© Immanuel Wallerstein 1997. (Iwaller@binghamton.edu)
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Keynote address at conference on "State and Sovereignty in the World Economy," University of California, Irvine, Feb. 21-23, 1997.
There have long been debates, as we all know, about the relationship of the individual states to the capitalists. Views range from those who emphasize the degree to which states are manipulated by capitalists to serve their individual and collective interests to those who emphasize the degree to which states are autonomous actors who deal with capitalists as one interest group among several or many. There has also been debate about the degree to which capitalists could escape control by the state machineries, and there are many who are arguing that their ability to do this has increased considerably in recent decades, with the onset of the trans-national corporation and so-called globalization.
In addition, there have long been debates about the relationship of so-called sovereign states to each other. Views range from those who emphasize the effective sovereignty of the various states to those who are cynical about the ability of so-called weak states to resist the pressures (and blandishments) of so-called strong states. This debate is often kept separate from the debate about the relationship of individual states to capitalists, as though we were dealing with two different questions. It seems to me difficult, however, to discuss these issues intelligently without looking at them in tandem, because of the peculiar structure of the modern world-system.
The modern world-system, in existence in at least part of the globe since the long sixteenth century, is a capitalist world-economy. This means several things. A system is capitalist if the primary dynamic of social activity is the endless accumulation of capital. This is sometimes called the law of value. Not everyone, of course, is necessarily motivated to engage in such endless accumulation, and indeed only a few are able to do so successfully. But a system is capitalist if those who do engage in such activity tend to prevail in the middle run over those who follow other dynamics. The endless accumulation of capital requires in turn the ever-increasing commodification of everything, and a capitalist world-economy should show a continuous trend in this direction, which the modern world-system surely does.
This then leads to the second requirement, that the commodities be linked in so-called commodity chains, not only because such chains are "efficient" (meaning that they constitute a method that minimizes costs in terms of output), but also that they are opaque (to use Braudel's term). The opacity of the distribution of the surplus-value in a long commodity chain is the most effective way to minimize political opposition, because it obscures the reality and the causes of the acute polarization of distribution that is the consequence of the endless accumulation of capital, a polarization that is more acute than in any previous historical system.
The length of the commodity chains determines the boundaries of the division of labor of the world-economy. How long they are is a function of several factors: the kind of raw materials that need to be included in the chain, the state of the technology of transport and communications, and perhaps most important the degree to which the dominant forces in the capitalist world-economy have the political strength to incorporate additional areas into their network. I have argued that the historical geography of our present structure can be seen to have three principal moments. The first was the period of original creation between 1450-1650, during which time the modern world-system came to include primarily most of Europe (but neither Russia nor the Ottoman Empire) plus certain parts of the Americas. The second moment was the great expansion from 1750-1850, when primarily the Russian empire, the Ottoman empire, southern and parts of southeast Asia, large parts of West Africa, and the rest of the Americas were incorporated. The third and last expansion occurred in the period 1850-1900, when primarily East Asia, but also various other zones in Africa, the rest of southeast Asia, and Oceania were brought inside the division of labor. At that point, the capitalist world-economy had become truly global for the first time. It became the first historical system to include the entire globe within its geography.
Though it is fashionable to speak of globalization today as a phenomenon that began at the earliest in the 1970's, in fact trans-national commodity chains were extensive from the very beginning of the system, and global since the second half of the nineteenth century. To be sure, the improvement in technology has made it possible to transport more and different kinds of items across great distances, but I contend that there has not been any fundamental change in the structuring and operations of these commodity chains in the twentieth century, and that none is likely to occur because of the so-called information revolution.
Still, the dynamic growth of the capitalist world-economy over 500 years has been extraordinary and very impressive, and of course we are dazzled by the ever more remarkable machines and other forms of applied scientific knowledge that have come into existence. The basic claim of neoclassical economics is that this economic growth and these technological accomplishments are the result of capitalist entrepreneurial activity, and that, now that the last remaining barriers to the endless accumulation of capital are being eliminated, the world shall go from glory to glory, wealth to wealth, and therefore satisfaction to satisfaction. Neoclassical economists, and their associates in other disciplines, paint a very rosy picture of the future, provided their formulae are accepted, and a quite dismal one if these formulae are rejected or even hampered.
