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International Economics 17th Edition

International Economics (17th Edition)

Book Edition17th Edition
Author(s)Carbaugh
ISBN9781337558938
PublisherCengage
SubjectEconomics
Country Risk Analysis
International Trade Application
Multinational Enterprises as a Source of Conflict
International Trade Application
International Labor Mobility: Migration
International Trade Application
Chapter 9, Country Risk Analysis, International Trade Application, Exercise 01
Page 319

What do you think? Do you feel that multinational firms provide overall benefits to people in developing countries?

Here is a tip:

Multinational firms are usually profit oriented, thus they search for ways to reduce their costs and increase profits.

Explanation

Critics of multinational firms argue that multinational firms exploit workers by paying them less than the wages they would have given in their home countries. This is true and it is economical on part of multinational firms to hire cheap labor, but the wages they pay are still higher than that paid by other local manufacturers in that country. Therefore, it is true that they provide benefits to people in developing countries, especially workers by providing them with higher wages. 

 

It is also argued that the multinational firms are solely guided by profit motives. They set up their subsidiaries/offices in less developed or poor countries in order to exploit cheap labor available in these countries. The workers in these countries are exploited by multinational firms, therefore multinationals do not provide benefits to these workers.    

Sample Response

Multinational firms provide benefits to people in developing countries because the wages they give are higher than that given by the local manufacturers in developing countries. 

 

The critics, on the other hand argue that multinational firms exploit workers in developing and poor countries by setting up their establishments in these countries in order to get cheap labor.

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