Transnational Corporations and Strategic Industrial Policy

Since the late 1970s, there has been a marked change in the models of government economic management across the world. The deteriorating economic performance and the political disillusionment with the ‘corporatist’ models of economic management which dominated the so-called ‘Golden age of capitalism’ in OECD countries have led to the rise of Neo-Liberalism (for a more detailed account and assessment of Neo-Liberalism, see Chang and Rowthorn, 1995, introduction). The Neo-Liberals sought to reduce the scope of the state through budget cuts, deregulation, privatization, and the introduction of more commercial principles in the provision of goods and services by the state, on the one hand, and to subject the economy more to the discipline of international market forces through the removal of restrictions in the international flows of trade, (direct and portfolio) investment, and technology (but, let us note, not the restrictions on international mobility of labour).1 In the developing world, the massive external macroeconomic shocks since the late 1970s, especially the Debt Crisis of the 1980s, forced many countries to abandon their previous models of economic management that relied on extensive state intervention and adopt policy reforms which were intended, again, to reduce the role of the state and, more importantly than in the case of the OECD economies which were already much more open than the developing countries, to open up the economy. The rise of Neo-Liberalism reached its peak with the collapse of the Communist system and the full embrace of the Neo-Liberal policy reform package by many ex-Communist countries since the late 1980s.