12 - Multinational Firms and Globalization
ucla | GEOG 4 | 2023-11-12 22:37
Table of Contents
Background
- beginning of disorganized capitalism of post-fordism
- breaking down govt-biz-labor collab in core econ
- declining rates of profit
- inc trade openness
- more permissive financialization of the world post-Bretton Words abrogation
Profits Crisis: Solution
- invest in new tech and products
- sub capital for labor
- more niche markets for products
- segment/separate labor and consumer markets
- go multinational to benefit from factor endowments
- take advantage of fiscal condition, tax services, etc.
- build foreign market shares <- saturation of domestic markets
- Methods to go Multinational:
- invest in foreign corps w/ M&A
- set up alliances with foreign partners to carry out offshore production
- set up subsidiaries and branches in multiple locations
- incentives
- lower prod costs
- tax advantages of subsidiaries
- macroeconomic benefits from exchange rate differences, tax rates, etc.
- diversify investment risk across countries
Consequences since 1970s
- biggest firms dominate world econ
- creation of tax havens to shelter profits
- majority of FDI still to core countries, esp. w/ rise of China (80% in 1995 -> 50% in 2020)
- product life cycle model
- relocation of labor intensive production based on factor endowments
- search for cheap labor and production from outsourcing
- massive share of intl. trade today within firms w/ offshore factories
- global supply chains
- components from multiple sites based on factor endowments
- VAX - ratio of value added to gross trad -> spiked in 1970s and 80s, declining now
- most trade is in components not final products
- Chinese consumption of raw materials since 1990s trended up
- still hard to identify “national origin” of a product in decentralized manufacturing
- components from multiple sites based on factor endowments
