Multinational corporations (MNCs) are very large global companies which have their headquarters in HICs but often manufacture their products in LICs, where the production costs are lower. When MNCs locate within LICs they can bring a number of advantages to the local community, but they can also bring negative impacts.
- They create stable employment and regular income for their local employees. This in turn leads to increased spending, and a number of other benefits to the local community – this is known as the multiplier effect. (see photo below)
- They often help to develop the local infrastructure including roads, water and power supplies.
- They bring foreign investment which means the local economy is improved without using taxpayers’ money.
- They may also contribute to social welfare projects including improving health and education.
- Workers are often exploited with poor working conditions, long hours and low pay.
- Health and safety standards are lower than in HICs, resulting in workers being exposed to a higher risk of accidents.
- The higher-paid managerial positions often go to foreign workers.
- Profits mainly go back to the country of origin rather than being used to improve the local area.
- Environmental regulations are often less restrictive in LICs, resulting in air, water and land pollution, and loss of wildlife habitats.
Revision task: a) categorise these effects into negative and positive as well as into social environmental and economic b) read these notes on Nike to see how one example fits into this overall pattern Nike revision notes
Also remember the videos we have watched on the Rana Plaza disaster in Bangladesh and how that shows poor working conditions and non-existent workers right/health and safety at work
So the BIG question is: Do you think MNCs are a good thing or not? Exam type 8 mark questions on this might look like… “Evaluate the impacts of MNCs in LICs”