Policy Innovations Digital Magazine (2006-2016): Briefings: Contested Governance in a Global-Corporate World

There has been a transformation before our collective eyes in the absolute balance of power between the nation-state and the transnational corporation. In today's global economy, the nation-state is a second order political power to the private corporate world.

Part of this transition was nurtured by privatization campaigns where state assets, intended to provide certain state functions, were transferred to the corporate world. The corporation not only obtained the asset (e.g., train lines) but also the public expectation that the corporation would provide, or be part of the provision of, a given service (i.e., a workable transportation system).

History has shown that significant changes in governance are not necessarily quick or painless. The reaction within corporations to this transition in governance has been divided. On the one hand there is enthusiasm for commercialization of state functions for private profit, but there is also ambivalence about assuming the new role of successor to the nation-state in "traditional" public policy issues. This ambivalence often takes the form of asserting simultaneously that the state and international organizations should not take a position on a given economic, social, or environmental issue, and that the firm is free to decide what it will do once it has blocked a public policy standard.

At the heart of the new global governance system is inter-firm and inter-sector coordination and competition. So it is not surprising that some firms and sectors will be significant losers in the battle for control of the global governance system. The rapid collapse of firms since September 2008 and consequent concentration of capital in the remaining enterprises means that the prevailing firms and sectors will have more concentrated power and capital in their hands than the prior governance system.

The movement toward corporate global governance has also induced the development of a counter-force—new constituency-based alliances that are not geographically defined. They are civil society alliances with the goal of bringing together organizations and individuals around specific themes or identities on a global or regional basis.

These international civil society alliances address specific thematic concerns (women, environment, health, human rights, socially conscious investing) that often are global or multi-sector in their emphasis. Other alliances (built around religious, labor, artistic, and ethnic identities) forge ties between peoples living in different geographic political areas, transcending claims to national patriotism in their personal and communal self-definition.

The current economic crisis can be seen as a contested moment in governance realignment.

As with the transnational corporation, there is some ambivalence in these alliances about their changing role in global governance. For some, the first priority of an international NGO remains to coordinate and assist national NGOs. Others are caught in the tension between their traditional role as "non-governmental organization" and their new role as challengers to global corporate governance either via direct "bilateral negotiations" or by international counter-organizing. These new governance-focused leaders have asserted that it is appropriate to expect that they will be consulted by transnational corporations when the companies are formulating their corporate strategies, goals, and objectives—the prime documents for internal governance of global private enterprise.

For international identity alliances, the first priority for many remains nurturing identity ties without regard to geopolitical considerations. Others in these communities are grappling with the realization that strong identity ties bring their community into direct engagement with corporations on issues of war, human welfare, and the future of the world community.

The current economic crisis can be seen as a contested moment in governance realignment. The leadership of the nation-state is struggling with the realities of a financial crisis created by the global business community. The situation may provide the basis for a reassertion of nation-state power in international relations, or the recognition that the loss of political and economic power has been so great as to prevent effective intervention.

In this sense, the current nation-states are being challenged: Can they individually or in coordinated fashion gather sufficient political and economic clout to regain their old power, prevent a significant global political crisis, and reassert control over key corporations? To date the nation-states have poured billions into the market without a significant impact on its behavior. With these resources, nation-states are trying to show that they can avoid a large loss of livelihoods in an extended depression.

The sheer volume of resources that the nation-state is putting into this confrontation with the corporate sector may well, if it does not succeed in exerting significant control over global corporations, result in further diminution of their economic and political power.

Harris Gleckman is the director of Benchmark Environmental Consulting of New York and Maine. This article is derived from a chapter of a forthcoming book on global governance.