The Global Economy
and the Decline of Social Reform

excerpted from the book

Globalization
and the Decline of Social Reform

by Gary Teeple

Garamond Press / Humanity Books, 2000, paper

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The Global Economy and the Decline of Social Reform

Changes in the postwar development of the welfare state became evident during the 1970s, and despite national variations these changes revealed numerous international parallels. In the context of fiscal crises and lower rates of growth, governments introduced shifts in tax structures, caps on public spending, wage and price controls, and "anti-inflation" monetary policies. Further expansion of reforms slowed or stopped, and the principle of the welfare state itself began to come under attack.

The general cause of these shifts was not a changed political vision but rather what has come to be called the "new reality," the byword for the internationalization of capital, the coming of the global economy. In this new world market capital became "denationalized," that is, characterized by such a high degree of productive capacity and interlocking trade and investment that it cannot be said to have a national home. This is not to say that the largest and most industrialized nations no longer act in the interests of their "national" capital or that the national state is no longer an important source and means of capital accumulation. It is, however, to say that, once internationalized, capital: 1) requires "freedom" from national controls or intervention; 2) has ultimately no national allegiance; 3) has interests that span the world and far exceed national jurisdictions; and 4) operates within a world economy and possesses a "global perspective" in which domestic or national markets form only one element and indeed are too small for the productive capacity it possesses. The global economy produces its own demands that are distinct from those of the national economy. It also produces an integrated international arena that is both distinct from and a challenge to bounded and protected national economies, now moribund as such but characteristic of the development of capitalism up to the 1970s.

It follows that the persistence of a national framework in the form of trade barriers, monetary and fiscal regulations and institutions, and a vast number of laws and standards must be overcome. Just as with the formation of the nation-state in the eighteenth and nineteenth centuries, when local and regional barriers to trade had to be eliminated and national standards established in order to provide the possibilities for capital to expand more or less unfettered within a defined geographic territory, so too national standards and barriers to trade now have to be eliminated to allow capital to compete without such restraints in a global economy. We have arrived at the end of the era of the nation-state, and its declining significance is an important factor in the erosion of social reforms. Economic powers are now able to determine the direction of development at the international level, where compromises with national working classes, and indeed national governments, are not so necessary.

The Coming of the Global Economy

Throughout the history of the capitalist mode of production there has been an expanding world market. Capitalist classes have always sought to encompass and capitalize not only their domestic markets but also the "external" market. Such expansion, moreover, has been facilitated by a corresponding growth in the size and power of the state, in the public debt, and in financial mechanisms, that is, in international banking and credit facilities. There have also been correlative developments in the nature of the labour supply: the development of capitalism engendered the forcible "freeing" of farmers or peasants from their land, the enslavement of non-Europeans, the purchase of indentured or bonded workers, the export of convicts, and the use of child labour.

To be sure, a world economic system was evolving, but it was coming about through the expansion of nationally defined corporations that were branching out, in competition with other capital formations, to increase their overseas territorial dominions as markets for their commodities, sources of raw materials, and avenues for investment. It was defined by the increasing interdependence of national capitals, but it was still a system of national capitals whose interests were promoted by a national state, and whose expansion gave rise to the modern colonial system, forms of protectionism, and international wars.

By World War I, the most industrialized national capitals supported by state military power had divided the world into spheres of influence, but they had also spilled over their national foundations in other ways.

They had formed international cartels, trusts, and banking syndicates for the control of world markets; and after the First World War they had attempted to create international organizations and regulatory agreements to mitigate imperial rivalry (League of Nations), to regulate inter-imperial trade, investment, and capital markets (Bank of International Settlements, BIS), and to help guard against the expansion of socialism (the tripartism of the International Labour Organization, ILO).

Despite these transnational beginnings, the world economic order between the two world wars remained dominated by competing national capitals. The Second World War, like the First, represented competition between national capitals raised to the level of the mobilization of the resources of the entire nation. It was, however, to be the last of such wars.

