Multinational Corporations vs. National Governments: Is the English East India Company (EIC) a Model for Future Multinational Corporations?
OVERVIEW:
In the future, what will be the relationship between central governments of nation-states and large private companies including multinational corporations (MNCs)? Private companies mean privately-owned, including public companies with widespread ownership and secondary markets for the company stock.
Like with the English East India Company (EIC) in the past, there are new questions about the relationships between the multinational company and the home country, and between the multinational company and foreign countries. To what extent do economic organizations and political institutions overlap or are mutually dependent? To what extent are corporations, especially multinational corporations (MNCs), assuming political functions because of the failures of nation-states?
INTRODUCTION
The following comments are speculative. This is a possible scenario, not a forecast. It depends on assumptions about the future political organization of the world and the future possible power of multinational corporations. IT IS BASED ON THE ONGOING FAILURES OF MANY NATION-STATES AND THE GROWING DEVELOPMENT AND CONTROL OF TECHNOLOGY BY MULTINATIONAL CORPORATIONS (MNCs) AND THEIR ECOSYSTEMS.
THE INTERNATIONAL POLITICAL STRUCTURE
After World War II, European colonial powers could no longer afford colonies or prevent their colonies from becoming independent. The number of sovereign states went from about 55 in 1945 to 193 today. The Industrial Revolution and international trade spread globally. But many of the new nations did not prosper or develop. A major reason was that their national governments were corrupt, violent, inefficient or extortion rackets. Many government were closer to organized criminal gangs than the rational, bureaucratically-planning states of Max Wever. Economists started talking about "failed states "and "extractive governments." Much of foreign aid to poor countries ended up in foreign banks and foreign luxury housing.
Newly-independent countries may have nationalized their natural resources. But they may still rely on foreign capital and technology because much of the wealth of export sales of natural resources is appropriated by the politically powerful, not invested in domestic economic development.
Many rich countries are finding it difficult to grow their economies. Their governments took on obligations including expanded social welfare and national medicine programs increasingly paid for by borrowing. The number of senior citizens rose as a percent of the total population. Total cumulative national debts rose. They rapidly increased as a percent of national output. Interest on national debts rose faster than revenue or the rest of national budgets.
Thus, for different reasons, many national governments became dysfunctional. They were a drag on economic growth and development. Tax revenue lagged behind expenditures. More of their functions were income transfers rather than infrastructure investment.
The international political structure is now moving in reverse as the post-World War II economic and political order created mostly by the United States is breaking down. America seems to be less willing to pay for global political leadership, reverting back to its traditional policies of isolationism and protectionism. It hugely expensive military is paid for with deficit financing. Wealthy countries cannot pay for all of their programs; frustrations seem to be expressed in voting for nationalist political parties headed by authoritarian leaders. Most wealthy countries, including the United States, are attempting to limit immigration. Most of the more than 100 new countries created after World War II are dysfunctional or corrupt. Civil wars and local conflicts disrupt the global economy, in addition to terrorist groups, pirates, and criminal gangs.
The geopolitical landscape is fragmented, with many small or poor countries. Most of the 193 nation-states in the UN are "failed" or "fragile" states because they are chaotic, subject to civil war and internal violence, corrupt, dysfunctional, and/or extortion operations. Economists called them "extractive" governments. Many are run by dictators or the military. Many surveys over the decades show that a large majority of people in many countries believe their government is corrupt and would like to emigrate.
(Fund for Peace, "Fragile States Index." Formerly called "Failed States Index.")
What these countries have in common is that they are a political or economic threat to their own people. In many countries, government is partly or wholly responsible for continuing poverty and lack of economic development. The central government is a negative factor harming economic growth and standards of living. In many countries, real income per worker has been stagnant or negative for decades. About one billion people do not have access to electricity. Income and wealth inequality is extreme.
Most of the wealthy democracies cannot pay for the cost of current social and medical welfare programs. They also cannot deal with the costs of global problems such as global warming. Budget deficits are structural and interest expense is climbing. Economic growth is low. The combination of more senior citizens and fewer workers (depending on immigration laws) will put further strains on government budgets.
Almost all governments are running structural budget deficits. National debts and interest expense is increasing faster than revenue and usually GDP. Governments are finding it increasingly difficult to finance welfare and health programs for older citizens, whose numbers are increasing faster than total population. Governments will not be fiscally capable of financing new and existing programs.
