This paper aims to discuss the rather amorphous concepts of ‘state sovereignty’ and ‘Globalization’ and how the notion of sovereignty has been diluted over the years by this phenomenon of globalization. To narrow down the analysis this paper will consider the dilution of sovereignty under the light of a primary force of globalization; Transnational Corporations. With the birth of the state, the concept of sovereignty originated. This included both internal and external sovereignty; however, the latter was recognized much later after the end of the ‘Thirty Years War’ and the signing of the Treaty of Westphalia. Internal Sovereignty was defined as the ability to exercise control and authority within the territorial boundaries of the state. While external sovereignty referred to the ability of the state to establish control and authority within its territory without any intervention from other states.
Although the doctrine of globalization gained recognition back in the mid 80’s its still impossible to concretely characterize this phenomenon. It can mean “sharing power,” “interconnectedness,” “interdependence,” “mobility of factors of production.” ("Does Globalization Cause Separatism?"). The definitions vary depending on the context. It may refer to the intensification of social and cultural interconnectedness across the globe ("Does Globalization Cause Separatism?") or to states sharing power with transnational corporations and organizations such as the United Nations and nongovernmental organizations (NGOs) ("Does Globalization Cause Separatism?")
Multinational or Transnational Corporations are large companies with “global strategies, management practices and resources to take advantage of opportunities created by differences in states’ policies, such as different labor costs, labor laws, environmental laws, business laws, and taxes”. ("Multinational Corporations and the Erosion of State Sovereignty").When faced with unfavorable conditions in a host country multinationals can “threaten to shift production and future investment to plants in other states,” which forces states to create favorable investment policies. In this way MNCs have a tendency to frustrate state economic planning, threatening states’ ability to effectively pursue “national economic and political goals” ("Multinational Corporations and the Erosion of State Sovereignty").
The concept of a Transnational trading company indulging itself in the affairs of a foreign state is not new to history. Who could appreciate it more than the citizens of the subcontinent who tasted the machinations of the East India Company for a couple of centuries finally leading to complete subjugation of the subcontinent to the British crown. As mentioned earlier whenever the exercise of a sovereign authority is influenced by external elements the sovereignty of the state is always compromised. A classic example of a transnational company out rightly breaching the sovereignty of a state is that of the...