# 1.1: Economics- The power of multinational corporations - Mathematics

Critics of globalization often make the following comparison [25] to prove the excessive power of multinational corporations:

In Nigeria, a relatively economically strong country, the GDP [gross domestic product] is $99 billion. The net worth of Exxon is$119 billion. “When multi- nationals have a net worth higher than the GDP of the country in which they operate, what kind of power relationship are we talking about?” asks Laura Morosini.

Before continuing, explore the following question:

Question

What is the most egregious fault in the comparison between Exxon and Nigeria?

The field is competitive, but one fault stands out. It becomes evident after unpacking the meaning of GDP. A GDP of $99 billion is shorthand for a monetary flow of$99 billion per year. A year, which is the time for the earth to travel around the sun, is an astronomical phenomenon that has been arbitrarily chosen for measuring a social phenomenon namely, monetary flow.

Suppose instead that economists had chosen the decade as the unit of time for measuring GDP. Then Nigeria’s GDP (assuming the flow remains steady from year to year) would be roughly $1 trillion per decade and be reported as$1 trillion. Now Nigeria towers over Exxon, whose puny assets are a mere one-tenth of Nigeria’s GDP. To deduce the opposite conclusion, suppose the week were the unit of time for measuring GDP. Nigeria’s GDP becomes $2 billion per week, reported as$2 billion. Now puny Nigeria stands helpless before the mighty Exxon, 50-fold larger than Nigeria.

A valid economic argument cannot reach a conclusion that depends on the astronomical phenomenon chosen to measure time. The mistake lies in comparing incomparable quantities. Net worth is an amount: It has dimensions of money and is typically measured in units of dollars. GDP, however, is a flow or rate: It has dimensions of money per time and typical units of dollars per year. (A dimension is general and independent of the system of measurement, whereas the unit is how that dimension is measured in a particular system.) Comparing net worth to GDP compares a monetary amount to a monetary flow. Because their dimensions differ, the comparison is a category mistake [39] and is therefore guaranteed to generate nonsense.

Problem 1.1 Units or dimensions?

Are meters, kilograms, and seconds units or dimensions? What about energy, charge, power, and force?

A similarly flawed comparison is length per time (speed) versus length: “I walk 1.5 m s−1—much smaller than the Empire State building in New York, which is 300 m high.” It is nonsense. To produce the opposite but still nonsense conclusion, measure time in hours: “I walk 5400m/hr— much larger than the Empire State building, which is 300 m high.”

I often see comparisons of corporate and national power similar to our Nigeria–Exxon example. I once wrote to one author explaining that I sympathized with his conclusion but that his argument contained a fatal dimensional mistake. He replied that I had made an interesting point but that the numerical comparison showing the country’s weakness was stronger as he had written it, so he was leaving it unchanged!

A dimensionally valid comparison would compare like with like: either Nigeria’s GDP with Exxon’s revenues, or Exxon’s net worth with Nige- ria’s net worth. Because net worths of countries are not often tabulated, whereas corporate revenues are widely available, try comparing Exxon’s annual revenues with Nigeria’s GDP. By 2006, Exxon had become Exxon Mobil with annual revenues of roughly $350 billion—almost twice Nige- ria’s 2006 GDP of$200 billion. This valid comparison is stronger than the flawed one, so retaining the flawed comparison was not even expedient!

That compared quantities must have identical dimensions is a necessary condition for making valid comparisons, but it is not sufficient. A costly illustration is the 1999 Mars Climate Orbiter (MCO), which crashed into the surface of Mars rather than slipping into orbit around it. The cause, according to the Mishap Investigation Board (MIB), was a mismatch between English and metric units [26, p. 6]:

The MCO MIB has determined that the root cause for the loss of the MCO spacecraft was the failure to use metric units in the coding of a ground software file, Small Forces, used in trajectory models. Specifically, thruster performance data in English units instead of metric units was used in the software application code titled SM_FORCES (small forces). A file called An- gular Momentum Desaturation (AMD) contained the output data from the SM_FORCES software. The data in the AMD file was required to be in metric units per existing software interface documentation, and the trajectory modelers assumed the data was provided in metric units per the requirements.

Make sure to mind your dimensions and units.

Look for everyday comparisons—for example, on the news, in the newspaper, or on the Internet—that are dimensionally faulty.

## Multinational Corporations: Myths and Facts

Many religious leaders are increasingly troubled by the growing presence of multinational corporations around the world, especially in poor and developing nations. In truth, such concern is warranted, but only if the allegations against multinational corporations are true. Such allegations include the charge that profit-motivated multinational corporations are engaging in destructive competition and insidious plots to economically and politically manipulate entire economies. Further, multinational corporations are perceived to be methodically eliminating domestic firms in order to exploit their monopoly powers, exporting high-wage jobs to low-wage countries, undermining the world’s environment, augmenting the external debt problems of developing countries, perpetuating world poverty, and exploiting child labor. But are such allegations, in fact, true? Religious leaders should examine the data so that they can draw reasonable conclusions about the impact of multinational corporations. Such an examination reveals that multinational corporations, in fact, have actualized numerous moral goals: the advancement of human rights, the improvement in the world environment, and, most importantly, the reduction of world poverty rates.

Critics of multinational corporations often profess to have a higher moral vision and to be pursuing a world with laudable goals of just wages and a clean environment. On the other hand, the extreme left conveniently ignores the socially destructive behavior of those economies that rely heavily on governmental regulations and state-operated monopolistic enterprises. These economies have incurred extreme rates of poverty, repressed human rights, and excessive environmental damage. For reasons mentioned below, the problem countries have almost no multinational corporations and are concentrated in sub-Saharan Africa, South Asia, North Africa, and the Middle East.

Paradoxically, the extreme left is hindering the momentum to decrease world poverty rates and is deaf to the continued suffering of the extreme poor. The left is quick to offer welfare to developing countries but, unfortunately, this hinders poor nations from becoming self-supporting. The extreme right, on the other hand, offers no charity and joins the left in denouncing trade.

To be open minded, we must also consider the views of the developing countries, which almost in unison believe that the movement against multinational corporations will not only hinder their economic progress but will also most likely reverse it. As Nobel Peace Prize Laureate and former president of Costa Rica, Oskar Arias, exclaimed at an August 2000 lecture to United Nations delegates and heads of state, “We [the developing countries] don’t want your [the developed countries] handouts we want the right to sell our products in world markets!” President Arias is referring to a right possessed by all developed countries and purposely denied to almost all developing countries for more than five decades.

