Are States the Most Important Actors in World Politics?

In 1648 the Peace of Westphalia effectively ended the rule of the Roman Catholic Church replacing it with a system of legal entities with a permanent population, a well-defined territory and governments capable of exercising sovereignty. The modern sovereign state with a supreme authority to manage internal and external affairs was born. For most of its existence the discipline of International Relations was normally presumed to treat the relations between states, the latter viewed as cohesive social actors driven by their desire for power and prestige. International organizations and other non-state actors were allowed an influence of their own in certain areas, but the state remained in ultimate control. Now IR scholars argue that there has been a transition in the system of sovereignty from the free reign power of the states over their political and economic rule, to a more liberal system that seeks to limit the states authority. There is a perception that IGO’s and NGO’s are replacing states as the dominant actors in the international system.`

Idealists often present non-state actors as the vanguard of an emerging global civil society, challenging the instinctive authoritarianism of states and the power of international capital. Hard-line realists see them either as front organizations thinly disguising the interests of particular states, or as potential revolutionaries, seeking to undermine national solidarity and stability of the state system ` (Josselin and Wallace, 2001). None of the theories can now deny that the balance of power between states and non-state actors has shifted. The purpose of this essay is to examine whether this shift has declined the authority of the states or left them as the most important actors in world politics? By comparing the state to other actors in IR the essay hopes to answer this question.

States vs. NGO’s.

Globalization is transforming the nature and form of political power today. As Susan Strange argues in her essay “The declining authority of states”:

`The need of political authority of some kind, legitimate either by coercion force or by popular consent, or more often by a combination of the two is the fundamental reason for the state’s existence. But many states are coming to be deficient in these fundamentals` (Strange, 2003, pp.127-134). That’s where NGOs come in. Those private and unofficial bodies whose members are volunteers from a number of states but not states themselves are growing to be more and more important as actors in IR and they are contributing heavily to the erosion of states sovereignty. Their influence has increased dramatically in recent years as their continuous demands have shaken sovereign control of state governments over their foreign and domestic policies.

Religious movements often challenge states authority as do groups with causes such as environmental protection, disarmament, human rights which are attacking the state from above and below with constant lobbying and pressuring decision makers of the state to alter their decisions in a particular, the most suitable for those NGOs way. However NGOs are limited to lobbying only and have no real participation in the decision making processes. There are also so many of them with opposing interests and little co-operation with each other that states, especially the most powerful tend to ignore NGOs. At the end of the day` NGOs have participation without real power and involvement without real influence` (Kegley and Wittkopf, 2004, p.179).

States vs. Transnational Corporations.

The most important shift of authority however took place on the economic frontier. The argument here is that states can no longer manage their economy. The power of states has significantly declined over their financial affairs and it happened voluntarily. Democratic states have moved away from the attempt to control significant proportions of their national economies after the Second World War and have gradually reduced barriers to cross-border trade, investment, production and provision of goods and services. The consequences of that benefited the market tremendously. ‘Where states were once masters of markets, now it is the markets which, on many crucial issues, are the masters over the governments of states.'(Strange, 2003, pp.127-134). Such market forces as transnational corporations have grown big enough to take the control over the financial and economic functions away from most of the states. The main objective of a transnational is to expand its activities into many diverse profitable areas so that the overall group achieves the highest level of profit (O’Connor and Roebuck, 2001). Now states have to play the game by their rules and obey their demands in order to prosper.

Of course the degree of reduction of states authority is highly dependant on the states size and financial power. The developed US and Western Europe economies are much less vulnerable to the transnational pressure than are countries with small or weak economies. Still there are examples of developed states that fell victim to the might of TNC’s. Ireland is one of them. On the outside it is a stable economy with a high standard of living, which is a good thing. Yet many argue that Ireland is too dependent on transnationals, its Gross Domestic Product is too high due to transfer pricing and Irish government has no control over its own economy. What will happen to Ireland if the TNC’s were to leave? It will probably fall to the bottom of the poorest countries in the world. There are countless other examples, especially in the Global South.

