Export-Enclave Economies, International Corporations, and Development

The attractiveness of export-oriented industrialization may yet prove irresistable to less developed countries (LDC). When multinational corporations (MNC) began to produce manufactured goods on an expanded scale in the large LDCs in Latin America during the 1950s, it often was the result of a calculated step by their governments to further the process of import-substitution industrialization begun in the 1930s. While the potential gains from such foreign investment are real, there are dangers to this strategy. Dependence on export subsidiaries of MNCs for gross national product and employment gains creates an economic structure without a foundation. It creates the appearance of growth and development of the forces of production. The vertically integrated MNC is not inherently conducive to local articulation. The open economy/comparative advantage strategy suggests that solutions to the problems of LDCs lie outside the country in external sources of capital and technology, thus downplaying the need for internal social and institutional change and transition.