Kulubekova Galiya Aidarovna (Кулубекова Галия Айдаровна)

L. N. Gumilyov Eurasian national university, Republic of Kazakhstan (Евразийский национальный университет им. Л. Н. Гумилёва, Республика Казахстан)

The development of transnational corporations between two World Wars.

The second generation of TNCs took a gap between two World Wars. This period is characterized by the continued development of the TNCs but, by comparison with the late nineteenth- and early twentieth centuries, at a slower rate due to the general instability in the world economy during this period [2, 46], caused by the war disasters and the Great Depression. Governments tried to deal with the Great Depression through currency controls and higher tariffs, which led to fracturing of the world into separate currency blocs which hindered international trade and investment. Companies still collaborated, but now preferred doing so through international cartels in which separate companies agree on pricing and division of markets among themselves rather than through direct ownership [3, 1-2]. To make clear the situation the difference between international cartel and TNC is shown in images (img. 1 and img. 2):

Img.1. International cartel

Img. 2 TNC structure according to UNCTAD

Moreover, the political situation of that period also influenced dramatically the development of TNCs. The revolution of 1917 in the Russian Empire and creation of the USSR brought the huge territory that occupied almost 1/6 of the Earth's inhabited land of 22,4 million sq. km outside the cross-border business flows and closed it for foreign investment. In the late 1920s - beginning of 1930s after the change of political power in the country the foreign concessions that used to take a significant part in the economy of the Russian Empire were forced to leave the region. S. Zakharov mentions among the particular reasons lack of clear monetary and credit policy, continuous government monitoring, unfriendly judicial and local authorities, prejudice against Soviet citizens employed in a managerial work in the concessions, imprecise wording in the concession agreements, which eventually led to a breach of contractual terms and made work of concession companies unprofitable, etc. [4] Revolutionary government in Mexico took over foreign owned assets in mining, oil, railways, to make them into state-owned enterprises. The growing nationalism made foreign-owned companies targets in many countries [3, 1-2]. The changing political situation in the world put some territories out of TNCs' scope.

This period is also characterized as a time for TNCs to start dealing with the production of arms and military equipment in order to meet the military needs of the countries engaged in wars [2, 46]. For example, Mitsui and Co., the first Japanese company of general trade became also a major arms importer [5, 325]. Even those TNCs that were not engaged in producing military equipment were likely to produce the products needed for military purposes. Such TNCs as IBM, Ford, Siemens, Volkswagen, Daimler-Benz and BMW are accused by some researchers for benefiting from war and even slave labour [6, 18].

During second period of the TNCs' growth the XIX century model of international economic relations was broken. The consequences of two World Wars and the Great Depression had enormous impact on the economy and investment. The political situation of that time defined crucially the direction future business development: even though it was not favorable for TNCs, it opened a new perspectives which marked the next stage of their growth.

BIBLIOGRAPHY

1. Peter Muchlincki, “Multinational enterprises and the law”, second edition, 2007, 12 p.;

2. V. V. Polyakov, R. K. Schenin, “Мировая экономика и международный бизнес” (“World economy and international business” in Russian), fifth edition, 2008, Moscow, 46 p.;

3. M. J. Peterson, “Multinational corporations in transnational accountability. International dimensions of ethics education in science and engineering. Background reading”, Version 1, February 2008, 1-2 pp., available at www.umass.edu/sts/ethics, accessed on 31.01.15;

4. S. Zakharov, “Concessional policy of the Soviet country in Ural in 1920s”, 2000, Yekaterinburg;

5. Mitsui & Co, “The 100 year history of Mitsui & Co., ltd., 1876-1976”, translated by T. I. Elliott, 1977, Tokyo, 325 p.;

6. Olufemi Amao, “Corporate Social Responsibility, Human Rights and the Law. Miltinational corporations in developing countries”, 2011, 18 p. http://books.google.it/books?id=QUvOD7ZC7_sC&pg, accessed 29.01.2015.