As a trend, the first idea appears difficult to disagree with. World trade has grown dramatically over the last few decades. Whereas world exports were $1.6 trillion in 1985, they were $5.4 trillion in 1998. Foreign direct investment (FDI) has grown from $209 billion in 1990 to $1,118 trillion ten years later (much of it representing cross-border mergers). A staggering $1.5 trillion in foreign exchange changed hands every day in 1998.2 World trade and investment is dominated by some 63,000 TNC's with about 690,000 foreign affiliates. The top 100 are based, with the exception of Venezuela's state petroleum company, in the economically advanced countries--the U.S., Japan, and Europe. They employ 6 million people worldwide, have assets of $2 trillion and their foreign sales are on the order of $2 trillion dollars.3

The trend among most of the world's governments since the early 1980s toward neoliberal policies--privatization of state-owned enterprises and services, deregulation of markets, lowering of trade barriers, gutting of social services and liberalization of financial and investment rules--have weakened government regulation and strengthened the ability of the TNCs to penetrate and dominate world markets.

As compelling as this analysis is, it is one-sided. Corporate domination has not replaced the struggle for domination between states. Transnational corporations cannot dispense with the role the state has played for capital in the past--as guarantors of order at home and power abroad.

The U.S. is not only the world's biggest military power, it consciously aims to perpetuate its dominance, and to increase its economic weight in the world economy. This is not some holdover from the past that will wither away as globalization proceeds. On the contrary, globalization cannot be understood without understanding the importance of imperialism--the rivalry between powerful states.

Capitalism and the nation-state

Writing in 1913 in a debate over national oppression, the Russian revolutionary Lenin noted two tendencies within capitalism: on the one hand, "the awakening of national life...and the creation of nation states" and, on the other hand, "the development and growing frequency of international intercourse" and "the break-down of national barriers."4

These two contradictory tendencies--toward internationalization of capitalism, fuller integration, and interdependence on the one hand, and toward the growth and consolidation of national states on the other--have been constant features of capitalism throughout its history. The balance between the two tendencies, and the way the contradiction has expressed itself, has shifted. But the contradiction remains, even today, at the heart of world capitalism.

The modern nation-state was necessary as a means of creating a single, unified market that could facilitate commerce. But the state was also crucial in providing necessary infrastructure, and sometimes the pooling of capital resources, necessary for national capitalists to operate and compete effectively.

But the state as a bureaucratic institution had another, more fundamental function. Lenin, citing Engels, defined the essence of the state as "bodies of armed men, prisons, etc.," in short, an instrument for the maintenance of the rule of the exploiting minority over the exploited majority.

As capitalism burst the bounds of the nation-state, the coercive military function of the state took on a new dimension--that of protecting (and projecting) the interests of the capitalists of one country over those of another. As capitalism developed, the role of the state increased, the size of the state bureaucracy increased, and the size of its coercive apparatus increased.

Lenin was soon to refine this conception in light of the world's descent into the mass slaughter of the First World War. He argued that capitalism had reached a new stage--imperialism--the struggle between the world's "great powers" for world dominance. The central feature of imperialism was the rivarly between the great powers--whose economic competition gave way to military conflict.

Another Russian revolutionary, Leon Trotsky, put it this way:

The forces of production which capitalism has evolved have outgrown the limits of nation and state. The national state, the present political form, is too narrow for the exploitation of these productive forces. The natural tendency of our economic system, therefore, is to seek to break through the state boundaries. The whole globe, the land and the sea, the surface as well as the interior, has become one economic workshop, the different parts of which are inseparably connected with each other. This work was accomplished by capitalism. But in accomplishing it the capitalist states were led to struggle for the subjection of the world-embracing economic system to the profit interests of the bourgeoisie of each country...

