The Relationship Between Corporations and the World’s Poor

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SEATTLE — In 2017, as part of its proposals for a new budget, the Trump administration planned on cutting certain foreign relief programs by as much as a third. In response to this, many U.S.-based businesses banded together and committed to sending aid to developing countries. Among these companies was the world’s largest retailer, Walmart.

But what exactly is the relationship between some of the biggest multinational companies and the world’s poorest people? Is it completely altruistic, or are these companies trying to increase their own profits by exploiting and expanding into these previously “untapped” markets? Exploring the answers to these questions can help illuminate the relationship between corporations and the world’s poor.

Foreign Direct Investment from Corporations Has Grown in the 21st Century

Currently, developing countries receive 27 percent more foreign business investment than development aid. The world’s poorest countries receive more aid from private businesses than they do from foreign governments. The amount of aid has increased ninefold since 2000.

What incentives do companies have to invest in the poorest parts of the globe? The most obvious answer is to increase their profits. For starters, investing in these countries creates a new consumer base for these businesses. If the world’s poor have more disposable, discretionary income (either from direct aid or from benefits from aid like education or job training), they can use that income to buy goods manufactured by the same company that invested in the nation in the first place. These companies can also train locals to manufacture and process the goods that these companies need for their products, much as Coca-Cola did with farmers in East Africa.

Access to trade undoubtedly helps developing countries. By aiding developing countries, many businesses are giving nations access to very large trade markets. In an example of the relationship between corporations and the world’s poor, Walmart provides the indigent with access to a wide variety of goods at relatively low prices.

The Varied Effects of Interactions Between Corporations and the World’s Poor

But is there a downside to this apparent altruism? The answer is, unfortunately, yes. While investing in these countries and trying to alleviate the global problem of poverty, many businesses end up exploiting the very people they are claiming to help. Walmart is, sadly, no exception to this. The American Prospect shared the story of a man identified as Zahir Chowdury, who manages apparel factories in Dhaka, Bangladesh, that supply Walmart with clothing. He admires Walmart for some of its business practices and standards, but worries because his costs for raw materials such as cotton are rising. His selling price has changed little over the past five years, but Walmart has yet to agree to pay more for finished products. Moreover, Walmart generally pays about 5 percent less for finished products than its competitors do.

That being said, not all businesses ignore or exploit the developing world. Tyson Foods is an example of this. As part of its Tyson Foods Fellows program, the poultry conglomerate has worked to educate developing nations on sustainable methods in raising poultry. Partnering with the charity World Vision, Tyson helps rural Tanzanians improve their poultry-based husbandry. The joint efforts have been extended to other African nations such as Rwanda and Tanzania. Through these efforts, Tyson Foods battles global hunger.

The relationship between corporations and the world’s poor is a complicated one. While many businesses send more aid to the developing world than some governments do, those businesses are also hoping to increase their own profits, often at the expense of the very people they are claiming to help. It is important to hold corporations to a high standard in their interactions with developing nations to ensure that other companies follow the standard set by Tyson Foods and that impoverished people can benefit from the companies’ actions.

– Raymond Terry

Photo: Flickr

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