Marius Rosenberg Amundsen
Msc in Marketing 1 year.
The Dark Sides of Rapid Economic Growth: The Chinese
Phenomena and its Negative Implications
China has emerged as an economic giant in the past years with an average
gross product of more than 8 percent each year since 1978, a figure few
other countries can hope to match (www.ers.usda.gov). This rapid growth
combined with the enormous population and a more market liberal
approach from the government has made China a desired location for
foreign businesses.
Inevitably such favourable conditions also attract actors with poor ethical standards. One
challenge the corporate world needs to take seriously is the use of child labour in China.
Global march against child labour reported that approximately 9,2 million, or 7,9 %, of
the children between the age of 10 and 14 were economically active in China in 2000
(www.globalmarch.org).However, most of these children worked in agricultural
industries indicating that they are from farming communities. In the same report it were
stated that no violation of children’s rights had been registered in the urban areas.
However, Global March Against Child Labour could also report of a growing trend that
rural children and teenagers were increasingly attracted by the far larger wages offered at
factories situated in more urban or sub-urban areas. This escalating supply of labour has
the dangerous potential of tempting corporations to take advantage of the huge work
force concentrating in urban areas and especially the children since they can be
compensated with fewer resources. Firms can set criteria for employment beneficial to
their own operations knowing that if the workers protests they can easily be replaced
(www.rfa.org). Large multinational firms have acknowledged that they can’t get away
with using under aged labour. The enormous media focus that followed the disclosure of
Nike’s use of child labour in Pakistan has contributed to that, but there are other smaller
players that do not rely so heavily on their reputation as Nike and other global brands do.
A good example of such a player is a subcontractor to Nokia situated in China that during
an inspection initiated by Nokia tried to conceal the fact that they hired under aged
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workers and compensated them below minimum wages as well as taking away other
privileges they were entitled to by law. The inspection of the Chinese factory was filmed
and included in a documentary broadcasted on NRK in November 2005. The
documentary addressed Nokia’s supplier requirements and how they were enforced.
Amongst several suppliers that were visited the Chinese factory that manufactured wires
for mobile phone chargers in China was included. The factory was very dependent on
their business relationship with Nokia. The inspection revealed that the labour legislation
was violated on several aspects in addition to the abovementioned, along with Nokia’s
own supplier requirements. As a consequence an ultimatum was presented to the
company regarding specific areas that had to be improved if they should gain any future
contracts with Nokia. However, the real concern that derives from this is the ethical
standards of smaller firms establishing in countries like China. The factory in question
had located their business relatively far away from any major urban area. The reason for
this was according to the manager that they wanted to contribute to economic growth in
the rural parts of China. The makers of the documentary doubted this and with good
reason as the infringement of the workers rights were revealed. The other and far more
cynical motivation for the chosen location proposed by the documentary makers was that
governmental intervention and monitoring are less frequent in rural areas, allowing easier
conditions for companies with deliberate intentions of operating in the borderlines of the
law. We can hope that firms with such characteristic represent only a fraction, but
unfortunately I believe that there are foreign actors in China with the similar mindset who
are tempted by the opportunity of cutting costs by ignoring and violating the basic rights
for labourers.
Returning focus to Nokia’s role it is only natural to ask whether this shows true
dedication towards corporate social responsibility from Nokia? I would say both yes and
no. Most global enterprises today realize the risk of being connected to an actor that
violates working legislations or in any other way act unethically. Undoubtedly this
motivates them to set requirements and standards to, for instance, their suppliers.
Consequently, I raise the question whether multinational players such as Nokia initiates
activities similar to the aforementioned with their own reputation and image in mind.
Hence, the intention behind the efforts is not driven by the desire to improve conditions
for workers, other stakeholder groups or the environment, that is merely a “side-effect”.
From another point of view one could argue that such initiatives are at least better than
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doing nothing altogether. I cannot disagree with that argumentation; nevertheless if that is
the case it shows a dark and cynical side of the corporate world that deliberately exploits
any possibility for positive PR regardless the ethical nature of it.
In the light of this it is apparent that there is a major challenge for the Chinese authorities
and the corporate world to ensure that even though the economy of China is blooming,
workers driving the growth are not left behind and taken advantage of.
Another critical corporate social responsibility issue that economic growth inevitably
brings about is environmental concerns. Through the course of history rapid economic
growth has come on the expense of the environment with the excuse that it creates jobs
and possibilities for more business establishments and increases the general welfare level.
