ARTS1811 EssayTamara Kunz: 3290735Tutor: 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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