Discussion in 'Economics' started by jiangkunpeng, May 15, 2007.

  1. With the development of the world economy, MNCs represent a significant change in todayÂ¡Â¯s globalization. Nobody can deny that MNCs not only have a great effect on the international economic system, but also on individual governmentÂ¡Â¯s status. As Ifesi (2001) states MNCs have so much financial power that 80% of foreign investment and 30% of the world's gross national product (GNP) are controlled by MNCs, and they have a great impact on society and government, especially when they are richer than most host states. The same idea is held by Bennett (1993) that MNCs have integrated production, sales, research, marketing and all the other finance areas, and they are threatening the sovereignty of independent governments greatly.
    Reuters (2001) states that the MNCs selling drugs in Africa together have a market capitalization beyond $1.3trillion which is 10 times the gross domestic product (GDP) of South Africa. The same idea is held by Borger (2001) that the worldÂ¡Â¯s top five multinational drug companiesÂ¡Â¯ GDP in Africa have twice the GDP of all sub-Saharan AfricaÂ¡Â¯s and they are very influential with African governments directly by using their wealth. Accordingly, Reuters (2001) also argues in his article that multinational drug companies expressed that the industry could be out of the control of African governments.
    For example, in despite of gaining huge profits, the achievement of drug firms in Africa should not be ignored. According to Briscoe (2001), for example, although there is the furious conflict between pharmaceutical firms and African governments, numbers of pharmaceutical firms agree to cut the prices on AIDS drugs for Africa in response to a critical issue that AIDS is sweeping through Africa. However, under the philanthropic act there is hidden a potential political aim. Â¡Â°Our aim for AIDS is not to have five big donors reducing their prices; Â¡_we must exert the pressure to the government.Â¡Â±
    Krause (1985) mentioned that a major fear of many governments is that MNCs are becoming so powerful that they are destroying the desirable degree of competition in world markets. Ben Jackson, Action for Southern Africa said that Â¡Â®We cannot allow global trade rules to be used to put the commercial interests of drug companies over the public health interests of millions in Southern Africa.Â¡Â¯ However, according to Baleta (2001), as a result, 42 multinational drug companies take South AfricaÂ¡Â¯s government to court due to the proposed legislation which will make drug firms lose more power than before and give the government total unfettered power to interfere with their operation.
    It is known that Microsoft Corporation is one of the most famous MNC in the world. Although, Microsoft is probably not more powerful than governments, it can be seen that it does have a strong influence on government policy. Firstly, in the United States this software giant has showered millions of dollars on politicians of both major parties and lawmakers. According to Widermuth (2001), Microsoft is one of the largest donors in the 2000 election and about 53 percent of that money was received by republicans. Therefore, Widermuth points out that the companyÂ¡Â¯s financial policy not only makes it easier to seek support but even expects to take a position in Washington to influence policy..

    Microsoft may not only influence its host government but it also affects the United Nations. As Markoff and Schenker (2004) claim, instead of supporting standards for business-to-business electronic transactions which were developed by the United Nations, a Microsoft hired two members of the committee and a few months later introduced new software as an alternative. They then paid the travel expenses of UN committee members for what may have been a trip to promote this alternative.
    It is a fact that the status of MNCs has changed dramatically with the development of economic globalization. Generally speaking MNCs are playing a pivotal role in economic areas such as trade, licensing and international technology. Furthermore, their size is a symbol of the amount of potential power they have in their relationships with governments. This also represents how important a role they play in global and local economies. As a result this has caused many developing governments to regard them as a threat to their autonomy.