Accounting and Economics the Power of Transnational Term Paper

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Accounting and Economics

The Power of Transnational Corporations

W]ith the exception of a handful of nation-states, multinationals are alone in possessing the size, technology, and economic reach necessary to influence human affairs on a global basis.'"

Fowler)

Fowler presents impressive statistics in support of this opinion, and there is no doubt these have multiplied, perhaps exponentially since this article was written in 1995. Fowler cites the recent proliferation of global free trade agreements as responsible for the recent reluctance in attempts by nations to control the TNCs. The United Nations even abandoned the plan to develop a code of conduct for TNCs, which it had pursued for fifteen years, because the control of TNCs is an unattainable goal. They simply have far too much power, and enforcing any code would have to be agreed upon by all the member states. Getting the member nations to agree upon even the smallest rule with attached consequences is a major undertaking, so the creation of an entire code of conduct is an unrealistic fantasy. Therefore, the United Nations and the member states have decided to focus their efforts on lesser, but more realistic goals.

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Actually controlling Transnational Corporations is considered impossible by many analysts. However, a large measure control can be achieved by controlling the environments, (business, economic, legislative and political), within which they do business. These are factors which can be controlled by the member states. They do not even have to agree upon a particular set of rules or consequences to have an impact, but only have to share one which is well thought out and logically supported with proof of its benefits to the state.

Term Paper on Accounting and Economics the Power of Transnational Assignment

Beyond this, few states have the means to control TNCs beyond allowing or disallowing them. China has come as close as any member state, perhaps, because of its ability to apply its rules to its own corporations immediately upon making any decision. It is the nature of the absolute power of the state in certain areas. This factor has inhibited investment in China until they can establish a more constant rule of law. Corporations have gotten around this since China joined the WTO by negotiating binding agreements with the state. While there are other states with absolute power, none can approach the economic power of the PRC. That TNCs negotiate directly with the host countries without the need to go through their own government's state department or some other political power is indicative of the actual power these TNCs wield.

Even in China, TNCs are powerful enough to gain many concessions, especially since many made their original inroads into this huge market by establishing joint ventures with Chinese corporations. This is no longer absolutely required by the PRC, but the most powerful TNCs already have joint ventures there.

The absolute unvarnished truth is that TNCs bring hard currency, jobs and expertise to the host countries. In exchange they often get low labor costs, preferential tax treatment and concessions on things like transportation access and land availability and zoning. That this exchange is probably more benefit to the TNCs is a cold fact of life. They have "wants," while the host countries have "needs." Once the economic development of a host country reaches a higher level, they will be in a position to renegotiate. However, many parts of the world have more people than they have resources, so this may never happen in these places. Such countries will always be in a less powerful position.

Anyone who does not believe that transnational corporations are the movers and shakers of international global trade only has to look at the world stock exchanges. When deals are made with TNCs, the partners or joint venture companies will enjoy a surge in their economic value. The recipient host countries will often see their own global credit rating go up as a result of a deal with a respected TNC.

In truth, globalization is a complex network of nations, corporations, international organizations and enterprises local to the various countries which contribute to the global economy. Ietto-Gillies describes it as much more than just involving trade.

Globalisation is a complex phenomenon which covers much more than the strictly economic sphere. 'Globalization is political, technological and cultural, as well as, economic' (Giddens, 1999:2)."

Ietto-Gillies 161)

He also cites TNCs as the driving force behind the process. In fact, the process of globalization is a reorganization of political power and a new division of labor on an international scale. The functionalist theory for sociological development predicted this phenomena, since it serves to make things work and to establish and maintain international stability. While national governments have honed their negotiating skills to a superior level, their interests are often ideological in nature, and people simply cannot eat ideology. So the power has moved to the corporations and the interference of politically or ideologically motivates entities is minimized in the interest of global economic development.

We must conclude from this evidence that transnational corporations are, indeed, global economic movers and shakers, since everyone want to dance with them. Host countries offer incentives. International bodies try to minimize interference. Global financial markets and currencies respond strongly to actions taken by TNCs. Even the richest and most powerful nations need economic productivity and cash, so they find ways to cooperate with the interests of TNCs. Fortunately, the owners and employees of these TNCs breathe the same air and drink the same water as the rest of us, so they usually consider benefits to humanity as also beneficial to the company. Problems only arise when ignorance rules or when personal greed overcomes reason.

Works Cited

Fowler, Robert J. "International Environmental Standards for Transnational Corporations." Environmental Law 25.1 (1995): 1-30. Questia. 14 Dec. 2006 http://www.questia.com/PM.qst?a=o&d=5000274495.

Ietto-Gillies, Grazia. Transnational Corporations: Fragmentation Amidst Integration. London: Routledge, 2002. Questia. 14 Dec. 2006 http://www.questia.com/PM.qst?a=o&d=108115153.

Environmental Concerns with Transnational Corporations

Transnational corporations are some of the most powerful entities on earth, and this presents problems for the various nations and international governing bodies how to apply some control to these corporations in the interests of the global community. While it is humane and ethical to consider even the smallest and poorest of nations, the fact is, within the global environmental envelope we are all connected, so it is also in the very real practical interests of all people of all nations.

Critics of TNCs have argued that their post-war expansion has become increasingly focused on the exploitation of the natural and human resources of developing countries.(8) Ethical issues arising from TNC activities include... environmental and cultural impacts..."

Fowler)

This is a very important consideration due to the previously mentioned interconnectedness of all nations.

Many owners, board members and personnel of TNCs are well aware of the interdependence of all nations and peoples, and they makes decisions based upon the good of the company and its employees, considering this global interdependence as an important factor. However, in any large group of human beings, there are good and bad, smart and short-sighted, reasonable and irrational and self-interested and just plain greedy. Therefore, just as traffic laws keep most drivers in compliance with safe driving practices, some controls must be applied to protect this global environmental envelope or we will all suffer. Controlling any large TNC is a daunting task we have not resolved. The problem, therefore, is how to apply controls to protect the environment, and the United Nations has recently moved from attempting to create a code of conduct for TNCs to creating methods to protect the environment from TNCs.

Basically we need to approach this problem on three fronts: from the self-interest of the TNCs, from the interest of the host countries and from the interest of the countries of origin. Self-interest are of several types: economic, cultural, social, health and political. Anything which has a detrimental effect on any of these would be counter to the interests of the entity involved. The tools which would be most useful in applying controls are education, economic consequences and public relations.

The fact is, we are the tail trying to wag the dog here, so a better approach is to become a herd of fleas. If the dog stays clean, we won't bite. Cooperation among the many countries involved is absolutely necessary if we are to create an international trade environment which promotes good environmental practices in global trade. The United Nations is attempting to create some resolutions upon which the members can agree. Another force we can apply come in the form of the World Trade Organization. It should not be difficult to convince a majority of the members of that body that global environmental protection in is the best interests of all its members and member nations. The WTO is an organization created to protect the economic interests of its membership. Due to the apolitical and ideologically neutral environment of this organization, creating practical solutions may be easier here than in any other international forum. This organization also has the power to inflict economic consequences… [END OF PREVIEW] . . . READ MORE

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