But even neoclassical economists will admit that the last 500 years have not been in reality ones of unlimited "free flow of the factors of production." Indeed, that is what the talk about "globalization" tells us. Seemingly, it is only today, and not even yet, that we are seeing this truly free flow. If so, one has to wonder how the capitalist entrepreneurs have been able to do so well prior to the last few decades, since persons of virtually every intellectual and political persuasion seem to agree that capitalist entrepreneurs have indeed, as a group, done quite well over the past few centuries in terms of their ability to accumulate capital. To explain this seeming anomaly, we have to turn to that part of the story which the neoclassical economists since Alfred Marshall have been strenuously excluding from consideration, the political and social story. And here is where the states come in.
The modern state is a peculiar creature, since these states are so-called sovereign states within an interstate system. I contend that the political structures that existed in non-capitalist systems did not operate in the same way, and that they constituted qualitatively a different kind of institution. What then are the peculiarities of the modern state? First and foremost, that it claims sovereignty. Sovereignty, as it has been defined since the sixteenth century, is a claim not about the state but about the interstate system. It is a double claim, looking both inward and outward. Sovereignty of the state, inward-looking, is the assertion that, within its boundaries (which therefore must necessarily be clearly defined and legitimated within the interstate system) the state may pursue whatever policies it deems wise, decree whatever laws it deems necessary, and that it may do this without any individual, group, or substate structure inside the state having the right to refuse to obey the laws. Sovereignty of the state, outward-looking, is the argument that no other state in the system has the right to exercise any authority, directly or indirectly, within the boundaries of the given state, since such an attempt would constitute a breach of the given state's sovereignty. No doubt, earlier state forms also claimed authority within their realms, but "sovereignty" involves in addition the mutual recognition of these claims of the states within an interstate system. That is, sovereignty in the modern world is a reciprocal concept.
However, as soon as we put these claims on paper, we see immediately how far they are from a description of how the modern world really works. No modern state has ever been truly inwardly sovereign de facto, since there has always been internal resistance to its authority. Indeed in most states this resistance has led to institutionalizing legal limitations on internal sovereignty in the form, among others, of constitutional law. Nor has any state even been truly outwardly sovereign, since interference by one state in the affairs of another is common currency, and since the entire corpus of international law (admittedly a weak reed) represents a series of limitations on outward sovereignty. In any case, strong states notoriously do not reciprocate fully recognition of the sovereignty of weak states. So why is such an absurd idea put forth? And why do I say that this claim to sovereignty within an interstate system is the peculiar political characteristic of the modern world-system, in comparison to other kinds of world-systems?
The concept of sovereignty was in fact formulated in western Europe at a time when state structures were very weak in reality. States had small and ineffective bureaucracies, armed forces they did not control very well, and all sorts of strong local authorities and overlapping jurisdictions with which to deal. It is only with the so-called new monarchies of the late fifteenth century that the balance begins, just begins, to be redressed. The doctrine of the absolute right of monarchs was a theoretical claim of weak rulers for a far-off utopia they hoped to establish. Their arbitrariness was the mirror of their relative impotence. Modern diplomacy, with its recognition of extraterriorality and the safe passage of diplomats, was an invention of Renaissance Italy and spread Europe-wide only in the sixteenth century. The establishment of a minimally institutionalized interstate system took over a century to realize, with the Peace of Westphalia in 1648.
The story of the past 500 years has been the slow but steady linear increase, within the framework of the capitalist world-economy, of the internal power of the states and of the authority of the institutions of the interstate system. Still, we should not exaggerate. These structures went from a very low point on the scale to somewhere further up the scale, but at no point have they approached anything that might be called absolute power. Furthermore, at all points in time, some states (those we call strong) had greater internal and greater external power that most other states. We should of course be clear what we mean by power here. Power is not bombast and it is not a theoretically (that is, legally) unlimited authority. Power is measured by results; power is about getting one's way. The truly powerful can be (and usually are) soft-spoken, respectful, and quietly manipulative; the truly powerful succeed. The powerful are those who are heeded, even when their legitimacy is only partially accorded. Their threat of force most often obviates the need to use it. The truly powerful are Machiavellian. They know that their ability to use force in the future usually is diminished by the very process of actually using it in the present, and they are therefore quite sparing and prudent in such use.
