Globalisation is meant to be the closer integration of the countries of the world. Any country would be free to sell its products to the rest of the world and use the monies received to better the lives of its people. Globalisation was meant to create a world where everyone benefits without any risk and where markets operate efficiently – without a glitch. Unfortunately, this is a myth.
With the advent of globalisation, a number of businesses have grown in size to become what we call multinationals. They have brought jobs and economic growth to certain developing economies. In addition, they were able to introduce cheap goods of excellent quality to the developed markets, giving them more value for every penny they spent.
At the same time, those same multinationals have also created havoc. In some parts of the world, they have driven out small businesses which is part of the backbone of the local communities. Local SME’s are the essential component of the economic and social life of a local community. They are more incentivised to do “the right thing” such as keeping jobs during periods of economic recession.
In contrast, there have been many instances where multinationals have left behind long lasting collateral damage to the natural environment and to the local communities. The most well-known example is the disaster in Bhopal in 1984. It caused the death of more than 3,000 people and injured over 550,000. However, it took 5 years for the victims to receive compensation from Union Carbide after several legal battles.
Though the Bhopal incident has had catastrophic repercussions for Union Carbide, it has not stopped corporate greed in its track. A more recent form of corporate irresponsibility is bio piracy. Developing countries have a reservoir of knowledge in their rainforests and in their traditional medicine such as Aryuveda. One of the most notorious cases of bio piracy, according to Joseph Stiglitz, was the attempt to patent turmeric for healing purposes. Turmeric is used as a colouring and flavouring agent in many Asian cuisines. It is also used in Aryuvedic medicine. The United States issued a patent for the medical use of turmeric in December 1993. The patent was eventually overthrown but not without incurring expensive legal costs.
These two examples demonstrate the current challenges involved in holding multinationals and their management teams accountable in foreign countries.
It also goes without saying that developing countries spend a huge amount of resources to maintain their bio diversity and it is only fair that they are given incentives to maintain their forests which is of enormous environmental and medical benefit to all. However, intellectual property rights are essentially meant for corporates or individuals. None has, ever, been drafted for the commercialisation of a country’s cultural heritage or bio diversity by a third party. Without full political commitment from the developed world, intellectual property rights would remain solely in favour of the inventors.
Fortunately, all is not lost. Novartis, a Swiss drug company has developed, in the past, an effective drug against malaria, using components of the Chinese tree Qinghao. Malaria is a life threatening disease. In 2017, it has affected 219 million lives and have caused the death of 435,000 persons, according to the World Health Organisation. 92% of the malaria cases are recorded on the African continent. Being socially responsible, Novartis has made it possible for developing countries to buy those drugs at cost or for free. For the past fifteen years, the company has continued its fight against Malaria and has developed the program: Novartis Malaria Initiative
Civil society has also taken a more active role in monitoring the behaviour of multinationals. Over the past few years, with the advent of social media, the wrongdoings of the multinationals are brought to the attention of the whole world. Bad publicity can bring expensive lawsuits and destroys the image of the company which can account for more than 50% of its value. The famous pasta brand, Barilla, has suffered huge decline in its sales and financial performance following the statement made by its chairman during an interview in 2013 about his negative views on homosexuality. Shortly after the interview, the public, with the help of social media, chose to boycott all Barilla products. It took the company more than 5 years to turnaround and become a gay friendly consumer product.
With the increasing social and political activism of the public at large, business concepts such as corporate social responsibility, responsible investing and impact investing have taken shape to encourage more responsible corporate citizens. Though these movements have not yet been fully embraced by the mainstream investment and business community, they have become the main objective of a few influential institutional investors. Norway has recently decided to sell off most of its investments operating in oil and gas exploration sector and to invest more in renewable energy companies. The country has a sovereign wealth fund of approximately US$1 trillion. Similarly, a number of US foundations such as KL Felicitas Foundation aim at promoting impact investment by creating a strong impact investing ecosystem.
It is true that most of us tend to live locally – in our own communities, towns and countries. Globalisation, actually requires that we all start to view ourselves as global citizens -breathing the same air, living on the same planet and promoting a better approach to doing business worldwide. The ongoing motto is “ We have only one planet for everybody. There is no planet B.”