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Human Geography

Economic Geography

Impacts of TNCs

Positive

Negative

Job Creation: Direct, and Multiplier effect

Employment to work in production plants

In some ELDCs, TNCs account for over 20% of employment in manufacturing

Low wages > no wages

Trickle down effect = better social provisions

Presence of MNCs also brings in investor confidence

Case: Coca-Cola

Direct: 138,000 RMB

Indirect (multiplier): 414,000 RMB

Glass suppliers, aluminium suppliers etc.

8.16b RMB into China’s economy in 1998

Creation of Industrial Linkages

Primary industries stand to gain by supplying raw materials and stuff to plants

Joint Ventures

Transfer of technology

Profits shared to some extent

Nurturing of local talent

Structural Shifts in Local Economies

Enables LDCs to jumpstart their mode of production from agrarian to industrial

Africa loses over 20,000 intellectuals annually through brain drain’

Social Strategies to engage local communities

Nike: Social programmes include providing small loans for women in Thailand to set up businesses (microfinancing)

Citigroup: Pioneer founder of microfinance programmes in various ELDCs

Small loans of ~$100 to poor families for them to start businesses

Exploitation of cheap labour

Profit repatriation

Minimal transfer of skills

Low level skills that are transferable to few other industries

High mobility enables TNCs to leave host countries for countries with cheaper labour costs

90s – MNCs left Singapore in favour of China

Maxtor

Repercussions on economies highly dependant on TNCs

Stifling of competition & entrepreneurship

Hindrance of smaller TNCs/companies trying to break into local markets

Chaebols in Korea: Samsung, Hyundai, LG

Keiretsus in Japan

Hegemony over markets

Over-dominate markets at the expense of smaller players

Immense diversification and penetration makes it difficult for them to lose out

Case: Wal-Mart

Flexible production systems means jobs impermanence

JIT

Outsourcing

Hire-fires

Violation of labour and human rights

Sweatshop phenomenon

Poor regulations in waste management

Case; Bohpal Incident in India, 1980s

Case: Nigeria Shell Incident, 1990s

Water pollution, spills make land barren

40% of Shell’s oil spills have occurred in the Niger Delta

Environmental and human rights activists executed

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