Now let’s address some of the myths that critics of multinational corporations claim to be facts. This article does not, however, deny that there are specific cases that reflect badly on all multinational corporations (Nike’s past problems with child labor and other media evidence of the wanton disregard of environmental responsibilities are but two examples). Such cases, however, are rare, given that there are over 60,000 multinational corporations.

Monolithic Monopoly Power?

Competition is not destructive it has compelled multinational corporations to provide the world with an immense diversity of high-quality and low-priced products. Competition, given free trade, delivers mutually beneficial gains from exchange and sparks the collaborative effort of all nations to produce commodities efficiently. As a consequence, competition improves world welfare while dampening the spirit of nationalism and, thus, promoting world peace.

Has the monopoly power of multinational corporations grown? Granted, some multinational corporations are very large: As of 1998, they produced 25 percent of global output, and, in 1997, the top one hundred firms controlled 16 percent of the world’s productive assets, and the top three hundred controlled 25 percent. Firm size and market power, however, are dynamic. The Wall Street Journal annually surveys the world’s one hundred largest public companies ranked by market value. Comparing the rankings in 1999 to that of 1990, there were five new firms (Microsoft, Wal-Mart, Cisco Systems, Lucent Technologies, and Intel) in the top ten, and four of these firms were not in the top one hundred in 1990. More remarkably, there were sixty-six new members in the 1999 list. Similarly, the United Nations tracks the one hundred largest nonfinancial multinational corporations ranked by foreign assets. Although not as dramatic as the change in the Wall Street Journal rankings, the United Nations reported a 25 percent change in the composition of its top one hundred from 1990 to 1997. According to the conventional wisdom, an increase in monopoly power should also lead to fewer and larger multinational corporations, but, as reported by the United Nations, the number of multinational corporations tripled from 1988 to 1997.

Has the increase in foreign direct investment by multinational corporations harmed domestic investment? (Foreign direct investment occurs whenever a firm locates a factory abroad or purchases more than ten percent of an existing domestic firm.) The United Nations’ World Investment Report 1999 cited two recent studies. The first, by Eduardo Borensztein, José de Gregorio, and Jong-Wha Lee, found that an additional dollar of foreign direct investment increases domestic investment in a sample of sixty-nine developing countries by a factor of 1.5 to 2.3. The second study, conducted by the United Nations, reached the same conclusion as the first for countries in Asia, but it offered some disputable evidence of a possible negative impact on Latin America.

Notably, coordinated international manipulations of markets are rarely conducted by large multinational corporations but are almost always government supported and directed (for example, opec , the Association of Coffee Producing Countries, and the Cocoa Producers Alliance). Further, government-sponsored cartels are not concerned about the poor. In the 1970s, opec’s price distortions were a major source not only of world recession but also of the increased external debt and poverty of developing countries. Free markets protect the poor from the prolonged abuses of cartels.

Rapacious Economic Exploitation?

Concerns about multinational corporation infringements on national sovereignty lack substance. Multinational corporations do not operate with immunity they are heavily monitored both in the United States and abroad. From 1991 to 1998, according to the United Nations, there were 895 new foreign direct investment regulations enacted by more than sixty countries.

Further, multinationals are not siphoning jobs from high- to low-wage countries in fact, they tend to preserve high-wage jobs in developed countries in 1998, 75 percent of foreign direct investment went to developed countries. Besides, labor costs alone do not determine where multinational corporations base their affiliates other variables–such as political stability, infrastructure, education levels, future market potential, taxes, and governmental regulations–are more decisive. In 1998, multinational corporations had eighty-six million employees–nineteen million in developing countries– and were also responsible, indirectly, for another 100 million jobs. The jobs created abroad also tend to pay far more than the domestic employers do. Based on an August 4 2000, discussion with both the general manager of Chesterton Petty and the senior manager of Price Waterhouse Coopers in Beijing, their Chinese employees average approximately $10,000 per year–a small fortune in China, where an upper-middle-class full professor or medical doctor brings home slightly more than$200 per month in the city of Jinan.

Evidence supplied by the World Bank and United Nations strongly suggests that multinational corporations are a key factor in the large improvement in welfare that has occurred in developing countries over the last forty years. In sub-Saharan Africa and South Asia, where the presence of multinational corporations is negligible, severe poverty rates persist and show little sign of improvement.

For example, from 1980 to 1998, world child labor rates (the percentage of children working between the ages of ten and fourteen) tumbled from 20 to 13 percent. Child labor rates dropped from 27 to 10 percent in East Asia and the Pacific, from 13 to 9 percent in Latin America and the Caribbean, and from 14 to 5 percent in the Middle East and North Africa. Interestingly, regions lacking multinational corporations had the worst child labor rates and the smallest reductions: Sub-Saharan Africa’s and South Asia’s child labor rates dropped from 35 to 30 percent and from 23 to 16 percent, respectively. This reduction in rates was attributable to increased family income, which has permitted families to improve their diets, to have better homes, and to provide their children with more educational opportunities. School enrollment rates for ages six to twenty-three rose for all developing countries from 46 percent in 1960 to 57 percent in 1995. Only sub-Saharan Africa had an enrollment ratio below 50 percent in 1995.

Moreover, multinational corporations are not committed to the destruction of the world’s environment but instead have been the driving force in the spread of “green” technologies and in creating markets for “green products.” Market incentives such as threat of liability, consumer boycotts, and the negative impact on reputation have forced firms to police their foreign affiliates and to maintain high environmental standards. The United Nations’ World Investment Report 1999 notes several studies that confirm foreign affiliates having higher environmental standards than their domestic counterparts across all manufacturing sectors. The United Nations also positively reflected on the efforts initiated by multinational corporations to assist domestic suppliers (“regardless of ownership”) to qualify for eco-labeling and to meet environmental standards currently supported by more than five thousand multinational corporations.

