The Recognition of the Role of the State in the Form of Government Regulation - Research Paper Example

Introduction Globalization is a contemporary phenomenon that is known only in the last fifty years (Soros, 2002). Although its inception is recent, what is undeniable is the fact that it has tremendously affected the manner with which trading relations between and among countries are now being undertaken. It has redefined trading relations among and between nations in such a way that trade boundaries have been minimized if not totally removed. This change is clearly manifested by the presence of transnational corporations and multinational corporations. Together with TNCs and MNCs, globalization have resulted in the massive movement of people, knowledge, technology, information and goods among and between nations the increasing insignificance of a country’s physical borders (Soros, 2002; Suarez- Orozco & Qin- Hilliard, 2004; Fischer, 2003; Balakrishnan, 2003). In this regard, there is a view that globalization has created a smaller world (SMEs , 2007). In the face of the reality of transnational corporations and multinational enterprises or corporations is foreign direct investment (FDI). FDI is an explicit consequence of the principles of globalization – economic liberalization, free trade and decentralization. Economic liberalization upholds the ideals of individual liberty, “treaties of friendship, liberal national legislation, bilateral trade /commerce and less and less government intervention in the market.” (Killion, 2003 p5). While free trade which is entailed in the idea of free market connotes the idea of the lowering or the elimination of tariffs and other forms of economic barriers (Helleiner, 2003; Chakraborty & Basu, 2002) and at the same time implementing less and less governmental intervention in the market (Burbidge, 1978;Helleiner, 2003;Killion, 2003). Thus, the role of FDI is primordial in understanding national economy and both the local and global market in the global economy (Stiglitz, 2004 b).But this is on the side of the investors. On the other hand, are the workers around the globe. As globalization opened jobs to both the developed and developing countries, it becomes the strategy with which the quality of life of people in the North countries are sustained and maintained (Howard-Hassmann,2005). While the In this regard, globalization, fdi, short term capitalization, TNCs and MNEs are interconnected at its center are the lives and experiences of the workers. Being such, this paper will try to analyze the notion of business regulation as protecting workers’ rights. In doing this the paper will be having the following structure. First is the introduction where the general background is laid down. Second is discussion of the tension between regulation and de-regulation. The third part will be a look at Nike. Then the fourth part will be a discussion of the movements of MNEs. Fifth part is an evaluation of Stiglitz’s criticism of globalization. Sixth is discussion of voluntary regulation. Seventh, is the look into the connection of regulation and economic recovery. Finally, eight is the conclusion. The Tension The tension between regulation and the current principles that underlie MNEs is found in the principles of economic liberalization, free trade and deregulation. These three factors are all considered as the fundamental theoretical principles that support and buttress globalization. What does this mean? The neo-classical liberalism which is the ideology behind all of these holds that the market to attain growth and progress should be left alone and be free from controls, regulations and interference coming from the government. In light of this development, the Keynesian framework has offered the ideal role of the government – the government acting as the market’s guide (Fagen et al, 1986; Peet, 2003). Moreover, working closely with Pareto efficiency, within the framework of this kind of development, no man will be left lagging behind but that in one way or another, some individuals are better off but no individual is within the society will be attained. And under this scheme, With these principles the development of strategies that propel globalization to what it is today is to encourage free trade which necessarily includes for government to undergo deregulation meaning putting aspect of the market economy under the invisible hand of the market (Peet, 2003). and at the same time upholding the open door policy that will allow the entrance of foreign direct investment into the local markets via incentives of minimal tariffs or even removal of other forms of economic barriers (Moran, 2003; Peet, 2003: Howard-,Hassmann, 2005). In this regard, countries are encouraging foreign direct investment and other forms of capital mobilization in order to act as drivers and thus hasten economic development in their own countries via the application of the principles of liberalization, deregulation and free trade (Fischer, 2003; Stiglitz, 2008). On the other hand, there is the principle of regulation. this principle is being raised again after numerous devastating experience of developing countries under the principle of neo classical liberalization (Stiglitz, 2008). In this principle, it holds that there is in fact a rationality behind governmental regulation. Primarily because, the market is imperfect, information is not complete, there is irrationality in the presupposition that the market should be left on its own (Stiglitz, 2008). And that