ARTS1811 Essay

Tamara Kunz: 3290735

Tutor: Andrew Kapos

Discuss how non-state actors (MNC, NGO) have influenced the working of the
international system.

Historically the ‘state’ has been the most important actor within the international
system with power and authority traditionally residing with them (Bieler and Underhill
2000.) More recently however, due primarily to globalisation, non-state actors, more
specifically, multi-national corporations (MNCs) have begun to exert great influence
within the system. This essay will assert, with a focus on the case studies Beyond
Petroleum (BP) and Royal Dutch Shell, that MNC’s have begun to challenge the
traditional concept of the international system- state sovereignty. This is seen through
their influence on economic markets, ability to generate clashes of sovereignty and
their capacity to continue to challenge the working of the system whilst establishing
themselves as a force of dynamic change.

The catalyst for shaping our modern international system was based on The Peace of
Westphalia (1648). The treaty was characterised by conventional concepts such as the
balance of power, diplomacy and international law- all facets which rely upon the state
as monopolistic forces of dynamic change. Since the creation of the United Nations in
1945 however, the international system has undergone a significant evolution
introducing to the system a vast proliferation of non-state actors- agencies, networks
and organisations- who are seeking to influence the governance of global affairs. Peter
Willets asserts however ‘the very words, non-state actors, imply that states are
dominant and other actors are secondary’ (Willets 2008: 332). However academics
have now termed ‘non-state actors’ as ‘transnational actors’ to affirm that the state is
no longer the sole or dominant actor within the system nor is international relations
limited by boundaries. (Willets 2008:332)

Despite the historical significance of the state as the dominant actor, the emergence of
the British East India Company in the 16th century, marked the birth of the MNC and as
such the birth of one of the first non-state actors. It quickly demonstrated its ability to
act as a force of change in the international system. As the company expanded in its
trade of cotton, silk, indigo dye, saltpetre and opium it began to establish its

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dominance through the world as an empire. This was clearly seen through its
increasing influence and control over both the British and Indian governments. In India
it gained control over military and administrative functions and was able to ensure
procedures that best suited its commercial pursuits. In Britain the Company was given
special privileges and trade exemptions that allowed them to essentially monopolise
the industry. In this way the British East India Company managed to maintain itself as a
force of change over various empires and governments for over 200 years. (Landow
2010)

Today one of the most powerful MNC’s operating is Beyond Petroleum (BP).
Established out of a merger between the Anglo-Iranian Oil company, its activities and
power it exerts today is highly controversial. Producing 2.3 million barrels of oil per
day, it has a market capitalisation of $181 billion, a sales operating revenue of $239
billion, wholesale and retail operating in over 80 countries and exploration and
production active in 30 countries. (Annual Reports and Accounts BP Inc. 2009)) These
figures alone testify to their extensive global reach and potential to exert great
influence to the working of the international system. BP’s operations in Colombia
present a valuable case study to determine ways in which a MNC influences the
working of the international system and the way in which it challenges the central
concept of the system- the state. In Colombia BP operates in the Casanare oil field
reserves with operations in this region worth approximately $40 billion (Beder 2002).
As such, it presents itself as a valuable target for guerrillas who wish to obtain much of
the profit and call for the nationalisation of the industry. Due to this volatile
environment in which BP operates the MNC began to work in collusion with the
Colombian government. As Beder (2002) states ‘In 1996, BP agreed to pay the Defence
Ministry between $54 and $60 million over three years to augment the battalion with
150 officers and 500 soldiers’ in order for the protection of the oil reserve. Similarly
they pay financial compensation to the police force which also acts as a further layer of
preventative security. Along with security issues, BP’s operation in the region is highly
controversial as it has led to deforestation, high levels of pollution, earthquakes and
ground contamination. These environmental concerns have led to significant anti-BP

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protests which in turn have led to claims of significant human rights abuses by BP and
its Colombian government associates. Human Rights Watch (cited in Beder 2002)
claims there have been abuses such as killings, beatings and arrests ‘committed by
those forces responsible for protecting the companies’ installations’ Whilst BP
assumedly deny all allegations Human Rights Watch argue that ‘BP cannot avoid
responsibility for human rights violations committed by government forces in defence
of its own interests’ (cited in Beder 2002).

As is evident BP’s operation in Colombia raise a number of concerns in regards to the

influence of MNCs as non-state actors. Firstly, the human rights abuses that were
carried out raises the question; who are MNC’s accountable to in the current
international framework? Is it state, organisation or other non-state actors that are
responsible for holding MNC’s answerable for their actions? As Korbin (2001) states:

‘the global system and international institutions are neither transparent nor
democratic. There has been a marked loss of accountability and democratic control
resulting from the shift of power from national governments to the market and
international institutions.’

