Journal of World-Syste1ns Research_, 1995, Volu1ne l, Number 4 http: //jwsr. ucr. edu/ ISSN 1076 -l56X The Co1mnit1nent to a Liberal World 11arket Order as a Hege1nonic Practice: The Case of the USA Christoph Scherrer J.F. Kennedy-Institute Free University Berlin Lansstr. 5 -9 14195 Berlin e -1nail: CSCHERR@fub46. zedat. fu -berlin. de Copyright (c) 1995 Christoph Scherrer An earlier version was presented at the XIII World Congress of Sociology, Bielefeld, July 18, 1994 Abstract: The ability of a nation to exert h ege1nony in world 1narkets rests on the hege1nony of a group of "internationalists" within that nation. In the USA the hege1nony of the internationalists was based on their control of the 1nost productive seg1nents of the econo1ny, on the trade surpluses of the early post-war years, on the their ability to secure raw 1naterials fro1n abroad, on the belief that the Great Depression had been deepened by protectionis1n, and on anti - co1mnunis1n. Since 197 l trade deficits and, 1nore recently, the end of the Cold War, have u nder1nined so1ne of these foundations of their hege1nony. Yet they were able to contain protectionist challenges and even to achieve further liberalization (e.g. NAFTA). The internationalists 1naintain their hold on U.S. foreign econo1nic policies by strategic behavior which is supported by the fact that their hege1nony is inscribed in the structure of the Ainerican state, that the process of internationalization increases the number of actors interested in liberal policies, that Keynesian policies have been discredited (and that therefore alternative policies lack theoretical support), that one of the 1nain social forces against liberalization -- the trade unions -- has been severely weakened, and that the Ainerican public supports U.S. leadership in world affairs. ---page l--- In the i1mnediate post -war period, the Ainerican co1mni t1nent to a liberal world 1narket order rested on its econo1nic predo1ninance and the perceived need to strengthen the ties with its Western allies in an effort to contain co1mnunis1n and the Soviet Union. Since 197 l trade deficits and, 1nore recently, the end of the cold war have under1nined these foundations. Yet, Ainerican public policy re1nained co1mnitted to opening up U.S. 503 Journal of World-Systems Research 1narkets for i1nports and foreign invest1nents. In fact, the free-1narket direction of public policy has just been confir1ned by NAFTA and will be extended once the recently co1npleted Uruguay-Round of the General Agree1nent on Tariffs and Trade (GATT) is ratified. The result has been a considerable increase in foreign trade and invest1nent: the ratio of i1nports and exports to GNP increased fro1n 6. 7 '.:, in 1950 to 25 '.:, in 1990. In this paper I want to explore the reasons for the adherence of the United States to a liberal world 1narket order despite the erosion of the foundations for its original co1mni t1nent. My research will be guided theoretically by the Gra1nscian concept of hege1nony, by the strategic-relational approach to political processes, and by the regulation approach to the political econo1ny. --page 2-- A Fra1nework of Analysis In the i1mnediate post -war era, "pluralists" and "realists" were at ease in explaining the do1ninance of free -traders. [1] Most industries displayed a foreign trade surplus and the United States of Ainerica reigned supre1ne a1nong nations. After 1970, whe n the trade surplus turned into a huge deficit and when the United States' international predo1ninance eroded, however, the Ainerican govern1nent continued to espouse a free trade rhetoric. This continued co1mnit1nent to a liberal world 1narket order is no surprise to world-syste1n theorists. It is clai1ned to be typical for a declining hege1nonic core state. The shift toward financial services, the export of capital, and the transfor1nation of the capitalists from entrepreneurs to rentiers is said to assure an internationalist outlook even in the face of declining industrial co1npeti ti veness. Further1nore, it is argued, that "once a national econo1ny beco1nes organized in a certain way there is a tendency to crystallization around patterns which are then not easy to change" [2]. This line of argu1nent can also point to historic precedent. In a co1nparable situation of relative decline and 1nounting trade deficits, accentuated by rising tariffs in co1npeting nations, neither the National Fair Trade League in the 1880s n or Joseph Chamberlain's idea of a "British Zollverein" around the turn of the century were able to change British free trade policy. Even the 1nodest proposal of Pri1ne Minister Arthur Balfour to i1npose --page 3-- selectively retaliatory tariffs sufficient to force concessions fro1n trading partners did not fare any better. In fact, not the least on account of the ca1npaign for tariff refor1n, Balfour went on to one of the worst electoral defeats in 1nodern British political history. [3] About 20 years later, another Pri1ne Minister, the Conservative Stanley Baldwin, was chastened out of office on the issue of tariff-refor1n. [ 4] Only in the course of the Great Depression did Britain finally adopt protectionist policies. [5] Given the argu1nents of the world -syste1n theorists and the historical precedent, any further research 1night see1n superfluous. However, while the world-syste1n argu1nents are very plausible, they have not been elaborated in any great detail. They also stand in an unresolved tension to the assertion that conflicting class interests over international econo1nic policy do not allow the declining hege1non to engineer a core -wide alliance. [6] Further1nore, historical precedent, even if the situations are fairly co1nparable, can at best 1nake one aware of a possible response to particular circu1nstances. The antecedent itself does not predeter1nine subsequent events. While the awareness of general tendencies in a capitalist world-syste1n as well as of historical precedent can sensitize the research for recurrent pheno1nena, it cannot substitute for an analysis of the specific circumstances and causal factors. For such an analysis a theoretical concept has to be developed that can account for the political processes at stake. --page 4-- Specifically for the United States in the 1980s, Neo-Institutionalist have tried to find an explanation for the apparent contradiction between trading position and free trade rhetoric. This contradiction is explained in the tradition of t.1ax Weber through the independent status of policy-1nakers. For exa1nple, Stephen Krasner has argued state actors try to represent the national interests. When confronted by a choice of interests, state actors would usually give priority to broader foreign