The Reform of the State

The Reform of the State:

Global Capital and the National State

John Holloway*

1. What state?

This article grows out of the experience of teaching a course on 'The Crisis of the Welfare State' in the Maestría de Ciencias Sociales in FLACSO (Mexico). To talk about the crisis of 'the welfare state' or the reform of 'the state' in an international setting immediately raises the question of 'which state? where?' To someone who has lived most of his life in Europe, there is an additional problem: of what relevance are ideas developed in Europe about 'the state' to people whose main point of reference is the Paraguayan, Bolivian or Argentinian state? The answer can only lie through some concept of the fragmentation of a united world. This article is an attempt to develop that point.

2. The state

The very concept of the 'reform of the state' (or the 'crisis of the welfare state') points to the fact that we are identifying something common in the development of different states, and therefore proclaiming that an analysis oriented to one particular state is insufficient. The states appear to be quite distinct, separate entities, and yet we speak of the reform of 'the state' or the crisis of 'the state' as though there were just one state, assuming some sort of unity between that which appears to be separate. How can we understand the relation between the development of different states as a unity of the separate, the unity-in-separation/ separation-in-unity of 'the state' and the multiplicity of different states?

In the tradition of political science, the state is taken as a basic, and largely unquestioned, category. The overwhelming majority of work in the discipline takes one particular state as its almost exclusive framework, analysing political developments as though they could be understood in purely national terms. This is particularly true of work in the United States and Europe, where theorists still wallow in the myth of national self-sufficiency: for example, it has been common, on both left and right, to analyse 'Thatcherism' or 'Reaganism' as purely national phenomena, rather than as part of a global shift in the relation between the state and capital. In Latin America people have been far more conscious of the world context within which the current changes are taking place, but there is still a sense in which the unquestioned category of 'the state' restricts and defines discussion.

If the state is taken as the starting point, then the world (in so far as it appears at all) appears as the sum of nation-states. Trends or developments which go beyond the borders of one state are discussed either in terms of inter-state relations (as in the tradition of the 'sub-discipline' of 'international relations') or in terms of analogy (as in the 'sub-discipline' of 'comparative politics'). Both start not from a concept of the unity of nation states but from their separation: common trends can be understood only as part of the inter-state network of power relations exercised either directly between states or through institutions such as the International Monetary Fund; or else in terms of similarities between states in ideas, political institutions or social structures - as in the currently influential regulation theory, with its nationally defined concepts of Fordism and post-Fordism.

Certainly inter-state pressures, pressures from international organisations, and institutional and theoretical fashions play an important role in shaping the development of the state, yet they are insufficient to explain the depth and the global dimensions of the changes currently taking place. To explain the changes in terms of pressure from the IMF, for example, simply throws the question to a different level: what lies behind the policy-orientation and influence of the IMF? Similarly, to explain the changes in terms of the influence of neo-liberal thought simply raises the question of why neo-liberal thought should have gained such influence in different countries at this particular time. Comparative analyses which focus on the occurrence of similar socio-economic changes in the different countries, as in the regulationist analysis of Fordism, take us deeper, but the analogies, although suggestive, tend to be sketchy and superficial (Clarke 1988/1991). It would appear that to reach a satisfactory understanding of the changes taking place at the moment we need to go beyond the category of 'the state', or rather we need to go beyond the separateness of the different states to find a way of discussing their unity.

Here, dependency theory offers itself as an attractive alternative, in so far as it emphasises the unitary character of the world, insisting on the importance of understanding the actions of particular states in the context of the bipolar relationship between centre and periphery, the periphery being subject to exploitation by the centre. Here there is a concept of the unity of the separate states, in so far as all are elements of a bipolar world. However, in so far as the 'centre' and the 'periphery' are understood as the 'central states' and the 'peripheral states', the analysis remains very state-oriented. In this sense it is closely related to the tradition of international relations: although the emphasis is on the primacy of the world system over particular states, the world system is understood basically as an international state system, with the central states as the dominant actors, and with the only possible path out of dependence lying through the action of peripheral states (see Dabat (1992) for a similar critique). As in the mainstream tradition, the state defines a distinction between internal and external, the difference being that in dependency theory, the emphasis (in relation to the dependent states) is very much on the external, rather than the internal determinants of state action. Developments such as the state reforms being carried out in the peripheral states can, in this perspective, be understood only in terms of the external constraints arising from the centre-periphery relationship, but there is no concept which allows us to understand the dynamic of that relationship.

3. The State as a Form of Social Relations

Each state proclaims its own separateness from other states, its own national sovereignty. In order to understand that which allows us to speak of the crisis or reform of 'the state' as though there were only one state, we need to soften that separateness, to dissolve the state as a category.

