EDITORIALS & ARTICLES
"Some feel Multinational Corporations (MNCs) are a vital new road to economic growth, whereas others feel they perpetuate underdevelopment." Discuss. (UPSC CSE Mains 2018 - Political Science and International Relations, Paper 2)
- A multinational corporation (MNC), often referred to as a multinational enterprise (MNE) or a multinational organization, is defined as “a firm that has its headquarters in one nation but also has part of its operations in one or more foreign countries.” Aside from their sheer scale, the significance of MNCs has expanded as a result of the rising importance of economic and welfare-oriented goals in the context of national security and politics.
- In today’s world, most national security plans are created to ensure not just the physical survival of people within national borders but also some minimal expected level of economic welfare, a certain degree of political and social autonomy for the country, and a certain level of national political status.
- Nation states have been utilizing MNCs’ extensive networks to further their foreign policy objectives; MNCs in return also ask their home governments for help in reducing the risks associated with their foreign investments.
- The effects of the same company may be extremely different in a state with a fragile economy and a fragmented society compared to a state with a strong economy and an established governmental setup.
- Multinational companies have played a significant role in advancing globalization. These enterprises, made possible by new technology and revolutions in communication and transportation, have shaped a more global economy in addition to their significant role as “champions” of specific national economies.
- MNCs currently dominate the majority of the world’s production networks, and the distributional effects of global trade are directly influenced by their political actions and business practices. The flow of not only the economy but also ideas, innovations, and technology has become more feasible than ever, due to the extensive networks of MNCs.
- Neo-colonialist policies are being pursued by multinational corporations, which violate the sovereignty of Third World nations, seizing control of their natural resources, forcing unfair agreements on them, and obstructing the growth of their independent national economies.
- MNCs with their impact of spillover from the parent countries to the various host countries are shaping the global economy in contemporary times. Apart from their influence on local and global economies, MNCs may also have an effect on national and international politics.
- They internationalize the economy as well as influence political decision-making either by choice or unintentionally. The MNCs have grown as very significant non-state actors which can intervene across national boundaries, blurring the concept of territorial sovereignty.
- However the demerits can be restricted or avoided altogether by having tough yet encouraging regulatory environment in the field of finance, intellectual property, competition laws, labor laws, framing of contracts etc. and by ensuring speedy and just reddressal of grievances and disputes. India has been reasonably successful in its liberalization attempts since 1991 mainly due to carefully opening up only specific sectors to foreign investments on a case-by-case basis and in a phased manner and not allowing full Capital Account Convertibility. India has been able to benefit from the dynamicity of MNCs while at the same time allowing enough space for its domestic firms to grow. This is the reason why India today boasts some of its very own home grown MNCs in the form of Tata, Infosys, Reliance, Wipro etc. who are now operating not only in the emerging countries of Africa and South Asia but also in the First World countries of North America and Western Europe.
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