Tuesday, December 09, 2008
just wondering about 'hot' bloggers. what's the appeal of a blogger? pictures? words? surely there's no character to a post. or reality to a picture.
it genuinely puzzles me.
xin has decided not to bore everyone with ermm underdevelopment of Third World countries.
Monday, December 08, 2008
Do TNCs benefit or disadvantage their hosts?
After discussing at length about the mercantilist fear that TNCs would empower hosts with the infusion of capital and knowledge, hereby improving the hosts' relative position in the global economy, we wonder if TNCs truly benefit their hosts.
Do TNCs aid Economic Development?
- FDI is more stable and long-term; costs of withdrawing capital higher thus improving the hosts' bargaining position
At the same time, because TNCs are foreign, they cannot be expected to CARE about national interests; and in times of crisis, naturally choose to retain their factories at home
- Diffusion of skills and technology to the host countries, equipping its workforce
Assuming of course that TNCs would want to hire locals and train them, also assuming that locals will not be averse to their business culture and resistant to picking up new skills; Madeley also argues that since only a specific stage of production is located within the host, workers do not pick up useful skills and knowledge of the whole process - subsidiaries are mere appendages
- Monopoly of TNCs due to their superior knowledge and greater financial access: hire locals and borrow money, depriving local entrepreneurs of resources; making use of economies of scale and advantages to oust out local industries -> creates high dependence on TNCs and not self-reliant growth
- Inappropriate technology: capital-intensive rather than labour-intensive (and labour is presumably the comparative advantage developing countries have); high unemployment, especially since labour-intensive, inefficient local industries are ousted out
TNCs rob states and its people of power
- Transfer pricing and sophisticated accountants - tax evasion in host countries: California's unitary tax laws an utter failure
- INfluence and impact World Trade ORganization: contributed to Trade-Related Intellectual Property Rights - allowing them to patent their products and host farmers (who have been planting a certain drug crop for generations) suddenly have to pay royalties to drug companies who has the money and resources to patent them
- Manipulation through trade: Kissinger on righting the 'irresponsibility' of citizens who voted Socialism and with help of US corporations ITT (International Telephone and Telegraph) helped overthrow President Gossens in Latin America in 1973
TNCs contribute to decline in citizen's welfare
- Democratic deficit: Exploitative alliance with authoritarian governments
- Race to the Bottom: Governments, trying to attract TNCs, has less resources for welfare, education, health care; promises low wage, tax free agreements
- Lack of product appropriateness: Nestle producing milk powder in West Africa where there isn't clean water; produces systematic bias against poor
- Cultural imperialism: erosion of traditional cultural and social values in marketing and advertisements, encourage demands for luxury goods
- Irresponsible TNCs in the case of catastrophes 1984 Union Carbide plant exhalation of toxic gases in the city of Bhopal; corporate responsibilities more like public relations; vagrant environmental destruction - Canada cannot prevent US corporations from emitting gases that contribute to acid rain that falls on Canadian forests
Note: In Asian NICs (Newly Industrialized Countries), component-parts-producing industries have a spill over effect, propelling the emergence of other industries, spurring economic development as a whole. Capital intensive industries create overall economic growth, which created jobs, and reduced unemployment e.g. Singapore, Taiwan, South Korea
While TNCs may be at fault, some problems e.g. cultural imperialism, inequality, decline in welfare inherent in economic development; some problems may be due to poor policy-making in host countries or to the structural weakness of host countries
Just like me... now. Boring. Ugh.
Thursday, December 04, 2008
xin has gotten back all her essays, and quite happy because xin expected to fail her last 2 essays :)
xin didn't do brilliantly either - but xin is easily contented.
Now for exams - let's discuss whether the mercantilist (oooh don't we love mercantilism) view that TNCs are detrimental to home countries ring true.
Transnational Corporations: A corporation that owns, controls and manages its assets in more than one country.
Mercantilists say: TNCs are bad for the home country due to outflow of money in terms of FDI to host country, and in view that mercantilists think wealth = power, shall we also argue that, ultimately, what mercantilists fear is that power (in other forms as well) will flow from home to host?
Yes, outflow of money in FDI - less money in home country for developing local industries, promoting economic growth... money which could have been used at home used to develop infrastructure, industries in host country
But money usually generated in the developing countries, and not taken out of home country - problem long pre-empted by Johnson Administration in the 1960s whose discouragement of capital outflow prompted TNCs to raise Eurodollars issues in London to pay for expenses rather than take money out of Wall Street.