But the way the governments propose to solve this problem of imperialism is not through the intelligent, organized cooperation of all of humanity's producers, but through the exploitation of the world's economic system by the capitalist class of the victorious country; which country is by this War to be transformed from a great power into a world power.5

Another contemporary of Lenin, Nikolai Bukharin, emphasized that the contradiction between internationalization of capitalism and the nation state was producing a fusion between the state and capital. As corporations became more and more huge and centralized, they tended to fuse with the state, creating what he called "state capitalist trusts." The trend was accelerated by the increasing internationalization of the system--as each state used its control over a particular national patch to martial the capital resources necessary to develop, protect, and project its own industries at home and abroad. War accelerated the process of fusion between state and capital, as states marshaled their resources for war.

Bukharin tended to treat as an accomplished fact what was only a tendency. But he did accurately capture a trend toward state capitalism in the world economy at the time. The process reached its zenith in the 1930s, as the fully-nationalized Russian state was matched in the West by autarkic state control of the economy in order to marshal it for war production (most pronounced in Nazi Germany), and a general retreat of the leading powers behind high tariff walls.

The postwar period

The victors of the Second World War implemented a postwar economic arrangement that both encouraged trade and varying degrees of state involvement in the economy. Like Britain in the 19th century, the U.S. emerged as the world's biggest powerhouse, accounting for over half of world production. It trumpeted free trade, as did the British Empire before it, because it considered it the policy best designed to ensure American capital's penetration of the world market.

But government intervention was now enshrined as a means to prevent crisis, raise employment levels, and boost economic development. In the U.S., state intervention took the form of military Keynesianism--massive military spending. In fact, it was the "permanent arms economy" that underwrote the long postwar boom.

The postwar period also saw a proliferation of newly-independent states seeking to develop their economies after decades of colonial domination. Small and undeveloped, many of them looked to the Soviet Union as a model for development. As Pete Binns has written, "the weaker the local capitalist class, the greater was the pressure to merge and centralize their resources under the aegis of the state itself."6 But this trend toward state intervention was not based on a commitment to socialism (confusingly identified with state ownership). It merely expressed that fact that less developed states--many of them unlikely to attract foreign investment--saw themselves as unable to marshal the capital resources necessary to compete on the world market without direct state intervention. There was, writes Binns, "the same move toward statization in this period, whether presided over by governments of the left (as in Algeria or Egypt) or of the right (as in Brazil or Argentina). This fitted in with the world economy in the long boom in a clear and definite way."7 This strategy seemed viable when the world economy was in boom.

The character of imperialism changed in the postwar period, but retained its essence. Instead of a world divided by several centers of world power--Britain, Germany, and the U.S.--imperial rivalry took the form of a military Cold War between the U.S. and the Soviet Union. The presence of nuclear weaponry capable of destroying the planet meant that much of the conflict took the form not of direct military conflict between Russia and the U.S., but of smaller conflicts on the system's periphery.

Moving away from state capitalism

But within this postwar arrangement, molecular changes were afoot. Under a U.S. military umbrella, Europe and Japan were to become major economic powerhouses, slowly reducing the relative economic weight of the U.S. in the world economy. While the uneven development of the world market meant that trade and investment became increasingly concentrated in the advanced countries, a handful of new nations, known as newly-industrializing countries (NICs)--in particular South Korea, Malaysia, Singapore, and Hong Kong--were able to achieve high rates of growth and successfully insert themselves as new global players.

Secondly, Russia, a far smaller economy than the U.S., was forced to consume more and more valuable resources in military competition with the U.S., and found its impressive growth figures for the 1950s and 1960s begin to slow and, by the 1980s, grind to a halt. Crisis hit the core of the world system once again in the 1970s, bringing an end to the long boom--and to the Bretton Woods system which pegged world currencies to the dollar. The prewar boom and slump cycles had returned.

