The Global Empire

The Making of Global Capitalism marks the start of a project to construct a new historical materialist analysis of the American empire and the world system it oversees.

Most of my radical friends have expressed, at one point or another, the importance of reading Noam Chomsky in their political and philosophical development. But as a generation of radicals seeks to develop its own theorization of empire, it is critical to understand the limits of his approach in particular his rejection of historical materialism. To be sure, the power of Chomsky’s analysis derives in part from his disavowal of the search for “general laws” that has dominated so much of the Marxist scholarship. Rather than trying to identify mechanistic, structural “iron laws” that govern history, Chomsky adopts an agency-oriented method, based in a detailed empirical analysis of the decisions of state managers. In doing so, he seeks to distill a consistent rationality underlying state actions.

However, in their recent book The Making of Global Capitalism, Leo Panitch and Sam Gindin likewise reject the search for a-historical “general laws,” and undertake a thorough empirical analysis of state institutions. Unlike Chomsky, in rejecting such theoretical dogmas, and issuing a strong challenge to earlier theories of empire, they nonetheless deploy a historical materialist methodology.

Despite the similarities between the two approaches, their differing theoretical foundations lead to often strikingly divergent conclusions about the nature of world order. Panitch and Gindin argue that in securing the interests of its MNCs abroad, the American state has also contributed to establishing the conditions for capital accumulation around the world. Disparate markets were integrated under the overall management of the American empire, which produced both tensions and synergies between the American state’s relation to its own social formation and its responsibility for managing capitalism globally. For them, American imperialism has helped establish a global order modeled on the US’ own internally evolved economic system of “free enterprise,” without discriminating in favor of its domestic capitalist class. It has, in other words, given rise to “a world after its own image.”

For Chomsky, on the other hand, the American state acts on behalf of domestic power concentrated in a “state-corporate nexus.” The US commitment to “free trade” has been more rhetorical than actual, much like its supposed dedication to democracy and human rights. To him, the American state has applied market discipline and protectionist measures in geographically differentiated ways, tailored to accord with the interests of its ruling elite. From this point of view, it is precisely the American state’s ability to impose such discipline on others while exempting itself that makes possible its imperial role, and is the basis of its continued dominance: it seeks to establish a world not in its own image, but after its own interest. Though his formulations are underdeveloped, Chomsky’s work can ultimately be seen as complementary to that of Panitch and Gindin.

Structure and Agency

The theoretical difference between Chomsky’s and Panitch and Gindin’s approach can be partially discerned in the way they handle the so-called “structure-agency problem.” Essentially, Chomsky’s method is to identify a consistent, systematic rationality underlying the decisions of state managers. By observing the way these individuals respond to their perceived reality, one can distill the principles motivating their decisions. Moreover, as large portions of the internal planning record are now declassified, relatively frank discussion of the rationale guiding US foreign policy decisions of the past is publicly available. It is therefore sufficient to illustrate continuity between the reasoning revealed in these more forthright expressions and state initiatives in other places and times: if one can demonstrate that the evidence conforms to previously established rational patterns, one can plausibly suggest that similar doctrines are at work in both cases. Deciphering institutional rationality is therefore the key to interpreting the activities of the American state. Since institutional decisions are systematic, predictable responses to contingent, conjunctural phenomena, the key to properly evaluating state behavior is to learn how the state “thinks.”

