Started on: 02/05/2014
C LASS N OTES FOR : P OLI S CI 2J03
McMaster University, Winter 2014
W EDNESDAY , FEBRUARY 5, Y
Who is right?
- Varies from case to case and benefits depend upon values of observer
- Pro TNCs ignore power
- Globalization of production
T RANSNATIONAL PRODUCTION
o Pre 1982 vs. post 1982 views
o Debt crisis ends ‘indebted industrialization’
o In the 1960s, 70s, etc. were attracting investment from FDI, but had to fit in the local
o Debt crisis strangles development projects and developing countries become more
dependent on FDI
o After 1982 more open to foreign direct investment and make policies to attract FDI
o Evaluation of this changes over time depending on how desperate they are to attract
o Economic Nationalism & dependency Theory vs. Neoliberalism and EOI (Export
Oriented Industrialization) …
Developing countries changed strategies from ISI to EOI
Making products that the rest of the world will buy!
- State policies are significant
o CRITICS OF MNC Significance of state policies
Is foreign investment good for Canada?
One of the things that will influence how good it is, could be the state policies in
Canada. Do we have the policies that make the most of foreign direct investment
that come into our country
Distribute benefits through tax system?
If we do not distribute the benefits of the investment More inequality and
opposition to foreign direct investment because the profits are not being spread
o Linkages to local economy (training, etc.)
What is the link between these economies and the global economy?
What about all of the parts that go into the cars?Are the things made in Mexico?
Or is assembly made somewhere else?
Governments can have a role in this through the establishment of training
programs, perhaps helping local companies with research and innnovation.
Government can provide links between the local economy and the global
o Encourage technology transfer and spread this technology around to other countries and
Angie © McMaster University 1
Winter 2014 Started on: 02/05/2014
o Many states are in a weak bargaining position with multinational corporations
The terms that the company invested in, and the activities depend on how badly
the multinational wants to get into the company.
- Industry Characteristics
o Resource intensive - unequal profit, distribution, environmental destruction, land claims
o Companies have characteristics, limited by where the resources are.
o Have to go where the oil and gold are
o They also have negative characteristics unequal distribution of profits. Rent industries
(massive amounts of wealth taken out of the local area and this does not filter back to the
people that live here)
Extractive industry (resource destruction that takes place) can’t get oil and gold
and other things without carving up the earth and these industries create waste.
Question about the disposal of waste
Geographically located, there will be disputes about who owns the land.
- Labour intensive - Mobile, wage sensitive, linkages to technology
o Wage costs make up a significant factor of the cost of production
o Example textiles.
o Those that work in the labour industry tend to be mobile.
o Dynamics between the company and the labour force
o If labour is a big percentage of the cost of production then you are sensitive to changes in
wages. If labour is a small part the cost of production, can afford to pay the labour more,
as opposed to if the labour is a large part of the cost production, cannot afford to pay the
o How technologically advanced are these industries? Are they only bringing money for
low wage labour? Economic spin off for these countries.
- Capital intensive - high value added, benefits distributed, spillover to other sectors
o Money instead of labour
o Pharmaceutical industry
o Research and development / software industry
o These are the industries that one would like to attract.
o These industries tend to have greater spillover benefits to the wider economy