At the centre of the process of integration advanced by liberalisation and globalisation during the 1990s stands the multinational corporation. And in terms of visibility and importance, US multinationals like General Motors, IBM, Microsoft and Coca Cola, occupy a pre-eminent position. This makes the release by the United States government’s Bureau of Economic Affairs (BEA) of the preliminary results of the 1999 benchmark survey of US direct investment abroad an event of some significance. A US MNC in the BEA data comprises a US parent company and its affiliates abroad. Much of the BEA data relate to majority owned foreign affiliates (MOFAs), which accounted for 84 per cent of employment of all non-bank foreign affiliates. For some time now the BEA has been conducting benchmark surveys or censuses of these MNCs once in five years, and annual sample surveys for the intervening years. Comparable benchmark surveys are available for the years 1982, 1989, 1994 and 1999, permitting a preliminary assessment of the changing role and impact of multinational operations during the years of globalisation.
 

The BEA’s data do point to an acceleration of the expansion of US multinationals (Charts 1 and 2). Over the 17-year period 1982-99, the nominal gross product of and employment in US multinationals grew at an annual rate of 5.1 and 1.2 per cent respectively. This average trend conceals, however, a moderate acceleration in the rate of growth of gross product and employment from 4.3 and 0.1 per cent respectively during 1982 to 1989, to 5.7 and 1.9 per cent during 1989-99. Further, if we break down the 1989-99 period, the evidence seems to point to a substantial increase in rates of growth of gross product and employment from 4.7 and 0.3 per during 1989-94 to 6.6 and 3.5 per cent. These trends, Charts 1 and 2 indicate, separately hold for parents of US multinationals and their majority owned foreign affiliates (MOFAs) as well. It is no doubt true that trends in nominal gross product figures may be vitiated by price movements. However, the facts that inflation has been subdued the world over during the 1990s and that employment figures follow gross product movements, make these trends representative of actual events.
Chart 1 >> Chart 2 >>
 

There are two sets of issues which the acceleration in the growth of US MNCs raise. First, are issues related to the impact of that acceleration on the structure of output and employment in the US economy. The second, are issues relating to the impact of these multinationals globally, and in particular on developing countries. The more conservative apprehensions regarding globalisation are based on the possibility that the growing importance of multinational corporations could reflect a process of hollowing out of economic activity in the developing countries and their relocation abroad, resulting in job and production losses in the metropolitan centres of global capitalism. Those who argue that liberalisation and globalisation are positive from the point of view of the developing countries also advance a less asymmetric version of this argument. In that view, globalisation, besides increasing the incomes of developed country corporations with attendant positive consequences in those countries, allows for an expansion of production, employment and exports in developing countries, driven by multinational corporations.
 

In these views, the defining feature of foreign direct investment (FDI) during the years of globalisation is that each enterprise-level investment decision is a component of a larger process of relocation of whole industries from sites in more industrially developed economies to less developed ones, resulting in the global restructuring of industrial production. Relocation takes its "ideal" form, which involves the once-for-all or gradual closure by more developed country producers of capacity at home and the establishment by the same producers of equal or larger capacities in developing country sites. This trend towards relocation, if it occurs, reflects a change in the nature of global flows of FDI during the years of liberalization and globalisation.
 
With the wave of liberalisation that began in the early 1980s, it is argued, the relevance of foreign investment stimulated by import-substituting policies in the developing world has declined. The removal of non-tariff barriers to trade and the reduction of tariffs on most imports, have done away with the need to jump barriers to control markets. Most developing country markets can be accessed as easily through imports from abroad of commodities either in their final form or ready for assembly. The corollary is that foreign investments aimed at catering to domestic markets must be competitive with imports accessible at relatively low tariff rates. That is, the segmentation of the world market that the import-substituting years implied and the consequent distinction between sites for local market-oriented production and world market-oriented production is disappearing. Investments aimed at catering to domestic markets should be capable, therefore, of catering to the world market. The resulting dissociation between sites of production and markets implies that a firm would now choose to invest in a particular location only if that site can serve as one of the production locations for its world market operations. Thus, when an enterprise chooses a new location for investment it is in essence "relocating" capacity that can service the local market, or its erstwhile "home"-country market, or its third country markets or some combination of those markets.