Who are the multinationals?

A multinational (or 'transnational') corporation is a company which operates in more than one country, as opposed to a purely domestic business which has no operations abroad. There are now 63,000 multinational corporations in the world, and between them they are responsible for two thirds of global trade and 80% of investment. They are the economic force behind globalisation.

Multinational corporations act as the principal motors of globalisation. Officially, however, it is governments which formulate the international rules on trade and investment, and they do so in various forums.

Chief among these is the World Trade Organisation (WTO), which was set up as a result of the Uruguay Round of GATT negotiations. The WTO's role is to increase the liberalisation of trade through further negotiations, and to remove barriers currently standing in the way of free trade.

As such it is the prime mover of pro-globalisation policies, and the prime target of a wide variety of interest groups from concerned citizens to anti-globalisation protestors.

Although the WTO is the body officially responsible for increasing globalisation, two other institutions play an equally important role in ensuring compliance with the free trade agenda. The International Monetary Fund (IMF) and the World Bank provide developing countries with loans for development.

In order to qualify for the loans, however, the governments of those countries are required to carry out programmes of drastic economic reform drawn up for them by the IMF. These have been known for years as structural adjustment programmes (SAPs).

World Trade Organisation (WTO) 

The WTO came into being on 1 January 1995 as the successor organisation to the GATT negotiations which had governed international trade from 1948. The great majority of the world's countries are WTO members, and most of the rest (including China and Russia) have applied to join. Membership involves signing up to a package of free trade agreements covering anything from agriculture to intellectual property rights.

According to the WTO's own description of itself, "The WTO provides a rules-based multilateral trading system. All members have both rights and obligations. The alternative is bilateral commercial relations based on economic and political power - small countries are then at the mercy of the larger trading powers."

Yet critics point out that the WTO's decision making system already puts small countries at the mercy of the larger trading powers. The WTO makes decisions by 'consensus' among its members rather than by voting. In practice this means that the rich nations band together and negotiate policies which they then impose on other member states.

Many Third World delegates were excluded from the key trade negotiations at the WTO's November 1999 Ministerial Meeting in Seattle - even when the negotiations were about the future of their own countries. US negotiators then tried to bully them into accepting deals which had been worked out in their absence.

As emphasised by S Narayanan, India's ambassador to the WTO, the greatest challenge is to ensure that the WTO is indeed operated as a rules-based as opposed to a power-based system. "Unless the present inequalities are removed in the WTO," argues Narayanan, "I do not believe in a new round."

IMF/World Bank

Both the IMF and the World Bank were conceived at the Bretton Woods Conference of 1944 (and hence are often referred to as the Bretton Woods institutions). Each had a different role to play in the work of global reconstruction after the Second World War.

The IMF was tasked with maintaining the stability of the global financial system, while the World Bank (full name: the International Bank for Reconstruction and Development) was to help rebuild the economies of a world shattered by war.

By the time the debt crisis developed in the 1980s, the primary focus of both institutions had shifted to the countries of the developing world. Despite their different mandates, both the IMF and World Bank have long shared a common analysis of what developing countries need to do in order to qualify for development assistance. Their policies aim to integrate developing countries into the expanding global economy, but have a disastrous effect on the countries themselves.

Both institutions have admitted the harm which their policies have caused to the poor of the developing world, and in public both have committed themselves to the goal of alleviating poverty in the future. Yet they have signally failed to put their rhetoric into practice, still providing loans to governments on the same basis as before.

The World Bank still gives only 8% of its loans to primary education, health and water/sanitation projects, while 45% of its lending goes directly to multinational corporations bidding for lucrative contracts overseas.

Both the World Bank and IMF are now fighting rearguard actions to limit the damage to their reputations. Internal IMF papers released in March 2001 acknowledge that its restructuring of economies has often been more to do with political ideology than economics.