Is Globalization Enhancing the Capacity of Mncs to Control the States Domestic Economic Affairs?

Is globalization enhancing the capacity of MNCs to control the States domestic economic affairs?

Ye ZHU

Executive MBA Cohort 18, ESC Rennes

In the recent decades, the globalization has brought a strong impact on state power, a new world order in the making, marked by the de-territorialization of economic and political affairs, the ascendance of highly mobile, transnational forms of capital, and the growth of global forms of governance. And with the catalysis of globalization, multinational corporations (MNCs) have had a strong growth of its worldwide scale in economics, finances, markets and etc. They strongly shaped economics especially in developing countries though foreign direct investment and intellectual property transfer; likewise, through the globalization, it also reacted to developed countries. This impact and power of MNCs are much bigger than our envisioning. The following will explain why my answer to the question is affirmative.

Firstly, what is globalization? From my understanding, globalization is the process of crossing borders, either it is idea, innovation, capital or people taking place in this process. Through the development of new technologies, transportations and communications have brought about the feeling of a smaller world as everything becomes quicker and cheaper for people, data and goods to get from one point in the world to another. That's why some people saying "The World is Flat"(2005).

According to Anderson and Cavanagh (2000), among the largest 100 economies in the world, 51 are MNCs, whereas only 49 are countries. And out of the 200 largest economies of the world, 144 are MNCs. The combined sales of the top 200 MNCs are bigger than the combined economies of all the countries of the world, minus the largest 10. It is doubtless of MNCs capacity and financial power is getting bigger under globalization process. Incidentally, MNCs' capacity of controlling state domestic economics is getting uplifted:

Starbucks, in year of 2008, had 5,115 international retail coffee stores operating in 34 countries. These 5,115 stores represent 31% of Starbucks total stores, and international operations accounted for about 20% of Starbucks 2008 revenues whereas it was 16% in 2005. Behind such a strong global network, Starbucks has a financial impact on people around the global. It has created a plethora of jobs, from the farmers who grow coffee beans to the baristas that serve them. As of 2010, Starbucks has reached employee number that is over 137,000. To domestic and local society, Starbucks stores also contributed to local economic growth, creating new jobs and adding to local tax revenues. For every dollar of spent at a Starbucks store, on average, $2.23 is put back into the local economy through employee wages and benefits, taxes, and payments