Sociology of Globalization

Eroding Commitments to National Boundaries

Now. I find it fascinating to contemplate the fact that the new configurations that have come to compete with the authority of established disciplines resemble developments within the universe of nation-states. Just as allegiances to disciplinary fields have had to compete with intellectual alliances that I have glossed as subdisciplinary, transdisciplinary, and supradisciplinary, so over the past generation, commitments to national political entities have been weakened by the spread of allegiances that are subnational, transnational, and supranational in scope.

The locus classicus for formulating the dynamics of subnational loyalties is a paper written in 1962 by Geertz. “The Integrative Revolution.” That paper identifies two powerful, interdependent, and often opposed motives: the desire to be recognized as a responsible person whose wishes, acts, hopes, and opinions “matter,” and the desire to build an efficient, dynamic modern state. The one aim is to be noticed: it is a search for identity, and a demand that the identity be publicly acknow- ledged as having import, a social assertion of the self as “being somebody in the world.” The other aim is a demand for progress – for a rising standard of living, more effective political order, greater social justice -and for playing a part in the larger arena of world polities.

As Geertz formulated the matter, tension between these two motives is a central driving force in the evolution of nations, yet one of the greatest obstacles to such evolution. The tension gets exacerbated in the new states, because of the accelerating importance of the sovereign state as a positive instrument for

pursuing collective aims, when people’s sense of self remains bound up with attachments based on blood, race, language, locality, religion, or tradition – attach- ments that Geertz designated generically (following Shils) as “primordial” ties.

A decade later Geertz was chagrined to note that the tensions among primordial groups that he had associ- ated with the new states of Africa and Asia were by no means limited to those countries. When republishing his essay he confessed that in 1972

my passage about the declining role of primordial divisions in “modern” countries seems, to put it mildly, rather less convincing than [it] did in 1962, when this essay was originally written. But if events in Canada, Belgium, Ulster, and so on have made primordial definition seem less predominantly a “new state” phenomenon, they have made the general argument developed here seem even more germane.

Two decades after that, the assertion of subnational identities based on primordial ties had become one of the fastest-spreading social phenomena in the world, ranging from the benign move to legitimate a dozen provincial languages and dialects in France to con- flagrations in Eastern Europe and Northeast Africa.

The remarkable thing is that precisely the opposite tendency has been increasing as well. Transnational organizations of many kinds have proliferated in recent decades. Corporations like General Motors, Royal Dutch Shell, and Goodyear Tire have emerged as multi- national enterprises commanding vast resources outside the control of any national regulatory system. Some years ago, Elise Boulding reported a figure of about 10,000 transnational corporations with 90,000 affiliates, spread over all the continents. Comparable expansions took place with intergovernmental organizations (IGOs)

Mm Dona ld N. Lev ine

and international nongovernmental organizations (INGOs). According to the 1995/1996 edition of the Yearbook of International Organizations, IGOs increased from a baseline of 37 in 1909 to nearly 4,000 in 1995. During the same period, INGOs exploded from a base- line of 176 to the current count of nearly 22,000.

Just as dramatic has been the expansion of supra- national processes, processes that parallel what we have called the supradisciplinary spheres of discourse. In a colorful metaphor. Benjamin Barber designates this general phenomenon as “McWorld.” Barber analyzes four imperatives that make up the dynamic of McWorld: a market imperative (all national markets now being vulnerable to the inroads of larger markets within which trade is free and currencies are convertible); a resource imperative; an information-technology imperative; and an ecological imperative. The trope – and reality- of cyberspace is a perfect manifestation of these new supranational realities.

Supranational forces manifest themselves even in the area of normative social controls. Yasemin Soysal has identified ways in which criteria of nationhood and citizenship have now accommodated to heavy streams of international migration. Her work, based on inter- views in Britain, France, Germany, The Netherlands, Sweden, and Switzerland – and on data from an additional half dozen countries – documents the widely spread pattern of granting rights to guest workers and other non-nationals, rights that previously had been restricted to national citizens. These guests have been able to gain access to most kinds of employment, to enjoy social services such as health care, education, and social insurance schemes, and even to vote in local elections. Commenting on this new phenomenon, Soysal observes:

The predominant conceptions of political sociology posit that populations are organized within nation-state boundaries by citizenship rules that acclaim national belonging as the legitimate basis of membership in modern states. This study, however, finds that […] the state is no longer an autonomous and independent organization closed over a nationally defined popula- tion […] My analysis of the incorporation of guest- workers in Europe reveals a shift in the main organizing principle of membership in contemporary polities: the logic of personhood supersedes the logic of national citizenship.

