New Political Economy, Vol. 7, No.

1, 2002

Globalisation Makes of States What

States Make of It: Between Agency
and Structure in the State/Globalisation
Debate
JOHN M. HOBSON & M. RAMESH
Across the social sciences the last decade has witnessed a proliferating interest
in the relationship between the state and globalisation . By the early 1990s a
range of writers working within what we label a structuralist approach asserted
that globalisatio n is, if not challenging the viability of the sovereign state, then
at least forcing it to adapt its policies to conform to the new global reality
being hollowed out, as the phrase had it. The pendulum then swung the other
way when an agent-centric backlash emerged, insisting that states have what
we call agential power, such that they can mitigate and even shape global
structures. In this article we build upon an emergent third way, or structurationist perspective, between these two antinomies, in which we synthesise
structuralist and agent-centric theory. We begin in Part I by taking stock of the
central issues in the state/globalisatio n debate and examine the various structuralist and agent-centric approaches, while Part II sketches the theoretical
outlines of a structurationis t approach and conceptualises what we call the spatial
promiscuity of the state. In Part III we apply this approach to the case of
Singapore. We choose Singapore only because it provides an excellent litmus
test for critically appraising the various positions on globalisation , including our
own, not least because Singapore is a small state that has perhaps the most
globalise d economy in the world.
I. The state/globalisatio n debate
Much, though certainly not all, of the literature on globalisation is cast in terms
of two main propositions : either a strong globalisation /decline of the state or
weak globalisation /strong state thesis. Another way of categorising this is to
note that the former theorists essentially privilege (the global) structure as a
realm of necessity, while the latter privilege agency (states). The structuralist s
tend to highlight the overwhelming constraints imposed by the structure of
John M. Hobson & M. Ramesh, Government and International Relations, University of Sydney,
Merewether Building, NSW 2006, Australia.
ISSN 1356-346 7 print; ISSN 1469-9923 online/02/010005-1 8
DOI: 10.1080/1356346012011549 9

2002 Taylor & Francis Ltd

John M. Hobson & M. Ramesh

global capitalism and accordingly view states as weak, whereas their opponents
assert the continued vitality and centrality of the sovereign state-as-agent. It is,
of course, possible for structuralists to conceive globalisation in agent-centric
terms, as when they focus on the agency of multinationa l corporations (MNCs)
or other global non-state actors, and for agent-centrists (e.g. statists or neorealists) to privilege international structures.1 But whichever we designate as the
agent and the structure, the main point is that a pure agent-centric or a pure
structure-centric analysis is problematic and that only by synthesisin g these two
extremes can we progress to an adequate theory of the relationship between
states and globalisation .
The structuralis t approaches
Structuralist interpretation s of globalisatio n rest on the assumption that the
capitalist world economy forms a global structure which requires states to adapt
(i.e. conform) to its constraining logic. Beyond this, there are signi cant
differences among them with respect to the level of causal power they attribute
to the global structure. To capture the differences, we differentiate hard from soft
structuralism, which are located along a continuum (see Figure 1).
Structuralism

Global structure transcends the

sovereign state, rendering it
increasingly obsolete

Hard

Agent-centrism

Sovereignty allows states to

resist extra-territorial in uences

Global structure `hollows out

the state, but requires the
sovereign state for its own
reproduction
Soft
Globalisation is enabled by
the actions of states

FIGURE 1. Classifying theories of the state and globalisation.

At one extreme of the continuum lies the pure form of hard structuralism,
which conceives the relationship between the global capitalist economy and the
state in pure zero-sum terms, interpreting the spread of globalisation as being
accompanied by the growing obsolescenc e of the sovereign state.2 As Camilleri
and Falk typically argue, global processes and institution s are invading the
national state and [are] dismantling the conceptual and territorial boundaries
that have traditionally sustained the theory and practice of state sovereignty.3
They conclude that states have no choice but to delegate or transfer their
authority to international and supranational organisations.4
Soft structuralist s argue that, although states remain sovereign, they are,
however, being internationalised or hollowed out by the disciplinary power of
globalisation. 5 Putting on a golden straitjacket (Friedman)6i.e. the promotion
of neoliberal economic policiesleads to a situation in which states are dragged
into a race to the bottom as they adapt national political and economic life to
the global economy in order to secure the national economys survival. Simultaneously, this process unintentionall y but necessarily provides a conductive
6

Globalisatio n Makes of States What States Make of It

environment for the reproduction of globalisation . Thus it is often assumed that
global capitalism requires the existence of a system of sovereign states for its
reproduction. 7 However, despite this important difference, in both variants of the
structuralist thesis states are depicted as little more than Trager or passive
victims of the global structure. Because the global structure is conceptualised as
a realm of necessity to which states must adapt, states are accordingly denied
any global agential power (i.e. the ability of states to shape or even buck the
logic of the global structure).
The agent-centric approache s
Structuralism has recently been challenged by what we call agent-centrism. At
one end of the continuum lies the pure hard agent-centrist approach, which
constitutes the antithesis of the hard structuralist approach and reproduces its
pure zero-sum conception of power: globalisatio n remains weak to the extent
that the national sovereign state remains strong. Here the state is granted a
defensive agential power, such that it can resist the imperatives of globalisatio n
and conduct policy free of global structural constraint.8 Such writers view global
linkages as being too weak to transcend or even constrain states,9 leading some
to declare globalisatio n as a redundant concept.10 Most emphasise not only
continuing national diversity, but also that global actors remain embedded within
national states.11 Many such writers prefer the term internationalisation to
globalisation , because the former acknowledges the states central location in the
international system.12
By contrast, at the other extreme of the continuum lies the pure soft
agent-centrist position which grants the state global agential power actively to
promote globalisation . This position is the antithesis of the pure soft structuralist
approach: instead of regarding the state as a passive victim that must adapt to
global imperatives, soft agent-centrists claim that states are able intentionally to
promote a permissive environment within which global structures develop.13
Some theorists argue that the rise of MNCs, for example, is speci cally bound
up with the actions of states or the proactive policies of the US hegemon in its
economic decline phase.14
In sum, while these different positions generate important insights, no single
position fully captures the complex relationship between states and globalisation .
There are perhaps three major problems, which stem from the terms of reference
of the state/globalisation debate itself. First, the debate tends to promote a
zero-sum conception of power in which there is a trade-off between global
structures and states-as-agents . For structuralists , the global economy is allpowerful and transcends states (hard structuralism ) or requires them to adapt to
its imperatives (soft structuralism). For agent-centrists , either the global economy is weak and states are all-powerful (hard agent-centrism) or agential states
are primary and globalisatio n is derivative (soft agent-centrism). Second, the
parameters of the debate tend to promote sociologically reductionist analyses, in
that each position exaggerates the power of one over the other: states for
agent-centrists and global structures for structuralists . Third, the various positions reproduce a logic of spatial separationism , or what Ian Clark aptly calls the
7

