The Significance of Multinational Companies to the Economies of Less Case Study

The Significance of Multinational Companies to the Economies of Less Case Study The Significance of Multinational Companies to the Economies of Less Developed Countries â€" Case Study Example > The paper “ The Significance of Multinational Companies to the Economies of Less Developed Countries” is an outstanding example of a case study on macro and microeconomics. Today, the impact of multinational companies is widespread. Whether in the production of television sets, computers, software, cars, or even chocolate, some of the major players have found the need to operate beyond their own borders, often in such cheap labor. But the activities of multinationals go much farther back than the recent technological breakthroughs that have allowed almost every business to maintain some form of international presence if only by having a web presence. Some multinational companies such as Dunlop and Cadbury have a long-standing history with Third World countries because they had to source their raw materials from these countries. But to what extent did the Third World countries benefit or suffer from their involvement with these multinationals. In order to fully understand the i mpact, it is important to appreciate that multinational companies are not charities and that self-interest drives their activities first and foremost. Multinationals often possess what many Third World countries lack, and that is   knowledge and expertise. This is not to say that there are no smart people in Third World countries. Far from it. Many Third World leaders are highly educated and may surround themselves with an equally well-educated elite but they may simply not have the technology and knowledge necessary to fully exploit their domestic resources. As such, the entry of multinationals, either by invitation or by business exploration on the part of the multinationals is predicated on the belief that there could be a mutual benefit for both parties. In effect, the multinationals would help the Third World countries in question by buying their resources or extracting them as the case may be and give the countries an opportunity to earn much needed foreign exchange and other resources so that they can take care of the needs of the local population. In the early part of the 20th century, for example, when information spread that the Amazon jungle was a source of rubber, many companies from the more advanced economies made their way there and did what they could to take advantage of those resources. As Bradford L. Barham and Oliver T. Coomes write in the article, “ Reinterpreting the Amazon rubber boom, ” “ For fifty years, the extraction of wild rubber from the jungles of the Amazon fueled unprecedented economic expansion in the region: per capita incomes in the Brazilian Amazon climbed by 800 percent: the regional population increased by more than 400 percent; urban centers and secondary towns blossomed along the river banks, and the vast Amazonian forest lands were integrated into national political spheres and the international market economy. But when low-cost rubber from British plantations in Asia flooded world markets in the 1910s, rubber prices plummeted, sharply curtailing financial returns from wild rubber extra ction” (Barham Coomes 73). As noted above, the primary interest of the multinationals is to make money, not to develop the Third World, so when opportunities for cheaper resources became available elsewhere they were quick to jump ship. In the case of the Amazon basin, some commentators believe that the failure of the area to develop a sustainable economy was due in part to the flight of capital from the area, in other words, the taking away of profits by the multinationals operating in the area rather than reinvesting the funds in the domestic Third World country. As Barham and Coomes note with regards to some interpretations, “ exceptional profits that accrued from the rubber trade were transferred out of the region and thus made unavailable for local development. The surplus was extracted within the region through unequal exchange maintained by debt-peonage and coercion. Foreign firms, perceived as operating as a monopoly or monopsony (Bonilla 1977; Flores Marin 1987 and d omestic elites (Santos 1980; Haring 1986) extracted the surplus and chose not to invest in the region” (Barham and Coomes 3). If the multinationals did not take as their priority the development of what was a foreign field to them the Third World countries have at times been betrayed by their own elite who prefer to skim off profits generated by their country for their own personal benefit rather than that of the nation as a whole.