Reunification on the German State and People Today
The physical Berlin Wall may be gone, but some observers suggest that it remains in the minds of many older Germans that lived with a divided Germany for most of their adult lives. Indeed, many people were surprised at just how quickly the Berlin Wall fell when it finally did, but the fallout from this event has not gone away and in many ways has become even more pronounced in recent years. To help understand the current situation in Germany today, this paper provides an overview of the reunification of East and West Germany, the process that led to it, and the political opposing forces that emerged in response. The focus of the paper will be the opposition to the reunification, comprised mainly of Great Britain, France, and Poland. The paper begins with the situation in East Germany in the late 80s, covering the Montagsdemonstrationen organized by Christian Fuehrer, heading on to the “Einigungsvertrag” and the integration of the GDR into Western Germany, followed by an analysis of the political concerns evinced by France, Poland, and Great Britain. A summary of the research and salient findings are presented in the conclusion.
Review and Discussion: Diplomatic Difficulties during the German Reunification Process
I. The Political Situation in Germany and the U.S.S.R. during the Late 1980s.
A. Social Insecurities after Perestroika and Glasnost Fail to Save USSR. It happened so quickly that many observers were taken by surprise. The events that ultimately led to the collapse of the former Soviet Union were characterized by half-measures and false starts that created the conditions needed to fuel further social unrest and political discord. According to Niven and Thomaneck, the fact that former GDR leader Erich Honecker’s attempt at political crisis management and linguistic “democracy” propaganda had failed became clear in the autumn of 1989, when the working people of Germany reminded him: “We are the people.” These authors report that, “Whereas the Polish free trade union Solidarity movement did not in any noticeable way capture the mood of the working people in the GDR, the policy shifts announced by Mikhail Gorbachev after his appointment as General Secretary of the Communist Party of the Soviet Union in 1985 triggered a new political discourse in East Germany” (57). At the time, Gorbachev recognized that the system of “actually existing socialism” simply could not endure in its existing form, either in the Soviet Union or in the Eastern bloc as a whole (Niven & Thomaneck 57).
In response, Gorbachev launched his program of openness (glasnost), reform (perestroika), together with a political philosophy that embraced non-interference in other aligned countries as outlined in his ‘Political Report of the CPSU Central Committee to the 27th Party Congress’ on 25 February 1986 (Niven & Thomaneck 57). A growing credibility gap also affected the ability of the former Soviet leadership to keep their critics at bay. According to these authors, “The intellectuals, managers, and ordinary people of East Germany saw Gorbachev and his policies as a panacea for the ills of the GDR regime. The new socialist theory exposed the contradictions in the GDR body politic and increased the awareness of an intolerable gap between the officially propagated image and actual existing reality” (Niven & Thomaneck 57).
The GDR regime was not only aware of its economic plight, it was also fully aware of the impact of Gorbachev’s new policies on the citizens of its state. It appeared unable to make up its mind how to react to this impact. In an interview with the West German illustrated weekly Der Stern, the GDR chief ideologue Kurt Hager stated on 9 April 1987 in respect of Gorbachev’s reforms: ‘Would you, when your neighbour puts new wallpaper up in his flat, feel obliged to put up new wallpaper in yours?’ Hager’s statement, with the politburo’s backing, was printed in Neues Deutschland the following day, and triggered a wave of protest letters within the GDR, not least from the SED [the GDR’s Socialist Unity Party] basis itself” (Wolle 1998, 292 cited in Niven & Thomaneck at 57).
B. USSR is Weakened. After the successful revolutions in Poland and Czechoslovakia, people in other Soviet states were also encouraged on their paths to independence. The impact of the events on the pace of events throughout the rest of Eastern Europe was profound. According to Kahn (2000), the relationship between the former East German regime and the Soviet leadership was strained but close, and the GDR had placed all of its political eggs in the Soviet basket. “The GDR was a satellite state,” Kahn notes, “linked to the Soviet Union. Up to the very end, the GDR openly declared that its existence depended on the Soviet Union. The Soviet Union established the GDK, Soviet troops assured the continued existence of the GDR, and Soviet wishes and the Soviet example determined everything” (85). In reality, Ronald Reagan simply outspent the Soviets to win the Cold War, and the economic toll this exacted on the former Soviet empire, combined with the gathering clouds of social unrest, spelled the end of the Soviet Union and the Warsaw Pact, and the Brandenburg Gate once again stood in the middle of a unified German state.
II. Early Stage.
A. Situation in the GDR.
1. Montagsdemonstrationen in East Germany Occurs, First in Leipzig, Then Entire State. In an unexpected attempt to accommodate the new vision of glasnost, the SED allowed and even officially accompanied a massive peace demonstration in September 1987, when the official East German ‘Peace Council’ and the Free German Youth Movement joined peace-committed and reform-minded groups of Christians on the Olof-Palme peace walk from Ravensbruck to Sachsenhausen memorial sites for World War II concentration camps (Niven & Thomaneck 2001). The reformers carried placards demanded “Free contacts to East and West,” “Peace education instead of defence studies” and “Swords to ploughshares”; the public demonstration was the first such event to be officially allowed in the GDR and its implications were not lost on the media: “New possibilities have opened up,” wrote the editors of the samisdat newspaper Umweltbl tter in October 1987, “possibilities which must be built on by the peace movement” (Niven & Thomaneck 2001, 57).
After reconsideration, though, the GDR’s Socialist Unity Party shifted position and became determined to resist all of these demands for reform, not to enter into dialogue with reformers, and to silence the critical elements; however, in retrospect, it quickly becomes clear that this decision was the wrong one because discontent in the East had already reached critical mass levels (Niven & Thomaneck 2001). According to Niven and Thomaneck, in November 1987, the Stasi invaded the Zionskirche rooms of the Environment Library and arrested several of the people responsible for publishing the critical periodical, “Grenzfall”; following the protest by about 200 people against these arrests, these demonstrators were also arrested (Niven & Thomaneck 2001, 58). Yet another group of new protesters emerged to assume their place, though, and the authors report that when the Western media took interest in the conflict, the East German authorities were forced to back down and release those imprisoned (Niven & Thomaneck 2001).
The Environment Library ‘affair’ caused a number of disgruntled GDR citizens (including exit visa applicants), to congregate in the Zionskirche, and for 17 January 1988 (the date of the official commemoration of the murder of the distinguished communist leaders Rosa Luxemburg and Karl Liebknecht), members of the GDR opposition and exit visa applicants planned to conduct a common protest by taking part in the demonstration with their own banners and placards calling for glasnost, peace, and increased tolerance; as a result, 120 demonstrators were arrested (Niven & Thomaneck 2001). Furthermore, in late January, 1988, more than 1,500 people in the Gethsemanekirche in East Berlin took part in a prayer service for those arrested and just a week later, the number of religiously minded supporters had reached 2,000 (Niven & Thomaneck 2001).
Still another example of the ‘redoubling’ effect of any attempt to stifle social discontent in the former GDR came later in the year when 37 schoolchildren at the Carl-von-Ossietzky School in Berlin affixed their signatures to a petition calling for an end to military parades on the GDR’s National Holiday; these children were subjected to enormous pressure from GDR authorities to withdraw their names from petition but five continued to refuse and on 14 October 1988, these children were expelled (Niven & Thomaneck 2001). According to Niven and Thomaneck, “On 19 November 1988, the SED banned the Soviet publication Sputnik, which had helped to convey some of the ideas of Gorbachev. There then followed on 20 November a GDR-wide action, initiated in the Berlin Church Erlserkirche, in protest at the expulsion, and calling for more pluralism and democracy” (2001, 58). These and other like events clearly reflected not only the growing social discontent that was bubbling to the surface in the GDR, but also suggests that the citizenry was becoming more forthright, committed and outspoken in achieving their goals of improving social conditions, gaining fundamental civil liberties and accomplishing the eventual reunification of the country. In this regard, Bartee (2000) points out that the Leipzig protest of January 15, 1989, was a good example of how social protest in the East was becoming more sophisticated and organized, with thousands of activists distributing leaflets calling for attendance at the rally all over Leipzig around midnight of January 11-12, 1989: “The leaflets boldly called for an open demonstration the next Sunday afternoon in front of Leipzig’s old Rathaus (City Hall). The occasion, the 70th anniversary of the murders of Rosa Luxemburg and Karl Liebknecht, offered the opportunity to publicize Luxemburg’s famous statement that ‘freedom means always freedom for those who think differently’” (Bartee 2000, 121). This author adds that the efforts by the activists during January 1988 to join the official parade with banners of their own clearly inspired the Leipzig protestors: “The Leipzig event would be different, however; it would be independent of any official ceremonies. The wide distribution of thousands of fliers by several alternative groups should rally so many people that the authorities would be unable to abort the event as they had very nearly done in Berlin with preemptive arrests” (Bartee 2000, 121).
2. Christian Fuehrer. According to Slusser (1996), “During his Leipzig years, Bach wrote many cantatas for the Thomas Church as well as the St. Nikolai Church, famous today for Monday-evening peace meetings that Pastor Christian Fuehrer has held there every Monday since 1982. These peace meetings, for most of the decade attended by only a handful of people, suddenly evolved into the mass demonstrations of December 1989 that spread to other GDR cities and helped bring about the collapse of the regime” (1).
3. 4 September 1989. In his book, The Role of the Masses in the Collapse of the GDR, Grix (2000) reports that, “The antagonism between proponents of exit and voice reached its height in Leipzig where the two groups marched separately on 4 September 1989. Whilst one group chanted ‘We want out!’ The other retorted ‘We’re staying here!’” (41). This animosity continued until late 1989 (Grix 2000).
4. Massive Exodus of GDR Inhabitants over Hungarian Border in Summer 1989. The motives of those who left or wanted to leave during the massive exodus to Hungary in the summer of 1989 included “dissatisfaction with the supply of consumer goods” and “limited opportunities for travel within and outside the GDR”; however, they also included constraints on rights of free speech and increasing dissatisfaction with the possibilities for personal development (Grix 2000). According to Grix, “In a representative survey of about 4700 emigres/refugees conducted between 10 October 1989 and 14 March 1990 the dominant motives for people wanting to leave the GDR were found to be both material and political. ‘Lack of individual freedom’ and ‘unfavourable political conditions’ were cited as the most dominant motives, closely followed by ‘East German living standards’ (Grix 2000, 41).
B. Fall of the Berlin Wall on November 9, 1989. The highly publicized scenes of giddy East and West German merrymakers tearing down the Berlin Wall by hand, assisted by East German border guards in some cases, were quickly followed by the grim realities that confronted the newly unified nation. Although East Germans have free access to the West, following the system change and the introduction of economic reforms after the fall of the Berlin Wall on November 9, 1989, all the former socialist economies in Central and Eastern Europe and the former Soviet Union (without exception) experienced a significant drop in output and GDP (Edwards, Polonsky, Pucko, Warner & Zhu 2004). According to these authors, “Some economies were better able to deal with this decline in output and GDP than others, as we have seen. The more successful economies were with the passage of time able to address the decline, bounce back and then surpass the output and GDP levels they had at the beginning of the transformation” (163).
III. On the Road to Unity.
A. Helmut Kohl’s Ten-Points Plan to Integrate GDR into West Germany. In the years immediately preceding its reunification, there was a general consensus that the constitutional authority for German unification could be derived from either Article 23 or Article 146 of the Basic Law (Pile 2001). At the time of its adoption, Pile reports that Article 23 provided for the possibility of a future German unification; however, Article 146 indicated that a new constitution could be drafted if unification was ever considered (Pile 2005). As a result, unification proceeded under Article 23 because the Article did not require a lengthy constitutional convention to achieve unification (as Article 146 appeared to require). According to Pile, Article 23 and Article 146 were not the only methods advanced for implementing the unification process. “Confederation,” he notes, “was another possible route to unification under the 1990 Basic Law. This unification method allowed both German States to ‘preserve their individual structures and governments while gradually merging some specified functions.’ Chancellor Helmut Kohl supported this method in his Ten-Point Plan of November 28, 1989. A lack of political support defeated this option and Chancellor Kohl soon withdrew his proposal” (633)
The East German prime minister, Hans Modrow, recommended yet another version involving a “contractual community” between West and East Germany that, like Chancellor Kohl’s confederation proposal, was eventually abandoned as a result of political support (Pile 2005).
B. Reunification of October 3, 1990. According to Pile (2001), “On October 3, 1990, West and East Germany officially united. Although several unification methods were possible, the unification occurred by East Germany acceding to the West German Constitution — the Basic Law — through a series of treaties. This ‘treaty route’ to unification necessarily required amendments to the Basic Law” (633). The primary instrument used for the reunification of the German states was the Treaty on the Establishment of German Unity, which set forth the Basic Law amendments that were immediately required to accomplish the legal requirements of the unification; however, the treaty also contemplated additional Basic Law amendments that would likely emerge as a direct result of the unification and even 10 years after the German unification was effected, the German legislature was compelled to pass six additional Basic Law amendments that directly addressed unification issues (Pile 2001).
IV. The British View of German Reunification.
A. Margaret Thatcher’s Concerns. The mistakes made during World War I and II may be buried in cemeteries throughout Europe, but the legacy of these German misadventures lived on in the minds of many British observers that questioned whether a reunified Germany represented yet another threat to the island’s security. In their book, Margaret Thatcher: Prime Minister Indomitable, Thompson and Thompson (1994) report that the United Kingdom’s foreign policy and business leaders had long accepted that the UK’s relations with Europe were at least as important as its relationship with the United States; however, Margaret Thatcher consistently assigned absolute priority to the alliance with the U.S.: “No one of my generation can forget that America has been the principal architect of a peace in Europe which has lasted forty years,” she pointed out (cited in Thompson & Thompson at 24).
