Does the sovereign nation- state have enough tools to control the excesses of globalization?
The sovereign state is facing contemporary challenges brought about by the globalization. The acceleration of globalization in the late twentieth century has severely destabilized the traditional structure of a state and the authority of governments. The destabilization implies that governments are “losing control both in domestic and international affairs as an increasing number of human activities are now escaping regulation and spinning out of control” . While these challenges have indeed tested than state’s ability to deal with new emerging problems, the sovereign state is still the only entity able to control the outcomes of the globalization.
In this paper I will demonstrate that despite the concerns raised by some legal scholars that the state apparatus can no longer regulate the cross-border activities effectively, the sovereign state has enough tools to control the excesses of globalization. I will show that the proposed substitutes for the state power lack the ability to perform the function of a state. In the first part of the paper I will discuss the traditional notion of the state sovereignty. The second part will cover the problems introduced by globalization. In the third part the possible substitutes for the state power will be identified.
My argument about the state’s ability to control the excesses of globalization requires explanation of the traditional notion of state sovereignty and the evolution of this concept. I will begin with the explanation of the present system of international relations, which is known as the Westphalian World Order and I will identify the main features of that system.
The traditional concept of state sovereignty
“The principle that independent states’, each recognizing the other’s judicial autonomy and territorial integrity, should co-exist in a single political system was established for the first time under Dutch hegemony by the Treaty of Westphalia in 1648” . When it was first established under Dutch hegemony, the principle of national sovereignty was meant to regulate relations among the States of Western Europe . Although the signatories of the Treaty had only the peace of Europe as their ultimate objective, as the Europe expanded in the next three centuries the European Order became the World Order, which was based on the “state system” .
The “state system” replaced the imperial-ecclesiastical authority that prevailed in pre-Westphalian Europe and brought to an end the long and bloody Thirty Years War in Europe . The basic principle of this “state system” was the sovereignty of individual nation-states, sovereignty being defined as supreme power against which there is no appeal. Till today the present system of international relations is known to legal scholars as the Westphalian World Order.
According to some legal scholars, the successful existence of the Westphalian World Order is based on certain structure that allowed the system to function efficiently. This structure developed slowly over three and a half centuries and was never consolidated into one single document .
The first observation is that the national governments are the sole holders of legal sovereignty. The notion of sovereignty has a long history and there have been many debates on the sources of sovereignty. But whatever the source is, sovereignty became the “ absolute reference point in global relations” . In other words, the only rightful owners of this state sovereignty were the governments of the recognized nations . National governments are not only legally sovereign but are the most powerful players on the world stage . This implies the freedom of action of a state in relation to other states .
The sovereignty of nations expressed itself through the control of geographical territory . Land was the principal factor and its control yielded both economic and political power . The only enforceable international law is hat based on treaties between sovereign states . The only real international law was that derived from the treaties. This type if international law merely re-affirmed the primacy of sovereignty since no sovereign country could be forced to accept what it had not consented to . From what has been said above, it is clear that the term sovereignty has evoluted with the time. And this term is used to refer to a number of different, though interrelated concepts. Today, the international system is based on sovereign states that act in accordance with international law.
As I have given the details of state sovereignty, I will move on to describe the changes that have occurred in the middle of the last century since 1945, under the name of globalization.The emergence of globalization
The term globalization has been used in may occasions to describe the novelty of the changes that have occurred since 1960’s .Globalization broadly refers to the expansion of global linkages, the organization of social life on a global scale, and the growth of global consciousness, hence to the consolidation of the worlds society . Despite the widespread use of this concept, the definitions of globalization vary in the particular driving force they identify .
We have to understand, that globalization is historically complex, and the meaning of the term is itself a topic in global discussion. It may refer to “real processes, to ideas that justify them, or to a way of thinking about them. And the term is not neutral: definitions express different assessments of global change” . The following definitions represent currently influential views:
· “the inexorable integration of markets, nation-states, and technologies to a degree never witnessed before- in a way that is enabling the individuals, corporations and nation-states to reach around the world farther, faster and cheaper than ever before…the spread of free-market capitalism to virtually every country in the world” .
