Investment

Liberal economic theory is based on the premise that free-market yield maximum productivity. In the eighteenth century, Adam Smith and David Ricardo came up with the liberal economic theory and challenged mercantilism. Mercantilism argues that extensive state regulation of economic activity is necessary to promote the interest of a nation. In the period between the 16th to 18th centuries, mercantilism was a dominant political-economic theory in Europe. According to mercantilists, a national wealth may be equated with the quantity of gold held hold by the state. Hence, they sought to restrict imports and increase exports to increase the gold supply.

When communism proved to be unsuccessful, a free-market economy was accepted as a means to marshal economic development. Then, the private economy was considered essential for the development of an economy. As a result, privatization of state companies took place in developed and developing countries. Accordingly, the ideological predisposition to foreign investment has shifted the view that. A multinational corporation is a threat to the sovereignty of developing states has changed. Developing states have built up confidence in dealing with these multinational corporations. Multinational corporations, on their part, usually ceased to be instruments of the foreign policy of their home states. It was also observed that such corporations formed alliances with developing states. For example, foreign corporations in the petroleum sector formed alliances with oil-exporting states to the determinant of oil-importing developed states.