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World History 2

<OpenstaxParagraph>
	The growing global economic integration represented by the rise of the <OpenstaxTerm>WTO</OpenstaxTerm> and regional trading blocs opened new opportunities for multinational corporations to extend their reach and influence around the world. A <OpenstaxTerm>multinational corporation</OpenstaxTerm>, or <OpenstaxTerm>MNC</OpenstaxTerm>, is a corporate business entity that controls the production of goods and services in multiple countries. MNCs are not new. Some, like the British East India Company and the Hudson’s Bay Company, exerted great influence during Europe’s imperial expansion in the early modern and modern periods. But with globalization and improvements in transportation and communication technology, MNCs have thrived, especially since the 1950s. They have used their growing wealth to lobby governments to create conditions favorable to their operation, enabling them to become even more powerful.
</OpenstaxParagraph>
<OpenstaxParagraph>
	Multinationals have also benefited greatly from the lowering of trading barriers around the world. These developments have encouraged major automobile manufacturers like Volkswagen, Toyota, Chevrolet, Kia, and Nissan to build and operate assembly plants in Mexico, for example, where workers are paid lower wages than they are in countries like Germany, Japan, South Korea, or the United States. This translates to significant cost savings and thus higher profits for them. And because Mexico is part of a free trade bloc with the United States and Canada, cars made there can be exported for sale in the United States or Canada without the need to pay tariffs.
</OpenstaxParagraph>
<OpenstaxParagraph>
	Supporters of MNCs claim that the benefits for workers in this arrangement are also substantial. They get access to well-paying and reliable industrial jobs not available before, and their paychecks flow into the local community and contribute to a general rise in the standard of living. The companies themselves invest in local infrastructure like roads, powerlines, and factories, and their presence often helps expand support industries like restaurants that cater to workers and shipping companies that employ them to move their goods. Technology spillovers also occur when MNCs either help to develop necessary job skills in local workers or introduce new technologies that ultimately become available to domestic industries in the host country. Finally, MNCs that focus on retail and establish branches in other countries, such as Walmart, Aldi, Costco, Carrefour, Ikea, and many more, provide access to high-quality consumer goods like clothing, appliances, and electronics at competitive prices, raising the standard of living in the countries where they operate (<a href="#fig-00004">Figure 15.6</a>).
</OpenstaxParagraph>
<OpenstaxFigure id="fig-00004" src="https://openstax.org/apps/archive/20240226.174525/resources/256658c2272a9dd716b49277a6d4f63413a08e57" alt="A picture shows the corner of a large, bricked building. The two sides shown are brown bricked with a beige stripe of bricks toward the top. Three windows are shown toward the front with doors in the middle. A beige flat surface shows at the two sides of the corner with an orange rectangle, blue “A”, and the word “Aldi” in white on both sides. Along the left of the front there are shopping carts in two rows along the front wall and on the right side of the middle post there is a beige garbage can. Through the windows you can see lights and some store shelves. The ground outside is wet and snow is seen in the two bottom corners. There are some trees and gray skies in the background." mediaType="image/jpg" width="1301" height="473" />
<OpenstaxFigureText width="1301">
	<strong>Figure 15.6</strong> Aldi is a multinational chain of grocery stores based in Germany with branches in twenty different countries. This Aldi store is in Bethlehem, Pennsylvania. (credit: “Aldi in Bethlehem, PA taken at sunset” by Michael Katz/Wikimedia Commons, Public Domain)
</OpenstaxFigureText>
<OpenstaxParagraph>
	There are drawbacks, however. Critics of MNCs note that while workers may be paid more than they could earn working for local businesses, they are still paid far less than the multinational can afford. Workers are often prevented from forming unions and forced to work long hours in unsafe environments. Furthermore, many multinationals are based in developed countries, mostly in the West, and they tend to express the interests and cultural norms of those countries. This bias has sometimes led to accusations of <OpenstaxTerm>neocolonialism</OpenstaxTerm> (the use of economic, political, or cultural power by developed countries to influence or control less-developed countries), particularly for the way MNCs have helped accelerate the homogenization of cultures around the world by exporting not only goods from the West but also ideas and behaviors.
