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Capital & Class The Internationalisation of the State

Sol Picciotto Capital & Class 1991 15: 43 DOI: 10.1177/030981689104300103 The online version of this article can be found at:

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Sol Picciotto


The Internationalisation of the State

G Summary: The capitalist state, although territorially defined, was born and developed as a loose network of interrelated and overlapping jurisdictions. The regulatory framework for corporate capitalism which emerged from the last part of the 19th century was based on the national state, but involved emulation and transplantation of forms, as well as international coordination; and it facilitated international ownership of capital through the transnational corporation, which became the dominant form in the 20th century. T N C s have favoured minimal international coordination while strongly supporting the national state, since they can take advantage of regulatory differences and loopholes. Processes of international coordination of state functions, relying on national legitimation, have taken the form of bureaucratic- administrative corporatist bargaining through a motley network of informal structures as well as the more visible and grand organisations. The growing globalisation of social relations has put increasing pressure on both national and international state structures.
The national state was the basis of the regulatory framework of modern corporate capitalism. International coordination of state functions is based on bureaucratic corporatist bargaining through formal and informal structures. The globalisation of social relations puts increasing pressure on both national and international state structures, and requires a popular internationalist response.

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Introduction A major feature of political economy in the current period is the existence of acute tensions in the international state system and struggles over its reformulation. There have been many attempts among international relations theorists to analyse this crisis in relation to the changing nature of global economic relations. A common theme has been that the increased internationalisation of economic relations has undermined political structures based on the national state and strengthened international state structures dominated by international capital. At the same time, it is argued, increased competition among the main elements of international (or, better, transnational) capital has led to the loss by the USA of its unchallenged postwar domination of the international system. Thus, the conflicts over the future of the international state system are attributed to attempts to establish a new multi-polar model: whether one based on the US-Europe-Japan Trilateral, or more radically one that breaks the North-South core-periphery relationship and allows a more autonomous development of dependent countries. However, the continued strength of the US allows it to dominate the terms of transition, perhaps asserted through a phase of unilateralism, as in the first period of the Reagan presidency. Consideration of these issues makes it imperative to move away from the traditional analysis of inter-state diplomacy and to introduce some discussion of transnational political and economic forces and structures. However, in mainstream international relations theory there has been only a slight modification of the realist treatment of bloc politics, towards a neo-realism of theorists such as Ruggie and Keohane, whose discussions of interdependence and regimes, although they admit non-state actors, are still essentially state-based and treat international relations in institutional terms. A more radical approach has been attempted by Robert Cox, using Gramscian concepts, to explain the formulation of hegemonic projects around which changes in world order structures emerge, in relation to changes in the global structure of social power generated by the internationalising of production (Cox 1981, 149; see also Cox 1987). Cox has argued that the postwar institutionalisation of an international policy process dominated by the US through organisations such as the IMF, IBRD, NATO, and the OECD was nevertheless based on the consolidation, especially in western Europe, of a national corporatism and welfare statism which was already obsolescent. The increased internationalisation of production,

Internationalisation of the State

however, led to the increased subordination of nationallyoriented state agencies (e.g. ministries of industry, labour, planning) to others which are key points in the adjustment of domestic to international economic policy (e.g. ministries of finance and prime ministers offices) (Cox 1981, 146). However, such an approach appears to assume that there is an opposition between nationally and internationally oriented state apparatuses; and that international capital attempts, usually successfully, to use its greater control over international state apparatuses to undermine the effectiveness of the national state. This assumption has also featured in other leftist discussions of international capital and the state. Thus, in the Poulantzian perspective that has been influential on the European left, it is the national social formation that is the site of social and class struggle, while internationalised capital has the unfair advantage of direct access to international state apparatuses, which can be used externally to coerce national states. (Poulantzas 1974; see the critique in Holloway & Picciotto 1980). The political implications of this approach were that social transformation must take place within a national framework, usually by an alliance of the oppressed classes and any elements of national capital, in opposition to international capital and by breaking with the international system. However, others pointed out, as Radice showed for the UK, that internationalisation has gone so far that not only does no significant national capital remain, but that the material base of the economy has become so internationalised that there would be significant costs in attempting a strategy of national autonomy (Radice 1984). Indeed, it could be said that a major factor in the loss of momentum of labourism or social-democracy in the 1980s, certainly in Britain, has resulted from the abrupt awareness of the limits of national sovereignty, and the consequent limitations of an essentially parliamentary politics focussed on the national state. This has now resulted in the often uncritical embrace by many in Britain, from the leadership of the Labour Party and the TUC to the new realists of Marxism Today, of the vision of a potential social Europe, eloquently evoked by the speech of Jacques Delors to the TUC Congress in September 1988. Paradoxically, it was Mrs Thatcher, notably in her Bruges speech in September 1988, who insisted that she had not defeated corporatism at home only to have it foisted on her in Europe, and who resisted entry into the European Monetary System (which came to be advocated by the Labour Party) in order to retain national control over