· “The compression of the world and the intensification of consciousness of the world as a whole…concrete global interdependence and consciousness of the global whole in the twentieth century” .
“The historical transformation constituted by the sum of particular forms and instances of …making or being made global (I) by the active dissemination of practices, values, technology and other human products throughout the globe (ii) when global practices and so on exercise an increasing influence on people’s lives (iii) when the globe serves as a focus for, or a premise in shaping, human activities” .
“As experienced from below, the dominant form of globalization means a historical transformation: in the economy, of livehoods and modes of existence; in politics, a loss in the degree of control exercised locally…and in culture, a devaluation of collectivity’s achievements…Globalization is emerging as a political response to the expansion of market power…It is a domain of knowledge.”
From the definitions given above we can infer that globalization involves “transnational processes of interaction and interdependence” . These transnational processes increases economic, cultural, and ideological homogeneity as well ass the idea of solidarity, a qualitative acceleration of information flows, an interdependence of societies, a mobility of populations without borders . In this sense, globalization is the extension and accelerator of an ongoing process of transnationalization . It tends to increasingly exclude human, especially economic activities from the jurisdiction of the state and institutional regulation . As a result, the alleged inability of states to control the transnational processes is attributed to two major changes that occurred at the end of the Cold War.
The transformation from local processes to transnational processes is attributed to many factors. Although scholars present different views on this issue, all of them agree that there were two main factors that have both accelerated the process of globalization and have led to the doubts on the effectiveness of the traditional nation state. Even if they agree that information revolution and the expansion of markets were the main causes of globalization, they perceive them differently. The first of these factors, the telecommunications revolution will be discussed in the following paragraph.
According to Matthews, “one of the changes introduced with the end of the Cold War was the computer and telecommunications revolution” . Widely accessible and affordable technology has broken down governments’ monopoly on the collection and management of large amounts of information and deprived governments of the deference they enjoyed because of it. These new technologies have changed people’s perceptions because the Internet “connected people across borders and separated them from natural and historical associations within nations” . Moreover, the “information technologies disrupted hierarchy and spread power among more people and groups” . As result, the states’ became merely passive observers, as they were no longer able to control the human activities escaping from their jurisdiction.
Many critics have pointed out that the state is not facing absolutely new challenges. According to Arrighi, the newness of the so called “information revolution is impressive, but the newness of the railroad and the telegraph, the automobile, the radio, and the telephone in their day impressed equally. Submarine telegraph cables from the 1860’s connected inter-continental markets. They made possible-day-to-day trading and price making across thousands of miles, a far greater innovation than the advent of the information technologies today” . And the state played a very active role not only by establishing rules governing trans-border trade but also by cooperating with other states in order to make the process as fluent as possible.“The most spectacular expansion of the last to decades, and the strongest piece of evidence in the armory of advocated of globalization thesis, has been in world financial markets” . As Saskia Sassen notes “ since 1980 the total value of financial assets has increased two and a half times faster than aggregate GDP of all rich industrial economies” .And the volume of trading in currencies, bonds and equities has increased five times faster . “Foreign exchange transactions were ten times larger than world trade in 1983:only ten tears later, in 1992, they were sixty times larger” . In the absence of this explosive growth in world financial markets, we would not probably be speaking of globalization.
However, the advocates of the globalization acknowledge that the growth in the financial markets is not a phenomenon. “ In many ways the international financial market from the late 1800s to World War I was as massive as today’s. Today’s transformations are not novel except for their scale, scope and complexity”. As Giovanni Arrighi notes “ the most important reason is that the present belle époque of financial capitalism, no less than its all historical precedents—from Renaissance Florence to Britain’s Edwardian era, through the age of the Genoese and the periwig period of Dutch history—is based on massive, system-wide redistributions of income and wealth from all kinds of communities to capitalist agencies ”.
