How Corporate Power and War Coincide with Globalization

How Has Globalization Changed International Politics?

Introduction

Globalization is defined as “an intensification of cross-border interactions and interdependence between countries” (Oldemeinen, 2011). In other words, it is a process by which the social, political, and economic world order depends upon integration of states around the world. It is not, however, viewed as a positive development by all. As Rodrik (1998) points out, “the process that has come to be called ‘globalization’ is exposing a deep fault line between groups who have the skills and mobility to flourish in global markets and those who either don’t have these advantages or perceive the expansion of unregulated markets as inimical to social stability and deeply held norms” (p. 2). Globalization, therefore, is not necessarily viewed as a win-win for all by all. Indeed, the Brexit vote in the UK to leave the EU has been described as a referendum against globalization (Colantone & Stanig, 2016).

Yet, in spite of the integrated nature of globalization, international politics is defined as something quite opposite in essence. The concept of international politics has been described as “a process of mutual influence in which each party seeks to protect and promote its own interests by shaping the behavior of the other party” (Science Direct, 2004). Broadly speaking, international politics focuses on the relations among nations, foreign affairs, and foreign policy. But if in international politics each actor is focused on self-interest, it stands to reason that the collective interest of the whole (necessary for globalization to function effectively) will be in conflict with the self-interest of any one state if any one state opposes the goals of the collective. In fact, it was recently said by Larry Fink of BlackRock that due to the invasion of Ukraine by Russia and the sanctions by the West on Russia, globalization is effectively dead (Sorkin et al., 2022). Globalization relies upon all states working together toward a common aim. War threatens that aim, as does, it could be argued, hegemony by any one state.

Globalization has empowered non-state actors and had a two-sided impact on the global economy. Non-state actors now play a significant role in the global world order as a result of their empowerment. They provide funds for developing nations, issue health warnings and guidance, oversee trade disputes and provide a place for resolutions, supply liquidity to markets, and influence regional policy. All of these actions have a two-sided impact on the economy, however. On the one hand, they help multinational companies to grow into new markets; on the other hand, they push out smaller business owners and entrepreneurs who cannot compete with larger corporations that enter the local marketplace as a result of globalization (Baars, 2019; Mukwarami et al., 2020; Vietor et al., 2008). The outcome is that globalization benefits those who can afford to leverage into the opportunity, but it hurts those who seek jobs offshored or who find their market share greatly diminished as a result of new international competition, and as a result international politics is at a crossroads in terms of how the future world order will be arranged (Colantone & Stanig, 2016).

Empowerment of Non-State Actors

The current world order is essentially unipolar-based, with the US in the West acting as the main hegemonic power whose might is demonstrated through a united front of multinational corporations (Baars, 2019). These multinational corporations work with other organizations in the private and public sector, including non-state actors and state actors, to establish their influence (Baars, 2019). However, the unipolar-based order is now at risk of being changed to a multipolar-based order, as Russia and China offer the Global South a new alternative to Western hegemony. This shift may be a problem for multinational corporations that are based in the West. Already there has been an enormous shift out of Russia by multinational corporations that want to avoid Western sanctions (Sorkin et al., 2022). How this will play out in the coming years remains to be seen.

The main point to be understood from globalization is that while individual voters like those in the UK may feel they have been hurt by it, others have certainly been empowered by globalization—especially various non-state actors like the World Economic Forum (WEF), the International Monetary Fund (IMF), the World Health Organization (WHO), the World Trade Organization (WTO), central banks like the Federal Reserve, the Assembly of European Regions, and major multinational corporations (Colantone & Stanig, 2016; Oldemeinen, 2011). Each of these non-state actors has played a tremendous role in globalization in different ways, but without the globalized world order, none of them would have grown or succeeded to the extent that they have. Their success has depended upon the integration of nations, cultures, politics, economies, finances, and trade. But as Baars (2019) explains, it is really the corporation that has benefitted the most from globalization.

