Changes in World Economy and Room for Manoeuvre of Multinational Firms - Essay Example

How have changes in world economy since the neoliberal restructuring in 1980s through globalisation and the 2008 world crisis affected room for manoeuvre of multinational firms Name Institutional affiliation Tutor Date How have changes in world economy since the neoliberal restructuring in 1980s through globalisation and the 2008 world crisis affected room for manoeuvre of multinational firms 1.0. Introduction The changes experienced in the world economy since neoliberal restructuring in the 1980s till globalisation as well as the 2008 world crisis have cost the multinational firms a great deal in the quest for survival in the tough economic times. In the arguments by analysts in the business world, the ongoing crisis facing the globe cannot be confined to a discussion of how the countries should survive in the tough times, since the crisis has a long way to go to find lasting solutions. However, they advocate for an understanding of the variances between the countries and the policies that would have a long term solution to the crisis as compared to the short term solutions. This paper shall solely endeavour to find out how the changes in world economy since the neoliberal restructuring in 1980s through globalisation and the 2008 world crisis affected the manoeuvre of multinational firms. 2.0. Body 2.1. Neoliberal restructuring in 1980s through globalisation- dominant macro-economic framework  With the neoliberal restructuring in 1980s through globalisation, Robinson (2003) indicates that many governments held the opinion that this move would be extremely profitable for the countries. As if not enough, the IMF, World Bank and other corporations joined in the campaign of the positives of the globalisation, which saw the introduction of free markets in the globe. This is clearly the dominant macro-economic framework .With free markets, it was believed that the trade would thrive on a higher rate; thus, a collective prosperity on the global arena. Through neoliberal restructuring, it was expected that a lot of countries would be saved form poverty stricken lives by the year 2015 (Petras & Veltmeyer, 2012). In the long run, however, the case was reported to be different, since most of the policies that were enacted, ended up not being implemented by the concerned parties, especially in the third world countries. In relation to this move and the manoeuvre of multinational firms, it can be argued that the firms faced a lot of challenges from the fact that they could not manage dealing with the tough completion that the ‘New Order’ that was existent in the region (Dunning & Mucchielli, 2002; Rugman, 2002). The state, global institutions and local establishments greatly affected MNCs ability to act, since a lot of consultations had to be made prior to embarking on any move. They had to adapt to their current ideologies in the market. A lot of capital was released in the market, an interpretation of escalating trends of capitalists in the market. For the prospective multi-national firms (MNCs), stringent measures were put, to govern their operations in the market. According to Ryner (2004), neoliberal restructuring in 1980s through globalisation was solely characterised by completion between the major players in the industry. This completion was not confined on the local realm, but an international one, that was geared for the benefits of a few business tycoons. Though a lot of these firms aimed at battling up with the competition, the business environment was not too conducive for running of the businesses. On another viewpoint, the survival of the multinational firms was made difficult by the fact that the poverty levels in the globe were on the rise, since a lot of people were unemployed (Rugman, 2005). At this particular time, these multinational firms, took the measure of applying corporate franchising, that led to the producers incur huge amounts of money to survive especially in low income countries. The operations of the global corporations in the globe saw the confinement of the jobs in the hands of a few persons who were experienced by high consumption levels of imported goods. Since these groups of persons were going the effects of the depression, the multinational firms could not produce a lot of goods in the market. This is solely for the reasons that the consumers did not have the purchasing power, from the increasing poverty levels. In the long run, a lot of companies were shut down, others that were in the pipeline collapsed, especially the main plants. Others firms went bankrupt, consequently pulling out of the market completely. In the views of Mensah (2008), in order to fit in the challenging economic situations, the neoliberal restructuring in 1980s through globalisation led to the multinational firms shifting their companies to the third world countries due to the cheap labor provide in these countries. The situation, in their opinion was bound to get easier, not considering the fact that the citizens in the developed countries became unemployed. With less spending powers by