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REVIEWS

Giovanni Arrighi and Beverly Silver, eds, Chaos and Governance in the Modern World System University of Minnesota Press: Minneapolis 1999, $22.95, paperback 336 pp, 0 8166 3152 2

Peter Gowan

AFTER AMERICA?
At the dawn of the century, America rampant appears to be master of global politics. Washingtons military budget currently accounts for over a third of world expenditure on arms, and is larger than that of the next nine powers put together. The Pentagons weapons systems are in a league of their own. The US enjoys an unchallengeable military predominance over any combination of hostile states for the foreseeable future. Critics point out that American strategic preponderance is overwhelmingly based on air and sea power: the US has lost its capacity to control populations on the ground because its hugely increased capacity to kill has been accompanied by a precipitate decline in its willingness to let its soldiers die. To some extent, this is true. Population control is typically delegated to other states. American military power controls these by presenting them with offers they cant refuse: either they co-operate or they will pay a price, and where necessary the price will be the modern equivalent of siege warfarea blockade, followed by devastating bombing that can completely destroy economic installations and infrastructures as well as military forces on the ground. Once this is completed, the US can usually find groups within the state prepared to join with it in an effort to overthrow the regime in place. Serbia is one example, Afghanistan another. China, Russia and the West European states, including even the UK, may mutter about American unilateralism. But when Washington beats the drum for international military action, these lesser powers tend to

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bandwagon with it rather than risking the consequences of building coalitions to balance against it. Since 1989 successive US administrations have mobilized this coercive might to secure American political dominance on a world scale. Madeleine Albright captured this objective in characteristic style. America, she announced, is today the indispensable power. Bush has taken this logic to its conclusion, with a strategy bent on scrapping the old arms-control frameworks established during the Cold War and making the US a post-nuclear power able to use missile defence systems to face down mere nuclear states. Meanwhile in Afghanistan the Pentagon has successfully showcased its devastating state-busting capacity. To all appearances, US global supremacy is now at its all-time zenith. But do the underlying realities of the new century correspond to the surface expressions of US power? In their important new work, Chaos and Governance in the Modern World System, Giovanni Arrighi and Beverly Silver mount a vigorous and wide-ranging case to the contrary. They argue that despite its historically unprecedented military dominance, the United States is suffering a long hegemonic decline which it is incapable of arresting. It can temporarily maintain an exploitative dominationa phrase they borrow from David Calleobut this will bring with it accelerating disorganization and chaos, entraining a potentially catastrophic transition to a new world order. At the same time, Arrighi and his co-authors identify East Asia as a new dynamic centre with the range of (non-military) capacities capable of establishing such an order. Far from the East Asian crisis of 1997 indicating any weakness of the region, they argue that just as the Wall Street Crash of 1929 revealed, through its international repercussions, the new centrality of the United States in the world system, so the global shock of 199798 is evidence that the centre of gravity of the international system is shifting eastwards. As the title of their book suggests, Arrighi et al explore their theme within a theoretical perspective deriving, in broad outline, from World-Systems theory. This is a tack that highlights successive cycles of rise and decline of a sequence of hegemonic powers amongst the core states. In an introductory chapter, they seek to modify a tendency towards system-determinism within this Wallersteinian perspectivearguing, in particular, that hegemons do not merely dominate an unvarying system: they typically transform the structure of the system itself as they rise to dominance. Thereafter, they suggest, each hegemon finds itself trapped in a kind of path dependency which makes it incapable of responding to new system-level problems, leading to its displacement by a new hegemon capable of resolving these. Chaos and Governance further amends Wallersteins conception of the nature of hegemonic crises, by broadening the scope of such upheavals beyond purely economic competition to include inter-state rivalries, inter-enterprise transformations, social conflicts and the emergence of new configurations of power. Equipped with these theoretical instruments, they then

