Problem

Domination of economic integration by transnational corporations

Nature:
The transnational corporation process of world integration, which concentrates strategic "overhead" in the home countries, creates international dependence through hierarchy as well as through regional inequality. Furthermore, it raises questions about how the world community should share in financing the world overhead, since all but a few core countries participate at only a "lower echelon" of the productive activities integrated through transnational corporations operations. Transfer pricing (including profit and royalty remissions), and international tax avoidance through transfer pricing, redistribute world income and finance the concentrated development of transnational corporations' overhead. In the longer run, perhaps more important than the unequal distribution of transnational corporations' surplus is the unequal accumulation of productive and technological capabilities in the home countries of the transnational corporations' parents. That concentration and captivity of key productive activities in the home countries could make host economies more dependent on those enterprises as they move through production, deepening into areas which could potentially create higher domestic value added (for example, from the last touches of import substitution to intermediate products and capital goods, or from commodity and mineral production to resource-based industries). The higher value-added activities, particularly those which involve more than returns to large-scale financial capital, might demand a high component of decision-making as well as highly skilled personnel. Through the historical performance of the transnational corporations, such capabilities might have been kept captive by the parent firms in their country of origin. This more complex form of dependency is particularly relevant to countries which attempt production-deepening through regional cooperation.
Problem Type:
E: Emanations of other problems
Date of last update
01.01.2000 – 00:00 CET