Civil Society and Global Finance - Essay Example

Civil Society and Global Finance Introduction The world economy has been under transition every day, every hour. The quest for the economic supremacy which was initially severe between the countries, have now grown bitter among the rival companies, irrespective of the country of origin. Initially the project feasibility was evaluated from social and environmental perspective, apart from economic consideration, however presently the situation is entirely different. The social and environmental considerations are no longer debated; rather the primary and supreme focus of the project has to be financial benefits, even at the cost of environmental and social debacles. When and why this shift occurred? This transition occurred in the running century, however it initiated in 1990s; the reason was increasing competition for economic sustainability and supremacy. In the running decade, the magnitude of the economic activities is considered enormous than previous decades, unfortunately this success is the cost of ignorance or non-compliance of social and environmental obligations. The companies are more interested in improving their financial positions for obtaining credit facility. The devised financial policies are extremely converged to point of high revenue generation, such that significant environmental and social aspects have been outclass. Such practices was never exercised in 20th century, the companies considered compliance of social and environmental laws obligatory, the financial profits were curtails, production numbers were reduced only to secure the necessary non-financial interests, beneficial for the human society (Clarkson, 2002). 20th Century: TNC and Profit Standards As per critics, it was in 1980s when the international investment regime transformed significantly. The attributing factors towards such transformation included "extra-ordinary increase in the volume of global FDI flows and stocks; second, the rising levels of corporate concentration in high technology global production resulting from mergers, acquisitions and network relationships, in particular strategic business alliances; and third, the development and widespread application of information technologies to international corporate organization". During 1980s and 1990s, the economic indicators of the world economy were negative, and severe slowdown in the foreign direct investment was witnessed, "global foreign direct investment flows declined in 1991 for the first time since 1982, falling from USD 230billion in 1990 to USD 180billion in 1991" (Jan, 2002). It was noted during this period that the transnational companies from Japan and Europe experienced decline of 90 percent, however the United States and United Kingdom also did not indicate any positive outlook. The global investment regime has developed new outlook, where such modulations have "deepened the economic ties across the developed economies of the triad, and more recently, the economic interdependency of the advanced industrialised countries and developing countries" (Clarkson, 2002). 21th Century: TNC and Profit Standards Our analysis indicates that not only the final announcement but also a series of previous announcements may deliver significant influences on changes in firm value. Our analysis suggests several managerial implications. First, it suggests that firms can exploit significant benefits from international alliances. Fast growing global economy makes international alliances more and more important as intensified global competition forces firms to focus on their core skills and competencies. Thus, international alliances are one of the fastest strategic alternatives to access or utilize external resources of partner firms. Second, since there are adverse effects of such alliances on non-aligned firms, it reminds managers that they need to deal with ongoing international alliance formations among rival firms. A firm's poor response to ongoing alliance formation could thus jeopardize its firm value. Third, considering the fast increases of international alliances in various industries, this study further suggests that smaller firms may be more vulnerable than larger firms to international alliances among their rival firms. In view of the above listed facts the corporate were reluctant to focus on profits due to ignorance towards risk management, and a culture of support which persisted. The current era is different and difficult, where there is no helping hand for assistance rather it is quick race which shall be participated with aggressiveness, courage, smartness and wisdom (Harald, 2000). The 21st century has emerged as an era of competition, the quest for the economic gains, and capitalization of resources has never been as severe in the previous century. Such accounts have been revealed where the companies have been involved in unethical practices and illegal acts only for the sake of profit making. A recent finding of the running decade revealed that Exxon Mobil has been involved in multi-billion deals with government of the African countries where human rights are exploited, and severe restrictions have been imposed by United Nations on such governments. The trans-national companies have adopted ignorant approach towards such resolution of international forum. The interest of the company in this specific case was to secure maximum number of oil wells to enhance its production capacity, and seek benefits of the rising oil prices in international market. Amnesty International, a blatant supporter of human rights have taken strong notice of such multi-billion deal by oil exploring countries, however no concrete actions has been taken to discourage such deals which shall restrict human, social liberty at the cost of economic gains. The trans-national companies have been involved in environmental specific scandals. The world's third largest copper mining company BHP Billiton has been accused of environmental and social exploitation in South America. The company has developed strong infra-structure of mining and transportation; the services of the local population have been rented. However no significant return has been provided to the locals in terms of educational and healthcare facilities. Beside, the mining activities have severely damage the environments of the locality; the concentration of green house gases, along with poisonous gases has multiplied soon after the mining has started. The public and environmental protection agencies have condemned such industrial activities, and have demanded community paybacks and opposed "environmentally destructive methods of extraction such as strip mines and heap leaching" (Dejan, 2003). Conclusion In international financial market, the foreign reserve of the specific country or company is critical as it exposes the country's ability to overcome economic and financial downfall. Such downfall and crisis situation have been studied by the money lending agencies. In this regard, the international credit lending agencies have focused upon "the strengthening of surveillance and improvements in armoury of lending instruments" (Christine, 2003). The international lending agencies have focused upon "policy areas that can leave a country vulnerable to crises", inclusive of management of reserves, macroeconomic policies, exchange rate regimes, financial sector soundness, and debt management (Jan, 2002). International credit facility is provided on conditional grounds, such conditions emphasises over the need for "greater transparency, including the publication of many IMF staff reports on national policies and prospects, and proliferation of international standards and codes of conduct in different policy areas, monitored in their respective areas of expertise by the institute and other relevant bodies" (Christine, 2003). Unfortunately the focus towards the performance evaluation by the money lending institutes have been finance, no specific clauses either in legislation of the respective government or money lending institutes sought protection of environmental and social obligations. Unless the common hopes that the simulation of effective economic policies along with the reduction in the uncertainties within the market shall support countries to controlled access to the capital required, at lower cost are eliminated, unless the industries are made compulsorily obliged towards social and environmental aspects, the profits shall remain the prime focus of the companies at the expense of human civilization. The monetary institutes along with the governments shall developed programs to estimate the intent of the credit agencies is to predict crises, and this requires development of the social and environmental warning system, based upon substantial methodology. The International Monetary Fund has developed an International Capital Markets Department, the intent of this department is to gather and analyze information. This forum includes presentation from private sector financial institutions through consultants. According to research, different credit lending agencies have introduced "greater financial incentive to adopt social and environmental crisis-resistant policies by offering those that do Contingent Credit Lines to protect them from contagion effects"; such developments are being regarded as important innovations introduced by the agencies (Christine, 2003). The financial crisis management shall therefore reign supreme against the social and environmental considerations. References 1. Christine Brentani. Portfolio Management in Practice. Elsevier Publication. 2003. 2. Jan Aart Scholte, Albrecht Schnabel. Civil Society and Global Finance. Routledge. 2002. 3. Harald A. Benink. Coping With Financial Fragility and Systemic Risk. Springer Publication. 2000. 4. Krishnamurthy Sriramesh, Dejan Vercic. The Global Public Relations Handbook Theory, Research, and Practice. Lawrence Erlbaum Associates. 2003. 5. Clarkson, Stephen. Uncle Sam and US, Globalization, Neo-conservatism and the Canadian State. University of Toronto Press. 2002. Read More