Multinationals bring festive cheer

Here’s a provocative thought for Christmas. Instead of buying your nearest and dearest one of those charity goat-for-Africa cards, it would make far more economic sense to buy them a few shares in a multinational corporation which is going to help boost the African economy.

It may be deeply unfashionable to say so, but the much-demonised multinationals do far more for the poor than all the world’s charities put together. Charity workers should not take this personally. They are doing their best in appalling conditions, and have saved or improved millions of lives. But however hard they work, and however many goats they provide, there is a limit to what they can do.

The stark reality is that the remarkable alleviation of poverty witnessed in recent years in Asian countries such as India and China has nothing to do with handouts and everything to do with governments embracing the institutions of capitalism. The only way sub-Saharan Africa will ever be able to feed and clothe its people is if African politicians follow suit — and that is where multinationals, the foot soldiers of the market economy, come in.

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The widespread view, even among those who should know better, is that multinationals exploit workers in poor countries by paying them extremely low wages and keeping them in ‘sweatshop’ conditions; and then make a huge profit by selling the goods they make at huge profit margins in the West. A related argument is that multinationals regularly violate the human rights of their poorest workers, and perpetuate the disgrace that is child labour. But the truth, as is so often the case, is the very opposite.

As Jagdish Bhagwati — the eminent Columbia University economist and author of In Defence of Globalisation — argues, a raft of empirical studies has been conducted in Bangladesh, Mexico, Shanghai, Indonesia, Vietnam, and elsewhere — and the findings are straightforward.