The State and the Making of Global Capitalism

by Sam Gindin, Leo Panitch

How the state makes global capitalism and how global capitalism makes the state. The first in our series of articles on ‘Global Capitalism and the State’.

First published: 03 June, 2013 | Category: Corporate power, Economy, International, Philosophy and Theory, Politics, Vision/Strategy

The central theme of our book, The Making of Global Capitalism, is the role of states in the making of global capitalism, and especially the role of the American state as an informal empire in that making—and in superintending it to this day.

The question of the state’s relationship with capital remains an important—and still highly contested—one for scholars as well as activists.  In the work of most economists, capitalism is seen as virtually synonymous with markets.  Globalisation in this framework is essentially the geographic extension of competitive markets, a process dependent on the removal of state barriers to this, and the overcoming of distance through technology.  Political scientists, for their part, have usually understood that markets are not natural and had to be made, and that states are fundamental actors in this process, but they rarely probe deeply into the ways this process has been shaped by the intersections of capitalist social relations and the dynamics of capital accumulation. 

The mutual constitution of states, classes and markets has been the main focus, of course, of political economists working within a historical materialist framework.  But they have often been hampered by Marxism’s inclinations to analyse the trajectory of capitalism as derivative of abstract economic laws.[1]  The conceptual categories Marx developed to define the structural relationships and economic dynamics distinctive to capitalism can be enormously valuable, but only if they guide the understanding of the choices made, and the specific institutions created, by specific historical actors.  Building on earlier attempts to develop a theory of the capitalist state along these lines, it is this approach that guides our study of the role of the American state in the making of global capitalism.[2]

Politics and economy under capitalism

One of capitalism’s defining characteristics, compared with pre-capitalist societies, is the legal and organisational differentiation of state and economy.  This is not to say there was ever anything like a complete separation between the political and economic spheres of capitalism.  Indeed, as capitalism developed states became more involved in economic life than ever, especially in the establishment and administration of the juridical, regulatory and infrastructural framework in which private property, competition and contracts came to operate.  Capitalist states also were increasingly major actors in trying to contain capitalist crises, including as lenders of last resort.  Capitalism could not have developed and expanded unless states came to do these things.  Conversely, states became increasingly dependent on the success of capital accumulation for tax revenue and popular legitimacy. 

It is one thing to say that capitalism could not exist unless states did certain things, but what states do in practice, and how well they do them, is the outcome of complex relations between societal and state actors, the balance of class forces, and not least, the range and character of each state’s capacities.  Capitalist states have developed varying means of promoting and orchestrating capital accumulation, as well as anticipating future problems and containing them when they arise, and this has often been embodied in distinct institutions with specialised expertise.  It is in these terms that we should understand the ‘relative autonomy’ of capitalist states: not as being unconnected to capitalist classes, but rather in having autonomous capacities to act on behalf of the system as a whole.  In this respect, capitalists are less likely to be able to see the forest for the trees than officials and politicians whose responsibilities are of a different order from that of turning a profit for a firm.  But what these states can autonomously do, or do in response to societal pressures, is ultimately limited by their dependence on the success of capital accumulation.  It is above all in this sense that their autonomy is only relative.

The differentiation of state and economy eventually allowed for the organisation of class interests and their representation vis-à-vis opposing classes and the state.  As capitalists, farmers, and workers developed distinctive institutions, the arbitrary authority of states was constrained, but the capacities of states were at the same time generally enhanced.  One aspect of this was the establishment of the rule of law as a liberal political framework for property, competition and contracts.  Another was the establishment of specialised agencies to facilitate accumulation through regulating markets.  Yet another was the establishment of liberal democracy as the modal form of the capitalist state, although this was not realised in any stable fashion even in the advanced capitalist states until the second half of the twentieth century.

