(2) On the other hand, critics of multinational corporations see globalization as a device corporations use to evade their proper liability to taxation: either limiting this liability by establishing artificial corporate residence in a jurisdiction where tax rates are very low (e.g. the Cayman Islands), or multiplying the locations of their subsidiary companies and manipulating the "transfer prices" for transactions between these subsidiaries, or in both ways at once.
The benefit of such procedures for multinational corporations is clear enough, and it is clearly hard for any single Nation State, acting alone, to counteract them. But (the critics argue) the advantage that corporations get from their multinational status in this way is unfair, because this benefit is not open to the majority of a country's citizens.
Both these responses - this paper argues - miss the crucial point about the current stage in the evolution of human enterprises, by taking up a narrowly "statist" point of view, and considering the "globalization" of industrial and other activities only as a contrast to similar activities confined within the boundaries of a single Nation State. The first response, for instance, treats "comparative advantage" as a phrase that refers solely to comparisons between one country and another -- the United States having an advantage in the field of computer software, as compared with Japan.
Historically, this is understandable. When Adam Smith developed the concept of comparative advantage, his focus was on The Wealth of Nations --or, more exactly, on the economics of Nation States. For nearly 100 years, however, many people have known that this interpretation of "comparative advantage" is too restrictive. In his 1910 book, The Great Illusion, which was a best seller just before the First World War and helped lead to the creation of the League of Nations, the Nobel Peace laureate Norman Angell emphasized that industrial and commercial activities cross the boundaries of all existing States, so that the economies of those States were unavoidably interdependent. Given the worldwide origins of the materials and components in any automobile today, Angell would never have accepted today's contrast between (say) "American" cars and "Japanese" ones: rather, he would have had us compare "economic advantages" within a given country -- between Microsoft and IBM -- or among different corporations -- between General Motors and Toyota. Anyone who followed recent disputes between the U.S. and Japan about the market for (say) photographic materials, indeed, knows that this is a dispute more between Kodak and Fuji as corporations than between Japan and America as countries.
Meanwhile, the radical critics of multinational corporations adopt a standpoint that is equally chauvinist: focussing on one Nation State at a time. Thus, the dispute about the "Eurodisney" theme park outside Paris becomes a struggle between the cultures of France and America. Critics look to the French government for national policies that will frustrate the "anti-national" activity of multinational corporations: as a result, they fail to recognize the possibility of pursuing multinational corporations on to the global playing field, and subjecting them to equally "multinational" measured that can directly affect their worldwide operations, as was done (for instance) by Greenpeace against Royal Dutch Shell.
So, the main thrust of this paper is to redress the imbalance in current discussion, by playing down the role of Nation State Governments, and broadening our picture of the scope of global activities and enterprises. The term "globalization" applies to many functions and activities besides industrial and financial corporations on the one hand, and governmental (including international or inter-governmental) agencies on the other. Let us first consider the great variety of activitites and functions that currently operate in ways that ignore, or transcend, the boundaries of individual Nation States.
The Variety of Nongovernmental Functions
Consider, for a start, the manner in which currency and exchange transactions are carried on. The scale of these transactions exceeds the financial capacity of any single State's Treasury to exert effective control over them. Informed commentators estimate the global volume of foreign exchange transactions at some $US 1,300,000,000,000 ($1.3 trillion) daily. The foreign reserves of no government, even the United States, are enough to support an overpowering intervention in these transactions. At most, they allow a State to steer part of the flow of funds in one or another direction, and so delay -- not prevent -- exchange rate adjustments that are forced on the market by the realities of the current economic situation.
Correspondingly, a map of the locations where the effective currency and exchange transactions occur yields a network that fits the standard map of the World only partly. Its nodes are located in New York City, Singapore, London, Frankfurt-am-Main and Tokyo, not Washington D.C. or Bonn; while an increasing fraction of the transactions takes place electronically, by communication channels that increasingly evade attempts by governments (even the People's Republic of China) to monitor or block them. So there is tension between the wishes of Nation State Governments for financial control, and actual business dealings. To cite a familiar, but minor, example: while European Nation State Governments grumbled about "unscrupulous" currency dealers, George Soros used his profits from the collapse of the Exchange Rate Mechanism to finance his Central European University in Budapest and Prague: this took less time than it took the government sponsored European Bank for Reconstruction and Development to buy the marble to line its grandiose entrance.