This political system of sovereign states within an interstate system, of states and an interstate system both having as intermediate degree of power, suited perfectly the needs of capitalist entrepreneurs. For what do persons whose goal is the endless accumulation of capital need in order to realize their objectives? Or, another way of asking this is, why isn't the free market sufficient for their purposes? Could they really do better in a world in which no political authority existed at all? To ask the question is to see that no capitalist or capitalist apologist not even Milton Friedman, not even Ayn Rand has ever quite asked for this. They have insisted at the very least on having the so-called night watchman state.
Now what does a night watchman do? He sits in relative darkness, twiddling his thumbs in boredom, occasionally twirling his baton or revolver when not asleep, and waiting. His function is to ward off intruders who intend to pilfer property. He does this primarily just by being there. So here we are at basics, the universally-noted demand for securing property rights. There's no point in accumulating capital if you can't hold on to it.
There are three major ways in which entrepreneurs can lose accumulated capital outside market operations. Capital can be stolen; it can be confiscated; it can be taxed. Theft in one form or another is a persistent problem. Outside the modern world-system, the basic defense against serious theft had always been to invest in private security systems. This was even true of the capitalist world-economy in its early days. There exists however an alternative, which is to transfer the role of providing anti-theft security to the states; generically this is called the police function. The economic advantages of shifting the security role from private to public hands is admirably laid out in Frederic Lane's Profits from Power, in which he invents the term "protection rent" to describe the increased profits that result from this historic shift, a benefit from which some entrepreneurs (those in strong states) drew far greater advantage than others.
For the truly rich, however, theft has probably been a smaller problem, historically, than confiscation. Confiscation always was a major political and economic weapon in the hands of rulers, especially of powerful rulers, in non-capitalist systems. Confiscation has undoubtedly been one of the major mechanisms whereby capitalists were prevented from making the priority of the endless accumulation of capital prevail. This is why institutionalizing the illegitimacy of confiscation via the establishment not only of property rights but of the "rule of law" has been a necessary condition of constructing a capitalist historical system. Confiscation remained widespread in the early days of the modern world-system, if not directly then indirectly via state bankruptcies (see the four successive ones of the Spanish Hapsburgs), and confiscation via socialization has been a phenomenon of the twentieth century. Nonetheless, the remarkable thing is not how much but how little confiscation there has been. There has been no comparable level of security for capitalists in any other world-system, and this security against confiscation has actually grown with time. Even the socialization processes have been frequently effectuated "with compensation" and furthermore, as we know, they have often been reversed and therefore, from a systemic point of view, have been only temporary. In any case, the pervasiveness of the rule of law has tended to make future levels of income more predictable, which allows capitalists to make more rational investments and therefore ultimately more profit.
As for taxation, no one wants to be taxed of course, but capitalists as a class have never been opposed to what they think of as reasonable taxation. From their point of view, reasonable taxation is the purchase of services from the state. As with all other purchases, capitalists prefer to pay the lowest rates available, but they do not expect to get these services gratis. In addition, as we know, taxes on paper are not the same as taxes really paid. Still, it is fair to say that the rate of real taxation has grown over the centuries of the capitalist world-economy, but this is because the services have grown. It is not at all sure that it would be less costly for capitalists to assume the costs of these necessary services directly. Indeed, I would argue that relatively high rates of taxation are a plus for large capitalists, since much, even most, of the money is recycled to them in one way or another, which means that state taxation tends to be a way of shifting surplus-value from small enterprises and the working classes to the large capitalists.
What are the services that capitalists need of the state? The first and greatest service they require is protection against the free market. The free market is the mortal enemy of capital accumulation. The hypothetical free market, so dear to the elucubrations of economists, one with multiple buyers and sellers, all of whom share perfect information, would of course be a capitalist disaster. Who could make any money in it? The capitalist would be reduced to the income of the hypothetical proletarian of the nineteenth century, living off what might be called "the iron law of profits in a free market," just enough barely to survive. We know that this is not how it works, but that is because the real existing market is by no means free.
Obviously, any given producer will be able to increase his returns to the extent that he monopolizes the market. But the free market does tend to undermine monopolies, which is of course what the spokespersons of capitalists have always said. If an operation is profitable, and monopolized operations are by definition so, then other entrepreneurs will enter the market if they can, thereby reducing the price at which a given item is sold on the market. "If they can"! The market itself puts only very limited constraints on entry. These constraints are called efficiency. If an entrant can match the efficiency of existing producers, the market says welcome. The really significant constraints on entry are the doing of the state, or rather of the states.
