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DOI: 10.1177/0309816891043001031991 15: 43Capital & Class

Sol PicciottoThe Internationalisation of the State

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43Sol Picciotto

The Internationalisation of the

State

Summary: The capitalist state, although territoriallydefined, was born and developed as a loose network ofinterrelated and overlapping jurisdictions. The regulatoryframework for corporate capitalism which emerged fromthe last part of the 19th century was based on the nationalstate, but involved emulation and transplantation of forms,as well as international coordination; and it facilitatedinternational ownership of capital through the transnational

corporation, which became the dominant form in the 20thcentury. TNCs have favoured minimal internationalcoordination while strongly supporting the national state,since they can take advantage of regulatory differences andloopholes. Processes of international coordination of statefunctions, relying on national legitimation, have taken theform of bureaucratic- administrative corporatist bargainingthrough a motley network of informal structures as well asthe more visible and grand organisations. The growing

globalisation of social relations has put increasing pressureon both national and international state structures.

The national statewas the basis of theregulatory frame-work of moderncorporate capital-ism. Internationalcoordination ofstate functions isbased on bureau-cratic corporatistbargaining throughformal and informalstructures. Theglobalisation ofsocial relations putsincreasing pressureon both nationaland internationalstate structures, andrequires a popularinternationalistresponse.

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Introduction

A major feature of political economy in the current period isthe existence of acute tensions in the international state systemand struggles over its reformulation. There have been manyattempts among international relations theorists to analyse thiscrisis in relation to the changing nature of global economicrelations. A common theme has been that the increasedinternationalisation of economic relations has underminedpolitical structures based on the national state andstrengthened international state structures dominated byinternational capital. At the same time, it is argued, increasedcompetition among the main elements of international (or,better, transnational) capital has led to the loss by the USAof its

unchallenged postwar domination of the international system.Thus, the conflicts over the future of the international statesystem are attributed to attempts to establish a new multi-polarmodel: whether one based on the US-Europe-Japan Trilateral,or more radically one that breaks the North-Southcore-periphery relationship and allows a more autonomousdevelopment of dependent countries. However, the continuedstrength of the US allows it to dominate the terms of transition,perhaps asserted through a phase of unilateralism, as in the firstperiod of the Reagan presidency.

Consideration of these issues makes it imperative to moveaway from the traditional analysis of inter-state diplomacy andto introduce some discussion of transnational political andeconomic forces and structures. However, in mainstreaminternational relations theory there has been only a slightmodification of the realist treatment of bloc politics, towardsa neo-realism of theorists such as Ruggie and Keohane, whosediscussions of interdependence and regimes, although theyadmit non-state actors, are still essentially state-based and

treat international relations in institutional terms.A more radical approach has been attempted by RobertCox, using Gramscian concepts, to explain the formulation ofhegemonic projects around which changes in world orderstructures emerge, in relation to changes in the globalstructure of social power generated by the internationalising ofproduction (Cox 1981, 149; see also Cox 1987). Cox hasargued that the postwar institutionalisation of an internationalpolicy process dominated by the US through organisationssuch as the IMF, IBRD, NATO, and the OECD was neverthelessbased on the consolidation, especially in western Europe, of anational corporatism and welfare statism which was alreadyobsolescent. The increased internationalisation of production,

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Internationalisation of the State

however, led to the increased subordination of nationally-oriented state agencies (e.g. ministries of industry, labour,planning) to others which are key points in the adjustment ofdomestic to international economic policy (e.g. ministries offinance and prime ministers offices) (Cox 1981, 146).

However, such an approach appears to assume that thereis an opposition between nationally and internationallyoriented state apparatuses; and that international capitalattempts, usually successfully, to use its greater control overinternational state apparatuses to undermine the effectivenessof the national state. This assumption has also featured inother leftist discussions of international capital and the state.Thus, in the Poulantzian perspective that has been influentialon the European left, it is the national social formation that is

the site of social and class struggle, while internationalisedcapital has the unfair advantage of direct access to internation-al state apparatuses, which can be used externally to coercenational states. (Poulantzas 1974; see the critique in Holloway& Picciotto 1980).

The political implications of this approach were thatsocial transformation must take place within a nationalframework, usually by an alliance of the oppressed classes andany elements of national capital, in opposition to internationalcapital 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 nosignificant national capital remain, but that the material baseof the economy has become so internationalised that there

would be significant costs in attempting a strategy of nationalautonomy (Radice 1984).