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attempt a systematic comparison of hegemonic cycles along four different axes: geopolitics and high finance; the transformation of business enterprise; transnational social conflicts; and the relationships between the West and other civilizations. It is from their consideration of these four axes that they derive their conclusions about the oncoming fate of American post-war hegemony. A hegemonic power, Arrighi and Silver insist, must be able to provide effective answers both to various system-wide challenges and to the problems confronting other states within the overall system. If it cannot produce such responses, it will find its capacity to control events undermined as rivals seek and find solutions elsewhere. In the interim, the system itself will be marked by various degrees of chaos. Such, indeed, is the books diagnosis of the present historical situation. There are, Arrighi and Silver consider, mounting signs that the United States is incapable of consolidating an international order in which social groups and collective processes are institutionalized in a stable way. At the centre of this chaos is the inability of American structures to establish a stable balance of transnational class power. Drawing upon Wallerstein, they suggest that US hegemony is failing to provide a basis for incorporating labour in the advanced countries and offering a wide enough social foundation for stable capitalisms outside the core. America is thus incapable of minimally stabilizing world society. Chaos and Governance thus sets out a comprehensive agenda for analysing the future of world politics. Many of its theoretical arguments derive from the central themes of Arrighis classic work The Long Twentieth Century. But the new book is less preoccupied with exploring the pastthe chronological startingpoint of The Long Twentieth Century actually lies in the High Middle Agesand develops more hypotheses about the social compacts and conflicts at work in the construction of hegemonic orders. Above all, it raises a very broad range of future-oriented questions about the contemporary historical situation, and concludes with a series of bold predictions about the kind of world into which we are moving. By any standards, Chaos and Governance is a commanding work. Central to its arguments is a dismissal of any idea that during the 1990s American capitalism generated a new, more dynamic basis for capital accumulation of the sort that accompanied the construction of US hegemony after the Second World War. The New Economy rates barely a mention. Arrighi and his colleagues likewise spurn any notion that we witness a coming hegemony of global markets. They insist instead that since the 1970s the main feature of the American and world economy has been a phase of financial expansion, of the kind analysed in depth in The Long Twentieth Centurythat is, a period when a long upswing of production and trade slows down, generating both growing surpluses of money capital and fiscal strains in leading states. Typically, Arrighi argued, such financial expansions have initially strengthened the declining hegemon as it manages to capture the largest share of the surplus capital

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set loose. But in a longer time-frame, more profitable outlets for investment emerge in newly developing regions than in the erstwhile hegemonic power itself. Amidst rising international disorder, as the institutions of the dying hegemonyunable to cope with the new trendsbreak down, quite small events can precipitate a shift in the entire axis of the world system towards a new hegemonic centre. In this optic, financial expansions of the sort that we have witnessed over the last twenty years are viewed as classic symptoms of hegemonic crisis. Arrighi and Silver predict that this financial expansion will end more or less catastrophically, depending on how the crisis is handled by the declining hegemon. The idea that capitalism moves both nationally and internationally through phases of productive expansion and slow-down and that phases of deceleration are marked by financial expansions is obviously well-founded. There is also no doubt that the period since the early 1970s has evidently been marked by just such a financialization. What is much less secure is the assumption that phases of major financial expansion must always be accompanied by a hegemonic crisis. This is sustainable only if we view the Netherlands as in some sense a hegemonic power in decline in the 18th century, but if we dont (and I think we cant), then the historical pattern on which the theoretical claim depends is broken. If we are to consider the contradictions of modern hegemonic powers, it would be better to focus on the inherent tendency of the dominant capitalism to generate financial surpluses which its capitalists then invest in new, secure growth centres. In the British case, these were the United States and the White Dominions. In the last twenty years, we have seen a scramble by American, Japanese and European capitals to invest in the new growth centres of East and South-East AsiaChina and the ASEAN. Obviously, the existence of a powerful phase of financial expansion in the core countries intensifies the pull of these new growth centres, and the accompanying shift in the centre of gravity of accumulation away from the erstwhile dominant capitalisms. It is in the context of this contemporary trend that we should note a central feature of the last two decades largely overlooked by Arrighi and Silver: the drive to open up the jurisdictions of the East and South East Asian political economies in ways that will enable core capitals to capture economic assets within them and thus to ensure that streams of value generated in these societies become the property of the possessing classes of the United States and other OECD states. This was a patent goal of US Treasury tactics towards South Korea in the crisis of 1997 and will no doubt be a prime objective of American policy towards China in the next decade or two. The same pattern is observable, of course, in Eastern Europe and Latin America. It is important to stress that this drive is not simply one-sided plunder by the dominant states, but has a real appeal to the propertied classes of the dominated states. For they can take advantage of the free movement of capital enforced by the US and its allies to transfer their assets

