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Debate: Globalization as Epochal Shift The Fin de Siecle Debate: Globalization
as Epochal ShiftBy Roger Burbach & William Robinson
Science & Society
Spring 1999Globalization, it seems, has become the "fin de siecle" debate. Ardent controversies over the extent and significance of globalization are taking place in a number of publications and forums.(l) Not even established economists and defenders of the current neoliberal world order seem able to agree on how to assess the current era, as demonstrated in the pages of Business Week and the Economist.(2) Our objective in this essay is not to summarize the debate, but to make the case for globalization as an epochal shift. It requires a change in our "weltanschauung," the very way we view the world and conceive of popular struggles against the class forces that dominate globalization.
This epochal shift is the fourth one in the world history of capitalism. First came the age of discovery and conquest. Capitalism, emerging from its feudal cocoon in Europe, began its outward expansion, symbolized by Columbus' arrival in the Americas. This was the epoch of mercantilism and primitive accumulation, what Marx referred to as the "rosy dawn of the era of capitalist production." The second shift is the birth of industrial capitalism, the rise of the bourgeoisie, and the forging of the nation state. This epoch spanned what Eric Hobsbawm in his seminal historical works (1962, 1977, 1987, 1994) calls the ages of revolution, capital, and empire. It is keynoted by the French revolution and the 18th-century manufacturing revolution in England. The third epoch starts around the turn of the 20th century with the rise of corporate ("monopoly") capitalism and the financial industrial corporation, intensified wars among the imperial powers, and the emergence of a socialist alternative. This epochal change is exemplified by World War I and the Bolshevik revolution, the "Age of Extremes," as Hobsbawm titles his history of the 20th century.
Today we are in the early phases of the fourth epoch of capitalism. Referred to as globalization, it is highlighted technologically by the microchip and the computer - the "information age" - and politically by the collapse of 20th-century attempts at socialism. The latter was most graphically signaled by the fall of the Berlin Wall and the disintegration of the Soviet Union shortly thereafter, and also by a lesser discussed event, the defeat of the Sandinistas in Nicaragua in the 1990 elections, which symbolized the failure of a whole generation of Third World national liberation movements to offer an alternative to world capitalism.
Periodization is somewhat arbitrary. But we can say that the first epoch ran from 1492 to 1789, the second from 1789 to 1900, and the third from 1900 to the early 1970s. Perhaps the first event that signaled the beginning of the transition to the globalization epoch is when Richard Nixon took the United States off the gold standard in 1971. Many have noted that this marked the end of the Bretton Woods currency agreements and the waning of U. S. supremacy. A single headquarters for world capitalism had become untenable as the process of transnational market, financial, and productive integration heightened.
Behind the economic turbulence that ensued in the 1970s was the transition from the nation-state phase of world capitalism with its distinct institutional, organizational, political and regulatory structures to a new, still emerging, transnational phase. Other markers include the formation of the Trilateral Commission in the mid-1970s, which foreshadowed the rise to hegemony of a transnational fraction of the bourgeoisie, and a lesser known event, the Cancun Summit in Mexico in 1982, when the core capitalist states, led by the United States, launched the era of global neoliberalism and began imposing structural adjustment programs on the third world as part of this process. There is a major current of dissenting voices on the left staking out the position that globalization is not a new epoch. These include some world systems theorists who believe in the continued primacy of the nation-state. But the most vocal opponents over the past few years have been some Marxists who insist that globalization is an illusion fostered by the ideologues and pundits of the established order. The basic dynamics of capitalism have not changed in any way, these Marxists argue. Capitalism is still capitalism.(3)
If we break capitalism down into its most fundamental characteristics - the exploitation of labor by capital, commodity production, and the continued expansion of capitalism - then, yes, nothing has changed. However, to take this view one could argue that nothing has changed since Columbus, or perhaps since the industrial revolution, if one defines the earlier period as mercantile capitalism. As A. Sivanandan has argued in an exchange with Wood, "doubtless capitalism is capitalism is capitalism, but the failure to distinguish between its different avatars freezes us in modes and forms of struggle which are effete and ineffectual and blinds us to the revolutionary possibilities opened up by information technology" (Sivanandan and Wood, 1997, 21).
To be sure, leftist critiques of the concept of globalization are railing out against some very disturbing developments. The process of capitalist globalization is used increasingly to justify the continued dominance of capital. On the one hand, most of the establishment politicians of the world, from Bill Clinton and Tony Blair to Ernesto Zedillo of Mexico and Atal Bajpayee Bijari of India, demand concessions from working classes in the name of "national competitiveness" in the global economy. Transnational capital in this way attempts to reify global capitalism as a reality external to its own agency and interests.
On the other hand, left-liberal critics of globalization, such as some members of the International Forum on Globalization (IFG), have put forward a critique that laments the passing of a mythical "golden age" of capitalism (see, e.g., Sandler, 1995). This critique of globalization, well articulated by David Korten in his book When Corporations Rule the World (1995), is not anti-capitalist. It calls for a return to measures and regulations of Keynesian national capitalism that brought prosperity to a portion of the working classes and middle classes in the core countries, such as the restoration of protectionism, the old corporate-labor aristocracy alliance, and so forth. In its extreme form, this critique can lead to disturbing alliances with far-- right forces, such as Pat Buchanan, who articulate the interests of bourgeois and petty-bourgeois fractions who are nationally based and adversely affected by transnational capital.
Another approach to globalization is put forward by some on the left, or former revolutionary left, who feel overwhelmed by the seeming power of global capital. Unable or unwilling to adjust their revolutionary outlook and strategy to fundamentally altered circumstances, they conclude that no alternative to global capitalism is currently possible: the TINA syndrome, or "There Is No Alternative." The only "realistic" strategy is to try to negotiate the best deal possible with capitalists and to achieve the best "competitive" reinsertion of each country into the global economy. This is the position put forth in its most coherent form by Jorge Castaneda in Utopia Unarmed. He believes that the left has to accept "the logic of the market" and limit itself to choosing what type of capitalist system it buys into - neoliberalism, or preferably the "social market" of Western Europe or Japan, which he argues can be adapted to Latin American necessities (Castaneda, 1993, 432).
