Critically Evaluate the Role of Tnc's in the Changing Global Economy

Topics: World Bank, Poverty, Economic development Pages: 5 (1646 words) Published: February 27, 2011
Critically evaluate the role of TNC’s in the changing global economy? (40 marks)
TNC’s are companies that operate across boundaries of countries, usually to maximise their profits and increase their selling market. How and whether they contribute to the changing global economy is a matter of debate. In order to evaluate their role the change, what TNC’s have done?, How have they shaped the economy? and who else is involved needs to be considered. Geographers feel differently about how TNC’s contribute to the global economy, some would say they stimulate it, whereas others would argue other factors such as the government, The World Bank and other organisations have a more important impact.

Firstly, the change in the global economy needs to be considered. It is only recently, perhaps in the last 20 years that the world market has not been solely dominated by MEDC’s. This can be seen with the rapid development of NIC’s, arguably with the help of TNC’s. It was only in the 1990’s when China began to develop financially. The change in the global economy is a very recent occurrence. With TNC’s choosing to locate in NIC’s because of the cheap but skilled workforce, they are helping to economically develop areas. They do this by providing good infrastructure and providing jobs. They pay their workforce, who in turn can buy the product they are manufacturing. They arguably bring these developing countries into the global market. At present, more than 200 transnational corporations have come to invest in China and their projects are found across the country either in coastal areas or inland ones. It would appear that TNC’s do stimulate the economy, but other factors must also be considered.

It is vital to look at what TNC’s actually do. Firstly, looking at a Hyundai’s role as an example, the positive actions of the TNC will be evaluated. Hyundai is located in 193 different countries around the world. Hyundai will be eager to locate in NIC’s as the labour costs are cheaper than in MEDC’s but they still need skilled workers, unlike those in most LEDC’s. Locating in NIC’s will offer the host country many benefits. Hyundai will provide jobs for local people, improve any infrastructure to make transportation as easy as possible, and encourage other TNC’s to locate in the same area. Hyundai’s actual production of cars occurs in the NIC’s, 2 factories are located in China as well as Vietnam and Malaysia. By giving local people jobs, the corporation is effectively giving money to a group of workers, who previously perhaps would have worked in the agriculture sector. This is often an unreliable source of income, whereas employment by Hyundai will offer security. With security of wages, workers can reinvest into the global economy, wanting better products for themselves. Although, some NIC’s have Hyundai show rooms, they are largely located in the EU, the world’s richest market. Import and export taxes will apply when moving the assembled cars to the market. This puts profits back into the global economy, helping to stimulate it. Often the infrastructure around TNC’s in NIC’s attracts other corporations, because of the skilled workforce and easy transportation. The more TNC’s that locate in a country the more stimulated their economy becomes. The workers will become richer and buy global products to improve their quality of life and their status. TNC’s appear to attractively stimulate the global economy. However, this is one sided, and many would disagree.

On the other hand, other geographers see TNC’s involvement in countries to negatively impact the economy and culture. Shell is a corporation operating in Nigeria and its participation here has been under huge scrutiny because of its immoral behaviour. For example $12 billion of oil funds disappeared, just in 1991. It is conventionally thought that this money was lost in bribery to the Nigerian government to cover up Shells unethical behaviour. If this statement is true, this is not...
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