Soysal suggests that the principle of human rights has come to ascribe a universal status to individuals and their rights. She therefore theorizes these developments by construing them in terms of two contrasting prin- ciples of the global system: national sovereignty and universal human rights. Barber casts his analysis in terms of a different pair of principles. To the globalizing processes of McWorld he counterposes the principle of “jihad,” the term he uses to designate a tendency to mobilize actors around more parochial kinds of allegiances. Thus, where Geertz found national loyalties in tension with subnational, primordial allegiances and Soysal finds national sovereignties in tension with global expectations about universal human rights, Barber removes nation-states from the equation altogether and conceives the great dualism of the contemporary world as a tension between tendencies toward global unification and subnational fragmentation.

In a searching critique of Barber’s formulations, Roland Robertson rejects a conceptualization that counterposes local against global processes. While Robertson sees an inexorable trend toward globaliza- tion, he argues that it is incorrect to view this as taking place at the expense of or in opposition to local alle- giances. Consequently, he urges us to adopt the term “glocalization” to symbolize a simultaneous expansion in both global and local directions, the universalization of particularisms and the particularization of universals.

However these processes get theorized, the growing consensus is that major developmental tendencies in the social world are weakening the claims of national boundaries. In Barber’s words, the forces of jihad recreate ancient subnational borders from within, while the forces of McWorld make national borders porous from without. As Barber foresees it, the optimal development would be toward

a confederal union of semi-autonomous communities smaller than nation-states, tied together into regional economic associations and markets larger than nation- states – participatory and self-determining in local matters at the bottom, representative and accountable at the top. The nation-state would play a diminished role, and sovereignty would lose some of its political potency. The Green movement adage “Think globally, act locally” would actually come to describe the conduct of politics.

Linda We iss

social movements non-governmental, they are popular in the widest sense of that word; they are alternative to established political systems, and therefore often at odds with national governments and political parties and they seek ‘to attain objectives that would entail alternative forms of economic development, political control and social organisation’.

In his introduction to this collection of essays, Cox does not predict the imminent demise of the ‘fading Westphalian system’. The future world, he observes, ‘will be determined by the relative strength of the bottom-up and top-down pressures’. The contest may be a long one and no one should underestimate the power of big business and big government interests behind these top-down pressures. Yet at the same time there is no denying that as Cox says, ‘people have become alienated from existing regimes, states and political processes’. Witness the recent amazing, unforeseen turn-out – a quarter of a million in Paris and the same in London – in anti-government marches by country dwellers of every class and occupation. Everywhere, in fact, politicians are discredited and despised as never

before. The state is indeed in retreat from its core competences in security, finance and control over the economy; and this retreat is not inconsistent with its proliferating regulation of many trivial aspects of daily life. The new multilateralism Cox predicates ‘will not be born from constitutional amendments to existing multilateral institutions but rather from a reconstitu- tion of civil societies and political authorities on a global scale building a system of global governance from the bottom up’.

For international studies, and for those of us engaged in them, the implications are far-reaching. We have to escape and resist the state-centrism inherent in the analysis of conventional international relations. The study of globalisation has to embrace the study of the behaviour of firms no less than of other forms of political authority. International political economy has to be recombined with comparative political economy at the sub-state as well as the state level. It is not our job, in short, to defend or excuse the Westphalian system. We should be concerned as much with its significant failures as with its alleged successes.

Globalization and the Myth of the Powerless State Linda Weiss

The new globalist orthodoxy posits the steady dis- integration of national economies and the demise of the state’s domestic power. This article, instead, seeks to show why the modern notion of the powerless state, with its accompanying reports about the demise of national diversity, is fundamentally misleading. It is undeniable that striking changes have taken place inside nation-states in recent times. On the social policy front, there has been a decisive move towards fiscal conser- vatism, whether from the Right or the Left, with reforms to taxation systems and the trimming of social pro- grammes. In the economic sphere, governments have moved towards greater openness in matters of trade, investment and finance. These changes are often rep-

resented as prima facie evidence of the emergence of a new global ‘logic of capitalism’. According to this logic, states are now virtually powerless to make real policy choices; transnational markets and footloose corpor- ations have so narrowly constrained policy options that more and more states are being forced to adopt similar fiscal, economic and social policy regimes. Globalists therefore predict convergence on neoliberalism as an increasing number of states adopt the low-taxing, market-based ideals of the American model.

In contrast to the new orthodoxy, I argue that the novelty, magnitude and patterning of change in the world economy are insufficient to support the idea of a ‘transnational’ tendency: that is to say, the creation

M y t h o f t h e Power less S ta te

of genuinely global markets in which locational and institutional – and therefore national – constraints no longer matter. The changes are consistent, however, with a highly ‘internationalized’ economy in which economic integration is being advanced not only by corporations but also by national governments. Proponents of globalization overstate the extent and ‘novelty’ value of transnational movements; they also seriously underrate the variety and adaptability of state capacities, which build on historically framed national institutions. My argument therefore seeks not simply to highlight the empirical limits and counter- tendencies to global integration. More importantly, it seeks to elucidate theoretically what most of the literature has hitherto ignored: the adaptability of states, their differential capacity, and the enhanced importance of state power in the new international environment.