John M. Hobson & M. Ramesh

Great Divide, such that there is little or no notion that the global, the national,
the regional and the domestic realms are entwined, and that they all have a
degree of autonomy.15 Thus in privileging the global, structuralist s necessarily
ignore the autonomous impact of domestic and national forces, while agent-centrists do not suf ciently enquire as to how the state is embedded in the global.
This is paradoxical given that many theorists of globalisation , usually structuralists, assume in the words of one prominent theorist that the central novelty of
globalisatio n as a concept lies in the fact that it de es traditional conceptions
of levels of analysis16 (where, traditionally, theorists assumed that the various
spatial realms could be wholly separated out and that one realm could be
ontologicall y privileged over the others).17
II. Beyond the state/globalisatio n divide
Ultimately both sides of the debate produce a lop-sided analysis of the relationship between states and globalisation . However, in recent years, a new third way
or structurationis t approach appears to be emerging, which is able to overcome
the restrictive parameters of the conventional state/globalisatio n debate.18 Our
argument seeks to build on this approach. To correct for the de ciencies of the
conventional state/globalisatio n debate we seek, rst, to develop a structurationist approach that enables us to go beyond the antinomies of agent-centrism
and structuralism by applying a collective both/and logic that transcends binary
either/or thinking and, second, to develop a theory of the state which accords
it agential power but also recognises that the state is embedded within, and
shaped by, domestic and global social forces/structures. This all comes together
in our concept of the state as spatially promiscuous.
Our structurationist approach begins with a simple observation, summarised
succinctly by Alexander Wendt: (1) human beings and their organizations [e.g.
the state] are purposeful actors whose actions help reproduce or transform the
[domestic and global] society in which they live; and (2) society [global/domestic] is made up of social relationships , which structure the interactions between
these purposeful actors.19 Thus global life embodies two truisms: that states
are purposeful agents that shape and determine the global system within which
they reside and, conversely, that the global system shapes states. In short, states
and globalisatio n are mutually re exive and are embedded in, or are co-constitutive of, each other. The adoption of a both/and collective-logi c approach
reconceptualise s global structures and agents (states) as doubled-edged . Here the
global structure represents not just a realm of constraint but also a realm of
opportunity . The global realm is simultaneousl y both a realm of constraint that
de nes parameters to which states must adapt and a resource pool into which
states-as-agents dip in order to enhance their power or interests either in the
external or internal realms. Accordingly, states are neither passive victims of
global structures nor purely autonomous agents. Of course, it is necessary to
brie y spell out what we mean by global structure.
Here we follow Jan Aart Scholtes useful de nition where he points out that
globalisatio n is akin to a process of deterritorialisation , or what he calls the
supraterritoria l relations between peoples.20 A full de nition of the global
8

Globalisatio n Makes of States What States Make of It

structure or global architecture would in our view necessarily require a lengthier
discussion (if not a whole article), not least because, rst, we would need to
specify the multiple faces of the global structureenvironmental, social, cultural, economic, military and political;21 and, second, if we look at each of the
global realms we will actually nd that they are rarely purely global, but are also
constituted by other spatial realms. Thus, for example, MNCs, which are often
assumed to be one of the main agents of global production, are not always purely
global, but are sometimes constituted in part by national forces.22 Nevertheless,
for the purposes of this article, we are interested in the economic face of the
global structure. Following Scholte, the global structure that we have in mind is
constituted by trans- or supra-territorial market, production, money and nance
relations that are not reducible to inter-national or inter-territorial relations.23
Our second theoretical objective here is to pay special attention to the state
and statesociety relationship. While mainstream International Relations (IR)
theoryneoliberal institutionalis m and especially neorealismhas, in Waltzs
terms, no theory of the state,24 it is vital that we correct for this de ciency if
we are to realise fully the requirements of our structurationis t approach. In
essence, we seek to occupy a middle ground between those theories that tend to
emphasise or privilege social forces over states (e.g. Marxism and liberalism)
and those that reify state power over social forces (e.g. statism and neorealism).
NeoMarxists are surely correct in insisting that states are fundamentally embedded in social forces, but, in our view, the concept of the relatively autonomous
state does not go quite far enough in revealing the agential power of the state.
Thus in the last instance states are in an ultimate sense beholden to ful lling
the requirements of the mode of production, even if they have to go against the
short-term interests of individual capitalists to achieve this.25 While some
statists, neorealists and neoliberal institutionalist s insist on granting the state
power, they err by neglecting to examine the partially autonomous impact of
domestic (and international /global) social forces upon the state.26 In effecting a
balance here, we seek to break the arti cial divides (global and subnational) that
such theorists have created so as to separate the state from social forces, and
instead seek to reveal how states-as-agents are socially embedded in a range of
non-state actors and social structures. In particular, in applying a both/and
logic, we suggest that social forces both enable and constrain states.
Rather than envisage a zero-sum game of power between states and non-state
actors/structures, we assert that states are nested or socially embedded within the
domestic and global realms. Thus when the state is deeply nested and cooperates
by making synergistic linkages with domestic, internationa l and global non-state
actors and institutions , the greater are the potential gains that accrue to all the
various parties.27 While the effect of entering into a nested or cooperative
relationship with global actors implies an acceptance of external constraints, as
structuralists argue, it is also symptomatic of a set of expanded opportunitie s that
ow from such a relationship . Nevertheless, this is not to rule out those
situations in which the state and non-state actors nd themselves at odds with
each other. Accordingly, the relationship between the two is best characterised
as one of competitive cooperation, rather than one of pure cooperation. In
short, states have re exive agential power, such that they can enhance their
9

