Globalization, global governance and multinational corporations

In recent years the world has changed dramatically. The Cold War and ideological confrontations on the World scale are over. But it does not mean that we are now safer, more secure, more prosperous now than we were before, on the contrary we live at the time when it is very hard to predict even our near future, because of technological innovation and acceleration, the dangers of nuclear weapons terrorism and environmental problems and so on. I think that nobody doubts that there is a need for some form of global governance in these areas. Globalization is the fact of our contemporary life. Today, the globalization of production is organized in large measure by multinational corporations (MNCs), they are assumed as main agents of globalization. Today markets have become global, but governments remain local, and in key respects the gap between them is widening. These two phenomena together have encouraged the growth of megacorporations whose activities literally span the globe, and whose turnover exceeds the GNP of some states. This is a global economy world has never known before. MNCs are mobile, while states are immobile, so MNCs can bargain for better conditions under threat of moving elsewhere. So states must in many cases accept their preconditions in order to keep their economic and social- stability. MNCs are able to bargain with states in the matter of taxes, conditions of production etc.t and thus they can create some problems for governments. The MNCs are so large and powerful, and they present problems in the home domestic arena as well as being important international-economic players. Thus, MNCs are perhaps the most controversial aspect of the international economic system. Controversy over the role that MNCs play in international economy arises from their size and from the nature of their managerial structure. MNCs are very large firms that extend managerial control across borders and make decisions in reference to global strategies. These activities coexist some-what uneasily with an international political system that remains organized around national governments controlling exclusive territorial domains. Because MNCs and governments pursue independent objectives, there are times when the global strategies of these large firms come into conflict with the economic objectives of the governments that host them. MNCs, therefore, highlight the tensions between emerging global economy and a fragmented international political system that continues to be organized around sovereign states. Governments have responded to the challenges posed by MNCs by attempting to regulate their activities. Governments have tried in some cases to harness MNCs to their development objectives, and in others have tried to prevent foreign control of critical sectors of the national economy.

Thus, as national economies become more and more interdependent and interconnected, some problems need to be resolved in cooperation. One of the biggest challenges we face today is to secure an open and rule-based international economy. The challenge is to provide a framework of rules and order for global competition in the widest sense. How, can better organize the world community its life in this interconnected and interdependent world, especially in the economic sphere? How should we treat MNCs, must they take some responsibilities in the political, social, ecological and economical areas or they just should pursue economic profit?

There is a need for a regulating mechanism which we call global governance, on a global scale in our times. Global governance is a multifaceted process, so in this process many actors can participate, and in turn global governance will affect many aspects of life. For global rules to enjoy legitimacy and general respect, they must be the product of a multilateral process. This should remind us that multilateral cooperation, existence of well-functioning global rules are necessary preconditions for spreading benefits and reducing risks.

The private sector, along with the rest of civil society, has to take its share of responsibility for global governance. Businessmen, along with many governments, can take responsibilities in such issues as human rights, labor rights and environmental standards to the rules of international trade.

Many authors suggest, and I agree with them that, the UN must continue to play a central role in global governance. But in today’s situation the UN cannot do all the work of global governance. In the UN till recent times states were the sole players in the international processes, but today nongovernmental organizations also play a great role. I explore just one influential aspect of this phenomena the relationship between global governance and the MNCs in this article. The case of the MNCs is significant for a number of reasons. Because MNCs operate simultaneously in national political systems and in global markets, they have been the subject of considerable controversy among governments and among observers of the international political economy. MNCs have been heavily criticized for the way they are alleged to treat workers in developing and advanced industrialized countries. MNCs are accused of exploiting workers jn developing countries by paying low wages and maintaining substandard workplaces. MNCs are accused of eliminating large numbers of jobs in advanced industrialized countries by shifting production to low-wage developing countries.

The basic questions I would like to tackle in the article are: what is a global governance, what role do MNCs play in global governance? How might be their aims compatible with each other? And what benefits they obtain in return from the global governance. Links between global governance and MNCs can take different and controversial forms, some of which are difficult to identify clearly. There are several books, chapters in books, which deal with these issues. For instance Imber M., examines the problem of global governance, connections between globalization, the democratization of world order, and the forms and quality of global governance. Thompson G., analyses the democratic governance of MNCs. Cox R., looks at the globalization and democracy problems. McGrew A.[1], discusses the applicability of democratizing of global governance and world order. Held et al explore the role of MNCs in the global production networks, analyzing the role of MNCs in global production networks from a historical perspective. «Our Global Neighborhood» - the report of the Commission on Global Governance[2] is the basic book, comprehensively covering the wide area of global governance. There is a debate issue in the «New Political Economy» devoted to MNCs. Hoogvelt A.[3], opening the debate says that two issues are at the centre of debate concerning MNCs: efficiency and accountability. But if before these issues were between national governments and multinational corporations, today they take place within the context of globalization. Dunning H.J.[4] analyses the relationship between MNCs and national governments, which has always been an uneasy one. Sklair L, looks at MNCs as political actors, and addresses two questions: 1) what forms do these activities take and are they effective? And 2) do they enhance or undermine democracy? He argues that, while MNCs have always been political actors, today the demands of the global economy require them to be political in a more systemic sense than previously. Walter A.® on the contrary, addressing concern that global, mobile firms are increasingly able to impose their preferences upon relatively immobile governments, workers and citizens, argues that such broad claims are exaggerated, and tries to explain that «global firms» often fail in their demands that important host states adopt inward investment rules allowing their full operational flexibility. Petrella R.[7], looks at EU competition policy and says that, EU competition policy has gradually been transformed into a tool to serve the interests of all those economic, financial, social and political forces which depend on free competition, market liberalization and state deregulation. This is very beneficial to MNCs. Bailey D, Harte G. and Sugden R. advocate the creation of monitoring bodies to understand more fully the forces being unleashed in 1992 by the EU, when it created more beneficial conditions to for MNCs. Thus there are rich sources of books available on MNCs as an issue, and many on global governance. They are very good as starting departure to explore the problems of global governance and MNC[8].

