What Impact Has Globalization Had on the Nation-State?

Spring, March 2006

What Impact Has Globalization Had on the Nation-State?

“A state can no more give up part of her sovereignty than a lady can give up part of her virtue”

– John Randolph-

Introduction

It is assumed that globalization is embedded in Neoliberal theory which builds on the conviction of classical liberalism that market forces will bring prosperity, liberty, democracy, and peace to the whole of humankind and advocate the removal of state controls on prices, wages, and foreign exchange rates.[1] Such activities have challenged the political structure such as who plays the key role thus they challenge both the sovereignty and autonomy of states: does it remain the only important actor or not? Globalization, they argue, depletes political authority from nation-states, the dominant figure of political organizations in world politics. Is it true?

In the heated debate surrounding globalization, its effects on nation-state are especially controversial. Some fear a more far-reaching erosion of the nation-state; some acknowledge it; while others refuse that it means the end of the nation-state. Overall, there are five theses that must be acknowledged in the contemporary debate over the impact of globalization on the nation-state: Hyperglobalist Thesis; Sceptical Thesis; Complex Globalization thesis; New Institutionalist thesis; and Ideational Globalization thesis. Each thesis views the issue from different perspectives and emphasizes it in different ways.

To tackling the question on globalization’s impact on the nation-state, this essay discusses three main parts: globalization in contemporary politics and its debate; the debate on globalization and the nation-state; and what impact globalization has had on the nation-state.

I. Globalization in Contemporary Politics and its Debate

Globalization covers an extensive range of aspects such as economic, politics, social and cultural. Scholte wrote that globalization is a distinctive and significant feature of recent world history.[2] The aspects in globalization, although being wide, both affect and are connected to each other. Thus, it is fair to say that, among other things, political globalization involves economic globalization as activities of both aspects are related and thus, to some extent, overlapped. Basically, politics and economics are inseparable within social relations whereas politics (the acquisition, distribution, and exercise of power) is in integral to economics (the production, exchange, and consumption of resources), and at the same time economics is integral to politics, helping to determine where power lies and how it is exercised.[3] Political Economy requires analysis of both views – political and economy – in which politics shapes the economy, and of the way in which the economy shapes politics.[4]

Economic globalization refers to what happens in the world in which the moving flows of goods, capital, labour, and information and technology seem to easily advance across national boundaries which rapidly expands the political and economic interdependence. In my opinion, political globalization is what happens in world politics as a result of the increasing economic activities within that of multiple processes. However, the linkage between economic globalization and erosion of the democratic nation-state is more political than economic in nature. Although, what seems somewhat less contentious is that the political processes, events and activities nowadays appear increasingly to have a global or international dimension.

Giddens mentioned that globalization generally includes four elements namely extensity, intensification, velocity and deepening impact.[5] Extensity refers to social, political and the economic activities stretching across national frontiers. This
is possible due to the greater rapidity ensued from the advance in technology and communication. The flow of ideas and goods over the globe leads to greater interdependence i.e. intensification. That means a local development can lead to an enormous global consequence. The talk of global politics is to acknowledge that political activity and the political process is ‘stretching’, ‘deepening’, and ‘broadening’ of the process itself. Related with this is such that developments at even the most local level can have global implications and vice versa. McGrew states that a broadening of political process refers to the growing array of issues which surface on the political agenda combined with the enormously diverse range of agencies or groups involved in political decision making processes at all levels from the local to the global. [6]

There are debates on how we see the contemporary world politics. The Hyperglobalist thesis, argues that the world we live in today is different from more than twenty years ago as it is now borderless in nature, particularly in economic terms. What we are witnessing is the cumulative effect of fundamental changes in the currents of economic activity around the globe.[7] National economies are included into one global economy, in which international financial markets and transnational companies dominate. In a borderless world, for example, companies can simply pick and choose where to invest since they are no longer constrained by geography.[8] Thus what happens is a real and profoundly transformative process[9] which will gradually expand further and eventually shape a more globalized world.

