nm1122: now i've also circulated the [0.2] arrangements for the seminars for 
this term [0.3] as we agreed [0.6] they're different from last term [0.3] we're 
having them right at the end [0.5] of the term [0.9] er [0.3] so you've got the 
topic there that er [0.8] you er volunteered to do [0.7] and [0.2] th-, also 
those are room numbers [0.5] where we're meeting [0.9] er right at the end of 
term [0.3] so we've got five seminars [1.0] er [0.5] we'll use the two hour 
slots for two seminars [0.3] okay [0.6] for each [0.4] each hour [0.7] plus [0.
2] one of the hours [0.7] so you've a total of five hours there altogether 
sm1123: yeah [0.2] 
nm1122: two-plus-two-plus-one [1.3] everybody clear on what we're doing [2.7] 
and the idea of that is that we get all the teaching out of the way [0.3] and 
then [0.3] there's no problem that the seminars are running ahead of the 
lectures [1.0] okay [3.1] er [1.0] those of you the the visiting students [0.4] 
er who [0.3] er i think [0.2] at least [1.3] at least a couple of you [0.2] got 
some rather low marks [0.5] and i think the reason for that might be as i have 
discussed certainly with one of you [0.4] that [0.2] you were unclear of what 
was required of you [0.4] er if 
you want to [0.3] pick a topic from last term and have another go at it [0.5] 
er i'm i'm willing to accept that [0.4] okay because you hopefully now have a 
better idea of what's required of you [0.4] so if you want to choose a topic 
from last term [0.4] er [0.4] then by all means do so and i'll put that mark in 
rather than the one that you've been given because [0.3] as i say i think 
there's a learning process going on [0.4] of what's required [0.9] okay [2.7] 
right [0.2] that only applies to visiting students the rest of you know exactly 
what's required [laughter] [1.8] right [16.9] oh [0.3] it's another one of 
those du-, [19.2] well today we're talking about globalization and 
liberalization you should all have a handout now [1.1] er [4.0] 
sm1124: [11.6] 
nm1122: have you covered globalization in in your International Relations 
course so are you doing that course [1.1] okay [1.4] well i'll er probably 
start off by asking you then what do you understand by globalization [1.5] 
what's your how would you define it [6.4] anyone [4.5] don't be shy [2.0] 
globalization you n-, if you were if somebody 
asked you just in general terms [0.4] what you understand by it and by that [0.
6] 
sf1125: glo-, [0.2] globali-, globalization is the phenomenon that took [0.4] 
er er [0.4] er technology [0.3] er all around the world the trade er [0.3] er 
[0.2] the trade er [0.3] er are liberalizied er 
nm1122: mm 
sf1125: and around to er duty er in the market er er something [0.7] 
nm1122: okay right so we've got this [0.2] huge expansion 
sf1125: yes 
nm1122: in the flow of information 
sf1125: yeah [0.4] 
nm1122: er integrating countries 
sf1125: yes 
nm1122: and and markets together [0.2] okay [0.2] is it a new phenomena i mean 
is it something new [0.4] or is it just an extension of what's been going on 
for a long time [2.1] 
sm1126: it's an extension really [0.2] 
nm1122: right in what sense [0.9] 
sm1126: er [0.5] well [0.5] countries avoid [0.5] one since [0.2] trading began 
globalization was really beginning [0.4] beginning beginning through trading as 
countries become more interlinked [0.3] in trading and then they [0.6] then 
their economies become more interlinked because of that trading and how well 
their trade runs [0.3] 
nm1122: right 
sm1126: [0.7] 
nm1122: so international trade isn't as we've said before isn't just goods [0.
3] it also brings people in contact with each other and this exchange of 
information [0.3] and the and the and the learning process that we've talked 
about [0.4] so [0.2] it's not new in that respect at all [0.5] i don't know 
whether some of you saw there was a programme earlier on in the week [0.5] er 
[0.5] talking about [0.3] er stone age temples in Malta anybody see it at all 
[1.6] well one of the fascinating things there was that and this was five-
thousand years ago [0.7] and er we're talking 
about Malta [0.4] and the axes they were using used greenstone [0.4] which can 
only have come from somewhere in the Alps [0.2] towards the Austrian frontier 
[0.6] er which is i guess in a straight line's about a thousand miles away [0.
4] and we're talking about five-thousand years ago there was obviously trade 
going on [0.2] even then [0.5] er so there's nothing new about trade [0.3] in 
that sense globalization has a very long history [0.7] er so the idea that it's 
something new and something spectacular that [0.2] you know we've really [0.4] 
er got to deal with now as a new exciting phenomena [0.4] in that sense is is 
overplayed [1.0] there's another view about globalization isn't there that [0.
4] er [0.6] to quote a a theologian recently who was writing about 
globalization [0.2] er [0.2] talked about it ravaging the planet [0.3] all 
right which is the other view about globalization [0.3] particularly in the 
context of developing countries [0.6] er the idea somehow that globalization [0.
5] and one of the key instruments of it which are multinational companies [0.5] 
er is somehow a 
vehicle for the exploitation of poor countries [0.5] er and that they're worse 
off as a result of globalization [1.1] and of course like any economic change 
[0.7] they can be and there are gainers and and losers from from this process 
[0.5] but our job is to take a more objective view [0.6] er [0.6] as i say 
stating that it's not something entirely new [0.8] er the new part of it [0.3] 
is the speed [0.5] at which factor and product markets [0.2] are being linked 
together [0.5] that's the new part [0.2] going back to what you were saying 
earlier [0.3] about the speed of communication the speed and the flow of 
information [0.6] er [0.3] so the phenomena itself isn't isn't new it's just a 
continuation [0.5] of traders for many thousands of years [0.4] er engaged in 
the movement of people and the movement of goods [0.6] er and today 
particularly services [0.6] er but it's the speed at which i think the change 
is taking place [1.0] er so the first question then is why [0.5] the speed of 
change [0.8] er in which factor and product markets have been much more closely 
integrated what are the forces 
giving rise to that [0.9] and secondly what are the role of multinational 
companies or [0.2] transnational corporations as they're more generally known 
perhaps outside of Britain [0.7] er what is their role in this process they're 
seen as being central to it [0.5] er what is their role in the process [0.3] 
and what i-, what are the costs and benefits [0.4] of multinational companies 
[0.4] er that are operating [0.5] er in post-developing countries [0.2] that's 
what we'll be looking at today [3.2] okay [0.4] i've given you [0.3] there [0.
2] er [0.4] my definition [0.7] of globalization [0.5] it's [0.3] the rapid 
increase in the integration of world markets [0.4] particularly for goods and 
services [0.2] and financial markets [1.0] er [2.0] do you have another handout 
there please is there a spare one [0.5] yeah [11.9] er [0.6] and i take this i 
mean i'd be interested in your views but i've listed some of the factors that 
seem to me to be important in driving the speed with which this is taking place 
[0.4] disintegration of of er [1.1] er of these markets but [0.2] please tell 
me if you can 
think of other [0.5] important factors that i've missed out [0.8] the first one 
seems to me [0.2] to be falling transport and communication costs [0.5] mm [0.
6] er [0.6] i mean that [0.2] fall in transport costs [0.2] particularly 
fuelled the huge expansion of trade from eighteen-seventy onwards [0.7] er [0.
2] combined of course with the Industrial Revolution [0.3] spreading [0.3] er 
in er Europe and North America [0.7] but we've seen a further revolution [0.3] 
in transport costs [0.3] i've put there that sea freights [0.3] have fallen by 
seventy per cent in real terms [0.4] er between nineteen-eighty and nineteen-
ninety-six so it's still going on [0.5] this is the containerization revolution 
[0.2] this is the huge increase in the size of ships [0.4] er and with it all 
the mechanization that goes with that [0.5] er in port handling facilities [0.
3] and the rest [0.8] er so we've seen huge investment [0.4] er in all this new 
technology in in in shipping and port handling [0.5] which has greatly reduced 
[0.3] cost [1.0] maybe perhaps given some of the sea disasters that we've seen 
[0.4] er perhaps the pressure on costs is a bit 
too much [0.5] er but that's another story [0.7] and of course the [0.2] huge 
fall in communications cost [0.3] i don't know if anyone's got any [0.7] 
numbers they could give me i couldn't find [0.2] any easily about [0.3] some 
number that might capture [0.5] the huge fall in communication cost [0.5] you 
know [0.3] the [0.4] tr-, the local cost of transmitting data back and forward 
say to America [0.5] or the changes in the cost of telephone calls and [0.2] so 
forth anyone any ideas on that [1.1] read any articles no i couldn't come 
across anything [0.3] off hand [0.2] but it's quite obvious [0.2] that there's 
been an enormous fall and that's continuing [0.4] er with er all the mergers [0.
3] that we've seen in the and the and the new technology that keeps pouring in 
every year [0.4] into the telecommunications industry [0.6] er [0.8] using 
satellites cables [0.3] combined with computers and everything else [0.5] so 
clearly that's [0.2] must be a huge figure as well [0.2] probably much much 
greater than the seventy per cent that i've given [0.5] er over those er 
sixteen seventeen years [0.8] so [0.7] the fall in 
transport and and communication costs seems to me to be one critical factor [0.
