hole countries!Foreign Direct Investment (FDI) measures the investment activities of MNCs, and it can be formally defined as “ownership of assets in one country by residents of another for purposes of controlling the use of those assets”.Unlike the “bipolar” investment configuration of earlier times (which was dominated by the United States and a few European countries acting independently), we now have a “tripolar” investment configuration consisting of European Union, Japan and the United States. Networks of affiliates clustered around their home countries have been constructed, and as a result, FDI is now increasingly regional and principal host countries in the Global South receive the bulk of its funds from a single member of the investment triad – usually the one geographically closest to it. FDI “stocks” reveal the current structure of global production and the principal location of economic activity, and the FDI “flows” indicate changing patterns. The Global North is both home and host to most FDI stock. However, the Global South’s share of FDI flows is increasing.The Effects of MNCs on Home and Host NationsMuch controversy regarding MNCs arises from this point. One argument against MNCs is that shifting production facilities to industrially backward countries causes structural unemployment in the industrially advanced countries. The MNCs shift production facilities abroad in order to avoid demands for higher wages from labor unions. In industrially backward countries, labor is cheap and there usually aren’t any unions.MNC supporters argue against this point and contend that MNCs reduce balance-of-payment deficits, create new employment opportunities, promote competition in both domestic and foreign markets, and reduce rather than widen income inequalities between and within rich and poor states.Occasionally, we do hear of incidents on the news ...
