Economics and Politics within the Capitalist

Core and the Debate on the New Imperialism.

By Peter Gowan
[NB: This paper is work in progress: still at a preliminary
stage. So please contact me if you want to quote from it]
Introduction
n the li!ely new "e#ate on what has come to #e calle" the New mperialism one
focal point is the e$tent to which there are structural sources of conflict #etween the
main centres in the capitalist core an" if there are% whether these currently take the
form of inter&state ri!alry.
'erhaps the two strongest poles in this "e#ate amongst authors with a connection to
(ar$ism are )eo 'anitch an" Sam *in"in on one si"e an" *io!anni +rrighi on the
other. The first two authors "eny that there is structural conflict an" ri!alry #etween
the main core centres an" see the lines of conflict as lying principally #etween la#our
an" glo#al capitalism with the latter #eing structure" #y a hegemonic +merican
mperialism. They !iew its most !ulnera#le flanks at the present time as lying in the
fiel" of political legitimation #oth of the +merican ,mpire itself an" of in"i!i"ual
states as they transform themsel!es into the receptacles of a Neo&)i#eral *lo#al
-apitalist or"er. *io!anni +rrighi% on the other han"% !iews the current perio" as
marke" a#o!e all #y a chronic an" acute crisis of +merican hegemony o!er the core
an" thus as a perio" of rather intense struggle o!er hegemonic succession.
will argue for elements of thir" position on these issues. will argue that there are
structural sources of conflict #etween core capitalisms in the fiel"s #oth of economics
an" politics. These sources of conflict are% will argue% generating tensions an"
ri!alries to"ay. But my argument will not "o so far as *io!anni +rrighis claim of a
terminal hegemonic "ecline of the .S. t may still ha!e the capacity to re#uil" its
"ominance.
first want to clarify some terms. want to contrast structural sources of conflict from
contingent sources of conflict. There are e!i"ently all kin"s of political conflict
occurring all the time #etween capitalist states. Some of these can #e quite intense% for
e$ample% a conflict #etween celan" an" Britain o!er fishing rights in the North Sea in
the /012s came !ery close to military clashes #etween Na!ies. But this was a
contingent conflict% not one that relate" to structural issues. -onflicts can #e
consi"ere" structural in two "ifferent senses: first #ecause they ha!e their source in
systemic features of capitalism3 #ut secon" #ecause they ha!e their source in what we
can call the structural configuration in the present con4ucture.
also want to "istinguish #etween structural sources of conflict #etween core
capitalisms an" actual inter&state ri!alries. 5i!alries in!ol!e a concerte" effort #y
states to gain a"!antage for itself an"6or its capitalism against other capitalist states
through a politicise" conflict. There can #e structural sources of conflict #etween
/
capitalist states which are ne!ertheless 4ointly manage" to a!oi" inter&state ri!alry on
the issue. +n e$ample of such a structural source of conflict that was 4ointly manage"
was the +merican&British relationship an" the conflict in Northern relan". The
+merican state for many "eca"es allowe" the rish 5epu#lican mo!ement to raise
fun"s an" campaign for support in the .nite" States while the British state was
acti!ely engage" in a military struggle to crush the 5epu#lican mo!ement. 7or the
British state this was a structural issue in that it touche" on the territorial integrity of
the so&calle" .nite" 8ing"om. But this structural source of conflict was manage"
#etween the British an" +merican state so that it "i" not poison the alliance #etween
the two 9#y the British putting up 5+ fun"&raising in the .S:.
also want to "istinguish political ri!alry #etween core capitalist centres from full&
#loo"e" military&political ri!alries in!ol!ing arms races an" political confrontations
that coul" generate war. There are le!els an" forms of political ri!alry an" conflict
well&short of war% which are nonetheless real conflicts.
The #ulk of this paper e$plores the e$tent to which there are structural sources of
conflict in economic relations #etween the main core capitalist centres. i"entify two
such sources: first% in"ustrial competition on which the great #ulk of the paper is
focuse"3 an" secon"ly% structural tensions in the fiel" of monetary relations an"
macro&economic management. But will also e$plore the e$tent to which there are
structural political sources of conflict within the core at the present time.
But first% will make some preliminary points a#out the general relationship #etween
international economics an" politics in the capitalist worl".

PART ! T"E RE#ATI$N%"IP BET&EEN INTERNATI$NA#
EC$N$'IC% AND INTERNATI$NA# P$#ITIC% IN T"E CAPITA#I%T
&$R#D
;hile there are strong ten"encies in mainstream international relations theory to treat
international politics an" economics as largely autonomous of each other an" as
go!erne" #y entirely "ifferent logics% there remains on the left a strong ten"ency to
a"opt an analytical perspecti!e #ase" on economic #ase&political superstructure
mo"els. Such mo"els lea" us to seek e$planations for "ramatic political e!ents% like
the recent +nglo&+merican aggression against raq in tensions within the economic
fiel". This is a metho"ological error.
take capitalism to #e a particular historical form of social organisation of economic
acti!ity. The #asis is this form of social organisation into "istincti!e types of class
relations #etween people. t is constituti!e of #oth "istincti!e kin"s of market
relations an" of "istincti!e forms of state an" "istincti!e kin"s of political conflict.
So we can say that the capitalist socio&economic #ase is constituti!e of a "istincti!ely
capitalist type of politics an" culture. t is also constituti!e of "istincti!e types of
international economic an" political relations.
But this type of systemic% constitutional causation shoul" not #e translate" into an
analytical mo"el for trying to un"erstan" the causes of international politics in
economic e!ents. The capitalist socio&economic system causes a certain type of
<
capitalist politics. But capitalist economic e!ents "o not necessarily cause particular
political e!ents.
;e are intereste" here in the "istincti!e types of international economics an"
international politics that take place in capitalist inter&state systems. +s ,llen
(eiksins ;oo" has recently remin"e" us% one crucial "istincti!e feature of capitalism
is the separation of state coerci!e authority an" the "irect owners of economic
property. +nother "istincti!e feature is that capitalist property =capital = is
polymorhic% it can take a multitu"e of forms = money% plant% raw materials an"
la#our% commo"ities an" a !ariety of types of paper 9loan agreements% #on"s% stocks%
etc. = all ma"e possi#le #y the acti!ity of the states legal% a"ministrati!e an" coerci!e
apparatuses. n all its forms capitals mission is e$pansion through a !ariety of market
e$changes. But the polymorphic forms of capital an" the capacity of law to protect its
character as property in all its forms makes it possi#le for capital to #e spatially
mo#ile = to profit from relationships #etween people far "istant from each other.
These features of capitalism make it possi#le for capitalists to e$pan" their property
rights an" property claims #y entering into contractual relationships with social groups
within the 4uris"iction of other states. Thus un"er capitalism the possi#ility of
transnational economic linkages #etween social groups in "ifferent states e$pan"s
enormously% #y permission of the go!ernments of the states concerne" 9since all
international economics takes place within the 4uris"ictions of states = offshore is the
pro"uct of some states 4uris"iction :.
Therefore the nature of the internal socio&economic% legal an" political regimes within
states lies at the !ery heart of capitalist international economics. The profita#ility of
international economic operations in a capitalist worl" can always #e enhance" #y or
weakene" #y a !ast range of "ifferent changes in the internal regime of any state.
Therefore% capitalist classes ha!e powerful economic reasons for seeking to ma$imise
the influence of their state o!er the shape of the internal regimes of other states. Thus
capitalist economic e$pansion a#roa" is always "eeply connecte" to efforts to reshape
the internal social an" political regimes of other states an" is always pre&occupie"
with ensuring that these internal regimes continue to protect an" facilitate the property
e$pansion of the source capitalisms capital. These are always more or less political
questions% questions of power.
-apitalist economic repro"uction requires a !ery high "egree of political security%
especially #ecause of the time&lag #etween throwing forwar" capital an" garnering
later profits. +n" state coerci!e policy is "esigne" to shape the en!ironment of the
working class to ensure that it faces market compulsion to sell its la#our an" work in
a "iscipline" way. +t the same time% market compulsion plus the meat&grin"er of the
legal system for criminali>ing the un"iscipline" poor is far from enough to ensure
social sta#ility an" security for capital. -apitalist states must fin" ways of gaining
loyalty to its authority on the part of #oth the capitalist classes an" the su#or"inate%
e$ploite" classes. -apitalist states characteristically "o this #y seeking to instill the
i"ea of a political i"entity #etween itself an" the population un"er its control: a
ra"ical contrast with many pre&capitalist political authorities which sought to esta#lish
a "iffernce in kin" #etween rulers an" rule". This is ai"e" #y the fact that the state
stan"s a#o!e the "irect conflicts #etween la#our an" capital at the workplace. But
?
capitalist states ha!e foun" the nee" to generate stronger% positi!e i"entities: through
common ethnicities% common religions% common history stories% national i"entities
an" also through esta#lishing i"entities of lea"ers an" le" through elections. -ommon
i"entities are also esta#lishe" negati!ely% through frien"&enemy polarisations. +s
*io!anni +rrighi has recently remin"e" us% "rawing in the work of -harles Tilly%
capitalist states characteristically consoli"ate these political i"entity #ases of their
authority #y actually "emonstrating a rea"iness an" capacity to "efen" an" protect the
imagine" community.
This peculiarly capitalist type of political "omination is e$ten"e" on an international
le!el. ;hile the ,uropean ,mpires o!er pre&capitalist societies generally trie" to
stress the ra"ical "ifference an" superiority of the colonial rulers% powerful capitalist
states asserting their political ascen"ancy o!er other capitalist societies ten" to "o so
#y #oth controlling their internal regimes in non&colonial ways 9gi!ing them formal
4uri"ical so!ereignty% for e$ample: while simultaneously presenting their political
"omination in the form of their lea"ership of a single community with a share"
political i"entity% pitte" against other alien 9an" typically hostile: political
communities. Thus% *ermany in the Secon" ;orl" ;ar was the lea"er of ,urope an"
the protector of ,urope against +siatic Bolshe!ism an" +merican 'lutocracy. @apan
was the lea"er of a *reater +sian -o&'rosperity sphere. +n" the .nite" States in the
-ol" ;ar was the lea"er an" protector of a 7ree ;orl".
The "egree to which the esta#lishment of these capitalist *rossraums ha!e require"
imperial coercion to maintain "epen"s crucially upon the e$tent to which the
"ominant power can gain the support of the capitalist classes an" linke" internal
elites of the su#or"inate states. This is not "etermine" simply #y the short&term
economic interests of these classes an" elites #ut #y their collecti!e conceptions of
their pre"icament as ruling classes. *erman lea"ership was wi"ely supporte" #y the
capitalist classes of ,urope #ecause they saw a real threat from Bolshe!ism an"
la#our% while the *erman state remaine" #roa"ly supporti!e of their ,mpires 9in
return for loyalty:. The -ommunist threat an" the priority of restoring their ,mpires
after /0AB similarly helpe" throw the ,uropean ruling classes to the feet of the
+mericans% while the ruling classes of "efeate" *ermany an" @apan manage" to
negotiate the re#uil"ing of their in"ustrial strength an" the relegitimation of their
states in return for accepting the status of military&political protectorates with the .S
controlling their geopolitical orientations.
n each case these grossraums offere" su#stantial prospects for a large geographical
e$pansion of the capitalism of the "ominant power. Thus the connection #etween
capitalist international politics an" international economics was o#!ious: *ermany%
@apan an" the .S coul" reorganise the internal legal socio&economic an" political
regimes of their satellites in ways that coul" set the framework for greatly e$pan"e"
capital accumulation with the lea" centre as the hu#. But equally% the international
economic "ominance of a gi!en capitalism can act as a powerful le!er for e$pan"ing
its political sway an" its political sphere of influence. Ne!etheless% to consoli"ate that
political sphere of influence% the gi!en lea"ing capitalist state 9or coalition of states:
must #e a#le to offer security an" protection to the regimes of other capitalist states
an" must also #e a#le to generate the political !alue system that will "raw that state
into some kin" of international political community% "istinct from other such
communities.
A
To capture these "ynamics% we shoul" not speak of separate logics in international
economics an" politics. t woul" #e #etter to speak of separate languages which share
a common "ialectical logic. The international market power of a states capitals
enhances the international political power of a state. The greater the political power
of a state within the inter&state system% the greater its capacity to open or close
markets in appropriate ways fa!oura#le to the e$pansion of its capitals. The way in
which the e$ecuti!es of capitalist states themsel!es conceptualise their e$ternal
strategies reflects the fact that they "o not think it terms of separate logics. They
"e!elop national strategies 9or more euphemistically% national security strategies as
if they were concerne" with "efensi!e matters rather than e$pansi!e matters:. These
national strategies seek to integrate the "omestic an" the e$ternal an" the political an"
economic. +n" it woul" #e quite wrong to assume in a"!ance that in the construction
of such national strategies economics pulls rank on politics. They are a#out
strengthening #oth the authority an" influence of their capitalist state an" the sway
an" growth of their capitalism% "omestically an" e$ternally.