The world of currency dealing and dealers, thus, operates more transnationally than nationally. But this is only one of a number of types of global networks that need to be included in any account of politics today. Moving to networks of a different kind, consider the humanitarian, environmental and human rights organizations commonly referred to as "non-governmental" organizations, or NGOs: two familiar examples are Greenpeace in the environmental field, and Amnesty in human rights. Greenpeace and Amnesty both have branches in many countries; but their scope is worldwide and they pursue their goals globally. For administrative purposes, their headquarters are located in a particular country, but they operate transnationally: their local organizations have local autonomy, and raise most of their own funds.
Typically, such organizations do not depend on public grants from governments or industrial corporations, but are financed by subscriptions from private individuals who have this "cause" at heart. They protect their independence of judgment and their claim to criticize impartially by keeping a distance from Nation State Governments -- dining with them (as the English say) "using a long spoon." Such transnational single-issue NGOs concentrate, in some cases, on humanitarian issues, others on problems of the environment, others on abuse of human rights. The first class includes the Red Cross, Save the Children, the Oxford Committee for Famine Relief (Oxfam), and MŽdŽcins sans FrontiŹres; the second includes the World Wild Life Fund, Worldwatch, and -- most particularly -- Greenpeace; the third includes Amnesty International (the pioneer post-1945 NGO), the network of regional agencies that form the Human Rights Watch, and such impromptu groups as the Nobel Peace Laureates who sought to exert pressure on the Military Government of Burma on behalf of Aung Sang Suu Kyi.
A further group of NGOs is grounded in the shared commitments of professionals in different disciplines. Working together, physicians or lawyers find common cause in the distinctive values of their work. Such organizations as International Physicians for the Prevention of Nuclear War, and the World Psychiatric Association, campaign in defense of medical values including the values of the public health movement, in a way that transcends the policies of Nation States. (Israeli and Palestinian physicians who meet over the injured body of a shared patient approach his treatment in the same frame of mind, and set aside considerations that rest on matters of citizenship or nationality.) The same can be said about (e.g.) the International Commission of Jurists.
One example of special interest is Accountancy. In recent years, closer attention is paid to the "transparency" of the accounting methods used in the Governments of States and their subordinates. For too long, such agencies as the International Monetary Fund paid large sums of money to State Governments for the purposes of development, only to see them dissipated without generating the intended results: the chief by-products of the grants were palaces, luxury cars, etc., for local Žlites. The instrument by which this corruption was eventually brought under control was an insistence on better accounting methods: donor agencies were encouraged to require that these funds be accounted for "transparently". Yet who decided what counted as "transparency" for these purposes? This was the work not of particular National Government or alliances of Governments, but of the collective profession of accountants, who have their own techniques to track
money flows, and can best decide -- on a transnational basis -- what standards to use in detecting governmental corruption.
Finally, other transnational NGOs operate from a commercial, not a professional or academic angle. A consultancy like McKinzie resembles Greenpeace or Amnesty in its modus operandi. It has branches in two dozen countries, each working independently, on the basis of experiences that let it address the local problems of its own country; but the branches pool their techniques of working with clients, and share their experience in other respects that go beyond local concerns. In the background there are those older Foundations of commercial origin (Rockefeller, Ford, Carnegie, etc.) which continue to operate multinationally, or transnationally.
None of these groups of organizations - humanitarian, professional or commercial - is tempted to act as agents for a National Government. If anything, their relations with Governments seek to preserve both the appearance and the fact of independence. Both the efficacy of their operations, and their credibility with those who benefit from them, depends on keeping a distance in these relations, so that political disputes among States or peoples do not affect the NGOs' reputation as honest brokers or disinterested helpers and bringers of aid.
