Global Capitalism and The State

Global Capitalism and the State Author(s): Jan Aart Scholte Reviewed work(s): Source: International Affairs (Royal
Institute of International Affairs 1944-), Vol. 73, No. 3, Globalization and International Relations (Jul., 1997), pp. 427-452 Published by: Wiley on behalf of the Royal Institute of International Affairs Stable URL: http://www.jstor.org/stable/2624266 . Accessed: 28/02/2013 04:44
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Global capitalism andthe state
JAN AART SCHOLTE
that 'Globalization' is a term has come to be usedin recent years increasingly frequently and,arguably, increasingly loosely. In a close analysis oftheterm, theauthor as thetranscendence thanthemere crossfocuses on theconcept ofglobalization (rather ingoropening) ofborders thatthisinterpretation themost distinctive and arguing offers oneofthe intocontemporary world helpful The article affairs. goeson to explore insight raised howthe keyquestions bythistrend, namely, growth ofsupraterritorial spacehas inparticular. altered capitalism ingeneral, and theroleofthestate within capitalism it is not(as is The author concludes bysuggesting that ifglobalization posesa threat, to thestate butrather often argued) to democracy. itseff A numberof commentators on globalizationhave recently speculatedthatthe logic of modern economic development is makingthe stateredundant.* The is hardly both Leninists and cernew.Earlyin the twentieth argument century tain liberalinternationalists forecast the demise of the state.Functionalist theories of international the predictionin mid-century, integrationreiterated while some versionsof what was called 'transnationalism' recycledthe argument in the I970s. In the latestrevival, severalbest-selling managementconadvance of sultants of the I99OS have suggestedthat, with the contemporary globalization, the statehas seen its day.' In a similar vein,various public polia world beyond cy analysts have proposed thatglobal companiesare creating statesand nationalities.2 of the end of the state As in previousroundsof thisdebate,I99OS predictions Paul have provokedinsistent in a seriesof publications refutations. For example, of globalization Hirstand Grahame thatarguments Thompson havemaintained are greatly and thatstates retainmanycrucialcapacitiesforgoverexaggerated
*
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J.Naisbitt, Global paradox: the bigger the world economy, the more itssmallest players (London: Brealey, powerful
thestate?', Schuster, contributions to thespecial issue,'What future for Daedalus I24, I99I); and several Spring I995.
I am grateful forthecomments ofan anonymous referee on an earlier draft ofthis article.

I994);
Cf.R. B. Reich, Thte work ofnations: preparing ourselves for 21st-century capitalism (New York: Simon &
K. Ohmae,Theendofthe state: the rise ofregional (London: HarperCollins, nation i995). econiomies
Initernational Affairs 73,3 (I997) 427-452
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tradition nance.3In therealist ofinternational relations StephenKrasner theory, has affirmed thatin the late twentieth has century'defacto [state]sovereignty been strengthened ratherthan weakened'.4 Sociologistslike Michael Mann who 'broughtthe stateback in' to theirdisciplineduringthe i98os have also been scepticalof any proposition thatthe stateis makingitsexit fromhistory.5 Of course one can, like Mann, refute the globalismof Reich et a!. without turning to the realism of Krasneretal. In thisvein Susan Strangehas described in the qualityas well as the quantity important shifts of statepower and author'fromthe welfarestateto ity.6For his part Phil Cerny has traceda transition the competition state' in advanced industrialeconomies, as governments to respondto,and shape and control, 'attempt economgrowinginternational ic interpenetration'.7 Other,moredeeplycritical of international analysts political economy have proposed that, under globalizingcapitalism, a globallyoriented state and/or suprastategovernance agencies are-without adequate democratic ifnot substantially controls-supplementing, the terrisupplanting, torialnation-state of old.8 This article likewise regards therelationship betweenglobalization and thestate in termsof subtleinterplays of continuity and change.Broad underlying contiis discerned in so faras the stateand interstate nuity relations persist at the core of governance arrangements in the contemporary globalizing world.Yetthereis also notablechangein the character of the state: itscapacities; itsconstituencies; itspolicy-making processes; itspolicycontents; and so on. This thesisis developedbelow through an analysis of global capitalism. Both the causes and the consequences of globalizationare substantially bound up with a capitalist politicaleconomy.9 On the-onehand,the dynamics of surplus accumulationhave been a majorforcebehind contemporary globalization and
See in particular P.Hirst and G.Thompson, Globalisation inquestion: the intertnational andthe economy possibilities of governance (Cambridge: I996);W Ruigrok and R. vanTulder, Thelogic Polity, ofinternational restructuring (London: Routledge, Zysman, 199s);J. 'The myth ofa "global" economy: enduring national foundations and emerging regional NewPolitical realities', Ecotnotmy i,July I996, pp.157-84; R. Boyer andD. Drache, eds,States agaitnst markets: the limits of globalization (London: Routledge, I996). 4 S.D. Krasner,'Economic interdependence andindependent in R. H.Jackson statehood', andA.James, eds,States ina chatnging world: a contemporary analysis (Oxford: Clarendon, 1993), p. 3I8. 5 M. Mann,'Nation-states in Europeandother continents: diversifying, notdying', developing, Daedalus I22, Summer 1993, pp.I I5-4o; alsoM. Shaw, Global society andinternational relations: sociological concepts atnd political perspectives (Cambridge: Polity, I994). 6 S. Strange, Theretreat ofthe state: the of potver inthe diffusion world econiomy (Cambridge: Cambridge Press, i996). University 7 P.G. Cerny, Thle chanigitng architecture of politics: andthefuture structure, ofthie state (London: Sage, agenicy,
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8 Cf.S. Picciotto, 'The internationalisation of thestate', Capital & Class43,Spring 1991, pp.43-63;R.W. Cox,'Structural issues ofglobalgovernance', in S. Gill, ed., Gratnsci, historical tnaterialism, andinternational relations (Cambridge: Cambridge University Press, I993), pp. 259-89. 9 In thepresent writing 'capitalism' describes not'private enterprise' nor'market economics' so muchas that situation where production is predominantly organized around processes ofsurplus accumulation. Undercapitalism mucheconomic activity-especially that controlled bythemorepowerful circles in society-isdirected atbuilding up evergreater stores ofresources in excess ofsubsistence needs. The drive to accumulate surplus is prone to encourage bothperpetual competition amongcapitalists anda highly unequaldistribution ofsurplus valueacross thepopulation at large.
I989), p. 205 and ch. 8 passimn.
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Global andthe state capitalism

on the other, globalizationhas considerably reshapedthe workingsof capitalism,includingin particular the activities of the state. To be sure,globalizationcannot be reduced to a question of capitalism alone.Thus,when takenas a whole,mystudy of globalization has not espoused a narrowmaterialist it has also accorded causal significance politicaleconomy, to structures of,forexample,identity, community, knowledge,and ecology.'0 Yet no account of globalizationand the stateis adequate without extended attentionto capitalismeither,and it is regrettable that so much analysisof globalizationhas neglectedeven to considerthe importanceof processesof surplusaccumulation. The remainder of thisarticleelaborates an argument concerningthe changof globalizingcapitalism in threesections.First, ing stateunder circumstances in view of the greatdiversity and the usual vagueness of notions of'globalhow thattermis understoodin the present to specify ization',it is necessary I arguein the first context. sectionthat'globalization' acquiresa distinctive and analytically extremely helpfulmeaningwhen it is conceived of as the spread or 'transborder' with the This approach contrasts of'supraterritorial' relations. more prevalentconceptualizationsof globalization as 'internationalization' and/or'liberalization'. The second sectionexaminesin generalterms betweenglobtherelationship alizationand capitalism. As a causal force, of surplusaccumulation are processes in three broad ways, seen to have encouraged the rise of supraterritoriality of:(a) larger thepursuit namely, through market range;(b) lowercostsof labour, foraccumulationthrough and regulation; and (c) new opportunities taxation, and mass media itemssuch as information, intangible telephoneconversations, in global space itself. thatcirculate At the same time,globalization productions forcapitalism. a greatdeal of has also had major repercussions For one thing, in termsof transmode of organization: capital has adopted a supraterritorial business associations. bordercompanies, and transworld globalstrategic alliances, for world marketposition in the presentglobalizing Furthermore, struggles and acquisitionsbetween firms economy have encouragedwaves of mergers both withinand betweencountries. As a consequence,levelsof concentration Globalization a substantial deterhave risenin manyindustries. has also effected of money, thatkeychannelof capitalaccumulation. ritorialization the articleturns Having developed thisbroaderaccount of global capitalism, in the thirdsection to the character of the statein relationto and activities transborder accumulation.Here it is argued that global capitalismhas concontributed to: (a) the end of sovereign statehood; (b) a riseof supraterritorial a decline in interstate stituencies; (c) possibly, warfare; (d) increasedconstraints
a critical Macmillan, forthcoming); 'Beyond the introduction (London: 0 See especially Scholte, Globalisation: ofglobalization', in E. Kofman eds,Globalization: theand G.Youngs, buzzword: towards a critical theory in a globalizing identities I996), pp. 43-57;'The geography ofcollective ory andpractice (London: Pinter, Political 3,Winter world', Retview ofItnternational Econotny I996, pp. 565-607.
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JanAartScholte and (f) the on stateprovisionof social security; (e) a growthof multilateralism; of through the state alone. In impracticability achieving democratic governance it is in at sum, then,althoughthe statesurvives under globalizingcapitalism, a different least six important respects kind of state.
What is 'global' about globalization?