The immediate preconditions of globalization lay in World War II, the last major conflict characterized by the expansion of capital in its national form. Prior to that war, capital was largely national in character, and corporate interests, as "national interests," were jealousy guarded at home and abroad by means of standing armed forces, tariff barriers, currency controls, and nationalism and citizenship, among numerous other national laws and policies. The war represented the historical denouement of the contradiction between the continuous impetus of capitalist expansion and its form as the nation-state.

From the point of view of capital, the war's end presented two dilemmas: how to reconstruct capitalism in Europe - but in a way that avoided rebuilding the contradiction between expanding capital and its national political form - and how to contain socialism, a form of property antithetical to the growth of capitalism. The solutions were more often than not combined in the same developments.

For the capitalist nations, the period between World War II and the 1970s constituted an interregnum between the age of competing imperial powers and the coming of the global economy. As the pre-eminent capitalist power at the end of the war, the United States was in a position to restructure the postwar world to reflect its own interests. Those interests, however, were in essence the interests of capital as capital, albeit still in national guise. Given this, the U.S. restructuring of the postwar capitalist world marked the beginning of the resolution of the contradiction that had given rise to both world wars. The world as it was - national governments representing national corporations - could grow no further except to encounter more collisions between national forms and with the obvious outcomes - bilateralisms, commercial warfare, national economic problems, and war. Moreover, given new atomic weaponry, another world war between the industrial nations had become unthinkable.

So began a period in which the boundaries of international relations were largely prescribed by the claims and exigencies of one imperial power. The "international regime" introduced after the war was a reflection of the international demands of U.S. corporate interests. As the dominant postwar power, hitherto limited in its access to the European and Japanese economies and their colonies or spheres of influence, the United States was intent on opening up new markets to itself. Its efforts were to lay the groundwork for a single world economy of competing capitals.

Establishing a global 'enabling framework'

The U.S.-designed postwar rapprochement saw the creation of political and economic structures and policies that remained dominated by the United States throughout the period. Under U.S. auspices in 1944, the future members of the United Nations (UN) held a conference at Bretton Woods and established the basis of an international monetary system. The delegates created an exchange-rate mechanism by setting the parities of national currencies against the U.S. dollar; and they established, among others, two institutions, the International Monetary Fund (IMF) and the World Bank (WB). The IMF was intended to regulate international trade balances, but its general function was described as "a sort of Magna Carta for a future world economic order." The World Bank was designed to manage an international fund for economic development. Alongside these mechanisms, the General Agreement on Tariffs and Trade (GATT, established in 1947) would provide the institutional means for a negotiated removal of all national barriers to world trade and to create universal regulations for increasingly freer commerce.

Although these economic institutions and agencies were of primary importance after the war, the United Nations, dominated by the United States, was formed as the beginning of supranational quasi-government, as the political foundation for the new internationalism. Among other things, the UN took upon itself powers to oversee the long process of decolonization (one of the purposes of peace-keeping operations), which in most instances aided U.S. penetration into the former European colonies and advanced the geographic expansion of the capitalist mode of production and the destruction of remaining precapitalist modes. The UN was also employed to contain the expansion of socialism (Korea, the Congo, Greece, Indonesia), to promote the principles of liberal democracy and the rights of private property as a political system consistent with the advance of capitalism, and to establish international laws grounded in private rights for the "world community."

Although the United Nations appeared to be the embodiment of a genuinely democratic and multilateral world in the making, it was dominated by an executive (the Security Council), whose members (with the exception of the U.S.S.R.) were largely beholden to the United States. The UN was, moreover, financially dependent on the United States, as were most of its member nations, making it largely an instrument to make the world over in the image of America. This quintessentially capitalist nation and the principles that it stood for were to be the model for the new world in the making, and U.S. dominance in supranational agencies and institutions remains to this day.

