The Two-Dimensional State: Globalisation of the Economy and the State

Every transition from one stage to another of capitalist society is marked by a throng of intellectuals who are so taken by the “new advance” that they lose even a minimal ability to distinguish the real process from their own personal expectations. Thus it was with the passage from competitive to monopoly capitalism at the turn of the century. Then numerous intellectuals, economists and political analysts concluded that monopoly was the ideal instrument for the state to overcome its class nature and for easing the painful passage from bourgeois to socialist society. More precisely, inside the social democratic camp of the 2nd International it was thought that the growth of large-scale industry - which was leading to the numerical and intellectual development of the workforce - would eventually also enable the working class to take over the management of the state by peaceful and electoral means. For example Bernstein urged social democracy to demand universal suffrage because

with the numerical and intellectual development of the workers this [universal suffrage, ed.] becomes the instrument for actually transforming the people's representatives from bosses into servants of the people. (1)

However subsequent development, far from demonstrating that the state had become the instrument for the socialist transformation of society, showed that it had made the imperialist imperative its own and that this was an intrinsic part of the predominance of monopoly.

As far as the current process of economic globalisation is concerned the glaring failure of reformist expectations - exemplified by the outbreak of two world wars, the extensive increase in misery on a planetary scale, the growing marginalisation of entire continents, the disproportionate growth of absolute forms of poverty reminiscent of the decadence of feudal society - would suggest that great prudence is called for, if panegyrics about the radiant future of humanity are not to be wasted. Here it's worth noting, out of respect to the fathers of historical reformism, that while for them the democratic conquest of the state would lead to the overthrow of capitalist relations of production as the precondition for building a new society; today, new Cities of the Sun are imagined on the basis of this or that existing tendency without calling into question bourgeois means of production. Thus current trends are being used to posit the possibility of revising marxism, if not to conclude that it has already irrevocably failed.

The Global Village

As we have pointed out elsewhere (2) it is undeniable that one of the most interesting aspects of economic globalisation is the tendency of the great industrial and financial concentrations to move towards transverse and transnational integration to the point that their scope and power far exceeds that of national states. The overriding assumption is that the national state is in decline. Deprived of the control it once had over the currency and of almost all the other macroeconomic variables once assumed to be indispensable for the normal process of capital accumulation, the national state is now giving way to a new transnational reality whereby each state is linked by a common interest in an efficient “business cycle”, itself integrated on a world scale. In this global village conflict between states, just as that between social classes, will no longer have any reason to exist. The market, that father of all liberty, will ensure that every individual has an equal opportunity to become part of the globalised cycle of production. In short, despite the massive concentration and centralisation of capital which is the basis of the globalisation process, it will lead to the spreading of democracy in one form or another across the planet.

At the beginning of the century it was thought that the extension of large-scale industry and the concomitant numerical and cultural development of the workers would allow them, by a simple manifestation of will (the vote), to win control of the state and transform it from a machine for domination by the ruling class into an instrument for the socialist transformation of society. Today the assumption is that by superseding the national state, globalisation will allow the transformation of the inhabitants of the planet into so many freely associated capitalists. Clearly, if such a tendency were in any way confirmed then the marxist theory of the state would be discredited by history itself.

The Marxist Theory of the State

For marxism - and we do well to remember it - the state is not the product of a social contract agreed on by the citizens of a certain community according to some fundamental rules of civil society. Neither, according to Engels,

is the state a power imposed on society from outside nor even, as Hegel affirmed is it "the reality of the ethical idea", "the image and the reality of reason". Rather, the state is the product of a society which has reached a certain stage of development; it is the admission that this society is enveloped in an insoluble self-contradiction, that it is split by irreconcilable antagonisms which it is impossible to eliminate. But, in order that these antagonisms, these classes with conflicting economic interests, do not destroy each other and society itself in a sterile struggle. a power apparently above society, which attenuates conflict and confines it within the limits of order became necessary. This power - which emanates from society but which places itself above it and which increasingly alienates itself from it - is the State.

