Free «The Role of Transnational Corporations in the Shaping of International Relations» Essay Sample

Introduction

Scientists and politicians cross swords when they search goals, means, and mechanisms of global governance and the establishment of a new world order. At the same time, the course of the transition from geopolitics of force, which originated at the turn of the19th and the 20th centuries and manifested itself in the world wars and division of the world between colonial powers, to global geopolitics becomes more and more evident in international relations.

The factor determining the development of international relations in modern conditions is globalization based on the growth of interdependence of national economies and their integration. Today, we have to admit that the process of globalization has affected all spheres of human activity, ranging from politics and economics to culture. It is most vividly manifested in international and economic relations, exerting enormous influence on the development of countries and the world economy as a whole. Multinational corporations became the new instruments in the struggle for world leadership.

From the other side, the nature of international relations is largely determined by the nature of the struggle for marginal fields. States are engaging in a struggle for space, which means the fight for new sources of raw materials and markets. It can be said that control over such territories will act as a measure of a state`s power in the future. Thus, the paper will discuss the role of marginal fields and transnational corporations in regard to geopolitical interests and international relations.

Marginal Fields

Marginal status of a territory may be defined as outlying, borderline or intermediate character of the territory position between the “power centers”, which have a favorable geographical position, occupy key positions in the economy and, as a result, have a greater weight in international politics and ideology.

One of the main topics of geopolitical studies is to find the heart of the world – the Heartland. Control over this region should ensure the world domination. The concept of the “Heartland” has become one of the major concepts in classical geopolitics, and the ideas about a key region for world domination are different. For example, Halford Mackinder (the founder of the Heartland concept and theory) considers that the center of the Eurasian continent has the most favorable geographical position. He also introduced other popular geopolitical terms: World Island (includes Asia, Africa, and Europe, the center of which is the Heartland), Inner or Marginal Crescent (includes coastal zones of the Eurasian continent – the Mediterranean, the Middle East, India, China and South-East Asia) and the Outer or Insular Crescent (includes island nations such as Great Britain). Mackinder declares that civilizations of interior territories of Eurasia are undemocratic and authoritarian, and maritime civilizations are liberal, trade and democratic. Geopolitical opposition is expressed in the political and ideological confrontation.

Nicholas Spykman, an American professor and the founder of the Institute of International Relations at Yale, paid even more attention to Marginal Crescent, designating it as Rimland. The concept of the Rimland is one of the main concepts in geopolitics. Spykman considered the Heartland less important than the Rimland. He was convinced that the control of Eurasia and ultimately the whole world was possible through controlling the Rimland.

Nowadays, it is about multipolar and multicultural world, deprived of the dominant center. However, the real geopolitical situation seems different. Despite the collapse of the Soviet Union and the widespread of “mondialist” (convergence theory by Zbigniew Brzezinski, “the end of history” concept by Francis Fukuyama) polycentric concepts and geopolitical dualism, founded during the Cold War between the two superpowers, have not lost their relevance. Moreover, the development of technology (aircraft, rocket, space technology) leads to a widening of the scope of geopolitical confrontation of opposing sides and going beyond the Earth’s surface in the near-Earth airspace (atmosphere) and the outer space.

It should be noted that the near-Earth space is essentially the Rimland, which has a peripheral and marginal status in relation to the Earth as the center. The establishment of the dictates over this marginal area will mean the establishment of a huge power over the earthly space, including all layers of the atmosphere. Battles in the ionosphere and the outer space define the face of geopolitical aspirations of superpowers in the end of the last and beginning of this century.

Following this idea, deep spheres of the Earth can be also called the Rimland or marginal territory. As it is known crust, mantle and core are allocated in the structure of the Earth in addition to the atmosphere and hydrosphere. The Earth’s crust and the upper part of the mantle form the lithosphere, which consists of tectonic plates, which include not only the continental, but also oceanic crust and asthenosphere. Modern global tectonics studies the fault zones of tectonic plates, seismic activity related to their shifts and its impact on the life of the biosphere (and human life in particular). It can be argued that the invasion in the peripheral zone of the lithosphere and control of such shifts (or a shifting management) of tectonic plates will allow (along with space projects) to establish the complete dictates over the Earth by a particular state or a group of states.

A Brief History of Transnational Corporations

The specifics of the current stage of development and operation of monopolistic institutions lies in the fact that not only commodity is trafficked abroad, but the whole process of production. This fact is indicative of the change of the priorities in the system of world economic ties from the prevailing role of trading companies and banks to the leadership of large monopolistic associations in form of international concerns – transnational corporations (TNCs). A distinctive feature of this group is that it is not a set of interrelated, formally independent joint stock companies (each controlling a particular stake, which is owned by the parent company), but it is the monopoly, which owns all the companies.