John M. Hobson & M. Ramesh

power by working through or with, rather than against, social forces at the
domestic, regional and global levels. Ultimately, we insist that states and
statesociety complexes are autonomous variables, which shape as well as
sometimes mitigate the logic of global and international structures, not least by
entering into cooperative relations with other states and non-state actors. In this
sense, conceptualisin g the agential power of states is fundamental to our
structurationis t theory of the state. In sum, the main problem with the
traditiona l agent-centric and structuralist theories is that they necessarily force us
to pick a winner: either the state or the global structure. But if we adopt a
collective-sum rather than zero-sum approach, we can envisage the point that
states enhance their power through or with global (and domestic) forces.
Moreover, the game is not simply winwin, but can also be loselose. States
that do not adapt to prevailing social structures, global as well as domestic, tend
to come off worse. Thus the appearance of strength tends to mask an underlying
weaknessZaire is a case in point. In sum, though, states in general are both
constitutiv e in that they shape and help constitute the global realm, and adaptive
(and in a minority of cases maladaptiveNorth Korea is a case in point) in that
they endogenise global in uences by conforming or adapting to the structure
of the global economy. In this way, states play a major role in creating and
maintaining the global architecture.
Fundamental to our theory of the state is the notion that states are spatially
promiscuous. States reside within the vortex of the global, the regional and the
domestic spatial realms, and their unique socio-spatia l location enables them to
mitigate the logic of structures (global or domestic) and/or to adapt (i.e.
conform) to the requirements of such multi-spatial structures. The structuralist
literature errs by assuming that states are territorially xed and are, therefore,
fundamentally caught within a kind of territorial trap. It assumes that global
capital can exit the national territory and dictate terms to the state as a result
of its ability to out ank it. Such a position is problematic precisely because it
fails to recognise that states are spatially promiscuous. Thus while states cannot
physically move across territory, nevertheless they have the ability to dip into the
global realm to circumvent, or adapt to, constraints faced at the domestic,
regional or global levels. Moreover, they can sometimes also turn to the
domestic realm to escape global constraints. Put simply, it is the spatial scope
derived from its unique socio-spatial location within the vortex of the global and
domestic realms that confers such exit or out anking powers upon the state. The
point here is that the spatially promiscuous state enablesintentionall y and
unintentionally the convergence and integration of the global, regional, national and subnational realms.28 This is signi cant because it reveals that states
and the global structure are not mutually antagonisti c (as in the conventional
debate), but are co-constitutiv e and in fact promote the reproduction of each
other.
More speci cally, states have three exit and three adaptive options available
to them (Figure 2). States employ exit strategies when they seek to overcome or
mitigate structural constraints by playing off the different realms against each
other. That is, they are able to exit from the domestic realm when they face
certain constraints and draw upon the international or global realms in order to
10

Globalisatio n Makes of States What States Make of It

Exit Strategies

Adaptive Strategies

First exit strategy: the state dips into the

global realm to mitigate or overcome
domestic constraints

First adaptive strategy: the state

turns to the global realm to conform
to domestic structural constraints

Second exit strategy: the state reforms

the domestic realm to mitigate or
overcome global structural constraints

Second adaptive strategy: the state

reforms the domestic realm to
conform to global structural constraints

Third exit strategy: the state dips into

the global and international realms to
mitigate global structural constraints

Third adaptive strategy: the state

dips into the global realm to conform
to global structural constraints

FIGURE 2. The global strategies of the spatially promiscuous state.

lessen or overcome such constraints; or, when confronting global pressures, they
can sometimes exit and draw upon the domestic in order to lessen and
sometimes mitigate such constraints. Conversely, they employ adaptive strategies when trying to conform to structural constraints. Speci cally, states can dip
into the global or international realms in order to counter domestic challenges
and/or buck the logic of domestic structural constraints ( rst exit strategy), or
they can dip into the domestic realm to overcome or mitigate global challenges
(second exit strategy), or they can dip into the global or international realms to
mitigate global challenges (third exit strategy).
There are plenty of examples of states employing the rst exit strategy.
Contrary to the global structuralists claim that the rise of internationa l institutions is eroding national sovereignty, states often deliberately bind themselves to
international agreements to enhance their ability both to resist domestic demands
as well as push through measures not otherwise possible due to oppositio n from
powerful domestic groups. Thus acceding to the GATT and the WTO has
enabled states both to resist domestic demands by industrial groups for trade
protectionism and deepen the liberalisatio n process within their national societies. Invoking the necessity of globalisation argumentthere is no alternative, as Margaret Thatcher famously put itis a common ploy utilised by
governments.
There are various examples of the use of the second exit strategy in the area
of taxation. Thus, instead of slashing effective corporate income tax rates and
shifting the burden to consumers in order to prevent capital from exiting, as is
commonly believed to have widely occurred,29 OECD governments have actually tightened scal regulations on international rms and have managed to
increase the burden of corporation income tax.30
Taxes also offer examples of the use of the third exit strategy. European
Union members have not responded to their increased vulnerabilit y to capital
ight by loosening their regulations, as the structuralist s claim, but have instead
collectively agreed to implement measures that discourage predatory tax competition. 31 Thus states have resorted to internationa l institution s and have implemented international agreements in order to buck the efforts of MNCs to avoid
11