Multinational corporations have also advanced several programs (the Global Environmental Management Initiative and the Global Sullivan Principles, among others) to establish industry codes dedicated to achieving high levels of social responsibility. A United Nations survey of multinational corporations revealed that the primary reason multinational corporations do not invest in certain countries is the presence of extortion and bribery not surprisingly, the main source of the corruption is governmental officials. Both the International Chamber of Commerce and the International Organization of Employers have established social codes and standards that attempt to establish principles for responsible environmental management.

The Crucial Role of Peace and Freedom

When multinational corporations make profits, this does not mean that developing countries are being exploited. Both the multinational corporations and domestic country are better off–the developing country receives jobs, an expanded tax base, and new technologies. If the investment does not do well, the multinational corporations may lose their investment and the developing country does not receive the aforementioned benefits, but the developing country owes no restitution. As a result, multinational corporation investments do not contribute to the external debt problems of developing countries.

According to the United Nations, in 1998, $166 billion, or 25.8 percent of the world foreign direct investment went to developing countries. Only$2.9 billion of foreign direct investment was obtained by the least developed countries, which are primarily composed of the sub-Saharan African countries. Given risk conditions, capital flows to where it can earn the highest rate of return. The required risk premium is much higher when a developing country is experiencing civil wars, suffers from over-regulation, has a weak infrastructure, is politically unstable, keeps its markets closed to foreign competition, has inflexible labor markets, and imposes high taxes.

The Heritage Freedom Index measures the degree of economic and political repression present in developing countries. As predicted, foreign direct investment is smaller in developing countries that are repressed. Based on the 2000 Heritage Freedom Index, of the eighteen economies in the Middle East and North Africa, ten are either mostly unfree or repressed, and only Bahrain is free. The results are more dismal for sub-Saharan Africa thirty-five (make that thirty-six, given Robert Mugabe’s policy of land-grab terrorism) of the forty-two economies in the region are mostly unfree or repressed.

Developing countries must be allowed to further themselves economically through free markets and the expansion of multinational corporations. Such countries want jobs, not welfare. Furthermore, what is comforting but not easily understood is that the promotion of trade increases the welfare not only of developing countries but also of developed ones free trade is a positive-sum game.

## THE INFLUENCE OF MULTINATIONAL COMPANIES IN THE ECONOMIC DEVELOPMENT OF NIGERIA

### Project Body:

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Study

Available literature on world history reveals that nothing bothers national leaders more than the thought of economic development. Hence outstanding world leaders are always formulating and carrying out policies aimed at economic development of their nations. No prospect is more alluring to nation leaders than the thought of bringing in businesses to develop their nations economy.

Nation leaders have never ignored economic field in their quest for development. Fleet wood feels that most people would despise &ldquothe pains that are taken in making collection &lsquo of so mean things as the price of wheat and oats (Chronicon Preciosum 1707). Mean things have however assumed dignity as they increasingly contributed to the economic power of the state.

During the first three decades of the 20th century, the development of the Nigerian economy was shaped primarily by Nigerian Farmers and Trader&rsquos response to changing conditions in national markets.

Agriculture and trading were the major economic activities. Apart from mining and handcraft, there was practically no industrial production in Nigeria. The government played a conservative and essentially passive role in the economy. Except for a few major budget and trying not to interfere with the market system. The 1950&rsquos witnessed the beginning of industrial development and the increasing government participation in nearly all sectors of the economy.

Available information unfortunately does not permit one to measure changes in the total level or the sectoral composition of economic activity in Nigeria with much precision, although data on external trade and on the budgets of different levels of government and of various public corporations do reveal absolute changes on these particular activities for example exports of goods and services increased in value by 11.7% between 1950 and 1962 while import rose by 24.6% during the same period. This situation supposes is now hanging with reverse being the case. The main reason for Nigeria&rsquos present backward condition and indeed much of Africa compared with the rest of the world is simply lack of money for development.

Development in Nigeria could not possibly be so rapid if we have to depend solely on the internal building up of capital. In fact much of the economic development found in Africa today is the result of capital imported from Europe and America, surplus capital produced by industries elsewhere brought from Europe to America and Austria in the past to develop these nations.

We are presently in the midst of a kind of regionalism in this country. States and regions are beginning to act like corporations biding for new businesses, trying to improve their capacities for economic growth, exploring new technologies and working a good deal about their public image.

Obviously speaking the development of modern nation states depended so much on the transformation spread? On the technological activities of multinational organisations.

(Imaga E.U.L. 1980). So many authorities are now seeing development plus change in the activities of multinational companies. Few developments have played as critical a role in the extraordinary growth of international trade and capital flow during the past two decades as the rise of multinational corporations. The multinationals corporations are seen as carriers of foreign technological know how, culture and social context hence their ability to help develop a nation. However these companies are not father Christmas and so have their own entrepreneurial goals plus their parent country&rsquos goals which they seek to attain alongside with the objective of providing the needed development goals of their host country.

In most cases their goals may not tally with that of their host countries hence the investor countries tries to protect themselves with restraints against their own enterprises as these firms react to meet the demands of their nation alongside that of their host country&rsquos.

1.2 Statement Of The Problem

Economic and political developments are the goals of any modern state. The yearning for these goals has in recent time dominated the literature of the economies of the developing nations of which Nigeria is one. The lopsided arrangement of the world&rsquos capitalist order under which the third world economy and its periphery components constitute a major obstacle to economic growth and development of these new nations in general.

In view of this, the project work is design to look into the performance of the economy and observe how the activities of the Multinational Corporations have contributed to an increase in the Gross Domestic Product (GDP) and economic development. Nigeria has been experiencing some problems in the area of transfer of technology, employment, economic inequality and balance of payments problems. This work will also aim at examining whether these problems are functions of the Multinational Corporations or whether there are intervening variable responsible for these problems.

1.3 Objectives Of The Study

The aims of this, is to find out the impact of multinational companies in the economic growth and development.

The specific objectives are:

1. To evaluate the nature of the relationship that exist between multi-national corporation and economic growth of Nigeria.

2. To examine the impact of multi-national corporation sector on Nigeria Economy.

3. To offer some recommendations based on the findings of the study.

4. Highlights ways Nigeria could maximize the benefits from the multinational corporations and minimize their negative and anti-development objectives.

1.4 Significance Of The Study

Multinational Corporations are institutions which lead to economic corporation among nations. There has been wide acceptance of economic corporation as the most effective method of enhancing economic development into the less developed countries, Mutharika (1972:20). This research work is important in the sense as it has to in lighten the government on the role of the Multinational Corporation Oil Sector (MNCs) play in the economy towards growth and development.

