Multinational Corporations (MNCs) Exploiting Developing Countries
Multinational Corporations (MNCs) also known as big businesses are a powerful economic force to reckon. These are firms that arise because it is much easy to get capital than labor. MNCs establish subsidiaries in other countries where cheap labor and raw material is readily available. There have been a lot of debates on the effects of MNCs on developing countries. Many economists, inspiring investors and local citizens feel that multinational corporations are fond of exploiting developing nations off their resources and many other benefits.
MNCs and developing nations are intertwined especially with political economic relationship. Not many developing countries can offer a sustainable relationship for multinational corporations to work on. multinational corporations are attracted to developing nations in relations to neoclassical economic theory where by nations with relative abundant low-skilled and unskilled labor will able to specialize and succeed in production and export pf goods using their central factor of endowment.
Global competition is a key factor that influences the nature of operation of MNCs as it pressures production technique in order to remain competitive. China, Indonesia and India are some of the countries that have pushed down wages in order to remain competitive in the market. Whenever labor needs increase, new industries develop and MNCs join these countries to develop trade. The core goal of multinational companies is to remain competitive and be able to increase their market share without any qualms.
As most of the firms increase in size in developing nations, they locate capital investment in production facilities where operational costs are low. Many economic experts feel that MNCs are exploiting developing nations in a context that rotate around the mode of function of these monopolies and the impact of their activities on the domestic economy of these nations. Most of the multinational corporations tend to centralize high level of decision making occupation in a few cities. These companies tend to develop distinct advantages which can be put into service of world development.
The ability of Multinational corporations to shape demand patterns undermine the ability of developing nationals to purse national and international objectives. This is because they can impact the lives of people and set policies of governments. This makes it easy for the MNCs to determine patterns and terms of trade and pursue their corporate purposes. Multinational corporations not only exploit poor nations, but also produce too much wealth for their shareholders abroad.
These corporations also eat up a lot of raw materials from poor nations and create inequality. In a sense, they also make it off-putting for small nations to intervene on a large scale within their varied home economies. This usually put most of the local businesses to likely cost and inconvenience. Evidently, foreign based competitors can shun some of the consequences of certain operations and exposure to the policies of any host country.
Multinational corporations also increase unemployment by upsetting the local labor providers. This is due to the factor that MNCs encourage capital intensive methods of production or by shifting labor. MNCs have contributed substantially to the integration of Western World’s economy and link between developing nations with this integrated economic growth. This has impaired political stability and social development in most of the nations. For developing countries to eradicate the negative impact of MNCs there is need to revisit their political and economic objectives.
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