The Sceptical thesis criticizes this thesis by suggesting that contemporary world is not really different from before. Hirst and Thompson, argued that the world economy is actually less open and integrated than it was before the First World War,[10] and rather than a ‘globalized economy’, it is an ‘internationalized economy’.[11] Thus, they acknowledge that globalization is a myth; that it is not a ‘globalized’ world but an ‘internationalized’ one. It conceals the reality of an international economy segmented into three major regional blocs in which national governments remain very powerful.[12] They conceive it as one in which the principal entities are economies[13]. The flow of trade and investments are far from being global, and despite there is increasing activities of Multinational Companies (MNCs) across borders, most firms remain to operate from their distinctive home country.[14]

On the other hand, the Complex Globalization theorists, such as Held and Dicken, view the globalization as a process and do not deny the globalization itself. Dicken suggested that today, fewer activities are oriented towards local – or even national – markets, more and more have meaning only in regional or a global context.[15]. According to Held and McGrew, globalization refers to a shift or transformation in the scale of human organization that links distant communities and expands the reach of power relations across the world’s regions and continents.[16] They argue that the world is experiencing a transformation, although, differently to Hyperglobalist thesis, it is not only about economic, but also covers other aspects: politically, socially, and culturally.

The New Institutionalist Thesis, such as Hall and Soskice, see resolutions of coordination and governance problems as strongly related to national political economies. Thus, they view that what happens in contemporary world is relations of continuing and increasing divergence between market liberal and social democratic regimes. They contrast liberal market economies (LMEs) such as the US and UK, with coordinated market economies (CMEs) such as Germany and Scandinavia.[17] In the former, the firm coordinates its activities primarily via hierarchies and competitive market arrangement, while in the latter they depend more on non-market relationships for coordination and the development of key competencies.[18]

Another prominent thesis is the Ideational Globalization. Among them are Hay and Marsh, known as their idea of Demystifying Globalization. Interestingly, they suggest that despite looking at the material reality of globalization, we should look at the idea of it. The way we understand the world and our ideas about the world is what shapes our behaviour. Thus, the role of ideas is important in shaping the world today. For instance, the United States (U.S.) adopted the idea advocated by Neoliberal thinking that it favors the opening of foreign markets by political mean and state always seeks to maximize its interests in all issue-areas.[19] In the case of UNCTAD I, it had opposed the schemes proposed by the developing countries since they were not something that could maximize its interests when it came to free trade. This thesis sees the discursive construction of globalization as a crucial explanatory variable in explaining policy outcomes.[20]

In sum, I would state that the contemporary world politics is different from what it was like a century ago, but not in the way the Hyperglobalists see it. The increasing importance of environmental issues in International Relations proves that it is different. What happens in contemporary world politics today is both a part and outcomes of its process. The ‘stretching’, ‘deepening’, and ‘broadening’ within the process and activity in politics is affected, particularly, by economic activities although other activities, too, has affected. It is noted by the increasing of international organizations, NGOS, the mobility of MNCs across borders, international regional integrations, and international and regional trade activities alongside the trade institutions. Thus they have modified the structure of world politics. The reconfiguring shape of contemporary world politics has challenged and impacted the nation-state.

II. Globalization and the Nation-State: The Fundamental Debate

No concept is more central to political discourse and political analysis than that of the state.[21] For most of the 20th century, the nation-state, with clearly defined borders, has been the leading political object which is considered very important in world politics. But, perhaps, since the subsequent collapse of the Soviet Union, globalization of the world economy has made political borders less important. Strategic alliances that would have been impossible during the Cold War era have developed to allow more economic and cultural interaction.

(i) What is the Nation-State?

It is important to explain a simple definition of what the term nation-state means. We all know that the nation-state is generally defined as a country by which it is ruled under one government. Specifically, the nation state is constituted by the government assuming a legal and moral right to exercise sole jurisdiction, supported by force in the last resort, over a particular territory and its citizens. This involves institutions for managing domestic and foreign affairs.[22] Some also refer the nation-state as a modern-state as it’s defined in Elmer Social Science Dictionary that nation-state is Modern state in which a government has sovereign power within a defined territorial area, and the mass of the population are citizens[23].

In addition, ‘Sovereignty’ in it modern form is a highly distinctive political claim which is to exclusive control of a definite territory[24] – within which the territory includes control over political and economic activities within their border – and the claim to sovereignty is the entitlement to rule over a bounded territory from state autonomy – the actual power the nation states possesses to articulate and achieve policy goals independently.[25]

(ii). How is the debate surrounding the globalization and the nation-state?

The issue of the role of nation-state in an era of globalization is highly crucial. Perhaps the most meaningful explanation of these diverging interpretations of what globalization is and how it should be defined is the result of the varying theoretical stances of academics on how best to conceptualize a nation-state. Questioning the impact of globalization on nation-state means that we have to bring up the debate surrounding the issue. Suggestions from each thesis are diverse. It is interesting to contrasting each thesis one to another.

