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Example research essay topic: Multinational Corporations Multinational Companies - 1,860 words

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Cause and Effect of Globalization The economic situation of the country we live in plays an important, I would say the most important, role in our every day living. It has been proved by many sociologists that even the way we think, perceive, and behave is affected by our financial status or the status of the society we live in. As everything in this world never remains static, so is the economy it constantly develops and changes. At the end of 20 th century the world economy entered a new stage of its development globalization. Unfortunately, not only it brought many benefits, like openness of virtually every national economy to others and disappearance of many trade barriers, but also its drawbacks of high exposures to various risks and global threats. Following the rapid growth of many world economies during past 10 - 15 years, several financial crises emerged throughout the globe.

Globalization of production and investment in recent years has led to an enormous expansion of private long-term capital flows from advanced economies to developing countries, where the cost of the same type of production and its labor is much more cheaper than in the well-developed industrialized countries. There is, though, a serious disadvantage of investing in such regions high instability of local economies, and, therefore, great exposures to risks of losing the investments. While contributing greatly to economic growth and development in the countries receiving such investments, these capital flows have led to increased risks for multinational businesses, banks and the world financial system itself. Human Resource and Development of Canada found that the impact of computer-based technologies in Canadian firms, created only high-skilled jobs while most of the jobs that were eliminated were low skilled jobs. (McMullen, Skill, 1996) The fluctuations in these flows and changes in the exchange rates of the key currencies has led to a series of disasters, which involve the economies of the countries that receive the capitals.

Because of globalization world financial system has changed much more rapidly than the institutions that were created to help regulate it. The world financial environment has been transformed from that of fifteen to twenty years ago by two phenomena. The first is the emergence of powerful new economic competitors in the world economy - the Asian tigers and several of the Latin American countries - with still relatively undeveloped domestic financial systems. The second is the return of the U. S. economy and financial system to a position of pre-eminence after a quarter of a century spent struggling with inflation, budget deficits and a weak currency.

It must be absolutely necessary to mention the collapse of the communism regime. After the USSR disappeared from the political map of the world, this one sixth of the earth began representing a unique economy. Though the countries, which now form the Commonwealth of the Independent States (CIS), are weak in the economic development, they still possess the potential of rapid growth. For example, along with its huge natural resources, Russia manages to play one of the leading roles in the energy market of the world.

But without regulations and recommendations of the world community the country, which is in the desperate need of professional managers, it not only risks failing in its development, but also can tragically affect the rest of the economic world. The crisis of the late summer of 1998 proved that this chance is very possible. The number of multinational companies has risen from 7, 000 in 1970 to 37, 000 in 1992. One of the reasons for this expansion has been the fact that former national companies have been merging with those from other countries, and they maintain a dependence on the largest ones.

The economic power of multinational companies is greater than that of many national states. Their sales, for example, have risen to 5. 5 billion dollars, 90 percent of which are made in the imperialist (northern) countries and just 10 percent of which are made in the producer (southern) countries. The economic power of the multinationals gives them an unlimited political power over national states. Therefore, alarmists of globalization claim that this phenomenon is largely responsible for the deterioration of many countries economic and social conditions. There is a widespread view among them that in the dawn of the new millennium, doing business has become a different concept with a different meaning in the global village, especially among the multinational corporations.

In the era prior to globalization, the idea of doing business had just one concept and goal: profit. But now in an era of globalization, the whole idea of business has a new dimension. It is no longer just about making money, but also about competition. Every action of the multinational corporations is in lieu of competition. But this is not only due to the fact that competition is becoming a new priority for corporations, but also the conditions that globalization poses in which it encourages big corporations to compete through the openness of the economies. If any one corporation chooses not to compete, it will be forced out of the market.

For example, treaties like the North Atlantic Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico, allows multinational corporations to produce in better ways by reducing costs. For example, a Canadian company can produce in Mexico using cheaper labor and yet sell the same product in its home country at the existing local price, therefore making a profit in the process, which will give a competitive advantage. Consequently, other companies will be forced to repeat these actions, as failure to do so will result in their losing market share. The basic argument for a linkage between increased global economic integration and the rising concern for the deteriorating of the standards of employment is fairly strait-forward. As was mentioned above, if goods can be can be produced more cheaply with much lower wages in developing countries, and if those goods and services can be exported freely back to those developed countries, it is obvious that TNCs will explore there. Their own governments, mired in countless other problems, seem incapable of bringing these services to them.