In terms of practical politics, the TINA stance has been adopted by current leftist supporters of the British Labor Party. To a greater or lesser extent, this critique also prevails among most social democratic and communist parties in the core and among many of the formerly revolutionary parties in the Third World. Its adherents include the Socialists and Communists who are leading France and Italy, respectively, into the European Union by providing the type of legitimacy for capitalist restructuring that the right could never accomplish. It also prevails among important groups within the African National Congress and the South African Communist Party, the Workers Party of Brazil, the Democratic Revolutionary Party of Mexico, and the Sandinistas in Nicaragua, to cite some other examples.
But the Marxist critics of globalization do not stop at rejecting these disturbing positions on the current epoch and the political strategies they bring forth. They dismiss the very notion that something is fundamentally new in the world. And they conflate a justified and vital opposition to the process of capitalist globalization with an unwarranted and increasingly dogmatic opposition to the concept of globalization, as if disarming ourselves intellectually is somehow to our advantage in the fight against capital. The problem with their argument that "capitalism is still capitalism" is less its tautology than its ahistoricism. Its logic writes off as insignificant or illusory earlier epochal transitions in the development of world capitalism, such as from mercantile to competitive manufacturing, and then to "monopoly" corporate capitalism. In this way it precludes from our examination the changing historic conditions under which popular classes may mount resistance and construct alternatives. Here we will argue that the current epochal shift, like the previous ones, profoundly affects the roles of governments and the nation-state, the way in which class struggle is conducted and manifests itself, and the very contours of societies and the world views of the populations exposed to capitalism.
To demonstrate some of these changes, let us compare and contrast the two most recent epochal shifts: that which occurred around the turn of the 20th century and that which is unfolding today. First, the most critical difference is the organization of capital. Around the turn of the present century it is large-scale capital that takes hold, which some call the system of monopoly capital, and others, like Rudolf Hilferding (1981), have referred to as the triumph of financial-- industrial capital. These large enterprises were concentrated in particular core nations, mainly those of Western Europe and the United States. In virtually all cases these corporations advanced their interests through their nation-states. Perhaps the most well-known example of these developments are the large trusts, particularly in Germany, in which the national government coordinated industrial policy so the corporations in a given area of production could better conquer international markets in the interests of the country they identified with.
The beginning of the end of this system occurred after World War II when the seeds of globalization were sown. The period from the war on is widely recognized as the era of U. S. supremacy. But what is less discussed is that the global capitalist umbrella established under U. S. supremacy enabled the different national capitals to begin to interpenetrate. A critical development in this process was the formation of the European Common Market. By merging markets and capital, in a relatively short span of perhaps a decade and a half, the scourge of the innumerable wars fought as a consequence of the competition between national capitals that went back centuries was brought to an end. Today due to the integration of capital and markets, it is inconceivable that there would be a war among the Western European nations. World conflict is no longer based on inter-imperial rivalry but increasingly between global capital and descendant national fractions of dominant groups and ascendant transnational fractions.
While many detractors of globalization focus on global trade, and therefore the market, in developing their argument, we believe that the process of globalization is driven by the transnationalization of production and productive systems and the transnationalization of capital ownership, which in turn leads to the rise of a transnationalized bourgeoisie that sits at the apex of the global order (Robinson, 1996a, 1996b) . The analyses of world trade are very important, but we need to focus on the production relations that underpin market relations, and, in turn, the social forces that drive production relations, so as to identify what is qualitatively new in the current epoch.
The Facts on Transnationalization of the Economy
A critical component in the consolidation of transnational capital is the dramatic increase in the flow of foreign direct investment (FDI) among the nations of the world in the 1980s and 1990s. From 1983 to 1987 the average annual FDI outflows were $76.8 billion, a growth rate of 35% per year (UNCTAD, 1996). In the early 1990s, a slump occurred due to the global economic downturn affecting most of the core countries; this explains why the annual growth rate was only 4% from 1988 to 1992. By 1993, however, the dramatic increase in FDI flows had resumed, led by the banner year of 1995 when the increase was 38%. By contrast, other important international economic indicators showed much more modest increases; for example international trade in 1996 increased by 6.6% while the world's gross domestic product grew by 4.5% (UNCTAD, 1997, 3).
By 1996, the global FDI stock was valued at $3.2 trillion, with its rate of growth over the previous decade more than double that of gross fixed capital formation throughout the world. Moreover, FDI by no means represents the sum total of international corporate holdings; in 1994 it is estimated that the worldwide assets of corporate foreign affiliates was $8.4 trillion. And as of 1995, some 280,000 affiliates of transnational corporations produced goods and services estimated at $7 trillion (UNCTAD, 1996, xv-xvi), which represents some 25 percent of total world output (calculated on the basis of United Nations, 1997, which reports that world output in 1993 was $24 trillion). Small wonder that the United Nations Conference on Trade and Development (UNCTAD) declared in the introduction to its 1997 World Investment Report that we are witnessing the "internationalization of national production systems" (UNCTAD, 1997, xvi).
One could argue, however, that this internationalization of production represents only the expansion of national capital; U. S. corporations and investors for example could simply be expanding their control of the global economy. But here again the facts and figures belie this interpretation. In 1996, U. S. FDI was $85.4 billion dollars, slightly less than one quarter of the total. Even more important to note is that FDI flows into the United States by foreign corporations were $84.6 billion in 1996 (ibid., 44). This transnationalization of U. S.-based industries is part of a pattern that began in the early 1980s when foreign corporations, particularly from Western Europe and Japan, began to make new investments and buy up established U. S. companies.
Beyond the issue of the transnationalization of U.S.-based companies, it is important to note that of the $318 billion in total global FDI outflows in 1995, $229 billion went into mergers and acquisitions. This means that less than one third of FDI was in new or start-up investments: the remainder was used to buy up other companies across national borders. This data, rather than belying the notion of globalization, indicates, in fact, that the assets of many national enterprises, and those social forces bound up with these enterprises, were "internationalized." In the case of mergers, it meant the integration of capitals from at least two distinct countries. If an acquisition, it meant that a given firm incorporated a foreign company with its employees, managers, and "national" interests. In 1995, the largest acquisition was the purchase of the U. S.-based Marion Merrel Dow pharmaceutical firm by Hoeschst of Germany for $7.1 billion, while the second largest was the buyout of Hollywood's MCA Studio (which was owned by Sony of Japan) for $5.7 billion by Seagrams of Canada (UNCTAD, 1996, 12).