In number and variety, such NGOs have multiplied since World War II, but their historical origins are much older. Like many of the educational and social services run by the State in secular societies, the work of the NGOs was in earlier times undertaken by Churches and religious orders. The Medieval Christian Church in Europe from AD 1200 on was in effect the dominant "transnational" institution, with a standing above -- and apart from -- the secular rulers of the time. In its current form, the NGO tradition dates from the founding of the International Committee of the Red Cross in Switzerland in 1865. To this day, with extreme care, the ICRC succeeds in keeping the confidence of people with very varied cultural and religious traditions: as a result, most peoples or governments have learned to accept its impartiality and independence.
To the extent that these organizations influence global affairs, a map of the locations that are "nodes" in their networks will differ from case to case. The transformation in communications is also giving new influence to satellite television, Internet servers, software developers and others. For some forty years after 1945, many Governments restricted access to international telephone service: but, since the 1970s, especially with the availability of facsimile machines, their control is much reduced,. So we can add to our Global Networks the networks of engineers who refine, and increase the power of, our communication techniques. The resulting map links Poughkeepsie and Seattle with Kista nr. Stockholm (Ericsson), Bangalore in India, and several places in Japan.
Beyond the Westphalian State
The standard ways of representing countries on maps, accordingly, show us not just territories but powers. Behind the geographical "facts" there lie both a coherent political theory and well-established political practices. The theory was first developed in the 17th century, in response to the Thirty Years' War, which ended in the Peace of Westphalia. It carried further theses -- e.g. the familiar motto, cuius regio eius religio -- that underlay the Treaty of Augsburg of 1555, which had led to a truce between the Protestant and Catholic Princes earlier in the Religious Wars.
Westphalian political practices rested on three basic maxims:
(1) Each Country / Monarch is entitled to form its (or his own) autonomous Sovereign State, and pursue its/his own interests as it/he chooses;
(2) Every Sovereign State is free to run its own domestic affairs (not least, to make its own domestic laws) without interference by outside agents;
(3) The citizens of each State are similar enough to constitute a Nation.
Taken separately, these maxims guaranteed the immunity of the country's government, protected its right to establish a religion of its choice, and set limits to the representative character of its institutions. Together, they define the "national sovereignty" claimed by Member States of the United Nations Organization to this day. The only significant person to object to the terms of the Peace of Westphalia was in fact the current Pope, whose right to interfere in and pass judgment on the actions of Sovereigns it abridged.
Each Westphalian maxim also had theoretical implications:
(1) If each State is autonomous, political, social and economic theory are best formulated one State at a time. The essential features of any State are its internal structures: its external relations are accidental.
(2) Since each Sovereign State decides its own Laws, all Law is positive law, i.e. the Sovereign's Will. Medieval claims that positive law can be overriden by a broader "natural law" express, at best, arbitrary preferences.
(3) Since the citizens of any Nation State are equivalent for practical purposes, theoretical "fairness" requires viewing them all as alike, and ignoring differences as accidental. In a rationally run State, electoral procedures will thus hide behind a "veil of ignorance" and be blindly impartial.
As political theory, these maxims served as axioms for Grotius in 1625, but their detailed theoretical implications were spelled out by Thomas Hobbes thirty years later. All the authors read by the Founding Fathers of the United States followed their lead: social theorists from John Locke on by way of Adam Smith (whose Wealth of Nations might be called "the Wealth of Nation States") assumed them, right down to Weber and Durkheim. As political practice, equally, they embodied the system of class-structured sovereign States set up after 1648, and still known as the "Westphalian" State system. Either way, as theory and in practice, they have kept their charm to the present, for both suspect rulers like Saddam Hussein and the Burmese military, and nostalgic nationalists like Charles de Gaulle and Margaret Thatcher. As such, these maxims are still relevant today, both within the European Union and on the larger world scene.