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monetary policy. However, Mrs Thatchers position could be seen as a defence of a larger, perhaps Atlanticist, internationalism, while the Labour Party and other social-democratic elements could be seen to be trying to replace nation-state with pan-European protectionism. The division therefore remains the same: those political forces seeking some degree of social control over the processes of capital accumulation look to the national or regional state, while those concerned more with a pro-business perspective seem to prefer the least state control possible, and to use their access to international state power to undermine national state control. In contrast, I shall argue that the characterisation of a correlation between national capital and the national state, as against international capital and the international state is in many ways inaccurate and unhelpful. The dominant vector for global economic internationalisation during the 20th century has been the transnational corporation (TNC). While TNCs have pressed for an adequate coordination of national regulation, they have generally resisted any strengthening of international state structures. Indeed, the emergence of internationalised ownership of capital through such international corporate groups resulted from the existence of national protectionist regulation: not only tariffs, but national procurement and national protection of scientific innovation. Having secured the minimalist principles of national treatment for foreign-owned capital, TNC s have been the staunchest defenders of the national state. It is their ability to exploit national differences, both politically and economically, that gives them their competitive advantage. This is the common element in explanations of the TNC s, from neo-classical theorists of internalisation (e.g. Rugman 1982) to the Marxist analyses of uneven development (e.g. Brett 1985; Jenkins 1987). The internationalisation of capital is clearly a contradictory process, creating both homogenisation and differentiation. On the other hand, popular and emancipatory movements have in modern times derived considerable strength from their global perspectives and internationalist orientation. In the closing decade of the 20th century, the overriding priority should be to revive this internationalism. A necessary basis for this is to analyse the historical process of internationalisation of both the state and capital, as an interrelated process. This will demonstrate a more complex set of relationships, and perhaps enable us to begin to theorise the changing forms of global state and capital in relation to international social and class relations.1

Internationalisation of the State

The International Corporate State The internationalisation of capital has not been a purely economic process: an important role in shaping it was played by the internationalisation of a framework of state structures which have generally guaranteed the internationalised ownership of capital and its reproduction primarily through the corporation. The modern capitalist state was born within an international framework. Although it was primarily national socio-economic forces that defined its sociogeographic boundaries, its form and functions developed internationally. It was not until the second half of the 19th century that many of todays leading states Germany, Italy, the USA were established in their modern unified forms. It was in this same period that the main institutions of property ownership were modernised in the major capitalist states. This process was both conflictual and international. It took place in a world which had been simultaneously united and divided by several centuries of mercantile capitalism, but where the old rigid mercantilist regulatory structures had crumbled or were being dismantled. Although its primary unit was the territorially-defined state, the international system did not consist of an aggregation of compartmentalised units, but a network of loose and overlapping jurisdictions. States have had a very broad jurisdiction to prescribe regulations for legal persons, since the nexus between the capitalist state and the subjects of its laws can be very loose. Although the executive power to enforce such regulation is essentially territorial, mobility of people and the interlinking of ownership and of global markets give it considerable scope. A states laws can be enforced against any person who can be found or even brought within the territory (even by kidnapping, as with Eichmann, or military expedition, as with Noriega), or against assets or goods present or passing through, or even by denying access to markets. Furthermore, reciprocal arrangements such as extradition and judicial assistance were also developed, from the late 19th century. Imperialist competition and domination certainly led to hierarchisation of states, and overt annexation and colonisation in some circumstances. Nevertheless, Britain, the dominant trading power until 1914, favoured a more open system; and the USA, which assumed the mantle during the 20th century, also pressed for the open door. However, it is important to note that this was on the basis of the extension of statehood. Woodrow Wilsons internationalism had as one