John M. Hobson & M. Ramesh

tax. In general, various international institution s have enabled states to
come together and cooperate, thereby preventing the Hobbesian scenario of an
economic war of all against all (otherwise known as the scal race to the
bottom).
But it would be wrong to conclude from the discussion so far that states can
do simply as they choose, free of global and domestic constraint. Globalisation
is not simply what states make of it; globalisatio n also makes states. To effect
a structurationis t synthesis, we need to focus on the three adaptive strategies that
states employ so as to conform to the requirements of global (and domestic)
structural imperatives. Thus states often dip into the global realm to conform to
domestic structural imperatives ( rst adaptive strategy), or they dip into the
domestic realm to conform to global structural imperatives (second adaptive
strategy), or they dip into the global realm to conform to global constraints (third
adaptive strategy).
A clear example of the rst adaptive strategy is to be found in the area of
intellectual property rights. Under pressure from domestic producers of media
products, the US government has constantly sought internationa l agreements to
free up restrictions on trade in cultural products. For the same reason, the French
government has sought international guarantees that would enable it to protect
its domestic producers.
Regarding the second adaptive strategy, it is clear that most governments
cannot conduct monetary policy entirely free of global considerations . Interest
rate policy, for example, although partially shaped by domestic concerns, is
fundamentally tied to global interest rate movements. Governments are indeed
concerned to appease international nance by trimming their monetary policies
and keeping scal de cits in check.
Finally, returning to the example of trade, the third adaptive strategy concerns
the way in which states are disciplined by multilateral institutions . In particular,
while these institution s have in part enabled states to increase their exports, they
have also disciplined them and pressed them into maintaining and deepening
their commitment to free trade. This is an excellent example of the way in which
the external realm is both a realm of constraint and opportunit y (given that we
noted above how such internationa l institution s have also at times enhanced the
ability of states to resist the rent-seeking pressures of domestic interest groups
and have enabled states to liberalise their domestic economies).
In sum, we argue that states both shape, and are shaped by, domestic and
global structures; that they cannot be sociologically reduced to any one of these
structures; and that none of these structures can be reduced to state power. The
crucial point to note is that, in pursuing these various exit and adaptive
strategies, states come to promoteintentionall y and unintentionally linkages
between the domestic, regional and global realms, thereby enabling the development of an increasingly integrated global architecture. States therefore play an
important enabling or constitutive role in the globalisatio n process and one that
is not entirely at states expense, but is rather bound within a positive-su m
relationship in which global and domestic forces and states enable each others
reproduction. To assume, as is so often the case, that globalisatio n implies the
demise or end of the state is
12

Globalisatio n Makes of States What States Make of It

recklessly premature. [S]tates have played a key role in promoting the rise of supraterritoriality . Moreover, they remain
prominent players in the contemporary governance of global
ows and show every sign of retaining that signi cance in the
twenty- rst century. We therefore do well to abandon all assumptions that globality and state are inherently contradictory.32
To illustrate this model of the state/globalisatio n relationship , we now turn to
examine the case of Singapore.
III. The Singaporean state in the global/national vortex
We choose to analyse Singapore because it provides an excellent litmus test for
the various positions found in the existing literature, given that it is a small state
with perhaps the worlds most globalised economy, as measured in terms of
foreign trade and investment.33 We nd that state policies in the last three
decades provide strong evidence for the structurationis t model. From the outset,
following its expulsion from Malaysia in 1965, the Singaporean state recognised
that, due to its lack of natural resources and small domestic market, it could only
survive by participating in the global economy. It viewed the global economy
not only as a constraint on what it could do, but also as offering immense
opportunitie s and, accordingly, pursued a exible multi-pronge d strategy that
utilised both global and domestic resources.34 In the following discussion we will
argue that the Singaporean states engagement with the global economy has gone
through three broad phases since independence: (1) an imported globalisatio n
phase from 1965 to 1985; (2) a mixed defensive-domestic /imported global phase
from 1985 to 1992; and (3) an exported globalisatio n phase since 1992.
As shown in Figure 3, at any given time the state has pursued a range of exit
and adaptive strategies simultaneously , the exact contours of which were
determined by its objectives and the external and internal circumstances with
which it was faced. Over the years the state has employed the entire range of
strategies (except for the rst adaptive strategy) depicted in Figure 2. Needless
to say, the move from one phase to another did not represent a complete
departure, as each phase built upon the preceding phases.
Imported globalisation : 19651985
For two decades after 1965 Singapore pursued an imported globalisatio n
strategy, where the state sought to nest the islands economy rmly within the
global economy and thereby to attract (i.e. import) foreign MNCs to relocate
within Singapore from where they would promote export-oriented industrialis ation. As with Japan, the Singaporean state has been normatively governed by
the belief that it is a small (city) state with few indigenous resources which left
it with no option but to go global. The strategy had two components: rst, to
overcome domestic constraints to export-oriented industrialisatio n (i.e. rst exit
strategy) and, second, to create a domestic politicaleconomic environment
hospitable to global capital (i.e. second adaptive strategy).
13

John M. Hobson & M. Ramesh

Exit Strategies

Adaptive Strategies

1965 85:
Imported
Globalisation

1st exit strategy: state seeks

to attract MNCs to Singapore
in part to overcome domestic
constraints to national
economic development

2nd adaptive strategy: to

attract MNCs and to promote
economic growth, the state
reshapes its domestic political
economy to conform to global
requirements

1985 92:
Mixed DefensiveDomestic/
Imported
Global

2nd exit strategy: state

promotes local capital to
mitigate the constraints of
MNC-led development ; MNCs
promoted only in select
areas of services and high
value-added manufacturing

2nd adaptive strategy: state

seeks to reshape domestic
economy in order to conform
to changing global imperatives

1992-Present:
Exported
Globalisation

3rd exit strategy: state

promotes developments in
the global realm to overcome
global structural constraints

3rd adaptive strategy: state

dips into the global realm to
conform to global constraints

FIGURE 3. The Singaporean state in the global/national vortex.

In the 1960s Singapore was primarily an entrepot to the region with a large
service and a edgling manufacturing sector. The domestic bourgeoisie at the
time was conservative and lacked capital and technological sophistication ;
elements of it displayed sympathy for oppositio n parties. This was a dif cult
time for the country and the ruling Peoples Action Party (PAP) wanted swift
economic results to strengthen its hold on of ce, an outcome that domestic
capital was thought to be incapable of delivering. Nor was the option of
promoting domestic industrie s behind protective barriers viableas was originally pursued after 1945 in Japan, South Korea and Taiwanbecause of the
small size of its home market. The government sought to escape these domestic
constraints to economic growth by turning to MNCs and world markets ( rst exit
strategy). The MNCs were thought to have the capital and technology that
Singapore needed and, more signi cantly, were expected to open up new
markets for the islands exports.35
The MNCs themselves had few reasons to be attracted to Singapore and the
government sought to redress the problem by employing the second adaptive
strategy. It began to foster assiduousl y conditions that would attract such rms
to the island by offering negligible tariffs on imports, a developed industrial
infrastructure , inexpensive industrial land, a low tax regime and a wide range of
regulatory and scal bene ts. In addition, it provided a disciplined and cheap
labour force which was expected to appeal to MNCs looking for overseas sites
to which they could relocate their labour-intensiv e production activities.36 The
governments task was made somewhat easier by the international conditions
that prevailed at the time. Flush with cash, large Western rms were looking
14