The imperialism-capitalism entanglement

The age-old history of empires as involving the political rule over extended territories was fundamentally affected by the differentiation between state and economy under capitalism.[3]  As part of the differentiation of economic and political spheres, particular capitalists extended their range of activity beyond the territorial boundaries of their respective states.  Insofar as states often encouraged and supported capitalists in doing this, there was always a specifically national dimension to processes of capitalist internationalisation.  And as the interaction with foreign capital affected domestic social forces, this in turn contributed to generating that combination of inside and outside pressures whereby states came to accept a certain responsibility for reproducing capitalism internationally.  It is mainly in this sense that we can properly speak of the ‘internationalisation of the state’.[4]

It is therefore wrong to assume an irresolvable contradiction between the international space of accumulation and the national space of states.  Rather, when looking at the role that states have always played on the international economic stage, we need to ask how far their activities have been consistent with extending capitalist markets internationally—and also consistent with the actions of other states.  The role of some states has been much greater than others in this respect, of course, and this cannot be analysed without taking into account the relationship between state and empire in capitalism. 

The analysis of the international dimension of capitalism, and the insight that the export of capital was transforming the role of the state in both the capital-exporting and importing countries was the most important contribution of theorists of imperialism writing at the beginning of the 20th century.  But the link these theorists made between the export of capital and the inter-imperial rivalry of those years was problematic, and would become even more so over the years from 1945 onwards.  The problem was not only that the classical theories of imperialism saw states as merely acting at the behest of their respective capitalist classes, and thus did not give sufficient weight to the role of pre-capitalist ruling classes in the inter-imperial rivalries of their own time.  It was also that they treated the export of capital itself as imperialist, and in doing so their theories did not really register the differentiation of the economic and political spheres in capitalism, and the significance of informal empire in this respect.  This was itself a product of the failure, as Colin Leys once noted, to ‘disentangle the concept of imperialism from the concept of capitalism.’[5]

In the ‘golden age’ after 1945 domestic markets were anything but saturated; the profits were realised through expanding working-class consumption, yet capital exports continued, driven by quite different factors, as the export of capital itself was transformed over the twentieth century in the context of the international integration of production through multinational corporations and the extensive development of international financial markets.[6]  In the passage from Britain’s only partially informal empire to the predominantly informal American empire something much more distinctive had emerged than Pax America replacing Pax Britannica.  The American state, in the very process of supporting the export of capital and the expansion of multinational corporations, increasingly took responsibility for creating the political and juridical conditions for the general extension and reproduction of capitalism internationally. 

This was not just a matter of promoting the international expansion of American MNCs.  That state actors explained their imperial role in terms of universal rule of law considerations was not mere dissembling, even if they always also cast an eye to whether this would benefit American capitalism.  As with the informal regional empire that the US established in its own hemisphere at the beginning of the twentieth century, a proper understanding of the informal global empire it established at mid-century requires a scale of analysis that can identify not only the domestic but also the international role of the American state in setting the conditions for capital accumulation.  It also requires a very different understanding of the roots of US empire than those advanced by critical historians who linked the US ‘policy too directly to its capitalists’ needs for exports due to over-accumulation at home (or even to businessmen’s belief in that need).[7]  It is incorrect to try to explain US imperial practices in aid of commercial interests merely in terms of capitalists imposing them on the American state.  The danger with this type of interpretation is that it exaggerates the extent to which capitalists’ consciousness of their interests was always so fixed and clear.  It also often leads to drawing far too rigid distinctions between internationally-oriented and domestically-oriented elements of the US capitalist class.  The tensions as well as synergies between the American state’s role vis a vis its own society and its growing responsibilities for facilitating capital accumulation in the world at large cannot be reduced to the lobbying of various ‘class fractions’.[8]  Most crucially, such an interpretation gives insufficient weight to the relative autonomy of the American state in developing policy and strategic directions and bringing about political compromises among diverse capitalist forces—and between them and other social forces. 

