Liberal models of the international economy, as of international relations in general, still spring predominantly from an early utilitarianism. The nation state is treated as the basic category in the world: the atom of the system. States are assumed to be rational, self-conscious, self-determining units, analogies of economic man. International relations, whether political or economic, are above all relations between these independent states whose conduct is assumed to be based on the principle of maximizing their own net benefit subject to internal and external constraints. Developments in the structure of economic organisations since 1945, especially the rapid growth of international firms, have bought into question the solitary concern of international relations with international state relations. International institutions have grown up, like the imf, the World Bank or the largest of the international corporations themselves, which have a greater significance than many national states, developed or underdeveloped. Raymond Vernon, the head of the Harvard Business School Research Programme on the international firm, puts the point in this way: ‘the advanced world, carried ebulliently on the crest of a technological revolution in transportation and communication, has absentmindedly set up a virile system of international institutions and relationships that sit alongside the system of nation-states.’footnote1 Moreover, together with the appearance of these international institutions comes a weakening of the nation states themselves: Kindleberger for example argues that ‘the nation state is just about through as an economic unit.’footnote2

The rapid post-war expansion of international firms has therefore brought into question the analytical primacy of the basic elements of the liberal model of the international system, and in doing so, has raised to the forefront the question of the relationship between political and economic organization. For it now appears that, for certain countries at least, there is no longer a one-to-one correspondence between the two. An editorial in Fortune summed up this view: ‘the real point is that business everywhere is outgrowing national boundaries and, in so doing, is creating new tensions between the way the world is organized politically and the way in which it will be increasingly organized economically’.footnote3 Now while this territorial non-coincidence is a common observation, there is little developed analysis by, let alone agreement between, liberal writers on the subject as to the consequences of such non-coincidence on political organization. In this they are reflecting a more general lack of attention in Anglo-Saxon economic theory to the structural relationship between private capital and public power.

In contrast to the atomistic liberal model, Marxist writers have tended to see the international economy not as an aggregation of national economies, but as a total system in which nations are subordinate structures. Trotsky for example writes that the world economy should be seen ‘not as the simple addition of its national units, but as a powerful independent reality created by the international division of labour and by the world market which dominates all the national markets.footnote4 Marx himself emphasized that capitalist production was indissolubly linked with foreign tradefootnote5 and that the capitalist division of labour was an international one. ‘Thanks to the machine, the spinner can live in England while the weaver resides in the East Indies.’footnote6 The international division of labour represents an advanced stage of the socialization of production.

Within the world economy some national capitals are more powerful than others. Their territorial expansion is the subject matter of the Marxist theories of imperialism, yet it is an expansion into fundamentally pre-capitalist areas. The political organizations of the imperialist powers are in this case expanded alongside the territorial expansion of their economic organizations: the one-to-one relationship is preserved at the expense of the pre-capitalist public structures of the imperialized regions.

The post-Second World War developments of colonial liberation and the interpenetration of the advanced capitalist states themselves has now raised the question of what we called ‘territorial non-coincidence’ which liberal writers have registered but not answered. The issue is whether, with an increasingly interdependent international economic system, national capitalist states will continue to be the primary structures within the international economic system, or whether the expanded territorial range of capitalist production will require the parallel expansion of co-ordinated state functions, either through the de facto annexation of weaker nations by the stronger, or through some form of supranational state.

This does of course regenerate the Kautsky/Lenin controversy on ultra-imperialism. Kautsky suggested the possibility of ‘a new ultraimperialist policy, which will introduce the joint exploitation of the world by internationally united finance capital in place of the mutual rivalries of national finance capital.’footnote7 In his reply Lenin argued that the international alliances which Kautsky observed were no more than truces between wars: for these alliances were based upon the economic, financial and military strength of the parties at the time of the formation of the alliance, and since these strengths develop unequally between nations the alliances would inevitably become anachronistic. The necessary rivalry between capitalist states would remain.footnote8 Secondly while Lenin regards as indubitable the ‘growing international interweaving between the cliques of finance capital’ which Kautsky saw as a basis for his forecast, he cites the armament industry to support the thesis that the internationalization of capital may increase rather than reduce national rivalry. ‘Interlinked on a world-wide scale, capital is thriving on armaments and wars.’footnote9

While we may agree with Lenin’s castigation of Kautsky’s position as ‘lifeless abstractions’ which mystify rather than reveal international antagonisms as they then existed, we should also note that Lenin does not discuss the consequences for the power and independence of nation states resulting from the interpenetration of national capitals. Certainly there is a tendency in 20th-century Marxist writing on the world economy to infuse the nation state with an independence set apart from the range and power of its own national capital. Nation states become an entity without substance.footnote10