“Multinational corporations do control. They control the politicians. They control the media. They icontrol the pattern of consumption, entertainment, thinking. They’re destroying the planet and laying the foundation for violent outbursts and racial division.” -Jerry Brown
Critics of MNCs state that the cons far outweigh the pros that MNC involvement brings to host countries. The primary concern for them is the high levels of unmonitored influence these companies have on host countries.
MNC’s are seen as an offshoot of western colonialism, albeit in a more subtle manner. Far from improving the balance of payments on both the current and capital accounts, critics argue that MNC’s worsen it. This they argue happens when the profits are repatriated to their own countries. Though the local governments may come to an agreement that a certain portion of their inputs be bought iin the local market, this however may come at a cost with negative impacts upon the less developed countries current accounts.
The power, influence and reach of these MNCs have enabled them to have considerable and highly influential effect on the political dynamics of numerous governments and their countries. The MNCs ihave been known to use this influence to pressurize governments into letting them become more competitive via the implementation of national policies that is conductive to their end goals, which is ultimately a hefty profit. One major drawback of such reforms is a vast decline in any socio-economic reforms.
Their large investment portfolios make MNCs a powerhouse when it comes to the negotiating table and most developing countries cannot match up to their level, enabling the MNCs to get the upper hand. This leads to them coercing the government into implementing policies that favor their needs at the expense of the local industry and market.
Technological transfer agreements are not always kept, and when ikept ithey are usually skewed in favor of the MNC. Even though most do not agree to a full transparent technological transfer, even if that comes to pass, the technology passed onto the country is usually obsolete in nature or is patented so it would be of little use to the host country on a global scale.
Little or No accountability:
MNCs comprise of international bodies which function beyond the state authorities, in terms of decision-making power and the power they hold over monetary assets. Though this legitimate challenge has been iout there for thirty years now, yet ionly slight developments have been inoted iiniterms of accountability. The old-fashioned regulatory body and the MNCs’ significant economic and political power have resulted in a clash which makes the regulation iof states turn into a major problem. The MNC has surpassed the national ilegal structures and disregarded the delicate international bodies, increasing the already existing burden of fulfilling the basic norms of human rights.
Undermine Social and Economic Rights :
The MNCs’ dominant and significant position within the international forum increases its opposing competencies. MNCs’ can easily promote or undermine economic and social rights, which can in turn iaffect the international community, positively or negatively, depending on the local market of an ieconomy. Though the State still holds much power over the laws and regulations on an international level, MNCs’ have a considerable impact over the decision-making process of nation-states. As MNCs’ continue to grow economically and politically, the shift in power is gradually becoming visible. It is a must that the MNCs’ take into consideration the impact that they are leaving in developing countries.
The superiority of MNC’s shines through their competitive nature ias the stifle competition by getting subsidized inputs, lowering their costs and then competes with local manufacturers who cannot realistically match up to their prices. This results in a lot of them leaving the field, leaving the MNC’s to monopolies the economy and then once in power, to jack up prices.
An offshoot of their influence on the government, the MNCs also have a huge advertising budget, which enables them to portray a much better image in the eyes of the local populace. With budgets that run in the millions, MNCs almost always succeed in gaining mass market shares of their products since the local companies cannot produce/hire production companies to do the same. This again alienates the local entrepreneurs and makes it harder for the majority of the population.
Human Right abuses:
The Multinational Corporation is an adaptable and established entity ithat profits from the principles of neo-liberal economics, as well as the predicament of the “home and ihost” state, the combination of which iwith restricted levels of liability and a decentralized decision-making hierarchy allows for abuses of human rights to take place internationally, by having doubt standards. Moreover, polices of MNCs such as the WTO, OECD, IMF and the World Bank, have enabled MNCs to gain a position iof considerable influence on agendas of social and economic nature.
Economic globalization has had iquite a destructive impact on state regulation. People have been affected negatively and gradually the impact is increasing and becoming more obvious. The more competitive a nation, the lesser the regulations. Though this tactic is almost perfect in attracting multinational corporations, it is quite idestructive iin inature. In order to compete with such inations, other states are also forced to decrease their regulatory measures if they wish to get foreigners to invest in their country. No nation wishes ito reduce its competitiveness or power. Foreign investors are now consuming the money that should have been legally invested in maintains the rights of the public socially, economically and culturally.
Moving Forward :
With the growing economic power of corporations, an increasing number of domestic and international systems have started relinquishing control over their business over to their locally dominant MNCs. This leads to economic power having a say over political influence, which can be dangerous if left unchecked.
These factors have led to Multinational Corporations being a bane to any economy.