Global Development Theme 5 - Role of Organisations

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Transnational Corporations

  • TNCs have benefitted hugely from the trade rules established by the World Trade Organisation
  • They operate in more than one country and have no clear national base
  • They seek to maximise profits and reduce costs by constantly seeking out the cheapest places to manufacture their goods
  • They are responsible for three quarters of global trade
  • They have sufficient resources to be able to move operations around the globe
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Modernisation Theory, Neo-Liberalism and TNCs

  • Believe that corporations provide a number of benefits for the developing world that can help kickstart development
  • Neoliberals believe that developing countries should actively encourage TNC investment by changing government policies to create favourable conditions for TNCs                                                                                             

WAYS IN WHICH DEVELOPING COUNTRIES CAN ATTRACT TNCs

  • By relaxing regulations on companies 
  • Privatising public services
  • Free Trade Zones/Export Processing Zones offer incentives for TNCs to invest such as tax breaks, low wages and lax health and safety regulations
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Benefits of TNCs

  • Bring investment in terms of money, resources, technology and expertise 
  • Creates jobs
  • TNCs need trained workers which leads to improvements in education 
  • Jobs provide opportunities for women which promotes gender equality
  • Encourages international trade which could increase economic growth
  • Wealth generated by TNC investment eventually 'trickles down' to the rest of the population
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Dependency Theory and TNCs

  • TNCs are there to exploit natural resources and cheap labour to benefit themselves
  • TNCs spreading out makes countries and workers more dependent on them
  • Money that TNCs make leaves the country and the poorest often do not see the benefits                                                                                                                   

CRITICISMS OF TNCs

  • TNCs exercise power without responsibility - they are programmed to exploit and dehumanise for profit
  • Removal of indigenous peoples in pursuit of profit (e.g. Shell in Nigeria and RTZ in Angola) 
  • Exploitation of workers (e.g. Primark and Matalan using sweatshop labour)
  • Ecological damage (e.g. Coca Cola in Kerula)
  • Death and Illness (e.g. Union Carbide in Bhopal)
  • Destroying local businesses
  • Miselling of goods (e.g. tobacco and baby milk)
  • Destabilising the local economy
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World Trade Organisation

  • Established world trade rules
  • The goal is to promote fair and free trade across all nations 
  • 149 states are WTO members, with a further 31 in the process of joining                                                                                                                                                                          

CRITICISMS:

  • The richest countries and corporations are more effective at getting their voices heard - they set the agenda for debates and issues of the developing world are not listened to
  • Rules often end up benefitting the West as free trade means that developing countries have to open up their borders to western TNCs
  • The WTO puts the rights of corporations to make profit before the human rights of people in the developing world
  • Lacks transparency as many talks happen privately
  • Members are not democratically elected
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World Bank

  • An international financial institution that provides loans to the poorer countries for capital programmes with a goal of reducing poverty
  • Provide loans for large scale development projects that are undertaken in partnership between governments and TNCs
  • Believes that economic growth through industrialisation and free trade is essential for development
  • It provides aid and loans to help countries develop in 5 main areas:                                                                           

1. Strengthening governments and educating government officials
2. Infrastruction creation
3. Developing financial systems
4. Combatting corruption
5. Research, consultancy and training                                                                                                                                     

CRITICISMS:

  • Countries that have adopted a free market have developed slower than those that have protected their economies
  • Dependency Theories argue that the policies are merely a way to open up countries for exploitation by TNCs
  • Forces structural adjustment programmes onto countries in return for aid
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Nation States

  • Nation states are what elected governments come to control when they get into power
  • They can be large or small (depending on whether industry or services are publically/privately owned)
  • The state can help development by protecting fragile economies in the early stages of economic growth. However, the state can hinder development through government corruption (African dictatorships)                                                                                                                                  

DEPENDENCY THEORY:

  • Western Nations caused underdevelopment in the first place through colonialism 
  • The state should play a key role in development but developing nations should islolate themselves from the global capitalist system                                                                                    

NEOLIBERALISM:

  • Nation States hinder development by interfering with free trade. They should have less of a role in development and development should be taken over by TNCs                                                                                                                                                                

PEOPLE CENTRED DEVELOPMENT

  • The militaristic nature of western states does little to help peace which is crucial for development
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NGOs

  • Have four functions: development, education, empowerment and emergency                                           

ADVANTAGES:

  • They are more democratic and responsive to the people who need the help
  • They are well funded by governments so can meet their aims
  • They are more effective/efficient than centralised state bureaucracies 
  • No political agenda or profit motive
  • More likely to help the poorest of the poor                                                                                                                                

DISADVANTAGES:

  • Lack of funding means that they can only do a limited amount comparies to official development aid
  • Dependence on support from the public
  • Aid can be misguided 
  • Spend money on advertising and administration
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