Globalization, Debt, and Transnational Corporations:

the Unfinished Health and Human Rights Agenda

Timothy H. Holtz, MD, MPH

Montefiore Medical Center

July 14, 2005

Outline

Economic, social, and cultural rights Globalization and its discontents Overview of myths of growth Background on debt, structural

adjustment, trade, and aid Impact of transnational corporations

(non-state actors) on health

What are economic rights?

Right to a standard of living Right to work, just and favorable conditions of

work, protection against unemployment, fair wages

Right to social security Right to own property Freedom of peaceful assembly

What are social rights?

Right to marry and form a family Freedom of religion/expression Right to rest and leisure Right to education

What are cultural rights?

Everyone has the right to freely participate in the cultural life of the community, to enjoy the arts, and to share in scientific advancement and its benefits. (Article 27, UDHR)

Everyone is entitled to a social and international order in which the rights and freedoms set forth in the Declaration can be fully realized. (Article 28, UDHR)

Do we really live in a “global village”?

*Marshall McLuhan

How does one define the concept of “globalization” that we hear about every day?

What does it mean that we live in a “global economy.”

Does anyone know what this really means?

Free markets make free men.

Milton Friedman

University of Chicago

Nobel Laureate, Neoliberal Economics

“Globalization is the growing interdependence of the world’s people through shrinking space, shrinking time, and disappearing borders.”

Markets, the HDR states, have been allowed to dominate the process, and the benefits and opportunities have not been shared equally.

The result is that “global inequalities in income and living standards have reached grotesque proportions.”

1999 Human Development Report, UN Development Program

Globalization

Rats and roaches live by competition under the laws of supply and demand; it is the

privilege of human beings to live under the laws of justice and mercy.

Wendell Berry

Development

Is growth necessary for a just and fair globalization?

Is economic growth necessary for social development?

Is growth in GDP our only measure of success in reducing poverty?

GNP and life expectancy

1979 Data

GNP and life expectancy

74

52

GNP per capita and Life Expectancy at Birth, 1994

From Development as Freedom, Amartya Sen 1999. Figures from Country Data World Bank, World Bank Development Report, 1996

Globalization is….

“When the profit motives of market players get out of hand, they challenge people’s ethics – and sacrifice respect for justice and human rights.”

“More progress has been made in norms, standards and policies for open global markets than for people and their rights.”

“Patent laws pay little attention to the knowledge of indigenous people. The result – a silent theft of centuries of knowledge from developing to developed countries.”

1999 Human Development Report, UN Development Program

Globalization also is... “The collapse of space, time, and borders

may be creating a global village, but not everyone can be a citizen. The global, professional elite now faces low borders, but billions of others find borders as high as ever.”

“The new rules of globalization – and the players writing them – focus on integrating global markets, neglecting the needs of people that markets cannot meet. The process is concentrating power and marginalizing the poor.”

1999 Human Development Report, UN Development Program

Growth

Myth: neoliberal capitalism is the only way to achieve economic growth (Does everyone “know this to be true?”)

Myth: Growth will automatically translate into greater prosperity for all

Myth: Growth is an sufficient objective Myth: Economic laws and markets

function independently of politics

Golden Age of Growth

1945-1970 was golden age of capitalism, industrialized countries grew at 5% annually

Managed growth by governments (Keynes) High trade flows, low currency flows (restrict

mobility of capital) Oil crisis of 1973 heralded end of age Stagflation (high rates of inflation and

unemployment) Election of anti-state governments in UK and

US

Globalization = neoliberal capitalism

High debt burden Promotion of “free markets” Relaxation of trade barriers Reduction of subsidies for the poor Privatization of public assets Weakened role of government Growing dominance of western-based

transnational capital Continued high military expenditures

The “global economy”

Crushing debt burdens on poor countries

“Free trade” theory elevated to dogma

Diminished aid from rich countries to poor countries

Accelerated capital flows and increased influence of privatization of public assets

Increasingly important role of transnational corporations

I. Debt crisis (1982 to present)

Commercial banks loaned vast amounts of capital to developing nations at high interested rates, not predicting….