This effort #y capitalist states to integrate politics an" economics into a single
strategic logic "oes not% of course% mean that they are successful in maintaining such
integration. The gi!en social formations interaction with its e$ternal en!ironment
will take unforeseen forms an" acute tensions an" contra"ictions can pull national
strategies apart. But it woul" #e quite wrong to suppose that the main form of these
tensions an" contra"ictions is one #etween economics an" politics. The purely
political "imension may enter "eep crises of e$plosi!e internal contra"ictions. t
woul" also #e wrong to assume that national strategies are strictly rational. They are
the pro"uct of the particular weltanshaungs an" social cultures of the gi!en ruling
classes of the gi!en states an" of their lea"ing elites.
;e ha!e stresse" that there is no international economy outsi"e the 4uris"iction of
states. But there are international regimes in the nternational 'olitical ,conomy.
These are necessary to the functioning of the international capitalist economy. The
most important of these regimes is that which pro!i"es arrangements for international
monetary arrangements for without these arrangements transnational economic
linkages will #e 4eopar"ise". But international legal regimes are also necessary for
pro!i"ing security for international tra"e an" in!estment% an" for cre"itor&"e#tor
relations as well as for a host of other kin"s of international transactions.
Ne!ertheless% the effecti!eness of all such ', regimes "epen"s upon the rea"iness of
the internal regimes of states to respect an" a#i"e #y them. +n" ensuring such
compliance is ultimately the task of politics. Thus the most powerful states within the
capitalist system ha!e historically #een the ones which esta#lish the ', regimes of
international capitalism an" they will esta#lish rules which fa!our the e$pansion of
their own capitalism.
This% of course% raises the question as to which is the most powerful centre. 'ower as
capacity to lea" in the ', can #e #ase" upon !ery "ifferent kin"s of resources from
power as the capacity to coerci!ely impose. +n" power in a #asically co&operati!e
framework amongst main capitalist centres can #e #ase" upon "ifferent foun"ations
from power in con"itions of political ri!alry an" confrontation. Thus the "istri#ution
of power as capacity in the international capitalist system is a function of the
con4unctural configuration at the worl" or"er le!el.
B
But one fun"amental question arises to"ay a#out the relationship at a systemic le!el
#etween power politics in the inter&state system an" international economics. This
question can #e pose" in a num#er of ways. Cne% li#eral% way of posing the question
is whether international e$changes #etween capitalist economies can #e a positi!e&
sum game. n other wor"s% can international capitalism #e organise" in such a way
that all capitalist societies will #enefit equally from the ma$imum e$pansion of
international e$changeD The li#eral answer to this question is affirmati!e. They claim
that if the nostrums of li#eral economic theory are applie"% all societies can gain
optimal outcomes in terms of welfare economics. This therefore implies that insofar
as there are tensions an" conflicts in international relations un"er capitalism% these
"eri!e either from rent&seeking acti!ity #y some states in the ', of from the
intrusion of power politics into international economics.
Eowe!er% this question has also #een pose" in another way #y left critics of
li#eralism who re4ect the li#eral linkage #etween capitalism an" human welfare. They
ask the question: has there #een the emergence of a glo#al capitalism in which (N,s
from "ifferent states co&operate to impose a neo&li#eral international regime in why
(N,s prosper at the e$pense of the su#or"inate classes of the worl"D
Both the )i#eral an" the alter&glo#alisation arguments imply that capitalism as an
international system has a systemic capacity to o!ercome the fragmentation of the
worl" into a set of antagonistic states an" political economies. They also imply that
this systemic ten"ency is manifesting itself to"ay an" that states are #ecoming the
han"&mai"ens of a glo#al capitalism whose functions are re"uce" to la#our control
an" to the maintenance of an international economy in which a glo#al capitalism%
transcen"ing the nation state can flourish. f this were in"ee" the case% we coul" not
speak of structural sources of conflict #etween core capitalisms at all. Structural
sources of conflict woul" lie% instea" #etween glo#al capital an" la#our.
PART (! T&$ %TR)CT)RA# %$)RCE% $* C$N*#ICT IN T"E
INTERNATI$NA# EC$N$'IC% $* C$RE CAPITA#I%'
n this section will argue that there are two structural sources of conflict amongst
core capitalisms in the economic fiel". Cne has systemic sources in the "ynamics of
in"ustrial competition% particularly in high tech sectors. The other also has systemic
sources in the pro#lem of com#ining a fiat international money% necessarily
constructe" politically% #ut in an inter&state system without a supranational political
authority.
A The Dynamics o+ Industrial Competition
1.Increasing Returns to Scale
The entire notion that the competition of capitals has #een or can #e "isconnecte"
from political ri!alry in an inter&state system rests upon an acceptance of certain key
assumptions in neo&classical economics. +t its core% this theory assumes that so long
as there is full factor mo#ility an" so long as markets set prices while all firms are
price takers% economic efficiency #oth in an allocati!e an" in a pro"ucti!e sense will
#e achie!e". f these con"itions apply internationally efficiency will #e ma$imise" for
the #enefit of all. Neo&classical economists thus argue that insofar as states are
"e"icate" to promoting the aggregate wealth of their societies they shoul" welcome
F
the esta#lishment of institutions of glo#al go!ernance "e"icate" to implementing neo&
classical principles: freeing markets in the factors of pro"uction an" pre!enting rent&
seeking monopolistic practices amongst their own firms.
The key pro#lem with this theory is that it rests entirely on the assumption that firms
face "ecreasing returns to scale% rather than increasing returns. This is the cogniti!e
#asis for its normati!e claims a#out the economic efficiency of free markets. ;ith
"ecreasing returns to scale a firm "e"icate" to ma$imising output an" sales woul" go
#ust #ecause its costs woul" rise while other firms coul" sell more cheaply
#ankrupting the output ma$imiser.
Get in most in"ustries an" especially in high tech in"ustries% this core assumption of
the foun"ers of neo&classical economics such as ;alras an" 'areto an" their
+merican successors ha!e #een foun" to #e wrong: in"ustry after in"ustry turns out to
#e marke" #y increasing returns to scale
/
. +n" where this applies the most efficient
firm structure in a gi!en in"ustry is not actually competition #etween a multitu"e of
firms #ut the "ominance in the in"ustry of the most efficient firm: the one that can
e$ploit to the ma$imum the logic of increasing returns to scale. Thus% let us assume
that we ha!e two firms in the market in con"itions of increasing returns to scale. )et
us assume that they #oth employ i"entical types of fi$e" capital% inputs an" la#our an"
pro"uce i"entical pro"ucts. But one has a far larger pro"uction run that the other. The
marginal costs of the smaller pro"ucer will then #e far larger than the marginal costs
of the larger. n such circumstances% the most efficient solution is for the first firm to
"ri!e out the secon" firm an" "ominate international pro"uction in the gi!en in"ustry:
one in"ustry% one firm woul" #e the #est outcome from an efficiency point of !iew.
(ar$ was not the first to un"erline the ten"ency for increasing returns to scale in
manufacturing.
<
But he

un"erstoo" it !ery clearly an" he use" it to e$plain what he
calle" the concentration an" centralisation of capital.
?
(ar$ graspe" the "ri!e for scale
economies in the first place through his e$perience of British capitalism. Ee
writes:HThe #attle of competition is fought #y cheapening of commo"ities. The
cheapening of commo"ities "epen"s% ceteris pari#us% on the pro"ucti!eness of la#our%
an" this again on the scale of pro"uction. Therefore the larger capitals #eat the
smaller.H9 -apital /% page FIF: Ee un"erline" that the "ri!e for economies of scale
e$presses itself un"er capitalism as the ten"encies towar"s the concentration an"
centralisation of capitals. -oncentration refers to enlargement of the scale of
pro"uction. t thus operates mainly at the le!el of the plant% rather than at the le!el of
the firm. Small plants get knocke" out #y #ig plants #ecause the latter en4oy
economies of scale "enie" to the smaller plants.
/
5o#ert ;a"e initially intro"uce" me to the centrality of increasing returns to scale an" to the
e$tremely important an" far too neglecte" work of his colleague at )S,% Te""y Brett. See in particular%
,.+ Brett% International Money and Capitalist Crisis. The Anatomy of Global Disintegration
(Heinemann,, ondon, !"#$% This #ook is seminal not only for its treatment of economies of scale #ut
also for its e$tremely !alua#le analysis of international monetary relations.
<
Schumpeter notes that the theory of increasing returns in manufacturing in"ustry was actually first
a"!ance" #y +ntonio Serra in his Bre!e Trattato in /F/?% an" +"am Smith also su#scri#e" to the i"ea
as "i" (c-ulloch an" Senior. See Schumpeter% Eistory of ,conomic +nalysis% pages <BI&0 an" BIB.
?
+lthough (ar$ "escri#e" the "ynamics of increasing returns to scale in a capitalist conte$t "ont
think he regar"e" this as necessarily confine" to capitalism. suspect that he woul" ha!e en!isage" it
continuing un"er socialism an" treate" it as a general feature of in"ustrial mo"ernity. -apital #oth "rew
on it an" limite" its "e!elopment in !arious crucial ways.
1
-entralisation% on the other han"% operates at the le!el of the firm% rather than the
plant. t means one firm go##les up other firms% com#ining capitals that are alrea"y in
e$istence. +s (ar$ says Jit only presupposes a change in the "istri#ution of capital
alrea"y to han" an" functioningK.capital grows in one place to a huge mass in a
single han" #ecause it has in another place #een lost #y many. This is centralisation
proper% as "istinct from accumulation an" concentration.J 9-apital /% page FIF:
7or neo&classical economists the tren" towar"s monopoly is e$plica#le #asically as the
su#!ersion of the free market #y rent&seekers using politics. But in in"ustrial markets
marke" #y increasing returns to scale% monopoly is the pro"ucti!e&efficiency telos of
the market. (ar$ also graspe" this. +fter e$plaining how the logic of increasing
returns generates concentration an" centralisation of capital (ar$ writes that for
society as a whole% the ultimate goal woul" not #e reache" Juntil the entire social
capital woul" #e unite" either in the han"s of one single capitalist% or in those of one
single corporation.J 9-apital % p.FII: Eere is the "ri!es ultimate monopolistic logic.
A

(ar$ was not alone in his grasp of the centrality of increasing returns to scale an" of
resultant efficiency telos of monopoly. The foun"er of mo"ern (arginalism% +lfre"
(arshall% also graspe". +s he e$plaine" in his &rinciples of 'conomics(
;e say #roa"ly that while the art which nature plays in pro"uction shows a ten"ency
to "iminishing return% the art which man lays shows a ten"ency to increasing return.
The law of increasing ret)rn may #e wor"e" thus:& +n increase of la#our an" capital
lea"s generally to impro!e" organi>ation% which increases the efficiency of the work
of la#our an" capital. Therefore in those in"ustries which are not engage" in raising
raw pro"uce an increase of la#our an" capital generally gi!es a return increase" more
than proportion3 an" further this impro!e" organi>ation ten"s to "iminish or e!en
o!erri"e any increase" resistance which nature may offer to raising increase" amounts
of raw pro"uceK.n most of the more "elicate #ranches of manufacturing% where the
cost of raw material counts for little% an" in most of the mo"ern transport in"ustries
the law of increasing return acts almost unoppose".
B
+n"% as Schumpeter = who also graspe" this && points out% (arshall was thus le" to
stress the centrality of the tren" towar"s monopoly an" imperfect competition whose
patron saint (arshall may in"ee" #e sai" to ha!e #een.
F
The Neo&-lassicals from ;alras onwar"s #urie" this reality of the central "ynamic of
mo"ern in"ustrialism.
1
+n" in"ee"% Eicks in the /0?2s acknowle"ge" that
a#an"onment of the i"ea of constant returns an" thus of the assumption of perfect
competition threatens the wreckageK.of the greater part of [ortho"o$] economic
theory.
I

A
+gain% "ont think that (ar$ himself was necessarily hostile to a monopolistic form of organisation
of mo"ern in"ustry. ;hat he oppose" was monopoly un"er pri*ate capitalist control. n"ee"% part of
the argument for a socialist organisation of pro"uctions greater efficiency surely lies here.
B
+lfre" (arshall% 'rinciples of ,conomics% (acmillan% /0<B% p?/I&/0 [#ook A% chapter /?% section <.]
F
Schumpeter% page 01B.
1
;alrass attempts to use the calculus to pro"uce a general equili#rium theory on assumptions of
perfect competition in!ol!e" him in assuming constant or "eclining returns. +s Schumpeter points out%
many neoclassical economists then trie" to fin" ways of claiming that constant returns were necessary
features of market economies% "enying the o#!ious fact that whether returns increase or "iminish is% in
the first place% a purely empirical question.
I
;e can illustrate these "ynamics of increasing returns to scale with e$amples from
high tech in"ustries where they are especially pronounce". n semi&con"uctors% since
the in!ention of integrate" circuits% memory chip prices ha!e "roppe" at a rate of
a#out ?BL a year. +n" in mainframe computers the quality a"4uste" annual price
"ecline has #een roughly <2L.
0
These "ramatic rises in what (ar$ woul" ha!e calle"
the rate of surplus !alue ha!e come a#o!e all from so&calle" learning economies.
-umulati!e pro"uction e$perience has taught work forces how to "ramatically re"uce
unit costs. By the mi"&/002s% the cost of esta#lishing a plant for lea"ing e"ge semi&
con"uctor pro"uction was o!er M/#n. Thus the "ri!e for ma$imising sales
internationally is o!erwhelming.