«MNC in its widest sense is a company, which produces goods or markets its services in more than one country. In its narrowest sense it refers to an enterprise which, through foreign direct investment (FDI), controls and manages subsidiaries in a number of countries outside its home base»[9]. Though MNCs are not a new phenomenon, in the medieval period also there were such companies (for instance the British East India company), their role increased in our times by the influence of globalization trends in global economy. According to Oatley[10] there are approximately 63,459 parent firms that together own a total of 689,520 foreign affiliates. Together, these parent firms and their foreign affiliates account for about 25 percent of the world’s economic production and employ some 86 million people worldwide A small number of MNCs dominate world markets for oil, minerals, foods and other agricultural products, while a hundred or so play a leading role in the globalization of manufacturing production and services. Together, the hundred largest MNCs control about 20 per cent of global assets, account for almost 30 per cent of total world sales of all MNCs[11]. MNCs are main driving forces of globalization. Thus, their influence as the main actors in international political economy has significantly increased in modern world.

Governance is the sum of the many ways individuals and institutions, public and private, manage their common affairs. It is exercise at different levels - local, national and international. There are different definitions of the term of «global gov ernance» in the existing literature. Cosmopolitans, liberal-internationalists, radicals and realists represent distinctive approaches to global governance. «Global governance (or geo-governance) is a term which refers to those formal and informal mechanisms for managing, regulating, and controlling international activity and international systems of interaction» says McGrew for example[12]. Global governance exists in many forms, it occupies the space between the extreme positions of «international anarchy» that is the complete absence of government and law in international relations and, its logical opposite, a «world government» which would replicate at the global level all the forms of government found in the domestic polity of every independent state[13]. Global governance is a form of «governance without government»[14]. Thus, there is no single model or form of global governance, nor is there a single structure or set of structures. It is a broad, dynamic, complex process of interactive decision-making that is constantly evolving and responding to changing circumstances. The UN is the most familiar of the many organs of global governance established since 1945. Before, at the global level, governance was viewed primarily as intergovernmental relationships, but it must now be understood as also involving nongovernmental organizations (NGOs), citizens' movements, multinational corporations, and the global capital market. Many actors may thus be involved in any one area of global governance. All these actors and institutions are increasingly active in advancing various political, economic, social, cultural, and environmental objectives that have considerable global impact. Some of their aims are mutually compatible; others are not. Thus, today effective global decision-making needs to build upon and influence decisions taken locally, nationally, and regionally, and to draw on the skills and resources of a diversity of people and institutions at many levels. It must build part nerships-networks of institutions and processes that enable global actors to pool information, knowledge, and capacities and to develop joint policies and practices on issues of common concern. The creation of adequate governance mechanisms is complicated because these must, be more inclusive and participatory-that is, more democratic - than in the past.

International organizations are the most visible institutions of global governance. There are also significant mechanisms of informal global governance, such as the G7 or G8, and many of nongovernmental organizations, which constitute an emerging global civil society.

As part of his «quiet revolution» to renew the United Nations, SecretaryGeneral Kofi Annan is building a stronger relationship with business community. «Thriving markets and human security go hand in hand; without one, we will not have the other» he told corporate leaders at the World Economic Forum in 1998. Next year he proposed a new initiative, the Global Compact (GC). The GC engages the private sector to work with the UN, in partnership with international labor and NGOs, to identify, disseminate, and promote good corporate practices based on nine universal principles. These are drawn from the Universal Declaration of Human Rights, the International Labor Organization’s (ILO) Fundamental Principles and Rights at Work, and Rio Declaration on Environment and Development. He asked business people around the world to accept and implement in their own spheres of influence, a set of nine universally agreed principles[15] in the areas of environment, labor and human rights. Since its official launch in July 2000, the Global Compact has evolved into a multistakeholder network, driven largely by the activities of its- private and civil society participants. The network is composed of: United Nations agencies – the Office of the High Commissioner for Human Rights (UNHCHR), the United Nations Environment Program (UNEP), the International Labor Organization (ILO), the United Nations Development Program (UNDP) and the United Nations Industrial Development Organization (UNIDO), the private sector, trade unions, non- governmental organizations active in the areas of environment, labor, human rights and development, and academic institutions. The Global Compact has emerged as a broad value framework to engage business in the work of United Nations and to encourage corporate citizenship through four core areas of operation:

• 1.    Country outreach- to make the Compact a truly global initiative, represented in every region of the world;

• 2.    policy dialogue and analysis - to reinforce the Compact’s substantive significance and to generate greater debate and insight into the dilemmas of and solutions for globalization;

• 3.    a learning forum – to promote information - sharing and organizational and institutional change;

• 4.    compact initiatives and projects - to stimulate practical action and partnership initiatives with UN bodies and other development actors to address the development needs of poorer countries and translate established norms and principles with respect to labor, human rights and the environment into concrete results.

Companies are asked to undertake three commitments:

thereby triggering a structured dialogue among the various participants about what is deemed to constitute a good practice.

Since it’s inception on July 26 2000, some 400 companies worldwide have engaged in the GC[16]. GC'e core is a learning forum. Companies submit case studies of what they have done to translate their commitment to the GC principles Into concrete corporate practices. This occasions a dialogue among GC participants from all sectors - the UN, labor, and Civil society organizations.

Thus, working together by global governance and business is essential to solve global problems, something which free markets, left to themselves, cannot do. Unless problems like climate change, ozone depletion, toxic waste, loss of forests and species, and air and water are addressed, markets and economies will not be sustainable in the long term-for they are depleting the natural «capital» on which growth and human survival, ere based. Since its inception, the UN’s primary mission has been to advocate universal values: freedom, justice and the peaceful resolution of disputes; social progress and better standards of living; equality, tolerance and dignity. The global acceptance and spread of the fee values is forging a common understanding that is paving the way for markets to expand and take root.

Exploration of the role of MNCs in the global economy and the possibility of their contradictory participation in global governance is very important today. An imbalance between the economic, social and political realms can be very dangerous in the long run. The market left to itself is not a fair or an effective manager of the global economy. A degree of restraint and regulation is necessary.

Some examples of the mutual compatibility of some aims of MNCs and global governance include the following, work of global governance helps to expand opportunities for business around the world. But without MNCs knowhow and resources, many of the objectives of global governance would remain elusive. The goals of global governance and those of business can, indeed, be mutually supportive. Business leaders and global governance will give a human face to the global market. They together can do a lot of progress to embrace, support and enact a set of core values in the areas of human rights, labor standards, and environmental practices. The UN agencies - the ILO, UNEP, the UN HCHR-all are institutions adjusted to help in tackling these problems. The GC has been Annan's major initiative in this domain. Goal of the GC is to align the corporation behind broader social and environmental goals, or at least to make sure that actions by firms do not undermine them. GC is an initiative intended to advance global social responsibility. The GC has adopted a learning model for inducing corporate change, in contrast to a more conventional regulatory approach, and it is a network form of organization rather than the traditional hierarchical or bureaucratic form. The Secretary - general chose this approach rather than propose a regulatory code because, GC does not have the capacity to be, a corporate code of conduct or a global standard- setting or monitoring body, because as Ruggie says, the probability of the General Assembly’s adopting a meaningful code anytime soon approximates zero. The only countries eager to launch such an effort at this time are equally unfriendly to the private sector, human rights, labor standards, and the environment. Secondly, the logistical and financial requirements for the UN to monitor global companies and their supply chains, let alone small and medium-sized enterprises at national levels far exceed its capacity. Thirdly, any UN attempt to impose a code of conduct not only would be opposed by the business community but would also drive progressive business leaders into a more uniform anti-code coalition[17].

Publicly support a set of universally agreed values and the work of the United Nations;

Learn lessons from each other on Implementing environmental, labor and human rights principles in their own business activities;

Initiate practical joint action to address the challenges of globalization.

So, private business's participation and support to global governance is very important to give humane face to globalization. In what ways can business and global governance work together? The main focus will be directed to the mechanisms of global governance and participation in this process MNCs - in particular their mutual influences, what institutions of global governance can do to MNCs and vice- versa, the role which can MNCs perform in global governance. As national economies become more and more interdependent through information, trade, investment and financial ties, global governance will help to fill a growing need for international co-operation and regulatory consistency to spread the benefits of globalization and to avoid chaos and backlash. The UN provides the «soft infrastructure» for the global economy. It sets technical standards and norms in such diverse areas as statistics, trade lows, customs procedures, intellectual property, aviation, shipping and telecommunications, thus facilitating economic activity and reducing transaction costs. By this way, the UN as an element of global governance prepares the ground for investment in emerging economies, by promoting political stability and good governance, battling corruption and human rights abuses, urging sound economic policies and business- friendly legislation, and working to improve health, education and social well-being. The UN also addresses the down side of globalization, by fighting transnational crime, the traffic in drugs, arms and people, and other problems.

Much of its work in countries is aimed at combating poverty. These efforts reduce tensions, prevent backlash and help build future markets.