The liberal democracy promoted and established in the former Axis regimes and the decolonized world was the Trojan Horse of the new order - it held no intrinsic national character. Its principles were the principles of corporate private property, and the political system would amount to the periodic choice of different policies within this property regime; and as a result those principles would ultimately overreach national barriers. The assertion of national interests was possible, and they were promoted, to be sure, but in the final analysis national goals would prove contrary to the embedded political principles.

Besides liberalized world trade, the containment of socialism, and the furtherance of liberal political and legal principles, another pillar of the new internationalism was the aggregation of national markets. As early as the late 1940s the United States encouraged the European countries to see their future as the "United States of Europe" (a larger market for the postwar expansion of capital), and to this end they entered into the Organization for European Economic Co-operation (OEEC), whose main function was to promote intra-European free trade. The Treaty of Rome (1957) soon followed, establishing the progressive growth of a European economic community. But Europe was not alone; by the 1960s, almost the entire world was part of one or another customs union, common market, or free-trade area.

Although engineered by the United States to suit its economic needs and prevent the imperial conflicts of the past, this rapprochement contained contradictions that were to frame the period of its existence. The most obvious concerned the ascendency of U.S. military and economic power over the industrial nations of Europe and Japan. In effect, the United States represented one configuration of national capital interests, albeit the most powerful, in a postwar world in which other national capitals and their states were far from moribund, and in which their economic reconstruction was necessary to the success of the new world order. A second contradiction involved the persistence of national interests in the face of the developing "international regime." With no realistic alternative to an international future, national capitals were confronted with the dilemma of defending national interests while embracing the internationalism necessary for expansion. Another contradiction came with the struggle between capitalism and socialism as the two main postwar roads to the future.

Throughout Europe the spread of socialism after the war as a promise of workers' power and a form of property antithetical to capitalism was pervasive. To ensure the future of capitalism, socialism had to be contained, and to this end the U.S. administration took up several initiatives. One comprised a massive financing of capitalist reconstruction on strictly U.S. terms (UNRRA- the United Nations Relief and Rehabilitation Administration, set up in 1943 to provide material relief for liberated nations - and the European Recovery Programme, or Marshall Plan, initiated in 1947), which involved a substantial degree of state intervention in both capital and working-class reproduction. Another involved the U.S. promotion of Keynesianism as a means of reconstruction that gave the working class varying degrees of protection from the effects of capitalism and involvement in its reconstruction. To affirm the U.S. commitment to this reconstruction of capitalism, a military alliance, NATO, was created in 1949 with a permanent U.S. commander-in-chief ensuring that country's military dominance over Europe. In addition the postwar period saw interference in European elections, political parties, government policies, and trade union movements.

Although socialism as state capitalism was ultimately abandoned in the 1980s and 1990s, the postwar period saw the consolidation of Soviet hegemony over Eastern Europe, the victory of the Chinese People's Liberation Army, and numerous wars of liberation in former colonial countries. All of these events suggested that the socialist road might indeed succeed, a possibility that was always implied in the co-operative military and economic arrangements of the interregnum.

The same problems of rebuilding and consolidating capitalism, containing socialism, and ending national barriers to accumulation also presented themselves in the European colonial empires and spheres of influence. Within one decade of the end of World War II, struggles of national liberation arose in most of the colonial world: in Vietnam, China, Malaysia, Dutch East Indies, Korea, the Philippines, and India; in Algeria, Egypt, and Kenya; and in the Middle East. For U.S. capital, and capital in general, the socialist and nationalist movements of liberation had to be fought or co-opted, and the colonial systems had to be dismantled and opened to international trade. While military means were employed in many of these cases, greatly supported by the United States, the chief means of disengaging the colonial link and establishing the foundations of a capitalist economy were United Nations peacekeeping (both military and diplomatic operations) and the installation in the colonies of liberal-democratic or dictatorial regimes as required. The colonial systems could no longer be tolerated because their very nature favoured restricted trade relations with the metropole, while liberal democracy (or, in many cases, authoritarian systems) opened the door to foreign investment and embraced the principles that would ultimately supersede the structure of the nation-state.

