'supraterritorial relations between peoples'.20 A full definition of the global. 8 ..... time for the country and the ruling People's Action Party (PAP) wanted swift.
New Political Economy, Vol. 7, No. 1, 2002
Globalisation Makes of States What States Make of It: Between Agency and Structure in the State/Globalisation Debate JOHN M. HOBSON & M. RAMESH Across the social sciences the last decade has witnessed a proliferating interest in the relationship between the state and globalisation . By the early 1990s a range of writers working within what we label a structuralist approach asserted that globalisatio n is, if not challenging the viability of the sovereign state, then at least forcing it to adapt its policies to conform to the new global reality— being ‘hollowed out’, as the phrase had it. The pendulum then swung the other way when an ‘agent-centric’ backlash emerged, insisting that states have what we call agential power, such that they can mitigate and even shape global structures. In this article we build upon an emergent third way, or ‘structurationist’ perspective, between these two antinomies, in which we synthesise structuralist and agent-centric theory. We begin in Part I by taking stock of the central issues in the state/globalisatio n debate and examine the various structuralist and agent-centric approaches, while Part II sketches the theoretical outlines of a structurationis t approach and conceptualises what we call the spatial promiscuity of the state. In Part III we apply this approach to the case of Singapore. We choose Singapore only because it provides an excellent litmus test for critically appraising the various positions on globalisation , including our own, not least because Singapore is a small state that has perhaps the most globalise d economy in the world. I. The state/globalisatio n debate Much, though certainly not all, of the literature on globalisation is cast in terms of two main propositions : either a ‘strong globalisation /decline of the state’ or ‘weak globalisation /strong state’ thesis. Another way of categorising this is to note that the former theorists essentially privilege (the global) structure as a ‘realm of necessity’, while the latter privilege agency (states). The structuralist s tend to highlight the overwhelming constraints imposed by the structure of John M. Hobson & M. Ramesh, Government and International Relations, University of Sydney, Merewether Building, NSW 2006, Australia. ISSN 1356-346 7 print; ISSN 1469-9923 online/02/010005-1 8 Ó DOI: 10.1080/1356346012011549 9
2002 Taylor & Francis Ltd
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John M. Hobson & M. Ramesh global capitalism and accordingly view states as weak, whereas their opponents assert the continued vitality and centrality of the sovereign state-as-agent. It is, of course, possible for ‘structuralists ’ to conceive globalisation in agent-centric terms, as when they focus on the agency of multinationa l corporations (MNCs) or other global non-state actors, and for ‘agent-centrists’ (e.g. statists or neorealists) to privilege international structures.1 But whichever we designate as the agent and the structure, the main point is that a pure agent-centric or a pure structure-centric analysis is problematic and that only by synthesisin g these two extremes can we progress to an adequate theory of the relationship between states and globalisation . The structuralis t approaches Structuralist interpretation s of globalisatio n rest on the assumption that the capitalist world economy forms a global structure which requires states to adapt (i.e. conform) to its constraining logic. Beyond this, there are signi cant differences among them with respect to the level of causal power they attribute to the global structure. To capture the differences, we differentiate hard from soft structuralism, which are located along a continuum (see Figure 1). Structuralism
Global structure transcends the sovereign state, rendering it increasingly obsolete
Hard
Agent-centrism
Sovereignty allows states to resist extra-territorial in¯ uences
Global structure `hollows out’ the state, but requires the sovereign state for its own reproduction Soft Globalisation is enabled by the actions of states
FIGURE 1. Classifying theories of the state and globalisation.
At one extreme of the continuum lies the pure form of hard structuralism, which conceives the relationship between the global capitalist economy and the state in pure zero-sum terms, interpreting the spread of globalisation as being accompanied by the growing obsolescenc e of the sovereign state.2 As Camilleri and Falk typically argue, ‘global processes and institution s are invading the national state and … [are] dismantling the conceptual and territorial boundaries that have traditionally sustained the theory and practice of state sovereignty’.3 They conclude that states have no choice but to delegate or transfer their authority to international and supranational organisations.4 Soft structuralist s argue that, although states remain sovereign, they are, however, being ‘internationalised ’ or ‘hollowed out’ by the disciplinary power of globalisation. 5 Putting on a ‘golden straitjacket’ (Friedman)6—i.e. the promotion of neoliberal economic policies—leads to a situation in which states are dragged into a ‘race to the bottom’ as they adapt national political and economic life to the global economy in order to secure the national economy’s survival. Simultaneously, this process unintentionall y but necessarily provides a conductive 6
Globalisatio n Makes of States What States Make of It environment for the reproduction of globalisation . Thus it is often assumed that global capitalism requires the existence of a system of sovereign states for its reproduction. 7 However, despite this important difference, in both variants of the structuralist thesis states are depicted as little more than Tra¨ger or passive victims of the global structure. Because the global structure is conceptualised as a realm of necessity to which states must adapt, states are accordingly denied any global agential power (i.e. the ability of states to shape or even buck the logic of the global structure). The agent-centric approache s Structuralism has recently been challenged by what we call ‘agent-centrism’. At one end of the continuum lies the pure hard agent-centrist approach, which constitutes the antithesis of the hard structuralist approach and reproduces its pure zero-sum conception of power: globalisatio n remains weak to the extent that the national sovereign state remains strong. Here the state is granted a defensive agential power, such that it can resist the imperatives of globalisatio n and conduct policy free of global structural constraint.8 Such writers view global linkages as being too weak to transcend or even constrain states,9 leading some to declare globalisatio n as a redundant concept.10 Most emphasise not only continuing national diversity, but also that global actors remain embedded within national states.11 Many such writers prefer the term ‘internationalisation ’ to globalisation , because the former acknowledges the state’s central location in the international system.12 By contrast, at the other extreme of the continuum lies the pure soft agent-centrist position which grants the state global agential power actively to promote globalisation . This position is the antithesis of the pure soft structuralist approach: instead of regarding the state as a passive victim that must adapt to global imperatives, soft agent-centrists claim that states are able intentionally to promote a permissive environment within which global structures