Concluding the discussion about globalization a few ponts can be made from what has been said above. The term globalization encompasses a number of different meanings covering a broad range of issues. In the broadest sense the notion involves transnational processes of interaction and interdependence, which occurred with the computer and telecommunications revolution and the expansion in the world financial markets. The next chapter will analyze in what ways the globalization affected the traditional nation-state and whether the state sovereignty was undermined by the present transformations in the financial markets.
In what ways did the globalization affect the sovereignty of the nation-states?
The impact of globalization upon the traditional state structure has become the most discussable issue recently. Various forces arising from the globalization processes are said to affect the sovereignty of nation-states through specific mechanisms . These forces can be classified into four broad categories. These four groups are illustrated in the table below.
1. The Global Economy Multinational Companies-Global Capital markets2.Transnational Bodies Economic regulatory bodies, for example World bank, IMF, WTO, UN and EU.3. International Law International treaties recognized by national Courts, EU legislative acts.4.Hegemonic powers and power blocks NATO and Former Warsaw Pact
According to David Held, the most significant challenge to state sovereignty arises from the global economy, which entails in it the dominant role of multinational companies of global markets . “Multinational companies make decisions on the basis of optimizing their profitability rather than the economic health of particular nations. Their decisions on investment, flows of resources are made rather independently regardless of national policies of host countries, thereby affecting the economic growth, employment, industrial structure, and even the government taxation” . As a result, the “rapid globalization of financial markets has left governments far behind” . “The governments only appear to have a free choice when they set economic rules. Theoretically, states have a choice to ignore these rules but in practice the penalties are severe – states lose foreign capital, foreign technology and domestic jobs” .
Together with this, the “development of global capital market is also widely reported to undermine the sovereignty of nation-states. Today, gamblers and investors can transfer huge amount of money from one country to another literally in a moment through the electronic communication network” . According to some legal scholars, such a situation implies that states cannot control this movement properly. The recent financial crisis in some Asian countries illustrates the devastating effects of the rapid money movement to the state sovereignty . Besides, the development of huge offshore bank deposits creates a perfect medium to money laundering that the sovereign state is not able to control . Transnational bodies and international law also affect the sovereignty of nation-states. “The number of NGO’s and their role has exploded in the last half decade. Not only non-governmental organizations are penetrating deeper into the official decision-making but they also deliver more official development assistance than the entire United Nation’s system” . As a result, a lot of legal scholars predict that the states are no longer able to compete with the potential that the NGO’s have.
However, NGO’s are not the only entities that posses threat to the state sovereignty. “The United Nations, as a transnational organization, has introduced an unprecedented event in the history of the state sovereignty by establishing new legal bases for international interventions. In the 1991 the United Nation’s General Assembly declared itself in favor of humanitarian intervention without the request or consent of the state involved” . Later steps by the Security Council in authorizing the use of force and peace –keeping and peace-enforcement operations imply the demise of the traditional state sovereignty.
The European Union is defined as “unprecedented hybrid” which represents the shift from the “hierarchical state order to some new functional entity, which is taking over some of the state’s powers” . According to Matthew, “it respects member’s border’s for some purposes, particularly in foreign and defense policy, but ignores them for others” . EU has already launched an effective single currency system, which is rapidly replacing the national currencies of its member states . Moreover, the EU’s judiciary can override the national law and the Council of Minister’s can overrule certain domestic executive decisions .
All of the above mentioned forces have affected the traditional structure of the nation-state in one way or another. These changes have been subjected to many different interpretations by different legal scholars. The following passage will briefly discuss the most relevant aspects of the two main theories.
From these discussions two prevailing views can be inferred. The opponents of the “new medievalism” argue that the acceleration of the processes of globalization has led to the disruption of hierarchies of the nation state and they predict the end of the nation state . Quite on the contrary, some scholars argue that the states are “empowered rather than disempowered by the financial expansion.” The following paragraph will discuss the arguments of the new medievalists and will analyze what other alternatives, if any, can substitute the state power.
