PETRAS ESSAYS IN ENGLISH

October 29, 2001

Review essay on Michael Hardt and Antonio Negri

Empire with imperialism

James Petras

Empire (*) is a strange book. At a time when the U.S. is the only super power, when almost fifty percent of the 500 biggest multi-nationals are U.S. owned and headquartered, and Washington is leading a war of intervention against Afghanistan (after previous interventionary wars in the Balkans, Central America (Panama), Carribean (Grenada) and proxy wars in Colombia (Plan Colombia) and earlier Angola, Mozambique, Nicaragua, the authors of this widely praised book tell us that imperialism is a thing of the past. They argue that "Empire" is a post-imperialist phenomena in which power is dispersed, and no single nation can control the "empire." Moreover they argue that "empire" is a positive advance in world history "The thing (sic) we call Empire is actually an enormous historical improvement over the international system and imperialism." After 413 pages of text and 57 pages of notes the best the authors can do in discussing "empire" is to tell us that "In this smooth space (?) of Empire there is no place of power - it is everywhere and nowhere. Empire is an OU-Topia or really a non-place." (p. 190). Without a clear notion of the agents of "empire" nor its dynamic in the real existing imperial states and their corporations, we are told that Empire is imperial but not imperialist, that the U.S. Constitution is imperial and not imperialist. From this they deduce (and we learn) that the U.S. Constitution is imperial because (in contrast to imperialism's project always to spread its power linearly in closed spaces and invade, destroy and subsume subject countries within its sovereignty) "the U.S. constitutional project is constructed on the model of re-articulating an open space and reinventing incessantly diverse and singular networks across an unbounded terrain. The contemporary idea of Empire is born through the global expansion of the internal U.S. constitutional project" (p. 182). In other words, this celebration of Empire, is also a celebration of U.S. constitutionalism (the idea to be exact) which is a model for "democratizing" the Empire. The study disposes of classes and class conflict as outdated and imprecise, and substitutes the notion of "biopolitical production multitudes" - a term which is never clearly delineated and is without any historical or empirical specificity. Apart from "multitudes" there are no designated agencies for the announced but unspecified "revolution". The program of this novel revolution is not very different form that embraced by welfare state social democrats.

Much has been written about the "sweep of the book, its theoretical grandeur". Frederic Jameson, Hardt's colleague at Duke, calls it "the first great new theoretical synthesis of the new Millenium." Hyperbole aside, few of the literary reviewers have commented on the lack of historical and empirical evidence to buttress their innumerable and unsubstantiated assertions.

The authors argue early on that the intellectual origins the U.S. revolution can be traced to Spinoza and Machiavelli. Rousseau and Locke are given short shrift, despite their greater immediate relevance. Extended and tendencious discussions of sovereignty are interspersed with reductionist assertions which collapse or omit numerous variations. For example, in their discussion of totalitarianism and the nation-state they argue "If Nazi Germany is ideal type of the transformation of modern sovereignty into national sovereignty and of the articulation in its capitalist form, Stalinist Russia is the ideal type of the transmission of popular interest and the cruel logics that follow from it into a project of national modernization, mobilizing for its own purposes the productive forces that yearn for liberation from capitalism" (p.110). I have quoted extensively in order to illustrate the confused, illogical, unhistorical nature of the author's broad and vacuous generalizations. What empirical or historical basis is there for claiming Nazi Germany is the "ideal type"? National sovereignty pre-existed the Nazis and continues after its demise in non-totalitarian settings. If Stalin's Russian embodied "popular interest" why should anyone seek to be liberated from it? "Cruel logic" of "popular interests" is stuff from the ancien regime - hardly the basis for orienting the "multitudes" which the writers describe to be the new agencies for democratizing the world.

The authors engage in what George Saboul once referred to as the "vacuum cleaner" approach to history: a little of ancient history, a smattering of exegesis of elementary political theory, a plus and minus evaluation of post-modernism, a celebration of U.S. constitutionalism, a brief synopsis of colonialism and post-colonialism. These discursive forays provide an intellectual gloss for the core argument dealing with the contemporary world: the disappearance of imperialism; the obsolescence of imperial states, nation states (and boundaries) and the ascendancy of an ill-defined Empire, globalization, and supra-national governing bodies, apparently resembling the United Nations.

Let us start with Negri's and Hardt's (NH) assertion of the decline of the nation or imperial state. Their argument for a state-less empire exaggerates the autonomy of capital from the state and parrots the false propositions of the free market ideologues who argue that the "world market" is supreme. Contrary to NH, in the contemporary world, the national state, in both its imperial and neo-colonial form, has expanded its activity. Far from being an anachronism, the state has become a central element in the world economy and within nation- states. However, the activities of the state vary according to their class character and whether they are imperial or neo-colonial states.