Ideas of'globalization'are so broad,so diverseand so changeablethatit someon the subject. Although timesseemspossibleto pronouncevirtually anything notionsof 'globalization'can-when developed thisdangeris clearlypresent, with care, precision,consistencyand suitable qualifications-be more than intellectualgimmick. For immediate purposes,in any case, a distinctand explicitconceptionis needed to lend focusand internalcoherenceto the presentargument. In one way or another,discussionsof globalization usually highlightthe i.e. the territorial of state and demarcations jurisdictions, question of borders, Around associated issues of governance,economy,identityand community. of this theme of bordersone can distinguish threecommon understandings the term 'globalization'.The firstidentifiesglobalization as an increase of The second treatsglobalizationas an increase of openrelations. cross-border The thirdregards borderrelations. globalizationas an increaseof trans-border these three notions overlap,they also have qualitatively relations. Although different the most emphases.The thirdconception is the newest and offers and helpfulinsightinto contemporary world affairs. distinctive Subsequent build on the notion that globalization sections of this articlewill therefore transcendence of involvesa growing borders. in terms of proliferating When understood cross-border exchanges,'globalization'is in effect with'internationalization'. Indeed,manypeople in synonymous commercial and journalistic circlesuse the two wordsinterchangeably. official, to between countriesof take denote movements increased They 'globalization' goods, investments, people, money, messagesand ideas. From thisperspective, greaterglobal interconnectedness means no more and no less than deepened international a larger amountof'intertradeis simply interdependence.'Global' national'trade;'global'migration is merely concentration of'internaa greater and so on. tional'migration; is redundant. Levels of Interpreted along theselines,the term'globalization' cross-border haverisenand fallen from timeto timethroughout the hisactivity the relations. For example, on variousmeasures amountsof toryof international investment cross-border and migration a hundred trade, yearsago were roughly the same as or higherthantheyare today. The old vocabularyof international When 'globalization'is relations is perfecdy adequate to describesuch trends. used merelyto denote'internationalization', are sceptics rightto ask why such a fussis made about the issue.
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Globalcapitalism and thestate to the contemabove,'globalization' refers In the second usage distinguished regulatory baras states removecountless porarylarge-scale openingof borders and communications. Here riersto international travel, financial transfers trade, On thisaccount,the with'liberalization'. 'globalization'is used synonymously world. It is presumedthat term describesthe creationof a single borderless will yieldplanetary economywill integration: a unitary'global' opening borders will replaceterritorial states; replace countryeconomies;a 'global' government and allegiances will replacediverse a homogeneous'global'culture local cultures; will replacenationalloyalties. to a 'global' community of'libusage is also redundant. Here the vocabulary This second widespread relations is perfectly of international has eralization' adequate.Again,the history when statecontrols on transactions betweencountries were seen othermoments The term'globalization' reduced. was not needed on those occasignificantly 'opening' of borders. sions,and it is not needed to describethe contemporary the of have been heard broad lines arguments today's 'globalists' Likewise,on advanced in the before. They rehashthe sortsof pointsthatanti-mercantilists in the nineeighteenth century, thatclassicalliberalsproposed againststatists of balteenthcentury, thatliberalinternationalists affirmed against proponents that in and 'transnationalists' ance of powerpolicies the earlytwentieth century, in the fieldof International Relationsduringthe 1970s. pittedagainst 'realists' then,tell us nothingnew; howThese two more conventionaldefinitions, ever,they do not exhaust the possible conceptions of globalization.A third and more innovative construction-generatingthe meaning of the term which informs the present article-highlightsa trendwherebysocial relations bordersare become less tied to territorial frameworks. From thisperspective not so much crossed or opened as transcended. Here 'global' phenomena are and can those which extendacrosswidely dispersedlocations simultaneously move between places anywhereon the earth prettymuch instantaneously. in these Territorialdistanceand territorial bordershold limitedsignificance the globe becomes a single'place' in its own right. circumstances: be seen in countless Globalization-the rise of thissupraterritoriality-can social life.For the sake of analyticalconvenience, situationsof contemporary in the the many manifestations mightbe grouped under six headings.First, media such as air travel, computer nettelephony, sphere of communications, works,radio,and televisionallow personsanywhereon earth to have nearly of the territorial distanceand immediatecontactwith each other, irrespective the bordersthatmightlie between them.Second, in the area of organizations, late twentieth has witnesseda proliferation and expansionof business century civic associations and regulatory agenciesthatwork as transborder enterprises, much movementof goods and services operations. Third,in respectof trade, between countriestodayfallswithina transworld exercise: consider, marketing for example,Disney films, AIG insurancepolicies and countlessother global globalizationoccurs with the spread of products.Fourth,in termsoffinance, various monies (e.g. the US dollarand the Special Drawing Right) and finan-
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JanAartScholte cial instruments (e.g. eurobondsand manyderivatives) thatelectronically circulate anywhere and everywhere acrosstheworldin an instant. Fifth, concerning ecology, the late twentieth century has broughta numberof anthropogenic alterations to the environment thatare not constrained by distanceor circumscribed by borders.Examples include stratospheric ozone depletion and the decline in biological diversity. Sixth,in regardto consciousness, globalizationis in evidenced so faras people conceive of the world as a singleplace, affiliate with communities(e.g. of religiousfaith, themselves race,etc.) thattranscend understand borders, and otherwise theirdestiny in transworld as well as (or perhaps insteadof) territorial terms. in each of thesesix interrelated It shouldbe noted that, spheres, globalization of recentdecades.To be sure,earlyintimations is mainlya characteristic of can be traced back several hundred years,when some supraterritoriality imaginations the possibility of transborder contemplated government, instant transworld and so on. More tangibleand sustained manifestacommunication, tions of globalitybegan to multiplyin the second half of the nineteenth a fewglobalproducts forexamplein theformof transworld telegraphy, century, like Remingtontypewriters, and so forth. the scale of thistransborder However, small. The greatintensiwas comparatively (as opposed to cross-border) activity in termsof the transcendence fication of global relations of (when understood has unfolded since the 195os, and at a generally rate. borders) accelerating In sum,then,the thirdand most distinctive conceptionsees globalizationas a fundamental transformation of humangeography. On the eve of the twentyhave acquired a (rapidly world affairs first century, growing)global dimension framework of old. Of course- and thispoint cannot alongsidethe territorial be stressedtoo much-it is not that territorial space has become wholly in contemporary in irrelevant live a rather thana comhistory.We globalizing pletely globalized condition. Global spaces of the kind formed through transworld and the like interrelate withterritorial telecommunications, finance, distanceand bordersstillmattervery much.Thus, for spaces,where locality, discardedtheir example, people have not while acquiringa global imagination forparticular have found territorial affinities places.Similarly, global marketers on countlessoccasions thattheyneed to tailortheirproductsand promotions to local sensibilities. thisimportant it However,notwithstanding qualification, remainsthe case that the territorialist which underpinmodern assumptions of'international relations' have become untenable. understandings
Supraterritorial capitalism It would be overlysimplistic, on Marxistlines,to explain the developmentof in of As I elaborateelsewhere, globalization solely terms capitalism. technological innovations, the dynamics of the states of modand certain features system, ern culturehave also contributed of bordersin waysthat to the transcendence
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Globalcapitalism and thestate are not reducible to capitalism." That said, however,the pursuitof surplus accumulationhas provideda principaland powerful spur to globalization. To thisextentKarl Marx has been borne out in his prescient observation, already in the i85os at the dawn of supraterritoriahity, that'capitalby its naturedrives beyond every spatialbarrier'to 'conquer the whole earth for its market'.'2 Today,in the words of the Secretary-General of UNCTAD, 'producersand investors behaveas iftheworldeconomyconsisted increasingly of a singlemarket and productionarea.'"3 As indicatedin thebeginning of thisarticle, thepresent sectionexploresboth the causes and the consequences of globalizationin relationto capitalism. In termsof causation, of surplus havefuelledglobalization dynamics accumulation features of markets, by virtueof certain costsand commodification. production In terms of consequences,globalizationhas brought much supraterritorial and considerable organizationof capital,waves of mergersand acquisitions, delinkageof money and financefromterritorial space.In addition-as will be elaboratedin the thirdsectionof the article-the growthof a supraterritorial dimensionof accumulationhas impliedchangesin the character and activities of the state. Globalmarkets has encouragedthe growthof transborder First, then,capitalism relations in so have overrecentdecadesincreasingly faras firms pursuedtransworld marketing the global reachafforded possibilities.With by telecommunications, computerization and air travel, a companycan develop any promising market site,whereverin the worldit mightbe situated. Since the 1970s a numberof companies have also developed transborder chains of retailoudets: 7-Eleven,Benetton, of a globalproductwill havebeen prodded IKEA, and so on. Sometimesbuyers by the same transborder promotioncampaign. By 1992 alUbut one of the 40 largestadvertising agencies in Britainand the United Stateshad departments 4 In theseways and thatspecializedin the productionof global commercials. has figured in theintensification more,globalization to be importantly (uneven, acrossthe worldoverrecentdecades.'s sure) of consumerism By increasing turnover, global sales can createnew economies of scale and forenhancedprofitability. associatedpossibilities as Indeed,it maywell be that,
