Multinational Enterprises, Sustainable Development and Poverty Alleviation: Past, Present, and Future

The relationship between multinational enterprises (MNEs) and host governments has seen different waves of trust and mistrust. Over the years, it has changed from a period of conflict after World War II, where MNEs were investing for purposes felt to be contradictory to government policies, to a more cooperative one, where countries are providing incentives and competing with each other to attract foreign direct investment (FDI). The 1990s saw the cooperative relationship leading to the danger of race to the bottom through excessive locational competition. In this chapter, we look at the past, present, and future state of this relationship as reported by different scholars from these periods. We look at the most influential literature from the 1970s onward and the current state of this relationship. Our analysis reveals that the increased tensions are caused by anxiety owing to unanticipated developments in the political economy, company strategies, and government policies. Thanks to globalization MNEs are increasingly becoming more powerful and often this process is accelerated owing to lack of any collaboration between MNEs and the governments. Thus, governments, particularly in emerging markets, are becoming more and more frustrated by the fact that on the one hand they want the MNEs to come and invest in their countries and, on the other hand, they feel that they cannot direct these MNEs to contribute toward economic development and poverty alleviation in their countries. In this chapter, we intend to evaluate the past and the present literature and look ahead to the future. Finally, on the basis of our own studies performed in this project and reported in different chapters of this book, we provide some policy guidelines for host country governments as to how they can encourage MNEs to contribute toward sustainable development and poverty reduction.