Zombie Capitalism Global Crisis and the Relevance of Marx

Every year UNCTAD provides a list of the top 100 multinationals and their "transnationality index" -the proportion of their sales, assets and investments which are located outside their "home" country. These figures are sometimes said to show how little multinationals depend on a national base. But in fact they can be looked at another way. In 2003 the top 50 multinationals still relied on their home base for over half their business. And the 20 with the highest ratios of foreign sales were mostly from small, open economies such as Canada, Australia and Switzerland, or are members of the EU such as Finland, France, the UK, Germany and Sweden whose sales are oriented to close neighbours. None of the US multinationals figured in the list of the most international global firms.20

Average Transnationality of the world's largest transnational corporations (TNCs) 2003

The proliferation of cross-border mergers did not mean that they represented the only, or even the dominant form of restructuring. They counted for only a quarter of all mergers21-and many were unsuccessful.22 And only a small portion of global investment was across national borders. Tim Koechlin showed that although the stock of American FDI had "grown quite dramatically", from "\$32 billion in 1960 to \$2,063 billion in 2004", this represented "a relatively small share of all US investment", with the ratio of foreign direct investment outflows to all investment at only 7.3 percent" .23 For manufacturing, the ratio was higher, at 20. 7 percent-"but was down on the figure of 35 .4 percent in 1994". 24 He concludes, "Although the investment process has become increasingly 'global' . . . capital accumulation remains an essentially national phenomenon". 25 What is more, foreign direct investment figures gave an exaggerated impression of the mobility of productive capacity, rather than of the ownership of it. UNCTAD figures bore out a point Riccardo Bellofiore made at the end of the 1990s. Foreign investment mostly involved buying up existing enterprises, not new ones, so that:

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FDI flows in manufacturing are dominated by mergers and acquisitions . . . rather than by the creation of new capacity: and a big share of FDI is in non-productive, speculative and financial ventures.26

Most multinationals concentrated their investments in a particular advanced industrial country and its neighbours, and then relied on the sheer scale of investment, research and development, and production there to provide an advantage over all competitors. The foreign investment that did take place was not necessarily "global" in its character. "Sixty-six percent of the output of US foreign afiliates" was "sold locally", that is, within the boundaries of the particular country in which a particular afiliate was based.27

This was a trend which broke with the predominantly national basis of production without, however, turning into the global production stereotype. A multinational could seek to overcome obstacles to exporting to a particular country by establishing plants inside its borders-in a pattern which Ruigrok and van Tulder called glocalisation.28 Even if it started off with "screwdriver plants" devoted simply to assembling components imported from the multinational's home country, it often ended up turning to local firms to provide components. The multinational gained because local firms effectively became its satellites, supplying it with resources and fighting for its interests against its local or regional competitors. It might even welcome protectionist measures by the state its subsidiary was in, since that would protect its sales there from international competitors.

Globalisation theorists failed to recognise such developments. Yet they often tried to bolster their own case by referring to investments like those of Japanese motor companies in the US and Britain which were precisely along these lines. Similarly, they stressed the "flexible production" characteristic, for instance, of part of the Italian knitwear industry, and "just in time" production methods pioneered in Japan as typical of globalisation, although, as Michael Mann quite correctly noted, both implied localised or regional, rather than global, production.29

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The "outsourcing" overseas by advanced country firms of particular parts of their production processes became an important phenomenon, but it was still a much more limited one than was widely believed. At the beginning of the 2000s, imported "material inputs" (including raw materials) accounted for 17.3 percent of total US output.3° Koechlin estimated that "outsourcing" accounted "for somewhat less than 4.8 percent of US gross domestic purchases and somewhat less than 9 percent of apparent consumption of manufactured goods" .31 Another study showed that the fall in "payroll employment in manufacturing" in the early 2000s had "not been caused by a flood of imports of either goods or services" but was:

primarily the result of inadequate growth of domestic demand in the presence of strong productivity growth . . . To the extent that trade did cause a loss of manufacturing jobs it was the weakness of US exports after 2000 and not imports that was responsible. 32

The diferent configurations of global capital

Not only did the popular globalisation accounts overstate the degree of mobility of capital, they also provided a much distorted view of what that mobility involves. Alan M Rugman pointed out that of the big multinationals:

Very few are "global" firms, with a "global" strategy, defined as the ability to sell the same products and/or services around the world. Instead, nearly all the top 500 firms are regionally based in their home region of the "triad" of North America, the EU, or Asia . . . 33

