TNCs: A Threat to the Powers of the Government?

Transnational corporations or the TNCs play a major role in the process of globalization and economic development of a country. They exercise a great deal of power in the globalize world market. They are the key players in the global economic transactions. But what are these TNCs? What are the positive and negative aspects they offer? Do they pose a threat to the powers of the government?

As stated in the United Nations’ Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights, the term “transnational corporation” refers to an economic entity operating in more than one country or a cluster of economic entities operating in two or more countries - whatever their legal form, whether in their home country or country of activity, and whether taken individually or collectively. (cited in Raghavan 1996)

The United Nations has justly described these corporations as “the productive core of the globalizing world economy.” TNCs’ 250,000 foreign affiliates account for most of the world's industrial capacity, technological knowledge, international financial transactions, and ultimately the power of control. (cited in Raghavan 1996)

In terms of energy, TNCs extract most of the world’s minerals from the ground. They mine, refine and distribute most of the world’s oil, gasoline, diesel and jet fuel, as well as build most of the world’s oil, coal, gas, hydroelectric and nuclear power plants. Moreover, they also manufacture and sell most of the world’s automobiles, airplanes, communications satellites, computers, home electronics, chemicals, medicines and biotechnology products. Lastly, they harvest much of the world’s wood and make most of its paper and they grow many of the world’s major agricultural crops, while processing and distributing much of its food. (cited in Raghavan 1996)

TNCs hold 90 percent of all technology and product patents worldwide. These corporations, together with their host governments, are reorganizing world economic structures - and thus the balance of political power - through a series of intergovernmental trade and investment accords. (Karliner 1997)

The treaties which serve as the frameworks within globalization are evolving; thus allowing international corporate investment and trade to flourish across the Earth. It includes the Uruguay Round of the General Agreement on Tariffs and Trade (GATT); the World Trade Organization, which was created to enforce the GATT's rules; the proposed Multilateral Agreement on Investment; the North American Free Trade Agreement (NAFTA); and, the European Union (EU). These international trade and investment agreements allow corporations to circumvent the power and authority of national governments and local communities, thus endangering workers' rights, the environment and democratic political processes. (Karliner 1997)

Transnational corporations are powerful entities. As the name implies, these companies are transnational in structure: meaning they are not directly subject to the rule of any individual nation. In fact, many of the transnational corporations are larger than most nations in strictly monetary terms of economics and finance. Only international treaties offer binding resolutions with these giants of industry. . (Karliner 1997)

National governments often offer incentives to these TNCs to invest in them. These incentives may be dams to provide cheap power, tax free areas for manufacturing or direct capital investment from the government. All government incentives force the government deeper into debt to transnational banking powers and therefore make it practically impossible for the government to end their corporate dependence. National governments also provide direct subsidies to TNCs in the form of military aide and population control. Few corporations will invest in a country if the political situation is 'unstable'. (Broadhead 1981)

When a transnational giant invests in a new foreign land, especially in a developing nation, its powerful sphere of influence affects the entire process, the social policies, political policies, environmental issues, taxes, labor rules, accounting, campaign contributions, and many other related issues that collectively have a huge impact on the host environment. (Gnazzo 1996)

TNCs exert significant influence over the domestic and foreign policies of the governments that host them. Indeed, the interests of the most powerful governments in the world are often intimately intertwined with the expanding pursuits of the transnational that they charter. At the same time, transnational corporations are moving to circumvent national governments (Karliner 1997)

Transnational corporations and companies have become some of the most powerful economic and political entities in the world today. Many corporations have more power than the nation-states across whose borders they operate. (Clark n.d.)

Since 50 of the top 100 economies in the world are TNCs and 70 percent of global trade is controlled by just 500 corporations and a mere one percent of the TNCs on this planet own half the total stock of foreign direct investment, the real power to rule is now being exercise not by the government and their agencies but by TNCs. (Clark n.d.)

Furthermore, the new free market and free trade regimes have created a global environment in which transnational corporations and banks can move - capital, technology, goods, services - freely throughout the world unfettered by the regulations of nation states or democratically elected governments. Thus, they secured the system of ruling and supremacy in the global economic and political arena. (Clark n.d.)

TNCs control national governments because the national government needs what the transnational have - technological expertise, equipment, goods, shipping lines, and investment capital - although most corporations are not above a few bribes or kickbacks to government officials. (Broadhead 1981)

Most national governments are also dependent upon transnational due to their reliance on import/export trade to keep their economy buoyant, thus these governments find themselves in a bind, where they must sell their resources at the corporate price and buy the goods and services they need back at the corporate price. Vertical integration and corporate bookkeeping procedures enable a transnational to name its prices. (Broadhead 1981)

Generally, our world today is no longer effectively ruled by nation states or by the democratically elected governments. Instead, there has been a massive shift in power - out of the hands of nation states and democratic governments and into the hands of transnational corporations and companies. (Clark n.d.)

It is the TNCs that effectively govern the lives of people and rule the earth itself. At the same time, extensive changes are taking place in the role and mandate of democratically elected governments. (Clark n.d.)

In democratic societies today, governments no longer have the mandate, let alone the powers and tools, to intervene in the operations of the market and regulate them in the public interest. Instead, the prime role of governments is to reorganize their national economic, social, cultural, and political system for efficient transnational competition and profitable investment. (Clark n.d.)

Now we are living in a new age of globalization which is characterized by forms of corporate tyranny. The laws have been designed to protect the rights and freedoms of transnational capital, not the basic human and democratic rights of people. It is no longer a prime role and responsibility of governments to defend or protect the economic, social, and environmental rights of its citizens but of the TNCs. (Clark n.d.)

The real power of governance is wielded behind the scenes by an elaborate system of transnational corporations. The operations of governments and their agencies largely serve to cover up these new forms of corporate rule. (Clark n.d.)