The proliferation of transnational corporations (TNCs) constitutes one of the most important economic, political and social phenomena of the last two decades. As these entities expand their global reach, integrate national economies, rearrange the international division of labour, consume environmental resources, manufacture homogenized products for a world market, and deliver goods and services across increasingly irrelevant national borders, they irrevocably and fundamentally transform the society in which we live.

During the past 25 years, the universe of transnational corporations has diversified and expanded dramatically. While only 7,000 TNCs existed in 1970, there are now 37,000 parent transnational corporations with over 200,000 affiliates worldwide.¹ Furthermore, there exist hundreds of thousands of non-equity links such as subcontracts, licensing agreements and strategic alliances between parent companies and foreign entities.²

Spanning the globe across all major sectors of the economy, transnational corporations are particularly prevalent in the petroleum refining, electronics, chemical, pharmaceutical and automobile industries.³ Furthermore, 90 per cent of all TNCs are located in a few industrialized nations⁴ with their foreign affiliates located in a relatively small number of host countries.⁵ Despite the geographical concentration of parent companies and their affiliates, however, a growing number of TNCs are chartered in developing countries.⁶

Transnational corporations have been expanding not only numerically and geographically, but also financially. From 1980 to 1992, TNC sales skyrocketed from 2.4 trillion dollars⁷ to 5.5 trillion dollars.⁸ Currently one third of all global trade is composed merely of financial transactions within the same transnational corporation.⁹ TNCs affect 86 per cent of the world's land that is cultivated for export crops, control over 60 per cent of aluminum mining and sell 90 per cent of the world's agrochemical products.¹⁰ Some transnational corporations are more financially powerful than national economies: annual sales of the Royal Dutch/Shell Group oil company are twice New Zealand's gross domestic product (GDP); annual sales of the British tobacco company, BAT Industries, are equivalent to the GDP of Hungary; the German electronics firm, Siemans AG, has annual sales that exceed the combined GDP of Chile, Costa Rica and Ecuador; and the annual sales of both General Motors and Mitsubishi are more than double the GDP of Hong Kong or Israel.¹¹

Transnational corporations possess particular influence over global economic and social development through their role in foreign direct investment (FDI). One of the most important forces for international trade, technology transfer and economic growth, FDI from transnational corporations increased remarkably during the 1980s from 910 billion to 1.7 trillion dollars.¹² FDI outflows originate almost exclusively from a few large TNCs headquartered in industrialized nations.¹³ However, developing countries now account for nearly one third of FDI inflows — a total of 70 billion dollars to developing countries in 1993.¹⁴

While the age of the transnational corporation has certainly arrived, it is less clear whether the financial power of these entities is being directed in a socially productive and equitable manner. This paper addresses this important issue by examining the complex relationship between TNCs and social development. In its annual Human Development Report, the United Nations Development Programme (UNDP) has enumerated various indicators of social development, including infant mortality rates, access to safe water, educational attainment, longevity rates, standards of living and purchasing power. Transnational corporations have only moderate effects on many of UNDP's indicators. This paper will primarily focus on the relationship between TNCs and social development with respect to their effects on employment, consumer safety and health, the environment and transfer of technology.

Part 1 of this paper discusses the direct and indirect effects of TNC activity on social development. Part 2 analyses the current balance between TNC rights and responsibilities. Finally, part 3 describes some governmental and non-governmental efforts designed to foster TNC social responsibility.

1 . Sauvant, 1994, p. 2.

2 . United Nations Commission on Transnational Corporations, 1993c, p. 4, para. 2.

3 . UNCTAD, 1994a, p. 26, para. 19.

4 . Ibid., p. 15, para. 12. Of the 100 largest TNCs, 53 are located in Western Europe, 27 in the United States and 14 in Japan (ibid., p. 18, para. 18).

5 . While 46 per cent of foreign affiliates are located in industrialized countries, 42 per cent are located in developing countries (United Nations Commission on Transnational Corporations, 1993c, p. 12, para. 13).

6 . Ibid., p. 4, para. 2.

7 . All references to dollars are to US dollars.

8 . United Nations Commission on Transnational Corporations, 1993a, p. 24, para. 39.

9 . United Nations Commission on Transnational Corporations, 1993b, p. 8.

10 0. United Nations Commission on Transnational Corporations, 1991, p. 4.

11 1. Sales of afore-mentioned transnational corporations in 1993: Royal Dutch/Shell Group: 96.2 billion dollars; BAT Industries: 48.2 billion dollars; Siemans AG: 50.4 billion dollars; General Motors: 133.6 billion dollars; Mitsubishi: 168.4 billion dollars (CIFAR, 1993, Appendix A, Table 1). Annual GDP of afore-mentioned countries in 1991: New Zealand: 48.2 billion dollars; Hungary: 29 billion dollars; Chile: 31.3 billion dollars; Costa Rica: 5.6 billion dollars; Ecuador: 11.6 billion dollars; Hong Kong: 67.6 billion dollars; Israel: 62 billion dollars (UNDP, 1994, pp. 180-181, 206).

12 2. United Nations Commission on Transnational Corporations, 1993a, p. 23, para. 38.

13 3. Only 1 per cent of parent transnational corporations account for one half of global FDI stock in foreign affiliates and 95 per cent of outflow originated in developed countries (United Nations Commission on Transnational Corporations, 1993c, p. 18, para. 21; UNCTAD, 1994a, p. 5, table 1).

14 4. UNCTAD, 1994a, p. 4, para. 2.