Phe massive growth of world trade throughout the period--and the concomitant increase in economic interdependence between different parts of the world economy--increasingly undermined individual governments' ability to use state intervention and protection to develop their own national patch. "The pull of the world economy toward the incorporation of all national economies within a single world division of labor," writes Binns, "proved increasingly hard to resist whatever the official ideologies of the governments involved..."8

Instead of continuing boom, economic crisis returned to the world in the mid-1970s, tipped over the edge by the sharp increase in oil prices. Daniel Singer describes the ruling class's response to the crisis of the 1970s:

Faced with a slowdown in growth, a declining rate of productivity, and a falling rate of profit, aggravated by the rise in the price in petroleum, the system was going to abandon its provisional compromises and social contracts for the sake of the old laws of the capitalist jungle...The 1980s were the years of the all-out offensive.

As usual, that offensive was first prepared and then reinforced by an ideological campaign...[M]ass propaganda was reviving the old clichés about the inherent vice of the public and the intrinsic value of private, "free" enterprise or about the perfect wisdom of the markets guided by a benevolent "invisible hand." Propaganda was closely linked with practice.9

As Singer shows, the processes that we now place under the heading "globalization" began in the 1970s, and accelerated in the 1980s and 1990s, as a means of restoring profitability on the backs of the world's working class and poor. Latin America was one of the first testing grounds for this new neoliberal approach--first in Chile after a military coup in 1973 backed by the CIA, then later applied elsewhere. U.S. policymakers seized the opportunity presented to them by the debt crisis to impose terms and conditions on indebted countries designed to open their markets up to investors. The fact that these policies have come to be known as "the Washington Consensus" should give some indication as to how structural adjustment policies were imposed. As Duncan Green writes:

[P]owerful interests in the North reap rich rewards from structural adjustment, which opens up the economies of the South to First World traders and investors. In the massive privatization of the late 1980s and early 1990s U.S. and European transnational corporations were able to snap up the pick of Latin America's airlines and telecommunications companies and also moved in on its oil sector.10

This process of using crisis in the emerging markets to pry them open was also on display in the wake of the Asian crisis. Walden Bello describes the process:

[U]sing the IMF as a battering ram for trade and investment liberalization in the industrial and financial sectors, U.S. transnational industrial and financial interests have been leading the takeover of Asian industrial and financial assets from Seoul to Bangkok...

In other words, much of the industrial and financial structure built up over a generation by Asian entrepreneurs is passing to northern transnational companies at firesale prices. And, in many cases, the objective of the buyer is not to add to productive capacity but simply to strip firms of their assets or to reduce their capacity in line with a global production plan to up profitability by bringing down supply to meet stagnant global demand.11

The state today

The U.S., in the first instance, championed the policies associated with globalization--dubbed the Washington Consensus--as a means to restore profitability and competitiveness--that is, they were state-initiated policies. But the importance of the state to the functioning of capitalism goes beyond this.

There is an important truth to the idea that states have no real control over the economy, and that the increasing integration of the world economy makes their efforts to control their own national patch more and more futile. But this is also true of corporations. That is because capitalism is an anarchic system, in which production on a world scale is unplanned and uncoordinated. And that is why capitalism has been plagued at more or less regular intervals with a crisis of overproduction--because neither private capital nor the states they depend upon are able, in the final analysis, to prevent crisis. If anything, the unprecedented and unregulated flow of financial transactions across borders has, as the 1998 Asian debacle shows, increased the volatility of the system.

On the other hand, it would be wrong to say that states have no impact at all on their own or the world economy. The state has means of intervening, through manipulation of interest rates and the money supply, and through its role as a "lender of last resort" that can sometimes be crucial. Fed Chairman Alan Greenspan, for example, organized the bailout of Long Term Capital Management in 1998 and averted an Asian type disaster in the U.S. by infusing large amounts of money into the system and lowering interest rates. And the over $100 billion bailout of the Asian countries did not come from private capitalists looking for ways to protect their investments. It came from the IMF--and IMF funds come from the state coffers of IMF member countries, primarily the U.S. and Europe.