+.How Increasing ret)rns are generated
The generation an" e$ploitation of increasing returns to scale% particularly in high
tech% capital&intensi!e sectors% is not the result only of acti!ities internal to the
in"i!i"ual firm. t is the consequence% as (ar$ saw% of much wi"er social processes%
in which the state is "eeply implicate". ;e can list some of these:
/. Nery large sources of cheap cre"it for hea!y in!estment in new fi$e" capital.
<. Nery large outlays on 5OP.
?. The supply of suita#ly qualifie" la#our
A. The supply of transport% communications an" other infrastructures.
B. + fa!oura#le ta$ en!ironment.
F. 'olicy support through the entire tra"e an" regulatory framework to protect
strategic sectors an" to open markets a#roa".
1. .sing the state rocurement market where possi#le to help launch new
pro"ucts.
I. Support mechanisms to ensure firm sur!i!al when the firms concerne" get into
"ifficulties.
0. -reating an in"ustrial relations en!ironment fa!ouring sta#ility in this fiel"% so
important for gaining learning economies from the work force.
(any of these mechanisms are nee"e" to counter&act what (ar$ calle" the rising
organic composition of capital an" the consequent ten"ency of the rate of profit to fall%
a particularly strong tren" in high tech sectors. ;e can mention some of these
mechanisms in the ta$&su#si"y fiel"s: in the .S state go!ernments typically gi!e
large su#si"ies to strategic sectors as we saw a#o!e in relation to Boeing. n another
important .S high tech sector% pharmaceuticals% the ma4or companies a!oi" paying
the great #ulk of .S corporation ta$. The latter is ?BL #ut in <22A 'fi>er ai" only 0L
of its worl" pre&ta$ profits in fe"eral an" state ta$es3 )illy pai" 4ust one per cent.
/2

n these circumstances where state acti!ity has a crucial #earing on the success of its
high tech companies% there are !ery large political pressures for the state to prioritise
general support for companies in these sectors. To remain in"ifferent is to in!ite
"efeat. +n" for the state to approach these sectors from the angle of non&
inter!entionist neo&li#eral rules #ase" on a false theory of "iminishing returns to scale
is equally to in!ite "efeat in an inter&state system.
I
Eicks% Nalue an" -apital% p IA% cite" in Schumpeter o.cit.% page 01<. am also grateful to 5o#ert
;a"e for pointing this out to me. The neo&classicals hi"e this secret #y imme"iatism an" #y e$clu"ing
the range of forces generating increasing returns% such as technological change an" learning% the role of
the cre"it system an" the roles of the state.
0
7lamm% page 1.
,
+le$ Berenson% Prug (akers 5eap Benefits of Ta$ Break New GorkTimes% I
th
(ay% <22B
0
$.The ogic of Increasing ,et)rns in an inter-state .ystem.
nsofar as the inter&state system arranges its ', regime in an entirely open regime%
those national political economies a#le to generate the greatest scale economies in
high tech Branch / in"ustries will make the in"ustrial sectors of other national
economies "epen"ent. To counter that "epen"ence% other centres must take special
measures to generate their own pro"ucers an" to ena#le them to acquire equi!alent
scale. +n" they also nee" to acquire instruments for protecting these infant high tech
in"ustries until they can go hea"&to&hea" against the currently "ominant player.
,qually states whose high tech capitals ha!e lost their "ominance must seek
instruments for fighting #ack an" regaining "ominance.
The crucial point a#out all this is that un"er con"itions of increasing returns to scale%
the neo&classical link of free tra"e un"er perfect competition with efficiency norms is
cogniti!ely false. +n" in con"itions of increasing returns to scale in an inter&state
system% the link #etween tra"e regime an" glo#al pro"ucti!e efficiency norms has to
#e #roken #ecause its monopolistic telos is not politically accepta#le to the main
centres. t is accepta#le for those centres for in"ustries lower "own the foo"chain = the
sorts of in"ustries through which less a"!ance" countries can rise if they can only
protect their in"ustrial sectors until they reach worl" class.
This reality pro"uces three crucial conclusions. 7irst the claim of li#erals an" neo&
classical economies that international capitalist economics can #e regulate" #y
regimes roote" in norms that #enefit all are simply false. Such norm&#ase" rules
woul" work if in"ustrial capitalism was marke" #y "ecreasing returns to scale. n that
case equili#rium theories woul" ha!e some purchase. But gi!en increasing returns to
scale capitalist in"ustrial economics is marke" #y "isequili#rium an" powerful
efficiency logics towar"s monopoly. This pro"uces a necessary source of conflict
#etween states in a capitalist inter&state system.
The secon" conclusion is that in a"!ance" in"ustries it is simply false to claim that
in"i!i"ual (N,s ha!e lost their national i"entities. Cn the contrary they "epen" !ery
hea!ily on e$ternal supports within their home states an" within their home societies.
+n" we can e$pect that they will face a relati!ely hostile en!ironment within the
markets of their main competitors.
The thir" conclusion is that to compete effecti!ely in a"!ance" sectors% states an"
their capitalists must fin" ways of gaining equi!alent scale to their lea"ing
competitors. Eere the #enchmark since /0AB has #een +merican scale. The ,uropean
route to achie!ing competiti!e scale was through the -ustoms .nion an" then Single
(arket programme in the /0I2s. The @apanese route in!ol!e" crucially "e!ising
institutional structures an" linkages at the le!el of the firm an" in state&firm co&
or"ination 9!ia (T an" the Bank of @apans so&calle" win"ow gui"ance system for
the #anks:. But @apan lacke" the regional #ase of "e!elope" capitalist societies that
e$iste" for *erman in"ustry 9an" other ,uropean national in"ustries: in ,urope. t was
thus pushe" towar"s seeking a market #ase within the .S an" ,uropean markets% a
!ulnera#le situation. +n" pressure from the nature of in"ustrial capitalism an" from
+merican scale to create regional #ases of equi!alent scale remains powerful. nsofar
as countries such as -hina an" n"ia can mo!e up the international "i!ision of la#our
/2
they can of course easily attain an" surpass the +merican #enchmark #ut that will take
time.
t is important to note the market power "ynamics of in"ustrial acti!ity when there
are powerful monopolistic "ynamics in high tech Branch / 9pro"ucer goo"s:
in"ustries. (ay other sectors lower "own the in"ustrial foo" chain #ecome "epen"ent
upon supplies from the monopolistic pro"ucer.
$. Capitalism and eadership in the International Ind)strial Di*ision of abo)r
t is not the case that capitalism is necessarily articulate" to ma$imise technological
inno!ation an" the struggle for technological lea"ership in a"!ance" in"ustries.
7urthermore% the phenomenon of increasing returns to scale in in"ustry "oes not
"eri!e from the nature of capitalism as a social system: it woul" operate equally in a
socialist in"ustrial or"er. The economic moti!e of in"i!i"ual capitals is profits an"
these can #e ma"e in a host of "ifferent ways% not least through efforts to e$pan"
a#solute surplus !alue.
//
There are plenty of e$amples of capitalist classes which ha!e
sought to #uil" their capitalism without concentrating on stri!ing for in"ustrial
lea"ership in the worl" market. +fter all% such a strategy entails creating a !ery
powerful in"ustrial working class an" many capitalists ha!e historically #een familiar
with the main outlines of (ar$ist thought a#out such mattersQ
The stress on technological "e!elopment an" technological competition "uring the
perio" of ,uropean ascen"ancy was "ri!en much more #y state acti!ity in the
military&in"ustrial fiel"% with little or no stress gi!en to state support for ci!ilian high
tech #efore /0AB. This non&in!ol!ement of the state in policies for "e!eloping high
tech lea"ership outsi"e the military sector also applie" in the .nite" States. But there%
the sheer scale of the "omestic market pushe" in"ustrial capitalists to "e!elop a scale
of pro"uction far greater than in ,urope. +n" 7or" "isco!ere" the secret of turning the
working class into consumers as well as pro"ucers. Thus American capitalism "i"
#ecome oriente" towar"s technological inno!ation to e$ploit economies of scale in the
ci!ilian sector. So #y /0AB .S in"ustry was in"isputa#ly hegemonic in the
international in"ustrial "i!ision of la#our. +n" its ascen"ancy was not the pro"uct of
a state mercantilist "ri!e to achie!e technological ascen"ancy on a glo#al scale.
+merican state policy on technological security was o!erwhelmingly focuse" on
military technology.
But in the post&war perio"% +mericas o!erwhelming military "ominance within the
capitalist core transforme" the military&political conte$t of intra&core relations. +n"
+merican policy quite consciously came to in!ol!e supporting efforts in ;est
*ermany an" @apan to #ecome the in"ustrial hu#s of their respecti!e regions while
simultaneously re"ucing #oth to the state of protectorates in the military&political
fiel". n this conte$t #oth ;est *ermany an" @apan 9as well as 7rance: "e!elope"
national strategies focuse" on struggling for in"ustrial lea"ership in some key sectors
within the core. This turn was thus not simply the spontaneous outcome of market
"ecisions #y capitalists. They were concerte" efforts in the fiel" of state strategy.
//
San"ra Ealperin "emonstrates this "eli#erate ten"ency in the case of /0
th
century an" early <2
th
century Britain. See her /ar and .ocial Change in Modern 0)rope (Cambridge 1ni*ersity &ress,
+223% pp. I<&/2I.
//
Such strategies in con"itions of .S military&political "ominance hol" out the
possi#ility of achie!ing real political le!erage in international relations. +s 5o#ert
-ooper points out% @apanese military security is pro#a#ly a !ital interest of the .nite"
States #ecause @apanese in"ustry is an integrate" component of the glo#al market%
!ital for many ;estern manufacturers an" retailersK.
/<
+n" this .S "epen"ence on
@apanese pro"ucts also gi!es @apan le!erage o!er the .S in the e!ent of sharp
political conflicts with ;ashington. +t the same time high tech sectors% though small
in their o!erall weight in *P' #ring multiple economic #enefits. They% on a!erage
ha!e more rapi" sales growth an" more than "ou#le the profits growth of me"ium&
tech in"ustries an" they pro!i"e wi"e positi!e e$ternalities for other firms supplying
components or working lower "own the in"ustrial foo" chain.
These strategic orientations to compete as national capitalisms with +merican
capitalism for lea"ership in the international "i!ision of la#our entaile" fin"ing ways
of coping with the scale of +merican in"ustry. The ;est *erman answer was foun"
through ,. construction% gi!ing a large% secure regional market #ase for *erman
in"ustry. The @apanese answer lay through an e$tremely efficient concentration of
resources on strategic high tech sectors% along with a strong state planning an" state
support for key in"ustrial sectors through (Ts in"ustrial policies an" through the
Bank of @apans so&calle" win"ow gui"ance system of cre"it allocation. t also
in!ol!e" structuring @apanese companies for ma$imising market share rather than for
ma$imising returns to sharehol"ers.
Bo# Brenners work has trace" the results of this in"ustrial challenge to the .S from
*ermany an" especially from @apan from the /012s through into the /002s at a macro&
economic le!el.
/?
;e will look at the more micro an" in"ustrial policy "imensions of
the conflicts in the fiel" of in"ustrial competition% particularly in the high tech area.
Ind)strial ,i*alry in High Tech .ectors
;e will #egin #y looking at some empirical material "emonstrating the configuration
of the largest in"i!i"ual capitals in the core. Pespite the !ast literature on economic
glo#alisation in the /002s% at a material le!el% property e$pansion of the main ?
centres of capitalism is o!erwhelmingly regionalise". This applies to #oth
international tra"e an" international stocks of in!estment.
/A
f we !iew @apan an" the
.S as centres of their imme"iate regions 9,ast an" South ,ast +sia for @apan an"
N+7T+ for the .S: o!er 02L of what is consume" within each region is pro"uce"
within that region.
/B
The sectoral e$ceptions to this pattern are in ,ast +sian
consumer electronics an" in information pro"ucts without significant transport costs.
These are significant e$ceptions% to #e sure. But the fact remains that the ma4or tren"
in terms of international economic integration lies in regionalisation. 'roponents of
/<
5o#ert -ooper% The Breaking of Nations( 4rder and Chaos in the Twenty-first Cent)ry (ondon(
Atlantic 5oo6s, +22$% page ?I.
/?
5o#ert Brenner% The ,conomics of *lo#al Tur#ulence% 7ew eft ,e*iew, no.
++", May-8)ne !""#.
/A
(uch of the empirical case for economic glo#alisation reste" on "ichotomising the national an" the
glo#al for tra"e an" in!estment statistics. ;hen you "ichotomise the glo#al an" the regional% the stistics
gi!e you "ramatically "ifferent results.
/B
+lan 5ugman% 7rom *lo#alisation to 5egionalism: The 7oreign Pirect n!estment Pimension of
nternational 7inance in 8arl 8aiser% @ohn @. 8irton an" @oseph '.Paniels 9e"s.:Shaping a New
nternational 7inancial System. -hallenges of *o!ernance in a *lo#ali>ing ;orl" 9+shgate% +l"ershot%
<222:pp<2?&</0
/<
economic glo#alisation often lay great stress on the importance of 7P rather than
tra"e. This is certainly important in one area: .S 7P in ,urope an" % to a lesser
e$tent% ,. 7P in the .S. But a great "eal of the inter&regional 7P is in the fiel" of
distrib)tion systems, not prod)ction. Thus @apanese 7P in the .S is o!erwhelmingly
in wholesaling% not pro"uction: its 7P in the former is fi!e times larger than its 7P
in the latter.