Globalisatio n Makes of States What States Make of It

overseas for investment opportunities , but all too often came up against investment barriers erected by host governments fearful of foreign domination of their
economy. By contrast, Singapores central location in a densely-populate d
region, coupled with its myriad incentives, made the island highly attractive to
foreign MNCs. The strategy paid off: foreign direct investment (FDI) ooded
in37 and, to the great satisfaction of the government, the MNCs were heavily
involved in exports.38 This was accompanied by a rapid development of the
economy coupled with declining unemployment rates.39
The state thus employed the rst exit strategy as it dipped into the global
realm to mitigate domestic constraints to its economic development. But this
exit strategy was complemented by the states (second) adaptive strategy of
forming synergistic linkages with global capital. As soft structuralists would
predict, we nd that the state took various measures, most notably to maintain
low taxes and labour costs, that conformed to the interests of global capital.
While the state did experience some diminution of capacity as a result, it also
gained additional capacity from the rapid economic growth that its measures
promoted. The increase in real income and employment coupled with increases
in public revenues allowed the state to spend more not only on economic
development but also on health, housing and education.40 Politically too, the
state began to enjoy a high level of support and legitimacy among the population.
Mixed strategy: 19851992
The second phase opened with the recession of 19856, which was the rst time
in two decades that the economy experienced negative growth. This led to the
adoption of the second exit strategy in which the state sought to promote local
capital to mitigate the perceived constraints of foreign MNCs. This was not,
however, a complete volte face, as the new strategy did not so much supplant as
re ne the imported globalisatio n strategy the state had been pursuing.
The origins of the second globalisation phase can be traced back to 1979 when
Singapore launched what was referred to locally as the Second Industrial
Revolution, intended to attract foreign investment speci cally in the area of
capital-intensiv e manufacturing. It was essentially the same strategy as before,
but with the difference that it explicitly sought to discourage low-wage manufacturing by increasing labour costs,41 as well as to concentrate its scal largesse
only on foreign rms with higher technological or capital content. The government pushed ahead with the high-wage strategy despite opposition from foreign
and domestic rms, which argued that increasing labour costs were reducing the
islands attractiveness to investors. Then came the 19856 economic recession
which demonstrated the constraints that the structure of global capitalism
imposes on peripheral countries. It also underscored the fact that the imperatives
of MNC-led development were such that the island would be forever locked into
low-wage labour-intensiv e exports, which would perpetuate low income despite
rapid economic growth and handsome pro ts for investors.
To temper its reliance on foreign capital, the government turned to domestic
capital which was viewed as less likely to desert the country because of
15

John M. Hobson & M. Ramesh

disagreement with the governments policy direction. Moreover, the small and
medium enterprises (SMEs) that characterised domestic capital were no longer
seen as unhelpful as they had been in the past. As the industrialise d countries
discovered in the 1980s, such rms were the engines of innovation , growth and
employment in the emerging economy. However, because local SMEs lacked
both capital and technology to compete in world markets, or even in the
domestic markets in sectors in which MNCs were present, the government
stepped in to create a conducive environment for the rapid development of local
capital. It also began to support its large domestic rms, which tended to be
concentrated in nancial servicesagain a rapidly growing sector in the world
economy as a whole.42
Under the Promising Local Enterprise (PLE) programme, the Economic
Development Board (EDB)Singapores pilot development agencycommitted
itself to developing local companies with an annual turnover of over S$100
million. The EDB aims to nurture existing PLEs into Asian MNCs, the EDB
bluntly declared.43 Many of the incentives that had in the past been available
only to foreign rms were now made available to domestic SMEs. However, the
shift in policy direction did not mean that reliance on foreign MNCs was
abandoned altogether. The government continued its imported globalisatio n
strategy, but sought to attract only those MNCs that were engaged in higher
value-added manufacturing. Correspondingly , it discouraged foreign rms that
wished to locate in Singapore for low wages.
Structuralists assume that states irting with globalisatio n cannot escape
joining the race to the bottom in terms of wages and working conditions . There
is a certain truth to this insofar as the government did have to back off from its
strategy of pushing up wages following the mid-1980s recession. At the same
time, it implemented an alternative strategy of enhancing domestic capital so as
to expand its economic base and at the same time reduce dependence on foreign
MNCs. While the state did not again deliberately try to raise wage levels, the
ensuing tight labour market pushed up the wages anyway. However, it would be
wrong to conclude that the state could conduct policy free of global constraint.
Its strategy of promoting domestic rms was carefully designed not to convey
the wrong signals to foreign investors, who were still needed in the targeted
sectors of capital-intensiv e manufacturing.

Exported globalisation : 1992present

In the early 1990s the state altered its globalisation strategy yet again, this time
pushing domestic capital to go regional44 (hence the label exported globalisa tion). Unlike the earlier period when the emphasis was on attracting foreign
companies, in 1993 the government announced that in future it would encourage
locally-based companies to spread out overseas, especially to Southeast Asia,
China and India. Demonstrating the governments acute awareness of the
opportunitie s and constraints that globalisatio n affords, Finance Minister Richard
Hu stated:
16

