ransnational Corporation is a firm which owns or controls production facilities in more than one country through direct foreign investment. Despite TNCs growing most rapidly in the 1960s the foundations were laid in the inter-war period, notable examples being that of Ford, Phillips and Vauxhall. Around 90% of TNCs are based in MEDCs. I will discuss social, economic and environmental advantages and disadvantages of TNCs.
There is a number of benefits in which TNCs create economically, one of the most significant benefit is infrastructure development that is created due to the demands and requirements of the TNCs. This can include the building of roads, airports, improved power and water supply. An example of this is when Toyota set up manufacturing in the UK, within the Deeside area near Chester infrastructure was provided including new gas and water supplies which not only benefited the workers but existing residents of the area. Coca-Cola invested $1. 5 million on infrastructure within the Russian economy.
Another benefit of TNCs is that they provide financial support for the countries they operate in through the taxes they pay to the local government however the taxes they pay are often reduced to attract their investment in the first place. The presence of TNCs within a country also created inward investment in which money is pumped into the local economy without the expense of local tax payers money. For example the presence of Shell in Nigeria has indirectly employed 20,000 local people thus boosting the local economy to a great extent.
Also it employs 5,000 people directly of which 95% are locals. Another significant benefit of TNCs is that exports are increased which help the balance of payments situation creating more buying power for the host country. This is shown through Toyota in the UK where the first of its cars in the UK were produced in 1992 and Toyota is now the UKs fourth largest exporter of fully built cars. Around 25% of its production is for the home market and a majority of the remaining to Europe. In 2002 Toyota exports made a significant ? 500 million net contribution to the UK’s balance of payments.
Another advantage of TNCs is that in particular when they are operating within LEDCs they will assist the host country in climbing the ladder of development an example of there existence in growing the economy of the host country is Coca-Cola who provided 4, 000 Vietnamese women with the equipment to start business selling coca-cola. As most TNCs are managed by those situated in MEDCs despite a majority of their production being based in LEDCs can result in a lack of concern for their workers, for example during an economic crisis their overseas branches are the first to close.
This has recently occurred in mass due to the recent recession. Another issue with TNCs is that a majority of their profits go back to the country of its origin rather than back to the local people working in the factories etc. For example throughout the time Shell were operating in Nigeria only 3% of the oil revenues went to the local people. Development of large energy schemes, needed by the economic TNCs can create large national debts for LEDC governments which they often find difficult to repay and often the product in which the TNC produces leads to competition with local industries.
The presence of TNCs within a country can lead to new technology and expertise and social management skill to be introduced such as quality management systems with technical skills of workers also being upgraded. For example India is now the home of call centres and customer services for a number of British companies this has benefited the Indian population as many of the people employed within this get taught language skills. TNCs also do occasionally attempt to improve the quality of life for their workers in their host country, for example The Coca-Cola system’s response to the January 12, 2010 earthquake in Haiti was immediate.
The Company donated $2 million to the Red Cross, and more than 1 million liters of water and other Coca-Cola beverages traveled by land, air and sea to reach those in urgent need. In 2009, The Coca-Cola Export Corporation Pakistan supported the rehabilitation of Internally Displaced Persons of northern areas of Pakistan. An estimated 3 million people were forced to leave their homes due to security issues. TCCEC donated Rs. 8. 1 million to National Commission for Human Development which actively worked on building temporary homes, medical camps, makeshift schools & setting up trauma counseling centers.
TCCEC also donated Rs. 5. 0 million to Chief Minister Punjab’s fund for IDPs. The presence of TNCs can also lead to a reduction in racism and nationalism as people of different nations work together and become more aware and tolerant of each others lifestyles. However despite the apparent work of TNCs to help there workers there are cases in which the local labour force is exploited with long working hours and low rates of pay. Young children are often employed and membership of unions is not allowed with the skilled and managerial positions being allocated to workers of the origin country.
For example When a group of Nike workers stopped working in March to protest that they had not been paid, they were fired. In the sewing section, there were 13 to 15-year old children illegally employed. As TNCs enter small rural country’s it can lead to rapid urbanization leading to the build up of slums in which many workers live in cramped un humain conditions for example the slums of Mumbai in India. There are no real examples of environmental advantages of TNCs apart from donations made from Coca-Cola to the WWF.
There are however a number of environmental disadantages, it has become the case that many TNCs have ignored the risk that their company may have to the surrounding environment, in Bhopal in India in 1984 the result of a lack of attention to health and safety was the worst industrial disaster in the world when a gas leak from a pesticide plant in the heart of the city killed many thousands of people outright and injured around half a million people.
Another disadvantage is that environmental laws are often less restrictive in LEDCs and, if present, are often relaxed to attract companies, resulting in air, water and land pollution, loss of wildlife habitats, loss of agricultural land etc. In Nigeria the arrival of Shell to the area led to considerable tension between itself and local tribes as the Ogoni people of the delta they were operating around protested about environmental issues.
This was a result of environmental effects of Shell including over 4,000 oil spills since the 1960’s which contaminated food supplies, gas flaring and deforestation. In conclusion it can be seen that there are some significant economic advantages of TNCs the most important being there contribution to the local economy and their provision of jobs. In my opinion despite that a majority of TNCs don’t reach the local people it is still economically advantageous to have a TNC present within a country.
The social advantages are also predominate as education is often provided along with infrastructure crucial for development however exploitation is till present however despite being on the decrease. In environmental terms TNCs are definitely disastrous for the host country as they appear to show little concern for the wildlife but concerned more on profits.