Given such variety, even where globalization has gone furthest, as in finance, we continue to find important differentials in national levels of savings and invest- ment, the price of capital, and even the type of capital inflows and outflows. This suggests that any significant ‘weakening’ in the capacity for macroeconomic management – to the extent that this has occurred – may owe at least as much to ‘domestic’ institutions as to global processes.

[…]

Different hypotheses of’globalization’

While I have thus far alluded only to the ‘strong globalization’ hypothesis, there are in fact at least three hypotheses that can be identified in the literature:

(i) strong globalization; state power erosion (ii) strong globalization; state power unchanged (iii) weak globalization (strong internationalization);

state power reduced in scope.

The findings of various studies summarized in the following section provide strong grounds for rejecting the first and second propositions in favour of the ‘ weak globalization’ thesis. However, I find no compelling evidence for that part of the third proposition which claims that the state’s role is now generally reduced to that of legitimating decisions initiated and implemented

elsewhere. Instead, I propose a fourth proposition that stresses the differential capacities of states and how the world economy, far from eliminating such differences, is more likely to sharpen and further emphasize their salience for national prosperity:

(iv) weak globalization (strong internationalization); state power adaptability and differentiation emphasized.

The full development of this proposition rests on more extensive comparative material than can be mustered here. Nevertheless, I shall present a two-step argument, for the globalization thesis can be tackled in two different ways. The more common strategy to date has been to evaluate the extent of economic globalization: how far has it gone? What are its limits and counter-tendencies? Most of the literature has adopted this quantitative approach, often with considerable ability and finesse. Though such assessments are indispensable, they are also controversial. The controversy arises as much from the notorious inaccuracies of the available data as from the different uses to which the data are put. For these reasons, I shall confine this first part of my account to highlighting some of the main findings, and where relevant, the pitfalls. The second part of my argument is concerned with the impact of so-called globalization and its implications for the ability of states to pursue particular policy goals.

I Limits to Globalization

There is clearly some substance to the new globalist orthodoxy. The sheer volume of cross-border flows, of products, people, capital and, above all, of money is impossible to dispute. The important issue, however, turns on the meaning of these flows. Do they point to a clear globalization tendency? If such a tendency existed, one would expect to find evidence indicating that the changes in question conformed to at least three criteria: (i) novelty – is it unusual or without parallel, thus suggesting secular growth rather than oscillation? (ii) magnitude – how substantial is it in size? and (iii) distribution – to what extent is it world-wide in scope? I summarize the main counter-evidence under these three headings.

Linda We iss

The novelty of global flows

Are contemporary international flows without his- torical precedent and therefore posing perhaps novel challenges? Are the post-war trends onward and upward? If the answer to both questions is in the affirmative, then we have clear evidence of a globalization tendency, of secular growth rather than oscillation. The answer, however, varies greatly according to when one starts to measure the changes, hence the often conflicting claims in the literature. At least two findings suggest room for caution.

First is the existence prior to 1913 of trade and capital flows not dissimilar in size to flows in the recent post- war period. [. . .]

The second finding is straightforward. The post- war trend towards greater trade integration, especially marked since the 1960s has been weakening. While world trade has grown much faster than output, this growth has actually been slowing over the 1980s and 1990s, the ratio declining from 1.65 in 1965-80 to 1.34 in 1980-90. Moreover, as Robert Wade has argued, there are not only cyclical but also structural reasons for expecting this slow-down to continue. Structurally, a gradual shift away from manufacturing within the OECD will mean less rather than more trade integration as the share of less trade-intensive services rises. Thus, from the perspective of our first criterion, evidence of an unprecedented tendency is not compelling.

The magnitude of global integration

How big are the changes? The answer depends not simply on when one starts measuring, but on what changes are measured. I will address this point with two examples commonly offered up by globalists as evidence of globalization: Foreign Direct Investment (FDI) and capital mobility.

FDI Globalists identify the transnationalization of produc- tion as the driving mechanism of economic integration, drawing readily on aggregate FDI figures in support of that hypothesis. However, the use of aggregate FDI figures as proxies for the so-called ‘globalization of production’ seriously distorts reality.

[.. .]

Taking a more disaggregated approach to the invest- ment figures, we can therefore see why FDI does not automatically extend economic linkages, especially in those areas of multinational economic activity that might have a direct bearing on state policies. If the level of FDI is indicative of a globalization tendency at work in the sphere of production, present trends do not point in that direction.

A more realistic indication of the extent to which the ‘national’ economy is being outflanked by transnational linkages can be gained by measuring inflows and out- flows of FDI as a percentage of gross domestic invest- ment. By this standard, the rates of FDI are actually quite modest. With certain notable exceptions – for instance, Britain and Sweden – gross domestic invest- ment in Europe exceeds total FDI, both outbound and inbound, by at least 90 per cent.