The empowerment of the corporation could not have happened without globalization. Nor could the empowerment of other non-state actors have happened. For instance, Bakan (2003) states that globalization “has substantially enhanced corporations’ abilities to evade the authority of governments” (p. 25). Multinational corporations can put pressure on governments without worrying about the position of any single government or feel any sense of loyalty to any one government or state. As a non-state actor without considerable economic and financial clout, a multinational corporation essentially acts as the dictator of policy in the global arena in many cases: “corporations now govern society, perhaps more than governments themselves do; yet ironically, it is there very power, much of which they have gained through economic globalization, that makes them vulnerable” (Bakan, 2003, p. 25). Mistrust, fear and anxiety are all social effects spawned by the takeover of the global society by multinational corporations; and this is why the Brexit vote occurred, according to Colantone and Stanig (2016): it was a reflection of the anxiety of UK voters over seeing their livelihoods, jobs, and sovereignty offshored or usurped by other actors. There was a push back against globalization by every day citizens. It could be said that the election of Trump in 2016 in the US essentially occurred for the same reason. But now that de-globalization is at hand as a result of the war between Russia and the West, the world will see new effects: “De-globalization will push inflation even higher, forcing central banks to choose between higher prices or lower economic activity” (Sorkin et al., 2022). Central banks, being another group of non-state actors that have been empowered by globalization now must adopt a defensive position. Additionally, states that “benefited from outsourcing will be hurt from any reversal” unless they can return production to their own shores (Sorkin et al., 2022). Thus, there will be much discussion among corporations, central banks, and states over what to do next.

Thus, today, multinational corporations serve as chieftans among various actors around the world. State governments, banks, financial institutions, and more all work with corporations to assess social, political, and economic situations in a global context (Baars, 2019). At the same time, Bakan (2003) argues that the corporation is always theoretically under the control of the government since it relies upon the government for its existence. This argument is purely theoretical, as the corporation through its various lobbies can hold great sway over government thus minimizing the control that the state holds over the corporation. It is quite likely that the corporation has more control over the state due to globalization. It is only in the wake of de-globalization, as pointed out by Sorkin et al. (2022) that more power may soon be demonstrated by states over the once-but-no-longer-empowered multinational corporations.

Impact of Globalization on the Economy

Yet, globalization has not introduced a new era of peace into the world; rather, it has exposed the fragility of international cooperation in view of a unipolar world order. As Huntington (1993) pointed out, “conflict between civilizations will be the latest phase in the evolution of conflict in the modern world” (p. 22). That conflict is now here in a big way. Not since the Cold War or WWII before it has the world been on a knife-edge the way it is now as Russia and the West ramp up for what could easily turn into WWIII. The conflict of civilizations could not come at a worse time for globalization. The COVID lockdowns all over the world served as a stark reminder of the perils of globalization with respect to supply chains. Globalization giveth, and globalization taketh away. Globalization has enabled China to rise up as the greatest manufacturing nation on the planet; it has enabled the US to export mountains of debt so that its citizens can have a comfortable lifestyle; it has enabled developing markets to receive economic aid and support. Globalization has created a wealth effect for a certain segment of society.

For another segment, it has been a nightmare. Small business owners in some parts of the world have been pushed out of their markets as globalization has ushered in new competition that domestic companies cannot compete against (Mukwarami et al., 2020). So while in one sense economies have grown thanks to corporations coming into new markets and driving sales, small business owners have had a harder time succeeding. Moreover, in other states, globalization has been driven by the offshoring of labor to other parts of the world. People have seen the labor market constrict and they have been forced into new job markets that they are unhappy with (Colantone & Stanig, 2016). The challenge for them is that globalization has also made labor markets more competitive and wages have not kept up with inflation.