develop.13 Some theorists argue that the rise of MNCs, for example, is speci cally bound up with the actions of states or the proactive policies of the US hegemon in its economic decline phase.14 In sum, while these different positions generate important insights, no single position fully captures the complex relationship between states and globalisation . There are perhaps three major problems, which stem from the terms of reference of the state/globalisation debate itself. First, the debate tends to promote a zero-sum conception of power in which there is a trade-off between global structures and states-as-agents . For structuralists , the global economy is allpowerful and transcends states (hard structuralism ) or requires them to adapt to its imperatives (soft structuralism). For agent-centrists , either the global economy is weak and states are all-powerful (hard agent-centrism) or agential states are primary and globalisatio n is derivative (soft agent-centrism). Second, the parameters of the debate tend to promote sociologically reductionist analyses, in that each position exaggerates the power of one over the other: states for agent-centrists and global structures for structuralists . Third, the various positions reproduce a logic of spatial separationism , or what Ian Clark aptly calls the 7
John M. Hobson & M. Ramesh ‘Great Divide’, such that there is little or no notion that the global, the national, the regional and the domestic realms are entwined, and that they all have a degree of autonomy.15 Thus in privileging the global, structuralist s necessarily ignore the autonomous impact of domestic and national forces, while agent-centrists do not suf ciently enquire as to how the state is embedded in the global. This is paradoxical given that many theorists of globalisation , usually structuralists, assume in the words of one prominent theorist that ‘the central novelty of globalisatio n as a concept … lies in the fact that it de es traditional conceptions of levels of analysis’16 (where, traditionally, theorists assumed that the various spatial realms could be wholly separated out and that one realm could be ontologicall y privileged over the others).17 II. Beyond the state/globalisatio n divide Ultimately both sides of the debate produce a lop-sided analysis of the relationship between states and globalisation . However, in recent years, a new third way or structurationis t approach appears to be emerging, which is able to overcome the restrictive parameters of the conventional state/globalisatio n debate.18 Our argument seeks to build on this approach. To correct for the de ciencies of the conventional state/globalisatio n debate we seek, rst, to develop a structurationist approach that enables us to go beyond the antinomies of agent-centrism and structuralism by applying a ‘collective’ both/and logic that transcends binary either/or thinking and, second, to develop a ‘theory of the state’ which accords it agential power but also recognises that the state is embedded within, and shaped by, domestic and global social forces/structures. This all comes together in our concept of the state as spatially promiscuous. Our ‘structurationist ’ approach begins with a simple observation, summarised succinctly by Alexander Wendt: ‘(1) human beings and their organizations [e.g. the state] are purposeful actors whose actions help reproduce or transform the [domestic and global] society in which they live; and (2) society [global/domestic] is made up of social relationships , which structure the interactions between these purposeful actors’.19 Thus ‘global life’ embodies two ‘truisms’: that states are purposeful agents that shape and determine the global system within which they reside and, conversely, that the global system shapes states. In short, states and globalisatio n are mutually re exive and are embedded in, or are co-constitutive of, each other. The adoption of a ‘both/and’ collective-logi c approach reconceptualise s global structures and agents (states) as doubled-edged . Here the global structure represents not just a realm of constraint but also a realm of opportunity . The global realm is simultaneousl y both a realm of constraint that de nes parameters to which states must adapt and a resource pool into which states-as-agents dip in order to enhance their power or interests either in the external or internal realms. Accordingly, states are neither passive victims of global structures nor purely autonomous agents. Of course, it is necessary to brie y spell out what we mean by ‘global structure’. Here we follow Jan Aart Scholte’s useful de nition where he points out that globalisatio n is akin to a process of deterritorialisation , or what he calls the ‘supraterritoria l relations between peoples’.20 A full de nition of the global 8
Globalisatio n Makes of States What States Make of It structure or global architecture would in our view necessarily require a lengthier discussion (if not a whole article), not least because, rst, we would need to specify the multiple faces of the global structure—environmental, social, cultural, economic, military and political;21 and, second, if we look at each of the global realms we will actually nd that they are rarely purely global, but are also constituted by other spatial realms. Thus, for example, MNCs, which are often assumed to be one of the main agents of global production, are not always purely global, but are sometimes constituted in part by national forces.22 Nevertheless, for the purposes of this article, we are interested in the economic face of the global structure. Following Scholte, the global structure that we have in mind is constituted by trans- or supra-territorial market, production, money and nance relations that are not reducible to inter-national or ‘inter-territorial’ relations.23 Our second theoretical objective here is to pay special attention to the state and state–society relationship. While mainstream International Relations (IR) theory—neoliberal institutionalis m and especially neorealism—has, in Waltz’s terms, ‘no theory of the state’,24 it is vital that we correct for this de ciency if we are to realise fully the requirements of our ‘structurationis t approach’. In essence, we seek to occupy a middle ground between those theories that tend to emphasise or privilege social forces over states (e.g. Marxism and liberalism) and those that reify state power over social forces (e.g. statism and neorealism). NeoMarxists are surely correct in insisting that states are fundamentally embedded in social forces, but, in our view, the concept of the ‘relatively autonomous’ state does not go quite far enough in revealing the agential power of the state. Thus ‘in the last instance’ states are in an ultimate sense beholden to ful lling the requirements of the mode of production, even if they have to go against the short-term interests of individual capitalists to achieve this.25 While some statists, neorealists and neoliberal institutionalist s insist on granting the state power, they err by neglecting to examine the partially autonomous impact of domestic (and international /global) social forces upon the state.26 In effecting a balance here, we seek to break the arti cial divides (global and subnational) that such theorists have created so as to separate the state from social forces, and instead seek to reveal how states-as-agents are socially embedded in a range of non-state actors and social structures. In particular, in applying a ‘both/and’ logic, we suggest that social forces both enable and constrain states. Rather than envisage a zero-sum game of power between states and non-state actors/structures, we assert that states are nested or socially embedded within the domestic and global realms. Thus when the state is deeply nested and cooperates by making synergistic linkages with domestic, internationa l and global non-state actors and institutions , the greater are the potential gains that accrue to all the various parties.27 While the effect of entering into a nested or cooperative relationship with global actors implies an acceptance of external constraints, as structuralists argue, it is also symptomatic of a set of expanded opportunitie s that ow from such a relationship . Nevertheless, this is not to rule out those situations in which the state and non-state actors nd themselves at odds with each other. Accordingly, the relationship between the two is best characterised as one of ‘competitive cooperation’, rather than one of pure cooperation. In short, states have re exive agential power, such that they can enhance their 9