The irony is that the bigger and more concentrated capitalist enterprises become, the more the state must stand ready to step in if any show signs of faltering. An important function of capitalist crisis is that it allows some businesses to go to the wall and others to pick up the pieces and restart the process of growth. But banks and manufacturing companies are so large today there is a danger that letting the crisis rip would be far too devastating. Hence an absolutely crucial role of the state today is as the last bulwark against economic collapse. So while the role of the state as an owner of capital (with some important exceptions, like Mexico's and Venezuela's oil industry) has diminished, its economic role in other ways has become more important.

As Harry Shut has commented:

[N]otwithstanding an unprecedented shift away from public ownership in favor of the private sector and extensive deregulation of the financial markets, governments in all the industrialized countries have shown a redoubled tendency to use taxpayers' money to subsidize private enterprise (through tax breaks, grants, loan guarantees and other devices)...12

Ironically, amid all the talk about the declining role of the state, state expenditure as a percentage of GDP has dramatically increased over the last quarter-century. The 1997 World Bank World Development Report shows that in the OECD countries, total government expenditure as a percentage of GDP has grown enormously since 1960, when it was just under 20 percent of GPD, to just under 50 percent by 1995.13

The argument that the transnational corporations can do without the state--and in particular, a home state--does not bear up to analysis. The most general argument is this: Transnational corporations need the state not only to guarantee labor peace (bodies of armed men, prisons, etc.), they depend on their home states for funding for research and development, subsidies to improve international competitiveness, and a host of other "services" (which critics might call corporate welfare) that the state provides, including, as we have already discussed, its ability to intervene and bail out corporations that are in trouble. Two analysts of the global economy have concluded that:

Of the largest 100 core firms in the world, not one is truly 'global,' 'footloose,' or 'borderless.' There is however a hierarchy in the internationalization of functional areas of management: around 40 firms generate at least half of their sales abroad; less than 20 maintain at least half of their production facilities abroad; with very few exceptions, executive boards and management styles remain solidly national in their outlook; with even fewer exceptions, R&D remains firmly under domestic control; and most companies appear to think of a globalization of corporate finances as too uncertain.14

Even today, after a wave of cross-border mergers, most corporations, with few exceptions, tend to operate from a home country. According to the Financial Times, most of these mergers have ended up as takeovers of one firm by the other. The much-heralded merger of Chrysler and Daimler-Benz, for example, has turned out to be a German takeover,

causing considerable bitterness and shareholder lawsuits in the U.S...

There are many companies with worldwide operations. Some even have multinational boards and executive teams. But, almost without exception, the world's most successful companies remain clearly identified with their countries of origin.15

Multinationals in the U.S. receive enormous amounts of government help in the form of direct subsidies, tax breaks, government-funded research and development, and a host of other forms of corporate welfare. To cite a few examples: The U.S. government paid $100 million in bonuses to top executives of Lockheed and Martin Marietta for successfully completing a merger in 1995. General Motors received $111 million in Federal technology subsidies between 1990 and 1994, while laying off 104,000 workers in the same period. IBM got $58 million in the same period.16 The point is, while the government has been busily deregulating industries and slashing social services, it has been spending large amounts of money to help big business. A 1996 Boston Globe study on government handouts to corporations concluded:

The $150 billion for corporate subsidies and tax benefits eclipses the annual budget deficit of $130 billion. It's more than the $145 billion paid out annually for the core programs of the social welfare state: Aid to Families with Dependent Children (AFDC), student aid, housing, food and nutrition, and all direct public assistance (excluding Social Security and medical care).17

Corporations rely on governments to maintain a good business climate. They therefore not only depend on their "own" state, but they are more likely to invest in other countries that maintain a good business climate--that is, "stable" regimes that seem able to maintain effective popular dissent to a minimum. The 1997 World Bank report noted that

A survey of local entrepreneurs in sixty-nine countries shows that many states are performing their core functions poorly: they are failing to ensure law and order, protect property, and apply rules and policies predictably. Investors do not consider such states credible, and growth and investment suffer as a consequence.18