This is the reverse of the history of the East India Company (EIC). State-sanctioned trading monopolies became less important as states become more powerful and long-distance communication and transportation costs declined. MNCs control global communication and transportation networks. Many states are slowly or quickly losing control and influence. Again, the historical example is England.
Two possible scenarios - an extension of state capitalism or a disintegration of most nation-state central governments. As a result, MNCs might combine their economic activities with extending their political functions, if only to protect themselves from voracious governments. Or combine their advanced technology and economic organization with the assumption of state functions. The history of the EIC is a possible model, and a warning of the dangers if this happens.
THE GLOBAL ECONOMY
The global economy dominated by multinational corporations operating on a global scale continues to expand. Markets, supply chain technology and organization, telecommunications, transportation, and finance are now all global. Supply chains and corporate ecosystems transcend national borders. Multinational companies have stronger economic links with companies in their global ecosystem than with the rest of their national economy.
All countries need privately-managed companies, domestic or foreign, if they want economic growth and development. Private companies develop and control technology, innovation, production, marketing and management of output. Customers include governments. Much of the military technology in the United States is developed and produced by private companies with government contracts. About $450 billion of the defense budget (about 45%) goes to private contractors and suppliers. Much of the government's data processing is done by private companies using purchased software from other private companies. Almost all of the undersea fiber optic cables that carry almost all of the global internet traffic is owned by private companies. New cables are being laid by private companies to connect their new data centers processing AI platforms to the global economy. Elon Musk replaces NASA. The Ukrainian army uses Starlink to pinpoint targets. Governments see using AI models for cyberwarfare.
Imports and exports have become a more important part of the global economy and the national output of most countries. Exports are produced and sold mostly by private companies. Countries like the United States, China and Russia have geopolitical goals. These countries attempt to control imports and exports to meet national geopolitical objectives.
Japan has faced these problems since the 1990s. Their solution has been that the government supports the political and social status quo and sucks up most of the Japanese peoples' savings to pay for large structural deficits to avoid deflation. Formerly a dynamic economy, there has been little economic growth or development since the 1990s.
In contrast, the global economy of international trade, global supply chains and global markets, and multinational corporations (MNCs) has expanded greatly. Transportation, communications and finance networks are now global. Private companies develop, own, and apply most of modern technology, including AI. Their reward is massive profits, part of which they use to buy other companies, lobby governments, and make large political contributions.
LARGE PRIVATE COMPANIES IN AUTHORITARIAN STATES
For central governments with authoritarian rulers the political objective is power and personal wealth. Economic resources and institutions are a means to political objectives and personal wealth. Key industries are often state-owned or controlled by the power elite. Political leaders have the resources - police, law courts, tax audits, extortion - to dominate and exploit private companies and shareholders. At best, political oversight; at worst, extortion, expropriation and prison or execution.
Government leaders measure success by power; corporate leaders by profit and wealth. Power and influence are used to protect profits. How are the two combined? One elite or two cooperating or competing elites?
In poor countries with authoritarian governments there are usually few large corporations. Companies stay small because of the "political risks" noted above. Also, much of the economy is in the "informal" sector, hopefully away from government view, government oversight, or competition with state-owned companies. Large private companies that enjoy subsidies or contracts with the government are vulnerable when there is a change of government.
LARGE PRIVATE COMPANIES IN DEMOCRATIC STATES
The relationship of large privately-owned companies and the state are more complicated than in authoritarian states. Democratic leaders have to be more sensitive to the concerns of the electorate. This may affect the government-business relationships in a number of areas. Democratic governments may have laws and regulations for oversight of private companies. They may have antitrust laws that discourage or reverse some mergers or acquisitions that lessen competition. There is a call for government regulation of the development and use of AI models. Governments may enforce laws and regulations that make companies pay for the "social costs" or "negative externalities" of production. Some areas might be air or water pollution control, carbon or methane emissions, unsafe products (tainted food, cigarettes, leader gasoline, opioids) or unsafe working environments (black lung disease) causing illness, disease or death.
A SURVEY THE RELATIONSHIP OF COUNTRIES AND MNCs
United States
In the past, American multinationals had complicated, sometimes adversarial, relationships with the American government but generally their business abroad was independent of the American government. Partly this depended on consistent American policy about tariffs and trade rules. No longer.
