Multinational Corporations, the Virtual State, and the Prospects for World Peace
1.What is the virtual state?
--A country that has moved its production abroad and
has retained “high-value” activities (design, marketing) at home.
It is a service-sector economy.
--Examples: Hong Kong, Singapore, Taiwan, Netherlands,
Switzerland, possibly US
--FDI, and particularly the multinational enterprise,
is the key mechanism by which virtualization of a nation occurs—that’s
why we’re interested in the subject.
2. What is the significance of virtualization?
--Rosecrance suggests that virtualization marks the
growing salience of “flows” over “stocks” in international relations.
Countries achieve wealth and power and security not by holding stocks (land,
natural resources) but instead by having access to flows, especially of
capital, but also goods and people.
3. What are the effects of virtualization
--Countries differentiate as “heads” and “bodies”—the
distinction between design and manufacturing.
--In addition, while conquest in the past made sense
insofar as it provided control over new stocks of valuable resources, conquest
does not provide greater access to flows but may instead lead to a cut-off
of such flows.
--The political effect of such head-body contacts
through foreign direct investment is that countries are becoming dependent
on one another to a greater degree than was true in earlier periods and
through other mechanisms of interdependence, including trade.
--By consequence, countries have a markedly stronger
incentive to cooperate with one another and not fight: foreign investment
trends mean that “production facilities are lodged inside the very countries
with whom power motivations might dictate conflict [US-Japan, Japan-China,
Europe-America, China-America]…These links do more than give potential
rivals a strong incentive to resolve conflicts peacefully; they also give
third parties with investments in each rival a strong incentive to intervene
to prevent war” (p. 79).
4. What might stop virtualization?
--Rosecrance emphasizes that peace is not inevitable
because some states may not understand the implications of virtualization:
countries in the Middle East, or Russia, or perhaps China.
--In some instances, countries may have real
reasons to be interested in stocks over flows: oil and the Middle
East.
--In other instances, RR is concerned that state elites
are simply uninformed about the real world: Russia, he notes, seems
still to have a “land fetish.”
--But RR points out a key condition for virtualization—democracy
(p. 76)—raising the question, do countries have an incentive to be oriented
to flows over stocks as a function of their regime-type?
--In addition, there is the question of whether in
fact flows matter more than do stocks.
--Also, is it true that flows would be impeded by
military force: does conquest really no longer pay?