I elaborate in Scholte, these points Globalisation: a critical introduction. K. Marx,Grundrisse:foundations ofthe critique of political economjy (Harmondsworth: Penguin, I973 [i857-8]),pp.524,539. '3 UNCTAD, Globalization andliberalization: development intheface oftwo currents. Report ofthe powe!ful Secretary-General ofUNCTAD tothe Ninth Session ofthe (Geneva: UnitedNations Cotnferettce Conference on TradeandDevelopment, i996),p. 4. '4 R. J.Barnet andJ.Cavanagh, Global dreatns: imperial and the new world corporationts order (NewYork: Simon & Schuster, I994),p. I70. '5 Cf.L. Sklair, Sociology ofthe global systetn (HemelHempstead: Harvester Wheatsheaf, I995),2ndedn.
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JanAartScholte various authorshave argued,the cost of developingcontemporary 'high technology'is such thatonlya global market can providea scale of return to make such ventures commercially viable.Furthermore, in thisand othersectors, corporate earningscan be advanced throughcoordinatedtransworld marketing alia focussales efforts strategies thatinter on pointsof greatest profit. In addition,a firmcan maximizelong-term earnings by coveringinitiallossesat new market locationswith highsurplusrevenuefromestablished oudets. As a resultof the widespreadglobalizationof markets, consumersdispersed acrossmanycornersof the planetpurchasethe same goods at the same time. The market for, say, aVolvo car,a Hilton Hotel room,a yen-denominated bond, Nestle foods or any of coundess other articlesis not a Samsung television, definedin termsof territorial units.In Michael Porter's 'market formulation, differences and more on buyerdifsegments todayseem based less on country ferences thattranscend boundaries.'"6 A global corporatesalesnetwork country in theworldinstantly transacts business via office anywhere computerand telethe Sabre transworld airlinereservation foundedin phone. For example, system, I962, now connectscomputerterminals on the desksof 28,000 travel agencies in 74 countries.'7 With excess exuberance, Bill Gates of Microsoft promisesa where 'all the goods for sale in the future 'shopper'sheaven' in cyberspace, worldwill be available'fromhome via the Internet.'8 Given the circumstances just described,many corporate executives have come to believe that global marketing is essentialto commercialsurvival. thiswidespreadconviction, a recent bannerin the WallStreetJournal Reflecting In practice, 'Globalization.It'snot a luxuryanymore, declared: it'sa necessity.'I9 sometimeseven 'going global' has oftendisappointedcapitalist expectations, a company'sbalance sheet.Nevertheless, visionsof and ambitionsfor hurting markets have continuedto give a major spurto globalization. transborder Globalproduction A second clusterof important capitalist impulsestowardsglobalizationrelates forreduced costsof prothattransborder afford to the opportunities relations of global comduction.In thisvein enterprises have pushed the development and global financein orderto be able to site munications, global organization wherever labour costs,taxationrates, frameproductionoperations regulatory works and other variablesare most favourableto them.Through so-called a companydrawsthe materials, 'global sourcing', components, equipmentand in the world.For example,more than I00 of servicesit needs fromanywhere
I6 M. E. Porter, ed.,Competition inglobal industries Business SchoolPress, (Boston, MA: Harvard I986),
'7
I8
'9
P. 44. Times, i 8 Jan.I 996, p. i. Finatncial Bill Gates, Thie road ahlead (London:Viking, I995),p. i58. WallStreetJournal, 26 Sept.I996, p.Ri.
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and thestate Globalcapitalism The the largest500 US-based businesses todayuse software servicesin India.20 coordination of production is oftenmuch less expense of transborder processes than the cost differentials between far-flung places.With capitalismdriving in of it the words become possible'to proglobalization, has, Milton Friedman, duce a productanywhere, usingresources from anywhere, by a companylocated anywhere, to be sold anywhere'.2' ease in responseto changing Companies can also relocatewith comparative In one the cost conditions. (admittedly extreme) exampleof'country-hopping', Nike duringa recent athletics and suppliers five-year period closed 20 factories at new sites, of milesaway22In cases opened 35 others manyof themthousands where plant relocationis difficult or unacceptablyexpensive,a transborder of global accountcompanycan stillincreaseits earnings through subterfuges ing.With transfer-price manipulation, forexample,the firm juggles itsbalance arelargely 'relocated'to thosepartsof the enterprise which sheetsso thatprofits in countriesor districts of lower taxation. are situated of globalizationto In some cases,companieshave exploitedthe possibilities spreadthe variousstagesof a singleproduction processacrossseveralcountries. cenIn a so-called'global factory', different countriesmighthost the research tre,fabricationplant, assemblyline, quality-control operation,and so on. in the clothing Illustrating such an arrangement sector, the head of Levi Strauss has explained that'our company buys denim in North Carolina,ships it to France where it is sewn intojeans, laundersthesejeans in Belgium,and markets them in Germany using TV commercialsdeveloped in England.' 23 of Transborder productionprocesseshave also developed in the manufacture leathergoods,sportsarticles, conmanymotorvehicles, toys, opticalproducts, sumer electronics, semiconductors, aeroplanes and constructionequipment. Global factories of the totalworldworkforce, employonly a smallproportion but in the sectors just named theyare veryimportant. reachand mobility of capital, labour-for which Faced with thistransworld bordercontrolsremainveryreal indeed-has seen its bargaining position visCritics weakenedin thelate twentieth a-vismanagement substantially century. in often allege that globalizationhas increasedunemployment(particularly more industrialized worsenedworkingconditionsforthosepeople countries), who retain threatened social cohesion.24 It is farfrom wagedjobs, and thereby clear thattransborder productionmust (as a matterof economic and historical necessity)have such effects; however,considerableevidence can in the event be marshalled to link contemporary globalizationto growingincome
Financial Times, 3 JulyI996, p. 4. Citedin Naisbitt, Global paradox, p. i9. 22J. C. Abegglen, Sea change: Asiaas the Pacific new world industrial center (NewYork: FreePress, I994), p. 26. 23 R. D. Haas,'The corporation without in M. Ray andA. Rinzler, in boundaries', eds,Thenewparadigm business: emerging strategiesfor leadership andorganizational (NewYork:Tarcher/Perigee, I993), p. I03. chatnge 24 See, e.g.R. Naderetal., Thecase agaitnstfree trade: the globalization ofcorporate power GATT,NAFTA,atnd (San Francisco: Earth Island Press, or andT. Costello, Global village global pillage: econotnoic 1993);J.Brecher recotnstructionfroti the bottonm up (Boston, MA: SouthEnd Press, I994).
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JanAartScholte inequalities,greater job insecurity, and so on.25 Even the organizersof the compaWorldEconomic Forum,an association linkingsome goo transborder how the new nies,have recognizedthe need of'demonstrating global capitalism can functionto the benefitof the majorityand not only for corporate managersand investors.'26 Globalcommodities has fuelledglobalizationstemsfrom The thirdmajor way in which capitalism thatare presented in the creationof forsurplus accumulation the opportunities of globalizationprovides The infrastructure supraterritorial spaces themselves. businesson a verylarge scale indeed. Companies dealing in digital profitable electronic massmedia and transinformation telecommunications, technology, borderfinancehave since the 1970S risento greatprominenceon the world's now not only service older securitiesexchanges.Moreover,these industries of production sectorsof capitalist activity; theyhave also become majorspheres in theirown right. term to extendwhat Marxists has providedopportunities Thus globalization to new kindsof articles. 'commodification' Indeed, with the growthof transcentreof gravity in capitalism's we have seen a notable shift border relations, from 'merchandise' (traditionaltrade and industry) towards 'intangibles' In the territorial information and communications). economy, profit (finance, and the like. is mainlypursued throughagriculture, mining,manufacturing, With globalization, surplusis also accumulatedthroughelectronicfinancial the productionof data,and flowsof imagesand sounds-all now transactions, to a largedegreeas ends in themselves. To take less than5 per just one example, cent offoreign transactions in is exchange the I99OS directly connectedto trade between countriesin'real goods'.27 Globalbusiness organization Anothermajor change in capitalism-which all threeof the generalimpulses to globalization coveredabove have encouraged-is the rise of the transborder Discussions of thisphenomenon usuallyspeak of 'multinational' or company. most of 'transnational' corporations. Not onlyare theselabelsmisnomers (since in question retaina pronouncednationalidentity), the firms but theyalso fail to capturethe distinctive feature of these enterprises: namely, the substantial (albeitnot complete) transcendence of distanceand bordersin theiractivities. The terms 'global' or 'transborder' companiesfitthe bill farbetter.
2s Elaborated in Scholte, Globalisation: a critical introduction.
26
K. SchwabandC. Smadja,'Start taking thebacklash against globalization seriously', International Herald Tribune, 2 Feb.I996. 27 D. Tober, 'One world-one vision for business', in S. Bushrui etal.,eds,Transition toa global society (Oxford: Oneworld, I993), p. Io5.
