Mexico Economic Development (the 1940s To The 1980s, Early)

Transnational corporations as one of the main world economic entities is playing a more and more important role in nowadays increasingly globalized economy. What roles do transnational corporations play in the economy of developing countries? How should the host developing countries deal with the relationship with transnational corporations? These are two controversial questions on which Liberalism, Dependency Analysis and Structuralism have given different views. The verification of these opinions requires solid positivistic analysis. This paper combines historical method and economic method to study in details the effects of transnational corporation on the economy of Mexico and the reaction of Mexican state to transnational corporations during the 1940-1982 import-substitution industrialization period under the guidance of Marxist historical materialism and dialectical materialism.Around 1940, the economic development of Mexico entered a period of import substitution industrialization, which has gone through three stages, namely the non-durable consumer goods import substitution phase (1940-1955), durable consumer goods import substitution phase (1955-1970), advanced import substitution and export promotion combination phase (1970-1982). A large number of transnational corporations entered Mexico's manufacturing industry, promoting the industrialization and the growth of the whole economy of Mexico during the second phase. However, with the arrival of "Mexican miracle" emerged a series of structural problems that foreshadowed the subsequent crises. Influenced by Mexican revolution and the 1917 Constitution, the Government of Mexico has taken a combined policy both utilizing and limiting foreign capital with different focus and degree of tightness at different points in time. For extractive industries, public facilities, and basic industries, the Mexican government sticked to the principle of nationalization, while for the manufacturing industry, it adopted Mexicanization and production integration approaches. During the first and second phase (especially the second phase), the foreign investment policies were quite loose; in the third phase, the control of transnational corporations was strengthened. Mexican State played multiple roles in the game with transnational corporations, including business owners, policy controller, promoter of manufacture exports, technological innovator, and fiscal and financial operators, some of which are the basic successful, maintaining the country's sovereignty independence and directly introducing foreign investment to the industries and regions that needed development. However, in advocating technological innovation and the implementation of fiscal policy and monetary policy, failure overshadowed success eventually. This became an important cause of the debt crisis.Compared to East Asian countries (regions), the use of transnational corporations in Mexico has flaws. From the view of the efficiency of macro resource allocation, transnational corporations in Mexico did not contribute to the fully utilization of the comparative advantage of local resources; from the view of the efficiency of micro resource allocation, transnational corporations did not promote the growth of local businesses nor enhance their competitiveness. Even though transnational corporations improved the structural efficiency of the manufacturing industry, this improvement was achieved by the entrance of transnational corporations into the "modern" departments of the industry without affecting the "traditional" departments and the technology progress rate of the whole industry. From the perspective of " linkages effective", the major parts of the industrial chain as well as the key technology of transnational corporations remained abroad, resulting small linkage effects on local economy. In contrast, transnational corporations in East Asian countries (regions) made use of the rich local labor resources and promoted the growth and upgrading of local business. The different effects of transnational corporations result not only from the different negotiation capacity of the two governments, but also from the different strategies of economic development in two regions, which are determined by a variety of internal and external factors.In short, based on the study of the transnational corporations and economic development in Mexico during the year 1940-1982, the author concludes that:First, the transnational corporations has made relatively important contributions on economic development in Mexico on a variety of aspects, including capital accumulation, tax, employment, technology, and export. However, transnational corporations are a double-edged sword which also brought many problems to the economic development in Mexico, such as the denationalization of the manufacturing industries in host countries discussed in the case studies of Chapter III and Chapter VI to VIII, the international balance of payments deficit, uneven regional development, income distribution inequalities, dependence on the strengthening of technical, changes of the market structure of host country, interference of political process in host country and so on. There is an inherent connection between transnational corporations and the 1982 debt crisis. Compared to East Asian countries (regions), the transnational corporations played a more active role in East Asian countries (regions). The economic proliferation effect brought by transnational corporations to East Asian countries (regions) almost did not occur in Mexico.Second, in the process of economic development, the relationship between the government on behalf of the benefits of the host country and transnational corporations can be viewed as a game, because the pursuit of the strategic objectives of both are very different, the host country can bargain with transnational corporations, guide and regulate the conduct of transnational corporations through a variety of policies. The case studies of Mexican auto industry, pharmaceutical industry and food industry show that: when the host country policies and the business strategy of transnational corporations were in the same general direction, transnational corporations would make a lot of improvements and concessions; when the host country policies and strategies of transnational corporations were in conflict, the transnational corporations would ignore national policy constrains, adopting a defensive status-quo position. At the trial of strength with the transnational corporations, the adoption of a proactive stance usually promises success of host country; the success or failure of the host country in the game depends on the balance of power as well as the international environment. The host country often succeed when it holds the trump card and also conforms to the international situation changes, making the negotiating parties feel that the common interests are greater than differences. Third, in the process of economic development, the character of transnational corporations on the one hand, depends on its inherent nature of seeking the maximum interest and their global business strategies, on the other hand, depends on the host country's negotiation capacity, economic policies and development strategies. The comparison to East Asian countries (regions) shows that Mexico's selection of economic development strategy and implementation of economic development polices had flaws, which limited the positive role that transnational corporations could play. In a sense, transnational corporations are only a means of economic development, whose role is only magnifying the effect of economic development strategies. Of course, such a selection of country development strategies is subjected to many objective constrictions and cannot be decided merely by subjective factors. The state can only exert initiative in the framework of certain constraints. But this is not fatalism, instead, the point to be emphasized is that national policy-makers should respect history, conform to the premise of the current situation, exert a positive initiative, master the opportunities and avoid the harmfulness, make use of transnational corporations, rather than be controlled by them.