Adam Smith in Beijing

1^ S^1l
1` Bl1]1`C
Lineages ol the Twenty-First Century
GIOV ANNI ARRIGHI

VERSO
London New York
First published by Verso 2007
Giovanni Arrighi 2007
All rights reserved
The moral rights of the author have been asserted
1 3 5 7 9 10 8 6 42
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Printed in the USA by Maple Vail
!o Phdrc Cuhdcr !rahk , l929-200)
CONTENTS
List oI !igurcs
IrcIacc ahd Pckhovcdgmchts
Ihtroductioh
Iart I. Pdam bmith ahd thc ^cv Psiah Pgc
l
âr: ih Lctroit, bmith ih Bci|ihg
2 Jhcistorical bociology oI Pdam bmith
J âr:, bchumpctcr, ahd thc `Lhdcss'
`ccumuatioh oICapita ahd Iovcr
Iart
II.
Jrac1ihg Coba !urbuchcc
+ Jhc Lcohomics oI Coba !urbuchcc
bocia Lyhamics oI Cba !urbuchcc
6 P Crisis oIcgcmohy
Iart III. cgcmohy Lhravcihg
7 Lo)ihatioh vithout cgcmohy
8 Jhc !crritoria Logic oIistorica Capitaism
9 Jhc ord btatc that ^cvcr as
Iart IN. Lihcagcs oIthc^cv Psiah Pgc
l0
Jhc Chachgc oI ÌcaccIu Psccht'
ll btatcs, ârkcts, ahd Capitaism, Last ahd cst
l2
Crigihs ahd Lyhamic oI thc Chihcsc Psccht
!pioguc
Bibiography
Ihdc:
ix
xi
l
lJ
+0
69
99
l2l
l+9
l7
2ll
20
277
J09
Jl
J/9
J90
+09
LIST OF FIGURES
l. l Combihcd CLI as a pcrcchtagc oIvord CLI.
Lb + LK vcrsus Chiha + japah J8
l .2 Combihcd CLIpcr capita.
Lb + LK vcrsus Chiha + japa! ,oggcd) J8
J. l Lov-cvciNaIthusiah) vcrsus high-cvc ,bmith iah)
cquiibrium traps 70
. l âtioha cxports as a pcrcchtagc oI tota vord cxports lJJ
.2 Currcht- accouht baahcc, l980-200 l+6
7. l Currcht-accouht baahcc as a pcrcchtagc oI vord CLI l92
9. l Ircsidcht Bush's approva ratihgs Irom
!cbruary 200l to Cctobcr 2006 26J
l2. l Icr capita ihcomc ahd adut iIc cxpcctahcy, l9602000 J7l
l2.2 Icr capitaihcomc ahd adut itcracy, l970-2000 J/2
PREFACE AND ACKNOWLEDGMENTS
!his bookis a scquc ahdcaboratiohoItvo caricr vorks, The Long
Twentieth Century ahd Chaos and Governance in the Modern World
System.
1
t Iocuscs oh tvo dcvcopmchts that, morcthah ahy ot1cr,
arc shapihg vord poitics,ccohomy,ahd socicty. Chcisthc risc ahd
dcmisc oIthchco-cohscrvativc IrocctIora^cvPmcricah Cchtury,
thc othcr is thc cmcrgchcc oI Chiha as thc cadcr oI thc Last Psiah
ccohomic rchaissahcc. Luc attchtioh vi bc paid to thc mahy statc
ahd hoh-statc actors that havc cohtributcd to thcsc tvo dcvcop-
mchts, but thc maih Iocus oI thc ahaysis vi bc o) thc Lb ahd
Chihcsc statcs as thc kcy actors oIthc uhIodihg goba trahsIorma-
tioh.
!richds , studchts, ahd cocagucs vho havc rcad ahdcommchtcd
oh thc mahuscript bcIorc thc Iiha rouhd oI rcvisiohs havc givch
uhusuay discrcpaht asscssmchts oI its compohchts. Chaptcrs that
somc rcadcrs choycd most, othcrs ch oycd cast. Chaptcrs ahd
scctiohs that somc rcadcis thought cchtra to thc argumcht oI thc
book, othcrs Iouhd supcrIuous. Liscrcpahcics ihrcadcrs' rcactiohs
arc horma but hot to thc ctchtthat havc cpcrichccd vith this
book. thihkthatthc ahomay cah bctraccdtothc doubcpurposc
oI thc book-hihtcd at ih its titc-ahd to thc diIIcrcht mcthods
dcpoycd ih its pursuit.
!hcpurposcoIthcbookisasmuchtooIIcrahihtcrprctatiohoIthc
ohgoihg shiIt oI thc cpicchtcr oI thc goba poitica ccohomy I rom
ôrth Pmcrica to Last Psia ih ight oI Pdam bmith's thcory oI
ccohomic dcvcopmcht, as it is to oIIcr ah ihtcrprctatioh oI The
Wealth of Nations ih ight oI that shiIt. !his doubc purposc is
pursucd throughoutthc book, but somc parts rcy morc hcaviy oh
1 Giovanni Arrighi, The Long Twentieth Century: Money, Power and the
Origins of our Times (London, Verso, 1994) and Giovanni Arrighi and Beverly J.
Silver, Chaos and Governance i n the Modern World System (Minneapolis, MN,
University of Minnesota Press, 1999).
II PREFACE AND ACKNOWLEDGMENTS
thcorcticaargumchts,othcrsohhistoricaahayscs,ahdyctothcrsoh
thc discussioh oIcohtcmporary phchomcha. Ihcvitaby, rcadcrs vith
ittc patichccIorthcory, orIorthcahaysisoIdistaht ahd uhIamiiar
pasts, or Ior history sti ih thc makihg, may bc tcmptcd to skip
scctiohs orcvchchtircchaptcrs. PvarcoIthispossibiity,Ihavcdohc
my bcst to chsurc thatrcadcrs vho do so cah sti gctthc gist oI at
cast ohc oI thc tvo ovcra argumchts oI thc book-thc ohc coh-
ccrhihgthcrcocatiohoIthccpicchtcroIthcgobapoitica ccohomy
toLast Psia, ahdthcohccohccrhihgThe Wealth of Nations. PI ask
ih cxchahgc is thatthc book bc |udgcd as a whole ahd hot |ust ih its
discrctc parts.
!his bookhas ohg bcch ih thcmakihg, ahdohgis thc istoI my
ihtccctua dcbts. ithout thc assistahcc oI mahy Last Psiah coa-
borators, I voud havc had ho acccss to kcy tcxts ih Chihcsc ahd
japahcsc, somc oI vhich appcar ih thc bibiography. Ikcda batoshi,
uiIo-kcuhg,LuPiguo,bhihîih-vch,uhgo-Iuhg,ahdZhahg
Lu a hcpcdih this rcspcct. Ihadditioh,Ikcdaihtroduccdmc tothc
japahcsc itcraturc oh thc Chiha-cchtcrcd tributc tradc systcm, ui
taught mc to rcad Braudc Irom ah Last Psiah pcrspcctivc, uhg
guidcdmyIoraysihtothcsociadyhamicoIatc impcria Chiha, ahd
Lu Piguo has rcihcd i1 my cxccssivc optimism about thc haturc oI
Chiha' s rcccht achicvcmchts.
Ph caricr ahd shortcr vcrsioh oI Iart II vas pubishcd as `!hc
bocia ahd Ioitica Lcohomy oI Coba Jurbuchcc,' ih New Left
Review, II/20 ,200J) , pp. -7l. Likc aportiohoIChaptcr l , itchgagcs
criticay vith thc vork oIKobcrt Brchhcr. It is part oI ah ohgoihg
attcmpt oh my partto cohvihcc Brchhcr to takc historica socioogy
morc scriousy thah ccohomics. I am thahkIu to Bob Ior thc
ihtccctua stimuatioh providcd by his vork ahd Ior takihg my
criticisms ih stridc.
Ph caricr vcrsioh oI Iart III vas pubishcd as `cgcmohy Lh-
ravcihg-I, ' ih New Left Review, II/J2 ,200) , pp. 2J-80, ahd `c-
gcmohyLhravcihg-II , 'ihNew Left,Review, II/JJ ,200) ,pp. 8J-ll6.
!hctvoarticcshavcbcchthoroughyrcstructurcdahdrcvrittchbut
mahy oIthc idcas ih Chaptcr 8 sti origihatc ih a scmihar thatLavid
arvcy ahd I | oihty taught at johhs opkihs Lhivcrsity. I am
gratcIu to Lavid ahd thc participahts ih thc scmihar Ior hcpihg
mcrccastkcycohtchtiohsoIThe Long Twentieth Century ahd Chaos
and Governance ih a tightcr ahd morc soid ahaytica Iramcvork.
Iortiohs oIChaptcrs l, ll, ahd l2 drav Irom apapcrco-authorcd
vith ui Io-kcuhg, uhg o-Iuhg, ahd ârk bcdch pubishcd as
ìstorica Capitaism, Last ahd cst,' ih The Resurgence of East
PREFACE AND ACKNOWLEDGMENTS xiii
Asia. JJ, IJ and J Year Perspectives, cditcd by C. Prrighi, !.
amashita, ahd ^. bcdch ,Lohdoh. Koutcdgc, 200J) ahd Irom a
soc-authorcd papcr pubishcd as `btatcs, ârkcts ahd Capitaism,
Last ahd cst,' ih Worlds of Capitalism. Institutions, Economic
Performance, and Governance in the Era of Globalization, cditcdby
^. îcr ,Lohdoh, Koutcdgc, 200) . I havc arcady mchtiohcd my
ihtccctua dcbts to ui ahd uhg. Ih additioh, I must thahk ârk
bcdch Ior his gchcrous guidahcc oI my attcmpts to grasp thc Last
Psiah cxpcrichcc asvc as Ior commchts oh Chaptcr l.
Bch|amih Brcvcr, Phdrc Cuhdcr !rahk, Phtohiha Cchtic, Crcta
Kripphcr, !homas Lhrich KciIcr, btcvc bhcrmah, Prthur btihch-
combc, bugihara Kaoru, Charcs !iy, ahd busah atkihs madc
hcpIucommchts ohpapcrs ahdarticcsthatvcrcatcrhcorporatcd
ih thc book. PstraBohihi ahdLahic Iasciutihcpcdihproducihgthc
Iigurcs ahd Lah aso did bibiographica rcscarch oh spcciIic issucs.
Baris Cctih Lrchcohtributcdtokccpihgthcmatcria oIChaptcr7up
todatc,vhicKaviIaatahdKcvaharrisihccssahtybombardcdmc
vith cvidchcc Ior ahd agaihst my argumchts oIvhich I havc madc
abuhdahtusc. Kcvahaso rcadthcchtircmahuscriptoIIcrihgvauabc
substahtivc ahdcditoria suggcstiohs. IatrickLoyprovidcd mc vith
somc cxcccht quotcs, ahd jamcs Cabraith gavc mc uscIu hihts
cohccrhihg both Pdam bmith ahd cohtcmporary Chiha. Commchts
by joc Phdrcas, îcoc PschoII, Ccorgi Lcruguiah, Pmy omcs,
Kichard Lachmah, Vadimir Iopov, Bch|amih bcuy, ahd Zhah
bhaohua vcrc most hcpIu ih thc Iiha rouhd oI rcvisiohs.
Icrry Phdcrsoh ahd Bcvcry bivcr havc actcd as usua as my
primary advisors. !hcir rcspcctivc rocs oI `good cop` ,Icrry) ahd
`badcop',Bcvcry)havcbcchcquaycruciaihthcrcaizatiohoIthis
vork. I am mostgratcIuto both Iorthcirihtccctua guidahcc ahd
mora support.
!his book is dcdicatcd to thc mcmory oI my good Irichd Phdrc
Cuhdcr !rahk. Ih thc thirty-six ycars sihcc vc mct ih Iaris ih l969
uhtihisdcathvcstruggcdtogcthcrahdagaihstohcahothcrtogctto
thc root causcs oI goba ihcquitics. c had mahy disputcs, but vc
vcrc travcihg thc samc road ahd ih thc chd vc discovcrcd that vc
vcrc hcadcdprcttymuch ih thc samcdircctioh. I khov-bccauschc
said so-that hcdisagrccdvith much oImy critiquc oIBob Brchhcr,
butI thihkthat hc voud havc rccoghizcdthc astihgihIuchccoIhis
thought oh thc ovcra argumchts oI this book.
ârch 2007
INTRODUCTION
`hchthctvchticthcchturyopchcd,' vrotcCcoIIrcyBarracoughih
thcmidl960s,`LuropcahpovcrihPsiaahdPIricastoodatitszchith,
ho hatioh, it sccmcd, coud vithstahd thc supcriority oI Luropcah
arms ahd commcrcc. bixty ycars atcr ohy thc vcstigcs oILuropcah
domihatiohrcmaihcd. . . . ^cVcrbcIorciht1cvhocoIhumahhistory
had so rcvoutiohary a rcvcrsa occurrcd vith such rapidity. ' !hc
chahgc ih thc positioh oI thc pcopcs oI Psia ahd PIrica `vas thc
surcst sigh oIthc advcht oIa hcv cra. ' Barracough had Icv doubts
thatvhchthchistoryoIthcIirsthaIoIthctVchticthcchtury-vhich
Ior most historiahs vas sti domihatcd by Luropcah vars ahd
probcms-camc to bc vrittch ih a ohgcr pcrspcctivc, `ho sihgc
thcmc vi provc to bc oIgrcatcrimportahcc thahthcrcvotagaihst
thcvcst. '` !hccohtchtiohoIthisbookisthat,vhchthchistoryoIthc
second haI oI thc tvchticthcchturyvi bcvrittch ih such a ohgcr
pcrspcctivc, thc chahccs arc that ho sihgc thcmc vi provc to bc oI 'x X
grcatcr sighiIicahcc thah thc ccohomic rchaissahcc oI Last Psia. !hc
rcvotagaihst thc cstcrcatcdthc poitica cohditiohs Ior thc socia
ahdccohomiccmpovcrmchtoIthcpcopcsoIthchoh-cstcrhvord.
!hcccohomicrchaissahccoILastPsiaisthcIirstahdccarcstsighthat
such ah cmpovcrmcht has bcguh.
c spcak oI rchaissahcc bccausc-ih Cibcrt Kozmah's vords
`LastPsiaisagrcatrcgiohoIthcpast, havihgbcchihthcIorcIrohtoI
vorddcvcopmchtIoratcasttvothousahdycars,uhtithcsixtcchth,
scvchtcchth, or cvch thc cightcchth cchtury, aItcrvhich itsuIIcrcd a
rcativcy bricI but dccpy Ictccipsc.
,,
!hc rchaissahcc has occurrcd
througha shovbaihgproccss oIcohhcctcdccohomic `miraccs' ih a
succcssiohoILastPsiahstatcs,startihgihjapahihthcl90sahdl960s,
1 Geoffrey Barraclough, An Introduction to Contemporary History (Harmonds
worth, Penguin, 1967), pp. 153 -.
2 Gilbert Rozman, The East Asian Region: Confucian Heritage and its Modern
Adaptation (Princeton, NJ, Princeton University Press, 1991) , p. 6.
2 ADAM SMITH IN BEIJING
roihgohih bouth Korca,!aivah,ohg Kohg, bihgaporc,âaysia,
ahd!haiahdihthcl970sahdl80s,ahdcumihatihgihthcl990sahd
cary 2000s ih thc cmcrgchcc oI Chiha as thc vord's most dyhamic
cchtcroIccohomicahdcommcrciacxpahsioh.Pccordihgto!crutomo
Czava-vho Iirstihtroduccdthc hotioh oI a shovbaihgproccssto
dcscribcthcLastPsiahasccht-`thcChihcscmiracc,thoughstiihits
ihchoatcphasc, vi bchodoubt. . . thc most dramaticihtcrmsoIits
impact oh thc rcst oIthc vord . . . cspcciay oh hcighborihg couh-
trics.
, ,
` Iha simiar vcih, ârtih oIhasprocaimcdthat
bhoudPsia'srisc|procccdasithasovcrthcastIcvdccadcs,itvi
brihg thc tvo cchturics oI goba domihatioh by Luropc ahd,
subscquchty, its giahtôrthPmcricah oIIshoot to anchd. japah
vas butthc harbihgcr oI ah siah Iuturc. 1hc couhtry has provcd
toosma ahdihvard-kihgtotrahsIormthc vord. hatIoovs
it-Chiha, abovc a-viprovc hcithcr . . . . Luropcvas thc past,
thc US isthcprcschtahdaChiha-domihatcd siathcIuturcoIthc
goba ccohomy. 1hat Iuturc sccms bound to comc. 1hc big
qucstiohs arc hov sooh ahdhov smoothy it docs b\.
!hc Psiah Iuturc chvisagcd by oI may hot bc as ihcvitabc as hc
impics.ButcvchiIhcis ohyihpart right, thcLast Psiahrchaissahcc
suggcsts thatPdambmith' sprcdictioh oIah cvchtuacquaizatioh oI
` povcr bctvcch thc cohqucrihg cst ahd thc cohqucrcd hoh-cst
mightIihaycomctruc.LikcKarârxaItcrhim,bmithsav ama| or
turhihg poiht ih vord history ih thc Luropcah `discovcrics' oI
Pmcrica ahd oI a passagc to thc Last Ihdics by thc Capc oI Cood
opc. c vas, hohcthccss, Iar css sahguihc thah ârx about thc
utimatc bchcIits Ior humahity oIthcsc cvchts.
1hcir cohscquchccs havc arcady bcch grcat, but, ih thc short
pcriod oIbctvcchtvo ahdthrcc cchturics vhichhas capscd sihcc
thcsc discovcrics vcrc madc, itis impossibcthatthcvhoccxtcht
oIthcir cohscquchccs cah havc bccn scch. hat bchcIits, or vhat
misIortuhcsto mahkihdmayhcrcaItcrrcsutIromthcsccvchts,ho
3 Terutomo Ozawa, "Pax Americana-Led Macro-Clustering and Flying-Geese
Style Catch-Up in East Asia: Mechanisms of Regionalized Endogenous Growth,"
Journal of Asian Economics, 13 (2003) , p. 700, emphasis in the original. The
"snowballing" metaphor was first introduced in Terutomo Ozawa, "Foreign Direct
Investment and Structural Transformation: Japan as a Recycler of Market and
Industry," Business and the Contemporary World, 5, 2 ( 1993), pp. 30-I.
4 "Asia Is Awakening," Financial Times, September 22, 2003.
INTRODUCTION
humahvisdomcahIorcscc.Byuhitihg,ihsomcmcasurc,thcmost
distaht parts oI thc vord, by chabihg thcm to rcicvc ohc
ahothcr's vahts, to ihcrcasc ohc ahothcr's ch|oymchts, ahd to
chcouragc ohc ahothcr' s ihdustry, thcir gchcra tchdchcy voud
sccmtobcbchcIicia. 1othchativcs,hovcvcr,bothoIthcLastahd
cst Ihdics, a thc commcrcia bchcIits vhich cah havc rcsutcd
Irom thcsc cvchts havc bcch suhk ahd ost ih thc drcadIu mis-
Iortuhcs vhich thcy havc occasiohcd. . . . t thc particuar timc
vhch thcsc discovcrics vcrc madc, thc superiority of force hap-
pchcd to bc so grcat oh thc sidc oIthc Luropcahs, that thcy vcrc
chabcd to commit vith impuhity cvcry sort oI ih|usticc ih thosc
rcmotccouhtrics.crcaItcr, pcrhaps,thchativcsoIthosccouhtrics
maygrovstrohgcr,orthosc oILuropcmaygrovvcakcr, ahdthc
ihhabitahts oI a thc diIIcrcht quartcrs oIthc vordmay arrivc at
that cquaityoIcouragc ahd Iorccvhich,by ihspirihgmutua Icar,
cah aohc ovcravc thc ih|usticc oI ihdcpchdcht hatiohs ihto somc
sort oI rcspcct Ior thc rights oI ohc ahothcr.`
+
!ar Irom thc hativcs oI Luropc grovihg vcakcr ahd thosc oI hoh-
Luropcah couhtrics grovihg strohgcr, Ior amost tvo cchturics aItcr
thc pubicatioh oI The Wealth of Nations thc `supcriority oIIorcc'
oh thc sidc oI thc Luropcahs ahd thcir oIIsprihgs ih ôrth Pmcrica
ahd cscvhcrc grcv Iurthcr, ahd so did thcir capacity `to commit
vith impuhity cvcry sort oI ih|usticc' ih thc hoh-Luropcah vord.
Ihdccd, vhch bmith vas vritihg, Last Psia's `ccipsc' had hardy
bcguh. Ch thc cohtrary, thc rcmarkabc pcacc, prospcrity, ahd
dcmographic grovth that Chiha cxpcrichccd Ior much oI thc cight-
cchth cchtury vas a sourcc oI ihspiratioh Ior cadihg Iigurcs oI thc
Luropcah Lhightchmcht. Lcibhiz, Votairc, ahd Qucshay, amohg
othcrs, ` ookcd to Chiha Ior mora ihstructioh, guidahcc ih ihstitu-
tioha dcvcopmcht, ahd supportihg cvidchcc Ior thcir advocacy oI
causcs as varicd as bchcvocht absoutism, mcritocracy, ahd ah
agricuturay bascd hatioha ccohomy.
, ,
!hc most strikihg cohtrast
vith Luropcah statcs vas thc Chihcsc cmpirc's sizc ahdpopuatioh.
Ih Qucshay' s charactcrizatioh, thc Chihcsc cmpirc vas `vhat a
5 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of
Nations, 2 vols (London, Methuen, 1961) , vol. II, p. 141, emphasis added.
6 Michael Adas, Machines as Measure of Men: Science, Technology and
Ideologies of Western Dominance (Ithaca, NY, Cornell University Press, 1989) , p.
79; see also Ho-fung Hung, "Orientalist Knowledge and Social Theories: China and
European Conceptions of East-West Differences from 1600 to 1900," Sociological
Theory, 21, 3 (2003) .
4
ADAM SMITH IN BEIJING
Luropc voud bciIthcattcrvcrc uhitcduhdcr a sihgc sovcrcigh'
a charactcrizatioh that vas cchocdih bmith' srcmarkthatthccxtcht
oI Chiha's `homc markct' vas `hotmuch ihIcrior to thc markct oI
a thc diIIcrcht couhtrics oILuropc put togcthcr.
,,
CvcrthchcxthaIcchtury,agrcatcapIorvardihLuropcahmiitary
povcr uhdcrmihcdthis positivc imagc oIChiha. Luropcah mcrchahts
ahdadvchturcrs had ohg cmphasizcd thc miitary vuhcrabiity oIah
cmpircrucdbyaschoar-gchtrycass,vhiccompaihihgbittcryabout
thcburcaucraticahdcuturahahdicapsthcymctihtradihgvithChiha.
!hcsc ihdictmchts ahd compaihts Iostcrcd a Iuhdamchtay hcgativc
vicv oI Chiha as a burcaucraticay opprcssivc ahd miitariy vcak
cmpirc. By l8J6, thrcc ycars bcIorc Britaih auhchcd thc Iirst Cpium
ar agaihst Chiha , l8J92) , thc author oI ah ahohymous cssay
pubishcd ih Cahtoh omihousy dccarcd that `thcrc is, probab y, at
thc prcscht ho morc ihIaibc a critcrioh oI thc civiizatioh ahd ad-
vahccmcht oI socictics thah thc proIicichcy vhich cach has attaihcdih
'thcmurdcrous art,' thc pcrIcctioh ahdvarictyoIthcirimpcmchts Ior
mutua dcstructioh, ahdthc ski vith vhich thcy havc carhcd to usc
thcm. ' c thch vcht oh to dismiss thc Chihcscimpcria havy as a
`mohstrous burcsquc, ' to arguc that ahtiquatcd cahhoh ahd uhruy
armics madc Chiha`povcrcssohahd, 'ahdtovicvthcscvcakhcsscs
assymptomsoIaIuhdamchtadcIicichcyoIChihcscsocictyasavhoc.
hrcportihgthcscvicvs,îchacPdas addsthatthcgrovihgimpor-
tahcc oI miitary provcss ìh shapihg Luropcah asscssmchts oI thc
ovcramcritoIhoh-cstcrhpcopcsbodcdiIorthcChihcsc,vhohad
IachIar bchihd thcaggrcssivc ' barbariahs' atthcir southcrh gatcs. '`
h thc cchtury Ioovihg thc dcIcat oI Chiha ih thc Iirst Cpium
ar, thc ccipsc oI Last Psia turhcd ihto vhat Kch omcrahz has
^ cacdthc `Crcat Livcrgchcc.
,,
!hcpoitica ahd ccohomicIortuhcs
oI tvo vord rcgiohs up uhti thch charactcrizcd by simiar ivihg
stahdards divcrgcdsharpy, Luropc ascchdihg rapidytothczchith oI
its povcr ahd Last Psia dcscchdihg ustas rapidytoits hadir. Bythc
chdoIthc bccohd ordar, Chii ahadbccomcthcvord'spoorcst
couhtry, japah had bccomc a miitariy occupicd, `scmi-sovcrcigh'
7 Fran<ois Quesnay, "From Despotism in China," in F. Schurmann and o.
Schell, eds, Imperial China (New York, Vintage, 1969), p. 115; Smith, Wealth of
Nations, vol. II, p. 202.
8 Adas, Machines as Measure of Men, pp. 89-93, 1245, 185-6. See also
Geoffrey Parker, "Taking Up the Gun," MHQ: The Quarterly Journal of Military
History, 1, 4 ( 1989), pp. 98-9.
9 Kenneth Pomeranz, The Great Divergence: Europe, China, and the Making of
the Modern World Economy (Princeton, NJ, Princeton University Press, 2000) .
INTRODUCTION 5
statc, ahd most othcr couhtrics ih thc rcgioh vcrc cithcr sti strug-
gihg agaihst coohia ruc or vcrc about to bc torh asuhdcr by thc
cmcrgihg Codar dividc. hLast Psia, as cscvhcrc,thcrcvcrcIcv
sighs oI ah immihcht vaidatioh oI bmith's cohtchtioh that thc
vidchihg ahd dccpchihg oI cxchahgcs ih thc goba ccohomy voud
act as ah cqu.izcroI povcr bctvcchpcopcs oILuropcah ahd hoh-
Luropcah dcsccht. !o bc surc, thc bccohd ord ar had givch a
trcmchdous impuscto thcrcvot agaihstthccst. !hroughoutPsia
ahd PIrica, od sovcrcightics vcrc rc-cstabishcd ahd scorcs oI hcv
ohcsvcrccrcatcd. Butdccoohizatiohvas matchcd bythcIormatioh
oI thc most cxtchsivc ahd potchtiay dcstructivc apparatus oI cs-
tcrh Iorcc thc vord had cvcr scch. ''
!hc situatioh appcarcd to bc chahgihg ih thc atc l960s ahd cary
l970s, vhch thc mighty Lb miitary apparatus Iaicd to cocrcc thc
Victhamcsc pcopc ihto a pcrmahcht scissioh aohg thc Cod ar
dividc. ritihgIorthc bicchtchary oIthcpubicatiohoIThe Wealth of
Nations, ahdshort y aItcrthcLhitcdbtatcshad dccidcd tovithdrav
Irom Victham, aoo byos-Labihi vohdcrcd vhcthcr thc timc had
Iihay comcvhch-asbmith hadchvisagcd-`thcihhabitahts oI a
thcdiIIcrchtquartcrsoIthcvord. . . arrivcatthatcquaityoIcouragc
ahd Iorcc vhich, by ihspirihg mutua Icar, cah aohc ovcravc thc
ihusticco!ihdcpchdchthatio:: sihtosomcsortoIrcspcctIorthcrights
oIohcahothcr. '
'!hcccohomiccohjuhcturc aso sccmcdtoIavorthc

couhtricsthathadcomctoconstitutcthc!hirdor d. '!hcirhatura
10 The far-flung network of quasi-permanent overseas military bases put in
place by the US during and after the Second World War was, in Stephen Krasner's
words, "without historical precedent; no state had previously based its own troops on
the sovereign territory of other states in such extensive numbers for so long a
peacetime period" (Stephen Krasner, "A Trade Strategy for the United States,"
Ethics and International Affairs, 2 [ 1988] , p. 21) .
11 Paolo Sylos-Labini, "Competition: The Product Markets, " in T. Wilson and
A. S. Skinner, eds, The Market and the State: Essays in Honor of Adam Smith
(Oxford, Clarendon Press, 1976) , pp. 230-2.
12 The emergence of a "Third World" in the 1950s was a joint product of the
revolt against the West and of the Cold War world order. While the historical non
West came to be grouped almost entirely in the Third World, the historical West split
into three distinct components. Its more prosperous components (North America,
Western Europe, and Australia) joined by Japan, came to constitute the First World.
One of its less prosperous components (the USSR and Eastern Europe) came to
constitute the Second World, and another (Latin America) joined the non-West to
constitute the Third World. With the end of the Cold War and the disappearance of
the Second World, the expressions First and Third World became anachronistic and
were replaced by the expressions global North and South, respectively. In this book,
we shall use the old or new designations depending on the context.
6
rcsourccsvcrcihgrcatdcmahd,ahdsovcrc thcirabdahtandchcap
aborsuppics. Capita Iovs Irom !irstto!hird ,ahd bccohd) ord
couhtricscxpcrichccdamaorcxpahsioh,thcrapidihdustriaizatiohoI
!hirdordcouhtricsvasuhdcrmihihgthcprcviouscohcchtratiohoI
mahuIacturihg activitics ih !irst ,ahd bccohd) ordcouhtrics, ahd
!hirdordcouhtricshaduhitcdacrossidcoogicadividcstodcmahd
a ^cv htcrhatioha Lcohomic Crdcr.
h rcvisitihg byos-Labihi'srcIcctiohs cightcch ycars atcr, hotcd
that ahy hopc ,or Icar) oI ah immihcht cquaizatioh oI thc oppor-
tuhitics oI thc pcopcs oI thc vord to bchcIit Irom thc ohgoihg
proccss oI vord ccohomic ihtcgratioh had bcch prcmaturc. h thc
l980s, a Lb-drivch cscaatioh oI compctitioh ih vord Iihahcia
/
markcts had suddchy dricd up thc suppy oI Iuhds to !hird ahd
bccohd ord couhtrics ahdprovokcd a maor cohtractioh oIvord
dcmahdIorthcirproducts.!crmsoItradchadsvuhgbackihIavoroI
X thc!irstordasIastahdsharpyasthcyhadsvuhgagaihstitihthc
l970s. Lisorichtcd ahd disorgahizcd by thc ihcrcasihg turbuchcc oI
thc goba ccohomy, ahd hard-prcsscd by a hcv cscaatioh oI thc
armamchtracc,thcbovictcmpirc haddisihtcgratcd.hstcadoIhavihg
tvo supcrpovcrs topay agaihstohcahothcr, !hirdordcouhtrics
hov had to compctc vith Iormcrbccohdord couhtrics ih gaihihg
acccss to thc markcts ahd rcsourccs oIthc !irst ord. Pt thc samc
timc, thc Lhitcd btatcs ahditsLuropcah aics scizcd thc opportuhity
crcatcd by thc coapsc oI thc LbbK to caim vith somc succcss a
goba `mohopoy' oI thc cgitimatc usc oI viochcc, Iostcrihg thc
bcicIthatthcir supcriorityoIIorcc vas hot ustgrcatcr thah cvcrbut
Ior a practica purposcs uhchachgcabc. '`
hohcthccss asohotcdthatthc backash hadhotrc-cstabishcd
povcrrcatiohstothcirprc-l970cohditioh. !orthcvahihgoIbovict
povcrhadbcchaccompahicdby thcvaxihgoIvhatBrucc Cumihgs
X
dubbcdthc `capitaistarchipcago' oILast Psia. ' japah vas by Iar
thc biggcst amohg thc ìsahds' oI this archipcago. !hc most
importaht amohg thc othcrisahds vcrc thc city-statcs oI bihgaporc
ahd ohg Kohg, thcgarrisoh statc oI!aivah, ahd thc haI-hatioha
statc oI bouth Korca. ôhc oI thcsc statcs vcrc povcrIu by coh-
vchtioha stahdards. hic ohg Kohg vas hot cvch a sovcrcigh
statc, thc thrcc biggcr statcs-japah, bouth Korca, ahd !aivah-
Origins of our Times (London, Verso, 1994), pp. 21-2.
14 Bruce Cumings, "The Political Economy of the Pacific Rim," in R.A. Palat,
ed., Pacific-Asia and the Future of the World System (Westport, CT, Greenwood
Press, 1993) , pp. 25-6.
INTRODUCTION 7
vcrc vhoy dcpchdcht oh thc Lhitcd btatcs hot ust Ior miitary
protcctiohbutasoIormuchoIthcirchcrgyahdIoodsuppics, asvc
as Ior thc proIitabc disposa oI thcir mahuIacturcs. Phd yct, thc
coctivcccohomicpovcroIthc archipcago ashcv`vorkshop'ahd
`cash box' oI thc vord vas Iorcihg thc traditioha cchtcrs oI
capitaist povcr-cstcrh Luropc ahd ôrth Pmcrica-to rcstruc-
turc ahd rcorgahizc thcir ovh ihdustrics, thcir ovh ccohomics , ahd
thcir ovh vays oI iIc.
PbiIurcatiohoIthis kihd bctvcch miitary ahdccohomicpovcr,
argucd, had hoprcccdchtihthc ahhasoIcapitaist history ahd coud
dcvcop ih thrcc quitc diIIcrcht dircctiohs. !hc Lhitcd btatcs ahd its
Luropcahaicsmighthavcattcmptcdtouscthcirmiitarysupcriority
to cxtract a `protcctioh paymcht' Irom thc cmcrgihg capitaist
cchtcrs oI Last Psia. Ithc attcmpt succccdcd, thc Iirst truy goba
cmpirc ih vord history might havc comc ihto cxistchcc. I ho such
attcmpt vas madc, or, iI madc, didhot succccd, ovcr timc Last Psia
might havc bccomcthc cchtcr oI a vord-markct socictyoIthckihd
chvisagcd by Pdam bmith. But it vas aso possibc that thc biIurca-
tioh voud rcsut ih chdcss vordvidc chaos. Ps put it uch
paraph|asihgjoscph bchumpctcr, bcIorc humahity chokcs ,or basks)
ihthcduhgcoh ,orparadisc) oIa cstcrh-cchtcrcd goba cmpirc or
oIah !astPsiah-cchtcrcd vord-markct socicty, ìtmight vc burh
up ih thc horrors ,or gorics) oI thc cscaatihg viochcc that has
accompahicd thc iquidatioh oIthc Cod ar vord ordcr. ''
.
!rchdsahd cvchts oIthcthirtcch ycars sihcc thisvasvrittch havc
chahgcd radicay thc probabiity that cach oI thcsc outcomcs vi
actuaymatcriaizc. ordvidcviochcchascscaatcdIurthcrahd,as
vi bc argucd ih art , thc Bush admihistratioh's cmbra+c oI thc
rocct Ior a ^cv Pmcricah Cchtury ih rcspohsc to thc cvchts oI
bcptcmbcr ll, Z00l vas, ih kcy rcspccts, ah attcmpt to brihg ihto
cxistchcc thc Iirsttruy goba cmpirc ih vord history. !hc abysma
Iaiurc oI thc rocct oh thc raqi tcstihg grouhd has hot cimihatcd
but hohcthccss grcaty rcduccd thc chahccs that a cstcrh-cchtcrcd
goba cmpircvicvcrmatcriaizc. !hcchahccsoIchdcssvordvidc
chaoshavcprobaby ihcrcascd. Ptthc samctimc,thcprobabiitythat
vc vi vithcss thc Iormatioh oI ah Last Psiah-cchtcrcd vord-
markct socicty has aso ihcrcascd. !hc brightcr prospccts oI this
outcomc arc ih part duc tothc disastrous impicatiohs Ior Lb vord
15 Arrighi, The Long Twentieth Century, p. 22.
16 Ibid., pp. 354-6, paraphrasing Joseph Schumpeter, Capitalism, Socialism,
and Democracy (London, George Allen & Unwin, 1954), p. 163.
Xx
8
povcr oI thc Iraqi advchturc. !or thc most part, hovcvcr, thcy arc
duc to Chiha's spcctacuar ccohomic advahcc sihcc thc cary l9Hs.
!hc impicatiohs oI Chiha's asccht arc momchtous. Chihaishot a
vassaoIthcLhitcdbtatcs,ikc japahor!aivah,hor isitamcrc city-
statc ikc ohg Kohg ahd bihgaporc. Pthough thc rcach oI its
miitary povcr pacs ih comparisoh vith that oI thc Lhitcd btatcs,
ahdthcgrovthoIitsmahuIacturihgihdustricsstidcpchdohcxports
to thc Lb markct, thc dcpchdchcc oI Lb vcath ahd povcr oh thc
_ import oI chcap Chihcsc commoditics ahd oh Chihcsc purchascs oI
Lb !rcasury bohds is | ust as grcat, iI hot grcatcr. ôrc importaht,
Chiha hasihcrcasihgy rcpaccdthc Lhitcdbtatcs as thc maihdrivihg
Iorcc oI commcrcia ahd ccohomic cxpahsioh ih Last Psia ahd
bcyohd.
!hcovcrathcsisputIorvardihthisbookisthatthcIaiurcoIthc
Iro|cct Ior a ^cv Pmcricah Cchtury ahd thc succcss oI Chihcsc
ccohomic dcvcopmcht, takch |oihty, havc madc thc rcaizatioh oI
bmith's visioh oI a vord-markct socicty bascd oh grcatcr cquaity
^ amohg thc vord's civiizatiohs morc ikcy thah it cvcr vas ih thc
amosttvoahdahaIcchturicssihccthcpubicatiohoIThe Wealth of
Nations. !hc book is dividcd ihto Iour parts, ohc primariy thcorc-
X
tica ahd thrcc primariy cmpirica.
!hc chaptcrs oI Iart I ay dovh thc thcorctica uhdcrpihhihgs oI
thc ihvcstigatioh. I bcgih by survcyihg thc rcccht discovcry oI thc
sighiIicahcc oIPdam bmith's thcory oIccohomic dcvcopmcht Ior ah
uhdcrstahdihg oIIomcrahz's `CrcatLivcrgchcc. 'I thch rccohstruct
^
bmith'sthcory ahdcomparcitvithârx'sahdbchumpctcr'sthcorics
oI capitaist dcvcopmcht. ^y maih cohtchtiohs ih Iart I arc, Iirst,
that bmith vas hcithcr ah advocatc hor a thcorist oI capitaist
dcvcopmcht ahd, sccohd, that his thcory oImarkcts as ihstrumchts
)
oI ruc is cspcciay rccvaht to ah uhdcrstahdihg oI hoh-capitaist
markct ccohomics, such as Chiha vas prior to its subordihatc
ihcorporatiohihthcgobaizihgLuropcahsystcmoIstatcs,ahdmight
vc bccomc agaih ih thc tvchty-Iirst cchturyuhdcr totay diIIcrcht
domcstic ahd vord-historica cohditiohs.
!hc chaptcrs oI Iart II usc thc cxpahdcd bmithiah pcrspcctivc
dcvcopcd ih Iart I to track thc goba turbuchcc thatprcccdcd ahd
sctthc stagc Ior thc Lb cmbracc oIthc Iro|cctIor a ^cv Pmcricah
Cchtury ahd Chiha's ccohomic asccht. I tracc thc origihs oI thc
X turbuchcc to ah ovcr-accumuatioh oI capita ih a goba cohtcxt
shapcd by thc rcvot agaihst thc cst ahd othcr rcvoutiohary
uphcavas oI thc Iirst haI oI thc tvchticth cchtury. !hc rcsut vas
aIirstdccp crisis oILbhcgcmohyihthc atc l960s ahdl970s-vhatI
INTRODUCTION
9
sha ca thc `sigha crisis' oI Lb hcgcmohy. !hc Lhitcd btatcs
rcspohdcd to this crisis ih thc l980s by aggrcssivcy compctihg Ior
capita ih goba Iihahcia markcts ahdvith a ma|or cscaatioh oIthc
)
armamcht racc vith thc LbbK. Pthough thc rcspohsc succccdcd ih
rcvivihg thc poitica ahd ccohomic Iortuhcs oI thc Lhitcd btatcs
bcyohd thc rosicst cxpcctatiohs oI its promotcrs, it aso had thc
uhihtchdcd cohscquchccs oI aggravatihg thc turbuchcc oI thc goba
poitica ccohomy ahd oImakihg thc hatioha vcath ahd povcr oI
thc Lhitcd btatcs cvcr morc dcpchdcht oh thc savihgs, capita, ahd
crcdit oIIorcigh ihvcstors ahd govcrhmchts.
Iart III ahayzcsthcBushadmihistratioh's adoptiohoIthc Iro|cct
Ior a ^cv Pmcricah Cchtury as a rcspohsc to thcsc uhihtchdcd
cohscquchccs oIprcvious Lb poicics. PItcr ahayzihg thc dcbacc oI
thcIro|cct, Irccastits adoptioh ahdIaiurc ihthc cxpahdcd bmithiah
pcrspcctivc dcvcopcd in Iart I ahd caboratcd ih Iart II. It vi bc
argucd that thc Iraqi advchturc dcIihitivcy cohIirmcd thc caricr
vcrdict oItIc Victhamar-thatis, thatthccstcrh supcriority oI
Iorcc has rcachcd its imits ahd shovs strohg tchdchcics tovards
imposioh. ôrcovcr, thc Victham ahd Iraq vcrdicts appcar to
compcmchtohc ahothcr. hic dcIcatihVicthamihduccdthcLhitcd
btatcs to brhg Chihabackihto vord poitics tocohtaihthcpoitica
damagcsoImiitarydcIcat,thcoutcomcoIthcIraqidcbaccmayvc
bc thc cmcrgchcc oI Chiha as thc truc vihhcr oI thc Lb ar oh .
!crror.
IartIVdcasspcciIicayviththcdyhamicsoIChiha'sasccht.PItcr
poihtihgoutthcdiIIicuticsthatthc Lhitcd btatcs Iaccs ihits attcmpts
to putthc gchicoI Chihcsc ccohomic cxpahsioh back ih thc bottc oI
Lb domihatioh, I cmphasizc hov attcmpts to Iorcscc Chiha's Iuturc
bchavior vis-a-vis thc Lhitcd btatcs, its hcighbors, ahd thc vord at
argc oh thc basis oI thc past cxpcrichcc oI thc cstcrh systcm oI
statcs arc IuhdamchtayIavcd. !or ohcthihg,thc goba cxpahsioh
oIthccstcrhsystcmhastrahsIormcdits modcoIopcratioh,makihg
much oIits past cxpcrichccirrccvahtto ahuhdcrstahdihgoIprcscht
trahsIormatiohs. ôrc importaht, as thc rccvahcc oI thc historica
cgacyoIthc cstcrhsystcmoIstatcs hasdccrcascd,thcrccvahccoI
thccaricrChiha-cchtcrcdsystcmhasihcrcascd.IhsoIarasvccahtc,
thchcvPsiahagc,iIthcrc isgoihgto bcohc,vi bcthcbcarcr oIa
Iuhdamchta hybridizatioh oI thc tvo cgacics.
!hc cohcudihgcpiogucsums up thcrcasohsvhyLbattcmptsto
robackthccmpovcrmchtoIthcgobabouthhavcbackIircd.!hcy
havc prccipitatcd vhat I sha ca thc `tcrmiha crisis' oI Lb
hcgcmohy, ahd havc crcatcd cohditiohs Ior thc cstabishmcht oI
Ihc kihd oI commohvcathoI civiizatioh that bmith chvisagcd morc
Iavorabc thah cvcr bcIorc. !hc cmcrgchcc oIsucha commohvcath
is Iar Irom ccrtaih. cstcrh domihatioh may bcrcproduccd ih morc
subtc vaysthahihthcpastahd, abovca,aohgpcriodoIcscaatihg
viochcc ahd chdcss vordvidc chaos rcmaihs a possibiity. hat
vord ordcr, or disordcr, vicvchtuay matcriaizc argcy dcpchds
X
oh thc capacity oI thc morc popuous bouthcrh statcs, Iirst ahd
Iorcmost Chiha ahd hdia, to opch up Ior thcmscvcs ahd thc vord
a sociay morc cquitabc ahd ccoogicay morc sustaihabc dcvcop-
mchta path thah thc ohc that has madc thc Iortuhcs oI thc cst.
Par I
ADAM SMITH AND
THE NEW ASIAN AGE
1
MARX IN DETROIT, SMITH IN BEIJING
`!hc Chihcsc
odcrhizatioh cIIort oI rcccht ycars,' vrotc johh K.

!airbahk oh thc cvc oI thc l989 !iahahmch crackdovh, ìs oh so
titahic a scac that it is hardto grasp. '
Cah Chiha svitch Irom a commahd ccohomy to a Ircc markct
ih goods, capita, pcopc, ahd cvch idcas I so, cah Iarty
dictatorship survivc P pcriod oI raivay ahd city buidihg,
typica oIthc hihctcchth cchtury, coihcidcs vith a Iovcrihg oI
postihdustria ccctrohic tcchhoogy. ssucs oI thc Kchaissahcc
ahd thc Lhightchmcht ih thc cst compctc vith a rcappraisa
oI Chiha' s ovh vaucs. Chahgc is hcadohg, Chiha's dcvcop-
mcht is strctchcd thih. ahg Yahg-mihg's uhity oI thcory and
practicc, N admircd sihcc thc sixtcchth cchtury, i hardto Iihd.
ô vohdcr Lchg Xiaopihg's rcIorms cohIusc us as vc as
pcopc ih Chiha.
!hc succcss oI thc rcIorms vas compctcy uhcxpcctcd. `ô
ccohomist'-hotcs !homas Kavski-àhticipatcd Chiha' s im-
mchsc dyhamism.
, ,
Lvch Iau Krugmah got it vrohg. Ps thc
Last Psiah ccohomic cxpahsioh vas chtcrihg its Chihcsc phasc,
hc drcv a parac bctvcch Last Psiah rciahcc oh hcavy
ihvcstmcht ahd big shiIts oI abor Irom Iarms ihto Iactorics
ahd thc simiar rciahcc oI arsav Iact hatiohs ih thc l90s .
`!rom thc pcrspcctivc oI thc ycar 20l0, ' hc cohcudcd, `currcht
pro cctiohs oI Psiah suprcmacy cxtrapoatcd Irom rcccht trchds
may vc ook amost as siy as l960s-vihtagc Iorccasts oI
bovict ihdustria suprcmacy did Irom thc pcrspcctivc oI thc
1 John K. Fairbank, "Keeping Up with the New China," New York Review,
March 16, 1989, p. 17.
2 Thomas G. Rawski, "Reforming China's Economy: What Have We
Learned?" The China Journal, 41 ( 1999) , p. 139.
Brczhhcv ycars.
,
` orsc sti, at a l996 cohIcrchcc ih !aipci a

`vc-khovh Pmcricah ccohomist' tod thc audichcc that Kus-
sia, rathcr thah Chiha, `got thc rcIorm path about right'-a
vicv cchocd thc Ioovihg ycar by The Economist's cohtchtioh
that Chiha' s ccohomic trahsIormatioh ahd its grovth coud hot
bc maihtaihcd iI gradua rcIorm vas hot givch up ih Iavor oI a
Chihcsc variaht oI shock thcrapy.
Pthough durihgthc Last Psiah crisisoIl99798 Chihcscccohomic
grovth sovcd, Chiha avoidcd thc catastrophic cxpcrichcc oI couh-
tricsthatIoovcd The Economist's advicc. hdccd, ihightoIChiha`s
ihsuatiohIromthcvorstcIIccts oIthccrisis, joscphbtigitzrcvcrscd
The Economist's cohtchtioh, arguihg that thc Chihcsc succcss vas
ducprcciscyto not havihggivchup gradua ismihIavoroIthcshock
thcrapics advocatcd by thc so-cacd ashihgtoh Cohschsus. Lhikc
Kussia, hc caimcd, Chiha `hcvcr cohIuscd chds thc vcIarc oI thc
popuatioh| vith mcahs privatizatioh ahd tradc ibcraizatiohj . '
t rccoghizcd that iI it vas to maihtaih socia stabiity, it had to
avoid massivc uhcmpoymcht. job crcatioh had to go m tahdcm
vithrcstructurihg. hch Chihaibcraizcd,itdidso graduay ahd
ih vays that chsurcd that rcsourccs that vcrc dispaccd vcrc
rcdcpoycd to morc cIIicicht uscs, hot cIt ih Iruitcss uhcmpoy-
mcht.`
Ps thcLb hcv-ccohomybubbc burst ih200l, ahd Chihcsc ccohomic
grovthcmcrgcdasthcmaihdrivihgIorccoIrccovcryihLastPsiaahd
bcyohd, caricr procctiohs oI a comihg hcv Psiah agc ho ohgcr
ookcd as siy as thcy didto Krugmah tch ycars caricr. Butthcvcry
purposc ahdsocia cohscquchccs oIthc spcctacuarChihcscccohomic
asccht camc uhdcr scvcrc scrutihy both ih Chiha ahd abroad. !cv
3 Paul Krugman, "The Myth of Asia's Miracle," Foreign Afairs, 73, 6 ( 1994), p.
78. For a more balanced comparative assessment of Soviet economic growth, see V.
Popov, "Life Cycle of the Centrally Planned Economy: Why Soviet Growth Rates
Peaked in the 1950s" available at http://www.nes. ru/%7Evpopov/documents/So
viet % 20Growth-Boston. pdf.
4 Rawski, "Reforming China's Economy," p. 140; 'The death of gradualism,"
China Survey, The Economist, March 8, 1997.
5 Joseph Stiglitz, Globalization and its Discontents (New York, Norron, 2002) ,
pp. 125-6. Two years later, Joshua Cooper Ramo, a member of the Council on
Foreign Relations in the US and of the Foreign Policy Center in Britain, suggested that
it was now possible to speak of an emerging "Beijing Consensus." See Joseph Cooper
Ramo, The Beijing Consensus; Notes on the New Physics of Chinese Power (London,
Foreign Affairs Policy Centre, 2004) .
MARX IN DETROIT, SMITH IN BEIJING 15
outsidc thc Chi
csc Commuhist arty-ahd, Ior a vc khov, cvch

ihsidc it-sccmcd totakc scriousy Lchg's caim thatthc purposc oI
thc rcIorms vas thc crcatioh oI a socialist markct ccohomy. !vo
ycars aItcr Lchg rcitcratcd thc sogah `!o gct rich is gorious, '
Lisabcthright rcportcd ih The Times ,Lohdoh) that `ôhcyhas
rcpaccdârx smas Chiha's god. ' ChccrccascdIromprisoh, cvch
!iahahmch pro-dcmocracy activists tchdcd `to takc thc commcrcia
road . . . oItch oihihg Iorccs vith thc oIIsprihg oI thc party citc.'
PItcrapcriodoIdccihc,mcmbcrshipihthcCommuhistarty startcd
togrovstcadiy,hotoutoIidcoogicacohvictiohbutoutoIpoitica
ahd commcrcia cxpcdichcy. `ôt Ior hothihg,' shc addcd, ìs
Chiha's prcscht systcm cacd 'ârkct Lchihism
!hc sociay corrosivc cIIccts oI mohcymakihg sooh camc uhdcr

attack.habookIirstpubishcdihohgKohgihl997,ahdrcpubishcd
ih Bciihg thc Ioovihg ycar, vhcrc it bccamc a bcstsccr, !udah
Lhivcrsity-traihcd c Qihgiah cohtchdcd that thc maih rcsuts oI
Lchg's rcIorms vcrc hugc ihcquaity, gchcraizcd corruptioh, ahd
thc crosioh oI thc mora basis oI socicty. h hcr vicv, rathcr thah
productiohoIhcvvcath,vhatoccurrcdihthcl990svas`puhdcr'
thatis,thctrahsIcroIstatcpropcrtytopovcr-hodcrsahdthcirhahgcrs-
oh ahdthctrahsIcrbystatc bahks oIthcpcrsoha savihgsoIordihary
citizchs to statcchtcrpriscs. !hc ohythihgthathadtrickcddovhto
ordihary pcopc vas cyhicism ahd thc coapsc oIcthics. hrcportihg
c' svicvs, LiuBihyahahdcrryLihkcohcurrcdvithhcrasscssmcht
thatsuch a systcm vas scI-dcstructivc
hdthcrcIorcuhsustaihabc.
cstcrh ârxists cagcry scizcd upohihdictmchts oIthis kihd to
dismissthcidcathatahykihd oI sociaism, markctorothcrvisc,sti
cxistcd ih Chiha. !hus, ihihtroducihgârtihart-Lahdsbcrg's ahd
au Burkctt's book-chgth articc oh `Chiha ahd bociaism, ' thc
cditors oIMonthly Review caimcd that
ohccapostrcvoutioharycouhtrystartsdovhthcpathoIcapitaist
dcvcopmcht,cspcciajvhchtryihgtoattaihvcryrapidgrovth
ohc stcp cads to ahothcr uhti thc harmIu ahd dcstructivc
charactcristics oI thc capitaist systcm Iihay rccmcrgc. Kathcr
6 E. Wright, "To Be Rich Is Glorious," World Press Review, 41, 7 (1994), pp.
10-11. The slogan "To get rich is glorious" was first launched in 1982, but its impact
gained momentum only after 1992, when during a tour of China's southern provinces
Deng called for everyone in the country to go into business and get rich "even more
boldly" and "even faster" than in the 1980s. See Liu Binyan and Perry Link, "A Great
Leap Backward," New York Review, October 8, 1998.
7 Liu and Link, "A Great Leap Backward," p. 23 .
thah promisihg ahcv vorld oI`markct sociaism,' vhat distih-
guishcs Chiha today is thc spccd vith vhich it has crascd past
cgaitariahachicvcmchts ahdcrcatcdgrossihcquaiticsahdhumah
ahd ccologica dcstructioh. . . . !hcrc is ho markct road to
sociaism iI that mcahs scttihg asidc thc most prcssihg humah
hccds ahd thc promisc oI humah cquaity.
8
Pthough ho ohc dchics thc ihroads oI capitaist tchdchcics ih thc
vakc oI Lchg`s rcIorms, thcir haturc, cxtcht, ahd cohscquchccs
rcmaih cohtrovcrsia cvch amohg ârxists. bamir Pmih, Ior ohc,
thihks that sociaism ih Chiha has so Iarhcithcr voh hor ost. `Ps
ohg as thc prihcipc oI cqua acccss to ahd is rccoghizcd ahd is
cIIcctivcy impcmchtcd,' hc caims, ìt is hot too atc Ior socia
actioh to succcssIuy ihIuchcc ah as yct uhccrtaih cvoutioh. '
!hc rcvoutioh ahd thc pluhgc ihto modcrhity havc trahsIormcd
thcpcopcoIChihamorcthahahyothcrihthc!hirdordtoday.
!hc Chihcsc popuar casscs havc cohIidchcc ih thcmscvcs. . . .
!hcy arc argcy Ircc Irom submissivc attitudcs. . . . bocia strug-
gcs arc a daiy occurrchcc, humbcr ih thc thousahds, arc oItch
viocht ahd do hot avays rcsut ih Iaiurc.
Kcccht dcvcopmchts support Pmih`s asscssmcht oI thc cxtcht ahd
cIIcctivchcssoIpopuarstruggcsih Chiha. !accdvith risihg ihcqua-
ity ahd uhrcst ih thc couhtrysidc, ih !cbruary 2006 thc Chihcsc
govcrhmcht ahhouhccd ma|or ihitiativcs uhdcr thc bahhcr oI a
`hcvsociaistcouhtrysidc' to cxpahdhcath,cducatioh, ahdvcIarc
bchcIits Ior Iarmcrs, vhic Iurthcr postpohihg thc privatizatioh oI
ahd propcrty. `!hc cchtra govcrhmcht has chahgcd dircctioh to
Iocus oh uhcvch dcvcopmcht,' cxpaihcd ch !ic|uh oI Kchmih
Lhivcrsity. `!hc ccohomicgap iscrcatihgsociacohIict, ahd socia
cohIict has bccomc a morc ahd morc scrious probcm. ' P mohth
atcr, Ior thc Iirst timc ih a dccadc
thc âtioha Icopc`s Cohgrcss

vas cohsumcd vith ah idcoogica dcbatc ovcr sociaism ahd capit-
aism thatmahy assumcdhadbcchmadcmootby Chiha`s ohgstrcak
oIrapid ccohomic grovth. Kciahcc oh markct mcchahisms vas hot
8 Harry Magdoff and John Bellamy Foster, "China and Socialism: Market
Reform and Class Struggle. Editors' Foreword," Monthly Review, 56, 3 (2004) , p. 6.
Although there are dissenting voices, this has become the predominant view among
Western leftists.
9 Samir Amin, "China, Market Socialism, and u.S. Hegemony, " Review, 28, 3
(2005), pp. 274-5.
ih qucstioh, but garihg disparitics bctvcch rich ahd poor, rampaht
corruptioh, abor abuscs, ahdahd scizurcs vcrc. ÌIyou cstabish a
markct ccohomy ih a pacc ikc Chiha, vhcrc thc ruc oI av is
impcrIcct,' commchtcd Liu Cuoguahg oI thc Chihcsc Pcadcmy oI
bociabcichccs, ìIyoudohotcmphasizcthc sociaistspiritoIIairhcss
ahd socia rcspohsibiity, thch thc markct ccohomy you cstabish is
goihg to bc ah citist markct ccohomy.
, ,
''
hat is ah "elitist markct ccohomy' r Is itthcsamc as a capitalist
markct ccohomyr hat csc cah a markct ccohomy bc r Is hot a
socialist markct ccohomy ah oxymoroh, as it is vidcy bcicvcdcIt,
right, ahd cchtcrr PhdiIitis hotah oxymoroh,vhatisit, ahduhdcr
vhatcohditiohs cah it bc cxpcctcd to matcriaizcr bcckihgto bridgc
thc chasm bctvcch oIIicia discoursc ih Bci| ihg-cmphasizihg `soci-
aism vith Chihcsc charactcristics'-ahd thc rcaity oI uhbridcd
capitaism ih vhich party oIIicias arc cagcr parthcrs, ih 200 thc
Commuhist Iarty auhchcd a campaigh amohg poitica cadcrs ahd
schior acadcmics to modcrhizc ahd dcpoy ârxism ih cohIrohtihg
vhat Commuhist Iarty cadcr, u jihtao, cacd `chahgcs, cohtra-
dictiohs ahd probcms ih a Iicds. ' !hc campaigh ihvovcs hcv
trahsatiohs oIârxist itcraturc, thc updatihg oItcxts oh ârxism
Ior sccohdary-scoo ahd uhivcrsity studchts, ahd rcscarch oh hov
ârxismcah bc rcdcIihcdtoihIorm Chiha`s poicics cvchas privatc
chtcrprisc ihcrcasihgy bccomcs thc basis oI its ccohomy.
'
hatcvcrthcrcsutsoIthccampaigh,thccohIusiohthat surrouhds
Lchg`s rcIorms is symptomatic oI vidcsprcad miscohccptiohs about
thc rcatiohship bctvcch markct ccohomy, capitaism, ahd ccohomic
dcvcopmcht. !hcmiscohccptiohsarcas muchthcorcticaasthcyarc
practica. It is chtircy possibc, ihdccd ikcy, that thcy vi bc
rcsovcd ih practicc bcIorc thcy arc rcsovcd ih thcory. But this is
ho cxcusc Ior hot scckihgthcir thcorctica rcsoutioh ahcad oIthcir
practica rcsoutioh, vhich is vhaLvc sha try to do ih this book.
N eo-Smithian Marxism
Lcvcopmchts ih thc idcoogica rcam arc uhrciabc ihdicators oI
socia rcaitics. !hcy may sigha as much thc abschccas thcprcschcc
10 J. Yardley, "China Unveils Plan to Aid Farmers, but Avoids Land Issue,"
New York Times, February 23, 2006. J. Kahn, "A Sharp Debate Erupts in China Over
Ideologies," New York Times, March 12, 2006.
11 E. Cody, "China Confronts Contradictions between Marxism and Markets,"
Washington Post, December 5, 2005.
18 ADAM SMITH I N BEIJING
oI thc rcaitics thcy purport to rcprcscht. !hus, ih ah cssay chtitcd
`ârx ih Lctroit' pubishcd at thc hcight oI thc rcviva oIârxist
ihIuchccsihthcvakcoIl968,thcârxistphiosophcrârio!rohti
dismisscd thc idca that thc Iormatioh oI socia-dcmocratic ahd
commuhistpartics oIârxist ihspiratioh madc Luropc thccpicchtcr
oI cass struggc. ' !hc truc cpicchtcr, hc caimcd, had bcch thc
Lhitcd btatcs, vhcrc ârxist ihIuchccs hadbcch mihima but vork-
crs had bcch most succcssIuih Iorcihg capita to rcstructurc itscIto
accommodatcthcir dcmahds Iorhighcrvagcs. hLuropc ârx ivcd
oh idcoogicay, but it vas ih thc Lhitcd btatcs that abor-capita
rcatiohs vcrc òbj cctivcy ârxiah. '
IoratcasthaIacchtury,uptothcpost-bccohdordarpcriod,
ârx coud bc rcad ih thc Uhitcd btatcs| ih thc rcaity oI thc
struggcs ahd oI thc rcspohscs provokcd by thc dcmahds oI thc
struggcs.1hisdocshotmcahthatârx' sbooks providcusvithah
ihtcrprctatioh oI Pmcricah abor struggcs. Kathcr, it mcahs that
thcscstruggcsprovidcusvithakcyIorahaccuratcihtcrprctatiohoI
ârx's most advahccdtcxts. . . . Capital ahdthc GrundrisseY
!rohti's cohtchtioh vas ah cxprcssioh oI thc crisis oI idchtity that
ârxism cxpcrichccd at atimc oIrchcvcd ihIuchcc ih thc capitaist
cst. Lvcr sihcc its Iouhdihg as a thcory oI capitaist dcvcopmcht
ahd a doctrihc oI sociaist trahsIormatioh, ârxism had scch its
ihIuchcc migratihg rcchtcssy Irom thc cchtcrs to cvcr morc pcr-
iphcra ocatiohsoIvordcapita ism.Bythcatc l960s, thccpicchtcrs
oI its diIIusioh had bccomc poor !hird ord couhtrics such as
Chiha, Victham, Cuba, ahd Iortuga ' s PIricah coohics-couhtrics
vhosc socia rcaitics had ittc, iI ahythihg, ih commoh vith thosc
thcorizcdih Capital ahdthcGrundrisse. t vas atthis timc that uhdcr
thcj oiht impact oILb diIIicutics ih Victhamahd studcht rcbciohs,
ârxism migratcd back to thc !irst ord. But vhch cstcrh
radicas startcd rcadihg Capital, thcy had a hard timc rccoghizihg
its rccvahcc to thcir poitica co
ccrhs. Ps Lavid arvcy rccas,

h thc cary l970s it vas hard to Iihd thc dircct rccvahcc oI
Voumc oI Capital to thc poitica issucs that domihatcd thc
12 This was actually the title of a section of the postscript to the second edition
of his book Operai e capitate (Turin: Einaudi, 1971) , pp. 267-311, but it might just as
well have been the title of the entire postscript.
13 Ibid., pp. 269, 300, 303-.
day. c hccdcd Lchih to gct Irom ârx to ah uhdcrstahdihg oI
thc impcriaist var that so uhhcrvcd us ih Victham. . . . Phd it
Ircquchty chtaicd ah act oI Iaith ih thc vhoc history oI thc
ârxist movcmcht ,or ih somc charismatic Iigurc ikc âo or
Castro, to bcicvc ih thc ihhcr cohhcctioh bctvcch ârx's
Capital ahd a that vc vcrc ihtcrcstcd ih. 1his is hot to say
thcrc vas hothihg ih thc tcxt to Iascihatc ahd dcight-thc
cxtraordihary ihsights that camc Irom cohsidcratioh oI thc
commodity Ictish, thc vohdcrIu schsc oI hov cass struggc
had atcrcd thc vord Irom thc pristihc Iorms oI capita
accumuatioh that ârx dcscribcd. . . . But thc paih Iact
vas that Capital did hot havc that much dircct rccvahcc to
daiy iIc. '
19
!hcrc cah bcittc doubtthat a hugc guI scparatcd ârx'sthcoryoI
capita Irom thc ârxism oI!idc Castro, Pmicar Cabra, o Chi
îhh, or âo Zcdohg, ahd that this guI coud bc bridgcd ohy
through ah act oI Iaith ih thc uhity oI ârxist history. But it is hot
atogcthcrtructhatih thcatcl960sahdcary l970sârx'sthcoryoI
capita did hot havc somc dircct rccvahcc to daiy iIc ih thc !irst
ord. !his vas a timc oIihtchsiIyihg cass cohIict ih Luropc ahd
cscvhcrc ahd !rohti vas hot aohc ih thihkihg that thcsc struggcs,
ikcthc caricr ohcs ih thc Lhitcd btatcs, thrcvhcv ight oh ârx's
Capital. t vas ih this cohtcxt that a grovihg humbcr oI cstcrh
ârxists oh both sidcs oIthc Ptahticrcdiscovcrcdthcaborproccss
ahdcasscohIictihthcvorkpaccthathadIigurcdsopromihchtyih
Vo umc oI Capital. Lhti thc l960s, ho ârxist thcorist oI ahy
promihchcc hadIoovcdârx' sihvitatiohto `takc cavcIor a timc
oIthcj hoisysphcrc oIthcmarkctj ,vhcrccvcrythihgtakcs pacc oh
thc surIacc ahdihvicvoIamch,ahdIoov thcposscssoroImohcy
ahd thc posscssoroIabor-povcrj ihto thc hiddch abodcs oIproduc-
tioh,' vhcrc, hc promiscd, ` vjc sha at ast Iorcc thc sccrct oI
14 David Harvey, Spaces of Hope (Berkeley, CA, University of California Press,
2000), pp. 6-7.
15 On the intellectual and political tendency of operaismo (workerism) pioneered
by Tronti, see Steve Wright, Storming Heaven: Class Composition and Class Struggle in
Italian Autonomist Marxism (London, Pluto, 2002) and "Children of a Lesser Marx
ism," Historical Materialism, 12, 1 (2004) . Partly inspired by Tronti's disciple Antonio
Negri, Michel Aglietta, A Theory of Capitalist Regulation: The US Experience
(London, New Left Books, 1979) and other representatives of the French Regulation
school put the organization of the labor process that had emerged out of workers'
struggles and capitalist responses to those struggles in the US automobile industry
(Fordism) at the center of their conceptualization of twentieth-century capitalism.
z` ADAM SMITH IN BEIJING
proIit-makihg.
,,
'
Lcscrtcd by ârxists, thc hiddch abodcs oI pro-
ductioh had bcch thc prcscrvc oI Lb ihdustria socioogy ahd labor
history,vhichihspircd!rohti'sdiscovcryoIârxihLctroit.But,ih
thc l970s, ârxists at ohg ast rcdiscovcrcdthc abor proccss as thc
cohtcstcdtcrraih oImahagcriaprcrogativcs ahdvorkcrs' rcsistancc
' to cxp oitatioh.
hstcad oI Iorcihg thc sccrct oI proIit-makihg, as ârx had
promiscd, thc rcdiscovcry dccpchcd thc ccavagc bctvcch ârxists
cohccrhcdprimariyvith!hirdordcmahcipatiohIromthccgacy
oI coohia impcriaism ahd ârxists cohccrhcd primariy vith
vorkihg-cass cmahcipatioh. !hc probcm vas that Capital did
providc kcy ihsights ihto cass cohIict, but ârx's prcsuppositiohs
cohccrhihg thc dcvcopmcht oI capitaism oh a vord scac did hot
stahd up to cmpirica scrutihy.
ârx's prcsuppositiohs bcar a cosc rcscmbahcc to thc Ìat
vord' thcsis that !homas !ricdmah has bcch pcddihg ih rcccht
ycars. PItcrrcadihg ,or rcrcadihg) thc Communist Manifesto, !ricd-
mah cohIcsscs to bc ìh avc at hov ihcisivcy ârx dctaicd thc
Iorccs thatvcrc Iattchihgthc vord durihgthc risc oIthchdustria
Kcvoutioh, ahd hov much hc Iorcshadovcd thc vay thcsc samc
Iorccs voudkccpIattchihgthc vordrightup tothcprcscht.
,,
c
thchgocs ohto quotc thcIamous passagcs ihvhichârxahdLhgcs
cohtchdcd that thc hccd oIcohstahty cxpahdihg markcts drivcs thc
bourgcoisic to cstabish cohhcctiohs òvcr thc vhoc surIacc oIthc
gobc', to rcpucc od-cstabishcd hatioha ihdustrics vith ihdustrics
`that ho ohgcr vork up ihdigchous ravmatcria, but rav matcria
dravh Irom thc rcmotcst zohcs, ihdustrics vhosc products arc
cohsumcd, hot ohy at homc, but ih cvcry quartcr oI thc gobc. '
16 Karl Marx, Capital, vol. I (Moscow, Foreign Languages House, 1959) , p. 176.
17 In the United States, the Marxist rediscovery of the labor process was
pioneered by Harry Braverman's Labor and Monopoly Capital: The Degradation
of Work in the Twentieth Century (New York, Monthly Review Press, 1974) , radical
political economists of the social structure of accumulation school, and Michael
Burawoy's industrial ethnography. See, among others, Richard Edwards, Contested
Terrain (New York, Basic Books, 1979), David Gordon, Richard Edwards, and
Michael Reich, Segmented Work, Divided Workers: The Historical Transformation
of Labor in the United States (New York, Cambridge University Press, 1982), and
Michael Burawoy, Manufacturing Consent: Changes in the Labor Process under
Monopoly Capitalism (Chicago, University of Chicago Press, 1982). It reached its
apogee with the widespread adoption of Capital as one of the classics of sociological
theory in many US universities.
18 Thomas L. Friedman, The World Is Flat: A Brief History of the Twenty-First
Century (New York, Farrar, Straus & Giroux, 2005) , pp. 201--.
MARX IN DETROIT, SMITH IN BEIJING z
Psarcsut, `thcodocaahdhatioha sccusiohahdscI-suIIicichcy'
givc vay to ìhtcrcoursc ih cvcry dircctioh, uhivcrsa ihtcr-dcpch-
dchcc oI hatiohs'-a uhivcrsa ihtcrdcpchdchcc that brihgs ih its
traih gchcraizcd capitaist dcvcopmcht.
1hc bourgcoisic, by thcrapiddcvcopmcht oI a ihstrumchts oI
productioh,bythcimmchscyIaciitatcdmcahsoIcommuhicatioh,
dravs a, cvchthc most barbariah hatiohs ihto civiizatioh. 1hc
chcap priccs oI commoditics arc thc hcavy articry vith vhich it
battcrs dovh a Chihcscvas. . . . tcompcs a hatiohs, ohpaih
oI cxtihctioh, to adopt thc bourgcois modc oI productioh, it
compcs thcm to ihtroducc vhat it cas civiizatioh ihto thcir
midst,i. c. ,to bccomcbourgcoisthcmscvcs.hohcvord,itcrcatcs
a vord aItcr its ovh imagc. '
Ps arvcy hotcd ohg bcIorc !ricdmah, it is hard to imagihc a morc
compcihg dcscriptioh oI `gobaizatioh' as vckhov it today thah
thc ohcârx ahdLhgcs providcd l0 ycars ago.
But vhat !ricd-
mah misscs, ahd ârx ahd Lhgcs did hot Iorcscc, is that ih thc
ihtcrvchihg l0 ycars thc ihcrcasihg ihtcrdcpchdchcc oI hatiohs did
hot Ìattch' thc vord through gchcraizcdcapitaist dcvcopmcht.
hcthcrthc prcschtrccchtcrihg oIthc goba ccohomy oh Psia vi
cvchtuayrcsutihaIattcrvordoIohckihdorahothcrisaqucstioh
thatIorhovvcmustcavcopch. hatisccrtaihisthat,ovcrthcpast
tvo cchturics, thc ihcrcasihg ihtcrdcpchdchcc oI thc cstcrh ahd
hoh-cstcrh vords has bcch associatcd hot vith thc cohvcrgchcc
hypothcsizcd ih thc Communist Manifesto but vith a hugc divcr-
gchcc.
Pt about thc samc timc that !rohti ahd othcrs vcrc rcdiscovcr-
ihg ârx ih thc hiddch abodcs oI !ordist productioh, Phdrc
Cuhdcr !rahk auhchcd thc mctaphor `dcvcopmcht oI uhdcrdc-
vcopmcht' to dcscribc ahd cxpaih this hugc divcrgchcc. !hc
divcrgchcc,hc caimcd, vashothihgbut thc cxprcssioh oI a proccss
oI goba capitaistcxpahsioh that simutahcousy gchcratcd dcvc-
opmcht ,vcath) ih its corc ocatiohs ,cstcrh Luropc ahd atcr
ôrth Pmcrica ahd |apah) ahd uhdcrdcvcopmcht ,povcrty) cvcry-
vhcrc csc. !hc proccss vas prcschtcd as rcstihg oh a scrics oI
19 Karl Marx and Frederick Engels, The Communist Manifesto (Harmonds
worth, Penguin, 1967), pp. 83-4.
20 David Harvey, "Globalization in Question," Rethinking Marxism," VIII, 4
( 1995) .
mctropois-satcitc rcatiohships through vhich thc mctropois
appropriatcs ccohomic surpus Irom its satcitcs Ior its ovh
ccohomicdcvcopmcht,vhicthc `satcitcs rcmaihuhdcrdcvcopcd
Ior ack oI acccss to thcir ovh surpus ahd as a cohscquchcc oI thc
samc poarizatioh ahd cxpoitativc cohtradictiohs vhich thc mc-
tropois introduces ahd maintains ih thc satcitc's domcstic struc-
turc. ' !hc mcchahisms oI surpus appropriatioh ahd cxpropriatioh
varicd across spacc ahd ovcr timc, but thc mctropois-satcitc or
corc-pcriphcry structurc oI thc proccss oI capitaist cxpahsioh
rcmaihcd ih pacc, cohtihuay poarizihg rathcr thah cquaizihg
thc vcath ahd povcrty oI hatiohs.
!rahk's cohccptuaizatioh oI thc dcvcopmcht oI uhdcrdcvcop-
mcht has bcch vidcy criticizcd Ior rcducihg cass rcatiohs to ah
cpiphchomchohoIcorc-pcriphcryrcatiohs. hohcoIthcsccritiqucs,
Kobcrt Brchhcr ackhovcdgcd that `thc cxpahsioh oI capitaism
through tradc ahd ihvcstmcht did hot automaticay brihg vith it
thc capitaistccohomicdcvcopmchtthat thc ârxoIthc Manifesto
had prcdictcd. '
hthc courscoIthcgrovthoIthc vord markct, Chihcsc asto
thc advahcc oI thc productivc Iorccs might bc crcctcd as vc
battcrcd dovh. hch such `dcvcopmcht oI uhdcrdcvcopmcht'
occurrcd, !rahk righty poihtcd out, thc `hatioha bourgcoisic'
acquircd ah ihtcrcst hot ih . . . dcvcopmcht, but ih supportihg
prcciscy thc cass systcm oI productioh ahd surpus cxtractioh
that| Icttcrcdccohomic advahcc. . . . Ps!rahk asscrtcd,to cxpcct
uhdcr thcsc circumstahccsthat capitaistpchctratioh voud dcvc-
op thc couhtry vas, by ahd argc, vishIu thihkihg.
Brchhcr hohcthccss Iouhd !rahk's schcmc oI thihgs Iuhdamchtay
IavcdIortrcatihgcass àsadcrivativcphchomchoh,arisihgdirccty
Irom thc hccds oI proIit maximizatioh. ' ôrc spcciIicay, thc
probcm vith !rahk's accouht is that `thc dcmahds oI thc markct,
oIproIit, dctcrmihcthc cass structurc,subjcctohytothcimitatiohs
oIgcography ahddcmography-asiIthc sighiIicahcc oIthcscIactors
vas hot, ih turh, to a grcat cxtcht socio-historicay dctcrmihcd, ahd
as iI thc potchtia Ior proIit did hot itscI dcpchd oh thc cass
21 Andre Gunder Frank, Capitalism and Underdevelopment in Latin America
(New York, Monthly Review Press, 1969), pp. 9-15.
22 Robert Brenner, "The Origins of Capitalist Development: A Critique of Neo
Smithian Marxism," New Left Review, 1, 104 ( 1977), pp. 90-1.
structurc.
, ,
` !or Brchhcr, ih othcr vords, thc maih rcasoh vhy thc
Manifesto's prcdictioh oI gchcraizcd capitaist dcvcopmcht Iaicdto
matcriaizcvas hotthcihhcrchtypoarizihgtchdchcicsoIthcproccss
oI vord-markct Iormatioh, but thc ihhcrcht ihcapacity oI vord-
markct Iormatioh to gchcratc capitaist dcvcopmcht uhcss appro-
priatc prc-cxistihg socia cohditiohs vcrc prcscht at thc oca cvc.
Brchhcr istcd tvo cohditiohs as paramouht. !irst, thosc vho
orgahizc productioh musthavc ost thc capacity to rcproducc thcm-
scvcs ahd thcir cstabishcd cass positioh outsidc thc markct ccoh-
omy. bccohd, thc dircct produccrs must havc ost cohtro ovcr thc
mcahs oI productioh. !hc Iirst cohditioh is hcccssary ih ordcr to
activatc ahd sustaih thc compctitioh thatvi Iorcc thc orgahizcrs oI
productiohto cutcosts so as to maximizcproIitsthroughspcciaiza-
tioh ahd ihhovatiohs. !hc sccohd cohditioh, ih turh, is hcccssary ih
ordcrto activatcahdsustaihthccompctitiohthatviIorccthcdircct
produccrs to sc thcir abor-povcr to thc orgahizcrs oI productioh
ahd to subjcct thcmscvcs to thc discipihc imposcd oh thcm by thc
attcr. !hcsc tvo cohditiohs, caims Brchhcr, arc hot automaticay
crcatcd by thc goba sprcad oI markct cxchahgcs ih thc pursuit oI
proIit.Kathcr,thcyarcbroughtihtocxistchccbythcparticuarsocia
historicsoIthccouhtricsthatarcbroughtuhdcrthcsvayoIthcvord
markct. !hc maihrcasoh vhythc Manifesto's prcdictioh oIgchcra-
izcd capitaist dcvcopmcht Iaicd to matcriaizc, thcrcIorc, is that
ohy ih somc couhtrics did thc history oI cass struggc brihg ihto
cxistchcc thc tvo hcccssary cohditiohs oI capitaist dcvcopmcht.
Brchhcr cohtrasts his modc oI capitaist dcvcopmcht-vhich is a
rcstatcmcht oI ârx's thcory oI capitaist productioh as skctchcdih
Voumc oICapital-with that put Iorvard by Pdam bmith ih The
Wealth of Nations. h bmith's modc, a hatioh' svcath is a Iuhctioh
oIthcspcciaizatioh oIproductivc tasks that chsucs Iromthcdivisioh
oI abor amohg productivc uhits, thc dcgrcc oI vhich is ih turh
dctcrmihcd by thc cxtcht oI thc markct. h such a modc, Brchhcr
argucs, thc proccss oI ccohomic dcvcopmcht isdrivchbythccxpah-
sioh oIthc markct rcgardcss oI vhcthcr or hot thosc vho orgahizc
productioh havc ost thc capacity to rcproducc thcir cass positioh
outsidc thc markct ccohomy ahd thc dircct produccrs havc ost
23 Ibid., p. 86.
24 Robert Brenner, "World System Theory and the Transition to Capitalism:
Historical and Theoretical Perspectives, " unpublished English version ( 1981) of a
paper published in Jochen Blaschke, ed. , Perspectiven des Weltsystems (Frankfurt,
Campus Verlag, 1983) , pp. 1 , 4, 6; Brenner, "Origins of Capitalist Development," pp.
35-6.
cohtroovcrthcmcahs oIproductioh.hthis rcspcct,bmith's modc is
thc matrix oI a grcat varicfy oI modcs oI capitaist dcvcopmcht,
ihcudihg!rahk' s, vhichBrchhcrcharactcrizcsascxcmparsoI`^co-
bmithiah ârxism.
,,
`
!hc imits ahdcohtradictiohs oIthis charactcrizatioh vi bccomc
cvidcht asvc procccd. !orour prcschtpurposcs,hovcvcr, it has thc
advahtagc oI dravihg a distihctioh bctvcch thc dcvcopmcht oI a
markct ccohomy ahd capitaist dcvcopmcht propcr. Lravh vith
spcciIic rcIcrchcc to thc origihs oI capitaist dcvcopmcht ih Luropc,
thc distihctioh is hohcthccss compatibc vith Pmih's asscssmcht
that, as ohg as thc prihcipc oI cqua acccss to ahd cohtihucs to bc
rccoghizcd ahd impcmchtcd, it is hot too atc Ior socia actioh ih
cohtcmporary Chiha to stccr cvoutioh ih a hoh-capitaist dircctioh.
!or as ohg as thatprihcipc is uphcd ih practicc, Brchhcr's sccohd
cohditioh oI capitaist dcvcopmcht ,that thc dircct produccrs must
havcostcohtroovcrthcmcahsoIproductioh) isIarIrombcihgIuy
cstabishcd. h spitc oIthc sprcad oImarkct cxchahgcs ihthc pursuit
oI proIit, thcrcIorc, thc haturc oI dcvcopmcht ih Chiha is hot
hcccssariy capitaist.
!his, oI coursc, docs hot mcah that sociaism is aivc ahd vc ih
CommuhistChiha,horthatitis aikcyoutcomcoIsocia actioh. P
it mcahs is that, cvch iI sociaism has arcady ost out ih Chiha,
capitaism,bythisdcIihitioh,hashotyctvoh. !hcsociaoutcomc oI
Chiha's titahic modcrhizatioh cIIort rcmaihs ihdctcrmihatc, ahdIor
a vckhov, sociaism ahd capitaism as uhdcrstood oh thc basis oI
past cxpcrichcc may hot bc thc most uscIu hotiohs vith vhich to
mohitor ahd comprchchd thc cvovihg situatioh.
Smithian Dynamic and the Great Divergence
!hc ccohomic rcsurgchccoIChiha-vhatcvcr its cvchtua socia out-
comc--has givch risc to a hcv avarchcss amohg a grovihg group oI
schoarsthatthcrcisaIuhdamchtavord-historicadiIIcrchccbctvcch
proccsscsoImarkctIormatiohahdproccsscs oIcapitaistdcvcopmcht.
htcgra tothis hcv avarchcsshas bcchthcdiscovcry , or rcdiscovcry)
thattradcahdmarkctsvcrcmorcdcvcopcdihLastPsiaihgchcra,ahd
ihChihaihparticuar,thahihLuropc,throughthccightcchthcchtury.h
ihtcrprctihgthisgrcatcrdcvcopmcht,K.Bihohghaschachgcdhiip
uahg'sargumcht that,priortothchdustriaKcvoutioh, Luropcvas
25 Brenner, "The Origins of Capitalist Development," pp. 33-41.
grovihg aohg ah cvoutiohary tracctory hcadcd tovards uhimitcd
ccohomic improvcmcht, vhic Chiha vas grovihg aohg ah ìhvou-
tiohary'tra cctoryoI`grovthvithoutdcvcopmcht'charactcrizcdby
dccrcasihgrcturhstothcihcrcasihghumbcroIdaysvorkcdahhuay.
Pgaihst this vicv, ohg caimcd that thc Luropcah ahd Chihcsc
tracctorics sharcdimportahtIcaturcsthat `vcrcpartoIthc bmithiah
dyhamicsoImarkct-bascdgrovthsupportcdbyaborihtchsiIicatiohih
thcadvahccdrcgiohsoIChihaahdLuropcihthccchturicsprcccdihgthc
ihdustria rcvoutioh.
, ,
Ps prcviousy hotcd ahd Iurthcr caboratcd ih Chaptcr 2, thc

csschccoIthis dyhamic is aproccssoIccohomic improvcmcht drivch
byproductivity gaihs attchdihg a vidchihg ahd dccpchihg divisioh oI
abor imitcd ohy by thc cxtcht oI thc markct. Ps ccohomic im-
provcmcht raiscs ihcomcs ahd cIIcctivc dcmahd, thc cxtcht oI thc
markct ihcrcascs, thcrcby crcatihg thc cohditiohs Ior hcv rouhds oI
divisioh oI abor ahd ccohomic improvcmcht. Cvcr timc, hovcvcr,
thisvirtuous circc comcsup agaihstthcimits imposcd ohthccxtcht
oI thc markct by thc spatia scac ahd ihstitutioha scttihg oI thc
proccss. hchthcsc imits arcrcachcd,thcproccsschtcrsahigh-cvc
cquiibrium trap. t Ioovs that, iILuropc ahd Chiha vcrc cxpcri-
chcihgthc samc bmithiah dyhamics,thcrca puzzc ishotvhy Chiha
vas caughtih a high-cvc cquiibriumtrap butvhy Luropc cscapcd
such a trapthrough thc hdustria Kcvoutioh.
!rahk ahd omcrahz raiscd thc samc issuc cvch morc cxpicity.
!rahk poihtcd out that bmith himscI sav Chiha as bcihg ahcad oI
Luropc aohgthc samcdcvcopmchta tracctory ahddid hotIorcscc
thc Luropcah brcakthrough.
bmith. . . vas thcastmaor ,cstcrh) socia thcoristto apprcci-
atc that Luropc vas a johhhy-comc-atcy m thc dcvcopmcht oI
26 "In the Euro-American experience, agrarian change in the early modern and
modern period was generally accompanied by expansion in both absolute output and
output per unit of labor. Therefore it has seemed so important to distinguish what
might be termed simple 'growth,' with expanding output, from 'development,' with
improved labor productivity. For China, however, the distinction is crucial . . .
[because] in the six centuries preceding the Revolution . . . agricultural output
expanded, enough to keep pace with dramatic population growth, but chiefly by
intensification and involution. Productivity and income per labor day either stag
nated, as in intensification, or shrank, as in involution" (Philip e. e. Huang, The
Peasant Family and Rural Development in the Yangzi Delta, 1350-1988 [Stanford,
CA, Stanford University Press, 1990], p. 12).
27 R. Bin Wong, China Transformed: Historical Change and the Limits of
European Experience (Ithaca, NY, Cornell University Press, 1997), pp. 16-23, 30-1.
thc vcath oI hatiohs. `Chiha is a muchrichcr couhtry thah ahy
part oILuropc,' bmithrcmarkcdin l776. bmith did hot ahticipatc
ahy chahgc ih this comparisoh ahd shovcd ho avarchcss that hc
vas vritihg at thc bcgihhihg oI vhat has comc to bc cacd thc
ìhdustria rcvoutioh.
2b
omcrahz,Iorhispart,chachgcdohcmpiricagrouhdsthcargumcht
that cstcrh Luropc grcvIastcrthah Chiha bccauscithad thc most
cIIicichtmarkctsIorgoodsahdIorIactorsoIproductioh.Lvchasatc
as l789, hc argucs, `vcstcrh Luropcah ahd, abor, ahd product
markcts . . . vcrc oh thc vhoc probaby further Irom pcrIcct
compctitioh-that is, css ikcy to bc composcd oI mutipc buycrs
ahd sccrs vith opportuhitics to choosc Irccy amohg mahy tradihg
parthcrs-thah thosc ih most oI Chiha ahd thus css suitcd to thc
grovth proccss chvisiohcd by Pdam bmith.
, ,
!akch oihty, thcsc cohtchtiohs bcarsomcrcscmbahccto!rohti's

discovcry oI ârx ih Lctroit. just as !rohti had dctcctcd a Iuhda-
mchta discrcpahcy bctvcch Luropc's idcoogica cmbracc oI ârx-
ism ahdthc grcatcrIactua rccvahcc oILb vorkihg-cass history Ior
ah accuratc ihtcrprctatioh oI ârx's Capital, ohg, !rahk, ahd
omcrahzhov dctcctcdahcquayIuhdamchta discrcpahcy bctvcch
thc cstcrh cmbracc oIthc idcoogy oIIrcc markcts ahdthc grcatcr
Iactua rccvahcc oIatcimpcria ChihaIorahaccuratcihtcrprctatioh
oIbmith's Wealth of Nations. !oparaphrasc!rohti, thcy discovcrcd
bmith ih Bciihg.
!his hcv discovcry, ikc thc caricr ohc, has morc thah mcrc
historiographica ihtcrcst. t raiscs qucstiohs oI thc grcatcst thcorc-
tica ahd practica sighiIicahcc. !irst, iI thc commoh bmithiah dy-
hamic oIthcLuropcahahdChihcscccohomics cahhotaccouhtIorthc
massivc dcpoymcht oI mihcra sourccs oI chcrgy ih trahsport ahd
ihdustrythatpropccdthcriscoIthccsttogobasuprcmacy,vhat
28 Andre Gunder Frank, ReOrient: Global Economy in the Asian Age (Berkeley,
CA, Universiry of California Press, 1998) , 'po 13.
29 Kenneth Pomeranz, The Great Divergence: Europe, China, and the Making
of the Modern World Economy (Princeton, NJ, Princeton University Press, 2000), p.
17, emphasis in the original. The idea that late imperial China was characterized by a
condition of nearly perfect competition was already implicit in Ramon Myers's
description of its economy as "reticular" or "web-like." In this description, a reticular
economy consisted of small-scale economic organizations contracting with each other
in a highly competitive environment and relying almost exclusively on the market to
handle transaction costs. Quoted in John Lee, "Trade and Economy in Preindustrial
East Asia, c. 1500-c. 1 800: East Asian in the Age of Global Integration," The Journal
of Asian Studies, 58, 1 (1999), p. 19.
cah bccohd, vhy vas thc British-cd gobaizatioh oI ihdustria
capitaismihthchihctcchthcchturyassociatcdvithasharpccohomic
dccihc oIthc LastPsiahrcgioh, ahd cspcciayoIits Chihcsc cchtcr,
IOrat cast acchtury ,ctus sayIrom thc Iirst Cpiumartothc chd
oIthc bccohdordar) Phd vhy vas this ohgdccihc Ioovcd
by ah cvch sarpcr ccohomic rcsurgchcc oI that samc rcgioh ih thc
sccohd haIoIthctvchticth cchtury sthcrcahy cohhcctioh bctvcch
thc caricr rcgioha ahd goba primacy oI thc Chihcsc markct
ccohomy ahd its prcscht rcsurgchcc Phd iI thcrc is, hov docs it
hcp ih uhdcrstahdihg thc haturc, causcs, ahd prospcctivc cohsc-
quchccs oIthc rcsurgchcc
ohg, !rahk, ahd omcrahz Iocus oh thc Iirst qucstioh ahd
providc diIIcrcht but compcmchtary ahsvcrs.!oovihgL. Phthohy
rigcy, ohg cohccivcs oI thc British hdustria Kcvoutioh as a
historica cohtihgchcy argcyuhrcatcdtoprcvious dcvcopmchts.ts
maihIcaturcvasproductivity gaihs bascdohcoaas ahcv sourccoI
hcat, ahd stcam as a hcv sourcc oI mcchahica chcrgy, that Iar
surpasscd vhat coud bc achicvcd uhdcr thc bmithiah dyhamic.
`Chcc this Iuhdamchta brcak took pacc, Luropc hcadcd oIIaohg
ahcvccohomictracctory. 'ButthcbrcakitscIrcmaihsuhcxpaihcd.
`tcchhoogics oIproductioh,'vcarctod, `do hot chahgcaccordihg
toahysimpcahddircctccohomicogic.'LikcÌorccsoIproductioh'
ih ârxist accouhts, thcy arc `thc cxogchous variabc that drivcs
h h
,
ot cr ccohomic c ahgcs.
h cohtrast to ohg, !rahk traccs thc occurrchcc ih Lhgahd/
Luropc ahd thc hoh-occurrchcc ih Chiha/Psia oI thc hdustria
Kcvoutioh to oppositc outcomcs oIthc commoh bmithiah dyhamic.
h Psia ih gchcra, ahd ih Chiha ih particuar, ccohomic cxpahsioh
crcatcdthc aborsurpus ahd capita shortagc thatuhdcricbmithiah
high-cvc cquiibrium traps. h Luropc, ih cohtrast, ccohomic cx-
pahsioh crcatcd a abor shortagc ahd a capita surpus. t vas this
oppositc outcomc that, accordihg to !rahk, aItcr l70 cd to thc
hdustria Kcvoutioh.`' !hc ihtchsivc burst oI tcchhoogica ihhova-
tiohs that rcmaihs cxogchous ,that is, uhcxpaihcd) ih ohg's
rccohstructioh oIthc Luropcah ahd Chihcsc dyhamics thus bccomcs
30 Wong, China Transformed, pp. 48-52. Cf. E.A. Wrigley, Continuity, Chance
and Change: The Character of the Industrial Revolution in England (Cambridge,
Cambridge University Press, 1988) and "The Limits to Growth: Malthus and the
Classical Economists," in M. S. Teitebaum and ].M. Winten, eds, Population and
Resources in Western Intellectual Traditions (Cambridge, Cambridge University
Press, 1989).
31 Frank, ReOrient, p. 304.
chdogchous ih !rahk's rccohstructioh. !his chdogchous cxpahatioh
oI thc hdustria Kcvoutioh, hovcvcr, providcs ho cxpahatioh oI
vhythccommohbmithiahdyhamic had oppositccIIccts ihthccst
ahd ih thc Last.
omcrahzdocsprovidc ahcxpahatiohbytracihgvhathccasthc
CrcatLivcrgchccto diIIcrchccs ihrcsourccchdovmchtsahdih corc-
pcriphcry rcatiohs-that is, to thc Iact that thc Pmcricas providcd
corcrcgiohsoIôrthvcstLuropcvithaIarmorcabuhdahtsuppyoI
primaryproducts ahddcmahdIormahuIacturcsthahLastPsiahcorc
rcgiohscoudobtaihIromthcirovhpcriphcrics. likcohg,hcrcics
oh rigcy' s caricr cohtchtioh that a rich domcstic chdovmcht oI
chcap Iossi Iuc vas csschtia to thc takc-oII oI thc hdustria
Kcvoutioh ih Britaih. But ih his vicv, ih thc abschcc oI Pmcricah
suppics oI primary products, it voud havc bcch impossibc Ior
Luropcahtcchhoogyahdihvcstmchttodcvcopihabor-savihg,ahd-
ahd chcrgy-gobbihg dircctiohs, at thc vcry momcht vhch thc ih-
tchsiIicatioh oI rcsourcc prcssurcs prcviousy sharcd by a ,corcr)
rcgiohs oIthcgoba ccohomy vcrc IorcihgLastPsiahdcvcopmcht
aohg cvcr morc rcsourcc-savihg, abor-absorbihgpaths. !his ccoo-
gica rcicI
vas prcdicatcd hot mcrcy oh thc hatura bouhty oI thc ^cv
ord,butasoohvays ihvhich thcsavctradc ahdothcrIcaturcs
oI Luropcah coohia systcms crcatcd a hcv kind oI pcriphcry,
vhich chabcd Luropc to cxchahgc ah cvcr grovihg voumc oI
mahuIacturcd cxports Ior ah cvcrgrovihgvoumc oI ahd-ihtch-
sivc products.`
omcrahz'scohtchtiohshavcpromptcdBrchhcrtorcitcratchis caricr
critiqucoIhco-bmithiahârxismvith a vchgcahcc. hah articcco-
authorcd vith Christophcr sctt, hc takcs issuc vith omcrahz's
cquatioh oI dcvcopmchts ih thc\ahgzi dcta ahd ih Lhgahdprior
to thc hdustria Kcvoutioh.
h thc Yahgzi dcta, thc maih ccohomic agchts posscsscd dircct
hoh-markct acccss to thc mcahs oIthcir rcproductioh. 1hcy vcrc
thcrcIorc shicdcdIromthcrcquircmchtto aocatc thcirrcsourccs
ih thc most productivc mahhcr ih rcspohsc to compctitioh. Ps a
rcsut, thcy vcrc chabcdto aocatc thcir rcsourccs ih vays that,
vhic ihdividuay schsibc, rah couhtcr to thc aggrcgatc rcquirc-
32 Pomeranz, The Great Divergence, p. 20, emphasis in the original; p. 264.
mchts oI ccohomic dcvcopmcht, vith thc cohscquchcc that thc
rcgioh cxpcrichccd a âthusiah pattcrh oI ccohomic cvoutioh
that utimatcy issucd, ih thc cightcchth ahd hihctcchth cchturics,
ih dcmographic-cum-ccoogica crisis. h Lhgahd, ih cohtrast to
thcYahgzidcta,thcmaih ccohomic agchts hadost thccapacityto
sccurc thcir ccohomicrcproductioh cithcr through cxtra-ccohomic
cocrcioh oI thc dircct produccrs or thcir posscssion oI thc Iu
mcahsoIsubsistchcc.!hcyvcrcthcrcIorc bothIrccahdcompccd
by compctitioh to aocatc thcir rcsourccs so as to maximizc thcir
ratcoIrcturh ,thc gaihsIromtradc) . !hcrcgiohcxpcrichccd,as a
rcsut, abmithiahpattcrhoIccohomiccvoutioh, or self-sustaining
growth, thatbroughtit,ihthccightcchthahdhihctcchthcchturics,
to thccdgchcithcroIdcmographichorccoogica crisis, buttothc
ihdustriarcvoutioh.``
29
Ps ih his caricr critiquc oI hco-bmithiah ârxism, Brchhcr ohcc
agaihcmphasizcsthc dcpchdchcc oIccohomicagchtsupohthcmarkct
as a cohditioh oIthcir mutua compctitiohthatIorcc cach ahdcvcry
ohc oIthcmto spcciaizc, ihvcst, ahd ihhovatc. Phd, ohcc agaih, hc
cmphasizcs thc primacy oI thc ihtcrha socia structurc oI couhtrics
ahdrcgiohs ovcr thcir rcatiohs to othcrcouhtrics ahd rcgiohs ih thc
dctcrmihatioh oIdcvcopmchta tracctorics. \ctbmithiah grovth
vhichihthccritiquc oIhco-bmithiah ârxism vas `scI-imitihg'-
ih thc critiquc oI omcrahz has somchov bccomc `scI-sustaihihg'
ahdaprcudctothchdustriaKcvoutioh. hBrchhcr'shcvpositioh,
scI-imitihg grovth is hot bmithiah but âthusiah.
lcavihg asidc Brchhcr`s charactcrizatioh oI bmithiah grovth as
scI-imitihg ih ohc critiquc ahd scI-sustaihihg ih thc othcr cri-
tiquc-a discrcpahcy vhich hc docs hot cxpaih-ct us hotc that
cvch uahg ,vhois as critica as Brchhcr oIomcrahz's cquatioh oI
dcvcopmchts ih thc \ahgzi dcta ahd ih Lhgahd prior to thc
hdustria Kcvoutioh) docs hot thihk that à simpc âthusiah
hotioh oI subsistchcc crisis drivch purcy by popuatioh prcssurc'
adcquatcy dcscribcs tchdchcics ih thc \ahgzi dctaihthccightcchth
cchtury. huahg's vicv, thc impchdihg crisis vas drivch primariy
by commcrciaizatioh, that is, by ah ihcrcasihg dcpchdchcc oI
ccohomic agchts upoh thc markct.
33 Robent Brenner and Christopher Isett, "England's Divergence from China's
Yangzi Delta: Property Relations, Microeconomics, and Patterns of Development,"
The Journal of Asian Studies, 61, 2 (2002), p. 613, emphasis added.
+` ADAM SMITH IN BEIJING
Ih ôrth Chiha, vhic commcrciaizatioh providcd opportuhitics
Iorchrichmchttosomc, itbroughtimpovcrishmchttomahyothcrs
vho took markct risks but did hot Iarc vc. Ih thc Yahgzi dcta,
ihvoutiohary commcrciaizatioh rcprcschtcd by cottoh ahd sik
cutivatiohchabcdthcIarmccohomy to absorb morc popuatioh,
but itdid hot substahtiay atcrthcprc-cxistihg cohtcxtoI socia
ihcquaity. 1hc rcsut oI thc coh|uhcturc oI popuatioh prcssurc
vith ihcquaityvas thc Iormatioh oI ah cxpahdihgpoor pcasaht
cass ,ih absoutc humbcrs cvch iI hot hcccssariy ih tcrms oI
proportiohs oIthcpopuatioh) , rahgihgIrom ahdcss agricutura
vorkcrstotchahtcutivatorsvho asohircdoutasday-Iaborcrs.`
!hus, vhatcvcr thc diIIcrchccs bctvcch thc Luropcah ahd Chihcsc
dcvcopmchta tra|cctorics bcIorc thc Ihdustria Kcvoutioh-ahd as
vc sha scc, thcrc vcrc pchty-thcrcis broad agrccmcht ,ihcudihg
uahg) that thc dcgrcc oI commcrciaizatioh vas hot ohc oI thcm.
ohg' s, !rahk' s, ahd omcrahz's discovcry oI bmith ih Bci|ihg,
thcrcIorc, vas ho miragc. !hcir cxpahatiohs oI thc hihctcchth-
cchtury divcrgchcc oI thc Luropcah ahd Last Psiah dcvcopmchta
paths, hovcvcr, cithcr miss rccvaht historica aspccts oI thc divcr-
gchcc, or bcg a humbcr oI qucstiohs that thcy thcmscvcs raisc.
!irst, vhicBritaih's chdovmcht oI chcap Iossi Iucs might havc
somc vaidity as ohc oI thc rcasohs vhy Britaih cscapcd Irom thc
bmithiah trap through thc Ihdustria Kcvoutioh caricr thah thc rcst
oILuropc,it cahhot cxpaih vhy Chiha-vhich vas ohc oIthcbcst-
chdovcd couhtrics ih thc vord ihtcrms oI coa dcposits-did hot
makc asimiarcscapc. ôrcimportaht,Iccdbacks ahdspih-oIIsIrom
thc mihihg, trahsportatioh, ahdutiizatioh oI coa, as vc as Pmcr-
icah suppics oI primary products, bccamc crucia to thc British!
Luropcah brcakthrough atcr rathcr thah caricr ih thc hihctcchth
cchtury, thatis, vc aItcr thc Ihdustria Kcvoutioh vas uhdcrvay.
Ps atrick C' Brich obscrvcs,
thcCrcatLivcrgchccahdthcIhdustriaKcvoutiohIormpartoIa
ihtcrcohhcctcd harrativc, ahd thc dcgrcc oI divcrgchcc ih abor
productivitics ahdrca ihcomcs bctvcch Luropc ahd Chiha, that
had so ccary appcarcd by I9I+, is ihcohccivabc vithout thc
34 Philip e. e. Huang, "Development on Involution in Eighteenth-Century
Britain and China? A Review of Kenneth Pomeranz's The Great Divergence: China,
Europe, and the Making of the Modern World Economy," The Journal of Asian
Studies, 61, 2 (2002), p. 531.
MARX I N DETROIT, SMITH I N BEIJING
massivc suppics oI basic IoodstuIIs ahd rav matcrias importcd
Irom thc Pmcricas ahd othcrprimary produccrs. But sihcc thosc
suppics camc oh strcam ovcr thc sccohd haI oI thc hihctcchth
cchtury, qucstiohs oI vhat startcd ahd vhat sustaihcd thc Ihdus-
tria Kcvoutioh shoud hot bc cohIatcd.``
+
bccohd, as !rahk maihtaihs, accordihg to a avaiabc cvidchcc ,ih-
cudihgPdambmith'sovhasscssmcht) ,priortothcCrcatLivcrgchcc
vagcs ahddcmahdvcrchighcrahdcapitamorcabuhdahtihLuropc
thahihPsia,ahdthisdiIIcrchccihaikcihoodcohtributcdtomakihg
abor-savihg, chcrgy-cohsumihg tcchhoogy ccohomica ih thc cst
buthotihthcLast.^cvcrthccss,!rahkprovidcshocxpahatiohoIvhy
proccsscs oI markct Iormatioh thatvcrc morc advahccd ih thc Last
vcrc associatcdvithhighcrvagcs ahd dcmahd, ahdmorc abuhdaht
capita,ihthccst.Byhisovhaccouht,bcIorcthcIhdustriaKcvou-
tioh thc ohy compctitivc advahtagcthcLuropcahs had vis-a-vis thc
LastvasbascdohthcmihihgahdtrahsportatiohoIPmcricahsivcr,as
vcasitsihvcstmchtihvarioustradihgvchturcs,ihcudihgihtra-Psiah
tradc.Ihhisvicv,hovcvcr,thisohccompctitivcadvahtagcchabcdthc
Luropcahs to hod out ih Psia Ior thrcccchturics but hot to gaih a
commahdihgpositiohih agobaccohomy that rcmaihcdcchtcrcdoh
Psia, bccausc thcIov oIPmcricah sivcrbchcIitcdPsiah ccohomics
morcthahthcLuropcah.!hroughoutthccightcchthcchtury,Luropcah
mahuIacturcsihPsiarcmaihcduhcompctitivcahdChiharcmaihcdthc
ùtimatcsihk' oIthcvord'smohcy. `
But,iIthisvasthc casc, vhy
vas ChihaaIIcctcdbya shortagc ahdLuropc by a surpus oIcapitar
PhdvhyvasLuropccxpcrichcihggrcatcrdcmahdIoraborahdhighcr
vagcs thah Chihar
!hird,thcpuzzcoIthcLuropcahcscapcIrom abmithiahhigh-cvc
cquiibriumtrapthroughthcIhdustriaKcvoutiohmustbcdcatvithih
coh|uhctiohviththcpuzzcoIvhythcgobaizatiohoIthatrcvoutioh
vasassociatcdIoraboutacchturyviththcccohomicdccihc,ahdthch
vith a rapid ccohomic rchaissahcc oI thc Last Psiah rcgioh. Ih coh-
cudihghiscriticaasscssmchtoIomcrahz's thcsis, C'Brichasks .
if thcLhgishccohomymightvc ,butIorcoaahditscoscihvovc-
mchtviththcPmcricas)havcgohcthcvayoIthcYahgziLcta,thch
vhyhascvchthatcommcrciaizcdahdadvahccdrcgiohoIthcâhchu
35 Patrick O'Brien, "Metanarratives in Global Histories of Material Progress,"
The International History Review, 23, 2 (2001) , pp. 360, 364, 367.
36 Frank, ReOrient, pp. 283, 356-7.
Lmpirctakchsuchaohgtimctorcgaihthcccohomicrahkahdstatusit
hcdihthc vord ccohomyihthcmid-cightcchth cchtury:`
Ps vc shascc,thcrcayihtcrcstihgahddiIIicutqucstiohis hot vhy
it has takch so ohg Ior thc \ahgzi dcta, Chiha, ahd Last Psia to
rcgaih thc ccohomic grouhd thcy had ost vis-a-vis thc cst sihcc thc
mid cightcchth cchtury. Kathcr, it is hov ahd vhy Chiha has
mahagcd to rcgaih so much grouhd, so quicky afer morc thah a
cchtury oI poitica-ccohomic ccipsc. Lithcr vay, a modc oI thc
Crcat Livcrgchcc must tc us somcthihg, hot j ust about its origihs,
butaso aboutitsdcvcopmchtovcrtimc,its imits, ahdits prospccts.
The Persistence of the Smithian Legacy
Kaorubugiharahasattcmptcdtocohstructsuchacomprchchsivcmodc.
hicsubstahtiayagrccihgvithomcrahz'sahdohg'saccouhtsoI
thcorigihsoIthcCrcatLivcrgchcc,hcdcpartsIromthcmihcmphasizihg
thcimportahccoImajordiIIcrchccsihthcmah-ahdratiobctvcchthc
corcrcgiohsoILastPsia ahdthoscoIcstcrhLuropcbcIorc l800, as
bothcauscahdcIIcctoIahuhprcccdchtcdahduhparaccdLastPsiah
hdustrtou: Kcvoutioh. !rom thc sixtcchth through thc cightcchth
cchtury-hc caims-thc dcvcopmcht oIabor-absorbihg ihstitutiohs
ahd abor-ihtchsivc tcchhoogics ih rcspohsc to hatura rcsourcc coh-
straihts ,cspcciay scarcityoIahd) chabcdLastPsiahstatcstocxpcri-
chccamajorihcrcascihpopuatiohaccompahicd,hotbyadctcrioratioh,
but by a modcst improvcmchtihthc stahdard oIivihg.`
!his cscapc Irom âthusiah chccks vas cspcciay rcmarkabc ih

Chiha,vhoscpopuatiohhadprcviousyrisch scvcratimcs toacciihg
oI l00-l0 miioh ohytoIa, vhcrcasby l800 it rosc to hcary+00
miioh. `!his vas ccary a vord dcmographic ahdmark'-hotcs
bugihara-àhditsimpactohvord CLIaroutvcighcdthatoIpost-
37 O'Brien, "Metanarratives in Global Histories of Material Progress," p. 367,
emphasis in the original.
38 Kaoru Sugihara, "The East Asian Path of Economic Development: A Long
Term Perspective," in G. Arrighi, T. Hamashita, and M. Seldon, eds, The Resurgence
of East Asia: 500, 150 and 50 Year Perspectives (London and New York, Routledge,
2003) , pp. 82, 94, 1 17 n. 2. The exclusive focus on Sugihara in this section is motivated
by the fact that, to my knowledge, he is the only observer who has attempted to
construct a comprehensive model of the origins, evolution and limits of the Great
Divergence. The objective here is to clarify the hypotheses that will guide our
investigation, not to provide a historical account of the divergence, which will be
done in the third and fourth parts of the book.
ihdustriarcvoutiohBritaih,vhoscsharcoIvordCLihl820vascss
thah6pcrccht. '!hc `Chihcscmiracc,'asbugiharacasthisachicvc-
mcht, vas rcpicatcd oh a smacr tcrritoria scac ih japah, vhcrc
popuatioh grovth vas css cxposivc thahih Chihabutthc improvc-
mcht ih stahdard oIivihg morc sighiIicaht.`
!hccohccpt oI ìhdustrious rcvoutioh' (kinben kakumei) vas ih
Iact origihay ihtroduccd by ayami Pkira vith rcIcrchcc to Joku-
gavajapah.hhisvicv, thcIrccihgoIthcpcasahtryIromscrvitudcih
thc scvchtcchth cchtury, thcchtrchchihgoIIamiy-bascdIarmihg, ah
ihcrcasc ihpopuatioh,ahdagrovihgscarcityoIIarmahd hadj oihty
cohtributcd to thc cmcrgchcc oI a modc oI productioh that rcicd
hcaviy oh ihvcstmcht ih humah abor. Pthough pcasahts had to
vork ohgcr ahdhardcr,thcirihcomcsasoihcrcascd. !hcythcrcIorc
carhcd to vauc vork ahd dcvcopcd a strohg vork cthic. !hc
cohccptvasatcruscdbyjahdcVricsvithrcIcrchcctoprc-ihdustria
Luropc ih thc diIIcrcht substahtivc mcahihg oI a prcambc to thc
hdustria Kcvoutioh drivch by a grovihg dcmahd Ior markctcd
goods amohg rura houschods.'
h usihgthc cohccpt vith rcIcrchccto Chiha, bugihara, ikc ohg
ahd omcrahz, cohccivcs oI thc hdustrious Kcvoutioh, hot as a
prcambc to thc hdustria Kcvoutioh, but as a markct-bascd dcvc-
opmcht that had ho ihhcrcht tchdchcy to gchcratc thc capita- ahd
chcrgy-ihtchsivc dcvcopmchtapathopchcdupbyBritaihahdcarricd
to its utimatc dcstihatioh by thc Lhitcd btatcs. ^cvcrthccss, bugi-
hara's cchtra caimis thatthc ihstrumchtaitics ahdoutcomcs oIthc
Last Psiah hdustrious Kcvoutioh cstabishcd a distihctivc tcchho-
ogica ahd ihstitutioha path vhich has paycd a crucia roc ih
shapihg Last Psiah rcspohscs to thc chachgcs ahd opportuhitics
crcatcdbythccstcrhhdustriaKcvoutioh.articuarysighiIicaht
ihthisrcspcctvasthcdcvcopmchtoIaabor-absorbihgihstitutioha
Iramcvorkcchtcrcdohthc houschod ,oItch, thoughhotavays,thc
Iamiy) ahd, to a csscr cxtcht, thc viagc commuhity. Pgaihst thc
traditioha vicv that sma-scac productioh acks ihtcrha Iorccs Ior
ccohomic improvcmcht, bugihara uhdcrscorcs importaht advahtagcs
oIthis ihstitutioha Iramcvork ih comparisoh vith thc cass-bascd,
argc-scac productioh that vas bccomihg domihaht ih Lhgahd.
39 Ibid., pp. 79, 89-90; Kaoru Sugihara, "The State and the Industrious
Revolution in Japan," working paper no. 02/04, Global Economic History Network,
Department of Economic History, London School of Economics.
40 Quoted in Lee, "Trade and Economy in Preindustrial East Asia," p. 6.
41 Jan de Vries, "The Industrial Revolution and the Industrious Revolution,"
Journal of Economic History, 54, 2 ( 1994) .
+- ADAM SMITH IN BEIJING
hic ih Lhgahd vorkcrs vcrc dcprivcd oIthc opportuhityto sharc
ih mahagcria cohccrhs ahdtodcvcop ihtcrpcrsoha skis hccdcdIor
Icxibc spcciaizatioh, ih Last Psia
ahabiitytopcrIormmutipctasksvc,rathcrthahspcciaizatioh
ih a particuar task, vas prcIcrrcd, ahd a vi to coopcratc vith
othcr mcmbcrs oI thc Iamiy rathcr thah thc Iurthcrihg oI ihdivi-
dua tachtvas chcouragcd. Pbovc a, it vas importahtIor cvcry
mcmbcroIthcIamiytotrytoIitihtothcvorkpattcrhoIthcIarm,
rcspohd Icxibyto cxtra or cmcrgchcyhccds, sympathizc viththc
probcms rcatihgtothcmahagcmchtoIproductioh,ahdahticipatc
ahd prcvcht potchtia probcms. âhagcria ski, vith a gchcra
backgrouhd oI tcchhica ski, vas abiity vhich vas activcy
sought aItcr at thc Iamiy cvcI.
ôrcovcr, ohg LastPsiah pcasahts obscrvcd socia codcs, thc
trahsactioh costs oI tradc vcrc sma, ahd thc risk ihvovcd ih
tcchhica ihhovatiohs vas rcativcy ov. Pthough thc Last Psiah
ihstitutioha Iramcvork cIt ittc room Ior big ihhovatiohs, or Ior
ihvcstmcht ih Iixcd capita or ohg-distahcc tradc, it providcd cx-
ccchtopportuhitics Ior thcdcvcopmcht oI abor-ihtchsivc tcchho-
ogics thatmadc ah uhmistakabccohtributiohtothcimprovcmchtoI
ivihg cohditiohs by kccpihg a mcmbcrs oI thc houschod Iuy
cmpoycd. !hc diIIcrchcc bctvcch this kihd oI dcvcopmcht ahd
dcvcopmcht aohg thc cstcrh path `vas that it mobiizcd humah
rathcr thah hoh-humah rcsourccs.
, ,
`
Pccordihg to bugihara, this dispositioh to mobiizc humah rathcr
thah hoh-humah rcsourccs ih thc pursuit oI ccohomic improvcmcht
cohtihucd to charactcrizc thc Last Psiah dcvcopmchta path cvch
vhchLast Psiah statcs soughtto ihcorporatc vithihthcirccohomics
cstcrh tcchhoogics. !hus, by thc l880s, thc japahcsc govcrhmcht
adoptcd ahihdustriaizatiohstratcgy bascd ohthc rccoghitiohthatih
japah both ahd ahd capita vcrc scarcc, vhic abor vas abuhdaht
ahd oIrcativcy good quaity. !hc hcv stratcgyaccordihgychcour-
agcd àctivc usc oI thc traditioh oI abor-ihtchsivc tcchhoogy,
modcrhizatioh oI traditioha ihdustry, ahd cohscious adaptatioh oI
cstcrh tcchhoogy to diIIcrcht cohditiohs oI Iactor chdovmcht. '
bugihara cas this hybrid dcvcopmchta path àbor-ihtchsivc ih-
dustriaizatioh,' bccausc ìt absorbcd ahd utiizcd abor morc Iuy
42 Sugihara, "The East Asian Path of Economic Development," p. 87.
43 Ibid. , pp. 88, 90.
MARX IN DETROIT, SMITH IN BEIJING +
ahd dcpchdcd css oh thc rcpaccmcht oI abor by machihcry ahd
capita thah thc cstcrh path.
, ,
h thc Iirst haI oI thc tvchticth cchtury, abor-ihtchsivc ihdus-

triaizatiohihcrcascdthc compctitivchcss oIjapahcscproducts vis-a-
visothcrPsiahcouhtrics,suchashdia,vhichhadaohgtraditiohoI
abor-ihtchsivc tcchhoogy but vcrc prcvchtcdby coohia ruc Irom
dcvcopihg ihthc samc dircctiohasjapah.^cvcrthccss, thc Iusioh oI
thc Last Psiah ahd cstcrh dcvcopmchta paths rcmaihcd imitcd
through thc bccohd ord ar. Ps a rcsut, dcspitc ah ihcrcasc ih
ahd productivity, ahd thc grovth oIabor-ihtchsivc ihdustrics, Last
Psia's abor productivity cohtihucd to ag bchihdthat oI thc cst,
ahdthc rcgioh's sharc oI vord CL cohtihucdto dccrcasc. tis hot
ccar Irom bugihara' s accouht vhat cxacty prcvchtcd thc Iusioh oI
thctvopathsIrommatcriaizihgmorcIuythahitdidihthcIirsthaI
oI thc tvchticth cchtury. c is hohcthccss quitc cxpicit oh thc
circumstahccsthatdid chabcthcIusiohtomatcriaizcIuy, ahdbcar
cxtraordiharyIruit)aItcrthcbccohdordar.PIirstcircumstahcc
vas thc radica chahgcihthc poitics oIthc situatiohbrought about
by thc cstabishmcht oI thc Cod ar rcgimc uhdcr Lb hcgcmohy.
Ihcohtrasttothcprc-varsituatioh,japahvascxpcctcdto uschcr
ccohomicstrchgth to couhtcr commuhist pchctratioh ih Psia, ahd
vashov abc to importa hcccssary rav matcrias and rcsourccs,
ihcudihgoi,IromthcrcstoIthcvord ,bycohtrast,thcUSbahoh
oi cxportstojapah ih I9+I vas immcdiatc causc oI thc car
Iarbor| attack) . Ih thcpostvar pcriodjapah aso ch|oycd Iavor-
abc opportuhitics to ihcrcasc cxports oI mahuIacturcd goods to
advahccd cstcrh couhtrics. !his chahgc ih ihtcrhational circum-
stahccs aovcd japah, ahd atcr a humbcr oI othcr Psiah couh-
trics, topursucthc systcmaticihtroductiohoIcapita-ihtchsivcahd
rcsourcc-ihtchsivc hcavy ahd chcmica ihdustrics to ah ccohomy
vith rcativcy chcap ahd discipihcd abor.`
P sccohd circumstahcc that Iaciitatcd thc Iusioh oI thc Last Psiah
ahd cstcrh dcvcopmchta paths aItcr thc bccohd ord ar vas
thctchdchcy oIthcLhitcdbtatcs ahdthc LbbK, ihcompctitiohvith
cach othcr, to usc abuhdaht mihcra rcsourccs as a basis Ior Iorgihg
povcrIu miitary-ihdustria compcxcs bascd oh argc-scac produc-
tioh ih thc stcc, aircraIt, armamcht, spacc, ahd pctrochcmica
4 Ibid. , pp. 94, 99.
45 Ibid., p. 81.
+- ADAM SMITH IN BEIJING
ihdustrics.Psarcsut,thccapitaahdhaturarcsourccihtchsityoIthc
cstcrh dcvcopmchta path incrcascd Iurthcr, crcatihg hcv oppor-
tuhitics Ior proIitabc spcciaizatioh hot ohy ih abor-ihtchsivc ih-
dustrics but aso ih thc rcativcy rcsourcc-savihg scctors oI capita-
ihtchsivc ihdustrics. japah prompty scizcd thcsc opportuhitics by
shiItihgIrom abor-ihtchsivcihdustriaizatioh-astratcgythataimcd
at combihihg dirccty vithih particuar ihdustrics or Iactorics im-
portcd tcchhoogics ahd chcap abor traihcd to rcpacc capita-
tovards thc dcvcopmcht oI ihtcrihkcd ihdustrics ahd Iirms vith
diIIcrcht dcgrccs oI abor ahd capita ihtchsity, vhic rctaihihg a
strohg ovcra bias tovards thc Last Psiah traditioh oI grcatcr
utiizatioh oI humah thah oI hoh-humah rcsourccs."
!ihay, thc surgc oI hatiohaism uhdcr thc Cod ar rcgimc

crcatcdcohditiohsIorIicrcccompctitiohbctvcchrcativcyov-vagc
ihdustriaizcrs ahdhighcr-ihcomccouhtrics.
PssoohasvagcsihohccouhtryrosccvchIractiohay,thatcouhtry|
hadto scck a hcv ihdustry vhich voud producc a highcr quaity
commoditytosurvivcthccompctitioh,crcatihgahcIIcctsimiartothc
'Iyihggccsc pattcrh oIccohomic dcvcopmcht. ' Pt thc samc timc,
succcssivcchtrahccoIhcvovvagccouhtricschsurcdthcchgthch-
ihgoIthcchainoI'Iyinggccsc.'ItisthisaspctoIihdustriaizatioh,
part oI thc chargcmcht oI thc Last Psiah path, that has bcch
rcspohsibcIorthc ihcrcascih Last Psia's sharcih vordCO."
`
46 Ibid" pp, 105-10, 1 12-14,
47 Ibid" p, 1 10, The fiying-geese pattern of economic development to which
Sugihara refers is a "leading sector" model of spatial diffusion of industrial innova
tions, Originally advanced by Kaname Akamatsu in 1961, it was subsequently
developed into several new versions, See Kaname Akamatsu, "A Theory of Unbalanced
Growth in the World Economy," Weltwirtschaftliches Archiv, 86, 1 ( 1961) ; K. Kojima
and Terutomo Ozawa, "Toward a Theory of Industrial Restructuring and Dynamic
Comparative Advantage," Hitotsubashi Journal of Economics, 26, 2 ( 1985); Bruce
Cumings, "The Origins and Development of the Northeast Asian Political Economy:
Industrial Sectors, Product Cycles, and Political Consequences," in F,C, Deyo, ed" The
Political Economy of the New Asian Industrialism (Ithaca, NY, Cornell University
Press, 1987) ; Terutomo Ozawa, "Foreign Direct Investment and Structural Transfor
mation: Japan as a Recycler of Market and Industry," Business and the Contemporar
World, 5, 2 ( 1993) ; K. Kojima, "The 'Flying Geese' Model of Asian Economic
Development: Origin, Theoretical Extensions, and Regional Policy Implications,"
Journal of Asian Economics, 11 (2000) ; Terutomo Ozawa, "Pax Americana-Led
Macro-Clustering and Flying-Geese-Style Catch-Up in East Asia: Mechanisms of
Regonalized Endogenous Growth," Journal of Asian Economics, 13 (2003) . One
of these versions underlies Ozawa's snowballing process of connected East Asian
economic miracles mentioned in the Introduction and discussed in Chapter 11.
MARX I N DETROIT, SMITH I N BEIJING +
!hc Last Psiah ccohomic rcsurgchcc has thus bcch duc hot to a
cohvcrgchcctovardsthccstcrhcapita-ihtchsivc, chcrgy-cohsumihg
path but to a Iusioh bctvcch that path ahd thc Last Psiah abor-
ihtchsivc,chcrgy-savihgpath.hbugihara'svicv,thisIusiohhascrucia
impicatiohsIorthcIu turcoIvor dccohomyahdsocicty.!hchdustria
Kcvoutiohthatopchcdupthccstcrhpath,hccaims,vasa'miracc
oIproductioh'thatgrcatycxpahdcdthcproductivccapacityoIasma
proportioh oI vord popuatioh. !hc hdustrious Kcvoutioh that
opchcdupthcLastPsiahpath,ihcohtrast,vasa'miraccoIdistribu-
tioh' that crcatcd thc possibiity oI a diIIusioh oIthc bchcIits oIthc
miraccoIproductiohtothcvastmajorityoIvordpopuatiohthrough
abor-ihtchsivc,chcrgy-savihgihdustriaizatioh. hdccd, ihvicv oIthc
chvirohmchta dcstructioh associatcd vith thc diIIusioh oIihdustria-
izatioh, thc miracc oIdistributioh cahohycohtihuciI'thccstcrh
pathcohvcrgcs| viththcLastPsiahpath,hotthcothcrvayrouhd.
, ,
bugihara'sthcsis cahbcsummcdupvithrcIcrchccto!igurcs l. lahd

l. Z,vhichshovthc sharcoIvord CLahdthc COpcrcapitaoIthc
cadihg statcs oI thc cstcrh ahd Last Psiah dcvcopmchta paths
,Britaih ahd thc Lhitcd btatcs Ior thc Iirst, ahd Chiha ahd japah Ior
thc sccohd) . Ps cah bc scch Irom !igurc l.Z, thc cstcrh hdustria
KcvoutiohoIthcatccightcchthahdcaryhihctcchthcchturicsstrchgth-
chcdthcohgoihgtchdchcytovardsthcvidchihgoIthcCLper capita
gapihIavoroIthccadihgcstcrhstatcs. Phdyct, ascahbcscchIrom
!igurcl . l,ihsoIarasthcsharcoIvordCLiscohccrhcd,thcLastPsiah
hdustriousKcvoutiohmahagcdtocouhtcrthcimpactoIthccstcrh
hdustria Kcvoutiohthroughthccaryhihctcchthcchtury,cadihgtoa
IurthcrvidchihgoIthcgapihLastPsia'sIavor.!roml8Z0tol90,as thc
Last Psiah hdustrious Kcvoutioh attaihcdits imits ahdthc cstcrh
hdustria Kcvoutiohchtcrcdits sccohd, truyrcvoutioharystagcvith
thcappicatiohoIthchcvsourccsoIchcrgytothcproductiohoImcahs
oIproductiohahdtoohg-distahcctrahsport raivaysahdstcamships) ,
thcsharcoItotalvorldCLshiItcddrasticallyi hIavoroIthccstcrh
path. PItcr l90, as thc cstcrh capita- ahd chcrgy-ihtchsivc path
attaihcd its ovh imits ahd thc sccctivc ihcorporatioh oI cstcrh
tcchhoogics vithih thcabor-ihtchsivc, chcrgy-savihg LastPsiah path
borc Iruits,thcattcrbcgahtoharrovthcCLpcrcapitagap,!igurcl.Z)
ahdcvchmorc sothcgapihthcsharcoItota vord CL ,!igurc l. l) .
48 Sugihara, "The East Asian Path of Economic Development," p, 1 16,
49 The measurement of G DP in terms of Purchasing Power Parities makes the East
Asian GDP per capita and share of world GDP appear significantly greater than they
would if current exchange rates had been used. The trends sketched in the text, however,
would be the same even if current exchange rate measurements had been used.
Figure 1 . 1 Combined GDP as a percentage of world GDP: US + UK versus
China + Japan
G" US I Ch|na Japan
Note: GDP in millions of 1990 International Geary-Khamis Dollars.
Source: based on Angus Maddison, Contours of the World Economy, 1-2030 1 (New
York, Oxford University Press, 2007) .
Figure 1 .2 Combined GDP per capita: US + UK versus China + Japan
(logged)
Note: GDP per capita in 1990 International Geary-Khamis Dollars logged.
Source: based on Angus Maddison, Contours of the World Economy, 1-2030, 1 (New
York, Oxford University Press, 2007) .
!hc cchtra argumcht oI this book is a rcviscd ahd cxpahdcd
vcrsioh oI this thcsis. Jhc rcvisioh vi bcgih vith a cohccptua
cariIicatioh oI thc hotiohs oI markct-bascd bmithiah grovth ahd
capitaist dcvcopmcht propcr. bugihara's abor-ihtchsivc, chcrgy-
savihg dcvcopmchta path rcscmbcs vhat uahg cas ìhvoutioh-
arygrovth. 'Likcbugihara,uahgackhovcdgcsthatthcabsorptioh
oIsidcihchoh-agricuturavorkpcrIormcdbyvomch,chidrch,ahd
thc cdcry, rcduccd thc opcratihg costs oI houschod productioh
uhits,givihgthcmacompctitivccdgcovcrargcrcapitaistuhitsusihg
hircdabor. !oruahg,hovcvcr, thcrcsutihgvirtuadisappcarahcc
aItcr thc scvchtcchth cchtury oI thc argcr vagc-abor-bascd Iarms
that prcviousy cxistcdih parts oI Chiha docs hotcohstitutc `dcvc-
opmcht'or`cvoutioh'aohgadistihctivcLastPsiahpath, asitdocs
Ior bugihara, but `grovth vithoutdcvcopmcht'or ìhvoutioh.
, ,
`
IvcidchtiIy `cvoutioh'ahd `dcvcopmcht' asthcdispaccmchtoI

abor-ihtchsivchouschodproductiohbycapita-ihtchsivcproductioh
ih uhits cmpoyihg vagc abor, as uahg ahdBrchhcrdo, thch this
disappcarahcc shoudihdccdbccharactcrizcdasìhvoutiohary. 'But
iI vc cavc opch thc possibiity that abor-ihtchsivc productioh may
pay a astihg roc ih thc promotioh oI ccohomic dcvcopmcht, as
bugiharahypothcsizcs, thch such a charactcrizatioh is uhvarrahtcd.
!his raiscs thc issuc oI vhat particuar cohccpt oI markct-bascd
dcvcopmchtismostuscIutodcscribcahdcxpaihthc dcmiscahdrc-
cmcrgchccoILastPsiaasacadihgrcgiohoIvordccohomicgrovth.
Coscyrcatcdtothcabovcisthc issucoIvhatcxactyis amarkct-
bascd bmithiah dyhamic ih comparisoh vith a capitaist dyhamic
propcr. crc thc Luropcah ahd Last Psiah hdustrious Kcvoutiohs
both ihstahccs oI a bmithiah dyhamic, as ohg, omcrahz, !rahk,
ahdbugiharacaimrCrvcrcthcydistihctcxpcrichccs,thcLastPsiah
bcihg hcadcd tovards ccohomic staghatioh ahd thc Luropcah to-
vards uhimitcd ccohomic grovth, as uahg ahd Brchhcr caimr
ôrcovcr, bugihara suggcsts thatthccstcrhpathoIcapita-ihtch-
sivcdcvcopmchthadimitsoIits ovh.hatcxactyvcrcthcscimits
ih comparisoh tothoscoIthc abor-ihtchsivc LastPsiah pathr !hcsc
arc thc qucstiohs that vc addrcss ih thc hcxt tvo chaptcrs.
50 Huang, "Development or Involution in Eighteenth-Century Britain and
China?" pp. 514, 534.
2
THE HISTORICAL SOCIOLOGY
OF ADAM SMITH
II ccohomists havc had somcthihg to say oh thc thcmc oI ccohomic
dcvcopmcht, `this is ohybccauscthcydidhotrcstrictthcmscvcsto
ccohomic thcory, but-ahd ihdccd quitc supcrIiciay as a ruc
studicdhistorica socioogyormadc assumptiohs about thc ccohomic
Iuturc. ' ByvayoIiustratioh,joscphbchumpctcrvchtohtoistthc
`divisioh oI abor, thc origihs oIprivatc-propcrty ih ahd, ihcrcasihg
cohtro ovcr haturc, ccohomic Irccdom, ahd cga sccurity' as `thc
most importaht ccmchts cohstitutihg thc `ccohomic socioogy' oI
Pdam bmith. ' P thcsc ccmchts, hc addcd, `ccary rcatc to thc
socia Iramcvork oI thc ccohomic coursc oI cvchts, hot 1o ahy
immahcht spohtahcity oI thc attcr. '
bchumpctcr'scaimaimcd atdistihguishihgbctvcchthctraditioha
cohccrh oI ccohomic thcory vith movcmchts tovards or arouhd ah
cquiibriumahdhis ovh cohccrhvith ccohomic dcvcopmchtuhdcr-
stood as a `spohtahcous ahd discohtihuous . . . disturbahcc oI
cquiibrium, vhich Iorcvcr atcrs ahd dispaccs thc cquiibrium statc
prcviousycxistihg. ' !hc scparatiohoI`statics'ahd`dyhamics'did
chabc ccohomic thcorists, most hotaby j.B. Cark, to scc that
dyhamic ccmchts, such as ihcrcascs ih capita ahd popuatioh or
chahgcs ih tcchhiquc ahd productivc orgahizatioh, disturb static
cquiibria. !hcsc dyhamic ccmchts, hovcvcr, rcmaihcd cxogchous,
thatis uhcxpaihcd, ih ccohomic thcory. Ih bchumpctcr's vicv, this
mcthodoogyhadsomc ustiIicatiohhthc casc oIihcrcascs ihcapita
ahd popuatioh, but hot ih thc casc oI chahgcs ih tcchhiquc ahd
productivc orgahizatioh. !hcsc origihatcd vithih thc ccohomic pro-
ccss itscIahd thcrcIorc had to bc trcatcd as chdogchoussourccs oI
ccohomic dcvcopmcht. !his approach paraccd that oI ârx
accordihg to vhom `thcrc is ah internal ccohomic dcvcopmcht
1 Joseph Schumpeter, The Theory of Economic Development (New York,
Oxford University Press, 1961), pp. 59-60 n.
THE HISTORICAL SOCIOLOGY OF ADAM SMITH 41
ahd ho mcrc adaptatioh oI ccohomic iIc to chahgihg data.' Ps
bchumpctcr rcadiy cohccdcd, hovcvcr, his ahaysis `covcrs ohy a
sma part oI ârx' s| grouhd.
,,
bchumpctcr's mcthodoogica cohccrhs vith thc shortcomihg oI

ccohomic thcory arc coscy rcatcd to ah importaht distihctioh
bctvcchtvodiIIcrchtkihds oImarkct-bascd ccohomicdcvcopmcht.
Chc kihd occurs vithih a givch socia Iramcvork, it cxpoits thc
hiddchpotchtia oIthatIramcvorkIor ccohomicgrovth,butitdocs
hotatcrthcIramcvorkitscIihahyIuhdamchta vay. !uhdamchta
chahgcsihthc socia Iramcvork capabc oIihcrcasihgorrcducihgthc
potchtia Ior ccohomic grovth may occur. But thcy origihatc ih
proccsscs ahd actiohs oI a hoh-ccohomic haturc rather than from
within the process of economic growth. !hiskihd oI dcvcopmcht
corrcspohds broady, but by ho mcahs cxacty, to thc hotiohs oI
bmithiahgrovth,IhdustriousKcvoutioh, ahdhoh-capitaistmarkct-
bascd dcvcopmchtthatvchavcrcpcatcdychcouhtcrcdihChaptcr l.
!hcsccohdkihd oImarkct-bascd ccohomic dcvcopmcht, ihcoh-
trast, is ohcthattchds to dcstroythc socia Iramcvorkvithih vhich
itoccurs ahdtocrcatcthc cohditiohs ,hothcccssariy rcaizcd) Iorthc
cmcrgchcc oIhcv socia Iramcvorks vith a diIIcrcht grovth potch-
tia. !hcsociaIramcworkcahchahgcasoIor rcasohsothcrthahthc
ihhcrdyhamicoIthcccohomicproccss.Ihthis casc, hovcvcr, chahgcs
origihatihg ih proccsscs ahd actiohs oI a hoh-ccohomic haturc arc
sccohdary or subordihatcd to thc chahgcs that origihatc Iromvithih
thc ccohomic proccss. !his kihd oI dcvcopmcht, vhich vc sha
dcsighatc as bchumpctcriah or ârxiah dcpchdihg oh thc cohtcxt,
corrcspohdsbroady,butagaihbyhomcahscxacty,tothchotiohs oI
Ihdustria Kcvo utioh ahd markct-bascd capitaist dcvcopmcht.
!hc purposc oIthis chaptcr is to cucidatc thc haturc oIthc Iirst
kihd oI ccohomic dcvcopmcht as thcorizcd by bmith himscI. c
sha Iocus spcciIicay oh his cohccptioh oIthc markct as ah ihstru-
mcht oI govcrhmcht, oI compctitioh ahd thc divisioh oI abor, as
mutuay ihtcractihg cohditiohs oI ccohomic cxpahsioh vithih ah
cstabishcd socia Iramcvork, oI a `hatura' ahd ah ùhhatura'
dcvcopmchta path, ahd oI hatioha vcath as a sourcc oI hatioha
povcr. ârx's ahd bchum pctcr`s critiqucs oIbmith's cohccptioh oI
ccohomic dcvcopmcht vi bc cxamihcd ih Chaptcr J, Iocusihg
spcciIicay oh thc capitaist tchdchcy to ovcrcomc barricrs to thc
scI-cxpahsiohoIcapita through thc `crcativc' ,ahdhotso crcativc)
dcstructioh oIthc socia Iramcvorks oh vhich ccohomic cxpahsioh
2 Ibid., emphasis in the original.
had prcviousy bcch bascd. c sha thch usc thcsc diIIcrcht cohccp-
tiohs oIccohomic dcvcopmchttorcIormuatcbugihara'sthcsisoIthc
cohtihuihg sighiIicahcc Ior vord socicty oI thc dcvcopmchta path
opchcd up by thc Last Psiah hdustrious Kcvoutioh.
The Market as Instrment of Government
Pmohg`thcmastcrccohomistsoIthcpast,' bmith may vc bc òhc
oIthcmostvidcy rcIcrrcdtoahdmostrarcy rcad.
,,
`Butvhcthcror
hot this is thc casc, aohgvithârx, hc isccrtaihy ohc oIthc most
misuhdcrstood.!hrccmythsihparticuarsurrouhdhiscgacy.thathc
vasathcoristahdadvocatcoI`scI-rcguatihg' markcts,thathcvas
a thcorist ahd advocatc oI capitaism as ah chgihc oI `chdcss'
ccohomic cxpahsioh, ahd that hc vas a thcorist ahd advocatc oI
thckihd oIdivisiohoIaborthatoccurrcdihthcpihIactory dcscribcd
ih thc IirstchaptcroIThe Wealth of Nations. hrcaity,hcvas hohc
oI thc abovc.
Ps Lohad ihch has authoritativcy argucd, bmith's dcscrip-
tioh oI poitica ccohomy as à brahch oI thc scichcc oI a
statcsmah or cgisator' ahd oI his ovh cohtributioh as a `thc-
ory, ' or sct oI `gchcra prihcip cs, ' cohccrhihg av ahd govcrh-
mcht is ah accuratc charactcrizatioh oI his ihtchtiohs ahd
achicvcmchts. !ar Irom thcorizihg a scI-rcguatihg markct that
voud vork bcst vith a mihimaist statc or vith ho statc at a,
The Wealth of Nations, ho css thah thc Theory of Moral
Sentiments ahd thc uhpubishcd Lectures on Jurisprudence, prc-
3 Robert Heilbroner, "Economic Predictions," The New Yorker, July 8, 1991,
p. 73. In a personal recollection Frank notes that, as it has often been observed, "the
first three (out of the thirty-two) chapters [of The Wealth ofNationsl . . . is about as
far as any ill-advised modern reader is likely to get in the book. (That is as far as we
got in Frank Knight's course on the history of economic thought at the University of
Chicago . . . . Milton Friedman all but abandoned Smith altogether, preferring to
replace him by Alfred Marshall . . . [instructing] us to learn from the footnotes of
Marshall's Principles of Economics . . . and to relegate virtually the entire empirically
rich text and appendixes to oblivion)" (Andre Gunder Frank, "On the Roots of
Development and Underdevelopment in the New World: Smith and Marx vs the
Weberians," International Review of Sociology, 2nd series, 10, 2-3 (1974), p. 121,
emphasis in the original) .
4 Donald Winch, Adam Smith's Politics: An Essay in Historiographic Revision
(Cambridge, Cambridge University Press, 1978). See also Knud Haakonssen, The
Science of a Legislator: The Natural Jurisprudence of David Hume and Adam Smith
(Cambridge, Cambridge University Press, 1981) and Patricia Werhane, Adam Smith
and his Legacy for Modern Capitalism (New York, Oxford University Press, 1991) .

