Welfare of Host Countries: TNCs as Oligopolists

The effects of foreign private investment on host LDCs are a subject on which there is considerable controversy and confusion. Not only does endless debate take place about the existence and magnitude of the various costs and benefits, but there is also fundamental disagreement about what constitutes ‘cost’ or ‘benefit’.1 It is not uncommon to find different writers accusing each other of ‘bias’, ‘prejudice’, ‘subjectivity’ or even ‘extremism’ when discussing the welfare effects of TNCs, each implying that his own approach is in some way more neutral and objective. No normative analysis (dealing, in this case, with judgements about what is ‘good’ or ‘bad’ for society) can be value-free and objective, and certainly economics, despite the pretensions of several ‘rigorous’ practitioners, does not provide us with neutral, scientific tools for tackling welfare problems.2 One may be consistent or inconsistent in welfare arguments or be more or less persuasive — but ultimately there is no scientific test of right or wrong. For this reason there cannot be a final objective judgement on the welfare implications of TNCs for developing countries.