The central thesis of Robin Murray’s essay in nlr 67 is to the effect that the postwar ‘internationalization of capital’ footnote1 has tended to weaken the (capitalist) nation State. His argument may be summarized as follows. Since the Second World War there has developed an increasing territorial divergence between the activities of nation-states and those of large international firms, which are becoming the economically dominant institution of the capitalist world. An analysis of the economic functions of the nation State shows, firstly, that these functions need not always be performed by a firm’s ‘own’ nation State and are in fact being progressively less so performed; and secondly, that the increasing operational divergence of international firm and nation State significantly weakens the State and reduces its ability to control the major firms and the economy in general.

It should be noted that the discussion of territorial non-coincidence suffers from the lack of any preliminary definition of an ‘international firm’ or indeed of ‘international capital’, or even of the ‘internationalization of capital’. Unfortunately, even with the utmost philological goodwill, this cannot be dismissed as simply a terminological nicety since the absence of such a definition leads Murray to treat as something new a phenomenon long characteristic of British imperialism; and permits the inclusion of the eec as an aspect of the ‘internationalization of capital’ even though it clearly represents an extension, via co-operation, of the power of the nation-states concerned vis-`-vis the large firms.

The point about British imperialism is, of course, that no one ever doubted that, however ‘internationally’ imperialist firms operated, they were British footnote2 and their fortunes were in a sense the fortunes of the British economy. Murray seems from time to time to have an inkling that something is wrong somewhere as his international Jekyll becomes on occasion an American Hyde, but in the absence of prior definition the two are necessarily indistinguishable and the difference between ‘national’ and ‘international’ firms disappears.

Nevertheless, something new has happened, even if a non-definitional approach tends to obscure it, and this is that within the post-war advanced capitalist world, the firms of individual nations, especially in the us and the uk, have increasingly tended to locate manufacturing activities in other advanced capitalist countries. This is not, of course, a completely unprecedented phenomenon either. footnote3 But it is new on the scale it has assumed since the Second World War, even though compared with total domestic sales or investment that of subsidiaries located abroad remains an extremely modest proportion. footnote4 This is the appropriate comparison if one wishes to gauge the significance of this phenomenon for the nation State. The figures are, in fact, quite remarkably low. Thus the annual average rate for the years 1960–64 of direct investment abroad as a percentage of gross domestic capital formation was only 3·5 per cent for the us, 4·7 per cent for the uk, 3·3 per cent for the Netherlands, 0·7 per cent for France and 1 per cent for Germany.

Apart from this development of overseas manufactures, the creation of the Common Market must also evidently be accounted a new phenomenon.

Now the crucial aspect of both the frontier-crossing productive activities of manufacturing firms and the creation of the Common Market is that both were in large part the direct and intended consequences of deliberate policies adopted by nation States. The post-war liberalization of world trade and finance was the consequence of deliberate state policy, footnote5 and it is this liberalization which underlies the ability and incentive of firms to locate productive activity abroad to take advantage of variations in market size and growth, of levels of cost and differences in technology. Furthermore, the merger movement of recent years in most advanced capitalist countries, associated with the expanded competition of the liberalized world capitalist economy, has been very much a product of national State policy, Britain itself being a notable example. The idea of national States cowering before the Paul Chambers of this world is wholly fanciful: the reality is national states deliberately encouraging the creation of gigantic competitive units.

Another equally widespread and yet incorrect notion is that the Common Market was the product of the ‘demand’ of European capital for a more effective State than the existing nations. The Common Market originated as a political initiative, whose underlying reasons related not only to the economic but also to the diplomatic-strategic interests of France and Germany. Subsequent economic developments owed little to business pressure as such and have occurred mainly as a result of developments in the political and bureaucratic superstructure of the eec, which has evolved policy in part-response to us economic dominance.