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State Sovereignty and the Global Economy
Global and transnational forces increasingly usurp the power of states to determine their own fiscal and economic policies. Some countries peg their currency to the dollar to maintain exchange rate stability, but dollarization eliminates the possibility of independent national monetary policy and exposes countries to policies set in Washington. In the interest of attracting foreign investment, some states set up Export Processing Zones that turn sovereignty over to corporate investors, undermining national tax and regulatory systems.
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Statehood and Sovereignty
Export Processing Zones
Export Processing Zones, sometimes known as maquiladoras or Special Economic Development Zones, are usually exempt from national taxes, tariff duties and a wide range of regulations, including those on wages, working conditions, health protection, environmental safety and trade union rights. Governments have set up these zones in the hope of attracting investments, creating jobs and developing the national economy. But in so doing, they turn over sovereignty to corporate investors and seriously undermine national tax and regulatory systems.Dollarization
In many countries, the US dollar has become the national currency. In others, the national currency has been pegged to the US dollar. In still others, major transactions like real estate usually take place using the dollar. Dollarization eliminates the possibility of independent national monetary policy and it exposes countries to policies set in Washington.Tax Havens
Offshore tax havens, spread by new computing and telecommunications, provide an unprecedented tax shelter, enabling rich citizens and corporations to escape the national tax system. Wealthy tax evaders save millions, while public services and infrastructure in their home countries, as well as on the small island havens, remain drastically underfunded.Globalization of the Economy
The ideology of neoliberal economics rules the global economic order. States are under pressure from international financial institutions to privatize public services like education and health care, as well as vital natural resources like water. Free trade areas, such as NAFTA or the proposed FTAA, accelerate the rate of resource exploitation and often lower wages for people in poor country, while undermining their ability to participate in democratic decision making.Transnational Corporations
With the rising concentration and globalization of corporate power, Transnational Corporations (TNCs) gain increasing power over states. TNCs influence states’ economic policy, exploit workers, and often endanger the environment. As privatization and deregulation expand into public services, states are left with less control over their economies and little recourse in times of trouble.The Three Sisters and Other Institutions
The International Monetary Fund and the World Bank have an enormous influence over the economic affairs of the states to which they lend money. Both institutions impose stringent loan conditions on recipient countries, forcing them to adopt a broad range of new economic policies. Other international bodies such as the WTO and the G8 also encroach over the nation-state’s economic sovereignty.
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