Researchers delving into the questions of human rights related to international investment have often modestly emphasized the need for further research. As a result, we now have an impressive array of studies on the subject. These studies provide enough documentation for sketching broad syntheses about the realities and dilemmas that human rights considerations—or lack of their consideration—create for international capital; and international capital creates for the exercise of human rights. Yet, little overall projection of the nature of the phenomena has been done. The purpose of this study is to make a preliminary attempt at a synthesis. 

Servitude or Entitlement:

The title of this study implies the juxtaposition of  two human dimensions: the affectional and the functional.  Human rights relates to such concepts as care, respect, dignity and understanding among human beings, hence the affectional. International finance connotes transfer of capital across frontiers for gain and therefore the functional.

Combining the human dimension with finance (in general and not necessarily international at this stage) we can conceive of different outcomes. At one extreme we are presented with financing for profit with little human consideration. But along the line we will find occasions when the affectional may, or may seem to, condition finance’s functional nature.

Take, for instance, the financing of a friend or one's own child without interest—in a way giving ones money away. The motivation for the act, however, is more important than the altruistic appearance. The child may even be charged interest or be required to reimburse the capital; not because of a desire for direct material gain by the parents, but in order to make the child socially responsible. In this case despite the functional appearance of the transaction, the motivation is affectional. Inversely, a friend or a protégé may be advanced funds without interest, “out of the goodness of ones heart,” yet the motivation may be a functional investment in the future and expectation of the return of the favor based on an evaluation of the recipient’s potentials for success. The operation is functional.

Transferring these interpersonal instances of the affectional and the functional to the socio-political arena, we may find that the functional extreme of financial gain may reduce the human factor to a mere tool; producing the phenomenon of slavery. In such a situation, the relationship of the human factor to the capital is that of servitude. On the other hand, the human consideration may reduce capital to a tool whose use is not to produce profit but to serve social welfare irrespective of financial cost effectiveness. In the extreme case of the claim of social welfare on the capital the relationship of the human factor to finance will be that of entitlement. This situation may be approached in a social democracy with strong egalitarian labor unions or in a totalitarian state capitalism with centralized democracy.

While the interpersonal affectional/functional and the sociopolitical servitude/entitlement tendencies can be traced in time and space to different cultures, when they are transferred to the international domain, they acquire a patently Western characteristic. It is that international finance is associated with capitalism and the human dimensions translated into human rights and identified with democracy: both developments of modern Western culture. To some extent, this Western association of the proposition is a distorting factor; because it projects the interaction of capitalism and human rights into societies and cultures whose historical evolution has been different from the West. In order to better grasp the proposition it may be useful to briefly scrutinize the development of capitalism and human rights within the Western culture and see whether the two were interrelated and, if so, what the nature of this interrelation was and to what extent it can be transferred to modern international relations.

The developments we are concerned about here are those of post-reformation Europe. The Calvinist and puritan concept of the “elect” did not, as such, contain a direct human rights component. God had chosen the “elect” to become rich probably because they were pious, hardworking and frugal and did not indulge in the joys of the tavern. By the very fact of the godly distinction between the “elect” and the others, the elect did not have to feel guilty for the lot of the downtrodden. Of course, as they amassed wealth and their reputation as conscientious craftsmen and businessmen grew, the elect could expand their activities and provide employment for the poor.

In the course of the centuries, however, riches became the measuring rod dissociated from the pious characteristics which were to bring it about. Indeed, as Protestant ethics metamorphosed into social Darwinism in the nineteenth century, social institutions, notably the churches, tried to attenuate its impact by emphasizing Christian charity and creating charitable foundations.

Human rights, however, were not originally developed in reaction to this state of affairs but as another concern of the emerging bourgeoisie and as a complement to capitalism. Locke’s life, liberty and property . were safeguards that the bourgeois capitalism wished to wrestle out of the monarchs. These ideas inspired the English Bill of Rights and the American and the French Revolutions. The human rights they proclaimed were civic and political, leaving free rein to liberal economy.