policy concerns over 1nore narrow econo1nic interests, such as the inexpensive supply of raw 1naterials. [7] Similarly, Judith Goldstein has argued "that continued support for the liberal econo1nic regi1ne is a function of the acceptance by the policy-1naking conununity of a set of rules and nor1ns." [8] This ideological consensus of decision 1nakers rests on the belief that free trade is beneficial as long as all participants respect the rules. The recent increase in exceptions to the free trade rule, while upholding the rule in principle, fits well with these statist --page 5-- argu1nents. These types of argu1nents, however, cannot explain how the ideological consensus of state actors is for1ned and how it is reproduced. Further1nore, the assu1ned coherence and internal cohesiveness of the state bureaucracy in this Weberian tradition contradicts the institutional structure of the U.S. state, conunonly described as decentralized, frag1nented and relatively responsive to social forces. Even in the area of foreign policy, where according to Krasner a "strong state" exists, nu1nerous state agencies and actors co1npete vigorously for policy authority. All atte1npts to create an effective, centralized trade 1ninistry have so far failed. [9] The belief that capitalist elites instru1nentalize the state for their foreign eco no1nic interests do1ninates what 1night be called a heterodox political science tradition. [10] The free trade ideology of the state actors would therefore be the result of their dependence on do1ninant capital fractions. While the influence of do1ninant capital fractions 1nust be considered in any explanation, 505 Journal of World-Systems Research --page 6-- the power elite theory falls short for at least three reasons. First, like pluralist approaches, it does not question state capacity. Second, it neglects unintended consequences of state actions as well as the unraveling of economic logic. Third, the state re1nains a "black box": this approach does not explore the relationship between society and the structure and functions of the state. l1aterialist approaches see1n to be 1nore pro1nising, since they exa1nine the state as a syste1n of political do1nination in the context of a 1node of production. Yet, they risk interpreting the state as the ideal collective capitalist whose functions are deter1nined "in the last instance" by the i1nperatives of econo1n ic reproduction. [ll] I believe such econo1nic reductionis1n can be avoided, however, by transcending the general concept of the capitalist state. This involves positioning the concrete political processes within state institutions in relation to do1ninant re gi1nes of accu1nulation and 1nodes of regulation. [12] Such an analytical approach requires the analysis of (a) the role of state structures and activities for the constitution and reproduction of specific for1ns of regulation; (b) the "strategic selectivity" of the state within a specific 1node of regulation; and --page 7-- (c) the strategies directed at the state by various social forces for the 1naintenance, 1nodification, or transfor1nation of specific for1ns of regulation. The following discussion is in for1ned by this fra1nework. Given the exploratory stage of this study, however, 1nore attention will be given to strategies deflecting challenges to the U.S. govern1nent 's co1mni t1nent to a liberal econo1nic world order. The Hege1nony of the "Corporate Liberal Establish1nent" Free traders and advocates for broad-scale American international acti vis1n had gained do1ninance only during the acbninistration of Franklin D. Roosevelt. [13] By the end of VJorld VJar II they beca1ne hege1nonic. The "conversion" of erstwhile i solationist Senator Arthur Vandenberg, chair of the Foreign Affairs Co1mnittee fro1n 1947 to 1949, signaled the beginning of a bipartisan foreign policy consensus. The internationalists had beco1ne hege1nonic in the Gra1nscian sense of leadership through the active consent of other classes and groups. [14] Several economic and political interests converged: bankers eager to finance the reconstruction of --page 8-- Europe; 1najor corporations happy to supply overseas 1narkets with raw 1naterials (especially oil) and 1nachinery; policy elites concerned about a postwar depression, the defense of the U.S.A. in a "Grand Area," or the contain1nent of co1mnunis1n. Since productivity was so 1nuch higher in the United States than elsewhere, the establish1nent of a liberal world trading regi1ne held the pro1nise of creating jobs in the U.S. by exporting goods to the rest of the world. In fact, al1nost all branches of the U.S. econo1ny showed trade surpluses in the i1mnediate postwar period. The transnational co1npanies also served th e national interest by securing raw 1naterials for the U.S. econo1ny. The internationalists' project was facilitated by the co1mnon belief that the Depression had been deepened by protectionist 1neasures. The internationalists were also a1nong the pri1nary pr otagonists of the fordist project, i.e. the dyna1nic 1node of growth that integrated the working class as consu1ners of durable goods. [ 15] Because of their control of the 1nost productive seg1nents of the U.S. econo1ny, the internationally oriented capital grou ps were capable of integrating the 1naterial interests of i1nportant parts of the working class and other capital fractions. --page 9-- Anti-co1mnunis1n served to functions: it tied together the ideological bonds between the diverse classes and class fractions, and it satisfied diverse 1naterial interests through state intervention in the accu1nulation process via a "1nili tary Keynesianis1n." "Organic intellectuals" advanced the hege1nony of the "corporate liberal establish1nent." They were especially pro1ninent in the Council on Foreign Relations and a1nong the anti -co1mnunist labor leadership. [16] Alternative foreign econo1nic policy concepts and especially protectionist de1nands had difficulties in reaching the executive. l1ost protectionist initiatives were effectively blocked by the "interaction 1nechanis1n" between congress and the adninistration. [17] The responsibility for the exchange rate policy rested in the hands of the Federal Reserve Syste1n and the Depart1nent of the Treasury. Both agencies were insulated fro in particularistic interests outside the financial co1mnuni ty. [ 18] --page 10-- Trilateralis1n: A Response to the Nixon Shocks The hege1nony of the corporate liberal establish1nent, however, did not i1nply a tight rule over the business co1mnuni ty, nor did the ruling block have exclusive access to the state. The influence of the internationalists on foreign economic policy was subjected to changing fortunes. Until the end of