Moreover, regardless of the legal status of an individual company (whether it maintains formal independence or not), all decisions on the organization in regard to the production process are taken in a single center of TNC in accodance with the strategy of its development. However, the transformation of TNC activities by transferring productive stage of the circuit of capital abroad also requires the formation of appropriate mechanisms and other resources: technology transfer, delivery of goods, and so on.

Thus, one of the phenomena that are closely linked to globalization is transnationalization, which is the formation of large international corporations and banks that operate worldwide. Qualitatively new era in the development of international business is related with the beginning of the process of globalization, when transnational corporations and transnational banks come to the fore.

A tendency to continuous expansion of economic interaction and interdependence of states began to manifest itself after World War II, although the intensity of this process is uneven. A huge role was and still is played by international companies, within which the flow of a large part of resources takes place. Their power and influence are determined by the concentration of control over the strategically important areas – finance, labor, technology, supply of raw materials and components, services and marketing.

Some of these companies have been operating since the industrial revolution, but exactly the end of the 19th century was the period of their active and wide distribution. Incentives, direction and pace of development, the nature of the activities and the sequence of activities carried out by international corporations, of course, have been changed since that time, especially after World War II, when the processes of internationalization and globalization accelerated. It should be noted that their growing role was both the consequence and the cause of these processes.

In general, the dynamics of TNCs after World War II can be represented as follows. Their large-scale offensive began in the 50-60s of the 20th century with rise of American and then Japanese and German institutions. English, Dutch and French corporations manifested themselves in that period as more traditional international players. Industrial and financial institutions in some less developed countries were also involved in the globalization process and enhanced their international standing. The companies of South Korea and other developing countries followed them in the 80s.

The expansion of TNCs has increased in the 90s. This was caused by several factors. First, they were able to discover some new regions: the system of the world market has spread to large areas due to the collapse of the Soviet Union and the change of orientation in the former socialist countries. Second, the processes of globalization of the financial sector and integration of financial markets have accelerated. There were huge multinational financial conglomerates. Global financial flows have become a significant factor in international economic relations. Third, the processes of privatization and commercialization led to appearance of new markets and industries that were previously not available or available with significant limitations.

Fourth, competition has become more severe for a number of reasons. Especially significant factors were the distribution of the technological revolution; convergence of technological capabilities in many industries, which facilitates the rapid simulation and the emergence of various types of products of the best qualities; corporate mergers on a global scale. Formation of a new framework for corporate partnerships and strategic alliances has strengthened the intensity and expanded spatial distribution of competition. There were new competitors in the market, particularly from Asian countries.

Fifth, the importance of regional integration processes and areas of cooperation has increased, and this fact started the multifaceted influence on direct investments. One of the most illustrative examples is deepening of European integration and creation of the single market in this region. Sixth, modern technological advances and technologies which resulted in structural changes and created new business opportunities (especially the information revolution) became widespread all over the world. Seventh, individual markets and national economies have become more interdependent. At the same time, technological gap, the gap in income inequality between regions and within countries, is increasing.

The Role of TNCs in International Relations

TNCs are the companies that own (or control activities of) industrial complexes or service centers located outside of a country in which the corporations are registered. As a rule, TNCs form an extensive network of branches and offices in different countries, allowing them to acquire a dominant position in the production and sale of a particular product or service. The exchange of activities between the branches is realized under centrally installed transfer prices, the size of which is determined by the central headquarters of the TNC’s management. Due to implementation of transfer payment schemes capital can be redistributed within TNC and resources of the subsidiaries in other countries can be used to conduct price competitive struggle, especially with the national monopolies.

Implementation of an international approach to the organization of TNC’s activity involves the development of the system branches in a number of foreign countries, which are managed by a single center in the home country. It also involves compliance with the principle of preserving the balance of centralized management and the relative independence of its constituent subdivisions, branches and representative offices located in other countries. Formation of a single interconnected system of parent headquarters and corresponding foreign affiliates allows TNC to implement its global strategy development in various areas of the economy, social and political life of society. This fact determines a significant impact of TNCs on the development of international economy and political relations.