widening gap between the poor and rich is seemingly getting wider and wider without any hope of bringing it to a halt. In this condition, the solution is to apply the principle of regulation. The principle works on the premise that governmental control is necessary since there are aspects of the economy that have to be regulated for the greater good for public welfare (Stiglitz, 2008). And this is where the tension between regulation and the current liberal policies is embedded. Liberalization holds minimal or even none (if possible) governmental intervention in the market economy (Hassmann, 2005) and following the Keynesian principle, the control is the government acting as a guide to the market (Peet, 2003) but intervening into it (Soros, 2002). On the other hand, regulation assumes that governmental control is necessary in the market (Stiglitz, 2008). This theoretical tension between regulation and deregulation is a reality felt by the workers in their work experience. There are numerous reports of workers abuse by MNEs in developing countries (Compa & Vogt, 2001). In this sense, the conflict is more perceptible and real in the activities and movement of MNEs in the developing countries. The Case of Nike Nike is the leading sports apparel in the world today. It controls about 33% of the global footwear market and about 33% of the US market (Locke et al, 2007). It has 1200 contractors and sub contractors around the globe.. The history of Nike’s going global stated during the 70’s. When the cost of production increased in Japan during the 70’s, they looked for a location that offers lower cost of labor in the United States. But they also started looking for other factories in Korea and Taiwan. By 1980’s when Korea and Taiwan had developed, Nike closed all its factories in the United States and “As a result, Nike began to urge its suppliers to re-locate their operations to other, lower-cost countries. The company worked with its lead suppliers to open up manufacturing plants in Indonesia, China, and Vietnam” (Locke et al, 2007: 7). Moreover, “By 2004, Nike’s products were manu­factured in more than 800 factories in 51 countries, employing over 600,000 workers. Nike has only 24,291 direct employees, the vast majority working in the United States” (Nike 2005:3–4 as cited in Locke et al, 2007). However, Nike’s relation with the contractor, sub-contractor and sub, sub contractor is at shoulder’s length (Locke et al, 2007). This means that there is no real rapport establish between Nike and the supply chain. This is due to the fact that “Nike sometimes enters into very short-term contracts with these companies or places very limited orders with them (or both)” (Locke et al, 2007: 8). Furthermore, Nike has been criticized that it selects countries that are known for violating workers’ rights – low wages, poor working conditions and human rights violations. Thus, by 1990 Nike has suffered from tarnish image because of it being involved in “ underpaid workers in Indonesia, child labor in Cambodia and Pakistan, and poor working conditions in China and Vietnam” (Locke et al, 2007). This has greatly affected the company. So much so, that even its founder claimed “The Nike product has become synonymous with slave wages, forced overtime, and arbi­trary abuse.”(Locke et al, 2007: 8). However, it should be noted that there are efforts made by Nike in order to address the problem. This has become necessary in response to the demands of corporate social responsibility, ethical consumers, NGOs and all other stakeholders. More than that, the tarnish image of Nike creates a bad publicity that, in effect, affects shareholders’ interest. In this sense, what can be impugned pertinent to the activities of MNEs like Nike? The Activities MNEs in other countries regulate the market. The national government caters to the demands of The MNEs to the detriment of the workers (Singh & Zimmat, 2004;Locke et al, 2007). National government , especially of developing countries have been so accommodating of MNEs for they see it as the opening of progress and development in their own countries (Rodriguez-Garavito, 2005). Being such, many developing countries have governmental policies that are perceived to be anti workers like no collective bargaining no unionism, threatening union leaders and especially in designated export/economic zones in developing countries, contractualization and no strike policy is implemented (Campo, 2009). And in the case of Nike, noticeable in their story is the continuous search for a country that affords them lower-costs of production regardless of workers’ rights violation that their contractor might be committing. In fact, during the 90’s the initial reaction of Nike is to claim that those workers are technically not their workers but the workers of their contractors and subcontractors (Locke et al, 2007). And what makes it worse is that Nike is involved in short term capital investments. That is why they can easily pull out their investments anytime that they prefer. In light of this reality, the response of Nike is to establish a Code of Conduct that will observe the just, fair and humane treatment of workers. And this code of conduct is implemented in all 800 worldwide factories that makes up Nike. In some cases like in Kukdong, Mexico the workers are able to lobby for the change that they are requesting even if they are threatened and some labor leaders have been arrested. Kukdong is one Nike’s sweatshop in Mexico. The workers were complaining of the bad food