Neoliberalism, Globalisation

Introduction

The way multinational corporations impact and develop relationships with the state is an extremely controversial issue. The fact that multinationals greatly impact states' economic development cannot be ignored. The earlier studies viewed the relationships between the state and multinational corporations as continuous conflicts of interest – a conflict between the economic needs of multinationals and the political needs of the state. Only with the advent of the neoliberal thought the state's powerless position against multinationals and numerous market forces was recognized. As a result of neoliberalism and globalisation, the state is no longer a powerful bargaining power in its relations with multinational corporations. Rather, it is multinational that predetermine their position and presence in the host country. In Bangkok, Thailand, Unilever represents a perfect example of a multinational corporation that constantly balances its home and host country demands. Originally European, Unilever is foreign to the Thai market, although the strength of its position in Bangkok should not be disregarded. The company must constantly balance the need for business and market expansion with the host country's cultural requirements. Unilever has profound economic impacts on Thailand through investments and technology transfers, which reduce the state's bargaining power, increase skills and wage inequality and, at the same time, enable Unilever to meet the home country demand for greater profitability.

Neoliberalism and Multinational Corporations: A Brief Review

A multinational corporation (MNC) is a business enterprise that holds its profit activities in more than one country (Rugman & Verbeke 2001). In contemporary globalisation literature, MNCs are often considered in the context of neoliberalism. The latter is a relatively new economic thought that came into existence in the 1930s (Kotz 2000). It is a body of theoretical and practical approaches that bears the features of both economic and political decision making. According to Kus (2006), in some countries neoliberalism was associated with a serious attack on the welfare state philosophy. However, in all countries without exception the transition to neoliberalism was caused and accompanied by a serious economic crisis (Kus 2006). Neoliberalism had to become an acute response to the fallacies of Keynesian economic thinking. Today, it is the fundamental feature of most developed economies, where distributional justice, economic efficiency and free choice have replaced the importance of state intervention and control of the macro- and microeconomic activities. MNCs are at the forefront of this neoliberal movement, representing an enormous power of economic decision making over the bargaining power of the state.

Unilever in Bangkok, Thailand

Unilever is a perfect example of the "why" and "how" of globalisation and MNCs in South Asia. The "why" aspect of the company's relationships with Thailand is based on profit motives and efficiency considerations: Unilever seeks to achieve and sustain its profits against all odds. The "how" aspect of these relationships is essentially about the way Unilever uses its current position to achieve its home country goals – mainly through considerable investments, better employment opportunities, and technology transfers. Just a few months ago, Unilever announced it would invest Bt2.8 billion in a new factory and distribution centre to be built in Thailand (The Nation 2013). The goal is to improve the company's logistics operations and increase the sales of fast-moving consumer goods (The Nation 2013). Unilever also announced it would commit €75 million to create a new homecare factory in Thailand (Hindustan Unilever Limited 2013). Apparently, investments is one of the best means MNCs like Unilever can bring together and balance their home and host country demands. In 2012, Unilever announced record sales of Bt40 billion in Thailand, a 13-percent increase from 2011 (The Nation 2013). As a result, the company was quite successful in meeting its home country demands, including profitability and increased sales (Lipsey 2002). Simultaneously, the investments made by Unilever to the Thai economy are believed to benefit the state. In other words, such investments are beneficial for all parties of the Unilever-Thailand relationship. Unfortunately, the company either overlooks or intentionally ignores other effects of its continued presence on the national economy of Thailand. Beyond profits and investments, the company confirms the reducing bargaining power of the state, increases wage and skills inequality, and creates a prisoner's dilemma, when the state and its citizens must comply with the company's requirements, because it is the only way to remain competitive in the market, have a decent job, and use the incoming financial flows to improve the country's economy and infrastructure.

