Academic journal article Review of Social Economy

The Multinational Corporation and Social Justice: Experiments in Supranational Governance

Academic journal article Review of Social Economy

The Multinational Corporation and Social Justice: Experiments in Supranational Governance

Article excerpt

Abstract The multinational corporation (MNC) is dichotomous in nature. While on the one hand it is a vehicle for private capital accumulation, when socially-embedded it may serve as a means to further social provisioning and social justice. A social economics approach to the MNC is developed to incorporate both private and social transaction costs in international production and trade where the divergence in these costs may require collective action to mitigate the effects of social dislocation. These issues are illustrated by experiments in corporate codes of conduct related to child labor and environmental sustainability. Since corporate codes may be insufficient to socially embed the activities of MNCs, efforts to develop supranational governance mechanisms to better achieve social justice are also considered.

Keywords: Multinational corporation, social justice, corporate codes of conduct, child labor, transaction costs, supranational governance.

The multinational corporation (MNC) is a mixed blessing. It is the major vehicle in the contemporary world economic system for technology transfer and the production of the goods and services that cross national borders. But it is also the means by which substantial social and environmental dislocation can be precipitated when considerations of capital accumulation clash with material provisioning. In diverse ways the MNC may contribute to social injustice manifested in the use of sweated labor, discriminatory practices based on differences in race, gender, class, and national origin, the denial of effective workplace and political participation, and in practices that damage biodiversity and environmental sustainability.

Social economics emphasizes the dichotomous nature of the MNC, captured in the phrase "making goods versus making money", to explore the ways in which conflict between these motives may precipitate social injustice. Often this social dislocation prompts collective action to redress the injustice, in effect lowering the social costs of the MNC's actions. In this article the framework of a social economics approach to the MNC and social justice is sketched, based upon the concepts of the transaction and the dichotomous nature of the MNC, the state, and other institutions of public cooperation. Recent experiments in embedding the activities of MNCs within a more socially-just context are then assessed by considering case studies of corporate codes of conduct prohibiting child labor in the knotted carpet and soccer ball industries and on environmental sustainability. Finally, recognizing some inherent limitations of these exercises in public cooperation, a review of efforts to enhance social justice through expe riments in regional integration such as the European Union (EU) and NAFTA is followed by consideration of the potential for a global regulatory agency of MNC activity.


The international investment and production of MNCs is extensive. In 1997, some 53,000 MNCs and their 450,000 foreign affiliates had an accumulated stock of direct foreign investment (DFI) valued at $3.5 trillion while the global sales of foreign affiliates approached an estimated $9.5 trillion (United Nations Conference on Trade and Development 1998). Of the 100 largest economic entities in the world, 51 are corporations and 49 are nation states measured on the basis of their annual sales or GDP. The combined sales of the largest 200 global corporations exceed the combined GDP of 182 countries.

International production has grown at a faster pace than international trade as indicated by sales of MNC's foreign affiliates rising faster than world exports and real DFI investment as a share of world GDP outpacing growth in the ratio of imports and exports to GDP. This internationalization of production has deepened the mutual interdependence of national and regional economies. Two-thirds of international trade is accounted for by only 500 corporations (United Nations Development Program 1997). …

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