Multinational Corporations (MNCs) are one of the strongest and most important players that are going to decide the future order of our world. These companies have long enjoyed a favourable climate for international collaboration and business. Unfortunately, the world is facing incredibly serious natural resources depletion and environmental crises. The Regional Risk for Doing Business Report has ranked extreme weather, failure to adapt to climate change and natural catastrophes among the top ten risks for business leaders. Multinational corporations have a productive capacity in a number of countries across the globe. The income flows generated by MNCs are considered as profit of the ‘foreign capital flow moving between countries’. The movement of MNCs to less developed countries in search of cheap resources and pollution havens has caused some problems. Although MNCs are maximising profit, it is ethically wrong that poor countries should bear the burden of problems caused by rich ones by inhaling bad air, drinking dirty water and eating dirty food. If this continues, in the long run, everyone will have to pay for it. Global warming will force a change in the world order which can have disastrous effects. Governments in developing countries need to come up with a solution for replacing outdated technology and decreasing imports of second hand items.
Globalisation and trade liberalisation have allowed the world to become a global village. Transfer of technology and ideas has eased the life of billions of people. Most of these transfers happened after 1970s when borders were opened for Multinational Corporations (MNCs). This transfer of production units from developed countries to developing countries resulted in economic growth, stability of the governments and prosperity in the general population of developing countries. Neo-liberal economists assume that rather than ‘pollution havens’, “MNCs create ‘pollution halos’ in developing countries through the export of modern technologies.” High level of pollution is causing temperatures to rise to an alarming level. By 2050, we either need an alternative source of energy or we have to cut the emissions by 70pc to keep global warming under control, otherwise governments may need to employ technologies that can suck back carbon dioxide from the air or they will need to plant billions of trees.
The Regional Risk for Doing Business Report has ranked extreme weather, failure to adapt to climate change and natural catastrophes among the top ten risks for business leaders. Multinational corporations have a productive capacity in a number of countries across the globe
Developing countries appear as pollution havens to the MNCs because normally there is no pollution prevention culture there. Secondly, there is either no proper legislation in developing countries regarding pollution permits, etc, or if there is one, it’s not enforceable because governments are weak and cannot stand to the pressure posed by MNCs. Economically these MNCs are doing their best because they are maximising profit. However, this gives rise to an ethical problem that whether they should be allowed to contaminate the environment due to which not only species of plants and animals are extinguishing but millions of humans are also dying annually. A line needs to be drawn otherwise MNCs will continue polluting the environment and in the long run the problem of global warming will affect the global order in an atrocious way.
Although industrialisation has a positive effect on the overall economy and wellbeing of the population it brings its own negative effects as well. In poor countries, environmental issues are further exacerbated by solid waste, sewage and overcrowded urban areas. Developed countries also export used or outdated machinery like automobiles to developing countries which is one of the major sources of pollution. Mexico City, Sao Paulo, Seoul, Jakarta, Lagos, Lima, and Calcutta are live examples of cities where lives of the citizens are at stake and even the local governments can’t really do anything about it.
As a result of globalisation MNCs continue to take over most economic activities. Today they outnumber states in terms of size and power which enables them to control much of the world. The adoption of complete laissez faire attitude by developing countries towards these MNCs is completely wrong. Most MNCs are willing to take precautions to protect the environment if laws are properly enforced or there is a culture of making surroundings less polluted. MNCs can play the most important role in this situation and the future of the world greatly lies in their hands. Governments also face a dilemma and it is up to them to draw a balance between industrialisation and environmental pollution. They also need to deal with second hand machinery and outdated technology. The situation needs to be dealt with now or it will get out of hands in the future.
The writer is an economist with the Sustainable Development Policy Institute (SDPI)