Dyukova A.*, PhD in Economics Vlasenko M. **

*Bellerbys College London (the United Kingdom),

**Oles Honchar Dnipropetrovsk National University (Ukraine)

THE IMPACT OF TRANSNATIONAL CORPORATIONS ON THE GLOBAL ECONOMY IN TERMS OF GLOBALISATION

 

Globalization is the process by which the world is increasingly interconnected as a result of a massive increase in trade and cultural exchanges [1]. Economic globalization is based on cross-border expansion of the market economy, which proclaimed free trade. This resulted in the appearance of transnational corporations. Transnational corporations (hereinafter referred to TNCs) are actors who can carry on business for profit in more than one country. Statistical data suggests that the 500 largest companies control more than two thirds of world trade. While 100 companies are estimated at approximately one-third go foreign direct investment overall (hereinafter FDI) [4].

 

Fig. 1. IPAs selection of the most promising investors (FDI) in 2013-2015 [2]

 

Promoting and facilitating FDI can create jobs and other benefits to local economies. Thus, most governments are implementing investment promotion agencies (IPAs) specifically mandated to attract FDI.

IPAs largely consider TNCs from the developed countries as the most potential sources of FDI in the medium term, although developing countries are still increasingly important for foreign investors. Indeed, 60 percent of IPA respondents placed China to the first grade of the rank as the most promising source of FDI in 2015, largely due to the rapid increase in FDI in recent years. The United States of America, Germany, the United Kingdom of Great Britain and Northern Ireland, Japan and France are classified as investors from the developed countries and the most promising economies, but their ongoing role in global FDI flows is being underscored. India, Republic of Korea, the Russian Federation, the United Arab Emirates and Turkey (for the first time) are also considered major sources of FDI from the developing countries [2].

There is a viewpoint that economic globalization through TNCs is the most is the most reliable means of reducing poverty. Many TNCs invest in developing countries (LDCs) because of low cost of operation there [2]. In the 2013 developing economies received 53,6% from overall FDI inflows. This increases the number of new jobs consequently skills and reduces the high level of unemployment in such countries as Chad, China, Jamaica [4]. In general, a country benefits from inward investment, as it brings wealth and foreign currency extra money, which can be spent on improvement in humanitarian sector and infrastructure. Asian Tigers are major beneficiaries: Singapore, Hong-Kong, Taiwan fully embraced globalization by welcoming such TCNs as Nike [5].

The contrary viewpoint is that TNCs just explore undeveloped countries by using cheap raw materials and cheap labor force. As the form of neocolonialism, economic globalization forces poor countries to open up their markets and allow their resources to be plundered by rich states [3]. Usually TNCs may operate in less developed countries in a way that would not be allowed in the more developed countries. This includes environmental pollutions, unsafe working conditions, ignoring human rights, for example, by employing child labor. In the 2013 there were 9.2 million (8.4%) of children involved in the child labor in the Middle East and North Africa [4]. It also should be mentioned that many TNCs are engaged in illegal activities such as tax avoidance, bribes to local official etc. So the conclusion can be made that TNCs can manipulate with the less developed countries economic status and ignore local concerns.

It comes from the state policy, which is driven by the need to attract inward investment. It can be considered that economic globalization diminishes the influence of the nation government and therefore restricts public accountability. Therefore, such loss of economic control makes states susceptible to decisions that are made in faraway places and TNCs do not need to take local interests into consideration.

 

List of References:

1. Global Politics / A. Watters, R. Marston, D. Cleaver, Foreman C. Anforme Ltd, 2008. 90 p.

2. World investment prospects survey 20132015 [Electronic resource]. United Nations Conference on Trade and Development, 2013. Available online at: http://unctad.org/en/PublicationsLibrary/webdiaeia2013d9_en.pdf.

3. Brewer Q. Economics / Q. Brewer.

4. As&A Level Economics (Oxford Revision Guide) / A. Gillespie // Oxford University Press, 2008. 121 p.

5. Introduction to International Relations / J. Grieco, G. J. Ikenberry, M. Mastanduno. Palgrave MacMillan, 2014. 576 p.