Hi, my name is Allen Sens and I'm sitting outside the Botanical Gardens here at the University of British Columbia. Welcome to the Global Politics instructional video series. In this series, we're exploring a number of the key concepts in the study of global politics and international relations. And today we're looking at multinational corporations. Now, multinational corporations are one of the most significant forms of non-state actor in world politics today. There are so many of them and many of them are very large. These organizations exert a significant economic and political influence around the world. So let's have a look at multinational corporations. Multinational corporations. Now there are many different terms for multinational corporations. You will see "international companies." You will see "multinational enterprises." You'll see "transnational corporations." But we're just going to use multinational corporations and the most common abbreviation of course is MNCs. Now, multinational corporations are for-profit enterprises that conduct business in more than one country. A fairly common experience is for a company like Company X which operates inside state (country) A to have retail outlets in state A, and have production facilities as well in state A. And many companies stay this way for their entire existence. They always operate within their home country. But, in some cases, companies like to expand their operations abroad. And Company X might wish to do business in state B. And one way it can do that is to open up production facilities in State B and open retail outlets in state B as well. Another possibility is Company X may wish to open up operations in state C. And it can do that by actually starting a company, a wholly-owned company, inside state C. And that is called a subsidiary. So Company X owns this subsidiary. And the subsidiary will have retail outlets and production facilities inside state C. Now another possibility is that Company X may decide that it wants to expand production into state D. But when it looks at state D, it sees another company, in state D: Company Y. And it looks at that company and says Hmm. They actually have production facilities and retail outlets already in state D. Rather than establishing a wholly-owned subsidiary, inside state D, why don't we just try to purchase company Y? And so Company X may purchase Company Y in state D and thus control both the production facilities and the retail outlets of that company. They will become part of Company X. Now, if Company Y is very large, about the same size let's say as Company X, the two might form a merger. And this is where the term "mergers and acquisitions" comes from. Company X can expand abroad by either acquiring other companies or merging with them. And, as a result, what we have here, in the form of Company X, is a multinational corporation: a for-profit enterprise that conducts business in more than one country. And there are many companies like this. There are over 80,000 multinational corporations in the world today, and they control over 800,000 subsidiaries. Some of these companies are also very big. Dozens of them have annual revenues of over $100 billion US. Today, multinational corporations account for about one-third of world exports. Now what's really striking about multinational corporations is the intensity of the debate around them. Advocates of multinational corporations say look multinational corporations can do a lot of good things in the global economy. They provide investment to other countries around the world. They create jobs in other countries. They encourage the development of infrastructure: roads, bridges, energy infrastructure. They can bring technology to other countries. And they create access to world markets for companies operating in other countries. But the critics of multinational corporations say that multinational corporations, on balance, have a negative impact. And they say this because they argue that multinational corporations serve to decapitalize other countries. And what they mean by that is they take profit. They take money and resources out of other countries and bring it to the home country, the headquarters country. They argue also that multinational corporations can create inequality around the world because some companies will pay very well and that will lead to income inequality in other countries around the world. They also argue that multinational corporations exploit poor workers, poor communities, and poor countries. They also create dependence. As multinational corporations, in some parts of the world, become increasingly exploitative, these other countries may depend increasingly on Company X for example. And, finally, there's the argument that multinational corporations stifle domestic innovation and economic activity, by virtue of the fact they expand around the world, it makes very difficult for companies in any of these other countries to actually get going, to establish market share, because the big companies can take advantage of the economies of scale and dominate the marketplace. So, for all these reasons, companies like Company X are very controversial. And a big part of the debate about global politics. Okay, so that was multinational corporations. Now obviously with so many of these corporations around the world and with so many of them being so very large, these organizations are increasingly being thought of as even potential challengers to the state. Many multinational corporations provide pension funds to their employees. They provide a sense of identity. To the point where some have even begun to question whether or not more of our identities are being wrapped up with our employers than they are with our sense of being citizens of a state. Well, that time may be a long time in the future, but it's still the case that multinational corporations today are among the most important and contentious non-state actors in global politics. I hope you enjoyed this video. Join me again next time.
