Transnational Companies can be compared to a tree: they have extensive branches everywhere, but their roots are firmly based at National HQ.
One of the contemporary clichés in the current discussion of global political economy is the rather dubious concept of the end of the nation state and the subsequent breaking of the shackles which had hitherto tied Transnational Corporations (TNCs) to specific geographical and legal locations. It is argued that these organizations have moved beyond the control of the states who can no longer exercise effective jurisdiction over their activities.
This ‘state-denial’ has been articulated by the influential hyper-globalist faction ensconced in the financial press, academic economics departments and political parties. In a borderless world the state apparently no longer matters; economic power has shifted from sovereign states to global markets. Markets were once fitted into states; now states are fitted into markets. This change has apparently been brought about by the revolutionary technologies in transport and communications.
Since the 2008 crisis, however, this view is more difficult to justify. It was after all the allegedly redundant state (or states) which pulled capitalism’s chestnuts out of the fire with the bail-out of insolvent banks. During the meeting between Obama and the Wall Street elite at the height of the crisis the President apparently remarked that it was only himself who stood between the assembled financial movers and shakers of Wall Street and ‘the pitchforks’. The US government also ponied up some US$50 billion to bail out distressed auto manufacturers General Motors and Ford who were based in ‘Motor City’ Detroit. Detroit itself was also bankrupt but the Federal government was unable to find an additional US$13 billion to bail out the city itself. Maybe – just a thought – because the population of Motor City was largely African-American.
In fact, the state always has and continues to be the most significant force in shaping and guiding national economic development, including globalization itself. Consider that an increased capability to overcome geographical distance made possible by technological innovations in transport and communication technologies is of little use if there are political barriers to such movements. Thus, policies of liberalization, deregulation and privatisation were necessary to overcome non-technical barriers to the free flow of labour, capital and commodities. Thus, the enabling force of globalization (i.e. neo-liberalism writ large) was the state. In fact, the bigger and more powerful states have used globalization as a means of increasing their power and interests.
‘’States actively construct globalization and use it as soft geo-politics and to acquire greater power over, and autonomy from, their national economies and societies respectively. For example the US and G7s other dominant members design and establish the international trade agreements, organizations, and legislation that support and govern trans-border investments, production networks, and market penetration constitutive of contemporary globalization. Advanced capitalist states, particularly, use these political instruments to shape international economic decision making and policy making in their interests.’’ (M. Gritsch – Review of International Political Economy 12: 1-25)
Moreover, nation-states protect, subsidize, manipulate currencies, impose quotas, sanctions, give tax breaks and exemptions to export industries, R&D, and grant patents, and intellectual property rights to their indigenous corporations to both protect their home markets and help them penetrate overseas markets. This is laughingly described as ‘free trade’. States and corporations are not antipodes they are twins, and arguably the state is the senior partner in this arrangement.
For example, in 1934 the Roosevelt administration passed the Glass-Steagall Act. This involved a forced separation of Investment banking from commercial banking which stopped banks speculating with depositors’ monies. In 1999, however Bill Clinton signed the Financial Services Modernization Act, commonly known as Gramm-Leach-Bliley, repealing the key components of Glass–Steagall whose articles became largely toothless. This was what Wall Street had been angling for and which gave an additional push to the eventual debacle in 2008.
The state giveth, and the state taketh away.
Thus, the notion that powerful trends of internationalization and interdependence have ended national sovereignty is vastly overstated. States remain in charge of the essential part of their national sovereignty: monetary policy, (except in the Eurozone of course) law-making, macroeconomic policy, finance and taxation, environment, education, labour markets, industrial relations, pensions, health and welfare, social policy, science and technology and so forth. Arguably no supra-national entity has yet been designed to replace what has been an effective system of national government. Unimpeded global flows of capital in search of lucrative investment opportunities, are hardly conducive for countries wishing to plan and stabilize their future free from the disruptive effects of mobile global capital flows (often ‘hot money’).
Which brings us to the EU. The state-declinist thesis seems to have gained a considerable traction with the Remainer left. No less a personage than Yanis Varoufakis – the initiator of DiEM2025 (Democracy in Europe) – has been reading the last rites of state democracy and sovereignty in Europe. Apparently, the model of politics based on the nation state is ‘finished’. The sovereignty of national parliaments has been dissolved. Today, national electoral mandates are impossible to fulfil. Hence, reform of the European institutions (specifically the EP), is the only remaining option.
Essentially this is the latest version of the TINA ‘argument’, (there is no alternative), pioneered by Mrs T and rolled out with monotonous regularity ever since by every cornered establishment politician, both left and right. As has been noted elsewhere. ‘’Tell the population that the nation-state is ‘finished,’ that it is unable to guarantee full employment (or to work towards it) and you free yourself of the responsibility of even trying.’’ The same goes for austerity or anything else. If the nation state is ‘kaput’ it is futile to oppose it. Globalization, however, is far from being the all-powerful and all-encompassing behemoth postulated by the declinists. ‘’There are major cultural and linguistic differences that preclude a full mobilisation of resources across national borders. There is ‘home bias’ in investment portfolios. There is a high correlation between national investment rates and national saving rates. Capital flows between rich and poor nations fall considerably short of what theoretical models predict. There are still severe restrictions to the international mobility of labour. The truth is that we do not live in a completely globalised world, far from it. Ergo, nation-states can pursue their own policies.’’
Corbyn’s policies of peoples’ QE, renationalisation of the Railways, taking into public ownership the energy and water industries together with the Royal Mail are not beyond the scope of the UK qua sovereign and democratic state. A sovereign country that issues its own currency and formulates its own fiscal policy, and if necessary can impose restrictions on the neo-liberal package of free movement of labour, capital and commodities, as well as the drive to deregulate labour markets (euphemistically, flexibilization) is perfectly capable of a policy for growth rather than for continued austerity which has become the hallmark of the EU area.
But there’s the rub. How is it possible to square that orientation with membership of the EU, a structurally, neo-liberal capitalist institution. The Euro has simply been designed to ensure that Germany runs a permanent trade surplus whilst the southern periphery runs continuing trade deficits – a simple accounting identity. It is also noticeable that Germany seems to be harbouring increasingly regional hegemonic ambitions regarding the rest of Europe. Socialism or even tepid social democracy can never truly thrive within such a hostile environment.
The position of the globalist left as outlined in the DiEM2025 manifesto, however, seems like a back-to-front attempt to by-pass national institutions and to attempt through a supra-national democracy’ to make fundamental reforms, through a democratised and strengthened EU. Even Varoufakis regards this as being ‘utopian.’ But, he continues, it is ‘a lot more realistic than trying to maintain the system as it is’ or ‘trying to leave.’ (The Independent).
More realistic, really? But this begs the obvious question of why such an entity is going to be any different from the present dispensation. Is it going to be any less neo-liberal and undemocratic if it is given greater powers and is integrated further. It seems to make more sense to work from the national to the supra-national level than the other way around – particularly given that most states in the EU are governed by centre right coalitions with social-democrats in tow and centre left parties (PS, Syriza, PSOE, PASOK, SPD) acting like centre right liberals. Moreover, the transfer of local democracy – which we are told is now obsolete – to supranational democracy contributes to a weakening of popular control. This leapfrogging of national democracy to supranational democracy perforce requires a supranational electorate. This is problematic however since ‘’for the great majority of ordinary European citizens linguistic barriers and cultural differences impair the opportunity for political participation at a supra-national level.’’
A more detailed examination of constitutional issues arising from Brexit and the EU will have to wait for another issue.