Capitalists, the state and globalization
“The tendency to create the world market is directly given in a concept of capital itself. Every limit appears as a barrier to be overcome…In accord with this tendency, capital drives beyond national barriers and prejudices as much as beyond nature worship, as well as all traditional, confined, complacent…reproductions of old ways of life. It is destructive towards all of this, and constantly revolutionizes it, tearing down all the barriers which hem in the development of the forces of production, the expansion of needs…” etc. (Grundrisse).
This is how Karl Marx saw globalization as an inseparable part of capitalists’ interests and drive. Nothing has changed in 180 years since the passage was written to make us believe that the behavior and the incentives of capitalists are different today. So is the continuation of “high globalization” that began with the opening of China and the fall of communism in the Soviet Union and Eastern Europe, simply a natural and unstoppable process of capitalism breaking barriers of space, technology and habits in search of profit? In our own time capitalism has expanded not only geographically but also by creating new activities and new markets from renting our flats to being paid for influencing other people’s buying decisions or selling one’s name as a trademark. How can we then understand that the quintessential capitalist country like the United States might decide to opt out of globalization or at least to restrict its further advance?
We can explain it, I think, only by bringing two other “players” in addition to the one highlighted by Marx. First, we can bring in the state assuming that the state is to some extent an autonomous actor, and that what it does is not entirely determined by capitalists’ interests. It is a topic which has been discussed for over a century and on which no consensus has been reached. But if the state does have sufficient autonomy of action then it can override, in some cases, the interests of capitalists.
The second possibility is to allow for the split within the capitalist class. Alongside what we may call “the cosmopolitan capitalists” who have profited handsomely from globalization through outsourcing of production, there may be what we might call “the military capitalists”, i.e. that part of the capitalist class directly linked with the “security” sector, procurement of weapons and replacement of technologically suspicious imports from unfriendly countries. The removal of every Kaspersky anti-virus protection software and every Chinese-made CCTV camera benefits somebody who would produce a substitute. They do have incentive to support a more bellicose policy and thus to question globalization.
But military capitalists labor under two important handicaps. They are very unusual capitalists in the sense that their profits depend on state expenditures which in turn require high taxes. So in principle they have to be in favor of high taxation in order to fund government expenses on defense. They might benefit on balance, but the preference for high spending and taxes puts them at odds with other capitalists. The second problem is that by restraining globalization they work against a force responsible for lower increase in nominal wages, namely cheaper wage goods imported from Asia. For perhaps that the greatest contribution of China and the rest of Asia was not the direct one (higher profits from investments), but the indirect one: allowing Western real wages to rise, albeit modestly, but shifting the distribution in favor of capital. This is what has happened over the last thirty years in the US and other advanced economies and goes under the rubric of the decoupling between productivity and real wage growth: it is just another way to say that the labor share has gone down. The labor share has gone down without reducing real wage thanks to the fact that wage goods themselves have become cheaper. This was a huge boon to both cosmopolitan and military capitalists. If globalization is overturned, that benefit will evaporate: nominal wage would have to go up even if the real wage is constant, and the profit share in GDP will be reduced.
Thus military capitalists face two problems: they need to argue for higher taxation and implicitly in favor of reduction of capital incomes. Neither is popular. However the success cannot be ruled out. An alliance may be formed between the military capitalists and the hawkish part of the semi-autonomous state. They may be wiling to accept such “costs” if they enable the US to curb China’s rise. The pure geopolitics would dominate economic interest. Historical experience helps such an alliance too: US has won all big wars (the First, the Second, and the Cold) and every time its victory has led it to the peak of geopolitical and economic power. Why should not that happen again?
This is how we should regard the future of globalization, at least from the point of view of the western calculation: as a trade-off between unconstrained geopolitical power and higher real domestic incomes. The economic arguments as well as the usual (and at times perhaps facile) assumption that the state does what capitalists want it to do overwhelmingly point in favor of continued globalization. Yet the “bellic alliance” may be just sufficiently strong to keep the other side in check, if not to entirely overturn globalization and shift the country towards autarky.
[This is the text of an article commissioned by New Statesman. I do not know what happened with it. It was not published by New Statesman; perhaps they did not like it. I thus decided to publish it on my Substack.]
From the point of view of Marxism, the State is not an independent actor from capitalism. This is made very clear by Marx, for whom the State is the amalgamation of class dominance that emanates from the development of capitalism.
