- TNCs are often known as the agents of globalisation as they enable (and often provoke) the large-scale movement of people, goods, capital, services and markets around the globe thus accelerating the process of globalisation which is the increasing interconnectedness of global markets, politics and culture, due to the powerful influence they have on both local economies and international relations.
- The presence of TNCs often provokes cumulative causation in the developing countries that they occupy. Therefore, if developing countries are able to attract TNCs, in some cases, in the long run, it can aid and accelerate development.
TNCs like Walmart, created in 1962, originally based in the USA and are the largest non-oil based TNC, do not source their goods from within the country but from countries like China. There are many reasons for TNCs to locate to other countries and this includes:
- To escape trade tariffs; this seems to effect the EU market the most with TNCs often choosing to produce goods within Europe to escape the expensive tariffs that would otherwise be placed on trade.
- In an attempt to see the lowest cost location for production facilities; this is often driven by the search for the cheapest possible labour hence why many production facilities are currently based in Asia as it offers a large, available, accessible and cheap labour force in countries with little enforcement of health and safety regulations and workers rights such as those present in Europe.
- Wanting to find an easier more effective way to reach into foriegn markets; this often provokes movement by TNCs as overseas developments do not just increase sales but they can also help to reduce the unit costs of each item produced or sold worldwide.
- Arguably the intial reason for TNCs to develop operation overseas is the fact that it enables them to exploit and effectively utilise the minerals and resources that they need.
Walmart have based the vast majority of their production facilities in China, where they pay workers less than $3 per week, make them work 7 days a week and, due to the abundance of workers can manage to keep production going practically 24/7. The workers in the film emphasised the poor worker conditions, the way in which they are tied in to continued work for Wal-Mart whom to some extent dictate things like where they live and work long hours for poor wages. Bangladesh is another country where Walmart have developed production facilities and it is estimated that they employ 189,000 female workers who have to put up with inhuman working conditions. Consequently, something that can be assembled for $0.18 is retailed for atleast $14.96 in the USA. This maximises profits for the company and with Walmart exporting $18 billion worth of goods from China to American stores in 2004 alone, it is no wonder that so many TNCs are attracted to this part of the world.
Walmart employs 2.1 million people around the world, including 1.4 million in the USA, in more that 9,600 retail units operating across 28 countries (4,400 of these retail units located in the USA) with Walmart estimating within which they serve customers 200 million times per week. The employers interviewed for the documentary we watch very strongly gave the impression that people are not happy with the way in which Walmart treats its employee's as they fail to hire enough staff, expect people to work more than their set hours, fail to pay sufficiently and offer benefits (with special regards to the health insurance - remember this is a huge problem in society in America). The health insurance issue came across as a real sticking point with it believed that the cost is shifted onto the government to be paid for by taxpayers at an estimated cost of $157,000,000.00 in America!!! Much of this poor treatment has been blamed on the managers who are greatly against unions. Walmart currently faces (when the film was produced, not 100% when this was) lawsuits in 31 states across America for unfair treatment of workers, exploitation of illegal immigrants and discrimination against women. From an environmental persepective, they have been fined in the past and continue to be for 'Environmental Violations' like, for example, in Texas in 2001 when they were fined $10.1 million for water contaimination. This has lead many to believe that Walmart clearly cares more about its property than the people and the environment; a belief furthered by the number of fatal/serious, and arguably avoidable, crimes that have occured in their premises.
Anyway, the criticisms for Walmart do not stop there! The wages recieved by the average employee compared to that of the companies CEO has recieved much attention with the CEO's hourly rate believed to exceed the yearly income of a new employee. Last year it is estimated that the CEO earned $35 million which apparently translates to $16, 826.92 an hour whilst the average employee starts out at $8.75 per hour which works out as $13, 650. Despite this, and the fact that in the last financial year, Walmart reached net sales greater that $260 billion; the Walton family only donated 1% of their wealth to charity. Workers collectively, and voluntarily, donated $5 million to a hurricane recovery effort a few years back (again whenever the film was made) whilst the Walton family only donated $6000. In contrast, that provided $3.2 million in political support in 2004 whilst recieving a $91,500 per tax break.
The film gave the clear impression that Walmart is not good news for towns/communities and consequently some have started to try and resist Walmart from taking over - something which is increasingly difficult as many TNCs are larger in relation to the income of the coutries in which they are located, meaning that it is very hard for governments to enforce national laws on them. Inglewood, in 2004, was the first example of a town who refused and then won their battle to prevent Walmart from developing in the town and since then many more communties have successfully fought against this huge TNC.
This is clearly all the negative stuff so are their any benefits to TNC presence and are their any 'winners' apart from company owners, share holders (and perhaps politicians)?
Well, generally speaking, governments actually normally want investment from TNCs as they generate jobs and incomes, train local workers in new and transferable skills, bring new technology and the taxes that they pay can be important in stimulating economic development via cumulative causation. TNCs and the appending Foreign Direct Investment (FDI) has, in some cases for both developed and developing countries, become so crucial for their economies that they are willing to compete against one another for their investment - a competition that often involves incentives such as tax breaks, pledges of governmental assistance and improved infrastructure. Unfortunately, in extreme cases, this can also involve the introduction of even lower wages and a relaxation on controls over wages/workers rights. On the other hand, TNC presence in the working sector can intiate a standardisation in working conditons and environmental laws etc. on par with those in operation in the developed world where the consumers are located. As a result, in the long term, developing countries who are able to attract TNCs can be considered as winners as their presence kick starts cumulative causation thus accelerating development. At this stage it is, perhaps, important to remember that every TNC is different and so should really be considered seperately to others, with regards to discussing positives and negatives of their occupation of countries, and that the documentary we watched focused on the negative side of Walmarts role in American society, politics and economy and that, as in every case, there are also a few benefits.