This free rein, combined with social Darwinism and the industrial revolution, caused economic and social disruptions in the nineteenth century. Christian charity was not enough to counter balance the encroachments of free enterprise capitalism. Trade unionist and socialist ideas and institutions emerged to counteract and interact with the free enterprise and the government to secure social and economic justice. Conflict, compromise and cooperation between the four dimensions (government, capital, labor, and, to some extent, the church) provided economic, social and political settings oscillating somewhere within the spectrum going from servitude to entitlement.

In the process, the intrinsic characteristics of most of these dimensions within the national boundaries of Western countries were compromised: governments assumed more and more social, economic and regulatory responsibilities beyond their political, military and judicial authority. Labor movements, originally inspired by Marxism, eventually sat down to negotiate with capital and government instead of wiping them out by revolution. And capital moved from sweatshops to unemployment and health insurance for the workers. These evolutions did not take place because they were intrinsic to the characteristics of each of these social dimensions but because of the presence and potentials of the other dimensions within the national boundaries and their input within the legal system. 

Servitude or Entitlement: International

In the course of the colonial and imperial expansions of the West, each of these dimensions produced different impacts on the penetrated territories. In general, and naturally, they reverted, circumstances permitting, to their intrinsic characteristics. The interactions in the new non-Western environments produced different complexes. The Western Governments, for example, while essentially political and military powers, were creating frameworks for the international economic penetration of their national capital. We thus could encounter home countries with well-developed human rights conditions whose international financial arms extending into other parts of the world needed not occupy themselves with human rights considerations.

Capital moved to non-Western regions of the globe in search of profit: its intrinsic characteristic. One of the incentives for the capital to move was the absence of the restraints encountered in the home country—notably in the domain of economic and social human rights. Of course, in some cases some residual developments of the interactions within the home country did move on with the capital. For instance, during the nineteenth century industrial revolution, capital had come to realize that the Malthusian misery of the workers was not cost-effective and that providing some standards of hygiene and housing were more efficient both for better production and better control of the workers.

Of course, the introduction of such standards in traditional societies could, at times, disrupt local ways of life and cultural patterns. Thus, in addition to possible lack of Western style civic, political, economic and social human rights in the countries penetrated by international finance and other dimensions of Western culture, such penetrations had the potential of disrupting the local traditional cultures.

In the aftermath of World War II, human rights became one of the major concerns of the United Nations. With the moral implications of decolonization the United Nations' efforts to improve human dimensions through international finance were inspired by affectional factors defined earlier. Governments were to contribute, with little or no interest, to such programs as the Special United Nations Fund for Economic Development or in later years finance arrangements made by the World Bank and IMF to help developing countries. Contributions to these international programs and institutions and aids and grants provided through bilateral arrangements between governments did not have profit or interest or capital as their direct functional goal. Their goals were economic and political and each government had its own ideological rationale to contribute to it. The indirect functional goals of such programs have become more apparent in the recent role played by the IMF in bailing out developing countries with huge debts which are unable to meet deadlines on their payments.

In 1948 the UN General Assembly adopted the Universal Declaration of Human Rights which served as basis for the “International Covenant on Civil and Political Rights” and the “International Covenant on Economic, Social, and Cultural Rights,” adopted by the General Assembly in 1966. The two covenants came into force in 1976. As the title of these covenants indicates, they are aimed at securing the two different kinds of human rights discussed earlier. But the forms and the circum-stances in which they have been formulated are far different from the evolution of these rights within the Western culture. At the UN, it is the governments of different countries who proclaim principles with little or no enforcement instruments at the international level. They can, of course, enforce the principles they proclaim within their national boundaries; although this is not always the case.

