Do the Multinational Corporations Harm the Developing Countries - Essay Example

Do The Multinational Corporations Harm The Developing Countries? Multinational corporations (MNCs) are business entities organized with a given country while creating various affiliate firms in other countries worldwide. Globalization and industrialization have revolutionized the entire world and today, multinational corporations operate even in poorer countries. MNCs are located in developed countries and they seek to expand their activities in developing countries because of the advantages they are entitled to when they operate in poor countries such as cheaper labor and resources among others. These corporations lower the costs by taking advantage of relatively cheap and skilled labor forces in developing countries. In the operations of MNCs, developing countries are the host countries and so many people have questioned the benefits of hosting these companies. Those supporting and opposing the operations of multinational cooperation in developing countries argue based on the employment and the working conditions of the locals; foreign direct investment; introduction of sophisticated managing strategies; and transfer of new sophisticated technologies among others. MNCs either introduce valuable and productive tools to developing nations which benefits the poor countries’ economies, creates employment opportunities and creates a skillful workforce, or MNCs exploits the developing countries because they mainly focus on how to maximize their profits. Multinationals can cause more negative consequences as compared to the positive impacts on developing countries. Many individuals from these poor countries have accused multinationals of pretending to contribute to the development of the country while in the real sense they are only interest in cheap labor (Muller 163). The production process is disintegrated and takes place in various nations globally but the management of the production process remains in the corporation’s headquarters situated in the developed nations (Muller 160). Firstly, the governments in most developing countries are very weak and by this, they create room for these corporations to completely exploit the standards of domestic labor. In most cases, these multinationals undermine governmental regulations through attempts to reduce national investment restrictions, lower consumer standards, and the elimination of unitary tax policies. Many developing countries are forced to change their foreign investment code so as to attract more multinational corporate involvement in their economies. However, the multinational investment can prevent economic development in developing nations based on the kind of infrastructure required by these corporations. Moreover, multinational corporations also interfere with the political policies of the host country and this includes creating political uncertainty and military coup that may negatively affect the country for decades. Scholars suggest that the level of economic development in developing countries affects the impact of multinationals on polity. More so, they penetrate areas with adequate natural resources and fully exploit these resources because most developing countries do not have the necessary finance to carry out highly expensive resource exploration. Secondly, many popular multinational corporations have been accused of abusing human rights in poor counties where they have set up firms. In addition, these corporations have forced the local communities and indigenous populations out of their land so as to utilize the land for their profit maximizing purposes. Further, MNCs have used the militia to suppress those who are demonstrating against their commercial activities in the country. As a result, these countries experience violence and increased panic and instability. Cases of underpayment or virtual slave labor are common in developing nations where MNCs operates. These companies expect the indigenous population to worker for them and help them maximize their profits but they reward them low wages that cannot even help them escape poverty cycle. More so, there are many cases of unsafe working conditions in which the locals are at risk of developing serious health conditions in the process. It is true that these corporations help in creating job opportunities for many locals but again, these people work in terrible conditions and receive low wages for their labor. This way, they are exploited by these multinationals who are only interested in maximizing their profits and not the well-being of their workers. They focus on how to make abnormal profits and so they see exploitation and oppression as the best way to help them achieve this. In the end, these individuals remain trapped in the vicious cycle of poverty because there is limited scope to escape from it and improve their social and economic conditions. Actually, international protest against multinationals has been experienced as these companies have been accused of exploiting women from the developing countries (Muller 163). Additionally, the indigenous population lives in a persistent fear of being displaced from their land by multinationals and so they are stressed as these corporations continue to emerge in their countries. Lastly, the industrial practices of multinational corporations cause serious environmental implications for these developing nations. The operations of these firms affect the environment negatively, for instance, these companies create great externalities via land erosion, air and water pollution, deforestation as well as exploitation of the available natural resources among others. The anti-MNCs individuals accuse MNCs of exploiting both the indigenous population and the natural resources in The Third World countries. Agreeably, the extraction of the natural resources leads to great economic losses though environmental degradation including soil erosion, pollution of water supplies, and desertification among others. As a result, there will be infertile soil left and this will affect food production and many locals will lose their homes, forests flooded, and water sources polluted with toxic wastes among others. In the developing nations, water sources are in most cases polluted because of dumping industrial waste and this has adverse effects on individuals’ health and that of other organisms. The Shell Oil in Nigeria has been cited as an example of environmental degradation caused by the practices of multinationals. The Nigeria Niger Delta is a place characterized by conflicts between the host communities and the multinational oil companies invading the region. Nowadays, a mechanism called Corporate Social Responsibility (CSR) has been developed to enable multinationals have a positive impact on the developing countries where they operate. In addition, multinational operations do not help developing countries because their activities reduce the autonomy of the country and the local and increases dependency. The emergence of multinational companies in developing countries has led to high dependency rate in these countries and this has negatively affected the economy of these poor countries. Nevertheless, multinationals corporations may introduce high technologies that cannot be used appropriately and may as well increases cases of unemployment as many works will be done technologically and no labor will be required. So Third World countries are also concerned with the appropriateness of the technology being transferred to them as a foreign investment. On the contrary, many governments in the Third World countries have decided to work with multinational corporations and have accepted multinational investment because it results to many economic benefits. For instance, the corporate taxes that these corporations pay greatly contribute to increased government revenue. More so, MNCs play a leading role in developing countries by providing better public goods and improved infrastructure in these countries. Furthermore, these corporations provide employment opportunities for the local individuals. Advocates of multinationals argue that these companies have generated many employment opportunities worldwide. More so, these firms create many job opportunities in the manufacturing industries particularly those dealing with technologies. Those supporting the practices of multinational companies claim that these corporations provide good jobs with higher wages, safer working conditions and better benefits packers as compared to local firms. However, these companies may sometimes provide lower wages relative to the productivity of workers. Advocates for MNCs practices in developing nations claim that these corporations have enabled these countries to achieve sustainable development. Corporate accountability requires multinationals to be accountable to the society that they are serving and operating in. Those backing the MNCs argue that these companies operate in a socially responsible way by providing required capital in poor countries and job opportunities among other benefits. These multinationals have to respect the need to improve governmental and individuals’ mechanisms to enhance the accountability of businesses and industries. In conclusion, the role played by multinationals is underappreciated because they have given developing countries necessary capital, created job opportunities, and introduced sophisticated technologies and skills required in improving economy. On one hand, MNCs are very beneficial to developing countries as they improve the economy of these countries though provision of capital, technology, skills as well as exports. On the other hand, MNCs have been accused of exploiting the locals and the developing countries since their practices are driven by the aim of maximizing gains. They exploit natural resources and degrade the environment and even though these multinationals create job opportunities for the locals, they rewards them with very low wages and these locals also work in poor working conditions. Multinationals do sign agreements to respect the interests of the locals and maintain ethical standards, but they fail to do this and they lack transparency in their operations. In order to eradicate the adverse effects of corporate practices in the developing nations, there is need to establish a strong regulatory framework. Multinationals need to be forced to improve the working conditions of the locals and labor standards. They also need to ensure that their operations does not abuse human rights and damage the environment. Moreover, governments need pay more attention to the violation of human rights by these corporations and enforce effective policies in eliminating abusive power of multinational corporations in the Third World countries. Works Cited Muller, Gilbert H. The New World Reader: Thinking and Writing About the Global Community. Boston: Houghton Mifflin company, 2007. Print. Read More