The Handbook of Global Companies

John Mikler

• Publisher: Wiley-Blackwell
• Year: 2013
• ISBN:
  9781118326121
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Public Policy
• Index: Politics & International Relations

The Handbook of Global Companies brings together original research addressing the latest theories and empirical analysis surrounding the role of global companies in local, national, and international governance.

• Offers new insights into the role of global companies in relation to policy and governance at local, national, and international levels
• Brings together newly-commissioned research by a global team of established and up-and-coming scholars from the fields of international relations, political science, public policy, and beyond
• Considers the environmental and societal responsibilities of global corporations.
• Covers topics including the spatial locations of global companies; debate about the power they wield and their role as catalysts in new forms of governance; and the ways in which global companies share authority with the state and international organizations to drive policy processes
• Speculates on the broader potential and limitations of global governance

Chapter 1

Global Companies as Actors in Global Policy and Governance

John Mikler

Introduction

Globalization is the master concept of our time, invoked to describe the way in which the vast transborder flows of capital, goods, ideas, and people are transforming society, politics, and economics. However, it is unfortunately the case that the centrality of global companies as actors in this process of transformation, and a complex understanding of the role they play in respect of it, remains more a matter of a priori assumptions in much of the globalization literature. In assuming corporations are primarily “mechanisms” for profit maximization, from a policy and governance perspective anything they do beyond this is usually seen as resulting from threats to their financial performance via penalties for non-compliance with regulations, or taxing their products so that changes in market forces present them with no alternative but to change what they offer consumers. Alternatively, incentives are required such as subsidies for new products (e.g. research and development tax breaks), or new opportunities stemming from market mechanisms (e.g. emissions trading schemes). This is made more difficult in a global context, given the structural power of global companies that undermines national efforts to regulate them in the public interest.

Depending on the issues and the circumstances, this may all be true to a greater or lesser extent, but such a simplistic rendering of global companies does not convey enough about their underlying motivations. As their role as agents of globalization has come to be better understood, their motivations are increasingly the subject of much deeper and complex analysis. In particular, many scholars, including the contributors to this Handbook, are now addressing their relative under-construction by comparison to studies of the state and society. They analyze them as not just purely economic, but as political and social actors, and not just for the impacts they have, but the outcomes they drive.

The intention in this introductory chapter is to lay some initial foundations and set the scene for the contributions by these scholars in the chapters to follow. Where global companies are located in the waves of theorizing globalization is considered initially, before considering how global companies matter as actors in global policy and governance. With a sense of them in this respect, just who and what they are that they matter in this regard is then outlined in order to set the scene for an overview of the parts and chapters to follow.

The State Is Not Yet Dead and the Market Is Not “in Charge”

Much of the early globalization debates revolved around the manner in which impersonal market forces, rather than states, were increasingly “in charge.” As the redoubtable Susan Strange put it, “where states were once the masters of markets, now it is markets which, on many crucial issues, are the masters over the governments of states” (Strange 1996: 4). In the aftermath of the Cold War, this was seen as an inevitable result of the irresistible “forces” of globalization by authors such as Fukuyama (1992) and Ohmae (1990) who saw a world of laissez faire capitalism and the “inevitability” of neoliberal market deregulation and privatization that went with it. The view of these hyperglobalists, as they are now often called, was popularized by Friedman's (1999: 87) declaration that all states had no alternative but to don their “golden straightjackets” in recognition that globalization means “your economy grows and your politics shrinks.” They could try to put on other “clothes,” but not only would they be unfashionable, they would suffer the consequences as the market chastised them for so doing with all the economic, social, and political pain that would be inflicted as a result. As such, many commentators actually foresaw the death of the state. Those on the left of the political spectrum despaired of the prospect, while those on the right celebrated it, but in between the extremes there was a growing acceptance of the proposition that states would increasingly function (rather than rule) in a passive, facilitative role as the places where global market imperatives were played out, and in this respect they would serve as “merely the handmaidens of firms” (Strange 1997: 184; see also Crouch 2004).

