Criticism and debate
Economist Sanjaya Lall in 1974 proposed a spectrum of scholarly analysis of multinational corporations, from the political right to the left. He put the business school how-to-do-it writers at the extreme right, followed by the liberal laissez-faire economists, and the neoliberals (they remain right of center but do allow for occasional mistakes of the marketplace, such as externalities). Moving to the left side of the line are nationalists, who prioritize national interests over corporate profits, then the "dependencia" school in Latin America that focuses on the evils of imperialism, and on the far left, the Marxists. The range is so broad that scholarly consensus is difficult to discern.[44]
Anti-corporate advocates criticize MNCs for being without a basis in a national ethos, which appears in their practice of doing business with countries that have low human rights or environmental standards.[45] The aggressive use of tax avoidance schemes and multinational tax havens allows MNCs to gain competitive advantages over small and medium-sized enterprises.[46] Organizations such as the Tax Justice Network criticize governments for allowing MNCs to escape taxation, particularly by using base erosion and profit shifting (BEPS) tax tools, since less money can be spent for public services.[47] Moreover, academics found that profit shifting by multinational corporations led to a reduction in domestic profit in much of the world, with the European Union losing upwards of 20% while developing countries lost up to 5% due to billions being transferred to corporate tax havens.[48] While research has found that anti-transfer pricing may be effective in raising corporate revenue,[49] many advocates continue to argue that more needs to be done since profit shifting, coupled with other methods such as export-processing zones, reduces government revenue for services that support lower and middle-class citizens, increases income and profits for high income shareholders, and reduce after-tax income for workers.[50]
According to Crotty, Epstein, and Kelly (1998), the mobility of multinational corporations within a neoliberal policy regime increases their bargaining power vis-à-vis labor and governments, which can lead to a "race to the bottom" in taxes, regulation, and wages. Through threat and spillover effects, this may contribute to greater inequality, persistent unemployment, and wage stagnation. However, the authors emphasize that the effects of foreign direct investment are context-dependent. When investments take place in an environment with high aggregate demand, strong institutions, and clear rules that limit coercive competition, and effective coordination among governments, multinationals may instead contribute to higher wages, improved working conditions, and broader economic development.[51]
Economist Paul Krugman argued in his essay "In Praise of Cheap Labor" (1997) that the jobs created by multinational corporations in developing countries, despite low wages and poor working conditions, are often an improvement compared to the available alternatives such as marginal farming or the informal economy. He maintained that "bad jobs at bad wages" are better than no jobs at all, since factory work in export-oriented sectors can serve as a stepping stone to broader economic development. According to Krugman, countries such as South Korea, Taiwan, Indonesia, and Bangladesh have achieved measurable progress in income, nutrition, and living standards through export-led industrialization. Although multinationals are primarily driven by profit, Krugman argued that the main beneficiaries are not capital owners but workers in developing countries.[52]