In a sense, agency and structure are merged in Chomsky’s analysis: the agents he observes are embedded within institutions, and therefore make decisions in accordance with institutional imperatives. The rationale behind their decisions is institutional, not individual, rationality. Likewise, the actions of individuals in this regard are manifestations of institutional behavior. Ultimately, this leads Chomsky to portray institutions as the ontological basis of social order, or at least to leave questions of more foundational organizational principles unexplored. This failure to account for such socio-historical foundations leads him to adopt a reified understanding of institutions. As he writes, “the basic framework of policy formation tends to remain in place as long as the institutions of power and domination are stable, with the capacity to deflect challenges and accommodate or displace competing forces . . . Nevertheless, policies have to be adapted to changing contingencies.” This is clearly a kind of theoretical shortcut: it assumes that the institutions from which policy flows are “stable.” While Chomsky sees a consistent institutional rationality that is merely “adapted to circumstances,” such “adaptation” cannot be understood as merely a particular application of a timeless abstract form, deviating by a matter of degree from an imagined stable equilibrium. In fact, when institutions “adapt” this logic, they also transform themselves, since they do not exist outside of their concrete, practical articulation. Chomsky is therefore unable to comprehend institutional change, which is the primary determinant of whether or not the state posses the capacity to carry out its chosen projects, whatever the rationale behind these may be.

Panitch and Gindin, on the other hand, offer a creative solution to the structure/agency problem that avoids reifying either institutions or the economy. Unlike Chomsky, Panitch and Gindin see institutions as dialectically integrated within the broader social totality, and thus internally linked to its other moments in a mutually transformative, organic relationship. Whereas Chomsky’s method posits the state as a stable space where identical decisions are repeated ad infinitum, Panitch and Gindin understand such decisions as taking place within a shifting institutional and social terrain, grasping not merely institutional rationality but also the unique patterns of institutional development that result as agents respond to conditions determined by processes outside their control. In managing and stabilizing capital accumulation, the state also positively shapes historical development, activating certain of capital’s crisis tendencies even as it resolves others. Thus Panitch and Gindin do not simply illustrate the role of extra-institutional processes in determining institutional evolution, but also see state agency as reciprocally conditioning these processes, which then in turn again become the foundation of agency in a mutually transformative dialectical relationship.

It goes without saying that neoliberal restructuring could not be properly understood by a theory that is based on an assumption of “stable institutions.” Though Chomsky understands that a sharp intensification of class struggle on the part of the American ruling class was key to resolving the crisis of the 1970s, it is not clear from his account that this arose from any fundamental crisis of capitalism. Indeed, he seems to suggest that it would have been possible to maintain the Keynesian system of fixed exchange rates, full employment, and liberal trade, alongside the New Deal financial regulations, if the will on the part of the ruling elite were present. And he even seems to advocate simply returning to such arrangements today. As he writes, though markets “can be controlled by some degree of regulation,” which he refers to as “elementary economics,” such safeguards were “dismantled under religious fanaticism about efficient markets, which lacked empirical support and theoretical basis; it was just based on religious fanaticism.”

Neoliberalism cannot be understood as a sudden break with the past, or the product of a change in the mood of state administrators. Rather, its emergence was the outcome of a long historical process. Chomsky’s method leaves him unable to perceive the massive restructuring that has taken place as the links between the state and capital have become increasingly organic, and more rigid regulatory structures have eroded —regulatory frameworks intended all along not to restrain, but to protect and strengthen capital. Perhaps even more important, Panitch and Gindin argue, were “the contradictions produced by the success of the ‘golden age’ in producing near full employment by the 1960s,” as wage militancy contributed to a crisis of profitability. Thus it was the very success of Keynesian measures that ultimately resulted in crisis, forcing the state to undertake a major restructuring: not only were the existing institutional arrangements not stable, they literally could not be perpetuated if the crisis was to be resolved.

Class Conflict, or Core-Periphery Conflict?

For Chomsky, the axis of global conflict is between the “core” industrial societies and the “peripheral” states, which mostly serve as suppliers of raw materials or subordinate enforcers of regional order. Chomsky argues that the basic contours of world order were sketched out in the planning sessions between the State Department and the Council on Foreign Relations that took place shortly before US entry into World War II. These sessions, he illustrates, sought to facilitate the emergence of a “Grand Area” that would be “subordinated to the needs of the US economy.” By ensuring that the Third World fulfills its “service function,” Washington also secures its dominance over the core by virtue of its control over resources, most importantly global energy production. Chomsky therefore agrees with Panitch and Gindin that US interests are “understood in global terms,” and that the American state is the “global enforcer, guaranteeing the interests of privilege.” However, for Chomsky it advances not the general interests of capital, but rather the collective interests of the core countries in dominating the periphery—predominantly the US’ own ruling elite.