Enlighten students and researchers on the economic importance of the oil sector Multinational Corporation and their contribution to economic growth and development of the Nigeria economy.

1. To what extent does Multi-national Corporation helps in the development of Nigeria?

2. To what extent does multi-national corporation transfers their technological skill to Nigerians?

3. How has multi-national corporation help in creating job opportunity in Nigeria?

4. What constraints will hinder Multi-national Corporation in their contributions to the economic development of Nigeria?

5. To what extent does the company attract government assistance?

6. To what extent does Multi-national Corporation re-invest their profit in Nigerian Economy rather than repatriating it abroad?

H0: Multi-national Corporation as one of the non oil sector GDP growth has significant impact on economic development (GDP) growth in Nigeria.

H0: Multi-national Corporation as one of the non oil sector GDP growth has no significant impact on economic development (GDP) growth in Nigeria.

1. Multinational National Enterprises (MNE)

This is a cross border national business organisation or aggregate of organization that are aggregate of organization that are characterized mainly by the disposal of their managerial ability among several nations.

This section, deals with the definition of some important terminologies in this work.

2. Undeveloped Country: A situation where some of the following feature. Absolute poverty, low per capital income, low rate of economic development, poor health, high death rate, high dependence on importation, balance of payment deficit eg Nigeria.

3. Economic Development: The process of improving the quality of all human living. It comprises the following economic growth, self esteem and economic freedom.

4. Capital Intensive: A method of production whereby capital proportion is relatively higher than labour or land.

5. Indigenization Policy: Measure aimed at localizing ownership and control of the economy by Nigerians. An example is the Nigerian Enterprises Decree of 28th

6. Balance of Payment: A statement of a national&rsquos financial transactions with the outside world over time period usually a year.

7. Cartel: A group of firms which enter into an agreement to set mutually acceptable prices for their products and this is often accompanied by output and investment.

8. Production Function: A technologically or Engineering relationship between the quantity of a goods produced and the inputs required to produce it.

9. Economic Growth: A process by which the productive capacity of the economy is increase over time to bring increase in the levels of national income.

Part I: Routinizing the Crimes of the Powerful

Introduction: On the State Routinization of Unchecked Corporate Power

1. Capitalism, Corporations, and Criminality

1.1 Globalizing Capital and Crime

1.2 Studying Multinational Corporate Crime and the Public’s Right to Know

1.3 From Felonies to Torts: Constrained and Unconstrained Corporations

1.4 Power, Growth, and Inequality in Early 21st Century Capitalism

1.5 Capitalism and the Contradictory Nature of Capital Accumulation, Capitalist Crisis, and Corporate Criminality

1.6 State Routinized Crime Control and the Capitalist Apparatus

2. Why Capitalist States “Fail” to Control the Crimes of the Powerful

2.2 State-Routinized Crime Control, Regulation, and Accountability

2.3 Police Use and Misuse of Force, Militarizing U.S. Law Enforcement, and Privatizing the Security Industry

2.4 U.S. Counter-Terrorist Torture and the Outsourcing of Harsh Interrogation Techniques

2.5 Wall Street and the Routinization of Securities Fraud

2.6 A Recapitulation of State Routinized Crime and Crime Control

Part II: Violating the Commons

3. Financial Crimes: Violations of Trusted Securities

3.1 Decriminalization, Fraudulent Libor Rates, and Victimization

3.2 The Contradictory Forces of Free-Market Capitalism and Securities Law Failures to Curb Wall Street Frauds Before and After the Financial Implosion

3.3 Treating High-Risk Securities Fraud as Noncriminal Matters

3.4 Criminal and Civil Prosecutions

3.5 Structured Finance Products, Investment Banking Fraud and the Case Against Goldman Sachs

3.6 Conciliatory Collusion, Goldman Sachs, and the Costs of Doing High Finance

3.7 The Big Banks, SEC Waivers, and State Financial Resources

3.8 Update: “Short Sellers Sold Short By Goldman”

4. Environmental Crimes: Violations of Health and Safety

4.1 Green Criminology, Environmental Crimes, and Structural Harms

4.2 Exposing West Virginians to Toxic Substances: DuPont, Cover-Up, Litigation and Decades of Chemical Pollution

4.3 Dow Chemical Company: A Trailblazer in Multinational Criminality

4.4 Monsanto Corporation: Masters of Fraud, Deception, and Public Relations

4.5 Unfettered Fracking and the Dangers of Hydraulic Fracturing

4.6 Climate Change, Power Plant Regulations, and the U.S. Supreme Court Stay as a Potential Unraveling of the Paris Agreement?

5. Colluding Crimes of States and Corporations: Violations of the Community

5.1 Routinizing Collusion Between and Within Nations: The Neutralization of Crime and the Rise of Securitization

5.2 Transparency, Surveillance, Whistleblowing, and Drone Warfare

5.3 Crimmigration and Privatization: Cashing in on Refugee Desperation

5.4 For Profit Charter Schools and the Privatization of Education: Looting the Public Purse at the Expense of the Public Interest

Part III: Halting Corporate Harm

6. Checking Corporate Power and State-Routinized Crime in an Age of Global Capitalism

6.1 Educational Debt and the Need for Collective Bargaining not Collective Punishment: Implications for Resisting State-Routinized Debtors

6.2 Reclaiming the Older and Newer Commons

6.3 The Sustainable Paradigm and Changing the Political Culture

6.4 From Manufacturing to Postindustrialism and Services: Building a Sustainable Global Economy

Conclusion: Democratic Capitalism, State Owned Multinationals, and Sustainable Pragmatism

## Disclaimer

All the research materials on this website are ONLY for research purposes and should be used as guidelines in developing your research or project works. For no reason should you copy word for word (verbatim) as samphina.com.ng will not be liable for any who copied the material.

The aim of providing these materials is to reduce the stress of moving from one school library to another all in the name of searching for research materials. This service is legal because, all institutions permit their students to read previous projects, books, articles or papers while developing their own works. According to Austin Kleon “All creative work builds on what came before”.