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cornerstone his principle of national self-determination, and the famous guarantees of territorial integrity and political independence a formulation later embodied in the UN Charter which remains central today. The institutional framework for corporate capitalism which developed from the end of the American Civil War to the beginning of World War I did so through a process of international debate and emulation. Measures such as the freedom of incorporation and its limits, if any, were embodied in legislative formulations and their interpretation which were responsive to international competition. There was mutual influence between the main capitalist countries in formulating legislation such as the English Companies Act of 1862, the French loi sur les societes of 1867 and the German Aktiensrechtsnovelle of 1870. More importantly, this was facilitative legislation, the development of which depended to a great extent on means devised by entrepreneurs and their advisors; and it was difficult for national authorities to resist international competitive pressures by refusing to legitimise such devices, e.g. one-person companies and corporate subsidiary networks. Furthermore, capitalist legal systems were exported by transplantation not only to colonies and direct dependencies, but also voluntarily as a means of modernisation, for example in Meiji, Japan. During this period also, newly formed international private and public organisations played a significant role in coordinating both the development of a regulatory framework for corporate capital and its enforcement. A notable example was the international movement for the modernisation and harmonisation of the intellectual property laws. This was given an early impetus by Prince Albert at the Great Exposition of 1851, and fuelled by the wave of international interest in scientific innovation, and even more by the energetic efforts to harness (some would say enslave) science to the interests of corporate capital (see Noble 1977). It culminated in the decade of negotiations and disputes that finally produced the Paris Convention of 1883 and the Union of States for the Protection of Industrial Property. The principles established in this convention still govern the debates and conflicts over international control of technology today. Although the legal framework for incorporation played little role in the early period of capitalist industrialisation, it provided the basis for the institutionalisation of corporate ownership in the form of giant enterprises based in the main capitalist states which developed in the period 1885-1914. This process of concentration and centralisation of capital was

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by no means smooth and orderly. It was an attempt to control the power of labour on a large scale, and was itself contested by new forms of labour organisation, in particular new mass unions, and socialist, anarchist or Marxist political parties. The internationalist orientations of these movements foundered when the First World War exposed the internal contradictions of social democracy: essentially, the bureaucratisation of its institutions and its divisions over the dilemma of social reform versus revolution. Yet, the integration of labour into the state was not a purely national process, but also entailed an interaction of national and international processes. The concentration of capital led to an international debate about the growth of big business and cartels. The concern was greatest in the USA , where the process of concentration of capital had been first and strongest after 1880, leading to the populist agitation against the trusts. In contrast to the free-market ideology of British judges, US courts were more willing to adopt restrictive interpretations of the common law doctrine of restraint of trade, and this was reinforced by the enactment by Congress of the Sherman Act of 1890. The fresh merger wave after 1897 led the Congress to set up an industrial commission, which spent three years taking evidence and publishing reports. In 1904, John Moody published The Truth about Trusts, and the German Imperial government also issued a report on cartels (see Fennema 1982, 11-20). However, both the legal restrictions on combinations and the popular pressures had the effect of stimulating concentration by outright mergers rather than unstable alliances and cartels. In this period, therefore, a form of regulated capitalism emerged, with differences in the different main capitalist states due to their historical characteristics. Germany, with its strong state and banking system, favoured state-sanctioned or supported cartels; the UKs liberal heritage rested on informal controls both by the state and public opinion; in the US a new form of corporate liberalism arose, initially coalescing around private bodies, notably the National Civic Federation, and leading to the establishment of the great regulatory commissions (see Kolko 1963, Weinstein 1968, Sklar 1988). However, not only were the combinations and cartels themselves frequently international in scale, they were often backed by states acting in concert, or even within a private or public international organisation. An example is the Permanent Sugar Commission of 1902, which restricted subsidised sugarbeet production in favour of the sugar-cane producers.