John M. Hobson & M. Ramesh power by working ‘through’ or ‘with’, rather than ‘against’, social forces at the domestic, regional and global levels. Ultimately, we insist that states and state–society complexes are autonomous variables, which shape as well as sometimes mitigate the logic of global and international structures, not least by entering into cooperative relations with other states and non-state actors. In this sense, conceptualisin g the agential power of states is fundamental to our structurationis t ‘theory of the state’. In sum, the main problem with the traditiona l agent-centric and structuralist theories is that they necessarily force us to pick a winner: either the state or the global structure. But if we adopt a collective-sum rather than zero-sum approach, we can envisage the point that states enhance their power ‘through’ or ‘with’ global (and domestic) forces. Moreover, the game is not simply ‘win–win’, but can also be ‘lose–lose’. States that do not adapt to prevailing social structures, global as well as domestic, tend to come off worse. Thus the appearance of strength tends to mask an underlying weakness—Zaire is a case in point. In sum, though, states in general are both constitutiv e in that they shape and help constitute the global realm, and adaptive (and in a minority of cases maladaptive—North Korea is a case in point) in that they ‘endogenise’ global in uences by conforming or adapting to the structure of the global economy. In this way, states play a major role in creating and maintaining the global architecture. Fundamental to our theory of the state is the notion that states are ‘spatially promiscuous’. States reside within the ‘vortex’ of the global, the regional and the domestic spatial realms, and their unique socio-spatia l location enables them to mitigate the logic of structures (global or domestic) and/or to adapt (i.e. conform) to the requirements of such multi-spatial structures. The structuralist literature errs by assuming that states are ‘territorially xed’ and are, therefore, fundamentally caught within a kind of territorial trap. It assumes that global capital can ‘exit’ the national territory and dictate terms to the state as a result of its ability to out ank it. Such a position is problematic precisely because it fails to recognise that states are spatially promiscuous. Thus while states cannot physically move across territory, nevertheless they have the ability to dip into the global realm to circumvent, or adapt to, constraints faced at the domestic, regional or global levels. Moreover, they can sometimes also turn to the domestic realm to escape global constraints. Put simply, it is the spatial scope derived from its unique socio-spatial location within the vortex of the global and domestic realms that confers such exit or out anking powers upon the state. The point here is that the spatially promiscuous state enables—intentionall y and unintentionally —the convergence and integration of the global, regional, national and subnational realms.28 This is signi cant because it reveals that states and the global structure are not mutually antagonisti c (as in the conventional debate), but are co-constitutiv e and in fact promote the reproduction of each other. More speci cally, states have three exit and three adaptive options available to them (Figure 2). States employ exit strategies when they seek to overcome or mitigate structural constraints by playing off the different realms against each other. That is, they are able to ‘exit’ from the domestic realm when they face certain constraints and draw upon the international or global realms in order to 10
Globalisatio n Makes of States What States Make of It Exit Strategies
Adaptive Strategies
First exit strategy: the state dips into the global realm to mitigate or overcome domestic constraints
First adaptive strategy: the state turns to the global realm to conform to domestic structural constraints
Second exit strategy: the state reforms the domestic realm to mitigate or overcome global structural constraints
Second adaptive strategy: the state reforms the domestic realm to conform to global structural constraints
Third exit strategy: the state dips into the global and international realms to mitigate global structural constraints
Third adaptive strategy: the state dips into the global realm to conform to global structural constraints
FIGURE 2. The global strategies of the ‘spatially promiscuous’ state.
lessen or overcome such constraints; or, when confronting global pressures, they can sometimes ‘exit’ and draw upon the domestic in order to lessen and sometimes mitigate such constraints. Conversely, they employ adaptive strategies when trying to conform to structural constraints. Speci cally, states can dip into the global or international realms in order to counter domestic challenges and/or buck the logic of domestic structural constraints ( rst exit strategy), or they can dip into the domestic realm to overcome or mitigate global challenges (second exit strategy), or they can dip into the global or international realms to mitigate global challenges (third exit strategy). There are plenty of examples of states employing the rst exit strategy. Contrary to the global structuralists ’ claim that the rise of internationa l institutions is eroding national sovereignty, states often deliberately bind themselves to international agreements to enhance their ability both to resist domestic demands as well as push through measures not otherwise possible due to oppositio n from powerful domestic groups. Thus acceding to the GATT and the WTO has enabled states both to resist domestic demands by industrial groups for trade protectionism and deepen the liberalisatio n process within their national societies. Invoking the ‘necessity of globalisation ’ argument—‘there is no alternative’, as Margaret Thatcher famously put it—is a common ploy utilised by governments. There are various examples of the use of the second exit strategy in the area of taxation. Thus, instead of slashing effective corporate income tax rates and shifting the burden to consumers in order to prevent capital from ‘exiting’, as is commonly believed to have widely occurred,29 OECD governments have actually tightened scal regulations on international rms and have managed to increase the burden of corporation income tax.30 Taxes also offer examples of the use of the third exit strategy. European Union members have not responded to their increased vulnerabilit y to capital ight by loosening their regulations, as the structuralist s claim, but have instead collectively agreed to implement measures that discourage predatory tax competition. 31 Thus states have resorted to internationa l institution s and have implemented international agreements in order to buck the efforts of MNCs to avoid 11
