‘… concepts of political sovereignty, of national sovereignty, are fictitious if there is no economic independence to go along with them.’
— Ché Guevara
SOVEREIGNTY in political science is usually defined as the most essential attribute of the state in the form of its complete self-sufficiency — its supremacy in domestic policy-making and independence in foreign relations.
This conforms to the ‘Westphalian’ (or traditional) concept of sovereignty, formed after the Thirty Year War and the 1648 Peace Treaties of Westphalia. Accepting territorially-bounded sovereign states, each with its own administration and a monopoly over the legitimate use of violence, the Treaties of Westphalia stipulate non-interference in domestic affairs of the state.
The United Nations’ Charter recognises states’ sovereign equality and nations’ right to self-determination (Article 1.2, 2.1, 55 and 78), and requires member states to ‘refrain… from the threat or use of force against the territorial integrity or political independence of any state’ (Article 2.4). However, the UN Charter also stipulates ‘preventative or enforcement measures’ against a member state ‘for the maintenance of international peace and security’ to be authorised by the Security Council, thus placing restraints on state sovereignty for the higher good.
The UN Charter (Article 55) also recognises economic and social progress, and ‘universal respect for, and observance of human rights and fundamental freedoms for all’ as ‘necessary for peaceful and friendly relations among nations.’
New International Economic Order: quest for economic independence
SOON it became clear to the decolonised newly independent states that meaningful political independence cannot be achieved without economic independence which requires control over their natural resources. Thus, in 1974, they united to successfully adopt the UN General Assembly resolution to establish the ‘New International Economic Order’ (NIEO). It sought to replace the US-led post-World War II economic order, which began collapsing since President Nixon’s unilateral decision in August 1971 to renege on the US’s promise of gold convertibility of national currencies at a fixed exchange rate with the US dollar.
The NIEO resolution stipulated ‘exercise of permanent sovereignty’ of developing countries over their natural resources ‘to take measures for the recovery, exploitation, development, marketing and distribution of natural resources for serving their national interests and promoting collective self-reliance.’ It also asked all member states to formulate, adopt and implement an international code of conduct for transnational corporations (TNCs):
— To prevent interference in the internal affairs of the countries where they operate and their collaboration with racist regimes and colonial administrations;
— To regulate their activities in host countries to eliminate restrictive business practices and to conform to the national development plans and objectives of developing countries, and in this context facilitate, as necessary, the review and revision of previously concluded arrangements;
— To bring about assistance, transfer of technology and management skills to developing countries on equitable and favourable terms;
— To regulate the repatriation of the profits accruing from their operations, taking into account the legitimate interests of all parties concerned; and
— To promote reinvestment of their profits in developing countries.
TNC-led globalisation constrains sovereignty
UNFORTUNATELY, what emerged was completely opposite to that envisaged by the NIEO resolution. Governments’ development policy became subject to conditionalities imposed by international financial institutions, such as the International Monetary Fund, the World Bank and the Asian Development Bank, controlled by powerful, developed countries. Essentially, governments are increasingly expected to leave decisions regarding their policies and institutions to the judgements of donors, creditors and interests of TNCs.
The TNC-led globalisation since the 1980s, which gathered pace in the 1990s with the support of IFIs, has sped up deregulation, liberalisation and privatisation to open up national economies and global economic interdependence. States are, thus, limited in their ability to act within domestic markets, especially regarding promoting industrialisation and structural transformation; moreover, they are required to recognise and protect the intellectual property rights of foreign firms.
The International Monetary Fund and the World Bank promoted ‘race to the bottom’ reductions in regulations and taxation, ostensibly to attract foreign investment. After more than three decades now, they acknowledge that corporate tax rates in developing countries have fallen by about 20 per cent since 1980 with uncertain impacts on ‘greenfield’ foreign direct investment outside resource sectors. In most cases, there have been net revenue losses as developing countries heavily depend on corporate taxation. Low and middle-income countries have lost $167–200 billion annually, usually around 1–1.5 per cent of a country’s gross domestic product due to ‘beggar thy neighbour’ corporate tax competition.
While TNCs are still controlling natural resources in most developing countries, the external debt burden of many low-income countries has continued to grow. At the same time, the number of TNCs grew more than 850 per pent from 1970 to 2000. In 2000, the hundred largest of these firms accounted for more than 4 per cent of global gross domestic product, increasingly raising TNCs’ bargaining power over states.
The global economy is now controlled by large TNCs and national economic policies are influenced by the World Economic Forum, the club of rich TNCs. Heads of state and government compete to attend the WEF and rub their shoulders with corporate leaders.
The rise of digitised TNCs, such as Facebook, Google and Amazon has further eroded economic sovereignty of states. For example, Facebook’s proposed global crypto currency Libra will end whatever little macroeconomic policy space developing countries have.
IN MARCH 1960, Ché Guevara, in a lecture at Cuba’s People’s University, warned that if countries do not take steps to secure economic independence, ‘little by little [their political independence] gets weaker and finally disappears.’
