Domivance of MNC’s

Through liberlisation there has been expansion & growth of MNC’s. The GDP has increased from about 5% in beginning of 1980’s to nearly 7% at end of 1990’s. The MNC’s are estimated to employ directly, at home and abroad around 73 billion people.

For example, the US footwear company Nike currently employes 9000 people, while nearly 75,000 people are employed by its independent sub-contractors located in different countries.

Merits of MNC’s

The important arguments in favour of MNC’s are given below:-

MNC’s help the host countries in following ways:-

1) MNC’s help to increases the investment level & thereby the income & employment in host country.

2). The transnational corporations have become vehicles for the transfer technology, especially to developing countries.

3) They also kind a managerial revolution in host countries through professional management and employment of highly sophisticated management techniques.

4) The MNCs enable that host countries to increases their exports & decreases their import requirements.

5) They work to equalize cost of factors of production around the world.

6) MNC’s provide and efficient means of integrating national economies.

7) The enormous resources of multinational enterprises enable them to have very efficient research & development systems. Thus, they make a commendable contribution to inventions & innovations.

8) MNC’s also stimulate domestic enterprise because to support their own operations, the MNC’s may encourage & assist domestic suppliers.

9) MNC’s help to increase competition & break domestic monopolies.

Demerits:-

1) MNC’s may destroy competition & acquire monopoly powers.

2) The transfer pricing enables MNC’s to avoid taxes by manipulating prices on intra-company transactions.

3) Through their power and flexibility , MNC’s can evade national economic autonomy & control, and their activities may be inimical to national income interests of particular countries.

4) MNCs retard growth of employment in home country.

5) MNCs technology is designed for world-wide Profit maximization, not the development needs of poor countries. In general, it is asserted, the imported technologies are not adopted to (a) Consumption needs (b) size of domestic markets (c) resource availabilities (d) stage of development of many of developing countries.