Transnational Corporations. A saviour or a threat to national sovereignty?
By Joe Whibley
Sovereignty is defined in the Oxford English dictionary as the right of a country to rule itself. It aims to lessen the inequality between countries of different levels through civility and a code of honour. National sovereignty is a sign of respect between countries. No matter the size or influence, respect for national sovereignty is ideally a given. Despite this being a question of international cooperation and respect, with increasing developments in technology and communications, sovereignty gains new layers of complexity that can be hard to find solutions for. International corporations have diversified the scope of ulterior motives a country could have in opposition to maintaining sovereignty. TNCs (Transnational corporations) have the power to influence the social, economic and political state of countries and therefore play an individual, significant role in determining the sovereignty of a state without representing or being tied to the same responsibilities of a country.
Transnational corporations and state governments have drastically differing interests. In contrast to a country’s political ideology which varies drastically depending on the state, all corporations have the same general interest of profit. Profit and economic gains in a rapidly decreasing scope of time. This contrast often pushes corporations to outsource different factions of their companies to nations in which the contrast is less significant. Multinational companies utilise their mobility to circumvent policies that individual countries implement effectively rendering them ineffective. The rapid development of TNCs has left governments behind. The regulations required to control TNCs are very distinct from those used to control companies solely within the confines of an individual country. States in lower levels of development are particularly vulnerable to TNC’s growing sphere of influence as they are more in need of growth in economic stability. However, even within their home countries multinational corporations still avoid taxes at an alarming rate. As a group, 258 American corporations paid a federal income tax of 21.2% (or less) despite the regular 35 per cent tax rate.
TNCs have a tendency to exploit weaknesses in sovereignty worldwide and influence government decisions concerning foreign sovereignty. For instance, in the dismantling of the apartheid state in South Africa, many western states were influenced by the interests their transnational corporations had in the area. Southern Africa is very rich in minerals, South Africa alone contains 73% of platinum, 86% of chrome and 68% of manganese worldwide. In particular, the Tete province of South Africa is covered in mines rich with these substances. In 1970 the UK owned over 500 firms in South Africa highly concentrated in this area. Neighbouring countries also were affected by contributing cheap migrant labour, many subsidiaries were located near the border to south Africa. Many US-based companies also exploited this area, this was important to the voting in the UN regarding sanctions on South Africa. South Africa also is rich in uranium, and due to the USA’s political conflicts of the time, this was of particular importance to them. Due to the growing autonomy over Arabic oil reserves in the middle east the mining of uranium, an alternative source of energy, was very important to the USA. The UK also maintained an arms embargo on South Africa that lasted up until the very end of apartheid. The restriction of arms exportation was to reduce violence within the country and reduce the likelihood of escalation, however many say this was so that they could still profit from the companies still working there. TNCs frequently profited off of un-unionized workers who were paid very little for jobs with very high risks, the increase in opposition to apartheid led to workers acknowledging their rights and rebelling against the working standards that were very profitable to foreign companies. Multi International corporations with branches working in South Africa also provided stability to the apartheid government, providing safety to an otherwise very weak economy.
The case of international companies’ influence in the apartheid is an example of the power that these companies hold over global security and sovereignty. Since 1994 the number and power of multinational companies have grown. A study done in 2001 studied the top 200 economic powers of the world. 51 out of 100 of these were corporations as opposed to countries. based on a comparison of corporate sales and country GDPs. This means that in other words, PepsiCo is more powerful than the entirety of Denmark. Between 1983 and 1999, their combined sales grew from the equivalent of 25.0 per cent to 27.5 per cent of the World GDP. However, the power that TNCs hold is often very profitable for the countries being used. They provide jobs and other economic benefits. In relation to sovereignty and democracy often TNCs collaborate closely with NGOs and submit to pressure that protesting populations put them under. It can be argued that their presence is better than the lack thereof as long as their power is put to good use. Towards the end of apartheid TNCs were key in the eventual collapse of apartheid, and afterwards working with NGOs helped the South African economy recover.
The harmonisation of goals between corporations and their harbouring nations is beneficial to both parties and is becoming of increasing interest to NGOs.
By the definition of sovereignty, TNCs undeniably have influence over the economy and social structures of a country. The functioning of entire political systems relies on the presence of TNCs. It is clear that the development of multinational corporations is not nearing the end nor slowing down and should be a priority of countries to accommodate and restrict them when necessary. These actions need to be supported internationally for them to be both realistic and effective.
Sources:
Top 200 rise of corporate global power:
https://www.iatp.org/sites/default/files/Top_200_The_Rise_of_Corporate_Global_Power.pdf
Oligopolies — world problems:
http://encyclopedia.uia.org/en/problem/132761
Corporate tax myths:
https://itep.org/the-35-percent-corporate-tax-myth/
The politics of transnational corporations and the problem of liberations in south africa:
Arms Exports and the Anti-Apartheid Struggle in the UK–South Africa Relations:
https://academic.oup.com/fpa/article/17/4/orab023/6324803
TNC codes and national sovereignty : deciding when TNCs should engage in political activity / John M. Kline:
https://digitallibrary.un.org/record/565640?ln=fr
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