## Essay: Role of Transnational Corporations (TNCs)

A transnational corporation (TNC) or multinational corporation (MNC) is a firm which has the power to co-ordinate and control stages in operations of production chain in more than one country, even if it does not own them. Transnational Corporation take advantage on national differences in production factor costs such as natural resources, labour, and state incentives where it has the ability to switch its resources and operations between locations at a global scale.

### 2.0 Role of Transnational Corporations (TNCs)

The role of transnational corporations (TNCs) or multinational corporations (MNCs) has created the wealth, new job opportunities and new tax revenues that arise from multinational corporations’ generated income. By increasing the efficiency of capital flows, multinational corporations (MNCs) will contribute in reducing the levels of world’s poverty in developing countries, improve their infrastructures, strengthen their human capital and always encourage countries to cooperate and seek peaceful solutions for conflicts.

Transnational corporations (TNCs) or Multinational corporations (MNCs) have responsibilities on its employers, customers, governments, suppliers and communities as well as towards shareholders. Corporate social responsibilities (CSR) that take part in protecting TNCs’ business where businesses must include duty, do business honestly, legally and with integrity, make deals fairly, do not be corrupt and always obey the laws’ of host countries. Sub-Saharan Africa, South Asia and North Africa are experiencing poverty, repressed human rights and environmental damage.

### 3.1 Transnational Corporations and Introducing New Technology

3.1.1 Positive impacts

Bianchi, Carnoy, and Castells (1988), research in People’s Republic of China, saying that that the importation of new technology includes both hardware and software including quality control with the use of technology to create minimal technology transfer and lesser productivity linkages to other firms. Besides that, it appears to imply a changing structure of the demand for skills due to the combination of the growth of high-technology production as economies expand. These will most probably a benefit to foreign firms by creating more opportunities in productions and capital equipment in the particular firm.

According to T. Koizumi and Kopecky (1980), developing new technology will provide great opportunities to countries’ economic growth as there will be a change in technology advance by improving information flows rapidly and increase the speed to integrate national economies into global economy so that countries that have relation with transnational corporations (TNCs) will be able to access to more advanced technology such as information technology as well as increasing their competencies and get a stronger position in the world market.

N. Kumar and N. S. Siddharthan(1997)stated similar idea on Introducing new technology to a country is very important because it is a critical aspect which related to the development of a country. Without advanced and sophisticated technology, a country might not be able to develop faster due to its low growth and development rate. By introducing new technology, it might create the possibility of producing new goods and services, treatment and dissemination of useful information which will turn into an increase in productivity, the expanding of production level and jobs employment.

3.1.2 Negative impacts

There are experts who argued that introducing new technology to a country especially developing country will result in unemployment because of uncoordinated world demand where the rates of economics’ growth are too slow. Hence, the standard of technology contrast the differences in competitiveness between the developing and developed countries in term of production level where the developed countries are more competitive than developing countries due to more advanced technology (J.W. Lee, 2001).

Ernst (1986), who did a study on employment effects in the Asian developing countries, made a conclusion by saying that, the new technical change will only make a very small percentage in contributing to the reduction of the mass unemployment in the third world societies. Since the new micro-technology is becoming automated itself in developing countries, it will cause an increase in unemployment rates where the jobs employment in the micro-electronics based industry is only a small percentage in total of manufacturing industry.

When micro-electronic take place in manufacturing industry, most of the jobs employment created in micro-electronics production is focusing on new workers where women take a larger participation in production level, highly educated than men in research and development, management and sales. This will lead to workers displaced by micro-electronics in jobs employment because they do not distinguish between the percentage of job loss and not controlling changes in production output due to developing new machinery into the particular organization (Carnoy, 1985a, 1985b).

An example of Bhopal disasters caused by America MNCs’ subsidiary, Union Carbide India Limited that produces pesticides which using sophisticate technology being brought to India. During 2-3 December 1984, a mixture of poisonous gases flooded the city of Bhopal and as people woke up with a burning sensation in their lungs, thousands died immediately from the effects of the exploration of the toxic gas in the atmosphere (Eckerman, 2005).

### 3.2 Transnational Corporations (TNCs) and Labour and employment

3.2.1 Positive Impact

Rama (2003) stated that the career opportunities are being created more and more then provided to the people of developing country especially skilled workers. While businesses organisations invest in developing country, it’s always aim for the lowest labour cost to minimize their business cost and maximize their profit while they are able to satisfy and achieve the expectations of the particular company.

However, when MNCs move their production operation into developing countries, jobs opportunities in host country will become more through the process of globalisation. The creation of job opportunities will only occur in the export-processing zones where large amount of work forces take place and required to keep the production process running (Rama, 2003).

A good example of jobs creation would be Coca-Cola Company that decided to invest in Malaysia with a new bottling plant, consist of \$301 million investment. Agence France-Presse, (2010) stated that this investment will able to create 600 to 800 new jobs opportunities from the plant with 8,000 jobs connect with local suppliers.

3.2.2 Negative Impact

Woods (2000) stated that the government of developing countries has been working very hard to attract foreign direct investment (FDI) of multinational corporations (MNCs)and started to compete with each other by deregulate their countries’ policy. Hence, with lower the wages and taxes rates, it enables the investors to avoid the risk of losing their capital invested in developing country.

The Economist (2001) and Woods (2000) saying the government of developing countries increasing minimum wage and labour safety standards in order to protect local workers’ rights and this might cause MNCs have to relocate their operation to another developing countries, who are willing to accept low wages, lack of union representative and legal protections such as child labour and other gross labour that abuses by global companies.

In a global market, the demand of the skilled worker is much higher than the unskilled workers. Thus, this will widen the gap of income between both the classes of workers when they used to compare with each other. Skill workers will be easily to be offered for a job while those unskilled workers will face the difficulties in getting a job. As the result, unskilled worker always being categorised as the low income class since their income is much lower from skill workers (G.A. Cornia, 1999 and A. Wood, 2002).

For example, the Niger Delta, Africa’s largest oil and gas industry such as Shell, developed by large TNCs. The Nigerian government makes billion annually from its resources, but the unemployment rate is around 90%. The gas flaring, has caused both acid rain and respiratory problems which has been in effect 24 hours a day across the Delta, with some flares burning continuously for 30 years. Appearance of TNCs has lead to logging, mining, and farming which has frequently destroyed land that supported by local communities for centuries or displaced by the local population by force and intimidation.

