By Francis Lee for the Saker Blog

The men and women who run global corporations are the first in history with the organization, technology, money, and ideology who are attempting to structure the world as an integrated economic unit. (1)


Scroll down another six decades (or thereabouts) and this statement has hardened into an objective fact – and moreover has turned out worse than the above authors had ever imagined. In effect what has taken place, and is still taking place, is the massive shift of power, out of the hands of nation states and democratic governments and into the hands of Transnational Corporations (TNCs) banks, Investment banks, Commercial banks, and Central banks. It is now the coalition that effectively governs the lives of the vast majority of the people on earth; yet these new world realities are seldom reflected in the strategies of citizen movements for democratic change. All too often, strategies are aimed primarily at changing government policies, whilst the real power being exercised by TNCs behind the scenes is rarely challenged, let alone dismantled. When the operations of TNCs do become a prime target for citizen action campaigns, there is a tendency to employ a rather piecemeal and foot-dragging approach to such popular struggles to what is a deeply systemic problem – a problem for the lower orders that is.

Regardless of their nominal home bases these globe-trotting corporate Leviathans have become essentially ‘stateless’ (I use this term advisedly) juggling multiple national identities and loyalties in order to achieve their global competitive interests. Regardless of where they operate in the world these conglomerates can use their overseas subsidiaries, joint ventures, licensing agreements, and assume foreign identities and tax evasion on a huge scale – as for example in the practise of ‘transfer pricing’ – whenever it suits their purposes. In so doing, they develop chameleon-like abilities to change their identities to resemble insiders wherever they are operating. As one nameless CEO put it, When we go to Brussels, we are member states of the EU, when we go to Washington, we become an American Company. Whenever the need arises these gentlemen will wrap themselves up in the national flag of choice (or flags of convenience as in the shipping industry) to get support for tax breaks, research subsidies, or governmental representation in negotiations affecting corporate profit and marketing plans. Through this process stateless corporations are effectively transforming what were independent nation states to suit their interests.


Having said this, however, I would add a qualifying disclaimer:

Namely, that nation states do not necessarily choose to prostrate themselves before their lords and masters of Finance and Industry, this was never – mirabile dictu – meant to be a one-way arrangement or an alternative to the liberal market economy. I have argued elsewhere that states and corporations are both conjoint and symmetrical. Both need each other. The state unquestionably remains the most significant force in shaping the national and world economies, despite the rhetoric of the state-denialist lobby. The state has played a fundamental role in the economic development of all countries, from the 19th century onwards, and my hunch is that it will continue to do so for the foreseeable future.

However, given the universality of the state-economy dualism it should be understood that a system of variegated capitalism is a feature of the contemporary state-economy partnership. In general terms this fragmentation breaks down into basic models of actually existing capitalism.

1. The liberal-market capitalism (LMC). This is generally understood to be associated with the Anglo-American economies. Rampant individualism has become the dominant characteristic, short-termist and based upon a weak industrial and a strong financial sector. Shareholder value has assumed a quasi-religious status. The banking system is oligopolistic and averse to industrial investment and fixated on the property sector. Financialization is the dominant economic form.

2. Social-market capitalism. (SMC) A premium is placed on collaboration between different actors in the economy with a broader definition of ‘stakeholders’ beyond that of solely the owners of capital. The concept of ‘social partnership’ is more prominent than the Anglo-American model, but somewhat weaker more recently. Capital markets – unlike the LMC – tend to be bank-centred and the banking industry tends to be more diffuse as instanced in the existence of the German Sparkassen. This model is characteristic of the German, Scandinavian, western European bloc.

3. Developmental Capitalism. This is a highly activist state-driven system (although not necessarily through public ownership of productive assets). The state sets substantial policies contained within an explicit industrial strategy. Capital markets tend also to be bank-centred and there is a strong emphasis on tight business networks – e.g., the Chaebol and Keiretsu. The model is exemplified by Japan, (south) Korea, Taiwan, Singapore, and more recently by China.

4. Russian Capitalism. This is difficult to categorize since it is given an unbelievably bad press – for geopolitical reasons – in the western media and academia.

It is also under the cosh of western sanctions which makes development even more difficult. Moreover much of what is going on is conducted in the Russian language which makes reporting and analysis even more difficult. Both political and economic structures were liberalized after 1991 but the Russian state still exerts strong control over the economy. The jury is still out on Russia’s system and development.

Given a choice of which system works best it would seem to be the highly state-activist developmental model.