Changes in international economy Expanded bank lending, fueled by oil prices Increased government borrowing

…many countries stretched to thin - July 1982 Mexico defaults, heralding beginning of crisis

The crippling burden of debt

Countries of Sub-Saharan Africa spent an average of $12 billion annually on debt repayments from 1990-1995, while their total debt increased by $33 billion.

For 27 highly- indebted nations, debt is greater than their GNP.

Tanzania’s debt service payments are nine times what it spends on primary health care and four times what it spends on primary education.

Mozambique has a debt burden nine times the value of its exports.

1998/9 Human Development Report, UN Development Program

Neoliberal diagnosis

State playing too large a role Markets are being inhibited, state

intervention is preventing markets from being efficient

Government should stick only to property rights and enforcing contracts

Neoliberal prescription

Reduce role of state relative to the market Allow floating currency rates, and wages to

be determined by market forces and interest rates

Lift all barriers to trade and investment (opposite of Adam Smith’s “invisible hand” – free movement of labor but not capital)

International Financial Institutions

“Bretton Woods Institutions,” NH, July 1944 World Bank (WB)

Support embedded liberalism “Free trade”, restrictions on capital mobility, and

domestic social contract Provided loans to countries for development

projects International Monetary Fund (IMF)

Prevent currency fluctuations/devaluations Contain 1930-style economic crisis

GATT – General Agreement on Tariffs and Trade

World Bank program of “Structural Adjustment” of the world’s poorest countries

Re-orienting economies toward export production, away from self sufficiency

Removing restrictions on foreign investment Reduction of wages Cutting tariffs Imposing consumption taxes (value added tax/VAT) Eliminating price subsidies on essentials like food and

housing Devaluing local currency Privatizing state enterprises Deregulating gov’t oversight of economic activity

Structural adjustment report card

75 countries had received loans by 1991 30 in SSA, 18 in Latin America Overal debt increased, both official debt and

commercial debt Did not reduce debt, reduce poverty, or

increase growth New category HIPC – Bolivia, Burkina, Ivory

Coast, Guyana, Moz, Uganda

Growth for whom?

Only 33 countries achieved sustained three percent annual growth in gross national product (GNP) per capita during 1980-1996.

For 59 countries, mainly in sub-Saharan Africa and the countries of the former Eastern Bloc, GNP per capita declined from 1980 to 1996.

1999 Human Development Report, UN Development Program

Revised poverty agenda - 1990

Labor intensive growth, invest in human capital, promote social safety nets

Enhanced Structural Adjustment Facility (ESAF) Enhanced Heavily Indebted Poor Countries Initiative

(HIPC) led by the G8 Reduction of tariffs, elimination of state support for industry,

privatization of infrastructure to foreigners, removal of capital controls, opening up of service sector to foreign investors

Goal was to bring debt burden to “sustainable level,” although HIPC failed to achieve goals

Progress has still not been achieved, as many sub Saharan African countries’s growth has been static for the past 15 years

Investing in Health, World Bank 1993

Promoted cost-efficiency approach to health care in developing countries in a world awash with capital.

Medical care defined as a commodity, and health defined as the absence of disease.

The concept of disability adjusted life years (DALYs) promoted.

Marked the entry of the World Bank in funding large health care projects in poor countries, such as vertical vaccine campaigns, TB control, etc.

What are the health effects of the IFIs?

ESAFs have failed to significantly raise GDP of participating countries

ESAFs have failed to reduce external debt burden of most highly indebted countries

Social safety nets are nonexistent: for education, health, housing, social security

“Cost-effectiveness” calculus further hurts the most vulnerable populations, violates their social rights, and results in continued stagnating health outcomes

II. World Trade: separate worlds

48 poorest countries account for 0.4% of global exports

Share of world’s exports by least developed nations fell from 15% in 1968 to 13% in 1998

Transnational trade (globalized economy) reaches AT MOST only 1/3 of the world’s population

“Free trade”

More trade between nations in late 1800s than there is now

46% of world trade is between EU, US, and Japan (OECD)

Actually 30-40% of “trade” consists of transactions within same TNC, trading with their own affiliates

More on trade

Most new manufacturing growth comes from NICs (SK, HK, RoC, Sing.)