Half of most global firms were still operating mainly in their home region market at the beginning of the 2000s-including Vivendi, Pernod Ricard, Thomson Corporation, Stora Enso and Akzo Nobel, Volvo, ABB and Philips. Only six multinationals operated in anything like a balanced way across at least three continents-Nestle, Holcim, Roche, Unilever, Diageo and British American Tobacco.34 Most foreign-owned firms operating in European Union countries were based in other EU countries, where the predominant form of multinational ownership was "regional'', not global, with "US-controlled firms responsible for only 4.5 percent of European value added" .35

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Research economists Georgios Chortareas and Theodore Pelagidis concluded in 2004:

The increase in international trade flows is predominantly confined within the three developed trade blocs of the global economy (the USA, the EU, Asia-Japan). A large part of the world continues to be excluded from the trade boom. The emerging reality is more a process of deepening regional integration (regionalisation) of particular groups/blocs of countries rather than a global increase in cross-border trade flows and production interdependence. 36

"Trade'', they argued, "has not come to be spread over a wider range of countries, even compared with the past. It is enough to recall that developed countries' imports from developing countries are still only about 2 percent of the combined GDP of the OECD".37 Their one exception was East Asia, which will have grown more important after their research at the turn of the century-by 2005 Chinese exports had expanded to reach to over 7 percent of the global total.

Investment flows were similarly concentrated within the "triad" of North America, Europe and Japan. In 2002-4 FDI flows into the European Union averaged about \$300 billion a year. The total for the rest of the world-the "developing countries"-was only \$180 billion, of which China (including Hong Kong) took two fifths, and Brazil and Mexico a fifth. Some 89 percent of the cumulative stock of FDI worldwide in 2004 was in the developed economies (roughly the same proportion as in 1990), and two thirds of that was in Europe. 38

The pattern was not one of capital flowing effortlessly over a homogenous worldwide landscape. It was "lumpy", concentrated in some countries and regions, in a way that was not fully grasped by either the crude globalisation view, by interpretations that stressed regional blocs, or by those who still spoke solely in terms of national economies. The empirical material could be looked at in different ways-just as a bottle can be seen as half full or half empty. But the reality of capitalism was that it could not be reduced to any one of these facets.

Different firms operated at different levels. Some, the majority in simple numerical terms, still operated within national economies from which they put out tentacles to see what they could gain by buying and selling to their neighbours. Others, smaller in number but enormously powerful, increasingly operated on a regional basis and reached out to pick up what they could elsewhere in the world. And a small minority saw their future in genuinely global terms. As capitals with each perspective bought and sold, manoeuvred to expand markets, searched for cheaper inputs and for more profitable places for investment, they both influenced each other and tripped over each other. The outcome was not some new model, but an ever shifting, kaleidoscopic pattern which was upset every time it seemed about to attain some fixity. "All that is solid " did " melt into air" as Marx had put it-but not in the way the crude globalisation theory held. For capital's old companion, the state, entered into the process at every point.

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States and capitals in the era of "globalisation"

All the advanced capitalist states still maintain historically very high levels of state expenditure, only surpassed historically during the time of total war. And although business often complains about the level of taxation, it never seriously suggests going back to the level of expenditure of a century ago. The reason is that capitals today, far from not needing states, require them as much as-if not more than-ever before.

They need them first because the continued concentration of capitals, in particular geographical locations, necessitates facilities that are not automatically provided by the operation of the market: police; judicial systems; a framework to limit the defrauding of some capitals by others; at least minimal regulation of the credit system; the provision of a more or less stable currency. Along with these they also need some of the functions fulfilled by the state during the period of the state-directed economy: regulation of the labour market; ensuring the reproduction of the next generation of labour power; the provision of an infrastructure for transport, communications, water and power; the supply of military contracts. Even the big multinationals, with half or more of their production and sales located abroad, still rely for much of their basic profitability on their operations in their home base, and therefore on what a state can provide for them.