To dissolve the state as a category means to understand the state not as a thing in itself, but as a social form, a form of social relations. Just as in physics we have come to accept that, despite appearances, there are no absolute separations, that energy can be transformed into mass and mass into energy, so, in society too there are no absolute separations, no hard categories. To think scientifically is to dissolve the categories of thought, to understand all social phenomena as precisely that, as forms of social relations. Social relations, relations between people, are fluid, unpredictable, unstable, often passionate, but they rigidify into certain forms, forms which appear to acquire their own autonomy, their own dynamic, forms which are crucial for the stability of society. The different academic disciplines take these forms (the state, money, the family) as given and so contribute to their apparent solidity, and hence to the stability of capitalist society. To think scientifically is to criticise the disciplines, to dissolve these forms, to understand them as forms; to act freely is to destroy these forms.

The state, then, is a rigidified (or 'fetishised', to borrow the term used by Marx) form of social relations. It is a relation between people which does not appear to be a relation between people, a social relation which exists in the form of something external to social relations. This is the starting point for understanding the unity between states: all are rigidified, apparently autonomous forms of social relations.

But why do social relations rigidify in this way and how does that help us to understand the development of the state? This was the question posed by the so-called 'state derivation debate', a slightly peculiar but very important discussion which spread from West Germany to other countries during the 1970s1. The debate was peculiar in being conducted in extremely abstract language, and often without making explicit the political and theoretical implications of the argument. The obscurity of the language used and the fact that the participants often did not develop (or were not aware of) the implications of the debate left the discussion open to being misunderstood, and the approach has often been dismissed as an 'economic' theory of the state, or as a 'capital-logic' approach which seeks to understand political development as a functionalist expression of the logic of capital. While these criticisms can fairly be made of some of the contributions, the importance of the debate as a whole lay in the fact that it provided a basis for breaking away from the economic determinism and the functionalism which has marred so many of the discussions of the relation between the state and capitalist society, and for discussing the state as an element or, better, moment of the totality of the social relations of capitalist society.

The focus of the debate on the state as a particular form of social relations is the crucial break with the economic determinism implied for example by the base-superstructure model (and its structuralist variants). In the base-superstructure model, the economic base determines (in the last instance, of course) what the state does, the functions of the state. The focus on the functions of the state takes the existence of the state for granted: there is no room in the base-superstructure model to ask about the form of the state, to ask why, in the first place, social relations should rigidify into the apparently autonomous form of the state. To ask about the form of the state is to raise the question of its historical specificity: the existence of the state as a thing separated from society is peculiar to capitalist society, as is the existence of the 'economic' as something distinct from overtly coercive class relations (Gerstenberger 1990). The question then is not: how does the economic determine the political superstructure? Rather, it is: what is peculiar about the social relations of capitalism that gives rise to the rigidification (or particularisation) of social relations in the form of the state2? The corollary of this is the question: what is it that gives rise to the constitution of the economic and the political as distinct moments of the same social relations? The answer is surely that there is something distinctive about the social antagonism on which capitalism (like any class society) is based. Under capitalism, social antagonism (the relation between classes) is based on a form of exploitation which takes place not openly but through the 'free' sale and purchase of labour power as a commodity on the market. This form of class relation pre-supposes a separation between the immediate process of exploitation, which is based on the 'freedom' of labour, and the process of maintaining order in an exploitative society, which implies the possibility of coercion (cf. Hirsch 1974/1978).

Seeing the state as a form of social relations obviously means that the development of the state can only be understood as a moment of the development of the totality of social relations: it is a part of the antagonistic and crisis-ridden development of capitalist society. As a form of capitalist social relations, its existence depends on the reproduction of those relations: it is therefore not just a state in a capitalist society, but a capitalist state, since its own continued existence is tied to the promotion of the reproduction of capitalist social relations as a whole. The fact that it exists as a particular or rigidified form of social relations means, however, that the relation between the state and the reproduction of capitalism is a complex one: it cannot be assumed, in functionalist fashion, either that everything that the state does will necessarily be in the best interests of capital, nor that the state can achieve what is necessary to secure the reproduction of capitalist society. The relation between the state and the reproduction of capitalist social relations is one of trial and error.