American corporations depend on the American state

TNCs also depend upon their home country's state in order to pursue foreign policy--diplomatic, trade-related, and military--in their own interests. The problem with the idea of unmediated corporate rule is that it ignores the very real fact that corporations not only exploit workers and wreck lives in order to make profits. They are also locked in deadly competition with each other for markets. They want and need all the forces they can muster--whether in terms of boosting their productivity edge or expanding market share--to beat out their opponents and capture more markets. For this, they cannot rely solely on their own resources. A truly stateless corporation is always at a disadvantage in comparison to a transnational that can rely upon the resources of its own government-- especially if that government is as powerful as the U.S., Germany or Japan--to go to bat for it. This truth is best expressed by Thomas Friedman in a March 28, 1998, New York Times magazine article on projecting American power:

For globalization to work, America can't be afraid to act like the almighty superpower that it is. The hidden hand of the market will never work without a hidden fist. McDonald's cannot flourish without McDonnell Douglas, the designer of the F-15, and the hidden fist that keeps the world safe for Silicon Valley's technology is called the U.S. Army, Air Force, Navy and Marine Corps.

Anticipating Friedman's line, Marine commandant general Alfred M. Gray remarked in 1991 that the U.S. needed "unimpeded access" to "established and developing economic markets throughout the world."19 The Marines are no strangers to establishing "unimpeded access" to Latin America. Major General Smedley D. Butler explained in 1935 how the U.S. used military power to extend economic power over the Caribbean and elsewhere in the early part of the last century:

I spent thirty-three years and four months in active service as a member of our country's most agile military force--the Marine Corps...And during that period I spent most of my time being a high-class muscle man for Big Business, for Wall Street, and for the bankers. In short, I was a racketeer for capitalism...

Thus I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in.... I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912. I brought light to the Dominican Republic for American sugar interests in 1916. I helped make Honduras right for American fruit companies in 1903.20

U.S aims have changed little since the days of Smedley Butler. This is well understood by the U.S. government and corporations that have been pushing Plan Colombia--the $1.6 billion Andean military package that makes Colombia the third largest recipient of funds from the U.S., and commits the Pentagon to providing training, hardware and intelligence support to military forces in the region. This is ostensibly to stop the flow of narcotics, but as one U.S. officer noted, "There's not much difference between counterdrug and counterinsurgency. We just don't use the [latter] anymore because it is politically too sensitive."21 The U.S. Southern Command (SOUTHCOM) has 200 Special Forces deployments in Latin America, and has a number of military bases established throughout Central America and the Caribbean, as well as one in Manta, Ecuador. SOUTHCOM emphasizes domestic intelligence and internal security operations that are indistinguishable from the violent counterinsurgency operations promoted by the U.S. during the Cold War that helped suppress domestic opposition in Latin America. This policy is not just about policing Colombia, but about placing the U.S. in the position of policing the entire region.

In a recent NACLA Report, Michael Klare outlines clearly how the U.S. continues to assert its supremacy in world politics and economics. He cites a Defense Department report, written in 2000, which states, "The U.S. must remain engaged as a global leader and harness the unmatched capabilities of its armed forces to shape the international security environment in favorable ways [and] respond to the full spectrum of crisis when it is in U.S. interests to do so."22 Klare makes clear that the U.S. remains determined to maintain a military that cannot be matched by any other world power--let alone smaller, regional powers. In other words, maintaining U.S. superiority and its right to intervene wherever it sees fit isn't only about protecting U.S. interests abroad. It's about preventing other powers from aspiring to the policeman's role outside of American control. Klare cites a leaked draft version of an early 1992 military planning document which deems it U.S. policy to "maintain the mechanisms for deterring potential competitors from even aspiring to a larger regional or global role."23 This was written by Paul Wolfowitz, recently installed as Donald Rumsfeld's number two man in the Pentagon.

