Multinational Corporations

AN INTERNATIONAL corporation is one which pursues business activities in one or more countries other than its home country. A multinational company is one in which a significant proportion of activities occur away from the home country. A global company is one which does not recognize a home country, but which conducts its activities on the basis of whichever location happens to be the most appropriate and efficient. In each of these cases, the organization is motivated by profit and considers activities in countries where they can obtain either new resources or new markets.

Multinational corporations first emerged as early as ancient Assyria and Mesopotamia, when overseas trading ventures were organized by partnerships of private individuals and facilitated by state governments. With people moving away from their homelands for trade, the influence of foreign ideas and customs and the absence of moderating home influence led many to behave in ways which would not be considered appropriate or legal at home. This has included not just marital infidelity and immoderate behavior, but mistreatment of workers, dishonesty in dealings, and the deliberate sale of goods of unacceptable quality.

In subsequent centuries, multinational companies became identified with the idea of colonization and the expansion of mainly European empires into third world areas. As a result, multinational corporations such as the British and Dutch East India Company, among others, were granted privileges by their home governments that enabled them to use military means to obtain desired markets and resources. This license allowed corporations and their representatives ample opportunity to benefit from fees, fines, and compensations paid by defeated states to the victorious corporations, as was the case with Robert Clive and the East India Company in defeating the Moghul Empire in India.

The creation of multinational companies in support of colonial empires enabled truly international trading networks on a large and stable basis. One of the most well-known was the triangular trade in rum, molasses, and slaves connecting New England, the Caribbean, and Africa. Another network of international trade, which would now be considered illegal, involved the forced importation of opium into China by British companies in return for Chinese silks and precious goods.

The 19th and early 20th centuries saw an intensification of international trading and business activities, with the growth of industry improving transportation and communication links lending great assistance to cross-border activities. Investors, particularly in London, England, and other great financial centers, were able to establish sophisticated portfolios of investment. The railroad era for the first time necessitated the creation of private networks of capital for use domestically; previous networks had been supported or facilitated by states through the formation of empire.

This process was halted by World War I and greatly hampered by the subsequent retreat away from free trade and toward tariffs that followed. Subsequently, the Great Depression of the 1930s had a huge worldwide impact because of the reach of international companies. However, this period did witness a number of important international agreements which facilitated the growth in importance of multinational companies. World War II offered the opportunity for the Allied Powers to try to redefine the international economic system and avoid the chaos that had marked previous years. This was attempted through the creation of the Bretton Woods system, pegging currencies to the dollar, the establishment of the World Bank and the International Monetary Fund, together with the inauguration of the General Agreement on Tariffs and Trade.

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