And Lenin adds:

Here the fundamental marxist idea on the historical function of the State is expressed perfectly clearly. The State is both the product and the manifestation of irreconcilable antagonisms between classes. The State appears at the moment and to the extent that class antagonisms cannot be reconciled.


the State is the organ of class rule, an organ of oppression by one class over another; it is the creation of an “order” which legalises and consolidates this oppression and moderates the conflict between classes. (3)

From this long quotation it is obvious that for marxism the state, and the bourgeois state above all, can change its organisational form and present itself now as democracy, then as dictatorship, but it cannot change its class nature. So long as the state remains it will be the instrument of domination by one class over another. And if that is true - as history has demonstrated up till now - it is also true that each state will model itself in accordance with this domination, for the very reason that it can have no other aim than to preserve that domination as best it might. Thus, changes in the organisation of the state undergone by any specific ruling class in the course of history only reflect a change in the form of domination, not in the nature of that domination. For marxism the bourgeois state can only remain such and if it does remain it is because the relationship between the bourgeoisie (ruling class) and the proletariat (subject class) remains unaltered. On the other hand, the birth of a new state entails the overthrow of that already in existence and of the subservient relation between social classes.

If capitalism, in order to maintain its own existence, transforms itself from competition to monopoly the state can only reflect this change, but never, absolutely never, can this serve to bring the state itself under the control of another class. On the contrary, the state must take an increasingly centralised form. Thus whilst for Bernstein, as we have seen, the state was due to become increasingly democratic, for Lenin the state in the epoch of imperialism: - the era of bank capital, the era of gigantic monopoly capitalist monopolies, the era of the development of monopoly capitalism into state-monopoly capitalism - has demonstrated with particular force an extraordinary strengthening of the “state machine” and an unprecedented growth of its bureaucratic and military apparatus, in connection with the intensification of repressive measures against the proletariat both in the monarchical and in the freest republican countries. (4) Globalisation of the Firm and Triadisation of Capital Normally when the term “globalisation” is used it refers to a whole series of processes which are tending to transform the world economy from a sum of national economies into a global economy which has lost all reference to single national entities. By contrast with multinationalisation, understood as the instrument by which An economic agent of foreign nationality acquires the capacity to influence and control the economy of other nations and their future (5), globalisation is rather the instrument by which the planet goes over to a single market, a single financial system, a single productive cycle. In sum, it is the instrument for going beyond present national differences and also, as a consequence, for superseding differences within national boundaries until eventually conflicts stemming from economic contradictions will cease to exist and the next world war, if there is one, will be a war between civilisations. (6) Clearly this scenario completely ignores the fact that the whole process is driven, not by a new self-consciousness on the part of humanity, but more prosaically by a world economic crisis. Thanks to modern technology based on microelectronics, this crisis is pushing the process of concentration and centralisation of capital to a level unimaginable only twenty years ago.

The very idea that globalisation can involve a widespread extension of the productive base and an equalisation of opportunity - to use a fashionable term - is absolutely false. In fact the process of concentration is directed at the maximisation of profit, including the addition of a quota of extra profit derived from the exercise of a monopoly position. To say “concentration” thus means to say “the quest for monopoly” and to say “monopoly” is to say “imperialism”. It is precisely because the present historical period is typified by the tendency towards integration of the big monopoly groups that imperialism can only become more powerful, offensive and suffocating than ever before.

The fact that it will shortly be possible for a vehicle to be designed in Japan, assembled in Germany with parts produced in China; or that a credit card can be used for the same transaction whether you are in Rome, Nairobi or Kabul, does not mean that everybody will make an equal contribution to the production of the world's wealth or that this will be equally distributed. The wealth will accrue where the concentration of capital is highest, resulting not only in a widening gulf between the richest and poorest areas but more generally in the rich becoming richer and the poor becoming poorer.

Certainly it is becoming increasingly difficult to ascribe a specific nationality to any one particular firm but this doesn't mean that there will be a proliferation of new power centres which will prevent some predominating over the others. Rather the signs are of an opposite tendency: towards the formation of gigantic, ultra-concentrated, monopoly groups and not towards the pure and simple spreading of economic and financial activity on a world scale.

For example, let's take tyres. In 1990 more than 600 million were produced.

