TNCs and globalisation: Prime sources of worsening ecological crisis

The failure of the Rio Summit to address the crucial issue of transnational corporations (TNCs) and their culpability for the global ecological crisis was perhaps the Summit's major failing. Since Rio, the processes of liberalisation, commercialisation and globalisation have facilitated the expansion of TNCs and their destructive impact on the environment. Meanwhile, within many countries, particularly those in the South, the same processes embodied in structural adjustment programmes (SAPs), have accelerated the development of environmentally harmful patterns of production and consumption.

Globalisation and ecological deterioration

If the post-UNCED processes have failed to resolve the development and social aspects of sustainable development, the record in relation to the environment is also very disappointing. The major reason for this is that the powerful commercial and financial interests have succeeded in pushing liberalisation and the 'free market' approach to be the overriding priority in the policies and policy framework of most governments. Environmental concerns, together with social and development concerns, fell several notches in the political agenda, internationally and nationally.

The inescapable overriding conclusion of an objective assessment of the environment would be that liberalisation, commercialisation and globalisation together with the logic of the race to retain or gain 'competitiveness' have undermined sustainable development both as a principle and as a programme.

The most important task in slowing down or preventing even greater environmental abuse is to build up (or re-build) public opinion and the political will on the necessity of placing long-term and public sustainability concerns above (or, to begin with, at least on par with) short-term and narrow commercial interests. Since the liberalisation/globalisation process is the main source of the increased ecological problems, the key to preventing a further worsening of environmental crises is to create conditions for state, inter-state and public intervention in free-market forces. The present reluctance of political leaders to institute policies that alter or temper the present pro-free market approach (or worse, their belief in the impossibility of instituting such policies) and to make businesses more publicly accountable and responsible, is at the root of the current environmental impasse.

Liberalisation and globalisation are related to the worsening of the global environment in various ways:

* The failure to internationally monitor and regulate TNCs, and the moves instead to widen their rights and access, have led to a spectacular rise in their power and authority. TNCs have generally and rapidly expanded the outreach and volume of their activities. This has correspondingly increased the damage caused to the environment in terms of volume and geographical spread.

* Liberalisation policies and global market integration have facilitated the institutions and activities that contributed to greater exploitation and depletion of biological diversity and resources such as forests and fishery resources and which promote and expand environmentally harmful land-based activities (agriculture and aquaculture), that lead to continued depletion of biodiversity.

* Other resources continue to be depleted beyond sustainable rates, such as water, soil and minerals. Liberalisation has opened up more mining concessions and a new wave of environmentally damaging mining activities.

* The lack of financial flows to, and resources in, most developing countries (accompanied by continuing debt and commodity price problems), and the persistence of structural adjustment restrictions and policies have meant a great lack of resources or 'economic space' in many of these countries to implement or change towards environmentally sound production.

* There is little improvement in technology. There is no real will to change harmful production methods. The promised technology transfer to the South has not taken place; instead new obstacles have emerged, such as enhanced IPR protection. Harmful technologies continue to be exported to the South and new technologies are being spread before adequate assessment and regulation.

* There is slow progress in reducing the trade in toxic and hazardous substances and products, and the export of these to the South has continued and even increased.

* The emphasis on the need to be competitive has meant slow progress (and in some countries an actual rolling back) in the control of pollution and energy use. Big infrastructure projects that are ecologically harmful are proliferating. The race to earn foreign exchange has led to increased tourism promotion and activities, with their side effects.

* With the accelerated spread of information and communications technology products, consumer culture has become more widespread. In the North and among Southern elite, there is little progress in curbing wasteful lifestyles. On the whole, there is an increase in unsustainable consumption patterns.

The rise of TNCs and the environmental implications

On the eve of the Earth Summit in 1992, the Third World Network made the assessment that the 'biggest gap in the UNCED documents being signed in Rio is the absence of proposals for the international regulation or control of big businesses and transnational corporations to ensure that they reduce or stop activities that are harmful to the environment, health and development.' (TWN 1992). The fact is TNCs account for the largest part of global economic activity and are the main entities responsible for the global environment crisis. TWN expressed concern that the UNCED secretariat had downgraded the need to strengthen regulation of TNCs (for example, the shelving the UN Centre on TNC's recommendations, requested for by the ECOSOC) and instead promoted self-regulation through a Business Council for Sustainable Development. 'A voluntary set of principles cannot be an adequate replacement for multilaterally agreed regulations which states industry and TNCs are obliged to follow,' the TWN concluded.

Following the Rio Summit, the trend of deregulating of TNCs and of granting them more rights and freedoms, without corresponding accountability, has greatly accelerated, particularly with the conclusion of the Uruguay Round agreements. This trend is likely to spurt ahead further if the OECD proposals for a multilateral agreement on investment and the WTO more on investment, competition and government procurement succeed.

That TNCs are the most important players involved in environmentally damaging activities can be gauged from the following:

* TNC activities generate more than half of the greenhouse gases emitted by industrial sectors with the greatest impact on global warming.

* TNCs have virtually exclusive control of the production and use of ozone-destroying CFCs and related compounds.

* In mining, TNCs still dominate key industries and are intensifying their activities. In aluminium, for example, six companies control 63% of the mining capacity.

* In agriculture, TNCs control 80% of land worldwide cultivated for export crops; and 20 firms account for 90% of pesticide sales.

* TNCs manufacture most of the world's chlorine, the basis for some of the most toxic chemicals including PCBs, DDT and dioxins.