What a load of “globaloney” retorted others (Hay and Marsh 2000: 6)!1 Skeptics, such as Hirst and Thompson (1996) and Weiss (1998) who famously dismissed the “myth of the powerless state,” subsequently attacked the hyperglobalists' zeal for the inevitability of free market capitalism writ large on the world. Their skepticism was not so much ideological, as it was based on a critique of what seemed a much too sweeping and disembodied account of globalization. In particular, they pointed out that the governments of nations remain very much drivers of the processes and outcomes of governance, as did those who followed them (e.g. see Bell and Hindmoor 2009; Drezner 2007; Weiss 2003). While many stressed the way the marketization of all aspects of society and state functions has produced a neoliberal form of the state, scholars in this vein stressed the way that states have embraced markets as a policy choice rather than having it thrust upon them (e.g. see Tiberghien 2007; Thatcher 2007). Indeed, there has been a vast literature since Vogel's (1996) Freer Markets More Rules that examines the marketization of the functions of the state as a process of reregulation rather than deregulation.

As for the ideological aspects underpinning globalization, many scholars have recognized the power of the idea, and the political impact of leaders who enthusiastically embraced the neoliberal market reforms that sprang from it. For example, Margaret Thatcher did her best to institutionalize this view given her much cited “TINA” principle: There Is No Alternative to the free market. Ronald Reagan agreed, as did world leaders of more left-leaning political persuasions who followed, such as Bill Clinton whose 1992 presidential campaign was marked by the phrase “it's the economy stupid” to excuse his administration's likely impotence in the face of global market forces. In a similar vein, on taking office as Britain's new Labour Prime Minister in 1997 Tony Blair said that “the determining context of economic policy is the new global market,” which Ralston Saul (1997: 21) cheekily translated as “don't worry, I won't be able to do much.” Even so, they were skeptical that there was anything particularly new about globalization. As Wade (1996) pointed out, those predisposed to embrace the inevitability of the market being in charge and the demise of the state have been predicting this for at least the last two hundred years. For example, writers of the early to mid-nineteenth century envisaged “a single, more or less standardized world where all governments would acknowledge the truths of political economy and liberalism would be carried throughout the world” (Hobsbawm 1977, quoted in Wade 1996: 61).

Where are corporations in this debate? As authors such as Culpepper (2011) and Fuchs (2005) note, too often they go missing in what amounts to a states-versus-markets account, with more focus on the states and a priori assumptions about the markets. The politics of global capitalism is more complex than this, and the reality is that as key agents of global integration, global companies are central to an understanding of the transformations underway in the policy process and new forms of governance that are the outcome of the increasingly globalized world in which we live. After all, the complex independence that underlies the concept of globalization calls for a study of the continually evolving relationship between state and non-state actors, rather than claiming the loss of sovereignty by states to “markets.” Therefore, focusing on global companies as the dominant private actors driving the processes of globalization grounds the debate as it re-embodies the forces for change as opposed to the shrill pronouncements of those who declared the inevitable death of the state on the altar of global forces that are “out there” beyond their control.

Considering global companies also shifts the focus to the processes by which global politics is being transformed. Globalization is a dynamic concept. As the term implies, it is a set of processes not an outcome. It is not an “ism” but a process of “ization.” Seen in this light, authors such as Held et al. (1999), Dicken (2007), Hay and Marsh (2000), and contributions to be found in collections such as Held and McGrew (2003) are emblematic of those who embrace a contemporary transformationalist perspective on the concept of globalization. They reject the epochal change prophesized by the hyperglobalists, but while sharing the concerns of the skeptics they have a dynamic perspective on the question of state sovereignty, in the sense that they see states' political agency as increasingly relying on them sharing sovereignty with each other in order to retain it, as well as with non-state actors such as global companies that are themselves agents of the transformation underway. Theirs is an institutional and relational conception of globalization through which political agency is being reconstructed as a result of the processes of transformation driven by the actors involved. As such, an actor-centered basis for analysis serves us best in understanding this as it is not that disembodied market “forces” have taken over, but that in a more interdependent world there are more actors involved, and global companies are central among these.