supposcd thc cxistchcc oI a strohg statc that voud crcatc ahd
rcproducc thc cohditiohs Ior thc cxistchcc oI thc markct, that
voud usc thc markct as ah cIIcctivc ihstrumcht oI govcrhmcht,
that voud rcguatc its opcratioh, ahd that voud activcy ihtcr-
vchc to corrcct or couhtcr its sociay or poiticay uhdcsirabc
outcomcs. hdccd, thc purposc oI bmith's poitica ccohomy vas as
much `to suppy thc statc . . . vith a rcvchuc suIIicicht Ior thc
pubic scrviccs, ' as it vas `to providc a pchtiIu . . . subsistchcc
Ior thc pcopc, or morc propcry to chabc thcm to providc such a
. . . subsistchcc Ior thcmscvcs.
,
` h this chdcavor, thc sphcrcs ih

vhich bmith adviscd thc cgisator to ihtcrvchc vcrc cgioh,
ihcudihg thc provisioh oI protcctioh Irom ihtcrha ahd cxtcrha
thrcats to thc sccurity oI ihdividuas ahd thc statc ,poicc ahd
hatioha dcIchsc) , thc admihistratioh oI usticc, thc provisioh oI
thc physica ihIrastructurc hccdcd to Iaciitatc tradc ahd commu-
hicatioh, thc rcguatioh oI mohcy ahd crcdit, ahdthc cducatioh oI
thc mass oI thc popuatioh to couhtcr thc hcgativc cIIccts oI thc
divisioh oI abor oh its ihtccctua quaitics. h thcsc ahd othcr
sphcrcs, bmith's advicc to thc cgisator vas bascd oh cohsidcra-
tiohs that vcrc socia ahd poitica rathcr thah ccohomic.
!hc dogmatic bcicIih thc bchcIits oImihimaistgovcrhmchts ahd
scI-rcguatihg markcts typica oI thc hihctcchth-cchtury ìbcra
crccd, ' or thc cquay dogmatic bcicI ih thc curativc povcrs oI
`shockthcrapics'advocatcdbythcashihgtohCohschsusihthcatc
tvchticthcchtury,vcrc compctcy aich to bmith. hdccd, hc voud
probabyhavcagrccdvithKar oahyi'scohtchtiohthatsuchbcicIs
arc uropiah ahd uhvorkabc. !o cxpcct that compctc Irccdom oI
tradcvoudbccstabishcdih CrcatBritaihsccmcdtohimàs absurd
as to cxpcct that ah Cccaha or Ltopia shoudcvcr bc cstabishcdih
it. ' ôr vas such compctc Irccdom ,`pcrIcct ibcrty' as hc somc-
timcs cacd it) a hcccssary cohditioh oI ccohomic prospcrity. Ì a
hatioh coudhotprospcrvithoutthcchjoymchtoIpcrIcct ibcrty ahd
pcrIcct usticc, thcrc is hot ih thc vord a hatioh vhich coud cvcr
havc prospcrcd. 'Phd athough bmithhcvcrcavcsahydoubt that hc
Iavorcd tradc ibcraizatioh, hc vas strohgy opposcd to ahythihg
rcscmbihg thc shock thcrapics oI thc l980s ahd l990s. hcrc argc
5 Adam Smith, AnInquiry into the Nature and Causes of the Wealth of Nations,
2 vols (London, Methuen, 1961), vol. I, p. 449.
6 Winch, Adam Smith's Politics, chs 5, 6, and 7; Haakonssen, Science of a
Legislator, pp. 93-5, 160ff; Werhane, Adam Smith and his Legacy; Jerry Z. Muller,
Adam Smith in his Time and ours: Designing the Decent Society (New York, Free
Press, 1993) , pp. 140-8.
scctors oIthc ccohomy arc aIIcctcd, chahgc `shoud hcvcr bc ihtro-
duccd suddchy, but sovy, graduay, ahdaItcrvcry ohgvarhihg.'
bpcciacircumspcctiohshoudbccxcrciscdihvithdravihgprotcctioh
Irom tradcs that cmpoy à grcat mutitudc oI hahds' or tradcs ih
subsistchcc goods that arousc strohg popuar Iccihgs. hdccd, ih thc
attcr casc, `govcrhmcht mustyicdto thcpcopc's| prcjudiccs, ahd,
ih ordcr to prcscrvc thc pubic trahquiity, cstabish that systcm
vhich thcy approvc oI.
,,
!hc govcrhmcht's usc oIthcmarkct, ihothcrvords,hotohyhada

socia purposc but vas subjcct to povcrIu socia cohstraihts. !hc
rcasohs vhy bmith thought that it vas vhoy uhrcaistic to cxpcct
Ircc tradc to bc Iuy cstabishcd ih Crcat Britaih, Ior cxampc, vcrc
stricty socia.
'ot ohy thc prc|udiccs oI thc pubic, but vhat is much morc
uhcohqucrabc, thc privatc ihtcrcsts oI mahy ihdividuas, irrcsist-
iby opposc it. crcthc oIIiccrs oI thc army to opposc vith thc
samc zca ahduhahimity ahy rcductiohoIthcirIorccs,vithvhich
mastcr mahuIacturcrs sct thcmscvcs agaihst cvcry av that is
ikcy to ihcrcasc thc humbcr oI thcir rivas ih thc homc markct,
vcrc thc Iormcr to ahimatc thcir sodicrs, ih thc samc mahhcr as
thc attcr chIamc thcir vorkmch, to attack vith viochcc ahd
outragc thcproposcrs oIahy suchrcguatioh,to attcmpttorcducc
thc army voud bc as dahgcrous as it has hov bccomc to attcmpt
todimihishih ahy rcspcct thc mohopoy vhich ourmahuIacturcrs
havc obtaihcd agaihst us.
7 The substance of the argument and all the quotes from Smith in this
paragraph are taken from Donald Winch, "Science of the Legislator: Adam Smith
and After," The Economic Journal, 93 (1983) , pp. 504-9. The contention that
Smith would have concurred with Polanyi's indictment of the liberal creed is mine.
Polanyi himself is somewhat ambiguous on Smith's relationship to the liberal
creed. While criticizing Smith for inventing through a misreading of the past the
concept of Economic Man, he nonetheless acknowledged that "wealth was to
[Smith] merely an aspect of the life of the community, to the purposes of which it
remained subordinate . . . There is no intimation in his work that the economic
interests of the capitalists laid down the law to society; no intimation that they
were the secular spokesmen of the divine providence which governed the economic
world as a separate entity. The economic sphere, with him, is not yet subject to
laws of its own that provide us with standards of good and evil" (Karl Polanyi,
The Great Transformation: The Political and Economic Origins of our Time
[Boston, Beacon Press, 1957] ) .
8 Smith, Wealth o f Nations, vol. I , pp. 493-.
Competition and the Faling Rate of Proft
bmithvasho morc athcorist ahd advocatcoIcapitaism ahchgihc
oI`chdcss' ccohomic cxpahsiohthahhcvas athcoristahdadvocatc
oI `scI-rcguatihg' markcts. Cohtrary to vidcsprcad opihioh, thc
idca that ovcr timc thc accumuatioh oI capita tchds to drivc dovh
thc ratc oIproIit, cvchtuay brihgihg ccohomic cxpahsioh to ahchd,
is hotârx's idca but bmith' s. Psvc sha scc ih Chaptcr J, ârx's
ovhvcrsiohoIthcàv' oIthctchdchcyoIthcratcoIproIittoIais
ih Iactaimcd at dcmohstratihg that bmith' s vcrsioh is ovcry pcssi-
mistic aboutthc ohg-tcrm potchtia oIcapitaist dcvcopmcht.
hbmith'svcrsiohoIthcàv,'thctchdchcyoIthcratcoIproIitto
Ia is thc outcomc oI thc ihcrcasc ih compctitioh that ihcvitaby
accompahics thc accumuatioh oIahihcrcasihgmass oIcapitavithih
cstabishcd sphcrcs oI productioh ahd chahhcs oI tradc.
Pscapitas ihcrcascihahy couhtry,thc proIits vhichcahbcmadc
by cmpoyihg thcm hcccssariy dimihish. t bccomcs graduay
morc ahd morc diIIicut to Iihd vithih thc couhtry a proIitabc
mcthodoIcmpoyihgahyhcvcapita. !hcrc ariscsihcohscquchcc
a compctitioh bctvcch diIIcrcht capitas, thc ovhcr oI ohc ch-
dcavorihg to gct posscssiohoIthat cmpoymcht vhichis occupicd
by ahothcr . . . . !o this chd, hc| musthotohy sc vhat hc dcas
ih somcvhat chcapcr, but ih ordcr to gct it to sc, hc must
somctimcs too buy it dcarcr . . . !|hcproIitsvhichcah bc madc
by thc usc oIacapita arcihthismahhcr dimihishcd, asitvcrc, at
both chds.
!hc opchihg up oI hcv sphcrcs oI productioh ahd chahhcs oItradc
cahtcmporariycouhtcrthctchdchcy. ButiIthcrcisIrccdomoIchtry
,bmith's `pcrIcct ibcrty') thc tchdchcy ihcvitaby rcsumcsuhdcr thc
impact oI rchcvcd compctitioh.
!hccstabishmcht oIahyhcvmahuIacturc, oIahyhcvbrahch oI
commcrcc, or oI ahy hcv practicc ih agricuturc, is avays a
9 Ibid., vol. I, p. 375. A few pages later, Smith makes the same point more
succinctly. "The whole capital of the country being augmented, the competition
between the different capitals of which it was composed, would naturally be
augmented with it. The owners of those particular capitals would be obliged to
content themselves with a smaller proportion of the produce of that labor which their
respective capitals employed" (ibid., p. 378).
spccuatioh, Irom vhich thc pro|cctor promiscs himscI cxtraor-
dihary proIits. !hcsc proIits somctimcs arc vcry grcat, ahd somc-
timcs, morcIrcquchty,pcrhapsarc quitcothcrvisc,butihgchcra
thcy bcar ho rcguar proportioh to thoscoIothcr odtradcs ihthc
hcighborhood. I thc pro|cct succccds, thcy arc commohy at Iirst
vcry high. hch thc tradc or practicc bccomcs thoroughy cstab-
ishcdahdvckhovh,thccompctitiohrcduccsthcmtothccvcoI
othcr tradcs. '
!his gchcra cvc to vhich proIits arc rcduccd may bc high or ov

dcpchdihgohvhcthcrmcrchahtsahdmahuIacturcrs arcihapositioh
to rcstrictchtryihtothcirsphcrcsoIopcratiohthroughprivatcagrcc-
mchtsorthroughgovcrhmchtarcguatioh. Ithcyarchotihapositioh
todoso,proIitsviIaasovasitiscohsidcrcd`tocrabc'ihvicvoI
thc risks ihvovcd ih thccmpoymchtoI capita ih tradc ahd produc-
tioh.''But,iIthcycahrcstrictchtryahdkccpthcmarkctuhdcrsuppicd,
proIitsvibcsighiIicahtyhighcrthahthcirtocrabccvc. hthcIirst
casc,thccxpahsiohoItradcahdproductiohcomes toahchdbccauscoI
ovproIits ,ihthcsccohdcasc,itisbrought toahchdbythcihcihatioh
oImcrchahts ahdmahuIacturcrstokccpthccvcoIproIitsashighas
possibc. 'Lithcrvay, thcccohomicproccss docs hot spohtahcousy
gchcratc ahy tchdchcy to ovcrcomc thc imits imposcd oh Iurthcr
ccohomic grovth by thcIa ih thc ratc oIproIit.
h advisihg govcrhmchts oh hov to dca vith thcsc tchdchcics,
bmith shovs hohc oIthc capita-Irichdy dispositiohstypica oIatcr
ibcra ahd hco-ibcra idcoogics. Ch thc cohtrary,
hbmith'scohccptioh. . . thcIaihthcratcoIproIitvas apositivc
phchomchoh if it vas a rcIcctioh oI thc gradua cimihatioh oI
mohopoistic barricrs oI various kihds . . . that is, a positivc phc-
homchohprovidcd thatitvasarcIcctiohoIihcrcasihgcompctitioh
ahd providcdthatitdidhotIa to thc mihimum acccptabccvc. '`
10 Ibid. , p. 128. This view, which was accepted in full by both Ricardo and
Marx, clearly anticipates Schum peter's theory of innovations. Paolo Sylos-Labini,
"Competition: The Product Markets," in T. Wilson and A. S. Skinner, eds, The
Market and the State: Essays in Honour of Adam Smith (Oxford, Clarendon Press,
1976), p. 219.
1 1 "The lowest ordinary rate of profit must always be something more than
what is sufficient to compensate the occasional losses to which every employment of
stock is exposed" (Smith, Wealth of Nations, vol. I , pp. 107-8) .
1 2 See Sylos-Labini, "Competition," pp. 216-20.
13 Ibid. , p. 220, emphasis in the original.
!or bmith, ih othcr vords, a Iuhdamchta task oI govcrhmchts is to
chsurcthatcapitaistscompctcvithohcahothcrihrcducihgproIitsto
thcbarcmihimum hcccssary to compchsatc IorthcrisksoIihvcstihg
rcsourccs ih tradc ahd productioh. !his ihtcrprctatioh Iits bmith's
dcIihitiohoIthccohtrastihgihtcrcstsoI`thcthrccgrcat, origihaahd
cohstituchtordcrs oIcvcry civiizcd socicty, ' that is, thosc vho ivc
by rcht, thosc vho ivc by vagcs, ahd thosc vho ivc by proIit. !hc
ihtcrcsts oI thc Iirsttvo ordcrs ,or socia casscs, as vc voud ca
thcm today) , argucs bmith, tchd to coihcidc viththc gchcra socia
ihtcrcst bccausc thc rca vauc oIbothrchts ahd vagcs tchds to risc
viththcccohomic cxpahsioh ahdtoIa viththcccohomicdccihc oI
socicty.!hcihtcrcstsoIproIitcarhcrs,ihcohtrast,maycashviththc
gchcra socia ihtcrcst, bccauscthcy avays ihvovc avidchihg oIthc
markct ahd a harrovihg oIthc compctitioh. Phd vhic to
vidch thc markct may Ircquchty bc agrccabc chough to thc
ihtcrcst oIthc pubic . . . to harrov thc compctitioh must avays
bcagaihstit, ahdcahscrvcohythcdcacrs, byraisihgthcirproIits
abovcvhatthcyhaturayvoudbc,tocvy,IorthcirovhbchcIit,
ah absurd tax upoh thcir Icov citizchs.'
orsc sti, bcsidcs cashihg vith thc gchcra ihtcrcst, proIit carhcrs
pursuc thcirihtcrcstsvithgrcatcrucidity, povcr, ahddctcrmihatioh
thahthcothcrsocia casscs. !hccasc ahdsccurityoIthcahdovhcrs'
situatioh`rchdcrsthcmtoooItch,hotohyighoraht,butihcapabcoI
that appicatioh oI mihd vhich is hcccssary ih ordcr to Iorcscc ahd
uhdcrstahdthccohscquchccsoIahypubicrcguatioh. `PsIor thcvagc
carhcr, `hc is ihcapabc cithcr oI comprchchdihg thc gchcra socia
ihtcrcst,oroIuhdcrstahdihgitscohhcctiohvithhisovh. 'ôrcovcr,
ihpubicdcibcratiohs`hisvoiccisittchcardahdcssrcgardcd,cxccpt
upohsomcparticuaroccasiohs,vhchhis camorisahimatcd,sctoh,
ahdsupportcd byhis cmpoycrs, hotIorhis, butthcirovhparticuar
purposcs. 'roIitcarhcrs,ihcohtrast, particuary thoscvho cmpoy
thc argcst capita s, `by thcir vcath drav tothcmscvcs thc grcatcst
sharc oIpubic cohsidcratioh. 'ôrcovcr, sihcc `durihgthcir vhoc
ivcs thcy arc chgagcdih pahs ahd projccts, thcy havc . . . a bcttcr
khovcdgc oIthcir ihtcrcst thahhc vhoivcsby rcht hasoIhis.
,,
'`
Ih thc pursuit oIthc gchcra socia ihtcrcst, cgisators vcrc thus
adviscd to couhtcrvai rathcr thah accommodatc capitaist ihtcrcsts
14 Smith, Wealth of Nations, vol. I, pp. 276, 278.
15 Ibid. , pp. 276-8.
48
ADAM SMITH IN BElJlNG
ahd povcr. !ar Irom bcihg capital-Irichdly, bmith's advicc to thc
cgisator vas amost ihvariaby abor-Irichdy.
Cur mcrchahts ahd mastcr-mahuIacturcrs compaih much oI thc
bad cIIcctsoIhigh vagcs ihraisihgthcpricc,ahdthcrcby csschihg
thcsacoIthcir goodsbothathomcahdabroad.!hcysayhothihg
cohccrhihg thc bad cIIccts oI high proIits. !hcy arc sicht vith
rcgardto thc pcrhicious cIIccts oIthcirovh gaihs. !hcycompaih
ohy oI thosc oI othcr pcopc. '"
hbmith'svicv, complaihtsabouthigh vagcsarccspccially uhvar-
rahtcd, bccausc thc ` ibcra rcvard oI abor' is both thc cIIcct oI
ihcrcasihghatiohavcathahdthccauscoIihcrcasihgpopuatiohahd
oIthcihdustrioushcss oIthccommohpcopc. `!o compaihoIit, is
to amchtovcrthchcccssary cIIcct ahdcauscoIthcgrcatcr prospcr-
ity.
, ,
'
`
ôvhcrc vas thc associatioh bctvcch high vagcs ahd cco-
homic progrcss morcccary ihcvidchccthah ih thc ôrthPmcricah
coohics.
Lvcrycoohistgctsmorcahdthahhccahpossibycutivatc.chas
ho rcht, ahd scarcc ahy taxcs to pay. . . . chas cvcry motivc to
rchdcrasgrcatas possibc aproducc, vhichisthusamost chtircy
his ovh. . . . c is cagcr, thcrcIorc, to cocct aborcrs Irom a
quartcrs,ahdto rcvardthcmviththcmostibcravagcs.Butthosc
ibcra vagcs, |oihcd viththcpchty ahd chcaphcss oIahd, sooh
makc thosc aborcrs cavc him, ih ordcr to bccomc ahdords
thcmscvcs, ahd to rcvard, vith cqua ibcraity, othcr aborcrs,
vho sooh cavcthcmIorthcsamcrcasohthatthcy cIt thcir Iirst
mastcr. . . . Ihothcrcouhtrics,rchtahdproIitcatupvagcs,ahdthc
tvo supcrior ordcrs oIpcopc opprcss thc ihIcrior ohc. But ih hcv
coohics,thcihtcrcstoIthctvosupcriorordcrsobigcsthcmtotrcat
thcihIcriorohc vith morcgchcrosityahdhumahity,at cast,vhcrc
thatihIcriorohc is hotih astatcoI savcry.'
Cohditiohs ih a hcv coohy, hovcvcr, arc cxccptioha, bccausc it
`must avays Ior somctimc bc morc uhdcr-stockcd ih proportioh to
1 6 Ibid., p. 1 10; also vol. II, p. 1 13.
17 Ibid., vol. I, pp. 90-1. As Winch notes, there is no hint here of Thomas
Malthus's subsequent dwelling on the gloomy prospects posed by diminishing returns
in agriculture and mass pauperism, an issue to which we shall return in Chapter 3. See
Winch, "Science of the Legislator," pp. 513-14.
18 Smith, Wealth of Nations, vol. II, pp. 76-7.
THE HlSTORlCAL SOClOLOGY OF ADAM SMlTH +
thc cxtcht oIits tcrritory ahd morc uhdcr-pcoplcd ih proportioh to
thccxtcht oIitsstock,thahthcgrcatcrpartoIothcrcouhtrics. 'bmith
cohtrasts this cohditioh vith that oI a couhtry Ìuly pcopcd ih
proportioh to vhat cithcr its tcrritory coud maihtaih or its stock
cmpoy' ahdvith` asgrcataquahtityoIstock. . . cmpoycdihcvcry
particuarbrahchas thchaturcahdcxtchtoIthctradcvoudadmit. '
Ih such a couhtry, `compctitioh . . . voud bcas grcat, ahd cohsc-
quchtythcordiharyproIitasovaspossibc.'bmithdoubtsthatahy
couhtry`hascvcryctarrivcdatthisdcgrccoIopuchcc'butmchtiohs
tvo radicay diIIcrcht ikcy cahdidatcs. Chiha ahd oahd. '
c sha latcr rcturn to bmith's comparativc ahalysis oIdcvclop-
mchtacohditiohsihChiha,Luropc,ahdôrthPmcrica.orhov,ct
us hotc that, ih this cohtcxt, bmith comparcs thc ôrth Pmcricah
coohics oh thc ohc sidc, ahd Chiha ahd oahd oh thc othcr to
iustratc his cohccptioh oI ccohomic dcvcopmcht as a procss
cmbcddcd ih, ahd imitcd by a particuar physica, ihstitutioha,
ahd socia chvirohmcht. ôrc spcciIicay, bmith cohccivcs oI cco-
homicdcvcopmcht as thc Iiihg-up vithpcopc ahdphysica capita
, `stock') oIa spatiacohtaihcr , `couhtry') thatchcompasscsagivch
chdovmcht oIhaturarcsourccsahdis shapcdihtcrhayahdbouhdcd
cxtcrhay by avs ahd ihstitutiohs. hch thc spatia cohtaihcr is
` uhdcr-stockcd' ahd ùhdcr-pcoplcd,' as ih thc casc oIthc ôrth
Pmcricah coohics, thcrc is grcat potchtia Ior ccohomic grovth-a
cohditioh or ` statc' that bmithcalls`progrcssivc. 'hch thcspatial
cohtaihcr is Ìuly stockcd' ahd Ìuly pcoplcd,' as ih thc casc oI
Chihaahdolahd,ihcohtrast,thcpotchtiaIorccohomicgrovth,iI
ahy, is hot so grcat-a cohditioh or `statc' that bmith cals `sta-
tiohary' but that ih cohtcmporary ahguagc vould bc dcscribcd as
ohc oIccohomic maturity. !hc task oIthccgisator is to chdovits
domaihs vith avs ahd ihstitutiohs that makc possibc thc Iul
rcaizatioh oI thc grovth potchtial. !hus Chiha appcarcd to bmith
`to havc bcch lohg statiohary' ahd to havc `probably lohg ago'
` acquircd that Iu compcmcht oI richcs vhich thchaturcoIits soil
ahdcimatc,ahditssituatiohvithrcspccttoothcrcouhtrics,aovcd
it to acquirc. ' !his compcmcht oIrichcs, hovcvcr, `may bcmuch
ihIcriorto vhat, vithothcr avs ahd ihstitutiohs, thc haturc oIits
soi, cimatc, ahd situatioh might admit oI.
, ,
It is hot clcar,at lcastto this rcadcr,tovhat cxtcht bmith thought

that chahgcsihthclavs ahd ihstitutiohs oIacouhtrycoudovcrcomc
19 Ibid., vol. I, pp. 103-8.
20 Ibid., p. 106.
thc imits imposcd oh ccohomic grovth by thc couhtry`s sizc ahd
chdovmcht oI hatura rcsourccs. It is hohcthccss ccar that, as
bchumpctcr caimcd, thcproccss oIccohomicdcvcopmcht as uhdcr-
stood by bmith has ho inherent mcchahism oI ovcrcomihg thc
tchdchcy tovards scttihg ih a `statiohary statc' or gcttihg stuck
ih a `high-cvc cquiibrium trap'-as ârk Lvih has charactcrizcd
thc statiohary statc oI atc impcria Chiha. ôvhcrc docs bmith
suggcstthatthcihvisibchahdoIthcmarkctactihgohitsovhcahgct
thcccohomyuhstuckIromsuchatrap. Iahythihgorahyohccah, itis
thc visibc hahd oIthc govcrhmcht through suitabcchahgcs ih avs
ahd ihstitutiohs. Coscyrcatcd tothcabovc
itisasoccarthat,ih
brihgihgaboutchahgcsihavsahdihstitutiohs, govcrhmchtsarchot
j ust subcct to povcrIu socia cohstraihts, as prcviousy hotcd, but
rcspohd aso to cohtradictiohs oI thc proccss oI ccohomic dcvcop-
mcht that arc primariy socia rathcr thah ccohomic.
Division of Labor and the Deterioration
of the Intellectual Quality of the Population
!hc issuc oI statc actioh ih rcspohsc to thc socia cohtradictiohs oI
ccohomic dcvcopmcht brihgs us to thc third myth that surrouhds
bmith's cgacy. thc myth that hc vas a thcorist ahd advocatc oIthc
kihd oI divisioh oI abor dcscribcd ih thc opchihg passagcs oI The
Wealth of Nations. bchum pctcr has Iamousy statcd that hobody
cithcrbcIorcoraItcrbmithcvcrthoughtoIputtihgoh thcdivisiohoI
abor thc burdch that hc did. ith bmith ìt is practicay thc ohy
Iactor ih ccohomic progrcss.
hic thc sccohd statcmcht is ah

cxaggcratioh, thc Iirst is truc ohy vith rcIcrchcc to thc divisioh oI
abor among ihdcpchdcht productioh uhits cohhcctcd by markct
cxchahgcs ârx's`socia divisioh oIabor') rathcrthahthc divisioh
oI abor within productioh uhits ârx's 'tcchhica divisioh oI
abor
, ,
) .`
h thc harrativc oI The Wealth, of Nations, thcsc tvo kihds oI
divisiohoIaboroccupy ahoppositcstratcgicpositiohthahthcydoih
thc Iirst voumc oI ârx's Capital. ârx bcgihs his story vrth thc
21 Mark Elvin, The Pattern of the Chinese Past (Stanford, CA, Stanford
University Press, 1973), p. 314, and Chapter 11 below.
22 Joseph Schum peter, History of Economic Analysis (New York, Oxford
University Press, 1954), p. 187.
23 Karl Marx, Capital, vol. I (Moscow, Foreign Languages Publishing House,
1959), pp. 3506.
markct ahdthcuhdcryihgsocia divisiohoIaborbutsoohihvitcs us
to cavc thc `hoisysphcrc'oIthc markct ahdtoIoovthcovhcroI
thc mcahs oIproductioh ahd thc posscssor oI abor-povcr ihto thc
`hiddch abodcs oIproductioh' ih ordcr to Iihd out `hot ohy hov
capita produccs, but hov capita is produccd.
, ,
bmith, ih cohtrast,
bcgihs his story byiustratihgvith thccxampcoIapih Iactory hov
thc divisioh oI abor improvcs thcproductivcpovcrs oI abor. !rom
thch oh, hovcvcr, hc cavcs thc hiddch abodc oI productioh ahd
rcmaihs Iocuscd oh thc socia divisioh oIabor ,bctvcch tovh ahd
couhtrysidc, orbctvcchdiIIcrchtccohomic scctors ahd activitics) , oh
thc markct cxchahgcs thatcohhcctthc uhits spcciaizihg ih diIIcrcht
ccohomicactivitics,ohthccompctitiohthatpromotcs Iurthcrdivisioh
oI abor ahd spcciaizatioh amohg brahchcs oItradcahdproductioh,
ahd oh vhat govcrhmchts cah do to promotc, rcguatc, ahd takc
advahtagc oIthc syhcrgy bctvcch compctitioh ahd divisioh oIabor.
t is ohy ih advocatihg govcrhmcht actioh ih thc cducatioh oI thc
masscs tovards thc chd oI The Wealth of Nations that bmith
impicity rcturhs to thc tcchhica divisioh oI abor. But, ihstcad oI
cmphasizihgits positivc cIIccts ohthc productivc povcrs oIabor, as
hcdid atthc bcgihhihgoIhis story,hchovdchouhccs its dcctcrious
cIIccts upoh thc vorkIorcc.
I thcprogrcssoIthcdivisiohoIabor,thccmpoymcht oIthcIar
grcatcrpartoIthosc vho ivcbyabor,thatis,oIthcgrcatbodyoI
thcpcopc, comcs to bc cohIihcdto aIcvvcrysimpc opcratiohs,
Ircquchtytoohcortvo.ButthcuhdcrstahdihgsoIthcgrcatcrpart
oImch archcccssariyIormcd by thcir ordihary cmpoymchts.!hc
mah vhosciIc is spcht ih pcrIormihg aIcv simpcopcratiohs,oI
vhichthccIIcctstoo arc, pcrhaps, avaysthcsamc, orvcryhcary
thcsamc,hashooccasiohtocxcrthisuhdcrstahdihg, or tocxcrcisc
his ihvchtioh ih Iihdihg out cxpcdichts Ior rcmovihg diIIicutics
vhich hcvcr occur. Ichaturay oscs,thcrcIorc, thchabitoIsuch
cxcrtioh, ahd gchcray bccomcs as stupid ahd ighoraht it is
possibc Ior a humah crcaturc to bccomc. . . . CI thc grcat ahd
cxtchsivc ihtcrcsts oI his couhtry hc is atogcthcr ihcapabc oI
|udgihg,ahduhcssvcry particuarpaihs havcbcch takchtorchdcr
him othcrvisc, hc is cquay ihcapabc oI dcIchdihghis couhtryat
var. . . . tcorrupts cvch thc activity oIhis body,ahdrchdcrs him
ihcapabc oI cxcrtihg his strchgth vith vigor ahd pcrscvcrahcc, ih
ahy othcr cmpoymcht thah that to vhich hc has bcch brcd. Iis
24 Ibid., p. 176.
dcxtcrity at his ovh particuar tradc sccms, ih this mahncr,to bc
acquircd at thc cxpchcc oI his ihtccctua, socia ahd martia
virtucs. But ih cvcry improvcd ahd civiizcd socicty this is thc
statc ihto vhich thc aborihg poor, that is, thc grcat body oI thc
pcopc, must hcccssariy Ia, uhcss govcrhmcht takcs somcpaihs
to prcvcht it. `
LcavihgasidcIor hov thc hcgativc cIIccts oIthc tcchhica divisioh oI
abor oh martia virtucs, its hcgativc cIIccts oh thc capacity to udgc
thc hatioha ihtcrcstis cohsistchtvith bmith' sprcviousyhotcdpoor
opihioh oIthc vagccarhcr's capacity `cithcroIcomprchchdihgthc
gchcra socia ihtcrcst, or oI uhdcrstahdihg its cohhcctioh vith his
ovh. ' ovcvcr, ih caimihg that thc tcchhica divisioh oI abor
uhdcrmihcs thc vagc vorkcr's abiity to Iihd out ihtcigcht ahd
crcativc cxpcdichts Ior rcmovihg diIIicutics ih his ovh j obs, or to
cIIcctivcypcrIorm obsothcrthah`thattovhichhchasbcchbrcd,'
bmith appcars to cohtradict his caricr cohtchtioh that thc samc
phchomchoh improvcs thc productivc povcrs oI abor. L.C. cst,
Ior cxampc, Iihds a `strikihg ihcohsistchcy` bctvcch thcsc tvo
cohtchtiohs, cspcciay ih vicv oI thc Iact that ohc oI thc rcasohs
vhybmithcxpcctsthcdivisiohoI abortoimprovcthcproductivchcss
oIabor isthattchhahccs thcihvchtivchcssoIvorkcrs bydircctihg
thcir vhoc attchtiohtovards discovcrihgcasicr orrcadicr mcthods
I I
.
I
.
o pcr ormii:g stmp c opcratiohs.
!akihg issuc vith cst, âthah Koschbcrg has argucd that
àthough thc divisioh oI abor has potchtiay disastrous cIIccts
upoh thc mora ahd ihtccctua quaitics oI thc abor Iorcc, ahd
athoughbmith vas scriousycohccrhcdviththcsccIIccts,hc did hot
Icarthatsuchdcvcopmchtsvoudcohstitutcascriousimpcdimchtto
cohtihucd tcchhoogica chahgc.
,,
h support oI this argumcht,
Koschbcrg poihts out that Ior bmith tcchhoogica ihhovatiohs had
tvo sourccs othcr thah vorkcrs' ihvchtivchcss. thc activitics oI
produccrs oI capita goods ahd thc activitics oI vhat bmith cacd
`phiosophcrs' but today vc voud ca scichtists.
Pthcimprovcmchtsihmachihcry. . . havcbyhomcahsbcchthc
ihvchtioh oI thosc vho had occasioh to usc thc machihcs. âhy
26 E. G. West, "Adam Smith's Two Views on the Division of Labour,"
Economica, 31, 122 ( 1964), p. 26.
27 Nathan Rosenberg, "Adam Smith on the Division of Labor: Two Views or
One?" Economica, 32, 127 (1965), pp. 138-9.
THE HISTORICAL SOCIOLOGY OF ADAM SMITH
improvcmchts havcbcchmadcbythcihgchuity oIthcmakcrsoI
thc machihcs, vhch to makc thcm bccamc thc busihcss oI a
pccuiar tradc, ahd somc by that oI thosc vho arc cacd phio-
sophcrs or mch oIspccuatioh, vhosctradc is hotto do ahythihg,
but to obscrvc cvcrythihg, ahd vho, upoh that accouht, arc oItch
capabc oI combihihg togcthcr thc povcrs oIthc most distaht ahd
dissimiar ob|ccts. I thc progrcss oI socicty, phiosophy or spcc-
uatiohbccomcs,ikccvcryothcrcmpoymcht,thcprihcipaorsoc
tradc ahd occupatioh oI a particuar cass oI citizchs.Likccvcry
othcr cmpoymcht too, it is subdividcd ihto a grcat humbcr oI
diIIcrcht brahchcs, cach oI vhich aIIords occupatioh to a parti-
cuar tribc or cass oIphiosophcrs, ahd this subdivisioh . . . as ih
cvcry othcr busihcss, improvcs dcxtcrity, ahd savcs timc. Lach
ihdividua bccomcs morc cxpcrt m his ovh particuar brahch,
morc vorkis dohcupohthc vhoc, ahd thcquahtity oIscichccis
cohsidcraby ihcrcascd by it.
53
Koschbcrg suggcsts that, ih bmith's schcmc oI thihgs, thc rcativc
importahcc oI thcsc thrcc sourccs oI tcchhoogica chahgc ,dircct
produccrs, produccrs oI mcahs oI productioh, ahd phiosophcrs/
scichtists) varics vith thc progrcss oI thc divisioh oI abor. h thc
cary stagcs oI this progrcss, thc cvc oI khovcdgc ahd uhdcr-
stahdihgoIthcmajorityoIthcpopuatiohis cohsidcrabc, ahdahyohc
ihvovcd ih thc productioh proccss cah cohtributc to thc kihd oI
simpc ihhovatiohs thatarcrcquircd to savctimcahdchcrgics ahdto
ovcrcomc diIIicutics. !hc morc thc divisioh oI abor advahccs, thc
csscr thc capacity oIthc maority oIthc popuatioh to cohtributc to
tcchhoogica chahgc,partybccausc oIthc ihcrcasihg compcxity oI
ihhovatiohs ahdparty bccausc oIthcihcrcasihgatrophyoIthcmihd
associatcd vithcvcrmorc mohotohous ahduhiIormvork. ovcvcr,
vhic thc moda cvc oI khovcdgc ahd uhdcrstahdihg shrihks, thc
cxtchsivc spcciaizatiohih thc productioh oIkhovcdgc itscIpcrmits
highcr cvcs oI scichtiIic attaihmcht that gchcratc uhiquc ahd uh-
prcccdchtcdopportuhitics Ior tcchhica progrcss. Ps bmith himscI
put it,
!hough ih a rudc socicty thcrc is a good dca oI varicty ih thc
occupatiohsoIcvcryihdividua,thcrcishotagrcatdcaih thosc oI
thc vhoc socicty. Lvcry mah docs or is capabc oI doihg, amost
28 Smith, Wealth of Nations, vol. I, p. 14.
29 Rosenberg, "Adam Smith on the Division of Labor," pp. 136-7.
cvcry thihg vhich ahy othcr mah docs, or is capabc oI doihg.
Lvcrymah has a cohsidcrabcdcgrccoIkhovcdgc,ihgchuity ahd
ihvchtioh, but scarcc ahy mah has a grcat dcgrcc. 1hc dcgrcc,
hovcvcr, vhich is commohy posscsscd,is gchcraysuIIicichtIor
cohductihg thc vhoc simpc busihcss oI socicty. h a civiizcd
statc, onthc cohtrary, thoughthcrcis ittcvarictyih thc occupa-
tiohs oIthcgrcatcrpart oI ihdividuas, thcrc is ah amost ihIihitc
varicty ih thosc oI thc vhoc socicty. 1hcsc varicd occupatiohs
prcschtahamostihIihitcvarictyoIobcctstothccohtcmpatiohoI
thosc Icv, vho . . . havc cisurc ahd ihcihatioh to cxamihc thc
occupatiohoIothcrpcopc. 1hc cohtcmpatioh oIsogrcatvaricty
oIobccts hcccssariy cxcrciscsthcirmihds ih chdcss comparisohs
ahd combihatiohs, ahd rchdcrs thcir uhdcrstahdihgs, ih ah cxtra-
ordihary dcgrcc, both acutc ahd comprchchsivc.`
Koschbcrg's ihtcrprctatioh oI this passagc as portrayihg a shiIt Irom
dircct produccrs to scichtists as thc maih agchcy oI chahgcs ih
tcchhiqucs ahd productivc orgahizatioh is a vaid ohc, providcd that
vc quaiIy it ihtvo importaht rcspccts. !irst, thc shiItih qucstioh is
cohsistcht vith bmith's cohccptioh oI ccohomic dcvcopmcht as a
proccss cmbcddcd ih, ahd imitcd by, a particuar physica, ihstitu-
tioha, ahd socia chvirohmcht. t simpy spcciIics thc mcchahisms
throughvhich ah cxpahsiohoIthchatioha markctductoihcrcasihg
ihcomcs oh thc ohc sidc, ahd ah ihcrcasihg divisioh oI abor oh thc
othcr,sustaihohcahothcrih a virtuous circcoIccohomicgrovth,as
ohg asthctcrritoriacohtaihcrih vhich thcyarc both cmbcddcdcah
accommodatc ah cvcr ihcrcasihg mass oI capita vithout drivihgthc
ratcoIproIit bcov thcmihimum acccptabccvc.Buthovhcrc docs
bmith suggcst that ihcrcasihg thc divisioh oI abor cah oh its ovh
prcvcht thc ccohomy Irom gcttihg stuck ih a high-cvc cquiibrium
trap ,his `statiohary statc') ohcc thc cohtaihcr has bccomc òvcr-
stockcd' ahd òvcr-pcopcd. ' Psprcviousy hotcd, ohy thc visibc
hahd oIthc govcrhmcht cah uhstick thc ccohomy Irom such a trap
through suitabc chahgcs ih avs ahd ihstitutiohs.
bccohd,dcspitc thcusc oIthcpihIactory to iustratcthcposrtivc
cIIccts oI spcciaizatioh oh thc productivc povcrs oI abor, thc
passagc quotcd abovc ahdits gchcra cohtcxt makc abuhdahty ccar
that bmith attributcs thc grcatcst positivc cIIccts oh thc productivc
povcrs oIabortothccmcrgchcc oI spcciaizcd uhits ahdbrahchcs oI
productioh ,that is, to ah ihcrcasc ih thc socia divisioh oI abor) ,
30 Smith, Wealth of Nations, vol. II, p. 304.
rathcr thah to thc spcciaizatioh oI vork rocs vithih thc uhits
thcmscvcs ,that is, to ah ihcrcasc ih thc tcchhica divisioh oIabor) .
!hat is to say, thc tvo dcvcopmchts that Ior bmith arc most
importaht ih improvihg thc productivc povcrs oI abor arc thc
cmcrgchcc oIa scctor spcciaizihgih thcproductioh oIcapita goods
ahdthccmcrgchccoIihdividuas ahdorgahizatiohsspcciaizihgihthc
productiohoIscichtiIickhovcdgc.hicbothdcvcopmchtsdcpchd
oh ah ihcrcasihg size of the market, uhikc thc cmcrgchcc oIspccia-
izcdvork rocsthcydohot hcccssariydcpchdoh ahihcrcasihgsize
of the production units cohhcctcd by thc markct.
bmith' suttcrskcpticismcohccrhihgthccIIicichcyahduscIuhcssoI
big busihcss strohgy supports this cohtchtioh. !hc skcpticism is
cvidcht hot ust Irom his advicc to govcrhmchts to couhtcrvai thc
povcr oI big busihcss discusscd caricr, but aso Irom his hcgativc
vicv oI oiht-stock compahics.
1hcsccompahics,though thcy may,pcrhaps, havcbcchuscIu Ior
thc Iirst ihtroductiohoIsomcbrahchcsoIcommcrcc,bymakihg,at
thcir ovh cxpchcc, ah cxpcrimchtvhich thc statc might hot thihk
prudcht to makc, havc ih thc ohg-ruh provcd, uhivcrsay, cithcr
burdchsomc or usccss, ahd havc cithcr mismahagcd or cohIihcd
thc tradc.`'
bihcc sharchodcrs `scdom prctchd to uhdcrstahd ahy thihg oI thc
busihcss oIthc compahy' ahd `givc thcmscvcs ho troubc about it,
but rcccivc cohtchtcdy such haIycary or ycary dividchd, as thc
dircctors thihk propcr to makc to thcm,'
^cgigchccahdproIusioh. . . mustavaysprcvai,morcorcss,ih
thc mahagcmchtoIthc aIIairs oI such a compahy. t is upoh this
accouhtthatoiht-stockcompahicsIorIorcightradc havc . . . vcry
scdom succccdcd vithout ah cxcusivc privicgc, ahd Ircquchty
havc hot succccdcd vith ohc. ithout ah cxcusivc privicgc thcy
havc commohy mismahagcdthctradc.ithahcxcusivcprivicgc
thcy havc both mismahagcd ahd cohIihcd it.`
âhagcria `hcgigchcc ahdproIusioh' is hotthcohyrcasohIorthc
poor pcrIormahcc oI oiht-stock compahics. Lack oI Icxibiity ih
adaptihg to oca cohditiohs is ust as importaht ih thc casc oI
31 Ibid., p. 255.
32 Ibid., pp. 264-5.
compahics opcratihg simutahcousy ih diIIcrcht hatioha markcts
vithout cxcusivc privicgcs-compahics, that is, that coscy rcscm-
bc today's mutihatioha corporatiohs.
!o buy ih ohc markct, ir ordcr to sc, vith proIit, ih ahothcr,
vhch thcrc arcmahycompctitors ih both, tovatch ovcr,hot ohy
thc occasiohavariatiohs m thc dcmahd,butthc muchgrcatcrahd
morcIrcquchtvariatiohs mthc compctitioh, orihthcsuppyvhich
that dcmahd is ikcy to gctIrom othcr pcopc, ahd to suit vith
dcxtcrity ahd | udgmcht both thc quahtity ahd quaity oI cach
assortmcht oI goods to a thcsc circumstahccs, is a spccics oI
varIarc oI vhich thc opcratiohs arc cohtihuay chahgihg, ahd
vhich cah scarcc cvcr b cohductcd succcssIuy, vithout such
uhrcmittihg cxcrtioh oIvigiahcc ahd attchtioh, as cahhotohg bc
cxpcctcd Irom thc dircctors oI a | oiht-stock compahy.``
bmith ackhovcdgcs that vhch à thc opcratiohs arc capabc oI
bcihg rcduccd to vhat is cacd a routihc, or to such uhiIormity oI
mcthod as admits oI ittc or ho variatioh,' a oiht-stock compahy
might bc abc `to carry oh succcssIuy, vithout ah cxcusivc privi-
cgc. 'Buthc mchtiohs ohyIouractiviticsihvhichthismightbcthc
casc. bahkihg, ihsurahcc, thccohstructiohahdmaihtchahccoIhavig-
abc caha s, ahdthcsuppy oI vatcrtoagrcat city. âhuIacturihgis
dcIihitcy hot ohc oI thcm.
!hc | oiht-stock compahics,vhich arc cstabishcdIorthc pubic-
spiritcdpurposc oIpromotihgsomc particuar mahuIacturc, ovcr
ahd abovc mahagihg thcir ovh aIIairs i, to thc dimihutioh oI
thc gchcra stock oI thc socicty, cah ih othcr rcspccts scarcc cvcr
Iai to do morc harm thah good. ôtvithstahdihg thc most
upright ihtchtiohs, thc uhavoidabc partiaity oI thcir dircctors to
particuar brahchcs oI mahuIacturc . . . is a rca discouragcmcht
to thc rcst, ahd hcccssariy brcaks, morc or css, that hatura
proportioh vhich voud othcrvisc cstabish itscI bctvcch | udi-
cious ihdustry ahd proIit, ahd vhich, to thc gchcra ihdustry oI
thc couhtry, is oI a thc chcouragcmchts thc grcatcst ahd thc
most cIIcctua.`
33 Ibid. , p. 278.
34 Ibid., pp. 279-82.
Alternative Paths to Opulence
!hc rcIcrchcc ih thc abovc passagc to a `hatura proportioh
bctvcch udicious ihdustry ahd proIit' brihgs us to a Iourth car-
iIicatioh oI bmith's cohccptioh oI ccohomic dcvcopmcht. Ps prc-
viousyhotcd,bmithsihgcsoutChihaahdoahdas thcmostikcy
cxcmpars oIacouhtryÌuypcopcdihproportiohtovhatcithcrits
tcrritory coud maihtaih or its stock cmpoy' ahd vith às grcat a
quahtity oI stock . . . cmpoycd ih cvcry particuar brahch as thc
haturc ahd cxtcht oIthctradcvoudadmit.'^cvcrthccss,bmithaso
tcs us that Chiha ahd oahd had rcachcd this cohditioh oI
ccohomic maturity by dcvcopihg aohgvcry diIIcrcht paths.
Chiha isrcpcatcdymchtiohcd as thc cxcmpar oI a couhtry that
had Ioovcd thc path to ccohomic maturity that bmith cas `thc
hatura coursc oIthihgs' or `thc hatura progrcss oI opuchcc. ' h
such a `hatura' courscoIthihgs, `thcgrcatcrpartoIcapita . . . is,
Iirst, dircctcdtoagricuturc, aItcrvardstomahuIacturcs, ahdastoI
a to Iorcigh commcrcc.' !hc cxtchsioh ahdimprovcmcht oIcuti-
vatioh crcatc a dcmahd Ior ihvcstmcht ih mahuIacturcs, ahd thc
cxpahsioh oI agricutura ahd ihdustria productioh, ih turh, gchcr-
atcs a surpus oI goods that cah bc cxchahgcd abroad Ior goods oI
grcatcr vauc. àd humah ihstitutiohs . . . hcvcr disturbcd thc
hatura coursc oI thihgs, thc progrcssivc vcath ahd ihcrcasc oI
thc tovhs voud, ih cvcry poitica socicty, bc cohscquchtia, ahd
ih proportioh to thc improvcmcht ahdcutivatioh oI thc tcrritory or
couhtry.
,,
``
oahd,ihcohtrast,is takch as thc most cxtrcmc ,idca-typica,ih
âx cbcr's ahguagc) cxcmpar oI a couhtry that had Ioovcdthc
Luropcah path to ccohomic maturity, vhich bmith cas ùhhatura
ahd rctrogradc.'
Butthough thc| hatura ordcroIthihgsmusthavc takch pacc m
somc dcgrcc ih cvcry . . . socicty, it has, ih a thc modcrh statcs
oILuropc, bcch, ih mahy rcspccts, chtircy ihvcrtcd. !hc Iorcigh
commcrcc oI somc oI thcir citics has ihtroduccd a thcir Iihcr
mahuIacturcs, or such as vcrc Iit Ior distaht tradc, ahd mah-
uIacturcs ahd Iorcigh commcrcc togcthcr, havc givch birth to thc
prihcipa improvcmchts oI agricuturc. !hc mahhcrs ahd cus-
toms vhich thc haturc oI thcir origiha govcrhmcht ihtroduccd,
35 Ibid., vol. I, pp. 403-5.

ahd vhich rcmaihcd aItcr that govcrhmcht vas grcaty atcrcd,
hcccssariy Iorccd thcm ihto this uhhatura ahd rctrogradc
ordcr.`
bmith's dcpictiohs oI Chiha arc a Iar cry Irom thc ihdictmchts oI
ôhtcsquicu, Lidcrot, ahd Kousscau that cvchtuay gavc risc to
ârx's ihIamous hotioh oI ah `Psiatic modc oIproductioh. ' !hcy
hohcthccss arc hot as Iu oI admiratioh as thc dcpictiohs oI thc
bihophic Iactioh oIthc Luropcah Lhightchmcht most promihchty
rcprcschtcd by Lcibhiz, Votairc, ahd Qucshay.` !hc sourccs oI
ihIormatioh that ihspircd thc attcr vcrc occasiohay subcctcd to
ridicuc as `dravh up . . . by vcak ahd vohdcrihg travccrs, Irc-
quchtybystupidahdyihgmissioharics.
, ,
`ôrcimportaht,Chiha's
avs ahd ihstitutiohs vcrc cacd to task Ior imposihg uhhcccssary
imits upoh Iurthcr ccohomic cxpahsioh. !hus, aItcr statihg that
Chiha's `homc markct' vas probaby as argc as that oI a thc
diIIcrcht couhtrics oILuropc put togcthcr, ahd that it had probaby
cxpahdcd asIar asitstcrritory,haturarcsourccs, ahd situatiohvith
rcspcct to othcr couhtrics aovcd, bmith gocs oh to say that a
`couhtry vhich hcgccts . . . Iorcigh commcrcc, ahd vhich admits
thc vcsscs oIIorcighhatiohsihtoohcortvooIitsports ohy, cahhot
trahsact thc samc quahtity oI busihcss vhich it might do vith
diIIcrcht avs ahd ihstitutiohs. '
P morc cxtchsivc Iorcigh tradc . . . vhich to this grcat homc
markct addcd thc Iorcigh markct oI a thc rcst oI thc vord,
cspcciay iIahy cohsidcrabc part oIthis tradc vas carricdoh ih
Chihcsc ships, coud scarccy Iai to ihcrcasc vcry much thc
mahuIacturcs oI Chiha,ahdtoimprovcvcrymuchthcproductivc
povcrs oI its mahuIacturihg ihdustry. By morc cxtchsivc haviga-
tioh, thc Chihcsc voud haturay carh thc art oI usihg ahd
cohstructihg thcmscvcs a thc diIIcrcht machihcs madc usc oI
ih othcr couhtrics, vc as thc othcr improvcmchts oI art ahd
ihdustry vhich arc practiccd ih a thc diIIcrcht parts oIthcvord.
Lpohthcirprcschtpahthcy havcittcopportuhity oI improvihg
36 Ibid. , pp. 405-6.
37 On the split within the Enlightenment among admirers and denigrators of
Qing China, see Michael Adas, Machines as Measure of Men: Science, Technology
and Ideologies of Western Dominance (Ithaca, NY, Cornell University Press, 1989),
pp. 79-93. On Marx's Asiatic mode of production, see Perry Anderson, Lineages of
the Absolute State (London, New Left Books, 1979), p. 462-549.
38 Smith, Wealth of Nations, vol. II, p. 251.
thcmscvcsby thccxampcoIahyothcrhatioh,cxccptthat oIthc
japahcsc.`
Lcavihg asidc Ior hov thc qucstioh oI its historica accuracy, this
criticism oI Chihcsc avs ahd ihstitutiohs docs hotih ahy vay impy
thatLuropcah avs ahdihstitutiohs vcrc supcriortothc Chihcsc, ahd
cvch css that thc ùhhatura ahd rctrogradc' Luropcah path oI
ccohomic dcvcopmcht vas supcrior to thc `hatura' Chihcsc path.
!hc criticism simpy cxprcsscs thc opihioh that ah acgcd Chihcsc
hcgcct oIIorcigh tradc prcvchtcd thc `hatura' Chihcsc path Irom
Iuyruhhihg its coursc. Buthovhcrc docs bmith suggcstthat Chiha
coud or shoud havc Ioovcd thc ùhhatura ahd rctrogradc'
Luropcah path. Ch thc cohtrary, thc maih thrust oI his advicc to
Luropcahstatcsmchisto stccrthccourscoIdcvcopmchtihthcirovh
couhtrics tovards thc `hatura' path.
bmith ustiIicdthis advicc ohscvcragrouhds.hpart,hcustiIicdit
ih tcrms oI thc impact that diIIcrcht kihds oI ihvcstmcht coud bc
cxpcctcd to havc oh thc hatioha markct ahd hatioha vcath.
Capitas cmpoycd ih agricuturc ahd rctai tradc, hc caimcd, havc
thc grcatcst positivc impact, bccausc thcy must rcsidc vithih thc
couhtry, bcihg`cohIihcdamosttoaprccisc spot, tothcIarm, ahdto
thc shop oIthc rctaicr. 'Capita cmpoycdih thc vhocsac tradc, ih
cohtrast, `sccms to havc ho Iixcd or hcccssary rcsidchcc ahyvhcrc,
butmayvohdcraboutIrom pacc to pacc, accordihgas it cahcithcr
buy chcap or sc dcar. ' t hohcthccss has a diIIcrcht impact oh thc
hatioha markct dcpchdihg oh vhcthcr it is cmpoycd ih thc `homc
tradc' ,that is, ìh purchasihgih ohc part oI thc samccouhtry,ahd
scihgihahothcr,thcproduccoIthcihdustryoIthatcouhtry') , orih
thc Ìorcigh tradc oIcohsumptioh' ,that is, ìh purchasihg Iorcigh
goods Ior homc cohsumptioh') , or ih thc `carryihg tradc' ,that is,
ìhtrahsactihgthccommcrccoIIorcighcouhtrics, orih carryihgthc
surpus producc oI ohc to ahothcr') . Capita ihvcstcd ih thc homc
tradc has thc grcatcst positivc impact, bccausc àh cqua capita
aIIords thc grcatcstrcvchuc, ahd crcatcs thc grcatcstcmpoymchtto
thc pcopc oI thc couhtry. ' Capita ihvcstcd ih purchasihg Iorcigh
goods Ior homc cohsumptioh has a css immcdiatc ahd ccrtaih
positivc impact thah thc homc tradc, bccausc thcrc is ho guarahtcc
that thc rcvchuc ahd cmpoymcht crcatcd abroad by thc purchasc oI
Iorcigh goods vi cvchtuay gchcratc ah cquivacht rcvchuc ahd
cmpoymcht ih thc ccohomy oI thc ihvcstihg couhtry. But thc cast
39 Smith, Wealth of Nations, vol. I, p. 106; vol. II, p. 202.
6`
positivc impact is tat oI thc capita oI a couhtry ihvcstcd ih thc
carryihgtradc, bccausc it is àtogcthcr vithdravh Irom supportihg
thc productivc abor oI that particuar couhtry, to support that oI
I
, ,
`
orcigh couhtrics.
!his IirstargumchtihIavoroIthc `hatura' dcvcopmchtapath
simpy statcs thatthc bcstpossibc vay todcvcop ahatiohamarkct
ccohomy is to start vith thc cxpahsioh ahd improvcmcht oI agri-
cuturcahddomcstictradc. !his cxpahsiohahdimprovcmchtcrcatcs
opportuhitics Ior thc spohtahcous dcvcopmcht oI mahuIacturihg
activitics ih a rcatiohship oI mutua support vith agricutura
activitics . Pgricutura ahd ihdustria grovth, ih turh, gchcratc a
surpus oI commoditics that is morc proIitabc to sc abroad ih
cxchahgc Iorothcrcommoditicsthahtosc thcmihthchomcmarkct.
Ps Iorcigh tradc Iurthcr ihcrcascs thc sizc oI thc markct, hcv
opportuhitics arisc Ior thc cmcrgchcc oI hcv spcciaizcd brahchcs
oI productioh ahd Ior thc accumuatioh oI capita ovcr ahd abovc
vhatcahbcproIitabycmpoycdìhsuppyihgthc cohsumptioh, ahd
supportihg thc productivc abor oI that particuar couhtry. ' hch
that happchs, `thc surpus part oI capita| haturay disgorgcs itscI
ihto thc carryihg tradc, ahd is cmpoycd ih pcrIormihg thc samc
oIIiccs to othcr couhtrics. '
1hc carryihg tradc i s thc hatura cIIcct ahd symptom oI grcat
hatioha vcath, but it docs hot sccmto bcthc hatura causc oIit.
1hosc statcsmch vho havc bcchdisposcd to Iavor it vith parti-
cuar chcouragcmchts, sccm to havc mistakch thc cIIcct ahd
symptom Ior thc causc.'
!his argumcht ih Iavor oIthc `hatura' path oI ccohomic dcvcop-
mchtiscompcmchtcdbytvoothcrargumchtsthatcpitomizcbmith's
ahti-urbah bias. Ps Koschbcrg has hotcd, this bias is a ogica
cohscquchcc oI bmith' s dua cohtchtioh that gcographic cohcchtra-
tiohmadcurbaharcasthccpicchtcroIrcstraihtsupohthccompctitivc
proccss ahd that thc rura popuation is css subjcct to thc hcgativc
cIIccts oI thc divisioh oI abor thah thc urbah popuatioh.
1hc ihhabitahts oIatovh, bcihg cocctcd ih ohc pacc, cah casiy
combihc togcthcr. 1hc most ihsighiIicaht tradcs carricd oh ih
40 Ibid., vol. I, pp. 385, 389-92, 456.
41 Ibid., p. 395.
42 Rosenberg, "Adam Smith on the Division of Labor," p. 138 n.
tovhs havc accordihgy . . . bcch ihcorporatcd, ahd cvch vhcrc
thcy havc hcvcr bcch ihcorporatcd, yctthc corporatioh spirit, thc
caousy oI strahgcrs, thc avcrsioh to takc apprchticcs, or to
commuhicatc thc sccrct oI thcir tradc, gchcray prcvai ih thcm,
ahdoItchtcachthcm,byvouhtaryassociatiohsahdagrccmchts,to
prcvchtthatIrcc compctitiohvhichthcycahhotprohibit by byc-
avs. . . . 1hc ihhabitahts oI thc couhtry, ih cohtrast,| dispcrscd
ih distaht paccs cahhot casiy combihc togcthcr. 1hcy havc hot
ohy hcvcr bcch ihcorporatcd, but thc corporatioh spirit hcvcr
prcvaicd amohg thcm.`
61
!his diIIcrchcc ih thc urbah ahd rura cohditioh, oItch backcd by
cgisatioh,chabcs `thc ihhabitahts oIthctovhsto raisc thcirpriccs,
vithout Icarihg to bc uhdcr-sod by thc Ircc compctitioh oI thcir
couhtrymch . . . ahd| oIIorcighcrs. 'Pthough ` ahdords, Iarmcrs,
ahdaborcrsoIthccouhtry'arcthcohcsvhocvchtuaypayIorthcsc
highcr priccs, thcy scdom opposc statc-backcd urbah mohopoics,
bccausc `thc camor ahd sophistry oImcrchahts ahd mahuIacturcrs
casiy pcrsuadc thcm that thc privatc ihtcrcsts oI a part, ahd oI a
subordihatcpart oIthcsocicty,isthc gchcra ihtcrcstoIthcvhoc.
,
'
bmith rcpcats hcrc thc argumcht discusscd caricr oI thc capacity oI
proIit carhcrs to imposc oh socicty a cass ihtcrcst that docs hot
corrcspohd to thc gchcra ihtcrcst. But, ih doihg so, hc dravs a
distihctioh bctvcch rura ahd urbah vorkcrs that vas missihgih thc
discussioh oI thc cass ihtcrcsts oI thosc vho ivc by proIit, by rcht,
ahd by vagcs. !or thc rcatioh oI uhcqua cxchahgc bctvcch tovh
ahd couhtry is said to bchcIit, hot ustthc mcrchahts ahd mahuIac-
turcrsvhoarcthcpromotcrs oIits cstabishmcht, buturbahvorkcrs
as vc.
tisihthiscohtcxtthatbmithasscrtsthatthcagricuturavorkcris
css subcctthah thcihdustria vorkcr to thchcgativc cIIccts oIthc
tcchhica divisioh oI abor. Pthough `gchcray rcgardcd as thc
pattcrhoIstupidityahdighorahcc,'thccommoh agricutura vorkcr
ìs scdom dcIcctivc ih thc udgmcht ahd discrctioh' rcquircd to
mahagc thc grcatvarictyoIihstrumchts vithvhich hc vorks ahd oI
matcrias upoh vhich hc vorks. ìs uhdcrstahdihg . . . bcihg
accustomcdto cohsidcr agrcatcrvarictyoIobccts, isgchcraymuch
supcrior to that oI thc othcr, vhosc a attchtioh Irom morhihg ti
hight is commohy occupicd ih pcrIormihg ohc or tvo vcry simpc
43 Smith, Wealth of Nations, vol. I, pp. 140-1; see also vol. II, pp. 383-4.
44 Ibid., vol. I, pp. 142-3.
opcratiohs. 'ôrcovcr, thc chahgihg cohditiohs oIagricutura pro-
ductioh `vith cvcry chahgc oI thc vcathcr, as vc as vith mahy
othcraccidchts, 'cohtihuayimposcdcmahds upoh ahdthcrcbykccp
aivc thc udgmcht ahd discrctioh oIthc agricutura vorkcr to a Iar
grcatcr cxtcht thah is thc casc amohg urbah vorkcrs vho Iacc
cohditiohs oI productioh `vhich arc avays thc samc or vcry hcary
thc samc. 'hdccd, iIgivchachahccto bccomc sma proprictors, thc
agricutura vorkcrs voud bc bcttcr chtrcprchcurs thah argc pro-
prictors. `
h thc abschcc oI rcstraihts oh compctitioh ih urbah arcas, thc
supcrior ihtcigchcc ahd skills oI agricutura vorkcrs voud bc
rcIcctcd ih a highcrrahkahdihhighcr vagcs oIrura aborcrs thah
oI urbah vorkcrs, as it vas said to bc thc casc ih couhtrics such as
Chiha that Ioovcd thc `hatura' dcvcopmchta path. But, ih
couhtrics vhcrc thc ùhhatura' path vas Ioovcd, as ih Luropc,
thc oppositc vas truc. bmith hohcthccss hotcs that, at cast ihCrcat
Britaih, this ùhhatura' statc oI aIIairs vas chahgihg uhdcr thc
vcight oI its ovh cohtradictioh.
1his chahgc may bc rcgardcd as thc hcccssary, though vcry atc
cohscquchcc oIthc cxtraordihary chcouragcmcht givchto thcih-
dustryoIthctovhs.1hcstockaccumuatcdihthcmcomcsihtimcto
bc so grcat, that . . . by ihcrcasihg thc compctitioh, hcccssariy
rcduccs thcproIit. 1hc ovcrihg oI proIit ih thc tovh Iorccs out
stocktothc couhtry,vhcrc,bycrcatihgahcvdcmahdIorcouhtry
abor,ithcccssariyraiscsitsvagcs.tthchsprcadsitscI. . . ovcrthc
Iacc oI thc ahd, ahd by bcihg cmpoycd ih agricuturc is ih part
rcstorcdtothccouhtry,atthccxpchccoIvhich,ihagrcatmcasurc,it
hadorigihay bcch accumuatcdihthctovhs.
bmith' s advicc to thc cgisator is to Iaciitatc this spohtahcous
cohvcrgchcc oI thc ùhhatura' tovards thc `hatura' path. h
summihg up thc rcasohs Ior this advicc, hc statcs that `thc grcat
obcct oI thc poitica ocohomy oI cvcry couhtry, is to ihcrcasc thc
richcs ahd povcr oIthatcouhtry. 'Phdyct, thc capita àcquircdto
ahy couhtry by commcrcc ahd mahuIacturcs, is a a vcry prccarious
ahd uhccrtaih posscssioh,' uhcss at cast ih part `has bcch sccurcd
ahd rcaizcd ih thc cutivatioh ahd improvcmcht oIits ahds . '
45 Ibid. , pp. 141-2, 410-19.
46 Ibid., pp. 142-3. On the greater rewards of agriculrural relative ro industrial
labor in China than in Europe, see also vol. II, p. 201 .
P mcrchaht, ithas bch said vcrypropcry, is hothcccssarily thc
citizchoIahyparticuarcouhtry.tisihagrcatmcasurcihdiIIcrcht
to him Irom vhat pacc hc carrics oh his tradc, ahd a vcry triIihg
disgust vi makc him rcmovc his capita, ahd togcthcr vith it a
thc ihdustry vhich it supports, Irom ohc couhtry to ahothcr. ô
part oIit cah bc said to bcohgto ahyparticuarcouhtry, ti ithas
bcch sprcad as it vcrc ovcr thc Iacc oI that couhtry, cithcr ih
buidihgs, or m thc astihg improvcmchts oI ahds . . . . 1hc
ordihary rcvoutiohs oI var ahd govcrhmcht casiy dry up thc
sourccs oI that vcath vhich ariscs Irom commcrcc ohy. 1hat
vhich ariscsIrom thcmorc solid improvcmchtsoIagricuturc
is
muchmorcdurabc, ahd cahhot bc dcstroycd but by thosc morc
viocht cohvusiohs occasiohcd by thc dcprcdatiohs oI hostic ahd
barbarous hatiohs Ior a cchtury or tvo togcthcr.
Wealth and Power
63
!hc cohhcctiohbctvcch`richcs' ahd`povcr' thatbmithcstabishcs
ih summihg up thc rcasohs Ior advocatihga grcatcrcohvcrgchcc oI
thc Luropcah ùhhatura' dcvcopmchta path tovards a morc
`hatura'ohc,brihgsusbacktohiscohccptioh oIpoitica ccohomy
às a brahchoIthcscichcc oIastatcsmahorcgisator. '`cath, as
^r. obbcs says, is povcr. ' mmcdiatcy aItcr quotihg obbcs,
bmith quaiIics hisagrccmcht by addihg that `thc pcrsohvhocithcr
acquircs, or succccds to a grcatIortuhc, docs hot hcccssariy acquirc
or succccd to any poitica povcr, cithcr civi or miitary. ' cath
may providc its posscssor vith `thc mcahs oI acquirihg both,' but
`docs hothcccssariycohvcyto him cithcr. '!hc povcrthatit docs
cohvcy ìmmcdiatcy ahd dirccty' is `thc povcr oIpurchasihg, a
ccrtaih commahdovcra thcabor,ora thcproduccoIaborvhich
is thch ih thc markct.
,,
Ps Pbcrt irschmah has uhdcrscorcd, thc dispaccmcht oI thc

povcr cohvcycd by cohtro ovcr mcahs oI viochcc by thc povcr
cohvcycd by posscssioh oI vcath vas Ior bmith thc most positivc
cIIcct oI thc dcvcopmcht oI commcrcc ahd ihdustry. rior to this
47 Ibid., vol. I, pp. 394, 444-5.
48 Ibid. , p. 35.
49 Alben o. Hirschman, The Passions and the Interests: Political Arguments for
Capitalism before its Triumph (Princeron, NJ, Prince ron University Press, 1977), pp.
100-2.
dcvcopmcht,thc grcat proprictors oIahd had ho bcttcr usc Iorthcir
surpusproduccthahtosupport argchumbcrsoIrctaihcrs,vhovcrc
chtircydcpchdcht ohthcgrcatahdordsahdcohstitutcdthcirprivatc
armics. Lhdcrthcsc circumstahccs it vasvcrydiIIicutIorthccchtra
govcrhmcht to rcstraih thc viochcc oI thc grcat ords `vho madcj
var accordihgto thcir ovh discrctioh, amostcohtihuayupoh ohc
ahothcr, ahd vcry Ircquchty upoh thc kihg,' turhihg thc opch
couhtry ihto à scchc oI viochcc, rapihc, ahd disordcr. ' But vhat
thcpoitica ahdmiitarypovcr oIthccchtra govcrhmcht coudhot
achicvc, `thcsichtahdihschsibc opcratiohoIIorcighcommcrccahd
mahuIacturcs graduay brought about. '
1hcscgraduayIurhishcdthcgrcatproprictorsvithsomcthihgIor
vhich thcy coud cxchahgc thc vhoc surpus oI producc oIthcir
ahds,ahd vhich thcy coudcohsumc thcmscvcs vithout sharihg
itvith cithcrthcirtchahts or rctaihcrs. . . . !or apair oIdiamohd
buckcs pcrhaps, or Ior somcthihg as Irivoous ahd usccss, thcy
cxchahgc thc maihtchahcc . . . oIa thousahd mch Ior a ycar, ahd
vith it thc vhoc vcight ahd authority vhich it coud givc thcm
. . . ahdthus,IorthcgratiIicatiohoIthcmost chidish,thcmcahcst
ahd thc most sordid oI a vahitics, thcy graduay bartcrcd thcir
vhoc povcr ahd authority . . . ahd| bccamc as ihsighiIicaht as
ahy substahtia burghcr or tradcsmah ih a city. P rcguar govcrh-
mchtvas cstabishcd ihthccouhtryas vc as ihthc city, hobody
havihg suIIicicht povcr to disturb its opcratiohs ih thc ohc, ahy
morc thah ih thc othcr.``
bmith sccms hcrc to Iorgct that, athough vcath docs hot immcdi-
atcyahddircctytrahsatcihtopoiticapovcr,itprovidcsthcmcahs
oI acquirihg it ih morc rouhdabout vays, ahd that hc cscvhcrc
dcscribcd urbah mcrchahts ahd mahuIacturcrs ,vhosc povcr ahd
authority hcrc is said to bc ihsighiIicaht) as havihg thc capacity to
imposc oh statc ahd socicty thcir particuar ihtcrcst agaihst thc
hatioha ihtcrcst. Ps vc sha scc h Chaptcr J, bmith's rcductivc
cohccptioh oImohcy as mcrc mcahs oIpaymcht imits his abiity to
sccthc ohgcr-tcrm ahd argcr-scac rcatiohship bctvcch thc pursuit
oIproIit ahd thc pursuit oIpovcr. hthc prcscht cohtcxt, hovcvcr,
vc cah rcsovc thc sccmihg cohtradictioh bctvcch bmith' s oppositc
caims cohccrhihg thcopcratioh oIIorcigh commcrcc ahd mahuIac-
turcs-that it strchgthchcd thc hahd oIthc cchtra govcrhmcht ahd
50 Smith, Wealth of Nations, vol. I, pp. 433-9.
65
that itcrcatcdpovcrIuIorccs that ihtcrIcrcdviththccapacityoIthc
cchtra govcrhmcht to pursuc thc hatioha ihtcrcst-by hoticihgthat
thcy rcIcr to diIIcrcht Iuhctiohs ahd `stagcs' oI hatioha dcvcop-
mcht.
!hcIirst caimrcIcrsto thccchtraizatiohoIthccgitimatc usc oI
viochcc ovcr thctcrritoryoIah cxistihg or voud-bc hatioha statc.
h this rcspcct, bmith cohdcmhs varIordism, ahd vccomcs thc roc
that thc opcratioh oIIorcigh commcrcc ahd mahuIacturcs paycd ih
ovcrcomihg its pccuiarLuropcahIorm , Ìcudaism') through thc
sprcad oI markct cxchahgcs Irom thc urbah to thc rura arcas. !hc
sccohdcaim,ihcohtrast,rcIcrstoa situatiohihvhichthccgitimatc
uscoIviochcchasbcchsucccssIuycchtraizcdahdahatiohamarkct
ccohomy has bcch Iuy cstabishcd. Lhdcr thcsc circumstahccs, thc
ùhhatura' ovcrdcvcopmcht oI Iorcigh commcrcc ahd mahuIac-
turcsbccomcsthcmaor obstacctothccchtragovcrhmcht'scapacity
topursucthcnationaihtcrcst. chccbmith'sadvicctothccgisator
tocouhtcrvai!thcpovcr oImcrchahts andmanuIacturcrsbymakihg
thcmcompctcvithoncanothcrihdrivingdovnpriccsandproIits.h
ohc situatiohthcmainimiton thcpovcroIthcccntragovcrhmcht
comcsIromthcandords` cohtroovcrmcahsoIviocncc,nthcothcr
situatioh, it comcs Irom thc mcrchahts' and manuIacturcrs` cohtro
ovcr vcath. But ih both situatiohs, bmith's ovcrvhcming prcoccu-
patioh is vith thc cstabishmcht ahd prcscrvatioh oI thc cchtra
govcrhmcht's capacity to pursuc thc hatioha ihtcrcst.
!hc pursuit oI thc hatioha ihtcrcst agaihst domcstic thrcats ahd
rcsistahcc is, oI coursc, coscy rcatcd to its pursuit ih thc ihtcrha-
tioha archa, ahd bmith hcvcr cavcs ahy doubtthat `protcctihgthc
socictyIromthcviochcc ahdihvasi ohoIothcrihdcpchdchtsocictics'
is `thcIirstdutyoIthcsovcrcigh' ahd ìs oImuchmorcimportahcc
thah opuchcc. ' h thc ihtcrcst oI hatioha dcIchsc, hc is thcrcIorc
viihgto supportpoicicsthatihhisvicvhavchcgativccIIcctsohthc
vcath oIthc hatioh.
IahyparticuarmahuIacturcvashcccssary. . . IorthcdcIchccoI
thcsocicty, it might hot avays bc prudcht todcpchd upohour
hcighbors Ior thc suppy, ahd u such mahuIacturc coud hot
othcrvisc bc supportcd at homc, it might hot bc uhrcasohabc
thata thcothcrbrahchcs oIihdustryshoudbctaxcdihordcrto
support it.
bimiary,bmith charactcrizcsthcâvigatiohPctoIl6l,vhich gavc
British ships a mohopoy oI British tradc, `pcrhaps thc viscst oI a
thc commcrcia rcguatiohs oI Lhgahd, ' cvch iI it `procccdcd Irom
hatioha ahimosity' rathcr thah ccohomic cohsidcratiohs. `âtioha
ahimosity atthatparticuartimcaimcdatthcvcrysamcob|cctvhich
thc mostdcibcratc visdom voud havc rccommchdcd, thc dimihu-
tiohoIthchavapovcroIoahd, thcohyhavapovcrvhichcoud
chdahgcr thc sccurity oI Lhgahd.
, ,
`'
bmith sav a ma|or cohtradictioh bctvcch thc hccds oI hatioha
dcIchsc ahd hatioha ccohomic dcvcopmcht. Ihcrcasihg hatioha
vcath makcs thc couhtry a morc attractivc targct to poorcr hcigh-
bors. But thc divisioh oI abor oh vhich ihcrcasihg hatioha vcath
dcpchds uhdcrmihcs thc martia virtucs oI thc grcat body oI thc
popuatioh. Pmohg hatiohs oIshcphcrds ahdhatiohs oIhusbahdmch
vith ittc Iorcigh commcrcc ahd ohy houschod mahuIacturcs,
`cvcry mah . . . cithcr is a varrior, or casiy bccomcs such.' ôt
so amohghatiohs oIspcciaizcd ihdustria, commcrcia, ahd agricu-
tura vorkcrs, vho arc hcithcr prcparcd Ior var by thcir cmpoy-
mchts hor havc thc timc to chgagc ih martia cxcrciscs. ith thc
progrcss oI hatioha vcath ahd oI thc divisioh oI abor, `thc grcat
body oI thc pcopc thus| bccomcs atogcthcr uhvarikc . . . ahd
uhcss thc statc takcs somc hcv mcasurcs Ior thc pubic dcIchcc, thc
hatura habits oI thc pcopc rchdcr thcm atogcthcr ihcapabc oI
dcIchdihg thcmscvcs.
,
`
Ih advisihgthc cgisator ohthc mcasurcs oIpubic dcIchsc to takc
ih ordcr tosovcthc cohtradictiohbctvcchthctchdchcicsoIccohom-
ic dcvcopmcht to makc thc hatioh both morcikcy to bc attackcd
ahd morc ihcapabc oIdcIchdihg itscI, bmith rcics primariy oh ah
cxtchsioh to thc àrt oI var' oI his thcory oI thc advahtagcs oI thc
socia divisioh oI abor.
1hc statc oIthc mcchahica, as vc as oIsomc othcr arts, vith
vhich it is hcccssariy cohhcctcd, dctcrmihcs thc dcgrcc oIpcrIcc-
tioh to vhich thc art oI var| is capabc oI bcihg carricd at ahy
particuartimc. Butih ordcrto carryittothisdcgrccoIpcrIcctioh,
it is hcccssary that it shoud bccomc thc soc or prihcipa occupa-
tioh oIa particuar cass oI citizchs, ahd thc divisioh oI abor is as
hcccssary Ior thc improvcmcht oI this, as oI cvcry othcr art.``
51 Ibid. , vol. I, pp. 486-7; vol. II, pp. 28, 213. For a detailed discussion, see
Haakonssen, Science of a Legislator, pp. 93-5, 180ff.
53 Ibid., p. 219.
!hc cxtchsioh oI thc divisioh oI abor to thc art oI var, hovcvcr,
cahhot rcy oh privatc ihitiativc. Ih thc othcr arts `thc divisioh oI
abor is haturay ihtroduccd by thc prudchcc oI ihdividuas, ' but
ohy thc statc cah ihducc thc privatc citizch `to givc up thc grcatcr
part oI his timc to this pccuiar occupatioh. ' !rom this stahdpoiht,
thc crcatioh oIa modcrh stahdihg army has scvcra advahtagcs ovcr
rciahcc oh miitias. It aIIords grcatcr spcciaizatioh ih miitary
activitics, it ihcucatcs thc quaitics oI rcguarity, ordcr, ahd prompt
obcdichcc to commahd that ìh modcrh armics, arc oI morc im-
portahcc . . . thah thc dcxtcrityahd ski oIthc sodicrs ih thc usc oI
arms', ahd it `cstabishcs, vith ah irrcsistibcIorcc, thc av oIthc
sovcrcigh through thc rcmotcstprovihccs oI thc cmpirc, ahd maih-
taihssomcdcgrccoIrcguargovcrhmchtihcouhtricsvhichcoudhot
othcrvisc admit oI ahy.
, ,
`
Lvchihdiscussihghatioha dcIchsc, bmith thus rcturhs to his ovcr-
vhcmihg cohccrh vith thc cchtraizatioh oI povcr ih thc hahds oI
hatioha govcrhmchts. But, ih cohcudihg that discussioh vith thc
`grcatchahgcihtroduccdihtothc art oIvar by thcihvchtioh oIIirc-
arms,
hcraiscsqucstiohsIorvhichThe Wealth of Nations providcsho

cohcrchtahsvcr.1hcmaihcIIcctoIthatgrcatchahgc,vcarctod,vas
tochhahcc`stiIurthcrboththccxpchccoIcxcrcisihgahddiscipihihg
ahy particuar humbcr oIsodicrs ihtimc oI pcacc, ahd oI cmpoyihg
thcmih timcoIvar. ' !hcirarms ahdammuhitiohhadbccomcmuch
morc cxpchsivc, ahd so had thc IortiIicatiohs that tovhs hccdcd `to
rcsist cvch Ior a Icv vccks thc attack oI modcrh| articry. ' !hc
uhavoidabc rcsutvas a trucrcvoutiohih ihtcrhatioha rcatiohs.
Ih modcrh var thc grcat cxpchcc oI Iirc-arms givcs ah cvidcht
advahtagc to thc hatioh vhich cah bcst aIIord that cxpchcc, ahd
cohscquchty, to d opucht ahdciviizcd, ovcr apoor ahd barbar-
ous hatioh. Ih ahcicht timcs thc opucht ahd civiizcd Iouhd it
diIIicut to dcIchd thcmscvcs agaihst thc poor ahd barbarous
hatiohs. Ih modcrh timcs thc poor ahd barbarous Iihdit diIIicut
to dcIchdthcmscvcs agaihstthc opuchtahdciviizcd. 1hc ihvch-
tioh oIIirc-arms . . . isccrtaihyIavorabcbothto thcpcrmahchcy
ahd to thc cxtchsioh oI civiizatioh.``
1vo scts oIqucstiohs immcdiatcy arisc. !irst, is it possibc that thc
advahtagcs cohIcrrcd to vcathy hatiohs by modcrh varIarc, othcr
54 Ibid. , pp. 219-22, 228-9.
55 Ibid., pp. 230-1.
thihgs bcihg cqua, arc grcatcr Ior thc ùhhatura' thah Ior thc
`hatura ' path oIccohomic dcvcopmcht, givch thc grcatcr roc that
mahuIacturihg, Iorcigh tradc, ahd havigatioh pay ih thc Iormcr
Phd, iIthis isthccasc, hovcah bmith' sprcIcrchcc Iorthc `hatura'
path oI dcvcopmcht bc rccohcicd vith thc priority hc assighs to
dcIchsc ovcr opuchccr Cr, to rcphrasc, voud hot òpucht ahd
civiizcd' hatiohs dcvcopihg aohgthc `hatura' path cxposc thcm-
scvcs to thc aggrcssioh oI css òpucht ahd civiizcd' hatiohs
dcvcopihg aohg thc ùhhatura' path, as vas arcady happchihg
to hdia ih bmith's ovh timcs ahd voud sooh happch to Chiha as
vc r bccohd, ahd coscy rcatcd to thc abovc, iI vcath procurcd
aohgthc ùhhatura'pathis asourccoIsupcriormiitaryIorcc, ahd
iI supcrior miitary Iorcc vas thc rcasoh vhy Luropcahs coud
appropriatc thc bchcIits oI thc grcatcr ihtcgratioh oI thc goba
ccohomy at thc cxpchsc oI hoh-Luropcah `barbarous' ahd `civi-
izcd' hatiohs aikc, asbmithmaihtaihs ih thc passagc quotcdihthc
htroductioh oIthis book, hov coud `commcrcc Irom a couhtrics
to a couhtrics' brihg about thc `cquaity oI Iorcc' amohg thc
vord'shatiohsasbmithcaimcdrhatIorccs,iIahy, voudprcvcht
this commcrcc Irom gchcratihg a virtuous circc oI chrichmcht ahd
cmpovcrmchtIorthcpcopcsoILuropcah dcscchtahdaviciouscircc
oIimpovcrishmcht ahd discmpovcrmcht Ior most othcr pcopcsr
!hcsc qucstiohs Ia bcyohd thc horizoh oI bmith' s historica
socioogy. !hcy arc, hohcthccss, cchtra to our cohccrhs. h ordcr
toahsvcrthcm,vcmusthovtakcastcpbackvardtorc-cxamihcthc
diIIcrcht cohccptiohs oIccohomic dcvcopmcht discusscdih Chaptcr
l, ahd a stcp Iorvard to scc vhat ight ârx's ahd bchumpctcr's
thcorics oI capitaist dcvcopmcht cah throv oh thc ccipsc ahd
rcsurgchcc oI Last Psia as a cadihg rcgioh oIvord dcvcopmcht.
3
MARX, SCHUMPETER, AND THE
"ENDLESS" ACCUMULATION OF
CAPIT AL AND POWER
!hc Iorcgoihg rccohstructioh oI thc historica socioogy oI Pdam
bmithcohIirms thatthc `discovcry' oIbmithihBciihgdiscusscdih
Chaptcr l is ho miragc. ôtohy didbmithhimscIscc atc impcria
Chihaas ahcxcmparoImarkct-bascddcvcopmcht,hcasosavitas
havihg gohc almost as Iar as that dcvcopmcht coud go. say
àmost' bccausc bmith thought that grcatcr ihvovcmchtih Iorcigh
tradc, cspcciay iI carricd out oh Chihcsc ships, coud havc Iurthcr
ihcrcascd Chiha's hatioha vcath. Lcspitc this shortcomihg, bmith
uphcd Chiha rathcr thah Luropc as a modc oIthc kihd oImarkct-
bascd ccohomic dcvcopmcht that vas most advisabc Ior govcrh-
mchts to pursuc.
h this rcspcct, !rahk's cohtchtioh that, accordihg to bmith,
`Luropcvas ajohhhy-comc-atcyihthc dcvcopmcht oIthcvcath
oI hatiohs' is ohy partiay truc. bmith did scc ccohomic dcvcop-
mcht ihLuropc as takihgpacc both vithih smacr hatioha ccoho-
mics thah ih Chiha ahd aohg ah ùhhatura' path, vhich hc
cohsidcrcd css Iavorabc to thc hatioha ihtcrcst thah Chiha's `hat-
ura'path.ovcvcr,ihhisvicv,oahdhadattaihcda cohditioh oI
opuchcc simiar to Chiha's, abcit oh ah ihcomparaby smacr
gcographica scac.
ôrc gchcray, thcprobcm vith thchotioh oIbmithiahgrovth
uscd by ohg, !rahk, ahd omcrahz, as vc as by thcir critics ,scc
Chaptcr l) , is that bmiththcorizcdccohomicdcvcopmcht as occur-
rihg, hot aohg a sihgc path, but aohg tvo distihct paths. thc
ùhhatura' or Iorcigh-tradc-bascd path typica oILuropc, ahd thc
`hatura' or homc-tradc-bascdpath typica oIChiha. Likc dc Vrics,
uahg, ahd Brchhcr, bmith thus sav Chiha ahdLuropc dcvcopihg
aohg distihct paths, uhikc thcm, hovcvcr, hc did hot scc thc
LuropcahpathashavihgagrcatcrgrovthpotchtiathahthcChihcsc.
Ch thc cohtrary, hc sav both paths cadihg to a statioharystatc or
Figure 3. 1 Low-level (Malthusian) versus high-level (Smithian) equilibrium
traps

" !
g_ " -Bl6U|O0j
q_ " Hlgl61 eu!l bf r tp
" ^ PN0D'e |UB
-- i*-- d ---- E
;-
--
Note: yip " per capita income, dyly " rate of income growth, dplp " rate of
population growth. Adapted from Richard Nelson, "A Theory of the Low-Level
Equilibrium Trap in Underdeveloped Economies," The American Economic Review,
46, 4 (1956).
high-cvccquiibrium. Chiha ahd oahd hadarcadyrcachcdthat
statc, butccohomic grovthihacouhtrics,ihcudihgthcsti ùhdcr-
stockcd' ahd ùhdcr-popuatcd' ôrthcrh Pmcricah coohics,
voud cvchtuay tapcroIIihto a simiar statc.
bmith's hotiohoI a statiohary statc , ahdthchotiohoIa high-cvc
cquiibrium trap dcrivcd Irom it) shoud hot bc cohIuscd, as thcy
oItch arc, vith thc âthusiah hotioh oI popuatioh chccks oh
ccohomic grovth. !hc diIIcrchcc bctvcch thc tvo cah bc cariIicd
by mcahsoI!igurcJ. l, ihvhichc
rcprcschts aov-cvc cquiibrium

simiar to that thcorizcdbyâthus, vhic c
rcprcschts a high-cvc
cquiibrium simiar to thc statiohary statc thcorizcd by bmith.' !hc
horizohta axis shovs cvcs oI pcr capita ihcomc ,y/p) , y bcihg
ihcomc ahdp popuatioh. !hcvcrticay axis shovs boththc ratc oI
ihcomcgrovth ,dy/y) ahdthcra
tc oIpopuatiohgrovth ,dp/p) . !hc

curvc dy/ythusdcscribcsthcrcatiohship bctvcchthcratcoIihcomc
1 Figure 3. 1 is derived from a similar one originally conceived by Richard Nelson
to illustrate his theory of the low-level equilibrium trap. See Nelson, "A Theory of the
Low-Level Equilibrium Trap in Underdeveloped Economies," The American Eco
nomic Review, 46, 4 (1956), and for more elaborate representations of the same idea,
Harvey Leibenstein, Economic Backwardness and Economic Growth (New York,
Wiley, 1963).
MARX, SCHUMPETER, AND THE "ENDLESS" ACCUMULATION 71
grovth ,dy/y) ahd thc cvc oIpcrcapita ihcomc ,y/p) . t posits that
ihcrcasihgcvcsoIpcrcapitaihcomcarcassociatcduptoapoihtvith
risihg,ahdaItcrthatpoihtvithdccihihgratcsoIihcomcgrovth.!hc
curvc dp/p dcscribcs ihstcad thc rcatiohship bctvcch thc ratc oI
popuatioh grovth ,dp/p) ahdthc cvc oIpcr capita ihcomc ,y/p) . t
posits thatihcrcasihgcvcsoIpcrcapitaihcomc arcassociatcd,up to
a poiht vith risihg, ahd aItcr that poiht vith dccihihg ratcs oI
popuatioh grovth. Pthough thc tvo curvcs havc a simiar shapc,
as thc Iigurc shovs, ratcs oI popuatioh grovth arc assumcd to risc
morc stccpy thah ratcs oIihcomc grovth atov cvcs oIpcr capita
ihcomc, ahdtodccrcasccss stccpyathighcvcs.hchthccurvcdy/
y is highcr thah thc curvc dp/p, thc ratc oIihcomcgrovthcxcccds thc
ratc oI popuatioh grovth, ahd thcrcIorc pcr capita ihcomc ,y/p oh
thchorizohta axis) ihcrcascs, ahd vhchthc curvcdy/y is ovcrthah
thc curvc dp/p, thc ratc oI popuatioh grovth cxcccds thc ratc oI
ihcomc grovth, ahd thcrcIorc pcr capita ihcomc ,y/p oh thc hor-
izohta axis) dccrcascs.
!hcscassumptiohsgchcratcthrccpoihts oIcquiibrium ,c d,ahd
c
)-poihts, that is, at vhich thc ratcs oI ihcomc ahd popuatioh

grovtharc cqua ahd,thcrcIorc,pcrcapita ihcomc docs hot chahgc.
oihtd,hovcvcr,rcprcschtsahuhstabc cquiibrium, ihthcschscthat
cvch a sma ihcrcasc ,dccrcasc) ih pcr capita ihcomc rcsuts ih a
highcr ,ovcr) ratc oIihcomc thah popuatioh grovth ahd, thcrcIorc,
iharisc ,dccihc) oIpcrcapitaihcomcuhtiitrcachcsc
,c
) . oihtsc
ahdc_, ihcohtrast,rcprcschtstabccquiibria,bccauscahydcparturc
Iromthcm,tothccItortothcright,vi rcsutihdiIIcrchtiasihratcs
oI ihcomc ahd popuatioh grovth that brihg pcr capita ihcomc back
tothcm.Pthoughthcyarcbothstabccquiibria,c
rcprcschtsaov-
cvc ahd c
a high-cvccquiibrium. !hc ov-cvc cquiibrium bcst

rcprcschtsthc âthusiah hotioh oIpopuatiohchccks oh ccohomic
grovth,bccauscvhatprcvchtspcrcapitaihcomcIromrisihgabovcc
is a stccp risc ihthcratcoIpopuatiohgrovth,thc bmithiah hotiohoI

statiohary statc is ihstcad bcst rcprcschtcd by thc high-cvc cquii-
brium,bccauscvhatprcvchtspcrcapitaihcomcIromrisihgabovcc
is a stccp dccihc ih thc ratc oIihcomc grovth.

!igurc J. l cah aso cariIy bchumpctcr's hotioh oI ah ccohomic
dcvcopmcht that has ho ihcrcht tchdchcy to trahsIorm thc socia
Iramcvork vithih vhich t takcs pacc. Chcc ah ccohomy has
somchov mahagcd to gct uhstuck Irom thc ov-cvc cquiibrium
c
by attaihihg a pcr capita ihcomc highcr that d, ccohomic grovth

procccds uhti dccrcasihg rcturhs brihg dovh thc ratc oI ihcrcasc oI
pcr capitaihcomcto thcsamccvc as thc ratc oIpopuatioh grovth.
hchthat happchs, thc ccohomy scttcsihthchigh-cvc cquiibrium
c
,bmith'sstatioharystatc)
ahdIurthcr grovth ispossibcohyiIthc

visibc hahd oIthc statc ,or somc othcrcxogchous proccssoractioh)
brihgs ihto cxistchcc a socia Iramcvork vith a grcatcr grovth
potchtia-a chahgc that voud bc rcprcschtcd ih !igurc J. l by ah
upvardshiIttothcrightoIthccurvcdy/y. !hc chahgc,hovcvcr,ohy
chabcs thc ccohomy to movc to a highcr cquiibrium, it docs hot
gchcratca proccss oIbouhdcssgrovth. PrcprcschtatiohikcthatoI
!igurc J. l, thcrcIorc, cahhotportrayvhat bchumpctcrcohsidcrs thc
mostimportaht charactcristic oIcapitalist dcvcopmcht. its tchdchcy
todcstroy thc socia Iramcvorks vithih vhichitoccurs ahdtocrcatc
thc cohditiohs Ior thc cmcrgchcc oI hcv Iramcvorks vith grcatcr
grovth potchtia.
h caimihg that, prior to thc Crcat Livcrgchcc, Lhgahd vas
arcady dcvcopihg aohg a path oI uhbouhd grovth, uahg ahd
Brchhcr havc ih mihd a dcvcopmchtcharactcrizcd by a tchdchcy oI
thiskihd. !orBrchhcr,thckcyihgrcdicht oIsuch dcvcopmcht vas
thc scparatioh oI dircct produccrs Irom thc mcahs oI productioh,
vhich vas hcccssary to Iorcc vorkcrs to sc thcir abor-povcr ih
compctitiohvithohcahothcrtoargcproductioh uhits. !hcabschcc
oI this cohditioh, hc caims, is thc rcasoh vhy markct-bascd dcvc-
opmcht ih Chiha did hot assumc thc bouhdcss charactcr it did ih
Lhgahd. uahg ackhovcdgcs that argc, vagc-abor-bascd Iarms
cxistcd aso ih Chihaup to thc scvchtcchthcchtury. But hc simiary
vicvs thcir subscqucht dispaccmcht by sma-scac houschod pro-
ductioh as thc maih rcasoh vhy Chiha's markct-bascd dcvcopmcht
did hot acquirc thc morc dyhamic charactcristics oI thc Luropcah
path.
!hc positiohs oIuahgahdBrchhcr-bcihg dcrivcd Iromârx's
critiqucoIpoiticaccohomy,tovhichvcshaprcschtyturh-arcih
sharp cohtrast vith thosc cxprcsscd ih The Wealth of Nations. By
ccvatihgargc-scacproductiohahdthctcchhicadivisioh oI aborto
cohditiohs oI bouhdcss ccohonic dcvcopmcht, thcy turh bmith's
hcgativcvicv oIbothphchomchaohitshcad.bugihara'sthcsisoIthc
astihgsighiIicahcc oIthcLastPsiahhdustriousKcvoutioh docshot
qucstioh thc compctitivc advahtagcs oIthc vagc-abor-bascd, argc-
scac productioh typica oIthc Luropcah path. t hohcthccss maih-
taihs, Iirst, that dcvcopmcht aohgthis path has its ovh imits, ahd,
sccohd,thatvhchthcscimits arcrcachcdthc LastPsiahhdustrious
Kcvoutioh path hods thc grcatcst promisc Ior Iurthcr ccohomic
dcvcopmcht. Pthoughbugiharadocs hotcitcbmith ih this cohtcxt,
his positivc asscssmcht oI thc advahtagcs oI smascac houschod
productioh typica oI thc Last Psiah path-most hotaby, thc prc-
scrvatioh oIa abor Iorcc capabc oIpcrIormihgmutipc tasks vc,
oIrcspohdihg Icxiby to variatiohs ih thc hatura ahdsocia chvir-
ohmcht oI productioh, ahd oI ahticipatihg, prcvchtihg, ahd sovihg
probcms rcatihg to thc mahagcmcht oI productioh-is cmihchty
bmithiah. Ps vc sha scc ih Chaptcr 6, it is aso typica oI rcccht
thcorics oI so-cacd Icxibc productioh. s it possibc that thc Last
Psiahrcsurgchcc is vihdicatihg at cast somc aspccts oIthcbmithiah
vicv oI markct-bascd dcvcopmchtr
hordcrto ahsvcrthis qucstioh,vcmustprcimihariycariIythc
cohccpt oI markct-bascd capitalist dcvcopmcht ahd its rccvahcc to
ahuhdcrstahdihgoIthc CrcatLivcrgchcc ahdthcprcschtLast Psiah
ccohomicrcsurgchcc.^y argumchtihthischaptcristhatârx'sahd
bchumptcr's thcorics oI capitaist dcvcopmcht do ihdccd providc
crucia ihsights ihto thc spcciIicity oI thc Luropcah dcvcopmchta
path.Butthcy arccvch cssuscIu thahbmith' shistorica socioogyih
rcsovihgthcissucoIthcrcatiohshipbctvcchLuropcIorcigh-tradc-
bascd dcvcopmcht ahd thc supcriority oImiitary Iorcc that, Ior at
cast thrcc cchturics, chabcd Luropcahs to appropriatc most oIthc
bchcIits oI thc ihcrcasihg ihtcgratioh oIthc goba ccohomy. sha
thcrcIorc rccast ârx's ahd bchumpctcr's thcorics ih ah ahaytica
Iramcvorkthatvichabcustodcaviththisissuc ihthcrcstoIthc
book.
The "Endless" Accumulation of Capital
h his critiquc oIpoitica ccohomy-thc subtitc oI Capital-Marx
docs hot ust cxprcss diIIcrcht vicvs thah bmith oh spcciIic issucs,
such as thcaccumuatioh oIcapita ahdthcIaihg ratc oIproIit, or
thcsocia ahd tcchhica divisioh oIabor. c pursucs ah atogcthcr
diIIcrchtrcscarchprogram. hc chahgcs,sotosay, thchaturcahdtopic
oIthc cohvcrsatioh. is ihtcrocutors arc hot govcrhmchts-bmith's
cgisators-but socia casscs. is subcct mattcris hot thc chrich-
mcht ahd cmpovcrmcht oIhatiohs, but thcchrichmcht ahdcmpov-
crmchtoIthc posscssors oIcapitavis-a-vis thc posscssors oIabor-
povcr. is rcscarch stratcgy docs hot privicgc compctitioh ih thc
markctpaccbut cass cohIictahdtcchhica chahgcihthc vorkpacc.
!his shiItihthc haturc ahdtopic oIthccohvcrsatiohhas bcch thc
sourcc oI grcat cohIusioh cohccrhihg ârx's implicit thcory oI
hatioha dcvcopmcht. say impicit bccausc, cxpicity, ârx has
ho such thcory. hat hc has is a thcory oI thc dcvcopmcht oI
+ ADAM SMITH IN BEIJING

capitaismohavordscacvhich,as hotcd ih Chaptcr l, ihsightIuy
ahticipatcd today's uhdcrstahdihg oI `gobaizatioh' but mistakchy
prcdictcdthatgchcraizcd capitaist dcvcopmchtvoud Ìattch'thc
vord, ih !homas !ricdmah's schsc oI thc cxprcssioh. hdccd, so
cohIidcht vasârx ihahimmihcht Iattchihg oIthcvord, thathc
bascd his chtirc thcory oI capitaist productioh oh thc prcmisc oIa
bordcrcssvord,ih vhich thcaborIorcc is Iuy disposscsscdoIthc
mcahs oI productioh ahd a commoditics,ihcudihg abor-povcr,
cxchahgcd Irccy at priccs morc or css cqua to thcir productioh
costs.
Pthoughârx has hocxpicitthcory oIhatiohadcvcopmcht,thc
thcory impicit ih his ahaysis oI capitaist dcvcopmcht diIIcrs Irom
bmith' s ih scvcra rcspccts. P Iirst diIIcrchcc, vhich cohditiohs a
othcrs, is that Ior ârx capitaist agchcics participatc ih markct
cxchahgcs Ior a purposc othcr thah trahsIormihg commoditics ihto
commoditics oIgrcatcr utiity. bmith rucs outthis possibiity oh thc
grouhd that, vhic commoditics arc ih thcmscvcs uscIu, `mohcy
scrvcs ho othcr purposc bcsidcs purchasihg goods. '
1hc mah vho buys, docs hot avays mcah to sc agaih, but
Ircquchty touscor cohsumc, vhcrcas hcvho scs, avays mcahs
to buy agaih. 1hcohcmayIrcquchtyhavcdohcthcvhoc,butthc
othcrcahhcvcrhavcdohcmorcthahthc ohc-haIoIhisbusihcss.It
ishot Ior its ovh sakc that mch dcsirc mohcy, butIor thc sakc oI
vhat thcy cah purchasc vith it.`
ârx symboizcs bmith's ogic vith thc Iormua oI commodity
cxchahgc C-^-C, ih vhich mohcy ,^) is mcrc mcahs ih thc
2 However unrealistic, this premise was j ustified by Marx's theoretical purpose
of demonstrating that, even in an ideal world of perfect competition, the increasing
subordination of iabor to capital in the workplace, along with an ever decreasing cost
of the commodities needed to reproduce the labor force, could be expected to result in
a relative enrichment and empowerment of the possessors of capital vis-i-vis the
possessors of labor-power. The premise, 'however, made (and still makes) no sense at
all as a description of the actual conditions of capitalist development at different times
and in different places. Indeed, in some of his historical analyses-most notably, of
the class struggle in France-Marx himself retreats from his critique of political
economy, defines class interests with reference to a national political-economic space
(as Smith does), and never mentions the hidden abodes of production. See Giovanni
Arrighi, Terence K. Hopkins, and Immanuel Wallerstein, Antisystemic Movements
(London, Verso, 1989), ch. 1.
3 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations,
2 vols (London, Methuen, 1961 ) , vol. I, p. 460.
MARX, SCHUMPETER, AND THE "ENDLESS" ACCUMULATION
trahsIormatioh oI a sct oIcommoditics ,C) ihto ahothcr sct ,C) oI

grcatcrutiity. cthch cohtrasts thisogicviththatoIthccapitaist,
vhosc busihcss is compctcd ,that is, has attaihcd its purposc) vhch
thcmohcy,^)ihvcstcdihthcpurchascoIaparticuarcombihatiohoI
commoditics ,C)yicds,throughsacsihthcmarkct,agrcatcramouht
oI mohcy "' ) . chcc, ârx's gchcra Iormua oIcapita ^-C-^' ,
vhich simpy mcahs that Ior capitaist ihvcstors thc purchasc oI
commoditics is stricty ihstrumchta to ahihcrcasc ih thc mohctary
vaucoIthcir assctsIrom^to^' . hdccd,iIahdvhchcircumstahccs
crcatc morc proIitabc opportuhitics ih thc crcdit systcmthah ih thc
tradc ahd productioh oIcommoditics, thc trahsIormatioh oI mohcy
ihto commoditics may bc skippcd atogcthcr ,as ih ârx's abridgcd
Iormua oI capita, ^-^
,
) .
ârx hcvcr ccary cxpaihs vhy capitaist agchcics pursuc thc
sccmihgy irratioha obcctivc oI accumuatihg mohcy Ior its ovh
sakc. hdccd, his dictum `Pccumuatc, accumuatc! !hat is ôscs
ahdthcprophcts, 'appcarstobcahadmissiohthathchashoratioha
cxpahatioh Ior thc accumuatioh oI mohcy as ah chd ih itscI.
^cvcrthccss, shorty bcIorc uttcrihgthc dictum hc statcs that `thc
ovc oIpovcr is ah ccmcht ih thc dcsirc to gctrich.
, ,
` c arc thus
backtoobbcs' scquatiohoIvcathahdpovcr,vhichbmithquotcd
approvihgy ohy to rcducc thc povcr associatcd vith mohcy to
`purchasihg povcr. ' ârx cxpicity rcccts this rcductioh, ahd
athough hc docs hot tc us cxacty vhat kihd oI povcr mohcy
cohIcrs, ahd hov it rcatcs to othcrkihds oI povcr, his chtirc vork
impics that thc `chdcss' accumuatioh oI mohcy is thc primary
sourcc oI povcr ih a capitaist socicty.
1his is cvidchtIrom a sccohd diIIcrchcc bctvcch ârx's impicit
ahd bmith's cxpicitthcorics oI markct-bascd hatioha dcvcopmcht.
ârx agrccs vith bmith that thc Luropcah path oI ccohomic dcvc-
opmchtvasbascdohohg-distahcc ,Iorcigh) tradcrathcrthahshort-
distahcc ,domcstic) tradc. Both ih thc Manifesto ahd ih Capital, hc
statcs catcgoricay thatthc`modcrhhistoryoIcapita'-that is,thc
risc to domihahcc oI thc bourgcoisic ahd modcrh ihdustry ih Lur-
opc-`datcs Irom thc crcatioh ih thc sixtcchth cchtury oI a vord-
cmbracihg commcrcc ahd vord-cmbracihg markct.
, ,
4 Karl Marx, Capital, vol. I (Moscow, Foreign Languages Publishing House,

1959), pp. 146-55; Capital, vol. III (Moscow, Foreign Languages Publishing House,
1962), pp. 343-4.
5 Marx, Capital, vol. I, pp. 592-5.
6 Ibid. , p. 146.
1hc Last-Ihdiah ahd Chihcsc markcts, thc coohizatioh oIPmcr-
ica, tradcvith thc coohics, thcihcrcascihthc mcahs oIcxchahgc
ahdih commoditics gchcray,gavcto commcrcc,to havigatioh,to
ihdustry, impusc hcvcr bcIorc khovh. . . . 1hc guid-mastcrs
vcrc pushcd oh ohc sidc by thc mahuIacturihgmiddc cass, thc
socia| divisioh oI abor bctvcch diIIcrcht guids vahishcd ih thc
Iacc oIthc tcchhica| divisioh oIabor ih cach sihgc vorkshop.
ovcvcr, vhat Ior bmith is ah ùhhatura' path oI ccohomic
dcvcopmcht, Ior ârx is thc capitaist path. ôrc importaht,
bmith' s prcoccupatioh vith thc hccd to couhtcrvai capitaist povcr
through govcrhmcht actioh, as vc as his prcIcrchcc Ior a dcvcop-
mcht bascd oh agricuturc ahd homc tradc, arc compctcy aich to
ârx. Ihhisvicv,viththccstabishmchtoImodcrhihdustryahdthc
vordmarkct,govcrhmchtsostacapacitytocouhtcrvaithcpovcr
oIthc bourgcoisic, vho `cohqucrcd Ior itscI, ih thc modcrh rcprc-
schtativc btatc, cxcusivc poitica svay,' virtuay rcducihg govcrh-
mchts to thc roc oIcommittccs Ior mahagihg its aIIairs. Ps Ior thc
Psiah hatiohs ahdciviizatiohs,vhichbmith took asthc cxcmpars oI
his `hatura' dcvcopmchta path, ahd vhich, ih ârx's ovh ac-
couht,hadprovidcdthcmarkctsthatmadcpossibcthccmcrgchccoI
thc Luropcah capitaist path, thcy had ho chahcc oI survivihg thc
ohs aught oI thc Luropcah bourgcoisic. `just as thc bourgcoisic|
madc thc couhtrydcpchdchtoh thc tovhs, soit has madc barbariah
ahdscmi-barbariahcouhtricsdcpchdchtohciviizcdohcs, hatiohs oI
pcasahts oh hatiohs oIbourgcois, thcLast ohthccst.
,
Bcihg chtircy Iocuscd oh casspovcr, ârx Iorgcts to tc us hov

thc vcath oIthc bourgcoisic coud so casiy trahsatc ihto poitica
povcr both hatiohay ahd ihtcrhatiohay. âtiohay, hc probaby
agrccdwithbmith that vcath ahd gcographica cohcchtratioh gavc
thc bourgcoisic thc povcr to imposc oh thc statc its particuar cass
ihtcrcst at thc cxpchsc oI thc gchcra hatioha ihtcrcst. Lvidchty,
hovcvcr, hcthoughtthatthispovcrhadgrovhsomassivcy sihccthc
pubicatiohoIThe Wealth of Nations thataattcmptstocouhtcrvai
itihthcshorttomcdiumruhhadbcchvahquishcd.Itis aso possibc,
hovcvcr,thatârxdisagrccdvithbmith, ahdthoughtthat,atcast
ih somc Luropcah couhtrics, thc bourgcois ihtcrcst had comc to
coihcidc vith thc hatioha ihtcrcst, ih thc schsc that thc capitaist
7 Karl Marx and Frederick Engels, The Communist Manifesto (Harmonds
worth, Penguin, 1967), p. 80.
8 Ibid. , pp. 82, 84.
path, oI vhich thc bourgcoisic vas thc bcarcr, had comc to bc
`cohccivcd oI, ahd prcschtcd, as bcihg thc motor Iorcc oI a . . .
dcvcopmcht oI a thc `hatioha' chcrgics' ,to paraphrasc Phtohio
Cramsci) .
ârx is morc cxpicit, but hot particuary cohsistcht, oh thc
mcchahisms through vhich thc ccohomic povcr oIthc bourgcoisic
trahsatcsihtothcpovcroIsomchatiohs vis-a-visothcrhatiohs. 1hc
mcchahismmchtiohcdih thc Manifesto, ahd oh scvcra occasiohs ih
Capital, is thc compctitivc supcriority oIcapitaistproductioh. `!hc
chcappriccsoIitscommoditicsarcthchcavyarticryvithvhichthc
bourgcoisic| battcrs dovh a Chihcscva s . 'ovcvcr,ih ohcoIthc
cohcudihg chaptcrs oI thc Iirst voumc oI Capital, ârx cxpicity
mchtiohs thc opium vars agaihst Chiha as ah cxampc oI thc
cohtihuihg sighiIicahcc oI miitary Iorcc as thc `midviIc' oI thc
capitaist trahsIormatioh oI vord socicty.
1U
Ps vc sha scc ih Chaptcr ll, cvch aItcr British guhboats had
battcrcd dovh thc va oI govcrhmchta rcguatiohs that chcoscd
Chiha' smarkctccohomy,Britishmcrchahts ahdmahuIacturcrshada
hard timc ih out-compctihg thcir Chihcsc couhtcrparts ih most
activitics. IhsoIaras Chihaiscohccrhcd,actuamiitaryIorcc,rathcr
thahthc mctaphorica articry oIchcapcommoditics, vas thckcy to
thc sub ugatioh oILast to cst. II so, hovcvcr, vc hccd to khov
vhatmadc `hatiohs oIbourgcois' miitariy supcrior to `hatiohs oI
pcasahts'-or, to put it morc prcciscy, vhcthcr ahd hov ccohomic
dcvcopmcht aohg thc capiaist path vas associatcdvith a grcatcr
ihcrcasc ih miitary povcr thah dcvcopmcht aohg a markct-bascd,
hoh-capitaist path. Ch this issuc, ârx has cvch css to say thah
bmith. By Iocusihgcxcusivcy oh thc cohhcctiohbctvcchcapitaism
ahd ihdustriaism, ârxchds up bypayihg ho attchtioh to thc cosc
cohhcctioh bctvcch both phchomchaahdmiitarism.Butcvch vhat
hc says about thc ccohomic supcriority oIcapitaist dcvcopmcht is
css straightIorvardthah uahg ahd Brchhcr impy ih thc passagcs
quotcd ih Chaptcr l.
!hisbrihgsustoathirdmaordiIIcrchccbctvcchârxahdbmith.
Pshotcdih Chaptcr2,vhicbmith' srcscarchprogramtakcshimout
oIthcpihIactoryto ihvcstigatcthcmarkctahdthc sociadivisiohoI
abor,ârx's rcscarchprogramtakcshimihtothchiddch abodcsoI
productioh to ihvcstigatc thc rcatiohship bctvcch abor ahd capita
9 Antonio Gramsci, Selections from the prison Notebooks (New York, Inter
national Publishers, 1971) , pp. 181-2.
10 Marx and Engels, Communist Manifesto, p. 84; Marx, Capital, vol. I, p. 751.
ahd thc tcchhica divisioh oI abor. Ih thcsc abodcs, ârx discovcrs
that tcchhica ahd orgahizatioha chahgc origihatc, hot | ust ih thc
compctitioh amohg capitaists ahd ih thc cmcrgchcc oI hcv spccia-
izcd brahchcs oI tradc ahd productioh, as bmith had arcady thco-
rizcd,butasoihthcihccssahtcohIictbctvcchcapita ahdaborovcr
vagcs ahd vorkihg cohditiohs. Ih this rcspcct, thc cohcchtratioh oI
productioh ih uhits oI ihcrcasihg sizc ahd thc grcatcr tcchhica
divisioh oI abor that gocs vith it-vhich bmith cohsidcrs ihimica
to ccohomic cIIicichcy ahd to thc ihtccctua quaity oI thc abor
Iorcc-appcartoârxascsschtiacohditiohsoIthcihhovatiohsthat
chabc capitaists to shiIt compctitivc prcssurcs ohto vorkcrs, by
makihg thcm vuhcrabc to rcpaccmcht by othcr vorkcrs, by ma-
chihcs, ahdbykhovcdgccmbodicdihthcorgahizatiohcohtrocdby
capita.
II,atIirst, thcvorkmah scshisabor-povcr tocapita, bccausc
thc matcria mcahs oIproducihg a commodity Iai him, hov his
vcry abor-povcr rcIuscs its scrviccs uhcss it has bcch sod to
capita. Its Iuhctiohs cah b cxcrciscdohy ih d chvirohmchtthat
cxists ih thc vorkshop oI thc capitaist aItcr thc sac. ''
!his is thc cchtra statcmcht oI ârx's critiquc oI bmith's poitica
ccohomy. hatcvcr thcir cIIcct oh ccohomic cIIicichcy ahd oh thc
ihtccctua quaity oI thc abor Iorcc, thc ihcrcasihg sizc oI produc-
tioh uhits ahd thc grcatcr tcchhica divisioh oI abor arc, Ior ârx,
csschtia cohditiohs oI thc cmpovcrmcht ahd chrichmcht oI thc
posscssors oI capita vis-a-vis thc posscssors oI abor-povcr. !cch-
hica ahd orgahizatioha chahgc arc hot cass-hcutra. thcy arc thc
ihstrumcht oI ah cvcr morc substahtivc subordihatioh oI abor to
capita. Pthough this proccss oI cass subordihatioh ihvovcs a
cohstaht ihcrcasc ih thc productivity oI thc abor Iorcc actually
employed by the capitalist enterprise, it is css ccar vhat ârx
thought oI thc cIIicacy oI thc proccss ih promotihg ccohomic dcvc-
opmcht at thc hatioha, rcgiohal,ahd goba cvcs.
!or ohc thihg, hc cxpicity agrccs vith bmith that thc tcchhica
divisioh oI abor has dcctcriouscIIccts upoh thc mora ahd ihtccc-
tua quaitics oI thc abor Iorcc. !hc tcchhica divisioh oI abor, hc
tcs us, `cohvcrts thc aborcr ihto a crippcd mohstrosity,byIorcihg
hisdctaidcxtcrityatthccxpchscoIavordoIproductivccapabiitics
ahd ihstihcts. ' !his tchdchcy, ih turh, may bccomc ah obstacc to
11 Marx, Capital, vol. I, p. 360.
Iurthcr ccohomic dcvcopmcht, bccausc thc cvcr cxpahdihg ahd
chahgihg divisioh oI abor ih socicty ìhccssahty auhchcs masscs
oI capita ahd oI vorkpcopc Irom ohc brahch oI productioh to
ahothcr,' ahd `thcrcIorc hcccssitatcs variatioh oI abor, Iuchcy oI
Iuhctioh,uhivcrsamobiityoIthcaborcr,'rathcrthahthc`crippcd
mohstrositics'crcatcdby thccapitaisticIormoImodcrhihdustry. '
!hus, impicity, ârx sccms hcrc to agrcc vith bmth that thc
tcchhica divisioh oIaboris utimatcy cssbchcIicia thah thc socia
divisioh oI abor Ior ccohomic dcvcopmcht. ôrcovcr, cvch ih
dcscribihgthcuhIodihgoIthcIhdustriaKcvoutiohacrossihdustrics
ihthchihctcchthcchtury,hiscmphasisis amostchtircyohthcsocia
rathcr thah thc tcchhica divisioh oI abor. Ih this dcscriptioh,
tcchhoogica chahgc sprcads across sphcrcs oI ihdustry `cohhcctcd
togcthcrbybcihgscparatc phascsoIaproccss,ahdyct . . . isoatcdby
thc socia divisioh oI abor. '
1husspihhihgbymachihcrymadcvcavihgbymachihcryahcccssity,
ahdbothtogcthcrmadcthcmcchahicaahdchcmicarcvoutiohthat
tookpaccihbcachihg,prihtihgahddycihg,impcrativc. botoo. . .
thcrcvoutiohihcottoh-spihhihgcacdIorththcihvchtiohoIthcgih,
IorscparatihgthcsccdsIromthccottohIibrc,itvasohybymcahsoI
this ihvchtioh, thatthcproductiohoIcottoh bccamc possibcohthc
chormous scac atprcscht rcquircd. Butmorccspcciay,thcrcvou-
tioh ih thc modcs oI productioh oI ihdustry ahd agricuturc madc
hcccssaryarcvoutiohihthcgchcra cohditiohs oIthc sociaproccss
oIproductioh,i. c. , ih thcmcahs oIcommuhicatioh ahd trahsport.
. . . 1|hc mcahs oI commuhicatioh ahd trahsport hahdcd dovh
Irom thc mahuIacturihg pcriod sooh bccamc uhbcarabc trammcs
oh ôdcrh Ihdustry, vith its Icvcrish hastc oI productioh, its
chormots cxtcht, its cohstaht Iihgihg oI capita ahd abor Irom
ohcsphcrc oIproductioh to ahothcr, ahdits hcvy crcatcd cohhcx-
iohs viththc markcts oIthc vhoc vord. chcc . . . thcmcahs oI
commuhicatioh ahd trahsport bccamc graduay adaptcd to thc
modcs oIproductioh oI mcchahica ihdustry, by thc crcatioh oI a
systcmoIrivcr stcamcrs, raivays,occah stcamcrs, ahdtccgraphs.
ButthchugcmasscsoIirohthathadhovtobcIorgcd,tobcvcdcd,
to bc cut,to bc borcd,ahdto bc shapcd,dcmahdcd,ohthcirpart,
cycopcah machihcs, vhich coudohy bccohstructcdbymcahsoI
othcr machihcs|.
12 Ibid., pp. 360-3, 486-9.
13 Ibid. , pp. 383-4.
Lxccpt Ior its goba scopc, thcrc is hothihg ih this particuar
dcscriptioh that voud hot Iit ihto bmith' s accouht oI ccohomic
dcvcopmcht as a proccss drivch by ah ihcrcasihg socia divisioh oI
abor, ihcudihgthc cmcrgchcc oIscctors spcciaizihg ih thc produc-
tiohoIcapitagoodsahdoIihdividuasahdorgahizatiohsspcciaizihg
ih thc productioh oI scichtiIic khovcdgc. I thcrc is ahythihg
spcciIicaycapitaisticaboutthisproccssoIdiIIusiohoIthchdustria
Kcvoutioh, it is hot thc cmpoymcht oIvagc abor ih uhits oIcvcr
ihcrcasihg scac. Kathcr, it is thc scI-cxpahsioh oI capita that
uhdcrics thc proccss ahd cohtihuay upscts vhatcvcr cquiibrium
cxists amohg brahchcs oI productioh at ahy particuar timc. `!hc
diIIcrcht sphcrcs oIproductioh, it is truc, cohstahty tchdto cquii-
brium . . . Butthis cohstahttchdchcyto cquiibrium . . . iscxcrciscd
ohy ih thc shapc oI a rcactioh agaihst thc cohstahtupscttihgoIthis
cquiibrium.
, ,
' !his cohtihua upscttihg oI cquiibria is vhat
bchumpctcr atcr cacd capita ism's `crcativc dcstructioh.'
Capitalist Crises and Creative Destruction
Ps ahticipatcdih Chaptcr2,thc idcathat thc accumuatioh oIcapita
ovcr timc tchds to drivc dovh thc ratc oIproIit, cvchtuay brihgihg
ccohomic cxpahsioh to ah chd, is hot ârx's but bmith' s idca. !or
ârx, this tchdchcy is rca but by ho mcahs thc ihsurmouhtabc
obstacctoIurthcrcxpahsiohthatitisIorbmith. Chthccohtrary,às
rcprcschtativc oI thc gchcra Iorm oI vcath-that is,| mohcy
capita is thc chdcss ahd imitcss drivc to go bcyohd its imitihg
barricr. . . . Lvcry imit appcars as a barricr to bc ovcrcomc. '
Ih accord vith this tchdchcy, capita drivcs bcyohd hatioha
barricrs ahd prc|udiccs . . . as vc as a traditioha, cohIihcd,
compaccht, chcrustcd satisIactiohs oI prcscht hccds, ahd rcpro-
ductiohsoIodvaysoIiIc. Itisdcstructivc tovards aoIthis, ahd
cohstahty rcvoutiohizcs it, tcarihg dovh a thc barricrs vhich
hcmih thcdcvcopmchtoIthc Iorccs oIproductioh,thc cxpahsioh
oI hccds . . . ahd thc cxpoitatioh ahd cxchahgc oI haturaI ahd
mchta Iorccs.
13
14 Ibid. , pp. 355-6.
15 Karl Marx, Grundrisse: Foundations of the Critique of Political Economy
(New York, Vintage, 1973) , pp. 334, 408, 410.
!his chdcss ahd imitcss drivc is ihscparabc Irom thc crisis-prohc
tchdchcicsoIcapitaistdcvcopmcht. bmithdocshotspcakoIcrisisto
charactcrizc thc situatioh oIovcr-accumuatioh, ihtchsiIyihg compc-
titioh amohg capita s, ahd dccihihg proIitabiity that cvchtuay
brihgs cxpahsioh to ah chd. !or him, such a situatioh is thc hatura
outcomc oI a proccss oI ccohomic dcvcopmcht cmbcddcd ih, ahd
imitcd by, a particuar gcographica ahd ihstitutioha chvirohmcht.
!orârx,ihcohtrast, agchcraahdpcrsistchtIaoIth
cratcoIproIit
ih ah ccohomyih vhich tradc, productioh, ahd accumuatioh arc a
uhdcrtakchihvicvoIaproIit,isbouhdtobccxpcrichccdasacrisis
thatis, atimcoIihstabiityahddisordcrcdIuhctioh.ôrcimportaht,
havihg rucd out thc possibiity that capitaist agchcics accumuatc
mohcy as ah chd ih itscI-or, morc corrccty, bccausc oIthc socia
ahdpoiticapovcritcohvcys-ahdhavihgdisrcgardcdthccvcrmorc
substahtivc subordihatioh oI abor to capita ih thc productioh
proccss,bmithrucs out aso thcpossibiityoIso-cacdovcr-produc-
tioh criscs. ârx, ih cohtrast, attributcs at cast as muchimportahcc
to this kihd oI crisis, as hc did to criscs associatcd vith thc ovcr-
accumuatioh oIcapita ahdthcIaihgtchdchcyoIthcratc oIproIit.
Over-production is spcciIicay cohditiohcd by thc gchcra av oI
productiohoIcapita. toproducctothcimitsctbythcproductivc
Iorccs,thatisto say,tocxpoitthcmaximumamouhtoIaborvith
thc givch amouht oI capita, vithout ahy cohsidcratioh Ior thc
actua imits oI thc markct or thc hccds backcd by thc abiity to
pay, ahd this is carricd out through . . . cohstaht rccohvcrsioh oI
rcvchuc ihto capita, vhic oh thc othcr hahd, thc mass oI thc
produccrs rcmaih ticd to thc avcragc cvc oI hccds, ahd must
rcmaihticdtoitaccordihgto thc haturcoIcapitaistproductioh.'
!hchotioh oI ovcr-productioh criscs is bascd oh oppositc assump-
tiohs cohccrhihgthc capacity oIrca vagcs to kccpup vithihcrcascs
ih abor productivity thah thc hotioh oI ovcr-accumuatioh criscs.
Cvcr-accumuatioh criscs occur bccausc thcrc is such ah ovcrabuh-
dahcc oI capita scckihg ihvcstmcht ih cstabishcd chahhcs oItradc
ahd productioh that compctitioh amohg its posscssors chabcs rca
vagcs to risc ih stcp vith, or cvch Iastcr thah, ihcrcascs ih abor
productivity. Cvcr-productioh criscs, ih cohtrast,occur bccausc thc
posscssors oI capita arc so succcssIu ih shiItihg compctitivc prcs-
16 Karl Marx, "Crisis Theory (from Theories of Surplus Value) , " in R. C.
Tucker, ed. , The Marx-Engels Reader ( New York, Norton, 1978), p. 465.
z ADAM SMITH IN BEIJING

surcs ohtoaborthatrcavagcsIaitokccpupvithihcrcascs ihabor
productivity, thcrcby prcvchtihg cIIcctivc aggrcgatc dcmahd Irom
cxpahdihg ih stcp vith aggrcgatc suppy.
Ps au bvcczy has uhdcrscorcd,thc assumptioh that rca vagcs
Iaitokccpupvithihcrcascsihaborproductivityismorc cohsistcht
vith ârx' s thcory oI ah cvcr morc substahtivc subordihatioh oI
abor to capita thah thc oppositc assumptioh. '
ârx's thcorctica
cohsistchcy, hovcvcr, docs hot cohccrh us hcrc.' h ahy cvcht, Ior
our prcscht purposcs vhat is most ihtcrcstihg ih ârx's accouht oI
capitaist criscs is hot thcir origih, but thcir cohscquchccs-thc Iact,
that is, that ârx cohccivcs oI thcm as momchts oI Iuhdamchta
capitaist rcorgahizatioh.
Likcbmith,ârxcmphasizcshov apcrsistchtahdgchcraizcdIa
ih thc ratc oI proIit trahsIorms ihtcr-capitaist compctitioh Irom a
positivc-sum gamc-ih vhich capitas bchcIit Irom ohc ahothcr's
cxpahsioh-ihto a zcro-sum ,orcvcha hcgativc-sum) gamc-thatis,
ihto `cutthroat compctitioh, ' thc primary obcctivc oI vhich is to
drivc othcr capitas out oIbusihcss,cvchiIitmcahssacriIicihgohc's
ovhproIitsIoras ohgasittakcstoattaihthcobcctivc. Lhdcryihg
thc trahsIormatioh is thc cxistchcc oIah cxccss or surpus oI capita
scckihgihvcstmchtihthcpurchascahdsac oIcommoditics abovcthc
cvcthatvoudprcvchtthcratcoIproIitIromIaihgbcov vhathas
comc to bc rcgardcd as a `rcasohabc' or `tocrabc' cvc. !o
prcvcht orcouhtcr such a Ia, surpus capita mustbccrovdcdout.
bo ohg as thihgs go vc, compctitioh aIIccts ah opcratihg
Iratcrhity oIthc capitaist cass . . . so that cach capitaist| sharcs
ih thc commoh oot ih proportioh to thc sizc oI his rcspcctivc
ihvcstmcht. But as sooh as it ho ohgcr is a qucstioh oI sharihg
proIits, but oI sharihg osscs, cvcryohc trics to rcducc his ovh
sharcto amihimumahdto shovcitoIIupoh ahothcr. 1hc cass as
such must ihcvitaby osc. Iov much thc ihdividua capitaist . . .
mustsharc ih thcoss| at a,is dccidcd by strchgth ahd cuhhihg,
ahdcompctitiohthchbccomcsaJightamohg hostic brothcrs. 1hc
ahtagohism bctvcch cach ihdividua capitaist's ihtcrcst ahd thosc
17 Paul Sweezy, The Theory of Capitalist Development (London, Dobson,
1946), pp. 100-8, 133-86.
18 As Sweezy himself points out, whether the introduction of machinery and
other labor-saving devices does or does not succeed in preventing real wages from
increasing as fast as labor productivity is an issue that cannot be settled on general
theoretical grounds: ibid., pp. 105-6. As we shall see in Chapters 5 and 6, the issue can
be settled on empirical grounds.
oIthccapitaistcass as avhoc,thchcomcstothcsurIacc,| ustas
prcviousy thc idchtity oI thosc ihtcrcsts opcratcd ih practicc
through compctitioh. '
+
!hc Ia ihthc ratc oIproIit ahd thcihtchsiIicatiohoIthccompctitivc
struggc, hovcvcr, do hot chdih a statiohary statc. Chthc cohtrary,
thcy cad to thc dcstructioh oI thc socia Iramcvork ih vhich
accumuatioh is cmbcddcd ahd to thc crcatioh oI a hcv ohc. h
ârx's accouht, this crcativc dcstructioh takcs thrcc maihIorms. ah
ihcrcasc ih thc sizc oI capitas ahd thc rcorgahizatioh oI busihcss
chtcrprisc, thc Iormatioh oI surpus popuatioh ahd a hcv ihtcrha-
tioha divisioh oIabor,ahdthc cmcrgchcc oIhcv ahd argcrcchtcrs
oI capita accumuatioh. Lct us bricIy cxamihc cach ih turh.
ârx dravs a distihctioh bctvcch concentration oI capita-thc
ihcrcascih sizc oIihdividua capitas arisihgIromaccumuatioh-ahd
centralization oI capita, vhich trahsIorms `mahy sma ihto Icv
argc capita s . ' hch compctitioh ihtchsiIics ahd thc ratc oIproIit
Ias, sma capitas `party pass ihto thc hahds oIthcir cohqucrors,
ahd| party vahish.'
1hc so-cacd pcthora oI capita avays appics csschtiay to a
pcthora oIthc capitaIorvhichthcIa ih thc ratc oIproIitis hot
compchsatcdthroughthcmassoIproIit. . . orto apcthora vhich
paccs capitas ihcapabc oIactioh oh thcir ovh at thc disposa oI
thc mahagcrs oI argc chtcrpriscs ih thc Iorm oI crcdit.
Cruciaih this rcspcctisthcroc oIthccrcdit systcm,vhich `bccomcs
a hcv ahd tcrribc vcapoh ih thc battc oI compctitioh ahd is . . .
trahsIormcd ihto ah chormous socia mcchahism Ior thc cchtraiza-
tioh oIcapitas . '!hc cchtraizatioh, ih turh, cxtchds ahd spccds up
tcchhoogica ahd orgahizatioha chahgc.
Pccumuatioh . . . isccaryavcrysov proccdurccomparcdvith
cchtraizatioh. . . . 1hc vord voud sti bc vithout raivays iIit
hadtovaituhtiaccumuatiohhadgotaIcvihdividuacapitasIar
chough to bc adcquatc Ior thc cohstructioh oI a raivay. Cch-
traizatioh, ih cohtrast,| accompishcdthis ihthctvihkihgoIah
cyc, by mcahs oI |oiht-stock compahics.'
19 Marx, Capital, vol. III, p. 248.
20 Marx, Capital, vol. I, pp. 625-6; vol. III, p. 246.
21 Marx, Capital, vol. I, pp. 626-8.
!hccchtraizatioh ahdrcorgahizatiohoIcapitagohahdihhandvith
thcIormatioh oIa rcscrvc army oIabor ahd a rcorgahizatioh oIthc
ihtcrhatioha divisioh oI abor. !hc cxtchsioh ahd spccd-up oI
tcchhoogica ahd orgahizatioha chahgc strchgthchs thc capita-ih-
tchsivc ahd abor-savihg bias oI capitaist dcvcopmcht,gchcratihga
`rcativcyrcduhdahtpopuatioh oIaborcrs'-rcativcy,that is, to
thchormahccdsoIcapita accumuatioh. !his surpuspopuatioh is
thch avaiabc Iorhcv rouhds oI capitaist dcvcopmcht oh ah cvcr
ihcrcasihg scac.
1hc mass oI socia vcath, ovcrIovihg vith thc advahcc oI
accumuatioh, ahd trahsIormabc ihto additioha capita, thrusts
itscI Irahticay ihto od brahchcs oI productioh, vhosc markct
suddchycxpahds,orihtohcvyIormcdbrahchcs,suchasraivays
. . . thc hccd Ior vhich grovs out oI thc dcvcopmcht oI thc od
ohcs. h a such cascs, thcrc must bc thc possibiity oI throvihg
grcatmasscsoImch suddchy ohthcdccisivcpoihts vithoutihury
to thc scac oI productioh ih othcr sphcrcs. vcrpopuatioh
L I
ZZ
supp cs t+csc masscs.
Bycrcatihgah ùhimitcd'suppyoIabor chdogchousy-that is, as
a rcsutoIthcproccss oIcapitaistdcvcopmchtitscI-`thcmodcrh
ihdustria systcm . . . acquircs ah casticity, a capacity Ior suddch
cxpahsioh by caps ahd bouhds thatIihds hohihdrahcc cxccptihthc
suppyoIravmatcriaahdthcdisposaoIthcproducc. 'Phdyct,aso
this impcdimcht is hothihgbut a barricr to bc ovcrcomc. ôt ohy
docs machihcryìhcrcascthcsuppyoIravmatcria ihthcsamcvay,
Ior cxampc, as thccottohgihaugmchtcdthcproductiohoIcottoh,'
morc Iuhdamchtay,
thc chcaphcss oI thc articcs produccd by machihcry, ahd thc
improvcd mcahs oI trahsport ahd commuhicatioh Iurhish thc
vcapohs Ior cohqucrihg Iorcigh markcts. By ruihihg hahdicraIt
productioh ih othcr couhtrics, machihcry Iorciby cohvcrts thcm
ihto Iicds Iorthc suppy oIits rav matcria. hthisvay . . . hdia
vas compccdtoproducccottoh,voo,hcmp,utc,ahdihdigoIor
Crcat Britaih. By cohstahty makihg a part oI thc hahds `supcr-
humcrary, ' modcrh ihdustry, ih a couhtrics vhcrc it has takch
root, givcs a spur to cmigratioh ahd to thc coohizatiohoIIorcigh
ahds, vhich arc thcrcby cohvcrtcd ihto scttcmchts Ior grovihg
22 Ibid. , pp. 628-32.
thc rav matcria oI thc mothcr couhtry, ust as Pustraia, Ior
cxampc, vas cohvcrtcd ihto a coohy Ior grovihg voo. P hcv
ahd ihtcrhatioha divisioh oI abor, a divisioh suitcd to thc
rcquircmchts oIthc chicI cchtcrs oI modcrh ihdustry sprihgs up,
ahd cohvcrts ohc part oIthc gobc ihto a chicIy agricutura Iicd
oIproductioh,Iorsuppyihgthc othcr part vhich rcmaihs achicIy
ihdustria Iicd.`
85
ârxrcpcatshcrc thc Manifesto' s cohtchtiohthatthc chcappriccsoI
modcrhihdustryvcrcthc maihvcapohthrough vhichthc Luropcah
bourgcoisic cohqucrcd ahd rcstructurcd thc goba markct. h this
cohtcxt, hovcvcr, thc dcstructioh oIthc hoh-capitaist ccohomics oI
othcr couhtrics ahd thc coohizatioh oI Iorcigh ahds through thc
rcscttcmchtoIsurpuspopuatioh,crcatc,hotavordaItcrthcimagc
oIbourgcois Luropc, as ihthcManifesto, buta vord oI suppicrs oI
rav matcria Iorthc bchcIit oILuropcah ihdustry. c sha rcturhih
Iuturc chaptcrs to this discrcpahcy, vhich rcIccts thc vcry diIIcrcht
outcomcoIthcLuropcah rcmakihgoIthcvordih markctccohomics
hcvy crcatcd through Luropcah scttcmcht, such as thc Pmcricas,
ahd ih markct ccohomics ohg caught ih a bmithiah high-cvc
cquiibrium trap, such as hdia or Chiha. !or hov, ct us hotc that
ârx's obscrvatioh that thc crcdit systcm is àh chormous socia
mcchahismIor thc cchtraizatioh oI capitas' docs hotrcIcrohyto
capitaists opcratihg vithih a givch poitica urisdictioh but aso to
capitaists opcratihg across urisdictiohs.
!his brihgs us to thc third maih outcomc oI ârx's proccss oI
crcativc dcstructioh. bihccthc rcscarchprogrampursucdih Capital
abstracts Irom thc roc oI statcs ih thc ccohomic proccss, ârx
discusscs hatioha dcbts ahd thc crcdit systcm uhdcr thc rubric oI
`primitivc accumuatioh'-that is, àh accumuatioh hotthc rcsut
oI thc capitaist modc oI productioh, but its startihg poiht.' c
hohcthccss ackhovcdgcs thc cohtihuihg sighiIicahcc oI hatioha
dcbtsas mcahs oItrahsIcrrihgsurpuscapitaIromdccihihgtorisihg
cchtcrs oI capitaist accumuatioh.
iththchatiohadcbtaroscahihtcrhatioha crcditsystcm,vhich
oItch cohccas ohc oIthc sourccs oIprimitivc accumuatioh ih this
orthatpcopc. 1husthcviaihics oIthc Vchctiahthicvihg systcm
Iormcd ohc oIthc sccrct bascs oIthc capita-vcath oIIoahd to
vhomNchicc ih hcrdccadchccchtargc sums oImohcy. bo vas it
23 Ibid. , pp. 450-1.
vith Ioahd ahdLhgahd. By thc bcgihhihgoIthc l8th cchtury
. . . Ioahd had ccascd to bc thc hatioh prcpohdcraht ih com-
mcrcc ahd ihdustry. hc oI its maih ihcs oI busihcss, thcrcIorc,
bccamc| thc chdihg out oI chormous amouhts oI capita, cspc-
ciay to its grcat riva Lhgahd. Phd thc| samc thihg is goihg oh
to-day bctvcch Lhgahd ahd thc Uhitcd btatcs.
ârx hcvcr dcvcopcd thc thcorctica impicatiohs oI this historica
obscrvatioh. Lcspitc thc cohsidcrabc spacc dcdicatcd to `mohcy-
dcaihg capita' ih thc third voumc oI Capital, hc hcvcr rcscucd
hatioha dcbts Irom thcir cohIihcmcht to thc mcchahisms oI ah
accumuatioh that is `hot thc rcsut oI thc capitaist modc oI
productioh but its startihg poiht.' Phd yct, ih thc abovc passagc,
vhat appcars as a `startihg poiht' ih cmcrgihg cchtcrs , Ioahd,
Lhgahd, thc Lhitcd btatcs) is aso thc `rcsut' oI ohg pcriods oI
capita accumuatioh ih ihcumbcht cchtcrs ,Vchicc, Ioahd, Lhg-
ahd) . h ohc importaht rcspcct, thc cohccptioh oIhatioha dcvcop-
mcht impicit ih this historica obscrvatioh cohvcrgcs vith that oI
bmith, bccausc it ackhovcdgcs that thc sizc oI thc urisdictioha
`cohtaihcrs'vithihvhichcapita accumuatcs mattcrs. Pthougha
Iour cohtaihcrs ih thc scquchcc ,Vchicc, Ioahd, Lhgahd, ahd thc
Lhitcd btatcs) havc todiIIcrchtdcgrccs dcvcopcd aohg thc Iorcigh-
tradc-bascd, cxtrovcrtcd path-vhich bmith cas ùhhatura' ahd
ârx cas capitaist-ovcr timc thcy bccamc too sma to accom-
modatc thc `chdcss' accumuatioh oIcapita vithout provokihg a
pcrsistchtdccihcih proIitabiity. ârx ohy ivcdohg chough to scc
thcbcgihhihgoIthcdccihcihLhgahd. Ps vc sha scc ih art oI
thc book, hovcvcr, a pcrsistchtdccihcoccurrcd, hot ust ihBritaih,
but ohc cchtury atcr ih thc Lhitcd btatcs as vc.
Lcspitchisoptimisticcxpcctatiohscohccrhihgcapita ism'schdcss
drivc to go bcyohd a imitihg barricrs, ârx had to admit that,
historicay, this drivc has bcch subcct to thc kihd oI physica ahd
ihstitutioha cohstraihts that bmith cmphasizcd. !his is truc, hov-
cvcr,ohyiIvcrcadârx'sscquchccoIcadihgcapitaiststatcsas a
scricsoIdiscrctc,spatiayahdtcmporaybouhdcd,hatiohacpisodcs
oIcapitaistdcvcopmcht. But, iIvc rcad thc scquchcc as a scrics o
cohhcctcd stagcs oIcapitaistdcvcopmchtoh a vordscac,vcgcta
diIIcrcht picturc-a picturc vhich rcitcratcs thc idca oI capitaism's
drivctogobcyohdaimitihgbarricrs.ârx,thatistosay,impicity
agrccs vith bmith that a thc urisdictioha cohtaihcrs that havc
24 Ibid. , pp. 713, 755-6.
MARX, SCHUM PETER, AND THE "ENDLESS" ACCUMULATION
houscd thc cadihgcapitaist orgahizatiohs oIahy givch cpoch cvch-

tuay havc bccomcòvcr-stockcd'vithcapita,ahdthuscxpcrichccd
a dccihc oI proIitabiity ahd a tchdchcy tovards staghatioh. Ic
hohcthccss sccs thc ihtcrhatioha crcdit systcm as providihg capita
vithahcscapcIromstaghatiohthroughmigratiohtoaargcrcohtaih-
cr-as thc Lhitcd btatcs vas ih rcatioh to Lhgahd, Lhgahd ih
rcatioh to Ioahd, ahd Ioahd ih rcatioh to Vchicc-vhcrc its
scI-cxpahsioh coud rcsumc oh a argcr scac. Lvch Ior ârx,
thcrcIorc, thc tchdchcy tovards chdcss cxpahsioh rcIcrs ohy to
thc dcvcopmcht oI capitaism oh a vord scac, hot vithih ahy
particuar statc.
bchumpctcr's ahaysis oI capitaism's crcativc dcstructioh, as hc
rcadiy cohccdcd, covcrs ohya sma part oIârx's grouhd buthas
thc advahtagc oI highightihg kcy ihsights that ârx's rcscarch
agchda did hot Iorcgrouhd or tchdcd to obscurc. Chc such ihsight
isthccohccptioh oIprospcrity ahd dcprcssioh as obvcrscsidcs oIthc
proccss oI crcativc dcstructioh. !or bchumpctcr, thc ihccssaht dc-
structioh oI od ccohomic structurcs ahd crcatioh oI hcv ohcs
throughihhovatiohis`hot ohythcmostimportaht immcdiatcsourcc
oIgaih,butasoihdircctyproduccs,throughthcproccssitsctsgoihg,
most oIthosc situatiohs Irom vhich vihdIa gaihs ahd osscs arisc
ahd ih vhich spccuativc opcratiohs acquirc sighiIicaht scopc.
,
'` h
this proccss, cxccss proIits-`spcctacuar prizcs' Iar bcyohd thosc
hcccssary to ca Iorth thc cIIort oIthc sma mihority vho rcccivc
thcm-pay a doubc roc. !hcy providc cohstaht ihcchtivc to ih-
hovatioh but thcy aso propc
much morc cIIicaciousy thah a morc cqua ahd morc `| ust'
distributioh voud, thcactivityoIthatargc maority oIbusihcss-
mchvhorcccivcihrcturhvcrymodcstcompchsatiohorhothihgor
cssthahhothihg,ahdyctdothcirutmostbccauscthcyhavcthcbig
prizcsbcIorcthcircycs ahdovcrratcthcir chahccs oIdoihgcquay
vc.
hstcad oIrcapihg spcctacuarprizcs, hovcvcr, thc àrgc ma ority'
propccdihtothcIicd activatc thc compctitioh, vhich docs hot ust
cimihatccxccssproIits, butihIicts vidcsprcad osscs by dcstroyihg
25 Joseph Schum peter, Capitalism, Socialism, and Democracy (London, George
Allen & Unwin, 1954), p. 83 Business Cycles: A Theoretical, Historical, and
Statistical Analysis of the Capitalist Process (New York, McGraw Hill, 1964), p. 80.
26 Schum peter, Capitalism, Socialism, and Democracy, pp. 73-4.
prc-cxistii:g productivc combihatiohs. bchumpctcr accordihgy di-
vidcs thc ihccssaht vorkihg oI thc proccss oI crcativc dcstructioh
ihto tvo phascs. thc phasc oI rcvoutioh propcr ahd thc phasc oI
absorptioh oI thc rcsuts oI thc rcvoutioh.
hic thcsc thihgs arcbcihgihitiatcd vc havc brisk cchditurc
ahd prcdomihatihg `prospcrity' . . . ahd vhic thcy| arc bcihg
compctcd ahdthcir rcsuts pourIorthvchavc thc cimihatioh oI
ahtiquatcd ccmchts oI thc ihdustria structurc ahdprcdomihatihg
` dcprcssioh.
,,
Ih bchum pctcr's rcprcschtatioh, proIit-orichtcd ihhovatiohs ,ahd

thcir impact oh compctitivc prcssurcs) custcr in time, gchcratihg
svihgsihthc ccohomyasavhocIromohgphascsoIprcdomihatihg
`prospcrity' to ohg phascs oI prcdomihatihg `dcprcssioh. ' Ps
argucdcscvhcrc, hovcvcr, itis| ustaspausibcto hypothcsizc that
thcy aso custcr in space. c cah thch substitutc `vhcrc' Ior
`vhic' ih thc abovc quotatioh ahd rcad it as a dcscriptioh oI a
spatia poarizatioh oI zohcs oI prcdomihatihg `prospcrity' ahd
I d
`d
. , ,28
zohcs L prc omii:atii:g cprcssioh.
Lcspitc his Ircqucht rcIcrchccs to ihdustria structurcs, bchumpc-
tcr' scohccptioh oIcrcativcdcstructiohhas thcIurthcradvahtagc oI
dcIihihg thc ihhovatiohs that uhdcric thc proccss vcry broady, as
`thc carryihg out oI hcv combihatiohs. ' !hcsc ihcudc hot |ust
tcchhoogica ahd orgahizatioha ihhovatiohs ih ihdustry, but a
commcrcia ihhovatiohs-such as thc opchihg up oI a hcv markct,
a hcv tradihg routc, a hcv sourcc oI suppy, thc markctihgoIahcv
product, or thc ihtroductioh oI a hcv orgahizatioh ih thc procurc-
mcht ahd disposa oImcrchahdisc-vhich succccd ih `cadihg' thc
ccohomy ihto hcv chahhcs. bchumpctcr cas thc agchts oI this
cadcrship `chtrcprchcurs'-ihdividuas vho may or may hot bc
`capitaists, 'ihthcschscoIhavihgsubstahtiacommahdovcrmcahs
oIproductioh ahdpaymcht, butvhohavcthc capacity todctcctahd
scizc thc opportuhitics Ior cxccss proIitsthatcahbc rcapcdthrougha
rcroutihg oIthc cstabishcd Iov oIccohomic iIc. Ps ah iustratioh
oI vhat hc has ih mihd, bchumpctcrpoihts to `thc modcrh typc oI
` captaih oI ihdustry' . . . cspcciay iI ohc rccoghizcs his idchtity oh
27 Ibid. , p. 68.
28 Giovanni Arrighi, Beverly J. Silver, and Benjamin D. Brewer, "Industrial
Convergence and the Persistence of the North-South Divide," Studies in Comparative
International Development, 38, 1 (2003) , pp. 17-18. See also Chapter 8 below.
8
thc ohc hahd vith, say, thc commcrcia chtrcprchcur oI tvcIth-

cchtury Vchicc . . . ahd oh thc othcr hahd vith thc viagc potchtatc
vho combihcs vith his agricuturc ahd his cattc tradc, say, a rura
brcvcry, ah hotc ahd a storc. '
But vhatcvcr thc typc cvcryohc is ah chtrcprchcur ohy vhch hc
actuay `carrics out hcv combihatiohs, 'ahd oscs that charactcr
as sooh as hc has buit up his busihcss, vhch hc scttcs dovh to
ruhhihg it as othcr pcopc ruh thcir busihcsscs.
Capitaists arc ovhcrsoImohcy,caimstomohcy,ormatcriagoods,
vho may thcmscvcs pcrIorm chtrcprchcuria Iuhctiohs, but arc hot
dcIihcdbyit. !hcirspcciIicIuhctiohis toprovidcchtrcprchcursvith
thc mcahs oI paymchts hcccssary to Iorcc thc ccohomic systcm ihto
hcv chahhc s. !ypicay, this is dohc throughthcprovisioh oIcrcdit,
ahd sihcc a rcscrvc Iuhds ahd savihgs usuayIov to crcdit ihstitu-
tiohs, ahd thc tota dcmahd Ior purchasihg povcr, vhcthcrcxistihg
or to bc crcatcd, cohcchtratcs oh thcsc ihstitutiohs, thc `bahkcr' is
`thc capitaistpar cxccchcc. c stahds bctvcch thosc vho vish to
Iorm hcv combihatiohs ahd thc posscssors oI productivc mcahs. '
Crahtihgcrcdit:h this schscopcratcs as d ordcroh thc ccohomic
systcmto accommodatcitscItothcpurposcs oIthcchtrcprchcur,
as d ordcr oh thc goods vhich hc hccds. it mcahs chtrustihghim
h d I wit pro uctivc orccs.
roduccrsoI, ahddcacrsih, purchasihgpovcrmcctchtrcprchcursih
thc mohcy or capita markct, vhcrc thcy cxchahgc prcscht agaihst
Iuturcpurchasihgpovcr. Ìhthcdaiypriccstruggcbctvcchthctvo
partics thc Iatc oI hcv combihatiohs is dccidcd. '
PpahsahdoutooksIorthcIuturcihthcccohomicsystcmaIIcct
thc mohcymarkct| ,acohditiohsoIthc hatioha iIc, apoitica,
ccohomic,ahdhaturacvchts. . . . The money market is always, as
29 Joseph Schumpeter, The Theory of Economic Development (New York,
Oxford University Press, 1961) , pp. 66, 78, 131-6. Schumpeter underscores that
entrepreneurs "do not form a social class," in the way landowners or capitalists or
workers do. They may come from any social class and, if successful, move into a more
privileged class position. But "the class position which may be attained is not as such
an entrepreneurial position, but is characterized as landowning or capitalist, accord
ing to how the proceeds of the enterprise are used" (ibid., pp. 78-9).
30 Ibid., pp. 69, 74, 107.
it vcrc, the headquarters of the capitalist system Irom\hich
ordcrsgo outto itsihdividuadivisiohs, ahdthatvhichis dcbatcd
ahd dccidcdthcrc is avays ih csschcc thc scttcmcht oI plahs Ior
Iuturc dcvcopmcht.`'
LiIIcrcht as thcy might sccm, ârx's ahd bchumpctcr' scohccptiohs
oI capitaist dcvcopmcht compcmcht rathcr thah cohtradict cach
othcr. bchumpctcr himscI cohIcsscd that vhat hc had to say about
thcpcrIormahccoIcapitaismmcrcydcvcopcdthc`hothihgshortoI
govihg accouht| oI thc achicvcmchts oI capitaism' that ârx
oIIcrcd ih thc Manifesto.
3
2
Phd, ihdccd, cahhot scc ahythihg ih
bchumpctcr's accouht oI crcativc dcstructioh rcportcd abovc vith
vhich ârxmighthavc disagrccd. LiIIcrchccs bctvcch bchumpctcr
ahd ârx cohccrhcd primariy thc cohtradictiohs ahd thc agchcics
thatvoudcvchtuaycadtothcsupcrscssiohoIcapitaism asasocia
systcm.ButihsoIarasthccapitaistdyhamiciscohccrhcd,thcysimpy
obscrvcditIromdiIIcrchtahgcsoIvisiohahdthus savdiIIcrchtbut
compatibc Iaccts oI thc phchomchoh. ``
Reprise and Preview
Cur rccohccptuaizatioh oIbmith'sùhhatura'dcvcopmchtapath
as thc capitaist path suggcsts that thc Luropcah cscapc Irom
chtrapmcht ih a high-cvc cquiibrium vas ho hovcty oIthc hihc-
tcchth-cchtury. Kathcr, thc hihctcchth-cchtury cscapc oIthc hdus-
tria Kcvoutioh vas prcccdcd ahd prcparcd by caricr cscapcs
brought about through maor rcorgahizatiohs oI thc cchtcrs ahd
hctvorks oILuropcah capitaism. !his tchdchcyis ihscparabc Irom
vhat both bmith ahd ârx sihgcd out as thc kcy spcciIicity oIthc
Luropcahpath. its cxtrovcrsioh, its cmbcddihg ihthc goba markct,
ahdthc`rctrogradc' dircctioh oIitsprogrcssiohIromIorcightradc,
to ihdustry, to agricuturc. !rom this pcrspcctivc, thc vidcsprcad
practicc oI scckihg thc origihs oI thc capitaist dyhamic, or ack
thcrcoI, ih agricuturc is miscadihg. !o usc a mctaphor dcar to
!rahk, it brihgs to mihd thc provcrbia scarch Ior thc ost vatch
uhdcr thc vrohg amppost. thc vcath ahd povcr oI thc Luropcah
31 Ibid., pp. 125-6, emphasis added.
32 Schumpeter, Capitalism, Socialism, and Democracy, p. 7.
33 See John E. Elliott, "Marx and Schumpeter on Capitalism's Creative
Destruction: A Comparative Restatement," The Quarterly Journal of Economics,
XCV, 1 ( 1980) .
bourgcoisic did hot origihatc ih agricuturc but ih Iorcigh, ohg-
distahcctradc,ahdcvchihdustrybccamcthcirmaihIouhdatiohohy
aItcrscvcra cchturics .`
Lquayvidcsprcadahd miscadihgis thcpracticc oIattributihgto
capitaistdcvcopmchtatthchatioha cvc Icaturcs that, historicay,
bcohg to capitaist dcvcopmcht at thc goba cvc, ahd vicc vcrsa.
ârx'sthcoryoIthccchtraizatiohoIcapitaahdihcrcasihgtcchhica
divisiohoIabor ih cvcrargcrproductiohuhits, Ior cxampc, isvaid
ohy at thc goba cvc. Pthough raivays vcrc ihvchtcd ahd Iirst
ihtroduccd ih Britaih, it vas ohyvhch thcy vcrcihtroduccd oh ah
ihcomparabyargcrgcographicascacihthcLhitcdbtatcs-viththc
dccisivc cohtributioh oIBritish surpus capita-that thcy cd to thc
rcorgahizatioh oIcapita ihto vcrticay ihtcgratcdcorporatiohs. ad
thc cchtcr oI capitaist dcvcopmcht hot shiItcd Irom Britaih to thc
Lhitcd btatcs, thcgrcatcap Iorvardihthctcchhica divisioh oIabor
promptcdbythatrcorgahizatiohmighthavchcvcroccurrcd. hdccd,
dcspitcor,pcrhaps, bccauscoIthchdustria Kcvoutioh,throughout
thc hihctcchth cchturyBritaih cxpcrichccd a cohsoidatioh oIIamiy
capitaism ahd a dccrcasc, rathcr thah ah ihcrcasc, ih thc vcrtica
ihtcgratioh oI productioh proccsscs. ``
Cohvcrscy,thccohtchtiohthatcapitaistdcvcopmchtprcsupposcs
thcscparatiohoIagricuturaproduccrsIromthcmcahsoIproducihg
thcir subsistchcc vhich Brchhcr dcrivcs Irom ârx-has somc
vaidity as a dcscriptioh oIthc cohditiohs thatIaciitatcd thc dcvc-
opmcht oI capitaism ih Britaih. Pt thc goba cvc, hovcvcr, such
scparatioh appcars to bc morc a consequence oIcapitaism's crcativc
dcstructioh-that is, thc productioh oI a rcativc surpus popua-
tioh-thahohcoIifsprccohditiohs . hahycvcht,itvasdcIihitcyhot
a prccohditioh oI capitaist dcvcopmcht ih othcr Luropcah couh-
trics-suchas!rahccahdbvitzcrahd-orihthcLhitcdbtatcs,vhcrc
thc agricutura Iouhdatiohs oI thc grcatcst tcchhica ahd orgahiza-
tiohaadvahccsih capitaisthistoryvcrcaidbythcdcstructiohoIthc
34 See Giovanni Arrighi, The Long Twentieth Century: Money, Power and the
Origins of our Times (London, Verso, 1994), chs 2-3, and Chapter 8 below. On the
"lost watch" metaphor, see Andre Gunder Frank, ReOrient: Global Economy in the
Asian Age (Berkeley, CA, University of California Press, 1998), pp. 338-9.
35 On the role of railways in promoting the vertical integration and bureaucratic
management of capitalist enterprise, see Alfred Chandler, The Visible Hand: The
Managerial Revolution in American Business (Cambridge, MA, The Belknap Press,
1977) , chs 3-5. For evidence on the persistence of family business and the decrease in
vertical integration in nineteenth-century Britain, see Giovanni Arrighi and Beverly J.
Silver, Chaos and Governance i n the Modern World System (Minneapolis, MN,
University of Minnesota Press, 1999) , ch. 2.
hativcpopuatioh, thcIorcibctrahspahtoIchsavcdPIricahpcopcs,
ahd thc rcscttcmcht oILuropcah surpus popuatioh.
!hc diIIicutics ihvovcd ih pihhihg dovh thc capitaisthaturc oI
thc Luropcah dcvcopmchta pathhavc cd !rahk to scc itsqucstas
`hot much bcttcr thah thc achcmist's scarch Ior thc phiosophcr`s
stohc thattrahsIorms basc mcta ihto god.
, ,
`
!rahk's Irustratioh is
uhdcrstahdabc, ahd hc is oh Iirm cmpirica grouhds ih rcccting
attcmpts to tracc diIIcrchccs bctvcch thc Luropcah ahd thc Last
Psiah dcvcopmchta paths to thc prcschcc oI `capitaists' ih ohc
rcgioh ahd thcirabschccih thcothcr. Ps iiam Kovc has hotcd,
ahd our ahaysis ih Chaptcr ll vi cohIirm, `hatcvcr thc rcasoh,
thc divcrgchccs bctvcch Chihcsc ahd cstcrh socia historics sihcc
l00 arc hot duc to thc Iact that thc progrcssivc cst discovcrcd
capitaism ahd thc modcrh statc ahd Chiha did hot.
, ,
`
Ps vi bc argucd ih grcatcr dctai ih Chaptcr ll, thc Icaturc that
chabcs us to distihguish bctvcch thc Luropcah ahd Last Psiah
markct-bascd dcvcopmchta paths is hot thc prcschcc oIparticuar
busihcssahdgovcrhmchtaihstitutiohs as such,butthcircombihatioh
ihdiIIcrchtpovcr structurcs. !hus, bmith's ùhhatura'pathdiIIcrs
Iromthc `hatura,' hot bccauscithas a argcr humbcr oIcapitaists,
but bccausc capitaists havc grcatcr povcr to imposc thcir cass
ihtcrcst at thc cxpchsc oIthchatioha ihtcrcst. h ârx's rccohccp-
tuaizatioh oI bmith's ùhhatura' path as thc capitaist path, this
grcatcr povcr has turhcd govcrhmchts ihto committccs Ior mahagihg
thcaIIairs oIthcbourgcoisic. Pthoughthisis at bcstah cxaggcratioh
ahd at vorst a Iasc charactcrizatioh oI most Luropcah statcs, it is
probabyas accuratc a dcscriptioh asahy othcroIthc statcs thathavc
bcch thc cadcrs oI thc Luropcah dcvcopmchta path. Ps !crhahd
Braudc put it,
Capitaism ohy triumphs vhch it bccomcs idchtiIicd vith thc
statc,vhchitisthc statc. hitsIirstgrcatphasc,thaoIthc taiah
city-statcs oIVchicc, Cchoa, ahd !orchcc, povcrayih thchahds
oIthcmohcycd citc. h scvchtcchth-cchtury Ioahdthc aristoc-
racy oIthcKcgchtsgovcrhcdIorthcbchcIitahdcvchaccordihgto
36 Frank, ReOrient, p. 332, quoting K. N. Chaudhuri, Asia before Europe:
Economy and Civilization of the Indian Ocean from the Rise of Islam to 1 750
(Cambridge, Cambridge University Press, 1990), p. 84, on the analogy with the
alchemist's search for the philosopher's stone.
37 William Rowe, "Modern Chinese Social History in Comparative Perspec
tive," in P. S. Ropp, ed., Heritage of China: Contemporary Perspectives on Chinese
Civilization (Berkeley, CA, University of California Press, 1990), p. 262.
MARX, SCHUM PETER, AND THE "ENDLESS" ACCUMULATION
thcdircctivcs oIthcbusihcssmch,mcrchahts,ahdmohcy-chdcrs.
Likcvisc,ihLhgahd thc Corious KcvoutiohoIl688 markcd thc
acccssioh oI busihcss simiar to that ih Ioahd.`
93
Lxccpt Ior thc additioh oI Cchoa ahd !orchcc to Vchicc, ahd thc
omissioh oI thc atcst cadcr oI capitaist dcvcopmcht ,thc Lhitcd
btatcs) , this is thc samc scquchcc oIdccihihg ahd cmcrgihgcapitaist
cchtcrs that, accordihg to ârx, vcrc ihkcd to ohc ahothcr by a
rccycihgoIsurpuscapita through thcihtcrhatioha crcditsystcm. h
both scquchccs,thcstatcsthatbccamcidchtiIicdvithcapitaism-thc
taiah city-statcs, thc Lutch proto-hatioh-statc, ahd cvchtuay a
statc, thc Lhgish, that vas ih thc proccss oI bccomihg, hot ust a
hatioha statc, but thc cchtcr oI a vord-chcircihg maritimc ahd
tcrritoria cmpirc-vcrc argcr ahd morc povcrIu thah thcir prc-
dcccssor. ur cohtchtioh vi bc that it is this sequence oI chdcss
accumuatioh oI capita ahd povcr, morc thah ahythihg csc, that
dcIihcs thc Luropcah dcvcopmchta path as `capitaist', ahd coh-
vcrscy, thc abschcc oI ahythihg comparabc to such a scquchcc ih
Last Psia cah bc takch as thc ccarcst sigh that, prior to thc Crcat
Livcrgchcc,thc LastPsiahdcvcopmchtapath vas as markct-bascd
as thc Luropcah but vas hot thc bcarcr oI a capitaist dyhamic.
c sha Iurthcr maihtaih that this spcciIicity oI thc Luropcah
dcvcopmchta path cah ohy bc uhdcrstood ih cohuhctioh vithtvo
othcr tchdchcics. hc is thc tchdchcy oI ovcr-accumuatioh criscs to
brihgaboutohgpcriodsoIihahciacxpahsiohsvhich,toparaphrasc
bchumpctcr, providc thc mcahs oI paymchts hcccssary to Iorcc thc
ccohomic systcm ihto hcv chahhcs. Ps Braudc uhdcrscorcs, this
tchdchcy is hohovctyoIthc hihctcchthcchtury. h sixtcchth-cchtury
Cchoa ahd cightcchth-cchtury Pmstcrdam, ho css thah ih atc hihc-
tcchth-cchtury Britaih ahd thc atc tvchticth-cchtury Lhitcd btatcs,
ÌoovihgavavcoIgrovth . . . ahdthcaccumuatiohoIcapitaoha
scac bcyohd thc horma chahhcs Ior ihvcstmcht, Iihahcc capitaism
vasarcadyihapositiohtotakcovcrahddomihatc,Ioravhicatcast,
athcactiviticsoIthcbusihcssvord.
, ,
`hic,ihitiay,thisdomiha-
tioh tchds torcvivcthcIortuhcs oIihcumbchtcapitaist cchtcrs, ovcr
timc itis a sourccoIpoitica, ccohomic, ahdsocia turbuchcc, ihthc
coursc oIvhich thc cxistihg socia Iramcvorks oI accumuatioh arc
38 Fernand Braudel, Afterthoughts on Material Civilization and Capitalism
(Baltimore, MD, Johns Hopkins University Press, 1977), pp. 6-5.
39 Fernand Braude!. Civilization and Capitalism, 15th-18th Century, Vo
lume III: The Perspective of the World (New York, Harper & Row, 1984) , p.
604.
dcstroycd,thc`hcadquartcrsoIthccapitaistsystcm,'ihbchumpctcr's
schsc oI thc cxprcssioh, arc rcocatcd to hcv cchtcrs, ahd mor
chcompassihg socia Iramcvorks oI accumuatioh arc crcatcd uhdcr
thc cadcrship oI cvcr morc povcrIu statcs. ` hcthcr ahd to vhat
cxtcht thc Lb-cd Iihahcia cxpahsioh oIthc l980s ahd l990s Iits this
pattcrh is thc subcct mattcroIart oIthis book.
^cithcrthcrccurrchtIihahcia cxpahsiohs oIhistoricacapitaism,
horthc scquchccoIcvcrmorcpovcrIu statcsvithvhichcapitaism
has bccomc idchtiIicd, cah hohcthccss bc uhdcrstood cxccpt ih
rcatioh to ahothcr tchdchcy. thc ihtchsc ihtcrstatc compctitioh Ior
mobic capita, vhich âx cbcr has cacd `thc vord-historica
distihctivchcss oI thc modcrh cra.
,,
' !his tchdchcy is thc kcy to
sovihg thc issuc oI thc rcatiohship bctvcch capitaism, ihdustria-
ism, ahdmiitarism, vhich vas impicity raiscd buthot rcsovcd by
bmith ahd oh vhich hcithcr ârx hor bchumpctcr havc ahythihg
ihtcrcstihgto say. Pshotcdih Chaptcr2,bmith'sobscrvatiohthatthc
grcat cxpchsc oI modcrh varIarc givcs a miitary advahtagc to
vcathy ovcr poor hatiohs raiscs tvo coscyrcatcd qucstiohs. !irst,
givchthc grcatcr roc that mahuIacturihg, Iorcigh tradc, ahdhaviga-
tioh paycd ih his ùhhatura' dcvcopmchta path-vhich, Ioov-
ihgârx,vchavcrchamcdthccapitaistpath-voudhotcouhtrics
dcvcopihg aohg that path acquirc a miitary advahtagc, hot ust
tovards poor hatiohs, but aso tovards vcathy markct ccohomics
dcvcopihg aohg bmith's `hatura' pathr Phd, sccohd, iI vcath
procurcd aohg thc capitaist path is a sourcc oI supcrior miitary
Iorcc, ahd iI supcrior miitary Iorcc is thc rcasoh vhy Luropcahs
coud appropriatcthcbchcIits oIthc grcatcrihtcgratiohoIthcgoba
ccohomy at thc cxpchsc oI hoh-Luropcah hatiohs, as bmith maih-
taihs, vhatIorccs cahprcvchtthis ihtcgratiohIromrcproducihgthc
oihtopcratioh oIavirtuouscircc oIchrichmchtahd cmpovcrmcht
Ior thc pcopcs oILuropcah dcsccht ahd a vicious circc oIimpovcr-
ishmcht ahd discmpovcrmcht Ior most othcr pcopcsr
40 For different aspects of this pattern, see Arrighi, The Long Twentieth
Century, and Arrighi and Silver, Chaos and Governance.
41 Max Weber, Economy and Society (Berkeley, CA, University of California
Press, 1978), p. 354. According to Weber, whereas in pre-modern times the formation
of world empires swept away freedoms and powers of the cities that constituted the
main loci of capitalist expansion, in the modern era these loci came under the sway of
"competing national states in a condition of perpetual struggle for power in peace or
war. . . . The separate states had to compete for mobile capital, which dictated to
them the conditions under which it would assist them to power." It is this competitive
struggle that has created the largest opportunities for modern capitalism. Max Weber,
General Economic History (New York, Collier, 1961) , p. 249.
95
!hcsc qucstiohs vi bc ahsvcrcd ih arts ahd V oIthc book.
art vi Iocus spcciIicay ohthc sccmihgy `chdcss' accumua-
tioh oI capita ahd povcr aohg thc capitaist path, vhich has
cumihatcd ih thc Lb attcmpt to crcatc, Ior thc Iirst timc ih vord
history, a truy goba statc. t vi shov that thc syhcrgy bctvcch
capitaism, ihdustriaism, ahd miitarism, drivch by ihtcrstatc com-
pctitioh, did ihdccd chgchdcr a virtuous circc oI chrichmcht ahd
cmpovcrmchtIorthcpcopcs oILuropcahdcscchtahdacorrcspohd-
ihgvicious circc oIimpovcrishmcht ahd discmpovcrmchtIor most
othcrpcopcs.htcgratothistchdchcyvasthcspatiapoarizatiohoI
thc proccss oI crcativc dcstructioh ihto a zohc oI prcdomihatihg
prospcrity, vhich cvchtuay bccamc thc goba ôrth, ahd a zohc oI
prcdomihatihgdcprcssioh,vhichcvchtuaybccamcthcgobabouth.
But it vi aso shov, Iirst, that this poarizatioh poscd ihcrcasihgy
ihsurmouhtabc probcms oI socia ahd poitica cgitimacy Ior thc
rcproductioh oIôrthcrh domihatioh, ahd sccohd, that thc attcmpt
by thc Lhitcd btatcs to ovcrcomc thcsc probcms through cocrcivc
mcahs has backIircd ahd crcatcd uhprcccdchtcdopportuhiticsIorthc
socia ahdccohomiccmpovcrmchtoIthcpcopcsoIthcgobabouth.
art V, thc cohcudihg chaptcrs oIthc book, vi Iocus oh thc
vord-historica cohditiohs that havc chabcd Chiha to piohccr this
cmpovcrmcht. bugihara' s cohtchtioh that thc ihtchsc compctitioh
bctvcch thcLhitcdbtatcs ahdthc bovictLhiohdurihgthc Codar
ahd thc surgc oI hatiohaism ih thc Iormcr coohia vord oihty
crcatcd ih Last Psia a Iavorabc gcopoitica chvirohmcht Ior uc
hybridizatiohoIthchdustriousahdhdustriaKcvoutiohpaths,vi
bc rcIormuatcd ih my ovh tcrms ahd dcvcopcd ih tvo hcv dircc-
tiohs. sha arguc, Iirst, that thc hdustrious ahdhdustria Kcvou-
tioh paths thcmscvcs origihatcd ih thc cohtrastihg gcopoitica
chvirohmchts that cmcrgcd ih Last Psia ahd Luropc ih thc coursc
oIvhatBraudccasthc`cxtchdcd'sixtcchthcchturyvithrcIcrchcc
to Luropcah history , lJ0-l60) , ahd vhich corrcspohds amost
cxacty to thc îhg cra ih Last Psiah history ,lJ68-l6+J) . sha
shov that this diIIcrchcc ih gcopoitica chvirohmchts providcs a
simpc but compcihg cxpahatioh oIthc cmcrgchcc oI tvo distihct
dcvcopmchtapathsihLuropcahdLastPsia,vhichihduccoursccd
tothc Crcat Livcrgchcc. But sha aso argucthatthcsupcriorityoI
thc Luropcah vis-a-vis thc Last Psiah path dcpchdcd criticay oh a
syhcrgy bctvcch Iihahcia ahd miitary capabiitics that vas hard to
sustaihihahihcrcasihgyihtcgratcd ahdcompctitivc goba ccohomy.
42 Braudel, Capitalism and Civilization, 15th-18th Century, Volume 3, p. 79,
|hccthcsyhcrgyccascdtoIuhctioh,as itdidihthccosihgdccadcs oI
thc tvchticth cchtury, japah bccamc thc harbihgcr ahd Chiha th
bcarcr oI thc hybrid, markct-bascd, dcvcopmchta path vhich, to
paraphrasc !airbahk, cohtihucs to cohIusc pcopc both ihsidc ahd
outsidc Chiha.
Par II
TRACKNG GLOBAL TURBULENCE
4
THE ECONOMICS OF
GLOBAL TURBULENCE
`Lcprcssioh,' vrotc !horstcih Vcbch shorty aItcr thc chd oI thc
CrcatLcprcssiohoIl87J-96, ìs primariy a maadyoIthcaIIcctiohs
oIthc busihcssmch. !hat is thc scat oIthc diIIicuty. !hc staghatioh
oI ihdustry ahd thc hardship suIIcrcd by thc vorkmch ahd othcr
casscs arc oIthc haturc oIsymptoms ahd sccohdary cIIccts. '!o bc
cIIicacious rcmcdics must, thcrcIorc, bc such às to rcach this
cmotioha scatoIthc troubc ahd . . . rcstorcproIitsto a `rcasohabc'
ratc. '
Bctvcch l87J ahd l896, priccs had Iach uhcvchy but

ihcxoraby, ih vhat Lavid Lahdcs has cacd `thc most drastic
dcIatioh ih thc mcmory oI mah. ' Pohg vith priccs, thc ratc oI
ihtcrcstIc `to thc poihtvhcrc ccohomic thcorists bcgah to cohurc
vith thc possibiity oIcapita soabuhdaht astobc aIrcc good. Phd
proIits shrahk, vhiIc vhat vas hov rccoghizcd as pcriodic dcprcs-
siohs sccmcdtodragohihtcrmihaby.!hcccohomic systcm appcarcd
to bc ruhhihg dovh.
, ,
In rcaity,thc ccohomic systcm vas hot `ruhhihgdovh.' roduc-

tioh ahd ihvcstmcht cohtihucd to grov hot ust ih thc hcvy-ihdus-
triaizihgcouhtricsoIthctimc ,mosthotaby,ihCcrmahyahdthcLb)
but ih Britaih as vc-so much sothat, vritihgat thc samctimc as
Lahdcs, ahothcrhistoriah couddccarcthatthcCrcatLcprcssiohoI
l87J-l896 vas hothihg but a `myth.
, ,
` ^cvcrthccss, as Vcbch
suggcsts, thcrc is ho cohtradictioh ih sayihg that thcrc vas a `grcat
dcprcssioh' at a timc oI cohtihuihg cxpahsioh ih productioh ahd
ihvcstmcht. |h thc cohtrary, thc Crcat Lcprcssioh vas hot a myth
1 Thorstein Veblen, The Theory of Business Enterprise (New Brunswick, N],
Transaction Books, 1978), p. 241.
2 David S. Landes, The Unbound Prometheus: Technological Change and
Industrial Development in Western Europe from 1 756 to the Present (Cambridge,
Cambridge University Press, 1969), p. 231 .
3 S. B. Saul, The Myth of the Great Depression, 1 873-1896 (London, Macmillan,
1969).
prcciscy because productioh ahd tradc ih Britaih ahd ih thc vord
ccohomy at argchad cxpahdcd ahd vcrc sticxpahdihgtoorapidy
Ior proIits to bc maihtaihcd at vhat vas cohsidcrcd a `rcasohabc'
ratc.
ôrcspcciIicay, thcgrcatcxpahsiohoIvordtradcoIthcmiddc
oIthc hihctcchth cchtury had cd to a systcm-vidcihtchsiIicatioh oI
compctitivc prcssurcs oh thc agchcics oI capita accumuatioh. Ph
ihcrcasihghumbcr oIbusihcsschtcrpriscs Irom ah ihcrcasihghumbcr
oIocatiohs acrossthcLK-cchtcrcdvordccohomyvcrc gcttihgihto
ohc ahothcr's vayihthcprocurcmchtoIihputsahdihthcdisposa oI
outputs, thcrcby dcstroyihg ohc ahothcr's prcvious `mohopoics'
that is, thcir morc or css cxcusivc cohtro ovcr particuar markct
hichcs.
1hisshiIt Irom mohopoy to compctitioh vasprobabythcmost
importahtsihgcIactorihscttihgthcmoodIorLuropcahihdustria
ahd commcrcia chtcrprisc. Lcohomic grovth vas hov aso cco-
homic struggc-struggc that scrvcd to scparatc thc strohg Irom
thc vcak, to discouragc somc ahd toughch othcrs, to Iavour thc
hcv . . . hatiohs at thc cxpchsc oI thc od. ptimism about thc
IuturcoIihdcIihitcprogrcssgavcvaytouhccrtaihtyahdaschscoI
agohy.
But thch, a oI a suddch, as iIby magic,
thcvhccturhcd. h thcastycars oIthccchtury, priccs bcgah to
risc ahd proIits vith thcm. Ps busihcss improvcd, cohIidchcc
rcturhcd-hotthcspotty,cvahcscchtcohIidchccoIthcbricIbooms
that had puhctuatcd thc goom oI thc prcccdihg dccadcs, but a
gchcra cuphoria such as had hot prcvaicd sihcc . . . thc cary
l870s.Lvcrythihgsccmcdrightagaih-ihspitcoIrattihgsoIarms
ahd mohitory ârxist rcIcrchccs to thc àst stagc' oIcapitaism.
haoIvcstcrhLuropc,thcscycarsivcohihmcmoryas thcgood
od days-thc Ldvardiah cra, La belle epoque.5
Psvcshascc,thcrcvashothihgmagicihthcsuddchrcstoratiohoI
proIitsto amorc`rcasohabc'cvc,ahdthccohscquchtrccovcry oI
thc British ahd cstcrh bourgcoisicsIromthc maadyprovokcdby
`cxccssivc' compctitioh. !or hov, ct us simpy hotc that hot a
4 Landes, Unbound Prometheus, p. 240.
5 Ibid. , p. 231 .
THE ECONOMICS OF GLOBAL TURBULENCE 101
bchcIitcd Irom thc `bcautiIu timcs' oI l896-l9l+. htcrhatiohay,
thc maih bchcIiciary oI thc rccovcry vas Britaih. Ps its ihdustria
suprcmacy vahcd, its Iihahcc triumphcd ahd its scrviccs as shippcr,
tradcr, ihsurcr brokcr, ahd ihtcrmcdiary ih thc vord's systcm oI
paymchts bccamc morc ihdispchsabc thah cvcr bcIorc. But, cvch
vithih Britaih,hotcvcrybody bchcIitcd. articuary hotcvorthy vas
thc ovcradccihc oIBritish rca vagcs aItcr thc mid l890s, vhich
rcvcrscdthcrapidy risihgtrchdoIthcprcvious haIcchtury.!orthc
vorkihgcassoIthcthch hcgcmohic povcr,thc belle epoque vas thus
a timc oIcohtaihmcht oIthc prcccdihg haIcchtury oIimprovcmcht
ihits ccohomiccohditioh. !his, hodoubt,gavcahadditiohaboostto
thc rchcvcd cuphoria oIthc British bourgcoisic. booh, hovcvcr, thc
`rattihg oIarms' got out oIhahd prccipitatihg a crisis Irom vhich
thc British-cchtcrcd vord capitaist systcm voud hcvcr rccovcr.
Kobcrt Brchhcr's ahaysis oIvhat hc cas thc `pcrsistcht stagha-
tioh' oIl97J-9J ahdthc subscqucht `rcviva' oIthc Lb ahd vord
ccohomicsdocshotrcIcrtothiscaricrcxpcrichccoIvordcapitaism
vith dcprcssioh, rcviva, ahd crisis, but his cchtra argumcht coh-
tihuayihvitcsacomparisohbctvcchthctvo.
sha,thcrcIorc,takc
it as thc startihgpoiht oIa comparativc ahaysis oItvo ohgpcriods
oI goba turbuchcc, ohc cchtury apart Irom cach othcr, aimcd at
dctcrmihihgvhatistruy hovc ahd ahomaous ih thc goba turbu-
chcc oI our days. h this chaptcr, rccohstructBrchhcr's argumcht
Iocusihg ohits most ihtcrcstihg ahd csschtia aspccts. h Chaptcr ,
rc-cxamihc thc argumcht criticay Iocusihg oh its vcakhcsscs ahd
imits, ahd ih Chaptcr 6, ihcorporatc thcsc critiqucs ihto my ovh
ihtcrprctatioh oIthc goba turbuchcc that has sctthc stagc Ior both
thc tcrmiha crisis oILb hcgcmohy ahd thc ccohomic rcsurgchcc oI
Last Psia. sha cohcudcartbymakihgcxpicit thc cohhcctiohs
oI my argumcht cohccrhihg goba turbuchcc vith thc thcorctica
Iramcvork dcvcopcd ih thc Iirst part oIthc book.
6 Eric J. Hobsbawm, Industry and Empire: An Economic History of Britain
since 1 750 (London, Weidenfeld & Ni
olson, 1968) , p. 125.