The internationalisation of the capitalist state

The most important novelty of the relationship between capitalism and imperialism that World War II set in train was that the densest imperial networks and institutional linkages, which had earlier run north-south between imperial states and their formal or informal colonies, now ran between the US and the other major capitalist states.  The creation of stable conditions for globalised capital accumulation, which Britain had been unable to achieve (indeed hardly even to contemplate) in the nineteenth century, was now accomplished by the American informal empire, which succeeded in integrating all the other capitalist powers into an effective system of coordination under its aegis.  The significance of this can only be fully appreciated with a proper understanding of what it meant in terms of the internationalisation of the capitalist state.  The creation of new international institutions in the postwar era did not amount to the beginnings of a proto-global state; these institutions were constituted by national states, and were themselves embedded in the new American empire.  National states remained primarily responsible for reorganising and reproducing their respective countries’ social relations and institutions of class, property, currency, contract and markets.  But they were now 'internationalised' in a different way than they had been before.  Now they too had to accept some responsibility for promoting the accumulation of capital in a manner that contributed to the America-led management of the international capitalist order.  The American state did not so much dictate this to other states; rather it ‘set the parameters within which [the others] determined their course of action.’[9]

Many US administrative, legal and constitutional forms were imitated in other states, but this was always mediated and refracted by the specific balance of social forces and institutional make-up of each of them.  Their politics were never a direct reflection of American economic penetration of their economies.  Nor did other states become merely passive actors in the American empire; ‘relative autonomy’ characterised the internationalisation of these state as well.  It was their relative autonomy within the American empire that allowed them to pressure the US governments to carry out their pre-eminent responsibilities in the management of global capitalism in ways that would not simply reflect the political and economic pressures to which they were subject at home.  But in doing so, they recognised, usually explicitly, that the US alone had the capacity to play the leading role in the expansion, protection and reproduction of capitalism. 

The interpenetration of capitals

As capitalist states increasingly sought to attract foreign investment, their policies became more oriented to offering equal treatment to all capitalists, independent of their nationality, which was precisely what the American state had pressed for.  MNCs came to depend on equal national treatment by many states; and these states were also internationalised in the sense of coming to take on more and more responsibility for creating and strengthening the conditions for non-discriminatory accumulation within their borders.  This eventually included legal and regulatory changes that facilitated the development of their own MNCs along the lines pioneered by the American state.  This did not spawn a ‘transnational capitalist class’, loosened from any state moorings or a supranational global state; ‘national capital’, in the shape of firms with dense historic linkages and distinct characteristics, did not disappear.[10]  Nor did economic competition between various centres of accumulation.  But the interpenetration of capitals did largely efface the interest and capacity of each ‘national bourgeoisie’ to act as the kind of coherent force that might have supported challenges to the informal American empire about to spawn.  Indeed they usually became hostile to the idea of any such challenge, not least because they saw the American state as the ultimate guarantor of capitalist interests globally.

The new relationship between capitalism and the informal US empire should not be understood in terms of the old ‘territorial logic of power’ long associated with imperial rule merely becoming fused with the ‘capitalist logic of power’ associated with ‘capital accumulation in space and time’.[11]  The US informal empire constituted a distinctly new form of political rule.  Instead of aiming for territorial expansion along the lines of the old empires, US military interventions abroad were primarily aimed at preventing the closure of particular places or whole regions of the globe to capital accumulation.  This was part of a larger remit of creating openings for or removing barriers for capital in general, not just for US capital.  The maintenance and indeed steady growth of US military installations around the globe after World War Two, mostly on the territory of independent states, needs to be seen in this light, rather than in terms of securing territorial space for the exclusive US use of natural resources and accumulation by US corporations.[12] Most important, however, and very different than the previous imperialisms based on territorial expansion, American state apparatuses like the Pentagon and CIA are actually much less important in the making and superintending global capitalism than the US Treasury and Federal Reserve.  It is the latter which play the key roles, not just in sponsoring the penetration and emulation of US economic practices abroad, but much more generally in promoting free capital movements and free trade while also trying to contain the international economic crises spawned by a global capitalism.

This article is adapted from the introduction to Leo Panitch and Sam Gindin’s The Making of Global Capitalism and is the first in our series, Global Capitalism and the State.

Leo Panitch is editor of the Socialist Register and distinguished research professor at York University, Canada.

