A Self-Defeating System
The Anarchic International Realm Contributes to the Modern Erosion of State Sovereignty
That was a longer sub-title than I had intended. Regardless, it makes the point I will try to elaborate on. We're living in an age with globalized actors. Not just local actors who happen to operate in a globalized world (read: stage), i.e. sovereign states, but truly international actors whose power-bases and reach cross boundaries and span the world.
One example is the multi-national corporation. The rise of global corporations began in the early modern period as mercantilism empires spread across the world and enabled the growth of the state corporations such as the British East and West India companies. These types of corporations were not the same entities we see today, however, as they were ultimately dominated by nation-states. In the modern day, at least in the West, private enterprises have arisen with levels of influence and wealth rivaling many modern states. Corporations such as Apple, Shell and Deutsche Bank, while headquartered in one particular location, operate trans-nationally and can be re-headquartered fluidly.
One example is the multi-national corporation. The rise of global corporations began in the early modern period as mercantilism empires spread across the world and enabled the growth of the state corporations such as the British East and West India companies. These types of corporations were not the same entities we see today, however, as they were ultimately dominated by nation-states. In the modern day, at least in the West, private enterprises have arisen with levels of influence and wealth rivaling many modern states. Corporations such as Apple, Shell and Deutsche Bank, while headquartered in one particular location, operate trans-nationally and can be re-headquartered fluidly.
Trans-national operation and fluidity are the critical elements here. A corporation, headquartered in one nation, can open up shop in another in order to circumvent the laws of its chartered state, for example McDonald's and the United States. While on an individual level, for singular citizens (in this case human beings, not corporate entities) this may work as the impact of any one person is relatively limited and so too is their ability to escape justice (again, by and large - the very rich, and thus capable, have the ability to operate in similar ways to corporations). When you transpose that same trans-national fluidity onto a corporate entity with far greater resources and far less tangible person-hood, matters are more complicated.
Taxation is an excellent example here. Traditionally, a person (both in human and corporate form) is taxed by their state of residence and any other territory they visit or otherwise do business in. Corporate, or otherwise extraordinarily rich, entities have a higher degree of fluidity. By using such tactics as establishing regional headquarters in a tax haven, such as Apple in Ireland, these entities are able to avoid a significant portion of their tax burden to their original charter-state. This is in a sense, a degradation of charter-state sovereignty as many are able to escape the bounds of sovereign law for more favorable shores while still gaining many of the benefits of residence in the charter-state. Again, this example is not specific to corporations, they just highlight a particularly striking point.
Due to the fact that there are not international norms or 'laws' that govern such practices, anarchy exists. In order to limit this practical erosion of sovereignty, anarchy must be hedged. This sounds country intuitive as anarchy theoretically enables the complete sovereignty of a nation-state, but in reality a 'reduction' of anarchy could have a similar effect. I don't have a full solution for this problem, as it would likely take much more than a blog post, but a place to start is the creation of international norms (and potentially a legally binding agreement at the WTO) to punish tax havens and the entities that utilize them to escape their obligations to their charter-states.
Due to the fact that there are not international norms or 'laws' that govern such practices, anarchy exists. In order to limit this practical erosion of sovereignty, anarchy must be hedged. This sounds country intuitive as anarchy theoretically enables the complete sovereignty of a nation-state, but in reality a 'reduction' of anarchy could have a similar effect. I don't have a full solution for this problem, as it would likely take much more than a blog post, but a place to start is the creation of international norms (and potentially a legally binding agreement at the WTO) to punish tax havens and the entities that utilize them to escape their obligations to their charter-states.
Dan, excellent post! I agree that we have not caught up in our institutions. The WTO would be a perfect place to start for establishing more stringent universal standards.
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