Extrapolating for any mode of production, we have that the State is the manifestation of class struggle of said mode of production, e.g. the feudal State, the ancient State etc. etc. The State is always born from the mode of production, never the inverse: the State is the superstructure of the mode of production.
In the specific case of capitalism, if we apply this concept, we have that the State, ultimately, is the neutral arbiter of the free market. Someone has to enforce private property, otherwise, the physically stronger will always expropriate the physically weaker, no matter if the weaker is wealthier than the stronger. Private property would self-destruct into the raw Survival of the Fittest.
Hence capitalism cannot exist without the State. The free market is, ultimately, artificial: it does not exist in nature.
Yes, intercapitalist struggle is constant and structural, according to Marx. The capitalist class oppresses the working class as a whole, i.e. as a class, but, at the individual or regional level, capitalist rivalry do and must exist. Marx himself tells us the example in Capital, where capitalists from one specific sector make political campaign to higher wages... in the other sectors. In its most acute form, there is a total war: WWI was the quintessential intercapitalist war, the so-called interimperialist war par excellence. It brought the end of classical liberalism and paved the way for the so-called neoclassical economy.
Again, it is easy to visualize why pure capitalism without the State and, as such and with, without ferocious and to-the-death intercapitalist competition, is impossible: imagine the perfect capitalist world, where every adult male divides equally planet Earth between themselves (including all the females in the planet, that is, each one will be a family), as capitalists. Each portion of this planet will be an individual capital, owned by exactly one family. Free market competition begins, in a way everything that happens to each individual capital will be the result solely of free, purely meritocratic, capitalist free market competition.
The first problem arises: planet Earth is not equal in all of its parts: some families will receive a wasteland, while others will be sat on gold mines, while others will be spawned in fertile lands. But the most important one here would be the families who would inherit the water.
The capitalists who own the water would then subjugate the rest, in a domino effect, until they become the new oligopoly. They would then amass this accumulated rent profit, this superprofit, to then mount a military sector, which would then subjugate the rest. If the water capitalists don't manage to unite wholly at once, then it is a simple matter of a shock of titans, an interimperialist war to decide which water oligopoly will reign supreme. The process will then continue as normal, until all the weaker capitalists will be enslaved and proletarianized (i.e. transformed into the working class). The ones who resist would be killed, which means they would “exist the game”. Meritocracy and fair competition break down as moral-ethic concepts.
Obviously, really existing capitalism doesn't behave that way. That's because the State, as the high council of the capitalists, arises as capitalism develops. First of all, because capitalism isn't born from a virgin planet Earth, but from the contradictions of feudalism, so the capitalist class has to gain class consciousness in order to topple the feudal dominant classes before properly founding capitalism. Second, the working class is born from from already existing relations of production, not from a race of fallen capitalists. So the working class already “exists” the moment the capitalist class gains class consciousness. Third, as capitalism becomes hegemonic and so does grow the working class' class consciousness, so does the State develops, as the neutral arbiter of the free market, of which one of the functions is to administer and equally distribute among the members of the capitalist class the so-called “inherent monopolies” such as water, land as abstract space (property rules of land), and war (modern day terminology: defense). That's why the capitalist classes around the world -- including the American one -- accept that the State has the monopoly of the Armed Forces: if it was in private hands, this capitalist would use it to dominate all the other capitalists.
Nowadays, the State as the neutral arbiter of the free market is called “minimum state”, in order to differentiate this essential function from its expanded function, which is to also administer the welfare state (which the social-democrats also call the “social wage”, because it gives the working class a series of services that are essential to its comfort). The Neoliberal faction defends the State should go back to just do its original function, i.e the “minimum State”, while the Keynesian, Social-Democratic faction defends the State should be “maximum” i.e. accumulate both the function of the neutral arbiter of the free market and build and administer the welfare state.
To sum it up, the State not only is not alien to capitalism, but is the manifestation of the Free Market itself.
I would add a third methodological strain - geographical split, i.e. there are American capitalists, and Chinese capitalists. If American capitalists can't keep their monopolies due to competition from China, and thus maintain their profit margins, the only logical course of action is to erect a Chinese wall. Yes, they will swim in a smaller pond, but will still be the biggest fish. Besides, if we take the globalization to the logical end, i.e. where everyone freely competes with each other, this will eliminate profits altogether, by definition. Hence, paradoxically, national capital is interested in globalization only to a certain extent, namely, as you mentioned, as long as it keeps a lid on wages. As soon as it faces margin erosion due to competition, globalization stops being in its interest.