Sam Gindin is the former Research Director of the Canadian Autoworkers Union and Packer Visiting Chair in Social Justice at York University.


[1] As in much of social science, there is an unfortunate tendency within Marxism to write theory in the present tense.  We are sympathetic to E.P. Thompson’s famous lament that Marx himself became for a period ‘caught into the trap’ baited by classical political economy’s search for ‘fixed and eternal laws independent of historical specificity.’ The Poverty of Theory and Other Essays, London: Merlin, 1978, esp.pp.251-3.

[2]  In light of widespread misguided assumptions—and often misrepresentations—of what is entailed in such a theory, it is important to stress that we are not proceeding from an ideal-typical notion of what capitalism requires, and then asserting in a functionalist manner that states must meet such requirements.  Nor do we see the relationship between policy-making and capital accumulation as a matter of capitalists telling state actors what to do.  For excellent discussions of the extent to which Miliband, Poulantzas and others who have sought to develop a theory of the capitalist state successfully avoided such problems, see especially Stanley Aronowitz and Peter Bratsis eds., Paradigm Lost: State Theory Reconsidered, Minneapolis: University of Minnesota Press, 2002; and Paul Wetherly et al., Class Power and the State in Capitalist Society, London: Palgrave Macmillan, 2008.

[3] Before the late eighteenth century all empires had combined economic control with military and political control.  It fell to Britain, where the separation of a capitalist economy from the capitalist state was most advanced, to develop a conception of empire based as much on economic expansion and influence—the ‘imperialism of free trade’—as on the military and political control of overseas territories.  This prototype of an ‘informal empire’ did not of course mark the end of territorial expansion, military conquest and colonialism.  Well into the twentieth century international capitalist competition was still accompanied by formal imperial rule, and a tendency to dangerous inter-imperial rivalry.  Nonetheless, by the late nineteenth century, even at the height of the ‘scramble’ to extend old-fashioned formal empires, the development of capitalism had gone so far that when capital expanded abroad it was increasingly looked after by other states that were themselves spawning capitalist social orders. 

[4] See Panitch, ‘Globalization and the State’, pp.69-71; as well as Robert Cox, Production, Power and World Order, New York: Columbia University Press, 1987, esp. pp.132-3; and Nicos Poulantzas, Classes in Contemporary Capitalism, London: NLB, 1974, esp. p.73. 

[5] Colin Leys, ‘Conflict and Convergence in Development Theory’, in W.  J.  Mommsen and J.  Osterhammel, eds., Imperialism and After, London: Allen and Unwin, 1986, p.322.  See also Norman Etherington, Theories of Imperialism: War, Conquest and Capital, London: Croom Helm, 1984.  The failure to make this distinction ensured that the words that opened Kautsky’s infamous essay in 1914—the one that so attracted Lenin’s ire—increasingly rang true: ‘First of all, we need to be clear what we understand from the term imperialism.  This word is used in every which way, but the more we discuss and speak about it the more communication and understanding becomes weakened.’ ‘Der Imperialismus’, Die Neue Ziet, Year 32, XXXII/2, 11 September 1914, p.908.

[6] The increasingly severe analytic problems with Hobson’s as well as the Marxist theories of imperialism gave rise by the 1970s to complaints that their association of imperialism with ‘an undifferentiated global product of a certain stage of capitalism’ reflected its lack of ‘any serious historical or sociological dimensions’.  Gareth Stedman Jones, ‘The Specificity of US Imperialism’, New Left Review, I/60, March-April 1970, p.60, n.  1.  Giovanni Arrighi went so far as to say that ‘by the end of the 60s, what had once been the pride of Marxism—the theory of imperialism—had become a tower of Babel, in which not even Marxists knew any longer how to find their way.’ Giovanni Arrighi, The Geometry of Imperialism, London: NLB, 1978, p.17.