Capital mobility Globalists assume that the world economy is now so integrated that the constraints of location and of institutional frameworks are increasingly irrelevant; that corporations – whether satisfied or disgruntled with a particular national environment – can simply take a ‘random walk’ in the world market, escaping the confines of any one nation-state. It is this footloose quality of MNCs – above all the threat of exit – that is seen to pose the greatest threat to territorially constituted forms of governance. The reality, however, is at odds with this vision. For, as many studies report, the number of genuinely transnational companies is rather small.

On virtually all the important criteria – share of assets, ownership, management, employment, the location of R8cD – ‘the importance of a home base remains the rule, not the exception’.

Conventional wisdom nevertheless tells us that cost-reduction is the driving force compelling MNCs toward a footloose career, and that new transport and information technology liberates and encourages MNCs to exploit low-cost production sites, resulting in a globalization of production. Yet, if cost-reduction were the driving force behind the mobile MNC, we would expect to find most, or at least a very sizeable chunk of FDI going to the developing countries. However, the evidence firmly contradicts that expectation. As of 1991, a good 81 per cent of world stock of FDI was located in the high-wage – and relatively high-tax

M y t h o f t he Power less S ta te

– countries: principally the US, followed by the UK, Germany, and Canada. Moreover, this figure represents an increase of 12 points since 1967. Indeed the stock of FDI in the UK and the US exceeds the stock in Asia and the entire South.

Such figures underline the point that MNCs do not by and large invest where wages and taxes are lowest. Why not? Three considerations seem relevant. First, new technologies place a premium on fixed costs (equipment, machinery and so on), while reducing the importance of variable costs (such as wages and raw materials). While certain types of labour – especially knowledge-intensive labour – tend to be treated increasingly as a fixed cost, the general effect of this overall transformation is to reduce the cost savings to be gained by moving to low-income sites. Second, new production methods emphasize the growing importance of physical proximity between producers and suppliers – especially in non-assembly operations. These methods privilege local supplier networks, thus driving a trend towards the constitution of regional, not global, sourcing networks. A third factor, under- scoring the critical importance of a home base, is the advantage firms derive from domestic linkages: national institutional frameworks which enmesh business in support relationships with trade associations, training and financial institutions, and national and local governments. In sustaining high-wage economies, one of the most important of these support systems is the relationship between government and business, which underpins the national innovation system. Being gen- erally exclusive rather than open to all, support relation- ships of this kind constitute a competitive advantage.

These considerations suggest that the advantages of maintaining a firm ‘home’ or regional base may be stronger than ever, perhaps for most companies out- weighing those to be gained from ‘going global’. It would therefore appear that not only the incidence but also the advantages of mobility have been overstated. But the case against a strong globalization tendency does not rest here. We turn next to evidence concerning how the changes are distributed.

The distribution of trade and investment

Up to this point, my objective has been to show that the novelty and the magnitude of change has been

overplayed. I have not sought to deny the existence of a more integrated world economy, a fact which I broadly acknowledge. My concern here is to draw attention to the way trade and investment are dis- tributed. Three trends are inconsistent with a global- ization tendency.

(i) The national bases of production First, even if we accept that national economies are more integrated through trade and investment flows than in the recent past, it appears that in all but the smallest economies, trade constitutes quite a small share of GDP, with exports accounting for 12 per cent or less of GDP in Japan, the US and the EC. This means that in the main industrialized economies around 90 per cent of pro- duction is still undertaken for the domestic market. The national bases of production – and, as we saw, for investment – therefore seem as pronounced as ever. (ii) North-South divisions A second pattern runs counter to the idea of a globalizing tendency. Whereas globalization predicts more even diffusion between North and South, in fact world trade, production and investment remain highly concentrated in the OECD – that is, in the rich North. Over the 1970-89 period, the North’s share of trade grew from 81 per cent to 84 per cent – though the decline of the South’s share in world exports masks their changing, composition, with largely negative growth of primary product exports, and a rising share of manufactured exports. Investment has followed a similar pattern, with around 90 per cent going to the North over the same period. (iii) Regionalization Finally, this predominantly Northern trade and investment is itself becoming more geographically concentrated in intra-regional patterns. For example, intra-European trade now accounts for some 62 per cent of its total export trade. Intra-regional trade within the American region – the US, Canada and Mexico – increased between 1980 and 1992 from 68 per cent to 79 per cent of total US-Japan and US-EU trade. Intra-regional trade has also become the dominant trend in Asia – China, ASEAN, Japan and the NICs – as the region has steadily enhanced its importance as export market and production site for Japan and the NICs. Intra-Asian trade in the period 1986-92 rose from 32.4 to 47.7 per cent of total exports, thus reversing the traditional dominance of trade with the US. In short, trade within Asia has been

Linda We iss

growing more rapidly than trade between Asia and the US.

Compelling evidence for a strong globalization tendency has thus far been wanting. In some respects, indeed, counter-tendencies seem more apparent. If we turn to the finance sector, however, the reality of a global market seems unassailable.