As in the previous epoch of national capital the bulk of FDI outflows, about 85%, continues to originate from the core, or developed, countries of the world, while about 90% of that comes from what is referred to as the triad, or the European Union,Japan and the United States ( ibid., 41) . Those who argue that globalization is overstated note that the vast majority of these capital outflows are destined for other core countries. However, it is crucial to place the direction of capital outflows in the context of the restructuring of capital globally and of the historic tendencies underway.
The trend towards concentration became particularly pronounced in the 1970s and early 1980s. Between 1986 and 1990, a full 83% of FDI flows were intra-core. This reflected the drive of transnational corporations to implant themselves firmly in the largest markets of the world, thereby deepening the process of internationalization of production that began earlier with the European Common Market. In this regard, the particular spatial pattern of capital flows and internationalization was a natural outcome of a key aspect of globalization: the transition from the internationalization to the transnationalization of capital (on this point, see Robinson, 1996a, 1996b). Transnational capital emerged out of the process of core capitals, as reflected in the trend toward core country concentration at the particular moment in which transnationalization took off (the 1980s). In fact, in a development largely ignored by opponents of the notion of globalization,(4) by the early 1990s this trend began to reverse itself, with the Third World, or periphery, once again absorbing an increasing share of FDI.
While it is still too early to predict any sustained reversal of core country concentration of FDI, especially in light of the Asian economic crisis of 1997, the issue of global capital flows -- particularly in FDI - needs to be analyzed in light of the globalization of production. The global mobility of capital has allowed for the integration around the world of vast chains of production and distribution, the instantaneous movement of values, and the unprecedented concentration and centralization of worldwide economic management, control, and decision-making power in the hands of transnational capital. At the same time the global dispersal of the circuits of production and distribution involves the relocation of diverse phases in the process of global capital accumulation to different sites around the world. This is done in accordance with a host of cost and political conditions congenial to accumulation, including pliant and/or cheap labor, and lax regulation and taxation, factors which for historical reasons are disproportionately concentrated in the Third World (for detailed discussion, see Robinson, 1996a).
Thus, the transition from the internationalization to the transnationalization of capital, which involved in the first instance the horizontal integration of the Triad, is being complemented by NorthSouth vertical integration. The ILO notes that FDI has increased sharply, especially to developing countries. The average annual flows have increased more than three-fold since the early 1980s for the world as a whole, while for developing countries it had increased fivefold by 1993. These increased flows of direct investment have been accompanied by the growth of globally-integrated production systems characterized by the rapid expansion of intra-firm trade in intermediate products and of subcontracting, licensing and franchising arrangements, including new forms of outsourcing of work across national frontiers. (ILO, 1996-97, 2.)
The 40% of FDI flows that went to non-core countries in 1996 constitutes a larger portion than the economic output of these countries as a percentage of global economic production. According to UNCTAD, most of this investment went to Asia and Latin America, which received $81 billion and $39 billion, respectively. China led with $40 billion, followed by Brazil and Singapore with around $10 billion each. The ranks of the top ten were rounded out by Indonesia, Mexico, Malaysia, Argentina, Peru, Chile and Colombia, in that order (UNCTAD, 1997, xxi).
It is surprising to note that the developing countries themselves invested $51 billion abroad, thereby reflecting the fact that corporations based in the Third World are increasingly an integral and active part of the globalization process. The Third World bourgeoisies of countries such as Singapore, South Korea, Taiwan, Brazil, Chile, and Mexico are becoming significant players on the international scene. What is happening here is a process of transnational class formation, including the emergence of a transnational bourgeoisie out of national bourgeoisies as national circuits of accumulation become integrated at the global level. In 1996, for the first time, two Third World companies, Daewoo Corporation of South Korea and Petroleos de Venezuela,joined the ranks of the top 100 transnational corporations. By the mid-1990s the internationalization of production by Third World-based corporations had become particularly pronounced. The top 50 transnational corporations of the Third World augmented their foreign assets by 280% between 1993 and 1995, while those of the top 100 corporations based in the core countries increased by only 30% (ibid., xvii).
Another important aspect of the internationalization of Third World economies is the growing importance of foreign portfolio equity investments (FPEI), which are not counted as FDI flows. These are international investments mainly by stock brokerage firms and mutual funds in foreign stock markets. While FDI invariably involves direct management control, foreign portfolio equity investors are generally interested only in securing an ample return on their investments and exercise virtually no direct role in the companies in which they invest. In a certain sense FPEI flows represent a "transnationalization" of capital that is even more pronounced than FDI flows, in that they are carried out by an array of investors with origins in a large number of countries.
In the 1990s, as part of the drive to implement neoliberal, freemarket policies, many Third World countries have facilitated FPEI inflows by establishing or liberalizing their stock market exchanges. Referred to as "emerging markets," much of the economic volatility of the developing economies in this decade is linked to the rise and fall of foreign equity investments. In 1993 FPEI flows to the developing world reached a high of $45 billion, about two-thirds of the level of direct foreign investments, or FDI. However, the Mexican economic crisis that began in late 1994 caused FPEI flows to plummet by 27% in that year and 2% in 1995 (UNCTAD, 1996, xxxi) .
In 1996, FPEI flows recovered, but the collapse of Thailand's baht currency in 1997 and the economic crisis that spread to other Asian economies caused another shakedown in FPEI flows. It should be recalled that when transnational finance capital pulled out en masse from Mexico following the peso crisis, it did not "go home" to the United States or to any other single country, but dispersed throughout North American, European, and Asian markets in search of new opportunities. Similarly, the Asian economic crisis, rather than leading to a retrenchment to "national" protectionist policies, compelled the Asian countries, including Japan, to open up their economies even more.
The growth of direct and equity investment flows is only one part, albeit a central part, of what is at the heart of the globalization process: the dramatic and growing integration of world capital markets through the commodification of financial instruments. One study finds that the total market value of securities traded in world capital markets tripled between 1980 and 1992, and declares that this was "fostered by the rapid expansion in the world economy in the 1980s" (Akdogan,1995, 9). The same study revealed that international gross equity flows doubled between 1986 and 1989, and that in 1991 they were equal to more than one quarter of the capital in the world capital markets. Aside from equity investments, other components of world capital markets are bond and debt financing as well as derivatives, stock options, warrants and convertibles.