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Along with these functions there is continued massive support by any state for its capital's domestic accumulation-and this was true long before the most recent turn to Keynesianism. So the Pentagon played a key role in resuscitating the American microchip industry in the late 1980s by putting pressure on firms to merge, to invest and to innovate39-and received strong industrial support:

"In today's global economy some central vision is required", Hackworth of Cirus Logic explained. "Somebody has to have an industrial strategy for this country", agreed LSI Logic's Corrigan.40

The result of that strategy was that by the end of the 1 990s the world's top semiconductor company was no longer NEC (Japanese) but Intel (American), with Motorola and Texas Instruments (both American) in third and fifth position. The US state also managed to bring about a similar rationalisation of the US aerospace industry, culminating in the merger of Boeing and McDonnell Douglas into a firm that controlled 60 percent of global civil aircraft sales, and a turnover in military aircraft production twice as great as the whole of the European industry. As the New York Times put it, "President Bill Clinton's administration" had "largely succeeded in turning America's military contractors into instruments of making the economy more competitive globally" .41

The internationalisation of firms' operations, far from leading to less dependence on state support, increases it in one very important respect. They need protection for their global interests. A whole range of things become more important to them than in the early post-war decades: trade negotiations for access to new markets; exchange rates between currencies; the allocation of contracts by foreign governments; protection against expropriation of foreign assets; the defence of intellectual property rights; enforcement of foreign debt repayments. There is no world state to undertake such tasks. And so the power of any national state to force others to respect the interests of capitals based within it has become more important, not less.

Floating exchange rates between major currencies mean that the capacity of a government to influence the value of its own currency can have an enormous effect on the international competitiveness of firms operating within its boundaries. This was shown, for instance, by the "Plaza Accord" of 1985, when the US persuaded the European and Japanese governments to cooperate with it in forcing up the value of the yen against the dollar. In the aftermath sales of US firms internationally "grew at their fastest rate during the postwar period, shooting up at an annual rate of 10.6 percent between 1985 and 1990" .42 It was shown again when the political decision of the government brought to office in the aftermath of the Argentinian uprising of December 2001 to devalue the currency by 75 percent gave a considerable boost to the industrial and agrarian capitals based in the country.43

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A change in the exchange rate alters the amount of global value which a firm operating within a national economy gets in return for the labour it has used in producing commodities. As Dick Bryan has put it:

The exchange rate is a critical determinant of the distribution of surplus value amongst capitals . . . Because nation-states are deemed responsible for the global commensurability of "their" currency, globalisation . . .is not about eradicating the national dimension of accumulation. Indeed, globalisation is not even about the national dimension "hanging on" in a process of slow dissolution. Global accumulation is actually reproducing the national dimension, albeit in ways different to past eras.44

Again the same centrality of states is shown in international trade negotiations conducted through the WTO. They gather as the representatives of the capitals clustered together within their borders. Different firms have different interests and will look to the individual states over which they have influence to achieve these. This is just as true of firms who look to establishing global domination through free trade as of those with protectionist inclinations. All are dependent upon "their" state to persuade other states to let them get their way. So the US state is an essential weapon for firms like Microsoft, GlaxoSmithKlein or Monsanto in getting the enormous royalty payments that accrue from world recognition of their intellectual copyrights. Likewise the financial power it exercises through the IMF and the World Bank has safeguarded the foreign loans made by American banks-and has helped US-based industrial corporations gain from the crises facing smaller states, as when Ford and General Motors gained control of two of the Korean car companies at the time of the Asian crisis.45

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Neither do international mergers show that the importance of states is declining. Part of their rationale is for a multinational to be able to extend its influence from its home state to other states. US and Japanese firms invest in West European countries so as to be able to "jump" national boundaries and so influence the policy of these states and the European Community from within: hence the spectacle in the early 1990s of US multinationals like Ford and General Motors lobbying European governments for measures to restrict the import of Japanese cars; hence also the sight of Japanese car firms negotiating for subsidies from the British state to set up car assembly plants. The giant company does not end its link with the state, but rather multiplies the number of states-and national capitalist networks-to which it is linked. The continued importance of such connections is shown most vividly during financial and economic crises. For states alone can marshal the resources to stop a giant firm or bank going bust-and pulling down with it whole industrial or financial complexes. The history of such crises since the early 1970s has been a history of states bailing out stricken corporations or putting pressure on some firms for "lifeboat operations" to keep others afloat. Because the period of globalisation has been one of much greater crises than the post-war decades, the reliance of corporations on governments for such rescues has been much greater. As we will see in the next chapter, the transformation of the credit crunch of 2007 into the great banking crash of 2008 showed how great that reliance had become. The overall conclusion has to be that corporations, whether multinational or other, do not regard a state which will defend their interests as some afterthought based on nostalgia for the past, but an urgent necessity flowing from their present day com petitive situation. The successor to the state capitalism of the mid-20th century has not been some non-state capitalism but rather a system in which capitals rely on "their" state as much as ever, but try to spread out beyond it to form links with capitals tied to other states. In the process, the system as a whole has become more chaotic. It is not as if individual firms have simple demands that they merely put on individual states. As a firm operates internationally, one of its divisions can establish relations with a particular state and its associated complex of capitals, even while other divisions of the same firm can be establishing other relations

