Global economy Essay Example | Topics and Well Written Essays - 2500 words

Global economy - Essay Example These opportunities are found in major developing countries like India and China, where a large population results in excess of labor demand over supply; leading to comparatively cheap skilled and unskilled labor being available (Dominguez, pp. 5, 2005). At a superficial glance, when a multinational invests in a country overseas, the partnership seems beneficial. Both the parties seem to profit. The multinational company finds a new domain to practice business on, while the country involved benefits due to the creation of jobs in its economy as well as the expansion in the consumer market due to the addition of the MNC’s product. There is however, a more deep-rooted impact of this operation, which implies increased benefit for the MNC and less benefit for the developing country. The nation state, which allows the multinational to operate within its borders, seldom sees the profit from the company’s operations (Chen, pp. 136, 2003). Multinational company, upon earning th is profit, will whisk the profit out of the country to its own origin and home. Resultantly, even when million-dollar companies enter a developing country’s market, the million-dollar profit is not beneficial to the country itself in any way. If evaluated by the subjective eye, the situation can appear as if the MNC exploits the hosting country for its cheap labor and consumer market, while paying back only the bare minimum in the form of wages, while earning a massive profit as well as a beneficial expansion in operations. The operations of a multinational consist of combining the expertise (especially new technology) and the stock capital of the multinational with any opportunities the MNC may find in other countries in the form of cheap labor and other resources, leading to an increased output (Toyne, pp. 42, 2009). The result is often a substantial profit that the investors in the multinational divide amongst themselves and take home. While arguments both favor and oppose this distribution to solely the owners, the unbiased spectator has to admit that there is no legal ground upon which one can object to this distribution. The question that follows is that is there no way out of this redundant cycle for the developing countries? Will they continue to serve the multinationals with their cheap labor without ever seeing a reasonable share of the end profit? To answer this question, one has to evaluate the situation objectively. Since only the investors of a business are entitled to profits, the only way a nation state can fairly demand a share of the profit is by being one of the risk takers of the business. Investors in the MNC who belong to the hosting country share the profit of the company, and it is their decision whether to keep their share within the country, or to send it elsewhere (Nagle, pp. 104, 1998). If the nation state makes investment attractive for these stakeholders, they are tempted to keep the profits within the country to invest. Th is is often not the case in developing countries, where the government policies underestimate the importance of investment. In a country where the government policies promote investment using fiscal and monetary rewards, the country’s economy gains much more benefit through the operations of multinationals. Not only does investment from several sources increase, MNC operations in the country have a two-fold favorable impact