How fully the Westphalian maxims were ever put into effect, and how far the world conformed to them before the 20th century, is another matter. Some would argue that Bruno Latour's comment on Modern Science (that we have never really been Modern) holds good also of the Modern State. Before Bismarck's consolidation, the German duchies and princedoms lacked the centralization imposed on France by Louis XIV and his successors: even in such constitutional States as Britain and the Netherlands, the powers of the State were limited, and less than omnicompetent. During the Napoleonic Wars, for instance, upper-class Englishmen on the "Grand Tour" travelled across the
territories of their country's official "enemies" freely and without serious difficulty: military operations were localized and, in the rest of the countries involved, life went on normally. As a practice, Totalitarianism has been a 20th century invention.
Still, from Thomas Hobbes on, the theory of the Modern State remained in place. It was not Joseph de Maistre, or the ideologues of Fascism, who described "voluntary associations" as worms in the intestines of the State, that must be purged, but Hobbes himself, using an image that would be echoed today by the government in Beijing, and other centres of absolute authority. From the start, the Modern State had the seeds of Totalitarianism within it in theory, but these seeds actually germinated only in our own 20th century.
The Emerging Post-National System
Elsewhere, I have written about the relationship between NGOs and Nation States with an image from Jonathan Swift's book Gulliver's Travels. His seaman, Lemuel Gulliver, is cast ashore on an unknown land and falls deeply asleep. When he wakes, he finds that he is anchored to the ground by a hundred tiny cords, as an object of fear and curiosity to the miniature humans who inhabit Lilliput. The Lilliputians are terrified by his size and strength, and restrict his movements by subjecting him to constraints, none of which could hold him down by itself, but which collectively limit his ability to use his strength.
The Nation State is Gulliver: Non-Governmental Organizations and other agencies are Lilliputian institutions: they have no deadly force at their disposal, but collectively limit the power of Governments to use deadly force as an instrument of policy. Instead of the Politics of Violence, these agencies use the Politics of Shame: exposing national Governments to criticism by denouncing their offenses against human rights or the like, and so subjecting them to ridicule of a kind they are unwilling to endure. (President Chirac's embarrasment, when he was mocked in the European Parliament for resuming nuclear testing at Muroroa Atoll, is a recent illustration of the power of shame.) So, we may argue, the political map of the world itself has to be re-drawn. All that is left of the traditional map of omnifunctional Nation States is a map of the territories in which the governments of States exercise a police authority. To show how the World's financial and economic institutions, professions, human rights organizations and the rest, exert political influence, we must overlay that map with multiple other maps of unifunctional networks -- international, multinational and transnational. No doubt (some will insist) a Nation State Government has to permit such agencies to operate on its territory; but, in refusing to do so, it lays itself open to criticism. Trying to "purge" Amnesty is a sure way for a Government to invite banishment to the category of "pariah" States.
Already, many functions traditionally performed by Governments are disaggregated and privatized. In the advanced industrial countries, the official system of Judges and Courts is overloaded, and informal judicial institutions are taking up the load: whether such unofficial forums of judgement as the Rabbinical Courts of the diamond trade, or the irrigation court (Tribunal das Aguas) at Valencia; or the non-State arbitrators whose rulings are accepted as binding in the Swiss system of Labour-Management Relations; or the community tribunals that act as Courts in (e.g.) the largely unpoliced favelas of Rio de Janeiro.
It is increasingly unlikely that these changes will be reversed. In the years ahead, the European Union may or may not adopt a common currency, but the reality is that Banks or Businesses now put their trust, and investments, in whatever currency looks most advantageous. (In the bond market, Eurobonds are denominated in Swiss francs, U.S. dollars or Deutschemarks, as the market requires.) So, surreptitiously, financiers realize Friedrich von Hayek's dream of Money as a commodity to be traded in the same way as other material commodities. Several currencies are effectively "current" in any single country at a given time, and their relative values are determined pragmatically, in the market. The resulting picture of the State, with multiple currencies, multiple Court systems and so on, is quite unlike the one most of us grew up with: more likely than not, circumstances will continue to carry us in this unforeseen direction.
