6.1: Introduction - Politics of Globalization

Learning Objectives

By the end of this section, you will be able to:

• Recognize the contested nature of globalization, including debates over policies in areas such as trade and immigration

Introduction

Helsinki, Finland, March 29, 2001. Inside a packed press conference room, World Bank President James Wolfensohn prepares his remarks. He sits at a speakers’ table at the head of the room. Two audience members stride toward him. It looks like they might be preparing to raise points about the importance of stakeholder outreach or stronger World Bank sustainability review. Everything about them befits the sober, professional atmosphere of the venue, except for the cream pies in hand. They continue walking to the speakers’ table. The first to reach Wolfensohn rubs pie in his face. Wolfensohn, startled, throws up his arms in defense but takes a quick read of the situation and lowers them. He proceeds to take a taste. The second pie thrower, a few steps behind, unceremoniously flings her pie in a follow-up smear. Wolfensohn takes a lick, then remarks, “Mmm. Tastes good but I’m on a diet,” (as quoted in Agent Apple for the BBB, 2001). The pie-throwers are rounded up and promptly hustled out of the room. Wolfensohn declines to press charges, but in the meantime the journalists in the room type up their copy and recount the incident to global audiences.

Figure 4.1.1: Global activist groups such as the Biotic Baking Brigade have used pie-throwing to humiliate their targets, often powerful corporate and political leaders, and to draw attention to progressive global causes. (CC BY 2.0; m01229 via Flickr)

Replayed in a 2002 documentary, Commanding Heights, this pie-throwing scene is one of many that unfolded in the early days of the Twenty-first Century, during a wave of anti-globalization protests which stretched back to 1999 and even earlier (PBS, 2002). This vignette highlights the contentious nature of the politics of globalization. As goods, people, ideas, and technology all circulate globally, in greater volumes and velocities, political movements have sprung up to lobby for the interests of various groups and issues. Anti-globalizers often frame their position in terms of fairness or justice. Pro-globalizers emphasize the gains that all have experienced from a more integrated world, one in which “a rising tide lifts all boats”.

A mix of actors populate this global landscape, and they can be divided into three major categories. The most powerful are the state governments that exist at the national level. States possess sovereign rights to set policies, domestic and foreign, over their territory and population. Importantly, state (national-level) governments have the capacity to enact border and immigration policies and collect taxes to enforce those policies. Governments deploy representatives worldwide, including diplomats and national representatives that sit in international bodies such as the United Nations. These envoys seek to negotiate agreements and implement policies which advance their state’s interests.

Second, there are important non-state actors that drive the politics of globalization, many of whom are part of civil society. Civil society comprises non-state organizations engaged in collective action and, in many cases, advocacy for certain policies and underlying values. Many civil society groups have connected globally to form transnational advocacy networks (TANs) (Keck & Sikkink, 1998). These groups, which may be loosely connected or tightly organized, seek to shape public opinion and state policies that accord with their vision. They may utilize a variety of tactics, from street protests to social media campaigns, to achieve their goals. The repertoire of tactics utilized by global civil society groups has been continually evolving and will continue to do so.

A third group of actors are intergovernmental organizations (IGOs), or international associations composed of state members. The United Nations is the most well-known of these. With headquarters in New York City, the UN is the most comprehensive international organization in the world, with representatives from nearly every country of the world sitting on the UN General Assembly. UN representatives vote on global issues ranging from poverty alleviation to international military interventions. Within the UN system are many other, more specialized international organizations such as the World Bank and International Atomic Energy Agency. Owing to the COVID-19 pandemic, the World Health Organization – also a part of the UN system – is now more widely recognized by the general populace. Many intergovernmental organizations such as the UN are dependent on state governments or private firms and individuals for funding. An example is the International Monetary Fund, which bails out governments in financial crisis and draws from funds contributed by member governments.

In addition to these international organizations are various “groups” of governments which convene heads of state or other government representatives to discuss international matters. Examples include the Group of Seven (G7), Group of Twenty (G20), Group of 77 (G77), and BRICS (a consortium including Brazil, Russia, India, China, and South Africa, all major economies of the Twenty-first Century). To gain a sense of the work of these groups, let’s consider the G7. Founded in 1975, the G7 includes several high-income democracies: Canada, France, Germany, Italy, Japan, the UK, and the United States. When the G7 met in Hiroshima, Japan for its 2023 summit, the invitee list was expanded to include leaders of countries not part of the G7 core, namely, India, Brazil, the Comoros, and South Korea, among others. On the agenda were global issues such as climate change and nuclear nonproliferation. These and other issues discussed in such international settings are often complex and interconnected, with little consensus on which policy path to tread.

Figure 4.1.2: Attendees at a working session of the 2023 G7 summit in Hiroshima, Japan (CC BY-NC-ND 2.0; Simon Dawson for No 10 Downing Street via Flickr)

One further way to break down the politics of globalization is to focus on some key policy areas and the contestation within each. Let’s take a look at the politics of globalization as they relate to trade, immigration, and corporate taxation.

