Chris Harman


Bonfire of the certainties

(May 1992)

From Socialist Review, No.153, May 1992, pp.18-20.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

The relationship between capitalism and particular nation states has been a major preoccupation for Marxists throughout this century. Chris Harman looks at these ideas in the light of a new book on rivalry between states

One of the key questions facing anyone trying to understand the dynamics of the world capitalist system today – and therefore the future facing the four billion or so people who live within it – is that of the relation of the rival firms which dominate its economy and the states which dominate its politics.

The question is not new. It was already posed almost a century ago when the first writings on imperialism appeared with the work of the liberal economist Hobson and then the Marxists Hilferding, Luxemburg, Bukharin and Lenin. It has dominated every serious discussion about the system ever since. Only by answering it have people been able to come to terms with slumps and booms, wars and famines, state barbarism and sudden revolution.

But the interrelation of the state and capital has not remained static over that time. When Hobson first raised the question of imperialism, he focussed on the relation between financial institutions – banks and stock exchanges – based in the advanced West, and profits to be made by lending to governments, railway speculators, mining companies and plantation owners in what we now call the Third World. Imperialism arose, for him, because of the need for the financiers to grab and hang on to safe outlets for lending. This remained a powerful theme in Lenin’s Imperialism, The Highest Stage of Capitalism.

But, writing in the middle of the First World War, Lenin and above all Bukharin began to stress something else as well: the way in which growing industrial concentration within each Western state – the rise of monopoly capitalism – was producing huge industrial corporations that sought to annexe industrial production elsewhere under their direct control by use of the forces of the state. Imperialism entered its state capitalist stage as huge industrial monopolies relied on military force to divide and redivide the world between them.

The boundaries between the state and business began to blur. War became as much a ‘normal’ method of achieving capitalist goals as did ‘peaceful’ competition.

Twenty years after Lenin and Bukharin wrote on imperialism, their account was vindicated by the way capitalists almost everywhere responded to the great slump. They turned to state capitalism at home and military confrontation abroad. And another ten years further on, hardly had the great military confrontation of the Second World War come to an end than they were lining up for the 30 years Cold War.

During the Cold War, however, the relation of the state and capital began to change yet again. The sheer scale of the military hardware in the hands of the great powers made all out war a risk they tried to avoid. The period was still one of bloody and barbaric wars, but in only three cases did they involve direct, large scale military action by the superpowers – in Korea, Vietnam and Afghanistan. Elsewhere the superpowers relied almost entirely on client states to do their dirty work for them (as with the successive wars of Israel against the Arab states, or of Iraq against Iran), or sat back, pan bemused, part horrified and part overjoyed, at the chance to trade arms for profit and influence, as smaller state capitalisms battered each other (as with the Indo-Pakistan wars).

During these long decades, ‘peaceful’ competition for markets began to make a comeback. While in the interwar years world trade fell and international trade was concentrated within the blocs of rival military powers (the British, French, German and Japanese empires and America’s informal empire), in the post-war decades world trade grew about twice as fast as world output. By the mid 1970s the rival Western state capitalisms had long since ceased to be self contained economically. Not only did trade and finance increasingly cross national borders, but so too did the organisation of production. What had been a rarity in the 1950s, the multinational corporation, was an increasingly dominant element in the world system by the late 1970s.

The path of the West was soon being followed in the then Eastern bloc and the Third World. Local enterprises sought to keep abreast of world wide developments in technology by pressuring governments to allow them to establish multinational links, and local states sought to refurbish their economies by encouraging direct investment from the multinationals.

These changes were accompanied, in the 1970s and 1980s, by the ditching of the old state capitalist ideologies – Keynesianism in the West, import-substitutionist development theories in the Third World and Stalinism in the East.

Yet what was to replace them? The most popular contender has been what is often called ‘neo-liberalism’ – referring to the ideal of an economy with minimal state controls on business activities.

It was the ideology of the Thatcher years in Britain and the Reeagan years in the US. It was the ideology which swept much of Latin America, from Pinochet’s Chile through Bolivia and Peru Peru to Venezuela, Brazil and Argentina. It is the ideology today of the various ex-Communist apparatchiks who run the governments of Russia, the Ukraine, Kazakhstan, Georgia and the rest.