3] speeding up this integration of markets [1.1] secondly changes in technology 
[1.5] er [1.0] in the sixties and seventies and on into the eighties [0.4] er 
it was still an era [0.2] of sort of a Henry Ford [0.2] type [0.3] er assembly 
operations [0.4] where you had huge integrated plants [0.4] er benefitting from 
economies of scale [0.5] er [0.3] in production [0.2] mm [0.7] er [1.5] and the 
big change in technology [0.3] er as much as i understand it which is not a lot 
[0.5] er is that that has [0.8] completely changed almost right across the 
board [0.7] er where new technologies computer controlled technologies in in 
particular [0.3] have enabled the whole scale of production [0.4] now to be 
much smaller than it was before [0.7] to put it more technically minimum 
efficient scale of production [0.5] er [0.3] all right the lowest point of the 
of the long run average cost curve [0.6] er minimum efficient scale of 
production [0.4] er is now at a much lower level of output [0.2] than it was 
before [1.1] now that must be good news for developing countries [0.5] mm [0.5] 
because [0.5] large-scale production [1.2] inevitably [0.3] centres production 
in the industrialized countries [0.4] mm [0.2] because [0.4] they have the 
large markets [0.2] they have access to capital [0.2] and skilled labour [0.2] 
and all the rest that is needed for these huge integrated plants [0.6] and a 
small developing country [0.3] finds it very difficult to break in [0.5] to 
industries [0.3] where there are large economies of scale in production [0.9] 
er [0.3] so this change in technology [0.4] which is decreasing minimum 
efficient scale of production [0.8] must be good news surely for developing 
countries [0.4] moving in [0.2] particularly into the new technologies and new 
products and new industries [0.6] er [2.9] er leaving perhaps the larger 
assembly operations which may still be subject to economies of scale [0.5] to 
er to the industrialized countries [1.9] so we've changes in technology 
decreasing [0.3] the minimum efficient scale of production [1.2] and [0.8] 
secondly changes in technology greatly increasing the speed and capacity [0.3] 
to process information [0.8] okay it's the combination of computers [0.5] and 
[0.4] 
er and information technology [0.2] in in general [0.2] satellites cables [0.2] 
the rest [0.6] er [0.4] which enable us to transfer huge [0.2] flows of 
information [0.6] er highly technical information [0.3] almost instantaneously 
[0.3] from one side of the world to another [1.3] er last year [0.4] er i was 
er lucky enough to be in Mauritius [0.6] er go there from time to time [0.2] 
doing [0.3] er some work for various organizations [0.4] just happened to 
choose Mauritius [0.4] er [laughter] [0.8] and there the key sector indeed the 
only er manufacturing sector on the small island [0.5] er is the clothing 
industry [0.9] i mean in the [0.5] to give you an idea of its expansion [0.6] 
er in the late seventies there was hardly any clothing industry at all in 
Mauritius [0.4] they were almost totally dependent on exports of sugar [1.0] er 
sugar cane of course [0.8] er [0.4] er huge expansion [0.2] in the population 
due to past growth of population [0.5] so [0.2] 
er they had ooh [0.2] twenty thirty per cent measured unemployment [0.2] and of 
course as we know in developing countries [0.5] er real unemployment is always 
quite a bit greater than measured unemployment [0.8] but you know twenty thirty 
per cent measured unemployment [0.4] much higher percentages of unemployment 
among young people 'cause there weren't any jobs for them [1.0] and so the 
government [0.4] er [0.5] intervened into this situation [0.4] and through 
various [0.5] processes that we'll be talking about in a moment [0.4] er 
attracted in foreign direct investment particularly [0.4] er Hong Kong 
investment [0.5] to set up a clothing industry [1.2] and by the [0.6] nineteen-
eighty-six eighty-seven [1.0] they had become the the world's third largest 
exporter [0.5] of [0.2] er woollen clothing [0.9] er you know proud boast is 
there isn't a single sheep on the island [0.6] er but all the wool comes from 
Australia [0.2] er it's made up then into woollen garments [0.3] and then it's 
exported particularly to Europe [0.3] but also to North America [1.3] er [0.9] 
having started off with woollen 
garments they also have er got into [0.4] er cotton [0.3] and into mixtures of 
cotton and artificial fibres and now it's a very thriving industry indeed it's 
the it's the main [0.2] source of employment on the island [0.4] and totally 
transformed the standard of living [0.4] there in the matter of a decade [0.7] 
so it's a a really a spectacular success story [0.3] so far [1.0] and going 
round some of these factories which of course were new factories [0.4] er one 
of the points that was made to me [0.4] was that [0.5] er [1.3] we only get the 
orders from Europe [0.3] and some of these er factories were supplying fashion 
houses in in France in particular [0.3] 'cause Mauritius has got a long history 
[0.3] er of association with France it used to be a French colony [0.4] before 
the er er Napoleonic Wars [0.5] er [1.3] and er the fashion houses in France [0.
6] only give the orders to the factories in in Mauritius [0.2] at the very last 
minute [0.4] you know [0.3] er [0.2] and then they'll say say it's sort of [0.
4] er er s-, spring clothing [0.5] they'll get the orders round about September 
October [0.4] and delivery's got to be 
now January [0.3] you know [0.7] er which of course a very short time period 
for them [0.4] er to respond to this [0.7] and one of the key factors in their 
ability to respond to it [0.4] is the ability to transfer [0.4] the details of 
the order [0.2] the exact you know precise patterns that are needed [0.4] the 
precise specification of the clothing the different sizes the different styles 
[0.3] measurements [0.2] that are a-, all needed [0.5] er [0.2] including all 
the instructions for setting up [0.5] the numerically controlled [0.5] er er 
machinery [0.3] which they then have computer controlled machinery [0.4] which 
is then used [0.2] to cut the cloth [0.4] and then it goes off for finishing 
which is more a sort of a a a labour intensive operation [0.5] er you know the 
stitching and the and various [0.4] bits and pieces [0.4] er that gives the 
style to the garment [0.5] er [0.2] but a key factor was this ability to 
transfer very very detailed information [0.4] to and fro the factory [0.3] and 
[0.2] er the fashion houses [0.5] er in the space of a second [0.9] er and to 
transfer that information [0.2] straight onto the new machinery [0.6] as 
well as the fact [0.2] that minimum efficient scale of production [0.3] was 
much smaller [0.5] er [0.4] than it had been maybe [0.2] you know fifteen 
twenty years before [0.5] er using the old machinery [1.5] so that's an example 
then [0.2] of a way in which [0.2] we've had a decrease in minimum efficient 
scale of production combined with [0.6] er this technological revolution [0.4] 
in transmitting information [0.5] er [0.2] combining together [0.3] to give a 
strong comparative advantage [0.4] er to a developing country such as Mauritius 
[2.9] the third element that seems to me important are [0.2] er changes in the 
organization of production [0.6] er at an international level [1.2] i mean all 
of you lot have heard about international sourcing [0.5] and i'm sure you've 
seen articles and [0.4] maybe diagrams showing [0.3] er lo-, th-, [0.3] where 
components for a car today come from [0.6] er the gear box may be made in in er 
[0.2] er Brazil [0.3] er the powertrain maybe comes from [0.2] er Taiwan [0.3] 
er the seats are maybe made in Italy [0.3] er the electronics [0.2] er come 
from Germany and so forth [0.4] and then it's all brought together [0.4] er [0.
5] in the 
assembly plants [0.3] which are generally near the markets [0.4] either in 
Europe or North America or i-, or in Japan [0.5] but worldwide sourcing of 
components [0.5] er is now [0.3] er the key element [0.4] in maintaining the 
competitiveness [0.4] er of a wide range of products of which the most 
spectacular i guess are cars [0.4] but it applies now right across the board to 
electronic goods and a whole range of other products [1.4] er [0.3] so [0.3] 
this change in the organization of production [0.2] which again goes back to 
some of the points we made earlier [0.6] er [0.3] the fact that transportation 
costs are much lower now [0.3] the fact that communication costs are lower [0.
3] and much more [0.3] er speedy and sophisticated than they were before [0.3] 
enable [0.2] this international sourcing of production [1.0] er so there's been 
this [0.5] change laid particularly by Japan [0.4] er in the organization of 
production [1.6] and the other element to the change in the organization of 
production [0.4] er is just in time production as it's called again [0.4] er [0.
3] particularly [0.2] introduced [0.4] in er Japan although they 
were actually using [0.3] er American engineers who had first invented this [0.
2] but it was [0.2] put into practice [0.4] in a large way [0.4] in Japan [0.5] 
and just in time production [0.2] is that all these components [0.5] from all 
over the place come together [0.7] just in time [0.4] to be assembled into the 
final car [0.5] er you don't keep stocks [0.7] er or you keep very little in 
the way of stocks it's a sort of huge conveyor belt [0.4] er stretching right 
across the world [0.4] and coming just in time [0.2] to be assembled together 
[0.3] er for the final product whether it's a car [0.2] or a video recorder [0.
3] er or a camera or C-D player or whatever it happens to be [0.7] er [0.4] and 
that again is increasingly [0.3] the element in maintaining competitiveness and 
firms [0.3] that are not able to organize production in that way [0.6] er 
simply can't compete [1.1] which is [0.2] you can see we're beginning now to 
move in to [0.5] the ways in which multinational companies [0.6] then have a 
strong competitive edge [0.4] er if not a dominant position [0.7] in these 
world markets [0.8] 'cause it's it's that sort of size that sort of worldwide 
sourcing that sort of knowledge about [0.4] where to buy goods [0.3] how to 
combine them together [0.5] er just in time [0.8] er that multinationals have 
[0.5] and which are very difficult for [0.4] er [1.2] er smaller national 
companies [0.3] er [0.4] to obtain [3.1] er so [1.1] we come then to the rise 
of transnational corporations [0.5] er producing for a global market [0.8] er 
they're the ones who can take advantage in particular [0.6] of [1.1] these 
various components that i've mentioned fall in transort communication costs 
changes in technology [0.3] changes in the organization of production [0.7] er 
[0.4] and their competitive strength particularly lies [0.4] in their ability 
to make use [0.5] er [0.6] of these fundamental changes [0.6] er in techniques 
of production [1.9] but of course all this would be impossible [0.4] without [0.
8] er the liberalization [0.5] of world trade [0.4] in goods and services [0.3] 
and in capital markets [0.4] we've talked about that [1.0] last term [0.6] when 
we talked about in particular the Uruguay round [0.5] of er multilateral trade 
negotiations [1.0] er [0.3] and the the [0.4] the fact now that [0.3] you know 
previously the W-T-O [0.3] had 
been regarded as the rich nations' club [0.7] but now almost all developing 
countries [0.3] are signing up or have signed up [0.3] to the W-T-O to be 
members [0.5] because the W-T-O [0.2] is the central point [0.5] for [0.2] er 
the development [0.7] of the liberalization of world trade [0.7] if world trade 
isn't isn't liberalized [0.5] then [0.4] transport and communication costs can 
fall as much as they like [0.5] we can have [0.2] changes in techniques of 
production [0.3] er going at a rapid pace but it's not going to lead to 
anything [0.6] unless we also have [0.4] the free movement [0.4] of [0.4] er 
factors of production [0.5] and goods and services [0.8] and so [0.3] it all 
fits together one [1.1] element reinforces the other [0.2] one element drives 
the other [0.7] er [0.4] the need to be competitive [0.5] er and utilize these 
[0.3] er changes [0.5] er in technology and changes in the organization of 
production [0.4] bring pressure to bear on governments [0.6] to [0.2] er 
negotiate [0.5] er trade agreeements [0.2] freeing barriers to trade [0.4] 
freeing barriers to movements of capital [0.8] er [0.7] and of course also 
freeing [0.4] barriers to movement of 
people [2.2] er [0.2] so [0.2] we've had this drive towards liberalization [0.