Indeed, it could be said that a major factor in the loss ofmomentum 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 limita-tions of an essentially parliamentary politics focussed on thenational state. This has now resulted in the often uncriticalembrace by many in Britain, from the leadership of theLabour Party and the TUC to the new realists of MarxismToday, of the vision of a potential social Europe, eloquentlyevoked by the speech of Jacques Delors to the TUC Congressin September 1988. Paradoxically, it was Mrs Thatcher,notably in her Bruges speech in September 1988, who insistedthat she had not defeated corporatism at home only to have itfoisted on her in Europe, and who resisted entry into theEuropean Monetary System (which came to be advocated bythe Labour Party) in order to retain national control over

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monetary policy. However, Mrs Thatchers position could beseen as a defence of a larger, perhaps Atlanticist, international-ism, while the Labour Party and other social-democraticelements could be seen to be trying to replace nation-state

with pan-European protectionism. The division thereforeremains the same: those political forces seeking some degree ofsocial control over the processes of capital accumulation lookto the national or regional state, while those concerned more

with a pro-business perspective seem to prefer the least statecontrol possible, and to use their access to international statepower to undermine national state control.

In contrast, I shall argue that the characterisation of acorrelation between national capital and the national state, asagainst international capital and the international state is in

many ways inaccurate and unhelpful. The dominant vectorfor global economic internationalisation during the 20thcentury has been the transnational corporation (TNC). WhileTNCs have pressed for an adequate coordination of nationalregulation, they have generally resisted any strengthening ofinternational state structures. Indeed, the emergence of inter-nationalised ownership of capital through such internationalcorporate groups resulted from the existence of nationalprotectionist regulation: not only tariffs, but national procure-ment and national protection of scientific innovation. Havingsecured the minimalist principles of national treatment forforeign-owned capital, TNCs have been the staunchestdefenders of the national state. It is their ability to exploitnational differences, both politically and economically, thatgives them their competitive advantage. This is the commonelement in explanations of the TNCs, from neo-classicaltheorists of internalisation (e.g. Rugman 1982) to theMarxist analyses of uneven development (e.g. Brett 1985;

Jenkins 1987). The internationalisation of capital is clearly a

contradictory process, creating both homogenisation anddifferentiation.On the other hand, popular and emancipatory

movements have in modern times derived considerablestrength from their global perspectives and internationalistorientation. In the closing decade of the 20th century, theoverriding priority should be to revive this internationalism. Anecessary basis for this is to analyse the historical process ofinternationalisation of both the state and capital, as an inter-related process. This will demonstrate a more complex set ofrelationships, and perhaps enable us to begin to theorise thechanging forms of global state and capital in relation to inter-national social and class relations.1

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The International Corporate State

The internationalisation of capital has not been a purelyeconomic process: an important role in shaping it was playedby the internationalisation of a framework of state structures

which have generally guaranteed the internationalisedownership of capital and its reproduction primarily throughthe corporation. The modern capitalist state was born withinan international framework. Although it was primarilynational socio-economic forces that defined its socio-geographic boundaries, its form and functions developedinternationally.

It was not until the second half of the 19th century thatmany of todays leading states Germany, Italy, the USA

were established in their modern unified forms. It was in thissame period that the main institutions of property ownershipwere modernised in the major capitalist states. This processwas both conflictual and international. It took place in aworld which had been simultaneously united and divided byseveral centuries of mercantile capitalism, but where the oldrigid mercantilist regulatory structures had crumbled or werebeing dismantled.

Although its primary unit was the territorially-definedstate, the international system did not consist of an aggregationof compartmentalised units, but a network of loose and over-lappingjurisdictions. States have had a very broad jurisdictionto prescribe regulations for legal persons, since the nexusbetween the capitalist state and the subjects of its laws can bevery loose. Although the executive power to enforce suchregulation is essentially territorial, mobility of people and theinterlinking of ownership and of global markets give itconsiderable scope. A states laws can be enforced against anyperson 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 passingthrough, or even by denying access to markets. Furthermore,reciprocal arrangements such as extradition and judicialassistance were also developed, from the late 19th century.

Imperialist competition and domination certainly led tohierarchisation of states, and overt annexation and colonisa-tion in some circumstances. Nevertheless, Britain, thedominant trading power until 1914, favoured a more opensystem; and the USA, which assumed the mantle during the20th century, also pressed for the open door. However, it isimportant to note that this was on the basis of the extensionof statehood. Woodrow Wilsons internationalism had as one

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48 cornerstone his principle of national self-determination, andthe famous guarantees of territorial integrity and politicalindependence a formulation later embodied in the UNCharter which remains central today.

The institutional framework for corporate capitalismwhich developed from the end of the American Civil War tothe beginning of World War I did so through a process ofinternational debate and emulation. Measures such as thefreedom of incorporation and its limits, if any, were embodiedin legislative formulations and their interpretation which wereresponsive to international competition. There was mutualinfluence between the main capitalist countries in formulatinglegislation such as the English Companies Act of 1862, theFrench loi sur les societes of 1867 and the German Aktiens-

rechtsnovelle of 1870. More importantly, this was facilitativelegislation, the development of which depended to a greatextent on means devised by entrepreneurs and their advisors;and it was difficult for national authorities to resist interna-tional competitive pressures by refusing to legitimise suchdevices, e.g. one-person companies and corporate subsidiarynetworks. Furthermore, capitalist legal systems were exportedby transplantation not only to colonies and direct dependen-cies, but also voluntarily as a means of modernisation, forexample in Meiji, Japan.