The states have three major mechanisms that transform the economic transactions on the market. The most obvious one is legal constraint. The states can decree or forbid monopolies, or create quotas. The most utilized methods are import/export prohibitions and, even more important, patents. By relabeling such monopolies "intellectual property," the hope is that no one will notice how incompatible this notion is with the concept of a free market, or perhaps it lets us see how incompatible the concept of property is with that of a free market. After all, the classic mugger's opening gambit, "your money or your life," offers a free market alternative. So does the classic terrorist menace, do x or else.
Prohibitions are important for entrepreneurs but they do seem to violate grossly much of the rhetoric. So there exists a certain amount of political hesitation to use them too frequently. The state has other tools in the creation of monopolies that are somewhat less visible and hence probably more important. The state can distort the market very easily. Since the market presumably favors the most efficient, and efficiency is a question of reducing cost for comparable output, the state can quite simply assume part of the cost of the entrepreneur. They assume part of the costs whenever the state in any way subsidizes the entrepreneur. The state can do this directly for a given product. But more importantly the state can do this on behalf of multiple entrepreneurs simultaneously in two ways. It can build so-called infrastructure, which of course means that given entrepreneurs do not have to assume those costs. This is usually justified on the grounds that the costs are too high for any single entrepreneur and that such state expenditure represents a collective sharing of the cost that benefits everyone. But this explanation assumes that all entrepreneurs benefit equally, which is seldom the case, certainly not transnationally and most often not even within the boundaries of the state. In any case, the costs of the infrastructure are not usually imposed on the collectivity of beneficiaries but on all taxpayers, and even disproportionately on non-users.
Nor is such direct assumption of costs via infrastructure the largest single assistance given by the states. The states offer the entrepreneurs the possibility of not paying the costs of repairing the damage they do to what is not their property. If an entrepreneur pollutes a stream and doesn't pay the costs either of avoiding the pollution or of restoring the stream to pristine state, de facto the state is permitting the transmission of the cost to society at large, a bill that is often not paid for generations thereafter, but which eventually must be paid by someone. In the meantime, the absence of constraint on the entrepreneur, his ability to "externalize" his costs, is a subsidy of considerable importance.
Nor does this end the process. There is a special advantage of being an entrepreneur in a strong state which entrepreneurs in other states do not enjoy to the same degree. And here we see the advantage of the location of states in an interstate system from the point of view of the entrepreneurs. Strong states can prevent other states from conferring monopolistic advantages against certain entrepreneurs, usually citizens of their own state.
The proposition is very simple. Real profit, the kind that permits a serious endless accumulation of capital, is only possible with relative monopolies, for however long they last. And such monopolies are not possible without the states. Furthermore, the system of multiple states within an interstate system offers the entrepreneurs great assistance in making sure that the states restrict themselves to helping them and do not overstep their bounds and hurt them. The curious interstate system permits entrepreneurs, particularly large ones, to circumvent states that get too big for their britches, by seeking the patronage of other states, or using one state mechanism to curb another state mechanism.
This brings us to the third way in which states can prevent the free market from functioning freely. The states are major purchasers in their national markets, and large states command an impressive proportion of purchases in the world market. They are frequently monopsonists, or near-monopsonists, for certain very expensive goods; for example, today, for armaments or superconductors. They could of course use this power to lower prices for themselves as purchasers, but instead they seem for the most part to use this power to permit the producers to monopolize a roughly equal share of the market, and to raise their prices scandalously.
But, you will think, about what then was Adam Smith so agitated? Did he not inveigh against the state's role in creating monopolies? Did he not call for laissez-faire, laissez-passer? Yes, he did, up to a point. The reason why, however, is the crucial thing to see. Obviously, one man's monopoly is another man's poison. And entrepreneurs are always competing first of all with each other. So, naturally, those who are out are always screaming against state-induced monopolies. Adam Smith was the spokesman of these poor, benighted underdogs. To be sure, once the underdogs have undone the monopolies in which they did not participate, they happily proceed to try to create new ones of their own, at which point they tend to cease citing Adam Smith and instead bankroll neoconservative foundations.
