Foreign investment, transnationals and developing countries

This book brings together many years of work on foreign investment and transnational corporations (TNCs). We have both been concerned with the impact of TNCS, particularly in the manufacturing sector, on the economies of less-developed countries (LDCs), and we have both come increasingly to realise that the conventional tools of economics, narrowly conceived, are inadequate to deal with issues which are much broader than those of 'private foreign investment'. What is at stake is the transformation of political, social and economic structures, and what is needed is political economy in the broadest sense. Unfortunately, political economy is an underdeveloped art, and this book reflects our difficulties in dealing with the enormous issues in hand without proper tools. Although we stay largely within the realms of economics as conventionally defined, it also reflects our disquiet with the use of the tools of conventional economic theory.

Part 1 of the book concentrates on the general questions of the growth of TNCs and their implications for the welfare of host LDCs. Part II draws upon research conducted for the New York office of the United Nations Conference on Trade and Development (UNCTAD) on the balance-of-payments and income effects of a sample of foreign invest ments is six LDCs. Chapters 7 to 10 present the main findings of these studies; Chapter 6 gives the results of some later work on the data collected for these studies on various aspects of the sample firms' performance. Part III discusses policy measures for host governments and outlines the difficulties in formulating and implementing policy. It is hoped that each part will in its own way prove useful to students and practitioners in this field.

The empirical part of the book was the work of Lall; the analytical sections were prepared jointly. Most of the drafting was done by Lall, but we collaborated in so many ways that it is difficult to separate our ideas and our contributions.