Multinational Corporations - Benefits and Drawbacks

The economic power of the United States is one that is virtually unrivaled in the international community. This economic supremacy, which is driven in large part by multinational corporations, remains a contentious issue in terms of the obligations of these organizations to developing nations. Clearly, multinational corporations can provide developing countries with critical financial infrastructure for economic and social development. However, these institutions also bring with them relaxed codes of ethical conduct that serve to exploit the neediness of developing nations, rather than to provide the critical support necessary for countrywide economic and social development.

With the realization that multinational corporations create such a mixed bag of pros and cons for developing nations, there is a clear impetus to examine what has been written about the advantages and disadvantages of these institutions. To this end, this investigation considers what benefits and problems are engendered when multinational corporations establish themselves in developing nations. Through a careful consideration of the benefits and drawbacks of these institutions, it will be possible to identify critical businesses standards that should be used by these organizations. Further, by examining the advantages and disadvantages of multinational corporations, recommendations for what role the American government should play in policing these organizations will be identified.

Multinational Corporations-Benefits and Drawbacks

Santoro (2002) in his examination of the impact of multinational corporations (MNCs) on developing nations argues that most of what has been written about the negative impact of these institutions is based more on anecdote than on empirical evidence. According to this author, "" (p. 94). Although these allegations remain the central arguments posited by critics and their analysis of multinational corporations, Santoro notes that a study conducted by economists found that in most cases, multinational organizations have a positive impact on developing nations overall. To illustrate this point Santoro notes the case of China: "In their study of 118 business ventures in China...Christmann and Taylor find that MNCs and their suppliers were more likely than local firms to comply with local regulations and to adopt internationally recognized environmental management standards such as ISO 14000" (p. 94).

Although Santoro is able to effectively argue that multinational corporations are having a positive impact on developing countries-in terms of providing sustainable economic and environmental development-other authors examining the same issue have not drawn the same conclusions. For example, Youngelson-Neal, Neal and Fried (2001) contend that multinational corporations are having a negative impact on the development of local cultures. As noted by these scholars, when multinational organizations infiltrate a developing country, the very context of local economic development changes. As a direct result the basic economic infrastructure of the country changes along with significant parts of local culture and tradition. In an effort to illustrate how this process occurs, Youngelson-Neal and coworkers examine the issue of economies of scale in the Canadian media.

As noted by Youngelson-Neal, Neal and Fried the growth of Canada's economy as a direct result of globalization has placed notable strain on Canada's media outlets. Although these outlets have pushed for more economic stability, the reality is that many Canadian media outlets have found that it is cheaper to import media-magazines, syndicated newspapers and cable shows-from the United States. As a result of this situation, Canada is losing local cultural variations in its media that makes it unique from the US. As the infiltration of US media into Canada occurs, Canada has begun to lose some of its cultural variations. Over the course of time, there is concern that Canadian culture will become Americanized and in terms of the global community, there will be no real differences between the US and Canada.

The process of cultural erosion that is occurring in Canada is a process that is occurring all over the globe. As multinational corporations from the US continue to infiltrate developing countries, the push toward a free market economy is eroding traditional cultural infrastructure that is seen as critical for maintaining global diversity. Despite this central issue however, it is evident that the process of globalization does afford developing nations the opportunity to improve overall standards of living through the adoption of technology and modernization. Thus, the true dichotomy created in this case is one that poses a unique challenge for those seeking to reduce the ill-effects of multinational corporations in developing nations.

The Role of the American Government

When the overall impact of multinational corporations on developing nations is summarized, it seems reasonable to argue that several decades of globalization has afforded MNCs the information and data necessary to understand the ethical issues that must be addressed in the context of undertaking business operations in developing countries. As noted by Santoro (2002), most MNCs have developed clear ethical standards and guidelines for operations in developing nations. Despite this however, it is evident that there are still violations of ethics principles by some organizations. With this in mind, it seems reasonable to argue that the ethical standards used by MNCs should be established by the American government as statues for the governance of MNCs in developing nations. By putting laws into effect, MNCs will have no choice but to ensure that all actions by these organizations are ethically sound.

In addition to creating clear rule for operation, the American government should consider some degree of regulation with respect to foreign investment. For instance, if Wal-Mart wishes to begin operations in India, the American government should limit the organization's amount of investment in the country. This will help ensure that Wal-Mart does not fully infiltrate and monopolize the retail industry in India. By preventing a monopoly, the American government would be able to ensure that US domination of economic and cultural infrastructure does not occur. In short, limiting foreign operations of multinational corporations would help ensure that local diversity is not completely eroded. In addition, by limiting the investment capabilities of MNCs, the American government could work toward building greater political strength by working with governments of developing nations, rather than just steamrollering them.

Conclusion

When the specific impact of multinational corporations on developing nations is examined, it seems reasonable to argue that overall, MNCs are providing notable benefits to the international community. In addition to improving the standard of living in many developing nations, these organizations are also providing a strong source of economic development. Despite these benefits however, it is clear that regardless of the benefits, these organizations are eroding cultural diversity in all regions of the globe. In order to prevent the complete and irrevocable loss of cultural diversity in the international community there are definitive steps that the American government can take to mitigate this situation. By ensuring that ethical statues are followed by all multinational organizations and further by limiting foreign investment of MNCs in developing nations, the US government can make notable strides toward reducing the cultural erosion that is occurring as a result of globalization. In the end, these steps will help preserve the unique character of the global community.

References

Santoro, M. (2002). Should LDCs love MNCs? Foreign Policy, 128, 94-96.

Youngelson-Neal, H., Neal, A.G., & Fried, J. (2001). Global and local culture in the 21^st century. Journal of American & Comparative Cultures, 24(3/4), 31-36.