The Dominance of Global Companies

The myth that markets are and should be in charge has long been propounded by those who would attack the state. The “father of liberalism,” Adam Smith, was among the first to lead such an attack with his reference to the governing power of the market's invisible hand. The invisible hand he referred to was an allegorical one, but it came to be accepted as real and inevitable. In Mikler (2012) I have argued that the veracity of “the market” as a concept for understanding global economic relations should be more widely debated than it often is. This is because rather than being buffeted by the competitive forces of global markets that the hyperglobalists asserted were now in charge, the reality is that the global economy is highly concentrated and oligopolistic. All the world's major industrialized sectors are now controlled by five multinational corporations (MNCs) at most, while 28% have one corporation that accounts for more than 40% of global sales (Harrod 2006: 25; see also Fuchs 2007).

A basic measure of the size and power of these corporations is given by their annual sales revenues in comparison to the national incomes and expenditures of states. Data from UNCTAD (2011) and the IMF (2011) indicates that in 2008 the top 20 non-financial corporations' sales were worth US$4.3 trillion, equivalent to the combined national expenditure of the bottom 163 states, and greater than the combined gross domestic product (GDP) of the bottom 137 states. These are astonishing figures, given that there are currently 192 states in total. On the basis of GDP, many of the top 20 corporations are as large as middle-income or emerging states such as Chile, Algeria, and the Philippines. On the basis of national expenditure, they are as large as many of the top 30 high income states. Only the world's largest and most influential economic powerhouses, such as the United States, Germany, Japan, and (relatively recently) China may be said to rival them.2 It may also be noted that in 2008 the United Nations had a budget of just US$4.2 billion (United Nations 2007), and perhaps more pertinently, given that it describes itself as “the only global international organization dealing with the rules of trade between nations” (WTO n.d.a), the World Trade Organization (WTO) had a budget of just US$171 million (WTO n.d.b).3 These global companies are much larger than not only many of the world's most powerful nations, but also the international organizations to which they belong that are supposed to make “rules for the world” (Barnett and Finnemore 2004).

Global companies are therefore vast conglomerates that underpin not just whole national economies, but the world economy. The decisions they make have flow-on effects to other industries and industrial sectors. For example, 5 of the world's top 30 non-financial corporations are car firms. They dominate the automotive sector which accounts for 4% to 8% of GDP and 2 to 4% of the labor force in OECD countries. The industry's importance is then further magnified in particular states and regions. In the United States, car manufacturing employs 14 million people either directly or indirectly in component suppliers and related industries, contributes 6% to private sector GDP overall and as much as 20% in some regions. In the EU, the car industry accounts for 9% of manufacturing value added and directly or indirectly employs over 12 million. In Japan, 7.1 million people are employed by the industry directly or indirectly, and it accounts for 11% of total manufacturing output (UNEP and ACEA 2002; see also UNEP 2002). Market forces are not in charge on the basis of the disembodied laws of Smith's invisible hand, but the embodied interests of global companies such as these.

The same may be said of Ricardian comparative advantage, because it has long been recognized that the majority of t...

Table of contents

• Cover
• Series
• Title Page
• Copyright
• Dedication
• List of Illustrations
• Notes on Contributors
• Preface
• Chapter 1: Global Companies as Actors in Global Policy and Governance
• Part I: Locating Global Companies
• Part II: Global Companies and Power
• Part III: Global Companies and the State
• Part IV: Global Companies and International Organizations
• Part V: Global Companies and Society
• Part VI: The Exercise and Limitations of Private Global Governance
• Index