Of course, monopoly is not the only advantage capitalists obtain from the state. The other main advantage, regularly noted, is the maintenance of order. Order within the state means first of all order against insurgency by the working classes. This is more than the police function against theft; it is the state's role in reducing the efficacy of class struggle by workers. The way this is done is through a combination of force, deception, and concessions. What we mean by a liberal state is one in which the amount of force is reduced and the amount of deception and concessions increased. This works better, to be sure, but it is not always possible, especially in peripheral zones of the world-economy, where there is too little surplus available to permit the state to allocate much of it to concessions. Even in the most liberal state, however, there are serious legal constrictions on the modes of action by the working classes, and on the whole these constrictions are greater, usually far greater, than those reciprocally imposed on employers. No legal system is class-blind although, as a result of workers' political activity over the past two centuries, the situation did tend to get somewhat better after 1945 than it previously had been. It is this improvement in the position of the working classes that the resurgent conservative ideology around the world since the 1970's has been contesting.
What, however, about interstate order? Schumpeter, in one of his few naive moments, insisted that interstate disorder was a negative from the point of view of entrepreneurs and a social atavism. Perhaps it was not naivety on his part, but merely Schumpeter's desperate need not to accept the economic logic of Lenin's Imperialism that led him to insist on this. In any case, it seems to me quite clear that capitalists generally feel about war what they feel about taxation. Their attitude depends on the particular circumstances. War against Saddam Hussein may seem positive in terms of preserving certain possibilities of capital accumulation for certain capitalists. Even world wars are useful for particular capitalists, usually provided they are serving the winning side, and are located somewhat out of the direct line of fire, or if their production is particularly geared to wartime needs of either side.
Still, Schumpeter has a point in general, in that too much or too persistent interstate disorder makes it difficult to predict the market situation, and leads to capricious destruction of property. It also makes impossible, or at least very difficult, certain kinds of economic transactions, interfering with previous routes of commodity chains. In short, if the world-system were continuously in a state of "world war," capitalism probably wouldn't work very well. So the states are needed to prevent this. Or rather it is useful to have a hegemonic power that can institute a certain degree of regulation in the system, which increases predictability and minimizes capricious losses. But once again the order a hegemonic power imposes is always better for some capitalists than for others. Collective unity of the capitalist classes is not too strong in this domain. We could sum this up by saying that waging war is, at many points in time and for certain capitalists, a great service, even if this is not always true. I certainly do not wish to suggest that capitalists, singly or collectively, call wars on and off. Capitalists are powerful in a capitalist world-economy, but they do not control everything. Others get into the picture of deciding on wars.
It is at this point that we must discuss the so-called autonomy of the states. Capitalists seek to accumulate capital. Politicians, for the most part, primarily seek to obtain, and remain in, office. One might think of them as petty entrepreneurs who, however, exercise considerable power beyond their own capital. Remaining in office is a function of support - support of capitalist strata to be sure, but also support of voters/citizens/popular strata. This latter support is what makes possible the minimal legitimacy of a state structure. Without this minimal legitimacy, the cost of remaining in office is very high, and the long-run stability of the state structure is limited.
What legitimates a state within the capitalist world-economy? Surely it is not the fairness of the distribution of the surplus-value or even of the application of the laws. If one says it is the myths that every state uses about its history or origins or special virtues, one still needs to ask why people buy into these myths. It is not self-evident that they will. And in any case we know that popular insurrections occur repeatedly, some of which even involve cultural revolutionary processes that call into question these basic myths.
So, legitimacy needs explaining. The Weberian typology allows us to understand the different fashions in which people legitimate their states. What Weber calls rational-legal legitimation is of course the form that liberal ideology preaches. In much of the modern world, this form has come to prevail, if not all of the time, at least for a good deal of the time. But why does it prevail? I insist not only on the importance of this question but on the fact that an answer is far from self-evident. We live in a highly unequal world. We live in one in which polarization is constantly increasing, and in which even the middle strata are not keeping up proportionately with the upper strata, despite any and all improvements in their absolute situation. So why do so many persons tolerate this situation, even embrace it?
There are, it seems to me, two kinds of answers one might give. One is relative deprivation. We may be badly off, or at least not well enough off, but they are really badly off. So let us not rock the boat, and above all let us prevent them from rocking the boat. That this kind of collective psychology plays a major role seems to me to be very widely accepted, whether one applauds it by talking of a sizeable middle class as the basis of democratic stability or deplores it by talking of a labor aristocracy having false consciousness, and whether one thinks of it as operating primarily within states or within the world-system as a whole. This explanation is a structural one; that is to say, it is an argument that a certain collective psychology derives from the very structure of the capitalist world-economy. If this aspect of the structure remains intact, that is, if we continue to have a hierarchical structure that has many positions on the ladder, then the degree of legitimation resulting from this structure should remain constant. At the moment, the reality of a hierarchical ladder of positions does seem to have remained intact, and therefore the structural explanation cannot explain any variation in legitimation.
