The devastating Globalization effects on State Sovereignty Term Paper

Introduction

Advancements in technology have made the flow of information, capital, labor and other factors of production considerably effortless. State boundaries are fast becoming insignificant as a seemingly seamless virtual world is created¹. The expansion of international trade has led to the rise of multinationals which are not content with a strong presence in the home country, and find it necessary to spread their wings across state borders.

Sovereign states are also finding it impossible to remain isolated and political partnerships and federations have become a necessity in the evolving world order². These changes are all results of globalization, which is now seen by many as a necessary evil.

The above occurrences have dire consequences on the concept of statehood. States especially those in the developing world are increasingly losing grip of sectors over which they hitherto held unquestioned control³.

This paper explores how globalization is contributing to the slow but sure death of the concept of statehood in most nations. The views of two globalization theorists in relation to this topic are examined, and possible solutions of this problem are also suggested.

The steady decline of the state

Global socio-economic health and financial stability depend significantly on legitimate state control and regulation of the economy⁴. Neoliberal ideologies, however, view the state as an imposer of unnecessary regulation and control over economic units, thereby being a hindrance to global trade⁵. Neoliberals, therefore, advocate for reduced state involvement and control in the economy.

The rise of globalization has reversed the roles of the state and even if its hand is still seen in many processes, it has been weakened considerably⁶. As will be seen later, the state’s capacity to make binding decisions has been reduced by the power that globalization has granted other entities such as multinational companies and international bodies.

State control over trade and interactions among its citizens and institutions gives a semblance of order and control within the state. The ease of movement and exchange of information, however, has created a virtue community which exists outside the borders and limits of state control⁷.

This community forms part of what some theorists call a “nation without a state”⁸. This is just but one of the many examples illustrating how the concept of “nationhood” is fast being rendered irrelevant in a world that is turning into a small global village.

Aspects of state power affected by globalization

States are losing ground in areas such as control over trade and democratic processes within their territories as a result of globalization.

Susan Strange expresses her views on the effect of globalization on the decline of the state in “The Erosion of the State” through a description of ways in which globalization erodes the powers held by the state over various processes. She lists three main problems which in her opinion, embody the problems that stem from globalization.

The first on this list is the erosion of state control over financial markets. Trade is no longer controlled by the state, but by multinational corporations, international financial institutions such as the World Bank and the IMF, and trade organizations⁹.

Globalization has been a significant factor in the spread of market economy ideologies, and its entrenchment in most economies in the developed and developing world.

Most international companies that invest in the economies of the developing world have a global presence and trade in different financial markets across the globe. It is, therefore, difficult for any state to effectively control trading in financial markets.

Market forces have taken over the control of financial markets, which are greatly influenced by decisions of companies and investors¹⁰. Though this may be instrumental in encouraging competition among firms, it is not necessarily good for all in the economy.

The downside of this event is that the power that these multinationals hold may be used inappropriately used to engage in unfair competition or even to effect takeovers in the market. The state, having lost its teeth in this sector cannot offer effective protection to weaker firms in hostile situations.

Globalization has also led to the loss of decision making powers by the state¹¹. States are not completely deprived of their power and authority to make decisions, but these decisions are often successfully contested and questioned by global firms.

An example supplied by Imade ¹²is that of environmental policies formulated by governments for the protection of the environment, but they are repeatedly contested by oil companies on the premise that they restrict trade.

The binding force of states’ decisions has shrunk and corporations continue to question state control and authority over their activities within the territory.

The weakness in state control over multinationals especially in the developing and underdeveloped parts of the world has led to severe environmental degradation¹³. Though globalization has brought progress with it, most countries in the third world do not enjoy its benefits. Strict implementation of environmental policies unfavorable to the companies has dire consequences.

These may include threats to pull out of the economy, leading to loss of hundreds of jobs, or withdrawal of funding or support for various projects. The state is rendered helpless in such circumstances.

Decision making in the provision of essential public social services such as education and medical care has always been the preserve of the state¹⁴. However, since many of these services are funded by foreign organizations (especially in third world countries), decisions about the ‘what and how” aspects of these services are made jointly by the donors and the recipients of aid.