Yes still, because state revenue threatened because of sophisticated accountants help TNCs cheat state of money, because difficult to ascertain the profits made within the country, and cannot tax money generated outside home country e.g. profits of oil companies and banks in 70s and 80s – the importance of these companies in bringing fuel and credit forced politicians to not question this preferential tax treatment; also, California tried with its unitary tax laws (tax worldwide profits) but ended with TNCs fleeing the country
Anyway, profits are usually repatriated (though part of it will be used to finance further development of the TNC)
Counterfactual - If TNCs don't use this money for investing in Host Country A, will they necessarily use this money to invest in (assuming TNCs were rational and picked A for its economic benefits) Home Country B and face higher costs of e.g. wages, raw materials, taxes... Will B's TNCs necessarily survive if they choose to keep investment home (and develop local industries blahblahblah) because they might face competition from A's TNCs in B (and which has the advantage of having economies of scale)
Other Forms of Outflow of Power
Technological Transfer – Technological knowledge and managerial know-how ‘exported’ to host country, allowing them to benefit and improve relative to home, relative gain in power by the host threatens home’s position in the hierarchy of power e.g. how the predominance of US position in the global economy was threatened by emergence of European and Japanese TNCs
Extent debatable – home governments not totally at a loss e.g. US Congress urge TNCs to keep their R&D at home, preserving not only skilled jobs domestically, but also its competitive edge in superior knowledge; managerial know-how preserved through employment of home managers even in host countries (high-end jobs preserved as well as managerial skills) e.g. Japanese corporations have a tendency – trust in compatriots, also business culture difficult to export – an implicit method of doing business inherent in culture; exploitation argument (quite Marxist to be honest)– TNCs only develop specific, mechanized stage of production in one particular area so workers are only capable of a standard, repetitive work, without gaining any useful skills applicable to even similar local industries
All down to bargaining power of host, home and TNCs – who has what other people need, formation of cartel (only successful, but very successful in Organization of the Petroleum Exporting Countries) to threaten TNCs with withdrawal of scarce resources (FUEL) – using supply and demand to successfully demand higher prices e.g. 1973 oil embargo – TNCs forced to come home; also, once TNC is settled, built infrastructure – nature of FDI such that it is more costly to simply uproot and go – bargaining power of host increases à home is more threatened
Compare bargaining power of hosts like Asia VS hosts like
General Loss of Political Power
Social impacts: Loss of jobs (duh!) Low-skilled jobs mainly cos R&D generally kept home, as are managerial positions
Environmental blame-game: when a Swiss chemical company inadvertently spilt toxic waste into the Rhine, it was the Swiss government to whom the French, German and Dutch governments complained; but also dependent on power of home country e.g.
Home, if no power (as in to bargain, to threaten, to set policies that will be followed), open to exploitation by TNCs – TNCs are like big bullies, they bully who they can. But we can’t blame them, after all, the state-power-struggle is none of their business, their sole aim is profit-maximization =)
TNCs can help states too in cunning, political manoeuvres because of their immense resources.
Tuesday, December 02, 2008
anyway on a happy note, i shall finally post my trip to dundee/st andrews.
we stayed in a nice hotel in dundee, a river away from st andrews - the land of golf!
dundee was famous in the past for its shipbuilding industry, and so famous in fact, that it managed to get itself a contract to build the first (?) ship to go to antartica, the RRS Discovery
Oh and did I mention because we're beside the River Tay, everything is called Tay, like Tay Road Bridge (is the bridge from Dundee to St Andrews in the first pic) and Hotel Tay and North Tay Street and so on. This may not be very interesting,but it kept reminding of my darling Huiyan who gets very excited at her river Tay.
We managed to reach the top of the hill (called the Law) at night (not really night, just dark) and looked down at the bridge connecting Dundee and St Andrews. For once, all the stars were below.
We went to St Andrews the next day and it has a very pretty university building...
Along with very pretty lawns =)
And the lucky Business people in the University of St Andrews has a campus that overlooks the sea. There's ruins of an ancient castle beside it
Drawn to the sea, we walked towards it, and along a very scary, narrow ledge, and looked back at the towering remains of some ancient church.
We visited the church and its cemetery and I found a lovely inscription:
of set music
in fast or slow
to the grave
Coming back to Dundee, how can we forgo a chance to embark the RRS Discovery?
And there we end our journey, catching a train back to foggy Edinburgh.
Amazing. The weather.