There does, however, seem to me a very important second factor that accounts for continuing legitimation of state structures. This factor is more conjunctural, and therefore can vary; and it has indeed varied. The degree of legitimation of the capitalist world-economy before the nineteenth century was undoubtedly quite low, and it has remained low in most of the peripheral zones right into the late twentieth century. The continuous commodification of productive transactions seemed to bring changes, many or even most of which were negative from the point of view of the direct producers. Still, after the French Revolution, the situation began to change. It is not that the impact of commodification became less negative, at least for the large majority. It is that their restiveness took the form of insisting that sovereignty could not be discussed merely as a definition of authority and lawful power. One had to ask the question, who exercised this power? who was the sovereign? If the answer were not to be the absolute monarch, what alternative was there? As we know, the new answer that began to be widely accepted was "the people."
To say that the people are sovereign is not to say anything very precise, since one then has to decide who are the people and by what means they can collectively exercise this authority. But just suggesting that there was such an entity as "the people" and that they might exercise sovereign power had very radical implications for those exercising de facto authority. The result has been the great politico-cultural turmoil of the nineteenth and twentieth centuries surrounding the question of how to interpret, and tame, the exercise by the people of its sovereignty.
The story of the taming of the exercise of popular sovereignty is the story of liberal ideology - its invention, its triumphal ascendancy in the nineteenth century as the geoculture of the capitalist world-economy, its ability to transform the two competitor ideologies (conservatism on the one hand and radicalism/socialism on the other) into avatars of liberalism. How this was done I have discussed at length in my book, After Liberalism. Let me just resume here the essential.
Liberalism presented itself as a centrist doctrine. The liberals preached that progress was desirable and inevitable, and could best be achieved if a process of rational reform were instituted, one controlled by specialists, who could, on the basis of an informed analysis, implement the necessary reforms throughout the historical system, using the authority of the states as their basic political lever. Faced with the impetuous demands of the "dangerous classes" of the nineteenth century - the urban proletariat of western Europe and North America - the liberals offered a three-pronged program of reforms: the suffrage, the beginnings of a welfare state, and a politically-integrating racist nationalism.
This three-pronged program worked exceptionally well and, by 1914, the original dangerous classes, the urban proletariat of western Europe and North America, were no longer dangerous. Just then, however, the liberals found themselves confronted with a new set of "dangerous classes" - the popular forces in the rest of the world. In the twentieth century, the liberals sought to apply a similar reform program at the interstate level. The self-determination of nations served as the functional equivalent of universal suffrage. The economic development of underdeveloped nations was offered as the equivalent of the national welfare state. The third prong, however, was unavailable since, once one was trying to include in the entire world, there was no outside group against whom one could construct an integrating, racist nationalism.
Nonetheless, the twentieth-century version of world-level liberalism seemed also to work up to a point, and for a while, especially in the "glorious" years after 1945. But the formula came unstuck as of 1968. To be sure, the self-determination of nations offered little problem. But world-level redistribution, even to a modest degree, threatened to put an enormous strain on the possibilities of endlessly accumulating capital. And the third prong was entirely absent. As of the 1970's, global liberalism no longer seemed to be viable.
To understand why this is so devastating to the system, we have to understand what it was that liberalism had offered and why therefore it had successfully stabilized the system politically for a long while. The three-pronged program that the liberals had used to tame the dangerous classes did not offer the dangerous classes what they wanted and had initially demanded - easily enough summarized in the classic slogan of the French Revolution: liberty, equality, fraternity. If these demands had been met, there would no longer have been a capitalist world- economy, since it would have been impossible to ensure the endless accumulation of capital. What the liberals offered therefore was half a pie, or more exactly about one-seventh of a pie: a reasonable standard of living for a minority of the world's population (those famed middle strata). Now this small pie was doubtless a lot more than this one-seventh had had before, but it was far less than an equal share of the pie, and it was almost nothing at all for the other six-sevenths.