/F
5egionalism is also !ery pronounce" when we look at the "ata from the angle of
(N, sales rather than 4ust at the aggregate tra"e an" foreign affiliate sales figures in
"ifferent countries an" regions. +lan 5ugmans work has #een particularly important
here. Ee an" +lain Ner#eke ha!e stu"ie" the "istri#ution of acti!ities of the 7ortune
B22 largest (N,s in the worl". They account for o!er 02L of the worl"s stock of
7P an" for a#out B2L of total worl" tra"e. Their ERs are gi!en in Ta#le /.
Table ! Distribution o+ &orld-s #ar.est /,, 'NEs
/0I/ /00/ /00F <222
No. inTria" A/2 AA? A?2
No. in .S <A< /B1 /F< /IB
No. in ,. /A/ & /BB /A/
No. in @apan F< //0 /<F /2A
Source: 5ugman% +. (. 9<222: The 'nd of Globali9ation% )on"on: 5an"om Eouse
an" New Gork: +macom&(c*raw Eill.
n e$amining the concrete relations of these aggregates to geo&economic patterns of
capital accumulation% it is useful to "istinguish #etween (N,s pro"uct market&
seeking tra"e an" in!estment an" their resource&seeking 9 a#o!e all la#our seeking:
tra"e an" in!estment.
9/: (arket&Seeking +cti!ities
5ugman an" Ner#eke "efine an (N, as ha!ing a #ase in any one region #y the
criterion of ha!ing at least <2L of its sales in that region. Thus a glo#al (N, woul"
ha!e at least <2L of its sales in each of the three tria"ic regions% a #i&regional (N,
woul" ha!e at least <2L of its sales in each of two regions% etc. +t the same time% they
"efine a home&region (N, as one ha!ing o!er B2L of its sales in a single region.
/1
Their "efinition of the +sian region inclu"es @apan% -hina% S.8orea an" +S,+N. +t
purchasing power parity% this region is as large in terms of consumer sales as the other
two.
/I
Note! &ei.hted a0era.es were calculated by assumin. the lowest point in intra1
re.ional sales 2i.e. 34,54,6
Source: +lan (. 5ugman an" +lain Ner#eke% + 'erspecti!e on 5egional an" *lo#al
Strategies of (ultinational ,nterprises 8o)rnal of International 5)siness .t)dies
$:(! (+223%( $-!#.
/F
*oul" an" 8rasner% page 1I.
/1
Cne weakness of 5ugman an" Ner#ekes work is their failure to a""ress issues concerning informal
alliances an" 4oint !entures #etween (N,s in "ifferent regions. t is possi#le that in some cases% these
relationships may increase regional sales in ways that "o not show up in the "ata. Cn the other han"% for
ta$ purposes% (N,s in ,urope an" especially in the .S may often e$aggerate their o!erseas sales 9an"
profits: for home ta$ purposes.
/I
+lan (. 5ugman an" +lain Ner#eke% + 'erspecti!e on 5egional an" *lo#al Strategies of
(ultinational ,nterprises 8o)rnal of International 5)siness .t)dies $:(! (+223%( $-!#.
/?
Table (! Classi+ication o+ top /,, 'NEs in (,,
Type of (N, No. of
(N,s
L of
B22
Lof ?I2 ;eighte" a!. L of
intra&regional Tra"e
*lo#al /2 <L <.FL ?I.<L
Bi&regional <B BL F.FL A<L
Eost&region Criente" // <.<L <.0L ?2.0L
Eome 5egion Criente" ?<2 FAL IA.<L I2.?L
nsufficient "ata /A <.IL ?.1L A2.0L
No "ata /<2 <AL & Na
n the ta#le < a#o!e% we fin" some rather "ramatic figures. 7irst% of the ?I2 (N,s for
which sales "ata is a!aila#le% a misera#le <.FL are glo#al companies% while IA.<L are
home region oriente". Cnly F.FL are #i&regional.
/0
The pro#lem% then% is to e$plain the pronounce" #ias towar"s regionalism rather than
glo#alism amongst (N,s. *i!en the fact that many of these companies will ten" to
#e operating in high tech% capital&intensi!e sectors with large economies of scale% they
shoul" ha!e a huge incenti!e to go glo#al an" achie!e large sales across all three
tria"ic markets. Get they "o not achie!e this. The language of 5ugman an" Ner#eke
is !ery coy a#out why this is so. They e$plain that con!entional (N, theory fails to
theorise what they call the lia#ility of foreignness. They argue that it is e$tremely
"ifficult for firms to acquire the locational a"!antages a#roa" that they can get in their
own region. +n" they a"" that host regions may require large a"aptation in!estments
"ri!en #y home6host region "ifferences in the institutional an" economic sphere in
or"er to mel" the (N,s e$isting knowle"ge #ase an" the host&region location
a"!antages. This requirement for high% region&specific JlinkingJ in!estments acts as an
entry "eterrent for many (N,s.
(,

They then finally grasp the nettle of tria"ic mercantilism: inter&#lock #usiness is
likely to #e restricte" relati!e to intra&regional sales #y go!ernment&impose" #arriers
to entry. 7or e$ample% the ,. an" the .nite" States are likely to fight tra"e wars an"
#e responsi!e to "omestic #usiness lo##ies seeking shelter in the form of su#si"ies
an"6or protection. nstitutional an" economy&relate" "ifferences among mem#ers of a
single tria" region may remain% #ut these will mostly #e less significant than across
tria" regions. The en" result is the persistence of (N,s that will continue to earn I2L
or more of their income in their home&tria" region. There will only #e a limite"
num#er of purely glo#al (N,s in the top B22.
</
/0
+n interesting category in Ta#le < is that of host&region oriente" (N,s.These are companies which
sell more than <2L of their output in a region other than their own an" ha!e less than B2L of their
sales in their home region. Cnly one .S company 9(anpower: has this characteristic% focuse" in
,urope. +ll the others are focuse" in the .S. I ,uropean (N,s are in this group3 one @apanese
company = Eon"a. The last mem#er of the group is (ur"ochs +ustralian News-orp
<2
+lan (. 5ugman an" +lain Ner#eke% Towar"s a Theory of 5egional (ultinationals: + Transaction
-ost ,conomics +pproach Management International ,e*iew AA 9A: 9Special ssue:9<22A:: ?&/B.
</
+lan (. 5ugman an" +lain Ner#eke% Towar"s a Theory of 5egional (ultinationals: + Transaction
-ost ,conomics +pproach Management International ,e*iew AA 9A: 9Special ssue:9<22A:: ?&/B.
/A
;e will return to the question of tria"ic protectionism later. But first we will #riefly
touch upon the other "imension of the outwar" e$pansionism of tria"ic in"ustrial
capitals: their international la#our&seeking acti!ities
9<: )a#our Seeking +cti!ities
+longsi"e the "ecline in the importance of the semi&periphery an" periphery as key
sources of raw materials for the most a"!ance" sectors of core in"ustries% we ha!e
also seen the rising importance of these regions as sources of cheap la#our. Cn the
one han"% mature in"ustrial sectors in the core% characterise" #y rather stagnant
technologies an" saturate" markets% ha!e often transferre" their pro"uction acti!ities
wholesale into the semi&periphery to #enefit from cheaper la#our. This tren" has #een
e!i"ent since the /012s.
+t the same time% since the /012s% there has #een a rather "ramatic fragmentation of
the pro"uction processes of the most a"!ance" sectors in the core an" the shift of the
more la#our&intensi!e phases of the pro"uction process into the semi&periphery to gain
from cheap la#our costs. -orrespon"ing to this shift has #een a "ramatic shift in the
composition of international tra"e: to"ay a#out one thir" of international tra"e
consists of so&calle" input&tra"e.
<<
(N,s outsource segments of their pro"uction to
cheap&la#our >ones an" then re&import the interme"iate goo"s for finishing an" sales.
But this tren" towar"s pro"uction fragmentation an" input tra"e also has a strongly
regional character. ,ach tria"ic centre has% since the /0I2s% #een #uil"ing regional
hinterlan"s of cheap la#our in or"er to gain ma$imum a"!antage from these kin"s of
economies: @apan 9an" increasingly South 8orea: has #een using South ,ast +sia an"
-hina3 the .nite" States% (e$ico an" -entral +merica3 the ;est ,uropeans% ,ast
-entral an" ,astern ,urope:. These operations also require the (N,s to shift their
#usiness% #anking% communications an" transport ser!ices into these hinterlan"s to
ser!ice such (N, operations. The classic form of these tactics is the (aquilla"ora
operations along the (e$ican #or"er with the .S.
+n" in seeking la#our from these hinterlan"s% (N,s generally fin" eager% not to say
"esperate welcomes. +s 5ugman an" Ner#eke put it% in this fiel" all rele!ant parties%
such as foreign suppliers% workers% an" acquire" companies themsel!es engage in
reciprocal commitments to make these in!estments worthwhile.
<?
But the source of
this welcome lies in the fact that the host countries ha!e in most cases #een #locke"
#y the tria" from other options% unless they are large enough to set their own course
without #eing entirely e$port "epen"ent.
This is% of course% not a complete picture of the international economy. There are new%
potentially powerful challenges from large states outsi"e the core% like -hina% n"ia
an" Bra>il. +n" large ,merging (arkets like Bra>il are important markets for core
e$porters. But my concern is with the character of relations within the core.
The 7ew Mercantilism in the Triad
7or "eca"es #oth the ,. an" the .S ha!e consistently an" lou"ly presente" a
narrati!e of the history of international economic regimes since /0AB as a progressi!e
<<
See 5onal" ;.@ones% Globali9ation and the Theory of Inp)t Trade(MIT &ress, +222%
<?
+lan (. 5ugman an" +lain Ner#eke% Towar"s a Theory of 5egional (ultinationals: + Transaction
-ost ,conomics +pproach Management International ,e*iew AA 9A: 9Special ssue:9<22A:: ?&/B.
/B
a"!ance towar"s completely open markets an" free tra"e% culminating in the .ruguay
5oun" an" the foun"ing of the ;TC. The impression is thus gi!en that in /0AB we
ha" a gi!en quantum of #arriers an" with each roun" that quantum has #een re"uce".
This is propagan"istic. Tra"e negotiations% le" #y the .S an" the ,.% focus on
opening markets for new growth sectors that they want to "ri!e into international
markets. +n" while new openings are ma"e% new closures are simultaneously often
taking place. The *+TT tra"e roun"s ten"e" o!er the "eca"es to open more an" more
of less an" less: #y the start of the /002s% *+TT co!ere" only a#out BL of worl"
tra"e.
;e will not attempt to pro!i"e here an o!er!iew of the current international tra"e
regime. ;e will focus instea" on aspects of the current tra"e regime most rele!ant to
economic relations #etween the core centres. ;e will 4ust take A e$amples of the
new mercantilism in the tria"% focusing particularly on the .S an" the ,.. 7irst% anti&
"umping policy3 then anti&trust% then 7ree Tra"e +greements an" then two e$amples
of core mercantilism in high tech sectors: the e$amples of semi&con"uctors an"
commercial aircraft.
+nti&Pumping 'olicy
Pumping use" to #e "efine" as selling goo"s a#roa" more cheaply than in your home
market. But since the /012s% .S tra"e law has re"efine" "umping as selling pro"ucts
#elow fair !alue. Since /0I2 a#out F2L of all .S anti&"umping cases ha!e #een
#ase" on this fair !alue concept
<A
.
7air !alue is calculate" #y the .S -ommerce Pepartment #y working out what
shoul" #e the long&run a0era.e costs o+ production in a gi!en in"ustry% an" then
a""ing on a fi$e" IL mark&up to reflect normal profits
<B
: sales #elow that can #e
treate" as "umping #y the .S an" can simply #e "ri!en out of the .S market.
But in in"ustries marke" #y increasing returns to scale = a feature of most in"ustrial
sectors an" especially of high tech sectors && pricing a pro"uct on the #asis of long run
a!erage costs makes no economic sense. ,!en pricing pro"ucts at current marginal
cost is often inefficient. -ompanies typically engage in forwar" pricing = pricing
#elow current marginal cost = particularly in in"ustries which e$hi#it strong learning
economies. This has long #een un"erstoo" in the .S% where it was first spelt out in the
early /0I2s.
<F
7orwar" pricing in this conte$t is not "umping #ut is simply roote" in
the knowle"ge that current marginal costs are #oun" to fall in the future.
<1
Get as
8enneth 7lamm points out pricing #elow a constructe" long&run a!erage cost has
<A
See 'ietro Ni!ola% Tra"e 'olicy: 5efereeing the 'laying 7iel" in Thomas ,. (ann 9e".: A ;)estion
of 5alance( The &resident, the Congress and <oreign &olicy (5roo6ings, !""2%. See also *ary
N.Eorlick% The .nite" States +nti"umping System in @ohn E @ackson an" ,"win +.Nermlost 9e"s.:
Antid)mping aw and &ractice( A Comparati*e .t)dy (1ni*ersity of Michigan ress, !"#"%.