### 3.3 Transnational Corporations and Impacts on the Host Countries’ Economy

3.3.1 Positive Impact

According to Baghwati (2004), when a country goes global, it is playing a significant role of enhancing economic affluence by offering more and more opportunities to developing countries. Transnational corporations (TNCs) created global markets and characterised it as a reduction in trade barriers such as free flow of goods, import duties, services and labour from one country to another (Gangopadhyay and Chatterji, 2005)

Richardson (2000) contends these views as, taking the advantage of trade to serves as an opportunity to stabilise country’s economy when the increasing in trade turn into increasing in income. Richardson, (2000) and Dierks, (2001) proved that the effect of this statement is true because global activities has greatly reduced trade barriers between trading countries through the adjustment of import duties.

3.3.2 Negative Impact

Aurifeille, (2006) argued that global economy activities has increased capital flow into developing countries’ economies while foreign direct Investment (FDI) injects capital in terms of stabilizing the countries’ economic. This is a benefit where it will increased the countries’ financing through loans and grants from developed countries but there is a risk that need to be take into consideration where the net capital inflow that could lead to negative effects on trade.

The adjustment in trade barriers has lead to the promotion of specialisation to developing countries because they are able to concentrate on the production of commodities which can be produced at the least cost (Aurifeille, 2006). Developing countries fully use the advantage of globalisation to enhance their income through trading goods which they can produce most effectively.

Corsi, (2009) saying it is always an effective way of enhancing innovation to produce better quality goods, enhanced competition as the flow of goods and services between countries has becomes easier but such development is giving developing countries an opportunity to obtain goods that prove expensive to produce in their own countries.

For example, financial crisis that fallen upon Argentina, crises of America free market economies was marked by the collapse of the Mexican stock market in December 1994.This situation happened during the new launching of neoliberal model called NAFTA (Salomon Partnoy, 2002).

At the same time, the indigenous Zapatista rebellion in Chiapas was challenging the corruption and lies on a total Mexican collapse through bailout orchestrated by President Bill Clinton to save the North American Free Trade Agreement (NAFTA). The second crisis fall on Argentina on December 2001, the collapse involved people in disaster, emptied the nation’s bank accounts and the poor people were robbed to pay the rich (Salomon Partnoy, 2002).

### 4.0 Conclusion

In conclusion, there are both positive and negative impacts on host countries which caused by transnational corporations (TNCs) or multinational corporations (MNCs). Countries will not growth without TNCs’ business but if one’s country is too dependent on TNCs, it might not be a good decision as TNCs might bring disaster to developing countries, even the whole country can collapse in very short times. Hence, research done by scholar indicated that TNCs bring more negative impacts than positive ones’ in developing countries because it is still a lot of business techniques that have to be learn before we can really handle the global markets’ activities.

Essay Sauce is the free student essay website for college and university students. We've got thousands of real essay examples for you to use as inspiration for your own work, all free to access and download.

If you use part of this page in your own work, you need to provide a citation, as follows:

Essay Sauce, Role of Transnational Corporations (TNCs). Available from:<https://www.essaysauce.com/business-essays/role-of-transnational-corporations-tncs/> [Accessed 02-07-21].

* This essay may have been previously published on Essay.uk.com at an earlier date.

### Review this essay:

Please note that the above text is only a preview of this essay.

## THE IMPACT OF MULTI-NATIONAL CORPORATIONS ON ECONOMIC DEVELOPMENT IN NIGERIA

### Project Body:

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

A typical multinational corporation normally functions with a head quarter that is based in one country, while other facilities are based in the host country. In some circles, a multinational corporation is referred to as the multinational enterprise (MNE) or a transnational corporation (TNC) (Tatum, 2010). They enter host countries in different ways and different strategies. Some enter by exporting their products to test the market and find out whether the existing products can gain sizeable market share. For such firms, they rely more on export agents. These foreign sale branches or assembly operations are established to save transport costs. This is because there is a limit to what foreign exports can achieve for a firm owing to tariff barriers and quotas. Most of the firms are encouraged by low wage rates and other environmental factors. To meet the growing demands in the foreign countries, the firm considers other options such as licensing or foreign direct investment which are critical steps. Some will export even when they have settled for the FDI option.

Tatum (2010) proposes that multinationals operate in different structural models. The first and the common model is for the multinational corporation positioning its executive headquarters in one nation, while production facilities are located in one or more other countries. This model often allows the company to take advantage of benefits of incorporating in a given locality, while being able to produce goods and services in areas where the cost of production is lower (Ozoigbo and Chukuezi, 2011). The second structural model is for the MNC to base the parent company in one nation and operate subsidiaries in other countries around the world. With this model, just about all the functions of the parent are based in the country of origin. The subsidiaries more or less function independently, outside of a few basic ties to the parent. A third approach to the setup of an MNC involves the establishment of an headquarter in one country that oversees a diverse conglomeration that stretches to many different countries.

Available literature on world history reveals that nothing bothers national leaders more than the development of their nations&rsquo economies. Outstanding world leaders always formulate and carry out policies aimed at economic development of their nations. No prospect is more alluring to nation leaders than the thought of bringing in businesses to develop their nation&rsquos economy.

Economic and political developments are the goals of any modern state. The yearning for these goals has in recent time dominated the literature of the economies of the developing nations of the world in which Nigeria is one. The lopsided arrangement of the world's capitalist order under which the third world economy and its periphery components constitute a major obstacle to economic growth and development of these new nations in general. Obviously speaking the development of modern nation states depend so much on the transformation spread on the technological activities of multinational organizations. (Imaga 1980).

In Nigeria, the first three decades of the 20th century, development was shaped primarily by Nigerian Farmer and Trader's response to changing conditions in national markets.

Agriculture and trading were the major economic activities apart from mining and handcraft there was practically no industrial production in Nigeria. The government played a conservative and essentially passive role in the economy except for a few major budgets, while trying not to interfere with the market system. The 1950's witnessed the beginning of industrial development and increased government participation in nearly all sectors of the economy.