While U.S. policymakers were appreciative of Thatcher’s unwavering support, the “special relationship” between the U.S. And Britain had suffered in recent years. According to these authors, the United States was increasingly reliant upon Thatcher to block the threat of a closed so-called “fortress Europe” that it feared would be the result of the European Community’s efforts to move toward a single market in 1992; however, her reluctance to shift position served to move the U.K. toward the periphery rather than the heart of Europe, a position where the U.K. would have more influence on the outcome. In addition, the end of the Cold War and collapse of the former Soviet Union reduced the United States’ need for a stalwart British ally in Europe: “Increasingly important for the U.S. were relations with the EC itself and with such new powers as Germany, whose unification in 1990 Thatcher had opposed” (Thompson & Thompson 24).
B. Dominance of Germany Economy in Europe. In his essay, “German Unification and the Union of Europe,” Berger (2001) reports that, “Perhaps no area witnessed a greater transformation, and has been haunted more by the memories of the past, than German foreign policy. The once notorious German drive for territorial expansion was replaced by a remarkable prudence in the definition of its national goals. Germany’s former readiness to resort to the force of arms gave way to what has been termed a “culture of restraint” in the use of military power” (80). Indeed, the first part of the 20th century was characterized by a German state bent on military and political dominance of the European continent, but after 1945, it became one of the driving forces in support of European integration (Berger 2001). According to Fassbender, “Germans, regardless of their political sympathies, think that their contribution to European integration after World War II is something for which they should be praised, not criticized. After all, in accordance with the advice of their neighbours, they abandoned nationalism and embraced the idea of European unity” (237). The Germans have, in fact, lived up to this commitment and, together with the French, have consistently sought to fuel the process of integration, albeit without allowing the French leadership to achieve a “Europe without America” (Fassbender 1994, 237). This author adds that, “Germans, including government officials, do not feel that Brussels generally would favour German interests. To them, the EC administration, modelled after the French governmental bureaucracy and marked by this influence, is truly foreign territory, particularly as all the work is done in French and English” (Fassbender 1994, 237).
In addition, many Germans maintain that they have been more ready to compromise when disagreements arise between members of the European Union, and more generous in terms of their financial contributions to the Community itself than most of the other nations. “Germany’s economic success which has made the country as important in the EC as it is today is indeed based upon the complete abandonment of traditional power politics — to an extent that many foreign observers have criticized Germany’s unwillingness ‘to do its share’ in the Gulf War, Somalia and former Yugoslavia” (Fassbender 1997, 238). As the result of these efforts, by the late 1980s, many observers agreed that the German state had successfully overcome its past and there were few informed analysts of German politics that maintained any longer that the Germans were particularly prone to authoritarianism, aggression, or a general lust for power; the primary concern during the 1980s was not that Germany would become obsessed with power, but rather that under the influence of the peace movement, the reformed German state would ignore political military realities (Berger 2001).
The fall of the Berlin Wall and the collapse of the Soviet Union, though, have caused some to express concerns about the potential revival of German nationalism and the German quest for power. These concerns are based on the reality of events that have taken place in the unified Germany rather than the political line espoused by its leadership; in fact, since 1989, there have been some profound shifts in both the domestic and international framework in which the foreign policy of Germany is conducted. “Externally the cessation of the east-west conflict allowed Germany to reunify while removing its principal security threat, the massed power of the Red Army,” Berger advises. “Internally, the fall of the Berlin Wall greatly expanded the territory and population of the Federal Republic, placing its social, economic, and political institutions under the greatest strain that they have had to endure since the 1950s” (Berger 2001, 80). Given these pronounced changes in Germany’s domestic and international environment, Berger suggests that it is also reasonable to expect that Germany possesses the ability – if not the outright will – to move towards greater independence in its foreign policy stance and exercise its military options with renewed confidence (Berger 2001).
In sum, the problem of German power and its consequences is once again the subject of much attention in European affairs, a state of affairs that has attracted an increasing amount of scholarly analyses; based on the growing body of research concerning these issues, three fundamental questions have emerged:
There is the question of whether and to what degree Germany will forego its historic reliance on the use of force and become once again a major military power. “Few analysts anticipate that the Federal Republic will revert to the expansionism of the pre-1945 period. Rather, the question now is whether Germany will become a ‘normal nation,’ one more like Britain or France who feels few inhibitions about using its armed forces in the pursuit of national interests” (Berger 2001, 80).
No matter which role the Federal Republic chooses to use for its military, there remains the question of whether it will become more assertive within the context of the European Union. “Whereas in the past the Federal Republic was content to follow the lead set by other members of the European Union, now that it is the largest and strongest nation, might it not insist as primus inter-parus on playing a greater role in setting the EU agenda? Whether the European Union could bear the strain of a more assertive Germany is a further, open question” (Berger 2001, 80).
There is the question of whether the Federal Republic’s use of power is the result of a deliberate strategy, or whether it is the unintended byproduct of distinctive German ideas and institutions and the ways in which they mesh with those of its neighbors. “This point is a subtle one, but nonetheless important. If German power is the result of a deliberate strategy, then this suggests that German leaders enjoy some measure of control over the ways in which the Federal Republic interacts with its neighbors and can be expected to avoid the pitfalls of the past” (Berger 2001, 80). Should the real-world situation play out so that German interactions with its neighbors are determined by structural factors (both domestic and international), then no matter what the intentions of German elites, the answer to the previous questions may be already in the works: “Should the exigencies of the international system incline it in that direction, the Federal Republic will inevitably move to assume great military power status, regardless of current German protestations that it has rejected power politics. Likewise, despite the Federal Republic’s ardent espousal of supranationalism, the European Union is predestined either to become subservient to German national interests or to disintegrate under the burden of increased German power” (Berger 2001, 80).
C. Balance of Power Disturbed. The events that have taken place since German reunification has been a steady erosion of the perception of the status quo balance of power in Europe as the last remaining vestiges of German disunity disappeared.
D. Militarily Too Powerful Germany Could Threaten Regional Stability. While the unified German states continued to hammer out the economic and social framework needed to accomplish the process successfully, many observers in Europe and elsewhere became concerned that such a reunited Germany represented a potential threat to the stability of the region, given Germany’s historic use of military force to accomplish political objectives. These concerns ranged from those expressed by France, whose experiences at the hands of the Nazis were still fresh in many minds, to those of other countries such as Poland that viewed any consolidation of power in Germany as a potential threat to their continued freedom (Fassbender 1994).
V. The French View of German Reunification.
According to Lauk (1994), “Germany’s geostrategic position made trade with Central and Eastern Europe a very reasonable option, and the high technical quality of German goods guaranteed a continuous market there, which depended heavily on well-synchronized political support” (57). Likewise, Judt (1994) advises that Had it not been for German unification, itself the most immediate and important consequence of the events of 1989, neither Germany nor France would be facing their present dilemmas. The French would not be suffering the short-term effects of high German interest rates and the long-term realization that their Europe, in which France was the primary beneficiary of German economic strength, no longer exists; the Germans would not be facing, for the first time since 1950, the prospect of a seriously troubled economy and, with it, the need to rethink the degree of importance they should attach to being ‘Europeans’ rather than Germans, given that the two may no longer be compatible. (2)
The French government was therefore wary of a reconstituted German state from both its potential military ambitions in the future as well as its potential economic clout if it was able to get its economic house in order without bankrupting itself in the reunification process.
VI. The Polish View of German Reunification.
Given its experiences at the beginning of World War II, not surprisingly, Poland was also worried about its borders with a reunified and expanded German state, and the country’s leadership also had other political fish to fry before they would sign off on the German unification process.
A. Poland Demanded that Germany Accept the Oder-Neisse Line as the Official Border.
According to Hofhansel (2005), “The legal argument that the West German government made even after the Warsaw Treaty of 1970 was that with this treaty the Federal Republic of Germany had recognized the Oder-Neisse line but that this did not affect earlier bilateral and multilateral agreements, and this meant that the commitment arguably was not binding for a reunited Germany” (39). One of these earlier agreements was the so-called Deutschlandvertrag (Germany Treaty) of 1954 that ended the occupation status of West Germany; article 7 of this treaty stipulated that the Western allies and the FRG would work toward a peace settlement for Germany as a whole and that the final determination of Germany’s borders would not take place until this initiative had been accomplished. “For a long time,” Hofhansel adds, “this legal interpretation of the Warsaw Treaty did not appear to have any practical consequences, but in 1989 and 1990 such arguments again assumed political significance” (39).
B. When Helmut Kohl Failed to Include this Line in his Ten Points, It Caused Major Worries on both Polish and German Sides. When the Berlin Wall fell on November 9, 1989, Kohl was in fact in Poland; however, he interrupted his trip to return to Germany for consultations (Hofhansel 2005). The newly elected Polish non-Communist government led by Prime Minister Mazowiecki considered German recognition of the finality of Poland’s western border as a fundamental component of its reunification process; in fact, this had been a longstanding Polish issue as well as compensation for Polish forced laborers during World War II (Hofhansel 2005). According to this author, “In contrast to the Polish Communists and nationalists on the right, the new government did not oppose German reunification as such, but in the Polish government’s view German unity was not just a bilateral affair of the two Germanys but required agreement among the four allied powers and the approval of all European states, and Germany’s neighbors in particular” (Hofhansel 2005, 39).
VII. German Development Following Reunification.
A. Breakdown of GDR Economy.
1. Obsolete East German Companies were Unable to Compete in a Free Market. Although the East German republic represented a shining economic star in the Soviet constellation of East European countries, it was a dull star in comparison to many of the rising economic powerhouses in Western Europe in general and in its West German counterpart in particular. The guaranteed jobs and social supports that were a concomitant of the East German system created a situation wherein East German workers largely pretended to work in exchange for job security and social benefits, and where the East German government pretended to care if their quotas were met. In fact, while citizens in East Germany recognized the advantages of a free market economy and the additional civil liberties enjoyed by their Western counterparts, they were also confronted with the harsh reality of being forced to give up some cushy social benefits in the process. These differences between the systems were point of divergence between the two states early on: “Even in 1951, when the West German Institute of Public Opinion asked people what they thought was the most important question facing Germany, only 18% replied reunification, compared with 45% who replied that it was the economic conditions” (Niven & Thomaneck 2001, 33).
a. Production Costs Too High Due to Too Many Employees. One of the glaring inefficient characteristics of the former East German economy was the inordinate number of workers used to produce a given product or service. These market inefficiencies were subsidized by the government but the impact on productivity and worker morale could not be so easily addressed (Kopstein 1997). According to this author, “All economies have inefficiencies, and the inefficiencies of the Soviet type might not have been so fatal were it not for the economic and political crises of the late 1970s. In particular, the delayed twin oil shocks of 1973 and 1979 and rising prices for other imported commodities, a world recession starting in 1974, and increased armaments spending after 1975 all contributed to a decrease in the GDR’s export earnings relative to its import requirements” (84). The 1980s were likewise difficult for inefficient East German industries; these industries desperately required imports from the West, and the East German leadership continued to import large quantities of Western goods to satisfy consumer demand as part of the social contract. “Under these conflicting pressures, net indebtedness to the West during the second half of the 1970s increased by more than 20% annually” (Kopstein 1997, 84).
b. Major Consumer of East German Products, USSR, had Collapsed. As Tables 1 and 2 below clearly show, the years leading up the German unification shows that the former GDR’s trade imbalance with its most important Western trading partner, West Germany, began to increase while its trade with its most important trading partner, the former Soviet Union, began to decline.
Source: Kopstein 1997, 84.
GDR Trade with West Germany, 1961-1976 (in millions of Deutsche marks).
Source: Kopstein 1997, 85.
These trends were not lost on the East German and Soviet leadership, either, and Kopstein points out that after 1976, the GDR stopped publishing separate import and export totals altogether and only issued aggregate trade figures.
2. Major Change 1:1 for Ostmark to Deutschmark. At the time of unification, the gross national product (GNP) of the GDR amounted to approximately 10% of that of the Federal Republic of Germany (Kirkpatrick 1990). The currency reforms of July 1990 was designed to bring the Ostmark in line with the Deutschmark, a process that followed earlier failed attempts to moderate these differences by the GDR (Staab 1998).
B. Exodus. During the period from October 1990 to October 1991, more than two million East Germans emigrated to the West (Fassbender 1994). The reasons cited for leaving varied, but virtually all such expatriates cited the superior living standards in the West and the additional civil liberties afforded their citizens as primary reasons (Fassbender 1994).
C. Money Spent on Reunification. Today, the German economy is the largest in Europe and the fifth largest in the world, and the reunified German state has more people than any other nation in Europe (Germany, 2006, 1). Further, the nation continues to be a key member of the European continent’s economic, political, and defense organizations and has assumed a new leadership role in the international community today. The reunified German state, though, has experienced some drastic shifts in demographic composition as well as some significant economic problems since reunification in 1990, due in large part to the enormous sums Germany has invested in an attempt to bring the former Eastern Germany’s productivity and wages up to Western standards (Germany, 2006).
1. Depending on Source, Costs Estimated at 250 Million to 1.5 Billion DM. The aforementioned currency reform of July 1990 that integrated Eastern Germany within the economic structure of the Federal Republic was following by the unified government being compelled to spent a great deal of them for unification purposes. According to Staab (1998), “The legal framework, the Deutschmark, and the free market were abruptly introduced to the Eastern L. nder. The decision by Bonn to pursue shock therapy did not fail to produce an immediate impact. When revisiting the former GDR after the first years of transition, one is struck by the vast changes in the economic sphere. Between 1991 and 1995 the net transfer of public funds from West to East rose from an annual 110 to over 150 billion Deutschmark” (33). These investments in the east have been to modernize or construct the roads, rail tracks, airports, highways, and telephone system needed to bring this infrastructure up-to-date to become competitive in the international marketplace (Staab 1998).
