Harmful Effects of MNCs on developing countries


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Though MNCs confer several benefits on the developing countries, they also create some problems for them. The more prominent amongst them can be described as follow:

 

  1. Disturbing the plan priorities

 

The MNCs are profit oriented. They show a strong tendency to take up the production of those commodities in which they can earn a high profit margin. They ignore the production of more important commodities if they do not give them the required profit margin. This results into the allocation of resources to the production of low priority goods. The local producers also show a tendency to enter into the low priority industries if they are more profit earning.

 

2 .Inappropriate technology

 

The MNCs are accustomed to use a particular type of technology which is suitable for conditions in developed countries. They bring that technology to the developing countries, but that technology is not suitable for the developing countries. There is excessive supply of labor in developing countries. The technology introduced by MNCs is not proper for absorbing labor. It aggravates the problem of unemployment.

 

3. Excessive profits

 

Most of the MNCs earn excessive profit by selling their products at very high prices. A large part of the profit is sent by the MNCs to their home countries. The host country has to provide foreign exchange to the MNCs to enable them to remit the profit to the Home country.

 

  1. Discrimination in staff

 

Often the MNCs give a cordial treatment to their own persons & a step motherly treatment to the staff belonging to the host country. This creates discontent amongst the staff & labor.

 

  1. Over exploitation of resources

 

The aim of an MNC is to maximize profit in shortest possible period. They do not care for the long run effects of their activities. They use the productive resources at a very fast rate & finish them. They do not care to renew or replace the used resources.

 

  1. Indifference to social cost

 

The MNCs are not very particular about controlling the social costs like pollution or loss of life in the event of an accident. They are careless in maintaining the required safety measure.

 

  1. Political pressure

 

The MNCs often use their money power for bringing pressure upon the government & political parties of the host countries. They interfere in the administration of the developing countries.

 

Conclusion

 

Balancing the pros & cons of the business of the MNCs, we have to admit that they are beneficial to the host. The possible adverse effects of their working can be controlled by suitable action.


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