The prevalence of these ideas today has led some Marxists – in this country notably Nigel Harris – to conclude that we are in a new period of capitalism, in which the members of an increasingly international capitalist class no longer need to root themselves in rival national state machines. The era of state capitalism and, by implication, imperialism is at an end.

It is a conclusion which many other Marxists have resisted. The trouble is that in resisting it, they have often restricted themselves to throwing about the slogans of 75 years ago, in many cases not even taking into account the long period of state capitalism.

What has been lacking from both sides of the argument in the great majority of cases has been any concrete examination of how capitalism and the state interact empirically today. Slogans or journalistic cliches replace any attempt at a scientific study of the system.

For these reasons, a new book [1], produced by academics who support the existing system, should be welcomed by those of us who want to fight it. For they cut through a lot of their side’s ideological crap and tell things as they are.

The authors endorse the view that autarchy – the attempt of states to cut off their economies from the rest of the system – is no longer a viable option. It simply leads to local economies losing out on the technological advances available to those who can mobilise resources on an international scale and integrate production processes across national boundaries.

They see this Intel-nationalisation as creating the beginnings of what we would call a genuinely international ruling class, although they refer to it as ‘a privileged transnational business civilisation’ and as ‘an emerging managerial technocracy’ linking ‘firms ... to education and skills infrastructures and the financial system’. But they do not draw the neo-liberal conclusion about the ending of the role of the state. Indeed, they argue, this can even grow:

‘Growing interdependence now means that the rivalry between states and the rivalry between firms for a secure place in the world economy has become much fiercer, much more intense. As a result, firms have become more involved with governments and governments have come to realise their increased dependence on the scarce resources controlled by firms.’

The rulers of states need to maximise the resources – the total surplus – at their own disposal if they are to buy support from a section of the population and ward off challenges from below. Increasingly, they can only do so if they can reach a bargain with the multinationals about the development of new productive forces.

But there is no easy way to achieve this goal. The neo-liberal doctrine of simply abandoning all government constraints on trade and opening up the economy to any multinational who wants to operate in it does not offer any guarantees of success. For firms have agendas of their own which can contradict the desires of those rulers who are trying to attract them:

‘As firms harness the power of new technology to create systems of activity linked directly across borders, so they increasingly concentrate on those territories offering the greatest potential for recovering their investment. Moreover, in a growing number of key sectors, the basis of competition is shifting to emphasising product quality, not just costs. Attractive sites for new investment are increasingly those supplying skilled workers and efficient infrastructures ...’

These are rarely provided by the poor regions that make up most of the Third World – or for that matter much of Eastern Europe and the ex-USSR. However much they dismantle their old, protectionist, import-substitutionist policies, they still remain unattractive to the multinationals they want to woo. ‘Small, poor countries face increased barriers to entry in industries most subject to the global forces of competition.’ The result is that, ‘Small, poorer countries cannot afford the luxury of letting market forces determine outcomes.’

Even the greatest successes in attracting the multinationals can be very transitory. For the multinationals are themselves subject to global competition, which is continually making them reassess their own priorities. They will invest in a particular country in order to open up certain markets – but then see the possibility of even bigger markets if they switch their investment elsewhere. What were enclaves of growth in a particular country can suddenly become abandoned ghettos of decay. And there may be very little the particular government can do about it.

This does not mean that governments are completely powerless and multinationals all powerful. A multinational cannot move huge chunks of productive investment at will in the same way that it can move finance from country to country, and this can provide governments with some leverage in the short term – particularly if they rule relatively large states that are strategically placed in terms of markets.

‘Only a few firms can operate in a “borderless” world. Governments, both host and home, continue to play a crucial and, perhaps paradoxically, an increasing role.’

Just as the multinationals try to extract concessions from states, states can try to extract concessions from multinationals. What exists is not a one dimensional world in which a single multinational can simply dictate what happens, but a complex bargaining system, ‘the new diplomacy’, in which firms set out to expand their operations and their markets by forming alliances with other firms and with states, and in which states attempt to maximise their resources by competing with other states to extract the best possible bargain from the multinationals.