To accommodate the increasing number of Western consumer outlets opening in the region, entire economic sectors, including banking, insurance, and retail facilities had to be established from the ground up. As of the end of 1993, the total investment of private industries totaled 340 billion Deutschmark (Staab 1998). This author adds that, “New businesses opened and former state-owned firms were reorganized under new ownership. Small enterprises sprang up, creating a Mittelstand, a formerly missing class of small and medium-sized independent businesses. Between 1991 and 1994, some 870,000 new businesses were registered” (Staab 1998, 33). At the time of unification, the Treuhand administered around 14,000 companies. Only small businesses, such as bars, restaurants, and pharmacies were excluded. With the agency, Bonn had established overnight the world’s biggest industrial conglomerate. At the end of 1994, the Treuhand had fulfilled its core task of privatization and all but 60 firms had been sold (Staab 1998).
Throughout the East, wages increased continuously; in fact, during the period 1991 to 1994, basic wages in the East increased by 53% (Staab 1998). While Western levels have not yet been equaled, trade unions in the East enjoyed the expertise of Western staff and negotiated highly advantageous contracts that caused the financial situation for East German employees to improve significantly at the expense of their Western counterparts (Staab 1998). According to this author, “The choice of goods quickly approached Western standards, and people had the money surplus to purchase them. In mid-1994 the purchasing power had already reached between 70 and 80% of the West, which more than outweighed the 35% rise in living costs” (Staab 1998, 33). Before unification, the Ostmark had a market exchange rate of approximately 4.50 to 1 to the Deutschmark; Chancellor Kohl’s initiative to introduce an average 1.8 conversion rate, though, transformed the already significant East German savings into a respectable financial surplus. In 1993, the sum of private financial capital doubled in comparison to 1992 and reached DM 35 billion; in this regard, the market economy provided for new opportunities for competing in the international marketplace (Staab 1998).
These foregoing indicators of a successful and rapid economic transformation, though, were offset to a large extent by the condition of the economy in the East. According to Staab, “During the initial unification euphoria, unrealistic parallels were drawn to the successful postwar transformation of the West German economy after World War II which led to a fundamental misjudgment of the extent of the structural deficiencies” (34). In 1991, the first head of the Treuhand, Detlev Rohwedder (later assassinated by Red Army Faction terrorists), estimated that the sell-off of the GDR’s state-owned enterprises would result in the generation of DM 600 billion in revenues; however, the Treuhand actually experienced losses of DM 265 billion (Staab 1998). Likewise, productivity in the East declined by more than 50%, down to 35% of the Western standard; furthermore, production costs were 20% higher than the already high levels of the old L. nder (Staab 1998). In this environment, industrial production declined precipitously and by 1991, had fallen to a mere 33% of that during 1989; between 1991 and 1994, the number of companies in the East that were forced to close down as a result totaled some 450,000 (Staab 1998).
2. Temporary State Deficit in Germany was 1.4 Billion DM. Not surprisingly, this flurry of economic activity created a major demand on the unified German economy. In their essay, “German Unification as a Cultural Dilemma: A Retrospective,” Grote and Kienbaum (1997) report that, “Times are hard for many people in the eastern area of Germany. In the first year after unification, industrial production in the eastern area fell to about one-third of what it was in 1989” (223). The problems in the eastern part of the unified German state have affected all of Germany as well. For example, in 1989, West Germany was ranked at the top in per capita income in Europe; the reunified German state dropped behind France to fourth position by 1997 (Grote & Kienbaum 1997). Likewise, in 1989, West Germany was as a role model for fiscal responsibility; however, by 1997, its public indebtedness in relative terms exceeded that of the United States (Grote & Kienbaum 1997). According to these authors:
In 1989 the Federal Republic was regionally balanced; today the regional imbalance is the most extreme in Western countries, with the possible exception of Italy. That meant, of course, phenomenal job losses. By mid-1993, there were 1.1 million East Germans unemployed, about 14.7% of the workforce. Many more worked merely part-time, went into early retirement, or were being re-trained. By some estimates, nearly four million jobs out of about 10 million had vanished since 1989. This is a picture more dismal than the worst of the German depression era of the late twenties and early thirties (Grote & Kienbaum 1997, 224).
Those who are fortunate enough to have jobs in eastern Germany only earn an average of 65% of what their counterparts in the West earn for comparable work; while there may be obvious and inescapable reasons for the differentials in wage scales, but many people in the east view them as proof that they are considered second-class citizens. As of 1997, western Germany had invested approximately $100 billion per year into the eastern area and the federal government has imposed a 7.5% income tax surcharge, regarded as an enormous burden that is increasingly resented in the West. In fact, these authors emphasize that, “In order to bring the new Lander up to the level of the old in the West, in strictly economic terms only, it has been estimated that an investment of DM 2000 billion may be required” (Grote & Kienbaum 1997, 224).
VIII. Germany Today.
A. The Wall in the Head. For many Germans who grew up before or during reunification, East Germany is still not a complete part of the German Republic. According to Grote and Kienbaum, “East Germans, of course, had been largely isolated from the political and cultural trends that have remade the West, even if most of them were able to watch Western television. The cult of obedience — so highly developed by the Nazis — was fully sustained by the socialist dictatorship. Forty years under the Marxist-Leninist-Stalinist version of socialism have left their mark” (224). In this regard, Mcadams (2002) adds that, “The future political culture of eastern Germany and, with it, the relationship between unified Germany’s once divided populations will depend heavily upon how all Germans respond to a distinctive fact about the east. The region experienced not one but, counting the German Democratic Republic (GDR), two separate eras of dictatorship. This fact can be, and has been, understood in two different ways, with significantly different implications in each case” (Mcadams 26); these respective views are discussed further below:
The perspective of the victim. According to this view, the citizens of the GDR uniquely had to shoulder the burden of having been born, in effect, “in the wrong place.” Not only did they endure greater hardships than their western counterparts, such as the rebuilding of Germany after World War II, but they suffered by themselves through the debilitating consequences of Soviet occupation and their inability, until 1990, to act upon the right to “free self-determination” (to quote the original preamble of the Basic Law). As a result, according to this argument, easterners were owed special treatment after unification because of their distinctive misfortunes.
The perspective of accountability. By contrast, the other way of viewing the GDR’s citizenry has been to treat it as at least partly responsible for its rate. Of course, no one can control the place of their birth, hut according to this line of reasoning, it was possible for eastern Germans to decide how fervently they supported the Socialist Unity Party (SED) regime. Unfortunately, despite the horrors of the Nazi dictatorship, it seemed that many had been willing to sell their honor and integrity in order to get ahead under communist rule. Thus, even though easterners were deprived of the conspicuous advantages enjoyed by Germans in the west — the Marshall Plan, the Basic Law, and the Wirtschaftswunder — it was still incumbent upon them after unification to atone for their past mistakes and to provide proof of their democratic credentials” (26).
A casual analysis alone would seem to suggest that these differing viewpoints could be attributed exclusively to eastern and western Germans, respectively, based on what each side had to gain from the interpretation of the different versions the GDR’s history. In this regard, Mcadams emphasizes that during the early months following the destruction of the Berlin Wall and during the ensuing efforts to consolidate national unity, a number of easterners considered the gains they were to make from unification as the fulfillment of rights long owed to them during decades of enforced deprivation by the Soviet-backed East German regime. “For their part, in contrast,” Mcadams adds, “western Germans often lamented the substantial cost of providing economic and political assistance to a people they barely knew. For many, their distant cousins still needed to demonstrate that they were worthy of being included fully in the Federal Republic of Germany (FRG)” (2002, 27). To this end, Kahn (2004) suggests that, “Much can be accomplished when human beings begin to see in themselves the qualities they had previously hidden from themselves by imputing them to others. Such splitting of the good–within — and the bad–outside — is what the Berlin Wall was all about and what the ‘wall in the head’ is all about. It’s time to dismantle it” (67).
In his essay, “Political Culture in Unified Germany: The First Ten Years,” Conradt (2002) reports that, “After ten years of research on Germany’s postunification political culture, there is no scholarly consensus on the critical questions of east-west differences, the impact of unification on western German culture, and developmental trends in the two regions. These questions have become more acute in the light of decreased eastern economic growth, high unemployment, and growing evidence of a radical right-wing subculture in the new states” (43). The paucity of consensus among the scholarly community does not surprise Conradt, with the author noting that 12 years after the establishment of the Federal Republic in 1949, there was also no consensus as to the stability and viability of the new democracy during this turbulent period in Europe’s history. In this regard, Conradt notes that, “Even in the 1960s West Germany still represented for some a ‘republic in suspense,’ while others were already writing about a ‘remade’ political culture” (44). In fact, there are a number of political developments in the former GDR that are influencing how Germans perceive the impact of reunification on their own lives, including:
Substantial support (20-25%) for the former, ruling communist party, the PDS, in the new eastern states with practically no support in the west. The PDS thus has a strong interest in maintaining or expanding the current level of east-west differences.
The clearly disproportionate amount of xenophobic right-wing violence in the east. According to the Verfassungsschutz data for 2000, right-wing violence in the new states occurs at a rate of 2.21 per 100,000 population as compared to 0.95 for the old states. While the west is not immune from such attacks on foreign residents, the frequency of such incidents is much greater in the east. Moreover, there is little evidence of any broad popular support for such behavior in the west; however, a number of anecdotal reports from the east indicate that many ordinary easterners tacitly support this behavior.
Persistent warnings from mainstream national political figures that the continued relative economic decline in the east, including population transfers, signals the emergence of a German Mezzogiorno, a region and economy “abgekoppelt” and permanently doomed to second-class status (Conradt 2002, 44).
B. Emmid Institut in 2004: every second West Germany thinks that too much money is pumped to the East, in Bavaria even 60%.
C. During the elections of 2005, some Satiric “Fun” Parties Made the Reconstruction of the Berlin Wall a Plank in Their Platform. Following the terrorist attacks of September 11, 2001, some observers were heard lamenting the loss of known enemies that during the “good old days of Communism”; likewise, given the enormous influx of immigrants and the problems associated with unification, some observers have adopted the reconstruction of the Berlin Wall as a satirical solution to Germany’s problems today.
No one thought it would be easy, which is a good thing because the events of the last two decades have made it clear that the reunification of East and West Germany is going to take some time. Astute analysts at the time suggested that the aftereffects of reunifications could well take between 10 and 20 years, and it appears the top end of this analysis is more appropriate than the former. In reality, though, much has been accomplished in the past 18 years or so, but much more remains to be done before the objectives promulgated by the German leadership can be said to have been achieved, and the concerns expressed by Germany’s neighbors sufficiently allayed that the unified state will be accepted into the European Union with open arms by people that no longer harbor visions of Germany once again arming itself and marching lemming-like off to war.
Bartee, Wayne C. 2000. A time to speak out: The Leipzig citizen protests and the fall of East Germany. Westport, CT: Praeger Publishers.
Berger, T. 2001. German unification and the Union of Europe. German Politics and Society 19(1):80.
Conradt, D.P. 2002. Political culture in unified Germany: The first ten years. German Politics and Society 20(2):43.
Edwards, Vincent, Gennadij Polonsky, Danijel Pucko, Malcolm Warner and Ying Zhu. 2004. Management in transitional economies: From the Berlin Wall to the Great Wall of China. New York: Routledge.
Germany. 2006. U.S. Government: CIA World Factbook. Retrieved November 11, 2006 from https://www.cia.gov/cia/publications/factbook/geos/gm.html.
Grix, Jonathan. 2000. The role of the masses in the collapse of the GDR. Basingstoke, UK: Macmillan.
Grote, M. And B. Kienbaum. 1997. German unification as a cultural dilemma: A retrospective. East European Quarterly 31(2):223.
Hofhansel, Claus. 2005. Multilateralism, German foreign policy and Central Europe. London: Routledge.
Judt, T. 1994. Nineteen eighty-nine: The end of which European era. Daedalus 123(3):1.
Kahn, Charlotte. 2000. Ten years of German unification: One state, two peoples. Westport, CT: Praeger Publishers.
Kirkpatrick, E.M. 1990. One country, one currency: Monetary and economic union. World Affairs 152(4):231.
Kopstein, Jeffrey. 1997. The politics of economic decline in East Germany, 1945-1989. Chapel Hill, NC: University of North Carolina Press.
Lauk, K.J. 1994. Germany at the crossroads: On the efficiency of the German economy. Daedalus 123(1):57.
Mcadams, A.J. 2002. What remains? The political culture of an unlucky birth. German Politics and Society 20(2):26.
Niven, Bill and J.K.A. Thomaneck. 2001. Dividing and uniting Germany. London: Routledge.
Pile, M.W. 2001. Ten years of Basic Law Amendments: Developing a constitutional model of German unification. Vanderbilt Journal of Transnational Law 34(3):633.
Slusser, R. 1996, December 22. ‘Leipzig is coming!’: In constructing future, city is proud of past. The Washington Times 1.
Staab, Andreas. 1998. National identity in Eastern Germany: Inner unification or continued separation? Westport, CT: Praeger Publishers.
Thompson, Juliet S. And Wayne C. Thompson. 1994. Margaret Thatcher: Prime Minister Indomitable. Boulder, CO: Westview Press.
Wolle, S. 1998. Die heile Welt der Diktatur: Alltag und Herrschaft in der DDR 1971-1989, Berlin: Links.
Discussion About Media Literacy art history essay help: art history essay help
Media refers to the communication channels used to disseminate information through physical and online mediums such as that newspapers and Television. With the revolution of time and the advancements in technology, there have been great strides in the field of media, with most of the new changes and improvements being in the area being in the method of delivery of the said information to the last receiver, who is the audience, reader or viewer in the case of video transmission of the data. The usefulness of media across different generations has remained significant despite disparities in the level of knowledge that each generation possesses in terms of media. This aspect is known as Media literacy (Bulger & Davison, 2018). Media literacy refers to the ability of different persons to make use of media platforms and information provided through media to make their lives and that of others better. Therefore, the idea of Media literacy capitalizes on an individuals ability to not only receive information but also use it in a way that realizes the importance of the information indicated in the said media platform.