If this representation of political interactions is correct, it prompts new questions. The Westphalian view was simple: each country was separated from its neighbours by frontiers, and interactions took place at or across such frontiers. On a post-Westphalian view, there are no omnifunctional separations: interactions are between agents within different trans-national networks. Multinational banks are monitored by international institutions: domestic police forces are open to outside criticism by transnational human rights organizations -- Amnesty vs. the Turkish police. Governments have a choice of accepting, or resisting, the political constraints imposed on their national institutions by unifunctional non-State organizations: the Beijing Government still resists Amnesty's attacks on its Tibet policy, the Malaysian Government bans demonstrations against the policy of its Indonesian ally in East Timor.
While the Lilliputian NGOs tend to operate in public as single-issue organizations, they are not without effective external allies. In the years since the Rio Conference on Environment and Development in 1992, significant cošperation has grown up between the major NGOs and the Secretariat of the United Nations Organization. Both the head offices of the UN in New York and its technical agencies (e.g. UNHCR) turn to NGOs for help: Sadako Ogata, as the head of UNHCR, has regular meetings with the NGOs that care for refugees, and senior UN headquarters staff draw on NGOs in preparing and documenting the international conferences that have been a feature of the 1990s, from Rio and Vienna to Cairo and Beijing. Even the main communications network serving these conferences was developed by NGOs, and can be accessed on the World Wide Web, via its principal URL, http://www.igc.apc.org.
The New Realm of Global Politics
To conclude, let us reconsider the issues about globalization from which this paper began: (1) the preoccupation of national governments with "global competitiveness", (2) the persistence of nationalist attitudes in trade unions and consumer organizations. If we broaden our viewpoint to include "trans-national" and "supra-national" as well as "national " and "inter-national" organizations and activities, we can see our way ahead: recognizing the need to extend the territory of politics on to a larger playing field, so as to replicate on this global stage the dynamics of the disputes between (e.g.) Labour and Management that in the last 150 or 200 years were typical of political activities on the national level.
For a start: (1) the governmental emphasis on dismantling social services so as to boost global competitiveness is not new. It is one more stage in a series of policies by which countries at similar stages of development have set out to increase their own prosperity by undermining their rivals. In the 20 or 30 years since exchange rates tied to gold or to the U.S. dollar were abandoned, these policies have rested on competitive devaluations of the national currency. By "floating" its currency and so making exports cheaper, each State improved its ability to succeed in international trade as compared to its rivals; but, in doing so, it exposed its domestic economy to inflationary pressures. Now, in the 1990s, the desire to eliminate inflation, and return to more stable exchange rates, has made competitive devaluations unacceptable, and the current way to achieve the same result has been a competitive attack on the costs of social services.
This result is achieved, however, only at a price. Most particularly, it undermines the humane traditions of European social democracy by penalizing citizens at large and allowing owners and managers of large corporations to reward themselves at a cost to their employees and the rest of the citizenry. Where the earlier practice of competitive devaluation relied on "beggaring" one's neighbours in other countries, the new practice of demolishing social services relies on "beggaring" the citizens of one's own country, so as to undercut the economic position of one's rivals, and turn one's own country into a "lower cost" producer.
Such "anti-welfare" policies were an intended part of (say) the European Union. On the contrary: from early on, the founders of the Union understood the social costs of such policies. The discussions leading to the drafting of the Maastricht Treaty were shaped by the tradition of Catholic social ethics shared by (e.g.) Jacques Delors of the European Commission and Ruud Lubbers of the Netherlands. On this view, the States of the European Union agreed to provide the minimum level of individual protection in social welfare, education, health and other services proper to a fully developed State: hence the social chapter of the Treaty, which the British (non-Catholic) governments of Margaret Thatcher and John Major are unable to accept.
Nor are these ideas confined to industrialized countries: at the meeting in Singapore of Member States of the World Trade Organization in December 1996, for instance, the issue of "labour standards" was raised. Allowing individual Member States to lower their labour standards without external criticism amounted - it was argued - to tolerating "unfair competition" in international trade. Once again, the British government sided with developing countries like Malaysia, which resisted any general imposition of such labour standards. It remains to be seen how this conflict develops and whether, in the years ahead, the World Trade Organization or International Labour Office is given the responsibility of monitoring labour conditions in the industries of its member States.