TNC’s are now becoming involved in all kinds of domestic and foreign affairs of their host countries instead of just their economic politics. Barnet and Cavanagh discuss this global phenomenon in their book “Global Dreams: Imperial Corporations and the New World Order”:

`The most disturbing aspect of this global system is that the formidable power and mobility of global corporations are undermining the effectiveness of national governments to carry out essential policies on behalf of their people. Leaders of nation-states are losing much of the control over their own territory they once had. More and more, they must conform to the demands of the outside world because the outsiders are already inside the gates… these institutions we normally think of as economic rather than political, private rather than public, are becoming the world empires of the 21st century. ` (Barnet and Cavanagh, 1994, p.14)

Global corporations now understand that territorially bound governments will do everything to keep the mobile companies within their states. The search for allies is not limited to other states anymore. Instead it is complemented by a search for allies among foreign-owned firms. While states offer access to the national markets, the corporations now have the power to raise the substantial amount of finance and apply their technology and innovation for the development of the state and their personal enrichment. They also provide the management and the access to export markets and take all the steps necessary to locate production of goods and services within the territory of the host state. TNC’s use that power to lobby their host governments for more liberal trade, reduction of taxes, investment policies and anything that will increase their profits. Their size enables them to obtain concessions from the governments and other agencies that ordinary firms could never manage. States have to co-operate because of the enormous benefits that TNC’s provide for them:

-They employ large numbers of people who in turn spend their income and benefit their local community.

-These employees contribute to government tax revenue through VAT on their purchases, and income tax and PRSI on their salaries.

-Transnationals pay taxes, which provide funds for the government.

-The presence of some of the world’s leading transnationals adds to the states reputation as a good place in which to locate and do business.

-Transnationals purchase much of their raw materials from indigenous firms. (O’Connor and Roebuck, 2001)

All this comes at the expense of power. However stripping the states of their sovereignty may not be enough for TNC’s. Even though they are already wealthier than many states, it is never enough. Several factors contribute to this negative image of transnational corporations:

-They obtain large grants from the state’s government that are lost if they decide to close their operations in that particular state and move somewhere else.

-Some transnationals refuse to employ trade union labor preferring to deal with employees directly.

-TNC’s engage in transfer pricing, which distorts the host state’s balance of payments.

-There is a belief that transnationals pay Global South states low prices for raw materials and they are often seen as the cause of exploitation and poverty.

-TNC’s are said to exhaust the natural resources of many states for quick gain, with global environmental implications.

-At the end of the financial year, transnationals repatriate profits to their head offices, which means that profits generated in the host states leave them and are not used for their benefit. (O’Connor and Roebuck, 2001)

It is up to states to make a chose. Lose authority and prosper with the help of TNC’s or stay independent and try to grow while keeping the economy in their own hands.

Robert Gilpin argues that the decline of the states authority is not as considerable as many would imagine. In his article `The Nation State in the Global Economy` he writes that there is hope in the states future after all: ` although the economic role of the states has declined in certain significant ways, it has expanded in others and, therefore, it is inaccurate to conclude that the state has become redundant or anachronistic… Indeed, the importance of the state has even actually increased in some areas, certainly with respect to promoting international competitiveness through support for research and development, for technology policy and for other assistance to domestic (and transnational) firms` (Gilpin, 2003, pp.349-358).

This is particularly true for the states in the Global North. Since this is where about 90 percent of the worlds biggest TNCs have their main headquarters, those countries have a tremendous influence on the behavior of transnationals. Very often they are the ones who manipulate TNCs, not the other way around. They give the companies access to huge and rich domestic markets, they give them the permission and finance to set up and do business and often they use transnational corporations as an force of imperialism: `Transnationalism had become the American mode of expansion` (Josselin and Wallace, 2001, p. 1). US is the home of most of the worlds largest TNCs and its foreign policy is seen by many as imperialistic.

