Transnational Corporations

Question 1

Define ‘Transnational Corporations’.

Answer 1

A company that owns production of goods in 2 or more countries other than their own.

Question 2

Why does a company become transnational?

Answer 2

• To gain more resources for more products as most of the world’s resources are in the Southern Hemisphere
• To gain profit from avoiding tax barriers and cheap labour in developing countries

Question 3

Identify a sociologist and their view on TNCs.

Answer 3

Frobel (1980) argued that there is a new international division of labour with the movement of industrial capital from developed countries to the developing world.

Question 4

Describe an example of a TNC and their possible problems.

Answer 4

Walmart (a retail outlet)

• Operates in 28 different countries, owning Asda in the UK
• 1 in every $8 spent in America is at Walmart
• 2.2 million employees worldwide
• Exploit people due to child labour, low wages, environmental destruction

Question 5

Briefly describe how TNCs operating in developing countries.

Answer 5

• They offer jobs to local people to help in the production of their goods
• Wages are higher than local businesses
• Introduce people to the industrialised technology from the West
• Import and export goods to and from the business

Question 6

Identify 5 advantages of a developing country hosting a TNC.

Answer 6

1) Jobs to boost the economy
2) Cheap goods
3) Country can tax the imports and exports of TNC
4) New technology fro development
5) Opens them up to the global market

Question 7

Identify 8 disadvantages of a developing country hosting a TNC.

Answer 7

1) Exploitation of workers through cheap labour
2) Poor working conditions
3) No trickle-down as profit goes to the TNCs
4) Increased dependence
5) Decreased control of the country making their own decisions
6) Majority of workers are women and children
7) Unstable due to potential of TNC leaving
8) Impact on environment

Question 8

What is an ‘export processing zone’?

Answer 8

• Free trade zones set up in developing countries by their government
• They promote industrial and commercial exports
• Offer incentives for TNCs (e.g. exemption from taxes and local laws)
• Geographical close to points of export

Question 9

Why might a TNC move production to EPZs in developing countries?

Answer 9

• Cheaper, larger land
• Avoiding trade barriers and exemption from local laws
• Gain profit from cheap labour

Question 10

Give evidence for the rise in EPZs

Answer 10

The increase in the number of EPZs from 1975 to 2006 was 3,400 with employment tripling since 1997.

Question 11

Identify 2 strengths of EPZs in developing countries.

Answer 11

1) Creates jobs that pay higher wages than local businesses

2) Introduction to new technology

Question 12

Identify 4 weaknesses of EPZs in developing countries.

Answer 12

1) Goods are purely for export so never benefit host country
2) Exploiting workers fro cheap labour and poor working conditions (e.g. high temperatures in ‘sweatshops’ and average of 12 working hours)
3) Majority of workers are women and children
4) Impact on environment

Question 13

Give evidence for the poor working conditions in EPZs in developing countries.

Answer 13

In 2002, 43 workers died in a factor fire in India due to all the doors and windows being locked which broke safety regulations.

Question 14

How do TNCs and EPZs cause environmental damage? -

Answer 14

• TNCs and EPZs take up land to build their factories
• Food companies cause deforestation to allow for cattle ranching and harvesting agriculture
• Deforestation causes environmental damage as it clears trees which take up CO2 however if there are less trees then this causes global warming and climate change
• Some TNCs dump their toxic waste in water supplies that local people may use for drinking and cleaning causing ill health and environmental degradation

Question 15

Give evidence for TNCs causing environmental damage.

Answer 15

In 2006, more than 30,000 people from the Ivory Coast claim their health was affected by waste dump from the TNC, Trafigura.

Question 16

What are Modernisation theory’s views on TNCs?

Answer 16

• Positive due to aiding development
• TNCs from the West introduce Western culture
• This stimulates economic growth due to encouraging entrepreneurship as competition is a Western value seen from higher wages than local businesses
• Improves the skills of workers with new Western technology
• Link the developing country to the global market

Question 17

Identify 2 criticisms of Modernisation theory.

Answer 17

1) Its assumption that entrepreneurship will transition traditional to modern is too simplistic
2) Kiely (1995) argues that modernity may create as many conflicts as it destroys

Question 18

What are Neoliberal theory’s views on TNCs?

Answer 18

• Positive
• Similar to Modernisation theory
• Encourage a free market whereby the sellers dictate the prices allowing the market to regulate itself
• Competition between TNCs for workers will increase wages
• Anderson and Cavanagh (2000) argue that TNCs are important in generating wealth for developing countries

Question 19

Identify a sociologist who is critical of the Modernisation and Neoliberal approach to TNCs.

Answer 19

Naomi Klein (2014) condemns TNCs for their reckless destruction of the environment by avoiding their corporate responsibility, describing their rhetoric of fair trade and sustainability as ‘green wash’.

Question 20

Identify a criticism of Neoliberalism.

Answer 20

Developed countries still experience poverty, gender inequalities, etc and so ignores the disillusion of ‘crisis of modernism’ that may cause a country to reject modernisation.

Question 21

What are Dependency theory’s views on TNCs?

Answer 21

• TNCs further global inequalities
• Satellites become dependent on the TNC as their economy would crash if they left
• Exploitation of workers with low pay and poor working conditions (e.g. Nike sweatshops)
• Prevents local industry developing due to stifling competition (e.g. Guatemala cannot industrialise to roast their coffee due to fear of competition)
• Only produce goods for export which therefore doesn’t benefit local economy as the wealth flows back to the West

Question 22

Identify a sociologist who agrees with Dependency theory suggesting TNCs are harmful.

Answer 22

Ivan Illich (1987) argued that TNCs create ‘false needs’ in the way they market products that have minimal nutritional value, e.g. fizzy drinks.

Question 23

Identify 2 criticisms of Dependency theory.

Answer 23

1) Defining dependency - hard to operationalise with undefined Satellites and Metropolises
2) Deterministic - Frank stated there was no way of changing position, whereas Wallerstein does with the World Systems Theory

Question 24

What are Feminist theory’s views on TNCs?

Answer 24

• Main demographic for employees are women and children
• Radical Feminists argue that employers abuse the female workers to maintain effeciency
• Contracts can ask pregnant women to terminate it
• Women would likely accept low wages due to needing work
• Controlled by the patriarchy and so would feel intimidated to stand up for themselves
• Not exposed to Western Liberalism and so wouldn’t feel as encouraged to fight back

Question 25

Identify a sociologist who agrees with the Feminist view of TNCs.

Answer 25

Susan George (1976) found that new mothers were manipulated into using formula in developing countries instead of a more natural process of breast-feeding, causing potential harm to their babies.

Question 26

Identify a criticism of Feminism.

Answer 26

Women having work gives them status that they would otherwise not have if there were no TNCs.

Question 27

What conclusion can be drawn from TNCs and their impact on the development of LDCs?

Answer 27

TNCs can improve development as they offer jobs and wages to local people to boost the economy, however ultimately it causes harm to their economy due to its instability (TNCs may leave) as well as environmental damage caused. Therefore they can be seen as a problem in developing countries due to only serving the West.