FORTUNE

Trending in Business

By Ilina Ghosh and Bableen Sra

The world of international business is ever-changing. New trends emerge and fade which reshape the way the world does business - among other things - and it can be hard to keep up. Thankfully, we, the team here at Fortune, have put together an all-you-need-to-know package regarding the trends currently transforming the global economic and social environment. Two trends, in particular, have caught our eyes - emerging markets increasing their global power and the world's deteriorating condition of human rights. The following will highlight the two trends and what we believe the future to be like as a result of their impacts - helping you navigate the next wave of what is trending in business.

Growing Emerging Markets

Benefit Analysis

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(Forbes)

Human Rights Ignored

Background

A right is a freedom of some kind that people are entitled to just for being human. Human rights are universal and apply to every person living on this planet simply because they are alive. We have to assume that each human is a rational and moral being that deserves to be treated with respect. Many people aren’t aware of all their rights, and if asked, they would probably list only freedom of speech, religion and a few others. People have the ability to make choices and take opportunities. They are able to adopt a career, choose a partner and raise children. People have the right to live wherever they please and even embrace the right to leisure. However, these rights weren’t always around and even today people are struggling to obtain them. Many businesses have chosen to ignore the rights of their employees in order to benefit their own business operations. Many businesses have gotten caught for their actions towards their employees and that not only affects the business, but the environment around the company as well. Also, many businesses take advantage of their consumers in order to make a profit.


The first development of human rights can be traced back to 539 B.C. where the first king of ancient Persia freed the slaves and made several decrees for human rights. The idea of human rights spread quickly to other countries including India and Greece (United for Human Rights). Over the years, many documents had been written up in order to assert individual rights, such as the Magna Carta (1215), the Petition of Right (1628), the US Constitution (1787) and many more (United for Human Rights). The United Nations adopted the Universal Declaration of Human Rights on December 10, 1948 and according to the Guinness Book of World Records, it is the most translated document in the world (United for Human Rights). It is a document containing 30 fundamental rights that form the basis for a democratic society. These human rights play a big role in preventing another world war from happening. One flaw with the Universal Declaration of Human Rights is that it bears no force of law and because of this, the International Bill of Human Rights was created as well as served as inspiration for the European Convention of Human Rights. These documents have made a big difference in the world. Since 1948, there has been a set of standards, which, over time, almost every government has come to accept in principle. However, persuading governments as well as businesses, and sometimes trying to push them to respect human rights is much more difficult. The Universal Declaration has stopped many countries from doing things, which are prohibited but have not eliminated them entirely. Due to this, new forms of abuse have developed. The task of building a human rights-friendly world will be a long and slow process that requires everyone to contribute in some way.

Negative Effects

Employees

In certain countries, the standards of living have continuously reduced and an example of this is through labour. Labour gets cheaper and cheaper which is beneficial for the multinational companies, but not for the workers themselves. Large corporations lobby favorable conditions into various international trade agreements in order to make certain resources (including work forces) cheaper. As more corporations expand their businesses internationally, they affect more and more people. For example, a situation in Massachusetts occurred where they were trying to put laws in place to restrict corporations doing business with regimes that violate certain rights of people in some way (Global Issues). They were pressured by a coalition of 600 major corporations in that State, saying that this is unconstitutional (Global Issues). Many companies offshore to international locations to get away from tight enforcement and regulations of USA and Europe; an example of this is Nike. As a strategy to increase their profit margin, Nike used child workers to manufacture products and they eventually got caught (Daily Mail). Also, a factory in Guatemala was closed in order to stop the workers from forming a union to protect their basic rights (Amnesty International). Of course it would be a good think if labour rights were made more secure and labour standards were improved anywhere in the world. However, to correct the situation of the exploited, many people would be affected and that is why the improvement of human rights in the workplace is at a stand still. Managing the fair wages for these workers risk affecting everyone due to passing on these extra costs to consumers. Corporations do not want to deal with the long-term effects that would come along with giving foreign workers more rights.