Finally, the transnationalization of capital is reflected in ever-- greater trade integration. World trade has grown much faster than output, and this growth, after slowing briefly in the early 1990s, a consequence of the worldwide downturn, picked up again in mid-decade. The decentralization and concentration of globalized production also drives the growth of intra-firm trade in intermediate products and in services. It is difficult to measure the extent of intra-firm trade due to the way transnational corporations are organized, but at the low end of estimates, the World Bank reported that by the early 1980s intrafirm investment within the largest 350 transnational corporations contributed about 40% of global trade (World Bank, 1992, 33).(5)
In sum, over the past decade trade has increased twice as fast as output, foreign direct investment three times as fast, and crossborder trade in shares ten times as fast (Economist, 1997, 79-80). The importance of international transactions in world markets is reflected by the astounding level of global trading in foreign currencies - over a $1 trillion a day by 1995 (New York Times, 1995) . Transnational finance capital has become the hegemonic fraction of capital on a world scale and plays a pivotal role in the globalization process.
A major impetus behind the European Union's drive for a single currency, in this regard, is the need to facilitate the rising tide of activity in world capital markets without having to resort to the continual buying and selling of national currencies. What this indicates, as we discuss in more detail below, is not so much that European states are "helpless" in the face of global capital, but rather that they are acting on behalf of transnational finance capital.
Similarly, the plummeting of Thailand's currency and the flight of capital from neighboring economies in Southeast Asia illustrates just how important currency transactions and the internationalization of capital are in the shaping of national economies, more pointedly, in integrating "national" economies into the emergent global economy. Several months after the economic crisis erupted, Prime Minister Mahathir of Malaysia, who had wedded his country's economic future to international markets and capital, began to openly denounce the IMF and foreign currency speculators for undermining Malaysia's economy. As a Business Week editorial pointed out, "dictator-Prime Minister Mahathir. . . having become the incarnation of Malaysia's miracle could not accept that world capital markets could with so much ease sink the currency." His attacks did no good, of course; in fact, every time he spoke out publicly even more capital fled the country. Business Week reasoned that Mahathir had no choice but to follow the logic of the system he had bought into: "A currency crisis is a wake-up call to bring bad finance, budgets, and unreal projects under control. Mahathir and his cohorts better stop blaming the messenger and get the message" (Dornbusch, 1997, 18).
Moreover, the Asian crisis is leading to a restructuring of many of the region's major corporations and economies that facilitates and advances the consolidation of transnational capital. The "chaebol," the powerful financial-industrial groups of South Korea, have been compelled to sell off national assets to transnational corporations and at the same time they have forged partnerships with corporations from other areas of the world. In mid-1998, South Korea's top 30 chaebol were discussing 200 deals with foreign investors, according to Kim Woo Choong, the head of the Daewoo group. Daewoo itself sold a 40% stake in its Korean Telecom monopoly to foreign investors and offered 50% ownership of factories in Eastern Europe and the former Soviet Union to General Motors (Business Week, 1998). These developments are indicative of the externalization of Asian capital and its accelerated integration into fully transnationalized circuits.
A Cautionary Note: Nation-State Bias of Economic Data
Much of the literature that points to significant international flows prior to the First World War in order to argue that there is nothing new about the current epoch misses entirely the qualitative distinctiveness of international flows today. In the earlier period of trade in national products, economic and political crises meant that a withdrawal to more autarchic national economies was possible and also logical. Moreover, as the Economist notes, the current period is very different from pre-1914 on at least three critical counts: 1 ) large parts of the world did not participate in the pre-1914 world economy, whereas the entire world is now integrated; 2) globalization is now driven by plunging communications costs and new communications and related technologies that facilitate a closer international integration than in the past and "allow firms to locate different parts of the production process in different countries" (hence, globalized production); 3) although net flows of global capital may be smaller than in the past, gross international financial flows are very much bigger (Economist, 1997, 80).
However, there is an equally important point to be made that renders such longitudinal comparisons inadequate: the globalization process itself generates a growing disjuncture between socioeconomic phenomena and the way in which we collect and interpret data on them. (For an important discussion on this point, and for the issues raised in this sub-section, see Sklair,1995, esp. chapter 1, and Robinson, 1998b.)
For instance, some have argued that because only 15% (as of 1990) of the world's industrial output comes from foreign branch plants of multinationals, this means that national industrial production is still overwhelmingly predominant (see Tabb, 1997; Du Boff, et al., 1997, 32), This, however, covers up the fact that much of this "national" production is done by transnationals that have global interests and strategies; these transnational holdings directly shape the way corporations carry on production and structure social relations in the principal national economy they are based in. For instance, Toyota located in a Japanese production zone or Ford located in a U. S. production zone might dedicate a portion of their output for the national market while another, smaller portion is exported. But Toyota and Ford are themselves transnational corporations with integrated international production systems. Therefore what appears as "U. S." production for the U. S. market and "Japanese" production for the "Japanese" market is in essence transnational production for specific geographic regions and therefore cannot be conceived as measuring national versus foreign production.
Moreover, the most dynamic corporations are precisely the ones with global investments. They are the wave of the future and sit at the pinnacle of the corporate world. A simple focus on industrial manufacturing and subsidiaries also ignores the growing role of finance capital and world capital markets discussed above; these are the financial motor behind the globalization process. Among the largest "U. S." corporations, foreign revenues and foreign assets are often 50% or more of total revenue and total assets. Already in 1991, McDonald's earned more than 45% of its revenue overseas; Boeing, 61%; Colgate-Palmolive, 63%; IBM, 59%; Coca Cola, 64%; Exxon, 78%; Hewlett Packard, 49%; Ford, 39%; Citicorp, 49%; NCR, 55%; Dow Chemical, 51%; Procter and Gamble, 45%; 3M, 49%; and so on. Many of these same corporations employ half or more of their workforce in foreign countries (see Mattera, 1992).