Ten years ago 80% of world tyre manufacture was divided up amongst 13 firms; in 1990 85% of the total world product was divided amongst 6 companies. Numerous experts and studies of industrial economics maintain that by the year 2000 there will only be two or three large global firms which will dominate the tyre sector, maybe in the form of a cartel. (7) Further, according to an IMF report on the Geographical Distribution of International Capital Flows According to their Origin, More than 80 per cent of world flows originate from and are directed towards the three regions of the Triad (EU, USA and Japan ed.). The role of the poorest countries as a source of global flows has been reduced to zero by 1989, starting from a level of 14% in 1982. There has been a slight recovery in 1989 but only in so far as they are recipient countries. (8)

And, according to the Lisbon Group,

The “triadisation” of capital flows in the course of the Eighties is signalled by the rapidly increasing role played by Japan compared with Europe and the United States. The reason is quite simple. While in the Seventies capital flows centred round the recycling of the OPEC surplus, in the Eighties they centred round the recycling of the Japanese surplus. Naturally the recycling has taken place almost exclusively within the OECD countries and the capacity of Japan to direct the process according to its own interests has far outweighed that of the OPEC countries in the Seventies. The result is that during the period 1986-1989 Japan represented on average 26.9% of global capital flows, above the United States' quota (16.4%). Moreover, between 1984 and 1988 64% of commercial loans, 70% of foreign investment and 86% of Japanese portfolio investment (95.5% in 1988) was directed towards the other regions of the Triad ...

From the beginning of 1980 the new global world created and moulded by capital flows also saw the disappearance of the majority of less developed countries as both source and destination of capital. In 1980 the entire group of less developed countries attracted around 55% of world capital flows and they were the source of 14% of outward flows. A decade later, both together were reduced to 2%. (9) Thus globalisation has at least two aspects: On the one hand there is the tendency towards the formation of companies or groups of companies on a planetary scale aiming to keep the price of labour power below its value. (See “Capitals Against Capital” in IC 14.). On the other, there is the concentration of the capital these companies control in the ambit of the three great areas which today dominate the globe, the area of the dollar, of the mark and of the yen.

The Role of the State in the Globalisation Process

Increasingly the market, or rather the great international financial groups, are defining monetary policy and with this the overall monetary policies of the various national states. The current anarchic situation provoked by such domination has given credence to the view that the state is subordinated to the great capitalist conglomerates in the same way as the world proletariat is daily obliged to submit - by means of wage cuts or, what is really the same thing, by increased exploitation - and thereby fill the coffers of those who exist on the proceeds of the great monopoly groups. So, it is in the name of this joint weakness that our rulers continually appeal to their "fellow citizens" to get them to willingly accept the interminable sacrifices demanded of them to make the "national enterprise" more competitive. For over twenty years the promise has been held out that the country will be stronger and that there will be a better chance of sitting round the rich man's table - in truth a table which is becoming less crowded. However, an examination of the various state policies over the last twenty years shows that they have ruthlessly followed the imperatives of a system threatened by the crisis of the accumulation cycle, often anticipating them and acting accordingly. It is clear that the state not only has not been a passive victim of globalisation but that, as far as is within its competence, it has encouraged and favoured it. When, at the beginning of the Eighties, the potent force of restructuring and the subsequent introduction of microelectronics to the production process obliged companies to find an international dimension or else lose their markets, it became evident that states were completely changing their industrial and financial strategies. Everywhere the state, that collective capitalist conscious of its own role, has encouraged economic restructuring and capital concentration and has targeted its own intervention along four fundamental policy lines:

  1. Liberalisation of the capital and labour markets (deregulation).
  2. Privatisations.
  3. Restructuring of public spending.
  4. Integration of the national economy into the continental context.

Deregulation, begun by the British and American governments of Thatcher and Reagan and then imposed on the rest of the world by the IMF, has eased the movement of finance capital on an international scale and has facilitated the process of capital concentration. Meanwhile, liberalisation of the labour market has allowed greater flexibility in the use of manpower in accordance with the strategic objective of keeping the price of labour power below its value. With privatisation, above all in Europe where the state was more directly involved in management, there came the birth of major groupings capable of responding to the process of integration and globalisation of the economy. In Italy it is enough to recall, for example, the ceding of Alfa Romeo to Fiat or the acquisition by Mediobanca of Comit and companies under its control and of Montedison. With the restructuring of public finance a mass of capital - which in Italy alone has surpassed two hundred thousand milliard lire in just under three years - has been taken away from social spending and is being directed towards the immeasurable growth of receipts from finance capital and the restructuring of the industrial apparatus. Finally, these strategic choices have been combined with policies of integrating national economies into the various continental contexts.