It is a world which can guarantee no one the easy economic miracles promised by neo-liberal theory, but which instead is marked by uncertainty and volatility:

‘All these shifts have acted to increase the volatility of change and the divergence of outcomes for the new diplomacy.’

The fortunes both of individual states and individual multinationals can rise and fall suddenly: this year’s economic miracle is next year’s economic basket case, this year’s star multinational player is next year’s cash strapped invalid.

‘The outcome of the bargaining has been markedly divergent’, with ‘divergence between continents, between countries in the same continent or region, even within countries over time and between sectors, and, finally, divergence between firms – not necessarily in accordance with their national origin.’

A ‘bonfire of the certainties’ has undermined the old sets of ideas, such as Keynesianism and monetarism, which guided the policies of both governments and firms. There are ‘no more clear guidelines, no simple models, no surefire prescriptions for success’ either for governments or for ‘managers as they wrestle with the new demands for innovation in global competition’.

The picture painted by the authors is of a world of increasing insecurity for bosses and governments – and, although it is hardly mentioned, for those of us who are exploited and oppressed by them. The picture is all the more convincing since the authors themselves support the existing system, assuming the choices are the options available within it. Much of the book reads like a bargaining manual for state bureaucrats and multinational managers. Yet the only conclusion to be drawn from an honest reading of it is that the bargaining offers no hope of ‘progress’ for most of humanity.

The book is valuable not merely for its overall picture of multinational capitalism, but also for the vast mass of empirical material contained in it. Here you will find figures on the rise of the multinationals and the shifts in the national origin of the most powerful, an account of flows of international investment, scores of examples of policy decisions by particular firms and countries, and much more besides. But it has faults. The detail tends to overwhelm the reader and the authors tend to assume that the old method of competition between states – that based on amassing rival armed forces – has been made out of date by the new international pattern of production.

Yet this hardly fits in with empirical reality. While the Cold War may have ended, there has been a continuing rise in new rivalries – in the Middle East, in the former USSR and, most interestingly, in the fast growth region of South and East Asia.

None of this should be surprising. Whatever the bargains struck between individual states and the multinationals, there is always the possibility of one of the states deciding it can gain by direct physical pressure on other states – and this possibility in turn pushes them to make sure they can exercise counter pressure. Indeed, there are many instances in which a particular state’s link with the multinationals is seen by it as aiding its recourse to arms – as was clearly the case with Iraq from the beginning of the First Gulf War in 1979 right up to its seizure of Kuwait in 1990.

This is not something which affects just middle level powers. It also determines the behaviour of the largest. The United States, in particular, has been using its military superiority to try to ensure other powers accept its global priorities: it waged the Second Gulf War last year to show to Germany and Japan that it alone could police the Middle East and that they had to accept its goals in the region producing much of the world’s most important raw material. But this, of course, begins to put pressure on them to build up the strength to engage in ‘police’ operations of their own, enabling them to compete with and counter US influence in key regions.

The system is not just a system of interacting multinationals and states. It is also a system in which some states are much more powerful when it comes to bargaining than others. The authors themselves recognise this when it comes to particular instances, as with the negotiations over Third World debt in the mid 1980s. ‘It was the internal policies of the United States that determined to a great extent who among the indebted nations won and who lost out in the long debt crisis of the 1980s ...’ US policies ‘adopted to safeguard the solvency of the domestic banking system could exacerbate the pain of adjustment’ for the debtor states.

If the power of states can be so important, measures to increase or decrease that power – the methods of old style imperialism – still have a role to play. The unpredictability of the new world of interacting states and multinationals is not just economic but political and, on occasions at least, military as well. Just as the state capitalist phase of the system’s history did not do away with imperialism, but gave it new and even more frightening forms, so the multinational phase does not eliminate the use of state capitalist imperialism as a complement to economic competition.


1. Rival States, Rival Firms, Stoppard and Strange, Cambridge University Press.

Last updated on 18 June 2010