For international finance an international covenant or any other principle of behavior is only effective to the extent that it is enforced by the governments of the countries within which they operate. This applies to the home as well as the host countries. International finance seeking gain on the international market place is not in charge of enforcing human rights. If the government of the United States forbids, under penalty, the U.S. firms to deal with the Soviet Union because the Soviet Union is helping the Polish government to suppress human rights in Poland, the U.S. firms will find it difficult to disregard such law—unless they can find some international trade practice or legal loophole permitting them to go around the prohibition. Similarly, where a host country has laws on minimum wage, workers insurance or taxes for welfare and education, international finance will find itself obligated to abide by those laws—unless it can negotiate concessions from the government. The side comments in the last two sentences above are, for some, the crux of the problem. 

The Church

So far, we have touched upon the international projection of the attitudes of the governments and the capital towards human rights. A look at the international projection of the other dimensions, namely, the church and labor, which we discussed in the context of the development of human rights within the Western countries will throw light on other human rights restraints on international finance.

The church has, of course, an involved relationship with international finance; too extensive to delve into within the limits of this study. Suffice to say that over the centuries, while saving the souls of non-Western people, the church in general created favorable grounds for the international movement of capital and at times served, more or less, as the conscience of international finance in cases of flagrant abuses. Churches have played important roles in influencing international capital in the field of human rights in the last two decades. They have, in fact, taken the lead in the popular pressure on multinational corporations to respect human rights.

As distinct from other popular protesters, such as civic and student groups which act on the outside and around international capital by such tactics as demonstrations, lobbies, boycotts and using the mass media, the churches have had leverage within multinational corporations and financial institutions as shareholders and investors. Together with such other institutional investors as universities, they have been able to influence corporations and financial institutions by threatening to withdraw their investments and accounts. Above all, as shareholders, churches have brought human rights issues in the corporate policy making process through proxy resolutions.

In the domain of human rights the impact of churches on international finance can be significant due to the parallelism of church structures with those of international finance, extending from within the home and host countries into an international network. Some, such as the Catholic church, have been inherently international. When the Pope tours Central America and tells the campesinos of their human worth, international finance and the government with which it works will have to cope with the new political awareness. When the Central Committee of the World Council of Churches adopts a resolution, as it did in 1977, considering multi-cultural corporations as oppressors and exploiters, it is addressed to its nearly 300 member churches and over a billion adherents around the world.

Trade Unionism and Socialism

The internationalization of institutions, which emerged as a consequence of trade unionist and socialist ideas, has had a checkered history. In the course of its evolution the trade unionist dimension did not lend itself to an integrated international growth. It enmeshed with the government and capital within the national frontier to gain job security, social benefits and favorable wages. This, of course, happened in those Western countries where negotiation—not always without conflict--among labor, capital and government was possible. In these contexts, labor movements recognized capital as a legitimate component of the social and economic process and distinguished between their claims on capital as syndicalist action for improvement of labor conditions and their political action for influencing the government through social democratic parties. As the symbiosis between labor and capital developed, more often than not, it pitted the national labor against foreign labor.

Where cultural, economic and political conditions were not favorable for symbiotic evolution, such as Southern and Eastern Europe, and later other parts of the world, the socialist dimension inspired by Marxism turned into militant political action. These evolutions can be traced through the history of the international labor and socialist movements. The International Secretariat of National Trade Union Centers created in 1901 fell apart in 1913, precisely because of the conflict between the pragmatic social democratic unionism and revolutionary socialism. When World War I started, workers of Western industrial nations picked up arms to defend their “bread baskets” against each other. But the end of that War was marked by the implantation of Revolutionary Communism in Russia where international and national capital was nationalized. The conditions surrounding the Russian revolution, however, did not lend themselves to putting capital at the service of entitlement programs. Eventually a state capitalism was instituted which, under Stalin, brought human rights conditions closer to the servitude end of the spectrum.

