Globalisation Without Multinational Corporations example essay topic

"Stop Globalisation!" is the catch cry of the group known as S 11, as well as many other left wing groups around the world. Over time they have held demonstrations at meetings of the World Trade Organisation and World Economic Forum, including at the Crown Casino in Melbourne in September 2000, where they attempted to shut down the Forum. One of the reasons for wanting to shut down the Forum was their opposition to globalisation. According to one view on the BBC website, the main bone of contention of S 11 is. ".. the fact that [multinational] corporations don't actually belong to any particular nation... It makes them almost unaccountable for their actions... Many corporations, while having offices in Europe and America, where executives get US$5000 a week paychecks, do their manufacturing in places like Indonesia and China, where they can get away with paying people "starvation wages".

" Ian Gerard of The Air puts it this way: "Most protesters aren't against globalisation itself, but globalisation executed at the expense of other cultures and other people who are powerless to resist the massive economic force of multinational companies". On the other side of the coin are the people who support globalisation. People, such as Saul Eslake, the Chief Economist of the ANZ Banking Group in 2000, argue that history has already shown us the consequences of avoiding globalisation. After World War I, governments across the world increased tariffs and other barriers to trade to such an extent that international trade almost ground to a halt. The result was disastrous. Globalisation has been shown to be extremely beneficial to the world economy, however can there be globalisation without multinational corporations?

How important are these huge companies to the economic wellbeing of the world? There are numerous benefits created by multinational corporations. These are mostly to do with the efficiency of their operations and the power with which they operate. Firstly, they are able to obtain a comparative advantage through ensuring the supply of foreign inputs and better distribution and service networks. They are also able to protect and exploit their monopoly power and adapt their products to local conditions and tastes.

For example, the cars produced by Ford Australia are not the same models as those produced in the US or in Europe. They have been designed to withstand Australian conditions and appeal to the Australian consumer. Multinationals are also able to ensure consistent product quality. As well-travelled tourists will tell you, a meal at McDonalds in Kuala Lumpur will be the same quality as one in Sydney. Multinationals are also able to take advantage of economies of scale. They can utilise cheaper inputs from other nations, such as Nike manufacturing its footwear in Asia, where it can obtain cheap labour.

Multinationals may be able to obtain capital on better terms than other firms can and they are able to funnel local information to headquarters so that well-informed decisions can be made. Multinationals can also concentrate their research and development activities in nations that have resources suited to that purpose. Multinationals are often able to influence their environment. For example, they may be able to reduce competition by buying up local firms, such as when Campbell's bought up Arnott's.

They may also be able to influence government policy. This has occurred in Australia, where multinational car manufacturers have convinced the government to maintain a relatively high tariff on imported vehicles. Finally, multinational corporations may create clerical, managerial and technical jobs in their home nation, so that their headquarters may function effectively. The problems associated with multinational corporations are more likely to be publicised than their benefits. They include problems for the home country, such as the loss of domestic jobs that could have been created if the company had invested in the home country. Although Nike may not have found it profitable to manufacture shoes in the US, it may have been able to invest in some other industry at home.

In terms of technology, there are two opposing arguments, either of which could hold. Firstly, if research and development is concentrated in the home country, its advantage may be maintained. However, the use of the advanced technology outside of the home country could undermine its technological superiority. Which argument dominates will depend on the situation.

When a multinational corporation shifts its operations to a nation with a lower tax rate than the home country, the tax base of the home country will be eroded. A multinational may also thwart the home government's attempt to control the domestic money market by accessing international capital markets. Problems for the host country are usually those that are most strongly opposed by groups such as S 11. In particular, these groups often cite exploitation as the strongest reason for opposing multinationals. Exploitation can be in the form of prices paid to the host nation. For example, wages paid by Nike to its workers in Asia are only a fraction of those that would be earned in the home country.

However, according to Saul Eslake, .".. the wages paid by multinationals to their workers in low-income countries are typically double what they would be paid by local firms". Others argue that the alternatives to working for a multinational firm in these countries is typically much worse. Exploitation can also be in the form of overexploitation of natural resources or the failure to maintain the health of the environment, such as the case of BHP allowing tailings to pollute the waters of the rivers at its Ok Ted i mine in Papua New Guinea. Multinationals may influence the national tastes of the host country in a negative way, such as through cigarette advertising by Phillip Morris or advertising campaigns by Coca-Cola. Some economies may end up being dominated by multinational corporations. In Canada, for example, .".. almost 60 percent of the total capital in manufacturing is owned or controlled by foreigners".

The percentage may be even higher in some developing countries. When multinationals siphon off funds for research and development to the home nation, the host country is kept technologically dependent. For example, companies like Bayer in the pharmaceutical industry and Monsanto in the chemical industry may be at the forefront of research, but then patent the ideas and force other nations to pay substantially for the products. Of course, it may be argued that such research and development would not occur if the developing companies were unable to make a profit from the result of their work.

The question to be asked is: What would life be like without the existence of multinational corporations? Australia, in particular, would be a much different place - we would be much more reliant on imports for our needs, the stock of capital would be lower, which implies a lower standard of living and we would not have the range of products from which to choose. Whether this is a price too high to pay to limit the chances of multinational corporations exploiting their position can only be answered on an individual basis. I believe that many of the problems associated with multinational corporations would still exist, in some form or other, whether they existed or not. With groups like S 11 and sites like web scrutinizing the activities of multinational corporations, they try to ensure that hosting governments hold corporations accountable for their activities. However, in many cases governments lack the power required to deal adequately with multinationals.

In one way, they hold governments over a barrel and are able to demand their own way. If governments disagree, the multinational will just move on to a new country. I believe that the existence of multinational corporations is justified. But I also believe that they need to be held accountable for their activities.

One suggestion is that an organisation be formed with representatives from nations around the world. This organisation would oversee the activities of multinationals and would have the power to reprimand them in some way. Of course, this would probably initiate even more problems, but would be a step in the right direction. Eslake, S., Globalisation: gains and losses, (web ), 29 August, 2003 Eslake, S., Globalization: Unprecedented? Inevitable? Irreversible?

Beneficial? , (web ), 30 August 2000 Gans, J., King, S., Stone cash, R. & Mankiw, N.G., Principles of Economics, Harcourt, Sydney, 2000 Gerard, I., The Shame of S 11, (web), [Accessed 18/9/03] h 2 g 2, The's 11 Protests, (web), 17 September, 2000 Krugman, P. & Obst feld, M., International Economics: Theory and Policy (6th edn), Addison Wesley, USA, 2003 Salvatore, D., International Economics (7th edn), Wiley, USA, 2001 Stol per, W.F. & Samuelson, P.A., "Protection and Real Wages", in Bhagwati, J (ed), International Trade, Penguin Books Ltd, Harmondsworth, 1969.