Media literacy could also refer to an individual’s ability to create useful information through the right means of a compilation of information and eventually a right means of delivery. The two, therefore, summarize the idea of Media literacy as the ability to not only understand the usefulness and need for media but also to be in a position to make use of elements of media for individual and communal gain. Based on this, it is important to note that Media learning, therefore, looks at the knowledge of the use of media from the point of view of receiving information and sending it out. With the rise of popular media outlets that have become popular among the Youth, such as Twitter, it is arguable that it is vital to understand the role. Medial learning plays in the youth population, including adolescents (Bulger & Davison, 2018). This paper aims to look into the idea of media literacy among the Youth and adolescent population and the level of impact in terms of positivity and negativity of media literacy on the said population.
Components of Media literacy
Media literacy is dependent on the ability to identify. Identification implies the ability to recognize data as valuable information. Media literacy is surrounded by the idea of knowing when and how to access and use the information, and in this case, the identification component relies on such an aspect. For information to be termed valuable, there is a need to create the right room from which perception of what the data has to offer can be made. Such a room involves the idea of locating information based on relevance to the purpose which is intended. This is termed identification.
In most cases, information identified is composed of data that is assigned meaning which is dependent on the receivers interpretation. For example, when an individual gets access to information about a certain individual on the media, the said person may associate the individual with a negative feeling such as hate or pity depending on their perception about the case or maybe an emotion such as admiration if their feel positive towards them (Valtonen et al. 2019). Ideally, media will tend to fall subject to interpretation, and for this reason, there must be keenness when allocating
Analyzing is also an important factor in Media literacy. Analyzing refers to the ability of an individual to pose questions and find an explanation of different aspects of media. Analyzing allows people to assess the credibility of the sources of the information being provided through media. It is only through analyzing that the individual can be able to certify the essence of the information provided concerning their lives. For a conveyor of communication through media, the element of analysis refers to efforts by the individual to determine whether the information being decimated is done so in a manner that allows the audience to understand and assign the expected feeling to the data being passed.
Types of Media
This is one of the earliest forms of media. Print media involves the use of written media such as newspapers. This type of media can relay news or even for entertainment purposes. Despite being a well-established type of media, this media form has found quite a disadvantage since technology has created a better platform in which people can get access virtually without having to undergo any insignificance of finding a newspaper vendor or going to the shop and buying a magazine. For this reason, this form of media is highly unpopular among teenagers and Youth since most of them prefer getting access to information using their phones.
Broadcasted media consist of media aired to many people through means such as Television. This was once the most popular type of media due to the idea of engagement. While there has been a slight decrease in the amount of keenness that teenagers and the youth pay towards such media platforms, it is arguable that this media platform remains one of the most well-learned media platforms among this population.
This is the new form of media. This type of media provides access to information through online platforms. Through this type of media, the highest percentage of Youth and adolescents seem to have the highest levels of media literacy. Digital media include platforms such as Instagram and youtube. Such platforms are the new and trendy forms of media, and for this reason, they are most popular among the Youth and adolescents.
Military as an Institution in Latin America online history assignment help
Military as an Institution in Latin America and Its Role in Chile
Latin America today is known not only for its unique, culture-based, Spanish legacy, but it’s also known for political instability, military coups and political adventurism. It’s enough to remind economic collapse in Argentina of 2001, presidential elections in Venezuela and Peru, insurgency in Columbia and Bolivia, etc. Militarist particularities of national governments laid into the main theme of a famous novel 100 years of Solitude by Gabriel Garcia Marquez., who wrote that nothing had changed in situation of working class since war for independence despite all revolutions and military governments with populist slogans. Latin America is characterized by unique political traditions, which have nothing common with political institutes of the U.S.A., despite the fact that political systems of both Americas developed under similar conditions in the same historical epoch: struggle for independence from their European metropolises in 18-19th centuries. Some authors, for example Jose Pinera note that the “fathers of nations” in Latin America didn’t fight for the ideals of democracy, freedom and equal opportunities, which they lacked under Spanish crown. Later it became clear, that it was a “desire” of chosen in colonies to become independent from the crown in order to get full control over the domestic affairs in South America. Due to historical particularities and political climate in colonies ambitions of new “hidalgos” were widely supported by lower classes that hoped to better their situation. S. Bolivar, O’Higgins and Sucre considered Napoleon’s France to be a perfect state, an authoritarian regime led by government of “elite.” Neither Bolivar nor Sucre considered constitutional government and civil society principles to be the most appropriate for Latin America states, as such principles and institutions would limit their powers:”… It is one thing to know how to fight and another to govern. The Liberators (and their successors) did not anchor the young republics in the values of individual liberty, did not establish the rule of law, and did not limit the delegation of authority by the people to their democratic representatives. On the contrary, they maintained — and in some cases, further improved on — the Spanish centralizing tradition.”(Pinera, 409)
Authoritarian tradition of government survived in Latin America today as corruption supplemented by social problems and economical instability creates favorable conditions for populism of charismatic political leaders. The words of Victor Hugo: “Most commonly revolt is born of material circumstances” suits Latin America perfectly well. One of the brightest examples of military dictatorship in Latin America is regime of general Augusto Pinochet in Chile. Despite cruelty of repressions and violations of human rights junta served as “reanimation” to a country with declining economy and growing poverty, as A. Pinochet was able to restore all diplomatic ties lost during Allende’s office. Victory of socialists led by Salvador Allende on presidential elections and his nationalization policies, led to investments outflow and further economical and political isolation. Allende cooperated with Soviet Union but he could not fully rely on the aid of Soviets, which subsidized Eastern Europe, communist regimes of Asia and Africa. Despite the support among lower classes, government of Allende was unable to control situation in the country, which led to the military coup organized by general A. Pinochet.
Military Junta government, which formed authoritarian regime for the next 27 years, didn’t change situation in the country for better but only worsened political and economical contradictions. Today it’s a well-known fact that regime of Pinochet is guilty in mass repressions, persecution and deportation of political decedents. More than 2200 people are officially recognized to be the victims of the regime, according to non-official data the number of victims exceeds 32000. Junta is often called a government of “strong hand and iron fist,” but in fact it was a new government of adventurism supported by national oligarchy and army.
It’s an interesting fact that Pinochet’s government accused in economical fails not only socialists led by Allende, but also all political parties which were considered to be dilettantes and demagogues. Junta banned all political parties including Christian Democrats and even Nationalist party. Economic policies were similar to political ideology, as they promoted on practice the theory of “neoliberalism” and open market, which in fact was absence of any control over privatization of strategic enterprises, social infrastructure objects and absence of income monitoring. Such practices led to the growth of foreign loans and investment to Chile, which were stopped during Allende’s office, but at the same time it led to the domination of foreign capital in economy sector and weaking positions of national production. Mining industry was privatized by big American corporations, which restored their traditional influence in this sector:
Pinochet’s neoliberal economic policies’ benefits have been sharply contested. In 1973, unemployment was only 4.3%. Following ten years of junta rule in 1983, unemployment skyrocketed to 22%. Real wages declined by more than 40%. In 1970, 20% of Chile’s population lived in poverty. In 1990, in the last year of Pinochet’s dictatorship, poverty doubled to 40%. Between 1982 and 1983, the GDP dropped 19%. In 1970, the daily diet of the poorest 40% of the population contained 2,019 calories. By 1980 this had fallen to 1,751, and by 1990 it was down to 1,629. Furthermore, the percentage of Chileans without adequate housing increased from 27 to 40% between 1972 and 1988, despite the government’s boast that the new economy would solve homelessness. Meanwhile, the wealthy were raking it in. In 1970, the richest one-fifth of the population controlled 45% of the wealth compared to 7.6% for the poorest one-fifth. In 1989, the richest one-fifth controlled 55% of the wealth while the poorest one-fifth controlled only 4.4%”
But at the same time we can conclude that the stability achieved by Pinochet’s junta was mainly resulted by different forms of aid which Chile received mainly from the U.S.A. USA was its main lobby in international financial institutions (such IMF) even during Carter’s office that criticized violence and repressions of junta. It was the time of the Cold war and Latin America with a big segment of working class and uneasy political conditions was very vulnerable towards penetration of “revolutionary Marxism.” Pinochet always justified his methods by the struggle against the spread of Marxism in Latin America. Similar politics was common for dictators of Argentina, Peru and Bolivia of that period.
Today it’s difficult to say whether Chile under Allende or socialists would have experienced better economical indicators, but we can obviously conclude that years of junta led to the total destructive lose of economic independence. Policies of Chicago Boys in monetary and financial sector were very short eyed, as the pay off to the growth of investments and foreign loans was incomparable to benefits. Country faced serious economic problems by the year when Pinochet resigned foreign debt was equal to 70% of GDP, unbelievable indicator even for Latin American states.
Making a conclusion it’s important to note that in many respects thanks to failure of socialists in Chile, South America was saved from the spread of “Marxism.” Attempts of “communist guerillas” to start revolution in any country of the continent failed by early 1970’s mainly because there existed no support in the face of legitimate government in neighboring countries. In case of different situation with copper prices in late 1960’s Chile’s socialist government would have preserved and spread influence of populism over Latin America. Today the similar situation is in Venezuela, where the success of Hugo Chavez, former marines colonel, is resulted by high oil prices, which allows him to promote wide populist social programs, gaining support of lower classes. Socialists in Latin America also restored their popularity in Nicaragua and Columbia. In case of socialism spread or even new military juntas these countries will be ruled by nationalists who would concentrate more on Latin American cooperation, rather than cooperation with the U.S.A. Or Europe. Such situation was possible in 1970’s and military coup of Pinachet had prevented spread of socialism and Marxism in Latin America, which could change the whole geopolitical situation on the continent.
Petras, James Leiva, Fernando Ignacio Democracy and Poverty in Chile: The Limits to Electoral Politics Westview Press, 1994
Pinera, Jose Latin America: a way out. An article from: The Cato Journal January 1, 2003 p.409
Constable, Pamela Valenzuela, Arturo A Nation of Enemies: Chile under Pinochet Norton, 1991
Hewitt, Kenneth Between Pinochet and Kropotkin: State Terror, Human Rights and the Geographers
The Canadian Geographer, Vol. 45, 2001
Falcoff, Mark Chile: Pinochet, the Opposition, and the United States
Journal article by World Affairs, Vol. 149, 1987
Petras, James Leiva, Fernando Ignacio Democracy and Poverty in Chile: The Limits to Electoral Politics
Military as an institution in Latin America and its role in Chile
Tourism Attraction Ethics Term Paper a level history essay help: a level history essay help
Tourism Attraction Ethics
Extensive international travel even amidst the growing incidence of terrorism, accidents and disease give rise to various types of ethical concerns, which are normally not taken, into consideration by the present day tourism industry. The ethical concerns associated with travel involve health, safety and accessibility and also includes the detection of individual and institutional duties, informed sanction, eventuality preparation, disaster response mechanisms, fairness and unbiased treatment. The government agencies, professional associations and other such institutions have all strived to devise successful plans to address health safety and accessibility challenges cropping out due to the rapidly expanding international travel. The State Department of U.S., the Centers for Disease Control and the World Health Organization provides worthy resources in respect of public safety information; however, political considerations most of the times challenge accuracy and credibility. (Ethics Challenges: Health, Safety and Accessibility in International Travel and Tourism)
The Health and Safety guidelines, vulnerability evaluations and other ethical approaches assist the institutions and administrators to address the future challenges. However, the primary role for administrators at all stages has been to become more conscious of the concerns prevalent around the tourism industry. The public authorities both in U.S. And abroad are confronted with the ethical concern that they seldom acknowledge are the growth of international tourism. During 1998 about 600 million people traveled internationally and this is expected to rise to 1.6 billion by the end of 2020. Such extensive growth will entail immense pressure on governmental staff to adjust with an extensive range of health, security and accessibility concerns. The domestic as well as international tourism in most of the countries constitute a significant portion of their economies with pro-growth efforts anticipated to be safeguarded by both the public and private sector.
By the year 1985 U.S. had about 43 federal agencies associated with tourism. Extensive efforts are being made by every state and major cities with number of communities to promote economic growth through tourism. Moreover, tourism is one of the few public sector areas that have cut down on its employees. Public authorities are concerned with encouraging, managing, budgeting, assessing and administering tourist attraction as well as administering the process of licensing, taxing, and zoning by which tourism is improved and maintained. The growth of tourism and particularly its economic impacts in terms tax receipts made the public authorities to evaluate the industry in terms of its costs. They found the tourism sector to be deficient of political will and recommended contingency planning efforts to be necessary to prevent major problems. (Ethics Challenges: Health, Safety and Accessibility in International Travel and Tourism)
Sometimes it is found worthwhile to acquiesce to local demand even amidst the long-term threat to public interest and the cost-benefit analyzing tends to supersede the future threat by the present advantage. The economic and political significance of the tourism sector sometimes prioritizes a few economic interests and favors tourists at the cost of the citizens. To illustrate the tourist resorts lacking sufficient sewage facilities in the short run may safeguard the tourists from dysentery by providing bottled water. However, in the long run the local communities and villages are succumbed to polluted wells, unsafe beaches, and a declining performance of the local fishing industry. When the public sector strives to implement stringent standards in the planning spheres, its inspectors may be allured to belittle the threats and the benefits of economic development to be over emphasized. Even when a threat of major health danger prevails similar to the medical wasters of New Jersey beaches and even when disease and political instability appears to be threatening, sufficient steps are not taken so as to dissuade the inflow of the tourists. (Ethics Challenges: Health, Safety and Accessibility in International Travel and Tourism)
Tourism is commonly promoted as being beneficial for health and as a stress buster. In the process due regard is not normally accorded to ethical considerations. In some cases even prostitution is advertised in terms of ‘a fresh peach on every beach’, ‘try a virgin … Island’ etc. Even children in some cases appears insufficiently protected from pedophiles B, some of whom really tour as groups in order to exploit children. These ethical problems pose serious concern in many nations; however, studies reveal that the low civil service salaries encourage bribery and made regulation of such activities difficult. The allotment of police and judicial service is another dimension of ethical problem. The affluent travelers are often accorded more safeguard than the non-tourists.
