Multinational Corporations: Good or Bad?

Readers Question: List and briefly describe the positive and negative attributes of multinational corporations.

Benefits of Multinational Corporations

• Create wealth and jobs around the world.
• Their size enables them to Benefit from Economies of scale enabling lower costs and prices for consumers.
• Large Profits can be used for research & Development. For example, oil exploration is costly and risky which could only be taken out because they make high profits.
• Ensure minimum standards. The success of multinationals is often because consumers like to buy goods and services where they can rely on minimum standards. i.e. if you visit any country you know that the Starbucks coffee shop will give something you are fairly familiar with. It may not be the best coffee in the district, but, it won’t be the worst. People like the security of knowing what to expect.

Criticisms of Multinational Coporations

• Companies interested in profit at the expense of the consumer. Multinational companies often have monopoly power which enables them to make excess profit. For example, Shell made profits of £14bn last year
• Their market dominance makes it difficult for local small firms to thrive. For example, it is argued that big supermarkets are squeezing the margins of local corner shops leading to less diversity.
• In the pursuit of profit, Multinational companies often contribute to pollution and use of non renewable resources which is putting the environment under threat.
• MNCs have been criticised for using ’slave labour’ workers who are paid a pittance by Western standards

Evaluation

• Some criticisms of MNCs may be due to other issues. For example, the fact MNCs pollute is perhaps a failure of government regulation. Also, small firms can pollute just as much.
• MNCs may pay low wages by western standards but, this is better than the alternatives of not having a job at all.