Exploring the Global Race to the Bottom

 

 

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What is globalization?

Project Proposal

An Introduction to Globalization

What is the RTB effect?

Exploring a Global Race to the Bottom

Case Studies

The Debate: A Global Race to the Top?

What can we do about it?

Conclusion

References

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   During the transitional stages before a developing nation becomes developed, one of the many factors that will catalyze development is the source of jobs.  Multinational corporations (MNCs) understand this need and are more than happy to fill it.  The problem is that MNCs, possessing such a massive source of jobs, recognize their appeal and instead of the relationship being equally weighted, there is a lopsided distribution of power in favor of the MNCs.  MNCs possess the power for one underlying reason: they are portable (Chan and Ross, 2003).  Therefore, they can risk being shut down in a developing nation by exploiting their workers and polluting the environment because they have the alternative of moving to another developing nation. 

            What’s worse, the developing countries are under the belief, whether or not it is true, that they can’t survive without the job source provided by the MNCs.  Therefore, in order to attract the MNCs, developing nations will lower their environmental and working standards.  Checks such as minimum wage, worker unions, and political autonomy are forgone for an environment conducive to worker exploitation and environmental degradation (Gitterman, 2000).  Once one developing nation lowers their standards, it triggers a global “race-to-the-bottom” in which developing nations, in order to stay competitive in appealing to the MNCs, lower their standards.  Like in all competition, the best wins, or in this case, the worst.  Countries with the worst working conditions and lowest environmental standards become most desirable to MNCs (Panayotou, 2000). 

 

 

 

 

            There are many more contributing factors to the “race-to-the-bottom.”  First, pollution is an externality that can be passed off to other neighboring countries (Woods, 2006).  Businesses and developing nations become more focused on the economy and less focused on the environment as they see pollution like a trip to the dentist, undesirable but necessary.  Second, according to Zarsky, developing nations are stuck in a  “policy paralysis” when it comes to fighting the “race-to-the-bottom” (Zarsky, 1997).  MNCs understand their crucial role in developing a nation and therefore are aware of their ability to influence government policy.  Any sign of political action to raise environmental standards and working conditions is met with the threat by the MNCs to cease operations within the country.  Finally, since all developing nations are self-interested, communications and legislation between nations to set minimum standards are, at best, temporary.  Furthermore, governmental instabilities in developing nations make it doubly hard to instate any precedents; government instabilities make it easier for an MNC to overpower a government.

            With all that being said, there is still evidence for the adverse effect, a “race-to-the-top.”  Some analysts argue that once developing nations gain capital from the jobs provided by MNCs, they also gain the ability to raise working conditions and environment standards.  Providing developing nations with capital gives them purchasing power to import products that in turn makes their economy even more competitive.  As the competition rises, more capital gain is made, in turn producing a more stable government to create better legislation to protect the environment and worker’s rights (Woods, 2006).  While empirical evidence for both races exists, it is heavily weighted in favor of the “race-to-the-bottom.”  However, some analysts counter by pointing out that the effects of the “race-to-the-top” are just yet to be seen because they take longer to accomplish.  Either way, both races are a cause for concern because of their unrivaled reliability on multinational corporations.

 

 

 

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