The 1917 Bolshevik Revolution further crystallized the differing characteristics of trade unionism and militant socialism. The post WW1 Western inspired international trade unions, whether the International Federation of Trade Unions (IFTU) founded in 1919, or the International Trade Secretariats of various crafts and industries, remained conglomerations of national trade unions. Among the international labor organizations, the International Confederation of Christian Trade Unions created in 1921 by Catholic workers unions was probably, in aspiration, more universal because of its religious orientation. The Comintern as an international political arm of Soviet communism was to mobilize the proletariat under the slogan of “Workingmen of the world unite.” In that spirit it created in 1920 the Red International of Labor Unions (RILU) to counteract Western inspired trade unions. It is interesting to note that RILU was dismantled in 1935 to permit its national units to act more freely within their respective countries.  The brief cooperation of the Soviet Union and Western democracies during WW2 saw the end of the Comintern in 1944 and IFTU in 1945. By the end of WW2, however, the Marxist socialist ideology had consolidated its home and widened its sway. The countries of Eastern Europe that had embraced it, despite the fact that they were not practicing it, had become the official standard bearers for the emancipation of the proletariat and in that role condemned international finance as the new form of Western imperialism.

Soon after the end of WW2 the trade unionist and ideological dimensions of labor reorganized in modified forms reflecting the new realities at the international level; but with little change in their intrinsic characteristics. (International Confederation of Free Trade Unions (ICFTU) created in 1949 can be reasonably considered a successor to IFTU while World Confederation of Labor (WCL) was the post-WW2 de-confessionalized merger of ICCTU and some Protestant unions.)

The World Federation of Trade Unions (WFTU) provides an interesting case. Despite its trade union appellation, it contained within it the two trade unionist and ideological characteristics with striking emphases. Created in 1945 under the influence of the Soviet Union, WFTU is mostly composed of workers’ organizations within the Eastern European countries. The national trade unions within these countries are enmeshed with the state capitalism of their government beyond recognition. An Italian trade union delegation to Moscow—having in mind Fiat automobile corporation which has factories in the Soviet Union—inquired from the Soviet unionists whether they would take solidarity action, if asked, against a multinational corporation within which workers in a Western country were on strike. The answer of the Soviet workers was that “... this is a political question and trade unions in the USSR are not involved in politics.”

Inversely, the relatively small portion of the member organizations of WFTU which are outside Eastern Europe have been the more militant unions in the West and the developing countries such as CGT in France, CGIL in Italy CUTch in Chile, or CNT in Uruguay—the latter two suppressed by military regimes. 

Underdevelopment and nationalism

The main international thrust for the ideological promotion of human rights, however, has not been the use of trade unions—precisely because of their intrinsic characteristics of symbiosis with the national government and the capital. The international setting has not lent itself to the Marxian scenarios of proletarian consciousness and revolution in the highly industrialized societies. Instead, the consciousness has been that of underdevelopment and nationalism, and in some extreme cases, that of religious fanaticism. The methods have been those of militancy, creation of national liberation fronts, guerrilla warfare, coup d’états and terrorism. And the target has been imperialism and its manifestation in the form of international finance. If there needed to be any proof for the justification of this scenario, Allende’s attempt at gaining control through democratic process in Chile and the circumstances of his overthrow provided it.

The threat of national liberation fronts and other forms of disruption have become a check on international finance for consideration of human rights; but usually they are perceived too late, basically because of capital’s primary intrinsic characteristic of profit making and also because where the international finance does promote human rights in the host country, it generally does it according to Western standards which often disrupt the cultural pattern of the host country and accelerate the process of social change. Unfortunately, when the political and social unrest become serious, consideration of human rights by international finance further precipitates the process. By trying to improve the economic and social conditions, it admits pate shortcomings and points the way. And by supporting the ruling class, yet nudging it to ease the situation by granting some civic and political human rights, it creates contradictions within the established order, thus weakening its position against the militant elements. The past history of these events, from the Soviet Revolution to Nicaragua has shown that once the process begins, the compromise between international finance and militant factors is unlikely.

