THE CHANGING ROLE OF

THE STATE AND THE
CORPORATION

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Last time....
Fordism and Post-Fordism as social processes
Changing geography of manufacturing and production in the
developed world
Rise of branch plants and outsourcing
Today's objectives
Globalization and free trade
Hollowing out of the nation state
Keynesianism, neoliberalism & the role of the state
The emergence of transnational corporations 
Hyper-globalization The Spiky world
Global population
What is globalization?
Global spread of capitalism
Lowering of barriers between nations for both goods and
investment
Increased international mobility for particular groups of people
Increased dissemination of technology between organizations
across the world
The discourse of globalization
Reduce inequalities through
free global trade
Market forces will bring
development
Communications will eliminate
the tyranny of distance
There Is No Alternative
None of this is new
"The propensity to truck,
barter and exchange one
thing for another is common
to all men." ~ Adam Smith
Trade has always been as
global to some extent
Modern globalization
represents an intensification
Emergence of modern
globalization
Trade barriers & protectionism
seen as major cause of conflict
Advances in global transportation
technology (containerization)
Necessity of expanding global
marketplace
Time-space compression
Technology 'shrinks'
distance
Constant reduction in the
time necessary for global
shipping and communication
A "speed up in the pace of
life"
Glocalization
Global events felt locally
Global forces are mediated
through local processes
Terms of glocalization depend
on local vs global power
The changing role of the state
The relationship between
national governments and the
economy has changed
States now play a much less
active role in regulating the
economy
A neo-liberal turn from
Keynesianism
Hollowing out of the nation-
state
Counties are simultaneously ceding sovereignty to supra-
national organizations and downloading it to regions and cities
Non-state actors have increasing influence over states
The state's ability to project power over corporations is
weakened by their mobility
A shift in the scale of power away from democratically elected
governments
power &
responsibility
Rescaling of governance
NGOs play a critical role in
stabilizing the world economy
Macro-Regional Trading Blocs
lower barriers between nations
Cities given expanded
responsibility to manage their own
growth
Transnational Corporations gain
increasing voice in national
priorities
National
Government
NGOs FTAs
Regions TNCs
sovereignty
Keynesian Welfare State
Emerged during Great
Depression as a response to
laissez-faire capitalism
Economic downturns are
reduced through government
spending (prime the pump)
Role of government is to
provide full employment in
order to support mass-
consumption
"Liquidate labor, liquidate stocks,
liquidate farmers, liquidate real
estate… it will purge the rottenness
out of the system. High costs of
living and high living will come
down. People will work harder,
live a more moral life. Values will
be adjusted, and enterprising
people will pick up from less
competent people."
~Andrew Mellon, US Secretary of
Treasury, 1929
The Neoliberal state
A reassertion of free markets and
competition
De-regulation, privatization,
removal of worker protection, tax
cuts & reductions in government
spending
A shift in what is seen as
"common sense" economics
US Top Marginal Tax Rate
Attributes of neoliberalism
Primacy of free markets
Privatization of non-core government functions (e.g. welfare,
infrastructure, oversight)
Protection of individual property rights
Competition as ultimate regulator
Neoliberalism as a process
Roll out neoliberalism -
Neoliberal reforms applied to
developed countries through
domestic political action
Roll back neoliberalism -
Structural Adjustment Programs
imposed on developing nations in
response to economic crisis
Neoliberalization is a continuous
process
Roll-Out Neoliberalism in
Canada
Mulroney government begins neoliberal, pro-market reforms in
1980s
Privatization of many crown corporations
Deregulation of energy and resource industry — growth of
voluntary enforcement and weakening of gov't regulators
Roll-Back Neoliberalism in
Malawi
World Bank pushed Malawi
to reduce subsidies for
fertilizer in exchange for
loans
Enforcement of the
"Washington Consensus"
Food supply improved after
reinstating subsidies in
2000s
0
750
1500
2250
3000
1990 1993 1996 1999 2002 2005 2008 2011
Grain Yeilds (Kilograms per Hectare)
No Subsidy
Neoliberalism as a discourse
Neoliberalism is based on the
belief that the free market is the
natural state of capitalism
All markets are social constructs
Social constructs have real world
effects
OWS, neo-liberalism &
globalization
Purpose of OWS was to
question capitalist logics of the
crisis
Not against globalization, just
its present form
Rise of alter-globalization
movements
Free trade
Modern globalization is
predicated on the notion of free
trade
Absence of tariffs, trade barriers,
and state support for industries
Free access to markets
Free movement of labor and
capital within and between
countries
Free trade agreements
Governments give up their right
to restrict trade in exchange for
freer access to world markets
Enforced through new supra-
national organizations like the
World Trade Organization or the
European Union
Example: GATT, NAFTA, WTO
"Complainants claimed that this Order will
reduce competitiveness on the French market
as their product will no longer be able to be
sold as “Coquille Saint-Jacques” although
there is no difference between their scallops
and French scallops in terms of colour, size,
texture, appearance and use, i.e. it is claimed
they are “like products”.
WTO dispute DS14 between Chile and the European
Commission
Canada and Free Trade
Canada has historically been a
branch plant economy of the US
Economy is oriented towards
exports to the US
Desire to protect nascent
industries balanced against needs
for US market 0%
12.5%
25%
37.5%
50%
1970 1978 1986 1994 2002 2010
E
x
p
o
r
t
s