To speak of the state as a rigidified form of social relations is to speak both of its separation from, and its unity with, society. The separation or rigidification (or fetishisation) is a process constantly repeated3. The existence of the state implies a constant process of separating off certain aspects of social relations and defining them as 'political', and hence as separate from 'the economic'. The antagonism on which society is based is thus fragmented: struggles are channelled into political and economic forms, neither of which leaves room for raising questions about the structure of society as a whole. Venezuela is an obvious example at the moment, where the stability of the existing society depends very much on being able to channel social discontent into the established procedures of the political system, on being able to impose certain definitions on an ill-defined rejection of the existing order. This process of imposing definitions on social struggles is at the same time a process of self-definition by the state: as a rigidified form of social relations, the state is at the same time a process of rigidifying social relations, and it is through this process that the state is constantly reconstituted as an instance separate from society (Holloway 1980/1991, 1992).

4. National States as Forms of the Global Totality of Social Relations

'The state' is thus doubly dissolved: it is not a structure but a form of social relations; it is not a totally fetishised form of social relations but a process of forming (fetishising) social relations (and hence a constant process of self-constitution). But the discussion is still at the level of 'the state': nothing has yet been said of the fact that 'the state' is not one state but a multiplicity of states. As otherwise sympathetic critics of the 'state derivation' approach have pointed out (Barker 1978/1991, von Braunmühl 1974, 1978), the debate "treats the state as if it existed only in the singular. Capitalism, however, is a world system of states, and the form that the capitalist state takes is the nation-state form" (Barker 1978/1991, 204).

At one level, this criticism is misdirected, because the state derivation debate was concerned not with the understanding of a particular state, but rather with the understanding of 'statehood' or, better, 'the political'. The derivation of 'the political' from the nature of capitalist social relations abstracted from the existence of 'the state' only in the form of a multiplicity of states. In the context of analysing the general relation between state and society, it was, as Picciotto points out, "convenient to assume a correlation between the society and the classes within it and the state within that society"4. Yet, convenient or not, this point was never made clear in the debate, and the result was a serious confusion between 'the state' in the sense of 'the political' (henceforward referred to simply as 'the political') and 'the state' in the sense of the Mexican, Argentinian or German state (henceforward referred to as 'the national state')5. This led to an impoverishment of the concept of 'the political', and it also contributed to some of the difficulties in carrying the debate further once the general theoretical argument had been made.

What are the implications of opening up this distinction between the political and the national state? The political, it was seen, is a moment of the totality of capitalist social relations. Once the constraints of state-oriented thought are abandoned, it is clear that the 'totality of social relations' can only be understood as a global (world-wide) totality. The global nature of society is not the result of the recent 'internationalisation' of capital (a concept which implies a moving out from a historically and logically prior national society) but is inherent in the nature of capitalism from the beginning (cf. von Braunmühl 1978; Clarke 1991; Picciotto 1985/1991). Relations between workers and employers, between producers and consumers, between financiers and industrialists, all transcend national frontiers. Capital is inherently a global relation.

The political, then, is a moment of a global relation, but it is expressed not in the existence of a global state but in the existence of a multiplicity of apparently autonomous national states. The political is fractured: this fracturing is fundamental to an understanding of the political, a crucial element that is lost if it is assumed that society and state are co-terminous. The world is not an aggregation of national states, national capitalisms or national societies: rather the fractured existence of the political as national states decomposes the world into so many apparently autonomous units.

The distinction between the political and the national state thus gives a new dimension to the concept of the state as a process of fetishising or rigidifying social relations. The decomposition of global society into national states is not something that is accomplished once national boundaries are set. On the contrary, all national states are engaged in a constantly repeated process of decomposing global social relations: through assertions of national sovereignty, through exhortations to 'the nation', through flag ceremonies, through the playing of national anthems, through administrative discrimination against 'foreigners', through war. The more feeble the social basis of this national decomposition of society - as in Latin America, for example, - the more obvious its forms of expression. This decomposition of global social relations is a crucial element in the fragmentation of opposition to capitalist domination, in the decomposition of labour as a class.

The national state, then, is crucially a form of fracturing global society. Seen in this light, there is a basic territorial non-coincidence between the state and the society to which it relates. The "convenient" assumption, mentioned by Picciotto, of a correlation of state and society is quite simply wrong. Each national state is a moment of global society, a territorial fragmentation of a society which extends throughout the world. No national state, 'rich' or 'poor' can be understood in abstraction from its existence as a moment of the global capital relation. The distinction so often made between 'dependent' and 'non-dependent' states falls. All national states are defined, historically and repeatedly, through their relation to the totality of capitalist social relations. The distinction made by Evers, for example, in his development of the state derivation debate in relation to the capitalist 'periphery', between the 'central' states in which there is a "social identity between the economic and the political sphere" and the 'peripheral' states, in which there is no such identity (Evers 1979, 77-79), is quite invalid. In spite of the national orientation of most theorists in the 'richer' countries, the existence of the national state as a moment of the global capital relation is no less crucial for an understanding of Thatcherism in Britain, say, than it is for an understanding of the rise of neo-liberalism in any so-called 'peripheral' country (as Bonefeld 1990 convincingly shows).