Integration By Currency Zones

With the onset of globalisation it soon became clear that the role of the state was destined to change. When giants appear on the currency markets that are able to move ten times more capital in one day than all the major central banks put together it is obvious that the management of some of the most important macroeconomic variables - such as control over the volume of money and interest rates, not to mention the allocation of capital - can no longer be within the competence of a single state. In reality, however, by far the biggest penalty is the prospect of ungovernability and anarchy which could prove fatal for the system.

Hence the sharply accelerated thrust towards continental integration in recent years. This process which is still underway is certainly not the result of noble principles of brotherhood but rather obeys the logic of the self-preservation of capital. It has simultaneously activated powerful inward drives and by the same token set in motion powerful outward impulses. The result is an outline structure of three great currency zones organised around the three principal currencies: the dollar, the mark and the yen. The conditions for adhesion to any one zone are imposed by the strongest in the area. Thus the United States manages the process for the American continent, Germany for Europe and Japan for Asia. Inward movement is permitted only to those who satisfy certain conditions and according to the strategic options of the strongest centre. In Europe it has been Germany, with the Maastricht Treaty, which has detailed the process and the conditions which every member state must fulfil in order to become a full participating member of the unified European Monetary System.

On the American continent, Mexico and Canada's joining NAFTA involved taking the dollar as their monetary reference point. Mexico in particular now has less autonomy from the US than any single state of the north American confederation vis-a-vis its own federal state. Argentina, Brazil, Uruguay and Paraguay are grouped together in Mercosur, apparently distinct from NAFTA but in reality linked to this by double ties. In order to contain inflation and as stipulated by the IMF, both Brazil and Argentina have had to link their currency to the dollar and thus, in practice, thoroughly accept all the decisions of the Federal Reserve.

The first and most glaring consequence of the process towards continental integration is an exacerbation of the fissures between the various states at the same time as a sharpening of class differences within each state. In addition there are growing cleavages between social strata as well as between different economic areas inside individual states. Whether they are integrated or whether they remain excluded, the weakest states are paying - and will continue to pay - a high price. If they join the integration process they are obliged to direct a great part of their resources to the stabilisation of exchange rates, to controlling the money supply and interest rates according to the directives of the central bank of the currency in question. But in order for an infinitely more feeble state such as Argentina, Mexico or Greece to maintain a stable exchange rate with the dollar or the mark it has, by necessity, to follow a policy of strong support for its own national capital, i.e. it must try to withstand competition at a continental and planetary level to the detriment of the working class and the weakest ranks in society. On the other hand, not to integrate means total marginalisation from the whole process of formation and appropriation of yields from finance capital, leading inevitably to a llapse into total poverty.

A closer analysis reveals that the notion of the state succumbing to capital's overwhelming power is quite simply false. As in all previous transitions from one stage to another of capitalism, the bourgeois state is acting as a lever in the passage from multinationalisation to globalisation. Moreover the active and determining part it is playing further confirms its class nature.

The movements for regional autonomy which are cutting across many states in the world have their roots more in the contradictory process of continental integration than in the supposed passivity of the state in the face of globalisation. There is a tendency for the more advanced regions to try to divest themselves of the less developed areas which are more costly to integrate. The break up of Yugoslavia, the appearance in Italy of a movement such as the Northern League (Lega del Nord), Quebec separatism in Canada, not to mention the complete disintegration of various states from the ex-Soviet Union: all these are clear evidence of this phenomenon, but in no case are they the prelude to the complete dormancy of the national state. On the contrary, precisely because integration entails strong support from the national capital, the national state is more than ever called upon to play a fundamentally important role. Throughout the upswing of the second accumulation cycle the state took on the task of stabilising demand and controlling social conflict in the interests of monopoly planning. Now, under the impact of the crisis, it takes on the historic task of ensuring that “its” key actors, the “local” multinationals (the only ones capable of acting at the appropriate level) succeed in carrying out the successful globalisation of the national economy. The rationale behind such activity is as follows: the success of national firms on the world scene is considered to be the prerequisite for the country's wellbeing, for its economic and technological autonomy. (10) There is a clear awareness that the role of the state is destined to change radically in the near future.