Past history has also shown that once the revolutionary elements have succeeded, the regime they install is not that of entitlement. They invariably call international finance back in. By suppressing and controlling civil and political rights and by standardizing economic and social human rights they create favorable and predictable conditions for international finance to follow its natural goal to seek profit which, at the same time, helps develop the economy of the authoritarian “socialist” or “state capitalist” host country. This transition process has not yet fully taken shape. In the early seventies a number of Eastern European countries and more recently China passed laws to facilitate the influx of international finance. Some efforts were made in that direction. But the economic and political upheavals since the seventies have brought that movement to a practical halt. For other more recent regimes issue of revolutions, wounds are still too fresh for accommodation.

We thus return to the realities of symbiosis between international finance and the government, and by doing so to their intrinsic characteristics. Governments are, in the last analysis, political, military and legal entities. International finance is a balance sheet. Balance sheets don’t have a soul. Whether it is Romania, Honduras, South Africa or Haiti, for the international finance to move across frontiers, its forecast printouts should show that the balance sheet will be in the black. The human dimensions of international finance lie outside of it, affecting and being affected by it. 

Human Rights’ Impact on International Finance

The shareholders invest capital in a corporation for return and banks make loans for interest. If the shareholders do not know or do not care what happens in South Africa or Haiti, the corporation calculates the price of labor—in combination with raw material, capital layout, management, energy costs, etc.—and comes to the conclusion that it is profitable to invest in those countries. If, however, the shareholders do know and do care about human rights conditions in these countries and make a point of it as shareholders, then the corporation may have to take human dimension of the operations into consideration.

As mentioned earlier, interestingly enough, the church is the dimension which provides national and international structures parallel with the international finance and is actually intertwined with it, therefore having a leverage on it for the observance of human rights. The church has the intrinsic characteristic of saving human souls. It is true that it has been known to promise only post-mortum salvation and thus appease the downtrodden without chastising the profiteers. But in the present international conjunctures the church seems to have also taken the direction of promoting earthly human rights among private as well as state (e.g. Poland) capitalists. The structure and intrinsic characteristics of the church thus single it out as one of the more likely national and international dimensions to sensitize international finance to human factors.

It must, however, be noted that the churches themselves were largely sensitized to human rights issues by “radical” movements of the sixties and the seventies which, from within the universities and student movements, were trying to mobilize the public opinion. Although the “radical” movements subsided or became more institutionalized—such as the Greens in the German Federal Republic—they helped develop the intellectual components of the public opinion concerned with international human issues. The intelligentsia/public opinion dimension runs through the social fabric beyond the structured institutions so far covered.

International trade unions, despite the national orientation of their member organizations have taken some critical stands against international finance. It is, of course, in the interest of trade unions in the developed countries to promote social and economic human rights in the less developed countries. The more the labor force in the developing countries moves towards entitlement claims the more expensive the price tag for that labor will become and the less interested international finance will become to move away from its home country labor market.

Governments do have components within their intrinsic characteristics, notably the political and the legal, which do reflect human dimensions. Elected officials, and even authoritarian leaders are sensitive to the intelligentsia/public opinion dimension mentioned above. Thus, the home country may try to become the soul of international finance by, for example, prohibiting it from moving to another country because according to its criteria the target country does not respect human rights or forbidding certain practices such as bribing officials of other countries. In terms of international realities, these policies are subjective and peculiar to the home country’s policy. To the extent that they are not universal practices, they may handicap the movement of international finance. Host countries, as we have already discussed, can also establish standards for human rights. This latter phenomenon, however, can be better observed from the other perspective

International Finance’s Impact on Human Rights

We pointed out that the international finance is a balance sheet. On the face of it, unskilled labor at $0.10 per hour in another country compared to $3.35 in the home country is attractive. Of course, it has to be fed into a complex of other factors to determine the feasibility of its use. The labor may be in the Andean Altiplano or Central Australia and when combined with such factors as transfer of capital goods, transportation, access to market, etc., may be found not to be cost effective.

