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Opposing Viewpoints: Globalization – Dark side of the dollar

By Adam Scherlis
Published: June 2010

Every minute, thousands of gallons of crude oil spill out into the Gulf of Mexico. That adds up to millions of gallons a day. The catastrophic British Petroleum oil leak is already many times the size of the infamous Exxon Valdez spill.

In many ways, however, it is merely symptomatic of a larger problem — the way multinational corporations exploit the worst aspects of every nation’s industry, economy and government.

The BP disaster could have been prevented by a more reliable safety mechanism, the acoustically-activated trigger required by law in most countries.

In the United States, however, oil companies persuaded the infamously corrupt Minerals Management Service that these triggers were too expensive and overly cautious. Like other multinationals, BP was drawn to the States’ combination of rich natural resources and lax regulation, and benefited enormously. The spill, to BP, is a setback of merely a few weeks’ profits.

In southern Nigeria, where the natural resources are richer and the regulations laxer, oil spills are a fact of life. Nigerians villagers have for decades watched as crude oil contaminated drinking supplies, destroyed forests and wrecked farmland. Here, the main offender is Royal Dutch Shell, another multinational oil corporation.

Over the past year, more oil has been spilled in the Niger Delta than the Gulf of Mexico, but there have been few headlines; although it would cost very little for Shell to fix the leaking pipes, they have ignored locals’ pleas for years. It is a matter of cost-benefit analysis; the bad publicity and lost oil is still cheaper than the modest repairs that would be required.

This type of cold calculation is not limited to oil companies.

For decades, most large corporations have based their factories in China and Southeast Asia, for two main reasons. First, wages are much, much lower there than in America or Europe; second, human rights, and labor rights specifically, are much weaker.

As a result, multinationals — from Walmart to Disney to Nike — can produce more goods at a lower cost. Their workers pay the price, often working long hours for no overtime pay in poor working conditions.

These abuses are illegal in China, but are largely ignored by the government. In theory, corporations have audits and monitoring procedures to prevent these abuses, but they are often ignored or cheated by factory owners. The factories that do treat their workers humanely find it nearly impossible to meet the prices set by their corporate clients. This is the secret of Walmart’s famously low prices: the corporation is big enough to outsource to places where workers can be deprived of basic rights without regulatory interference.

Another cause of those ubiquitous “Made in China stickers is the Chinese government’s poor product-safety regulations. Ensuring the safety of consumer products is expensive; by eliminating this step, factories can offer even better prices. The downside, at least for consumers, is obvious.

In February, Walmart learned that a line of Miley Cyrus jewelry contained dangerous levels of cadmium, a known carcinogen. Three months later, unpleasant publicity forced Walmart to remove the product from shelves. This recall is the latest of a series of health disasters from outsourced factories in recent years.

Multinational corporations exploit economic differences and regulatory loopholes to increase their margin while desecrating human rights and the environment. Local businesses, for whom this strategy is not available, are at a comparative disadvantage.

Combined with the effects of an economy of scale, this leads to the infamous Walmart Effect: local, mom-and-pop businesses are out-competed by multinational chains, leaving communities entirely dependent on those chains for jobs and consumer goods.

The Walmart Effect has an ugly twin. In the United Kingdom by the name of Asda, in India as Best Price, and in Mexico as Walmex, the Walmart enterprise is now worldwide.

It is far from alone; the iconic Golden Arches of McDonald’s have extended into over one hundred nations. Proponents of globalization have claimed that it brings the world’s cultures together. Rather, it enforces the culture of the strongest corporation, quietly replacing local cuisine with the Big Mac and local crafts with Wal-Mart Supercenters.

Globalization will, indeed, unite humanity under one banner — a banner born in a sweatshop, emblazoned with the credo: The Only Social Responsibility of a Business is to Increase its Profits.

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