Business Studies

MNCs have helped and also harmed the developing countries.


ANSWER

True


SOLUTION

Multinational Corporations in developing countries

  • Environmental costs. Multinational companies can outsource parts of the production process to developing economies with weaker environmental legislation. For example, there is a trade in rubbish, which gets sent to developing economies like India for disposal and recycling.
  • Profit repatriated. Although multinationals invest in developing economies, the profit is reptriated to the location of the multinational, so the net capital inflows are less than they seem.
  • Skilled labour. When undertaking new projects, the multinational may have to employ skilled labour from other economies and not the developing economy. This means best jobs are not received by local workers and the investment is diffused.
  • Raw materials. A large component of multinational investment in developing economies is seeking out raw materials – oil, diamonds, rubber and precious metals. The extraction of raw materials can cause environmental externalities – polluted rivers, loss of natural landscape.
  • Sweat-shop labour. Not all economists are convinced sweat-shop labour is a good thing. Critics argue that weak labour conditions allow multinationals to use their monopsony power and pay lower wages to workers than they should get paid

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Single Correct Medium Published on 18th 08, 2020
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