Argument: Free trade benefits the large multinationals of developed countries

Issue Report: Free trade

Multinational Corporations improve the standard of living in developing countries

  • Gary M. Quinlivan , “Multinational Corporations: Myths and Facts ““Has the increase in foreign direct investment by multinational corporations harmed domestic investment? (Foreign direct investment occurs whenever a firm locates a factory abroad or purchases more than ten percent of an existing domestic firm.) The United Nations’ World Investment Report 1999 cited two recent studies. The first, by Eduardo Borensztein, José de Gregorio, and Jong-Wha Lee, found that an additional dollar of foreign direct investment increases domestic investment in a sample of sixty-nine developing countries by a factor of 1.5 to 2.3. The second study, conducted by the United Nations, reached the same conclusion as the first for countries in Asia, but it offered some disputable evidence of a possible negative impact on Latin America.”
  • Gary M. Quinlivan , “Multinational Corporations: Myths and Facts “Evidence supplied by the World Bank and United Nations strongly suggests that multinational corporations are a key factor in the large improvement in welfare that has occurred in developing countries over the last forty years. In sub-Saharan Africa and South Asia, where the presence of multinational corporations is negligible, severe poverty rates persist and show little sign of improvement.For example, from 1980 to 1998, world child labor rates (the percentage of children working between the ages of ten and fourteen) tumbled from 20 to 13 percent. Child labor rates dropped from 27 to 10 percent in East Asia and the Pacific, from 13 to 9 percent in Latin America and the Caribbean, and from 14 to 5 percent in the Middle East and North Africa. Interestingly, regions lacking multinational corporations had the worst child labor rates and the smallest reductions: Sub-Saharan Africa’s and South Asia’s child labor rates dropped from 35 to 30 percent and from 23 to 16 percent, respectively. This reduction in rates was attributable to increased family income, which has permitted families to improve their diets, to have better homes, and to provide their children with more educational opportunities. School enrollment rates for ages six to twenty-three rose for all developing countries from 46 percent in 1960 to 57 percent in 1995. Only sub-Saharan Africa had an enrollment ratio below 50 percent in 1995.