However, available information does not permit one to measure changes in the total level or the sectorial composition of economic activities in Nigeria with much precision. Although, data on external trade and budget of different levels of government and of other public corporations do reveal absolute changes on these particular activities on export of goods and services. An increase in value by 11.7 percent between 1950 and 1962 while import rose by 24.6 percent during the same period. The rise of MNCs is considered a great influence on this development. (Imaga 1980)

1.2 STATEMENT OF THE PROBLEM

Understanding the essence of Multinational Corporations and their impacts on economic growth has become a global phenomenon. In the light of this, there has been increasing attention to what indicators to look out for in the valuation of economic growth of a country in consideration of its MNCs.

Tatum (2010) noted that, attention were as a result of controversies on how these MNCs affect variables of the economy employment, infrastructures, goods and services, local firms and GDP. Some believe MNCs are agents of imperialism while others believe they are agents of growth and development.

These controversies are due to lack of proper understanding of the nature and workings of the MNCs, as a result, the judgment of the government and the people are from personal perspectives.

Based on the foregoing, the research questions the study intends to provide solution to in this research work

i. To what extent do Multi-national Corporations help in nation development?

ii. To what extent has the Multi-national Corporations transfer their technological skills to Nigerians?

iii. How has the Multi-national Corporations helped in creating job opportunities in Nigeria?

iv. What constraint hindered Multi-national Corporations in their contribution to the economic development of Nigeria?

v. To what extent has the company attract government assistances?

vi. To what extent has Multi-national Corporations re-invest their profits in the Nigerian economy rather than repatriating it abroad?

1.3 OBJECTIVES OF STUDY

This project work is designed to look into the impact of Multinational Companies on the Nigerian economy and observe how their activities have contributed to an increase in the Gross Domestic Product (GDP) and economic development.

The specific objectives are:

To evaluate the nature of the relationship that exists between Multi-national Corporations and economic growth of Nigeria. To examine the impact of multi-national corporation sector on Nigeria Economy. To offer some recommendations based on the findings of the study.

1.4 RESEARCH HYPOTHESIS

H0: there is no significant relationship between multi-national corporations and economic growth of Nigeria.

H1: there is significant relationship between multi-national corporations and economic growth of Nigeria.

H0: Multi-national Corporation&rsquos investment has no significant effect on the Nigeria economy

H1: Multi-national Corporation&rsquos investment has significant effect on the Nigeria economy

1.5 JUSTIFICATION OF STUDY

A nation with Multinational Corporations compared to one without is considerably more advanced technologically, socially and economically. MNCs in Nigeria, Nestle, Glaxosmith Kline, Unilever, Friesland etc are institutions that led to economic corporation among Nigeria and other nations. There have been wide acceptances of economic corporation in the most effective method of enhancing economic development into the less developed countries. In Nigeria, MNCs provide a wide range of job opportunities for both skilled and unskilled labor. They provide a wide variety of goods and services in addition to the locally provided options. MNCs pressurize local producers to develop and improve local production they import social skills, man power and technology which locals adopt. They are directly involved in the development scheme of the economy, sponsoring of local projects and programs, provision of social goods for the locality in which they are situated like construction and repairs of roads, provision of street light and security measures which is beneficial to them and the community.

This research work emphasizes to the government, the role Multinational Corporations (MNCs) play in the economy towards growth and development. It can serve as a go-to source for information where anyone can consult for reference in respect of formulation of policies, evaluation of MNCs in Nigeria and their impacts on socio-economic development. It shall provide an understanding on strategies for promoting these corporations which are useful to all concerned stakeholders. It could serve as a guide for future researchers who are embarking on the same subject matter. Also, it serves as an additional knowledge for students or interested study groups as it creates more awareness on the Multinational corporations, how they affect the economy and vice versa.

1.5 SCOPE AND LIMITATIONS OF STUDY

The scope of this research work is Nigeria as a whole. This broad horizon is due to the irregular distribution of these companies across the country, the selection of a small geographical area as case study might lead to a biased conclusion in this research work with regards to the method of analysis used. More so, to ensure the suitability of this work, titled &ldquo The Impact of Multi-national Corporations on Economic Development in Nigeria&rdquo as a reference point for the government at all levels, investors, researchers and students.

This research work has been limited primarily by time frame used to carry out this study. As an undergraduate student, there is a stipulated time to carry out this research work, this hinders the quality of the work as required materials cannot be fetched, readily available materials that are easy to reach have to be used instead. Also are the problems of inadequate data and limited funds.

1.6 ORGANISATION OF CHAPTERS

This research work is divided into five (5) main chapters. The first part deals with the introduction aspect of the work which comprises background of the study, statement of the problem, research questions, objectives of the study, justification of study, scope and limitations of the study and organization of chapters.

Chapter two is made up of review of literature, of which review of related conceptual framework can be found economic growth and its determinants, economic growth, its challenges and history in Nigeria, objectives of multinational corporations, and nature of multinational corporations in Nigeria.

The third chapter contains research methodology which includes items such as nature and source of data used, research area, the sample and sampling technique used in the research work, the model used, and the method used in analyzing the data collected.

Chapter four presents the results and analysis of data collected while chapter five summarizes the findings of the research work followed by conclusions and recommendations.

## Multinational Corporations versus the Nation‐State

The extent to which the proliferation and growth in size of MNCs has eroded the power of sovereign governments to govern nation-states is another issue causing an unbridgeable split between those favorably disposed to private enterprise and those critical of its alleged excesses. This chapter repeats the thesis that objectivity requires black-and-white extremes to be avoided in favor of a nuanced middle-ground providing a more accurate diagnosis of the complex issue at hand. Following an examination of the multiple definitions of sovereignty, two sections examine the merits in the opposing arguments regarding the assertion that the power of big global companies has reached the point that it now transcends the ability of national leaders to make decisions affecting the economic well-being of their countries' citizens. The chapter concludes with the argument that the question of MNC's diminution of national sovereignty should be rephrased and placed in a larger context to give proper regard to imponderables and ambiguities.

Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

### Solutions

1. Scarcity means human wants for goods and services exceed the available supply. Supply is limited because resources are limited. Demand, however, is virtually unlimited. Whatever the supply, it seems human nature to want more.
2. 100 people / 10 people per ham = a maximum of 10 hams per month if all residents produce ham. Since consumption is limited by production, the maximum number of hams residents could consume per month is 10.
3. She is very productive at her consulting job, but not very productive growing vegetables. Time spent consulting would produce far more income than it what she could save growing her vegetables using the same amount of time. So on purely economic grounds, it makes more sense for her to maximize her income by applying her labor to what she does best (i.e. specialization of labor).
4. The engineer is better at computer science than at painting. Thus, his time is better spent working for pay at his job and paying a painter to paint his house. Of course, this assumes he does not paint his house for fun!

