“TNCs have more of a negative effect in LICs than a positive
effect”. To what extent do you agree with this statement?
[6 marks]
Transnational companies operate in more than one county. They typically
have their manufacturing processes in newly emerging economies (NEEs)
and Low Income Countries (LICs), with their headquarters in High Income
Countries (HICs). They can have both a positive and negative effect in LICs.
One positive effect of TNCs in LICs is that they bring employment to local
people, who get a regular wage. This means that the wages can then be
spent on goods and other services in the local communities, which
encourages further development – this is called the multiplier effect.
Another positive effect is that the TNCs themselves pay taxes in the
countries they operate in, and the government then uses this money on
improving roads and other services like healthcare and education. Overall,
these two positive impacts can help to improve the lives of the people in
LICs, and lift them out of poverty.
However, although TNCs do bring employment opportunities the number
of individuals employed may still be small, especially when mechanisation
means fewer people need to be employed in factories. And often, many of
the jobs which are provided are not skilled, meaning they do not develop
the skill base of the country.
In addition, much of the profit is then sent back to the country where the
TNC is based, usually a high income country, and therefore this leaves little
benefit to the country where the TNCs operate.
Overall, I believe that TNCs have more of a positive effect in LICs than
negative, because their involvement helps to cause the multiplier effect in
their economic development. This also improves their social and economic
development, meaning they can be lifted out of poverty.
“TNCs have more of a negative effect in LICs than a positive
effect”. To what extent do you agree with this statement?
[6 marks]
Transnational companies operate in more than one county. They typically
have their manufacturing processes in newly emerging economies (NEEs)
and Low Income Countries (LICs), with their headquarters in High Income
Countries (HICs). They can have both a positive and negative effect in LICs.
One positive effect of TNCs in LICs is that they bring employment to local
people, who get a regular wage. This means that the wages can then be
spent on goods and other services in the local communities, which
encourages further development – this is called the multiplier effect.
Another positive effect is that the TNCs themselves pay taxes in the
countries they operate in, and the government then uses this money on
improving roads and other services like healthcare and education. Overall,
these two positive impacts can help to improve the lives of the people in
LICs, and lift them out of poverty.
However, although TNCs do bring employment opportunities the number
of individuals employed may still be small, especially when mechanisation
means fewer people need to be employed in factories. And often, many of
the jobs which are provided are not skilled, meaning they do not develop
the skill base of the country.
In addition, much of the profit is then sent back to the country where the
TNC is based, usually a high income country, and therefore this leaves little
benefit to the country where the TNCs operate.
Overall, I believe that TNCs have more of a positive effect in LICs than
negative, because their involvement helps to cause the multiplier effect in
their economic development. This also improves their social and economic
development, meaning they can be lifted out of poverty.