This is not to say that the relation between global capital and all national states is the same. On the contrary, although all national states are constituted as moments of a global relation, they are distinct and non-identical moments of that relation. The fracturing of the world into national societies means that every state has a specific territorial definition and hence a specific relation to people within its territory, some (usually but not always - South Africa, Kuwait - the majority) of whom it defines as 'citizens', the rest as 'foreigners'. This territorial definition means that each state has a different relation to the global relations of capitalism.

The territorial definition also means that each state is immobile in a way that contrasts strongly with the mobility of capital. The national state can change its boundaries only with difficulty, whereas capital can move from one side of the world to the other within seconds. Where national states are solid, capital is essentially liquid, flowing to wherever in the world the biggest profits are to be made. Clearly there are obstacles to this flow, limits to this mobility. Crucially, the reproduction of capital depends on its (transitory) immobilisation in the form of productive capital, involving its embodiment in machinery, labour power, land, buildings, commodities. Other obstacles also impede the free flow of capital, such as state regulations or the existence of monopoly situations, but, in its most general and abstract form, money, capital is global, liquid and fast-flowing. Money knows no personal or national sentiments.

The relation of the national state to capital is a relation of a nationally fixed state to a globally mobile capital. It is in these terms that both the relation between the national state and the world and the relation between national states must be conceptualised. This is important because it has been common, particularly on the left, to discuss the relation between the state and capital as though capital were immobile, as though it were attached to particular activities, places or persons. This gives rise to analyses of political development in terms of conflict between capital fractions (textile capital versus chemical capital, say, or banking capital versus industrial capital) as though capital were in some way tied down to a particular activity6, or, more to the point in the present discussion, to the discussion of the state in terms of some sort of fusion, unity or interlocking between the state and 'national capital', as though capital were tied down in some way to some particular part of the world. The link between the state and capital is shown in terms of family links, personal connections, the existence of military industrial complexes, and these links are theorised as showing the capitalist nature of the state (as in Miliband 1969), or in terms of a 'fusion' of state and monopolies (as in state monopoly capitalist theories), or as the formation of competitive state-capitals (as in state capitalist theories such as Barker 1978/19917), or in classic theories of imperialism. All of these approaches treat capital as though it could be understood in terms of its personal, institutional or local attachment, instead of seeing these attachments as transitory moments, staging posts in the incessant flow of capital. Certainly personal, institutional and political links exist between groups of capitalists and national states, but 'groups of capitalists' are not the same as capital and often national states are obliged to break their links with their capitalist friends and act against them in the interests of securing the reproduction of capital as a whole (cf. Hirsch 1974/1978). The relative immobility of the national state and the extremely high mobility of capital makes it impossible to establish such a simple relation between a national state and any particular part of world capital (Murray 1971; Picciotto 1985/1991).

The competition between states and the changing positions of national states in relation to global capital can therefore not be adequately discussed in terms of competition between 'national capitals'. The discussion must start not from the immobility of capital but from its mobility. In so far as the existence of any national state depends not just on the reproduction of world capitalism, but on the reproduction of capitalism within its boundaries, it must seek to attract and, once attracted, to immobilise capital within its territory8. The competitive struggle between national states is not a struggle between national capitals, but a struggle between states to attract and/or retain a share of world capital (and hence a share of global surplus value). In order to achieve this end the national state must try to ensure favourable conditions for the reproduction of capital within its boundaries (through the provision of infrastructure, the maintenance of law and order, the education and regulation of labour power, etc) and also give inter-national support (through trade policy, monetary policy, military intervention etc) to the capital operating within its boundaries, largely irrespective of the citizenship of the legal owners of that capital.

In this competitive struggle positions of hegemony and subordination are established, but a hegemonic position does not free states from the global competition to attract and retain capital. Relative positions of hegemony and subordination are based ultimately on the existence of more or less favourable conditions for capital accumulation in the different state territories: hence the long-term decline of Britain as a hegemonic power and the present instability of the inter-national position of the United States. Conditions for capital accumulation depend in turn on the conditions for the exploitation of labour by capital, but there is no direct territorial relation here. Capital may accumulate in the territory of one national state as the result of the exploitation of labour in the territory of another state - as in the case of colonial or neo-colonial situations, but also in cases where states, through tax advantages or other incentives, make themselves into attractive locations for capital accumulation (the Cayman Islands and Liechtenstein are obvious examples).

