Business and Global Governance

Morten Ougaard, Anna Leander

• Publisher: Routledge
• Year: 2012
• Print ISBN: 9780415493376
• eBook ISBN: 9781136961137
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Over the past two decades, the role of business in global governance has become increasingly topical. Transnational business associations are progressively more visible in international policy debates and in intergovernmental institutions, and there is a heightened attention given to global policy-making in national and international business communities.

This text examines and explains the multiple modes of engagement between business and global governance; it presents a variety of theoretical approaches which can be used to analyse them, along with empirical illustrations. Featuring a range of leading US and European scholars, it is divided into three parts that summarize different modes of engagement. Each section is illustrated by two or three studies that represent a distinct theoretical take on the issue with empirical illustrations. The book examines:

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• Business as master and purpose of global governance

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• Business as subject and opponent to global governance

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• Business as partner and facilitator of global governance

This book will be of interest to students and scholars of Business Studies, International Relations, International Politics and International Political Economy, as well as for practitioners – in the public and private sector.

1 Introducing Business and Global Governance¹

Morten Ougaard

Introduction

Business and global governance is an important and multifaceted topic. This is evident from even a cursory look at the current global agenda with the unfolding financial and economic crises, the politics of climate change, and the persistent problems of poverty and development. The influence of the financial industry on international regulation is blamed as one reason for the crisis; multilateral efforts at strengthening financial regulation have been launched by governments and international institutions; private credit rating agencies are criticized for the impact of their ratings, international bodies such as the G20 and the G8 are discussing how governments can stimulate business and restart growth without resorting to protectionism; much of the politics of climate change is about changing productive practices in the private sector; and, under headings like corporate social responsibility and public-private partnerships, efforts are made to mobilize business for addressing a range of problems concerned with development, human rights and environmental sustainability.

Unquestionably, business and global governance are central features of world society in the era of globalization. Over the last decades, international trade in goods and services has grown faster than world production, and foreign direct investment by transnational corporations (TNCs) has continued to rise, so that in 2008 “an estimated 79,000 TNCs control some 790,000 foreign affiliates in the world economy” and “the value added activity of foreign affiliates worldwide accounted for 11% of global GDP in 2007” (UNCTAD 2008: 9). The immensely increased global economic interconnectedness represented by private business is a profound characteristic of the contemporary world order. At the same time, the Yearbook of International Organizations 2007/2008 listed 970 active intergovernmental international bodies and registered no less than 2376 “multilateral treaties and intergovernmental agreements” (Union of International Associations 2007: 2996). These numbers do not include less formalized and private arrangements such as voluntary codes of conduct, but they do provide a clear indicator of the extensive network of international and global governance arrangements existing in the global political economy.

Generally, across many policy areas, global governance arrangements address business practices with incentives, support and regulations; international institutions provide legal and institutional preconditions for international business; business has influence on governance arrangements, directly and indirectly; business practices may by themselves generate governance effects; and cooperation between businesses, other non-state actors and public institutions is seen as a solution to many problems. In short, as Levy and Kaplan put it: multinational corporations “have, de facto, become part of the fabric of global governance” (Levy and Kaplan 2008: 433) and the business and global governance nexus – the multiple ways in which business and global governance interact, impact on, and condition each other – is a multifaceted and increasingly important phenomenon.

This book is about analyzing different aspects of this business-global governance nexus. It aims to show how such aspects are identified, conceptualized and analyzed by different scholars who share the interest in business and global governance, but who approach it with diverse conceptual frameworks and from different theoretical perspectives. In other words, the book is based on theoretical pluralism and diversity, but unified by the shared ambition to advance theory building and empirical research on the mutual engagements between business and global governance. Thus the volume presents different theoretical takes on the ways in which business directly and indirectly impacts global governance arrangements, including perspectives on ways in which business practices by themselves have governance effects; it presents contributions to the analysis of how global regulations of business are created and changed, and it presents perspectives on ways in which businesses are mobilized as partners in global governance arrangements through voluntary efforts and partnership arrangements. These themes do not constitute separate theoretical perspectives on the topic; rather, they are different aspects of the business-global governance nexus that represent different emphases in scholars’ research interests, each of which can be pursued from different theoretical positions.