During this period also, newly formed internationalprivate and public organisations played a significant role incoordinating both the development of a regulatory frameworkfor corporate capital and its enforcement. A notable example

was the international movement for the modernisation andharmonisation of the intellectual property laws. This was givenan early impetus by Prince Albert at the Great Exposition of1851, and fuelled by the wave of international interest inscientific innovation, and even more by the energetic efforts to

harness (some would say enslave) science to the interests ofcorporate capital (see Noble 1977). It culminated in thedecade of negotiations and disputes that finally produced theParis Convention of 1883 and the Union of States for theProtection of Industrial Property. The principles established inthis convention still govern the debates and conflicts over inter-national control of technology today.

Although the legal framework for incorporation playedlittle role in the early period of capitalist industrialisation, itprovided the basis for the institutionalisation of corporateownership in the form of giant enterprises based in the maincapitalist states which developed in the period 1885-1914.This process of concentration and centralisation of capital was

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49by no means smooth and orderly. It was an attempt to controlthe power of labour on a large scale, and was itself contested bynew forms of labour organisation, in particular new massunions, and socialist, anarchist or Marxist political parties.The internationalist orientations of these movementsfoundered when the First World War exposed the internalcontradictions of social democracy: essentially, thebureaucratisation of its institutions and its divisions over thedilemma of social reform versus revolution. Yet, theintegration of labour into the state was not a purely nationalprocess, but also entailed an interaction of national and inter-national processes.

The concentration of capital led to an internationaldebate about the growth of big business and cartels. The

concern was greatest in the USA, where the process ofconcentration of capital had been first and strongest after1880, leading to the populist agitation against the trusts. Incontrast to the free-market ideology of British judges, UScourts were more willing to adopt restrictive interpretations ofthe common law doctrine of restraint of trade, and this wasreinforced by the enactment by Congress of the Sherman Actof 1890. The fresh merger wave after 1897 led the Congressto set up an industrial commission, which spent three yearstaking evidence and publishing reports. In 1904, John Moodypublished The Truth about Trusts, and the German Imperialgovernment also issued a report on cartels (see Fennema 1982,11-20). However, both the legal restrictions on combinationsand the popular pressures had the effect of stimulatingconcentration by outright mergers rather than unstablealliances and cartels.

In this period, therefore, a form of regulated capitalismemerged, with differences in the different main capitalist statesdue to their historical characteristics. Germany, with its strong

state and banking system, favoured state-sanctioned orsupported cartels; the UKs liberal heritage rested on informalcontrols both by the state and public opinion; in the US a newform of corporate liberalism arose, initially coalescing aroundprivate bodies, notably the National Civic Federation, andleading to the establishment of the great regulatorycommissions (see Kolko 1963, Weinstein 1968, Sklar 1988).However, not only were the combinations and cartelsthemselves frequently international in scale, they were oftenbacked by states acting in concert, or even within a private orpublic international organisation. An example is the PermanentSugar Commission of 1902, which restricted subsidised sugar-beet production in favour of the sugar-cane producers.

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50 Corporate Power, the State and Social Movements.

The emergence of a nationally based but internationallycoordinated corporate capitalism raised important questionsfor the many popular movements of this period. Socialistsgenerally saw the concentration of capital as laying the basisfor a transition to a better society through the socialisation ofproduction. Thus, Hilferding (the Austrian social democrat,later Finance Minister in Weimar Germany) argued that thedevelopment of large corporations, trusts and combinations,

with the intermediation of the banks, entailed the emergenceof the enormous concentrated power of finance capital, in

which all the partial forms of capital are brought togetherinto a totality, in which form capital now appears as a

unitary power which exercises sovereign sway over the lifeprocesses of society (Hilferding 1910/1981, 234-5). In hisview, this facilitated the transition to socialism, since thenecessity for political control over such economic forces wasmade clearer, and the task was simplified, s incenationalisation of a few great banks would be sufficient toinitiate it.2

Whereas Hilferding saw an increasingly acute contradic-tion between economic forces which were becoming highlysocialised and political relations which were becoming morepolarised and conflictual, a different conclusion was drawn bythe German socialist Karl Kautsky. In a famous article written

just before the First World War, Kautsky argued that thecoordination of economic forces could lead to political coordi-nation, the translation of cartellisation into foreign policy: aphase of ultra imperialism. Although this view was almostimmediately disproved by the outbreak of the war, the issue itraised retained its relevance, especially with Kautskysamended prediction that the result of the World War

between the great imperialist powers may be a federation ofthe strongest, who renounce their arms race (Kautsky1911/1970).

