Role of Global Mncs in Governance

Question: Discuss about theRole of Global MNCs in Governance. Answer: Introduction: In the era of globalisation, the spread of operations of multinational corporations has become unprecedented which has led to humongous wealth generation. Such is the capacity of wealth generation of these corporations that they dwarf the total GDP of a host of nations including some bigger nations. It is estimated that the MNCs generate a sales in excess of USD 28 trillion annually and provide direct employment to over 70 million people globally. As a result of this immense spread and wealth creation, there arises the need for them to protect their commercial interests which requires indirect interference in governance through collusion with politicians and other influential stakeholders (Cutler, 2003). It is imperative that the forging of tacit relationships with MNCs serves the government well especially in underdeveloped and developing nations. This is because most of these nations are bestowed with rich mineral resources and other factor endowments but lack the requisite capital, technology and management to exploit these resources. Hence, the national governments go out of the line to provide these MNCs with an enabling environment so as to incentivise them for setting shop. However, in the process, the government ends up giving up its autonomy by surrendering to the profit making intentions of these companies. In the pretext of bringing development, these MNCs demand tax credits and guarantees from the government with regards to protection from nationalisation (Detomasi, 2015). There are frequent interventions in the policy sphere which are tailored as per these needs especially with regards to labour regulation. In the process, there are adverse consequences for the domestic industries, labour and also the local environment. Hence, while these countries assume that they are gaining, there are actually not gaining much as the long term effects negative effects are essentially hidden (Cutler, 2003). In the developed world, the role of government has receded ever since Thatcherism has gained prevalence and privatisation has gained a solid hold. This results in even essential services being privatised in the name of efficiency. However, in certain cases, a monopoly is created which in collusion with politicians is exploited due to which the consumers have to pay utility charges that are unreasonably high. A case in point is that of Enron which has developed a virtual monopoly on energy trading business in the US and hence could control the electricity prices by leveraging political contacts (Gourevitch Shinn, 2005). From the above, it may seem that MNC tend to abuse their power in order to serve their interests. Through the aid of CSR (Corporate Social Responsibility) measures, these MNC can potentially act as change agents especially for the poor nations (Detomasi, 2015). However, there is no denying that on account of their economic power, MNC would continue to act as significant players in the governance. The requisite approach is to ensure that accountability of usage of this power is enhanced through global measures by involving consumer awareness. Also, the state regulation mechanism needs to be strengthened so as to reinstate adequate checks and balances to prevent abuse of power (Abbott Snidal, 2009). References Abbott, KW Snidal, D 2009, Strengthening international regulation through transnational new governance, Vanderbilt Journal of Transnational Law,vol. 42, no.2, pp. 501578 Cutler, C 2003, Private power and global authority: Transnational merchant law in the global political economy, 4th ed., Cambridge University Press, Cambridge Detomasi, D 2015, The Multinational Corporation as a Political Actor: Varieties of Capitalism Revisited, Journal of Business Ethics, Vol. 128, No.3, pp.685-700 Gourevitch, PA Shinn, J 2005, Political power corporate control: The new global politics of corporate governance. 3rd ed., Princeton University Press, Princeton