Single commodity exports account for half of export earnings for many countries

The record shows, however, that the US, Rep of S Korea, Taiwan, & Japan ALL developed under restricted and protective trade laws

World Trade Organization

WTO created in 1990 to supersede GATT Set up to manage world trade system Extensive set of regulations and rules are

required (free is a misnomer) Many argue these rules are set up to benefit

the powerful, the TNCs, big finance capital from West

All meetings held closed door

III. Diminishing aid from the West

US is steadily decreasing its annual contribution in foreign development aid, which is now at 16 cents for every $100

Many other countries, especially Scandinavia, devote over 80 cents/$100 of their GNP for foreign aid

Blair proposal is to increase aid to 70 cents for every $100 by 2015

Given historical US rates, we will never achieve that level

IV. Global finance capital

Dramatic increase in movement of capital

Principle of free trade to capital? Daily trading in foreign exchange is over

$2 trillion per day Control of capital is increasingly

centralized

Transnational Capital Flows

Currency flows reach trillions of dollars every day, mainly between developed countries.

Foreign direct investment (FDI) reached $XXX billion in XXXX

FDI is dominated by TNCs 58% of it went to developed nations, and just

5% to the transition economies of Central and Eastern Europe

Foreign Direct Investment (FDI)

FDI in developing countries increased from $18.3 billion in 1983 to $149 billion in 1997

FDI to developing countries is highly concentrated: 80% went to only 10 countries, with China as the largest recipient

The 100 smallest countries received less than 1% of worldwide FDI

Only 5% of FDI to developing countries goes to Africa

New poverty agenda – 2000s

Caps on health and education expenditures, esp staffing

User fees Liberalization of imports Export driven growth

Structural adjustment in disguise?

G8 (G7?) Communique – July 2005

Bilateral Debt cancellation Limited number of countries (18) Conditionalities Strict surveillance and transparency requirements “Good governance” (aka “anti-corruption”)

“Free trade” Further liberalize economy Lower trade barriers

Increasing development aid? Bush left without any further commitment of funds

Alternative Global Equity Agenda - 2005

Complete multilateral debt cancellation Unconditional cancellation of all sovereign

developing country debt Cap on debt servicing level

Fair trade justice End of conditionalities on trade and tariffs Ending of agricultural subsidies

Adequate aid (> 0.7%) to meet need

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“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”

President Abraham Lincoln, November 21, 1864, letter to Colonel William F. Elkins.

V. Transnational CorporationsTNCs

“Non-state actors” Characteristics

Economic power International character Impact of activities Regulatory difficulty in LDCs

TNC Economic Power-1

Of the 100 largest economies in the world, 51 are corporations (sales versus gross domestic product/GDP)

The top 200 corporations’ sales are growing at a faster rate than global economic activity

The top 200s’ combined sales are 18 times the size of the combined annual income of 1.2 billion people living in severe poverty

US firms dominate the top 200 (82), while Japanese firms are second with 41

TNC Economic Power-2

The sales of the Top 200 are the equivalent of 28% of world economic activity, they only employ 0.8% of the world’s workforce

Between 1983 and 1999 Top 200 profits grew by 362%, but employment grew by only 14%

44 of 82 US Corporations in the Top 200 did not pay full taxes; Seven actually paid <0% - Texaco, Chevron, Pepsico, Enron, McKesson, Wal-Mart

TNC International Character

The top corporations earn 40-50% of their yearly profits from sales overseas

Assets of TNCs are also located overseas, 33% of pharmaceutical industry, and 75% of electrical industry

