Multinational Corporations (MNC's) are an integral field of study in International Political Economy (IPE) due to its economical and political powers excered in the global market. An MNC is a cooperation that has a home base along with foreign locations abroad where they practice their productivity through foreign direct investment (FDI).
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The argument is that LDC competes for Multinational corporations' foreign direct investment which may stimulate their economies, but though this competition amongst nations, we can observe a decrease in environmental regulations, deterioration of workers’ rights, and the establishment of a dependency relation between the MNC and its host country. The reason MNCs are attracted to foreign markets often include, cheap labor, lower taxes, less governmental intervention and market specialization. In order to retain control of a market, MNC's have been witnessed to practice lobbying and acquire considerable political power within a state.
The increase of power is a direct challenge to the internal political stability of the countries they occupy and threaten their sovereignty as well. Thanks to neo-liberal policies since the 70's, the numbers of MNC’s have multiplied considerably. Those polities allowed the existence of MNC's but also allowed this success in the global south. While advocating the liberalization of former colony's markets it made it possible for MNC's to penetrate and destabilize the fragility of those economic structure in their advantage.
The economic growth of MNC's correlate directly with their political involvement and political power acquired through those gains. Today MNC's are an integral part of the poli-economic affairs of the world. Other Scholars have argued in favor of the effects of MNC's and justified their impact as positive into foreign economies. These economies liberalist demonstrate the positive effects of MNC's both at home and abroad. Arguably the introduction of new technologies, administrative training and FDI are all positive effects of MNCs.
The production of goods in a local market sensitive to the needs of the foreign markets. MNC's also create jobs abroad whether it is in the productivity sector or the business management aspects of the cooperation, therefore reducing unemployment and introducing new business training to the foreign markets. Aside from only managing production and financial assets, multinational corporations introduce western style of living; working and consumption in the LZDCs which helps ameliorate those conditions.
Because of MNCs, the world is becoming ever more globalized foreign markets are in direct contact with western corporations whom do not only trade cheap labor but also western culture and values at parts of the world that may be living under oppressive governments or lower standards of living. Although MNCs do have some potential benefits to the markets they have invested in, it seems that they do more harm. Home markets face the extraction of financial investments and the diminishment of employments opportunities for home citizens.
Since the 70's some countries successfully developed without the injection of FDI in their economies such as South Korea, but many other have been negatively affected by FDI. It created a dependency relationship between MNC's and LDCs and preventing them to develop further without the involvement of FDI. Under MNC's there’s also the weakening of the states authority and it continues will potentially lead to the creation of the world governed by capitalistic ventures
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