Quick questions on The rise of multinational corporations and trade explained: H2 History

The decades after 1945 saw world trade grow far faster than world output, a defining feature of the postwar global economy. This was made possible by the steady reduction of tariffs and other barriers under the postwar trade framework, by the monetary stability of the Bretton Woods system, and by dramatic improvements in transport, such as containerised shipping, and in communications. As barriers fell and costs dropped, countries specialised in what they produced best and exchanged across borders on a growing scale. This expansion of trade was both a cause and a measure of the integration of national economies into a single global economy, and it was a powerful engine of growth through specialisation and access to larger markets.

The most distinctive institutional development of the period was the rise of the multinational corporation, the firm that produces and operates across many countries. Multinationals grew enormously in size, number and reach, and came to account for a rising share of world production, trade and investment. They did far more than export goods: they invested directly abroad, building factories and operations in many countries, and they began to integrate production internationally, so that a single product might be designed in one country, with components made in several others and assembled in yet another. This internationalisation of production was a new and powerful form of economic integration.

The impact of multinationals is genuinely contested. Supporters stress the benefits: investment, technology transfer, employment, and the integration of developing economies into world markets. Critics stress the costs: multinationals could concentrate enormous economic power, repatriate profits from poorer host countries rather than reinvesting them, undermine local producers, and deepen the dependency of developing economies on foreign capital and decisions made elsewhere. The truth is that both effects occurred, often together, and the net balance varied greatly between countries.

Both benefits and costs occurred and varied by country; reflect that variation.

Define a multinational corporation. [4 marks]

Explain how the expansion of world trade contributed to postwar growth. [12 marks]

"Multinational corporations did more harm than good to developing economies." How far do you agree? [20 marks]