If it is not in the interests of the donor, certain services such as family planning may not be provided in accordance with the government’s wishes, as it is rendered powerless in the making of decisions regarding the issue.

Strange introduces the concept of “new diplomacy” in the globalization discourse. This term is explained as part of the process of eroding a state’s power to make uncontested and binding decisions. It refers to the bond between states and companies, and amongst companies in the global economy. Companies realize that individual states’ economies cannot thrive or survive in the absence of international trade.

For this reason, they acquire bargaining power in the decision making process of the state. They can, therefore, negotiate with governments on matters relating to employment, wages, labor and trade. In this regard, the state is stripped of its power to make independent decisions without considering the bearing they will have on its relations with the companies.

When companies, and not the government, make decisions regarding employment and wages, at this point the state’s existence can be said to be irrelevant. This is one of the major problems of globalization that developing economies are facing. Foreign investments drive economic growth, but the price is too high.

The conditions of labor deteriorate and the minimum wage is very low, since the big boys in the industry are mainly interested in maximizing profits and keeping costs at a minimum. Economies in parts of the world such as Asia, Africa and Mexico deal with problems of exploitation consistently, since multinationals take advantage of the cheap labor available due to the high unemployment rates.

The views of Strange mainly reflect the negative impacts of globalization and its role in the attrition of the concept of nationhood. Other voices however, point out that though globalization has a negative impact on state power, there is some good that can come out of it.

Joseph Stiglitz opines that when globalization reduces a state’s effectiveness in decision making, there are several negative outcomes that emerge. Countries’ vulnerability to international shocks is increased. Affected nations cannot effectively cushion their economies from the volatilities of global economic conditions.

He voices a strong criticism of the IMF which he says contributes to many of the world economic disasters such as economic troubles in parts of Asia through its unfavorable economic policies. In his opinion, a state willing to implement policies it deems necessary in its economy may be stopped by such international financial bodies which have conspired with Washington and other powers to control the world’s economy.

He opines that it is a conspiracy to keep other economies under their command and control. Though his opinions seem somewhat biased, they nevertheless, make a lot of sense in view of what happens in the world.

Most governments cannot make financial decisions that the IMF and the World Bank object to¹⁵. This is because the interdependency among economies and nations that has been brought by globalization has sunk many nations deep into debts, and their decisions are therefore controlled by the lenders-the IMF and World Bank.

In this regard, only physical boundaries of states exist, but the states were eroded a long time ago. Decisions affecting the so called states are centrally made at the world headquarters in Washington.

As a result of the above, political, social and financial instabilities increase and there is a decrease in economic growth. Imade¹⁶ argues that globalization and capitalism benefits the affluent in the developed world and leaves the people in third world countries unprotected.

The central argument is that without proper controls and protection mechanisms in place, third world development and statehood are on their deathbeds. This will continue being the case unless globalization adopts a human face.

Stiglitz, however, gives another face to globalization and says that it is not always a bad thing, and some good can be realized from it. If a state is to retain its “statehood” and sovereignty in the face of globalization, then it must take it with caution. It should be adopted and embraced after paying attention to the uniqueness of an individual country.

The individual goals of the country, its policies, structures and culture among other considerations should be examined before taking the plunge and embracing globalization. The problem I have with the last part of the argument is that it is almost impossible for a country to disregard the force globalization. Even when it is not in line with its interests, it is treated as a necessary evil that the state must deal with.

The “Washington Consensus” propagated ideas such as that states are unnecessary, and that markets are best left alone¹⁷. State interference in a market economy is seen as inappropriate, and market forces are left to operate and control it.

This only hurts the weak economies in the third world, but the beneficiaries such as the US will not say this. Poor regulation is weak economies such as Thailand and Indonesia has been blamed for exposing them to volatilities such as those in capital flows and employment shifts¹⁸.

I attribute the loss of “nationhood” of nations across the world to globalization. It is globalization that has given so much power to multinational companies over states. The stakes are high and states willingly hand over their powers, though there are elements of arm twisting in some instances.

Ease in the exchange of information has made geographical boundaries irrelevant in modern operations. States have little control over what happens over the internet, and regulation of these activities is limited.