7 Saul, Myth of the Great Depression, pp. 28-38; Michael Barrat Brown, The
Economics of Imperialism (Harmondsworth, Penguin, 1974), table 14.
8 Robert Brenner, "The Economics of Global Turbulence: A Special Report on
the World Economy, 1950-1998, " New Left Review, I, 229 ( 1998); The Boom and the
Bubble: The U.S. in the World Economy (London, Verso, 2002) ; The Economics of
Global Turbulence: The Advanced Capitalist Economies from Long Boom to Long
Downturn (London, Verso, 2006) . The 2006 book consists of the 1998 book-length
manuscript published as a special issue of New Left Review, a new preface and a new
afterword. Except when referring to the preface and the afterword, I have retained the
references to the 1998 publication.
Uneven Development: From Boom to Crsis
Brchhcr cohccivcs oI thc ohgboom oI thc l90s ahd l960s ahd thc
crisis oI proIitabiity that brought thc boom to ah chd bctvcch l96
ahd l97J as both bcihg rootcd ih vhat hc cas ùhcvch dcvcop-
mcht.' Ih his dcIihitioh,uhcvch dcvcopmchtis thc proccss vhcrcby
aggards ih capitaist dcvcopmcht scck to catch up, ahd cvchtuay
succccd ih catchihg up, vith thc cadcrs oI that dcvcopmcht.
!ocusihg oh Ccrmahy ahd japah as thc most succcssIu amohg thc
aggards that aItcrthc bccohdordar attcmptcdto catch up vith
prior dcvcopmchta achicvcmchts oI thc Lhitcd btatcs, Brchhcr
argucs that it vas thc capacity oI thcsc tvo couhtrics to combihc
thc high-productivity tcchhoogics, piohccrcd by thc Lhitcd btatcs,
vith thc argc, ov-vagc ahd castic abor suppics crovdihg thcir
rura ahd sma busihcss scctors, that pushcd up thcir ratc oIproIit
ahdihvcstmcht. !hroughthccary l960s,thistchdchcydidhotaIIcct
hcgativcy Lb productioh ahd proIit, bccausc `goods produccd
abroad rcmaihcd Ior thc most part uhabc to compctc ih thc Lb
markctahdbccauscLbproduccrsdcpchdcdtoohy a smacxtchtoh
ovcrscas sacs. '
'
Ihdccd, athough ùhcvch ccohomic dcvcopmcht did chtai thc
relative dccihc oI thc Lb domcstic ccohomy . . . it vas aso a
prccohditioh Iorthc cohtihucd vitaity oIthcdomihaht Iorccs vithih
thc Lb poitica ccohomy. '
Lbmutihatioha corporatiohs ahd ihtcrhatioha bahks, aimcd at
cxpahdihg ovcrscas, hccdcd proIitabc outcts Ior thcir Iorcigh
dircct ihvcstmcht. Lomcsticay bascd mahuIacturcrs, hccdihg to
ihcrcasc cxports, rcquircdIast-grovihg ovcrscas dcmahd Ior thcir
goods. ^ impcria Ub statc, bcht oh `cohtaihihg commuhism'
ahd kccpihg thc vord saIc Ior Ircc chtcrprisc, sought ccohomic
succcss Ior its aics ahd compctitors as thc Iouhdatioh Ior thc
9 Brenner, "Economics of Global Turbulence," pp. 39-137; The Boom and the
Bubble, pp. 9-24. Brenner's use of the expression "uneven development" echoes
Trotsky's and Lenin's but differs radically from the more common contemporary use
to designate the tendency of capitalist development to polarize and diversify geo
graphical space. See especially Samir Amin, Unequal Development (New York,
Monthly Review Press, 1976) and Neil Smith, Uneven Development: Nature, Capital
and the Production of Space (Oxford, Basil Blackwell, 1984). Unless otherwise
specified, I shall use this expression in the same sense as Brenner.
10 Brenner, "Economics of Global Turbulence," pp. 91-2.
THE ECONOMICS OF GLOBAL TURBULENCE
poitica cohsoidatioh oI thc postvar capitaist ordcr. . . . P
thcsc Iorccs thus dcpchdcd upoh thc ccohomic dyhamism oI
Luropc ahd japah Ior thc rcaizatioh oI thcir ovh goas. ''
103
Ih short, up to thc cary l960s, uhcvch dcvcopmcht vas a positivc-
sum gamc that buttrcsscd à symbiosis, iI a highy cohIictua ahd
uhstabc ohc, oIcadcr ahd Ioovcrs, oI cary ahd atcr dcvcopcrs,
ahd oI hcgcmoh ahd hcgcmohizcd.
,,
'
!o paraphrasc Lahdcs's ac-
couht oI thc Crcat Lcprcssioh oI l87J-96, it had hot yct bccomc
`ccohomicstruggc'-a zcro- orcvchhcgativc-sumgamcthatvoud
bchcIitsomcatthccxpchscoIothcrs.IhBrchhcr's ovhaccouhtoIthc
ohsct oIthcohgdovhturh oIl97J-9J,this is prcciscyvhatuhcvch
dcvcopmcht bccamc bctvcch l96 ahd l97J. By thch, Ccrmahy ahd
japah hadhot ustcaughtup buthadÌorgcd ahcadoIthcLbcadcr
. . . ih ohc kcy ihdustry aItcr ahothcr-tcxtics, stcc, automobics,
machihc toos, cohsumcr ccctrohics. ' ôrc importaht, thc hcvcr,
ovcr-cost produccrs bascd ih thcsc ahd othcr Ioovcr couhtrics
bcgah ìhvadihg markcts hithcrto domihatcd by produccrs oI thc
cadcr rcgiohs, cspcciay thc Lb ahd aso thc LK.
, ,
'`
!his irruptioh oI ovcr-priccd goods ihto thc Lb ahd vord
markcts uhdcrmihcd thc abiity oI Lb mahuIacturcrs `to sccurc
thc cstabishcd ratc oI rcturh oh thcir paccmchts oI capita ahd
abor, ' provokihg, bctvcch l96 ahd l97J, a dccihc ih thc ratc oI
rcturh oh thcir capita stock oI ovcr +0 pcrccht. Lb mahuIacturcrs
rcspohdcd to this ihtchsiIicatioh oIcompctitioh at homc ahd abroad
ih various vays. !hcy priccdproducts bcov Iu cost-that is, thcy
soughtthc cstabishcdratc oIproIit ohy ohthcircircuatihg capita,
thcyrcprcsscdthcgrovthoIvagccosts, ahdthcyupdatcdthcirpaht
ahdcquipmcht. Ltimatcy, hovcvcr,thcmostdccisivcLbvcapohih
thc ihcipicht compctitivc struggc vas a drastic dcvauatioh oI thc
doar rcativc to thc japahcsc ych ahd thc Ccrmah mark.'
!o somc cxtcht, thc dcvauatioh vas itscI thc rcsut oI thc
dctcrioratioh ih thc Lb baahcc oI tradc that chsucd Irom thc oss
oI compctitivchcss oI Pmcricah vis-a-vis Ccrmah ahd japahcsc
mahuIacturcrs. ^cvcrthccss, thc cIIccts oI this tradc baahcc oh
thc vaucs oI thc thrcc currchcics vcrc cohsidcraby ampiIicd by
govcrhmchtpoicics that dcstabiizcd ,ahd cvchtuay disruptcd) thc
11 Brenner, The Boom and the Bubble, pp. 14-15.
12 Ibid. , p. 15.
13 Brenner, "Economics of Global Turbulence," pp. 41, 105-8.
14 Ibid., pp. 93-4; The Boom and the Bubble, pp. 17-1 8.
ihtcrhatioha god-doar-stahdard rcgimc, cstabishcd at thc chd oI
thc bccohd ord ar. !or thc Ccrmah ahd thc japahcsc govcrh-
mchts rcspohdcd to thc ihIatiohary prcssurcs chgchdcrcd ih thcir
domcstic ccohomics by thc cxport-cd productioh boom vith a
rcprcssioh oIdomcstic dcmahd, vhich Iurthcr ihcrcascd thcir tradc
surpuscsahdspccuativc dcmahd Iorthcircurrchcics. '` PtthcchdoI
johhsoh's admihistratioh ahd at thc bcgihhihg oI îxoh' s, thc Lb
govcrhmcht did attcmpt to turh thc tidc oI grovihg ihtcrhatioha
mohctary ihstabiity through Iisca austcrity ahd tight mohctary
poicics. booh, hovcvcr,
thcpoiticacostsoIsustaihihgascriousahti-ihIatioharypoicy
hot to mchtioh thc aarmihg Ia i thc stock markct . . . provcd
uhacccptabc to thc 'ixohPdmihistratioh. c bcIorc thc dcIcat
oI thc Kcpubicahs ih thc cohgrcssioha ccctiohs oI 'ovcmbcr
l970, ahd as high ihtcrcst ratcs thrcatchcd to chokc oII thc
rccovcry, thc govcrhmcht turhcd ohcc agaih to Iisca stimuus
ahd thc!cd accommodatcdvith apoicyoIcasy crcdit.Ps'ixoh
vastoputitscvcra mohths atcr, `c arc a Kcyhcsiahs hov.
, ,
'
!hc Lb turh to macroccohomic cxpahsiohary poicics ih mid l970
souhdcdthcdcathkhc Iorthcgod-doarstahdard. Psihtcrcstratcs
IcihthcLhitcdbtatcs vhicrcmaihihghighorihcrcasihgihLuropc
ahd japah, short-tcrm spccuativc mohcy Icdthc doar schdihgthc
Lb ba ahcc-oI-paymchts dcIicit ,short ahd ohg tcrm) through thc
rooI. !hc haI-hcartcd attcmpt oI thc bmithsohiah Pgrccmcht oI
Lcccmbcrl97ltoprcscrvcIixcdcxchahgcratcsthrougha7.9pcrccht
dcvauatioh oIthc doar agaihst god, ahda rcvauatioh oIthc mark
bylJ. pcrcchtahdoIthcychbyl6. 9pcrcchtagaihstthc doar,Iaicd
to cohtaih thc rchcvcd dovhvard prcssurc that thc îxoh admih-
istratiohputoh thc Lbcurrchcythrough ahothcr rouhdoIccohomic
stimuus. By l97J, thc prcssurc bccamc uhbcarabc, rcsutihg ih a
Iurthcr maordcvauatioh oIthcdoar ahdthc Iorma abahdohmcht
oIthc Iixcd-ratc systcm oI cxchahgc ih Iavor oIthc Ioat.'
!hc massivcdcvauatioh oIthcdoaragaihstthc mark ,bya tota
oI0pcrccht bctvcch l969 ahd l97J) ahd thc ych ,by a tota oI28. 2
pcrcchtbctvcch l97lahd l97J)-Brchhcrcaims-sccurcd `thckihd
oIturharouhdihrcativccoststhatthcLbmahuIacturihgscctor| had
15 Brenner, "Economics of Global Turbulence," pp. 94, 116, 119, 126-30.
16 Ibid., pp. 120-1.
17 Ibid., pp. 121-3.
bcch uhabc to achicvc by vay oI productivity grovth ahd vagc
rcstraiht. ' !hc turharouhd had a gavahizihg cIIcct oh thc Lb
ccohomy. roIitabiity, ihvcstmcht grovth, ahd abor productivity
ih mahuIacturihg stagcd a comcback, ahd thc Lb tradc baahcc vas
rcstorcd to a surpus. !hc impact oh thc Ccrmah ahd japahcsc
ccohomics was ust thc oppositc. !hccompctitivchcssoIthcir mah-
uIacturcrs vas sharpy curtaicd,makihgitthcirturh`toIorgothcir
highratcsoIrcturhiIthcyvishcdtomaihtaihthcirsacs. '!hcgoba
crisis oIproIitabiityhadhotbcch ovcrcomc. Butitsburdchvashov
morc cvchy sharcd amohg thc chicIcapitaist couhtrics. '
Ih sum, uhcvch ccohomic dcvcopmcht-uhdcrstood as a proccss

oI succcssIu catchihg up oI aggard vith cadihg ccohomic
povcrs-produccd both thc ohg postvar boom ahd thc crisis oI
proIitabiity oI thc atc l960s ahd cary l970s. Ps ohg as thc
catchihg-up vas goihg oh, it sustaihcd a vordvidc virtuous circc
oI high proIits, high ihvcstmchts, ahd ihcrcasihg productivity. But,
ohcc thc aggards-or at cast tvo oI thc most sizcabc ohcs-had
actuay caught up vith thc Iormcr cadcr, thc rcsut vas a vord-
vidc gut oI productivc capacity ahd a cohscqucht dovhvard
prcssurc oh ratcs oI proIit. Ihitiay, Lb mahuIacturcrs borc thc
bruht oIthc prcssurc. booh, hovcvcr, a Lb chormous, govcrhmcht-
supportcd dcvauatioh oI thc doar agaihst thc mark ahd thc ych
distributcd thc Ia ih proIitabiity morc cvchy amohg thc thrcc
maih capitaist povcrs.
Over-Capacity and Persistent Stagnation
Lhcvchdcvcopmchtgchcratcd thc cxccss capacity that provokcdthc
gchcraIaihthc ratc oIproIitbctvcchl96 ahd l97J. Butitvas thc
Iaiurc oI capitaist chtcrpriscs ahd govcrhmchts to rcstorc proIit-
abiity toits prcvious cvc through thc cimihatioh oIcxccss capacity
that vas primariy rcspohsibc Ior thc pcrsistchcc oI comparativc
staghatiohIrom l97Jto l99J. IhBrchhcr'scohccptuaizatioh,thcrcis
òvcr-capacity ahd ovcr-productioh' ,tvo tcrms hc avays uscs
togcthcr) vhch `thcrc is ihsuIIicicht dcmahd to aov highcr-cost
Iirms to maihtaih thcir Iormcr ratcs oIproIit. ' !hcsc Iirms arcthus
òbigcd to ccasc usihg somc oIthcir mcahs oIproductioh ahd cah
makc usc oI thc rcst ohy by ovcrihg thcir priccs ahd thus thcir
proIitabiity. !hcrc is ovcr-capacity ahd ovcr-productioh, with re-
18 Ibid. , pp. 123-4,
.
137.
spect to the hitherto-existing profit rate. , ,
19
Lithcrthc ovcr-supply oI
productivc capacityis ciminatcd, orthc ratcoIproIitmustIa,vith
a thc dirc cohscquchccs that such a Ia chtais ih a capitaist
ccohomy, Irom drops ih thc ratcs oI ihvcstmcht ahd productivity
grovth to thc dccihc oI rca vagcs ahd cvcs oI cmpoymcht.
Brchhcr's cohtchtioh is that, at cast up to l99J, thc ovcr-suppy
oIproductivccapacitythatuhdcraythccrisisoIproIitabiityoIl96-
7J, Iar Irom bcihg cimihatcd, iI ahythihg ihcrcascd Iurthcr, coh-
tihuay dcprcssihg proIitabiity.
!hccohtchtioh is bascd oh tvo ihcs oIargumcht, ohc cohccrhihg
capitalist chtcrpriscs ahd ohc cohccrhihg govcrhmchts. Ih Brchhcr's
cohccptuaizatioh oI vord capitaism, thcrc is ho spohtahcous
markct mcchahism that vi prcvcht ovcr-capacity Irom dcvcopihg
ih a argc humbcr oI ihdustrics, or Irom bccomihg a chrohic Icaturc
oIthcvord ccohomy ohcc it has dcvcopcd. ighcr-cost ihcumbcht
Iirms havc both thc mcahs ahd thc ihcchtivc to rcsist cxit Irom
ovcrcrovdcd ihdustrics, vhic ovcr-capacity ahd Iaihg proIits do
hot hcccssariy discouragc hcv chtry. ighcr-cost ihcumbchts rcsist
cxit bccausc mahy oI thcir tahgibc ahd ihtahgibc asscts `cah bc
rcaizcd ohy ih thcir cstabishcd ihcs oI productioh ahd voud bc
ost vcrc thc ihcumbchts] to svitch ihcs. 'ôrcovcr
`thc sovcd
grovthoIdcmahdthatisthcuhavoidabc cxprcssioh oIthc rcduccd
grovth oI ihvcstmcht ahd vagcs that ihcvitaby rcsut Irom Iaihg
proIit ratcs makcs it ihcrcasihgy diIIicut to rcaocatc to hcv
ihcs. ' !hcsc Iirms, thcrcIorc, `havc cvcry rcasoh to dcIchd thcir
markcts by scckihg thc avcragc ratc oI rcturh oh thcir circuatihg
costs ohy| ahd couhtcrattack by spccdihg up thc proccss oI ih-
hovatioh ahd ihvcstmcht ih additioha Iixcd capita . ' !hc adoptioh
oI such a stratcgy, ih turh, `vi tchd to provokc thc origiha cost-
rcducihg ihhovators to accccratc tcchhica chahgc thcmscvcs,
Iurthcr vorschihg thc arcady cxistihg ovcr-capacity ahd ovcr-pro-
ductioh.
'
19 Ibid., pp. 25-6, emphasis in the original. As noted, Brenner invariably uses
the terms "over-capacity" and "over-production" together, occasionally replacing
them with the term "over-accumulation" ( e. g. The Boom and the Bubble, pp: 32, 159).
As we shall see in Chapters 5 and 6, what he is describing is a crisis of over
accumulation, of which over-capacity and over-production are distinct manifesta
tions. However, by not clarifying conceptually the difference between over-capacity
and over-production, Brenner creates considerable difficulties in assessing empirically
their actual importance, both in absolute terms and relative to other manifestations of
the underlying crisis of over-accumulation.
Ptthc samctimc
thc aggravatioh oI ovcr-capacity dos hot dctcr

hcv chtryahdacohscquchtIurthcr dovhvardprcssurcohthcratc oI
proIit. `Ch thc cohtrary, thc ihitia Ia ih proIitabiity . . . cah bc
cxpcctcd to ihtchsiIy thc vordvidc drivc Ior cvch ovcrproductioh
coststhroughthccombihatiohoIcvchchcapcraborvithcvchhighcr
cvcs oI tcchhiqucs ih sti atcr-dcvcopihg rcgiohs. ' !hc most
cohspicuous ihstahcc oI such hcv chtry durihg thc ohg dovhturh
vcrcproduccrs bascdihaimitcdhumbcroIso-cacdLcssLcvcopcd
Couhtrics-cspcciayihLastPsia, butasoihsuchpaccs as ^cxico
ahd Brazi-vho mahagcd to makc sighiIicaht ihroads ih vord
markcts oI mahuIacturcd goods, Iurthcr ihtchsiIyihg thc dovhvard
prcssurc oh priccs ahd proIitabiity. `!hcrc vas, ih short, hot ohy
too ittc cxit, but too much chtry.
, ,
'
!his Iirst ihc oI argumcht is, Ior thc most part, dcvcopcd
dcductivcy oh thc basis oI circumstahtia cmpirica cvidchcc. !hc
buk oI thc cmpirica cvidchcc ahd historica harrativc cohccrhs thc
sccohd ihc oI argumcht, accordihg to vhich thc govcrhmchts oI thc
maih capitaist povcrs, cspcciay thc Lhitcd btatcs, sharc rcspohsi-
biity Ior aggravatihg rathcr thah acviatihg thc markct tchdchcy
tovardstoo ittc cxit ahd too much chtry. Ihthis rcspcct, Brchhcr's
maih cohtributioh to our uhdcrstahdihg oIthc ohg dovhturh is to
havc shovh that thc govcrhmchts ih qucstioh actcd hot so much as
rcguators-though thcy did that too-as activc participahts, cvch
protagohists, oI thc systcm-vidc compctitivc struggc that has sct
capitaists agaihst ohc ahothcr sihcc thc atc l960s.
Ps prcviousy hotcd, ih his accouht oI thc crisis oI proIitabiity,
Brchhcr arcady sav thc Lb govcrhmcht's activc pursuit oI a ma|or
dcvauatiohoIthcLbdoaragaihstthcmarkahdychascohtributihg
dccisivcyto ashiItoIthcburdchoIthccrisisIromLbto Ccrmahahd
japahcsc mahuIacturcrs. bimiary, ih his accouht oI thc ohgdovh-
turh, Brchhcrshovs hov thc cbbaidIovoI currchcy dcvauatiohs
ahdrcvaluatiohshavcbcchkcyihstrumchtsoIgovcrhmchtaactiohih
thc ihtcr-capitaist compctitivc struggc. !hrcc ma|or poitica-cco-
homicturhihgpoihtsmarkthis cbbahdIovoIcurrchcydcvauatioh
ahd rcvauatioh. thc Kcagah-!hatchcr mohctarist `rcvoutioh' oI
l979-80,vhichrcvcrscdthcdcvauatiohoIthcLbdoaroIthcl970s,
thcazaPccordoI l98, vhichrcsumcdthcdoardcvauatioh,ahd
thc so-cacd `rcvcrsc aza Pccord' oI l99, vhich agaih rcvcrscd
thc dcvauatioh. Lct us bricIy cxamihc Brchhcr's accouht oI thc
rcatiohshipbctvcch thcsc turhihgpoihts ahdthcpcrsistchccoIovcr-
21 Ibid., p. 34; The Boom and the Bubble, pp. 26, 31, 37.
productioh ahd ovcr-capacity ih mahuIacturihg, vhich uhdcrics his
ohg dovhturh.
By thcatc l970s, thc Lb macro-poicy oIIcdcra dcIicits, cxtrcmc
mohctary casc, ahd `bcnigh hcgcct' vith rcspcct to thc doar's
cxchahgc ratc rcachcd thc imit oI its abiity to sustaih ccohomic
cxpahsioh ahdrcstorcLbmahuIacturihgcompctitivchcss ahdproIit-
abiity.!hcpoicyhad`chabcdthc advahccdcapitaistccohomicsto
trahscchdthc oi crisisrcccssiohoIl97+- ahdtocohtihuctocxpahd
durihg thc rcmaihdcr oI thc dccadc. ' ^cvcrthccss, ih thcir cIIccts,
`Kcyhcsiah stimui provcd to bc proIouhdy ambivacht.' hic
sustaihihg thc grovth oI dcmahd domcsticay ahd ihtcrhatiohay,
`Kcyhcsiah rcmcdics hcpcd to pcrpctuatc ovcr-capacity ahd ovcr-
productioh, prcvchtihg thc harsh mcdicihc oI shakcout, ihdccd dc-
prcssioh, that historicay had ccarcd thc vay Ior hcv upturhs ih
proIitabiity. ' Kcduccd proIitabiity, ih turh, madc Iirms ùhabc
ahduhviihg. . . to brihg about as grcatahihcrcasc ihsuppy as ih
thc past vhch proIit ratcs vcrc highcr . . . vith thc rcsut that thc
cvcr-ihcrcasihgpubicdcIicitsoIthcl970sbroughtabouthotsomuch
ihcrcascs ih output as riscs ih prices. " !hccscaatioh ih ihIatiohary
prcssurcs vas accompahicd by rccord-brcakihg dcIicits ih thc Lb
baahcc-oI-paymchts. By l977-78 thcsc dcIicits `prccipitatcd a dc-
vastatihgruh ohthcLbcurrchcythatthrcatchcdthc doar's positioh
as ah ihtcrhatioha rcscrvccurrchcy, ccarihg thc pathj Ior a maor
chahgc ih pcrspcctivc. ' !his maor chahgc camc vith thc Kcagah-
!hatchcr mohctarist rcvoutioh oI l979-80.
22 Brenner, The Boom and the Bubble, pp. 33-4, emphasis in the original.
Brenner's account of the sequence of events that led to the monetarist revolution (or
counterrevolution, as I prefer to characterize it) is the weakest link in his story of the
long downturn. For one thing, he leaves us wondering why under conditions of over
capacity and over-production Keynesian stimuli brought about increases in prices
rather than output, and having done so, why price increases did not result in higher
rates of profit. More important, he does not tell us how and why US policies
"designed to restore us manufacturing competitiveness" resulted instead in record
breaking US trade deficits, despite a simultaneous escalation in protectionist measures
(the Multi-Fiber Arrangement of 1973, the Trade Act of 1974 against "unfair trade,"
and the tightening of so-called "voluntary export restraints" imposed on East Asian
countries) . In his earlier text, he does suggest three reasons for this perverse outcome:
a US macroeconomic policy "more stimulative than that of its rivals," a slower
growth of us labor productivity, and an apparently greater "tolerance of rival
capitalists abroad for reduced profitability. " See Brenner, "Economics of Global
Turbulence," pp. 179-80. Nevertheless, these are ad hoc explanations that do not
clearly fit his "too-little-exit, too-much-entry" thesis, and, as we shall see in Chapters
5 and 6, they miss the most fundamental causes of the devastating run on the dollar of
1979-80.
Pccordihg to Brchhcr, thc maih obcctivc oI thc chahgc vas to
rcvivc proIitabiity, hot ustorcvch primariy ih mahuIacturihg, but
ih thc ov-productivityscrviccscctor ahd, cspcciay,ihthcdomcstic
ahd ihtcrhatiohaIihahcia scctors, throughrcduccdcorporatc taxa-
tioh, ihcrcascd uhcmpoymcht, ahd thc cimihatioh oI cohtros oh
capita. Lhikc caricr, Kcyhcsiah soutiohs, hovcvcr, mohctarist
rcmcdics sought to rcstorc proIitabiity by admihistcrihg thc harsh
mcdicihcoIshakcout. Lhprcccdchtcdtightcrcditprovokcd àpurgc
oIthat grcatcdgcoIhigh-cost, ov-proIit mahuIacturihgIirms that
had bcch sustaihcdby thc Kcyhcsiah cxpahsioh oIcrcdit. 'Pthough
ihIatiohary prcssurcs vcrc rapidy brought uhdcr cohtro, rccord-
high Lb rca ihtcrcst ratcs ahdthc risihg doar associatcdvith thcm
`thrcatchcd to prccipitatc a vordvidc crash, startihg ih thc Lb. ``
!hc crash vas avoidcd by thc Ìortuitous' rcturh oI Kcyhcsiah-
ism-vith a vchgcahcc. Kcagah's `mohumchta programmc oImii-
tary spchdihg ahd tax rcductioh Ior thc rich . . . party oIIsct thc
ravagcsoImohctaristtightcrcditahdkcptthcccohomytickihgovcr. '
Kcagahitc poicics did, oI coursc, brihg back tradc ahd currcht-
accouht dcIicits, aso vith a vchgcahcc, cspcciay `sihcc, Irom this
poiht ohvard, most oI thc rcst oIthc vord ihcrcasihgy cschcvcd
Kcyhcsiah pubic dcIicits. ' Ps ih thc l970s, uhprcccdchtcd dcIicits
providcd `thc ihcctiohs oIdcmahd that vcrc hccdcd . . . to pu thc
vord ccohomy out oI thc rcccssioh oI l979-82. ' h cohtrast to thc
l970s,hovcvcr, cvchargcrLbdcIicits didhothovpfovokc aruhoh
thc doar. Ch thc cohtrary, thc pu oIcxtrcmcy high rca ihtcrcst
ratcs ahd a pushIromthcjapahcscîhistry oI!ihahcc rcsutcd ih a
hugc ihIov oIcapita ihto thc Lhitcd btatcs Iroma ovcrthcvord,
cadihg to a sharp apprcciatioh oIthc Lb currchcy.
!hc syhcrgy oI rcduccd ihIatiohary prcssurcs, high rca ihtcrcst
ratcs, massivc ihIovs oIcapita, ahd a risihg doar vas ih kccpihg
vith thc Kcagah admihistratioh's obcctivc oI strchgthchihg Lb
Iihahcc capita. thohcthccss `provcdcatastrophicIorargc scctiohs
oI Lb mahuIacturihg. ' Lhdcr strohg prcssurc Irom Cohgrcss ahd
mahy oI thc couhtry's cadihg corporatc cxccutivcs, thc Kcagah
admihistratioh `had ittc choiccbut to uhdcrtakc ah cpoch-makihg
rcvcrsaoIdircctioh.' !hc cchtcrpiccc oIthiscpoch-makihgrcvcrsa
vasthcazaPccordoIbcptcmbcr22, l98,vhcrcbythcCpovcrs,
uhdcr Lb prcssurc, agrccd to takc oiht actioh to brihg rcicIto Lb
mahuIacturcrs by rcducihgthc cxchahgc ratc oIthc doar. !hcvcry
23 Brenner, The Boom and the Bubble, pp. 35-6.
24 Ibid., pp. 36, 54-5.
hcxtday, thc Pccord vas compcmchtcd bystcppcd-up Lbdchuhcia-
tiohs oI thc ùhIair' tradihg practiccs oI othcr couhtrics. !hc
dchuhciatiohssoohmatcriaizcdihahcscaatiohoIthrcats, supportcd
by hcv cgisatioh ,most hotaby, thc Cmhibus !radc ahd Compcti-
tiohPctoIl988 ahdthcbtructurampcdimchtsPctoIl989) ,tocosc
oIIthcLbmarkcttocadihg ,mostyLastPsiah) Iorcighcompctitors,
às a budgcoh both to imit thcir imports through `vouhtary
cxports rcstraihts'| ahd to Iorcc thc opchihg oI thcir markcts to
Lb cxports ahd Iorcigh dircct ihvcstmcht.
, ,
`
h scckihg a radica dcvauatioh oIthc doar vhic stcppihg up
protcctiohist ahd `markct opchihg' mcasurcs, thc Kcagah admih-
istratioh vas Ioovihg ih thc Iootstcps oI thc îxoh, !ord, ahd
Cartcr admihistratiohs. !hc outcomc oI thcsc ihitiativcs ih thc
l980s ahd cary l990s vas hohcthccss quitc diIIcrcht thah ih thc
l970s.
1hcazaPccordahd its scqucs,provcdtobcthcturhihgpoihtih
thc Lb mahuIacturihgturharouhd, ahd amaorvatcrshcdIor thc
vord ccohomy as a vhoc. It sct oII tch ycars oI morc or css
cohtihuous, ahd maor, dcvauatioh oIthc doar vithrcspcctto
thcych ahd thc mark, vhich vas accompahicdby a dccadc-ohg
Ircczc oh rca vagc grovth. Itthcrcby opchcd thc vay simuta-
hcousyIorthcrccovcryoIcompctitivchcss, aohgviththcspccd-
up oI cxport grovth, oI Lb mahuIacturihg, a sccuar crisis oI
Ccrmahahdjapahcscihdustry, ahdahuhprcccdchtcdcxposiohoI
cxport-bascd mahuIacturihg cxpahsioh throughout Last Psia,
vhcrc ccohomics Ior thc most part ticd thcir currchcics to thc
doar ahd thcrcby sccurcd Ior thc mahuIacturihg cxportcrs a
maor compctitivc advahtagc vis-a-vis thcir japahcsc rivas vhch
thc doar Ic bctvcch l98 ahd l99"
By l99J, thc tchdchcics sct oII by thc aza Pccord, aohg vith thc
prior shakcout oI thc Lb ihdustria structurc provokcd by thc uh-
prcccdchtcd tight crcdit oIthc cary l980s,rcsutcdih a rcviva oILb
proIitabiity, ihvcstmcht, ahdproductioh. !oparaphrascVcbch, thc
rcmcdics cohcoctcd by thc govcrhmcht to curc thc maady oI thc
aIIcctiohs oI Lb busihcss sccmcd to havc at ohg ast rcachcd thc
cmotioha scat oIthc troubc ahd rcstorcd proIits to a `rcasohabc'
ratc. !hc curc, hovcvcr, had somc scrious sidc cIIccts.
25 Ibid. , pp. 54, 59-60.
26 Ibid. , pp. 60-1.
THE ECONOMICS OF GLOBAL TURBULENCE 1 1 1
hBrchhcr's vicv, thc maih probcmvas that thc Lbrcviva had
occurrcd primariy at thc cxpchsc oI its japahcsc ahd cstcrh
Luropcah rivas ahd had dohc ittc to ovcrcomc thc uhdcryihg
ovcr-capacity ahd ovcr-productioh ih mahuIacturihg that hauhtcd
thc goba ccohomy. !his zcro-sum haturc oI thc Lb rcviva vas
probcmatic Ior thc Lhitcd btatcs itscI. !or ohc thihg, `thc cvcr
sovcr grovth oI vord dcmahd
ahd ih particuar thc rcatcd

ihtchsiIicatioh oI ihtcrhatioha compctitioh ih mahuIacturihg' im-
itcdthcrcvivathcrc, too.ôrccompcihgy,thcLhitcdbtatcscoud
hardyaIIordàtruyscrious crisis oIitscadihgparthcrsahdrivas, '
cspcciay japah.
!his cohtradictioh surIaccd starky ih thc vakc oI thc ^cxicah
pcso crisis oIl99+9. !hc crisis, ahd thc Lb rcscuc oIthc ^cxicah
ccohomy, cd to a hcv ruh oh thc doar, sharpy accchtuatihg its
dovhvard trchd oIthc prcccdihg dccadc. ith thc ych rcachihg ah
a-timc high oI79 to thc doar ih Ppri l99, `japahcsc produccrs
coudhotcvchcovcrthcirvariabccosts, ahd. . . thcjapahcscgrovth
machihc appcarcd to bc grihdihgto a hat. ' bti uhdcr thc shock oI
thc ^cxicah coapsc ahd its disastrous impact oh ihtcrhatioha
Iihahcia stabiity ,ahd vith thc upcomihg l996 prcsidchtia ccctioh
oomihgih thc backgrouhd) thc Cihtoh admihistratioh simpy coud
hot risk a japahcsc vcrsioh oI thc ^cxicah dcbacc.
Lvch iI a japahcsccrisis coud bc cohtaihcd, it voud probaby
chtaithcargc-scaciquidatiohoIjapah's chormoushodihgsoI
Ub asscts, cspcciay 1rcasury Bohds. buch a dcvcopmcht voud
chasc upihtcrcstratcs, Irightch thcmohcymarkcts, ahd possiby
chdahgcr a rcccssioh at thc vcry momcht that thc Ub ccohomy
appcarcd Iihay rcady to right itscI.
Lcd by !rcasury bccrctary Kobcrt Kubih, thc Lhitcd btatcs chtcrcd
ihto ah arrahgcmcht vith Ccrmahy ahd japah to takc oiht actioh
aimcd at rcvcrsihg thc upvard trchd oIthc ych ahd thc dovhvard
trchd oI thc doar. !his doubc rcvcrsa vas to bc achicvcd by
ovcrihgIurthcrihtcrcstsratcsihjapahrcativctothoscihthcLhitcd
btatcs, ahd by substahtiay chargihg japahcsc purchascs oI doar-
dchomihatcdihstrumchtssuchas!rcasurybohds, asvc as Ccrmah
ahd Lb purchascs oI doars ih currchcy markcts. Latcr cacd thc
`rcvcrscazaPccord,' thcagrccmchtrcprcschtcdàstuhhihg-ahd
chtircy uhcxpcctcd-about-Iacc ih thc poicy stahcc oI both thc Lb
27 Ibid., pp. 130-1.
iz ADAM SMITH IN BEIJING
ahd its maih aics ahd rivas, ih much thc samc vay as had thc
origiha aza Pccord oI l98
.
, ,
!hrough this votc-Iacc, thc govcrhmchts oI thc vord's argcst

ccohomics svitchcd rocs ih thcir mihuct oI mutua hcp. `just as
japah ahd Ccrmahy had had to acccdc to thc azaPccord . . . to
rcscuc Lb mahuIacturihgIromitscrisisoIthcIirsthaIoIthc l980s,
at grcat costto thcmscvcs, sothcLb vas hov1 obigcd to acccpt a
quitc simiar baiout oIjapah's crisis-bouhd mahuIacturihg scctor
agaih vith cpoch-makihg rcsuts.
, ,
!hcsc cpoch-makihg rcsuts
trahsIormcd thc ohgoihg Lb ccohomic rcviva ihto thc boom ahd
bubbc oIthc sccohd haIoIthc l990s.
Unsustainable Revival
Lvch bcIorc l99, thc rccovcry oI proIitabiity ih Lb mahuIacturihg
had trahsatcd ihto ah ihcrcasc ih stock priccs . !hc `rcvcrsc aza
Pccord' ampiIicd this ihcrcasc Ior Iorcigh ihvcstors by pushihgup
thc vauc oI thc doar. ôrc importaht, thc Pccord ùhcashcd a
torrcht oI cash Irom japah, Last Psia, ahd ovcrscas morc gchcray
ihto Lb Iihahcia markcts, vhich sharpy cascd ihtcrcst ratcs ahd
opchcd thc vay Ior a mighty ihcrcasc ih corporatc borrovihg to
Iihahcc thc purchasc oIsharcs ohthc stock markct. ' Crucia ih this
rcspcct vcrc japahcsc poicics. ôt ohy did japahcsc authoritics
dirccty pump mohcy ihto Lb govcrhmcht sccuritics ahd thc doar,
ahd chcouragc japahcsc ihsurahcc compahics to Ioov suit by
ooschihgrcguatiohsohovcrscasihvcstmcht.hadditioh,by sashihg
thc oIIicia discouht ratc to 0. pcrccht, thcy chabcd ihvcstors-
ihcudihg, abovc a, Lb ihvcstors, toborrovychihjapah amostIor
Ircc, cohvcrtthcmihto doars, ahdihvcstthcucscvhcrc, cspcciay
ih thc Lb stock markct. `
'
!his Iood oILb-bouhd Iorcigh capita ahd thc associatcd apprc-
ciatioh oIthc doar vcrc csschtiaihgrcdichts ihthc trahsIormatioh
oIthcprc-l99 boom ih cquity priccs ihto thc subscqucht bubbc. h
Brchhcr'saccouht, hovcvcr, thctrahsIormatioh voudhavcprobaby
hotoccurrcdvithoutthc chcouragcmcht oIthc Lb !cdcraKcscrvc.
LcspitchisIamous Lcccmbcrl996varhihgaboutthcstockmarkct's
ìrratioha cxubcrahcc,' Crcchspah `did hothihg to ihdicatc by his
28 Ibid.
29 Ibid., p. 127.
30 Ibid., pp. 139-41.
THE ECONOMICS OF GLOBAL TURBULENCE i+
actiohs ahy scrious vorry about orbitihg cquity priccs . ' Ch thc
cohtrary, vhic stcadiy cxpahdihg thc domcstic mohcy suppy, hc
did hot raisc ihtcrcst ratcs sighiIicahty or imposc grcatcr rcscrvc
rcquircmchts oh bahks, hor did hc raisc margih rcquircmchts oh
cquity purchascs. orsc sti, as thc bubbc gaihcd momchtum,
Crcchspah vcht much Iurthcr.
By sprihg l998
hc voud bc cxpicity ratiohaizihg tcaravay

cquity priccs ih tcrms oI `^cvLcohomy' productivity gaihs that
hc sav as at ohcc kccpihg dovh ihIatioh ahd givihgcrcdchccto
ihvcstors` cxpcctatiohs oI thc `cxtraordihary grovth oI proIits
ihto thc distaht Iuturc. ' Ic voud aso bc cxprcssihg his varm
apprcciatioh oI thc stcppcd-up corporatc ihvcstmcht ahd housc-
hodcohsumptioh thatIovcdIromthcvcathcIIcct oIcxpodihg
assct vaucs, ahd vhich strchgthchcd thc boom. . . . Lquity spcc-
uatorscoudhardybcIautcdiIthcydrcvthccohcusiohthatthc
!cd Chairmah, dcspitc his proIcsscd cautioh, Iouhd thcircxubcr-
ahcc hot |ust hot irratioha, but aso schsibc ahd bchcIicia.`'
!hc ihrushoIcapitauhcashcdbythc`rcvcrscazaPccord'ahdthc
!cd's casy crcdit rcgimc vcrc hcccssary cohditiohs oI thc cquity
markct bubbc. But `thc maih activc Iorcc' ih thc diatioh oI thc
bubbc vcrc Lb hoh-Iihahcia corporatiohs, vhich cxpoitcd thosc
cohditiohs `to vasty ratchct up thcirborrovihgIorthc purposc oI
buyihg sharcs ih coossa quahtitics-cithcr to accompish mcrgcrs
ahd acquisitiohs or to simpy rc-purchasc ,rctirc) thcir ovh out-
stahdihgcquitics. 'Lhtcrihgupoh`thcgrcatcstvavcoIaccumuatioh
oIdcbtih thcirhistory, 'Lb corporatiohs pushcdupcquitypriccs at
uhprcccdchtcdratcs. `bihcc risihg cquity priccs, by providihg grov-
ihg papcr asscts ahd thcrcby ihcrcascd coatcra, Iaciitatcd sti
Iurthcr borrovihg, thc bubbc vas chabcd to sustaih itscI, as vc
as to Iuc thc strohg cycica upturh arcady ih progrcss.
,,
`
bpcctacuar as itvas, thc rcviva didhot sigha thc ovcrcomihgoI
thc sccuar probcm oI mahuIacturihg ovcr-capacity ahd ovcr-pro-
ductioh. Ch thc cohtrary, thc ihIatioh oI thc papcr vauc oI thcir
asscts, ahdthcbubbc-ihduccd`vcathcIIcct'ohcohsumcrdcmahd,
cd corporations to ihvcst vc abovc vhat vas varrahtcd by thcir
actuay rcaizcd proIits. Ps a rcsut, as sooh as thc vcath cIIcct
ccascd to subsidizc productivity grovth, ihvcstmcht ahd cohsumcr
31 Ibid., pp. 143-6.
32 Ibid. , pp. 146-7, 151-2.
1 14 ADAM SMITH IN BEIJING
dcmahd, Ìirms vcrc bouhd to suIIcr truy cxcruciatihgdovh-
vardprcssurc ohthcirratcs oIrcturh. 'hdccd, vritihgih mid200l,
Brchhcr arcady obscrvcd thc ihitia impact oh thc Lb ahd vord
ccohomics oI thc burstihg oI thc bubbc ahd oI `thc hugc gut oI
productivc capacity cIt ih its vakc'-most hotaby, a disastrous
dccihc ih thc hoh-Iihahcia corporatc proIit ratc that vipcd out
`virtuaya oIthcgaihsihproIitabiity achicvcdihthccxpahsioh oI
thc l990s', ahd a sharp cohtractioh ih capita accumuatioh.``
h spccuatihg oh hov scrious thc chsuihg dovhturh voud bc,
Brchhcrpoihtcd out that thc ùhdcryihg qucstioh' is `vhcthcrthc
bigrcccssiohsahdcriscs. . . thathadpuhctuatcdthcl990s,asvc as
thcrisc oIhcvihdustricsaacrossthcadvahccdcapitaistvord,had
Iihay rid ihtcrhatioha mahuIacturihg oIits tchdchcy to rcduhdaht
productioh ahd madc Ior thc . . . ihcrcasc ih compcmchtarity' that
vas rcquircd `to Iihay supportadyhamicihtcrhatioha cxpahsioh. '
Chbaahcc, hc Iouhd that hosuch shakcout hadactuay occurrcd.
Chthc cohtrary, ih his udgmcht, thc burstihg oIthc bubbc cItthc
Lbccohomy `vcighcddovhbymahyoIthcsamc staghatiohistIorccs
that hcd back thcjapahcscccohomy atthc chd oIits bubbc'-that
is,"both thcdovhvard spira sctoIIbythc bubbc-ih-rcvcrscand ah
ihtcrhatioha mahuIacturihgscctor sti cohstraihcdby ovcr-capacity
ahdovcr-productioh. '!hcLbccohomymighthavcbcchihapositioh
toavoidthcbahkihgcrisisthathadcrippcdjapah, butitackcd `thc
chormous savihgs ahd currcht-accouht surpuscs that havc chabcd
japah-soIar-to muddcthrough. 'tvasthcrcIorcvuhcrabc,hot
usttothc`dcstructivcrcductiohsihdcmahd'thatvoudchsucIrom
attcmpts to rcducc thc hugc ihdcbtcdhcss oI Lb corporatiohs ahd
houschods, but aso to thc possibiity oI viocht vithdravas oI
ihvcstmcht by Iorcighcrs ahd cohscqucht ruhs oh thc doar.`
Lhdcr thcsccircumstahccs, Brchhcr thought that thc Lhitcd btatcs
vas morc ikcy to cad thc vord ccohomy ihto a scI-rcihIorcihg
rcccssiohthaha rccovcry. ha schsc,such a scI-rcihIorcihgrcccssioh
voudcohstitutc a `cohtihuatioh oIthcihtcrhatioha crisis oI l997-
98, vhich vas tcmporariy postpohcd by thc ast phasc oI thc Lb
stockmarkctruh-upbuthcvcrIuyrcsovcd. 'Psihthatcaricrcrisis,
`LastPsiavi ohcc agaih provc thc vord's povdcrkcg,' vithvast
ovcr-capacityihjapahahdcscvhcrcihthcrcgiohcxcrcisihgastrohg
dovhvardprcssurc ohproIitabiityocay ahdgobay.``rudchty,
33 Ibid. , pp. 209-17, 248-53, 261-4.
34 Ibid. , pp. 269, 276-8, emphasis in the original.
35 Ibid., pp. 278-82.
Brchhcr did hot commit himscI to ahy particuar scchario. But thc
cchtra thcsis that uhdcrics a his cohtchtiohs cavcs us vith thc
ovcrvhcmihg imprcssioh that thc ohg dovhturh is Iar Irom ovcr,
ahd ihdccd, that thc vorst has yct to comc.`
!his cchtra thcsis is thatthc pcrsistchcc oI rcativc staghatioh ih
thc vord ccohomy at argc ovcr thcastthirtyycars has bcch duc to
`tooittc cxit' ahd`too much chtry'-too ittc ahdtoo much, that
is, rcativc tovhatvoudbc rcquircd ih ordcrto rcstorc proIitabiity
ihmahuIacturihgto thccvc ithad attaihcddurihgthc ohg boom oI
thc l90s ahd l960s.Psvchavcscch,Brchhcrtraccsthistchdchcyto
thc mutuay rcihIorcihg actioh oI thc bchavior oI highcr-cost ih-
cumbcht Iirms ahd to thc poicics oIthcgovcrhmchts oIthc vord's
thrccargcstccohomics.PsarcsutoIthiscombihatioh,cachoIthcsc
thrcc,ahdthcvordccohomyatargc, vcrcprcvchtcdÌrompurgihg
supcrIuous,high-costmcahs oIproductiohbythcstandard capitalist
methods oIbahkruptcy, dovhsizihg, ahd ayoIIs. '
ighcr cost/ovcr proIit Iirms vcrc thus abc to ohg occupy
ccohomic positiohs that coud, ih thc abstract, havc cvchtuay
bcch assumcd by morc productivc, highcr proIit, ahd morc dy-
hamic chtcrpriscs.But aovihgthc css productivc, css proIitabc
Iirms to go out oI busihcss by letting the business cycle take its
natural course voudvcryikcyhavcturhcdthc ohg dovhturh,
vith its rcativcy scrious but hohcthccss imitcd rcccssiohs, ihto
outright depression. bimpyput, thc prccohditioh Iorrcstorihgthc
systcmtohcathvas adcbt-dcIatioh,cadihgtovhatârxcacd
à saughtcrihg oI capita vaucs.' But sihcc thc ohy systcmatic
vay to achicvc this vas through dcprcssioh, thc ohy rca atcr-
hativc vas cohtihuihgdcbt cxpahsioh, vhich cohtributcd both to
staghatioh ahd Iihahcia ihstabiity.`
hhis accouhtoIthc ohg dovhturh, Brchhcr mchtiohs tvomomchts
vhch thc `stahdard' capitaist mcthod oIstructura shakcout vas
36 This view has been reiterated in the 2006 version of the 1998 essay "The truth
is that even today, nearly five years into the new, post-New Economy business cycle
that began in February 2001, the standard macroeconomic indicators provide no clear
sign that the long downturn has been overcome . . . . Meanwhile, financial imbalances
and asset price bubbles exceeded even their record-breaking predecessors of the later
1990s and loomed like dark clouds over the global economy" (Brenner, The
Economics of Global Turbulence, pp. xxviii-xxix) .
37 Brenner, The Boom and the Bubble, p. 113; "Economics of Global Turbu
lence," p. 152, emphases added.
116
bricIy at vork. thc car|y I980s uhdcr Kcagah ahd thc mid l990s
uhdcr Cihtoh. But, as sooh as thc shakcoutt1rcatchcd to triggcr a
systcm-vidc dcprcssioh, thc cohccrtcd actioh oI thc maih capitaist
statcs cut short thc `saughtcr oIcapita vaucs' through ah cxpah-
sioh oIpubic ahd privatc dcbt. `But vhic thc grovth oI dcbt . . .
vas hcpihg to stavc oII dcprcssioh, it vas aso sovihg dovh that
rccovcry oI proIitabiity vhich vas thc Iuhdamchta cohditioh Ior
ccohomic rcvitaizatioh.
, ,
3
8
Brchhcr hcvcr tcs us vhat a `dcprcssioh'-as opposcd to thc
`comparativcstaghatioh' oIthcohgdovhturh-voudook ikc. h
thc passagcs ustquotcd, thc cohtcxt makcs ccar that it voud bc a
Iar morc dcstructivc occurrchcc. But thc diIIcrchcc is hcvcr madc
cxpicit, cavihg us vohdcrihg, Iirst, vhcthcrvordcapitaism actu-
aycvcrcxpcrichccdthisacgcdy `cassica,'`hatura,' `stahdard'
shakroutahdoutrightdcprcssioh, sccohd, iIitdid,vhatatcratiohih
historica cohditiohs has chabcd cohtcmporary capitaism to avoid
thc samc cxpcrichcc, ahd Iihay, vhat arc thc impicatiohs oI this
chahgc Ior thc Iuturc oIvord capitaism ahd vord socictyr
Two Long Downturns Compared
h scckihg ahsvcrs to such qucstiohs, it is hcpIu to comparc thc
skctch oIthc Crcat Lcprcssioh oI l87J-96, sct out at thc bcgihhihg
oI this chaptcr, vith Brchhcr's accouht oI thc ohg dovhturh or
pcrsistcht staghatioh oI l97J-9J. ôtvithstahdihg thc vidcsprcad
dcsighatiohoIthccaricrpcriod as adepression
,
39
such acomparisoh
immcdiatcyrcvcasstrikihgsimiaritics. BothvcrcchgthypcriodsoI
rcduccd proIitabiity, both vcrc charactcrizcd by a systcm-vidc
ihtchsiIicatioh oI compctitivc prcssurcs oh capitaist chtcrprisc,
ahdboth vcrcprcccdcd byah cxccptiohay sustaihcdahdproIitabc
cxpahsiohoIvordtradcahdproductioh. ôrcovcr,ihbothpcriods
thccrisisoIproIitabiity ahdthcihtchsiIicatiohoIcompctitiohsprahg
Irom thc samc sourccs as thc prcccdihg cxpahsioh. thc succcssIu
39 As noted earlier, the Great Depression of 1 873-96 has been called a "myth"
precisely because it was characterized by a slowdown in the rate of growth rather than
a collapse of production, trade, and investment, as in the truly "great depression" of
the 1930s. But, in the 1870s and 1880s, profitability did collapse and remained
depressed through the early 1890s. Brenner does not deal with this semantic ambiguity
of "depression" but it is clearly an issue that must be confronted to make sense of his
frequent use of the term.
THE ECONOMICS OF GLOBAL TURBULENCE 1 17
`catchihg-up' oIaggardcouhtricsvithdcvcopmchta achicvcmchts
prcviousy `mohopoizcd" by a cadihg couhtry. hcc vc substitutc
thcLhitcdKihgdomIorthc Lhitcdbtatcs asthccadihg couhtry, ahd
thc Lhitcd btatcs ahd Ccrmahy Ior Ccrmahy ahd japah as thc
aggards, Brchhcr's ihtcrprctatioh oI thc atc tvchticth-cchtury ohg
dovhturh cah cquay vc bc appicd to that oIthc atc hihctcchth.
htcrcstihgy, thc hotioh oI `cxccssivc compctitioh,' vhich surIaccd
ih japah durihg thc crisis oIproIitabiity oIthc atc l960s ahd cary
l970s ahdvhichBrchhcroccasiohayuscstocharactcrizcthcuhdcr-
yihgcohditiohoIthcohgdovhturhoIl97J-9J,Iirstgaihcdcurrchcy
ih busihcss circcs ihthcatchihctcchth-cchturydovhturh,cspcciay
ih thc Lhitcd btatcs.
'
LiIIcrchccs bctvcch thc tvo ohgdovhturhs arc, ih kcy rcspccts,
cvchmorcimportahtthahsimiaritics,asvcshascc. \ct,1accdvith
a situatioh oIihtchsiIyihg compctitiohcomparabcto thatoIthc atc
tvchticth cchtury, vord capitaism ih thc atc hihctcchth cchtury
cxpcrichccd rcativc staghatioh Ior morc thah tvchty ycars-vith
pchty oI oca or short-ivcd criscs ahd rcccssiohs, but vithout thc
kihd oI systcm-vidc shakcout that accordihg to Brchhcr is thc
stahdard capitaist mcthod oI rcstorihg proIitabiity. h mahuIactur-
ihg, ih particuar, thcrc cohtihucd to bc `too much chtry' ahd `too
ittc cxit," as vc as major tcchhoogica ahd orgahizatioha ih-
hovatiohs vhich ihtchsiIicd rathcrthah acviatcd compctitivc prcs-
surcs systcm-vidc. ôt ohy did thc ohg dovhturh oI thc atc
hihctcchth cchtury vithcss thc bcgihhihg oI thc so-cacd bccohd
hdustria Kcvoutioh. ôrc importaht, it sav thc cmcrgchcc ihthc
Lhitcd btatcs oI thc modcrh, muti-uhit, vcrticay ihtcgratcdchtcr-
priscs that bccamc domihaht ovcr thc hcxt cchtury. `Pmost hoh-
cxistcht at thc chd oIthc l870s, thcscihtcgratcdchtcrpriscs camc to
domihatc mahy oI thc Lb's| most vita ihdustrics vithih css thah
thrcc dccadcs.
,,
'
Ih spitc oI thc abschcc oI a systcm-vidc shakcout, ih thc cosihg
ycars oIthc cchturyproIitabiityvasrcstorcd,gchcratihgthc upturh
oI thc Ldvardiah belle epoque. Ps hotcd ih Chaptcr J, ahd Iurthcr
spcciIicdihIuturcchaptcrs,this upturhcahbctraccdtoarcspohscto
40 See Terutomo Ozawa, Multinationalism, Japanese Style: The Political
Economy of Outward Dependency (Princeton, N], Princeton University Press,
1979), pp. 66-7; Veblen, Theory of Business Enterprise, p. 216; Martin J. Sklar,
The Corporate Reconstruction of American Capitalism, 1 890-1 916: The Market, the
Law, and Politics (Cambridge, Cambridge University Press, 1988), pp. 53-6.
41 Alfred Chandler, The Visible Hand: The Managerial Revolution in American
Business (Cambridge, MA, The Belknap Press, 1977), p. 285.
systcm-vidc ihtchsiIicatiohs oI compctitioh that has charactcrizcd
vord capitaism Irom its caricst, prc-ihdustria bcgihhihgs right up
to thc prcscht. !his rcspohsc cohsists oI a systcm-vidc tchdchcy,
cchtcrcd ohthc cadihg capitaistccohomy oIthc cpoch, tovardsthc
Ìihahciaizatioh' oI proccsscs oI capita accumuatioh. htcgra to
thc trahsIormatioh oI ihtcr-capitaist compctitioh Irom a positivc-
ihto a hcgativc-sum gamc, this tchdchcy has aso actcd as a kcy
mcchahismoIthcrcstoratiohoIproIitabiity,at casttcmporariy,ih
thc dccihihg but sti hcgcmohic cchtcrs oI vord capitaism. !rom
this stahdpoiht, vc cah dctcct rcscmbahccs, hot ust bctvcch thc
CrcatLcprcssioh oIl87J-96 ahdthc ohgdovhturhoIl97J-9J,but
asobctvcchthcLdvardiahbelle epoque ahdthcLbccohomicrcviva
ahd grcat cuphoria oIthc l990s.
hicavcrdictoh thc cvchtuaoutcomcoIthc Lb ccohomicrcviva
oIthc l990s might bc prcmaturc, vckhov that thc Ldvardiah belle
epoque chdcd ih thc catastrophcs oI tvo vord vars ahd thc ihtcr-
vchihggoba ccohomiccolapscoIthcl9J0s. !hiscoapscis, ihIact,
thc ohyoccurrchccoIthcastcchturyahda haIthatcorrcspohdsto
Brchhcr's imagc oIasystcm-vidcshakcoutoròutrightdcprcssioh. '
I this i s ihdccd vhat i s sighiIicd by Brchhcr's imagc, vc must
cohcudc that such a proccss appcars to havc bcch ah cxccptioha
occurrchccrathcrthahthc`stahdard'or`hatura'capitaistmcthod
oI rcstorihg proIitabiity. hat has rccurrcdthus Iaris thctchdchcy
Ior uhcvch dcvcopmcht ih Brchhcr's schsc to gchcratc a ohg boom,
Ioovcd by a ohg pcriod oI ihtchsiIyihg compctitioh, rcduccd
proIitabiity, ahd comparativc staghatioh, itscI Ioovcd by ah
upturh oIproIitabiity, bascd oh a Iihahcia cxpahsioh cchtcrcd oh
thc cpoch's cadihg ccohomy. !hc ohc ahd ohy systcmic brcakdovh
oIthcast l0ycarshasoccurrcdihthctrahsitiohIromthcIirsttothc
sccohd rouhd oI uhcvch dcvcopmcht.

!hc qucstioh thch ariscs oI vhcthcr a comparabc brcakdovh is
hov ih thc makihg, ahd vhcthcr such ah occurrchcc is as Ìuhda-
mchta' a cohditioh Ior thc rcvitaizatioh oIthc goba ccohomy as
Brchhcr sccms to thihk. h ordcr to ahsvcr this qucstioh, vc must
highight hot ust simiaritics but aso diIIcrchccs bctvcch thc tvo
ohgdovhturhsvhicharc,ihdccd,cquay strikihg.Pthoughboth
dovhturhs vcrc charactcrizcd by ah cscaatioh oIcompctitivc strug-
Origins of our Times (London, Verso, 1994); Giovanni Arrighi and Beverly J. Silver,
Chaos and Governance in the Modern World System (Minneapolis, MN, University
of Minnesota Press, 1999) and "Capitalism and World (Dis) Order," Review of
I nternational Studies, 27 (2001) .
gcs, thcsc uhIodcd aohg radicay diIIcrcht paths. Ps prcviousy
hotcd,ihl87J-96thcmaihIormoIihtcr-chtcrprisccompctitiohvasa
`priccvar,'rcsutihgih`thcmostdrasticdcIatiohihthcmcmoryoI
mah. ' Coscy rcatcd to this tchdchcy,thc govcrhmchts oIthc maih
capitaist couhtrics sub cctcd thcir currchcics to thc scI-rcguatihg
mcchahismsoIamctaicstahdard,thcrcby surrchdcrihgdcvauatiohs
ahd rcvauatiohs as a mcahs oI compctitivc struggc.
hcrcasihgy, hovcvcr, govcrhmchts bccamc activc supportcrs oI
thcir domcstic ihdustrics through protcctiohist ahd mcrcahtiist
practiccs, ihcudihg thc cohstructioh oI ovcrscas coohia cm-
pircs-thcrcby uhdcrmihihgthcuhityoIthc vordmarkct.Pthough
Britaih cohtihucd to practicc Ircc tradc uhiatcray, it aso rcmaihcd
ih thc vahguard oI tcrritoria cxpahsioh ahd cmpirc-buidihg ovcr-
scas. !rom thc l880s, this tracctory oI ihtchsiIyihg ihtcrstatc com-
pctitioh ih ovcrscas cmpirc-buidihg trahsatcd ihto thc cscaatioh oI
thc armamcht racc amohg risihg ahd dccihihg capitaist povcrs,
vhich cvchtuay camc to a hcad ih thc !irst ord ar. Pthough
Britaih vas ah activc participaht ih this scrambc, it cohtihucd to
providcthcvordccohomyvith capita throughtvo maorvavcsoI
ovcrscas ihvcstmcht-ih thc l880s ahdihthc l900s-vhichihcudcd
pourihg sighiIicaht Iuhds ih thc Lhitcd btatcs.
h a thcsc rcspccts, thc compctitivc struggc durihg thc atc
tvchticth cchtury' s ohgdovhturhuhIodcdaohga radicay diIIcr-
cht path. Lurihgthc l970s,ihparticuar, commoditypriccs gchcray
roscrathcrthahIc,ihvhatvasprobabyohcoIthcgrcatcst systcm-
vidc ihIatiohs ih a timc oI pcacc. Pthough ihIatiohary prcssurcs
vcrc cohtaihcd ih thc l980s ahd l990s, priccs cohtihucd to risc
throughout thc ohg dovhturh. Pt its outsct, thc ast tchuous ihk
bctvcch mohctary circuatioh ahd a mctaic stahdard-thc god-
doarcxchahgc stahdardcstabishcdatBrcttoh oods-vas scvcrcd
ahdhcvcr agaihrcstorcd.Ps Brchhcruhdcrscorcs,thcgovcrhmchtsoI
thc maih capitaist couhtrics vcrc thus ih a positioh to usc thc
dcvauatioh ahdrcvauatioh oIcurrchcics asmcahsoIthccompctitivc
struggc. Phd vhic thcy did so systcmaticay, thcy hohcthccss
cohtihucd to promotc thc ihtcgratioh oI thc vord markct through
a scrics oI hcgotiatiohs that Iurthcr ibcraizcd goba tradc ahd
ihvcstmcht, cvchtuay rcsutihgih thcIormatiohoIthcord!radc
Crgahizatioh.
!arIrombcihguhdcrmihcd,thcuhityoIthcvordmarkctvasthus
Iurthcrcohsoidatcddurihg this pcriod. ôr vas thcrcahy sighoIah
armamcht racc amohgrisihg ahd dccihihgcapitaistpovcrs. Ch thc
cohtrary, durihg ahd cspcciay aItcr thc Iiha cscaatioh oIthc Cod
ar arms buid-up ih thc l980s, goba miitary capabiitics tccamc
cvch morc cchtraizcdihthc hahds oIthc Lhitcd btatcs thahthcyhad
bcchprcviousy. Ptthcsamc timc, ihstcadoIprovidihgcapita tothc
rcst oI thc vord ccohomy, as Britaih had throughout thc prcvious
ohg dovhturh ahd Iihahcia cxpahsioh, sihcc thc l980s thc Lhitcd
btatcs has bcch absorbihgcapita athistoricayuhprcccdchtcdratcs,
as Brchhcr himscI hotcs. h a thcsc rcspccts, thc tracctory oI thc
compctitivcstruggcihthcatcstohgdovhturhdiIIcrsradicayIrom
thc prcvious ohc. Curhcxt taskisto accouhtIorthis combihatioh oI
simiaritics ahd diIIcrchccs bctvcchthc tvo pcriods ahd to Iihd out
vhat hcv ightthis kihdoIcomparisoh throvs ohBrchhcr's accouht
oI goba turbuchcc ovcr thc ast thirty ycars.
5
SOCIAL DYNAMICS OF
GLOBAL TURBULENCE
Brchhcr prcschts his accouht oIthc ohg dovhturh as a critiquc oI
vhat hc cas `suppy sidc' thcorics oIcapitaist criscs . Pdvahccd
ih various Iorms by cIt ahd right aikc, thcsc thcorics cohtchdcd
that, by thc l960s, abor had acquircd a cvcragc ih thc vcathicr
capitaist couhtrics suIIicicht to squcczc proIits ahd thcrcby
uhdcrmihc thc mcchahisms oI capitaist accumuatioh. hic
ackhovcdgihgthat abor may ihdccd bc ih such a positioh ocay
ahd tcmporariy, Brchhcr Iihds it ihcohccivabc that abor cah
vicd thc povcr hcccssary to provokc a ohg-tcrm, systcm-vidc
dovhturh.
Labor cahhot, as a ruc, brihg about a tcmporay cxtchdcd,
systcmic dovhturh bccausc, as a ruc, vhat might bc cacd thc
potchtiasphcrcoIihvcstmchtIorcapitaih ahyihc oIproductioh
gchcray cxtchds bcyohd thc abor markct that is aIIcctcd by
uhiohs ahd/or poitica partics or is rcguatcd by horms, vaucs,
ahd ihstitutiohs supportcd by thc statc. bo Iirms cah gchcray
circumvchtahdthcrcbyuhdcrmihcthc ihstitutiohaizcdstrchgthoI
vorkcrs at ahy givch poiht by ihvcstihg vhcrc vorkcrs ack thc
capacity to rcsist. Ihdccd, thcy must do so, or thcy vi Iihd
thcmscvcs outIahkcd ahd compctitivcy dcIcatcd by othcr capi-
taists vho vi.'
tIoovsthat,asBrchhcrputsit, `vcrtica'prcssurcoh capitaIrom
bcov-thatis, Irom abor-coud hot ahd did hot brihg about thc
spatiaygchcraizcd ahdtcmporaycxtchdcd squcczc ohproIits that
1 Although Brenner mentions immigration-"unless . . . restrained by political
means"-as another mechanism through which workers' power can be undermined,
his overwhelming emphasis is on the mobility of capital. Robert Brenner, "The
Economics of Global Turbulence: A Special Report on the World Economy, 1950-
1998," New Lft Review, I/229 (1998) , pp. 18-20.
uhdcricthc ohg dovhturh. Chy `horizohta' prcssurc Irom intcr-
capitaist compctitioh coud do bL.
!his hypothcsis is bascd oh thc assumptioh that thcrc is ih Iact
`chcapcr abor that cah bc combihcd vith mcahs oI productioh
cmbodyihg somcthihg ikc thc currcht cvc oI tcchhoogy vithout
ossoIcIicichcy ,that is, at ovcruhitcosts) . 'Pccordihgto Brchhcr,
this assumptioh is ustiIicd Ior tvo rcasohs. !irst, àbor Iorccs ih
rcgiohs vith ohg historics oIccohomic dcvcopmcht tchd to rcccivc
vagcs that arc substahtiay highcr thah cah bc cxpaihcd simpy by
rcIcrchcc to thcir cvc oI productivchcss', ahd sccohd, òvcr simi-
arycxtchdcdtimcpcriods,tcchhicachahgctchdstorcduccthcski
rcquircdtoproduccahygivcharrayoIproducts,viththcrcsutthat
thc aborIorccthatcahmakcthoscproductsvithoutossoIcIIicichcy
is cohtihuay chargcd, ahd thc vagc rcquircd to pay it corrcspohd-
ihgy rcduccd.
, ,
`
hshort,IorhistoricarcasohsthatBrchhcrdocshotcxporc,abor
Iorccs ih àdvahccd' capitaist couhtrics havc sccurcdrcvards Ior
cIIortIar highcr thah varrahtcd by thcirproductivity. !his ihitscI
makcs thcmvuhcrabc to thc compctitioh oI aborIorccsthat-Ior
cquay uhcxporcd historica rcasohs-vork Ior vagcs ovcr thah
thcir actua or potchtia productivity might varraht. Pt thc samc
timc, tcchhica chahgc cohtihuay chargcs thi goba poo oI
uhdcrpaid vorkcrs, or voud-bc vorkcrs, vho cah bc mobiizcd
to outIahk thc prcssurc oh proIitabiity comihg Irom ovcrpaid
vorkcrs. !hc ohy prcssurc oh proIitabiitythat capitaists cahhot
outIahk is thc prcssurc comihg Irom thc compctitioh oI othcr
capitaists.
!hcrc arc tvo maih probcms vith this argumcht. !irsty
it
appcars to bc ogicay ihcohsistcht bccausc it caims that, ih thc
past,vorkcrs ihthcàdvahccd'capitaistcouhtrics vcrc abcto gaih
grcatcr rcvards thah varrahtcd by thcir productivity, ih cohtra-
dictioh to thc thcorctica caim that ahy attcmpt to do so voud
pricc vorkcrs out oI thc vord markct. h additioh, thc argumcht
ovcrcstimatcs thc casc vith vhich, ih thc prcscht ho css thah ih thc
past, chcapcr abor suppics cah bc mobiizcd to outIahk morc
cxpchsivc ohcs. Lct us cariIy thcsc probcms by ookihg ohcc agaih
at thc historica rccord.
2 Ibid., p. 23.
3 Ibid., p. 18.
SOCIAL DYNAMICS OF GLOBAL TURBULENCE
123
Class Confict and Inter-Capitalist Competition
PhahaysisoIthcohgdovhturhoIl87J-96providcsstrohgcvidchcc
both ih Iavor ahd agaihst Brchhcr's thcsis oI thc prcdomihahcc oI
horizohta ,ihtcr-capitaist) rcatiohs ovcr vcrtica , abor-capita) rc-
atiohs ih brihgihg about a ohg-tcrm ahd gchcraizcd squcczc oh
proIits.hsupportoIBrchhcr'sargumcht,itcoudbcpoihtcdoutthat
ihtchsc abor-capita cohIicts-cithcrihthcIorm oIsustaihcdstrikc
activity, asihBritaihahdthcLhitcdbtatcs,orihthcIormoIvorkihg-
casspartyIormatioh, asihCcrmahyahdcscvhcrc-]o//oucJrathcr
thahprcccdcdthcohsctoIthcohgdovhturhihproIitabiity.!hcrccah
bcittcdoubtthatihtchscihtcr-capitaistcompctitioh,ihthcIormoIa
rcchtcss pricc var, vas thc maih, ahd prior, drivihg Iorcc Ior thc
substahtiaihcrcascih rca vagcsthatoccurrcddurihgthcdcprcssioh,
cspcciayihBritaih.tisasopausibctoassumcthatrisihgrcavagcs
at homcvcrc atcastih part rcspohsibcIorthccxposivcgrovthoI
Britishovcrscasihvcstmchtih thc l880s. Brchhcr'sargumchtIor thc
atc tvchticth cchtury thus Iits kcy Icaturcs oI thc atc hihctcchth-
cchtury cxpcrichcc. !hc Iit, hovcvcr, is Iar Irom pcrIcct.
Pthoughihtcr-capitaistcompctitiohvasuhdoubtcdythcprimary
IorccsqucczihgproIitabiityahdpushihguprcavagcsthroughdrastic
pricc dcIatioh, did hot vorkcrs' rcsistahcc ih thc Iorm oIihcrcasihg
strikcactivityahdcass-bascdorgahizatiohcohtributcih amaorvay
to that outcomc by prcvchtihg homiha vagcs Irom dccrcasihg as
rapidyaspriccsrPhddidhotthisrcsistahccitscIaIIcctthctracctory
oIihtcr-capitaistcompctitiohbystrchgthchihgthctchdchcy,hotust
tovardsthccxportoIcapitaIromBritaihahdthcimportoIabortothc
Lhitcdbtatcs,butasotovardsthc`poiticizatioh'oIthatcompctitioh
through a rcviva oIhco-mcrcahtiist practiccs ahd ovcrscas cmpirc-
buidihgohahuhprcccdchtcdscacrhatcvcrthccxactahsvcrtothcsc
qucstiohs,Brchhcr's hardahdIastdistihctiohbctvcchhorizohta ahd
vcrtica cohIicts, ahdhisa prtort cxcusioh oIthc attcr asa possibc
cohtributihg Iactor oI gchcra ahd pcrsistcht dovhturhs ih proIit-
abiity, arc i-suitcd to uhravc thc compcx historica ihtcractioh
bctvcch thc tvo kihds oI cohIicts.
bimiary,Brchhcr'scohtchtioh cohccrhihgthcihcvitabc outIahk-
ihgoI vorkcrs' cvcragc ih corc capitaist couhtrics through ihtcrha-
4 See Beverly J. Silver, Forces of Labor: Workers' Movements and Globalization
since 1 870 (Cambridge, Cambridge University Press, 2003), pp. 131-8, for one set of
answers to these questions.
tiohaIIactormobiityighorcskcyaspcctsoIhov thatmobiiIyactuay
Iuhctiohcd durihg thc caricr ohg dovhturh. ôst oI thc capita
cxportcd Irom Britaih ahd csscr corc couhtrics ih this pcriod did
hot ihvovc a rcocatioh oIihdustria productioh but thc buidihg oI
ihIrastructurcsihovcrscastcrritorics,cxpahdihgdcmahdIorthcout-
put oIBritish ahdothcr mctropoitah ihdustrics vhic ihcrcasihg thc
suppy oIchcaprav matcrias ahdvagc goods.!arIromuhdcrmihihg
thc cvcragc oI abor ih thc maih capitaist cchtcrs, this pattcrh oI
ovcrscas ihvcstmcht cohsoidatcd it. Ptthcsamc timc, vhic cohstaht
immigratiohmayhavchcpcdcohtaihthcgrovihgcvcragcoILbabor,
massivc cmigratioh-cspcciay IromBritaih-surcy hcpcdthc cm-
povcrmcht oI Luropcah abor. Ps Corah !hcrborh hotcs, ih thc
hihctcchthcchturyLuropcihgchcraahdBritaihihparticuarchoycd
practicayuhimitcdmigratiohoutctsIorits abor. `LvchthcLhgish
cchtcroIgobaihdustryvasahout-migratioharca. . . . Pcohscrvativc
cstimatc is that about 0 miioh Luropcahs cmigratcd out oI thc
cohtihcht ih thc pcriod l80-l9J0, vhich corrcspohds to about l2
pcrccht oIthc cohtihcht'spopuatioh ih l900.
, ,
`
P thihgs cohsidcrcd, thc pcrsistchcc ahd gchcraity oI thc atc
hihctcchth-cchturyproIitsqucczcappcartohavc bcch duc, hot ustto
thc ihtchsiIicatioh oI ihtcr-capitaist compctitioh, but aso to thc
cIIcctivcrcsistahccoIvorkcrs agaihstattcmptstomakcthcmbcarthc
costs oI that compctitioh ahd to thc diIIicutics vhich capitaists
chcouhtcrcd ih outIahkihg that rcsistahcc. arty rcatcd to thcsc
diIIicutics, ihthchaIcchturyIoovihgthcchdoIthcohgdovhturh
oI l87J-96, ihtcr-capitaist compctitioh bccamc ihcrcasihgy poiti-
cizcd. itcra vars amohg risihg ahd dccihihg capitaist povcrs,
rathcrthahpriccvarsamohgcapitaistchtcrpriscs,camcto domihatc
thcdyhamics oIhorizohta ahdvcrtica cohIicts aikc. !rom thc atc
l890s uhti thc !irst ord ar, this trahsIormatioh vas ihstru-
mchtaihrcvivihgproIitabiity.Lvchtuay,hovcvcr, itrcsutcdihthc
brcakdovh oI thc LK-cchtcrcd vord markct ahd a hcv ahd morc
vicious rouhd oIihtcr-impcriaistcohIicts. !orapracticapurposcs,
ihthc l9J0sahdl9+0sthcrcvashovordmarkcttospcakoI. hLric
obsbam' svords, vord capitaismhadrctrcatcdìhto thcigoos
oI its hatoh-statc ccohomics ahd thcir associatcd cmpircs.
, ,
Lhdcr thcsc circumstahccs,abor-capita cohIicts dcvcopcdaohg

tvo distihct ahd ihcrcasihgy divcrgcht paths. Chc vas thc prcdo-
5 G6ran Therborn, European Modernity and Beyond: The Trajectory of
European Societies, 1 945-2000 (London, Sage, 1995) , p. 40.
6 Eric ]. Hobsbawm, Nations and Nationalism since 1 780: Programme, Myth"
Reality (Cambridge, Cambridge University Press, 1991) , p. 132.
SOCIAL DYNAMICS OF GLOBAL TURBULENCE 125
mihahty `socia'pathoImovcmchts hcstihg atthc poiht oIproduc-
tioh, vhosc maih vcapoh oI struggc vas thc disruptivc povcr that
mass productioh puts ih thc hahds oI stratcgicay paccd vorkcrs.
!hisorigihatcdihatchihctcchth-cchturyBritaihbutassumcdamost
idca-typicaIorm ih thc Lhitcd btatcs. !hc othcr vas thc prcdomi-
hahty `poitica' path oI movcmchts hcstihg ih thc burcaucratic
structurcs oIpoitica partics, vhosc maihvcapoh vasthcscizurc oI
statc povcr ahdthcrapid modcrhizatioh oIthc statcs thatIc uhdcr
thcir cohtro. t origihatcd ih cohtihchta Luropc, most hotaby ih
Ccrmahy, but assumcd its idca-typica Iorm ih thc LbbK.
!hccourscoIstruggcaohgbothpathsvasthoroughyshapcdbythc
tvovordvars.LachoIthcscvas charactcrizcd by a simiarpattcrh.
ovcrtabormiitahcyroscohthccvcoIbothvars,dccihcdtcmporariy
durihgthccohIictsthcmscvcs,ahdthchcxpodcdihthciraItcrmath.!hc
Kussiah Kcvoutioh took pacc durihgthc !irst ordar'svavc oI
abormiitahcy,vhicthatoIthc bccohdordarsavthcsprcadoI
CommuhistrcgimcstoLastcrhLuropc,Chiha,ôrthKorca,ahdVict-
ham. tvasihthiscohtcxtoIcscaatihgabormiitahcyihthccorc,ahd
advahcihg commuhist rcvoutioh ih pcriphcra ahd scmi-pcriphcra
rcgiohs,thatthc socia paramctcrs oIthcLbpostvarvordordcrvcrc
cstabishcd.
!hcIormahdihtchsityoIihtcr-capitaistcompctitioh-that
is, ihtcr-impcriaist rivarics ahd vord vars-shapcd thc Iorm ahd
ihtchsityoIvorkcrs' struggcs durihg this pcriod. But thc Ìccdback'
oIvorkcrs' struggcs ohthctracctory oIihtcr-capitaistcohIictsvas
cvchmorcpovcrIuihthcIirsthaIoIthctvchticthcchturythahithad
bcchdurihgthcohgdovhturhoIl87J-96.hdccd,ihthcabschccoIthis
povcrIuIccdback,thccstabishmchtatthcchdoI thcbccohdordar
oI vhat Pristidc Zobcrg has cacd a àbor Irichdy' ihtcrhatioha
rcgimcvoudbchardtocxpaih.
7 Giovanni Arrighi and Beverly J. Silver, "Labor Movements and Capital
Migration: The US and Western Europe in World-Historical Perspective," in Charles
Bergquist, ed. , Labor in the Capitalist World-Economy (Beverly Hills, CA, Sage, 1984).
8 Silver, Forces of Labor, pp. 125-31 , 138-61.
9 Aristide R. Zolberg, "Response: Working-Class Dissolution," International
Labor and Working-Class History, 47 (1995). To be sure, the "labor friendly" reforms
instituted with the establishment of US hegemony-e. g. , macroeconomic policies favor
ing full employment-went hand in hand with fierce repression of any sectors of the labor
movement that sought a deeper social transformation than the postwar social contract
offered. Nevertheless, the reforms instituted under the pressure of escalating labor unrest
and advancing commw1ist revolution marked a significant transformation in comparison
with the laissez-faire regime characteristic of the period of British world hegemony. See
Giovanni Arrighi and Beverly J. Silver, Chaos and Governance in the Modern World
System (Milmeapolis, MN, 1999) pp. 202-7; Silver, Forces of Labor, pp. 157-8.
Pohg vith thc Lb-spohsorcd rccohstitutioh oIthc vord markct
oh hcv ahd morc soid Iouhdatiohs, this rcgimc crcatcd thc ihstitu-
tioha cohditiohs Ior thc systcm-vidc rcviva oI proIitabiity that
uhdcray thc ohg boom oIthc l90s ahd l960s. havc ho particuar
disagrccmcht vith Brchhcr's cohtchtiohthat ùhcvchdcvcopmcht,'
ihhis schsc oIthctcrm,vasakcydctcrmihahtoIthcohgboomahd
oI thc ohg dovhturh that Ioovcd. But his ihsistchcc that abor-
capita cohIicts paycdho sighiIicaht rocih dctcrmihihgthc cxtcht,
chgth, ahdshapcoIthcdovhturhsccms cvchcssvarrahtcdthahIor
caricr comparabc pcriods.
Lctus bcgih byhotihgthat,ihthcatc tvchticthcchtury,vorkcrs'
struggcs paycd a Iar morc proactivc roc vis-a-vis ihtcr-capitaist
compctitioh thahthcy didih thc atc hihctcchthcchtury. hcrcas ih
thc caricr pcriod, thc ihtchsiIicatioh oI abor-capita cohIicts, ahd
thc most sighiIicaht ihcrcascs ihrca vagcs,followed thc ohsct oIthc
dovhturh ih thc sccohd haI oIthc tvchticth cchtury thcy preceded
it. hargu.hghis casc agaihstth
rocoIvorkcrs'cvcragcih brihgihg
about a systcm-vidc ahd pcrsistcht squcczc oh proIits, Brchhcr
Iocuscs amost cxcusivcy oh thc cohtaihmcht oI vorkcrs' povcr
ih thc Lhitcd btatcs ih thc atc l90s ahd cary l960s. sihcc thc
cohtaihmcht occurrcd bcIorcthc crisis oIproIitabiity, hc argucs, thc
crisis coud hot bc duc to vorkcrs' prcssurcs. ''
LhIortuhatcy, this
harrov Iocus ohthc sihgc `trcc' oIa short-tcrm ahdoca cpisodc oI
cass cohIict, prcvchts Brchhcr Irom sccihg thc Ìorcst' oI thc
multinational risihg tidc oIcohIicts ovcr vagcs ahd vorkihg coh-
ditiohs thatih l968-7J cumihatcd ihvhatL. . hcps Brovh apty
cacd thc`pay cxposioh.'
Comihgih thc vakcoItvchtyycars oI

risihg rca vagcs ih thc corc rcgiohs oIthcvordccohomy, ahd at a
timc oIihtchsiIyihg ihtcr-capitaist compctitioh vordvidc, this pay
cxposioh did hot mcrcy cxcrcisc a systcm-vidc dovhvardprcssurc
ohproIitabiity,as mahyhavccmphasizcd. 'ôrcimportaht,ithad
a maor ahd astihg impact oh thc subscqucht tracctory oI ihtcr-
capitaist compctitioh.
10 Brenner, "Economics of Global Turbulence," pp. 52-4, 58-63.
11 E.H. Phelps Brown, "A Non-Monetarist View of the Pay Explosion," Three
Banks Review, 105 ( 1975) .
12 See, among others, Makoto Itoh, The World Economic Crisis and Japanese
Capitalism (New York, St Martin's Press, 1990), pp. 50-3; Philip Armstrong, Andrew
Glyn, and John Harrison, Capitalism since World War II: The Making and Breakup
of the Great Boom (London, Fontana, 1984), pp. 269-76; Philip Armstrong and
Andrew Glyn, Accumulation, Profits, State Spending: Data for Advanced Capitalist.
Countries 1 952-83 ( Oxford, Oxford Institute of Economics and Statistics, 1986) .
!his brihgs us to a sccohd obscrvatioh cohccrhihg diIIcrchccs
bctvcch thc tvo chd-oI-cchtury ohg dovhturhs. Pthough hc occa-
siohaymchtiohspriccihIatioh,Brchhcrisgchcrayobivioustothc
pccuiary ihIatiohary charactcr oIthc dovhturh hc dcscrbcs-a
thc morc rcmarkabc vhch cohtrastcd vith thc strohg dcIatiohary
charactcr oI thc atc hihctcchth-cchtury dovhturh. Brchhcr hcvcr
qucstiohs this pccuiarity, hor docs hc raisc thc coscy rcatcd
qucstioh oI vhy thc l96-7J crisis oI proIitabiity vithcsscd thc
scvcrahccoIthc asttchuousihkbctvcchmohctarycircuatiohahda
mctaic stahdard, ih sharp cohtrast vith thc tchdchcy oIthc l870s
ahd l880s tovards thc diIIusiohoIthc god ahdothcrmctalic-bascd
rcgimcs.
!o bc surc, Brchhcr docs impicity ackhovcdgc that ashihg-
toh'sIiha abahdohmcht,ihl970, oIhaI-hcartcdattcmptstostcmthc
tidc oIspccuatioh agaihst thc god-doar systcm vashot ust a poy
to shiIt thc dovhvard prcssurc oh proIits Irom Lb to japahcsc ahd
Ccrmah mahuIacturcrs through a radica rcaighmcht oI cxchahgc
ratcs. Ps hc mchtiohs ih passihg, `thc poitica costs oIsustaihihg a
scrious ahti-ihIatiohary poicy . . . quicky provcd uhacccptabc to
thc îxoh admihistratioh.
,,
'` hat thcsc `poitica costs' vcrc, ahd
vhcthcrthcyhad ahythihgto dovithabor-capita rcatiohs, vc arc
hottod. Psvc sha sccihthchcxtscctiohoIthis chaptcr,ihthc casc
oI thc Lhitcd btatcs such costs vcrc vord-systcmic as vc as
domcstic. ^cvcrthccss, cvch ih thc Lhitcd btatcs-torh as it vas
by ihtchsc socia cohIicts ovcr var ih Victham ahd civi rights at
homc-thcpoitica pricc oI subcctihg mohctary circuatioh to thc
discipihc oI a mctaic stahdard ccary had a socia compohcht,
ihcudihg thc costs ahd risks oIaichatihg abor Irom thc idcoogics
ahd practiccs oI thc domihaht socia boc. '
h Iact, thc mostcompcihgcvidchcc Ior thc roc paycd by abor
cvcragcihthcIihadcmiscoIthc godstahdardcomcs,hotIromthc
Lhitcd btatcs, but Irom thc couhtry that had bcch thc stauhchcst
advocatc oI a rcturh to a purc god-bascd rcgimc ih thc l960s. dc
Cauc's !rahcc. !rchch advocacy oI thc god stahdard chdcd
abrupty, hcvcr to bc rcvivcd agaih, ih ây l968, vhch dc Cauc
hadtograhtahugcvagchikctoprcvchtaborIromsidihgviththc
rcbcious studchts. ad mohctary circuatioh bcch subcct to thc
automaticmcchahismoIamctaicstahdard,suchavagchikcvoud
havc bcch impossibc. Bcihg pcrIccty avarc oI this, dc Cauc did
13 Brenner, "Economics of Global Turbulence," pp. 12a.-I.
14 Silver, Forces of Labor, pp. 161-3.
vhat vas hcccssary torcstorc socia pcacc ahd stoppcd daydrcamihg
about a rcturh to god. '`
Ps thc Lb ahd !rchch cxpcrichccs suggcst, thc cvcragc oIabor
durihg thc trahsitioh Irom boom to rcativc staghatioh ih thc atc
l960s ahd cary l970s vas hot a mcrc rcIcctioh oI ihtcr-capitaist
compctitioh, as itargcyhadbcchatthc ohsctoIthcatchihctcchth-
cchtury dovhturh.'
Ch thc cohtrary, it vas sighiIicaht chough to

makc its ovh ihdcpchdcht cohtributioh, hot ust to thc squcczc oI
proIitabiitythatuhdcraythctrahsitioh, but asotovardsauhchihg
thc dovhturh aohg ah ihIatiohary rathcr thah dcIatiohary path.
!his docs hot mcahthatihtcr-capitaist compctitioh vas hot aso at
vork ih squcczihg proIits, hor that vorkcrs ahd thcir socia povcr
bchcIitcdIromthcihIatioharyhaturcoIthc dovhturh-thcy ccary
did hot. P it mcahs is that Brchhcr's modc-hcar-absoutc prc-
domihahcc oI ihtcr-capitaist compctitioh ovcr abor-capita coh-
Iict-Iits thc atcst ohg dovhturh cvch css thah it did thc
prcvous ohc.
P coscr cxamihatioh oI thc cIIccts oI capita mobiity oh abor
cvcragc providcs Iurthcr cvidchcc Ior such ah asscssmcht. Ih thc
l970s, ih particuar, thcrc vas ihdccd a strohgtchdchcyIorcapita,
ihcudihg ihdustria capita, to `migratc' to ovcr-ihcomc, ovcr-
vagc couhtrics. ^cvcrthccss, as Bcvcry bivcr has documchtcd ih
grcat dctai, thc rcocatioh oI ihdustria activitics Irom richcr to
poorcr couhtrics has morc oItch thah hot cd to thc cmcrgchcc oI
strohg, hcv abor movcmchts ihthcovcr-vagc sitcs oIihvcstmcht,
rathcr thah ah uhambiguous `racc to thc bottom. ' Pthough cor-
poratiohs vcrc ihitiay attractcd to particuar !hird ord sitcs
Brazi, bouth PIrica, bouth Korca-bccausc thcy appcarcdtooIIcra
chcap ahd docic abor Iorcc, thc subscqucht cxpahsioh oI capita-
ihtchsivc,mass-productiohihdustricscrcatcdhcvahdmiitahtvork-
ihg casscs vith sighiIicaht disruptivc povcr. !his tchdchcy vas
arcadyihcvidchccihthcatchihctcchthahdcarytvchticthcchturics
ihtcxtics,thcchicIihdustry oIBritish capitaism. Butithas bcchIar
15 Completely forgotten today, the connection between the May events and the
abrupt end of French advocacy of the gold standard was also little noticed at the time.
I nonetheless remember quite vividly from newspaper accounts how May 1968
brought about a sudden reversal in French support of the gold standard as a means
of challenging US dollar supremacy.
16 As noted in Chapter 4, real wages rose throughout the Great Depression of
1873-96. Although in the 1 880s and 1890s, the increase could be attributed to workers'
resistance against cuts in nominal wages, initially it was entirely due to inter-capitalist
competition driving prices down more quickly than wages.
strohgcr ih thc cadihg ihdustrics oI Lb capitaism, such as thc
automobic ihdustry. '
!hus capitaist attcmpts to outIahk abor prcssurcs oh proIit-
abiity through ihdustria rcocatioh tchdcd to dcprivc capita oIthc
cohsidcrabc bchcIitsassociatcdvithproducihgcosctothcvcathicr
markcts ahdihsaIcrpoitica chvirohmchts,vithoutactuay provid-
ihgmahyoIthc cxpcctcdbchcIits oIabuhdaht, ov-vagcd, ahd casy-
to-discipihc abor suppics. Pctihg ih cohuhctioh vith othcr tch-
dchcicsto bcdiscusscdatcr, thistchdchcymadcitsovhcohtributioh
to thc massivc rcdircctioh oI trahshatioha capita Iovs ih thc l980s
Irom ov- ahd middc-ihcomc dcstihatiohs to thc Lhitcd btatcs.
Pgaih, I am hot dchyihg that ihdustria rcocatiohhcpcd ih uhdcr-
mihihg vorkcrs' cvcragc ih thc couhtrics thatcxpcrichccdthc grcat-
csthctoutIovoIcapita.I amsimpy sayihgthat,gchcrayspcakihg,
ittchdcd to backIirc ohproIitabiity, ahd, ihsoIarasthc Lhitcd btatcs
vas cohccrhcd,thchctoutIov sooh turhcdihto ahugchctihIov. II
abor's cvcragc dccihcd ih thc coursc oI thc ohg dovhturh, as it
ccrtaihy did, capita mobiity is hot a vcry cohvihcihg cxpahatioh.
Labor migratioh docs hot providc a vcry pausibc cxpahatioh
cithcr. Itistructhatabormigratiohovcrthcastthirty-Iivcycarshas
comcprcdomihahtyIrompoorcouhtrics,toaIargrcatcrcxtchtthah
ih thc atc hihctcchth cchtury-thcrcby cohstitutihg a grcatcr com-
pctitivcthrcatIorvorkcrsihthcvcathicrihdustriacchtcrs. ^cvcr-
thccss, ih thc atc tvchticth cchtury thc capacity oIvorkcrs ih thc
richcr couhtrics to Iorcsta compctitioh Irom immigraht abor Iorccs
,oItch throuh adhcrchcc to racist idcoogics ahdpracticcs) has bcch
Iar grcatcr.'
17 Silver, Forces of Labor, esp. chs 2 and 3. Brenner and Silver both make use of
Raymond Vernon's product cycle model (see "International Investment and Inter
national Trade in the Product Cycle," Quarterly Journal of Economics, 80, 2 [1966] ) .
Brenner ("Economics of Global Turbulence," p. 1 8) uses i t t o buttress on a priori
grounds the assumptions of his own model, whereas Silver (Forces of Labor, pp. 77-
97) uses it to show empirically the limits of industrial relocation i outflanking labor
resistance.
18 This greater capacity is reflected in the fact that, proportionately speaking,
migratory flows in the late nineteenth century were larger than today's, despite the
technological advances in transportation since then. See David Held et aI., Global
Transformations (Stanford, CA, Stanford University Press, 1999), ch. 6. Moreover,
immigrant workers have been the protagonists in some of the most militant and
successful labor struggles in the US in the 1990s, for example, the Justice for Janitors
campaigns. See Roger Waldinger et ai., "Helots No More: A Case Study of the Justice
for Janitors Campaign in Los Angeles," in K. Bronfenbrenner et aI., eds, Organizing
to Win (Ithaca, NY, Cornell University Press, 1998) , ch. 6.
hsum, Brchhcr'sargumcht IorthcabsoutcprcdomihahccoIihtcr-
capitaist compctitioh ovcf abor-capita struggcs ih dctcrmihihg
systcm-vidc ahd pcrsistcht cohtractiohs ih proIitabiity misscs thc
compcx historica ihtcractioh bctvcch horizohta ahd vcrtica coh-
Iicts. Pthough, vord-historicay, ihtcr-capitaist compctitioh has
ihdccd bcch thc prcdomihaht ihIuchcc-providcd that vc ihcudc
ihtcr-capitaist vars amohg thc most importaht Iorms oI that com-
pctitioh-abor-capita cohIicts hcvcr vcrc a mcrc `dcpchdcht
variabc,' abovc a oh thc cvc ahd cary stagcs oI thc atcst ohg
dovhturh. ' ôt ohy did cohIicts ovcr vagcs ahd vorkihg cohdi-
tiohs ih corc rcgiohs cohtributcto thc ihitia squcczc oh proIitabiity
ih thc crucia l968-7J pcriod, morc importahty, thcy Iorccd thc
ruihg groups oI corc capitaist couhtrics to choosc ah ihIatiohary
rathcr thah a dcIlatiohary stratcgy oI crisis mahagcmcht.
!oputitbuhty,atthcchdoIthcohgpostvar boom,thccvcragc
oIabor ih corc rcgiohs vas suIIicichtto makc ahyattcmptto ro it
backthrough a scriousdcIatiohIar too risky ih socia ahdpoitica
tcrms. Ph ihIatiohary stratcgy, ih cohtrast, promiscd to outIahk
vorkcrs' povcr Iar morc cIIcctivcy thah ihtcrhatioha Iactor mobi-
ity coud. t vas, ihdccd, thc grcatstaghatioh-cum-ihIatioh oI thc
l970s-`stagIatioh, ' as itvascacdatthctimc-ahdits cIIccts oh
ihtcr-capitaist compctitioh ahd l abor-capita rcatiohs, that cIIcc-
tivcy vorc dovh vorkcrs' povcr ihthccorc, opchihgthc vayIorits
coapscuhdcrthcimpactoIthcKcagah-!hatchcrcouhtcrrcvoutioh.
h ordcr to capturc thc Iu sighiIicahcc oI this dcvcopmcht ahd its
impactohthcsubscquchttracctoryoIthcohgdovhturh,hovcvcr,it
is hot chough to Iocus oh abor-capita rcatiohs. Lvch morc im-
portahtvcrc ôrth-bouth rcatiohs, to vhich vc hov turh.
Souther Exposure
h his critiquc oI suppy-sidc thcorists, Brchhcr cohtrasts thcir dis-
positioh to vicv thc vord ccohomy as thc mcrc sum oIits hatioha
compohchtsvithhis ovhattcmptto sccsystcmicproccsscsashavihg
a ogic oIthcir ovh.
1|hccmphasis oIthcsupply-sidcthcorists oh ihstitutiohs, policy
ahd povcr has cd thcm to Iramc thcir ahalyscs too hcaviy oh a
couhtry-by-couhtry basis, ih tcrms oIhatioha statcs ahd hatioha
19 See Arrighi and Silver, Chaos and Governance, ch. 3.
ccohomics-to vicv thc ihtcrhatioha ccohomy as a sort oI spil-
ovcr oIhatiohal ohcs ahd to scc systcmic ccohomic problcms as
stcmmihgIrom agglomcratioh oIoca ohcs. Ihcohtrast,I shall
takc thc ihtcrhatiohal ccohomy-the capital accumulation and
profitability of the system as a whole-as a thcorctica vahtagc
poiht Irom which to ahalyzc its criscs ahd thosc oI its hatiohal
compohchts.
Z
131
Laudabc as this ihtcht is, Brchhcr's ahaysis Ias short oI its
promiscs, bcihg Iocuscd amost cxcusivcy oh thrcc hatioha
statcs/ccohomics ,thc Lhitcd btatcs, japah, ahd Ccrmahy) ahd thcir
mutua rcatiohs, vith occasiohal rcIcrchccs to othcr cstcrh Lur-
opcah couhtrics ahd thc `miracc ccohomics' oI Last Psia. Chiha
appcars ohy Icctihgly tovards thc chd oI`Coba !urbuchcc' ahd
ih a ittc morc dctai ih thc cosihg pagcs oI The Boom and the
Bubble. hthc2006PItcrvordto Global Turbulence, Brchhcrcahhot
avoid rcIcrrihg to thc spcctacuar ccohomic pcrIormahcc oI Chiha
sihcc thc pubicatioh oIthc caricr tcxts. Chiha's asccht, hovcvcr, is
said to makc ho diIIcrchcc, ihdccd, to strchgthch thc cohcusiohs
rcachcd oh thc basis oI thc caricr ahaysis Iocuscd oh thc Lhitcd
btatcs, Ccrmahy, ahd japah. '
!hc vast maority oI thc vord's statcs ahd thc buk oI its
popuatioh havc, apparchty, ho bcarihg oh thc Iuhctiohihg oI Brch-
hcr's vord ccohomy. Brchhcr admits that cohcchtratihg oh thrcc
couhtrics `docsihtroduccdistortiohs. 'But,vithoutspcciIyihgvhat
thcscdistortiohs arc, hc gocs ohto ustiIy his harrov Iocus oh thrcc
grouhds. !irst, ih l90, thc Lb, Ccrmah, ahd japahcsc ccohomics
takchtogcthcr àccouhtcd Ior 60 pcrccht oIthcoutput ,ih tcrms oI
purchasihgpovcrparitics) oIthc scvchtcchcadihgcapitaistccoho-
micsahdbyl99+thatIigurchadrischto66pcrccht. 'bccohd,cachoI
thc thrcc ccohomics `stood . . . at thc hub oIgrcat rcgioha bocs,
vhichthcy cIIcctivcy dyhamizcdahddomihatcd. 'PhdIihay, `thc
ihtcractioh amohg thcsc thrcc ccohomics vas . . . ohc oIthckcysto
thc cvoutioh oIthc advahccd capitaist vord throughout thcpost-
var pcriod.
,,
!hcsc prcmiscs arc qucstiohabc oh tvo grouhds. !hc combihcd

vcight oI thc thrcc ccohomics ih qucstioh is ihdccd cohsidcrabc,
20 Brenner, "Economics of Global Turbulence," p. 23, emphasis in the original.
21 Robert Brenner, The Economics of Global Turbulence: The Advanced
Capitalist Economies from Long Boom to Long Downturn, 1945-2005 (London,
Verso, 2006), pp. 323-9, 340-3.
22 Brenner, "Economics of Global Turbulence," p. 9.
thoughsomcvhatcssthahBrchhcr'ssourccssuggcst. `^cvcrthccss,as
!igurc. lshovs ,thcirsharcoItotavordcxportshasbcchcssthahJ0
pcrcchtIormostycars,ahdvhicthroughthcl980sthcgrovihgCcrmah
ahdjapahcscsharcscompchsatcdormorcthahcompchsatcdthcIaihg
Lbsharc,sihccthcmidl990sthcsharcsoIathrcccouhtricshavcbcch
dccihihg ih sharp cohtrast vith thc rapid risc oIthc Chihcsc sharc.
ôrcovcr,thccombihcdsharcoIvaucaddcdihmahuIacturihgoIthc
thrcc couhtrics-thc brahch oI activitics oh vhich Brchhcr cohcch-
tratcs-has dccihcd sighiIicahty ihthc coursc oIthc ohg dovhturh.
!hc Ia has bcch argcy duc to thc rapid ihdustriaizatioh oI mahy
couhtrics oIthc vord's bouth-vhat Picc Pmsdch has cacd `!hc
KiscoIthc`Kcst.'' Lvch cxcudihgChiha,thcgobabouth'ssharcoI
vordmahuIacturihgvaucaddcdroscIroml0.7pcrcchtihl97tol7.0
pcrcchtihl998,ahditssharcoIvordmahuIacturcdcxportsgrcvcvch
Iastcr,risihgIrom7.pcrcchtihl97to2J. Jpcrcchtihl998. Bydcaihg
viththcvord'sbouthihacursoryvay,Brchhcrthustchdsto missohc
oIthc mostdyhamicccmchts oIthcihtchsiIicatiohoIcompctitioh to
vhichhc attributcs somuchimportahcc.
!hc sccohd probcm vith Brchhcr's Iocus oh thrcc couhtrics is
morc scrious. thcvirtuacvictiohoIvord poitics Iromthc ahaysis
oIcapitaistdyhamics. !hcrcishoqucstiohthatthcihtcractiohoIthc
23 Using the more inclusive data sets of the World Bank, their combined share of
"world" GNP appears to have remained virtually constant, rising insignificantly from
53. 1 per cent in 1960 to 53. 6 per cent in 1999 (calculated from World Bank, World
Tables, vols 1 and 2 [Washington DC, World Bank, 1984] and World Development
Indicators, CD ROM [Washington DC, World Bank, 2001] ) . "World" GNP excludes
the former Communist countries of the USSR and Eastern Europe and other countries
for which there are no comparable data for both 1960 and 1999. However, all the
available evidence suggests that the exclusion has the effect of raising the above figures
by one or two percentage points at most.
24 Alice Amsden, The Rise of "The Rest" (New York, Oxford University Press,
2001), and "Good-bye Dependency Theory, Hello Dependency Theory," Studies in
Comparative International Development, 38, 1 (2003) , tables 1 and 2. By recalculating
Amsden's percentages to include China, I obtain an increase in the Southern share of
world manufacturing value added from 11. 9 per cent in 1975 to 21. 8 per cent in 1998.
As shown elsewhere, this increase in the Southern share of manufacturing value added
reflects a strong North-South convergence in degree of industrialization-accom
panied, however, by a complete lack of income convergence. See Giovanni Arrighi,
Beverly J. Silver, and Benjamin D. Brewer, "Industrial Convergence and the Persis
tence of the North-South Divide," Studies in Comparative International Develop
ment, 38, 1 (2003) ; "A Reply to Alice Amsden," Studies in Comparative International
Development, 38, 1 (2003) ; and "Industrial Convergence and the Persistence of the
North-South Divide: A Rejoinder to Firebaugh," Studies in Comparative Interna
tional Development, 40, 1 (2005) .
Figure 5. 1 National exports as a percentage of total world exports
Note: Percentages of world exports in current US dollars.
Source: WTO International Trade Statistics.
133
Lhitcd btatcs,japah,ahd Ccrmahy has bcch òhcoIthc kcys' tothc
cvoutiohoIvord capitaism sihcc thc bccohd ord ar, butithas
ccrtaihyhotbcchthcohyohc,orcvchthcmostimportaht.PsBrchhcr
impicity rccoghizcs ih ohc oI thc passagcs quotcd ih Chaptcr +,
throughout thc ohg boom Lb ihtcractioh vithCcrmahyahdjapah
vas thoroughy cmbcddcd ih, ahd domihatcd by, thc Cod ar
rcatiohsbctvcchthcLhitcdbtatcs, thcLbbK, ahd Chiha. !hccrisis
oIproIitabiitythatmarkcdthctrahsitiohIromthcohgboomtothc
ohg dovhturh, as vc as thc grcat stagIatioh oI thc l970s, vcrc
thcmscvcsdccpyaIIcctcdbythcparaccrisisoI Pmcricahhcgcmohy
vhichchsucdIromthccscaatiohoIthcVicthamarahdcvchtuaLb
dcIcat. Ps Iorthc Kcagah-!hatchcrhco-ibcracouhtcrrcvoutioh, it
vas hot ust, or cvch primariy, a rcspohsc to thc uhsovcd crisis oI
proIitabiity but aso-ahd cspcciay-a rcspohsc to thc dccpchihg
crisis oIhcgcmohy. P aohg, thc tracctorics oIihtcr-capitaist com-
pctitiohahdoIthcihtcractiohamohgthcvord'sthrccargcstccoho-
micsvcrcshapcdbythcbroadcrpoiticacohtcxt.!hcamostcompctc
abschccoIthiscohtcxtihBrchhcr'sstoryisihdccdthcsourcchot ustoI
distortiohsbut oIihdctcrmihatchcss as vc.
CohsidcrthccohhcctiohbctvcchthccrisisoIproIitabiityoIthcatc
l960s ahdcary l970s ahd thc cohtcmporahcous brcakdovh oIthc
god-doar cxchahgc stahdard. Ps vc havc scch, Brchhcr impicity
ackhovcdgcsthat`poitica costs'paycd arocihthcabahdohmcht
oIgod,buthohcthccssuphodsthcthcsisthatitsprimarydctcrmihaht
vas thc compctitivc struggc bctvcch Lb mahuIacturcrs ahd thcir
Ccrmahahdjapahcscrivas . chavcarcadycriticizcdthisargumcht
Ior ighorihg thc rcativcy autohomous roc that vorkcrs' cvcragc
paycdihthccrisis.^cvcrthccss,thcmostimportahtdctcrmihahtvas
hcithcrihtcr-capitaistcompctitiohhorabor-capitarcatiohsbutthc
dircct ahd, cspcciay, thc ihdircct cIIccts oI thc cscaatioh oI thc
Victham ar oh thc Lb baahcc-oI-paymchts. Pthough Victham is
cohspicuousIor its abschccihBrchhcr' sstory, thcsc cIIcctsdocrccpih
ohaIcvoccasiohs.!hus,`stcppcd-upVicthamarspchdihg'issaid
to bc thc rcasohIor thc suddch accccratioh oIpricc ihIatioh ih thc
Lhitcdbtatcsvhich,bctvcchl96ahdl97J,sovcddovhbutdidhot
stopthcgrovthoIrcavagcs.!hisaccccratiohoIihIatioh,ihturh,is
hcd rcspohsibc Ior thc vcakchihg oI thc compctitivc positioh oI
Pmcricah mahuIacturcrs, both at homc ahd abroad, vis-a-vis thcir
Ccrmah ahdjapahcscrivas ihthc samc pcriod.`
!hcsc casua obscrvatiohs shov that cvch Brchhcr is Iorccd lo
ackhovcdgc that bchihd thc ihtchsiIicatioh oIcompctitioh bctvch
Lb ahd Iorcigh mahuIacturcrs, ahd thc vagarics oI abor-capita
cohIicts ihthc Lhitcdbtatcs ahdcscvhcrc,thcrc urks ah cmihchty
systcmicbutpoiticavariab c, vhichhisrcscarchdcsighhasrucdout
oIcohsidcratioh. !hislurkihgvariabcisthcpovcrstruggcihvhich
thc Lb govcrhmcht sought to cohtaih, through thc usc oIIorcc, thc
oiht chachgc oI hatiohaism ahd commuhism ih thc !hird ord.
Ps thc cscaatioh oIthcvar ihVicthamIaicd to brcakthc back oI
Victhamcsc rcsistahcc, ahdprovokcd ihstcad vidcsprcad oppositioh
tothcvarihthcLhitcdbtatcsitscI,thisstruggcrcachcditscimaxih
thc samc ycars as thc crisis oI proIitabiity. Ps havc argucd csc-
vhcrc,thccostsoIthcvar-ihcudihgthccostsoIprogramsaimcdat
stcmmihg thc tidc oI domcstic oppositioh-hot ohy cohtributcd to
thc proIit squcczc, but vcrc thc most Iuhdamchta causc oI thc
coapsc oI thc Brcttoh oods rcgimc oI Iixcd cxchahgc ratcs ahd
thc prccipitous dcvauatioh oI thc Lb doar that chsucd. "
PsBrchhcrmaihtaihs,thcdoardcvauatiohoIl969-7Jdrdhcpthc
LhitcdbtatcstoIoistthcburdchoIthcproIitabiitycrisisohtoCcrmahy
25 Brenner, "Economics of Global Turbulence," p. 97; The Economics of
Global Turbulence, pp. 102, 119.
Origins of our Times (London, Verso, 1994) , pp. 300-8, 320-1.
f
t
'
135
ahdjapahahdchcckthcprcssurcoIrisihgmohcyvagcsohproIits at
homc. But voud arguc that this rcdistributioh oIthc burdch vas
argcy a byproduct oI poicics aimcd primariy at Irccihg thc Lb
govcrhmcht'sstruggcIordomihahccihthc!hirdordIrommohc-
tary cohstraihts. Pt cast ihitiay, thc iquidatioh oIthc god-doar
cxchahgc stahdarddid sccm to chdov thc Lb govcrhmcht vith ah
uhprcccdchtcdIrccdomoIactiohihtappihgthcrcsourccs oIthcvord
simpybyissuihgitsovhcurrchcy.ovcvcr,thisIrcchahdcoudhot
prcvchtthcdcIcatoIthc Lhitcd btatcs ih Victhamhor stop thc stccp
dccihc oILb prcstigc ahd povcr ih its vakc. hdccd, iIahythihg, it
vorschcd that dccihc byprovokihga vordvidc ihIatiohary spira
vhich thrcatchcd to dcstroy thc chtirc Lb crcdit structurc ahd thc
vordvidc hctvorks oI capita accumuatioh oh vhich Pmcricah
vcath ahdpovcrhadbccomcmorcdcpchdchtthahcvcrbcIorc
!hc dccihcoILbpovcr ahdprcstigcrcachcdits hadir ih thc atc
l970sviththcrahiahKcvoutioh,ahcvhikcih oipriccs,thcbovict
ihvasioh oIPIghahistah, ahd ahothcr scrious crisis oIcohIidchcc ih
thc Lb doar. Brchhcr hardy mchtiohs this dccpchihg crisis oI Lb
hcgcmohy as thc cohtcxt ih vhich, bctvcch l979 ahd l982, thc
mohctary poicics oI thc Lb govcrhmcht chahgcd Irom utra axity
to cxtrcmc tighthcss. c docs tracc thc chahgc to ` a dcvastatihgruh
oh thc Lb currchcy that thrcatchcd thc doar's positioh as ah
ihtcrhatioha rcscrvc currchcy. ' But hc has ho satisIactory cxpaha-
tioh oI thc Iight ahd pays ho attchtioh to thc Prab Icars ovcr
PIghahistah ahd rah that, accordihgto Business Week, vcrc bchihd
thc surgc ih thc pricc oIgod to ah a-timc high oI S87 ih jahuary
l980. Ps ih thc casc oIthc iquidatioh oIthc god--oar cxchahgc
stahdard tch ycars caricr, var ahd rcvoutioh ih thc bouth, rathcr
thah ihtcr-capitaist compctitioh amohg thc vord's thrcc argcst
ccohomics,vcrcthc primarydrivihgIorcc oIthc mohctarist couhtcr-
rcvoutioh oI l979-82. !uhdamchta chahgc ih thc mohctary sphcrc
ohcc agaih had maor impicatiohs both Ior thc ihtcr-capitaist ahd
cass struggcs ih corc rcgiohs. But thc strohgcst stimuus Ior thc
27 Riccardo Parboni, The Dollar and its Rivals (London, Verso, 1981) , pp. 47,
89-90.
28 Arrighi, The Long Twenti
e
th Century, pp. 310-14, 317-20. As we shall see in
Chapter 6, the so-called first "oil shock" of 1973-74 was a crucial intervening variable
in the worldwide inflationary spiral that connects the crisis of us hegemony of the late
1960s and early 1970s to the devastating run on the US dollar of the late 1970s.
29 Cited in Michael Moffitt, The World's Money: International Banking from
Bretton Woods to the Brink ofInsolvency (New York, Simon & Schuster, 1983), p.
178.
i+

chahgc camc Irom thc uhsovcd crisis oI Lb hcgcmohy ih thc !hird
ord rathcr thah thc crisis oIproIitabiity as such.
crc too, thc pccuiaritics oI thc atc tvchticth-cchtury ohg
dovhturh may bc uscIuy highightcd through a comparisoh vith
that oI l87J-96. !hough scdom rcmarkcd upoh, diIIcrcnccs ih
ôrth-bouth rcatiohs bctvcch thc tvo ohg dovhturhs arc cvch
morc sighiIicahtthahthosc oIabor ahdcapita.!hc most importaht
ahd a-chcompassihg diIIcrchcc is that thc caricr ohg dovhturh
occurrcd ih thc midst oI thc atcst ahd grcatcst vavc oI ôrthcrh
tcrritoria cohqucst ahd coohizatioh oIthc bouth, vhcrcas thc atcr
ohg dovhturh occurrcd at thc tai-chd oI thc grcatcst vavc oI
dccoohizatioh ih vord history.` Ih bctvcch thcrc stood thc grcat
`rcvot agaihst thc cst' oI thc Iirst haI oI thc tvchticth cchtury
vhich, accordihg to Barracough's vicv quotcd ih thc Ihtroductioh,
markcd thc bcgihhihg oI ah chtircy hcv cra ih vord history.
Pthough, ih thc l990s, thc sccmihgy uhimitcd povcr oI thc cst
madc thc caricr bouthcrh rcvot ook ihsighiIicaht, iI hot Iutic,
hcithcr thc origihs, hor thc tracctory, hor thc cohscquchccs oI thc
atcst ohg dovhturh cahbcaccuratcy dcciphcrcd cxccptih thcight
oIthcIuhdamchta chahgcihôrth-bouthrcatiohs that occurrcdih
thc prcccdihghaIcchtury. !oiustratc thc poiht, I sha Iocus ohcc
agaih oh thc mohctary aspccts oIthc tvo ohg dovhturhs.
IhthcprcccdihgscctiohvctraccdthcihIatioharycharactcroIthc
atcst ohgdovhturh to thc socia ahdpoitica impossibiity oIsub-
cctihg abor-capita rcatiohs ih corcrcgiohs to thc discipihc oI a
mctaicstahdard,asthcy had bcch durihgthcatchihctcchthcchtury.
!hc haturc ahdstrchgth oIthis socia cohstraiht vithih corcrcgiohs,
hovcvcr, thcmscvcs dcpchdcriticay oh thc particuarpoitica ar-
rahgcmchtsthatihkthccorctothcpcriphcrics. ôthihgiustratcsthis
bcttcrthahthccosccohhcctiohbctvcchBritaih'sadhcrchcctothcgod
stahdard ahd its cxtractioh oItributc Irom thc Ihdiah subcohtihcht.
Britaih'sIhdiahcmpirc vascritica ih tvomaih rcspccts.
!irst, miitariy. ih Lord baisbury' svords, Ìhdia vas ah Lhgish
barrackihthcCrichta bcasIrom vhichvc maydravahyhumbcroI
troops vithout payihg Ior thcm.
,,
`' !uhdcd chtircy by thc Ihdiah
taxpaycr, thcsc Iorccs vcrc orgahizcd ih a Luropcah-styc coohia
30 On waves of colonization and decolonization, see Albert Bergesen and
Ronald Schoenberg, "Long Waves of Colonial Expansion and Contraction, 1415-
1969," in A. Bergesen, ed., Studies in the Modern World-System (New YOlk,
Academic Press, 1980) .
31 Quoted in B.R. Tomlinson, "India and the British Empire, 1880-1935," The
Indian Economic and Social History Review, 12, 4 (1975) .
SOCIAL DYNAMICS OF GLOBAL TURBULENCE i+
army ahd uscd rcguaryih thc chdcss scrrcs oIvars throughvhich
Britaih opchcdup Psia ahdPIricatocstcrh tradc, ihvcstmcht, ahd
ihIuchcc.` !hcy vcrc `thc iroh Iist ih thc vcvct govc oIVictoriah
cxpahsiohism . . . thc major cocrcivc Iorcc bchihd thc ihtcrhatioha-
izatioh oI ihdustria capitaism.
, ,
`` Ps atc as l920, sodicrs Irom
Ihdia accouhtcd Ior morc thah 87 pcrccht oI thc troops Britaih
dcpoycd ih Iraq to quc a Iu-scac ihsurgchcy agaihst British
miitary occupatioh. `crhaps, thch, thc grcatcst probcm Iaccd by
thc Phgophohc cmpirc oI our timc is vcry simpc. thc Lhitcd Kihg-
dom had thc Ihdiah Prmy, thc Lhitcd btatcs docs hot.
,,
`
bccohd, ahd cquay importaht, thc ihIamous omc Chargcs ahd
thcBahkoILhgahd's cohtro ovcrIhdia'sIorcigh-cxchahgc rcscrvcs,
oihtyturhcdIhdiaihtothc `pivot' oIBritaih's gobaIihahciaahd
commcrcia suprcmacy. Ihdia's baahcc-oI-paymchts dcIicit vith
Britaih, ahd surpusvith a othcrcouhtrics,chabcdBritaihto scttc
its dcIicit oh currcht-accouht vith thc rcst oI thc vord. ithout
Ihdia's Iorcibc cohtributioh to thc baahcc-oI-paymchts oI impcria
Britaih, it voud havc bcch impossibc Ior thc attcr `to usc thc
ihcomcIrom hcr ovcrscas ihvcstmcht IorIurthcrihvcstmcht abroad,
ahd to givc back to thc ihtcrhatioha mohctary systcm thc iquidity
shc absorbcd as ihvcstmcht ihcomc. ' ôrcovcr, Ihdiah mohctary
rcscrvcs `providcd a argc masse de mancuvre vhich British mohc-
tary authoritics coud usc to suppcmcht thcir ovh rcscrvcs ahd to
kccp Lohdoh thc cchtcr oIthc ihtcrhatioha mohctary systcm.
,,
``
32 If we take Asia and Africa together, there were as many as seventy-two separate
British military campaigns between 1 837 and 1900. Brian Bond, ed., Victorian Military
Campaigns (London, Hutchiuson, 1967), pp. 309-11. By a different count, between 1803
and 1901 Britain fought fifty major colonial wars (Anthony Giddens, The Nation-State
and Violence (Berkeley, CA, University of California Press, 1987), p. 223.
33 David Washbrook, "South Asia, the World System, and World Capitalism,"
The Journal of Asian Studies, 49, 3 (1990) , p. 481.
34 N. Ferguson, "Cowboys and Indians," New York Times, May 24, 2005. In
2003, the United States exerted heavy pressure on the Indian government to commit a
full division of 17,000 troops. Even if the Indian government had been willing to do so,
the domestic political environment simply did not allow it. "In retrospect, this was
one of the key events of the first thirty months of the Iraq war. No Indian commitment
meant that no other major troop offerings [ironically, with the exception of the British
army] were forthcoming" (P. Rogers, "Fragments of the 'War on Terror'," open
Democracy, August 25, 2005) .
35 Marcello de Cecco, The International Gold Standard: Money and Empire,
2nd edn (New York, St Martin's Press, 1984), pp. 62-3. For a full account of the
tribute that Britain extracted from India in the late nineteenth and early twentieth
centuries, see Amiya K. Bagchi, Perilous Passage: Mankind and the Global Ascen
dancy of Capital (Lantham, MD, Rowman & Littlefield, 2005) , pp. 239-43.
h chIorcihg mohctary discipihc at homc ohvorkcrs ahd capita-
ists aikc, Britaih's ruihg groups thus Iaccd ah atogcthcr diIIcrcht
situatioh to that oI Lb cadcrs a cchtury atcr. !or ohc thihg, thc
cxcrcisc oI vord-hcgcmohic Iuhctiohs-ihcudihg thc chdcss scrics
oI vars Iought ih thc vord's bouth-did hot ihvovc thc kihd oI
ihIatioharyprcssurcsthatthcVicthamarchgchdcrcdihthcLhitcd
btatcs . ôtohy vcrcthcvarsIihahccdbyhdiah mohcybut,Iought
by hdiah ahd othcr coohia troops, thcy did hot rcquirc thc kihd oI
sociacxpchditurcthcLbgovcrhmchthadtoihcurihordcrtocohtaih
domcstic oppositioh to cscaatihg casuatics.
Costs oI var asidc, uhikc thc Lhitcd btatcs ih thc atc tvchticth
cchtury, Britaih coud ihtcrhaizc thc bchcIits ,Ior its mctropoitah
subccts)ahdcxtcrhaizcthccosts,ohitscoohiasubccts)oIthcccasccss
`structuraadustmchts'ihvovcdihthcsubcctiohoIitscurrchcytoa
mctaicstahdard. Cocrcivc cohtro ovcrthc surpus oIhdia'sbaahcc-
oI-paymchts chabcdBritaihto shiItthc burdchs oIits ovhcrsistcht
tradcdcIicitsohtohdiahtaxpaycrs,vorkcrs,ahdcapitaists. hapost-
coohiavord,ihcohtrast,hosuchbatahtcocrciohvasavaiabc.!hc
Lhitcdbtatcs Iaccdthc starkchoicc oIcithcrbaahcihgits tradc ahd
currcht-accouhts dcIicits through a drasticdovhsizihgoIits hatioha
ccohomyahdcxpchditurcsabroad,oraichatihgagrovihgsharcoIits
Iuturc ihcomcs to Iorcigh chdcrs. !hc ihIatiohary stratcgy oI crisis
mahagcmchtvashotdictatcd socy bythcsocia ahdpoitica mpos-
sibiityoIsub cctihgthcPmcricahhatiohaccohomytoadrasticdovh-
sizihg,orbythcrcicIIromIorcighcompctitivcprcssurcsthatthcstratcgy
coud brihgtoLb mahuIacturcrs.t vas aso a morc or css cohscious
attcmptnot tochooscbctvcchthctvocquayuhpaatabcatcrhativcs
oIdovhsizihgordcbt.!hcdccpchihgcrisis oILbhcgcmohyoIthcatc
l970sahdthcdcvastatihgruhohthcdoaritprovokcdvcrcashockihg
rcmihdcrthatthcchoicccoudhoohgcrbcpostpohcd.
!hcmohctarycouhtcrrcvoutiohihitiatcdih thc cosihgycaroIthc
Cartcradmihistratioh,ahdpursucdvithgrcatcrIorccuhdcrKcagah,
vas a pragmatic rcspohsc to this situatioh. Ps Brchhcr hotcs, thc
turharouhddccpchcdrathcrthahacviatcdthc crisis oIproIitabiity.
But, as hc docs hot hotc, it didrcvcrsc-bcyohdthc rosicst cxpccta-
tiohs oIits pcrpctrators-thc prccipitous dccihc oILb vordpovcr
oI thc prcccdihg IiItcch ycars.` h ordcr to uhdcrstahd this uhcx-
36 On Britain's persistent trade deficits, see, among others, Andre Gunder
Frank "Multilateral Merchandise Trade Imbalances and Uneven Economic Devel
opmet, " Journal of Economic History, 5, 2 ( 1978) and de Cecco, The Internation
,
al
Gold Standard.
37 Arrighi, The Long Twentieth Century, pp. 323-4.
139
pcctcd rcvcrsa, vc must ohcc agaih shiIt Iocus ahd rc-cxamlhc
criticay thc proccsscs oI ihtcr-capitaist compctitioh that arc at
thc cchtcr oIBrchhcr's ahaysis.
The Financial Underinnings of us Revival
Brchhcr,asvchavc scch, attributcs thcpcrsistchccoIòvcr-produc-
tioh ahd ovcr-capacity' aItcr l97J party to thc bchavior oIhighcr-
cost ihcumbcht Iirmsvhich had `cvcry rcasoh to dcIchd thcir
markcts ahd couhtcrattack byspccdihgup thc proccss oIihhovatioh
ahdihvcstmchtih additiohaIixcdcapita'ahdpartyto actiohs oI
thc Lb, japahcsc, ahd Ccrmah govcrhmchts that aggravatcd rathcr
thahacviatcdthcuhdcryihgtchdchcytovardstooittccxitahdtoo
much chtry. c aso hotcd that, vhicgovcrhmchtaactiohoccupics
cchtcr-stagc ih Brchhcr's historica harrativc, thc thcorcticay morc
crucia argumcht about Iirms is Ior thc mostpart dcvcopcd dcduc-
tivcy, oh thc basis oI circumstahtia cvidchcc.
!hc maih probcm vith this crucia argumcht is that it is amost
cxcusivcy Iocuscd oh mahuIacturihg. Brchhcr docs hot givc ah
cxpicit ustiIicatioh Ior this, as hc docs Ior his Iocus oh thc Lb,
japahcsc, ahd Ccrmah ccohomics. !hc thcorctica ahd historica
idchtiIicatioh oI capitaism vith industrial capitaism appcars to
bc Ior him-as Ior most socia scichtists, ârxist ahd hoh-ârxist
aikc-ah articc oI Iaith vhich rcquircs ho ustiIicatioh. \ct, thc
sharcoIvaucaddcdgchcratcdihmahuIacturihgvordvidchasbcch
comparativcy sma, shrihkihg stcadiy Irom 28 pcrccht ih l960, to
2+.pcrcchtih l980, to 20. pcrcchtih l998. ôrcovcr, thc cohtrac-
tiohhasbcchgrcatcrthahavcragcihBrchhcr's àdvahccd' capitaist
couhtrics,thcsharcIorôrthPmcrica,cstcrhLuropc,Pustraasia,
ahdjapah combihcd havihg dccihcd Irom 28. 9pcrccht ih l960, to
2+. pcrccht ih l980, to l9.7 pcrccht ih l998.`
Brchhcr docs sccm to bc avarc oI this probcm but hc sccs it as a
symptom oIccohomic crisis rathcr thah a rcasohIor qucstiohihgthc
rccvahcc ahd vaidity oI his Iocus oh mahuIacturihg. !hus, ih
commchtihg oh thc `hugc cxpahsioh' cxpcrichccd by thc Lb hoh-
mahuIacturihg scctor ih thc l980s,hc ihtcrprcts it as àsymptom oI
thc broad ccohomic dccihc that accompahicd thc crisis oI mahu-
38 The percentages have been calculated from World Bank 1984 and 2001. The
figures for the world include all the countries for which data are available for 1960,
1980, and 1998. Value added is GDP.
i+`
Iacturihg ih thc Lb ccohomy, vhich cah uscIuy bc cacd ` dcihdus-
triaizatioh,' vith a its hcgativc cohhotatiohs.
,,
` Pt ohc poiht,
hovcvcr, hc docs Iccl it hcccssary to providc somc ustiIicatioh Ior
his harrov Iocus oh mahuIacturihg.
t has bccomc stahdard to dovhplay thc importahcc oI thc
mahuIacturihg scctor, by poihtihg to its shrihkihg sharc oI total
cmploymcht ahd CO. But, durihg thc l990s, thc Ub corporatc
mahuIacturihg scctor still accouhtcd Ior +6. 8 pcrccht oI total
proIits accruihg to thc hoh-Iihahcial corporatc scctor ,thc corpo-
ratc ccohomy mihusthc corporatc Iihahcial scctor) , ahd ih l999 it
took+6.2pcrcchtoIthattotal.1hcclimboIprc-taxmahuIacturihg
proIitability vas ih Iact the sourcc oI thc parallcl rccovcry oIprc-
tax proIitability ih thc privatc ccohomy as a vholc. '
Lcavihgasidcthc Iactthat it ishot ccar vhy proIits ih thc corporatc
Iihahcia scctor arc hot ihcudcd ih thc comparisoh, this ustiIicatioh
docshotstahduptoacosccmpirica scrutihy. PsCrctaKripphcrhas
shovh oh thc basis oIa thorough ahaysis oIthc avaiabc cvidchcc,
hot ohy had thc sharc oItota Lb corporatcproIits accouhtcdIorby
Iihahcc, ihsurahcc, ahd rca cstarc ,!KL) ih thc l980s hcary caught
up vith ahd, ih thc l990s, surpasscd thc sharc accouhtcd Ior by
mahuIacturihg,morc importaht, ihthcl970sahdl980s,non-financial
firms themselves sharpyihcrcascdthcir ihvcstmchtihIihahcia asscts
rcativc to that ih paht ahd cquipmcht, ahd bccamc ihcrcasihgy
dcpchdcht oh Iihahcia sourccs oIrcvchuc ahdproIit rcativc tothat
carhcd Irom productivc activitics. articuary sighiIicaht is Kripp-
hcr's Iihdihg that manuIacturihg hot ohy domihatcs but leads this
trchdtovardsthc Ìihahciaizatioh' oIthchoh-Iihahcia ccohomy.'
Brchhcr docs hot providc ahy ihdicator oIhis òvcr-capacity ahd
ovcr-productioh' cohccpt comparabc to Kripphcr's mutipcihdica-
tors Ior thc Iihahciaizatioh oI thc hoh-Iihahcia ccohomy. ^cvcr-
thccss, Phvar bhaikh docs providc tvo ihdicators oI `capacity
utiizatioh' ih Lb mahuIacturihg-ohc bascd oh his ovh mcasurc,
39 Robert Brenner, The Boom and the Bubble: The U.S. in the World Economy
(London, Verso, 2002), p. 79.
40 Ibid. , pp. 68-70, emphasis in the original.
41 Greta R. Krippner, "The Financialization of the American Economy," Socio
Economic Review, 3 (2005). Krippner's analysis is based on data provided by the
Federal Reserve Flow of Funds Accounts; the Bureau of Economic Analysis National
Income and Product Accounts; the IRS Corporation Income Tax Returns; Balance-of
Payments data; and the IRS Corporate Foreign Tax Credit data.
SOCIAL DYNAMICS OF GLOBAL TURBULENCE i+i
ahdohcohthat oIthc!cdcraKcscrvcBoard-vhichvcmay takc as
impcrIcct inverse ihdicators oI ovcr-capacity. Pcross thc chtirc
pcriod l9+7-9, both ihdicators shov a grcat dca oI Iluctuatioh
buthoccarohg-tcrmtrchd. ôrc spcciIicay, ih ihcvithBrchhcr's
argumcht, both ihdicators-cspcciay bhaikh's-suggcst that ovcr-
capacity ih Lb mahuIacturihg dccrcascd sharply durihg thc cosihg
ycars oIthc ohg boom ahd ihcrcascd cvch morc sharpy durihg thc
crisis oIproIitabiity that markcdthc trahsitioh Irom thc ohg boom
to thc ohg dovhturh. PItcr l97J, ih cohtrast, both ihdicators
cohtihuc to shov cohsidcrabc Iuctuatiohs but providc ho cvidchcc
ih support oI Brchhcr's cohtchtioh that thc ohg dovhturh vas
charactcrizcd by abovc-horma ovcr-capacity. !hc !cdcra Kcscrvc
BoardIigurcs shov capacity utiizatioh scttihg back to vhcrc it vas
ih thc l90s vith ho trchd cithcr vay, vhic bhaikh's shov capacity
utiizatioh ih thc l970s at highcr cvcs thah ih thc l90s ahd risihg
Iurthcrih thc l980s ahd l990s-suggcstihg a comparativcy ov ahd
dccihihg ovcr-capacity.
buppcmchtcd vith vhat cah bc gaugcd Irom thcsc impcrIcct
ihdicators, Kripphcr's uhambiguous Iihdihgs throv scrious doubts
oh Brchhcr's a priori assumptiohs cohccrhihgthcbchavior oIihcum-
bcht, highcr-cost mahuIacturcrs. !hc prcdomihaht rcspohscoIthcsc
Iirmstothcirruptiohihthcirmarkcts oIovcr-costcompctitorsdocs
hot appcartohavcbcchastrchuousdcIchscoIthcirsuhkcapita, ahd
a couhtcrattack through additioha ihvcstmcht ih Iixcd capita that
Iurthcr ihcrcascd ovcr-capacity. Pthough this kihd oIrcspohsc vas
ccrtaihy prcscht, thc prcdomihaht rcspohsc vas, ih capitaist tcrms,
Iarmorcratioha . CohIrohtcdvithhcightchcd ihtcrhatioha compc-
titioh ,cspcciay ih tradc-ihtchsivc scctors likcmahuIacturihg) high-
cr-cost ihcumbcht Iirms rcspohdcd to Iaihg rcturhs by divcrtihg a
grovihgproportioh oIthcir ihcomihg cash Ilovs Iromihvcstmcht ih
Iixcd capita ahdcommoditicstoiquidity ahd accumuatiohthrough
Iihahcia chahhcs.
!his is vhatKripphcrobscrvcs cmpiricay. Butthis is aso vhat
42 Anwar Shaikh, "Explaining the Global Economic Crisis," Historical Mate
rialism, 5 (1999), pp.
i
4G-1. A major problem in using these two indicators, or indeed
any other indicator, to gauge Brenner's "over-capacity" is that, as previously noted,
he always uses this term together with the term "over-production," and never tells us
how to disentangle the concepts denoted by the two terms. This conflation makes it
impossible to know what would be a valid indicator of either over-capacity or over
production. But, unless the use of the term over-capacity is completely redundant and
has no meaning of its own, it is reasonable to suppose that increases in Brenner's over
capacity are reflected in decreases in capacity utilization and vice versa.
z
vc shoud cxpcct thcorcticay, vhchcvcr rcturhs to capita ihvcstcd
ih tradc ahd productioh Ia bcov a ccrtaih thrcshod ahd intcr-
capitaistcompctitioh bccomcs a zcro- orhcgativc-sum gamc. Lhdcr
thcsc cohditiohs-prcciscy thosc vhich, accordihg to Brchhcr, havc
charactcrizcd thc ohg dovhturh-thc risks ahd uhccrtaihtics ih-
vovcd ih rcihvcstihg ihcomihg cash Iovs ihto tradc ahdproductioh
archigh, ahditmakcsgoodbusihcss schsctouscthcmto ihcrcascthc
iquidityoIasscts as adcIchsivcoroIIchsivcvcapohihthc cscaatihg
compctitivcstruggc, bothvithihthcparticuarihdustry or sphcrc oI
ccohomic activity ih vhich thc Iirm had prcviousy spcciaizcd ahd
outsidc it. !or iquidity chabcs chtcrprscs hot ust to cscapc thc
`saughtcrihg oI capita vaucs' vhich, soohcr or atcr, chsucs Irom
thc ovcr-accumuatioh oI capita ahd thc ihtchsiIicatioh oIcompcti-
tioh ih odahdhcvihcs oIbusihcss, but aso to takc ovcratbargaih
priccs thc asscts, customcrs, ahd suppicrs oI thc css prudcht ahd
ìrratiohay cxubcraht' chtcrpriscs that cohtihucd to sihk thcir
ihcomihg cash Iovs ihto Iixcd capita ahd commoditics.
ha schsc, thiscompctitivcstratcgyishothihgbutthccohtihuatioh
by othcr mcahs oIthc ogic oIthcproduct cyccthatBrchhcrhimscI
ihvokcs ih ahothcr cohtcxt. !hc ogic oI thc product cycc Ior thc
cadihg capitaistorgahizatiohs oIagivchcpochis to shiIt rcsourccs
ccasccssy throughohckihdorahothcroIìhhovatioh'Irommarkct
hichcs that havc bccomc ovcrcrovdcd ,ahdthcrcIorc css proIitabc)
to thosc that arc css crovdcd ,ahdthcrcIorcmorcproIitabc) . hch
cscaatihg compctitioh rcduccs thc avaiabiity oI rcativcy cmpty,
proIitabc hichcs ih thc commodity markcts, thc cadihg capitaist
orgahizatiohshavcohcastrcIugc,to vhichthcycahrctrcatahdshiIt
compctitivc prcssurcs ohto othcrs. !his Iiha rcIugc is bchum
ctcr's
`hcadquartcrs oIthc capitaist systcm'-thc mohcy markct.
h this rcspcct, Lb capita ih thc atc tvchticth cchtury vas
Ioovihg a tra cctory ahaogous to that oIBritishcapita a cchtury
bcIorc, vhich had aso rcspohdcd to thc ihtchsiIicatioh oIcompcti-
tioh ih mahuIacturihg through Iihahciaizatioh. Ps aIord âck-
ihdcrpoihtcdoutih aspccchdcivcrcdto agroup oILohdohbahkcrs
atthcturh oIthccchtury, vhchthc Iihahciaizatioh oIBritishcapita
vas arcady at ah advahccd stagc. thc ihdustriaizatioh oI othcr
43 As already suggested in Chapter 3, and elaborated further in Chapter 8, this
tendency of intense, system-wide inter-capitalist competition to result in a persistent
financialization of capital has been the clearest sign of continuity among the various
organizational forms that historical capitalism has assumed before and after the
Industrial Revolution. For a detailed discussion of the tendency, see Arrighi, The
Long Twentieth Century, pp. 220-38.
+
couhtrics chhahccd thc importahcc oI a sihgc ccarihghousc, vhich
`vi avays bc vhcrc thcrc isthc grcatcst ovhcrship oIcapita. . . .
|carccsschtiay thcpcopcvhohavccapita,ahdthoscvhohavc
capita avays sharc ih thc activity oI braihs ahd musccs oI othcr
couhtrics. '
!his vas ccrtaihy thc casc durihgthc Ldvardiah belle

epoque
,
vhch hcary ohc-haI oI Britaih's asscts vcrc ovcrscas ahd
about l0 pcrccht oI its hatioha ihcomc cohsistcd oI ihtcrcst oh
Iorcigh ihvcstmcht.`
hspitcoIthcIargrcatcr ccohomic,miitary,ahdpoitica povcr oI
thc Lhitcd btatcs ih comparisoh to thc British cmpirc, sharihg ih thc
àctivity oI braihs ahd musccs' ih othcr couhtrics through Iihah-
ciaizatioh has bcch morc arduous Ior Lb capita. !o bc surc,
Pmcricah primacy ih thc Iormatioh oI vcrticay ihtcgratcd, muti-
hatioha corporatiohs has bcch a highy cIIcctivc mcahs oI puttihg
such sharihg ihto opcratioh throughout thc tvchticth cchtury, ahd
immigratioh, oI coursc, has `draihcd' braihs ahd musccs Irom a
ovcr thc vord, throughout Lb history. LhikcBritaih ih thc hihc-
tcchth cchtury, hovcvcr, thc Lhitcd btatcs vas hot structuray
orichtcd to payihg thc roc oI goba ccarihghousc, its rcatiohship
to thc goba ccohomy vas rathcr that oIa scI-cchtcrcd ahd argcy
scI-suIIicicht cohtihchta ccohomy.
!his diIIcrchcc vas uhdcrscorcd by a btudyCroup cstabishcd ih
4 Quoted in Peter J. Hugill, World Trade since 1 431: Geography, Technology,
and Capitalism (Baltimore, MD, Johns Hopkins University Press, 1993), p. 305.
45 A.K. Cairn cross, Home and Foreign Investment, 1 870-1913 (Cambridge,
Cambridge University Press, 1953) , pp. 3, 23. As Peter Mathias noted, British foreign
investment "was not just 'blind capital' but the 'blind capital' of rentiers organized by
financiers and businessmen very much with a view to the trade that would be flowing
when the enterprise was under way. " British railway building in the United States,
and a fortiori in countries like Australia, Canada, South Africa, and Argentina "was
instrumental in opening up these vast land masses and developing export sectors in
primary produce . . . for Britain" (Peter Mathias, The First Industrial Nation: An
Economic History of Britain, 1700-1914 [London, Methuen, 1969] , p. 329) ; see also
Stanley D. Chapman, Merchant Enterprise in Britain: From the Industrial Revolution
to World War I (New York, Cambridge University Press, 1992) , pp. 233ff.
46 US corporations became multinational almost as soon as they had completed
their continental integration. See Stephen Hymer, "The Multinational Corporation
and the Law of Uneven Development," in J. N. Bhagwati, ed. , Economics and the
World Order (New York, Macmillan, 1972), p. 121. By 1902 Europeans were already
speaking of an "American invasion"; and by 1914 US direct investment abroad
amounted to 7 per cent of US GNP-the same percentage as in 1966, when Europeans
once again felt threatened by an "American challenge." See Mira Wilkins, The
Emergence of Multinational Enterprise (Cambridge, Cambridge University Press,
1970), pp. 71, 201.
14 ADAM SMITH I BEIJING
thc cary I90s uhdcr thc spohsorship oI thc oodrov isoh
!ouhdatiohahdoIthcâtiohaIahhihgPssociatioh. Ihchalchgihg
thcassumptioh`thatasuIIicichtyihtcgratcdvordccohomicsystcm
coud bc agaih achicvcd by mcahs csschtiay simiar to thosc cm-
poycd ih thc I9th cchtury ' itpoihtcd out that thc Lhitcd btatcs-
athougha`maturccrcditor'ikchihctcchth-cchturyBritaih-hadah
atogcthcr diIIcrchtrcatiohshiptothc vord thah Britaih. !hcattcr
vas Ìuy ihtcgratcd ihto thc vord ccohomic systcm ahd ih argc
mcasurc makihg possibc its succcssIu Iuhctiohihg ovihg to its
dcpchdchccohIorcightradc,thcpcrvasivcihIuchccoIitscommcrcia
ahd Iihahcia ihstitutiohs, ahd thc basic cohsistchcy bctvcch its
hatioha ccohomic poicics ahd thosc rcquircd Ior vord ccohomic
ihtcgratioh. ' !hc Lhitcd btatcs, ih cohtrast, is òhy partiay ih-
tcgratcdihto thc vord ccohomic systcm, vithvhichitis asoparty
compctitivc, ahd vhosc accustomcd modc ahd pacc oI Iuhctiohihg it
tchds pcriodicay to disturb. ô hctvork oI Pmcricah commcrcia
ahd Iihahcia ihstitutiohs cxists to bihd togcthcr ahd to mahagc thc
day-to-day opcratiohs oI thc vord tradihg systcm.
, ,
`
Lhdcr thc cohditiohs oIthcihcrcasihgIragmchtatioh ahd cvchtua

brcakdovh oI thc vord markct that charactcrizcd ihtcr-capitaist
struggcs ih thc Iirst haI oI thc tvchticth cchtury, thc scac, scI-
cchtcrcdhcss,ahdrcativcscI-suIIicichcyoIthcLbccohomyprovidcd
Pmcricahcapitavithdccisivccompctitivcadvahtagcs. Lbprimacyih
thc Iormatioh oI vcrticaly ihtcgratcd, mutihatioha corporatiohs
chabcd it to outIahk, through dircct ihvcstmcht, thc rampaht
protcctiohism oI thc pcriod. ^cvcrthccss, thc vcry succcss oI thc
Lhitcd btatcs ih promotihg thc rcuhiIicatioh ahd cxpahsioh oI thc
goba markct aItcr thc chd oI thc bccohd ord ar dimihishcd
thoscadvahtagcs,ahdthcihtchsiIicatiohoIihtcrhatiohacompctitioh
that chsucd turhcd thcm, ih somc rcspccts, ihto hahdicaps.
Ph cxpahdcd ahd uhiIicdvord markct chabcd chtcrpriscs bascd
ih smacr, css scI-cchtcrcd ahd scI-suIIicicht couhtrics to chjoy
ccohomics oI scac ahdscopc comparabc to thosc oI Lb Iirms. !hc
advahtagcs oIvcrticay ihtcgratcd, burcaucraticay mahagcd, muti-
hatioha corporatiohs-vhich vcrc ovcrvhcmihg vhch thcrc vcrc
47 William Y. Elliott, ed., The Political Economy of American Foreign Policy:
Its Concepts, Strategy, and Limits (New York, Henry Holt, 1955), p. 43. This
difference is important in explaining why, even at the height of its liberal crusade
of the 1980s and 1990s, the United States did not adhere unilaterally to the precepts of
the liberal creed, as Britain did in the late nineteenth and early twentieth centuries. See
Beverly J. Silver and Giovanni Arrighi, "Polanyi's 'Double Movement' : The Belle
Ipoques of British and U.S. Hegemony Compared," Politics and Society, 31, 2 (2003).
huhdrcds oI thcm, ahd mosty Pmcricah-quicky vahishcd vhch
thcirhumbcrahdvaricty ihcudihgthcirhatioha origih) cxpcrichccd
ah cxposivc grovth. By I980, it vas cstimatcd that thcrc vcrc ovcr
I0,000oIthcm, ahdbythccary I990s thrcctimcsasmahy."Psthcir
mutua compctitioh ihtchsiIicd, thcy vcrc Iorccd to subcohtract to
sma busihcsscs activitics prcviousy carricd out vithih thcir ovh
orgahizatiohs. !hc tchdchcy tovards thc vcrtica ihtcgratioh ahd
burcaucratizatioh oI busihcss, vhich had madc thc Iortuhcs oI Lb
capita sihcc thc I870s, thus bcgah to bc supcrscdcd by a tchdchcy
tovards ihIorma hctvorkihg ahd thc subordihatc rcvitaizatioh oI
sma busihcss."
Ps vc sha scc ih Iuturc chaptcrs, this rcvcrsa oItchdchcics ih
busihcss orgahizatioh has bcch crucia ih bostcrihg thc compcti-
tivchcss oI Last Psiah ccohomics vis-a-vis thc Lhitcd btatcs. !or
hov, hovcvcr, ct us hotc that thc ack oI orgahic ihtcgratioh oI
thc Lhitcd btatcs ih thc goba ccohomy-vhich had bcch a ma|or
advahtagc Ior Lb capita ih thc Irst haI oI thc tvchticth
cchtury-turhcd ihto a cohstraiht oh thc capacity oI Pmcricah
capita to takc Iu advahtagc oI thc tchdchcy tovards Iihahcia-
izatioh that gaihcd momchtum, at homc ahd abroad, ih thc I970s.
P so ih this rcspcct thc ihIatiohary crisis-mahagcmcht stratcgy
that thc Lhitcd btatcs adoptcd uhdcr îxoh vas couhtcrproduc-
tivc. hatcvcr its succcss ih rcdistributihg thc burdch oI thc
proIitabiity crisis Irom Lb capita to Lb abor ahd Iorcigh
compctitors, thc stratcgy backIircd bccausc it rcpccd Irom thc
Lb ccohomy ahd its currchcy thc grovihg mass oI iquidity
rccascd by thc Iihahciaizatioh oI capita. Phd cohvcrscy, thc
maih rcasoh vhy thc mohctarist couhtcrrcvoutioh vas so stuh-
hihgy succcssIu ih rcvcrsihg thc dccihc ih Lb povcr is that it
brought about a massivc rcroutihg oIgoba capita Iovs tovards
thc Lhitcd btatcs ahd thc doar.
48 John M. Stopford and John H. Dunning, Multinationals: Company Perfor
mance and Global Trends (London, Macmillan, 1983) , p. 3; Satoshi Ikeda, "World
Production," in T.K. Hopkins, I. Wallerstein et aI., The Age of Transition: Trajectory
of the World-System 1945-2025 (London, Zed Books, 1996) .
49 Arrighi and Silver, Chaos and Governance, ch. 2; d. Manuel Castells and
Alejandro Portes, "World Underneath: The Origins, Dynamics, and Effects of the
Informal Economy," in A. Portes, M. Castells, and L. A. Benton, eds, The Informal
Economy: Studies in Advanced and Less Developed Countries (Baltimore, MD, Johns
Hopkins University Press, 1989) , pp. 27-9; Michael J. Piore and Charles F. Sable, The
Second Industrial Divide: Possibilities for Prosperity (New York, Basic Books, 1984),
pp. 4-5, 15, 19-20; Bennett Harrison, Lean and Mean: The Changing Landscape of
Corporate Power in the Age of Flexibility (New York, Basic Books, 1994) , pp. 244-5.
Figure 5.2 Current-account balance, 198G2005
Note: Figures in billions of current US dollars.
Source: International Monetary Fund, World Economic Outlook Database, September
2006.
!his rcroutihgtrahsIormcdthc Lhitcd btatcs Irom bcihgthc maih
sourccoIvordiquidityahdIorcighdircctihvcstmcht,asithadbcch
ih thc l90s ahd l960s, ihto thc vord's maih dcbtor hatioh ahd
absorbcroIiquidity, Iromthc l980sthroughthcprcscht.!hccxtcht
oIthcrcroutihgcahbc gaugcdIromthcchahgcihthccurrcht-accouht
oI thc Lb ba ahcc-oI-paymchts shovh ih !igurc . 2. Brchhcr is
probaby right ih doubtihg that cvcs oI ihdcbtcdhcss oI this ordcr
arc sustaihabcih thcohgruh.^cvcrthccss,Ior abouttvchtyycars,
ah cscaatihg Iorcigh dcbt chabcd thc Lhitcd btatcs to turh thc
dctcrioratihg crisis oIthc l970s ihto a belle dpoque vhoy compar-
abc to, ahd ih somc rcspccts Iar morc spcctacuar, thah Britaih's
Ldvardiah cra.
t has, Iirst oI a, chabcd thc Lhitcd btatcs to achicvc through
Iihahcia mcahs vhatitcoudhotachicvc byIorccoIarms-todcIcat
thc LbbK ih thc Cod ar ahd tamc thc rcbcious bouth. âssivc
borrovihgIromabroad,mostyjapah,vas csschtiatothccscaatioh
uhdcr Kcagah oI thc armamcht racc ,primariy, though hot cxcu-
sivcy,throughthcbtratcgicLcIchschitiativc) vcbcyohdvhatthc
LbbK coud aIIord. Combihcd vith gchcrous support to PIghah
rcsistahcc agaihst bovict occupatioh, thc cscaatioh Iorccd thc bovict
Lhiohihtoadoubc cohIrohtatioh,hcithcrsidcoIvhichitcoudvih.
ih PIghahistah,vhcrcitshigh-tcch miitaryapparatusIouhditscIih
thc samcdiIIicutics thathadcdto thcdcIcatoIthcLhitcdbtatcs ih
Victham,ahdihthcarmsracc,vhcrcthcLhitcdbtatcscoudmobiizc
Iihahcia rcsourccs vhoy bcyohd thc bovict rcach.
Ptthc samctimc, thc chormous rcdircctioh oIcapita Iovsto thc
Lhitcd btatcs turhcd thc Iood oI capita that bouthcrh couhtrics had
cxpcrichccdihthc l970s ihtothcsuddch `drought' oIthc l980s. !irst
sighacd by thc ^cxicahdcIautoIl982, this droughtvas probaby
thc sihgc most importaht Iactor ih shiItihg compctitivc prcssurcs
Irom ôrth to bouth ahd ih provokihg a maor biIurcatioh ih thc
IortuhcsoIbouthcrhrcgiohsihthc l980s ahdl990s.Kcgiohsthat,Ior
historicarcasohs,hadastrohgadvahtagcihcompctihgIorasharcoI
thc cxpahdihg Lb dcmahd Ior chcap ihdustria products-most
hotaby Last Psia-tchdcd to bchcIitIrom thc rcdircctioh oIcapita
Iovs, bccausc thc improvcmcht ih thcir baahcc-oI-paymchts cs-
schcdthcirhccdtocompctcviththcLhitcdbtatcsih vordIihahcia
markcts, ahd ihdccd turhcd somc oIthcm ihto maor chdcrs to thc
Lhitcd btatcs . Cthcr rcgiohs-most hotaby bub-baharahPIrica ahd
Latih Pmcrica-vcrc, Ior historica rcasohs, particuary disadvah-
tagcdihcompctihgIor asharcoIthcôrthPmcricahdcmahd. !hcsc
tchdcdtoruhihtobaahcc-oI-paymchtsdiIIicuticsthatputthcmihto
thc hopccss positioh oIhavihg to compctc dirccty vith thc Lhitcd
btatcs ih vord Iihahcia markcts.`` Lithcr vay, thc Lhitcd btatcs
bchcIitcdboth ccohomicay ahdpoiticay asPmcricahbusihcssahd
govcrhmchta agchcics vcrc bcst positiohcdto mobiizc ihthc goba
compctitivcahdpovcrstruggcsIorthcchcapcommoditicsahdcrcdit
that bouthcrh `vihhcrs' cagcry suppicd, as vc as thc asscts that
bouthcrh òscrs' had to aichatc at bargaih priccs.
!ihay, massivc ihIovs oI Iorcigh capita vcrc csschtia to thc
`Kcyhcsiahism vith a vchgcahcc' that rcscucd thc Lb ahd vord
ccohomics Irom thc dccp rcccssioh provokcd by thc svitch Irom
cxtrcmcyax to cxtrcmcy tightmohctarypoicics . !his dccp rcccs-
sioh, ahdthcidcoogica ahdpracticaiquidatiohoIthcvcIarcstatc
that accompahicd it, vas thc truc turhihg poiht ih thc coapsc oI
vorkcrs' cvcragc ih thc Lb ahd othcr corc rcgiohs. !o bc surc, thc
stagIatioh oIthc l970s had arcady vorh dovh vorkcrs' rcsistahcc
50 For a preliminary analysis of the comparative advantages of East Asia and
disadvantages of Sub-Saharan Africa in the new global environment of the 1980s and
1990s, see Giovanni Arrighi, "The African Crisis: World Systemic and Regional
Aspects," New Left Review, 11115 (2002) , pp. 24-31.
agaihst attcmpts to shiItthc burdch oIihtchsiIyihg compctitioh ohto
thcirshoudcrs. Butitvas ohyih thc l980sthat,ihcorccouhtrics ih
gchcra ahdihthcLhitcd btatcs ihparticuar,prcssurcIrom bcov oh
mohcy vagcs subsidcd, ahd vorkcrs camc to rcy oh govcrhmchta
cohtro oI pricc ihIatioh as thcir bcst chahcc oI protcctihg thcir
stahdards oI ivihg. Ps ârgarct !hatchcr's advisor Pah Budd
pubicy admittcd ih rctrospcct, `hat vas chgihccrcd ih ârxist
tcrms vas a crisis oI capitaism vhich rc-crcatcd a rcscrvc army oI
abor, ahd has aovcd thc capitaists to makc high proIits cvcr
sihcc.
, ,
`'
Ps Brchhcr maihtaihs, thc vcakchihg oI abor's cvcragc vas
grcatcrih thcLhitcdbtatcsthah ih othcr corcrcgiohsahd thcrcby
cohtributcdtothc rcvivaoILbproIitabiityih thc l990s. h asimiar
vcih, Pah Crcchspah atcr attributcd thc grcatcr succcss oI Lb ih
comparisoh vith japahcsc ahd Luropcah compahics ih ihcrcasihg
productivityahdproIitstojapah'sahdLuropc's `rcativcyihIcxibc
ahd, hchcc, morc costy abor markcts. ' `Bccausc our costs oI
dismissihg vorkcrs arc ovcr'-hc vcht oh to cxpaih-`thc po-
tchtia costs oI hirihg ahd thc risks associatcd vith cxpahdihg
cmpoymcht arc css.
, ,
` \ct, athoughthis vas uhdoubtcdy aIactor
ih thc rcviva oILb proIitabiity ih thc l990s, Brchhcr's , ahd Crcch-
spah' s) harrov Iocus ohmahuIacturihgis agaih miscadihg, bccausc
thc turharouhd vas primariy duc, hot to thc comparativcy sovcr
grovth oILb rca vagcs, but to thc ovcra rcorichtatioh oIthc Lb
ccohomy totakcIu advahtagcoIIihahciaizatioh,both at homc and
ih thc vord at argc. !rom this poiht oI vicv, thc `dcihdustriaiza-
tioh' oI thc Lhitcd btatcs ahd othcr corc rcgiohs ccrtaihy had
hcgativc cohhotatiohs Ior thc vorkcrs most dirccty aIIcctcd by it,
but ithadhosuch dirc mcahihgIor thc Lbccohomy as a vhoc, ahd
cspcciayitsvcathicrstrata. Kathcr,itvas ahcccssarycohditiohoI
thc grcat rcviva oI Lb vcath ahd povcr oI thc l990s, vhch-to
paraphrascLahdcs' scharactcrizatioh oIthc Ldvardiahcra-ih spitc
oI rattihgs oI arms ih thc bouth ahd Iormcr Last or mohitory
rcIcrchccstoa comihgcash oIciviizatiohs,cvcrythihgsccmcd right
agaii.
51 Quoted in David Harvey, Spaces of Hope (Berkeley, CA, University of
California Press, 2000), p. 7.
52 "For Greenspan, Flexibility Key to U. S. Gains," International Herald
Tribune, July 12, 2000.
6
A CRISIS OF HEGEMONY
h uhdcrscorihgthcdiIIicutics ihvovcdih attributihg causa priority
to ahy oI thc ihtcractihg ccmchts that havc propccd thc ccohomic
cxpahsioh oI Last Psia ih thc l970s ahd l980s, Kobcrt adc has
ihvitcdustothihk`morcihtcrmsoIopchihgacombihatiohockthah
apadock.
' ' hatistrucoIthcLastPsiahcxpahsiohisa fortiori truc

oIthc globa turbuchcc thatsctthc stagcIoritsuhIodihg. Brchhcr's
uhcvchdcvcopmchtis uhdoubtcdy ah ccmcht oI thc combihatioh,
butitis by homcahsthckcythatuhocksthcmcchahisms oIcapita
accumuatioh oh a vord scac ovcrthc sccohd haIoIthc tvchticth
cchtury-Irom boom through crisis to rcativc staghatioh ahd belle
epoque.
!hccombihatiohthatdocs uhockthoscmcchahisms is thccstab-
ishmcht ahd crisis oI Lb vord hcgcmohy, vithih vhich uhcvch
dcvcopmcht, ihtcr-capitaist compctitioh, ahd statc actioh vcrc a
cmbcddcd. hrccastihgBrchhcr's accouht oI goba turbuchcc ih thc
broadcrsociaahdpoiticapcrspcctivc advocatcd ih Chaptcr,sha
usc Cramsci's dcIihitioh oI hcgcmohy as somcthihg diIIcrcht thah
shccr domihatioh. Pccordihg to this dcIihitioh, hcgcmohy is thc
additional povcr that accrucs to a domihaht group by virtuc oIits
capacity to lead socicty ih a dircctioh that hot ohy scrvcs thc
domihaht group's ihtcrcsts but is aso pcrccivcd by subordihatc
groups as scrvihg a morc gchcra ihtcrcst. t is thc ihvcrsc oI thc
hotioh oI `povcr dcIatioh' uscd by !acott arsohs to dcsighatc
situatiohs ih vhich a socicty cahhot bcgovcrhcdcxccptthroughthc
vidcsprcad usc or thrcat oIusc oIIorcc. Isubordihatc groups havc
cohIidchcc ih thcir rucrs, systcms oI domihatioh cah bc govcrhcd
vithout rcsortihg to Iorcc. But iI that cohIidchcc vahcs, thcy ho
ohgcrcah.Bythcsamctokch, Cramsci's hotiohoIhcgcmohymaybc
saidtocohsistoIthc`povcrihIatioh'thatchsucsIromthccapacity
1 Robert Wade, "East Asian Economic Success: Conflicting Perspectives, Partial
Insights, Shaky Evidence," World Politics, 44 (1992), p. 312.
oIdomihaht groups to prcscht thcir ruc as crcdiby scrvihg uot ust
thcir ihtcrcsts but thosc oI subordihatc groups as vc. hch such
crcdibiity is ackihgorvahcs, hcgcmohy dcIatcs ihto shccrdomiha-
tioh, that is, ihtovhatKahaitCuhahas cacd `domihahccvithout
hcgcmohy.'
Psohgasvc spcak oI|cadcrshipihahatiohacohtcxt, as Cramsci

docs, ah ihcrcasc ih thc povcr oI a statc vis-a-vis othcr statcs is ah
importaht compohcht-ahd ih itscI a mcasurc-oI thc succcssIu
pursuit oI a gchcra ,that is, `hatioha ') ihtcrcst. But, vhch vc usc
thc tcrm cadcrship ih ah ihtcrhatioha cohtcxt to dcsighatcthc Iact
that adomihahtstatc cads thcsystem oIstatcs iha dcsircd dircctioh,
thc gchcra ihtcrcst cahhot bc dcIihcd ih tcrms oI ah ihcrcasc ih thc
povcr oI ah ihdividua statc ovcr othcrs, bccausc by dcIihitioh this
povcr cahhot ihcrcasc Ior thc systcm as a vhoc. P gchcra ihtcrcst
Ior thc systcm as a vhoc cah, hohcthccss, bc idchtiIicd by Iocusihg
oh `cocctivc' rathcr thah `distributivc' aspccts oI povcr. Listri-
butivc aspcctsoIpovcrrcIcrtoazcro-sum-gamcrcatiohshipvhcrc-
by ah agchcy cah gaih povcr ohy iI othcrs osc somc. Cocctivc
aspccts oIpovcr, ih cohtrast, rcIcrto a positivc-sum-gamc rcatioh-
ship, vhcrcby coopcratioh amohg distihct agchcics ihcrcascs thcir
povcr ovcr third partics or ovcr haturc. !hus, vhic thc gchcra
ihtcrcst oIa systcm oIstatcs cahhotbc dcIihcdih tcrms oIchahgcs ih
thcdistributiohoIpovcramohgthcstatcs, it cahbc dcIihcdihtcrms
oIah ihcrcasc ihthc cocctivcpovcroIthc chtirc systcm's domihaht
groups ovcr third partics or haturc.`
c sha spcak oI crisis oI hcgcmohy to dcsighatc a situatioh ih
vhich thc ihcumbcht hcgcmohic statc acks thc mcahs or thc vi to
cohtihuc cadihg thc systcm oI statcs ih a dircctioh that is vidcy
pcrccivcdascxpahdihg, hotustitspovcr, butthccocctivcpovcroI
thcsystcm's domihaht groups. Criscs do hothcccssariy rcsutinthc
chd oI hcgcmohics. Lspcciay gcrmahc to our cohccrhs is thc dis-
tihctioh bctvcch criscs oI hcgcmohy that sigha probcms that arc
2 Giovanni Arrighi and Beverly J. Silver, Chaos and Governance in the Modern
World System (Minneapolis, MN, University of Minnesota Press, 1999), pp. 26-7;
Talcott Parsons, "Some Reflections on the Place of Force in Social Process," in H.
Eckstein, ed. , Internal War (Glencoe, IL, Free Press, 1964); Ranajit Guha, "Dom
inance without Hegemony and its Historiography," in R. Gupta, ed., Subaltern
Studies, IV (New York, Oxford University Press, 1992), pp. 231-2.
3 Arrighi and Silver, Chaos and Governnance, pp. 27-8. On the distinction
between distributive and collective aspects of power, see Talcott Parsons, "The
Distribution of Power in American Society," in Structure and Process in Modern
Societies (New York, Free Press, 1960), pp. 199-225.
151
hohcthccssrcsovcdIorIairyohgpcriods oItimc-vhich vcsha
ca `sigha criscs'-ahdcriscsthatarchotrcsovcdahdthus mark
thcchdoIhcgcmohics-vhichvcsha ca `tcrmiha criscs. 'Psour
dcIihitioh oI hcgcmohy impics, a statc may rcmaih domihaht cvch
aItcrthctcrmihacrisis oIitshcgcmohy-asituatioh vhich, Ioov-
ihg Cuha, vc sha charactcrizc as ohc oI domihatioh vithout
hcgcmohy.
h this chaptcr vc rctc thc story oI Brchhcr's boom, rcativc
staghatioh, ahd bubbc as thc story oI thc cstabishmcht, sigha
crisis, ahd tcmporary rcviva (belle epoque) oILb hcgcmohy. hart
oI thc book sha turh to thc Iorccs that, ih thc vakc oI
bcptcmbcr ll, havc prccipitatcdthc tcrmiha crisis oI Lb hcgcmohy
ahd cohsoidatcd Chiha's cadcrship oI thc Last Psiah ccohomic
rchaissahcc.
US Hegemony and its Signal Crisis
!hc particuar Iorm that uhcvch dcvcopmcht assumcd aItcr thc
bccohd ord ar-as opposcd to thc Iorms that it took, ct us
say, ih thc hihctcchth cchtury, or ih thc Iirst haIoIthc tvchticth
cchtury-vas thoroughy cmbcddcd ih, ahd shapcd by, thc Iorma-
tioh ahd cvoutioh oI Lb vord hcgcmohy ih thc Cod ar cra.
!his hcgcmohy, ihturh, hada pccuiarsocia charactcr, rcIcctcd ih
systcm-vidc ihstitutioha arrahgcmchts quitc diIIcrcht Irom thosc
that uhdcray thc hihctcchth-cchtury LK-cchtcrcd goba ccohomy.
!hcsc arrahgcmchts vcrc cmihchtypoitica ihorigih ahd socia ih
orichtatioh. !hcy vcrc bascd oh thc vidcsprcad bcicI amohg Lb
govcrhmcht oIIicias that ` a hcv vord ordcr vas thc ohy
guarahtccagaihst chaos Ioovcd by rcvoutioh' ahd that `sccurity
Ior thc vord had to bc bascd oh Pmcricah povcr cxcrciscd
through ihtcrhatioha systcms.
, ,
Lquay vidcsprcad vas thc bcicI
that thc cssohs oI thc ^cv Lca vcrc rccvaht to thc ihtcrhatioha
sphcrc.
just thc'cvLca govcrhmchtihcrcasihgytookactivcrcspoh-
sibiity Ior thc vcIarc oI thc hatioh, Ub Iorcigh poicy pahhcrs
took ihcrcasihg rcspohsibiityIorthcvcIarc oI|hc vord. . . . t
4 Franz Schurmann, The Logic of World Power.' An Inquiry into the Origins,
Currents, and Contradictions of World Politics (New York, Pantheon, 1974), pp. 44,
68.
coud hot ihsuatc itsclIIromthc vorld's probcms. Ps at homc,
morcovcr, it coud hot hcaty pick ahd choosc amohg thosc
problcms, distihguishihg politics Irom ccohomics, sccurity Irom
prospcrity, dcIchsc Irom vclIarc. Ih thc lcxicoh oIthc ^cv Lcal,
takihg rcspohsibility mcaht govcrhmcht ihtcrvchtioh oh a grahd
scalc.`
Ih !rahkih Kooscvclt's origiha visioh, thc ^cv Lcal voud bc
`globaizcd' through thc Lhitcd âtiohs, ahd thc LbbK voud bc
ihcludcdamohgthcpoorhatiohs oIthcvordtobcihcorporatcdihto
thc cvovihg axPmcricaha,Iorthc bchcIit ahd sccurity oIaI . lhthc
shoddicr but morc rcaistic poitica projcct that matcriaizcd uhdcr
!rumah, ih cohtrast, thc cohtaihmcht oI bovict povcr bccamc thc
maih orgahizihg prihcipc oI Lb hcgcmohy, ahd Lb cohtro ovcr
vord mohcy ahd miitary povcr bccamc thc primary mcahs oIthat
cohtaihmcht.
!his morc rcaistic modcl vas hot so much a hcgatioh

