Comparison of the national income of different developing countries with the published turnover of the largest MNCs.


Essay, 2008
4 Pages, Grade: 1,3

Excerpt

Task: Compare the national income of different developing countries with the published turnover of the largest MNCs.

Make a list of political issues usually object to governmental or parliamentary work, which are impacted by the activity of MNCs (e.g. tax law) and how they are impacted (e.g. by reducing corporate taxes).

MNCs are spanning the globe and dominate the global business on the world stage. They transact more money than most of the smaller developed and almost all developing countries in terms of their annual turnover, and thus belong to the largest economies of the world.

Global 500 in 2006

Abbildung in dieser Leseprobe nicht enthalten

Source: Fortune (2007)

In comparison to the five most powerful developing countries, the five largest MNCs produced with a total of approximately 2,424,200 million employees (UNCTAD 2007) a business volume of 1,422,497 million USD – about half of the GDP of whole China, a country with more than 1,3 billion people! Relating to the world’s second most populous country India, just Exxon Mobil turned over 1/3rd of this nation’s GDP in 2006.

Most powerful Developing Countries

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Source: World Bank (2008)

In reference to the 50 Least Developed Countries, the contrast is even more salient: the MNC with the highest turnover in 2006 – Exxon Mobil – shows a nearly 55fold higher turnover than the least developed country of the world – Burkina Faso - with just 6,205 billion USD. Exxon Mobil’s business volume is higher than each single LDC’s GNP in 2006 by far.

Least Developed Countries

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Source: HDI (2008)

This demonstrates clearly the great economic power of such global players. But the numbers of turnover also give a hint on the power that MNCs can exert directly or indirectly on national government legislation. Due to their size, business volume and number of employees, domestic politics is in part strongly affected by decisions which the leading management makes. Subsequently are listed some political issues influenced by MNCs’ activities.

Tax Policy

Due to globalization, MNCs become less dependent on their choice of where to invest. “Blurred” borders promote an easier shifting of plants and branches to countries that offer better conditions concerning taxation (offshore tax havens). Tax evasion by choosing countries that offer tax advantages can hit inland revenues considerably. Therefore, countries are forced to make concessions and tax incentives (e.g. through lowering corporate taxes) in order to attract investment (see Held 1999, p. 268).

Labour policy

Large MNCs have the capacity to shift their production and technologies into those countries where they find the most favourable conditions regarding wages and working conditions. This in turn exerts pressure on governments to ease legislation such as lowering payments, non-wage labour costs (like security contributions) and increasing working time (see Held 1999, p. 278).

Social policy

In order to keep its location attractive for business, a country often has to carry out certain infrastructural measures before a company decides to invest. To save money for infrastructure installation, other measures like social basic security and welfare have to be cut.

Monetary Policy

If MNCs are going to invest in a foreign state, they can borrow the necessary sum of money in the country with the lowest interest rates. Countries are interested in attracting such large sums of money. This in turn influences indirectly a state’s monetary policy in terms of lowering interest rates, which in turn “compromises the effectiveness of national monetary policy” (Held 1999, p. 276).

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Details

Title
Comparison of the national income of different developing countries with the published turnover of the largest MNCs.
College
Free University of Berlin  (Center for Global Politics)
Course
International Political Economy
Grade
1,3
Author
Year
2008
Pages
4
Catalog Number
V180109
ISBN (eBook)
9783656027041
File size
440 KB
Language
English
Tags
developing country, Entwicklungsland, national income, Volkseinkommen, MNC, TNC, turnover
Quote paper
Natalie Züfle (Author), 2008, Comparison of the national income of different developing countries with the published turnover of the largest MNCs. , Munich, GRIN Verlag, https://www.grin.com/document/180109

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