The Political Economy Review 2017

included countless allegations of exploitation of workers in foreign countries (by companies including Nike and Apple) and environmental crises (such as the Gulf of Mexico oil spill caused by BP in 2007). Media has shifted from portraying corporations as the champions of the free world, to quasi-nations that feed off poor nations. Many people are now demanding corporations to become more environmentally and socially responsible. If they do not comply, they can face widespread loss of customer base. In the near future companies are likely to be more cautious about expanding into new countries. If they will not change their methods of operation, they will likely continue feeling pressure from consumers around the world, and will risk losing more revenue. While consumer preferences are an integral part of the business model, policies can have an even more significant effect on firms. In recent years, brewing negativity towards multinationals has expanded into the political spectrum. More citizens and politicians in Western nations see multinationals as predatory conglomerates without any roots or loyalty to the countries where they are based. They rightfully accuse companies of being willing to export jobs overseas and avoid paying taxes at home, all with the sole purpose of maximising profits. The mindset which opposes free markets and globalisation has been understandably fuelled by the financial crisis, has already caused significant issues for multinationals, and is likely to do so more in the future. This crisis brought a substantial increase in regulation, especially in the banking sector, where banks now have to endure stricter limitations on leverage ratios and have to maintain larger stocks of cash at all times. While in some countries, such as the UK, this distrust for big, international business is mild, elsewhere nationalistic and protectionist rhetoric has had a much more significant impact. Most importantly, the election of Donald Trump in the USA marked a remarkable shift in the American mindset. The USA is indeed the home of the world’s biggest corporations, which have brought unimaginable wealth to the country. However, American citizens no longer regard many of them as wonderful harbingers of prosperity as they once used to. Instead, they largely blamed multinationals for exporting jobs out of the USA and that they are causing harm to the society. In response to these calls comes Donald Trump, who was opposed trade deals and wants to coerce firms to bring back production of goods to the USA. Already he has pulled the USA out of the Trans-Pacific Partnership (TPP) trade deal, which was meant to integrate the US economy with many East- Asian nations. Trump has also succeeded in pushing General Motors to cancel plans for creating a factory in Mexico, and to instead invest in the USA. However, this is not only an American phenomenon; many nations in Europe also have brewing protectionist tendencies. This is in part what led to the demise of another trade deal, the Transatlantic Trade and Investment Partnership (TTIP). It is very likely the firms will not only find it difficult to sustain their operations overseas, but they will also have to endure increasing pressures in the home countries to bring back production and pay more taxes at home, all which is likely to bring up costs and decrease revenues. While social and political pressures on multinationals are rising, so is competition from local firms. Countries where multinationals used to have a substantial advantage, primarily newly-developed economies such as China, Brazil, and those in eastern Europe, are now much more difficult to expand in to. When firms were expanding originally into these nations, they had the expertise, the structure, and most importantly the capital to expand abroad. Local entrepreneurs did not have access to finance and were not experienced enough to create firms that could compete on the same level. As these economies have grown (partially due to multinationals), finance has become much more readily available. Local firms also tend to have more insider knowledge of the countries themselves, and are more flexible in comparison to the huge, diversified conglomerates. One of the key issues with international corporations is their multi-level management structure. While they can be very efficient at producing goods and services on a large scale, they will often


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