6] er [0.3] of er world trade [0.6] and er capital movements [1.0] 
multilaterally through the W-T-O [0.9] but also bilaterally [0.6] through [0.2] 
er free trade agreements [1.0] and remember we mentioned again [0.2] last term 
[0.4] er [0.2] the [0.2] huge proliferation [0.5] of free trade agreements [0.
7] er notably by Europe [1.0] er [0.2] but also [0.3] increasingly [0.3] by [0.
2] er the United States [0.5] and in turn [0.2] by a wide range of developing 
countries particularly in Latin America [0.7] er to a lesser extent but it's 
gathering pace [0.4] also in Europe [0.6] er in er [0.2] er [0.2] in [0.2] in 
Asia [0.7] er started off with ASEAN the Association [0.4] of er South-East 
Asian Nations [0.6] which is still more a political organization than economic 
but the economics are increasing [0.7] but the key one [0.2] er is er [0.2] is 
APEC [0.4] er [0.5] which covers [0.2] er the Pacific and East Asia [0.7] and 
er countries like Thailand Taiwan [0.6] er [0.4] China probably coming into it 
[0.5] er [0.7] er Malaysia and so on [2.8] er [0.8] and of course [0.2] er 
unilaterally [0.5] er we tend to think of trade negotiations being a bargaining 
process [0.5] but remember the theory of international trade [1.6] er tells us 
that [0.3] far from giving something away when you lower your barriers to trade 
[0.3] mm [0.5] on the contrary [0.3] er you gain by this and that's what the 
theory of comparative advantage tells you [0.8] er [0.2] that's not intuitively 
obvious to people [0.5] that by lowering your barriers to trade you're not 
giving something away you're gaining [0.3] you're raising the welfare of the 
country [0.7] you're increasing your [0.2] production possibilities you're 
increasing real income [0.5] so lowering barriers to trade [0.5] er 
unilaterally [0.6] is a welfare increasing process for the country concerned [0.
3] they don't need to get something in exchange [0.4] in order to benefit from 
trade [1.0] and increasingly that message is also coming home [0.7] er to 
countries [1.4] who are unilaterally lowering their barriers to trade [1.9] so 
at the bottom of that page there i've given you some [0.2] er [1.2] i mean you 
can have [0.2] as many figures as you like here you can look at the growth of 
world trade you can look in particularly [0.3] at the rising share [0.3] of [0.
4] er [0.3] trade [0.4] in gross domestic product [0.4] er for for rapidly 
growing countries [0.6] and what i've given you here is just some figures [0.4] 
taken from the [0.3] world development indicators [0.4] remember that key 
source [0.3] from the World Bank [0.8] er [0.3] showing trade in goods [0.6] 
and remember it's just goods that are in here [0.5] as a percentage of 
purchasing power parity [0.4] all right P-P-P [0.3] stands for purchasing power 
parity [0.4] er of gross domestic product [0.5] just comparing [0.2] nineteen-
eighty-seven with nineteen-ninety-seven [1.0] and [0.7] not surprisingly you 
see particularly for East Asia and the Pacific [0.6] er there was just under 
ten per cent trade was in goods was just under [0.4] ten per cent of G-D-P in 
nineteen-eighty-seven [0.5] it was just under fifteen per cent [0.3] in 
nineteen-ninety-seven [0.6] now remember in nineteen-eighty-seven [0.3] East 
Asia [0.2] had already made huge progress [0.3] with they they were already in 
the newly industrialized countries [0.4] in nineteen-eighty-seven [0.4] and if 
i'd gone back ten years before that [0.3] you'd have seen an even more 
spectacular change [0.7] so that's already started in nineteen-eighty-seven [0.
4] 
already got the newly industrialized countries established in world trade [0.3] 
and they're still increasing [0.2] trade [0.4] as a share [0.2] of their gross 
domestic product [0.6] er [0.9] er [0.5] at world level er you can see again a 
a a a ten per cent increase [0.6] er Latin America now is the area [0.3] where 
trade [0.3] is [0.3] the powerhouse [0.4] for the growth of of these economies 
[0.8] er trade both between countries [0.2] the Mercasor countries [0.4] in 
Latin America that we talked about [0.5] er last term [0.6] er [0.2] rapidly 
increasing trade between themselves in which Brazil [0.4] er of course given 
its size a central [0.5] er country here [0.6] er [0.2] but also 
trade with the rest of the world as well [0.6] er and of course [0.3] we've got 
the [0.3] er North American Free Trade [0.2] er Agreement [0.3] between Mexico 
[0.4] and the United States and Canada [0.4] and [0.2] the plan to [0.4] er 
expand that [0.4] into the Free Trade Area of the Americas [0.4] mm [0.5] er 
well that'll be [0.3] something for the future [0.4] er [0.7] but that's the 
pattern which [0.5] er [0.8] er Latin America will almost certainly follow [0.
3] bringing into the Caribbean [2.1] now of course that's just trading goods [0.
3] mm [0.4] er what we [0.3] tend to forget about because we're still rooted a 
bit in the past in our thinking [0.2] and the textbooks are still [0.3] rooted 
a bit in the past here as well [0.6] trade in services [0.6] has expanded [0.3] 
to a much greater extent [0.4] than trade in goods trade in goods has expanded 
rapidly [0.3] but trade in services has exploded [0.7] mm [6.1] and again 
changes in technology [0.7] do enable developing countries to take part in that 
[0.8] for example [0.3] the er [0.5] er [0.2] software [0.2] for [0.3] er [0.7] 
that was written [0.3] to produce the [0.3] er timetable for the London 
Underground [0.3] was written in India [0.5] mm [0.8] er [0.6] many an 
increasing number of er large [0.5] er companies today [0.5] er [0.5] transfer 
all their routine data processing and data inputting [0.5] er out to developing 
countries [0.2] out to India out to the Caribbean [0.2] out to countries in the 
Latin America [0.5] er so the raw data is just exported en masse [0.2] again 
using [0.4] the revolution in communications and computer technology [0.4] er 
and then it's inputted and processed [0.3] and produced in whatever form the 
companies require [0.2] and transferred [0.2] back [0.2] to the er head office 
or distributed out to the various [0.3] er branches [0.3] of these large 
corporations throughout the world [0.6] er and labour's cheap of course in 
developing countries so you've got a pool of [0.3] of cheap [0.2] but skilled 
and educated labour [0.4] er [0.3] and so rather than do the task [0.5] in the 
industrialized countries where labour is is is er [0.3] is not plentiful it's 
scarce it's expensive [0.3] you transfer it out to developing countries [0.6] 
but there's all sorts of areas of growth of services [0.5] er again using new 
technology [0.5] er for which developing countries [0.4] are increasingly [0.2] 
involved [1.0] another rapid area of course are financial services [0.6] er [0.
3] which again can involve [0.3] a limited number of of developing countries [0.
5] and then of course we've got tourism [0.4] and international tourism [0.4] 
is er a rapidly growing [0.5] er source of income and employment [1.0] 
particularly for small developing countries [0.3] er quan-, quantitatively it's 
going to be [0.3] not terribly important for a country like India or China [0.
3] although they've got a rapidly expanding [0.4] er [0.2] tourism market [0.8] 
but for smaller countries [0.2] er [0.2] in [0.5] er say like [0.4] er Sri 
Lanka [0.3] in er South Asia [0.4] or other countries in South-East Asia [0.4] 
or one of the Caribbean countries [0.4] er or Pacific countries [0.3] you know 
tiny island countries like Tonga and Fiji [0.5] tourism [0.4] is becoming the 
most important source of employment [0.5] er and a major source of export 
earnings [1.5] so [0.2] don't forget the service sector in here we tend to 
think of goods all the time we tend to think of comparative advantage [0.4] in 
terms of production of goods [0.3] er 
for final consumption [0.6] but apply the same theories apply the same thinking 
[0.3] to the service sector [0.7] and that's [0.4] re-, er that's expanding 
even more rapidly [0.4] than trade in goods [3.2] well those are the sort of [0.
5] things that seem to me to be driving [0.2] this globalization process [1.1] 
and as a [0.2] a-, as a result of that [0.3] particularly giving [0.3] er a 
competitive strength to big international multinational companies [0.6] and i 
want to move onto those in a moment [0.7] but [0.6] i'll stop there for a 
moment [0.4] any questions you have for me or [0.3] points that i've missed out 
that you think are also driving this [0.5] globalization process [16.3] okay 
well if anything [1.0] comes to mind while you're thinking about it let me know 
and chip in particularly when we're talking about multinationals [0.6] er [0.2] 
which we're now [0.5] er concerned with [4.2] i keep calling them 
multinationals but i er [0.3] because [1.6] that's what i've [0.2] called them 
in the past [0.7] but i gather that the standard term today [0.2] is now [0.5] 
transnationals the American term [0.8] and indeed we have the U-N 
Centre on Transnational Corporation [0.6] so i er that's why i stuck to that 
term [0.4] don't like it transnational [0.4] er sounds a bit clumsy to me [0.4] 
prefer multinational but [0.6] never mind [0.6] er we'll stick to that [0.2] 
now first of all let's [0.4] and those of you who who've done [0.3] er courses 
in international trade might well have covered this so apologies [0.4] if i'm 
er covering something some of you already know and indeed chip in [0.5] if [0.
7] there's something i've missed out or [0.4] not quite made clear [0.9] er but 
the theory of multinationals [0.8] transnational corporations [0.5] er [1.5] 
[cough] [0.3] is really based on on three factors so you [0.4] r-, really the 
the [0.2] the the the the the [1.2] er emphasizing that the growth [0.4] and 
indeed the dominance of transnational corporations [0.5] is the outcome of 
three interacting circumstances [0.7] er [0.3] the ownership advantage [0.4] of 
these [0.2] firms [0.6] their locational advantage and their internalization 
advantages [0.9] and i'd like to go through each of those briefly [0.4] in in 
turn [1.9] er [1.5] the ownership advantage of multinationals transnationals [0.
