For 300 years, nation-states grew and prospered. They waged wars on an increasingly destructive and global scale (the national security state) and they assumed broad tasks of social and economic management (the welfare state). Their ubiquity was taken for granted. But for the past 25 years or so, states have been in retreat -- weakening, shrinking, sinking as globalizing capital undermines their tax base, erodes their regulatory apparatus, stymies their policy machinery and questions their legitimacy. The future of humanity depends on what happens to states and where "sovereign" decisions will be taken instead. These materials look at these questions and track some of the main trends.
Failed states can no longer perform basic functions such as education, security, or governance, usually due to fractious violence or extreme poverty. Within this power vacuum, people fall victim to competing factions and crime, and sometimes the United Nations or neighboring states intervene to prevent a humanitarian disaster. However, states fail not only because of internal factors. Foreign governments can also knowingly destabilize a state by fueling ethnic warfare or supporting rebel forces, causing it to collapse.
Offshore banking, secret financial havens, money laundering and corruption steadily corrode the foundations of the nation-state. Offshore tax havens, spread by new computing and telecommunications, provide an unprecedented tax shelter, enabling rich citizens and corporations to escape the national tax system - eroding the tax base, weakening state finance and undermining the legitimacy of the tax system in the eyes of ordinary citizens. Offshore havens also promote money laundering, aiding criminal anti-social activities of all kinds, beyond the detection of national authorities. Corruption of public officials flourishes under such conditions, in the North as in the South, further eroding the capacity of the state to operate "legally" and to command the loyalty of its ordinary citizens.
Offshore tax havens, spread by new computing and telecommunications, provide an unprecedented tax shelter, enabling rich citizens and corporations to escape the national tax system. Wealthy tax evaders save millions, while public services and infrastructure in their home countries, as well as on the small island havens, remain drastically underfunded.
Advances in communication and transportation technology, combined with free-market ideology, have given goods, services, and capital unprecedented mobility. Northern countries want to open world markets to their goods and take advantage of abundant, cheap labor in the South, policies often supported by Southern elites. They use international financial institutions and regional trade agreements to compel poor countries to "integrate" by reducing tariffs, privatizing state enterprises, and relaxing environmental and labor standards. The results have enlarged profits for investors but offered pittances to laborers, provoking a strong backlash from civil society.
Transnational Corporations exert a great deal of power in the globalized world economy. Many corporations are richer and more powerful than the states that seek to regulate them. Through mergers and acquisitions corporations have been growing very rapidly and some of the largest TNCs now have annual profits exceeding the GDPs of many low and medium income countries. This page explores how TNCs dominate the global economy and exert their influence over global policymaking.
Traditionally, each independent nation had its own currency as a symbol of sovereignty, but in a globalizing world national currencies have been weakening or even disappearing. The US dollar has been taking over as the world's currency of account. Neo-liberal open markets and rapid currency conversion have reinforced the dollar's role since the mid-1970s. Much trade is now dollar-based, countries prefer to hold their central bank reserves in US dollars, and private companies as well as wealthy citizens often hold dollars or dollar-denominated assets. The United States derives great economic and political power from this dollar hegemony. During the 1990s, dollarization accelerated. A number of countries pegged their currencies to the dollar or even adopted the dollar outright as their national currency, hoping that this would solve inflation problems. Dollar-denominated notes, especially $100 bills, grew in popularity with individuals as well as criminal networks, becoming the US's largest export. But huge US trade imbalances and federal budget deficits undermined the dollar and eventually knocked down its value in international currency markets. Further erosion of the dollar could undermine and reverse decades of dollarization, but a globalizing world still needs a strong common currency. If the dollar weakens further, alternatives might emerge. But for the moment, the (weaker) dollar still is King.
In recent years, specialized private companies have increasingly offered military and police services, dramatically changing the role of the state by ending a long-standing state monopoly in these areas. Such companies have precedents in mercenary units such as the Hessian forces that fought for the British during the US war for independence and the Pinkerton Company, founded in 1850 as a detective agency that later on provided armed guards and strike-breakers to industrial firms in the US. But the current developments are on a much larger scale. Beginning in the 1990s, private security companies grew rapidly, providing guards and police-type security services and eventually out-numbering police forces. At the same time, mercenary activities increasingly took a corporate form and companies of this type began to operate in Africa and elsewhere, led by former military officers and soldiers of fortune enjoying close ties to diplomatic and intelligence services of major countries. US operations in Iraq have drawn heavily on military and security companies, an important precedent. Unlike state military and police forces, these private companies operate beyond the realm of legal accountability and public oversight, and they enable states and industrial companies to engage in military operations, seize valuable natural resources, terrorize citizens and overthrow governments without public knowledge. Because they are available for hire, these companies are the ultimate neoliberal re-invention of the state, putting armed force at the direct service of those who can pay for it.
Food for thought. My thanks to: http://www.globalpolicy.org/nations-a-states/state-sovereignty-and-private-security-companies.html