Whereas for Chomsky international relations are external interactions between atomized states, Panitch and Gindin reveal the internal unity that defies this apparent externality. The primary conflict, for Panitch and Gindin, is not between states, but within them. This, too, is a clear product of their differing theoretical foundations: recall that Chomsky sees institutions — understood as isolated, closed units — to be the ontological foundation of social organization, while Panitch and Gindin identify capital accumulation as the meta-process integrating them with other moments of the social totality. Therefore this must also apply at the international level: it is impossible to consider states as purely external to one another, particularly as the interpenetration of capital has increasingly generalized capitalist interests and expanded internal social linkages. It was these processes, for Panitch and Gindin, which “redefined the American ‘national interest’ in terms of the extension and defense of global capitalism.”

It is likewise clear that Chomsky does not consider local ruling classes to be significant social forces in their own right. His emphasis on internal US planning sessions in the development of post-war world order underscores this point. One could easily conclude from Chomsky’s account that the formation of the world system has simply been the realization of the ideas of American state planners. But although internal documents reveal a great deal about the principles guiding policy, one cannot treat the economic and political transformations that have engulfed the planet since World War II to have simply emanated from the American state. As Panitch and Gindin point out, at no time was,

policymaking ever centered in any singular state “brain.” It was only in the context of dealing with specific problems thrown up by an international capitalism, and of the accompanying shifts in the hierarchy of US state agencies, that key actors inside the American state struck the compromises and developed the common tactics to produce the kind of policy cohesion that allows us to speak in terms of the American state’s imperial strategies.

Local elites — engaged in bitter class struggles within their own social formations — are in many cases the primary authors (if not implementers) of imperial programs, and have therefore contributed immensely to the making of global capitalism. In turn, these processes lead to the further strengthening of local capitalist classes within their own social formations, reinforcing the development of capitalism locally and, thanks to the coordination of the American state, globally.

States and Markets

Though of course Panitch and Gindin understand that capitalism has always required substantial state involvement, Chomsky suggests that this support extends significantly further, forming a “state-corporate nexus” at the very core of the American economy. This “state-corporate nexus,” Chomsky argues, is “a system of state-corporate industrial management to sustain high-technology industry, relying on the taxpayer to fund research and development and provide a guaranteed market for waste production, with the private sector taking over when there are profits to be made.” This “state-corporate nexus” — portrayed as the concentrated articulation of ruling class interests — to some extent stands in for capital. However, this ossified, institutionalized “nexus” seems to lack the dynamic properties of capital. One important example is competition: by presenting the “state-corporate nexus” as a kind of central committee of the American ruling class, this class appears more or less homogenous. Just as the balance between class forces within the US and elsewhere is critical to understanding the unfolding of global capitalism, so too is it important to carefully take note of conflicts within capitalist classes. The interpenetration that has resulted from the increasing mobility of capital, Panitch and Gindin show, has often lead fractions of the American ruling class to find their interests more closely linked with foreign capitals than their fellow nationals, driving both the internationalization of the state and the particular development of the American empire.

These dynamics are particularly pronounced in relation to the financial sector, the nerve center of global capitalism. The relationship between Wall Street and the key state economic apparatuses, Panitch and Gindin show, is one of “mutual embeddedness.” The major financial firms have been increasingly essential to capital accumulation all around the world, regardless of the particular national origins of those with whom they engage. The basic common interest of finance, which must be implemented by the state, is ensuring that capital can freely be transported and assembled where and when it is needed. Meanwhile, the increasing volatility of financial markets has forced those state apparatuses most closely linked to the financial sector to underwrite the activities of Wall Street. It is in this sense that the American state manages the “general interests” of global capitalism, safeguarding and regulating the free movement of capital. As Panitch and Gindin show, the development of this element of American imperialism is reflected in the shift in state policy from “failure prevention” to “failure containment,” as the growth of the power and complexity of the finance sector has increasingly superseded the ability of the state to micromanage its operation.

