Abstract
While allegations about the effects of foreign direct investment on “host” countries abound, the imagination and emotions of commentators on the subject have far outrun the supply of carefully evaluated empirical facts, never mind analysis. The dramatic expansion of international investment by firms in the period since World War II has raised issues at a variety of levels in both economic science and policy formation. These issues have been extensively analysed by professional economists in many countries and they will be briefly surveyed in the following pages.
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Notes
Stephen Hymer and Robert Rowthorn present an empirical refutation of the thesis advanced by the French journalist Jean-Jacques Servan-Schreiber, Le défi Americain (Paris: Denoël, 1967), and argue that European companies will in their turn become multinational and competitive with American-based multinational enterprises: in “Multinational Corporations and International Oligopoly: the Non-American Challenge”, in Charles P. Kindleberger (ed.), The International Corporation (Cambridge, Mass.: MIT Press, 1970), pp. 57–91. And such, indeed, became the case with the realignment of exchange rates following the Smithsonian Accord of 18 December 1972 and subsequent monetary crises.
In this connection, see for example Frank Vogt, “Growing American Business Concern over Increasing Foreign Investment”, The Times, London, 3 July 1974.
Hymer, “The International Operations of National Firms: a Study of Direct Investment”, doctoral thesis (Cambridge Mass.; MIT, 1960 ).
Richard Caves, “International Corporations: the Industrial Economics of Investment”, Economica, February 1971.
Ronald W. Jones, “A Three-factor Model in Theory, Trade and History”, in Jagdish Bagwati et al. (eds), Trade, Balance of Payments and Growth ( Amsterdam: North Holland, 1971 ).
W. B. Reddaway et al., Effects of UK Direct Investment Overseas, Final Report ( Cambridge: Cambridge University Press, 1968 ).
John Lindemann and Donald Armstrong, Policies and Practices of US Subsidiaries in Canada (Washington and Montreal: Canadian-American Committee, National Planning Association and Private Planning Association, 1960 ). The Private Planning Association of Canada has since become the C. D. Howe Research Institute.
See for example C. W. Gonick, “Foreign Ownership and Political Decay”, in Ian Lumsden (ed.), Close the 49th Parallel Etcetera: the Americanization of Canada ( Toronto: University of Toronto Press, 1970 ), pp. 43–74.
A useful and carefully dispassionate discussion of the issues raised by American investment in the United Kingdom is presented in M. D. Steuer, American Capital and Free Trade: Effects o f Integration ( London: Trade Policy Research Centre, 1969 ).
For a fuller discussion, see Johnson, “The Multinational Corporation as a Development Agent”, Columbia Journal of World Business, New York, May–June 1970, pp. 25–30. Also see Chapter 5 below.
See for example Kindleberger, American Business Abroad ( New Haven, Conn.: Yale University Press, 1969 ), pp. 206–7.
See Group of Eminent Persons, The Impact of Multinational Corporations on the Development Process and on International Relations, Report for the UN Economic and Social Council ( New York: United Nations, 1974 ).
Dominion Bureau of Statistics, The Canadian Balance of International Payments in 1960 and the International Investment Position (Ottawa: Queen’s Printer, 1962), table vii, p. 75, statement 18, p.48. This publication fell noticeably short of the highest standards of objectivity in its presentation of data on US investment in Canada especially with respect to the statistically rather arbitrary concept of American “control” of Canadian industry. Both its choice of years between which to make comparisons and its selection of particular industries for detailed presentation created the strong impression that foreign, and in particular American control, was a rapidly growing problem. Only the reader who took the trouble to study the main tables or read the text very carefully could discover that neither the percentage of total foreign control nor the percentage of American control of industry as a whole had changed over the previous three years.
This point was made by Jacob Viner in his witty lectures on Canada and its Giant Neighbour (Ottawa: Carleton University, 1958).
The subject of take-over bids was widely discussed in the United Kingdom during the 1960s. Opposition to them there was concerned more with their alleged unfairness than with fears of foreign ownership and control, which were not a factor in the debate. For an extensive discussion of the economics of take-over bids, related to the British controversy, see Anthony Vice, “Balance Sheet for Take-Overs”, in Ralph Harris (ed.), The Radical Reaction ( London: Hutchinson, for the Institute of Economic Affairs, 1961 ), pp. 159–95.
For a major study of American investment in Canada, see A. E. Safarian, Foreign Ownership of Canadian Industry ( Toronto: McGraw-Hill, 1966 ).
Also see Herbert Gray, Foreign Direct Investment in Canada, Gray Report ( Ottawa: Queen’s Printer, 1972 ).
Other country studies on “inward” investment to which the attention of readers might be drawn are Donald J. Brash, American Investment in Australian Industry (Canberra: Australian National University Press, 1966)
Steuer et al., The Impact of Foreign Direct Investment on the United Kingdom, Steuer Report ( London: Her Majesty’s Stationery Office, for the Department of Trade and Industry, 1973 ).
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© 1975 Harry G. Johnson and the Trade Policy Research Centre
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Johnson, H.G. (1975). General Issues in International Investment. In: Technology and Economic Interdependence. Trade Policy Research Centre. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-15611-5_4
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