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What is the Wirecard Scandal all about and Why it is a Wakeup Call for Whistleblowers Anyone who has been following financial and business news over the last couple of years would have heard about Wirecard, the embattled German payments firm that had to file for bankruptcy after serious and humungous frauds were uncovered leading […]
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The previous articles in this module discussed how international businesses expand into overseas markets both for selling their products as well as to extract the resources in mineral rich countries.
We discussed how the international expansion of these businesses has to equitable and follow the rules of justice. What happens when these businesses ride roughshod over local populations and insist on carting away the resources to their native lands? The result is that the local populations would be outraged against the exploitative practices of these multinationals. This has been the case with Shell in Nigeria, Vedanta in India, BHP in Africa, and other businesses in Latin America.
The reason for this resistance is that the communities and the people surrounding the locations where these businesses have plants feel that they are being cheated of their resources and are not being adequately compensated.
Indeed, if anything can be said about global capital, the local resistance is the phenomenon that has emerged consistently across the world in the recent past. The latest of the resistances is about the POSCO steel plant in Odisha, India where the native people are protesting against land acquisition, which they allege has been done forcibly.
While not advocating that the local communities are not within their rights to protest, the point needs to be made that the international businesses can help them with in a more equitable manner by sharing some part of their profits.
Without getting into the debate as to whether resources must belong to the native country and not to a foreign country, the fact that all countries gain because of the Ricardian theory of competitive advantage wherein a country with resources can export them and import something that is not available in it.
The bone of contention here is that the price at which the resources are being exploited is not just and fair and hence, there are calls for proportional pricing and compensatory royalties.
The multinationals respond to this criticism saying that the native countries do not have the expertise in extracting and developing the resources and hence, these companies are actually helping them. Therefore, it follows from this that the best way to deal with the global capital meeting local resistance is through dialogue and the evolution of an international mechanism to deal with such cases.
The protests against global businesses are growing by the day and hence, there is an urgent need to tackle this issue before the very stakeholders in these businesses start to lose out. There is an active role for governments in this case as they are the ones who set the rules for engagement.
Therefore, along the lines of what the Supreme Court in India has done which is to throw open the question about pricing of resources (all kinds including spectrum) and how they must be managed. This is the way ahead for other countries to follow and it remains to be seen how India deals with this issue so that other countries can replicate its experience.
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