While multinational corporations (MNCs) play a big role in the development of economies in developing countries, evidence supports that they are responsible for much of the poverty and violence in some developing countries they operate in.
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Multinational Corporation is a term that is used to refer to the companies that operate in more than one country and that whose activities involve Foreign Direct Investment (FDI). The FDI carried out by multinational firms is influenced by their objectives of maximizing the profits while their role in the economic development of the countries they operate incomes as a secondary objective. 1
Several concerns have been raised trying to link the sorry situation in developing countries of poverty and violence to the involvement of MNCs in those nations. On the other hand, the contributions of such organizations towards development as a social responsibility of these organizations can not be overlooked.
Many MNCs have utilized the opportunity created as a result of globalization to enter into the economies of the developing countries by establishing branches or extending services to the markets of the developing countries. This concern together with the fact that many developing countries in which the MNCs operate have experienced or continues to experience poverty and violence more often than not have generated the debate on the role the MNCs in creating or worsening the situation.
This paper examines the role played by the MNCs in economic development in developing countries and the role they take in perpetuating the violence and conflict witnessed in many developing economies.
Foreign investment and deprivation
The influence of the MNCs on the social-political and economical aspects in developing countries takes advantage of the poverty, weakness, and the need for a more rapid economic development in most developing countries. In this case, the large multinational corporations use their influence to dominate the developing countries and at the same time destroy the setting of the countries whose economic, social, and political policies are likely to interfere with the businesses of the MNCs.2
Several claims have been raised regarding the involvement of MNCs in different countries being involved in perpetrating violence in areas where the corporations operate.
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Some cases have been reported where some MNCs have been actively involved in politics by lobbying for the governments that are favorable to them. These motives aim at exploiting the community through the access of cheap labor and raw materials by the MNCs where the regime does not question or enact policies that eliminate such instances. Such organizations lead to increased poverty in developing countries. Multinational firms can contribute to poverty and violence through supporting military action by offering monetary as well as material support, lobbying for governments to enact policies that favor them, engaging in foreign treaties that enable the firms to have more influence over the poor countries, etc.3 the political influence of the violence fuelled by the multinational firms can be demonstrated in the case wherein 2001 Talisman the Canadian energy company which was accused to have taken part in the civil war in Sudan was sued by the citizens of Sudan in a federal court in New York. Talisman was accused of supporting the government of Sudan through direct financial and logistics in the operation that aimed to wipe out the black non-Muslim community. The firm was undertaking this in exchange for crude oil.4
In general, some multinationals are to blame for the conflict and the continued poverty in many developing countries due to their involvement in activities that violate human rights like perpetrating civil war, etc. the primary objective of the firm in foreign countries is an accumulation of wealth. The form can therefore use its influence to adversely affect the political and economic environment in the countries they operate in that leads to increased poverty and cases of internal as well as external violence.
The role of multinationals in development
Good governance and strong institutions that recognize the role of multinational corporations in development are important factors when MNCs are to be allowed to operate in developing countries. At the same time, these institutions must be aware of the potential of foreign firms in disrupting the economic environment in developing countries. When political institutions are put in place to maximize the positives and minimize the negatives of the presence of MNCs in any economy by setting codes of conduct, moderating their operations, and specifying their rights and responsibilities positive development can be realized. 5
Firms that engage in serious corporate social responsibility activities help in the development of the communities as well as the countries they operate in. such activities of corporate social responsibility includes engaging in conflict resolution in the countries they operate in as well as participate in environmental conservation activities, infrastructural development, community empowerment programs, etc.
The liberal argument tries to support the activities of multinationals in developing countries and how they contribute to the overall development of the countries without engaging in political activities. The argument is that there are two reasons why the multinationals would not like to engage in politics in the countries they operate in. one, the firms avoid influencing the politics of the countries they operate in for fear of suspicion that their mother companies have may gain undue influence in the country an aspect that may lead to unfavorable business. Secondly, the firms avoid international concerns relating them to the violence of poverty in the countries they operate in. these two aspects make the multinationals engage in business that upright their international reputation and image by actively contributing to development projects. Many developing countries have realized many benefits after embracing the role the MNCs play in their economies e.g. Bermuda, Bahamas, Hong Kong, South Korea, etc. the development in these countries is attributable to the positive roles played by the MNCs that operate in those countries. 6
Reports by the World Bank as well as the United Nations suggest that the presence of MNCs in some developing countries had been noted to accompany positive development and alleviation of poverty by a large margin as compared with the nations that do not welcome their presence. The reports also indicate that in the countries where MNC’s influence in the national economy is negligible, those nations encounter severe poverty and show little or no signs of improvement. MNCs initiate development through direct capital investment, job opportunities, and environment-friendly technologies.7
The question about the responsibility of the multinational corporations in the perpetuation of poverty and violence in developing countries can be viewed from various perspectives as shown. Many corporations are cautious of their social responsibility and undertake projects that support the local economy. This is enacted through various activities like environmental conservation and other community projects like the building of schools and other social infrastructure. In addition, the forms employ people from the local community and empower them through training. This aspect contributes to the economy positively. However, although the MNCs are believed to contribute positively to the national economy, this growth has been accompanied by a huge social inequality between the rich and the poor a situation that can easily lead to social conflict and violence.8
Ahiakpor, James C. W. Multinational Corporations in the Third World: Predators or Allies in Economic Development? (2009). Web.
Anup, Shah. Corporations and Human Right. 2002). Web.
Bennett, Juliett. “Multinational Corporations, Social Responsibility and Conflict,” Journal of International Affairs, vol. 55, no. 2 (2002): 396.
Billet, Bret Le. Investment behavior of multinational corporations in developing areas: comparing the development assistance committee, Japanese, and American corporations. New Jersey: Transaction Publishers, 1991.
Kehl, Jenny Rebecca. Foreign investment and domestic development: multinational and the state. Lynne Rienner Publishers, 2009). Web.
Mehmet, Özay. Economic planning and social justice in developing countries. London: Tylor & Fransis, 1978.
Quinlivan, Gary. Sustainable Development: The Role of Multinational Corporations. (Saint Vincent College, N.d), 2009. Web.
Rothgeb, John. Foreign investment and political conflict in developing countries, NY: Greenwood Publishing Group, 1996.
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- Bret Le Billet, Investment behavior of multinational corporations in developing areas: comparing the development assistance committee, Japanese, and American corporations, (New Jersey: Transaction Publishers, 1991), 29.
- John Rothgeb, Foreign investment and political conflict in developing countries, (Greenwood Publishing Group, 1996), 26.
- Anup Shah, Corporations and Human Right, (2002). Web.
- Juliett Bennett, “Multinational Corporations, Social Responsibility and Conflict,” Journal of International Affairs, vol. 55, no. 2 (2002): 396.
- Jenny Rebecca Kehl. Foreign investment and domestic development: multinational and the state. (2009), 4. Web.
- James C. W. Ahiakpor, Multinational Corporations in the Third World: Predators or Allies in Economic Development? (2009). Web.
- Gary Quinlivan, Sustainable Development: The Role of Multinational Corporations. Saint Vincent College. Web.
- Özay Mehmet, Economic planning and social justice in developing countries, (London Tylor & Fransis 1978), 29.