Kautskys article has been best known through its denun-ciation by Lenin in his famous pamphlet Imperialism, theHighest Stage of Capitalism. This followed and was partlybased on the work of another Bolshevik, Bukharin, who haddeveloped Hilferdings view, and argued that the growth offirms and links between them was much more dense withinthe developed capitalist countries than between them, to thepoint where he envisaged a sort of state capitalism in themain capitalist states. Lenin, however, introduced two crucialchanges to the argument: he emphasised that the growth of

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51monopoly does not eliminate but transforms the nature ofcompetition; and to the extent that competition is controlled,this does not produce economic rationality but parasitism anddecay. Linked with this was his second point, that capitalistalliances are unstable because the even development ofdifferent undertakings, trusts, branches of industry, orcountries is impossible under capitalism (Lenin 1917/1960,Vol.1, 807). This uneven development not only meant aninsecure economic base for alliances. Lenin also emphasisedthat it created differences in political conditions betweenstates. It was for this reason that he stressed the importance ofnational political struggles, including progressive struggles ofdependent peoples for national self-determination. This viewof Lenins created disagreements with other revolutionaries of

the period, who saw revolutionary change in terms of an inter-national working-class alliance to destroy all capitalist states,and resisted the idea of class alliances to achieve state power atthe national level.

For the non-revolutionary left, which saw the conquest ofpolitical power as taking place mainly through parliamentarymeans, the focus on the national state was inevitable. Thelitmus test of a genuine socialist programme was whether itincluded the subsequent transfer of ownership of major firmsto the state. Thus, the extensive involvement of the state inindustry through direct fixing or controlling of prices andoutput, which developed in all states during the war, was seenas a step towards full nationalisation, and socialists saw noneed for laws to enforce competition. Neither did businesscircles or non-socialist parties see any need to enforcecompetition: on the contrary, the dominant ideology in theperiod between the wars favoured a controlled capitalism.This was intended to be not merely nationalistic andprotectionist, but within an international framework of

corporatist planning, based on state support for orinvolvement in the extensive network of international cartels.Indeed, it was the existence of extensive networks of largelyprivate cartels, rather than national protectionism, that heldback the growth of TNCs in the 1930s.

It was not until the depression reawakened concern in theUnited States about the power of big capital that the controlof corporations and cartels again became a live issue. Althoughsome of the New Deal studies of big business were conductedby socialists such as Victor Perlo and Paul Sweezy, and wereinfluenced by the new left-Keynesian theories of Sraffa and

Joan Robinson on monopolistic competition, the secondphase of the Roosevelt administration was dominated by

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52 Brandeisian liberalism. Following the setting up of the new regulatory structures for banking and securities in the earlythirties, the liberal-populist wave moved on to theDepartment of Justice. From 1937-8, under first Robert

Jackson and then Thurman Arnold, it activated the antitrustlaws, and initiated a flood of cases, which resulted in a spate ofconsent decrees and a stream of court judgments from 1938 to1952. Some antitrust actions against international cartels weresuspended during the war and to some extent impeded in thepostwar period by British government pressures on the UnitedStates.

However, New Deal lawyers carried the antitrust gospelwith them: they drafted competition or antimonopoly laws forpostwar Japan and West Germany, and influenced those of

the European Coal and Steel Community (and therefore laterthe EEC), as well as encouraging antimonopoly thinkingamong British Keynesians such as Beveridge and Gaitskell,

which led to the postwar British monopolies and mergerslegislation. However, attempts to institutionalise the inter-nationalisation of competition laws through the proposedInternational Trade Organisation were blocked by the refusalof the United States Congress to ratify its charter. Discussionof competition law in the United Nations Economic andSocial Council in the postwar period made little headway, andit was only later that the issue, renamed restrictive businesspractices, became revived, in a different political forum, theUNCTAD.

Both revolutionary and non-revolutionary socialists,therefore, have over the last century come to emphasise thepolitical task of gaining national state power, to which task thestrengthening of the social power of popular movementsbecame secondary. The essence of the transition to socialismcame to be seen as the transfer of ownership of the large

capitalist enterprises to the state, following the conquest ofpolitical power. This became diluted by the reformist wing ofsocialism, under the banner of the control rather than theoverthrow of capitalism, into a collaboration with corporatistregulation. Meanwhile, the great achievement of corporatecapitalism over the same period has been to escape anyeffective social accountability, democratisation or control.This has occurred through the internationalisation of capitalistregulation and corporate ownership, by means of aninternational structure which coordinates the formulation andfunctioning of regulation, while preserving an importantlegitimation and implementation role for an increasingmultiplicity of national states.

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53The Contradictions and Crisis of the International State

As pointed out above, the emergence of the modern capitaliststate in the second half of the nineteenth century took place

within an international framework. Important institutionssuch as the granting of patent monopolies were created in acoordinated way, as well as by the emulation andtransplantation of state and legal institutions for theownership and transfer of property, notably the liberalisationof the corporate form, and the ideology of contractualfreedom. I have also emphasised the important role played inthis process by international debate among business as well asscientific and cultural circles, and the formation ofinternational private organisations. The twentieth century has

seen the consolidation and extension of the national state, aswell as the development of a mushroom growth of inter-national organisations. The nature and significance of thelatter has generally been obscured by the importance placedon the former.