7] er [0.9] is 
that they they own assets [1.6] which can be profitably exploited [0.6] on a 
comparatively large scale [0.5] all right that's the first characteristic [1.0] 
that they own assets [0.5] which can be profitably exploited [0.5] on a 
comparatively large scale [5.6] and the sort of assets we're talking about [0.
5] are [0.2] particularly things like intellectual property [0.5] okay 
Microsoft [0.8] er [0.5] classic example perhaps of [0.4] er [0.2] er [0.2] of 
intellectual property [1.2] but it applies right across the board [0.4] er it's 
i-, it's the knowledge [0.5] of [0.6] er [1.1] you know what to produce [0.4] 
how to produce it [0.8] where to sell it [0.7] how to market it [0.6] that sort 
of knowledge okay that proprietary knowledge [0.6] er [1.3] which is a key 
component [1.2] but also that that knowledge [0.3] can be exploited on a large 
scale i mean if it's a highly specialized piece of knowledge [0.4] you're not 
going to get a transnational corporation out of that [0.3] mm [0.5] so it's not 
only that they have this [0.2] proprietary knowledge [0.4] but also that the 
knowledge can be applied [0.3] on a relatively large scale [2.3] er [0.7] other 
sort of [0.3] er ownership advantages er would 
also be [0.2] er organization and managerial skills [1.1] which again in a 
sense develop from [0.5] the size of the organization because the organization 
gets bigger [0.6] er it has to rearrange the way in which it it it carries out 
its functions [0.6] er [0.2] some will be efficient at doing that and some 
won't [0.5] er [0.6] the usual Darwinian selection [0.3] that we believe in in 
economics [0.5] er [0.2] those that can't organize themselves on a large scale 
go under [0.4] so the ones that we actually see surviving are the ones that 
have adapted their organizational structures [0.6] to [0.2] be able to expand 
on a large scale [1.2] er [0.4] and that of course [0.3] er brings a cumulative 
advantage to them [0.6] over [0.2] smaller firms [0.3] or national firms [0.3] 
which don't have those organizational and managerial skills [0.8] equally of 
course it's presumably why [0.2] you'll probably app-, at least some of you 
apply to [0.4] these sort of firms [0.4] er looking for a job [0.5] er because 
they're the ones with the sophisticated training programmes graduate training 
programmes [0.5] and you're then inculcated into [0.4] 
er the organizational and managerial [0.2] structures and norms [0.4] and 
methods of er er and and practices [0.2] of [0.4] these huge [0.4] er 
transnational corporations [0.7] er so they build on these skills by investing 
heavily in people [0.7] er that's why they're good organizations to join [0.4] 
but it's essential for their survival that they do so [0.7] er if they don't 
heavily invest in people [0.5] and in organizational skills [0.6] then the 
sheer size of the organization [0.2] will be its downfall [2.0] er [1.0] and 
they also because they're producing on a comparatively large scale [0.4] er 
they also develop sophisticated marketing networks [1.2] er and again [0.3] 
this is er a key ownership advantage [1.9] locational advantage [1.0] er is 
simply stating that it's more profitable [0.6] er [1.1] to produce whatever it 
is the goods or service [0.6] er [0.3] [cough] by utilizing assets [0.4] er [0.
7] in different countries [2.0] so that production takes place [0.2] utilizing 
assets in different countries [0.4] rather than just the home country [0.5] of 
[0.5] er the corporation [1.0] mm [1.4] so again this is another characteristic 
[0.2] the there's this [0.5] 
er locational advantage [0.8] er [0.4] which means that [0.7] er they can [1.3] 
use these assets [0.2] particularly these intangible assets their [0.2] their 
ownership advantage and produce the goods or service [0.5] utilizing [0.4] er 
the factors of production [0.2] in a number of countries and not just the home 
country [0.4] of the of the multinational [1.1] er [0.7] otherwise you simply 
produce the product [0.2] in your home country and then you simply export the 
good or service [0.2] you wouldn't be [0.2] a transnational corporation [0.4] 
you would simply be a large company exporting [0.6] we could talk about 
international production here [0.5] so another key characteristics of the goods 
and services [0.5] are that they can be more competitively produced [0.6] er 
utilizing factors of production [0.4] at an international level [1.7] and the 
third element there which is [0.5] the one that's perhaps most difficult for 
people to grasp [0.4] is the internalization advantage [3.2] er [1.5] by 
internalization [0.6] we mean [0.5] overcoming market failure [1.7] er in in 
open markets [0.7] or regular markets if you like [0.9] by developing 
internal markets [0.3] within the transnational corporation [1.5] now the 
clearest example of market failure [0.4] and the need for an internal market 
therefore [0.3] is the market for knowledge [0.8] mm [1.0] firms guard their 
ownership advantages their their knowledge [0.7] er [1.0] er [0.3] fiercely [1.
2] if you join one of these firms [0.2] the fir-, one of the first things 
you'll do have to do [0.4] is to sign the declaration [0.5] which will list all 
sorts of things [0.3] which you must not do [0.6] er [0.4] er and which you are 
will will be sued if you transfer knowledge outside of the firm [0.5] er [0.2] 
even without making it available to their competitors [0.6] but you you [0.4] 
er you must have a clear desk [0.4] er you must lock away [0.3] er your various 
pieces of information in certain places [0.5] er [0.4] it is absolutely 
forbidden [0.2] to copy down onto floppy disks sources of information [0.4] er 
and so on and they [0.2] er they they police [0.3] their computer systems [0.4] 
to make sure that people [0.2] are not misusing this knowledge 'cause knowledge 
is the most precious commodity that they have [0.5] in 
their competitive advantage [1.0] and the problem for them is [0.3] on the one 
hand for the firm or for the enterprise [0.5] to work efficiently [0.7] 
knowledge has to be freely available [0.9] er within the corporation itself [0.
5] otherwise [0.3] you're not exploiting [0.4] your [0.3] er [0.3] er your [0.
3] er competitive advantage whether it's in computer systems or [0.3] in 
producing cars or whatever it happens to be [1.0] er on the other hand you want 
to guard this knowledge [0.2] so that it doesn't [0.2] er it's not available to 
your competitors [1.4] also [0.6] knowledge is a is a difficult product once 
you try and sell it [0.8] hence all the complicated [0.4] er legislation that 
we have [0.4] on intellectual property rights [0.5] remember again last term we 
talked about [0.4] the W-T-O agreement [0.4] on trade related [0.2] 
intellectual property rights [0.5] and that was [0.2] fuelled particularly [0.
3] by American companies [0.5] who were very concerned [0.3] about firms 
throughout the world [0.5] er ripping off their knowledge [0.4] er for software 
or for anything that happened to be [0.2] er you know i talked about in Taiwan 
it's [0.2] politely 
called [0.3] er reverse engineering you get hold of [0.2] a Phillips video 
recorder [0.2] and you take it to pieces and say oh that's how they made it [0.
4] er fine you know we can we can do better than that and sell it for half the 
price [0.5] er [0.6] er 
it is is no longer competitive [0.9] so [0.3] knowledge is your o-, often your 
most comp-, er precious [0.2] competitive advantage [1.1] but you can't sell 
that knowledge easily [0.5] 'cause as soon as you put it into the [0.3] i-, 
into the open market [0.3] it becomes a public good [0.6] mm becomes a a free 
good [0.6] er anybody can rip it off [0.5] er anybody can use this reverse 
engineering to see how you've built the product [0.4] er what components you've 
used and how you've designed the circuitry and so forth [0.8] er [0.4] and you 
can't [0.3] er [0.7] adequately guard that knowledge [0.5] through the law 
although you obviously as i say in the in in in the TRIPS aggreement [0.5] er 
[0.3] we've [0.2] been trying to do that [0.8] so knowledge is this very 
fragile commodity [0.7] and 
what multinational companies transnational corporations do [0.6] is to make 
this knowledge freely available within the company [0.8] er [0.3] but guard it 
against going outside [1.5] so there g-, got market failure then [0.2] and the 
market for knowledge [0.4] you can't [0.3] the firm cannot obtain [0.4] er the 
[0.5] er value [0.3] of its knowledge by selling it in markets [0.7] mm because 
it can't make it exclusive [0.8] er [0.4] so if it keeps it internal within the 
firm [0.5] but then [0.2] maximizes [0.4] er the knowledge advantage that it 
has [0.4] er [0.8] by er ha-, [0.2] by developing internal markets [0.6] so 
that [0.2] there is parts of the organization of access to the knowledge they 
require [0.4] but don't have access to the knowledge [0.2] that they don't need 
[0.3] mm and you control [0.2] the dissemination of knowledge in that way [0.7] 
er to [0.4] er guard against [0.3] it er going to your competitors [0.4] but at 
the same time [0.2] exploiting it [0.2] in an optimal manner [0.3] er within 
the [0.4] i-, in [0.2] in the company [2.7] now this knowledge of course it 
can't simp-, er isn't simply in terms of patent and er er various other 
proprietary knowledge like 
that [0.4] it can also be knowledge about markets [0.3] it can be knowledge 
about [0.2] er production processes [0.5] er knowledge [0.4] obtained [0.2] by 
the very operations by the international operations [0.4] of the multinational 
company [1.1] er [1.3] and so again [0.2] making that freely available [0.6] er 
pooling together [0.7] the knowledge of gain by the worldwide operations of the 
multinational [0.3] itself builds up its competitive advantage [0.6] so [0.8] 
the competitive advantage then of transnationals [1.0] obtained from their 
ownership [0.3] locational [0.4] and internalization advantages [2.0] er and 
combining those together [2.2] now this bit there the [0.7] personal and 
potential benefits [0.4] of multinationals transnationals to [0.3] er 
developing countries [2.0] the most obvious one [0.2] is that you get capital 
and the foreign direct investment comes in [0.5] er [0.7] so er the developing 
country gets capital [0.6] but these days of international [0.3] capital 
movements [0.5] that's not terribly important [0.9] because if you've got a 
worthwhile investment project even in a developing country where there's 
higher risk [0.7] er [1.0] you still shouldn't have too much difficulty in 
financing that project [0.3] mm [0.4] there are sophisticated international 
banks [0.5] who are s-, scouring the world [0.4] looking for [0.3] er good 
rates of return for their for their clients' money [1.0] er if you're a small 
developing country there might be a problem [0.3] if you're just too small for 
them to be bothered with [0.4] you know anything less than a few billion 
dollars worth of investment they might not be interested in [0.5] er but on the 
whole [0.4] er [0.2] we've got sufficiently sophisticated international [0.2] 
capital markets these days [0.5] for [0.3] investment [0.5] er and the flow of 
investment [0.4] not to be terribly important [0.4] er as a benefit from 
multinationals [2.0] obviously it is still important but [1.1] one of the key 
points unfortunately about the flow of foreign direct investment is that it's 
heavily concentrated [0.5] in a relatively few countries few developing or 
transitional economy [0.2] and i've given you some figures there [0.4] er [1.0] 
er [0.6] though in in recent 
years [0.4] investment been particularly in the huge economies of China [0.2] 
also in in in in Brazil [0.4] and then [0.3] er Mexico [0.2] principally 
because of NAFTA [0.2] the North Atlantic [0.5] er the er er er North American 
Free Trade Agreement [0.4] and [0.2] er the transitional economy [0.6] and [0.