First, however, this introduction will survey the literature for contributions to the analysis of business and global governance. On the one hand it only recently has become a central research theme in its own right, but on the other hand there is a long history of scholarly interest in aspects of the topic. This interest, however, appeared in different and separate scholarly communities, as evidenced by the following quotes from what arguably was the first comprehensive discussion of international governance arrangements pertaining to business, namely The Rules of the Game in the Global Economy: Policy Regimes for International Business (Preston and Windsor 1992; 1997). The authors set themselves the task of combining “themes and topics from two major fields of knowledge, international relations (a branch of political science) and international business.” They described these two fields as follows:

The international relations and international political economy literature is primarily theory-focused and state-centered; its principal emphasis is on relationships among governments. […] it gives little attention to the internal dynamics of industries and business enterprises. The international business literature is, of course, typically enterprise- or industry-centered, but its treatment of the surrounding policy environment is typically descriptive, institutional and static. It gives little attention to the origins and evolution of the various policy regimes governing international business operations, the connections among such regimes, or the role of business in shaping them.

(xiii-xiv)

This assessment was undoubtedly correct at the time, although the publication of Rival States – Rival Firms (Stopford et al. 1991) had signaled that things were beginning to change. Today business and global governance constitutes a rich and complex field of inquiry with many contributions from both of the literatures mentioned by Preston and Windsor.

What follows is an overview of major contributions to this field, providing a context for the following chapters. It is also intended as an introduction to each of these two bodies of literature to readers unfamiliar with one or both of them. First, the introduction takes a brief look at early beginnings in the 1960s and 1970s. Then it surveys the business literature, focusing on theories on international business strategies and investment decisions because of the utility of these contributions for understanding business interests towards national and international governance arrangements. It moves on to the diverse universe of international relations and international politics, looking at contributions to the analysis of international governance arrangements pertaining to business, under the headline “Policy regimes for international business” borrowed from Preston and Windsor (1992, 1997). The purpose here is not to recount the intense theoretical debates that have characterized this area, but rather to identify some of the main insights developed concerning the creation (or non-creation), evolution and change of such policy regimes. The context here is still what could be called the general theory of regimes and international institutions, and therefore the fourth section goes on to focus on contributions that have put the role of business in global governance more squarely at the center of interest. Finally, the introduction presents the subsequent chapters.

Beginnings

The interest in issues related to business and global governance can be traced back many decades. Although a dominant strand of research in international politics, realism, focused mainly on military and security matters – according to Hans Morgenthau (1973) “politics among nations” was a “struggle for power and peace” and not, for instance, for wealth and welfare – early on several debates and themes emerged with a focus on economic issues. Richard Cooper’s The Economics of Interdependence (1968) marked the beginning of an interest in the international politics of economic issues, in particular the politics of trade and international monetary matters. It also introduced the notion of interdependence as an important feature of international relations, in addition and correction to realism’s emphasis on anarchy as a defining feature.

Cooper’s work was followed by several studies that focused on the politics of the international economy (Bergsten and Krause 1975; Kindleberger 1970; Spero 1977), studies of economic aspects of foreign policy such as Susan Strange’s study of monetary aspects of British foreign policy (Strange 1971), and the study of policy problems presented to the US by the international expansion of American companies (Bergsten et al. 1978). Much of this work shared a state-centered focus with realism and dealt with the economy in aggregate terms – it was about national and international policies towards markets in goods and capital – but some also began to see private actors, including business, as relevant for international politics. Thus the economic and political activities of multinational corporations were one of several kinds of transnational relations singled out for study in Robert Keohane and Joseph Nye’s Transnational Relations and World Politics (1972) and these authors maintained this element in their landmark study of Power and Interdependence (1977) which initiated what later became known as the liberal institutionalist approach to international relations. This book also gave central attention to the concept of international regimes, in particular regimes concerning economic matters, which became the central designator for international governance arrangements of the kind that later scholarship would group together under the heading of international and global governance.

