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Are Multinational Corporations stealing wealth of nation's?

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FastLaner007

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Hey,

There is one question that has been lingering in my head for quite some time now. I come from a business family, yet I fail to understand this whole globalization thing and I have never even clarified it with my family before, so asking it here to learn from you FastLaners.

When companies from America, UK, South Korea, China and Japan pop up in other developing countries or developed countries, does it mean that they are stealing wealth from those nations and sending that wealth to their original countries? I know these Multinational Corporations are giving value (through product or service) in exchange for money. But I am pretty sure that similar value (monetarily) can be obtained from local competitors too that are based in their own countries.

So, in short. Are corporations like Dominoes or McDonald's or BMW or Amazon, etc stealing wealth of Asian countries and African countries, even though they are giving something in return they must still be making profits, when they open shop there?

Thanks.
 

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Interesting question. I don't think stealing is the right term, but that's just semantics.

The companies need to invest in the countries they are moving into before they can begin operations. They'll need to hire locals to work in the business, which pumps money INTO the country via payroll. They'll also need to invest in a space to have their business, either by buying or renting the real estate space. This is also a cash inflow for the country.

When a customer buys a hamburger from McDonald's, where does that cash go? Some of it will go to paying the rent, utilities, and maintenance on the building. Some will go to payroll. Some will go to buying more hamburgers to sell. Some will go to taxes. Most, if not all, of this money is going back into the country where McDonald's operates. So for every $1 earned, $0.75 might be put right back into the country of operations.

But what about the $0.25? There are a few possibilities for this. It could be used to expand operations in the same country. It could be pulled out and sent to a different country for expansion. It could also be sent to the parent company and sit in a bank there, or used for domestic operations, etc. It's difficult to know.

So perhaps, yes, multinational corporations are removing cash from circulation in the countries in which they operate, but hopefully that's offset by the exports of that country which bring cash back into the country.
 
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FastLaner007

FastLaner007

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Interesting question. I don't think stealing is the right term, but that's just semantics.

The companies need to invest in the countries they are moving into before they can begin operations. They'll need to hire locals to work in the business, which pumps money INTO the country via payroll. They'll also need to invest in a space to have their business, either by buying or renting the real estate space. This is also a cash inflow for the country.

When a customer buys a hamburger from McDonald's, where does that cash go? Some of it will go to paying the rent, utilities, and maintenance on the building. Some will go to payroll. Some will go to buying more hamburgers to sell. Some will go to taxes. Most, if not all, of this money is going back into the country where McDonald's operates. So for every $1 earned, $0.75 might be put right back into the country of operations.

But what about the $0.25? There are a few possibilities for this. It could be used to expand operations in the same country. It could be pulled out and sent to a different country for expansion. It could also be sent to the parent company and sit in a bank there, or used for domestic operations, etc. It's difficult to know.

So perhaps, yes, multinational corporations are removing cash from circulation in the countries in which they operate, but hopefully that's offset by the exports of that country which bring cash back into the country.
Thanks for the detailed explanation bro, now it's clear to me. A company setting up operations in a different country may lose it's investment too in case of loss. So that money goes into the economy of that country which may be the reason most of the countries allow foreign direct investment as most of the investment will be circulated in the country itself. Am I right guys?
 

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Thanks for the detailed explanation bro, now it's clear to me. A company setting up operations in a different country may lose it's investment too in case of loss. So that money goes into the economy of that country which may be the reason most of the countries allow foreign direct investment as most of the investment will be circulated in the country itself. Am I right guys?
It tends to balance itself out, to an extent. You're isolating the example of a company that enters into a new country and potentially withdraws the profits, but the overall economics of a country are far more complex. The workers get paid, like we discussed, but the government also gets paid when the workers get taxed. The business itself is also taxed, which is good for the government. Then, there are also foreign investors who put money into the economy without taking it out quickly (think foreign real estate investors). Finally, there are people within the country that invest into other countries, thus reducing the cash in circulation. There's a constant ebb and flow of cash coming in and cash going out.

The central government monitors the cash in circulation and tries to maintain a healthy level of cash, and either removes excess cash from circulation by issuing Treasury Notes and Bonds (you pay the government money and they issue a note that will pay you back small amounts with interest over a long period of time), or they add to the cash in circulation by printing more bills, but hopefully not so much that it will devalue the currency through inflation.

