Multi Nationals as Engines of GrowthEssay title: Multi Nationals as Engines of GrowthMultinationals as Engines of GrowthUnited Fruit and the Banana RepublicsThe United Fruit Company, a U.S. concern, is notorious for having economically colonized Central American in particular, using the support of the U.S. politically–and, on occasion, militarily–to ensure its taking of large profits in the region. Dissent within the U.S. against the U.S. government-United Fruit Company collaboration reached its peak in the second decade of the 20th century.
The United Fruit Company owned vast tracts of land in Central America, and sometimes the Company was said to be the real power in control of those nations, the national governments doing the Companys bidding. The Company several times overthrew governments which they considered insufficiently compliant to Company will. For example, in 1910 a ship of armed hired thugs was sent from New Orleans to Honduras to install a new president by force when the incumbent failed to grant the Fruit Company tax breaks. The newly installed Honduran president granted the Company a waiver from paying any taxes for 25 years.
The Company had a mixed record of encouraging and discouraging development in the nations it was involved in. For example, in Guatemala the Company built schools for the people who lived and worked on Company land, while at the same time for many years prevented the Guatemalan government from building highways, because this would lessen the profitable transportation monopoly of the railroads, which were owned by United Fruit. A popular name for the company was Mamб Yunay (“Mommy United”).
Oil and Banking in Iran before the 1950sIn the nineteenth century Iran was one of the poorest countries on the world. The technological level was very low. The economy was dominated by foreign enterprises. The two most important of these were the British-owned bank and Oil Company. The Imperial bank of Pershia, was a state bank, and held a de facto monopoly on modern banking until the late 1920s.
Major findings:The presence of foreign multinational enterprises, in addition to the companies themselves, may benefit local economies.MNEs might discover hidden natural resources that in the future might be the main player in major development of the country’s economy.Free zones are one of the best tools to encourage multinational companies.In order to avoid negative affects on the country’s economy, other governments should not interfere in the host country.In order to have successful results from multinational operations, both parties should agree upfront on a contract that is based on mutual benefits of both parties.
Q1) List and explain the positive and negative influences of the multinational on each country, as explained in the case.United Fruit and the Banana RepublicsCentral America:Positive:Building infrastructure which includes rail roads, drainage and water system, hospitals and towns.Transfer the region to a well-organized plantation economy.Solve employment problems.Income to the government from taxation.Funding local producers (planters).Negative:The economy is dominated by a single company.Cutting down jungle forest.Importing labor from outside.Few inputs from local origins. For example, machineries are imported from outside.Workers were paid in vouchers which can only be used in the company’s stores.Depleted soils.One sided contracts. For example, if the US health authorities do not accept the product, the company will not pay for it.viii.Enforced the local government by getting support from the US government.Backing coups.Bribing officials.Oil and banking in Iran before the 1950s:Positive:Building
Billion dollar factories, with limited production.Localized food, vegetables, and even sugar production.Trade with neighbouring countries:Negative:The industry, with its limited investment.The market for these goods was divided up, creating a monopolistic one.Supplying money and services, with cheap imports and low returns.The international trade of products by the US in this area.Negative:The US does not export very much (the only countries it imported from were Brazil and New Zealand).International payments, mainly based on dollar.Unfair trade practices (e.g., low inflation) during the 1970s and 1980s.Lack of international collaboration (e.g., to maintain American monopoly in the international markets).Negative:In contrast to the US, the Soviet Union has one or more foreign companies.A large part (if not all) of the foreign-owned companies are concentrated in the West Bank.In Central America, a high percentage of the population lives outside.Localized agriculture.A few indigenous villages, some of which were formerly under Soviet rule, are in the center of the country.Workers do not have access to local water supply or access to the air, thus reducing the potential of a poor working age generation in the West.The number of illiterates has increased considerably in the region, leading to serious shortages.Negative:The country is poor and economically dependent, with large sections of the population dependent on imported food.The US has no direct investment resources in the region nor any external support.Eighty percent of the US workforce relies on imported food, in part due to a poverty-stricken South American country in the process.Unfair trade practices since the 1970s (e.g., low inflation).The country depends heavily on U.S. investment.Negative:Although there is no government support, the US government (along with its regional allies) will always be affected by such countries as Honduras and El Salvador, and vice versa.The country has to compete with other wealthy countries to be rich.As stated above, it is poor and poorly educated in their understanding of finance and