Outline Multinational corperations What are they and why do they invest offshore? FDI - Foreign Direct Investment Where do they invest, where do they not? What scares them away? What benefits do FDI give? The worry of concentration of economic and political power What role does competition play?
What's a multinational corporation? A corporation having exposure in more than one economy Has an INVESTMENT in more than one economy (Nike might not own the Chinese factory, but they lease it and THAT is an investment) Corporation - from Latin for "Body of people" 1886 the supreme court of the USA in the county of Santa Clara vs. The Southern Pacific Railway Co. ruled that corporations entitled to protection under the 14th amendment 14th amendment assures equal protection of the law for all persons Corporation is a legal entity who's owners (shareholders) have limited liability (ltd or Inc.) Recognized in the law as enjoying the rights of individuals 1) Not owner/proprietors but delegated management-through a board of governors 2) Limited liability-shareholders not responsible for liabilities 3) Investor ownership-shareholders collectively own the corporation 4) Separate legal personality-see ruling santa clara county vs. southern railway co. covered by 14th 5) Transferable shares which are listed on a stock exchange
What do multinational corporations gain from offshore development? Raw materials-minerals, petroleum, coffee, sugar, tropical fruit Lower production costs (cheap labour) According to UN world investment report a worker working for Nike in china etc would make more money than the next door neighbour who works for domestic industry In economies that receive foreign investment there are lower amounts of child labour than in areas w/out foreign investment Education levels in areas with foreign investment are higher than in areas w/out Usually goes to more advanced areas or business friendly regimes Corporations DON'T go to areas where there is high levels of corruption Corruption undermines the concept of merit Foreign direct investment in sub-Saharan Africa is almost negligible No foreign investment where infrastructure is not in place (ie transportation, electricity, healthcare and educational facilities) Why do host nations like foreign investment? For every dollar created by foreign investment there is a resultant creation of 1.5-2.3% of domestic Investment-money and jobs Access to 21st century industrial "know how"; technological, production know how, Branding People with poorest health and life expectancy are sub-Saharan Africa The better educated your workforce is, the healthier your workforce is, the lower the levels of child labour the more likely you will benefit from foreign investment Of the top 100 economical entities, 50 are multinational corporations, the other 50 are nation states The headquarters of multinational corporations are found in America, the European Union, and Japan During the 1990's the number of multinational corporations INCREASED (meaning corporations DIDN'T have the ability to stop competition) During the 1990's, the number of multinational corporations TRIPLED Multinational corporations are the target of considerable negative attention from the consumer They are perceived to be overly powerful-economically and politically All of legislations that bring corporations into existence ensure that the business makes profits for it's shareholders They're also charged with not having a heart-ie they are not interested in the greater good
POLITICAL ECONOMY
March 17, 2009
Outline
Multinational corperations
What are they and why do they invest offshore?
FDI - Foreign Direct Investment
Where do they invest, where do they not?
What scares them away?
What benefits do FDI give?
The worry of concentration of economic and political power
What role does competition play?
What's a multinational corporation? A corporation having exposure in more than one economy
Has an INVESTMENT in more than one economy (Nike might not own the Chinese factory, but they lease it and THAT is an investment)
Corporation - from Latin for "Body of people"
1886 the supreme court of the USA in the county of Santa Clara vs. The Southern Pacific Railway Co. ruled that corporations entitled to protection under the 14th amendment
14th amendment assures equal protection of the law for all persons
Corporation is a legal entity who's owners (shareholders) have limited liability (ltd or Inc.)
Recognized in the law as enjoying the rights of individuals
1) Not owner/proprietors but delegated management-through a board of governors
2) Limited liability-shareholders not responsible for liabilities
3) Investor ownership-shareholders collectively own the corporation
4) Separate legal personality-see ruling santa clara county vs. southern railway co. covered by 14th
5) Transferable shares which are listed on a stock exchange
What do multinational corporations gain from offshore development?
Raw materials-minerals, petroleum, coffee, sugar, tropical fruit
Lower production costs (cheap labour)
According to UN world investment report a worker working for Nike in china etc would make more money than the next door neighbour who works for domestic industry
In economies that receive foreign investment there are lower amounts of child labour than in areas w/out foreign investment
Education levels in areas with foreign investment are higher than in areas w/out
Usually goes to more advanced areas or business friendly regimes
Corporations DON'T go to areas where there is high levels of corruption
Corruption undermines the concept of merit
Foreign direct investment in sub-Saharan Africa is almost negligible
No foreign investment where infrastructure is not in place (ie transportation, electricity, healthcare and educational facilities)
Why do host nations like foreign investment?
For every dollar created by foreign investment there is a resultant creation of 1.5-2.3% of domestic
Investment-money and jobs
Access to 21st century industrial "know how"; technological, production know how,
Branding
People with poorest health and life expectancy are sub-Saharan Africa
The better educated your workforce is, the healthier your workforce is, the lower the levels of child labour the more likely you will benefit from foreign investment
Of the top 100 economical entities, 50 are multinational corporations, the other 50 are nation states
The headquarters of multinational corporations are found in America, the European Union, and Japan
During the 1990's the number of multinational corporations INCREASED (meaning corporations DIDN'T have the ability to stop competition)
During the 1990's, the number of multinational corporations TRIPLED
Multinational corporations are the target of considerable negative attention from the consumer
They are perceived to be overly powerful-economically and politically
All of legislations that bring corporations into existence ensure that the business makes profits for it's shareholders
They're also charged with not having a heart-ie they are not interested in the greater good
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