Discuss the role and impacts of TNC’s in the global economy. (40 marks)

Transnational Corporations (TNC’s) play a large role in the development of the global economy, through the sharing of research, trade and technological advances between the different countries. They also play a big part in increasing the interconnection in the world’s economic, cultural and political systems, otherwise known as globalisation. Nevertheless there are both positive and negative impacts that TNC’s bring to the global economy, socially, economically, politically and culturally.

The world has seen a huge rise in the number of Transnational Corporations. Since the 1970s the number of TNCs has risen from 7,000 to over 60,000. To begin with, around 95% of manufacturing took place in the industrialised economies such as the UK. However since then decentralisation has occurred, as Transnational Companies take advantage of global operational differences such as the fact that labour can be offered at more competitive prices in developing countries. Subsequently global shift occurred which is the filtering down of manufacturing industries from the developed countries to lower wage economies. For example, automation, used in company’s such as Jaguar Land Rover to build many parts of the car, has contributed to a decline in the secondary sector in the UK. As can be seen in the Rostow Model of Development, stage 5 (the age of high mass consumption) the initial exploitative industries move elsewhere and any remaining industries shift production to durable consumer goods.

However due to globalization through TNCs, a new international division of labour has arisen separating the global economy into two main groups: the highly skilled, highly paid, decision-making, research and managerial occupations which are mostly found in the developed countries, and the unskilled, poorly paid