In recent years the centrality of the imperial state has been evidenced in fundamental areas of political-economic, cultural and economic activity that buttress the position of the imperial powers, particularly the U.S.

Crisis Management

Over the past decade several major financial and economic crises have occurred in various regions of the world. In each instance, the imperial states, particularly the U.S. state, have intervened to save the MNC, and avoid the collapse of financial systems. For example, in 1994, when the Mexican financial system was on the verge of collapse, then President Clinton intervened to dispatch $20 billion to the Mexican state to bail out U.S. investors and stabilize the peso. In the second instance, during the Asian crisis of 1998, the U.S. and European governments approved an IMF-WB multi-billion dollar bail-out in exchange for opening their economies, particularly South Korea, to foreign take-overs of basic industries. In the Brazilian crisis in 1999 and the Argentine crisis in 2001, Washington pressured the IFI's to bail-out the regimes. Within the U.S. the threatened bankruptcy of a major international investment bank, led to Federal Reserve (central bank) intervention, pressuring a private bank bail-out. In a word, with greater frequency and with greater resources the imperial state has played a dominant role in crisis management, saving major investors from bankruptcy, propping up insolvent MNCs and preventing the collapse of currencies. More than ever the MNCs and the so-called "global economy" depends on the constant massive intervention of imperial states to manage the crisis, and secure benefits (buy-outs of local enterprises).

Inter-imperialist Competition

The competition between rival imperial powers, economic enterprises and MNC's has been essentially spearheaded by rival imperial states. For example, the U.S. imperial state is leading the fight to open European markets to U.S. beef, and U.S. exports of bananas from South and Central America, while the Japanese and the European states negotiate with the U.S. to increase the 'quota' on a series of exports, including steel, textiles, etc. Trade and markets are largely defined by state to state agreements 'Globalization' is not only a product of the 'growth of the MNC', but largely an artifice of state to state agreements. The competition between capitals is mediated, influenced, and directed by the state. The markets do not transcend the state, but operate within state defined boundaries.

Conquest of Markets

The state plays a pervasive and profound role in the conquest of overseas markets and the protection of local markets. In the first instance, the state provides indirect and direct subsidies to export sectors. In the U.S., agricultural exports receive subsidized water and electrical power, and subsidies in the form of tax relief. Secondly, the imperial state, via the IFI, pressures loan recipient states in the Third World, through conditionality agreements, to lower or eliminate trade barriers, privatize and de-nationalize enterprises, thus permitting U.S., European and Japanese MNCs to penetrate markets and buy local enterprises. So-called "globalization" would not exist if it were not for state intervention, nor would the markets remain open if it were not for imperial state military and electoral intervention, political-economic threats or pressure and recruitment of local clients.

Imperialism takes many forms, but pursues similar goals: the conquest of markets, the penetration of competitors and the protection of home markets. The U.S. has an elaborate set of trade barriers in a wide range of product areas of strategic importance: auto imports are limited by quotas, as are sugar, textiles, steel, etc. A multiplicity of non-traditional constraints and informal agreements limit export countries from entering U.S. markets -- all negotiated on a state to state basis. In many cases, in its dealings with neo-colonial regimes, like Brazil under Cardoso, the U.S. state rejects reciprocity, demanding and securing the liberalization of the information industry while restricting Brazilian steel exports, on the bogus pretext of "anti- dumping" charges.

Trade Agreements

All the major trade agreements, liberalizing trade and establishing new trade regulations are negotiated by the states, enforced by the states and subject to state modifications. GATT, WTO, Lome, etc., which established the trade rules and framework for global trading networks were formulated by the states. In addition, bi-lateral as well as regional multi-lateral trade pacts, such as NAFTA, LAFTA, etc. are initiated by the state to open new markets for the multi- nationals. The imperial state operates in synergy with its multi-national corporation. The "expansion in markets" has nothing to do with multi-national corporations superseding anachronistic states: on the contrary, most movements of capital to new markets depend on the state intervening to knock down barriers and in some cases destabilizing nationalist regimes.

Investment Agreements

New multi-lateral as well as bi-lateral investment agreements are formulated at the state level with the agreement and active participation of the MNCs. The reason is clear: the MNCs want state participation to guarantee that their capital will not be expropriated, subject to "discriminatory" taxes, or restricted in remitting profits. The state is the enforcer of investment guarantees, a crucial element in corporate investment expansion. In many cases, the imperial states use their representatives in the IFI to impose new investment codes as conditions for 'stabilization' or development loans.

