Globalization is an accelerated global interconnectedness (Held et al., 1999). There are different descriptions of globalization and its impact on the state, generally dependent on the understanding of what the terms imply. The state can be defined as “the sovereign authority in a specified territory, with the right to use force both to maintain internal order and to defend its territory against aggression” (Lechner and Boli, 2008: 219). As national borders became more fluid, Finer (1999:79) determined that a state should be judged based on “defence, internal law and order, law-making and taxation, public works and welfare, rights and citizenship.” When any of these characteristics are threatened, the power of the state can be seen as diminished. The World Bank (quoted in CLMS, M5 U1: 2) defines globalization as an “inevitable phenomenon in human history that’s been bringing the world closer through the exchange of goods and products, information, knowledge and culture.” Alternatively, globalization can be considered a choice to encourage and benefit from the growing interdependence between states in their economic, social, cultural, technological and political agendas (Weiss, 1997). Some perceive it as domination by multinational corporations influencing people’s preferences as well as the national and global economy (Reinicke, 1998). This can reduce the authority of the state allowing greater conflict and unchecked corporate power. Others contend that globalization makes the state stronger by creating opportunities for prosperity, democracy and equality (The United Nations, 2001). The various perspectives determine how people view the relationship between globalization and the state (CLMS, M5 U1).
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Globalization challenges national sovereignty with rising international trade, capital flows and foreign direct investment (Pinder, 2011). Faster innovation, new technology, better communication and increasing deregulation give transnational corporations a wider array of options for production and distribution (Carayannis et al., 2012). Globalization enables international collaboration by allowing companies, organizations and individuals to voice their agenda without the involvement of the state (Mackay, 2004). According to Reinicke (1998), nation-states can choose how to respond to these developments. They can use market ideology to determine their international policies and provide the most favorable environment for business and investment. They can work with neighboring nations in order to standardize polices in a region like the European Union (Weiss, 1998). Some states advocate nationalism to protect their interests. Dominant forces like the United States, China and G8 can use their power to influence global policy to their advantage (Carayannis et al., 2012). However, there are also states that seek to democratize global governance (McGrew, 2004).
We will consider three general schools of thought with regards to the impact of globalization on the state. Internationalists believe that the effects of globalization are greatly exaggerated and that the state has remained strong (Dunning, 1999), while globalists see globalization as the end of the nation state citing the fact that external developments influence national events and that territory is now irrelevant (Ohmae, 1995). Transformationalists posit that the nation state will not disappear completely but will alter the manner in which it functions in order to adapt to the changes wrought by globalization (Held et al., 1999). In this essay we will examine different aspects of globalization from a globalist, internationalist and transformationalist perspective and will see that while globalization has changed the structure of the state making it more flexible, the state still retains significant power.
Globalists view globalization as an inevitable process immune to human interference and political entities like nation states (Ohmae, 1995). Pessimistic globalists consider the displacing of local culture in favor of more dominant cultures like those of America, Europe or Japan to be cultural imperialism (Mackay, 2004). They believe that immigration without assimilation is also undermining national culture (Hirst et al, 2009). A report from the Pew Hispanic Center says that about 51% of Hispanics in the United States of America (USA) identify themselves with their family’s country of origin while about 21% identify themselves as American (Taylor, et al., 2012). Additionally, contemporary culture is driven by corporations. People have more in common with those they are connected with through technology across the world (Ohmae, 1995). For example, globalists see the international computer game community as one connected by a global product like Sony Playstation or Xbox irrespective of nation state (Goggin, 2008).
Media is no longer constrained by jurisdictional borders. This reduces the ability of local government to enforce their policies on culture or morality (Hirst et al, 2009). Technology has strengthened the flow of information and conversation that bypasses government control (Mackay, 2004). An open global forum can help people rise up against injustice or dictatorial governments or give the disadvantaged a more equal footing in today’s free market (Cochrane and Pain, 2004). The infrastructures created by the internet and new technology help globalize services and manufacturing thereby shaking a critical foundation of a nation state which is territory (Mackay, 2004).