John M. Hobson & M. Ramesh tax. In general, various international institution s have enabled states to come together and cooperate, thereby preventing the Hobbesian scenario of an economic war of all against all (otherwise known as the scal ‘race to the bottom’). But it would be wrong to conclude from the discussion so far that states can do simply as they choose, free of global and domestic constraint. Globalisation is not simply what states make of it; globalisatio n also makes states. To effect a structurationis t synthesis, we need to focus on the three adaptive strategies that states employ so as to conform to the requirements of global (and domestic) structural imperatives. Thus states often dip into the global realm to conform to domestic structural imperatives ( rst adaptive strategy), or they dip into the domestic realm to conform to global structural imperatives (second adaptive strategy), or they dip into the global realm to conform to global constraints (third adaptive strategy). A clear example of the rst adaptive strategy is to be found in the area of intellectual property rights. Under pressure from domestic producers of media products, the US government has constantly sought internationa l agreements to free up restrictions on trade in cultural products. For the same reason, the French government has sought international guarantees that would enable it to protect its domestic producers. Regarding the second adaptive strategy, it is clear that most governments cannot conduct monetary policy entirely free of global considerations . Interest rate policy, for example, although partially shaped by domestic concerns, is fundamentally tied to global interest rate movements. Governments are indeed concerned to appease international nance by trimming their monetary policies and keeping scal de cits in check. Finally, returning to the example of trade, the third adaptive strategy concerns the way in which states are disciplined by multilateral institutions . In particular, while these institution s have in part enabled states to increase their exports, they have also disciplined them and pressed them into maintaining and deepening their commitment to free trade. This is an excellent example of the way in which the ‘external’ realm is both a realm of constraint and opportunit y (given that we noted above how such internationa l institution s have also at times enhanced the ability of states to resist the rent-seeking pressures of domestic interest groups and have enabled states to liberalise their domestic economies). In sum, we argue that states both shape, and are shaped by, domestic and global structures; that they cannot be sociologically reduced to any one of these structures; and that none of these structures can be reduced to state power. The crucial point to note is that, in pursuing these various exit and adaptive strategies, states come to promote—intentionall y and unintentionally —linkages between the domestic, regional and global realms, thereby enabling the development of an increasingly integrated global architecture. States therefore play an important enabling or constitutive role in the globalisatio n process and one that is not entirely at states’ expense, but is rather bound within a positive-su m relationship in which global and domestic forces and states enable each other’s reproduction. To assume, as is so often the case, that globalisatio n implies the demise or end of the state is 12
Globalisatio n Makes of States What States Make of It recklessly premature…. [S]tates have played a key role in promoting the rise of supraterritoriality . Moreover, they remain prominent players in the contemporary governance of global ows and show every sign of retaining that signi cance in the twenty- rst century. We therefore do well to abandon all assumptions that globality and state are inherently contradictory.32 To illustrate this model of the state/globalisatio n relationship , we now turn to examine the case of Singapore. III. The Singaporean state in the global/national vortex We choose to analyse Singapore because it provides an excellent litmus test for the various positions found in the existing literature, given that it is a small state with perhaps the world’s most globalised economy, as measured in terms of foreign trade and investment.33 We nd that state policies in the last three decades provide strong evidence for the structurationis t model. From the outset, following its expulsion from Malaysia in 1965, the Singaporean state recognised that, due to its lack of natural resources and small domestic market, it could only survive by participating in the global economy. It viewed the global economy not only as a constraint on what it could do, but also as offering immense opportunitie s and, accordingly, pursued a exible multi-pronge d strategy that utilised both global and domestic resources.34 In the following discussion we will argue that the Singaporean state’s engagement with the global economy has gone through three broad phases since independence: (1) an imported globalisatio n phase from 1965 to 1985; (2) a mixed defensive-domestic /imported global phase from 1985 to 1992; and (3) an exported globalisatio n phase since 1992. As shown in Figure 3, at any given time the state has pursued a range of exit and adaptive strategies simultaneously , the exact contours of which were determined by its objectives and the external and internal circumstances with which it was faced. Over the years the state has employed the entire range of strategies (except for the rst adaptive strategy) depicted in Figure 2. Needless to say, the move from one phase to another did not represent a complete departure, as each phase built upon the preceding phases. Imported globalisation : 1965–1985 For two decades after 1965 Singapore pursued an imported globalisatio n strategy, where the state sought to nest the island’s economy rmly within the global economy and thereby to attract (i.e. import) foreign MNCs to relocate within Singapore from where they would promote export-oriented industrialis ation. As with Japan, the Singaporean state has been normatively governed by the belief that it is a small (city) state with few indigenous resources which left it with no option but to ‘go global’. The strategy had two components: rst, to overcome domestic constraints to export-oriented industrialisatio n (i.e. rst exit strategy) and, second, to create a domestic political–economic environment hospitable to global capital (i.e. second adaptive strategy). 13
John M. Hobson & M. Ramesh Exit Strategies
Adaptive Strategies
1965± 85: Imported Globalisation
1st exit strategy: state seeks to attract MNCs to Singapore in part to overcome domestic constraints to national economic development
2nd adaptive strategy: to attract MNCs and to promote economic growth, the state reshapes its domestic political economy to conform to global requirements
1985± 92: Mixed DefensiveDomestic/ Imported Global
2nd exit strategy: state promotes local capital to mitigate the constraints of MNC-led development ; MNCs promoted only in select areas of services and high value-added manufacturing
2nd adaptive strategy: state seeks to reshape domestic economy in order to conform to changing global imperatives
1992-Present: Exported Globalisation
3rd exit strategy: state promotes developments in the global realm to overcome global structural constraints
3rd adaptive strategy: state dips into the global realm to conform to global constraints
FIGURE 3. The Singaporean state in the global/national vortex.