[7] The classic study in this vein is William Appleman Williams, The Contours of American History, Chicago: Quadrangle, 1966. Andrew J. Bacevich embraced this interpretation in his American Empire: The Realities and Consequences of US Diplomacy, Cambridge, MA: Harvard University Press, 2002, even though it fails to register the small contribution that exports made to capital accumulation relative to the domestic economy at the time, and gives vastly disproportionate weight to the significance of US capitalist expansion in Central America at a time when California was barely yet a site of US capital accumulation. Others who have recently embraced this Open Door explanation of US foreign economic policy have acknowledged that ‘US economic well-being did not objectively depend on trade,’ but still insist that ‘policy makers in Washington believed that prosperity was tied to its exports abroad.’ Christopher Layne, The Peace of Illusions: American Grand Strategy from 1940 to the Present, Ithaca: Cornell University Press, 2006, p. 72. As Gabriel Kolko long ago pointed out, this interpretation suggests a kind of ‘transcendental false consciousness’ whereby capital and the state ‘failed to perceive where it was their main gains were to be made.’ But despite his insistence on the need for a more sophisticated explanation than ‘the specifi c needs of this or that business interest,’ Kolko unfortunately offered only an uncritical reference to the ‘general theory of the role of imperialism in resolving United States capitalism’s structural contradictions.’ Gabriel Kolko, Main Currents in Modern American History, New York: Harper & Row, 1976, p. 36.

[8] An insistent line of interpretation, originally advanced by radical scholars but today also embraced much more widely, has made this error in directly tracing US policy to the influence of ‘large capital-intensive corporations that looked to overseas markets and outward-looking investment banks’ (as opposed to ‘labour intensive industries that favoured economic nationalism’).  And if it is admitted, on this interpretation, that it is not quite correct to speak of these capitalist ‘dominant elites’ as ‘hijacking the state’, it is only because they allegedly ‘are the state.’ See Layne, The Peace of Illusions, esp. pp.200-201, who is explicitly drawing here on Tom Ferguson’s famous essay, ‘From Normalcy to New Deal’, International Organization, 38(1), Winter 1984.

[9] ‘Even when it did not speak first, the allies always had to figure America’s response to their actions.  This defining function was crucial.’ Geir Lundestad, The United States and Western Europe since 1945, Oxford: Oxford University Press, 2003, p.64.

[10] On the transnational capitalist class, see Leslie Sklair, The Transnational Capitalist Class, Oxford: Blackwell, 2001; William I.  Robinson, A Theory of Global Capitalism, Baltimore: Johns Hopkins University Press, and especially, Jonathan Nitzan and Shimshn Bichler, Capital as Power, New York: Routledge 2009.  Apart from Poulantzas’s penetrating theoretical critique of this in the 1970s in his Classes in Contemporary Capitalism, and the strong empirical refutation in Winfried Ruigrok and Rob van Tulder, The Logic of International Restructuring, London: Routledge, 1995, see the more recent analysis by Geoffery G.  Jones, which demonstrates how much, in the new millennium as before, ‘the influence of nationality on multinational corporations is still strong today.  The composition of boards of directors remains heavily biased toward home-country nationals, despite the fact that equity ownership of large corporations is now widely dispersed among countries… Today, technological advances may permit different parts of the value chain to operate in different places, companies may hold portfolios of brands with different national heritages, and leaders, shareholders, and customers may be dispersed.  Still, the nationality of a firm is rarely ambiguous.  It usually has a major influence on corporate strategy, and it seems to be growing in political importance.’ ‘The Rise of Corporate Nationality’, Harvard Business Review, October 2006, pp.20-22.  See the argument more fully in his ‘Nationality and Multinationals in Historical Perspective’, Geoffrey G.  Jones, Harvard Business School Working Paper, 06-052, 2005.

[11] See David Harvey, The New Imperialism, New York: Oxford University Press, 2003, pp.26-33. 

[12] Despite their contributions in detailing the extent of US foreign interventions and global military installations, many critics often fail to see the significance of this crucial point.  See, for instance, Noam Chomsky, Hegemony or Survival: America’s Quest for Global Dominance, New York: Henry Holt, 2004; Chalmers Johnson, The Sorrows of Empire: Militarism, Secrecy and the End of the Republic, New York: Metropolitan Books, 2004.

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