Hyperglobalists view globalization as something that is a real force, aiming to produce a global social culture, sipping coke, watching Disney, wearing GAP, waiting at McDonalds, and a single global economy. Thus, they ensure that the effects of globalization reach the remotest societies and in its progress diminish the constraints inflicted by nation-states. They view this as a good thing, where possibilities and opportunities arise enabling societies to be 'enriched' by the phenomena of globalization. Furthermore, Ohmae believes that global market has made the undermining of nation states’ role in world economy. He assumes: in today’s more competitive world, nation states no longer posses the seemingly bottomless well of resources from which people used to draw with impunity to fund their ambitions; and further questions: Are these nation states – not withstanding the obvious and important role they play in world affairs – really the primary actors in today’s global economy?”[26] He suggests that one way to answer this question is to observe the flows of what he calls the four “Is” [27] that define it.

In contrast, Hirst and Thompson argued that “whereas tendencies towards internationalization can be accommodated within a modified view of the world economic system, that still gives the major role to national-level policies and economic actors; when firms, governments and international agencies are being forced to behave differently, but in the main they can use existing institutions and practices to do so.”[28] They choose to define economic globalization as internationalized economy, within which nation states are still the central actor, thus they take such an important account in the process.

Complex globalization theorists, Dicken assumes that in politics, “The position of the state is being redefined in the context of a polymeycentric political-economic system in which national boundaries are more permeable than the past.[29] Held et al suggest that, in fact, the nation-state remains an important actor in global political economy. Its role is, indeed, experiencing a reconfiguration. They are in the same opinion with scepticsts on the argument: while nation-state’s government is not the passive victims of internationalization but, on the contrary, its primary architects.[30] At the core of this thesis is a belief that contemporary globalization is reconstituting or‘re-engineering’ the power, functions and authority of national governments.[31]

Institutionalists note the proliferation of private and often oligopolistic networks of trans-governmental and non-governmental organizations, and the issues which they both address, and fail to address. They argue that globalization, rather than obstructs the nation-state, it may actually provide to enable it. They state that nation-state indeed may undergo common pressures, yet the existence of domestic institutions can obstruct or enable states in facing the pressures of globalization.

Hay, while approving the sceptics that there is no enough evidence that the world is globalized, suggests that globalization may play a powerful role in ideational terms, and might weaken the nation-state. Globalization may be something of a self-fulfilling prophecy in a way if policy-makers believe in globalization thus it may shape their approach whether or not globalization exists. This thesis emphasizes the demystifying globalization in a way what globalization had had impact on the nation-state depends on the way nation-state sees the globalization itself. The idea shapes the way nation-state respond and its decision-making process. So, basically, it is about an ideational term.

III. What Impact Has Globalization Had on the Nation-State?

Having discussed the debate above, I choose not to take side on any thesis. However, I would identify on some of their points where, to some extent, I agree or not agree to each of them. On the way I see the contemporary world politics, I tend to agree with the complex globalization thesis that the world has transformed, and globalization is happening. Activities in globalization, indeed, have influenced the structure of world politics. Yet, I would stress that the economic ones is particularly prominent and related to the transformation of it.

My answer to the essay’s question is that, opposite to that of Ohmae, globalization does not necessarily mean the end of the nation-state. Globalization has had impact on nation-state causing it to adapt to the process in world politics, but at the same time, national interests remain on top of its priority. What actually happens is that the nation-state remains powerful actors in the global system, yet it shares the arena with other actors such as agencies and organizations. Such actors are non-state actors: MNCs, transnational pressure groups also participate in global politics. Thus, the nation-state maintains considerable discretion in how they respond to international markets. Rather than strong convergence toward a Neoliberal ideal, they predict continuing, and perhaps increasing, diversity of state institutions and policy in the global economy.[32]

To explain my answer, I would emphasize it on three debated issues in globalization: the growing international movement of MNCs; the emerging regional integration, and the tendency of international trading regime.

The increasing process in economics globalization is assumed by Hyperglobalists as something that undermines the role of nation states thus it will finish the nation-state. According to Ohame, the strategies of MNCs are no longer shaped and conditioned by reasons of state. The mobility of MNCs across borders has had impact to economic activity in the contemporary world and is considered to influence nation states’ economic and political policies as well as the society.