the 1960s, they do1ninated foreign policy thinking. l1ost social forces consented to th e establish1nent of a liberal world 1narket order. The support of 1nost trade unions was, however, lost in the late 1960s when foreign producers scored their first great successes. In the Nixon-adninistration, the internationalists had to share power with groups of a 1nore do1nestic -1narket orientation. This beca1ne painfully clear when, in 197 l -- the year of the first trade deficit since the turn of the century -- President Nixon abandoned 507 Journal of World-Systems Research the Bretton V'Joods 11onetary Order and unilaterally i1nposed a ten percent i1nport surcharge. The latter policy alar1ned the internationalists since unilateral U.S. protectionist action would have seriously under1nined the credibility of the free trade gospel. Several transnational liberals resigned their posts within the Adninistration and joined the effort of David Rockefeller to found the Trilateral Co1mnission. The Co1mnission set daunting tasks --page ll-- for itself, na1nely "to oppose a return to the 1nercantilist policies of the 1930s, to integrate Japan into the core oft he American alliance syste1n; and to change the orientations of the foreign and do1nestic policies of the 1najor capitalist powers so that they 1night beco1ne congruent with a globally integrated econo1nic structure." [19] The Co1mnission explicitly included CEOs and political consul tan ts fro1n V'Jestern Europe and Japan. Its credo was to overco1ne the nation state: "The public and leaders of 1nost countries continue to live in a 1nental universe which no longer exists -- a world of separate nations -- and have great difficulties thinking in terms of global perspectives and interdependence." [20] The objectives of the Trilateralists went further than criticizing Nixon for a lack of concern for the liberal world 1narket order. Those Co1mnission 1nembers affiliated with the De1nocratic Party were trying to regain do1nestic consent to and international legi ti1nation for U.S. international acti vis1n that had been lost by the Vietna1n war and by the cynical use Nixon and Kissinger 1nade of Realpolitik. Their solution was 1nost force£ ully articulated by Zbigniew Brzezinski (the Trilateral Co1mnission I s first director): engage in a hu1nan rights ca1npaign, share power with the V'Jestern allies, and respond to Third-V'Jorld aspirations "within a fra1nework of generally cooperative relations."[21] --page 12-- The Trilateralists were successful at first. The i1nport surcharge was rescinded. V'Ji th the de1nise of Nixon speeded, as V'Jal ter R. 11ead suggests, through the influence of the foreign policy establish1nent on the V'Jashington Post and the New York Ti1nes [22] the access of the Trilateralists to the executive was greatly i1nproved. At the end of 1975, President Ford realized the idea of closer coordination a1nong the V'Jestern powers by attending the first su1mni t of the seven 1nost powerful V'Jester n nations held at Ra1nbouillet. In 1976, Richard Ull1nan of the Council of Foreign Relations could even clai1n that: "Ainong elites ( ... ) trilateralis1n has beco1ne a lino st the consensus position on foreign policy." [23] The apex of the Trilateralists triu1nph was reached when their fellow 1ne1nber Ji1mny Carter beca1ne President. Carter recruited 1nost of his foreign policy staff fro1n within the Co1mnission and started in earnest the experi1nent to 1nanage the world 1narket (and world politics) in close collaboration with the 1nost i1nportant allies. [24] --page 13-- The Limits of Trilateralism At the end of Carter's tenure, the Trilateralists considered their own project as a failure. The revolution in Iran and the Soviet intervention in Afghanistan were both interpreted as resulting fro1n a lack of Western deter1nination. A decision -1naking structure built on consensus, they argued, could not adequately avert the challenges to the capitalist world order. [25] The allies also displayed little willingness to share in the cost s of 1naintaining the Pax Alnericana. West Ger1nany' s Chancellor Hel1nut Sch1nidt showed little inclination to support the Carter -acbninistration' s policies of econo1nic expansion. He refused to defend the U.S. dollar. The Dollar's subsequent precipitous declin e in 1979 encouraged Carter to i1npose budget austerity and the Federal reserve to increase interest rates. [26] The world of nation states, which supposedly had already been overco1ne, had shown its nasty face. These foreign develop1nents did not si1nply cha llenge the idea of trilateralis1n. They also posed an i1mnediate threat to the interests of the Co1mnission' s corporate 1nembers. Third World assertiveness translated into higher prices for raw 1naterials, threatened their steady supply, and led at ti1nes to e xpropriation of assets. The weakness of the U.S. dollar i1nperiled the privileged role of U.S. banks in the world capital 1narkets. --page 14-- The critique of trilateralis1n on an international scale coincided with the rejection of tripartis1n in the do1ne stic arena. The Carter Acbninistration had developed the concept of tripartite re-industrialization to 1nanage the i1npact of growing foreign co1npetition. This was to be jointly conceived and i1nple1nented by representatives of capital, labor, and the state. Fro1n 1nanage1nent' s perspective, however, tripartis1n perpetuated precisely what was perceived to be the 1nain cause of unco1npeti ti veness: the acco1mnodation of labor's interests. In contrast, political action "against" the state held the pro1nise of i1nprovin g industry's conditions of accu1nulation at the expense of the state. It would also give fir1ns the freedo1n to pursue strategies to weaken labor or, if these failed, to 1nove out of production al together. The 1nanagers of industries in distress, with the exception of Chrysler, rejected Carter's offers for tripartite crisis 1nanage1nent. [27] In response to the international challenges and the new do1nestic agenda, 1nany internationalists abandoned trilateralist "acco1nodationis1n" and turned to the unilateralist po sition espoused by the supporters of Ronald Reagan. U.S. interest were to be furthered by the "free play" of 1narket forces. International cooperation was no longer considered necessary. Co1nplaints of other countries, that the U.S. budget deficit and high dollar were distorting the international 1nonetary and financial syste1n, went unanswered. [28] --page 15-- 509 Journal of World-Systems Research Instead, it was hoped that the unilateral actions would force other countries to pursue "structural (i.e., microeconomic) policy refor1ns to bring down inflation and free up labor, capital, and product 