* TNCs are the main transmitters of environmentally unsound production systems, hazardous materials and products to the Third World. For example, 25% of pesticide exports from the US in the late 1980s were chemicals banned or withdrawn in the US itself.

* TNCs dominate the trade in (and in many cases the extraction or exploitation of) natural resources and commodities that contribute to depletion or degradation of forests, water and marine resources, and toxic wastes and unsafe products.

* Through advertising and product promotion, they also promote a culture of unsustainable consumption.

Case studies of the recent performance of 20 TNCs by Greer and Bruno show that despite the improved public relations exercises designated to foster the image of greater environmental responsibility and despite more voluntary codes of conduct by industry, there has been few change with the corporations continuing with activities that are environmentally harmful.

With their growth, both in production volume and the geographical scope, big companies, based largely on the continuing use of unsustainable production systems and the promotion of wasteful lifestyles (which in many cases displace more sustainable systems or lifestyles) more environmental degradation worldwide must be expected.

Because of their greater technological capacity, the use of production techniques or substances that are often more ecologically damaging, and the larger volume of production that they characterise, TNCs usually have a negative effect on the environment when they newly produce in, or export to (or increase their activities in) an area. With the increasing spread and market penetration and share of TNCs and big business concerns, the damaging environmental effect have increased. This effect is not been confined to Northern-based companies. In recent years there has been a significant increase in overseas investment and activities by companies based in developing countries, especially in East and South- East Asian. For example, these companies account for a large part of new and increased forest logging and deforestation in Indochina, the Pacific and South America.

Liberalisation policies and the environment

Within countries, the processes of liberalisation, commercialisation and deregulation have generally had adverse implications for the environment. This is true in the North as well as the South. In developing countries, whilst much of the research on structural adjustment programmes (SAPs) has focused on the development aspects of sustainability, there is a growing body of evidence that it has also contributed to the process of environmental deterioration.

In the designing of SAPs, environmental concerns have not been explicitly taken into account. The deregulation, privatisation and liberalisation measures that lie at the heart of SAPs have accelerated the development of environmentally harmful patterns of production and consumption, whilst the reduction of government budgets has affected the state's capacity to deal with environmental problems.

By promoting external liberalisation, SAP has encouraged the increase in the extraction and export of raw materials in many countries, thus contributing to resource depletion and degradation. The growth of poverty and inequities resulting from debt and SAP has also pushed poor farmers and communities to opening up forests to eke a living from the land.

According to Walden Bello (1994), most of the top 15 Third World debtors have tripled the rate of exploitation of their forests since the late 1970s. This is related to the survival imperative of poor, landless people and the pressing need of nations to gain foreign exchange for debt servicing. Bello has also summarised detailed case studies of four countries that adopted SAP (Chile, Costa Rica, Ghana and the Philippines), demonstrating the dynamics and interrelations between structural adjustment, poverty, market liberalisation and environmental degradation. In these countries, the overriding need to service debts led to an emphasis on expanding exports of natural resources and commodities (such as timber, fish, bananas, cocoa and minerals). Moreover, SAPs- induced poverty resulted in a situation where landless farmers had to exploit forest, land and fishery resources. The result was rapid depletion and degradation of the fragile natural resource base in these countries.

The environment and health conditions in many Third World countries has also been adversely affected by import liberalisation, promoted through SAP as well as through the trade measures of the US administration (through its Super and Section 301 laws) and GATT. For instance, there has been a significant increase in the incidence of smoking in several Asian countries that were compelled to facilitate the increased importation of cigarettes. Import liberalisation has also resulted in the proliferation of modern consumer products (aimed initially at the higher-income groups that have benefited from SAPs) which promote environmentally unsustainable consumption patterns. There is a danger these imported and well-advertised products may replace and displace more socially appropriate and environmentally friendly local products, including those now used by ordinary people.

According to UNRISD (1995), the effectiveness of policy responses to environmental degradation is often curtailed by adjustment: 'In general terms, there are three main variants of environmental policy approaches; conservationism, primary environmental care and environmental economics. The potential of all of these to alleviate environmental problems has been limited by the economic and social changes that have accompanied economic restructuring.' For example, SAPs-induced agricultural export growth often has negative environmental effects, especially where ecological conditions are such that export crop cultivation is less sustainable than that of traditional food crops. Conservation programmes and environmental protection agencies are also most vulnerable to government spending cuts. Also, SAPs undermine the potential for community-based action and weakens the capacity of communities to adapt to changing ecological conditions, thus reducing the possibility of implementing the community-based 'primary environmental care' approach.

The environmental effects of trade and trade liberalisation in the transfer of inappropriate technologies, production methods and consumption patterns has been examined in Khor (1996). The view that 'free trade' is the best route to environmental protection (because it generates wealth to pay for protection measures) ignores the role that trade liberalisation plays in facilitating resource depletion and unsustainable production and consumption patterns. The present pattern of trade has in fact helped accelerate environmental degradation worldwide.

Investment liberalisation, without corresponding tightening of regulation but instead accompanied by further deregulation, can be predicted to accelerate the process further. The higher flows of FDI in recent years to developing countries is increasing the tempo of ecologically-damaging activities. The proposed multilateral agreement on investment (developed in the OECD) and similar moves in the WTO to liberalise investment rules will have very wide environmental implications, and have raised serious concerns with many environmental groups. (TWR No. 81/82, May/June 1997)