Globalization has been a significant factor in world politics for a couple of decades. It is the “process (or set of processes) that embodies a transformation in the spatial organization of social relations and transactions, generating transcontinental or interregional flows and networks of activity, interaction, and power.”1 It includes several actors, with multinational corporations being one of the big ones. A multinational corporation is a corporate organization that has facilities and other assets in at least one country other than its home country, and such company has offices and/or factories in different countries and usually has a centralized head office where it coordinates global management.2 Nowadays, multinational corporations show an immense influence in the world, with some of them being even richer than some countries. According to the World Bank report, of the top hundred economies in the world, thirteen of them are multinational corporations. Of the 100 wealthiest economic entities in the world, 69 of them are multinational corporations.3 With their growing power and influence, whether multinational corporations are making states weaker in the international system is a question to think about.
States need multinational corporations because of the corporations’ wealth and ability to help states with economic growths and developments. They are wealthy, even wealthier than states. For instance, the biggest corporations such as Wal-Mart, Sinopec, Royal Dutch Shell, and Exxon Mobil all have bigger revenues than the GDPs of, for example, Austria, South Africa, Thailand, Denmark, Singapore, and Nigeria. And the cash that Apple has on hand exceeds the GDPs of two-thirds of the world’s countries.4 In addition, multinational corporations play a significant role in states’ economies. First, they make foreign direct investment, which is essential for the sustain development of states. The host countries where multinational corporations have made FDI in regard FDI as a significant opportunity for integrating their economies into the global market and promoting their economic development.5 For developing countries, FDI helps the growth of economies. For developed countries, FDI helps to integrate the country’s market into the global market and to stay competitive.6 Besides FDI, multinational corporations provide benefits to host countries in the form of increased profits, developing of new products, reduced operational costs, and reduced labor costs. Thus, states rely on multinational corporations to promote and sustain development. While multinational corporations benefit states in terms of economic growth, they eventually weaken states’ roles as an actor in the international system. This essay will analyze how multinational corporations weaken the state by challenging its four essential elements: population, territory, government, and sovereignty.
Multinational corporations pose a challenge on the state’s population, the primary element of a state. The state is a community of people, and it is the people who make the state. Population has a direct impact on state development because people bring resources with them and influence states’ economic and political activities. Population also affects the stability of a state. States where the population shares a general political and social consensus or agreement about basic beliefs are more stable than states where the population does not share a consensus. However, multinational corporations are changing the population of the state now.
Multinational corporations affect the part of state population that is employed by them. They pose challenges to the traditional concept of citizenship that people should live in a state with a fixed territory and be loyal to the domestic government. Due to the fact that multinational corporations have companies, factories, and allied branches all over the world, their senior managers, technicians, and even their general laborers may have to travel between the headquarters and the corporation’s offices that are located in other countries and change working places frequently. This results in the frequent change of living places in different countries. For the employees who are constantly moving because of work, they feel that the corporations rather than their home countries are homes to them. Because home is assumed to be a place that does not change often, when the employees have to move from one country to another frequently, the corporations that remain the same appear more stable than the countries the employees are from. Consequently, because the link to their home countries is weakened substantially, corporate identity becomes more important than national identity for those people. They become more loyal to their corporations than to their home countries. According to the Fortune Global 500’s data, the world’s largest 10 multinational corporations based on the number of employees in 2016 have about 9.8 million employees in total, with Walmart having 2.3 million employees.7 With the growing power of multinational corporations and the increase in the number of their employees, more population of the state is affected and start to share fewer common social, political, and cultural values with the state, multinational corporations weaken the population of the state.
Territory is the second essential element of the state. It refers to the land with clearly defined boundary over which the state claims its sole legitimate authority. There can be no state without a fixed territory. People need territory to live and organize themselves socially and politically, and territory provides the state with resources for development. The mobility of multinational corporations challenges the traditional concept of state territory. Due to the global flow of capital, the activities of multinational corporations will not be constrained by the limit of state territories, and “the space of economic activities is expanding and it goes beyond boundaries of nation states.”8 When state territories and boundaries contradict the global requirements of capital, multinational corporations will manage to make the requirements of the state territories to meet the necessities of capital expansion. In other words, when state territories are in conflict with multinational corporations’ global activities, the traditional concept of territory gives way to corporations. As a result, the role of state territory is weakened.
Government is the third essential element of the state. It is the agency of the state that makes, implements, enforces, and adjudicates the laws of the state. Without a government, there would be lawlessness and anarchy and ultimately the state would be dissolved. The state exercises its sovereignty through its government. Now, with the growing power of multinational corporations in the world, these giant corporations also pose challenges to the government of the state. First, they influence the government through lobbying by spending a huge amount of money hiring lobbyists to convince the government to make decisions in favor of the corporations. Of the top 20 lobbying spenders in the United States from 1998 to 2017, nine of them are giant multinational corporations.9 For example, Microsoft’s budget for its Political Action Committee increased from about $16000 in 1995 to $6.4 million in 2017.10 In 1995, the software company only had a single lobbyist based in Chevy Chase, Maryland, and now it has one of the largest Political Action Committees in the U.S. corporate history.11 The speed at which the company went from having no political influence to having one of the largest and most sophisticated political operations is astonishingly fast. Because of its increased budget for lobbying, Microsoft successfully influenced the U.S. administration on antitrust policy.12 Thus, multinational corporations make influence over the government by spending money on lobbying.
1 Held, David. “Globalization.” Global Governance 5.4 (1999): 483-96. JSTOR. pp. 483.
2 Staff, Investopedia. “Multinational Corporation – MNC.” Investopedia. N.p., 05 Dec. 2014.
3 Hoornweg, D., P. Bhada, M. Freire, C.L. Trejos Gómez, R. Dave. 2010. Cities and Climate Change: An Urgent Agenda. World Bank.
4 Khanna, Parag, and David Francis. “These 25 Companies Are More Powerful Than Many Countries.” Foreign Policy. Foreign Policy, 18 Mar. 2016.
5 Long, Guoqiang. “China’s policies on FDI: Review and Evaluation.” Does foreign direct investment promote development? 2005. Washington, DC: Institute for International Economics.
6 Jensen, Nathan M. “Multinational Firms and Domestic Governments.” Nation-States and the Multinational Corporation: A Political Economy of Foreign Direct Investment, Princeton University Press, PRINCETON; OXFORD, 2006, pp. 23–39. JSTOR.
7 “The World’s 50 Largest Companies Based on Number of Employees in 2016.” Global Fortune 500. N.p., June 2017.
8 Keping, Yu. “China’s Governance and Political Development under the Impact of Globalization.” The Chinese Model of Modern Development (n.d.): pp. 220.
9 “Top Lobbying Spending in U.S, 1998-2017.” OpenSecrets.org. The Center for Responsive Politics, 21 Oct. 2017.
10 Loney, Matt. “US: Microsoft’s Lobbying Efforts Eclipse Enron.” CorpWatch. N.p., 12 Feb. 2002.