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Globalcapitalism and thestate withoperations in more thanone state The count of enterprises jurisdiction increasedfrom3,500 in I960 to 40,000 in 1995.28 These companiesare highly significantin contemporarycapitalism.For example, it is estimated that trade between subsidiariesof the same transborder intrafirm corporation accounts forat least a quarterand perhapsas much as over 40 per cent of the firms directly world's total cross-bordercommerce. Although transborder of the world workforce, employ only a verysmallproportion theyfigure very in termsof theirshareof world research and development prominently activimarkets and profits. ty, In additionto the growth of supraterritoriality within manycompanies, globbetween the to enteralizationhas also opened aliances' way so-called'strategic prises.Theterm'strategic alliance'coversall mannerof cooperationagreements can involvesubInterfirm collaboration between legallyseparate corporations. research contracting arrangements,joint efforts, co-production operations,joint A burgeonand manyothercooperativeactivities. and distribution, marketing has since the earlyi98oS producedthousandsof ing'diplomacy'betweenfirms in the automotive, thesecorporate information technology especially 'treaties', telecommunications and travel pharmaceutical, sectors. In a further large-scaleinstitutional trend,contemporary globalizationhas stimulatedmany companies to go beyond strategiccoalitions to full-scale fusion.The i98os and I990S have seen successive flurries of mergers and acquisitions(M&A). Followinga sequence of record-setting increases, the numberof cross-border takeovers reachednearly 6,ooo in I995, withan aggregate value of $229.4 billion.29 Thousands more M&A deals have takenplace withincounoftenwith the specific aims of creating tries, a largernationalfirmthatis capable of surviving competition fromtransborder rivalsand/orusingthe enlarged to launch or expand transborder entity operations. The rise of supraterritorialityhas also been implicatedin 'mergermania' in so faras the deals have been in sectorsat the heartof globalization especially prevalent such as brand-name consumerarticles, tourism, aircraft production, banking, insurance, informatics, telecommunications and electronic massmedia. True,the mid-iggoshave witnessed several important demergers as well; nor are mergersand acquisitionsby themselves guaranteesof profitability in the globalizingworld economy.Indeed,manyfusions have failedin termsof subsequent shareprice performance, earnings growth, turnover of top executives, new productdevelopment, etc. Nevertheless, the overalltrendin the present context of globalizationhas been decidedlytowardsincreasedcombinations, and the tendency to mergein response to globalmarket competition showslittle sign of abating.
2s UNCTAD, Transnational corporations andtworld development (London: International Thomson Business Press, ix. 1996), p.19Financial Times, 29 Jan. I996, p. 22.
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JanAartScholte As a result largelyof strategic and acquisitions, alliances, mergers globalizing capitalismhas broughtincreasedconcentration of ownershipand power to many areas of production.For example, in several industriesfusions have of corporategiantsthathas radically involveda 'mega-merger' transformed the A limited number of large firmsnow competitivebalance in these sectors. dominate world production of aircraft, electrical equipment, film, music debt instruments, recordings, insurance, telecommunications, semiconductors firms the largest300 transborder and creditcards.In thesecircumstances, control70 per cent of all foreign directinvestment between a (FDI) and anywhere quarterand a thirdof all corporateassetsworldwide.3? Overall,then,fourdecades of acceleratedglobalizationhave yielded conditionsof considerable oligopolyin the world economy. Indeed,thereis a widein manycorporatecirclesthatonly the largestcompanyin spreadassumption in a global a sector-or possiblythe two or threebiggestfirms-can profit The much-discussed market. of global competition' have made gov'pressures ernmentsand citizensmore ready to allow 'their'corporate flag-carriers to acquire marketdominance of a degree thatan earliergenerationwould not have countenanced. No Global Monopolies and Mergers Commission or Global Anti-Trust has emergedto monitor, and if necessary Authority curtail, thisconcentration on a world scale. has also adoptedglobalforms Capitalism in respect of organization of business associations, creatingsomethingof a transborder communityof managerial elites. The International Chamberof Commerceand a fewsector-specific bodies like theInternational Federation of thePhonographic Industry datefrom the interwar period,but such transborder lobbies have proliferated since the I96os. Moreover, some of theseorganizations have latelyplayedan important regulain thefinancial toryrole,particularly sector. For instance, non-state agencieslike the International SecuritiesMarketAssociation(ISMA) and the International AccountingStandards Committee(IASC) have developedrulesto governtheir respectivespheres of global markets.Meanwhile, bodies like the World Economic Forum (foundedin 197I) and theTrilateral Commission(I973) have given transborder businessa voice in broaderpublic policy.For example,the WEF was instrumental in launching theUruguayRound of GATT in the midI980s and has even attempted conciliation in intractable interstate conflicts such as theArab-Israeli and Greco-Turkish disputes. For itspart, theWorld Business Council forSustainable Developmenthas since 1995 linked 125 global companies to promote'eco-efficient leadership'.3'Global businessalso standsbehind transborder as dispensedthrough philanthropy multibilhion-dollar endowments includingthe Ford,Kellogg,Packard, Rockefeller and Soros Foundations.
3?J. H. Dunning, Theglobalization 1990S (London: ofbusiness: the challenge ofthe Routledge, 1993), p. Harvey, Thereturn ofthe strong: the drift toglobal disorder (London: Macmillan, i995),p. I89. 3I Strategy 2000: the way the aheadfor WBCSD (Geneva: World Business CouncilforSustainable Development, I996).
I 5;
R.
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Globalcapitalism and thestate andfinance Globalmoney conA last-and no less crucial-consequence of globalizationforcapitalism of moneyfrom territorial space.Fromthe dawn of modcernsthe detachment which surpluses ern capitalismmoney has been the principalmeans through More particularly, measures like wages, acrosssociety. are distributed monetary and so on have gendividends, foreign exchangerates, prices,interest charges, capitalhas been erallydefinedeconomic value in such waysthataccumulating It is largely both within and between countries. shared highly unequally thathas createda throughfinancial instruments, money,and its manipulation class'. 'capitalist acceleratedglobalization, money and financeoperatPrior to contemporary in a territorial ed almost entirely political economy.Money took material overland and sea in pockets forms: coinage,paper bills,etc. It was transported and cases (althoughwired transfers by telegraph began on a smaliscale in the century). Especiallyin the hundredyearsto finaldecades of the nineteenth and and so on had a clearnationalidentity bank assets, securities, I960, monies, circulatedmainlywithin the territorial jurisdictionof the state where they loans and foreignbonds; but originated.Certainlythere were international were alwaysbilateral, affairs: thatis, the credits cross-border these transactions denominatedin the currencyof that country, emanated fromone country, in a second country. directedat a borrower thissituationhas changed. After severaldecades of substantial globalization, has greatly loosened. For one thing,the link between money and territory in has left wallets and safes and moved the distanceMost money to be stored these electronicflows less,borderless cyberspaceof bankingcomputers.With as easilyoutsideas insideitsostensible'home' a nationalcurrency can circulate In the late I98os almost as many US dollars were held outside as country. and in certainsituations insecuriinside the United States, of major financial easternEurope) the greenbackhas largety (e.g. in much of post-communist ly displacedthe local nationalmoney as a storeof value. Certain othermoney forms of the late twentiethcenturylack a single country referent. Prime examples include the Special Drawing Right (issued throughthe IMF since I968) and the European CurrencyUnit (employedby the European Union since 1978). Meanwhile, severalhundredmillion creditcardsand bank passes in circulationtoday are valid in scores of countriesworldwide.The recent introduction of 'electronicpurses'-which carrydigitalcash, sometimesin several denominationsat once has taken money still further away froma world of borders. With moneythuslargely removedfrom territorial into global space,much of financeconsists of transborder that activities, thatis, transactions contemporary cannotbe easilyfixed in specific in 1995 over countries. In banking, forexample, of the world'sbank assets in the belongedto depositors non-resident $9 trillion in a currency countrywhere the account was held and/orwere denominated
439
AartScholte Jan
on the lendingside Globalization is also apparent issued outsidethatcountry.32 Since the 1970S it hasbecome commonfora loan to be issuedin of thebusiness. in thecurrency a basdenominated of a secondcountry (or perhaps one country, in a third by a countries), fora borrower ketofcurrencies ofseveral country, globin fourth and morecountries. of bankswithhead offices al bank or syndicate In the case of in securities markets. and derivatives are apparent Similartrends the syndicate of managers, the borrower, the so-called'eurobond',forexample, and the securities exchangeon which the bond is listedare spread the investors Since its inceptionin I963, the eurobond markethas over multiplecountries. in the world (after the US domesticbond grownto become the second largest with shorter maturities notes,com(e.g. medium-term market). Many credits mercialpaper,repurchase agreements, etc.) have since the mid-ig8os also taken number (if stillsmali minority)of a global form.Moreover,in an increasing cases, companies are today issuing and trading their stock on securities on timezones.Transactions financial exchangesin each of the world'sprincipal occur via and derivatives markets now securities mainly telephone the major the In thissituation rather thanon an open-outcry floor. terminal and computer dealer can as well be located halfa world away as next door to the exchange activities just listedcan be pinned down building. Indeed,none of the financial in each is conducted the worldas a singleplace. to one country: it is clear that describedabove together, Taking the various developments in big ways.The characters of globalizationhas alteredthe face of capitalism institutions, moneyand finance commodification, business markets, production, On thewhole,thegrowth of transborder have all markedly shifted. relations has aliowed processesof surplusaccumulationto extendmore widely and deeply contemporary into the fabricof world affairs. Thanks largelyto globalization, capitalist thanever.Indeed, the world economy of societyis more thoroughly manifests the greatercompetitionand volatility the I99OS generally that one would expect froman intensification of capitalism.
The state in globalizing capitalism

