The war in Ukraine and the accompanying wave of economic sanctions represent an interruption in the process of globalisation that has been developing intensively over the last thirty years in particular. Economic globalisation has many different definitions, but at its core it means that the logic of trade has overridden the logic of power-politics and the interests of corporations in crossing borders have taken precedence over the interests of states in maintaining borders. It is trite, but globalisation only makes sense on a global scale. It allows large corporations to increase their profits in three ways. They can move production to countries with cheaper labour, they can sell products and services in countries with higher purchasing power, and they can pay taxes in countries with the highest tax breaks. Specifically for countries like the Czech Republic, this means that they are free to compete compete with the cheapest possible labour, free to buy goods of the lowest possible quality (which may not always be cheaper because of this) and free to lure large multinational companies for tax holidays.
The war conflict and subsequent sanctions have thrown globalisation back to sometime in the 1970s.
The war conflict and subsequent sanctions have thrown globalisation back to sometime in the 1970s. They reduce the ability of multinational corporations to exploit cheap labour globally, reduce the purchasing power of the populations of so-called economically developed countries where it is profitable to sell products and services, and leave only the third feature of a globalised economy – the ability to pay taxes in tax havens.
For multinational companies based in EU countries, this will reduce the room for manoeuvre. They will have to resign themselves to a global presence and will try even harder than before to make the whole of Europe a space of a kind of miniature economic globalisation. The United States as a trading partner will not help them in this respect, because US-based multinationals follow the same logic as Western European-based multinationals.
…and leave only the third feature of a globalised economy – the ability to pay taxes in tax havens.
Critics of globalisation have always dreamed that political power, that is, the will of the people, would correct the process of economic globalisation. The biggest dreamers have been delusional about a globalised world democracy. It turns out that globalisation will be interrupted (and perhaps even abolished) by a very different development. Political power will rise above corporate profit interests, and the insistence of states on maintaining borders will gain the upper hand over the movements of investment, capital, goods and services. To what extent political power will be democratic is anyone’s guess.
Professor Jan Keller is a sociologist and a former member of European Parliament.