<B
There are also key a"ministrati!e an" accounting rules in the -ommerce Pepts fair !alue
calculations an" these are wi"ely seen as systematically #iasing the system towar"s fin"ings of "umping
an" towar" higher "umping margins. See 5ichar" Boltuck an" 5o#ert ,. )itan% +mericas S.nfairT
Tra"e )aws in Boltuck an" )itan% Down in the D)mps( Administration of the 1nfair Trade aws
(5roo6ings, !""!%
<F
(ichael ). Spence% The )earning -ur!e an" -ometition 5ell 8o)rnal of 'conomics, =ol !+ 9Sring
/0I/:% ppA0&12.
<1
8enneth 7lamm% Mismanaged Trade> .trategic &olicy and the .emi-Cond)ctor Ind)stry (5roo6ings
Instit)tion &ress, !""?% % page ?21.
/F
#ecome the principal groun"s for applying the .S "umping laws to .S imports of
some foreign pro"ucts.
<I
Thus .S anti&"umping policy is a !ery powerful instrument of economic warfare. t
has #een use" on countless occasions. The ,. also engages in a whole range of #ogus
anti&"umping measures for e$actly the same marcantilist purposes as the .S.
+n" howe!er many in"ustrial sectors are ma"e tariff free is irrele!ant in this conte$t:
ri!als can #e hammere" in all such sectors through this mechanism. +n" to a!oi"
#eing hammere" in this way% states are typically require" to intro"uce !oluntary
e$port restraints 9N,5s:% !oluntary price floors etc.
These instruments ha!e #een use" !ery wi"ely against so&calle" emerging markets
such as Bra>il or South 8orea #ut they ha!e also #een use" against @apan. +n" it is
crucially important to note that the anti&"umping weapon can #e use" in all an" any
tra"e sector as a "e!astating protectionist instrument regar"less of how open the sector
may formally #e within the ;TC.
t is also worth noting that the .S has e$hi#ite" a penchant for what Bhagwati calls
aggressi!e unilateralism un"er Section ?2/% Super ?2/ an" Special ?2/ of .S tra"e
law.
<0
This was the main characteristic of .S tra"e policy in the late /0I2s an" the
first half of the /002s. +n" although it was attenuate" after the formation of the
;TC% the Bush a"ministration has shown that this ten"ency is far from "ea". +n" 4ust
as the .S was ne!er actually a legal mem#er of the *+TT = #ecause the .S Senate
woul" not ratify the Treaty = is has only con"itionally accepte" the ;TC Treaty: the
Senates ratification was con"itional upon the rea"iness of the ;TC to make
"ecisions which were fair to the .S.

+nti&Trust
+nti&trust regulation in the .S an" the ,. woul" seem% on the face of it% to #e a pillar
of li#eral ', norms% protecting companies an" consumers from monopolistic
practices. They are often presente" as #astions of li#eral internationalism ensuring
genuine international competition. Tra"itionally% in"ee"% in the .nite" States the key
aspect of competition policy = that on mergers an" acquisitionsUwas geare" to
pre!enting incipient monopoly. +s ,"war" *raham of the nstitute of nternational
,conomics e$plains: .ntil the late /012s% this was "one pretty much without regar"
to whether these "istortions might #e offset #y factors that woul" enhance
efficiencyKThis unwillingness to consi"er efficiency "efences% howe!er% change"
"uring the /0I2s% when these enforcement agencies = the 7e"eral Tra"e -ommission
an" the +ntitrust Pi!ision of the Pepartment of @ustice = upgra"e" their analytical
techniques to recognise that mergers coul" create offsetting efficiencies.
?2
The phrase
a#out upgra"ing analytical techniques is a pleasant little 4oke. ;hat *raham means
is that the rele!ant agencies graspe" that in in"ustries characterise" #y increasing
<I
7lamm% page ?BI.
<0
7or a "etaile"% rather sympathetic account of the use of these measures #y the .S in the /0I2s an"
early /002s see Thomas C. Bayar" an" 8im#lerley +nn ,lliott% ,ecirocity and ,etaliation in 1. Trade
&olicy (Instit)te for International 'conomics, /ashington DC, !""3%
?2
,"war" (.*raham% ,conomic -onsi"erations in (erger 5e!iew in Simon @. ,!enett% +le$an"er
)ehmann an" Benn Steil 9e"s.: Antitr)st Goes Global. /hat f)t)re for Transatlantic Cooeration
(5roo6ings, ,IIA, +222%% age F/
/1
returns to scale% monopoly coul" #e goo" 9for +merican capitalism: if it was 4u"ge" to
enhance increasing returns an" glo#al market "ominance.
The same pattern is !isi#le at the ;est ,uropean le!el: the ,- esta#lishe" a merger
regulation in /0I0. This was suppose"ly to implement article I< of the Treaty of
5ome against the a#use of a "ominant firm position. But the regulation specifically
allows P*N 9the -ommission authority on mergers an" acquisitions: to take account
of efficiency consi"erations in its 4u"gement on mergers. Since in in"ustries
characterise" #y increasing returns to scale efficiency can #e enhance" #y ma$imum
concentration of capital to the point of complete market "ominance for one firm% the
regulation suppose"ly against market "ominance can assure market "ominance in the
name of efficiency. +n" the regulation has the great !irtue = from the angle of
,uropean #ig #usiness = of gi!ing no e$planation of how the efficiency criterion will
relate to other factors: in other wor"s% P*N has more or less complete "iscretion as
to what policy to a"opt on monopolisation.
*raham goes on to e$plain that efficiencies shoul" #e un"erstoo" "ynamically an" not
in a static way. So the authorities can #e tolerant of mergers that create "ynamic
efficiencies e!en if these create some static welfare losses "ue to increase" market
power.
?/
This interesting remark then softens us up for the ne$t. 7or *raham
e$plains: in recent years in the .nite" States an" implicitly in the ,.% merger an"
acquisition re!iew has operate" largely un"er the premise that market concentration is
in most circumstances a self&correcting "istortion. n other wor"s% it is largely hel"
that% if monopoly rents are create" #y merger or acquisition% in the a#sence of greater
efficiency of the merge" enterprise% these rents will in most instances "raw new entry
into the market. This entry% in turn% will correct the inefficiencies create" #y market
power hel" at the outset #y the merge" firm.
?<
This is a piece of cant. + @apanese
company% say% entering the .S or ,uropean market in a gi!en sector for the first time
will not "o so #ecause of the e$istence of monopoly rents on the part of "omestic
pro"ucers. t will "o so if it 4u"ges it can co!er its costs of entry. +n" amongst such
huge o!erhea" costs are those of ha!ing to esta#lish a new "istri#ution system an"
those of ha!ing to face a host of other pri!ileges of the "omestic competitor% not least
their easy access to "omestic political influence. *raham in fact illustrates this when
he says that while the creation of "ynamic efficiency is the key criterion of anti&trust
#o"ies% #ut a secon" #est criterion is to ignore inefficiencies on the groun"s that the
foreign cometition is #oun" to enter the marketQ Thus in a conclu"ing remark% *raham
is honest enough to a"mit% in splen"i" un"erstatement: in #oth 4uris"ictions [ie .S
an" ,.] the threshol"s for challenging a merger or acquisition on groun"s that the
merger creates a monopolyKha!e #een quite high.
t is also striking that there is no enthusiasm in either the ,. or the .S to work for a
glo#al antitrust authority to "eal with (O+ issues on a worl" scale. Get
simultaneously% there are strong ten"encies for each to "efine the rele!ant market for
antitrust cases in !aria#le ways: if the market is 4u"ge" to #e glo#al% then 4ust a#out
any "egree of monopolisation within the 4uris"iction can #e 4ustifie". Get the market
"efinition can #e re"uce"% often quite "rastically% in the case of a foreign firm seeking
an acquisition "omestically which faces strong "omestic opposition. +n" #ecause of
their huge market access power% #oth the .S an" the ,. antitrust authorities are a#le
?/
i#i".page F<.
?<
#i".% page FA
/I
to e$ert powerful e$traterritorial 4uris"iction% with the capacity to 4u"ge% say% mergers
of two foreign firms with some presence in their market #ut with the #ulk of their
acti!ities outsi"e it monopolistic.
To put matters more #luntly we are in a normless an" politicise" >one. Some e$perts
in transatlantic anti&trust openly acknowle"ge this. ,!enett% )ehman an" Steil% for
e$ample% e$plain that antitrust is a political phenomenon an" is therefore su#4ect to
all the normal interest group pressures that affect policy across the spectrumK.the
larger firms that will #e the actual targets of anti&trust inter!ention are far more likely
to #e foreign than "omestic% as the former will ha!e consi"era#ly less "omestic
lo##ying power.
??
Thus% since the late /0I2s in #oth the .S an" the ,. anti&trust policy has #ecome a
political phenomenon in the sense that it targets foreign companies entering the
market much more than "omestic firms. ;e will consi"er later on whether this
mercantilist politicisation is 4ust a rent&seeking flouting of li#eral norms of efficient
markets or whether these li#eral norms themsel!es are groun"less.
7ree Tra"e +greements97T+s:
+nother striking e$ample of how li#eral language is turne" insi"e out is the
proliferation of 7T+s. These are% in reality% key instruments for the mercantilist
e$pansion of accumulation from the main tria"ic centres. The key feature of them is
the fact that they allow free tra"e only in the specifie" pro"ucts of national origin
amongst the contracting states. Thus an 7T+ #etween% say the ,. an" State V will
allow the specifie" pro"ucts from State V into the ,. if the pro"ucts are pro"uce"
either #y ,. companies in State V or #y State Vs own territory&#ase" pro"ucti!e
acti!ities a#o!e !arious specifie" threshol"s. These threshol"s are "esigne" to ensure
that no .S or @apanese (N, coul" enter State V to assem#le pro"ucts for sale in the
,.. They also gi!e state V e$tremely powerful incenti!es to pri!ilege 7P from the
,. in its territory since only ,. companies will #e sure not to face #arriers to entry
into ,. markets.
+t the present time #ilateral 7T+s centre" on each of the tria"ic centres are
proliferating% un"ercutting the multi&lateral principles of the ;TC. They are an
e!i"ent sign of attempts #y each centre to "raw national economies lower "own the
international "i!ision of la#our into "epen"ence on one tria"ic centre as against the
others.
Eigh Tech (ercantilism
Pespite all the neo&li#eral i"eology a#out the efficiency of free markets% a#out the
triumph of free markets o!er states an" a#out the efficiency&necessity for remo!ing
the state from any role other than policing competition% tria"ic state policy in
strategic in"ustrial sectors has #een marke" #y ruthless mercantilism% not least on the
part of the .nite" States. By strategic sectors we "o not mean those with military
significance. ;e mean those which generate chain&reaction effects across many
in"ustrial sectors.
??
+ntitrust 'olicy in an ,!ol!ing *lo#al (arketplace in Simon @. ,!enett% +le$an"er )ehmann an"
Benn Steil 9e"s.: Antitr)st Goes Global. /hat f)t)re for Transatlantic Cooperation (5roo6ings, ,IIA,
+222% pp./A&/B
/0
;e will take two e$amples in or"er to illustrate this theme: semi&con"uctors an"
ci!ilian aircraft. Semi&con"uctors stan" at the top of the in"ustrial foo" chain of the
computer an" electronics in"ustries. -i!ilian aircraft pro"uction is the motor of a
whole range of high tech components sectors which can ha!e economies of scope
lea"ing into other in"ustrial sectors.
.emi-Cond)ctors
n the mi"&/0I2s% @apan achie!e" glo#al "ominance in a"!ance" semi&con"uctor
pro"uction. t ha" achie!e" this "ominance through strongly mercantilist state
in"ustrial support #ut the fact remaine" that it was pro"ucing the highest quality semi&
con"uctors at the cheapest price.
The 5eagan a"ministration complaine" a#out @apanese mercantilism in this fiel". But
it is worth e$amining .S in"ustrial policy in semi&con"uctors as well. The 7e"eral
*o!ernment #etween /0BI an" early /012s "irectly or in"irectly fun"e" #etween A2
an" ABL of all in"ustrial semi&con"uctor 5OP.
?A
By the late /0I2s% 7e"eral fun"ing
of semi&con"uctor&relate" research was running at a#out half a #illion "ollars a year.
+t the same time% o!er one quarter of all semi&con"uctors pro"uce" in the .S "uring
the late /0I2s ha" a capti!e state market in .S "efence agencies alone. +long with
such assistance woul" come a whole range of ta$ #reaks an" ta$ cre"its an" other
kin"s of su#si"ies to #oost the profita#ility an" lower the costs of pro"uction in
semi&con"uctors an" other sectors. Thus in /0I/ the .S -ongress passe" a <BL
incremental ta$ cre"it for 5OP in semi&con"uctors.
?B
Thus we fin" that the entire
"e!elopment of the .S semi&con"uctor in"ustry has #een the result of massi!e state
support.

By the mi"&/0I2s% the @apanese semi&con"uctor in"ustry ha" achie!e" glo#al
lea"ership in semi&con"uctor pro"uction with a#out 12L of the glo#al market. n the
face of this @apanese ascen"ancy% the .S go!ernment "i" not opt for imposing the
rinciles of li#eral free tra"e theory on the @apanese. t opte" instea" for manage"
economics. n /0IF the .S impose" upon @apan the Semi&-on"uctor Tra"e
+rrangement 9ST+:. n /00/ the ST+ was renewe" in a somewhat "ifferent = an"
more e$plicit &&form for another B years% to /00F. n /00<% the approach which the .S
use" on the ST+ was e$ten"e" to car parts. +n" the -linton +"ministration in /00?
in"icate" that it woul" use the approach containe" in the ST+ more wi"ely in its
economic "iplomacy towar"s @apan.