Similarly, outsourcing, subcontracting, and intra-firm trade -- practices that are expanding rapidly under globalization -- conceal the extent of transnationalization by disaggregating and pigeon-holing into "national" data sets production chains that are in fact globally integrated.
Just as the particular distribution of economic output in the United States among the 50 states, and the ratio of goods marketed within and between states, tells us very little about the nature of the nation-state as our object of inquiry, so also aggregate world economic data does not have any inherent meaning in and of itself for global structures. In comparing nation-states with transnational structures, we need to focus on the particular fit between sets of institutions, classes and groups, and social production. The problem here is the use of data that is itself collected and registered in nation-state terms to measure a phenomenon that is transnational. In methodological terms, there is a problem of the relationship between theory and the thing we are measuring. Absent a paradigmatic shift away from nation-state centrism in the very way we collect and organize data, it is best to draw qualified conclusions from a broad set of indicators.
The Globalization of Japanese-U. S. Capital Relations
The process of globalization, including the convergence of economic and political phenomena, is further elucidated in a look at the two countries that are allegedly at loggerheads in terms of protecting national capital and national markets: Japan and the United States. Japan, as is widely recognized, has had the most protected markets of the core capitalist powers. Its large corporations have been virtually joined at the hip with the national government, and with one party in particular, the Liberal Party, overseeing that process.
Changes in what was originally the principal bone of contention between the United States and Japan, the auto industry, reflect the transition to globalization occurring even in Japan. Japanese auto firms in the late 1980s began to collaborate with U. S. auto firms, as exemplified by the joint ventures between Chrysler Motors and Mitsubishi and between General Motors and Suzuki, and by Ford Motors' purchase of a controlling interest in Mazda. In tandem,Japanese auto firms have internationalized their auto production, thereby ending their paternal alliance with Japanese workers in which manufacturing jobs were kept at home. Here the building of feeder assembly lines in parts of Asia and the construction of a Honda plant in the United States illustrates how Japanese firms have transnationalized their production.
The auto industry by the 1990s had become, in the words of one researcher, a "transnational spider's web . . . stretch [ing] across the globe" (Dicken, 1992, 291), in which U. S., European, and Japanese auto firms had become so interpenetrated that national distinctions had lost meaning. A 1993 UNCTAD study reported that transnational auto companies adopt a strategy of attempting to accentuate the insider-outsider distinction in the United States among the government and the public as a public relations strategy aimed at maximizing market shares by influencing a host country public's sense of "who is us" (Eden and Molot, 1993, 33). In other words, a transnational auto company in the United States will engage in "Japanese bashing" and generate public perceptions of unfair Japanese practices as tactics of manipulation in its marketing strategy.
The financial and productive internationalization of the Japanese auto industry explains why Japanese auto imports to the United States are no longer a burning issue in trade talks between the two countries, even though Japanese autos continue to be a major component in the ongoing trade deficit of the United States. Since the automobile complex has been at the core of accumulation activities of world capitalism in the 20th century, these recent changes are highly instructive. In the late 1980s, at the height of "Japanese bashing" among U. S. politicians and trade unions over the auto issue, the ratio of U. S. exports of cars to Europe relative to imports was 1: 9, whereas for Japan it was about 1: 6 (Dicken, 272, calculated on the basis of figure 9.3). In other words, the U. S. maintained a more unfavorable trade relation in cars with Europe than with Japan.
Applying a framework of analysis centered on the nation-state, there should have been even greater U. S.-European than U. S.Japanese trade tensions. But this outdated analytical framework obscures the transnational essence of the phenomenon. The $130 billion merger of Chrysler and Daimler Benz in mid-1998 was merely the most dramatic example of the trans-Atlantic interpenetration of capital that took place from the 1960s onward, which included the interpenetration of U. S. and European auto firms and also the establishment on both sides of the Atlantic of operations by these transnationalized firms. A similar process between U. S. and Japanese firms, however, did not mature until the 1980s and early 1990s, and once it did, trade tensions lessened in the auto industry.
In the mid-1990s, the United States and Europe have pressured Japan to open up its communications system, its financial markets and institutions, and even its shipping and commercial air transport systems. The Asian crisis has accelerated this process, particularly in the financial sphere. The concessions made by Japanese port and shipping interests in October 1997, when the United States threatened to block Japanese shipping in U. S. ports, is reflective of the brinkmanship that is played on both sides, as the Japanese are driven to open up their economy. It also shows how states, controlled by transnational fractions, push forward the globalization process, modifying economic and social structures in a manner conducive to the deepening of the globalization process.
When these changes are consolidated in shipping as well as other areas of the Japanese economy, there will be a comprehensive interlinkage of the economies of all the major metropoles of the world. The process of globalization is open-ended and unfinished. For the first time in history, however, we can speak of the transnationalization of capital, a world in which markets are truly global and integrated. Capital ownership of the leading enterprises is also internationalized, with shareholders or financial institutions from various parts of the world being able to move their stockholdings in and out of any number of corporations and countries.
Globalization and "Third Worldization"
The change in the organization of capital in the globalization epoch is related to other profound changes. Since transnational capital is free to roam the world, tapping the cheapest labor markets, the most favorable factor costs, regulatory environments, and political conditions, its structural power over labor worldwide has been greatly enhanced. Wages have thus been undermined and the standard of living of the working classes in the core countries has declined precipitously. Worldwide convergence, through the global restructuring of capitalism, means that the geographic breakdown of the world into north-south, core-periphery, or First and Third worlds, while still significant, is diminishing in importance (for detailed discussion on this point, see Robinson, 1998b).
The concepts of core and periphery, or North and South, are increasingly not geographic per se, as much as they are social class in character, as the global economy creates new variation, specialization, and asymmetries that cut across nations and regions (Robinson,1996b, 1998a). Of course in the late 20th century there are still very poor countries and very rich countries. But the trend is one in which there is ever growing poverty and marginalization in the First World, while the Third World has a large number of nouveau riche who are able to buy and sell in the global economy, creating vast fortunes that match or rival many in the First World. And in global capitalism's newest playground, the former Second World, it is obvious to all that the end of socialism has brought dramatic increases in poverty along with the creation of a new rich and ostentatious upper class.