Since formal removal of the gold standard in 1971 and subsequent liberalization of exchange controls, international capital flows have reached truly spectacular levels. Whichever way we look, it is hard to escape the reality of global money markets where enormous sums are traded daily. This is the ‘casino’ face of capitalism, unleashed by national governments which now appear powerless to contain its destabilizing effects. It is this change which has given most life to the idea and reality of’globalization’.

However, there is evidence of national diversity even in money markets. First, the price of capital has not converged. While studies disagree on whether real interest rates in different national markets continue to diverge, the price differential for both loan and equity capital remains considerable. Second, whereas globaliza- tion implies equalization, marked differences in savings and investment rates persist. For example, in 1992, the ratio of savings to GDP in eleven countries ranged from 0.5 to 25 per cent. In the lowest band (0.5-2 per cent) sat the US, the UK, Australia and Sweden; Germany and Austria occupied the middle band (10-15 per cent); and in the highest band (20-25 per cent) were Japan, Taiwan and Korea. The differentials in national investment rates tend to parallel those for savings. In 1992, investment as a percentage of GDP ranged from around 15 to 36 per cent, with the US, the UK, Australia and Sweden in the lowest band (15-19 per cent), Germany, Austria and Taiwan in the middle (22-25 per cent), and Japan and Korea in the highest (31-36 per cent).

This strong correlation between savings and invest- ment rates has been interpreted to mean that countries do not draw freely on other countries’ savings. Robert Wade, however, reports a fall in the OECD savings- investment correlation from 75 per cent in the mid 1970s to 60 per cent in the 1980s. Financial markets, he suggests, have therefore become more integrated,

even if the mobility of capital is somewhat less than anticipated.

Finally, ‘dualism’ rather than ‘transnationalism’ seems to distinguish the operation of financial markets, most notably in the area of company shares. These tend to be fixed to specific national stock markets, thus con- trasting dramatically with other parts of the financial market – for example, the bond, currency and futures markets – which are genuinely ‘transnational’.

These qualifications to ‘global’ finance suggest that the relevance of national institutions is far from insignificant. Thus, the conclusion to the first part of my argument is that while national economies may in some ways be highly integrated with one another, the result – with the partial exception of money markets – is not so much a globalized world (where national differences virtually disappear), but rather a more internationalized world (where national and regional differences remain substantial and national institutions remain significant). What does this mean then for the power of governments to govern?

II The Extent of Government Powerlessness

For many commentators, the power of global finance – especially of the bond market – to undermine the monetary and fiscal policies of governments seems an incontrovertible truth. It is also viewed as the key constraining feature of a globalized economy: forcing all governments to adopt similar neoliberal – deflationary, fiscally conservative – policies. From this perspective, two conclusions follow. First, global money markets are all-powerful, forcing on govern- ments fiscal conservatism – read ‘powerlessness’. Second, it matters not whether a state is weak or strong; all national governments are impotent in the face of global finance. Here I will examine each of these claims in turn.

The problem with the ‘powerlessness’ argument is not that it is wrong about the new constraints on government capacity to make and implement policy. Rather, it is the assumption that such constraints are absolute rather than relative, and that they repre- sent ‘the end of state history’ rather than an evolving history of state adaptation to both external and

M y t h o f t he Power less S ta te

internal challenges. Three weaknesses in particular deserve highlighting.

Overstating earlier state powers

First, globalists tend to exaggerate state powers in the past in order to claim feebleness in the present. Whilst financial globalization is commonly identified as the factor undermining governments’ ability to practise effective macroeconomic management – of the Keynesian reflationary variety – some commentators have recently questioned just how effective Keynesian demand management ever was. While in theory the fixed exchange rates guaranteed under the Bretton Woods system provided a more stable policy-making environment, in reality there is little compelling evidence that the state has ever had the sorts of powers that allegedly it has been forced to relinquish.

[.. .]

Overstating uniformity of state response

The fact that not all governments follow neoliberal dictums surely throws into question the central assumptions of the powerlessness argument.

[.. .] Thus, if global finance has not exerted the uniformly

debilitating effects so often claimed for it, why then, we may ask, has the idea of the powerless state seemed so persuasive to so many?

The political construction of helplessness

Perhaps more than anything, it has been the rise of monetarist policies in the 1980s, the emergence of fiscal retrenchment in bulwarks of social democracy like Sweden, and the various speculative attacks on national currencies that have led globalists to conclude that – while governments may reign – the global economy rules.

It must be said, however, that political leaders – especially in the English-speaking world dominated by neoliberal economic philosophy – have themselves played a large part in contributing to this view of government helplessness in the face of global trends. In canvassing support for policies lacking popular appeal, many OECD governments have sought to ‘sell’ their

policies of retrenchment to the electorate as being somehow ‘forced’ on them by ‘global economic trends’ over which they have no control.

While it is true that governments are responding to similar pressures in the world economy – the long slump in world-wide demand, stagnant or falling living standards – it is quite misleading to conclude that these pressures derive solely or largely from ‘globaliza- tion’ tendencies, or that the latter produces a uniform- ity of response.

