Are Multinational Corporations Good for the Developing World?

Multinational corporations obviously have many effects both for good and for ill on the developing world. Nonetheless, it is unlikely that these cumulative effects are precisely neutral.

Given the significant technology gap between the developed and developing worlds, multinational corporations have a clearly positive contagion effect that spreads innovation quickly around the world. And even if these corporations don't directly share their expertise with anyone, the increased competition probably encourages domestic firms to be more efficient. Multinationals have greater access to worldwide capital markets, so they bring capital into the economy. They pay their workers higher than prevailing wages and provide management skills not locally available.

Taken together, these benefits clearly ensure that at least some multinational corporations are a force for good.

Yet, multinationals are also capable of exploiting their workers, maintaining control over their fiscal and intellectual resources, and preempting local development. The culture gap also introduces products that aren't appropriate because multinationals can't accurately understand local culture. And even if that doesn't occur, human rights abuses have been repeatedly documented by corporations that drop to local standards rather than rising to expectations.

A real danger for many developing countries is that multinationals create a net capital outflow, actually remitting more profits to their home country than they initially put into the local economy. When the multinationals use inappropriate technology for the country's level of development, they can actually drive many out of work and retard local development.

On balance, multinational corporations are neither an unmitigated good nor a force for evil. Rather, these corporations have numerous disparate effects, both intended and otherwise, that need to be evaluated on an individual basis. Still, the history of multinational development provides significant hope that the benefits from technology transfer outweigh most other considerations under most circumstances.