Some cities extend special patrolling in tourist belt. The state appears to prescribe harsh punishments for the crimes against tourists. This is seer violation of equity principle in judicial system. In some cases the particular vulnerability of tourists being unfamiliar with the destination, its language, signage, money, traffic patterns or customs etc. are emphasized. Enforcement official often resort to discriminatory treatment in favor of the tourists in order to protect tourism and keep tourists from being targeted since they are transients. This is in line with the principles of John Rawls on justice that indicate equal treatment, except in such cases where the most vulnerable would be able to take advantage from unequal dealings. (Ethics Challenges: Health, Safety and Accessibility in International Travel and Tourism)
Another ethical concern is related to both domestic and international dimensions. National, state and local officials are rarely seen to warn the in-bound tourists on health, safety and accessible concerns. Moreover, the tourist and non-tourist health and safety concern constitute another ethical concern. It is found to be unethical to reduce the health requirements globally, with a view to facilitating tourism at a time of enhanced vulnerability to infectious diseases. Even barring entrance of the visitors who are tested HIV positive are considered to be in violation of the WHO guidelines that necessitates minimum possible scrutiny of incoming tourists.
Accidents appear to be another major cause of injuries and fatalities for tourists. The canyoning deaths of 19 adventurers in Alps during July 1999 and the countless fatalities associated with commercialization of the Mt. Everest Treks have constituted additional ethical concerns that raise the adoption of more stringent control on popular but dangerous activities. Insufficient signage seems to be another important determinant of accidents. The World Travel Organization — WTO has insisted the member nations to enhance international signage. However the application of international signage that communicates through pictures instead of particular language is more prevalent in Europe, Australia, and New Zealand however, more scarce in the United States. As a result foreign visitors are succumbed to more accidents in the U.S. than in the developing countries. (Ethics Challenges: Health, Safety and Accessibility in International Travel and Tourism)
The individual tourism is administered by consumer law and government policies; however, public educational institutions have some more ethical concerns related to their international student services and study abroad programs for their citizens. Such situations have only started to be dealt in very recently. The International educational travel is much emphasized in consideration to fact that the students being at the age of 18-22 years are considered at their prime time for risk taking behavior. They may be traveling to nations having unfamiliar laws and customs. The remarkable variations in sexual liberty are quite apparent through out the world. The possibility of running afoul to drug, alcoholism or other laws necessitated to be dealt with more vigorously since the laws vary widely in terms of stringency.
In consideration to the fact that international students bring financial and educational and cultural benefits the universities in most of the nations are progressively associated with the recruitment of such students. The international study opportunities are considered as a significant facet of the career of a student. The exchanges, study tours, international internships and community service projects abroad are certain ways by which various universities structure their college credit and travel — which are more often instituted with established procedures and necessary supervision. The economic competition, recruitment and a common faith in the educational value of such scopes maintain the educators who are committed to their expansion. The United States is not the only nation addressing such concerns. In Australia, New Zealand and throughout Europe, the experience of student travel lies much ahead of the U.S. In most of such societies the vacations are seen to be longer and government policies seem to subsidize the travel of youth and workers. However, with regard to ethical and legal concerns of such travels has since been considered slow in comparison to the need of the time. (Ethics Challenges: Health, Safety and Accessibility in International Travel and Tourism)
The first ethical concern in this regard is quality control. The absence of a set of standards for a myriad of prevailing programs or set of requirements for the faculty leading tours is increasingly been felt. There is no mechanism to judge the growing number of inflow at the cost of sufficient preparations for those who travel internationally. There appears an absence of any screening mechanism other than the academic criteria to suitably evaluate the mental health or emotional maturity of the participants. Some students seem to be under severe depression, being thrown into the entirely new surroundings, irrespective of the absence of language and custom barriers. There also exists a conflict between the privacy issues and the requirement of the institution to become aware of the mental and physical condition of the students.
The students are required to be oriented to become aware of the health and safety risks of excess drinking abroad, accidents in unfamiliar settings, the punishments for illicit drugs, restrictions on women and the political situation of the environment to which they are entering. Moreover, the institutions have moral responsibility of safeguarding the students and faculties of the imminent health and security risks. Such aspects broadly conclude that there prevails uncommon but enormous threat to the public health, security and accessibility from the huge growth and multiple facets of travel and tourism. Besides, deregulation, privatization, cutthroat competition for tourists and a sharp enhancement in the inclination and ability to travel have become sources of ethical concerns in many respects. (Ethics Challenges: Health, Safety and Accessibility in International Travel and Tourism)
The tourism and recreation appears to have both advantageous and detrimental impact on the ocean ecosystem. The beneficial impact can be emphasized in terms conservation of natural resources while the community acknowledges the economic benefits from tourism and recreation; the progressive acknowledgement of the significance of the quality environments by government and public and the follow up constitution of managed and protected areas and enhanced environmental awareness that individuals find through meaningful interaction with nature. The adverse impact on the ocean ecosystem may include disturbances to uplands, near shore and ocean environments, habitat degradations from constructions of facilities, runoff from land clearing activities, enhanced reverie and near shore turbidity; accidental or intentional releases of oils, fuels and other effluents; irresponsible disposal of trash and debris, and beach erosion out of development of resorts that restricts sand flow to and along the coast. (Tourism and Recreation)
Enhanced ocean and coastal tourism and recreational activities have also become the source of a number of other related problems. The increasing number of tourist inflow into a tourist site abnormally exceeding its capacity gives rise to increasing demand for new parks, facilities and shoreline access. It requires additional educational and decent programs to educate an increasing number of tourists on the ways to minimize their influence on the marine environment. Public water safety and training programs are required to go side by side with the growing trends of water-related activities. There also occur growing conflicts between various users and wildlife. The ethical consideration in this regard entails greater or new management and enforcement activities to cater to such enhanced demands. With excess carrying capacity of a destination there appears degradation in tourism and recreation experience and this requires management of unacceptable levels of resource degradation, traffic congestion, parking and public transportation problems, deteriorating facilities, noise, trash and debris, safety concerns and user conflicts.
Such damage to recreational resources are considered to be the outcome of irresponsible behavior of recreational users themselves and involves the ethical considerations of limiting the use of sensitive sites, educating the public on the ways to avoid damaging marine resources and extending highly visible enforcement. The growing conflict between humans and marine species has attracted ethical considerations. The watching of abundant living marine resources has been a center of attraction to the tourism. The wild life such as sea lions, whales and shore birds are much fascinating to observe. The growing fascinations in this respect sometimes are found to be harmful for the existence of such species and also to the tourists and needs adequate management giving due importance to ethical considerations. (Tourism and Recreation)
To illustrate, breeding colony of elephant seals has been instituted in the coves of south of Piedras Blancas in northern San Luis Obispo County in California. This has increased the population of elephant seal population tremendously. The colony attracted a never before enhancement in the number of visitors, generating several hazards, increasing traffic, illegal parking, trespassing of tourists crossing over barbed wire and private property to access the colony. Moreover, there also exists conflict between recreational users and increasing safety concerns. The scope of ocean and coastal recreational activities has been increasingly diverse. It is seen that many forms of recreation if not managed properly can generate conflicts between users. There exists a conflict between noisy and quiet or comparatively safe and higher risk forms of recreation. To illustrate, a combination of bird watching and personal watercraft use give rise to such user conflicts. The use of personal watercraft those are ridden similar to a motorcycle and being run by powerful jets are capacitated to reach enormous speeds exceeding about 30 miles per hour.
The statistics of California Boating Accident Report for 1995 reveals that personal watercraft constitutes more than 36% of all reported accidents and more than 46% of all reported injuries. Such accident rate is seen to be quite disproportionate taking into consideration only the 13% of all registered vessels in California. The commercial practice of shark chumming is taken to be the one of the most unethical incidents in the field of tourist attraction. The practice involves throwing of fish or animal parts into the ocean to allure Great White Sharks off Ano Nuevo Island established within the Monterey Bay National Marine Sanctuary, California. Such activities attract sharks so that tourists can watch them from cages suspended underneath a boat. This resulted in significant oppositions from other users like scuba divers, surfers and operators of commercial fishing vessels. Maintenance and improvement of ocean ecosystem is particular significance for those who desire to swim, surf, sail or fish in clean and productive ocean or coastal waters. (Tourism and Recreation)
The ethical responsibility of the developers of tourism evolves the concept of ecotourism, which originated in the year1965 with the promotion of ecological tourism by N.D. Hetzer, with four standards of minimum levels of environmental impact, minimum levels of impact on and maximum amount of respect for host cultures, maximum amount of economic advantages to the grassroots of host country and maximum amount of recreational satisfaction to the participating tourists. Presently, the concept is recognized in terms of “adventure tourism, nature-oriented or green tourism, responsible or ethical tourism, and socio-ecological tourism.” (Tourism and Recreation)
Ecotourism is normally regarded as an alternative approach in contradiction to mass tourism and thought of as an alternative form of development wherein problems are solved using a bottom up approach as opposed to the traditional top down approach. This emphasizes on the autonomy of the local community to make decisions about their livelihood and environment. It has been increasingly felt at all levels of government, civil societies, local and indigenous communities to acknowledge the goal of economic growth with tourism along with according significant priorities to the concept of ecotourism. (The Ethics and Attitudes towards Ecotourism in the Philippines)
Educational and research activities have undertaken extensively since long in Evo recreational areas located in the Southern part of Finland. The Evo Recreational Area is a center for tourist attraction with its beautiful and diverse natural resources and entails plenty of fascinating opportunities for tourist and leisure activities inclusive of trekking, hunting, swimming, boating, spoon and fly fishing. The concept of ecotourism and social responsible tourism strikes a balance between the rights and responsibilities of tourists. The tourists have the liberty to ski and cycle in the natural environment without bringing damage to it. The tourists are forbidden from “disturbing or damaging birds’ nests or nesting, disturb reindeer, litter the nature, fish or hunt without proper licenses.” (Sustainable Tourism Development in Evo, Finland)
Tourism is considered to be the product of social and cultural natural environment within which it occurs and its success is dependent upon the environments within which it operates. However, the tourism and the travel industry are necessarily treated as a short-term encroachment of the other people’s environments whether it is a coastline, a city or a mountain range or a rainforest. (National responsible Tourism Development Guidelines for South Africa) Taking into consideration an evaluation of the problems, constraints and opportunities confronting the South African tourism industry, the concept of responsible tourism has been introduced as a proactive approach by the tourism industry with a view to developing, marketing and managing tourism industry
Responsibility of companies Term Paper african history assignment help
responsibility of companies has historically been defined in purely economic terms. For example, Friedman (1990) considered maximization of shareholder wealth as being the sole objective and responsibility of a well-managed company. This perspective, though, generally viewed corporate social responsibility activities as a distraction rather than a goal. From this perspective, any expenditures of resources in the interests of social responsibility was at the expense of shareholders, and the interests of shareholders and other stakeholders were defined implicitly as conflicting and mutually exclusive. Today, though, stakeholder theory maintains that stakeholders should be considered as an important component in a company’s overall business plan. By sharp contrast, neoclassical economic theory treats companies as unitary actors that seek to maximize their profits. The stakeholder approach to doing business suggests that all people who hold a legitimate interest in an entity have a right to be heard, and to have their views must be considered as well. Today, the stakeholders in a corporation include not only shareholders and officers, but also customers, lenders (including those other than creditors), employees, creditors, suppliers and the community at large. The vast majority of multinational corporations, though, compete in environments that are characterized by a lack of regulatory or other oversight. This paucity of regulatory guidance has compelled many corporations to forego their responsibilities to their stakeholders in favor of more profits in the near-term, a practice that some observers believe is no longer a sustainable approach to doing business in an increasingly globalized marketplace.
To gain some additional insights into how these forces are playing out in the real world today, this study examines the scholarly and refereed literature to identify the salient issues involved in stakeholder theory as they apply to multinational corporations, and what companies can do today to ensure their long-term profitability while balancing the needs of all of their stakeholders. A summary of the research and findings is presented in the conclusion, followed by personal reflective journal in the appendix.
Chapter 1: Introduction
Purpose and Significance of Study
Scope of Study
Research Method of the Study
Chapter 2: Literature Review
Chapter 3: Methodology
Description of the Study Approach
Data-gathering Method and Database of Study
Chapter 4: Data Analysis
Chapter 5: Summary, Conclusions and Recommendations
Study of Relationships between Corporate Social Responsibilities Promotion and Corporate Performance in Multinational Corporations
According to Mcmenamin (1999), today, it is not possible, or even desirable, for a company to seek to achieve shareholder wealth maximization in terms of profitability to the total exclusion of all other considerations. Indeed, this author reports that, “In the management of a firm there are a diverse group of interests, often conflicting interests, which need to be recognized and included within the goals and objectives of the firm” (p. 40). For example, there is the primary group of the company’s managers who are responsible for operating and controlling the company on a day-to-day basis on behalf of the shareholders, the actual owners of the enterprise. Further, in larger publicly owned companies, there is a principal-agent relationship between shareholders and managers, with managers acting as agents on behalf of shareholders as their principals (Mcmenamin, 1999).
This separation of ownership and control, or agency relationship, particularly in large corporations, can result in conflicts and problems between the interests of managers and the interests of shareholders. Mcmenamin notes that this conflict of interests is known as the agency issue or the agency problem. “In addition to the interests of shareholders and managers, there are other ‘stakeholders’ whose interests need to be considered,” he says. “That is, other groups exist who can be considered to have a legitimate interest, or stake (economic or otherwise) in the goals and objectives of the firm” (p. 40).