Ill Convergence versus Varieties of State Capacity

Globalists have not only overstated the degree of state powerlessness. They have also over-generalized it. It is to this final weakness in the globalist argument that we now turn.

The variety of ‘national capitalisms’ – continental European, East Asian, Anglo-American – finds a parallel in the variety of ‘state capacities’ for domestic adjust- ment strategies. In a different context, I will undertake to show how the two may be linked. At issue here, however, is the variety, as opposed to the convergence, of state capabilities. Contrary to globalist predictions, I propose that national differences are likely to become more rather than less pronounced in a highly inter- nationalized environment, thus exacerbating rather than diminishing current differences between strong and weak states.

Yet even those who agree that ‘globalization’ has been highly exaggerated, nevertheless part company when considering the effects of economic internation- alization on state capacity. While some conclude that the nation-state persists as an important locus of accumulation, and that national – and international – actors and institutions continue to structure economic space, others see state powers much more circumscribed through the shedding and shifting of traditional responsibilities.

In a comprehensive recent study, Hirst and Thompson propose that certain traditional powers are declining: ‘The power of nation states as administrative and policy-making agencies has declined’ while the state’s role as an economic manager is ‘lessening’. In this respect, they appear to overlap with the globalists. In

Linda We iss

a more nuanced approach, however, they insist on the enduring importance of the nation-state – not in traditional terms as sovereign power or as economic manager, but as the key source of legitimacy and the delegator of authority to powers above and below the national level. Its territorial centrality and constitutional legitimacy assure the nation-state a distinctive and continuing role in an internationalized world economy, even as conventional sovereignty and economic cap- acities lessen: ‘Nation-states should be seen no longer as “governing” powers [ . . . ] Nation-states are now simply one class of powers and political agencies in a complex system of power from world to local levels.’ According to this interpretation of current tendencies, state power is being reduced and redefined on a broad scale, stripped to the basics, becoming even a shell of its former self: still the supreme source of legitimacy and delegator of authority, but exercising no real capacity over its economic domain. The question is whether one can identify any clear cases which might fit this conception, and whether, having identified them, they represent not simply a group of tradition- ally ‘weak’ states, but a group where real power shifts are in train.

It is doubtful that the ‘basic state’ hypothesis fits even the EU experience, which appears to inform so much of this kind of reasoning. In the German case neither sub-national nor supranational agencies have supplanted the national state’s coordinating capacities. Indeed, in a number of important respects – technological innovation and industrial investment – coordination has been growing, not declining, over the past two decades.

Although Hirst and Thompson do insist on the state’s continuing importance as the source of legitimacy and the rule of law, and would therefore probably reject the ‘weak state’ characterization of their position, it is hard to see what kind of substantive powers the state would retain if it is no longer where the action is. If the state is increasingly becoming merely the place from which law is promulgated, authority delegated, powers devolved, then is that not simply a form of power shrinkage by stealth – somewhat akin to the centrifugal tendencies of feudalism? After all, their image of the evolving role of the state (as Rechtsstaat) has much in common with the role envisaged by eighteenth- century liberals: thus, not an eclipse of state power as

some globalists are led to claim, but certainly a very narrowly defined power.

This seems to me mistaken. For it is blind to state variety and to adaptation. I, too, would emphasize change, but change is hardly novel to the state. Adaptation is the very essence of the modern state by virtue of the fact that it is embedded in a dynamic economic and inter-state system – even the evolving forms of warfare must be seen in that context. My argument is that nation-states will matter more rather than less – and, though not elaborated here, this will advance rather than retard development of the world economy. The argument is in three parts, emphasizing: (i) state adaptation rather than decline of functions; (ii) strong states as facilitators not victims of interna- tionalization; and (iii) the emergence of ‘catalytic’ states consolidating national and regional networks of trade and investment.

Adaptiveness of the state

[•••] The major point to emphasize is that the capacity

for domestic adjustment strategy does not stand or fall with macroeconomic capacity, whether of the refla- tionary or deflationary variety. It rests, perhaps more than ever, on industrial strategy, the ability of policy- making authorities to mobilize savings and investment and to promote their deployment for the generation of higher value-added activities.

This capacity for a coordinated and strategic response to economic change depends, in turn, not so much on specific policy ‘instruments’ or levels of’integration into the world economy’. The contrasting cases of Singapore and Britain are testimony to this. Highly integrated Singapore – whose per capita GDP now exceeds that of Britain – maintains strong control over its savings and investment rates, thus engineering upward mobility in the international system. By contrast, highly integrated Britain, with little capacity for industrial adjustment, has failed to arrest its downward slide in the interna- tional order – Britain’s traditional strength in promoting its financial sector being part of that drama. Thus, high integration does not necessarily mean the displacement of ‘national’ economies as the locus of accumulation, or the weakening of national economic management.

[• • • ]

M y t h o f t h e Power less S ta te

The state as victim or facilitator of ‘globalization?