In the 1960s Singapore was primarily an entrepoˆt to the region with a large service and a edgling manufacturing sector. The domestic bourgeoisie at the time was conservative and lacked capital and technological sophistication ; elements of it displayed sympathy for oppositio n parties. This was a dif cult time for the country and the ruling People’s Action Party (PAP) wanted swift economic results to strengthen its hold on of ce, an outcome that domestic capital was thought to be incapable of delivering. Nor was the option of promoting domestic industrie s behind protective barriers viable—as was originally pursued after 1945 in Japan, South Korea and Taiwan—because of the small size of its home market. The government sought to escape these domestic constraints to economic growth by turning to MNCs and world markets ( rst exit strategy). The MNCs were thought to have the capital and technology that Singapore needed and, more signi cantly, were expected to open up new markets for the island’s exports.35 The MNCs themselves had few reasons to be attracted to Singapore and the government sought to redress the problem by employing the second adaptive strategy. It began to foster assiduousl y conditions that would attract such rms to the island by offering negligible tariffs on imports, a developed industrial infrastructure , inexpensive industrial land, a low tax regime and a wide range of regulatory and scal bene ts. In addition, it provided a disciplined and cheap labour force which was expected to appeal to MNCs looking for overseas sites to which they could relocate their labour-intensiv e production activities.36 The government’s task was made somewhat easier by the international conditions that prevailed at the time. Flush with cash, large Western rms were looking 14
Globalisatio n Makes of States What States Make of It overseas for investment opportunities , but all too often came up against investment barriers erected by host governments fearful of foreign domination of their economy. By contrast, Singapore’s central location in a densely-populate d region, coupled with its myriad incentives, made the island highly attractive to foreign MNCs. The strategy paid off: foreign direct investment (FDI) ooded in37 and, to the great satisfaction of the government, the MNCs were heavily involved in exports.38 This was accompanied by a rapid development of the economy coupled with declining unemployment rates.39 The state thus employed the rst exit strategy as it dipped into the global realm to mitigate domestic constraints to its economic development. But this exit strategy was complemented by the state’s (second) adaptive strategy of forming synergistic linkages with global capital. As soft structuralists would predict, we nd that the state took various measures, most notably to maintain low taxes and labour costs, that conformed to the interests of global capital. While the state did experience some diminution of capacity as a result, it also gained additional capacity from the rapid economic growth that its measures promoted. The increase in real income and employment coupled with increases in public revenues allowed the state to spend more not only on economic development but also on health, housing and education.40 Politically too, the state began to enjoy a high level of support and legitimacy among the population. Mixed strategy: 1985–1992 The second phase opened with the recession of 1985–6, which was the rst time in two decades that the economy experienced negative growth. This led to the adoption of the second exit strategy in which the state sought to promote local capital to mitigate the perceived constraints of foreign MNCs. This was not, however, a complete volte face, as the new strategy did not so much supplant as re ne the ‘imported globalisatio n strategy’ the state had been pursuing. The origins of the second globalisation phase can be traced back to 1979 when Singapore launched what was referred to locally as the ‘Second Industrial Revolution’, intended to attract foreign investment speci cally in the area of capital-intensiv e manufacturing. It was essentially the same strategy as before, but with the difference that it explicitly sought to discourage low-wage manufacturing by increasing labour costs,41 as well as to concentrate its scal largesse only on foreign rms with higher technological or capital content. The government pushed ahead with the high-wage strategy despite opposition from foreign and domestic rms, which argued that increasing labour costs were reducing the island’s attractiveness to investors. Then came the 1985–6 economic recession which demonstrated the constraints that the structure of global capitalism imposes on peripheral countries. It also underscored the fact that the imperatives of MNC-led development were such that the island would be forever locked into low-wage labour-intensiv e exports, which would perpetuate low income despite rapid economic growth and handsome pro ts for investors. To temper its reliance on foreign capital, the government turned to domestic capital which was viewed as less likely to desert the country because of 15
John M. Hobson & M. Ramesh disagreement with the government’s policy direction. Moreover, the small and medium enterprises (SMEs) that characterised domestic capital were no longer seen as unhelpful as they had been in the past. As the industrialise d countries discovered in the 1980s, such rms were the engines of innovation , growth and employment in the emerging economy. However, because local SMEs lacked both capital and technology to compete in world markets, or even in the domestic markets in sectors in which MNCs were present, the government stepped in to create a conducive environment for the rapid development of local capital. It also began to support its large domestic rms, which tended to be concentrated in nancial services—again a rapidly growing sector in the world economy as a whole.42 Under the Promising Local Enterprise (PLE) programme, the Economic Development Board (EDB)—Singapore’s pilot development agency—committed itself to developing local companies with an annual turnover of over S$100 million. ‘The EDB aims to nurture existing PLEs into Asian MNCs’, the EDB bluntly declared.43 Many of the incentives that had in the past been available only to foreign rms were now made available to domestic SMEs. However, the shift in policy direction did not mean that reliance on foreign MNCs was abandoned altogether. The government continued its ‘imported globalisatio n strategy’, but sought to attract only those MNCs that were engaged in higher value-added manufacturing. Correspondingly , it discouraged foreign rms that wished to locate in Singapore for low wages. Structuralists assume that states irting with globalisatio n cannot escape joining the ‘race to the bottom’ in terms of wages and working conditions . There is a certain truth to this insofar as the government did have to back off from its strategy of pushing up wages following the mid-1980s recession. At the same time, it implemented an alternative strategy of enhancing domestic capital so as to expand its economic base and at the same time reduce dependence on foreign MNCs. While the state did not again deliberately try to raise wage levels, the ensuing tight labour market pushed up the wages anyway. However, it would be wrong to conclude that the state could conduct policy free of global constraint. Its strategy of promoting domestic rms was carefully designed not to convey the wrong signals to foreign investors, who were still needed in the targeted sectors of capital-intensiv e manufacturing.
‘Exported globalisation ’: 1992–present In the early 1990s the state altered its globalisation strategy yet again, this time pushing domestic capital to ‘go regional’44 (hence the label ‘exported globalisa tion’). Unlike the earlier period when the emphasis was on attracting foreign companies, in 1993 the government announced that in future it would encourage locally-based companies to spread out overseas, especially to Southeast Asia, China and India. Demonstrating the government’s acute awareness of the opportunitie s and constraints that globalisatio n affords, Finance Minister Richard Hu stated: 16