National states thus compete to attract to their territory a share of global surplus value produced. The antagonism between them is not an expression of exploitation of the 'peripheral' states by the 'central' states (as dependency theorists suggest) but rather expresses the (extremely unequal) competition between them to attract to their territories (or retain within their territories) a share of global surplus value. For that reason, all states have an interest in the global exploitation of labour. It is true, as dependency theorists argue, that national states can be understood only by reference to their existence in a bipolar world characterised by exploitation, but the exploitation is not the exploitation of rich countries by poor countries but of global labour by global capital, and the bipolarity is not a centre-periphery bipolarity but a bipolarity of class, a bipolarity in which all states, by virtue of their very existence as states dependent on the reproduction of capital, are located at the capitalist pole.

The relation between national states is thus not adequately understood as an external relation, even though it presents itself as such. If the national state is a moment of the global capital relation, then neither the global capital relation ('international capital') nor other states can properly be understood as being external to it. In trying to understand the development of any national state, it is thus not a question of choosing between the 'external' determinants of state development (favoured by dependency theory in the case of 'peripheral' states) and the 'internal' determinants (preferred by regulation theory (Hirsch 1992).) Nor can state development be understood as being the result of a combination of endogenous and exogenous motor forces, the solution pursued by Dabat (1992). The distinction between inside/outside, internal/external, endogenous/exogenous reproduces the apparent autonomy of national states, and so reinforces the murderous rigidification of social relations which national boundaries represent, but is not adequate as an explanation of state development. All national states manipulate the internal/ external distinction as a crucial element of practical politics. All states which have dealings with the IMF, for example, present the results of such dealings as being externally imposed, whereas in reality they are part of 'national' political conflict, or rather of the seamless integration of national and global political conflict. This is equally true of the terms 'imposed' by the IMF on the British state in 1976 (an important victory for the right in Britain) and the terms 'imposed' by the IMF on the Venezuelan state, which form an important element of the Venezuelan state's strategy to restucture society in such a way as to create more favourable conditions for capital accumulation. Global capital is no more 'external' to Cochabamba, or Zacatlán or even Sant'ana do Agreste than it is to New York, Tokyo or London, although the forms and consequences of its presence differ enormously.

Understanding the development of the national state cannot be a question of examining internal and external determinants, but of trying to see what it means to say that the national state is a moment of the global capital relation. Most obviously, it means that the development of any particular national state can be understood only in the context of the global development of capitalist social relations, of which it is an integral part. The 'global development of capitalist social relations' is not a logical process nor something 'out there', but the historical outcome of conflict, a conflict which, although fragmented, is global. The structure of that conflict (ultimately the form of capital's dependence on labour) creates certain rhythms of development, expressed most clearly in capital's tendency to crisis (cf. Holloway 1992). However, the relation between any particular national state and global development is a complex one. Although the fact that all national states are moments of the same global relation is expressed in the occurrence of common patterns of development, as illustrated by the theme of 'the reform of the state', the differential relation of national states to global capital means that the forms taken by the struggles around the development of global capital, and hence the development of the national states, can differ enormously, and often what appears at first to be a common development (the reform of the state, for example) conceals a large number of different (and competitive) strategies to achieve a redefined relation to a global capital in the process of restructuring.

In all this there can be no functionalism. One of the problems associated with the analysis of 'the capitalist state' as though there were only one state was that it led very easily to the functionalist assumption that because the state was a capitalist state it therefore performed the functions required of it by capital. As pointed out in the account of the state derivation debate, this is already an unjustifiable conclusion at the level of 'the state', but the weakness of the functionalist argument becomes much clearer when it is borne in mind that capital is global and 'the state' is a multiplicity of national states: it cannot be assumed from the fact that the reproduction of global capital would be promoted by some political action that some state or states will achieve what is required (Picciotto 1985/1991). It cannot be assumed that capital will always solve its crises.

5. The Reform of the State: The National Politics of Global Overaccumulation

The national state is fixed, capital flows globally. Capital flows globally, but at any given moment it has some territorial location, be it in the account of some financial insitution or tied up in the bricks and mortar of some factory. The different states compete to attract and immobilise the flow of capital. The relation of particular national states to global capital is mediated through this competitive process of attraction-and-immobilisation. The relation can perhaps be imagined in terms of a series of reservoirs seeking competitively to attract and retain the maximum amount of water from a powerful and largely uncontrollable river.

As the river metaphor suggests, national states do not control the overall pressure, the speed and volume of the flow of water. This can be understood only in terms of that which produces the movement of the water in the first place. The national states, the reservoirs of our metaphor, can only respond to changes in the magnitude and power of the river.

