Take extending First World labor standards to Third World countries. This is a major issue for most protesters, who have, of course, the best of intentions. But it is naive economics and is opposed by India and just about every other developing country. Why? The competitive advantage of many developing countries lies precisely in their lower costs of doing business. As Japan, Korea, and Taiwan have shown, the road to prosperity often begins with low wages and cheap exports. As skills increase, the sophistication and value of goods produced rise, allowing wages and income to move higher. West Germany's attempt to impose its higher wages on East Germany after the fall of communism led to an economic disaster, with little growth and high unemployment in the east. It's one thing for corporations to pay decent local wages and follow local laws protecting workers. But buckling under to pressure to extend U.S. or European pay scales to emerging nations could mean shutting down local factories--hurting people, not helping them.
There are major sovereignty issues as well. Anti-globalization groups speak in the name of Third World countries, but democratically elected governments in countries such as Mexico and India often disagree with them. They want more corporate investment, not less; freer trade, not more restricted markets; and the enforcement of local labor laws, not the imposition of foreign ones. Moreover, Mexico, India, and other nations insist on speaking for themselves.
Culture can be a serious problem. Child labor in factories is opposed by anti-globalization forces, but in many countries it is a major source of income, keeping families together and girls out of prostitution. Besides, it is commonly accepted on American farms today and was legal during the long period when the U.S. itself was a developing country. The environment poses a similar conundrum. Opposition to the Three Gorges dam in China is intense because it will displace many farmers. But dam-building was crucial in controlling water and generating electricity in the U.S. Without dams, California and much of the West could not have been settled. Imposing high 21st century labor and environmental standards on developing countries runs the risk of appearing hypocritical and undermining growth.
Despite these difficulties, smart CEOs should proceed in opening a dialogue with the reformers. Many have already successfully negotiated with some of the groups. Gap Inc., Nike Inc., and others have adopted codes of conduct for their overseas plants, hiring monitors to oversee compliance. Levi Strauss Co. has ethical manufacturing standards for its overseas operations. Home Depot Inc. (HD
) has adopted an eco-friendly lumber supply program with the Rainforest Action Network. Starbucks Corp. (SBUX
) is working with Conservation International to buy coffee from farmers preserving forests.
The truth is that many of the demands of the anti-globalization groups reflect the values of middle-class consumers in the U.S. and Europe, especially the young. It may be hard, but by working with reasonable reformers of the global system, corporations can not only help others, they just might help themselves.