To bring an end to colonialism and to ensure that the newly independent countries remained within the orbit of international capital accumulation, the preferred solution appeared to be a form of political independence embracing the formalities of liberal democracy and constitutionally entrenched principles of private property. Neo-colonialism - the subordination of former colonial countries mainly by economic means and principles - was established as the new relation between the industrial metropoles and the "lesser developed" nations. Transformed from colony to nominally independent nation-state, from subordination to one industrial metropole to compliance with the new international regime of corporate private property, most of the former colonies were, under the guise of political freedom, opened to international trade. A political shell of independence without the "content" of an indigenous capital formation obscured the real content, which was in essence the multinational corporation of the industrial world.

From the point of view of capital, both the war and its aftermath represented the restoration of the conditions for renewed accumulation. The war brought an end to economic depression, with state intervention in labour supply (regulated wages, restricted union activity, and even slave-labour in Germany and Japan) and in corporate assistance (superprofits and tax concessions for war production); government mobilization of public and private capital; and the destruction of inventories and new products in the war effort. After the war, the basis for renewed accumulation became the reconstruction of the devastated economies, again promoted by state-levered capital for the corporate sector by means of deficit financing, increased taxes, debased money, and, very importantly, U.S. "aid," particularly in the form of UNRRA and the Marshall Plan. Moreover, new markets and sources of raw materials emerged as many of the former colonial territories were opened to international capital.

Within a decade after 1945, the main elements of a framework of a supranational regime of accumulation, albeit dominated by the United States, had been established. There were the principles of liberal democracy ensconced in the United Nations, Marshall Aid for reconstruction, the IMF, World Bank, and GATT to regulate and liberalize world trade, incipient common markets promoted everywhere, and U.S. military control and influence throughout the world. All these facets of the postwar world order were progressively realized and operative by the end of the 1960s. A foundation had been laid for the regulation of multinational corporations that in principle transcended bilateral or multilateral relations between nation-states. This global regulatory regime was an essential precondition, a necessary and complementary part of the | e of the transnational corporation and the process of globalization.

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The decline of national sovereignty

... extranational economic expansion was eroding the power and influence of the national state. Corporate trade and investment overseas were growing dramatically as a percentage of total operations, and the multinational corporations (MNCs) had begun shifting profits and operations to places where the advantages in taxation, wages, or state support were greatest. Increasingly, they assumed the powers of sovereign entities, ignoring and interfering in the interests of nation-states. This expansion of the MNCs added international pressure to remove national barriers and level the costs of corporate activities. The rise of foreign currency and international capital markets, moreover, meant not only that these economic functions were increasingly outside the control of national regulation, but also that they increasingly set the limits, as independent markets, on national policies with respect to credit systems, money supply, exchange and interest rates, debt-management, investment policies, and taxation.

The growing erosion of the role and powers of the national state was also visible in the rise of supranational accords or treaties, multilateral agreements and organizations that all in their own way began to restrict national sovereignty. Between 1945 and the early 1970s, international government organizations (IGOs) and international non-governmental organizations (INGOs) broadened their powers and increased by about threefold in number, such that by the end of the 1970s there was hardly an aspect of national life in industrial countries that was not addressed in some way by a supranational body. Military multilateralism in the shape of NATO, the Warsaw Pact, the United Nations, and other regional pacts took the place of the independent national exercise of armed force outside national borders. National policies on international trade, scientific and technical standards for goods and services, transportation and communication, employment and health standards, and pollution were all increasingly subject to modification and reformulation to bring them into accord with internationally set rules and regulations.

The decline in powers of the national state was also reflected in the worldwide increase in preferential trading groups. Although the most important and earliest was the European Economic Community (EEC) in 1958, there was not a single region in the world, including the centrally planned economies, that had not attempted to create a common market, customs union or free-trade area between the 1950s and the mid-1970s. Despite certain political resistance and at times faltering success, economic interdependence at the global and regional levels had everywhere profoundly circumscribed national sovereignty.

