Economic Growth
Economic Growth
The MNE would prefer that every country in the world have political stability,
low rates of inflation, and high rates of real growth. Even if the firm does not
expand market share in each market, it would be able to increase revenues
at the same pace as the general economy. Developing countries provide large
market potential and exhibit strong economic growth overall, but investing
there tends to be riskier than in the industrial countries. Figure 2.5 illustrates
real growth in GDP between industrial and developing countries during the
periods 1973-1980, 1980-1989, and the year 1989. Although growth in de-
veloping countries has been slightly better than it has been in the industrial
countries, the two have essentially kept pace with each other.
Growth in recent years has been especially strong in East Asia and South
Asia. (See Fig. 2.5.) There is tremendous market size and growth in Asia. The
relatively slower growth in the industrial countries is a troublesome sign be-
cause these countries tend to ignite growth for the rest of the world.
An interesting trend in the 1980s was the increasing privatization of busi-
ness. The initiatives taken during the 1960s and 1970s to absorb industry into
the public sector were not very successful in the industrial or developing
countries. For example, during the 1980s, a number of British state-owned
companies were sold to individual shareholders as part of Prime Minister
Thatcher's movement to private sector ownership of firms. A center-right co-
alition in France, headed by Jacques Chirac, defeated the socialists in 1986
and began to sell off many of the companies that had been taken over by the
government when Frangois Mitterrand was first elected president.
Severe internal and external debt has been an incentive to speed the
privatization effort. In Argentina, the government sold two major state-
owned enterprises in 1990. The first was the national telephone company,
where the government sold 60 percent of its ownership interest to private
investors. The second was its national airline, Aerolineas Argentinas, which
was sold to Iberia, the Spanish airliner. The government retained a 5 percent
interest, sold 10 percent to the employees, and sold the rest to Iberia. It was
able to get rid of the fiscal responsibility for the airliner as well as eliminate
$2.01 billion in foreign debt paper as part of the sale. Similar trends have
emerged in other developing countries, principally in Africa, which have
found that state socialism does not generate enough economic growth.
The MNE would prefer that every country in the world have political stability,
low rates of inflation, and high rates of real growth. Even if the firm does not
expand market share in each market, it would be able to increase revenues
at the same pace as the general economy. Developing countries provide large
market potential and exhibit strong economic growth overall, but investing
there tends to be riskier than in the industrial countries. Figure 2.5 illustrates
real growth in GDP between industrial and developing countries during the
periods 1973-1980, 1980-1989, and the year 1989. Although growth in de-
veloping countries has been slightly better than it has been in the industrial
countries, the two have essentially kept pace with each other.
Growth in recent years has been especially strong in East Asia and South
Asia. (See Fig. 2.5.) There is tremendous market size and growth in Asia. The
relatively slower growth in the industrial countries is a troublesome sign be-
cause these countries tend to ignite growth for the rest of the world.
An interesting trend in the 1980s was the increasing privatization of busi-
ness. The initiatives taken during the 1960s and 1970s to absorb industry into
the public sector were not very successful in the industrial or developing
countries. For example, during the 1980s, a number of British state-owned
companies were sold to individual shareholders as part of Prime Minister
Thatcher's movement to private sector ownership of firms. A center-right co-
alition in France, headed by Jacques Chirac, defeated the socialists in 1986
and began to sell off many of the companies that had been taken over by the
government when Frangois Mitterrand was first elected president.
Severe internal and external debt has been an incentive to speed the
privatization effort. In Argentina, the government sold two major state-
owned enterprises in 1990. The first was the national telephone company,
where the government sold 60 percent of its ownership interest to private
investors. The second was its national airline, Aerolineas Argentinas, which
was sold to Iberia, the Spanish airliner. The government retained a 5 percent
interest, sold 10 percent to the employees, and sold the rest to Iberia. It was
able to get rid of the fiscal responsibility for the airliner as well as eliminate
$2.01 billion in foreign debt paper as part of the sale. Similar trends have
emerged in other developing countries, principally in Africa, which have
found that state socialism does not generate enough economic growth.
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