What has the globalizingcapitalism The describedabove impliedforthe state? by and respondfirst havebeen affected point to emphasizeis thatnot all states in the same way.Commentsin the following ed to transborder paracapitalism have,of course, Individualstates graphspaintthe picturein verybroad strokes. faced globalization different histowith different levelsand kindsof resources, riesand cultures, different the globalizapolicyoptionsand choices.Moreover, tion of capitalhas on the whole proceeded much further (in aggregate terms) in Australasia, Europe thanin the restof East Asia,NorthAmericaand western Asia and Europe,Africaand LatinAmerica. globalizaThat said,contemporary
32
International banking andfinancial developments mtarket BankforInternational Settlements, (Basle: I996), AnnexI.
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and thestate Globalcapitalism smallconcentrations and even relatively of tion has leftno country untouched, in various countriesof the effects transborder capital have had far-reaching forexample). South (as the debt crisishas demonstrated, in therelationship betweenglobalcapseveral Amid thediversity, majorthemes do to one degreeor another hold ital and the statein thelate twentieth century One is that the state survives and shows trueforall countries. preciouslitdesign in thefaceof globalizing to date of dissolving capital. Second,transborder capitalofglobalization, states withother ismhas,together aspects deprived contemporary of sovereignty. statescertain Third, transborder capital has given present-day in additionto theirtraditional domesticcitizenry. constituents supraterritorial accumulation havearguably created ofsurplus Fourth, transborder processes major hasin genbetweenstates. to warfare disincentives Fifth, supraterritorial capitalism statesto reduce manysocial security eral encouragedcontemporary provisions. an unprecedented in multilateralSixth, globalizing capitalhas promoted growth in sum have createdmajordiffithe foregoing trends ism among states. Seventh, of democracy thestate. culties forthe realization through Persistence ofthestate of thisarticle, of the I99OS have preAs noted at the start manycommentators as powerless sentedthestate and obsoletein thefaceofglobalizing Neither capital. claimholds.Atmostone can arguethat transborder marketing, production, money and financehave severely constrained the bargaining positionsof smallerand weakerstates, in theSouth.Such states seen their mainly havethereby subordinate and oftenexacerbated.Yet positionin worldaffairs reconfirmed, nowherebut in Somalia has the entire state apparatus collapsedforanyprolonged period, and the reasons in thatcase had little immediately to do withglobalcapital. On the contrary, acrossthe worldthe stateis,after severaldecades of accelerin most cases largerand more entrenched ated globalization, in social relations thanever.Most states-includingthosein which neoliberalgovernments have been committedto shrinking ostensibly the public sector-have in the late twentiethcenturyincreased their payroll, budget,and scope of regulation. stateshave stageda generalretreat Contemporary onlywith respectto ownerof means of ship production.However,shrinkagein termsof privatizations (whose totalvalue has run to hundreds of billionsof dollarsworldwidesince the mid-ig8os) has usuallybeen more thancancelledout by stateexpansionin otherrespects. For themomentthere is-contrary to themuch-publicized pronouncementsof some-little indicationthattransborder capitaland the state forma contradiction, and everysignthattheyare complementary. Indeed,states haveplayedan indispensable enabling rolein the globalization of capital.33Contraryto liberalist presumptions, everymarketrequiresa frame33 Cf.E. Helleiner, States andthe re-emnergence of Woods tothe I990S (Ithaca, Bretton NY: globalflnance:from
CornellUniversity Press, I994).
44'
JanAartScholte in environment work of rules,and stateshave createdmuch of the regulatory For example, have facilitatgovernments which transborder capitalhas thrived. and profits withsuitably constructed property guared global firms' operations labour laws and tax regimes, codes, currencyregulations, antees,investment architecture Stateshavealso providedmuch of the regulatory police protection. alia removing passinglegislation exchange controls, forglobal financeby inter to firms based banksand securities externaliy foroffshore facilities, permitting ownershipof bonds and equities,and set up operations, aliowingnon-resident would not unfold-or would occur a greatdeal of globalization so on. In short, did not sponsorthe process. Moreover, more slowlyand ponderously-ifstates and suprastate bodies like theWorld associations (e.g.business otherinstitutions farto assumeallTrade Organization)have to date not developedsufficiendy functions. or even most-of theseregulatory The endofsovereignty howof the state, of the statedoes not implythe immutability The persistence in globalwhile the statehas retained pivotalsignificance ever.For one thing, Prior to the of sovereignty. core attribute it has lost itsformer izing capitalism, governancein the worldperiod of acceleratedglobalization, contemporary was constructed mainly international-system and, at thattime,more distinctly accorded each state statehood.Sovereignty around the principleof sovereign and exclusiverule over its territorial jurisdiction.In comprehensive supreme, states facedno higherauthority, theygovernedall areas otherwords,sovereign eitherwith otherstatesor and theydid not sharetheirauthority of social life, of governance. To be sure,the principleof statesovereignty with othercentres violatedin practice; in pre-globalcircumstances a state was sometimes however, to apparatus, graduatefrommere legal sovereignty could, with a strengthened positivesovereignty. in the tradito the growthof transborder sovereignty capital, Owing largely of the word has in the late twentieth centurybecome tional understanding duringthe period of Indeed,mostnew states(established whollyimpracticable. except in name. acceleratingglobalization)have never enjoyed sovereignty thatis,on a worldwhere events Sovereignstatehooddependson territorialism, jurisdictionor at designated occur at fixedlocationseitherwithina territorial Yet global processes like electronic points across tightlypatrolledborders. manufacturing chainscannotbe fixedin a singleterrimoneyand transborder torialunitoverwhich a statemightexercise jurisdiction. supreme and exclusive to speak of leaders in many countriescontinue regularly True, government is no longerin place to defend. however, sovereignty 'defendingsovereignty'; refer not (according generally sovereignty' appeals to 'preserve Contemporary and to the traditional definition) to the assertionof absolute,comprehensive of stateinfluunilateral stateauthority, to the retention but (farmoremodestly) ence in a given area of regulation.
442
Globalcapitalism and thestate In particular, supraterritorial capitalism has cost contemporary statesone of the principalmarksof sovereignty: namely, completeand exclusivecontrolof the national currency and associatedfinancial markets. For example,globally monies have greatly circulating of itsmoney complicateda state's management levels.Withvolumeson the world'swholesupply, exchange ratesand interest sale foreign at $1,230 billion per day in 1995, even exchange markets running statescannot singlymaintaintheirtarget the most powerful exchange rates.34 tax Meanwhile,global bankinghas offered ample scope formoneylaundering, which todaymoves as evasion and reckless lending.Indeed,launderedmoney, banksin the United Statesalone,has much as $5oo billionper annumthrough thathave grownto rivalthe statein certain financedmafia-type organizations of Brazil, China, Colombia, Italy,Pakistan,Russia, and Thailand.35 districts of the statein whose Likewise,eurobondslie beyond the regulatory authority avoid supervision currencytheyare denominated. Transborder equitylistings is located.Trillionsof dollars by the statein which the companyheadquarters in global derivatives detachment fromterritobusiness, too, operatein relative rialjurisdiction. are close to understanding Indeed,few government regulators the 'rocket science' of the more complex derivatives instruments. On the whole, the power of global financecapitalis such thatgovernments have felt constrainedto appease the markets with insistently applied policies to lower inflation and public sectordeficits-often withpainful consequencesforweaker sectorsof the population. forms More tangible ofglobalcapital also readily override statesovereignty. For transborder example, and trading manufacturing companies frustrate regularly tax collectorsthroughtransfer pricingand offshore corporateregistration. These firms can also withrelative ease relocate production facilities and salesoudets to other iftheyfinda particular jurisdictions state's regulations overly burdensome. Usuallythisthreat alone is sufficient to makea stateamenableto,inter alia,privatizationand liberalization. Thus governments have not pursued'deregulation' or flockedto theWTO as a resultof sovereign initiative, but because (rightly or wrongly) theyassumesuch stepsto be indispensable tojobs creation, technology transfer and generaleconomic prosperity in a globalizing world. Sovereignty has also disappearedunder globalizingcapitalismin so far as stateshave lost the capacityforthe unilateral contemporary exerciseof comprehensive macroeconomicpolicy. As will be elaboratedbelow,thissurrender sometimesentailssharing macroeconomictasksamong states(e.g. through the Group of Seven). On other occasions it involves a transfer of certain responsibilities to regional and worldwide suprastate agencies. Several state in factexplicitly constitutions prescribe the cessionof sovereignty in the interest of regionalcollaboration. (The Italian, Portuguese and Spanishconstitutions containsuch provisions in respect of theEuropeanUnion. LatinAmericangov34 Financial Titnes, II