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into metropolitan financial centres and live as rentiers rather than risking their wealth in hazardous development strategies locally. The paradigm of this form of social engineering is Argentina today. For Arrighi and Silver, the ensuing chaos and social disorganization would be the best proof of the hegemonic crisis they diagnose; but they could equally be read as symptoms of the other concept they deploycontinuing effects of exploitative domination by the hegemonic power. Arrighi and Silver rightly highlight the power potential of what they term, after Polanyi, high finance. As they put it, for states to be able to ascend to hegemony, the two key requirements are that they should be more powerful than their predecessors, not just militarily, but financially as wellthat is, wielding greater control over globally effective means of violence and universally accepted means of payment. Today, however, they contend, we witness not the fusion but the fission of these core capabilities: Control over globally effective means of violence has become even more concentrated than it was in the hands of the declining hegemon. But control over universally accepted means of payment is increasingly concentrated in the hands of transnational business agencies or (mostly East Asian) governmental agencies of no politicalmilitary significance and far removed from the traditional (Euro-American) power centres of the modern world system. In situating this development historically, Arrighi and Silver focus especially on one aspect of the exercise of financial power, the role of credit creation. In the late 17th and 18th centuries, they contend, the Netherlands continued to wield major international power, even after military diminution, through its supply of credit to larger states, especially Britain. They also show how decisive Washingtons long purse was in bringing the West European states into the new American order after the Second World War. Hence, they suggest, the potential significance of what they call the new cash-boxes of East Asia such as Hong Kong and Singapore, as well as Taiwan and Japan. How valid is the implied deductionthat the US could soon find itself in the position of France or Britain after 1945? It is certainly true that the American state itself has limited credit capacity today, while many Pacific Rim governments have large reserves. It is also correct that credit creation can give significant political leverage, since so many states in the current period are often desperately eager for new sources of funds. A case in point would be German loans to the USSR in 198990, at a time when the American state was itself in straitened circumstances and incapable of engaging in significant credit politics on its own account. But it would be a mistake to underestimate continuing American power even in the financial field. For the US is still able to live off the institutional legacy of its period of national financial dominance by continuing to control the international financial institutions it set up at its economic zenith. Significantly, the IMF rates scarcely a mention in Chaos and World Governance. Yet in so far as it can insist upon the primacy of international financial institutions that it controls as the centres of public credit for other states, America

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can tap into the reserves of its major rivals, and use these as sources of its own credit-creating power. Nor should it be imagined that military and financial assets exist in separate worlds, without political interaction. At the height of the East Asian crisis, when Japan was threatening to break ranks and establish its own Asian Monetary Fund for the distressed states in the region, Washington had little difficulty defending the jurisdiction of the IMF (and thus of the US Treasury), and facing down Tokyo, which beat an ignominious retreat, mindful of its dependence on the US Security Pact. Nor, finally, can financial capacity be divorced from industrial interdependence. Theoretically, the Japanese government had some instruments for a counter-move: it could have threatened the dollar by dumping Japans huge holdings of US Treasury bonds. But to do so would not only have driven the yen sky-high, to the general detriment of its manufacturers, but would also have crippled purchasing power in its principal export market, the United States itselfa self-defeating course, which not surprisingly Tokyo declined to adopt. The vicissitudes of high finance do not, of course, affect just inter-state relations. Domestic credit systems are also susceptible to traumatic changes and crises, to which Arrighi and Silver give less attention. A severe crash of the American financial system, if it took the form of a banking collapse, and coincided with a severe economic downturn weakening fiscal resources, would have a dramatic effect on the American states ability to operate externally. That such a scenario cannot altogether be ruled out is suggested by premonitory signs of trouble under the elder Bush. At the turn of the nineties, Washington was still able to launch the Gulf War and demand that Japan and Germany bear most of the cost of it, with the result that the US made a net profit out of the military campaign. The ability to extract tribute on this scale may not exist today, so US military operations might, in future, become dependent upon lines of credit supplied by other states. But the likelihood of such a development should not be exaggerated. For all its crushing strategic supremacy, the American war machine costs the US relatively little. Washingtons military budget today stands at less than 4 per cent of GDPa lower percentage than at any time since the late 1930s. It should be also be noted that the US continues to earn more from its military services abroad than it pays for themanother sign of a still vigorous capacity for tribute-extraction. There is thus plenty of slack in the system, provided US domestic politics allows for heavy increases in taxation if and when they prove necessary. In the domain of high finance, the real Achilles heel of the United States lies elsewherein the combination of a very large trade deficit and very low domestic savings rate. These are sustainable only so long as the dollar continues to be the worlds dominant unit of account and means of payment, allowing the US to cover its trade deficit and other obligations by issuing its own currency. If it had to pay these debts in other currencies, it would quickly find itself in

