1275 



the mining areas of Asia, Africa, and the Americas, and the creation 

 of social and political instability."^ 



Still, host countries of the MNCs, particularly m the LDCs, have 

 usually welcomed the economic benefits of foreign mvestment. They 

 have gained from the importation of new products and foreign capital, 

 the transfer of modern technology, the creation of new jobs, the intro- 

 duction of advanced management and organizational skills, and access 

 to new markets."^ Operating on a global scale and connecting the 

 advanced nations with the LDCs, the MNCs have helped to diffuse 

 management, production, and marketing techniques throughout the 

 world. Nourished by the growing integration of world product and 

 capital markets, they have contributed to the further integration of 

 the world economy.^" 



But what is most important, the MNCs have stimulated the rapid 

 spread of industrial technology around the world. According to Law- 

 rence B. Krause, a Senior Fellow at the Brookings Institution, this 

 global diffusion of technology has accelerated the movement towards 

 expanding research and development within the multinational firms, 

 which in turn has substantially raised the level of technology in the 

 host countries, and in the process has set into motion a self -enforcing 

 cycle of development. In order to utilize new technology the MNC 

 must train workers and managers who are primarily local citizens. 

 The effects of this training process gradually spread beyond the enter- 

 prise as the economy develops and competition in the job market from 

 other enterprises emerges. "The aggregative effect of this spread," 

 writes Krause, "is to reduce the technological gap among nations and 

 thereby reduce income differentials." In brief, the effect is to strengthen 

 the base for development. ^^^ 



Thus, the MNCs, despite the shortcomings attributed to them by 

 critics and the risks that they incur by operating in foreign lands, can 

 play a potentially positive role in the nation-buildins: process within 

 the LDCs. That the United States perceives this possibility is evident 

 by the various measures that have been taken to encourage investment 

 among the LDCs, notably those measures discouraging foreign gov- 

 ernments from expropriating U.S. property without prompt and ade- 

 quate compensation.^" 



"0 Anthony Astrachan, "Multinationals Criticized Before U.N. Panel," The Washington 

 Post, Sept. 18, 1973, p. A12, and Lawrence B. Krause, "The International Economic System 

 and The Multinational Corporation." The Annals of the American Academy of Political and 

 Social Science, 403. September 1972, p. 103. Stephen. Hymer of Yale University ends an 

 article on, "The Efficiency (Contradictions) of Multinational Corporations," with this 

 skeptical note : "The coming age of multinational corporations should represent a great 

 step forward in the eflBcieney with which the world uses its economic resources, but it will 

 create grave social and political problems and will be very uneven in exploiting and dis- 

 tributing the benefits of modern science and technology. In a word, the multinational 

 corporation reveals the power of size and the danger of leaving it uncontrolled." (American 

 Economic Review 60 (May 1970), p. 448.) 



"1 Bancroft, op. cit., p. 3. 



'12 Krause, op. cit., pp. 93, 102-103. 



""^ Mr. Krause continues : "Countries obtain newest technology much faster, and it be- 

 comes more widely adopted throughout the Industry." In explaining the dilemma that the 

 technological aspect of MNCs cause for some governments, Krause notes that multinational 

 firms may do their research at home in the advanced country, and thus "local citizens are 

 not encouraged to become scientists or engineers, or even worse, they may emigrate to 

 other countries after local training." A solution by insisting that MNCs undertake some 

 research locally, he continues, "may make the situation worse, since the multinationals 

 would then absorb the often scarce scientific talent, making It even more difficult for local 

 firms to compete." He concludes on a note that is explicit In this study as a remedy to brain 

 drain : "Clearly, the supply of locally available scientific talent must be Increased faster 

 than the demand for It by multinational firms In order to promote R. & D. In locally owned 

 firms. . . ." (Ibid., pp. 98-99.) 



"* Bancroft, op. cit., p. 11. 



