Essay
A level Economics (AQA) Macroeconomics essay answer (25 marks)
- Module
- Macroeconomics
- Institution
- AQA
Evaluate the view that MNCs play a positive role in the development of LEDCs.
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Evaluate the view that MNCs play a positive role in the development of LEDCs (25 marks).Multinational corporations or MNCs are businesses that operate in at least two countries.
Examples of MNCs include Apple and Coca-Cola. MNCs create positive effects on less
developed countries, e.g. creating employment. It can also however create negative effects
like the exploitation of workers. Multinational corporations could lead to an improvement in
Angola’s economy by creating jobs, creating stable economic growth, and increasing
aggregate demand.
MNCs, like Apple and Microsoft, play a positive role in the development of less-developed
countries by creating job opportunities. As businesses like Apple will invest in infrastructure
to open factories, this creates more available jobs for the unemployed. For example, in 2015,
Apple created 400,000 jobs in China and provided them with $150-$200 a month, which is
more than their national minimum wage. As MNCs are providing LEDCs with more jobs,
they may also offer higher wages to attract
more workers, leaving employees in LEDCs
with a stable income. As more people in
LEDCs, e.g. Angola, are working it generates
more money flowing within the economy.
This leads to an increase in the multiplier
effects within the economy. As more
individuals are earning income and spending
the MPW is lower than the MPC. the increase
in national income has led to an increase in
the country's overall GDP. This is a positive
effect on LEDCs, like Angola, as it can lead
to the further development of the country.
Through more employment, may attract more businesses or MNCs to open in LEDCs so that
production is efficient. LEDCs are becoming more attractive to MNCs so that they can invest,
leading to increases in employment. This effect of LEDCs is shown on the Keynesian LRAS
diagram as AD1 shifts to the right to AD2. leading to P1 increasing to P2 and Y1 increasing
Y2, demonstrating the long-term effects on LEDCs/Angola as there is an increase in capacity
as there is more labour available. Through MNCs investing in Angola, it can lead to the
accelerator effect as the investment leads to increases in employment creating an increase in
the country’s GDP, leading to the development of LEDCs, like Angola, increasing their
employment rate from 7.7%.
However, MNCs can exploit the workers they employ. Workers may be treated in an
unethical manner as economies in LEDCs do not provide workers with clear protection. For
example, Nestle was aware of the unethical labour practices which took place on their farms.
It was also reported that 15,000 children between 9-12 years old were tricked into working on
farms in West Africa for only $30. This demonstrates the MNCs taking advantage of workers
as they’re given lower wages. MNCs can also take advantage of the poor property rights in
less developed countries. MNCs can open working sites or factories in buildings with poor
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