a
s

%

o
f

G
D
P
United States Canada
World cities
Particular cities have become global nodes of international capitalism
They have displaced nations as the most important site of economic
activity
Investment capital and transnational knowledge workers flow through
these cities
Cities are ranked by how many global firms are headquartered their
and their position in global financial, political, and cultural networks
World cities
But the state still remains
States still retain substantial
power
Power to leave trade agreements
or defend existing subsidies and
barriers
Stronger nations are able to
retain more sovereignty than
weaker ones
TRANSNATIONAL
CORPORATIONS
What is a firm?
More than just a collection of workers
Coordinates and configures resources and knowledge to
produce a product
A bundle of resources, routines, and relations in constant flux
Need to examine internal and external transactions
Firm Transactions
Internal vs external
transactions
Direct ownership vs strategic
alliance vs arm's-length
relationship vs franchise
Need to carefully examine
power relations with and
between firms
Transnational Corporations
(TNCs)
Difference between multi-national
companies and TNCs
TNCs do not specifically identify
themselves with one particular
country
Power within the organization is
unevenly spread across multiple
nations
Country /
Company
2010 GDP or
Revenue
(billions)
Norway 414
Walmart 408
Royal Dutch Shell 378
Exxon Mobile 354
Thailand 318
BP 308
Greece 305
Sinopec Group 273
Toyota 221
Different forms of TNCs
Public firms controlled by shareholders (America, Canada)
Family-held firms (Germany, Switzerland)
Chaebol ( Korea) or Zaibatsu/Keiretsu (財閥/系列
Japan)
State owned firms (China, Russia, many developing
countries)
State Owned Firms
Firms controlled (State owned
Enterprise) or passively
managed (Government linked
Corporation) by government
Priority access to domestic
resources or markets
But are they TNCs?
Energy
Utilities
Telecom
Financial
Industrial
Materials
Health Care
IT
Consumer
0% 35% 70%
Share of SoEs in Emerging Markets
TNC's control of space
Shell lubrication facilities
TNCs use spatial mobility
to access markets
unavailable to others
TNCs locate to access
markets, resources, and
labor pools
However, no corporation is
truly global
The different parts of a firm
Corporate HQ
Regional HQs
Operating
Units
Research &
Development
Sales &
Marketing
Production Service Fulfillment
The different parts of a firm -
geography
Corporate HQ
Regional HQs
Operating
Units
Research &
Development
Sales &
Marketing
Production Service Fulfillment
Product life cycle
The geography of production
changes as the product matures
New products have low spatial
division of labor & require
skilled labor
Mature products can be
produced in low-cost locations
Transnational Corporations 137
or, alternatively, close to production units to enhance communications and the
sharing of ideas.Yet another possible locational pull is to markets, in order to benefit
from closeness to customer needs, tastes and preferences.
The type of R&D undertaken by TNCs within their own transnational net-
work can be classified into three major categories. The lowest level is the support
laboratory, whose primary purpose is to adapt parent company technology to the
local market and to provide technical back-up. It is by far the most common form
of overseas R&D facility. The locally integrated R&D laboratory is a much more
substantial unit, in which product innovation and development are carried out for
the market in which it is located.The international interdependent R&D laboratory is
of a quite different order. Its orientation is to the integrated global enterprise as a
whole rather than to any individual national or regional market. Indeed, there may
be few, if any, direct links with the firm’s other affiliates in the same country. Only
a small number of technologically intensive global corporations operate international
interdependent laboratories.
Of course, these categories are not fixed and unchanging. In particular, the
development of so-called ‘open innovation’ is changing the nature and relationships
of corporate R&D units.
Figure 5.13 Corporate R&D processes
Source: based in part on Buckley and Casson, 1976: Figure 2.7
Marketing of
final product
Production of
final product
‘De-bugging’ and adaptation
to the local environment
Marketing experience
with prototype
Production experience
with prototype
Product
development
Product
specificatio n
Product
design
Marketing
experience
Access to Universities,
research institutes,
trade associations, etc.
Access to large supply
of highly qualified
scientists, engineers
and technicians.
Access to relevant
production and
marketing units.
Marketing
research
Applied scientific
research
Production
experience
Environmental
scanning
PHASE
III
PHASE
II
PHASE
I
Major locational
requirements
R&D processes
Geography of R&D in TNCs
Conflicting cultures in TNCs
TNCs face both internal and
external cultural conflicts
Internal: clashing cultures
between subunits & HQ
External: Cultural miscues
when advertising in multiple
markets
Summary
Hyperglobalization and geography
Development and influence of neo-liberalism
Shifting scales of governance
Diverse structures of TNCs

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