Transnational Corporations and Development Policy: Critical Perspectives

Citation

Radice, H. (2010), "Transnational Corporations and Development Policy: Critical Perspectives", Critical Perspectives on International Business, Vol. 6 No. 4. https://doi.org/10.1108/cpoib.2010.29006dae.002

Transnational Corporations and Development Policy: Critical Perspectives

Transnational Corporations and Development Policy: Critical Perspectives

Article Type: Book Reviews From: critical perspectives on international business, Volume 6, Issue 4

E. Rugraff, D. Sánchez-Ancochea and A. SumnerPalgrave MacmillanBasingstoke2009xiii +321 pp.ISBN 978-0-230-53706-4£50 (hardback only)

Keywords: Transnational companies, Developing countries

The editors of this volume rightly point out that books on transnational corporations (TNCs) and development have become less frequent in recent years. The present reviewer first became interested in this issue over 40 years ago, since when the cycles of scholarly interest have been clearly correlated with changes in the global political economy. Thus, the 1960s to mid-1970s saw fierce debates as TNCs defended their wealth and power in the Third World against rising economic nationalism, while in the subsequent 15-20 years, the Third World debt crisis shouldered TNCs off the research agenda. Globalisation and the Washington Consensus have since 1990 seen a dramatic reversal of attitudes, with almost all developing countries vying with each other to attract direct investments and eliminate barriers to trade and capital flows. In this recent context, TNCs have become part of the development scenery, largely taken for granted and studied only by business scholars and specialists in investment policy, and so the volume reviewed here is a very welcome addition to the literature.

The editors begin with two excellent chapters, which review in turn the evolution of TNCs over the last 50 years, and their developmental impacts. What is most striking is the extraordinary diversity of experience, and the great difficulty that scholars have had in trying to reach any general conclusions – even on fundamental issues such as the relation between foreign direct investment (FDI) levels and host-country growth rates. Key long-standing unsettled issues include the effect of openness (in trade and investment policy) on the volume and profitability of investments, and the extent and impact of spillover effects from FDI.

The remainder of the book is arranged in four parts, dealing respectively with development policy, “new players”, national and regional impact studies, and sectoral cases. Given the picture presented in Part I it is hardly surprising that development policy, while broadly moving more in favour of liberalisation, has in practice proved very varied in attitude and outcome. Beneath the somewhat impenetrable “policy studies” jargon, the picture that Sumner paints (chapter 3) is one of governments, NGOs and intergovernmental agencies being alert to the specifics of place, sector and purpose; and also proving pragmatic in response, for example in developing effective performance requirements in spite of incessant demands for a “free” market approach. In chapter 4, Sánchez-Ancochea corroborates this through an examination of the Dominican Republic and CAFTA’s trade agreement with the USA, with comparisons along the way with the success stories of Ireland and Singapore.

In Part III, Pedersen looks at Indian outward FDI, and Crabtree and Sumner examine the case of Chinese investments in Africa. Before the global debt crisis broke in 1982, there had been some advocacy of “South-South” investments, working on the assumption that in the context of Third World ambitions for a New International Economic Order, Southern investors would be more usually beneficent than Northern TNCs. Today, no such assumption would be made; instead, the research reported seeks to uncover the specific aims, instruments and effects of FDI originating in the two dominant “emerging economies” of Asia. In the Indian case, the past decade has seen striking growth in investment in the richest countries, but continuities from the past in developing countries, notably when linked to trade, consultancy and public aid programmes. With regard to Chinese investment in Africa, Crabtree and Sumner summarise well its rapid growth, and the political and scholarly responses to what has been perhaps the most dramatic recent development in global FDI patterns. They show that the widespread view of this as essentially natural resource pillage is too simplistic, with nearly half of these investments taking place in manufacturing. Both employment and spillover benefits appear limited, and the Chinese disavowal of political conditionality is a mixed blessing – good for dictators, but bad for human rights.

Part IV examines in turn the impacts of inward FDI on Central Europe, South Africa and Mali, and India. The authors are all at pains to set out fully the economic attributes and policy objectives of the host governments. Rugraff’s very brief survey of Central Europe (chapter 7) focuses on spillover effects, which have been hotly debated ever since the restoration of capitalism in 1989-1990, and argues in particular that specific institutional configurations, of both TNCs and host governance, are important determinants of developmental benefits. Mainguy and Jeppesen (chapter 8) very briefly reviews the overall African experience, before presenting a comparative study of South Africa and Mali. However, the dramatic differences in economic scale and developmental level between the two countries dominate explanation of FDI impacts, leaving no lessons as regards policy differences. In this regard, Tiwari’s study of India (chapter 9) provides substantive policy conclusions because of its tight focus on one impact area, poverty reduction, in two southern states at similar levels of income and human development. The depressing conclusion is that although inward FDI has accelerated economic growth, it has not really impacted on poverty, especially in rural areas.

The first three chapters of Part V examine particular sectors in three countries: electronics in Vietnam (chapter 10), gold mining in Ghana (chapter 11) and pharmaceuticals in India (chapter 12). All are field-work based studies, capturing rich empirical detail but inevitably yielding conclusions that are not easy to generalise; indeed, Haakonsson’s Indian case explicitly highlights the difficulties of applying general models (in this case, the Global Value Chain approach) to a specific case. Chapters 10 and 11 provide further evidence of the difficulties of achieving substantive developmental benefits through linkages from externally oriented FDI.

Finally, the editors provide an excellent summary of the book’s overall conclusions: TNCs really do transfer assets to their affiliates; in the end they generate few spillovers in host countries; Southern TNCs are no different; and effective host policy regimes must temper liberalism with hard-headed interventions in pursuit of specific developmental objectives.

Hugo RadicePOLIS, University of Leeds, Leeds, UK

About the reviewer

Hugo Radice is at POLIS, University of Leeds, Leeds, UK. He edited International Firms and Modern Imperialism (Penguin, 1975), and taught courses on TNCs and development from 1982 to 2005. He is a Life Fellow of the School of Politics and International Studies, University of Leeds. For current research and recent publications, see www.polis.leeds.ac.uk/about/staff/radice