The two-tiered development of the interregnum

From 1945 to the early 1970s, capitalism developed in a two-tiered manner that reflected the nature of the postwar rapprochement: the state-managed reconstruction of capitalism took place within the nation-state, while at the same time the framework for international free trade was undermining the national economy, the rationale of the nation-state. The contradiction between the national form of capital and the intrinsic drive of capital to overcome this shell was moving towards its resolution with the erosion of this rationale. Given the expanding supranational economic framework, the size and power of MNCs, and the actual global development of capitalism, the only resolution remaining to the contradiction was the dismantling of the national shell. By the early 1970s, the national relations of production were increasingly seen by transnational corporations (TNCs) as mere fetters to intercorporate relations at the global level.

Throughout this postwar period, and corresponding to the growth of MNCs and international government organizations, there arose international strata of bureaucrats, technocrats, academics, and corporate managers, owners, and advisors. They managed the agencies and organs of supranational governance, and the highest placed also met regularly in certain forums for the express purpose of discussing global trends and policies for the advance of certain interests. Besides the more "public" venues, such as UN agencies, the Organization for Economic Cooperation and Development (OECD), and GATT, private venues such as the Trilateral Commission, the Bilderberg conferences, the Club of Rome, and the so-called think-tanks such as the Mont Pelerin Society and the Heritage Foundation were all employed for these purposes. While not coherent as a national government, here nevertheless was a growing matrix of "public" and private organizations for decisionmaking and policy-formation at the global level that became increasingly influential as the demands for a global economy increased, and that formed the meeting-ground for transnational strata occupied with the advancement of a global economy.

It is perhaps not possible to say when the global economy became a reality as distinct from interrelated national economies, but certainly by the mid-1970s the end of the interregnum could be seen in two significant developments. One was the extensive reduction in barriers to world trade and production: the productivity of the advanced Fordist mode of production possessed the capacity for world supply, and the postwar "enabling framework" had gone far to erode national restrictions. The other was the loss of U.S. national paramountcy, signaled by several events. Perhaps the most important was the suspension of the convertibility of the dollar into gold in 1971, which ended the fixed exchange rate mechanism that had so benefited U.S. expansion. Another was the waning of the rate of U.S. direct investment and exports to Europe by the early 1970s, while European and Japanese products and capital began to claim ever greater shares of the U.S. market. Also about this time the United States had begun to lose some of its edge in technological superiority to Germany and Japan. On the surface, the United States appeared to be yielding to these rival economic powers; in effect, it was succumbing to the internationalization of capital - built on a foundation that Washington itself had forced on the world. Americanization was becoming tempered by internationalization; the premise was becoming absorbed by its conclusion.

There were other harbingers of the end of the interregnum or the approaching global economy, and all were consequences of two decades of unprecedented capital accumulation. One was the near completion of decolonization and the consequent "opening up" of the entire globe (with the exception of the "socialist" countries) to capitalization. The world was now in effect subjected to the capitalist mode of production. Another precursor was the transformation of increasing numbers of multinational corporations into TNCs, defined by the expanding internationalization of their production and decline of a meaningful home base or domestic market. Related to this development was the rising importance of international foreign exchange and capital markets and of supranational agreements and organizations, and the consequent increasingly obvious erosion of national identity and sovereignty, not to mention the globalization of culture.

Ironically, at the culmination of this interregnum, and before the transformation of the nation-state was about to begin in earnest, the voice of the non-corporate sector began to be heard. In the industrialized nations, a citizenry that had come to believe that their right to vote gave them power over policy began to demand and expect a progressive extension of the welfare state - demands characterized by the corporate sector as the "ungovernability of democracy." In the decolonized nations, leaders labouring under the belief that independence would bring freedom, democracy, and material betterment and not a new form of colonization made demands for an end to unequal exchange, a new international economic order. More successfully, a group of oil-producing nations formed a loose coalition (OPEC) and began to exact a somewhat fairer share of oil revenues, albeit mainly for their own elites, from the oil cartel. By the end of the 1970s, as the "new reality" began to set in, these voices were silenced or compromised, or had found other forms of expression.

