Arguments for Transnational Corporations in Development

Modernisation theory saw TNCs as playing a positive role in helping societies to develop. Rostow (1971) saw the injection of capital as essential in the pre-conditions for take-off phase of development, and he thought TNC’s were one of the institutions which could help kick start the process of development by investing money, technology, and expertise that the host country did not possess.

It is neoliberals, however, who have historically been the real champions of TNCs as the most efficient institutions to kick-start and carry through development in poor countries. In neoliberal theory, economic success is proof of competence – the fact that TNCs have been making goods efficiently at a profit on a global scale for decades, if not centuries, mean that these are the institutions best placed to kick start economic growth in poor countries.

Neoliberals argue that the governments of developing countries need to pull down all barriers in order to create a ‘business-friendly’ environment in order to encourage inward investment from Transnational Corporations.

In Neoliberal theory, corporations will help a country develop in the long term by providing jobs and training. The money earned will be spent on goods and services at home and abroad creating more money to invest and (limited) tax revenue for further development.

A summary of the supposed benefits TNCs can bring to developing countries

  • TNCs bring in investment in terms of money, resources, technology and expertise, creating jobs often where local companies are unable to do so.
  • TNCs need trained workers and this should raise the aspirations of local people and encourage improvements in education
  • Jobs provide opportunities for women promoting gender equality.
  • Encourage international trade which could increase economic growth, access to overseas markets
  • All of the above means that wealth generated from TNC investment and production should eventually trickle down to the rest of the population.
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