Many examples of individual factories and entire industries moving overseas to benefit from reduced wages, lower standards, higher profit margin

Takeover in Nigeria

150 Ugborodo and Arutan women successfully shut down a Chevron/Texaco oil plant in Escavros for several weeks in June/July 2002 by occupying an pipeline terminal, trapping 150 workers inside

Demands: Jobs for locals and electricity for their villages

Damage to Nigerian environment and health of villagers throughout Niger River Delta from oil and gas drilling is extensive

New York Times, July 14, 2002, Foreign Desk

Gas flaring in Ogoniland, Niger River Delta, December 2002Credit: Owens Wiwa

HR Impact of TNC Activities-1

Civil and political violations Violate right to self-determination Violate freedom of association Perpetuate racial discrimination Genocide against indigenous peoples Violate right of people to dispose of the natural

wealth Bodily harm to people opposed to TNC by security

forces

HR Impact of TNC Activities-2

Violations of ESC rights Right to work freely chosen Right to just and favorable working conditions, fair

wages, equal pay for equal work, safe and health working conditions, reasonable limit on working hours

Right to education Right of children to be protected from economic

and social exploitation Right to an adequate standard of living for

individuals and their families

HR Impact of TNC Activities-3

Indirect impact Pursuit of export oriented economic

policies Destruction of environment Urbanization Engaging in business with repressive

regimes

TNCs and Repressive Regimes

Loans to repressive regimes Breaking sanctions against repressive

regimes Buying from repressive regimes Selling to repressive regimes Lending credibility to repressive regimes

Health and Human Rights Impact of TNC Activities-1

Oil/power exploration Texaco-Gulf in Ecuador – environmental destruction BP in Colombia – private security abuses Royal Dutch Shell in the Niger Delta – murder and

environmental destruction Mining industry

Freeport-MacMoRan in PNG – mine tailings Chemical Industry

Union Carbide - Bhopal Disaster 1984 Manufacturing industry

Wal-Mart, Disney, K-Mart, Kathy Lee Gifford

Health Impact of TNC Activities-2

Maquiladora sector on US-Mexican border has blossomed to over 2,500 factories

Assembly plants, part of export processing strategy to develop Mexico (though most people there live in squalor)

90% are owned by US corporations, though often subcontracted work; Korean corporations also common

Preferential tariffs, low taxation, lax environmental standards

Health Impact of TNC Activities-3

Maquiladora sector characterized by low wages, poor working conditions, environmental abuse, poor infrastructure

Human rights issues center around fair wages, right to organize, hazardous working conditions, disclosure of hazardous waste, safety training, infrequent occupational inspections, occupational compensation for injury, sexual harassment, child labor, housing conditions

Health issues center around repetitive strain, noise/solvent/toxic waste pollution, miscarriages, skin disorders, pulmonary disease/asthma, depression

Approaches to regulate TNC abuses

“Social Responsibility” approach Promotional, use rational persuasion and moral

argumentation TNCs to sign corporate codes of conduct

“Social Accountability” approach TNCs can’t self-monitor, need independent accounting

“Economic threat” approach TNCs only respond when profits threatened with boycotts,

etc. “Punitive” approach

Sanctions, selective purchasing laws, divestment campaigns

Regulating TNCs-1

Commission on Transnational Corporations in 1975 formed draft code – focused on bribery, disclosure of dangerous processes, and export of hazardous products and factories

Blocked by Reagan administration and died a sudden death

As “Non-state actors” they cannot be held accountable to same standards as states in UN

Voluntary codes exist, but no enforcement Declaration and Guidelines on International Investments and

Transnational Enterprises (OECD) Tripartite Declaration on Principles of Transnational

Enterprises and Social Policy (ILO) WHO/UNICEF code on infant formula marketing

TNC Response to Criticism

Avoidance Resistance Acquiescence Compromise

Corporate Codes of ConductBare essentials

Employment standards – nondiscrimination, working hours, compulsory labor, fair wages, child labor, freedom of association, healthy workplace guidelines, excessive punishment guidelines