Their focus on these processes — hitherto largely unexplored — is partly what leads Panitch and Gindin to perceive a change in American national interests alongside the expansion of finance, through which the national dimension of globalization has gradually faded. To them, the American state has subjected its own social formation to the same disciplines it promotes elsewhere. Although it has made “tactical concessions to protectionist forces by making it easier to secure remedies for the costs of free trade, the strategy was essentially to channel these pressures into “much broader demands for liberalizing foreign markets, while at the same time complicating the conditions under which those affected at home could demonstrate unfair trade practices.” This process, they argue, has culminated in the neoliberal era, characterized by “the removal of barriers to competition in all markets.”

However, Panitch and Gindin too often downplay the ability of US MNCs to exert greater influence over policy formulation than others. This structural empowerment is not merely a periodic aberration interrupting the general trajectory American imperial project; indeed, it is one of the very bases of that project. Just as the American state’s ability to contain financial crises and protect financial firms has been critical to their growth, its efforts to manipulate trade barriers and ability to strategically allocate public resources have likewise been important to the ongoing predominance of American MNCs. Insofar as the rise of finance and expanding globalization has negatively affected the ability of non-financial MNCs to retain beneficial protectionist measures, these processes can be seen to have benefitted one fraction of US capital at the expense of others.

It is here that Chomsky’s analysis retains some truth: while the American state has undoubtedly promoted the free movement of capital in accordance with the interests of the major financial firms, it has not sought to implement free trade, but rather to manipulate trade barriers and structure competition in accordance with dominant corporate interests (financial or otherwise). There is, from this point of view, no “tension” within “the American state . . . between the governance of its own social formation and its imperial responsibilities for the reproduction of global capitalism,” as Panitch and Gindin claim. On the contrary: US imperialism is executed in the interests of domestic power. The state’s ability to manipulate trade barriers and shape the implementation of market forces needs to be seen as a weapon in class struggle and capitalist competition at home and abroad, not just a means to establish universal free trade.

If Chomsky describes the structure of the American economy and logic of the US state correctly, the United States has not created a world “in its own image,” but rather in its own interest. From this point of view, although the growth of finance and hypermobility of capital has lead the United States to adopt a vital role in managing global financial flows, these activities must be seen in the context of a broader set of “national interests,” generated from an “unstable equilibrium of compromise” engineered by the state between competing fractions. In fact, there is no necessary conflict between the American state’s role in regulating and overseeing the flow of credit and its efforts to protect its own MNCs — this needs only be seen as the application of a consistent logic to different capitalist fractions. Just as the US state seeks to support and protect the activities of its financial firms, so too does it seek to do so in relation to other centers of corporate power that play the major part in formulating American policy. Further, non-financial MNCs also rely on the free movement of capital to sustain existing transnational production networks, however dependent on state protection and subsidy these may be.

Chomsky’s “state-corporate nexus” may not be the sole author of American empire, but although lacking the empirical support needed to truly understand the importance of the structural linkages between the American state and its domestic MNCs, his theory demands that these questions be further investigated. This should certainly include an examination of the relation between those state apparatuses most closely tied to the financial sector, such as the Treasury and the Fed, and the defense, security, and diplomatic apparatuses on which Chomsky focuses. What is needed, in other words, is a second volume of The Making of Global Capitalism, in which these other apparatuses and logics can be explored, and placed in their proper relation to those already examined.

Indeed, The Making of Global Capitalism should be seen as the beginning, not the end, of a project to construct a new historical materialist analysis of the American empire and the world system it oversees.