8] the [0.2] new NIX [0.4] er Malaysia and Thailand [2.6] conversely the whole 
of sub-Saharan Africa [0.4] er only accounts for five per cent [0.3] of foreign 
direct investment [0.8] er [3.0] but the second point i'll make [0.7] is that 
[0.5] as i say [0.7] if you've got a worthwhile investment project you should 
be able to borrow in international capital markets [0.7] and the involvement of 
T-N-Cs [0.6] isn't just confined to foreign direct investment [0.7] today 
there's a whole sophisticated [0.2] forms [0.3] of involvement [0.6] which may 
or may not involve [0.3] foreign direct investment [0.5] licensing agreements 
[0.2] joint ventures management contracts [0.3] turnkey projects [0.2] all 
sorts of ways [0.5] in which [0.4] er multinational transnational corporations 
[0.4] can be involved [0.4] in the production of a good or service [0.2] in a 
developing country [0.4] it 
doesn't just have to be a wholly owned [0.3] er affiliate [0.3] of the of the 
multinational [0.3] and indeed increasingly today [0.4] er [0.2] transnational 
corporations [0.3] are [0.3] quite wary about having wholly owned affiliates 
operating in developing countries [0.5] er they prefer joint ventures [0.3] 
quite often governments in developing countries [0.4] er require them to have 
joint ventures [0.5] but in any case it it minimizes their exposure to risk [0.
6] by having a joint venture [0.2] or by having a licensing agreement [0.3] or 
the rest [0.3] rather than [0.3] putting large sums of capital in [0.7] er as i 
say there's international capital markets to deal with that side of things [2.
8] so it's perhaps the second form of involvement then the the sort of non-
equity forms of involvement which are increasingly important today in the 
activities [0.4] of [0.2] er transnationals [1.9] the second benefit is 
increased employment [0.6] er particularly for women in the manufacturing 
sector [0.6] if you look at the [0.3] opening chapter of your textbook [0.4] 
there's er a little story in there [0.3] about er [0.6] a er [1.2] a 
young girl leaves school [0.3] er i think it's in Thailand is it [0.5] er any 
anybody read it [0.7] er [0.5] going into an electronics factory or is Malaysia 
no i think it's Malaysia yes anyway [0.2] going into an electronics factory and 
so forth [0.6] because [0.5] very often the first stage anyway of [0.2] a 
transnational's involvement in a developing country [0.5] will be in simple 
assembly operations [1.1] and er [1.2] that's particularly provides a source of 
employment for women [0.3] rather than men [0.6] er so that's why i've said 
it's increased employment [0.3] especially for women [0.3] in the manufacturing 
sector [0.5] same's true of [0.2] i talked about data processing and data 
entering and so forth [0.5] er again [0.4] that very often [0.3] er [0.3] 
produced employment for women [0.4] in in developing countries [0.9] and that's 
fortunate as well because given the labour markets in developing countries [0.
5] there is a a particularly in the urban sector [0.3] not so much the rural 
sector but in the urban sector [0.5] there is very limited employment for women 
[0.3] er in the manufacturing sector in the in the local 
manufacturing sector [0.5] in developing countries [0.4] so [0.6] providing 
employment for women may be particularly valuable [0.4] er [0.5] in these 
countries [1.3] third that it obviously increases real income [1.4] remember [0.
3] it's the multiplier effect here [0.3] okay it's not simply the direct 
employment [0.5] say of women [0.4] in an electronics assembly [0.3] er plant 
or whatever it happens to be [0.4] it's not simply that direct employment [0.4] 
there's also the multiplier effects of that [0.5] you remember that [0.4] the 
multiplier effects can be quite substantial [0.6] er because it's a labour 
intensive operation [1.1] er [0.2] then [0.7] the women employed in that 
factory will then go out they'll have a high propensity to consume [0.2] all 
right given very low levels of income [0.5] so a high proportion of their wages 
will be spent [0.5] mostly on local [0.4] er goods and services [0.3] mm [0.2] 
and that'll then lead to multiplier [0.2] increases [0.3] er in output [0.5] 
employment [0.5] and real incomes [0.5] throughout the economy [0.5] mm [2.9] 
er fourthly [0.5] er [0.5] depending on the activity of multinationals and i'll 
come on to that [0.2] er later on [0.7] er there'd 
be a decrease in prices too [0.9] er i mean if it's export platform [0.4] er 
assembly operations [0.4] well there won't be much effect [0.3] that way [0.8] 
but particularly if it's import substituting [0.7] er activity by a 
multinational which you particularly find [0.5] er in larger economies [0.3] 
say like India [0.2] or China [0.4] but also in er Latin America [0.8] if it's 
import substituting [0.5] er [0.2] er activity by the multinational [0.7] then 
[0.5] they can be providing [0.8] a higher quality product [0.2] at a lower 
price [0.7] than er domestic manufacturers [0.8] or maybe [0.3] er in terms of 
the imported article [1.7] er simply because [1.4] the transnational 
corporation [0.2] is more efficient [0.8] er [0.5] has lower cost of production 
[0.6] er [0.9] and also because [0.2] its very presence [0.6] may well bring in 
competition [0.4] into the domestic market [0.6] where previously [0.5] the 
market was a monopolistic or or or oligopolistic [0.2] structure [1.7] er [0.5] 
particularly for smaller developing countries [0.6] er local manufacturers may 
well be [0.6] you know fixing prices between themselves [0.5] or there may be 
open or there may be tacit collusion [0.5] er because it's a relatively small 
market [0.4] and a foreign company coming in which is not part of that process 
[0.7] can produce more competition [0.6] er and can force lower prices [0.8] 
the general effect of opening up an economy [0.4] to trade [13.8] further 
advantage which [0.6] a gain which [0.3] transnationals can bring is increasing 
[0.2] government revenues [5.0] this perhaps is particularly indeed perhaps the 
only gain [0.8] that you get from transnationals' operation [0.5] in say [0.2] 
er mineral extraction you know mining operations and the rest [0.5] i mean the 
employment effects are going to be small [0.4] er [0.3] very little linkage 
into the local economy [0.4] so principally the only benefit [0.3] which the 
government gets from it [0.4] is [0.3] er probably a licence agreement to 
operate [0.3] er extracting the copper the bauxite the uranium whatever it 
happens to be [0.4] plus [0.2] er [0.5] er payments [0.3] are based on on 
production [1.3] so [0.4] source of government revenue in those cases important 
[0.3] while manufacturing processes [0.7] well [0.3] government revenue might 
depend might be increased [0.4] particularly if 
it's import substituting [0.4] er manufacturing [0.6] er selling products in 
the local market [0.3] and again [0.4] there's er [0.4] the there's usually 
some sort of local purchase tax or value added tax [0.5] er that'll generate 
government revenues in that way [0.9] but also go back to what we said earlier 
[0.5] that [0.7] the on the on the multiplier effects [0.6] of transnationals 
[0.3] increasing [0.4] output increasing employment [0.5] er [0.3] and that'll 
increase the base [0.5] for [0.4] er er government revenues [6.5] also creating 
important external economies spillover effects [1.5] er [1.4] now these are 
potentially [0.4] the most important effects of all [0.7] well we say you can 
borrow capital [0.3] on international markets [0.4] or you can attract equity 
investment on international capital markets [0.8] fairly easily these days [0.
7] er [0.6] generates a bit of employment increased government revenues and and 
so on [0.9] but the key advantage to a developing country [1.3] of the 
operation of a transnational [0.4] er [0.4] in its economy [0.5] is to be able 
to tap in [0.8] to these competitive advantages of the multinational [0.5] mm 
[0.5] to tap into their 
knowledge [1.6] about [0.4] production processes [0.8] about how to organize 
production [2.0] about how to design the product [0.7] how to market the 
product [1.9] how to keep financial controls [0.9] er and so on all the 
thousand-and-one [0.2] factors [0.6] which together [0.5] are essential if 
you're going to compete [0.4] especially in world markets [1.6] and remember 
that most developing countries are small economies [1.3] so [0.3] they've got 
to go into world markets at a 
fairly early stage in their development [0.6] remember we said it's sort of 
catch twenty-two really [0.6] er [0.5] you know they've got small economies [0.
4] and so [0.2] they have to [0.3] move into world markets at an early stage in 
their development [0.6] er [0.6] but if they're able to compete in world 
markets [0.4] they wouldn't be underdeveloped countries [0.2] all right [0.5] 
so how do you crack the catch twenty-two problem [0.6] er [0.5] part of the 
answer to that [0.3] is [0.6] attract [0.2] transnational corporations [0.3] 
and then tap into their knowledge [1.9] of course it depends crucially [0.6] on 
the extent to which this knowledge [0.2] that i've mentioned about [0.4] 
production processes and organizing production and management and marketing [0.