Trade

International trade refers to the movement of goods and services across international borders. Trade volume has increased sharply in the post-Second World War period (1945-present) and especially since the integration of the global economy after the collapse of the Soviet-led socialist bloc in 1989-1991. On average, world trade volume has increased by 4 percent each year since 1995, which translates to a doubling of world trade volume over the period 1995 to 2013.

One of the classic arguments supporting international trade hinges on the concept of comparative advantage. Comparative advantage focuses on specialization and efficiency, or the lowering of relative costs. Note that comparative advantage applies at the individual and firm level, though this example will focus on national economies. When countries specialize in producing those goods and/or services which they can produce most efficiently, or at lower relative cost, in comparison to others, then they have a comparative advantage in that good. The United States, for example, has a comparative advantage in the production of agricultural commodities such as corn and wheat. It also has a comparative advantage in financial services. Norway has a comparative advantage in salmon production. Mexico has a comparative advantage in automobile manufacturing. In a world of international trade, a country should specialize in making those goods or services in which it has a comparative advantage, then trade with others. This results in an overall lowering of production costs. Those savings are passed along to consumers, who end up paying less for goods which are traded in international markets, from rice to smart phones. Moreover, a world of free trade is one in which countries erect minimal barriers to trade. This means reducing taxes at the border (tariffs), synchronizing international standards, and otherwise reducing friction that comes with moving things across borders. Opposing free trade are protectionist measures, which seek to provide advantages to domestic producers by raising tariffs or other barriers to a domestic market.

In turning to the politics of trade, there are many interests at play in a world of exchange and comparative advantage. Free trade and the principle of comparative advantage benefits many groups. Consumers are a key beneficiary, as they pay lower prices for goods that are produced from the specialization and exchange implied by focusing on comparative advantage and free trade, respectively. Firms with global products also benefit from free trade, for example Meta Platforms, Inc., or General Motors. Such firms may pressure politicians around the world to loosen regulations on the trade related to their products or form industry organizations to lobby for favorable government policies. They might also pressure international organizations, such as the World Trade Organization, for favorable trade laws or seek to shape international standards related to their products.

There is a broad array of groups which oppose free trade and favor protectionism. In some cases, these groups perceive a threat from international producers or corporations. Labor unions in the United States have organized against lower-cost goods made in countries with lower labor costs, such as consumer electronics made in China or cars made in Mexico. In other cases, groups may protest the harm done in the name of free trade. Environmental groups have organized transnational movements to oppose deforestation, for example by drawing attention to deforestation associated with the production of palm oil or overharvesting of tropical hardwoods. Human rights organizations have sought to shed light on labor violations in international supply chains. Some of these campaigns call for consumer action and boycotting of goods or pressure on international corporations. Others have called for bans on the importation of goods produced by child labor and forced labor. Even governments have gotten involved. For example, the U.S. Department of Labor has invested in public education campaigns about the environmental harms and labor violations that are part of the global palm oil industry. Such educational campaigns can spark consumer awareness as well as generate pressure for producers in the United States to switch to more sustainable and ethical palm oil suppliers.

Figure \(\PageIndex{3}\): The global palm oil supply chain includes environmental harm and labor violations, as detailed in this infographic created by the US Department of Labor’s Bureau of International Labor Affairs (public domain; US Department of Labor via US Department of Labor)

Immigration

The movement of people across international borders, or international migration, is another deeply political aspect of our globalizing world. Nearly four in 100 people on the planet is an international migrant, and this number is projected to increase as the global economy grows and climate change reshapes the habitable and arable regions of the world. Migration increases with global economic integration but also as a result of militarized conflict and crisis. Whether immigrants are welcomed by host countries, or allowed to migrate from their home countries, is a function of many political forces: public opinion, the policy decisions of elites, the efforts of national and transnational advocacy groups, and the work of international organizations.

The power of these political forces become evident when examining a specific subset of international migrants, those who leave their home countries to seek employment as domestic workers in host countries. Migrant domestic workers (MDWs) are predominantly female and often hail from the Global South, from countries such as Nepal, the Philippines, and Guatemala. MDWs number in the millions worldwide, and they are estimated to be over 80 percent of all domestic workers in the Middle East and over 70 percent of all domestic workers in North America (International Labour Organization, 2021). Their labor is invisible insofar as they are confined to the private spaces of a host family’s home, often with little to no organizational support. Within these working conditions, MDWs are vulnerable to abuse by employers. This has sometimes reached a crisis point, galvanizing action by many political actors. In 2018, in response to the deaths of seven Filipino domestic workers in Kuwait, an outraged public supported a ban by the Philippine government on emigration of Filipino workers to Kuwait. International organizations and advocacy groups, such as Human Rights Watch, joined the fray with policy recommendations. The Philippine government lifted this ban after negotiations with the government of Kuwait to improve labor conditions, but enforcement proved difficult (Shivakoti et al., 2021). Advocacy continues. The International Labour Organization has sought, since the passage of a Domestic Workers Convention in 2011, to provide greater legal protections to these particularly hidden migrant workers worldwide.