Globalisatio n Makes of States What States Make of It In the race of nations, it is impossible for us to stand still and try to preserve what we have. The way out is to build an external dimension to our economy, in order to overcome the problems of a small mature domestic market and a limited resource base…. The external economy is valuable because of its ability to improve the economic structure in two ways: rst, it generates business and economies of scale for companies operating in Singapore, making the domestic economy more productive. Second, it strengthens our links with other rapidly growing countries in the region, so that we will not be so heavily dependent on the developed countries for growth and markets.45 Consistent with its pro-active style, the government offered tax incentives (the ‘Overseas Enterprise Incentive scheme’ and the ‘New Technology Regionalisa tion scheme’) to approved domestic rms to expand their operations overseas and remit pro ts to Singapore at reduced tax rates. In some instances the government itself took an equity position in those rms that it wished to expand overseas (the ‘Co-investment Programme’). The incentives are highly targeted and generally available to companies that invest in the emerging economies in the region (Vietnam, Cambodia, Burma) where the MNC presence is still small, and in the vast emerging markets in China, India and Indonesia. By entering markets before other large multinational s do, the government hopes that Singaporean rms will enjoy the ‘early mover’ advantages in the years to come. The drive is being spearheaded by government-owned or -linked companies, which rank among the largest and most pro table rms on the island. The shift in strategy was partly shaped by fear of the possible emergence of closed regional trade blocs in Europe and North America, as seemed likely in the late 1980s and early 1990s in the wake of oundering Uruguay Round negotiations. In the context of much talk about an impending collapse of the global trade order and regionalisation of the world economy, the Singaporean state responded by vigorously participating in the formation of the ASEAN Free Trade Area (AFTA) and the Asia Paci c Economic Cooperation (APEC) in order to build synergistic links with countries in the region. Earlier, in 1989, the government had launched the Growth Triangle concept designed to encourage rms to combine the island’s advantages (capital, technology and infrastructure ) with the large pools of cheap labour found in neighbourin g Johor (Malaysia) and Riau (Indonesia). It was increasingly apparent that a defensive–agential strategy of autarchic economic development was inadequate in a global environment characterised by substantial economies-of-scale advantages for established MNCs. The decision to encourage Singaporean rms to expand in the region followed the realisation that the previous strategy of promoting SMEs in the domestic sphere had achieved only limited success due to their small size, which made it dif cult for them to compete in the global economy. Put simply, the state shifted its strategies in order to conform to global economic constraints. However, this was not so much a surrender to global forces as an effort to bene t from them by adapting to their core imperatives. Consistent with the third exit strategy, the 17
John M. Hobson & M. Ramesh state sought to out ank foreign MNCs by relying on its own domestic rms. In the process the state employed the third adaptive strategy, in that it transformed its external regional relations in order to conform to the general constraints imposed by the global economy. The outbreak of the regional economic crisis in Asia in 1997 also af icted Singapore even though its economic fundamentals were in every respect solid, underscoring the endemic vulnerabilitie s of small open economies. However, the government’s deft steering of the economy during this dif cult period may well have enhanced its international ‘credibility’ which, it has been argued, is one of the salient features of the developmental state in Singapore.46 Moreover, as one expert has recently put it, ‘the Asian economic crisis tends to strengthen, rather than weaken, the capabilities of the state in economic governance and the social regulation of the economy. This in turn guarantees the enduring, if not enhanced, role of the state in Singapore’s regionalisatio n program.’47 Conclusion In developing a structurationis t approach, we nd that neither the pure structuralist nor pure agent-centric approaches can adequately capture the relationship between the state and globalisation . In the case of Singapore, we nd that where the structuralists would predict scal crisis, the evidence shows that the economy has achieved constant budget surpluses since 1968 and has the largest foreign reserves in per capita terms, and one of the largest in absolute terms, anywhere in the world.48 Defying the prediction that MNCs necessarily cause underdevelopment and impoverishment ,49 foreign-owned rms are responsible for a massive 60 per cent of employment in manufacturing and 86 per cent of exports.50 Moreover, being integrated into the global economy propelled Singapore’s per capita income to one of the highest levels in the world: US$30,550 in 1996, compared to a mere US$1050 in 1970.51 In short, forming synergistic linkages with global capital has paid substantial dividends to Singapore. While the state has indeed employed various adaptive strategies so as to conform to the global structure, as soft structuralists would expect, this has not led to its ‘hollowing out’. In fact, throughout the post-1965 period the state has pursued an interventionis t and proactive set of policies that laid down the terms of engagement with global capital. Because it played a hands-on role with respect to global capital, the state successfully channelled global capital into productively bene cial avenues. Again to quote Henry Yeung: Since its independence in 1965, the PAP-led state has planned and implemented several national development strategies to create and sustain Singapore’s competitivenes s in the face of accelerated global competition. In that sense, the global economy has always been Singapore’s ‘hinterland’ and the city-state has always been a key player in the globalizatio n of economic activities.52 It would nevertheless be wrong to exaggerate the state’s degree of agential power, as the state has had to negotiate and cooperate with global capital and conform or adapt to the structural imperatives of the global capitalist economy. 18
Globalisatio n Makes of States What States Make of It This is hardly surprising considering that Singapore is but a small, albeit rich, economy with little capacity to determine global patterns of trade and investment. Consequently , the state cannot freely choose whatever it wishes, and must at all times operate within the parameters of global capitalism. In general, the state has not sought to preserve itself against global capital by following defensive autarchic policies, but has embedded itself rmly within global capitalism. Underlying the speci cs of this particular case lie several key theoretical premises. This analysis derives from our structurationis t approach, which posits that agents (in this case, states) constitute structures as much as structures constitute agents. Moreover, the implications of charting a middle ground run deep, because, as Ian Clark argues, such a position entails rethinking IR theory and suggests that we need a new theory of internationa l relations and a ‘new political economy’ that can better come to grips with the ‘new global era’.53 In contrast to the prevailing orthodoxies , we conclude that we do not have to do away with the state to establish the in uence of transnational or global relations in world politics, nor do we have to do away with the global in order to demonstrate the importance of the state. Thus the notion of the ‘powerless state’ is no less of a ‘myth’54 than is the claim that states can make of global structures whatever they choose. Globalisation makes of states what states make of it. Notes 1. It is certainly the case that Waltzian neorealism privileges the international political structure over states-as-agents; see Martin Hollis & Steve Smith, ‘Beware of Gurus: Structure and Action in International Relations’, Review of International Studies, Vol. 17, No. 4 (1991), pp. 393–410; but also see Alexander Wendt, ‘The Agent–Structure Problem in International Relations Theory’, International Organization, Vol. 41, No. 3 (1987), pp. 335–70. However, Waltz and other neorealists are unequivoca l that states have agency—not vis-a`-vis the international political structure—but with respect to the global realm; see Kenneth N. Waltz, Theory of International Politics (McGraw Hill, 1979), ch. 7; Robert Gilpin, US Power and the Multinational Corporation (Basic Books, 1975); and Stephen D. Krasner, ‘Power politics, institutions and transnational relations’, in: Thomas Risse-Kappen (Ed.), Bringing Transnational Relations Back In (Cambridge University Press, 1995), pp. 257–79. For a full discussion, see John M. Hobson, The State and International Relations (Cambridge University Press, 2000), ch. 2. 2. Robert B. Reich, The Work of Nations (Knopf, 1991); Kenichi Ohmae, The Borderless World (Collins, 1990); Richard A. Falk, ‘State of Seige: Will Globalization Win Out?’, International Affairs, Vol. 73, No. 1 (1997), pp. 123–36; and Joseph A. Camilleri & Jim Falk, The End of Sovereignty ? (Edward Elgar, 1992). 3. Camilleri & Falk, The End of Sovereignty ?, p. 98. 4. Ibid., pp. 98–9 and ch. 9. 5. James N. Rosenau, The Study of Global Interdependenc e (Pinter, 1980); Susan Strange, The Retreat of the State (Cambridge University Press, 1996); Robert W. Cox, with Timothy J. Sinclair, Approache s to World Order (Cambridge University Press, 1996), pp. 296–313; and Ankie Hoogvelt , Globalisation and the Postcolonial World (Macmillan, 1997), pp. 134–9. 6. Thomas L. Friedman, The Lexus and the Olive Tree (HarperCollins, 1999), chs 5, 18. 7. This, of course, was originally propounde d by Immanuel Wallerstein in The Modern World System, Vol. 1 (Academic Press, 1974). 8. Waltz, Theory of International Politics, ch. 7; Janice E. Thomson & Stephen D. Krasner, ‘Global transactions and the consolidation of sovereignty’, in: E-O. Czempiel and J.N. Rosenau (Eds), Global Changes and Theoretical Challenges (Lexington Books, 1989); and Krasner, ‘Power politics, institutions and transnational relations’. 9. Waltz, Theory of International Politics, ch. 7; Paul Hirst & Grahame Thompson, Globalization in Question: The International Economy and the Possibilities of Governance (Polity, 1996); and David
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10.
