State and Globalization

Capitalism expands, deepens, becomes global, thus shrinking the world. In this shrinking world, the nation-state is withering away paving the way to a metamorphosed existence adopted to the new era for the nation and for the state. In this article we will try to point out some observations on the state in the turmoil of globalization.

*

§1. The state of the nation-state fulfilled its historical mission. It put an end to the super structure of the feudal mode of production, to the aristocratic privileges and to the internal customs, thus establishing the free-trade inside the country. It protected the national market with customs regulations, taxes, import quotas, and, when necessary, with arms. It introduced a unique national currency and it adopted a national monetary and budgetary policy. It constructed the infrastructure of the country, helped the growth of bourgeoisie. Its borders and its national sovereignty were recognized as such.

§2. By fulfilling perfectly its mission, the national state proved that the nation-state was the ideal form of the day for the capital accumulation. And its present demise proves that it is no longer the ideal form for it.

§3. The national state was protective, protecting its national market against unlimited volume of imports, against dumping, against the unlimited transfer of profits generated in the country by foreign investments, against unwanted foreign capital incursions, especially, if need be, against hot money, protecting its independence for formulating its economic and social policies and for building its industrial structure. The nation-state was conservative, conserving what it created.

§4. By contrast, the state within the framework of globalization is the vehicle to carry the dynamics of globalization into the national market, effectively destroying the independence of the national market, orienting its economic and social policies to facilitate the flow of goods, services and capital, even the labor into the country, submitting itself to the technological renovations chosen by multinational and transnational corporations. Bit by bit, it is sacrificing its sovereignty in order to be able to survive as an economical unit amongst the competing states having the same ends. This state allows the destructive action of globalization and it is not after conserving what the nation-state had created.

§5. In this picture of the contrast between the past and present, the concept of sovereignty comes to the fore. With globalization, the concept of sovereignty, introduced and adopted by the peace treaty of Westphalia (1648) and historically one of the most rigid political concepts, became, so to speak, a soft concept. In other words, it is no longer a determining concept in actual working of global dynamics. In permanent presence of powerful political intervention of supranational agencies, it is no longer definable within the national state context. National sovereignty still exists between the countries which are outside the subsystems like European Union and partially exists between the member countries of the subsystems as far as international matters concern and only as long as those matters do not interfere with capital movements in transnational sphere. More generally, a continuous flow of capital without let or hindrance anywhere and everywhere in the world must objectively disregard national sovereignty.

§6. Yet, there is one important dimension of national sovereignty which cannot be discarded any time soon: The state is still the exclusive holder of the legitimate violence and in this age-old capacity, it plays its most important political role in globalization processes by fighting the anti-capitalist movements and anti-establishment forces, with not much respect to democracy. All other political functions of the state revolve around this anti-democratic function. The state protects the interests of the capitalist class, but this time, above all, those of the global capitalist class. The police are national. The multinational or the transnational corporations cannot have their private police since no consensus can yet be built to this effect. Although private police do not exist, a subsystem like European Union went beyond the national police.¹

§7. It is not the lofty concept of sovereignty which determines who is the decision-maker in a given situation but it is the balance of power at that particular moment between the national state and the multinational or transnational corporation involved. This means that it is not a question of total and unconditional submission of the national state to the strategies of global capital. It is a question of mutual benefit, but under the hegemony of global capital.

§8. The main economic function of the national state is to render the country as attractive as possible for global investors and that, let us remember, in a context of global competition with other states having the same perspective. The global capital investors represented by multinational and transnational corporations or by private investors want to enter freely into the national markets. So, the national borders must be substantially lowered for the entry of capital. They want the wages, the state pensions, the social security contributions and other social benefits be as low as possible so as to increase their rate of profit. Thus the labor movement must be kept in check and the power of trade unions must be curbed. They want generous incentives, good facilities for investment and a stable judicial environment. Hence, the state must offer, amongst other facilities, a good infrastructure, free-trade zones² with tax immunity or tax reduction, guaranteed rate of exchange, commitment to prepurchase of certain amount of goods planned to be produced. All the financial incentives granted to the global capital mean that a slice of public funds is confiscated by the global investors, thus increasing their profits.

§9. Since the constant free movement of capital on global scale (i.e. through all possible national markets) is the motto of globalization, the state must keep the country permanently attractive for global investors. First and foremost, by its laws, by close observance of global financial orientations and by the policy initiatives it takes, the state must demonstrate its intention to keep the favorable investment conditions permanently available for the global capital.

§10. Above all, the environment must be ruled and be known to be ruled by independent judicial power. Its independence is the prerequisite for being trustworthy in the eyes of the capitalist. But an independent judicial power may not be enough. As a general observation, faster the profit moves in big quantities more anxious becomes the capitalist. It may be required that the probable disputes arising from investments be tied up to the international courts of arbitrage, thus bypassing altogether the national justice apparatus, an exclusion which may be difficult to swallow for the state.