in the cafeteria which were often spoiled and worm infested, union leaders which are corrupt and the reinstitution of 5 supervisors who were dismissed (Rodriguez, Garavito, 2005). Although the case of Kukdong positive attestation of the power of the unity of the workers, many workers around the world continue to suffer from low wages, poor working conditions, long working hours, child labor, sexual assaults and other forms of abuses (Compa, 2005; Compa & Vogt, 2001). In this context, criticisms have been thrown against globalization of the widening gap between the poor workers and the rich capitalist. The Criticisms How about the criticisms against globalization especially of Stiglitz? Are they correct? In this sense, it can be claimed that Stiglitz’s criticisms against globalization hold true and are correct for the following reasons: First, the theoretical framework of globalization and the actual reality and experiences of the people regarding it do not match. The ideal of globalization only works for the North (Compa & Vogt, 2001). Much has been talked about opening global markets but it has been seen that North countries only allow developing countries to enter into their market if there is sufficient reason for such trading relations (Compa & Vogt, 2001) and if the North has high stake into the country. For example, take the case of United States and Thailand, the General Preference System of US have repeatedly requested that Thailand should be banned as country with establish export relation because of workers’ abuse and child labor. However, United States have been very silent about because it has $2.2 billion trading with Thailand. On the other hand , it only took three years for GPS to sanctioned Belarus as non-cooperative country. The reason, behind, is that trading Belarus will not be affecting the US economy because US trade with Belarus is only 33 million (Compa & Vogt, 2001). This imbalance shows that North countries utilize globalization to further their own economic interests most of the time. Second, MNEs although claiming to have embraced the corporate social responsibility as part of their code and the recognition of ethical consumers which prod to be ethical in their dealings, but still, code of conduct is not sufficient in protecting the workers’ rights. What does it? Many workers when asked regarding the workers’ code thought that it pertains to their attitude and behavior in work (Locke et al, 2007; Singh & Zammit, 2004). Many do not have any clear idea as to what it is for (Rodríguez- garavito, 2005)). In Nike alone, when managers in developing countries are asked about their opinion, they see it as waste of time, and source of tension since its regular done (Locke et al, 2007). The monitoring is such that it becomes a technicality that has to be reckoned and not a vision or goal that is to be incorporated in the company policy as part of goal and CSR. This is surprising because much effort have been done by Nike in order to rectify and counter its bad image. However, unfortunately, their effort is deemed to be not enough as there is as worker’s abuse in terms of low wage, poor working condition and child labor are still practiced by some of their contractors (Locke et al, 2007: Rodríguez- Garavito, 2005) Third, according to Stiglitz (2008;2004), there is need for regulation because MNEs are acting above national laws. And that should not be the case. This is of primary importance as it raises the need to re-conceptualise development (Stiglitz, 2004a). Development is no longer merely limited to the material gain that is derived from FDI, short term capitalism like Nike. But that there is a move towards an integrative, authentic and holistic development wherein people’s quality of life is increased. And they are given the chance and the freedom to choose and decide their destiny, their future (Stiglitz, 2000). This is very important change in the perception of development. Since, many young girls who are working in Nike factories are forced to work long hours and that they given low wages (Locke et al, 2007). Also, they are subject to verbal and sexual abuse as almost 80% of workers are women. This reality is not what development is and this is what Stiglitz is claiming. The development that should ensue in the implementation of globalization is an increase quality of life for the workers, and a venue wherein collaborative work for their growth as a person and as members of the corporation and the society can be opened (Stiglitz, 2004,2000;2008; Compa & Vogt, 2001, Singh & Zimmat, 2004). Moreover, development should be empowering to the workers and to all members of the society as it gives them the chance to chart their own destiny and future (Stiglitz, 2000). Fourth, the asymmetry of the market is clearly perceived in the era of globalization (Stiglitz, 2009). This is very important because globalization is working on the presupposition that the market competition will level out. However, this is not true. The case of NIKE shows that the salary of their factory workers is only $40 per month (http://voice.paly.net/view_story) while Nike CEO earns $1.5 million (http://voice.paly.net/view_story). In this regard, the nagging question is what can be learned from best practice code of conduct or voluntary regulation? Voluntary Regulation Voluntary regulation or code of conduct is the response of MNEs and TNCs to curtail the numerous incidence of workers’ abuse in developing countries (Compa, 2005). It seeks to provide the guidelines and parameters with which the audit and monitoring of the workers’ plight and condition in the factories are truly safeguarded, affirmed, recognized and upheld (Compa, 2005). It can be deemed as ““new international communities of accountability,” embodying a nascent global public sphere capable of checking the power of TNCs and providing the requisite background conditions and political leverage for local workers and labor support organizations to meaningfully participate in the governance of labor relations.”