23 Things they don't tell you about Capitalism

Free-market economists typically characterize transnational corporations as a boon to the economies of developing countries, suggesting that the governments of such countries are foolish to discourage foreign corporations from setting up operations within their borders.

While acknowledging that the world is increasingly globalized, Chang counters that transnational corporations typically benefit their home countries most. As an example, he considers US car company Chrysler, which was successively taken over by a German company, a US private equity firm, and an Italian company. In each case, the new owners appointed board members and executives from their own country, revealing a clear bias. Chang suggests that companies are particularly likely to situate research and development initiatives in the company’s home country or region. Whether these biases stem from a sense of patriotic pride or sheer convenience, they are widely observable.

The possibility of such biases does not mean that companies should avoid all foreign investment but rather that they should wisely and selectively restrict it, especially in developing countries. The key issue is how any particular type of foreign investment will “affect the future trajectory” of the economy (84).