Growth of Transnational Corporations

The growth of transnational corporations has contributed to the expansion of globalization, because countries become much more interconnected when goods are produced and sold across borders. If a corporation set up a factory in a poor country, it would provide employment for workers, who could then buy products, which would in turn create more jobs.

When a transnational sets up operations in one of these countries, it can lead to:

• greater employment

• skill development for workers

• higher paying jobs

• improved tax revenue

• increased economic activity

• an overall increase in the standard of living

Developed countries also receive benefits, including:

• cheaper goods and services

• profits for shareholders and corporations

• increased markets for goods

Because benefits are available to nations where transnationals operate, these countries will often compete by offering incentives that are good for the transnationals, but not always so good for workers or other citizens.

Examples include:

• tax breaks for transnationals

• government assistance

• improved infrastructure

• reduced environmental standards

• poor labour laws, including reduced wages

This can cause problems for people in the developing world, including:

• environmental damage

• global warming

• poor working conditions

• low pay

• loss of traditional culture and values

• disintegration of the family unit

• reduced taxes for government

Sometimes this is called the race to the bottom, because countries compete with each other to make their own nation seem the most attractive to the transnational by making things worse for the people in the country.