ABSTRACT

It is commonly claimed that increasing capital mobility, an important aspect of globalisation in the world political economy, has eroded the ability of governments to make policies that constrain the activities of transnational corporations (TNCs) within their jurisdictions.1 This view is widespread amongst both critics and supporters of globalisation and, as outlined in the introduction of this book, represents the currently dominant neo-liberal discourse. As in the early 1970s, there is today a thriving populist literature on the growing power of TNCs in the world economy and the associated loss of power on the part of states and communities.2 Such critics fear a ‘race to the bottom’ in real wages and in labour and environmental standards, as well as lower corporate taxes and higher subsidies to mobile firms. Supporters of globalisation also often argue that the competition for foreign direct investment (FDI) between states explains the trend towards the liberalisation of inward FDI rules. For them, globalisation produces a beneficial ‘race to the top’ in regulatory and policy standards. For example, the Financial Times recently editorialised that ‘fierce worldwide competition for capital means that countries that discriminate unfairly against foreign investors risk severe market sanctions. That is a powerful incentive for host governments to stick to the straight and narrow’ (Financial Times 1998a). From both sides of the debate, there is agreement that TNCs enjoy increasing amounts of influence or ‘structural power’ over national policies.