Student Activism and Multinational Corporations
April 6, 1999

Self-absorbed. Awash in apathy. Avarice-ridden. Brains addled by gangsta rap. This is how the young folks of today, the Generation X-ers, are often portrayed in the media. The greatest generation they are not. Perhaps, if Tom Brokaw was kind enough to them, they might make it to the Top Ten Generations of All Time.

So it came as a pleasant surprise to Sylvia to learn that college students were up and about these days. According to a recent newspaper article, students at colleges and universities around the country, including some elite institutions, were participating in protests. Ah, thought Sylvia approvingly, student activism lives. But what were they protesting? She read on. Turns out the students were up in arms about exploitation of labor in developing countries. Well, well, thought Sylvia, this was getting to be rather good. Did the much-maligned student of today have a conscience after all? To be concerned about the plight of workers in distant lands, that certainly was a far cry from harboring an obsession to land a plum finance job on Wall Street after graduation.

Sylvia raced through the article. The protests were directed at colleges and universities for selling campus merchandise – sweatshirts, caps and the like – that had been produced by multinational corporations employing low-cost labor in developing countries. These firms, desperate to wring out the last penny in profits, had transferred their operations from the United States to developing countries (like Thailand) where they paid a mere pittance to their employees.

Disgusted by the actions of these unconscionable multinationals (Nike always appears to draw the deepest ire), college students in this country were now beginning to boycott their products. Or rather, they were urging their institutions to stop selling the ill-gotten merchandise in campus stores.

But how to urge? Writing letters and articles in the college rags was evidently not sufficient. For all they knew, the college administrators didn't even read those things. Sterner measures were called for. Protests, marches and sit-ins presented themselves as suitable instruments.

And thus, noted Sylvia, students at Harvard, Yale and Princeton have vociferously aired their complaints. At the University of Michigan, some students went to the extent of occupying administrators' offices.

Now, nothing quite exercises the mind of a college administrator as the prospect of losing his office. Yet, noted Sylvia, some of the displaced administrators, far from being irate at the unceremonious treatment meted out to them, appeared to be rather indulgent of their students' actions. Their hearts are in the right place, noted one worthy after being kept out of his office by a group of students.

How quaint. Were some of these administrators, wondered Sylvia, suddenly feeling nostalgic about their own protest-filled days of the ‘60s? Hadn't they themselves bestirred themselves three decades ago to make the world a better place to live in (the exact details about how that was going to be accomplished had dimmed with the passage of time -- but no matter)? And now, today's students were taking up cudgels on behalf of the impoverished workers of developing countries. One could scarcely doubt the students' motives: their demands that multinationals pay their workers higher wages were clearly driven by a genuine concern for the welfare of the workers.

But, alas, thought Sylvia, noble intentions did not always translate into noble deeds. Suppose Nike (to use the archetypal multinational corporation) were forced to pay higher wages to its workers in the developing country. How was it likely to respond? Well, since the cost of an input (labor) had increased, the firm would reduce its use of the input. The result: Nike would end up employing fewer workers. To be sure, the workers who continued to work at Nike would enjoy the higher wages, but those who got laid off as a result of the wage increase would find their well-being dramatically reduced.

Furthermore, the smaller number of workers at Nike would comprise the most productive workers in the area. If Nike's wages were now considerably higher than those offered by competing local firms, the latter would find it difficult to retain their most experienced and productive personnel. (In an interesting twist here in the United States, the arrival of Toyota in Indiana has aggravated the labor shortage situation for local businesses as they find their workers departing in droves to Toyota's production plants to take advantage of the automaker's irresistibly generous wages and benefits.)

In some ways, the argument is similar to that employed in the minimum-wage debate. Proponents of a minimum-wage increase point to the gains to be enjoyed by those who find employment; opponents argue that such an increase hurts the least-productive workers who now find themselves without work.

The problem of low wages in developing countries is not one that can be solved with quick fixes (like requiring multinationals to be overly generous). Wages will rise as workers' productivity goes up, which in turn requires that education and training become more readily available to the population. Perhaps the activist-minded college students might accomplish more by drawing attention to the real problem, viz. the vexing paucity of education in developing countries.

What could the students do, Sylvia wondered? The task seemed so gargantuan. Could they urge the U.S. government to earmark more of its foreign aid payments for education? Or, perhaps, participate in private-sector initiatives, like charity programs, to foster education in developing countries? Send textbooks to schools overseas? These might be small steps, but they were more likely to confer lasting benefits on the impoverished workers of the developing world.