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very serious difficulties. Short of being able to use its military-political muscle to insist upon the continued dominance of the dollar, it would have to undergo a radical social reorganization internally to cope with the disruptive consequences. Such a challenge to the dollar could, of course, come from a rise of the euro or some East Asian regional currency. But that, of course, would inescapably require an exercise of political power outside the financial arena. Rather than pursuing this line of thought, Arrighi and Silver shift our attention from the summits of the system downwards to the emergent forms of business networking that they see as foiling the kinds of corporate organization associated with American hegemony. Focusing here on types of enterprise rather than Marxist concerns with class relations in production, they provide an illuminating historical tour of successive patterns of business organization from the military-economic trading companies of the Dutch and British in the 17th century to the modern multinational corporation based principally in the US, and the informal networks of contemporary East and South-East Asia. What conclusions do they draw from this conspectus? Following Charles Tilly, they argue rather unconvincingly that American MNCs have in the recent past actually weakened the capacities of the American state, by going off-shore and denying it needed tax revenues. But, as Ronan Palans work has shown, the growth of off-shore facilities has been strongly promoted by the American state itself, and attempts to close down or discipline them by the EU and other OECD states have been resisted by Washington. For their part, American employees of US multinationals working overseas are subject to US taxation, and new techniques are being developed to ensure that total world profits of the corporations for which they work are brought within the reach of the IRS. The more interesting argument of the book lies in the suggestion that Japanese and overseas Chinese regional networks in East and South-East Asia have proved both powerful levers of economic growth and robust barriers to economic penetration of the area by American MNCs. The implication is that what the Anglo-Saxon world denounces as crony capitalism may be less of a problem for the economies of the region than for their take-over by Atlantic corporations. Arrighi and Silver believe that it is the very informality of these regionalizing networks that makes them so resistant to American appropriation, and that any attempt to build a more formal, rule-governed regional system would probably weaken their immunity to infiltration. But they are less interested in exploring the inner mechanisms of these networks than in placing them in the wider historical perspective of relationships between the West and the Sino-centric civilization of East Asia. They show how the rise of first the Netherlands and later of Britain depended crucially on the ability of each state to deploy military superiority to extract wealth from the civilizations of South and East Asia, without any cultural ascendancy over them. In Gramscian terms, they insist that Western expansion into Asia was always a matter of dominationcoercive violence

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rather than directionthat is, ideological sway. They then read the history of the second half of the twentieth century as a series of reverses for the Western push into East Asia, as the United States proved unable to defeat Chinese or Vietnamese Communism and today faces a mounting economic challenge from the region. Chaos and Governance ends with the conclusion that this challenge is now probably unstoppable and will ultimately lead to the displacement of the global dominance of the United States, not least because American military strength cannot be serviceable for meeting this challenge. But the rise of a Sinocentric East Asia will not present a threat to the prosperity or security of the Atlantic world because its economies, Arrighi and Silver promise us, will remain structurally open to the rest of the world. Thus the only question for them is whether the United States will accept its decline from world hegemony peacefully and accommodate itself to the ascent of East Asia, or whether it will react destructively, seeking to strike back with a renewed exploitative domination. Yet the social and cultural substance of the hegemony they predict for Sinocentric East Asia remains a black box in Chaos and Governance. For Arrighi and Silverthis is the last and most striking of their claimssee the region not only as the centre of a civilizational challenge to the West, but also as the most likely epicentre of the next round of social insurgency against the rule of capital. Following Hobsbawm, they stress that the late twentieth century was, sociologically speaking, above all the time of the death of the peasantrythe final proletarianization of the rural population of the globe, unfolding on a gigantic scale in China today. It is here that they expect that the disempowerment of labour throughout the world will eventually be reversed. A new wave of transnational labour radicalism, marked much more strongly than in the past by the feminization of labour and the multi-ethnic composition of the worlds labour forces, will, they assure us, henceforward give fresh accents to the challenge from below. Chaos and World Governance is a welcome call to break free from narrow, mystifying debates about globalization and to place Americas seemingly overwhelming political ascendancy in historical perspective. Written with exemplary clarity and concision, it offers a mass of new questions and stimulating hypotheses for further research and debate. But admiration for its boldness of vision needs to be accompanied by critical probing of its arguments. For all its illustrative ingenuity, the two central claims of the bookfor an ongoing decline of American power, and a dynamic and cohesive East Asian challenge to itremain in the end unproven. For Arrighi and Silver omit two crucial dimensions of any answer to the question of the durability of American hegemony. The first can be put very simply. Like other World-System theorists, Arrighi and Silver correctly stress the general historical tendency towards concentration and centralization of power in ever-larger geographical units. Thus they emphasize the sheer scale of the economic and military resources which the USA (and