For instance, all corporations have employees, customers, and community groups, all with interests that are frequently different and even competing that must be taken into account.
Proponents of the stakeholder theory suggest an all-inclusive approach to management by recognizing the rights of all the diverse interest groups in managing the activities of the corporation; further, stakeholder theory applies equally to public sector and not-for-profit organizations (Mcmenamin, 1999).
Multinational corporations have become increasingly common in recent years, a process that suddenly accelerated in the late 1990s, particularly in the fields of telecommunications and energy; further, approximately one-third of the $3.3 trillion in goods and services traded internationally in 1990 was comprised of transactions within a single firm (Korten, 1995, p. 43). The globalization of markets, the increased need for working capital, and new technology, combined with an improved investment environment, are contributing to this acceleration today as well (Miller, 2000). According to Rao (1999), “Globalization, with its corollaries of global products, global consumers and the global marketplace, appears to signify the crystallization of the entire world as a single place. The questions are: what economic, political or cultural parameters does this process of globalization render invisible? What groups of people or regions are excluded from this discourse?” (pp. 58-9). These fundamental issues have emerged as the result of the globalization of the world’s marketplace, a process that has been driven by two primary technological forces. First, transportation costs have decreased dramatically with the introduction of improved physical communications such as better vehicles, modern aircraft; containerization; and expanses of interstate and international motorways. Second, and more spectacular, advances in computing power and in telecommunications through the introduction of a wide range of computer-based systems, satellite technology, and, more recently, fiber optics; these innovations have fundamentally improved the ease, speed, quantity, and quality of international information flows around the world (Cable, 1995).
According to Mayer (2001), though, today, just a few multinational corporations are increasingly consolidating their hold on the global economy. “Given their impact on our lives,” he advises, “it is predictable that individuals will in various ways accommodate their lives to the dynamics and beliefs of corporate values” (p. 215). These trends have resulted in many observers suggesting that multinational corporations owe a higher duty to the communities in which they are situated, with various theories being advanced on how best to accomplish this end. In reality, though, most major multinational corporations are constrained only by various laws and regulations in these venues that do not pertain to their ethical conduct, and the consequences have been both severe and pervasive in many cases. In order to determine how a multinational can compete in an increasingly globalized economy today, this study examines multinational corporate governance policies and what issues have emerged in recent years to compel these companies to afford greater attention to their responsibilities to all of their stakeholders rather than just a few shareholders. Stakeholder theory maintains that there are constituents other than the shareholders of the corporation to whom the corporate leadership has certain responsibilities; these constituents are groups that are likely to be affected, either directly or indirectly, by the decisions of executives. Therefore, these stakeholders are said to have a “stake in the corporation”; stakeholder theorists recognize that corporate managers may act from various incentives and a number of stakeholder theorists recognize that the interests of noninvesting stakeholders may not always override the financial interests of shareholders (Karake-Shalhoub, 1999).
According to Mayer (2001), “The vast majority of international trade and business is carried on by large multinational corporations whose pursuit of ever-increasing global market share is breaking down traditional patterns of life and community, imposing a dynamic of rapid change on many segments of most societies, and severely degrading the natural environment on which business, communities, and human life ultimately depend” (p. 215). “Readers may rightly ask about the corporate responsibilities that accompany those rights. Suffice it to say that the responsibilities are few. With the exception of those activities either banned by government (child labor) or mandated by government (minimum wage, job safety, etc.), the corporate entity operates largely in a do-as-you-please environment” (Gates & Schmidheiny, 1999, p. 313).
The primary research questions that will guide this study are:
1. What are corporate responsibilities in general and how do they affect multinational corporations in particular; and, 2. Can an ethical multinational corporation compete in a globalized marketplace where other similarly situated companies may not be so concerned about stakeholder rights?
Purpose and significance of study
Claims that various types of corporate activity have a detrimental impact on human welfare are certainly not new, but the assertions today represent different issues both in terms of their origin and their content. According to Ratner (2001), these claims “emanate not from ideologues with a purportedly redistributive agenda, but from international organizations composed of states both rich and poor; and from respected nongovernmental organizations, such as Amnesty International and Human Rights Watch, whose very credibility turns on avoidance of political affiliation” (p. 435). Just as importantly, these groups have not attempted to undermine capitalism or corporate economic power per se; rather, they have leveled increasing amounts of criticism at certain types of corporate behavior that has clearly transcended accepted norms of human rights law based on widely ratified treaties and customary international law (Ratner, 2001).
These claims are virtually all based on the concept that corporations – particularly multinationals — should be held accountable for their actions within their sphere of operations. “Corporations, for their part, have responded in numerous ways, from denying any duties in the area of human rights to accepting voluntary codes that could constrain their behavior” (Ratner, 2001, p. 436). In fact, this very point is echoed throughout the literature; for example, “At the turn of the 20th century, corporations tended to disregard the public interest willy-nilly. And even as recently as one-half century ago, corporations had so much power over the marketplace and so little responsibility to society” (Sriramesh & Vercic, 2003, p. 450). Despite these trends, things are changing, though, as Ratner points out: “The last decade has witnessed a striking new phenomenon in strategies to protect human rights: a shift by global actors concerned about human rights from nearly exclusive attention on the abuses committed by governments to close scrutiny of the activities of business enterprises, in particular multinational corporations” (p. 435). This closer scrutiny has profound implications for those companies who would seek to expand their market share into the global marketplace.
Research method of the study
The research method used in this study will consist of an exploratory approach comprised of a critical review of the scholarly and refereed literature, with an emphasis on identifying the corporate responsibilities of multinational corporations today based on historic trends and events.
Background and overview.
It just makes good sense the companies must be concerned with their profitability; clearly, without profits, the company would simply cease to exist and there would be no benefits accruing to anyone. In recent years, however, there has been an increasing amount of attention paid to the underlying ethics of how companies, and particularly multinationals, compete in an increasingly globalized marketplace, and precisely what responsibilities are associated with doing business abroad. These questions are not new, but they have assumed increasing importance today. Citing studies by J. Scott Armstrong, Mayer reports that in the 1970s, there was fairly global and homogenous response to increasing corporate pressures to make decisions with their bottom line foremost in mind identified. Armstrong surveyed approximately 2,000 management students from ten countries to play the roles of corporate board members of a multinational pharmaceutical company; the author posed the question of whether the company should remove a drug that had been found to endanger human life from the market. As board members, fully 79% refused to withdraw the drug and sought legal and political actions to either delay or stop government efforts to ban the drug (Mayer, 1999).
Likewise, the Bhopal tragedy caused by Dow Chemical and the Exxon Valdez oil spill are just some of the better-known instances of the disasters that took place in the late 20th century that clearly demonstrated the power of the multinationals to cause enormous devastation on the health and safety of neighboring communities if unconstrained. Not surprisingly, these events have resulted in a demand for the imposition of corporate responsibilities (Mehmet & Mendes, 2003). Unfortunately, these authors point out that, “These patterns of immediate denials and downplaying or withholding of vital information seem a constant theme in these corporate activities which have devastating impacts on local communities. Such exercise of power without responsibility is a serious flaw in the workings of global governance” (Mehmet & Mendes, 2003, p. 122). In order to identify precisely what responsibilities such multinationals have, it is first necessary to define and describe them; these issues are discussed further below.
Corporate responsibilities – What are they?
According to Pava (1999), things have changed in fundamental ways for most companies today. “Most of us, most of the time,” he says, “look at business through the commodity-based lens. Business is action-oriented. Defining the corporation in this way does not necessarily entail an amoral view of the business corporation. The best example of a business ethics built upon a commodity-based view of the corporation is the now-familiar ‘stakeholder theory’” (p. 6). The stakeholder theory maintains that corporations must recognize their responsibilities to various stakeholder groups in society, beyond just their own stockholders; in this regard, these responsibilities include:
1. Providing customers to produce safe, high-quality products at reasonable prices;
2. Treating suppliers with honesty and with integrity;
3. Ensuring that employees and managers are provided with profitable work opportunities and to be rewarded in an open and just way;
4. Being good corporate citizens with regards to local, national, and global communities; and, 5. Providing their shareholders and creditors with a fair return on their invested capital (Pava, 1999).
While the stakeholder theory assumes that corporate executives are responsible to stockholders, it also maintains that there are other groups that are directly affected by the conduct of the company. For example, employees, consumers, creditors, suppliers, and legal subsystems are representative constituents who have a vested interest in the corporation and who might affect, in one way or another, corporate decision making; consequently, corporate executives have a direct responsibility to promote the interests of these groups. Nevertheless, there remains significant disagreement among stakeholder theorists concerning whether stakeholders’ interests of these groups take precedence over the financial interests of stockholders, just as there is disagreement over which of the stakeholders’ interests should be the predominant ones (Karake-Shalhoub, 1999).
By sharp contrast, social demandingness theorists maintain that corporations have a fundamental responsibility to protect and to promote certain interests of the general public. According to Karake-Shalhoub:
They [social demandingness theorists] agree with the stakeholder theorists that the interests of stakeholder groups are important, but they believe that these interests do not override nonstakeholders’ interests or demands for such things as safety, health, freedom, and prosperity. As with the stakeholder theory, this one repudiates the notion that there is some balanced or sensible list of tangible responsibilities that corporate executives always have toward society. The list varies as the nature and ranking of the interests or demands of the public change. (p. 6).
Furthermore, many companies are seeking to decentralize and make basic corporate functions such as buying, selling, financing, developing, producing, and servicing, more efficient and effective by changing their mode of internal organization; these changes have placed greater reliance on worker initiative and a less rigid division of labor (Dunning, 1999). Today, groups or circles of workers (or ‘associates’) are being empowered to make front-line decisions based on their own best judgments concerning the best way to run a production line or a specific machine, reduce costs at all stages of production, and improve quality. As a result, “Middle strata (such as supervisors), as a result, are becoming increasingly irrelevant” (Dunning, 1999, p. 433). The fundamental goal of these new business models is to improve company performance by facilitating the flow of information both within the firm, and between the firm and its network of suppliers and clients; and by establishing new incentive regimes for labor, whose greater involvement and increased responsibilities is being rewarded with longer tenure, extensive training, and better compensation (Dunning, 1999).
In reality, though, the key challenge facing multinational corporations and their leadership today does not so much concern the difficulties related to guiding individual behavior, but rather in providing an ethical framework for corporate behavior (Casmir, 1997). In this regard, Casmir suggests that when the individual is the subject of investigation, the majority of attention is afforded to straightforward issues of compliance, while the value of the policy or procedure to which compliance is directed receives little or no attention. “Additionally, the largest issues of responsibility and value relate to systemic problems and collective actions. Clearly this is also the case in international business. There are unethical employees and they do harm (judged by any number of standards and measures), but their compliance to laws and corporate policies will not solve many of today’s difficult problems” (Casmir, 1997, p. 190). The primary objectives and day-to-day activities of multinational corporations have become the focus of concern; however, the primary constraint involved here concern developing an adequate public rather than merely private ethic (Casmir, 1997).
According to Casmir, “Today, many lament the weak morality of commercial corporations. Thus, an adequate discussion of ethics must focus on both the individual and corporate levels. But the discussion of corporate responsibilities has been severely hampered by dominant social conceptions which make such a discussion difficult” (p. 190). Indeed, while it is frequently difficult, if not impossible, to provide a “one-size-fits-all” guide concerning the critical issues related to business ethics, the stakeholder theory provides a useful framework for investigating and pinpointing corporate responsibilities while at the same time providing a company’s leadership with a powerful reminder that their stockholders are not the only legitimate stakeholders involved (Dunning, 1999, p. 433).
Unfortunately, it would appear that these trends have created more questions than answers, and the underlying issues have been perhaps better described than they have been understood by most observers today. In his essay, “Community, Business Ethics and Global Capitalism,” Mayer (2001) advises that, “The field of business ethics is in a quandary. No unified theory has been accepted by its many scholars and practitioners, and, according to some, little practical guidance to business managers has been generated” (p. 215). This is not to say, though, that multinational managers do not have any tools at their disposal to help them make these judgment calls; it is to say, though, that many have not recognized the need or accepted these responsibilities in a meaningful way. For example, Mayer points out that, “Rather than trying to apply the most abstract moral theories (Utilitarianism, Kantian Deontology, or Aristotelian Eudiamonism) to ongoing ethical quandaries, business ethicists as well as managers of multinational enterprises can usefully examine the customs and mores of a particular community to discover viable ethical norms (or microsocial contracts)” (p. 215). This type of attention to the particular extant norms, though, must be balanced by the corporate regard for broader, more universally applicable standards, a process that is inherently confounded by a wide range of social, cultural, geographic as well as a need to continue to focus on a company’s bottom line. In this regard, Andrew Carnegie recognized early on the responsibilities of wealth while at the same time maintaining a clear differentiation between personal and corporate responsibilities. For example, in his 1889 essay appropriately titled “The Gospel of Wealth,” Carnegie pointed out that the man of wealth has a duty:
to consider all surplus revenues which comes to him simply as trust funds, which he is called upon to administer, and strictly bound as a matter of duty to administer in the manner which, in his judgment, is best calculated to produce the most beneficial results for the community – the man of wealth thus becoming the mere trustee and agent for his poorer brethren, bringing to their service his superior wisdom, experience, and ability to administer, doing for them better than they would or could do for themselves (in Krauz & Pava, 1995, p. 113).
In 1919, in the case of Dodge v. Ford, the State of Michigan Supreme Court held that “[a] business corporation is organized and carried on primarily for the profit of the stockholders” (Tsuk, 2003, p. 1861). This concept of corporate responsibility has remained the standard for the doctrine of fiduciary duties; Tsuk notes that this concept is based on the assumption that market competition, “as manifested in the profit motive,” is in and of itself a sufficient constraint on corporate power. “Legal doctrine does not exist in a vacuum,” though he notes. “Over the past century legal scholars and political scientists helped legitimize the shareholder-centered vision of the corporation by suggesting how different interests would help direct corporate power toward socially beneficial aims” (Tsuk, p. 1861).