The Two Dimensional State

As we have seen, the growing concentration and centralisation of capital on a world scale have until now been encouraged by the state. However, this has only accentuated the complete inadequacy of the present system of macroeconomic management and threatens to increase the anarchy that reigns in the market to the point that any kind of economic planning will be impossible. It is true that up until today the large monopoly groups have benefited most from the state's weakening grip on the economy. Nevertheless, it is also true that in the long run they, above all others, cannot do without some secure economic reference points, either in the form of economic planning or something at least as reliable, which only the state can offer. Should the globalisation process stabilise itself then, by force of circumstance, a new kind of alliance between state and enterprise will be necessary. This new alliance will go beyond the rationale behind monopoly planning and, as the Lisbon Group shows, will be dictated by a series of objective conditions, amongst which are,

  • a growing integration between technologies (microelectronics and telecommunications, constituent parts and optics) and various economic sectors (agriculture, chemical, energy, multimedia). It is not easy for an enterprise, even the biggest, to cover all the vital technologies and all the sectors which are destined to influence its future field of development. From this point of view ... an alliance with the state can assure the necessary coverage of technologies and sectors;
  • the growing cost of research and development (more than $3bn are needed to design and realise a new generation of Boeing 747; the development of a new system of digital telephone connections also costs about $3bn; discovering and developing a simple new industrial enzyme costs around $100m) ... Costs are mounting at the same time as the growing uncertainty of receiving any return. Companies are obliged to seek help from each other (often abroad) and from the state.
  • the shortening of the production cycle (by 6 to 8 months in the clothing sector; by 2 to 3 years in vehicles and microelectronics). This demands an accelerated rhythm of amortisation and very large markets. As a consequence "privileged" access to government contracts becomes an instrument of prime importance. (11)

However, it's obvious that if a state which actively supports business is required then it's also important that it possesses the appropriate instruments to carry out its task. Thus the state must maintain and reinforce several of its prerogatives such as the control of public spending and government debt or more generally, control of the money supply. But since the centralisation of finance capital has reached a point where it is impossible for any of the existing central banks to carry out such a task, a radical restructuring of the credit system is required. Currency management itself will have to be more centralised by increasing the volume of money under the control of each central bank. Thus state intervention in the economy will take on a different meaning. Force of circumstance will turn today's tendency into reality. In each currency zone control of the money supply will be centralised at a single point so that we will have two, or at the most three, centres in the whole world. If we bear in mind that in the EU alone at the moment there are at least three other central banks of similar weight to the Bundesbank then the extent of the changes which continental and/or currency integration will bring about is easy to appreciate. It doesn't require a great leap of imagination to foresee that this new role will mean that the continental central banks will avoid any interference that might possibly be a source of instability or uncertainty to the continental or national political economy. They will thus operate to secure the best possible conditions for capital accumulation as the economic cycle itself signals from time to time.

On the other hand, the Bundesbank - which is the model for the future European system of monetary union - already takes the rate of inflation as its institutional reference point and is completely autonomous, with the ability to set interest rates and the money supply without any external interference (from government or parliament). Despite its directors being nominated by the government and indirectly coming under control of parliament, even the Bank of Italy has for some years had full freedom to set interest rates. In future the national central banks will still function but their operations will be bound by the fixed parameters of the whole currency area, in the same way as when today's indebted countries resort to IMF loans.