He further warned, ‘If a country does not have its own economy, if it is penetrated by foreign capital, then it cannot be free from the tutelage of the country it is dependent on. Much less can a country make its will prevail if it clashes with the powerful interests of the country that dominates it economically.’
Ché observed, ‘big business, the news media, and the opinion columnists in the United States provide us the key to a leader’s importance and honesty — only in reverse. When a leader is most attacked, then undoubtedly he is better.’
We see this unfolding in Ché’s Latin America. The big business, the US and its western allies have succeeded in toppling governments from Chile to Brazil opposed to their interest by manipulating the justice system, bribing the media and corrupting the democratic process with money.
Ché did not have to be a prophet; his observations and warnings were based on an objective analysis of what happened in Latin America, for example, after Mexico had nationalised British- and US-owned oil companies in 1938. Ever since president James Monroe announced a sort of protectorate over the hemisphere in the early 19th century — the so-called Monroe Doctrine, the United States has involved itself in the daily affairs of nations across Latin America. US Marines repeatedly intervened in Central America and the Caribbean often to protect US business interests and to support right-leaning forces against socialist governments.
Cuba, Venezuela and Bolivia
CUBA survived unlawful US sanctions and managed to achieve a remarkable progress in the well-being of its citizens. It has a life expectancy higher than that of the United States, the world’s wealthiest country and the only super power. Yet, the western media continue to portray Cuba as a crippled economy.
In Venezuela, extreme poverty fell by 63 per cent in 2004–2014. The number of primary-care physicians in the public sector increased more than 12 times between 1999 and 2007, providing healthcare for millions of poor Venezuelans. Some 3.9 million school children received lunch in school and the number of people over 60 years old receiving public pensions tripled. Whereas the Chávez administration inherited an unemployment rate of 15.6 per cent, it dropped from 19.7 per cent in 2003 to 8.25 per cent in 2008. Inequality also declined substantially as measured by the Gini coefficient —from 48.7 in 1998 to 42 in 2007.
These achievements of the government which took control of Venezuela’s oil and natural resources from the US TNCs are lost in the relentless western media propaganda. They hide the fact that it is the TNC-inspired US blockade that strangled Venezuela’s economy to create conditions for a constitutional right-wing coup, backed by para-military mercenaries trained by the United States and its allies.
To the credit of the Venezuelan people, Venezuela’s sovereignty has endured.
Unfortunately, Bolivia’s socialist government succumbed. Bolivia’s democratically elected president Evo Morales went into exile in Mexico. The US-controlled Organisation of American States failed to find any conclusive evidence of government manipulation. The coup plotters were afraid to face the people and refused Morales’s offer for a fresh election.
The Bolivian coup happened less than a week after Morales had stopped TNC’s lithium deal to either a renegotiation with terms delivering more of the profits to the area’s population or the outright nationalisation of the Bolivian lithium extraction industry. Bolivia’s Salar de Uyuni salt flats hold the largest reserves of lithium in the world.
Evo Morales freed his country from the International Monetary Fund and achieved extraordinary socio-economic progress by the Latin American standards. In 2010, the World Bank upgraded Bolivia’s classification from ‘lower-income’ to ‘lower-middle income’. A strong economic growth allowed Bolivia to reduce extreme poverty by 60 per cent since president Evo Morales took office in 2006 and ended 20 years of IMF agreements and nationalised its oil and gas industries. Starting in 2006, approximately 4,500 educational facilities were built with funds from the nationalised hydrocarbon industry and commodities boom.
One-time coca farmer and the country’s first indigenous president Morales promised to bring power to marginalised groups — a promise that he fulfilled. He redistributed 134 million acres of land from state or private ownership to indigenous families, some of whose relatives had been forced to work as share-croppers or slaves.
Yet he had to flee the country because TNCs and their local allies — the elite — did not like the nationalisation of Bolivia’s natural resources.
INCREASINGLY, more states have willingly and consciously limited their sovereign rights. What is extremely important is that many countries quite regularly give away some of their sovereign powers voluntarily by enthusiastically signing up to various trade and investment deals that give priority to TNC interests. Provisions for investor-state dispute resolution and the protection of intellectual property rights in many trade and investment deals are not in national interest.
It is often argued that such deals will bring economic prosperity. Even if the supposed economic gains do occur, questions remain as to who in society benefits. In majority of the cases, the elite linked to the TNCs capture most of the gains, thus contributing to growing inequality and the concentration of wealth.
Cuba, Venezuela and Bolivia are perhaps a few rare examples of defiance. They remind us of the Aesop’s fable of two dogs — one skinny that chose to remain free and those voluntarily surrendering sovereignty are like the fat one, but happy to be chained.
In his 1960 lecture, Ché said, ‘We cannot yet swear on our martyrs’ graves that Cuba is economically independent’; but Cuba has certainly guarded its sovereignty for six decades.
How many countries can swear on their martyrs’ grave that they have not been betrayed?
Anis Chowdhury, an adjunct professor at Western Sydney University and the University of New South Wales (Australia), held senior United Nations positions in New York and Bangkok.
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