In failing to differentiate state capacities, global enthu- siasts have been blinded to an important possibility: that far from being victims, (strong) states may well be facilitators (at times perhaps perpetrators) of so-called ‘globalization’. Although those researching in the field have yet to explore this possibility, there is sufficient evidence to suggest that this would be a promising line of enquiry. Such evidence as exists for Japan, Singapore, Korea, and Taiwan indicates that these states are acting increasingly as catalysts for the ‘internationalization’ strategies of corporate actors. As ‘catalytic’ states (see below), Japan and the NICs are taking the bull by the horns, providing a wide array of incentives to finance overseas investment, promote technology alliances between national and foreign firms, and encourage regional relocation of production networks.

[ . . .]

The emergence of ‘catalytic’ states

The final strand in my argument is that we are witness- ing changes in state power; but these changes have to do not with the diminution but with the reconstitution of power around the consolidation of domestic and international linkages.

As macroeconomic tools appear to lose their efficacy, as external pressures for homogenization of trade regimes increase, and as cross-border flows of people and finance threaten the domestic base, a growing number of states are seeking to increase their control over the external environment. State responses to these pressures have not been uniform. They have varied according to political and institutional differences. But, in general, one of two strategies has prevailed. Both involve building or strengthening power alliances: ‘upwards’, via inter-state coalitions at the regional and international level, and/or ‘downwards’, via state- business alliances in the domestic market.

To the extent that states are seeking to adapt and reconstitute themselves in these ways, they can perhaps best be seen as ‘catalytic’ states, to use Michael Lind’s term. Catalytic states seek to achieve their goals less by relying on their own resources than by assuming a dominant role in coalitions of states, transnational institutions, and private-sector groups.

As a catalyst, this kind of state is one that seeks to be indispensable to the success or direction of particular strategic coalitions while remaining substantially independent from the other elements of the coalition, whether they are other governments, firms, or even foreign and domestic populations. Thus, far from relinquishing their distinctive goals and identity, states are increasingly using collaborative power arrangements to create more real control over their economies – and indeed over security. As such, these new coalitions should be seen as gambits for building rather than shedding state capacity.

There are many who would support the claim that we are witnessing the end of an era marked by the ‘integral state’, with assured territorial control over the means of legitimacy, security, and production. But at a time when serious analysis of ‘state power’ or the ‘state’s role’ has become academically unfashionable, there will undoubtedly be less support for Lind’s asser- tion that in place of the integral state we are now witnessing the rise of the catalytic state.

To what extent can the catalytic state be generalized? The first point to make is that ‘catalytic’ is being con- trasted with ‘integral’. It is a way of highlighting the tendency of states to seek adaptation to new challenges by forging or strengthening partnerships with other (state and non-state) power actors, rather than going it alone. Consolidation of such alliances is taking place primarily at regional and international level, between states, though also domestically, between states and corporate actors. The proliferation of regional agree- ments between nation-states – including the EU, APEC, and NAFTA – can be seen as one manifestation of this tendency. The evolving character of close domestic government-business cooperation, most notably in East Asia, is another.

The second point, however, is that even catalytic states have differential capabilities: some, like Japan and Germany, have both domestic and international clout, and hence are able to use their domestic leverage to position themselves advantageously, for example, in regional coalitions. Others, like the United States, exploit strong international leverage but at the expense of domestic adjustment capacity. Still others, like Russia, are so lacking in domestic capability that they are not even serious candidates for the kind of regional coali- tions they otherwise might aspire to lead or join.

Linda We i s s

Recent examples of states using international agree- ments as a means of pursuing domestic economic goals include such initiatives as NAFTA and APEC. While both weak and strong states enter into such alliances, it is often the domestically weaker states which take the lead in seeking out this external path, aspiring to constrain others to adopt their own more ‘hands off’ approach to trade and industry. Australia’s enthusiastic efforts in seeking to establish APEC, and the United States’ leadership of NAFTA can be seen in this light. These states, with their traditional ‘arms length’ approach to the corporate sector, lack the more strategic capacities of their East Asian counterparts. In the absence of a normative and institutional base for strengthening developmental capabilities at home, both countries have sought instead to ‘level the playing field’ outside their domain. To this extent, one might agree with the conclusion that unlike the EU, such moves are driven not by a supranational vision but by ‘insecure governments’ seeking ‘new tools to stimulate growth, employment, and a stable regional policy community’. To make the point in slightly different language, regionalism (inter-state coalitions) without domestic capacity (public-private coalitions) is only half the story, akin to conducting a war of movement without having established a war of position.

What this analysis suggests is that the most important power actors in these new inter-state coalitions will not be those initiating them – for instance, the US and Australia – but those who participate in them from a position of domestic strength. For the major solidity of Japan as a catalytic state in international coalitions is that it has developed robust capability at home via domestic (government-business) linkages. By contrast, the major weakness of the US is the underdevelopment of such linkages, reinforced by the overdevelopment of external strength.

