Multinational Enterprises and the Prospects for Justice

By Spar, Debora; Yoffie, David | Journal of International Affairs, Spring 1999 | Go to article overview

Multinational Enterprises and the Prospects for Justice


Spar, Debora, Yoffie, David, Journal of International Affairs


One of the defining features of the modern era is the spread of business enterprises across international borders. Markets once considered peripheral or exotic are now often viewed as integral to a firm's success; and a global corps of businesses has replaced the once-scattered legion of expatriate firms. As corporations increasingly define their markets to encompass wide swathes of the globe, cross-border flows of capital, technology, trade and currencies have skyrocketed. Indeed, cross-border activities of multinational firms are an integral piece--perhaps the integral piece--of globalization. They are also, in some quarters at least, highly controversial.

One of the controversies centers on the impact of global mobility According to some scholars, the corporate scramble for ever-wider markets has a dark side. In addition to creating economies of scale and enhancing efficiency, globalization may create a deleterious "race to the bottom," a downward spiral of rivalry that works to lower standards among all affected parties. As described by proponents of this view, the dynamic behind such races is straightforward and compelling. As corporations spread throughout the international economy, their constant search for competitive advantage drives down all those factors that the global players seek to minimize. Tax and labor rates are pushed down, and health and environmental regulation are kept to a bare minimum. In the process, crucial functions of governance effectively slip from the grasp of national governments, and corporations and capital markets reap what societies and workers lose. Since justice is hardly a central concern of the modern corporate enterprise, it presumably gets lost in the shuffle.

Does corporate expansion necessarily lead to such race-to-the-bottom behavior? Or are there situations in which multinational enterprises might actually contribute to the pursuit of international justice? Common wisdom would probably suggest that because corporations are motivated solely by the desire to maximize profits, it would be unrealistic to expect them to play any positive role in the pursuit of international justice. This paper seeks to unbundle such arguments and looks in greater detail at races to the bottom and their impact on affected nations. In particular, it seeks to examine when such races really do occur and when they do not; when corporate expansion is liable to drive global standards to rock-bottom lows; and when it can, paradoxically perhaps, actually enhance prospects for global governance and international justice.

As the articles in this volume attest, "justice" is difficult to define. It means different things to different people, and incorporates a range of normative goals and assumptions. Our treatment of the word here is specific and quite narrow. When we speak of justice, we are referring to the basic conditions of human livelihood, to the political and economic factors that expand the realm of human choice and possibility Our definition of justice, based on the United Nations' description of human development, is the process of enlarging people's choices, ensuring access to basic resources and providing citizens with education and the ability to live a healthy life.(1) One might argue that these factors are more directly linked to political concerns for justice: civil liberties, for example, only become plausible once the citizens of a particular state have reached a basic level of economic subsistence and political sophistication. In this article, however, such claims are neither made nor drawn upon. Rather, we confine our analysis to a much more limited, preliminary sphere. We try to examine whether multinational expansion always leads to race-to-the-bottom behavior, with all of its presumed ill effects, or whether, under some circumstances, multinationals can actually lead the charge toward higher global standards and greater concern for the lives and livelihoods of affected populations. …

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