Recent presidents, but most vigorously Trump, have initiated and enforced new trade policies. Tariffs, bans on some imports, protection of some industries from foreign competition, export subsidies, and sanctions impact trade and the sales and profits of multinational corporations.
President Trump has extorted or received large amounts of money from corporations and wealthy individuals to finance campaigns, pay for his monuments, and increase family wealth. In return, he has loosen regulations, protected companies from competition from new technology and imports, eliminated most regulations intended to reduce carbon emissions, stopped antitrust and federal lawsuits, and has had the federal government invest in private companies.
The greatest danger now (2025-26) to multinational corporations, predominantly American, is the American government. President Trump's pursuit of narrow mercantilist and political goals — fluctuating, higher tariffs and trade restrictions to reduce trade deficits, attacking universities and greatly reducing scientific and medical research funds, attacking companies developing and producing renewable energy technology, cutting off immigration of technological and scientific personnel, and extorting money from large companies for personal and political gain — adversely impacts American multinationals and American economic growth and development.
China
No country, with the possible exception of China, protects and supports its companies abroad. Private Chinese corporations are increasingly dominating global markets, especially in new technology (except AI). They are also a part of the government's Belt and Road programs, a development initiative to project Chinese geopolitical power and influence. Many are state owned or dominated and share some similarities with the EIC.
Export growth, especially of new technologies, is a key part of the development and growth of the Chinese economy. New companies in favored industries are heavily subsidized by government. Business firms that export are either instruments of global political objectives (Belt and Road programs) or expand Chinese influence in the country's geoeconomics competition with the United States.
China's foreign policy contains a reversal of the development of the EIC from private trading company to a sovereign entity. China uses its state-owned companies such as construction companies and state-owned banks to implement its Belt and Road foreign economic strategies.
China, like many developing countries, uses exports by private companies as an important means to accomplish high domestic economic growth and influence abroad.
Russia
Most of Russia's economy is controlled by Putin plus dependent oligarchs. Exports of natural resources are an important part of the total economy. They are controlled by the national government and oligarchs close to Putin. All of the oligarchs know they can replaced or destroyed if they antagonize Putin. Profits from the export of natural resources have not been used to develop the country.
European Union
The European Union promotes economic integration of sovereign national governments. The national governments are reluctant to give up political control or national economic policies. In the extreme, as with England, a country might leave the EU and suffer the economic consequences. Economic growth has been low and, with a few exceptions like ASML, Europe has fallen behind in technological development. Right-wing national parties and leaders are "skeptical" of the advantages of being in the European Union.
Less-developed countries
Military and political leaders seize power as a path to personal wealth and power. In some countries, including Pakistan and Egypt, the military owns or controls large parts of the economy.
All economic institutions are at the mercy of the power of government. Largest ones most of all, although the costs of trade policies filter down to all consumers and smaller companies through supply chains.
AI - A NEW COMPLICATION
At the same time as AI erodes ordinary workers’ leverage, it may concentrate power and wealth in large companies and the U.S. government — two entities whose interests are increasingly linked. AI-related investments such as software and data centers accounted for 39 percent of U.S. economic growth in the first three-quarters of 2025, per an analysis by the St. Louis Fed. The percent will probably be higher in 2026. That gives the federal government a vested interest in sustaining the AI boom. Dario Amodei of Anthropic acknowledges that this concentration can lead to “the reluctance of tech companies to criticize the U.S. government, and the government’s support for extreme anti-regulatory policies on AI.”
Interests of AI companies and government converged. AI provides military weapons, intelligence, surveillance and control systems. AI is a potent weapon in cyberwarfare. AI automates government's massive data storage and processing needs, improving the effectiveness and extending the reach of surveillance. More of government operations will be outsourced to private companies like Palantir and Elon Musk's companies. Large AI companies in the US and China supply platforms to their governments.
Only the United States and China are facing the problem of how massive investment in AI, data centers, and applications will affect their geoeconomic competition. Both countries have to worry about the impact of AI on domestic economic development and growth, domestic employment, and international trade and investment. The vehicles for these changes will be multinational corporations. Because of the pervasive nature of this technology, governments will attempt to control, regulate, and tax the MNCs. At some point, they may realize it is more effective to cooperate with the MNCs than to have an adversarial relationship.