Imperialism and trade policy

For the U.S., pushing a free trade agenda is not about free trade at all, but securing U.S. economic advantage. That the U.S. views trade and trade policy from the prism of American economic dominance should be clear from the statements made by the Business Roundtable, a prominent organization of top U.S. business figures. The title of a recently published document of the Business Roundtable gives the game away: "The Case for U.S. Trade Leadership: The U.S. is Falling Behind." The article laments the fact that while the U.S. has just two trade agreements--NAFTA and a bilateral Free Trade Agreement with Israel--130 different free trade agreements have been signed since 1990 involving the EU and a host of other countries and regions:

From the end of World War II until a few years ago, there was an unwritten rule of trade negotiations: the U.S. is the indispensable country--the one country that has to be involved in a trade negotiation for that negotiation to succeed...

But today, the rules have changed profoundly, and irrevocably. The U.S. still is a major player, but it is no longer indispensable. Our trading partners are cutting deals without us, gradually surrounding the U.S. with a network of preferential trade agreements.24

What most worries the U.S. is the fact that Europe has negotiated 27 separate trade agreements and has 15 more in the works. There is no question that what appears to be shaping up in the world of trade is not free trade, but the setting up of competing trade blocs that in fact erect barriers to non-participants. The Roundtable's concern is that if the U.S. does not act quickly it might find itself cut out of preferential deals that benefit its competitors:

What happens if other countries are bringing such agreements into effect and we are not? U.S. businesses, workers and farmers face both an immediate threat and a long-term threat. Immediately, they are forced to compete on an uneven playing field. Longer term, our trading partners are creating rules that cut against us and are forming strategic alliances that are hostile to U.S. interests. While many of the agreements...are not as comprehensive as agreements to which the U.S. is a party, they nevertheless pose a considerable threat to our economic interests.25

Here we have not stateless transnationals running rampant all over the globe, but U.S. corporations appealing to the U.S. government to use its power and leverage to negotiate trade deals that benefit U.S. corporations against their competitor state's corporations. The U.S. is not just interested in figuring out how it can dominate the weaker players in the trading game like Mexico, but how they can compete more effectively with their peers, in particular the European Union and Japan. These developments are pushing the Bush Administration to secure the signing of the Free Trade Area of the Americas (FTAA)--a plan to expand NAFTA to the whole hemisphere by the year 2005. The FTAA could act as a counterweight to trade blocs such as the European Union, the South America trade bloc MERCOSUR and trade blocs involving various Asian countries.

The expansion of world trade and the growing economic interdependence of parts of the world, in other words, does not lessen regional rivalries and national conflicts, but exacerbates them, especially today, as the world economy begins an economic slide. As economic competition intensifies for world markets, conflicts between rival trading nations also heat up. The result is that free trade agreements become preferential deals around which various forces--private and state--maneuver to gain the greatest advantage over their competitors.

Citing the Clinton administration's efforts in 1993 to shore up the slumping aluminum industry in the U.S. by forming a cartel to help curtail production and boost prices, William Greider concludes that:

In sum, despite the reigning pieties, the global system could not properly be called a free-trade regime. When all of the contradictions, exceptions and purposeful evasions were taken into account, most of the world's trade was not a free exchange based on market prices. One way or the other, trade was massaged and regulated, managed explicitly by governments or internally by the multinational corporations or often by both in discreet collaboration...

Yet the conventional political discourse, especially in the U.S., insisted on ignoring the reality and portraying the world as marching progressively toward a more and more liberalized system.26

A supporter of capitalism but a critic of its "excesses," Edward Luttwack is even more blunt than Greider, emphasizing the kindred relationship between economic and military competition:

The paradox of a worsening atmosphere amidst the prosperous growth of ever more liberalized world commerce should not surprise. Commerce leads to interdependence, which does not guarantee harmony as its celebrants forever claim; on the contrary, it is an irritant...

War is thus truly different from commerce, but evidently not different enough. In particular, an action-reaction cycle of trade restrictions that evoke retaliation has a distinct resemblance to crisis escalation that can lead to outright war...

