Table of Content
2. The Nexus between States and Corporations
2.1. States, MNCs and the Bargaining Process
2.2. Institutions and the Bargaining Process
2.3. Unified but in Contradictory Roles
3.Making Globalization Work
One of the most discussed developments in contemporary political economy is the evolving relationship between states and multinational corporations. With its origins in the Peace of Westphalia in 1648, states have long been the most powerful force in economy. However, with the end of the Cold War around 1990 and the evolution of liberalism and neo liberalism, states began to pull back from former state-ruled political decisions. The ideas of the Washington Consensus, mainly shaped by the American economist Milton Friedman and the Chicago School, were voluntarily adopted by many states worldwide, promoting liberalization of markets and trade as well as financial deregulation. The state has repositioned itself as a passive or acquiescent actor within the economy, handing over power to global markets (Sweeney, 2005; Strange, 1996). Consequently, many scholars argue that multinational corporations (MNCs), as another major actor within the economy, have gained power, threatening the sovereignty of states. However, the discussion between different scholars varies widely in terms of whether the state has lost its entire power (Ohmae, 1996) or still remains a powerful and equal counterpart to MNCs (Gordon, 1988).
This essay will discuss this nexus between states and MNCs. Furthermore, it will examine what impact institutions have on this relationship considering evidence from recent times. Consequently, it will provide concepts on how to ensure a better functioning of the global economy whilst bearing in mind different perspectives.
As a note on terminology, I will use the terms MNCs and TNCs interchangeably, although small differences occur in terms of whether the corporations in question have a relationship with a home country (MNCs) or not (TNCs; Vaughan, 2011).
2.The Nexus between States and Corporations
2.1.States, MNCs and the Bargaining Process
It seems that the state itself, as one of the major actors in the post-WWII globalization process, provided the groundwork for a new global order by giving away parts of its own power by applying neoliberal ideas of the Washington Consensus (Sweeney, 2005). This process created an unstable situation, in which states are increasingly valued by market share instead of territories or military power and which, as a result, have become increasingly integrated with the global economy (Lansford, 2000; Strange, 1996). The result is a global market in which a clear distinction between different state economies is often not possible and financial flows are uncontrollable (Willets, 2011). This process is likely to benefit MNCs because they “will outsource elements of their production where overseas locations give them some sort of economic advantage that they cannot secure at home”(Baylis et al., 2011).
As Monbiot highlights, MNCs actively “engineered” this global market to benefit from economics of scale by selling identical products worldwide and most importantly under the same conditions (Monbiot, 2000, p.9).
The conflictual relationship between states and MNCs can be illustrated by analysing their different objectives, shown in table 1.
MNC – State Objectives (adapted from Dicken, 2007, p. 233)
illustration not visible in this excerpt
- Quote paper
- Matthias Boeing (Author), 2013, The Nexus Between States and Multinational Corporations, Munich, GRIN Verlag, https://www.grin.com/document/209806