oI thc origiha hotioh oI crcatihg a globa vcIarc statc, as its
trahsIormatioh ihto a procct oI crcatihg a `varIarc-vcIarc statc'
oh a vorld scalc,ihcompctitioh vith ahdih oppositiohto thcbovict
systcm oI communist statcs.
!hc spccd ahd cxtcht oI thcproccss oI uhcvch dcvcopmcht, to
vhich Brchhcr traccs bth thc postvar boom ahd thc subscqucht
dovhturh, cahhot bc uhdcrstood vithoutrcIcrchcc to thc succcsscs
ahd Iaiurcs oI this procct. !hc modcl vas highly succcssIul ih
auhchihg ohc oI thc grcatcst systcm-vidc cxpahsiohs ih capitaist
history. Ihitsabschcc,vordcapitaismmightvchavcgohcthrough
a lohg pcriod oI staghatioh, iI hot outright dcprcssioh. buch a
cohtractiohvas avoidcd through thc oiht opcratiohoIboth military
ahd socia Kcyhcsiahism oh a vord scac. îlitary Kcyhcsiahism
that is,massivccxpchditurcs ohthcrcarmamcht oIthc Lhitcd btatcs
ahd its aics ahd thc dcpoymcht oI a Iar-Iuhg hctvork oI qusi-
pcrmahcht miitary bascs-vas uhdoubtcdythc most dyhamic ahd
cohspicuous clcmcht oI thc combihatioh. But thc Lb-spohsorcd
sprcad oI socia Kcyhcsiahism-that is, thc govcrhmchta pursuit
oIIu cmpoymcht ahd high mass cohsumptioh ih thc cst/ôrth
5 Ann-Marie Burley, "Regulating The World: Multilateralism, International
Law, and the Projection of the New Deal Regulatory State," in J. G. Ruggie, ed. ,
Multilateralism Matters: The Theory and Praxis O fan Institutional Form (New York,
Columbia University Press, 1993), pp. 125-6, 129-32.
6 Schur mann, Logic of World Power, pp. 5, 67, 77.
7 To borrow James O' Connor's expression. See James O' Connor, The Fiscal
Crisis of the State (New York, St Martin's Press, 1973).
A CRISIS OF HEGEMONY 153
ahd oI `dcvcopmcht' ih thc goba bouth-vas aso ah csschtia
Iactor.
!hc rccohstructioh ahd upgradihg oI thc Ccrmah ahd japahcsc

ihdustrial apparatuscs-thc cchtcrpiccc oI Brchhcr's uhcvch dcvcl-
opmcht-vcrc ihtcgral aspccts oIthc ihtcrhatiohalizatioh oIthc Lb
varIarc-vclIarcstatc.PsCumihgshotcs,commchtihgspcciIicalyoh
thc Pmcricah approach to japahcsc rcihdustriaizatioh, `Ccorgc
Kchhah's poicy oI cohtaihmcht vas alvays imitcd ahd parsimo-
hious, bascdohthcidcathatIourorIivcihdustrialstructurcscxistcd
ih thc vord. thc bovict had ohc ahdthc Lhitcdbtatcs hadIour, ahd
thihgs shoudbckcptthis vay. 'Kchhah's ìdca' vas trahsatcdihto
Lb govcrhmcht spohsorship oI japahcsc rcihdustriaizatioh. !hc
Korcah ar bccamc ``japah's ârsha ah' . . . arprocurcmcht
propclcd japah aohg its var bcatihg ihdustria path.
, ,
Lb promo-
tioh oIthc rccohstructioh ahd upgradihg oI thc Ccrmah ihdustria
apparatus occurrcd through diIIcrcht but cqualy cIIcctivc chahhcls.
Ccrmahy vas, oI coursc, amohg thc maih bchcIiciarics oI thc
ârsha lah ahd Lb miitary cxpchditurc abroad. But thc most
importaht cohtributioh vas Lb spohsorship oI cstcrh Luropcah
ccohomic uhioh. Ps johh !ostcr Lucs dccarcdih l9+8, à hcalthy
Luropc' couId hot bc `dividcd ihto sma compartmchts. ' t had to
bcorgahizcdihtoa markct` bigchoughtoj ustiIymodcrhmcthodsoI
8 On the critical role of military Keynesianism in launching the expansion
see, among others, Fred Block, The Origins of International Economic Disorder:
A Study of the United States International Monetary Policy from World War II
to the Present (Berkeley, CA, University of California Press, 1977), pp. 103-4;
Thomas J. McCormick, America's Half Century: United States Foreign Policy in
the Cold War (Baltimore, MD, Johns Hopkins University Press, 1989), pp. 77-8,
98; Giovanni Arrighi, The Long Twentieth Century: Money, Power and the
Origins of our Times (London, Verso, 1994), pp. 295-8. On the Northern and
Southern variants of social Keynesianism, see Arrighi and Silver, Chaos and
Governance, pp. 202-11; Beverly J. Silver, Forces of Labor: Workers' Movements
and Globalization since 1870 (Cambridge, Cambridge University Press, 2003), pp.
149-61.
9 Bruce Cumings, "The Origins and Development of the Northeast Asian
Political Economy: Industrial Sectors, Product Cycles, and Political Consequences,"
in F. e. Deyo, ed., The Political Economy oftheNew Asian Industrialism (Ithaca, NY,
Cornell University Press, 1987) , p. 60, and "The Political Economy of the Pacific
Rim," in R. A. Palat, ed., Pacific-Asia and the Future of the World-System (Westport,
CT, Greenwood Press, 1993) , p. 31. See also Jerome B. Cohen, Japan's Postwar
Economy (Bloomington, IN, Indiana University Press, 1958), pp. 85-91; Takafusa
Nakamura, The Postwar Japanese Economy (Tokyo, Tokyo University Press, 1981) ,
p. 42; Makoto Itoh, The World Economic Crisis and Japanese Capitalism (New York,
St Martin's Press, 1990), p. 142.
chcap productioh Ior mass cohsumptioh. ' P rcihdustriaizcd Ccr-
mahy vas ah csschtia compohcht oI this hcv Luropc.
|
!arIrombcihga spohtahcousproccssorigihatihgIromthcactiohs
oI capitaist accumuators Ìrom bcov'-as it had bcch ih thc
hihctcchth cchtury uhdcr British hcgcmohy-uhcvch dcvcopmcht
uhdcr Lb hcgcmohy vas a proccss cohsciousy ahd activcy chcour-
agcd Ìrom abovc' by a gobaizihg Lb varIarc-vcIarc statc. !his
diIIcrchcc accouhts hot| ustIorthcspccdahdcxtchtoIthc ohgpost-
bccohd ord ar boom but aso Ior thc particuar combihatioh oI
imits ahdcohtradictiohsthattrahsIormcditihtothcrcativcstagha-
tiohoIthc l970sahdl980s.Brchhcr'saccouhtoIthcohsctoIthcohg
dovhturh poihts to ohc such imit ahd cohtradictioh. succcssIu
catchihg-up crcatcs hcv compctitors, ahd ihtchsiIyihg compctitioh
cxcrciscs a dovhvardprcssurc ohthcproIits oIihcumbchtIirms. !o
thc cxtcht that this vas ah uhahticipatcdoutcomc oI thc Codar
pro|cct, it vas hot | ust a imitatioh but aso a cohtradictioh oI
Pmcricah poicics. It is hohcthccss morc pausibc to supposc that
thc outcomc vas ah ahticipatcd but uhavoidabc ccohomic cost oI
poicics vhosc primary ob|cctivcs vcrc hot ccohomic but socia ahd
poitica-that is, thc cohtaihmcht oI commuhism, thc tamihg oI
hatiohaism ahd thc cohsoidatioh oI Lb hcgcmohy.
!hcmostscriouscohtradictiohoILbpoicicsaycscvhcrc.thatis,
prcciscy ih thc diIIicutics ihvovcd ih attaihihg thcsc socia ahd
poitica ob|cctivcs. !o bc surc, ih thc risihg cchtcrs oI capita
accumuatioh, rapid ccohomic grovth, ov cvcs oI uhcmpoymcht
ahd thc actua sprcad oI high mass cohsumptioh cohsoidatcd thc
hcgcmohy oI ohc variaht or ahothcr oI ibcra capitaism. Ps prc-
viousy hotcd, hovcvcr, cvch ih thcsc ccntcrs thcpoiticatriumphoI
ibcra capitaismdidhot cssch ahd, ohthc vhoc, actuay strchgth-
chcd thc dispositioh oI vorkcrs to scck a grcatcr sharc oI thc socia
product through dircct struggc or ccctora mobiizatioh. ashihg-
toh's Codarpoicics thusputa doubc squcczc ohproIits-aIirst
squcczcIromthcihtchsiIicatiohoIihtcr-capitaistcompctitioh,vhich
thcy promotcd bycrcatihgcohditiohs Iavorabctothcupgradihgahd
cxpahsioh oI thc japahcsc ahd cstcrh Luropcah productivc appa-
ratuscs, ahda sccohd squcczc dcrivihgIromthc socia cmpovcrmcht
oI abor, vhich thcy promotcd through thc pursuit oI hcar Iu
cmpoymcht ahd high mass cohsumptioh throughout thc cstcrh
vord.
!hisdoubcsqucczcvasbouhdtoproducca systcm-vidccrisisoI
10 Quoted in McCormick, America's Half Century, pp. 79-80.
proIitabiity but thcrc is ho rcasoh vhy, ih itscI, it shoud havc
produccd thc crisis oI Lb hcgcmohy vhich bccamc thc domihaht
cvcht oI thc l970s. II thc probcms oI proIitabiity camc to bc
subsumcd vithih this broadcr hcgcmohic crisis, thc rcasoh is that
ih thc goba bouth thc Lb varIarc-vcIarc statc attaihcd hcithcr its
socia hor its poitica ob|cctivcs. bociay, thc `!air Lca' that
!rumah promiscd to thc poor couhtrics oI thc vord ih his l9+9
ihaugura addrcss hcvcr matcriaizcd ih ah actua harrovihg oI thc
ihcomc gap that scparatcd ôrth ahd bouth. Ps !hird ord
couhtrics stcppcd up thcir ihdustriaizatioh cIIorts-thc vidcyprc-
scribcd mcahs to `dcvcopmcht'-thcrc vas ihdccd ihdustria coh-
vcrgchcc bctvcch ôrth ahd bouth, but, as prcviousy hotcd, thcrc
vas ho ihcomc cohvcrgchcc at a. !hirdordcouhtrics vcrc thus
bcarihg thc costs vithout rcapihg thc cxpcctcdbchcIits oI ihdustria-
izatioh. orsc sti , ih l970, Kobcrt ^câmara, thch prcsidcht oI
thc ord Bahk, ackhovcdgcd that cvch high ratcs oI grovth oI
C^ didhot rcsut ih thc cxpcctcdimprovcmchts ihvcIarcih!hird
ord hatiohs.
arty rcatcd tothis socia Iaiurc, thc poitica Iaiurc oIthc Lb
vcIarc-varIarc statc vas Iar morc cohspicuous. !hc cpicchtcr oI
this vas,oI coursc,thc var ih Victham, vhcrc thc Lhitcd btatcs vas
uhabctoprcvai,dcspitccscaatihgLbcasuaticsahdthcdcpoymcht
oImiitaryhardvarcahdIircpovcrvithouthistoricaprcccdchtIora
cohIictoIthis kihd. !hcupshotvas thatthc Lhitcd btatcs ostmuch
oI its poitica crcdibiity as goba poiccmah, thcrcby cmbodchihg
thc hatiohaist ahdsociarcvoutioharyIorccs thatCodarpoicics
vcrcmcahttocohtaih. PohgvithmuchoIthcpoiticacrcdibiityoI
itsmiitaryapparatus,thcLhitcdbtatcs aso ost cohtro oIthcvord
mohctarysystcm. PscohtchdcdihChaptcr,thccscaatiohoIpubic
cxpchditurcs to sustaih thc miitary cIIort ih Victham ahd to ovcr-
comc oppositioh to thc var at homc-through thc Crcat bocicty
program-strchgthchcdihIatioharyprcssurcihthcLhitcdbtatcsahd
thc vord ccohomy atargc, dccpchcdthcIisca crisis oIthc Lb statc,
ahdcvchtuaycdto thc coapsc oIthcLb-cchtcrcdsystcm oIIixcd
cxchahgc ratcs.
It is, oI coursc, impossibc to khov vhcthcr thc Brcttoh oods
rcgimcvoudhavc survivcdvithoutthc cIIccts oIthcVicthamar.
ôr is it possibc to khov vhat voud havc happchcd to vord
capitaism haduhcvchdcvcopmchtbcchdrivchÌrom bcov,' as ih
11 Robert McNamara, "The True Dimension of the Task," International
Development Review, 1 (1970), pp. 5-6.
thc hihctcchth ccntury, rathcr thah Ìrom abovc' as uhdcr thc Lb
Cod ar rcgimc. P I am sayihg ih cohtrast to Brchhcr is that,
historicay, uhcvch dcvcopmcht aItcr thc bccohd ord ar vas
cmbcddcd Irom bcgihhihg to chd ih Cod ar rivarics, ahd vas
thcrcIorc thoroughy shapcd by thc succcsscs ahd Iaiurcs oI thc
stratcgics ahd structurcs dcpoycd by thc hcgcmohic Lb varIarc
vcIarc statc. !hc ihtchsiIicatioh oI ihtcr-capitaist compctitioh ahd
thc associatcdcrisis oIproIitabiity vcrc importahtas a sigh thatthc
ohg postvar boom had rcachcd its imits. But thcy vcrc ohy ah
ccmcht oI thc broadcr sigha crisis oI hcgcmohy that cohtcmpor-
ahcousy rcvcacd thc imits ahd cohtradictiohs oI Lb Cod ar
_
'
z
poicics.
Financialization and the Monetarist Counterrevolution
Ps suggcstcdih Chaptcr , thc mohctaristcouhtcrrcvoutiohoI l979-
82 vas a Iar morc dccisivc turhihg poiht ih thc cvoutioh oI Lb ahd
vordcapitaism thah cithcr thc IazaPccord oI l98 or thc rcvcrsc
Iaza Pccord oI l99, to vhich Brchhcr sccms to attributc cqua or
cvchgrcatcrimportahcc.Importahtas thcy vcrc ihothcrrcspccts,thc
Pccords oI l98 ahd l99 vcrc momchts oI ad|ustmcht vithih a
proccss oI rcviva oI Lb hcgcmohy that had arcady bcguh vith thc
svitchIrom utra ax tocxtrcmcy tightmohctarypoicics. BcIorc thc
svitch, Lb mohctary ahd Iisca poicics tchdcd to rcpc rathcr thah
attractthcgrovihgmassoIcapita that soughtaccumuatiohthrough
Iihahcia chahhcs. orsc sti, ih spitc oI thc positivc cIIccts oh thc
compctitivchcss oI Lb mahuIacturcrs that Brchhcr cmphasizcs, thcy
crcatcd cohditiohs oI accumuatioh oh a vord scac that bchcIitcd
hcithcr thc Lb statc hor Lb capita.
Crucia ih this rcspcctvas thc cxposivc grovthoIthcLurodoar
ahd othcr cxtratcrritoria Iihahcia markcts. Curiousy, Brchhcr
hardy mchtiohs this dcvcopmcht, cvch though it origihatcd ihthc
samc ycars as his trahsitioh Irom boom to dovhturh ahd cIt ah
ihdcibc mark oh thc l970s. Lstabishcd ih thc l90s to hod doar
baahccsoICommuhistcouhtricsuhviihgtorisk dcpositihg thcmih
thc Lhitcd btatcs, thcLurodoarmarkctgrcvprimariythroughthc
dcpositsoILbmutihatiohas ahdthcoIIshorcactiviticsoI^cv\ork
bahks. avihg grovh stcadiy through thc l90s ahd cary l960s, it
12 On the Vietnam W ar as the central event ofthe signal crisis of US hegemony, see
Chapter 5 above and Arrighi, The Long Twentieth Century, pp. 215-17, 300, 320-2.
startcd grovihg cxpohchtiay ih thc mid ahd atc l960s, vith curo-
currchcy asscts morc thah guadrupihg bctvcch l967 ahd l970. '`
ard as it is to khov cxacty vhat ay bchihd this cxposioh, it is
pausibc to supposc that it vas triggcrcd by thc |oiht crisis oI
proIitabiity ahd Lb hcgcmohy oI thosc ycars. Pthough Brchhcr
Iocuscs oh Lb mahuIacturcrs producihg at homc, vc khov that Lb
corporatiohs opcratihg abroad had aso bcguh to Iacc toughcr
compctitioh Irom thcir Luropcah riva s. ' ôrcovcr, Luropc vas
thc cpicchtcr oI thc pay cxposioh oI l968-7J. orizohta prcssurc
Irom ihtchsiIyihg compctitioh ahd vcrtica prcssurc Irom abor dc-
mahdsmusthavcgivchama|or boosttothciquidityprcIcrchccoILb
mutihatiohacorporatiohs opcratihgabroad.bihcccohditiohsIorthc
proIitabc rcihvcstmcht oI cash Iovs ih productioh vcrc cvch css
Iavorabc ihthcLhitcdbtatcsthahihLuropc,itmadcgoodbusihcss
schscIorLb mutihatiohas to `park' thcirgrovihgiquid asscts ih
curo-currchcy ahdothcr oIIshorcmohcymarkcts rathcrthahrcpatri-
atc thcm.
Bc that as it may, thc cxposivc grovth oI curo-currchcy
markcts providcd currchcy spccuators-ihcudihg Lb bahks
ahd corporatiohs-vith a hugc masse de manoeuvre vith vhich
to bct agaihst, ahd thcrcby uhdcrmihc, thc stabiity oI thc Lb-
cohtrocd systcm oI Iixcd cxchahgc ratcs. Phd ohcc that systcm
actuay coapscd, thc gatcs vcrc opch Ior ah cvcr grovihg mass
oI privatcy cohtrocd iquidity to compctc vith thcLb ahd othcr
statc actors ih thc productioh oI vord mohcy ahd crcdit. !hrcc
mutuay rcihIorcihg tchdchcics vcrc at vork ih this particuar
compctitivc strugg c.
!irst,thcbrcakdovh oIthcrcgimcoIIixcdcxchahgcratcs addcd a
hcv momchtum to thc Iihahciaizatioh oI capita, by ihcrcasihg thc
risks ahd uhccrtaihtics oI commcrcia-ihdustria activitics. !uctua-
tiohs ihcxchahgcratcs bccamc a ma|or dctcrmihaht oIvariatiohsih
corporatc cash-Iov positiohs, sacs, proIits, ahd asscts ih diIIcrcht
couhtrics ahd currchcics. Ih hcdgihg agaihst thcsc variatiohs, or ih
tryihgtoproIitIromthcm,mutihatiohastchdcdtoihcrcascthcmass
oIiquiditydcpoycdihIihahciaspccuatiohihcxtratcrritoriamohcy
13 Engene L. Versluysen, The Political Economy of International Finance (New
York, St Martin's Press, 1981) , pp. 16-22; Marcello de Cecco, "Inflation and
Structural Change in the Euro-Dollar Market," EUI Working Papers, 23 (Florence,
European University Institute, 1982) , p. 11; Andrew Walter, World Power and World
Money (New York, St Martin's Press, 1991) , p. 182.
14 Alfred Chandler, Scale and Scope: The Dynamics of Industrial Capitalism
(Cambridge, MA, The Belknap Press, 1990), pp. 615-16.
158
markcts vhcrc Irccdom oIactiohvas grcatcstahdspcciaizcdscrviccs
most rcadiy avaiabc.
bccohd, combihcdviththcoss oIcrcdibiityoIthcLhitcd btatcs as
goba poiccmah, thc massivc dcvauatioh oI thc Lb currchcy ih thc
cary l970s promptcd !hird ord govcrhmchts to adopt a morc
aggrcssivc stahcc ih hcgotiatihg thc priccs oI thcir cxports oI ihdus-
tria rav matcrias-oi ih particuar. IhtchsiIyihg ihtcr-capitaist
compctitioh ahd thc stcppihg-up oI ov- ahd middc-ihcomc couh-
trics` ihdustriaizatioh cIIorts hadarcady cdtosighiIicahtihcrcascs
ih rav matcria priccs bcIorc l97J. Ih l97J, hovcvcr, thc virtua
ackhovcdgmcht oI dcIcat by thc Lb govcrhmcht ih Yictham, Io-
ovcd immcdiatcy by thc shattcrihg oI thc myth oI Israci ihvihci-
biity durihg thc \om Kippurar, chcrgizcd ILC ihto protcctihg
its mcmbcrs morc cIIcctivcy Irom thc dcprcciatioh oI thc doar
through aIourIod ihcrcascih thcpricc oIcrudc oi ih aIcvmohths.
Comihg as it did at thc tai chd oI thc pay cxposioh, this so-cacd
Iirstòishock'dccpchcdthccrisisoIproIitabiity ahdstrchgthchcd
ihIatioharytchdchcicsihcorc capitaist couhtrics. ôrcimportaht, it
gchcratcd a S80 biioh surpus oI `pctrodoars, ' a good part oI
vhichvasparkcdorihvcstcdihthccuro-currchcy ahdothcroIIshorc
mohcy markcts. !hc mass oIprivatcy cohtrocdiquiditythatcoud
bcmobiizcdIorIihahciaspccuatiohahdhcvcrcditcrcatiohoutidc
pubicy cohtrocd chahhcsthcrcbyrcccivcd ah additiohapovcrIu
stimuus. '
!ihay, thc trcmchdous cxpahsioh ih thc suppy oI vord mohcy
ahd crcdit, duc to thc combihatioh oI cxtrcmcy ax Lb mohctary
poicics ahd thc cxposivc grovth oI privatcy cohtrocd iquidity ih
oIIshorc mohcy markcts, vas hot matchcd by dcmahd cohditiohs
capabc oI prcvchtihg thc dcvauatioh oI mohcy capita. !o bc surc,
thcrc vas pchty oI dcmahd Ior iquidity, hot ohy oh thc part oI
mutihatioha corporatiohs-to hcdgc agaihst or spccuatc oh cx-
chahgc ratc Iuctuatiohs-but aso oh thc part oI ov- ahd middc-
ihcomc couhtrics, to sustaih thcir dcvcopmchta cIIorts ih ah ih-
crcasihgy compctitivc ahd voatic chvirohmcht. !or thc most part,
hovcvcr, this dcmahd addcd morc to ihIatiohary prcssurcs thah it
did to thc cxpahsioh oI sovcht ihdcbtcdhcss.
15 See, among others, Susan Strange, Casino Capitalism ( Oxford, Basil Black
well, 1986), pp. 11-13.
16 Itoh, World Economic Crisis, pp. 53-4, 60-8, 116; de Cecco, "Inflation and
Structural Change," p. 12; Strange, Casino Capitalism, p. 18.
!ormcry,couhtricsothcrthahthcUhitcdbtatcs hadtokccpthcir
baahcc-oI-paymchts ih somc sort oI cquiibrium. 1hcy had to
`carh' thc mohcy thcy vishcd to spchd abroad. ôv thcy coud
borrov it. ith iquidity apparchtycapabcoIihIihitccxpahsioh,
couhtrics dccmcd crcdit-vorthy ho ohgcr had ahycxtcrhachcck
oh Iorcigh spchdihg. . . . Lhdcr such circumstahccs, a baahcc-oI
paymchtsdcIicitho ohgcr providcd, ih itscI, ah automatic chcck
to domcstic ihIatioh. Couhtrics ih dcIicit coud borrov ihdcIi-
hitcy Irom thc magic iquidity machihc. . . . ôt surprisihgy,
vordihIatiohcohtihucdaccccratihgthroughoutthcdccadc,ahd
Icars oI coapsc m thcprivatc bahkihg systcm grcv ihcrcasihgy
vivid. ôrc ahdmorc dcbts vcrc`rcschcducd,' ahd ahumbcr oI
poor couhtrics grcv Iagrahty ihsovcht.
17
i:
Ih short, thc ihtcractioh bctvcch thc crisis oI proIitabiity ahd thc
crisis oIhcgcmohy, ih combihatioh vith thc Lb ihIatiohary stratcgy
oI crisis mahagcmcht, rcsutcd ih a tch-ycar-ohg ihcrcasc ih vord
mohctarydisordcr,cscaatihgihIlatiohahdstcadydctcrioratiohihthc
capacityoIthcLbdoartoIuhctiohasthcvord`s mcahsoIpaymcht,
rcscrvc currchcy, ahd uhit oI accouht. Brchhcr`s harrov Iocus oh
proIitabiity ih mahuIacturihg misscs thisbroadcr cohtcxt oI coap-
sihgmohctaryIouhdatiohsoIthcvordcapitaistordcr.hatvasthc
poihtoItakihgsomc oIthcprcssurcoIIproIitsih Lb mahuIacturihg
through ax mohctary poicics iI, ih thc proccss, mohcy capita-thc
bcgihhihgahdchdoIcapitaistaccumuatioh-vas madc soabuhdaht
as tobcaIrcc goodrashotthc abusc oILbscighioragcprivicgcsih
Iactchasihgcapita ihto atcrhativcmohctarymcahs, thcrcbydcpriv-
ihg thc Lb statc oI ohc oI its main cvcrs oI vord povcr
!hc root oIthcprobcm oI Lb ahdvord capitaism ihthc l970s
vas hot ov ratcs oI proIit as such. PItcr a, thc drivihg dovh oI
proIitrates ih thc pursuit oI a argcr mass oIproIits has bcch a ohg
cstabishcd traditioh oI historica capitaism. !hc rca probcm
throughout thc l970s vas that Lb mohctary poicics vcrc tryihg
to chticc capita tokccp vord tradc ahdproductioh cxpahdihg, cvch
though such ah cxpahsioh had bccomc thc primary causc oI risihg
costs, risks, ahd uhccrtaihty Ior corporatc capita ih gchcra, ahd Lb
corporatccapitaihparticuar.ôtsurprisihgy,ohyaIractiohoIthc
17 David Calleo, The Imperious Economy (Cambridge, MA, Harvard Univer
sity Press, 1982), pp. 137-8.
18 On this,
M
arx and Smith were in full agreement. See Karl Marx, Capital, vol.
III (Moscow, Foreign Languages Publishing House, 1962), pp. 245-6.
iquidity crcatcd by thc Lb mohctary authoritics Iouhd its vay ihto
hcv tradc ahd productioh taciitics . ôst oI it turhcd ihto ah
cxtratcrritoria mohcy suppy, vhich rcproduccd itscI mahy timcs
ovcr through thc mcchahisms oIprivatc ihtcr-bahk mohcy crcatioh,
ahd prompty rc-cmcrgcd ih vord markcts to compctc vith thc
doars issucd by thc !cdcra Kcscrvc.
h thc ast rcsort, this grovihgcompctitioh bctvcch privatc ahd
pubic mohcy did hot bchcIit thc Lb govcrhmcht, bccausc thc
cxpahsioh oI thc privatc suppy oI doars sct ah ihcrcasihgy argc
group oI couhtrics Ircc Irom baahcc-oI-paymchts cohstraihts, ahd
thcrcbyuhdcrmihcdashihgtoh' s scighioragc privicgcs. ôr did it
bchcIit Lb capita, sihcc thc cxpahsioh oIthcpubic suppy oIdoars
IcdoIIshorcmohcy markctsvith morc iquidity thah coudpossiby
bcrccyccdsaIcyahdproIitaby.tthcrcIorcIorccdthcLbbahksahd
othcr Iihahciaihtcrmcdiaricsthat cohtrocd thcscmarkcts to com-
pctcIicrccyvithohcahothcrihpushihgmohcyohcouhtricsdccmcd
crcdit-vorthy, ahd ihdccd ih ovcrihg thc stahdards by vhich this
crcdit-vorthihcss vas asscsscd.
LhIodihg as it did ih thc cohtcxt oI a dccpchihg crisis oI Lb
hcgcmohy,this mutuay dcstructivc compctitioh cumihatcd ih thc
dcvastatihg ruh oh thc doar oI l979-80. hatcvcr thc actua
motivatiohs ahd ostchsibc ratiohac oI thc suddch rcvcrsa ih Lb
mohctary poicics that Ioovcd thc ruh, its truc ohg-tcrm sighiIi-
cahcc-ahd thc maih rcasoh vhy it cvchtuay rcvivcd Lb Iortuhcs
bcyohd ahyohc's cxpcctatiohs-is that it brought this mutuay
dcstructivc compctitioh to ah abrupt chd. ôt ohy did thc Lb
govcrhmcht stopIccdihgthc systcm vith iquidity, morc importaht,
it startcd compctihg aggrcssivcy Ior capita vordvidc-through
rccord-high ihtcrcst ratcs, tax brcaks, ihcrcasihg Irccdom oI actioh
Ior capitaistproduccrsahdspccuators ahd,asthcbchcIitsoIthchcv
poicics matcriaizcd, ah apprcciatihg doar-provokihgthc massivc
rcroutihg oI capita Iovs tovards thc Lhitcd btatcs discusscd ih
Chaptcr . !o putit crudcy, thc csschcc oI thc mohctarist couhtcr-
rcvoutioh vas a shiIt oILb statc actioh Irom thc suppy sidc to thc
dcmahd sidc oIthc ohgoihg Iihahcia cxpahsioh. !hrough this shiIt,
thc Lb govcrhmcht stoppcd compctihg vith thc grovihg privatc
suppy oI iquidity ahd ihstcad crcatcd brisk dcmahd cohditiohs
Ior thc attcr's accumuatioh through Iihahcia chahhcs.
!hcmohctaristcouhtcrrcvoutiohvashotahisoatcdcvchtbutah
ohgoihg proccss vhich had to bc mahagcd. Brchhcr's accouht oI
ihtcrstatc coopcratioh ahdcompctitioh amohg thc cadihg capitaist
couhtrics ihthc l980s ahd l990s isparticuary uscIu ihhighightihg
161
thc svihgs that havc charactcrizcd this mahagcmcht. hchcvcr thc
proccss thrcatchcd to gct out oI hahd ahd provokc a systcmic
brcakdovh, thc cadihg capitaist statcs coopcratcd to avcrt thc
dahgcrbybrihgihg rcicIIrom compctitivc prcssurcsto thcproduccrs
most immcdiatcy thrcatchcd vith coapsc-Lb mahuIacturcrs oh
thc cvc oIthc aza Pccord oI l98,japahcsc ahd, to a csscr cxtcht,
cstcrh Luropcah mahuIacturcrs oh thc cvc oI thc rcvcrsc aza
Pccord oI l99. But ohccthcdahgcrvasavcrtcd,ihtcrstatccompcti-
tioh rcsumcd uhti thc thrcat oI a hcv brcakdovh oomcd oh thc
horizoh.umihatihgasitis, thisaccouhtdocshottcusvhcthcrthis
proccss has ahy imits-ahd iI it docs, vhat thcsc imits might bc.
Belle Epoque as rcudc to !crmiha Crisis
ritihgihthccaryl990s-bcIorcthctakc-oIIoIthcrcvivaahayzcd
by Brchhcr, but aItcr thc mohctarist couhtcrrcvoutioh had arcady
succccdcd ih trahsIormihg thc crisis oI thc l970s ihto a hcv belle
epoque oI Lb ahd vord capitaism- cohtchdcd that `thc most
strikihgsimiarity bctvcchthis hcv belle epoque ahdthcLdvardiah
ohc has bcch thc amost compctcack oIrcaizatioh oh thc part oI
thcir bchcIiciarics thatthc suddch ahd uhprcccdchtcd prospcrity that
thcy had comc to choy did hot rcst oh a rcsoutioh oI thc crisis oI
accumuatioh that had prcccdcd thc bcautiIu timcs. ' Kathcr, `thc
hcvy Iouhd prospcrity rcstcd oha shiItoIthc crisis Irom ohc sct oI
rcatiohs to ahothcr sct oI rcatiohs. t vas ohy a qucstioh oItimc
bcIorc thc crisis voud rccmcrgc ih morc troubcsomc Iorms.
, ,
'
!his diaghosis rcscmbcs Brchhcr's asscssmcht rhar thc Lb cco-
homic rcviva oI thc sccohd haI oI thc l990s did hot cohstitutc à
dcIihitivctrahscchdchccoI thcohgdovhturh,' ahdthat,ihdccd,thc
vorst had yct to comc. !hcrc arc hohcthccss tvo maih diIIcrchccs
bctvcch Brchhcr's diaghosis oI thc crisis oIproIitabiity uhdcryihg
thcgoba turbuchcc oIthc astthirtyycars,ahdmy ovh. Chcis that
ihtcrprctthc crisis oIproIitabiity as ah aspcctoIa broadcrcrisis oI
hcgcmohy. Phd thc othcr is that sccthc Iihahciaizatioh oIcapita,
rathcr thah pcrsistcht òvcr-capacity ahd ovcr-productioh' ih mah-
uIacturihg,asthcprcdomihahtcapitaistrcspohsctothc oihtcrisisoI
proIitabiity ahdhcgcmohy.
Ps vc sha scc ih thc third part oIthc book, thc rcspohsc oIthc
Bush admihistratioh to thc cvchts oI bcptcmbcr ll has arcady
19 Arrighi, The Long Twentieth Century, p. 324.
prccipitatcdthctcrmina crisis oILbhcgcmony
thcrcby bringingthc
Lb belle epoque to ah chd soohcr rathcr thah atcr. ^cvcrthccss, thc
maih rcasoh vhy thcLb belle epoque vas bouhd to bc a tcmporary
phchomchoh, rcgardcss oI vhat Bush or ahy othcr Lb prcsidcht
might havc dohc, is that Iihahcia cxpahsiohs havc a Iuhdamchtay
cohtradictory impactoh systcmic stabiity. Ihthcshortruh-viththc
uhdcrstahdihg that, ih this cohtcxt, a short ruhchcompasscs dccadcs
rathcr thah ycars-Iihahcia cxpahsiohs tchd to stabiizcthc cxistihg
ordcr
by chabihg ihcumbcht hcgcmohic groups to shiIt ohto sub-

ordihatc groups, hatiohaly ahd ihtcrhatiohay, thc burdchs oI thc
intcnsiIying compctition that chacngcs thcir hcgcmony. I havc
skctchcd abovc thc proccss through vhich thc Lb govcrhmcht suc-
cccdcdihturhihgthcIihahciaizatiohoIcapitaIromaIactoroIcrisis
oI Lb hcgcmohy-as it vas through thc l970s-ihto a Iactor oI
rcIatioh Ior Lb vcath ahd povcr. !hrough diIIcrcht mcchahisms,
ahaogous-iI css spcctacuar-rcvcrsa s cah bcdctcctcdhot | ustih
thc coursc oI thc LK-cchtcrcd Iihahcia cxpahsioh oI thc atc hihc-
tcchth ahd cary tvchticth cchturics, but cvch ih thc coursc oI thc
Lutch-cchtcrcd Iihahcia cxpahsioh oIthc mid cightcchth cchtury. '
vcr timc, hovcvcr, Iihahcia cxpahsiohs tchd to dcstabiizc thc
cxisting ordcrthroughproccsscsthatarc asmuch socia ahdpoitica
as thcy arc ccohomic. Lcohomicay, thcy systcmaticay divcrt pur-
chasihg povcr Irom dcmahd-crcatihg ihvcstmcht ih commoditics
,ihcudihgabor-povcr) tohoardihgahdspccuatioh,thcrcbycxaccr-
batihg rcaizatioh probcms. oiticay, thcy tchd to bc associatcd
vith thc cmcrgchcc oI hcv cohIiguratiohs oI povcr, vhich uhdcr-
mihc thc capacity oI thc ihcumbcht hcgcmohic statc to turh to its
advahtagc thc systcm-vidc ihtchsiIicatioh oI compctitioh. Phd so-
ciay, thcy chtai thc massivc rcdistributioh oI rcvards ahd socia
disocatiohs, vhich tchd to provokc movcmchts oI rcsistahcc ahd
rcbcioh amohg subordihatc groups ahd strata, vhosc cstabishcd
vays oIiIc arc comihg uhdcr attack.
!hc Iorm that thcsc tchdchcics takc, ahd thc vay ih vhich thcy
rcatc to ohc ahothcr ih spacc ahd timc, havc varicd Irom Iihahcia
cxpahsioh toIihahcia cxpahsioh. But somc combihatiohoIthcthrcc
tchdchcics cah bc dctcctcd ih cach oI thc tvo so Iar compctcd
hcgcmohictrahsitiohsoIhistoricacapitaism-IromLutchtoBritish
ahd Irom British to Lb hcgcmohy. Ih thc past trahsitiohs, thcy
cvchtuay rcsutcd ih a compctc ahd sccmihgy irrcmcdiabc brcak-
dovhihthcsystcm's orgahizatioh
vhichvashotovcrcomcuhtithc
20 Arrighi and Silver, Chaos and Governance, ch. 1 and conclusion.
systcm vas rcconstitutcd undcr a ncv hcgcmony.
!hc Crash and

Crcat Lcprcssioh oI thc l9J0s-thc ohy occurrchcc ih thc ast l0
ycarsthatcorrcspohds to Brchhcr'simagcoIa systcm-vidcshakcout
or òutright dcprcssioh'-vas ah ihtcgra ccmcht oI thc atcst
brcakdovh. !hc succcss oI thc mohctarist couhtcrrcvoutioh ih
trahsIormihg thc Iihahcia cxpahsioh oI thc l970s ihto thc drivihg
Iorcc oIthcrcIatioh oILb vcath ahdpovcr oIthc l980s ahd l990s
vas hot ih itscI a guarahtcc that ah ahaogous systcmic brcakdovh
voud hot occur agaih. h thc cohtrary, thcvcry scac ahd scopc oI
thc trahsIormatioh might havc cxaccrbatcd rcaizatioh probcms
vordvidc to s uch an cxtcnt as to makc an òutright dcprcssion'
morc rathcr thah css ikcy.
hcc agaih, hovcvcr, thc ccohomics oI thc situatioh cvovcd ih
combihatioh vith thc poitica ahd socia dimchsiohs oI thc ohgoihg
trahsitioh.Phdvhicthcccohomics oIthcprcschttrahsitiohisihkcy
rcspccts simiar to that oI past trahsitiohs--as vithcsscd by thc ih-
tchsiIicatiohoIihtcr-capitaistcompctitiohahdassociatcdIihahciaiza-
tioh oI capita-its poitics ahd socioogy arc quitc diIIcrcht. Ps
prcviousyhotcd, ih thc coursc oIthc atcstohgdovhturhahd belle
epoque thcrchasbcchhotchdchcy-as thcrcvas ih thc coursc oIthc
ohg dovhturh ahd belle epoque oI thc atc hihctcchth ahd cary
tvchticth cchturics-tovards thc trahsIormatioh oI ihtcr-chtcrprisc
compctitiohihtoavord-scacihtcrstatcstruggcovcrtcrritory,vithits
associatcdcscaatiohoIthcarmamchtsraccamohgrisihgahddccihihg
capitaist povcrs. h thc contrary, goba miitary capabiitics havc
bccomccvchmorccchtraizcdihthchahdsoIthcLhitcdbtatcsthahthcy
arcady vcrc, vhic risihg ahd dccihihg capitaist povcrs havc coh-
tihucd to vork tovards thc cohsoidatioh oI thc uhity oIthc vord
markct. Itis oIcoursc impossibc totchov thismightchahgc,vcrc
ihcrcasihg rcaizatioh probcms to prccipitatc a ma|or systcm-vidc
dcprcssioh. !or thc timc bcihg
hovcvcr, thc ihcrcasihgscgmchtatioh

oIthcvordmarkctthatcontributcddccisivcytothccconomicbrcak-
dovhoIthcl9J0sdocshotappcartobcaIactorihthcprcschttrahsitioh.
Coscy rcatcdtothc abovc, thcsociaIorccsthathavcshapcdahd
cohstraihcd ihtcr-capitaist compctitioh ih thc atc tvchticth cchtury
21 Ibid., chs 1, 3, and conclusion.
22 In response to a critique by James Crotty, Brenner acknowledges that tight
monetary policies exacerbated realization problems in 1969-70. See James Crotty,
"Review of Turbulence in the World Economy by Robert Brenner," Challenge, 42, 3
(1999)and Robert Brenner's reply, pp. 1 19-30. Curiously, however, he hardly men
tions the much more serious realization problems that have been created by the far
more persistent, widespread, and tight monetary policies of the 1980s and 1990s.
arc sighiIicahty diIIcrcht Irom thosc at vork ih thc prcvious trahsi-
tioh.PthoughthcmohctaristcouhtcrrcvoutiohvasquitcsucccssIu
ih uhdcrmihihg thc capacity oI abor ih corc rcgiohs, ahd o! most
bouthcrhhatiohsihthcvord at argc, to obtaih a argcrsharcoIthc
hatioha ahd goba pics, rcspcctivcy, this succcss has its ovh imits
ahd cohtradictiohs. ChicI amohg thcsc, as Brchhcr himscI cmpha-
sizcs, is thc Iact that thc Lb ccohomic rcviva oIthc l990s, ahd thc
cohtihuihg dcpchdchcc oI thc vord ccohomy oh a grovihg Lb
ccohomy, havc bcchbascdoh ah ihcrcascih LbIorcighihdcbtcdhcss
that has ho prcccdcht ih vord history. P situatioh oIthis kihd cah
hardy bc rcproduccd Ior ahy chgth oI timc vithout trahsIormihg
ihto ah outright tributc, or `protcctioh paymcht,' thc morc thah S2
biioh , ahdcouhtihg) thatthcLhitcdbtatcshccdsdaily tobaahccits
currchtaccouhtsviththcrcstoIthcvord.Phdyct,asvcsha sccih
art oI thc book, Lb attcmpts to makc thc cxtractioh oI such a
tributc thcIouhdatiohoIahcv,ahdIorthc Iirst timc ihhistory,truy
uhivcrsa cmpirc, havcIaicd miscraby, crcatihg a situatioh oIgoba
poitica ihstabiity vith ho prcccdcht sihcc thc l920s ahd l9J0s.
!ovards thcchdoIthcbelle epoque oILutchcapitaism ih l778,
thc pcriodica De Borger vrotc. `Lach ohc says ìt vi ast my timc
ahd aItcr mc thc dcugc! ' as our !rchch| hcighbors' provcrb has it,
vhich vc havc takch ovcr ih dccds iIhot ih vords.
,,
` !his prctty
much sums up thc phiosophy that uhdcrics a Iihahcia cxpahsiohs
ahd belles epoques oIhistorica capitaism, ihcudihg thc atcst. !hc
maih diIIcrchcc bctvcch thch ahd hov is thc ihcomparaby grcatcr
povcr vicdcd by thc dccihihg hcgcmohic statc.
PsLavidCacohasargucd,ihtcrhatiohasystcmsbrcakdovh,hot
ohy bccausc uhbaahccd ahd aggrcssivc hcv povcrs chachgc thc
cxistihgordcr,butasobccauscdccihihgpovcrs,rathcrthahadustihg
ahd accommodatihg, try to ccmchtthcir sippihg hcgcmohy ihto ah
cxpoitativc domihatioh. h l999, Bcvcry bivcr ahd cohcudcd a
comparisohoIcurrcht ahd past hcgcmohic trahsitiohs ih thccstcrh
vordbyuhdcrscorihgahistoricarcvcrsaihthcrocpaycdbyCaco's
tvocauscsoIsystcmicbrcakdovhs.PtthctimcoIthcbelle epoque oI
Lutchcapitaism, Lutchvordpovcrvas arcadysodimihishcdthat
23 Quoted in Charles R. Boxer, The Dutch Seaborne Empire 1600-1800 (New
York, Knopf, 1965) , p. 291.
24 David P. Calleo, Beyond American Hegemony: The Future of the Western
Alliance (New York, Basic Books, 1987), p. 142. I have changed Calleo's expressions
"slipping preeminence" and "exploitative hegemony" into "slipping hegemony" and
"exploitative domination," respectively, to match the Gramscian distinction between
hegemony and domination adopted in this chapter and throughout the book.
Lutchrcsistahcctoadustmchtahdaccommodatiohpaycdvirtuayho
rocihthcsubscquchtsystcmicbrcakdovh,ihcomparisohviththcroc
paycdbythccmcrgihg,aggrcssivc,cm pirc-buidihghatiohastatcs,Iirst
ahdIorcmostBritaihahd!rahcc. !oday, ihcohtrast,vchavcrcachcd
thc othcr chd oIthc spcctrum.
1hcrc arc ho crcdibc aggrcssivc hcv miitary| povcrs that cah
provokc thc brcakdovh oIthc Lb-cchtcrcd vorld systcm but thc
LhitcdbtatcshascvchgrcatcrcapabiiticsthahBritaihdidacchtury
ago to cohvcrtits dccihihg hcgcmohyihto ah cxpoitativcdomiha-
tioh. I thc systcm cvchtuay brcaks dovh, it vi bc primariy
bccausc oILb rcsistahcc to ad|ustmcht ahd accommodatioh. Phd
cohvcrscy, Lb ad|ustmcht ahd accommodatioh to thc risihg cco-
homicpovcroIthcLastPsiahrcgiohisahcsschtiacohditiohIora
hoh-catastrophic trahsitioh to a hcv vord ordcr. Ph cquay
csschtiacohditiohisthccmcrgchccoIahcvgobalcadcrshipIrom
thcmaihcchtcrsoIthcLastPsiahccohomiccxpahsioh. . . viihg
ahdabctoriscuptothctaskoIprovidihgsystcm-cvcsoutiohsto
thc systcm-cvcprobcms cItbchihdbyLb hcgcmohy.
bihccthisvasvrittch,Lb rcsistahcctoadustmchtahdaccommodatioh
has matcriaizcd ih a morc cxtrcmcIorm thah ahyohccxpcctcd ihthc
rocctIora^cvPmcricahCchtury,vhoscdisastrousIirsttriaihraq
has arcady prccipitatcd thc tcrmiha crisis oI Lb hcgcmohy ahd coh-
soidatcdIurthcr thc shiIt oIgoba ccohomicpovcr to Last Psia. But
vhcthcrthccatastrophicoutcomcoIthcraqiadvchturcisaprcudcto
cvchgrcatcrcatastrophcs,orhastaughtthcPmcricahpcopcahdgovcrh-
mcht to adust to thc hcv rcaitics oI vord povcr, rcmaihs ah opch
qucstioh.PhdsodocsthcqucstiohoIvhcthcrahcvgoba cadcrshipis
cmcrgihgihLastPsiaviththccapacitytoprovidcsystcm-cvcsoutiohs
tothcprobcmscItbchihdbyLbhcgcmohy.!hcscissucsarcaddrcsscdih
artsahdVoIthcbook.But,bcIorcvcprocccd,shaIurthcrcariIy
my argumchtcohccrhihggoba turbuchcc by makihg cxpicitits coh-
hcctiohsviththcthcorcticaIramcvorkdcvcopcdihart1.
Reprise and Preview
LcspitcBrchhcr's charactcrizatioh oI thc atc tvchticth-cchtury ohg
dovhturh as a situatioh oI ovcr-productioh, vhat hc actuay dc-
25 Arrighi and Silver, Chaos and Governance, pp. 288-9.
scribcs is avariant oIthckihdoIovcr-accumuatiohoIcapitathat,ih
bmith' s thcory oI ccohomic dcvcopmcht, drivcs dovh thc ratc oI
proIit ahd brihgs ccohomic cxpahsiohs to ah chd. Ps argucd ih
Chaptcr J, ârx's hotioh oI ovcr-productioh shoud bc rcscrvcd
Ior situatiohs ih vhich thc abor-savihg dispositiohs oI capitaist
accumuatorsprcvchtaggrcgatcdcmahdIromcxpahdihgih stcpvith
aggrcgatcsuppy. PsituatiohoIthiskihdmayhavcbcchthcresult oI
thc mohctaristcouhtcrrcvoutioh, butvas dcIihitcy hot thc cause oI
thc oiht crisis oI proIitabiity ahd hcgcmohy that promptcd thc
couhtcrrcvoutioh itscI.
!hcmatchbctvcchthcdccihcoIproIitabiityoIthcatctvchticth
cchtury ahd bmith's thcory oI ccohomic dcvcopmcht is Iar Irom
pcrIcct,bccauscbmith'sthcoryprcsupposcsthccxistchccoIasovcrcigh
vhoactivatcsahdrcguatcsihtcr-capitaistcompctitiohihthcgchcra
ihtcrcst, vhcrcas thc dccihc oI proIitabiity oI thc atc tvchticth
cchtury occurrcdih a goba cohtcxt charactcrizcd by mutipc sovcr-
cightics. h our cohccptuaizatioh, hovcvcr, hcgcmohic statcs pay
govcrhmchta Iuhctiohs at thc goba cvc, ahd ih so doihg pursuc
poicicsthatmay ormayhothccdbmith's advicctogovcrhmchts.!hus
cary Lb Cod ar poicics Ioovcd thc spirit, iI hot thc cttcr, oI
bmith' s advicc, both bccausc thcy crcatcd thc cohditiohs oIthc sub-
scquchtihtchsiIicatioh oI ihtcr-capitaist compctitioh-byupgradihg
ahdcxpahdihgthcjapahcsc ahdcstcrhLuropcahproductivc appa-
ratuscs-ahd bccausc thcy cohstraihcd thc capacity oI capitaists to
shiItohtoaborthcburdchoIihtchsiIyihgcompctitioh-bypromotihg
hcarIucmpoymchtihthcôrthahddcvcopmchtihthcbouth.!hc
Lb-spohsorcdmohctaristcouhtcrrcvoutiohoIthc l980s,ihcohtrast,
did cxacty thc oppositc oI vhat bmith adviscd govcrhmchts to do
bccausc, uhdcr thc ihIamous sogah `!hcrc s ô Ptcrhativc'
,!^P) , it promotcd thc rc-cstabishmcht oI proIitabiity through
poicics thatcmpovcrcdcapitaiststoshiItthcburdchoIcompctitivc
prcssurcs ohto abor ahd subordihatc groups vordvidc.
PshotcdihChaptcr,bothBrchhcrahdCrcchspahpoihtoutthatthc
grcatcrvcakchihgoIabor'scvcragcihthcLhitcdbtatcsthahihLuropc
ahdjapahcohtributcdtothcrcvivaoILbproIitabiityihthcl990sahd
bcyohd. bmith'sthcoryoIthcIaihgratcoIproIithohcthccssihvitcsus
toaddrcssthcmorcimportahtissucoIvhcthcrthisrcvivamay,ihturh,
havc cohtributcd to a dctcrioratioh oI thc compctitivchcss oI Lb
busihcss athomcahd abroad. !hc baahcc oIthccurrcht accouht oI
acouhtry'spaymchtsisasgooda mcasurcasahyothcroIthisovcra
compctitivchcss. Ps !igurc .2 shovs, aItcr thc rcviva oI Lb proIit-
abiityoIthcmidl990sthcLbdcIicitcxpcrichccdavcritabccxposioh,
vhicCcrmahyahd]apahcohtihucdtogchcratcasurpus.Locshotthis
divcrgchcc suggcst that bmith might havc bcch right ih caimihgthat
highproIits havc morc `pcrhicious cIIccts' ohthc compctitivchcss oI
busihcssthahthchighvagcs capitaists avays compaih about, cspc-
ciayihvicv oIthchugcihcrcascihthcratiooIthcavcragcihcomcoI
PmcricahCLCstothatoIthcavcragcmahuIacturihgcm poyccthathas
accompahicd thc dctcrioratioh oI thc goba compctitivchcss oI Lb
busihcss r h l980, thisratio vas+0. l, tvchtyycars atcr, itvas+7. l,
thati s , tvchtytothirtytimcs grcatcrthahi hLuropcah couhtrics ahd
japah,dcspitcthcIactthatthcsc couhtricshadcithcramostcaughtup
vith or surpasscdthc Lhitcd btatcs ih productivity pcr hour vorkcd.
!hccxtravagahtrcvardsthrovhatLbCLCs,IarIrombcihgpartoIthc
soutioh, may vc havc bcch part oI thc probcm oI thc dccihihg

I Lb
.
26
compctitivchcss L corporatiohs .
Bc that as it may, thc most Iuhdamchta probabc causc oI thc
dccihc ih Lb compctitivchcss has bcch thc rcvcrsa oI thc tchdchcy
tovards thc vcrtica ihtcgratioh ahd burcaucratizatioh oI busihcss
mchtiohcdihChaptcr. !hc ihtchsiIicatioh oIcompctitivcprcssurcs
oI thc atc hihctcchth cchtury-as bmith had thcorizcd a cchtury
caricr-drovc proIits dovh to a barcy `tocrabc' cvc,provokihg
vidcsprcad rcactiohs amohg capitaists agaihst `cxccssivc compcti-
tioh. ' Lb mahuIacturcrs ih particuar-vrotc Ldvard b. ^cadc ih
l900-vcrc`tircdoIvorkihgIorthc pubic', thcyvahtcd àargcr
proIit vithout such a dcspcratc struggc to gct it,' ahd sought vays
`to stop this vorrisomc struggc, vhoscbchcIits vcrc hcary a oI
h d b h I
, , 27
t cm gamc y t c cohsumcr m ov pfccs.
Chcobvious vay oIrcstraihihg compctitioh vas horizohta com-
bihatioh-thc Iusioh through associatioh, mcrgcr, or takcovcr oI
chtcrpriscs usihg much thc samc ihputs to makc much thc samc
outputs Ior much thc samc markcts. Jhrough combihatiohs oI this
kihd, compctihg chtcrpriscs coud sct thcir combihcd productioh,
purchascs,ahd sacs at cvcs thatvoudguarahtccargcrproIits ahd
poo rcsourccs to brcak ihto uhrcguatcd markcts, to dcvcop hcv
tcchhoogics, ahd to orgahizc morc cIIcctivcy thcir opcratiohs.
orizohta combihatiohs, hovcvcr, vcrc hard to chIorcc ih ovcr-
26 Cf. Robin Blackburn, Banking on Death; Or Investing in Life: The History
and Future of Pensions (London, Verso, 2002) , p. 201; Tony Judt, "Europe vs.
America," New York Review, February 10, 2005; M. Reutter, "Workplace Tremors,"
Washington Post, October 23, 2005.
27 Quoted in Martin J. Sklar, The Corporate Reconstruction of American
Capitalism, 1 890-1916: The Market, the Law, and Politics (Cambridge, Cambridge
University Press, 1988) , p. 56.
-

crovdcd markcts-that is, prcciscy vhcrc thcy vcrc most hccdcd
cspcciay ih thc abschcc oI support by govcrhmchts.
hcrcIcasibc,amorccIIcctivcvayoIrcstraihihgcompctitiohvas
vcrtica ihtcgratioh-thcIusioh,thatis, oIah chtcrprisc' sopcratiohs
vith thosc oI its suppicrs ahd customcrs, so as to chsurc suppics
ùpstrcam' Irom primary productioh, ahd outcts `dovhstrcam'
tovards Iiha cohsumptioh. !hcmuti-uhitchtcrpriscs that rcsutcd
Irom this Iusioh coud rcducc thc trahsactioh costs, risks, ahduh-
ccrtaihticsihvovcdihmovihgihputsahdoutputsthroughthcscquch-
tia subproccsscs oI productioh ahd cxchahgc that ihkcd thc
procurcmchtoIprimaryihputstothcdisposa oIIihaoutputs .hic
amorccIIcctivcschcduihgoIIovschabcdthcmtouscIaciiticsahd
pcrsohhc ih productioh ahd distributioh morcihtchsivcy, admihis-
trativccoordihatiohprovidcdthcmvithamorcccrtaihcashIovahd
amorcrapidrcpaymchtIorscrviccsrchdcrcd.Psthcargcahdstcady
cashIovschsurcdbythiskihdoIcchtraizatiohvcrcpovcdbackih
thccrcatiohoImahagcriahicrarchicstomohitorahdrcguatcmarkcts
ahd aborproccsscs,thcvcrticayihtcgratcdchtcrpriscsgaihcddcci-
sivc compctitivc advahtagcs vis-a-vis sihgc-uhit ci:tcrpriscs or css
spcciaizcdmuti-uhitchtcrpriscs.Chcccstabishcd,thcschicrarchics
cohstitutcdimposihg barricrstochtryih thcihdustricsthathadbcch
succcssIuy rcorgahizcd throughvcrtica ihtcgratioh.
!hc tchdchcics tovards horizohta combihatioh ahd vcrtica ih-

tcgratioh sct oII by thc cut-throat compctitioh oI thc atc hihctcchth
cchtury dcvcopcd uhcvchy ih thc thrcc maih ihdustria couhtrics oI
thctimc-Britaih,thcLhitcdbtatcs, ahdCcrmahy.Ccrmahbusihcss,
vith crucia govcrhmcht support, movcd most succcssIuy ih both
dircctiohs,givihgrisctothchi ghycchtraizcdahdcohcsivc systcmoI
busihcsschtcrpriscthatbccamcthcmodcoIârxistthcoricsoIstatc
mohopoy capitaism. British busihcss , ih cohtrast, vas drivch to
spcciaizcIurthcrih goba commcrcia ahdIihahciaihtcrmcdiatioh,
ahd vas cast succcssIu ih movihg tovards horizohta combihatioh
ahd, cspcciay, vcrtica ihtcgratioh. Lb busihcss Ic somcvhcrc ih
bctvcch, bcihg css succcssIu thah Ccrmah busihcss ih crcatihg
horizohtacombihatiohsbutcvchtuaycmcrgihgasthcmostsucccss-
Iu ih practicihgvcrtica ihtcgratioh.
!hus, vhic thcihtchsiIicatiohoIcompctitivcprcssurcsahddccih-
28 Alfred Chandler, The Visible H and: The Managerial Revolution in American
Business (Cambridge, MA, The Belknap Press, 1977), pp. 7, 299.
29 Chandler, Scale and Scope; Arrighi and Silver, Chaos and Governance, pp.
121-30.
A CRISIS OF HEGEMONY i-
ihg proIitabiity oI thc atc hihctcchth cchtury vihdicatcd bmith's
cohtchtioh that ccohomic cxpahsiohs arc imitcd by thc particuar
ihstitutioha scttihg ih vhich thcy arc cmbcddcd, thc outcomc oIthc
compctitivcstruggcih Ccrmahy ahdihthc Lhitcd btatcs vihdicatcd
ârx's cohtchtiohthatthccohcchtratiohahdcchtraizatiohoIcapita
voud dcstroy thc od ihstitutioha scttihg ahd crcatc a hcv ohc oI
grcatcr grovth potchtia. Pthough ârxists rcmaihcd ohg Iixatcd
oh thc Ccrmah modc oI statc mohopoy capitaism, it vas ih thc
Lhitcdbtatcs thatvcrtica ihtcgratiohhadcrcatcdthckihdoIbusihcss
orgahizatioh ahd tcchhica divisioh oIabor that ârx thcorizcd ih
Capt/a/-as !rohti's `discovcry' oI ârx ih Lctroit discusscd ih
Chaptcr l cvchtuay suggcstcd.
!hcatctvchticth-cchturyohgdovhturh,ihcohtrast,appcarstobc
vihdicatihgbmith'sprcdictiohs,hot ustIromthcstahdpoihtoIitscauscs
,ovcr-accumuatiohvithihaparticuarihstitutiohascttihg) ,butasooI
itsoutcomc.arcvivaoImorcdccchtraizcdIormsoIbusihcss,vhichrcy
IarmorcohthcsociadivisiohoIaboramohgproductiohuhitsthahoh
thc tcchhica divisioh oI abor vithih uhits. Prcady ih thc atc l960s,
ctcrLruckcrIorcsavthatthcdomihahccoIbigLbcorporatiohsikc
CchcraôtorsahdLbbtccvasabouttochdihahcraoI`turbuchcc'
comparabc to thatoIthchaIcchturybcIorcthc!irstordar. Ps
Krugmahhotcs, Lruckcr'sIorccastprovcdprophctic.`
By thc l980s, thc crisis oI vcrticay ihtcgratcd, burcaucraticay
mahagcdcorporatiohs had bccomc arcaity. `!hc argccorporatioh,
vithits hatiohavcrtica structurc ahdthcscparatiohoIitsIuhctiohs
bctvcchstaIIahdihc,'vrotcâhuc CastcsahdPc ahdroortcs,
`docs hotappcarahymorc as thc aststagc oIahcccssarycvoutioh
tovard ratiohaizcd ihdustria mahagcmcht. ^ctvorks oI ccohomic
activitics, hctvorks oI Iirms, ahd coordihatcd custcrs oI vorkcrs
appcar to comprisc ahcmcrgntmodc oIsucccssIu productioh ahd
distributioh. ' h a simiar vcih, îchac iorc ahd Charcs babc
argucdthat thctriumph oI mass productioh, uhdcrtakch ih burcau-
craticay mahagcd, giaht corporatiohs, ovcr thc Ìcxibc spcciaiza-
tioh' oI sma-batch craIt productioh, carricd out ih sma ahd
mcdium-sizcd busihcss uhits coordihatcd by markct rcatiohships,
vas hcithcrcompctc hor irrcvcrsibc.`'
30 Peter Drucker, The Age ofDiscontinuity (New York, Harper & Row, 1969) ;
P. Krugman, "Age of Anxiety, " New York Times, November 28, 2005.
31 Manuel Castells and Alejandro Partes, "World Underneath: The Origins,
Dynamics, and Effects of the Informal Economy," in A. Partes, M. Castells, and L.A.
Benton, eds, The Informal Economy: Studies in Advanced and Less Developed Countries
(Baltimore, MD, Jolms Hopkins University Press, 1989) , pp. 29-30; cont'd over!
Ps Bchhctt arrisoh has uhdcrscorcd, thc portrait oI thc argc
corporatioh as `somcthihg oI a dihosaur, ihcrcasihgy uhabc to
compctc ih a `post-ihdustria' vord charactcrizcd by cohtihuay
Iuctuatihgcohsumcrdcmahds ,hcightchcdihtcrhatiohacompctitioh,
ahdthc hccdIor morc Ìlcxibc' Iorms oIvork ahdihtcrIirmihtcrac-
tioh,' has bcch grcaty cxaggcratcd. Kathcr thah dvihdihg avay,
`cohcchtratcd ccohomicpovcrischahgihgits shapc, as thcbigIirms
crcatc a mahhcr oI aiahccs, short- ahd ohg-tcrm Iihahcia ahd
tcchhoogy dcas-vith ohc ahothcr, vith govcrhmchts at a cvcs,
ahdvithcgiohs oIgchcray ,athough hotihvariaby) smacrIirms
vhoactasthcirsuppicrsahdsubcohtractors. 'hthcproccss,thcycut
to thc bohc pcrmahcht , `corc') obsahdrcocatcas muchaspossibc
cohtihgcht , `pcriphcra')ohcstothcoutcrrcachcsoIthcirhctvorks,
oItch ih diIIcrcht gcographica ocatiohs. !hc argc corporatiohs
thcmscvcs thus rcsortcd to hctvorkihg to dccchtraizc productioh
outsidc thcir orgahizatioha domaihs, rctaihihg as much as possibc
cohtro ovcrmarkcts ahdtcchhoogica ahdIihahcia rcsourccs.`
Crahtcd a this, thc vord-historica sighiIicahcc oI thc chahgc
shoudhotbcuhdcrcstimatcdIoratcasttvorcasohs.!irst,thcchahgc
shovs hov dcpchdcht thc compctitivc advahtagcs oI vcrticay ihtc-
gratcdahdburcaucraticaymahagcdcorporatiohsvcrcohtvopccu-
iar historica cohditiohs. thcscgmchtatioh oIthcvordmarkctihthc
IirsthaIoIthctvchticthcchtury ohthcohc sidc, ahdthcspatia ahd
hatura rcsourcc chdovmchtoIthc cohtihcht-sizcd Lbhatioha ccoh-
omy ohthc othcr. !hosc advahtagcsvcrc cohsidcrabcasohgas thc
31 cont'd Michael J. Piore and Charles F. Sable, The Second Industrial Divide:
Possibilities for Prosperity (New York, Basic Books, 1984), pp. 4-5, 15, 19-20. Claims
of this kind revived interest in Alfred Marshall's notion of "industrial districts" as the
locus of "external economies" (external, that is, to individual business units), which
enabled small business to survive and prosper without exploiting the "internal
economies" of scale and scope available to big business. See Alfred Marshall, Industry
and Trade (London, Macmillan, 1919) ; Giacomo Becattini, "The Marshallian In
dustrial District as a Socio-Economic Notion," in F. Pyke, G. Becattini, and W.
Sengenberger, eds, Industrial Districts and Inter-Firm Cooperation in Italy (Geneva,
International Institute for Labor Studies, 1990); Sebastiano Brusco, "Small Firms and
Industrial Districts: The Experience of Italy," in D. Keeble and F. Weaver, eds, New
Firms and Regional Development (London, Croom Helm, 1986) . As should be evident
from Chapter 2, however, behind Marshall's notion stood, largely unnoticed, Smith's
skepticism concerning the competitive advantages of corporate business, because of the
inevitable "negligence and profusion" of managers, their lack of flexibility in adapting
to local conditions, and the deleterious effects of the technical division of labor on the
quality of the labor force.
32 Bennett Harrison, Lean and Mean: The Changing Landscape of Corporate
Power in the Age of Flexibility (New York, Basic Books, 1994) , pp. 8-12.
humbcr ahd varicty oIsuch corporatiohs vcrc sma, ahdtradc vas a
poor substitutc Ior dircct ihvcstmcht as a mcahs oIpchctratihg thc
vord'srcativcyprotcctcdhatiohaahdcoohiamarkcts.But, assooh
as LbhcgcmohypromotcdthcrcuhiIicatiohoIthcvordmarkct,ahd
thchumbcrahdvarictyoIcorporatcstructurcsproiIcratcdvordvidc,
thc advahtagcs oIvcrticaihtcgratioh ahd burcaucratic mahagcmcht
bcgahtovahc, vhicthcadvahtagcsoIihIormaycoordihatcdsocia
divisiohsoIaborcmphasizcdbybmithahdârshaihcrcascdcorrc-
spohdihgy. !hc rcsut is hota rcturhto thcIamiycapitaismoIthc
hihctcchthcchtury,butagrcatvarictyoIhybridIormsoIcorporatcahd
hoh-corporatcbusihcss,aoIvhichdiIIcrradicayIromthcdomihaht
busihcss orgahizatioh oIthctvchticthcchtury.
bccohd, thcstratcgy oIbig busihcss toturhthcadvahtagcsoIsma
busihcssihtoahihstrumchtoIthccohsoidatiohahdcxpahsiohoIits
ovh povcr has bcch ih cvidchcc cvcryvhcrc. But hovhcrc has this
stratcgy rcsutcd ih rapid ahdvidcsprcadccohomic grovth as it has
ih Last Psia. Ps vc sha sccih art oIthc book,this outcomc ics
at thc roots oIthc shiIt oI ccohomic povcr to Last Psia ahd cah bc
traccdtothc hybridizatioh oIthc rcgioh's traditiohoImarkct-bascd,
hoh-capitaist dcvcopmcht vith thc cstcrh traditioh oI capitaist
dcvcopmcht. h thc Lhitcd btatcs, hovcvcr, thc outcomc oI thc
stratcgy ih qucstioh has bcch quitc diIIcrcht, dccpchihg rathcr thah
sovihgthc crisis oI thc prcviousy domihaht ihdustria corporatioh.
!hcmostdramaticmahiIcstatiohoIthisdccpchihgcrisishasbcchthc
dispaccmchtoICchcraôtorsbya-ârtasthchatioh's`busihcss
tcmpatc. ' h thc l90s, C. ^. vas thc argcst Lb corporatioh, its
rcvchucsmakihgupJpcrcchtoILbCL. !oday,a-ârthastakch
itspaccvithavorkIorccoIl.miiohahdrcvcnucscquato2.Jpcrccht
oILbCL.ButthctvotcmpatcsdiIIcrihIuhdamchtavays.C.^.vas
avcrticayihtcgratcdihdustriacorporatioh,vhichcstabishcdproduc-
tiohIaciiticsthroughoutthc vord, butrcmaihcddccpyrootcdihthc
Lbccohomy,vhcrcthcbukoIitsproductsvcrcmahuIacturcdahdsod.
a-ârt,ihcohtrast,isprimari yacommcrciaihtcrmcdiarybctvcch
Iorcigh ,mosty Psiah) subcohtractors, vho mahuIacturc most oIits
products, ahd Lb cohsumcrs, vho buy most oIthcm. !hc chahgc oI
guardbctvcchthctvocorporatiohsasthctcmpatcoILbbusihcsscah
thus bctakch as a symbo ahda mcasurc oIthc trahsIormatioh oIthc
LhitcdbtatcsIromahatiohoIproduccrstoahatiohvhoscrocasgoba
Iihahciachtrcpotchabcsit,toparaphrascâckihdcr,to`sharcihthc
activity oIbraih ahd musccs oIothcrcouhtrics. '
PsapoogistsIorthchcvtcmpatcoILbbusihcssihsist,a-ârt
has bcch a highy im :ovativc cxpoitcr oI thc chcapcst sourccs oI
suppy ahd oI thc most cIIicicht tcchhiqucs oI procurcmcht ahd
distributioh, vhich havc chabcd it to providc its 20 miioh or so
daiy customcrs vith a vidcvarictyoI products at ov priccs ahdto
makc asighiIicahtcohtributiohtothc boom ihLbproductivitysihcc
thcl990s.ButasthcdctractorsoIthchcvtcmpatchavcargucd,a-
ârt has bcch a cadcr, hot ustoI ovcr priccs ahd highcr produc-
tivity, but aso ahd cspcciay oI thc rcdistributioh oI ihcomc Irom
abor to capita ahd oIthctrahsIormatioh oIvorkcrs, to paraphrasc
ârx, ihto `crippcd mohstrositics' ahd disposabc commoditics.
!akihg advahtagc oI its positioh as thc biggcst rctaicr ih vord
history, vritcs Barry Lyhh, a-ârt has drivch dovh vagcs ahd
bchcIits hot ust ih rctaiihg but ih mahuIacturihg ahd shippihg as
vc. à-ârt ahd a grovihg humbcr oItoday' s domihaht Iirms
. . . arc programmcd . . . todictaic dovhvard thc vagcs ahdproIits
oIthc miiohs oIpcopc ahd smacr Iirms vho makc ahdgrov vhat
thcy sc, to brcak dovh chtirc ihcs oI productioh ih thc hamc oI
cIIicichcy. ' `Chcc upoh a timc,' commchts Krugmah ih rcportihg
a-ârt's bruta trcatmcht oIits ovh cmpoyccs, à compahythat
trcatcd its vorkcrs this bady voud havc madc itscI a primc targct
Ior uhioh orgahizcrs. ' !hcsc days, hovcvcr, cmpoycrs ikc a-
ârt `doh't vorry that ahgry vorkcrs vi rcspohd to thcir var oh
vagcs by Iormihg uhiohs, bccausc thcy khov that govcrhmcht
oIIicias , vho arc supposcd to protcct vorkcrs' rights, vi do
cvcrythihg thcy cah to comc dovh oh thc sidc oIvagc-cuttcrs.
, ,
``
h short, thc risc oI a-ârt ahd its ahti-abor stratcgics arc
mahiIcstatiohs oI thc crisis oI thc prcviousy domihaht ihdustria
corporatiohs ohthcohcsidc, ahdoIthc mohctarist couhtcrrcvoutioh
that has Iaciitatcd thc Iihahciaizatioh oI Lb capita oh thc othcr.
a-ârtdidhotcrcatcthcsc circumstahccs, but,ihcxpoitihgthcm,
it did bccomcah activc agcht oIthcir cohsoidatioh. By cohtributihg
tothcrcvivaoIproIitabiityatthccxpchscoIabor,ihothcrvords, it
has strchgthchcd thc positioh oI thc Lhitcd btatcs as thc vord's
Iihahcia ccarihghousc, thcrcby chabihg a grovihg ahd ihIuchtia
mihority oI thc Lb popuatioh tosharc ih thc activity oI braih ahd
musccs oIothcrcouhtricsvithouthavihgto uscthcirovhbraihahd
musccs.
33 ]. Madrick, "Wal-Mart and Productivity," New York Times, September 2,
2004; Barry Lynn, "The Case for Breaking Up Wal-Mart," Harper's Magazine, July 24,
2006; P. Krugman, "The War Against Wages," New York Times, October 6, 2006.
Par III
HEGEMONY UNRVELING
7
DOMINATION WITHOUT HEGEMONY
Pt thc turh oI thc tvchty-Iirst cchtury, thc `L' ahd `' vords ,
cmpirc ahd impcriaism, camc back ih Iashioh. !hcir rcturh vas
hot duc, pace johh kchbcrry, to thc advcht oI thc `Pmcricah
uhipoar agc' ih vhich, ` I]or thcIirst timc ih thc modcrh cra, thc
vord's most povcrIu statc cah opcratc oh thc goba stagc
vithout thc cohstraihts oI othcr grcat povcrs. '
!hat agc had

bcguh vith thc coapsc oI thc bovict boc ih l989, yct throughout
thc l990s thc buzzvord vas `g obaizatioh, ` hot cmpirc or im-
pcriaism, ahd, as kchbcrry himscI hotcs, thc uhparaccd goba
povcr oIthc Lhitcd btatcs vas gchcray discusscduhdcrthc rubric
oI`hcgcmohy. 'Lvch critica thihkcrs-ihcudihgmahy ârxists
Iouhd thc cohccpts oI cmpirc ahd impcriaism oI ittc ahaytica
usc Ih thc aItcrmathoIthc l99l CuIar, Cumihgs caimcd that
it voud havctakch ah ccctroh microscopc to dctcctthc usc oIthc
vord ìmpcriaism' to dcscribc thc Lhitcd btatcs' s roc ih thc
vord.` ypcrboc, oI coursc, but thc cxaggcratioh cohtaihcd ah
importaht ccmcht oI truth.
ôr did thc pubicatioh oI Empire ih 2000 sighiIicahty atcr
thc situatioh, Ior ardt's ahd ^cgri's vork simpy rcpackagcd
ahd gavc a radica tvist to thc cchtra tchcts oI gobaizatioh-
spcak, ihcudihg thc propositioh that, uhdcr thc prcscht cohdi-
tiohs oI goba ccohomic ahd ihIormatioha ihtcgratioh, ho ha-
tioha statc, hot cvch thc Lb, cah Iorm thc cchtcr oI ah
impcriaist procct. Ihdccd, ardt ahd ^cgri prcschtcd Lmpirc
as a ogic ahd structurc oI vord ruc that vas ih kcy rcspccts
1 G. ]. Ikenberry, "Illusions of Empire: Defining the New American Order,"
New York Times, March 16, 2004.
2 Leo Panich and Sam Gindin, "Global Capitalism and American Empire," in L.
Panich and C. Leys, eds, The New Imperial Challenge (London, Merlin Press, 2003) ,
pp. 2-3.
3 Bruce Cumings, "Global Realm with No Limit, Global Realm with No
Name," Radical History Review, 57 ( 1993) , pp. 47-8.
ahtithctica to thc impcriaism that ârxists had thcorizcd ih thc
tvchticth cchtury.
P rca brcak vith thc l990s occurrcd ohy ih 200l, vhch thc Bush
admihistratiohrcspohdcdtothccvchtsoIbcptcmbcrllbycmbracihga
hcv impcria program-that oI thc rocct Ior a ^cv Pmcricah
Cchtury. !hcrc is a curious rcscmbahcc bctvcch this rcIcx ahd thc
actiohs that, sixty ycars caricr, had ushcrcd ih thc Iirst Pmcricah
cchtury. !hc Crcat Lcprcssioh oIthc l9J0s ahd thc risc oIIascism ih
Luropc ahdjapah hadcohvihccdKooscvctthataaxPmcricaha vas
hcccssarytochsurcdomcsticsccurityahdprospcrity.Buthoh-ihtcrvch-
tiohist currchtsihIorcighpoicyvcrchardtochachgc, as ohg as thc
Pmcricahpcopc bcicvcdthatcohtihchtaisoatiohchsurcdthcirsaIcty.
Bctvcch thc outbrcak oI thc Luropcah var ahd car arbor, bchur-
mahh has argucd, `Kooscvct uhdoubtcdy praycd Ior somc dramatic
dcmohstratioh thatthisvas hotso. 'hchhispraycrsvcrcahsvcrcd,
`KooscvctmadcastutcuscoIthcidcoogicaschtimchtsoIhatiohaism
arouscdbycararbortocaboratcahidcoogyoIimpcriaismthrough
vhichhcpromiscd Pmcricahs ordcr, sccurity, ahd usticc. '`
Chcc thc bccohd ord ar vas ovcr, hovcvcr, isoatiohist
dispositiohs rcasscrtcd thcmscvcs. !rumah ahd bccrctary oI btatc
Pchcsoh khcv vcry vc that appcas to raison d'etat ahd Lb
ccohomic ihtcrcsts voud hot bc chough to ovcrcomc thcm. h
draItihgthctcxtthatbccamcthc!rumah doctrihc, thcy accordihgy
Ioovcd Prthur Vahdchbcrg's hotorious advicc to `scarc hc out oI
thc Pmcricah pcopc' by ihIatihg thc hotioh oI goba commuhist
mchacc. !hc trick vorkcd ih vihhihg Cohgrcss support Ior thc
ârsha ah. Butsomcthihgmorcvas hccdcdtosccurcIuhdihgIor
thc argc-scac Lb ahd Luropcah rcarmamcht chvisagcd ih âtioha
bccurity Couhci documcht 68, vhich !rumah approvcd ihprihcipc
ih Ppri l90. !hc ^bC documcht gavc ho prccisc Iigurc, but
cstimatcs suggcstcd ahhua cxpchditurcs J00 pcrccht abovc that
origihay rcqucstcd by thc chtagoh Ior l90.
ov to gct that kihd oI mohcy Irom a Iiscay cohscrvativc
Cohgrcss,cvchihthchamcoIahticommuhism,prcschtcdho sma
4 Michael Hardt and Antonio Negri, Empire (Cambridge, MA, Harvard Uni
versity Press, 2000) , pp. xiv, 327-32. For a variety of critical assessments of the book,
see Gopal Balakrishnan, ed., Debating Empire (London, Verso, 2003) .
5 Franz Schurmann, The Logic of World Power: An Inquiry into the Origins,
Currents, and Contradictions of World Politics (New York, Pantheon, 1974) , pp. 40-l .
6 Thomas J. McCormick, America's Half Century: United States Foreign Policy
in the Cold War (Baltimore, MD, Johns Hopkins University Press, 1989) , pp. 77-8.
DOMINA TION WITHOUT HEGEMONY
task Ior thc admihistratioh. hat vas rcquircd vas ah ihtcrha-
tioha cmcrgchcy, ahd sihcc ôvcmbcr l9+9, bccrctary Pchcsoh
had bcchprcdictihgthat ohc voudoccur somctimc ih l950 ihthc
Psiah rimahds-ih Korca, Victham, 1aivah, or a thrcc. 1vo
mohthsaItcrthcrcsidchtcxamihcd^bC-68,thatcrisishappchcd.
Pchcsoh vas to say atcr, `Korca camc aohg ahd savcd \b.
|77
tis hard totc vhat rcsidchtBush may havc bcch prayihg Iorihthc
cight mohths bctvcch his ihauguratioh ahd bcptcmbcr ll, but vc
khov thatthcpromotcrs oIthcrocctIor a^cvPmcricahCchtury
vithih his admihistratioh vcrc vaitihgIora chahcc toimpcmchtthc
hcv impcria stratcgy thcy had ohg bcch vorkihg oh.` !hcir Iirst
mohths ih oIIicc vcrc hot propitious, but Csama bih Ladch, to
paraphrascPchcsoh, savcd thcm. Ps îchac âhhhasobscrvcd,hc
providcd both `thcpopuarmobiizihgpovcr ahdthc targcts.
, ,
!hc
mchacc oIûsimÌuhdamchtaists' ahd `roguc statcs' bccamc thc
hcv IcarIactor, scarihg hc outoIthc Pmcricah pcopc ahdvihhihg
amost uhahimous Cohgrcss support Ior thc ihvasioh oI raq that
Chchcy, KumsIcd, ahd oIovitz had bcch uhsucccssIuy advocat-
ihg Ior thc bcst part oI a dccadc.
t is this dcvcopmcht that rcvivcd thc Iortuhcs oIthc `L' ahd `'
vordstodcscribc thccmcrgchtimpcria procctoIthc Lhitcdbtatcs.
!hc procct has Iaicd ih its obcctivcs morc rapidy ahd abysmay
thahcvchitscriticscxpcctcd,sothatthc `L' ahd `' vordsmayosc
currchcyasquickyasthcygaihcdit. ^cvcrthccss,cvchiIthcydo,thc
socia, poitica, ahd ccohomic circumstahccs that cd to thc cmcr-
gchccoIthcrocctIora^cvPmcricahCchturyahdits adoptiohby
thc Bush admihistratioh cah bc cxpcctcd to pcrsist ih ohc Iorm or
ahothcr. CI particuar ihtcrcst is vhcthcr ahd hov thcsc circum-
stahccs rcatc to thc turbuchcc oI thc goba poitica ccohomy
7 Ibid., p. 98.
8 For details on the Project for a New American Century see the website http://
www. newamericancentury.org. On the rise of its promoters to power, see Arthur
Schlesinger Jr, "The Making of a Mess," New York Review, September 22, 2004.
9 Michael Mann, Incoherent Empire (London, Verso, 2003) , p. 9.
10 On the determination of the neo-conservatives to wage war on Iraq long
before September 11, see Ron Suskind, The Price of Loyalty: George W. Bush, the
White House, and the Education of Paul O'Neill (New York, Simon & Schuster,
2004) and Richard Clarke, Against All Enemies: Inside America's War on Terror
(New York, Free Press, 2004) . Clarke reports on the now (in)famous cabinet-level
meeting in which, less than a day after the attacks, Rumsfeld pointed out that there
were "no decent targets for bombing in Afghanistan" and therefore "we should
consider bombing Iraq instead" because it had "better targets. "
178
discusscdih artIIoIthc bookahdhov thcy havc chahgcduhdcrthc
impact oI thc ar oh !crrorism.
Ih this chaptcr, I sha ahayzc thc uhravcihg oI thc hco-coh-
scrvativc impcria pro|cct ahd thc trahsIormatioh oI Lb hcgcmohy
ihto vhat, Ioovihg Cuha, vc caricr cacd domihatioh vithout
hcgcmohy. IIocusIirstohthcdoubcIaiurcoIthcvar ohIraqtochd
thc so-cacdYicthamsyhdromc ahdto ay thc Iouhdatiohs oIa hcv
Pmcricah cchtury. I thch turh to thc Iaiurc oI thc hco-cohscrvativc
impcriapro|ccttocouhtcrthc ccohomic dccihc oIthcLhitcdbtatcs
ahd cohcudc by suggcstihg that thc most importaht uhihtchdcd
cohscquchcc oI thc Iraqi advchturc has bcch thc cohsoidatioh oI
thc tchdchcy tovards thc rccchtcrihg oIthc goba ccohomy ohLast
Psia ahd, vithih Last Psia, oh Chiha.
The Persistence of the Vietnam Syndrome
ithih six mohths oI thc oIIicia dccaratioh oIthc chd oIhostiitics,
mahy commchtators vcrc obscrvihg that, athough Iraq is hot Yict-
ham, thc cvcr morc Ircqucht usc oI imagcs ikc `quagmirc,' àttri-
tioh,'`crcdibiitygap,' ÌraqiIicatioh' madcthccurrchtdcbatcsccm
tobc àmostasmuchaboutYicthamasaboutIraq. '
Ih Iraq,asih
Yictham, ihcrcasihgLb diIIicutics ih ovcrcomihgthcrcsistahccoI a
comparativcy ihsighiIicaht miitary advcrsary vcrc | copardizihg thc
crcdibiity oILb miitary might ih thc vord at argc. But prcciscy
bccausc IraqishotYictham,Ishacohtchd,IaiurcihIraqposcsaIar
morc scrious chachgc toLbpovcr thahdidIaiurcih Yictham.
Ps prcviousy hotcd, thcYicthamarvas thccchtracvchtoIthc
` sighacrisis' oILbhcgcmohy, but,ihthc l980s ahdcspcciayihthc
l990s, thc sigha crisis oI l968-7J gavc vay to a rcmarkabc rcsur-
gchccoILb vcath ahdpovcr-a |c//ccpoqucvhoy comparabcto
that ch|oycdbyBritaih a cchtury bcIorc. !hc rcsurgchcc rcachcd its
apogcc aItcrthc coapsc oIthcLbbK, vhch thcLbbcgah to prcscht
itscI-ahdtobcvidcypcrccivcd-asthcgrcatcstmiitarypovcrthc
vord had cvcr scch. Bchihd this Iaadc, hovcvcr, thcrc urkcd thc
probcm that thc vcrdict oI Yictham had hcvcr rcay bcch rcvcrscd,
hor thc actua crcdibiity oILb miitary might Iuy rcstorcd.
!hc ohg scrics oI miitary cohIrohtatiohs thc Lhitcd btatcs ch-
gagcdih aItcritsdcIcatihYicthamvcrcrcmarkabcIorthcircarcIu
11 C.R. Whitney,"Watching Iraq, and Seeing Vietnam," New York Times,
November 9, 2003.
DOMINA TION WITHOUT HEGEMONY 179
avoidahccoIthccohditiohsthathadcdtothatdcbacc.Lxcmparyih
thisrcspcctvasthcLbIightIromLcbahohaItcrthcl98JbombihgoI
thcârihccompouhdihBcirutktcd2+lPmcricahs. !romthch oh,
uhtithccoapscoIthcLbbK,thcLhitcdbtatcscithcrIoughtvarsby
proxy as ih îcaragua, Cambodia, Phgoa, PIghahistah, ahd ih
supportihg Iraq ih thc var agaihst Irah) , or agaihst ihsighiIicaht
chcmics Crchada,ahama) , or Irom thc air, vhcrcthcLbhigh-tcch
apparatus had ah absoutc advahtagc Libya)Y
Pt thc samc timc, thc Lb cscaatcd thc armamcht racc vith thc
LbbK-primariy, though hot cxcusivcy, through thc btratcgic
LcIchsc Ihitiativc-vc bcyohd vhatôscov coudaIIordccohom-
icay. !hc cscaatioh trappcd thc LbbK ihto a doubc cohIrohtatioh.
ih PIghahistah, vhcrc its high-tcch miitary apparatus chcouhtcrcd
thc samc diIIicutics that had cdto thc dcIcat oIthcLb ih Yictham,
ahd ih thc armamcht racc, vhcrc thc Lhitcd btatcs coud mobiizc
Iihahcia rcsourccs that vcrc vhoy bcyohd thc bovict rcach. !hc
bovictLhioh`scvchtuadcIcat,hovcvcr,didhothihgtodisposcoIthc
Yicthamsyhdromc. !othccxtchtthatitvascauscdbyLbpovcr,it
vas duc hot to Lb miitary mightbut to supcrior Iihahcia capabi-
itics.Phdtothccxtchtthatithadmiitaryorigihs,itcohIirmcdrathcr
thahrcvcrscdthc Yictham vcrdict. It shovcd that, ih PIghahistah ho
css thahih Yictham,thchigh-tcchmiitaryapparatuscscohtrocdby
thc Cod ar supcrpovcrs vcrc ihcIIcctua ih poicihg thc !hird
ord oh thc grouhd, hovcvcr vc thcy had succccdcd ih rcprodu-
cihg thc `baahcc oI tcrror. '
1 2 In March 1984, undeterred by Saddam Hussein's atrocities, Rumsfeld flew to
Baghdad as Reagan's envoy to offer him US support, on the very day that Iraq
launched a chemical weapons attack on Iran. Four years later, while Hussein was
razing hundreds of villages in northern Iraq and killing thousands of Kurds,
Washington offered him $500 million in subsidies to buy US farm products. The
following year, the US government doubled the subsidy to $1 billion and provided him
with high-quality germ seed for anthrax and dual-use material that could be used to
manufacture chemical and biological weapons. See S. Milne, "We Are Sleepwalking
into a Reckless War of Aggression," Guardian, September 27, 2002; and A. Roy, "Not
Again," Guardian, September 27, 2002.
13 The fact that "Third World Rollback," as the Reagan doctrine that inspired
these confrontations was sometimes called, eventually backfired does not mean that it
did not inflict unspeakable damage and suffering on the countries singled out. To give
just one example, 300,000 children died directly or indirectly as a result of the
prolongation of the Angolan civil war by the murderous Unita organization with US
support. D. Aaronovitch, "The Terrible Legacy of the Reagan Years," Guardian,
June 8, 2004. On the longer-term effects of the Reagan doctrine in breeding future
terrorists, see Mahmood Mamdani, Good Muslim, Bad Muslim: America, the Cold
War, and the Roots of Terror (New York, Pantheon, 2004) .
!hccoapscoIthcLbbKhohcthccsscrcatcdthc opportuhitytotcst
thc vidcy hcd assumptioh that, vithout bovict assistahcc, thc Vict-
hamcsc coud hot havc dcIcatcdthc Lhitcd btatcs, ust as thc PIghahi
varords ahd thc û ahidcch coud hot havc dcIcatcd thc LbbK
vithout Lb aid. ôrcovcr, thc sub ugatioh oI ôscov ccarcd thc
grouhdIorthcmobiizatiohoIthc L^bccurity Couhci to cgitimatc
Lb poicc actiohs to ah cxtcht that had hot bcch possibc sihcc thc
Korcahar. baddam usscih's l990ihvasioh oIKuvaitimmcdiatcy
crcatcdahidcaopportuhityIorsuchamobiizatioh,vhichthcLhitcd
btatcs prompty scizcd, puttihg oh a tccviscd shov oI its high-tcch
Iircpovcr.'^cvcrthccss, as johh ^cCaihhas pohtcd out, victory ih
thcIirst CuIar `did hotchdthchodoIthcVictham syhdromcovcr
thc Pmcricahj hatioha cohscioushcss'-ih his vicv,bccauscbaddam
usscih vas hot rcmovcd Irom povcr.` !hc Iirst CuI ar, othcr
commchtatorshotcd,`vasihtchdcdtobccvcrythihgthatVicthamvas
hot. hstcad oIa ohg, gradua usc oIIorccthcgoavasto ovcrpovcr
thc chcmy ahd quicky vithdrav.
,,
' Khovh as thc ovc doctrihc,
this stratcgyvas thc cumihatioh oILb chdcavors hot to rcvcrsc but
morc to avoid ahothcr Victham vcrdict.
Ph attcmpt to tcst thc Lb miitary's abiity to poicc thc !hird
ord oh thc grouhd camc sooh aItcrthcIirst CuI ar, uhdcr thc
covcr oIa `humahitariah' missioh ih bomaia. t Iaicd abysmay.
tccviscdIootagcoIa dcadPmcricahbcihgpucdthroughthcstrccts
oIôgadishurcvivcdthcVictham syhdromc athomc ahd cd to thc
immcdiatc vithdrava oILb troops. But, uhdcr Cihtoh, thc ovc
doctrihc bccamc ah ihcrcasihg cmbarrassmcht, cadihg bccrctary oI
btatc âdccihc Pbright to ask hcr Iamous qucstioh. `hat's thc
poihtoIhavihgthisgrcatarmyyou'rcavaystakihgaboutiIvccah't
usc itr'
14 According to General Anthony Zinni, Desert Storm i n 1991 "left the impression
that the terrible mess that awaits us abroad can somehow be overcome by good, clean
soldiering, just like in World War Two. In reality, the only reason Desert Storm work
d
was because we managed to go up against the only jerk on the planet who was stupId
enough to challenge us to refight World War Two" (Tom Clancy with Anthony Zinni
and Tony Koltz, Battle Ready [New York, Putnam, 2004] ) .
1 5 Quoted i n C. R. Whitney, "Watching Iraq, and Seeing Vietnam," New York
Times, November 9, 2003. A similar view undoubtedly loomed large in the fixation of
the promoters of the New American Century with the removal of Hussein. Wolfo
witz, for example, had criticized the first Bush administration, in which he served as
undersecretary of defense for policy, for failing to "deal with Saddam" after the 1991
Gulf War: "Democrats Target Wolfowitz on Iraq Crisis," New York Times, May 18,
2004.
16 M. R. Gordon, "A Sequel, Not a Re-run," New York Times, March 18, 2003 .
181
!hcovcrridihgob cctivcoIthc`humahitariah'missiohsihBoshia
ahdagaihstvhatrcmaihcd oI\ugosaviavasprcciscytoshovthat
thcrc vas a poiht ih `havihgthis grcatarmy.' !hcKosovoarvas
aso mcaht to dcmohstratc that prior L^ chdorscmcht oIthc poicc
actiohsthcLb chosctouhdcrtakcvasvccomcbutdispchsabc. !hc
morcrciabc^P! chdorscmchtvas chough.îitariy,hovcvcr,
a thc Kosovo arcoudprovc vas vhatcvcrybody arcady khcv.
that ashihgtoh has thc tcchhoogica capabiitics to bomb out oI
cxistchccahycouhtryitchooscs. thohcthccssIaicdtodcmohstratc
that thc Lb govcrhmcht vas viihg to risk thc ivcs oI Pmcricah
citizchs ih ovcrscas poicc actiohs that madc ittc schsc to thc Lb
pubic.
h thc cvc oI 9/ll, thc uhviihghcss to takc such risks sti
cohstitutcd thc cay Icct oI thc Lb miitary coossus. !hc shock oI
attacks oh thc ord !radc Cchtcr ahd thc chtagoh chahgcd thc
situatioh, providihg a casus belli that madc schsc to thc Pmcricah
pubic. But,cvchih thcPIghahistahar,vhichchoycd vidcsprcad
domcstic ahdihtcrhatiohasupport,thcBushadmihistratiohshovcd
ittc ihcihatioh to risk Pmcricah casuatics, cvch iI this rcuctahcc
mcaht compromisihg thc avovcd Lb var aim oI gcttihgbih Ladch
`dcad or aivc. ' hstcad, PIghahs did most oI thc Iightihg oh thc
grouhd, cavihg a Washington Post commchtator to ccr that.
Pmcrica has Iought this varohthc chcap. 1hc rcspohsc to thc
vorst attack ohPmcricahsoiamouhtcdto thc hirihgoIIcssiahs.
1hc Lhitcd btatcs vouId hot cvch commit troops to scaIihg thc
bordcr vith akistah. ho khovs hov mahy oI bih Ladch's
IightcrsgotthroughhokhovsiIbihLadchhimscIIvas amohg
thcm'
hcompctchcc ahd idcoogy-drivch irratiohaity arc commoh ahd
somctimcs pausibc cxpahatiohs oIthc mahy ihstahccs oIpuzzihg
bchavioroh thcpart oIthcBushadmihistratioh.!ightihgthc varih
PIghahistah òh thcchcap' ahdriskihgho casuatics ihthchuhtIor
bihLadchvas hohcthccss apcrIcctyratiohachoicc,iIthcob cctivc
oI tnc ar oh !crror vas hot mcrcy capturihg tcrrorists but
rcmakihg thc poitica gcography oI cst Psia ih thc pursuit oI a
hcvPmcricahcchtury. !rom thcstahdpoihtoIthis broadcrob cctivc,
PIghahistah vas a most uhpropitious pacc to tcst thc grcatcr
17 R. Cohen, "Even a Low-Risk War Brings its Own Cost," International
Herald Tribune, January 9, 2002.
i
`
dispositioh oI Pmcricahs to suIIcr casuatics ih Iorcigh vars, aItcr
9/ll. It vas quitc rcasohabc to supposc that Ìihishihg thc |ob' ih
PIghahistahvoudcost morc Lb ivcs, ahd voud brihg much ovcr
poitica ahd ccohomic rcturhs pcr casuaty, thah movihg oh ahd
cohqucrihg Iraq.
!hc succcssIu bitzkricg oh Baghdad sccmcd to bcar out thcsc
cxpcctatiohs, vith Iraqi armcd Iorccs oIIcrihgvirtuay ho rcsistahcc.
By juhc 200J, hovcvcr, Lb casuatics startcd to add up rcchtcssy.
orsc still, political ahd ccohomic rcturhs pcr casualty dcclihcd
prccipitousy, as Lb pahs to rcmakc Iraq, ct aohc thc cst Psiah
rcgioh, to suitPmcricahihtcrcsts cashcdvith rcaitics ohthc grouhd
ahd had to bc rcviscd, dovnsizcd, or atogcthcr abahdohcd. \ct, oh
this occasioh ashihgtoh sccmcd dctcrmihcd to Ìihish thc| ob,'cvch
though it kcpt rcdcIihihg thc haturc oI thc `job. ' P ycar aItcr thc
ihvasioh, ihthc midst oIgrovihgdiIIicutics, Bushauhchcdthcsogah
`c must stay thc coursc ih Iraq,' dcspitc thc opch criticism oI his
gchcras. `!hc coursc,' rctortcd Iormcr CL^!CC^ commahdcr
Cchcra Zihhi, ìs hcadcd ovcr thc îagara !as.
,,
By 200, hot
ohy did thc Lb army appcar to bc vhoy ihcapabc oIIihishihg thc
| ob, vhatcvcrthatvas,itbcgahIacihga coapscihquaityahdmorac
simiar to that cxpcrichccd ih Victham, ahd vithout a draIt. !hc
atcrhativc ho ohgcr sccmcd to bc bctvcch vihhihg ahd osihg, as a
ârihcoIIiccrputit. `ccahoscihIraqahddcstroy ourPrmy,orvc
cah j ust osc.' By Lcccmbcr 2006, Iormcr bccrctary oI btatc Coih
ovc said oh CBb ^cvs that `thc activc Prmy is about brokch,'
vhicBushIorthcIirsttimcadmittcdthatthcLbvashotvihhihgthc
var ih Iraq ahd ordcrcd his hcv LcIchsc bccrctary Kobcrt Catcs to
dcvcopa pahtoihcrcascthc troopstrchgth oIthcPrmy ahdârihc
Corps-a pah that hc had dismisscd ohy a Icv mohths bcIorc.By
thch, hovcvcr, crisis mahagcmchthad suppahtcdprihcipcdpoicy.
1hc vord's ohy supcrpovcr ho ohgcr acts, ihstcad, it rcacts,
usuay to vhatcvcr happchs to bc thc atcst bad hcvs out oI
Baghdad.PscvchtsihIraqsipoutoIhiscohtrol,rcsidchtCcorgc
. Bush's stratcgy Ior vagihg his `goba var oh tcrror' ics ih
18 Chalmers Johnson, "Why I Intend to Vote for John Kerry," The History
News Network, June 14, 2004, p. 1 .
1 9 P. Krugman, "Time t o Leave," New York Times, November 21, 2005;
Editorial, "Army Stretched to Breaking," Minneapolis-St. Paul Star Tribune, Feb
ruary 20, 2006; P. Rogers, "A Tale of Two Insurgencies," open Democracy, June 1,
2006; P. Baker, "U. S. Not Winning War i n Iraq, Bush Says for First Time,"
Washington Post, December 20, 2006.

ruihs.cishavigatihgvithoutacompass. . . Iraqcohstitutcdstcp
ohc.bucccssthcrcvoudpavcthcvayIorthcBushadmihistratioh
to procccd aohg simiar lihcs to stcps tvo, thrcc ahd Iour. !hc
disappoihtmchtsahdIrustratiohsrcsutihgIromthatIirststcphov
cavcs thc chtirc pro|cct m a shambcs.
i
Prcady ih 200+, a dcIchsc cxpcrt at thc cohscrvativc Lcxihgtoh

Ihstitutioh sav hov scrious thc probcm vas Ior thc Lhitcd btatcs
`bccauscthcvholc vorldcahsccthcpattcrhoIVicthamahdbomaia
ih Iraq hov.' By Cctobcr 2006, cvch Bush had to cohccdc that thc
ohgoihgsurgc oIviochccih Iraq `coud bc' comparabc to thc !ct
CIIcivc,vhichhadturhcdthc^mcricahpubicagaihstthcVictham
ar. Ih rcaity, thc probcm thc Lb has bcch Iacihg ih Iraq is Iar
morc scrious thah thc ohc it Iaccd ih Victham. !hc situatioh oI
poitica bockagc is simiar. !hch, ashihgtoh had Ict uhabc to
brihg thc var to ah chd ohg aItcr its Iutiity had bccomc cvidcht
bccauscvithdrava,ihîxoh' svords,voud shovthcLhitcdbtatcs
to bc àpitiIu hcpcss giaht, ' ahd voud ihspirc `totaitariahism
ahd aharchy throughout thc vord.
, ,
bimiary, dcspitc today`s
`gravc ahd dctcrioratihg' situatioh ih Iraq, cvch var critic Brcht
bhovcroIt has caimcd that vithdrava vithout somchov Iihishihg
thc ob voud shov that `thc Pmcricah coossus has stumbcd, vas
osihg its rcsovc, ' thcrcby cmbodchihg tcrrorists ahd cxtrcmists
cvcryvhcrc.` Butthc oss oIpovcr thatthcLhitcd btatcsIaccsIrom
its ihabiity to carry out its vi agaihst Iraqi rcsistahcc is Iar grcatcr
20 A. Bacevich, "Bush's Illusions," International Herald Tribune, December 22
2006.
'
21 B. Bender, "Study Ties Hussein, Guerrilla Strategy," Boston Globe, October
1 1 , 2004; M. Fletcher and P. Baker, "Iraq Violence, 'No Child' Occupy Bush,"
Washington Post, October 19, 2006.
22 W. Pfaff, "Reclaiming the U. S. Army," International Herald Tribune, July
24-25, 2004.
23 B. Snowcroft, "Why America Can't Just Walk Away," International Herald
Tribt:e, January 4, 2007 . ln reality, US actions evoked the image of "a pitiful helpless
gi ant well before Its Withdrawal was even considered. Thus, in a more colorful
formulation, Saudi Arabia's Arab News described US military power in the wake of
the Abu Ghraib disclosures as "a behemoth with the response speed of a muscle
bound ox and the limited understanding of a mouse," quoted in P. Kennicott, "A
Wretched New Picture of America," Washington Post, May 5, 2004. This image is
remllllscent of the "ghastly metaphor" with which Mann illustrated his prescient
assessment that the "American Empire will turn out to be a military giant, a back-seat
economic driver, a political schizophrenic and an ideological phantom. The result is a
disturbed, misshapen monster stumbling clumsily across the world" (Mann Inco'
herent Empire, p. 13) .
7
i
"
ahd css rcmcdiabc thah that vhich it cxpcrichccd Irom dcIcat ih
Victham.
!hcmaihrcasohishotLb dcpchdchccohcstPsiahoi, asmahy
commchtatorsmaihtaih,ihcudihgcary critics oIthcvarikc Ccorgc
boros."Kathcr, as prcviousy hotcd, it is that dcspitc thc simiaritics
Iraq is hot Victham. Ih purcy miitary tcrms, thc Iraqi ihsurgchts,
uhikc thc Victhamcsc, do hot Iicdhcaviy armorcdvchiccs, hor do
thcy havc a ohg cxpcrichcc vith gucrria varIarc ih a Iavorabc
hatura chvirohmcht, or ch|oy thc support oI a supcrpovcr ikc thc
LbbK. Ih thcsc ahd othcr rcspccts, thcy arc a Iar css Iormidabc
advcrsary thah thc Victhamcsc. Iurthcrmorc, durihg thc thrcc dcc-
adcs that scparatc thcLb vithdravaIromVictham ahdthcihvasioh
oIIraq, thcLbmiitaryuhdcrvchtaIuhdamchtarcstructurihgaimcd
spcciIicay at rcvcrsihg thc Victham vcrdict. !his `proIcssiohaiza-
tioh'oIthcarmcdIorccsvasihtchdcdbothtoimprovcthcircombat
rcadihcss ahdsimutahcousytoIrccthcmIromthccohstraihtsthata
cohstahtturhovcroIciviiah sodicrsahdtcmporary oIIiccrs imposcd
oh miitary actioh ahd discipihc. Combihcd vith thc cxtraordihary
tcchhoogica improvcmchts ih Lb vcapohry that occurrcd ih that
samc thirty-ycar pcriod, thc rcstructurihg turhcd thc Lb miitary
apparatus ihto aIar morc ctha Iorccthah it hadbcch at thctimc oI
thc Victham ar.
Ih short, thc disparity oI Iorccs bctvcchthc Lb ihvadcrs ahd thc
oca rcsistahcc ih Iraq has bcch ihcomparaby grcatcr thah +h
Victham. !his is vhy thc Bush admihistratioh hopcd thc ihvasioh
oI Iraq voud rcvcrsc thc Victham vcrdict, but it is aso thc rcasoh
vhy thc Iaiurc to do so cohstitutcs a Iar grcatcr bov to thc
crcdibiity oI Lb miitary might thah dcIcat ih Ihdochiha. II thc
ovc doctrihchadraiscd thc issucoIvhat thc poiht vas oIhavihg
a grcat army iI it coud hot bc uscd, thc Iraqi quagmirc, as Phdrcv
Baccvichhas hotcd, raiscd aIar morc troubihgqucstioh. `hat`sthc
poiht oI usihg this grcat army iI thc rcsut is Iau|ah, â|aI, ahd
Karbaar
, ,
`
!o bc surc, thc Lhitcd btatcs v rcmaih thc vord`s domihaht
miitary povcr Ior somc timc to comc, rcgardcss oI thc outcomc oI
24 "Having invaded Iraq, we cannot extricate ourselves. Domestic pressure to
withdraw is likely to build, as in the Vietnam war, but withdrawing would inflict
irreparable damage on our standing in the world. In this respect, Iraq is worse than
Vietnam because of our dependence on Middle Eastern oil" (G. Soros, "The US Is
Now in the Hands of a Group of Extremists," Guardian, January 26, 2004) .
25 Andrew Bacevich, "A Modern Major General," New Left Review, II129
(2004), p. 132.
`
thc Iraqiar. But, |ust as Lb diIIicutics ih Victham prccipitatcdthc
sigha crisis oILb hcgcmohy, ih a ikcihood Lb diIIicutics ih Iraq
vi, ihrctrospcct, bc scch as havihgprccipitatcditstcrmihacrisis.
!his crisis has ohg bcch ih thc makihg, ahd vas bouhd to comc,
soohcroratcr,ihohcIormorahothcr,rcgardcssoIthcactiohsoIthc
Bushorahyothcradmihistratioh.ButthcparticuarIormihvhichit
ishovoccurrihghasbcchdctcrmihcdbythcdccisiohtoihvadcIraqih
thc hopcthatah casyvictoryvoud rcvcrscthcVicthamvcrdictahd
ay thc Iouhdatiohs oI a hcv Pmcricah cchtury.
Ps prcviousy hotcd, Cihtoh` sKosovoar vas mcaht to dcmoh-
stratc, amohg othcr thihgs, that L^ support Ior Lb poicc actiohs
backcd by^P! vas dispchsabc. Bush`s Iraqar vashov mcaht
todcmohstratcthatcvch^P! vasdispchsabc.!hcassumptioh,ih
thc vords oI ohc hco-cohscrvativc Iorcigh poicy cxpcrt, vas that
ih thc past 500 ycars or morc, ho grcatcr gap had cvcr cxistcd
bctvcchthc ô. I ahd thc ô. 2 povcr m thc vord. Civch this
Pmcricah domihatioh, thc Bush admihistratioh bclicvcd that it
vas chough to cxprcss thc Pmcricah hatioha ihtcrcst Iirmy ahd
cvcryohc voud accommodatc thcmscvcs.
Psit turhcd out, amostho ohcthat mattcrcd did. Lxccpt IorBritaih,
ihcrcasihgy bchavihg ikc thc IiIty-Iirst statc oI thc Lhioh, ahd a
pitiIu `coaitioh oI thc viihg,
,,
thc rcst oI thc vord rc|cctcd

Pmcricahcadcrship to ahcxtchtthathadhoprcccdchtihthc ahhas
26 From a different perspective Fred Halliday made a similar point in claiming
that "in the spring of 2004 we are in the midst of one of the greatest, most intractable
and global crises of modern times. It is not a world war, a strategic military conflict
between major states-the form of conflict that, with two world wars and the cold
war, dominated the 20th century; nor is it a major international economic crisis, as
was 1929 and (less seriously) 1973. But at every level of social and political life, we
confront a situation that is likely to affect everyone on earth and have serious global
consequences." See his "America and Arabia after Saddam," openDemocracy, May
13, 2004.
27 Norman Ornstein, American Enterprise Institute, quoted in R. Cohen, D. E.
Sanger and S. R. Weisman, "Challenging the Rest of the World with a New Order,"
New York Times, October 12, 2004.
28 Already at the end of 2004, the coalition was reported to be a "j oke." Of the
28 allied countries that still had troops in Iraq, "only eight have more than 500. Most
are there as window dressing. And because of language and equipment difficulties,
some contingents-like Macedonia's 28 or Kazakhstan's 29-may be more trouble
than they are worth" (N. Kristof, "Brother, Can You Spare a Brigade?" New York
Times, December 1 1 , 2004) . Since then, all contingents of any significance, except
Britain's and Australia's, have withdrawn or announced their withdrawal.
oILb hcgcmohy. !o bc surc, mahy Iorcigh critics oIthc ihvasioh oI
Iraq Iouhd ittc to rc|oicc ovcr ih thc Lb prcdicamcht. P schior
advisor atthc !rchch Ihstitutc Ior Ihtcrhatioha Kcatiohs cxpaihcd.
hchthcUSIhdstsclIboggcddovhabroad,tposcsabgchachgc
to thc rcst oI thc vord. IIPmcrca smpy pucd out hov, othcr
couhtrcsvoudIhd thcmscvcs ihthc strahgcpositohoIhavhgto
putprcssurcohthcPmcricahstostay,havhgprcvousybcggcdthcm
hot to risk hvasoh vthout a Uhtcd âtiohs rcsoutoh. Ih thc
aItcrmath oIarapdvthdrava,thcIocusoIhtcrhatohacohccrh
voudquckysvtchIromthcpcrsoIUSgobadomhatioh,tothc
dahgcrs oI a vord dcprivcd oI US htcrhatioha chgagcmcht. 1hc
probcmsthatiIthcprcschtstratcgy h Iraq docs hotrcay vork,
thcrcshocohvhchgatcrhatvc.Its uhikcythatschdhgmorcUS
troops or hahdihg ovcr povcr to thc Iraqs voud makc a scrous
dIIcrchcc.Pmcricash amcss, but soarcvc.
Kcasohihg aohg thcsc ihcs probaby motivatcd Ihc uhahimous L^
bccurityCouhcircsoutiohoICctobcr l6, 200J that providcdthc Lb-
cd occupatioh vith somc | uridica cgitimacy ahd cacd oh thc
vord's govcrhmchts to chd it thcir support. juridica cgitimacy
assuch,hovcvcr, mattcrcdtothcLbprimariy, iIhotcxcusivcy,asa
mcahsoIcxtractihgrcsourccsIrom othcrstatcstocovcr thccscaatihg
humah ahd Iihahcia costs oI thc Iraqi occupatioh. Ihdccd, thc maih
purposc oI rushihg thc rcsoutioh through thc L^ bccurity Couhci
vas tochsurc thc succcss oIthc `dohorscohIcrchcc' thatthcLhitcd
btatcs had cohvchcd ih âdrid Ior thc Ioovihg vcck-thc poor
rcsuts oIvhich, asvc sha sccihChaptcr9,providcagoodmcasurc
oI thc dcIatioh that Lb povcr had cxpcrichccd as a rcsut oI its
trahsIormatioh Irom hcgcmohy ihto shccr domihatioh.
PhcvchbcttcrmcasurcvasthcdccihcoILbihIuchccihthccst
Psiah rcgioh, vhosc poitica gcography thc ihvasioh oI Iraq vas
supposcdtorcmakcto suitLbihtcrcstsahd vaucs. By thc sprihgoI
200+, thc probcms ih Iraqhad dcprivcd oI a practica sighiIicahcc
thc issuc oIhov thc Lhitcd batcs voud usc thc occupatioh, cavihg
!homas !ricdmah to amcht that.
c arc h dahgcr oIosihgsomcthihg much morcmportaht thah
| ust thc var h Iraq. c arc h dahgcr oI oshg Pmcrca as ah
29 Dominique Moisi, "The World Is Trapped in the Iraqi Quagmire," Financial
Times, November 14, 2003.
hstrumchtoImoraIauthortyahd hspratoh hthcvord. Ihavc
hcvcrkhovhatmchmyIcvhchPmcrca ahditsprcsdchtvcrc
morc hatcd arouhd thc vord thah today. . . . 1 hc var oh
tcrrorsm s a var oI dcas, ahd to havc ahy chahcc oI vhhhg
vcmustmahtahthccrcdbtyoIourdcas. . . . ccahhotviha
var oI dcas agahst thc pcopc vho hit L oh 9/ll] by ourscvcs.
hyPrabahdûsimscah. . . . Buttshardtoparthcrsomcohc
vhch you bccomc so radoactvc ho ohc vahts to stahd hcxt to
you.`
187
Ihdccd, thc Lb had bccomc so `radioactivc' that pahs to promotc
a raIt oI cosmctic poitica rcIorms ih thc so-cacd Crcatcr îddc
Last had to bc scrappcd. hch, ih !cbruary 200+, ah Prabic
hcvspapcr pubishcd a draIt oI thc Bush admihistratioh's ca
Ior thc vord's vcathicst hatiohs to prcss Ior poitca chahgc
ih cst Psia, scvcra Prab cadcrs cruptcd ih ahgcr, vith cvch
ûbarak caihg thc pah `dcusioha ', thc admihistratioh quicky
vithdrcv it. P Icv mohths atcr, ashihgtoh tricd to usc thc toos
oI `soIt povcr' by spohsorihg a mutilatcra agchda bascd oh a
L^ rcport oh humah dcvcopmcht ih thc Prab vord at thc C8
summit mcctihg oh bcaIsahd, Ccorgia. !hcdraItcrs oIthcrcport,
hovcvcr, vcrc harshy critica oI thc ihitiativc, poihtihg out that
thc Lb hadittc crcdibiity ih thc Prab vord ahdthat, thc morc it
associatcd itscI vith thc L^ dcvcopmcht rcport, thc morc it
uhdcrmihcd thc authority oI thcir vork. By Lcccmbcr 200+, vhch
bccrctary oI btatc Coih ovc arrivcd at a summit mcctihg ih
ôrocco ihtchdcd to promotc dcmocracy across thc Prab vord,
thc Lb had givch up tryihgto takc thc cad. Prab cadcrs, hotcd ah
Pmcricah oIIicia, arc `viihg to takc thc aid, but thcy arc hot
viihg to carry out thc rcIorms.
, ,
`'
!hc probcm Ior thc Lbvas hot | ust thc vidcsprcad pcrccptioh
amohg Prabs ahd ûsims that thc ihvasioh oI Iraq vas aimcd at
strchgthchihg Israc's hahd vis-a-vis acstihiah rcsistahcc ahd thc
Prab vord ih gchcra, hor thcir rcschtmcht at thc argcr-scac
rcproductioh ih Iraq oI thc kihd oI cocrcivc domihatioh that Israc
hadpiohccrcdihthcacstihiahtcrritorics. thc`strikihgsymmctryih
miitarytactics', thc`simiarihattchtiohtothcpightoIthcvictims',
3 0 "Restoring our Honor," New York Times, May 6, 2004.
31 J. Brinkley, "U. S. Slows Bid to Advance Democracy in Arab World," New
York Times, December 5, 2004; F. Heisbourg, "Mideast Democracy Is a Long-Term,
Global Project," International Herald Tribune, March 23, 2004.
ahd thc `cxccssivc soicitudc tovards thc misIortuhcs oIthc aggrcs-
sors.
, ,
`!hcprobcm vas asG, ahdcspcciay, thc pcrccptioh amohg
thc ruihg groupsoIthc Prab ahd ûsim vord thatsubscrvichccto
thc Lb had highcr costs ahd risks thah dcIiahcc. hicdiIIicutics ih
raq madcLbthrcats touscmiitaryIorccagaihstothcrûsimstatcs
mosty cmpty, thc statc thatvas most cmpovcrcdbythcvarih raq
vas rah, itscIhcxtoh thc ist oILbtargctsIorrcgimc chahgc ih thc
cst Psiah rcgioh.
1hcLhitcdbtatcshasdcstroycdrah'sarchchcmy,vhicitscIdoihg
grcatdamagctoitsovhcrcdibiityihthcrcgioh,rah'sovhpoitica
aics ih raq, amohgKurds ahdbhi'a, arcihtcgratcdihto thchcv
govcrhmchtstructurcahdhavchcvcrbcchstrohgcr,ahdthccouhtry
ishovpoiscdtopay amaor,iIhotdccisivc,rocihthcIormatiohoI
ahyhcvraqipoiticaahdsociasystcm.rah. . . ishotuhhappyto
scc thc Pmcricahs boggcd dovh ih raq| Ior a chgthy pcriod, at
cohsidcrabccost.ti dcightcdthat,IorthcIirsttimcihthcpoitics
oI ahyPrab couhtry,thc bhi'a commuhity . . . has hov acquircd
pubic, cgitimatc, ihtcrhatiohay rccoghizcd status.``
bhiitcdomihahccihraq,coupcdvithbhiitcrucihrah,isparticuary
thrcatchihgtobuhhi-rucdstatcsthatbordcrraqahddovhthccrsiah
CuI, carryihg as it docs thc thrcat oI ihcrcasihg uhrcst amohg ohg
supprcsscdbhiitcpopuatiohs. ÌraqgocssamicKcpubic,' varhcd
KihgPbduahoIjordah,`vc'vcopchcdourscvcstoavhocsctoIhcv
probcmsthatvi hotbcimitcdtothc bordcrs oIraq.' !hcscIcars
havccrcatcdahopchihgIorthcLhitcdbtatcstomobiizcbuhhirucrsih
thcrcgioh agaihst rah, butthc opchihgis strictyimitcdby a grovihg
pcrccptiohthatitisdahgcrousIoraPrabcadcrstoaythcmscvcstoo
coscyviththc Lb.`
32 In the months before the war, US and Israeli officials expressed quite openly
the hope that a swift US victory over Iraq would bolster the safety and security of
Israel by demonstrating to Arab leaders that defiance did not pay. For a good selection
of statements to this effect, see Sukumar Muralidharan, "Israel: An Equal Partner in
Occupation of Iraq," Economic and Political Weekly, October 9, 2004.
33 F. Halliday, "America and Arabia after Sad dam," openDemocracy, May 13,
2004.
34 R. Khalaf, "Iranian Nuclear Ambitions Worry Gulf Arab States," Financial
Times, December 18/19, 2004; ]. F. Burns and R. F. Worth, "Iraqi Campaign Raises
Questions of Iran's Sway," New York Times, December 15, 2004; B. Daragahi,
"Jordan's King Risks Shah's Fate, Critics Warn," Los Angeles Times, October 1,
2006; B. Snowcroft, "Why America Can't Just Walk Away," International Herald
Tribune, January 4, 2007.
DOMINATION WITHOUT HEGEMONY 189
tishardtotcvhatthccvchtuaoutcomcoIthcLbihvasiohoI raq
vibcihthcvidcrcstPsiahrcgioh.Lvchthcrahiah`victory'may
provc tcmporary,givchthcgrovihgatrophyahduhpopu arity oIthc
PyatoahrcgimcahdthcpossibiityoIyctahothcri-cohsidcrcdactioh
ohthcpartoIthcLhitcdbtatcs.hdccd,accordihgtobcymourcrsh
ahd rcports ih thc New York Times
,
it appcars thatthc Bush hitc
ousc vas coscy ihvovcdih thcpahhihgoIsrac's2006 bombard-
mcht ahd ihvasioh oI Lcbahoh ahd backcd thc oIIchsivc agaihst
czboah. !his movc, hovcvcr, aso backIircd. hstcad oI crcatihg
a crcdibc casus belli vith rah, it dcmohstratcd srac's ovh vuhcr-
abiity to thc chaos gchcratcd ih thc rcgioh by thc ihvasioh oI raq.
PthoughthishcvIaiurc-aohgvithLbdcpchdchccohbhiitcgood-
viihraq-makcsamiitaryattackohrahimpausibc,thcdispatch
ihjahuary2007oItvoaircraItcarricrsahdthciraccompahyihgbattc
groups ihto thc crsiah CuIvas mcaht,ih thc vords oIa schior Lb
mirtary oIIicia, `to rcmihd thc rahiahs that vccahIocus oh thcm,
too.
, ,
``Lhdcrthcsccircumstahccs,thc ohysaIcbctis that, vhatcvcr
thccvchtuaoutcomcoIthcraqiadvchturc,itvibcarhorcscmbahcc
to its bucpriht. !ar Irom bcihg thc opchihg act oIa hcv Pmcricah
cchtury,ih aikcihooditvibcthccosihgactoIthcIirstahdohy
Pmcricahcchtury,thc ` ohg'tvchticthcchtury.
The Strange Death of the Globalization Project
!hc idca that vc arc vithcssihg thc tcrmiha crisis oI Lb hcgcmohy
bccomcs morc compcihg vhch vc turh to thc impact oI thc raqi
ar oh thc Lb ccntraity ih thc goba poitica ccohomy. Ps arvcy
has uhdcrscorcd, thc obcctivcs oI thc hco-cohscrvativc impcria
procct, both at homc ahd oh thc vord stagc, vcrc ohy ih part
cohsistcht vith hco-ibcra procamatiohs oI bcicI ih acgcdy scI-
rcguatihg markcts. bhoud thc opcratioh oIIrcc markcts thrcatch to
uhdcrmihc Lb cchtraity, hco-cohscrvativcs vcrc prcparcd to trahs-
Iorm thc ov-ihtchsity varIarc vagcd arouhd thc gobc uhdcr hco-
35 Z. Mian, "Choosing War, Confronting Defeat," Economic and Political
Weekly, October 7, 2006; D .E. Sanger, "On Iran, Bush Confronts Haunting Echoes of
Iraq," New York Times, January 28, 2007; M. Slackman, "Iraqi Ties to Iran Create
New Risks for Washington," New York Times, June 8, 2006; F. Halliday, "Lebanon,
Israel, and the 'Greater West Asian Crisis' , " openDemocracy, August 18, 2006; W.
Pfaff, "Can Bush Forestall Defeat?" International Herald Tribune, January 13-14,
2007; G. Kolko, "The Great Equalizer. Lessons from Iraq and Lebanon," Japan
Focus, August 25, 2006.
ibcraism ihto a dramatic cohIrohtatioh capabc oI cimihatihg thc
thrcat ohcc ahdIora. !hc ihvasioh oI raq vas mcaht to bc such a
cohIrohtatioh. a Iirst tactica movc ihaohgcr-tcrm stratcgy aimcd at
usihgmiitary might tocstabishLb cohtro ovcr thc goba oi spigot,
ahdthus ovcr thc goba ccohomy, Ior ahothcrIiIty ycars or morc.`
!hc uhcxpcctcdy disastrous rcsuts oIthc raqi ihvasioh raisc thc
qucstioh oIvhat vas so thrcatchihg to Lb povcr ih thc outcomc oI
thc `gobaizatioh procct' oI thc l980s ahd l990s as to drivc hco-
cohscrvativcs ihto thc risky raqi advchturc. ad hot thc Lb-spoh-
sorcdibcraizatiohoIvordtradcahdcapita movcmchtsrcsutcdih
a ma or rcIatioh oIPmcricah povcraItcr thc mutipc criscs oIthc
l970s r as hot rciahcc oh thc vcrdict oI a Lb-cchtcrcd ahd Lb-
rcguatcd goba markct, suppcmchtcd by a prudcht usc oI ov-
ihtchsity varIarc, thc bcst guarahtcc oI thc rcproductioh oI Lb
cchtraity ih thc goba poitica ccohomyr
!ora itsIrcc-markctrhctoric,thcBush admihistratioh vashcvcr
as chthusiastic as thc Cihtoh admihistratioh about thc proccss oI
mutiatcra ibcraizatioh oI tradc ahd capita movcmchts that coh-
stitutcd thc cchtra ihstitutioha aspcct oI so-cacd gobaizatioh.
hdccd, thc vord `gobaizatioh' has rarcy, iI cvcr, croppcd up ih
rcsidchtBush's spccchcs. Pccordihgto a schiorprcsidchtia aid, thc
vord `makcs him uhcomIortabc. ' bpcakihg, ih Lcccmbcr 200J, as
thc Bush admihistratioh vas bcihg Iihcd by thc !C Ior its 2002
tariIIs oh importcd stcc, uhdcr thrcat oI S2.J biioh ih rctaiatory
sahctiohs,thc aidcxpaihcdthatthchitcousc `thihksvhatvcht
vrohgih thc90's is thatvcIorgottoputPmcricahihtcrcstsIirst. bo
gobaizatiohsouhds ikcthccrcatiohoIaotoIrucs thatmay rcstrict
thc prcsidcht's choiccs, that diutc Pmcricah ihIucncc.
,,
`
36 David Harvey, The New Imperialism (New York, Oxford University Press,
2003) , pp. 24-5, 75-8, 84-5, 190-2; 201-2.
37 Quoted in D. Sanger, "While America Sells Security, China Is Buying Its
Dollars," New York Times, December 7, 2003. See also Chalmers Johnson, The
Sorrows of Empire: Militarism, Secrecy, and the End of the Republic (New York,
Metropolitan Books, 2004) , p. 272. "September 11 was the ultimate blow to
globalization's promise . . . . Threafter . . . the United States retreated into full
national-interest-first mode . . . . Now, to the extent that President Bush talks with
any conviction about cross-border cooperation or integration, it's always in the
context of the war on terrorism, and in the narrowest of terms" (A. Martinez, "The
Borders Are Closing," Los Angeles Times, June 1, 2005) . The Bush administration
accordingly switched from multilateral to bilateral free-trade agreements. The only
multilateral negotiation it supported-the new global trade round initiated at Doha,
Qatar, shortly after the attacks of 9/11-broke up spectacularly two years later at
Cancun, in large part over US and European farm subsidies.
!hc Bush admihistratioh's attcmpt to sct itscI Ircc Irom thc
cohstraihts that gobaizatioh imposcd oh Lb povcr has bcch most
cvidcht ih thc Iihahcia sphcrc. îa !crgusoh, cohtrastihg thc
Iihahcia positioh oIthc Lhitcd btatcs ahd that oIBritaih a cchtury
caricr,has poihtcd out that, ih Britaih'scasc, hcgcmohy àsomcaht
hcgcmoncy. ' Ps thc vord's bahkcr, Britaih ih its impcria hcyday
`hcvcrhadtovorry aboutaruh ohthcpouhd,' vhcrcas thc Lb, asit
òvcrthrovs `roguc rcgimcs,' Iirst ihPIghahistahahdhov ih raq, is
thc vord's biggcst dcbtor. ' !his cohditioh vas thc rcsut oI thc
cscaatihg dcIicits ih thc currcht-accouht oI thc Lb baahcc-oI-pay-
mchts discusscd ih Chaptcrs ahd 6.
1husrcsidchtBush'svisioh oIavordrccastbymiitaryIorccto
suit Pmcricah tastcs has a piquaht coroary. thc miitary cIIort
ihvovcd vi bc ,uhviihgy) Iihahccdby thcLuropcahs-ihcud-
ihgthcmuchrcvicd!rchch-ahdthcjapahcsc. Oocs thathotgivc
thcm ust a ittc cvcragc ovcr Pmcricah poicy, oh thc prihcipc
thathc vhopays thcpipcrcasthctuhcBazacohcc said thatiIa
dcbtor vas big chough thch hc had povcr ovcr his crcditors, thc
Iatathihgvastobcasma dcbtor.t sccms that^r. Bushahdhis
mch havc takch this cssoh to hcart.`
h Iact, it vas hot Luropcahs vho vcrc thc maih Iihahcicrs oI thc
hugc Lb currcht-accouhtdcIicit. Ps!igurc7. lshovs,sihccthcPsiah
crisis oI l997-98 thc currcht-accouhts oIthc couhtrics oI thc goba
ôrthtaken together , i. c. , thc Iormcr!irstord, ihcudihgjapah)
havc cxpcrichccd ah cscaatihg dcIicit-Iorthcmostpartducto thc
LbdcIicit-tovhichcorrcspohds ahcscaatihgsurpusihthccurrcht-
accouht oIthc rcst oIthc vord , i. c. , oIthcIormcr!hirdahdbccohd
ords) . Ps vc sha scc ih thc Lpioguc, this strikihg biIurcatioh
ihvovcs a grovihg dcpchdchcc oIôrthcrh ahd cspcciay Lb goba
Iihahcia domihatioh oh a Iov oI mohcy ahd crcdit Irom thc vcry
couhtrics that arc most ikcy to bccomc thc victims oIthat domiha-
tioh. Lhsurprisihgy, thc dircctor oIrcscarch at a Lb thihk tahk has
varhcd agaihst thc dahgcrs oI thc cmcrgihg situatioh. `c arc
ihcrcasihgy couhtihgoha group oIcrcditors vho arc hot ourcoscst
Irichds but havc a biggcr ahd biggcr stakc ih Pmcrica.
, ,
`
38 Niall Ferguson, "The True Cost of Hegemony," New York Times, April 20,
2003. The argument is developed further in Niall Ferguson, Colossus: The Price of
America's Empire ( New York, Penguin, 2004) , pp. 261-95.
39 Quoted in F. Kempe, "Why Economists Worry about Who Holds Foreign
Currency Reserves," Wall Street Journal, May 9, 2006.
192
Figure 7.1 Current-account balance as a percentage of world GDP
I

* I
Source: IMF World Economic Outlook Database; September 2006
!or thc timc bcihg, by Iar thc most importahtIihahcicrs oIthcLb
currcht-accouhtdcIicitshavcbcchLastPsiahgovcrhmchts,vhohavc
chgagcd ih massivc purchascs oI Lb trcasurics ahd ih buidihg up
doar-dchomihatcd Iorcigh-cxchahgc rcscrvcs-Iirst ahd Iorcmost
thc japahcsc, but to ah ihcrcasihgy sighiIicaht cxtcht aso thc
Chihcsc. !hc maih motivatiohs oI thcsc ahd othcr govcrhmchts
40 Wbereas "foreign investors in tbe 1990s poured trillions of dollars into Amer
ican stocks and corporate acquisitions . . . most of tbe money is [now] coming not from
private investors but from foreign governments, led by Japan and Cbina. Ratber tban
profits, tbeir goal bas been to stabilize excbange rates . . . . Many economists contend
tbat tbe Asian central 'banks bave created an informal version of tbe Bretton Woods
system offixed excbange rates tbat lasted from sbortly after World War II until tbe early
1970s" (E. Andrews, "Tbe Dollar Is Down, but Sbould Anyone Care?" New York
Times, November 16, 2004). Towards tbe end of2004 foreigers owned about 13 percent
of US stocks, 24 percent of corporate bonds, and 43 percent of US treasuries securities:
R.]. Samuelson, " Tbe Dangerous Dollar," W ashingtonPost, November 17, 2004. As of
August 2006, tbe largest foreign balding of US treasuries was Japan's ($664 billion),
followed by Cbina's ($339 billion). Cbina's boldings surpassed tbose of tbe tbree largest
Nortbern boldings (Britain, Germany, and Canada) taken togetber ($300 billion).
Moreover, to an unknown extent, Britain's balding of over $200 billion include large
boldings of non-Britisb investors in Britain's financial markets and institutions: calcu
lated from data provided in F. Norris, "Accessory for a U. S. Border Fence: A Welcome
Mat for Foreign Loans," New York Times, 4 November 2006.
that havc Iihahccd thc cscaatihg Lb currcht-accouht dcIicit arc hot
stricty ccohomic but poitica. !crgusoh himscI quotcs thch I^!
chicI ccohomist Kchhcth b. KogoII's statcmchtto thc cIIcct that hc
voud bc `prctty cohccrhcd about a dcvcopihg couhtry that had
gapihg currcht-accouht dcIicits ycar aItcr ycar, as Iar as thc cyc cah
scc, oI pcr ccht or morc oI CL , vith budgct ihk spihhihg Irom
back ihto rcd. ' CI coursc, as KogoII hastchcd to add, thc Lhitcd
btatcs is hot a `dcvcopihg' couhtry, but-as hcithcr KogoII hor
!crgusoh hotcd-thc Lhitcd btatcs is ho ordihary `dcvcopcd'
couhtry cithcr. !hc Lb cxpccts ahd obtaihs Irom othcr govcrhmchts
ahd ihtcrhatioha ihstitutiohs-Iirst ahd Iorcmost thc ^!-a prc-
Icrchtiatrcatmchtih thchahdihgoIits Iihahccs thathoothcrstatc,
ho mattcr hov `dcvcopcd,' coud hopc to gct. !his is hot duc
primariy to thc Bazac cIIcct, but rathcr to thc uhparaccd vcight
ahdcchtraityoIthcLhitcdbtatcsvithihthc goba ccohomy, ahdto
thcgchcraizcdpcrccptioh , at cast bcIorcthcprcschtIraqcrisis) that
Lb miitary might is csschtia to vord-poitica stabiity. Ih this
rcspcct,povcr ahdcchtraityih thc gobapoitica ccohomymattcrs
IarmorcIorthcLbthahitcvcrdidIorBritaih,bccausc-asargucdih
Chaptcr-Britaih coud couht oh somcthihgthatthc Lhitcdbtatcs
cahhot. a tcrritoria cmpirc ih hdia Irom vhich it coud cxtract
Iihahcia ahd miitary rcsourccs amost at vi .
c may thcrcIorc summarizc thc Lb cohditioh oI domihatioh
vithout`hcgcmoncy'asIo ovs. PsihBritaih' scascatacomparabc
stagc oIrcativcdccihc,cscaatihgLb currcht-accouhtdcIicits rcIcct
a dctcrioratioh ih thc compctitivc positioh oIPmcricah busihcss at
homc ahd abroad. Phd as ih Britaih' s casc, though css succcssIuy,
Lbcapitahaspartiaycouhtcrcdthis dctcrioratiohbyspccia|izihgih
goba Iihahcia ihtcrmcdiatioh. Lhikc Britaih, hovcvcr, thc Lb has
ho tcrritoria cmpirc Irom vhich to cxtractthc rcsourccs hccdcd to
rctaihitspoitico-miitaryprccmihchccihahihcrcasihgycompctitivc
vord. Britaih, oIcoursc, cvchtuay ost its prccmihchcc. Ps compc-
titiohIrom od ahdhcv cmpirc-buidihg rivas ihtchsiIicd, crcatihg a
IavorabcchvirohmchtIorthcrcbciohoIcoohia subccts,thccosts
oIcmpirc cscaatcd ovcr ahd abovc its bchcIits. Ps BritaihIouhdit
ihcrcasihgydiIIicuttomakccmpircpayIoritscI,ctaohcprovidca
surp us, thc couhtry bccamc ihcrcasihgy ihdcbtcd to thc Lhitcd
btatcs, vhich combihcd ovcr protcctioh costs ahd grcatcr proIi-
cichcyih ihdustriaizcd varIarcthahBritaihorahy oIitsriva|s. Cvcr
timc,this situatiohIorccdLohdohtoiquidatcitsovcrscascmpircahd
to scttc Ior thc positioh oI uhior parthcr oI thc hcv hcgcmohic
povcr. It hohcthccss took tvo vord vars , both oI vhich Britaih

voh miitariy but ost Iihahciay, IorBritaihtooscitspriorpositioh
as thc vord's cadihgcrcdiIorhatioh.'
!hc Lb,ih cohtrast, has bccomc a dcbtor hatioh much caricr ahd
morc substahtiay thah thc LK, hot ustbccausc oI its cohsumcrist
orichtatioh, but aso bccausc it had ho hdia Irom vhich to drav,
gratis, a thc troops it hccdcdto vagc as chdcss a scrics oIvars ih
thcgobabouthasBritaihdid durihgits ovhhcgcmohy.ôtohydid
ashihgtoh havc to pay Ior thosc troops ahd thcir highy capita-
ihtchsivcvcapohry, ih additioh,ihstcadoIcxtractihgtributcIromah
ovcrscas cmpirc, it had to compctc aggrcssivcy ih vord Iihahcia
markcts Ior thc capita hccdcdto baahcc thc cxposivc grovth oIits
currcht-accouht dcIicit. Pthough thc Lhitcd btatcs vas highy suc-
ccssIu ih this durihg thc l980s ahd l990s, thc capita it attractcd
uhikc hdiah cohtributiohs to thc British baahcc-oI-paymchts-did
hotcomcIorIrcc. Chthccohtrary, it gchcratcda scI-cxpahdihgIov
oIihcomcs toIorcighrcsidchts thathas madc thcLbcurrcht-accouht
dcIicit ihcrcasihgy hard to baahcc.
t Ioovs that thc Lb belle epoque oI thc l990s vas bascd oh a
virtuous circc that coud, at ahy timc, turh vicious. !his virtuous-
but-potchtiay-vicious circcrcstcdohthcsyhcrgyoItvocohditiohs.
thcLbcapacitytoprcschtitscIas pcrIormihgthcgobaIuhctiohs oI
markct oIast rcsort ahdihdispchsabcpoitica-miitary povcr, ahd
thc capacity ahdviihghcss oIthc rcstoIthc vordtoprovidcthcLb
viththccapita ithccdcdto cohtihuctopcrIormthosctwoIuhctiohs
oh ah cvcr-cxpahdihg scac. !hc coapsc oI thc bovict boc, thc
spcctacuar `victorics' ih thc Iirst CuI ahd \ugosavvars, ahd thc
cmcrgchcc oIthc hcv-ccohomy bubbc a gavc atrcmchdous impusc
to thcsyhcrgybctvcchLbvcathahdpovcrohthcohcsidc,ahdthc
ihIuxoIIorcighcapita oh thc othcr. But iIahy oIthosc cohditiohs
41 Giovanni Arrighi and Beverly J. Silver, Chaos and Governance in the Modern
World System (Minneapolis, MN, University of Minnesota Press, 1999), pp. 72-87.
42 Thus, in late September 2006, the Wall Street Journal reported that, for the
first time in at least ninety years, the United States was paying noticeably more to
foreign creditors than it received from its investments abroad, thereby reverting to
it
s
nineteenth-century condition when it was borrowing vast sums from Europe. Besides
the fact that the vast sums are now borrowed from Asia instead of Europe, there is a
fundamental difference between the debtor-nation condition of the United States in
the nineteenth century and today: in the nineteenth century, borrowing financed the
building of railroads and other infrastructure, which strengthened the productiveness
of the US economy, whereas today they finance private and public consumption that
the United States can no longer produce competitively. M. Whitehouse, "US Foreign
Debt Shows its Teeth as Rates Climb," Wall Street Journal, September 7, 2005; P.
Krugman, "Debt and Denial," New York Times, February 8, 2006.
DOMINA TION WITHOUT HEGEMONY i
:
chahgcd,thcsyhcrgymightgoihtorcvcrscahdturhthc virtuous circc
ihto a vicious ohc.
Comihg to povcr ust aItcr thc burstihg oI thc hcv-ccohomy
bubbc, Bush had pchty oI rcasohs to bc ùhcomIortabc' about
thc poicics oIthcCihtoh cra.`Lurihgthcbubbc's cxpahsioh, most
oI thc Iorcigh capita that Iovcd ihto thc Lhitcd btatcs had bcch
privatc capita ih scarch oI proIits, ahd thc privatc ihvcstors thcm-
scvcs cohsistcd oI ah amorphous mass that gaihcd ittc or ho
cvcragc ovcr Lb poicics. Ps hotcd, hovcvcr, aItcrthc bubblc burst,
thcihIovoIcapitaihtothcLhitcdbtatcsbccamcmorcpoitica,ahd
thc govcrhmchts that Iihahccd thc cscaatihg Lb currcht-accouht
dcIicithcccssariygaihcdmorcthaha ittc cvcragc ovcr Lbpoicics.
!his grcatcr cvcragcposcd hoimmcdiatcprobcm Iorashihgtoh,
bccausc most oI thc Last Psiah crcditor statcs, Iirst ahd Iorcmost
japah, IctdccpydcpchdchtohthcLbIorthcirsccurityahdprospcr-
ity. Ps vc sha scc, this situatioh chahgcd radicay vith thc
cmcrgchcc oI Chiha as ah atcrhativc dcstihatioh Ior Last Psiah
cxports ahd ihvcstmcht, ahd as a sighiIicaht crcditor oIthc Lhitcd
btatcs. But cvch abstractihgIromthc ChihaIactor, grovihgIihahcia
dcpchdchccohIorcighgovcrhmchtshcccssariycohstraihcdLbabiity
to pursuc its hatioha ihtcrcst ih thc mutiatcra ahd biatcra
hcgotiatiohs that promotcd ahd rcguatcd goba ccohomic ihtcgra-
tioh.hjuhcl997,Iorcxampc,ohhisvaybackIromaC8mcctihgih
Lchvcr that Icaturcd cohsidcrabc chcst-thumpihg by thc Cihtoh
admihistratioh about thc boomihg Lb ccohomy, thc japahcsc primc
mihistcr tod a ^cv \ork audichcc thatjapah had bcch tcmptcd to
sc argc ots oILbtrcasurics durihgjapah'shcgotiatiohsviththcLb
ovcr auto sacs, ahd agaih vhch cxchahgc ratcs vcrc Iuctuatihg
vidy vhic thc Lhitcd btatcs appcarcd prcoccupicd ohy vith
domcstic issucs.Psohc commchtatorhotcd, ashimoto `vas simpy
rcmihdihg ashihgtoh that vhic it had crcatcd a robust . . . ccoh-
omy, Psiah cchtra bahks hcd thc dccd.
, ,
43 Prior to the invasion of Iraq, foreboding comparisons between post-bubble

United States and Japan gained currency. The fact that in 2002 US stocks declined for
the third consecutive year, the longest losing streak since 1939-41, did not help. D.
Leonhardt, "Japan and the U. S. : Bubble, Bubble, Toil and Trouble," New York
Times, October 2, 2002; S. Roach, "The Next Japan?" http://www.morganstanley.
com (accessed October 21, 2002) . The unprecedented combination of fiscal and
financial stimuli that was put in place by the Bush administration (see below) allayed
but never completely disposed of fears that the United States in the 2000s might repeat
the Japanese experience of the 1990s.
44 W. Pesek, "Commentary: Across Asia, the Sounds of Sharpening Knives,"
International Herald Tribune, December 7, 2004.
- ADAM SMITH IN BEIJING
!hc Bush admihistratioh's dccisioh to rcspohd to >/l l vith a
protractcd var oh mutipc Irohts addcd a hcv urgchcy to thc hccd
to svitchIromthcpoicics oIthc l990s, Ior hovcoud sucha varbc
IihahccdIromastartihgpoihtoIhca vyihdcbtcdhcsstoothcrcouhtrics r
!hcrc vcrc Iourpossibcahsvcrstothis qucstioh. raisc taxcs,borrov
morc hcaviyIrom Iorcighcrs, makc varpay Ior itscI, or cxpoitthc
scighioragc privicgcsthatthcLhitcd btatcs choycd by virtuc oIthc
gchcra acccptahcc oIthcLbdoarasihtcrhatiohacurrchcy.
KaisihgtaxcsvasoutoIthcqucstioh.avihgvohthcccctiohsoh
apatIormoIcxtchsivctaxrcductiohs,thcBush admihistratioh coud
hot raisc thcm vithout aichatihg its corc ccctora basc, thus com-
mittihgpoitica suicidc. ôrcovcr,thcpopuarity oIthc var cIIort
rcstcdih good part oh thc bcicI, Iostcrcdbythc admihistratioh, that
thcLbdidhothavctochooscbctvcchguhsahdbuttcrbutcoudhavc
morc oI both. hdccd, thc 9/l l crisis vas uscd to auhch tvo vars
vhic takihg advahtagcoIthc surpuscs buit bythcprcvious admih-
istratioh to spchd vhic cuttihg taxcs. h rctrospcct, amchts !ricd-
mah, thc Lhitcd btatcs Ìoovcd thc dot-com bubbc vith thc 9/ll
bubbc. . . . !hc Iirst vas Iihahccd by rcckcss ihvcstors, ahd thc
sccohd by a rcckcss admihistratioh ahd Cohgrcss.
, ,
`
Borrovihg morc hcaviy Irom abroad vas possibc but vithih
ccohomic ahdpoiticamits.Lcohomicay,thcimitsvcrcsctbythc
hccd to kccp ihtcrcst ratcs ov ih ordcr to rcvivc thc domcstic
ccohomy aItcr thc 2000-0l crash oh a btrcct, vhich 9/l l had
Iurthcr aggravatcd. oiticay, thc imits vcrc sct by thc Bush
admihistratioh's rcuctahcc to givcIorcighgovcrhmchts morccvcr-
agc ovcrLbpoicics. BorrovihgIromIorcigh ,cspcciayLastPsiah)
govcrhmchts did hovcvcr ihcrcasc aItcr 9/lI-as did thcir cvcragc.
!hcIuhdihgoIthc dcIicit vas thuscItihcrcasingy at thc mcrcy oI
LastPsiahcchtrabahks.Butthissituatiohvashotsomuchthcrcsut
oI a cohscious Lb poicy to ihcrcasc borrovihg, as oI Iorcigh
govcrhmchts' dccisiohs, Ior rcasohs oIthcir ovh, to kccp Iihancihg
currcnt-accouht dcIicits spiraihg out oILb cohtro.
âkihgthcvar pay IoritscIvas morc casiy said thah dohc. !hc
prcviousy hotcd svitch Irom thc uhIihishcd var ih PIghahistah to
raq vas duc hot ust to thc cxpcctatioh that raq providcd a morc
Iavorabc tcrraih Ior ah casy Lb victory, as Iamousy cpitomizcd ih
45 T. Friedman, "The 9/11 Bubble," New York Times, December 2, 2004.
46 F. Norris, "Is It Time for the Dollar to Fall in Asia?" International Herald
Tribune, October 22, 2004; E. Porter, "Private Investors Abroad Cut their Invest
ments in the U. S," New York Times, October 19, 2004.
KumsIcd's rcmarkthatraqhad `bcttcr targcts'thahPIghahistah.t

was duc aso to thc cxpcctatioh that raqi oi voud providc thc
vhcrcvithaIor thc cohsoidatioh oILb povcrih raqahdthccst
Psiahrcgiohatargc.Ps vchovkhov,bothcxpcctatiohshavcgohc
uhIuIicd. Chcc thc `bcttcrraqitargcts'hadbcchtakchout,raqi
oicoudhotcvchbcgihto covcrthcrapidycscaatihgcosts oIa var
that draggcd oh vithout chd ih sight
BcIorcthcvar,oIIiciasrcIuscdtodiscusscosts,cxccpttoihsistthat
thcy voud bc mihima t vas ohy aItcr shootihg startcd, ahd
Cohgrcss vas ih ho positioh to bak, that thc admihistratioh
dcmahdcd S75 biioh Ior thc raq !rccdom !uhd. 1hch, aItcr
dccarihg `missioh accompishcd' ahd pushihg through a big tax
cut . . . ^r. Bush tod Cohgrcss that hc hccdcd ah additioha S87
biioh. . . . ahdvarhcdthatPmcricah sodicrsvoudsuIIcriIthc
mohcy vash'tIorthcomihg.
Pycaratcrhc camc backviththcsamcvarhihg,askihg CohgrcssIor
ahothcr S2 biioh. By thc chd oI 2006, Cohgrcss had approvcd
morcthahS00 biiohIorthcvarsihraqahdPIgahistah,as vc as
Ior tcrrorism-rcatcd opcratiohs cscvhcrc, ahd thc ar oh !crror
vaspro cctcdtosurpassih2007thccost ,adustcdIorihIatioh) oIa
Lb vars cxccptIor thc bccohd ord ar.
bihcctaxcs coud hotbcraiscd,IurthcrborrovihgIrom abroadhad
imits, ahd thc var vas hotpayihgIoritscI,thc cxpoitatioh oI Lb
scighioragc privicgcs bccamc thc maih sourcc oI Iihahcc Ior Bush's
vars. Psohccommchtatorvrotc,shortyaItcrthcihvasiohoIraq,a
cyhic might vicv thc vay Iorcigh couhtrics vcrc providihg thc Lb
vith goods, scrviccs, ahd asscts ih rcturh Ior ovcrpriccd picccs oI
papcr, às a briiaht Lb cohspiracy. '
h thc l980s ahd l990s, Lb| poicymakcrs pcrsuadcd a host oI
ccohomicsto ibcraizcthcirIihahciamarkcts. buchibcraizatiohs
gchcraychdcdvithIihahciacriscs,currchcycriscs,oracombiha-
tiohoIthctvo.1hcscdisastcrsovcrcddomcsticihvcstmchtihthc
aIIictcdcouhtrics,ihsticddccpIcaroIcurrcht-accouhtdcIicitsahd
chgchdcrcdastrohgdcsirctoaccumuatcIorcigh-cxchahgcrcscrvcs.
47 P. Krugman, "The Wastrel Son," New York Times, May 18, 2004.
48 P. Baker, "U. S. Not Winning War in Iraq, Bush Says for the First Time,"
Washington Post, December 20, 2006; "Costs of Major U.S. Wars," CounterPunch,
May 5, 2006.
i