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Consumers

Businesses nowadays are taking advantage of consumer’s lack of information and bargaining power. The most common kinds of abusive business practices occur when consumers are in vulnerable circumstances. These circumstances may include falling behind on bills and having debt collectors harass them. Such abusive practices go against the rights of these consumers. A number of consumer protection lawsuits were created because interest rates may be extremely high, charging high interest rates on credit cards and other loans and hiding penalties in agreements. However, corporations have gotten around the law many times. Also, consumers fall for false advertising all the time. For example, automobile dealers advertise false prices to lure in consumers but sell the automobiles for less favourable terms when consumers come in to purchase (HG Legal Resources). This is called a “bait and switch” tactic that is often used in advertising. Such actions go against the rights of these consumers and some companies don’t care as long as they’re making a profit. When consumers become a victim by purchasing a product or service that does not measure to the seller’s promises, then the consumer may suffer a loss equal to the amount paid. Consumers have the option of filing a lawsuit but this does not help get their money back. When shopping, consumers need to be more alert in order to avoid certain companies from taking advantage of them.

Corporations

Frequently, governments fail to regulate the human rights impact of business or ensure access to justice for victims of human rights abuses. Guatemala has great gold and silver mining operations that Canada invests in. Canada does not regulate the overseas activities of their mining companies and because of this, Canadian mining projects faced international scrutiny due to the rises of human rights harms associated with these projects (Global Issues). The pressure to compete often means fighting against social clauses and policies that may lead to more costs for a company. Many corporations have signed up to human rights related pacts and agreements; however, their commitment level is still on an all time low. The reputation of many corporations has been tarnished due to getting caught for their unethical behaviour. For example, a media frenzy broke out when Trafigura (multinational oil and metal company) was found guilty for releasing toxic waste illegally that affected 108, 000 people (Accounting Degree Scandals). Their plan was to operate efficiently and minimize certain costs. Trafigura negatively impacted the environment and harmed the lives of many people in order to cuts costs. Essentially it ruined their reputation. Another example includes Lehman Brothers (global financial firm) hiding $50 billion in loans disguised as sales in 2008 (Accounting Degree Scandals). In 2007, Fortune Magazine ranked Lehman Brothers as #1 as the most admired security firm (Accounting Degree Scandals). When companies get caught for their unethical actions, it drives consumers away, which has major effects on revenue for the business. Not only do these actions affect the company but also other companies as well as the economy. Many corporations are facing consequences for impacting society in a negative way, taking advantage of labour workers and harming local citizens.

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Looking Ahead

1. Exchange Rate Appreciation

As productivity increases in emerging markets in comparison to more advanced nations, so will local wages and the prices of nontradables (eg. haircuts, prepared foods) relative to tradables (Dadush, Stancil). Furthermore, as mentioned above, this rapid growth in emerging markets has meant good news for investors. Emerging markets have become attractive destinations for investments and thus increased the capital inflows to these countries. These shifts will "put upward pressure on exchange rates" in emerging markets, resulting in real exchange rate appreciation (Dadush, Stancil).

This may produce certain unwanted results as well, such as the loss of competitive edge these nations currently have in basic labour-intensive manufacturing. However, overall this future development is thought to be positive. A stronger currency implies improved terms of trade and cheaper products, which boosts both purchasing power of consumers and lowers cost of imported inputs for producers relative to cost of labour. Higher exchange rates may also result in innovation and improvements in productivity, as it will force domestic producers to now compete with cheaper imports (Dadush, Stancil).

2. Make way for the MINT era

While emerging markets will continue to be prove themselves worthy of their place on the international stage, the BRIC era in particular, which began this revolution, is coming to a close. The new MINT - Mexico, Indonesia, Nigeria, Turkey - era is to be ushered in, along with several other non-BRIC nations who also show great promise - including Vietnam and South Africa (Keeler). After a decade of exceptional growth, BRIC nations are beginning to see slowdowns. For example, for the first time more than a decade, car sales are set to fall in China, Brazil and India. The MINT countries, however, "all have very favorable demographics for at least the next 20 years, and their economic prospects are interesting," says Jim O'Neill, the former Goldman Sachs exec and creator of the terms BRIC and MINT. Corporations around the world will continue to receive the aforementioned benefits of emerging economies, however they may coming from a different emerging source than in the past.

3. Technological Progress

Increasing wealth in emerging nations will result in the spreading of necessary technologies - electricity, sanitation - and other technologies - internet, cell phones - to their populations. While their urban centers - Shanghai, New Delhi, Mexico City - already enjoy access to such technologies and more, this is an important step for their large rural populations. Furthermore, although advanced countries will remain the more prominent source of cutting-edge technological innovation, some emerging nations - particularly those with pockets of highly educated and skill individuals - may be leaders in innovation, while other developing nations may innovate by modifying technology to suit local conditions (Dadush, Stancil). According to a 2008 World Bank report “Part of the strong projected performance for developing countries derives from stronger labor force growth, but much can be attributed to technological progress,” (World Bank).