Globalisatio n Makes of States What States Make of It

In the race of nations, it is impossible for us to stand still and try
to preserve what we have. The way out is to build an external
dimension to our economy, in order to overcome the problems of
a small mature domestic market and a limited resource base.
The external economy is valuable because of its ability to improve the economic structure in two ways: rst, it generates
business and economies of scale for companies operating in
Singapore, making the domestic economy more productive. Second, it strengthens our links with other rapidly growing countries
in the region, so that we will not be so heavily dependent on the
developed countries for growth and markets.45
Consistent with its pro-active style, the government offered tax incentives (the
Overseas Enterprise Incentive scheme and the New Technology Regionalisa tion scheme) to approved domestic rms to expand their operations overseas
and remit pro ts to Singapore at reduced tax rates. In some instances the
government itself took an equity position in those rms that it wished to expand
overseas (the Co-investment Programme). The incentives are highly targeted
and generally available to companies that invest in the emerging economies in
the region (Vietnam, Cambodia, Burma) where the MNC presence is still small,
and in the vast emerging markets in China, India and Indonesia. By entering
markets before other large multinational s do, the government hopes that Singaporean rms will enjoy the early mover advantages in the years to come. The
drive is being spearheaded by government-owned or -linked companies, which
rank among the largest and most pro table rms on the island.
The shift in strategy was partly shaped by fear of the possible emergence of
closed regional trade blocs in Europe and North America, as seemed likely in the
late 1980s and early 1990s in the wake of oundering Uruguay Round negotiations. In the context of much talk about an impending collapse of the global
trade order and regionalisation of the world economy, the Singaporean state
responded by vigorously participating in the formation of the ASEAN Free
Trade Area (AFTA) and the Asia Paci c Economic Cooperation (APEC) in
order to build synergistic links with countries in the region. Earlier, in 1989, the
government had launched the Growth Triangle concept designed to encourage
rms to combine the islands advantages (capital, technology and infrastructure )
with the large pools of cheap labour found in neighbourin g Johor (Malaysia) and
Riau (Indonesia). It was increasingly apparent that a defensiveagential strategy
of autarchic economic development was inadequate in a global environment
characterised by substantial economies-of-scale advantages for established
MNCs.
The decision to encourage Singaporean rms to expand in the region followed
the realisation that the previous strategy of promoting SMEs in the domestic
sphere had achieved only limited success due to their small size, which made it
dif cult for them to compete in the global economy. Put simply, the state shifted
its strategies in order to conform to global economic constraints. However, this
was not so much a surrender to global forces as an effort to bene t from them
by adapting to their core imperatives. Consistent with the third exit strategy, the
17

John M. Hobson & M. Ramesh

state sought to out ank foreign MNCs by relying on its own domestic rms. In
the process the state employed the third adaptive strategy, in that it transformed
its external regional relations in order to conform to the general constraints
imposed by the global economy.
The outbreak of the regional economic crisis in Asia in 1997 also af icted
Singapore even though its economic fundamentals were in every respect solid,
underscoring the endemic vulnerabilitie s of small open economies. However, the
governments deft steering of the economy during this dif cult period may well
have enhanced its international credibility which, it has been argued, is one of
the salient features of the developmental state in Singapore.46 Moreover, as one
expert has recently put it, the Asian economic crisis tends to strengthen, rather
than weaken, the capabilities of the state in economic governance and the social
regulation of the economy. This in turn guarantees the enduring, if not enhanced,
role of the state in Singapores regionalisatio n program.47
Conclusion
In developing a structurationis t approach, we nd that neither the pure structuralist nor pure agent-centric approaches can adequately capture the relationship
between the state and globalisation . In the case of Singapore, we nd that where
the structuralists would predict scal crisis, the evidence shows that the economy
has achieved constant budget surpluses since 1968 and has the largest foreign
reserves in per capita terms, and one of the largest in absolute terms, anywhere
in the world.48 Defying the prediction that MNCs necessarily cause underdevelopment and impoverishment ,49 foreign-owned rms are responsible for a massive 60 per cent of employment in manufacturing and 86 per cent of exports.50
Moreover, being integrated into the global economy propelled Singapores per
capita income to one of the highest levels in the world: US$30,550 in 1996,
compared to a mere US$1050 in 1970.51
In short, forming synergistic linkages with global capital has paid substantial
dividends to Singapore. While the state has indeed employed various adaptive
strategies so as to conform to the global structure, as soft structuralists would
expect, this has not led to its hollowing out. In fact, throughout the post-1965
period the state has pursued an interventionis t and proactive set of policies that
laid down the terms of engagement with global capital. Because it played a
hands-on role with respect to global capital, the state successfully channelled
global capital into productively bene cial avenues. Again to quote Henry Yeung:
Since its independence in 1965, the PAP-led state has planned
and implemented several national development strategies to create
and sustain Singapores competitivenes s in the face of accelerated
global competition. In that sense, the global economy has always
been Singapores hinterland and the city-state has always been
a key player in the globalizatio n of economic activities.52
It would nevertheless be wrong to exaggerate the states degree of agential
power, as the state has had to negotiate and cooperate with global capital and
conform or adapt to the structural imperatives of the global capitalist economy.
18

Globalisatio n Makes of States What States Make of It

This is hardly surprising considering that Singapore is but a small, albeit rich,
economy with little capacity to determine global patterns of trade and investment. Consequently , the state cannot freely choose whatever it wishes, and must
at all times operate within the parameters of global capitalism. In general, the
state has not sought to preserve itself against global capital by following
defensive autarchic policies, but has embedded itself rmly within global
capitalism.
Underlying the speci cs of this particular case lie several key theoretical
premises. This analysis derives from our structurationis t approach, which posits
that agents (in this case, states) constitute structures as much as structures
constitute agents. Moreover, the implications of charting a middle ground run
deep, because, as Ian Clark argues, such a position entails rethinking IR theory
and suggests that we need a new theory of internationa l relations and a new
political economy that can better come to grips with the new global era.53 In
contrast to the prevailing orthodoxies , we conclude that we do not have to do
away with the state to establish the in uence of transnational or global relations
in world politics, nor do we have to do away with the global in order to
demonstrate the importance of the state. Thus the notion of the powerless state
is no less of a myth54 than is the claim that states can make of global structures
whatever they choose. Globalisation makes of states what states make of it.
Notes
1. It is certainly the case that Waltzian neorealism privileges the international political structure over
states-as-agents; see Martin Hollis & Steve Smith, Beware of Gurus: Structure and Action in International
Relations, Review of International Studies, Vol. 17, No. 4 (1991), pp. 393410; but also see Alexander
Wendt, The AgentStructure Problem in International Relations Theory, International Organization, Vol.
41, No. 3 (1987), pp. 33570. However, Waltz and other neorealists are unequivoca l that states have
agencynot vis-a`-vis the international political structurebut with respect to the global realm; see
Kenneth N. Waltz, Theory of International Politics (McGraw Hill, 1979), ch. 7; Robert Gilpin, US Power
and the Multinational Corporation (Basic Books, 1975); and Stephen D. Krasner, Power politics,
institutions and transnational relations, in: Thomas Risse-Kappen (Ed.), Bringing Transnational Relations
Back In (Cambridge University Press, 1995), pp. 25779. For a full discussion, see John M. Hobson, The
State and International Relations (Cambridge University Press, 2000), ch. 2.
2. Robert B. Reich, The Work of Nations (Knopf, 1991); Kenichi Ohmae, The Borderless World (Collins,
1990); Richard A. Falk, State of Seige: Will Globalization Win Out?, International Affairs, Vol. 73, No.
1 (1997), pp. 12336; and Joseph A. Camilleri & Jim Falk, The End of Sovereignty ? (Edward Elgar, 1992).
3. Camilleri & Falk, The End of Sovereignty ?, p. 98.
4. Ibid., pp. 989 and ch. 9.
5. James N. Rosenau, The Study of Global Interdependenc e (Pinter, 1980); Susan Strange, The Retreat of the
State (Cambridge University Press, 1996); Robert W. Cox, with Timothy J. Sinclair, Approache s to World
Order (Cambridge University Press, 1996), pp. 296313; and Ankie Hoogvelt , Globalisation and the
Postcolonial World (Macmillan, 1997), pp. 1349.
6. Thomas L. Friedman, The Lexus and the Olive Tree (HarperCollins, 1999), chs 5, 18.
7. This, of course, was originally propounde d by Immanuel Wallerstein in The Modern World System, Vol.
1 (Academic Press, 1974).
8. Waltz, Theory of International Politics, ch. 7; Janice E. Thomson & Stephen D. Krasner, Global
transactions and the consolidation of sovereignty, in: E-O. Czempiel and J.N. Rosenau (Eds), Global
Changes and Theoretical Challenges (Lexington Books, 1989); and Krasner, Power politics, institutions
and transnational relations.
9. Waltz, Theory of International Politics, ch. 7; Paul Hirst & Grahame Thompson, Globalization in
Question: The International Economy and the Possibilities of Governance (Polity, 1996); and David