States vs. IGOs.

More and more, world affairs are being influenced by intergovernmental organizations that rise above national boundaries – global international organizations such as the United Nations and regional organizations such as the European Union (Kegley and Wittkopf, 2004, p.136). IGOs are created by the states and are dominated by them most of the time. Occasionally however they use their own authority to make decisions on particular problems. What, though, is the broader impact of IGOs? Have they acquired some of the policy-making role of national governments or do they just express the interests and values of the most powerful states? (Hague and Harrop, 2004, p.26).

Whenever IGOs are created, they are used to solve particular international and sometimes even domestic problems for their member states. They develop their own agenda and often grow above their main purpose. For example ‘World Bank has changed – from a strictly financial IGO to that of a development agency dedicated to solving problems of economic and political development and, recently, environmental sustainability` (Kegley and Wittkopf 2004, p.152).

European Union is an example of a powerful IGO that successfully operates with the most dominant states in Europe and allows them to cooperate on many global issues. The EU represents a desire for peace and cooperation among sovereign European states. With increased cooperation and growth, this regional IGO has become a major economic unit. However, the long-term goal of a single federal European political state as envisioned by the original proponents of European economic cooperation has largely been rejected by the EU member states. They may be cooperating on some issues but morphing into one giant super state is not in their plans, and EU can do nothing about it.

Indeed, IGOs may be important actors in world politics but they are still controlled by their member states. They can’t tell states what to do and their decisions are not binding for the states. States only follow IGO rules if it fits their interests or they are not strong enough to resist.

Most of the time international institutions are dominated by the developed states from Global North and even though they claim that the major IGOs are run democratically, this is not always the case: `In practice, however, there is little evidence of democracy within the WTO operations. The United States, the European Union, Canada, and Japan have routinely hammered out agreements in informal, `green room` meetings, … (They) then use their considerable economic and political influence to build `consensus` around these decisions made without participation from the full WTO membership.` (Smith and Moran 2001, p.69). WTO has also been accused in violating the Peace of Westphalia nonintervention norm.

For many states in the Global South WTOs authority comes in the form of the reduction of the states ability to regulate its own economic activities. This serves as a cause for a lot of critics to point the finger at WTO as an organization primarily dominated by the great powers. Of course, this sets off a reaction from the less developed Global South to resist the supremacy of the North, but most of the time their efforts are doomed to failure. The only exception may be UN, which gives more voting power to the developing countries yet it is still controlled by the US. For instance US President George W. Bush didn’t need UN’s permission to invade Iraq. Even though UN voted against the invasion, he did it anyway. This leads to conclude that major IGOs were created to help the most powerful states enforce their philosophy and decisions on others.

It has become ever more deceptive to think that the international system is still being dominated by territorial states which settle their differences privately and recognize no superior authority to themselves. Indeed acquiring territory is no longer seen as means to increase wealth. Instead states now compete for the global market shares and economic development, which is considered as the new paths to enrichment. However, while doing that, states are becoming increasingly dependent on the market forces they used to control:

`the impersonal forces of world markets, integrated over the postwar period more by private enterprise in finance, industry and trade than by cooperative decisions of governments, are now more powerful than the states to whom the ultimate political authority over society and economy is supposed to belong`( Strange, 2003, pp.127-134).

Undoubtedly states remain as the primary decision makers in most of the issues concerning international politics, though their options are limited due to constant pressure from other actors. TNCs seem to be the most influential ones, as in exchange for co-operation they provide states with massive benefits. Since TNCs possess something states will never have – the ability to move wherever they want, territorially bound states are restricted in their capacity to affect economic decisions within their borders.

The dramatic increase in activity of nonstate actors is seen as a threat to sovereignty of most states although by no means all. Most nonstate actors have great influence in Global South, yet they are not seen as a particular threat to the powers of Western Europe and North America. No actor in international relations can even think of challenging the only undisputed power in world politics – the United States of America.