The epochal shift to globalization suggests that the labor aristocracy that imperialism nurtured in the core countries, as argued by Lenin and other Marxists, might well have been less a feature immanent to world capitalism than a historically transitory phenomenon. The three largest countries in North America that have a free trade zone, or NAFTA, illustrate the trend. The two richest countries -- the United States and Canada - have experienced a growing polarization and a decline in the influence of the working classes and trade unions that even adversely affects sectors of their societies referred to as "middle class." Both societies have been "third worldized" to some extent because of increasing marginalization, expanding Third World immigration, "downward leveling," and a capitalist strategy of competitiveness through a cheapening and casualization of the work force, all of which are related to the process of globalization.
As discussed earlier, parallel to the transatlantic and transpacific integration of capital among the Northern countries there has been an integration of Southern capitalists into the emergent system of transnational capital. This has meant a process of rearticulating national and North-South class relations. For instance, Mexico's rich have benefited enormously by pushing for an end to their country's protectionist policies and integrating themselves into the global economy. Today Mexico has 24 billionaires (Marichal, 1997, 29-31). One of them, Carlos Cabal Peniche, brought up the fresh fruit division of the Del Monte Corporation for more than $500 million. Another one, Carlos Slim Helu, made a move in mid-1997 into Silicon Valley in California by buying up 4% of Apple stock. This occurred just days before Apple announced its alliance with Microsoft, thereby running Apple's stock value up by more than 25%, and significantly increasing Slim's assets in the same manner that U. S. finance capitalists expand their fortunes by speculating on Mexico's stock exchange.
Some Mexican-based corporations are significant players in the transnational arena. Cementos Mexicanos, or CEMEX, has become the world's fourth largest cement producer by acquiring subsidiaries in the United States, Spain, Venezuela, and the Philippines. Vitro, Mexico's largest glass manufacturer, purchased the Anchor Glass Container Corporation, the second largest glass container producer in the United States. Even the Mexican media industry is getting into the act, as the Mexico City-based media giant Televisa bought Univision in the United States and set up a subsidiary in Chile (Calderon, et al., 1996, 273-274).
Meanwhile, the Mexican working class, the poor and the indigenous sectors continue to suffer from the "readjustment" imposed on Mexico by global capital in the wake of the currency collapse of late 1994, which resulted in a decline in real wages of over 50%. There has been talk recently in financial circles of an economic recovery in Mexico, but this recovery is highly skewed towards the larger export-- oriented businesses and selected sectors of the job market. Over 28,000 small Mexican businesses have gone bankrupt since 1994, primarily due to the drop in domestic demand, while about two million Mexican jobs have simply disappeared. Nearly three quarters of all Mexico's urban families cannot afford to buy a basic basket of goods. And the situation is even worse in the rural areas of the country (see Marichal, 1997).
The State and the Nation-State in the Epoch of Globalization (6)
Each epoch has seen a successive expansion of world capitalism over the preceding period and the establishment of sets of institutions that made this expansion possible and laid the foundations for organized long-term cycles of capitalist development. The determinant feature of the current epoch is the supersession of the nationstate as the organizing principle of capitalism, and with it, of the interstate system as the framework of capitalist development.
Relatedly, capitalism is undergoing a dramatic new expansion that is more intensive than extensive. The final stage of capitalism's extensive enlargement began with the wave of colonization of the late l9th and early 20th centuries and concluded in the early 1990s with the reincorporation of the former Soviet-bloc and Third World revolutionary states. Capitalist production relations are replacing what remains of all precapitalist relations around the globe. The era of the primitive accumulation of capital is coming to an end. Because the epoch of globalization does not involve the earlier geographic expansions, such as new territorial conquest, its enlargement is not as visible, and is not as linked to the military might of imperial nation-states.
There is no longer anything external to the system of global capitalism. The internal social nexus is a global one. Organic social relations are always institutionalized, which makes them "fixed" and makes their reproduction possible. As the organic and internal linkages among peoples become truly global, the whole set of nationstate institutions is becoming superseded by transnational institutions.
Here there is a straw-man argument made by some opponents of the concept of globalization. For example, writing in New Left Review, Linda Weiss asserts that "globalists have . . . overstated the degree of state powerlessness" under globalization. In this construct, reified states are assumed to want to defend the interests of pluralist "citizens" of their countries. Worldwide shifts in the norm of state policy towards neoliberal fiscal conservatism are accounted for by Weiss by "domestic pressures" in the form of citizen opposition to taxation expressed through electoral shifts (as opposed to "the power of money markets") (Weiss, 1997). A "plurality of special interests" in turn accounts for the "politics of redistribution," and "autonomy" and "accountability" to "national priorities" explain the "politics of growth" in Weiss' paradigm.
In our view, the trend towards worldwide fiscal conservatism has little to do with recession and government inability to raise income, since capital could always be taxed. Instead, the trend has to do with the popular classes' inability to force states to redistribute wealth. And the source of the weakening of the popular classes worldwide is precisely the restructuring of capital on a global scale.
Arguments such as that advanced by Weiss are couched in a dualism of "states" and "markets." Instead, we should analyze in a dialectical manner the nature of states and the social forces that congeal in state structures and practices in particular historic periods. "Markets" are the site of material life while states spring from economic relations and represent the institutionalization of social relations of domination. State practices and the very structure of states are negotiated and renegotiated in specific historic periods through changes in the balance of social forces as capitalism develops and classes struggle. The current epoch is not the first time that capital has broken free of reciprocities with labor expressed in state practices. This happened in the late l9th century as the epoch of competitive capitalism was coming to an end and monopoly capital was emerging. Newly strengthened ruling classes can quickly constrict state autonomy,just as they make more intensive use of the state in times of major capitalist restructuring. In the late 20th century, capital has abandoned earlier reciprocities with labor precisely because the process of globalization has allowed to it break free of nation-state constraints.
Governments are undertaking restructuring and serve the needs of transnational capital not simply because they are "powerless" in the face of globalization. A particular historical constellation of social forces now exists that presents an organic social base for neoliberal restructuring. Here the case of Mexico is once again illuminating as to how this process occurs even in Third World countries. When the transnational fraction of the Mexican bourgeoisie undertakes neoliberal restructuring and integration into the global economy, it is not doing so merely because the Mexican government became "powerless" in the face of globalization, but because the interest of this class fraction lies in integration into global capitalism. It was the privatization program that allowed the Mexican billionaires mentioned above to emerge and to join the ranks of the transnational bourgeoisie. The peso crisis might have thrown millions of poor Mexicans into dire straits, but it saved the necks of the Mexican bourgeoisie just as surely as it saved those of its counterparts in the United States and elsewhere.