Environmental standards – protection of biosphere, energy conservation, sustainable use of resources, risk reduction, disposal of waste

Internal compliance regulations – personnel to monitor compliance, business partners to abide by standards (outsourcing), audit instruments to be used on site

Country assessment guidelines – assessment of performance of all affiliates, gathering information from all sources

Independent monitoring

Amnesty International HR Principles for TNCs/companies-1

Explicit company policy/UDHR Security/law enforcement policy Community engagement Freedom from discrimination Freedom from slavery

HR Principles for Companies, Amnesty International

HR Principles for TNCs/companies-2

Healthy and safe work environment Freedom of association and right to

collective bargaining Just and favorable working conditions,

including security and fair compensation/wages

Freedom from child labor Monitoring human rights policy

HR Principles for Companies, Amnesty International

Corporate Codes of ConductCurrent problems

Lack of uniform language Lack of compulsory enforcement mechanisms Lack of language on sexual harassment Fair wage/living wage clauses often

inadequate and vague Codes do not cover contractors and

outsourcers ***Lack of independent monitoring***

Do we really live in a “global village”?

*Marshall McLuhan

“People say, what is the sense of our small effort? They cannot see that we must lay one brick at a time, take one step at a time. A pebble cast into a pond causes ripples that spread in all directions. Each one of our thoughts, words, and deeds is like that. No one has the right to sit down and feel hopeless. There is so much work to do!”

Dorothy Day

Summary

Civil-Political rights and Social-Economic-Cultural rights are interdependent and indivisible, cannot have one without the other

Neoliberal capitalism and its “aid system” imposes many constraints on poor countries in promoting and protecting health rights

Globalization brings with it many human rights issues not generally discussed

Transnational corporations and other non-state actors have health and human rights impacts that should and can be monitored

Militarism

$781 billion spent per year on military expenditures

78% of expenditures done by developed countries

The US exports over $50 billion in arms every year, more than all other countries combined

1998 Human Development Report, UN Development Program

Health costs of the weapons race

“War is bad for public health” Majority of casualties since 1900 have been civilians,

more so in the last 50 years 75-90% of casualties since 1980 have been civilians Health care facilities are targets in wars, ie El

Salvador, Nicaragua, Mozambique, Philippines Arms not only kill, but do chronic damage

Landmine injuries cripple victims for life Arms fought with small arms have long lasting effects, ie

Rwanda, Sierra Leone

Arms exports The US exports over $50 billion in arms every year, more

than all other countries combined Many of these exports are to developing nations,

especially those in conflict, human rights violations common

Of 24 countries which experienced at least one armed conflict in 1997, the US had sold arms to 21 out of 24

US taxpayers spent $7.6 billion in 1995 to promote and finance weapons exports – taxpayers underwrite the R&D of weapons, subsidize the costs, privatize the profits, and employ thousands of government staff whose main jobs are to promote US arms sales

1998 Human Development Report, UN Development Program

Share of world arms exports by US, 1984-1996

Indirect costs of weapons race

Diversion of resources from developing countries budgets into weapons, away from social needs

Some countries spend 5-10% of the GNP on military expenditures (Sivard’s Military and Social Expenditures yearly almanac)

Damage to the environment/hazardous waste, from weapons manufacturing as well as use (in US as well as abroad)

Create of climate of violence/crime, ie El Salvador

What can we do?

Document the effects of war on health and public health

Disseminate this information widely Work for peace! Not militarism SIGN THE LANDMINE TREATY!!

Code of Conduct in arms sales

“Code of Conduct” needed to ensure that arms do not fall into wrong hands

Code would prohibit arms exports to any government that does not meet criteria set out by law: democratic government, respect for human rights of citizens, non-aggression, and participation in the UN Register of Conventional Arms.

Many supporters, Nobel Laureate Oscar Arias Sanchez, Rep Cynthia McKinney from Georgia, Rep. Rohrbacher from California