Globalization and Mncs

Topics: Globalization, Developing country, Multinational corporation Pages: 11 (4137 words) Published: June 21, 2013
The spread of globalization around the world has been fed by many factors. Though the political decisions of economic globalization get all the headlines, it is however, institutions like Multinational corporations that power it along. The power and influence of multinational corporations in the world is one that cannot be doubted. In fact, the new game for world power is no longer Geo- political but Geo-economic. Its main actors are no longer the former world aristocracy of great powers but a new aristocracy in the name of multinational corporations. In this essay, we provide a critical analysis of the role of Multinational Corporations (MNCs) in the spread of globalization. It is structured as follows:- we begin by defining key terms and concepts that will be used in the essay before we proceed to discussing a brief historical background of MNCs. We will then discuss some of their characteristics for us to understand and appreciate their role. By looking at their strengths, weaknesses, including the opportunities they create including factors that threaten their existence, we will analyze their role in the spread of globalization. It should be noted from the onset that, though there are different dimensions of globalization, this essay, is however, written from the economic point of view. Furthermore, the essay is written from a developing country’s point of view. DEFINITIONS OF TERMS/CONCEPTS

MNCs, sometimes called transnational corporations or international corporations, are businesses that produce or distribute products or services in one or more foreign countries by establishing a branch or affiliate there. Todaro and Smith (2003), define them as corporations with headquarters in one country but with branch offices in a wide range of both developed and developing countries. ECONOMIC GLOBALIZATION

It is the movement towards one solid economic system. It means the movement of many and different economic sub systems towards an interlinked and dependent system. Madeley (2003), in line with MNCs, defines globalization as the integration of people into a global economic system where the corporations have huge power and represents a transfer of wealth from the public to the private sector.

It is a multi dimensional process that involves quantitative increases in wealth and qualitative changes in the economy through improved technology, better utilization of natural resources and better division of labour and capital. In short, development is the process of improving the quality of life. HISTORICAL BACKGROUND OF MNCs

MNCs can be traced to as far back as the 18th century in England and a century later in America. Wilkins (1974) considers them as the foreseeable, cumulative products of a process developing overtime out of the requirements of the innovative business enterprise. However, Orakzai (2007) says the history of MNCs coincides with the rise of globalization. It was the eve of the world war one that spurred entrepreneurs and firms to drive the manufacturing and production at global scale. However, the true global economy took place between the 1950s and 1970s. The Japan economic miracle made it possible to drive the integration of capital and commodity throughout the world. With the passage of time, these gigantic corporations, which used to be viewed with such fear as manifestations of imperialism, are now considered the embodiment of prosperity and modernity. According to Buckman (2004), there were about 7,000 MNCs by 1970. By 1997, the United Nations Conference on Trade and Development (UNCTAD) estimates that there were about 53,000 MNCs with 448,000 foreign affiliates. The value of the overseas investments owned by these MNCs came to about US$3,500 billion in the same year. Their estimated total sales were a staggering US$9,500 billion. As a matter of fact, these corporations are richer than most countries in the developing world. Stiglitz...
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