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<OpenstaxNote>
	<OpenstaxNoteTitle> Link to Learning </OpenstaxNoteTitle> 
	<OpenstaxParagraph>
		These short Planet Money videos follow the <a href="https://openstax.org/l/77TShirt">manufacture of a simple t-shirt</a> and reveal how many people around the world are involved. Click on “Chapters” to navigate among the five short videos.
	</OpenstaxParagraph>
</OpenstaxNote>
<OpenstaxParagraph>
	One such idea is that countries should encourage the <OpenstaxTerm>privatization</OpenstaxTerm> of public services like utilities, transportation systems, and postal services. Privatization means delegating these services to mostly private companies that operate to earn a profit rather than such services being delivered by arms of the government. Organizations like the <OpenstaxTerm>World Bank</OpenstaxTerm> and the <OpenstaxTerm>International Monetary Fund</OpenstaxTerm> (<OpenstaxTerm>IMF</OpenstaxTerm>) have pushed for privatization as a way to make these public services more efficient. The World Bank is an international organization that offers financing and support to developing countries seeking to improve their economies. Founded in 1944 to rebuild countries after World War II, it later shifted its focus to global development. The IMF, also created in 1944, promotes global monetary stability by helping countries improve their economies with fiscal plans and sometimes loans. In exchange, it requires countries to adopt plans that often include privatizing public services and paying off their debts.
</OpenstaxParagraph>
<OpenstaxParagraph>
	In some places, this privatization process has been successful. For decades after independence, for instance, <OpenstaxTerm>India</OpenstaxTerm> employed a <OpenstaxTerm>mixed-economy strategy</OpenstaxTerm>, with a combination of free-market policies and heavy intervention by the government. The result, however, was that a large part of the public sector operated under cumbersome bureaucratic controls that critics complained slowed economic growth. Beginning in the 1990s, new leadership in India began pursuing economic liberalization by privatizing aspects of its large public sector including airlines, shipbuilding, telecommunications, electric power, and heavy industry. As expected, these efforts increased productivity and efficiency, but the public often was confronted by higher prices and loss of access to services.
</OpenstaxParagraph>
<OpenstaxParagraph>
	The World Bank made similar efforts across <OpenstaxTerm>Latin America</OpenstaxTerm>. Some view privatization there as largely successful, noting that as the number of state-owned industries declined, the profitability and efficiency of the privatized companies increased. But sometimes, as in <OpenstaxTerm>Bolivia</OpenstaxTerm>, privatization came at considerable cost. In 1999, the <OpenstaxTerm>Bechtel Corporation</OpenstaxTerm>, a U.S.-based multinational, was awarded a contract by the Bolivian city of Cochabamba to improve the efficiency of the city’s water delivery system. By January 2000, however, water delivery in Cochabamba had actually become worse. Service rates increased even for people who did not receive any water at all. This result led to large and sometimes violent protests later known as the <OpenstaxTerm>Cochabamba Water War</OpenstaxTerm>. The Bolivian government sided with the protestors, expelled Bechtel, and passed the <OpenstaxTerm>Bolivian Water Law</OpenstaxTerm> in April 2000. Water in Bolivia was no longer privatized. In the aftermath of the protests, which drew international media attention, the World Bank promised to study and revise its procedures and recommendations.
</OpenstaxParagraph>
<OpenstaxParagraph>
	Multinationals have been crucial in the emergence of modern <OpenstaxTerm>China</OpenstaxTerm> as an economic powerhouse. Starting in the 1970s under Deng <OpenstaxTerm>Xiaoping</OpenstaxTerm>, the country began to pursue a market-based growth strategy, adopting some of the tools of capitalist economies without ending its Communist system. These economic changes, sometimes called the “<OpenstaxTerm>Opening of China</OpenstaxTerm>,” vastly changed the country’s role in the world’s economy and improved a new generation’s prospects for a higher standard of living. Factories constructed for <OpenstaxTerm>MNC</OpenstaxTerm>s in coastal cities like Shanghai, Guangzhou, and Shenzhen were filled with workers from the Chinese countryside. Large ships stacked high with Chinese factory-made products crossed the Pacific and Indian Oceans and passed through the Suez and Panama Canals. With the world’s largest population, China holds its largest group of consumers. In 2001 it joined the <OpenstaxTerm>WTO</OpenstaxTerm>, and in 2010 it became the world’s second-largest economy, after the United States. As of 2022, China’s economy was predicted to become the world’s largest in 2030.
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15.1.2 Multinationals and the Push to Privatize