In fact, during the middle of the 20th century, this sharp distinction between personal and corporate responsibilities began to change and the nature of corporate social responsibility today has become focused on transforming these concepts into a set of standards that can be called upon by corporate leaders when they are faced with situations where the ethical alternative may not be so readily discernible though (Krauz & Pava, 1995). According to Mayer, “These more universal standards are called hypernorms, and would limit the moral free space of microsocial contracts by forbidding acts which violate the most fundamental principles of human existence” (p. 215). In response to violations and perceived violations of these fundamental principles, the following small set of claims is representative of the challenges being made today concerning private business activity and the venues in which they take place:
1. The United Nations Security Council condemns illegal trade in diamonds for fueling the civil war in Sierra Leone and asks private diamond trading associations to cooperate in establishing a regime to label diamonds of legitimate origin;
2. The European Parliament, concerned about accusations against European companies of involvement in human rights abuses in the developing world, calls upon the European Commission to develop a “European multilateral framework governing companies’ operations worldwide” and to include in it a binding code of conduct;
3. In response to public concern that American companies and their agents are violating the rights of workers in the developing world, the U.S. government endorses and oversees the creation of a voluntary code of conduct for the apparel industry;
4. The South African Truth and Reconciliation Commission, in a searching study of apartheid, devotes three days of hearings and a chapter of its final report to the involvement of the business sector in the practices of apartheid;
5. Human Rights Watch establishes a special unit on corporations and human rights; in 1999, it issues two lengthy reports, one accusing the Texas-based Enron Corporation of “corporate complicity in human rights violations” by the Indian government; and another accusing Shell, Mobil, and other international oil companies operating in Nigeria of cooperating with the government in suppressing political opposition;
6. Citizens of Burma and Indonesia sue Unocal and Freeport-McMoRan in United States courts under the Alien Tort Claims Act and accuse the companies of violating the human rights of people near their operations; the corporations win both suits without a trial.
7. Holocaust survivors sue European banks, insurance companies, and industries for complicity in wartime human rights violations, and, with the aid of the U.S. government, achieve several multimillion-dollar settlements (Ratner, 2001, pp. 436-7).
Stakeholder Theory and Its Implications for Multinational Corporations.
Stakeholder theory is fairly straightforward in its approach to developing effective and ethical corporate governance regimens. The term “stakeholder” first appeared in the business lexicon after its introduction by Robert K. Merton in the 1950s, and it first appeared in the 1963 management literature at Stanford Research Institute (Kakabadse, 2001). The stakeholder concept was defined originally as being “those groups without whose support the organization would cease to exist” (Freeman, 1984, p. 31 cited in Kakabadse, p. 25). Freeman was the first scholar to provide a theory that examined the role and impact of actors with divergent agendas on an enterprise, firm; in his works, he sought to provide an understanding of the dynamic relationships that a typical company develops with its external environment, and its behaviors within this environment (Kakabadse, 2001). This body of early research emphasized the fact that a wide variety of internal and external actors have an impact on a company’s actions. As a result, stakeholders today are regarded as being “any group or individual who can affect or is affected by the achievement of the organization’s objectives’ and as such firms should identify their direct and indirect stakeholders” (Kakabadse, p. 25). Along these lines, Donaldson and Preston (1995) maintain that individual stakeholder groups are not so readily discernible; however, it is the interests that groups represent (internal or external) that can be highlighted. Therefore, Kakabadse suggests that today, it is the “interest” that is the critical variable rather than the individual stakeholders involved.
According to Mcmenamin (1999), “What is needed is for the concept of shareholder to be broadened to that of ‘stakeholder.’ All those affected by corporate behaviour — ” the general public, workers, consumers, and the surrounding community — ” ought to have some representation on corporate boards” (p. 53). In the private sector, the primary stakeholders are, of course, the company’s owners; in the public sector, though, the primary stakeholders are citizens as exemplified by a wide range of citizens’ charters, patients’ bill of rights, and so on. In addition, a company’s employees, lenders (besides its creditors) and any others who may have a direct economic interest in the entity are regarded as secondary stakeholders; while potential investors and their advisers, stockbrokers, tax authorities, members of the public and other users of published accounts are considered to be “tertiary stakeholders” (Mcmenamin, p. 54). Those corporations that subscribe to the stakeholder theory of corporate governance consider these actions to be part of their “social responsibility”; these enterprises tend to believe that encouraging and actively promoting good stakeholder relationships is vital for the long-term benefit and competitiveness of the company. According to Mcmenamin:
For example, providing good value for customers enhances customer loyalty and improves competitiveness, which in turn creates value for the firm, allowing it to create even greater value (wealth) for its other stakeholders such as its employees. Stakeholder theory is reflected in the ‘partnership’ approach taken by many organizations in their relationships with suppliers, customers and community groups. (p. 54).
The stakeholder approach to corporate management is also a comprehensive one in that it must recognize the rights of all the diverse interest groups rather than just the rights of the shareholders. As a result, numerous organizational goals are likely to emerge, just one of which the maximization of shareholder return on investment; in fact, this author suggests that for some multinationals, this aspect may not even be the most important goal (Mcmenamin, 1999). In their book, Rethinking Business Ethics: A Pragmatic Approach, Buchholz and Rosenthal point out that effective stakeholder management by multinational corporations demands attention to the legitimate interests of all appropriate stakeholders, including the government as just one among the variety of types of stakeholder; in fact, this is the very basis of the stakeholder model which precludes assigning any inordinate attention to the interests of any one constituency over another. In this regard, Donaldson and Preston emphasize that:
To be sure, it remains to implement in law the sanctions, rules, and precedents that support the stakeholder conception of the corporation…. Yet over time, statutory and common law are almost certainly capable of achieving arrangements that encourage a broader, stakeholder conception of management — one which eschews single-minded subservience to shareowners’ interests — while at the same time restraining the moral hazard of self-serving managers. (p. 91).
The responsibilities of multinational corporations to society at large as well as their stakeholders in particular has received greater attention in recent years, particularly in view of the above-cited instances of extreme abuses by some companies as well as others that are not as well-known. For instance, in the UK, the Prince of Wales Trust recently sponsored a meeting of the Prince of Wales Business Leaders Forum devoted to the topic of “responsible business” (Kennedy, 2000, p. 206). According to this author, “North American readers may find this obscure, but as one who has lived in the UK for many years, I can tell you it is an event of note in the business community there. Closer to home, hundreds of articles and a score of books have been published every year for the past twenty years extolling the virtues of stakeholder management” (Kennedy, p. 206). The need to assess stakeholder interests while competing on a global basis though carries with it some inherent difficulties that may not be readily discernible to the casual observer. For example, “Duties of care and loyalty emerge in the corporate setting as restraints upon managerial behavior. Corporate profits do not belong to the managers — they belong to the shareowners. These duties thus compel managers (1) to conduct business in such as way that contributes toward increasing these profits, and (2) not to use corporate profits to serve personal purposes, or the purposes of anyone other than shareowners” (Radin, 2003, p. 620).
Despite these restrictions and frequently indiscernible limitations, though, a number of organizations have been established in North American college campuses that are concerned with the associated issues that have emerged from the stakeholder theory of the corporation, including concepts such as business ethics, corporate responsibility, corporate community relations, and corporate citizenship. Kennedy suggests that one reason the shareholder value theory of the global marketplace has gained such popular acceptance is that it has struck a responsive chord among the citizens of the world. “And as far as it goes, it is true,” he adds. “I have argued that the shareholder value theory of the corporate world, though perfectly valid, went wrong in its exploitation of stakeholders when it forced their backs so much to the wall that each and every one of them had to respond aggressively, so that the future viability of corporations is today threatened” (Kennedy, p. 206). The author cautions, though, that these observations are not advocating one position over another, but rather they are simply the reality of doing business in the international marketplace today.
According to Kennedy, “Corporate managers and board members should take heed, or they will be overwhelmed by the forces set in motion against them. There is nothing wrong with the idea that people, even theoretical ‘people’ like corporations, should do ‘right.’ It just belongs in the province of religion, not commerce” (p. 206). Clearly, what is “right” in any given setting can be a highly subjective matter, but the vast majority of people appear to have a fine-tuned sense of justice that can readily detect when something does not pass the “smell test.” In this regard, Radin suggests that, “Ignoring stakeholder concerns might not affect short-term performance, but it can have a serious negative impact on long-term performance. If we have not learned anything else from the experiences of such companies as Enron, Arthur Andersen, and WorldCom, we should have learned that life catches up to you. This is true for individuals, organizations, and society at large” (emphasis added) (p. 621). Therefore, if a multinational corporation seeks to develop a comprehensive set of ethical guidelines by which it intends to prosecute its business interests abroad, there is much to consider but there are a number of issues involved that may not be readily discernible to the casual observer. These issues are discussed further in the analysis section following a description of the methodology employed below.
As noted above, this study employs a critical review of the scholarly and peer-reviewed literature in an exploratory fashion to answer the guiding research questions. In his book, Social Research Methods (5th ed.), Neuman (2003) reports that, “Reviewing the accumulated knowledge about a question is an essential early step in the research process. As in other areas of life, it is best to find out what is already known about a question before trying to answer it yourself” (p. 96). According to Wood and Ellis (2003), a well-conducted literature review can produce a wide range of positive results including the following:
It helps describe a topic of interest and refine either research questions or directions in which to look;
It presents a clear description and evaluation of the theories and concepts that have informed research into the topic of interest;
It clarifies the relationship to previous research and highlights where new research may contribute by identifying research possibilities which have been overlooked so far in the literature;
It provides insights into the topic of interest that are both methodological and substantive;
It demonstrates powers of critical analysis by, for instance, exposing taken for granted assumptions underpinning previous research and identifying the possibilities of replacing them with alternative assumptions;
It justifies any new research through a coherent critique of what has gone before and demonstrates why new research is both timely and important.
Both primary and secondary sources will be consulted, and a qualitative assessment will be made as to the relevance of the material for the purposes of this analysis.
It would seem reasonable to assert that if a multinational corporation seeks to ensure that its behaviors afford the maximum protections and benefits for all of its stakeholders, it would be at a competitive disadvantage compared to those which did not. After all, any efforts that are directed at initiatives that do not contribute to a company’s overall profitability would seem to detract from its ability to compete effectively, particularly in a globalized marketplace; however, this is not always the case and studies have shown time and again that to the extent that a multinational seeks to achieve this balance is the extent to which it will enjoy an improved reputation and facilitate consumer loyalty (Rao, 1999). In this regard, Krauz and Pava point out that although there is not a one-to-one relationship between corporate social responsible activities and profitability, nevertheless, these initiatives represent “a signal of the presence of a style of management that extends broadly across the entire business function and leads to more profitable operation” (p. 31). These authors conclude that “it is exactly this ability to sense, adapt, negotiate with, and cope with these forces that is… The sign of managerial excellence and hence profitability” (Krauz & Pava, p. 31).
In his book, Managers and National Culture: A Global Perspective, Peterson (1995) reports that, “International business operations have changed rather dramatically in the latter years of the twentieth century. The first international presence of a German, American, or Japanese firm may have been through exporting a product or establishing a sales operation in another country” (p. 5). A few years later, though, companies may have established an international division to assist in the management of operations in a variety of countries. Even more recently, the same companies may be attempting to compete on a global basis such as exemplified by Unilever (Peterson, 1993). A key feature of the modern global economy has been the emergence of what Dunning terms “alliance” capitalism (also called relational, collective, stakeholder and collaborative capitalism). “While retaining many of the characteristics of hierarchical capitalism,” the authors advises, “the distinctive feature of alliance capitalism is the growing extent to which, in order to achieve their respective objectives, the main stakeholders in the wealth-seeking process are needing to collaborate more actively and purposefully with each other” (p. 119). This level of collaboration includes the conclusion of closer, continuing, and more clearly delineated intra-firm relationships, such as that required between functional departments and between management and labor; the growth of a variety of interfirm cooperative agreements between suppliers and customers and among competitors; and the increasing recognition by governments and companies alike concerning the requirement to work as partners if the economic goals of the enterprise itself and society at larger are to realized (Dunning, 2001).
The stakeholder theory suggests that by taking into account the broader interests and responsibilities that go hand-in-hand with multinational enterprises, a firm stands to fulfill its obligations in such a manner that the public will naturally support it (Rao, 1999). Likewise, Karake-Shalhoub (1999) reports that the most commonly endorsed argument in support of the stakeholder theory is the performance one, which has been advanced by some strategic management theorists, who emphasize the advantages that accrue to multinational corporations that subscribe to the stakeholder approach. This view is in stark contrast, though, with some other traditional views about how companies should behave in a globalized marketplace; a comparison of such assumptions is provided in Table 1 below.
Table 1. Comparison of Paradigm Assumptions Concerning Firm Behaviors and Their Implications.
Maximize wealth through consumption and economic expansion
Survival and quality-of-life issues
Context of external environment
Social, political, cultural, economic
Social, political, cultural, economic, biophysical
Financial, human, technological
Financial, human, technological, natural
Unlimited growth and resources
Limits to growth, limited resources
Resource conservation and utilization
Nature of relationship
Anthropocentric, reversible processes
Holistic, irreversible processes
Short to medium, focus on present and immediate future
Ecological time span, longterm, future generations
Shareholders, customers, public, institutions
Shareholders, customers, public, institutions, planet preservation, future generations
Source: Rao, 1999, p. 57.