4. Shrinking Poverty, Growing Human Rights

The future will also be marked by improvements in the most basic human terms, as rapid economic growth will pull large sections of emerging populations out of extreme poverty. It is expected only a small fraction of the G20 population will be left behind (Dadush, Stancil).

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(Carnegie Endowment for International Peace)



As a result of their limited economic means, many in our world today are denied basic human rights as defined by the United Nations, such as the right to an adequate standard of living, including food and housing, the highest attainable standard of physical and mental health. and education (UNOHCHR). People living in poverty are often socially excluded and marginalized from political power and processes, ignoring their right to effectively participate in public affairs. According to the UN Office of the High Commissioner for Human Rights, "The elimination of extreme poverty is not a question of charity, but a pressing human rights issue." Therefore, although the current state of human rights in the world is nowhere near acceptable, it is possible the economic success of the developing nations - where much of these abuses take place - which has translated into improvements in poverty reduction will result in improvements in human rights conditions as well. This can mean two things for investors and businesses however. While they will reap the rewards of having more people with more money, resulting in widened market potential, increasing human rights will likely translate to increasing worker rights. The low standards of human rights which many businesses abused in order to profit and meet the demands of consumers, may no longer be so low in the future.

5. Reduced Human Rights Abuse Equals Success of Economy

Allowing workers to gain more rights with receiving fair wages and fair working conditions will increase productivity overall for the whole business. This would allow high employee retention rates and they would stay motivated to work everyday. Although, the amount of human rights abuse in the business world is still high, consumers are more conscious about what they are buying and how that product was made. As more companies are getting caught for human rights scandals, business are encouraged to stay scandal free to avoid the risk of losing consumers. This results in more rights for employees in general and less sweatshops. It also results in the increase of prices because businesses have more expenses to deal with. Although, it won’t stop consumers from buying these product; it will help businesses continue to make profits. As businesses prosper, the economy benefits from this as well. Due to globalization many countries will benefit by reducing human rights and encourage consumers to support the reduction of human rights by allowing them to purchase products not made in sweatshops.

6. Democracy and Human Rights

Democratic principles have a direct correlation with the ideals of universal freedoms, such as the right to free speech. Covering all groups including indigenous people, minorities and people with disabilities are equally essential for democracy (OHCHR). If the government is addressing the needs of minorities, businesses should do the same in order to achieve some sort of uniformity. Everyone has equal respect of access to civil and political rights. In Canada, people are allowed to vote and have their voice heard no matter what their background is. In many other countries, people are denied many rights. Allowing the right to vote will result in people being able to plan their own future. Running fair elections is a determining factor in building sustainable human development and lasting peace. It allows people to choose the right person they want in charge to make their country better and process rapid growth. For example, the democratic reforms and respect for human rights have become distinct goals in Turkey (WMD). It has encouraged freedom of religion throughout the country, benefiting many people that call Turkey their home. Civil society plays an important role in every country in promoting and defending human rights resulting in a prosperous future for its citizens.

7. Human Rights and the Environment

Maintaining a safe and healthy environment is a prerequisite to the enjoyment of human rights. The victims of environmental degradation tend to be the people of minority and the poor. People who have been exposed to contaminated water and other resources due to environmental degradation is being denied the right to live free and without any harm. UNEP and OHCHR had a meeting to discuss these issues and create more rights regarding the environment (UAPress). This would result in more strict laws against business dumping waste into bodies of water in order to cut costs. It allows people to live in a healthier environment and not worry about using contaminated resources. It would also require local citizens to respect the laws of the environment as well as businesses.

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8. Global Human Rights Initiatives

Many human rights defenders across the world have called on initiatives to assist in stopping certain human rights from being abused. For example, Kazakhstan has been experiencing the lack of free and independent media, causing the right to freedom of expression and opinion to dim down (FHR). Specific proposals have been formulated to guarantee the rights of these journalists as well as the population in general (FHR). Due to the lack of rights about expression and opinion in Kazakhstan, businesses that manufacture newspapers and magazines are limited to only specific articles that they can publish. Some journalists have been sentenced for several days for participating in protests (FHR). This proposal will guarantee concrete results for the people of Kazakhstan to get their rights back. Many proposals have taken place all over the world and more are to come in the future, allowing businesses and people to have more freedoms. It’s getting us a step closer to a human rights-friendly world.

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Bableen Sra


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