In that case, I would suggest that although MNCs are the new important actor in world politics; it does not undermine the role of nation state. As an actor which has made globalization to happen, nation states have formed the regulation to maintain it. Holton argues that nation-state can not be regarded as being in decline or overrun by globalization and this is in large measure because global capital is mostly not of an anarchic variety and still requires state functions to be performed;[33] thus, we must acknowledge that some nation-states are home base for MNCs. Hirst and Thompson also argue that the MNCs are subject to the national regulation of and are effectively policed by the home country.[34] While shareholdings in various MNCs may happen to be transnational, yet they headquarters place within a single nation. Some amount of their profit are feasibly expected to be sent back to the state of the company origin., and they also hold yearly shareholders’ meetings in that nation as well as develop close relations with the nation state’s government in which they are domiciled. They depend on state structures to guarantee stable property rights or at least predictability in determining the rules of the game under which they operate.[35] To conclude, Hirst and Thompson stated that “International business are still largely confined to their home territory in terms of their overall activity”.[36]

Furthermore, it is quite clear to see that current trends suggest that countries are not just out to obtain free trade but also regional trade treaties with the idea of globalization still being a figurehead as an economic and political goal. Despite this, regionalism is also kept on a high agenda with the European Union (EU), the North American Free Trade Agreement and the African Union being examples of regionalism.

Since the Second World War, global politics have witnessed the emergence of a new political phenomenon that is the cooperation and integration of states on regional scale. The prime example among these regional groupings is the European Union (EU). In the EU, supranational institutions and national governments share political authority, and where market forces play an important role in the setting of standards and regulations. In term of regional organization, the EU is often referred as a perfect example for this. It has achieved substantial progresses towards with a single market and a single currency creating less trade barriers and a competitive business and market environment. Externally, economic integration has led to a common trade policy that has made the EU a key player in international negotiation.[37] This is true. However, the EU has not been succeeded in its political integration in which member states are still put their national interests above others. This means that political integration has somewhat lagged behind, and efforts at creating a common foreign and security policy have tended to promise more than they were able to deliver. For instance, in term of Common Foreign Policy, there are differences among member states’ foreign policy towards U.S.’ current invasion to Iraq. Britain as a member of the EU supported US by joining as the alliance of US in this invasion and sending its military forces to be part of the US alliance troops. Another example is that Britain remains undecided towards the single currency of EU. If we look back, the basic motivation regarding why Britain joined the European Community (EC) – which now has formed to be the EU – is based on its national interests, which if Britain did not join the EC, then it would be left out in its own region in term of economic affairs.[38] And also, its ‘so-called special relationship’ with US put Britain under pressure since the former US President, Kennedy, personally stressed that it would prefer to choose the EC over Britain if Britain would not want to join.

The tendency of international trading regime as an impart dimension of globalization is the establishment of worldwide regimes to foster rule-governed within the international system.[39] The current international economy is relatively open and has more and institutionalizes free trade through the World Trade Organization (WTO) that was formed to liberalize the world market. It is argued that free trade and globalization are rhetorical devices covering the international shift from nation-states to transnational corporations: a significant and fundamental change in international relations. However, we must note that WTO is a member-driven organization where all regulations are formulated by member states. Principally, nation-states bring their main concerns and area of its interests of its national interests to the meeting to be negotiated. Resolutions achieved in the meetings have to be implemented by all members. Unfortunately, WTO has been dominated by developed countries that always seek to maximize their interests yet they also try to maintain and protect their national interests by avoiding to negotiating unbeneficial issues for them. The voice of the LDCs is often ignored. This situation has led to what happened at the Cancun Ministerial meeting where the LDCs united together responding the force by developed countries into acquiescing with an agreement with thich most of them profoundly disagreed.

Accordingly, what really happens to nation-states in contemporary world politics today is about the power structure: the divide of North-South relations. The North, being the rich ones, has the power to dominate the world politics and world markets; and, to some extent, control it. The South, being the poor ones, has struggled to manage to overcome their problems while also strives to compete with other countries in an era where international market economy is more open and borderless. Strange assumes that what decides the nature of wealth, order, justice, and freedom is, fundamentally, a question of power. It is power that determines the relationship between authority and market thus markets can not play a dominant role in the way in which a political economy functions unless allowed to do so by whoever wields power and possesses authority.[40] This suggestion may explain why the LDCs formed a coalition in the WTO. They have sought to gain more power in voicing their interests. Such disparities between North-South have long been brought up in International Relations when the South had started their movement to create UNCTAD, especially dedicated to their economic development needs.

Conclusion

Globalization has reconfigured the world politics and its impact on nation-state has been questioned. One of the key issues in the implementation of global regulatory arrangements is the role of nation states in general and in particular the influence of the powerful nation states. Their role may be reconfigured in facing other important actors to be considered, yet it remains to have such significant roles in governing the contemporary world economy. However, the nation-state remains effective and necessary players in the global politics although globalization requires nation-state to adapt to the new environment if they are to succeed in meeting the demand of their constituents. What happens to nation-state in the contemporary politics is about power structure in which it is divided between North and South which has been the most-debated issues in International Relations.

