7.8.2: Multinational Corporations

 7.8.2: Multinational Corporations Multinational corporations, companies that operate across many national boundaries, also help to maintain the global dominance of the Most Industrialized Nations. In some cases, multinational corporations exploit the Least Industrialized Nations directly. A prime example is the United Fruit Company, a U.S. corporation that used to run Central American nations as its own fiefdoms. If a government became uncooperative, the CIA would plot and overthrow it (Central Intelligence Agency [CIA] 2003), while an occasional invasion by Marines would remind area politicians of the military power that backed U.S. corporations. 225 Most commonly, however, it is simply by doing business that multinational corporations help to maintain international stratification. A single multinational corporation may manage mining operations in several countries, manufacture goods in others, and market its products around the globe. 

No matter where the profits are made, or where they are reinvested, the primary beneficiaries are the Most Industrialized Nations, especially the one in which the multinational corporation has its world headquarters. 

Buying Political Stability: Co-Opting Local Elites In their pursuit of profits, the multinational corporations need cooperative elites in the Least Industrialized Nations (Maloba 2017; Schwartz and Cameron 2017). 

In return for funneling money to these local elites and selling them modern weapons, the corporations get a “favorable business climate”—that is, low taxes and cheap labor. The corporations politely call the money they pay to the local elites “subsidies” and “offsets”—which ring prettier to the ear than “bribes.” These local elites, able to siphon money from their country’s tax collections and government budgets, live a sophisticated upper-class life in the major cities of their home country. Although most of the citizens of these countries live a hard-scrabble life, the elites are able to send their children to prestigious Western universities, such as Oxford, the Sorbonne, and Harvard. 

You can see how this cozy arrangement helps to maintain global stratification. 

The significance of these payoffs is not so much the genteel lifestyles that they allow the elites to maintain but the translation of the payoffs into power. 

The payoffs allow the elites to purchase high-tech weapons with which they preserve their positions of privilege, even though they must oppress their people to do so. 

The result is a political stability that keeps alive this diabolical partnership between the multinational corporations and the local elites.

 Unanticipated Consequences

 This, however, is not the full story. An unintentional by-product of the multinationals’ global search for cheap resources and labor is to modify global stratification.

 When corporations move manufacturing from the Most Industrialized Nations to the Least Industrialized Nations, they not only exploit cheap labor, but they also bring jobs and money to these nations. 

Although workers in the Least Industrialized Nations are paid a pittance, it is more than they can earn elsewhere. With new factories come opportunities to develop skills, acquire technology, and accumulate a capital base from which local elites can launch their own factories. 

The Pacific Rim nations provide a remarkable example.

 In return for providing the “favorable business climate” just mentioned, multinational corporations invested billions of dollars in the “Asian tigers” (Hong Kong, Singapore, South Korea, and Taiwan). 

These nations have developed such a strong capital base that, along with China, they have begun to rival the older capitalist countries. 

This has also made them subject to capitalism’s “boom and bust” cycles. 

When capitalism suffers a downturn, workers and investors in these nations, including those in the maquiladoras that you just read about, have their dreams smashed.