Geography Reference
In-Depth Information
governments in nation states are incapable of acting with sufficient speed to
counter these transmission mechanisms; second, multinationals themselves
are nowadays almost entirely independent on the nation-states from which
they emerged and this is very different to the situation in the earlier decades
of the twentieth century; third, even an enormous economy such as the US
is very dependent on these multinational transmission mechanisms. Indeed,
as we saw in Chapter 1, some 31 per cent of US economic growth since the
1990s is accounted for by multinational firms (McKinsey 2010a).
In terms of its power to influence its own economic destiny, these argu-
ments suggest that even the US is in many ways too small as a nation
to isolate itself from global shocks. However, shocks from the USA are
rapidly transmitted to other generally much smaller countries, which are
largely powerless to respond to these shocks. The arguments in this topic
all point to the conclusion that multinational and multi-lateral integration
are therefore necessary today because unfettered globalization is simply
too powerful and too unpredictable a force to be managed by individual
nations. The 1930s experience demonstrated that a typical national politi-
cal economy response to adverse global shocks is to strive for protection,
which if widely repeated leads to wholesale protectionism and global
depression. As such, international fragmentation and a lack of multi-
national coordination lead to a total inability on the part of all nations
to influence or fashion the forces of globalization for the individual
(national) or common (international) good.
It is this problem of the smallness of countries which requires new
forms of multi-lateral multinational integration and coordination to be
developed in order to correct for the international market failures associ-
ated with these political economy coordination problems. An irony of
increased international openness and the stateless characteristics of MNEs
in the modern era of globalization is therefore that it forces ever-increasing
mutual interdependence between nation states, and ultimately leads to the
secession of many aspects of national sovereignty. This ceding of national
powers was obviously evident in the Bretton-Woods reforms as well as
in the formation of other twentieth century bodies such as NATO and
the United Nations, but it is most clearly manifested in the processes of
European Union integration, in which selected powers are pooled for the
common good. The pooling of national powers is required in order to
both take advantage of the benefits of globalization, but also to provide a
more powerful bulwark against its adverse implications. However, while
these arguments follow naturally from analyses of the nature of the mul-
tinational transmission mechanisms, this observation appears to be rather
at odds with some other currently-popular arguments positing the advan-
tages associated with small nation-states.