Judged by the ideal of a world state or government, littleweight can be given to the creation of a plethora of largelypowerless international organisations, whose main attractionseems to be the exotic location of their meetings. Yet the verymultiplicity and heterogeneity of the international bodies thathave grown up, and their primarily ideological function, is thekey to their importance. It has been estimated that in 1914about 50 formal intergovernmental organisations had beencreated, in 1939 there were perhaps 80, and by 1980 over600. The numbers of nongovernmental bodies (againregistering only those with a formal existence) are obviouslyfar greater: a probably conservative estimate gives 330 in1914, 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 andcontacts of officials, managers and representatives of all kinds.Indeed, such internationally organized networks have played amajor part in ensuring the minimum degree of coordinationof state regulation necessary to permit the internationalreproduction of capital.

For example, an important actor has been theInternational Chamber of Commerce, which originated in aninternational congress at Liege in 1905, and was re-formed atthe International Trade Conference in the US in 1919, with aview to stimulating American assistance in Europeanreconstruction (see Ridgeway 1938). The ICC was given aconsultative status by the League of Nations (and later also

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54 within the UN system) and has helped to prioritise theinternational harmonisation of corporate regulation alongessentially liberal lines. This it has done both by its directinvolvement in the processes of formulation of proposals atthe international level, as well as through pressures brought onthe relevant national government agencies through its nationalcommittees.

Indeed, many of the forms of state regulation that aresometimes thought of as quintessentially national can beshown to have originated from or been stimulated by theprocess of political internationalisation. Notably, the classicaltripartite structure of regulation of industrial affairs bycooperative consultation between representatives of business,labour and the state, is sometimes thought of as embodying an

essentially national corporatism. But it was in facttransplanted from the United States model which developedin the Progressive era, into the constitution of theInternational Labour Organisation, from which it hasinfluenced many national structures. This process was part ofthe first stage of international liberalisation spearheaded by

Woodrow Wilson, mentioned above. It was inspired by thefear not only of Bolshevism, but of any independent labourinternationalism. Both the revived Socialist International andthe new International Federation of Trade Unions met inGeneva in 1918 in the months during which the Paris peaceconference was in preparation. It was to counter in particularthe IFTUs Labour Charter that the Paris conferencesCommission for International Labour Legislation, headed bySamuel Gompers, drew up the charter of the ILO. It is perhapsnot surprising that the ILOs most daring venture, the 8-hourday convention, made little headway in terms of actual stateratifications.

Although corporate internationalism initially aspired to

grandiose and comprehensive schemes of international regula-tion, it quickly shrank from the political issues that theseopened up. An example is the elimination of internationaldouble taxation of income, especially of business andcorporate profits. This was identified as a problem from thebeginnings of the emergence of direct income taxation as themajor form of finance of the welfare-warfare state at the startof the 20th century. Business pressures, including those of theICC, led to its active consideration mainly through the Leagueof Nations Fiscal Committee. A major study of the basis forthe allocation of income of international businesses wasfunded by the Rockefeller Foundation, and carried out byMitchell B. Carroll, an American lawyer who began with the

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55Commerce department, later represented the US on theLeagues Fiscal Committee (despite the US non-membershipof the League itself), and finally founded the InternationalFiscal Association.

Carrolls report rejected a comprehensive approach tointernational allocation of income based on formulaapportionment. This was largely because it would posedirectly and openly at the international level the politicalquestions of equity in taxation, since formula apportionment

would require international agreement both on the definitionof the tax base of business profits as well as the formula fortheir apportionment, between capital exporting and capitalimporting countries. The alternative system recommended

was embodied in a model convention which became the basis

of the network of double tax treaties that greatly facilitatedthe postwar growth of international investment. This wasbased on separate accounting by each national subsidiary of aTNC, founded on the arms length principle. However, theenforcement of arms length pricing by national taxauthorities required a corporate-bureaucratic process ofbargaining and negotiation between the various nationalofficials concerned and the corporate advisors. Despitecomplaining about the arbitrary nature of the arrangements,the corporations have preferred this decentralised but looselycoordinated system to any more comprehensive alternative(see Picciotto 1989).