The neoliberal states of the late 20th century reflect a new historic correlation of social forces. It emerged following the breakup of the capitalist state structures that were shaped by particular class struggles in the period from the 1890s into the 1970s. Neoliberalism is being implemented around the world because a new bloc of social forces has been able to take control of national states in the 1980s and 1990s, epitomized by the Reagan and Thatcher regimes.(7) Nicholas Brady and Robert Rubin, the gurus of the Bush and Clinton economic cabinets, reflect these new interests and are perfectly able to exercise state power. There is no reason to assume that when these U. S. state managers (or those of any neoliberal state) adjust national economies to the global economy they are doing so because they are compelled to by some "external" (extra-national/global) force: the national-global duality is a mystification. To understand this process we need to comment on globalization and social classes.
Transnational Class Formation and a Transnational State Apparatus
The world economy in the nation-state phase of capitalism was characterized by national circuits of production linked to the larger system by international market and financial flows. But the global decentralization and fragmentation of the production process in the new global economy redefines the accumulation of capital in relation to the nation-state. What is occurring now is a process of transnational class formation. Social classes are no longer tied to national territories in the same way as they once were. World class structure in the nation-state phase of capitalism included: 1) core bourgeoisie and subordinate classes organized in their respective states in the First World; 2) a Second World that had attempted until the 1970s to opt out of world capitalism; 3) a Third World that was integrated into world capitalism with the end of colonialism in a form that made autonomous multi-class national projects feasible. Class formation proceeded through the nation-state. In the core countries in the early part of the 20th century, local and regional corporations became national corporations. As national markets were consolidated, national bourgeoisies displayed an organic identity of interests vis-a-vis their foreign rivals around national circuits of accumulation. And these core state bourgeoisies turned to their states for international market expansion and war making, to paraphrase Clausewitz and Lenin, as an extension of economic competition by other means.
The worldwide class struggle unfolded in the post-World War II period through the institutional and organizational logic of the nation-state system. It spawned: 1 ) in the First World, Keynesian welfare states and rising affluence; 2) in the Second World, efforts to construct an alternative system to world capitalism; 3) in the Third World, national liberation movements and multi-class developmentalist alliances symbolized in Bandung and the Non-Aligned Movement. In this period, national states enjoyed a varying but significant degree of autonomy to intervene in the phase of distribution of the process of global capital accumulation. Surpluses could be diverted through nation-state institutions.
However, at the same time, the earlier turbulent period in world capitalist development was giving way to the integrated international market. In the post-World War II period, the multinational corporation and internationalized production spawned international class alliances under U. S. supremacy that sustained the capitalist world order. Now under globalization, national bourgeoisies are metamorphosing into local (national) contingents of an emergent transnational bourgeoisie. To the extent that local productive apparatuses are integrated into transnationalization, the logic of local and global accumulation tend to converge and the earlier rivalries among capitalists no longer take the form of national rivalries.
Competition among capitals continues of course to be as intense as ever. But given the separation of accumulation from determined territories and the transnational integration of capitalists, competition is now among oligopolist clusters in a transnational environment. Simultaneously, there is the struggle between descendant national fractions of dominant groups and ascendant transnational fractions. These two fractions have been vying for control of local state apparatuses since the 1970s. In that decade and in the 1980s incipient transnationalized fractions set out to eclipse national fractions in the core capitalist countries of the North and to capture the "commanding heights" of state policy-making. From the 1980s into the 1990s, these fractions became ascendant in the South and began to vie for, and in many countries to capture, state apparatuses. From the state, hegemonic transnational fractions have been setting out to implement restructuring and integration of their economies into the global economy.
Global capitalism, therefore, is now represented in each nationstate by in-country representatives, who constitute transnationalized fractions of dominant groups. The international class alliances of national bourgeoisies in the post-World War II period have mutated into a transnationalized bourgeoisie in the globalization epoch; this transnational bourgeoisie has become in the 1990s the hegemonic class fraction globally. This denationalized bourgeoisie is class conscious, and conscious of its transnationality. At its apex is a managerial elite that controls the levers of global policy-making, and responds to transnational finance capital as the hegemonic fraction of capital on a world scale.
The political processes bound up with this dynamic can confuse observers attuned to a nation-state framework of analysis. For instance, this is what is behind the power struggle within Mexico's ruling party, the PRI. The "dinosaurs" in the power struggle represent the old bourgeoisie and state bureaucrats whose interests lay in Mexico's corporatist-import substitution model of national capitalism. The new "technocrats" are the transnational fraction of the Mexican bourgeoisie that captured the party, and the state, with the election in 1988 of Carlos Salinas de Gortari. Since then, this transnationalized fraction has implemented neoliberal structural adjustment, including the accelerated privatization of public spheres (what Marx termed the "alienation of the state") and commodification of non-market spheres. Similar fractions have taken power, and are thoroughly transforming, the vast majority of countries in the world, ranging from Sweden and New Zealand, to India, Brazil, Mexico, Chile, South Africa, and so on.
Nor should we dismiss the increased structural power transnational capital and its representatives can exercise over the direct power of states, simply to instill discipline or to undermine polices that may emanate from these states when they are captured by national fractions of local dominant groups or by subordinate groups. The assertion that transnational social forces impose their structural power over nations and the simultaneous assertion that states, captured by transnational fractions, are proactive agents of the globalization process, only appear as contradictory if one abandons dialectics for the Weberian dualist construct of states and markets and the national-global dualism.
