From this foundation provided by Caves, the question becomes how to address the MNCs that figure so prominently in the global economy. Predictably, Wolf and Stiglitz come down on different sides of the fence. In his gushing defense of corporations, Martin Wolf overstates his case and, true to form, delivers a lopsided and unbalanced prescription of market-based solutions to political problems. In broad strokes, Wolf’s argument asserts that the presence of MNCs in the global economy is less bad than their absence. Wolf’s attempt to portray states as the exclusive holders of political power and corporations as powerless lobbies at the mercy of market forces proves to be a disservice to his argument. Wolf takes pains to show that “companies do not dominate markets, but rather that markets dominate companies,” but gives little heed to the inevitable intertwining of politics and economics. Furthermore, Wolf’s complete dismissal of the power of corporate branding and advertising is vexing in that it ignores the billions spent on advertising and brand recognition by MNCs and the constant image-nurturing that most businesses eat, sleep and breathe.
Wolf’s finer moments in the reading comes in his debunking of the “race to the bottom” argument. He makes his case in point with the statement that “the world’s least developed countries are not exploited by transnationals, but ignored by them.” Taking to task the argument that MNCs exploit poor countries and workers, Wolf shows that MNCs tend to look for opportunities more often in the developed than developing world, with 2/3 of all FDI in 2001 going to developed countries. Wolf also asserts that transnational companies have the know-how and wherewithal to pay more than local companies and drive up domestic wages in the local economy. Citing other macroeconomic phenomenon, Wolf is secure in his position that corporate investment is overall adding value to countries on the business end of FDI, but never seems to put his hand on a human pulse or appreciate the serious damage done by corporate greed and corruption. Wolf makes no mention of the environment or the dangers of global monopolies . While recognizing the criticism that MNCs are creating “industrial slums and low-wage ghettos,” Wolf shrugs it off with the cheeky assertion that conditions are better than they would have been otherwise.
While Wolf sees no problems with the culture of corporations, Stiglitz offers a more balanced look at the costs and benefits of MNCs. Sitglitz praises corporations for transferring information, services, goods and technology around the world and raising the overall standard of living, but also notes the ugly externalities, or “market failures,” that corporations produce. Unlike Wolf, Stiglitz grasps the enormous economic and political power wielded by MNCs and questions the merit of letting them lose on the global markets. Of particular concern to Stiglitz are the problems of anti-competitive behavior, monopolies, and the protection offered to unscrupulous corporations by limited liability. Stiglitz lapses into one of his more idealistic moments with his discussion of corporate social responsibility and the prospect of improving global corporate governance. While his suggestions of ending banking secrecy and removing the protection of limited liability partnerships are valid, he ultimately settles on a market-based approach to regulate corporations in the global economy. Ending corporate corruption and greed will only come when moral and economic incentives are aligned .As corporations converse exclusively in the language of money, financial and economic incentives are the only way for socially responsible governments to overcome the apparent language barrier and include virtue in the value added coveted by MNCs.
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