The government likes foreign investment because it should increase the tax revenue of the government, which gives them much more flexibility in where they spend it.
 

Kak

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The simple answer is no. They're not STEALING because they are engaging in free enterprise where a customer freely and openly exchanges money for the value the company brings to the table.

Stealing means theft or robbery.
 

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Wouldn't they be paying their taxes in those places like everyone else?
What do the taxes we pay have anything to do with justifying business practices? There is zero correlation between virtue and taxes paid.

Taxation is classed up robbery at gunpoint by organized crime... Not to be confused with a charitable and/or virtuous endeavors.
 

Fastlane Liam

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What do the taxes we pay have anything to do with justifying business practices? There is zero correlation between virtue and taxes paid.

Taxation is classed up robbery at gunpoint by organized crime... Not to be confused with a charitable and/or virtuous endeavors.
By paying taxes into a country, you're putting money into the country? The question was are Global Businesses stealing the wealth of nations.

As for Taxation being robbery, I don't agree with Tax rates fully in the UK - but Im perfectly fine paying them towards Emergency Services, Defence, Prisons, Infrastructure, Schooling etc? I feel like Ive won the lottery being born in an Extremely Safe country thats bursting with opportunity and prosperity.

Not sure if I missed the point here and we're talking about totally different things?
 

Kak

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By paying taxes into a country, you're putting money into the country?
By paying taxes you are putting money into the black hole of government. The wealth of a country is not determined by it's tax base. It's determined by the commerce that takes place within its borders. Taxes are a zero sum game. Everyone paying more taxes doesn't necessarily mean more government freebies.

The free enterprise is the only place where value is created. Taxes are where value goes to die.

In contrast market exchanges always advance both sides. The real value to multinational companies comes from the capitalist value, not the taxes they pay.

Here is an example:
Toyota, a Japanese company, builds Toyota Tundras in TEXAS out of more US made parts than Ford or Chevy. They wouldn't do it that way unless it was worth it for them to do.

Employees won't trade time unless the money is worth it.

Toyota won't hire employees unless the employee is worth the money.

Parts suppliers won't supply Toyota unless it is worth it to them.

Toyota won't buy the parts unless they are worth it to them.

Customers won't buy a Tundra unless they think it's worth the money.

Toyota wouldn't sell the tundra unless it was worth it to them.

These are free, open and voluntary exchanges of wealth... Each time it happens, more value is created. Everyone, at every stage, traded up.
 

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MTF

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@Kak's post should be marked GOLD.

Though I've been always opposed to taxes, it's only now that I realize that creating value ends the moment it ceases to be a voluntary transaction of trading up that creates a virtuous cycle (which makes total sense).
 

Kak

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@Kak's post should be marked GOLD.

Though I've been always opposed to taxes, it's only now that I realize that creating value ends the moment it ceases to be a voluntary transaction of trading up that creates a virtuous cycle (which makes total sense).
You can even look at it in a micro level like personal finance.

You run a business, make a profit and promptly spend 80 percent of the profits that only leaves 20 percent left to invest back in the business, you are killing the golden goose, or at least starving it.

Taxes do the same thing on macro level to the economy as a whole.
 

SquatchMan

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So, in short. Are corporations like Dominoes or McDonald's or BMW or Amazon, etc stealing wealth of Asian countries and African countries, even though they are giving something in return they must still be making profits, when they open shop there?

Thanks.
It's not considered stealing if you give something in return.

The profits get transferred back home, yes. However, I'd wager that more value is created than is removed from the country.

A better example of stealing the wealth of nations would be the Chinese in Africa. They bribe the government to allow Chinese corporations to purchase mines, corps bring in Chinese miners to extract resources, and then leave once the resources have been extracted.

Value is still transferred directly to the government, which is never distributed to the people or reinvested in the country in those countries. Sometimes the Chinese companies will build roads though.

For a country to truly steal the wealth of a nation that would involve an army invading the country, using foreign workers to extract resources, and then leaving. No value is transferred to the invaded country.

Countries have always gone to war to steal the resources of weaker countries... for all of human history.
 

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