1 Understanding the Past

1.1 Developing a Global Perspective

1.1.1 World History as Preparation for Life After College

1.1.2 World History and Global Citizenship

1.1.3 Features of This Textbook

1.2 Primary Sources

1.2.1 Learning to Evaluate Documents and Images

1.2.2 Documentary Sources: Competing Narratives

1.2.3 Textual Sources: The Importance of Language

1.2.4 Hidden in History

1.3 Causation and Interpretation in History

1.3.1 Levels of Causation

1.3.2 Interpretation in History

2 Exchange in East Asia and the Indian Ocean

2.1 India and International Connections

2.1.1 The Mughal Empire

2.1.2 The Sultanate of Gujarat

2.1.3 The Rise of the Maratha Empire

2.1.4 European Colonialism

2.2 The Malacca Sultanate

2.2.1 The Rise of the Malacca Sultanate

2.2.2 European Malacca

2.3 Exchange in East Asia

2.3.1 Japan

2.3.2 China’s Dynastic Exchanges

2.3.3 Korea and Its Neighbors

3 Early Modern Africa and the Wider World

3.1 The Roots of African Trade

3.1.1 Saharan Trade Routes

3.1.2 The Spread of Islam

3.1.3 The Mali Empire

3.2 The Songhai Empire

3.2.1 The Rise of Imperial Songhai

3.2.2 The Reign of Askia the Great

3.2.3 The Decline of Songhai

3.3 The Swahili Coast

3.3.1 The Rise of the Swahili City-States

3.3.2 Slavery on the Swahili Coast

3.3.3 The Contest for the Swahili Coast

3.4 The Trans-Saharan Slave Trade

3.4.1 The Role of Kanem-Bornu

3.4.2 The Arrival of Europeans

3.4.3 The Later Trans-Saharan Slave Trade

4 The Islamic World

4.1 A Connected Islamic World

4.1.1 Politics and Religion in the Ummah

4.1.2 Islamic Trade Networks

4.1.3 Technology in the Islamic World

4.2 The Ottoman Empire

4.2.1 Culture and Society

4.2.2 Expansion, Revolutions, and Reform

4.2.3 Science and Technology

4.3 The Safavid Empire

4.3.1 The Rise of the Safavid Empire

4.3.2 Establishing Shi‘ism as the State Religion

4.3.3 Safavid Government and Culture

5 Foundations of the Atlantic World

5.1 The Protestant Reformation

5.1.1 The Origins of the Protestant Reformation

5.1.2 Calvinists, Anabaptists, and Anglicans

5.1.3 The Catholic Reformation and the Wars of Religion

5.2 Crossing the Atlantic

5.2.1 The Rise of Maritime Nations

5.2.2 The Columbian Exchange

5.3 The Mercantilist Economy

5.3.1 The Rise of Mercantilism

5.3.2 Mercantilism and the Expansion of Empire

5.3.3 Mercantilism and Its Critics

5.4 The Atlantic Slave Trade

5.4.1 Slavery and the Triangular Trade

5.4.2 African and North American Slavery

5.4.3 The Economics of Slavery

6 Colonization and Economic Expansion

6.1 European Colonization in the Americas

6.1.1 Spain’s Encomienda System

6.1.2 English Settlements in North America

6.1.3 French and Dutch Settlements

6.2 The Rise of a Global Economy

6.2.1 The Seven Years’ War

6.2.2 British Influence in India

6.2.3 China’s Dominance in Trade

6.2.4 Colonial Resistance and Revolution

6.3 Capitalism and the First Industrial Revolution

6.3.1 From Mercantilism to Capitalism

6.3.2 Mechanization

6.3.3 Marxism

7 Revolutions in Europe and North America

7.1 The Enlightenment

7.1.1 The Authority of Reason

7.1.2 Natural Rights

7.1.3 Social Contract Theory

7.2 The Exchange of Ideas in the Public Sphere

7.2.1 Public Debate and Dissent

7.2.2 The Republic of Letters

7.2.3 Academies, Universities, and Intellectuals

7.3 Revolutions: America, France, and Haiti

7.3.1 The American Revolution

7.3.2 The French Revolution

7.3.3 The Haitian Revolution