Secondly, it can be seen that the Colombian government has become reliant upon BP’s
funding to defence and law enforcement agencies, marking the growing governance
and security roles that MNCs can play. This therefore has resulted in the willingness of
the Colombian government to engage in human rights abuses in order to protect BP
interests which by necessity have become Colombia’s interest. Furthermore, BP’s
involvement in the Casanare region has resulted in the provision of economic
stimuluses that in any other circumstance the government could never have been able
to provide. As William Rosenau (2008) states ‘in many violent regions, multinational
corporations are the only institutions with the financial resources and technical
expertise to reduce armed conflict.’ This role of MNC’s in zones of conflict has been
termed as ‘corporate counterinsurgency’ (Chalk 2008). As a BP executive told Amnesty
International (cited in Beder 2002) “BP is a force for good, surely we should not deny
the Casanare the development which is available to others” CEO of BP, Brown, also

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claimed to have spent $25 million in the region on the establishment of local business
and industry and social infrastructure. As James Ahiakpor (2010) emphasises:

“Even as MNCs may be motivated primarily by profits to invest in the Third

World, the morality of their activities in improving the material lives of many in these
countries should not be obscured through misperceptions.”

Overall however it is evident how MNC’s have the potential to exert great influence
over a nation state to the extent that they have the capacity to diminish the role of the
state as the sole provider of security and reduce the state to a less influential actor
even in its own affairs.

Similarly Royal Dutch Shell Shell is a dominant and powerful non-state actor operating
within the international system. Its subsidiary, Shell Nigeria, has a significant presence
and impact upon the governance of Nigeria today, especially the Delta region where oil
is being extracted. The Delta is regarded as a high conflict zone where there is
essentially no government or military presence that maintains order but rather cults,
gangs and insurgents operating in the region. Politicians within the government are
also highly corrupted aligning themselves with gangs to serve their own interests. As
one scholar (cited in Beder 2002) noted ‘the state is in fact a source of violence and
instigator of conflict.’ Whilst Shell has been criticised for numerous human rights
abuses, linkages to the corrupt Nigerian government and exacerbating conflict, Shell
have more recently adopted a different approach. As Chalk (2008) states ‘a heart-and-
minds-strategy’ which includes providing social services such as health care, education
and agriculture services. Many residents of the area have stated ‘Shell is the only
government we know’. Shell Nigeria however has become concerned that their aid is
fostering ‘a dependency mentality...which can further undermine the already limited
legitimacy and capacity of the government’. (Rosenau 2008) As is evident Shell has
now established themselves almost as a form of government in Nigeria wielding
significantly more power and authority than the state. In this way, whilst their
presence is now necessary due to the regions’ reliance upon their resources, they have

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essentially undermined the state sovereignty of Nigeria. Whilst MNC’s operating in

conflict zones often view reasons for conflict in the region being outside their control
and scope of responsibility, as seen with Shell and BP, corporations are increasingly
taking on the burden and responsibilities of state building.

As the above analysis of two of the world’s most powerful MNCs reveals, they clearly
have immense capability to exert change within the workings of the international
system. A few issues raised in the case studies are their imposition on state
sovereignty, accountability and their ability to shape zones of conflict. These issues,
including a discussion of globalisation will now be discussed in further detail to
demonstrate exactly how the international system is changing as a result of their
growing power.
Firstly, one of the cardinal concerns about non-state actors is as Miller states:

“The growth of so many kinds of non-state actors challenges and even weakens
the "state-centric" concept of international politics and replaces it with a
"transnational" system in which relationships are more complex. These organizations
changed the international environment” (cited in Ataman 2003).

It can be suggested today that due to globalisation and the growing influence of MNC’s
that it is no longer possible to regard each country as having its own separate
economy. According to Willets (2008: 335) this then raises the fact that MNC’s
challenge two very central concepts of state sovereignty: control over the currency
and control over foreign trade, consequently leading to a government’s loss of control
over financial flow and difficulty in regulating international transactions. This problem
for states is exemplified through the concept of ‘triangulation’- where trade between
two countries is routed indirectly via a third country (Baylis and Smith 2008: 588). For
example in the 1980’s neither Britain nor Argentina allowed trade between the two
countries however this was resolved by companies diverting trade through first Brazil
or Western Europe. As Ajiakpor states:

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‘MNCs challenge the state sovereignty of host countries. Host countries may
lose control over their economies. They may create political and social division and
prevent the development of domestic industries in host countries.’

