I’m really not fond of multinationals. The simple fact is that they exist for profit. That in itself isn’t the issue though – their economies of scale and resources mean they can operate with relative impunity in most democratic states. Legislation always lags behind reality. A company can exploit a loophole for as long as it is open and then quickly adapt. Legislative structures take a while to catch up and by that point the big fish have escaped the net.

In this case I’ve been thinking about how they contribute to the economy of the country they operate within. Follow the money.

Local people spend their money in a store owned by a multinational.

The profits from the store flow through the multinationals accountancy department.

The rest goes into the company’s coffers to pay for whatever needs to be paid.

A small amount flows back to pay the staff of the store.

Profits go to shareholders all over the world.

Unless they create an insane number of jobs there’s no way they contribute sufficiently to the local economy to justify the many other enterprises they are able to push out. Marketing and ability to endure enormous losses means they can afford to drive away all competition should they be so inclined.

So taxation needs to pick up the slack. Of course this just means that multinationals put a lot of resources into their accountancy departments to find the most impressively acrobatic routes to funnel money. Governments try to stop them and by the time they do a different route is used. It’s a fair cop, guv.

Local people spend their money in a store owned locally.

The profits from the store flow into the business, suppliers are paid, staff are paid, tax is paid.

The rest goes to the owner who also pays tax on earnings.

In theory the owner could sit on a huge pile of money but given that there aren’t ridiculous economies of scale at work it doesn’t usually work out that way. Even then, large profits tend to be invested or spent and the money keeps flowing locally.

I’m not trying to say that local business is better in every way but it would seem some inefficiency is required until we rebuild our system from the ground up to take into account the behaviour of companies much larger than anyone imagined when we started out. How’s that for a run-on sentence?

Capitalism is supposed to be about competition, if memory serves, but MNCs are incredibly anti-competitive. The question being whether we should favour efficiency at all costs in a Randian fashion or whether one needs to consider that efficiency in one area makes others inefficient. Which do we want for our economy and society?

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