The role of the state is being usurped more often by nongovernmental organizations (NGOs) that respond to social needs on an international scale more effectively than the government. We see NGOs and the global civil society focus on issues like human rights, gender and wealth equality and environmental protection (McGrew, 2004). For example, the Forest Stewardship Council (FSC) was established by NGOs and several companies to solve the problem of deforestation after government efforts failed (IISD, 2002). Additionally, the number of private security firms is increasing in proportion to the rising population, immigration and urban insecurity (McGrew, 2004). More people are employed by the private security industry in the United Kingdom than by their uniformed police force (Kobrin, 1999: 178). The nation state also does not have the authority to police international crime effectively. Privatizing parts of its administration and allowing supranational organizations to use its armed forces are further examples of how the state is sharing its responsibilities (Hirst et al, 2009). Therefore, the state’s internal sovereignty, legitimacy as well as their enforcement and regulatory capabilities are vulnerable (Reinicke,1998).
States may be seen to have lost their ability to govern themselves due to the influence of multinational corporations, organizations like the International Monetary Fund (IMF) and World Trade Organisation (WTO) and the increasingly global market that limits the negotiating capability of individual states (CLMS, M5 U1). The WTO deals with global trade policies and this reduces some of the power that nation states have to influence trade through tariffs, subsidies, or other means. The European Union also promotes its own monetary and regulatory policies (Weiss, 1998). The legislation of member countries needs to reflect the principles of the supranational organization (Carayannis et al., 2012). While the purpose of these agreements is to limit a government’s ability to adversely affect other countries, it does entail a loss of some national sovereignty (Pinder, 2011). Intervention by the IMF or the United Nations on an economic or military front can undermine a nation’s credibility, thus weakening its security and independence (McGrew, 2004).
States are being pressured to support local interests and organizations in the face of global encroachment and challenges. They are also being encouraged by the international community to collaborate or comply with international mandates (Pinder, 2011). Several policies, like those regarding taxation or investment, are influenced by or have a significant impact on other countries (Carayannis et al., 2012). For example, according to a report issued by the IMF in 2001, the European Commission spends 2.7 billion euro a year to help European farmers profit from making sugar while imposing high tariffs to prevent low-cost imports of tropical sugar (IMF, 2001). Therefore, some policies and their consequences are not entirely in the state’s control (CLMS, M5 U1). Factors like transnational companies, outsourcing and division of labour diminish the state’s ability to enforce their regulations and laws in fear of investments and industry leaving the country (Ohmae, 1995). The international financial market is a decisive factor in the economic policies of national government. The emphasis is on deregulation, dismantling the welfare state and reducing government involvement in the provision of goods and services. However, this could result in unfavorable environmental, worker and welfare policies (Pinder, 2011). Private companies like Moody’s and Standard & Poor’s wield tremendous power in evaluating a nation’s credibility and ability to repay its debts. Their credit assessment determines a nation’s access to capital and interest rates and is dependent on the health of that nation’s government (Hirst et al, 2009).
Transnational organizations like IBM, Coco-Cola or Microsoft draw income from the host state as well as control some of its resources (Ohmae, 1995). Sourcing, processing, manufacturing, research and development, various administrative tasks and even management can all take place in different parts of the world resulting in a larger difference between political and economic borders and a decreasing importance of individual nation’s policies (Pinder, 2011). Ohmae (cited in CLMS, M5 U1) sees the lessened role of the state as a way to ensure that people can get the best the world has to offer and not be constrained by a government trying to protect certain industries or groups of people.
Governments are finding it more difficult to implement policies that will allow for fairer redistribution of income and improve the quality of life of its citizens (Dunning, 1999). More countries are considering a flattened tax rate instead of a progressive system. By 2008, 24 nations including Russia, Hongkong and several Central and Eastern European nations had adopted a version of the flat tax (CF&P, 2008). The growing number of multinational corporations (MNCs) and tax havens makes it easier for companies to shift funds across borders and more difficult for states to determine exactly where profits are made (Carayannis et al., 2012).
