There is no doubt that MNCs have an immense amount of power that they can use to get what they want. Stephen Brooks’ article contends that “the globalization of production is a historically unprecedented change in the international economy” (p. 16). The enhanced significance of MNCs in the global economy is a reality where Brooks states that if we look beyond the growth rates, “the globalization of production outstrips trade as an organizing feature of international economy” (p. 17). When reading Brooks’ chapter, I realized that he is right; a lot of the trade today is a by product of the “geographic dispersion of MNC production.” A product is not made in only one country, rather, the product transcends across an array of boundaries, from country to country. These examples demonstrate the large influence that MNCs have in the world because of their operations. MNCs have the ability to subcontract, that is, they no, longer contribute to every stage in production chain and source particular stages out for other enterprises to undertake. If firms split up the production process into a variety of specific stages, such as finance, R&D, parts production and distribution, with each of the stages carried out by affiliates; what we get is a web of connections between one affiliate in a country to an affiliate in another. What is created in the global arena then is an international-infra firm division of labour. This example shows that the activities of MNCs can re-create and create the global economy, whether that be intentionally or unintentionally. In addition, the characteristics of MNCs give them immense amounts of power. The fact that MNCs possess the technology and investment capital is what makes them attractive. In fact, developing states now face a cost if they choose to isolate from MNCs. These characteristics of MNCs have pushed states to create a more favourable investment climate for global firms. Viewed in this light, MNCs are not merely economic actors, but political and social actors as well. They have the power to influence the global economy through its globalized production chains through subcontracting and interfirm alliances (where firms collaborate to minimize the cost, difficulty, and complexity of research and development). They are political actors since they are able to (usually successfully) lobby governments to have governments on their side to implement business policies that are favourable to them. IMF and World Bank uphold policies that are largely to the benefit of MNCs. MNCs are also social actors, for their actions within countries can have social impacts on the citizens (i.e. pushing people off their land to create factories, and implementing poor working policies in factories). From this perspective then, MNCs are extremely powerful actors due to the fact they have a role to play in various aspects of world society. It would be a mistake to view these entities as merely economic actors; they too, are agents of global governance that are able to have their interests heard and make their interests more important than the interests of others.
I read an article a while back from the Huffington Post that posed the following question: “Are We the People the boss of giant multinational corporations, or are they the boss of us?” (Johnson, 2016). The CEO of Apple, Tim Cook was asked about the large amounts of profits that Apple had shifted into overseas tax havens due to a loophole in US tax law that allowed them to “defer paying taxes on those profits as long as the money technically stayed outside the country” (Johnson, 2016). He said a quote that really stood out to me:
“And when we bring it back, we will pay 35 percent federal tax and then a weighted average across the states that we’re in, which is about 5 percent, so think of it as 40 percent. We’ve said at 40 percent, we’re not going to bring it back until there’s a fair rate. There’s no debate about it.”
This quote is telling; it shows you just how much power MNCs really have. If an ordinary person were to do this and were caught, there would certainly be repercussions. It demonstrates that MNCs do not have to comply to the rules if it does not suit their interests. The power of MNCs cannot be underestimated. They are global actors who have global impacts and are entities that can significantly influence other actors to align with their interests. I am not saying that all MNCs are inherently bad and that we should only think of them as lousy people who do not care about human rights. Rather, as global citizens, we should be at least aware that MNCs can be both positive and negative actors in this world.
Johnson, D. (2017, August 25). CEO Of Giant Corporation Tells US Government He’s the Boss Of Them. The Huffington Post. Retrieved from https://www.huffpost.com/entry/ceo-of-giant-corporation_b_11686542
Brooks, S. (2007). “Understanding the Globalization of Production,” In Producing Security: Multinational Corporations, Globalization, and the Changing Calculus of Conflict. Princeton: Princeton University Press.