Case Study
#6
Transnational Corporations
Outline
 Dimensions
of Globalization
 Economic Globalization
 History
 Examples
 Project
Dimensions of Globalization
Economic
Social
Political
Environmental
Dimensions of Globalization
Political
•
The United Nations, the European Union
Economic
•
•
•
An American company outsourcing the production of their shirts to
a factory in Thailand
The trading price of the Japanese Yen affecting the trading price
of the Canadian dollar
NAFTA, the European Union
Social
•
•
Watching the K-Pop (Korean Pop) in Canada
YouTube, Facebook
Environmental
•
•
The destruction of the Amazon rainforest affecting global climate
change
Greenpeace
Economic Globalization
Deals with the spread of goods, services, and
money around the world
Important Terms:

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

Trade liberalization
Free trade v. Fair Trade
Foreign investment v. Microcredit
Privatization v. Joint Ownership
Outsourcing
Knowledge Economy
Economic Globalization
Trade liberalization: The removal or reduction of barriers (tariffs
and subsidies) that block trade between nations.
Tariffs: Taxes on imported goods and services
 Subsidies: Money paid to domestic producers, from the
government, to prevent a decline in their industry, an increase in
prices, or to promote hiring more workers

Economic Globalization
Free Trade versus Fair Trade


Free Trade: Trade without government interference
Fair trade: Trade that promotes sustainability
(environmental, social, and economic)
Economic Globalization
Watch & Respond
1. What is fair trade?
2. How are workers treated on most
banana plantations?
3. What is the purpose of a “workers
cooperative?”
4. How are fair trade practices
related to the environment?
5. Why are companies willing to pay
a higher price for fair trade
products?
Economic Globalization
Common
criticisms of big
multinational
banana
companies =
labour &
environmental
problems
Economic Globalization
Activity – The Price of a Banana!!


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Assume the price of a banana is $1.00
On the Handout, “Roles for Slicing the Banana,” read the roles
involved in getting the banana from the plantation into your
hands
Decide what amount you believe each role should have of
the final banana price
For each amount, explain your reasoning and discuss the
factors that impacted your decision
Economic Globalization
Economic Globalization
$0.02
$0.08
$0.10
$0.20
$0.10
$0.50
Economic Globalization
This diagram illustrates how the $$$ of bananas
is distributed
More than 90% of the price paid by the
consumer stays in the Global North and never
reaches the producer
Most of the risks of producing a perishable fruit
are, however, born by the producer…
Economic Globalization
Foreign Investment: One country investing in people, goods, or
services in another country



Example: Chinese companies purchasing Alberta Oil Sands
companies
Advantage: Potential increase in money and jobs in the country’s
economy
Disadvantage: Can lead to a loss of independence (is it ok for a
foreign country to own our natural resources??)
Economic Globalization
Foreign Investment – Maquiladoras v. Micro Credit


Micro Credit: Providing small loans to poor borrowers to start
their own businesses
Designed to encourage entrepreneurship, alleviate poverty
& empower women
Economic Globalization
Privatization v. Joint Ownership (PPPs)
Privatization: Taking something owned by the public and
changing it to private ownership
 Joint Ownership: A business venture that is formed through a
partnership between the government and business
 PPP =“public private partnership”

Dimensions of Economic Globalization
Outsourcing

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Definition: Asking someone else to do something for you – that
you have to do
Example: You may outsource your chores to your younger
brother
Usually because a company/country/etc. can produce
goods for less $$$ and in less time
Challenges:
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
Often jobs are outsourced to different countries, which takes
$$$ away from the home country’s economy
The job may not be completed to your exact specifications,
because of cultural barriers, poor instructions,
Dimensions of Economic Globalization
Outsourcing
Economic Globalization
Example: AJ Jacobs’ Outsourced Life (video)
Writing Activity
Outsourcing can drastically reduce a
company’s costs but it also often takes jobs
out of a country…
What is more important - paying less for goods
or having jobs stay in Canada? Explain.
Economic Globalization
Knowledge Economy: Using thinking (research, education, new
ideas, etc.) instead of physical products to produce money and
jobs.
 Example: The University of Alberta
 Advantage: Rewards people for their creativity and
thoughts
 Disadvantage: Doesn’t often develop skills/trades (which
are still needed)
Economic Globalization
Term Review
Characteristics of
Economic
Globalization
Increased Trade
Challenges