What is more and more clearly taking shape is a state which intervenes in economic life at two levels: the one as an arm of the supranational centre responsible for the centralised management of the money supply and other macroeconomic variables for the currency area in question; the other, a local level of control geared to maintain the compatibility of supranational and national variables. To avoid divergences between the two the national state will have no choice but to exercise the most rigorous control - direct and indirect - over wages and the labour market. From national trade union deals to bargaining at company level, from ministerial accounting to the smallest local health authority, everything will have to fall within prefixed parameters or else incur the penalty of being thrown out of the currency zone altogether. And these parameters cannot avoid including the interests of the globalised multinationals: in this way the interests of the latter will determine the rhythm of society as a whole.

New Scenarios

The picture of a centralised state decentralising itself while capital becomes more concentrated and more centralised is a fairy tale to delight the hearts of those on the margins of existence but it is a pure nonsense, a contradiction in terms which has no grounding in reality. If, in the not too distant future, the present tendencies towards globalisation are confirmed then there certainly will emerge a very different kind of state: but only in the sense that it will have no alternative but to develop even more centralised power structures than today. The current debate in Italy (and to a lesser extent elsewhere) on constitutional change with proposals to increase the powers of the executive confirms this. Nowadays in Italy even the left bourgeoisie, traditionally supporters of the prerogative of parliament in the decision-making process, has come out in favour of the direct election of a premier or president of the republic who would have greater autonomy and decision-making powers. We want points of reappraisal - Adornato, editor of the journal Liberal, recently declared - in order to overcome the centrality of parliament. (12) This is from an intellectual, an ex so-called marxist, who only yesterday couldn't make a speech more than five words long without spending at least three of them defending parliament and the central importance of its activity.

In reality the decision-making process is travelling the same course as is leading to a reduction in the economic/financial centres of power. The ferocious inter-bourgeois struggle, which in recent years has literally undermined the whole frame of Italian politics, really stems from the struggle between the various bourgeois factions who fear they will be cut out of the new map of power being drawn by globalisation. Obviously we are witnessing a contradictory process whereby it is difficult to predict the exact outcome. The transition from monopoly capital based on multinational firms to one based on globalised multinationals involves so much upset and disturbance that numerous scenarios are possible. For example, the move towards centralised economic management on a continental or currency zone basis necessarily means a new distribution of capital amongst the various productive sectors as well as between the productive sector as a whole and the financial sector. Not only small and medium firms are in danger of being marginalised. Even large conglomerates are at risk of being absorbed into others with the relative loss of power this involves. For many countries this can threaten national unity itself, as events in ex-Yugoslavia and the ex-Soviet bloc show. The relations of force between the various factions of the world bourgeoisie are destined to undergo profound changes. For this reason there will be a long period of sharpening tensions and conflicts which will undoubtedly be reflected in the process of globalisation of the economy, slowing it down or even directly blocking it.

More generally, this whole society which is going through a gigantic process of decomposition and recomposition could fracture and rot in its own contradictions. This does not exclude the maturation of a high degree of consciousness within the international proletariat - a consciousness of the need for the revolutionary overthrow of the existing relations of production. The arrival of a fully globalised economy is far from discounted, but if capitalism reaches that point it will be with the state and by means of the state and the state will be one of its principal pillars of support. And the universal franchise which reformists of all type and race maintained would lead to socialism will not even serve to decide - as Lenin said - once every few years which member of the ruling class is to repress and crush the people through parliament. (13) Instead, emptied of all content, elections and parliament will serve only to legitimate the iron heel of the most powerful of bourgeois dictatorships.

Giorgio Paolucci

(1) E. Bernstein Socialism and Democracy Laterza p.187.

(2) See “Capitalism's Global Crisis” in Internationalist Communist 14.

(3) Lenin State and Revolution, Riuniti 1966 p.60-61. (In English, see for example p.7 of 1970 Peking edition.)

(4) op.cit. p.92. (In English, see op.cit. p.38.)

(5) Lisbon Group I Limiti della Competitivita, Manifestotilibri, p.46.

(6) Much touted in the Anglo-Saxon world by Prof. S.P. Huntington of MIT.

(7) op.cit. p.110.

(8) op.cit. p.54.

(9) op.cit. p.55-56.

(10) op.cit. p.107.

(11) op.cit. p.108.

(12) La Repubblica 15.11.95 in “Romiti nella lobby di Liberal”.

(13) Lenin, op.cit. p. 109. (P.54 English edition op.cit.)