Impact of Non-State Actors: TNCs and NGOs on Global Economy

Posted on Dec 7, 2024 in Social sciences

Item 10 – Non-State Actors: TNCs

A Transnational Corporation (TNC) is a private organization that operates in several countries but has a common logic of action. The parent company, responsible for direct investments made in other countries, is also ultimately responsible for overall management. They have a profit objective to maximize profits through a global strategy and cost of the conditions for foreign locales. Their aims are to expand and try to reduce production costs to benefit from more favorable conditions for activities in other countries. They diversify their signature in order to maximize profit and spread risks. The history of transnational companies is partnered with international organizations. The conditions of the nineteenth century and accelerating scientific and technical development of production and marketing are the point of departure for this phenomenon. It gains importance after World War II and is favored by the decolonization. The importance of the United States in the global economy rests largely on these big companies that are going to be implanted around the world. From the mid-1960s, there was a decrease in U.S. companies and the emergence of other (European, Japanese, Brazilian, Chinese, Korean) new multinationals.

There is a qualitative and quantitative growth.

Greater involvement of TNCs in world GDP; 48 states and 52 companies make up the ranking of the hundred most important production units worldwide.

Relationship Between TNCs and States

Structuralist authors highlight the negative impact on the countries of the periphery. Their involvement in politics in recipient countries, the responsibility for the growing dependence of economies of the South, not to create conditions for an effective local development. So have taken advantage of cheap labor without investing their profits in the host country and the displacement of polluting industries to developing countries.

Authors on transnationality highlight the positive impact on the creation of networks of interdependence among states. While this process of interdependence has been concentrated geographically, since the 1980s, there has been a divestment of the South in favor of a tripolar world (USA, Japan, and the European Union).

Geographical diversification of production, encouraging the creation of productive regions, leads to regionalization of the world economy into three major regions with their centers in the European Union, United States, Japan/China, to the detriment of countries that remain outside Africa, the poorest areas of Africa and Latin America. The role of transnational corporations challenges the control of states over their national economies, including their political affairs.

Positive Balance

  • Increase the volume of world trade
  • Supports free trade and dismantles trade barriers
  • Creates jobs
  • Promotes technological development
  • Powers national growth and facilitates the modernization of developing countries

Negative Balance

  • Creates a system of debtors and financial dependence
  • Monopolizes the production and controls worldwide distribution
  • Limits the salaries of workers
  • Creates cartels that help create inflation
  • Increases the gap between rich and poor

TNCs regularly tend to maintain close liaison with NGOs. There are companies that finance for a more expensive, amiable image. States boast their transnational corporations, and not having them is a sign of weakness. All things that happen to damage or favor transnational companies also favor the state.

NGOs

We define an NGO (Non-Governmental Organization) by what it is not, i.e., a non-governmental organization.

They have two essential features: private and non-profit.

“Groups of individuals or groups, faiths freely by private initiatives which are active, non-profit, international activity of general interest, regardless of any order purely domestic concern.” What differentiates them from TNCs is the lack of a profit motive. They do not have an internal legal status and are subject to the law of the countries in which they act. Some authors link the origins of NGOs to the religious movement. One of the oldest NGOs is The Red Cross, a secular organization that assumes an important role in humanitarian and emergency aid.

Historical Periods of NGOs

  • Until the 19th century, the NGO phenomenon is linked to religious life.
  • From the 19th century, a dominant liberal spirit in the Anglo world, coupled with Christian charity, individuals have to be organized, not to mention the government, to address social injustices generated by the industrial revolution.
  • Late 19th century to present: the appearance of multiple diverse organizations addressing disasters of war, living conditions of the third world, and human rights advocacy.

Council of Europe Requirements for NGOs

  • Having a non-profit purpose
  • Have been created by an act derived from the law of one party
  • Exercise effective activity in at least two states
  • Have a statutory seat in the territory of a party and have their real seat in the territory of that party or another party

Elements of NGOs

  • International structure
  • They should not have their origin in an intergovernmental agreement
  • There should be no intergovernmental representation
  • Must be organized in a democratic way
  • Its purpose is not to be profitable
  • Should pursue international interest
  • Must be incorporated under the law of a State

The ends sought can only be carried out with financial resources. Their viability depends on their solvency, and independence depends on the origin of the resources. The United Nations has established that the resources should come mostly from individual members or contributions from national affiliates, but no other financial resources are discarded.

Public Funding of NGOs

  • Recurrent block grants
  • Financial grants to individual projects
  • Subcontracts that make NGOs the executive agent for government action in question
  • Tax measures

The relationship between international organizations and NGOs with consultative status can be quite varied. This status makes them advisory, on links between society and international organizations. Sometimes NGOs are responsible for conducting field programs provided by an organization. Consultative status supplies in some way to legal status. The United Nations Charter recognizes the work of NGOs. Recognizes their development through the Economic and Social Council (art. 71). When an NGO is stripped of its Consultative Status, it is because it has committed fraud. There are three types of consultative status:

  • General NGOs with experience and general experience, reaching diverse topics
  • Specialized for a particular sector
  • Materialized in a list of NGOs

NGOs can become, compared to international organizations, lobbyists, advisers, consultants, and operational tools. The role of NGOs, as instigators on behalf of society from government representatives, has been noticeable in large meetings held under the aegis of the United Nations. We refer to the organization of parallel NGO summits, bringing together thousands of people and have been echoed in the media (e.g., the Vienna Conference of 1993). NGOs are a phenomenon in areas of expansion. The areas of sensitizing action that most Western societies are:

  • Humanitarian Aid
  • Environmental Defense
  • Human Rights Promotion
  • Development Aid

NGOs have the support of the media. They help to sensitize the public about the dangers and how to address them.