Direct Foreign Investment and North-South Trade: Uneven Development or Convergent Growth?

Abstract

A persistent theme in the writings of Hans Singer (1950, 1975) is that direct foreign investment (DFI) from developed economies — collectively referred to here as the North — to less-developed economies — the South — has a detrimental effect on the latter and leads to uneven global development. While Singer’s view was shared by many, though by no means all, economists when he first propounded it, and for several years thereafter, it now seems to find few takers. In fact, in recent discussions of the effects of globalization, many scholars and Southern governments earlier critical of transnational corporations (TNCs) have softened or reversed their views,² while concerns have instead been raised about jobs disappearing in Northern countries as capital moves to Southern countries with low wages and high productivity (thanks to the transfer of technology by the TNCs) in an increasingly globalized world economy.³

Prepared for a conference at the University of Innsbruck, Austria, in May 1996, celebrating Hans Singer’s 85th birthday. I am grateful to Professors John-ren Chen and Hans Singer, and to other participants of the Innsbruck conference, for their comments.