The new globalist orthodoxy posits the steady disintegration of national economies and the demise of the state’s domestic power. This article, instead, seeks to show why the modern notion of the powerless state, with its accompanying reports about the demise of national diversity, is fundamentally misleadingfootnote1. It is undeniable that striking changes have taken place inside nation-states in recent times. On the social policy front, there has been a decisive move towards fiscal conservatism, whether from the Right or the Left, with reforms to taxation systems and the trimming of social programmes. In the economic sphere, governments have moved towards greater openness in matters of trade, investment and finance. These changes are often represented as prima facie evidence of the emergence of a new global ‘logic of capitalism’. According to this logic, states are now virtually powerless to make real policy choices; transnational markets and footloose corporations have so narrowly constrained policy options that more and more states are being forced to adopt similar fiscal, economic and social policy regimes. Globalists therefore predict
In contrast to the new orthodoxy, I argue that the novelty, magnitude and patterning of change in the world economy are insufficient to support the idea of a ‘transnational’ tendency: that is to say, the creation of genuinely global markets in which locational and institutional—and therefore national—constraints no longer matter. The changes are consistent, however, with a highly ‘internationalized’ economy in which economic integration is being advanced not only by corporations but also by national governments. Proponents of globalization overstate the extent and ‘novelty’ value of transnational movements; they also seriously underrate the variety and adaptability of state capacities, which build on historically framed national institutions. My argument therefore seeks not simply to highlight the empirical limits and counter-tendencies to global integration. More importantly, it seeks to elucidate theoretically what most of the literature has hitherto ignored: the adaptability of states, their differential capacity, and the enhanced importance of state power in the new international environment.
Given such variety, even where globalization has gone furthest, as in finance, we continue to find important differentials in national levels of savings and investment, the price of capital, and even the type of capital inflows and outflows. This suggests that any significant ’weakening‘ in the capacity for macroeconomic management—to the extent that this has occurred—may owe at least as much to ’domestic‘ institutions as to global processes.
Indeed, evidence from Japan and the East Asian nics (newly industrialized countries) indicates that strong states—that is, those with fairly firm control over socio-economic goal setting and robust domestic linkages—are often facilitating the changes identified as ’globalization‘. Thus, rather than counterposing nation-state and global market as antinomies, in certain important respects we find that ’globalization‘ is often the by-product of states promoting the internationalization strategies of their corporations, and sometimes in the process ’internationalizing‘ state capacity. However, because state capacities differ, so the ability to exploit the opportunities of international economic change—rather than simply succumb to its pressures—appears much more marked in some countries than in others.
Since much—though by no means all—of my evidence of robust state capacity is drawn from East Asia, it is important to clear away at the outset any possible misconceptions which recent events (notably, the Thai currency crisis) may have encouraged. It needs to be emphasized that,