The major changes in the organisation and conceptualisation of the state which have taken place over the last fifteen years or so not only in Latin America but throughout the world are a response to a radical change in the flow of the river of capital.

To understand the change in the flow of capital, we must go to its source, the relations of capitalist production. The form taken by the flow of capital depends on the conditions of capitalist production. The flow of capital is incessant but not undifferentiated. Capital flows through different functional forms, existing now as money, now as productive capital embodied in the means of production and the labour power employed, now as commodities. Each form has different implications in terms of the speed of geographical mobility. Capital in the form of money can travel from London to Tokyo in seconds. Capital in the form of productive capital embodied in machinery, buildings, workers etc. is much less mobile geographically. Capital in the form of commodities is clearly somewhere in between the other two forms in terms of mobility. In all this, productive capital plays a decisive role, since it is production which is the sole source of surplus value and hence of the reproduction and expansion of capital. Capital, however, is blind to such theoretical considerations: it will flow into whichever form appears to offer the biggest profits, the best possibilities for expansion. Thus, if production does not offer good profits and if commodity markets are saturated, capital will flow into the money form. The result will be a radical change in the mobility of capital. This is essentially what has happened over the last twenty years or so, and is the key to the changes in the organisation of the national states.

The destruction caused by the second world war and the pre-war depression, combined with the experience of fascism in a number of countries, created favourable conditions for capitalist production globally. The twenty-five years or so after the war was generally a period of high and steady growth based on the profitability of capitalist production. The flow of money was of course important, but it played a subordinate role to the development of production. The resulting relative stability of capital created the basis for the development of a certain type of relation between national state and global capital, giving credibility to the image of a world composed of 'national economies'. The relative stability also created an environment in which it was possible for the inter-national agreements established after the War to regulate the economic relations between national states: particularly important in this respect was the Bretton Woods agreement which, by creating a system of fixed exchange rates, regulated to some extent the movement of money between national states and hence insulated national states to some degree from the global movement of capital (cf. Bonefeld 1990; Holloway 1992a). This relative insulation, founded on the relative stability of productive capital and bolstered by international regulation and by national policies to control the movement of capital, provided the basis for the state-oriented politics of this period, be it the politics of the Keynesian welfare state or the politics of import-substitution. The same relative stability also made possible the creation of reasonably stable alliances between the national state and groups of capitalists - the sort of alliances fixed conceptually in the theories discussed above (military-industrial complex, state monopoly capitalism etc); and also between the state and bureaucratised labour movements, as found in the many varieties of corporatist political development9. Many of the theoretical conceptions concerning the state that are still common - particularly the abstraction of 'the state' from the world, discussed above - arose from the experience of this period, which was also a period of rapid expansion for 'political science' and the social sciences in general.

The relative insulation of the national state came to an end with the end of the long period of post-war boom. From the mid-1960s there are clear signs of growing instability. The conditions which had made production profitable throughout the post-war period were weakening: the costs associated with the exploitation of workers (often referred to as the organic composition of capital) were rising, the discipline established by the war period was weakening, the state bureaucracies associated with the previous pattern of development were proving costly for capital. Investment in production came to be a less secure means of expanding capital. There was, in other words, an excess of capital, an over-accumulation of capital. In the years of boom, there had been a rapid accumulation of capital: more capital had accumulated than could now find a secure and profitable outlet in productive investment. When that happens, then, in much the same way as bees swarm when there is no longer enough honey in the hive to support an expanded population, capital swarms - part of it gets up and flies in search of a new home10. More precisely, capital assumes the liquid form of money and flows throughout the world in search of a means of gaining profit. Instead of embodying itself in the bricks and mortar, machinery and workers of productive investment, it flows in search of speculative, often very short-term means of expansion. Many of the factories which have now become unprofitable are closed down and the buildings and machinery sold: the capital released remains as money, which may be transformed into productive investment elsewhere, but is more likely to remain in the form of money as long as conditions for productive investment remain relatively unfavourable. The difficulties of production express themselves in an increase both in the supply of money, as previously productive capital converts itself into money and offers itself for loan, and in the demand for money, as the capital which remains in production tries to overcome difficulties through borrowing, and states try to reconcile growing social tensions through increasing their debt.

