Introduction and Literature Review
Post World War II Latin American countries were industrializing and moving towards self-sufficient economies. When economic stagnation crippled Latin America professional scholars, economists and national organizations such as the United Nations Economic Commission for Latin America sought to explain the unforeseen economic downturn. They found significant difficulty in applying traditional neoclassical economic assumptions in the Latin American case and as a result developed dependency theory.
Dependency theorists “see capitalist states in the core of the global economy and either ‘under developing’ Least Developed Countries (LDCs) in the periphery or preventing them from obtaining genuine autonomous development” …show more content…
LDCs offer investor incentives to Multinational Corporations (MNCs) such as low wages, reduced environmental policies and transfer pricing to attract investment. The result of such incentives does produce growth in host countries but it is largely unequal. More importantly the reduction or elimination of such incentives would negatively affect the inflows of Foreign Direct Investment (FDI). As associated-dependent development matures MNCs pose greater political influence and pressure, the elites of the core collaborate with elites in the periphery based on interests of profitability and objectives of development become immaterial. The purpose of this essay is to address the current influence MNCs currently hold in LDCs and argue that the presence of the majority of MNCs in LDCs is deepening LDC dependency on the North and hindering their development. In this work I will discuss three catalysts of dependency that are manufactured through the traditional relationships of MNCs and LDCs. The first being the discrepancy of benefits of foreign investment, it is believed that the benefits of foreign investment are unequally or poorly distributed and the MNCs take advantage of profits that could be used for internal development. Second that foreign investment causes economic distortions in LDCs economies. Then finally that FDI influences LDC economic and political policies. It is my argument that the current model of development is not a mutually beneficial relationship between MNCs and LDCs. Recently we have seen new MNCs outside of the major north American players and Keystone International Economic Organization (KIEOs) such as China becoming and alternative source of partnership for LDCs. Chinas current development model is not significantly different and is largely considered neocolonialist but I will discuss why their emergence may actually be the start of a
Post World War II Latin American countries were industrializing and moving towards self-sufficient economies. When economic stagnation crippled Latin America professional scholars, economists and national organizations such as the United Nations Economic Commission for Latin America sought to explain the unforeseen economic downturn. They found significant difficulty in applying traditional neoclassical economic assumptions in the Latin American case and as a result developed dependency theory.
Dependency theorists “see capitalist states in the core of the global economy and either ‘under developing’ Least Developed Countries (LDCs) in the periphery or preventing them from obtaining genuine autonomous development” …show more content…
LDCs offer investor incentives to Multinational Corporations (MNCs) such as low wages, reduced environmental policies and transfer pricing to attract investment. The result of such incentives does produce growth in host countries but it is largely unequal. More importantly the reduction or elimination of such incentives would negatively affect the inflows of Foreign Direct Investment (FDI). As associated-dependent development matures MNCs pose greater political influence and pressure, the elites of the core collaborate with elites in the periphery based on interests of profitability and objectives of development become immaterial. The purpose of this essay is to address the current influence MNCs currently hold in LDCs and argue that the presence of the majority of MNCs in LDCs is deepening LDC dependency on the North and hindering their development. In this work I will discuss three catalysts of dependency that are manufactured through the traditional relationships of MNCs and LDCs. The first being the discrepancy of benefits of foreign investment, it is believed that the benefits of foreign investment are unequally or poorly distributed and the MNCs take advantage of profits that could be used for internal development. Second that foreign investment causes economic distortions in LDCs economies. Then finally that FDI influences LDC economic and political policies. It is my argument that the current model of development is not a mutually beneficial relationship between MNCs and LDCs. Recently we have seen new MNCs outside of the major north American players and Keystone International Economic Organization (KIEOs) such as China becoming and alternative source of partnership for LDCs. Chinas current development model is not significantly different and is largely considered neocolonialist but I will discuss why their emergence may actually be the start of a