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[1] J.A. Scholte, J. A. (2000) Globalization: A Critical Introduction, (London: Macmillan, 2000), p. 34.

[2] Ibid, p. 3.

[3] Jan Aart Scholte, “Global Trade and Finance”, in John Baylis and Steve Smith (eds), The Globalization of World Politics: An Introduction to International Relations (New York: Oxford University Press, 2005), p. 600.

[4] Stephen Gill and David Law, The Global Political Economy: Perspectives, Problems, and Policies, (Baltimore: The John Hopkins University Press, 1988), p. xviii.

[5] A. Giddens (ed.), Sociology: Introductory Reading, (Oxford: Polity, 2001).

[6] Anthony McGrew, “Conceptualizing Global Politics”, in Anthony G. McGrew and Paul G. Lewis, et al, Global Politics, (Oxford: Polity Press, 1992), p. 3.

[7] Kenichi Ohmae, The End of The Nation State, (London: HarperCollins Publishers, 1996), p. 9.

[8] David Marsh, Nicola J. Smith, Nicola Hothi, “Globalization and the State”, in Colin Hay, Michael Lister, and David Marsh, The State: Theories and Issues, (Basingstoke: Palgrave, 2005), p. 173.

[9] Nicola Jo-Ann Smith, Showcasing Globalisation?: The Political Economy of the Irish Republic, (Manchester: Manchester University Press, 2005), p.13.

[10] Marsh, Smith, and Hothi, in Colin Hay, et al, p. 173.

[11] Paul Hirst, Grahame Thompson, Globalization in Question, (Cambridge: Polity Press, 1999), chapter 1.

[12] Held and McGrew, et al, Global Transformations: Politics, Economics, and Culture (Cambridge: Polity Press, 1999), p. 2. See also: Hirst and Thompson, ch.1; Ohmae, introduction and ch. 1.

[13] Hirst and Thompson, p. 8.

[14] See for instance: Ibid, chapter 3.

[15] Peter Dicken, Global Shift: Reshaping the Global Economic Map in the 21^st Century, (London: Sage Publications Ltd, 2003), p. 9.

[16] David Held and Anthony Mcgrew, Globalization / Anti-Globalization (Cambridge: Polity Press, 2002), p. 1.

[17] J. Brocker, et al, Innovation Clusters and Interregional Competition, (Springer-Verlag Berlin and Heidelberg GmbH & Co. K, 2003), p. 276.

[18] P.A. Hall and D. Soskice, Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, (Oxford: Oxford University Press, 2001), p. 8

[19] Steven L. Lamy, “Contemporary Mainstream Approaches: Neo-Realism and Neo-liberalism”, in John Baylis and Steve Smith (eds), The Globalization of World Politics: An Introduction to International Relations (New York: Oxford University Press, 2005), p. 213.

[20] Marsh, Smith, and Hothi, in Colin Hay, et al, p. 177.

[21] Colin Hay and Michael Lister, ‘Introduction’, in Ibid, p. 1.

[22] Robin Cohen, Paul Kennedy, Global Sociology, (Palgrave, 2002), p. 78.

[23] Elmer Social Science Dictionary, http://www.elissetche.org/dico/index.htm

[24] Hirst and Thompson, p. 256.

[25] Held and McGrew, et al, p. 29

[26] Ohmae, p. 2.

[27] See Appendix 1.

[28] Hirst and Thompson, p. 1.

[29] Dicken, p. 122.

[30] Held and McGrew, et al, p. 6; See also Hirst and Thompson, p. 270

[31] Ibid. p. 8.

[32] Miles Kahler and David A. Lake (eds), Governance in A Global Economy: Political Authority in Transition, (Princeton: Princeton University Press, 2003), p. 414.

[33] Holton, p. 155.

[34] Hirst and Thompson, p. 9.

[35] Holton, p. 83.

[36] Hirst and Thompson, p. 96

[37] Thomas Christiansen, “European Integration and Regional Cooperation”, in Baylis and Smith, p. 595.

[38] Colin Pilkington, Britain in the European Union today, (Manchester: Manchester University Press, 2001), chapter 1.

[39] Richard Little, “International Regimes”, in John Baylis and Steve Smith (eds), The Globalization of World Politics: An Introduction to International Relations (New York: Oxford University Press, 2005), p. 370.

[40] Susan Strange, States and Markets, (London: Pinter, 1994), p. 23.