!hcsaIcstvayvastoihvcstsurplusIuhdsihthccouhtry vith thc
vorld's biggcst ccohomy ahd most liquid capital markcts. hch
gulliblcIorcighcrscahho lohgcr bcpcrsuadcdto IihahccthcLb,thc
dollarvill dcclihc. bihcc Ub liabilitics arc dollar-dchomihatcd, thc
biggcrthcdcclihc,thcsmallcrhctUbliabiliticstothcrcstoIthcvorld
villthchturhouttobc.hthisvay,thclaststagcoIthc`cohspiracy'
vill bc partialdcIaultthroughdollar dcprcciatioh.
Pt thc chd oI 2004 The Economist put thc dccihc oI thc doar ovcr
thcprcvious thrccycars at35 pcrcchtagaihstthccuro ahd24 pcrccht
agaihst thc ych, ahd cstimatcd thc stock oI dolar asscts hcld by
Iorcighcrs at hcary Sll trilioh. Ì thc doar Ias by ahothcr 30
pcrccht, as somc prcdict, it voud amouht to thc biggcst dcIaut ih
history. hot a cohvchtioha dcIaut oh dcbt scrvicc, but dcIaut by
stcath,vipihgtriiohsoIIthcvalucoIIorcighcrs'dolarasscts.
, ,
`'
Ps
it turhs out, this `biggcst dcIaut ih history' has yct to occur. But
vhcthcr it vi or hot, Lb cxpoitatioh oI scighioragc privicgcs ih
ordcr to cohsumc both guhs ahd buttcr Iar bcyohd its mcahs, cah
postpohc but hot avoid ihdcIihitcy a Iuhdamchta structura adust-
mchtoIthcLhitcdbtatcshccdcdtorcIcctitssubstahtiaydimihishcd
compctitivchcss ih thc goba ccohomy.
!hcohgcr-tcrmcauscsoIthisdimihishcdcompctitivchcssbcIorcthc
ihvasioh oIraq havc arcady bcch discusscd ih Chaptcr 6. bihcc thc
ihvasioh,ahihcrcasihghumbcroILbobscrvcrshavclamchtcdthisoss
oIcompctitivchcss,hot ust ih ov-tcchhoogy, abor-ihtchsivc activ-
itics,butasoihthchigh-tcchhoogy,khovcdgc-ihtchsivcactiviticsthat
cohstitutc thc backbohc oI Lb comparatvc advahtagc.`' Lb muti-
49 M. Wolf, "A Very Dangerous Game," Financial Times, September 30, 2003.
For more complex accounts of the US "conspiracy," see R.H. Wade, "The Invisible
Hand of the American Empire," openDemocracy, March 13, 2003, and Andre Gunder
Frank "Meet Unde Sam-Without Clothes-Parading around China and the
Worl+," available at http://www.rrojasdatabank.info/agFrank/noclothes.htm.
50 "The Disappearing Dollar," The Economist, December 2, 2004.
51 See, among others, Adam Segal, "Is America Losing its Edge?" Foreign
Affairs (November-December 2004) ; J. Kumagi and W. Sweet, "East Asia Rising,"
IEEE Spectrum Online, October 19, 2004; W.J. Broad, "U.S. Is Losing Its Dominance
in the Sciences," New York Times, May 3, 2004; E. Porter, "Innovation and
Disruption Still Going Hand in Hand," New York Times, December 6, 2004; D.
Baltimore, "When Science Flees the U. S, " Los Angeles Times, November 29, 2004; T.
Friedman, "Fly Me t o the Moon," New York Times, December 5 , 2004; K. Bradsher,
"Made in U. S. , Shunned in China," New York Times, November 18, 2005; P. G.
Roberts, "Another GrimJobs Report. How Safe Is Your Job?" CounterPunch, April
18, 2006; J. Perry and M. Walker, "Europeans' Appetite for Imports Benefits China at
the Expense of the U. S, " Wall Street Journal, September 11, 2006.
i
hatiohals did scc thcir rcvchucs ahd proIits grov, but thc grovth
occurrcdprimarilyabroad,ahdthcscIirms could ohyhold ohtothcir
gobalmarkctsharcsbyrcihvcstihgproIitsabroad.`!hcrcvauatiohoI
thccurrchcics oIothcrcouhtrics ,mosthotaby Chiha)-vidclyhcldas
thc rcmcdy Ior thc loss oI compctitivchcss-might hclp, but past
cxpcrichccishotchcouragihg.
!hcrc is ah abuhdahcc oI cvidchcc that thc Ub obscssioh vith
currchcics is misplaccd. bihcc l976 thc ych has roughly trcblcd ih
valuc agaihst thc dollar. But thcrc has bcch ho sighiIicaht im-
provcmcht ih thc Ub bilatcral positioh agaihst japah-thc lohg
stahdihg bere noire oI Ub mahuIacturcrs.``
Lb adustmchtto thc hcv rcaliticsoIthcgobalccohomyviihvolvc
somccombihatiohoIIurthcrdcprcciatiohoIthcLb doar, apprccia-
tiohoIthccurrchcicsoIthccouhtricsviththclargcstcurrcht-accouht
surpuscs,ahdarcroutihgoIthcscsurpuscs IromthcIihahcihgoILb
dcIicits to thccrcatiohoIdcmahdcscvhcrc, cspcciay ih Last Psia.
!his cvchtualadustmchtmay bc `bruta,'through a dolarrout, or
`smooth.
, ,
` Lithcr vay, thc adustmcht vi ihcvitaby rcsut ih a
Iurthcr dccrcasc oILb commahd ovcr vord-ccohomic rcsourccs, a
rcductioh oIthc vcight ahd cchtraity oIthc Lb markct ih thc goba
ccohomy, ahda dimihishcdrocIorthcdoarasihtcrhatiohalmcahs
oI paymcht ahd rcscrvc currchcy.
!hc Bush admihistratioh has shovh somc avarchcss oI thc risks
ihvovcdihrcyihgtoohcaviyoh adcprcciatihgdolarahddcIautoh
Lb liabiitics to Iorcighcrs to buttrcss Lb compctitivchcss. !hus, at
thc Loha mcctihg ih juhc 2003, !rcasury bccrctary johh bhov
pcrsuadcd thc Iihahcc mihistcrs oIthc othcr C7 couhtrics to sigh a
oiht statcmcht arguihg that thc markct shoud dctcrmihc cxchahgc
ratcs. !hc statcmcht vas takch as a sigha that ashihgtoh vas
52 L. Uchitelle, "Increasingly, American-Made Doesn't Mean in the U. S. A,"
New York Times, March 19, 2004.
53 J. Kynge and C. Swann, "US Risks Paying High Price for Calls over Currency
Flexibility," Financial Times, September 26, 2003. Similarly, between July 2001 and
March 2006, the euro rose 44 percent against the dollar but the US bilateral deficit
with the euro zone grew by 75 percent: C. Swann, "Revaluation of the Renminbi 'Will
Do Little to Reduce US Deficit,' " Financial Times, March 28, 2006. More generally,
the massive dollar depreciation of 2001-04, far from narrowing the US trade deficit,
sent it to a new record of $617.7 billion. As Figure 5.2 shows, the US current-account
deficit since the mid 1990s has been escalating regardless of whether the dollar was
appreciating (as in 1995-2000) or depreciating (as in 2001-04).
54 M. Wolf, "A Very Dangerous Game," Financial Times, September 30, 2003.
oIIiciay abahdohihgthc strohg doar poicy oIthcCihtoh cra, ahd
thc doar prompty divcd agaihst a ma|or currchcics.Butvhchcvcr
thc divc has thrcatchcd to bccomc a rout, Lb oIIicias havc rcpcatcd
thc mahtra about thc importahcc oI a strong currchcy. `'obody ih
thc markcts quitckhovsvhat that| mcahsahymorc,but| ustih casc
itcoudsigha aburstoIihtcrvchtioh,thcytakccovcrahdstopscihg
grcchbacks.
,,
``
CohIusioh ih thc markcts has bcch Iuy | ustiIicd ih ight oI thc
cohtradictioh bctvcch rhctorica adhcrchcc to thc importahcc oI a
strohg currchcy ahd thc cxtrcmc mohctary ahd Iisca axity through
vhich thc Bush admihistratioh sustaihcd thc rccovcry oI thc Lb
ccohomy aItcr thc crash oI 200I ahd Iihahccd thc cscaatihg costs
oI thc ar oh !crror. !his cxtrcmc axity is rcmihisccht oI Lb
poicics ih thc cosihg ycars oI thc Victham ar, vhch 'ixoh's
!rcasury bccrctary, johh B. Cohhay, Iamousy tod a vorricd
vord. `!hcdoaris ourcurrchcy,butyourprobcm.
,,
`
Lvchtuay,
hovcvcr, thc sihkihg doar did bccomc a Lb probcm. !or a bricI
momcht ih jahuary l980,thc risc oI thc pricc oI god to ah a-timc
high oI S87 ah ouhcc sccmcd to sigha ah immihcht chd oI thc de
facto doar stahdardihauguratcd ihl97l-thcycar ih vhich thc Lb
IihayabahdohcditscommitmchttobuygodatthcIixcdpriccoISJ
ah ouhcc. Psitturhcdout,thc doarquickyrccovcrcdIromthcrout
ahdthc de facto doar stahdard has rcmaihcd ih pacc cvcr sihcc. Ih
ightoIthiscxpcrichcc,thcBushadmihistratioh'sviihghcsstopush
to its imits thc abusc oI scighioragc privicgcs may rcIcct thc bcicI
that, iIthcvorsc comcstothcvorst, ashihgtohcahpu backIrom
thc brihk ahd ch|oy ahothcr tvchty ycars oI uhcohtcstcd scighio-
ragc.`
Ih thc cvcht oI a hcv doar rout comparabc to that oI thc atc
l970s, hovcvcr, it voud bc Iar morc diIIicut, iI at a possibc, Ior
thc Lhitcd btatcs to rcgaih thc uppcr hahd ih thc vord mohctary
systcm. IhthcI980s,thcLbdoarrccoupcditspositiohasthcvord's
mohcy by virtuc oI a suddch ahd radica rcvcrsa oI Lb mohctary
poicics,Iromcxtrcmc axitytocxtrcmctighthcss,accompahicd by a
stcppihg-up oI Lb compctitioh Ior capita vordvidc-through rc-
55 C. Denny, "Trap a Dragon, Mr. Bush, and Lose an Election," Guardian,
November 3, 2003.
56 M. Landler, "Sidelined by U. S. and Asia, Singing the Euro Blues," New York
Times, December 12, 2004.
57 This belief seems to be implicit in Cheney's contention, as reported by Paul
O'N eill, that "Reagan proved that deficits don't matter" (quoted in J. Cassidy,
"Taxing," The New Yorker, January 26, 2004) .
cord-high ihtcrcst ratcs, taxbrcaks, ahdihcrcasihgIrccdom oIactioh
Ior capitaistproduccrs ahdspccuators.`Butthcvcry succcss oIthis
poicyrcvcrsaih attractihggargahtuahamouhtsoIcapitahasturhcd
thc Lb Irom a crcditor hatioh ihto thc vord's cadihg dcbtor. Lb
crcditors maypausc-as thcyccrtaihydo-atthc idca oIpuihgthc
rug Irom uhdcr thc Icct oI such a big dcbtor. Pace Bazac, it voud
hohcthccssmakcho schscat aIorthcmtorcdoubcthcirchdihgto
a couhtry that has partiay dcIautcd oh its dcbt through massivc
currchcy dcprcciatioh. ` ôrcovcr, havihg arcady grahtcd cxtraor-
diharyihcchtivctocapita,thcLhitcdbtatcshas ittccIttooIIcrih
thc situatioh oI a hcv doar rout. Lhdcr thcsc circumstahccs
uhprcccdchtcd ihdcbtcdhcss ahd cxhaustioh oI ihcchtivcs-a hikc
ihihtcrcst ratcs ikcthc ohc chgihccrcduhdcrKcagah voud provokc
aIar morcscvcrc domcstic cohtractioh, vithoutahy guarahtccthatit
voudbcIoovcdby a robustrccovcry. P ma|orihcrcascih ihtcrcst
ratcs voud thcrcby aggravatc, rathcr thah acviatc, thc rcativc
dovhsizihgoIthcLbccohomythatvoudchsucIromthcdoarrout.
!othisvc shoudaddthatihthcatcl970sthcrcvcrc Icv,iIahy,
viabcatcrhativcstothcLb doaras ihtcrhatiohacurrchcy.!hccuro
vasstiapro|cctrathcrthaharcaity.!hcrapidyapprcciatihgCcrmah
markahdjapahcscychhadhcithcrthcgobaccohomicvcighthorthc
hatioha ihstitutioha support hccdcd to bccomc sighiIicaht mcahs oI
ihtcrhatiohapaymchtahdrcscrvccurrchcics.avihghovhcrc cscto
go, capitatakihgIightIromthcdoarthus vchtprimariyihtogod.
ButhocapitaistpovcrhadahyihtcrcstiharcmohctizatiohoIgodata
timc oI vordccohomic staghatioh, cspcciay ih vicv oIthccvcragc
thatsucharcmohctizatiohvoudhavcputih thchahds oIthcLbbK.
Lhdcrthcsccircumstanccs,Lba ttcm ptstoprcscrvcthcdoarstahdard
coud couht oh thc activc coopcratioh oI a thc govcrhmchts that
mattcrcdih vord mohctary rcguatioh.
PsoihthisrcspcctthcsituatiohtodayisquitcdiIIcrcht.Jhcgovcrh-
mchtsthatmattcrmaystibcviihg,toaargccxtcht,tocoopcratcvith
thcLbgovcrhmchtihprcscrvihgthcdoarstahdard.Butthisviihghcss
rcstsohIouhdatiohsthatarcdiIIcrcht-ahdcssIavorabctothcLb-
thah thcy vcrc ih thc l980s. Ps Iormcr !rcasury bccrctary Lavrchcc
bummcrs has rccchty put it, Lb dcpchdchcc oh Iorcigh cash is `cvch
morcdistrcssihg' thahLbdcpchdchccohIorcighchcrgy.
58 As we have seen in Chapters 5 and 6, the policy reversal began under Carter
but materialized fully only under Reagan.
59 M. Wolf, "The World Has a Dangerous Hunger for American Assets,"
Financial Times, December 8, 2004.
Iharcaschsc,thccouhtricsthathodU. b. currchcyahdsccuriticsih
thcir bahks asohod U. b. prospcrityihthcirhahds. 1hatprospcct
shoud makc Pmcricahs uhcomIortabc. 1hcrc is somcthihg odd
aboutthcvord'sgrcatcstpovcrbcihgthcvord'sgrcatcstdcbtor.It
istruc,oIcoursc,thatthcIorcigh govcrhmchtsahdihvcstors Iihah-
cihgthcsupcrpovcrspchdihgsprcchavchoihcchtivctobahkruptthc
u. s. ccohomy by suddchy dumpihg thcir doar rcscrvcs. 1hc
chsuihgIihahciacrisisvoudscriousydamagcthcirovhccohomics
as vc. But havihg Iihay cmcrgcd Irom thc Cod ar's miitary
baahcc oItcrror, thcUhitcdbtatcs shoud hotighty acccptahcv
vcrsioh oImutuayassurcddcstructiohiIit cah bc avoidcd.'
Ihdccd,it is Iar morcdiIIicutIorthcUhitcdbtatcs to rcsovcthchcv
`baahccoItcrror' ih its Iavor thah vas thc casc vith thc UbbK. Ps
prcviousy hotcd, thc dccisivc advahtagc oI thc Ub durihg thc Cod
ar vas Iihahcia. But,ihthchcvcohIrohtatioh,Iihahciapovcris
stackcdhot ih Iavorbut agaihstthcUhitcdbtatcs. bhoud Ubabuscs
oIscighioragc privicgcs ohccagaihrcsutih adoarrout,Luropcah
ahdLastPsiahgovcrhmchtsarcihaIarbcttcrpositiohthahthcyvcrc
tvchty-Iivc ycars ago to crcatc viabc atcrhativcs to thc doar
stahdard. c shoudhohcthccss bcar ih mihdthat,ihthcscmattcrs,
ihcrtia is thc ruc ahd thc dcthrohihg oI thc doar docs hot rcquirc
that ahy othcr sihgc currchcytakc its pacc.
Lisodgihg ah ihcumbcht currchcy cahtakc ycars. btcrihg maih-
taihcd a cchtra ihtcrhatioha roc Ior at cast haI a cchtury aItcr
Pmcrica's CL ovcrtook Britaih's at thc chd oI thc hihctcchth
cchtury.Butitdid cvchtuay osc thatstatus. IIPmcrica cohtihucs
oh its currchtproIigatcpath, thc doar is ikcytosuIIcrasimiar
Iatc. But ih Iuturc ho ohc currchcy, such as thc curo, is ikcy to
takc ovcr. Ihstcad thc vord might driIt tovards a mutipc
rcscrvc-currchcy systcm sharcd amohg thc doar, thc curo ahd
thcychorihdccdthcyuahatsomctimcihthcIuturc) . . . .Psov,
stcadyshiItoutoIdoars coudpcrhapsbchahdcd.ButiIPmcrica
cohtihucs to shov such hcgcct oI its ovh currchcy, thch a last-
Iaihg doar ahd risihg Pmcricah ihtcrcst ratcs voud rcsut.'
Ihsum,ikcmahyoIitscritics,thcBush admihistratiohmayvcthihk
that a sihkihg Ub doarishotaUb probcmbutrathcravcrycIIcctivc
60 Lawrence H. Summers, "America Overdrawn," Foreign Policy, 143 (2004).
61 "The Passing of the Buck?" The Economist, December 2, 2004.
mcahs oI Iorcihg Irichds ahd Iocs to Iihahcc thc Ub var cIIort ahd
ccohomic grovth. Ih rcaity, thc sihkihg doar oI thc 2000s is thc
cxprcssiohoIaIarmorcscriouscrisisoIUbhcgcmohythahthcsihkihg
doaroIthcl970s .hcthcrgraduaorbruta,itisthccxprcssioh,ahda
Iactor) oIarcativcahdabsoutcossoIthchatioh'scapacitytorctaihits
cchtraityvithihthcgobapoiticaccohomy.IhordcrtoIuyapprcci-
atcthccxtchtahdhaturcoIthisoss,vcmustsvitchourIocustovhat,
ih rctrospcct, may vc appcarto havcbcch thc grcatcstIaiurc oIthc
hco-cohscrvativc impcria pro|cct. thc Iaiurc to prcvcht Chiha Irom
bccomihg a potchtia hcv cchtcr oIthc goba poitica ccohomy.
The China Syndrome
Ch thccvcoI9/ll, johh^carshcimcrcohcudcdThe Tragedy of Great
Power PoliticsthcmostambitiousproductoIrccchtUbihtcrhatioha
rcatiohs thcorizihg-vith a proghosis ahd a prcscriptioh cohccrhihg
thcimpicatiohsIor Ub povcr oIthc Chihcsc ccohomic asccht.
Chiha is sti Iar avay Irom thc poiht vhcrc it has chough
ccohomic| povcr to makc a ruh at rcgioha hcgcmohy. bo it is
hot too atc Iorthc Uhitcd btatcs to . . . do vhat itcah to sov thc
risc oI Chiha. Ih Iact, thc structura impcrativcs oI thc ihtcrha-
tioha systcm, vhich arc povcrIu, vi probaby Iorcc thc Uhitcd
btatcs toabahdohits poicy oIcohstructivcchgagcmchtihthchcar
Iuturc. Ihdccd, thcrc arc sighs that thc hcv Bush admihistratioh
has takch thc Iirst stcps ih this dircctioh.
62 John J. Mearsheimer, The Tragedy of Great Power Politics (New York, W. W.
N orton,2001), p. 402. Mearsheimer's argument echoed Wolfowitz's 1992 contention that
the obj ective of foreign policy should be "to prevent any hostile power from dominating a
region whose resources would, under consolidated control, be sufficient to generate global
power" (quoted in Chalmers Johnson, The Sorrows of Empire: Militarism, Secrecy, and
the End of the Republic [New York, Metropolitan Books, 2004] , pp. 85-6) . Mearsheimer
reiterated his position in an interview given eight months after 9/11. "The United States
will goto greatlengths . . . to contain China and to cut China off at theknees, the wayitcut
Imperial Germany off at the knees in World War I, the way it cut Imperial Japan offat the
knees in World War II, and the way it cut the Soviet Union off at the knees during the Cold
War." At the same time, he acknowledged that "it would be almost impossible to slow
down Chinese economic growth." A more effective strategy, he claimed, would beforthe
United States to put in place a political and military "balancing coalition" that included
Japan, Vietnam, Korea, India, and Russia. The United States could then back Russia in a
border dispute with China; it could back Japan in a dispute with China over sea lines of
communication; or it could "go to war on behalf of Taiwan" (Harry Kreisler, "Through
the Realist Lens," Conversations with History, Conversation with John Mearsheimer
[Institute of International Studies, UC Berkeley, April 8, 2002]) .
Ps it turhs out, by gcttihg boggcd dovh ih thc Iraqi quagmirc, thc
Bush admihistratiohhas bcchIorccdto dccpch, rathcrthahabahdoh,
thccohstructivcchgagcmchtvith Chiha. ChhisvaytoahdIromthc
200J Psia-aciIic Lcohomic Coopcratioh ,PLC) mcctihg ih Bahg-
kok,Bushskirtcd-gcographicayahdrhctoricay-thccouhtrythat
ohcc vas at thc cchtcr oI his admihistratioh`s hatioha sccurity
poicy.
` Ps thc Financial Times hotcd, this is à sighiIicaht shiIt
Ior a prcsidcht vho camc ihto oIIicc toutihg his brcak Irom Cih-
tohiah poicics oIchgagcmchtvithChiha, ihsistihg ihthc Iirstvccks
oIhisprcsidchcythatChihavas a`stratcgiccompctitor`tothcLhitcd
btatcs. 'Ps sccurity issucsih cst Psia vcighcd morc hcaviy ohthc
Lb govcrhmcht, so varhihgs oI thc Chihcsc thrcat gavc vay to ah
cvch grcatcr chgagcmcht vith Bci|ihg thah uhdcr Cihtoh. !hc
rcvcrsa vas so compctc that thc hitc ousc bcgah boastihg that
it had bcttcr rcatiohs vith Chiha thah ahy admihistratioh sihcc
Kichard lixohrcsumcd rcatiohs vith thc KC.
"
Ps vc sha scc ih Chaptcr l0, ashihgtoh has by ho mcahs givch
up oh thc idca oI cohtaihihg Chiha through a varicty oI stratcgics,
ihcudihg thc kihd oI poitica ahd miitary `baahcihg coaitioh'
Iavorcd by ^carshcimcr. lcvcrthccss, thc morc thc Lb bccamc
chtahgcd ih thc ar oh !crror and dcpchdcht oh chcap Iorcigh
crcditahdcommoditics,thcmorcsucccssIu vas Chihaihbrihgihgto
bcar a diIIcrchtkihdoI`structuraimpcrativc'tothosc chvisagcdby
^carshcimcr. Ps Krugmah has poihtcd out, vhch thc Lb !rcasury
bcctctaryvchttoBci|ihg to rcqucsta rcvauatiohoIthcyuahahdgot
ho satisIactioh, ohc rcasoh vas that Chiha`s tradc surpus vith thc
Lhitcdbtatcsvas argcyoIIsctby tradc dcIicitsvithothcrcouhtrics.
But ahothcr rcasoh vas that.
thc U. b. currchty has vcry ittc cvcragc ovcr Chiha. ^r. Bush
hccds Chiha`s hcpto dca vithlorth Korca . . . . !urthcrmorc,
purchascs oI 1rcasury bis by Chiha`scchtra bahkarc ohc oIthc
63 "In the first draft of the 1992 Defense Policy Guidance drafted by Paul
Wolfowitz and Lewis Libby, it was unclear where the new rival to U.S. supremacy
would most likely emerge. Europe and Japan as well as China were among the
candidates. By the time the Bush administration came into office, however, the
proponents of this doctrine of supremacy saw only one possible peer competitor
emerging in the foreseeable future: China" (John Gershman, "Remaking Policy in
Asia?" Foreign Policy in Focus [November 2002], available at http:/www.fpif.org).
64 J. Harding and P. Spiegel, "Beijing Looms Large in the White House's
Defence Strategy," Financial Times, October 17, 2003. See also R. Cohen, "The Iraqi
Silver Lining: Closer U. S.-China Ties," International Herald Tribune, December 13,
2006.
maihvaysthcU. b. IihahccsitstradcdcIicit. . . . justIourmohths
aItcr pcratioh !ight buit, thc supcrpovcr has bccomc a suppli-
caht to hatiohs it uscd to ihsut. îssioh accomplishcd| `
205
ôrcovcr, thc Bush admihistratioh has bcch quitc avarc oI thc
dahgcr that imposihg tariIIs oh Chihcsc imports, as a vay to prcss
rcvauatioh, is a movc that coud backIirc. Ps Bush`s ccohomic
advisor Crcg âhkiv rcpcatcdy statcd, most Lb | obs havc bcch
ost ih ihdustrics-machihcry, trahsport cquipmcht, ahd scmicoh-
ductors-vhcrc Chihcsc compctitioh is sight. ôrc importaht, a
rcvauatioh oI thc yuah voud mcrcy rcpacc Chihcsc imports vith
thoscoIothcr,morc cxpchsivcIorcigh suppicrs.!hcrcsutIorthcLb
voud bc risihg ihIatioh, a Iurthcr oss oI compctitivchcss, ahd a
rcductioh rathcr thah ah ihcrcasc ih | obs.
!hc combihcd cIIccts oI Chiha`s strohg ccohomic hahd ahd

ashihgtoh`s troubcs ih cst Psia vcrc sooh rcIcctcd hot | ust ih
thc tvo couhtrics` mutua rcatiohs but aso ih thcir rcspcctivc
stahdihg vith third partics. Ch thc cvc oI thc 200J PLC mcctihg
ihBahgkok,thcNew York Times rcportcdthatpoitica ahdbusihcss
cadcrs ih Psia sav Lb hcgcmohy `subty butuhmistakabycrodihg
as Psiah couhtrics ookcd| tovard Chiha as thc ihcrcasihgy vita
rcgioha povcr. ' Pthough thc Lb vas sti thc rcgioh`s biggcst
tradihg parthcr, Chiha vas rapidy catchihg up, ahd sooh bccamc
a biggcr tradihg parthcr oI Pmcrica`s tvo most importaht stratcgic
aics,japah ahd bouth Korca. ôrc importaht, oca pcrccptiohs oI
thc poitics oI thc situatioh cxpcrichccd a radica turhabout. P
promihchtbihgaporcahbusihcssmahvho,aycar caricr,had accuscd
ChihaoIbcihga| uggcrhautpoiscdto smothcrthcvcakcrccohomics
oI bouthcast Psia, ih thc Ia oI 200J drcv ah atogcthcr diIIcrcht
picturc. `!hc pcrccptioh is that Chiha is tryihg its bcst to pcasc,
assist,accommodatcitshcighborsvhicthcLhitcdbtatcsispcrccivcd
as a couhtryihvovcd morc ahd morc ih its ovhIorcigh poicy, ahd
strohg-armihgcvcryohcohto that agchda.
, ,
By 2006, thc turhabout
ih pcrccptiohs had rcsutcd ih ah cquay radica chahgc ih thc
gcopoitics oI thc situatioh.
65 P. Krugman, "The China Syndrome," New York Times, September 5, 2003.
66 "Mr. Wen's Red Carpet," The Economist, December 11, 2003.
67 J. Perlez, "Asian Leaders Find China a More Cordial Neighbor," New York
Times, October 18, 2003; "With U. S. Busy, China Is Romping with Neighbors, " New
York Times, December 3, 2003; P. Pan, "China's Improving Image Challenges U. S. in
Asia," Washington Post, November IS, 2003; G. Kessler, "U. S. , China Agree to
Regular Talks," Washington Post, April 8, 2005.
âhy oIthcarrahgcmchtsthathavcihspircdsccuritymcasurcs ih
bouthcast Psiah sccurity over thcpast 0 ycars vcrc dcsigncd
buvarks agaihst Chihcsc Commuhist cxpahsioh. 'ov bouthcast
Psia, vhosc cadcrs havc traditiohaly ookcd to thc Uhitcd btatcs
as thc ahchoroIrcgioha sccurity, arc spcakihg out aboutthchccd
to strchgthch thcir rcatiohships vith Bciihg.
!hcrc vcrc sighs oIvahihg Lb ihIuchcc cvch ih thc cutura sphcrc
vhcrc-Irom oyvood movics to ^!V-thc Pmcricah appca
rcmaihcd strohgcst. Lctcrrcd Irom visitihg thc Lb by thc diIIicutics
oI gcttihg visas aItcr 9/ll, an ihcrcasihg humbcr oI Psiahs bcgah
travcing to China, as studcnts and tourists. Cutura cxchangcs
Iovcd both vays. thc Chihcsc bccamc thc domihaht tourist group
ih thc rcgioh, Psiah studchts took advahtagc oI proiIcrating oppor-
tuhitics Ior highcr cducatioh ih Chiha, vhic middc-cass Chihcsc
studchts vho coud hot aIIord thc stccp Pmcricah Iccs vcht to
b h P
campuscs 1 out cast sia.
ButitisihthcccohomicsphcrcthatthcascchtoIChihcscihIuchcc
vas most rcmarkabc. h200l-0+, Chiha accouhtcd Ior ohc-third oI
thc tota ihcrcasc ih vord-import voumc, thcrcby bccomihg à
ocomotivc Ior thc rcst oI Last Psia' ahd payihg a big part ih
|apan's cconomic rccovcry. Jhis cading cconomic roc oI China
vas takch as òhc morc piccc oI cvidchcc poihtihg to thc shiIt oI
gcopoitica povcr uhdcrvay ih Psia. '
hthc spaccoIaIcvycars, Chihahasbccomcah ccohomicpovcr
ahdihcrcasihgypotchtpoiticaIorccih arcgiohvlcrcthcUhitcd
btatcs ohcc stood uhchachgcd. . . . ûch oI Chiha's hcv status
stcmsIromitscmcrgchccasoncoIthcvord'smaortradihghatiohs
ahd, m thc proccss, ah importaht markct Ior cxport-orichtcd
hcighbors. But thcrc is a strohg poitica dimchsioh to this povcr
asBcijihg'sncv cadcrs shov thcmscvcsprcparcd tosct asidc od
disputcs ahd chgagc, rathcr thah buy, othcr hatiohs.'
68 D. Greenlees, "Asean Hails the Benefits of Friendship with China," Inter
national Herald Tribune, November 1, 2006.
69 J. Perlez, "Chinese Move to Ecl.ipse U. S. Appeal in South Asia," New York
Times, November 18, 2004.
70 "The Passing of the Buck?" The Economist, December 2, 2004. In 2004,
China surpassed the United States to become Japan's biggest trading partner since
records began.
71 T. Marshall, "China's Stature Growing in Asia," Los Angeles Times,
December 8, 2003.
htcgratothisshiItvasChiha'sgrovihgimportahccrcativctothcLb
cvchoutsidcthcLastPsiah rcgioh. hbouthPsia,tradcvithhdiahas
grovhIromSJ00miiohinl99+tomorcthahS20biiohih200,cadihg
toa`compctcL-turh'ihthcrcatiohshipbctvcchthctvocouhtricsahd
to ah uhprcccdchtcd mutua chgagcmcht at thc govcrhmchta ahd
busihcss cvc aikc. ashihgtoh's Iaiurc totightchits cohtro ovcr
thc`goba oi spigot'ihcstPsiavassighacd most spcctacuary by
thc sighihg oI a maor oi agrccmcht bctvcch Bciihg ahd !chrah ih
Cctobcr200+.`!urthcrsouth,oiIucsChiha'spushihtoPIrica.h2000
Bciihgvouhtariy vaivcd Sl.2 biioh ih sovcrcigh PIricah dcbt, ahd,
ovcrthchcxtIivcycars,tradc bctvcchPIricaahdChihaihcrcascdIrom
ust uhdcr SI0 biioh to ovcr S+0 biioh. Lach ycar, morc Chihcsc
chtrcprchcurs-ih2006tcntimcsasmahyasih200J-arrivcihPIricato
ihvcstvhcrccstcrhcompahicsarcuhihtcrcstcdtodobusihcss,vhic
thc Chihcsc govcrhmcht ,cxccpt Ior rcqucstihg that !aivah hot bc
rccoghizcd) providcs dcvcopmcht assistahcc vithhohc oIthc strihgs
that arc attachcd to cstcrh aid. hcrcasihgy, PIricah cadcrs ookcd
Last Ior tradc, aid, ahd poitica aiahccs, shakihg up thc cohtihcht's
historicaihksvithLuropcahdthcLhitcdbtatcs LquaysighiIicaht
vcrcChihcscihroads ihbouthPmcrica.hicBushpaidohyaIcctihg
visit to thc 200+ PLC mcctihg ih Chic, ujihtao spcht tvo vccks
visitingPrgcntina, Brazi, Chic, andCuba, announccd morcthanSJ0
biioh ih hcv ihvcstmchts, ahd sighcd ohg-tcrm cohtracts that vi
guarahtcc Chiha suppics oI vita rav matcrias. oitica spih-oIIs
sccmcdtobcadvahcihgmostrapidyvith Brazi,vhcrcLuarcpcatcdy
Ioatcd thc idca oIa `stratcgic aiahcc' vith Bciihg, ahdvith Vchc-
zuca,vhcrcChavczcccbratcdihcrcasihgoisacstoChihaasavayIor
Vchczuca to brcak Ircc oIdcpchdchcc oh thc Pmcrican markct.`
72 A. Greenspan, "When Giants Stop Scuffling and Start Trading," International
Herald Tribune, September 14, 2004; N. Vidyasagar, "Meet India's Future No 1 Bilateral
Trade Partner," The Times of India, February 9, 2005; S. Sengupta and H. French, "India
and China Poised to Share Defining Moment," New York Times, April 10, 2005; W.N.
Dawar, "Prepare Now fora Sino-Indian TradeBoom," FinanciaITimes,October31 , 2005.
73 K. Afrasiabi, "China Rocks the Geopolitical Boat," Asia Times Online,
November 6, 2004.
74 J. Murphy, "Africa, China Forging Link," Baltimore Sun, November 23, 2004;
K. Leggett, "Staking a Claim," Wall Street Journal, March, 29,2005; E. Economy and K.
Monaghan, "The Perils of Beijing's Africa Strategy," International Herald Tribune,
November 1, 2006; "Africa and China," The Economist, November 3, 2006.
75 L. Rohter, "China Widens Economic Role in Latin America," New York
Times, November 20, 2004; J. Forero, "China's Oil Diplomacy in Latin America,"
New York Times, March 1, 2005. See also R. Lapper, "Latin America Quick to Dance
to China's Tune," Financial Times, November 10, 2004.
``

By 200+, thc Luropcah Lhioh ahd Chiha vcrc oh thcirvay to
bccomihgcach othcr'scadii+gtradihgparthcr. Combihcd viththcir
mutua dcsighatioh as `stratcgic parthcrs' ahd Ircqucht oiht mcct-
ihgs ahdstatcvisits,thcscihcrcasihgycoscrccohomicticspromptcd
taks oIah cmcrgihg `Chiha -Luropc' axis ih vord aIIairs. `Pxis'
maybctoostrohgavord,butiIsuchahaiahccactuay cmcrgcs,it
vibcargcybccauscoIacommohpcrccptiohthatLbIihahcia ahd
miitary poicics cohstitutc a scrious thrcat to vord sccurity ahd
prospcrity.PsohcLuropcah CommissiohoIIicia dcscribcd. `!hcLb
isthcsichtparty atthctabc ih a LL-Chiha mcctihgs, hotih tcrms
oIprcssurc but ih tcrms oIour mutua ihtcrcst ih dcvcopihg muti-
atcraism ahd cohstrarhrhg Pmcricah . . . bchavor.
, ,
Chihaasobcgahtoovcrshadov thcLhitcdbtatcsihthcpromotioh
oImutiatcra tradc ibcraizatioh. Kcgiohay, it succcssIuy sought
ihtcgratioh vith PbLP' couhtrics, vhic simutahcousy scckihg
ccohomicticsvithjapah, bouth Korca, ahdhdia. Cobay,itoihcd
Brazi,bouthPIrica,ahdhdiaihcadihgthcC20oIIchsivcatthc200J
!C mcctihg ih Cahcuh agaihst 'orthcrh doubc stahdards-im-
posihgmarkct-opchihg oh thc bouthvhic rcmaihihg Iicrccyprotcc-
tiohist itscI, cspcciay ih activitics vhcrc thc bouth has thc grcatcst
comparativcadvahtagc.hthisrcspcct, too, Chiha'sstahcccohtrastcd
sharpy vith thc Lb abahdohmcht oImutiatcra tradc hcgotiatiohs
ih Iavor oI biatcra agrccmchts aimcd at brcakihg up thc bouthcrh
aiahccthatcmcrgcdatCahcuh,oratgaihihgsupportIorthcaroh
!crror.
Ps vcshasccihChaptcr9,ohyih2006 didthcabysmaIaiurcoI
thc hco-cohscrvativc impcria procct bccomc a gchcray acccptcd
Iact. But arcady oh juy +, 200+, Lb hdcpchdchcc Lay, thc New
York Times magazihc,arcady couhtcrcdthc hco-cohscrvativcs''cv
Pmcricah Cchtury by ahhouhcihgthc probabc comihgoIa`Chihcsc
Cchtury' as its covcr story.
1hc u.s. ccohomy is about cight timcs thc sizc oI Chiha's. . . .
Pmcricahs, pcr capita, carh J6 timcs vhat thc Chihcsc do. Phd
thcrcishoshortagcoIpotchtiaroadbocksihChiha'spath,cithcr.
76 David Shambaugh, "China and Europe: The Emerging Axis," Current
History (September 2004) , pp. 243-8.
77 R. L. Smith, and e. G. Cooper, 'The US and Economic Stability in Asia,"
Asia Times Online, December 6, 2003; A. Kwa, "The Post-Cancun Backlash and
Seven Strategies to Keep the WTO off the Tracks," Focus on Trade, 95, November
2003; M. Vatikiotis and D. Murphy, "Birth of a Trading Empire," Far Eastern
Economic Review, March 20, 2003.
ts bahks may coapsc. ts poor ahd its mihoritics may rcbc.
Lppity 1aivahahduhatic'orthKorcamay pushChihato var.
hc U. b. coud sap taxcs oh cvcrythihg Chiha ships to us. bti,
barrihg . . . huccar catacysm, hothihg is ikcy to kccp Chiha
dovh Ior ohg. bihcc I978 . . . it| has gohcIrom bcihg virtuay
abscht ih ihtcrhatioha tradc to thc vord's third-most-activc
tradihg hatioh, bchihd thc U. b. ahd Ccrmahy ahd ahcad oI
japah. . . . 2l rcccssiohs, a dcprcssioh, tvo stock-markct crashcs
ahd tvo vord vars vcrc hot abc to stop thc U. b. ccohomy`s
grovth, ovcr thc ast cchtury. . . . Chiha is poiscd Ior simiar
grovthih this cchtury.LvchiI Chiha's pcopcdo hot,oh avcragc,
havc thc vcath Pmcricahs do, ahd cvch iI thc Lhitcd btatcs
cohtihucs to pay a strohgccohomic gamc ahd to cad ih tcchho-
ogy, Chihavi stibcahcvcrmorcIormidabccompctitor. IIahy
couhtry is goihg to suppaht thc U. b. ih thc vord markctpacc,
Chiha is it.
``
h sum. Iar Irom ayihg thc Iouhdatiohs oI a sccohd Pmcricah

cchtury, thc occupatioh oI raq has copardizcd thc crcdibiity oI
Lbmiitarymight,IurthcruhdcrmihcdthccchtraityoIthcLbahdits
currchcy ih thc goba poitica ccohomy, ahd strchgthchcd thc
tchdchcy tovards thc cmcrgchcc oI Chiha as ah atcrhativc to Lb
cadcrship ih Last Psia ahd bcyohd. t voud havc bcch hard to
imagihc a morc rapid ahd compctc Iaiurc oI thc hco-cohscrvativc
impcria procct. But iI thc Bush admihistratioh`s bid Ior goba
suprcmacyis most ikcy togo dovh ihhistory as ohc oIthc scvcra
`bubbcs'tohavcpuhctuatcdthctcrmihacrisisoILbhcgcmohy,thc
burstihg oI this bubbc trahsIormcd but did hot crasc thc vord-
historicacircumstahccs thatgchcratcdthcrocctIora 'cvPmcr-
icah Cchtury.Pthoughho ohgcrhcgcmohicih thc schsc ih vhich
vc havc uscd thc tcrm, thc Lb rcmaihs thc vord`s prccmihcht
miitary povcr ahdrctaihs cohsidcrabccvcragcihthchcv `baahcc
78 T.e. Fishman, "The Chinese Century," New York Times Magazine, July 4,
2004.
79 "Iraq was supposed to signal the US's new global might: in fact it may well
prove to be the harbinger of its decline . . . . Once the bubble of US power has been
pricked in a global context already tilting in other directions, it could deflate rather
more quickly than has been imagined" (M. Jacques, "The Disastrous Foreign Policies
of the US Have Left it More Isolated than Ever, and China Is Standing by to Take
Over," Guardian, March 28, 2006). George Soros, The Bubble of American Supre
macy: Correcting the Misuse of American Power (New York, Public Affairs, 2004) ,
characterized the neo-conservative bid for global supremacy as a "bubble" well before
its unraveling became evident.
oI tcrror' that ihks its ccohomic poicics to thosc oI its orcigh
compctitors ahd Iihahcicrs. n ordcr to idchtiIy thc possibc Iuturc
uscs oI this rcsidua povcr, vc must hov turh to thc historica
proccsscs that uhdcric thc rcatiohship bctvcch capitaism ahd
impcriaism.
8
THE TERRITORIAL LOGIC OF
HISTORICAL CAPITALISM
`mpcriaismisa vordthattrips casiy oIIthctohguc. 'Likcjohh P.
obsohohccchturycaricr,arvcyhotcs thatthc tcrmhasassumcd
somahydiIIcrchtmcahihgsthatitsahaytic,asopposcdtopocmica,
usc rcquircs somc cariIicatioh.
'
ts most gchcra mcahihg is ah
cxtchsioh or impositioh oI thc povcr, authority or ihIuchcc oI a
statc ovcr othcr statcs, or statccss commuhitics. !hus uhdcrstood,
impcriaismhasbccharouhdIoravcryohgtimcuhdcragrcatvaricty
oI Iorms. But thc spccia brahd oI impcriaism that arvcy cas
`capitaist impcriaism' or ìmpcriaism oI thc capitaist sort' is
vhatvc hccd toihvcstigatcih ordcrtouhdcrstahdvhy thc grcatcst
capitaist povcr ih vord history,thc Lhitcd btatcs, has dcvcopcd a
miitaryapparatus oIuhparaccdahduhprcccdchtcddcstructivchcss
ahd has shovh a strohg dispositioh to dcpoy that apparatus ih thc
pursuit oI thc most ambitious procct oI vord ruc cvcr cohccivcd.
arvcy dcIihcs impcriaism oI thc capitaist sort as a `cohtra-
dictoryIusioh' oItvocompohchts. `thcpoitics oIstatcahdcmpirc'
ahd `thc moccuar proccsscs oI capita accumuatioh ih spacc ahd
timc.' !hc Iirst compohcht rcIcrs to `thc poitica, dipomatic ahd
miitary stratcgicsihvokcdahduscd by a statc ,or somc cocctioh oI
statcs opcratihgas a poitica povcrboc) as it struggcs toasscrtits
ihtcrcstsahd achicvcitsgoasihthcvordat argc. '!hisstruggcis
drivch by a `tcrritoria ogic oIpovcr'-a ogic, that is, ih vhich
commahd ovcr a tcrritory ahd its humah ahd hatura rcsourccs
cohstitutcs thc basis oIthcpursuitoIpovcr. !hc sccohdcompohcht,
ihcohtrast,rcIcrstothcIovoIccohomicpovcràcrossahdrhrough
cohtihuous spacc, tovards ahd avay Irom tcrritoria chtitics . . .
1 David Harvey, The New Imperialism (New York, Oxford University Press,
2003) , p. 26. On Hobson's classic definition of imperialism and its usefulness in
mapping analytically the different (often opposite) meanings that the term has
assumed historically, see Giovanni Arrighi, The Geometry of Imperialism (London,
Verso, 1983) .
through thc daiy practiccs oI productioh, tradc, commcrcc, capita
Iovs, mohcy trahsIcrs, abor migratioh, tcchhoogy trahsIcr, cur-
rchcy spccuatioh, Iovs oI ihIormatioh, cutura impuscs, ahd thc
ikc.' !hc drivihg Iorcc oI thcsc proccsscs is a `capitaist ogic oI
povcr'-a ogic, thatis, ih vhich commahd ovcr ccohomic capita
cohstitutcs thc basis oI thc pursuit oI povcr.
!hc Iusioh oI thcsc compohchts is avays probcmatic ahd oItch
cohtradictory ,thatis, diacctica) . 'cithcr ogic cahbc rcduccdtothc
othcr. !hus, ìtvoud bchard to makc schsc oIthcVictham aror
thcihvasiohoIraq. . . socyihtcrmsoIthcimmcdiatcrcquircmchts
oI capita accumuatioh,' bccausc it cah bc pausiby argucd that
`such vchturcs ihhibit rathcr thah chhahcc thc Iortuhcs oI capita . '
By thcsamctokch, hovcvcr, ìti shardt omakc schscoI thc gchcra
tcrritoria stratcgy oI cohtaihmcht oI bovict povcr by thc Lhitcd
btatcs aItcrthcbccohdordar-thcstratcgythatsctthc stagcIor
Lb ihtcrvchtioh ih Victham-vithout rccoghizihg thc compcihg
hccd Ict oh thc part oI busihcss ihtcrcsts ih thc Lhitcd btatcs to
kccp as much oIthc vordopch to capita accumuatiohthroughthc
cxpahsioh oItradc . . . ahd opportuhitics Ior Iorcigh ihvcstmcht.
, ,
`
hic thc tcrritoria ahd thc capitaist ogics oI povcr arc hot
rcducibctocach othcr,ahdattimcs thctcrritoria ogic comcstothc
Iorc, `vhat scts impcriaism oIthc capitaist sort apart Irom othcr
cohccptiohs oI cmpirc is that it is thc capitaistic ogic that dom-
ihatcs. ' But,iIthis isthc casc,arvcyasks, `hovcahthctcrritoria
ogics oIpovcr, vhichtchdto bc avkvardyIixcdih spacc, rcspohd
to thc opch dyhamics oI chdcss capita accumuatiohr' Phd iI
hcgcmohy vithih thc goba systcm is a propcrty oI a statc or
cocctioh oI statcs, `hov can thc capitaist ogic bc so mahagcd
asto sustaihthchcgcmohr'LocshotthcattcmptoIhcgcmohicstatcs
to maihtaihthcirpositioh ihrcatioh to chdcsscapita accumuatioh
2 Harvey, New Imperialism, pp. 26-7. Harvey refers to my own distinction
between a capitalist and a territorialist logic of power. See Giovanni Arrighi, The
Long Twentieth Century: Money, Power and the Origins of our Times (London,
Verso, 1994). His use of the distinction, however, differs from mine in two important
ways. In his, the territorialist logic refers to state policies, while the capitalist logic
refers to the politics of production, exchange, and accumulation. In mine, in contrast,
both logics refer primarily to state policies. Moreover, Harvey seems to assume that
all market processes (including trade, commerce, labor migration, technology trans
fer, information flows, and the like) are driven by a capitalist logic. I make no such
assumption. As we shall see, these differences result in a historical account of the
relationship between capitalism and imperialistic practices that departs in key
respects from Harvey's account.
3 Harvey, New Imperialism, pp. 29-30.
THE TERRITORIAL LOGIC OF HISTORICAL CAPITALISM
213
ihcvitabyihducc thcm to cxtchd,cxpahd,ahdihtchsiIy thcir povcrs
miitariy ahd poiticay to a poiht vhcrc thcy chdahgcr thc vcry
positioh thcyarctryihgto maihtaihras hotthcLhitcdbtatcsuhdcr
Ccorgc . Bush Iaihg ih this trap, dcspitc au Kchhcdy's l987
varhihg that ovcrcxtchsioh ahd ovcrrcach havc agaih ahd agaih
provchthcPchicshccoIhcgcmohic statcsahdcmpircs rPhdIihay,
ìI thc Lb is ho ohgcr ih itscIsuIIicichtyargc ahd rcsourccIu to
mahagcthccohsidcrabycxpahdcd vordccohomyoIthctvchty-Iirst
cchtury, thch vhat kihd oI accumuatioh oI poitica povcr uhdcr
vhatkihdoIpoitica arrahgcmchtvi bccapabc oItakihgitspacc,
givchthatthcvordishcaviycommittcdstitocapitaaccumuatioh
vithout imitr
, ,
"
h scckihg ahsvcrs to thcsc qucstiohs, arvcy ihtcrprcts thc Bush
admihistratioh'sadoptiohoIthcrocctIora'cvPmcricahCchtury
as a high-risk approach to sustaihihg Lb hcgcmohy uhdcr thc coh-
ditiohs oI uhprcccdchtcd goba ccohomic ihtcgratioh crcatcd by
chdcss capita accumuatioh at thc chd oI thc tvchticth cchtury. I
thcLhitcd btatcs coudihstaaIrichdyrcgimcihraq,movcohtodo
thcsamcihrah, cohsoidatcitsstratcgicprcschccihCchtraPsia ahd
so domihatc Caspiah Basih oi rcscrvcs-`thch it might, through
cohtro oIthcgoba oi spigot,hopctokccpcIIcctivccohtro ovcrthc
goba ccohomy Ior thc hcxt IiIty ycars. ' bihcc a thc ccohomic
compctitorsoIthcLhitcdbtatcs,bothihLuropcahdihLastPsia, arc
hcaviy dcpchdcht oh cst Psiah oi,
hatbcttcrva yIorthcLhitcdbtatcstovardoIIthatcom pctitioh
and sccurc its ovn hcgcmonic position thah to cohtro thc pricc,
conditiohs, ahd distributioh oI thc kcy ccohomic rcsourcc upoh
vhichthosccompctitors rcyrPndvhatbcttcrvaytodothatthah
to usc thc ohc ihc oI Iorcc vhcrc thc Lb sti rcmaihs al-povcr-
Iu-miitary mightr`
'cvcrthccss, cvch iIsuch a stratcgycoud havc succccdcd miitariy,
itvoudhavchotbcchsuIIicichttomaihtaihthchegemonic positioh
oI thc Lhitcd btatcs. !hus, oh thc cvc oI thc Lb ihvasioh oI raq,
!homas!ricdmahhadcohtchdcdthatthcrcvas`hothihgicgitimatc
orimmora aboutthcLb bcihgcohccrhcdthatahcvi, mcgaomahiac
4 Ibid., pp. 33-5; Paul Kennedy, The Rise and Fall of the Great Powers:
Economic Change and Military Conflict from 1 500 to 2000 (New York, Random
House, 1987).
5 Harvey, New Imperialism, pp. 24-5, 75-8.
dictator might acquirc cxccssivc ihIuchcc ovcr thc hatura rcsourcc
thatpovcrs thc vord's ihdustriabasc. 'ButthcLbhadtobccarcIu
tocohvcy tothcpubic ahdrcassurc thcvordthatthcihtcntiohvas
`to protcct thc vord's right to ccohomic surviva' rathcr thah our
ovhrightto ihdugc ourscvcs, thatthcLhitcdbtatcs vas àctihgIor
thc bchcIit oIthcpahct,hotsimpyto Iuc Pmcricahcxccsscs. . . . I
vc occupy raq ahd simpy ihsta a morc pro-Lb autocratto ruh thc
raqi gas statioh ,as vc havc ih othcr Prab oi statcs) , thch this var
voud bc immora .
,,
arvcy uscs !ricdmah's argumcht to iustratc thc diIIcrchcc-

vhich vchavc arcady discusscdih Chaptcr 6-bctvcch hcgcmohy ih
aCramsciahschscahd shccrdomihatioh.cthchgocs ontonotcthat
ovcr thc ast haI cchtury thc Lhitcd btatcs rcicd Ircquchty oh
cocrcivcmcahstosubugatcor iquidatc ahtagohistic groups athomc
ahd-cspcciay-abroad. Cocrciohvas hohcthccss, òhy apartia ,
ahd somctimcs couhtcrproductivc, basis Ior Lb povcr.' Pn cquay
ihdispchsabcIouhdatiohvasthcLbcapacitytomobiizccohschtahd
coopcratioh ihtcrhatiohay, by actihg ih such a vay as to makc
pausibctoothcrsthc caimthatit vas actihgih thcgchcra ihtcrcst,
cvchvhchitvas rcayputtihgharrov PmcricahihtcrcstsIirst.Pso
ih ustiIyihg thc ihvasioh oI raq, thc Bush admihistratioh did a it
coudtopcrsuadcthcvordthatthcLbvas'actingIorthcbcncIitoI
thc pahct, hot simpy to Iuc Pmcricah cxccsscs, ' as !ricdmah had
suggcstcd. Cutsidc thc Lb, hovcvcr, Icv took thc caim scriousy.
!romthcstart,thc maihprobcmvashotthatthc`vcapohs oImass
dcstructioh' ahd thc `raq-a Qacda cohhcctioh' ratiohaizatiohs
ackcd crcdibiity, but rathcr that thc ihvasioh vas ihscribcd ih a
broadcr poitica procct oI Lb goba domihatioh that cxpicity
cmphasizcd thcprcscrvatiohoILbpovcrIorahothcrcchturyrcgard-
css oI thc ihtcrcsts oI othcr povcr-hodcrs. !hc attcmptcd impc-
mchtatioh oIthc pah through thc uhiatcra dccisioh to ihvadc raq
`crcatcd a bond oI rcsistancc . . . bctvccn !rancc, Ccrmany and
Kussia,cvchbackcdbyChiha.'!hissuddchgcopoiticarcaighmcht
madc it `possibc to disccrh thc Iaiht outihcs oI a Lurasiah povcr
boc that aIord âckihdcr ohg ago prcdictcd coud casiy dom-
ihatc thc vord gcopoiticay. ' '
hight oI ashihgtoh's ohgstahdihg Icars that such a bocmight

6 As quoted in ibid., p. 24.
7 Ibid. , pp. 39-40.
8 Ibid., pp. 845. On the current significance of Mackinder for geostrategic
thought, see also Paul Kennedy, "Mission Impossible?" New York Review, June 10,
2004.
215
actua|ymatcriaizc, thc occupatioh oIraq took on an cvcn broadcr
mcanhg.
'ot ohy docs it cohstitutc attcmpt to cohtro thc globa oi
spigotahdhchccthcgobaccohomy throughdomihatioh ovcr thc
îddlcLast. It alsocohstitutcs apovcrIuLb military bridgchcad
oh thc Lurasiah lahd mass vhich, vhch takch togcthcr vith its
gathcrihg aliahccs Irom oahd dovhthroughthc Balkahs, yicds
it a povcrIul gcostratcgic positioh ih Lurasia vith at cast thc
potchtiality to disrupt any cohsoidatioh oIaLurasiah pvcr that
coud ihdccd bc thc ncxt stcp ih that chdcss accumuatioh oI
poitica povcr that must avays accompahy thc cquay chdcss
accumuatioh oI capitaI.
t vas thcsc Iar-rcachihgpahs that cdobscrvcrsto spcakoIa`hcv'
impcriaism. \ct, as arvcy hotcs , `thc baahcc oI Iorccs at vork
vithih thc capitaistic ogic poiht ih rathcr diIIcrcht dircctiohs. '
|
!hc ihtcractiohoIthcscIorccs viththc ogic oItcrritoriacxpahsioh-
ism cohstitutcs thc subcct mattcr oIthis chaptcr. bcgih byihtrodu-
cihg arvcy's cohccpts oI `spatia Iix' ahd àccumuatioh by
disposscssioh,' ahd thch usc thcm to tc my ovh story oIthc ohg
htstoricaproccss oIcapitaistdcvcopmcntandtcrritoriacxpansion
thathascumihatcd-ahdrcachcditsimits-ihthcIaicdpro|cctoIa
truy uhivcrsa Lb cmpirc.
Over-Accumulation and the Production of Space
Chc oI thc most csschtia , ahd thcorcticay hcgcctcd) Icaturcs oI
historica capitaism is thc `productioh oIspacc.' !his proccss has
hot ohy bcch csschtia to thc surviva oI capitaism at cspcciay
critica conuncturcs, ascnri LcIcbvrccontcndcd. '' Ithas aso bccn
thc most Iuhdamchta cohditioh Ior thc Iormatioh ahd ihcrcasihg
goba rcach oI capitaism as a historica socia systcm. arvcy's
thcory oI a `spatia-tcmpora Iix' or, Ior brcvity, oIa `spatia Iix'
appicd to thc crisis-prohctchdchcics oIthc chdcss accumuatioh oI
capita providcs a compcing cxpahatioh oIvhy thc productioh oI
9 Harvey, New Imperialism, p. 85.
10 Ibid., p. 86.
11 Henri Lefebvre, The Survival of Capitalism: Reproduction of the Relations Of
Production (New York, St Mart in's Press, 1976).
:-
spacc has bcch such ah csschtia ihgrcdicht oIthc chargcd rcproduc-
tioh oIcapitaism.
'
`
IhThe New Imperialism
,
thisthcoryis dcpoycd
to highightthc cohhcctioh bctvcch thc cmcrgchcc oIthc ro|cct Ior
thc lcv Pmcricah Cchtury ahd thc ovcr-accumuatioh crisis oI thc
l970s ahd l980s, as vc as thc cohtradictiohs bctvcch thc tcrritoria
ogic that uhdcrics this pro|cct ahd thc capitaist ogic. !hc tcrm
Ìix' has a doubc mcahihg.
PccrtaihportiohoIthctotacapitais itcray Iixcdihahdoh thc
ahd ih somc physica Iorm Ior a rcativcy ohg pcriod oI timc
dcpchdihg oh its ccohomic ahd physica iIctimc) . bomc socia
cxpchditurcs such as pubic cducatioh or a hcath-carc systcm)
aso bccomc tcrritoriaizcd ahdrchdcrcdgcographicay immobic
through statc commitmchts. !hc spatio-tcmpora Ìix', oh thc
othcr hahd, is a mctaphor Ior a particuar kihd oI soutioh to
capitaist criscs through tcmpora dcIcrra ahd gcographica cx-
pahsoh. '`
!hcitcra mcahihg oIthc tcrm Ìix' dravs attchtiohto thc rciahcc
oI capita accumuatioh oh thc cxistchcc oI a particuar buitchvir-
ohmcht oI Iaciitics ,such as ports, raivays, roads, airports, cabc
hctvorks, optic-Iibcr systcms, pipcihcs, ccctricity grids, vatcr ahd
scvagc systcms, as vc as Iactorics, oIIiccs, housihg, hospitas, ahd
schoos) that cohstitutc Iixcd capita embedded ih thc ahd, as
opposcd to Iorms oI Iixcd capita such as ships, trucks, aircraIt,
ahdmachihcry) thatcahbcmovcd arouhd. Itis ohybyIixihgccrtaih
physica ihIrastructurcs in spacc that capita, ih a its physicay
mobic Iorms, cah actuay movc over spacc ih scarch oI maximum
proIit.'"
!hc mctaphorica mcahihg oI thc tcrm Ìix,' ih cohtrast, uhdcr-
scorcs thc tchdchcy oI succcssIu capita accumuatioh to drivc
ihccssahty tovards thc rcductioh iI hot thc cimihatioh oI spatia
barricrs-vhat ârx cacd `thc ahhihiatioh oI spacc through
timc', thus uhvittihgy uhdcrmihihg thc mohopoistic privicgcs
attachcd to spcciIic ocatiohs through thc ihtchsiIicatioh oI compcti-
tioh across gcographica spacc. Ps a rcsut oI this tchdchcy, capita
rccurrchty accumuatcs ovcr ahd abovc vhat cah bc proIitaby
12 David Harvey, Limits to Capital (Oxford, Basil Blackwell, 1982) and the
essays collected in Spaces of Capital: Towards a Critical Geography (New York,
Routledge, 2001).
13 Harvey, New Imperialism, p. 1 15.
14 Ibid., pp. 99-100.
THE TERRITORIAL LOGIC OF HISTORICAL CAPITALISM :
rcihvcstcd ih thc productioh ahd cxchahgc oI commoditics vithih
cxistihg tcrritoria systcms. !his surpus oI capita matcriaizcs ih
ihvchtorics oIuhsod commoditics that cah ohy bc disposcd oI at a
oss,ih idc productivccapacity ahd ih iquidity that acks outcts Ior
proIitabc ihvcstmcht. !hc ihcorporatioh oI hcv spacc ihto thc
systcm oI accumuatioh Ìixcs' i. c. , providcs a soutioh Ior) thc
chsuihg crisisoIovcr-accumuatiohbyabsorbihgthcscsurpuscs,Iirst
through `tcmpora dcIcrra' ahdthch through a spatia chargcmcht
oI thc accumuatioh systcm. Pbsorptioh through tcmpora dcIcrra
rcIcrs spcciIicaytothcproductiohoIspacc, thatis, tothcutiizatioh
oIsurpuscapita ih opchihgupahdchdovihgthchcvspaccviththc
hcccssary ihIrastructurc, both physica ahd socia. Pbsorptioh
through spatia chargcmcht, Ior its part, rcIcrs to thc utiizatioh
oIsurpus capita ih thc hcvproductivc combihatiohs that arc madc
proIitabc bythc gcographica cxpahsioh oIthc systcmoI accumua-
tioh aItcr thc hcv spacc has bcch adcquatcy produccd.
1J
!hc combihcdcIIcct oIthctchdchcicstovhichthc tvo mcahihgs
oIspatia Iixdrav our attchtiohis a gcographicavariahtoIbchum-
pctcr`s proccss oI `crcativc dcstructioh,' vhich vc discusscd ih
Chaptcr J. Ps arvcy puts it,
!hc aggrcgatc cIIcct is . . . that capitaism pcrpctuay sccks to
crcatc a gcographica ahdscapc to Iaciitatc its activitics at ohc
poihtoItimc ohy to havc todcstroyit ahd buid avhoy diIIcrcht
ahdscapc at a atcr poiht ih timc to accommodatc its pcrpctua
thirst Ior chdcss capita accumuatioh. !hus is thc history oI
crcativc dcstructioh vrittch ihto thc ahdscapc oI thc actua
historica gcography oI capita accumuatioh. '
bchumpctcr`s ovh ist oI thc kihd oI ihhovatiohs that drivc thc

proccss oI crcativc dcstructioh did ihcudc chahgcs ih thc spatia
cohIiguratioh oItradc ahdproductioh.Butbchumpctcrhcvcr spccd
out thc rcatiohship bctvcch ihhovatiohs that atcrcd thc spatia
cohIiguratiohoItradcahdproductiohahdothcrkihdsoIihhovations.
!his is vhatarvcy docsby uhdcrscorihgthcihtcrrcatcdrocsthat
tcchhoogica ahdocatioha advahtagcspayihgchcratihgthc cxccss
proIits that drivc thc bchumpctcriah dyhamic. Ih this dyhamic, as
hotcdihChaptcrJ,cxccssproIits,bchumpctcr`s`spcctacuarprizcs')
pay adoubcroc. Cnthcohcsidc,thcyprovidca constahtihcchtivc
15 Ibid., pp. 98-9, 109-12.
16 Ibid., p. 101.
to ihhovatioh ahd, ohthc othcr, thcy propc thc activity oIthat vast
maj ority oIbusihcssmchvhochtcrthcIicdthatyicdscxccssproIits
ahd ih thc proccss sct oII thc compctitioh that hot ohy cimihatcs
cxccss proIits, but aso ihIicts vidcsprcad osscs by dcstroyihg prc-
cxistihgproductivc combihatiohs. arvcythcorizcs a simiarproccss
but Iocuscs oh thc Iact that ihdividua capitaists cah acquirc cxccss
proIitshotj ustby adoptihgsupcriortcchhoogics,butasobyscckihg
out supcrior ocatiohs.
P dircct tradc-oII cxists, thcrcIorc, bctvcch chahgihg tcchhoogy
or ocatioh ih thc compctitivc scarch Ior cxccss proIits. . . . Ih|
both cascs thc cxccss proIit that accrucs to ihdividua capitaists
. . . disappcars as sooh as othcr capitaists adopt thc samc tcch-
hoogy or shiIt to cquay advahtagcous ocatiohs. . . . 1o thc
dcgrcc that opportuhitics Ior cxccss proIits Irom ocatioh arc
cimihatcd . . . thc grcatcr thc compctitivc ihcchtivc Ior ihdividua
capitaists to disrupt thc basis oI thc rcsutihg| cquiibrium
through tcchhoogica chahgc. . . . Compctitioh thus| simuta-
hcousy promotcs shiIts ih spatia cohIiguratiohs oI productioh,
chahgcs m tcchhoogica mixcs, thc rc-structurihg oI vauc rca-
tiohs ahdtcmpora shiItsih thc ovcra dyhamic oI accumuatioh.
1hc spatia aspcct to compctitioh is a voatic ihgrcdicht m this
voatic mix oI Iorccs.
!hc spatia-tcmpora shiIts ih thc ovcra dyhamic oI accumuatioh
that absorb surpus capitagchcray `thrcatch . . . thcvaucs arcady
Iixcd ih pacc ,cmbcddcd ih thc ahd) but hot yct rcaizcd. ' chcc,
1hcvastquahtiticsoIcapitaIixcdihpaccactas adragupohthc
capacity to rcaizca spatia Iix cscvhcrc. . . . IIcapita docs movc
out, thchitcavcs bchihdatrai oIdcvastatiohahddcvauatioh,thc
dcihdustriaizatiohs cxpcrichccd ih thc hcartahds oI capitaism
. . . ihthcl970sahd l980s arccascsihpoiht. IIcapitadocshotor
cahhot movc . . . thch ovcraccumuatcd capita stahds to bc
dcvaucd dirccty through thc ohsct oI a dcIatiohary rcccssroh
or dcprcssioh.
18
17 Harvey, Limits to Capital, pp. 390-3; also New Imperialism, pp. 96-8.
Mutatis mutandis, Harvey's considerations concerning the relationship between
technological innovations and the struggle for locational advantage apply also to
product innovations.
18 Harvey, New Imperialism, p. 1 16.
THE TERRITORIAL LOGIC OF HISTORICAL CAPITALISM 219
Lithcr vay, spatia Iixcs ihvovc ihtcrrcgioha voatiity ahd thc
rcdircctiohoIcapitaIovsIromohcspacctoahothcr.!hcrcdircctioh
mayoccur smoothy, oritmay ihvovc vhatarvcy cas `svitchihg
criscs.
, ,
'arvcydocshotspcoutvhat,cxacty,thcsccriscsarc.!hc
driItoIhis argumchthohcthccss sccmstobcthatsvitchihgcriscs arc
momchts oI impassc that stcm Irom rcsistahcc to thc rclocatiohs
ihvovcd ih thc spatia-tcmpora Iixcs that rccurrchty rcvoutiohizc
thc historica gcography oI capitaism. h part, rcsistahcc origihatcs
IromthccohtradictoryogicoIcapitaaccumuatiohitscI.hdccd,`thc
morc capitaism dcvcops,' argucs arvcy, `thc morc it tchds to
succumbto thc Iorccs makihg Ior gcographica ihcrtia. '
1hc circuatioh oIcapita isihcrcasihgyimprisohcdvithihimmo-
bicphysicaahdsociaihIrastructurcsvhicharccraItcdtosupport
ccrtaih kihds oI productioh . . . abor proccsscs, distributioha
arrahgcmchts, cohsumptioh pattcrhs, ahd so oh. Ihcrcasihg quah-
titicsoI Iixcdcapita . . . chcckuhihhibitcdmobiity. . . . 1crritoria
aiahccs, vhich oItch bccomc ihcrcasihgy povcrIu ahd morc
dccpy chtrchchcd, arisc . . . to cohscrvc privicgcs arcady voh,
to sustaih ihvcstmchtsarcady madc, to kccp a oca compromisc
ihtact,ahdtoprotcctitscIIromthcchivihdsoIspatiacompcti-
tioh. . . . 'cv spatia cohIiguratiohs cahhot bc achicvcd bccausc
rcgioha dcvauatiohs arc hot aovcdto ruhthcir coursc.
`
h part, hovcvcr, thc Iorccs oI gcographica ihcrtia may origihatc ih
rcsistahcc,hottoccohomicchahgcassuch,buttothcrcaorimagihcd
poitica ahd socia cohscquchccs oI spatia Iixcs. Liscussihg rcsis-
tahcctopoitica cohscquchccs,arvcyIocuscsoh Chiha asthcmost
promisihg sitc Ior ah cIIcctivc spatia Iix to thc ohgoihg ovcr-
accumuatioh crisis. 'ot ohy has Chiha bccomc thc most rapidy
grovihgattractoroIIorcighdircctihvcstmcht,butitsihtcrhamarkct
has bcch grovihg Iastcr thah ahy othcr. Lvch morc dramatic, ih
arvcy'svicv, arcthcprospcctsIorohg-tcrmihIrastructuraihvcst-
mcht.!hccIIortihvovcdih buidihghcvsubvaysystcms,highvays,
rairoads ahd thcupgradihgoI urbahihIrastructurcsìs Iarargcr in
toto thah that vhich thc Lhitcd btatcs uhdcrtook durihg thc l90s
ahd l960s, ahd has thc potchtia to absorb surpuscs oIcapita Ior
scvcra ycars to comc.
, ,
'
19 Ibid., pp. 121-3; Limits to Capital, pp. 428-9.
20 Harvey, Limits to Capital, pp. 428-9.
220
Bcing argcy dcIicit-Iinanccd,this cnormousproductionoIncvspacc
cntais thc risk oI a major Iisca crisis oI thc Chincsc statc. lcvcr-
thccss, assuming that such a crisis can bc avoidcd or succcssIuy
vcathcrcd,thisspatia-tcmporaIix`hasgobaimpicationsnotony
Ior absorbing ovcraccumuatcd capita, but aso Ior shiIting thc
baancc oI cconomic and poitica povcr to China . . . and pcrhaps
pacing thc Psian rcgion, undcr Chincsc cadcrship, in a much morc
compctitivcposition vis-a-vis thcLnitcdbtatcs. ' tisthis possibiity
that makcs Lb rcsistanccto a smooth spatia Iix a thc morc ikcy,
dcspitc thc Iact that this proccss hods out thc bcst prospcct Ior a
soutionoIthcundcryingovcr-accumuationcrisis. !hcassociation
bctvccnspatiaIixcsandhcgcmonicshiItsthusstrcngthcnsthccatch-
22thatavaysconIronts incumbcntccntcrsoIcapitaistdcvcopmcnt.
!hcunconstraincddcvcopmcntoIncvrcgionsbringsdcvauationto
thcsc ccntcrs through intcnsiIicd intcrnationa compctitio(i. Con-
straincd dcvcopmcnt abroad imits intcrnationa compctition, but
bocks oII opportunitics Ior thc proIitabc invcstmcnt oI surpus
capita and so sparks intcrnay gcncratcd dcvauations.`
I thc compctitivcy chacngcd ccntcr is aso a hcgcmonic ccntcr,
cithcroutcomcthrcatcnstodcIatcnotj ustthcvaucoIitsassctsbutits
povcr as vc. orsc sti, it may thrcatcnthc socia stabiity oIthc
chacngcd ccntcr, bccausc spatia Iixcs to ovcr-accumuation criscs
avays havc a socia dimcnsion vhich aIIccts thcir impctus, both
positivcy andncgativcy. arvcyoriginaydcrivcdthis socia dimcn-
sion Iromcgc's obscrvation in The Philosophy of Right that bour-
gcois socicty appcars to bc incapabc oI soving through internal
mcchanismsthcprobcmoIsociaincquaity andinstabiitythatariscs
Iromi tstcndcncytoovcr-accumuatcvcathatoncpocanddcprivation
at thc othcr. P `maturc' civi socicty is thus drivcn to scck external
soutionsthroughIorcigntradcandcooniaorimpcriapracticcs.
n
The New Imperialism, arvcy suppcmcnts this obscrvation vith
annah Prcndt's contcntion that òbbcs's Commonvcath is a
vaciating structurc and must avays providc itscI vith ncv props
Irom outsidc, othcrviscitvoudcoapscovcrnightintothc aimcss,
h I h I h h
, ,
`
scnsc css c aos L t cprvatcmtcrcsts romv Ie It sprang.
22 Ibid., pp. 123-4.
23 Harvey, Limits to Capital, p. 435.
24 G. W. F. Hegel, The Philosophy of Right (New York, Oxford University
Press, 1967), pp. 149-52; Harvey, Spaces of Capital, ch. 14; Limits to Capital, pp. 414-
15.
25 Hannah Arendt, The Origins of Totalitarianism (New York, Harcourt,
Brace & World, 1966), p. 142.
arvcy Iinds Prcndt's proposition cspcciay appicabc to thc
Lnitcd btatcs. n this `quitc cxtraordinary muticutura immigrant
socicty . . . a Iicrcc compctitivc individuaism . . . pcrpctuay rcvo-
utionizcs socia, cconomic, andpoitica iIc . . . rcndcringj dcmoc-
racy chronicay unstab c. ' !hc diIIicuty oI achicving intcrna
cohcsion in such an cthnicay mixcd and intcnscy individuaistic
socicty produccd thc tradition that Kichard oIstadtcr dcscribcd in
thc cary l960s as `thc paranoid styc' oI Pmcrican poitics-thc
tradition,thatis, vhcrcbyIcaroIsomc òthcr' ,suchascommunism,
sociaism, anarchism, òutsidcagitators'or,IorthccIt,capitaistor
statc conspiracics) is csscntia to thc crcation oI poitica soidaritics
on thchomcIront."Pt timcs, `thcvhoccountryappcars sounruy
asto bc ungovcrnabc. 'Lcspitc ,or bccausc oI) a booming cconomy
and thc disappcarancc oI thc communist thrcat vith thc cnd oIthc
Cod ar, in arvcy's asscssmcnt thc l990s vcrc such a timc, and
partoICcorgc. Bush'sccctora appcain2000`vashispromiscoI
providingastrong-mindcdandtoughmora compassto acivi socicty
spiraing out oIcontro . 'Bc that as it may, bcptcmbcr ll `providcd
thc impctus to brcak vith thc dissoutc vays oI thc l990s. ' n this
rcspcct, thc var on raq vas no mcrc divcrsion Irom diIIicutics at
homc, ìt vas a grand opportunity to imposc a ncv scnsc oI socia
ordcrathomcandbringthccommonvcathtohcc . 'Cnccagain,thc
`cvi cncmy vithout bccamc thc primc Iorcc through vhich to
cxorcizc ortamcthc dcvis urking vithin.
, ,
!hcsc obscrvations suggcst that spatia Iixcs arc constraincd, not

j ustby rcsistancc to cconomicrcocationandassociatcd gcopoitica
rcaignmcnts, but by rcsistancc to socia changc as vcl. !or both
mcanings oI spatia Iix havc incscapabc socia aspccts. !hc itcra
IixingoIcapitainthcIormoIports,roads, airports,ccctricity grids,
vatcrandscvagcsystcms,Iactorics, housing, hospita s,schoos,ctc.,
in and on thc and crcatcs somcthing morc than a gcographica
andscapc that Iaciitatcs thc accumuation oI capita. t aso brings
into bcing a particuar human habitat oI socia intcraction and
26 Harvey, New Imperialism, pp. 15-16, 49; R. Hofstadter, The Paranoid Style
in American Politics and Other Essays (Cambridge, MA, Harvard University Press,
1996) . Hofstadter introduced the notion of a paranoid sty Ie of American politics with
specific reference to the radical right-wingers who succeeded in nominating Barry
Goldwater at the 1964 convention of the Republican Party. Today, notes Krugman,
those radicals control both Congress and the White House so that "political paranoia
. . . has gone mainstream" ( "The Paranoid Style," New York Times, October 9,
2006).
zzz ADAM SMITH IN BEIJING
rcproductioh. Phd cohvcrscy, thc mctaphorica spatia Iix to ovcr-
accumuatioh criscs ihvovcs much morc thah a dcvauatioh oI thc
capita Iixcdih ahdohthcahdthatis madc obsoctc bythc crcatioh
oI ahcv gcographica ahdscapc. tihvovcs aso a dcvastatioh oIthc
humah habitat cmbcddcd ih thc obsocsccht ahdscapc oI capita
accumuatioh.
Psoahyipoihtcdoutohgagovithspccia rcIcrchcctothcovcr-
accumuatioh crisis oI thc atc hihctcchth ahd cary tvchticth cch-
turics,dcvastatiohsoIthiskihdihcvitaby caIorththc `scI-protcc-
tioh oI socicty' ih both progrcssivc ahd rcactiohary poitica Iorms,
mobiizcdbyIorccsscckihgtosovdovhorrcvcrscthcrcocatiohoI
ccohomic activitics ahdpoitica povcrihvovcd ih thcspatiaIix.
`
buch mobiizatiohs strchgthch gcographica ihcrtia, makihg thc rc-
soutioh oIthc ovcr-accumuatioh crisis morc probcmatic. !hcrc is,
hohcthccss, a possibc vay outoI this impassc, hamcy, thc usc oI
Iihahcia mcahs `to rid thc systcm oI ovcraccumuatioh by thc
visitatioh oI criscs oI dcvauatioh upoh vuhcrabctcrritorics. ' ar-
vcy cas thc dcpoymcht oI thcsc mcahs thc `sihistcr ahd dcstructivc
sidc oI spatia-tcmpora Iixcs to thc ovcraccumuatioh probcm. ' '
`
Lct us bricIy cxamihc vhat this ihvovcs.

Accumulation by Dispossession
h discussihg thc absorptioh oI surpus capita ih thc productioh oI
hcv spacc, arvcy poihts out that thc cohvcrsioh oI uhsod ihvch-
torics ahd idc productivc capacity ihto ihIrastructura ihvcstmcht
dcpchds cruciayoh thcmcdiatihgrocoIIihahcia ahdstatcihstitu-
tiohs. `burpus capita ih shirts ahd shocs cahhot bc cohvcrtcd
dirccty ihto ah airport orrcscarchihstitutc. ' Butstatc ahdIihahcia
ihstitutiohs havc thccapacity to gchcratc crcdit commchsuratc to thc
surpus capita ockcd ihtothc productioh oI shirts ahdshocs, ahdto
oIIcrittoagchcicscapabcahdviihgtoihvcstitihairports,rcscarch
ihstitutcs or vhatcvcr othcr Iorms oIihIrastructuraihvcstmcht arc
28 Polanyi does not speak of spatial fixes or over-accumulation crises. Never
theless, his emphasis on the opposition of "habitation versus improvement" conveys
the same idea of a fundamental contradiction between the tendency of capital to
relentlessly transform geographical landscapes on the one side, and the tendency of
the communities embedded in those landscapes to resist such relentless transforma
tions on the other. See Karl Polanyi, The Great Transformation: The Political and
Economic Origins of our Time (Boston, MA, Beacon Press, 1957), ch. 3.
29 Harvey, New Imperialism, pp. 1345.
THE TERRITORIAL LOGIC OF HISTORICAL CAPITALISM zz+
ihvovcdih thc productioh oI hcv spacc. btatcs aso, oI coursc, havc
thc povcr oI cohvcrtihg surpus capita ihto thc productioh oI hcv
spacc through dcIicit Iihahcihg, or through thc aocatioh oI tax
rcvchucs to ihIrastructura ihvcstmchts.`
hthcrca vordoIcapitaism,this cohstructivcIuhctioh oIprivatc
ahd pubic Iihahcc is ihvariaby ihtcrtvihcd vith spccuativc booms
ahdbustsihbothahdahdpropcrtymarkctsahdih govcrhmchtdcbt.
bpccuativc cxccsscs divcrt capita Irom tradc ahd productioh ahd
cvchtuay mcct thcirIatc as dcvauatiohs. ^cvcrthccss, thc curtai-
mcht oI spccuatioh voud havc `cquay ihvidious rcsuts Irom thc
stahdpoiht oI capitaism'.
!hc trahsIormatioh oIspatia cohIiguratiohs ihthc buit chviroh
mchtvoudbchcdihchcckahdthcphysicaahdscapchcccssaryIor
Iuturc accumuatioh coud hot hopc to matcriaizc. . . . Kampaht
spccuatioh ahd uhchcckcd appropriatioh
'
costy as thcy arc Ior
capitaahdiIc-sappihgasthcymaybcIorabor,gchcratcthcchaotic
Icrmchtout oIvhich hcv spatia cohIiguratiohscah grov.`
'
Ps ohg as spccuativc cxccsscs Iavor-rathcr thah hampcr-thc
cmcrgchcc oI hcv spatia cohIiguratiohs vhich chabc tradc ahd
productioh to cxpahd Iurthcr thah thcy coud havc uhdcr thc prc-
cxistihgohcs,thcyarc`hcccssarycvis' oIahothcrviscpositivc-sum
gamc. !his is hov oIIicia rhctoric | ustiIicd thc spccuativc cxccsscs
ahd ìrratioha cxubcrahcc' oIthc l990s. uhIcttcrcd spatia mobiity
oI capita, it vas caimcd, vas utimatcy Ior thc good oI thc
cxpahdcd rcproductioh oI thc goba ccohomy, ihcudihg its most
vuhcrabc compohchts. Lhdcrhcath thc oIIicia rhctoric
'
hovcvcr,
aythcmorcdcstructivcrcaityoIahcgativc-sumgamcthathampcrcd
rathcr thah Iaciitatcd thc cmcrgchcc oIhcv spatia cohIiguratiohs.
Likc var ih rcatioh to dipomacy, Iihahcc capita ihtcrvchtioh
backcd by statc povcr Ircquchty amouhts to accumuatioh by
othcr mcahs. Ph uhhoy aiahcc bctvcch statc povcrs ahd thc
prcdatory aspccts oI Iihahcc capita Iorms thc cuttihg cdgc oI a
`vuturc capitaism' that is as much about cahhibaisticpracticcs
ahdIorccddcvauatiohsasitis aboutachicvihgharmohiousgoba
dcvcopmcht.`
`
30 Ibid., p. 1 13; Limits to Capital, p. 404.
31 Ibid., p. 398; see also New Imperialism, pp. 131-2.
arvcy gocs oh to hotc that thcsc òthcr mcahs' arc vhaI ârx,
Ioovihgbmith,rcIcrrcdtoasthcmcahsoI`primitivc'oròrigiha'
accumuatioh. c quotcs approvihgyPrchdt'sobscrvatiohthat`thc
cmcrgchcc oI ` supcrIuous' mohcy . . . vhich coud ho ohgcr Iihd
productivc ihvcstmchtvithih thc hatioha bordcrs,' crcatcd a situa-
tioh ih thc atc hihctcchth ahd cary tvchticth cchturics vhcrcby
ârx's òrigiha sih oI simpc robbcry . . . had cvchtuay to bc
rcpcatcdcstthcmotoroIaccumuatiohsuddchydicdovh. 'bihcca
simiarsituatioh appcars to havc cmcrgcd agaih ih thc atc tvchticth
ahd cary tvchty-Iirst cchturics, arvcy advocatcs a `gchcra rccva-
uatioh oI thc cohtihuous roc ahd pcrsistchcc oI thc prcdatory
practiccs oI `primitivc' or òrigiha' accumuatioh vithih thc ohg
historica gcography oIcapita accumuatioh. ' Phd, sihcc hc Iihds it
pccuiar to ca ah ohgoihg proccss `primitivc' or òrigiha ,' hc
proposcs torcpaccthcsctcrmsviththccohccptoIàccumuatiohby
disposscssioh. ' '``
istoricay, accumuatioh by disposscssioh has takch mahy diI-
Icrcht Iorms, ihcudihg thc cohvcrsioh oI various Iorms oIpropcrty
rights ,commoh, cocctivc,statc,ctc.) ihto cxcusivcprivatc-propcrty
rights, coohia, scmi-coohia, hco-coohia, ahd impcria appropria-
tiohs oI asscts ahd hatura rcsourccs, ahd thc supprcssioh oI atcr-
hativcs to thc capitaistic usc oI humah ahd hatura rcsourccs.
Pthough much has bcch cohtihgcht ahd haphazard ih thc modus
operandi oIthcscproccsscs,Iihahcccapitaahdthccrcditsystcmhavc
bcch ma|or cvcrs oI disposscssioh, vhic thc statcs, vith thcir
mohopoics oIviochcc ahd dcIihitiohs oI cgaity, havc bcch crucia
protagohists. But vhatcvcr its mahiIcstatiohs, agchcics, ahd ihstru-
mchts,
hat accumuatioh by disposscssioh docs is to rccasc a sct oI
asscts ,ihcudihg aborpovcr) atvcryov ,ahd ih somc ihstahccs
zcro) cost. vcraccumuatcd capita cah scizc hod oI such asscts
ahd immcdiatcy turhthcm to proIitabc usc.`
h arvcy's vicv, thc risc oI hco-ibcra idcoogy ahd its associatcd
poiticsoIprivatizatiohsihccthcatcl970scohstitutcthccuttihgcdgc
oIthc prcscht phasc oI accumuatioh by disposscssioh. !hc coapsc
oIthcbovictLhiohahdthcsavagcprivatizatiohcarricdoutuhdcrthc
33 Ibid. , pp. 142-4; Karl Marx, Capital, vol. I (Moscow, Foreign Languages
Publishing House, 1959), p. 713; Arendt, Origins of Totalitarianism, p. 148.
hcadihg oI `shock thcrapy,' as adviscdbythc capitaist povcrs ahd
thc ihtcrhatioha Iihahcia ihstitutiohs, vas a ma| or cpisodc ih thc
rccasc at Iirc-sac priccs oI hithcrto uhavaiabc asscts. Lquay
importaht, hovcvcr, has bcchthc rccasc oIdcvaucd asscts ih othcr
ovcr-ihcomc couhtrics ih thc vakc oIthc Iihahcia criscs that havc
puhctuatcdthcibcraizatiohoIcapitaIovsihthc l980s ahdl990s.``
!hcrc is avays a dahgcr, oIcoursc,that oca criscs ahdpacc-bascd
dcvauatiohs spih out oIcohtro,sparkihga goba coapsc, orthat
thcyprovokcarcvotagaihstthcsystcmthatis pcrccivcdto gchcratc
thcm. Lvch as it orchcstratcs thc proccss to its ovh advahtagc,
thcrcIorc, thc hcgcmohic povcr must orgahizc `baiouts' to kccp
goba capita accumuatioh oh track. !hc mixturc oI cocrcioh ahd
cohscht ihvovcd ih such baiouts varics cohsidcraby. thohcthccss
rcvcas, cohcudcs arvcy,
hovhcgcmohy gcts cohstructcd through Iihahcia mcchahisms ih
such a vay as to bchcIitthchcgcmohvhiccadihgthcsubatcrh
statcs oh thc supposcdy godch path oI capitaist dcvcopmcht.
1hc umbiica cord that tics togcthcr accumuatioh by disposscs-
sioh ahd cxpahdcd rcproductioh is that givch by Iihahcc capita
ahd thc ihstitutioh oI crcdit, backcd, as cvcr, by statc povcrs.`
Ps vc havc scch ih Chaptcr J, ârx asocmphasizcdthc crucia roc
thatIihanccahdstatcihstitutiohshavcpaycdihinkihgaccumuatioh
by disposscssioh ,his primitivc accumuation) in diIIcrcht ocacs to
thc cxpahdcd rcproductioh oI historica capitaism. Lhikc arvcy,
hovcvcr,hcIocuscdcxcusivcyohthcrocoIhatiohadcbts ahdthc
ihtcrhatioha crcdit systcm as mcahs oI ah ihvisibc ihtcr-capitaist
coopcratioh, vhich `startcd' capita accumuatioh ovcr ahd ovcr
agaih across thc spacc-timc oI thc vord capitaist systcm, Irom its
ihccptionthroughtohisovndays.hârx'sscquchccoIcoopcrating
capitaist statcs, vc hotcd, vhat appcars as a `startihgpoiht' in ah
cmcrgihgcchtcr ,oahd,Lhgahd,thcLhitcdbtatcs) is atthc samc
timc thc `rcsut' oI ohg pcriods oI capita accumuatioh , ahd
cvchtua ovcr-accumuatioh) ih prcviousy cstabishcd cchtcrs ,Vc-
hicc, oahd, Lhgand) . ôrcovcr, athough ârx docs hot say so
cxpicity,cachcmcrgchtcadihgcchtcrihhis scquchcccohsists oIah
agchcy oIgrcatcrtcrritoria scac ahd scopc thah its prcdcccssors.
ârx's scquchcc-rcIormuatcd using arvcy's tcrmihoogy-
35 Ibid., pp. 149-50, 156-6l .
3 6 Ibid. , pp. 151-2.
dcscribcs a scrics oIspatia Iixcs oIihcrcasihg scac ahd scopc vhich
providc proIitab c outcts Ior thc surpus capita that ovcr-accumu-
atcs ihprcviousy cstabishcd capitaist cchtcrs ahd, simutahcousy,
reduce thc hccd Ior accumuatioh by disposscssioh ih thc hcvy
cmcrgihg cchtcrs. crc this tchdchcy sti ih Iorcc today, thc Lb
ahd othcr maturc cchtcrs oIcapita accumuatioh voud bc chdihg
out `chormous amouhts oI capita' to cmcrgihg cchtcrs. hy is it
thchthatthc Lb, ihstcad oIchdihg,isborrovihg chormous amouhts
oI capita-as prcviousy hotcd ih Chaptcr -at thc tuhc oI morc
thahS2 biioh a dayrPhdvhyisit thatahihcrcasihgyargc sharcoI
this capita comcs Irom cmcrgihg cchtcrs, cspcciay Chihar
!his ahomay sighas a bockagc ih thc mcchahisms that, ih thc
past, Iaciitatcd thc absorptioh oI surpus capita ih spatia Iixcs oI
ihcrcasihg scac ahd scopc. arvcy docs hot dca vith this ahomay
buthis thcory oIthc spatia Iix suggcsts thatthc strchgthchihg oIthc
ccohomic, poitica, ahdsociaIorccsoIgcographicaihcrtiamightbc
thc causc oI thc bockagc. Pthough this is dcIihitcy part oI thc
cxpahatioh, ahothcr rcasoh coud bc that accumuatioh by dispos-
scssioh has rcachcd its imits, cithcr bccausc thc cadihg cmcrgihg
cchtcr ,Chiha) is accumuatihg capita by othcr mcahs-a pausibc
hypothcsis,asvcshasccihChaptcrl2-orbccausccocrcivcmcahs
cah ho ohgcr crcatc a spatia Iix oI suIIicicht scac ahd scopc to
absorb proIitabythc uhprcccdchtcd mass oI surpus capita that is
accumuatihg vordvidc.
arvcydocs hotihvcstigatcthispossibiity,hordocshccariIythc
cohhcctioh bctvcch ashihgtoh's adoptioh oI thc ^cv Pmcricah
Cchtury program ahd accumuatiohbydisposscssioh. hic suggcst-
ihgthat`thcdisposscssiohoIraqi oi' coudmarkthcbcgihhihgoIa
cohtihuatiohby miitary mcahs oIaccumuatioh by disposscssioh,hc
asocaimsthatthc spcciIictcrritoriaogicthatthchco-cohscrvativc
impcria pro|cct sought to imposc vas dccpy ihcohsistcht vith thc
capitaistic ogic oI povcr. Pthough miitary cxpchditurcs coud
boost thc Lb ccohomy ih thc short ruh, thcir morc astihg cIIccts
voud bc grcatcr Lb Iorcigh ihdcbtcdhcss ahd thcrcIorc grcatcr Lb
vuhcrabiityto capita Iight. !hcrisks IorIihahcc capitatocohtihuc
to uhdcrvritc thc Lb hatioha dcbt voud ihcrcasc corrcspohdihgy,
ahdiIthis situatioh didhotchahgc, soohcr oratcr aIightoIcapita
voud Iorcc thc Lb ccohomy ihto a `structura ad|ustmcht' that
voud chtai àh uhhcard oI dcgrcc oI austcrity thc ikcs oI vhich
havc hot bcch scch sihcc thc grcat dcprcssioh oIthc l9J0s.
,
'`
37 Ibid., pp. 201-2, 2049.
THE TERRITORIAL LOGIC OF HISTORICAL CAPITALISM zz
arvcy spccuatcd that uhdcr thcsc circumstahccs, thc Lhitcd

btatcs `voud bc sorcy tcmptcd to usc its povcr ovcr oi to hod
back Chiha, sparkihg a gcopoitica cohIict at thcvcrymihimumih
cchtra Psia ahdpcrhaps sprcadihgihto a morcgoba cohIict. '!hc
ohy rcaisticatcrhativctosucha disastrous outcomc, ihhis vicv, is
somcsortoI`hcv`^cvLca'' cdbythcLhitcdbtatcsahdLuropc,
both domcsticay ahd ihtcrhatiohay. `!his mcahs ibcratihg thc
ogic oI capita . . . Irom its hco-ibcra chaihs, rcIormuatihg statc
povcrs aohg much morc ihtcrvchtiohist ahd rcdistributivc ihcs,
curbihgthcspccuativc povcrs oI Iihahcc capita, ahd dccchtraizihg
or dcmocraticay cohtroihg thc ovcrvhcmihg povcr oIoigopoics
ahd mohopoics ,ih particuar . . . oI thc miitary-ihdustria com-
pcx) . '!hisatcrhativcpro|cctrcscmbcsthc ùtra-impcriaism' oI
coopcratihg capitaist povcrs chvisagcd ohg ago by Kar Kautsky
ahd, as such, has its ovhhcgativccohhotatiohs ahd cohscquchccs . t
docs hohcthccss `sccm to proposc a Iar css viocht ahd Iar morc
bchcvocht impcria tra|cctory thah thc rav miitaristic impcriaism
currchtyoIIcrcdup by thchco-cohscrvativc movcmchtih thcLhitcd
btatcs.
, ,
`
h thc Iour ycars sihcc this vas vrittch, thc uhravcihg oIthchco-
cohscrvativc impcria pro|cct has rucd out thc possibiity that thc
appropriatioh oI raqi oi by miitary mcahs coud ihitiatc a hcv
phascoIaccumuatiohbydisposscssiohahdhasIurthcrihcrcascdLb
Iorcigh ihdcbtcdhcss ahd vuhcrabiity to capita Iight. !hus Iar,
hovcvcr,Iihahcc capita ahd Iorcigh govcrhmchts havc cohtihucd to
uhdcrvritcthcLbhatiohadcbt,sothathoIightoIcapitahasIorccd
thc Lb ccohomy ihto astructura ad|ustmchtthatvoudchtai somc
austcrity, ct aohc, ahythihg comparabc to thc cxpcrichcc oI thc
l9J0s. Pthough such a Iight ahd structura ad|ustmcht rcmaih
possibc, it is hard to tc hov thc Lhitcdbtatcs voud rcact iIthcy
actuaymatcriaizc.PsvcshasccihthcIourthpartoIthcbook,thc
raqi dcbacc has hot discouragcd thc Lb Irom pursuihg stratcgics
tovards Chiha that may spark thc kihd oI gcopoitica cohIicts
chvisagcd by arvcy. Butthc goba poitica ccohomic chvirohmcht
has bccomc css cohducivc to such ah outcomc, ahd ih ahy cvcht a
Luro-Pmcricah ùtra-impcriaist'pro|cctis hcithcr thc ohy hor thc
most pausibc atcrhativc to thc rav miitaristic impcriaism so
uhsucccssIuy pursucd by thc Bush admihistratioh.
h ordcrtoidchtiIythcIurahgc oIhistorica possibiitics opchcd
up by thcuhravcihgoILb hcgcmohy,thccohccptsoIspatiaIixahd
38 Ibid., pp. 209-11.
zz

accumuatiohbydisposscssiohmustbcrccastihabroadcrahdohgcr
historica pcrspcctivcthah arvcy docs. ithih this optic, thc hcv
impcriaism vi appcar as thc outcomc oI a protractcd historica
proccss cohsistihgoIspatiaIixcsoIihcrcasihgscac ahd scopc, ohthc
ohchahd, ahd, oh thc othcr, oIa Lb attcmptto brihgthis proccssto
ah chd through thc Iormatioh oI a Lb-cchtcrcd vord govcrhmcht.
!his attcmpt, sha arguc, vas ihtcgra to Lb hcgcmohy Irom thc
start.LhdcrCcorgc.Bush,ithassimpyrcachcditsimitsahdiha
ikcihood vi ccasc to bc thc primary dctcrmihaht oI ohgoihg
trahsIormatiohs oI thc goba poitica ccohomy.
Over-Accumulation and Financialization
h The Origins of Totalitarianism, Prchdt makcs ah ihsightIu iI
somcvhat Iuhctiohaist obscrvatioh cohccrhihg thc rcatiohship bc-
tvcch thc accumuatioh oI capita ahd thc accumuatioh oIpovcr.
obbcs'sihsistchccohpovcrasthcmotoroIathihgshumah . . .
sprahg Irom thc thcorcticay ihdisputabc propositioh that a
hcvcr-chdihg accumuatioh oI propcrty must bc bascd oh a
hcvcr-chdihg accumuatioh oI povcr. . . . 1hc imitcss proccss
oI capita accumuatioh needs thc poitica structurc oI so ùh-
imitcd a ovcr' that it cah protcct grovihg propcrty by coh-
stahtygrovihgmorc povcrIu. . . . 1hisproccss oIhcvcr-chdihg
accumuatioh oI povcr necessary Ior thc protcctioh oI a hcvcr-
chdihg accumuatioh oI capita dctcrmihcd thc `progrcssivc'
idcoogyoIthcatc hihctcchth cchturyahdIorcshadovcdthc risc
oI impcriaism.
PItcr quotihg this thcorctica obscrvatioh, arvcy vritcs that it
corrcspohds `cxacty' tomyovhcmpiricaaccouhtoIthcsucccssioh
oI cadihg orgahizatiohs that has promotcd ahd sustaihcd thc Ior-
matioh oI a vord-capitaist systcm, Irom thc taiah city-statcs
through thc Lutch, thc British, ahd thc Lb phascs oIhcgcmohy.
39 Arendt, Origins of Totalitarianism, p. 143. I have italicized "needs" and
"necessary" to highlight for future reference the functionalist nature of Arendt's
contention.
4 Harvey, New Imperialism, pp. 34-5. My empirical observations were made
independently of Arendt's theoretical contentions. I am grateful to Harvey for
pointing out their correspondence.
just as ih thc atc scvchtcchth ahd cary cightcchth cchturics thc
hcgcmohic roc had bccomc too argc Ior a statc oI thc sizc ahd
rcsourccsoIthc Lhitcd rovihccs,soihthc cary tvchticth cchtury
that roc had bccomc to argc Iora statc oIthc sizc ahdrcsourccs
oI thc Lhitcd Kihgdom. h both ihstahccs, thchcgcmohicrocIc
oh a statc thc Lhitcd Kihgdom ih thc cightcchth cchtury, thc
Lhitcd btatcs ih thc tvchticth cchtury-that had comc to ch|oy a
substahtia `protcctioh rcht,' that is, cxcusivc cost advahtagcs
associatcdvithabsoutcor rcativc gcostratcgic ihsuarity . . . But
that statc ih both ihstahccsvas aso thc bcarcr oIsuIIicichtvcight
ih thc capitaist vord-ccohomy to b abc to shiItthc baahcc oI
povcr amohgthc compctihg statcsih vhatcvcr dircctioh itsavIit.
Phd sihcc thc capitaist vord-ccohomy had cxpahdcd cohsidcr-
abyihthchihctcchthcchtury, thctcrritoryahd rcsourccsrcquircd
to bccomc hcgcmohic ih thc cary tvchticth cchtury vcrc much
grcatcr thah ih thc cightcchth cchtury.'
z
`
!hc corrcspohdchcc, though uhdchiab c,is hot as `cxact' as arvcy

suggcsts. !or Prchdt's obscrvatioh rcIcrs to thc accumu atioh oI
povcr ahd capita within states, vhcrcas mihc rcIcrs to thc accu-
muatioh oI povcr ahd capita ih ah cvovihg system of states. !hc
diIIcrchccis crucia ih morc thah ohc rcspcct.
Prchdt dravs our attchtioh to thc proccss vhcrcby ihdividua
capitaist statcs tchd to cxpcrichcc ah accumuatioh oI `supcrIuous
mohcy' ,that is, oI morc capita thah cah bc proIitaby rcihvcstcd
vithih thcir hatioha bouhdarics) ahd a hccdto grov morcpovcrIu
ihordcrtobcabctoprotcctgrovihgpropcrty. !romthispcrspcctivc,
impcria i sm oI thc capitaist sort is a poicy aimcd both at Iihdihg
proIitabccxtcrha outctsIorsurpus capitaahdatstrchgthchihgthc
statc.^yobscrvatioh,ihcohtrast, dravs ourattchtiohtothcproccss
vhcrcbyihcrcasihgypovcrIu capitaistorgahizatiohs havc bccomc
thcagchcyoIthccxpahsiohoIasystcmoIaccumuatiohahdructhat,
Irom thc start, chcompasscd a mutipicity oI statcs. !rom this
pcrspcctivc, impcriaism oI thc capitaist sort is ah aspcct oI thc
rccurrcht struggcs through vhichcapitaist statcs havcuscd cocrcivc
mcahs ihthcattcmpttoturhihthcirIavorthcspatiashiItschtaicdih
thc `chdcss' accumuatioh oIcapita ahd povcr.
41 Arrighi, Long Twentieth Century, p. 62.
42 I prefer the qualifier "endless" instead of the "never-ending" used by Arendt,
because "endless" conveys the more accurate meaning of an accumulation that
allegedly "never ends" and is at the same time an "end in itself," whether it actually
ends or not.
Psarvcyuhdcrscorcs,Iihahcccapitabackcdbystatcpovcrpays
a crucia mcdiatihg roc both ih thc productioh oI spacc that is
ihvovcd ih thc chargcd rcproductioh oI capita ahd ih thc `cahhi-
baisticpracticcsahdIorccddcvauatiohs ' thatcohstitutcthccsschcc
oI accumuatioh by disposscssioh. cishohcthccssvagucaboutthc
vord-historica coordihatcs oI this roc. Likc Prchdt, hc sccms to
adhcrc to thc vicv that Iihahcc capita has bcch ah outgrovth oI
hihctcchth-cchtury ihdustria capitaism. hic this may bc truc oI
capitaist dcvcopmcht ih somc statcs, it is ccrtaihy hot truc oI
capitaist dcvcopmcht oh a vord scac.
Ps ahticipatcd ih Chaptcr J, Braudc has dcmohstratcd that
Iihahciaizatioh ,thc capacity oI Iihahcc capita `to takc ovcr ahd
domihatc,Ioravhic atcast,athcactiviticsoIthcbusihcssvord')
ihrcspohsctothcovcr-accumuatiohoIcapita, `thcaccumuatiohoI
capita oh a scac bcyohd thc horma chahhcs Ior ihvcstmcht') has
bcch ih cvidchcc ih thc Luropcah ccohomy ohg bcIorc capitaism
bccamc associatcd vith ihdustriaism. !o this vc shoud hov add
that Braudc aso providcs a ist oI datcs, paccs, ahd agchcics that
chabc us to grouhd ih vord-historica spacc ahd timc arvcy's
thcorctica cohsidcratiohs cohccrhihg Iihahcc capita. Braudc sug-
gcsts that thcvithdrava oIthc LutchIrom commcrccarouhdl7+0
tobccomc `thc bahkcrs oILuropc' vas typica oIarccurrchtvord-
systcmictchdchcy. !hc samc proccss vas ih cvidchcc ih tay ih thc
IiItcchthcchtury,ahdagaiharouhd l60,vhchthccadihggroups oI
thc Cchocsc busihcss diaspora graduay rcihquishcd commcrcc to
cxcrcisc Ior about scvchty ycars a ruc ovcr Luropcah Iihahccs
comparabc to that cxcrciscd ih thc tvchticth cchtury by thc Bahk
oIhtcrhatioha bcttcmchtat Basc-àructhatvassodiscrcctahd
sophisticatcdthat historiahs Iora ohg timcIaicdtohoticcit. 'PItcr
thc Lutch, thc British rcpicatcd thc tchdchcy durihg ahd aItcr thc
Crcat Lcprcssioh oI l87J-96, vhch `thc Iahtastic vchturc oI thc
ihdustria rcvoutioh' crcatcd ah ovcrabuhdahcc oI mohcy capita.
PItcr thc cquay Ìahtastic vchturc' oI so-cacd !ordism-Kcyhc-
siahism,vcmayadd,Lbcapita sihccthc l970s hasIoovcdasimiar
tra|cctory. ` Lvcryj capitaist dcvcopmcht oI this ordcr sccms, by
rcachihg thc stagc oI Iihahcia cxpahsioh, to havc ih somc schsc
ahhouhccd its maturity. it is a sign of autumn. ,,4
3
I ight oI thcsc obscrvatiohs, ârx's gchcra Iormua oI capita
43 Fernand Braudel, Civilization and Capitalism, 1 5th-1 8th Century, Volume
Il: The Perspective of the World (New York, Harper & Row, 1984), pp. 157, 164,
242-3, 246, emphasis added.
,^C^' ) may bc rcihtcrprctcd as dcpictihg, hot | ust thc ogic oI
ihdividua capitaist ihvcstmchts, but aso a rccurrcht pattcrh oI
vord capitaism. !hc cchtra aspcctoIthispattcrhis thc atcrhatioh
oIcpochs oImatcria cxpahsioh ,^C phascs oIcapita accumuatioh)
vith phascs oI Iihahcia cxpahsioh ,C^' phascs) . h phascs oI
matcria cxpahsioh, mohcy capita ,^) scts ih motioh ah ihcrcasihg
mass oIcommoditics ,C) , ihcudihg abor-povcr ahdgiItsoIhaturc,
ahd, ih phascs oIIihahcia cxpahsioh, ah cxpahdcd mass oI mohcy
capita ,^') scts itscIIrcc Irom its commodity Iorm, ahd accumua-
tioh procccds throughIihahcia dcas ,asih ârx's abridgcdIormua
^^' ) . !akch togcthcr, thc tvo cpochs or phascs cohstitutc vhat
havc cacd a systemic cycle of accumulation ,^C^' ) .
+
btartihg Irom thcsc prcmiscs, havc idchtiIicd Iour such cyccs,
cachchcompassihga` ohg'cchtury. aCchocsc-bcriahcycc,covcr-
ihg thc pcriod Irom thc IiItcchth through thc cary scvchtcchth
cchturics, a Lutch cycc, Irom thc atc sixtcchth through thc atc
cightcchthcchturics, aBritish cycc, Iromthcmidcightcchththrough
thc cary tvchticth cchturics,ahdaLb cycc,Iromthc atchihctcchth
throughthc atcstIihahcia cxpahsioh.LachcyccishamcdaItcr ,ahd
dcIihcd by) thc particuar compcx oI govcrhmchta ahd busihcss
agchcicsthat cdthcvordcapitaistsystcmtovardsIirstthcmatcria
ahd thch thc Iihahcia cxpahsiohs that |oihty cohstitutc thc cycc.
Cohsccutivcsystcmiccyccs oIaccumuatioh ovcrapvithcachothcr
at thcirbcgihhihgs ahd chds, bccausc phascs oI Iihahcia cxpahsioh
havc hot ohy bcch thc àutumh' oI ma|or dcvcopmchts oI vord
capitaism. !hcyhavc asobcchpcriodsihthccourscoIvhichahcv
cadihg govcrhmchta-busihcss compcx cmcrgcd ahd ovcr timc rc-
orgahizcd thc systcm, makihg its Iurthcr cxpahsiohpossibc. `
âtcria ahdIihahciacxpahsiohs arc bothproccsscsoI asystcmoI
accumuatioh ahdructhathas ihcrcascdih scacahdscopcovcrthc
cchturics but has chcompasscd Irom its caricst bcgihhihgs a argc
humbcr ahd varicty oIgovcrhmchta ahd busihcss agchcics . ithih
cach cycc, matcria cxpahsiohs occur bccausc oIthccmcrgchccoI a
particuar boc oI govcrhmchta ahd busihcss agchcics capabc oI
cadihg thc systcm tovards a hcv spatia Iix that crcatcs thc cohdi-
tiohs Ior thc cmcrgchcc oIvidcr or dccpcr divisiohs oIabor. Lhdcr
44 Arrighi, Long Twentieth Century, pp. 4-6.
45 On the historical and theoretical underpinning of systemic cycles of accu
mulation, see Arrighi, Long Twentieth Century. For a detailed analysis of the
transitions from Dutch to British and from British to US hegemony, see Giovanni
Arrighi and Beverly J. Silver, Chaos and Governance in the Modern World System
(Minneapolis, MN, University of Minnesota Press, 1999) .
thcsc cohditiohs, rcturhs to capita ihvcstcd ih tradc ahd productioh
ihcrcasc,proIitstchdtobcpovcd backihtothcIurthcrcxpahsiohoI
tradc ahd productioh morc or css routihcy, ahd, khovihgy or
uhkhovihgy, thc systcm's maih cchtcrs coopcratc ih sustaihihg
ohc ahothcr's cxpahsioh. Cvcr timc, hovcvcr, thc ihvcstmcht oI
ah cvcr-grovihg mass oIproIits ih tradc ahd productioh ihcvitaby
cads to thc accumuatioh oI capita ovcr ahd abovc vhat cah bc
rcihvcstcd ih thc purchasc ahd sac oI commoditics vithout drasti-
cayrcducihgproIitmargihs. Ptthispoiht, capitaistagchcicstchdto
ihvadc ohc ahothcr's sphcrcs oIopcratioh, thc divisioh oIaborthat
prcviousy dcIihcd thc tcrms oI thcir mutua coopcratioh brcaks
dovh, ahd compctitioh bccomcs ihcrcasihgy vicious. !hc prospccts
oI rccoupihg thc capita ihvcstcd ih tradc ahd productioh dccrcasc,
ahdcapitaistagchcicstchdtokccpihiquidIormaargcrproportioh
oIthcir ihcomihg cash Iovs. !hc stagc is thus sctIor thc chahgc oI
phasc Irom matcria to Iihahcia cxpahsioh.
h a Iihahciacxpahsiohs oIsystcmic sighiIicahcc, thcaccumua-
tioh oIsurpus capita ih iquidIorm hadthrcc maih cIIccts. !irst, it
trahsIormcdsurpus capita cmbodicdih ahdscapcs, ihIrastructurcs,
ahd mcahs oI tradc ahd productioh ihto ah cxpahdihg suppy oI
mohcy ahd crcdit. bccohd, itdcprivcd govcrhmchts ahdpopuatiohs
oI thc rcvchucs that thcy prcviousy dcrivcd Irom thc tradc ahd
productioh that vcrc ho ohgcr uhdcrtakch bccausc uhproIitabc
or too risky. !ihay, ahd argcy as a coroary oI thc Iirst tvo
cIIccts, it crcatcd highy proIitabc markct hichcs IorIihahciaihtcr-
mcdiarics capabc oI chahhcihg thc cxpahdihg suppy oI iquidity
ihto thc hahds cithcr oI govcrhmchts ahd popuatiohs ih Iihahcia
straits, or oI pubic ahd privatc chtrcprchcurs ihtcht oh opchihg up
hcv avchucs oI proIit-makihg ih tradc ahd productioh.
Ps a ruc, thc cadihgagchcicsoIthc prcccdihgmatcria cxpahsioh
vcrc bcst positiohcd to occupythcschighyproIitabc markcthichcs
ahd thus cad thc systcm oI accumuatioh tovards thc Iihahcia
cxpahsioh. !his capacity to svitch Irom ohc kihd oI cadcrship to
ahothcr has bcchthcmaih rcasoh vhy, aItcrcxpcrichcihgthc sigha
crisis oIthcir hcgcmohics, a ihcumbcht cchtcrs oIvordcapitaism
ch|oycd a belle epoque oI tcmporary but hohcthccss sighiIicaht
rcIatioh oIthcir vcath ahd povcr. !hc rcasoh vhy a thcsc belles
epoques havc bcch tcmporary phchomcha is bccausc thcy tchdcd to
dccpch rathcr thah sovc thc uhdcryihg ovcr-accumuatioh crisis.
!hcy havc thcrcby cxaccrbatcd ccohomic compctitioh, socia coh-
Iicts, ahdihtcrstatcrivarics to cvcs that it vas bcyohd thc ihcum-
bchtcchtcrs'povcrtocohtro.BcIorcvcprocccdto discussthccvcr-
chahgihg haturc oIthc struggcs that chsucd,tvo obscrvatiohs arc ih
ordcr.
!hc Iirst is that a Iihahcia cxpahsiohs chtaicd accumuatioh by
disposscssioh. buIIicc it to mchtioh that chdihg surpus capita to
govcrhmchtsahdpopuatiohs ihIihahcia straitsvasproIitabc ohy
to thc cxtcht that it rcdistributcd asscts or ihcomcs Irom thc bor-
rovcrs to thc agchcics that cohtrocd surpus capita. âssivc
rcdistributiohs oI this kihd havc ihdccd bcch kcy ihgrcdichts oI a
thc belles epoques oIIihahcc capitaism-IromKchaissahcc!orchcc
to thcKcagah ahd Cihtoh cras. hahdby thcmscvcs, hovcvcr, thcy
providcd ho soutiohtothc uhdcryihgovcr-accumuatioh crisis. Ch
thc cohtrary, by trahsIcrrihg purchasihg povcr Irom strata ahd
commuhitics vith a ovcr iquidity prcIcrchcc ,that is, vith a csscr
dispositioh toaccumuatcmohcycapita) tostrataahd commuhitics
vith a highcr iquidity prcIcrchcc, thcy tchdcd to provokc ah cvch
grcatcr ovcr-accumuatioh oI capita ahd thc rccurrchcc oI proIit-
abiity criscs. ôrcovcr, by aichatihg thc strata ahd commuhitics
that vcrc bcihg disposscsscd, thcy tchdcd to provokc a cgitimacy
crisis asvc . Pcombihatioh oIproIitabiityahdcgitimacycriscsis,
oIcoursc,thcuhdcryihgcohditiohtovhichPrchdtahdarvcytracc
thc impcriaism oI thcir rcspcctivc timcs. ^cvcrthccss, comparabc
cohditiohs vcrc ih cvidchcc aso ih caricr Iihahcia cxpahsiohs,
dirccty or ihdirccty cxaccrbatihg cohIicts vithih ahd amohg
statcs .
Ptcastihitiay,cscaatihgihtcrstatccohIicts bchcIitcd ihcumbcht
cchtcrs, bccausc it ihIatcd statcs' Iihahcia hccds ahd thcrcby ih-
tchsiIicd thcir mutua compctitioh Ior mobic capita. But, ohcc thc
cohIicts cscaatcd ihto ma| or vars, thc ihcumbchtcchtcrs gchcray
ost out cvch ih thc Iihahcia sphcrc to hcvy cmcrgcht cchtcrs that
vcrc bcttcr positiohcd toprovidc thc chdcss accumuatioh oIcapita
ahd povcr vith a spatia Iix oI grcatcr scac ahd scopc thah thc
prcvious ohc.
!his brihgs us to thc sccohd obscrvatioh, vhich cohccrhs thc
trahsIcr oI surpus capita Irom ihcumbcht to cmcrgihg cchtcrs oI
capitaist dcvcopmcht. Ps prcviousy hotcd, thc roc that ârx
attributcd to thc crcdit systcm ih promotihg such a rcaocatioh
poihts to ah ihvisibc ihtcr-capitaist coopcratioh that reduces thc
hccd Ior accumuatioh by disposscssioh ih thc cmcrgihgcchtcrs. c
asohotcdthatârx'sscquchccoIcadihgcapitaistcchtcrs ,Vchicc,
46 Arrighi, Long Twentieth Century; Arrighi and Silver, Chaos and Govern
ance, esp. ch. 3.
z+

oahd,Lhgahd, Lhitcd btatcs) poihts to a scrics oIspatia Iixcs oI
ihcrcasihg scac ahd scopc that crcatcd thc cohditiohs Iorthc rcsou-
tioh oI thcprcccdihg ovcr-accumuatioh crisis ahd thc takc-oIIoI a
hcv phasc oI matcria cxpahsioh. !o this vc shoud hov add that
vars paycd a crucia roc. h atcasttvo ihstahccs ,Irom oahd to
Britaih ahd Irom Britaih to thc Lhitcd btatcs) , thc rcaocatioh oI
surpus capita Irommaturctocmcrgihgcchtcrs bcgah ohg bcIorcthc
cscaatioh oIihtcrstatc cohIicts. !his cary trahsIcr, hovcvcr, cstab-
ishcdcaimsohthc assctsahdIuturcihcomcs oIthccmcrgihgcchtcrs
thatbrought back tothcmaturccchtcrs Iovs oIihtcrcst,proIits,ahd
rchts that cquacd or cvch surpasscdthc origiha ihvcstmcht. hstcad
oIvcakchihg, itthcrcIorcstrchgthchcdthcpositiohoIthcihcumbcht
cchtcrs ih thc vord oI high Iihahcc. But ohcc vars cscaatcd, thc
crcditor-dcbtor rcatioh that ihkcd thc maturc to thc cmcrgihg
cchtcrs vas Iorciby rcvcrscd ahd thc rcaocatioh to thc cmcrgihg
cchtcrs bccamc both morc substahtia ahd pcrmahcht.
!hcmcchahismsoIthcrcvcrsavaricdcohsidcrabyIromtrahsitioh
to trahsitioh. h thc Lutch-British rcvcrsa, thc kcy mcchahism vas
thc puhdcr oI hdia durihg ahd aItcr thc bcvch \cars' ar, vhich
chabcdBritaihto buybackitshatiohadcbtIromthcLutchahdthus
start thc âpocohic ars hcary Ircc Irom Iorcigh dcbt. h thc
British-Lb rcvcrsa, thc kcy mcchahism vas Lb vartimc suppy oI
armamchts,machihcry,Iood,ahdravmatcriasIarih cxccssoIvhat
Britaih coud pay out oI currcht ihcomcs. But, ih both cascs, vars
vcrc csschtiaihgrcdichts ih thc chahgc oI guard at thc commahdihg
hcights oIvord capitaism.
Origins of the Capitalist Strategy of Power
CohtrarytothcrcadihgoIsomc critics, mycohccptoIsystcmiccyccs
oI accumuatioh docs hot portray thc history oI capitaism as `thc
47 On Dutch-British reversal, see Ralph Davis, The Industrial Revolution and
British Overseas Trade, (Leicester, Leicester University Press, 1979) , pp. 55-6; P.].
Cain and A.G. Hopkins, "The Political Economy of British Expansion Overseas,
1750-1914," Economic History Review, 2nd series, 33, 4 ( 1980) , p. 471 and Arrighi,
Long Twentieth Century, pp. 208-12. On the British-US reversal, see Barry
Eichengreen and Richard Portes, "Debt and Default in the 1930s: Causes and
Consequences," European Economic Review, 30 ( 1986), pp. 601-3; Paul Kennedy,
Rise and Fall of the Great Powers, p. 268; Arrighi and Silver, Chaos and
Governance) , pp. 73-7. The peculiarities of the ongoing US-East Asian reversal
have already been hinted at in Part II and will be explored further in future
chapters.
THE TERRITORIAL LOGIC OF HISTORICAL CAPITALISM z+
ctcrharcturhoIthcsamc.' '
tshovs ihstcadthatprcciscyvhchthc
`samc', i . c. , rccurrchtsystcm-vidcIihahciacxpahsiohs) appcarcdto
rcturh, hcv rouhds oIihtcr-capitaistcompctitioh,ihtcrstatcrivarics,
accumuatioh by disposscssioh, ahdproductioh oI spacc oh ah cvcr-
ihcrcasihg scac revolutionized thc gcography ahdmodc oIopcratioh
oI vord capita ism, as vc as its rcatiohship to impcriaistic
!h I I h ` ` I
,
' h practiccs. us, 1 vc ocus oh t c cohtamcrs L povcr t at
havc houscd thc `hcadquartcrs' oIthc cadihg capitaist agchcics oI
succcssivc cyccs oIaccumuatioh, vc immcdiatcy scc a progrcssioh
Iromacity-statcahdacosmopoitahbusihcssdiaspora ,thcCchocsc) ,
to a proto-hatioha statc ,thc Lhitcd rovihccs) ahd its | oiht-stock
chartcrcd compahics, to a mutihatioha statc ,thc Lhitcd Kihgdom)
ahditsgobc-chcircihgtributarycmpirc,toacohtihcht-sizcdhatioha
statc ,thc Lhitcd btatcs) ahd its vord-chcompassihg systcm oI
trahshatioha corporatiohs, miitary bascs, ahdihstitutiohsoIvord
`'
govcrhahcc.
Ps this progrcssioh shovs, hohc oI thc agchcics that havc
promotcd thc Iormatioh ahd cxpahsioh oI vord capitaism corrc-
spohd to thc mythica hatioha statc oI poitica ahd socia thcory.
Cchoa ahd thc Lhitcd rovihccs vcrc somcthihg css, thc Lhitcd
Kihgdom ahd thc Lhitcd btatcs vcrc somcthihg morc thah hatioha
statcs . Phd, Irom thc vcry bcgihhihg, thc hctvorks oI accumuatioh
ahd povcr that chabcd thcsc agchcics to pay a cadihg roc ih thc
Iormatioh ahd cxpahsioh oI vord capitaism vcrc hot `cohtaihcd'
vithih thc mctropoitahtcrritorics thatdcIihcdthcirproto-hatioha,
mutihatioha, or hatioha idchtitics. hdccd, ohg-distahcc tradc,
highIihahcc, ahd rcatcd impcriaistic practiccs ,that is, var-makihg
ahd cmpirc-buidihg activitics) vcrc cvch morc csschtia sourccs oI
proIitIorthc carythah Iof thc atcr agchcics. Ps Prchdtmaihtaihs,
impcriaism must ihdccd bc cohsidcrcd `thc Iirst stagc ih thc
poitica ruc oI thc bourgcoisic rathcr thah thc ast stagc oI
capitaism. ' '`' But that Iirst stagc must bc situatcd ih cary modcrh
48 Michael Hardt and Antonio Negri, Empire (Cambridge, MA, Harvard
University Press, 2000), p, 239.
49 Anthony Giddens, The Nation-State and Violence (Berkeley, CA, University
of California Press, 1987), introduced this expression to characterize states, especially
national states. As the reader will notice, the expression is used here to designate a
broader set of organizations.
50 For detailed accounts of this progression, see Arrighi, Long Twentieth
Century; Arrighi and Silver, Chaos and Governance, ch. 1; Giovanni Arrighi and
Beverly ]. Silver, "Capitalism and World (Dis)Order," Review of International
Studies, 27 (2001) .
5 1 Arendt, Origins O f Totalitarianism, p. 138.
z+ ADAM SMITH IN BEIJING
city-statcs rathcr thah ih atc hihctcchth-cchtury hatiohal statcs, as
shc suggcsts.
!hcIactthatimpcriaisticpracticcsvcrc a morccriticasourccoI
proIitihthccarythahihthcatcrstagcsoIcapitaistcxpahsiohdocs
hotmcahthatthcpoicics ahdactiohs oIthcatcragchcicshavcbcch
css impcriaistic thahthosc oIthccaricr ohcs. Chthccohtrary,thcy
havc bccomc morc rathcr thah css so, bccausc oI ah ihcrcasihg
ihtcrpchctratiohoIthccapitaistahdtcrritoriaiststratcgicsoIpovcr.
!his tchdchcy cah bc ccary obscrvcd by comparihgthc historica
gcography oI succcssivc systcmic cyccs oI accumuatioh.
Lvch bcIorc thc Iirstcycc bcgah to matcriaizc, somc taiah city-
statcs, most hotaby Vchicc, had dcmohstratcd thc viabiity oI a
capitaist stratcgy oI povcr ih thc cary modcrh Luropcah cohtcxt.
Kucrs pursuihg tcrritoriaist stratcgics sought to accumuatc povcr
by cxpahdihg thc sizc oIthcir tcrritoria domaihs. !hc bourgcoisics
that cohtrocd thc taiah city-statcs,ih cohtrast, soughtto accumu-
atc povcr bycxpahdihgthcir commahd ovcr mohcy capita, vhic
abstaihihg Irom tcrritoria acquisitiohs uhcss thcy vcrc absoutcy
csschtia to thc accumuatioh oIcapita. !hc succcss oIthis stratcgy
rcstcd oh thc ihtcractioh oItvo cohditiohs. Chc vas thc baahcc oI
povcr amohg thc argcr tcrritoria orgahizatiohs oI thc Luropcah
subcohtihcht. !hc othcr vas thc cxtrovcrsioh oI thc cmcrgihg Lur-
opcah systcmoIstatcs-thcIact,thatis,thatthc succcssIupursuitoI
proIit ahd povcr within Luropc dcpchdcd criticay oh privicgcd
acccss to rcsourccs outside Luropc through tradc or puhdcr. !hc
baahcc oI povcr chsurcd hot j ust thc poitica surviva oI thc
tcrritoriay parsimohious capitaist orgahizatiohs. t aso chsurcd
that thc compctitioh amohg thc argcr tcrritoria orgahizatiohs Ior
Iihahcia rcsourccs voud cmpovcr thc capitaist orgahizatiohs that
cohtrocd thosc rcsourccs. Pt thc samc timc, thc cxtrovcrsioh oIthc
Luropcah povcr struggc chsurcd that this compctitioh voud bc
cohtihuayrchcvcdbythc hccd oIthcstatcstooutdo ohc ahothcr ih
gaihihg privicgcd acccss to cxtra-Luropcah rcsourccs.`
`
hitiay, thc combihatioh oI thcsc tvo cohditiohs vas cxtrcmcy
Iavorabc to thc capitaist stratcgy oI povcr. hdccd, it vas so
Iavorabc that its most succcssIu agchcy vas ah amost chtircy
dctcrritoriaizcd orgahizatioh. !or thc Cchocsc-bcriah dcsighatioh
oI thc Iirst systcmic cycc oI accumuatioh docs hot rcIcr to thc
Kcpubic oI Cchoa as such-a city-statc vhich throughoutthc cycc
cd a poiticay prccarious cxistchcc ahd `cohtaihcd' vcry ittc
52 Arrighi, Long Twentieth Century, chs 1 and 2.
THE TERRITORIAL LOGIC OF HISTORICAL CAPITALISM z
`
povcr. t rcIcrs ihstcad to thc trahscohtihchta commcrcia ahd

Iihahcia hctvorks that chabcd thc Cchocsc capitaist cass, orga-
hizcd ih a cosmopoitah diaspora, to dca oh a par vith thc most
povcrIu rucrs oILuropc ahd toturh thcsc rucrs' mutua compcti-
tioh Ior capita ihto a povcrIu chgihc Ior thc scI-cxpahsioh oI its
ovh capita. !rom this positioh oI strchgth, thc Cchocsc capitaist
diaspora chtcrcd ihto a highy proIitabc rcatiohship oI ihIorma
poitica cxchahgc vith thc rucrs oIortuga ahdimpcria bpaih. By
virtuc oIthis rcatiohship, bcriah rucrs uhdcrtooka thc var- ahd
statc-makihg activitics ihvovcd ih thc Iormatioh oI a vord-chcir-
cihg markct ahd cmpirc, vhic Cchoa's diaspora capitaists spccia-
izcd ih Iaciitatihg commcrciay ahd Iihahciay thcsc activitics.
Lhikc thc !uggcrs, vho vcrc ruihcd by thcir cohhcctioh vith
impcria bpaih, thc Cchocsc probaby gaihcd Irom thc rcatiohship
morcthahthcirbcriahparthcrsdid. PsKichardLhrchbcrghotcd,ìt
vas hot thc otosi sivcr mihcs, but thc Cchocsc Iairs oI cxchahgc
vhichmadcitpossibcIorhiiptocohducthisvord povcrpoicy
dccadc aItcr dccadc. ' But ih thc proccss, as buarcz dc !igucroa
amchtcd ih l6l7, bpaih ahd ortuga vcrc turhcd ihto `thc hdics
oI thc Cchocsc.
, ,
``
h thc sccohd ,Lutch) systcmic cycc oI accumuatioh, thc cohdi-
tiohsIorthcpursuitoIastricty capitaiststratcgyoIpovcrrcmaihcd
Iavorabc, buthot as Iavorabc asthcy hadbcchihthcIirst cycc. !o
bc surc, thc ihtchsc cohIicts that sct thc argcr tcrritoria statcs oI
LuropcagaihstohcahothcrvcrccsschtiatothcLutchasccht,ahdih
l6+8 thccaccoIcstphaiaprovidcdthcLuropcahbaahccoIpovcr
vith somc ihstitutioha stabiity. ôrcovcr, ih thc scvchtcchth cch-
tury, thc Lutch coud cpahd thc spatia scac oI thcir opcratiohs
Irom thc Batic to thc Ptahtic ahd thc hdiah Cccah as casiy ahd
sviIty as thcy did ohy bccausc thc bcriahs had arcady cohqucrcd
thc Pmcricas ahd cstabishcd a dircct sca routc to thc Last hdics.
^cvcrthccss, thc gcopoitica ahdscapc crcatcd ih Luropc by thc
bcriah vord-chcircihg spatia Iix cIt ho room Ior thc kihd oI
capitaiststratcgyoIpovcrthathadmadcthcIortuhcsoIthcCchocsc
diasporaihthc` ohg'sixtcchthcchtury.hdccd,thcLutchsuccccdcd
ih carvihg out oI thc bcriah scaborhc ahd tcrritoria cmpircs thc
Pmstcrdam-cchtcrcd systcmoIcommcrciachtrcpotsahdoiht-stock
53 Ehrenberg is quoted in Peter Kriedte, Peasants, Landlords, and Merchant
Capitalists: Europe and the World Economy, 1500-1800 (Cambridge, Cambridge
University Press, 1983) , p. 47, and de Figueroa in ]. H. " Elliott, The Old World and the
New 1492-1650 (Cambridge, Cambridge University Press, 1970), p. 96. For details on
the Genoese-Iberian cycle, see Arrighi, Long Twentieth Century, pp. 109-32, 145-51 .
`

chartcrcd compahcs that bccamc thc Iouhdatioh oI thc sccohd
systcmic cycc oIaccumuatioh prcciscy by doihg vhatthc Cchocsc
had hot bcch doihg, that is, by bccomihg scI-suIIicicht ih var- ahd
k `" statc-ma hg.
VioctBarbour has caimcdthatthis Pmstcrdam-cchtcrcd systcm
vas thc ast ihstahcc oI àvcritabccmpirc oItradcahdcrcdit . . .
hcdby acityihhcrovhright, uhsustaihcdbythcIorccs oIamodcrh
statc.
, ,
`` bihcc thc Lhitcd rovihccs combihcd Icaturcs oI thc dis-
appcarihg city-statcs viththoscoIthcrisihghatioha statcs, vhcthcr
itquaiIicsasa `modcrh statc' is acohtrovcrsiaissuc.Butvhichcvcr
Icaturcs ohc may vahtto cmphasizc, thc Lutch cycc docs appcarto
havc bcch thc vatcrshcd bctvcch tvo distihct agcs oI historica
capitaism. thc agc oI thc city oh thc ohc sidc, ahd that oI thc
tcrritoria statc ahd thc hatioha ccohomy oh thc othcr.
PtthchcartoIaLuropc svochvrthsucccssahdtchdrhg,by thc
chd oI thc crghtcchth cchtury, to cmbracc thc vhoc vord, the
dominant central zone had to grow in size to balance the entire
structure. Citrcs stahdrhg aohc, or amost aohc, by hov ackcd
suIIicrcht purchasc ohthc hcrghborrhg ccohomrcs Iromvhrchthcy
drcv strchgth, soh thcyvoudho ohgcr mcasurcup to thc task.
1hc tcrritorra statcs voud takc ovcr.`
c sha dca atcr vith thc issuc oI vhy thc cchtra zohc had to
`grov ih sizc' so as `to baahccthc chtirc structurc. '!or hov ctus
hotcthatthccmcrgchccoItcrritoriastatcs asthccadihgagchcicsoI
capitaistcxpahsioh brought about a Iar grcatcr ihtcrpchctratioh oI
capitaismahdrmpcriaismthahhad hithcrto bcch thc casc. Pthough
thc Iortuhcs oIthc Cchocsc capitaist diaspora had bcch toroughIy
dcpchdcht oh thc var-makihg ahd cmpirc-buidihg activitics oI its
bcriah parthcrs, thc diaspora itscI abstaihcd compctcy Irom such
activitics. Cchocsccapitaism ahd bcriah impcriaism sustaihcd cach
othcrbutthrougharcatiohshipoIpoiticacxchahgcthatrcproduccd
thcir scparatc orgahizatioha idchtitics Irom bcgihhihg to chd. hic
hosuchscparatiohcxistcdihthcLutch cycc, thccighty-ycarstruggc
Ior ihdcpchdchcc that thc Lhitcd rovihccs vagcd agaihst impcria
54 Arrighi, Long Twentieth Century, pp. 36-47, 127-51; Arrighi and Silver,
Chaos and Governance, pp. 39-41, 99-109.
55 Violet Barbour, Capitalism in Amsterdam in the Seventeenth Century
(Baltimore, MD, Johns Hopkins University Press, 1950) , p. 13.
56 Braudel, Civilization and Capitalism, 15th-18th Century, Volume 3, p. 175,
emphasis added.
`
bpaih chdovcd Lutch capitaism vith a ohg-astihg ahti-impcriaist

idchtity. Lvch aItcr that struggc had comc to ah chd, ctcr dc a
Courtcoudportray oahd as a `cat' ih a uhgc oI`vidbcasts. '
!hcvidbcasts vcrcthctcrritoria statcsoILuropc. `Liohs,!ygcrs,
ovcs, !oxcs, Bcars, or ahy othcrBcastoIrcy, vhichoItchpcrish
by thcir ovh btrchgth, ahd arc takch vhcrc thcy ic ih vait Ior
othcrs. ' P cat docs rcscmbc a ioh. But oahd vas ahd voud
rcmaih a cat bccausc `vc vho arc haturay ^crchahts, cahhot bc
turhcdihtoboudicrs' ahd`thcrcismorcto bcgottchbyus ihatimc
oIcacc ahd good!radihg, thah by ar, ahd thc ruih oI !radc.
,,
`
h rcaity, thc Lutch systcm oI accumuatioh, vhich voud ihdccd
havc bchcIitcdmorcIrompcacc thahIromvaraItcrcstphaia,had
bcch prcviousy buit through var ahd thc ruih oI bcriah tradc.
ôrcovcr, ih thc hoh-Luropcah vord, cspcciay ih thc hdohcsiah
archipcago,thc`catoIoahd'vassccohdtohohcoIthcLuropcah
`bcastsoIprcy'ihthcuscoIviochcctodcstroycxistihgahdscapcsoI
tradc ahdproductiohih ordcrto crcatcahdscapcsmorcIavorabcto
thc chdcss accumuatioh oI Lutch capita. Lc a Court's mctaphor
docs hohcthccss drav a distihctioh bctvcch thc impcriaism oI thc
argcrtcrritoriastatcsoILuropcahdthccapitaismoIthctcrritoriay
parsimohious Lutch Kcpubic that rcmaihcd disccrhibc throughout
thcLutch cycc. !orthcstratcgyoIpovcroIthc LutchKcpubic vas
primariybascd,hotohthccxpahsiohoIitstcrritoriadomaihs,butoh
thccxpahsiohoIits cohtro ovcr mohcy capita ahdthc ihtcrhatioha
crcdit systcm. Combihihg thc strchgths oI thc Vchctiah ahd Cchocsc
stratcgics,itrcicdohmohcyahdcrcditasthckcymcahsbyvhichthc
struggcs amohg thc tcrritoria statcs oILuropc vcrc turhcdihto ah
chgihc oIthcscI-cxpahsiohoILutch capita. Cvcrtimc, hovcvcr,thc
cscaatioh oI thcsc struggcs uhdcrmihcd thc succcss oI thc Lutch
stratcgy, ahd simutahcousy crcatcd thc cohditiohs oI a compctc
Iusioh oIcapita ismahdimpcriaismihthcpracticcsoIthcstatcthat
cvchtuaycmcrgcd as thc hcv cadcroIcapitaistcxpahsioh.`
h ordcr to gaih somc ihsight ihto thc rcasohs Ior this Iusioh vc
must rcturh to Braudc ' s cohtchtioh that thc tcrritoria scac oI thc
domihahtcchtcroIthc systcmoIaccumuatiohhadsomchovtogrov
ih stcp vith thc ihcrcasc ih thc spatia scac oI thc systcm. Braudc
himscIsuggcststhatohcoIthcmaihrcasohsvhythcsmatcrritoria
57 Quoted in Peter Taylor, "Ten Years that Shook the World? The United
Provinces as First Hegemonic State," Sociological Perspectives, 37, 1 (1994), pp. 36,
38.
58 Arrighi, Long Twentieth Century, pp. 144-58; Arrighi and Silver, Chaos and
Governance, pp. 48-51.
`
` ADAM SMITH IN BEIJING

scac oI oahd bccamc a hahdicap ih hodihg thc cchtcr oI thc
gobaizihgLuropcah systcmoI accumuatioh vas a structura short-
agc oI abor. òahd,' hc caims, `coud ohy IuIi hcr roc as
Ircightcr oIthchigh scas iIshc coud obtaihthc hcccssary cxtraabor
IromamohgthcvrctchcdoILuropc. 'tvasthcpovcrtyoIthcrcstoI
Luropc that `chabcd thc Lutch to `sct up' thcir Kcpubic. '` But
ohcc ah ihcrcasihg humbcr oI Luropcah statcs sought to ihtcrhaizc
vithih thcir ovh domaihs thc sourccs oI Lutch vcath ahd povcr
through ohc variaht or ahothcr oI mcrcahtiism ahd impcriaism,
compctitiohovcrLuropcahaborrcsourccsihtchsiIicdahdthcsizc oI
thc Lutch Kcpubic turhcd ihto ah ihcrcasihgy ihsurmouhtabc
hahdicap. Ps btavorihus amchtcd,
cvcrsihccthcycarI7+0,thcmahyhavavars,thcgrcatihcrcascoI
tradc ahd havigatioh, particuary ih mahy couhtrics, vhcrc Ior-
mcry thcsc pursuits vcrc ittc attchdcd to, ahd thc cohscqucht
grcat ahd cohtihua dcmahds Ior abc scamch, both Ior ships oI
var ahd Ior mcrchahtmch, havc so cohsidcraby dimihishcd thc
suppy oI thcm, that, ih our ovh couhtry, vhcrc thcrc Iormcry
uscd to bc a grcat abuhdahcc oI marihcrs, it is hov, vith grcat
diIIicuty ahd cxpchsc, that ahy vcssc cah procurc a propcr
humbcr oI abc hahds to havigatc hcr.
ôr coud thc Lutch compctc vith argcr tcrritoria statcs ih scttihg
coohics, simpy bccausc too Icv Lutchmch vcrc avaiabc Ior thc
purposc.Psarcsut,ihôrthPmcrica most oIthc coohiapopuatioh
ahd hcary a oI thc vc-to-do mcrchaht, pahtcr, ahd proIcssioha
casscsvcrcoIBritishorigih,accustomcdtomahuIacturcsIromBritish
sourccs ahd sacs throughBritishIactors. Lhgishports thus bcgahto
chachgc ahd thch tooutdoPmstcrdam' schtrcpottradc. ôrcovcr,
vhicLutchihdustricsahguishcd,Lhgishihdustricscxpahdcdrapidy
uhdcr thcj oiht impact oIPtahtic tradc ahdihcrcasihg govcrhmchta
protcctioh.'British succcss ihout-compctihgthc Lutch,bothihovcr-
59 Braude!, Civilization and Capitalism, 15th-18th Century, Volume 3, pp, 192-
3,
60 Quoted in Charles R, Boxer, The Dutch Seaborne Empire 1 600-1800 (New
York, Knopf, 1965), p, 109,
61 Ibid" p, 109; Ralph Davis, "The Rise of Protection in England, 1689-1786,"
Economic History Review, 2nd series, 19 ( 1966), p, 307, and "English Foreign Trade,
1700-1774," in WE Minchinton, ed" The Growth of English Overseas Trade in the
Seventeenth and Eighteenth Centuries (London, Methuen, 1969), p, 115; Minchinton,
Growth of English Overseas Trade, p, 13,
`
i
scas commcrcia cxpahsioh ahd domcstic ihdustriacxpahsioh,gradu-
ayrcduccdPmstcrdam'ssharcoIchtrcpottradc.Butthcdcathbovto
LutchcommcrciasuprcmacycamcIromthcsprcadoImcrcahtiismto
thc Batic rcgioh ahdthccohscqucht disruptioh oIvhat had a aohg
bcchthc `mothcrtradc' oILutchcapitaism.
`
The Fusion of Capitalism and Imperialism
tvasihthiscohtcxtthatthcLhitcdKihgdomcmcrgcdasthchcvcadcr
oIthcchdcss accumuatioh oIcapita ahdpovcrthrougha compctc
Iusioh oI capitaism ahd impcriaism. Chcc Lohdoh had dispaccd
Pmstcrdamas thcIihahcia cchtcroIthcgobaizihgLuropcah systcm
oIstatcs, asitdidbythcl780s,thcLhitcdKihgdombccamcthcmaih
bchcIiciaryoIihtcrstatccompctitiohIormobiccapita.hthisrcspcct,it
bccamcthchciroIthccapitaisttraditioh ihitiatcdbythcCchocscihthc
òhg' sixtcchth cchtury ahd dcvcopcd Iurthcr by thc Lutch ih thc
òhg' scvchtcchth cchtury. h othcr rcspccts, hovcvcr, thc Lhitcd
Kihgdom vas aso thchciroIthcimpcriaisttraditiohihitiatcdbythc
bcriah parthcrs oIthc Cchocsc-a traditiohvhich thc àhti-impcri-
aism' oIthc Lutch ahd thc stabiizatioh oIthc Luropcah baahcc oI
povcratcstphaia hadrcvcrscdohytcmporariy ahdpartiay.`
!his pccuiar Iusioh oI capitaism ahd impcriaism providcd thc
chdcss accumuatioh oI capita ahd povcr vith a spatia ahd
orgahizatioha Iix that diIIcrcd Irom that oI thc Lutch cycc ih
kcy rcspccts. Ccopoiticay, thc systcm oI statcs cstabishcd at
cstphaia uhdcr Lutch cadcrship vas truy aharchic-charactcr-
izcd, that is, by thc abschcc oI cchtra ruc. !hc ihtcrstatc systcm
rccohstitutcd aItcr thc âpocohic ars uhdcr British cadcrship, ih
cohtrast, vas ohc ih vhich thc Luropcah baahcc oI povcr vas
trahsIormcd, Ior a vhic at cast, ihto ah ihstrumcht oI ihIorma
62 "The basic reason for the decisive decline of the Dutch world-trading system
in the 1720s and 1730s was the wave of new-style industrial mercantilism which swept
practically the entire continent from around 1720, , , , Down to 1720 countries such
as Prussia, Russia, Sweden, and Denmark-Norway had lacked the means and, with
the Great Northern War in progress, the opportunity, to emulate the aggressive
mercantilism of England and France, But in the years around 1720 a heightened sense
of competition among the northern powers, combined with the diffusion of new
technology and skills, often Dutch or Huguenot in origin, led to a dramatic change,
Within the next two decades most of northern Europe was incorporated into a
framework of systematic industrial mercantilist policy" (Jonathan Israel, Dutch
Primacy in World Trade, 1585-1740 [Oxford, Clarendon Press, 1989], pp. 383-4) ,
63 See Arrighi, Long Twentieth Century, pp, 47-58, 159-69,
Britishruc. avihggaihcdmastcryovcrthc baahcc oIpovcr durihg
thc vars, thc British took a humbcr oI stcps to chsurc that it voud
rcmaihihthcirhahds.hicrcassurihgthcabsoutistgovcrhmchtsoI
CohtihchtaLuropcorgahizcdihthcoyPiahccthatchahgcsihthc
baahccoIpovcr voud comc about ohythroughcohsutatiohihthc
hcvy cstabishcd Cohccrt oI Luropc, thcy crcatcd tvo couhtcr-
vcights tothcir povcr. h Luropc, thcy rcqucstcd ahd obtaihcd that
dcIcatcd !rahcc bc ihcudcd amohg thc Crcat ovcrs, abcit hcd ih
chcck by bcihgrahkcdvithsccohd-ticrpovcrs.hthcPmcricas,thcy
couhtcrcd thc oy Piahcc' s dcsighs to rcstorc coohia ruc by
asscrtihgthc prihcipc oIhoh-ihtcrvchtioh ih Latih Pmcrica ahd by
invitingthcUnitcd btatcs tosupportthcprincipc. hat atcr bccamc
thc ôhroc doctrihc-thc idca that Luropc shoud hot ihtcrvchc ih
Pmcricah aIIairs-vasihitiay a British poicy.
Bypursuihgits hatioha ihtcrcstihthc prcscrvatioh ahdcohsoida-
tioh oIa Iragmchtcd ahd `baahccd'povcrstructurcih Cohtihchta
Luropc, Britaih Iostcrcd thc pcrccptioh that its ovcrvhcmihg vord
povcr vas bcihg cxcrciscd ih thc gchcra ihtcrcst-thc ihtcrcst oI
Iormcr chcmicsasvcasoIIormcraics,oIthchcvrcpubics oIthc
Pmcricas asvc as oIthc od moharchics oILuropc. !hispcrccptioh
vas cohsoidatcd by Britaih's unilateral ibcraizatioh oI its tradc,
vhichculminatcd in thcrcpcal oIthc Corn Lavs in 1848 and oIthc
âvigatioh Pcts ih 1849. vcr thc Ioovihg tvchty ycars, cosc to
ohc-thirdoIthc cxports oIthcrcst oIthc vord vchtto Britaih. !hc
Lhitcd btatcs, vithamost25 pcrcchtoIa imports ahd cxports, vas
Britaih's sihgc argcst tradihg parthcr, vhic Luropcah couhtrics
accouhtcd Ior ahothcr 25 pcrccht. !hrough this poicy, Britaih
chcapchcd thc domcstic costs oI vita suppics ahd at thc samc timc
providcd thc mcahs oI paymcht Ior othcr couhtrics to buy its
mahuIacturcs. t aso drcv much oI thc cstcrh vord ihto its
tradihg orbit, Iostcrihg ihtcrstatc coopcratioh ahd sccurihg ov
protcctioh costs Ior its ovcrscas tradc ahdtcrritoria cmpirc.
`
64 See Polanyi, Great Transformation, pp. 5-7, 259-62; Da vid Weigall, Britain and
the World, 1815-1986: A Dictionary of International Relations (New York, Batsford,
1987), pp. 58, 111; Henry Kissinger, A World Restored: Europe after Napoleon. The
Politics of Conservation in a Revolutionary Age (New York, Grosset & Dunlap, 1964),
pp. 38-9; Alonso Aguilar, Pan-Americanism from Monroe to the Present: A View from
the Other Side (New York, Monthly Review Press, 1968) , pp. 23-5.
65 Michael Barrat Brown, After Imperialism (London, Heinemann, 1963) , p. 63;
Paul Kennedy, The Rise and Fall of British Naval Mastery (London, Scribner, 1976),
pp. 156-64, 149-50; Joseph s. Nye, Bound to Lead: The Changing Nature of
American Power (New York, Basic Books, 1990), p. 53.
+
Pso ih this rcspcct, thc LK-cchtcrcd systcm oI accumuatioh
diIIcrcd radicay Irom its Lutch prcdcccssor. h both systcms, thc
mctropoitah tcrritorics oIthc cadihg capitaist statc paycd thc roc
oI cchtra chtrcpot. But sooh aItcr thc Lutch systcm had bccomc
prcdomihaht,itbcgahtobcchachgcdbythcaggrcssivcmcrcahtiism
oI both Britaih ahd !rancc. !hc British systcm, ih cohtrast, coud
cohsoidatcIurthcrthroughthc ohgcstpcacc ihLuropcah history
oahyi's uhdrcd \cars' cacc ( 1815-1914) . British mastcry oI thc
Luropcah baahcc oI povcr ahd cchtraity ih vord tradc vcrc
mutuay rcihIorcihg cohditiohs oIthis ohg pcacc. !hcIirst rcduccd
thc chahccs that ahy statc voud havc thc capabiitics to chachgc
British commcrcia suprcmacy in thc samc vay thc British had
chachgcd Lutch suprcmacy aItcrcstphaia. !hc sccohd `cagcd'
a grovihg humbcr oI tcrritoria statcs ih a goba divisioh oI abor
that strchgthchcd cach ohc`s ihtcrcst ih prcscrvihg thc LK-cchtcrcd
systcm. Phd thc morc gchcra this ihtcrcst bccamc, thc casicr it vas
Ior Britaih to mahipuatc thc baahcc oI povcr to prcvcht thc
cmcrgchcc oI chachgcs to its commcrcia suprcmacy.
!his combihatioh oI circumstahccs dcpchdcdcriticay oh a third
diIIcrchccbctvcchthcBritishahdLutch systcms.hcrcasthcLutch
chtrcpot vas primariy a commcrcia ohc, thc British chtrcpot vas
alsoindustrialthc 'vorkshop oIthcvorld. 'Lnglandhadlongbccn
ohc oI thc maih ihdustria cchtcrs oILuropc. But it vas ohy ihthc
coursc oI thc cightcchth cchtury that thc cxpahsioh oI Lhgahd's
chtrcpot tradc ahd massivc govcrhmchta cxpchditurc durihg thc
âpocohicars turhcdBritishihdustria capabiitics ihto ah cIIcc-
tivc ihstrumchtoIhatioha aggrahdizcmcht.!hc âpocohicars,
ih particuar, cohstitutcd a dccisivc turhihg poiht. h ^c^ci's
vords,
govcrhmcht dcmahd crcatcd a prccocious iroh ihdustry, vith a
capacity i cxccss oI pacctimc hccds as thc postvar dcprcssioh
1816-20 shovcd. But it aso crcatcd thc cohditioh Ior Iuturc
grovth by givihg British irohmastcrs cxtraordihary ihcchtivcs
Ior Iihdihg hcv uscs Ior thc chcapcr product thcir hcv, argc-
scac Iurhaccs vcrc abc to turh out. îitary dcmahds oh thc
British ccohomy thus vcht Iar to shapc thc subscqucht phascs oI
thc ihdustria rcvoutioh, aovihg thc improvcmcht oI stcam
chgihcs ahd makihg such critica ihhovatiohs as thc iroh raivay
ahdirohshippossibcat atimcahduhdcrcohditiohsvhichsimpy
66 Arrighi, Long Twentieth Century, ch. 3.
244
voud hot havc cxistcd vithout thc vartimc impctus to iroh
d

pro uctioh.
h thc coursc oI thc hihctcchth cchtury, raivays ahd stcamships
Iorgcdthc gobcihto a sihgcihtcractihg ccohomy ashcvcrbcIorc. h
l8+8, thcrc vas hothihg rcscmbihg a raivay hctvork outsidc
Britaih. Cvcr thc hcxt thirty ycars or so, hotcs Lric obsbavm,
`thc mostrcmotcpartsoIthcvord bcgah| tobcihkcdtogcthcrby
mcahs oIcommuhicatiohvhichhad ho prcccdchtIorrcguarity,Ior
thc capacity to trahsport vast quahtitics oI goods ahd humbcrs oI
pcopc, ahd abovc a, Ior spccd. ' Ps this systcm oI trahsport ahd
commuhicatioh took shapc, vord tradc cxpahdcd at uhprcccdchtcd
ratcs. !rom thc mid l8+0s to thc mid l870s, thc voumc oIscaborhc
mcrchahdisc bctvcch thc maor Luropcah statcs morc thah quad-
rupcd, vhic thc vauc oI thc cxcahgcs bctvcch Britaih ahd thc
Cttomah cmpirc, Latih Pmcrica, hdia, ahd Pustra asia ihcrcascd
about sixIod. Lvchtuay, this cxpahsioh oI vord tradc ihtchsiIicd
ihtcrstatc compctitioh ahd rivarics. Butihthc middc dccadcs oIthc
cchtury thc advahtagcs oIhookihg up to thc British chtrcpot so as to
drav upohits cquipmchtahdrcsourccsvcrc too grcatto bcviihgy
Iorgohc by ahyLuropcah statc.
Lhikcthcscvchtcchth-cchturyLutchvord-tradihgsystcm,vhich
vas avays a purcy mcrcahtic ohc, thc hihctcchth-cchtury British
vord-tradihg systcm thus bccamc aso ah ihtcgratcd systcm oI
mcchahizcd trahsport ahd productioh. Britaih vas both thc chicI
orgahizcr ahd thc chicI bchcIiciary oI this systcm, vithih vhich it
pcrIormcdthcdoubcIuhctiohoIcchtraccarihghouscahdrcguator.
hic thc Iuhctioh oI cchtra ccarihghousc vas ihscparabc Irom
Britaih's roc as thc vorkshop oI thc vord, thc Iuhctioh oIcchtra
rcguator vas ihscparabcIrom its roc asthc cadihg cmpirc-buidcr
ih thc hoh-Luropcah vord. !o rcturh to dc a Court's mctaphor,
uhikc oahd, vhich vas ahd rcmaihcd a `cat,' Britaih vas ahd
rcmaihcdatcrritoria `bcastoIprcy' vhosccohvcrsiohtocapitaism
ohy vhcttcd its appctitc Ior tcrriroria cxpahsioh. Ps prcviousy
hotcd, thc puhdcr oI hdia chabcd Britaih to buy back its hatioha
67 William McNeill, The Pursuit of Power: Technology, Armed Force, and
Society since A. D. 1 000 (Chicago, University of Chicago Press, 1982), pp. 211-12.
See also Leland H. Jenks, The Migration of British Capital to 1875 (New York and
London, Knopf, 1938), pp. 133-4, and Eric J. Hobsbawm, Industry and Empire: An
Economic History of Britain since 1750 (London, Weidenfeld & Nicolson, 1968), p. 34.
68 Eric J. Hobsbawm, The Age of Capital 1848-1875 (New York, New
American Library, 1979), pp. 37-9, 50-4.
dcbt Irom thc Lutch ahd to start thc âpocohic ars hcary Ircc
Irom Iorcigh dcbt. tthcrcby Iaciitatcd thc sixIod ihcrcascihBritish
pubic cxpchditurc ih l792-l8l to vhich ^c^ci attributcs a
dccisivc roc ih shapihg thc capita-goods phasc oI thc hdustria
Kcvoutioh. ôrc importaht, itihitiatcdthcproccss oIcohqucstoIa
tcrritoria cmpirc ih bouth Psia that vas to bccomc thc prihcipa
piar oI Britaih's goba povcr.
!hc uhIodihg oI this proccss oI tcrritoria cohqucst has bcch
dctaicd cscvhcrc.
crc, sha simpy mchtioh thc tvo maih

aspccts oI its rcatiohship to thc chargcd rcproductioh oI British
povcr, ohcdcmographicahdohcIihahcia. hdia'shugcdcmographic
rcsourccs buttrcsscd British vord povcr both commcrciay ahd
miitariy. Commcrciay, hdiah vorkcrs vcrc Iorciby trahsIormcd
Irom maor compctitors oI Luropcah tcxtic ihdustrics ihto maor
produccrs oIchcapIoodahdrav matcrias IorLuropc. îitariy, as
arcadymchtiohcdihChaptcr, hdiahmahpovcrvasorgahizcdiha
Luropcah-styccoohia army, Iuhdcd chtircy bythc hdiahtaxpaycr,
ahd uscd throughout thc hihctcchth cchtury ih thc chdcss scrics oI
vars through vhich Britaih opchcd up Psia ahd PIricato cstcrh
tradc ahd ihvcstmcht. PsIor thc Iihahcia aspcct, thc dcvauatioh oI
thchdiahcurrchcy,thcim positiohoIthcihIamousomcChargcs
through vhich hdia vas madc to pay Ior thc privicgc oI bcihg
piagcd ahdcxpoitcdbyBritaih-ahdthcBahkoILhgahd'scohtro
ovcr hdia's Iorcigh-cxchahgc rcscrvcs, oihty turhcd hdia ihto thc
`pivot' oIBritaih's vord-Iihahcia ahd commcrcia suprcmacy.
Lhdcr British cadcrship, thc chdcss accumuatioh oI capita ahd
povcr thus camc to bc cmbcddcdih a spatia Iix oI grcatcr scac ahd
scopcthahihthcCchocsc-bcriahahdLutchcyclcs. But, Iorthat vcry
rcasoh,itcvchtuayrcsutcdihaIarmorcmassivcovcr-accumuatioh
oIcapita. Psihthc caricr cyccs, thc ihcumbchtcchtcrvasihitiay
bcstpositiohcdtotakcadvahtagcoIthcihtchsiIicatiohoIcompctitioh
that sighacd thc chahgc oI phasc Irom matcria to Iihahcia cxpah-
69 Arrighi and Silver, Chaos and Governance, pp. 106-14, 223-46.
70 On these and other aspects of tribute extraction from India, see Michael
Barrat Brown, The Economics of Imperialism (Harmondsworth, Penguin, 1974), pp.
133-6; B.R. Tomlinson, "India and the British Empire, 1880-1935," The Indian
Economic and Social History Review, 12, 4 ( 1975) ; Marcello de Cecco, The Inter
national Gold Standard: Money and Empire, 2nd edn (New York, St Martin's Press,
1984), pp. 62-3; David Washbrook, "South Asia, the World System, and World
Capitalism," The Journal of Asian Studies, 49, 3 (1990), p. 481; Amiya K. Bagchi,
Perilous Passage: Mankind and the Global Ascendancy of Capital (Lantham, MD,
Rowman & Littlefield, 2005), pp. 145-7, 239-43.
z

sioh. !hc chsuihg Ldvardiah belle epoque
,
hovcvcr, vas but a
prcambc to ah cscaatioh oI ihtcrstatc cohIicts that ohcc agaih
rcvoutiohizcd thc historica gcography oI vord capitaism. !hc
ahaogous `rcvoutioh' oI thc atc cightcchth ahd cary hihctcchth
cchturics had cimihatcd Irom thc struggc Ior capitaist cadcrship
proto-hatiohastatcsikcthcLhitcdrovihccs. hthc `rcvoutioh' oI
thcIirsthaIoIthctvchticthcchtury, it vasthcturhoIthchatioha
statcs thcmscvcs to bc squcczcd out oI thc struggc uhcss thcy
cohtrocd ihtcgratcd agricutura-ihdustria-miitary compcxcs oI
cohtihchta scac.
`Britaih' s hcv ihsccurity ahd grovihg miitarism ahd jihgoism
tovardsthcchdoIthchihctcchthcchtury| , 'hotcsPhdrcvCambc,
àrosc bccausc thc vord sccmcd suddchy Iicd vith ihdustria
povcrs, vhosc mctropoitah bascs ih tcrms oI rcsourccs ahd mah-
povcr ahdihdustriaproductiohvcrcpotchtiay muchmorcpovcr-
Iu thah Britaih's.
, ,
' !hc rapid ihdustriaizatioh oI thc uhiIicd
Ccrmahy aItcr l870vasparticuaryupscttihgIorthcBritish,bccausc
itcrcatcdthccohditiohsIorthcriscoIaahdpovcrihLuropccapabc
oI aspirihg to cohtihchta suprcmacy ahd oI chachgihg Britaih' s
maritimc ruc. Lurihg thc !irst ord ar, Britaih ahd its aics
succccdcd ih cohtaihihg Ccrmahy, ahd Britaincvch ihcrcascd thc
rcachoIits ovcrscastcrritoria cmpirc. ButthcIihahcia costsoIthcsc
miitary-poitica succcsscs dcstroycd Britaih's capacity to hod thc
cchtcr oI vord capitaism.
Lurihg thc var, Britath did cohtihuc to Iuhctioh as prihcipa
bahkcr ahd oah-raiscr oh thc vord's crcdit markcts, hot just Ior
itscI, but aso by guarantccihg oahs to Kussia, tay, ahd !rahcc.
!his ookcd ikc a rcpctitioh oI Britaih's cightccnth-cchtury roc as
`bahkcr oIthccoaitioh. '!hcrcvas hohcthccss ohc critica diIIcr-
chcc. thc hugc tradc dcIicit vith thc Lhitcd btatcs, vhich vas
suppyihg biiohs oI doars' vorth oI muhitiohs ahd IoodstuIIs to
thc Pics but rcquircdIcvgoods ih rcturh. `^cithcr thctrahsIcroI
god hor thc sac oIBritaih's chormous doar sccuritics coud cosc
this gap, ohy borrovihg oh thc ^cv \ork ahd Chicago mohcy
markcts, to pay thc Pmcricah muhitiohs suppicrs ih doars, voud
do thctrick. 'hchBritaih'scrcditapproachcdcxhaustioh,thcLb
thrcv its ccohomic ahd miitary vcight ihto thc struggc, titihg thc
baahcctoits dcbtors' advahtagc. âstcry ovcrthcLuropcahbaahcc
oI povcr had shiItcd dccisivcy Irom British to Lb hahds . !hc
71 Andrew Gamble, Britain in Decline (London, Macmillan, 1985) , p. 58.
72 Kennedy, Rise and Fall of the Great Powers, p. 268.
ihsuarity that thc Lhgish Chahhc ho ohgcrprovidcd, thc Ptahtic

sti did. ôrc importaht, as ihhovatiohs ih mcahs oI trahsport ahd
commuhicatiohs cohtihucd to ovcrcomc spatia barricrs, Pmcrica's
rcmotchcss bccamc css oI a disadvahtagc commcrciay ahd miita-
riy. `hdccd, as thcaciIicbcgahtocmcrgcas ariva ccohomiczohc
tothcPtahtic,thcLbP'spositiohbccamccchtra-acohtihcht-sizcd
isahd vithuhimitcd acccss to both oIthc vord's major occahs.
, ,
`
!his `cohtihcht-sizcd isahd' had ohg bcch m thc makihg. t vas
thc spatia product oI thc cchtury-ohg proccss oI tcrritoria scizurc
ahd occupatioh through vhich thc Lhitcd btatcs had ìhtcrhaizcd'
impcriaism Irom thc vcry bcgihhihg oI its history. `Pmcricah
historiahs vho spcak compacchty oIthc abschcc oIthc scttcr-typc
coohiaismcharactcristic oIthcLuropcahpovcrs mcrcy cohcca thc
Iact that thc vhoc internal history oILhitcd btatcs impcriaismvas
ohcvastproccss oItcrritoria scizurc ahd occupatioh. !hc abschcc oI
tcrritoriaism ` abroad' vas Iouhdcd oh ah uhprcccdchtcd tcrritori-
aism 'at homc. '
, ,
Ps Cydc Barrov poihts out ih summihg up
Charcs Bcard's accouht oIthis ihtcrha impcriaism.
!hc vcstvard migratioh brought humah carhagc ahd chviroh-
mchta dcstructioh oh a massivc scac as Pmcricah scttcrs movcd
across succcssivc Irohticrs ikc ocusts, vho stoppcd ohy ohg
chough to piagc thc ahd ahd to rcmovc, ki, or margihaizc thc
hativc ihhabitahts. hdccd, oh thc cvc oI ord ar , Bcard
ccturcd studcht paciIists ih his casscs that ìt vas ah iusioh to
thihk oI Pmcricahs as a paciIic pcopc, thcy arc ahd avays havc
bcch ohc oI thc most viocht pcopcs ih history.
,,
`
Ithc cohtihcht-sizcdLb ìsahd'vascrcatcdthroughmassivchumah
ahd chvirohmchta dcstructioh, it vas thc trahsport rcvoutioh ahd
ihdustriaizatioh oIvar oI thc sccohd haI oI thc hihctcchth cchtury
thatturhcditihtoapovcrIu agricutura-ihdustria-miitary compcx
vithdccisivc compctitivc ahd stratcgic advahtagcs vis-a-vis Luropcah
73 Joshua S. Goldstein and David P. Rapkin, "After Insularity: Hegemony and
the Future World Order," Futures, 23 ( 1991) , p. 946.
74 Gareth Stedman Jones, "The History of US Imperialism," in R. Blackburn,
ed., Ideology in Social Science (New York, Vintage, 1972), pp. 216-17, emphasis in the
original. See also John Agnew, The United States in the World-Economy: A Regional
Geography (Cambridge, Cambridge University Press, 1987) .
75 Clyde W. Barrow, "God, Money, and the State: The Spirits of American
Empire," Forschungsgruppe Europiische Gemeinschaften, Arbeitspapier 22, Univer
sitit Marburg.
`

statcs. !o bc surc, Britaih's vord-chcompassihg tcrritoria cmpirc
cohtaihcdcvchgrcatcrrcsourccsthahthcLhitcdbtatcs. ^cvcrthccss,
thcgobadispcrsiohahdvcakmutuaihtcgratiohoIBritaih'scoohia
domaihs-ih cohtrast vith thc rcgioha cohcchtratioh ahd strohg
mutua ihtcgratioh, both poitica ahd ccohomic, oI thc tcrritoria
domaihs oIthc Lhitcdbtatcs-vas a crucia diIIcrchccih thc spatia
cohIiguratioh oIthccadihg capitaist statcs oIthc òhg' hihctcchth
ahd tvchticth cchturics rcspcctivcy. Ps hotcd caricr, Britaih's Iar-
Iuhg cmpirc vas ah csschtia ihgrcdicht ih thc Iormatioh ahd coh-
soidatioh oIthcLK-cchtcrcdsystcmoIaccumuatioh. Butas soohas
ihtcrstatc compctitioh Ior ìvihg spacc' ihtchsiIicduhdcrthc impact
oI thc trahsport rcvoutioh ahd thc ihdustriaizatioh oI var, thc
protcctioh costs oIBritaih's mctropoitahahdovcrscasdomaihsbcgah
to cscaatc, ahd its impcria posscssiohs turhcd Irom asscts ihto
iabiitics.Ptthcsamctimc,thcovcrcomihgoIspatiabarricrsbrought
about by thcsc samc tvo phchomcha turhcd thc cohtihchta sizc,
compacthcss, ihsuarity, ahd dircct acccss to thc vord's tvo maor
occahs oI thc Lhitcdbtatcs ihto dccisivc stratcgic advahtagcs ih thc
I
_
g
cscaatmg mtcrstatc povcr strug c.
Lhsurprisihgy, thc struggc chdcdviththc arriva oIthc bipoar
vord so oItch Iorccast ih thc hihctcchth ahd cary tvchticth cch-
turics . `thcihtcrhatiohaordcr. . . hov movcd 'Iromohc systcm to
ahothcr. ' ChythcLhitcdbtatcsahdthcLbbKcouhtcd. . . ahdoIthc
tvo, thcPmcricah ' supcrpovcr' vasvasty supcrior.

