What are the likely consequences of globalisation for the state and why

Topic: BusinessWorkforce
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Last updated: April 11, 2019

1. There are many actors in the process and structure of globalisation. Governments, Multi-National Corporations, Non-Government Organisations and International Organisations are the main actors.

Each of these entities plays its own role in the Liberalist application of International Political Economy known as Globalisation and each moral paradigm has a different thesis as to the motivations of these actors2. Realist school of thought stresses the primacy of political structure over economic structure. Issues of national security are paramount and the economic structure must work within the framework laid down by the political superstructure. The state is the ultimate actor in the Realist application of International Political Economy. Realists believe that the world is open, but incompletely so. The relative military strength of a nation determines its ability to create markets which are to its benefits, hence Bretton-Woods system being geared so heavily toward US interests. The Realist school suggests that the US allowed Europe to exploit a loophole in GATT to create the Customs Union (later EC then EU) in order to promote a united Europe which would be a stronger force against communism – therefore achieving the US’ political aim.

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In the realist argument Corporations expand overseas because of government policy, eg tax laws enabling US MNCs to avoid tax by reinvesting profit abroad.3. Liberalist approach to IPE can be described as Globalisation. Firms, governments and International Organisations are the main players and interdependence causing peace and stability is the best means of achieving the Liberalist utopia. Technology and free-market economics are important catalysts for globalisation, the former because it makes processes more efficient and makes communication easier and the latter in order to stimulate growth and encourage competition. Liberalism is spread through markets.

4. Instrumental Marxism renders an unsatisfactory argument. One of its central tenets, that corporations seek profit in rich markets, does not seem farfetched in theory but in practice is in conflict with events – it cannot explain why there has been so much investment, for example, in the economies of South Asia.5.

Structural Marxism examines the future – the past does not matter as much as growth and earnings. Corporations are motivated to act by future prospects for profit and earnings. Innovation is achieved through competition and has a trickle down effect into society giving the illusion of upward mobility. The political structure is traditionally dependent on the economic superstructure.6. Perhaps the most interesting effect of globalisation will be the increased proliferation of ideas across border which were, before the information explosion of the last ten to twenty years, sealed to the philosophies and paradigms of the developed states. Already we are seeing liberalisation in states such as Iran although the effect of globalisation with regards to culture and ideas may not be universally accepted and has often been the source of anti-globalisation feeling in states where national identity or religion are strong forces.

7. Globalisation is inherently undemocratic because it undermines the sovereignty of the state by not being subject to its laws and cultures and further it can be a means of imposing foreign cultures and standards in a target country. Those running international NGOs and Multi-Nationals are not elected by the masses and should they come to wield undue power in any given state there may well be some degree of social backlash.8. Furthermore globalisation has the effect of widening social classes both on a national and international level. On a national level, in developed countries it may create more unemployment among unskilled workers as they are uncompetitive in their wage demands compared to workers in underdeveloped countries.

These unemployed will find themselves increasingly at odds with a political structure which does not provide ample social security to compensate for the increased need for competitiveness in international markets (that is a government whose economic policies accede to the needs of international organisations). On an international level too the effect of globalisation will be the widening of the gap between rich and poor countries as underdeveloped countries compete for foreign investment.While this investment may lead to the creation of many new jobs these states often erode their surpluses in achieving this competitiveness and as a result are unable to maintain necessary socio-economic standards. As Multi-National Organisations become more and more centralised in a bid to better streamline and accumulate profit centres of wealth corresponding with the headquarters of these entities become the norm, with most highly qualified staff working in executive and planning roles in these major cities, mapping out international corporate strategy, appropriating profit and then redistributing it as wages and themselves receiving the greatest level of remuneration.9. The obvious result is social tension. The further the forces of globalisation go the greater the inevitable reaction from those who have not benefited – thelower strata of both exploiter and exploited societies.

It is important to note however that this ‘exploitation’ may benefit the underdeveloped societies as the MNCs bring with them the baggage of international norms on labour and environment standards and most importantly foreign capital investment and wages – although these may be below the wages paid in a more developed and less labour – competitive states it may still be better than unemployment which was prevalent before MNCs arrived.Non-Governmental Organisations are often better positioned or better able to deal with many of the issues usually dealt with by the political structure of these developing countries and are often invited by national governments to participate in the running of certain elements of the state’s structure. With these as with MNCs there is a high risk of domestic backlash if their involvement compromises the integrity or sovereignty of the host state. It is my argument that although their position may be stronger as a result of their often non-political nature NGOs will only be able to involve themselves in a country’s affairs to a certain extent before the sovereignty of that country is compromised. The obvious benefit of being non-political is that there is often less space to question the motives for their actions, especially with regard to special interest groups, however the sword is double edged: There is strong argument to suggest that NGOs and Special Interest Groups are a threat to democracy – they are so numerous that if they were given an international role of any significance the bureaucracy they would create would be too inefficient.International orgainsations such as the World Bank and the IMF have already lost a great deal of credibility as they are often seen to be extensions of American policy – not too facetious a belief considering the remarkable pro-American nature of the Woods-Bretton system. These organisations do however have the benefit of being truly international in their scope comparable only to the United Nations and the largest of Non-profit organisations such as CARE and Amnesty International.In conclusion I would argue that as long as the proletariat is satisfied with the effects the Liberalist paradigm will continue to motivate globalisation as it has in the past.

The realist interpretation may, however, have the last laugh. With it there will inevitably be a proliferation of Liberalist and Capitalist ideas into previously sheltered societies and initially the political structure of underdeveloped nations may change towards the free-market politics of the developed world, but ultimately as US military and economic hegemony declines and other states fill the vacuum the impetus for Liberalisation will be lost and people will choose to reunite themselves from the defragmentation of globalisation on ethnic and national lines.The law of uneven development and the exploitation of underdeveloped economies will play an increasingly important role in the nature of globalisation both on domestic and international levels, and it is my conclusion that the fate of globalisation remains in the hands of the proletariat who are ultimately in control of their own destinies – if MNCs and IOs continue down the path of exploitation and capital markets and Liberal governments continue in their quest for ‘competitiveness in the world market’ at the expense of social welfare they may well suffer revolutionary backlash to their evolutionary policies.

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