In this area as in many others, the rapid postwar processof international growth of capital began to create severetensions. From the mid-1960s, there was an increasinginternational political awareness of the growing power of largeTNCs, and the disjuncture between their centralised decision-making in the allocation of resources, as against the loosecoordination of political regulation by an increasing

multiplicity of states.This problem has two aspects. From the point of view ofthe TNC, its global operations are subject to political interven-tions by an increasing number of states, often from divergentperspectives. The effective power of each state is in the lastanalysis limited to the assets and individuals located within itsterritory, which can be described in international law terms asthe territoriality of enforcement jurisdiction. However, themore specialised and integrated are the internationallydispersed activities of the TNC, the more vulnerable they are.Increasing disruption can be caused to a TNCs global strategyby political intervention in one location, whether by awkwardtrade unions or workforces or maverick state officials, and

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56 even more so by joint international interventions. On theother hand, from the point of view of the apparently sovereignstate, it has increasingly seemed as if state powers to regulateeconomic 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 becameincreasingly inadequate. The greater international mobility ofcapital revealed the gaping holes in the network of co-ordination of state functions. An important example is that ofoffshore financial centres and tax havens. These developedrapidly from the early 1960s, as a tolerated, indirectlyregulated 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 taxevasion and money-laundering by a wide variety ofspeculators, fraudsters, drug-dealers, dictators and othercorrupt politicians. They have opened up opportunities forinternational financial and tax arbitrage, as well as avoidanceand evasion, which seriously distort optimal allocation ofmoneycapital.

Attempts to develop some international coordination offinancial regulation have resulted in the spawning of a motleycollection of semi-formal, informal and often secret organisa-tions and meetings of officials, advisors and consultants. Forexample, for banking supervision there is the Committee onBanking Regulations and Supervisory Practices (CookeCommittee), the Contact Group of EC Supervisory

Authorities, the Offshore Group of Banking Supervisors, theCommission of Latin American and Caribbean BankingSupervisory and Inspection Organisations, and so on.

Arrangements for exchange of information betweensupervisors have developed in relation to taxation (including

simultaneous examination of related companies), securitiesregulation, and banking supervision; and there has been arapid spread of laws on money-laundering, insider dealing,etc. This activity has resulted in a spread of scandals, and anattempt to distinguish legitimate from illegitimate financialdealings; but it cannot be said to have produced an adequateinternational regulatory system for finance.

Once again, attempts to tighten up the internationalregulatory system have entailed increased bureaucratic-administrative coordination and corporatist bargaining at theinternational level. Not only has this been in many waystechnically ineffective, but also it has created an increasingproblem of legitimation. The technical-bureaucratic nature of

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57most international regulatory processes relied on legitimationthrough national political processes. Already under intensepressure from the new social and class movements, nationalstate bodies have also increasingly been seen to be ineffectiveagainst the global power of capital. At the same time, theincreasingly evident contradictions and inadequacies of theinternational state system have been counterposed by arenewed internationalisation of social and class movements.

One result has been the growth, since the late 1960s, ofwhat has been called international economic soft law. Thebestknown examples of this are the Codes of Conduct forinternational business or TNCs, which have been promulgatedby a variety of international bodies. At the most general level,the United Nations Code of Conduct for TNCs, under negoti-

ation 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 Investmentand Multinational Enterprise, in 1972. In the increasingclimate of concern and debate about TNCs, symbolised by thesetting up of the United Nations Group of Experts to producea report on Multinational Enterprises, a Declaration onInternational Investment and Multinational Enterprises washurriedly passed through the OECD in 1976, to a great extentin order to provide an area of common agreement among theOECD countries and a common front in the ensuing debates inthe broader forum of the United Nations. Agreement was alsoachieved at the ILO on its Tripartite Declaration of 1977.Undoubtedly, the harder line taken by the Reagan administra-tion, backed by the Thatcher government, against any anti-business actions by international organisations, has preventedapproval of the United Nations Code.

The United Nations Code, and the other sets of general

guidelines, are perhaps largely symbolic, a reaction to and anattempt to contain the growing criticisms of and actionsagainst TNCs from the late 1960s. The changing politicalclimate of the 1980s, with high unemployment hitting theindustrialised core countries, and governments of the hardright in power in the leading states (West Germany, Japan,the United Kingdom and the United States), created a harsherclimate in international fora.

Many other proposals also pressed by developingcountries and others, some of them in the context of theproposals for a New International Economic Order of 1974,have also been blocked. A notable example is that of theproposals to revise the Paris Convention on Patents of 1883

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58 (mentioned above): it is now twenty years since LatinAmerican economists pointed to the paradox that the restric-tions in the 1883 Paris convention on the power of a state tocompel local working of patents inhibits the inflow of foreigninvestment (Vaitsos 1970), yet successive conferences toamend the convention have met with failure. Instead, theleading capitalist governments have regained the initiative, byshifting the issue of Intellectual Property Rights to the GATTnegotiations in the Uruguay round. The UNCTAD Code on theTransfer of Technology has also failed to meet with agreementfor similar reasons.

These examples, and many others that could be cited,show both the overwhelming need for acceptable and effectivemechanisms of control of international capital, and the failure,

so far, of attempts to develop such mechanisms, of whateverkind. As I have argued above, in many cases this failure can betraced to the inadequacies not only of the international systemas it has developed in the past century or so, but also of theattempts to supplement it through essentially bureaucratic-corporatist forms of regulation.