Meanwhile: (2) critiques of the activities of multinational corporations are blunted by the fact that trades unions and consumer organizations continue to operate within the Nation State framework, attacking the abuses of industry or commerce as anti-national and looking to national governments to prevent them. On the supranational stage, there are no truly global trades unions, capable of confronting industry on its global terrain, only confederations of essentially State-based unions. In the long run, however, the only organizations that can hope to monitor or restrain the multinational corporations will be equally multinational labour organizations. This is true in fields like consumer protection, too. At present, there exist State-based consumer organizations that follow (and to some extent cošrdinate) each others' activities. But there is room, equally, for a global consumer movement that extends its research, and its critiques, beyond national boundaries. As matters stand, we lack both any global journal corresponding to (say) Which? in Britain or Consumer Reports in the United States, and the research structure needed to give their critiques scientific support.
For a start, it would be useful to have a Europe-wide research organization and journal to monitor or criticize the consumer goods and appliances sold across the European Union, and the often-inflated differences in (e.g.) car prices as between the countries of the Union. For, in the long run, the issues for consumers are as global as other human issues: those that face such human rights organizations as Amnesty, or such environmental organizations as Greenpeace; and these issues can be effectively handled only on the fully global stage. To mention only one area of industrial activity: at present, nothing stops manufacturers of hazardous chemicals or pharmaceuticals that cannot be made or sold in advanced industrial countries from shifting their production and sale to other, less developed countries. The catastrophe at the Union Carbide plant in India involved a product previously made at a Union Carbide plant in Pennsylvania, which had been closed down for safety reasons; similarly, agricultural pesticides and insecticides whose us is no longer permitted in the United States or Europe are still sold for use in Africa or South America; and tobacco companies that, for medical reasons, face a shrinking market back home, enthusiastically expand sales in Eastern Europe. No organization for consumer protection exists to counter these activities, globally, in the way that would be done on the national scale.
So we should not complain about the power of multinational corporations: instead, we should copy them. They are the scouts, who show how the land will lie in future. Rather than rely on national governments to restrict their activities, we should follow their example: creating, on a transnational stage, institutions parallel to those that now exist only on a "one-state-at-a-time" basis. So we may hope for, and welcome the rise of transnational trades unions, supranational consumer organizations, and all the rest, alongside the (oldest) Universal Postal Union, the Red Cross, the International Courts of Justice, and the World Trade Organization.
To sum up: the multinational and transnational networks of businesses, financial dealers, media organizations, physicians, accountants, humanitarian organizations, and so on, place fresh limits on the traditional autonomy of Westphalian State governments. None of these networks has access to the use of deadly force, but it is increasingly clear that, in a World increasingly dominated by economic and technological considerations, the use of deadly force itself -- for so long a privilege of Governments -- has at most a marginal utility.
So understood, the phenomenon of globalization need not be resisted. Instead, this expansion in the scope of economic, political and other actions is only beginning: other sectors of life, in developed and developing countries alike, have an opportunity to move creatively onto the global stage, in the wake of the multinational corporations. We need not just (for instance) a Friedrich Ebert Stiftung, staffed chiefly by Germans and focussed on German affairs, but also a Foundation with worldwide scope, staff and concerns. At the least, this should be a transnational organization with a network of local and regional offices, on the model of Greenpeace and Amnesty in the field of human rights or the environment, or McKinzie among management consultants.
This is only the beginning of a longer story. To some extent, NGOs already serve the functions of these future transnational agencies: Greenpeace (e.g.) acts in part as a self-appointed transnational counterpart of national Environmental Protection Agencies. Still, the aim of this paper is not to give a full account of the destination toward which we are moving. It is only to draw attention to a few of the implications of this move away from the familiar norms of the Westphalian system of Nation States, and pose -- rather than answer -- some of the questions that arise as a result.
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