6] it crucially depends on the extent to which [0.3] that knowledge 
disseminates [0.7] into the local economy [1.3] er if it's a mining operation 
[0.2] there's not going to be much dissemination of useful knowledge [0.2] mm 
[0.7] manufacturing process potentially [0.5] er it can [0.2] er be very useful 
[1.1] go back to the case of Mauritius [0.6] that i was talking about on on the 
clothing 
industry there [0.6] it's an interesting very interesting [0.4] er case study 
[1.5] because it started off with [0.4] er Hong Kong investment [0.6] on pretty 
simple [0.4] you know [0.3] C-M-T cut make and trim operations they're called 
[0.5] so the cloth comes in [0.3] it's simply cut up sewn up into cheap 
garments and sold [0.3] er throughout the world [0.8] er [1.4] but then it 
developed into more sophisticated operations [0.3] mm [0.9] er [0.2] 
particularly brought in [0.3] by [0.3] er European investment [0.3] into the 
clothing industry [1.4] and of course [0.8] the the wise guys there [0.5] 
worked for [0.2] the [0.5] er foreign companies [0.9] they saw how things were 
done [0.3] mm they saw they learned quickly [0.5] er [0.3] er about overseas 
markets [0.4] er about the n-, how to organize production [0.5] in particular 
[0.5] how to [0.2] deal with these very short lead times [0.5] between the 
buyer saying this is what we want for the spring sales [0.4] and being able to 
produce it you know three or four months later [0.3] or even shorter lead time 
than that [0.7] er [0.5] how to keep financial controls [0.4] er and so on [0.
3] okay [0.3] er and they would indeed some of the families that i talked to 
there [0.4] er had specifically the father would send the sons out you know 
you're going to work for that French company there and you'll work for that 
Hong Kong f-, company [0.5] er er you'll go into the accounts department [0.2] 
you'll become a production engineer [0.3] you'll go into marketing i mean it 
was it was it's as far-sighted as that [0.6] you learn then from their 
operations [0.6] er [0.3] and then we set up our own factory [1.2] er not only 
then do we find in Mauritius [0.5] that more than half the factories are now 
owned by Mauritian nationals [0.6] but they've also bought out [0.5] er the 
original [0.3] er investors the original Hong Kong investors [0.3] er and 
American investors in in particular [0.4] er so they started off working for 
the company [0.2] they ended up owning the company [0.2] mm [0.2] but even 
without that [0.7] a key factor in this dissemination of knowledge [0.3] is 
simply you work for the company you learn how things are done [0.3] and then 
off you go and do it yourself [0.6] er [0.3] and [0.5] er because you have 
these credentials [0.4] you don't have m-, much problems [0.3] er in borrowing 
money [0.2] er to set up the factory either you've worked for a a a big name [0.
5] er you've probably established your contacts as well [0.2] throughout the 
industry [0.2] so you'll know you're a known quantity in the industry 
particularly on the marketing side [0.6] er and they've been extremely 
successful in doing that [0.8] er so as i say so now [0.3] more than half the 
industry is owned by Mauritian nationals [0.4] well [0.2] at the beginning [0.
5] you know [0.3] my first sort of fifteen years ago [0.4] er [0.3] it was [0.
2] er almost exclusively [0.4] er foreign owned [1.6] so this dissemination of 
knowledge then [0.6] er [0.2] not only by people working for the companies [0.
6] but also by the transnational sourcing [0.5] er its inputs [0.2] from local 
firms [0.2] mm [0.5] if you're going to source your inputs from local firms [0.
4] you've got to tell the local firms what you want [0.2] mm [0.4] what your 
design requirements are [0.5] you'll probably also [0.4] er put in engineers 
into the firm [0.4] er in order to tell them how to do it [0.4] mm [0.7] one of 
the key factors which has greatly increased the productivity of the British 
motor industry 
for example [0.7] has been the fact of Japanese companies [0.3] coming in [0.3] 
er w-, w-, w-, whether it's Honda [0.2] er working on in Swindon [0.3] or 
Nissan working up in Newcastle on [0.2] er both on greenfield sites [0.5] er [0.
4] they were then sourcing they had to source [0.4] er [0.2] er within the 
European Union [0.2] in order to meet rules of origins [0.2] which is [0.2] 
another area [0.5] that a a key element in their ability to export in Europe [0.
3] there had to be a European content in production [0.4] otherwise they 
wouldn't have been allowed to establish themselves [0.3] so they had to source 
from Europe [0.8] they particularly sourced from the U-K [0.7] but then they 
looked at some of the U-K suppliers and held their [0.5] hands up in horror [0.
3] at their working practices and the technology that we're using and the 
skills of their labour force [0.3] and so they brought in [0.2] a whole lot of 
engineers from from from Japan [0.5] er and put them into these [0.3] er 
suppliers [0.3] to bring them up [0.2] to best practice [0.4] mm [0.5] and 
that's what you find in developing countries as well [0.6] er [0.3] that [0.4] 
er they will 
increasingly source their supplies [0.4] er from the local economy 'cause it's 
profitable to do so [0.3] all right it's efficient to do so [0.6] particularly 
using [0.4] as i say modern technologies and just in time production [0.7] er 
you increasingly source [0.4] from the local economy [0.5] but you've got to 
train [0.3] the suppliers [0.2] especially in a developing country [0.4] how to 
meet your requirements [0.4] in terms of quality [0.3] and design and 
everything else [0.9] er so you disseminate knowledge in that way inevitably by 
[0.2] by by doing that [1.0] so that's probably the most important potential 
benefit [0.4] potential benefit [0.7] from a multinational [2.4] er [1.9] but 
of course [0.3] there's the potential cost of multinationals [1.0] er [0.2] and 
i'm sure [0.3] most of you are probably familiar with those [0.2] people tend 
to dwell on the cost [0.6] i don't know of of multinationals and [0.5] perhaps 
sometimes forgetting the potential benefits [0.7] they can achieve a dominant 
position because they're Coca-cola [0.2] all right [0.4] er they go in [0.2] to 
[0.2] India whatever it was [0.2] and they wipe out [0.3] all the [0.3] er 
local [0.2] er producers of soft drinks [0.2] by 
their sheer marketing [0.3] er name their image [0.3] er their efficiency [0.2] 
in production their efficiency in marketing [0.2] their financial strains [0.5] 
er [0.3] so they can quickly get a monopoly position [0.2] particularly perhaps 
in a developing country [1.6] er and then of course there's the the appalling 
examples [0.4] of er companies like Nestlé [0.4] er [0.2] that you know [0.3] 
er pushing [0.2] powdered milk [0.4] in developing countries you know saying 
it's better than mothers' milk [0.5] er [0.5] which is untrue [0.4] er and also 
[0.4] er [0.3] ignoring the fact [0.4] that the er parents may not be able to 
get access to clean drinking water [0.2] to combine with the powdered milk [0.
4] and so [0.3] you have er create serious illnesses and you know so there's [0.
3] there's various notorious examples [0.5] er of er [0.4] the aggressive 
activities of multinationals [0.5] er but even without those notorious sort of 
Nestlé type examples [0.4] there's also [0.3] this simply they point that in a 
small market [1.0] transnational [0.4] particularly import substituting one [0.
4] can achieve a monopoly position [0.6] rather than just 
stimulate [0.3] er local competition [0.5] er in the way that we described 
before [1.7] at least for the second point they can crowd out [0.6] er [1.5] 
actual potential local producers [0.3] again by their [0.2] sheer size [1.0] 
simply based on their reputation [0.2] and their marketing power [0.4] and 
their overall efficiency [0.9] and they may even [0.2] you know [0.3] squeeze 
out local producers in the way that [0.4] er Branson or Virgin Airlines [0.3] 
claimed that British Airways did [0.3] er by simply you now keep selling at a 
loss all right [0.3] er because they can afford to do so they had the financial 
muscle to do so [0.5] so you can squeeze out the opposition by selling the 
goods at knock-down prices [0.6] er then once the opposition's gone [0.2] then 
you bang up the price [0.5] er [2.9] the third point [0.2] er [0.3] profits [0.
6] er may well be [0.2] er repatriated and not reinvested in the economy [0.3] 
i mean obviously the propensity of a [0.2] of a transnational corporation [0.5] 
to invest in the local economy [0.6] will be lower [0.4] than [0.3] the 
propensity to invest [0.5] er of a [0.3] a wholly owned [0.6] er local company 
[1.1] er [0.2] 
because [0.6] they have all these investment opportunities throughout the world 
[0.4] and they're maximizing the global profits [0.4] of [0.3] er the 
corporation [1.8] so propensity to reinvest [0.5] er may well be lower [1.6] 
fourthly inappropriate products and technologies [0.8] er inappropriate 
products or like the dried milk case of Nestlé is the most as i say [0.4] a 
notorious example [0.6] but it [0.6] may not be [0.2] quite as as notorious as 
that [0.3] er it may simply be [0.3] that [0.2] er [1.8] given their marketing 
power [0.3] they're able to [0.4] you know distort [0.5] patterns of taste and 
preferences [0.4] towards [0.3] sophisticated goods [0.6] er [0.2] whereas the 
more approriate product [0.2] may be [0.5] a cheaper [0.4] less sophisticated 
good [0.9] but not with all the all the design features [0.3] that they have [0.
7] er i guess the selling of maybe trainers and things like that in developing 
countries [0.4] er at [0.4] well they're for local people very high prices but 
for high prices for us as well in this country [0.4] it's er [0.3] but er 
particularly in in in developing countries you know the kids have got to have 
those trainers [0.4] er 
there are [0.3] er much cheaper local substitutes for f-, of [0.2] of of 
footwear [0.6] but the [0.3] er marketing power of Nike or whatever it happens 
to be is such [0.4] that they can distort tastes and preferences in that way [1.
0] inappropriate technologies [1.2] that's a tricky one [0.4] er [2.3] the [1.
3] first example of that first source of that [0.3] might be [0.4] that [0.4] 
the transnational comes in [0.7] er [0.4] with European or American trained 
engineers [0.7] and best practice for them [0.5] is [0.5] the highly 
sophisticated [0.5] capital intensive [0.3] skill intensive operation [0.5] mm 
[0.9] er and [0.2] given their training given their education [0.2] back in 
Europe or North America [0.9] that's the only technique they know that's the 
best technique [0.5] as far as they're concerned [0.5] they think in [0.2] er 
as engineers [0.2] mm [2.0] whereas as economists [0.2] we would think in terms 
of [0.5] the least [0.3] cost [0.3] method of production [1.8] and the least 
cost method of production [0.7] may well be a more labour intensive technology 
[0.3] in a developing country [0.4] mm [0.6] not only because [0.3] labour 
costs are much lower [0.4] than labour costs in the 
industrialized countries [0.8] but also the sophisticated piece of machinery [0.
