Social, economic and environmental impacts of TNCs

Question 1

What are the positive impacts of TNCs on the host country? 4

Answer 1

1. Employment e.g. UK 2007: FDI generated 700 projects - 50,000 jobs.
2. Multiplier effect - wealth to local economy.
3. Injects capita into local economy - wages.
4. New methods of working e.g. just-in-time.
   Technology transfer - more skilled workforce in host.
   More female opportunities in low-skilled jobs.

Question 2

What are the negative impacts of TNCs on the host country? 6

Answer 2

1. Competition loss with local firms- less efficient, lose business and employees.
   E.g. Russia, Western chocolate manufacturers.
2. Environmental concerns - atmosphere damage.
   Developing world - less strict, habitats lost.
3. Labour exploitation - cheap, non-unionised workers.
4. Urbanisation - young migrate to cities - rural areas - elderly population.
5. Capital removal - capita doesn’t stay in host country.
6. Outside decision making - plant open/closed decisions made by head TNC office - not made in host country interest.

Question 3

What are the impacts on the country of origin? 3

Answer 3

1. Unemployment.
2. Decreased disposable income - downward spiral (vicious circle).
3. Traditional industrial regions relying on one+ industry - hard hit.

Question 4

Negative TNC country of origin impact - mini case study.

Answer 4

Dyson vacuum cleaner production transfer from Wiltshire to Malaysia - cost 800 UK jobs.
Claimed to cut 30% production costs.
BUT several hundred high salary UK jobs kept - in R and D, and administration.
Total UK revenue - £63.8 billion - 2004.

Question 5

How are call centres used in TNCs?

Answer 5

British Airways.
Call centres and back offices in India.
Lower wages - 20% lower than UK.