Courtesy Reuters

Multinationals: The Game and the Rules: Multinationals and Developing Countries: Myths and Realities

Four assumptions are commonly made in the discussion of multinationals and the developing countries-by friends and enemies alike of the multinational company. These assumptions largely inform the policies both of the developing countries and of the multinational companies. Yet, all four assumptions are false, which explains in large measure both the acrimony of the debate and the sterility of so many development policies.

These four false but generally accepted assumptions are: (1) the developing countries are important to the multinational companies and a major source of sales, revenues, profits and growth for them, if not the mainstay of "corporate capitalism"; (2) foreign capital, whether supplied by governments or by businesses, can supply the resources, and especially the capital resources required for economic development; (3) the ability of the multinational company to integrate and allocate productive resources on a global basis and across national boundaries, and thus to substitute transnational for national economic considerations, subordinates the best national interests of the developing country to "global exploitation"; (4) the traditional nineteenth-century form of corporate organization, that is, the "parent company" with wholly owned "branches" abroad, is the form of organization for the twentieth-century multinational company.1


What are the realities?

In the first instance, extractive industries have to go wherever the petroleum, copper ore or bauxite is found, whether in a developing or in a developed country. But for the typical twentieth-century multinational, that is a manufacturing, distributing or financial company, developing countries are important neither as markets nor as producers of profits. Indeed it can be said bluntly that the major manufacturing, distributive and financial companies of the developed world would barely notice it, were the sales in and the profits from the developing countries suddenly to disappear.

Confidential inside data in my possession on about 45 manufacturers, distributors and financial institutions among the world's leading multinationals, both North American and European,2 show that the developed two-thirds of Brazil-from Bello Horizonte southward-is an important market for some of these companies, though even Brazil ranks among the first 12

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