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New Left Review 2, March-April 2000


Globalization is the watchword of the moment. Does it mean the irresistible sway of markets over states—or are welfare regimes in Europe or dirigiste governments in East Asia still potentially robust? Neither, Leo Panitch argues: the reality is an unprecedented dominance of the United States over world capital flows and allied political systems alike.

LEO PANITCH

THE NEW IMPERIAL STATE

To free markets from states: thus has neo-liberal ideology trumpeted the cause of the untrammelled financial speculation, export competition and capital accumulation that goes by the name of ‘globalization’. Even more critical analysts have repeated the theme. ‘The most convenient world for multinational corporations’, Eric Hobsbawm wrote in Age of Extremes, ‘is one populated by dwarf states or by no states at all.’ [1] London 1996, p. 281. Yet states, and above all the world’s most powerful state, have played an active and often crucial role in making globalization happen. Increasingly, they are now encumbered with the responsibility of sustaining it. This was made dramatically clear in the wake of the East Asian financial crisis of 1998. As Robert Rubin and Lawrence Summers returned from Seoul, where they had been dictating policy to the new Korean government, the US Treasury and Federal Reserve interrupted their Christmas holidays to rope together the Japanese Finance Ministry, the Bundesbank and the Bank of England in coordinating private bank lending to Korea. ‘We were all told, “Thou shalt not cut”,’ one managing director for global markets at an American bank in Hong Kong later admitted. [2] Wall Street Journal, 4 November 1998. The Wall Street Journal also quoted a UK banker who put this ‘rescue operation’ in broader perspective: ‘The sad fact is that international banks never accomplish much unless they are pushed by the US Treasury.’ On 8 January 1998, shortly after Rubin’s return from Seoul, the economist Rudi Dornbusch was quipping on CNBC that the ‘positive side’ of the financial crisis was that South Korea was ‘now owned and operated by our Treasury’. This elicited a knowing chuckle from the other pundits: after all, it used to be the State Department or the Pentagon that ran the Korean franchise—not the Treasury.

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