Discuss whether Transnational corparations are good or bad for a nation state, its citizens and the economy as whole.

Essay by mbirk1College, UndergraduateD+, March 2003

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To be able to discuss the above questions, it is necessary to understand what is meant by transnational corporations (TNCs). TNCs are generally characterised as a company that have modes of operation in two or more countries across the globe. Dicken (1992) gave a more definitive characterization,

"TNCs maximise the comparative advantage between countries, profiting from the differences in factor endowments, wage rates, market conditions and the political and fiscal regimes."

On a more basic level, this means that TNCs tend to operate within countries where there are little restrictions on working conditions subsequently profits can be maximised through low wages and not having to provide the benefits that some countries see as basic. TNCs have a propensity to operate in countries that are flexible enough to be able to move their businesses elsewhere on a global scale. Transnational corporations normally operate at a high level that the global economic and social effect that they can have upon a country is enormously substantial; a fact to bear in mind is that the 50 largest TNCs have a larger economic value than the gross domestic product (GDP) of the 130 poorest states.

TNCs employ in excess of 6 million people worldwide and own 20% of foreign assets and have total foreign sales in excess of 2 trillion us dollars. These figure give a good understanding of how important TNCs are in today's society and the impact that TNCs have on globalisation. Good examples of TNCs are General motors, Ford, BP and Microsoft. These large companies also have a tendency to have more than one line of business, for example, Enron, formerly one of the world's largest TNCs until it collapsed last year, markets electricity and natural gas, delivers energy and other physical commodities, and provides financial and risk management services to...