Democrats & Liberals Archives

Multinational Corporations and Democracy

Here’s a question for you to answer: Why do American corporations do more business with China than with India? India has almost the same population as China and is roughly at the same level of economic development. India has universities that graduate lots of technical-savvy and business-knowledgeable individuals. What does China have that India does not?

Before answering this question, let's take a look at what multinational corporations and promoters of free trade have been saying:

Listen to the apostles of free trade, and you'll learn that once consumer choice comes to authoritarian regimes, democracy is sure to follow. Call it the Starbucks rule: Situate enough Starbucks around Shanghai, and the Communist Party's control will crumble like dunked biscotti.

This is a fairly common assumption, and has been used by multinational corporations as a way to excuse the big deals they make with autocratic China. However, we now learn that since March of last year, Big Business has been lobbying the leaders of China to make sure that society is NOT made more democratic even a tiny bit. American businesses in China have fought mightily to prevent the adoption of legislation somewhat beneficial to workers:

The legislation wouldn't allow workers to form independent trade unions or grant them the right to strike -- this is, after all, a communist regime. It would, however, require employers to provide employees, either individually or collectively, with written contracts. It would allow employees to change jobs within their industries or get jobs in related industries in other regions... It would also require that companies bargain with worker representatives over health and safety conditions.

Not much. But too much for American businesses:

The American Chamber of Commerce in Shanghai and the U.S.-China Business Council embarked on a major campaign to kill these tepid reforms... Based on a second draft of the law, completed in December, it looks like American businesses have substantially prevailed.

Evidently, Chinese leaders are more in favor of democratic reform than American businesses in China are. Isn't that an eye opener? Doesn't this little story answer my original question?

American corporations do more business with China than with India because China is autocratic and India is democratic. With autocratic regimes, corporations can make deals easily. With democratic regimes, deals are harder to execute because they must conform to the law.

More free markets and more free trade does not necessarily lead to greater openness and democracy.

Posted by Paul Siegel at April 5, 2007 5:17 PM
Comments
Comment #215263

Paul

China organized its infrastructure sooner. Both places are very corrupt, but India was corrupt and disorganized. It also suffered under a dehabilitating type of corrupt socialism and only recently began to recover. Give India time.

If China would grant its workers the right to independent unions, it would be one thing. I am no a great supporter of unions, but workers have the right to belong to unions. The trouble with Chinese government unions is that they would rip off both workers and foreign firms even more than they do now. Firms would be bargaining with the Chinese government, not the workers. And the Chinese government, not the workers, would get the benefit. And then the Chinese government would blame the firms for any troubles.

What China could really use is better private property protections.

Posted by: Jack at April 5, 2007 6:04 PM
Comment #215272

Once again our friend Paul slanders American Corporations doing business in foreign countries and anywhere else for that matter. Corporations evil, unions good. End of story for Paul.
I recommend investing in corporations doing business in China and India since both are exempt from Kyoto and even more jobs will be outsourced there when the combination of low wages combined with low energy costs will make these countries unresistable to developed world businesses.

Posted by: Jim at April 5, 2007 7:16 PM
Comment #215283

I think this might be the first time I agree with you. So lets see you find politicians from either party willing to do something about it. Slick Willy took so much bribe money from China he wanted to give them one of our west coast harbors for free. Bush probably can’t find China on a map and doesn’t really care what they do as long as they finance our debt and give us cheap products. I can pretty much guarantee all the ‘08 candidates will embrace China so how exactly do you suggest the current situation will change?

Posted by: carnak at April 5, 2007 9:18 PM
Comment #215295

I think the question shouldn’t be “what does China have that India does not,” but what does India have that China does not?

One thing that springs to mind is a greater private entrepreneural tradition resulting in a situation where foreign companies have to compete with Indian-owned and managed companies when they set up shop in India. What China offers foreign companies is loads of cheap labor which they’re invited to come in, organize and exploit.

Posted by: Loyal Opposition at April 5, 2007 10:50 PM
Comment #215300

This is a curious dichotemy.

White collar jobs are being shipped to India, and blue collar jobs are being shipped to China.

What exactly are the jobs that are left?

Posted by: Rocky at April 6, 2007 12:24 AM
Comment #215306

Excellent post Paul. If you’re a corporation the last things you want are free markets and democracy. Corporations have a job to do earning as much as they can. Democracies have a job to do regulating corporations and setting up the rules by which they are allowed to operate. Corporations are to be subservient to democracies and should not be allowed to interfere with the democratic process.

Posted by: muirgeo at April 6, 2007 1:34 AM
Comment #215329

The Multinationals headquartered in this Country have proven time and again that they will stoop to the lowest levels including, selling out this Country, to accomplish their objectives. Yet the free trade types will continue to support these thugs and their lies. Yet these same supporters will blame the dems for being unpatriotic when it comes to a variety of issues.
The Multinationals are allowed to buy our politicians because it would violate their free speech rights to do otherwise. Its time to realize this and amend the Constitution to prohibit the corporatist from controlling our nation.
There was a time when big government was the evil to be controlled, those days are behind us, its now the Corporations that treads on the individual liberties of the people of this nation.

Posted by: j2t2 at April 6, 2007 9:50 AM
Comment #215348

You can make up excuses and blame whoever you want on this topic. It’s a business decision that does not look at everything through a particular political lens.

I work for a company that imports some of its products from China. China provides a quality product at a reasonable price that allows us to provide jobs to our local community. This allows us to remain competitive.

China is a lot easier to work with and is responsive to our needs. They understand what supply chain management means and they make it happen.

India does not, they need a committee to do everything and take forever to make decisions.

Paul just despises corporations (capitalism) and what he “thinks” they stand for.

Posted by: cliff at April 6, 2007 1:09 PM
Comment #215362

Cliff, And the corporatist despises democracy and we the people. Their actions speak for themselves its not about thinking what they stand for.

Posted by: j2t2 at April 6, 2007 5:04 PM
Comment #215369

j2t2,

Who are the corporatists and how can I join their party? It sounds like they have all the fun.

Posted by: Rob at April 6, 2007 6:08 PM
Comment #215399

Jim says we should invest in these corporations that actively try to stop democracy. Jim also notes that China has low wages.

Well I don’t wish to import those low wages here. We need labor tariffs now! You want to go make your product for $2.00 a day in wages, fine. You want to sell your product here, it’s going to cost you as much as if you actually made that product here.

Also, we need environmental standards written into our trade deals, with a proactive enforcement body.

Let’s protect our standred of living!

Posted by: Patrick Howse at April 6, 2007 11:59 PM
Comment #215407
Evidently, Chinese leaders are more in favor of democratic reform than American businesses in China are. Isn’t that an eye opener?

That’s not surprising at all. Even if we Americans don’t remember that the US military occupied China for 100 years at the behest of American businesses, the Chinese remember it.

Having said that, I’d much, much rather work in China than India. So it doesn’t surprise me that American workers employed by multinationals feel the same.

Posted by: American Pundit at April 7, 2007 12:35 AM
Comment #215576

it is not democracy but bureaucracy that is the problem with India and attracting business. Furthermore, india has an extreme federal system that makes opening up the entire market very difficult. Democracy need not be messy and disorganized, but in the case of India it is and it hurt its competitiveness in the world market. It is not like indian democracy is so great either, there is extreme poverty in the country that its democracy has not even begun to fix.

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Comment #360791

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