How large corporation might influence the economic health of a developing country?using the technical words below: living standard, employment, economy, investments, instability, production.

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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When a country is just starting to develop its economy, direct foreign investment by a large company can be very important to it.

What will hopefull happen is that the company will make a lot of investments in buildings and such that are needed to carry out production in the country.  Beyond that, the company will surely increase the levels of employment in the economy, both in terms of direct employment for the company and in terms of a "multiplier."  In the multiplier effect, the workers employed directly by the company will spend their money in ways that cause others to have jobs selling goods and services to those workers.

The company can reduce instability in the country by improving its economy and its living standards.

kapokkid's profile pic

kapokkid | High School Teacher | (Level 1) Educator Emeritus

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Any large corporation gives the managers at the top enough distance from the workers at the bottom that their decisions can be based entirely on profit motive without any regard for living standards, or steady employment for the workers in this developing country.  The corporation may in fact make investments in this developing country but these may simply be in the form of factories without any regard for infrastructure outside of that which aids in production and increases profit margins.  In terms of benfitting the economy, it will depend to some extent on whether there are any profit-sharing motives with the employees or what kinds of tax deals the corporation has received from the government in order to base their operation there.  If the corporate managers and owners are based outside the developing country, as is often the case, much of the money ends up circulating outside of the developing country.

krishna-agrawala's profile pic

krishna-agrawala | College Teacher | (Level 3) Valedictorian

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The impact of a single corporation on complete economy will depend on the size of the corporation in relation to the whole economy. The compact will also be significantly influenced by the nature of business and operations of the corporation. Variations in the turnover of a large corporation will thus have a direct impact on the GDP and living standards of the people.

A corporation with very large turnover is likely to have greater impact on the complete economy rather than a corporation with smaller turnover.

The nature of business of the corporation is also very important. For example, the failure of a large bank which has deposits from a large population of the economy can have serious direct impact on economy, as well as much more severe indirect impact due to fear and uncertainty generated by the failure. The panic created by large banks can start a chain reaction which can lead to steep reduction in bank deposits. Leading to reduced availability of borrowings for investments. This can lead to further panic affecting the levels of expenditure also.

Also a company employing large number of people will have greater impact on employment in the economy as compared with a technology intensive company employing only small work force.

A the industry or the sector within which the corporation also affect the economy by encouraging and facilitating business of other forms. For example, an automobile company helps the economy by promoting industries supplying components. Also a corporation, may promote growth of other sectors in the economy. This generally includes corporations engaged i infrastructure sectors such as power, and transportation.

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