I was reading William Robinson’s brilliant A Theory of Global Capitalism today and couldn’t help but be struck by his incredible prescience in describing the present status of the Transnational State (TNS). I have already addressed Robinson’s theory of the Transnational Capitalist Class (TCC) in an earlier post, and you can think of the TNS as complementing the TCC in establishing its rule. The two work together to form an “extended state” that manages global capitalism and ensures its continued expansion.
Since the dawn of globalization and the concurrent rise of neoliberalism in the 1970s nation-states have become increasingly integrated into a TNS that is comprised of organizations such as the IMF, the WTO, the World Bank, the EU, the UN, the Trilateral Commission, the World Economic Forum, the International Chamber of Commerce, the G8 and G20, APEC, NAFTA, and other such groups. Some of these organizations predate the neoliberal era, and fulfilled quite different roles during the Fordist-Keynesian era that preceded it, however like the nation states that created them they underwent a process of co-evolution with the TCC that lead to their redirection towards the purpose of ensuring the stability and expansion of a global capitalism based on transnational production. The IMF’s neoliberal restructuring plans are representative of the sort of role the TNS plays, disciplining individual nation states into imposing austerity programs upon their populations in order to increase capital mobility (by removing legislative barriers to trade and capital flow) and rates of capitalist exploitation (by driving down wages and eliminating social welfare programs). The nation-state is not annihilated under this new regime, but instead holds a certain amount of residual power both, because of the legitimacy it holds as the seat of “democracy” and the object of nationalist attachments, and because the consolidation of the TNS remains an incomplete and contradictory process that is resisted by both the unincorporated remnants of national capitalist classes and the oppressed popular classes of the world, who suffer under the neoliberal TCC/TNS agenda.
It is this incomplete and contradictory character of the TNS that has been put on display during the Eurozone crisis, and is at least partially the cause of the rudderless response on the part of the TCC. As Robinson writes:
The TNS, I have emphasized does not yet constitute a centralized global state, and formal political authority remains to a considerable extent fragmented, and fragmented unevenly, among weaker and stronger national states. This peculiar institutional structure is a historical contradiction of the global capitalist system. It presents transnational elites with the possibility, as well as the need, to influence a multitude of national states. State managers are exposed to multiple and contradictory pressures, including distinct sets of local and transnational demands. National states are bureaucratic apparatuses operating according to standard procedures and established routines. They are subject to ongoing instrumental pressures from a variety of sectors. State managers may respond to the agenda of a transnational elite, but they must simultaneously sustain legitimacy, or at least attempt to, among nation-based electorates and often develop contradictory strategies and legitimation discourses. These multifarious processes can produce confusing and unpredictable behavior on the part of policymakers within states, even seemingly ‘schizoid’ conduct as the enactment of protectionist measures in one area simultaneous to liberalization in other areas.
Much of the tangled web of the Eurozone crisis can be seen through this lens. To begin with, the euro itself is a product of these contradictions. As Paul Krugman as repeatedly noted, its structure is a mess from an economic policy standpoint, conceived with what Krugman calls “magical thinking.” Krugman describes one of the central problems with the euro as follows:
…when the single European currency was first proposed, an obvious question was whether it would work as well as the dollar does here in America. And the answer, clearly, was no — for exactly the reasons the Ireland-Nevada comparison illustrates. Europe isn’t fiscally integrated: German taxpayers don’t automatically pick up part of the tab for Greek pensions or Irish bank bailouts. And while Europeans have the legal right to move freely in search of jobs, in practice imperfect cultural integration — above all, the lack of a common language — makes workers less geographically mobile than their American counterparts.