By about 1970, the key institutional preconditions for a global economy were in place; they had become a force of production in the encouragement of global economic interdependence and helped foster new means of production. Nevertheless, production was still largely national, although much trade and commerce had turned international. The movement to a global economy in which the circuit of capital itself was global and national integrity weak and in decline had not yet become manifest. About this time a dramatic change in the technology of production, distribution, and circulation began to be realized. These were changes that could not possibly be contained within the framework of the nation-state.

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The Global Era

The trends towards the internationalization of capital during the interregnum continued and intensified in the 1970s and thereafter. Commodity trade expanded, though it was now in the shape of world commodities in a world market: by 1980 the sales of many TNCs in "foreign markets" increased to more than one-half of total sales; and the imports and exports of all the industrial nations, except Japan, increased as a percentage of the GNP. A system of highly integrated world trade was an irreversible fact by the end of the 1970s, confirmed and hastened by the new means of transportation and communications, whose increased productivity were transforming the worldwide distribution of products and hence the global conditions for valorization. Also, with the coming of computer-based systems, capitalist production became less constrained by large-scale, long-term investments; and with the continuing diminution of national barriers it could increasingly be "sited" in regions or countries with the most favourable conditions for accumulation (for instance, proximity to markets, types of labour force, and state concessions). This locational flexibility of productive capital became an important factor in the development of a changing international division of labour, and the 1970s saw a geographic restructuring of production leading to a rapid rise in the world share of manufactured exports from developing countries. Along with this came a growth in the Eurocurrency markets, to such a degree that by the end of the 1970s the world's financial markets were close to becoming a single integrated market.

Global labour market

All these changes worked towards the establishment of a global labour market. The decolonization and capitalist penetration of the non-industrialized countries after World War II gradually created an enormous potential, internationally available labour supply, previously "locked up" in precapitalist modes of production or restricted to the needs of the capital of the colonial "mother country." During the interregnum, an unprecedented international migration from former colonies to the metropolitan countries and enormous internal immigration in the industrial countries from transformed sectors of the labour market had provided a continuous supply of new labour power. Yet given the sustained national growth rates and limited entry, the supply was more or less readily absorbed until the early 1970s. By this time, Europe and the United States had many millions of ex-colonials and/or illegal immigrants forming a large "underclass" of poor and unorganized workers, condemned to menial work, ineligible for citizenship, restricted in legal rights, and limited in access to the welfare state. The national working classes were to a large degree insulated from the effects of these reservoirs of labour as long as their position in an advanced Fordist mode of production and growing public and unproductive sectors was maintained, and as long as national laws controlled immigration and prevented the integration of the underclass. Even so, these labour pools produced a drag on minimum wages and therefore on the whole wage structure; and despite their limited access to social security, they reduced the redistribution of social surplus to the national working class.

Just as national capital in the eighteenth and nineteenth centuries had created national labour markets, so too had the processes of trade liberalization, changes in the means of production, and increasing international production begun to create an international labour market by the mid-1970s. At this stage it was made up of three main components: the "underclass" of displaced and immigrant labour in the metropolitan countries, the labour force in centres of cheap labour (Puerto Rico, Hong Kong, Singapore, Dominican Republic), and workers in "free-enterprise zones" or elsewhere, wherever commodities for the world market were produced. The more that products from all the less-industrialized countries entered the global market, the more that the value of the labour power in these countries, and embedded in these products, became a part of the internationalization of labour value.

