Multinational Corporations (MNCs) and The State

MNCs are interrelated to the state, their relationship may varied from positive to negative. In  this context, it will discuss about their relationship within the context of the home and host country where the MNCs are operated.

The home country of MNCs will get benefit, because MNCs contribute to the overall production, revenue, and GDP growth of the state. As for example, US multinationals corporations accounted for 23 percent of US private sector GDP (or value added) in 2007. They contributed 31 percent of the growth in real GDP and 41 percent of US gains in labor productivity since 1990. The larger the company, the higher the tax rates, especially when the country adapt a progressive tax system. The more income a MNC get, the more taxes they have to pay. Therefore the state will gain more revenue from taxes.

While MNCs in the host country will contribute to reduce the number of unemployment by employing many people. Other than that, MNCs will increase the consumption of the people in the host country due to their more attractive products than the domestic. However, sometimes because of this domination of MNCs in the host country, the other domestic industries, especially infant industries, will seek protection from the state to limit the power of MNCs through protectionism.

If we refer to a real life MNC, one of the example is McDonald's franchise. The McDonald's Corporation is the world's largest chain of fast foods restaurant, serving around 68 million customers daily in 119 countries across 35,000 outlets.. Their origin headquarter is in United States, and they also contribute to the growth of real GDP of US as mentioned in the previous paragraph. And when they set up their businesses all over the world, like for example in Indonesia, they require labour from the local people, so it creates job opportunity for indonesian people as well. Thus, it leads to more employment.

So, perhaps the MNCs tend to create more positive impacts for the home and host country rather than negative impacts. This can be proved by their contributions that indirectly strengthen the economy of both countries.

Dania S. Hardiani
170135984


http://www.mckinsey.com/insights/americas/growth_and_competitiveness_in_us

http://en.wikipedia.org/wiki/McDonald's