Blog 4: What is the relation between economy and globalization?

 

It is widely agreed that transnational corporations (TNCs) are central actors and major shapers of the global economy. The development of TNCs has been a part of early international economic growth. Particularly since the 15th century, trading companies have played a significant role in political and economic evolution, building vast business empires on a global scale. The primary purpose of these companies was trade and exchange.

Before World War I, manufacturing companies in the United States and continental Europe became increasingly transnational, and over the past 50 years, the number of TNCs has grown exponentially. A TNC can be defined as a company that has the authority to coordinate and control operations across multiple countries, regardless of ownership.

TNCs primarily operate in two ways: through "greenfield investment," which involves building entirely new facilities, or through mergers, acquisitions, or strategic alliances with other companies. Acquisitions allow companies to enter local markets quickly and with less risk.

However, TNCs cannot be regarded as entirely free economic entities. All companies are embedded in their unique social, political, and economic contexts. The national background of a company's origin continues to influence its behavior. Each country's economic system organizes its economy uniquely within the broad ideology of capitalism. Hence, capitalism appears in diverse forms rather than a singular form.

The power of TNCs is mainly based on their potential ability to leverage geographic differences in resources and costs or to shift their operational locations. However, this does not imply absolute dominance, as they operate under a multi-level regulatory system that functions at international, national, and regional levels.

Regarding labor issues, international civil society organizations (CSOs) also exist, holding the potential to overcome local constraints. By leveraging the internet, workers, consumers, and other stakeholders can unite internationally.

TNC activities often create conflicts with local or national interests and interact with the regulatory systems of various countries, forming complex networks.

Therefore, the author argues that while TNCs wield significant influence and interests, they do not hold absolute dominance.

This phenomenon illustrates the relationship between the economy and globalization. As globalization has progressed, it is likely that the number of TNCs has grown exponentially. Globalization has facilitated more active and easier exchanges between countries, impacting the economy. The ability to cater to demand across multiple countries is influenced by globalization.

Just as TNCs’ vast influence on the global economy has been shaped by globalization, the power to check these corporations has also been impacted by globalization. For example, the aforementioned international civil society organizations have found it easier to form international solidarity due to advancements in technology and globalization. Moreover, local and national conflicts of interest and regulatory systems of various countries have also been affected by globalization. Through globalization, countries may have shared information on how to regulate companies, and the foundations or values underpinning corporate regulations might have been globally disseminated. Regulations based on some form of agreement can also be said to be influenced by globalization.

Furthermore, the current global economy is interconnected. Therefore, the profits and losses of TNCs are closely tied to the global economy, which has likely expanded under the influence of globalization. Hence, it can be said that the global economy operates under the influence of globalization.

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