The effects of this emerging global labour market began to become visible from the early 1970s on with a general downward pressure on wages in the industrial world. The incipient international levelling of the value of labour power encouraged the rise of female participation in the labour force, a growth in forms of coerced or unfree labour, and the gradual reintroduction of child labour.' Union bargaining rights began to confront increasing legal restrictions, and union membership in the industrial nations started to fall as the establishment of a growing surplus of low-wage workers in the international labour market began to reduce both the high demand for labour and upward pressure on wages. As permanent unemployment climbed in the second half of the 1970s, high wages declined, as did the social wage, and so began the deterioration of the fiscal foundation of the KWS. The contemporary movement towards world wages also commenced.

The making of a global capitalist labour market that will encompass all the world's labour-power is far from complete. It continues, as in the past, by the same legal, illegal, and coercive means. The brutalities continue no less now than in the past, with land clearances, forced emigration and transmigration, war, slaughter, disease, and habitat destruction. The more or less forceful proletarianization of that substantial part of humanity that has not yet entered the capitalist labour market proceeds apace. It is the creation of a labour market that is without protection from either the national state or global agency. The supranational framework that has developed exists by and large for capital alone; no such labour-capital compromise as developed in the form of the KWS in the industrial nations after World War II has appeared at the global level.

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Capital has been outgrowing the very geographic and political forms it had made for itself. By the end of the interregnum it was superseding its own political framework, and the functions of the state and meaning of nationality were being eroded and becoming redefined at the supranational level. After the 1970s, all the earlier trends towards internationalization continued, beset by all the problems attendant on such a profound transformation. TNCs increasingly assumed the powers of sovereign entities; the markets in capital, commodities, and foreign exchange consolidated their transnational existence; customs unions, common markets, and free-trade areas embraced most of the countries of Europe and the less developed world. Multilateral treaties and agreements, military pacts, and the formation of numerous IGOs and INGOs covered almost every aspect of economic activity, as well as significant aspects of social and political life, placing constraints on national independence. The authority of international laws increasingly asserted itself over all national states. Even general policies and programs for the globalization of the economy became subject to transnational formulation in several venues, namely, in right-wing think-tanks such as the Mont Pelerin Society and the Heritage Foundation, in the Trilateral Commission, and in the annual economic summits of the world's most advanced industrialized nations, known as the Group of Seven (G7).

Without fear of exaggeration, it can be said that the national state has lost and continues to lose much of its sovereignty, although the degrees of independence vary with the degree of remaining integrity to national economic and military formations. It is not so much that a political state cannot act independently because of the erosion or usurpation of its powers, but that its raison d'etre- the existence of a nationally defined capitalist class - has been waning. Taking its place has been the rise of an international capitalist class with global interests. The idea of national considerations is increasingly becoming an anachronism, as capital has by and large lost its national character and seeks worldwide for advantages for itself in the conditions of accumulation. The present role of national states becomes the task of developing the international mechanisms and agencies to facilitate and regulate the accumulation of capital on a global scale. The more these are developed, the more the functions of the national state themselves will be subverted.

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A second major effect of the "new reality" that began to become evidently the late 1970s was the decline of social reform everywhere in the industrialized nations. This retrenchment began with the erosion of the conditions calling and allowing for social reform.

Those conditions, multifold and interrelated, had begun to change even before the 1970s. National capitals, as such, with distinct national interests had begun to decline. The new agencies and definers of policy and action were gradually becoming the terms of membership in trading blocs, the world market, international monetary agreements and institutions, and supranational political and military organizations. The purpose and function of the national state were becoming increasingly usurped by this "higher" level, and its role began to shift more and more to merely "regional" administration and security, and the facilitation of local capital accumulation.

The ability of the state in the West to finance reform programs went into decline, largely because of the falling rates of national economic growth. But whether the rate was rising or falling, economic growth no longer maintained the "positive" relation it once had to "national" wealth in the form of corporate tax revenues and high wages. Since the 1970s, corporations have been more able than ever to play off nation against nation and have taxes reduced while maintaining or increasing concessions. Wage controls and inflation, moreover, have led to a decline in real wages in many countries, while new technology has increased the levels of long-term structural unemployment. An increased tax burden on the working class has been the main factor offsetting declining revenues. The future possibility of syphoning increasing surpluses out of the Third World for the benefit of the industrial countries would appear to be at an end. And the developing global labour market has undermined the delimited national labour market and thereby weakened the main condition allowing for the social wage.