1narkets." [29] Thus Reagan I s unilateralis1n was not a rerun of Nixon I s "do1nesticis1n," but a conscious atte1npt to project Ainerica I s structural econo1nic power abroad and set the conditions for its econo1nic relations with other states. Internationalis1n was not abandoned. Rather, it was stripped of its "cos1nopolitan" rhetoric and beca1ne fir1nly rooted in "national interests." The li1ni ts of unilateralis1n, however, beca1ne apparent shortly after its adoption. When t.1exico threatened to default on its loans, the liquidity crisis threatened U.S. banks. In response, the Reagan Acbninistration negotiated a conunon debt crisis strategy with other creditor nations. t.1oreover, the policy of strengthening the dollar ha d 1nade i1nports ever 1nore cheaper and ubiquitous. Hard -pressed do1nestic industries cried for protectionis1n. The Acbninistration deflected these calls by a devaluation strategy. Yet, this presupposed cooperation with the other central banks, for unilateral action would have risked an uncontrollable flight out of the dollar. Thus, by the 1nid -1980s, the United States returned to cooperation. (Cooperation here should not be confused with har1nony of interests). [30] --page 16-- Despite these obvious li1ni ts of unilateralis1n, the return to a 1nore cooperative strategy at least towards the Western allies was 1nade possible precisely because unilateralis1n had achieved its 1nain objective: averting the challenges to capitalist rule. The power of labor, both inside and outside of the United States, had been weakened. The ter1ns of trade for raw 1naterials deteriorated and the debt crisis forced 1nany countries in the periphery to adopt a 1nore 1 welco1ning 1 attitude to foreign enterprises. [31] Using the Trade Deficit to Uphold Free Trade The devaluation of the Dollar, however, did not bear the expected fruits. The trade deficit with Japan, in particular, kept rising. In order to deflect do1nestic protest, then -Secretary of the Treasury, Ja1nes Baker, started a ca1npaign to open-up 1narkets for U.S. products worldwide. [32] The Trade Act of 1988 gave the Acbninistration tools to retaliate against foreign discri1niniation: Section 301 created a "'crowbar' that could, with the aid of threatened tariff retaliation, pry open foreign markets deter1nined by the United States to be closed to its exports." [33] --page 17-- The trade deficit and the co1nparatively low level of export dependency have thereby provided bargaining power to U.S. trade negotiators. The econo1nies of Japan and Western Europe have beco1ne addicted to exporting to the United States. An exclusion fro1n this 1narket would cause severe do1nestic proble1ns. So1ne co1npanies have already bowed to this pressure tactic. For exa1nple, the Ger1nan electric co1npany Sie1nens was threatened with expulsion fro1n the U.S. telephone 1narket if it did not cease to oppose the opening of the V'Jest European 1narkets for teleco1mnunication equip1nent. [34] 11ost efforts, though, were directed against Japanese practices. They cul1ninated in the Structural I1npedi1nent Initiative of 1990 which obliged Japan to 1nake sweeping changes in do1nestic co1mnercial practices. Thus, Baker's strategy ai1ned at placating do1nestic producers while regaining leadership initiative a1nong OECD nations by spearheading the trade liberalization efforts. In other words the late Reagan and early Bush acbninistrations tried to renew U.S. hege1nony by furthering the hege1nonic project of transnational capital. By the su1mner of 1990, however, the Alnerican foreign policy establish1nent feared that the Structural I1npedi1nent Initiative might not suffice to suppress the calls for protectionism, since it --page 18-- was unlikely to produce rapid results. It was alar1ned about reinvigorated isolationist forces given both the recession and the end of the Cold V'Jar. It urged do1nestic refor1ns to stein the tide. According to the president of the Council on Foreign Relations, Peter Tarnoff: "If ... the United States is consu1ned by its failure to resolve internal social proble1ns, Alnerican leaders will have little political support for an activist international role."[35] On the foreign front, these voices called for 1nore intensive tripartite consultation and even suggested that "the United States has to 1nake the difficult adjust1nent fro1n hege1non to partner." [36] These suggestions went unheeded, as the decisive defeat over Iraq in 11arch of 1991 te1nporarily reversed the relationship between do1nestic and foreign policy. For a short ti1ne, it appeared that international activis1n no longer required do1n estic prosperity and that it co1npensated for do1nestic failures. The victory over Sadda1n Hussein had sy1nbolically rewarded the U.S. population for its support of the foreign acti vis1n of its elites. In addition, 1nany U.S. co1npanies were awarded lucrative contracts fro1n Kuwait and Saudi Arabia. The foreign policy establish1nent had thus won a new license for international activism which it put to use by obtaining "fast-track" authorization fro1n Congress for the negotiation of a --page 19-- free trade agree1nent with 11exico. This "window of opportunity" for active internationalis1n, however, was threatened to be shut by the beginnings of the Presidential ca1npaign of 1992, in which all De1nocratic candidates were espousing so1ne kind of "It's ti1ne to take care of our own!" the1ne. Pat Buchanan, the Republican challenger of President Bush, assu1ned a clear isolationist "Alnerica First" stand. [37] Clinton's Industrial Policy Internationalis1n Bill Clinton, the De1nocratic challenger 1nost perceptive to 511 Journal of World-Systems Research internationali sin, won the election on a platfor1n that pro1nised to reconcile the concern for do1nestic jobs with an internationalist agenda. Since taking office, Clinton has, on the one hand, 1nore forcefully pursued the 1narket access strategy with Japan. While his acbninistration has not achieved co1mnit1nents to specific 1narket shares for U.S. products in Japan (a goal that was very 1nuch contested by the free trade co1mnuni ty within the USA), Japan is about to agree to extend the se1niconductor agree1nent to other industries such as auto1nobiles, auto parts, and --page 20-- teleco1mnunications. The se1niconductor agree1nent of 1991 had set a nu1nerical goal - but not a require1nent - for i1nproved 1narket access. [38] To what extent these agree1nents will reduce the growing trade deficits with Japan has to be seen. On the other hand, Clinton clai1ned strategies which would increase the co1npeti ti veness of U.S. businesses so that they could better take advantage of opportunities in world 1narkets. This position had been ridiculed by the