Transnational Corporations and Urban Development

• Author: Franklin Obeng‐Odoom
• Date: 01 March 2018
• DOI: http://doi.org/10.1111/ajes.12213
• Published date: 01 March 2018

Transnational Corporations and Urban

Development

By FRANKLIN OBENG-ODOOM*

ABSTRACT. Transnational corporations (TNCs) in Africa play significant

roles in controlling utilities, privately appropriating common resources,

and planning urban space. On the one hand, the extralegal powers of

TNCs are legitimized with patronizing discourses about the

incompetence of African nations in managing their own affairs and

with the specter of a “resource curse” that supposedly immobilizes the

self-governing capacities of Africans. On the other hand, TNCs arrogate

to themselves statutory municipal power, ignore or manipulate various

channels of accountability, and privately appropriate sociallycreated

rents. Some critics of TNCs propose a withdrawal from globalization or

greater regulation to limit the power of TNCs. But protectionist or

isolationist approaches are entirely mistaken and further undermine the

social management of the commons in Africa. Instead, Africans should

seek directly to break the chains of monopoly and oligopoly, especially

over natural resources. They should also strive to use land for the

common good and to systematically build social states in Africa to

overcome subservience to TNCs. While previous attempts at

autonomous development in Africa have sometimes led to military

action by former colonizers and current neo-colonial imperialists,

recent evidence from Africa suggests that such a strategy might succeed

now. This article proposes to extend the politics of urban reform in the

Gilded Age and Progressive Era in the United States to contemporary

Africa. In doing so, it shows how African cities today are working to

*Franklin Obeng-Odoom is a Senior Lecturer at the University of Technology

Sydney in Australia where he teaches Urban Economics and Property and Political

Economy in the School of Built Environment. He is the author of Oiling the Urban

Economy: Land, Labour, Capital and the State in Sekondi-Takoradi, Ghana (Routledge,

2014) and Reconstructing Urban Economics: Towards a Political Economy of the Built

Environment (Zed, 2016). He is an Elected Fellow of the Ghana Academy of Arts and

Sciences. He can be contacted at Franklin.Obeng-Odoom@uts.edu.au. Thanks to

Raphael Edem Fiave for very helpful suggestions.

American Journal of Economics and Sociology, Vol. 77, No. 2 (March, 2018).

DOI: 10.1111/ajes.12213

V

C2018 American Journal of Economics and Sociology, Inc.

create local capacity by municipalizing services that have been

privatized, such as distribution of water. Despite many obstacles posed

by TNCs and their home governments, Africans are making great

strides to overcome theenduring legacies of colonialism.

Introduction

Transnational corporations (TNCs) are increasingly taking power from

the hands of resource-rich urban authorities in Africa. As this trend has

major implications for the distribution of the urban commons and the

sovereignty of African peoples and their territory, it warrants careful

study. Research on urban governance has grown, but the growing

uneven relationship between transnational corporations and urban

authorities has received little empirical attention (Obeng-Odoom

2013b, 2016a; Resnick 2014a, 2014b; Fuseini 2016). Obeng-Odoom

(2015c: 52–53) has identified “the growing sphere of influence of trans-

national corporations” as the least understood issue in researchon cities

that are affiliated with the development of natural resources, which we

shall henceforth refer to as “resource cities.”

TNCs that engage in extraction and production of fuel and minerals

receive some attention, but TNCs involved in the storage and transfer of

fuels as well as the governance of urban retailers of gasoline or petrol

receive very little study. In the global urban economics literature, the

“stages of growth” concept centers around increasing agglomeration

economies, declining transaction costs, and technological advance-

ment. Being the dominant framework of mainstream economists, its

key claim is that firms become transnational through their own autono-

mous strategies (Stilwell 1995: 114–117;Obeng-Odoom 2016b: 83–93).

Oliver Williamson is a leading proponent of the idea that TNCs arise

out of endogenous factors. He won the Nobel Prize in economics in

2009 for introducing such ideas. Williamson (1981, 2002, 2009) claims

that TNCs arise because of their own internal strategies or innovations

that economize on transaction costs. To reduce transaction costs, it is

more efficient for a single firm to subsume activities under its ownman-

agerial control rather than exchanging services among many smaller

entities.TNCsexistnotonlytoseekto makeaprofit,Williamson

The American Journal of Economics and Sociology448

argues, but also to govern. For Williamson, TNCs offer an alternative

mode of governance that is superior to both the market and the state in

terms of what he calls “affirmative economic purposes” that are under-

pinned by efficiency (Williamson 1981: 1538; 2002; 2009). While Wil-

liamson recognizes that TNCs may sometimes falter, he contends that

they are inherently a better mode of governance and hence should nei-

ther be regulated nor be treated “inhospitably.”

Although highlyinfluential, these claims have received limited empir-

ical attention. There is a vast empirical literature on TNCs, of course,

but it is heavily centered on debates about their relationship with

national governments. Representative work in these debates includes

Hardt and Negri (2000, 2004) and Korten (1995, 1999). These books

have received much praise, but also significant criticism. In his exten-

sive review of Hardt and Negri’s first book, Samir Amin (2005) argued

that the authors downplay the power of imperial states in advancing

seemingly new forces of transnationalism. Critics of Korten’s work

show that Korten does not sufficiently analyze the relationship between

TNCs and the nation-state. As Susan George (1996) explains, Korten’s

attempt to resolve unbalanced state-TNC relationships assigns too

much power to the TNCs and no role to the state. Kuecker (2006), by

contrast, complains that Korten attributes too much power to the state,

to the point that it becomes intrusive. So, both proponents and oppo-

nents focus on the nation-state or central state, and their solutions can

be arranged according to whether they favor more or less intervention

by the nation-state.

A major problem with this debate over the role of TNCs vis-

a-vis the

state is that, much like the ongoing debate over globalization, it ignores

key analytical distinctions. Existing research and policy analysis ends

up recommending a wholesale, one-size-fits-all solution (either social-

ism or improved capitalism) to every social probleminstead of applying

different solutions to different conditions. In this case, the missing ele-

ment is the distinction between TNCs that engage in manufacturing or

production of services, on the one hand, and TNCs that control natural

resources and public utilities, on the other hand. Yet, different types of

TNCs generate quite distinct social relations(UNCTAD 2007).

In addition to ignoring different categories of TNC activity, there has

been a tendency to ignore the level of government involved in the

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