The globalists conclude that all the essential functions of a nation state are negatively affected by globalization. In a borderless world, where deregulation is encouraged and the corporate agenda is dominant, states can no longer wield the authority they once had (Ohmae, 1995). MNCs, supranational organizations, NGOs and even subnational entities are usurping the roles of the state. When states cannot act independently to solve their domestic problems whether in regards to policy or even internal security, there is a definite lack of sovereignty (McGrew, 2004).
On the other hand, internationalists and transformationalists firmly believe that the state has an important role despite globalization (Cochrane and Pain, 2004). Internationalists view the concerns of cultural imperialism as underestimating the local human dynamic (Mackay, 2004). For example, while gaming technology itself has spread worldwide, the popularity of games, whether action, sport or role playing, vary from nation to nation depending upon cultural preferences (Goggin, 2008). They also note that individual nations continue to exert a lot of power over media using licensing and regulatory frameworks (Mackay, 2004). For example, the Middle East and China heavily censor their media industry. Broadcast media is subject to regulation like the Federal Communications Commission (FCC) in the USA (Biagi, 2013). Several governments also have legislation that gives them control of the internet in emergencies like the 2003 Communications Act in The United Kingdom and the Protecting Cyberspace as a National Asset Act in The United States.
The importance of the G8/G20 in forming international policy and the continuing dissension between countries like the USA, Iran, North Korea and China highlight that nation states are still significant (Carayannis et al., 2012). In addition to market forces, internationalists consider factors like slow domestic economic growth, the end of the Cold war and the growth spurt of public sector enterprises in the 1950’s and 1960’s to have contributed to the diminished policy making ability of the states (Dunning,1999). Kurdle (1999) posits that the state still has the power to make its own policy and regulate the impact of the global financial market as it sees fit. Personal tax can be set at the state’s discretion and cannot be avoided easily by citizens. The state also has complete control over its immigration policy. Any lack of effectiveness in this area is mainly due to politics not capability (Kurdle, 1999). Dunning (1999) states that the policies of nation states do not have to be dependent or linked to those of other nation states. Country specific rules and policies are still necessary and effective since the majority of business is still domestic and new developments always require new regulations (The United Nations, 2001). The government may change and acquire new functions but this does not make it obsolete. Even though territorial borders are becoming more fluid, the government ensures that transaction costs are kept at an acceptable level (Carayannis et al., 2012).
Dunning (1999) argues that states can choose what role they want to play. They can be the instigator, co-coordinator or they can even opt to resist globalization. Most states prefer to orchestrate by controlling the competition in their region. They can heavily tax businesses that they do not wish to support and subsidize the businesses that they want. While it is easy to assume that jobs go to where the wages are the lowest, Dunning (1999) reminds us that factors like infrastructure, training, productivity, health and education are the responsibility of the state and are used to attract businesses. States can ensure high standards of living, high quality workforce and goods as well as create an environment that supports entrepreneurship and innovation (McGrew, 2004). Conforming to international policies is a political choice and does not represent lack of sovereignty. Internationalists conclude that the role of states hasn’t changed a great deal due to globalization. Governments can still have individualistic yet effective policies (Dunning, 1999). Supranational organizations do not have to be at odds with nation-states but can in fact support them. Their main contention is that globalization is not forced upon states but that states can choose how they involve themselves (Weiss, 1998).
Transformationalists consider that aspects of globalization are more calculated and less inevitable (Cochrane and Pain, 2004). For example, video games have been designed incorporating the preferences of multiple nations in order to have global appeal (Goggin, 2008). Transformationalists also have a different point of view on the globalist claim of cultural imperialism. While culture is no longer limited by geographical boundaries, several products are tailored to suit the importing market. Audiences and consumers view them through their own cultural perspectives and absorb or transform it accordingly (Mackay, 2004). For example, global fast-food companies like Kentucky Fried Chicken and McDonald’s cater to the regional market by incorporating local food preferences into their menu (Ritzer and Malone, 2001). Transformationalists place more importance on the individual and the nation-state rather than the unstoppable force of globalization.