For instance, Weiss argues that "catalytic states" are emerging, which act directly to promote the internationalization of capital (Weiss, 1997, 24). But this observation, which we agree with fully, hardly counters the concept of globalization, and indeed, in our view, contributes to it. States have always been central to class development, and in the age of globalization they are indispensable to the development of a transnational bourgeoisie. Transnational capital and the transnational bourgeoisie utilize national state apparatuses to create the conditions for global capital accumulation. Moreover, "strong" states will impose adjustment on "weak" states. But class relations underpin this phenomenon, and here it is necessary to move beyond state-centric analysis.(8)
The transnational bourgeoisie exercises its class power through two channels. One is a dense network of supranational institutions and relationships that increasingly bypass formal states, and that should be conceived of as an emergent transnational state that has not yet acquired any centralized institutional form. The other is the utilization of national governments as territorially bound juridical units (the inter-state system), which are transformed into transmission belts and filtering devices, but also into proactive instruments for advancing the agenda of global capitalism.
Globalization and Transnational Hegemony
The Globalization Epoch and its impact on the nation-state also calls for an end to the belief that the capitalist world continues to need a hegemonic nation-state to impose order. In the early history of capitalism the Genoese and Dutch capitalists exercised this role, then the British, and more recently the United States. As Giovanni Arrighi, among others, has reminded us, interregnums between the decline of one hegemonic power and the rise of another have been characterized by instability and wars, such as the period between the early 20th and mid-20th century when neither Britain nor the United States was able to predominate (see, inter alia, Arrighi, 1994).
Now all that is changing. Nation-states will continue to exist and many will be powerful entities, but instead of serving the "nation" they now increasingly respond to transnational economic interests, particularly those of footloose and entirely deterritorialized finance capitalists and transnational corporations. There will be no single hegemonic power, or even a regional bloc of nations, to replace the United States as that country's relative importance in the global economy declines. Rather we are witnessing the creation of a number of international economic and political institutions that are attempting to assume the functions that earlier corresponded to a nation-state hegemon.
Among the key global financial institutions imposing order for the capitalist world are the International Monetary Fund, the World Bank, and the World Trade Organization. As might be expected, the more explicitly political institutions are trailing behind, but certainly the annual meetings of the G8 play an important role in coordinating the policies of the key capitalist countries, along with the Organization of Economic Cooperation and Development (OECD) and the Conference on Security and Cooperation in Europe. The recent expansion of NATO into Eastern Europe should not be viewed as simply an attempt by the United States and the Western European nations to expand their interests at Russia's expense, but as an effort by most of the leading powers to have a more extensive multinational military alliance to impose order in Europe and other parts of the world. The United Nations also is a factor in efforts to create a "new world order," as exemplified by the UN-backed war against Iraq and the interventions in Somalia and Bosnia.
In sum, global capitalism is organized in a set of institutions. These institutions include: the transnational corporations that own and manage the world's resources and appropriate its wealth; the international financial agencies that impose the conditions necessary for global capital accumulation to take place; the states of the North, and their junior counterparts of the South, that create the global and the local political, administrative, and legal environment that allow the system to function; and the formal and informal transnational elite forums, such as the G8, the Trilateral Commission, and the World Economic Forum, which develop strategies for the maintenance and reproduction of the system and supervise its overall operation (Robinson, 1996b).
However, this is a period of extraordinary conflict and upheaval precisely because we are witnessing the decline of U. S. hegemony and the early stages of the creation of a transnational hegemony through supra-national structures that are still not capable of providing the economic regulation and political conditions for global capitalism to function smoothly. There will be many unforeseen twists and turns in this process. Nor is it necessarily inevitable that a new transnational elite will fully establish its economic and political hegemony. A major economic crisis or collapse could stymie, or even reverse, the process that is underway. Transnational capital currently enjoys an unprecedented structural power over popular classes worldwide, but this is an historic conjuncture and not a fixed feature of the system. Capitalism has always been a violent and unstable system wreaked by contradictions. The confidence exuded by the transnational bourgeoisie - with its "end of history" thesis and so on - conceals a fragility in the foundations of the system.
Therefore, the most critical question is what will be the role of the popular classes around the world in this process. While this question is too complex to be addressed fully in this essay, we can say that globalization has also led to an increasing popular awareness that transnational, rather than merely national, perspectives are necessary to deal with many issues of popular, grass-roots concern. The laboring classes in the North and the South have begun to realize that their struggles against the adverse effects of globalization must take on a transnational perspective and that they even need to engage in transnational organizing. Moreover, most of the new social movements, from the women's rights and gay movements to the environmental and indigenous movements, have a transnational perspective and can even be characterized in many ways as transnational movements or ideologies.(9) In the long term the question is whether these movements can begin to coalesce and build a transnational platform to challenge capital and to make the new global economy serve the needs of the many rather than the interests of the rich and powerful, as it currently does.
Endnotes
1. For some of this debate, see Weiss, 1997, and the slew of articles and exchanges that have appeared in recent months in left and progressive journals such as Monthly Review, Radical Philosophy, Race and Class, The Nation, Rethinking Marxism, and elsewhere. The debate on globalization within the left is even becoming acrimonious, as reflected in Du Boff, et al., 1997.
2. See Shepard, 1997. The Economist ran a series of articles in October and November 1997 on the debate as seen from capital's perspective.
3. Monthly Review has taken the lead in staking out this position. See, inter alia, Sweezy, 1997; Sivanandan and Wood, 1997.
4. For example, summarizing much of the literature in this regard, Weiss, 1997, discusses this concentration but does not examine recent variation and historic context.
5. Gilpin, 1987, estimated that 60 percent of U. S. imports were intra-firm in the early 1980s. Braun, 1991, reported that already by 1970, three-fourths of total U. S. exports and over one-half of all imports were transactions between the domestic and foreign subsidiaries of the same U. S. multinational firms.
6. For extended discussion on the themes in this sub-section, see Robinson, 1998b, 1996a, and 1996b.
7. Weiss notes that the German government has not followed the neoliberal dictum. If this is so, it would explain very well why Germany has a double-digit unemployment figure, why transnationalized German capital has been abandoning the "home country" and why transnational capital finds alternative sites such as the United States or Great Britain, with their low-wage neoliberal environment, so much more attractive than Germany.
8. There is almost a universal conflation of states with nation-states in much of the literature on globalization. Global capitalism cannot function without the state. But there is no reason, historically or theoretically, to assume that states are coterminous with nation-states.
9. For as more extended discussion of how these and other movements can come together to create an alternative vision, see Burbach, et aL, 1997; Burbach, 1997.
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