The Internationalization of Production

The internationalization of the state is associated with the expansion of international production. This signifies the integration of production processes on a transnational scale, with different phases of a single process being carried out in different countries. International production currently plays the formative role in relation to the structure of states and world order that national manufacturing and commercial capital played in the mid-nineteenth century.

International production expands through direct investment, whereas the rentier imperialism, of which Hobson and Lenin wrote, primarily took the form of portfolio investment. With portfolio investment, control over the productive resources financed by the transaction passed with ownership to the borrower. With direct investment, control is inherent in the production process itself and remains with the originator of the investment. The essential feature of direct investment is possession, not of money, but of knowledge--in the form of technology and especially in the capacity to continue to develop new technology. The financial arrangements for direct investment may vary greatly, but all are subordinated to this crucial factor of technical control. The arrangements may take the form of wholly owned subsidiaries, joint ventures with local capital sometimes put up by the state in host countries, management contracts with state-owned enterprises, or compensation agreements with socialist enterprises whereby, in return for the provision of technology, these enterprises become suppliers of elements to a globally organized production process planned and controlled by the source of the technology. Formal ownership is less important than the manner in which various elements are integrated into the production system.

Direct investment seems to suggest the dominance of industrial capital over finance capital. The big multinational corporations which expand by direct investment are, to some degree, self-financing and to the extent that they are not they seem capable of mobilizing money capital in a number of ways, such as through local capital markets (where their credit is better than that of national entrepreneurs), through the Eurocurrency markets, through infusions of capital from other multinationals linked to technology and production agreements, through state subsidies, and so forth. And yet, particularly since the 1970s, finance capital seems

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to be returning to prominence through the operations of the multinational banks, not only in the old form of rentier imperialism administering loans to peripheral states, but also as a network of control and private planning for the world economy of international production. This network assesses and collectivizes investment risks and allocates investment opportunities among the participants in the expansion of international production, that is, it performs the function of Lenin's collective capitalist in the conditions of late-twentieth-century production relations.

International Production and Class Structure

International production is mobilizing social forces, and it is through these forces that its major political consequences vis-à-vis the nature of states and future world orders may be anticipated. Hitherto, social classes have been found to exist within nationally defined social formations, despite rhetorical appeals to the international solidarity of workers. Now, as a consequence of international production, it becomes increasingly pertinent to think in terms of a global class structure alongside or superimposed upon national class structures.

At the apex of an emerging global class structure is the transnational managerial class. Having its own ideology, strategy and institutions of collective action, it is a class both in itself and for itself. Its focal points of organization, the Trilateral Commission, World Bank, IMF and OECD, develop both a framework of thought and guidelines for policies. From these points, class action penetrates countries through the process of internationalization of the state. The members of this transnational class are not limited to those who carry out functions at the global level, such as executives of multinational corporations or as senior officials of international agencies, but include those who manage the internationally oriented sectors within countries, the finance ministry officials, local managers of enterprises linked into international production systems, and so on. ²⁶

National capitalists are to be distinguished from the transnational class. The natural reflex of national capital faced with the challenge of international production is protectionism. It is torn between the desire to use the state as a bulwark of an independent national economy and the

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opportunity of filling niches left by international production in a subordinate symbiotic relationship with the latter.

Industrial workers have been doubly fragmented. One line of cleavage is between established and nonestablished labor. Established workers are those who have attained a status of relative security and stability in their jobs and have some prospects of career advancement. Generally they are relatively skilled, work for larger enterprises, and have effective trade unions. Nonestablished workers, by contrast, have insecure employment have no prospect of career advancement, are relatively less skilled, and confront great obstacles in developing effective trade unions. Frequently, the nonestablished are disproportionately drawn from lower-status ethnic minorities, immigrants and women. The institutions of working class action have privileged established workers. Only when the ideology of class solidarity remains powerful, which usually means only in conditions of high ideological polarization and social and political conflict, do organizations controlled by established workers (unions and political parties) attempt to rally and act for nonestablished workers as well.

The second line of cleavage among industrial workers is brought about by the division between national and international capital (i.e., that engaged in international production). The established workers in the sector of international production are potential allies of international capital. This is not to say that those workers have no conflict with international capital, only that international capital has the resources to resolve these conflicts and to isolate them from conflicts involving other labor groups by creating an enterprise corporatism in which both parties perceive their interest as lying in the continuing expansion of international production.

Established workers in the sector of national capital are more susceptible to the appeal of protectionism and national (rather than enterprise) corporatism in which the defense of national capital, of jobs and of the workers' acquired status in industrial relations institutions, are perceived to be interconnected. ²⁷

Nonestablished labor has become of particular importance in the expansion of international production. Production systems are being designed so as to make use of an increasing proportion of semi-skilled (and therefore frequently nonestablished) in relation to skilled (and established) labor. ²⁸ This tendency in production organization makes it possible for

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the center to decentralize the actual physical production of goods to peripheral locations in which an abundant supply of relatively cheap nonestablished labor is to be found, and to retain control of the process and of the research and development upon which its future depends.

As a nonestablished workforce is mobilized in Third-World countries by international production, governments in these countries have very frequently sought to preempt the possibility of this new social force developing its own class-conscious organizations by imposing upon it structures of state corporatism in the form of unions set up and controlled by the government or the dominant political party. This also gives local governments, through their control over local labor, additional leverage with international capital regarding the terms of direct investment. If industrial workers in Third-World countries have thus sometimes been reduced to political and social quiescence, state corporatism may prove to be a stage delaying, but in the long run not eliminating, a more articulate self-consciousness. ²⁹

Even if industry were to move rapidly into the Third World and local governments were, by and large, able to keep control over their industrial workforces, most of the populations of these countries may see no improvement, but probably a deterioration, in their conditions. New industrial jobs lag far behind increases in the labor force, while changes in agriculture dispossess many in the rural population. No matter how fast international production spreads, a very large part of the world's population in the poorest areas remains marginal to the world economy, having no employment or income, or the purchasing power derived from it. A major problem for international capital in its aspiration for hegemony is how to neutralize the effect of this marginalization of perhaps onethird of the world's population so as to prevent its poverty from fueling revolt. ³⁰