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Corporate Power, the State and Social Movements. The emergence of a nationally based but internationally coordinated corporate capitalism raised important questions for the many popular movements of this period. Socialists generally saw the concentration of capital as laying the basis for a transition to a better society through the socialisation of production. Thus, Hilferding (the Austrian social democrat, later Finance Minister in Weimar Germany) argued that the development of large corporations, trusts and combinations, with the intermediation of the banks, entailed the emergence of the enormous concentrated power of finance capital, in which all the partial forms of capital are brought together into a totality, in which form capital now appears as a unitary power which exercises sovereign sway over the life processes of society (Hilferding 1910/1981, 234-5). In his view, this facilitated the transition to socialism, since the necessity for political control over such economic forces was made clearer, and the task was simplified, since nationalisation of a few great banks would be sufficient to initiate it.2 Whereas Hilferding saw an increasingly acute contradiction between economic forces which were becoming highly socialised and political relations which were becoming more polarised and conflictual, a different conclusion was drawn by the German socialist Karl Kautsky. In a famous article written just before the First World War, Kautsky argued that the coordination of economic forces could lead to political coordination, the translation of cartellisation into foreign policy: a phase of ultra imperialism. Although this view was almost immediately disproved by the outbreak of the war, the issue it raised retained its relevance, especially with Kautskys amended prediction that the result of the World War between the great imperialist powers may be a federation of the strongest, who renounce their arms race (Kautsky 1911/1970). Kautskys article has been best known through its denunciation by Lenin in his famous pamphlet Imperialism, the Highest Stage of Capitalism. This followed and was partly based on the work of another Bolshevik, Bukharin, who had developed Hilferdings view, and argued that the growth of firms and links between them was much more dense within the developed capitalist countries than between them, to the point where he envisaged a sort of state capitalism in the main capitalist states. Lenin, however, introduced two crucial changes to the argument: he emphasised that the growth of

Internationalisation of the State

monopoly does not eliminate but transforms the nature of competition; and to the extent that competition is controlled, this does not produce economic rationality but parasitism and decay. Linked with this was his second point, that capitalist alliances are unstable because the even development of different undertakings, trusts, branches of industry, or countries is impossible under capitalism (Lenin 1917/1960, Vol.1, 807). This uneven development not only meant an insecure economic base for alliances. Lenin also emphasised that it created differences in political conditions between states. It was for this reason that he stressed the importance of national political struggles, including progressive struggles of dependent peoples for national self-determination. This view of Lenins created disagreements with other revolutionaries of the period, who saw revolutionary change in terms of an international working-class alliance to destroy all capitalist states, and resisted the idea of class alliances to achieve state power at the national level. For the non-revolutionary left, which saw the conquest of political power as taking place mainly through parliamentary means, the focus on the national state was inevitable. The litmus test of a genuine socialist programme was whether it included the subsequent transfer of ownership of major firms to the state. Thus, the extensive involvement of the state in industry through direct fixing or controlling of prices and output, which developed in all states during the war, was seen as a step towards full nationalisation, and socialists saw no need for laws to enforce competition. Neither did business circles or non-socialist parties see any need to enforce competition: on the contrary, the dominant ideology in the period between the wars favoured a controlled capitalism. This was intended to be not merely nationalistic and protectionist, but within an international framework of corporatist planning, based on state support for or involvement in the extensive network of international cartels. Indeed, it was the existence of extensive networks of largely private cartels, rather than national protectionism, that held back the growth of TNCs in the 1930s. It was not until the depression reawakened concern in the United States about the power of big capital that the control of corporations and cartels again became a live issue. Although some of the New Deal studies of big business were conducted by socialists such as Victor Perlo and Paul Sweezy, and were influenced by the new left-Keynesian theories of Sraffa and Joan Robinson on monopolistic competition, the second phase of the Roosevelt administration was dominated by


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Brandeisian liberalism. Following the setting up of the new regulatory structures for banking and securities in the early thirties, the liberal-populist wave moved on to the Department of Justice. From 1937-8, under first Robert Jackson and then Thurman Arnold, it activated the antitrust laws, and initiated a flood of cases, which resulted in a spate of consent decrees and a stream of court judgments from 1938 to 1952. Some antitrust actions against international cartels were suspended during the war and to some extent impeded in the postwar period by British government pressures on the United States. However, New Deal lawyers carried the antitrust gospel with them: they drafted competition or antimonopoly laws for postwar Japan and West Germany, and influenced those of the European Coal and Steel Community (and therefore later the EEC ), as well as encouraging antimonopoly thinking among British Keynesians such as Beveridge and Gaitskell, which led to the postwar British monopolies and mergers legislation. However, attempts to institutionalise the internationalisation of competition laws through the proposed International Trade Organisation were blocked by the refusal of the United States Congress to ratify its charter. Discussion of competition law in the United Nations Economic and Social Council in the postwar period made little headway, and it was only later that the issue, renamed restrictive business practices, became revived, in a different political forum, the UNCTAD. Both revolutionary and non-revolutionary socialists, therefore, have over the last century come to emphasise the political task of gaining national state power, to which task the strengthening of the social power of popular movements became secondary. The essence of the transition to socialism came to be seen as the transfer of ownership of the large capitalist enterprises to the state, following the conquest of political power. This became diluted by the reformist wing of socialism, under the banner of the control rather than the overthrow of capitalism, into a collaboration with corporatist regulation. Meanwhile, the great achievement of corporate capitalism over the same period has been to escape any effective social accountability, democratisation or control. This has occurred through the internationalisation of capitalist regulation and corporate ownership, by means of an international structure which coordinates the formulation and functioning of regulation, while preserving an important legitimation and implementation role for an increasing multiplicity of national states.

