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June 2, 2013 / C H Thompson

Globalisation and the State

Hirst and Thompson (1996) are critical of Ohmae’s ideas. They argue for the need to differentiate between transnational and multinational corporations because there’s a distinction between a globalised and internationalised economy. Multinational businesses remain regulated by their home government while transnational corporations (TNCs) are globally based. Hirst and Thompson’s research found that multinational corporations (MNCs) dominate in a mainly international rather than global economy.

They argue most corporations are still based within national boundaries, generating money for the individual nation-state within which they operate with companies like BSkyB proclaiming they’re shutting down most of its off-share tax havens “Sky directly contributes more than £1 billion a year in tax – 40 per cent more than the average FTSE 100 company. We’re very proud of the significant – and growing – contribution we make to the British economy,” insisted the broadcaster.

This highlights Hirst and Thompson’s point that for MNCs the national base is very important and they are effectively regulated by their home government (the state they’re situated in) through regulatory measures like minimum-wage; business rates; health & safety regulations etc). Whereas as we previously saw TNCs are ‘footloose’ have international management teams and like Apple are willing to locate their headquarters anywhere in the world.

Hirst and Thompson admit that states have lost some power, but they still control their sovereign territory and regulate the population living within it therefore still retain their power. This is evident from minimum wage regulations and the power of the state to penalise those firms that flout such laws such as the Arcadia group who run Miss Selfridge and Topshop stores.

Giddens (1999) sits between Hirst and Ohmae by adopting a broader or shall we say moderate view of globalisation. For Giddens globalisation is a relational dynamic. Modern communication systems allow real-time experiences irrespective of the locality of such events. Giddens termed this time-space distanciation – where interaction isn’t dependent on the communicating parties need to be in the same location, just think of Skype. This idea can be applied to events in one country being discussed and influencing reactions in another location or country. This use of Sykpe was evident in the recent Arab Spring uprisings.

His emphasis on computer based global communication systems challenges Hirst and Thompson’s questioning of the existence of a global economic system by highlighting the breadth and depth of global financial markets. These global markets allow enormous sums of money to flow from one country to the next in seconds evading nation-state tax regimes.

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