Unilever, Home and Host Country Effects, and the Power of State

As mentioned earlier, Unilever has profound impacts on the Thai economy. Its investments and technology transfers greatly contribute to the economic and social growth in the country. "Unilever insists that it is deeply rooted in Thailand. A large Research and Development Centre is about to open. Unilever is growing thanks to deep insights into the consumer behaviour of the Thai population and by user and usage analysis" (Sanet 2013). These investments help the company mediate the home country demands for productivity, efficiency, and increased sales, while also creating a vision of cultural sensitivity and responsiveness to the country's and consumer demands in Thailand. Simultaneously, it is also clear that, through investments, the state of Thailand is losing the upper hand and voice in its negotiations with MNCs like Unilever (Haslam 2007). MNCs like Unilever have a wide variety of strategies and options to avoid government restrictions and frustrate governments' expectations (Haslam 2007). In the relationship between Unilever and the host country of Thailand, bargaining does not seem a valid force, mainly because it is Unilever, a fundamental provider of considerable investment resources, that defines the rules of the market game. These investments are intended to develop innovative products and target more consumers. The greater Unilever's market share in Thailand becomes, the more powerful it grows in its striving to meet its home country demands at the expense of the host country's cultural needs. Unilever recognizes that its investments and capabilities have led to a serious increase in market share, which reflects the company's vision to double its business size (The Nation 2013).

The situation with Unilever supports the so-called "uneven development" vision of neoliberalism and globalisation, which holds that one region of the world uses its MNCs and other corporate players to grow at the expense of other regions (Crotty, Epstein & Kelly 1998). Whenever it comes to Unilever, its claims are based primarily on the company's policies and strategic goals, with little or nothing done to address Thailand's cultural, social, or economic concerns. In 2012, Unilever announced it would spend Bt2.6 billion to build its new headquarters in Bangkok – an investment made in line with the company's business policy, not with the needs of Thai authorities and consumers (Rouwers 2012). These strong commitments to host country requirements and demands undermine the potential benefits of FDI made by Unilever in the Thai economy. Unilever has created a situation, in which Thailand is willing to sacrifice its principles for the sake of investments and profits (Crotty et al. 1998). For example, at present, many employment opportunities in Bangkok are focused around Unilever and similar multinational companies. In the atmosphere of a continuous global economic decline, the state would prefer having most of its citizens employed with an MNC rather than provide generous financial and workplace assistance to everyone, who wants to find a job. Not surprisingly, Unilever enjoys a very strong and profitable position in the Thai economy and, obviously, its share of the Thai market will continue to grow.

Certainly, the way Unilever impacts the economic and employment situation in Bangkok should not be disregarded. Thousands of people were able to find a decent employment with Unilever. The company transfers its domestic technologies to work for the benefit of Unilever and its Thai workers. However, again, the negative consequences of such technology transfers are far-reaching. According to Xu (2000), technology transfers by MNCs benefit the developed world but not the least developed countries. Despite certain advancements, Thailand is still one step behind the developed countries of the western world. Wage levels and structure require major improvements, but Unilever's investments and technologies further increase the existing wage inequalities. Multinational corporations using higher technologies are always in need for qualified and skilled personnel (Figini & Gorg 1999). As a result, those who have such skills are more likely to find a job, while those without such skills are left at the bottom. Thailand does have a chance to benefit from the new technologies, but only when it achieves the required level of productivity and human capital (Xu 2000). Unilever will remain the predominant decision making power in its relations with Thailand, until the country builds the resources and infrastructure needed to benefit from Unilever's financial and technology investments.

Conclusion

In the context of neoliberalism, multinational corporations become more powerful than states. The example of Unilever in Bangkok, Thailand, suggests that MNCs use their dominant position to influence states' market policies. Through investments and technology transfers, MNCs negotiate their home and host country demands. Through investments and technologies, MNCs expand their presence in the host country, meet the home country's demand for profitability and sales and, at the same time, reduce the state's bargaining power in everything that concerns MNCs' development and growth. Certainly, the growth of MNCs has some positive sides, but least developed countries do not have enough resources and infrastructure to benefit from the financial inflows coming through multinationals. As a result, it is possible to assume that skills and wage inequality caused by the rapid expansion of MNCs will continue to persist.

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