Such a perception is quite short term oriented. Economic growth must be managed in a
sustainable way ensuring that the environment isn’t harmed, thus ensuring future
generations to benefit from it. These two issues are highly interconnected, nevertheless
incidents have occurred revealing that certain segments of the corporate world neglects
the importance of sustainable growth and development. Driven by profit possibilities
enterprises have engaged in projects and started activities without proper quality check
and planning, stating that operations are hazard free and tests show that everything is
working according to regulations. The latest example of such behaviour is only a few
months away. On the 13th of November 2005 an explosion at the Jilin Petroleum and
Chemical Co. in the Northeast of China caused several tons of cancer-causing Benzene to
be dumped in the Songhua River (www.chinastudygroup.org).
This toxic dump will affect the environment and the surrounding populations for years to
come and it also threatens Russian villages situated nearby the border. In light of this it is
tempting to draw a parallel to the plans of the developing oil- and gas fields in the
northern region of Norway. Even though security standards and governmental monitoring
can be assumed to be stricter in Norway than China this does not automatically imply that
operations will run flawless. Taken into consideration the implications a similar incident
as the one in China would have on the natural resources, such as fish and sea birds,
surrounding the oil and gas fields in the Barents Sea the risk is high. Again the question
of sustainable development arises. Do we know enough about the potential of these oil
and gas fields? Do the oil companies have the necessary equipment and routines to deal
with a major oil spill? According to Bellona the answers to these two questions are
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definitely no. On their web site they refer to both the Norwegian institute of pollution,
who proclaimed that the data which the government based their decision on when they
allowed drilling in the Barents Sea were poor, and the Norwegian institute of sea research
who stated that the sub sea maps of the Barents Sea area are far from sufficient to engage
drilling (www.bellona.no). Subsequently, the question which derives from this is; what is
most important? Arguments supporting both views can be quite persuasive. When the
CEO’s of Statoil and Hydro appears on television with enthusiasm and promises of
increased welfare and economic growth in the region, people wish them welcome. When
questions about the dangers to the environment such activities inhibits, they quickly
assure that operations in the respective area is safe and that every precaution are taken,
but as mentioned no-one can guarantee this 100%. Advocating the totally different
perspective Bellona and other environmental groups state that the risk of retrieving oil
and gas from the northern regions are too high and that it will permanently damage the
vulnerable environment and natural resources located there. To address the initial
question of what is most important a universal answer is difficult to agree upon, it will
depend heavily on which stakeholder groups’ interests are emphasized. Nevertheless a
common understanding of the necessity of a sustainable development of the fields can be
reached.
Linking the political issue of whether the Barents Sea should be utilized for oil retrieving
purposes with the galloping economical growth in China, history has showed that
economic growth needs “fuel” to escalate further. The Roman Empire was dependent on
slave labour and the downfall of Rome came as a direct consequence of the abolishment
of slave labour. In more recent periods in history steam, coal and electricity has served as
the “fuel” for progressive economic prosperity. As the Chinese economy continuously
grows the need for oil will increase proportionately, and the oil companies are well aware
of this fact. The Chinese government has already proven to be an aggressive purchaser of
fossil resources and this trend will only amplify. Could it be that the Norwegian oil
companies have realized that in order to serve its markets they need to act fast? And that
this may be the reason why they have pushed on to access the Barents Sea? Hydro and
Statoil may seem large, seen from a Norwegian perspective, but, compared to other
players in the international oil market they are merely dwarfs. Combined with the
restrictions recent corruption scandals, especially the incident in Iran with Statoil, has
burdened the Norwegian oil companies with, it places them in a difficult position. Getting
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contracts to develop oil fields outside Norway are becoming increasingly more complex
due to competition with actors that gladly pay a “consultancy fee” to get access to the
same fields. The mounting demand for oil requested by the Chinese economy combined
with the harsher competitive climate can be a motivation for the Norwegian oil
corporations to speed up the oil retrieving process in vulnerable areas faster than what
may be wise. This leaves us with the same question represented earlier; what is most
important, and subsequently what will be beneficial in a long-term perspective?
References
http://www.ers.usda.gov/AmberWaves/February05/Findings/ChinaEconomicGrowth.htm
http://www.globalmarch.org/resourcecentre/world/china.pdf
http://www.chinastudygroup.org/index.php
http://www.rfa.org/english/features/lelyveld/2005/12/07/china_harbin/
http://www.bellona.no/no/energi/35034.html
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