‘’We can safely predict that the Anglo-American model will become less influential … whilst … virtually all of the Asian models of capitalism involve a more active role for government. And the rise of these models is taking place as the US approach is discredited by abuse, shrivelling opportunities and a shrinking middle-class. Among listed alternatives, the US model is now the outlier.’’ (2)

Earlier, historical proponents of this activist, top-down state-capitalist model would characterise it as being a structure which is primarily capitalistic; although this is arguable. Unquestionably, however, there is a significant degree of government ownership/control of the system of production, distribution, exchange and consumption, and moreover being subject to long term and strategic planning. One such proponent included the US politician/statesman, Alexander Hamilton (1755-1804). As the first Secretary of the Treasury, Hamilton was the main author of the economic policies of George Washington‘s administration. He took the lead in the Federal government’s funding of the states’ debts, as well as establishing the nation’s first two de facto central banks, the Bank of North America and the First Bank of the United States, this combined with a system of tariffs, and friendly trade relations with Britain. His vision included a strong central government led by a vigorous executive branch, a strong commercial economy, government-controlled banks, support for manufacturing industry, and a strong military capable of future wars with Mexico.

Alexander Hamilton 1755-1804

These views on industrialisation and state-building could legitimately be described as a protectionist and strategic policy, this to the extent that his theories made a positive impression, and these were not lost on US President and ex-commander-in-chief of the Army of the Potomac, Ulysses S Grant. (1822-1885).

According to Grant:

‘’For centuries England has relied on protection, has carried it to extremes and has obtained satisfactory results from it. There is no doubt that it is to this system that it owes its present strength. After two centuries, England has found it convenient to adopt free trade because it thinks that protection can no longer offer it anything. Very well then, gentlemen, my knowledge of our country leads me to believe that within 200 years, when America has gotten out of protection all that it can offer, it too will adopt free trade.’’

Interestingly enough the United States did not become a great trading power and not recognisably be a free-trade nation until after WW2.

Similarly In Germany, Friedrich List (1789-1846) who also had scant regard for any ‘free-market’ nonsense along with the Ricardian corollary of comparative advantage, was instrumental in promoting a guided political economy; a system of political supervision from above as a policy for economic development. He argued that,

‘’…the first stage (of such a long-term policy) is one of adopting free-trade with more advanced nations as a means of raising themselves from a state of barbarism, and of making advances in agriculture; in the second stage, promoting the growth of manufactures, fisheries, navigation and foreign trade by means of commercial restrictions; and in the last stage, on after reaching the highest degree of wealth and power by gradually reverting to the principle of free-trade and of unrestricted competition in home and foreign markets.’’ (3)

As with Hamilton’s economic theories and their influence on Grant, so with List’s theories, on the leading figure in Germany at the time, the ‘Iron Chancellor’ and leading statesman of the day – Otto Von Bismarck (1771-1845).

These strategic, nation-building, and planned approaches were to give rise to the considerable success of the ‘mixed economies’ during the Bretton Woods era – 1944-1971 – and particularly so in the west. But this historical phase ended abruptly with the rise of the Thatcher-Reagan axis circa 1980, to the tune of TINA – there is no alternative, although such policies continued to be the chosen road to development in East Asia. If the TNC-State paradigm operates globally they do so only because the state allows and facilitates this. But the relationship between the two varies from one state’s political economy to another.

The present actually existing state-market archetype – which in its essence is neo-liberal – is such that business enterprises now seem fit to expect/demand more from their governments in order to secure markets for their products (these enterprises certainly have some chutzpah in this respect!)Trade follows the flag. This special pleading notwithstanding, the fashionable nostrums extolling the economic virtues of neo-liberalism – nostrums of an entirely theoretical nature, based upon a type of reasoning associated with the medieval schoolmen, or rolled out as if it were Immanuel Kant’s Categorical Imperative. In this respect also such economic theory, as postulated by the marginalist school (see below) takes place before any engagement with the material world, the theory precedes practice when it should be the other way around. I believe that it was Goethe who once said “All theory is grey, my friend. But forever green is the tree of life.”


However, in spite of the neo-classical economics theological school founded in 1870 (4) the fact of the matter is that the private sector requires at least 4 principles of support and services from governments.

1. Infrastructure support. That is to say state funding of high-risk and basic research. This involves funding of universities and of vocational training systems. Subsidizing of mechanisms for the dissemination of scientific and technological transfers.

2. Providing tax breaks. Incentives, necessary for investment in industrial R&D

3. Guarantees. That national enterprises from the given country have a sufficiently stable Home Base and privileged access to the home market via public contracts (defence, telecommunications, health, transport, education, social services). Industrial policy, particularly for those in the high technology strategic sector (defence, telecommunications, and data processing), also guarantee of a certain basic scientific and technical competence, as well as protecting designated sectors of the internal market on which local enterprises may depend.

4. Provision: that is the necessary support and assistance (regulatory and/or commercial, diplomatic, and political) to local enterprises in their activities and in their fight to better survive in international markets.

The above prescriptions would constitute the absolute sine qua non for economic growth and development. But it is no longer necessarily the case that these expectations will be met. Instead of the assessment (and presence) of past economic developmental strategies with measurable outcomes we have a religious, inflexible dogma of ‘market forces’ which is not to be gainsaid, gibberish in theory, but not even workable in practice. Herewith the record.

1. Capital/Labour relations.

Promise: Deregulation will allow for full employment.