19

John M. Hobson & M. Ramesh

10.

11.

12.
13.
14.
15.
16.
17.
18.

19.
20.
21.
22.

23.
24.
25.

26.

27.

20

Armstrong, Globalization and the Social State, Review of International Studies, Vol. 24 (1998), pp.
46178.
Hirst & Thompson, Globalization in Question; and John Zysman, The Myth of the Global Economy:
Enduring National Foundations and Emerging Regional Realities, New Political Economy, Vol. 1, No. 1
(1996), pp. 15784.
Waltz, Theory of International Politics, p. 151; and Louis W. Pauly & Simon Reich, National Structures
and Multinational Corporate Behavior: Enduring Differences in the Age of Globalisation, International
Organization, Vol. 51, No. 1 (1997), pp. 130.
Hirst & Thompson, Globalization in Question.
Eric Helleiner, States and the Reemergence of Global Finance (Cornell University Press, 1994); and Ethan
B. Kapstein, Governing the Global Economy (Harvard University Press, 1994).
Gilpin, US Power and the Multinational Corporation.
Ian Clark, Globalization and International Relations Theory (Oxford University Press, 1999), especially
ch. 1.
Philip G. Cerny, Globalization and Other Stories: The Search for a New Paradigm for International
Relations, International Journal, Vol. 51, No. 4 (1996), p. 620.
As originally argued by J. David Singer, The Level of Analysis Problem in International Relations,
World Politics, Vol. 14, No. 1 (1961), pp. 7792.
See especially Ian Clark, Beyond the Great Divide: Globalization and the Theory of International
Relations, Review of International Studies, Vol. 24 (1998), pp. 47998; and Clark, Globalization and
International Relations Theory. Differing versions can be found in: Jan Aart Scholte, Global Capitalism
and the State, International Affairs, Vol. 73, No. 3 (1997), pp. 42752; Jan Aart Scholte, Globalization:
A Critical Introduction (Macmillan, 2000); Philip G. Cerny, The Changing Architecture of Politics (Sage,
1990); Ronen Palan & Jason Abbott, State Strategies in the Global Political Economy (Pinter, 1996);
Michael Mann, Has Globalization Ended the Rise and Rise of the Nation-State?, Review of International
Political Economy, Vol. 4, No. 3 (1997), pp. 47296; Linda Weiss, Globalization and National
Governance : Antinomy or Interdependence? , Review of International Studies, Vol. 25, No. 5 (1999), pp.
130; and Henry Wai-chung Yeung, State Intervention and Neoliberalism in the Globalizing World
Economy: Lessons from Singapores Regionalization Program, Paci c Review, Vol. 13, No. 1 (2000), pp.
13362. It is also noteworthy that the search for a structurationist approach is now emerging (either
implicitly or explicitly) within the complementar y area of regional studies; see Andrew Gamble &
Anthony Payne, Conclusion: The New Regionalism, in: Andrew Gamble & Anthony Payne (Eds),
Regionalism and World Order (Macmillan, 1996), pp. 24764; and Andrew Hurrell, Explaining the
Resurgence of Regionalism in World Politics, Review of International Studies, Vol. 21 (1995), pp.
33158.
Wendt, The AgentStructure Problem, pp. 3378; see also the original statement in Anthony Giddens,
The Constitution of Society (Polity, 1984).
Scholte, Globalization, pp. 4650.
The best and fullest discussion is found in ibid.
For example, many MNCs are multi-national rather than trans-national insofar as the majority of their
production goes on within their home country; see especially Hirst & Thompson, Globalization in
Question.
Scholte, Globalization, pp. 503.
Kenneth N. Waltz, Re ections on Theory of International Politics: A Response to My Critics, in: Robert
O. Keohane (Ed.), Neorealism and its Critics (Columbia University Press, 1986), pp. 32245.
The classic statement is found in Nicos Poulantzas, Political Power and Social Classes (New Left Books,
1973), pp. 255321. Nevertheless, this is not to deny the point that some neoMarxists have gone a long
way in overcoming the traditional problem of class-reductionism in Marxist state theory; see Ellen K.
Trimberger, Revolution From Above (Transaction Books, 1978); Fred Block, Revising State Theory
(Temple University Press, 1987); Bob Jessop, State Theory (Polity, 1990); and Colin Mooers, The Making
of Bourgeois Europe (Verso, 1991).
See Theda Skocpol, States and Social Revolutions (Cambridge University Press, 1979); Stephen D.
Krasner, Defending the National Interest (Princeton University Press, 1978); Waltz, Theory of International Politics; Robert Gilpin, War and Change in World Politics (Cambridge University Press, 1981);
and Robert O. Keohane, After Hegemony (Princeton University Press, 1984).
Although this claim echoes that made by Keohane in After Hegemony, it differs in that it emphasises the
way in which states cooperat e with domestic and global social forces (rather than only with other states).