Inflation is another factor that is affected by globalization, which really relies upon large amounts of credit. Without credit, developing nations would not be able to enter into the global marketplace; without credit, large corporations would not be able to scale to the extent that they do; without credit, states would not be able to provide the liberal economies with the social programs that people have come to expect. Yet all of that credit comes at a price, and when disruptions occur like the 2008 great financial crisis or the lockdowns of 2020, markets can crash in a hurry. That is when central banks react by bailing out states, corporations, and markets with trillions of dollars in new liquidity. That liquidity injection then causes inflation rates to rise, which triggers new demand in consumers because they know the purchasing power of their dollar (or whatever currency they own) will go down; and with excess demand, supply is further constrained, and prices surge higher. This effect can be seen in the housing market, in the auto market, in the food market, and in nearly every sector from commodities to services. Globalization causes an initial boom or booms to occur for some years, but booms are inevitably followed by busts, and the cycle continues. Only now the cycle is being disrupted in a big way by countries that no longer want to accept the unipolar world order that has been driving globalization in prior decades. China has become too strong; Russia does not like being marginalized by the West. The US wants to control trade and use its reserve currency status as a weapon to bring other states to heel. The conflict of civilizations is now at the doorstep. Globalization helped economies grow, but this growth has not necessarily been healthy for all stakeholders. Shareholders and corporations have done well in many cases.

Then there is the problem of energy. Energy is what drives the engine of the global economy and in the 20th century fossil fuels were the energy of choice. Today, corporations and leaders like Larry Fink of BlackRock want to promote an Environment Sustainability Governance (ESG) Movement. But that movement cannot exist without globalization. Thus, corporations are driving a new shift in how some parts of the world think about energy, while other corporations are still trying to maintain the 20th century view of energy, and this creates conflict. Clearly there is also a state-sponsored shift towards clean energy, thanks to events like the Paris Accords, and with new developments in solar and wind power. However, even clean energy comes with costs. The electric vehicle trend, for example, requires massive amounts of rare earth materials, and countries like Russia and China sit on massive reserves of these rare earth materials. Thus, if the West does not want to work with China and Russia towards a new multipolar global order, Western states and corporations may find themselves unable to achieve their ESG objectives. Additionally, Seren (2019) points out that even ESG objectives do not meet the idealized goals of its proponents since “the mining practice of rare earth metals creates toxic and radioactive waste almost ton for ton, causing an environment hazard in China and the surrounding region.” Therefore, even if WWIII does not break out and at least temporarily derail globalization, the problem of energy is going to be a major source of conflict.

Considering that China, the US, and India consume the most fossil fuels, the need for energy and who controls it is not one that can be solved by globalization of the economy at the same time that various actors seek after their own self-interest. The only real way in which globalization benefits the global economy is if the process of globalization is conducted with some restraint; indeed, it was Adam Smith’s belief in Wealth of Nations that the only way for capitalism to work effectively would be if the various actors exercised common sense, virtue, and restraint. The moment that actors seek to win a zero sum game, dominate and control a market, or establish monopolies is the moment that the system can no longer be expected to work in everyone’s favor. Fairness and equity in globalization has to be maintained and enforced by those states that have the power to do so—but organizations like the IMF prey upon weaker nations and turn them into debt colonies.

At the same time, globalization has not ended civil war in various states. On the contrary, civil wars are occurring right now all over the world: Ukraine, Myanmar, Israel-Palestine, Philippines, Afghanistan, Nigeria, Sudan, Syria, Libya, Yemen, Mexico—and these are just to name a few. Elsewhere, instability can be seen throughout the East and the West and the Global South. These civil wars or clashes of civilizations like what Huntington (1993) described. The rise of globalization has exacerbated this clash by heightening the tension among civilizations, bringing them closer together, and emphasizing their differences and disagreements. Moreover, the arms trade, which is a major factor in the boosting of the global economy, does a lot to support civil war entanglements. The UK sends arms to Saudi Arabia to be used in Yemen against the Houthis. The US sends arms through Poland to Ukraine to help the government oppose the East Ukrainians. If globalization has integrated the global economy to a point where the only way for states to extricate themselves from it is by way of war, it has also created a situation in which the zero sum game players will use force to oppose any actors who do not submit to their zero sum game play.