Giving this much did not significantly diminish the possibilities of accumulating capital for the large capitalists, but it did
accomplish the political objective of pulling the plug on revolutionary ferment over the middle run. The one-seventh who
benefited materially were for the most part quite grateful, all the more so when they saw the conditions of those they left
behind. (Remember Tawney's image of the talented "scrambl(ing) to shore, undeterred by the thought of drowning companions!"{1})
[1. R. H. Tawney, Equality (London: George Allen & Unwin, 4th ed., 1952), 109.]
What is more interesting is the reaction of the drowning companions. They came to interpret the ability of the talented to
swim to shore as evidence of hope for them. This was understandable psychologically if imprudent analytically.
Liberalism offered the opiate of hope, and it was swallowed whole. It was swallowed not least by the leaders of the world's antisystemic movements, who mobilized on the promise of hope. They claimed that they would achieve the good society by revolution, but of course they in fact meant by reform which they, as substitute specialists for those offered by the current authorities, would administer once they gained control of the levers of state power. I suppose that if you are drowning, and someone offers hope, it is not irrational to grab hold of whatever is extended as a life-saver. One cannot retrospectively reprimand the popular masses of the world for offering their support and their moral energy to the multiple antisystemic movements who voiced their grievances.
Those in authority, faced with voluble, vigorous, and denunciatory antisystemic movements could react in one of two ways. If they were frightened, and they often were, they could try to cut off the heads of what they saw as vipers. But since the beasts were in fact hydra-headed, the more sophisticated defenders of the status quo realized that they needed more subtle responses. They came to see that the antisystemic movements actually served in a perverse way the interests of the system. Mobilizing the masses meant channelling the masses, and state power for the leaders had very conservatizing effects. Furthermore, once such movements were in power, they moved themselves against the impetuous demands of their followers, and tended to do so with as much, even more, severity than their predecessors. Furthermore, the sedative of hope was even more efficacious when the peddler was a certified revolutionary leader. If the future was theirs, the popular masses reasoned that they could afford to wait a while, especially if they had a "progressive" state. Their children, at least, would inherit the earth.
The shock of 1968 was more than momentary. The shock of 1968 was the realization that the whole geoculture of liberalism, and especially the construction of historical optimism by the antisystemic movements, was tainted, nay fraudulent, and that their children were not scheduled to inherit the earth; indeed, their children might be even worse off than they. And so these popular masses began to abandon the antisystemic movements, and beyond the movements all of liberal reformism, and therefore abandoned the state structures as vehicles of their collective betterment.
To abandon a well-worn path of hope is not done with lightness of heart. For it does not follow that the six-sevenths of humanity were ready to accept quietly their fate as oppressed and unfulfilled human beings. Quite the contrary. When one abandons the accepted promises of hope, one searches for other paths. The problem is that they are not so easy to find. But there is worse. The states may not have offered long-term betterment for the majority of the populations of the world, but they did offer a certain amount of short-term security against violence. If however the populations no longer legitimate the states, they tend neither to obey its policemen nor to pay its tax-collectors. And thereupon the states are less able to offer short-term security against violence. In this case, individuals (and firms) have to return to the ancient solution, that of providing their own security.
As soon as private security becomes once again an important social ingredient, confidence in the rule of law tends to break down, and therefore so does civil (or civic) consciousness. Closed groups emerge (or reemerge) as the only safe haven, and closed groups tend to be intolerant, violent, and inclined toward zonal purifications. As intergroup violence rises, the leadership tends to become more and more mafioso in character - mafioso in the sense of combining muscular insistence on unquestioning intragroup obedience and venal profiteering. We see this all around us now, and we shall see much more of it in the decades to come.
Hostility to the state is fashionable now, and spreading. The anti-state themes common to conservatism, liberalism, and radicalism/socialism, which had been ignored in practice for over 150 years, are now finding deep resonance in political behavior in all camps. Should not the capitalist strata be happy? It seems doubtful that they are, for they need the state, the strong state, far more than their official rhetoric has ever admitted.
No doubt they don't want peripheral states to interfere with the transactions flows of the world-economy, and now that the antisystemic movements are in deep trouble, the big capitalists are currently able to use the IMF and other institutions to enforce this preference. It is however one thing for the Russian state no longer to keep out foreign investors; it is quite another thing for the Russian state to be unable to guarantee the personal safety of the entrepreneurs who visit Moscow.