these citizens meant that the goods being shipped in these countries could not be purchased. The cycle of poverty can in this case be attributed to the neoliberal restructuring in 1980s through globalisation. Competition increased, the economy stagnated, and in the long run the firms could hardly survive in the market. Some of the firms were operating at losses since the costs of production, branding their products and exportation of the goods were higher than the profits being received. The basics of neoliberal policies saw the redeployment of income to all persons, with the aim of making the ground leveled for investments, but the results turned differently. The production capacities increased which made the situation worse, as a lot of persons were getting into the market. The levels of growth, in this era decreased leading to the conclusion that the neoliberals could dilute the stagnation that was taking place in the globe. 2.2. The 2008 world crisis The world crisis is yet another crisis that had negative implications on the multinational firms on the globe. This crisis in the economic world portrayed its implications in the globe in the mid 2007 and 2008. At this particular time, Mills (2009) and United Nations (2009) indicate that the stocks in the market had deteriorated on a large scale. Moreover, a lot of financial institutions were not existent in the market any more as had shut down due to the economic conditions in the globe. In response to this move the governments of the concerned countries undertook a move to get out of the crisis by bailing out the debtors in the country. During the crisis, Peters (2010) indicates that, a lot of money was lent to the citizens, but with the number of debtors and the chances of inability foreseen by the business persons, investments in the economy minimized. This was no different for the case of multinational firms that had invested a lot of capital and energies in the industry. This is from the fact that the conditions for the investments were not good enough, especially after constant complaints by the banks on the likelihood of an occurrence due to the excessive lending (Dunning, 2002). On the side of the multinational firms, they also could not access loans since the investments financial institutions had began collapsing. With the excessive credits in the country, the number of employed persons diminished greatly, therefore, low purchasing power of the produced goods from the multinational firms. This is a clear indication of the fact that as the normal citizens and the financial institutions were going down; the multinational firms were going down too. The levels of consumption recorded a decreasing trend; a lot of energy was shifted to paying their mortgages (Arieff, 2010). The multinational firms were clearly struggling to survive as they constantly recorded losses in the market. In the long run, a great percentage of them ended up shutting down since they did not have enough funds to deal with ‘economic thunder’ and deal with the increasing losses. 3.0. Conclusion Conclusively, it is justified to argue that neoliberal restructuring in the 1980s till globalisation as well as the 2008 world crisis have cost the multinational firms a great deal in the pursuit to deal with the economic conditions. Though globalisation is beneficial in the globe, neoliberals led to creation of more and more gaps in the economy. Responsively, globalization in this case cannot be indicated to be beneficial, but has caused a lot of negatives for the globe. Globalization must also increase trade on productive environmental conditions, a complete opposite of the neoliberal ideologies. The multinational firms could hardly survive in the inflated global economy, and not until reflation policies are adopted in the globe, the case might worsen (Lundan &Dunning, 2008). The poverty levels have also been indicated to increase greatly, what should not be the case while referring to globalisation. Integration of all forms of capitalists in the economy was a sign of the run for cheap labour force and numerous attempts to fit in the global market. The entry into the market was made too easy; barriers were abolished, as well as creating environments of foreign investments, was later to witness huge losses which the states could not survive. References Arieff, A., 2010. Global Economic Crisis: Impact on Sub-Saharan Africa and Global Policy Responses. London: DIANE Publishing. Dunning, J., & Mucchielli, L., 2002. Multinational Firms: The Global-Local Dilemma. London: Routledge. Dunning, J.,2002. The Selected Essays of John H. Dunning, Volume 2. New York: Edward Elgar Publishing. Lundan , S., &Dunning, J.,2008. Multinational Enterprises and the Global Economy. New York: Edward Elgar Publishing. Mensah, J., 2008. Neoliberalism and globalization in Africa: contestations from the embattled continent. Michigan: University of Michigan. Mills, Q., 2009. The World Financial Crisis Of 2008 - 2010: What Happened, Who Is to Blame, and How to Protect Your Money. Northwestern University: Create Space. Peters, M., 2010. 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