ON THE ROLE OF FDI ECONOMIC CHANGE THROUGH INTERNATIONAL ECONOMIC INTEGRATION

The Foreign Direct Investment (FDI), that was mainly flowing to developing countries before the Second World War, became increasingly concentrated among developed economies since the war s aftermath. A similar increase in the concentration of other capital flows and trade followed suit during many decades in which the liberal post-war international order was far from being global. By late 20th century, increased international willingness to expand global markets was matched by changes in the economic policy of developing countries, originating a process that started to reshape economic geography and reorient FDI flows and other economic flows. Eventually, in the wake of the 2008 global financial crisis, developing countries again received the bulk of global FDI flows. The author argues that the primary reason for the new distribution of FDI is how institutional change at the global level interacted with institutional change within countries. As such, this interaction will also define the reorientation s endurance. To sustain the point, the book takes the cases of China and Brazil, demonstrating that the change in the incentive structure – provided by the international environment around the end of the Cold War and the creation of the World Trade Organization (WTO) – was accompanied by major domestic institutional transformations, along with the pursuit of greater integration with the global economy. The FDI, which was always present in Brazil, gained a new relevance, while in China it emerged during the reform era in a way that was responsible for a large part of the unprecedented growth the country experienced. By emphasizing that well defined policies are critically important to harness the FDI to further induce higher goals of development at large, this book establishes the basis on which to evaluate this phenomenon.