§11. Furthermore, a multi-party regime is not essential for the global capital, but preferable as long as neoliberalism is not politically and insistently challenged. Let us remember, neoliberalism is only a metaphysical construction, firmly believing that playing with figures on the paper can change the reality lived by the society, a doctrine resembling rather to the classical Catholic doctrine which is called ‘dogma’ by the Church itself. It is this metaphysical construction, the neoliberalism, that binds together in a consensual way the state, the vehicle of globalization, and the global capital. The global actors and national actors share the same metaphysical vision to generate profits. That is the main reason why national central banks became independent establishments able to formulate their monetary policies in conformity with the policies of supranational financial organizations and taking account of the ratings of the Credit Rating Agencies.³

§12. It is in this context that the programs of the political parties or coalition of parties once in power to exercise state authority become less and less applicable. So, the programs proposed by these parties to win elections are not more than a statement of intent, not anything more. They do not have the room for maneuver they once had, because the state they control or want to control does not itself have the room for maneuver it once had. Anti-capitalist parties are of course exceptions, but they never win election under the domination of capitalism.

§13. The global economy is controlled by supranational organizations like the IMF, World Bank, World Trade Organization, OECD, European Council, European Commission and the summit meetings of G7, G8 and G20. The governments cannot ignore their decisions and their orientations in shaping their national economic, financial and fiscal policies. For instance, to get IMF credits, IMF must approve the detailed plan of the allocation of the credit submitted by the government and their spending of that credit is closely monitored. Every government has to observe closely the capital movements in global financial circuits. The laws concerning capital accumulation, especially the legislation on public tenders, are scrutinized by global actors. Today, there is such an international network of commercial banks with interwoven capital structures that the concept of national commercial bank is effectively outdated.

§14. Once the economy of a national state is in the hands of a government which represents the monopolist bourgeoisie keen on collaborating with global monopolist bourgeoisie, which is the dominant fraction of the power bloc, the country in question appears immediately in the collimator of the multinational and the transnational corporations, of all the supranational organizations and of all banks and the agents of global financial circuits. Because that is a government on the same wavelength with them, a government which will in all probability soon approach them, sharing the same neoliberal dogma with them. And that is the government to support against the opposition parties and to help in times of crisis. That is how the bond based on mutual benefit between the state, candidate ready to be the vehicle of globalization, and the global capital, hungry as ever to dismantle the national economy for profits, is formed to the detriment of the working class movement and all the other progressive movements.

§15. All the countries of the world capitalist system are in various degrees integrated to the globalization.

The countries higher up in the hierarchy of the world capitalist system, which are highly industrialized rich countries, benefit immensely from the advantages of the globalization. Above all, their technological development driven by the new scientific revolution, based on microchip-based information-communication technologies, allows them to reduce substantially their production costs. The socially necessary labor-time consumed for the production of their commodities is much reduced and it is now, so to speak, globally necessary labor-time.⁴ Their profits increase. They easily reach the globally equalized rate of profit. We can call their integration to globalization as ‘positive integration’. Their state is part of this ‘positive integration’.

A great number of countries which are lower down the hierarchy of the world capitalist system do not and cannot benefit or benefit enough from the advantages of the globalization, because their productive systems are not compatible with dynamics created by the new scientific revolution. The socially necessary labor-time, that is socially necessary labor-time of the country, consumed for the production of their commodities is way too long compared to the globally necessary labor-time. Even with extremely low wages, their production costs are very high and even if they are ready to give up a big chunk of their profits, they cannot reach the global rate of profit. Hence, their commodities are unsellable, they are stocked in warehouses with no commercial perspective, the capital expended for their production is wasted, company shares become worthless on stock exchange and the companies may go bankrupt, and of course the workers are laid and the unemployment becomes wide spread which fuels immigration. So, these countries, totally or partially excluded from the globalization, suffer nevertheless all the negative consequences of the globalization, they cannot escape the negative consequences of it. We can call the situation those countries find themselves in as ‘negative integration’ to globalization. Thus, objectively or subjectively, the states of these countries fail to assure the capitalist development of the country which sinks further to the bottom of the hierarchy of the world capitalist system.

*

One last point: The activists of anti-capitalist movements whatever their field of struggle, should bear in mind that it becomes important to know who takes and who executes the decision that triggered the particular battle in progress. State officials or company executives? Which side of the holy bond woven between the state and the globalization is responsible for what? Of course, the police apply the violence, the violence ordered by those who is in charge of the execution of the decision, but to identify the decision maker and the decision executor clears the immediate target.

***

Coşkun Adalı is author of several books published in Turkey, mainly on capitalism and world capitalist system. He was a lecturer on economic history in Paris University for eleven years. He is an independent multidisciplinary researcher in social sciences. 

Also published on the author’s personal blog: https://coskunadali.home.blog/2025/03/08/state-and-globalization/