Sol Picciotto

43

The Internationalisation of the

State
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.

Capital & Class #43

44

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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Capital & Class #43

46

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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48

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

Internationalisation of the State

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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50

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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52

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

Internationalisation of the State

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

Internationalisation of the State

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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58

(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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60

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.

2.

3.

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.

Notes

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Capital & Class #43

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