11.
12. 13. 14. 15. 16. 17. 18.
19. 20. 21. 22.
23. 24. 25.
26.
27.
20
Armstrong, ‘Globalization and the Social State’, Review of International Studies, Vol. 24 (1998), pp. 461–78. Hirst & Thompson, Globalization in Question; and John Zysman, ‘The Myth of the “Global” Economy: Enduring National Foundations and Emerging Regional Realities’, New Political Economy, Vol. 1, No. 1 (1996), pp. 157–84. Waltz, Theory of International Politics, p. 151; and Louis W. Pauly & Simon Reich, ‘National Structures and Multinational Corporate Behavior: Enduring Differences in the Age of Globalisation’, International Organization, Vol. 51, No. 1 (1997), pp. 1–30. Hirst & Thompson, Globalization in Question. Eric Helleiner, States and the Reemergence of Global Finance (Cornell University Press, 1994); and Ethan B. Kapstein, Governing the Global Economy (Harvard University Press, 1994). Gilpin, US Power and the Multinational Corporation. Ian Clark, Globalization and International Relations Theory (Oxford University Press, 1999), especially ch. 1. Philip G. Cerny, ‘Globalization and Other Stories: The Search for a New Paradigm for International Relations’, International Journal, Vol. 51, No. 4 (1996), p. 620. As originally argued by J. David Singer, ‘The Level of Analysis Problem in International Relations’, World Politics, Vol. 14, No. 1 (1961), pp. 77–92. See especially Ian Clark, ‘Beyond the Great Divide: Globalization and the Theory of International Relations’, Review of International Studies, Vol. 24 (1998), pp. 479–98; and Clark, Globalization and International Relations Theory. Differing versions can be found in: Jan Aart Scholte, ‘Global Capitalism and the State’, International Affairs, Vol. 73, No. 3 (1997), pp. 427–52; Jan Aart Scholte, Globalization: A Critical Introduction (Macmillan, 2000); Philip G. Cerny, The Changing Architecture of Politics (Sage, 1990); Ronen Palan & Jason Abbott, State Strategies in the Global Political Economy (Pinter, 1996); Michael Mann, ‘Has Globalization Ended the Rise and Rise of the Nation-State?’, Review of International Political Economy, Vol. 4, No. 3 (1997), pp. 472–96; Linda Weiss, ‘Globalization and National Governance : Antinomy or Interdependence? ’, Review of International Studies, Vol. 25, No. 5 (1999), pp. 1–30; and Henry Wai-chung Yeung, ‘State Intervention and Neoliberalism in the Globalizing World Economy: Lessons from Singapore’s Regionalization Program’, Paci c Review, Vol. 13, No. 1 (2000), pp. 133–62. It is also noteworthy that the search for a structurationist approach is now emerging (either implicitly or explicitly) within the complementar y area of regional studies; see Andrew Gamble & Anthony Payne, ‘Conclusion: The New Regionalism’, in: Andrew Gamble & Anthony Payne (Eds), Regionalism and World Order (Macmillan, 1996), pp. 247–64; and Andrew Hurrell, ‘Explaining the Resurgence of Regionalism in World Politics’, Review of International Studies, Vol. 21 (1995), pp. 331–58. Wendt, ‘The Agent–Structure Problem’, pp. 337–8; see also the original statement in Anthony Giddens, The Constitution of Society (Polity, 1984). Scholte, Globalization, pp. 46–50. The best and fullest discussion is found in ibid. For example, many MNCs are multi-national rather than trans-national insofar as the majority of their production goes on within their home country; see especially Hirst & Thompson, Globalization in Question. Scholte, Globalization, pp. 50–3. Kenneth N. Waltz, ‘Re ections on Theory of International Politics: A Response to My Critics’, in: Robert O. Keohane (Ed.), Neorealism and its Critics (Columbia University Press, 1986), pp. 322–45. The classic statement is found in Nicos Poulantzas, Political Power and Social Classes (New Left Books, 1973), pp. 255–321. Nevertheless, this is not to deny the point that some neoMarxists have gone a long way in overcoming the traditional problem of class-reductionism in Marxist state theory; see Ellen K. Trimberger, Revolution From Above (Transaction Books, 1978); Fred Block, Revising State Theory (Temple University Press, 1987); Bob Jessop, State Theory (Polity, 1990); and Colin Mooers, The Making of Bourgeois Europe (Verso, 1991). See Theda Skocpol, States and Social Revolutions (Cambridge University Press, 1979); Stephen D. Krasner, Defending the National Interest (Princeton University Press, 1978); Waltz, Theory of International Politics; Robert Gilpin, War and Change in World Politics (Cambridge University Press, 1981); and Robert O. Keohane, After Hegemony (Princeton University Press, 1984). Although this claim echoes that made by Keohane in After Hegemony, it differs in that it emphasises the way in which states cooperat e with domestic and global social forces (rather than only with other states).
Globalisatio n Makes of States What States Make of It
28.
29. 30.
31. 32.
33.
34. 35. 36.
