Multinational Corporations and Economic Development: The Lessons of Singapore

By Nizamuddin, Ali M. | International Social Science Review, Fall-Winter 2007 | Go to article overview

Multinational Corporations and Economic Development: The Lessons of Singapore


Nizamuddin, Ali M., International Social Science Review


Introduction

Today, multinational corporations (MNCs) comprise a central place in the world economy. Before World War II, terms such as "multinational" or "transnational" were seldom used to describe international economic relations. Although transnational entities like the British East India Company and joint-stock enterprises existed in the past, the expansion and proliferation of multinational agents is a recent phenomenon. The hyperbolic spread of transnational activity has spawned a spirited debate and the concomitant development of theoretical models that seek to explain their causes and effects.

This study examines why MNCs gravitate toward certain economies and not others. The cause for this is to be found primarily at the state level and governmental policies designed to reduce market risks (i.e., political instability, inadequate infrastructure, and a poor regulatory environment) for prospective investors. Two competing paradigms seek to explain state policies and foreign investment decisions. The neoclassical model is predicated on the self-sufficiency of the market and prescribes a reduced role for the state. Dependency theory, which is far more skeptical of multinational activity, asserts that state institutions become hostage to foreign capital. Both paradigms, however, fail to explain the rise of multinational corporations and economic development in Singapore. Recognizing that Singapore is poorly endowed in natural resources, state leaders adopted a series of measures that reduced market risks and created a host country climate attractive to foreign investment. The process of modernization in Singapore was inextricably tied to liberal foreign investment policies that sought integration into the world economy. The state was an instrumental agent that spearheaded growth and was not controlled by powerful multinationals centered in more developed countries.

Alternative Explanations

A. The Neoclassical School and State Involvement

In the neoclassical conceptualization of a world economy composed of small, decentralized, and unitary agents, state intervention in the economy is discouraged. (1) The collective interplay of self-interested rational actors produces an equilibrium outcome that is socially optimal. According to the Ricardian principle, not every country can produce every good it needs. Consequently, nations sell those goods and services in which they have a comparative advantage. It is understood that certain countries can produce some goods more efficiently than others. (2) For instance, Patrick J. Buchanan, a prominent conservative commentator, once lamented the fact that he had purchased two dozen roses imported from South America for his wife for Valentine's Day. A vocal critic of free trade, he recommended that the United States should try to cultivate its own rose industry rather than be dependent on imports. (3) In so doing, Buchanan failed to realize that South America can produce roses more efficiently than the United States because its climate is much more conducive to growing roses in February. In order for Americans to produce roses during winter, green houses would have to be established everywhere, and as such, resources would have to be diverted from the efficient production of other goods such as cars or computers. This would deviate from the principle of comparative advantage which asserts that states need to take advantage of their differences and create those goods which they can produce most efficiently and sell them in international markets unencumbered by trade and investment barriers.

Since the neo-classical model is predicated on the self-sufficiency of the market, the policy recommendation is that states should play a minimal role in the economy. According to Adam Smith, the father of laissez-faire economic theory, state intervention should be restricted to three areas: ensuring domestic security (i.e., the establishment of rule of law); providing national security; and, the provisioning of public goods (e. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Multinational Corporations and Economic Development: The Lessons of Singapore
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.