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Globalisation: Threat to nation-state?

M. Abdul Hafiz
Globalisation is a word that has so many connotations that there is no widely acceptable formulation of a concept of its own. However, there runs a central strand, indicating something new, which erodes national power. It is something that is changing man's territorially arranged state system, and has initiated a "process" where the people, practices, norms, ideas, currencies, goods, services, information and institutions will transcend geographical barriers, obliterating traditional state boundaries. It's a boundarybroadening process, allowing people to move across increasingly tenuous national frontiers.
But then, it cannot be looked upon as an altogether new phenomenon because some kind of globalisation existed as early as in early nineteenth century when the industrial revolution was taking place, with its impact felt worldwide. International mobility of capital, which began in small ways in the late eighteenth century, has been the sine-qua-non of twentieth centuryglobalisation.
There is, however, a difference now --difference in its value, intensity and pervasiveness through the acceleration of technology and the information revolution. The power of economic variables has been further strengthened with the diffusion of
consumer products, the rapid transfer of financial resources and the efforts of the transnational companies to extend their market share.
These companies have proved that they can withstand and eventually surmount any pressure of political and cultural pro tectionism. We have reached a level of development in which it is possible for innovations occurring in any sector of any country's economy to be instantaneously transferred to and adapted in any other country or sector.
The inexorable surge of globalisation that we witness today is nevertheless a direct challenge to one of the central features of modern civilisation — the existence of nations. The control of money, credit and fiscal policy was the most important pillar on which Jean Bodin, one of the exponents of nation-states, based his concept during the late sixteenth century. That pillar is now on the verge of collapse, which has, of course, come about over a period of time. By the late nineteenth century, the dominant currency was no longer the state-minted coins or bank notes, but the credit created by fast growing, privately controlled commercial banks.
Even though every nation-state countered this trend with the establishment of central banks to control the commercial banks and their credits, one nation-state after another throughout the nineteenth
century had perforce been under the control of a non national gold standard, which imposed strict limits on a country's monetary and fiscal policy.
A gold exchange standard agreed upon in Breton Woods after the Second World War also did not give individual states full monetary and fiscal sovereignty. It will, thus, be seen that the nation-states have since been under assault from some of the symptoms of globalisation.
First, the expanded concept of globalisation, by shifting power from state to non-state authorities like multi-national or trans-national firms, has allowed international bureaucracies to further undermine the state fabric. It has virtually assailed the ramparts of nation-states, which are now almost non-entities. The phenomenon has totally changed the traditional structures of production.
Second, globalisation also involves changes in the financial structure -- the system by which credit is created to finance production and trade in goods and services. Finally, globalisation takes place at the level of perceptions, beliefs, ideas and tastes. This is where globalisation collides with the cultural differences that exist between nations.
In full-scale globalisation, gaining world market share will be preferred to territorial acquisition. Except for control over the sources of water and energy, there will be little temptation to wage war, which will render a country's military -- a symbol of state authority -- redundant. But the erosion of the state's authority over its finances will be the severest blow for the state. The state can no longer resist the foreign exchange market; neither can it
determine interest or inflation rate. Globalisation has curtailed the state's means for the provision of welfare to the disadvantaged segment of the population.
The demise of nation-states had been speculated about since talk of globalisation of the world's economy began some forty years ago. As a matter of fact, such speculation was in the air for the last 200 years, beginning with Kant's 1795 essays Perpetual peace. People assert that the internet will make tax evasion so easy that sovereignty will inevitably shift to the individual, leaving the state to die of fiscal starvation.
Yet, the nation-state showed amazing resilience There is no other Institution capable of political integration and effective membership in the world's political community. On the other hand, according to the detractors of globalisation, it is still a myth and illusion. It is an illusion because the state will exist as the enterprises will have to belong to some state and their directors are almost exclusively of one national origin.
Since the early industrial revolution it was argued that economic interdependence would prove stronger than nationalist passion. But whenever political passions and nation-state politics clashed with economic rationality, the former won. Therefore, in all probability, the nation state will survive globalisation. But it will be a greatly changed nation state, especially in domestic fiscal and monetary policies, control of international business and, perhaps, also in war.
Bng (retd) Hafiz is former DG of BUSS.