5] will need pretty sophisticated maintenance [0.4] mm [0.9] which you can 
sustain [0.4] in a in an industrialized country [0.6] because you have all the 
skilled engineers to keep it going [0.4] and you have the specialist [0.5] er 
firms [0.2] who can come in and fix whatever's wrong with it [0.3] and supply 
the components [0.3] and off you go [0.3] er within an hour or so [1.1] in a 
developing country when a sophisticated piece of important machinery breaks 
down [0.8] well it may be months before the blasted thing can be can be got 
going again [0.6] 'cause the part's got to be imported from the other side of 
the world [0.5] and once you've got the part [0.3] you've then got to get an 
engineer [0.2] who knows how to fit it [0.3] to this [0.2] highly sophisticated 
piece of [0.3] er of equipment [0.4] and so on [1.0] so [0.5] the most 
appropriate technology for a developing country [0.3] may be [0.3] er an older 
fashion if you like [0.5] er more labour intensive [0.5] er more robust [0.2] 
piece of machinery [0.4] rather than a highly sophisticated piece [0.3] of 
computer 
driven electronic [0.5] er state of the art [0.3] er machinery [1.4] that's one 
view [0.3] okay [0.7] that the that the that that the western trained engineer 
[0.4] brings in an inappropriate technology [1.2] yeah [1.0] 
sm1127: 
nm1122: if you want to produce [0.3] a particular product [1.2] given its price 
and non-price characteristics all right [0.6] there may be no choice of 
technique [0.7] okay [0.6] so the smooth isoquant that we draw [0.2] in 
economics [0.4] er of er variations [0.4] in capital and labour inputs for any 
[0.2] given level of output [0.6] er may not exist [0.3] mm the point you've 
just made [0.4] to produce [0.2] that design of garment [0.3] for the fashion 
house in Paris [0.4] selling at international market in particular [0.6] you 
may have to produce [0.4] you they you may have to use [0.2] the best practice 
technology of the western engineer [2.0] even if that's not true [1.1] it it 
may also be the case that transnational corporations [0.5] er [0.8] have 
engineers [0.3] who have experience [0.4] in production conditions throughout 
the world [0.3] mm [0.6] so that for a few years they might have been working 
[0.4] er say in Russia or Kazakhstan or 
wherever it happens to be or Poland [0.5] er then few more years they're down 
in Brazil [0.3] er [0.4] then they're off to India [0.3] mm [1.1] in the course 
of that [0.7] experience of working under different economic conditions in 
different production environments [0.5] they will have amassed [0.4] er a 
tremendous amount of knowledge [0.3] which is not codified in books [0.4] er or 
into [0.3] er manuals all right [0.4] er [0.2] it's [0.2] it's embodied in them 
as highly sophisticated [0.4] very experienced [0.3] highly trained engineers 
[0.6] and so when they go into Africa [0.3] or into a new environment [0.4] er 
they bring with them all that experience and expertise [0.5] and so [0.2] they 
can solve problems [0.5] which [0.2] maybe a local engineer couldn't do because 
they don't have this breadth of experience [0.6] er they can increase the 
efficiency of existing production [0.5] because they know how you can [0.2] er 
deal with these problems [0.3] they know how you can back up systems [0.3] so 
that er you can quickly [0.2] er [0.3] er deal with problems particularly 
breakdowns you know breakdowns of production [0.3] in developing countries are 
are a are a continual problem [0.3] mm [0.6] if you've got people there that 
know how to fix it [0.7] when the electricity supply fails when the machines 
fail [0.5] er [0.2] when something goes wrong with a production process [0.3] 
those people are invaluable [0.7] er and maybe the training which they get and 
the experience [0.5] which engineers get working for transnational corporations 
[0.3] is another invaluable asset [0.3] far from being the er [0.2] er er 
bringing it er [0.2] er the inappropriate technologies [1.4] they may well be 
able on the contrary to adapt [0.3] technologies [0.5] and use local 
technologies [0.5] er more efficently [0.7] than local [0.3] er less 
experienced engineers [0.4] so [0.3] you know [0.9] the idea that it's 
inappropriate technology shouldn't be [0.2] er automatically assumed [0.4] 
there may be no choice of techniques of production [0.8] or indeed [0.2] they 
may be more flexible in their choice of techniques of production [1.1] it's a 
it's an empirical question [5.5] another cost [0.2] is extracting concessions 
from governments [1.9] again we're dealing with highly sophisticated companies 
here they're usually [0.4] dealing [0.3] with governments [0.3] throughout the 
world [0.7] they have teams of accountants and lawyers and negotiators [0.5] 
who are very experienced very sophisticated [0.4] er er negotiators [0.4] 
coming up against [0.4] er civil servants [0.3] and er [0.2] er politicians [0.
2] in [0.2] er developing countries [0.2] who simply don't have that breadth of 
experience and expertise [1.2] also transnationals are very good at playing off 
[0.5] one country against another [0.3] mm [0.7] er and that's a game that 
they've been playing ever since they [0.6] started doing [0.5] this er you know 
[0.2] twenty thirty years ago [0.8] i mean a recent example i guess would be in 
Britain [0.4] where B-M-W [0.3] er said well you know if you if the government 
doesn't give us so many [0.2] whatever it was hundred millions pounds [0.5] er 
[0.5] then we'll close the Rover works [0.4] and we'll move production to 
Hungary [0.2] mm [0.6] er [0.2] you know nobody's it was quite open in saying 
that [0.4] er the European Commission are now saying [0.4] er [0.2] you know 
that's absolute rubbish er B-M-W had no 
intention of moving production to to Hungary [0.3] they had no plans to do so 
it wasn't viable [0.3] and it's causing problems in terms [0.4] of er the 
subsidy which the British government have had given B-M-W [0.6] but it's an 
example [0.6] how how [0.3] er a transnational corporation even dealing with a 
sophisticated government [0.5] er and sophisticated officials that you would 
find in in in Britain [0.5] can still use that argument [0.4] if you don't give 
us concessions [0.3] we'll go somewhere else [0.8] er if you do give us the 
concessions [0.3] we'll put in our money our expertise [0.4] and [0.2] you 
won't have [0.3] er in the case of [0.6] the Rover works you won't have the 
closure of the works with all the unemployment that's going to give rise to [0.
3] and loss of votes and [0.2] er other things that politicians [0.4] terribly 
concerned about [0.4] er [0.8] er in the case of a developing country [0.3] you 
know if you don't give us the concession if you don't [0.4] exempt us from tax 
[0.3] all right paying taxes [0.6] if you don't build us advance factories [0.
6] if you don't build roads for us [0.7] er if you don't lay in [0.3] er the 
all 
the all the public services at zero cost [0.6] if you don't give us special 
prices for the electricity that we need [0.4] or the various other services 
that we need [0.5] then we'll go to some other country 'cause they'll do it 
China will do it Brazil will do it [0.2] mm [0.5] so you've got to do it do 
you've got to do something better than that [0.3] mm [0.9] and you play off one 
country against another [1.4] the U-N Centre on Transnational Corporations [0.
8] tries to act as a clearing house [0.8] er to alter the bargaining [0.5] er 
or or the strength of bargaining [0.4] between [0.2] er developing countries [0.
3] and transnational corporations [0.6] by trying to in a sense call the bluff 
[0.4] of the transnational [0.6] er trying to get developing countries 
particularly in a region [0.6] not to engage [0.6] in this [0.2] er zero sum 
gain [0.2] mm [0.4] to st-, all of them to stick together and say [0.6] these 
are our tax rates [0.3] you've got to pay the local rate for the electricity 
supplies [0.4] if you want these special facilities you've got to pay for them 
[0.2] and we're all going to stick by that [0.6] and the U-N Centre on 
Transnationals [0.3] 
tries to get [0.2] countries [0.2] to cooperate in that way [0.4] rather than 
[0.2] this zero sum gain [0.3] er of playing one off against another [0.6] but 
i have to say it's not terribly effective [0.4] they're too desperate to get 
them in [3.0] er [1.5] other possibilities er [1.3] a possible conflict [0.2] 
of objectives [1.5] er [1.7] between the global objectives of the multinational 
[1.3] and the objectives of the of the host country [0.9] i mean [0.2] there's 
bound to be that conflict [0.4] to a much greater extent [0.3] than if you're 
dealing with [0.3] a a local producer [0.7] 'cause they're concerned with [0.2] 
going back to what we were saying right at the beginning [0.2] they're global 
sourcing of supplies [0.3] they're selling in global markets [0.3] they're 
maximizing the global profits of the group [0.3] mm [0.6] er [0.9] and er [0.6] 
whereas a local producer [0.2] will have a more limited framework [0.3] in 
which they're maximizing their [0.5] their their profits [0.9] and that leads 
to the [0.2] next point in particular [0.4] people allege [0.3] that [0.4] 
transnational corporations [0.2] are footloose [0.6] now by footloose [0.3] 
they mean [0.2] they're here today [0.2] and they're gone tomorrow [0.3] 
all right [0.5] er you know you set up your assembly plant [0.6] er [0.6] for 
[0.4] er er [0.2] say in Malaysia [0.7] er for assembling electronic goods [0.
4] er whatever it happens to be [1.1] but then Malaysia begins to develop and 
real wages rise [0.6] and so you pack up shop and you go off to China [0.4] 
because China's now got a much more open door policy [0.2] and wage rates are a 
third those in Malaysia mm [0.7] er [0.2] and in when wage rates rise in in 
China [0.2] well you go off to Africa okay [0.3] so [0.2] er footloose then [0.
