Transnational Companies and Globalization

896 Words2 Pages

The latest official figures indicate that

there are now more than 37,000 transnational companies controlling

almost a quarter of a million subsidiaries. Ninety per cent or 34,000

are based in industrialised countries. Just over half of their

subsidiaries are operating in the Developing World. 56% of the parent

corporations have their base in the European Union but only 24% of

their subsidiaries operate within European boundaries.

The number of multinationals is growing daily and increasingly have a

base in the newly industrialised countries. These companies have a

major impact on home and host country output, demand patterns, trade

and technology flows and employment and labour practices. They also

set the tone for the structure and pattern for competition in their

sector.

Transnational companies are continuing to expand their activities and

at a rapid rate. One can see this when measuring foreign direct

investment flows. During the 1990´s there has been a major growth in

flows to developing countries. The increase was 32% in 1992; 55% in

1993 and between 1983 - 1993 the increase was fivefold. The reasons

for this are straightforward. Transnational companies are searching

for lower cost sources of production and the greater flexibility

offered by developing country governments as well as incentives and

privatisation. It is worth noting that 60% of all privatisations have

fallen into the hands of transnational companies.

And, of course, competition for inward investment is intense. Success

usually depends on the incentives being offered. Increasingly these

include the establishment of export processing zones where the inward

investors are freed from taxation and often from the legislation of

the country concerned, including labour legislation.

The benefits to the host country are limited; usually the production

being carried out is based on assembly operations. The labour force is

generally young women. There is little transfer of technology and

skills and while there is a huge growth in exports, there are very

limited local benefits. This is not surprising when the wages paid are

often below subsistence level with the only benefit to the local

community or local economy being the wage payments as all raw

materials are imported with no flow back into the domestic economy.

When greater opportunities offer themselves elsewhere the companies

are quick to quit and move on. In reality, the situation is not too

much different to that of logging in the rain forests where the

loggers come in and chop down all trees in their path and leave the

waste behind. Unfortunately it is human beings who constitute the

waste as transnational corporations forage through nations in search

of cheaper and cheaper labour.

Their economic strength is reflected in the political power of the

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