mncs tree cartoon

(Find this picture along with others at this source)

Everywhere around us we see the giant corporations dominating global markets, whether it’s the Microsoft run laptops, the iPhone’s many of us rely so heavily on, or the slick Adidas trainers you saw that guy wearing on the train. Not many of us stop to think about the horde of multinational corporations (MNCs) we are all engulfed in. But where did these guys come from? How did companies such as Wal-Mart (known as ASDA in the United Kingdom), Apple, Nestlé, Coke, and McDonald’s get so big, powerful, and global? Does the US dollar have an effect over any of this?

A brief explanation of how these corporations got global and giant might be in order first. Corporations’ desire for raw materials they didn’t have at home is what originally drove them to look abroad. By the twentieth century, MNCs started setting up camp in “major foreign markets in order to escape protectionist trade barriers” (Thun, 2011, p. 369). This puts up difficulties and opportunities for developed and developing economies. Countries with developing economies, for example, might find that they are too small or not easily attainable. They’ll probably see that this put them in a more difficult situation than they were in before.

In developed economies, on the other hand, corporations seem to have a menu of sites for production; this allows them to make up for being held back at in the motherland without actually withdrawing completely from home (Thun, 2011, p. 369). Cantwell (1990) explains that “US manufacturing firms expanded their productive activities in Europe rapidly in the 1950s and 1960s…” and buy the 1970s the US was densely internationalized. Since then, many Japanese and European corporations have also quickly broadened their internationalization.

These corporations have it almost all figured out. Crouch (2011) says “they will mount marketing and advertising campaigns to create demand.” They’ve found ways to make us want what they sell, instead of selling what we demand, but they “have not liberated themselves fully from the market; they remain subject to it in order to buy and sell successfully” (Crouch, 2011, p. 52). So, uh, that’s good.

In the case of the US dollar, O’Brien and Williams (2013) points out that “many products traded on the international market are priced in US dollars — the most important of these is oil.” They go on to discuss how the US dollar has been the world’s reserve currency for quite some time just because some random people back in the 1940s thought the American economy would work out better than any of the other countries . But has it been on top for too long? The US relies heavily on their currency being what people want to trade and buy in. Right now America has it pretty good with being able to price things, such as oil, in dollars; it leaves them immune from price swings. If everyone abandoned the dollar the United States would be “[challenged] to reduce consumption, restore fiscal balance, and invest in infrastructure and human capital to become more competitive” (O’Brien & Williams, 2013, p. 175).

I mean, it’s pretty unlikely that would ever happen since the euro has zero state backing and the Chinese renminbi has too much state backing it. O’Brien and Williams (2013) also suggest that these three currencies could share the role of ‘world reserve currency’. But that would require more coordination between the three countries when it comes to international money affairs. That would definitely be interesting to see how it would play out, but again, it’s unlikely for a whole variety of reasons (O’Brien & Williams, 2013).

P. Culver

References:

Thun, E. (2011) Global Political Economy. 3rd Ed. New York: Oxford University Press.

O’Brien, R. & Williams, M. (2013) Global Political Economy. 4th Ed. Hampshire: Palgrave Macmillan.

Cantwell, J. (1990) Structural Change in the World Economy. London: Routledge.

Crouch, C. (2011) The Strange Non-Death of Neoliberalism. Cambridge: Polity Press.

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