37.
38.
39. 40. 41.
42. 43. 44.
For a full discussion, see John M. Hobson, The Wealth of States (Cambridge University Press, 1997), ch. 7; Hobson, The State and International Relations, ch. 7; Linda Weiss & John M. Hobson, States and Economic Development (Polity, 1995); and Linda Weiss, The Myth of the Powerless State: Governing the Economy in a Global Era (Polity, 1998), chs 2 and 7. See especially Mann’s discussion of the ‘polymorphous ’ state in Michael Mann, The Sources of Social Power, Vol. 2 (Cambridge University Press, 1993), ch. 3; also Michael Mann, States, War and Capitalism (Blackwell, 1988), ch. 1. With respect to states and globalisation, see especially Clark, Globalization and International Relations Theory, ch. 3; Weiss, The Myth of the Powerless State, chs. 1 and 7; and Hobson, The State and International Relations, ch. 7. Paulette Kurzer, Business and Banking (Cornell University Press, 1993); and Dani Rodrik, Has Globalization Gone Too Far? (Institute for International Economics, Washington, 1997), ch. 4. OECD, Harmful Tax Competition (OECD, 1998), pp. 41–3; Ruding Committee, Report of the Committee of Independent Experts on Company Taxation (Commission of the European Community, 1992); Duane Swank, ‘Funding the Welfare State: Globalization and the Taxation of Business in Advanced Market Economies’, Political Studies, Vol. 46 (1998), pp. 671–92; and John M. Hobson, ‘Disappearing taxes? Fiscal policy in the OECD’, in: Linda Weiss (Ed.), States in the Global Economy (Cambridge University Press, forthcoming 2002). OECD, Harmful Tax Competition, pp. 41–55. Scholte, Globalization, pp. 132–3; Scholte, ‘Global Capitalism and the State’; Mann, ‘Has Globalization Ended the Rise and Rise of the Nation-State?’; Weiss, ‘Globalization and National Governance ’; Clark, Globalization and International Relations Theory, especially, chs 3–5; and Hobson, The State and International Relations, ch. 7. Its international trade formed a staggering 356 per cent of GNP in 1995, according to World Bank, World Development Indicators, CD-ROM 1998. Moreover, foreign capital contributed some 38 per cent of all equity capital invested in Singapore and more than 80 per cent of manufacturing investment in 1989. 96 per cent of all foreign investment in the country in 1989 took the form of direct investment (Singapore, Foreign Equity Investment in Singapore, Singapore, Department of Statistics, 1992). As a proportion of GDP, FDI stocks constitute 70 per cent—the highest penetration rate in the world. Finally, Singaporeans themselves are signi cant investors overseas: the stock of overseas private direct and portfolio investments was equal to 69 per cent of GNP, and the share would be higher still if public investments were also included (World Bank, World Development Indicators, CD-ROM 1998). For a general discussion on the Singapore state’s efforts to globalise its economy, see M. Ramesh, ‘Economic Globalization and Policy Choices: Singapore’, Governance , Vol. 8, No. 4 (1995), pp. 243–60. Gary Rodan, The Political Economy of Singapore ’s Industrialization: National State and International Capital (Macmillan, 1989), p. 87. See Frederic C. Deyo, Dependen t Development and Industrial Order (Praeger, 1981). Speci cally the state carried out a comprehensiv e strategy of annihilating the radical trade unions, consolidating the moderate unions into a national federation staunchly supportive of the government , restricting the right to strike, and limiting the terms of collective bargaining. See Venkatraman Anantaraman , Singapore Industrial Relations System (McGraw Hill, 1990), pp. 34–5. In 1968/9 (i.e. in the years immediately following the launch of the state’s pro-globalisation policies), FDI stock (S$297 million) formed 54 per cent of total gross xed assets in manufacturing , up from 45 per cent as recently as 1966. See Rodan, The Political Economy of Singapore’s Industrialization, p. 99. Fully 70 per cent of foreign rms in 1969 were engaged in export, compared to only 30 per cent of local rms. Exports grew by 12 per cent annually between 1970 and 1984 and formed 161 per cent of GDP, up from 121 per cent during 1965–9. See Economic and Social Statistics 1960–1982 (Department of Statistics, Singapore, 1983). GDP grew by 13 per cent annually during 1965–9 and by 9 per cent during 1970–84. Unemploymen t fell from 6 per cent in 1970, to 4 per cent by 1977, and to a mere 2.6 per cent by 1982 See ibid. Public spending on social and community services increased from S$228 million in 1965, to S$575 million in 1974, to S$2.1 billion in 1984. See ibid. Under the ‘corrective wage policy’ of 1979–81, the National Wage Council had recommende d an average wage increase of between 54–58 per cent. See Rodan, The Political Economy of Singapore ’s Industrialization, p. 145. Ministry of Trade and Industry, Economic Survey of Singapore (National Printers, 1990). Economic Developmen t Board, Annual Report 1997 (Economic Developmen t Board, 1998). Yeung, ‘State Intervention and Neoliberalism in the Globalizing World Economy’.
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John M. Hobson & M. Ramesh 45. The Straits Times, 27 February 1993. 46. W.G. Huff, ‘Turning the Corner in Singapore’s Developmenta l State?’, Asian Survey, Vol. 39, No. 2 (1999), pp. 214–42. 47. Yeung, ‘State Intervention and Neoliberalism in the Globalizing World Economy’, pp. 146ff. 48. The government ’s annual budget surplus amounted to 5 per cent of GDP during 1985–91 and a massive 16 per cent during 1992–6. The country’s foreign reserves stood at US$76.8 billion in 1996. See World Bank, World Development Indicators, CD-ROM 1998; and M.G Asher, ‘Taxation policies’, in: L. Low & T. Mun Heng (Eds), Public Policies in Singapore (Times Academic Publishers, 1992), p. 245. 49. Richard J. Barnett & Ronald E. Mu¨ller, Global Reach (Simon & Schuster, 1974). 50. United Nations, World Investment Directory 1992: Asia and the Paci c (United Nations, 1992). 51. World Bank, World Development Indicators, CD-ROM 1998. 52. Yeung, ‘State Intervention and Neoliberalism in the Globalizing World Economy’, p. 141. 53. Clark, Globalization and International Relations Theory. 54. Weiss, The Myth of the Powerless State.
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