Multinational Corporations and National Governments

Multinational Corporations and National Governments

            A national government regulates the laws of a given land and has very little influence on the laws operating outside the territorial borders. Multinational corporations on the other said can be said to be organizations that conduct business on several nations and thus can be said to be above national laws. Multinational corporations enjoy the advantage that the requirements of a particular country cannot limit the business conducted by multinational corporations. The operation of the federal governments is restricted by the laws made by the same government with contribution from the government’s nationals. On matters of power, government possesses power only to the extent that the Nationals are comfortable and the revenues collected are enough to support the government’s plans. Multinational organizations are not obliged to listen to the ideas of their customers but operate purely to generate profits and expand businesses. Multinationals do not suffer severely from sanctions made on them by governments since they have the freedom to conduct business on the environment that favors the company’s purpose. Multinational corporations are powerful than national governments because they are purely on business while national governments only do business as an additional revenue collection activity.

The power of a national government is only applicable within the territorial boundaries and thus does not have dominion over multinational companies. Under normal legislation, a national government tries to regulate the conduct of business within the government’s territory. However, the regulations are only applicable to domestic companies. For example, the government may ban the deposition of industrial waste into the rivers; Domestic companies will have to comply by taking the necessary measures to avoid legal costs or sanctions by the government. The process of meeting the standards set by the government is always costly, and few companies are comfortable in meeting the requirements. However, the case is different for multinational companies. Multinational companies ignore the regulations set by the national governments and instead choose to move to developing countries, which are only interested in the services provided by the companies and do not give significant attention to the issues of environmental conservation (Averchenkova, 2016, 518 ). The freedom to hover between territorial borders gives the multinational companies an advantage over the national governments in that; no regulations can be set to regulate the operations of the multinational corporations outside a government’s territory (Kennedy, 2017, p.124). The power of multinational companies becomes evident when national governments are forced to make regulations only as per the guidelines that appear friendly to the multinational corporations. For example, a national government will have to consider the economic impact of a multinational corporation deciding to move its operations to a different country. Some of the regulations that a national government has to take considerations before altering are the working conditions of employees (Stephens, 2017, p.25). For example, if the government improves the regulations concerning working conditions above the levels set by the multinational corporations, then the corporations are likely to move operations to countries with better labor markets.

Multinational companies have better strategies in dealing with international factors affecting business operations. The multinational companies enjoy the advantage of the flexibility and most of the times; international factors hit less hard than is the case with national governments (Kostova, 2018, p. 2612). A national government faces a higher risk when international factors hit economic progression since diversification is not an option. The hardest part of economic crises is that the national government will have to deal with the situation single-handedly since multinational corporations will consider moving the business to less risky environments and the government has no power whatsoever to compel the multinational corporations to remain in business (Khanna, 2016, p.15). The national governments are also likely to lose heavily in terms of taxes when the multinational companies decide to move business abroad instead of helping the government get through the situation. The national governments would be considered powerful if the regulations of a certain territory could be strong enough to impose regulations on the multinational corporations but have only been left for supra-national agencies with a special interest in the regulation of multinational corporations.

National governments cannot regulate multinational corporations; thus multinational corporations are powerful. The control of multinational corporations is beyond the reach of any government or even an international body. However, governments have devised ways of dealing with abusive company activities by launching strategic warfare directed on public relations. For example, a government can finance a campaign against a particular multinational corporation, but the success of the campaign only depends on the corporation of other partners of the multinational corporations and the ability of the campaign to go abroad and reach the intended audiences. Also, the national governments still have to take considerations as to the extent by which the respective economies will suffer from the decision made to act against the multinational corporations. Several multinational corporations have well-established strategies in that; the corporations contribute the most significant percentage of private investments in the countries they operate from and thus have substantial security against rebellion by governments. Multinational corporations have devised strategic structures that can be compared to lenient colonization of the victim countries. Multinational corporations do not directly control the economies, but the influence of the companies leaves the national governments with no option other than conforming to the requirements of the companies.

The relationship between multinational corporations and nations can, however, be seen as a win-win situation for both parties. Multinational corporations depend entirely on the cooperation of national governments in creating environments suitable for business. Under normal circumstances, a multinational corporation will not conduct business in a country without the approval of the government of the land. The approval required gives the national governments some power; however little over the arm of the company conducting business in the said country. However, the power of the government is only applicable for as long as the company remains in business in the country. On the other hand, the government gains through taxes paid by the said corporation as well as a direct contribution to economic growth (Bundock, 2017, p.350). The corporation, therefore, has the power to demand legislation that acts to the favor of the company’s business.

In sum, the debate on whether the multinational corporations are more powerful than the national government seems to go in favor of the multinational corporations. Multinational corporations enjoy the advantage that the laws of a particular nation cannot limit the business conducted by the multinational corporations unlike the operation of the national governments that are restricted by the laws made by the same government with contribution from the government’s nationals. Generally, multinational corporations are powerful than national governments because multinational corporations are purely on business while national governments only do business as an additional revenue collection practice.

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