Tag Archives: westphalian system

Week 5: Regulation and Multinationals

Concern over the dangers of multinationals is not new.  Read anything on the subject by Ray Vernon (Sovereignty at Bay (1971) Storm over the Multinationals (1977), Beyond Globalism (1989), In the Hurricane’s Eye (1998)) or, more recently, Dani Rodrik (Has Globalization Gone Too Far? (2001) and The Globalization Paradox (2011)).  The potential for erosion of national sovereignty, ‘domination’ by ‘foreign’ firms and the unaccountability of the private sector are recurring themes for populists on both right and left as well as many others concerned about the power of the nation state. The current incarnation of the anti-globalisation exploded into public view with the WTO demonstrations in Seattle in 1999 and have largely continued unabated ever since.

We have lived in a Westphalian System for over four centuries where nations recognise the territorial integrity of other states, but the successful modern multinational, succeeds when it ‘opens new markets’ and grows beyond its home market.  When one country regulates an area of research then leading academics and firms can simply redirect their research or leave.  For example, when the US restricted research into human embryonic stem cells, other jurisdictions, notably the UK, were the beneficiaries in terms of both human resources and foreign investment.

I would not underestimate the challenge for countries such as the US case or Germany, which has been even more restrictive, in enacting restrictions on biomedical research.  Similarly, Austria can ban nuclear power or France, Germany and others can ban fracking.  Imposing such ‘physical’ restrictions are relatively straightforward for a nation state even if there may be serious implications for investment flows.  Far more difficult is when the object of the regulation is more ephemeral, such as virtually anything to do with data and communications.  Yet increasingly, these sectors are critical to the future of economic growth even as it touches on sensitive questions that are at  the heart of the nation state.  Whether the concerns are matters of high cultural sensitivity, such as hate speech in Germany, France, or the UK or blasphemy laws in many countries, criticism of the government, incitement to terrorist acts or communications among terrorists or government secrecy (a la Wikileaks), these subjects are ‘too important’ for governments not to intervene.  The real question is how, since many interventions will be ineffective or even counterproductive.

All nations, from the most liberal to the most despotic, are grappling with these issues.

  1. How do you see this battle evolving over the coming years?
  2. How should nation states seek to exert their influence over multinationals? What are the most effective tools at the disposal of national authorities?
  3. Do multinationals have a responsibility to abide by mottos such as ‘Don’t Be Evil’? (what does that even mean? is their responsibility not simply to their shareholders?)
  4. Are we witnessing a slow and subtle reshaping of the concept of the nation state or will the changes be more profound and far reaching?

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