It should be clear by now that the issues of partnership in development go far beyond economics and industrial competition. The dilemmas we noted in chapter 4 for states seeking equally desirable but mutually exclusive goals can only be resolved over time and with political choices of priority at each step on the way. But political choice inextricably involves society. Who benefits? Who wins? Who loses? Who takes on new risks or sheds old ones? Whose opportunities to make choices are enlarged, or restricted? These are always key issues in political relationships. Bargaining between multinationals and their host governments is no different. For our purposes it is necessary to try to sort out which consequences for different social groups have resulted primarily from the state–firm relationship rather than from other factors. That is what we attempt in this chapter, focusing particularly on the issues that affect organised labour and the development of skills.

An example shows the analytical problems that come with the question ‘who benefits?’. Recall Firestone's moves to reduce its exposure to risk in Kenya. The controlling interest in the tyre factory was bought by a small group of local investors sufficiently influential to be able to persuade the authorities to make a special case. The ‘concessionary’ negotiations were limited to a chosen few: the state development finance institution was not permitted by the authorities to increase its holding though this would have required a smaller equity transfer to achieve local majority control. Kenya increased output and workers got new jobs. Local investors were awarded a rich ‘prize’.

Nothing could demonstrate more clearly the dangers of using ‘developing country’ as a generic term than the statistical tables which follow. Our three exemplars of developing countries could hardly be more different from one another. Equal differences would emerge from any other randomly chosen group.

Brazil is obviously much larger than the other two, both in area and in population. The disparity in GNP very roughly matches the difference in physical size. Brazil's GNP in 1988 was estimated at $323 billion; Malaysia's at about a tenth of that at $35 billion; and Kenya's barely $8 billion. In wealth per head, there's not much to choose between Brazil and Malaysia – an average of $2,160 per head against $1,940 – while Kenyan poverty is striking. And the gap widens. Where Kenya has grown annually since 1965 at barely 2 per cent, Malaysia has achieved 4 per cent. The disparity, however, is not as sharply reflected in life expectancy at birth as one might have expected or as it probably was earlier this century. One possible reason is that, though poor, fewer Kenyans live in towns – 22 per cent compared with 41 per cent in Malaysia and 75 per cent in Brazil – where urban infant mortality is known to be very high.

In terms of economic growth, Malaysia is unquestionably the star performer of the three. It has the highest savings rate proportionate to GNP, and the highest growth throughout the 1980s of its exports, of which 45 per cent are now manufactures.

Export-led growth and increased autonomy have proved elusive goals for most developing countries. Most are constrained by limited resources and by intractable domestic agendas that impede their capability to implement policy. The grinding together of internationally mobile capital and intellectual resources against immobile labour has produced acute dilemmas for choosing policy and reconciling conflicting objectives. Where some have attempted to ignore international structural changes, others, perhaps grudgingly, have accepted the need for change and grasped the nettle of internal adjustment. Few have rivalled Singapore's enthusiasm for harnessing the multinationals as agents of growth and economic transformation.

In chapters 1 and 2, we laid out some of the broad lines of argument about how national choices are conditioned by the international political economy. Chapter 3 described how multinationals' strategies are similarly being shaped by the combination of external and internal forces. In this chapter we begin to assess how the changes can both bring together states and firms in partnership and also pull them apart. Figure 4.1 suggests one way of looking at the emerging relationships. National resources, combined with policy choice, affect both the appropriateness of various forms of firm strategy and the nation's attractiveness to existing and potential investors. Multinationals' resources and ambitions shape both their global strategies and choices of location. The lines of causality and interaction go both ways, affecting the performance of both players.

The focus of this chapter is on the government side of the equations. We aim to illuminate the nature of their dilemmas and to show how they affect the bargaining relationships with foreign investors.

We now draw together the strands of argument in preceding chapters to indicate the types of new questions we believe should be asked both by those who study international relations or international political economy and by those whose main concern is with corporate strategy and management. All our findings suggest that many of the conventional frameworks of analysis fail to deal adequately with the contemporary dynamism of change. The most common reason why they fail is that they do not take sufficiently into account either the broad structural changes in the global political economy, nor the highly differentiated conditions of individual states, where social, cultural and political forces often clash with economic imperatives. In looking at host-state/foreign firm relations we see governments typically perceiving themselves as caught between the upper millstone of structural change that forces them to compete for world market shares and the nether millstone of their dependence for survival both on foreign investors and on local political support. We also see foreign investors feeling caught between the same upper millstone of structural change and the nether one of the rooted resistance of third world governments to more accommodating policies.

In suggesting new questions to be asked, we also attempt to provide some advice for both governments and managers. That task is extraordinarily difficult, for there are few generalisations that hold up to scrutiny in particular circumstances. Advice that might be appropriate for Brazil may be wholly inappropriate for Kenya.