Are states losing power relative to MNC's that are organized for production on a global scale?
Although the Bretton Woods system of exchange rates collapsed in the early 1970's the International organizations created at this summit have had lasting effects on the world economy. Most notably, their effects on the opening and stabilization of international trade have led to exponential growth in interdependence and globalization. One example of this can be found in the proliferation of multi-national corporations (MNC's). These corporations, which have their headquarters in one state and subsidiaries in others, have become an integral part of the world and domestic economies. Furthermore, MNC's have had an enormous impact on the control that states now have over their economic resources compared to fifty years ago. The growing power and resources of MNC's have made these companies rivals of political states in the arena of world trade, and in some instances MNC's have usurped the power of states to control their domestic economies. The rise of MNC's can be attributed to growth in the globalization of production. Because strong liberal economies support the theory of comparative advantage, production has shifted from a process of domestic dominance to production on a global scale. More specifically, MNC's produce diff
------------------------------------------------------------------------ Although the benefits seen in the above example impacted the area greatly, there are some drawbacks to the trend of globalization created by MNC's. The most important in a discussion about international political economy is the state's loss of power over its own economic resources. When a powerful foreign company decides to invest in a particular state, it is doing so under the assumption that it will succeed in extracting profits from that state. Consequently, domestic currency is attained and sent "back home" to the headquarters of the MNC. Billions of U.S. dollars were extracted from the domestic economy in the eighties by powerful Japanese automakers, leading to the trade war between these two nations. One of the fears in the U.S. was that Japanese control over large sums of U.S. dollars would impede the U.S. government's control over its own currency and consequently, its economy. Another example of globalization in the automobile industry is Mercedes-Benz's American plant. This company wished to build a plant for its new M-Class vehicles, a sports utility vehicle, in the U.S. due to the high demand of these automobiles in America. Mercedes demanded an area wi
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Approximate Word count = 846
Approximate Pages = 3 (250 words per page double spaced)
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