The modern version of the EIC is state capitalism. Formerly, it was called the East Asia model. Versions were practiced by Japan, Singapore, South Korea and China. At first, governments attempted to control economic development, mostly through state-owned companies and state bureaucracies. When this failed, they turned over the implementation of growth and development objectives to private companies (zaibatsu in Japan and chaebol in South Korea, dismantling of Maoism in China). Governments outsourced economic growth to companies that cooperated with government agencies. Industrialization became the basis of economic growth and exports. As a consequence, both corporations and central governments have grown tremendously in size and power.
What if they have overreached? All countries are experiencing rapidly increasing fiscal deficits and national debt. Since World War II, many countries have gone through partial or total bankruptcies. Most have to deal with the rising cost of increasing numbers of senior citizen and the related social welfare costs, global warming and environment degradation, and pollution control.
This scenario assumes a breakdown of many nation-states. This could take a number of forms. Anarchy, civil war, loss of territory to drug and criminal gangs. Many governments are nothing more than protection rackets. Widespread fear or loss of faith in government.
This scenario is based on a fragmented global polity divided into 200 nation-states and sovereign territories. Many are failed states. The US, which ensured order and stability in the past, has pulled out of most international organizations and is experiencing declining power and influence. the US is currently attacking vital sea-lanes rather than protecting them. American attacks of allies is rupturing global cooperation. The EU is coming apart and being attacked by nationalist far-right parties.
Multinational corporations (MNCs) have created the global economy and control the technology needed for economic development and growth. Large companies often have most of their sales outside their home country. Extreme examples are ASML in the Netherlands and TSMC and Foxcomm in Taiwan.
THE EAST INDIA COMPANY: MODEL FOR FUTURE MULTINATIONAL CORPORATIONS?
For a description of the structure and strategy of the English East India Company, see
The English East India Company: Trade with India and Asia
This is a scenario, not a forecast. It depends on trends and assumptions about the future. Assumptions are highly uncertain because of the large and rapid technological change that is occurring and might accelerate in the future.
The East India Company was born as part of the European expansion of rival nation-states to capture global trade and project power. As European countries conquered territory, established colonies, and projected military power anywhere in the world, private trading and colonization companies were replaced by extensions of the home country’s global reach. Royal governors replaced company officials and boards of directors. Free competition replaced government sanctioned trading monopolies. The modern international economic order began to take shape.
The EIC and the VOC (Dutch version) were established because England and the new Netherlands in the early 1600s did not have the government resources to finance large long-distance trading operations or pursue imperial ambitions in Asia. But the private sector had the sailing and navigation technology, experience in long-distance shipping and trade, and the financial resources. As both countries became much wealthier, their governments took over the administration of India and the Dutch East Indies (Indonesia). Private trade and colonial policies converged.
The EIC was the first modern multinational corporation (MNC). It operated far from home in the hostile, fragmented political environment in Asia. It had to pay the costs of self-protection. In doing so, it eventually adopted many of the functions of a sovereign nation-state. It also had to manage its contentious relationship with English governments.
The EIC and the VOC took on many of the functions of a government because the home government could not provide them. The two companies controlled much of their countries' trade. Tariffs on imports provided by the companies were major sources of government revenue. The companies took on many of the functions of a sovereign state. They had their own militaries, taxing powers, negotiated treaties with local rulers and passed laws and regulations. They were an extension of government power in an increasingly integrated global economy, which they helped create.
But as England became a naval power, and transportation and communication costs fell, England took over the position of the EIC in India (and the Netherlands replaced the VOC in Indonesia). England could project power in Asia and turned India into a governed colony. By the beginning of the 1900s, much of the world had become European colonies. The advantages to the home country were sources of raw materials and protected markets for manufactured exports.
While the East India Company operated in a different era, it may suggest some lessons for our times because it operated in a fragmented Asian political environment similar to the global one currently evolving. The global political system constructed by the United States after World War II is breaking down. There are over 200 nation-states and territories. Many are poor or small. Many are autocratic (not democratic). But all are sovereign within their borders, although in many cases this sovereignty is limited.
The English East India Company (EIC) was an innovative new type of corporation. It was a multinational trading corporation that became an important part of the global economy, created to exploit the profit potential of global trade.
It might be a model for how a multinational corporation (MNC) could survive and prosper in an increasingly chaotic and hostile geopolitical world.
