Coursework 1: MNCs, Governments, and Economic Power Dynamics

This essay provides a critical discussion on the power dynamics between multinational corporations (MNCs) and national governments, examining the influence each exerts on the other within the context of globalization and economic liberalization. It explores how MNCs leverage foreign direct investment and foreign institutional investment, impacting national economies and influencing government decisions. The essay highlights the arguments that MNCs can influence government policies through lobbying and financial resources, potentially exceeding the power of national governments. However, it also acknowledges the government's ability to regulate MNCs and the dependence of MNCs on national economies. The essay analyzes the impact of MNCs on job creation, economic growth, and the role of legal and political factors in their success, using the PESTLE framework. The conclusion emphasizes the need for governments to monitor MNC operations to prevent unethical practices and protect societal interests. The essay references various academic sources to support its arguments.

ECONOMICS

Critical discussion on: “Multinational corporations are more powerful than national
governments”.
The essay brings out a critical discussion on the way multinational corporations started
playing main role in running the national economies. Liberalisation and globalisation has
widened the scope of power imposed by multinational corporations, as it enables foreign
direct investment and foreign institutional investment. This essay states both how government
influences the operations of the MNCs and on the other hand, how a MNC or group of
powerful MNCs affects the government decisions. Form the current situation, it can be seen
that national government has no longer power enforcement while managing its domestic
economies. The purpose of the essay is to critically discuss the impact of government and
business on each other (Caner, 2015).
A MNC (multinational company) is a large corporation, which is incorporated in one country
but operates globally and also sells its goods and services in other countries (Moyo, 2017).
Two main characteristics are large sized and operating worldwide who is centrally controlled
by parent company. Existence of multinational company creates jobs in the world. Inward
investment in the developing countries through multinationals creates foreign currency. The
size and scale of operations facilitate them to get benefit from economies of scale that enables
lower prices for consumers and average costs (Moyo, 2017). While evaluating the impact of
MNCs on the government, it can be seen that countries are well known to be company`s
legislative subsidiaries for the organisation. It is often said that one who has gold makes the
rules. These days, corporations have money and resources in order to set the legislative
agenda in many countries by passing laws that can suit their needs. In other sense, it can be
said that corporations are more powerful than country but still they can still lobby those
government to get the preferences for the laws so ultimately, power lies in the hands of states.

From the realistic perspective view, power comes from a gun in the hand until corporations
have their own army forces. Another instance exemplifies that corporations are more
powerful than China. They control corporations and the activities in their country
demonstrate which is still possible for the states to become more powerful (Moyo, 2017).
Companies have top government executives on their payrolls. The companies dictate
government policies even when government take action because it the companies first ask the
government to do so but behind the scenes, it executes and do everything and lobby changes
for the policies so that it can benefit them and ask them to rank the officials to lobby with
officials of other countries. Several reasons proves that MNCs are powerful than countries.
Money makes world go round. Rich and wealthy people often run large companies and this is
the reason why no outright comes into play. If a rich, popular, charismatic person tries to
stand in politics, he/she easily get the power and position or a political seat because they have
enough funds to support who stands in elections. People in power and position helps the
MNCs to reach at the top position. Security contracting and spacious private operations
already exist in place. Large corporate entities are able to mass large armies, hire private
soldiers, and finally equip them to sustain without worrying about the public outrage and for
unpredictable spending. New space flight and private satellites is not allowed without
surveillance and communications that ultimately rival the government (Elmi, Kerosi, and
Tirimba, 2015). Corporations are not very powerful because they will associate the financial
spiral turning downwards, which further may generate destroying effects for the individual
global and national economies that does not prove that companies are more powerful than
countries. Although, company is able to create economic collapse but they can not wholly
affect the public policy or control the government in the country directly that certainly have
various shades of conspiracy written all around it. Corporations have an omnipresent in the
world but claims they are more powerful than other individual nations that met with complete

military resistance. Corporations can never be very powerful as their indeed entities who
holds a lot of power. It does not mean to deny the power of corporations or the government
but at last they cannot be separate entities or the standing army of any sort. Countries often
rely on multinational corporations to help the local businesses to operate internationally,
which affect how actually country operates (Elmi, Kerosi, and Tirimba, 2015). When
organisations branch out through FDI (foreign direct investment), they provide employment
and create more jobs through their operations. They shortly inflates their financial conditions.
Countries are often at mercy for the corporations because they are much power to thrive and
make their surrounding by their own (Zhang et al., 2018). Moreover, the countries can not
operate effectively and efficiently without perpetual business that is brought by corporations
in other countries. Moreover, it is important to know that once the company accomplish all
the legal compliances, it can create a good reputation in front of government and legal
department and can enjoy advantages to some rules to some extent (Bristy, 2015). Apart from
this, the role of MNC differs from country to country as it pace up the economic growth as
inward FDI provides external financing in order to compensate the inadequate amount of
local savings and aids foreign. While evaluating the FDI reports in the developing countries,
it is seen that the countries have liberalised the great amount of gross fixed capital formation
and balances of payment for companies (Mehta, and Rajan, 2017). For example- huge loan
from outskirts or outside by the MNCs will lead to huge difference in the national economy
as capital usage of these loans will leads to increase in efficiency of labour. MNC have
created employment as it plays an important role in creating new kind of jobs that further
contributes to generation of employment, which further increases quality of life in developing
countries. For example- exporting organisations pay wages at least 58 percent higher than
non-exporting organisations, which is almost 80 percent of sales that are used for exporting

which a foreign-owned plant paid 33 percent more for blue-collar labours and its 70 percent
of the white-collar labourers locally own the firms in Indonesia (Chin, 2010).
Conclusion
From the above discussion, it can be concluded that companies influence the government
decisions. Legal factors and political factors affect the success of the organisation. While
undertaking the environmental analysis of the company and driving it towards the success of
the organisation, the companies undertake PESTLE framework in which Political and legal
factors have the significant role. Government needs to keep a check especially when
companies start dominating the country in the wrong way either through unethical way or
through disrupting the society. Therefore, the country legislation has to keep a check on the
operations of the company through binding it in legal compliances such as labour act,
mandatory CSR fulfilling.

References
Bristy, J.F., 2015. ENVIRONMENTALAND SOCIAL RISK ANALYSISOF
BANGLADESH. International Journal of Managing Value and Supply Chains, 6(1), p.93.
Caner B. (2015). ‘Bargaining with Multinationals: Why State Capacity Matters’, New
Political Economy, 20:1, 63-84
Chin, G. T. (2010). China's Automotive Modernization : The Party-state and Multinational
Corporations, Palgrave Macmillan Limited.
Elmi, M.A., Kerosi, E. and Tirimba, O.I., 2015. Relationship between Tax Compliance
Barriers and Government’s Revenue Generation at Gobonimo Market in Somaliland.
Liu, Z., 2015. Do We Need Local Ownership Requirement for Foreign Direct Investment?
Evidence from Chinese Firms. National University of Singapore.
Mehta, Y. and Rajan, A.J., 2017. Manufacturing sectors in India: outlook and challenges.
Procedia engineering, 174, pp.90-104.
Moyo, N., 2017. Corporate social responsibilty: steel worx's hidden hand to suffering in
South Africa's steel valley (Doctoral dissertation).
Zhang, R.J., Liu, J.H., Milojev, P., Jung, J., Wang, S.F., Xie, T., Choi, H.S., Yamaguchi, S.
and Morio, H., 2018. The structure of trust as a reflection of culture and institutional power
structure: Evidence from four East Asian societies. Asian Journal of Social Psychology.