The crisis of production relations is expressed in the liquefaction of capital. There is a sharp change in the relation between productive capital and capital held in the form of money11: money, instead of appearing to be subordinate to production, now appears as an end in itself. The flow of capital, previously relatively stable, turns into a fast-moving torrent and this torrent sweeps away the institutions and the assumptions of the post-war world. One of the first pillars of the post-war world to collapse was the Bretton Woods system of fixed exchange rates based on a fixed parity of the dollar with gold. The rapid growth in the 1960s in the quantity of dollars held as money outside the United States (and outside the regulatory powers of any national state), the so-called Eurodollars, led to an undermining of the position of the dollar and the abandonment in 1971 of the Bretton Woods system, which was eventually replaced by a system of floating exchange rates. The breakdown of the system of fixed exchange rates means that national states are now subjected far more directly to the flow of global money: the adoption of policies apparently harmful to the interests of capital now leads far more quickly to the reactions on the money markets and the weakening of the national currency (Clarke 1988; Bonefeld 1990).

The breakdown of Bretton Woods is just the first step. The rapid growth in world money markets throughout the 1970s and 1980s, and the increased speed of movement which is facilitated by the application of new technology, has drastic consequences for the organisation of national states. National states seek to attract and retain capital within their territories: what this means changes radically with the new liquidity of capital. Competition between states to attract their share of capital increases sharply, obliging all national states to find new ways of making themselves attractive to capital. The fact that a far higher share of capital is invested on a short term basis means that states are under constant pressure to maintain conditions which will hold capital within their territory. The old ideologies go: the new rule of money finds expression in the new ideologies of neo-liberalism, supply-side theory, monetarism, all of which say in one way or another: the state must retreat, the market and money must rule. The old alliances go. The established links between groups of capitalists and the state come to be seen as a hindrance once it is seen that capital in its money form attaches to no group of people and no particular activity. The patterns of corporatist domination through trade unions also come under strain: what is needed to attract global money is a new organisation of work, a new 'flexibility' and new discipline that is incompatible with the old trade union structures, a new way of 'learning to bow' (cf. Peláez and Holloway 1990/1991). Money, in its desperation to find a way of expanding itself, forces open areas previously closed to private capitalist investment: everywhere areas of activity previously controlled by national states are being privatised, opened up to the torrent of money in search of a profitable home. Even the most solid bastion of them all, the Soviet Union, is opened up and torn apart by money.

And then there is debt. The transformation of capital into its money form means that much of that money is offered for loan, that it is converted into credit and debt. The last years of the post-war boom were sustained by a rapid expansion of debt. In the late 1970s, after the crisis of profitability had made itself evident in the richer countries and monetary austerity had been proclaimed, the flood of money came south, particularly to Latin America, offering itself to governments looking for a way of containing social tensions, and converting itself into debt. After it became clear, on the Mexican government's declaration of difficulties in 1982, that Latin America was not a safe location for loans, the money flowed north again, breaking the short-lived attempts at tight monetary control in the United States and giving rise to a massive expansion of consumer debt and, especially in the United States, of military-led government debt. With debt comes a new politics of debt, both inter-nationally and within national states (Cf. Holloway 1990; Cleaver 1989). The growth of debt means the growth of discrimination, discrimination between those deemed worthy of credit and those who are not, a new division that has made itself horribly obvious both between national states and in society throughout the world. For debtors, whether state debtors or private debtors, debt means a more intense subjection to money.

The national state is not what it used to be. As a moment of the global relation of capital, it no longer has the same significance: an internal shift in the forms of capitalist domination has taken place. There is, as Marazzi puts it, "a shift in state power to the world level - the level at which monetary terrorism operates" (Marazzi 1976, 107). Political decisions taken at the level of the national state are now more directly integrated into the global movement of capital. In this sense it can be said that the national state is hollowed out. Democracy too, where it exists is hollowed out: since political decisions are in any case more directly subject to global capital, it becomes easier to reconcile the democratic political form with the interests of capital. It is this hollowing of democracy, Cavarozzi et al (1992) suggest, which is the key to understanding why the growth of democracy in Latin America in recent years has gone hand in hand with a growth of poverty and of social inequality (not, of course that these have been limited to Latin America). The hollowing of democracy also brings its problems, however: the subjection of the national state to global capital makes more difficult the national decomposition of society, and gives rise to tensions evidenced in very different ways by the current difficulties of the Venezuelan government, the fall of Thatcher in Britain or the recent speech of President Salinas of Mexico distinguishing his patriotic 'social liberalism' from the neo-liberalism which knows no national sentiment.

In all this, capital appears all-powerful. Money is the brashest, most arrogant form of capital. Its successes throughout the world have been many and obvious. And yet the dominance of money is the manifestation of capital's weakness. Bees in swarm too are the brashest, most arrogant form of bee, yet they are in swarm precisely because there was not enough honey to go around. Money dominates because production has ceased to be so attractive for capital, but ultimately it is production and only production which provides the honey: production is the sole source of capital's self-expansion. It is not the breaking of old patterns by money, nor the 'reform of the state', which holds the key to the recovery of capitalist health, but the reorganisation of production, the restructured subjection of the power of labour to capital; and despite all the changes in the organisation of production, and despite the aggressive politics of capital over the last ten or fifteen years, it is not clear that capital has yet succeeded in achieving this end.