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the USSR) could mobilize to outclass the fragmented nation-states of Europe in the middle of the twentieth century. It follows, however, that any replacement of a unilateral American dominance in the twenty-first century would require some junction between the two main centres from which a competitive challenge to the United States could be mounted: Europe (perhaps including Russia) and East Asia (including China and Japan). Such a development, however remote it may look today, cannot be ruled out. Arrighi and Silver, however, do not even consider itdwelling instead on a presumptive rise of East Asia alone. A touch of Orientalist romanticism is detectable here. For whatever else may be said about East Asia, the region plainly lacks anything approaching the degree of cohesion or unity that the EU, for all its own weaknesses, possesses. For thirty years, relations between Japan and China have been consistently tenser than between either country and the United States, and they are deteriorating rapidly today, as trade conflicts mount. Korean relations with Japan, its ex-colonial master, could scarcely be colder. Moreover, as Kuan-Hsing Chen has recently noted in these pages, it is by no means the case that American power in the region is exclusively coercivecultural identification with the US may well run deeper in Beijing and Shanghai than in Paris or Berlin these days. To paraphrase Bismarck, East Asia is a geographical expression, not a political agency. The United States has many resources to keep it that way. So far American statecraft has maintained without undue effort the hub-and-spokes pattern it favours with local regimes. There are, it is true, serious efforts by ASEAN-plus-3 (China, Japan and South Korea) to establish a regional financial support system by Central Banks to prevent a repeat of US Treasury operations on the lines of the South Korean incursion in 1997. There are even attempts by the same grouping to work towards a regional preferential trade zone. But these efforts remain vulnerable to ChineseJapanese rivalry over leadership of the regional political economy as well as to US geopolitical manoeuvres within the region aimed at preventing the emergence of such a bloc. The second difficulty in the overall construction of Chaos and Governance goes deeper. How is the transnational clash of social forces in the early twentyfirst century supposed to dovetail with the geopolitics and geoeconomics of global hegemony? Or does it cut across them? What is the meaning of the striking coincidence that East Asia should be singled out as the site both of the coming hegemonic challenge to the United States and the coming social challenge to the hegemony of capital, as if there were no tension between these prospects? Behind the double prognosis, one senses a single hopethat American paramountcy will be brought down, and with it the order of capital itself. But these two are very different prospects, and it is as if Arrighi and Silver are betting on horses going in opposite directionspinning their hopes on the East Asian bourgeoisie to oust its American counterpart, and on the East Asian proletariat to overthrow the East Asian and American bourgeoisies alike. Is there

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a distant echo of Comintern two-stage strategies, circa 1925, here? Chaos and Governance allocates no distinct chronological order to its two aspirations, however. Political wish and historical reality are in any case not to be identified. In China, the death of the peasantrystill the majority of the populationis not only far from consummated. Social rebellion is much more visible in the countryside than in the towns, where for all its own exploitation, urban labour enjoys a series of privileges that set it apart from the rural masses, and have so far rendered it quiescent. It is legitimate to hope that will change, though the submissive example of Japanese labour should be a caution. But the real paradox of what could be called the reinsurance policy of the political optimism offered by Chaos and Governance would come home if it did. For why should a powerful challenge from its labour-force not prompt the propertied classes of East Asia to follow the earlier pattern of their European counterparts and cleave to an American state which, whatever else it has stood for, has excelled as the global champion of the untrammelled property rights of capital?

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