MarchI996, p. I, citing BankforInternational Settlements. 35 FinancialTitnes, I March I996, p. 7.
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JanAartScholte in the Mercosurtradepact are currently exploringsimparticipating ernments MonetaryFund has, through Since 1978 the International ilar formulations.) reviewsof detailedauthoritative undertaken so-calledArticleIV consultations, The IMF and World the macroeconomicpolicies of its membergovernments. and overa government's influence monetary Bank have exercisedeven greater adjustment fiscalpolicies when theseagenciesdesignand monitora structural programme(SAP), as they have done at one time or anothersince the late WorldTrade Organization created The recently 1970S for over I00 countries. governance.For example, the marks another strikinggrowth of suprastate and proceduresto to altertheirstatutes commitsmemberstates WTO charter a WTO rulingagainst tradelaw,and in tradedisputes withtransworld conform the votesto overturn memberof the organization a stateis bindingunlessevery manydecisionsconcerningthe regulatojudgement.In thesewaysand others, thanfromthe state. now come to rather forcapitalism ryenvironment have of states sovereign'voluntarily' relinquished course, Formally speaking, of globalizing theforces capitalhave heavilyconhowever, tyin theseinstances; strainedthem to make this'choice'. For example,weaker statesin particular tend to need an IMF/World Bank stampof approvalbeforetheywill obtain let alone new creddebts, of theirtransborder flowsof FDI or a rescheduling lobbieslike theWEF and theAllianceforGATT its.Meanwhile,globalbusiness have Now, a pressuregroup of 285 firmsspearheadedby Texas Instruments, of theWTO. been among the strongest proponents authorities to assert In othercases,transborder capitalhas encouragedsubstate On state. sovereign, formerly independencefrom(or even against)theircentral, in Europe have comUS states or substate authorities variousoccasionsseveral to centralgovernments peted with one anotherand/orwith theirrespective In China, Guangdong, attractglobal productionfacilities to their territory. distancedthemselves Xinjiang,Shandong,andYunnan Provinceshave similarly has done the Tatarstan companies.36 fromBeijing in dealingwith transborder Moscow. In southern same vis-a-vis India the stateofAndhraPradeshis,in the adjustment its own structural FDI, negotiating contextof a campaignto attract in New fromthe centralgovernment loan with the World Bank, separately Delhi.37 in the face of independent stateshave also lost sovereignauthority Finally, The work of the ISMA and IASC by businessassociations. activities regulatory agencies in global financial has been mentionedabove. Credit-rating markets Service and Standard& Poor's,which todayassessthe like Moody's Investors influenceon creditworthiness of some 6o states each,can exercisea significant macroeconomic policies.38Various corporate foundationshave taken far36 D. S. G. GoodmanandG. Segal, eds,Chiina deconstructs: andregionalismn politics, trade (London: Routledge, '994). 37 Financial Times, 26 March 1997, p. 6. 38 T. J. Sinclair, 'Passingjudgement: creditratingprocessesas regulatory mechanismsof governance in the emergingworld order',Review ofInternational Political Economy i, Spring 1994, pp. 133-59.
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and thestate Globalcapitalism as well. Indeed, the Ford Foundation'sinvolvement reachingpolicy initiatives in the driveforNamibian self-determination thatthe orgawas so substantial Franklin nization'spresident, Thomas,was f^eted alongsideheads of stateat the independence ceremoniesin 1990. does not mean the end of the state. As Of course the end of statesovereignty instrumental in the globalizationof emphasizedabove,stateshave been highly forexample,the continuesto affect, capital.In addition, government legislation conditionsforworkersin global facand price of global products, availability the more powerful states-have also and so on. States-again, especially tories, in contemporary For instance, influence with retained important globalfinance. state authorities can curb timed astute and carefully interventions, monetary in the foreignexchange markets. and sometimesoutwitcurrency speculators have also employedsophisticated Some treasuries computerprogrammes (like transborder to pursuelaunderedmoneythrough Austracin Australia) banking centresin has pressedoffshore Since the I98os the US government circuits.39 of so-called'mutuallegal assistance' which the Caribbean to accede to treaties to demandinformation about accountsin cases of allow officials inWashington That said,however, even the best-endowedconsuspectedcriminalactivity.40 controlover global statedoes not have the means to assert temporary sovereign flows. capitalist constituencies Supraterritorial The end of sovereignty is also reflected in changesin the state'sconstituents. The sovereignstateof old almost exclusively represented and promoted socalled 'domestic'or 'national'-read territorial-interests. Governments sought to advance the pursuits of theircitizens(some circlesperhapsmore than others) in the wider world and to defendthose clientsagainstharmful so-called 'external'or'foreign' intrusions. Occasionallya powerful statewould act in the name of'international order'or'civilization', but such initiatives were comparatively rareand usuallycomplemented theinterests of domesticconstituents. In contrast, under the influence of contemporary globalization,the state has become less a medium for holdinga territorial line of defenceof its 'inside' againstits'outside'.With such a divisionnow largely unsustainable, statestend to be an arena of collaborationand competitionbetween territorial and interests. supraterritorial In thisenvironment even governments with strong protectionist inclinations (like those of Cuba and Myanmar, forinstance)have tendedto succumb to at leasta partial accommodation oftransborder capitalism. Indeed,in thelate twentieth centurymany statesare substantially dependent on global capital.For
39 A. Courtenay,'Washed andbrushed up', TheBanker, Oct. I996, p. 72.
40
S. Roberts, 'Fictitious fictitious capital, thegeography spaces: ofoffshore in S. Corbridge financial flows', etal., eds,Money, powper andspace (Oxford: Blackwell, 1994), p.97.
445
JanAartScholte govexample,transborder companieshave frequendy providedcontemporary new technologies, etc. ernments with important equipment, revenues, military if theydo not providesuffifearthat, Also,as noted above,manygovernments cientlyappealing regulatory conditions,foodoose global capital will desert investment acrossthe worldhave rewritten codes,alteredtaxthem. Thus states the demandsof theirsupraterritorial ation laws and otherwise soughtto satisfy constituents. Some reductions of corporatetax rateshave occurredin capitalist formobile business. interstate tax competition the contextof scarcely disguised accommodations of global capitalhave come Some of the mostfar-reaching With offshore in the formof offshore arrangements. legislationa stateoffers investors transborder special tax reductions, regulationwaivers,subsidiesand rebates,secrecy guaranteesand other inducementsto locate their capitalist financial centres date back to theinterwithinitsjurisdiction. Offshore activity manufaczone (EPZ) foroffshore war period,and the first exportprocessing and ture was createdin the mid-I19os. However,the principalproliferation growthof offshore surplusaccumulationhas occurredsince the I970s. There are now severalhundredEPZs in some fourscore (especially low-wage) counfinancecentres existin more than40 countriesand tries.In addition,offshore insurance host trillionsof dollars'worth of bank deposits,investment funds, schemes, 'flag-of-convenience' shippinglines,aindso on. Even New York and to launch offshore facilities Tokyo have been constrained (in I98I and I986, in orderto attract respectively) some of theglobal moneythatwould otherwise flowto sitessuch as the Cayman Islandsand Luxembourg. In thelight ofthetrends just described, ofUNCTAD has theDirector-General underforcesof globalization, observedthat, is progres'the role of government towards an appropriate environment forprivate sively shifting providing enabling More blundy, statesas enterprise.'4' Robert Cox has describedcontemporary beltsfrom the globalto the nationaleconomic spheres'.42 'transmission in so faras his metaphor Cox exaggerates could implythatthepost-sovereign ofits'internal', statehaslostall sight In practice, contemterritorial constituency. have oftenbeen a siteof struggle and supraterporarystates betweenterritorial ritorial capital.For example,even the radically neoliberal Thatchergovernment in the face of Nestle'sI988 takeover 'British' instituprevaricated of a hallmark tion,Rowntree Mackintosh. Many governments have sanctionedoligopolistic and acquisitions mergers among domesticfirms in order thatnationalcapital in global markets. mightbe strengthened Especiallyin the more industrialized globalization partsof the world, variousstates have responded to contemporary withintensified trade in respect economic secprotectionism ofcertain domestic tors.Likewise, in the name of guarding controls 'nationalinterests', immigration
