TNCs: The Powerforce Behind Global Economics?
Transnational Corporations (TNCs) play an essential role in our global community by impacting our lives daily. For a simple definition, TNCs are companies that operate in more than one country at a given time. These entities produce a wide range of products, and have over the years become very powerful economically and politically. It is safe to assume that TNCs are a vital player in the international arena today, but their importance will only enhance as time goes by.
The strength of TNCs is seen in their ability to influence the size and nature of cross-border transactions. In fact, in 1995 there were 40,000 TNCs, a rise from only 7,000 in 1970, and they accounted for two-thirds of the world trade in
goods and services. TNCs are so powerful that they control eighty-six percent of the world’s land that is used for cultivation of export crops, sixty percent of aluminum mining and sell ninety percent of the world’s agrochemical products.
For many TNCs, their power far extends that of nation-states. For example, their ability to move provides them with the flexibility to gain their goals with little to none accountability. These corporations, together with their host governments, are reorganizing world economic structures–and thus influencing the balance of political power. For example, there are numerous TNCs that are financially more powerful than nation-states: annual sales of the Royal Dutch/Shell Group oil company are twice New Zealand’s gross domestic product (GDP); annual sales of the British tobacco company, BAT Industries, are equivalent to the GDP of Hungary; the German electronics firm, Siemans AG, has annual sales that exceed the combined GDP of Chile, Costa Rica and Ecuador (1993). Furthermore, the combined
revenues of just General Motors and Ford–the two largest automobile corporations in the world–exceed the combined GDP for all of sub-Saharan Africa. Overall, fifty-one of the largest one hundred economies in the world are corporations.
Their growth can be attributed to inter-governmental trade and investment accords, via which TNCs are able to manuever their way around the globe. Treaties, such as the North American Free Trade Agreement (NAFTA), serve as the foundation for companies to investment, and in turn for trade to flourish. These agreements allow corporations to circumvent the power and authority of national governments and local communities, and achieve their own objectives. In fact, TNCs have almost total control over the so-called process of “globalization.”
TNCs are aided in their quest for globalization vis-a-vis technology. Over the years, the speed of transportation and communication has increased, while the monetary costs associated with them has declined. For example, the cost of an international call has fallen by 80 percent between 1940 and 1970, and 90 percent between 1970 and 1990. All these factors have contributed to strengthening TNCs abilities to expand with minimum costs. Today, around ninety percent of all technology and product patents are own by TNCs worldwide. In the music industry, for example, six companies control the market:
- Polygram 19 %
- Time Warner 18%
- Sony 17%
- EMI 15%
- Bertelsmann 13%
- Universal 9%
- Others 9%
TNCs have been described by the United Nations as being “the productive core of the globalizing world economy.” These corporations account for most of the world’s industrial capacity, technological know-how and international financial transactions. They mine, refine and distribute most of the world’s oil, gasoline, diesel and jet fuel. They build most of the world’s oil, coal, gas, hydroelectric and nuclear power plants. They extract most of the world’s minerals from the ground. They manufacture and sell most of the world’s automobiles, airplanes, communications satellites, computers, home electronics, chemicals, medicines and biotechnology products. They harvest much of the world’s wood and make most of its paper. They grow many of the world’s agricultural crops, while processing and distributing much of its food. They are truly engulfed into every segment of our globe.
These corporations,further, have provided us with technologies that have altered our lives. They allow us to fly and drive across the earth, as well as communicate by telephone, television, computer and fax. Also, they played a role in promoting medical advances that have cured diseases previously thought to be incurable. In many parts of the developing world, TNCs have provided jobs, which in turn aids in providing a better lifestyle and raises individuals from below the poverty line. TNCs have truly aided in molding our current global world. They have provided us with numerous benefits and in the future they may even replace existing nation-states.