?F

+lthough much .S rhetoric at the time suggeste" that this pose" a national security
threat to the .S in military terms% .S military "eman" for semi&con"uctors ha" #een%
since the late /012s% no longer a "eman" for the most a"!ance" chips. The @apanese
lea" was rather in the ci!ilian% commercial sector.
?1
+t the start of the /0I2s% the .S
go!ernment starte" fun"ing 5OP to counter the @apanese commercial threat in what
was a ma4or policy shift.
?I
The 5eagan a"ministration then "eci"e" to take more
?A
7lamm% pages ?F&?0.
?B
7lamm% page /A1.
?F
Bo# Pa!is% ,conomy: -linton Team to Suggest mport *oals for @apan as Tra"e Talks +proach
;all Street @ournal% <2 (ay% /00?% pp +<% +//
?1
7ramm% page ?I.
?I
This shift was signalle" with the Nery Eigh Spee" ntegrate" -ircuit 'rogramme. See @ohn +.+lic et
al.% 5eyond .pin-off( Military and Commercial Technologies in a Changing /orld (Har*ard 5)siness
.chool &ress, !""+%, p.+?".
<2
"rastic action in the form of manage" tra"e. ;e will #riefly mention the main features
of this pro4ect.
W7rom late /0IF% the .S -ommerce Pept worke" out the prices which each @apanese
chip maker ha" to charge for each of its pro"ucts in the fiel" of P5+(s an"
,'5C(s 9a"!ance" semi&con"uctors:. 7rom (arch /0I1% the -ommerce Pept was
fi$ing price floors for these sales for only in the .S #ut also in /0 other markets
9inclu"ing F ,uropean markets:.
WThe @apanese go!ernment ha" to accept that #y /00< foreign companies woul" ha!e
a <2L share of the @apanese "omestic market in P5+(s.
W (T% the @apanese foreign tra"e ministry% was require" to re"uce #oth output an"
in!estment on the part of specific @apanese semi&con"uctor pro"ucers. Thus a (T
memoran"um in +pril /0I1 circulate" to ;ashington state": n 7e#ruary% (T
e$ercise" a"ministrati!e gui"ance to the companies to re"uce pro"uction "uring the
first quarter of /0I1 #y <?L #elow fourth quarter /0IF le!els. )ast month% (T
again e$ercise" a"ministrati!e gui"ance to the companies to re"uce pro"uction still
further in the secon" quarter to ?<L #elow fourth quarter /0IF le!els.
?0
+n" .S
tra"e negotiators ga!e (T "etaile" "eman"s for limiting in!estments #y @apanese
firms in new capacity well into /0II.
A2

The fact that the @apanese go!ernment ga!e way in the face of these "iktats cannot #e
e$plaine" purely #y the economic #alance of forces #etween @apan an" the .S in the
late /0I2s. n"ee"% that #alance of forces ga!e @apan some potentially "e!astating
economic statecraft instruments for .S against the .S. @apan ga!e way #ecause the
.S was master of the entire geopolitical conte$t in which the @apanese state operate"
an" the @apanese political lea"ership was not prepare" to place that geopolitical
conte$t at risk.
-i!ilian +ircraft 'ro"uction
-i!ilian aircraft pro"uction is another strategic% high tech in"ustrial sector marke" #y
huge economies of scale an" with !ery large spin&offs across relate" sectors. n the
post&war years% the British faile" to e$ploit their opportunities in this fiel" an"
+merican pro"ucers% a#o!e all Boeing% achie!e" ascen"ancy.
n the early /012s the 7rench le" other ;est ,uropean states into the air#us
consortium to mount a challenge to .S "ominance in this fiel". 7or the ne$t twenty
years% Boeing% which ha" emerge" as the "ominant .S player% an" +ir#us were
supporte" #y their respecti!e state sponsors to continue in #usiness. +ccor"ing to the
.S go!ernment% ;est ,uropean go!ernments ha!e gi!en +ir#us preferential
go!ernment loans of more than M/B#n o!er the last B years.
A/
+ccor"ing to the ,.%
Boeing has recei!e" aroun" M<? #illion 9X/1./ #illion: in go!ernmental "e!elopment
ai" since /00<% mostly in the form of military an" N+S+ contracts% research an"
"e!elopment e$pen"iture an" ta$ su#si"ies. The total ..S. *o!ernment in"irect
support of the ..S. ci!il aircraft in"ustry in <22? alone was a#out M<.1A #illion. This
represents aroun" //.0L of the <22? commercial turno!er of the ..S. in"ustry. n
a""ition since /002 Boeing has a!oi"e" paying more than M/.< #illion in fe"eral
ta$es through the use of off&shore 7oreign Sales -orporations 97S-: 9a tactic rule"
?0
Ruote" in 7lamm% page /IB.
A2
7lamm% page /0B.
A/
@effrey ,. *arten% The Big Blowout.;hy the +ir#us&Boeing case coul" wreck the ;TC% an" how to
stop it Newsweek nternational (arch <1% <22B
</
illegal #y the ;TC:. +n" Boeing also recei!es large su#si"ies from +merican state
go!ernments. 'lanne" su#si"ies for Boeings new 1,1 aircraft pro"uction amount to
M?.< Bn from ;ashington State % M2.B#n from 8ansas% an" M2.?B#n from Cklahoma.
A<
The ,. also claims that Boeings @apanese su#contractors% who will pro"uce a#out
F2L of the new 1,1U(itsu#ishi% 8awasaki an" 7u4i Eea!y n"ustries && recei!e
more than M/ #illion in su#si"ies from @apanese state sources. Cn the other si"e% the
.S go!ernment claims +ir#us is mo!ing the same way% ha!ing recently cut a "eal
with state&owne" -hina +!iation n"ustry -orp.
A?
n the last three years +ir#us has o!ertaken Boeing in share of the worl" market. n
/00?% Boeing controlle" a#out 1? percent of the market in /00?. But /2 years later% its
share of the worl" market "roppe" to AI percent. +ir#us sol" ?2B aircraft in <22?%
compare" with BoeingJs <I/. +n" in <22A% +ir#us "eli!ere" ?<2 planes compare" to
<IB from Boeing.
AA
+gainst this #ackgroun"% the .S go!ernment has threatene" to
take +ir#us to the ;TC for illegal state su#si"ies an" the ,. has respon"e" #y
threatening to take Boeing to the ;TC on the same groun"s. But the key point is that
the reality of inter&tria"ic competition in high tech sectors such are large ci!ilian
aircraft is !ery far from the neo&li#eral i"eological claims assi"uously promote" #y
#oth the ,. an" the .S. +n" the picture in semi&con"uctors an" aircraft is far from
unique. n"ee"% at the launch of +ir#uss new +?I2 super4um#o in @anuary <22B%
'resi"ent -hirac of 7rance hel" up the +ir#us 4oint go!ernment&company in"ustrial
mo"el as the way forwar" in other sectors% mentioning specifically energy% transport
an" me"icine.
AB
The Conse@)ences Ind)strial ,i*alry within the Triad and the C)rrent .tate of
relations
Cne consequence of "eca"es of in"ustrial ri!alry in high tech sectors within the core
is that the .S is no longer in"ustrially hegemonic. t has lea"ership in some sectors
#ut not in others. The claims of 'oulant>as in the /012s% cite" #y )eo 'anitch% no
longer hol" goo" to"ay. There is real inter&"epen"ence of the three centres at the top
of the international in"ustrial "i!ision of la#our to"ay after all the #itter struggles #y
the .S to weaken @apan in se!eral sectors through imposing manage" tra"e on
@apanese pro"ucers in the /0I2s an" /002s.
+nother consequence is that there are #oun" to #e further tense confrontations in this
area in the future insofar as the lea"ers of +merican capitalism percei!e a threat of
"efeat in what they regar" as "ecisi!e% strategic new growth sectors 9with Boeing&
+ir#us as simply the latest e$ample:. f% for e$ample% a whole new growth sector
emerge" in say energy alternati!es to oil in transportation% it coul" set of a new roun"
of intense% politicise" inter&state competition.
Tensions "i" ease greatly in this fiel" "uring the /002s for a num#er of reasons:
7(
,uropean -ommission% ,. = .S +greement on )arge -i!il +ircraft /00<: key facts an" figures
9(,(C62A6<?<% Brussels% F Ccto#er <22A:
A?
*arten% The Big Blow Cut
AA
..S.&,. +ircraft Talks Stalle" C!er +ir#us +i" 'ush% 'eople Say% Bloom#erg% (arch <<% <22B
AB
*arten% The Big Blow Cut
<<
/. The enormous profits growth for the .S financial sector from the opening up
of the financial sectors of other states an" from the enormous e$pansion of
worl" "e#t markets 9#on" markets:% centre" in New Gork an" )on"on.
AF
<. .S ascen"ancy in telecoms an" T.
?. The .S #oom6#u##le from /00B.
A1
A. The spatial e$pansion of capitalism into the former So!iet Bloc an" the new
opportunities for core capitalisms in the ,ast an" South ,ast +sian New
*rowth -entre.

But all these phenomena are con4unctural% not structural.
The Attempted Anglo-American Drive for a Revolution in the Institutional forms
and ulturse of apitalism
But since the /002s% there has #een a concerte" effort #y the .nite" States an" Britain
to reshape the institutional forms an" cultures of capitalism within the Tria". This can
#e "escri#e" as a "ri!e for a cultural shift #ecause it in!ol!es persua"ing the capitalist
classes of the core to reconfigure their i"entities #y turning themsel!es into rentiers or
representati!es of money capital. n this way their interests will shift in the "irection
of ma$imising returns on royalties. t will also in!ol!e a cultural shift from the
relati!ely small "ifferentiations of income #etween managers an" in"ustrial workers
in these countries.
(oney capital a"!ances money to others in or"er to make more money in the form of
royalties 9returns on #on"s% shares% #ank loans% mortgages an" their "eri!ati!es: or
capital gains. 5entiers earn their li!ing from such royalties an" capital gains.
Cne of the most striking features of +nglo&Sa$on capitalism o!er the last <2 years
has #een the rise of the power of the rentier an" the money capitalist. ,!er since the
emergence of the 4oint stock company the rentier has ha" an important place in
capitalism 9an" earlier in fun"ing state acti!ities% especially wars an" speculati!e
!entures #y state tra"ing companies:.
But since the late /0F2s% there has #een the "ramatic growth of the power of the
money capitalist an" rentier interests in the +nglo&Sa$on worl".
AI
-han"ler highlights
this phenomenon at the en" of his #ook% .cale and .cope an" notes its historical
no!elty. Eis account highlights a con4unction of < tren"s in the .S% one in the
in"ustrial sector an" one in the rise of rentier interests% !ia mutual fun"s an" pension
fun"s. Eis remarks on the in"ustrial sector are particularly intriguing. Ee notes the
appearance in the .S in"ustrial sector in the late /0F2s of conglomerates an" of a
mania for mergers an" acquisitions% an" alongsi"e this he notes the cutting of the link
#etween the top management of .S in"ustrial companies an" management at the
operating le!el.
A0
n the .S case from the late /0F2s% top managements then engage"
in #oth mergers an" sell&offs to generate ma$imum cash returns.
AF
See the work of *erar" Pumenil an" Pominique )e!y on this.
A1
But see Bo# Brenner% The 5oom and the 5)bble
AI
ha!e attempte" to "escri#e this in The Global Gamble.
A0
The only parallel he can fin" for this is in *erman capitalism in the chaotic con"itions 4ust after
;orl" ;ar / when there was the 8on>ern mo!ement% a tren" similar to the conglomerate phenomenon%
#ut a tren" which "isappeare" with the en" of the hyperinflation. -han"ler% page F<<
<?
The con4unction of this tren" with the rise of the mutual fun"s an" pension fun"s%
tra"ing e!er larger #locks of shares on the stock markets then #egan to generate an
entirely new market in the #uying an" selling of corporations.
B2
The mutual an"
pension fun"s were the new owners of .S in"ustry an" they ha" their own acti!e
agen"a for managing it in the ser!ice of short&term returns. This tren" was further
strengthene" in the /0I2s with the huge rise of the .S #on" markets an" especially of
the 4unk #on" market.
Thus we can fin" the rise of a rentier6money capitalist tren" which em#races not only
the fun" managers an" in!estment #anks #ut also top management of in"ustrial
corporations.
Cne way of thinking a#out this tren" is to !iew it as a "istancing of the lea"ing
sectors of the capitalist class from any close connection to the actual pro"uction of
use&!alues in any particular sector. (oney capital tells all sectors to ma$imise short&
term share price or risk either capital flight or a hostile #uy&out. The use of 4unk
#on"s to finance #uy&outs% first starte" #y outsi"ers in the .S in the early /0I2s was
then a"opte" #y the ;all Street mainstream in the late /0I2s.