The new medievalists argue that globalization has led to the power shift in the structure of organizations: from hierarchies to networks, from centralized compulsion to voluntary association . According to them, the traditional nation states are not able to adapt to the rapidly changing environment because they are “quintessential hierarchies, wedded to an organizational form incompatible with all the new technologies make possible” . Moreover, the nontraditional threats, such as international terrorism, organized crime escape the control of the state and at the same time bring insecurity to the lives of the individuals . As a result, they predict that in the long run the outside forces will be making the decisions for the states. Non-governmental organizations and multinational corporations are among these outside forces that will take over the public or state power. The private power, as some critics point out, is still no substitute for state power. We will first discuss the NGO’s power. According to Valasakis “ the NGO’s principal weapon is appeal to public opinion” . A number of NGO’s represent various interests of the society and they are deemed to be better aware of the problems that people have. “The range of these groups work is almost as broad as their interests. They breed new ideas: advocate, protest, and mobilize public support: do legal, scientific, technical, and policy analysis: provide services; shape, implement, monitor, and enforce national and international commitments; change institutions and norms” .
The critics of this private power point out that for all their strengths, NGO’s are special interests, albeit not motivated by personal profit. The best of them, the ablest and most passionate, often suffer most from tunnel vision, judging every public act by how it affects their particular interest. Generally, they have limited capacity for large-scale endeavors, and as they grow, the need to sustain growing budgets can compromise the independence of their mind and approach that is their greatest asset . Another possible scenario is the governance by markets where the forces of supply and demand will make the political decisions as well as the economic . This approach has been highly criticized by many scholars. They believe that the governance by markets will eventually lead to the oligarchy because businesses will only be concerned with satisfaction of their own interests. According to Valasakis “ political democracy is normally based on the principle one –person one vote. Markets function under the rule one-dollar one vote expressed through the price mechanism. Most corporations dream of becoming monopolists and if governance is left to the monopolistic markets, then serious democratic deficits will arise with a handful of oligarchs making crucial decisions affecting everybody” .Contrary to the “new medievalism” theory, some scholars support the idea that the traditional nation-state is becoming more mature and today it is needed more than ever. George Soros and Giovanni Arrighi are among the opponents of this view. Although they appreciate the potential and power of the financial markets they believe that unregulated markets can cause “social disruption”. According to Arrighi, “the idea of self-adjusting global market is a “stark utopia” . He argued that no such institution could exist for any length of time without annihilating the human and natural substance of world society . The state is an extremely important player in the market regulation because only a state can “ cushion the disruptive effects of market regulation and in this way can prevent society from revolting in self-defense against the market system” . Hence, they believe that only the traditional nation-state has the necessary power not only to ensure the effective functioning of the financial markets but also to guarantee the protection of the basic individuals’ needs.
Conclusion
The sovereign nation state is enhancing changes that during the recent decades have been going under the name of globalization. The process of globalization, as some scholars point out, is historically not unprecedented, but the technology and the speed, and certain features are new. As a result, the proponents of the globalization claim that the process of globalization is undermining the sovereignty of nation-states and will lead to the eventual disintegration of the sovereign states system in international politics. They predict that NGO’s and multinational corporations are likely to take over the state power. However, the critics say that both NGO’s and multinational corporations will never be able to perform the functions of a traditional nation state.Although NGO’s and especially multinational corporations are more powerful than some states, only states can create favorable conditions for the markets to flourish. The state regulation today is needed more than ever because states are the only no voluntary political unit, the one that can impose order and is invested with a power to tax. Moreover, only the nation-state can meet crucial social needs, such as protecting consumers, providing medical care, ensuring the right to education and many others that markets do not value.Finally, it is rather clear that the sovereign states are still the basic constituents of the international community. The concept of sovereign states has formed the political basis of the political world since the treaty of Westphalia and today in an extremely fast changing world it is needed more than ever.