Academic journal article Journal of Third World Studies

Global Political Economy and the Power of Multinational Corporations

Academic journal article Journal of Third World Studies

Global Political Economy and the Power of Multinational Corporations

Article excerpt

INTRODUCTION

There is no doubt today that multinational corporations (MNCs), also called transnational corporations, which are companies with their parent headquarters located in one country and subsidiary operations in a number of other countries (host countries), are the principal actors in global political economy. The MNCs view the world as a single entity. Their impact transcends all national boundaries. They make decisions not in terms of what is best for the home or host country of operations, but rather what is best for the corporations as a whole on an international basis. The basic principle on which these corporations operate is that they consider the entire world as their market. They organize production and marketing of products with little regard for national interest in order to maximize profits. The contention is that the poverty, of the peripheral world is not an inscrutable natural phenomenon; rather, it is largely, but not exclusively, the result of exploitative globalization of their economies into the capitalist system in which the MNCs remain the principal actors.

There has been no greater challenge to nation-states sovereignty since the middle of the 20th century than the threat of MNCs. Defenders of MNCs believe that they are the 'engine of development.' They argue that MNCs create jobs by hiring workers in the locality of plant operations thereby contributing towards employment. The proponents contend that MNCs transfer technology by sharing the formula of their products to the host countries of operation. It is further postulated that MNCs help to reduce inflation in the plant operations of host countries through increased productivity; and they even make war unthinkable in the sense that since these corporations from various countries invest in each other's country there would be less incentive to wage a war that could jeopardize the economic interest of all stakeholders. These claims and many others attributed to supporters of MNCs are fallacies. A body of evidence suggests that MNCs, whose goal is the maximization of profits, are not philanthropic institutions and they serve the interests of no one but themselves.

The profound hypocrisy and inherent exploitation of MNCs' globalization lies unveiled before our eyes, turning from their homes, where they assume some respectable forms, to the underdeveloped countries where they go uninhibited. The corporations undermine not only their parent countries, where they are headquartered, but cause even more damages to the peripheral world. Applying aggregate of empirical data and logical plausibility, it is argued in this paper that the unbridled operations of MNCs in the peripheral world undermine the sovereignty of the underdeveloped states, cause environmental degradation, contribute to poor nutrition standards, destroy labor unions, circumvent national and international laws, support repressive regimes, and do not assist in the transfer technology as defenders claim.

BACKGROUND

The dominance of U.S. foreign investment that shaped the post-World War II years was grounded in the overwhelming military and economic power of the U.S. As part of the coalescence of these developments, the MNCs remain on the global stage as an embodiment of capitalist enterprise. While the advocates of the need for foreign investment build their case on the assumption that the science and technology of the industrialized countries can only be transferred by foreign investors, who have a profit incentive to do so, that assumption has been proven false by history. The cases of former Soviet Union, China, to some extent, North Korea, and even the "Asian Tigers"--Singapore, Thailand, Hong Kong, and South Korea--are prime examples that formerly underdeveloped countries can actually obtain, exploit, and adapt modern science and technology without dependence on foreign investment. These countries achieved relative level of industrialization before the current influx of foreign investments. …

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