41
42
on Trade and Development, I996), ICIa22. Cox,'Structural issues of global governance',p. 260.
UNCTAD, Globalizatiotn atnd liberalizatiotn: detvelopuietit it)tlheface two of powerful curretnts. Report ofthle Secretary-Getieral ofUNCTAD tothe Nitith Sessiot (f the Cotiferetice (Geneva: UnitedNations Conference
446
and thestate Globalcapitalism century. as theyare at the end of the twentieth been as tight have rarely conIn short,it is not thatglobalizationhas broughtan end to territorial century in the late twentieth but thatthe clienteleof government stituencies, has become geographicallymore dispersed and fluid.As the example of as against to territorial the state's relationship Rowntree Mackintoshillustrates, when the two can be ambiguousand inconsistent, particularly global interests conflict. New patterns ofwarfare constituencies of the growthof transborder may be capitalist One by-product In thisrespect Hans-HenrikHolm and Georg warfare. a reductionin interstate between states' describedan emergenceof'postmodern S0rensenhave recently which warfareis unthinkable.43 Preparationfor and engagementin armed was a major spur to the with otherstatesforthe controlof territory struggle remainedone of itschief emergenceof the modernstateand has untilrecently conclusionson thispoint,but It is too earlyto draw definitive preoccupations. does seem to have generalinterests capitalist the expansionof supraterritorial among those countries for interstate war,particularly ly reduced incentives combat generally Interstate where globalizationhas proceeded the furthest. to harm-most global gives littleadvantageto-and is more likelypositively comOn the whole,contemporary of capital.44 states would rather circulation territory. capitalthancompete to acquire supraterritorial pete to attract to stateshave shown litde disinclination At the same time,contemporary againstpeople who rankamong theircitizens. applyarmed violence inwardly, or relihave soughtto repress ethnicmovements Most such operations substate In resisto provoke such has helped some cases global capital gious resurgence. to local livelihoods(the example of Shell in Ogoniland tance with disruptions sanctionedarmed forcehas been comes to mind).In otherinstances, officially adjustmentprogrammes(e.g. in deployed against opposition to structural local eliteswho hold greater Venezuela and Zambia) or to protectexploitative Hence markets stakesin the eurocurrency thanin theirpurported'homeland'. so much as deployed the post-sovereign state has not abjured militarization armed forcedifferently.
43
H-H. Holm and G. S0rensen, 'International relations theory in a world ofvariation', in Holm and S0rensen, world eds, 4hose order? Uneven globalization the endofthe ColdWar an(d (Boulder, CO, Oxford: p. 204. Westview, I995), 44 Thishypothesis seemsmoreconvincing than thealternative claimthat thedecline ofwarfare relates to theliberal-democratic ofdomestic character politics: andworld cf.M. Doyle,'Liberalism politics',
American Political Science Review80, Dec. 1986, pp. ii5i-69.
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JanAartScholte
state Contraction ofthewelfare also appearsto have put constituencies capitalist The growthof supraterritorial data ofsocialsecurity. on state downward Although provision significant pressures much evidence have yet to be fullyassembledand systematically analysed,45 'crisis of capitaland the oft-proclaimed pointsto linksbetweenthe globalization state'. of the welfare of the twentieth of statesduringthe first century The history three-quarters of of growingcradle-to-grave was in good parta story public sectorguarantees minimumincome and otherwelfare healthcare,housing, education, nutrition, taxationwere introducedto needs.At the same time,regimesof progressive A numberof cirof wealthin manycountries. redistribution a substantial effect thisexpansionof social security notablythe cumstances programmes, generated the Bolshevik challenge,and promisesmade by spread of universalsuffrage, massesduringthe world wars and decolonization elitesto suffering governing struggles. to a The growingpower of transborder significantly capitalhas contributed At a century. duringthe last decades of the twentieth reversal of these trends was coming under of many social security time when the financing systems in any case,the added pressure fromglobal capitalforreduced taxesand strain to cut back welfare programmes. In labour costshas drivenmanygovernments acrossthe planet the cause of bolstering governments global competitiveness, statesocialism. have since I980 rolled back social democracyand dismantled have been a cornerstone Such shrinkages of many'adjustment' packagesin the in theNorth,and 'transition' policiesin theformer South,'reform' programmes Soviet bloc.That said,the IMF and WorldBank have in recentyearsbegun to the worst nets'with the aim of alleviating incorporateso-calied 'social safety pains of structural adjustment. Certainpartsof thewelfare statehaveusuallycome undermorepressure than have generally others. Governments cutsin respect of implemented thegreatest sunk costs such as unemployment benefits, old-age pensions,and untied official developmentassistance. In comparison,education and trainingbudgets have oftenbeen less affected, in so faras such spendingis believed particularly to enhance a country's positionin global markets. Yet almost no government anywheretoday dares openly to pursue a proredistribution of wealth. The world of the I990S grammeof radicalprogressive hostsmanya would-be socialist who, as a statesperson facingglobal capitalism, has temperedor reversed programmes of redistribution. This roll call includes Blair in Britain, in Kwasniewskiin Japan, Kok in the Netherlands, Murayama
45 Cf.P BowlesandB.Wagman,'Globalization and thewelfare state: four hypotheses andsomeempirical March 1997.
evidence'. Paperpresented to theAnnual Convention oftheInternational Studies Association, Toronto,
448
and thestate Globalcapitalism Poland, Mbeki in South Africaand Museveni in Uganda. Meanwhile, many arguing that have unabashedlyembraced neoliberalism, other governments of growing inequalities of wealth and income are unavoidable side-effects and viable public finances. increasedeconomic efficiency have emergedin the past 20 yearsto challengethe Various sitesof resistance alleviation, of contemporary statesto poverty reduced commitment generally The of wealth and associatedguaranteesof equal opportunity. redistribution the labour movement,has of capital'straditional counterpoint, effectiveness of tradeunions to develop adebeen severely hamperedby the generalfailure to tame transborder capitalhave tended Instead,efforts quate global networks. to come fromdevelopment NGOs, certainpocketswithinthe United Nations religious and system,and some sections of consumer, environmentalist, women's movements. and management consultants, too,a numAmong global companyexecutives have in the I99OS promotedthe cause of'sociallyresponsible ber of reformers the general welfare. business'as a means to contributeto, if not guarantee, Today's prospectivemanagers take business ethics courses to obtain their MBAs, and financialmarketsoffera growingnumber of ethical investment frombusinessas'band-aid' schemes.However,criticsdisparagesuch initiatives of transborder formore proactive capital measuresand no substitute regulation a global public sector. through ofmultilateralism Unprecedented growth stateof globalization theloss of sovereign As suggested above,underconditions governance hood has oftengone hand in hand with a growthof multilateral Here statesabandon unilateral approachesforcollectiveregulaarrangements. tion of various aspectsof world affairs. (some of Throughjoint interventions them more institutionalized thanothers)governments have playedkey rolesin capitalism. shapingsupraterritorial facilitating, curbingand otherwise variously include over IOO regional trading The many instancesof multilateralism established since I945, 29 in the period I992-5 alone.46 Other arrangements importantcases of collectiveeconomic managementhave developed among countries and most deeply capitalist of the most industrialized governments in thisregard include theBank forInternational ('the North'). Key institutions Settlements (BIS), the Organization for Economic Cooperation and By comDevelopment (OECD) and the Group of Seven (G7) consultations. of the South such as the Group of 77, the Group parison,collectiveinitiatives of I5, and variousproducercartelshave (with the exception of OPEC in the has developed on a Finaliy, multilateralism 197os) been far less influential. worldwide basis,for example in the aforementioned IMF, World Bank and
46
R. Ruggiero,'Growing in international complexity economic relations demands broadening and deepeningofthemultilateral trading system', Focus: World Trade Organizationi Newvsletter (Oct.-Nov.I995), p. I3; Fitiaticial Exporter, Titnes 28 Feb.I996, p. 3.
449