In relation to international codes of conduct, this can beseen in the dilemma of enforcement, raised by the question ofthe binding force of codes. Advocates of stricter controls overTNCs often suggest that these would depend on establishingcodes or regulations that would be legally binding. Thisresults, however, in implementation and enforcement at thenational level by states, which not only leaves gapingloopholes, but tends to defuse any popular involvement bypressure groups, trade unions or other bodies. In fact, suchbodies have in recent years become more adept at using inter-national codes of conduct, as a focus for political action on avariety of issues relating to the social impact of TNCs. Suchactions emerge from and develop a critique of the ways in

which the exploitation of social assets by TNCs on a globalscale fails to respond to the real needs of the worlds peoples.The response is based on notions of popular power, aiming todemocratise both the political structures of the state and theinternational system, as well as the system of productiondominated by TNCs.

Towards a new popular Internationalism

The current era has indeed seen the emergence, and morerecently the internationalisation, of the new socialmovements, notably the womens, ecology, anti-nuclear and

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59anti-poverty movements. Their rise has counterpointed thedecline of the traditional bases of the labour movement, inparticular the trade unions, leading to a wide-ranging debatein many countries about the class basis of popular movements.

Among theorists, the debate has too often been polarised. Onthe one hand, social movements are characterised as obscuringthe class basis of exploitation under capitalism and thereforelimiting themselves to essentially liberal reformist aims, suchas non-discrimination, democratisation, or peace. On theother hand, the labour movement is itself divided betweensocial-democratic reformism based on obtaining the best dealfor workers from a managed capitalism, and revolutionarysocialism, with its apparently utopian perspective of the finaloverthrow of capitalism.

Hence, the opposition between class-based and populistmovements is not so clear. In practice, those involved inpopular campaigns of all sorts are well aware of the conflictingcurrents within them, stemming from the difficulty of devel-oping a class politics on social issues (for example, peace,

women, racism, ecology) without a reductionism that putsclass unity higher than effective and united action on eachsocial issue. Equally, the experience of many involved in thelabour movement is that the necessity of building a party thatcan achieve state power is given priority over active andconstructive involvement in actual popular movements, andthat where such involvement takes place it too often takes theform of attempting to channel and control such movements.

The most challenging perspective for the labourmovement today is the building of a new internationalism

which can combine the strengths of class politics and popularsocial movements. This process must necessarily engage with,and attempt to capture and transcend, the forms ofinternational state which have developed as part of the

internationalisation of capital. The developmentalist pressure-groups and networks have developed considerableorganisational skills in combining action throughinternational bodies and focussed on national states, as incampaigns on the baby-food marketing issue (see Chetley1986). Other effective campaigns have focussed on pesticides,pharmaceuticals, and waste-dumping, while a more directlypolitical issue has been divestment from South Africa.

Attempts to combine the flexibility of organi sation ofpressure-groups and grass-roots campaigns with the moredisciplined but bureaucratised power of trade unions have hadmixed success, although such combinations are often vital. Forexample, in following up the Bhopal disaster, the different

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60 strengths of the international trade union organisations andthe network of social movements, while they have not alwaysbeen combined, have both been important.3

The weaknesses and contradictions of legal and stateregulation of capital are most apparent at the internationallevel. These are to a great extent the result of, and reflect the

weaknesses of , international popular movements. If thebureaucratic-administrative forms of international businessregulation are secretive, it is because of the difficulty ofdeveloping an open international flow of information in a

world where access to knowledge is unequal, and business andofficial secrecy are strongly protected. If these regulatory formsare undemocratic, it is because of the problems of buildingdemocratic forms of international participation among

peoples divided by language and the costs and difficulties oftravel.Yet however frustrating attempts at international

popular organisation can be, they offer great rewards. Aboveall, they force socialist activists to see through the mirage thathas dogged the labour movement since 1914, that humanemancipation, and the harnessing of productive power tomeet social need, can be achieved solely through the attain-ment of national state power by political organisations basedmainly on male industrial workers. The broader popular baseof social movements, and the wider horizon developed bytheir internationalisation, necessarily involves a differentattitude to the state. At its worst, this can be based on naiveillusions that social power exists quite independently of thestate. At its best, it can develop more sophisticated analysesof the contradictions of the state and the ways they can beexploited to build the strength of popular movements, whileremaining aware that the national state is only a part of theoverall structure of power in a global capitalist society.

_____________________________________________________

This paper was given at the conference on Global Imbalances at theAmerican University in May 1989, and at the After the Crisis confer-

ence at the University of Amsterdam in April 1990. An earlierversion was published in the special issue on Law, Democracy andSocial Justice in theJournal of Law in Societyin 1988.

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611. An important contribution towards the development of atheorisation of class in international relations has been made byKees van der Pijl (1979, 1984). However, his approach might becriticised as being too formalistically based on the identificationof class fractions rooted in an abstract analysis of accumula-

tion. It leads to a somewhat mechanistic postulate of an alliancebetween the liberal-internationalist and the state-monopolistfractions of the ruling class during the period of capitalistexpansion, which breaks down in the period of crisis and of USunilateralism. Although rich in fruitful insights and detail, thefractionalist approach makes it difficult to grasp the contradic-tions in the forms of domination, especially of the internationalstate.