(Rodriguiz-Garavito, 2005: 206) Several things can be gained by looking into several best practice code of conduct or voluntary regulation. These are: First, workers’ rights are human rights. And to deny one is to deny the humanity and dignity of the worker Second, the real wealth of the company are human resources that strive hard in order to turn into reality the goals and vision of the company. Only in treating them as persons and as equals that the reality of quality of life for everybody starts. And the organization becomes advo Third, by monitoring workers’ rights and condition, it is not only the workers who are benefitted but the corporation as well. A good image is a good publicity and that it attracts ethical consumers (Rodriguez-Garavito, 2005). Ethical consumers are significant segment of the market not only in terms of their numbers but of the fact that they are willing to spend an extra cost for their cause (Memery et al, 2005). Fourth, collaborative effort is necessary in the implementation of the workers’ rights (Compa, 2005). It is not only the work of trade unions or the workers themselves. The government, management and all the workers should work together in order to come up with code of conduct that is feasible and recognizant of the humanity and dignity of the workers. This is especially necessary in developing countries where there are weak political and labor structures that may protect workers. Fifth, progress and development are not only for the few. But it should be for all the people in the global community. Being such, regulation should be incorporated as social policy that protects the interest of the workers and the ordinary tax payers and individuals. Regulation and Economic Recovery Only in recognizing the importance of workers as human beings who are creative, intelligent, rational, with sentiments and the other stuffs that makes human beings human beings can an authentic and integrative development be attained and workers’ rights affirmed. A genuine economic growth, especially now that the world has been plunged into an economic crisis due to the selfishness of some bankers, shows that globalization is inept in addressing market failure. And that the need for government regulation is necessary in order to protect public welfare, secure the jobs of ordinary people, and social protection (Stiglitz, 2009). It is the sure way that can protect society and the people, affirm public welfare over and above the interest of the few. Some may contend that the presence of CSR mandates that corporations become responsible (Tencati &Zolsnai, 2009) and as such undertake voluntary inception of code of conduct. However, it should be remembered that at the other side of the coin is the desire for profit. As such, finding the balance between the two is often difficult and is many times tipping against public. In this regard it can be claimed that companies should: Treat workers as persons. they are not automaton and just like the owners and capitalists, they too are aiming for the good life Government regulations are necessary in protecting public interests. And once this is secured, economic growth is attained (Stiglitz, 2008,2009). Since there is trust working between and among the stakeholders of the company, of the society. It protects the workers from the shareholders ardent pursuit of profit (Compa & Vogt, 2001) . Regulation is governmental interference that should be seen as a remedy for the inherent irrationality and selfness that drives the market and its players. Thus, protecting the interests of the general public (Stiglitz, 2008, 2009) Conclusion Advocating workers’ right is long struggle that is not just defined by victories or failures. It is a struggle that never ends as long as political and structures are oppressive and repressive of workers’ rights. Stiglitz has shown that there numerous glitches in the current policy of globalization. And the case of Nike attest to this truism. However, there is glimpse of hope as voluntary regulation among MNEs and TNCs themselves are being undertaken. Although there still question regarding the authenticity and motivation behind it, what it opens is the possibility of a global action that continuous to monitor, counter and rectify abuses committed against the workers. At the same time, the recognition of the role of the State in the form of government regulation that protects social welfare may become one of the tool that can drive economic recovery and protection of workers and the society. REFERENCES: Balakrishnan,P. (2003). “Globalisation, power and justice”, Economic and Political Weekly, 3166 – 3170. Burbidge, J.B. (1978). “Post Keynesian Theory: The International Dimension”, Challenge, 40 – 46. Chakraborty, C., & Basu, P. (2002). “Foreign direct investment and growth in India: A cointegration approach”, Applied Economics, 24, 1061 – 1073. Compa, L (2005) “Trade unions, NGOs and corporate code of conduct” Compa, L. A., & Vogt, J.S. 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