Not every aspect of the erosion of statehood is negative. The reality is that globalization has expanded the horizons of international trade and eased the way business is conducted. However, the loss of state power over certain processes hurts the economy and other stakeholders.

The advantages of letting market forces control the market are not lost to me, and I acknowledge the fact that undue government interference in the activities of businesses hurts the conduct of business by creating an unfavorable environment.

Additionally, globalization as a single factor is only a contributory to, but is not the only cause of states’ loss of ground in areas that they previously controlled. The decline of the state has also been attributed to other factors by a variety of writers.

Blad¹⁹ makes the case for the augment of national culture in the decline of the state. Other factors to which state decline has been attributed include the spread of terrorism and invasion of sovereign territories.

An increased consciousness of one’s ethnicity or sense of identity can lead to the detestation of things that are foreign²⁰. Ethnocentric reactions towards foreign things and control have been witnessed in prosperous societies in the recent past.

Civil solidarity surges forth when the society view the state as a puppet of foreign forces and the public wants nothing to do with it. The result is the rejection of the state’s authority over it and its affairs, and at this stage an uprising may erupt.

Blad²¹ identifies the Bretton Woods system as an example of state decline in favor of neo liberalism as a result of rise national culture. Closely related to national culture is the failure or incapacity of state institutions to propagate and support a national ideology that the public can identify with.

What is likely to happen is that counter ideologies will spring up in such a situation, as was the case in the rise of “urban youth culture” in Brazil. It is my opinion, however, that these other explanations cannot be separated from globalization. This is because ease in the flow of information is important for these uprising to succeed. In this case, globalization also plays a role, albeit from the periphery.

The spread of terrorism has necessitated the concerted efforts of all stakeholders in the fight against it. This fight has an international aspect to it, and international security agencies often disregard state regulations and authority in the extraction of information about terrorists and in the pursuit of suspected terrorists.

When it comes to terrorism, states lose their statehood and sovereignty. A good example is the capture of Osama bin Laden by American forces, whose operation can be said to have violated the sovereignty and territorial rights of Baghdad.

The invasion of a sovereign state by foreign forces acting under the umbrella of international bodies such as the United Nations sometimes contributes to the decline of statehood. Excluded here are sanctioned peacekeeping missions.

The focus is on invasions that are motivated by factors other than assisting to keep peace. Globalization also has a role here. The global scramble for natural resources has made some states invade others with the intention of siphoning natural resources such as oil from those countries.

Conclusion

The rapid advancements in technology have absolutely changed the world. Globalization as a process began centuries ago, but it is only recently that its effects have been seen. There is faster movement of factors of production and transmission of information.

These fall on the positive side of globalization. However, it is a concept that has contributed significantly to the decline in statehood of nations, there are also other factors to blame, such as the spread of terrorism and the rise of national culture.

Works Cited

Blad, Cory. “The Paradoxical Return of National Culture in Globalization Era: Theorizing Present and Future Legitimization.” Race, Gender and Class. 18.3-4(2003): 329-347. Print.

Imade, Lucky. The Two Faces of Globalization: Impoverishment or Prosperity? 2003. Web.

Payne, Richard. Global Issues, Politics, Economic and Culture, London: Pearson Education, 2011. Print.

Footnotes

1. Blad, Cory. “The Paradoxical Return of National Culture in Globalization Era: Theorizing Present and Future Legitimization.” Race, Gender and Class. 18.3-4(2003): 329-347.
2. Blad, ibid.
3. Payne, Richard. Global Issues, Politics, Economic and Culture, London: Pearson Education, 2011. Print.
4. Payne, ibid.
5. Blad, supra.
6. Imade, Lucky. The Two Faces of Globalization: Impoverishment or Prosperity? 2003. Web.
7. Imade, ibid.
8. Payne,supra.
9. Blad, supra.
10. Payne, supra.
11. Blad, supra.
12. Supra.
13. Payne, supra.
14. Payne, supra.
15. Blad, supra.
16. Supra.
17. Imade, supra.
18. Imade, supra.
19. Supra.
20. Blad, supra.
21. Blad, supra.