Ps !homas
^cCormick has uhdcrscorcd, Lb cadcrs Iought thc bccohd ord
ar `hot simpy to vahquish thcir chcmics, but to crcatc thc
gcopoitica basis Ior a postvar vord ordcr that thcy voud both
bui d ahd cad. ' h thc pursuit oI this ambitious chd, avarchcss oI
Britishprcccdchtsdurihgthc âpocohicarshcpcd. hparticuar,
BritaihchtcrcdthcmaihLuropcah thcatcrohyvhchthcvarhad
rcachcd its Iihal ahd dccisivc stagc. ts dircct miitary prcschcc
actcd to ihhibit any othcr cohtihchta povcr Irom attcmptihg to
takc !rahcc's pacc ih thc cohtihchta povcr structurc ahd rcih-
IorccdthccgitimacyoIBritaih's caimto adomihahtsayih pcacc
hcgotiatiohs. I parac Iashioh, thc Uhitcd btatcs chtcrcd thc
Luropcahthcatcrohyih thc ast ahddctcrmihahtphascoIord
ar . pcratioh vcrord, its ihvasioh oI !rahcc ih juhc l9++,
ahd its pushcastvardihto Ccrmahy simiary rcstraihcd potchtia
76 Arrighi and Silver, Chaos and Governance, pp. 66-84.
77 Kennedy, Rise and Fall of the Great Powers, p. 357.
Kussiah ambitiohs ih thc vcst ahd assurcdPmcrica's scat at thc
hcad oI thc pcacc tabc.
`
!hcsc ahaogics rcIcct thc Iact that, ih both trahsitiohs, mastcry oI

thc baahcc oI povcr ih thc ihtcrstatc systcm vas csschtia to thc
cmpovcrmcht oI thc risihg hcgcmohic statc. But thc spatia ahd
orgahizatioha Iix oI thc chdcss accumuatioh oI capita ahdpovcr
thatcamcihtobcihguhdcrLbhcgcmohycoudhotbcthcsamcasthc
British. thad to rcIcct thc hcv historica gcography oI capitaism
thathadcmcrgcdIrom thcirrcvocabcdcstructiohoIthchihctcchth-
cchtury British spatia Iix. !his hcv historica gcography ay at thc
Iouhdatioh oIthc most ambitious poitica projcct cvcr cohccivcd ih
humahhistory. thc crcatioh oIa vordstatc. !othc risc ahd dcmisc
oIthis projcct vc hov turh.
78 Thomas ]. McCormick, America's Half Century: United States Foreign
Policy in the Cold War (Baltimore, MD, Johns Hopkins University Press, 1989),
pp. 35-5.
9
THE WORLD STATE THAT NEVER WAS
bhortyaItcrthcchdoIthcbccohdordar, LudvigLchioargucd
that cach rouhd oI thc Luropcah povcr struggc had crcatcd thc
cohditiohs oI a gcographica cxpahsioh oI thc Luropcah- cchtcrcd
systcm oI sovcrcigh statcs, oI a `migratioh' oI thc ocus oI povcr
Iurthcr vcst ahdcast, ahdoIahirrcvcrsibc mutatioh ih thcstructurc
oI thc cxpahdihg systcm. Ihdccd, Lchio prcschtcd his study oI thc
mcchahismsthathadrcproduccdthcLuropcah baahcc oIpovcrovcr
thc prcccdihg Iivc cchturics as dcaihg `vith a structurc that has
ccascd to cxist . . . ih a mahhcr oI spcakihg, as thc rcsut oI ah
autopsy. '
1hcbaahcc oIpovcrihthc ccidcht vas prcscrvcd ohy bccausc
hcv couhtcrvcights Irom tcrritorics bcyohd its Irohticrs coud
agaih ahd agaih bc throvh ihto thc scac agaihst Iorccs scckihg
suprcmacy. . . . IhordarI, thcIorccs thathadcItLuropcm
succcssivc cmigratiohs . . . turhcd back tovard thc rcgioh Irom
vhichthcyhadcomc. . . . 1hcodpuraisticsystcmoIsmastatcs
vas compctcy ovcrshadovcdbythc giahtyouhgpovcrsvhichit
had summohcd to its aid. . . . 1hus thc od Iramcvorlthat had
chcompasscdthcLuropcahscchc. . . isbrcakihgup.1hcharrovcr
stagc is osihg its ovcrridihg importahcc as a scttihg Ior a strohg
castoIitsovh,ahdisbcihg absorbcdihtothcbroadcrproscchium.
h both stagcs thc tvo vord giahts arc takihg ovcr thc prota-
gohists' roc. . . . PdividcdsystcmoIstatcsrcvcrtsagaihahdagaih
to a cohditioh oI Iux. But thc od Luropcah tchdchcy tovard
divisioh is hov bcihgthrust asidcbythchcv goba trchd tovard
uhiIicatioh. PhdthcohrushoIthistrchdmayhotcomctorcstuhti
it has asscrtcd itscI throughout our pahct.'
1 Ludwig Dehio, The Precarious Balance: Four Centuries of the European
Power Struggle (New York, Vintage, 1962), pp. 264-6, 269.
THE WORLD STATE THAT NEVER WAS 251
aIa cchturyaItcr this vas vrittch, thc coapsc oIohc oIthc tvo
`vord giahts' ahd thc Iurthcr cchtraizatioh oI goba miitary
capabiitics ih Lb hahds madc thcsc rcmarks souhd prophctic. But
vc bcIorc Lchio poihtcd to thc dcmisc oI `thc od Luropcah
tchdchcy tovard divisioh,' !rahkih L. Kooscvct had arcady ad-
drcsscdthcissuc oIvhatkihdoIpoiticastructurcmightcmcrgcout
oI`thc hcv goba trchdtovarduhiIicatioh. 'Lookihgbackatthirty
ycars oI vord vars, rcvoutiohs, couhtcrrcvoutiohs, ahd thc most
scrious ccohomic brcakdoh ih capitaist history, hc had bccomc
cohvihccdthat vordvidc chaos coud bc ovcrcomc ohy through a
Iuhdamchta rcorgahizatioh oI vord poitics. Cchtra to his visioh
vas thcidcathatsccurityIorthc vordhadtobcbascdohLbpovcr
cxcrciscdthroughihtcrhatioha ihstitutiohs. `But Ior such a schcmc
to havc a broad idcoogica appca to thc suIIcrihg pcopcs oI thc
vord, it had to cmahatc Irom ah ihstitutioh css csotcric thah ah
ihtcrhatioha mohctary systcm ahd css crudc thah a sct oI miitary
aiahccs or bascs.
,,
`
!hc kcy body vas tobcthcLhitcdâtiohs, vith its appca tothc
uhivcrsa dcsirc Ior pcacc ahd thc ohgihg oI poor hatiohs Ior
ihdcpchdchcc ahd cvchtua cquaity vith thc rich hatiohs. ôt vith-
out rcasoh, bchurmahh Iihds thc poitica impicatiohs oIthis visioh
truy rcvoutiohary.
!orthcIirst timc ih vordhistory, thcrc vas a cohcrctc ihstitu-
tiohaizatioh oIthcidcaoIvordgovcrhmcht.hcrcasthcLcaguc
oI âtiohs vas guidcd by ah csschtiay hihctcchth-cchtury spirit
oIacohgrcssoIhatiohs,thcLhitcdâtiohsvasopchyguidcdby
Pmcricah poitica idcas. . . . 1hcrc vas hothihg rcvolutiohary
aboutthckihdoIvordsystcmBritaih crcatcdthroughits cmpirc.
. . . Britaih's truc impcria grcathcss vas ccohomic, hot poitica.
1hcLhitcdâtiohs, hovcvcr, vas ahdrcmaihs a poiticaI idca.
1hc Pmcricah Kcvoutioh had provch that hatiohs coud bc
cohstructcd through thc cohscious ahd dcibcratc actiohs oI
mch. . . . hat Kooscvct had thc audacity to cohccivc ahd
impcmcht vas thc cxtchsioh oI this proccss oI govcrhmcht-
buidihg to thc vord as a vhoc.`
2 Franz Schurmann, The Logic of World Power: An Inquiry into the
Origins, Currents, and Contradictions of World Politics (New York, Pantheon,
1974) , p. 68.
3 Ibid. , p. 71.
252
Kooscvct's visioh oI vord govcrhmcht had both socia obcctivcs
ahd Iisca-Iihahcia impicatiohs. t vas a cohscious procctioh oh a
vord scac oI thc Lb ^cv Lca.
!hccsschcc oIthc ^cv Lcavasthc hotrohthatbrggovcrhmcht
must spchd rbcray rh ordcr to achrcvc sccurrty ahd progrcss.
!hus postvarsccurrty voud rcqurrcrbcraoutays by thc Lhrtcd
Statcs rh ordcr to ovcrcomc thc chaos crcatcd by thc var. Prd to
. . . poor hatrohs vould havc thc samc cIIcct as socra vcIarc
programs vrthrh thc Lhrtcd Statcs-it voud grvc thcm thc
sccurrty to ovcrcomc chaos ahd prcvcht thcm Irom tumrhg rhto
vrocht rcvoutioharrcs. ^cahvhrc, thcy voud bc dravh rhcx-
tricaby rhto thc rcvivcd vorldmarkct systcm. y bcrhg brought
rhto thc gchcra systcm, thcy vould bccomc rcspohsrbc, | ust as
Pmcrrcah uhrohs had durrhg thc var. Icprhg rrtarh ahd thc
rcmarhdcr oI cstcrh Luropc voud rckrhdc ccohomrc grovth,
vhrch voud strmuatc trahsatahtic tradc ahd, thus, hcp thc
Pmcrrcah ccohomy rh thc ohg ruh. Pmcrrca had spcht chormous
sums ruhhrhg up hugc dcIicrts rh ordcr to sustarh thc var cIIort.
!hcrcsuthadbcch astouhdrhgahduhcxpcctcdccohomicgrovth.
ostvar spchdrhgvoudproducc thc samc cIIcct oh a vordvrdc
scac.
Phd so it did, but ohy aItcr Kooscvct's òhc-vordism'-vhich
ihcudcd thc LbbK amohg thc poor hatiohs oI thc vord to bc
ihcorporatcd ihto thc hcv ordcr Ior thc bchcIit ahd sccurity oI
a-bccamc !rumah's Ìrcc-vordism,' vhich turhcd thc cohtaih-
mcht oI bovict povcr ihto thc maih orgahizihg prihcipc oI Lb
hcgcmohy. Kooscvct's rcvoutiohary idca ism-vhich sav ih ihsti-
tutiohs oIvorIdgovcrhmchtthcprimary ihstrumchtthrough vhich
thc ^cv Lca voud bc cxtchdcd to thc vord as a vhoc-vas
dispaccd by thc rcIormist rcaism oI his succcssors vho ihstitutio-
haizcdLbcohtroovcrvordmohcyahdgobamiitarypovcrasthc
primary ihstrumchts oI Lb hcgcmohy. `
!or Kooscvct's procct vas simpy too idcaistic Ior thc tastcs oI
Cohgrcss ahd Lb busihcss. !hc vordvas too big ahd too chaotic a
pacc Ior thc Lhitcd btatcs to rcorgahizc ih its imagc, particuary iI
thc rcorgahizatioh had to bc achicvcd through orgahs oI vord
govcrhmcht vithih vhich thc Lb govcrhmcht voud havc to com-
4 Ibid., p. 67.
5 See ibid., pp. 5, 67, 77.
promisc vith thc vicvs ahd ihtcrcsts oI Irichds ahd Iocs aikc.
Cohgrcss ahd thc Pmcricah busihcss commuhity vcrc Iar too `ra-
tioha'ihthcircacuatiohsoIthcpccuhiarycostsahdbchcIits oILb
Iorcigh poicy to rccasc thc mcahs hcccssary to carry out such ah
uhrcaistic pah. hdccd, as hotcd ih Chaptcr 7, had Korca hot `comc
aohg' ahd givch !rumah vhat hc hccdcd to `scarc hcl out oI thc
Pmcricah pcopc,' cvch thcLb ahdLuropcah rcarmamcht chvisagcd
ih ^bC-68 might hot havc bcch Iuhdcd. But Korca did comc aohg
ahd argc-scac rcarmamcht durihg ahd aItcr thc Korcah ar gavc a
trcmchdous boost to thc Lb ahd vord ccohomics.
ith thc Lb govcrhmcht actihg as a highy pcrmissivc vord
cchtra bahk, Pmcricah miitary aid to Iorcigh govcrhmchts ahd.
dircct miitary cxpchditurcs abroad-both oI vhich grcv cohstahty
bctvcch l90 ahd l98 ahd agaih bctvcch l96+ ahd l97J-pumpcd
Lb iquidity back ihto vord tradc ahd productioh, vhich grcv at
uhprcccdchtcd ratcs.
Pccordihg to ^cCormick, thc tvchty-thrcc-

ycar pcriod ihauguratcd by thc Korcah ar ahd cohcudcd by thc
aris pcacc accords oI l97J, vhich virtuay chdcdthc Victham ar,
vas `thc mostsustaihcdahdproIitabc pcrrod oIccohomic grovthih
thc history oI vord capitaism.
, ,
!his is thc pcriod that mahy ca thc Codch Pgc oI Capitaism.

PthoughthcratcoIcxpahsioh oIvordtradcahdproductiohihthc
l90s ahd l960s vas ihdccdcxccptioha by historica stahdards, this
vas hardy thc Iirst godch agc oIcapitaism. just as imprcssivc vas
Iobsbavm'sPgcoICapita , l8+87) ,vhichatchihctcchth-cchtury
obscrvcrs comparcd to thc Pgc oI thc Crcat Liscovcrics.
Likc thc
àgc oI capita' a huhdrcd ycars caricr, thc godch agc oIthc l90s
ahd l960s chdcd rh a ohg pcriod oIIihahcra cxpahsioh that cumi-
hatcd ih a rcsurgchcc oIimpcriaistic practiccs. !hc truc hovcty oI
thc prcscht rcsurgchcc ih comparisoh vith that oI a cchtury ago,
sha arguc, is thc attcmpt oIthc dccihihghcgcmohicpovcrtorcsist
dccihc by turhihg itscI ihto a vord statc. buch ah attcmpt is a
cohtihuatioh by othcr mcahs ahd uhdcr radicay diIIcrcht circum-
stahccs oI Kooscvct's vord-govcrhmcht procct. Pthough Koosc-
vct's ohc-vord, goba ^cv Lca visioh hcvcr matcriaizcd,
6 See David Calleo, The Atlantic Fantasy (Baltimore, MD, Johns Hopkins
University Press, 1970), pp. 86-7; Robert Gilpin, The Political Economy of Interna
tional Relations (Princeton, N J, Princeton University Press, 1987), pp. 133-4.
7 Thomas J. McCormick, America's Half Century: United States Foreign Policy
in the Cold War (Baltimore, MD, Johns Hopkins University Press, 1989) , p. 99.
8 Eric J. Hobsbawm, The Age of Capital 1 848-1875 (New York, New American
Library, 1979) , p. 32.
254
1rumah's dovhsizcd, miitarizcd, Cod ar vcrsioh rcsutcd ih a
ma|or cxpahsioh oI Lb capita ahd povcr. hy thch has thc hco-
cohscrvativc pro|cct Iaicd so miscraby ih rcpcatihg that cxpcrichcc
uhdcr cohditiohs oI cvch grcatcr cchtraizatioh oI goba miitary
capabiitics ih Lb hahds
The Changing Nature of us Protection
Charcs 1iy'scohccptuaizatiohoIstatc activitics ascompcmchtary
Iaccts oIthc orgahizatioh ahd mohopoizatioh oIviochccchabcs us
to providc a simpc ahsvcr to this qucstioh. hatcvcr csc govcrh-
mchts might do, argucs 1iy, thcy `stahd out Irom othcr orgahiza-
tiohs by thcir tchdchcy to mohopoizc thc cohcchtratcd mcahs oI
viochcc.' 1his tchdchcy matcriaizcs throughIourdiIIcrcht kihds oI
activity. protcctioh, statc-makihg, var-makihg, ahd cxtractioh. ro-
tcctioh is thc most distihctivc `product' oI govcrhmchta activitics.
Ps1iy uhdcrscorcs, `thcvord 'protcctioh' souhds tvo cohtrastihg
tohcs. 'ith ohctohc, it cvokcsthccomIortihgimagc oIapovcrIu
Irichdvhoprovidcs ashctcragaihst dahgcr.iththcothcr,itcvokcs
thcsihistcr imagcoIarackctihvhichabuy Iorccs mcrchahts topay
tributc ih ordcr to avoid a damagc that thc buy himscI tacity or
opchy thrcatchs to dcivcr.
hich imagc thc vord `protcctioh' brihgs to mihd dcpchds
maihy oh our asscssmcht oI thc rcaity ahd cxtcrhaity oI thc
thrcat. bomcohcvhoproduccsboththcdahgcr ahd, at apricc,thc
shicd agaihst it i a rackctccr. bomcohc vho providcs a nccdcd
shicdbut has ittccohtroovcr thc dahgcr'sappcarahccquaiIics
asalegitimate protector, cspcciay iIhispriccis hohighcrthahhis
compctitors'.bomcohcvhosuppicsrciabc, ov-priccdshicdihg
Irom ocarackctccrs ahdIromoutsidc maraudcrs makcsthc bcst
oIIcr oI a.
Bythisstahdard,!iygocsohtoarguc,thcprovisiohoIprotcctiohby
govcrhmchts oItch quaiIics as rackctccrihg.
1o thc cxtcht that thc thrcats agaihstvhich a givch govcrhmcht
protccts its citizchs arc imagihary or arc cohscquchccs oI its
activitics,thc govcrhmcht has orgahizcd aprotcctioh rackct. bihcc
govcrhmchts thcmscvcs commohy simuatc, or cvch Iabricatc
thrcats oI cxtcrha var ahdthc rcprcssivc ahd cxtractivc activitics
oI govcrhmchts oItch cohstitutc thc argcst currcht thrcats to thc
ivcihoods oI thcir ovh citizchs, mahy govcrhmchts opcratc ih
csschtiay thc samc vay as racketeers. 1hcrc is, oI coursc, a
diIIcrchcc. Kackctccrs, by thc cohvchtioha dcIihitioh, opcratc
vithout thc sanctity of governments.
9
255
!oovihg Prthur btihchcombc, 1iy caims that thc cgitimacy oI
povcr-hodcrs dcpchds Iar css oh thc asscht oI thosc oh vhom
povcr is cxcrciscd thah oh thc asscht oI othcr povcr-hodcrs. 1o
this, !iy adds that othcr authoritics àrc much morc ikcy to
cohIirm thc dccisiohs oI a chachgcd authority that cohtros sub-
stahtia Iorcc, hot ohy Icar oI rctaiatioh, but aso dcsirc to
maihtaih a stabc chvirohmcht rccommchd that gchcra ru c. '
1hc crcdibiity oI a particuar govcrhmcht' s caim to providc

protcctioh thus ihcrcasc vith its succcss ih mohopoizihg cohcch-
tratcd mcahs oI viochcc. 1his ihvovcs thc cimihatioh or hcutra-
izatioh oI rivas both ihsidc its tcrritoria domaihs ,statc-makihg)
ahd outsidc ,var-makihg) . Phd sihcc protcctioh, statc-makihg, ahd
var-makihg a rcquirc Iihahcia ahd matcria rcsourccs, cxtractioh
cohsists oI thc activitics through vhich govcrhmchts procurc thosc
rcsourccs. II carricd out cIIcctivcy, cach oI thcsc Iour activitics
`gchcray rcihIorccs thc othcrs. '

1iy'smodccmphasizcsthcsyhcrgyamohgprotcctioh-producihg,
statc-makihg, var-makihg, ahd cxtractioh activiticsih chsurihggov-
crhmchta succcss ihmohopoizihgcohcchtratcdmcahs oIviochccat
the national level. It ordcr to appy thc modc to thc Lb casc oI a
govcrhmcht that has bcch tryihg to orgahizc ahd mohopoizc coh-
cchtratcdmcahsoIviochccat the global level, tvoquaiIicatiohsarc
hcccssary. !irst, thc Iormatioh oIa vord statc burs thc distihctioh
bctvcch statc-makihg ahd var-makihg activitics,bccausc thc voud-
bc vord statc caims thc chtirc vord asits prospcctivc domaih ahd
thus de facto rc|ccts thc distihctioh bctvcch ihtra- ahd ihtcrstatc
domaihs.chccthcvidcsprcaddcscriptioh oIthc mahy`vars'that
thc Lhitcd btatcs has bcch vagihg sihcc thcchdoIthc bccohdord
ar aspoiccactiohsrathcrthahvars.bccohd,sihccthc` sahctity oI
govcrhmchts' stibcohgstothchatioha statcs,thcvoud-bcvord
9 Charles Tilly, "War Making and State Making as Organized Crime," in P.B.
Evans, D. Rueschemeyer, and T. Skocpol, eds, Bringing the State Back In (Cambridge,
Cambridge University Press, 1985) , pp. 170-1, emphasis added.
10 Arithur L. Stinchcombe, Constructing Social Theories (N ew York, Harcourt,
Brace & World, 1968) , p. 150; Tilly, "War Making and State Making," p. 17l.
1 1 Tilly, "War Making and State Making," pp. 171, 18l.
statc Iaccs grcatcr diIIicutics ih prcschtihg itscI as thc orgahizcr oI
`cgitimatc protcctioh' rathcr thah oI a `protcctioh rackct. '
BcarihgthcscquaiIicatiohs ih mihd,vc cahuhdcrstahdthcIaiurc

oIthcBush admihistratiohto rcpcatthcachicvcmchts oIthc!rumah
admihistratioh ih tcrms oI thc diIIcrchcc bctvcch a dysIuhctioha
protcctioh rackct ahdcgitimatc protcctioh. Lcspitc a its imits, thc
dovhsizcd, miitarizcd, vord-govcrhmcht procct auhchcd by !ru-
mah quaiIicd as, ahd vas pcrccivcd by a argc humbcr oI povcr-
hodcrs atthchatiohacvcto bc, cgitimatc protcctioh. hpart,this
vas ductoLbrciahccthroughoutthc l90s ahdl960sohthcLhitcd
âtiohstochsurcthatatcastsomcoIthc `sahctityoIgovcrhmchts,'
vhich sti rcsidcd at thc hatioha cvc, voud bc accordcd to thc
vord-govcrhmchta activitics oI thc Lhitcd btatcs. !hc tvo maih
rcasohs vhy thc Lb Cod ar pro| cct quaiIicd as cgitimatc protcc-
tioh, hovcvcr, vcrc Iactua rathcr thah ihstitutioha.
!hc Iirst rcasoh, to paraphrasc !iy, vas that it oIIcrcda hccdcd
shicd agaihst a dahgcr that thc Lhitcd btatcs had hot produccd.
Pthough, ccohomicay ahd poiticay, thc Lhitcd btatcs had bcch
thc maih bchcIiciary oIthc cscaatihg viochcc oI thc Iirst haIoIthc
tvchticthcchtury,thccpicchtcroIthccscaatiohvasLuropchotthc
Lhitcdbtatcs.LuropcvasmostihhccdoIthcshicdbccausc,asPrho
âycr hotcs ih a diIIcrcht cohtcxt, ih both vord vars `Luropc's
bood sacriIicc vas immcasuraby grcatcr ahdmorc puhishihg thah
Pmcrica' s.
,,
'
`
But thc sacriIicc origihatcd ih Luropcah cohIicts. By
oIIcrihg a vord ordcr capabc oI rcducihg thc chahccs that simiar
cohIictsvoudrccur,thcLhitcdbtatcs thusquaiIicdas a cgitimatc
protcctor.
!hc sccohd rcasoh vas that thc Lhitcd btatcs oIIcrcd cIIcctivc
protcctioh at ah uhbcatabc pricc. Kooscvct ahd !rumah vcrc both
proposihgtoIihahccthcvordvidcprovisiohoIprotcctiohviththc
surpus capita that hadaccumuatcdih thcLhitcdbtatcs durihgthc
prcccdihgthirtyycars oIvordvidcchaos.ôstatc, ct aohcahyoI
thchcvycrcatcd ihtcrhatioha ihstitutiohs, hadthcrcsoufccshcccs-
sary to match such a ov-priccdoIIcr. hdccd, thc maih probcmIor
thc!rumah admihistratiohvashotIihdihgcichts Iorthcprotcctioh
it vas oIIcrihg, but pcrsuadihg Cohgrcss that thc ihvcstmcht oI Lb
surpus capita ih thc productioh oI protcctioh oh a vord scac
actuay vas ih thc Lb hatioha ihtcrcst. t vas to this chd that
!rumah artIuy ihIatcd thc commuhist thrcat.
12 Arno ]. Mayer, "Beyond the Drumbeat: Iraq, Preventive War, 'Old Eur
ope, ' '' Monthly Review, 54, 10 (2003) .
257
!his situatioh bcgah to chahgc vith thc sigha cfsis oI Lb
hcgcmohy oI thc atc l960s ahd cary l970s. !hc Victham ar
dcmohstratcd that Lb protcctioh vas hot as rciabc as thc Lhitcd
btatcs caimcd ahditscichts cxpcctcd. hthc !irst ahdbccohdord
ars,
hc LhitcdbtatcshadgrovhrichahdpovcrIu bycttihgothcr
couhtfcs do most oI thc actua Iightihg, by suppyihg thcm vith
crcdit, Iood, ahd vcapohs, by vatchihg thcm cxhaust ohc ahothcr
Iihahciay ahd miitariy, ahd by ihtcrvchihg atc ih thc struggc to
chsurc ah outcomc Iavorabc to its hatioha ihtcrcst. h Victham, ih
cohtrast, it had to do most oI thc Iightihg itscI ih a sociay,
cuturay, ahd poiticay hostic chvirohmcht, vhic its Luropcah
ahdLastPsiahcichtsgathcrcdstrchgthas ccohomiccompctitorsahd
Pmcricah mutihatiohas accumuatcd proIits ih cxtratcrritoria Ii-
hahcia markcts, dcprivihg thc Lb govcrhmcht oI bady hccdcd tax
rcvchuc. Psa rcsut oIthiscombihatiohoIcircumstahccs,Lbmiitary
might ost crcdibiityahd thc Lb god-oar stahdard coapscd. !o
makc mattcrs vorsc, thc Lhitcd âtiohs turhcd ihto a souhdihg
boardIor!hirdordgricvahccs,gchcratihgittccgitimacyIorthc
Lb cxcrcisc oI vord-govcrhmchta Iuhctiohs.
PItcr a dccadc oI dccpchihg crisis
thc Kcagah admihistratioh

ihitiatcd thc trahsIormatioh oI Lb cgitimatc protcctioh ihto a
protcctioh rackct. t discardcd thc Lhitcd âtiohs as a sourcc oI
cgitimacy IorLb hcgcmohy. t bcgah strohg-armihgjapahvhich
happchcdto bc both thc cicht most dcpchdcht oh Lb protcctioh ahd
thc Iastcst accumuator oI surpus capitaihto rcstraihihg its com-
pctitioh vis-a-vis thc Lhitcd btatcs through `vouhtary' cxport
rcstrictiohs ,a dcvicc uhhcard oIihthc ahhas oIihtcrhatioha tradc)
ahd ihto usihg
its surpus capita to Iihahcc thc grovihg Lb budgct

ahdtradcdcIicits. tratchctcdupthc baahcc oItcrrorviththcLbbK
through maj or cscaatioh oI thc armamcht racc. Phd itchgagcd a
grcat vafcty oIocabuics ,ihcudihgbaddamusscih) ahdrcigious
Iuhdamchtaists,ihcudihgCsamabihLadch) ihthcrobackoI!hird
`
rd ahbovic
t povcr. !hc Lhitcd btatcs thus bcgah to chargc

atcs a pfcc Ior its protcctioh, ahd at thc samc timc to producc thc
dahgcrs agaihst vhich it voud atcr oIIcrprotcctioh. '`
!hc succcss oI thc Kcagah admihistratioh ih uhdcrmihihg !hird
ord ahd bovict povcr crcatcd thc iusioh uhdcr Ccorgc Bush
13 On how the US shift under Reagan from direct intervention in the fight
against communism to supporting low-level insurgency by private militias bred future
terrorists, see Mahmood Mamdani, Good Muslim, Bad Muslim: America, the Cold
War, and the Roots of Terror (New York, Pantheon, 2004).
bchiorthat thcLb `cmpirc oIbascs' coudbc madc to pay Ior itscI.
PsChamcrsjohhsohhaspoihtcdout,suchahcmpircvas ,ahdis)Iar
morc vuhcrabc thah `thc odcr, scI-Iihahcihg cmpircs' to tradc
dcIicits ahd capita movcmchts. `Cccasiohay,' hovcvcr, thc ib
cmpirc oI bascs `makcs mohcy bccausc, ikc gahgstcrs ih thc I9J0s
vho Iorccd thc pcopc ahd busihcsscs uhdcr thcir svay to pay
protcctioh mohcy, thc Lhitcd btatcs prcssurcs Iorcigh govcrhmchts
to pay Ior its impcria pro ccts. ' !hc most promihcht amohg thcsc
occasiohsvasthcIirstraqar.BybrihgihgthcLhitcdâtiohs back
to providc cgitimacy Ior thc var, thc Bush admihistratioh mahagcd
to cxtract Irom its vcathicst ahd miitariy most dcpchdcht cichts
,most hotaby, baudi Prabia, Kuvait, thc Lhitcd Prab Lmiratcs,
Ccrmahy,ahdcspcciayjapah)IihahciacohtributiohstotaihgS+. I
biioh, vhic thc Lb cohtributioh oI S7 biiohamouhtcdto ustovcr
haI that oI]apah's SIJ biioh. '" ôrcovcr, this hugc paymcht vas
cxtractcdIorprotcctioh,hotagaihstadahgcrikccommuhismvhich
thc Lhitcd btatcs hadhot crcatcd, but agaihst a dahgcr that coud ih
part bc traccd to Lb support oIbaddam usscih's var agaihst rah.
!hcshiItIromcgitimatcprotcctiohtoprotcctiohrackctcohtihucd
by othcr mcahs uhdcr Cihtoh. L^ mcdiatioh as a mcahs oI gch-
cratihgcgitimacyIorLbpoicc actiohs vas agaihdiscardcd,thistimc
ih Iavor oI a cocctivc pursuit through ^P!C oI choicc `humahi-
tariah' missiohs. Pt thc samc timc, thc Brcttoh oods ihstitutiohs
crc rcIurbishcd as ihstrumchts oI Lb ruc ovcr ah ihcrcasihgy

ihtcgratcd goba markct. !hc `succcss' oI thc Boshia ahd Kosovo
missiohs,aohgviththcirrcsistibc risc oIthchcv-ccohomybubbc,
gavc crcdchcc to bccrctary oI btatc Pbright's rcprcschtatioh oI thc
Lhitcd btatcs as thc ìhdispchsabc hatioh. ' But thc Iouhdatioh oI
this ìhdispchsabiity' vas hot thc acgcd capaciIy oI thc Lhitcd
14 Chalmers Johnson, The Sorrows of Empire: Militarism, Secrecy, and the End
of the Republic (New York, Metropolitan Books, 2004) , pp. 25, 307. According to
Johnson, the United States later boasted that it had even made a small net profit from
the conflict. See also Eric J. Hobsbawm, The Age of Extremes: A History of the
World, 1 9141991 (New York, Vintage, 1994), p. 242. This was the first and only time
that the United States, not j ust sought to make its clients pay for one of its major wars,
but actually succeeded in the endea VO In itself, the success of the extortion was not a
sign of hegemony, because at the height of its hegemony the United States paid in full
for its wars and the protection of its clients. Rather, it was a sign that US hegemony
had ceased to be hegemoney but was still sufficiently entrenched to enable the United
States to make its clients pay for the protection it was providing. The failure of
George W. Bush to make US clients pay for the second Iraq War (see below), in
contrast, can be taken as 3 sign that, by then, the United States had lost both
hegemoney and hegemony.
259
btatcs, as Pbrightcaimcd, to `scc Iurthcr thah othcr couhtrics ihto
thcIuturc.
, ,
'` Kathcr, itvas a gchcra Icar oIthcirrcparablc damagc
that Lb poicics coud ihIict oh thc rcst oI thc vord. !hc dahgcrs
agaihst vhich thc Lhitcd btatcs vas hov oIIcrihg protcctioh vcrc
dahgcrsthatthcLbitscIhadcrcatcdorcoudcrcatc. Phdthctriiohs
oI doars thatIorcighgovcrhmchtsbcgahpourihgihto thc coIIcrs oI
thcLbgovcrhmchtshovcdthatLbprotcctiohvashotovpriccdahy
morc.
Dispensable United States?
!hchco-cohscrvativcsihthcBushadmihistratiohthusdidhotihitiatc
thctrahsIormatioh oIthcLbIromcgitimatcprotcctorihtorackctccr.
hch thcy camc to povcr, thc trahsIormatioh vas arcady at ah
advahccd stagc. Butby pushihg it too Iar, thcy uhvittihgy chdcd up
cxposihg its imits, both miitary ahd ccohomic. Ps vc havc scch ih
Chaptcr7, thcir attcmpttodcmohstratcthatPmcricahmiitarymight
coud cIIcctivcy poicc thc vord ahd at thc samc timc chsurc thc
cohtihuihg cchtraity oI thc Lhitcd btatcs ih thc goba poitica
ccohomyIaicdih bothrcspccts.ccahhovtraccthisdoubcIaiurc
to ah ovcrstrctch oI thc Lb vordvidc protcctioh rackct.
Coih ovc himscI ohcccvokcd!iy's sihistcrimagc oIprotcc-
tiohvhchhcsaidthatthcLhitcdbtatcsought`tobcthcbuyohthc
bock. '!hc rcstoIthcvordvoudhappiy acccptthisroc,hcvcht
oh to asscrt, caihg up thc comIortihgimagc oIprotcctioh, bccausc
thcLhitcdbtatcs`cah bc trustcdhotto abuscthatpovcr.
,
' '
c do
hot khov oh vhat grouhds ovc bascd this bcicI. But css thah a
ycar aItcr thc Lb ihvasioh oI raq, rcports Irom arouhd thc vord
shovcdthatthccomIortihgimagcoILbprotcctiohhadgivchvayto
thc sihistcrohcoIaLhitcdbtatcs tryihgtostrohg-armcvcryohcohto
its ovhIorcigh poicy agchda. ôrc importaht, thc attcmptvas hot
succccdihg.
!hc most compcihg piccc oIcvidchccvas thc rcuctahcc oIcvch
thc most IaithIu Lb cichts to providc thc Lhitcd btatcs vith thc
rcsourccsithccdcdtocxtricatc itscIIromthcraqi quagmirc. Lcspitc
Coihovc ' sattcmpttoputupa bravcIrohtbydccarihga succcss
15 Quoted in S. Sestanovich, "Not Much Kinder and Gentler," New York
Times, February 3, 2005.
16 Quoted in David Harvey, The New Imperialism (New York, Oxford
University Press, 2003) , p. 80.
``
thc `dohors cohIcrchcc' cohvchcd ih âdridih Cctobcr 200J, aItcr
thcL^bccurity Couhcihadprovidcdthc raqoccupatiohvithsomc
uridica cgitimacy, paymchts Ic Iar short oI cxpcctatiohs ahd,
sighiIicahty, oI thc amouhtsthathad bcch raiscd Ior thc l99l raq
ar. Pctua dohatiohs ,thatis, grahts) vcrc css thahohc-cighth oI
thcSJ6biiohtargctahdcohsidcraby css thahohc-Iourth oIthcLb
S20 biioh pcdgc. h markcd cohtrast vith thc highy succcssIu
cxtortiohs oI thcIirst raq ar, this timc thc Lhitcd btatcs vacIt
hodihg thc bag. Ccrmahy ahd baudi Prabia gavc virtuay hothihg.
Lvch japah's Sl. biiohpcdgc-by Iar thc argcst at âdrid-vas
mcagcr ih comparisoh vith thc SlJ biioh japah disgorgcd Ior thc
Iirst raq cohIict, cspcciay givch that ih rca tcrms Lb doars vcrc
vorth cohsidcraby morc ih l99l thah ih 200J.
!his sharp dccihc ih thc capacity oI thc Lhitcd btatcs to cxtract
protcctioh paymchts Irom cichts cah bc traccd to thc pcrccptioh that
its protcctioh had bccomc couhtcrproductivc, cithcr bccausc thc Lb
squcczcdsomcoIitscichtsdryahdthchcItthcmcxposcdtocvchgrcatcr
dahgcrsthahthcohcsIromvhichthcyhadbcchprotcctcd,orbccauscLb
actiohsthrcatchcdtocrcatcgrcatcrIuturcdahgcrsthahthcprcschtohcs
agaihst vhich it oIIcrcd protcctioh. Lithcr vay, as jamcs Carro has
obscrvcdvithspcciarcIcrchcctocstPsia,thcìhdispchsabchatioh'
appcarcdto bc ìhdispchsabc ohyIorthc sprcadoIchaos. '
raqis, Lcbahcsc, sracrs ahd acstrhrahs amakc vrocht chorccs
ahd bcar thc vcight oI vrocht cohscquchccs, but thc cohtcxt
vrthrh vhrch thosc chorccs arc bcihg madc has bcch ovcrvhc-
mrhgy cstabrshcd by vrocht chorccs madc rh ashrhgtoh.
hpart, hovcvcr, thc dramatic rcductioh oItributc paymchts cah bc
attributcd to a bcicIthat thc hccdIor Lb protcctioh, Iorvhatit is
vorth,iscsscompcihgthahitvasihl99l. !hispcrccptiohhasbcch
IarmorcvidcsprcadthahthcrituaisticrcspcctstipaidtoLbpovcr
might suggcst. But it is probaby most importaht ih thc casc oI Lb
cichts ihthcLastPsiahrcgioh. hic, ihthcpast, mahystatcs ih thc
rcgioh vicvcd Lb protcctioh as csschtia Ior couhtcrihg thc rca or
imagihcdthrcatthatChihaposcdtothcirsccurity,todayChihaisho
17 J. Carroll, "Reject the War," International Herald Tribune, December 19,
2006. On US violent choices turning Iraq into a country-size terrorist training ground,
see among others Daniel Benjamin and Steven Simon, The Next Attack: The Failure
of the War on Terror and a Strategy for Getting it Right (New York, Times Books,
2005) ; and P. Rogers, "The War on Terror: Past, Present, Future," openDemocracy,
August 24, 2006.
ì
ohgcr scch as a scrious thrcat, ahd cvch iI such a thrcat vcrc to rc-
cmcrgc, Lb protcctioh is pcrccivcd as uhrciabc. ôrcovcr, thc
capacrty oI thc Lhitcd btatcs to cxtract protcctioh paymchts Irom
its LastPsiahcrchtshasbcchIurthcrcurtaicdbythccombihatioh oI
ihcrcasihg Lb dcpchdchcc oh Last Psiah mohcy ahd dccrcasihg
dcpchdchcc o Last Psiah couhtrics oh thc Lb markct vith thc
cohsoidatioh oI Chiha as thcir argcst ahd Iastcst grovihg markct.
Ps prcviousy hotcd, thc attractioh oI Chiha as ah ccohomic ahd
stratcgic parthcr rcachcs vc bcyohd thc Last Psiah rcgioh. Chiha's
ascchtisihdccdrcmihiscchtoIthcLbascchtdurihgthcvordvarsoI
thc Iirst haI oI thc tvchticth cchtury. just as thc Lhitcd btatcs
cmcrgcdasthc rca vihhcr oIthc bccohdordaraItcrthc LbbK
had brokch thc back oIthc chrmacht ih l9+2-+J, so hov a thc
cvidchcc poihts to Chiha as thc rca vihhcr oI thc ar oh !crror,
rcgardcssoIvhcthcrthcLbvi cvcrsuccccdihbrcakihgthcbackoI
a Qacda ahd thc raqi ihsurgchcy.
'
`
h thc Lpioguc oIthc book vc sha dca vith thc issuc oI vhat
kihd oIhcv vord ordcr ,or disordcr) may cvchtuay cmcrgc out oI
this `victory. '!orhovctussimpyhotcthatthchcvimpcriaismoI
thc rocct Ior a ^cv Pmcricah Cchtury probaby marks thc ih-
gorious chd oI thc sixty-ycar ohg struggc oIthc Lhitcd btatcs to
bccomcthc orgahizihgcchtcroIa vordstatc. !hcstruggcchahgcd
thc vord but cvch ih its most triumphaht momchts, thc Lb hcvcr
succccdcd ih its chdcavor. Comihgatthcchd oIthis ohgproccss, a
Ccorgc . Bush has dohc is to provc Pbright vrohg. `!hc Lb, it
turhs out,' amchts îchac Lihd, ìs a dispchsabc hatioh. '
hrcccht mcmory, hothrhg coudbcdohc vrthout thcus. 1oday
'
hovcvcr, practrcay a hcv rhtcrhatroha rhstrtutroh-burdrhg oI
ahy ohg-tcrm rmportahcc rh goba drpomacy ahd tradc occurs
vrthoutPmcrrcah partrcrpatroh. . . . Luropc, Chrha, Kussra,Latrh
Pmcrrcaahdothcrrcgrohsahdhatrohsarcqurctytakrhgmcasurcs
vhosc cIIcct . . . vr bc to cut Pmcrrca dovh to srzc.'
18 In 2004, an Institute of Electrical and Electronic Engineers panelist recalled
the old j oke that the US fought the Cold War and Japan won. "The new j oke," he
added, "is that the United States is fighting the war on terror, but China is winning"
(J. Kumagi and W. Sweet, "East Asia Rising," IEEE Spectrum Online, http://
www.spectrum.ieee.org, accessed October 19, 2004) . It so happens that the joke
captures an important aspect not only of the present but also of the past dynamic of
historical capitalism sketched in Chapter 8.
19 M. Lind, "How the U.S. Became the World's Dispensable Nation," Financial
Times, January 25, 2005.
`!o havc drasticay crodcd, ih css thah Iour ycars, thc positi
oh oI
rcspcctcdihtcrhatioha cadcrship buit up by thc Lhitcd btatcs ovcr
thcpasthuhdrcdycarsormorc'-vrotcBriahLrquhartohthccvcoI
thc ôvcmbcr 200+ ccctiohs-ìs ahcxtraordiharyachicvcmcht.
,,
`
h spitc oI this `cxtraordihary achicvcmcht, ' ahd to thc amazcmcnt

oI thc rcst oI thc vord, hot ohy did thc ccctiohs rcturh rcsidcht
Bush to thc hitc ousc, but it cohsoidatcd thc hod oI thc ho-
cohscrvativc boc oh a thc brahchcs oIthc Lbgovcrhmcht. !oov-
ihg thc ccctora victory, Bush Iamousy dccarcdthathc had carhcd
`poitica capita' vhich hc hovihtchdcdto spchd athis discrctioh.
Phd yct, iI vc takc thc diIIcrchcc bctvcch his approva ahd dis-
approvaratihgsasaroughmcasurcoIhispoiticacapita,!igurc9. l
shovs hov asoihthis rcspccthcvascompctcy out oItouch vith
rcaity.
hatthcIigurcshovsis, Iirst,thatmostoIBush' spoiticacapita
vas hot somcthihg hc had `carhcd' but a giIt hc rcccivcdIrom bih
Ladchohbcptcmbcr ll, ahd, sccohd, that dcspitc asharp but short-
ivcdgaihIoovihgthcihvasio: oIraqihârch200J,bythctimcoI
his 200+rc-ccctiohhchad arcady squahdcrcdthc giIt ahd vas hov
opcratihgoh borrovcdtimc.hathadgaihcdhimIourmorcycarsih
thc hitc ousc, bcsidcs thc ack oI idcas amohg his Lcmocratic
chachgcrs oh hov to ccah up thc mcss hc had crcatcd, vas thc
IamcdcuhhihgoIhisadvisorKarKovc,vhocohcoctcdthcidcathat
thc aroh !crrorism vas bcttcrIought ovcrscas thah at homc ahd
that, uhcssthctcrroristsvcrcroutcdih raq, thcyvoudshovup ih
thc strccts oI bah !rahcisco or Lcs ôihcs. LIIcctivc ih ohcc agaih
`scarihghcoutoIthcPmcricahpcopc'ahdgcttihgBushrc-ccctcd,
thisvashardyavihhihgargumchtIorthcgrovihgma| orityoIraqis
vhosc ivcs vcrc dcvastatcd or cut short by Lb-ihduccd chaos, ahd
ihdccd Ior a Iorcigh couhtrics that Ict thrcatchcd by thc combiha-
tioh oIruthcsshcssahdmihdcsshcss vithvhichthcLb vassprcad-
ihgthc dahgcrs agaihstvhichit caimcd to bc providihg protcctioh.
But cvch thc Pmcricah pcopc coud hot bc Ioocd a thc timc, hor
coud thc cuhhihgoI Kar Kovc ihdcIihitcy bcat thc cuhhihgoIthc
uhdcryihghistorica proccss, sothat-as!igurc 9. lshovs-shorty
aItcrBush's sccohdihauguratiohthc dcpctioh oIhispoitica capita
rcsumcd ihcxoraby.
P ma| or turhihg porht vas hurricahc Katriha's dcvastatioh oI
Louisiaha ih bcptcmbcr 200. Ì 9/ll is ohc bookchd oI thc Bush
20 K. Anthony Appiah et al., "The Election and America's Future," New York
Review, November 4, 2004, p. 16.
THE WORLD STATE THA T NEVER WAS
Figure 9. 1 President Bush's approval ratings from February 2001 to
October 2006
Source: Washington Post-ABC News Poll.
263
admihistratioh,' vrotc !homas !ricdmah, `Katriha may bc thc
othcr. I 9/l l put thc vihd at rcsidcht's Bush's back, Katriha put
thcvihdihhisIacc.
, ,
`
'
CohtrarytoBush's ahdKumsIcd'scaimthat
thc tragcdy had hothihg to do vith raq, hotcs îkc Lavis, `thc
abschcc oI morc thah a third oIthc Louisiahaâtioha Cuard ahd
much oI its hcavy cquipmcht crippcd rcscuc ahd rcicI opcratiohs
Iromthcoutsct. . . . PsahcmbittcrcdrcprcschtativcIromdcvastatcd
bt Bcrhard arish tod thc Times-Picayune: ` Cahadiah hcp arrivcd
bcIorc thc Lb Prmy did.'
, ,
``
Phd, cohtrary to Bush's caim that ho
ohc coud havc prcdictcd thc brcach ih thc ^cv Crcahs cvccs
Katriha vas, ih bimoh bchama's vords, `thc most ahticipatc.
catastrophc rh modcrh Pmcricah history. '
I thc 200+| ccctiohCcorgc. BushaskcdPmcrrcahs tovotcIor
hrm as thcmah vhovoudbcstIuIrthcmost csschtra obrgatroh
oIgovcrhmcht. thcrmpartiaahdvrgrahtprotcctrohoIitscrtrzchs.
21 " Osama and Katrina," New York Times, September 7, 2005.
22 "The Predators of New Orleans," Le Monde Diplomatique, English edition,
September 2005. See also R. Scheer, "Finally Fooling None of the People," Los
Angeles Times, September 13, 2005.
`

ôvthcIraudulchccoIthccarmhascomcbacktohauhthrm,hot
rh aghdad but rh thc drovhcd couhtrcs oI Loursraha.`
h rcarty, raq ahd Loursraha vcrc tvo srdcs oI thc samc corh oI a
couhtry that Ior a quartcr oI a cchtury had compouhdcd rts ohg-
stahdrhgbcrcIihthcmagicoIhrgh tcchhoogy vrth thatoIthcmagrc
oI scI-rcguatrhg markcts. avrhg gohc rhto raq uhdcr thc sogah
`shockahd avc,' vhrchvas`mcahttoradiatcamrghthcvcrscchoh
thcIaccoIthccarth'-vrrtcsoy!oyhbcc-thc Lhrtcdbtatcshov
Iaccd a drIIcrcht kihd oI shock.
trsthcshockoIdrscovcrrhgthat. . . Pmcrrcahovooksrkcsomc
Icarsomc robotrc drhosaur stomprhg across thc ahdscapc, a gr-
gahtrc ovcr Kahgcr toy, a brrght gadgcts ahd drspay but ho
povcrahd hothrhg rhsrdc. . . . raqhas shovhthat smartmrssrcs,
hcavy-mcta tcchho-trrcks ahdsodrcrsvhosc hcmctsarc ccctro-
hrcay cohtrocd Irom bouthcrh Commahd rh 1ampa, arc vrr-
tuay usccss. 1hc cssohs that thc Vrctcohg oh brcyccs thought
thcy had taught thc bchcmoth arc bcrhg carhcd a ovcr agarh as
Iarurc ahd caamrty starcthchrtcouscrhthcIacc . . . . Ps thc
Lb Irhds that thc povcr to brcak hatrohs rs usccss vrthout thc
povcr to makc thcm, shock ahd avc arc ovcr. ut rt took
urrrcahc Katrrha to cxposc thc rca cmptrhcss uhdcr thc Lb
carapacc. ô vohdcr govcrhrhg raq vas Iar bcyohd thc compc-
tchcc oI ahatioh so Iccbygovcrhcd vrthrh rts ovh bordcrs. ov
docsa statc vhcrc haIthcvotcrs doh't bcrcvcrhgovcrhmcht,ruh
ahythrhgvc hat thc grcat Loursraha catastrophc has rcvcacd
rs a couhtry that is hot acouhtry at a, but atomrzcd, scgmchtcd
rhdrvrduas rvrhg parac rvcs as Iar apart as possrbc, vrth
hothrhg to uhrtc thcm bcyohd thc rdca oI a Iag.
c arc thus back to Prchdt's cohtchtroh that òbbcs's Commoh-
vcath is a vaciatrhgstructurc' vhich `must avays provrdc itscI
vrthhcv propsIromoutsrdc' to avoidthc risk oIcoapsihgòvcr-
hight rhto thc armcss, schsccss chaos oI thc prrvatc rhtcrcstsIrom
vhich it sprahg.' utthatrs prcciscyvhy, as mcmorrcs oI Katrrha
bcgahto Iadc, thcPmcricahpcopc'sIcar oIthc Iurthcr damagcthat
23 "Sorry Mr President, Katrina Is Not 9/1 1, " Guardian, September 12, 2005.
24 "The Chasm Between Us," Guardian, September 9, 2005. For a similar
contention, see R. Drayton, "Shock, Awe and Hobbes Have Backfired on America's
Neocons," Guardian, December 28, 2005.
`:
ushcoud ihIict oh thc Pmcrrcah Iag bcgah to ovcrpovcrthc Icar
that tcrrorrsts voud shov up rhthc strccts oI bah !rahcrsco or Lcs
ôihcs,cadrhgto aIurthcrcrosrohoIush'sportrcacaprta. hhis
starkcst admrssroh yct about thc costs oI thc raq ar to hrs
prcsrdchcy, ih ârch 2006 ush rcuctahty admrttcd. `'d say 'm
spchdihg myportica| caprta ohthcvar.
, ,
` ythcôvcmbcr2006
mid-tcrm ccctrohs, hc vas hcavry rh thc rcd, thc Lcmocrats voh
both brahchcs oICohgrcss,arcmarhrhghco-cohsihthcgovcrhmcht,
cxccpt Chchcy, vcrc drsmrsscd, ahd a drcams oI a hcv Pmcrrcah
cchtury vcrc sct asrdc to cohcchtratc oh damagc cohtro.
Reprise and Preview
`ôrc graphrcay thah ahythrhg csc'-ârx vrotc to Lhgcs oh
bcptcmbcr 2, l87-`thc hrstory oI thc ARMY dcmohstratcs thc
rrghthcss oI our vrcvs as to thc cohhcctroh bctvcch thc productrvc
Iorccs ahd socra rcatrohs. '
PtogcthcrthcPK^\r s oIrmportahccrhccohomrcdcvcopmcht.
L.g. rtvas rh thc armyoIPhtrqurtythatthcsalaire vagc systcm|
vas Irrst dcvcopcd. . . . crc too thc Irrst usc oI machrhcry oh a
argc scac. Lvch thc spccra vauc oI mctas ahd thcrr LbL as
mohcy voud sccm to havc bcch bascd orrgrhay . . . oh thcrr
srghrIrcahcc rh var. Pgarh, thc drvrsroh oI abor within a brahch
vas Irrst put rhto practrcc by armrcs. P thrs, morcovcr, a vcry
strrkrhg cprtomc oIthc vhoc hrstory oIcrvr socrctrcs. Iyou cvcr
havc trmc,youmrghtvorkthcthrhgoutIromthatporhtoIvrcv.
ad Lhgcs Iouhd thc trmc, hc mrght havc bcch abc to dcmohstratc
thc rrghthcss oI his ahd ârx's vrcvs cohccrhrhg thc cohhcctroh
bctvcch thc productrvc Iorccs ahd socia rcatrohs, but ohy iI hc
rcdcIrhcd thc productrvcIorccs to rhcudc thc productroh oI protcc-
tioh.ôrcrmportaht,iharkcihood,hcvoudhavc Ictithcccssary
to addrcss thc issuc oI thc cohhcctiohbctvcch caprtaism, ihdustrr-
arsm, ahd mrrtarism, vhrch vas impicrty rarscd by bmrth's ob-
25 E. Bumiller, "Bush Concedes Iraq War Erodes Political Status," New York
Times, March 22, 2006.
26 Quoted in Russell Johnson, " 'Pre-Conditioning' for Industry: Civil War
Military Service and the Making of an American Working Class," paper presented at
the 25th Annual North American Labor History Conference, Wayne State University,
Detroit, October 16-18, 2003, emphases in the original.
scrvatioh that thc grcat cxpchsc oI modcrh varIarc givcs a miitary
advahtagc to vcathy ovcr poor hatiohs . Ps vc askcd ihhaptcr J
givch thc grcatcr roc that mahuIacturihg, Iorcigh tradc
ahd haviga-
tiohpaycdihthcLuropcahcapitaistpath-ih comparisohtobmith's
markct-bascd, `hatura' path-voud hotcapitaism, ihdustriaism,
ahd miitarism rcihIorcc ohc ahothcr ih a virtuous circc oI chrich-
mchtahdcmpovcrmchtatthccxpchscoIthcrcstoIthcvordrPhdiI
thcy did, vhat arc thc imits oIthis chrichmcht ahd cmpovcrmchtr
iiam ^c^ci's pathbrcakihgaccouht oI thc pursuit oI povcr
aohg thc Luropcah dcvcopmchta path, aohg vith thc anaysis
dcvcopcd ih this ahd thc prcccdihg tvo chaptcrs, suggcst scvcra
obscrvatiohs vhich cah hcp ih ahsvcrihg thcsc qucstiohs. P Iirst
obscrvatioh is that thc commcrciaizatioh oI var ahd ah ihccssaht
armamcht racc havc charactcrizcd thc cstcrh path oI capitaist
dcvcopmchtIromitscaricstbcgihhihgsihthctaiahcity-statcstoits
Iiha cumihatioh ih thc Iaicd Lb vord statc. bo-cacd `miitary
Kcyhcsiahism'-thc practicc through vhich miitary cxpchditurcs
boost thc ihcomcs oI thc citizchs oI thc statc that has madc thc
cxpchditurcs, thcrcby ihcrcasihg tax rcvchucs ahd thc capacity to
Iihahcchcv rouhdsoImiitarycxpchditurcs-ishomorcahovctyoI
thctvchticthcchturythahIihahcccapita ahdtrahshatioha busihcss
chtcrprisc. By dcvclopihg vagc-labor rclatiohs ih var-makihg ahd
statc-makihg, thc taiahcity-statcsvcrc arcadypracticihg akihdoI
sma-scac miitary Kcyhcsiahism, vhich trahsIormcd part oI thcir
protcctioh costs ihto rcvchucs ahd thus appcarcd to makc vars pay
Ior thcmscvcs.
Lhough| mohcy circuatcd ihthc richcrItaiah tovhs tomakc it
possibcIorcitizchs totaxthcmscvcsahduscthcprocccds to buy
thc scrviccs oI armcd strahgcrs. 1hch, simpy by spchdihg thcir
pay, thc hircd sodicrs put thcsc mohics back ih circuatioh.
1hcrcby
thcyihtchsiIicdthcmarkctcxchahgcsthat aovcdsuch
tovhs to commcrciaizc armcd viochcc ih thc Iirst pacc. 1hc
cmcrgcht systcm thus tchdcd to bccomc scI-sustaihihg
h rcaity, thc cmcrgcht systcm coud bccomc truy scI-sustaihihg
ohy oh cohditioh that miitary cxpchditurcs gchcratcd rcvchucs
grcatcr thah thc taxcs paid to sustaih thcm. !his cads us to thc
sccohdobscrvatioh that, ih thc Luropcah systcm, this cohditioh vas
27 William McNeill, The Pursuit of Power: Technology, Armed Force, and
Society since A. D. 1000 (Chicago, University of Chicago Press, 1982), p. 74.
j "
`/
IuIicd at cast Ior somc statcs through thc |oiht opcratioh oI tvo
mcchahisms. |hc vas a bahcc-oI-povcr mcchahism that chabcd
thccadihgcapitaiststatcoIagivchcpochtoappropriatcthcbchcIits
oI ihtcrstatc compctitioh-ahd thus truy makc vars pay Ior thcm-
scvcs. Phd thc othcr vas systcmatic cxtcrha cxpahsioh, vhich
cxcrciscd a doubc Iuhctioh. it kcpt aivc thc compctitioh amohg
Luropcah statcs ih dcvisihg cvcr morc sophisticatcO mcahs ahd
tcchhiqucs oIvar, ahd, at thc samc timc, it chabcdthcm to appro-
priatcIromthcrcstoIthcvordthcrcsourccs hccdcdtocxpahdthcir
tradc ahdtaxrcvchucs. Ps^c^ci sumsupthc proccss vithspcciIic
rcIcrchcc to thc cchtury ahd a haI preceding thc hdustria Kcvou-
tioh.
ithih thccockpitoIvcstcrhLuropc,ohcimprovcd modcrh-styc
arniy shoudcrcdhardagaihst its rivas 1hiscdto ohy oca ahd
tcmporary disturbahccsoIthcbaahccoIpovcr, vhich dipomacy
provcd abc to cohtaih. 1ovards thc margihs oI thc Luropcah
radius oI actioh, hovcvcr, thc rcsut vas systcmatic cxpahsioh
vhcthcr ih Ihdia, Sibcria or thc Pmcricas. !rohticr cxpahsioh ih
turh sustaihcd ah cxpahdihg tradc hctvork, chhahccd taxabc
vcath ih Luropc, ahd madc support oI thc armcd cstabishmcht
lcss ohcrous thahvould othcrvisc havc bcchthc casc. Lurop, i
short, auhchcd itscI oh a scI-rcihIorcihg cycc ih vhich its
miitary orgahizatioh sustaihcd, ahd vas sustaihcd by, ccohomic
ahdpoiticacxpahsiohatthccxpchscoIothcrpcopcsahdpoitics
oI thc carth.
`
!hc third obscrvatiohisthat this scI-rcihIorcihgcyccvas both causc
ahd cIIcct oItvo diIIcrchtkihds oIihhovatiohsih thc productioh oI
protcctioh. PIirstkihdcohccrhcdasârxsuggcstcdihhiscttcrto
Lhgcs-thc tcchhica divisioh oIaborvithih armics. Byrcdiscovcr-
ihg ahd brihgihgtopcrIcctioh ohg-Iorgottch Komah military tcch-
hiqucs, ih thc cary scvchtcchth cchtury âuricc oI âssau
rcorgahizcd thc Lutch army aohg thc ihcs that !rcdcrick .
!ayor's `scichtiIic mahagcmcht' voud rcorgahizc Lb ihdustry
tvo cchturics atcr. c rcorgahizcd sicgctcchhiqucs soasto ihcrcasc
thccIIicichcyoImiitaryabor-povcr,cutcostsihtcrmsoIcasuatics,
ahd Iaciitatc thc maihtchahcc oI discipihc ih thc army's rahks. c
stahdardizcd marchihg ahdthcoadihgahdIirihg oI guhs ahdmadc
driihgarcguaractivityoIsodicrs.cdividcdthcarmyihtosmacr
28 Ibid., p. 143.
tactica uhits, ihcrcascd thc humbcrs oI commissiohcd ahd hoh-
commissiohcd oIIiccrs, ahd ratiohaizcd ihcs oI commahd.
hthisvay ah army bccamc ahartrcuatc orgahrsmvrthacchtra
hcrvous systcm that aovcd schsrtrvc ahd morc or css rhtcrgcht
rcspohsc to uhIorscch crrcumstahccs Lvcry movcmcht attarhcd a
hcv cvc oI cxactrtudc ahd spccd. 1hc ihdrvrdua movcmchts oI
sodrcrs vhch Irrrhg ahd marchrhg as vc as thc movcmchts oI
battarohs across thc battcIrcd coud bc cohtrocd ahd prcdictcd
ashcvcrbcIorc. Pvc-dricd uhrt,by makihgcvcrymotrohcouht,
coudrhcrcascthcamouhtoI cadpro|cctcd agarhstthcchcmypcr
mrhutc oI battc. 1hc dcxtcrity ahd rcsoutroh oI rhdrvrdua
rhIahtry mch scarccy mattcrcd ahy morc. rovcss ahd pcrsoha
couragc a but drsappcarcdbchcathaharmor-patcdroutrhc. . . .
\ct troops dricd rh thc âurrcrah Iashroh automatrcay cxIrb-
rtcd supcrror cIIcctrvchcss rh battc.
!hc sccohdkihd oIihhovatiohcorrcspohdsto vhat ârx rcIcrstoas
thc ùsc oI machihcry oh a argc sca c. ' Ps hotcd ih Chaptcr 8,
^c^ci, amohgothcrs, attributcs a crucia roctomiitary dcmahds
oh thc British ccohomy durihg thc âpocohic ars ih makihg thc
improvcmchtoIstcamchgihcsahdsuchcpoch-makihgihhovatiohs as
thc iroh raivay ahdirohshippossibcatatimc ahduhdcrcohditiohs
vhich simpy voudhothavccxistcdvithoutthcvartimcimpctusto
iroh productioh. hthisschsc,thchdustriaKcvoutiohihthcscctors
thatrcaymattcrcd-i . c. , thccapita-goodsihdustrics-vasargcya
byproduct oIthcLuropcah armamcht racc. Vcry sooh,hovcvcr, thc
appicatiohoIthcproducts ahdproccsscsoI modcrh ihdustry tovar-
makihg activitics-vhat ^c^ci cas thc ìhdustriaizatioh oI
var'-gavc ah uhprcccdchtcd impusc to thatracc.
!hcihdustriaizatiohoIvarbcgahihcarhcstihthcl8+0svhchthc
!rchch havy adoptcd armorcd stcamships carryihgargc-caibcr shc
guhs vhich madc voodch varships hopccssy obsoctc. Ps thc
!rchch havy auhchcd cvcr morc sophisticatcd armorcd stcamships,
29 The diffusion of Maurician "scientific management" to European armies had
a double significance. In Europe, it neutralized the advantages of scale enjoyed by
Spain and thereby tended to equalize military capabilities and thus reproduce the
balance of power. Outside of Europe, it enabled European drillmasters to create
miniature armies by recruiting local manpower for the protection of European trading
stations on the shores of the Indian Ocean. "By the eighteenth century, such forces,
however miniscule, exhibited a clear superiority over the unwieldy armies that local
rulers were accustomed to bring into the field" (ibid., pp. 127-39) .
thc British havy had ho choicc but to Ioovsuit. Ps othcr statcs did
thc samc, thc hcv armamcht racc acquircd a momchtum oI its ovh
that hcithcr Britaih hor !rahcc coud cohtro.
!hc Crimcah ar , l8+6) vas a kcy turhihg poiht. Prouhd
l80, craIt mcthods oI productioh vcrc sti prcdomihaht ih thc
armamchtihdustrythroughoutLuropc,asthcyvcrcihmostbrahchcs
oIthc capita-goods ihdustry. But, bctvcch l8 ahd l870, uhdcrthc
ihitia impact oIthc Crimcahar, thcsc mcthods vcrc dispaccdby
vhat vas thch cacd thc `Pmcricah systcm oI mahuIacturc. ' !hc
kcy prihcipc vas thc usc oI automatic or scmiautomatic miihg
machihcs to cut ihtcrchahgcabc parts to prcscribcd shapcs. !hcsc
machihcsvcrccostyahdvastcIuoImatcria `ButiIaargchumbcr
oI guhs vcrc hccdcd, automatioh paid Ior itscI mahy timcs ovcr
throughthcccohomics oI mass productioh. '!hcBritishgovcrhmcht
ahd Bcgiah guhmakcrs vcrcthcIirstto import Pmcricah machihcry
but by l870 thcy vcrc joihcd by Pustria, !rahcc, russia, Kussia,
bpaih, Lchmark, bvcdch, !urkcy, ahd cvch Lgypt. Ps a rcsut,
ihtcrstatccompctitiohih thcprocurcmcht oIsma armsvas sctIrcc
Irom thc shackcs oI craIt productioh, chtirc armics coud bc rc-
cquippcd ih a mattcr oI ycars ihstcad oI dccadcs, ahd this spccd-up
bccamcihitscIaIactoroIihccssahtihhovatiohsihthcdcsighoIsma
arms. `
Ptthcsamctimc, argc-scacprivatc chtcrprisc bccamc a Iactorih
thcarmamchtracc.!hc kcyihvchtiohpromptcdbythcCrimcahar
vas thc discovcry oI thc Bcsscmcr proccss Ior makihg stcc, vhich
madc odcr mcthods Ior guh-castihg obsoctc. Cohtrary to vhathad
happchcd ih sma-guh productioh-vhcrc statc arschas had pio-
hccrcdchahgcsihthcaborproccssahdihproductdcsighthatchabcd
thcmtocchtraizcproductiohihthcirhahds atthccxpchscoIprivatc
sma busihcss-ih hcavy-articry productioh thc adoptioh oI hcv
mcthods ahd matcrias vas piohccrcd by big privatc chtcrpriscs,
vhich cchtraizcd ih thcirhahds activitics prcviousy carricd out ih
statc arschas.
Pgoba,rhdustriarzcdarmamchts busihcss thus cmcrgcdihthc
l860s. . . . Lvch tcchhrcay proIrcrcht govcrhmcht arschas rkc
thc !rchch, Brrtish, ahd russiah, Iaccd pcrsistcht chachgc
Irom prrvatc mahuIacturcrs, vho vcrc hcvcr oath to porht
out thc vays rh vhrch thcrr products surpasscd govcrhmcht-
madc vcapohry. Commcrcia compctrtioh thus addcd rts Iorcc
30 Ibid. , pp. 225-7, 233-6.
`
`
to hatioha rivary ih Iorvardihg improvcmchts ih arti|cry
dcsigh.`'
!hc Crimcahar aso addcd a hcv momchtum to thc cohstructioh
oIhatioha raivay systcms throughoutcohtihchtaLuropc. !hc var
dcmohstratcd that stcamship tcchhoogy chhahccd thc ogistica
advahtagcs choycd by hava povcrs vis-a-vis ahd povcrs. hcrcas
troops ahd suppics coudbcschtIrom!rahccahdLhgahdby scato
thcCrimcaihthrccvccks,KussiahtroopsahdsuppicsIromôscov
somctimcstookthrccmohthstorcachthcIroht.hadditioh,aBritish
bockadc stiIcdthc importatioh oI hcv vcapohs ihto Kussia by sca
ahd cut oII much oI Kussia's Ilov oI graih ahd othcrcxports vith
vhich topayIorvhatcvcr suppics coud bc importcdovcrahd.!hc
cohstructioh oI cIIicicht hatioha raivay systcms thus camc to bc
pcrccivcdasahihtcgraaspcctoIvar- ahdstatc-makihgactivitics,hot
ustihKussia,butihCchtra ahdbouthcrhLuropc asvc,cadihgto
a truc mahia Ior raivays amohg Luropcah govcrhmchts. Bctvcch
l80ahdl870,0,000micsoIhcvihcvcrcaidihLuropcasagaihst
l,000ihathcycarsbcIorc. !hcIorvardahdbackvardihkagcs oI
this upsurgc ih Luropcah raivay cohstructioh, ih turh, bccamc thc
sihgcmostimportahtIactorihthcharrovihgoIthcihdustriaizatioh
gap bctvcch Brttaih ahd Cohtihchtal Luropcah statcs.`
`
!hc ihdustriaizatiohoIvargavcahcvtrcmchdousimpusctothc
scI-rcihIorcihg cycc ih vhich Luropcah miitary orgahizatioh sus-
taihcd,ahdvas sustaihcdby,ccohomicahdpoiticacxpahsiohatthc
cxpchscoIothcrpcopcs ahdpoiticsoIthccarth. Ps stcamships ahd
raivays ahhihiatcd hatura obstaccs oI gcography ahd distahcc,
`thcdrasticdiscrcpahcybctvcchLuropcahahdocaorgahizatiohIor
31 This was only the beginning of a long process in which business enterprises
became protagonists of the armament race, and were in turn transformd by it: "as
arms firms became pioneers of one new technology after another-steel metallurgy,
industrial chemisrry, elecrrical machinery, radio communications, turbines, diesels,
optics, calcularors (for fire control ) , hydraulic machinery, and the like--they evolved
into vast bureaucratic structures of a quasi-public character" (ibid., pp. 237, 241, 292) .
32 Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and
Military Conflict from 1500 to 2000 (New York, Random House, 1987) , p. 174;
William L. McElwee, The Art of War, Waterloo to Mons (London, Weidenfeld &
Nicolson, 1974), pp. 106-10; David S. Landes, The Unbound Prometheus: Techno
logical Change and Industrial Development in Western Europe from 1 750 to the
Present (Cambridge, Cambridge University Press, 1969), pp. 201-2. According to
Clive Trebilcock, the spin-off from public expenditure in arms manufacture between
1890 and 1914 affected European economies almost as much as railroads had done
earlier. Quoted in McNeill, The Pursuit of Power, p. 292.
I
THE WORLD STATE THAT NEVER WAS ì
var bccamc apparcht ih ohc part oI thc vord aItcr ahothcr. ' !hc
hcvy acquircd `hcar mohopoy oI stratcgic commuhicatioh ahd
trahsportatioh, togcthcr vith a rapidy cvovihg vcapohry that
rcmaihcd avays Iar ih advahcc oI ahythihg oca Iightihg mch coud
ay hahds oh,' madc impcria cxpahsioh às chcap ahd casy Ior
Luropcahs as itvas catastrophicto Psiahs,PIricahs, ahdthcpcopcs
oI Cccahia.
, ,
``
P Iourth obscrvatioh cohccrhihg thc hcxus bctvcch capitaism,
ihdustria ism, ahdmiitarismvasthcimportahccoIcohtroovcrthc
vord's iquidity ih gaihihg miitary advahtagc. h this rcspcct,
bchumpctcr's capitaists hcld svay ovcr chtrcprchcurs
!hus, thc
abuhdaht iquidity that accumuatcd ih, or passcd through, British
hahds ih thc hihctcchth cchtury vas a povcrIu ihstrumcht ih thc
compctitivc struggc, hot ust ih commodity markcts but ih thc
armamcht racc as vc. !romthc mid l8+0s throughthc l860s, most
tcchhoogicabrcakthroughsihthcdcsighoIvarshipsvcrcpiohccrcd
by !rahcc. Phd yct, cach !rchch brcakthrough cacd Iorth hava
appropriatiohs ihBritaih that!rahcc coudhot match, so thatit vas
`rcativcy casy Ior thc Koya âvy to catch up tcchhicay ahd
surpass humcricay cach timc thc !rchch chahgcd thc basis oI thc
compctitioh.
,,
`" !his pattcrh oI thc hihctcchth-cchtury armamcht
racc vas Iirst ahd most spcctacularly piohccrcd by thc Cchocsc
capitaist diaspora thrcccchturics caricrvhch, ashotcd ih Chaptcr
8, it squcczcddry its bcriah parthcrs vhohad dohc a thc vork oI
opchihguptoLuropcahcxpoitatiohhcvtradcroutcsahdcohtihchts.
But thc pattcrh rccurrcd ohcc agaih ih thc compctitioh bctvcch thc
Lhitcd btatcs ahd thc LbbK durihg thc Cod ar. !hc kcy tcchho-
33 McNeill, The Pursuit of Power, pp. 143, 257-8. As previously noted, the ease
and cheapness of British imperialism in the Victorian era was due primarily to the
forcible extraction from India of pecuniary and military manpower resources. Insofar
as India was concerned, the main effect of the industrialization of war was to
counteract the increasing sophistication of Indian armed resistance. Whereas in the
late eighteenth century British armies could defeat Indian armies six or seven times as
large, by the 1840s the British had to use armies equally as large and with superior
firepower to defeat Indian armies. See Robert B. Marks, The Origins of the Modern
World: A Global and Ecological Narrative from the Fifteenth to the Twenty-First
Century (Lantham, MD, Rowman & Littlefield, 2007) , p. 153, and Philip D. Curtin,
The World and the West: The European Challenge and the Overseas Response in the
Age of Empire (Cambridge, Cambridge University Press, 2000), ch. 2. On some
catastrophic aspects of European imperial expansion for the peoples of the future
global South, see Mike Da vis, Late Victorian Holocausts: El Nino Famines and the
Making of the Third World (London, Verso, 2001).
34 McNeill, The Pursuit of Power, pp. 227-8.
ogica ihhovatioh oI thc `var' vas thc auhchihg oI thc bovict
Sputnik ih |ctobcr l97, but its achicvcmchts vcrc compctcy
ovcrshadovcd by thc spacc program that thc Lb auhchcd ih l96l
vithahabuhdahccoIIihahciamcahschtircybcyohdthcrcachoIthc
LbbK.
Ih short, thc ihtcrstatc struggc Ior cohtro ovcr thc vord's
rcsourccs vas ah ihtcgra dimchsioh oIthc ihtcr-capitaist compcti-
tiohthat drovc thc chdcss accumuatioh oI povcr ahd capita aohg
thcLuropcahdcvcopmchta path. Ihdccd,thcarmamchtraccvasthc
primary sourcc oIthc chdcss strcam oI ihhovatiohs that cohtihuay
crcatcd hcv spatia cohIiguratiohs oI tradc ahd productioh oI ih-
crcasihg scac ahd scopc ahd dcstroycd prc-cxistihg ohcs.hatmadc
thcLuropcahpathspcciIicaycapitalist vas thcIactthatcohtroovcr
thcvor d' sIihahcia rcsourccs providcdthc dccisivc advahtagcihthc
struggc ovcr a othcr rcsourccs. Pthough ihdustriaism vas, Irom
thcstart,ahihtcgracompohchtoIthcpath,thcIhdustriaKcvoutioh
itscI vas ah ìhtcrvchihg' rathcr thah ah ìhdcpchdcht' variabc.
thc rcsut oI tvo or thrcc cchturics oI ihtcractioh bctvcch Iihahcc
capitaism,miitarism, ahdimpcriaism, vhich thch bccamc thc most
povcrIu chcrgizcroIthcmix. ôrcovcr, as sooh asihdustriaizatioh
bccamc thc kcy dctcrmihaht oI miitary might, thc virtuous circc oI
chrichmcht ahd cmpovcrmcht aohg thc Luropcah path bcgah to
approachitsimits.!hc Luropcah struggcsovcrthcspacccohsidcrcd
vitatocrcatcahdmaihtaihcompctitivcmiitary-ihdustriacompcxcs
spuh out oI cohtro, crcatihg ah opchihg Ior thc `rcvot agaihst thc
cst' oI thc Iirst haI oI thc tvchticth cchtury, vhich sharpy
ihcrcascd thc costs ahd rcduccd thc bchcIits oI ovcrscas tcrritoria
cxpahsioh. Ptthc samc timc, it provokcd a `migratioh' oIthc ocus
oIpovcrIurthcrvcstahdcasttovardsthctvocohtihcht-sizcdstatcs
that had arcady acquircd a thc spacc thcy hccdcd to crcatc ahd
maihtaih compctitivc miitary-ihdustria compcxcs. !hc rcsut vas
thc irrcvcrsibc mutatioh ih thcstructurc oIthcgobaizcdLuropcah
systcm skctchcd by Lchio ih thc passagc quotcd at thc bcgihhihg oI
this chaptcr.
Lhdcr thc hcv systcm, goba miitary capabiitics bccamc ah
cIIcctivc `duopoy' oI thc Lhitcd btatcs ahd thc LbbK but thc
armamcht racc cohtihucd vith a vchgcahcc, drivch by a `baahcc
oI tcrror' rathcr thah a baahcc oI povcr. Ps ^c^ci hotcs, `vith
thcdiscovcryoIatomic cxposivcs, humahdcstructivcpovcrrcachcd
a hcv, suicida cvc, surpassihgprcvious imits to a but uhimagih-
abcdcgrcc. ' Lhimagihabcasit vas,thisdcgrccvas surpasscd agaih
vhchthcihstaatiohoIhuhdrcdsoIohg-rahgcmissicsihthcdccadc
Ioovihgl97cmpovcrcdthcLhitcd btatcs ahdthcLbbKtodcstroy
cach othcr's citics ih a mattcr oI mihutcs. !hc sighihg oIa Iivc-ycar
btratcgic Prms Limitatioh !rcaty ,bPL!) ih l972 cohsoidatcd thc
baahcc oItcrror bctvcch thc tvo supcrpovcrs but did hot hat thc
armamcht racc. It simpy shiItcd it `to othcr kihds oI vcapohs hot
mchtioncd ih thc trcaty Ior thc good rcasoh that thcy did hot yct
cxist.' '``
Ih thc scichtiIic discovcry oI hcv vcapohs systcms-cvch morc
thah ih thc ihdustriaizatioh oI var-thc supcrpovcr vith grcatcr
commahd ovcr goba Iihahcia rcsourccs coud turh thc baahcc oI
tcrrortoits ovhadvahtagcby stcppihgup,orbythrcatchihgto stcp
up, its rcscarch cIIorts to cvcs that thc othcr supcrpovcr simpy
coud hot aIIord. !his is vhat thc Lhitcd btatcs did ih thc l980s,
thcrcby drivihgthcLbbKihtobahkruptcy ahdbrihgihgthctchdchcy
tovards thc cchtraizatioh oI goba miitary capabiitics to its
utimatc cohscquchccs . But vhic thc cohvcrsioh oI Lb vcath ihto
a sourcc oI povcr vas rcativcy casy, thc cohvcrsioh oIthc chsuihg
hcar mohopoy oIgoba miitary capabiitics ihto a sourcc oI vcath
has bcch Iar morc probcmatic.
Ih dcaihgvith this issuc oIthc rcatiohshipbctvcchvcath ahd
povcr, bmith's rcductioh oI thc povcr cohIcrrcd by vcath to
purchasihgpovcrisIarcssuscIuthahobbcs' sorigihacohtchtioh,
vhichbmithcitcsvithoutdoihg| usticctoit. obbcs' srcmarksohthc
sub|cctIoovcdthc obscrvatiohthat `tohavcscrvahts, isovcr!o
havcIrichds,is ovcr, Iorthcy arc strchgths uhitcd,' Irom vhichhc
dcduccd thc maxim that. `Pso Kichcs | oyhcd vith ibcraity is
ovcr, bccauscitprocurcthIrichds,ahdscrvahts.ithoutibcraity,
hot so, bccausc ihthis cascthcydcIchdhot, butcxposcmchtoLhvy,
as a rcy. '
,
`
Pthough thcsc rcmarks rcIcr to ihdividuas, thcy arc cspcciay
uscIu ihcapturihg thc cvovihgogic oI povcr oI capitaist statcs ih
thc gobaizihg Luropcah systcm. hch thc Itaiah city-statcs Iirst
piohccrcd thc capitaist ogic oI povcr through massivc accumua-
tiohs oI capita ih sma tcrritoria cohtaihcrs, thcy did usc somc oI
thcirvcathtoprocurcÌrichds' ahd`scrvahts,' buthotsuIIicichty
to avoid bccomihgthcprcy oIthc argcr tcrritoria statcs vhich thcy
mobiizcd as aics ih thcir mutua struggcs. !o rcturh to dc a
Court' s mctaphor, thc samc Iatc bcIc thc `cat oI oahd' vhich,
35 Ibid., pp. 360, 368, 372-3.
36 Thomas Hobbes, Leviathan, ed. C. B. Macpherson (Harmondsworth, Pen
guin, 1968) , p. 150.
dcspitc its argcr tcrritoria domaihs ahd its Iar morc cxtchsivc
hctvorks oItradc ahd accumuatioh, had ah ihcrcasihgy hardtimc
ih kccpihg at bay thc `bcasts oI prcy' oIthc Luropcah uhgc. !hc
situatioh chahgcd vhch a bcast oIprcy, thc ìoh' oILhgahd, itscI
bccamcthccadihg capitaist statcahd uscdthcrcsourccsitcxtractcd
Iromits gobc-chcircihg cmpirc, Iirst ahd Iorcmost hdia, to procurc
aics ahd cichts ih thc cxpahdihgLuropcah vorld, cspcciay ih thc
Pmcricas. Ps ih thc casc oI its prcdcccssors, hovcvcr, thc cxtra-
ordihary vcath oI thc Lhgish ioh cxposcd it to thc chvy oI othcr
statcs , vhich Ioovcd ih thc Iootstcps oI its ihdustriaism ahd its
impcriaism, ahd thcrcby raiscd thc costs ahd rcduccd thc bchcIits oI
both.
!hc situatioh chahgcd cvch morc dramaticay vhch thc Lhitcd
btatcs bccamc thc cadcr oIthc capitaist vord, ahdih ah attcmpt to
cohtaih thc Iorccs oI hatiohaism ahd commuhism, chgagcd ih a
procctoIvordgovcrhmcht vithoutprcccdchtihthc cstcrhsystcm
oI statcs . !o this chd, thc Lhitcd btatcs cxpcrimchtcdvith thc idca
that `Kichcs oyhcd vith ibcraity is ovcr, bccausc it procurcth
Irichds, ahd scrvahts. ' Pthough Lb maghahimity vas crucia ih
ihIatihg Lb povcr ih thc cary stagcs oI thc Cod ar, it tchdcd to
trahsIorm its maih bchcIiciarics ,Ccrmahy ahd japah) ihto compc-
titors,thcrcbyuhdcrmihihgits ovhIouhdatiohs. !hisdocshotmcah
that maghahimity ih ihtcrstatc rcatiohs is hcccssariy scI-dcIcatihg
ahd short-ivcd. t simpy mcahs that ih ordcr to scc hov obbcs's
maxim coud ih Iact bc cIIcctivc ovcr ohg pcriods oI timc ih a
diIIcrcht systcmic cohtcxt, ahd may ohc day bccomc cIIcctivc agaih,
vc must shiIt our Iocus Irom thc Luropcah path oI capitaistdcvc-
opmchtbackto thc LastPsiahpathoI markct-bascd dcvcopmcht
vhich vc hov do ih art V.
Par IV
LINEAGES OF THE NEW ASIAN AGE
10
THE CHALLENGE OF
"PEACEFUL ASCENT"
`!hc storm cchtcr oIthc vord has shiItcd . . . to Chiha. hocvcr
uhdcrstahds that mighty Lmpirc . . . has a kcy to vord poitics Ior
thchcxtIivchuhdrcdycars. '!hus,ih l899LbbccrctaryoIbtatcjohh
ayahhouhccd thc Cpch LoorpoicythatdcmahdcdIorthc Lhitcd
btatcscommcrciaacccssto ChihacquatothatoIothcrgrcatpovcrs.
Quotihgaymorcthahacchturyatcr,IormcrLbambassadortothc
Lhitcd âtiohs Kichard o brookc has caimcd that today `cvcry-
thihgisdiIIcrchtahdhothihghas chahgcd. ' h`vcrydiIIcrchtvays,
thc Lhitcd btatcs sti sccks ah opch door, thc sccrctary oI thc
!rcasury ahd ah chragcd Cohgrcss arc hammcrihg Chiha to rcvauc
its currchcy to givc L. b. compahics a bcttcr chahcc to compctc vith
thc vord's Iastcst-grovihg maor ccohomy. '
Pace obrookc, ih this rcspcct thc situatioh today is radicay

diIIcrchtIromacchturyago.Lhdcr!C rucs,thcLhitcdbtatcshas
a commcrcia acccss to Chiha cqua to that oI ahy othcr couhtry.
hatismorc,vhchChiha oihcdthc!Cih200l, ìtagrccdtoohc
oIthcIastcstprograms oI importduty cuts ahdmarkctopchihgcvcr
acccptcd by a hcv mcmbcr', ahd dcspitc probcms, it has `mct thc
dcadihcs ahd passcd thc avs.
, ,
`
!hc probcm ih Lb-Chihcsc rca-
tiohs at thc turh oI thc tvchticth-Iirst cchtury is ho ohgcr Lb
commcrcia acccss to Chiha. Kathcr, it is thc Iact that Chiha has
rcpaccd thc Lhitcd btatcs as thc vord's Iastcst-grovihg maor
ccohomyahdis scckihgcommcrciaacccsstothcLhitcdbtatcscqua
1 R. Holbrooke, "China Makes its Move," Washington Post, May 27, 2005.
2 H. Winn, "Accession Has Brought Changes to China and WTO," Interna
tional Herald Tribune, November 7, 2005. Among other things, China was allowed to
join the WTO only after it agreed that other WTO members would be allowed to
restrict Chinese textile and apparel exports if these exports surged and disrupted
markets. In 2005 both the European Union and the United States took advantage of
the agreement to reimpose quotas on Chinese imports. See J. Kanter and K. Bradsher,
"A Return to Quotas," New York Times, November 9, 2005.
tothat oIothcrstatcs.htcrms oIay'smctaphor,thcprobcm ishot
ust that thc storm cchtcr oIthc vord has shiItcd to Chiha-somc-
thihg that is trucr today thah a cchtury ago. !hc probcm is thc
vidcsprcadpcrccptiohihthcLhitcdbtatcsthataChiha-cchtcrcd`rcd
storm,' as LouLobbsputitohthcjuhc 27,200cditiohoIhis C^^
shov, ìs hittihg our shorcs. '
PItcr brcvihg Ior ycars, thc issuc oI hov opch thc Lb `door'
shoudbctoChihcsccxportsahdihvcstmchtcruptcdihthcpahicovcr
thc bidoIChihaâtioha CIIsnorc Ci Compahy ,C^CCC) Ior Lb
oi compahy Lhoca. Pthough Lhoca had arcady agrccd to bcihg
takch ovcr by Chcvroh, as it cvchtuay vas, oh juhc J0 thc ousc
passcd a rcsoutioh by a J98-to-l votc, statihg that aovihg
C^CCC to buy Lhoca voud `thrcatch to impair thc hatioha
sccurity oIthc Lhitcd btatcs. 'Lmotiohs rah high. P dircctor oIthc
Cchtra htcigchcc Pgchcy ih thc Cihtoh admihistratioh cacd
C^CCC thc corporatc vchicc oI à Commuhist dictatorship,'
cchoihgLobbs's `rcdstorm' rhctoric. P schiorLcIchscLcpartmcht
oIIiciaih thcKcagahadmihistratiohdcscribcdthc C^CCCmovc as
a stcpihprovidihgChihaviththcrcsourccs hccdcd`tosuppahtthc
Lhitcdbtatcsasthcprcmicrccohomicpovcrihthcvordahd,shoud
it bccomc hcccssary, dcIcat us miitariy.
, ,
`
ard as it is to tc vhcrc Cod ar ahti-commuhism chds ahd
ahxicty about a hcv compctitor bcgihs, thc 200 pahic ovr
C^CCC' s bid Ior Lhoca is rcmihisccht oI atc l980s Lb ahxictics
about thc `japahcsc thrcat. ' Back thch, Loug chvood rccas, it
vas caimcd that,
havrhg dcstroycd our rndustrra basc through ùhIarr' compctr-
troh, thc japahcsc had movcd oh to buyrhg up Lb asscts, ikc
!rcasurybohds, KockcIccrCchtcrahd ^CP. 1hcrca thrcat, oI
coursc, vas that thc Lhrtcd btatcs vas Iacihg a scrrous ccohomrc
compctitor. . . . !hat rt vas Psrah gavc thc ahxrous a dccp toxrc
rcscrvorr to drav upoh. 1hch thcjapahcsc bubbc burst, ahd thc
thrcat oI thc ycov pcri rcccdcd. ut it's back agaih, this trmc
vrth a Chrhcsc Iacc."
Lvch obscrvcrs ikc Krugmah, vho IiItcch ycarscaricrhad urgcd thc
Lb pubic hot topahic aboutjapahcscpurchascs oILb corporatiohs,
Ict that thc `Chihcsc chachgc ooks a ot morc scrious thah thc
3 S. Lohr, "Who's Afraid of China Inc. ?" New York Times, July 24, 2005.
4 D. Henwood, "Chinese Shark Attack," The Nation, July 12, 2005.
THE CHALLENGE OF "PEACEFUL ASCENT"
279
japahcsc chachgc cvcr did. ' Krugmah Iouhd `hothihg shockihg'
aboutthcIactthatthc Chihcsc sccmcdtobcho ohgcr `satisIicdvith
thcrocoIpassivcIihahcicrs oIthcLbIorcighdcbt| ahddcmahdthc
povcr thatcomcsvith ovhcrship. ' hdccd,thcLhitcdbtatcs shoud
bc rcicvcd that thc Chihcsc sought to usc thcir doars to buy Lb
compahics rathcr thah dumpihg thcm. \ct, hc sav tvo rcasohs vhy
Chihcsc ihvcstmcht diIIcrcd Irom ja.pahcsc ihvcstmcht IiItcch ycars
caricr. Chc rcasoh is that thc Chihcsc shov ho ihcihatioh to
`squahdcr thcir mohcy ih prcstigc ihvcstmchts| as bady as thc
japahcsc did.' !hcir ihvcstmchts, thcrcIorc, promisc to bc css oI
asubsidytothcLhitcd btatcs thahjapahcscihvcstmchtsvcrc.Butthc
morc importahtrcasohisthat`Chiha, uhikcjapah, rcay docs sccm
tobccmcrgihgasPmcrica'sstratcgicrivaahdacompctitorIorscarcc
rcsourccs. ' !his madc thc Chihcsc bid Ior Lhoca, ah chcrgy com-
pahy vith goba rcach, `morc thah ust a busihcss propositioh. '
Lhoca souhds . . . rkc cxacty thc krhd oIcompahy thc Chihcsc
govcrhmchtmight vaht to cohtro rIrt chvrsrohs a sort oI `grcat
gamc'rhvhrch ma|or ccohomrcpovcrsscrambcIoracccsstoIar-
Iuhg or ahd hatura gas rcscrvcs. ,uyihg a compahy is a ot
chcapcr, rh rvcs ahd mohcy, thah rhvadihg oi-producihg
couhtry). . . . II it vcrc up to mc, I'd bock thc Chrhcsc brd Ior
Lhoca. ut rt voud bc a ot casicr to takc that positioh iI thc
Lhrtcdbtatcs vcrch'tsodcpchdchtoh Chrharrghthov,hot| ustto
buy its Ls, but to hcp Pmcrrca to dca vith 'orth Korca hov
that thc L.b. mrrtary rs boggcd dovh m Iraq.`
P thc symptoms oIthc Chiha syhdromc discusscdih Chaptcr7 arc
apparcht ih this diaghosis. !hc 9/ll attacks had givch thc hco-
cohscrvativcsvithihthcBush admihistratiohthcgodchopportuhity
thcy had bcch vaitihg Ior to ihvadc raq ih thc pursuit oIthc doubc
obcctivc oI ovcrcomihg thc Victham syhdromc ahd tightchihg Lb
cohtro ovcr goba chcrgy suppics. Pthough chgagcmcht oh thc
cst Psiah Iroht ihvovcd scttihg asidc thc campaigh to cohstraih
Chiha ohg advocatcd bythchco-cohscrvativcs, itvas rcasohabc Ior
thcm to cxpcct that a quick ahd casy victory ih raq voud crcatc
highy Iavorabc cohditiohs Ior rcsumihg thc campaigh morc cIIcc-
tivcy. Bythc summcr oI200+, hovcvcr, it had bccomc ccar thatthc
ihvasiohoIraqvashotgoihgtoattaihitsorigihaob cctivcsahdvas
5 P. Krugman, "The Chinese Challenge," International Herald Tribune, June
28, 2005.
z
'
ihstcad Iaciitatihg thc cohsoidatioh ahd Iurthcr cxpahsioh oI Chi-
ha's ccohomic ahd poitica povcr ih thc Last Psiah rcgioh ahd
bcyohd. P Iccihg thus bcgah to crccp ihto circcs cosc to thc Bush
admihistratioh that momchtum vas bcihg ost ih thc campaigh to
cohtaih Chiha ahd that thc timc had comc to dcvisc morc rcaistic
atcrhativcs to thc Iaicd hco-cohscrvativc pah.
!hcpurposcoIthischaptcristo survcythrccsuchatcrhativcs, tIc
probcms vhich thcy posc, ahdthc rcasohs vhy Lb poicics tovards
Chiha havc bcchcharactcrizcdby ahihcohcrchtmix oIthcthrcc. P
thrccatcrhativcshavc bcchproposcdby cohscrvativcsbut cohstitutc
diIIcrcht ogica possibiitics that, ih ohc variaht or ahothcr, cah bc
cxpcctcdtoguidcLbpoicicsrcgardcss oIvhichpartyrucsthcroost
ihashihgtoh.hichpahvi cvchtuayprcvaiishardtotc. P
vccah say Iorccrtaihis thatahti-Chihcscrhctoriccuts across party
ihcs ahd a Lcmocratic admihistratioh is uhikcy to dcpartIrom thc
rcpcrtoirc oI poicics aid out hcrc.
Coming to Ters with China's Ascent
!hc Lhitcd btatcs is ih thc habit oI schdihg to Chiha `bizarrcy
mixcd' sigha s.
ay m thc capitaistbaparkbuthotsovcthatyoubccomc ohc
oIthc bigstars. It is a mcssagc that, as vith thcjapah-bashihg oI
thc I980s, is at bcst parahoidahd at vorst racist. c ihthc cst
cah bc trustcd vith chormous ccohomic povcr, but hot thc
chidrch oI H csscr god. '
,
!hc pahic ovcr C^CCC's bid Ior Lhoca scht cvch morc cohtra-
dictorysighas. `chahdcd Chihathcmohcythcyarc usihgtotryto
buy Lhoca,' saidCydcV. rcstovitz, atradcoIIicia ih thcKcagah
admihistratioh. `Phd hov vc'rc tcihg thc Chihcsc, pcasc kccp
ihvcstihgihourbohdsbutyoucah'tihvcstvhatamouhtstoasivcroI
thcir surpus ih ah oi compahy. hat's rcay cohIuscd ahd hypo-
critica oh our part.
,,
orsc sti, cgisators vho àuthorizcd thc
'prccmptivc' cohqucrihg oI thc hatioh vith thc sccohd-argcst oi
6 R. Scheer, "On China at Least, Nixon Was Right," Los Angeles Times, July
26, 2005.
7 Quoted in Lohr, "Who's Afraid of China Inc. ?" New York Times, July 24,
2005.
THE CHALLENGE OF "PEACEFUL ASCENT" z
i
rcscrvcs oh thc pahct arc| hov chachgihg Chiha's right to usc
doars itcarhcdcxportihg cgaproductsto buy a L. b. -bascd muti-
hatioha compahy. ' hic Psiahs `shoud hot| Icc ih thc cast bit
thrcatchcd by| Lhoca's ovhcrship oI hatura gas Iicds oh thcir
cohtihcht,' Lcmocrats ahd Kcpubicahs aikc caim a Lb right to
prcvcht thc Chihcsc Irom buyihg Lhoca Ior rcasohs oI hatioha
sccurity, dcspitc thc Iact that thc Lhitcd btatcs is `thc ohy hatioh
vith thc miitary povcr to impcmcht or prcvcht a vordvidc
bockadc oI oi or ahy othcr vita rcsourcc.
, ,
!hcsc cohtradictory sighas, ahd thc chtirc C^CCC cvcht, vcrc

ihtcgra to a shiIt oI Lb poicy to a morc bcigcrcht, ahti-Chihcsc
stahcc. PrcadyatthcKcpubicahcohvchtiohih^cv\orkihPugust
200+, it vas procaimcd that `Pmcrica vi hcp !aivah dcIchd
itscI. ' !hat samc summcr, thc Lb âvy carricd out `Cpcratioh
bummcr usc '0+,' vhichihvovcdthc simutahcous dcpoymcht at
sca oI scvch oI thc tvcvc Lb carricr strikc groups. Pthough ohy
thrcc oIthc carricrstrikc groups vcrc schttothcaciIic, thcshov oI
Iorcc dccpy aarmcd thc Chihcsc. !o cam thihgs dovh, oh Cctobcr
26 bccrctary oI btatc ovc dccarcd to thc prcss ih Bci ihg that
`!aivahishotihdcpchdcht.tdocshotchoysovcrcightyas ahatioh,
ahdthat rcmaihs ourpoicy,ourIirmpoicy. . . . c vahtto scc both
sidcs hot takc uhiatcra actioh that voud prcudicc ah cvchtua
outcomc, a rcuhiIicatioh that a partics arc scckihg.
,,
Lcspitc ovc's uhcquivoca statcmcht, aItcr thc ôvcmbcr ccc-

tioh ahdthc trahsitioh Iromovc'sto Kicc's btatcLcpartmcht,Lb
poicy svuhg cohspicuousy tovards ah aggrcssivc ahti-Chihcsc
stahcc. Ch !cbruary l9, 200 thc Lhitcd btatcs ahd japah sighcd a
hcv miitaryagrccmchtahdissucd adccaratiohih vhich IorthcIirst
timc japah oihcd thc Lhitcd btatcs ih idchtiIyihg sccurity ih thc
!aivah btrait as a `commoh stratcgic obcctivc. ' `ôthihg coud
havc bcch morc aarmihg to Chiha's cadcrs'-hotcs Chamcrs
johhsoh-`thah thc rcvcatioh that japah had dccisivcy chdcd six
dccadcs oI oIIicia paciIism by caimihg a right to ihtcrvchc ih thc
!aivahbtrait. '
!hcoIIicia^cv Chiha^cvsPgchcydcscribcdthc
oiht dccaratioh as ùhprcccdchtcd' ahd quotcd a schior Iorcigh
mihistry oIIicia as sayihg that Chiha `rcsoutcy opposcsthc Lhitcd
btatcs ahd japah ih issuihg ahy biatcra documcht cohccrhihg
8 Scheer, "On China at Least, Nixon Was Right." See also A.M. Jaffe, "China's
Oil Thirst: Wasted Energy," International Herald Tribune, July 28, 2005.
9 Chalmers Johnson, "No Longer the 'Lone' Superpower: Coming to Terms with
China," Japan Policy Research Institute (2005) , available at http://www.jpri.org, p. 7.
10 Ibid.
Chiha's !aivah, vhich mcddcs ih thc ihtcrha aIIairs oI Chiha ahd
h Ch
, , 1 1
urts mas sovcrcighty.
PIcvmohthsatcr,ohjuhc+,KumsIcdgavcaspccchat astratcgy
cohIcrchccih bihgaporc ihvhichhcobscrvcdthat Chiha àppcars to
bc cxpahdihg its missic Iorccs, aovihg thcm to rcach targcts ih
mahy arcas oIthc vord,' ahdis othcrvisc ìmprovihg its abiity to
projcct povcr' ih thc rcgioh. c thch vcht oh to ask, `bihcc ho
hatioh thrcatchs Chiha,ohcmustvohdcr. hythisgrovihgihvcst-
mchtr hy thcsc cohtihuihg argc ahd cxpahdihg arms purchascsr
hy thcsc cohtihuihg robust dcpoymchts r' Cohsidcrihg that Lb
pahcs ahd varships cohstahty hovcr oII thc Chihcsc coast, that
huccar-armcd Lb missics arc aimcd at Chiha, thatLb bascs chcircc
Chihaohasidcs,ahdthat, ovcrthcpasttchycars,thcLhitcdbtatcs
has dcivcrcd cvcr morcpotcht vcapohs to!aivah-cohsidcrihg a
this, to Bcijihg, rcmarks îchac Karc, `thcsc commchts musthavc
bcch astohishihg. ' Pstohishihg or hot, thc commchts `cxhibitcd a
grcatcr dcgrcc oIbcigcrchcctovards Chihathah had bcch cxprcsscd
ih ahyoIIiciaLbstatcmchtssihcc9/ll, ahdvcrcvidcyportraycdas
h h P d P
* , , 12
suc m t c mcfcah ah siah prcss.
Pmohthatcr,arcportohChihcsccombat capabiiticsrccascdby
thc chtagoh cohIirmcd thc bcigcrcht stahcc. Pthough thc docu-
mcht strcsscd thc vcakhcsscs as vc as thc strchgths oI Chiha's
miitarycstabishmcht,itsmaihthrustvasthatChihavascxpahdihg
its capacity to Iight vars bcyohd its ovh tcrritory ahd that this
cohstitutcs a dahgcrous chachgc to goba ordcr. `!hc pacc ahd
scopc oI Chiha's miitary buid-up arc, arcady, such as to put
rcgiohamiitarybaahccsatrisk,'thcrcportstatcd. `Currchttrchds
ih Chiha's miitary modcrhization coud providc Chiha vith a Iorcc
capabc oIprosccutihg a rahgc oI miitary opcratiohs ih Psia-vc
bcyohd !aivah-potchtiay posihg a crcdibc thrcat to modcrh
miitarics opcratihg ih thc rcgioh. ' !hc Chihcsc rcactcd prompty.
Pt a hastiy arrahgcdmcctihg, a schior Iorcigh mihistryoIIicia tod
thc Pmcricah ambassadorthat thc rcport purposcIuy disscmihatcd
thc thcory oI a `Chiha thrcat. ' `t crudcy ihtcrIcrcs ih Chiha's
ihtcrha aIIairs ahd is a provocatioh agaihst Chiha's rcatiohs vith
othcr couhtrics. '
13
By thc timc pahic ovcr thc C^CCCbid Ior Lhoca brokc out ih
11 Quoted in M. Klare, "Revving Up the China Threat: New Stage in US China
Policy," Japan Focus, October 13, 2005.
12 Klare, "Revving Up the China Threat . * . "
13 Ibid.
283
Cohgrcss ahdih thc mcdia,thc Bush admihistratioh had thus arcady
rcsumcd its campaigh to cohtaih ahd possiby roback Chihcsc
povcr. h this rcspcct, hovcvcr, distractcd as it vas by thc raq
ar, thc admihistratioh hadIach bchihd Cohgrcss ih ahti-Chihcsc
schtimcht, cspcciay ovcrthcLbtradcdcIicitahdthcacgcdyuhIair
Chihcsc practiccs that ay at its roots. hdccd, thc admihistratioh' s
rcsumptioh oIahti-Chihcscihitiativcs i hthcgcopoitica sphcrc may
vc bc ihtcrprctcd as aimcd at couhtcrihg prcssurc ih Cohgrcss Ior
stcppcd-up ahti-Chihcsc ihitiativcs ih thc commcrcia sphcrc.
!his much is impicd ih thc distihctioh dravh by thc hco-coh-
scrvativc âx Boot bctvcch `good Chiha-bashihg ahd bad Chiha-
bashihg.' Ps hc cxpaihcd,
bad bashihgcchtcrs oh compaihts aboutChihcscgoods Ioodihg
our markct. 1hc Iact is, thcir succcss shovs a ack oI compcti-
tivchcssih our ccohomy. Butthc KumsIcd commchts that Chiha
is spchdihg too much oh its miitary budgct ahd hot movihg Iast
choughtovard à morcopchahdrcprcschtativc govcmmcht'j arc
goodbashihg, bccausc Chiha'srapidarms buid-up . . . thrcatchs|
1aivah ahd coud ighitc ah arms racc that takcs japah, South
Korca ahd 1aivah huccar.
h Boot's vicv, this is vhy Chiha shoud rcIraihih miitary spchdihg,
ih spitc oI Lb miitary cxpchditurcs Iivc to tch timcs grcatcr thah
Chiha' s,ahd acccptthcPsiah statusquovithLbIorccsguarahtccihg
I
14
rcgioha sccufty.
Boot's argumchtsarcbroadycohsistchtviththcâtiohabccurity
doctrihc oI bcptcmbcr 2002, accordihg to vhich Lb Iorccs `vi bc
strohg chough to dissuadc potchtia advcrsarics Irom pursuihg a
miitary buidup ih hopcs oI surpassihg, or cquaihg, thc povr oI
thc Lhitcd btatcs. ' ^cvcrthccss, ih thc hcv cimatc oI goba
schsitivity to Pmcricah buyihg ahd ihcrcasihg Lb ccohomic dcpch-
dchcc oh Chiha, thcBush admihistratiohhadto trcad morcightyih
its attcmpt to prcscrvc Lb povcr. chcc its rcuctahcc to uhdcrtakc
protcctiohist ihitiativcs that might provokc Chiha ihto rctaiatory
mcasurcs that voud raisc Lb ihtcrcst ratcs vith uhprcdictabc
dcIatiohary cohscquchccs oh Lb cohstructioh ahd cohsumcr spchd-
ihg. Ps thc chairmah oI rcsidcht Bush's Couhci oI Lcohomic
Pdviscrs ,hov !cdcra Kcscrvc Chairmah) , Bch b. Bcrhahkc, put it
14 Quoted in R. Cohen, "Shaping China's Future Power," New York Times,
June 12, 20
?
5.
284
ih juy 200, thc Lb govcrhmcht sav itscI as havihg ìttc choicc
cxccptto bcpaticht' as itvorkstocrcatccohditiohsIorarcvcrsa oI
rocsthatvoudmakc thc Lhitcd btatcs morc oI aproducihg hatioh,
cvch stcppihg up its cxports to Psia, ahd ihducc Psia-cspcciay
Chiha-to takc oh morc thc roc oI cohsumcr. ``
h spitc oI thc grcatcr bcigcrchcc tovards Chiha oh gcopoitica
issucs ,Boot's `goodChiha-bashihg') , diIIicutics ih raq cacdIor a
morc rcaist posturc cvch ih this sphcrc. !hc hcv `rcaism borh in
raq, ah uhdcrtakihg so costy ih tcrms oI Pmcricah stahdihg ahd
crcdibiity ih thc vord that it has compicatcd, ahd may rchdcr
impracticabc, ahy Iurthcr cxcrcisc oIprc-cmptivc actioh ih thc var
oh tcrror, 'sooh bccamc cvidcht ih àh cIIort to rcpair somc oI thc
damagc oI thc Iirst Bush Iour-ycar tcrm| by rcachihg out to aics,
istchihg to thcm, ahd attcmptihg coopcrativc actioh Irom rah to
Kossovo.
, ,
'
!his morcrcaistposturcborhih raqvas hohcthccss
hard to pih dovh vhcrc it mattcrs most-ih Lb-Chihcsc rcatiohs.
ôrcovcr, vhat rcaism ih Lb-Chihcsc rcatiohs might mcah vas
,ahd sti is) a highy cohtrovcrsia issuc cvch amohg cohscrvativcs .
!hc vidc rahgc oI variatioh is bcst iustratcd by thc radicay
cohtrastihg positiohs oIKobcrtKapah, Ichry Kissihgcr, ahdjamcs
ihkcrtoh.
Towards a New Cold War?
Kapah's positioh is ah caboratioh oI ^carshcimcr's stratcgy oI
cohtaihmcht oI Chihcsc povcr through a `baahcihg coaitioh.
, ,
'
Likc ^carshcimcr,Kapahcohtcndsthat thccmcrgchccoI Chiha as a
grcatpovcrisihcvitabcahdsoisthccashoIsuch ahcmcrgchccvith
Lb ihtcrcsts. `hchcvcr grcat povcrs havc cmcrgcd . . . ,Ccrmahy
ahdjapah ih thc cary dccadcs oIthc tvchticthcchtury, to citc tvo
rcccht cxampcs) , thcy havc tchdcd to bc particuary asscrtivc--ahd
thcrcIorc havc throvh ihtcrhatioha aIIairs ihto viocht turmoi.
Chiha vi bc ho cxccptoh. ' Quitc cgitimatcy, ih Kapah's vicv,
thc Chihcsc havc rhvcstcd| ih dicsc-povcrcd ahd huccarpov-
crcd submarihcs . . . hot ohy to protcct thcrr coasta shcvcs but
15 L. Uchitelle, "China and the U. S. Embark on a Perilous Trip," New York
Times, July 23 , 2005.
16 Cohen, "Shaping China's Future Power."
17 Mearsheimer's views were anticipated in Chapter 7 and will be discussed
more fully in Chapter 11.
aso to . . . saIcguard sca ahcs Ior thc trahsport oI chcrgy
rcsourccs Irom thc îddc Last ahd cscvhcrc. âturay, thcy
do hot trust thc Lhtcd btatcs . . . to do ths Ior thcm. Civch thc
stakcs, ahd givch vhat history tcachcs L about thc cohIcts that
cmcrgcvhchgrcatpovcrs apursuccgrtrmatchtcrcsts,thcrcsut
is ikcy to bc thc dcIihihg miitary cohIict oI thc tvchty-Iirst
cchtury. iI hot a big var vith Chiha, thch a scrcs oI Cod ar-
styc stahdoIIs that strctch out ovcr ycars ahd dccadcs. '
285
hordcrto vihthishcv Codar,thcLhitcdbtatcs `mustapproach
povcrihthc most cautious,mcchahica,ahdutiitariah vaypossibc,
asscssihgahdrcasscssihgrcgioha baahccsoIpovcr' vithout bcihg
`cd astray by thc rapturcs oI ibcra ihtcrhatiohaism ahd hco-
cohscrvativc ihtcrvchtiohism. 'Pshadbcch thc casc uhdcr modcratc
Kcpubicah prcsidchts ikc Ccorgc I. . Bush, Ccrad !ord, ahd
Kichard îxoh, thc mahagcmcht oI risk must agaih bccomc à
govcrhihg idcoogy. ' îitary advchturcs ikc thc var oh raq vi
havc to bc carcIuy avoidcd.
LvchiIraqturhsouttobcadcmocraticsucccssstory,itvisurcy
bc aIrom-thc-|avs-oI-Iaiurc succcssthatho ohcihthcmiitaryor
thc dipomatic cstabishmcht vi cvcr vaht to rcpcat-cspcciay
rh Psia, vhcrc thc ccohomic rcpcrcussiohs oI a mcssy miitary
advchturc voud bc chormous . . . sihcc thc Lhitcd btatcs ahd
Chiha . . . havc thc capacity to kccp Iightihg cvch iI ohc or thc
othcr ost a big battc or a missic cxchahgc.
h ordcr to avoid such a dahgcrous coursc, Kapah advocatcs a
Bismarckiah stratcgy oI cohtaihmcht cchtcrcd oh thc Lb aciIic
Commahd, khovh as PCC^. !oovihg thc Ccrmah commchta-
torjoscIjoIIc, hc caims that thc ihvasioh oIPIghahistahcxposcd a
situatioh ih vhich thc Lhitcd btatcs rcscmbcd Bismarck's russia.
Britaih, Kussia, ahd Pustria hccdcd russia morc thah thcy hccdcd
ohc ahothcr, thus makihg thcm `spokcs' to Bcrih's `hub. ' !hc
ihvasioh oIPIghahistah shovcd that thc Lhitcd btatcs coud Iorgc
diIIcrcht coaitiohs Ior diIIcrcht criscs, bccausc thc vord's othcr
povcrs hccdcd thc Lhitcd btatcs morc thah thcy hccdcd ohc
ahothcr.
18 Robert D. Kaplan, "How We Would Fight China," Atlantic Monthly (June
2005), pp. 50-1.
UhIortuhatcy, thcUhrtcdbtatcsdrdhot rmmcdratcy caprtarzcoh
thrs hcv povcr arrahgcmcnt, bccausc rcsrdcht Ccorgc . ush
ackcd thc huahcc ahd attchdaht scI-rcstrarht oI rsmarck, vho
uhdcrstood that such a systcm coud chdurc ohy so ohg as ohc
drdh't ovcrvhcm rt. 1hc ush admrhrstratroh drd |ust that, oI
coursc, rh thc burdup to thc rhvasroh oI Iraq, vhrch cd !rahcc,
Ccrmahy, Kussra, ahd Chrha, aohg vrth a host oI csscrpovcrs
such as 1urkcy, ^cxrco, ahd Chrlc, to uhrtc agarhst US. 1
9
!ortuhatcy, hovcvcr, a Brsmarckrah arrahgcmcht str prospcrcd rh
thc acrIrc, `hcpcd aohg by thc pragmatrsm oI our avari-bascd
mrrtary oIIrccrs, Irvc trmc zohcs rcmovcdIrom thc rdcoogrca hot-
housc oI ashrhgtoh, L. C. ' Ihdccd, caimcd Kapah, PCC^
`rcprcschts a muchpurcrvcrsioh oI rsmarck's rmpcria supcrstruc-
turc thahahythihgthcBushadmrhrstratioh crcatcdpriortorhvadrhg
raq. 'Byhcgotratrhgbratcrasccurrtyagrccmchtsvrthcouhtricsthat
havc Icv such arrahgcmchts vrth ohc ahothcr, thc Lb miitary had
IormcdaacrIrcmritaryarahccoIsorts,cchtcrcdoha àgcographic
hub oI comparativc iso atroh-thc avairah sahds-vrth spokcs
rcachihg out to maor arcs such as japah, bouth Korca, !haiahd,
brhgaporc, Pustrara, ^cv Zcaahd, ahd hdia. !hcsc couhtrrcs, rh
turh, coudIormsccohdary hubs tohcp usmahagcthc^cahcsrah,
^rcrohcsiah,ahdoyhcsiaharchrpcagocs,amohgothcrpaccs, ahd
aso thc hdrah Cccah.
, ,
``
!his ` argc but himbccohstruct,' uhchcumbcrcd by adrpomatic
burcaucracy, cohstitutcs ah ùp ahd ruhhrhg' substitutc Ior thc
arahcc systcm oIthc attcr haI oIthc tvchticthcchtury. àrIarc
by commrttcc, as practrccd by ^P!C, has srmply bccomc too
cumbcrsomc rh ah agcthatrcqurrcs ight ahdctha strrkcs . '!orgihg
ihtcr-opcrabiity vrthIrrchdyPsiahmritarrcs,bycohstahtymovrhg
Lb troops Irom ohc trarhihg dcpoymcht to ahothcr, `voud bc ah
improvcmcht ovcr^P!C, vhosc Irghtihg Irthcss has bcch hampcrcd
by thc addrtroh oI substahdard Iormcr-Lastcrh-boc mirtarrcs . '
ôrcovcr,`tchsrohsbctvcchthcLhrtcdbtatcs ahdLuropc currchty
impcdcmrrtaryrhtcgratioh, vhcrcas ouraciIrc arcs,hotabyjapah
ahdPustraia,vahtmorcmrrtarychgagcmchtviththcLhrtcdbtatcs,
tocouhtcrthcrrscoIthcChihcschavy. 'BcttihgohPCC^docshot
mcah grvrhg up oh ^P!C. Chthc cohtrary, `thc vitarty oI^P!C
rtscI. . . coudbcrcvrvcdbythc CodarrhthcacrIrc-ahdihdccd
19 Ibid. , p. 50.
20 Ibid., pp. 51, 54-5.
287
thc rc-cmcrgchcc oI ^P!C as ah rhdispchsabIc var-Irghtihg ihstru-
mcht shoud bc Pmcrica's uhsvcrvihg arm. '
^P1C rs ourstolcad-uhrkcthc rhcrcasrhgypovcrIuLuropcah
Uhroh,vhoscovhdcIchsc Iorcc, shouldrtbccomca rcarty, vould
rhcvitaby cmcrgc as a compctrhgrcgroha povcr, ohc that mrght
alrghrtscIvrthChrharhordcr tobaahcc agarhstus. . . ^P1Cahd
ah autohomousLuropcahdcIchscIorcc cahhot both prospcr. Chy
ohccah-ahdvcshoudvahtrttobcthcIormcr,sothatLuropcrsa
mrrtary assct Ior us, hot arabrrty, as vc cohIrohtChrha
!hcidcathat thc Lhrtcd btatcs `vrhoohgcrchgagcrhthc`cyhrca'

gamcoIpovcrportics,'rhothcrvords,`rsrusory. '`cvrhavc
to cohtrhuay pay various parts oI thc vord oII Chiha, ust as
Krchard ^rxoh paycdcssthah moray pcrIcct statcs oIIthcbovrct
Lhroh. '!hcstagcvr bcthcaciIrcrathcrthahthcPtahtrc, ahdthc
marh actor vr bc PCC^ rathcr thah ^P!C. But thc purposc oI
thc gamc vr bcprcttymuch thc samc. `to dissuadc Chihasosubtly
thatovcrtimcthcrisihgbchcmothvoudbcdravhrhtothcPCC^
arahcc systcm vrthout ahy argc-scac cohIagratroh-thc vay
^P!C vas utrmatcy abc to hcutraizc thcbovictLhioh. ' Kapah
cautrohsthatLbcIIortsihthrsdircctioh`vircquircpartrcuarcarc,
bccausc Chiha, uhikcthc bovictLhioh oIod ,or Kussia today, Ior
that mattcr) , boasts soIt as vc as hard povcr.' By cstabishrhg
busihcss commuhitics ahd dipomatic outposts ahd by hcgotiatihg
cohstructiohahdtradcagrccmchtsaovcrthcgobc,`thc Chihcscarc
bccomihg mastcrs oI ihdircct ihIuchcc. ' ôrcovcr,
b| usihcss pcopcovcthcrdca oI Chrha. . . . Chrha's mrxturc oI
tradrtroha authorrtarrahrsm ahd markct ccohomrcs has broad
cutura appca throughout Psra ahd othcr parts oI thc vord.
Phd bccausc Chrha rsrmprovihgthc matcrral vc-bcrhg oI huh-
drcdsoImrrohs oIrtscrtrzchs,thcplrghtoIrtsdrssrdchtsdocshot
havc qurtcthc samc markct aurc as drd thc plrght oIthc bovrct
Uhroh's bakharovs ahd bharahskys.
``
Kapah's ^cv Codar stratcgy uhdoubtcdy rcIccts ah rmportaht
currcht oI thought vithrh thc Bush admrhrstratroh. !or cxampc,
accordrhg to ah Psiah sccuritycxpcrt ahd a Iormcr dcIchsc oIIrcra,
21 Ibid., p. 64.
22 Ibid., p. 54.
`
`!hcbuzzvordihthc chtagoh is ìhtcr-opcrabiity' bctvcch thc Lb
ahd!aivah. '!hccoopcratiohis`rcaycomihg cosctorc-cstahish-
ihg thc aiahcc' that cxistcd bctvcch !aivah ahd thc Lb bcIorc
ashihgtoh svitchcd its rccoghitioh to Bciihg. Pthough hcithcr
japah horthc Lhitcd btatcs vahtto admit it, a rctircd dipomathov
at thc critagc !ouhdatioh caims that thcrc is Ìar, Iar morc thah
mccts thc cyc' ih ihtcigchcc cxchahgcs bctvcch japahcsc ahd
!aivahcsc Iorccs via thc Lb aciIic commahd.
`
`
ôrcsighiIicahty, ccmchts oIKapah'sstratcgycahbc dctcctcdih
thc tcstimohy oI Pdmira iiam!aoh, Commahdcr oI PCC^,
bcIorcthcbchatcPrmcd bcrviccs Committcc oh ârch 8, 200 thrcc
mohthsbcIorcthcpubicatiohoIKapah's articc. !ocouhtcrChiha's
miitary modcrhizatioh, !aoh cacd Ior improvcmchts ih Lb ahti-
missic ahd ahtisubmarihc varIarc capabiitics, aohg vith a dccpch-
ihg oI Lb miitary tics vith od ahd hcv aics ih Psia aimcd at
cohtaihihg Chiha to its homc tcrritory. c dcscribcd thc !hcatcr
bccurity CoopcratiohahIorchhahccdmiitary coopcratiohvithLb
aics ih thc rcgioh as òhc oIthc primary mcahs through vhichvc
cxtchdLbihIuchcc, dcvcop acccss ahdpromotc compctchcc amohg
potchtia coaitiohparthcrs. '!hccoopcratiohtypicayihcudcsthc
dcivcry oI arms ahd mitary assistahcc, oiht miitary mahcuvcrs,
rcguar cohsutatioh amohg schior miitary oIIicias, ahd thc cxpah-
sioh or cstabishmcht oI Lb miitary bascs. h japah, Ior cxampc,
PCCîscoopcratihgihthcoihtdcvcopmchtoIarcgiohaba istic
missic dcIchsc systcm, ih thc hiippihcs, it is assistihg ih thc
rcorgahizatioh ahd modcrhizatioh oI hatioha Iorccs, ih bihga-
porc-vhich arcady pays host to visitihg Lb aircraIt carricrs
`vc arc cxporihgopportuhrticsIor cxpahdcd acccssto bihgaporcah
Iaciitics. ' !aoh aso dcscribcd cIIorts to voo hdia ihto thc coai-
tioh. `Cur rcatiohshipviththchdiah htcgratcdLcIchscbtaIIahd
thc hdiah Prmcd bcrviccs cohtihucs to grov,' hc hotcd. `Lb ahd
hdiah sccurity ihtcrcsts cohtihuc to cohvcrgc as our miitary co-
opcratioh cads to a strohgcr stratcgic parthcrship.
, ,
`
"
t voud sccm Irom this tcstimohy that Kapah's ^cv Cod ar
btratcgyishothihgbutahcaboratiohoIpoicicsadvocatcdbyPCCN
itscI. Phdyct,thrccmohthsaItcrthcpubicatiohoIKapah's articc,
!aoh cxpicity rccctcd thc idca that a scrics oI Cod ar-styc
23 M. Dickie, V. Mallet, and D. Sevastopulo, "Washington is turning its
attention from the Middle East to contemplate a previously disregarded threa
t
that
the Bush administration now sees as more worrying even than North Korea's nuclear
weapons programme" (Financial Times, April 7, 2005) .
24 Klare, "Revving Up the China Threat . . .
:
stahdoIIs strctchihg out ovcr ycars ahd dccadcs is ikcy to bc thc

dcIihihg miitary cohIict oI thc tvchty-Iirst cchtury. `Lo vc havc
cohIictbccauscoIthcriscoIChihardoh'tbcicvcso,'hcdccarcd.`Ps
thcygrov,thcrc's goihgtobcahihcvitabcpushasthcytakcadvahtagc
oIthcirccohomicabiitytoimprovcthcirmiitarycapabiitics,'hcsad
oIthc Chihcsc. `coughttorccoghizcthatas arcaity.!hisis hota
zcro-sum gamc. ' h spitc oI KumsIcd's rcmarks qucstiohihg Chiha's
motivcsihmodcrhizihgitsmiitaryIorccs,!aohvchtohtocaimthat
hchadrcccivcdaccarmahdatcIromashihgtohtobuidahctvorkoI
cohtactsviththc Chihcscgovcrhmchtahdmiitarythroughvhichthc
povcrovcrap coud bc mahagcdrathcrthahIoughtovcr.
c do hotkhov vhcthcr this i ustIroht-stagc rhctoric aimcd at
covcrihgup vhat i goihg oh back-stagc. c do khov, hovcvcr, that
Kapah's is by ho mcahs thc ohy routc back to thc rcaism oI
modcratc Kcpubicah prcsidchts ikc îxoh, !ord, ahd Bush thc
cdcr. Ch thc cohtrary, thc ihtccctua Iathcr oI that rcaism has
bcch advocatihg ah atogcthcr diIIcrcht routc.
Towards Adjustment and Accommodation?
Lcspitchis varhihgscohccrhihgIuhdamchta diIIcrchccs bctvcchthc
sourccs oI prcscht Chihcsc ahd past bovict povcr, Kapah's stratcgy
rcsts oh thc prcmisc that Chiha's chachgc, ikc thc bovict, is
utimatcy miitary ahd cah bccIIcctivcy mctthrough thc mahipua-
tioh oI a systcm oI miitary aiahccs cchtcrcd oh thc aciIic rathcr
thah thc Ptahtic. h ah articc pubishcd at about thc samc timc as
Kapah's, Kissihgcr advahccd a radicay diIIcrcht rcaist positroh.
\hicagrccihgthatthc `cchtcr oI gravity oI vordaIIairs is shiItihg
Irom thc Ptahtic . . . to thc aciIic,' Kissihgcr qucstiohcd thc
assumptioh that a stratcgic cohIrohtatioh vith Chiha is ihcvitabc.
1hat assumptioh rs as dahgcrous as rt rs vrohg. !hc Luropcah
systcm oI thc I9th cchtury assumcd that rts maor povcrs voud,
rh thc chd, vhdrcatcthcrrihtcrcstsbyIorcc. Lachhatrohthought
thatavarvoudbcshortahdthat, atrtschd, rts stratcgrcposrtroh
voud havc improvcd.
25 E. Cody, "Shifts in Pacific Force. U. S. Military to Adapt Thinking,"
Washington Post, September 17, 2005.
26 H.A. Kissinger, "China: Containment Won't Work," Washington Post, June
13, 2005.
``
Ih a gobaizcdvord oIhuccar vcapohs, such cacuatiohs makc ho
schsc. àr bctvcch ma| or povcrs voud bca catastrohc Ior a
participahts, thcrc voud bc ho vihhcrs. ' ôrcovcr, thc kihd oI
miitary impcriaism that cd Ccrmahy to chachgc Britaih vith a
hava buid-up ahd to scck to humiiatc Kussia ovcr Boshia ih l908
ahd!rahccihtvocriscsovcrôrocco ihl90:ahdl9ll, ìshotthc
Chihcsc styc.'
Causcvitz, thc cadihg cstcrh stratcgic thcorcticiah, addrcsscs
thc prcparatioh ahd cohduct oI a cchtra battc. buh 1zu, his
Chihcsc couhtcrpart, Iocuscs oh thc psychoogica vcakchihg oI
thc advcrsary. Chihasccks its ob| cctivcs by carcIustudy,patichcc
ahd thc accumuatioh oI huahccs-ohy rarcy docs Chiha risk a
vihhcr-takc-a shovdovh.
!or simiar rcasohs, Chiha is hot thcbovictLhioh. !hc bovict Lhioh
vas hcir to ah impcriaist traditioh that cxpahdcd Kussia Irom thc
rcgioh arouhd ôscov to a tcrritoria cmpirc that strctchcd Irom
cchtra Luropc to Vadivostok. `Jhc Chihcsc statc ih its prcscht
dimchsiohs,'ihcohtrast,`hascxistcdsubstahtiayIor2,000ycars . '
ôrc importaht, Chiha's aIIirmatioh oIcoopcrativc ihtchtiohs ahd
dchia oI a miitary chachgc cxprcss thc stratcgic rcaitics oI a
situatioh ih vhich,
cvchatitshighcstcstimatc,thcChihcscmiIitarybudgctiscssthah
20 pcrccht oIPmcrica's. . . barcy,iIat a, ahcad oIthatoIjapah
ahd . . . much css thah thc combihcd miitary budgcts oIjapah,
Ihdia ahd Kussia, a bordcrihg Chiha-hot to spcak oI 1aivah's
miitary modcrhizatioh supportcdbyPmcricahdccisiohsmadcih
200I. . 1hc chachgc Chihaposcs Ior thcmcdium-tcrm Iuturc
vi, ih a ikcihood, bc poitica ahd ccohomic, hot miitary.
ItIoovsthatappyihgto Chiha thcpoicyoImiitarycohtaihmchtoI

thcCodar, as Kapah proposcs to do,ìs uhvisc.' P Codar
vith thc Lhitcd btatcs cah ihdccd havc a `potchtiay catastrophic
impact . . . oh thc cohtihucd raisihg oI thc Chihcsc| stahdard oI
ivihg, oh vhich thc cgitimacy oI thc govcrhmcht dcpchds. ' But it
docshotIoovthata CodarvithChihavoudbchcIitthcLhitcd
btatcs. `c voud havc Icv Ioovcrs ahyvhcrc ih Psia. Psiah
27 Ibid.
28 Ibid.
ì
couhtrics voud cohtihuc tradihg vith Chiha. hatcvcr happchs,
Chihavihotdisappcar. '!hcLbihtcrcstthcrcIorcicsih coopcrat-
ihgvith ChihaihthcpursuitoIa stabcihtcrhatioha systcm. Ihsuch
a pursuit, adds Kissihgcr,
Pttitudcsafcpsychoogicayimportaht. Chihahccdsto bc carcIu
about poicics sccmihg to cxcudc Pmcrica Irom Psia ahd our
schsitivitics rcgardihg humah rights . . . Pmcrica hccds to uhdcr
stahd that a hcctorihg tohc cvokcs ih Chiha mcmorics oI impcri
aist cohdcscchsioh ahdthat itishotappropriatcih dcaihgvitha
couhtry that has mahagcd +,000 ycars oI uhihtcrruptcd scI-gov-
crhmcht.
Kissihgcr'srcaistpositiohi rcmarkabycompatibcviththc Chihcsc

doctrihc oI he ping jueqi ,itcray `cmcrgihg prccipitousy ih apcacc-
Iu vay') . !hcdoctrihcvasIirstauhchcdih200JatthcBoao!orum
Ior Psia-Chiha' s attcmptto crcatc a Lavos-styc ordLcohomic
!orumIor Psia. Bascd oh historica ihvcstigatiohs commissiohcdby
thc oitburo oIpast cxpcrichccs oIrisihgpovcrs ahd thc rcactiohs
thcy triggcrcd, it vas advahccd as a dircct rcbutta oIthc idca oI a
` Chiha thrcat' ahd as a charm oIIchsivc dcsighcd to couhtcr thc Lb
stratcgy oI chcircihg Chiha vith a systcm oI miitary bascs ahd
sccurity rcatiohships. !hc cchtra tchctoIthcdoctrihcis thatChiha
cah ahdvi avoidthcroad oIaggrcssioh ahdcxpahsioh Ioovcd by
caricrrisihgpovcrs.IhthcvordsoIZhchgBi|iah, ohcoIthcIramcrs
ahdmaih advocatcs oIthc doctrihc, `Chihavihottakc thc road oI
CcrmahyihthcIirstvordvar, or Ccrmahyahdjapahihthc sccohd
vord var-usihg viochcc to piagc rcsourccs ahd scck vord
hcgcmohy.
, ,
`
`
Kathcr, as a rcscarchcr at a govcrhmcht-aIIiiatcd
orgahizatioh put it, `Chiha aims to grov ahd advahcc vithout
upsctting cxistihg ordcrs. c arc tryihgtorisc ih a vaythatbchcIits
our hcighbors.
, ,
`'
bihcc it vas Iirst auhchcd, thc cxprcssioh `pcaccIu risc/cmcr-
gchcc' has comc uhdcr attack Irom oppositc Irohts both vithih ahd
outsidc thc Commuhist arty. Pt ohc poc, thcrc arc pcopc vho,
Ioovihg Lchg Xiaopihg's maxim that Chiha shoud `hidc its
brighthcss, 'Iccthatspcakihg at a oIa rise
,
cvchiIpcaccIu,Iucs
29 Ibid.
30 Quoted in M. Leonard, "China's Long and Winding Road," Financial Times,
July 9-10, 2005.
31 Quoted in Y. Funabashi, "China Is Preparing a Peaceful Ascendancy,"
International Herald Tribune, December 30, 2003.
`
`
idcas oIa Chihcsc thrcat. Ptthc oppositc poc,thcrc arc pcopc vho
Icc that spcakihg oI a peaceful risc givcs thc mcssagc to thc Lhitcd
btatcs ahd !aivah that thcy cah impudchty push Chiha arouhd.
`Bctvcch thcsc tvo pocs, thc poitica cadcrship hcdgcs.
,,
`
Pthough thc cxprcssioh `pcaccIu risc' has bcch quicty droppcd
ih Iavor oI `pcaccIu dcvcopmcht' or `pcaccIu cocxistchcc,' thc
uhdcryihg doctrihc has hohcthccss rcmaihcd Iirmy ih pacc, as
vithcsscd by rcsidcht u ]ihtao' s 200+ procamatioh oI Ìour
hos' , `ho to hcgcmohy, ho to Iorcc, ho to bocs, ho to thc arms
racc') , ahd Ìour ycscs' ,to `cohIidchcc buidihg, rcducihg diIIicu-
tics, dcvcopihg coopcratioh, ahd avoidihg cohIrohtatioh
,,
) .`` !o
Chihcsc oIIicia s, thcrc is ho cohtradictioh bctvcch thcir doctrihc
oI`pcaccIu dcvcopmcht' ahd thcir dctcrmihatioh to dcvcop morc
capabc armcd Iorccs, vhich thcy scc as ihtcgra to Chiha's dcvc-
opmcht as vc as a hatura rcspohsc to thc humiiatiohs Irom thc
opium vars oI thc mid hihctcchth cchtury to thc bruta ]apahcsc
ihvasiohahdoccupatiohihl9Jl-+. `Chiha'shatiohadcIchscpoicy
is ohc oI scI-protcctioh,' caimcd rimc îhistcr ch ]iabao, ih
Ppri 200. `Cvcr thc past l00 ycars, Chiha has avays bcch buicd
byothcrs. Chihahashcvcrschtasihgcsodicrtooccupycvchahihch
oI ahothcrcouhtry's ahd.
, ,
`
u rcitcratcd Chiha's commitmcht to `pcaccIu dcvcopmcht'
durihg a visit to thc Lhitcd âtiohs ih ^cv \ork ih bcptcmbcr
200, uhdcrscorihg thc chachgcs chtaicd ih mahagihg ahd raisihg
thc prospcrity oI a hatioh oI l. J biioh. Pccordihg to Lb oIIicias,
boththcchachgcs ahdthcvisiohimprcsscdBush.`` ^cvcrthccss,ih
a comprchchsivc statcmcht oIthc Bush admihistratioh's positioh oh
Chihadcivcrcd shorty aItcrvards,LcputybccrctaryoIbtatcKobcrt
Zocick dcscribcd thc Lhitcd btatcs as a `caudroh oI ahxicty. '
`Lhccrtaihtics about hov Chiha vi usc its povcr vi cad thc
Lhitcd btatcs-ahd othcrs as vc-to hcdgc rcatiohs vith Chi-
ha . . . . âhy couhtrics hopc Chiha vi pursuca ` pcaccIu risc, ' but
32 Leonard, "China's Long and Winding Road. "
33 Quoted in M. Bulard, "China: Middle Kingdom, World Centre," Le Monde
Diplomatique, August 2005.
34 Dickie, Mallet, and Sevastopulo, "Washington is turning its attention from
the Middle East . . . " Wen here conveniently glossed over China's invasions of India
in the early 1960s and Vietnam in the late 1970s. Nevertheless, as we shall see in
Chapter 11, the image of China being bullied by others (especially Japan and the
Western powers) , fits perfectly well the historical record from the opium wars to the
establishment of the PRe.
35 P. Baker and P.P. Pan, "Bush's Asia Trip Meets Low Expectations,"
Washington Post, November 21, 2005.
I
\

`
hohc vi bct thcirIuturc oh it.' hic acccptihg that `Chiha docs

hotvahta cohIictvith thc Lhitcd btatcs,' hc vchtoh to ay dovh
markcrsbyvhichChihcscbchaviorvibccvauatcd. !hcscihcudcd
ah cxpahatioh oI Chiha's dcIchscspchdhg,ihtchtiohs, ahddoctrihc,
grcatcropchihgrathcrthahmahagihgoImarkcts, ihcudihgcurrchcy
markcts, css tocrahcc oI `rampahtthcItoIihtccctua propcrty ahd
couhtcrIcitihg', chsurihg ôrth Korca's compiahcc vith ah agrcc-
mcht to chd its huccar programs, supportihg cIIorts to chd rah's
huccarprograms,ahdpcdgihgmorcmohcytoPIghahistahahdraq,
stop attcmptihg to `mahcuvcr tovard a promihchcc oI povcr' ih
Psia by buidihg scparatc aiahccs, spccd-up poitica rcIorms by
cohsidcrihg ccctiohs at thc couhty ahd provihcia cvcs ahd `stop
harassihg ourhaists vho poiht out probcms.
, ,
`
!hc vcry chgth oI Zocick's ist oI markcrs, mahy oI thcm
impossibc to vcriIy or uhikcy to matcriaizc, vas morc ihdicativc
oI Lb ahxictics thah oI a cohcrcht agchda. !hc ack oI a cohcrcht
agchda vas Iurthcr cvihccd by thc mixcd sighas that thc Lb
govcrhmcht kcpt schdihg to Chiha. Lurihg a visit to Chiha ih
Cctobcr200, !rcasury bccrctary ]ohh . bhov, vho had rcpcat-
cdy criticizcd Chiha' srcIusa to aov thcyuahtoIoatmorcIrccy,
praiscd thc !ivc \car ah that thc CC had ust approvcd as
`bchcIiciahotohyIorChihabutgoodIorthcvor d. 'ccspcciay
appaudcd thc pah' s objcctivc to rcducc thc hugc dividc bctvcch
city-dvccrs ahd huhdrcds oI miiohs oI mosty rura Chihcsc,
bccausc iIthcprospcrityoIrura Chihcscimprovcs cvchmargihay,
thcyviprobabybuymorcPmcricahgoodsahdthcLbtradcdcIicit
vith Chiha vi dccrcasc.`
booh aItcr bhov dcpartcd, KumsIcd himscI arrivcd ih Bciihg.
hicsticriticizihgihcrcascdChihcscdcIchscspchdihg,hcrcachcd
ah agrccmcht vith his Chihcsc couhtcrparts to ` oih hahds to
upgradc biho-Lb miitarytics ahdmakc thcmcohsistchtvithovcra
biatcra rcatiohs. ' hdccd, rumor haditthat oh this tripKumsIcd
tricdto scLbvcapohs to Chiha,cvchas hcvaspubicycriticizihg
I d h `
its ca crs ip.

PtthcrootoIthcscmixcdsighasvccahdctcctthcdiIIicuticsthat
thc oss oI crcdibiity oI Lb miitary povcr ih raq crcatcd Ior thc
36 G. Kessler, "U. S. Says China Must Address its Intentions," Washington Post,
September 22, 2005.
37 T. Sakai, "Hu Jintao's Strategy for Handling Chinese Dissent and U. S.
Pressure," Japan Focus, November 20, 2005.
38 Ibid.
`

capacity oI thc Lhitcd btatcs to kccp ih chcck or turh to its ovh
advahtagc Chiha's `pcaccIu asccht. ' !aiurc ih raq cacd Ior a
grcatcr dosc oI rcaism ih Lb poicics. Phd yct, it madc it morc
diIIicutIorthcLhitcd btatcs tomobiizcaicsihthckihdoImiitary-
bascd cohtaihmcht oI Chihcsc povcr chvisagcd, Ior cxampc, ih
Kapah's `^cv Cod ar' stratcgy. buIIicc it to mchtioh thc casc
oIbihgaporc,vhichKapahhaicdas amodcLb ayihthcPCC^-
cd coaitioh hc advocatcd. Ps thc ihIuchtia dcah oIthc Lcc Kuah
\cvbchoo oIubicPIIairsihbihgaporc, Kishorcâhbuhahi, madc
ccar, bihgaporc's coopcratiohvith PCC^ docs hotimpy support
Ior Lb poicics aimcd at dcstabiizihg Chiha. Ch thc cohtrary, as
mahy othcrs ihLast Psia do, hc sav a suddch chdoICommuhistruc
ihChihaasthctriggcroIdahgcroushatiohaistIorccsthatvoudcad
to cohIict ih thc rcgioh to ho ohc' s bchcIit. `
ôtsurprisihgy,thcrcIorc,Lb attcmpts to chcircc Chiha through

a systcm oI miitary aiahccs vcht hovhcrc. Lb ihtcigchcc ahd
miitaryticsvithVicthamahdhdiaimprovcd.Butrcatiohs bctvcch
thcsctvocouhtricsahdChihaimprovcdcvchmorc. Ptthcsamctimc,
aItcr ycars oI chmity tovards Chiha ahd a ohg aiahcc vith thc
Lhitcd btatcs, hdohcsia cohcudcd a stratcgic parthcrship vith
Bciihg that rcsidcht u haicd as ihauguratihg a `hcv cra' ih
rcatiohs bctvcch thc tvo hatiohs. P simiar shiIt has occurrcd ih
bouth Korca. Lurihg thcir visits to thc couhtry ih ôvcmbcr 200,
rcsidchtBushvas mortiIicdby bcou ' sahhouhccmchtthatit voud
vithdravathirdoIitstroopsIrom raq, vhicrcsidchturcccivcd
a stahdihg ovatioh ih thc bouth Korcah asscmby ahd dccarcd that
rcatiohs bctvcchbouthKorcaahdChihahadchtcrcdthc`bcstcraih
history.
, ,
Chyjapah movcd dccisivcytovards coscrmiitarytics

vith thc Lhitcd btatcs. !hcsc coscr tics, hovcvcr, sccmcd to isoatc
japahrathcrthah Chiha. Pohgvith Koizumi' stactcss visits to thc
\asukumi shrihc, thcy costjapah thc much sought-aItcr pcrmahcht
scat oh thc Lhitcd âtiohsbccurity Couhci, as vc as thc cahcca-
tioh ih Lcccmbcr 200 oI thc thrcc-vay mcctihg vith Chiha ahd
bouthKorcathathadbcchhcdohthcsidcihcs oIPbLP^gathcrihgs
cvcry ycar sihcc l999. !his is probaby vhy Koizumi's rcpaccmcht
vithbhihzoPbcasjapah'sprimcmihistcrih2006vas vccomcdhot
39 M. Vatikiotis, "U. S. Sights Are Back on China," International Herald
Tribune, June 7, 2005.
40 Cody, "Shifts in Pacific Force . . . "; E. Nakashima, "Vietnam, U. S. to
Improve Intelligence, Military Ties," Washington Post, June 17, 2005; J. Burton,
V. Mallet, and R. McGregor, "A New Sphere of Influence: How Trade Clout Is
Winning China Allies yet Stocking Distrust," Financial Times, December 9, 2005.
`
:
ust ih Psiah capitas but aso in japah as a chahcc Ior a shiIt ih
dircctioh tovard morc coopcratioh bctvcch Chiha ahd japah.`
Pt thc oppositc chd oI thc rcaist spcctrum Irom Kapah, thc
mixturc oI accommodatioh oI Chihcsc povcr ahd rciahcc oh poi-
tica-ccohomicmcchahismsoIcohtaihmchtthatKissihgcradvocatcd
vas uhdoubtcdy morc acccptabc to actua ahd potchtia Lb aics
but it vas much hardcr to `sc' to thc Lb ccctoratc. !hc hcary
uhahimous oppositioh to thc Chihcsc bidIorLhoca ih thc ousc oI
Kcprcschtativcs vas butohc oImahy sighs thatahti-Chihaschtimcht
vas strohgcr ih Cohgrcss across party ihcs thah ihthc Bush admih-
istratioh. biho-phobia has a ohgtraditioh ih Lb popuar cuturc.
Butits suddchrcsurgchcc at thc turh oIthc tvchty-Iirstcchturyvas
promptcdbythcrcaizatiohthatChiha,rathcrthahthcLhitcdbtatcs,
vascmcrgihgasthcmaihbchcIiciaryoIthcgobaizatiohprocctthat
thc Lhitcd btatcs itscI had spohsorcd ih thc l980s ahd l990s. !o
cxpcctIurthcr ccohomic ihtcgratioh across thcaciIic to rcdrcss thc
situatiohih IavoroIthcLhitcdbtatcs rcquircd a maoractoIIaithih
thc utimatc compctitivchcss oI thc Lb ccohomy. hic most ih
Cohgrcss proIcsscd that Iaith, Icv bchavcd accordihgy ahd thus
uhdcrmihcd thc Icasibiity oI stratcgics aimcd at accommodatihg
Chiha' s `pcaccIu asccht.'
A Happy Third?
Cohsidcratiohs oI this kihd uhdcrics thc advocacy oI yct ahothcr
routctogrcatcr rcaism ihLbpoicicstovards Chiha. ritihgih The
41 B. Wallace, "Japan Looks at Ridding Military of its Shackles," Los Angeles
Times, November 23, 2005; T. Shanker, "U. S. and Japan Agree to Strengthen Military
Ties," New York Times, October 30, 2005; Burton, Mallet, and McGregor, "A New
Sphere of Influence . . . "; V. Mallet, "Japan's Best Chance to Strike a Deal with
China," Financial Times, September 28, 2006.
42 G. Dinmore, A. Fifield, and V. Mallet, 'The Rivals," Financial Times,
March 18, 2005. Another sign was the struggle between Congress and the admin
istration over the imposition of tariffs on Chinese imports to force China to let its
currency revalue vis-a-vis the dollar. In April 2005, the Republican-controlled Senate
voted 67 to 33 for an amendment sponsored by Democratic Senator Charles Schumer
and Republican Senator Lindsey Graham aimed at imposing a 27.5 percent tariff on
Chinese imports if China failed to change its currency policies. Although the
administration managed to convince Schumer and Graham to withdraw the amend
ment, pressure from Congress forced it to enter into negotiations with China to
restrict its exports to the United States. E. Andrews, "Bush's Choice: Anger China or
Congress over Currency," New York Times, May 17, 2005.
American Conservative
,
ihkcrtoh vas as critica as Kissihgcr ol
stratcgics oI miitary cohtaihmcht-ihcudihg Kapah's PCC^-
bascd stratcgy.
PcichcoIthccraisthatChihaisahaogoustoKaiscrihcmII's
Ccrmahy, a risihgpovcr ookihgIor its`paccihthcsuh. ' IIso,
thch it's a qucstioh oIhov thc Chihcsc vi bc rcstraihcd. Ih thc
casc oICcrmahy, a grahd coaitiohoI!rahcc,ritaih, Kussia, ahd
thc Lhitcd btatcs vas rcquiro-tvicc-to brihg crih to hcc. It
rcmaihs to bc scch vhctIcr thc Lhitcd btatcs coud cvcr asscmblc
ah cquivachty argc coaitioh to rcstraih Chiha. `
ihkcrtoh cohsidcrcd this a rcmotc possibiity. orsc sti, ahy
attcmpt to asscmbc such a coaitioh, ih his vicv, voud provokc
adisastrous varvithChiha. cvashohcthccsscvchmorccriticaoI
thc atcrhativc stratcgy oI accommodatioh. ithout rcIcrrihg cxpi-
cityto Kissihgcr, hcdubbcdsuchastratcgy`hco-Phgcism'bccausc
oIits rcscmbahcc to ôrmah Phgc ' s l9l0 cohtchtiohthatvarhad
bccomc obsoctc. Jhc rcasohs that Phgc-ikc today's `dogmatic
gobaists'-gavc Ior this acgcd obsocscchcc vcrc, Iirst, that ha-
tiohscohhcctcdtoohc ahothcrothcrbyccohomicshadhochoiccbut
to coopcratc oh poitics, ahd, sccohd, that miitary ahd poitica
povcrho ohgcrgavcahy commcrcia advahtagc. Kcassurihgas hco-
Phgcism might bc to busihcsspcopc, ihkcrtoh Iouhdit Iavcdih
Iuhdamchta vays.
Jhc maih Iav is outsourcihg. Ih support oI thc vicv that out-
sourcihg is csschtia to Lb compctitivchcss, ihkcrtoh quotcd thc
cxccutivc oI a argc Pmcricah mutihatioha compahy vho tod him
`\ou shov mc a compahy that docsh't do its mahuIacturihg ih
Chiha, ahd ' shov you a compahy that cah bc bcatch, compcti-
tivcy. 'Ptthcsamctimc,hovcvcr, hcuhdcrscorcdhov outsourcihg
crcatcs a substahtia backash ih thc Lhitcd btatcs, as vorkcrs Icar
osihg thcir obs, ahd cspcciay hov it copardizcs Lb hatioha
sccurity.
atotalypost-ihdustria Pmcricavoud bc uhabcto producc thc
hcccssary impcmchts oIvar, should thcy bc hccdcd. Ihdccd, thc
chtagohisstruggihgtomaihtaihsomc sortoIdomcstic ihdustria
basc Iorthc L. b. . . . I|Iprcschttrchds cohtihuc, tIc Chihcsc vi
43 James P. Pinkerton, "Superpower Showdown," The American Censervative,
Noveinber 7, 2005, p. 5 available at http://www.amconmag.com.
sooh bc ablcsimpyto pul thcpugoh ourccohomy-ahd so vc
voh'tbcablcto IightChihacvchiIvcvahtto, orhavcto,vhicI
mightmakc var a thcmorc tcmptihg to thc Chihcsc.
z
c thch vcht oh to citc thc British Cohscrvativc poiticiah Lco

Pmcry, `vho had rcguary argucd agaihst Phgc, as vc as othcr
dogmatic gobaists. '
Pmcry varhcd that Ccrmahy's mcrcahtiist hcighbor-bcggarihg
ccohomic stratcgy, thc oppositc oI ritaih's Phgclist approach,
vas givihg thc Kaiscr a dahgcrous var-productioh advahtagc.
`1hc succcssIul povcrs vil bc thosc vho havc thc grcatcst
ihdustria basc,' Pmcry prophcsicd, addihg that thosc hodihg
`thc ihdustria povcr ahd thc povcr oIihvchtioh ahd scichccvi
bc abcto dcIcat al othcrs. 'Ps ihstoh Churchi, vhom Pmcry
scrvcd ih ritaih's ord arIIcabihct, ohcc obscrvcd, acouhtry
chgagcd ih var hccds thc toos to Iihish thc |ob. "
PsccohdIav i thatPhgcism`vihotprovcpoiticayacccptabc
to havkishy ciihg-bashihg Pmcricahs. ' Jo bc surc, `most oI thc
!ortuhc00vichgagc obbyists tokccpthctradcroutcsopchtothc
cast. 'Phdyct, àthcobbyistsohKbtrcctcoudhottampdovhthc
vidIircoI ahti-Chihcsc IccihgthatcruptcdovcrthcIaicdbidbythc
Chiha âtioha Cvcrscas Ci Compahy to buy . . . Lhoca . '
IIissucsoIstatusahdprimacyarcatstakc,itsccmsasthoughizard
braihs takc ovcr, dimihishihg ratioha thihkihg-as hatiohaism,
xchophobia, ahd morc primitivc rcIcxcs risc up ih a sahguihary
primordiaism.1hcoutcomcisprcdictabc. asvithPhgcl90ycars
ago, thc hco-Phgcs vi bcovcrvhcmcdyct agaih.`
Ih short, vhic a miitary stratcgy oI cohtaihmcht voud cad to a
disastrous var vith Chiha, bccausc ìI you Iakc somcthihg ohg
chough, you vi makc it happch,' hco-Phgcism `voud osc its
L. C. poicystruggctothc hatiohaist-miitaristj camp-vhichthch
voud go back to Iightihg its disastrous var vith Chiha. ' bo, asks
ihkcrtoh,vhat is to bc dohcr `PrcPmcrica's ohy choiccs miitar-
istic ihgoismorhaivcPhgcismr
, ,
Jhcbcttcrchoicc, hc caimcd,is
44 Ibid., p. 8.
45 Ibid., pp. 8-9.
46 Ibid., pp. 6-7, 9.
`

a tvo-prohgcd stratcgy. !oovihgîchac Lihd, ohthc gcopoitica
Iroht hc advocatcd thc cohtaihmcht oI Chiha through a baahcc-oI-
povcr stratcgy.
!orcchturics,Britaih||uggcdLuropcahrivasagaihstcachothcr,
ahd it vorkcd vc Ior thc Lmpirc. bo iIthc British coud pay oII
thc ikcs oIthc Bourbohs, apsburgs, ohchzocrhs, ahd Koma-
hovs, pcrhaps thc L.b. cah pay oII thc ihcvitabc rivary oI thc
Psiahpovcrs.It'sthcgoodIortuhcoIPmcricahs,aItcra,thatvc
arcuhchachgcdmourovhhcmisphcrcahdikcytorcmaihsoIor
a ohg timc to comc. Phd by our Iurthcr good Iortuhc, thrcc
chormous povcrs-Chiha, Ihdia, ahdjapah-arc a hcxt to cach
othcr, |ust ikc bpaih, !rahcc, oahd, ahd Ccrmahy m timcs
past.
hstcad oI cohIrohtihg dirccty thc risihg Psiah povcrs, thc Lhitcd
btatcs shoud pay thcm oII cach othcr. Ps thc Latih cxprcssioh
tertium gaudens-thc happy third-rcmihds us, rathcr thah gcttihg
ihthc middc oIcvcry Iight, somctimcs it is bcttcr `to hod thc coats
oIthosc vho do. ' !or thcLb hatioha ihtcrcst, àbcttcrPsia voud
bc ohc ih vhich Chiha, Ihdia, ]apah, ahd possiby ahothcr `tigcr' or
tvo cohtchd vith cach othcr Ior povcr vhic vc choy thc happy
uxury oI third-party by-stahdihg.
, ,
P prcrcquisitc oIsucccss ih thc pursuit oIthis stratcgy is a rcaist

soutiohoIthc Jaivahcscprobcm. Barrihgagchcravar, ustasthc
LbôrthrcuhiIicdvith thcbouthaItcrthc Civiar, so Chihavi
rcuhiIy vith !aivah. `!hcIcdcragovcrhmchtih ashihgtoh . . .
voud hot havc ookcd kihdy oh ahy Iorcigh povcr that sought to
assurc thc scccssioh oI Kichmohd. . . . Lsihg hohcst rcapoitik, thc
L. b. shoud tc !aipci that its optima coursc is a pcaccIu ohg
Kohg/âcau-ikcrcturhto thcmothcrahd. '!rccdIromthc Jaivah
issuc, thc Lhitcd btatcs voud bc ih a positioh to rcap thc bchcIits
rathcrthahbcarthccosts oIcohIicts amohgthcthrccgrcatpovcrs oI
Psia. `bo iI]apah,Iorihstahcc, marchcd dovhthchuccarroad . . .
othcrPsiahpovcrsvoudrcsistsuch]apahcscrcarmamcht, butthat
shoud bcthcirprobcm, hotours. t's bcttcrto bcthchappy thirdih
ahy such Psiah struggc-hot ah uhhappy primary participaht.
, ,
h ordcr to bccomc thc `happy third' oh thc gcopoitica Iroht,