2. Fred Halliday has recently pointed out that the recentconfluence of Marxism and international relations theory is a

development of precisely that debate which was conductedwithin liberal thought and Marxism in the period up to andduring the First World War. The triangle of concepts that thetheorists of the earlier generation sought to relate theinternal structure of industrialised capitalist society, the armsrace and war, the international workings of the economy isthe same... Halliday 1987, 171.

3. Considerable material on the involvement of labour andtrade union organisations and social movements in internation-al issues is available in the invaluable Newsletter of InternationalLabour Studies:see especially the double issue of Jan.-April 1987

Nos. 32-33. NILS is edited by Peter Waterman, who has alsopublished Waterman 1988, which provides many usefulmaterials and discussions. Also very helpful is Munck 1988;although Muncks emphasis is very much on trade unions andhe devotes only a very few pages to their role in broader socialstruggles, his conclusion is correct, that the old workerism ofthe left, which was really a workingmanism, has had its day(p. 213). My own view, as mentioned above, is that there isnothing particularly new about social movements; it is only thatsome sections of the left, having previously pinned their expec-

tations on white workerism, have been forced to reconsider.This is linked with the limitations and crisis of structuralistMarxism, which conceived of a separate sphere of productionrelations, divided from other social relations in the sphere ofreproduction. This is obvious nonsense, since even the mostdirectly trade union struggles over the wage, working conditionsand working time, are also struggles over reproduction. Theproblem has always been how to overcome the fragmentedforms of specific conflicts and generate a broader social and classperspective: see Holloway and Picciotto 1977.

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Notes

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62 Brett, E. A.. (1985) The World Economy since the War the Politicsof Uneven Development.

Chetley, Andrew (1986) The Politics of Baby Foods. SuccessfulChallenges to an International Marketing Strategy. London:Pinter.

Cox, Robert W. (1981) Social Forces, States and World Orders:Beyond International Relations Theory, in Millennium,Vol. 10, 126-155; revised version in R. O. Keohane (ed.) Neo-realism and its Critics. 1986, New York: Columbia UniversityPress.

__________ (1987) Production, Power and World Order. SocialForces in the Making of History. New York: Columbia UniversityPress.

__________ (1983) Gramsci, Hegemony and InternationalRelations; an Essay in Method, Millennium, Vol. 12, 162-175.

Fennema M. (1982) International Networks of Banks and Industry.Gill, S. (1986) Hegemony, Consensus and Trilateralism, Review ofInternational Studies, 205.

Halliday, F. (1987) Vigilantism in International Relations:Kubalkova, Cruickshank, and Marxist Theory, Review of Inter-national Studies, Vol. 13, 163.

Hilferding R. (1910/1981) Finance Capital. A Study of the LatestPhase of Capitalist Development.

Holloway, J. and Picciotto, S. (1977) Capital, Crisis and the State,Capital & Class2, 76-101.

__________ (1980) Capital, the State and European Integration,

in Research in Political Economy, ed Zarembka, JAI Press.Jacobson, H.K. (1984) Networks of Interdependence. International

Organisations and the Global Political System.Jenkins R. (1988) Transnational Corporations and Uneven

Development.Kautsky, Karl (1911/1970) Ultra-Imperialism, in New Left Review

59, 41-46.Kolko G. (1963) The Triumph of Conservatism: A Reinterpretation of

American History.Lenin, V.I. (1917/1960) Imperialism, the Highest Stage of

Capitalism, in Selected Works in Three Volumes, Vol.1, 807Munck, Ronaldo (1988) The New International Labour Studies. AnIntroduction. London: Zed Press.

Noble, David F. (1977)America By Design.Picciotto, S. (1989) Slicing a Shadow: Business Taxation in an

International Framework, in Hancher and Moran (eds.),Capitalism, Culture and Economic Regulation. Oxford UniversityPress.

Poulantzas N. (1974) The Internationalisation of CapitalistRelations and the Nation-State, Economy & Society3,

Radice, Hugo (1984) The National Economy: A Myth? Capital &Class 22, 111-140.

Ridgeway, G.L. (1938) Merchants of Peace: Twenty Years of BusinessDiplomacy through the International Chamber of Commerce.

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Sklar M.J. (1988) The Corporate Reconstruction of AmericanCapitalism 1890-1916. The Market, Law and Politics.

Vaitsos, C. (1970) Bargaining and the Distribution of Returns in thePurchase of Technology by Developing Countries, in Bulletinof the Inst. of Development Studies, Vol. 3, 16.

Van der Pijl, Kees (1979) Class Formation at the InternationalLevel. Reflections on the Political Economy of Atlantic Unity,Capital & Class9, 1-22.

__________ (1984) The Making of an Atlantic Ruling Class, Verso.Waterman, Peter (1988) The Old Internationalism and the New, The

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