In addition to these obviously functional factors, international finance will need to look into the political and legal structure of the potential host country in terms of foreign exchange convertibility, repatriation of capital and interest and other pertinent laws. These considerations should per force lead into other questions. It is appropriate for the international finance to find out why labor is at $0.10 per hour. The variables here will be enormous. For example, we may find that labor is cheap due to an archaic feudal social pattern where a small oligarchy of families exploits the masses. It would be quite disruptive and absurd if the international finance getting into the host country took upon itself to improve the lot of the people by offering the workers the minimum wage of its home country.

It may equally be the case that in order to have access to the labor, the market or the raw material in the host country, or simply to make its capital available there, the international firm may have to make some donations to the official oligarchs and power holders of the country. Indeed, the word “bachshish” usually used to imply bribe means donation. It is true that acceptance of favors by the prince consort of the Netherlands or the prime minister of Japan to influence a deal in the context of what we know as a modern culture can be considered reprehensible. But in our own culture, for many centuries, when the King bestowed titles to his officials, they were to collect tributes for their services and even pass on some to the King. The process is feudal and still in practice in some developing countries. It is not for the international finance or its home country to impose their own value system on other countries.

It is, however, a fact of social dynamics that the introduction of a foreign agent into a body will influence it. Whether it is by “donation” to the ruling class or competing with local job givers for labor, international finance will contribute to the process of change; and as a factor, will acquire a certain image. The image, in the long run, is that of superiority and aggressiveness. The nineteenth century mandarins who looked down on the Western mercenary commerce soon came to realize its potency.

The influx of international finance does not only awaken a general sense of alienation but contributes to new radii of identification. The labor in developing countries working for foreign industries, when receiving special treatment, becomes, so to speak, a separate class. It may be considered lower by traditional societies which have pride in their own identity as was the case in China earlier, or it may be considered superior in cultures which do not have respect for their own identity.

Usually there is a combination of both because some segments of the society may remain traditional while others may aspire to modernism. At the same time, those who work for foreign firms, despite the fact that they may be better treated than the rest of the indigenous population, may become more conscious about the discrepancy between themselves and the foreign personnel and resent the discrepancy. Inversely, some, recognizing the discrepancy, become loyal to their foreign employers in that context and try to imitate the culture of the latter.

These phenomena, and others, such as the collusion between the ruling class and international finance, can trigger social upheavals which will use the concepts of human rights to justify their cause and in doing so will find international finance and its home country the appropriate villains. As past events have demonstrated, this process spirals into confrontation between the discontented elements and the international finance. The government of home country—especially when it is the USA—gets involved, and the market mechanisms by which international finance was attracted into the host country get distorted.

For example, the home country will provide military and economic aid to the government of the host country to suppress the social unrest and secure the continuation of the privilege of the international finance. The beleaguered host government will suspend whatever human rights which may have existed in the country and the international finance and its home country by association become implicated in the process.

At some point the situation loses its cost effectiveness in the overall picture of the home country. Whatever its international finance may be gaining in the host country may be offset by the expense to the taxpayers of the home country to maintain the government of the host country. Unfortunately, at this point the situation is no longer evaluated in terms of sound financial considerations but gets marred by ideological and political exigencies. Where social upheavals end up in successful revolutions, international finance takes a loss during the revolution and its usual aftermath of nationalization. Further, the antagonism and resentments between the new regime and international finance handicap the resumption of the activities of the international finance in the host country for a time. 

Conclusion

If international finance is to survive the wave of state capitalist totalitarian governments with claims of putting capital at the service of entitlement, it should make sure that not only its own balance sheet is in the black, but that the overall outcome of its operations is profitable. In terms of free enterprise capitalism, bombs, tanks and helicopters which go up in flames in “national wars of liberation,” and for which the taxpayers foot the bill, are economic hemorrhage. They produce inflation and reduce our competitiveness. We are still suffering from the economic consequences of the Vietnam War. In our own enlightened self-interest, there comes a time when we should cease to prop up unpopular regimes. For that, we need awareness on the part of the people, governments, and the international finance. In short, we need broader and deeper education about international realities, and better political analyses put at the service of international finance. We can start by offering seminars and internships in international relations for corporate managers.

Anoush Khoshkish
April 1983

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