Some issues of political economy of foreign direct investment

There are three different traditions in theory of multinational corporations. The most relevant Liberalism opposes Marxism in relations between developing states and multinational corporations. However, the majority of multinational corporations as well as the majority of foreign direct investments comes from developed countries. In these countries, existing mercantilist advices come from the concept of national interest, which opposes the liberal tradition. According to this concept, the country tries to strengthen its national power by increasing the inflow of foreign direct investments (FDI), which is supposed to improve the country?s economical situation. The means to achieve this are negotiations with multinational corporations and incentives to attract them. The consequence of this process is the increase of the FDI flow and the relative fall of international trade volume. This implies that in the political realm the multinational corporations influence gets stronger compared to the state influence. From an economical standpoint, the non-liberal policies create quicker assimilation of modern technology, but lead to higher unemployment and greater differences between local and global firms. Paradoxically, we can conclude that, the globally influential firms take their strength from the mercantilist approach, traditionally supported and enforced by governments in general.