business concepts.Negative:Despite extensive research and research to develop solutions to the problem, the US government has not been able to develop them.Its limited support has made it difficult to create effective national economic policy.The United States is one of the few countries in the hemisphere in which economic policies are based on the maxim “if you can make a lot of money it’s a lot of money”.In the 1980s, when the United States became involved in the World Economic Forum, there was already a strong consensus to develop international economic partnership.Negative:Even at its peak in the 1980s, investment in the US economy was $4 trillion, about 70% of which goes to the US Treasury.During the Reagan administration, almost half of the US government’s $6 trillion budget was spent on international cooperation in the 1980s.Negative:The United States was once a nation that had to protect its national security.It has been replaced by other foreign aid agencies.The only reason for these projects has been through the use of foreign currency reserves.Unproductive lending against the United States.Negative:The US is in a much better position and has gained a lot in many areas such as health, education, education-related aid and military assistance.A weaker global economy.Economic sanctions against major industrialized countries.Negative:The economic model of the World Trade Organization (WTO) was one of the greatest challenges to the United States in the 1960s and 1980s.The United States was forced to build a new trade relationship with Mexico, even though its trade with Mexico was weak.Negative:Trade treaties between Mexico, Canada, the US and China were signed during NAFTA.The trade that Washington signed with Mexico in the US during this period is called the “Golden Tariff” for NAFTA.Negative:The US has failed
Billion dollar factories, with limited production.Localized food, vegetables, and even sugar production.Trade with neighbouring countries:Negative:The industry, with its limited investment.The market for these goods was divided up, creating a monopolistic one.Supplying money and services, with cheap imports and low returns.The international trade of products by the US in this area.Negative:The US does not export very much (the only countries it imported from were Brazil and New Zealand).International payments, mainly based on dollar.Unfair trade practices (e.g., low inflation) during the 1970s and 1980s.Lack of international collaboration (e.g., to maintain American monopoly in the international markets).Negative:In contrast to the US, the Soviet Union has one or more foreign companies.A large part (if not all) of the foreign-owned companies are concentrated in the West Bank.In Central America, a high percentage of the population lives outside.Localized agriculture.A few indigenous villages, some of which were formerly under Soviet rule, are in the center of the country.Workers do not have access to local water supply or access to the air, thus reducing the potential of a poor working age generation in the West.The number of illiterates has increased considerably in the region, leading to serious shortages.Negative:The country is poor and economically dependent, with large sections of the population dependent on imported food.The US has no direct investment resources in the region nor any external support.Eighty percent of the US workforce relies on imported food, in part due to a poverty-stricken South American country in the process.Unfair trade practices since the 1970s (e.g., low inflation).The country depends heavily on U.S. investment.Negative:Although there is no government support, the US government (along with its regional allies) will always be affected by such countries as Honduras and El Salvador, and vice versa.The country has to compete with other wealthy countries to be rich.As stated above, it is poor and poorly educated in their understanding of finance and business concepts.Negative:Despite extensive research and research to develop solutions to the problem, the US government has not been able to develop them.Its limited support has made it difficult to create effective national economic policy.The United States is one of the few countries in the hemisphere in which economic policies are based on the maxim “if you can make a lot of money it’s a lot of money”.In the 1980s, when the United States became involved in the World Economic Forum, there was already a strong consensus to develop international economic partnership.Negative:Even at its peak in the 1980s, investment in the US economy was $4 trillion, about 70% of which goes to the US Treasury.During the Reagan administration, almost half of the US government’s $6 trillion budget was spent on international cooperation in the 1980s.Negative:The United States was once a nation that had to protect its national security.It has been replaced by other foreign aid agencies.The only reason for these projects has been through the use of foreign currency reserves.Unproductive lending against the United States.Negative:The US is in a much better position and has gained a lot in many areas such as health, education, education-related aid and military assistance.A weaker global economy.Economic sanctions against major industrialized countries.Negative:The economic model of the World Trade Organization (WTO) was one of the greatest challenges to the United States in the 1960s and 1980s.The United States was forced to build a new trade relationship with Mexico, even though its trade with Mexico was weak.Negative:Trade treaties between Mexico, Canada, the US and China were signed during NAFTA.The trade that Washington signed with Mexico in the US during this period is called the “Golden Tariff” for NAFTA.Negative:The US has failed