While transformationalists acknowledge the inherent challenges faced by states as a result of globalization, they contend that states are not static entities. They adapt and embrace new roles such as working closely with private institutions and international coalitions at both the regional and national level (Weiss, 1998). A country that chooses to integrate its economy with the global economy is aware of the constraints. However, this does not negate the state’s ability to tax or regulate. In fact, economic integration increases the number of options a state has when responding to policy. It creates competition and encourages governments to provide better services to retain valued businesses (Carayannis et al., 2012). Agreements made with supranational and powerful private organizations with regards to long term policy decisions solidifies a nation’s credibility and enhances their commitment to the private sector (McGrew, 2004).
The rules of the global economy are designed by individual governments (Pinder, 2011). While some states have more political leverage when it comes to formulating international agenda, others need to learn how to influence international policy to their benefit (Carayannis et al., 2012). However, stronger nations have always impacted the internal affairs of weaker nations and weaker nations have always been ready to surrender a part of their sovereignty in return for protection or some other advantage (Hirst et al, 2009).
In short, globalization is a product of global strategies (Held et al., 1999). Instead of abandoning their national identity and ambitions, states are building alliances and using agreements with other nations and corporations, both domestically and internationally, to gain more security, tighten immigration and strengthen their economy (Carayannis et al., 2012). While the WTO is sometimes criticized for being biased towards the richer, developed countries and subject to powerful business interests, the majority of WTO member countries are not rich. These developing economies are therefore capable of taking care of their own interests, like when the G20 rejected proposed trade policies in Doha (CLMS, M5 U2).
Globalization may have increased transnational collaboration but it has also increased the inequalities between nations that have embraced globalization and those that are struggling with it (Pinder, 2011). The state is the main entity that can reduce these inequalities and can make a difference in a time of economic crisis (Lechner and Boli, 2008). The ability of the state to act, especially in cooperation with international bodies when needed, is essential when addressing global problems. For example, the global financial crisis of 2007 and 2008 began with the mortgage crisis in the USA and spread worldwide (Carayannis et al., 2012). Developed nations coordinated with international entities like the G20 to call for financial reform as well as bailed out some banks in trouble at the national level (BBC News, 2010).
The contention that the state is powerless implies that the limits on government capabilities are definite instead of variable. Globalists tend to exaggerate the earlier powers of the state so as to highlight a greater lack of power now (Weiss, 1997). Many of the problems with regards to financial policies like the budget, deficit or being able to fund public programs are primarily due to the recession rather than globalization (Held et al., 1999). The inclination of capitalists to seek the best business environment is not a new phenomenon. States are under pressure to lessen the tax burden and restructure taxes where possible due to the increased mobility of today’s capitalists (Pinder, 2011). Globalists believe that this will reduce the state’s capability to provide high quality social services (Weiss, 1998). However, nations can use differentiated taxes depending on industry to allow themselves to have attractive national policies as well as control the personal tax rate. Weiss (1997) posits that governments’ claim of powerlessness is a fallacy promoted by them in order to implement legislation of their choice. An open economy does not automatically reduce government expenditure or size. In fact, open economies are likely to spend more and collect the taxes to do it (The United Nations, 2001).
Globalists assert that territory is increasingly irrelevant and international organizations can move between nations to benefit from the most favorable policies (Pinder, 2011). However, there are several advantages to having a strong national base like the cost benefits of regional sourcing and production, strengthening relationships with local associations and institutes as well as subsidies or benefits from national or local governments (Weiss, 1997). Political stability of the state and a strong domestic economy are important for investment and trade. For example, most firms still sell more products domestically and they tend to invest a greater portion of their assets locally (Hirst et al, 2009). In addition, the inputs for a large number of transnational corporations are sourced by national suppliers (The United Nations, 2001). Local and international businesses need states to address their concerns and negotiate better rules for trade and investment (Carayannis et al., 2012).