To be sure, many confidently believe that the economies of the major trading states are simply too interdependent to allow geo-economic adventures... Alas, the interdependence that grew so easily in the late Cold War era, when economic cooperation within each camp was the natural adjunct of strategic confrontation between them, guarantees nothing at all.

No two economies were more interdependent than the French and German in August 1914...27

In fact, the dismantling of the Cold War and the return to a multipolar world of competing "great powers" recalls the period prior to the First World War. Then, too, some argued that economic integration might bring an end to destructive economic and military conflicts. Reality quickly dispelled these views. This is not to say that the world is on the verge of a world war: far from it. However, while the U.S. retains (and strives to retain) its military dominance, the end of the Cold War and the rise of Japan and European economic powerhouses at least raises the future possibility of a realignment of economic and military power in which other powers assert more independent military role in word affairs. This is certainly the implication of Europe's plans to set up a rapid reaction force outside NATO--i.e. U.S.--control.

Conclusion

The arguments we have made here, that imperialism remains the central framework for understanding the character of globalization, is a crucial corrective to the idea that corporations have replaced, or are in the process of, replacing the state. For example, it might be tempting to see the WTO as some kind of supranational institution which is directly beholden to stateless multinationals. But this would be a completely mistaken view. Not only is the WTO made up of trade representatives from 140 states, it is the powerful states that call the shots. As Martin Khor explains,

[T]he GATT (the WTO's predecessor) and WTO have been dominated by a few major industrial countries. Often, these powerful countries negotiate and make decisions among themselves, and then embark on an exercise of winning over (sometimes through intense pressure) a select number of the more important or influential developing countries. Most WTO members may not be invited to these "informal meetings" and may not even know that these meetings are taking place, or what is happening there. When an agreement is reached among a relatively small group, the decisions are rather easy to pass through the various committees. 28

For all the talk of worldwide free trade, the WTO--and the proliferation of bilateral and regional trade deals over the last ten years--are not about free trade, but about trade advantage for the most powerful states and their transnational corporations. In the process, the sovereignty of weaker states may be trampled, but not that of the powerful states.

Such a view not only flies in the face of what institutions like the WTO are all about, as we have argued, but are in danger of feeding a kind of nationalism that calls upon people to rally around their "own" state. In America, where struggles against NAFTA and the FTAA need to be linked to opposition to American attempts to dominate Latin America and other parts of the world, such a view would set the movement back. When the U.S. government decides to honor a WTO ruling that guts environmental or social protection, we should be clear that this is a corporate attack on workers and the poor under the convenient cover of "globalization made us do it," not, as right-wing nationalist Pat Buchanan argues, America "surrendering" to foreigners.

Our task is to build a movement that unites workers and oppressed people's across borders, in order to challenge the priorities of world capitalism, not to fall into the nationalist trap of "defending" American sovereignty.

The alternative is not harking back to a (non-existent) golden age when states had sovereignty, and when there was a modicum of state intervention to ensure a social wage. These were policies adopted by the world's ruling classes on the basis of a sustained boom and in the wake of devastating crises and wars. They were policies designed to ensure the smooth functioning of capitalism. But they were policies born of economic prosperity. The crisis of the 1970s prompted ruling classes to search for ways to claw back the gains of workers' struggles and restore profitability on the backs of the world's poor and oppressed. These policies have continued even as capitalism restored growth in the 1980s and 1990s. Indeed, the boom of the 1990s was based in large part upon the savage reduction in workers' compensation and the social wage.

World capitalism today is still defined by the rivalry between states and by economic competition--if anything, globalization can be understood as the intensification of international competition. As in the past, economic competition and military conflict are not separate phenomena, but expressions of the system's central dynamic. There can be no purely national solutions to the crisis of international capital. The system is truly global; the response must also be. That is why Marx's slogan in the Communist Manifesto is more relevant than ever before: "The proletarians have nothing to lose but their chains. They have a world to win. Workers of all countries, unite!"29

29 Karl Marx and Frederick Engels, The Communist Manifesto (New York: International Publishers, 1994), p. 44.