## EFFECT OF MULTINATIONAL CORPORATIONS ON NIGERIA ECONOMY

Based in part on the development of modern communications and transportation technologies, the rise of multinational corporation was totally unanticipated by the classical theory of international trade as first developed by Adam Smith and David Ricardo. According to this theory which rests on the doctrine of comparative advantage each nation should specialize in the production and export of those goods that it can produce with highest relative efficiently while importing those good that other nations can produce relatively more efficiently (Gilpin, 2011).

Underlying this theory is the assumption that white good and services can move internationally factors of production such as capital labour and hand are relatively imniobile furthermore the theory deals only with trade in commodities it ignores the role of uncertainty economies of scale and technology in international trade and is static rather than dynamic.

Contrary to the postulates of smith and Ricardo, the very existence of multinational corporation is based on international mobility of certain factors of production. Capital raised in London on the Eurodollar market may be used by on wise based pharmaceutical firm to finance the acquisition of equipment by a subsidiary in Brazil (Goerzen, A. & Makino, 2007). It is the globally world innate allocation of resources by a single centralized management that differentiate the multinational enterprise from other firms engaged in international business. Decision regarding market entry strategy, ownership of foreign operations and production marketing, and financial activities and made with an eye to what is best for the corporation as a whole (Onimode, 1982). The true multinational corporation can be characterized by its emphasis on group performance rather than of its individual components.

At the center of the debate on globalization one the multinational corporations giant actors who think and act globule. Their exetence is often associated with the phenomenon of globalization itself. These actors have gained power visibility and influence at all levels, and one determinant to the setting and implementation of the “ global agenda”. MNCS have created a massive wealth and propelled high technological development. However, their global role their increased economic and political power especially felt in developing countries of which Nigeria is among ) their strong influence in shopping international rules and their lack of transparency and democratic control has put them under severe scrutiny (Ozoigbo & Chukuezi, 2011).

Infact the mention of multinational corporation usually elicits mixed reactions. On the one hard, MNCS are associated with exploitation and ruthlessness. They are criticized for moving resources in and out of a country as they strive for profit without much regard for the country social welfare Varity Corp a Canadian multinational firm. Was criticized for its action in 1991 to relocate its headquarter from Toronto to the united states (Buffalo) in order to take advantage of U.S Canadian Free Trade agreement. “For a long time India referred MNCs as agents of neocolonialism (Robinson, 1979).

On the other hand MNCs have power and prestige additionally they create social benefit by facilitating economic balance. As explained by Miller “with resources capital, food and technology unevenly distributed around the plannet and all in short supply, an efficient instrument of quick and effective production and distribution of a complex of goods and services is first essential (Stopford, 1998).

According with the UNCTAD (United Nations conference on trade and development) more than two thirds of the world trade involve at least one multinational half of which occurs within the same multinational around the world. The worlds 44,508 MNCs manage some 280,000 affiliates all over the world.

With regards to Nigeria economy there some 3,000 of them having their foreign direct investment either in manufacturing or service industries. Their emergency with regard to Nigeria economy dated back to the history and activities of the Royal Niger company. Of which today in Nigeria they have increased much more in number (Tatum, 2010). These multinational corporations while Nigeria in a way opportunity of genning what they did not have from foreign country, but the issue is that did they create opportunity with some part of the produce of Nigeria industry employed in a way in which Nigeria have greater advantage (Wiig & Kolstad, 2010).

1.2 STATEMENT OF THE PROBLEM

Most of the multinational corporations operate by seeking and securing the opportunity for environment that has least cost of production of goods for world markets. This goal may be achieved through acquiring the most efficient locations for production facilities or obtaining taxation concession from host governments. This has been looked upon by many has counterproductive to the host country. Though multinational corporations have contributed in terms of job creation but many of the employees of most Multinational Corporation are poor remunerated. However, the researcher is evaluating the role of multinational corporations towards economic growth of Nigeria.

1.3 OBJECTIVES OF THE STUDY

The following are the objectives of this study:

1. To examine the role of multinational corporations towards economic growth of Nigeria.

2. To identify the factors determining the growth and success of multinational corporation in Nigeria.

3. To examine the demerits of multinational corporation to their host country.

1.4 RESEARCH QUESTIONS

1. What is the role of multinational corporations towards economic growth of Nigeria?

2. What are the factors determining the growth and success of multinational corporation in Nigeria?

3. What are the demerits of Multinational Corporations to their host country?

1.5 HYPOTHESIS

HO: Multinational Corporations have not contributed to economic growth in Nigeria.

HA: Multinational Corporations have contributed to economic growth in Nigeria.

1.6 SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1. The outcome of this study will be useful to government of Nigeria and the general public on the role of multinational corporation in the economic growth in Nigeria.

2. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.7 SCOPE/LIMITATIONS OF THE STUDY

This study on the effect of multinational corporations on the Nigeria economy will cover how the multinational corporation has affected the economy of Nigeria.

LIMITATION OF STUDY

1. Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

2. Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8 DEFINITION OF TERMS

1. Multinational corporation: A multinational corporation may be defined as a company or group of companies with subsidiaries in more them one country. They owns (in whole or in part) control and mange income generating asset in than one country.

2. Global corporation: A group of people having authority to operate as a single unit with separate legal existence affecting the whole world.

3. Corporate planning: This is the establishment of objectives and formulation evaluation and section of polices, strategies, tactics and action requirement to achieve an objectives.

4. Globalization as a phenomenon is the most evident in the convergence in trade, finance and information flows across national boundaries.

5. Indigenous skilled man power This refers to the number of people working or available for work who are skillful and belong to a place naturally.

6. Neocolonialism: This means control by powerful countries of former colonies or less developed countries by economic pressure.

7. Acquisition: Has been defined as a series of transition whereby a person (individual group of individuals or company) acquire control over the assets of a company either directly by becoming the owner of those assets or indirectly by obtaining control of the management of the company.

8. Subsidiary: It simply means a company whose another company acquired more than 50% of that company shares.