Globalisatio n Makes of States What States Make of It

28.

29.
30.

31.
32.

33.

34.
35.
36.

37.

38.

39.
40.
41.

42.
43.
44.

For a full discussion, see John M. Hobson, The Wealth of States (Cambridge University Press, 1997), ch.
7; Hobson, The State and International Relations, ch. 7; Linda Weiss & John M. Hobson, States and
Economic Development (Polity, 1995); and Linda Weiss, The Myth of the Powerless State: Governing the
Economy in a Global Era (Polity, 1998), chs 2 and 7.
See especially Manns discussion of the polymorphous state in Michael Mann, The Sources of Social
Power, Vol. 2 (Cambridge University Press, 1993), ch. 3; also Michael Mann, States, War and Capitalism
(Blackwell, 1988), ch. 1. With respect to states and globalisation, see especially Clark, Globalization and
International Relations Theory, ch. 3; Weiss, The Myth of the Powerless State, chs. 1 and 7; and Hobson,
The State and International Relations, ch. 7.
Paulette Kurzer, Business and Banking (Cornell University Press, 1993); and Dani Rodrik, Has Globalization Gone Too Far? (Institute for International Economics, Washington, 1997), ch. 4.
OECD, Harmful Tax Competition (OECD, 1998), pp. 413; Ruding Committee, Report of the Committee
of Independent Experts on Company Taxation (Commission of the European Community, 1992); Duane
Swank, Funding the Welfare State: Globalization and the Taxation of Business in Advanced Market
Economies, Political Studies, Vol. 46 (1998), pp. 67192; and John M. Hobson, Disappearing taxes?
Fiscal policy in the OECD, in: Linda Weiss (Ed.), States in the Global Economy (Cambridge University
Press, forthcoming 2002).
OECD, Harmful Tax Competition, pp. 4155.
Scholte, Globalization, pp. 1323; Scholte, Global Capitalism and the State; Mann, Has Globalization
Ended the Rise and Rise of the Nation-State?; Weiss, Globalization and National Governance ; Clark,
Globalization and International Relations Theory, especially, chs 35; and Hobson, The State and
International Relations, ch. 7.
Its international trade formed a staggering 356 per cent of GNP in 1995, according to World Bank, World
Development Indicators, CD-ROM 1998. Moreover, foreign capital contributed some 38 per cent of all
equity capital invested in Singapore and more than 80 per cent of manufacturing investment in 1989. 96
per cent of all foreign investment in the country in 1989 took the form of direct investment (Singapore,
Foreign Equity Investment in Singapore, Singapore, Department of Statistics, 1992). As a proportion of
GDP, FDI stocks constitute 70 per centthe highest penetration rate in the world. Finally, Singaporeans
themselves are signi cant investors overseas: the stock of overseas private direct and portfolio investments
was equal to 69 per cent of GNP, and the share would be higher still if public investments were also
included (World Bank, World Development Indicators, CD-ROM 1998).
For a general discussion on the Singapore states efforts to globalise its economy, see M. Ramesh,
Economic Globalization and Policy Choices: Singapore, Governance , Vol. 8, No. 4 (1995), pp. 24360.
Gary Rodan, The Political Economy of Singapore s Industrialization: National State and International
Capital (Macmillan, 1989), p. 87.
See Frederic C. Deyo, Dependen t Development and Industrial Order (Praeger, 1981). Speci cally the state
carried out a comprehensiv e strategy of annihilating the radical trade unions, consolidating the moderate
unions into a national federation staunchly supportive of the government , restricting the right to strike, and
limiting the terms of collective bargaining. See Venkatraman Anantaraman , Singapore Industrial Relations
System (McGraw Hill, 1990), pp. 345.
In 1968/9 (i.e. in the years immediately following the launch of the states pro-globalisation policies), FDI
stock (S$297 million) formed 54 per cent of total gross xed assets in manufacturing , up from 45 per cent
as recently as 1966. See Rodan, The Political Economy of Singapores Industrialization, p. 99.
Fully 70 per cent of foreign rms in 1969 were engaged in export, compared to only 30 per cent of local
rms. Exports grew by 12 per cent annually between 1970 and 1984 and formed 161 per cent of GDP,
up from 121 per cent during 19659. See Economic and Social Statistics 19601982 (Department of
Statistics, Singapore, 1983).
GDP grew by 13 per cent annually during 19659 and by 9 per cent during 197084. Unemploymen t fell
from 6 per cent in 1970, to 4 per cent by 1977, and to a mere 2.6 per cent by 1982 See ibid.
Public spending on social and community services increased from S$228 million in 1965, to S$575 million
in 1974, to S$2.1 billion in 1984. See ibid.
Under the corrective wage policy of 197981, the National Wage Council had recommende d an average
wage increase of between 5458 per cent. See Rodan, The Political Economy of Singapore s Industrialization, p. 145.
Ministry of Trade and Industry, Economic Survey of Singapore (National Printers, 1990).
Economic Developmen t Board, Annual Report 1997 (Economic Developmen t Board, 1998).
Yeung, State Intervention and Neoliberalism in the Globalizing World Economy.

21

John M. Hobson & M. Ramesh

45. The Straits Times, 27 February 1993.
46. W.G. Huff, Turning the Corner in Singapores Developmenta l State?, Asian Survey, Vol. 39, No. 2
(1999), pp. 21442.
47. Yeung, State Intervention and Neoliberalism in the Globalizing World Economy, pp. 146ff.
48. The government s annual budget surplus amounted to 5 per cent of GDP during 198591 and a massive
16 per cent during 19926. The countrys foreign reserves stood at US$76.8 billion in 1996. See World
Bank, World Development Indicators, CD-ROM 1998; and M.G Asher, Taxation policies, in: L. Low &
T. Mun Heng (Eds), Public Policies in Singapore (Times Academic Publishers, 1992), p. 245.
49. Richard J. Barnett & Ronald E. Muller, Global Reach (Simon & Schuster, 1974).
50. United Nations, World Investment Directory 1992: Asia and the Paci c (United Nations, 1992).
51. World Bank, World Development Indicators, CD-ROM 1998.
52. Yeung, State Intervention and Neoliberalism in the Globalizing World Economy, p. 141.
53. Clark, Globalization and International Relations Theory.
54. Weiss, The Myth of the Powerless State.

22