In a recent issue of CEPAL Review, Juan Carlos Lerda makes a very cautious assessment of the loss of autonomy of state authorities in the face of globalization. He does however stress what he believes to be a bright side in the increased vigor of world market forces:
The globalization phenomenon effectively restricts national governments' freedom of movement. However, the disciplining force of international competition which underlies at least a large part of the process may have considerable beneficial effects on the future course of public policy in the countries of the region. Thus, when talking about "loss of autonomy", care must be taken to check whether it is not rather a matter of a welcome "reduction in the level of arbitrariness" with which public policy is sometimes applied.{2}
[2. Juan Carlos Lerda, "Globalization and the Loss of Autonomy by the Fiscal, Banking and Monetary Authorities," CEPAL Review, No. 58, April 1996, 76-77. The text goes on: "It is worth asking, for example, whether the international financial markets' growing intolerance - of arbitrary manipulation of the exchange rate, or of sustained high public deficits - really affects domestic authorities' autonomy (by tightening the restrictions on governments) or if it is not rather a force for good which will prevent greater evils in the future (such as the accumulation of large exchange rate slippages which give rise to financial traumas with considerable negative effects in the real sphere of the economy when devaluation inevitably occurs)."]
Here we see what one might call the official line. The market is objective and therefore "disciplining." What it disciplines, it seems, is everyone's perverse instincts to make social decisions on any basis other than the maximization of profits. When states make social decisions on such grounds, they are being arbitrary.
But let the states try not to be "arbitrary" when important capitalist interests are at stake, and you will hear the shouting. When in 1990, major U.S. financial institutions were in danger of bankruptcy, Henry Kaufman wrote an op-ed piece in the N.Y. Times in which he said:
Financial institutions are the holders, and therefore, the guardians of Americans' savings and temporary funds, a unique public responsibility. Truly letting the marketplace discipline the financial system would mean acquiescing in an avalanche of potential failures....{3}
[3. Henry Kaufman, "After Drexel, Wall Street is Headed for Darker Days," International Herald Tribune, Feb. 24-25, 1990 (reprinted from N.Y.Times).]
So there we have it, clearly outlined. It is welcome for the market to discipline the states when they are arbitrary, but irresponsible if the states allow the same market to discipline the banks. Social decisions to retain social welfare is irresponsible, but a social decision to save banks is not.
We must always keep clearly in mind not only that one man's monopoly (or arbitrary decision) is another man's poison, but that capitalists depend on the intervention of the states in such a multitude of ways that any true weakening of state authority is disastrous. The case we have been arguing here is that globalization is not in fact significantly affecting the ability of the states to function, nor is it the intention of large capitalists that it do so. The states are however, for the first time in 500 years, on a downward slide in terms of their sovereignty, inward and outward. This is not because of a transformation of the world-economic structures but because of a transformation of the geoculture, and first of all, because of the loss of hope by the popular masses in liberal reformism and its avatars on the left.
Of course, the change in the geoculture is the consequence of transformations in the world-economy, primarily the fact that
many of the internal contradictions of the system have reached points where it is no longer possible to make adjustments
that will resolve once again the issue such that one sees a cyclical renewal of the capitalist process. These critical dilemmas
of the system include among others the deruralization of the world, the reaching of limits of ecological decay, and the fiscal
crises of the states brought on by the democratization of the political arena and the consequent rise in the levels of
minimum demand for education and health services.{4}
[4. See the detailed analysis of the crisis in the structures of the capitalist world-economy in T.K. Hopkins & I. Wallerstein,
coord., The Age of Transition: Trajectory of the World-System, 1945-2025 (London: Zed Press, 1996).]
The sovereignty of the states - their inward and outward sovereignty within the framework of an interstate system - is a fundamental pillar of the capitalist world-economy. If it falls, or seriously declines, capitalism is untenable as a system. I agree that it is in decline today, for the first time in the history of the modern world-system. This is the primary sign of the acute crisis of capitalism as an historical system. The essential dilemma of capitalists, singly and as a class, is whether to take full short-run advantage of the weakening of the states, or to try short-run repair to restore the legitimacy of the state structures, or to spend their energy trying to construct an alternative system. Behind the rhetoric, intelligent defenders of the status quo are aware of this critical situation. While they are trying to get the rest of us to talk about the pseudo-issues of globalization, some of them at least are trying to figure out what a replacement system could be like, and how to move things in that direction. If we don't want to live in the future with the inegalitarian solution that they will promote, we should be asking the same question.
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