In today’s global world TNCs occupy key economic positions, which allows them to influence the socio-political processes in most states. Intensification of the processes of globalization and integration of financial markets, which is manifested in the emergence of transnational financial conglomerates and global financial flows, have led to the fact that TNCs have become an important factor in economic and political relations. TNCs have actually become an independent center of power, which has an impact on national governmments and the global economy as a whole. Moreover, the scope of activities of certain TNCs (IBM, Nestle, General Motors) can be compared to the functioning of national economies of small countries in terms of their annual income.

At the turn of the 20th-21st centuries, TNCs almost turned into actors of international politics, actively participating in all global processes taking place in the world. Transnational corporations, along with industrialized countries, widely manifest themselves in politics, economy, finance and investment, science and technology, military, technological and environmental fields. TNCs implement their own corporate diplomacy in foreign policy. They created their own corporate ideology to ensure a successful corporate policy. Along with the major powers, they have their own numerous special services. Moreover, one can equip an army of more than one state with arms, which produces, for example, just one “General Dynamics.”. 

Transnational corporations control the half of industrial production in the world, two-thirds of international trade and about 4/5 of patents and licenses for new equipment, technology and know-how. The concentration of human abilities, scientific and technical knowledge and experience, as well as international (global) organization of management allow TNCs to optimally allocate logistic, production and marketing resources. By virtue of its transnational structure, TNCs can benefit from the international differences in the business cycle, economic policy, the level of taxes and customs duties, inflation, wage rates, productivity, technical standards, nomenclature demand and so on.

Moreover, they are able to smooth or enhance those differences to a certain extent. Many of them were able to develop and distribute effective competitive strategies in a number of countries, regions and even the whole world, using advanced planning systems and information communication and taking into account the fact they are subjects of the direct impact on the global information space. Using vast financial resources, international financial institutions and technologies, TNCs have received significant and large-scale access to the multidimensional impact on all political and formational structure of the international community.

Exactly TNCs are the main structural element of the economies of most countries, the driving force of development and efficiency. Global trends of internationalization of production and capital, privatization, strategic alliances and trade liberalization have put TNCs in the center of the global economic development. Given the further redistribution of the world markets and spheres of influence, as well as numerous mergers and acquisitions of large TNCs, it is possible predict the emergence of transnational supercorporations in the nearest future. Uniting and absorbing their neighbors, they concentrate economic power in their hands, become able to influence not only individual markets, but also the activities of individual states.

This influence becomes particularly important with a trend towards the transnationalization of research and development. This fact will provide TNCs with control over the development of new technologies in key sectors of the world economy in the future. In many cases, TNCs already have a key influence on global politics and international relations. Their participation in the creation of a transnational environment of world politics increasingly acquires a structure-forming, geographically extensive and in-depth value.

Politicization of the activities of TNCs on an international scale is enhanced in the 21st century. The international nature of the activities of TNCs constantly confronts them with foreign policy issues. In this case, the heads of major corporations prefer to solve the basic issues of their companies in the host countries independently and without the support of foreign bodies of home country, through meetings and negotiations with the leaders of the respective countries.

TNCs are actively involved in local political processes when acting in host countries. Their representatives enter different national associations, consortiums and other industrialist associations, within which they are able to reach the leaders of local governments. Corporations make their “contribution” to election funds and other local political parties that aim to obtain certain commercial benefits, which also indirectly affect the policies of the host country.

The most important activities of TNCs in the political sphere in the home country are interaction and maintaining contacts with the leadership of the central and regional bodies of the executive, legislative and judicial power of the state, political parties, civil society organizations and the media. This is achieved by rotation of personnel between TNCs and the most important government agencies of the host country, active participation of the corporations in the electoral process and lobbying the interests of companies. The range of TNCs’ intervention methods in the affairs of host countries and ways of influence on the political and social situation in these countries is very wide. The struggle between corporations for sources of raw materials and markets led to numerous military and political conflicts in the countries where TNCs are functioning.

Political activities of TNCs have a significant and often decisive influence on the elucidation of the fate of state sovereignty.  It is closely linked with issues of “blurring” and even marginalization of sovereignty. The concepts of “humanitarian intervention” and “limited sovereignty”, which were globally discussed and postulated in the UN, cannot be formulated and implemented without TNCs. Political activities of TNCs, which are based on their economic power and geographical scale of their activities, are also involved in the establishment of global governance of world political processes and affect the formation of global regulatory institutions.

People, states and international organizations are only a means to achieve goals of transnational corporations. Today, they control the basic resources and capital. States do not always intervene in the activities of TNCs because their interests frequently overlap, and sometimes individual states cannot counteract TNCs. For example, the interests of the United States, the United Kingdom and such TNCs as Shell Oil and British Petroleum, which are the world’s major oil traders, are often interrelated.