Outcome: No clear impact.

2. Forms of Competition.

Promise: Deregulation will erode oligopolistic market power and will restore free competition

Outcome: Re-regulation, less producers, increased market concentration, from one oligopolistic form of competition to another.

3. Monetary Regime

Promise: Control of Monetary Base is possible.

Outcome: Monetary Innovation prevents this control and the rise of the shadow banking system.

4. State.

Promise: Minimal state will enhance growth and productivity

Outcome: Poor levels of productivity due to lack of educational infrastructures. Finance is put before industry.

5. International Regime

Promise: Smooth currency adjustments.

Outcome: Large movements up and down of exchange rates

And so on and so forth. The state – if it so chooses – remains the most formidable institution to channel and tame the power of the markets. In the absence of powerful countervailing regulation any economic analysis shows that persisting unemployment, recurring financial crises, rising inequality, underinvestment in productive activities such as education and research, a cumulative asymmetry of information and power and overinvestment in financial activities are the outcomes of a complete reliance on market forces. This we already know, but the suffocating global impact of Anglo-American liberal globalism – in both theory and practice, and in its sphere of influence – has served to erect a seemingly insurmountable barrier, both political and ideological, to any exit from the dead-end of TINA.


Sad to say, however, that the public authorities on both sides of the Atlantic have defaulted on their obligations to their electorates and to a large extent have merged with the corporate and banking sector. The US and EU remain in thrall to neo-liberal doctrine, the only ‘growth’ policy considered worthy of the name consists of eliminating organizations or institutions of any kind that are regarded as obstructing markets and competition, be they cartels, chambers of commerce and industry, trades unions or tax guilds, or minimum wages or employment protection. This is all that is meant when todays creditors expect debtor states to implement the dreaded ‘structural reforms’. The collapse of the Keynesian economics establishment and its political manifestation in both social-democratic theory and practice was unable (and even unwilling) to prevent the counter-revolutionary onrush of the neoliberal forces who now command the political and economic agenda.

‘’The historical significance of the transition from a Keynesian to a Hayekian political economy, which has been taking place since the 1970s, becomes clearer if we recall the situation at the beginning of the neoliberal turn. Whereas today with open borders, formerly sovereign states with independent central banks must pursue a rule-bound economic policy in accordance with a prescriptions of efficiency theory, the Keynesian mixed economy of the post-war decades had at its disposal a wide range of instruments for discretionary government intervention, especially in the distribution of the national product and the life-chances of national citizens … The neoliberal counter-revolution has left nothing of this. It’s objective was to trim the states of post-war capitalism as much as possible reducing them to providing for the functioning and expansion of markets and making them institutionally incapable of corrective intervention in the self-regulating enforcement of market justice.’’(5)

Returning to the global perspective of the opening passage the problems of under-development in the periphery is now being felt in the imperial centre as the centre becomes more and more like the periphery. A state cannot be emerging or developed if it is not inward rather than outward looking to the goal of creating a domestic market and thus reasserting a national economic sovereignty. This complex objective requires over all aspects of economic life. In particular, it demands policies that protects food security and sovereignty, and equally sovereignty over ones natural resources and access to others outside one’s territory. These multiple and complementary objectives are contrasted with those objectives of the internal comprador class, who are content to adapt to growth models that meet the requirements of the dominant global system (liberal globalization) and the possibilities that these latter alternatives offer. (6)

At the present time, the historical requirement for the establishment of an entirely new social and economic order based upon sound principles and respecting the environment with a goal of the fulfilment of human rights has become imperative. It hardly needs stating that this is a monumental task and the possibilities between success and failure are evenly balanced. Nonetheless it remains the greatest challenge in today’s world – moreover it is a challenge which spans both the developed and developing world and for tackling the issue of the survival of the human species and the Earth itself. Whether mankind is up for this challenge remains to be seen, but the world is running out of time and positive action needs to start very soon indeed. We shall wait and we shall see.

La Lotta Continua.



(1) Richard Barnet & Robert Mueller -Global Reach – 1974

(2) Rothkopf – Financial Times – 01/02/2012)

(3) Freidrich List. – National System of Political Economy. P.15

(4)The Marginalist ‘Revolution’ of 1870. The term ‘marginalist revolution’ is commonly utilised to indicate the abandonment of the classical liberalism – of Adam Smith, and John Stuart Mill – and posited a theoretical shift to a subjective theory of value and the analytical notion of marginal utility. The years between 1871 and 1874 saw publication of the major writings of the leaders of the Austrian marginalist school, Carl Menger (1840-1921); of the British school, William Stanley Jevons (1835-1882); and of the French (Lausanne) school, Leon Walras (1834-1910). For better or worse – pretty much the worse FL – this is the basis of the contemporary economics taught in schools and universities today. It is a toxic legacy.

(5) Wolfgang Streeck – Buying Time – pp.111/112

(6)Samir Amin – The Implosion of Capitalism – p.44


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