Go, Michael John 9/10/18

BSIE-1 Activity 3

A transnational company, or also known as TNC, has been defined by the

Business Dictionary as “a commercial enterprise that operates substantial facilities, does business

in more than one country and does not consider any particular country its national home.” This

speaks volumes as the definition implies that TNCs are able to be or already are the world’s

biggest economic institutions covering. According to Global Policy Forum in 2000, the rough

estimate of 300 TNCs own or control at least a quarter of the world’s productive assets which is

worth US$5 trillion. It can be said with no doubt that transnational companies have the power

and the means to out produce the GDP of multiple countries thus, having influences both

politically and economically. It has been said that TNCs hold so much influence that they are

able to do whatever they wish to do and the consequences of their actions are not as heavy as it

ought to be. This in mind puts a sense of unease in the minds of states and countries that are not

able to regulate TNCs’ influence in the market. According to Bakan (2004) in his book The

Corporation: The Pathological Pursuit of Profit and Power; he argues that TNCs exercise power

without responsibility. Some acts were mentioned such as sweat shop labour for low wages, the

pollution of the environment by Union Carbide in Bhopal and Human rights abuses by Coca

Cola in Columbia.

These companies mentioned above are examples of TNCs that have so much power and

have so little responsibilities. Union Carbide, a transnational company focusing on chemicals and

related products. It is more known for creating consumer brands such as Everyready and was a
major contributor to the first Atomic Bomb. In 1984, Bhopal, a fcilitiy owne by Union Carbide

accidentally leaked more than 40 tons of methyl isocyanate which led to an estimate 15,000-

20,000 premature deaths over the next 20 years. In the aftermath, Union Carbide has denied the

public the contents of the chemical, paid $470,000 for the damages done when the liability

would have cost more than the company was sanctioned and has since abandoned the chemical

plant without cleaning it up causing more contaminations in Bhopal until today. This incident

has shown the public just how powerful the TNCs had become and just what kind of

consequences they face contrary to their actions. These companies manage to get away with

these acts due to the fact that without it, our livelihood would collapse. Another example would

be Shell. In our world today, oil is essential for travel and without travel, productivity decreases

in a normal day. Shell has the power to sell oil as it can raise its prices. Once Shell starts raising

prices, other oil companies start raising its prices as well. To show its power further, once the

world market decreases oil prices, Shell would slowly decrease their prices and increase the price

immediately just when the World market increases their price. That is legal, and the government

cannot stop it at all.

According to Kuepper (2018) in his article What was the Asian Financial Crisis?,

he mentions that “The Asian Financial Crisis of 1997 was a financial crisis that affected many

Asian countries, including South Korea, Thailand, Malaysia, Indonesia, Singapore and

the Philippines.” In those times, the mentioned countries underwent a bubble economy where a

product’s price increases far more than its intrinsic value. This was all caused by these countries’

large amounts of debts. As foreign investments started to increase, so did the bolder and larger

projects started happening. All of these countries’ funding all came from large borrowing from
banks. Eventually, all the money these countries borrowed became unsustainable and eventually

lost about 70% of their currency’s value. As the Asian countries started losing their value,

inflation started rising as far as South Korea and Japan.

Ultimately, this was all solved by the International Monetary Fund (IMF), which gave the

countries loans in order for them to rise back up. The IMF lent the Asian countries $110-Billion

of short term loans in late 1997. In exchange for the loans, the Asian countries were required to

follow certain strict conditions such as higher taxes, higher interest rates and privatization of

state-owned businesses. By 1999, signs of recovery started to show as GDP growth was evident

and the Asian Crisis was over. Though the currency valuations and stock markets of many

countries reduced compared to previous years, it set the stage for Asia to rise back as a strong

investment destination.

Overall, these events have shown us the importance of government spending and the

awareness of bubble economies. Moreover, though the IMF was later on criticized for the strict

agreements especially towards more successful economies; if it were not for them, then the

Asian Crisis would have lasted longer than it had.

Sources:

1. BusinessDictionary.com. (2018). What is a transnational company? Definition and

Meaning. Retrieved from http://www.businessdictionary.com/definition/transnational-

company.html

2. Greer & Singh. (2000). A Brief History of Transnational Corporations. Retrieved from

https://www.globalpolicy.org/empire/47068-a-brief-history-of-transnational-corporations.html
3. Global Policy Forum. (n.d.). Transnational Corporations. Retrieved from

https://www.globalpolicy.org/economic-expansion/transnational-corporations-8-23.html

4. Broughton, E. (2005). The Bhopal Disaster and it’s Aftermath: A Review. Retrieved from

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1142333/

5. Revise Sociology. (October 2, 2017). Arguments and Evidence that Transnational

Corporations Harm Developing Countries. Retrieved from

https://revisesociology.com/2017/03/01/transnational-corporations-harm-poor-countries/

6. Encyclopaedia Britannica. (October 10, 2012). Union Carbide Corporation. Retrieved

from https://www.britannica.com/topic/Union-Carbide-Corporation

7. Kuepper, J. (n.d.). What was the Asian Financial Crisis?. Retrieved from

https://www.thebalance.com/what-was-the-asian-financial-crisis-1978997

8. Bakan, J. (December 4, 2009). The Corporation: The Pathological Pursuit of Profit and

Power. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1517433