Internationalisation of the State

The Contradictions and Crisis of the International State As pointed out above, the emergence of the modern capitalist state in the second half of the nineteenth century took place within an international framework. Important institutions such as the granting of patent monopolies were created in a coordinated way, as well as by the emulation and transplantation of state and legal institutions for the ownership and transfer of property, notably the liberalisation of the corporate form, and the ideology of contractual freedom. I have also emphasised the important role played in this process by international debate among business as well as scientific and cultural circles, and the formation of international private organisations. The twentieth century has seen the consolidation and extension of the national state, as well as the development of a mushroom growth of international organisations. The nature and significance of the latter has generally been obscured by the importance placed on the former. Judged by the ideal of a world state or government, little weight can be given to the creation of a plethora of largely powerless international organisations, whose main attraction seems to be the exotic location of their meetings. Yet the very multiplicity and heterogeneity of the international bodies that have grown up, and their primarily ideological function, is the key to their importance. It has been estimated that in 1914 about 50 formal intergovernmental organisations had been created, in 1939 there were perhaps 80, and by 1980 over 600. The numbers of nongovernmental bodies (again registering only those with a formal existence) are obviously far greater: a probably conservative estimate gives 330 in 1914, 730 in 1939, and some 6,000 in 1980 (Jacobson 1984). This institutional census, however, only indicates the formal structure of a network comprising innumerable meetings and contacts of officials, managers and representatives of all kinds. Indeed, such internationally organized networks have played a major part in ensuring the minimum degree of coordination of state regulation necessary to permit the international reproduction of capital. For example, an important actor has been the International Chamber of Commerce, which originated in an international congress at Liege in 1905, and was re-formed at the International Trade Conference in the US in 1919, with a view to stimulating American assistance in European reconstruction (see Ridgeway 1938). The ICC was given a consultative status by the League of Nations (and later also


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within the UN system) and has helped to prioritise the international harmonisation of corporate regulation along essentially liberal lines. This it has done both by its direct involvement in the processes of formulation of proposals at the international level, as well as through pressures brought on the relevant national government agencies through its national committees. Indeed, many of the forms of state regulation that are sometimes thought of as quintessentially national can be shown to have originated from or been stimulated by the process of political internationalisation. Notably, the classical tripartite structure of regulation of industrial affairs by cooperative consultation between representatives of business, labour and the state, is sometimes thought of as embodying an essentially national corporatism. But it was in fact transplanted from the United States model which developed in the Progressive era, into the constitution of the International Labour Organisation, from which it has influenced many national structures. This process was part of the first stage of international liberalisation spearheaded by Woodrow Wilson, mentioned above. It was inspired by the fear not only of Bolshevism, but of any independent labour internationalism. Both the revived Socialist International and the new International Federation of Trade Unions met in Geneva in 1918 in the months during which the Paris peace conference was in preparation. It was to counter in particular the IFTU s Labour Charter that the Paris conferences Commission for International Labour Legislation, headed by Samuel Gompers, drew up the charter of the ILO. It is perhaps not surprising that the ILOs most daring venture, the 8-hour day convention, made little headway in terms of actual state ratifications. Although corporate internationalism initially aspired to grandiose and comprehensive schemes of international regulation, it quickly shrank from the political issues that these opened up. An example is the elimination of international double taxation of income, especially of business and corporate profits. This was identified as a problem from the beginnings of the emergence of direct income taxation as the major form of finance of the welfare-warfare state at the start of the 20th century. Business pressures, including those of the ICC, led to its active consideration mainly through the League of Nations Fiscal Committee. A major study of the basis for the allocation of income of international businesses was funded by the Rockefeller Foundation, and carried out by Mitchell B. Carroll, an American lawyer who began with the