Are we in America who, with one blithe stroke of our congressional pen, rendered these children jobless, willing to shoulder that burden? (Divakaruni, 2005) Globalization not only has dislocated the whole structure of the economy, but has also created a system where each region is heavily interdependent on the other. Any slight changes or downturns in one economy will have the same effect on the other. A perfect example of this notion of interdependency can be illustrated from the effects of the collapse of the Japanese house market on the Canadian Lumber Industry in 1997. Canada has always been Japans leading trading partner in lumber where an estimated 2. 6 billion board feet were shipped to Japan 1996. By introducing new information technologies, the companies are able to achieve long run economies of scale, which in turn allows them to remain competitive.

This strategy can not only increase productivity and efficiency, but also reduce time, resources, and expenses in the long run by eliminating low-skilled employees. As a result, long run job security has become an issue for workers, especially in sectors such as agriculture, service, and manufacturing where major dislocation of workers on a massive scale has been moved by the corporate sector. A major factor contributing to this job insecurity is the continuously changing skill requirements for employees with the introduction of new information technologies. Employment security in the long term is doubtful, labor costs are cut by contracting-out or by the introduction of work teams, making supervisors redundant (Leisink, 1999) The increasing importance of knowledge, technological change and associated changes in workplace practices are some of the profound changes that are contributing, either directly or indirectly to increased insecurity faced by workers. This is the village where Bill Gates lives, amassing a fortune of $ 55 billion while a third of his workforce is classified as temporary workers, and where competitors are either incorporated into the Microsoft monolith or made obsolete by the latest feat in software bundling. (Klein, 2006) Firms will eliminate low skilled workers and keep only those high skilled laborers who can cope with the demands of the new information technologies and systems. Today in global economy it seems that multinational companies are getting out of the control of the state.

Firms will locate wherever economic advantage is, they will seek to dump costs on local governments and taxpayers, they will threaten to move if challenged, and they will seek to drive down both wages and social costs. But this is just an exaggerated view of multinational firms. In fact, if such companies really pose such threats, why dont we ask whether output and employment in the internationally traded sectors of the world economy as well as in the industrialized countries are being dominated by multinational firms? The answer is that they are not. In terms of the amount of internationalized production, the share of production by multinationals is far from being a big player. Structural unemployment is unemployment due to the mismatch between the needs of employers and the skills and training of the labor force. (Wagner) Concerns that globalization will result in is a downward slide in health and food safety regulations are simply unfounded.

If anything, these standards are likely to move standards upward rather than downwards. In addition, critics claim that due the forces of globalization, new inventions and technologies, changing preferences and external shocks are constantly changing the structure of the markets. In conclusion, the claim by critics that globalization is the cause of unemployment in many developed nations like Canada and US, comes under scrutiny and questioning when it seems that the role played by multinational corporations on the labor markets is ambiguously defined. True, more and more corporations have gone multinational and moved to developing countries, but they have not taken the jobs with them. In fact, they have created employment through extensive trading between countries. Furthermore, as mentioned earlier, transnational businesses are heavily concentrated in the industrial world where most of the trading occurs.

Therefore, concern that these transnational corporations will be out of the governments control just because of a huge FDI figure is just an overly exaggerated concern. In the same respect, the view that the increase in information technology has increased or will increase unemployment is another fallacious argument by critics. Clearly, with increased technology, there will be more jobs available. But the question is whether the population is willing to accept these new jobs or not. All the issues that have been discussed have been centered on globalization. It seems that this phenomenon is truly a global phenomenon that is deteriorating our lives.

Bibliography: Divakaruni, Chitra. Live Free and Starve, 2005. Klein, Naomi. A Web of Brands. Picador, 2006.

Leisink, Peter. Globalization and Labor Relations. Massachusetts: Edgar Publishing Limited, 1999. McMullen, K, Skill and Employment Effects of Computer-Based Technology: The Results of the Working with Technology Survey III.

Ottawa: Canadian Policy Research Networks Inc. , 1996. Wagner, Helmut. Globalization and Unemployment. New York: Springer, 2000.


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