World Politics and International Economics

By C. Fred Bergsten; Lawrence B. Krause | Go to book overview

The multinational firm and international regulation

Robert O. Keohane and Van Doorn Oorns

Writing about alternative international regimes to deal with direct foreign investment (DFI) may seem to be somewhat like discussing a perpetual motion machine: most people would like one for their own purposes; no one has ever built one; and discussions about their construction often take on a certain air of unreality. In contrast to the issue areas of money, trade, and aid, there is no important set of international institutions concentrating primarily on DFI. Numerous bilateral agreements and multilateral arrangements regulate or facilitate, in one way or another, the activities of private investors, but these have not been systematized into a coherent structure. Negotiations for new agreements do not take place within a large and semiformal international arrangement, such as the General Agreement on Tariffs and Trade (GATT), and no large international institution, such as the World Bank in the aid field, exists primarily to give direction to activities in this area.

This institutional confusion is compounded by lack of agreement on the value of DFI itself. The desirability, indeed necessity, of world trade, and of appropriate monetary relationships, is seldom questioned by writers on those subjects, although the distribution of benefits from existing arrangements is often debated. Yet the desirability of direct investment per se is often questioned in precisely this way. Critics of multinational firms -- the dominant organizational vehicles for direct investment -- argue that with reference to less developed countries at least, "poverty is the product."1 Defenders of the enterprises counter with claims about the contributions of the firms to global welfare.

Robert O. Keohane is an associate professor of political science at Stanford University. Van Doorn Ooms is an associate professor of economics at Swarthmore College. A number of colleagues and friends have read this essay in manuscript and offered constructive criticism. Valuable discussions of earlier drafts were held by Professor Ooms with the Swarthmore College social science faculty, and by Professor Keohane with participants in a Stanford conference on multinational enterprises and international regulation, supported by the National Endowment for the Humanities. The authors particularly appreciate the perceptive comments and suggestions of Jonathan Aronson, James Kurth, Joseph S. Nye, Jr., Raymond Vernon, and the editors of this special issue.

____________________
1
Ronald Müller, "Poverty is the Product", Foreign Policy, no. 13 ( Winter 1973-74): 71-102.

-169-

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