Blasé Capital SEE, NEW MNCs

What the US president, Donald Trump, has done in the past year, as well as during his first term, and what he said during the Davos speech, reveals extreme political meddling in the operations of American and global MNCs. Although he has doled out huge benefits in terms of lower taxes, the president wants the MNCs to cumulatively invest trillions of dollars in America, spend huge sums in Venezuelan oil industry, cut interest rates on local credit cards, and stop buying single-family homes in America. He said as much during the speech at the World Economic Forum. During the four years of Joe Biden’s rule, the US attracted less than a trillion dollars in investments. Trump secured commitments of $18 trillion, and the final number may be $20 trillion. “That has never been done by any country at any time. Not even close,” he said proudly. According to him, America is the hottest country anywhere, and is likely to grow by 5.4 per cent in the third quarter, or higher than China.

What Trump did not say, or maintained the opposite was true in other nations, is that political meddling is a norm across most nations. According to an article in The Economist magazine, “Sadly, lots of data already suggest that big, global firms are indeed reshaping their operations in response to political interference…. The era of geopolitical multinationals has arrived.” The march of the MNCs “gathered pace” in the 1990s, and big MNCs (defined as firms that receive over 30 per cent of sales abroad) now account for 70 per cent of the global trade of listed firms. Their combined profits are $2.4 trillion a year, and they employ 100 million people. “Even children far too young to make purchases recognise the golden arches of McDonald’s or Nike’s swoosh,” states the article. It adds, “Yet over the past decade… Western firms have become more parochial.”

More importantly, as Trump gloated over the strength of the American economy due to his policies, the politics of MNCs seems to be helping the global leaders, and policy-makers. In 2016, according to one data, American MNCs invested 44 per cent of their overall capex in the US. The figure rose by more than half to 69 per cent in 2025. According to another set of data, while sales by the foreign arms of the American MNCs fell a per cent in the five years up to 2023, local sales grew by eight per cent. “The share of American firms’ employees, who are based in America, nudged up from 67 per cent to 68 per cent over the same period,” states the article. The last may be because of the impact of Artificial Intelligence, as firms, especially MNCs need a lesser number of employees to perform tasks, and improve productivity largely through AI tools.

Politics over economics of MNCs is not restricted to America. In Europe, the focus is to grab the American markets, rather than seek consumers that are based farther-off geographically. “The number of employees of European firms in America grew by eight per cent to three million between 2018 and 2023, faster than the expansion in the rest of the world…. Europe is also investing more in America. Between 2018 and 2024, the continent’s stock of FDI (foreign direct investment) in America grew from $2.8 trillion to $3.6 trillion. America welcomed some 17 per cent of European greenfield FDI (building a new mine or factory, say, rather than buying one) last year, up from 12 per cent in 2018,” reveals the article. Even the share of American revenues of the European firms has grown by a quarter within six years (2018-24), from 16 per cent to 20 per cent.

In effect, the larger pattern that emerges in geopolitical terms is that MNCs were more likely to be more active in nations that are ideologically aligned with their respective home countries. “The finding held for investment even when America and China (the two most ideological regimes) were removed from the analysis. In a similar vein, capital spending fell at subsidiaries located in countries that were diverging ideologically from the home country,” states the article. Researchers measured the ideological affinity of each nation based on how it had voted at the UN General Assembly, and with which nations it had collaborated. The FDI flows almost mirrored, or were highly correlated with such UN-specific affinities. “Geopolitics, in other words, has become almost as important to investment decisions as geography,” adds the article.

A corollary of the larger trends is that western MNCs are losing their earlier fascination for China. Or, possibly, the firms are being forced to do so at both ends of the political stock. American and European leaders want them to stay away from China, especially after the pandemic, and China wants to support and encourage home-grown rivals, now that it has appropriated and absorbed most of the technologies. China accounts for a mere two per cent of FDI outflows from America, down from seven per cent a decade ago. European firms cut employee strength in China by a tenth between 2019 and 2023. China, which was the largest host of American workers, is down to the fourth rank. China is the new pariah for MNCs.