6] because they're transnational corporations [0.4] they have [0.3] complete 
knowledge [0.5] of where exactly [0.5] is [0.4] the most efficient [0.2] and 
the cheapest [0.4] er location [0.2] for their production [0.3] mm [0.5] and 
they can utilize this information [0.3] to switch production from one country 
to another [0.7] footloose [2.2] er [1.4] you have to have be a little careful 
with that argument [1.0] because it assumes that the costs [0.4] of [0.6] being 
here today and gone tomorrow [0.4] are virtually zero [0.5] and that's never 
the case [0.8] when a transnational is deciding [0.2] when it will locate 
production [0.8] they will invest a lot of resources [0.9] in [0.6] 
looking at alternative locations [0.7] what are the costs and benefits [0.3] of 
locating in Sri Lanka as opposed to in Southern India [0.2] as opposed to 
Mauritius [0.3] et cetera okay [0.4] and they'll be looking obviously [0.2] at 
the local resources that are available [0.2] the tax system [0.5] but also the 
political situation how politically stable are the countries [0.5] er what are 
their regulations governing repatriation of profits [0.4] is there a 
possibility of nationalization [0.4] all sorts of factors come in [0.4] before 
they actually locate in a country [0.8] so there's a [0.2] a quite a 
considerable investment [0.6] in setting up [0.4] even a a a simple assembly 
operation [0.5] in a developing country [0.4] it's not costless [1.0] having 
invested [0.5] that time and energy and resources [0.6] er they're not going to 
suddenly just pack up and go away tomorrow [0.4] mm [0.4] 'cause they'll have 
to repeat the exercise all over again for some other country [0.9] so what 
tends to happen [0.6] is that having located in a developing country [0.5] they 
will remain there [0.5] mm [0.8] unless things get [0.2] very bad or [0.3] er 
[0.5] er 
wage rates really go through the roof in which case [0.3] they'll want to move 
somewhere else [0.5] but the big decision [0.3] really is [0.6] do we expand 
production [0.8] say in Malaysia [0.3] okay in the electronics theme [0.4] or 
do we set up [0.2] a new plant in China [0.7] it's the marginal decision like 
that [0.5] which transnationals make [0.6] rather than the absolute decision of 
closing one factory here [0.5] and [0.3] er relocating it to another country [1.
3] so it's more a case of [0.2] where do we expand production do we use our 
existing [0.3] er facilities [0.2] in particular developing countries [0.3] or 
do we go into a new situation [0.6] what's the costs of uncertainty [0.6] of of 
of moving into a new [0.3] country and into a new situation [1.3] so provided 
the experience then the initial experience [0.6] er of setting up [0.6] in the 
developing country [0.5] er proves to be [0.4] er [0.2] profitable and 
worthwhile [0.3] er venture [0.3] they'll tend to stay there [0.3] mm at least 
for some considerable period of time [4.8] indeed there is some evidence to 
show that as real if the if the initial experience [0.2] is a [0.2] is a 
profitable 
one [0.8] as real wages rise [1.1] so instead of closing down the factory and 
moving somewhere else [0.2] they'll change the nature of the production [0.6] 
they'll they'll they'll move upmarket into higher value added operations [0.4] 
so you might start with simple assembly operations [0.8] but as the [0.5] 
developing country the host developing country [0.3] becomes more developed [0.
6] er [0.4] a greater pool of skilled labour [0.8] er higher levels of 
education and the rest [0.5] so they'll move into higher value added operations 
[0.2] rather than close the factory down [1.0] er that's certainly what's 
happened [0.4] in the newly industrialized countries [0.4] er of South Korea 
Taiwan [0.5] er [0.7] but also in the next wave of NIX Malaysia [0.3] er 
Thailand [0.4] er and in Latin American countries [1.1] so the reaction to 
rising real wages is not to close the factory [0.8] generally speaking [0.9] 
but rather to move into as i say higher value added operations [0.7] but 
obviously again it's an empirical question [4.1] loss of sovereignty [2.5] er 
well that's really follows from what i've just been saying just now [0.5] 
er [0.2] in terms of the ability [0.2] of a post- [0.3] government [0.3] to 
allocate resources [0.3] er within its economy [0.6] that's in in the economic 
sense of the term [0.5] er er loss of sovereignty [0.9] but it also could be 
more general [0.4] in the sense that [0.2] the multinational [0.8] can be a 
terribly ins-, important source [0.4] of employment [0.6] government earnings 
[0.5] er [0.3] in the small developing country [0.4] okay [0.5] and so it can 
exert political influence [0.4] as well as economic influence [1.6] the 
multinational may well be able to influence government policy in general [1.3] 
er for example they may influence [0.4] be a strong influence [0.5] for 
liberalizing [0.2] trade policy [1.0] mm [0.4] so that they can [0.2] import 
goods [0.3] er free of tariffs and duties and other restrictions [0.7] they may 
put pressure on post-governments [0.3] to liberalize the capital account [0.5] 
of the balance of payments [0.5] so that they can move capital and earnings and 
profits [0.4] in and out of the country [0.3] er more freely than they [0.4] er 
can at the moment [0.9] they can exert influence on tax policies [0.4] on 
labour [0.2] and social and environmental legislation [1.2] 
in terms of their own objectives [1.2] in that sense then [0.5] there can be a 
loss of sovereignty [0.6] er as well as [0.2] er the narrower [0.7] aspect [0.
5] of [0.5] you know threatening to pull out if you [0.5] er if you don't do 
such and such [3.4] and the final one i've list there er [0.8] little phrase by 
a Latin American economist [0.5] er Osvaldo Sunkel [0.8] er [0.7] there's the 
er dependence dependencia school [0.4] er [0.4] in er in er Latin America [0.6] 
which paints as you would imagine a pretty critical view [0.2] about 
multinationals and they're thinking of course about the activities of American 
multinationals [0.4] in Latin America [0.8] er [0.5] and Sunkel [0.6] has this 
interesting phrase which i've put there [0.5] er which is [0.3] international 
integration [0.3] and national disintegration [1.9] what he had in mind [0.3] 
is that [0.6] the [0.6] er [0.9] the multinational companies [0.5] of [0.4] the 
nineteenth century [0.2] and early twentieth century [0.2] in Latin America [1.
1] which were very often British companies [1.2] er [0.6] would be involved in 
building railways for example in developing port facilities [0.5] er [0.6] in 
developing 
the markets in these countries [0.6] and not simply British investment but 
there was a lot of British investment particularly [0.5] er from the sort of 
eighteen-eighties [0.4] er into the early part of the [0.3] er [0.4] of the 
nineteen-hundreds [1.2] and Sunkel says [0.3] this form of activity [0.8] by [0.
2] these foreign companies [0.4] er led to national integration [0.3] right [0.
2] bulding railways obviously helps to integrate the whole economy [0.3] in a 
way that hadn't been possible before [0.6] and [0.3] that was beneficial to the 
country [0.7] and he contrast those activities [0.5] with modern [0.4] er 
transnational corporations [0.4] they're not at all concerned [0.4] with [0.2] 
except in very large markets like Brazil or China [0.5] er with the national 
market [0.2] all right [0.5] it's it's what what they're concerned with [0.2] 
is international production [0.4] okay [1.2] er [0.2] so that's the the 
international integration [0.3] mm [0.5] but it also leads to national 
disintegration [0.3] in Sunkel's [0.3] er terms [0.6] because you create these 
enclaves [0.2] these foreign enclaves [0.2] mm [0.6] these privileged elites 
the priviresed e-, elites [0.3] 
work for the transnational corporation [0.3] okay [0.4] er [0.3] at all levels 
[0.5] er [0.2] er the foreign companies [0.3] will pay substantially more [0.4] 
than the [0.2] average wage rate that you find [0.2] in the local economy [0.4] 
whether it's for unskilled labour or skilled labour or professional workers [1.
1] the the transnational corporation always pays a premium [0.4] and it offers 
[0.3] very nice working conditions [0.5] and there may be [0.2] other benefits 
health benefits education benefits [0.6] pensions schemes even [0.6] totally 
unknown in developing countries [0.5] er so there's all these benefits that you 
get for working for [0.3] er a transnational corporation [0.6] er so you become 
a privileged elite [0.5] mm [0.5] and [0.3] those that are associated with the 
transnational corporation at a political level [0.5] or the firms supplying 
them [0.3] become part of their elite [0.5] but it's a foreign enclave [0.4] 
it's the values of the transnational [0.6] er [0.3] which [0.2] er you sell 
yourself for if you like [0.2] according to Sunkel's view [0.6] and these 
elites [0.3] then distance themselves from the mass of people [0.5] er [0.6] 
almost look down 
their noses at them [0.2] all right [0.3] er at the poorer people [0.5] er [0.
2] who [0.2] er are not part of this [0.2] privileged [0.2] foreign enclave [1.
0] so that's what Sunkel has in mind then as as as a cost [0.4] he sees the 
modern transnational [0.5] as er as he puts it here [0.3] er [0.3] leading to 
international integration [0.2] but national disintegration [0.7] well [0.2] i 
just throw that out [0.3] as a as as another broader perspective [0.5] than 
perhaps the more narrower one that we look on as economists [1.7] well i'll 
stop at that point [0.5] er [1.2] obviously what i want you to think of [0.5] 
is going through these costs and benefits and the activities of and and the [0.
7] er and the competitive advantage of multinationals [0.3] is ultimately an 
empirical question [0.6] okay [0.5] that's really what i want you to go away 
with [1.4] rather than that multinationals [0.3] are the salvation of 
developing countries [0.4] which perhaps is what the World Bank [0.4] er would 
[0.6] tend to suggest [1.0] or [0.5] maybe Sunkel's view [0.6] that they lead 
to national disintegration and you shouldn't have anything to do with them [0.
4] mm [0.8] er [0.2] they're 
the sort of two extremes of the spectrum [0.6] okay [0.3] what i want you to do 
as economists [0.4] is the usual [0.7] er objective [1.0] cost-benefit approach 
of course there'll be cost [0.3] but there there there are also potential 
benefits [0.6] er [0.4] and looking at what the determinants of those costs and 
benefits are likely to be [0.3] in any particular situation [0.9] and therefore 
[0.2] what you would also look for in the empirical evidence what what would be 
[0.3] the sort of testable hypotheses [0.5] that you would put up [0.4] if you 
were looking at [0.5] whether [0.3] er the activities of [0.3] er 
transnationals or particular transnationals [0.5] in a developing country what 
were those effects [0.2] likely to be what would be the hypothesis that you 
would set up [0.5] in order to test [0.3] whether net [0.6] er they were a 
benefit or a cost [0.6] to the host developing country [1.5] and what i've 
given you there [0.2] are [0.5] key aspects look at the activities of of 
transnationals [0.5] look at linkages with the local economy [0.5] and apply 
them to the examples that i've given you over the page there [0.5] if you'd 
like to think about that [0.5] and then [0.3] er we'll have a look at that next 
week [1.4] any