If this reasoning is accepted, then we must enter a caveat to the notion of the rise of the catalytic state. Domestically strong states will more likely act in concert with others; while domestically weak states – especially large ones like the United States – will not completely lose their ‘integral’ character. In such cases, rather than a concentration on power-sharing we can expect to find an oscillation, as weak states shift between acting alone – through, for instance, defensive protectionism and bilateralism – and with others.

Thus, in this new era, the most successful states will be those which can augment their conventional power resources with collaborative power: engaging others – states, corporations and business associations – to form cooperative agreements and ‘consortia’ for action on this or that issue. But by far the most important of these coalitions will be partnerships of government and business, for this goes to the very heart of state capacity.

In contrast to Hirst and Thompson’s conception discussed earlier, both domestic and regional coalitions imply that the state is not so much ‘devolving’ power – in a negative sum manner – to other power actors from whom it then maintains a passive distance. Rather, the state is constantly seeking power sharing arrangements which give it scope for remaining an active centre, hence being a ‘catalytic’ state.

Responses to globalization

Against the hypotheses of advancing globalization, diminishing state capabilities, and eroding institutional diversity, this paper has advanced three propositions. First, the world economy is an internationalized eco- nomy, increasingly a regionalized economy; but it is not genuinely a globalized economy in which territorial boundedness and geographic proximity have declining importance for economic accumulation. While money and finance have increasingly become ‘global’ in some – but not all – aspects of their operation, the same can- not be said of production, trade or corporate practice.

Second, convergence towards a neoliberal model of political economy is highly improbable. This is not simply because economic ‘globalization’ is rather more limited and subject to counter-tendencies than many accounts would suggest. It is also because nation-states themselves exhibit great adaptability and variety – both in their responses to change and in their capacity to mediate and manage international and domestic link- ages, in particular the government-business relationship.

Finally, however, because domestic state capacities differ, so the ability to exploit the opportunities of international economic change – rather than simply succumb to its pressures – will be much more marked in some countries than in others. For while current tendencies in the world economy subject more and more national economies to similar challenges and opportunities, these are likely to solidify the institutional

Resil ience of S ta te P o w e r

differences that separate the weaker from the stronger performers. Change is indeed occurring, but by the end of the millennium, one should be able to see more clearly that the changes in process in different national systems are those of adaptation rather than of conver- gence on a single neoliberal model.

The rise of East Asia, the national responses elicited by that challenge, together with the proliferation of regional agreements suggest that we can expect to see more and more of a different kind of state taking shape

in the world arena, one that is reconstituting its power at the centre of alliances formed either within or out- side the state. For these states, building state capacity, rather than discarding it, would seem to be the lesson of dynamic integration. As we move into the next century, the ability of nation-states to adapt to inter- nationalization – so-called ‘globalization’ – will continue to heighten rather than diminish national differences in state capacity and the accompanying advantages of national economic coordination.

Globalization and the Resilience of State Power Daniel Béland

Despite growing evidence that contradicts their claims, several prominent contemporary thinkers argue that globalization favors a decline of the national state. According to Michael Hardt and Antonio Negri, for example, the world is witnessing the emergence of a global capitalist “Empire” in which national states have a far less central position than before. Discourse on the decline of the national state, though shared across ideological lines, is especially popular on the far left, where Marxists and former Marxists have long promoted internationalism and the revolt of the “multitude” (i.e., ordinary people) against global capitalism.

For sociologist Manuel Castells, the planetary expansion of information networks like the Internet goes against national institutions and hierarchies:

Networks dissolve centres, they disorganize hierarchy […] Thus, contemporary information networks of capital, production, trade, science, communication, human rights, and crime, bypass the national state, which, by and large, has stopped being a sovereign entity.

From this perspective, the development of global capitalism and new communication technologies makes national states increasingly irrelevant: in a world of global communication, national boundaries lose their meaning.

However, these views oversimplify globalization’s impact on the national state. Far from being passive in the process of globalization, policymakers in advanced industrial countries often promote free trade, economic integration, and foreign investment in order to gain electoral power and to push their own political agendas at home. These actors stress the domestic prosperity that can result from global exchange: economic openness may benefit countries and may even stimulate welfare state development and coordination. In Canada, for example, the Liberal Party in power between 1993 and 2006 promoted economic integration through the North American Free Trade Agreement (NAFTA) while stressing the need to preserve and even improve the country’s welfare state. This welfare state was reframed as a competitive tool oriented toward the reproduction of a well-educated and competitive workforce.

The enactment of NAFTA and, more significant, the creation of the European Union (EU), are the most spectacular outcomes of the integration strategy many political leaders have initiated. Yet institutional and political integration remains limited even within the EU; for example, national states remain in charge of the large social insurance systems that protect workers and citizens against economic insecurity. As such, national states remain the primary source of economic, environmental, social, and military protection in advanced industrial societies.

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.