(any ha!e seen this tren" as a way of generating a powerful new kin" of offensi!e
against la#our% in!ol!ing "ownsi>ing% "ownwar" pressure on wages% the lengthening
of working hours an" the remo!al of employment rights. +ll this is true. t has also
in!ol!e" an e$traor"inary enrichment of #oth top in"ustrial management an" the
financial ser!ices in"ustry in the +nglo&Sa$on worl".
There has #een intense pressure from the +merican state as well as the +merican
#usiness class an" #usiness me"ia to sprea" this mo"el across the rest of the core. The
attractions of this new capitalist culture for other capitalist classes are o#!ious: the
huge potential pecuniary gains for in"i!i"ual capitalists are o#!ious. ;ith the
pri!atisation of pu#lic utilities in other centres there has also #een a huge e$pansion of
stock market listings an" of stock market acti!ity% encouraging the growth of the
money&capitalist6rentier groups across the core.
But there are other "imensions of this "ri!e: the effort to harmonise stock&market
regimes% corporate go!ernance regimes an" accounting stan"ar"s along +nglo&
+merican lines an" to open up all economies to the mo!ements of short&term fun"s in
an" out of 4uris"ictions an" to ena#le financial operators to work with national
treatment in other 4uris"ictions.
+ll this is legitimate" as a tren" towar"s economic glo#alisation an" as the
"e!elopment of a much more efficient form of capitalism. Get it is% in reality% a tren"
towar"s e$pan"ing +nglo&+merican institutional regimes an" cultures across the core.
+n" when we look at the "ifferences #etween the +merican internal institutional
regimes an" those of% say% *ermany an" @apan "uring the whole post&war perio"% the
most striking "ifference is the way in which the financial&in"ustrial linkages in
*ermany an" @apan were precisely geare" towar"s a long&term effort at in"ustrial
upgra"ing an" in!estment that woul" compensate for the much larger scale of the
B2
(assi!e growth in the ratio of shares tra"e" to total shares on NGS,: early /0F2s /<&/FL3 mi"&
/0I2s o!er B2L. 5ise of #lock tra"ing: /0FB only ?./L of total tra"es3 #y /0IB B/L. The rise in the
!olume of total transactions annually on NGS,: /.B#n in /0FB3m<1.BBn in /0IB. +ll this meant the rise
of an institutionalise" market for corporate control. -han"ler% page F<B.
<A
+merican internal market. The +merican economy "uring its perio" of in"ustrial
ascen"ancy ha" not require" such a concerte" financial&in"ustrial linkage. +n" #y
a#olishing these linkages in *ermany an" @apan% +mericanising their institutional
structures% +merican capitalism gains a strategic national a"!antage o!er these other
centres.
(ore than that% the +nglo&+merican systems contain huge pension fun"s whose
enormous financial resources can #e mo#ilise" for hostile #uy&outs in% say% *ermany
or @apan% if their systems of corporate go!ernance make them !ulnera#le to such
hostile #uy&outs. Thus the suppose" "isconnection #etween money&capital an" the
pro"uction of use&!alues in particular sectors may #e far from complete. Cn the
contrary% the shift to financialisation an" away from in"ustrial capitalism may #e%
instea"% a new strategy for pursuing in"ustrial competition #y other = financialise" =
means.
Eere we see the way in which .S market forces an" the .S state can work together
using "ifferent languages #ut achie!ing common goals. 7or .S money capitalists%
*erman an" @apanese companies are currently grossly un"er!alue" in stock market
terms% precisely #ecause managements "o not e$tract !ast streams of income from
their pro"ucti!e acti!ities for themsel!es an" the sharehol"ers. f these companies
were restructure" on +nglo&+merican lines much greater streams of !alue woul" go
to the rentiers an" thus the market !alue of the companies woul" soar. This gi!es .S
financial operators a great incenti!e for seeking to #uy these companies. nsofar as
they can #uy them at something like their e$isting stock market !alue% the #uyers can
make an enormous killing. +t the same time the restructuring of these companies in
that way will precisely make them una#le to engage in long&term strategic
in!estment an" upgra"ing to compensate for .S companies scale a"!antages. By
applying the .S corporate go!ernance regime in a huge integrate" economy to
companies in much smaller integrate" economies% .S capitalism will gain a key
a"!antage.
This is precisely how the +merican financial glo#alisation "ri!e is !iewe" #y
powerful sectors of the ruling classes of #oth *ermany an" @apan. The e$perience of
South 8orea in an" after the ,ast +sian crisis of /001 strongly confirme" these
concerns as foreign companies e$ploite" the .S Treasurys restructuring package to
gra# large chunks of 8orean assets at knock&"own prices. The 9British: No"aphone
take&o!er of (annesmann in *ermany in /00I arouse" similar concerns in *ermany
an" le" to the criminalisation of the (annesmann management for recei!ing large
personal pay&offs in e$change for the acceptance of the "eal = something consi"ere"
normal in the +nglo&Sa$on worl". ,$actly the same #attle is #eing wage" in @apan at
present.
t is e!i"ently the case that the +nglo&+merican coalition has powerful allies in
continental ,urope an" in @apan. Both the Bank of @apan an" the ,-B ha!e #een
using tight% "eflationary monetary policies to e$ert pressure on the capitalist classes
an" on la#our to restructure in an +nglo&+merican "irection.
B/
These central #anks
reflect precisely the interests of money capital6rentier interests an" e$ert an enormous
political influence on economic life. But it woul" #e quite wrong to imagine that this
B/
See two !ery important stu"ies #y 5ichar" ;erner: &rinces of the Aen% an" 7ew &aradigm in Macro-
economics.
<B
struggle is alrea"y won #y the +nglo&+merican camp. n"ee"% in ,urope there has
#een a fifteen&year #attle o!er efforts to esta#lish an +nglo&+merican form of
corporate go!ernance in the ,.% ena#ling hostile #uy&outs% with the British lea"ing
the #attle% supporte" #y smaller ,. capitalisms like the Putch an" Belgians whose #ig
capitals e$pan" through mergers an" acquisitions elsewhere. But in <22?% the *erman
go!ernment sei>e" on Britains isolation an" possi#le "efeat on working hours rules
in the ,. to offer a "eal: in e$change for *erman support for Britain to keep long
working hours% Britain shoul" support the *erman stance against a corporate
go!ernance regime allowing easy hostile #uy&outs. The British accepte" the "eal. +n
unname" Bush a"ministration official "eclare" that the "ecision meant that *ermany
was not open for #usiness. (eanwhile in @apan in <22A successful resistance was
mounte" to .S pressure for firms engaging in hostile #uy&outs to #e a#le to offer their
shares as payment for acquisitions. +t the same time% there are in"ications that
@apanese capitalists are prepare" to shift to the +merican mo"el of corporate
go!ernance 4ust so long as ownership of companies remains mainly in @apanese han"s.
B. International 'onetary Relations A+ter Gold
nternational economic acti!ity un"er capitalism requires an international money
stan"ing a#o!e the "omestic currencies of states.
B<
n the early phase of the
"e!elopment of capitalism% this pro#lem was sol!e" #y using commo"ity money =
gol" an" sil!er. The !alue of #oth was constraine" at the margin #y their pro"uction
cost an" they thus containe" an intrinsic !alue as commo"ities. They coul" thus stan"
a#o!e national currencies an" form the unit of account for international transactions
an" form the #asis for esta#lishing e$change rates #etween "ifferent national
currencies. But using a commo"ity money was !ery restricti!e gi!en the limite"
supply of these commo"ities% so international money came to #e a mi$ture of a top
national currency an" gol": first the gol"&sterling system% then the gol"&"ollar system
up to /01/. The top currencies ena#le" a huge e$pansion of international cre"it money
in a""ition to gol" an" thus facilitate" an enormous e$pansion of international
monetary emission. +t the same time% the top currency state guarantee" the
e$changea#ility of its currency for gol" at a gi!en% fi$e" e$change rate. These
arrangements pro!e" their worth for a su#stantial perio" of time in the history of
international capitalism. The top currency state gaine" !ery large seignorage
pri!ileges from its role #ut also face" significant constraints on its economic policy: it
ha" to keep its currency as goo" as gol". This ensure" that capitalists e!erywhere
coul" make rational calculations of the likely profita#ility of any international
transactions which they might wish to engage in: they coul" use the top currency as
the measuring ro" of their likely returns. +n" the top currency coul" also act as a store
of !alue for states an" in"i!i"ual capitalists.
+t the same time an international monetary system un"er capitalism requires
mechanisms for tackling im#alances in international payments% for a"4usting
e$change rates% an" for tackling international panics% cre"it&crunches an" other such
"istur#ances. These are highly politicise" issues an" ten" to push capitalist states
towar"s seeking some kin" of collegial worl" state authority for han"ling these
issues in inter&state relations. Get it is e$tremely "ifficult for capitalist states to
commit themsel!es to accepting their own su#or"ination to such an authority. There
B<
Barter relations "o% of course% take place un"er capitalism% #ut they are e$tremely inefficient an"
confine" to tra"e in goo"s.
<F
was such a collegial management system with rules un"er the pre&/0/A *ol"
Stan"ar"% #ut inter&war efforts to re#uil" it faile": Britain was no longer strong enough
to lea"% while the .S% though strong enough was unwilling to "o so. +fter the secon"
worl" war% the new Bretton ;oo"s supranational authority was% in effect% impose" on
the other main states #y one state = the .nite" States = which possesse"% at the time
all the capacities to impose such rules. The British negotiator with the .S Treasury%
8eynes% was una#le to persua"e the +mericans to esta#lish a genuinely supranational
state&like monetary authority issuing its own international cre"it&money an" policing
the international monetary system% tackling international crises% tackling chronic
im#alances an" "eci"ing on e$change rate a"4ustments.
But the Bretton ;oo"s rules were at first too restricti!e for the ,uropean capitalisms%
which thus a!oi"e" their full application until /0BI. They were then foun" to #e too
restricti!e for the .S% a#o!e all #ecause they require" the .S either to manage its own
economy so that the "ollar remaine" as goo" as gol" or that the .S authorities
com#ine "omestic retrenchment with a negotiate" "e!aluation of the "ollar. So the
Ni$on a"ministration "eci"e" to scrap the Bretton ;oo"s regime an"% for the first
time in the history of capitalism make the currency of one state the international
money with accepting any policy constraints on .S management of the "ollar.
+merican political power ga!e it the a#ility to #lock any alternati!e arrangement%
there was no other alternati!e international money% an" the .Ss successful
manoeu!res to li#erate pri!ate financial flows an" to make New ;ork an" its )on"on
off&shore satellite financial market the "ominant international financial centres
ena#le" "ollar "ominance to #e maintaine".
But the result has #een a structural source of tension an" conflict in the ',. These
tensions "eri!e first from the refusal of the .S authorities to create the con"itions for
sta#le e$change rates #etween the main currencies3 or to put the same point another
way% the .S Treasurys rea"iness to swing the "ollars !alue upwar"s an" "ownwar"s
in line with the percei!e" macro&economic management requirements of the .S
alone. This makes international economic e$changes "enominate" in "ollars
e$tremely ha>ar"ous for countries that "o not confine almost all their international
transactions within the "ollar >one. The huge swings an" !olatilities in the fore$
markets ha!e generate" an enormous set of "eri!ati!es markets #ut these "o not
tackle the pro#lem since he"ging contracts last no more than F months.
n #oom phases of the .S economy% the .S authorities encourage the "ollar to rise%
sucking in capital from a#roa"% keeping interest rates an" pro"uct market inflation
low3 in recessionary phases% the .S authorities seek to swing the "ollar "own%
re"ucing their "ollar&"enominate" international "e#t o#ligations while seeking to
generate a "e!aluation&"ri!en mercantilist e$port "ri!e. These swings ra"ically
transform the macroeconomic con"itions of the rest of the worl"% #ut in the a#sence of
an alternati!e international monetary unit% the .S can hope to maintain "ollar
"ominance.
+t the same time% the .S authorities ha!e e$ploite" "ollar "ominance to allow a large
gap to arise #etween its state resource commitments to "omestic .S constituencies
an" its state fiscal capacity to pay for these commitments. Successi!e .S
a"ministrations ha!e felt a#le to "o this on the #asis of an assume" permanent
"ominance of the "ollar. They can thus hope to #orrow en"lessly from a#roa" in the
<1
knowle"ge that the "e#ts can #e ser!ice" in "ollars% which the +merica state itself
pro"uces.
+n" the "ollars "ominance has also le" successi!e .S a"ministrations to ignore the
.S current account constraint% allowing huge "eficits in that fiel"% "eficits which tie
foreign pro"ucers into "epen"ence on market access to the .S an" thus gi!e the .S
le!erage o!er the shaping of these e$porters internal political economy regimes for
the #enefit of the e$pansion of .S capitals.
This kin" of imperial "ollar policy then generates precautionary mercantilist policies
on the part of the other core centres% policies geare" to maintaining permanent current
account surpluses% strengthening their cre"it power% generating lower interest rates an"
a"opting a "eflationary macroeconomic policy #ias.
;hile the @apanese sought to protect their capacity to generate current account
surpluses #y "eli#erately pre!enting the emergence of the Gen as a reser!e currency
9thus hoping to pre!ent steeper yen re!aluations: the *erman authorities ha!e #een
prepare" to allow the Pmark to "e!elop a reser!e role% forming first the Pmark >one
9the ,(S: an" later ,urolan". This then poses a significant potential alternati!e
reser!e currency to the "ollar.
