As we know economic globalization is spreading at a fast rate and the most significant threat is to the state, or at least the nation-state. States have found it increasingly difficult to regulate multinational companies than can easily relocate production and investment. There are less and less traded barriers regionally and globally. Powerful forces exerted on the states by financial markets, MNCs and international organisations such as the WTO and the IMF mean states are forced to develop policies which leave the market as free as possible by lowering taxation, privatizing, deregulating and cutting spending. In doing so the governments are reducing restrictions on businesses and individuals with the intent of encouraging the well-organized operation of markets. David Held cites that “Where states were once the masters of markets, now it is the markets which, on many crucial issues are the masters over the governments of states” (Held et al., 2000:149) and this does seem to be the case in many states. It is obvious of the growing importance of these international and multinational bodies such as the EU, The UN and the WTO. It is clear, for instance that membership of the EU for example threatens state power, because a growing range of decisions are made by European institutions rather than by member states (Heywood,2002:99).
The World Trade Organisation has been much criticised by the pessimistic globalists on a number of counts. They believe that globalization is depending on the exploitation of the developing world, in that globally free trade results in the rich becoming richer, while the poor are becoming poorer. According to Michael Albert, for instance, “The WTO is about protecting corporate ownership and monopoly… and breaking down any protections of labour the environment, health and safety, that might limit corporate profit making” (el-Ojeili et al.,2006:58). To the globalists, global commerce takes priority over everything, whether that is democracy, the environment, equity and more. In addition critics maintain that despite the consensus of decision making there is still power politics and bullying going on within the organisation with the more vulnerable countries such as Haiti, Guyana and Sierra Leone forced into agreements with the wishes of more powerful nations. One major problem affecting most global regulatory bodies is the lack of effective representation for the interests of the countries of the developing world (Holton, 1998:74). There are over thirty developing countries within the WTO and over thirty which have no negotiators at the World Trade Organisation headquarters. In theory, the World Trade Organisation is democratic, and each member has one vote. But in practice, the World Trade Organisation is quite undemocratic, and poor countries are subject to bullying and exclusion from key discussions and decision making.
It has been noted that fifty one of the largest economies in the world today are MNCs. This is calculated by comparing corporate sales with countries’ GDPs. For instance Wal-mart stores rank above Pakistan, Peru and Algeria, and General Motors ranks about Hungary (el-Ojeili et al., 2006:65). MNCs are characterised by a number of different factors, they control economic activities in two or more countries and they have significant economic and social effects at a global level. In terms of market values, the largest MNCs include General Electric, Microsoft, Wal-Mart Stores, BP, IBM and Toyota (el-Ojeili, 2006:65). For the optimistic globalists they are enthusiastic about global free trade in the belief that it promotes economic growth and ultimately better living standards for all. These globalists consider MNCs as enormously beneficial. El-Ojeili portrays them as “providing customer goods, technology, and new skill, and acting with states to advance economies and provide jobs” (el-Ojeili et al., 2006:65). These enthusiasts feel that global problems such as climate change can only be remedied through multilateral cooperation and technological innovations which may be brought about via MNCs. However, for critics multinational corporations exercise far too much power, are unrestrained, exploit their workers, weaken the autonomy of the state and are undermining democracy in general. One major criticism of MNCs is that they can simply relocate their facilities to overcome barriers to profitability (el-Ojeili et al., 2006:66). Nike provides a good case study for this. Nike originated in the 1970s introducing Japanese produced shoes into the US market. As labour costs rose Nike moved production to South Korea, Taiwan then into Indonesia, China and Thailand, and then finally into Vietnam where workers earned as little as $1.60 a day. Now one hundred per cent of Nikes goods production is to 75,000 workers in these countries mentioned.
MNCs show very little responsibility, especially in the developing world. One prominent case study of MNCs misconduct in a developing country was Shell’s activities in Nigeria in the late 1990s. Royal Dutch/Shell was boycotted internationally because of its activities in Nigeria. Shell had been condemned the by local people for the social and environmental damage it had caused in the country. There was a resistance movement against the company and the government had responded against these protests by brutal force. Frynas states that “a number of oil companies had provided financial and logistical support to security forces” (el-Ojeili et al., 2006:69).
In addition, then, there is good evidence to suggest that MNCs exercise too much power in global terms, more power than countries themselves. Governments submit to their wills, hoping for investment and fearing corporate withdrawal to other locations. It is a form of blackmail; these countries accept MNCs power as countries can become unable to maintain significant autonomy and develop local industry.
It is clear that there have emerged with globalization a number of profound challenges to the sovereignty of the state, not only economically but politically and culturally. The near disintegration of states which have been provoked by ethnic conflicts such as Palestine and the growth of terrorist networks have exerted pressure on states today. However, it is evident, economic globalization is now reflected in the idea that no national economy or state is on its own and that all economies have, to a greater or lesser extent, been immersed into an intertwined global economy. Absolute sovereignty may well be a historical myth, but for sovereignty to survive in any form, Holton states “it is necessary for states to remain institutions with capacities to act that are of potential benefit to particular sets of interests… from economic rule-setting, industrial relations regulations, and fiscal policy, to capacities that involve legitimizing particular institutional arrangements” (Holton,1998:90). The powerful forces of the global economy today arguably prevent states from pursuing independent economic or social policies. The spread of neoliberalism and the powerful forces exerted on states by financial markets, MNCs and international organisations such as the WTO and the IMF leave the markets free. Consequently the general consensus about the decline of state power is fairly persuasive. However, it is important to note that it does not necessarily imply that the strong globalists view that globalisation is eroding the power of the state and nation-states are completely powerless and as Ohmae puts it “a nostalgic fiction” (Ohmae,2000:208). Neither does it imply that political changes in the power of the state are simply a result of MNCs power and the free trade of financial markets, but rather as Held quotes “a reconfiguration of power or governance” (el-Ojeili,2006:97). Ultimately states will not lose their power completely but will share their sovereignty in managing major economic, environmental and security issues.
Bibliography
Baylis, J., Smith, S. (ed.) (2001): The Globalization of World Politics: An Introduction to International relations. Oxford University Press, Oxford
El-Ojeili, C., Hayden, P. (2006): Critical theories of Globalization. Palgrave Macmillan, Hampshire
Held, D., McGrew, A. (2000): The Global Transformations Reader: An Introduction to the Global Debate. Blackwell, Cambridge
Holton, R.J., (1998): Globalization and the nation-state. Macmillan, Hampshire
Ohmae, K. (2000): The End of the Nation State. Blackwell, Oxford