Figure 4.1.3: A domestic worker in Indonesia. Migrant domestic workers, which number in the millions worldwide, are often unseen as they labor in private homes (CC BY-NC-ND 2.0; ILO/A.Mirza via flickr)

Zooming out from this specific example, the politics of immigration encompass many groups, all seeking to shape the movement of people across borders. These groups fall into the three categories explored above: state (national) governments, nongovernmental organizations, and international (state-based) organizations. Some governments have relatively open borders, as in the case of the European Union’s Schengen Zone. Other governments have highly restrictive immigration policies, such as Japan.

Anti-immigration groups have mobilized to influence public opinion and legislation against open borders. Some have highlighted the strain on public services, especially on border regions. In the European Union, countries such as Greece and Italy have been thrust into the role of first responders when migrants pushing northward from Africa and westward from Asia have sought first landing in the EU on Mediterranean shores. These population pressures have strained local services, requiring transfers and other responses from the EU. 

Pro-immigration groups focus on the rights of migrants to seek safer living conditions and more gainful employment, emphasizing the economic contributions of immigrants and socio-cultural gains that stem from a diverse society. They highlight how migrants fill needs in the domestic labor market, especially in countries with an aging workforce, and add to the innovative capacity of a society. The United States is one prime example: according to one study, as of 2022, over half of startups valued at over one billion USD were founded by immigrants (Anderson, 2022).

The politics of immigration are contentious, touching on both material well-being as well as conceptions of national identity. International migration has tended to rise during times of global economic prosperity and integration, but also in the face of conflict and crisis. To the degree that all of this characterizes a globalizing world, people will continue to be on the move.

Corporate taxation

Scholars have debated whether the rise of the multinational corporation (MNC) has eroded state power in a time of globalization (Strange, 1996; Wolf, 2001). When the world’s largest firms are valued in the trillions of dollars, they have more financial assets at their disposal than many low- and even middle-income states. At the same time, states have the sovereign authority to set policies affecting MNC behavior. National governments establish trade and labor policies, environmental standards, and much more. The law of the land can be enforced through courts and other coercive bodies. Importantly, national governments have the authority of taxation, which is foundational in the provision of public goods.

A corporate income tax is imposed by federal and state governments on the profits earned by businesses. Corporate taxes vary greatly across national jurisdictions, with governments levying taxes ranging from zero to fifty percent of corporate profits (Enache, 2022). In 2022, sixteen jurisdictions, mostly island countries, had zero general corporate taxes. So-called “corporate tax havens” are often well-governed jurisdictions that wish to attract corporations in order to benefit from their investments in the broader national economy. Even if a corporation’s profits are untaxed by a given government, that country’s lawyers, accountants, bankers, and others benefit from the corporation’s activities. In other words, there are private interests behind what may seem like a counterintuitive policy for a national government. MNCs are nimble actors, and they search internationally for ways to reduce their overall tax rate. One estimate places the income losses from corporate tax havens at 500 to 600 billion USD annually, with low income countries bearing a disproportionate share of these losses (Shaxson, 2019).

Figure \(\PageIndex{4}\): Many island countries, such as the Bahamas, levy zero general corporate income taxes. Taino Beach, pictured above, is on Grand Bahama Island and such paradises inspired the name of leaked tax haven documents, the Paradise Papers (CC BY-SA 4.0; Didier Moïse via wikipedia)

There has been growing popular awareness of tax havens, due in part to the leaking of millions of financial and legal documents to global media outlets. These have included terabytes’ worth of leaked documents known as the Panama Papers (2015), Paradise Papers (2017), Pandora Papers (2021), and others (International Consortium of Investigative Journalists, 2023). The documents themselves highlight the complex web of shell companies, offshore trusts, and other instruments used to reduce the tax burden and obscure the true wealth of corporations and individuals. A major media organization that has been analyzing the Panama Papers, the International Consortium of Investigative Journalists (ICIJ), demonstrates how global civil society can spur worldwide networks of groups into action. One of the first political figures to face fallout for their use of tax havens was Iceland's Prime Minister Sigmundur David Gunnlaugsson, who resigned in the face of public protests over his family’s use of tax havens. In the realm of MNCs, the Paradise Papers revealed how Apple Inc., the world’s largest technology corporation, had employed a firm based in Bermuda, known as Appleby, to shift assets and ultimately reduce Apple Inc.’s tax burden by billions of dollars.

Since these revelations, there have been international calls to reform. The G20 and Organisation for Economic Co-operation and Development (OECD) have worked on hammering out a global tax agreement. This would create a global minimum tax with an effective rate of 15 percent. Over one hundred countries and other jurisdictions have signaled willingness to agree to these terms, but there have been delays and as of the publishing of this textbook in late 2024, the agreement has still not gone into effect.