These strains in the international monetary fiel" ha!e% of course% ha" e$tremely
negati!e impacts on countries outsi"e the core. +n" while all monetary authorities
ha!e a strong interest in maintaining an open worl" economy an" the monetary
con"itions for continue" e$pansion of the worl" economy% the contra"ictions of this
system coul" e$plo"e in either the international economic fiel" or the international
political fiel" or #oth.
;e can spell out some possi#le scenarios:
/. The increasing e!olution of the international economy into three regional #locs
#ase" on regional moneys 9with the emergence of an ,ast +sian monetary
>one = something which the @apanese state is clearly now seeking to esta#lish:.
This woul" ine!ita#ly threaten "ollar "ominance.
<. The esta#lishment of a fi$e" e$change&rate regime #etween ,urolan" an" ,ast
+sia. This woul" sharpen the tren" in 9/:.
?. + precipitate collapse of the "ollar in the face of which the other centres
refuse" to pro!i"e uncon"itional "ollar "efence% generating strong ten"encies
towar"s imposing a protectionist&mercantilist tra"e regime in the .S.
A. + an international financial crisis in which co&operation from the three main
centres #roke "own.
None of these scenarios will necessarily materialise. But all are perfectly possi#le.
+n" they constitute a real% structural source of tension in the ',.
PART 8! A NE& %TR)CT)RA# %$)RCE $* C$N*#ICT IN P$#ITICA#
RE#ATI$N% &IT"IN T"E C$RE
n 'art we argue" that the "istincti!e features of capitalist international politics are
the way lea"ing capitalist powers seek to #uil" political communities of states un"er
their lea"ership. This is achie!e" in the first place #y #ecoming the protector power
<I
o!er the state or its e$isting internal regime. t then in!ol!es constructing a political
i"entity for the new community of states #y generating common political !alues
share" #y #oth the protector state an" the su#or"inate state. These common !alues
then ha!e the effect of legitimating the lea"ership of the "ominant state o!er the
su#or"inate state. This was precisely the system employe" #y the .S to turn the
entire capitalist worl" into a single political community un"er its lea"ership after the
secon" worl" war. But with the collapse of the So!iet Bloc this political empire has
#een "amage" in two ways. The protector mechanisms ha!e #een weakene". +n" the
common political !alue system legitimating +merican lea"ership of the community
has #een un"ermine".
The post1war political system in the Capitalist Core! a Community under
Primacy
ha!e written a#out the political system of the core elsewhere an" will confine myself
here to a few !ery #rief points.
The key concepts in +merican post&war gran" strategy were% in the political fiel"%
those of what% in the 4argon of +merican gran" strategy is calle" primacy: this
means the "irect .S management of the security pro#lems of the other main centres3
secon"ly% the concept of shaping the security en!ironment of the other main centres
in such a way that they woul" fin" themsel!es wanting .S protection an" primacy3
thir"ly the concept of hu#&an"&spokes alliances in the military&political fiel"%
ensuring that the other centres "i" not 4oin up with each other in regional caucuses
that coul" thus acquire autonomy an" mount their own 4oint efforts to #uil" their own
spheres of influence.
+ll these concepts match the .S e$perience "uring the -ol" ;ar. The .S !ictory in
;orl" ;ar Two ga!e the .S primacy o!er *ermany an" @apan an" the militarise"
confrontation with the .SS5 then consoli"ate" that primacy for A2 years. The .S
shape" the en!ironments of *ermany an" @apan through the militarise" confrontation
with the .SS5 in such a way that their !ery sur!i!al "epen"e" on the protection
offere" #y .S strategic ser!ices. +n" the .S organise" its security alliances at each
en" of ,urasia as hu#&an"&spokes systems. n N+TC for e$ample% there coul" #e no
,uropean military&political caucus. ;est ,uropean states military&political relations
with each other ha" to pass through ;ashington. 7rench efforts to challenge this
faile" repeate"ly.
These military&political arrangements forme" a crucial #ackgroun" to the lea"ership
role which the .S playe" in the ',. ,!en when the .S was weakene" in relati!e
in"ustrial power an" in international financial capacity% it coul" maintain its
"ominance o!er the international political economy regimes% acting unilaterally in the
monetary fiel"% engaging in what Baghwati has calle" aggressi!e unilateralism in the
tra"e fiel"% etc. t coul" "o so% #ecause it knew that if political conflict within the core
escalate"% each rung of the escalation la""er le" towar"s the sphere in which the .S
remaine" o!erwhelmingly "ominant: the military&political sphere.
t is important to note that .S military power was fungi#le in "isputes with allies
#ecause the allies knew that the .S coul" make mo!es in their en!ironment which
coul" make them more !ulnera#le or coul" e$ert negati!e pressures upon them. .S
military&political "ominance was ne!er use" to "irectly threaten its allies militarily.
<0
Cne crucial a#ility was the a#ility of the .S to configure the political en!ironment of
their allies in such a way that they woul" feel "epen"ent on the .S to protect their
security. The other crucial a#ility was then to "raw them into a political community
of share" political !alues legitimating .S "ominance with the political community of
states.
The Breaches created by the %o0iet Bloc Collapse and the Rise o+ China
The So!iet Bloc collapse then pro"uce" a para"o$: on the one han" it ga!e the .S a
military "ominance o!er all other states in the worl" without historical parallel3 #ut on
the other han"% it cause" two serious pro#lems for the political "ominance of the .S:
/. it greatly re"uce" the "epen"ence of the ;est ,uropeans on the .S for their
security an" it somewhat re"uce" = though to a lesser e$tent = such security
"epen"ence on the part of the ,ast +sian centres of capitalism. This re"uction
of "epen"ence was a "ou#le one: the en" of the threat of a war with the So!iet
Bloc3 #ut also the en" of the threat from ra"ical leftist mo!ements to their
capitalist property aroun" the worl".
<. it "estroye" the free&worl" =-ommunist totalitarianism clea!age which
generate" the political !alues which "efine" the .Ss political community.
The /002s thus witnesse" geopolitical flui"ity across the whole of ,urasia% as 5ussia
an" the former So!iet Bloc mo!e" towar"s capitalism an" as -hina "i" the same. Two
possi#ilities arose: first that new regional security arrangements coul" e$clu"e the
.nite" States. 7or e$ample% with 5ussia an" the former So!iet Bloc esta#lishing a
collecti!e security regime with the ;est ,uropeans or for e$ample% with -hina an"
@apan esta#lishing a new ,ast +sian collecti!e security regime. But secon"ly% that
whate!er the precise security configurations% the role of .S military power as !alue"
coinage in international politics coul" #e massi!ely "e!alue" as security issues coul"
#e sol!e" through transparent% Treaty&#ase" collecti!e regimes.
+s a result of these new challenges% successi!e .S a"ministrations ha!e sought to
#uil" an entirely new configuration of political relations across ,urasia% one that
woul" ensure a series of new mutual "epen"encies on the part of all the great powers
there on the .S. Simultaneously% the .S has sought to maintain an" enhance the !alue
of military capa#ilities in international politics.
t has ha" mi$e" results. The ;est ,uropeans engage" in what call su#!ersi!e
#an"waggoning in the face of .S efforts to make N+TC the central political
institution in the new ,urope. They rolle" with the thrust of N+TC enlargements an"
.S manoeu!res in the ;estern Balkans. But they simultaneously sought to #uil" their
own ;est ,uropean political caucus 9through the -7S' an" the ,SP':. They also ha"
a "iplomacy of military&power "e!aluation. +ll this #uttresse" their construction of
,urolan" an" of an integrate" ;est ,uropean centre. The .S has ha" much more
success at keeping @apan an" -hina "i!i"e" #ut it has also face" attempts to "e!alue
military power there% nota#ly from South 8orea.
+t the same time the -linton a"ministration faile" to fin" an effecti!e transnational
set of political !alues that coul" #in" the capitalist worl" into a political community
go!erne" #y share" !alues legitimating +merican lea"ership. The -linton
a"ministration trie" to promote the concept of a political community unite" #y
li#eral human rights an" "emocracy an" campaigning for a cosmopolitan triumph of
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these !alues. But this turne" out to #e worse than ineffecti!e. n the first place% the
,uropean .nion ha" the capacity to present itself as a far more principle" an"
effecti!e promoter of human rights an" "emocracy on a glo#al scale Secon"ly% it
pro!e" a#le to turn these !alues against aspects of .S militarism 9with the --
threatening to criminalise !arious aspects of .S targeting an" !arious .S weapons
systems:. +n" the whole campaign fitte" with a more general effort on the part of the
,. to marginalise" the use of military force to humanitarian an" peacekeeping
operations while trying to insist on .NS- man"ates for aggressi!e military action
9e$cept where the ;estern Balkans was concerne":.
The Bush a"ministration has attempte" to fight this challenge with this with its
campaign against international terrorism an" rogue states with ;(P. This has also
assiste" the Bush a"ministration to re!alue military power% something it has
assi"uously pursue" #y a#rogating% weakening an" #locking a whole host of treaty&
#ase" arms control an" arms re"uction regimes. +n" the more !igorous .S thrust into
-entral ,urasia an" into the oil centres of the *ulf an" -aspian ha!e e!i"ently #een
aime" at creating a new range of "epen"encies on .S power on the part of all the
,urasian powers. This "ri!e for war against raq was also e!i"ently articulate" in such
a way as to split the ;est ,uropeans an" to factionalise ,urope in such a way that its
future unity woul" "epen" upon +merican permission.
The ultimate goal of this ;ashington strategy woul" #e to achie!e what coul" #e
calle" +merican glo#al go!ernment% to #e legitimate" through a reforme" .N an"
through what the ;ashington 4argon calls the re!i!al of strong alliances =
hegemonic political alliances with allies. n"ee" the Bush campaign shoul" #e !iewe"
as a tactical operation towar"s the strategic goal of refiguring the .N an" the .Ss
own alliances in such a way that the .S can re&attach itself to a political community
of share" !alues as a way of re&legitimating its glo#al "ominance.
But while this is still not achie!e" we ha!e a structural source of intra&core conflict in
the political fiel"% with 7rance an" *ermany still trying to #uil" a semi&autonomous
political community of share" political !alues un"er their lea"ership with a
,uropeanist #ase #ut with a uni!ersalist&cosmopolitan mission statement. They are
seeking to control their own imme"iate en!ironment an" to esta#lish their own
political autonomy with a !iew to seeking a 4oint lea"ership of a common e$pansi!e
political pro4ect with the .S. The lea"ership of the .S capitalist class is seeking to
resist this an" restore .S primacy% this time on a truly glo#al scale.
C$NC#)%I$N
The aim of this paper has #een to suggest some key systemic features of capitalist
international politics an" international economics an" to point to some structural
sources of continuing conflict within the capitalist core. ha!e argue" that these e$ist
in the economic fiel" of in"ustrial competition% in the economic an" political fiel" of
international monetary relations an" in the political fiel" of capitalist political
community&#uil"ing.
The paper contains !ery large gaps: it a#stracts from core capitalist relations with the
rest of the capitalist worl"% yet these relations are o#!iously e$tremely important. t
also "oes not e$plore the #ases of cooperation #etween the main capitalist centres.
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+n" one of these #ases is surely the fact that all three core centres an" particularly the
two +tlantic centres% can frequently fin" a large range of important ways in which
they can ease tensions #etween them at the e$pense of countries in the South. They
can also pursue mutually a"!antages strategies towar"s the South = an e!i"ent reality
in their common efforts in the nternational 7inancial nstitutions an" in the ;TC.
f the arguments in this paper are more or less right% then think )eo&'anitchs an"
Sam *in"ins argument && that we alrea"y ha!e an integrate" .S empire across the
core in which the .S lea"s a glo#al capitalism = is premature. +t the same time% the
approach of this paper "oes not point towar"s an irre!ersi#le hegemonic "ecline on
the part of the .S.
Cn the other han"% this paper says nothing a#out the rise of -hina an" it is perfectly
possi#le within the logic of this paper that some "eca"es hence -hina might mount a
formi"a#le challenger to .S "ominance. But to "o so it woul" ha!e to turn its internal
scale potentialities into a reality in the in"ustrial fiel" an" it woul" ha!e to fin" a way
of organising a hegemonic transition% perhaps #y #ecoming a generator of further
antagonisms within the current core while a"opting a strictly pacific posture in
international politics = the tactic which the .S the .S itself pursue" in the inter&war
perio".
Throughout this paper the term imperialism has not #een "iscusse". But we woul"
argue that it shoul" #e un"erstoo" as effecti!e control of the internal political&
economy regimes of other capitalist states an" effecti!e control of the political&
economy an" military&political linkages of these other states with the rest of
international or"er. But if such a "efinition of imperialism was a"opte" it woul"
make the concept a relati!e one% in!ol!ing more an" less "egrees of imperial control.
But some such concept is nee"e" in or"er to ena#le us to grasp the ways in which
powerful capitalist states seek an" achie!e sta#le "ominance o!er other capitalist
states. Ctherwise we risk falling either for the foun"ationless claims for norm&#ase"
solutions to inter&capitalist relations pushe" #y li#eral theorists or for what @ustin
5osen#erg has rightly calle" the follies of glo#alisation theory.
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