Increased Foreign
Investment
Increase in
Privatization
Use of Outsourcing
Domestic industries can collapse –
workers lose jobs and country becomes
dependent on foreign goods
Global North countries can take
advantage of Global South for their
cheap labour and weak laws (i.e.
Maquiladoras)


Can use Fair Trade – the
opportunity to promote
global sustainability
Can provide consumers
with better prices and
different goods
Foreign investors don’t have a stake in the
local economy
Can stimulate economic
development in Global South
(i.e. microcredit)

Can raise consumers’ prices
Can lower taxes

Can charge consumers for basic needs


Loss of domestic sovereignty
Opportunities
Domestic workers can lose their jobs
Can promote increased
overall efficiency
How economic globalization
happen?
Well….
After WWI…
Things seemed great for a while
But then ….
The Great Depression
 What’s

to blame?
Not enough government intervention!!
 John

Maynard Keynes
Too much government intervention!!
 Milton
Friedman & Friedrich Hayek
Keynesian Economics
Not ENOUGH
government
intervention!!
Classic Liberalism
Milton Friedman
&
Friedrich Hayek
• Pro-Economic Freedom
• Why? There is no way that the
gov’t can have enough info
to make rational decisions
• Why? The free market is the
only way to balance supply
and demand in the economy
while maintaining individual
liberty
How Can Governments Intervene?



Monetary policy: Using the supply of money to influence
the economy (connected to interest rates)
Fiscal policy: Using government expenditures and revenue
collection (taxes) to influence the economy
Government Spending: Creating big public works projects
to stimulate the economy
Video
Classic Liberalism Won!
The rise of transnational corporations….
Economic Liberalism
Transnational Corporations
 Definition:
A company that is registered in more
than one country or that has operations in more
than one country
 Of the 100 largest economies in the world, 51 are
corporations while only 49 are countries
Economic Liberalism
Transnational Corporations
Case Study: Nike
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Thailand: Nike donated $1 million to tsunami relief efforts
Environment:
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Nike is among 500 U.S. companies which have pledged to avoid
the use of products made from clear-cut old-growth temperate
rainforests and implement a comprehensive program to source
responsibly-produced wood products
Since 1993 Nike has sponsored the Reuse-A-Shoe program, which
grinds up used athletic shoes to create football fields, basketball
courts, and playgrounds
Workers Rights:

In 1999, as part of its efforts to address charges levelled at it by
anti-sweatshop campaigners, Nike donated $7.7 million to the
International Youth Foundation to set up the Global Alliance for
Workers and Communities to monitor the factories of global
companies' subcontractors
Economic Liberalism
Transnational Corporations
Case Study: Nike
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Canada: Nike acquired Bauer Nike Hockey, including three
Canadian union-represented facilities, in 1995. The company
announced in late 2003 that it will close two of these facilities
and drastically downsize the third
Indonesia: Oxfam Community Aid Abroad finds that Nike
workers:
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Are paid so little they are forced to separate from their children,
Have good reason to fear that if they join independent unions they
may face dismissal, jail or physical assault;
Work in dangerous conditions (i.e. inhaling toxic chemicals), and
are shouted at when they work too slowly
Politics: Senators (i.e. Ron Wyden) who are the top recipients
of political contributions from Nike have been linked to
supporting free trade agreements (i.e. Central AmericanDominican Republic Free Trade Agreement)
Economic Liberalism
Transnational Corporations
Case Study: Apple
 Health:
Part of the Product RED campaign,
whose mission is, together with other brands such
as Nike, Girl, American Express and Converse, to
prevent the transmission of the HIV virus from
mother to child by 2015
 Charity: Apple donated $2.5 million dollars to the
American Red Cross to aid in Hurricane Sandy
relief
Corporate Investigation
Project!!!