Reagan free-1narketeers throughout the 80s. Even before Clinton 1nade Robert Reich, the fore1nost proponent of such an industrial co1npetitiveness strategy, head of his transition tea1n on do1nestic issues and subsequently Secretary of Labor, this position had gained so1ne elite acceptance. [39] A 1najor reason for this change of heart 1nay be the need to address the public's concern with jobs in a period of econo1nic stagnation. Still, the envisaged business -govern1nent partnership cannot be co1npared to the tripartis1n of the Carter era for the si1nple reason that labor and other subaltern interests have beco1ne so enfeebled that they are unlikely to play a 1najor role in any industrial policy sche1ne. Labor can no longer be bla1ned for the co1npeti ti ve proble1ns of U.S. industries. In the high -tech industries organized labor has never gotten a foothold. For the fordist core industries studies such as l1IT' s "The l1achine that Changed the World" have shown that --page 21-- "lean production" requires a lot 1nore changes in 1nanage1nent practices than the re1noval of work rules on the shop floor. [ 40] Thus, the idea that research and develop1nent as well as the training of workers are "public goods" has gained acceptance a1nong businesses which want to be co1npeti ti ve on a global s cale. Govern1nent has to either provide or subsidize these "public goods." Despite 1nounting support, a nu1nber of factors suggest skepticis1n about whether these targeted state policies to enhance international co1npeti ti veness can be i1nple1nented and deliver the desired results. U.S. 1nanagers continue to dislike "govern1nent interference." With the exception of the Pentagon, the executive lacks the capacity for carrying out a coherent policy. In so1ne fields, e.g. co1nputer chips, technology is advancing so fa st that 1nany co1npanies fear that any exclusive national technology strategy 1nay risk access to the latest international develop1nents. [ 41] As desirable a federally funded or 1nandated retraining offensive would be, it will take a strong labor 1nove1nent to fig ht for it. Organized labor, however, does not show any sign of recovery. Further1nore, any significant spending on industrial policy projects faces strong budget restraints. The record of the Clinton acbninistration so far does not dispel this skepticis1n. [ 42] However, even if Clinton 1nanages to i1nple1nent a 1neaningful industrial policy, its fruits could not be harvested in the short ter1n. His industrial policy internationalis1n 1nay soon loose its expediency in placating the public's wariness of the world 1nar kets. --page 22-- NAFTA: Free Trade against the De1nocrats The recent battle over the ratification of the North Ainerican Free trade Agree1nent (NAFTA) suggests, however, that a 1najor trade liberalization initiative 1nay nevertheless be politically feasibl e, even if it does not provide specific safeguards for jobs or co1nprehensi ve retraining opportunities. Clinton succeeded in obtaining Congressional approval to NAFTA against the 1najority of his own party 1nembers and against the vocal opposition of one of his key constituencies, organized labor. He did so without offering strong enforce1nent 1nechanis1ns against violations of each participating country's labor and environ1nental laws and without a co1mni t1nent to a broad retraining offensive. Clinton's achieve1ne nt can be interpreted in ter1ns of interest group politics and Presidential bargaining power. [43] His feat can also be read as a reflection of elite consensus and effective discursive practices. Though the political struggle over NAFTA deserves a 1nore in -depth analysis, a few observations based on a study about public opinion on free trade have to suffice here. [ 44] Public opinion polls on NAFTA revealed a significant gulf between elite and public opinion. In 1990, 86'.:o of the total Chicago Council on Foreign Relations --page 23-- elite sa1nple expressed support for opening negotiations on NAFTA, and after they were co1npleted in 1992 this support re1nained fir1n, at 84 '.:,, and did not change during Congressional deliberations. The public's opposition to NAFTA grew to a high of 63 '.:, in t.1arch of 1993. Public debate over NAFTA 1nobilized protectionist forces. In a t.1arch 1991 poll, while only 32 '.:, had "read or heard anything about the recent proposal to create a so -called 'North Alnerican free trade zone'," astounding 72 '.:, thought that NAFTA "would be 1nostly good for the U.S." By September 1992, however, only 54'.:o thought NAFTA to be 11 1nostly good" and the positions 11 1nostly bad" and "don't know" gained about evenly. In a survey taken in t.1arch 1993, opposition to NAFTA had grown to 63'.:o. Concern about jobs drove opposition to NAFTA. In t.1arch of 1991, a full 50'.:o of respondents to one survey feared the loss of Ainerican jobs. In a September 1993 poll, this number increased to 74'.:o. After V'Jhite House efforts to rally public opinion 1nany opponents beca1ne "undecideds". V'Jhere a Septe1nber 1993 poll revealed that 33 '.:, were in favor and 29'.:o in opposition to NAFTA, two 1nonths later, shortly before the televised debate between Vice -President Albert Gore and billionaire Ross Perot (No ve1nber 9) the percentage of those favoring the pact had risen to 48 '.:, while 41 '.:, re1nained opposed. 513 Journal of World-Systems Research The debate increased support considerably a1nong viewers: fro1n 34 '.:, to 57 '.:,. The acbninistration scored on the crucial issues of jobs and leadership. Post -debate attitude surveys revealed that 50 '.:, of the general population thought NAFTA would create 1nore jobs than it would destroy (up fro1n 42 '.:, in October), and 1nore than half said --page 24-- that the views of for1ner presidents and secretaries of state had 1nade the1n feel 1nore positive toward NAFTA. In trying to overco1ne the public's apprehension that Alnerican jobs 1night disappear south with a "giant sucking sound" (Perot), Al Gore did not only pointed out that in recent years the United States enjoyed trade surpluses with 11exico, but he also re1ninded the TV- audience of the significant role high tariffs played in bringing about the Great Depression. [45] Further1nore, President Clinton attacked unions for using "roughshod, 1nusclebound tactics" and "naked pressure" to inti1nidate De1nocratic law1nakers. [ 46] By so stereotyping unions, Clinton fed the widely -shared belief that high labor costs reduced Alnerican co1npeti ti veness. [ 4 7] Aware of the fact that the Ainerican public has been generally inclined to support U.S. leadership in world affairs, the acbninistration consciously fra1ned NAFTA as a grand foreign policy issue. [ 48] President Clinton