In his essay, “Transaction Costs and the Historical Evolution of the Capitalist Firm,” Pitelis (1998) observes that the neoclassical view holds that “institutions are sets of rules, compliance procedures, and moral and ethical behavioral norms designed to constrain the behavior of individuals in the interests of maximizing the wealth or utility of principals” (p. 999). The proponents of the neoclassical approach to competing in a global marketplace maintain that corporate law requires managers to exercise their power to maximize shareholder value, not the interests of other corporate constituencies, specifically workers; however, the collapse of Enron and the enormous losses suffered by its rank-and-file workers identified serious problems with this shareholder-centered vision of corporate law (particularly the short-term shareholder-wealth-maximization norm) (Tsuk, 2003).
According to Prakash (2000), neoclassical economists view the social objective of business is to maximize shareholders’ wealth; by contrast, stakeholder theory maintains that multinationals should (and in some cases do) design corporate policies by taking into account the preferences of multiple stakeholders; stakeholders being “any group or individual who can affect or is affected by the achievement of the organization’s objectives” (p. 5). In a similar vein, the literature on corporate social performance, responsibility, and responsiveness suggests that companies have inherent societal responsibilities other than the goal of maximizing shareholder wealth. For example, Ostas (2001) points out that some authorities on corporate social responsibility may simply adopt a formalist perspective that naturally assumes that the relevant “law” comprises a set of singular and well-defined commands. “When a corporate social responsibility issue arises,” Ostas notes, “the manager is advised to consult in-house counsel, and the legal consequences of alternative actions will be made clear. The manager has no real discretion; he or she must simply follow ‘the law’” (p. 261). By contrast, Prakash notes that corporate social performance policies are frequently adopted by many multinational companies simply because they are the “right things to do” (p. 5). However, in her book, The Governance of Corporate Groups, Dine (2000) points out that:
major difficulty with stakeholder theory, at least as it has been applied in Britain, is that the term ‘stakeholding’ has been used to refer to a very wide range of interests which are loosely related at best… If the category of stakeholding interests is widened to include those of all potential consumers of the company’s products, for example, or to refer to the general interest of society in the sustainability of the environment, there is a danger that the idea of stakeholding will cease to be relevant. (p. 20)
Of course, different stakeholders and institutions have different expectations; sometimes expectations may even be mutually exclusive; Rao makes the point, though, that all of these frameworks have been based on Western perspectives to the virtual exclusion of other worldviews, a fact that compelled many researchers to reexamine their underlying tenets in the face of the new realities of the 21st century if companies want to attract and retain loyal customers. According to Kennedy, though, “Consumer loyalty is at best a nebulous concept. Does it mean a consumer is willing to buy something more than once or shop regularly at the same retail outlet? Or does it mean a consumer has a regular and immutable pattern of buying only one brand and not another?” (p. 149). Taken together, this means that identifying where consumer loyalty stands at any point in time is challenging, but it is a basic precept to ensuring the survival of almost every organization today.
Based on the important nature of developing consumer loyalty, it is little wonder that so much attention has been focused on attempting to quantify it. The results of a survey of food-buying behavior in 1997, for example, found that: fewer than one in four consumers in any food category relies on a brand; 26% of consumers who do have a preferred brand buy instead what best fits their budget at the time; 37% of those who think of themselves as brand loyal indicate they try other brands all the time; and, 71% of those surveyed who did switch brands said they experienced no difference from the switch (Kennedy, 2000). Likewise, a 1998 survey of traveler brand loyalty determined that fully 65% of travelers avowed loyalty to a particular brand in 1998, a decrease from 75% in the same survey in 1997; however, 45% of the leisure travelers surveyed indicated they were more than willing to change brands, and business travelers reported that their brand allegiance (which is frequently obtained at great expense through airline or hotel loyalty programs) was important only when it was convenient for them. Similarly, a 1996 research study of loyalty to 500 separate brands concluded that only 12% of consumers were “highly loyal to any brand” (Kennedy, p. 150).
Given these constraints, multinationals are at a distinct disadvantage, it would seem, in attempting to garner additional market share particularly if they are distracted by issues involved the potential stakeholders that are involved. In this regard, Kennedy reports that, “Loyalty is dead, the experts proclaim, and the statistics seem to bear them out. On average, U.S. corporations lose half their customers in five years, half their employees in four, and half their investors in less than one. We seem to face a future in which the only business relationships will be opportunistic transactions be tween virtual strangers” (p. 151). Notwithstanding these dismal conclusions, though, the fact remains that multinationals have succeeded in attracting new customers while balancing their responsibilities to their shareholders and stakeholders alike. In fact, Radin (2003) points out that convincing arguments can be and have been made that attention to multiple stakeholders can actually improve a multinational’s overall profitability in the long-term if not the short-term as well. In reality, consumer choice, legal regulations, and global competition all make assessments of what products are acceptable to consumers in one venue or another (Fort, 2001). Because corporations are legal entities but not actual “people,” some authorities suggest that they are fundamentally incapable of assuming a moral position on these matters; in other words, a corporation can neither be considered to be a moral agent nor be said to have social responsibilities. The following statement is illustrative of this point: “A corporation… is nothing more than a legal fiction that serves as a nexus for a mass of contracts which various individuals have voluntarily entered into for their mutual benefit. Since it is a legal fiction, a corporation is incapable of having social or moral obligations much in the same way that inanimate objects are incapable of having these obligations. Only people can have moral obligations or responsibilities” (Dalton & Metzger, 1996, p. 66). Nevertheless, these authors also make it clear that:
Just as the forest is not itself a full-fledged biological entity, so the corporation is not a full-fledged person. Gulf Oil Co. does act in some sense of that term, but its acts are vicarious ones, and its personhood is thus greatly restricted. But, corporate agency is not restricted to such an extent that moral appraisal of its action is ruled out. There are actions of the corporation which can be morally blameworthy even though the corporation’s agency status is much more restricted than that of full-fledged moral agents (emphasis added). (p. 491)
According to Krauz and Pava (1995), the leadership of many multinational corporations perceive corporate social responsibility activities as being legitimate endeavors that are also in their own best interests. In terms of socially responsible behaviors on a company’s bottom line, the findings reported to date are largely inconsistent and there is evidence to support both the neoclassical and stakeholder approaches (Blackburn, Doran & Shrader, 1994). In their book, Work and Life Integration: Organizational, Cultural, and Individual Perspectives, Kossock and Lambert (2005) point out that the results of 60 years of scientific research on criteria between 1917 and 1976 was the identification of the “criterion problem”; this term describes the inherent difficulty involved in the conceptualization and measurement of performance constructs, particularly when financial performance measures are multidimensional and are used for different purposes. In this regard, Blackburn et al. report that the most widely used measures of corporate social responsibility are reputational indexes; however, the primary constraint associated with this measure is its undetermined reliability. “An equally prevalent reputational measure of social responsibility has been provided by the Council on Economic Priorities (CEP),” they advise. “The CEP reported the pollution control performance of 24 firms in the paper and pulp industry. This measure has been subsequently used as a proxy for social responsibility in numerous studies” (Blackburn et al., 1994). Reputational measures are insufficient for a number of reasons, though. For example, this technique assumes that social responsibility is a unidimensional concept that can be delineated in an investigation of the firm’s pollution control record; however, this assumption requires yet another assumption concerning the commonality of interests of all stakeholder groups. The validity of these assumptions becomes unwieldy in view of the number of affected stakeholder groups; likewise, the pollution control measure has only been provided for a single industry which represents an enormous constraint on the external validity of the findings since it is most likely inappropriate to assume that the dimensions of social responsibility are comparable across all industries. In this regard, Blackburn and his colleagues point out that, “The interests of stakeholder groups and their ability to affect corporate activities are also likely to vary with respect to the nature of the industry, be it upstream manufacturing, consumer products or service oriented” (p. 196). Still another technique designed to assess the impact of a company’s social responsibility behaviors using reputational measures was advanced by McGuire et al., who employed the Fortune reputational measure comprised of executive rankings of firm performance within certain industries. According to Blackburn et al., the largest ten companies within each industry were rated on eight separate dimensions: 1) financial soundness, 2) long-term investment value, 3) use of corporate assets, 4) quality of management, 5) innovativeness, 6) quality of products and services, 7) ability to hire and maintain qualified personnel, and 8) community and environmental responsibility. It remains unclear, though, whether these researchers used only the social responsibility measure or an aggregate measure of all eight dimensions (Blackburn et al., 1994). The McGuire et al. study cited previous work suggesting strong correlation between the Fortune rankings and financial performance as being sound evidence of the validity of the measures while Blackburn and his colleagues point out that the opposite is most likely true in reality. In still other studies, there has being a strong “halo effect” identified within the Fortune rankings. According to Blackburn et al., “The results of the principal component analysis report in these studies suggests that financial performance is most likely the source of the “halo effect” since the public information that is available is generally limited to financial results, a fact that may help to explain McGuire et al.’s findings that past performance was more strongly correlated with socially responsibility behaviors than future performance. “At a minimum,” they add, “the evidence casts suspicion on the use of the Fortune reputational survey as a valid measure of social responsibility” (Blackburn et al., p. 197). Therefore, developing appropriate criteria for multinational corporations to assess the impact of socially responsible behaviors requires the accurate conceptualization and measurement of success. The terms “conceptual,” “theoretical,” and “ultimate criterion” describes the full spectrum of corporate performance and include everything that ultimately defines success for a given enterprise (Kossek & Lambert, 2005). According to these authors:
The ultimate criterion is strictly conceptual and therefore cannot be measured or directly observed. It embodies the notion of true, total, long-term, and ultimate worth to the employing organization. Implicit in this model for analyzing criterion contamination, deficiency, and the like is the questionable assumption that we all know and agree about the conceptual definition of performance or success (i.e., the idea that the ultimate criterion is obvious and uncontroversial). (Kossek & Lambert, p. 322).
Likewise, the definition of what constitutes satisfactory job performance, a successful career, an effective organization, and so on also requires the ability to make decisions about what will constitute facets of success and what will be considered irrelevant for the corporation’s unique purposes. According to Kossek and Lambert, in most organizations, “The most powerful stakeholders set the agenda and decide what will legitimately define success. In addition, the most powerful stakeholders influence how these dimensions of success are actually measured and by whom” (p. 322). In multinationals, it is generally the company’s management that determines how best to conceptually define and then measure their success along these dimensions; however, this definition necessarily involves a value judgment concerning whose values are important. “The values of various stakeholders might lead to widely varying definitions of performance or success” (p. 322). Clearly, then, developing clear measures of success transcends mere financial performance, but it does not obviate the need to remain profitable for the company’s long-term survival.
The last few years have witnessed fundamental changes in the social and political arena of the global marketplace. Markets that were formerly restricted have now eagerly embraced the principles of free market economies, and the focus of many multinational corporations has shifted to these emerging markets (Rao, 1998). Likewise, the past few years have also witnessed a trend away from the neoclassical view of corporate responsibilities toward one that emphasizes the stakeholder relationships that influence companies and communities alike, indeed, not only on a local or national level, but also on a truly global scale (Radin, 2003). Neoclassical theorists have long maintained that the primary obligations of a company’s leadership is to maximize the return on investment of their shareholders, but increasingly, stakeholder theorists are justifying their rationale with substantive examples of how multinationals can achieve their organizational goals while balancing the needs of all of those affected by their enterprise. One of the primary limitations of this analysis, though, is also related to its primary strength. The analysis of the extant data at any given point in time provides the researcher with a “snapshot” view of the state of affairs, but given the nature of the international marketplace today, this view is of only passing value.
Based on the foregoing, it would seem that any company that seeks to achieve its organizational goals in an increasingly globalized marketplace must pay careful attention to how it is perceived by its customers and potential customers. Companies that invest too heavily in social responsible activities may jeopardize their profitability, thereby failing their shareholders; likewise, to the extent that such companies fail to engage in such social responsible activities at all, or only in superficial ways, may threaten their company’s survival by driving customers and potential customers away. Therefore, a careful balance of the neoclassical and stakeholder approach to doing business in the international marketplace is required today.
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Appendix A Reflective Journal
The primary issue that emerged from the analysis of the literature was that corporate managers today are faced with some profound challenges as they seek to achieve their organizational goals in an increasingly competitive, international marketplace. On the one hand, a company’s leadership has a primary obligation to ensure that they manage the enterprise’s affairs in a responsible way that ensures the long-term survival of the company; on the other hand, these same leaders are being confronted by a wide range of external forces over which they have little or no control, but which must be taken into account in formulating strategic business plans. Perhaps the most glaring issue in this analysis concerned the need to balance these needs while conforming to a standard that appears in many cases to be a highly elusive moving target. For example, a company might well be regarded as a highly ethical enterprise because of its commitment to a certain set of ideals in one country, while the people of another nation might view the same set of standards with contempt and disdain. Further complicating this mix is a highly volatile international political situation today that may adversely affect even the best-laid plans of a multinational today.
Another issue to emerge from the research was just how much attention has been devoted to the subject of socially responsible corporate behaviors, perhaps as a reflection of a world that is becoming smaller by virtue of telecommunications and improvements in transportation. Issues that may not have even been considered important just a few years ago have assumed critical importance for many multinationals today. What was not surprising was that the research to date on the relationship between corporate profitability and social responsible behaviors showed mixed results; what was surprising, though, was that there has been such a paucity of reliable measures that can accurately assess the impact of these actions on a company’s financial performance. Given its relevance and importance today, this would seem to represent a principal component of any company’s strategic business plans, particularly for those who would seek to expand their operations into foreign locales. Even for those companies who merely wish to establish a presence in the global marketplace through a Web site, for example, understanding why and when to engage in activities that may detract from a company’s short-term profitability in favor of developing a “corporate halo” must be viewed with some degree of suspicion notwithstanding the underlying need to “do what is right.” Knowing what is “right” today involves much more than it did just a few years ago, it would seem, and even the most environmental friendly and socially responsible multinationals may fail to reap the full benefit of their investments abroad if they fail to take into account these sometimes nebulous concepts. Nevertheless, it became abundantly clear as the research progressed that this is what is required today, and those managers who ignore these realities do so at their companies’ peril.