47 Ibid. , p. 9.
48 Ibid. , p. 1.
49 Ibid. , p. 10.
`
hovcvcr,actiohishccdcd aso ohthchomcIroht. `Pmcricahsshoud

kccp Irom kiddihg thcmscvcs that our currchty boomihg domcstic
rca-cstatc markct . . . vi assurc our ohg-tcrm gcopoitica pri-
macy. ' buch a primacy cah ohybcattaihcdthrough a `2lst-cchtury
cquivacht oI Pcxahdcr amitoh's l8th-cchtury `Kcport oh âh-
uIacturcs' ' ' , that is, a dccisioh oI vhat ihdustrics arc csschtia to
hatioha sccurity, ahd à cohscious tcchho-ihdustria poicyto makc
surc that thosc vita ihdustrics rcmaih ohshorc. ' Pthough this hco-
amitohiahpoicyvoudihcrcascthcpriccoIcohsumcrgoods,raisc
ihtcrcstratcs,ahdpcrhapsovcrthcstockmarkct,thcscàrca sma
pricctopayIortruchatiohasccurity. 'ihkcrtoh ackhovcdgcdthat
this tvo-prohgcd stratcgy vas bcyohd thc currcht horizoh oI Lb
poity ahd socicty. chohcthccss hopcd `that thcdircvakc-upca,
vhchitcomcs,vihotbctoodamagihg.Badpoicicscahbcrcvcrscd,
athough, uhIortuhatcy, itusuaytakcs a dcIcattogctthc attchtioh
oI poicymakcrs ahd thc pubic.
,,
`
`
Jhis happy-third stratcgy has Iar morc importahtprcccdchts ih Lb
history thah ihkcrtoh ackhovcdgcd. hhis vicv,ohyih l90l-09-
mostydurihgthcprcsidchcy oIJhcodorcKooscvct-didthcLhitcd
btatcs practicc such astratcgy.`' hrcaity,asvchavcscchih Chaptcr
8, throughoutthchihctcchthcchtury,ahdcspcciay ihthcIirsthaIoI
thctvchticthcchtury,thcLhitcdbtatcsbchcIitcdimmchscyIromthc
cohIicts that sct thc Luropcah povcrs agaihst ohc ahothcr. Phd its
capacity to turh thc vord vars oIthc carytvchticthcchtury to its
ovhadvahtagcvas duc as muchtothcscI-suIIicichcy ahdtcchhica
proIicichcy oI its miitary-ihdustria compcx, as it vas to rcativc
cohtihchta isoatioh.
hcthcr avovcd orhot, ihthcvakcoIdcIcat ih raq,thcLhitcd
btatcs may vc attcmpt to Ia back oh this traditioh. ^cvcrthccss,
thc Psiah ccmchts oI thc baahcihg-povcr modc that ihkcrtoh
advocatcs cah arcady bc dctcctcd ih prcscht Lb poicics. Koizumi
might ihdccd havc bcicvcd that his rcpudiatioh oI six dccadcs oI
]apah's oIIicia paciIism `to suppaht Pustraia as ashihgtoh's
` dcputy shcriII' ih thc Psia-aciIic rcgioh' voud strchgthch thc
shcriII's utimatc commitmcht to thc protcctioh oI ]apah ih thc
cvchtuaity oI a cohIict vith Chiha.` But it is aso possibc that
past ahd Iuturc Lb chcouragcmcht oI ]apahcsc ihvovcmcht ih thc
50 Ibid., p. 11.
51 Ibid.
52 S. Tisdall, "Japan Emerges as America's Deputy Sheriff in the Pacific,"
Guardian, April 19, 2005.
!aivahcsc disputc arc ihscribcd, hot ih a Kapah-typc coaitioh-
buidihg stratcgy, but ih a ihkcrtoh-typc ba ahcihg-povcr stratcgy.
!hat is to say, Lb chcouragcmcht oI japah' s cmcrgchcc Irom its
rcccht paciIist past to bccomc agaih a miitary povcr oI rcgioha
sighiIicahcc may turh out to bc a vay oI Iaciitatihg Lb miitary
dischgagcmcht Irom Last Psia through thc crcatioh vithih Psia oI
miitary couhtcrvcights to Chiha.
!his cvchtuaity, oI coursc, docs hot hccd to bc, ahd probaby is
hot,thcuhdccarcdob cctivcoIprcschtLbpoicics.Butitmayvcbc
thc Iaback ,or `pah B') to vhich thc Lhitcd btatcs cah advahta-
gcousy rcsort shoud thc attcmpt to buid a PCC^-cd ahti-
Chihcsc coaitioh Iai to matcriaizc or bccomc too risky. hdccd,
thc possibiity thatIaiurc ih raq may rcsutih a miitary dischgagc-
mchtoIthcLhitcdbtatcs IromthcLastPsiahrcgiohhas hotcscapcd
!aivahcsc obscrvcrs. !hus, ih Cctobcr 200, !aivah's Iormcr
mihistcr oI Iorcigh aIIairs, !' ich uhg-mao, statcd ih ah ihtcrvicv
vith oca mcdia.
I thc Lhitcd btatcs pus out oI raq, Pmcrica vi bc svcpt by
isoatiohism ahd hot vaht to bccomc ihvovcd ovcrscas, ahd thc
sprcad oI Chihcsc hcgcmohy vi pick up spccd. Ps Pmcrica's
dcsircIor a Iight Ias, thc ikcihood oIa miitary cohIict ih thc
1aivah Straits vi dccrcasc. 1hc 1aivahcsc govcrhmcht shoud
Iaccuptothisscchario,ahdmakcrcaisticpahsabouthovitvi
dca vith such a situatioh.5
3
!hc !aivahcsc govcrhmcht may hot bc ihcihcd to Iacc up to this
scchario. bighiIicahty, hovcvcr, its ihdccisioh at thc chd oI 200 oh
vhcthcr to Iihahcc ah arms-procurcmcht packagc oh oIIcr Irom
ashihgtoh Ior morc thah Iour ycars causcd ihdighatioh ih thc Lb
Cohgrcss. PItcr hotihg that !aivah had accumuatcd tchs oI
biiohs oI doars oI Iorcigh-cxchahgc rcscrvcs, !om Lahtos, at
thc timc thc schior Lcmocrat oh thc !orcigh PIIairs Committcc oI
thc ousc oIKcprcschtativcs, omihousydccarcd. ÌI you cxpcct us
to comc to your aid, to quibbc ovcr ah l8 biioh-doar packagc is
ah outragc.
,,
`
Cutragcous or hot, thc !aivahcsc ihdccisioh docs hot ustbctray
thc suspicioh that thc protcctioh oIIcrcd by a Lb-spohsorcd ahti-
53 Quoted in Sakai, "Hu Jintao's Strategy . . . "
54 Quoted in Dickie, Mallet, and Sevastopulo, "Washington is turning its
attention from the Middle East . . . " See also Cody, "Shifts in Pacific Force . . . "
THE CHALLENGE OF "PEACEFUL ASCENT" 301
Chihcsccoaitiohmayhotbcathatrciabc. tpoihts aso toa basic
cohtradictioh oIthchappy-thirdstratcgy. IthcLhitcdbtatcs disch-
gagcd miitariy Irom thc rcgioh, vhy shoud thc Psiah povcrs
cscaatc thcir mutua cohIicts to thc bchcIit oI thc Lhitcd btatcs,
rathcr thah scck mutua accommodatioh to thcir ovh bchcIitr !hc
capacity oI thcLhitcd btatcs to bcthc tertium gaudens oI thc ihtra-
Luropcah povcr struggcs oI thc cary tvchticth cchtury dcpchdcd
criticay oh ahihtchsity ahdihhcr momchtum oIthoscstruggcsthat
havchocquivachtihcohtcmporaryPsia. hdccd,ashotcdihprcvious
chaptcrs, Last Psia has bcch thc truc `happy third' oI thc atc
tvchticth ahd cary tvchty-Iirst cchturics. h thc l980s , japah ahd
thcIourìttctigcrs' vcrcthcmaihbchcIiciaricsoIthccscaatiohoI
thc Cod ar bctvcch thc Lhitcd btatcs ahd thc LbbK, ahd atcy
Chihahas bcchcmcrgihgas thcrcavihhcroIthcLbaroh !crror.
îscacuatiohs,oIcoursc, arcavayspossibc.Pace Latos,hovcvcr,
itis uhccarvhy a oI a suddch thc Psiahstatcs voudchgagcih ah
armamcht racc that voud bchcIit thc Lb armamcht ihdustrics ahd
ccohomy but voud scriousy uhdcrmihc thc crcditor positioh that
cohstitutcs thc maih sourcc oI thc Psiah statcs' povcr.
hdccd, thc Iirst Last Psiah summit hcd ih Kuaa Lampur ih
Lcccmbcr 200 arcady shovcd hov diIIicut it voud bc Ior thc
Lhitcd btatcs to pay Psiah statcs oII ohc ahothcr. ashihgtoh had
avays opposcdthcvcryidcaoIsuchasummit ahdhadpromotcdthc
Iar morc ihcusivc PLC as ahatcrhativcIorumih vhichthc Lhitcd
btatcs voud bc thc most ihIuchtia participaht. h rcccht ycars,
hovcvcr, vhic Lb ihIuchcc rcativc to Chiha vithih PLC has
dccihcd, thcimportahcc oI ah cxpahdihg PbLP^ that cxcudcs thc
Lhitcd btatcs ahd ihcudcs Chiha ih dccisiohs aIIcctihgLast Psia has
bcch stcadiy risihg.`` `hic Chiha ahd Pmcrica spar ovcr gcopo-
itica prccmihchcc, thc rcst oILast Psia ust vaht a morc cIIicicht
tradihg arca ahd acccss toa argcr markct. Phdrighthov, thcbiggcst
markctis Chiha. ' Ps a rcsut, atthcPbLP^summitmcctihghcdih
thc hiippihcs ih jahuary 2007, Chiha took cchtcr-stagc, sighihg a
55 ASEAN first expanded to include China, Japan, and South Korea into the so
called ASEAN+3 in the wake of the 1997-8 East Asian financial crisis. This was a
move explicitly aimed at reducing the influence of the United States, which was widely
perceived as being responsible for the seriousness of the crisis. The further expansion
of the ASEAN+3 into the ASEAN+3+3, to include India, Australia, and New Zealand
as full participants at the first East Asian summit, in contrast, was seen primarily as a
move to balance China in the absence of the United States. See S. Mydans, "New
Group for 'Asian Century' Shuns U. S, " International Herald Tribune, December 12,
2005; Burton, Mallet, and McGregor, "A New Sphere of Influence . . .
hcv tradc-ih-scrviccs agrccmcht ahd, morc importaht, Iuy partici-
patihg ih various agrccmchts aimcd at stccrihg thc associatioh to-
vards ah LL-styc chartcr.`
The Great Wall of Unknowns
h ]uy 200+, a commchtary pubishcd ih thc International Herald
Tribune amchtcd thc ack oI a Lb Chiha stratcgy.
ur actiohs dcIy cohcrcht catcgorizatioh. OovctrcatChihaas a
Iu parthcr: Karcy. Oo vc trcat Chiha as a compctitor: bomc-
timcs. Prc vc cohIidcht about hov vc act: Pmost hcvcr. ôt
much oI a poicy. 1hc L. b. has bcch ucky that morc criscs,
ccohomic or poitica, havc hot matcriaizcd vhic it has bcch
d h I ` occupic wit raq.
!vo ahd a haI ycars atcr, thc Lhitcd btatcs sti has ho Chiha
stratcgy to spcak oI. !hc rcaizatioh that Lb diIIicutics ih raq havc
cohsoidatcd Chiha' scmpovcrmcht has cd to a stcppihg-up oI ahti-
Chihcsc ihitiativcs ahd simutahcousytoa grcatcr dosc oIrcaism ih
Lb poicics. Butthcrcsutihgcombihatioh cohtihucs todcIy cohcrcht
catcgorizatioh.
ccahdctcctatcastthrccmaihrcasohsIorthiscohtihuihgackoI
a cohcrcht Lb Chihapoicy. Chcis thatIorthcBush admihistratioh
thc dccisivc battc to cohtaih thc risihg povcr oI Chihais sti bcihg
Iought ih raq. Laricr drcams oI ah casy victory that voud havc
chabcd thc Lhitcd btatcs to dca vith Chiha Irom a positioh oI
strchgth havc givch vay to thc obcctivc oI vithdravihg Irom raq
vith mihima osscs to Lb crcdibiity. Lhdcr thcsc circumstahccs,
ahti-Chihcsc rhctoric ahd attcmpts to cmpovcr thc Pustraiah ahd
cspcciay]apahcsc `dcputyshcriIIs'ih LastPsiahavc bcchstcppcd
up. Butuhti thc Lhitcd btatcs has dischtahgcd itscIIrom thc raqi
quagmirc, it has to cohtihucto chgagc Chiha. !rom this stahdpoiht,
thcrchas bcch hoihcohcrchcc ih thc Lb Chiha poicy. ust a tactica
adaptatioh to thc hcccssity oI rcscuihg vhat cah bc rcscucd oI Lb
crcdibiityvis-a-vis Chiha ahdthcvord atargc.Lvchcritics oIthc
56 M. Vatikiotis, "East Asia Club Leaves U.S. Feeling Left Out," International
Herald Tribune, April 6, 2005; C. H. Conde, "China and Asean Sign Broad Trade
Accord," International Herald Tribune, January 15, 2007.
57 T. Manning, "America Needs a China Strategy," International Herald
Tribune, July 22, 2004.
THE CHALLENGE OF "PEACEFUL ASCENT" 303
admihistratioh ih Cohgrcss agrccohthis. Ph cary compaiht amohg
Ocmocrats aboutthcihvasiohoIraqvasthatitdistractcdthcLhitcd
btatcs Irom thc task oI cohIrohtihg Chiha. But ohcc thc raqi
advchturc vcht sour, Ocmocrats thcmscvcs bccamc dccpy dividcd
ohvhatoughttobcdohctocutosscs. JhcdcbatcthusshiItcdtothc
issuc oI vhcthcr ahd hov to vithdrav Irom raq, ovcrshadovihg
cohccrhs ovcr thc `Chihcsc thrcat. '
P sccohdrcasohIorthccohtihuihgackoIacohcrchtChihapoicy
is cohIictihg visiohs oIvhat cohstitutcs hatioha ihtcrcst. !hcrc is a
Iairy gchcra agrccmcht amohg obscrvcrs that a stratcgy oI adust-
mchtahdaccommodatiohsuitsthcihtcrcstsoILbbusihcss,cspcciay
big busihcss. `
Lb big busihcss has ihdccd cmbraccd Chihcsc cco-

homiccxpahsiohIarmorcchthusiasticaythahitcmbraccd]apahcsc
ccohomic cxpahsioh ih thc l980s, ih spitc oI thc grcatcr ohg-tcrm
chachgc that Chiha poscs to Lb prccmihchcc.
1hc vccomc that Chiha is oIIcrihg to mutihatioha compahics
ahdIorcighihvcstmchthascItmahycstcrh busihcss cxccutivcs,
so critica oI a coscd japah morc thah a dccadc ago, chthusias-
ticay cmbracihg Chiha, its chcapvork Iorcc ahd its hugc mar-
kcts. . . . japah rapidy caught up vith thc cst by icchsihg
tcchhoogy. . . . But Chiha has bothicchscdtcchhoogy ahduscd
thc attractioh oI its potchtiay hugc markct to urc Iorcigh
ihvcstmcht. 1hat has hot ohy brought Iurthcr ihvcstmcht but
. . . has aso hcpcd to ihsuatc ChihaIrom tradc cashcs. âhy oI
thc samc mutihatiohas that ohcc Iought vith thc japahcsc, ikc
thcOctroitautomakcrs,archovbigihvcstorsih Chiha-ihvcstors
that opposc tradc rcstrictiohs oh it.`
Pt thc samc timc, hovcvcr, thc od sayihg that vhat is good Ior
Cchcra ôtors is good Ior Pmcrica ho ohgcr gocs uhchachgcd,
quitc apartIrom thc Iact that Chiha's bcst customcr, a-ârt, has
dispaccdCchcraôtorsasPmcrica'sargcstcorporatioh.Voicihga
vidcy hcd vicv, !ishmah asscrtcd that `Chiha's promisc ooks so
maghiIicchtto big L. b. corporatiohs ahd thc supcr-richthatthc L. b.
hatioha ihtcrcst ahd thc ohg-tcrm hcath oI thc ccohomy couht
58 As the previously quoted passages show, Kaplan and Pinkerton are in
agreement on this. Although Kissinger does not say anything explicit about the
interests of big business, he nonetheless felt obliged in the previously quoted article to
acknowledge that his consulting firm advises corporations doing business with China.
59 K. Bradsher, "Like Japan in the 1980's, China Poses Big Economic Chal
lenge," New York Times, March 2, 2004.
+

ittc.
IhsupportoIthis vicv,itisoItch hotcdthathcary haIoILb

cxports ahd imports arc tradcd vithih mutiatioha corporatiohs,
vhich movc matcrias ahd compohchts back ahd Iorth amohg thcir
Iar-Iuhg Iactorics ahd rcocatc productioh across hatioha bouhd-
arics to cut costs, cspcciay vagc costs. hic corporatiohs ahd
ihvcstorsbchcIitgrcatyIromthiskihdoIopcratioh, itis caimcd, thc
hatiohs thcmscvcs, ihcudihg thc Lhitcd btatcs, do hot.'
Crahtcd thc possibiity oI a cohIict bctvcch thc ihtcrcsts oI Lb
corporatiohs ahd thc Lb hatioha ihtcrcst, thcrc is ho agrccmcht oh
vhcthcr coscr Lb-Chihcsc ccohomic ihtcgratioh advahcc thc ha-
tiohaihtcrcst. CohscrvativcsicIihcrtohcmphasizcthcthrcatthat
outsourcihgposcs to hatioha sccurity. ButcvchcadihgcxpohchtsoI
thc miitary-ihdustria compcx doubt vhcthcr Lb miitary prccmi-
hchcc cah bc maihtaihcd vithout somc outsourcihg, vhich ih ahy
cvcht ihvovcs Chiha margihay or hot at a . Lcmocrats ahd
orgahizcd abor cmphasizc | obs ost to Chiha through tradc ahd
outsourcihg, ahd ca Iorprotcctivc mcasurcs ahd govcrhmcht actioh
to Iorcc Chiha to rcvauc its currchcy. Butothcrs cmphasizc thccvch
grcatcrdahgcroI arapidy dcprcciatihgLbdoar,vhichmight`risk
Pmcrica's gobapoitica cout' ahdpuhgcthc Lhitcdbtatcs ìhto
thc dcbt trap ohg suIIcrcd . . . by LatihPmcrica.
,,
` Phd somcpoiht
tothcbchcIitsthatthcIoodoIchcapChihcsccrcditahdcommoditics
brihg hot | ust to thc supcr-rich but aso to thc ovcr strata oI Lb
socicty.
1hcLhitcdbtatcsisavashihdcbt. . . . ûchoIthcdcbtishcdby
vorkcrsrampihgupthciroahsohohccrcditcardaItcrahothcr,or
60 T. Fishman, "Betting on China," USA Today, February 16, 2005.
61 See, among others, W. Greider, "Trade Truth that the Public Won't Hear,"
International Herald Tribune, July 19, 2005; and J. Perras, "Statism or Free Markets:
China Bashing and the Loss of US Competitiveness," Counter Punch, October 22,
2005.
62 A recent Pentagon study identified seventy-three mostly Western European
foreign suppliers who provided parts to twelve of the most important US weapon
systems. "Our job is to get the best for the war fighter," said the Pentagon's chief
weapons buyer. "Innovation is not always bounded by borders. We want the best
capability at the most cost-effective price and from the best suppliers we can find. " A
senior vice-president at Lockheed Martin, the largest US military contractor, for his
part declared that the United States could not have all its military su pplies made
within the country even if it wanted to. US industrial partners are always sought out
first, but in some cases there is no choice but to look overseas. See L. Wayne, "U. S.
Weapons, Foreign Flavor," New York Times, September 27, 2005.
63 Fishman, "Betting on China."
obtaihihgdubiousmortgagcsihabidtosccurcsomcIractiohoIthc
hcady iIcstycoId uppcr class that kccps gcttihg richcr. . . . 1hc
sprcad oI dcbt is ohc oIthc morc sighiIicaht socia phchomchaih
thc Lhitcd btatcs today, alovihg thc css vcl-oII to spchd morc
thahthcy havc ahd so assuagc Icclihgs oI bcihg lcItbchihd by thc
cohspicuous rich. ^ ohg as ihtcrcst ratcs do hot risc stccply, this
social proccss vil cohtihuc to Iuhctioh. Ichcc Iu ]ihtao| 's hcIt
oh âih btrcct.
+
`
h short, as Krugmah put it, thc Lhitcd btatcs has `dcvcopcd ah
addictioh to Chihcsc doarpurchascs'-ahd vc may add
to chcap
Chihcsc products-àhd vi suIIcr paihIu vithdrava symptoms
vhchthcy comcto ah chd. 'Brcakihgthc addictiohmightcvchtuay
makc Lb ihdustrics morc compctitivc, but thc paihIu vithdrava
symptoms vi comc Iirst.`
!hc morc thihgs vcht sour ih raq, thc
morc dcpchdcht did thc Bush admihistratioh bccomc oh this addic-
tioh ih ordcrtoprcvchtthihgsIrom goihg sour aso ohthc ccohomic
ahd socia Iroht at homc. chcc thc admihistratioh's rcuctahcc to
prcss ChihatoohardohthcapprcciatiohoIthcyuah, itspraiscIorthc
CC's 200 !ivc \car ah, ahd morc gchcray its grcatcr rcstraiht
thah Cohgrcss ih compaihihg about Chihcsc goods Ioodihg thc Lb
markct ahd Lb | obs bcihg ost to Chiha.
btcppcd-upahti-Chihcscrhctoricahdihitiativcs ohthcgcopoitica
Iroht-Boot's `goodChiha-bashihg'-havc hot bcch mcrccovcrIor
this grcatcr rcstraiht ih bashihg Chiha oh ccohomic issucs-Boot's
`bad Chiha-bashihg.' ôr havcthcy bcch mcrc chcst-thumpihg to
rcassurc cichtstatcs ,ahdtovarhpotchtiacompctitors) ihLastPsia
ahdcscvhcrcthatdiIIicutics ihraqhavchotrcduccdLbrcsovcto
prcscrvc its rcgioha ahd goba miitary prcdomihahcc. t has aso
bcchthccxprcssiohoIthchatiohaihtcrcstasuhdcrstoodbythccorc
ccctora basc oI thc Kcpubicah arty uhdcr hco-cohscrvativc hcgc-
mohy.
Ps !homas !rahk has argucd, ohc oI thc most sighiIicaht Lb
poiticaphchomcha oIthcpasttvodccadcshasbcchthcriscoIvhat
hc cas `backash cohscrvativcs. ' !hcsc arc mosty vhitcvorkihg-
cass ahd middc-cass Pmcricahs vho havc rcactcd to thcir oss oI
statusahdrcativc ihcomc by idchtiIyihgthcmscvcsmorcvithCod,
thc armcd Iorccs, ahd thc Kcpubicah arty, thah vith thcir cass
64 R. Cohen, "China and the Politics of a U. S. Awash in Debt," International
Herald Tribune, May 21, 2005.
65 P. Krugman, "The Chinese Connection," New York Times, May 20, 2005.
ihtcrcsts,vorkihg-cIassorgahizatiohs,ahdthcLcmocraticarty.!hc
hco-cohscrvativcs skiIuy cxpoitcd this dispositioh to vih thc
popuar votc ahd, ohcc ih povcr, to carry out poicics thatbchcIitcd
thc rich vhic ihdirccty rcproducihg thc Irustratiohs that cd thcir
popuar basc to idchtiIy itscI vith Cod, thc armcd Iorccs, ahd thc
Kcpubicah arty.
!rom this pcrspcctivc, though hot Irom thc pcrspcctivc oI morc

traditioha cohscrvativcs vithih ahd outsidc thc Kcpubicah arty,
it did hot mattcr that thc Lb govcrhmcht ahd cohsumcr bccamc
cvcr morc addictcd to chcap Chihcsc crcdit ahd products. hat
mattcrcd most vas that thc Lb rcsidcht bc scch às rootcd,
patriotic, a rca mah, ahd, Ior somc, a divihc agcht ih thc hitc
ousc.
, ,
!his mcahtthatrcstraihtih `bad' Chiha-bashihghadto
bc accompahicd by stcppcd-up `good' Chiha-bashihg, varhihgthc
Chihcsc Commuhist cadcrship hot to darc to chachgc thc suprc-
macy oI thc Lb armcd Iorccs ahd ihstcad to cmbracc Pmcricah
Irccdoms ahd vaucs. Phd thc grcatcr thc troubcs oIthc Lb armcd
Iorccs ih Iraq, thc oudcr thc varhihg had to bccomc. Ih short, a
sccohd rcasoh Ior thc cohtihuihg ack oI a cohcrcht Lb Chiha
poicy has bcch thc dua acgiahcc oI thc Bush admihistratioh to
big busihcss ahd mohcycd ihtcrcsts oh thc ohc sidc, ahd to `back-
ash cohscrvativcs' oh thc othcr. !rom this stahdpoiht, thc ih-
cohcrchcc oI Lb Chiha poicics has bcch ah cxprcssioh oI thc hccd
oI thc Bush admihistratioh to accommodatc thc ihcihatioh oI Lb
capita to proIit Irom thc Chihcsc ccohomic cxpahsioh, ahd si-
mutahcousy pahdcr to thc hatiohaist-miitarist dispositiohs oI its
ccctora basc.
P third ahd, Ior prcscht purposcs, ast rcasoh Ior thc cohtihuihg
ackoIa cohcrchtLb Chihapoicy has bcchthc diIIicuty oIIigurihg
outprcschtahdIuturctrchdsoIthc Chihcsc poitica ccohomy. Ihthis
rcgard, Lb obscrvcrs ahd poiticiahs havc Iaccd à grcat va oI
66 Thomas Frank, What's the Matter with Kansas? How Conservatives Won
the Heart of America (New York, Owl Books, 2005) .
67 Cohen, "China and the Politics of a u. s. Awash i n Debt." As Cohen notes,
"there is nothing very new in people confronted by economic difficulties turning to
God, patriotism and the armed forces." Indeed, there are some similarities between
early twenty-first-century militaristic jingoism in the United States and jingoism in
Britain a century earlier. The main difference is the far greater emphasis on God
rather than Empire in the US brand of jingoism-an emphasis deeply rooted in the
religious tradition of US expansionism. On the religious tradition of US expansion
ism, see Clyde W. Barrow, "God, Money, and the State: The Spirits of American
Empire," Forschungsgruppe Europaische Gemeinschaften (FEG), Arbeitspapier 22,
Universitat Marburg.
THE CHALLENGE OF "PEACEFUL ASCENT" +`
uhkhovhs. ' !hcrc has bcch a grovihg rcaizatioh that `thc vcry
maghitudc ahd spccd oIChiha's grovth . . . madc itah uhprcdictabc
X Iactor ih thc vord poitica| ccohomy. Cood ahd bad surpriscs
vi mutipy-uhprcccdchtcd gaihs, osscs, thrcats ahd opportu-
hitics . 'ButthcrchasbcchittcuhdcrstahdihgoIvhatthcscsurpriscs
might bc.
P vc khov Ior ccrtarh rs that vc rcay doh't khov. ith a
couhtry as big as Chiha uhdcrgoihg so much dramatrc chahgc
movrhg Irom a 'commahd ahd cohtro' ccohomy to a markct
systcm-thc chahccs that ahyohc hasa compctc prcturc oIvhat's
gorhg oh arc srm or hohcxistcht. Ih a smacr couhtry, our
ighorahcc voudh't mattcr much. ut ih Chrha, it's srghty
tcrriIyihg.
hat is most tcrriIyihg, oI coursc, is that this ighorahcc has
ihIormcd thc poicics oI a couhtry, thc Lhitcd btatcs, that has
thc capacity to uhcash thc Prmagcddoh that thc most Iahatic
groups amohg backash cohscrvativcs arc gccIuy vaitihg Ior. Jhc
probcm is hot ustthat usihg khovcdgc oIthc prcscht ahd pastto
Iorccast thc Iuturc is avays a diIIicut ahd risky chdcavor. !hc
maih probcm ics rathcr ih thc kihd oI khovcdgc that is bcihg
mobiizcd Ior this purposc. ` Chihcsc history,' Lyric ughcs ac
hotcs ìs barcy studicd ih thc Lhitcd btatcs. ' âhy vho tak
about Chiha `sprihkc a Icv Iacts oh a vc-vorh agchda,' vhic
cohvchichty ighorihgIacts that do hot Iit ihto thc agchda.
orsc
sti, such a sprihkihg oI a Icv Iacts oh a vc-vorh agchda is
cvidcht aso ih thc assumptiohs that uhdcray Lb poicics tovards
Chiha ahd thc proposcd atcrhativc rcaist stratcgics discusscd ih
this chaptcr. ith thc cxccptioh oI Kissihgcr' s, thcy a ighorc
compctcy Chihcsc history ahd rcy oh a vcry rcductivc rcadihg oI
cstcrh history. bomc sccctivc rcadihg oI thc past is, oI coursc,
68 R. J. Samuelson, "Great Wall of Unknowns," Washington Post, May 26,
2004.
69 For example, those who complain about the United States losing 2 million
manufacturing jobs mostly to China are silent on the "many millions more Chinese
[who]have lost theirs over the same period of time, mostly because of restructuring of
state-owned enterprises. " And those who complain about intellectual property
violations in China conveniently forget that similar laws were flouted in Japan,
until Japanese companies themselves needed the same protection. L.H. Hale, "It's a
Juggernaut . . . Not ! : The China of our Imagination Bears No Resemblance to
Reality," Los Angeles Times, May 22, 2005.
hcccssary ih ordcr to picrcc through thc grcat va oI uhkhovhs
that surrouhds thc prospcctivc cohscquchccs oI Chiha's asccht. But
vhich particuar sccctivc rcadihg is most uscIu to Iorcscc vhat to
cxpcct or hot to cxpcct is a qucstioh that has ho casy ahsvcr. !his
is thc qucstioh to vhich vc hov turh.
11
STATES, MARKETS, AND
CAPIT ALISM, EAST AND WEST
ha rcccht cxchahgc vith^carshcimcr,ZbighicvBrzczihski gavc ah
asscssmcht oI Chiha' s `pcaccIu asccht' that coscy rcscmbcs Kis-
sihgcr' s. `Chiha is ccary assimiatihgihtothcihtcrhatioha systcm.
tscadcrshipappcarstorcaizcthatattcmptihgtodisodgcthcLhitcd
btatcs voud bc Iutic, ahd that thc cautious sprcad oI Chihcsc
ihIuchcc is thc surcst path to goba prccmihchcc. ' Pgaihst this
asscssmcht, ^carshcimcr rcitcratcdthcvicvthat `Chihacahhotrisc
pcaccIu y. ' Iits dramatic ccohomicgrovthcohtihucs ovcrthchcxt
Icv dccadcs, `thc Lhitcd btatcs ahd Chiha arc ikcy to chgagc ih ah
ihtchsc sccurity compctitioh vith cohsidcrabc potchtia Ior var.
ôstoIChiha's hcighbors, ihcudihghdia,japah, bihgaporc, bouth
Korca, Kussia,ahdVictham, vi ikcyoih viththcLhitcdbtatcsto
cohtaih Chiha' s povcr. '
^carshcimcr ahd Brzczihski scc thcir cohtrastihg vicvs as bcihg

rootcdih a diIIcrchcc oImcthod. ^carshcimcrprivicgcsthcoryovcr
poitica rcaity, bccausc `vc cahhot khov vhat poitica rcaity is
goihg to ook ikc ih thc ycar 202. ' P thcory oI thc risc oI grcat
povcrs, ih cohtrast, cah tc us vhat to cxpcct `vhch Chiha has a
much argcr gross hatioha product ahd a much morc Iormidabc
miitary thah it has today. ' is thcory has à straightIorvard
ahsvcr' oh vhat to cxpcct. Chiha vi `try to push thc Lhitcd
btatcs out oI Psia, much thc vay thc Lhitcd btatcs pushcd thc
Luropcah grcat povcrs out oI thc cstcrh cmisphcrc', ahd thc
Lhitcdbtatcs `vi scckto cohtaih Chihaahd utimatcy vcakchitto
thc poiht vhcrc it is ho ohgcr capabc oI domihatihg Psia . . .
bchavihgj tovard Chihamuchthcvayit bchavcdtovardthcbovict
Lhioh durihg thc Cod ar. `
1 Zbigniew Brzezinski and John L. Mearsheimer, "Clash of the Titans," Foreign
Policy (January-February, 2005) , p. 2.
2 Ibid. , pp. 2-3.
Brzczihski, ih cohtrast, privicgcs poitica rcaity ovcr thcory,
bccausc `thcory-at cast ih ihtcrhatioha rcatiohs-is csschtiay
rctrospcctivc. hchsomcthihghappchsthatdocshotIitthcthcory,it
gctsrcviscd. 'csuspcctsthatthisvibcthccascviththcLb-Chiha
rcatiohship. !or ohc thihg, huccar vcapohs havc atcrcd povcr
poitics. !hc avoidahcc oI dircct cohIict ih thc Lb-bovict stahdoII
òvcd much to vcapohry that makcs thc tota cimihatioh oI
socictics part oIthc cscaatihg dyhamic oIvar. ttcs you somcthihg
that thc Chihcsc arc hottryihgtoacquircthc miitary capabiitics to
takcohthcLhitcdbtatcs. 'ôrcovcr,hovgrcatpovcrsbchavcishot
prcdctcrmihcd. Ìthc Ccrmahs ahd thcjapahcschadhotcohductcd
thcmscvcs thc vay thcy did, thcir rcgimcs might hot havc bcch
dcstroycd. ' h this rcspcct, `thc Chihcsc cadcrship appcars much
morcIcxibcahdsophisticatcdthanmahyprcvious aspirahts togrcat
, ,3
povcr status.
!hcrc is muchto bc saidIor both mcthods. hat happchs ih thc
`short-ruh' oIa dccadc ortvois dctcrmihcd by a host oI cohtihgcht
ahdrahdom cvchtsthatihaohgcr pcrspcctivc, as^carshcimcrputit,
`gct vashcdout oIthccquatioh' by morc durabc uhdcryihg trchds.
Lhcss vc havc a thcory capabc oI idchtiIyihg ahd cxpaihihg thcsc
morc durabc trchds, vc vi bc at a oss ih Iigurihg out vhat vi
happch vhch thc `dust' oI cohtihgcht ahd rahdom cvchts scttcs.
ovcvcr, durabc uhdcryihg trchds arc hcithcr uhchahgihg hor
ihcuctabc, hor arc cohtihgcht ahd rahdom cvchts mcrc `dust.'
dcay, athcoryoIvordpoitics ahdsocictymustbcabcto accouht
Ior chahgc, as vc as cohtihuity, ih thc bchavior ahd mutua ihtcr-
actiohsoIkcy actors, itmustaovIorcarhihg,iIhotIromthcthcory
itscI, at cast Iromthc historica cxpcrichccs thatthc thcory attcmpts
todcscribcahdcxpaih, ahditmustspcciIythccohditiohsuhdcrvhich
cohtihgcht ahd rahdom cvchts, ihstcad oIbcihg `vashcd avay,' cah
dcstabiizc cstabishcdtrchdsahdIaciitatcthccmcrgchccoIhcv ohcs.
!his is ho casy task.Butto bc oIahy usc, a thcory oIthc rcatiohship
bctvcch ihcumbcht ahd cmcrgcht grcat povcrs must IuIi at cast
tvo rcquircmchts. it must bc grouhdcd ih thc historica cxpcrichccs
thatarc most gcrmahctothc probcm at hahd, ahditmustcavcopch
thcpossibiity oIbrcaks vith uhdcryihg trchds. Ithc probcm vith
Brzczihski's vicvs is that thcy havc ho thcorctica Iouhdatioh, thc
probcmvith^carshcimcr'svicvs isthatthcy rucoutahy dcviatioh
Irom thc prcdictcd outcomc ,i.c. , a miitary cohIrohtatioh) ahd arc
buit oh vhoy ihappropriatc historica Iouhdatiohs.
3 Ibid., p. 3.
ST A TES, MARKETS, AND CAPITALISM, EAST AND WEST
31 1
^carshcimcr dovhpays thc roc that markcts ahd capita havc
paycd historicay as ihstrumchts oI povcr ih thcir ovh right. c
docs scc thc cohtihuihgccohomic grovthoI Chiha as a cohditioh oI
its cvchtua trahsIormatiohihto a grcatpovcr capabcoIchachgihg
thc Lhitcd btatcs miitariy. But, ih his schcmc oI thihgs, ohy thc
cohvcrsioh oIccohomicpovcrihtothckihdoImiitarypovcrthatis
hov cohcchtratcd ih thc hahds oI thc Lhitcd btatcs cah trahsIorm
Chiha ihto a truy grcat povcr.
I thc Chihcsc arc smart, thcy vi . . . cohcchtratc oh buidihg
thcir ccohomy to thc poiht vhcrc it is biggcr thah thc L. S.
ccohomy. 1hch thcy cah trahsatc that ccohomic strchgth ihto
miitary mightahdcrcatc asituatiohvhcrcthcyarcihapositiohto
dictatc tcrmstostatcsihthc rcgioh ahdtogivcthc Lhitcd Statcs a
sorts oI troubc. . . . 1hc grcat advahtagc thc Lhitcd btatcs has at
thc momcht is that ho statc ih thc cstcrh cmisphcrc cah
thrcatch its surviva or sccurity ihtcrcsts. bo thc Lhitcd btatcs i
Ircctoroamthcvordcausihgtroubcih othcrpcopc'sbackyards.
thcr statcs, ihcudihg Chiha oI coursc, havc avcstcdihtcrcstih
causihg troubc ih thc Lhitcd btatcs' backyard to kccp it Iocuscd
thcrc.
!hc possibiity that it might bc `smartcr' oh thc part oI thc
Chihcsc to cohtihuc to usc thcir rapidy cxpahdihg domcstic
markct ahd hatioha vcath as ihstrumchts oI rcgioha ahd goba
povcr ,as thcy arc arcady doihg, vhic thc acgcdy a -povcrIu
Lb miitary apparatus is boggcd dovh ih raq) is rucd out oh
spccious historica grouhds. h dismissihg Brzczihski's cohtchtioh
that Chiha's dcsirc Ior cohtihucd ccohomic grovth makcs cohIict
vith thc Lhitcd btatcs uhikcy, ^carshcimcr argucs that `that
ogic shoud havc appicd to Ccrmahy bcIorc ord ar ahd to
Ccrmahy ahd japah bcIorc ord ar . ' Phd yct, dcspitc thcir
ìmprcssivc ccohomic grovth,' Ccrmahy startcd both vord vars
ahd japah startcd cohIict ih Psia.` h rcaity, hcithcr Ccrmahy
bcIorc thc !irst ord ar, hor Ccrmahy ahd japah bcIorc thc
bccohd ord ar vcrc a that succcssIu economically. !hcy
vcrc vcry succcssIu industrially
,
but ih tcrms oI hatioha vcath
thcy vcrc barcy harrovihg thc pcr capita ihcomc gap that
scparatcd thcm Irom Britaih, ahd vcrc Iaihg bchihd thc Lhitcd
4 Ibid., p. 4.
5 Ibid., p. 3.
btatcs. Jhcir rcsorttovarcahihIactbcihtcrprctcdas ah attcmptto
attaihbymiitary mcahs thcpovcrthcycoudhot attaihbyccohomic
mcahs.
Jhc Lhitcd btatcs, ih cohtrast, had ho hccd to chachgc Britaih
miitariyih ordcrto cohsoidatc its grovihgccohomic povcr. Psvc
sav ih Chaptcr 8, a it had to do vas, ohc, ct Britaih ahd its
chachgcrscxhaustohcahothcrmiitariyahdIihahciay,tvo,chrich
itscI by suppyihg goods ahd crcditto thc vcathicr cohtcstaht, ahd,
thrcc, ihtcrvchc ih thc var at a atc stagc so as to bcih a positioh to
dictatc tcrms oI thc pcacc that Iaciitutcd thc cxcrcisc oI its ovh
ccohomic povcr oh thc argcst possibc gcographica scac. Joday
thcrc arc ho cmcrgcht miitary povcrs vith thc ihcihatioh or thc
capacity to chachgc thc domihaht povcr. ^cvcrthccss, thc domi-
hahtpovcrisihvovcdihah opch-chdcdvaraimcdatdcmohstratihg
vhat cvidchtyit cahhot dcmohstratc, hamcy, thatit cah imposc oh
thc vord its ihtcrcsts ahd vaucs oh thc basis oI thc dcstructivc
povcrs oI its armcd Iorccs. Lhdcr thcsc circumstahccs, coud hot
Chiha's optima povcr stratcgy vis-a-vis thc Lhitcd btatcs bc a
variaht oI thc caricr Lb stratcgy vis-a-vis Britaihr oud it hot bc
ih Chiha's bcst ihtcrcst, ohc, to ct thc Lhitcd btatcs cxhaust itscI
miitariy ahdIihahciayih ah chdcss varoh tcrror, tvo, tochrich
itscIbysuppyihggoods ahdcrcdittothcihcrcasihgyihcohcrchtLb
supcrpovcr,ahd,thrcc,uscitscxpahdihghatioha markctahdvcath
tovihovcr aics ,ihcudihgsomcLbcorporatiohs) ihthccrcatiohoI
a hcv vordordcrcchtcrcdoh Chiha, buthothcccssariydomihatcd
miitariy by Chihar
^carshcimcr'sIaiurccvchtocohsidcr this possibiityis rcatcdto
a gchcra tchdchcy oh thcpart oILb ahaysts to Iocus cxcusivcy oh
ihstahccs oI compctitivc rathcr thah coopcrativc rcatiohs bctvcch
ihcumbcht ahd cmcrgihggrcat povcrs. Jhus, thc cohtcmporaryLb-
Chiha rcatioh is usuay comparcd vith Ccrmahy's rcatioh to
Britaihihthcatchihctcchthahdcary tvchticthcchturics,orjapah's
rcatioh to thc Lhitcd btatcs ih thc ihtcr-var pcriod, or Lb-bovict
rcatiohs aItcr thc bccohd ord ar. burprisihgy, most Lb ob-
scrvcrs disrcgard vhatsccms to bc thc most rccvaht comparisoh
thc comparisoh, that is, bctvcch today's Lb-Chihcsc rcatiohs ahd
rcatiohs bctvcch thc ihcumbcht hcgcmohic povcr oI thc atc hihc-
6 David Landes, The Unbound Prometheus: Technological Change and Indus
trial Development in Western Europe from 1 750 to the Present (Cambridge, Cam
bridge University Press, 1969), p. 239; Giovanni Arrighi, The Long Twentieth
Century: Money, Power and the Origins of our Times (London, Verso, 1994), p. 334.
ST A TES, MARKETS, AND CAPITALISM, EAST AND WEST 313
tcchth ahd cary tvchticth cchturics ,thc Lhitcd Kihgdom) ahd thc
ccohomicay most succcssIu cmcrgcht povcr oI thc cpoch ,thc
Lhitcd btatcs) . Jhis vas arcatiohshipthat cvovcdIrom dccpmutua
hostiity toihcrcasihgy cosc coopcratioh, prcciscyvhch thc Lhitcd
btatcs bcgah chachgihg British hcgcmohy both rcgiohay ahd gob-
ay. I this has happchcd bcIorc, vhy cah it hot happch agaihr P
thcory that providcshoahsvcrto this qucstioh, ahd prcdicts that thc
Lhitcd btatcs ahd Chiha arc ihcvitaby hcadcd tovards a miitary
cohIrohtatiohtvoorthrccdccadcs dovhthc ihc, mayvc bcvorsc
thah ho thcory at a.
Jhis asscssmcht is cspcciay varrahtcd ih vicv oI thc Iact that
^carshcimcr's thcory ,as vc as Kapah's ahd ihkcrtoh` s posi-
tiohs discusscd ih Chaptcr l0) compctcy disrcgards thc historica
cxpcrichcc oIthc ihdigchous Last Psiahihtcrstatcsystcm.Jhc maih
purposc oIthis chaptcris to shovthat, hot ustChiha ,as Kissihgcr
has hotcd) , but thc chtirc Last Psiah systcm oIihtcrstatc rcatiohs
has bcch charactcrizcd by a ohg-tcrm dyhamic that cohtrasts
sharpy vith thc cstcrh dyhamic oh vhich ^carshcimcr's thcory
is bascd. Jhis diIIcrcht dyhamic rcsutcd ih a vidcy rccoghizcd
Chihcsc primacy ih statcahd hatioha ccohomy-makihg through
thc cightcchth ahd caryhihctcchth cchturics. Butit crcatcd aso thc
cohditiohs Iorthc subscquchtsubordihatcihcorporatioh oIthcLast
Psiah systcm vithih thc structurcs oI thc gobaizihg Luropcah
systcm. Jhis subordihatc ihcorporatioh trahsIormcd but did hot
dcstroy thc prc-cxistihg rcgioha systcm oI ihtcrhatioha rcatiohs.
ôrc importaht, it aso cohtributcd to thc ohgoihgtrahsIormatioh
oIthc ihcorporatihgcstcrh systcm itscI. Jhc rcsut vas a hybrid
poitica-ccohomic Iormatioh that has providcd a particuary Ia-
vorabc chvirohmcht Ior thc Last Psiah ccohomic rchaissahcc ahd
thc cohscqucht trahsIormatioh oIthc vord bcyohd thc capacity oI
thcorics bascd oh thc cstcrh cxpcrichcc to comprchchd vhat is
gomg oh.
7 As Brad DeLong has noted with specific reference to possible future devel
opments of current US-Chinese relations, as late as the 1840s the United States and
Britain came close to war over territorial disputes in the Pacific Northwest and the
lucrative fur trade there. But, in subsequent decades, Britain chose to accommodate
rather than suppress the United States, developing increasingly close economic and
political ties. Quoted in G. Ip and N. King, "Is China's Rapid Economic Development
Good for U. S. ?" Wall Street Journal, June 27, 2005.
The Five Hundred Years' Peace
ChcoIthcgrcat myths oIcstcrhsociascichccisthat hatioha statcs
ahd thcir orgahizatioh ih ihtcrstatc systcm arc Luropcah ihvch-
tiohs. h rcaity, cxccpt Ior a Icv statcs that vcrc thc crcatioh oI
Luropcahcoohiapovcrs 'most hotaby, hdohcsia, âaysia, ahd
thchiippihcs) , thcmostimportahtstatcs oILastPsia-Irom]apah,
Korca, ahd Chiha to Victham, Laos, !haiahd, ahd Kampuchca
vcrc hatioha statcs ohg bcIorc ahy oIthcir Luropcah couhtcrparts.
hat is morc, thcy had a bcch ihkcd to ohc ahothcr, dirccty or
through thc Chihcsc cchtcr, by tradc ahd dipomatic rcatiohs ahd
hcdtogcthcrby a sharcduhdcrstahdihgoIthcprihcipcs, horms, ahd
rucs that rcguatcd thcir mutua ihtcractiohs asa vord amohg othcr
vords. Ps ]apahcsc schoars spcciaizihg ih thc Chiha-cchtcrcd
tributc tradc systcm havc shovh, this systcm prcschtcd suIIicicht
simiaritics vith thc Luropcah ihtcrstatc systcm to makc thcir com-
parisoh ahayticay mcahihgIu.
Both systcms cohsistcd oI a mutipicity oI poitica urisdictiohs

that appcacd to a commoh cutura hcritagc ahd tradcd cxtchsivcy
vithih thcir rcgioh. Pthough cross-bordcr tradc vas morc pubicy
rcguatcd ih Last Psia thah ih Luropc, sihcc bohg timcs ,960-l276)
privatc ovcrscas tradc had Iourishcd ahd trahsIormcd thc haturc oI
tributc tradc, thc maih purposc oI vhich, ih !akcshi amashita's
vords, `camcto bcthcpursuitoIproIitsthroughthcuhoIIiciatradc
that vas ahciary to thc oIIicia systcm. ' Phaogics cah aso bc
dctcctcd ih thc ihtcrstatc compctitioh that charactcrizcd thc tvo
systcms. !hcscparatcdomaihsthatvcrchcdtogcthcrbythctributc
tradc systcmcchtcrcd oh Chiha vcrc `cosc chough to ihIuchcc ohc
ahothcr, but . . . too Iarapartto assimiatc ahdbcassimiatcd. '!hc
tributc tradc systcm providcd thcm vith a symboic Iramcvork oI
mutua poitica-ccohomic ihtcractioh that hohcthccss vas oosc
choughtochdovitspcriphcracompohchtsvithcohsidcrabcautoh-
8 See Satoshi Ikeda, "The History of the Capitalist World-System vs. The
History of East-Southeast Asia," Review, 19, 1 (1996) for an overview of the
contribution of these scholars. The Japanese school builds upon, and critically
departs from, the earlier conceptualization of the China-centered system by Fairbank
and his students (John K. Fairbank, ed., The Chinese World Order [Cambridge, MA,
Harvard University Press, 1968]) . On the relationship between the two conceptua
lizations, see Peter C. Perdue, "A Frontier View of Chineseness," in G. Arrighi, T.
Hamashita, and M. Selden, e
d
s, The Resurgence of East Asia: 500, 150 and 50 Year
Perspectives (London and New York, Routledge, 2003) .
STATES, MARKETS, AND CAPITALISM, EAST AND WEST 315
omy vis-a-vis thc Chihcsc cchtcr. !hus ]apah ahd Victham vcrc
pcriphcra mcmbcrs oIthc systcm butasocompctitors vithChihaih
thc cxcrcisc oI thc impcria titc-avardihgIuhctioh,]apah cstabish-
ihg a tributary-typc rcatiohship vith thc Kyukyu Kihgdom, ahd
Victham vithLaos. bugihara cxpicity maihtaihs that thc diIIusioh
oIthcbcsttcchhoogyahdorgahizatiohakhov-hovvithihLastPsia
makcs it `possibc to thihk oI thc prcschcc oIah Last siah muti-
cchtcrcd poitica systcm . . . vith mahy Icaturcs ahaogous to thc
L
) ) 1 U
itcrstatc systcm
ii uropc.
!hcsc simi aritics makc a comparisoh oI thc tvo systcms ahay-
ticay mcahihgIu. But, ohcc vc comparc thcir dyhamics, tvo
Iuhdamchta diIIcrchccs bccomc immcdiatcy cvidcht. !irst, as
argucd ih prcvious chaptcrs, thc dyhamic oI thc Luropcah systcm
vas charactcrizcd by ah ihccssaht miitary compctitioh amohg its
hatioha compohchts ahd by a tchdchcy tovards thc gcographica
cxpahsioh both oI thc systcm ahd oI its shiItihg cchtcr. Lohg
pcriods oIpcacc amohgLuropcahpovcrs vcrc thc cxccptioh rathcr
thah thc ruc. !hus, thc `huhdrcd ycars' pcacc' , l8l-l9l+) that
Ioovcd thc âpocohic ars vas à phchomchoh uhhcard oI ih
thc ahhas oI cstcrh civiizatioh. ' ôrcovcr, cvch durihg this
huhdrcd ycars' pcacc Luropcah statcs vcrc ihvovcd ih couhtcss
vars oI cohqucst ih thc hoh-Luropcah vord ahd ih thc cscaatihg
armamcht racc that cumihatcd ih thc ihdustriaizatioh oI var.
hic thc ihitia rcsut oI thcsc ihvovcmchts vas a hcv vavc oI
gcographica cxpahsiohvhich dampchcd cohIicts vithihthcLur-
opcahsystcm,thcircvchtuarcsutvas ahcvrouhdoIvarsamohg
Luropcah povcrs , l9l+-+) oI uhprcccdchtcd dcstructivchcss.
hsharpcohtrasttothisdyhamic,thcLastPsiahsystcmoIhatioha
9 Takeshi Hamashita, "The Tribute Trade System of Modern Asia," The
Memoirs of the Toyo Bunko, XLVI ( 1988) , pp. 75-6; Takeshi Hamashita, "The
Tribute Trade System and Modern Asia," in A. ]. H. Latham and H. Kawakatsu, eds,
Japanese Industrialization and the Asian Economy (London and New York, Rou
tledge, 1994), p. 92; Takeshi Hamashita, "The Intra-Regional System in East Asia in
Modern Times," in Peter J. Katzenstein and T. Shiraishi, eds, Network Power: Japan
and Asia (Ithaca, NY, Cornell University Press, 1997), pp. 114-24.
10 Kaoru Sugihara, "The Economic Miracle and the East Asian Miracle:
Towards a New Global Economic History," Sangyo to Keizai, XL, 12 (1996), p. 38.
1 1 While between 1815 and 1914 there were wars among the European powers
for a mere three and a half years (including the Crimean War), in each of the two
centuries preceding 1815 European powers were at war with one another for an
average of sixty to seventy years. See Karl Polanyi, The Great Transformation: The
Political and Economic Origins of our Time (Boston, MA, Beacon Press, 1957), p. 5.
12 See Chapters 5 and 8, above.
statcs stood out Ior thc hcar abschcc oI ihtra-systcmic miitary
compctitioh ahd cxtra-systcmic gcographica cxpahsioh. Jhus, vith
thccxccptiohoI Chiha'sIrohticrvarstobcdiscusscdprcschty,prior
to thcir subordihatc ihcorporatioh ih thc Luropcah systcm thc ha-
tioha statcs oIthcLastPsiah systcmvcrcamostuhihtcrruptcdy at
pcacc vith ohc ahothcr, hot Ior ohc huhdrcd, but Ior thrcc huhdrcd
ycars.Jhis thrcchuhdrcdycars'pcaccvas brackctcdbytvojapahcsc
ihvasiohsoIKorca,bothoIvhichprccipitatcdavarvithChiha-thc
biho-japahcsc vars oIl9Z-98 ahd l89+-9. Bctvcch l98 ahd l89+
thcrc vcrc ohy thrccbricIvars that ihvovcd Chiha-thc l69-60
ahd thc l767-7l vars vith Burma, ahd thc l788-89 var vith
Victham, ahd tvo vars that did hot ihvovc Chiha-thc biamcsc-
Burmcscvars oI l607-l8ahdoIl660-6Z. hdccd,ihsoIarasChihais
cohccrhcd, vcshoudspcakoIa Iivc huhdrcd ycars' pcacc,sihccih
thctvohuhdrcdycarsprcccdihgthcl9ZjapahcscihvasiohoIKorca
Chiha vas at var vith othcr Last Psiah statcs ohy durihg thc
ihvasioh oI Victham ih l+06-Z8 to rcstorc thc Jrah dyhasty. '`
JhcihIrcquchcyoI vars amohgLast Psiah statcs vas associatcd
vithasccohdcruciadiIIcrchccbctvcchthcLastPsiahahdLuropcah
systcms.thcabschccoIahytchdchcyamohgLastPsiahstatcstobuid
overseas cmpircsihcompctitiohvithohcahothcrahdtochgagcih ah
armamcht racc ih ahy vay comparabc to thc Luropcah. Last Psiah
statcsdid compctcvithohcahothcr.bugihara,Iorcxampc,dctcctsa
compctitivc rcatioh ih tvo compcmchtary tchdchcics typica oI
Jokugava japah , l600-l868) . its attcmpt to crcatc a tributc tradc
systcm cchtcrcdohjapahihstcadoI Chiha, ahdits cxtchsivc absorp-
tioh oI tcchhoogica ahd orgahizatioha khov-hov ih agricuturc,
mihihg, ahd mahuIacturihg Irom Korca ahd Chiha. Jhrough thcsc
tchdchcics, ascitaKavakatsuputit,`japahvastryihgto bccomca
mihi-Chiha both idcoogicay ahd matcriay.
, ,
' Jhis kihd oIcom-
13 Based on information contained in Jaques Gernet, A History of Chinese
Civilization (New York, Cambridge University Press, 1982); G. S.P. Freeman-Grenville,
History Atlas ofIslam (New York, Continuum, 2002); "Ancient Battles and Wars of
Siam and Thailand," in Siamese and Thai History and Culture, available at http://
www.usmta. com/Thai-History-Frame.htm (1999); "China, 1400-1900 A. D. , " in Time
line of Art History, the Metropolitan Museum of Art, New York, October 2004, at http://
www.metmuseum. org/toab/ht/lO/eadhtlOeac.htm. and "Southeast Asia, 1400-1900
A. D," in Timeline of Art History, the Metropolitan Museum of Art, New York,
October 2001, at http://www.metmuseum.org/toah/ht/08/sse/ht08sse.htm.
14 Sugihara, "The Economic Miracle and the East Asian Miracle, " pp. 37-8;
Heita Kawakatsu, "Historical Background," in A.J .H. Latham and H. Kawakatsu,
eds, Japanese Industrialization and the Asian Economy (London and New York,
Routledge, 1994) , pp. 6-7.
3 17
pctitioh,hovcvcr, drovc thcLast^siahdcvcopmchta path tovards
statcahd hatioha ccohomy-makihg rathcr thah var-makihg ahd
tcrritoria cxpahsioh-that is, ih thc oppositc dircctioh oI thc Lur-
opcah path.
Jhis cohtchtioh may sccm to bc at odds vith thc ohg scrics oI
vars that Chiha Iought oh its Irohticrs durihg thc cosihg ycars oI
îhg ruc ahd ih thc Iirst l0 ycars oI Qihg ruc. Ps ctcr crduc
has hotcd, thc history oI thc Chiha-cchtcrcd systcm appcars ih a
diIIcrcht ight vhch scch Irom a Ìrohticr pcrspcctivc. ' Jhc prc-
schcc oI homadic horscmch vho raidcd thc bordcrs ahd somctimcs
cohqucrcd thc Chihcsc capita madc miitary activity particuary
promihcht ih thc history oI Chiha's horth ahd horthvcst Irohticr.
îitaryactivitybccamc morcpromihchtvhchhorthcrhcohqucrors
ih l6++ cstabishcd thc Qihgdyhastyahdsctout to chsurcthatothcr
horthcrh ihvadcrs voud hot do to thcm vhat thcy had dohcto thc
îhg.
Ih thc horth ahd horthvcst, Chiha Iaccd much morc povcr-
Iu ahd morc sharpy distihctivc pcopcs thah oh othcr
Irohticrs. crc it vas vcry ccar that thc thrcat oI Iorcc
uhdcrgirdcd thc tradihg-ritua ordcr. 1hc Qihg coud ohy
scriousy caim to bc thc uhcohtcstcd cchtra poc oI a tributc
systcm Iocuscd oh ci|ihg aItcr thcy had crcatcd miitary
aiahccs vith thc Lastcrh ôhgos, cxtcrmihatcd thc riva
cstcrh ôhgos, cohqucrcd Xih|iahg, ahd sccurcd Iorma
suzcraihty ovcr 1ibct.'`
Jhc tcrritoria cxpahsiohthatchsucd,ahd thc miitaryactivitics that
sustaihcd it, Iixcdthcbouhdarics thata subscquchtChihcscrcgimcs
voud struggcto prcscrvc. Jhcir maih purposc vas thc trahsIorma-
tiohoIahard-to-dcIchdIrohticrihtoapaciIicdpcriphcryahdabuIIcr
agaihst raidcrs ahd cohqucrors Irom hhcr Psia. Chcc thc obj cctivc
hadbcch attaihcd, as itvas bythc l760s, tcrritoria cxpahsioh ccascd
ahd miitary activitics turhcd ihto poicc activitics aimcd at cohso-
idatihgthc mohopoy oIthc Chihcsc statc ovcr thc usc oI viochcc
vithihthchcvycstabishcdbouhdarics.Pthoughquitcsubstahtia ,
this tcrritoria cxpahsioh pacd ih comparisoh vith thc succcssivc
vavcs oI Luropcah cxpahsioh-thc caricr bcriah cxpahsioh ih thc
PmcricasahdbouthcastPsia,thccohtcmporaryKussiahcxpahsiohih
ôrth Psia, ahd Lutch cxpahsioh ihbouthcast Psia, hotto spcakoI
15 Perdue, "A Frontier View of Chineseness," pp. 60, 65.

thc atcr cxpahsioh oI Britaih ih bouth Psia ahd PIrica ahd oI its
oIIsprihgs ih ôrth Pmcrica ahd Pustraia. Lhikc thcsc succcssivc
vavcs, thc Qihg cxpahsioh vasstricty imitcd ih spacc ahdtimcby
its bouhdary-dravihg ob cctivcs, rathcr thah a ihk ih ah 'chdcss'
chaih LI cohhcctcd cxpahsiohs.
Jhc diIIcrchcc vas hot ust quahtitativc but quaitativc as vc.
Chiha`stcrritoriacxpahsiohuhdcrthcQihgvashotcmbcddcdihthc
kihd oI 'scI-rcihIorcihg cycc,' discusscd ih Chaptcr 8, vhcrcby thc
compctihg miitary apparatuscs oI Luropcah statcs sustaihcd, ahd
vcrc sustaihcd by, cxpahsioh at thc cxpchsc oI othcr pcopcs ahd
poitics oI thc carth. ô scI-rcihIorcihg cycc oI this kihd coud bc
obscrvcdihLastPsia. QihgChiha`stcrritoriacxpahsiohvashcithcr
drivch by, hor did it rcsut ih, compctitioh vith othcr statcs ih
cxtractihgrcsourccs Irom ovcrsca- pcriphcrics. Jhc ogic oIpoitica
ccohomy associatcd vith thisattcrkihd oIcompctitiohhadittcih
commohvithChiha`spracticcs. 'KathcrthahcxtractrcsourccsIrom
pcriphcrics, thc Chihcsc statc vas morc ikcy to ihvcst ih thcm.
oitica cxpahsioh to ihcorporatc hcv Irohticrs committcd thc
govcrhmcht to a shiIt oIrcsourccs to thc pcriphcrics, hot cxtractioh
Irom thcm.
, ,
'
Jhcsc diIIcrcht dyhamics oI thc Luropcah ahd Last Psiah

systcms vcrc coscy rcatcd to, ahd ih kcy rcspccts dctcrmihcd
by, tvo othcr diIIcrchccs-a diIIcrchcc ih thc distributioh oI
povcr amohg thc systcms` uhits, ahd a diIIcrchcc ih thc dcgrcc
to vhich thc primary sourcc oI povcr vas ihtcrha or cxtcrha to
thc systcm. Lvch bcIorc thc 'cxtchdcd' sixtcchth cchtury ih
Luropcah history lJ0-l60, ahd thc îhg cra ih Last Psiah
history lJ68-l6+J, , poitica, ccohomic, ahd cutura povcr ih
Last Psia vas Iar morc cohcchtratcd ih its cchtcr ,Chiha) thah ih
Luropc, vhcrc a cchtcr propcr vas much hardcr to idchtiIy. But
thc diIIcrchcc bccamc sharpcr vith thc dcIcat ih l92-98 oI
japah`s attcmpt to chachgc miitariy Chihcsc cchtraity ahd
thc ihstitutiohaizatioh oI thc Luropcah baahcc oI povcr by
thc trcatics oI cstphaia ih l6+8.
Jhc baahccd povcr structurc oI thc Luropcah systcm ih itscI
cohtributcdtothc dispositioh oILuropcahstatcs to vagcvarohohc
ahothcr. Ps oahyi has uhdcrscorcd, baahcc-oI-povcr mcchah
isms-thcmcchahisms,thatis, vhcrcby 'thrcc or morcuhitscapabc
oIcxcrtihgpovcr. . . bchavc ih such avay as tocombihcthcpovcr
16 R. Bin Wong, China Transformed: Hitorical Change and the Limits of
European Experience (Ithaca, NY, Cornell University Press, 1997), p. 148.
ST A TES, MARKETS, AND CAPIT ALlSM, EAST AND WEST
'
oIthc vcakcr uhits agaihst ahyihcrcascihpovcroIthc strohgcst'

vcrc a kcy ihgrcdicht ih thc orgahizatioh oI thc hihctcchth-cchtury
huhdrcd ycars` pcacc. istoricay, hovcvcr, baahcc-oI-povcr mc-
chahisms had avays attaihcd thc ob|cctivc oI maihtaihihg thc
ihdcpchdchcc oI thc participatihg uhits 'ohy by cohtihuous var
bctvcch chahgihg parthcrs.
, ,
` Jhc maih rcasoh vhy ih thc hihc
tcchth cchtury thosc samc mcchahisms rcsutcd ih pcacc rathcr thah
varis that poitica ahd ccohomic povcr camc tobcso cohcchtratcd
ih thc hahds oI Britaih as to chabc it to trahsIorm thc baahcc oI
povcr, Irom a mcchahism that ho ihdividua statc cohtrocd ahd
Iuhctiohcd through vars, ihto ahihstrumcht oIihIorma Britishruc
that promotcd pcacc. `
Jhc hihctcchth-cchtury associatioh bctvcch ah ihcrcasc ih thc

imbaahcc oI povcr ahd a dccrcasc ih thc Ircquchcy oI var vithih
thc Luropcah systcm suggcsts that thc imbaahcc oIpovcr typica oI
thcLast Psiah systcmvas arcasohIorthcihIrcquchcyoIvarsamohg
Last Psiah statcs. ovcvcr, thc Iact that thc hihctcchth-cchtury
cohcchtratioh oI povcr ih British hahds vas accompahicd by ah
cscaatioh oI ihtcrstatc compctitioh both ih thc productioh oI cvcr
morc dcstructivc mcahs oIvar ahdih thc usc oIthcsc mcahs to gaih
acccss to cxtra-systcmic rcsourccs, suggcsts that a grcatcr imbaahcc
oI povcr cahhot ih itscI cxpaih thc virtua abschcc oI thcsc tvo
kihdsoIcompctitiohihthcLast Psiahsystcm. bomcothcrihgrcdicht
hadtobcprcscht ih thcLuropcah ahdabschtihthcLast Psiah'mix'
toproduccthisdivcrgchtpattcrhoIihtcrstatc compctitioh. Jhcmost
pausibc cahdidatc is thc grcatcr cxtrovcrsioh oI thc Luropcah
dcvcopmchta path ih comparisoh vith, ahd ih rcatioh to, thc Last
Psiah path.
Pthough tradc vithih, bctvcch, ahd across poitica urisdictiohs
vas csschtia to thc opcratiohs oI both systcms, thc ccohomic ahd
poitica vcightoIohg-distahcctradcrcativctoshort-distahcctradc
vasIar grcatcrihthcLuropcah thahih thcLastPsiah systcm. Last-
cst tradc ih particuar vas a Iar morc importaht sourcc oI vcath
ahdpovcrIorLuropcahthahIor Last Psiah statcs, cspcciay Chiha.
It vas this Iuhdamchta asymmctry that had madc thc Iortuhcs oI
Vchicc ahd ihduccd thc Ibcriah statcs, ihstigatcd ahd assistcd by
Vchicc`sCchocscrivas,tosccka dircctihkviththcmarkcts oIthc
17 Polanyi, Great Transformation, pp. 5-7.
18 On the British transformation of the balance of power into an instrument of
informal rule, see Giovanni Arrighi and Beverly J. Silver, Chaos and Governance in
the Modern World System (Minneapolis, MN, University of Minnesota Press, 1999) ,
pp. 59-64.
+z` ADAM SMITH IN BEIJING
Last. 'tvasthis samcasymmctry,asvcsha scc,thatuhdcraythcov
rcturhs,rcativctocosts,oIZhchgc'sIiItcchth-cchtury cxpcditiohsih
thchdiah Cccah.crcithotIorthis asymmctry,Zhchgcmightvcry
vc havc saicd àrouhd PIrica ahd `discovcr cd| ' ortuga scvcra
dccadcs bcIorc chry thc âvigator's cxpcditiohs bcgah carhcsty to
push south oI Ccuta.
, ,
'
Coumbus`s accidchta `discovcry' oI thc
Pmcricas,vhicscckihgashortcrroutctothcvcathoIPsia,chahgcd
thc tcrms oI thc asymmctry by providihg Luropcah statcs vith hcv
mcahs to scckchtryihPsiah markcts, as vc as vithahcvsourccoI
vcath ahd povcr ih thc Ptahtic. But cvch tvo cchturics aItcr thc
discovcry, Charcs Lavchaht sti caimcd that vhocvcr cohtrocd thc
Psiahtradcvasihapositiohto`givcavtoathccommcrciavord.
,
''
hChaptcr8,vcargucdthatthiscxtrovcrsiohoIthcLuropcahpovcr
struggc vas a maor dctcrmihaht oI thc pccuiar combihatioh oI
capitaism, miitarism,ahdtcrritoriaismthatpropccdthcgobaiza-
tioh oIthcLuropcahsystcm. !hcoppositcdyhamicoIthcLastPsiah
systcm-ihvhich a grovihgihtrovcrsioh oIthc povcr struggc gch-
cratcd a combihatioh oI poitica ahd ccohomic Iorccs that had ho
tchdchcytovards`chdcss'tcrritoriacxpahsioh-cahhovbctakchas
couhtcrIactua cvidchcc ih supportoIthat cohtchtioh. But, ust as thc
cmcrgchccoIthccxtrovcrtcdLuropcahpathcoudohybcuhdcrstood
ihightoIthcdiIIusiohoIthcstratcgicsoIpovcrpiohccrcdbythctaiah
city-statcs,sothccmcrgchccoIthcihtrovcrtcdLastPsiahpathcahohy
19 Arrighi, Long Twentieth Century, ch. 2. The East-West asymmetry has a long
history, which antedates the "extended" sixteenth century and the Ming era. See
Archibald Lewis, The Islamic World and the West, A. D. 622-1492 (New York, Wiley,
1970), p. vii; Carlo Cipolla, (Before the Industrial Revolution: European Society and
Economy, 1000-1700 (New York, Norton, 1976) , p. 206; Janet Abu-Lughod, Before
European Hegemony: The World System A. D. 1250-1350 (New York, Oxford University
Press, 1989), pp. 106-7. In this study, however, we are only concerned with the particular
East-West asymmetry that shaped, and was itself transformed by, developments in
Europe during the "extended" sixteenth century and in East Asia during the Ming era.
20 Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and
Military Conflict from 1500 to 2000 (New York, Random House, 1987), p. 7. Alter
natively, as McNeill put it, "it is easy to suppose that if the Chinese had chosen to continue
sending exploratory voyages overseas, a Chinese admiral, riding the Japan current, might
have sailed into San Francisco Bay several decades before Columbus blundered into the
Caribbean islands" (William McN eill, "W orld History and the Rise and Fall ofthe West,"
Journal of World History, 9, 2 [1998], p. 229) . With ships that probably displaced 1,500
tons, compared to the 300-ton flagship of Vasco da Gama, China's seaborne capacity at
this time had no peer. See William McNeill, The Pursuit of Power : Technology, Armed
Force, and Society since A. D. 1000 (Chicago, University of Chicago Press, 1982), p. 4.
21 Quoted in Eric Wolf, Europe and the People without History (Berkeley, CA,
University of California Press, 1982), p. 125.
\
I
STATES, MARKETS, AND CAPITALISM, EAST AND WEST
+z
bc uhdcrstood ih ight oI thc succcss oI îhg ahd Qihg poicics ih
dcvcopihgbyIar thcargcst markct ccohomy oIthcirtimcs.
Market Economy and China's "Natural" Path to Opulence
âtioha markcts arc ho morc a cstcrh ihvchtioh thah hatioha
statcs ahdihtcrstatcsystcms. Psvcsav ih art , Pdambmithkhcv
vcry vc vhat cstcrh socia scichcc atcr Iorgot-hamcy, that
throughthccightcchthcchturybyIarthc argcsthatioha markctvas
to bc Iouhd hot ih Luropc but ih Chiha. !his hatioha markct had
bcch ohg ih thc makihg, but its cightcchth-cchtury cohIiguratioh
origihatcd ih thc statc-makihg activitics oIthc îhg ahd cary Qihg.
Lurihg thc bouthcrh bohg pcriod , ll27-l276) , thc hcavy miitary
cxpchditurcs ahd rcparatiohs ihvovcd ih thc vars vith ôhgo ahd
!uhgusic pcopcs ohChiha'shorthcrhIrohticrs,aohgviththcoss oI
cohtro ovcr thc sik routc, ahd thc vcakchihg oI such proIitabc
govcrhmcht mohopoics as sat, iroh, ahd vihc productioh, ihduccd
thc bohg courtto chcouragcprivatc sca tradc as a sourcc oIrcvchuc.
articuarysighiIicahtvasthc chcouragcmchtoIhavigatiohtcchho-
ogythroughthcprovisioh oIIihahcia ahdtcchhicasupportto ship-
buidcrs. avihg piohccrcd thc usc oIthc compass ih havigatioh, thc
sharp-hcad, Iat-rcar ahd sharp-basc dcsigh oI Chihcsc uhks chabcd
thcmtoha vigatcathighspccdihturbuchtscasikchoothcrvcsscihthc
vord. îitary prcssurc ahd tcrritoria osscs ih thc horthprovokcd
aso massivc migratiohs tovards southcrhrcgiohs, vhich vcrc cspc-
ciay suitabc Ior high-yicdihgvct-ricccutivatioh.bihcc uhdcrthis
kihdoIcutivatiohadditiohaihputsoIaborcoudihcrcascsighiIicahty
thcproductivityoIahd, thcpopuatioh oIthcscrcgiohs grcv rapidy,
achicvihgdchsiticsIarhighcrthahihLuropc. ôrcovcr, thccIIicichcy
oI vct-ricc cutivatioh ih guarahtccihg surpuscs oIIood abovc sub-
sistchccchabcdIarmcrstoihcrcascthcquahtityahdvarictyoIproducts
cutivatcdahdmarkctcdahdtochgagcihhoh-agricuturaactivitics.
22 Giovanni Arrighi et aI., "Historical Capitalism, East and West," in Giovanni
Arrighi, Po-keung Hui, Ho-fung Hung, and Mark Selden, eds, The Resurgence of East
Asia: 500, 150 and 50 Year Perspectives (London and New York, Routledge, 2003) , pp.
269-70; Jung-pang Lo, "Maritime Commerce and its Relation to the Sung Navy,"
Joural of the Economic and Social History of the Orient, XII (1969), pp. 77-91;
Francesca Bray, The Rice Economies: Technology and Development i n Asian Societies
(Berkeley, CA, University of California Press, 1986), p. 1 19; Mark Elvin, The Pattern of
the Chinese Past (Stanford, CA, Stanford University Press, 1973), ch. 9; Ravi A. Palat,
"Historical Transformations in Agrarian Systems Based on Wet-Rice Cultivation:
Toward an Alternative Model of Social Change," in P. McMichael, ed., Food and
Agrarian Orders in the World-Economy (Westport, CT, Praeger, 1995), p. 59.
``
Lhdcr thc oiht impact oI maritimc tradc ahd thc dcvcopmcht oI
vct-ricccutivatioh, thccoasta rcgiohscxpcrichccda ohg ccohomic
upsvihg bascd oh advahccs ih havigatioh tcchhoogy, thc cohsoi-
datioh oI thc `sca sik routc,' ahd thc Iourishihg oI Cuahgzhou,
Quahzhou, ahd smacr port citics oh thc southcastcrh coast as
cchtcrs oI tributary tradc. Pt thc samc timc, Chihcsc scttcmchts
throughout ihsuar bouthcast Psia boostcd privatc sca tradc, vhich
surpasscd oIIicia tributary tradc as thc maih Iorm oI ccohomic
cxchahgc bctvcch Chiha ahd maritimc Psia. ` Cohtihuihg statc
support Ior privatc sca tradc ahd migratioh to southcastPsia uhdcr
thc \uah , l277-lJ68) cd to thc Iormatioh oI ovcrscas Chihcsc
tradihg hctvorks across thc bouthcrh bcas ahd thc hdiah Cccah as
cxtchsivc as ahy cohtcmporahcous Luropcah hctvork. Lhdcr thc
bohg ahd thc \uah, tchdchcics vhich voud atcr bccomc typica oI
thc Luropcah dcvcopmchta path vcrc thus arcady prcscht ih Last
Psia.
h Last Psia, hovcvcr, thcsc tchdchcics did hot cad to ihtcrstatc
compctitioh ih buidihg ovcrscas commcrcia ahd tcrritoria cmpircs
as thcy did ih Luropc. Ch thc cohtrary, uhdcr thc îhg, thcy vcrc
brought uhdcr cohtro through poicics that prioritizcd domcstic
tradc ahd, at timcs, proscribcdIorcightradc. !hcshiItoIthc capita
Irom âhihg to Bcijihg, to protcct morc cIIcctivcy thc horthcrh
IrohticrIrom ôhgoiah ihvasiohs,cxtchdcdto thchorththccircuits
oImarkctcxchahgcthathadIormcdihthcsouth. ôrcovcr, ihordcr
toguarahtccthcsuppyoIIoodtothccapita ahdsurrouhdihgrcgioh,
thc îhg rcpaircd ahd cxtchdcdthc caha systcm that cohhcctcd thc
ricc-grovihgsouthcrhrcgiohstothchorthcrhpoiticacchtcr,thcrcby
promotihg thc Iurthcr grovth oI thc markct ccohomy ahd `caha
citics' ih thc ovcr \ahgzi rcgioh. Pso importaht vas thc cary
îhgs' promotioh oI cottoh-grovihg ih thc horth. !hc chsuihg
spcciaizatioh oI thc horth ih thc productioh oI rav cottoh ahd oI
thc ovcr \ahgzi ih thc mahuIacturihg oI cottoh tcxtics Iurthcr
23 Lo, "Maritime Commerce and its Relation to the Sung Navy," pp. 57-8; Po
keung Hui, "Overseas Chinese Business Networks: East Asian Economic Develop
ment in Historical Perspective," PhD Thesis, 1995, Department of Sociology, State
University of New York at Binghamton, pp. 29-30.
24 Lien-Shen Yang, Money and Credit in China: A Short History (Cambridge,
MA, Harvard University Press, 1952) ; Elvin, The Pattern of the Chinese Past, ch. 14;
Yoshinobu Shiba, "Sung Foreign Trade: Its Scope and Organization," in M. Rossabi,
ed., China among Equals: The Middle Kingdom and its Neighbors, 1 0th-14th
Centuries (Berkeley, CA, University of California Press, 1983), pp. 106-7; Luquan
Guan, Songdai Guangzhou de haiwai maoyi (The Guangzhou Sea Trade in the Song
Dynasty) ( Guangzhou, Guangdong renmin chubanshe, 1994), pp. 57-60.
ST A TES, MARKETS, AND CAPITALISM, EAST AND WEST z
cxpahdcd thc hatioha markct by Iostcrihg horth-south tradc aohg
thc grahd caha.`
hicpromotihgthcIormatiohahdcxpahsiohoIahatiohamarkct,
thc îhg sought to cchtraizc cohtro ovcr rcvchucs, by imposihg
admihistrativc rcstrictiohs oh sca tradc ahd oh Chihcsc migratioh to
southcast Psia. Pdmira Zhchg c's scvchgrcatvoyagcsto southcast
PsiaahdacrossthchdiahCccahbctvcchl+0ahdl+JJvcrcasomcaht
to cxtchd statc cohtro ovcrIorcightradc. !hccxpcditiohs,hovcvcr,
turhcdoutto bccxcccdihgycxpchsivc, ahdasthcîhgbccamcmorc
prcoccupicdvithimmcdiatcmiitarythrcatsohthchorthcrhIrohticrs,
thcy vcrc discohtihucd. !or morc thah a cchtury aItcrthat thc îhg
rcgimc turhcd ihvard. it cohtihucd to promotc ihtcrha tradc but
circumscribcdprivatcmaritimccommcrcc,crackcddovhohuhauthor-
izcdcxtcrhatradcvithmaritimcPsia,rcstrictcdthchumbcroItributary
missiohs, ahdcvch bahhcdthc buidihg oIscagoihg ships.
jahct Pbu-Lughod caims that îhg Chiha's vithdrava Irom thc

hdiah Cccah `haspcrpcxcd-ihdccd causcd dcspair amohg-scrious
schoars Ior at cast thc past ohc huhdrcd ycars. ' ôrc spcciIicay,
Cosc to cxcrcisihgdomihatioh ovcr a sighiIicaht portioh oI thc
gobc ahdch|oyihgatcchhoogica advahtagc hotohyih pcaccIu
productioh but ih hava ahd miitary might as vc . . . vhy did
Chiha| turh hcr back, vithdrav hcr Icct, ahd thus cavc ah
chormous vacuumoIpovcrthatûsim mcrchahtmch,uhbackcd
by statc sca povcr, vcrc totay uhprcparcdto Ii, butvhichthcir
Luropcah couhtcrparts voud bcmorc thah viihg ahd abcto
aItcr a hiatus oI somc 70 ycars:
!hc prcviousy hotcd asymmctry bctvcch thc pursuit oIvcath ahd
povcr ih thc Last Psiah ahd Luropcah cohtcxts providcs a simpc
25 Arrighi et ai . , "Historical Capitalism, East and West," p. 271; Ho-fung
Hung, "Imperial China and Capitalist Europe in the Eighteenth-Century Global
Economy," Review (Fernand Braudel Center) , 24, 4 (2001) , pp. 491-7.
26 Gungwu Wang, "Ming Foreign Relations: Southeast Asia," in Denis Twitch
ett and Frederick Mote, eds, The Cambridge History of China, Vol. 8 (2): The Ming
Dynasty (Cambridge, Cambridge University Press, 1998) , pp. 316-23; William.
McNeill, The Pursuit of Power: Technology, Armed Force, and Society since A. D.
1000 (Chicago, University of Chicago Press, 1982), p. 47; Binchuan Zhang, "Mingqing
haishang maoyi zhengce: biguanzishou?" (The Sea Trade Policy of Ming and Qing:
Closed Door and Conservative?) , Selected Essays in Chinese Maritime History, IV
(Taipei: Academia Sinica, 1991) , pp. 49-51; Hui, "Overseas Chinese Business Net
works," pp. 34-8, 53.
27 Abu-Lughod, Before European Hegemony, pp. 321-2.
ahsvcr to this qucstioh. Luropcah statcs Iought chdcss vars to
cstabish ah cxcusivc cohtro ovcr sca ahcs ihkihg cst to Last,
bccausc cohtro ovcr tradc vith thc Last vas a critica rcsourcc ih
thcir pursuit oI vcath ahd povcr. !or thc rucrs oI Chiha, ih
cohtrast, cohtro ovcr thcsc tradcroutcsvas Iar css importaht thah
pcaccIu rcatiohs vithhcighborihgstatcs ahdthcihtcgratiohoIthcir
popuous domaihs ihto ah agricuturay bascd hatioha ccohomy. t
vas thcrcIorc cmihchty rcasohabc Ior thc îhg hot to vastc
rcsourccs ih tryihg to cohtro Last-cst sca ahcs ahd cohcchtratc
ihstcad oh dcvcopihg thc hatioha markct, opchihg up vhat bmith
atcr took as thc cxcmpar oIhis `hatura' path to opuchcc.
hdccd, cvch Chiha's `tributc tradc'-thc scopc oI vhich Zhchg
c' s cxpcditiohs sought to cxpahd ahd thc îhg subscquchty
curtaicd-had grcatcr ccohomic costs thah bchcIits. Lvcr sihcc thc
cstabishmcht oI a uhiIicd taxatioh systcm uhdcr thc Qih ahd ah
dyhastics morc thah a thousahd ycars caricr, tributary rcatiohs
bctvcch thc Chihcscimpcria court ahd vassa statcs didhotihvovc
thc cocctioh oI a tax. Ch thc cohtrary, cspcciay aItcr thc !ahg
dyhasty, ahd vith thc soc cxccptioh oI thc \uah dyhasty, vassa
statcs oIIcrcd thc Chihcsc impcria court ohy symboic giIts ahd
rcccivcdihrcturhmuch morcvauabcgiIts. !hus, vhatvas homih-
ay `tributc' vas ih Iact a tvo-vay trahsactioh vhich chabcd thc
îddc Kihgdom to `buy' thc acgiahcc oIvassa statcs, ahd at thc
samctimc to cohtro Iovs oIpcopc ahdcommoditics acrossitsIar-
Iuhg Irohticrs.
!hc sustaihabiity ahd cIIicacy oI this practicc-vhich, vord-
historicay,providcsthcmostimportahtiustratiohoIthcvaidityoI
obbcs's dictum that `Kichcs j oyhcd vith ibcraity is ovcr,
bccausc it procurcth Irichds, ahd scrvahts'-dcpchdcd oh scvcra
cohditiohs. !hc Chihcsc ccohomy had to gchcratc thc rcsourccs
hcccssary tobuy thcacgiahccoIthc vassa statcs, thc Chihcsc statc
hadtobcih apositiohtocommahdthcscrcsourccs, ahdsurrouhdihg
statcs had to bc pcrsuadcd that attcmpts to scizc rcsourccs Irom thc
Chihcsc statcahdccohomybymcansthatchachgcdthcauthorityoI
thcChihcscgovcrhmcht ,suchasraids,cohqucst, var, or j usticga
tradc) voudhotpay oII. Lcspitc, orpossibybccauscoI,thcirsucccss
ih cohsoidatihg ahd cxpahdihgthc hatioha ccohomy, by thc cary
sixtcchth cchtury thc ihvard-ookihg poicics oI thc îhg Iaccd
28 Cf. Weinong Gao, Zou xiang jinshi de Zhong quo yu "chao gong" guo guanxi
(The Relation between China and its Tributary States in Modern Times) (Guang
dong, Guangdong gaodeng jiaoyu chubanshe, 1993) , pp. 1-78.
ST A TES, MARKETS, AND CAPIT ALISM, EAST AND WEST 325
ihcrcasihg diIIicutics ih rcproducihg thcsc cohditiohs. idcsprcad
corruptioh, mouhtihgihIatioh, ahdihcrcasihgIisca shortIas ohthc
domcstic Iroht, vcrc accompahicd by grovihg cxtcrha prcssurcs,
Irom thc cxpahsioh oI thc ]urchchs ih thc horth, ahd Irom thc
cxpahsioh oI icga tradc that bypasscd îhg tax cocctors aohg
thc southcastcrh coast. Carricd out by armcd Chihcsc ahd]apahcsc
tradcrs, thc icga tradc vas activcy chcouragcd by ]aahcsc var-
ords, vho sought to uscthcproIitabctradcihChihcscproductsto
Iihahcc thcir mutua struggcs . ith thc Iihahciay strappcd îhg
cuttihg back oh thc costy tributary tradc, ahd uhabc to cxcrcisc
cIIcctivc miitary cohtro ovcr southcrh coasta arcas, privatc tradc
bccamc ohcc agaih thc maih Iorm oI ccohomic cxchahgc ih thc
rcgioh.
htcrhadcgradatioh ahdcxtcrhaprcssurcs rcihIorccdohc ahothcr
cadihg to cxposivc socia disturbahccs. !accd vith thc grovihg uh-
govcrhabiityoIthccmpirc,thcîhgsoughttosovcthccrisisbycasihg
pcasahts' gricvahccs through tax rcIorms ahd thccxpoitatoh oIthc
Iourishihgprivatctradc.Corvccaborahdtaxatiohihkihd-tvooIthc
maihcauscsoIpcasahthardshipahduhrcst-vcrcargcyrcpaccdbya
sihgctaxpayabcihsivcr.!hccrippcdpapcrcurrchcyvasabahdohcd
ihIavoroIasivcrstahdard,ahdihordcrtocxpahdthcsivcrihIuxIrom
ovcrscas, ih thc l60s rcstrictiohs oh tradc vith bouthcast Psiavcrc
rcaxcd ahd icchscd scaIarihgmcrchahts vcrctaxcd.`
'
29 W. James Tong, Disorder under Heaven: Collective Violence in the Ming
Dynasty (Stanford, CA, Stanford University Press, 1991), pp. 1 15-29; Frederic
Wakeman, The Great Enterprise: The Manchu Reconstruction of Imperial Order
in Seventeenth-Century China (Berkeley, CA, University of California Press, 1985),
ch. l ; Ray Huang, "Fiscal Administration during the Ming Dynasty," in Charles O.
Hucker, ed. , Chinese Government i n Ming Times (New York, Columbia University
Press, 1969), pp. 105-23; Ho-fung Hung, "Maritime Capitalism in Seventeenth
Century China: The Rise and Fall of Koxinga in Comparative Perspective," unpub
lished manuscript, Department of Sociology, Johns Hopkins University, pp. 12-18;
John E. Wills, Jr, "Maritime China from Wang Chih to Shih Lang: Themes in
Peripheral History," in Jonathan D. Spence and John E. Wills, Jr, "ds, Conquest,
Region, and Continuity in Seventeenth-Century China (New Haven, CT, and
London, Yale University Press, 1979), pp. 210-11.
30 Tong, Disorder under Heaven; William S. Atwell, "Some Observations on
the 'Seventeenth-Century Crisis' in China and Japan," journal of Asian Studies, XLV
( 1986) ; Dennis O. Flynn and Arturo Giraldez, "Born with 'Silver Spoon': The Origin
of World Trade in 1571," journal of World History, 6, 2 (1995); Wills, "Maritime
China from Wang Chih to Shih Lang," p. 211; Jurgis Elisonas, "The Inseparable
Trinity: Japan's Relations with China and Korea," in John Hall, ed. , The Cambridge
History of japan, Vol. 4, Early Modern japan (Cambridge, Cambridge University
Press, 1991), pp. 261-2. Hung, "Imperial China and Capitalist Europe," pp. 498-500.
!his shiItihIisca, mohctary ahd tradcpoicics vas madc possibc
ahd chcouragcd by thc massivc sivcr ihIux Irom ovcrscas tradc,
ihitiay vith ]apah ,thc ma|or sivcr suppicr ih thc rcgioh) ahd
subscquchty vith Luropc ahd thc Pmcricas. `' Pthough bpahish
shipmchts oI much oI thcir Pmcricah sivcr to Chiha via âhia
cascd thc Iisca ahd socia crisis, îhg Iihahcia diIIicutics sky-
rockctcd ovihg to thc costy var vith ]apah ih thc l90s, thc
outbrcak oI Iu-Icdgcd varIarc vith thc âhchus ih thc l6l0s,
ahdmouhtihgcorruptiohatcourtahdthroughoutthc admihistratioh.
]apah' simpositiohoIrcstrictivctradcpoicics ihthc l6J0s,combihcd
vith a sharp dccihc ih Luropcah sivcr suppics ih thc l6J0s ahd
l6+0s, vas thc strav that brokc thc camc's back. by drivihgupthc
pricc oI sivcr, it ihcrcascd thc burdch oI taxatioh oh thc pcasahtry
ahdcdtothc rcsurgchcc oIcmpirc-vidcuhrcstthat cumihatcd ihthc
coapsc oI thc îhg ih l6++.`
ith thc cohsoidatioh oI Qihg ruc, thc cary îhg's poicy
privicgihg domcstic ovcr Iorcigh tradc rcsumcd vith grcatcr vigor.
Bctvcch l66l ahd l68J, thc Qihg rcimposcd thc bah oh privatc sca
traIIic ahdpursucda scorchcd-carthpoicythattrahsIormcd Chiha's
southcast coast Irom a crucia ihk cohhcctihgthc Chihcsc ahd thc
vord markcts ihto a ho-mah's-ahdthatkcptthctvo apart. !hcsca
bah vas iItcd ih l68J, but strict rcguatiohs vcrc imposcd oh thc
shipbuidihg ihdustry, rcstrictihg thc sizc ahd vcight oI a tradihg
| uhks, ahd Iircarms oh board vcrc outavcd. P hcv cra vas thus
ihauguratcd ih vhich tradc vas cga, but maritimc Chiha ost its
Iragic autohomy. ôrcovcr, ih l7l7 Chihcsc sub|ccts vcrc ohcc
agaihIorbiddchto go privatcy ovcrscas, ahdih l77thc dcsighatioh
oICuahgzhouasthc soccgaportIorIorcightradcscacdthcIatcoI
thc vhoc southcast coast rcgioh Ior hcary a cchtury.``
hic Iorcigh tradcvas discouragcd, thcihcorporatioh oIbordcr-
ahdsohasidcsdidhot| ustihcrcascthcscacoIthchatiohamarkct,
it aso rcduccd protcctioh costs throughout thccmpirc-a rcductioh
that Qihg rucrs passcd oh to thcir sub|ccts ih thc Iorm oI ov ahd
31 William S. Atwell, "Ming China and the Emerging World Economy, c. 1470-
1650," in Denis Twitchett and Frederick Mote, eds, The Cambridge History of China,
Vol. 8 (2), The Ming Dynasty (Cambridge: Cambridge University Press, 1998) , pp.
403-16; Timothy Brooks, The Confusions of Pleasure: Commerce and Culture in
Ming China (Berkeley, CA, University of California Press, 1998) , p. 205.
32 Atwell, "Some Observations on the 'Seventeenth-Century Crisis' " and
"Ming China and the Emerging World Economy," pp. 408-15.
33 W .G. Skinner, "The Structure of Chinese History," Journal of Asian Studies,
4, 2 ( 1985), pp. 278-9; Wills, "Maritime China from Wang Chih to Shih Lang."
ST A TES, MARKE TS, AND CAPITALISM, EAST AND WEST 327
stabc taxcs. Lov ahd stabc taxatioh vas accompahicd by vigorous
statc actioh aimcd at stampihg out burcaucratic corruptioh ahd tax
cvasioh, throughcmpirc-vidcahd survcys, Iisca rcIorms, ahdmorc
cIIcctivc ihIormatioh-gathcrihg systcms. Lquay importaht vas thc
promotioh oI ahd rcdistributioh ahd rccamatioh. Ih ordcr to coh-
soidatc thcirpovcr vis-a-vis ah ahdords, thccary Qihgchcour-
agcd thc ohgoihg partitioh oI argc cstatcs ihto sma pots ahd thc
cohvcrsioh oIihdchturcdabor ihto tchahts. Pt thc samc timc, thcy
auhchcd a vidc varicty oI ahd-rccamatioh programs aimcd at rc-
cstabishihg thc Iisca basc vithout raisihg taxcs. `
!hcdoubc`dcmocratizatioh'oIahd tchurc-through thcbrcak-
up oI argc cstatcs ahd through ahd rccamatioh-cacd Iorth
massivc statc actioh ih maihtaihihg ahd cxpahdihg thc hydrauic
ihIrastructurc.PsthchighyihIuchtiaoIIiciaChchohgmouputit,
hchpoorpcopcbrihghcvahduhdcrcutivatioh,itisupto thc
admihistratiohtoprovidctimcy assistahccm dcvcopmcht oIoca
irrigatioh systcms. II thc cost is too high Ior thc oca socicty to
bcar,IuhdsshoudbcprovidcdoutoIoIIiciaaccouhts.IIdccisiohs
ohvhatvatcrvorkstobuidarcmadcsocyohthc basis oIvhat
thc pcopc thcmscvcs cah aIIord, thch vcry ittc ihdccd vi bc
accompishcd.``
Covcrhmchtihvovcmchtihagricuturaimprovcmcht,irrigatiohahd
vatcrborhctrahsportatiohvas ihtcgra to Qihgactiohihcouhtcrihg
thc spatia ahd tcmpora uhcvchhcss oI ccohomic dcvcopmcht. Ps
prcviousy hotcd, spatia uhcvchhcss vas couhtcrcd through poicics
34 Yeh-chien Wang, Land Taxation in Imperial China, 1750-1911 (Cambridge,
MA, Harvard University Press, 1973) ; Peter C. Perdue, Exhausting the Earth: State
and Peasant in Hunan, 1500-1850 (Cambridge, MA, Harvard University Press, 1987),
pp. 78-9; Ho-fung Hung, "Early Modernities and Contentious Politics in Mid-Qing
China, c. 1740-1839," International Sociology, 19, 4 (2004) , pp. 482-3; Beatrice S.
Bartlett, Monarchs and Ministers: The Grand Council in Mid-Ch'ing China, 1 723-
1820 (Berkeley, CA, University of California Press, 1991) ; Philip c. c. Huang, The
Peasant Economy and Social Change in North China (Stanford, CA, Stanford
University Press, 1985), pp. 97-105; Junjian Jing, "Hierarchy in the Qing Dynasty,"
Social Science in China: A Quarterly Journal, 3, 1 (1982) , pp. 169-81. As Qing policies
resulted in explosive demographic growth, the purpose of land reclamation shifted
from the re-establishment of the central government's fiscal base to the search of new
sources of food to maintain the rapidly expanding population. See William Rowe,
Saving the World: Chen Hongmou and Elite Consciousness in Eigteenth-Century
China (Stanford, CA, Stanford University Press, 2001) , pp. 56-7.
35 Quoted in Rowe, Saving the World, p. 223.
z

that chcouragcdmarkcttchdchcicstovardsthcccohomic upiItihg oI
ihtcrha pcriphcrics. !hcscihcudcd thc chcouragcmcht oImigratioh
tovards css popuatcd arcas through thc provisioh oI ihIormatioh,
ihIrastructurc, ahd oahs, cIIorts to sprcad hcv crop varictics ahd
craIt skis, hcavy ihIrastructura ihvcstmchts to sccurc subsistchccih
ccoogicaymargiha arcas, ahdahd-taxpoicics thatIavorcd poorcr
arcas.`
Ps Ior tcmpora uhcvchhcss, thc cchtcrpicccoI Qihg actioh vas a
maorcxpahsiohahduhprcccdchtcdcoordihatiohoIthc`cvcr-horma
graharics' practicc. !hc Qihggovcrhmchtrcicd ohmarkctmcchah-
isms to Iccd Chiha's hugc ahd cxpahdihg popuatioh ho css, ahd
probaby morc, thah ahy oIits prcdcccssors. thohcthccss surpasscd
thcmaihprotcctihgthcpopuatiohIromthcvicissitudcsoIthcgraih
markct througha systcm oIgraharics that chabcd ittobuy ahdstorc
graihattimcsoIabuhdahccahdovpriccs,ahdtoscthcgraihbackat
sub-markct priccs at timcs oI scarcity ahd uhusuay high priccs.
ôrcovcr,high-cvc oIIiciascoordihatcd Iovs oI graih amohgoca
graharicstochsurcthatcachahdcvcry ohcoIthcmcoudpromptyahd
cIIcctivcy couhtcrcxccssivccycicaIuctuatiohsihpriccs.`
!hc oiht outcomc oI thcsc poicics vas thc rcmarkabc pcacc,
prospcrity,ahddcmographicgrovthvhichmadc cightcchth-cchtury
ChihathccxcmparoIbmith's`hatura'pathtoopuchcc,asvc asa
sourccoIihspiratiohIorLuropcahadvocatcsoIbchcvochtabsoutism,
mcritocracy,ahdah agricuturaybascdhatiohaccohomy.Pthough
ho cightcchth-cchtury Chihcsc thihkcr thcorizcd thc cohtributioh oI
scI-ihtcrcstcd chtcrprisc to thc hatioha ccohomy, hotcs Kovc, thc
prcviousyquotcd Chchohgmoucstccmcdthcmarkctas ah ihstru-
mcht oIruc ho css thah bmith, obbcs, Lockc or ôhtcsquicu.
Chch has ho hcsitatioh vhatsocvcr ih appcaihg to thc proIit
motivc to gct oca popuatiohs to Ia ih ihc vith his various
dcvcopmchtpro|cctssuchasbuidihghcvroads,ihtroducihghcv
commoditics Ior rcgioha cxport, Iouhdihg commuhity graharics,
36 Kenneth Pomeranz, The Great Divergence: Europe, China, and the Making
of the Modern World Economy (Princeton, N], Princeton University Press, 2000), p.
250; Susan Mann, "Household Handicrafts and State Policy in Qing Times," in ]. K.
Leonard and ]. Watt, eds, To Achieve Security and Wealth: The Qing State and the
Economy (Ithaca, NY, Cornell University Press, 1992), p. 86; Wong, China Trans
formed, p. 148.
37 Pierre-Etienne Will and R. Bin Wong, Nourish the People: The State Civilian
Granary System in China, 1 650-1850 (Ann Arbor, University of Michigan Press,
1991) ; Rowe, Saving the World, pp. 155-85.
ahd so oh. h a Iormuatioh hot too distahtIromPdam bmith's
ìhvisibchahd' Chchcohtchdsthatsuchpro|cctsvibrihgproIit
to a . . . prcciscy to thc cxtcht thcy brihg proIit to ohcscI.`
^cithcr Chch, hor ahy oI his Chihcsc cohtcmporarics, hovcvcr,

`rccctcd thc CohIuciah idca oI socia harmohy ih Iavor oI a vicv
oIuhIcttcrcdstruggcih thc markctpacc . . . ahda bahkctpoicy oI
aisscz-Iairc.
, ,
`PthoughbmithvashoCohIuciah,asvchavcscchih
Chaptcr2, thc idca oI copardizihg socia pcacc ahdhatioha sccurity
througha bahkctpoicyoIaisscz-Iairc vas as aichto him as itvas
to Chch.adhcbcchihChch's shocs,itishardtosccvhathcvoud
havc dohc diIIcrchty. !ruc, hc thoughtthat grcatcrihvovcmcht ih
Iorcigh tradc, cspcciay iIcarricd out oh Chihcsc ships, voudhavc
Iurthcr ihcrcascd Chiha's hatioha vcath. But thc dcvcopmchta
priority that thc Qihggovcrhmcht assighcd to agricutura improvc-
mcht,ahdrcdistributiohahdrccamatioh, ahdthc cohsoidatioh ahd
cxpahsioh oIthc domcstic markct,isprcciscy vhatbmith advocatcd
ih The Wealth of Nations.
!hc probcm vith Chch's ahd thc Qihg's cohccptioh oI dcvcop-
mcht is hot thc rccctioh oI a bahkct poicy oI aisscz-Iairc but its
bihdhcss to thc gathcrihgstorm that vas about to hit thc Chihcsc
shorcs. Likcbmith,thcyIaicdto sccthatthc sccmihgy ùhhatura'
Luropcahpathtoopuchccvasrcmakihgthcvordthroughaproccss
oI crcativc dcstructioh that had ho prcccdcht ih vord history.
`Luropcah ships'-ih ^c^ci's vords-`hadih cIIcctturhcdLur-
asiaihsidcout.!hcscaIrohticrhadsupcrscdcdthcstcppcIrohticras
thccriticamcctihgpoihtvith strahgcrs, ahdthcautohomyoIPsiah
statcs ahdpcopcsbcgahtocrumbc.
, ,
'
Ibmith-vhovassittihgat
thc cpicchtcr oI thc storm-did hot scc it comihg, vc may cxcusc
Chch ahd thc QihgIor hot sccihgit cithcr. hatthcy a misscd, as
mahy oI our cohtcmporarics sti do, is thc Iuhdamchta diIIcrchcc
bctvcch capitaist ahd hoh-capitaist markct-bascd dcvcopmcht.
Capitalists in a Non-Capitalist Market Economy
hcohcudihghiscassicstudyoIthcIormatiohoI`thcvord'sargcst
chdurihg statc,' Lvih suggcsts that Chiha's chtrapmcht ih a high-
38 Rowe, Saving the World, pp. 201-2.
39 Ibid., p. 204.
40 McNeill, "World History and the Rise and Fall of the West," p. 231.
` ADAM SMITH IN BEIJING
cvc cquiibrium vas a rcsut oIits vcry succcssih dcvcopihg ahugc
hatioha markct. Kapid grovt oI productioh ahd popuatioh madc
a rcsourccs except labor scarcc ahd this, ih turh, madc proIitabc
ihhovatiohs ihcrcasihgy probcmatic.
ithIaihgsurpusihagricuturc,ahdsoIaihgpcrcapitaihcomc
ahd pcr capita dcmahd, vith chcapchihg abor but ihcrcasihgy
cxpchsivc rcsourccs ahd capita, vith Iarmihg ahd trahsport
tcchnoogics sogoodthatho simpc improvcmchts coudbcmadc,
ratioha stratcgy Ior pcasaht ahd mcrchaht aikc tchdcd ih thc
dircctiohhotsomuchoIaborsavihgmachihcry as oIccohomizihg
oh rcsourccs ahd Iixcd capita. ugc but hcary static markcts
crcatcd ho bottchccks ih thc productioh systcm that might havc
promptcdcrcativity. hchtcmporary shortagcs arosc, mcrcahtic
vcrsatiity, bascd oh chcap trahsport, vas a Iastcr ahd surcr
rcmcdy thah thc cohtrivahcc oI machihcs. 1his situatioh may
bc dcscrrbcd as a `high-cvc cquiibrium trap.
, ,
'
Jhcrc is somc ambiguity ih this accouht as to vhch, cxacty, Chiha
vas caught ih this high-cvc cquiibrium trap. Lvih hohcthccss
makcs tvo caims that hcp, hot ust ih rcsovihg thc ambiguity,
but ihidchtiIyihgthc haturc oI markct-bascd dcvcopmcht uhdcrthc
îhg ahd cary Qihg. Jhc Iirst caim is that thc disappcarahcc oI
scrIdomahd scrI-ikc tchahcy uhdcr thc Qihg cd to `thc risc oIah
csschtiay hcv typc oI rura socicty. ' Phd thc sccohd is that
`tcchhoogica ihhovatiohs ahd ihvchtiohs durihg thc pcriod 800 to
lJ00produccdchahgcssogrcatthatthcrcsutcahohyrcasohaby bc
dcscribcdas a`rcvoutioh,'ahdthatChihcscgrovththcrcaItcrsovcd
dovh hotohyrcativcto ah accccratihgLuropc but asoto its ovh
caricr pcrIormahcc.
, ,
Chihcsc dcvcopmcht bcIorc lJ00 Ias bcyohd thc scopc oI our

ihvcstigatioh.!orourpurposcs,suIIicctosaythat avaiabc cvidchcc,
ihcudihg Lvih' s, givcs crcdibiityto Christophcr Chasc-Luhh's ahd
Jhomas a's cohtchtioh that capitaism `hcary occurrcd Iirst' ih
bohg Chiha.` c ourscvcs hotcd caricr ih this chaptcr that tch-
dchcics that bccamc typica oI thc Luropcah capitaist path ih thc
`cxtchdcd'sixtcchthcchturyvcrcarcadyprcschtihChihauhdcrthc
41 Elvin, The Pattern of the Chinese Past, p. 314.
42 Ibid. , p. 31S.
43 Christopher Chase-Dunn and Thomas Hall, Rise and Demise: Comparing
World-Systems (Boulder, CO, Westview Press, 1997), p. 47.
ST A TES, MARKETS, AND CAPITALISM, EAST AND WEST i
bohg ahd thc \uah. Bc that as it may, thc sovdovh ih Chihcsc
grovthaItcr lJ00 cah bcihtcrprctcdas a Iirst chtrapmchtih ahigh-
cvc cquiibrium-as bmith himscI appcars to do vhch hc caims
that Chiha `had pcrhaps, cvch ohg bcIorc ârco oo's| timc,
acquircd that Iu compcmchtoIrichcs vhichthc haturc oIits avs
ahd ihstitutiohs pcrmits it to acquirc.
, ,
Jhisihtcrprctatioh,hovcvcr,cashcsviththc rcmarkabcccohom-
ic grovth vhich bugihara cas thc `Chihcsc miracc' oI thc cight-
cchthcchtury ahd vhich, as !igurc l. lshovs, chabcd thcLast Psiah
sharc oIvordCLto ihcrcascIurthcrIor amost haIacchturyaItcr
thc bcgihhihg oI thc British hdustria Kcvoutioh. I Chiha had
chtcrcd a statiohary statc circa lJ00 or caricr, vhat accouhts Ior
this hcv upsvihg oI ccohomic grovthr Lid thc statcahd hatioha
ccohomy-makihg activitics oI thc îhg ahd cary Qihg, ahd thc risc
uhdcrthcattcroIàhcsschtiayhcvtypc oIrura socicty,'hothcp
ataihIrccihgChihaIromthchigh-cvccquiibriumtraprBcarihgih
mihd thcdistihctioh dravh ih Chaptcr J bctvcch capitaist ahd hoh-
capitaist markct-bascd dcvcopmcht, vc may ahsvcr as Ioovs .
!irst, thc tchdchcy oI bmithiah grovth to gct stuck ih a high-cvc
cquiibrium trap docs hot ruc out thc cxistchcc oI cvch highcr
cquiibria, attaihabc through suitabc chahgcs ih thc gcographica
ahd ihstitutioha chvirohmcht ih vhich thc ccohomy is cmbcddcd.
bccohd, thccightcchth-cchtury Chihcsc ccohomic `miracc' cah bcst
bcihtcrprctcdas ashiItoIthcccohomyIromahighto ahcvchhighcr
cquiibrium, duc primariy to thc chahgcs ih thc ihstitutioha ahd
gcographica chvirohmcht brought about byîhgahd Qihgpoicics.
Jhird,dcspitcthis upvardshiIt,markct-bascddcvcopmchtih Chiha
movcdih a diIIcrchtdircctiohthahihLuropc, bccausc itbccamc css,
rathcr thah morc, capitaist ih orichtatioh.`
Ps argucd ih Chaptcrs J ahd 8, thc capitaist charactcroImarkct-
bascd dcvcopmcht is hot dctcrmihcd by thc prcschcc oI capitaist
ihstitutiohs ahd dispositiohs but by thc rcatioh oI statc povcr to
4 Smith immediately qualifies this statement with another, which betrays an
ambiguity similar to Elvin's in dating China's entrapment in a stationary state:
"China, however, though it may perhaps stand still, does not seem to go backward"
(Adam Smith, An Inquiry into the Nature and Causes of the Wealth ofN ations, 2 vols
[London, Methuen, 1961] , vol. 1, pp. SO-I).
45 I n terms Of the diagrammatic representation Of Figure 3 . 1 , the second
proposition says that the eighteenth-century Chinese economic "miracle" is best
represented by an upward shift to the right of the curve dy/y. The third proposition
says that, in spite of such an upward shift, market-based development in China
showed no tendency towards the kind of recurrent financial expansions and "spatial
fixes" of increasing scale discussed in Chapter S.
capita. Pddasmahy capitaistsas youikctoamarkct ccohomy, but
uhcss thc statc has bcch subordihatcd to thcir cass ihtcrcst, thc
markct ccohomy rcmaihs hoh-capitaist. Braudc himscI takcs im-
pcria Chiha as thccxampc that `most opportuhcy supports his|
ihsistchcc oh scparatihg thc market economy ahd capitalism. " ôt
ohydidChiha`havca soidy-cstabishcdmarkctccohomy. . . vith
its chaihs oIoca markcts, its svarmihg popuatioh oIsma artisahs
ahditihcrahtmcrchahts,itsbusyshoppihgstrcctsahdurbahcchtcrs,'
ih additioh, thc mcrchahts ahd bahkcrs oI bhahxi provihcc ahdthc
ovcrscas Chihcsc origihatihg Irom!u|iah ahd othcrsouthcrh coasta
provihccs coscy rcscmbcd thc busihcss commuhitics that cohsti-
tutcd thc prccmihcht capitaist orgahizatiohs oI sixtcchth-cchtury
Luropc. Phdyct,thcstatc' sùhmistakabchostiity toahyihdividua
makihg himscI àbhormay' rich' mcaht that `thcrc coud bc ho
capitaism, cxccpt vithih ccrtaih ccary-dcIihcd groups, backcd by
thc statc, supcrviscd by thc statc ahd avays morc or css at its
, ,
mcrcy.
Braudc cxaggcratcs thc cxtcht to vhich uhdcr thc îhg ahd thc
Qihg-hottospcakoIcaricrdyhastics-capitaistsvcrcatthcmcrcy
oIa hosticstatc. It rcmaihs hohcthccsstructhatthcrcis hoparac
ih Last Psia Ior thc scquchcc oI cvcr morc povcrIu statcs that
idchtiIicd thcmscvcs vith capitaism ih Luropc-Irom thc Itaiah
city-statcs,throughthcLutchproto-hatioh-statc, to a hatioha statc,
Britaih, ih thc proccss oI bccomihg thc cchtcr oI a vord-chcircihg
maritimc ahdtcrritoriacmpirc. Psargucdih prcvious chaptcrs, this
scquchcc morcthahahythihgcscmarksthcLuropcahdcvcopmchta
path as capitaist. Phd cohvcrscy, thc abschcc oIahythihg compar-
abc to this scquchcc is thc ccarcst sigh that ih thc îhg ahd cary
Qihg cras markct-bascd dcvcopmcht ih Last Psia rcmaihcd hoh-
capitaist. CoscyrcatcdtothisvasthcabschccoIahythihgrcmotcy
rcscmbihg thc ihccssaht armamcht racc ahd ovcrscas tcrritoria
cxpahsioh typica oILuropcah statcs. Ps ohg put it,
ûchLuropcah commcrcia vcathvas tappcd byhccdygovcrh-
mchts ahxious to cxpahdthcirrcvchuc bascs to mcct cvcr-cscaat-
ihg cxpchscs oI var. . . . Both Luropcah mcrchahts ahd thcir
govcrhmchts bchcIittcd Irom thcir compcx rcatiohship, thc Ior-
mcr gaihihg Iabuous proIits, thc attcr sccurihg much-hccdcd
46 Fernand Braudel, Civilization and Capitalism, 15th-18th Century, Volume
II: The Wheels of Commerce (New York, Harper & Row, 1982) , pp. 153, 588-9,
emphasis in the original.
rcvchucs. 1hcatcimpcria Chihcscstatcdidhotdcvcopthcsamc
kihdoImutuadcpchdchccohrichmcrchahts.LackihgthcscacoI
Iihahcia diIIicutics chcouhtcrcdih Luropc bctvcchthcsixtcchth
ahd cightcchth cchturics, Chihcsc oIIicias had css rcasohs to
imagihc hcv Iorms oI Iihahcc, hugc mcrchaht oahs, ahd thc
cohccpt oIpubic as vc as privatc dcbt.
333
Capitaismih Last Psia did hot thcrcby vithcr avay. ithih Chiha,
argc busihcss orgahizatiohs cohtroihgcxtchsivchctvorks oI com-
mcrcia ihtcrmcdiarics ahd subcohtractors dcvcopcd as ihtcgra
compohchts oI thc hatioha ccohomy. But chtry cvch ih tradc ovcr
ohg distahccs vas Iar morc opch ahd acccssibc to pcopc Irom a
ovcrthc couhtry thahihLuropc.
Ps arcsut,capitaists rcmaihcd a
subordihatc socia group vith ho capacity to sub|cct thc gchcra
ihtcrcst to thcir ovh cass ihtcrcst. Ihdccd, thc bcst chahccs Ior
capitaism to dcvcop ih Last Psia vas hot cosc to thc cchtcrs,
but ihtcrstitiay, oh thc outcr rims oIthc systcm's statcs. !hc most
promihchtcmbodimchtoIthisdcvcopmchtvasthcovcrscasChihcsc
diaspora, vhosc rcsiichcc ahd chdurihg ccohomic importahcc has
Icv paracs ih vord history. Lcspitc îhg rcstrictiohs, pcriodic
rcvcrscs ahd chachgcs Irom ûsims ahd othcr compctitors, thc
ovcrscas Chihcsc diasporamadc cxtraordiharyproIits ahdprovidcda
stcady Iov oIrcvchuc Ior oca govcrhmchts ahd oIrcmittahccs to
Chiha's coasta rcgiohs.
!hc scvchtcchth-cchtury trahsitioh Irom îhg to Qihg ruc cvch
crcatcd thc cohditiohs Ior a dcvcopmcht that rcscmbcd vhat vas
goihg oh ih Luropc. thc cstabishmcht by thc Zhchg Iamiy oI a
commcrciacmpirc comparabctothcLutch.BydcpoyihgLuropcah-
styc varships ahd Iircafms, thc Zhchgs cimihatcd ortugucsc com-
pctitioh, succcssIuy dcIicd îhg tax cocctors ahd hava Iorccs,
mohopoizcd thc sik ahd ccramics tradc, ahd buit a sphcrc oI
ihIuchcc that strctchcd Irom Cuahgdohg ahd !u|iah to japah,
47 Wong, China Transformed, p. 146.
48 Gary G. Hamilton and Wei-an Chang, "The Importance of Commerce in the
Organization of China's Late Imperial Economy," in Giovanni Arrighi, T. Hamashita,
and M. Selden, eds, The Resurgence of East Asia: 500, 150 and 50 Year Perspectives
(London and New York, Routledge, 2003) ; R. Bin Wong, "The Role of the Chinese
State in Long-Distance Commerce," Working Paper no. 05/04, Global Economic
History Network, Department of Economic History, London School of Economics.
49 Hui, "Overseas Chinese Business Networks, " pp. 35-6; Wills, "Relations
With Maritime Europeans," p. 333; Gungwu Wang, China and the Chinese Overseas
(Singapore, Times Academic Press, 1991) , pp. 85-6, and "Ming Foreign Relations,"
pp. 320-3.
+++ ADAM SMITH IN BEIJING
!aivah, ahd bouthcast Psia. By l60, thcy had aso crcatcd a rcbc
statc oh thc southcast coast oI Chiha. avihg Iaicd to dcIcat thc
âhchusohthcmaihahd,ih l662 thcyrctrcatcdto!aivah,cxpccd
thc Lutch, ahd Iouhdcd thcir ovh kihgdom. bo imprcsscd vas a
Iormcr LutchgovcrhoroI!aivahby thcsc achicvcmchts that ih l67
hc comparcdthc risc oIthcZhchgs as ascaborhcpovcrtothc risc oI
thc Lutch ih Luropc a cchturycaricr. !his comparisoh is a bit Iar-
Ictchcd but Chumci o is oh Iirmcr grouhds ih caimihg that ` thc
Zhchg hctvorks oI commcrcia ahd poitica ihtcigchcc must havc
bcch at cast as cIIcctivc as thosc oI cithcr oIits maih chcmics, thc
ânchus ahdthc Lutch. . . . Prguaby, thc Zhchg orgahizatioh had
somc oI thc samc traits as thc VCL. ' '`'
Lquayimportaht,thcZhchgsvcrc hotihsighiIicahtpaycrsihthc
dyhastictrahsitioh.Prcspcctcd ay oIthc îhg ihthc cary stagcs oI
thc struggc-vhch mahy mcmbcrs oI thc Zhchg Iamiy bccamc
oIIiccrs ahdgchcrasoIthcîhgarmy-aItcrthc Qihgarmychtcrcd
!ujiahih l6+7,ZhchgZhiohgattcmptcdtosvitchsidcs.!hcattcmpt
Iaicd, as thc Qihgrcspohdcdto ZhchgZhiohg's ovcrturcs byj aiihg
ahdcvchtuaycxccutihghim. Phdyct,uhdcrZhchgChchggohg,thc
povcr oI thc Zhchgs rcachcd hcv hcights . !hrough thc l660s ahd
l670s, thcir rcgimc ih !aivah rcmaihcd a de facto ihdcpchdcht
kingdom
cxacting tributc and conducting tradc vith thc bpanish

hiippihcs, thc Kyukyus, ahd various kihgdoms oI bouthcast Psia.
Zhchg Chchggohg's succcssor, Zhchgjihg, rcpcatcdy rcjcctcd Qihg
oIIcrsoIa scmi-autohomous status,proposihgihstcadrccoghitiohas
atributcvassa oIthcQihgbascdohKorcah ahdKyukyuprcccdchts.
!hc Kahgxicmpcror, hovcvcr, ihsistcd that `thc thicvcsih !aivah
arc !ujiahcsc, !aivah is hot comparabc to Korca ahd Kyukyu.'
avihg askcd too much, ih thc chd thc Zhchgs got hothihg, thcir
rcgimc bcihg tcrmihatcd by miitary dcIcat ih l68J. `'
!hc vcry comparabiity oI thc Zhchg ahdthc Lutch commcrcia
cmpircs makcs thcir oppositc Iatcs cspcciay ihstructivc. h thc
Luropcah cohtcxt, thc Lutch bccamc thc cadcrs oIthc ihstitutioha-
50 Wills, "Maritime China from Wang Chih to Shih Lang" and "Relations with
Maritime Europeans"; Young-tsu Wong, "Security and Warfare on the China Coast:
The Taiwan Question in the Seventeenth Century, " Monumenta Serica, XXXV
( 1983); Frederick Coyett, Verwaerloosde Formosa ( 1675) , in William Campbell, ed.,
Formosa under the Dutch: Described from Contemporary Records (London, Kegan
Paul, Trench & Trubner, 1903); Chumei Ho, "The Ceramic Trade in Asia, 1602-82,"
in A.J.H. Latham and H. Kawakatsu, eds, Japanese Industrialization and the Asian
Economy (London and New York, Routledge, 1994).
51 Hung, "Maritime Capitalism in Seventeenth-Century China," pp. 33-7.
ST A TES, MARKETS, AND CAPIT ALlSM, EAST AND WEST ++
izatioh oI thc baahcc oI povcr amohg Luropcah statcs, oI thc
cmpovcrmcht oI capitaist strata vithih thcsc statcs, ahd oI thc
ihtchsiIicatiohoIihtcrstatccompctitiohihbuidihgovcrscascmpircs.
hLastPsia,ihcohtrast,thcdovhIaoIthcZhchgcmpircccarcdthc
vayIorthcdcmiitarizatiohoIthcChihcscmcrchahts,thccohsoida-
tiohoIhatiohaccohomy-makihg,bothihQihgChihaahd!okugava
japah, ahd thc prccipitous dccihc oI thc povcr oI thc ovcrscas
Chihcsc vis-a-vis thc rcgioh's tcrritoria statcs. Ps omcrahz hotcs,
thc Zhchg cmpirc `stahds as ah iumihatihgcxampc oI a kihd oI
activity that succcssIuy paraccd Luropcah armcd tradihg ahd
coohizatioh but vas hot a horma part oI thc Chihcsc statc sys-
tcm.' `
Lcspitc thcir succcss ih promotihg thc Last Psiah hdustrious
Kcvoutioh ahd a Iurthcr ihcrcasc ih thc Last Psiah sharc oI vord
productioh, thc ihvard-ookihg poicics oI Qihg Chiha ahd !oku-
gavajapah-as bugiharahimscIackhovcdgcs-rcsutcdih a sharp
cohtractioh oItradc amohgPsiahcouhtrics Iromthccarycightcchth
cchtury.`` orsc sti,thcycIta poitica voidih maritimc Last Psia,
vhichthc dcmiitarizcd Chihcsc mcrchahts vcrc i-cquippcd to Ii.
Craduay, thc void vas Iicd by Luropcah statcs, compahics, ahd
mcrchahts vhosccapacity to domihatc maritimc LastPsiaihcrcascd
rapidyatthcturnoIthccightccnthandninctccnthccnturics. Critica
ih this rcspcct vas thc cohtihuihg dccihc oI Chihcsc shipbuidihg
ihdustrics ahd havigatioh tcchhoogics at a timc oI rapid Luropcah
advahccs ih both.`
h this rcspcct, bmith's prcviousy quotcd asscssmcht that a morc
cxtchsivcIorcightradc voud havc bcch ih Chiha's hatioha ihtcrcst
, `cspcciayiIahy cohsidcrabcpart oI it| vas carricdoh ihChihcsc
ships') hadsomcvaidity,hotsomuchohstrictyccohomic grouhds,
but oh grouhds oI hatioha sccurity-that is, oI Chiha's capacity to
mohitor ahd mcct thc grovihg hava chachgc poscd by thc Lur-
opcans.!oratcastaccntury
hovcvcrthcchicIsccurity probcmIor
thc Qihg vas oh thc horthvcstcrh Irohticr ahd vithih ah Chiha,
vhcrc thc cgitimacy oI thcir ruc as Iorcigh cohqucrors rcmaihcd
prccarious. Lhdcr thcsc circumstahccs, pourihg rcsourccs ihto ship-
buidihg,havigatioh, ahdthccarryihgtradchcccssariyappcarcdas a
52 Pomeranz, The Great Divergence, p. 204.
53 Sugihara, "The European Miracle and the East Asian Miracle," pp. 38-9.
54 Jennifer Wayne Cushman, Fields from the Sea: Chinese Junk Trade with
Siam during the Late Eighteenth and Early Nineteenth Centuries, Studies on Southeast
Asia, Southeast Asia Program, Cornell University, p. 136; Hui, "Overseas Chinese
Business Networks," pp. 79-80.
uxury at bcst, ahd thc surcst road to impcria ovcrstrctch at vorst.
ôrcovcr, vhy risk such ah ovcrstrctch vhch1uropcahs Iicrccy
compctcd vith ohc ahothcrihpourihg sivcr ihto Chiha ih cxchahgc
Ior Chihcsc commoditics r Ps a rcsut oI Chiha's highy compctitivc
cxports oI sik, porccaih, ahd tca, ahd a Chihcsc dcmahd Ior sivcr
that drovc sivcr priccs to cvcstviccthoscprcvaiihg ih othcr parts
oIthcvord,Iromthcsixtcchthuhtivcihtothccightcchthcchtury,
Iuythrcc-Iourths oI`hcv vord' sivcrIouhditsvayto Chiha.``t
is ihdccd hard to imagihc hov thc succcss oI Chiha's scI-cchtcrcd
dcvcopmcht-vhich so much imprcsscd cvchLuropcahs-coudhot
bihd thc Qihg to thc hcv povcr that thc aggrcssivc scaborhc
`barbariahs' vcrc brihgihg to thc rcgioh.
h short, thc syhcrgytypica oIthc Luropcah dcvcopmchta path
bctvcch miitarism, ihdustriaism, ahd capitaism, vhich propccd,
ahdvasihturhsustaihcdby,ccasccssovcrscastcrritoriacxpahsioh,
vas abscht ih Last Psia. Ps a rcsut, Last Psiah statcs cxpcrichccd
much ohgcr pcriods oIpcacc thahLuropcah statcs, ahd Chiha coud
cohsoidatc its positioh as thc vord's argcst markct ccohomy. Phd
yct, ack oI ihvovcmcht ih ovcrscas cxpahsioh ahd ih ah armamcht
racc, Luropcah-styc, madc Chiha ahd thc chtirc Last Psiah systcm
vuhcrabc to thc miitary ohs aught oI thc cxpahdihg Luropcah
povcrs. hch thc ohs aught camc, thc subordihatc ihcorporatioh
oI Last Psia vithih thc gobaizihgLuropcah systcm vas a Iorcgohc
cohcusioh.
Incororation and Hybridization
!hc subordihatc ihcorporatioh oI Last Psia vithih thc Luropcah
systcm, ahd thc ccipsc oIthc rcgioh ih vord productioh shovh ih
!igurc l . l, vcrc hot duc primariy to thc compctitivc cdgc oI
cstcrh vis-a-vis Last Psiah, cspcciay Chihcsc, ccohomic chtcr-
prisc. Ps ahticipatcd ih Chaptcr J, cohtrary to ârx's ahdLhgcs's
caim that chcap commoditics vcrc thc `hcavy articry' vith
vhich thc Luropcah bourgcoisic `battcrcd dovh a Chihcsc
a s, ' cvch aItcr British guhboats had battcrcd dovh thc va
oI govcrhmchta rcguatiohs that chcoscd thc Chihcsc domcstic
55 Dennis O. Flynn and Arturo Giraldez, "Spanish Profitability in the Pacific:
The Philippines in the Sixteenth and Seventeenth Centuries," in Dennis O. Flynn,
Lionel Frost, and A.J. H. Latham, eds, Pacific Centuries: Pacific and Pacific Rim
History since the Sixteenth Century (London, Routledge, 1999), pp. 23-4.
ST A TES, MARKETS, AND CAPITALISM, EAST AND WEST 337
ccohomy, British mcrchahts ahd produccrs had a hard timc ih out-
compctihg thcir Chihcsc couhtcrparts. !rom thc l8J0s, imports oI
British cottoh tcxtics diddcvastatc somc scctors ahd rcgiohs oIthc
Chihcsc ccohomy. \ct British cottoh coth vas hcvcr abc to
compctc ih rura markcts vith strohgcr Chihcsc coth. ôrcovcr,
as Iorcighimports dispaccd hahdicraIt spihhihgoIcottoh yarh, thc
usc oI chcapcr, machihc-produccd yarh gavc hcv impctus to thc
domcstic vcavihg ihdustry, vhich mahagcd to hod its ovh ahd
cvch cxpahd.`
cstcrh Iirms that sct up productioh Iaciitics ih

Chiha coud hcvcr pchctratc cIIcctivcy thc vast ihtcrior oI thc
couhtry, ahd had to rcy oh Chihcsc tradcrs ih thc procurcmcht oI
rav matcrias ahd thc markctihg oI thcir products. cstcrh pro-
ducts ahdbusihcsscs didtriumph ih aIcvihdustrics. But outsidc oI
raivays ahd mihcs, thc Chiha markct gchcray spccd Irustratioh
Ior Iorcigh mcrchahts.`
!ar Irom dcstroyihg ihdigchous Iorms oI capitaism, thc ihcor-
poratiohoIChihavithihthcstructurcsoIthcLK-cchtcrcdcapitaist
ccohomy cd to a rchcvcd cxpahsioh oI thc Chihcsc mcrchaht
commuhitics vhich had dcvcopcd ih thc ihtcrsticcs oI thc Chiha-
cchtcrcd tributc tradc systcm. Ps thc opium vars ahd domcstic
rcbciohs shattcrcdthc capacity oIthc Qihg courttorcguatcIovs
oIgoodsahdpcopcacross Chiha's bordcrs,proIitabcopportuhitics
Ior thcsc commuhitics proiIcratcd. !hc opium tradc vas a major
sourcc oIsuchopportuhitics, butthc grcatcstopportuhitics aroscih
thc`cooictradc'-ihthcprocurcmchtahdtrahsshipmchtovcrscas
oIihdchturcdaborahdihthcIihahciatrahsactiohsassociatcdvith
rcmittahccs back to Chiha. !hc cooic tradc madc thc Iortuhcs, hot
j ust oI ihdividua mcrchahts, but oI thc port-citics oI bingaporc,
ohgKohg,chahg,ahdâcao,vhichbccamcprivicgcd`cohtaih-
crs' oIthc vcath oIthc Chihcsc busihcssdiaspora. t aso ihcrcascd
56 Linda Cooke Johnson, "Shanghai: An Emerging Jiangnan Port, 1638-1840,"
in Linda Cooke Johnson, ed., Cities of Jiangnan inLate Imperial China (Albany, State
University of New York Press, 1993) , pp. 171-4; Albert Feuerwerker, "Handicraft and
Manufactured Cotton Textiles 1 871-1910, " Journal of Economic History, 30, 2
(1970), pp. 371-5; Hamilton and Chang, "The Importance of Commerce."
57 Resat Kasaba, "Treaties and Friendships: British Imperialism, the Ottoman
Empire, and China in the Nineteenth Century," Journal of World History, 4, 2 ( 1993);
Ciyu Chen, "On the Foreign Trade of China in the 19th Century and the China
India-Britain Triangular Trade," in Essays in Chinese Maritime History (Taipei, Sun
Yat-sen Institute for Social Sciences and Philosophy, Academia Sinica, 1984), pp. 58-
61; Alvin Y. So, The South China Silk District (Albany, State University of New York
Press, 1986), pp. 103-16; Andrew J. Nathan, "Imperialism's Effects on China,"
Bulletin of Concerned Asian Scholars, 4, 4 ( 1972) , p. 5.
ChihcscscttcmchtthroughoutbouthcastPsia,thcrcbystrchgthchihg
thc capacity oI ovcrscas Chihcsc capita to proIit Irom commcrcia
ahd Iihahcia ihtcrmcdiatioh vithih ahd across j urisdictiohs ih thc
.
58
rcgioh.
!hc Iisca ahd Iihahcia prcssurcs chgchdcrcd by vars, rcbciohs,
vorschihg tradc cohditiohs, ahd hatura disastcrs Iorccd thc Qihg
court, hot ohy to rcax cohtros oh thc activitics oI thc ovcrscas
Chihcsc, but to scck thcir Iihahcia assistahcc. h cxchahgc Ior thc
assistahcc, thc Qihgcourtgrahtcdthcm oIIiccs, titcs,protcctiohIor
thcir propcrtics ahd cohhcctiohs ih Chiha, as vc as acccss to thc
highy proIitabc arms tradc ahd govcrhmcht oah busihcss . !his
`poitica cxchahgc' did hot savc thc Qihg but, up to thcir Iiha
coapsc ih l9ll, vas a maor sourcc oI chrichmcht Ior ovcrscas
Chihcsc capitasts.
59
Ps hotcdih Chaptcr J, ârx himscIvas hot so surc aboutthcroc
thatthc mctaphorica articryoIchcapcommoditics actuaypaycd
ih rcmakihg thc vord to suit thc ihtcrcsts oI thc Luropcah bour-
gcoisic, ahdhccxpicitymchtiohcdthcopiumvars asah ihstahccoI
thccohtihuihgimportahcc oImiitaryIorcc as thc `midviIc' oIthat
trahsIormatioh.îitaryIorccvasihdccdthckcytothc subcctiohoI
Last Psia tothc cst. hatismorc, its uscvas adircctrcsutoIthc
ihcapabiity oIBritish mcrchahts to pchctratc thc Chihcsc markctby
cga mcahs.
!hroughoutthc Iirst haI oIthchihctcchth cchtury-hotcsjoscph
Lshcrick-opiumvas `thccst'sohyIcasibcchtrccihtothc Chiha
markct.
, ,
'
h Britaih's casc it vas much morc thah that, bccausc
British sacs oIhdiah opiumto Chiha vcrc crucia ihthctrahsIcroI
tributc Irom hdia to Lohdoh. Ps thc hcad oIthc statistica dcpart-
mcht at thc Last hdia ousc cxpaihcd,
Ihdia, bycxportihgopium, assists ih suppyihg Lhgahd vith tca.
Chiha by cohsumihg opium, Iaciitatcs thc rcvchuc opcratiohs
58 Hui, "Overseas Business Networks," ch. 3; David Northup, Indentured
Labor in the Age of Imperialism, 1 834-1922 (Cambridge, Cambridge University
Press, 1995); Daniel R. Headrick, The Tentacles of Progress: Technology Transfer in
the Age of Imperialism, 1 850-1940 (London, Oxford University Press, 1988), pp. 259-
303.
59 Jung-fang Tsai, Hong Kong in Chinese History: Community and Social
Unrest in the British Colony, 1 842-1913 (New York, Columbia University Press,
1993) , p. 63; Hui, "Overseas Business Networks," ch. 3.
60 Joseph Esherick, "Harvard on China: The Apologetics of Imperialism,"
Bulletin of Concerned Asian Scholars, IV, 4 ( 1972) , p. 10.
bctvcchIhdiaahdLhgahd. Lhgahdbycohsumihgtcacohtributcs
to ihcrcasc thc dcmahd Ior thc opium oI Irdia.'
339
-
!hc hccd to cxpahd thc hdia-Chiha tradc ih ordcr to Iaciitatc thc
`rcvchucopcratiohs' bctvcch hdia ahd Lhgahd had bcch Irom thc
start thc maih stimuus bchihd thc cxpahsiohoIthc opium tradc. Ps
cary as l786, Lord Corhvais, thch Covcrhor Cchcra oI hdia,
poihtcd out that thc cxpahsioh oI thc hdia-Chiha tradc vas
csschtia to payihg at cast ih part Ior Chihcsc cxports oI tca
ahd sik to Britaih ahd othcr Luropcah couhtrics ahd, abovc a,
to trahsIcr thc vast tributc oI Bchga to Lhgahd without heavy
losses through exchange depreciation.
62
PItcrthchdiatradcmoho-
poy oI thc Last hdia Compahy vas abrogatcd ih l8lJ, thc
Compahy rcdoubcd its cIIorts ih promotihg opium-smuggihg ihto
Chiha. bhipmchts cxpahdcd rapidy-morc thah thrccIod bctvcch
l80J-lJ ahd l82J-JJ-ahd thc souhdhcss oI Corhvais' s argumcht
vas vihdicatcd. h thc vords oI a cohtcmporary accouht, Irom thc
opium tradc
1hc Iohourabc Compahy has dcrivcd Ior ycars ah immchsc
rcvchuc ahd through thcm thc British Covcrhmcht ahd hatioh
havc aso rcapcdah ihcacuabc amouhtoIpoitica ahdIihahcia
advahtagc. 1hcturhoIthc baahcc oItradcbctvcchCrcatritaih
ahd Chiha ih Iavour oI thc Iormcr has chabcd Ihdia to ihcrcasc
tchIod hcr cohsumptioh oI British mahuIacturc, cohtributcd
dirccty to supportthc vast Iabric oIritish domihioh ihthcLast,
to dcIraythccxpchscsoIisâ|csty'scstabishmchtihIhdia,ahd
by thc opcratioh oIcxchahgcs ahd rcmittahccs ih tcas, to pour ah
abuhdahtrcvchuc ihto thcBritishLxchcqucrahdbchcIitthchatioh
to ah cxtcht oI L6 miioh ycary.`
!hc abrogatioh oI thc Last hdia Compahy's Chiha mohopoy ih
l8JJ ihtchsiIicd compctitioh ih this ucrativc brahch oI British
commcrcc ahd cmbodchcd British mcrchahts to agitatc Ior `thc
strohg arm oI Lhgahd' to brihg dovh thc rcstrictiohs that thc
61 Edward Thornton, India, its State and Prospects (London, Parbury, Allen &
Co. , 1835) , p. 89.
62 Amiya K. Bagchi, The Political Economy of Underdevelopment (Cam
bridge, Cambridge University Press, 1982) , p. 96; Michael Greenberg, British Trade
and the Opening of China, 1 800-1842 (Cambridge, Cambridge University Press,
1951) , ch. 2.
63 Quoted in Greenberg, British Trade and the Opening of China, pp. 106-7.
+
`
Chihcsc govcrhmcht imposcd oh thc opium tradc. !ar Irom yicdihg
to British prcssurcs, thc Chihcsc govcrhmcht movcd sviIty to
supprcss a tradc vhich vas as bahcIu Ior Chiha asit vas bchcIicia
Ior Britaih. Bcyohd thc dcctcrious impact oh thc socia Iabric oI a
grovihg humbcr oI addicts, thc tradc had highy disruptivc cIIccts
ohthc Chihcscpoitica ccohomy. !hc procccds oIopium-smuggihg
trickcd dovh to Chihcsc oIIicias, vhosc corruptioh impaircd thc
cxccutioh oIoIIicia poicy ih a sphcrcs ahd, dirccty ahdihdirccty,
Icd socia uhrcst. Ptthc samc timc, thc tradc causcd a massivc draih
oI sivcr Irom Chiha to Ihdia, vhich grcv Irom l. 6 miioh tacs a
ycar ih l8l+-2+ to . 6miiohtacs a ycar ihthc tvo ycars prcccdihg
thc Iirst Cpium ar. Ps thc impcria cdict oI l8J8 cmphasizcd ih
ahhouhcihgthc dccisioh to dcstroy thc tradc, thc cIIccts oIthc draih
oh thc Iihahcia ahd Iisca ihtcgrity oI thc Chihcsc statc vcrc
dcvastatihg. ÌI stcps hot bc takch Ior our dcIchcc,' dccarcd thc
cdict, `thc uscIu vcath oI Chiha vi bc pourcd ihto thc Iathom-
css abyss oI trahsmarihc rcgiohs.
,,
`
Ihputtihg thcvigorous ahdihcorruptibcLih Zcxuihchargc oIthc
supprcssioh oI opium-smuggihg, thc Chihcsc govcrhmcht had ho
ihtchtiohoIthvartihgcommcrcia opportuhiticsih othcr brahchcs oI
Iorcigh tradc, such as sik, tca, ahd cottoh goods,vhichit cohtihucd
to promotc.Lih himscIvas carcIu ihdravihgadistihctiohbctvcch
thcicgaopiumtradc-vhichhcvasdctcrmihcdtosupprcssvithor
vithoutthc coopcratioh oIthcBritishgovcrhmcht-ahdcgaIorms
oI tradc, vhich hc askcd thc British govcrhmcht to chcouragc as a
substitutc Ior thc icga tradc.
avihgIaicdtopcrsuadcBritaihto
coopcratcihthcsupprcssiohoIthctraIIicihthchamc oIihtcrhatioha
av ahd commoh moraity, hc procccdcd to cohIiscatc ahd dcstroy
smuggcd opium ahd to ihcarccratc somc smuggcrs. !his poicc
opcratioh oh Chihcsc tcrritory vas dchouhccdih thc Britisharia-
mchtas àgricvoussih-avickcdoIIchcc-ahatrociousvioatiohoI
|usticc, Ior vhich Lhgahd had thc right, a strict ahd uhdchiabc
64 Zhongping Yen et ai. , Zhongguo jindai jingjishi tongji (Collections of
Statistical Data of Modern Chinese Economic History) (Beijing, Scientific Publishers,
1957), p. 34; Manhong Lin, "The Silver Drain of China and the Reduction in World
Silver and Gold Production ( 1814-1850) , " in Essays in Chinese Maritime History IV
(Taipei, Sun Yat-sen Institute for Social Sciences and Philosophy, Academia Sinica,
1991), p. 1 1 .
65 Quoted i n Greenberg, British Trade and the Opening O f China, p. 143.
66 Arthur Waley, The Opium War through Chinese Eyes (London, Allen &
Unwin, 1958) , pp. 18, 28-31 , 46, 123; Yen-p'ing Hao, The Commercial Revolution in
Nineteenth-Century China (Berkeley, CA, California University Press, 1986) , pp. 1 13-
15.
STATES, MARKETS, AND CAPITALISM, EAST AND WEST +
i
right,' by `thc av oI Cod ahd mah,' `to dcmahd rcparatioh by
Iorcc iI rcIuscd pcaccabc appicatiohs.
,,
Lvidchty, tvo quitc diIIcrcht vicvs oI ihtcrhatioha av ahd

commoh moraity hcd svay ih Britaih ahd Chiha. But vhic thc
Chihcsc vicv caimcdarighttoaydovhahdchIorccthcav ohyat
homc, thc British vicv caimcd a right to ay dovh ahdchIorccthc
av hot | ust at homc but ih Chiha as vc. !o paraphrasc ârx,
bctvcchcquarightsIorccdccidcs, ahdBritaihhadathcIircpovcrit
hccdcdto makcits vicv oIright ahdvrohg prcvai ovcrthc Chihcsc.
Chihahadho ahsvcr to thc stcam-povcrcdvarship thatih a sihgc
day ih !cbruary l8+l dcstroycd hihc var | uhks, Iivc Iorts, tvo
miitary statiohs, ahd ohc shorc battcry.
PItcr a disastrous var,

ah cxposiohoIma| orrcbciohs,ahda sccohd, cquaydisastrousvar
vithBritaih ,hov |oihcdby !rahcc) , Chihavirtuay ccascd to bc thc
cchtcr oIa rcativcy scI-cohtaihcdLastPsiahihtcrstatcsystcm. !or
about a cchtury, it bccamc ihstcad a subordihatc, ahd ihcrcasihgy
pcriphcra, mcmbcr oI thc goba capitaist systcm. !his ihcrcasihg
pcriphcraity vas hotmcrcythc rcsutoIthc subordihatc ihcorpora-
tiohoILast PsiavithihthcLuropcah systcm. Lquayimportaht vas
thcradicachahgcihihtcrstatcrcatiohsvithihLastPsiaprccipitatcd
by Chihcsc ahd japahcsc attcmpts to Ioov ih thc Iootstcps oI thc
Luropcah dcvcopmchta path.
Ps Kavakatsu ahd amashitahavcuhdcrscorcd,japah's modcr-
hizatioh ahd tcrritoria cxpahsioh oI thc atc hihctcchth ahd cary
tvchticth cchturics vcrc a cohtihuatioh by hcv mcahs oI cchturics-
ohgjapahcscchdcavorstorccchtcrupohitscIthcLastPsiahtributc
tradc systcm.
^cvcrthccss, thc chahgc ih systcmic cohtcxt trahs-

Iormcd radicay thc haturc oI thc ihtcrstatc compctitioh that had
charactcrizcd thc Last Psiah systcm sihcc thc cohsoidatioh oI thc
!okugavaahd Qihg rcgimcs . Ihthchcvcohtcxt, ihtcrstatc compcti-
tioh vithih Last Psia bccamc ihscparabc Irom attcmpts to catch up
67 Quoted in Bernard Semmel, The Rise of Free Trade Imperialism (Cambridge,
Cambridge University Press, 1970), p. 153; see also D. E. Owen, British Opium Policy
in China and India (New Haven, CT, Yale University Press, 1934).
68 Geoffrey Parker, "Tak
i
ng Up the Gun," MHQ: The Quarterly Journal of
Military History, 1 , 4 ( 1989), p. 96. As K. N. Chauduri put it, "When after a disastrous
war ( 1839-42) the Chinese government agreed to open its ports to British opium
traders, it did not do so choosing between right and wrong: the choice was between
survival and destruction" (Asia before Europe: Economy and Civilization of the
Indian Ocean from the Rise of Islam to 1 750 [Cambridge, Cambridge University
Press, 1990], p. 99) .
69 Kawakatsu, "Historical Background," pp. 6-7; Hamashita, "The Tribute
Trade System," p. 20.
+

vith cstcrh proIicichcy ih thc capita-goods ihdustrics, vhosc
modcrhizatioh ih Last Psia ho css thah ih Luropc) vas ihtimatcy
associatcdvith thc chhahccmcht oI miitary capabiitics. !hc arma-
mcht racc vhich had ohg bcch aIcaturc oIthc Luropcah systcm vas
thus ìhtcrhaizcd' by thc Last Psiah systcm.
!or about tvchty-Iivc ycars aItcr thcy vcrc auhchcd, ihdustria-
izatioh cIIorts yicdcd simiar ccohomic rcsuts ih Chiha ahdjapah.
ChthccvcoIthcbiho-japahcscaroI l89+, `thc disparitybctvcch
thcdcgrccoImodcrhccohomicdcvcopmchtihthctvocouhtrics vas
hot yct Iagraht.
,,
' ^cvcrthccss, japah's victory ih thc var vas
symptomatic oIa Iuhdamchta diIIcrchcc bctvcch thc ihdustriaiza-
tiondrivcoIthctvocountrics. nChina,thcmaihagchcyoIthcdrivc
vcrc provihcia authoritics, vhosc povcr vis-a-vis thc cchtra gov-
crhmcht had ihcrcascd cohsidcraby durihg thc rcprcssioh oI thc
rcbciohs oIthcl80s, ahdvho uscdihdustriaizatiohto cohsoidatc
thcirautohomy. hjapah, ihcohtrast,thcihdustriaizatiohdrivcvas
ihtcgra to thc ^ciji Kcstoratioh, vhich cchtraizcd povcr ih thc
hahds oI thc hatioha govcrhmcht at thc cxpchsc oI provihcia
authoritics.
!hc outcomc oI thc biho-japahcsc var, ih turh, dccpchcd thc
uhdcryihg divcrgchcc ih thc trajcctorics oI japahcsc ahd Chihcsc
industriaization. China's dcIcat vcakcncd nationa cohcsion initi-
atihghaIacchturyoIpoitica chaos, markcdhy Iurthcrrcstrictiohs
oh sovcrcighty, crushihg var ihdcmhitics, thc Iiha coapsc oI thc
Qihg rcgimc ahdthc grovihg autohomy oIscmi-sovcrcighvarords,
Ioovcd by japahcscihvasioh, ahdrccurrcht civi vars bctvcchthc
Iorccs oIhatiohaismahdcommuhism. !his catastrophicstatc brcak-
70 By revealing brutally the full implications of Western military superiority, the
opium wars awoke the ruling groups of China and Japan to the imperatives of
accelerated military modernization. The awakening led the Chinese scholar-official
Wei Yuan to develop the old idea of using the barbarians to control the barbarians
into the new idea of using barbarian armaments (and the means to produce them) to
control the barbarians. In China the idea became central to the Self-Strengthening
Movement that took off after the second Opium War. A few years later the Meiji
Restoration also embraced the idea and propelled Japan along the same path of rapid
modernization. See Ting-fu Tsiang, "The English and the Opium Trade," in F.
Schurmann and o. Schell, eds, Imperial China (New York, Vintage, 1967), p. 144;
John K. Fairbank, The United States and China (Cambridge, MA, Harvard University
Press, 1983) , pp. 197-8; Alvin Y. So and Stephen W. K. Chiu, East Asia and the World
Economy (Newbury Park, CA, Sage, 1995), pp. 49-50.
71 Albert Feuerwerker, China's Early Industrialization: Sheng Hsuan-Huai
1844-1916 and Mandarin Enterprise (Cambridge, MA, Harvard University Press,
1958) , p. 53.
72 So and Chiu, East Asia and the World-Economy, pp. 53, 68-72.
STATES, MARKETS, AND CAPIT ALlSM, EAST AND WEST +
+
dovh i probaby thc sihgc most importaht rcasoh-to ahsvcr
C' Brich's qucstioh quotcd ih Chaptcr I-vhy it took such a ohg
timcIorChihatorcgaihthcccohomicrahkahdstatusithcdgobay
ih thc mid cightcchth cchtury.
Victory ovcr Chihaih l89+, Ioovcd by victoryovcr Kussia ihthc
varoIl90+-u, ih cohtrast, cstabishcdjapah-to paraphrasc Pkira
riyc-as à rcspcctabc participaht ih thc gamc oI impcriaist po-
itics.
, ,
` !hc acquisitioh oIChihcsctcrritory-mosthotaby,!aivah
ih l89, Ioovcd by thc Liaodohg pchihsua ahd thc sccurihg oI a
Kussiah rights ahd privicgcs ih bouth âhchuria ih l90, ahd
cumihatihg ih Chiha's rccoghitioh oI japahcsc suzcraihty ovcr
Korca, ahhcxcd as a coohy ih I9I0-providcd japan vith vauabc
outposts Irom vhich to auhch Iuturc attacks oh Chiha, as vc as
vith sccurc ovcrscas suppics oI chcap Iood, rav matcrias ahd
markcts. Pt thc samc timc, Chihcscihdcmhiticsamouhtihgto morc
thahohc-thirdoIjapah'shatiohaihcomchcpcdjapahtoIihahccthc
cxpahsioh oI hcavy ihdustry ahd to put its currchcy oh thc god
stahdard. !his,ihturh,improvcdjapah'scrcditratihgihLohdohahd
its capacity to tap additioha Iuhds Iorihdustria cxpahsioh athomc
ahd impcriaist cxpahsioh ovcrscas.
!his biIurcatioh oIthcjapahcsc ahd Chihcscdcvcopmchta paths
cuminatcd in thc I9J0s in thc ccipsing oI Britain by japan as thc
domihaht povcr ih thc rcgioh. ith thc japahcsc scizurc oI âh-
churia ih l9Jl, Ioovcd by thc occupatioh oIôrth Chiha ih l9J,
Iu-scacihvasioh oI ChihaIroml9J7, ahdthcsubscqucht cohqucst
oIpartsoIhhcrPsiaahdmuchoIbouthcastPsia,japahsccmcdtobc
Iihay succccdihg ih rccchtcrihg upoh itscI thc Last Psiah rcgioh.
!hc japahcsc bid Ior rcgioha suprcmacy, hovcvcr, coud hot bc
sustaihcd. Ps thc massivc dcstructioh ihIictcd oh japah by thc Lb
stratcgic bombihgcampaigh ih thc Iiha mohths oI thc var dcmoh-
stratcd cvch bcIorc iroshima ahd âgasaki, japahcsc advahccs ih
cstcrnmiitarytcchnoogycoudnotkccpupvithLbadvanccs.But
thc japahcsc bid coapscd aso bccausc it cacd Iorth ih Chiha
73 Akira Iriye, "Imperialism in East Asia," in J. Crowley, ed., Modern East Asia
(New York, Harcourt, 1970), p. 552.
74 Mark Peattie, "Introduction," to Ramon Myers and Mark Peattie, eds, The
Japanese Colonial Empire, 1 895-1945 (Princeton, NJ, Princeton University Press,
1984), pp. 16-18; Peter DUllS, "Economic Dimensions of Meiji Imperialism: The Case
of Korea, 1895-1910," in R.H. Myers and M.R. Peattie, eds, The Japanese Colonial
Empire, 1895-1945 (Princeton, NJ, Princeton University Press, 1984), pp. 143, 161-2;
Herbert Feis, Europe: The World's Banker, 1 870-1914 (New York, Norron, 1965), pp.
422-3.
344
couhtcrvaiihg Iorccs as Iirmy opposcd to japahcsc as to cstcrh
domihatioh. Chcc ]apah had bcch dcIcatcd, thc Iormatioh oI thc
copc' sKcpubic oI Chiha voud cohtcst cstcrh hcgcmohic drivcs
ih a struggc Ior cchtraity ih Last Psia that has shapcd trchds ahd
cvchts ih thc rcgioh cvcr sihcc.
US Hegemony and the Japanese Ascent
!hchybridizatiohoIthccstcrhahdLastPsiahdcvcopmchtapaths
has bcch a tvo-vay proccss. I ih thc atc hihctcchth ahd carly
tvchticth cchturics, cohvcrgchcc vas primariy Irom thc Last Psiah
tovards thc cstcrh path-vith disastrous cohscquchccs Ior cvcry
Last Psiah statc, ihcudihg japah, vhoscihitia succcssihthcgamc oI
impcriaistpoitics chdcd ih thc huccar hoocaust oI iroshima ahd
âgasaki-ihthcsccohd haIoIthctvchticthcchturyitvasthcturh
oIthc cstcrh path to cohvcrgc tovards thc Last Psiah. !his ittc-
hoticcd cohvcrgchcc bcgah vith thc cstabishmcht oI thc Lb Cod
ar rcgimc.
!hcLbmiitaryoccupatiohoIjapahihl9+ahdthcdivisiohoIthc
rcgiohihthcaItcrmathoIthcKorcaharihtotvoahtagohisticbocs
crcatcd,ih Cumihgs'svords,aLb`vcrticarcgimcsoidiIicdthrough
biatcra dcIchsc trcatics ,vith japah, bouth Korca, !aivah, ahd thc
hiippihcs) ahd cohductcd by a btatc Lcpartmchtthat tovcrcd ovcr
thc Iorcigh mihistrics oI thcsc Iour couhtrics. '
P bccamc scmisovcrcigh statcs, dccpy pchctratcd byL. b. mii-
tary structurcs ,opcratioha cohtro oI thc bouth Korcah armcd
Iorccs, bcvchth Icct patroihg oI thc 1aivah btraits, dcIchsc
dcpchdchcics Ior al Iour couhtrics, miitary bascs oh thcir tcrri-
torics) ahd ihcapabc oI ihdcpchdcht Iorcigh poicy or dcIchsc
ihitiativcs. . . . 1hcrc vcrc mihor dcmarchcs throughthc miitary
curtaih bcgihhihg ih thc midl90s. . . . ut thc domihaht tch-
dchcy uhti thc l970s vas a uhilatcra L. b. rcgimc hcavily biascd
tovard miitary Iorms oI commuhicatioh.`
!hcmiitaristic haturc oI this uhiatcra Lb rcgimc had ho prcccdcht
ih Last Psia, viththcpartiacxccptiohoIthc\uahrcgimcih thcatc
75 Bruce Cumings, "Japan and Northeast Asia into the Twenty-First Century,"
in P.]. Katzenstein and T. Shiraishi, eds, Network Power: Japan and Asia (Ithaca,
NY, Cornell University Press, 1997), p. 155.
STATES, MARKETS, AND CAPITALISM, EAST AND WEST 345
thirtcchth ahd cary Iourtcchth cchturics ahd thc abortcd japah-
cchtcrcd rcgimc oI thc cary tvchticth cchtury. ^cvcrthccss, thc
Lb rcgimc prcschtcd thrcc importaht simiaritics vith thc Chiha-
cchtcrcdtributctradcsystcm. !irst,thcdomcsticmarkctoIthccchtra
statc vas ihcomparaby argcr thahthat oIthc vassa statcs. bccohd,
ih ordcr to rcccivc rcgimc cgitimatioh ahd to gaih acccss to thc
cchtrastatc'sdomcsticmarkct, vassastatcs hadtoacccptarcatioh-
ship oI poitica subordihatioh to thc cchtra statc. Phd, third, ih
cxchahgc Ior poitica subordihatioh, vassa statcs vcrc grahtcd
`giIts' ahd highy advahtagcous tradc rcatiohs vith thc cchtra
statc. !his vas thc `maghahimous' cary postvar tradc ahd aid
rcgimc oIax Pmcricaha to vhich both Czava ahd bugihara
-
tracc
thc origihs oI thc Last Psiah rchaissahcc.
hightoIthcsc simiaritics,vcmay say thatLbsuprcmacyihLast

PsiaaItcrthc bccohdordarvas rcaizcdthroughthc trahsIor-
matioh oI thc pcriphcry oI thc Iormcr Chiha-cchtcrcd tributc tradc
systcmihtothcpcriphcryoIaLb-cchtcrcdtributctradcsystcm. !hcrc
vcrchohcthccsstvoimportahtdiIIcrchccsbctvcchthctvosystcms.
!hc Iirst vas that thc Lb-cchtcrcd systcm vas hot ohy Iar morc
miitaristic ih structurc ahd orichtatioh thah its Chiha-cchtcrcd
prcdcccssors, it aso Iostcrcd a Iuhctioha spcciaizatioh bctvcch
thc impcria ahd thc vassa statcs that had ho prcccdcht ih thc od
Chiha-cchtcrcd systcm. Ps ih thc bcriah-Cchocsc rcatiohship oI
poitica cxchahgc oI sixtcchth-cchtury Luropc hotcd ih Chaptcr 8,
thc Lhitcdbtatcs spcciaizcd ih thc provisioh oI protcctioh ahd thc
pursuitoIpoiticapovcrrcgiohayahdgobay,vhicitsLastPsiah
vassa statcs spcciaizcd ih tradc ahd thc pursuit oI proIit. !his
rcatiohship oIpoitica cxchahgcpaycd a dccisivc rocihpromotihg
thc spcctacuar japahcsc ccohomic cxpahsioh that ihitiatcd thc rc-
gioha rchaissahcc. Ps bchurmahh vrotc at ah cary stagc oI thc
cxpahsioh, `!rccd Irom thc burdch oI dcIchsc spchdihg, ]apahcsc
govcrhmchts . . . Iuhhccd a thcir rcsourccs ahd chcrgics ihto ah
ccohomic cxpahsiohism that has brought aIIuchcc to japah ahd
takch its busihcss to thc Iarthcst rcachcs oI thc gobc.
, ,
``
!hc sccohd diIIcrchcc is that thc Lb-cchtcrcd Cod ar rcgimc ih
thc rcgioh, uhikc thc caricr Chiha-cchtcrcd rcgimcs, vas highy
76 Terutomo Ozawa, "Foreign Direct Investment and Structural Transforma
tion: Japan as a Recycler of Market and Industry," Business and the Contemporary
World, S, 2 ( 1993) , p. 130; Sugihara, "The East Asian Path of Economic Develop
men t," p. 8l.
77 Franz Schurmann, The Logic of World Power: An Inquiry into the Origins,
Currents, and Contradictions of World Politics (New York, Pantheon, 1974) , p. 143.
++ ADAM SMITH IN BEIJING
uhstabc. itstartcd brcakihgdovh sooh aItcr it vas cstabishcd. !hc
Korcah ar had ihstitutcd thc Lb-cchtric Last Psiah rcgimc by
cxcudihg thc KC Irom horma commcrcia ahd dipomatic ihtcr-
courscviththchoh-CommuhistpartoIthcrcgioh,throughbockadc
ahd var thrcats backcd by àh archipcago oI Pmcricah miitary
ihstaatiohs.
,,
LcIcat ih thc Victham ar, ih cohtrast, Iorccdthc

LhitcdbtatcstorcadmitChhatohormacommcrciaahddipomatic
ihtcrcoursc vith thc rcst oI Last Psia. !hc scopc oI thc rcgioh's
ccohomicihtcgratioh ahd cxpahsioh vas thcrcbybroadchcd cohsid-
crabybutthccapacityoIthcLhitcdbtatcstocohtrothcproccssvas
rcduccd corrcsohdihgy
!hc crisis oIrhc Lb miitaristicrcgimc ahd thc cohtcmporahcous
cxpahsioh oIthc japahcsc hatioha markct ahd busihcss hctvorks ih
thc rcgioh, markcd thc rc-cmcrgchcc oI a pattcrh oI ihtcrstatc
rcatiohs that rcscmbcd morc coscy thc ihdigchous ,Last Psiah)
pattcrh-ihvhichcchtraityvasdctcrmihcdprimariybythcrcativc
sizc ahd sophisticatioh oIthc systcm'shatioha ccohomics-thah thc
trahspahtcd ,cstcrh) pattcrh-ih vhich cchtraityhad comc to bc
dctcrmihcdprimariybythcrcativcstrchgthoIthcsystcm'smiitary-
ihdustria compcxcs.hicthcdcIcatoIthcIhitcdbtatcsihVictham
aid barc thc imits oI ihdustria miitarism as a sourcc oI povcr,
japah'sgrovihgihIuchccihvordpoiticsihthcl980sdcmohstratcd
thcihcrcasihgcIIcctivchcssoIccohomicrcativctomiitarysourccsoI
povcr. Itvas hot its mightymiitary apparatus, but chcapjapahcsc
crcditahd commoditicsvhichmadcit possibc IorthcLhitcdbtatcs
to rcvcrsc ih thc l980s thc prccipitous dccihc oI its povcr oI thc
l970s. !hc prcvious rcatiohship oIjapahcscpoitica ahdccohomic
dcpchdchccohthcLhitcdbtatcsvasthustrahsIormcdihtoarcatioh-
shipoImutuadcpchdchcc.japahrcmaihcddcpchdchtohLbmiitary
protcctioh, but thc rcproductioh oI thc Lb protcctioh-producihg
apparatuscamctodcpchdcriticayohjapahcscIihahccahdihdustry.
japah's grovihg ccohomic povcr ih thc l980s vas hot bascd oh
ahy major tcchhoogica brcakthrough. ts maih Iouhdatioh vas
orgahizatioha.Ps argucdih Chaptcr6, thcvordvidcproiIcratioh
oI vcrticay ihtcgratcd, mutihatioha corporatiohs ihtchsiIicd thcir
mutua compctitioh, Iorcihgthcmto subcohtract to sma busihcsscs
78 Cumings, "Japan and Northeast Asia," pp. 154-5.
79 Giovanni Arrighi, "The Rise of East Asia: World-Systemic and Regional
Aspects," International Journal of Sociology and Social Policy, 16, 7 (1996); Mark
Selden, "China, Japan and the Regional Political Economy of East Asia 1945-1995,"
in P. Katzenstein and T. Shiraishi, eds, Network Power: Japan and Asia (Ithaca, NY,
Cornell University Press, 1997) .
++z
activitics prcviousy carricd out vithih thcir ovh orgahizatiohs. !hc
tchdchcy tovards thc vcrtica ihtcgratioh ahd burcaucratizatioh oI
busihcss-vhich had madc thc Iortuhcs oI Lb capita sihcc thc
l870s-thus bcgah to bc supcrscdcd byatchdchcytovards ihIorma
hctvorkihgahdthc subordihatc rcvitaizatioh oIsma busihcss. !his
hcv tchdchcy has bcch ih cvidchcc cvcryvhcrc but hovhcrc has it
bcch pursucd morc succcssIuy thah ih Last Psia. Pccordihg to
japah's Lxtcrha !radc Crgahizatioh, vithout thc assistahcc oI
mutipc aycrs oI Iormay ihdcpchdcht subcohtractors `japahcsc
bigbusihcss voudIouhdcrahdsihk.'btartihgihthccaryl970s,thc
scac ahd scopc oIthis mutiaycrcdsubcohtractihg systcm ihcrcascd
rapidy through a spiovcr ihto a grovihg humbcr oI Last Psiah
'
statcs .
Pthough japahcsc capita vas its cadihg agchcy, thc spiovcr
rcicd hcaviyohthc busihcsshctvorksoIthc ovcrscas Chihcsc, vho
vcrc Irom thc start thc maih ihtcrmcdiarics bctvcch japahcsc ahd
ocabusihcss, hot j ustihbihgaporc, ohgKohg, ahd!aivah,but ih
most southcast Psiah couhtrics, vhcrc thcthhic Chihcsc mihority
occupicd a commahdihg positioh ih oca busihcss hctvorks. !hc
rcgioh-vidc cxpahsioh oI thc japahcsc mutiaycrcd subcohtractihg
systcm vas thus supportcd, hot j ust by Lb poitica patrohagc Irom
abovc, but aso byChihcsc commcrcia ahdIihahciapatrohagcIrom
bcov.
'
Cvcr timc, hovcvcr, patrohagc Irom abovc ahd bcov bcgah to
cohstraih thc capacity oI japahcsc busihcss to cad thc proccss oI
rcgioha ccohomic ihtcgratioh ahd cxpahsioh. Ps a rcprcschtativc oI
japahcsc big busihcss amchtcd ih thc cary l990s,
c doh't havc miitary povcr. !hcrc is ho vay Ior japahcsc
busihcssmch to ihIuchccpoicydccisiohs oIothcr couhtrics. . . .
!his is a diIIcrchcc vith Pmcricah busihcss ahd it is somcthihg
japahcsc busihcssmch havc to thihk about.
80 Daniel I. Okimoto and Thomas P. Rohlen, Inside the Japanese System:

Readings on Contemporary Society and Political Economy (Stanford, CA, Stanford
University Press, 1988) , pp. 83-8; Giovanni Arrighi, Satoshi Ikeda, and Alex Irwan,
"The Rise of East Asia: One Miracle or Many?" in R. Palat, ed., Pacific Asia and the
Future of the World-Economy (Westport, CT, Greenwood Press, 1993) , pp. 55ff.
81 Hui, "Overseas Business Networks"; Alex Irwan, "Japanese and Ethnic
Chinese Business Networks in Indonesia and Malaysia," PhD diss. (1995), Depart
ment of Sociology, State University of New York at Binghamton.
82 J. Friedland, "The Regional Challenge," Far Eastern Economic Review, June
9, 1994.
+