kicked-off his NAFTA ca1npaign by convening all living for1ner Presidents, with the exception of Ronald Reagan, for a dra1natic public endorse1nent. In the debate with Ross Perot, Al Gore e1nphasized Alnerica' s unique international leadership role and played on Ainerican' s self -i1nage as an opti1nistic, can -do people. He thereby ca1ne across as 1nore "presidential," in contrast to Perot's inability to escape his i1nage as a protectionist displaying, in the words of Phil Duncan, a "testiness that bordered on anger." [49] --page 25-- In su1n, the deep seated skepticis1n of the public towards a free trade agree1nent with 11exico was neutralized by port raying NAFTA as a job creator, by discrediting trade unions as parochial fear-1nongers unable to adapt to the new i1nperatives of the 1narket place, and by invoking Ainerican leadership in the Western He1ni sphere . Prospects for a Sustained Internationalism Beyond this elite consensus and effective discursive practices, the internationalists benefit fro1n the consequences of their previous policies. First, the internationalists can ground their politics on the growing integration of the Ainerican econo1ny into world 1narkets. 11ore co1npanies face co1npeti ti ve i1nports, but the volu1ne of exports, the number of exporters, and the i1nportance of exports to so1ne co1npanies has considerably increased in the last decade. 11ore co1npanies have beco1ne dependent on foreign su ppliers and would feel threatened in their co1npeti ti ve position if protectionis1n would force them either to pay tariffs or to switch back to do1nestic supply sources. In su1n, the fear of retaliatory 1neasures by foreign countries has grown. --page 26-- Second, transnational operations have taken on a new quality. In the 1960s, invest1nent abroad ai1ned either at exploiting a different national 1narket 1nore profitably or at reducing certain production costs by co1nparison with ho1ne -country activities. By the 1980s, 1nultinationals pursued a strategy of worldwide integration. Production sites in various countries were increasingly connected through co1nplex global sourcing, production and sales networks. As a result, transnationals have beco1ne ever 1nore depend ent on a liberal world 1narket order. Technological innovations have beco1ne 1nore capital-intensive while a1nortization cycles have shortened. Therefore, 1nore co1npanies sell globally. Third, Japanese and others foreign co1npanies have invested heavily in the U.S.A. (partially in response to protectionist threats), thereby creating a do1nestic constituency for an open Alnerican econo1ny and subverting the protectionists' objectives. Foreign co1npanies within the United States contribute increasingly to the causes and the think tanks of the Alnerican internationalists. [ 50] Finally, foreign goods and capital have beco1ne a functional part of U.S. 1nacro-econo1nic steering. Foreign capital has largely financed --page 27-- the federal budget deficit. Rising i1nport levels have kept inflation low. They have partially co1npensated the fall of no1ninal wages in the low wage sectors of the econo1ny. [51] Global 1narket forces 1nay have beco1ne already so co1npelling that individual states, including the United States, have few alternatives other than to co1npete "a1nong the1nselves and with the rest of the world for talent, trade and capital."[52] States would thus tend to liberalize their tax, regulatory and social regi1nes to a nor1n established in the freest possible co1npeti tion. In the think-tanks fro1n V'Jashington to Tokyo, this kind of co1npetition a1nong states is already envisioned for the whole OECD -world. [53] In this vision the rise of regional trading blocks such as the European Co1mnuni ty or the North Alnerican Free Trade Zon e will not lead to a division of the world into separate blocs as an editorial of the Econo1nist feared. [54] "On the contrary," according to Rudiger Dornbusch, "it 1nay be a good way to achieve 1nul tilateral liberalization."[55] As with Baker's initiative of opening foreign 1narkets, a regional trading bloc can be interpreted as a crucial stepping stone for the realization of the final objective: a co1npletely liberal world 1narket order. The increasing nu1nbers of "strategic alliances" a1nong Japanese, European and U.S. corporations (e.g. t.1ercedes -t.1itsubishi) see1n to support the vision of "Triad Power" within an OECD free trade zone rather than a triad of 1nutually exclusive trading blocs. [56] --page 28-- These "strategic alliances" and the co1npelling strength of world 515 Journal of World-Systems Research 1narket forces have led nu1nerous observers to suggest the e1nergence a new, transnationalist hege1nonic project. [57] If realized, so1ne of the core steering capacities of the nation state would be transferred to supranational institutions (for 1naintai ning law and order worldwide) and to the co1npanies the1nselves. The latter would assu1ne control over i1nportant infrastructural services like teleco1mnunication. Class rule would no longer rely on the Keynesian, nationally organized co1npro1nise, but on the t hreat of plant closure or what sociologist Mike Burawoy has called the "rational tyranny of capital 1nobility". [58] Consent would be elicited by internal co1npany ladders of advance1nent, participation opportunities ("quality circles"), fringe benefits and philosophical thoughts on the environ1nent. Thus, the hege1nonic project of the transnational corporation 1nay be nascent in the crisis of US-hege1nony. The bourgeois utopia of a "borderless" capitalis1n, [59] however, has yet to be realized. The nation state is still alive, and not the least thanks to the transnationals themselves. Even such an international co1npany as Ford l1otor which earns 50 percent of its revenues abroad does not hesitate to call for i1nport barriers if it feels its 1narket shares are threatened. [60] Foreign 1narkets were supposed to be accessible, but not one's own ho1ne turf. --page 29-- Besides, this liberal hege1nonic project has an Achilles heel. It rests on the pre1nise that a liberal world 1narket order will lead to a long period of prosperity. If one does not believe in the assu1nptions of neo-classical econo1nics, then little evidence exists for such a clai1n. Especially the global financial 1narkets appear highly vulnerable to self -induced crises and 1nay in turn destroy the fabric of global co1mnodity exchange. In that case, the 1nore a country has beco1ne integrated in the global econo1ny, the 1nore it will be affected. The liberal 1narket project 1nay then beco1ne as quickly discredited as protectionis1n so1ne 60 years ago. Fro1n the perspective of the regulation theory a nu1nber of conditions would