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Commerce department, later represented the US on the Leagues Fiscal Committee (despite the US non-membership of the League itself), and finally founded the International Fiscal Association. Carrolls report rejected a comprehensive approach to international allocation of income based on formula apportionment. This was largely because it would pose directly and openly at the international level the political questions of equity in taxation, since formula apportionment would require international agreement both on the definition of the tax base of business profits as well as the formula for their apportionment, between capital exporting and capital importing countries. The alternative system recommended was embodied in a model convention which became the basis of the network of double tax treaties that greatly facilitated the postwar growth of international investment. This was based on separate accounting by each national subsidiary of a TNC, founded on the arms length principle. However, the enforcement of arms length pricing by national tax authorities required a corporate-bureaucratic process of bargaining and negotiation between the various national officials concerned and the corporate advisors. Despite complaining about the arbitrary nature of the arrangements, the corporations have preferred this decentralised but loosely coordinated system to any more comprehensive alternative (see Picciotto 1989). In this area as in many others, the rapid postwar process of international growth of capital began to create severe tensions. From the mid-1960s, there was an increasing international political awareness of the growing power of large TNCs, and the disjuncture between their centralised decisionmaking in the allocation of resources, as against the loose coordination of political regulation by an increasing multiplicity of states. This problem has two aspects. From the point of view of the TNC, its global operations are subject to political interventions by an increasing number of states, often from divergent perspectives. The effective power of each state is in the last analysis limited to the assets and individuals located within its territory, which can be described in international law terms as the territoriality of enforcement jurisdiction. However, the more specialised and integrated are the internationally dispersed activities of the TNC, the more vulnerable they are. Increasing disruption can be caused to a TNCs global strategy by political intervention in one location, whether by awkward trade unions or workforces or maverick state officials, and


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even more so by joint international interventions. On the other hand, from the point of view of the apparently sovereign state, it has increasingly seemed as if state powers to regulate economic and social matters falling clearly within its national jurisdiction are being undermined and rendered ineffective. Under these pressures, the international regulatory processes which had facilitated the growth of TNCs became increasingly inadequate. The greater international mobility of capital revealed the gaping holes in the network of coordination of state functions. An important example is that of offshore financial centres and tax havens. These developed rapidly from the early 1960s, as a tolerated, indirectly regulated arena of global circulation of money-capital. However, they came to be used not just by blue-chip companies and small savers seeking security, but for tax evasion and money-laundering by a wide variety of speculators, fraudsters, drug-dealers, dictators and other corrupt politicians. They have opened up opportunities for international financial and tax arbitrage, as well as avoidance and evasion, which seriously distort optimal allocation of moneycapital. Attempts to develop some international coordination of financial regulation have resulted in the spawning of a motley collection of semi-formal, informal and often secret organisations and meetings of officials, advisors and consultants. For example, for banking supervision there is the Committee on Banking Regulations and Supervisory Practices (Cooke Committee), the Contact Group of EC Supervisory Authorities, the Offshore Group of Banking Supervisors, the Commission of Latin American and Caribbean Banking Supervisory and Inspection Organisations, and so on. Arrangements for exchange of information between supervisors have developed in relation to taxation (including simultaneous examination of related companies), securities regulation, and banking supervision; and there has been a rapid spread of laws on money-laundering, insider dealing, etc. This activity has resulted in a spread of scandals, and an attempt to distinguish legitimate from illegitimate financial dealings; but it cannot be said to have produced an adequate international regulatory system for finance. Once again, attempts to tighten up the international regulatory system have entailed increased bureaucraticadministrative coordination and corporatist bargaining at the international level. Not only has this been in many ways technically ineffective, but also it has created an increasing problem of legitimation. The technical-bureaucratic nature of