In a related development, researchers also had begun to study the transnational corporations in their own right. Scholars were describing and classifying their internal organization and their strategies, seeking explanations for their strategic choices and more generally asking why they were becoming a steadily more salient feature in the world economy. An important figure in these early years was Stephen Hymer, “the undisputed pioneer” according to Peter Dicken (2003: 202). Among other things, Hymer mapped the major types of foreign operations: wholly-owned subsidiary, majority-owned subsidiary, joint venture, minority interest, licensing arrangement and tacit collusion (Hymer 1976:65), and posed the central explanatory question of why companies chose one of these forms instead of arms-length market relations to suppliers or customers in foreign countries, suggesting that the answer had to do with control; for instance in order to reduce competition, to exploit advantages, to step over barriers between countries, or to avoid exchange rate risk (Hymer 1976: 33–48).

Another significant contribution to these early studies in multinational companies was Raymond Vernon’s Sovereignty at Bay (1971) which among other things introduced the notion of the product cycle to explain patterns in FDI. A few years later, Barnet and Müller’s Global Reach (1974) offered a rich description of TNC activities and a discussion of many policy issues, economic and political, posed by them for home and host countries. By then such issues had become quite contentious in political debates.

In the US, where opposition to the Vietnam War and other elements in US foreign policy was growing, critics such as Gabriel Kolko had argued that business interests and particularly the interests of American transnational corporations were the dominant force in shaping policy (Kolko 1969). In Europe, the French journalist and politician Jean-Jacques Servan-Schreiber warned in 1967 against Le défi américain, “the American challenge,” pointing to the rapid growth in Europe of affiliates of American companies and expressing grave concerns about the consequences in terms of possible loss of autonomy and a competitive decline of European-owned business (Servan-Schreiber 1967). This was also a time in which developing countries grew increasingly critical of the international economic order in general and the role of transnational corporations in particular. In 1974 they utilized their voting power in the United Nations General Assembly to adopt the Declaration on the Establishment of a New International Economic Order, which, among other things, called for “Regulation and supervision of the activities of transnational corporations by taking measures in the interest of the national economies of the countries where such transnational corporations operate on the basis of the full sovereignty of those countries” (United Nations General Assembly 1974).

The practical consequences of this declaration remained negligible; the distance between the regulations sought by the Group of 77 and what developed countries would offer was far too wide. But the declaration signaled that transnational corporations had become thoroughly politicized, and that the impact of their activities for growth, development, welfare and other social objectives in home and host countries, developed as well as developing, had become subject to intense debate. So had also the question of whether and how they should and could be regulated nationally and internationally, discussed for instance in Barnet and Müller (1974) quoted above and in Robert O. Keohane and Van Doorn Ooms’ “The multinational firm and international regulation” (1975).

In addition to these three sources of scholarly interest in business and global governance – studies of the politics of international economics, the study of transnational corporations, and the political debates surrounding the international economy and the regulation of TNCs – a fourth source deserves mention. This consisted of critical studies of the international political economy, mainly associated with Marxist theories of imperialism and theories of North-South dependency.

Going back to questions and modes of analysis initiated in the classical theories of imperialism, represented in particular by Hobson, Lenin and Luxembourg (which was being maintained and reproduced in a rather dogmatic fashion by Soviet scholarship), the study of imperialism experienced a renewal in Western Marxism, outside the orbit of communist party orthodoxy. A major area of interest was relations between developed and underdeveloped countries (as developing countries were called then), with Paul Baran’s The Political Economy of Growth (1957) as an early contribution, later followed by, for instance, Samir Amin’s Accumulation on a World Scale (1974) and Benjamin Cohen’s The Question ofImperialism: The Political Economy of Dominance and Dependence (1973). A core question in these and other works was whether mechanisms of the global capitalist economy systematically worked to the disadvantage of the developing countries so that capitalist development would remain a development of underdevelopment. Such notions were not unique to Marxist theories of imperialism; they were also advanced by structural theories of development and dependency (e.g. Cardoso and Faletto 1979; Evans 1979) that focused on unequal international trade relations and on negative developmental consequences of foreign direct investment.

Other issues taken up by critical scholarship were the relations between Third World governments and transnational business (e.g. Evans 1979), a theme that fed into debates about the international regulation of TNCs, and US foreign policy which, for instance by Harry Magdoff in The Age of Imperialism (1969), was explained largely as a response to the expansionary drive inherent in American capitalism and transnational corporations. Furthermore, although there wa...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• List of figures and tables
• List of Contributors
• Preface
• 1. Introducing business and global governance
• Part I: Business as master of global governance
• Part II: Business as subject to global governance
• Part III: Business as partner in global governance
• Index