The state defines a people’s identity and most people would be reluctant to give it up. Regardless of the number of non-state organizations that help the drive the state’s economy and policy, the majority of people will still hold the state responsible for their quality of life and protecting their interests (Cochrane and Pain, 2004). From a social perspective, we see that NGO’s seek to support or reform the existing system, not abandon it entirely (McGrew, 2004). While some NGOs like Greenpeace do not accept government funding, many NGOs like Oxfam and Medecins Sans Frontieres (MSF) are dependent on the state for a great deal of government aid (Moore, 2011). Even independent security companies are often hired by the state to enhance their capabilities (Held et al., 1999). We have seen a mix of cultures, like European, Eastern, Asian, Latino among others, that have had a global influence. Historically, cultural interactions have taken place for centuries and local culture has always remained strong and integrated cultural elements of their choice (Cochrane and Pain, 2004). Technological innovations and faster, cheaper communication has influenced politics, culture, education and social organization. The prevalence of new technology does not negate the effect of the environment, language and customs on people. The generation gap will exist regardless of global media. While some aspects of new technology are liberating, its distribution throughout the world is uneven and is strictly monitored by the government (Mackay, 2004). The state can also use these technological advances to increase their surveillance capabilities and exert further control on its people (Carayannis et al., 2012).
A strong democratic state promotes social welfare, institutes means for representation and accountability, funds public services, provides for internal and external security, protects the more vulnerable parts of society and works towards a fairer distribution of the benefits of globalization (Carayannis et al., 2012). It facilitates discussion at various levels and supports a system that helps mediate disputes and resolves conflicts, cultural or otherwise, that evolve in a diverse society. The modern state is moving towards a more regulatory position (The United Nations, 2001). It aims to establish a framework for the private sector and entrepreneurship to succeed. While several of the state’s functions are being transposed on to supranational organizations or being outsourced to private organizations, the state is still needed to coordinate the planning, negotiating and decision making process among different entities and at various levels of governance (The United Nations, 2001).
As we can see, one’s understanding of the term nation-state affects how one views the impacts of globalization. Globalists see globalization as a new unstoppable force that is eradicating the nation state and generally consider territorial sovereignty to be crucial. Internationalists see globalization as simply more of the existing conditions and still regard the state as a continuously evolving dominant force. Those that see a transformation in the state’s roles often differentiate between external and internal sovereignty. However, globalists ignore the power of the nation state as a collective, while internationalists ignore that new technology like the internet has made the state less effective in some of its roles (Carayannis et al., 2012). Transformationalists acknowledge the new trends caused by globalization and the uncertainty of the role of the state, but still believe in the state’s ability to adapt to these trends. The flexibility of the transformationalist theory allows it to cover different aspects of globalization and makes it the most exhaustive (Cochrane and Pain, 2004).
Modern states have the ultimate authority over their citizens (Weiss, 1998). The state’s role is fundamental in protecting the general interests of its citizens as well as managing the various multilateral and intergovernmental agreements. The United Nations Secretary-General, Kofi Annan (quoted in The United Nations, 2001: 6) stated that the “challenges that we confront today are beyond the reach of any State to meet on its own. At the national level we must govern better, and at the international level we must learn to govern better together. Effective States are essential for both tasks, and their capacity for both needs strengthening.” Globalization is a choice made by a nation to enhance its economy. The act of making a choice determines that the state cannot be considered powerless (Weiss, 1997). Globalization does not reduce the functions of the state but simply redefines them in response to the changing regional, national and international conditions (The United Nations, 2001). States are learning to adapt to the new environment, co-operate with non state entities to direct their resources as much as possible and retain their influence locally and on an international scale (Lechner and Boli, 2008).