In addition to this declining ability to finance the welfare state, increasing social needs, a depressed or shifting corporate sector, decaying infrastructure, and approaching limits to taxation on falling real incomes have placed increasing demands on state expenditures. Together these pending limits, rising needs, corporate blackmail, and falling potential for national economic expansion have produced the chronic and growing state indebtedness that further limits the resources needed to fund the KWS.

The existence of trade unions has been fundamental to the achievement of social reform because they have been the main organized force arising from the working class, and its only authentic voice. With the introduction of computer-aided production in every sphere of the economy, however, the nature of work and the structure of the working class have changed. New strata have begun to arise, but fewer overall; and structural, long-term unemployment grows while most job creation is at the lower income levels. The global labour market has begun to undermine wages and conditions of work in the industrial nations. As a consequence of these developments, the trade union movement has steadily been losing its members and political and economic importance and has become more quiescent and defensive. The national jurisdictions in which it grew and was defined have become less and less relevant to business decisions. In short, unions are left as national organizations in an era of international forces. They begin to appear as anachronisms because they have not for various reasons followed capital into the international arena.

The conditions that gave rise to the welfare state are being eroded or transformed. The nation-state is losing its raison d'etre, that is, capital with a national identity; there is a decline in "returns" from the Third World; a continuous revolutionary restructuring of industry is creating weakened trade union movements, a levelling of social strata, and a growth in long-term unemployment; and the consequent changes in the tax-base and growing social needs are increasing state indebtedness. Since the 1970s, when the People's Republic of China shifted to the "capitalist road," and since the early 1990s, when the U.S.S.R. collapsed from its own bureaucratic weight, the threat of socialism in the world, let alone in the West, has been minimized. If part of the rationale of the KWS was to counter working-class attraction to socialism, this concern has dissipated.

If the conditions of the postwar era - capital in its national clothes with a nationally delimited labour market - led to the creation of the KWS as the national mechanism for the reproduction of labour and capital, it cannot be said that these conditions obtain any longer. In the global market, capital can reproduce itself with abundant cheap and unorganized labour from around the world and with few and often no associated "external" costs.

Another factor in this present transformation can no longer be ignored. If the decline of social reform is increasingly leaving social needs unanswered, there has never been much by way of environmental reform, national or international, to confront the consequences of planetary pollution caused by decades of industrial production and consumption. "Nature" now appears as plundered and polluted and in many places apparently unable to regenerate itself in the short term. Several areas of the world's oceans have been badly contaminated or fished out, huge expanses of forest have been depleted, soil exhaustion and erosion are appearing everywhere, fresh water sources are increasingly used up or poisoned, and air in urban and industrial areas is polluted. The impact of this destruction, which economists once considered as mere "externalities," is having a limiting effect on production itself. While critics agree that these effects can no longer be ignored, governments seek to minimize their import, mouthing concern but doing little to clean up or prevent further destruction; and corporations resist the idea of accepting responsibility for the external costs of their industrial processes.

The decline of the conditions allowing for social reform means that no matter which party assumes power, the possibility of continuing those reforms associated with the KWS has been diminished. Such policies were the product of the politics of the age of maturing national capital, that is, capital in the imperialist era, which implied international relations between nation-states, but not global relations between organized capitals.

In this period of transition to a world economy, all political parties in the industrial nations, including those whose tendency is social-democratic, are confronted with the tasks of managing a capitalist economy, now no longer national, with only the tools of the moribund national state. Given this predicament, most parties in the West coming into power since the mid-1970s have pursued more or less similar policies - policies reflecting the demands of internationalized capital, yet at the same time spelling out the conditional end of the nation-state and its associated political alternatives and social reforms.

Globalization and the Decline of Social Reform

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