JanAartScholte WTO as well as other United Nations agencies and the International Organizationof SecuritiesCommissions(IOSCO). as a means by which stateshave collechas been important Multilateralism of capital.For example, the globalization regionaltradeareasand fostered tively in which transborder have done much to createcontexts proWTO initiatives thesecretariat and the6oo economists thrive. For their part, ductionand markets the growthof global since the I98os, furthered of the OECD have,especially harmonizationof and multilateral marketsby promotingboth liberalization and other rules.Meanwhile,IMF/World Bank-sponsored technicalstandards have done much to open post-colonialand structural adjustment programmes relevant to countries changesin global capitalby prescribing post-communist and so on. At the same time investment codes, exchangecontrols, tax regimes, enormousdebtdefaults. banksfrom manySAPs have helpedto savetransborder moreabjectservants still made governments has not simply Yet multilateralism also on various occasions have These collectiveinitiatives of global business. to establish surof theNorth)opportunities greater states (especially givenstates of surplus accumulation. For veillanceof and controlovertransborder processes on offshore example, the European Union has developed some restrictions Social Rights and in I989 issuedthe Charterof the Fundamental arrangements and have used G7 consultations ofWorkers(or Social Charter).Governments relatedto inflation, IMF meetingsto enhance theirefforts to achieve targets interest balance of foreignexchange rates, levels,money supply, employment, central banksof theASEAN countries and public spending. Likewise, payments of foreign exchange stabilization have since I995 developedjoint mechanisms assaults Stateshave also overthe on theircurrencies. to help wardoff speculative collaborative regulation initiatives towards significant past20 yearstakenseveral For of financial officials develhas of global banking. example,the Paris Club of the South. of the North to debtproblems by states oped collectiveresponses meetingsince 1974 under the The Basle Committeeon BankingSupervision, supervisionof auspices of the BIS, has developed principlesfor collaborative Basle Committee way through the are also under transworld banking.47 Efforts and the Offshore (formed in I980) to introduce Group of BankingSupervisors a global code on bank failures.48 Meanwhile the IOSCO and the Basle regCommitteehavein the mid-iggostakensome modeststepsto gain greater markets. and derivatives securities ulatory purchaseon transborder Note, of course,thatstateshave had to abandon the pretenceof sovereignand unilateral initiative-in order to acquire this ty-i.e. supremeauthority To repeat, too,posmarkets. initiative transborder vis-a-vis greater (multilateral) in sibilities for controls far been available have thus globalizingcapitalism joint
47 T. Porter,States, nmarkets and regitmies inglobalfintance (London: Macmillan, 1993), ch. 3; E. B. Kapstein, Gotverning theglobaleconotmjy: interntationalfinatnce and tile state(Cambridge,MA: Harvard UniversityPress, I 994). 48 Financial 8 Oct. I996, p. 5. Tim1es,
450
and thestate Globalcapitalism the has reinforced mainlyto statesof the North.To thisextentmultilateralism to far done little states have thus In addition, subordinationof the South. as a means towardsachievinggreater exploit the potentialof multilateralism distributive justice. Blocksto democracy statehood post-sovereign As a number of remarksabove have intimated, In the old territorialized world, involvesenormous problemsfor democracy. refin a country's populace through could-when it was invested sovereignty provide a and accountableinstitutions-notionally erenda and representative The people could thenhope to control fordemocratic governance. framework in theirname.Althoughin and thestatewould governsocial relations the state, thatone accepteda libit was had often (provided pitfalls, practicethisformula in principle. eral conceptionof democracy)realizable has made thistradicapitalism statehood, globalizing sovereign By dissolving Transborder production,markets, tional model of democracyimpracticable. monies and businessassociationsreadilyevade most democraticcontrolsthat might be attemptedthrougha state.Moreover,no mechanismshave been in open debate and accountability devised thusfarto guaranteetransparency, constituents. Meanwhile, and theirsupraterritorial betweenstates relationships and inwardapplication ofarmedviolence by governments both thewidespread suggest the pervasive freezeson, if not real cuts in, public social expenditures in meetingthe demands statesare havingseveredifficulties thatcontemporary of theirterritorial constituents. of significant proportions in of multilaterallie a democratization An answerto such problemsmight it Certainly few advanceshave yetbeen achievedin thisrespect. ism;however, statesproducesa of democratic is not tenableto maintainthatan aggregation For example,the G7 do not consult the wider democraticmultilateralism. Few citizensare their decisionscan deeply affect. world whose circumstances veiled aware even of the existenceof the BIS and IOSCO, where technocracy AlthoughtheWorld Bank,WTO in secrecyleaves littlespace for democracy. to publics in recent yearsto appeal directly and IMF have takensome initiatives dialogue in in theirclientcountries, few signshave yetappearedof a full-scale which theseglobal institutions learnfrom as well as educate theirconstituents. In any case,manyof the so-called'NGOs' or'civil society'groupswho engage memberand highlyunrepresentative in these encounters have a self-selected of channels formal (if any) secret financial and weak arrangements ship, two with thoseforwhom theypurportto speak.Exceptionally, accountability the European Union and the CentralAmerican regional tradeorganizations, suffrage.Yet elected by universal Common Market,have a parliament directly limitedmedia coverage, severely low voter turnouts, restricted competences, etc., have so far considerably in schools and universities, outdated syllabuses the democratizing frustrated potentialof theserareinitiatives.
4A I
JanAartScholte Conclusion thatnotionsof has,one hopes,clearlydemonstrated The precedingdiscussion a consultant's gimmickor slogan, can be morethanan advertiser's 'globalization' theconjargon.Whenconceivedofas theriseofsupraterritoriality, an academic's and into continuity insights and important offers distinctive cept of globalization With the spreadof transworld world affairs. relations, change in contemporary on manycircumstances constraints cease to exertsignificant and borders distance article has exploredone of the keyquestionsraisedby The present of social life. capitalism of supraterritorial space has altered how thegrowth namely, thistrend: in particular. and the role of the statewithincapitalism in general, has providedsome of themainspursto and has figcapitalism To recapitulate, With the rise of of the chiefimpactsof globalization. in some ured centrally much surplusaccumulationhas come to occur throughthe supraterritoriality, of distances develop largelyirrespective sale of global articleswhose markets well In transborder inputsare sourcedpretty processes, production and borders. markets and The of in the world. production growth supraterritorial anywhere of global businessorganizaalia through a proliferation has been achievedinter lobbieswhose networks tranalliancesand corporate strategic tions:companies, has promptedmanymergThe emergenceof global capitalism scend borders. in manyindustries a trendthathas increased concentration ersand acquisitions, both withincountriesand on a world scale. Globalizationhas also broughta and has crefrom instruments territory majordelinkageof moneyand financial information ated major new spheresof accumulation:telecommunications, electronic etc. finance, technology, forcontemimplications have had far-reaching These variousdevelopments have not erased the global markets Contraryto manyassertions, porarystates. of mutualdependence stateshave developed strong relationships state.Instead, That said,theseadjustments with otheragentsof global capitalism. and support states capital, kindof state. Largelyowing to globalizing have yieldeda different acquired of the late twentieth centuryhave on the whole lost sovereignty, warfare from (forthe moment), interstate retreated constituents, supraterritorial governance multilateral multiplied provisions, frozenor reducedsocial security and lost considerable potential. democratic arrangemhents pointforfurther starting The lastof theseobservations an important provides a challengenot critical capitalpresents globalizing Contemporary investigation. Transborder to the survivalof states,but to the realizationof democracy. the state incorporated have to date generally processesof surplusaccumulation but marginalized The obvious questionto ask is whethergrowing democracy. era of globalization inequalityand decliningdemocracyin the contemporary are not connected, and whether more democratic global governance and justice could not go hand in hand towardsa more greaterglobal distributive equitablefuture.
4S2

Global Capitalism and The State

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Global Capitalism and the State Author(s): Jan Aart Scholte Reviewed work(s): Source: International Affairs (Royal

Global capitalism andthe state

JAN AART SCHOLTE

I am grateful forthecomments ofan anonymous referee on an earlier draft ofthis article.

Initernational Affairs 73,3 (I997) 427-452

I989), p. 205 and ch. 8 passimn.

Global andthe state capitalism

What is 'global' about globalization?

The state in globalizing capitalism

CornellUniversity Press, I994).

MarchI996, p. I, citing BankforInternational Settlements. 35 FinancialTitnes, I March I996, p. 7.

evidence'. Paperpresented to theAnnual Convention oftheInternational Studies Association, Toronto,

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