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MULTINATIONAL CORPORATIONS
OVERVIEW
3. CONTROLLING MNCS
EMPLOYMENT
• MNCs bring in FDI and invest into the country; it will need to employ people which will
create employment.
• Some jobs may require additional training which will aid in transferring technology and
methods to the host country.
• MNCs will have a demand for many services such as meals, transport, raw materials,
maintenance services that will be provided by domestic businesses, indirectly increasing
employment.
WAGES
• Wages should increase as MNCs will want the best people that the country has to offer.
• Wages may be lower on international standards but should be higher than the local
standard, as logically the business will pay its workers more in order to motivate them.
• Often MNCs are criticised for their wage policies but recent research and statistics prove
this wrong.
• Transfer of technology through training and skill will make domestic businesses more
competitive.
• Efficiency will rise as new technologies can be availed of.
• Production of more sophisticated goods and services will make the economy stronger due to
transfer of technology.
• Exports will rise as businesses are producing goods and selling them for foreign
currency.
o This will raise GDP
• The government will get tax revenue from both exports as well as production.
• More employment means that the government will get more income tax as well
as having to spend less of unemployment benefits.
• MNCs that offer higher wages will force domestic businesses to increase wages,
raising the standard of living.
• MNCs often help local communities greatly by providing them compensation for
things such as taking up farming land.
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• Multinational companies are often accused of giving bribes to government officials to gain advantage of tax breaks and
other forms of financial assistance; they are essentially being subsidised.
• Governments can often turn a blind eye to these MNCs’ actions that may exploit the
environment of use child labour.
• Either way, these advantages mean that the MNCs will grow in
prominence and make more profits as they are getting very cheap
production costs. This in turn will diminish competition as they cannot hope
to compete.
o Increasing unemployment and making the MNC too influential.
• BAT (British American Tobacco) are accused of using child labour in production;
these children are exposed to large quantities of nicotine and can be subject to
nicotine poisoning.
o This means that the child is also working in harmful working conditions.
• MNCs such as Nike are accused of paying Chinese workers very little wages in
order to make large profits – often referred to as ‘sweatshops’.
• The Bhopal explosion in India proved how unsafe MNCs can be, and how little
respect they have for human life.
• Toyota in the year 2010 had to do a massive re-call of the Prius Model hybrid cars
sold in America because the brakes did not work properly, although this was an
unintentional mistake by the company, it had caused injuries and caused massive
outcry over the scrutiny of safety tests.
CULTURAL IMPERIALISM
FOOTLOOSE CAPITALISM
• MNCs have the power to jump from
producing in one country to another,
creating and destroying jobs and prosperity
in their wake. MNCs can shift production
from more developed nations where it is
more expensive to produce to nations with
cheaper labour. This will leave a large
number of jobless people and therefore the govt. has to spend more on
unemployment benefits.
o Their first priority is profits.
o This can put a road block to government plans they rely on the MNC
to provide a large part of its GDP. Exports from Dell made up 5% of
Ireland’s GDP, and when they left Ireland for Poland, it had a big
negative influence.
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INTERNET
The internet has now become one of the main places for all sorts of advocacy.
Sites such as Chevwrong (Chevron + Wrong) and Tescopoly (Tesco + Monopoly)
highlight what these companies. Nestle bowed down to pressure from these
groups and stopped using palm oil in making Kit-Kats. This was in response to this
YouTube Video. Nestle stopped buying palm oil from Indonesian producers that
deforested to make new palm-oil farms.
SELF REGULATION
Businesses have now become far more conscious of how PR (Public Relations) especially with respect to
the environment affects their image. Businesses are now strengthening their CSR policies and some joining
umbrella groups such as ETI (Ethical Trading Initiative) and EITI (Extractive Industries Transparency
Initiative) – both of these organisations aims to work towards giving workers better living conditions,
making the business more transparent and increasing the priority of protecting the environment. More
and more companies are using the FAIR TRADE logo on their products to prove that they actually care
about farmers.
LEGAL CONSTRAINTS
The legal way of taking a business to court for their alleged wrongdoings can be lengthy
and very costly. But there are instances where businesses have been taken to court and
made to pay for their wrongdoings. Daimler (the owner of Mercedes Benz) was fined
for paying bribes to over 22 countries. The consequences of being proven guilty in
court can be very deadly; the Competition Commission in the UK and EU has the power
to fine 10% of the company’s turnover.
However Multinational Corporations, as they fall under no direct legal system are often
very hard to control through law.
GOVERNMENT CONTROL