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with other states and their complexes of capital. And particular state apparatuses can lose a lot of cohesion as their parts try to cope with the demands of different, competing capitals. The global agenda, the regional agenda, the national agenda and, in the cases of the larger states, the sub-national agenda (of particular localised geographical complexes of capital) clash with each other, producing frictions-on occasions deep schisms-within the national political-economic structure. This was what occurred during the very long crisis inside Britain's traditional ruling class party, the Tories, through the 1990s and early 2000s: its feuds reflected a clash between those who saw British capitalism's future as tied to the US and those who saw it as dependent on integration into Europe (a clash which itself reflected British capitalism's position having the majority of its trade with Europe, but half its overseas investment in the US).

Those who see the national states as archaic hangovers from the past often speak of the emergence of an "international capitalist class" which will have as its correlate an "international capitalist state" .46 They fail to take seriously Marx's point that once "it is no longer a question of sharing profits, but of sharing losses . . . practical brotherhood of the capitalist class . . . transforms itself into a fight of hostile brothers", the outcome of which is "decided by power and craftiness".47 And when it comes to the use of power, the national state is an instrument ready to hand. Interstate conflict, to a lesser or greater degree, is an inevitable outcome once economic competition becomes a matter of life and death for giant corporations. This is just as true today as in the time of Lenin and Bukharin, even if the interconnectedness of national, regional and global circuits of capital accumulation impacts on how the instrument is used.

Such applications of pressure by states on other states still requires the deployment of large "bodies of armed men", backed up by prodigious expenditure on military hardware-alongside such "non-violent" methods as economic aid, trade embargoes, offers of privileged trading relationships and crude bribery. Much of the time the role can be passive rather than active. The force that sustains a certain level of influence does not need to be used so long as no one dares to challenge it-as with the Mutually Assured Destruction (MAD) doctrine between the USSR and the US which prevented either moving into the other's European spheres of influence during the Cold War. Again force can play an indirect rather than a direct role as with the implicit US threat to the West European powers and Japan not to help them militarily during the Cold War years unless they acceded to US objectives. But the violence of the state remained a vital background factor in such cases. In this lies the continuity with the imperialism analysed by Lenin and Bukharin. Even today the rulers of Russia, China, India, Pakistan and North Korea-and for that matter Britain, France and the US-see possession of nuclear weapons as the ultimate defence against enemies.

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The interaction between the great powers is not the peaceful concert of nations dreamt of by certain apostles of neoliberalism and free trade. There are contradictory interests, with military force a weapon of last resort for dealing with them. But there is still a difference with the first four decades of the 20th century. These culminated in wars which ravaged the heartlands of the great powers. Tensions since 1945 have led to massive accumulations of arms that could potentially be unleashed against the heartlands. But hot wars have been fought outside them, usually in the Third World.

One reason for this has been the "deterrent" effect, the fear that waging war on a nuclear power will lead to destruction of the whole domestic economy as well as most of its people. Another has been the very interpenetration of the advanced capitalist economies that puts pressure on states to exercise power outside their own boundaries. Few capitalists want their national state to destroy huge chunks of their property in other states-and most of it will be in other advanced capitalist countries.

This does not rule out war completely. The capitalist economy was highly internationalised in 1 9 14, but this did not prevent allout war. Again, in 1941, the presence of Ford factories and Coca-Cola outlets in Germany did not stop a US declaration of war after Pearl Harbor. But it does provide them with an incentive to avoid such conflicts if they can-and to settle their diferences in less industrialised parts of the world. Hence the years since 1945 have been marked by war after war, but away from Western Europe, North America and Japan. And often the wars have been "proxy wars" involving local regimes to a greater or lesser extent beholden to, but not completely dependent on, particular great powers.

This was the logic which led the US in the 1 980s to give tacit support to Iraq in its long war against Iran and to provide modern weaponry to the Mujahadin fighting the Russian occupation of

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