MULTINATIONAL CORPORATIONS AND NATIONAL GOVERNMENTS
Maybe multinational corporations, in this environment, will evolve to be more like the EIC. They will need some way to protect themselves from the “extractive” policies of national political elites. Governments have power - sovereignty, guns, laws, forms of coercion, corruption and cooptation, “populist” support, that can be used against private companies. They have centralized bureaucracies and armies. But companies control most economic resources (except some natural resources like fossil fuels and minerals) and innovate new technology. They have large financial resources. Employees of multinational companies may possibly have alternative loyalties.
So the political dynamic may be moving in reverse, to a world that looks more like the world of the EIC and VOC. The world is made up of increasingly dysfunctional governments and political fragmentation. In contrast, the world is also becoming more economically integrated; this integration is being driven by large multinational corporations and their ecosystems. Ultimate power still is wielded by central governments. This is unstable; the leaders of large corporations with global markets and global production supply chains resent national government interference and exploitation. "Political risk" has to be factored into investment and strategic decisions. For multinationals, this is an added cost.
Multinational corporations are increasingly at the whim of national policies, particularly those of autocratic rulers. Autocratic rulers commonly threaten and extort funds from corporations.
When the political objectives of nation-states begin to seriously reduce and jeopardize the profits or even the survival of multinational corporations, MNCs might began to take measures to protect themselves. Some of these measures may bring them into direct conflict with nation-states.
Many groups besides MNCs avoid national power and control. Companies and wealthy individuals controlling companies avoid national laws and launder money. Money launderers including major banks help families move money out of their home country. Get into a cab in Malta and the driver will recommend a bank that will set up a secret account for you. The more sophisticated ones, who hire lawyers and specialized financial consultants, use shell companies owning secret accounts. Cryptocurrencies are used to avoid the financial system and the reporting of income.
Already there are large areas where the national governments’ writ doesn’t run. Drug and criminal gangs control large areas.
While the East India Company operated in a different era, it may suggest some lessons for our times because it operated in an environment similar to the one currently evolving. The global political system constructed by the United States after World War II is breaking down. There are over 200 nation-states and territories. Many are poor or small. Many are autocratic (not democratic). But all are sovereign within their borders, although in many cases this sovereignty is limited.
Maybe multinational corporations, in this environment, will evolve to be more like the EIC. They will need some way to protect themselves from the “extractive” policies of political elites. Governments have power - sovereignty, guns, laws, forms of coercion, corruption and cooptation, “populist” support, that can be used against private companies. They have centralized bureaucracies and armies. But companies control most economic resources (except natural resources like fossil fuels and minerals) and innovate new technology. They have large financial resources. Employees of multinational companies may possibly have alternative loyalties.
For a case study of a country that was an English colony that became independent after World War II and illustrates the internal problems of many former colonies, see
For the story of how England fell behind American and Germany in economic development, see
Innovate or Fall Behind. A Cautionary Tale - England and the Industrial Revolution
MORE SPECULATION ON FUTURE MULTINATIONAL CORPORATIONS
For a wildly imaginative vision of a future society (not too future) dominated by powerful corporations similar to the EIC (with advanced technology similar to AI), see Neil Stephenson's The Diamond Age. The book centers around an English global company much like the EIC. This corporation combines nostalgic Victorian culture and loyalties with advanced technology, electronic surveillance, and sovereign political power.
No one seems to be conjecturing how corporate structures and economic organization will be affected by new technologies such as unsupervised AI, AI-driven singularity, and quantum computing. In an environment of shrinking population and labor force in wealthier countries, burgeoning national debt, and increasingly dysfunctional (or to be fair, overwhelmed) central governments.
Another vision is in Donald Westlake’s comic novel Good Behavior. It argues that the political structures of nation-states are breaking down. The world is becoming more like the feudalism of the Middle Ages. Kings and emperors (central national governments) had limited power. Local areas were controlled by different types of aristocrats – barons, princes, dukes, etc. The people in a baron's area of control were loyal to the baron, not the king. Local rulers fought each other. To a large extent, barons were independent of kings and their governments; kings depended on barons for soldiers.
Multinational corporations (MNCs) have some of the attributes of the medieval barons. Sovereign in their own domains, they demand loyalty from their employees. They have hierarchical relations with suppliers similar to medieval ties. They form alliances, negotiate and compete with other barons. MNCs are part of a hierarchy of organizations with responsibilities to each other. They provide resources - technology and taxes - to national governments.
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