The lack of separate economies and prevention of domestic industries leads to an

increased level of interdependence between states which could potentially, out of the
growing necessity to cooperate economically, lead to a new form of global
governance. As suggested by hyper-globalist theorists, MNC’s make states almost
irrelevant and therefore change within the international system is already evident. As
a result of the increasing irrelevance of the state, domestic policies have seen a shift to
impose the ‘global market discipline to a domestic market’ (McGrew 2008: 29) due to
the inability of national governments to control their economies.

Secondly according to Willets (2008: 336) ‘transnational companies generate clashes of

sovereignty between different governments’ through the problem of
‘extraterritoriality’, a concern that is inherent in the structure of all MNCs. This is
defined by Baylis and Smith (2008: 580) as occurring ‘when one government attempts
to exercise its legal authority in the territory of another state.’ For example BP’s
headquarters are in London therefore under the sovereignty of Britain however they
have subsidiary companies around the world (eg. Colombia.) Both governments would
accept that they each have sovereignty to control purchasing, production and sales.
However problems arise when, for example, the British government decisions cover
global operations of the MNC. The issue of extraterritoriality is who the Colombian
subsidiary must obey- the Colombian government or the British government orders
(Baylis and Smith 2008: 336). Hence it is evident that MNCs have significant ability to
challenge the state-centric concept of state sovereignty and undermines its
importance to the working of the international system. As reaffirmed by Miller (cited
in Ataman 2003), the activities of MNCs

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‘may seem evidence of the growing inability today of the sovereign state to
control and regulate effectively economic activities within the private sector. If that is
so, then one of the traditional rationales for modern sovereignty is undermined"

Globalisation- defined by some as ‘compression of time and space’, has been a

revolutionary process that has allowed MNCs to become a force of dynamic change
within the working of the international system. As Korbin (2001) notes by the late
1990’s, 63 000 MNCS accounted for 25% of global output, roughly half of world trade
takes place between multinational firms and he suggested that ‘MNCs coordinate
international economic flows and allocated activities and resources worldwide’. The
difference between the way the international system worked previously and today is
not only a greater interdependence between states but as some suggest also greater
inequality. As Immanual Wallerstein theorises in his world systems theory, today there
are three zones to the world economy: the core, semi-periphery and periphery. MNCs
are a driving force behind the capitalist relationship in which wealth is taken from the
periphery and channelled to the core. Similarly globalists see the international system
becoming reflective of a borderless world in which Strange (cited in Bieler and
Underhill 2000: 1) sees the increasing ‘hollowness of state authority’ and rise of an
“economic level playing field on which truly global companies are the primary actors”.

Despite often the emphasis on the ability of non-state actors such as MNCs to diminish
the traditional concept of the dominance of the state, it can also be asserted however
that we are now entering into a ‘post-Westphalian’ order. According to McGrew (cited
in Baylis and Smith 2008: 29) this order is characterised by power which ‘is being
transformed in which sovereignty is now understood as the shared exercise of public
power and authority between national, regional and global authorities’. This new
conceptualisation of sovereignty therefore places MNCs and other non-state actors on
the same level as states suggesting equal influence within the international system. As
Korbin (2001) notes the post-Westphalian order has ‘seen a shift from an international
system comprised of like actors (states) to one where multiple authorities are the

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norm’. Therefore the it can also be suggested that the role of the state is not
diminishing but rather transforming, as Barnet and Muller state (cited in Korbin 2001)
global corporations are demanding ‘the right to transcend the nation-state, and in the
process, to transform it’. The assumption that arises from such statements is that no
longer will global governance be the responsibility of one state, but rather we will see
a change in the role of states as well as a movement towards a multi-polar world stage
dominated by a variety of actors where the new world order may be “a leaderless
forum in which multiple players exert influence”. (Rejeski and Wong, n.d)

When analysing the influence of non state actors, specifically MNCs, on the working of
the international system it becomes evident that they have begun to transform the
system and have established themselves as a force of dynamic change. Case studies of
BP and Shell are just two examples of the way in which a non-state actor can effect
change within a state and consequently the workings of the international system. It
has been demonstrated how the power of MNCs has been fuelled by the ongoing
process of globalisation and how ultimately as their influence grows a states influence
and sovereignty is undermined leading to a new conceptualisation of the international
system. Today the international system can no longer be seen to function as a bipolar
system but rather it can be suggested that we are moving towards a world order
dictated by mulitpolarity- as Timothy Ash (2006) states this is primarily due to ‘the rise
and importance of non-state actors and their influence over established states’
Furthermore, whilst MNCs have already changed the working of the international
system it will not remain static. Rather, MNCs will continue to challenge the traditional
concepts of the system.

Word Count (Harvard In-text citation): 2739

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Ahiakpor, J.C.W 2010, Multinational Corporations in the Third World: Predators or

Allies in Economic Development?, accessed 24 October 2010,
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