Bees which swarm for too long die of hunger. The weakness of the basis of money's rule has become increasingly obvious in the last few years since the stock market crash of 1987: the collapse of so many banks and financial institutions amid scandal after scandal after scandal in all the financial centres has made it plain. Many of the bees in swarm have indeed died, and are continuing to die in the 'credit crunch' which is at the core of the present recession. Whether this destruction of over-accumulated capital is sufficient to create a basis for a return to healthy capitalist production on a global basis remains doubtful, however, and it seems increasingly unlikely that the collapse of the Soviet Union will provide the hoped-for solution. The deep recession experienced by all the apparently most powerful 'economies' in the last couple of years make all the claims that capitalism is emerging into a new phase of profitable production (sometimes referred to as post-Fordism) seem unconvincing. The much discussed flow of capital to Latin America in the last year or two is probably more a turn in the flow of capital (away from the currently unattractive conditions in other countries) than the regional resolution of capital's difficulties. It seems likely that the world will continue to suffer from the violence and volatility of the national (and inter-national) politics of global overaccumulation.

Footnotes:

* This article is the English version of an article originally published in Spanish in Perfiles Latinoamericanos, no. 1, FLACSO (Facultad Latinoamericana de Ciencias Sociales), Mexico City, July 1992. The theme of the issue is the Reform of the State in Latin America.

1. On the state derivation debate and its spread, see for example: Holloway and Picciotto (1978); Clarke (1991) (Great Britain); Vincent (1975) (France); Perez Sainz (1981) (Spain); Críticas de la Economía Política (1979; 1980); Sánchez Susarrey (1986) (Mexico); Archila (1980); Rojas y Moncayo (1980) (Colombia); Fausto (1987) (Brazil).

2. The state derivation debate revived the question that Pashukanis had posed in 1923: "Why does the dominance of a class not continue to be that which it is - that is to say, the subordination in fact of one part of the population to another part? Why does it take on the form of official state domination? Or, which is the same thing, why is not the mechanism of state constraint created as the private mechanism of the dominanat class? Why is it disassociated from the dominant class - taking the form of an impersonal mechanism of public authority isolated from society?" (Pashukanis 1923/1951, 185). This question eventually cost Pashukanis his life, since its implication, namely that the state is a specifically capitalist form of social relations, was incompatible with Stalin's attempt to build a statist 'socialism in one country'.

3. It cannot be assumed, as Jessop does (1991), and as Hirsch seems to assume, at least in his later work, that the particularisation of the state is a process completed at the origins of capitalism. For a critique of Jessop, see Holloway (1991).

4 "There has been a tendency for Marxist analysis of the capitalist state to focus on the state, the individual state. This is perhaps a greater tendency in Marxist than in non-Marxist writing, since the Marxist emphasis on the class nature of the state makes it necessary to discuss the state in relation to the structure of society, and it becomes convenient to assume a correlation between the society and the classes within it and the state within that society" (Picciotto 1985/1991, 217).

5. In that sense, Colin Barker (1978/1991, 208) is quite right when he criticises an article by Sol Picciotto and myself (Holloway and Picciotto 1977/1991), saying "their whole article is concerned with an abstraction called 'the state' whose connection with the actual states of the capitalist system is not adequately developed".

6. For a seminal critique of 'fractionalism', see Clarke 1978

7. Although Barker's critique of the limitations of the state derivation debate is basically correct, the conclusions which he draws about the need to analyse the national states in terms of competing state-capital blocks is thus quite wrong.

8. The extent to which particular states can break from these constraints in revolutionary situations would require a separate discussion, which is not attempted here.

9. Many of these interconnections have been analysed in the regulationist discussion of Fordism, but since regulation theory takes the national state and not global capital as its frame of reference (cf. Clarke 1987/1991, Hirsch 1992), it has not succeeded in relating these issues to the mobility of capital. The orientation of regulation theory to the national state is a reflection of the fact that the national state in the post-war period probably played a more central role in the global containment of labour than at any other time; but because the national state is taken as given in regulation theory, this remains quite untheorised.

10. Metaphors mix without shame in this section. But bees and rivers are enough.

11. For a much more detailed account of the processes described in these paragraphs, see Bonefeld (1990), to which the present article owes a considerable debt.

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