Question

4:17 Search 14GO Done 6 of 28 What are the historical conditions that have been most conducive to the growth of multinational enterprise during the last 150 years? Do you consider these conditions to be under threat, or are predictions about the end of globalisation greatly exaggerated?

Answer 1

Historical reasons for rise of Multinational corporations are:

Industrial revolution: which took place around 18th century in Britain and spread to the rest of Europe and Americas. As industries expanded, these countries went on to search new sources of raw materials and market to sell their mass produce.  These companies were often supported by the respective governments to set up subsidiaries in Third world countries. Examples are English East India company or Dutch East India company.

Post war conditions: With the end of wars, a capitalist ideology prevailed around the world, except for the Soviets and China and few others. Especially during 1970s, rise of neoliberalism gave birth to many multinational corporations. Developed countries cut slashed tax rates on high incomes and corporations. Free trade was propagated, with huge reductions in duties and opening of markets.

Rise of third World: these coutries were the ones that were war torn due to wars and colonialism. As these countries stabilized, they provided huge workforce and markets to work upon. As factors have already been used up in developed world, the MNCs started looking for profitable investments in countries of Asia and Africa. Favourable trade conditions in the 70s also provided ripe ground for some Asian MNCs to rise. Example are Toyota, Samsung, Asus etc

Overall, positive outlook towards free trade has been a main contributor towards rise of MNCs

However, today there is negative outlook of free trade. many developed countries like US are undertaking protectionist measures. Many global financial crises like the one of 2008 lends to increased uncertainty. Investors' spirits are shaken, so flows of capital and trade across borders are coming down.

However, there is some hope because of international agencies like WTO. They ensure that a rule based system is followed, so there is no uncertainty. many bilateral treaties are signed between countries to ensure free trade among them. Many developing countries are also pushing their domestic firms to o global, so there is government support. However rise of protectionism remains a great challenge.