have to be 1net before a new dyna1nic accu1nulation of capital is likely to take place on a global scale. For exa1nple, no production paradig1n is in sight whose productivity increases would co1npensate for the concurrent increase in the technical co1nposi tion of capital. If growth can only be gained at the expense of others, then the ever faster race for co1npetitiveness 1nay lead to a crisis inducing divergence between productive capacities and social de1nand. [61] Further1nore, the strong belief in the viability of 1narket forces overlooks the fact that 1narkets function only if they are e1nbedded in for1ns of societal regulation. These for1ns can be as rudi1nentary as the rule of law. But even the rule of the law needs backing through force, a force which is still organized nationally. The enforce1nent of the liberal world 1narket order, therefore, still rest with the U.S. 1nili tary. For its deploy1nent, the Alnerican transnationals are dependent on popular suppor t. The potent force of anti-co1mnunis1n will be hard to substitute. If the public's desired role in foreign -policy is to wage successful crusades, [62] then neither Realpolitik nor trilateral "consensus" foreign policy will gain 1nass appeal. --page 30-- Conclusion So what are the reasons for the adherence of the United States to a liberal world 1narket order despite the erosion of the foundations for its original co1mnit1nent? In this paper I have focussed on the strategic behavior of internationalists inside and outside the Ainerican state: trilateralis1n, unilateralis1n, dollar devaluation, Structural I1npedi1nent Initiative, Gulf war, co1npetitiveness policies, plus selective concessions to protectionist interests. These initiatives served them to integrate the interests of other relevant groups in the Ainerican society and to deflect challenges to their internationalist agenda. The internationalists' strategies were supported by a couple of structural circumstances. I have suggested following factors: First, the internationalist's hege1nony is inscribed in the structure of the Ainerican state. Alternatives to the liberal agenda had difficulties in reaching the executive. Second, the process of internationalization increases the number of actors interested in libera 1 policies. Third, one of the 1nain social forces against liberalization, the trade unions, has been severely weakened. The unions have also not been able to for1nulate a co1nprehensi ve alternative to the liberal agenda. These factors, however, need further elaboration in future research. --page 31-- The i1nplications of 1ny findings for the future of the relations a1nong the core powers of the capitalist world syste1n are quite li1nited. My approach does not lend itself to future projections. It only shows that so far it was possible to 1naintain the co1mni t1nent to a liberal world 1narket order despite the erosion of the original foundations. It can, therefore, lend support to any speculation that suggests a liberal world 1narket order will survive the relative decline of U.S. econo1nic power and the need for capitalist cohesion in the face of co1mnunist challenges. However, whether this free 1narket order will soon be consu1mnated by its own contradictions or whether corporate internationalists will be able to 1naintain their hege1nony over U.S. foreign econo1nic policy even when the costs of this co1mnit1nent keep rising, re1nain open questions. Endnotes: l. See, Bauer, Ray1nond A., Ithiel de Sola Pool, Lewis A. Dexter, (eds), 1972: Ainerican Business and Public Policy: The Politics of Foreign Trade, 2nd ed., Chicago, Aldine Altherton, and Keohane, Robert 0., 1980: The Theory of Hege1nonic Stability and Changes in International Econo1nic Regi1nes, 1967 -1977, in: Ole Holsti et al. (eds), Change in the International Syste1n, Boulder, Col., V'Jestview. 517 Journal of World-Systems Research 2. Chase-Dunn, Christopher, 1989: Global For1nation. Structures of the V'Jorld-Econo1ny, Cambridge, t.1ass., Basil Blackwell, p. 177. 3. Friedberg, Aaron L., 1988: The V'Jeary Titan. Britain and the Experience of Relative Decline, 189 5-1905, Princeton, Princeton University Press, p. 22-88. 4. Pelling, Henry, 1963: A History of British Trade Unionis1n, London, St.t.1artin's Press, p. 169. 5. V'Jur1n, Cle1nens A., 1993: Business, Politics, and International Relations: Steel, Cotton, and International Cartels in British Politics, 1924-1939, New York, Ca1nbridge University Press. 6. Chase-Dunn 1989, supra note 3, p. 187. 7. See, Krasner, Stephen D., 1978: United States Co1mnercial and t.1onetary Policy: Unravelling the Paradox of External Stren gth and Internal V'Jeakness, in: Peter J. Katzenstein (ed), Between Power and Plenty: Foreign Econo1nic Policies of Advanced Industrial States, t.1adison: University of V'Jisconsin Press, p. 51 -87. 8. Goldstein, Judi th, 1986: Political Econo1ny of Trade: Institutions of Protection, in: Alnerican Political Science Review, 80 (1), 161-184, p. 180. 9. See, Cohen, Stephen D., 1988: The t.1aking of United States International Econo1nic Policy, 3rd edition, New York, Praeger, p. 178-190. 10. See, Shoup, Laurence H., 19 80: The Carter Presidency and Beyond. Power and Politics in the 1980s, Palo Alto, Cal., Ra1nparts Press, and Mills, C. Wright, 1956: The Power Elite, New York, Oxford University Press. 11. See, Jessop, Bob, 1990. State Theory. Putting Capitalist States in their Place, Cambridge, UK, Polity Press. 12. These concepts were developed by the so -called French regulation school. A regi1ne of accu1nulation is a dyna1nically conceived sche1ne of reproduction which takes into account both changes in the conditions of production and conditions of consu1nption. A strategy of accu1nulation describes the specific ways in which a single capital entity pursues its accu1nulation (work organization, 1narketing strategy, etc.) . V'Ji thin a regi1ne of accu1nulation different strategies of accu1nulation can co-exist. Forms of regulation are internalized rules and social procedures which incorporate social ele1nents into individual behavior. A 1node of regulation secures the co1npatibili ty a1nong the different for1ns of regulation within a specific regi1ne of accu1nulation (see, Lipietz , Alain, 1984: I1nperialis1n or the Beast of the Apocalypse, in: Capital and Class, No. 22, 81 -110). 13. See, Frieden, Jeff, 1988: Sectoral Conflict and Foreign Economic Policy, 1914-1940, in: International Organization 42(1), 59-90. 14. See, Gill, Stephen, 1990: Ainerican Hege1nony and the Trilateral Co1mnission, New York, Cambridge University Press, p. 41 -46. 15. See, Ferguson, Tho1nas, 1981: Von Versailles zu1n New Deal: Der Triu1nph des 1nultinationalen Liberal is1nus in Ainerika, in: Ainerika, Traum und Depression 1920-1949, Berlin, 436-450. For the concept of Fordism, see Lipietz, supra note 7. 