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most international regulatory processes relied on legitimation through national political processes. Already under intense pressure from the new social and class movements, national state bodies have also increasingly been seen to be ineffective against the global power of capital. At the same time, the increasingly evident contradictions and inadequacies of the international state system have been counterposed by a renewed internationalisation of social and class movements. One result has been the growth, since the late 1960s, of what has been called international economic soft law. The bestknown examples of this are the Codes of Conduct for international business or TNCs, which have been promulgated by a variety of international bodies. At the most general level, the United Nations Code of Conduct for TNCs, under negotiation for over a decade, still lacks an agreed text. It is notable, however, that it was the International Chamber of Commerce, sensitive to the needs of international business for legitimacy, that drew up the first Guidelines for International Investment and Multinational Enterprise , in 1972. In the increasing climate of concern and debate about TNCs, symbolised by the setting up of the United Nations Group of Experts to produce a report on Multinational Enterprises, a Declaration on International Investment and Multinational Enterprises was hurriedly passed through the OECD in 1976, to a great extent in order to provide an area of common agreement among the OECD countries and a common front in the ensuing debates in the broader forum of the United Nations. Agreement was also achieved at the ILO on its Tripartite Declaration of 1977. Undoubtedly, the harder line taken by the Reagan administration, backed by the Thatcher government, against any antibusiness actions by international organisations, has prevented approval of the United Nations Code. The United Nations Code, and the other sets of general guidelines, are perhaps largely symbolic, a reaction to and an attempt to contain the growing criticisms of and actions against TNCs from the late 1960s. The changing political climate of the 1980s, with high unemployment hitting the industrialised core countries, and governments of the hard right in power in the leading states (West Germany, Japan, the United Kingdom and the United States), created a harsher climate in international fora. Many other proposals also pressed by developing countries and others, some of them in the context of the proposals for a New International Economic Order of 1974, have also been blocked. A notable example is that of the proposals to revise the Paris Convention on Patents of 1883


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(mentioned above): it is now twenty years since Latin American economists pointed to the paradox that the restrictions in the 1883 Paris convention on the power of a state to compel local working of patents inhibits the inflow of foreign investment (Vaitsos 1970), yet successive conferences to amend the convention have met with failure. Instead, the leading capitalist governments have regained the initiative, by shifting the issue of Intellectual Property Rights to the GATT negotiations in the Uruguay round. The UNCTAD Code on the Transfer of Technology has also failed to meet with agreement for similar reasons. These examples, and many others that could be cited, show both the overwhelming need for acceptable and effective mechanisms of control of international capital, and the failure, so far, of attempts to develop such mechanisms, of whatever kind. As I have argued above, in many cases this failure can be traced to the inadequacies not only of the international system as it has developed in the past century or so, but also of the attempts to supplement it through essentially bureaucraticcorporatist forms of regulation. In relation to international codes of conduct, this can be seen in the dilemma of enforcement, raised by the question of the binding force of codes. Advocates of stricter controls over TNCs often suggest that these would depend on establishing codes or regulations that would be legally binding. This results, however, in implementation and enforcement at the national level by states, which not only leaves gaping loopholes, but tends to defuse any popular involvement by pressure groups, trade unions or other bodies. In fact, such bodies have in recent years become more adept at using international codes of conduct, as a focus for political action on a variety of issues relating to the social impact of TNCs. Such actions emerge from and develop a critique of the ways in which the exploitation of social assets by TNCs on a global scale fails to respond to the real needs of the worlds peoples. The response is based on notions of popular power, aiming to democratise both the political structures of the state and the international system, as well as the system of production dominated by TNCs. Towards a new popular Internationalism The current era has indeed seen the emergence, and more recently the internationalisation, of the new social movements, notably the womens, ecology, anti-nuclear and

Internationalisation of the State

anti-poverty movements. Their rise has counterpointed the decline of the traditional bases of the labour movement, in particular the trade unions, leading to a wide-ranging debate in many countries about the class basis of popular movements. Among theorists, the debate has too often been polarised. On the one hand, social movements are characterised as obscuring the class basis of exploitation under capitalism and therefore limiting themselves to essentially liberal reformist aims, such as non-discrimination, democratisation, or peace. On the other hand, the labour movement is itself divided between social-democratic reformism based on obtaining the best deal for workers from a managed capitalism, and revolutionary socialism, with its apparently utopian perspective of the final overthrow of capitalism. Hence, the opposition between class-based and populist movements is not so clear. In practice, those involved in popular campaigns of all sorts are well aware of the conflicting currents within them, stemming from the difficulty of developing a class politics on social issues (for example, peace, women, racism, ecology) without a reductionism that puts class unity higher than effective and united action on each social issue. Equally, the experience of many involved in the labour movement is that the necessity of building a party that can achieve state power is given priority over active and constructive involvement in actual popular movements, and that where such involvement takes place it too often takes the form of attempting to channel and control such movements. The most challenging perspective for the labour movement today is the building of a new internationalism which can combine the strengths of class politics and popular social movements. This process must necessarily engage with, and attempt to capture and transcend, the forms of international state which have developed as part of the internationalisation of capital. The developmentalist pressuregroups and networks have developed considerable organisational skills in combining action through international bodies and focussed on national states, as in campaigns on the baby-food marketing issue (see Chetley 1986). Other effective campaigns have focussed on pesticides, pharmaceuticals, and waste-dumping, while a more directly political issue has been divestment from South Africa. Attempts to combine the flexibility of organisation of pressure-groups and grass-roots campaigns with the more disciplined but bureaucratised power of trade unions have had mixed success, although such combinations are often vital. For example, in following up the Bhopal disaster, the different


