REVISITING STRUCTURAL POWER IN THE GLOBAL ECONOMY: IT'S MULTINATIONALS, NOT STATES.

• Author: Shukla, Srijan

INTRODUCTION

There is growing interest in the resilience and vulnerabilities of the liberal international order. (1) However, most system-level analyses by macro-economic and international relations scholars tend to overlook a growing strain of literature in international political economy (IPE) that focuses on the expanding influence of multinational enterprises (MNEs). This growing strand of literature by academics studying the IPE of trade, foreign direct investment (FDI), and global production networks indicates that MNEs are not just shaped by the global economy, but they are increasingly shaping the global economy itself. In other words, MNEs have emerged as actors in the international system that define the underlying structure of the global economic system itself, changing the way states interact with one another.

Any assessment of the resilience and vulnerabilities of the prevailing global order is incomplete without understanding the role MNEs play in it. Recent discussions on the growing role of MNEs have been narrowly focused on the growing clout of tech monopolies and their run-ins with regulators. (2) For example, Ian Bremmer argues that this era can be understood as experiencing a "technopolar moment," in which technology companies are becoming the most important global players. In fact, the power of major MNEs exists beyond just tech firms. (3)

It is time to start treating MNEs as powerful and autonomous actors in the international system, which most mainstream IPE literature still shies away from doing. Even the dominant IPE theories, which see MNEs as immensely influential, treat them as powerful actors who manage to pursue their policy preferences but do so by lobbying and politicking within the state. (4) For a more accurate picture, MNEs should be seen as distinct actors from states, whose objectives are not just narrowly limited to facilitating market access or expanding market power. Rather, they often espouse their ideologies and have particular preferences with respect to governance.

One of the key reasons why various streams of international relations theory consider only states as legitimate actors is because they conceptualize power only in "relational" terms. (5) Here, power is the ability of A to make B do something they are unlikely to do otherwise. This paper moves away from this narrow conception of power and uses Susan Strange's idea of "structural power." (6) Strange defines structural power as "the power to shape and determine the structures of the global political economy within which other states, their political institutions, their economic enterprises and their scientists and other professionals have to operate."

Using this concept of structural power allows us to categorize both states and non-state actors like MNEs as important actors in the international system. However, many recent studies looking at structural power tend to focus on Strange's overarching idea of state-centric hegemony. (7) They generally analyze how a dominant state and a rising state compete for structural power and how MNEs play into this competitive dynamic.

This paper advances a different conception of structural power inspired by Strange's definition. Rather than focusing on state-centric hegemony, actors with structural power--including MNEs--often shape their environments according to their interests, creating embedded hierarchies. This paper presents two arguments. First, we need to treat MNEs as autonomous actors in an international hierarchy that includes both states and MNEs. Second, MNEs do not influence the international order merely by acting through states: MNEs have begun to compete with states to define the rules of the international system. In some domains, MNEs have even started to emerge as the most important actors in the global economy. Finally, to analyze these changes in the international system, this paper uses the Taiwan Semiconductor Manufacturing Company (TSMC) and its power on global semiconductor value chains as a case study.

LITERATURE REVIEW

Power in international relations is often defined relationally: the greater state A's ability is to make state B do something it would not have done otherwise, the more power it has. This view is predominantly based on the idea of capabilities and resources. (8) If an actor has more capabilities than the other, it can punish its enemy by using hard power or economic exclusion.

Structural Power Redux

Strange's concept of structural power, on the other hand, focuses on the "social process affecting outcomes," not just the capabilities states have. (9) In her own words, "[structural power] confers the power to decide how things shall be done, the power to shape frameworks within which states relate to each other, relate to people, or relate to corporate enterprises." (10)

Strange's framework of structural power has four aspects: security, knowledge, production, and finance. At any point, all of these aspects influence structural power, but they do necessarily interact with each other. (11) A good example of all-encompassing structural power is the United States' relationship with Europe after WWII. The U.S. had demonstrated its security power to its Western European allies. However, for the Marshall Plan to succeed, it also had to deploy its productive power to supply food and capital goods for European reconstruction and its financial power to facilitate credits in universally-acceptable dollars. The security, production, and financial components of American power were further compounded by a belief that the U.S. was willing to use its power to shape a more favorable world order for itself and its allies, granting the U.S. knowledge power as well. (12)

While conventional definitions of power are visible and coercive, structural power is more subtle. "What is common to all four kinds of structural power is that the possessor is able to change the range of choices open to others, without apparently putting pressure directly on them to take one decision or to make one choice rather than other," contends Strange. (13) She borrows the idea of "unconscious power" from gender studies, where "[structural power] can be effectively exercised by 'being there,' without intending the creation or exploitation of privilege or the transfer of costs or risks from oneself to others." (14)

Though states have always been in possession of traditional definitions of power, MNEs retain the stealthier structural power. Strange argued that other than security, states no longer dominate any of the aspects of structural power in the international political economy. Her peers such as Robert Keohane, Joseph Nye, Robert Gilpin, and others had, at one time, also been pointing to the increasing role of MNEs in the global economy. (15) However, these scholars still saw states as the most significant global actors. And in their frameworks, MNEs generally asserted their power by lobbying these states. Even in some of the recent literature that revisits the idea of structural power, the focus has been on great power competition. (16)

Other scholars have rebuked the state-centric perspective and adopted a view influenced by international capitalism, which sees MNEs as the fundamental actor in the global political economy. (17) But this view is also too simplistic--states like China use powerful MNEs, such as Huawei, as tools to achieve their global economic and geopolitical objectives.

MNEs in the Global Hierarchy

The academic debate has been too narrowly focused on these two competing perspectives: the state-centric and MNE-centric views. Even some recent literature, which tries to move against this binary, tends to juxtapose MNEs as state-like, thus suggesting a lingering shadow of orthodox thinking.

MNEs are not simply large corporations whose interests are limited to expanding market access and achieving market power. They often have governing ideologies, which are key to their legitimation...