16. See, V'Jolfe, Alan, and Jerry Sanders, 1979: Resurgent Cold V'Jar Ideology: The Case of the Co1mnittee on the Present Danger, in: Richard Fagen (ed.), Capi tali sin and the State in U.S. -Latin American Relations, Stanford, Cal., Stanford University Press, 41 - 75, and Gill, supra note 9. 17. See, Fuerst, Andreas, 1989: The "Interaction t.1echanis1n" Between Congress and the President in t.1aking U.S. Foreign Trade Policy, in: Carl-Ludwig Holtfrerich (ed.), Econo1nic and Strategic Issues in U.S. Foreign Policy, Berlin, de Gruyter, 67 -86. 18. See, Cohen supra note 9. 19. Gill, supra note 14, p. 143. 20. Trilateral Co1mnission Task Force Report, "Toward a Renovated International Syste1n," January, 1977, quoted in NACLA Report, 1981: Fro1n He1nispheric Police to Global t.1anagers, July/August, p. 6. 21. Fred Bergsten, quoted in Sklar, Holly (ed.), Trilateralis1n. The Trilateral Co1mniss ion and Elite Planning for V'Jorld t.1anage1nent, Boston, South End Press, p. 25. 22. t.1ead, V'Jal ter Russell, 1987: t.1ortal Splendor: The Ainerican E1npire in Transition, Boston, Houghton t.1ifflin, p. 53 -77. 23. As quoted in Sklar, supra note 21, p. 2. 24. See, Shoup supra note 10. 25. See, Rosati, Jerel A., 1987: The Carter Acbninistration I s Quest for Global Co1mnunity: Beliefs and Their I1npact on Behavior, Columbia, University of South Carolina Press. 26. See, Block, Fred, 1987: Revising State Theory, Philadelphia, Te1nple University Press, p. 114. 27. See, Scherrer, Christoph, 1992: I1n Bann des Fordis1nus. Die US-Auto-und Stahlindustrie i1n internationalen Konkurrenzka1npf, Berlin, Sig1na. 28. Gilpin, Robert, 1987: The Political Econo1ny of International Relations, Princeton, Princeton University Press, p. 155. 29. Nau, Henry R., 1990: The t.1yth of Alnerica I s Decline. Leading the V'Jorld Econo1ny into the 1990s, New York, Oxford University Press, p. 216. 519 Journal of World-Systems Research 30. Cohen, supra note 9, p. 215. 31. Gill, supra note 14, p. 110. 32. Cohen, supra note 9, p. 215. 33. Bhagwati, Jagdish, 1989: U.S. Trade Policy at Crossroads, in: The World Economy 12 (4) 439 -479, p. 440. 34. Projektgruppe, 1988: " ... Stueck fuer Stueck verkauft". Unlbau der Bundespost - Folgen fuer die Besch aeftigten, herausgegeben von der Deutschen Postgewerkschaft, Bezirk Hessen, Frankfurt, p. 35. 35. Tarnoff, Peter,1990: Ainerica's New Special Relationships, in: Foreign Affairs, 69 (3) 67 -80, p. 79; for si1nilar calls, see Kirkpatrick, Jeane J., 1990: Beyond the Cold War, in: Foreign Affairs 69 (l) l-16. 36. Bergsten, C. Fred, 1990: The World Econo1ny after the Cold War, in: Foreign Affairs 69 (3) 96 -112, p. 105. 37. Gergen, David, 1992: Ainerica' s t.1issed Opportunities, in: Foreign Affairs 71 (l), l-19, p. ll. 38. International Herald Tribune, t.1ay 25, 1994, pl. 39. Early in 1992, a pro1ninent 1nainstrea1n 1nacro -econo1nist, Fred C. Bergsten, chaired a panel on U.S. co1npeti tiveness appointed by President Bush and Congress which called for policies to help specific sectors (Co1npetitiveness Policy Council, 1993: A Co1npetitiveness Strategy for Ainerica. Second Report to the President & Congress, Washington, DC, U.S. Govern1nent Printing Office). See also: National Acade1ny of Sciences, National Acade1ny of Engineering, Institute of t.1edicine, 1992: The Govern1nent Role in Civilian Technology. Building a New Alliance, Washington, D.C., National Acade1ny Press. 40. Wo1nack, Ja1nes P., Daniel T. Jones, and Daniel Roos, 1990: The t.1achine that Changed the World, t.1IT -Study on the Future of the Autoinobile, New York, Rawson Ass. 41. See the case of SEt.1ATECH in International Herald Tribune, July 15, 1992, pl. 42. Faux, Jeff, 1993: Industrial Policy. Will Clinton Find the High-Wage Path?, in: Dissent 40(4 Fall) 466 -474. 43. For a list of the President's pro1nises to legislators, see Public Citizen, 1993: NAFTA' S Bizarre Bazaaar. The Deal t.1aking that Brought Congressional Votes, Washington, D.C., and, Anderson, Sarah, and Ken Silverstein, 1993: Nafta Price Tag, in: The Nat ion, Dec. 20, 1993, 752 -753. 44. Scherrer, Christoph, 1994: Freer Trade Elites and Fair trade t.1asses. Why Has Public Opinion t.1attered so Little?, Freie Universitaet Berlin, John F. Kennedy -Institut, Working Paper No. 65. All of the following references to surv ey data are docu1nented on pages 18 and 19 of this working paper. 45. Duncan, Phil, 1993: Perot Gores His Own Ox in Debate, in: Congressional Quarterly Weekly Report, 51 (45) 3105. 46. VJall Street Journal Europe, Nov. 8, 1993: 2. 47. Scherrer, 1994, supra note 44, p. 16. 48. Newsweek, Nov. 15, 1993: 33. 49. Duncan 1993, supra note 45. 50. Choate, Pat, 1990: Agents of Influence. How Japan's Lobbyists in the United States t.1anipulate A..1nerica I s Political and Econo1nic Syste1n, New York, Alfred A. Knopf. 51. Bowles, Sa1nuel, David t.1. Gordon, and Tho1nas E. VJeisskopf, 1990: After the VJaste Land. A De1nocratic Econo1nics for the Year 2000, Ar1nonk, N. Y., t.1. E. Sharpe. 52. Editorial "How to Tell a Pro -European," VJall Street Journal/Europe April 26, 1989: 6. 53. See, Hufbauer, Gary Clyde (ed.) 1990: Europe 1992. An A..1nerican Perspective, VJashington, D.C., Brookings, and Oh1nae, Kenichi, 1990: The Border less VJorld, New York, HarperCollins. 54. Economist April 20, 1991: 3. 55. "Dornbush on Trade" in: Econo1nist, t.1ay 4, 1991: 75. 56. Oh1nae, Kenichi, 1984: Triad Power, New York, HarperCollins. 57. E.g. Radice, Hugo, 1988: Capital, Labour and the State in the VJorld Econo1ny, paper presented at the International Conference on Regulation Theory, Barcelona, 16. -18. June. 58. Burawoy, t.1ichael, 1985: The Politics of Production, London, v-erso. 59. Oh1nae 1990, supra note 56. 60. VJall Street Journal/Europe, Jan. 14, 1991: 3. 61. Boyer, Robert, and Benja1nin Coriat, 1987: Technical Flexibility and t.1acro Stabilization, CEPREt.1 AP, No. 8731, Paris. 62. Augelli, Enrico, and Craig t.1urphy, 1989: A..1nerica I s Quest for Supre1nacy in the Third VJorld: An Essay in Gra1nscian Analysis, New York, Pinter Publishers, p. 71. Volume1Issue1Scherrer_Page_01 Volume1Issue1Scherrer_Page_02 Volume1Issue1Scherrer_Page_03 Volume1Issue1Scherrer_Page_04 Volume1Issue1Scherrer_Page_05 Volume1Issue1Scherrer_Page_06 Volume1Issue1Scherrer_Page_07 Volume1Issue1Scherrer_Page_08 Volume1Issue1Scherrer_Page_09 Volume1Issue1Scherrer_Page_10 Volume1Issue1Scherrer_Page_11 Volume1Issue1Scherrer_Page_12 Volume1Issue1Scherrer_Page_13 Volume1Issue1Scherrer_Page_14 Volume1Issue1Scherrer_Page_15 Volume1Issue1Scherrer_Page_16 Volume1Issue1Scherrer_Page_17 Volume1Issue1Scherrer_Page_18 Volume1Issue1Scherrer_Page_19