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strengths of the international trade union organisations and the network of social movements, while they have not always been combined, have both been important.3 The weaknesses and contradictions of legal and state regulation of capital are most apparent at the international level. These are to a great extent the result of, and reflect the weaknesses of, international popular movements. If the bureaucratic-administrative forms of international business regulation are secretive, it is because of the difficulty of developing an open international flow of information in a world where access to knowledge is unequal, and business and official secrecy are strongly protected. If these regulatory forms are undemocratic, it is because of the problems of building democratic forms of international participation among peoples divided by language and the costs and difficulties of travel. Yet however frustrating attempts at international popular organisation can be, they offer great rewards. Above all, they force socialist activists to see through the mirage that has dogged the labour movement since 1914, that human emancipation, and the harnessing of productive power to meet social need, can be achieved solely through the attainment of national state power by political organisations based mainly on male industrial workers. The broader popular base of social movements, and the wider horizon developed by their internationalisation, necessarily involves a different attitude to the state. At its worst, this can be based on naive illusions that social power exists quite independently of the state. At its best, it can develop more sophisticated analyses of the contradictions of the state and the ways they can be exploited to build the strength of popular movements, while remaining aware that the national state is only a part of the overall structure of power in a global capitalist society.

_____________________________________________________ This paper was given at the conference on Global Imbalances at the American University in May 1989, and at the After the Crisis conference at the University of Amsterdam in April 1990. An earlier version was published in the special issue on Law, Democracy and Social Justice in the Journal of Law in Society in 1988.

Internationalisation of the State 1. An important contribution towards the development of a theorisation of class in international relations has been made by Kees van der Pijl (1979, 1984). However, his approach might be criticised as being too formalistically based on the identification of class fractions rooted in an abstract analysis of accumulation. It leads to a somewhat mechanistic postulate of an alliance between the liberal-internationalist and the state-monopolist fractions of the ruling class during the period of capitalist expansion, which breaks down in the period of crisis and of US unilateralism. Although rich in fruitful insights and detail, the fractionalist approach makes it difficult to grasp the contradictions in the forms of domination, especially of the international state. Fred Halliday has recently pointed out that the recent confluence of Marxism and international relations theory is a development of precisely that debate which was conducted within liberal thought and Marxism in the period up to and during the First World War. The triangle of concepts that the theorists of the earlier generation sought to relate the internal structure of industrialised capitalist society, the arms race and war, the international workings of the economy is the same... Halliday 1987, 171. Considerable material on the involvement of labour and trade union organisations and social movements in international issues is available in the invaluable Newsletter of International Labour Studies: see especially the double issue of Jan.-April 1987 Nos. 32-33. NILS is edited by Peter Waterman, who has also published Waterman 1988, which provides many useful materials and discussions. Also very helpful is Munck 1988; although Muncks emphasis is very much on trade unions and he devotes only a very few pages to their role in broader social struggles, his conclusion is correct, that the old workerism of the left, which was really a workingmanism, has had its day (p. 213). My own view, as mentioned above, is that there is nothing particularly new about social movements; it is only that some sections of the left, having previously pinned their expectations on white workerism, have been forced to reconsider. This is linked with the limitations and crisis of structuralist Marxism, which conceived of a separate sphere of production relations, divided from other social relations in the sphere of reproduction. This is obvious nonsense, since even the most directly trade union struggles over the wage, working conditions and working time, are also struggles over reproduction. The problem has always been how to overcome the fragmented forms of specific conflicts and generate a broader social and class perspective: see Holloway and Picciotto 1977.





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62 References

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