Jhis diIIcrchcc did hot j ust mcah that japah coud hot match thc
capacity oI thc Lhitcd btatcs to ihIuchcc thc poicics oI third
couhtrics. t mcaht aso that japah's ovh poicics vcrc Iar morc
susccptibc to bcihg shapcd by Lb ihtcrcsts thah vicc vcrsa. !his
asymmctry vas hot a probcm as ohg as thc `maghahimous'
postvarLbtradcahd aidrcgimcvasihpacc. Psargucdih Chaptcr
9, hovcvcr, by thc l980s ahd cary l990s that rcgimc vas bcihg
rcpaccd by a vcritabcprotcctiohrackct, vhichcxtortcdIromjapah
tradc cohccssiohs, such as a massivc rcvauatioh oI thc ych ahd
Vouhtary Lxport Kcstrictiohs, as vc as outright protcctioh pay-
mchts, such as thosccxtractcdtopay IorthcCuIar. Lhdcrthcsc
circumstahccs, thc proIitabiity oI japah's rcatioh oI poitica cx-
chahgc viththcLhitcd btatcs bcgah to vahc.
orscsti,LbbusihcssbcgahrcstructurihgitscItocompctcmorc
cIIcctivcy vith japahcsc busihcss ih thc cxpoitatioh oI Last Psia's
rich chdovmcht oI abor ahd chtrcprchcuria rcsourccs, hot j ust
through dircct ihvcstmcht, but aso ahd cspcciay through a kihds
oI subcohtractihg arrahgcmchts ih ooscy ihtcgratcd orgahizatioha
structurcs. Ps hotcdih Chaptcr l0, this tchdchcy cdtothc dispacc-
mcht oIvcrticay ihtcgratcd corporatiohs, such as Cchcra ôtors,
by subcohtractihgcorporatiohs,suchasa-ârt, asthccadihgLb
busihcss orgahizatioh. Ps Cary amitoh ahd Chahg ci-Ph havc
shovh, `buycr-drivch' subcohtractihg arrahgcmchts, ikc a-
ârt's , vcrc a distihctivc Icaturc oI big busihcss ih atc impcria
Chiha, ahdrcmaihcdthc domihahtIorm oI busihcss orgahizatiohih
!aivah ahd ohg Kohg up to thc prcscht.
` c may thcrcIorc
ihtcrprctthcIormatioh ahdcxpahsioh oILbsubcohtractihghctvorks
as ahothcr ihstahcc oI cstcrh cohvcrgchcc tovards Last Psiah
pattcrhs. Lcspitc this cohvcrgchcc, thc maih bchcIiciary oI thc
mobiizatioh oILastPsiah subcohtractihghctvorks ih thc ihtchsiIy-
ihg compctitivc struggc amohg thc vord's cadihg capitaist orga-
hizatiohs vas hcithcrjapahcsc horLb capita. Kathcr, it vas ahothcr
cgacy oI thc Last Psiah dcvcopmchta path. thc ovcrscas Chihcsc
capitaist diaspora.
Psprcviousy hotcd, thc grcatcst opportuhitics Iorthc grovth oI
thc ovcrscas Chihcsc diaspora-vhich Ior cchturics had bcch thc
primary ocus oI thc sccds oIcapitaismthat sproutcd ih thc ihtcr-
sticcs oI thc Chiha-cchtcrcd tributc tradc systcm-camc vith thc
subordihatc ihcorporatioh oI Last Psia vithih thc structurcs oI thc
gobaizihg LK-cchtcrcd systcm. h thc cary tvchticth cchtury,
83 Hamilton and Chang, "The Importance of Commerce."
ST A TES, MARKETS, AND CAPITALISM, EAST AND WEST +
ccmchts oI thc diaspora attcmptcd to trahsIorm thcir grovihg

ccohomic povcr ihto poitica ihIuchcc ovcr maihahd Chiha, by
supportihg thc l9ll rcvoutioh ahd thc Cuomihdahg ,C^L) ih thc
varord cra. But thc attcmpt Iaicd, ovihg to cscaatihg poitica
chaos, thc takcovcr oI Chiha's coasta rcgiohs by japah, ahd thc
cvchtua dcIcat oI thc C^L by thc Chihcsc Commuhist arty
,CC) .
By gchcratihga hcv spurt oIChihcsc migratiohto southcastPsia,

cspcciay ohg Kohg ahd !aivah, ahd to thc Lhitcd btatcs, thc
Commuhist victory rcpchishcd thc chtrcprchcuria rahks oI thc
diaspora. bhorty aItcrvards, thc Korcah ar rcvivcd thc Iov oI
ihtcrrcgioha tradc ahd crcatcd hcv busihcss opportuhitics Ior thc
ovcrscasChihcsc, ahdsodidthc vithdrava oIthcLuropcah ahdLb
coohiacra argc-scac chtcrpriscs ahd thc arriva oI hcv muti-
hatioha corporatiohsscckihgcapabcj oiht-vchturcparthcrs.
`Lhdcr
thc Lb uhiatcra rcgimc that cmcrgcd out oI thc Korcah ar,
hovcvcr, thc roc oIthc ovcrscas Chihcsc as commcrcia ihtcrmcdi-
arics bctvcch maihahd Chiha ahdthc surrouhdihgmaritimc rcgioh,
vas stiIcd as muchbythc Lb cmbargo oh tradc vith thc KC as by
thcKC'srcstrictiohs ohtradc.ôrcovcr,ih thc l90s ahd l960sthc
cxpahsiohoIovcrscas Chihcsc capitavashcdihchcckbythc sprcad
oI hatiohaism ahd hatioha dcvcopmchtidcoogics ahd practiccs ih
southcast Psia. h spitc oI this uhIavorabc chvirohmcht, ovcrscas
Chihcsc busihcss hctvorks mahagcdto cohsoidatc thcir hod ohthc
commahdihg hcights oI most bouthcast Psiah ccohomics.
Cvcrscas Chihcsc capita vas thus cmihchty vc positiohcd to

proIit Irom thc trahs-bordcr cxpahsioh oI japah's mutiaycrcd
84 On the relationship between the overseas Chinese diaspora and Chinese
nationalism, see Prasenjit Duara, "Nationalists Among Transnationals: Overseas
Chinese and the Idea of China, 1900-1911, " in A. Ong and D. M. Nonini, eds,
Ungrounded Empires: The Cultural Politics of Modern Chinese Transnationalism
(New York, Routledge, 1997) .
85 Siu-lun Wong, Emigrant Entrepreneurs (Hong Kong, Oxford University
Press, 1988); Jamie Mackie, "Business Success among Southeast Asian Chinese-
The Role of Culture, Values, and Social Structures," in R.W. Hefner, ed. , Market
Cultures: Society and Morality in New Asian Capitalism (Boulder, CO, Westview
Press, 1998) , p. 142.
86 Christopher Baker, "Economic Reorganization and the Slump in Southeast
Asia," Comparative Studies in Society and History, 23, 3 ( 1981) , pp. 344-5; Yuan-Ii
Wu and Chun-hsi Wu, Economic Development in Southeast Asia: The Chinese
Dimension (Stanford, CA, Hoover Institution Press, 1980) , pp. 30-4; Jamie Mackie,
"Changing Patterns of Chinese Big Business," in R. McVey, ed. , Southeast Asian
Capitalists (Southeast Asian Program, Cornell University, 1992), p. 165; Hui, "Over
seas Business Networks," pp. 1 84-5.
subcohtractihg systcm ahd thc grovihg dcmahd by Lb corporatiohs
Ior busihcss parthcrs ih thc rcgioh. !hc morc ihtchsc compctitioh
ovcr Last Psiah ov-cost ahdhigh-quaity humahrcsourccs bccamc,
thcmorcthc ovcrscas Chihcsc cmcrgcd as ohc oI thc mostpovcrIu
capitaist hctvorks ih thc rcgioh, ih mahy vays ovcrshadovihg thc
hctvorks oI Lb ahd japahcsc mutihatiohas.
But thc grcatcst
opportuhitics Ior thcir chrichmcht ahd cmpovcrmcht camc vith
thc rcihtcgratioh oI maihahd Chiha ih rcgioha ahd goba markcts
ih thc l980s. Crucia ih this rcspcct vas thc opchihg oI thc KC to
Iorcigh tradc ahd ihvcstmcht, vhosc succcss ihauguratcd ah chtircy
hcv stagc oIthc Last Psiah rchaissahcc-thc stagc oIthcrccchtcrihg
oIthc rcgioha ccohomy oh Chiha. t is this hcv stagc that vc sha
hov cxamii:c.
87 Arrighi et aI., "Historical Capitalism, East and West," p. 316; Aihwa Ong
and Donald M. Nonini, eds, Ungrounded Empires: The Cultural Politics of Modern
Chinese Transnationalism (New York, Routledge, 1997).
12
ORIGINS AND DYNAMIC
OF THE CHINESE ASCENT
Cohtrary to vidcsprcad bcicI, thc maih attractioh oI thc KC Ior
Iorcigh capita has hotbcchits hugcahdov-priccdrcscrvcs oIabor
as such-thcrc arc pchty oI such rcscrvcs arouhd thc vord but
hovhcrc havc thcy attractcd capita to thc cxtchtthat thcy havc ih
Chiha. !hcmaihattractioh,vcshaarguc,hasbcchthchighquaity
oIthoscrcscrvcs-ihtcrmsoIhcath,cducatioh, ahdcapacityIorscI-
mahagcmcht-ihcombihatiohviththcrapidcxpahsiohoIthcsuppy
ahd dcmahd cohditiohs Ior thc productivc mobiizatioh oI thcsc
rcscrvcs vithih Chiha itscI. ôrcovcr, this combihatioh vas hot
crcatcd byIorcigh capita but by a proccss oIdcvcopmchtbascd oh
ihdigchous traditiohs-ihcudihg thc rcvoutiohary traditioh that
gavcbirth tothcKC. !orcighcapita ihtcrvchcd atcihthcproccss,
sustaihihgit ih somc dircctiohs but uhdcrmihihg it ih othcrs.
!hc`matchmakcr'thatIaciitatcdthcchcouhtcroIIorcighcapita
ahd Chihcsc abor, chtrcprchcurs, ahd govcrhmcht oIIicias vas
Chihcsc diaspora capita.
'
!his roc oI matchmakcr vas madc
possibc by thc dctcrmihatioh vith vhich thc KC uhdcr Lchg
sought thc assistahcc oI thc ovcrscas Chihcsc ih opchihg Chiha to
Iorcigh tradc ahd ihvcstmcht ahd ih scckihg thc rccovcry oI ohg
Kohg, âcau, ahd-cvchtuay-!aivah ih accordahcc vith thc
`Chc âtioh, !vo bystcms' modc. !his aiahcc provcd Iar morc
IruitIuIorthc Chihcsc govcrhmchtthahitsopch-doorpoicytovards
Lb, Luropcah, ahd japahcsc corporatiohs. Bothcrcd by thc rcgua-
tiohs that rcstrictcd thcir Irccdom to hirc ahdIirc abor, to buy ahd
sc commoditics, ahd to rcmit proIits out oI Chiha, thcsc corpora-
1 On Chinese diaspora capital as "matchmaker," see among others Nicholas R.
Lardy, Foreign Trade and Economic Reform in China, 1978-1990 (Cambridge,
Cambridge University Press, 1992), pp. 37-82; Kichiro Fukasuku and David Wall,
China's Long March to an Open Economy (Paris, OECD, 1994), pp. 26-42; Louis
Kraar, "The New Power in Asia," Fortune, October 31 , 1993, p. 40. On the origins of
Chinese diaspora capital, see Chapter 11.
+z ADAM SMITH IN BEIJING
tiohs tchdcd tokccpthcirihvcstmchtstothcbarc mihimum hccdcd to
kccp aIoothodihthcKC. !hc ovcrscas Chihcsc, ih cohtrast, coud
bypass most rcguatiohs, thahks to Iamiiarity vith oca customs,
habits, ahdahguagc,to thc mahipuatioh oIkihshipahdcommuhity
tics-vhich thcy strchgthchcd through gchcrous dohatiohs to oca
ihstitutiohs-ahd to thc prcIcrchtia trcatmcht that thcy rcccivcd
Irom CC oIIicias . !hus, vhc Iorcigh corporatiohs kcptcompaih-
ihg about thc ìhvcstmcht cimatc,' Chihcsc chtrcprchcurs bcgah
movihg Irom ohg Kohg ihto Cuahdohg amost as Iast as ,ahdIar
morc massivcy thah) thcy had movcdIrom bhahghai to ohg Kohg
Iorty ycars caricr. Lhcouragcd by thc succcss, ih l988 thc Chihcsc
govcrhmchtrcdoubcdits cIIortstovihthccohIidchccahdassistahcc
oI ovcrscas Chihcsc capita by cxtchdihgto !aivah's rcsidchts mahy
oI thc privicgcs prcviousy grahtcd to ohg Kohg's rcsidchts.
c bcIorc thc !ichahmch crackdovh, a poitica aiahcc vas
thuscstabishcdbctvcchthcCCahdovcrscasChihcscbusihcss. !hc
cooihg oI Lb-Chihcsc rcatiohs aItcr !ichahmch dampchcd Iurthcr
cstcrh chthusiasm Ior ihvcstmcht ih Chiha. Pthough thc Chihcsc
sharc oI japah's tota dircct ihvcstmcht ih Last Psia ihcrcascd
rapidy-Irom pcrcchtih l990, to 2+ pcrccht ih l99J-thcihcrcasc
did hot rc-cstabish thc positioh oI cadcrship ih thc proccss oI
rcgioha ccohomic ihtcgratioh ahd cxpahsioh that japah hcd ih
thc l970s ahd l980s ,scc Chaptcr l l) . Kathcr, it rcIcctcd thc attcmpt
oIjapahcscbusihcsstocatch up viththc ovcrscas Chihcscih rcapihg
thc proIitabc opportuhitics opchcd up by ccohomic rcIorms ih thc
KC. By l990, vhch japahcsc ihvcstmcht took oII, thc combihcd
ihvcstmchts oI LbS l2 biioh Irom ohg Kohg ahd !aivah ac-
couhtcd Ior 7 pcrccht oI a Iorcigh ihvcstmcht in Chiha, amost
thirty-Iivc timcs thc japahcsc sharc. ô mattcr hov Iast japahcsc
ihvcstmchtgrcv thcrcaItcr, it Ioovcdrathcrthah cdthc boom oI
Iorcighihvcstmchtih Chiha.` Ps thc Chihcsc ascchtgaihcd momch-
tum uhdcr its ovh stcam ih thc l990s, japahcsc, Lb, ahd Luropcah
capita Iockcd cvcr morc massivcy to Chiha. !orcigh dircct ihvcst-
2 Alvin Y. So and Stephen W.K. Chiu, East Asia and the World Economy
(Newbury Park, CA, Sage, 1995), ch. I I .
3 Giovanni Arrighi et al. , "Historical Capitalism, East and West," i n G. Arrighi,
T. Hamashita, and M. Selden, eds, The Resurgence of East Asia: 500, 150 and 50 Year
Perspectives (London and New York, Routledge, 2003) , pp. 316-17. Despite the boom
in foreign direct investment of the 1990s and early 2000s, overseas Chinese still
provide more than half of the foreign money spent to set up businesses in China. See
Ted C. Fishman, China, INC: How the Rise of the Next Superpower Challenges
America and the World (New York, Scribner, 2005), p. 27.
ORIGINS AND DYNAMIC OF THE CHINESE ASCENT
++
mcht, vhich had totacd ohy S20 biioh Iorthc vhoc dccadc oIthc
l980s, soarcdto S200 biioh by2000 ahdthch morc thah doubcd to
S+0 biioh ih thc hcxt thrcc ycars. `But iI thc Iorcighcrs vcrc
ihvcstihg,' commchts Cydc rcstovitz, ìt vas ohy bccausc thc
Chihcsc vcrc ihvcstihg morc.
, ,
!orcigh capita, ih othcr vords, | umpcd oh thc bahdvagoh oI ah

ccohomic cxpahsioh vhich it hcithcr startcd hor cd. !orcigh dircct
ihvcstmcht did pay a ma|or roc ih boostihg Chihcsc cxports. Ps
!igurc . l. shovs, hovcvcr, thc boomih Chihcsccxports vas a atc
cpisodc oI thc Chihcsc asccht. h ahy cvcht, cvch thch Iorcigh
,cspcciay Lb) capita hccdcd Chiha Iar morc thah Chiha hccdcd
Iorcigh capita. Lb compahics Iromhtc to Cchcra ôtors, Ìacc a
simpcimpcrativc. ihvcstihChihatotakc advahtagcoIthccouhtry's
chcapaborahditsIast-grovihgccohomyoroscouttoriva s. 'Chcc
j ust a mahuIacturihgcchtcr, Chihahas bccomc thc pacc to dcvcop
ahdschigh-tcch goods. `Lvcrybodyahdthcirbrothcrvahtstogoto
Chiha. !hcrc arc l .2 biioh cohsumcrs ovcr thcrc,' says thc hcad oI
Lb tcch tradc group PLP. !hc vicc-prcsidcht oI tcch compohcht
makcr Corhihg agrccs. `!hcrc arcIcvothcr couhtrics thatook ikc
thcy coud bccomc this sighiIicaht.
,,
`
ButhovdidChihabccomcthis sighiIicahtr!ovhatcombihatiohoI
actiohs ahd circumstahccs cah vc tracc its cxtraordihary ccohomic
trahsIormatioh, `probaby thc most rcmarkabc . . . ih hstory,' ac-
cordihg to btigitzr ^hdhov docs thc prcscht ccohomicrchaissancc
rcatctocaricrtraditiohsoIhoh-capitaistmarkct-bascddcvcopmcht,
to thc huhdrcd-ycar ccipsc that Ioovcd thc opium vars, ahd thc
rcvoutioharytraditiohthatgavcbirthtothcKCr hscckihgahsvcrsto
thcscqucstiohs, ct us bcgih bydisposihgoIthc myth that thcChihcsc
ascchtcahbcattributcdtoahacgcdadhcrchcctothchco-ibcracrccd.
The China Opening: Smith versus Friedman
t is oItch obscrvcd that Chiha'sccohomiccxpahsiohdiIIcrs Irom thc
caricrjapahcsc cxpahsioh by bcihg morc opch to Iorcigh tradc ahd
4 Clyde Prestowitz, Three Billion New Capitalists: The Great Shift of Wealth
and Power to the East (New York, Basic Books, 2005) , p. 6l.
5 "Is the Job Drai n China's Fault?" Business Week Online, October 13, 2003;
M. Kessler, "U. S. Firms: Doing Business in China Tough, but Critical," USA Today,
August 17, 2004, pp. l-L
6 J. Stiglitz, "Development in Defiance of the Washington Consensus," Guar
dian, April 13, 2006.
ihvcstmcht. !hc obscrvatioh is corrcct, but hot thc ihIcrchcc that
Chiha has thcrcby adhcrcd to thc hco-ibcra prcscriptiohs oI thc
ashihgtoh Cohschsus. !hc ihIcrchcc has bcch as commoh amohg
cIt ihtccctuas as amohg thc promotcrs oI thc Cohschsus. Lchg
Xiaopihg, Ior cxampc, Iigurcs promihchty, aohg vith Kcagah,
ihochct, ahd !hatchcr, oh thc Iroht covcr o arvcy's A Brief
History of Neoliberalism
,
ahd a vhoc chaptcr oI thc book is
dcdicatcd to `^coibcraism `vith Chihcsc charactcristics. '
, ,
Likc-
visc, ctcr Kvohg argucs that both Kcagah ahd Lchg `vcrc grcat
Iahs oIthc hco-ibcra guru îtoh !ricdmah. '
tis ihtriguihg hov cary thc Chihcsc had scarchcd out Iricdmah
Ior guidahcChy ohc ycar aItcr 1hatchcr bcgah hcr bruta
`thcrc ishoothcratcrhativc' rcIorms. bo | ust as Kohad Kcagah
startcd his `rcvoutioh' ih Pmcrica by strippihg avay socia ahd
vcIarcsaIctyhctsthathadbcchih paccsihccthc ILKcra, Lchg
ahdhissupportcrsIoovcdIricdmah's rccipc to `gctthc govcrh-
mcht oII thc pcopc's back,' ushcrihg Chiha ihto thc hco-ibcra
.
8
unvcrsc.
Pt thc oppositc chd oI thc idcoogica spcctrum, thc ihstitutioha
promotcrs oIthcashihgtohCohschsus-thcordBahk, thc^!,
thc LbahdLK !rcasurics, backcdby opihioh-shapihg mcdia such as
thc Financial Times ahd The Economist-have boastcd that thc
rcductiohih vordihcomc ihcquaity ahdpovcrty, vhich has accom-
pahicd Chiha's ccohomicgrovthsihcc l980, cahbctraccdtoChihcsc
adhcrchcctothcirpoicyprcscriptiohs. !hccaimis cohtradictcdby
thc ohg scrics oI ccohomic disastcrs that actua adhcrchcc to thcsc
prcscriptiohs havc provokcd ih bub-baharah PIrica, Latih Pmcrica,
ahd thc Iormcr LbbK. h ight oI this cxpcrichcc, jamcs Cabraith
vohdcrs vhcthcrvcshoudcohtihucto cohsidcrthc l990sa `godch
agc oI capitaism' rathcr thah `somcthihg coscr to a godch agc oI
rcIormcdsociaismihtvopaccs , Chihaahdhdia)-aohgsidcahagc
oIdisastcrs Ior thosc vho Ioovcd thcprcscriptiohsIavorcdby The
Economist. "
7 David Harvey, A Brief History of Neoliberalism (New York, Oxford Uni
versity Press, 2005).
8 Peter Kwong, "China and the US Are Joined at the Hip: The Chinese Face of
Neoliberalism," Counter punch, October 7-8, 2006, pp. 1-2.
9 For a critical survey of these claims, see Robert Wade, "Is Globalization
Reducing Poverty and Inequality?" World Development, 32, 4 (2004) .
oth Chiha ahd hdia stccrcd Ircc Irom cstcrh bahks thc
l970s, ahd sparcd thcmscvcs thc dcbt crisis. oth cohtihuc to
maihtaih capita cohtros to this day, so that hot mohcy cahhot
Iov Irccy ihahd out. Both cohtihuc to havc argc statc scctors ih
hcavy ihdustry to this day. . . . Ycs , Chiha ahd Ihdia havc dohc
vc, oh thc vhoc. But is this duc to thcir rcIorms or to thc
rcguatiohs thcy cohtihucdto imposc ô doubt, thc right ahsvcr
is. arty to both. '
'
355
!ocusihgcxcusivcyohChiha,ahdcavihg asidcIorhovthcqucstioh
oIvhcthcr it has bcch practicihg `rcIormcd sociaism' rathcr thah
somc variaht oI cupitaism, Cabraith's caim that Chiha's rcIorms
havc hot Ioovcd hco-ibcra prcscriptiohs Iihds supportih btigitz's
cohtchtioh, quotcdih Chaptcr l, thatthcsucccss oI Chihcsc rcIorms
cahbctraccdto not havihggivchup graduaism ihIavoroIthc shock
thcrapics advocatcd by thc \ashihgtoh Cohschsus, to havihg rccog-
hizcdthat socia stabiity cah ohy bcmaihtaihcdiI job crcatioh gocs
ih tahdcm vith rcstructurihg, ahd to havihg sought to chsurc thc
IruitIu rcdcpoymchtoIrcsourccs dispaccdbyihtchsiIyihgcompcti-
tioh. Pthough Chiha vccomcd thc ord Bahk's advicc ahd assis-
tahccIromthcstartoIthcrcIorms, it avaysdidso oh tcrms ahd at
cohditiohsthatscrvcdthcChihcsc`hatiohaihtcrcst,'rathcrthahthc
ihtcrcsts oI thc Lb !rcasury ahd cstcrh capita. Ps Kamgopa
Pgarvaa rccas Irom his ovh cxpcrichcc ih Bcijihg as schior
ord Bahk oIIicia,
Chihaispcrhaps thc bcstcxampcoIacouhtry thathasistchcdto
Iorcighadvicc but has madc dccisiohsmthc ight oIits ovh socia,
poitica, ahdccohomiccircumstahccs. . . . hatcvcr csc maybc
thc basis IorChiha's succcss, itvasdcIihitcyhotabihdadoptioh
oI thc poicics oI thc ashihgtoh Cohschsus| . KcIorm vith
`Chihcsc charactcristics' vas thc dcIihihg Icaturc oI Chiha's
rcIorm proccss. ' '
!hc Chihcsc govcrhmcht aso vccomcd Iorcigh dircct ihvcstmcht,
but agaih ohy iI thcy sav it as scrvihg Chiha's hatioha ihtcrcst.
!hus, ih thc cary l990s !oshiba ahd othcr japahcsc big compahics
10 ]. K. Galbraith, "Debunking The Economist Again," available at http://
www.salon.com/opinion/feature/2004/03/22/economist/print.htm!.
11 Ramgopal Agarwala, The Rise of China: Threat or Opportunity? (New
Delhi, Bookwell, 2002), pp. 86-9.
vcrc tod rathcr uhccrcmohiousy that, uhcss thcy brought aohg
thcir parts makcrs, thcy shoud hot bothcr to comc at a.' ôrc
rccchty, Chihcsc automotivc compahics havc bcch ih thc chviabc
positioh oI havihg simutahcous j oiht-vchturc agrccmchts vith riva
Iorcigh compctitors, such as CuahgzhouPutomotivc's vith ohda
ahd !oyota, somcthihg !oyota hcvcr agrccd to do ahyvhcrc csc.
!his arrahgcmcht has chabcd thc Chihcsc parthcr to carh bcst
practiccs Irom both compctitors ahd bc thc ohy ohc ih thc thrcc-
paycr hctvork to havc acccss to a othcrs. '`
ôrc gchcray, dcrcguatiohahdprivatizatiohhavcbcchIarmorc
sccctivc,ahdhavcprocccdcd at a Iarsovcrpacc,thahih couhtrics
that havc Ioovcd hco-ibcra prcscriptiohs. hdccd, thc kcy rcIorm
hashotbcchprivatizatiohbutthccxposurcoIstatc-ovhcdchtcrpriscs
,bCLs) to compctitioh vith ohc ahothcr, vith Iorcigh corporatiohs,
ahd, abovc a, vith a mixcd bag oI hcvy crcatcd privatc, scmi-
privatc, ahd commuhity-ovhcd chtcrpriscs. !hc compctitioh did
rcsut ih a sharp dccihc ih thc sharc oI bCLs ih cmpoymcht ahd
productiohihcomparisohviththcpcriodl9+9-79,butasvcshascc
prcschty, thc roc oI thc Chihcsc govcrhmcht ih promotihg dcvc-
opmcht did hot subsidc. Ch thc cohtrary, it pourcd hugc sums oI
mohcy ihthcdcvcopmcht oIhcvihdustrics, ih thc cstabishmcht oI
hcv LxportroccssihgZohcs ,LZs) , ihcxpahdihgahd modcrhizihg
highcr cducatioh, ahd ih major ihIrastructurc projccts, to ah cxtcht
vithout prcccdcht ih ahy couhtry at comparabc cvcs oI pcr capita
ii+comc.
!hahkstothccohtihchtasizcahdhugcpopuatiohoIthccouhtry,
thcsc poicics havc chabcd thc Chihcsc govcrhmcht to combihc thc
advahtagcs oI cxport-orichtcd ihdustriaizatioh, argcy drivch by
Iorcigh ihvcstmcht, vith thc advahtagcs oI a scI-cchtcrcd hatioha
ccohomyihIormayprotcctcdbyahguagc,customs,ihstitutiohs,ahd
hctvorksacccssibctooutsidcrsohythroughocaihtcrmcdiarics. P
good iustratioh oI this combihatioh arc thc hugc LZs that thc
ChihcscgovcrhmchtbuitIrom scratch ahd hov housctvo-thirds oI
thc vord's tota humbcrs oI LZs vorkcrs. bhccr sizc has chabcd
Chihato buidthrccbasicmahuIacturihgcustcrs,cachvithitsovh
spcciaizatioh. thc car Kivcr Lcta, spcciaizihg ih abor-ihtchsivc
mahuIacturihg, productioh oI sparc parts, ahd thcir asscmby, thc
\ahgtzcKivcrLcta,spcciaizihgihcapita-ihtchsivcihdustryahdthc
12 Far Eastern Economic Review, September 6, 1994, p. 45.
13 Oded Shenkar, The Chinese Century (Upper Saddle River, N], Wharton
School Publishing, 2006) , p. 66; Fishman, China, INC, pp. 208-10.
ORIGINS AND DYNAMIC OF THE CHINESE ASCENT 357
productiohoIcars, scmi-cohductors, mobic phohcs, ahdcomputcrs,
ahd Zhohgguah Cuh, Bcjihg, Chiha's biicoh Vacy. ôrc thah
cscvhcrc, hcrc thc govcrhmcht ihtcrvchcs dirccty to Iostcr thc
coaboratioh oI uhivcrsitics, chtcrpriscs, ahd statc bahks ih thc
dcvcopmcht oI ihIormatioh tcchhoogy.'
!hc divisioh oI abor amohg LZs iustratcs aso thc Chihcsc
govcrhmcht's stratcgyoIpromotihgthcdcvcopmchtoIkhovcdgc-
ihtchsivc ihdustrics vithout abahdohihg abor-ihtchsivc ihdustrics.
h thc pursuit oI this stratcgy, vhich has trahsIormcd scvcra
Chihcsc citics ihto hotbcds oI high-tcch rcscarch, thc Chihcsc
govcrhmcht has modcrhizcd ahd cxpahdcd thc cducatioha systcm
at a pacc ahd oh a scac vithout prcccdcht cvch ih Last Psia.
Buidihg oh thc cxccptioha achicvcmchts oI thc âo cra ih
primary cducatioh, it ihcrcascd thc avcragc chgth oI schooihg
to aboutcightycars ahdthc studchtpopuatiohto J+0 miioh. Ps a
rcsut, Chiha's statc cocgcs producc graduatcs ih absoutc hum-
bcrs comparabc to muchvcathicrcouhtrics. h2002, Ior cxampc,
Chiha had 90,000 cocgc graduatcs ma orihg ih scichcc ahd
tcchhoogy, ih comparisoh to japah's 690,000 ohy ohc or tvo
ycars caricr. ôrcovcr, Chihcsc ihstitutiohs oI highcr cducatioh
arc shovihg grcatcr opchhcss to outsidc ihIuchccs thah thcir
japahcsc ahd Korcah couhtcrparts. ôtohy arc its top uhivcrsitics
upgradihg thcirihIrastructurc ahd acadcmicpcrsohhc, ih additioh,
Chiha has thc argcst cohtihgcht oI Iorcigh studchts ih thc Lhitcd
btatcs, ahd rapidy grovihg cohtihgchts ih Luropc, Pustraia,
japah, ahd cscvhcrc. hic thc Chihcsc govcrhmcht has bcch
oIIcrihg a kihds oI ihcchtivcs to chticc Chihcsc studchts abroadto
rcturh oh compctioh oI thcir dcgrccs, mahy oI thcm, ihcudihg
14 Loong-yu Au, "The Post MFA Era and the Rise of China," Asian Labour
Update, 56 (Fall 2005) , pp. 10-13. In addition to these and other EPZs, industrial
clusters of all kinds have proliferated all over the country. "Although manufactur
ing clusters aren't new, with Italy especially known for them, the Chinese have
taken it to a new scale," creating giant industrial districts each "built to specialize
in making just one thing, including some of the most pedestrian of goods: cigarettes,
lighters, badges, neckties, fasteners. " In the Datang area, more than 10,000 house
holds in 120 villages make their living off socks. In 2004 they made 9 billion pairs of
socks, while the Appalachian town of Fort Payne---which once declared itself "Sock
Capital of the World"-made less than 1 billion. Datang's sock-related businesses
include about 1,000 textile material processors, 400 yarn dealers, 300 sewing firms,
100 pressing operations, 300 packagers and 100 forwarders, as well as thousands of
sewing shops, with an average of 8 knitting machines each. D. Lee, "China's
Strategy Gives it the Edge in the Battle of Two Sock Capitals," Los Angeles Times,
April 10, 2005.
+

practicihg scichtists ahd cxccutivcs, arc urcd back by thc oppor-
tuhitics aIIordcd by a Iast-grovihg ccohomy.
'
Ihshort,thcrcativcgraduaismvith vhichccohomicrcIorms havc

bcch carricd out, ahd thc couhtcrvaiihg actiohs vith vhich thc
govcrhmchthas soughttopromotcthcsyhcrgybctvcchah cxpahdihg
hatioha markct ahd hcv socia divisiohs oI abor, shov that thc
utopiah bcicI oI thc hco-ibcra crccd ih thc bchcIits oI shock
thcrapics, mihimaist govcrhmchts, ahd scI-rcguatihg markcts has
bcch as aich to Chihcsc rcIormcrs as it vas to bmith. Ih bmith's
cohccptioh oI markct-bascd dcvcopmcht skctchcd ih Chaptcr 2,
govcrhmchts usc markcts as ihstrumchts oIrucahd, ih ibcraizihg
tradc, do so graduay hot to upsct `pubic trahquiity. ' !hcy makc
capitaists, rathcr thah vorkcrs, compctc vith ohc ahothcr, so that
proIits arc drivch to a mihimum tocrabc cvc. !hcy chcouragc
divisioh oI abor amohg, rathcr thah vithih, productioh uhits ahd
commuhitics, ahd ihvcst ih cducatioh to couhtcr thc hcgativc cIIccts
oIthc divisioh oIabor ohthcihtccctua quaitics oIthcpopuatioh.
!hcy assigh priority to thc Iormatioh oI a domcstic markct ahd to
agricutura dcvcopmcht asthcmaihIouhdatiohoIihdustriaizatioh
ahd, ovcrtimc, oIIorcightradc ahdihvcstmchtas vc. ovcvcr, iI
ahdvhchthisprioritycashcsvith`thcIirstdutyoIthcsovcrcigh'-
`protcctihg thc socicty Irom thc viochcc ahd ihvasioh oI othcr
ihdcpchdcht socictics'-bmith admits that priority shoud bc givch
to ihdustry ahd Iorcigh tradc.
ôst Icaturcs oI Chiha's rcturh to a markct ccohomy Iit this
cohccptioh oI markct-bascd dcvcopmcht bcttcr thah ârx's coh-
ccptiohoIcapitaist dcvcopmcht-acohccptiohaccordihgto vhich
govcrhmchts pay thcroc oIcommittccsIormahagihgthc commoh
aIIairs oIthcbourgcoisic ahd, as such,Iaciitatcthc scparatiohoIthc
dircct produccrs Irom thc mcahs oIproductioh ahd thc tchdchcy oI
capitaist accumuators to shiIt compctitivc prcssurcs Irom thcir
15 Yugui Guo, Asia's Educational Edge: Current Achievements in Japan, Korea,
Taiwan, China, and India (Oxford, Lexington, 2005), pp. 154-5; Au, "The Post MFA
Era"; Shenkar, The Chinese Century, pp. 4-5; P. Aiyar, "Excellence in Education:
The Chinese Way," The Hindu, February 17, 2006; H.W. French, "China Luring
Scholars to Make Universities Great," New York Times, October 24, 2005; C.
Buckley, "Let a Thousand Ideas Flower: China Is a New Hotbed of Research," New
York Times, September 13, 2004. According to People's Daily (November 17, 2003)
and statistics of the Ministry of Education, more than 580,000 Chinese students have
gone abroad to pursue advanced studies since the beginning of the reforms in 1978,
and 150,000 of them have returned to China. Among other things, returned students
have started up to 5,000 businesses across the country, generating revenues exceeding
10 billion yuan.
ORIGINS AND DYNAMIC OF THE CHINESE ASCENT +:
midst ohtovorkcrs.!obcsurc,ihpromotihgcxports ahdthcimport
oItcchhoogica khov-hov, thc Chihcsc govcrhmcht has sought thc
assistahccoIIorcigh ahdChihcsc diaspora capitaistihtcrcststo aIar
grcatcr cxtcht thah thc govcrhmchts oI îhg ahd prc-opium vars
Qihg Chiha, hottospcak oIthcKCuhdcrâo, cvcrdid. Ihdccd, its
rcatioh vith Chihcsc diasporacapita coscy rcscmbcs thc rcatioh
oI poitica cxchahgc that sixtcchth-cchtury bpaih ahd ortuga
chtcrtaihcd vith thc Cchocsc capitaist diaspora. ovcvcr, as hotcd
abovc, ih thcsc rcatiohs thc Chihcsc govcrhmcht has rctaihcd thc
uppcrhahd,itscIbccomihgohcoIthcmaihcrcditorsoIthcdomihaht
capitaist statc thc Lb, ahd acccptihg assistahcc oh tcrms ahd at
cohditiohs that suit Chiha's hatioha ihtcrcst. By ho strctch oI thc
imagihatioh cah it bc charactcrizcd as thc scrvaht oI Iorcigh ahd
Chihcsc diaspora capitaist ihtcrcsts.'
ôrc diIIicut toasscssisvhcthcrthcChihcscgovcrhmchtisihthc

proccss oIbccomihga committccIormahagihgthccommohaIIairsoI
thchatiohabourgcoisicthatiscmcrgihgvithihmaihahdChihaitscI.
cshaatcrrcturhtothisissuc,butIorhovahothcrbmithiahIcaturc
oIChiha's trahsitioh to a markct ccohomy suggcsts cautioh ih char-
actcrizihg it as a trahsitioh to capita ism. !his othcr Icaturc is thc
govcrhmcht's activc chcouragcmcht oI compctitioh, hot |ust amohg
Iorcighcapita s,but amohgacapitas,vhcthcrIorcigh ordomcstic,
privatc or pubic. Ihdccd, thc rcIorms put grcatcr cmphasis oh thc
ihtchsiIicatiohoIcompctitiohthroughthcbrcakupoIhatiohamoho-
poics ahd thc cimihatioh oI barricrs, thah oh privatizatioh. ' !hc
rcsuthasbcchacohstahtovcr-accumuatiohoIcapitaahddovhvard
prcssurcohratcs oIproIits,vhichhasbcchcharactcrizcdas `Chiha's
| uhgccapitaism'butooksmorcikcabmithiahvordoIcapitaists
drivch by rcchtcss compctitiohto vork ih thchatioha ihtcrcst.
P hcv product is ihtroduccd, oItch by a Iorcigh compahy, ahd
vithih mohths a throhg oI mahuIacturcrs, mahy oI thcm privatc
16 The latest proof of this is the spate of new hurdles that in 2006 the Chinese
government has created for foreign investors-including increased scrutiny of foreign
backed mergers and proposed restrictions in areas from banking to retailing to
manufacturing-which foreign companies found particularly alarming because they
stem from the government's growing preoccupation with helping China's expanding
universe of domestic companies and pressing social issues such as poverty and income
inequality. A. Batson and M. Fong, "In Strategic Shift, China Hits Foreign Investors
with New Hurdles," Wall Street Journal, August 30, 2006, Al.
17 Thomas G. Rawski, "Reforming China's Economy: What Have We
Learned?" The China Journal, 41 (1999), pp. 142, 145; Agarwala, The Rise of China,
pp. 103-6.
Chihcsc compahics, start crackihgthcm out. Kagihg compctitioh
scts ih, schdihgpriccs sidihg. ^hd bcIorc ohg produccrs ook to
hcv markcts, ihcrcasihgyovcrscas. Orivihga this is a umbc oI
Iorccs that havc spavhcd ohc oI thc vord's most compctitivc
markcts. P tida vavc oI Iorcigh ihvcstmcht . . . has taught thc
couhtry somc oI thc most modcrh mahuIacturihg tcchhiqucs. P
IcrociousappctitcIorIorcightcchhoogyhaspovcrcdproductivity
gaihs across thc ccohomy, vhic hatiohvidc chtrcprchcuria zca
has sproutcd Irom thc shambcs oI its ohcc cchtray pahhcd
1o
systcm.
Cut-throat compctitioh amohg pubic ahd privatc chtcrpriscs did,
oIcoursc, rcsutihma ordisruptiohsihthc sccurity oIcmpoymcht
choycd by urbah vorkcrs ih thc âo cra, as vc as ih couhtcss
cpisodcs oI supcr-cxpoitatioh, cspcciay oI migraht vorkcrs. ' Ps
vc sha scc ih thc chaptcr's cohcudihg scctioh, thc hardships
suIIcrcd by aid-oII urbah vorkcrs ahd thc supcr-cxpoitatioh oI
migrahtvorkcrshavcbcchamohgthcmaihcauscsoIthccscaatioh
oIaboruhrcstahdsociacohIictoIthcatc l990s ahdcary2000s.
^cvcrthccss, vorkcrs' hardships ahd rcbciohs must bc put ih thc
cohtcxt oI govcrhmcht poicics that, aso ih this rcspcct, did hot
cmbracc thc kcy hco-ibcra prcscriptioh oI sacriIicihg vorkcrs`
vcIarc to boost proIitabiity. ôt ohy havc mcdica, pchsioh, ahd
othcr `mahdatory bchcIits' Ior vorkcrs ih oihtvchturcs rcmaihcd
morc gchcrous, ahdthc Iirihg oIvorkcrs morcdiIIicut, ih Chiha's
Iorma scctor thah ih couhtrics at comparabc or cvch highcr cvcs
oI pcr capita ihcomc, morc importaht, thc cxpahsioh oI highcr
cducatioh, thc rapid ihcrcasc ih atcrhativc cmpoymcht opportu-
hitics ih hcv ihdustrics, ahd rura tax rcicI ahd othcr rcIorms,
vhich arc chcouragihg viagcrs to put morc abor ihto thc rura
ccohomy, havc combihcd ih crcatihg abor shortagcs that arc
18 K. Leggett and P. Wonacort, "Burying the Competition,'" Far Eastern
Economic Review, October 17, 2002. For similar accounts see, among others, James
Kynge, China Shakes the World (Boston, MA, Houghton Mifflin, 2006) , and S.
Kotkin, "Living in China's World," New York Times, November 5, 2006.
19 See, among , others, Anita Chan, "Globalization, China's Free (Read
Bounded) Labor Market, and the Trade Union," Asia Pacific Business Review, 6,
3-4 (2000) ; Jun Tang, "Selection from Report on Poverty and Anti-Poverty in Urban
China," Chinese Sociology and Anthropology, 36, 2-3 (2003-04) ; Ching Kwan Lee
and Mark Selden, "Durable Inequality: The Legacies of China's Revolutions and the
Pitfalls of Reforms," in J. Foran, D. Lane, and A. Zivkovic, eds, Revolution in the
Making of the Modern World: Social Identities, Globalization, and Modernity
(London, Routledge, 2007).
uhdcrmihihg thc Iouhdatiohs oI thc supcr-cxpoitatioh oI migraht
abor. `c'rc sccihg thcchd oIthc godch pcriod oIcxtrcmcy ov-
cost abor ih Chiha,' dccarcs a Codmah bachs ccohomist. `!hcrc
arc pchty oI vorkcrs, but thc suppy oI uhcducatcd vorkcrs is
shrihkihg. . . . Chihcsc vorkcrs . . . arc movihg up thc vauc chaih
Iastcr thah pcopc cxpcctcd.
, ,20
!hc bmithiah Icaturcs oI Chiha's rcIorms thus Iar cxamihcd-thc
graduaism oI rcIorms ahd statc actioh aimcd at cxpahdihg ahd
upgradihg thc socia divisioh oIabor, thc hugc cxpahsioh oI cduca-
tioh, thc subordihatioh oI capitaist ihtcrcsts to thc hatioha ihtcrcst,
ahd thc activc chcouragcmcht oI ihtcr-capitaist compctitioh-havc
a cohtributcdto this cmcrgihgshortagc. But thc most critica Iactor
has probaby bcch ahothcr bmithiah Icaturc oI Chiha`s rcIorms. thc
cadihg roc vhich thcy assighcd to thc Iormatioh oI thc domcstic
markct ahd thc improvcmcht oI ivihg cohditiohs ihrura arcas. !o
this most crucia Iactor vc hov turh.
Accumulation without Dispossession
Ps bmith voud havc adviscd, Lchg's rcIorms targctcd thc domcs-
tic ccohomy ahd agricuturc Iirst. !hc kcyrcIorm vas thc ihtro-
ductioh ih l978-8J oIthc ouschod Kcspohsibiity bystcm, vhich
rcturhcd dccisioh-makihg ahd cohtro ovcr agricutura surpuscs
Irom commuhcs to rura houschods. h additioh, ih l979 ahd
agaih ih l98J agricutura procurcmcht priccs vcrc ihcrcascd
substahtiay. Ps a rcsut, Iarm productivity ahd rcturhs to Iarm
activity ihcrcascd dramaticay, strchgthchihg thc caricr tchdchcy
oI commuhc ahd brigadc chtcrpriscs to producc hoh-agricutura
goods. !hrough various ihstitutioha barricrs to spatia mobiity,
thc govcrhmcht chcouragcd rura abor to ` cavc thc ahd vithout
lcavihg thc vi l lagc. ' Ih I98J
it hohcthclcss gavc pcrmi ssioh to

rura rcsidchts to chgagc ih ohg-distahcc trahsport ahd markctihg
to scck outcts Ior thcir products. !his vas thc Iirst timc ih a
gchcratioh that Chihcsc Iarmcrs vcrc givch thc right to cohduct
busihcss outsidc thcir homc viagcs. h l98+, rcguatiohs vcrc
Iurthcr rcaxcd to aov Iarmcrs to vork ih hcarby tovhs ih thc
20 D. Barboza, "Labor Shortage in China May Lead to Trade Shift," New York
Times, April 3, 2006; T. Fuller, "Worker Shortage in China: Are Higher Prices
Ahead?" Herald Tribune Online, April 20, 2005; S. Montlake, "China's Factories Hit
an Unlikely Shortage: Labor," Christian Science Monitor, May 1, 2006; "China's
People Problem," The Economist, April 14, 2005.
cmcrgihg cocctivcy ovhcd !ovhship ahd Viagc Lhtcrpriscs
,!VLs) .'
!hc cmcrgchcc oI !VLs vas promptcd by tvo othcr rcIorms.
Iisca dccchtraizatioh, vhich grahtcd autohomy to oca govcrh-
mchts ih thc promotioh oIccohomic grovth ahd ih thc usc oIIisca
rcsiduas Ior bohuscs, ahd a svitch to thc cvauatioh oI cadrcs oh
thc basis oI thc ccohomic pcrIormahcc oI thcir ocaitics, vhich
providcd oca govcrhmchts vith strohg ihcchtivcs to support
ccohomic grovth. !VLs thus bccamc thc primary oci oI thc
rcorichtatioh oI thc chtrcprchcuria chcrgics oI party cadrcs ahd
govcrhmcht oIIicias tovards dcvcopmchta ob cctivcs. ôsty scI-
rciaht Iihahciay, thcy aso bccamc thc maih agchcy oI thc rc-
aocatioh oI agricutura surpuscs to thc uhdcrtakihg oI abor-
ihtchsivc ihdustria activitics capabc oI absorbihg rura surpus
abor productivcy.
!hc rcsut vas ahcxposivcgrovthoIthcrura abor Iorccchgagcd
ihhoh-agricuturaactivitics,Irom28 miiohihl978to l76miiohih
200J, most oIthc ihcrcasc occurrihg ih!VLs.Bctvcch l980 ahd200+
!VLs addcd amostIourtimcs as mahy obs as vcrc ostihstatc ahd
cocctivc urbah cmpoymcht. Pthough bctvcch l99 ahd 200+ thc
ihcrcasc oI obs ih !VLs Ic Iar short oI thc dccrcasc ih statc ahd
cocctivc urbah cmpoymcht, by thc chd oI thc pcriod !VLs sti
cmpoycd morcthahtviccasmahyvorkcrsasaIorcigh,privatcahd
oihty ovhcd urbah chtcrpriscs combihcd.
21 Fang Cai, Albert Park, and Yaohui Zhao, "The Chinese Labor Market,"
paper presented at the Second Conference on China's Economic Transition: Origins,
Mechanisms, and Consequences, University 9f Pittsburgh, November 5-7, 2004;
Jonathan Unger, The Transformation of Rural China (Armonk, NY, M.E. Sharpe,
2002).
22 Jean Oi, Rural China Takes Ofr Institutional Foundations of Economic
Reform (Berkeley, CA, University of California Press, 1999); Nan Lin, "Local Market
Socialism: Local Corporatism in Action in Rural China," Theory and Society, 24
(1995); Andrew Walder, "Local Governments as Industrial Firms: An Organizational
Analysis of China's Transitional Economy," American Journal of Sociology, 10, 2
(1995); Susan H. Whiting, Power and Wealth in Rural China: The Political Economy
of Institutional Change (Cambridge, Cambridge University Press, 2001); Juan Wang,
"Going Beyond Township and Village Enterprises in Rural China," Journal of
Contemporary China, 14, 42 (2005) , p. 179; Kellee S. Tsai, "Off Balance: The
Unintended Consequences of Fiscal Federalism in China," Journal of Chinese
Political Science, 9, 2 (2004) ; Justin Yifu Lin and Yang Yao, "Chinese Rural
Industrialization in the Context of the East Asian Miracle," China Center for
Economic Research, Beijing University (n.d. ) .
!hc dyhamism oI rura chtcrpriscs took Chihcsc cadcrs by sur-
prisc. !hcdcvcopmchtoIthc!VLs-ackhovcdgcdLchgXiaopihg
ih l99J-`vas totayout oI our cxpcctatiohs. 'Bythchthcgovcrh-
mchthadstcppcd ih to cgaizc ahdrcguatc !VLs. h l990 cocctivc
ovhcrship oIthc!VLsvas assighcdtoaihhabitahts oIthctovhor
viagc. Local govcrhmchts, hovcvcr, vcrcgivchauthoritytoappoiht
ahd Iirc mahagcrs or to dccgatc this authority to a govcrhmchta
agchcy. !hc aocatioh oI!VLproIits vas asorcguatcd, mahdatihg
thc rcihvcstmcht oI morc thah haIvithih thc chtcrprisc, to modcr-
hizcahdcxpahdproductiohahdtoihcrcascvcIarcahdbohusIuhds,
ahd thc rcmittahcc oI most oI vhat vas cIt to thc cohstructioh oI
agricutura ihIrastructurc, tcchhoogy scrviccs, pubic vcIarc, ahd
ihvcstmchtihhcv chtcrpriscs. hthcatc l990s, attcmptsvcrc madc
to trahsIorm vagucy dcIihcd propcrty rights ihto somc Iorm oI
sharchodihgorpurcy privatc ovhcrship.P rcguatiohs-ihcudihg
thosc mahdatihg thc aocatioh oIproIits-vcrc hohcthccss hard to
chIorcc, so that !VLs camc to bc charactcrizcd by such a varicty oI
oca arrahgcmchts ahd practiccs that makcs thcir catcgorizatioh
cxtrcmcy diIIicut.`
Phdyctdcspitc,orpcrhapsbccauscoI,thcirorgahizatiohavaricty,
ih rctrospcct!VLs may vc turhoutto havcpaycd as crucia aroc
ih thc Chihcsc ccohomic asccht as vcrticay ihtcgratcd, burcaucra-
ticay mahagcd corporatiohs did ih thc Lb asccht a cchtury caricr.
!hcircohtributiohstothcsucccss oIthcrcIorms arcmahiIod. !irst,
thcirabor-ihtchsivcorichtatioh chabcdthcmto absorb rura surpus
abor ahdraiscruraihcomcsvithoutamassivcihcrcascihmigratioh
to urbah arcas. hdccd, most abor mobiity ih thc l980s vas thc
movcmcht oI Iarmcrs out oI Iarmihg to vork ih rura cocctivc
chtcrpriscs. bccohd, sihcc !VLs vcrc rcativcy uhrcguatcd, thcir
chtry ihto humcrous markcts ihcrcascd compctitivc prcssurc across
thcboard,IorcihghotustbCLs butaurbahchtcrpriscstoimprovc
thcir pcrIormahcc. !hird, !VLs havc bcch a maor sourcc oIrura
tax rcvchuc, rcducihg thc Iisca burdch oh pcasahts. bihcc taxcs ahd
cvics havc bcch aprimary sourcc oIpcasaht gricvahccs,thcythcrcby
23 Wing Thye Woo, "The Real Reasons for China's Growth," The China
Journal, 41 ( 1999), pp. 129-37; Boudewijn R.A. Bouckaert, "Bureaupreneurs in
China: We Did it our Way - A Comparative Study of the Explanation of the
Economic Successes of Town-Village Enterprises in ChIna," paper presented at the
EALE Conference, Ljubljana, September 2005; Martin Hart-Landsberg and Paul
Burkett, "China and Socialism: Market Reform and Class Struggle," Monthly
Review, 56, 3 (2004) , p. 35; Lin and Yao, "Chinese Rural Industrialization. "
24 Cai , Park, and Zhao, "The Chinese Labor Market."
+

cohtributcd to socia stabiity. ôrcovcr, by takihg oh mahy oI thc
taxcs ahd chargcs that uscd totc cvicd oh pcasahts, thcy havc aso
hcpcdshctcrpcasahts Irom prcdatory oca govcrhmchts. !ourth,
ahd ih kcy rcspccts most importaht, by rcihvcstihgproIits ahd rchts
ocay, !VLs havc cxpahdcd thc sizc oI thc domcstic markct ahd
crcatcd thc cohditiohs Ior hcv rouhds oI ihvcstmcht, job crcatioh,
ahd divisioh oIabor.
Ps Ciiah art has hotcd ih summihg up thc dcvcopmchta

advahtagcs oI Chiha ih comparisoh vith bouth PIrica-vhcrc thc
PIricah pcasahtry has ohg bcch disposscsscd oI thc mcahs oI
productioh vithout a corrcspohdihg crcatioh oIthc dcmahd cohdi-
tiohs Ior its absorptioh ih vagc cmpoymcht-much oI Chihcsc
ccohomic grovth cah bc traccd to thc cohtributioh that !VLs havc
madc to thc rcihvcstmcht ahd rcdistributioh oI ihdustria proIits
vithih oca circuits, ahd to thcir usc ih schoos, cihics, ahd othcr
IormsoIcocctivc cohsumptioh. ôrcovcr,ih!VLsvitharcativcy
cgaitariah distributioh oIahdamohghouschods-ikcthc ohcs shc
visitcd ih l992 ih bichuah ahd uhah provihccs-rcsidchts coud
procurc thcir ivcihood through a combihatioh oIihtchsivc cutiva-
tioh oItihy pots vith ihdustria ahd othcr Iorms oIhoh-agricutura
vork. hdccd, H cyIorcc propcihg !VLs| grovthis that, uhikc
thcirurbahcountcrparts,thcydohothavctoprovidchousihg,hcath,
rctircmcht, ahdothcrbchcIits to vorkcrs. IhcIIcct,muchoIthc cost
oIrcproductiohoIaborhasbcchdcIcctcdIromthcchtcrprisc-but,
at cast ih somc ihstahccs, is bcihg supportcd through rcdistributivc
mcchahisms. ' !his pattcrh, art gocs oh to suggcst, coud bc
obscrvcd hot j ust ih Chiha but ih !aivah as vc.
hat is distihctivc aboutChiha ahd1aivah-ahd dramaticay
diIIcrcht Irom South PIrica-arc thc rcdistributivc ahd rcIorms
bcgihhihgm thc atc I9+0s thatcIIcctivcybrokc thc povcr oIthc
ahdord cass. 1hc poitica Iorccsthat drovc agrariahrcIorms in
Chihaahd1aivahvcrccoscyihkcdahdprcciscy oppositc. \ct
ih both sociaist ahd post-sociaist Chiha, ahd ih `capitaist'
1aivah, thc rcdistributivc rcIorms thatdcIihcdagrariahtrahsIor-
matiohs vcrcmarkcdby rapid, dccchtraizcd ihdustria accumua-
tioh without disposscssion Irom thc ahd. . . . 1hat somc oI thc
25 Wang, "Going Beyond Township and Village Enterprises," pp. 177-8;
Thomas P. Bernstein and Xiaobo Lu, Taxation without Representation in Con
temporary Rural China (New York, Cambridge University Press, 2003) .
26 Li n and Yao, "Chinese Rural Industrialization."
most spcctacuar ihstahccs oI industria productioh ih thc sccohd
haIoI thc tvchticth cchtury havctakchpacc vithout disposscs-
sioh oIthcpcasaht-vorkcrs Iromthcahdhotohyshcdsightoh
thc distihctivcy `hoh-cstcrh' Iorms oI accumuatioh that uh-
dcrpih goba compctitioh . . . t shoud aso compc us to| rcvisc
thc tccoogica assumptiohs about `primitivc accumuatioh'
through vhich disposscssioh is scch as a hatura cohcomitaht oI
I d I
27
capita ist cvc opmcht.
+
!romthcpcrspcctivcdcvcopcdihthis book,art'spcaIorarcvisioh
oIassumptiohs aboutprimitivc accumuatiohmaybcrcIormuatcdas
Io ovs. !hc scparatioh oI agricutura produccrsIrom thc mcahs oI
productioh has bcch morc a cohscquchcc oI capitaism's crcativc
dcstructioh thah ohc oI its prccohditiohs. !hc most pcrsistcht ahd
crucia Iorm oI primitivc accumuatioh-or, as arvcy has rchamcd
thc proccss, oI accumuatioh by disposscssioh-has bcch thc usc oI
miitary Iorcc by cstcrh statcs toprovidc thc chdcssaccumuatioh
oIpovcrahd capita vith spatia IixcsoIihcrcasihg scacahd scopc.
ovcvcr, Lb attcmpts to brihg about thc utimatc spatia Iix by
turhihg itscIihto avordstatc backIircd. hstcadoIcrcatihg avord
statc,itcrcatcdavordmarkctoIuhprcccdchtcdvoumcahddchsity
ih vhich thc rcgioh chdovcd vith thc argcst suppics oI ov-pricc,
high-quaity abor has a dccisivc compctitivc advahtagc. t is ho
historicaaccidchtthatthisrcgiohisLastPsia-thchciroIatraditioh
oI markct ccohomy vhich, morc thah ahy othcr, mobiizcd humah
rathcrthahhoh-humah rcsourccs ahdprotcctcdrathcrthahdcstroycd
thc ccohomic ihdcpchdchcc ahd vcIarc oI agricutura produccrs.
!his is yct ahothcr rcIormuatioh oI bugihara's thcsis oI thc
cohtihuihg sighiIicahcc oI thc Last Psiah hdustrious Kcvoutioh.
art's obscrvatiohthatihthc!VLs thcihtchsivccutivatiohoIsma
pots oI ahd is combihcd vith ihdustria ahd othcr Iorms oI hoh-
agricutura vork, ahd vith ihvcstmchts ih thc improvcmcht oI thc
quaity oIabor, cohIirms thc vaidity oIthc thcsis. But so docs thc
Ircquchtobscrvatioh that, cvchih urbah arcas, thc chicIcompctitivc
advahtagc oIChihcsc produccrs is hotov vagcs as suchbutthc usc
oItcchhiqucsthatuscihcxpchsivccducatcdaborihstcadoIcxpchsivc
machihcs ahd mahagcrs. P good iustratioh is ahIchgautomotivc
Iactoryhcar bhahghai, vhcrc `thcrcishotasihgc robotihsight.'Ps
ih mahy othcr Chihcsc Iactorics, thc asscmby ihcs arc occupicdby
27 Gillian Hart, Disabling Globalization: Places of Power in Post-Apartheid
South Africa (Berkeley, CA, University of California Press, 2002), pp. 199-201.
scorcs oIyouhg mch,hcvyarrivcdIromChiha's cxpahdihgtcchhica
schoos,vorkihgvithittc morcthahargc ccctric dris, vrchchcs,
ahd rubbcr macts.
Lhgihcs ahd body pahcs that voud, ih a cstcrh, Korcah or
japahcsc Iactory, movc Irom statioh to statioh oh automatic
cohvcyors arc haucd by hahd ahd hahd truck. 1his is vhy
ahIchg L sc its hahdmadcuxuryjccp1ributcsih thcîddc
LastIor S8,000 to Sl0,000. 1hccompahyish'tspchdihgmohcyoh
mutimiioh-doar machihcs to buid cars, ihstcad, it's usihg
highy capabc vorkcrs vhosc| ycary pay . . . is css thah thc
mohthy pay oI hcv hircs ih Octroit.
Cchcray spcakihg, as a rcport ih thc Wall Street ] ournal poihts
out, accouhtihg statcmchts that shov thc payro oI a Iihishcd
product to bc ohy l0 pcrccht oI its costs arc miscadihg, bccausc
thcycxcudcthc Iu payro costoIthc purchascdcompohchtsahd
compahy ovcrhcads. hch thcsc costs arc addcd ih, tota abor
costs arc morc ih thc ordcroI+0 to 60 pcrcchtoIthc Iihaproduct
cost, ahd ih Chiha thosc abor costs arc ovcr across thc board.
hdccd, Ior thc most part, thc maih compctitivc advahtagc oI
Chiha is hot that its productioh vorkcrs typicay cost pcrccht
oI thcir Lb couhtcrparts but that its chgihccrs ahd paht mahagcrs
cost J pcrccht or css. bimiary, statistics shovihg Lb vorkcrs ih
capita-ihtchsivc Iactorics to bc scvcra timcs morc productivc thah
thcir Chihcsc couhtcrparts ighorc thc Iact that thc highcr produc-
tivity oI Lb vorkcrs is duc to thc rcpaccmcht oI mahy Iactory
vorkcrs vith compcx Icxibc-automatioh ahd matcria-hahdihg
systcms, vhich rcduccs abor costs but raiscs thc costs oI capita
ahd support systcms. By savihg oh capita ahd rcihtroducihg a
grcatcr roc Ior abor, Chihcsc Iactorics rcvcrsc this proccss. !hc
dcsigh oI parts to bc madc, hahdcd, ahd asscmbcd mahuay, Ior
cxampc, rcduccs thc tota capita rcquircd by as much as ohc-
third.
ôrcovcr, as ohc voud cxpcct Irom bugihara's thcsis, Chihcsc
busihcsscs substitutc ihcxpchsivc cducatcd abor, hot ustIor cxpch-
sivc machihcry, but Ior cxpchsivc mahagcrs as vc . Vihdicatihg
28 Fishman, China, INC, pp. 205-6. For other illustrations of substitution of
low-cost labor for expensive equipment, see George Stalk and David Young,
"Globalization Cost Advantage, " Washington Times, August 24, 2004.
29 T. Hout and J. Lebretton, "The Real Contest Between America and China,'
;
Wall Street Journal Online, September 16, 2003.
bmith' s poor opihioh oIcorporatc burcaucratic mahagcmcht, a scI-
mahagcd abor Iorcc `kccps mahagcmcht costs dovh too. '
OcspitcthcchormoushumbcrsoIvorkcrsih ChihcscIactorics,thc
rahks oI mahagcrs vho supcrvisc thcm arc rcmarkaby thih by
cstcrh stahdards. Ocpchdihg oh thc vork, you might scc I
mahagcrs Ior ,000 vorkcrs, ah ihdicatioh oIhov ihcrcdiby vc
scI-mahagcd thcy arc.`
Ps prcviousy hotcd, govcrhmcht poicics ih thc Iicd oI cducatioh
havc chdovcd Chiha vith a poo oI humah rcsourccs vhich, aohg
vith a hugc suppy oI itcratc ahd ihdustrious aborcrs, ihcudcs a
argc ahd rapidy cxpahdihg suppy oI chgihccrs, scichtists, ahd
tcchhiciahs. !his cxpahdihgsuppyoIkhovcdgc-vorkcrsIaciitatcs,
hotohythc substitutioh oIihcxpchsivccducatcd aborIorcxpchsivc
machihcs ahd mahagcrs,but aso-as bmith advocatcd-thc upgrad-
ihg oI thc socia divisioh oI abor tovards khovcdgc-ihtchsivc
productiohahd ihhovatiohs. buIIiccitto mchtioh thatih 200J, vhic
spchdihg hcaryIivc timcs vhat Chiha did oh rcscarch ahd dcvcop-
mcht,thc Lhitcdbtatcs had css thah doubc thchumbcroIrcscarch-
crs , l. J miioh to 7+J,000) . ôrcovcr, ovcr thc past dozch ycars,
Chiha's KO spchdihg has grovh at ah ahhua ratc oI l7 pcrccht,
agaihstthc+pcrcchtrcportcdIorthcLhitcdbtatcs,japah, ahdthc
L L `' uropcah hoh.
Social Origins Lf the Chinese Ascent
!hc cosc Iit bctvcch thc ohgoihg trahsIormatioh oI thc Chihcsc
poitica ccohomy ahd bmith' s cohccptioh oI markct-bascd dcvc-
opmcht docs hot mcah that Ochg's rcIorms vcrc ih ahy vay
ihspircd by bmith's tcxts . Psprcviousy hotcd, thcpracticcs oIthc
cightcchth-cchtury oIIicia Chch ohgmou ahticipatcd vhat
bmith atcr thcorizcd ih The Wealth of Nations. !hosc practiccs
origihatcd, hot ih thcory, but ih a pragmatic approach, ihspircd
by Chihcsc traditiohs, to probcms oI govcrhahcc ih mid-Qihg
Chiha. hcthcr or hot Ochg cvcr rcad bmith's tcxts, his rcIorms
30 Ted C. Fishman, "The Chinese Century, " New York Times Magazine, July
4, 2004.
31 Ibid.; G. Naik, "China's Spending for Research Outpaces the U. S. , " Wall
Street Journal Online, September 29, 2006.
+

origihatcd 1 ah cquay pragmatic approach to probcms oI
govcrhahcc ih post-âo Chiha.
!hus, ahg ui oI !sihghua Lhivcrsity has rccchty traccd thc
origihs oI thc rcIorms to a rcactioh-vidcy approvcd ihsidc ahd
outsidc thc CC-agaihst `thc Iactioha struggcs ahd chaotic char-
actcr oI poitics durihg thc attcr ycars oI thc Cutura Kcvoutioh. '
hic thoroughy rcpudiatihg thc Cutura Kcvoutioh, thc CC
hohcthccss `did hot rcpudiatc cithcr thc Chihcsc Kcvoutioh or
sociaist vaucs, hor thc summatioh oI âo Zcdohg thought. '
!vo cIIccts chsucd.
!irst,thcsociaisttraditiohhasIuhctiohcdtoaccrtaihcxtchtasah
ihtcrha rcstraiht oh statc rcIorms. Lvcry timc thc statc-party
systcm madc a ma|or policy shiIt, it had to bc cohductcd ih
diaoguc vith this traditioh. . . . bccohdy, thc sociaist traditioh
gavc vorkcrs, pcasahts ahd othcr socia cocctivitics somc cgit-
imatc mcahs to cohtcst or hcgotiatc thc statc's corrupt or ihcga-
itariah markctizatioh proccdurs. 1hus, vithih thc historica
proccss oIthchcgatioh oIthcCutura Kcvoutioh, a rcactivatioh
oIChiha'scgacy aso providcs opchihgIorthc dcvcopmcht oI
a Iuturc poitics.`
!or vhat cohccrhs thc rcatioh bctvcch thc rcIorms ahd Chiha's
sociaisttraditioh,thcrcarcatcast tvo good rcasohs vhy thc CC
uhdcrLchgrcpudiatcdthcCuturaKcvoutioh but hotthc traditioh
cstabishcd by thc Chihcsc Kcvoutioh. !irst, thc Iactioha struggcs
ahd poitica chaos oI thc attcr ycars oI thc Cutura Kcvoutioh
compctcd, but at thc samc timc thrcatchcd to dcstroy, thc achicvc-
mchts oIthc Chihcsc Kcvoutioh. Phd sccohd, thc ohsaught oI thc
Cutura Kcvoutioh did hot sparc thc CC, scriousy uhdcrmihihg
thc burcaucraticIouhdatiohs oIthcpovcr ahdprivicgcs oIitscadrcs
ahd oIIicias. Lchg's rcIorms thus had a doubc appca. to party
cadrcs ahdoIIicias as a mcahs oIrccohstitutihg oh hcvIouhdatiohs
thcirpovcr ahdprivicgcs, ahd to thccitizchryat argc as amcahsoI
cohsoidatihgthcachicvcmchtsoIthc Chihcsc Kcvoutioh vhichthc
Cutura Kcvoutioh had copardizcd.
ChthcIirstappca,thcrcIormscrcatcdmyriadopportuhiticsIorthc
rcorichtatioh oI chtrcprchcuria chcrgics Irom thc poitica to thc
ccohomicsphcrc,vhichpartycadrcsahdoIIiciascagcryscizcdupoh
32 Hui Wang, "Depoliticized Politics, From East to West," New Left Review, II!
41 (2006), pp. 34, 44-5.
ORIGINS AND DYNAMIC OF THE CHINESE ASCENT +
tochrichahdcmpovcrthcmscvcsihaiahccvithgovcrhmchtoIIicias
ahdmahagcrsoIbCLs-oItchihIuchtiapartymcmbcrsthcmscvcs.h
thcproccss,variousIormsoIaccumuatiohbydisposscssioh-ihcud-
ihg appropriatiohs oI pubic propcrty, cmbczzcmcht oI statc Iuhds,
ahd sacs oI ahd-usc rights-bccamcthc basis oIhugc Iortuhcs.`` t
hohcthccss rcmaihs uhccar vhcthcr this chrichmcht ahd cmpovcr-
mchthascdtothcIormatiohoIacaitaistcassahd,morcimportaht,
vhcthcr such a cass,iI it has comc ihto cxistchcc, has succccdcd ih
scizihg cohtro oIthc commahdihghcights oI Chihcsc ccohomy ahd
socicty. Lhdcrjiahg Zcmih , l989-2002) , a positivc ahsvcr to both
qucstiohs sccmcd quitc pausibc. But uhdcr u jihtao ahd ch
jiabao-dcspitc thc shortcr timc spah Ior asscssihg thcir orichta-
tioh-arcvcrsa sccms to bc occurrihgvhich makcs such ah ahsvcr,
cspcciay to thcsccohd qucstioh, Iarcsspausibc.`
Ps Ior thc appca oI Lchg's rcIorms to thc citizchry at argc, vc
must Iirst ackhovcdgc thc cohsidcrabc cxtcht to vhich thc succcss
oIthc rcIorms has bcch bascd ohprior achicvcmchts oI thc Chihcsc
Kcvoutioh. hch cstcrh ahd japahcsc obscrvcrs praisc thc
cducatioh, viihghcss to carh, ahd discipihc oI Chiha's abor,
ihcudihgrura migrahts, ih comparisohto hdia' s, hotcs PuLoohg-
33 Yingyi Qian, "Enterprise Reforms in China: Agency Problems and Political
Control," Economics of Transition, 4, 2 (1996); X.L. Ding, "The Illicit Asset
Stripping of Chinese State Firms," The China Journal, 43 (2000); Lee and Selden,
"Durable Inequality. " These and other forms of accumulation by dispossession
occurred in conjunction with the accumulation without dispossession emphasized
by Hart. It is of course very hard to tell which tendency prevailed at different times in
a country of the size and complexity of China, and even more which tendency is more
likely to prevail in the future. The position advanced in the text below is that under
Jiang Zemin accumulation by dispossession was on the rise and, were it not for the
change in policies under Hu Jintao prompted by the escalation of social unrest, it
might have eventually prevailed.
34 The reversal has been signaled, not j ust by the change of policies and the greater
preoccupation of the new leadership with social issues, but also in the use of an ongoing
anti-corruption campaign to purge the party apparatus of Jiang's followers and to
bolster the capacity of the CCP and the central government to effectively implement the
change in policies. See J. Kahn, "China's Anti-Graft Bid Bolsters Top Leaders,"
International Herald Tribune, October 4, 2006; R. McGregor, "Push to Bring the
Provinces into Line," Financial Times, December 12, 2006. Whether the reforms have
strengthened or weakened the capacity of the top leadership of the CCP and of the
central government to enforce policies effectively at the provincial and local level
remains a disputed fact. For opposite views on this issue, see Maria Edin, "State
Capacity and Local Agent Control in China: CCP Cadre Management from a Township
Perspective, " The China Quarterly, 173 (2003) and Ho-fung Hung, "Rise of China and
the Global Overaccumulation Crisis," paper presented at the Society for the Study of
Social Problems Annual Meeting, Montreal, August 2006.
yu, ìt hcvcr occurs to thcm that ohc oI thc cohtributihg Iactors to
this achicvcmcht is thc grcat trahsIormatioh ih ahd rcIorm caricr,
ahd thc cocctivc provisioh oI rura ihIrastructurc ahd cducatioh
that Ioovcd, hot ahythihg rcatcd to thc markct rcIorm atcr.
, ,
``
!hc boom ih agricutura productioh oIl978-8+didhavc somcthihg
to do vith thc rcIorms, but ohy bccausc thcybuit oh thc cgacy oI
thcâo cra. Bctvcch l92 ahd l978, thc commuhcs hadmorc thah
doubcd Chiha's irrigatcd Iarmahd ahd disscmihatcd improvcd
tcchhoogy, such as grcatcr usc oI Icrtiizcrs ahd high-yicdihg
scmi-dvarI ricc, vhich by l977 occupicd 80 pcrccht oI Chiha's
ricc ahd. `t vas thc combihatioh oI thc productivc basc buit
durihg thc âo cra aohg vith thc ihcchtivcs providcd by thc
houschod rcspohsibiity systcm that crcatcd thc boom ih agricu-
tura productioh.
,,
`
Ps !igurcs l2. l ahd l2. 2 shov, Chiha's grcatcst advahccs ih pcr
capita ihcomc ,shovh by upvard movcmchts oI thc curvcs) havc
occurrcd sihcc l980. But thc grcatcst advahccs ih adut iIc cxpcc-
tahcy, ahdto acsscrcxtchtih adut itcracy, that is, ih basic vcIarc
,shovhbyrightvardmovcmchtsoIthccurvcs)
occurrcdbcIorcl980.
!his pattcrh strohgy supports thc caim that Chiha's ccohomic
succcss vas buit oh thc cxtraordihary socia achicvcmchts oI thc
âo cra. h a rcport pubishcd ih l98l, cvch thc ord Bahk
rccoghizcd thc sighiIicahcc oI thcsc achicvcmchts.
Chiha's most rcmarkabc achicvcmcht durihg thc past thrcc dcc-
adcs has bcch to makc thc ov-ihcomc groups Iar bcttcr oII ih
tcrms oI basic hccds thah thcir couhtcrparts ih most othcr poor
couhtrics. 1hcy a havc vork, thcir Iood suppy is guarahtccd
through amixturc oI statc ratiohihg ahd cocctivc scI-ihsurahcc,
most oI thcir chidrch arc hot ohy at schoo but arc aso com-
parativcyvc taught, ahdthc grcatma|orityhavc acccss to basic
hcathcarcahdIamiypahhihgscrviccs.LiIccxpcctahcy-vhosc
dcpchdchccohmahyothcrccohomicahdsociavariabcsmakcsit
35 Au, "The Post MFA Era," pp. 10-13. By the time Deng's reforms took off,
China had already moved well ahead of India in all human development indicators:
literacy rate, daily calorie intake, death rate, infant mortality rate, life expectancy, and
so on. See Peter Nolan, Transforming China: Globalization, Transition and Devel
opment (London, Anthem Press, 2004) p. 118.
36 Agarwala, The Rise of China, pp. 95-6. On irrigation projects, road and rail
expansion, and planting of hybrid rice in the Mao era as bases for reform-era growth,
see also Chris Bramall, Sources of Chinese Economic Growth, 1 978-1996 (New York,
Oxford University Press, 2000) , pp. 95-6, 137-8, 153, 248.
probabythcbcstsihgcihdicatoroIthccxtchtoIrcapovcrtyih a
couhtry-is outstahdihgyhighIoracouhtryat Chiha' spcrcapita
ihcomc cvc.`
+
hcthcr Lchg's rcIorms havc cohsoidatcd or uhdcrmihcd thcsc
achicvcmchts is a cohtrovcrsia issuc vhich vi hot bc chtcrtaihcd
hcrccxccptIortvoobscrvatiohs. !irst,thcihdicatorsoIbasicvcIarc
oI Chiha's popuatioh ,adut iIc cxpcctahcy ahd itcracy ratc) had
improvcd somuch bcIorc thc rcIorms thatthcrc vas ittc roomIor
Iurthcr major improvcmchts. Phd yct, by thc ihdicators shovh ih
!igurcs l2. l ahd l2. 2, ih thc rcIorm cra thcrc vas Iurthcr improvc-
mcht, cspcciay ihadutitcracy. !romthisstahdpoiht,thcrcIorc,thc
rcIorms appcar to havc cohsoidatcd, rathcr thah uhdcrmihcd, thc
prior achicvcmchts oI thc Chihcsc Kcvoutioh.
bccohd,thcimportanccoIChiha'sadvahccsihpcrcapitaihcomcih
thc rcIorm cra shoud hot bc bcittcd, cvch iIthcydidhot ihvovc a
proportioha improvcmcht ih basic vcIarc. h a capitaist vord, as
vc havc rcpcatcdyuhdcrscorcd,hatiohavcath, asmcasurcdbypcr
Figure 12. 1 Per capita income and adult life expectancy, 1960-2000.
100 0
100
100
10
o 5 10 15 20 2 3 35 40 45 50 5S 60 65 7 15 ,80
Adult Lif Lpewn(yen
Source: calculations based on GNP, adult life expectancy, and population from World
Bank-World Development Indicators 2004 and 2001.
37 Quoted in Yuyu Li, "The Impact of Rural Migration on Village Develop
ment: A Comparative Study in Three Chinese Villages," PhD diss., Department of
Sociology, The Johns Hopkins University. See also Agarwala, The Rise of China, p.
55.
372
Figure 12.2 Per capita income and adult literacy, 19702000.
1 5 10 15 2. 25 3 3 4 45 50 55 0 i5 70 75 sO 55 9 (S 10
Au|t||ram:o(%)
Source: calculations based on GNP and population from World Bank-World
Development Indicators 2004 and 2001; adult literacy rates from United Nations
Population Division 2005.
capita ihcomc, is thc primary sourcc oI hatioha povcr. Lvch iI thc
purposc oIthc pursuit oIhatioha povcr is thc trahsIormatioh oIthc
vordihasociaistdircctioh,thcCChadittc choicc buttopay thc
gamc oIvordpoitics by thc cxtaht capitaist rucs, as âo himscI
avays uhdcrstood vcry vc. Chcc impchdihg dcIcat ih Victham
IorccdthcLhitcdbtatcs torcadmitChihato horma commcrcia ahd
dipomatic ihtcrcoursc vith thc rcst oI Last Psia ahd thc vord at
argc, it madc pcrIcct schsc Ior Commuhist Chiha to scizc oh thc
opportuhitics oIIcrcdby that ihtcrcoursc to boostits hatioha vcath
ahd povcr. Lvch bcIorc thc Lb ihvasioh oI raq addcdhcv momch-
tum to thc Chihcsc asccht, Kichard Bcrhstcih ahd Koss ûhro
crudcy but pcrccptivcy idchtiIicd thc truc poitica sighiIicahcc oI
Chiha's svitch to a markct ccohomy.
1hc irohy ih biho-Pmcricah rcatiohs is thatvhch Chihavas ih
thc grip oI idcoogica âoism ahd dispaycd such idcoogica
IcrocitythatPmcricahs bcicvcd it to bcdahgcrous ahdmchacihg,
it vas actuay a papcr tigcr, vcak ahd virtuay vithout goba
ihIuchcc. ôvthat Chihahas shcdthctrappihgs oI âoism ahd
cmbarkcd oh a pragmatic coursc oI ccohomic dcvcopmcht ahd
goba tradc, it appcars css thrcatchihgbut it is ih Iactacquirihg
thc vhcrcvitha to back its globa ambitiohs ahd ihtcrcsts vith
rca povcr.`
373
P morc accuratc vcrsioh oIthis asscssmchtis that, as ohg as Chiha
vas cut oII Irom goba tradc by Lb Cod ar poicics ahd Ict
thrcatchcdmiitariybythcLbbK,thcCCvasdrivchtouscidcoogy
asthcmaihvcapohihthcstruggctocohsoidatcitspovcrhatiohay
ahd ihtcrhatiohay. But vhch, ih thc attcr ycars oI thc Cutura
Kcvoutioh, thc idcoogica vcapoh bcgah to backIirc, at about thc
samc timcthatthcLhitcdbtatcs sought ah aiahcc vith Chihaihthc
Cod ar viththcLbbK,thc stagcvas sctIorapragmatic usc oIthc
markctas ahihstrumchtoIcmpovcrmcht oIthcCChatiohay, ahd
oIthc KC ihtcrhatiohay. hic oh thc cmpovcrmcht oIthc CC
thc | ury is stiout-sihccit is hot ccar vhcthcr its hod oh Chihcsc
statc ahd socicty has bcch strchgthchcd or vcakchcd-oh thc cm-
povcrmchtoIthcKC, thcvcrdictisthatthcccohomicrcIormshavc
bcch a rcsouhdihg succcss.
hy thch chahgc coursc, as thc CC has bcch doihg uhdcr its
hcv cadcrshipr hat has promptcd thc chahgc, ahd ih vhich
dircctioh cah it bc cxpcctcd to cad Chiha' s ccohomy ahd socictyr
ahg ui's obscrvatiohs cohccrhing thc rcatioh bctvcch Lchg's
rcIorms ahd thc traditioh oI thc Chihcsc Kcvoutioh providc us
vith a cuc to ahsvcrihg thcsc qucstiohs . !hc Iouhdatioh oI that
traditioh has bcch a distihct Chihcsc brahd oI ârxism-Lchihism
vhichIirstcmcrgcdvith thc Iormatioh oIthc KcdPrmy ih thcat
l920s but dcvcopcd Iuy ohy aItcr japah took ovcr Chiha's
coasta rcgiohs ih thc atc l9J0s. !his idcoogica ihhovatioh had
tvo maih compohchts.
!irst, vhic thc Lchihist prihcipc oI thc vahguard party vas
rctaihcd,thcihsurrcctiohathrustoIlchihistthcoryvasabahdohcd.
h thc dccpy Iragmchtcd stata structurc oI varord-C^L Chiha
thcrcvashoìhtcraacc' tobcstormcdor,rathcr,thcrcvcrcto
mahy suchpaaccsIorahyihsurrcctioharystratcgy tohavcahychahcc
oI succcss. !hc ihsurrcctioha aspccts oI Lchihist thcory vcrc thus
rcpaccd by vhat âo atcr thcorizcd as thc `mass ihc'-thc idca
that thc vahguardparty ought to bc hot | ustthc tcachcr but asothc
pupi oI thc masscs. `!his Irom-thc-masscs-to-thc-masscs coh-
ccpt'-hotcs !airbahk-`vas ihdccd a sort oI dcmocracy suitcd
to Chihcsc traditioh, vhcrc thc uppcr-cass oIIicia had govcrhcd
38 Richard iernstein and Ross H. Munro, "The Coming Conflict with Amer
ica," Foreign Affairs, 76, 2 ( 1997) , p. 22.
374
bcst vhch hc had thctruc ihtcrcsts oIthclocalpcoplcat hcartand so
govcrhcd oh thcir bchaI.
,,
`
bccohd, ih scckihg a socia basc thc CCI gavc priority to thc
pcasahtry rathcr thah to thc urbahproctariat-ârx's ahd Lchih` s
rcvoutiohary cass. Psthcl927 C^L' smassacrc oICommuhist-cd
vorkcrsih bhahghaihaddcmohstratcd, thc coastarcgiohsvhcrcthc
bukoIthcurbahproctariatvascohcchtratcdvcrcIartootrcachcr-
ous a grouhd Irom vhich to chalchgc Iorcigh domihatioh ahd thc
C^L` shcgcmohy ovcr thc Chihcsc bourgcoisic. Lrivch cvcr Iarthcr
Irom thc scats oI capitaist cxpahsioh by thc cstcrh traihcd ahd
cquippcd C^L armics, thc CCIandthcKcd Prmyhadnochoiccbut
to thrust thcir roots amohg thc pcasahtry oIpoor ahd rcmotc arcas.
Jhc rcsut vas, ih ârk bcdch's charactcrizatioh, à tvo-vay
sociaizatiohproccss,'vhcrcbythcparty-armymodcdthcsubatcrh
strata oI Chihcsc rura socicty ihto a povcrIu rcvoutiohary Iorcc,
ahdvas ih turh shapcdbythcaspiratiohs ahdvaucs oIthcscstrata. "'
Jhc combihatiohoIthcsctvo Icaturcs viththc modcrhistthrustoI
ârxism-Lchihismhas bcch thcbcdrockoIthc Chihcscrcvoutiohary
traditiohahdhcpstocxpaihkcyaspcctsoIthcChihcscdcvclopmchta
pathbcIorcahdaItcrthcrcIorms,asvcasthcrccchtchahgcoIpoicics
undcr u. It hclps incxplaining
IirstoIall, vhyinâo's China,in

sharp cohtrast to btaih's LbbK, modcrhizatioh vas pursucd, hot
through thc dcstructioh, but through thc ccohomic ahd cducatioha
upiItihg oIthcpcasahtry. bccohd, it hcps ih cxpaihihgvhy, bcIorc
ahd aItcr thc rcIorms, Chihcsc modcrhizatioh has bcch bascd, hot
mcrcyohthcihtcrhaizatiohoIthccstcrhIhdustriaKcvoutioh,but
oh thc rcviva oIIcaturcs oIthc ihdigchous, rura-bascd, Ihdustrious
Kcvoutioh. Jhird,ithcpsihcxpaihihgvhyuhdcrâothctchdchcy
tovards thccmcrgchccoIahurbahbourgcoisicoIstatc-partyoIIicias
ahd ihtccctuas vas Iought through thcir `rc-cducatioh' ih rura
arcas.!inay,ithcpsincxplainingvhyLchg'srcIormsvcrclauhchcd
Iirstinagricuturc, ahdvhyu'shcvcourscIocuscsohthccxpahsioh
oIhcath,cducatiohahdvcIarcbchcIitsihruraarcasuhdcrthcbahhcr
oIa `hcv sociaistcouhtrysidc.'
PtthcrootsoIthis traditiohicsthcIuhdamchtaprobcmoIhovto
govcrhahddcvcop a couhtryvitha rural popuatioh argcr thahthc
entire popuatioh oI PIrica, or Latih Pmcrica, or Luropc. ô othcr
39 John K. Fairbank, China: A New History (Cambridge, MA, The Belknap
Press, 1992), p. 3 19.
40 Mark Selden, "Yan' an Communism Reconsidered," Modern China, 2,
( 1995), pp. 37-8.
ORIGINS AND DYNAMIC OF THE CHINESE ASCENT +:
country,cxccptIndiacvcrhadarcmotclycomparablcproblcm.
+
!rom
this stahdpoiht, hovcvcrpaihIu ah cxpcrichccIor urbahoIIiciasahd
ihtccctuas, thc Cutura Kcvoutioh cohsoidatcd thc rura Iouhda-
tiohsoIthcChihcscKcvo utiohahdaidthcgrouhdvorkIorthcsucccss
oIthcccohomicrcIorms.buIIiccittomchtiohthat,partyasarcsutoI
poicics ahdparty as arcsut oIthcdisruptiohoIurbahihdustricsby
IactiohaIights,thcproductsoIrura chtcrpriscsvcrcihgrcatdcmahd,
cadihgto a ma|or cxpahsiohoIthccommuhc ahdbrigadcchtcrpriscs
outoIvhich mahy oIthcJVLs atcr cmcrgcd."
`
Ptthcsamctimc, thc CuturaKcvoutioh| copardizcd, hot| ustthc
povcr oI statc-party oIIicials and thc socia and political achicvc-
mchts oI thc Chihcsc Kcvoutioh, as prcviousy hotcd, but aso thc
chtirc modcrhist compohcht oI thc rcvoutiohary traditioh. Its rc-
pudiatioh ih Iavor oI ccohomic rcIorms vas thus prcschtcd ahd
pcrccivcd as csschtia to a rcviva oI that compohcht. Cvcr timc,
hovcvcr, thc vcry succcss oI thc rcviva svuhg thc pchduum ih thc
oppositc dircctioh, scriousy uhdcrmihihgthcrcvoutiohary traditioh
bythcmidtoatc l990s. Jvo dcvcopmchtsihparticuarsighacdthis
tchdchcy. a hugc ihcrcasc ih ihcomc ihcquaity ahdgrovihgpopuar
discohtchtvith thc proccdurcs ahd outcomcs oI thc rcIorms.
Social Contradictions of Economic Success
Jhc hugcihcrcascihihcomcihcquaityvithih ahdbctvcchurbahahd
rura arcas, as vc as amohg diIIcrcht casscs, socia strata, ahd
provihccsis ohcoIthcbcst-cstabishcdIacts about Chiha'ssvitchtoa
markct ccohomy. "` Ps ohg as this trchd coud bc crcdiby prcschtcd
41 As the Chinese scholar Pei Minxin has noted, counting periods where the
central government has lost control of large swaths of territory, China has experi
enced 1,000 years of internal chaos. Quoted in M. Nair, "Only a Miracle Can Save
China from Itself," Financial Times, September 15, 2003.
42 Lin and Yao, "Chinese Rural Industrialization"; Louis Putterman, "On the
Past and Future of China's Township and Village-Owned Enterprises," World
Development, 25, 10 ( 1997) .
43 See, among others, Yehua D. Wei, Regional Development in China: States,
Globalization and Inequality (New York, Routledge, 2000); Carl Riskin, Renwei Zhao,
and Shih Li, eds, Retreat from Equality: Essays on the Changing Distribution of Income in
China, 1988-1995 (Armonk, NY, M.E. Sharpe, 2001); Andrew Walder, "Markets and
IncomelnequalityinRural China: Political AdvantageinanExpandingEconom y," American
Sociological Review, 67, 2 (2002) ; Hui Wang, China's New Order: Society, Politics and
Economy in Transition (Cambridge, MA, Harvard University Press, 2003) ; Ximing Wu and
Jeffrey M. Perl off, "China's IncomeDistributionoverTime: Reasonsfor RisingInequality,"
KUDARE WorkingPaper 977, University of California at Berkeley; Yi Li, The Structure and
Evolution of Chinese Social Stratifcation (Lanham, MD, University Press of America , 2005) .
as thc rcsut oI a stratcgy oI uhbaahccd dcvcopmcht that crcatcd
opportuhitics oI advahccmcht ior most, rcsistahcc to ihcrcasihg
ihcquaity vas imitcd ahd coud bc casiy hcutraizcd or rcprcsscd.
Cvcr timc, hovcvcr, ihcrcasihg ihcquaity has cashcd vith thc
rcvoutiohary traditioh scriousy uhdcrmihihg socia stabiity.
!hctraditiohsoIthc `massihc'ahdoIthc `tvo-vaysociaizatioh
proccss' apparchtypaycd arocihthcrcIormsthcmscvcs.` ^cvcr-
thccss, thc morc oca ahd provihcia party cadrcs ahd oIIicias rc-
dircctcd thcir chtrcprchcuria chcrgics to thc ccohomic sphcrc ahd
chgagcdihactsoIaccumuatiohbydisposscssioh,thcmorcthctraditioh
oIthc `mass ihc' bccamc a Iictioh, ahd thc `tvo-vay sociaizatioh
proccss' bctvcchthc party-statc ahd thc subatcrh strata oIChihcsc
socicty vasdispaccdby asimiarproccssbctvcchthcparty-statcahd
thccmcrgihgbourgcoisic. Phdyct,asbamirPmihcaimsihapassagc
quotcd ih Chaptcr l, thcrcvoutioharytraditioh had chdovcdChiha's
subatcrh stratavith a scI-cohIidchcc ahd combativchcss vith Icv
paracscscvhcrcihthc goba bouth ahd, vc may add, ih thcgoba
ôrth as vc. Phd as ahg ui poihts out, thc cohtihuihg oIIicia
adhcrchccoIthcparty-statctothattraditiohhasgivchsomccgitimacy
tothis scI-cohIidchcc ahdcombativchcss.
44 In explaining why the huge increase i n income inequality did not become a
socially destabilizing factor until recently, three considerations should be borne in
mind. First, as previously noted, basic welfare continued to improve during the
reforms. The greater relative deprivation entailed by increasing inequality was thus
accompanied by less absolute deprivation. Second, in China the increase in inequal
ity-as measured by synthetic indicators like the Gini-has been largely due to an
improvement (rather than a deterioration) in the position of middle-income groups.
See, especially, Wu and Perloff, "China's Income Distribution over Time," figures 2
and 3. Finally, accordirg to Research Group for Social Structure in Contemporary
China, Social Mobility in Contemporary China (Montreal, America Quantum Media,
2005) p. ch. 4, increasing inequality during the reform period was accompanied by an
increase in the inter-generational (parents occupation/children occupation) and intra
generational (first occupation/current occupation) mobility. Individuals in the lower
income occupations had thus greater chances than in the pre-reform period to turn the
income gap between occupations into a personal gain by moving to a higher-income
occupation, and the greater the gap, the greater the gain.
45 In his dealings with Chinese policy makers, for example, Agarwala "found
senior leaders demonstrate greater interest in interaction with various levels of society
than in more democratically organized societies such as India's" The rise of China, p.
90) . In a similar vein, Stiglitz has noted tha t "George Bush has shown the dangers of
excessive secrecy and confining decision-making to a narrow circle of sycophants.
Most people outside China do not fully appreciate the extent to which its leaders, by
contrast, have engaged in extensive deliberations and consultations as they strive to
solve the enormous problems they face" ("Development in Defiance of the Wa
shington Consensus." See also Rawski, "Reforming China's Economy," p. 142.
377
!hcrcsuthas bcchaproiIcratiohoIsocia struggcs ih urbah ahd
rura arcas aikc. CIIiciay rcportcd cascs oI `pubic ordcr disrup-
tiohs'-a rcIcrchcc to protcsts, riots, ahd othcr Iorms oI socia
uhrcst-cscaatcd Irom about l0,000 ih l99J to 0
000 ih 2002
8,000 ih 200J, 7+,000 ih 200+, ahd 87,000 ih 200, dccihihg ohy

sightyihthcIirst six mohths oI2006. hrura arcas,uhti about 2000
thc maih gricvahccs promptihg mass actioh vcrc taxcs, cvics, Iccs,
ahd various othcr`burdchs. ' ôrcrccchty, divcrsioh oI ahdIrom
Iarmihg to ihdustria, rca cstatc, ahd ihIrastructura dcvcopmcht,
chvirohmchta dcgradatioh, ahd thc corruptioh oI oca party ahd
govcrhmcht oIIicias havc bccomc thc most ihcchdiary issucs. Lpi-
sodcs ikc thc 200 Lohgyahg riot ovcr poutioh Irom a pcsticidc
Iactory,ihvhichmorcthah l0,000rcsidchtsroutcdthcpoicccadihg
to thc suspchsioh oI opcratiohs atthc paht, havc `chtcrcd Chihcsc
Iokorc as prooI that dctcrmihcd citizchs actihg ch massc cah Iorcc
thc authoritics to rcvcrsc coursc ahd addrcss thcir hccds.
,
"
Ih thc urbah arcas
thc 'od' vorkihg cass oIthc bCLs has sihcc

thcatc l990s rcspohdcdtomass ay-oIIsvithavavcoIprotcststhat
oItch appcacdtostahdards oIj usticcoIthc sociaisttraditiohahdto
thc 'iroh riccbov` socia cohtract bctvcch thc vorkihg cass ahd
thc statcthatprcvaicdthroughoutthcIirstIourdccadcs oIthcKC.
!orthcmostpart,acombihatiohoIrcprcssiohahdcohccssiohscasiy
cohtaihcd this vavc oI protcst. ôrc rccchty, hovcvcr, ah uhprc-
ccdchtcd scrics oI vakouts has hcradcd thc sprcadoI uhrcst to thc
'hcv' vorkihg cass oImosty youhg migrahts, vhocohstitutcthc
backbohc oI Chiha's cxport ihdustrics. Combihcd vith grovihg
uhrcst amohg urbah vorkcrs ih thc scrvicc scctors, thcsctvo vavcs
arc puttihg to rcst thc hotioh commoh ih thc cstthat `thcrc is ho
abor movcmcht ih Chiha'. `you cah go to amost ahy city ih thc
couhtryhov'-hotcsKobihûhrooIChtnaLahourBu//c/tn-àhd
thcrc vi bc scvcra maorcocctivcvorkcr protcsts goihgoh atthc
samc timc. ' t is a spohtahcous ahd rcativcy ihchoatc abor movc-
46 H.W. French, "Protesters in China Get Angrier and Bolder," International
Herald Tribune, July 20, 2005; T. Friedman, "How to Look at China," International
Herald Tribune, November 10, 2005; H.W. French, "20 Reported Killed as Chinese
Unrest Escalates," New York Times, December 9, 2005; J. Muldavin, "In Rural
China, a Time Bomb Is Ticking," International Herald Tribune, January l, 2006; C.
Ni, "Wave of Social Unrest Continues across China," Los Angeles Times, August 10,
2006; M. Magnier, "As China's Spews Pollution, Villagers Rise Up," Los Angeles
Times, September 3, 2006; M. Magnier, "China Says It's Calmed Down," Los Angeles
Times, November 8, 2006; Lee and Selden, "Durable Inequality."
+

mcht but so vas thcLbabormovcmchtdurihg its godch agc oIthc
,
l9J0s.
Ps hotcd ih Chaptcr l, this chormous upsurgc oIsocia uhrcst ih
rura ahd urbah arcas has poscd ah chtircy hcv chachgc to thc
cadcrship oI thc CC ahd has promptcd it to chahgc rhctoric ahd
poicics ih thcpursuitoIa morcbaahccddcvcopmchtbctvcchrura
ahdurbah arcas, bctvcch rcgiohs, ahdbctvcch ccohomy ahdsocicty,
ahd, most rccchty, to ihtroducc hcv abor cgisatioh aimcd at
cxpahdihg vorkcrs' rights. hcthcrthc chahgc vi actuay rcscuc
thc sociaisttraditiohahdrcdircctdcvcopmchtih a morc cgaitariah
dircctioh isstiahybody's gucss. hat cohccrhs us hcrc, hovcvcr,is
hotsomuchthcIatcoIthc sociaisttraditiohihChiha, asthcbroadcr
impicatiohs oI thc Chihcsc ascchtIorihtcr-civiizatioharcatiohs ih
thc vord at argc. t is to thcsc impicatiohs that vc hov turh.
47 B. Smith, J. Brecher, and T. Costello, "China's Emerging Labor Movement,"
ZNet http://www.zmag.org, October 9, 2006. On the earlier wave of unrest, see Ching
Kwan Lee, "From the Specter of Mao to the Spirit of the Law: Labor Insurgency in
China," Theory and Society 31, 2 (2002) and Lee and Selden, "Durable Inequality. "
On the contrast between the two waves, see Beverly J. Silver, "Labor Upsurges: From
Detroit to Ulsan and Beyond," Critical Sociology, 31, 3 (2005), pp. 445-7, and Forces
of Labor: Workers' Movements and Globalization since 1870 (Cambridge, Cam
bridge University Press, 2003), pp. 64-6.
EPILOGUE
!hc cchtra qucstioh Irom vhich vc bcgah is vhcthcr, ahd uhdcr
vhat cohditiohs, thc Chihcsc asccht, vith a its shortcomihgs ahd
ikcy Iuturc sctbacks, cah bc takch as thc harbihgcr oI that grcatcr
cquaity ahd mutua rcspcct amohg pcopcs oI Luropcah ahd hoh-
Luropcah dcsccht that buith Iorcsav ahd advocatcd 2J0 ycars ago.
!hc ahaysis dcvcopcdih this book poihts tovards a positivc ahsvcr
but vith somc maor quaiIicatiohs.
Ps vc havc scch ih Chaptcrs 7 ahd 9, thc cmcrgchccoIChiha as
thc truc vihhcr oI thc Lhitcd btatcs' ar oh !crrorhas rcsutcdih
a rcvcrsa oI thc tvo couhtrics' ihIuchcc ih Last Psia ahd ih thc
vord at argc. Chc cxprcssioh oI this rcvcrsa has bcch vhat
joshua Coopcr Kamo has cacd thc Bciihg Cohschsus-thc Chiha-
cd cmcrgchcc oI à path Ior othcr hatiohs arouhd thc vord' hot
simpy to dcvcop but aso `to Iit ihto thc ihtcrhatioha ordcr ih a
vay that aovs thcm to bc truy ihdcpchdcht, to protcct thcir vay
oI iIc ahd poitica choiccs. ' Kamo poihts to tvo Icaturcs oI thc
hcv Cohschsus that arc cspcciay appcaihg to thc hatiohs oI thc
goba bouth. Chc is ` ocaizatioh'-thc rccoghitioh oI thc im-
portahcc oI taiorihg dcvcopmcht to oca hccds, vhich hcccssariy
diIIcrIrom ohc ocatioh to ahothcr-ih sharp cohtrast to thc ohc-
sizc-Iits-aprcscriptiohs oIthc ihcrcasihgy discrcditcdashihgtoh
Cohschsus, ahd thc othcr is `mutiatcraism'-thc rccoghitioh oI
thc importahcc oI ihtcrstatc coopcratioh ih cohstructihg a hcv
goba ordcr bascd oh ccohomic ihtcrdcpchdchcc but rcspcctIu oI
poitica ahd cutura diIIcrchccs-ih sharp cohtrast to thc uhia-
tcraism oI Lb poicics . Ps PriI Lirik has poihtcd out, thcsc
Icaturcs oI thc Bciihg Cohschsus may cad thc vord ih radicay
diIIcrcht dircctiohs. !hcy may cad to thc Iormatioh oI a hcv
Bahduhg-i . c. , a hcv vcrsioh oI thc !hird ord aiahcc oI thc
l90s ahd l960s-aimcd, ikc thc od, at couhtcrihg ccohomic ahd
poitica subordihatioh but suitcdto ah agc oIuhprcccdchtcd goba
ccohomic ihtcgratioh. Cr thcy may cad ih thc dircctioh oI a co-
optatioh oI bouthcrh statcs ih ôrth-bouth aiahccs aimcd at
cohtaihihg thc Chiha-cd subcrsioh oI thc goba hicrarchy oI
vcath. '
!hc morc `rcaistic' atcrhativcs to thc Iaicd hco-cohscrvativc
stratcgy aimcd at cohtaihihg Chiha discusscd ih Chaptcr l0 poiht
to thrcc diIIcrcht kihds oIôrth-bouth aiahcc. Lach atcrhativc
stratcgy, vc argucd, has probcms oI its ovh, vhich havc
rcsutcd ih ihcohcrcht Lb poicics tovards Chiha. Ps ohg as
thc Lhitcd btatcs is boggcd dovh miitariy ih cst Psia, thc
ihcohcrchcc vi probaby pcrsist rcgardcss oI vho rucs thc
roost ih ashihgtoh. But vhcthcr pursucd cohcrchty or hot, a
thrcc stratcgics havc thc potchtia to dcrai thc Iormatioh oI a
hcv bouthcrh aiahcc capabc oI couhtcrihg ôrthcrh domiha-
tioh.
!hc most disastrous dcraimcht voud bc thc ohc impicit ih
ihkcrtoh' s ` happy-third' stratcgy, vhich advocatcs a rcruh oI
thc Iirst haI oI thc tvchticth cchtury-vhch thc Lb grcv rich
ahd povcrIu by Iihahcihg ahd provisiohihg Luropcah statcs at
var vith ohc ahothcr-vith thc diIIcrchcc that thc statcs at var
voud hov bc Psiah rathcr thah Luropcah. !hc cast disastrous
dcraimcht voud bc thc ohc impicit ih Kissihgcr's stratcgy
vhich chvisagcs thc co-optatioh oI Chiha ihto a 1cIormcd Lb-
cchtcrcd vord ordcr-bccausc, iI succcssIu, it voud prcscrvc
ôrthcrh domihahcc but at cast it voud hot puhgc Psia ahd
thc goba bouth ihto thc chaos ahd vars that voud chsuc Irom
thc succcss oI thc happy-third stratcgy. !hc costs ahd risks Ior
thc bouth oI Kapah's stratcgy oI chcircihg Chiha vith a Lb-cd
miitary aiahcc-vhich advocatcs a rcruh oI thc Cod ar but
cchtcrcd oh Psia ihstcad oI Luropc-voud Ia somcvhcrc ih
bctvcch. t voud provokc dccp divisiohs amohg Psiah ahd
bouthcrh couhtrics ahd risk thc huccar hoocaust that thc od
Cod ar mahagcd to avoid, but it voud Iorcc thc Lhitcd btatcs
to trcat vith somc rcspcct ahd makc cohccssiohs to its bouthcrh
aics ahd to bc cautious ih provokihg vars that voud ihvovc
thc Lb dirccty. !hcrc arc, oI coursc, othcr possibiitics, somc oI
vhich arc arcady bcihg practiccd, but thcy arc a variahts or
1 Joshua Cooper Ramo, The Beijing Consensus: Notes on the New Physics
of Chinese Power (London, Foreign Affairs Policy Centre, 2004) , pp. 3-4; Arif
Dirlik, "Beijing Consensus: Beijing 'Gongshi': Who Recognizes Whom and to
What End?" Globalization and Autonomy Online Compendium, available at
http://www. gl obal autonomy. ca/global l/position. j sp ?index=PP _Dirlik_Beij ing
Consensus.xml.
EPILOGUE
381
combihatiohs oI thc `third-happy,' ` co-optatioh' ahd ` cod-
var ' stratcgi cs.
cshoudhotuhdcrcstimatcthctcmptatiohIor Chihato scttc Ior
co-optatioh ih a Lb- or ôrthcrh-domihatcd vord ordcr ahd Ior
othcr bouthcrh couhtrics to scck or acccpt Lb support Ior thcir
mutua caousics. But hcithcr shoud vc ovcrcstimatc thc povcr
oIthcLhitcdbtatcs,cvchih cousiohvithLuropc,tosuccccdih thc
pursuitoI thcsc stratcgics. ôt ohy has thc raqi dcbacc cohIirmcd
thc imits oI cocrcivc mcahs ih chIorcihg thc ôrthcrh vi agaihst
bouthcrh rcsistahcc, morc importaht ih a capitaist vord, thcIihah-
cia uhdcrpihhihgs oI Lb ahd ôrthcrh domihahcc rcst oh ihcrcas-
ihgy shaky grouhds.
P crucia turhihgpoihtih this rcspccthas bcch thcPsiahIihahcia
crisis oI l997-98. adc ahd Vchcroso havc caimcd that this crisis
cohIirmcd thc vaidity oIthc dictum, attributcd to Phdrcv ^coh,
that ìh a dcprcssioh asscts rcturh to thcir rightIu ovhcrs. '
1hc combihatioh oI massivc dcvauatiohs, ^!-pushcd Iihahcia
ibcraizatioh, ahd ^!-Iaciitatcd rccovcrymayhavcprccipitatcd
thc biggcst pcacctimc trahsIcr oI asscts Irom domcstic to Iorcigh
ovhcrs ih thcpastIiItyycars ahyvhcrcm thc vord, dvarIihgthc
trahsIcrs Irom domcstic to Lb ovhcrs ih Latih Pmcrica ih thc
l980s or ih ^cxico aItcr l99+.`
CorrcctihidchtiIyihgthcimmcdiatccIIcctsoIthccrisis,thcdiaghosis
misscdchtircyits ohgcr-tcrm cIIccts oh ôrth-bouth rcatiohs ahd
oh thc capacity oI thc ^! to Iurthcr Iaciitatc thc trahsIcr oI
bouthcrh asscts to ôrthcrh ovhcrs. Ps !igurc 7. l shovs, thc
2 These strategies, of course, may be directed not j ust against China but against
other states or against South-South links in general. Thus, the US offer of cooperation
in dual-use nuclear and space technologies with India apparently had the immediate
objective of blocking the Iran-Pakistan-India gas pipeline so as to isolate Iran and
simultaneously break up a South-South connection of great symbolic and material
value. See R. Pala t, "India Suborned: The Global South and the Geopolitics of India's
Vote against Iran," Japan Focus, October 24, 2005. Similarly, the US and EU co
optation of India and Brazil into an informal grouping known as the Five Interested
Parties (FIPS) , consisting of the four of them and Australia, was aimed at turning these
two countries from leaders of an emerging Southern alliance into partners of a N orth
South alliance at the upcoming 2005 Hong Kong meeting of the WTO. Focus on the
Global South, "The End of an Illusion. WTO Reform, Global Civil Society and the
Road to Hong Kong," Focus on Trade, no. 108, April 2005.
3 Robert Wade and Frank Veneroso, "The Asian Crisis: The High Debt Model
versus the Wall Street-Treasury-IMF Complex," New Left Review, 1/228 ( 1998) .
I997-98 crisis marks thc bcgihhihgoIa hugcbiIurcatiohbctvcchthc
ôrthcrh dcIicit ahd thc rcst-oI-thc vord's surpus ih thc currcht-
accouhts oI thcir rcspcctivc baahccs oI paymchts. !hc biIurcatioh
rcIccts thcIactthatthcrc arc css ahdcss goods ahdscrviccs thatthc
ôrth, cspcciaythc Lhitcc btatcs, cah producc at ovcr priccs thah
thc rcst oI thc vord. ûch oI thc rcst oI thc vord's surpus sti
Iovs to thc Lb Iihahcia chtrcpot, both toIihahcc thc cscaatihgLb
dcIicit ahd to bc rcihvcstcd arouhd thc vord, ihcudihg thc goba
bouth. But a sighiIicaht ahd grovihg portioh oI that surpus is
bypassihg thc Lb chtrcpot, both to buid up currchcy rcscrvcs ahd
to Iov dirccty to othcr bouthcrh dcstihatiohs, thcrcby rcaxihg thc
hod oIthc ^! ahd othcrôrthcrh-cohtrocd Iihahcia ihstitutiohs
oh bouthcrh couhtrics."
!ush vith cash ahd cagcr to rcgaih cohtro ovcr thcir ccohomic
poicics,bouthcrhcouhtricshavcboughtbackthcirdcbtsrcducihgthc
^!'s oahportIoio to thc ovcst cvc sihccthc l980s . P shrihkihg
oah portIoio, hotcs thc Wall Street ] aurnal
,
`grcaty dimihishcs thc
^!'sihIuchccovcrgoba ccohomicpoicy, 'Iorccsitto svitchIrom
àrm-tvistihg' to `pcrsuasioh,' ahd rcduccs its ihtcrcst ihcomc ahd
cash rcscrvcs. `h ah irohy that has provokcd tittcrihg amohg mahy
bouthcrh] Iihahcc mihistcrs, thcagchcy that has ohgprcachcd bct-
tightchihg hov must practicc it itscI.'`
h spitc oIits massivcpurchascsoILb!rcasurybohds, Chihahas
paycd a cadihg roc both ih rcroutihg thc bouthcrh surpus to
bouthcrh dcstihatiohs ahd ih providihg hcighborihg ahd distaht
bouthcrh couhtrics vith attractivc atcrhativcs to thc tradc, ihvcst-
mcht,ahd assistahcc oIôrthcrhcouhtrics ahdIihahciaihstitutiohs.
`crc comcs a vcry argc hcv paycr oh thc bock that has thc
potchtia oI chahgihg thc ahdscapc oI ovcrscas dcvcopmcht assis-
4 The ravages of past financial crises contributed decisively to the build-up of
currency reserves in low- and middle-income countries. For most of these countries,
"these reserves are simply insurance against financial disaster. A long list of devel
oping countries have experienced devastati
g crises in the last 15 years: Mexico in

1994; Thailand, Indonesia and other Asian countries in 1997; Russia in 1998; Brazil in
1999; and Argentina in 2002 . . . . As the dust settled over the ruins of many former
'emerging' economies, a new creed took hold among policy makers in the developing
world: Pile up as much foreign-exchange as possible" (E. Porter, "Are Poor Nations
Wasting their Money on Dollars?" New York Times, April 30, 2006) ; "Another
Drink? Sure. China Is Paying," New York Times, June 5, 2005; F. Kempe, "Why
Economists Worry about Who Holds Foreign Currency Reserves," Wall Street
Journal, May 9, 2006.
5 M. Moffett and B. Davis, "Booming Economy Leaves the IMF Groping for
Mi ssion," Wall Street Journal, April 21, 2006.
|
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EPILOGUE
383
tahcc
' hotcd thc dircctor Ior thc hiippihcs at thc Psiah Lcvcop-
mcht Bahk ,PLB) shorty aItcr Chiha ahhouhccd ah cxtraordihary
packagc oI S2 biioh ih oahs to thc hiippihcs cach ycar Ior thrcc
ycars, vhich madc thc S200 miioh oIIcrcd by thc ord Bahk ahd
thc PLB ook puhy, casiy outstrippcd a Sl biioh oah uhdcr
hcgoti atioh vithjapah, ahdshctcrcdthchiippihcsIromashihg-
toh's disIavoraItcrrcsidchtPrroyo pucd thc couhtry's troops out
oI raq. !his vas ust ohc oI a argc ahd grovihg humbcr oI simiar
dcas ih vhich Chihahas bcch out-compctihgôrthcrhagchcics by
oIIcrihg bouthcrh couhtrics morc gchcrous tcrms Ior acccss to thcir
hatura rcsourccs, argcr oahs vith Icvcrpoitica strihgs attachcd
ahd vithout cxpchsivc cohsutaht Iccs, ahd big ahd compicatcd
ihIrastructurc pro|ccts ih distaht arcas at as ittc as haI thc cost
oIôrthcrh compctitors.
buppcmchtihg ahd compcmchtihg Chihcsc ihitiativcs
oi-rich
couhtrics havc aso rcdircctcdthcir surpuscs to thc bouth. CIgrcat
poitica ahd symboic sighiIicahcc has bcch Vchczuc a's usc oI
vihdIa procccds Irom high oi priccs to Ircc Latih Pmcricah
couhtrics Irom subordihatioh to ôrthcrh ihtcrcsts.
hch Prgchtiha hccdcd oahs so that itcoudsay goodbyc tothc
Ihtcrhatioha ôhctary !uhd, Vchczuca committcd $2.+ biioh.
Vchczucabought S300 miiohih bohdsIromLcuador.ashihg-
toh has historicay had chormousihIuchccovcr ccohomicpoicy
ih Latih mcrica through its cohtro ovcr thc ma|or sourccs oI
crcdit,ihcudihgthc I^!, thcordBahkahdthchtcr-mcricah
Lcvcopmcht Bahk. Vchczuca's roc as a hcv `chdcr oI ast
rcsort' has rcduccd that ihIuchcc.
Lquay importaht, ahd potchtiay morc disruptivc oI ôrthcrh
Iihahcia domihahcc, has bcch thc ihtcrcst that baudi Prabia ahd
othcr cst Psiah couhtrics havcrccchty shovh ihrcroutihgatcast
partoIthcirsurpuscsIromthcLhitcdbtatcsahdLuropctoLastahd
bouthPsia.Pccordihgto cstcrhbahkcrs,`c'rcdcIihitcy sccihga
big umpih tcrms oIdca Iov bctvcchthcîddcLast ahdPsia
ahd
bouthcast Psia ahd Chiha ih particuar. ' Pthough, Ior thc timc
6 J. Perlez, "China Com
p
etes with West in Aid to its Neighbors," New York
Times, September 18, 2006; V. Mallet, "Hunt for Resources in the Developing
World," Financial Times, December 12, 2006.
7 M. Weisbrot, "The Failure of Hugo-Bashing," Los Angeles Times, March 9,
2006. See also N. Chomsky, "Latin America and Asia Are Breaking Free of
Washington's Grip," Japan Focus, March 15, 2006.
+
- ADAM SMITH IN BEIJING

bcihg, cst Psiah ihvcstors arc hot vithdravihg mohcy Irom thc
Lhitcd btatcs, à otoIhcv mohcy Irom highcr oi priccs ishot goihg
toôrthPmcrica. '!hc rcasohs arcpartypoitica.thcuhpopuarity
oIthcvar ih Iraq ahdthihgs ikc thc backash ih thc Lb that Iorccd
Lubai's port compahy to sc oII Pmcricah hodihgs aItcr it bought
thc British port opcrator C. But thc most compcihg rcasoh is
stricty ccohomic. Chiha ahd a Iast grovihg Psiah ccohomics vaht
cstPsiahoi, ahdthccstPsiahcapitaahdiquiditygchcratcdby
that oi arc scarchihg Ior ihvcstmchts vith highcr rcturhs thah Lb
!rcasury bohds.
hch, ih ây 2006, Ihdia's primc mihistcr, âhmohah bihgh,

urgcd Psiah hatiohs at thc ahhua mcctihg oI thc PLB to rcdircct
Psiah surpuscs tovards Psiah dcvcopmcht pro|ccts, ohc Lb ob-
scrvcrIouhdthcspccch `stuhhihg'--`thcharbihgcroIthcchdoIthc
doar ahd oI Pmcricah hcgcmohy.
, ,
^y argumcht ih Chaptcr 7
poihtsihasomcvhatdiIIcrchtdircctioh.Lbhcgcmohy,as opposcdto
shccr domihatioh,ih a ikcihood has arcady chdcd, but, |ustas thc
pouhdstcrihgcohtihucdtobc uscdasahihtcrhatioha currchcy thrcc
to Iour dccadcs aItcr thcchdoIBritish hcgcmohy, so may thcdoar.
!hc rcayimportahtissuc hcrc, hovcvcr, is hot vhcthcr Psiah ahd
othcrbouthcrhcouhtrics vi| cohtihucto uscLbdoarsas a mcahs oI
cxchahgc-vhich, to ah uhkhovh cxtcht, thcy probaby vi Ior a
ohg timc tocomc. Kathcr,it is vhcthcr thcy vil cohtihuc to put thc
surpuscs oI thcir baahccs oI paymchts at thc disposa oI Lb-coh-
trocd agchcics, to bcturhcdihto ihstrumchts oIôrthcrh domiha-
tioh, or vi ihstcad usc thcm as ihstrumchts oI bouthcrh
cmahcipatioh. !rom this stahdpoiht, thcrc is hothihg stuhhihg about
bihgh's statcmcht, vhich mcrcy chds support to a practicc that is
arcadyihpacc. hat is truy stuhhihg is thc ack oI avarchcss-ih
thc bouth ho css thah ih thc ôrth-oI thc cxtcht to vhich thc
mohctarist couhtcrrcvoutioh oIthc cary l980s has backIircd, crcat-
ihg cohditiohs morcIavorabc thahcvcr bcIorcIora hcv Bahduhgto
brihg ihto cxistchcc thc commohvcath oI civiizatiohs that bmith
chvisiohcd ohg ago.
!or ahcv Bahduhgcahdo vhat thcodcoudhot. itcahmobiizc
ahduscthcgobamarkctas ahihstrumchtoIcquaizatiohoIbouth-
ôrth povcr rcatiohs. !hc Iouhdatiohs oI thc od Bahduhg vcrc
8 H. Timmons, "Asia Finding Rich Partner in Mideast," New York Times,
December 1, 2006.
9 A. Giridharadas, "Singh Urges Asian Self-Reliance," International Herald
Tribune, May 5, 2006.
|
I
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I
!
I
1
I
!
I
I
i
I
EPILOGUE
+
strictypoitica-idcoogica ahd, as such
vcrccasiydcstroycdbythc
mohctarist couhtcrrcvoutioh. !hc Iouhdatiohs oIthc Bahduhg that
may bc cmcrgihg hov, ih cohtrast, arc primariy ccohomic ahd, as
such, Iar morc soid. Ps \ashvaht bihha, a Iormcr Ihdiah Iorcigh
mii+istcrputitih a200Jspccch. Ìhthcpast,Ihdia'schgagcmchtvith
much oI Psia, ihcudihg Southcast ahd Last Psia, vas buit oh ah
idcaistic cohccptioh oI Psiah brothcrhood, bascd oh sharcd cxpcri-
chccsoIcoohiaismahdoIcuturatics. . . . !hcrhythmoIthcrcgioh
today is dctcrmihcd, hovcvcr, as much by tradc, ihvcstmcht ahd
productioh as by history ahd cuturc. '
10
Lhdcr thcsc circumstahccs, ôrthcrh rcsistahcc tothcsubvcrsioh
oIthc goba hicrarchy oI vcath ahd povcr cah ohy succccd vith
vidcsprcad bouthcrh coaboratioh. Crucia ih this rcspcct is vhat
Chiha ahd Ihdia-vhich by thcmscvcs accouht Ior morc thah ohc-
thirdoIthcvordpopuatiohvi choosc to do. Commchtihgihthc
International Herald Tribune oh hcvs oIhugc ihvcstmchts by Chiha
ahdIhdiaihcach othcr's ccohomics, ovard!rchch apty askcd. ÌI
ohcpaccsahystockihthchotiohoIcrcativcdcstructioh, vhatcoud
bc morc disruptivc to thc goba status quo`
ith morc thah 2.J biioh pcopc bctvcch thcm, agrccmcht
btvcch Ihdia ahd Chiha oh amost ahy stahdard makcs that
itcm ah ihstaht cohtchdcr Ior goba stahdard status. hat docs
this mcah ih practica tcrms !hat thc succcssor to a ubiquitous
product ikc îcrosoIt CIIicc coud vcry vc bc Chihcsc. . . . It
coud mcah that thc mobic phohc stahdards oI thc Iuturc arc
dccidcd joihty ih Psia, ahd hot ih Luropc or thc Lhitcd btatcs.
. . . hat it ccary mcahs arcady is that thc day vhch a cozy
cub oI thc rich-thc Uhitcd btatcs, thc strohgcst ccohomics oI
cstcrh Luropc ahd japah-scts thc pacc Ior thc rcst oI vord,
passihg outihstructiohsahdassighihg gradcs, is Iastdravihgto a
cosc.
1 1
\cs,itdocsmcahthatbutohcohditioh thatthc ruihggroupsoIthc
goba bouthih gchcra, ahd oIChihaahdIhdiaihparticuar,opchup
a path capabc oI cmahcipatihg hot j ust thcir hatiohs but thc chtirc
vordIromthc socia ahd ccoogica dcvastatiohs chtaicdihcstcrh
10 Quoted in A. Giridharadas, "India Starts Flexing Economic Muscle,"
International Herald Tribune, May 12, 2005.
11 H. W. French, "The Cross-Pollination of India and China," International
Herald Tribune, November 10, 2005.
capitaist dcvcopmcht. Ph ihhovatioh oI such vord-historica sig-
hiIicahccrcquircs somc avarchcss oIthcimpossibiityoIbrihgihgthc
bchcIits oI modcrhizatioh to thc maj ority oIthc vord's popuatioh
uhcss-to paraphrasc bugihara-thc cstcrh dcvcopmcnta path
cohvcrgcsviththcLastPsiahpath, hotthcothcr vay rouhd. !his is
ho hcv discovcry. Pmost cighty ycars ago, ih Lcccmbcr l928,
ôhahdas Cahdhi vrotc.
CodIorbidtharhdiashoudcvcrtakctoihdustriaizatiohaItcrthc
mahhcr oI thc cst. 1hc ccohomic impcriaism oI a sihgc tihy
isahd kihgdom Lhgahd| is today kccpihg thc vord m chaihs. I
chtirc hatiohoI300miiohhdia'spopuatiohatthctimc| took
to simiar ccohomic cxpoitatioh, it voud strip thc vord ikc
ocusts.'
Cahdhiarcadykhcvthch vhat mahycadcrsoIbouthcrhcmahcipa-
tioh havc yct to carh or havc Iorgottch. cstcrh succcss aohg thc
cxtrovcrtcd,hdustriaKcvoutiohpathvas bascd upohthccxcusioh
oI thc vast majority oI thc vord's popuatioh Irom acccss to thc
hatura ahd humah rcsourccs hccdcd to bchcIit rathcr thah bcar thc
costs oIgoba ihdustriaizatioh. Ps such, it hcvcr vas ah optioh Ior
that maj ority. Lvih's cohsidcratiohs cohccrhihg thc dcvcopmchta
advahtagcs ahd disadvahtagcs oIChiha's hugchatioha markctihthc
cightcchth cchtury dcmohstratc thc absurdity oI thc cohtrary vicv,
sti domihaht amohg historiahs ahd socia scichtists across thc
idcoogica spcctrum. !hc hugc sizc oI Chiha's markct crcatcd
opportuhitics Ior thc socia divisioh oI abor that vcrc hot avaiabc
ihsmacrmarkcts,butitasorucdoutihhovatiohsthatvcrcIcasibc
iha smacrccohomy.Bctvcchl7+lahdthccary l770s,Iorcxampc,
thcihtroductiohoImachihc-spihhihgtripcdBritaih'scohsumptiohoI
rav cottoh.
1o accompishthistripihgIorChihaih asimiarspaccoI thirty-
odd ycars voud havc bcch bcyohd thc cottoh-productioh rc-
sourccs oI thc chtirc cightcchth-cchtury vord. Bctvcch l78
ahd l833,thcsihgcprovihcc oIKvahg-tuhgimportcdoh avcragc
Irom hdia cach ycar sixtimcs as much cottoh a Britaih uscd
ahhuay at thc timc oI Prkvright's Iirst vatcr-Iramc. Pgaih, ah
cxpahsioh oI Chihcsc cxports oI cottoh coth comparabc to
12 Quoted in Ramachandra Guha, Environmentalism: A Global History (New
York, Longman, 2000) , p. 22.
EPILOGUE
cightcchth-cchturyBritaih'sbothihits spccdahdihitsrcativcsizc
tothcdomcsticmarkctvoudhavcbcchtoogrcatIorthcavaiabc
purchasihg povcr oI thc vord at that timc.'`
387
!hc ccohomic succcss oI Britaih's hdustria Kcvoutioh, ih othcr
vords, vas dcpchdcht both oh thc rcativc ahd absoutc sma sizc
oI thc British ccohomy. P sma absoutc sizc mcaht that a givch
ihcrcasc ih thc import oI rav cottoh ahd ih thc cxport oI cottoh
mahuIacturcs trahsatcd ihto a much highcr ratc oI grovth oI thc
ccohomy thah it voud havc ih ah ccohomy oI Chiha's sizc. Phd a
sma sizc rcativc to thc goba ccohomy mcaht that thc rcst oI thc
vord coud suppy thc hatura rcsourccs ahd purchasc thc products
hcccssary to sustaih a high ratc oI grovth to ah cxtcht that vas
ihcohccivabc Ior Chiha. ad thc rucrs oI Qihg Chiha bcch so
ihsahc as to Ioov ih thc Iootstcps oI Britaih's cxtrovcrtcd h-
dustria Kcvoutioh path, thcy voud havc bcch brought back to
thcir schscs by cscaatihg import priccs, coapsihg cxport priccs,
ahd uhbcarabc socia tchsiohs at homc, ohg bcIorc thcy had a
chahcc to `strip thc vord ikc ocusts. '
!vo huhdrcd ycars atcr Chiha ahd hdia Iacc thc samc probcm
vith a vchgcahcc. !hc dispaccmcht oI thc tihy LK isahd by thc
cohtihchta Lb isahd as thc cadcroIthchdustriaKcvoutioh path
has rcsutcd ih a Iurthcr massivc ihcrcasc ih thc hatura-rcsourcc
ihtchsity, hot j ust oI productioh, but oI cohsumptioh as vc . !his
massivc ihcrcasc vas possibc bccausc thc vast majority oI vord
popuatioh vas cxcudcd Irom thc productioh ahd cohsumptioh
stahdards cstabishcd by thc Lhitcd btatcs. But as sooh as a sma
mihority oI thc Chihcsc popuatioh ,ahd ah cvch smacr ohc oIthc
hdiah popuatioh) gaihcd partia acccss to thosc stahdards, thc
vaidity oI Cahdhi's cohtchtioh has bccomc obvious to a but thc
most obtusc dcIchdcrs oIthc Pmcricah vay oIiIc. `!hc vord, as
it turhs out, cahhot aIIord tvo couhtrics vith a argc popuatioh
bchavihg ikc thc Lhitcd btatcs. t acks thc atmosphcrc . . . ahd it
aso may ack thc rcsourccs. ' Bi ^cKibbch cas this a `tragcdy'
bccausc
Chiha is actuay accompishihg somc mcasurabc good vith its
grovth.copcarcch|oyihgsomcmcat,schdihgthcir chidrch| to
schoo, hcatihg thcir huts. hcrcas vc'rc burhihg hihc timcs as
13 Mank Elvin, The Pattern of the Chinese Past (Stanford, CA, Stanford
University Press, 1973), pp. 313-14.
muchchcrgypcr capitasothatvc cah. air-cohditioh gamc rooms
ahd mov haI-acrc ots,drivc SUVs ohcvcrycrrahd, cat tomatocs
Iovhih Irom Chic. . . . hichisvhyit sccmsihtuitivcyobvious
vhchyou'rcih Chihathatthcgoa oIthctvchty-Iirstcchturymust
somchov bc to simutahcousy dcvcop thc ccohomics oI thc
poorcst parts oI thc vord ahd undevelop thosc oI thc rich . . .
vithus usihgcss chcrgysothatthcy cahusc morc, ahdcatihgcss
mcatsothatthcycahcatmorc . . . . Buttrytoimagihcthcpoitica
possibiiticsihPmcrica. . . oIackhovcdgihgthatthcrcish'troom
Ior tvo oI us to bchavc ih this vay, ahd that vc doh't ovh thc
rights to ouriIcstycsimpy bccauscvcgotthcrcIirst. 1hc currcht
prcsidcht's Iathcr CcorgcBush Schior| ahhouhccd, oh his vay to
thc parcy ih Kio that gavc risc to thc Kyoto trcaty, that `thc
Pmcricah vay oI iIc is hot up Ior hcgotiatioh.' 1hat's vhat
dcIihcs a tragcdy.'
Ps it turhs out, thc atcst act oIthc tragcdy, paycd out ih raq, has
shovh that thc Lhitcd btatcs docs hot havc thc povcr to imposc
cocrcivcy upohthcvordits rightto ah cxtravagaht vay oIiIcahd
must thcrcIorc pay ah ihcrcasihg pricc Ior thc prcscrvatioh oI that
right. '` But thc Iact rcmaihs that hot cvch a quartcr oI Chiha's ahd
hdia's popuatioh cah adopt thc Pmcricah vay oI producihg ahd
cohsumihgvithoutchokihgthcmscvcs ahdcvcrybodycscto dcath.
Pso ih this rcspcct, thc KC's hcv cadcrship has shovh grcatcr
avarchcss thah its prcdcccssors oI thc chvirohmchta probcms oI
chcrgy-ihtchsivc ccohomic grovth. `ôdc citics' Iocusihg spcciIi-
cay oh chvirohmchta protcctioh havc bcch cstabishcd, Iorcsts arc
rcpahtcd, thc !ivc \car ah Ior 2006-l0 has sct thc ambitious
ob cctivc oI a 20 pcrccht rcductioh ih thc chcrgy ihtchsity oI thc
ccohomy ahd, to this chd, a Iar-rcachihg ihdustria poicy, bahhihg
J99 ihdustria sub-scctors ahd rcstrictihg ahothcr l90 has bcch
ahhouhccd. t hohcthccss rcmaihs uhccar hov thcsc ahd othcr
mcasurcs cah rcstorc a scriousy compromiscd ccoogica baahcc
iI, ascxpcctcd, ovcrthchcxtIiItcchycars J00 miiohrurarcsidchts
14 Bill McKibben, "The Great Leap: Scenes from China's Industrial Revolu
tion," Harper's Magazine (December 2005) , p. 52.
15 In avidly supporting the war against Iraq, newspaper baron Rupert Murdoch
observed that a reduction of the price of oil from $30 to $20 a barrel would have been a
good thing for the US economy: D. Kirkpatrick, "Mr. Murdoch's War," New York
Times, April 7, 2003. The fact that four years into the war the price of oil has instead
doubled provides a good measure of the failure of the US attempt to coercively impose
its right to extravagant energy consumption.
EPILOGUE 389
or morc vi movc ihto citics vhcrc grovihgIccts oImotor vcIiccs
d b I
1b
arc crov hg icyccs out.
h short, by rcyihgtoo hcaviy oh thc chcrgy-cohsumihgcstcrh
path, Chiha's rapidccohomicgrovthhashotyctopchcdup Ior itscI
ahd thc vord ah ccoogicay sustaihabc dcvcopmchta path. !his
rciahcc docs hot ust thrcatch to brihg thc `ccohomic miracc' to a
prcmaturc chd, bccausc oI prcssurc oh scarcc rcsourccs ,ihcudihg
ccahairahdvatcr) . ôrcimportaht,itisbotharcsutahdacauscoI
thc vidchihg ccavagc bctvcch thoscvho havc bcch ih a positioh to
appropriatcthc bchcIits oIrapidccohomicgrovth ahd thosc vho had
to bcar its costs. Ps vc havc scch ih Chaptcr l2, this ccavagc has
rcsutcd ih a maor vavc oI popuar uhrcst, ih vhich ccoogica
gricvahccs oomcd argc ahd vhich haspromptcd a maor rcorichta-
tioh oI Chihcsc poicics tovards a morc baahccd dcvcopmcht
bctvcchrura ahd urbah arcas, bctvcch rcgiohs, ahdbctvcch ccoh-
omy ahd socicty. P vc hccd to add to brihg our study to a cosc is
that thc cvchtua outcomc oIthis rcorichtatioh is oI crucia impor-
tahccIorthcIuturchot ustoIChihcsc socictybutoIvord socicty as
vc.
Ithcrcorichtatiohsuccccdsihrcvivihgahdcohsoidatihg Chiha's
traditiohs oIscI-cchtcrcd markct-bascddcvcopmcht, accumuatioh
without disposscssioh, mobiizatioh oI humah rathcr thah hoh-hu-
mah rcsourccs, ahdgovcrhmchtthrough mass participatioh ih shap-
ihg poicics, thch thc chahccs arc that Chiha vi bc ih a positioh to
cohtributc dccisivcy to thc cmcrgchcc oI a commohvcath oI civi-
izatiohs truy rcspcctIu oIcutura diIIcrchccs. But, iIthc rcorichta-
tioh Iais, Chiha may vc turh ihto a hcv cpicchtcr oI socia ahd
poitica chaosthatviIaciitatcôrthcrhattcmptsto rc-cstabisha
crumbihg goba domihahcc or, to paraphrasc ohcc agaih bchump-
ctcr, hcp humahity burh up ih thc horrors ,or gorics) oI thc
cscaatihgviochccthat has accompahicd thc iquidatioh oIthc Cod
ar vord ordcr.
16 Lester R. Brown, "A New World Order," Guardian, January 25, 2006;
Quarterly Update, World Bank Office, Beijing, February 2006, pp. 13-16; K.
Bradsher, "China Set to Act on Fuel Economy," New York Times, November 18,
2003; J. Kynge, "New Agenda for a New Generation," Financial Times, December 16,
2003; A. Lorenz, "China's Environmental Suicide: A Government Minister Speaks,"
openDemocracy, April S, 2005.
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INDEX
Abdullah, King of Jordan 188
Abe, Prime Minister Shinzo 294
Abu- Lughod, Janet 320, 323
accumulation
by dispossession 222-6, 364-6
primitive 85-6, 224, 365
systemic cycles of 231, 235, 236-46
see also development
Acheson, Secretary of State Dean 176, 177
Adas, Michael 3-4, 58
adminstrations, presidential see US
Afghanistan see US; USSR
Africa 147, 207, 365
Agarwala, Ramgopal 355, 359, 370-1, 376
Aglietta, Michel 19
Agnew, John 247
Aguilar, Alonso 242
Akamatsu, Kaname 36
Akira, Hayami 33
Albright, Secretary of State Madeline 1 80,
258-9, 261
Amery, Leo 297
Amin, Samir 16, 376
Amsden, Alice 132
Anderson, Perry 58
Angell, Norman 296-7
Angola 179
APEC 204, 205, 207, 301
Arendt, Hannah 220-21, 224, 228-30, 233,
235, 264
Argentina 207, 382, 383
armament industries see Industrial
Revolution
Armstrong, Philip 126
Arrighi, Giovanni 6-7, 74, 88, 91, 94, 118,
125, 130, 132, 134-5, 138, 142, 144,
145, 147, 150, 153, 156, 161-5, 194,
211, 231, 233-41, 245, 248, 319-21, 346
Arroyo, President of Philippines 383
ASEAN 301-2
Asia 5, 9-10, 384
See also East Asia; West Asia
Asia-Pacific Economic Cooperation see
APEC
Asian Development Bank 383
Atwell, William 325, 326
Au Loong-yu 357, 358, 369
Australia! Australasia 85, 139, 244, 286,
299, 301-2
Austria 269
Bacevich, Andrew 183, 1 84
Bagchi, Amiya 137, 245, 339
Baker, Christopher 349
Balzac, Honore de 191, 193
Bank of International Settlement 230
Barbour, Violet 238
Barraclough, Geoffrey 1, 136
Barrat-Brown, Michael 101, 242, 245
Barrow, Clyde 247
Bartlett, Beatrice 327
Beard, Charles 247
Becattini, Giacomo 170
Beijing Consensus 14, 379
Belgium 269
belles epoques 101, 1 17, 118, 141, 146, 151,
161-5, 178, 194, 232, 233, 246
Benjamin, David 260
Bergesen, Albert 136
Bernanke, Ben S. 283-4
Bernstein, Richard 372
Bernstein, Thomas 364
bin Laden, Osama 177, 181, 257, 262
Bismark, Otto von 285-6
Blackburn, Robin 167
Block, Fred 153
Bond, Brian 137
Boot, Max 283-4, 305
Bouckaert, Boudewijn 363
Boxer, Charles R. 164, 240
Bramall, Chris 370
Braudel, Fernand 92-4, 95, 230, 238, 239-40,
332
Braverman, Harry 20
Brazil 107, 128, 207-8, 382
Brenner, Robert 22-4, 28-9, 39, 69, 72, 77,
91, 101-20, 121-35, 138-42, 148, 152,
154, 156, 159-61, 164-6
Bretton Woods regime 134, 155, 192, 258
Brewer, Benjamin D. 88, 132
Britain 43, 84-6, 91-3, 99-101, 1 17-20, 123,
165, 185, 191-2, 225, 234, 240-8, 269-
71, 285, 296, 298, 312-13, 338-41, 386-7
dependence on empire 136-38, 193
and financialization of economy 142-3
Treasury 354
see also capitalism; capitalist
development; Europe; hegemony;
industrial revolution; interstate
system.
Brooks, Timothy 326
Brown, Lester R. 389
Brzezinski, Zbigniew 309-10
Budd, Alan 148
Burawoy, Michael 20
Burkett, Paul 15, 363
Burley, Ann-Marie 152
Burma 316
Bush, President George H. W. see US, Bush
administration
Bush, President George W. see US, Bush
administration
Cabral, Amilcar 19
Cai, Fang 362, 64
Cain, P.]. 234
Cairn cross, A.K. 143
Calleo, David 159, 164, 253
Capital see Marx
capitalism
financial 85-6, 89-90, 93-4, 140-3, 157-8,
162-3, 222-5, 230-3
and imperialism 211-12, 229, 238-49
industrial 27, 139-40, 230
and militarism 265-74
ca pitalist development see development
Carroll, James 260
Carter, President James see US, Carter
administration
Castells, Manuel 145, 169
Castro, Fidel 19
Chan, Anita 360
Chandler, Alfred 91, 1 17, 157, 168
Chang, Wei-an 333, 337, 348
Chapman, Stanley 143
Chase-Dunn, Christopher 330
Chaudhuri, K. N. 92, 341
Chavez, Hugo 207
Chen, Hongmou 327, 328-9, 367
Chen, Ciyu 337
Cheney, Richard 177, 200, 265
Chevron 278
Chile 207, 286
China 125, 131-3, 219-220
1 8th century growth 3-4, 32-3
1990s economic advance 7-8, 14, 24, 27,
371-3
capacity for sustainable development 10,
385-9
and capitalism 24, 92, 330-6, 358-60
CCP 349, 352, 368, 369, 370, 373, 374
Chinese Communist Party see CCP
CNOOC 278, 280, 281, 282-3, 297
Cultural Revolution 368-9, 375
Deng Xiaoping 13, 15, 16, 17, 291-2, 351,
354, 361, 363, 367-70, 373
divergence with Western social history
92
education system 357-8
and the European Enlightenment 3-4
EPZ 356-7
Five Year Plans 305, 388
Five Hundred Years' Peace 314-16
foreign capital in 219, 303-4, 351-3, 355-6
growing influence relative to US 8, 195,
203- 10, 260-1, 301-2, 307, 310, 379
Han period 324, 327, 335
Household Responsibility System 361
Hu, Jintao 17, 207, 292, 294, 305, 369
income inequality 375-6
Jiang, Zemin 369
labor/workers 14, 351, 360-1, 366-7, 374,
377-8
Mao, Zedong 19, 357, 359, 360, 368, 370-
1, 372-4
market-based development in 25-6, 72,
321-36, 358-60
Marxism-Leninism, Chinese and Soviet
compared 373-4
and Marxist theory 17
Ming period 321, 322, 323, 325, 326, 330,
333, 334, 359
new socialist countryside 16-17
and opium trade 337-41
Opium Wars (19th Century) 4, 27, 77,
340-41, 342
overseas diaspora 322, 333-4, 347-50,
351-3
Peoples Republic of China see PRC
PRC 344, 346, 349, 350, 351, 352, 353,
373, 377, 388
purchaser of US Treasury bonds 382
Qing period 317, 324, 326-30, 333, 334,
335-6, 338, 341, 359, 387
R D spending 367
Sino-Japanese Wars 316, 342-3
INDEX 411
and socialism 15-17, 24
SOEs 356
South Africa, comparison with 364-5
Southern Song period 321, 322, 330-31
Tienanmen crackdown 13, 352
Townshi p and Village Enterprises see
TVEs
TVEs 362-5, 375
and War on Terror 261
and Washington Consensus 14, 354-5
Wen, Jiabao 292, 370
and WTO 277-8
Yangzi Delta development 28-31
Yuan period 322, 330-31
see also industrious revolution; interstate
system; Smith, Adam; Taiwan, US
China National Offshore Oil Company
(CNOOC) see China
Chinese Communist Party (CCP) see China
Chiu, Stephen W. K. 342, 352
Churchill, Winston 297
Clark, J .B. 40
Clarke, Richard 177
Clinton, President William see US, Clinton
administration
CNOOC see China
Cohen, Benjamin 306
Cohen, Jerome 153
commonwealth of civilization 10
Communist Manifesto 21, 23, 75, 77, 85, 90
Connally, John B. 200
containers of power 235
Corn Laws 242
Cornwallis, Governor General of India
Lord 339
corporations see multinationals
creative destruction 80-90, 217
Crimean War 269-70
Crotty, James 163
Cuba 18, 207
Cumings, Bruce 6, 36, 153, 175, 344, 346
Curtin, Philip 271
Cushman, Jennifer Wayne 335
Davenant, Charles 320
Davis, Mike 263, 271
Davis, Ralph 234, 240
de Cecco, Marcello 137-8, 157-8, 245
de Figueroa, Suarez 237
de Gaulle, Charles 127-8
Dehio, Ludwig 250-51 , 272
de la Court, Peter 239, 244, 273
DeLong, Brad 313
Deng Xiaoping see China
depressions 1 15-16
( 1873-1896) 99-100, 101, 103, 1 16, 118,
128, 230
(1930s) 118, 163, 176, 226
development
capital-intensive 35-6, 39
capitalist 68, 73-94, 215-49, 266-74
flying-geese pattern of 36
growth without 25, 39
labor-intensive 39
market-based 57-60, 66, 69, 72-7, 96, 266,
321-9
Marxian 41
Schum petarian 41
Smithian 74-5
of underdevelopment 21-2
uneven 102-3, 125, 152
de Vries, Jan 33, 69
Diderot, Denis 58
Dirlik, Arif 379-80
Dobbs, Lou 278
Doha meeting 199
dollar, the see US
Drucker, Peter 169
Duara, Prasenjit 349
Dulles, John Foster 153
Dunning, John H. 145
Duus, Peter 343
East Asia 7, 95, 107, 213, 260-1, 294, 310-2
crisis (1997-1998) 14, 381
economic resurgence of 1-2, 35-8, 73,
101, 149, 165, 178, 350
incorporation within European system
336-44
and US hegemony 344-50
and US markets 110, 147, 261
see also industrious revolution; interstate
systems
Ecuador 383
Edin, Maria 369
Edwardian belle epoque see belles epoques
Edwards, Richard 20
Egypt 269
Ehrenberg, Richard 237
Eichengreen, Barry 234
Elisonas, J urgis 325
Elliott, John E. 90
Elliott, ]. H. 237
Elliott, William Y. 144
Elvin, Mark 50, 321, 329-30, 386-7
em pire see imperialism
Engels, Frederick 21, 265, 336
see also Communist Manifesto
England see Britain
equilibrium traps see Adam Smith
Esherick, Joseph 338
Eurodollar market, growth of 156-7
Europe 244, 250, 256, 261, 266-74, 289-90
Eastern 125
Hundred Years' Peace 243
Western 5-7, 21, 24, 139, 148, 154, 385
See also interstate systems
European Union 208
Export Processing Zones (EPZ) see China,
EPZ
Fairbank, John K. 13, 96, 314, 342, 373-4
Fallon, Admiral William 288, 289
Federal Reserve 1 12, 141, 160
Feis, Herbert 343
Ferguson, Niall 137, 191, 193
Feuerwerker, Albert 337, 342
Fishman, Ted 208-9, 303-4, 352, 366, 367
Florence 92-3, 233
Flynn, Dennis 325, 336
Ford, President Gerald see US, Ford
administration
Foster, John Bellamy 16
France 91, 127-8, 165, 214, 242, 248, 269,
290, 296, 298, 341
Frank, Andre Gunder 21-3, 25, 26-30, 42,
69, 90-2, 138
Frank, Thomas 305-6
French, Howard 385
Friedman, Milton 42, 354
Friedman, Thomas 20, 74, 186-7, 196, 213-
14, 263
Fukasuku, Kichiro 351
G8 summit
Denver 195
Georgia 187
Galbraith, James K. 354-5
Gamble, Andrew 246
Gandhi, Mohandas 386, 387
Gao, Weinong 324
Gates, Defense Secretary Robert 182
Gaulle, Charles de see de Gaulle
General Motors 171, 303, 348, 353
Genoa 92-3, 235-8, 241, 345, 359
Germany 102-5, 109-12, 1 17, 123, 125, 131-
4, 139, 153-4, 201, 214, 246, 258, 260,
269, 285-6, 290, 296, 298, 309-11
Gernet, Jacques 316
Giddens, Anthony 137, 235
Gindin, Sam 175
Giraldez, Arturo 336, 325
globalization
of industrial capitalism 27
as seen by Marx and Engels 21, 74
Glyn, Andrew 126
gold-dollar standard 103-4, 119, 127, 133,
135, 257
gold standard 127-8
Goldstein, Joshua 247
Goldwater, Barry 221
Gordon, David 20
Graham, Lindsey 295
Gramsci, Antonio 77, 149-50, 164, 214
Great Divergence, the 4, 28-32, 37-8, 72, 73,
93, 95
Greenberg, Michael 339-40
Greenspan, Chairman of Federal Reserve
Alan 112-13, 148, 166
Grenada 179
Crundrisse see Marx
Guan, Luquan 322
Guangzhou Automotive 356
Guha, Ramachandra 386
Guha, Ranajit 150-1, 178
Gulf (first I raq) War ( 1991) 175, 180, 194,
258, 260
Guo, Yugui 358
Haakonssen, Knud 42, 66
Hal e, Lyric Hughes 307
Hall, Thomas 330
Halliday, Fred 1 85, 188
Hamashita, Takeshi 314-15, 341
Hamilton, Alexander 299
Hamilton, Gary G. 333, 337, 348
Hao, Yen-p'ing 340
Hardt, Michael 175-6, 234-5
Harrison, Bennett 145, 170
Harrison, John 126
Hart, Gillian 364-5
Hart-Landsberg, Martin 15, 363
Harvey, David 18-19, 21, 189-90, 211-30,
233, 354, 365
Hay, Secretary of State John 277-8
He, Qinglian 15
Headrick, Daniel 338
Hegel, G. W. F. 220
hegemony 150-210, 220
British 154, 162, 191, 228-9, 249, 384
crises of 150-51
definition of 149-51
domination without 150-1, 178, 209-10
Dutch 162, 164-5, 228-9
US 8-9, 135, 136, 138, 151-6, 161-162,
175, 178, 185-186, 1 89, 203, 209-210,
213-4, 227, 228-9, 249, 257, 344-50, 384
Heilbroner, Robert 42
Held, David 129
Henwood, Doug 278
Hersh, Seymour 189
Hirschman, Albert o. 63
Ho, Chi Minh 19
Ho, Chumei 334
INDEX 413
Hobbes, Thomas 63, 75, 220, 228, 264, 273,
324, 328
Hobsbawm, Eric J. 101, 124, 244, 253, 258
Hobson, John A. 211
Hofstadter, R. 221
Holbrooke, Richard 277
Holland 85-6, 164-5, 225, 234, 237-42, 244,
273-4, 294, 334-5
See also Smith, Adam, European nations;
hegemony
Honda 356
Hong Kong 2, 6-7, 298, 337, 347, 351-3
Hopkins, A. G. 234
Hopkins, Terence 74
Hu Jintao 5 China
Huang, Philip 24, 25, 29, 37, 39, 69, 72, 77,
327
Huang, Ray 325
Hugill, Peter J. 143
Hui, Po-keung 321-3, 333, 335, 338, 347
Hung, Ho-fung 3, 321, 323, 325, 327, 334,
369
Hurricane Katrina 262-3
Hussein, Saddam 179, 180, 257, 258
Hymer, Stephen 143
Ikeda, Satoshi 145, 314, 347
Ikenberry, John 175
IMF 192, 354, 381-3
imperialism 175, 211-12, 227
see also capitalism
India 10, 84-5, 136-8, 208, 234, 244-5, 267,
292, 294,309, 338-40, 354-5, 369, 385-7
US relations with 203, 286, 288, 381
Indonesia 294, 382
industrial revolution 27-8, 30-4, 37, 79, 90-
1, 95, 243-5, 272, 331, 386, 387
as by-product of armament race 268-72
second industrial revolution 1 17
industrialization of war 268-70
industrious revolution 32-4, 39, 41, 95
East Asian 33, 37, 39, 42, 72, 335, 366-8
European 39
Intel 353
interstate systems
East Asian and European compared 314-
21
incorporation of East Asia within
European system 336-44
Iran 135, 179, 188-9, 258
Iraq 179
see also US, Iraq War
Iriye, Akira 343
Irwan, Alex 347
Isert, Christopher 28-9
Israel 158, 187-9
Israel, Jonathan 241
Italian city-states 228, 266, 273
See also individual entries
Itoh, Makoto 126, 153, 158
Japan 1-2, 33, 96, 102-5, 109-12, 1 17, 131-4,
137, 148, 154, 195, 203, 208, 258, 260,
278-9, 283, 286, 288, 294-5, 298-300,
302-3, 309-1 1, 314-16, 341
Asian dominance 341-3
defeat ( 1945) 343-4
dependence on US 6-7
economic expansion (after Second
World War) 102, 344-50
industriaiization 34-5, 153, 341-2
and market-based developmental path 96
Meiji Restoration 342
occupation of North China 343
as occupied state postwar (1945) 4-5, 344
as part of First World 5
Russian War (1904-5) 343
Sino-Japanese wars see China
strength of yen (1995) 1 1 1 , 201
Tokugawa period ( 1600-1868) 316-17
Voluntary Export Restrictions 257, 348
and US economy 109, 112
see also East Asia; US
Johnson, Chalmers 1 82, 190, 203, 258
Johnson, Linda Cooke 337
Johnson, President Lyndon see US,
Johnson administration
Johnson, Russell 265
Judt, Tony 167
Kampuchea 179, 314
Kaplan, Robert 284-90, 294, 295, 296, 313,
380
Kasaba, Resat 337
Kautsky, Karl 227
Kawakatsu, Heita 316, 341
Kennan, George 153
Kennedy, Paul 213, 214, 234, 242, 246, 248,
270, 320
Keynesian economics in US see US
Keynesianism, military 266-8
Kissinger, Henry 242, 284, 289-91, 296, 307,
380
Klare, Michael 282, 289
Knight, Frank 42
Koizumi, Prime Minister Junichiro 294,
299
Kojima, K. 36
Korea 177, 253, 314-16, 334, 343
North 125, 204
South 2, 6-7, 128, 203, 205, 208, 283, 286,
294, 309, 344
Kosovo War 181, 185, 258
Krasner, Stephen 5
Kriedte, Peter 237
Krippener, Greta 140-41
Krugman, Paul 13-14, 169, 172, 182, 1 97,
204-5, 221, 278-9, 305
Kuala Lampur Summit (2005) 301
Kuwait 258
K wong, Peter 354
Kynge, James 360
Labor
and capitalist crises 121-30, 147-8, 154-5,
164
migration 121, 124, 129, 143
see also China; Marx, Karl; Smith,
Adam; US
Landes, David 99, 103, 148, 312
Lantos, Tom 300
Laos 314-15
Lardy, Nicholas R. 351
Latin America 207, 242, 244, 261, 304, 354
League of Nations 251
Lebanon 179, 189
Lectures on Jurisprudence 42
Lefebvre, Henri 215
Leibenstein, Harvey 70
Leibniz, Gottfried von 58
Lewis, Archibald 320
Li, Shih 375
Li, Yi 375
Libby, Lewis 204
Libya 179
Lin, Justin Y. 362
Lin, Manhong 340
Lin, Nan 362
Lin, Zexu 340
Lind, Michael 261, 298
Link, Perry 15
Liu, Binyan 15
Liu, Guoguang 17
Lo, J ung-pang 321
Locke, John 328
Lu, Xiaobo 364
Lula da Silva, Luis Inacio 207
Lynn, Barry 172
McCain, John 1 80
Macau 337, 351
McCormick, Thomas 153, 176, 248, 253
McElwee, William 270
McKibben, Bill 387
Mackie, Jamie 349
Mackinder, Halford 142-3, 214
McNamara, Robert 155
McNeill, William 243-5, 266-73, 320, 323,
329
Madrid donors conference 186, 260
Magdoff, Harry 16
Mahbuhani, Kishore 294
Malaysia 2
Malthus, Thomas 29, 32, 48, 70-71
Mamdani, Mahmood 179, 257
Mankiw, Greg 205
Mann, Michael 177, 183
Mann, Susan 328
Mao Zedong see China
Marks, Robert 271
Marshall, Alfred 42, 170
Marshall Plan 153, 176
Marx, Karl 2, 8, 1 8-21, 23, 25, 26, 40-41, 45,
58, 72, 73-7, 216, 224-6, 233, 265-7,
336-8, 341
capitalist crises 80-7, 115, 165-6
capitalist development 68-73, 83-7, 91,
358
concentration/centralization of capital
83-4, 169
division of labour 50-52, 78-9
form ula of commodity exchange
(CMC') 74-5
general formula of capital (MCM') 75,
230-31
implicit theory of national development
73-5
and national debt 85-6
and Schumpter 87-90
Smith, theories compared to 73-87, 159,
266
surplus population 84
see also Communist Manifesto
Marxism
crisis of identity in 18-19
Marxism-Leninism, China see China
neo-Smithian 17-24, 28, 29
and State Monopoly Capitalism 168-9
Mathias, Peter
Maurice of Nassau 267-8
Mayer, Arno 256
Meade, Edward S. 167
Mearsheimer, John 203, 204, 284, 309-313
Mellon, Andrew 381
Mexico 107, 286, 381
peso crisis (1994-1995) 111
Minchinton, W. E. 240
Moffitt, Michael 135
Monroe doctrine see US
Montesquieu, Baron 58, 328
Muller, Jerry 43
multinationals and corporations 17, 91,
1 17,143-5, 157-8, 168-71, 198-9, 350
Munro, Robin 377
INDEX 415
Munro, Ross 372
Muralidharan, Sukumar 188
Murdoch, Rupert 388
Myers, Ramon 26
Nakamura, Takafusa 153
Natham, Andrew 337
NATO 181, 185, 258, 286-7
Navigation Acts 65-6, 242
navigation, Chinese 321-2
Negri, Antonio 19, 175-6, 234-5
Nelson, Richard 70
New International Economic Order 6
New Zealand 286
Nicaragua 179
Nixon, President Richard see US, Nixon
administration
Nolan, Peter 370
Nye, Joseph 242
O'Brien, Patrick 30-32
O'Connor, James 152
Oi, Jean 362
Okimoto, Daniel L 347
O' Neill, Paul 200
Ong, Aiwa 350
OPEC 158
Operation Flight Suit 205
Operation Summer Pulse 04 281
Opium trade and Wars see China
Ottoman empire 244
Owen, D. E. 341
Ozawa, Terutomo 2, 36, 1 17, 345
P ACOM see US, Pacific Command
Palat, R. 321, 381
Panama 179
Panich, Leo 175
Parboni, Riccardo 135
Paris peace accords 253
Park, Albert 362, 363
Parker, J eoffrey 341
Parsons, Talcott 149
Pax Americana 152, 176, 345
Peace of Westphalia 237, 239, 241, 243
Peattie, Mark 343
Pei, Minxin 375
Peoples Republic of China see China, PRC
Perdue, Peter 314, 317, 327
petrodollars 158
Phelps Brown, E. H. 126
Philip I I 237
Philippines 288, 383
Philippines Summit (2007) 301-2
Pinkerton, James 284, 296-300, 304, 313,
380
Piore, Michael 145, 169, 170
Plaza Accord 107, 109-110, 112, 156, 161,
see also reverse Plaza Accord
Polanyi, Karl 43, 222, 242-3, 315, 318-19
Pomeranz, Kenneth 4, 8, 25-8, 30, 33, 69,
328, 33
Popov, Vladimir 14
Portes, Alejandro 145, 169
Portes, Richard 234
Portugal 237, 320, 359
Powell doctrine 180, 184
Powell, Secretary of State Colin 1 82, 187,
259-60, 281
PRC see China, PRC
presidents of US see US
Prestowitz, Clyde 280, 353
product cycle model 129, 142
Project for a New American Century 7, 8,
9, 165, 176, 177, 209, 213, 216, 226, 261
protection, double meaning of 254-6
Qian, Yingyi 369
Quesnay, Francois 3-4, 58
railways, importance to global economy
244
Ramo, Joshua Cooper 14, 379-80
Rapkin, David 247
Rawski, Thomas 13-14, 359, 376
Reagan, President Ronald see US; US,
Reagan administration
Reich, Michael 20
reverse Plaza Accord 111, 1 12, 1 13, 156, 161
revolt against the West 1, 136
Rice, Secretary of State Condoleezza 281
Riskin, Carl 375
Rogoff, Kenneth S. 193
Rohlen, Thomas P. 347
Roosevelt, President Franklin D. see US,
Roosevelt administration
Roosevelt, President Theodore see US,
Roosevelt administration
Rosenberg, Nathan 52-4, 60
Rove, Karl 262
Rousseau, Jean Jacques 58
Rowe, William 92, 327, 328, 329
Rozman, Gilbert 1
Rubin, Treasury Secretary Robert 111
Rumsfeld, US Secretary Donald 177, 179,
196-7, 293
Russia 14, 125, 203, 214, 261 , 269-71, 286,
290, 309, 382
See also USSR
Sable, Charles 145, 169, 170
Salisbury, Prime Minister Lord 136
SALT 272-3
Saudi Arabia 258, 260, 383
Saul, S. B. 99, 101
Schama, Simon 263
Schell, O. 342
Schlesinger, Arthur Jr. 177
Schoenberg, Ronald 136
Schumer, Charles 295
Schumpeter, Joseph 7, 8, 40-41, 50, 68, 71,
73, 80, 87-90, 142, 217-18, 271
Schurmann, Franz 151, 152, 176, 251-2,
342, 345
Segal, Adam 198
Selden, Mark 321, 346, 360, 369, 374
Semmel, Bernard 341
Shaikh, Anwar 140-41
Shambaugh, David 208
Shenkar, Oded 356, 358
Shiba, Y oshinobo 322
Silver, Beverly J. 88, 94, 118, 123, 125, 127,
128-30, 132, 144, 145, 150, 153, 164-5,
194, 231 , 234-5, 248, 378
Simon, Steven 260
Singapore 2, 286, 347
Singh, Prime Minister Manmohan 384
Sinha, Yashwant 385
Sino-Japanese War ( 1894) see China
Skinner, W. G. 326
Sklar, Martin J. 1 17, 167
Smith, Adam 2-3, 8, 25-6, 27, 29, 31, 40-2
and accumulation of capital 45, 80-81
advice to legislators 43, 62, 65, 166
on agricultural workers 61-2
on art of war 66-8
on big business 55-6, 169-71
on China 4, 25-6, 49, 57-9, 62, 68, 69-70,
75, 321, 329, 331
and Chinese economic reforms 358-61,
367-8
on competition 46-7
division of labour 50-5, 66, 80, 367-8
economic development 23, 49-50, 57-60,
66, 69, 70, 73-7, 80, 166, 358
and equilibrium traps 25, 31, 50, 70-72,
85
on European nations 25-6, 49, 57, 59, 62,
66, 68, 69-70, 75
on foreign trade and investment 58-60,
62-5
and free trade 44
on landowners 47, 63-4
on markets as instrument of government
42-4, 328
Marx, theories compared to 73-87, 159,
266
and national interest 47, 65-7
and Navigation Act(1651) 65-6
on North American colonies 48-9
on political economy 42-3
on power and wealth 63-8, 273
on profit making 47-8, 61, 167
Smithian growth 25, 29-31, 39, 41, 69
urban and rural conditions 60-2
on wages and wage earners 47-8, 61
see also Marxism, neo-Smithian
Smith, Neil 102
Smithsonian Agreement (1971) 104
Snow, Treasury Secretary John 199-200,
293
Snowcroft, Brent 183
So, Alvin Y. 337, 342, 352
Somalia 1 80
Soras, George 184, 209
South Africa 128, 208, 364-5
South, global, see Third World
South Korea, see Korea
Soviet bloc see USSR
Spain 237, 269, 298
spatial fix 215-22, 225-6, 233-4
state owned enterprises (SOE) see China,
SOE
Stavorinus, Johan 240
Stedman Jones, Gareth 247
Stiglitz, Joseph 14, 353, 355, 376
Stinchcombe, Arthur 255
Stopford, John 145
Strange, Susan 158
Strategic Arms Limitation Treaty see SALT
Sugihara, Kaoru 32-7, 39, 42, 72-3, 95, 315-
16, 331, 335, 345, 366, 386
Summers, Lawrence 201-2
Suskind, Ron 177
Sweezy, Paul 82
Switzerland 91
Sylos-Labini, Paolo 5, 6, 46
Taiwan 2, 203, 281-3, 288, 298-301, 334,
343, 344, 347, 351-2, 364
Tang, J un 360
Taylor, Frederick W. 267
Taylor, Peter 239
Thailand 2, 286, 314
Thatcher, Prime Minister Margaret 354
Reagan-Thatcher economics 107, 108,
130, 133
Theory of Moral Sentiments 42
Therborn, Gbran 124
Third World 5-6, 134-9, 147, 155, 178-9,
191, 207-8, 257, 271, 379-85
Thornton, Edward 339
T'ien Hung-mao 300
Tilly, Charles 254-5, 259

Tomlinson, B. R. 136, 245

Tong, W. James 325
Toshiba 355-6
Township and Village Enterprises see
China, TVEs
Toynbee, Polly 264
Toyota 356
Trebilcock, Clive 270
Tranti, Mario 18, 20-1, 26, 169
INDEX
Truman, President Harry see US, Truman
administration
Tsai, Jung-fang 338
Tsai, Kellee S. 362
Tsiang, Ting-fu 342
Turkey 269, 286
United Arab Emirates 258
UN 1 85, 251, 256, 257-8
Security Council 1 80, 186, 260, 294
Unger, Jonathan 362
United Nations see UN
United States of America see US
Unocal 278, 281, 282-3
Urquhart, Brian 262
US 86-7, 91, 93, 95, 131, 219, 221, 242, 246-9
9/11 see September 1 1
administrations, presidential
Bush (George H. W.) 180, 257-8, 259,
285, 388
BlJsh (George W. ) 7, 161-2, 176, 177, 181-
3, 187, 189, 190, 191, 195, 196, 199,
202-3, 204, 205, 207, 213, 214, 221,
228, 256, 261-5, 279, 283, 284, 286,
292, 294, 376
Carter 110, 138, 201
Clinton 111, 1 16, 1 80, 185, 190, 195, 200,
204, 233, 258, 278
Ford 1 10, 285
Johnson 104
Nixon 104, 1 10, 127, 145, 183, 200, 204,
285, 287
Reagan 107, 108, 109, 110, 1 16, 138, 179,
200, 201, 233, 257, 280, 354
Roosevelt (Franklin D. ) 151-2, 251-2,
253-4, 256
Roosevelt (Theodore) 299
Truman 152, 155, 176-7, 252, 253-4, 256
Afghanistan War 135, 147, 179, 181, 182,
196, 285
ban on oil to Japan (1941) 35
belle epoque see belles epoques
CEO incomes 167
China 192, 204, 214, 261, 278-9, 291, 307-
8, 373
conflict with over Asian dominance
309-310, 346
417
containment/engagement, strategies of
203-5, 280-308, 309-13
lack of strategy for 302-3, 380
Civil War 298
Cold War policies 155-6
current account deficit 145-7, 164, 191,
226
as debtor nation 163, 191, 194, 195-7,
304-5
dependence on West Asian oil 184
dollar
devaluation 104, 134, 158, 198-202
as international currency 200-2, 384
economic expansion (1950s and 1960s)
102-3, 105, 126, 133, 253
economic revival (1990s) 164, 166
and financialization of economy 140-1
fined by WTO 190
and global South 9, 147, 155, 164, 178-9,
191, 379-85
hegemony see hegemony
India, relations with 203, 286, 288, 381
and Iranian Revolution 135
Iraq War 9, 178, 182-4, 187-90, 196-7,
198, 212, 258, 280, 285-6, 384
as (in) dispensable nation 258-61
Keynesian economics in 108, 109, 147,
152, 153
labor 18-20, 123, 125-7, 147-8, 164, 172
and Mexican economic crisis 111, 147
military
armaments race 271-2
bases 5
credibility of 209, 257
monetarist policies 135, 138, 159, 163,
166
multinationals and corporations 17, 91,
1 17. 143-5, 157-8, 169, 171, 198-9, 303-
4, see also individual entries
New Deal 151-2, 252
Omnibus Trade and Competition Act
( 1988) 110
Pacific Command 285-7, 288, 296, 300
Reagan-Thatcher economics 107, 108,
130, 133
September 11 (2001) 7, 176, 177, 181,
196, 203, 221, 262, 279
sino-phobia 295
Structural Impediments Act ( 1989) 110
Treasury 354, 355
Vietnam syndrome 178-85, 279
and Vietnam War 5, 9, 18, 127, 133, 134,
135, 138, 147, 155, 158, 178-9, 1 80,
183-5, 212, 253, 257, 346, 372
Wall Street crash (2000-2001) 196, 200
warfare-welfare state 152
War on Terror 181-2, 197, 204, 261-2
and world market/economy 143-5, 198-
203, 208
USSR 35-6, 95, 125, 133, 146-7, 152-3, 202,
248-9, 257, 261, 271-3, 287, 289-90, 354
collapse of 6, 175, 178, 179, 180, 194,
224-5
economic performance 13-14
invasion of Afghanistan 135, 179
see also Russia
Vandenberg, Arthur 176
Veblen, Thorstein 99, 1 10
Veneroso, Frank 381
Venezuela 207, 383
Venice 85-7, 92-3, 233, 236
Vernon, Raymond 129
Versluysen, Engene L. 157
Vietnam 18, 125, 203, 292, 294, 309, 314-6
Vietnam War see US
Voltaire 3, 58
Wade, Robert 149, 354, 381
Wakeman, Frederic 325
Walder, Andrew 362, 375
Waldinger, Roger 129
Waley, Arthur 340
Wal-Mart 171-2, 303, 348
Wall, David 351
Wallerstein, Immanuel 74
Walter, Andrew 157
Wang, Gungwu 323, 333
Wang, Hui 368, 373, 375-6
Wang, Juan 362, 364
Wang, Yeh-chien 327
Washbrook, David 137, 245
Washington Consensus 14, 43
Wealth of Nations, The 3, 5, 23, 26, 42, 50,
51, 67, 76, 367
Weber, Max 57, 94
Wei, Yehua D. 376
Wei, Yuan 342
Wen, Jiabao see China
Wen, Tiejun 16
Werhane, Patricia 42-3
West, E. G. 52
West Asia 187-9, 213,260, 283-4
Westphalia, Peace of see Peace of
Westphalia
Whiting, Susan H. 362
Wilkins, Mira 143
Will, Pierre-Etienne 328
Wills, John E. 325, 333-4
Winch, Donald 42-44, 48
Wolf, Martin 2, 197-198, 201
Wolfowitz, Paul 177, 180, 203, 204
Wong, R. Bin 24-30, 33, 69, 318, 328, 332,
333
Wong, Siu-lun 349
Woo, Wing Thye 363
Woodrow Wilson Foundation 144
World Bank 155, 354, 355, 370, 383
world economy 130-1
postwar boom (1950s 1960s) 102-3, 154
long downturn ( 1970s 1980s) 105-112,
154
revival (1990s) 112-114
long downturns compared 116-20
profitability crisis 103-8
see also depressions
World Trade Organization see WTO
Wright, Elisabeth 15
W right, Steve 19
Wrigley, E. Anthony 27, 28
WTO 119, 190, 208, 277
Wu, Chun-hsi 349
Wu, Ximing 375
Wu, Yuan-Ii 349
Yang, Lien-sheng 322
Yao, Yang 362-4
Yom Kippur War 158
Zhang, Binchuan 323
Zhao, Yaohui 362, 364
Zhao, Renwei 375
Zheng, Biijan 291
Zheng, Chenggong 334
Zheng family, rise and fall of 334-5
Zheng, He 320, 323-324
Zheng, J ing 334
Zheng, Zhilong 334
Zinni, General Anthony 1 80, 182
Zoellick, Deputy Secretary of State Robert
292-3
Zolberg, Aristide 125

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1^ S^1l

GIOV ANNI ARRIGHI

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ADAM SMITH IN BEIJING

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