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SINGAPORE’S DEVELOPMENT POLICIES 385

(Moosa, 2002: 1). In this conceptualization, search for optimizing profits, they will seek
FDI might involve the establishment of new to exploit resources and enlarge markets.
business units in another country, or the However, capitalism cannot flourish with-
acquisition of firms in another country. Most out the input of the state. In Marxist theories,
studies agree that (capitalist) firms invest not only does the state protect property rights
abroad for two main reasons: (1) resource and uphold the law, so that firms have a
acquisition and (2) market expansion (see ‘predictable’ and ‘calculable’ operating envi-
Dunning, 1998; Henderson et al., 2002). For ronment; the state often ‘prepares’and ‘disci-
the issue of resource acquisition, firms go plines’ labour as well (see Jessop, 2002).
abroad in search of ‘cheaper and/or better’ While earlier Marxist theories centred on
factors of production. Factors of production understanding the relations of production
are the elements necessary for producing within a national economy, when these theo-
goods or to perform services. There are pri- ries are utilized for explaining processes in
mary as well as secondary factors of produc- the global economy, they will require some
tion; the former refers to factors that rethinking, particularly as capital will deal
contribute directly towards production, with more than one state within the global
including land, labour, raw materials and economy. This notion is central to the
capital. However, equally important are sec- process of FDI: its eventual destination
ondary factors, which include any element cannot be solely dependent on the strategies
that supplements the industrial production of transnational corporations alone; govern-
processes, including state policy, fiscal ments can and do directly influence FDI
incentives, financial inducements, tariffs, inflows (Howells and Wood, 1993). This is
availability of infrastructure and political because states have the ability to grant or
stability (Dobson, 1997: 7). Studies have deny foreign investors access to local
shown that transnational corporations do not resources and markets. Further, as recent his-
merely seek out the lowest cost factors of tory has shown, states will compete against
production. Instead, what is most important each other to attract FDI.
is the balance between the quality of these This position – FDI for development – is
factors and the cost (see Hayter, 1997). the complete opposite of the earlier dominant
Hence, firms will invest abroad if factors are position, which was that of highly nationalist
either cheaper or better, preferably both, as and protectionist state dirigisme. In this era,
this would enhance their profits. There are import substitution for purposes of grooming
many reasons why the quality and cost of domestic enterprises was viewed as the pri-
factors of production vary from location to mary pathway towards modernization and
location, including geographic, historical, development (see Sachs, 1999). The shift
political and economic reasons. However, towards greater economic globalization
transnational corporations will try to take began (but was not yet dominant) in the
advantage of these differences as a strategy 1970s. There was a political rather than an
to maximize profits. The second reason why economic agenda of ‘neo-liberal capitalism’
firms invest abroad is for purposes of ‘market or ‘neo-liberalism’ furthered by leaders of
expansion’. Markets may include consumers, certain governments, such as the USA and
2
but may also include other enterprises, which the UK. Under the guise of ‘Thatcherism’
have a demand for the product. It is very and ‘Reaganomics’ – referring to the eco-
important to firms to constantly expand their nomic policies of the UK Prime Minister
markets, as this would greatly enhance their Margaret Thatcher and USA President
profits. They might also seek to enter into new Ronald Reagan – there was a strong push
markets to prolong the life cycle of their prod- from these countries to so-called ‘third world
ucts. In many ways, these firms are operating countries’ to lower protectionist barriers
with a typically capitalist outlook. In the in favour of ‘free trade’. These ideas were