As an economic policy the euro was clearly a misadventure, however it is easy to see why the creation of the euro made a certain amount of sense for transnational elites (Krugman exempted) who were engaging in a project of TNS formation. The formation of the euro did transfer a considerable amount of power to the transnational institutions of the EU and the ECB, as has been made plainly evident in their co-operation with the IMF to form an austerity dispensing troika. That the theory of TNS formation is not a conspiracy theory should be plainly obvious in the confused political events of the day, where TNS formation has placed considerable constraints on the TCC, leading to seemingly irresolvable problems. For example the debt-afflicted nations of the EU are unable to debase their currency because they do not have control over the ECB (that power rests with a combination of TCC/TNS elites and the German ruling class, which has no interest in harming its own economy with a change in currency value) this means that their only option for capitalist “recovery” is a brutal program of austerity implemented at the behest of the Troika. Why this is hardly an ideal situation for TCC/TNS elites should be fairly obvious.
First of all the imposition of the austerity program, while it does have the “benefit” of potentially crushing working class power, also considerably delegitimates the TNS formation project and raises the specter of organized working class retaliation. Second, continued working class resistance induces paralysis in the economic system as the prospects of the austerity program’s implementation remain up in the air. National elites can seek legitimation by at least partially siding with popular forces, leveraging those parts of the state that have not yet been integrated into the TNS in order to hold the TCC hostage. This has particularly been evident in the Greek response to austerity, where Prime Minister George Papandreou threatened to put the austerity program to a referendum and forced the troika’s hand into conducting an coup d’etat that replaced both him and Italian President Silvio Burlesconi with more reliable TNS “technocrats.” Papandreou was hardly an anti-globalist, but his position as Prime Minister put him in conflict with the TNS troika. The situation in Greece continues to be tense, with some indications of the possibility of an eruption into working class revolution. It is not in Greece alone that working class resistance has been aroused, with strikes evident across Southern Europe, and a general resentment among Germans arising to the prospect of bailing out “foreigners.” While the German response has hardly been progressive, it has paralyzed the TNS response to the crisis and created a great deal of tension amongst the TNS itself. All of these outcomes are clearly not to the liking of the TCC, with a great deal of fretting evident amongst its media organs (Such as the Economist and the BBC World Service) and even some open statements of dissent by the IMF against the EU and ECB’s austerity-mania.
What would an ideal response to the crisis look like for the TCC? One can imagine two scenarios. First let us imagine that the euro was not implemented and the countries of Europe had independent currencies. This would in itself have prevented much of the crisis from occurring in the way it did because it would have A) Prevented the economic imbalances that German currency manipulation caused and B) Prevented the Greek borrowing spree (more here) but let us assume that the same crisis confronted a euro-free Europe. The root cause of the crisis is of course not simply that the “PIIGS” countries owe a great deal of money, but that they owe this money to banks located in more advanced capitalist countries (For example Greece owes much of its national debt to German banks) in this case the afflicted countries would have devalued their currencies along with the imposition of some kind of TNS imposed austerity program. This would have allowed them to export their way out of the problem, and allow them to service the debts they owed to the foreign banks. In this case: A) The IMF would not need to ask Germany for unpopular bailout funds B) Popular resistance would be greatly reduced C) TNS legitimacy would remain higher as the problem could more easily be explained away as endemic to Southern Europe and of little global significance (As was done with the “Asian Flu” crisis of 1997).
What about if the Euro was implemented but the TNS was given free reign to do as it pleased? First of all the EU would command the ECB to lower the value of the Euro. Then a program of European political and fiscal integration would be implemented which would put Europe under the control of a centralized and coherent TNS run by an unelected technocratic oligarchy comprised of members of the TCC. Internal redistribution programs would be used to make the necessary fiscal adjustments within the union in order to avoid mass working class action (perhaps including even some stimulus spending) and European capitalism would recover. This has more or less been the program that Paul Krugman has advocated (with a more democratic veneer), and the TNS has attempted to implement something along these lines, but it has been constrained both by its membership’s own neoliberal dogma, the resistance of nation-states, and the European working class.
Clearly both of these scenarios would be preferable for the Davos jet set, but the reality is quite different. This is largely a crisis of the TCC/TNS’ own making, and it shows that they are neither omnipotent, nor omniscient. The EU is arguably the leading organ of TNS formation (insofar as it incorporates the greatest number of functions traditionally fulfilled by nation-states), and its fate will have considerable implications for global capitalism. It remains to be seen what will come of it.