Protection, Subsidies and Adjudication

The imperial states of EU impose powerful protective barriers for their agricultural products. The U.S. and European states heavily subsidize agriculture with low rates for electricity and water use. Research and development of new technology is heavily financed by the state and then turned over to the multi-nationals. At each stage prior to, during and after the expansion of MNC overseas into the international market, the state is deeply implicated. Moreover, where national enterprises are non-competitive, the imperial states invent pretexts to protect them from more efficient producers. Japan protects its rice producers, even though their production is ten times more costly to consumers. The U.S. provides huge subsidies to agro-business exporters in the form of research, cheap water rates and tied loans to the purchase of U.S. grain exports. EU subsidizes the formation of its high tech industries.

Statism or neo-statism is the centerpiece of 'global expansion' of MNCs, located in the imperial states. The state has grown, its reach has been expanded, its role in the international economy is essential. The empty rhetoric of 'free markets' promoted by conservative ideologues has been consumed and parroted by the "globalist left". While NH write about the declining role of the state, the Right has been active in promoting state activity to further the interests of the MNC's. While NH write of the 'globalization' of markets, the MNC's from the imperial countries and their states carve up the markets, enlarging their spheres of domination and control.

Above all the imperial state is not simply an economic institution; the overseas expansion of the MNCs is heavily dependent on the military and political role of the imperial state.

Expansion of Political and Military Power of the Imperial State

The overseas expansion of the MNCs has been made possible by the military-political expansion of Euro-American imperialism via NATO and surrogate armies in Southern Africa, Latin America, and Asia. In Russia and (the former USSR) and Eastern Europe, client regimes have been sponsored and supported by the imperial states, laying the groundwork for the take- over of a vast array of strategic industries, energy sources, etc. The U.S. imperial state's triumph over the USSR provided the impetus for dismantling the welfare states in Europe and what pretended to be a welfare state in the U.S. The Euro-American wars in the Gulf and Balkans consolidated the imperial states' dominance and extended their influence over dissident states. The de-stabilization of the former Communist regimes, the destructive wars against nationalist and socialist regimes in Southern Africa, Latin America and elsewhere opened these regimes to neo-liberal policy prescriptions. Military expansion was organized by state apparatuses which accompanied and promoted MNC overseas expansion.

So called globalization grew out of the barrel of a gun - an imperial state gun. To further protect overseas capital, the U.S. and the E.U. created a new NATO doctrine which legitimates offensive wars, outside of Europe against any country that threatens vital economic interests (their MNCs). NATO has been expanded to incorporate new client-states in Eastern Europe, and new "peace associates" among the Baltic states and the former republics of the USSR (Georgia, Kazakstan, etc.). In other words the imperial state military alliances incorporate more states, involving more state apparatuses than before - to ensure the safe passage of Euro-U.S. MNCs into their countries and the easy flow of profits back to their headquarters in the U.S. and West Europe.

The State and the Mass Media

While the mass media and its political-cultural propaganda crosses more borders than ever, ownership and control is highly concentrated in the hands of U.S. and European MNCs. The message is increasingly homogenous, and the source and inspiration is closely coordinated with policymakers in Washington, Berlin, London, etc. Global flows, imperial controls - that is the essence of the mass media today. The mass media MNCs look to the imperial states and officials to set the political line as is explicitly stated during the Afghan War and define the parameters for discussion, while they reap the profits.

In conclusion the imperial states, far from being superceded by the overseas expansion of capital, have grown and become essential components of the world political economy. NH concept of empire mystifies the role of the imperial state, thus undermining an essential adversary, in the front lines of the defense of the privileges and power of the MNCs.

Hardt and Negri base their argument about a state-less, class-less empire without imperialism on the notion of a world market dominated by multi-national corporations (MNC) which, they argue, "must eventually overcome imperialism and destroy the barriers between inside and outside." (p. 234) These "global" MNCs have turned the nations and imperial states into anachronisms.

NH provide no data on the internal organization of the MNCs, no analysis of the decision-making structure, no discussion of their relations to states. Theorizing by fiat is a convenient way of evading inconvenient empirical studies. Essentially Hardt and Negri's argument is based on six unsubstantiated assumptions.

Assumption 1: MNC are global corporations which have no specific location in any particular nation-state. They form a new world economy divorced from national controls and are part of a new world ruling class.

This assumption is based on the fact that large scale corporations operate in a number of countries, they are mobile and they have the power to evade taxes, regulations in many national jurisdictions. There are several conceptual and empirical problems with this assumption.

First, the fact that MNCs operate in many countries does not detract from the fact that the headquarters, where most of the strategic decisions, directors and profits are concentrated, are located in the U.S., E.U. and Japan.

Secondly, mobility is based on strategic decisions taken by directors in the headquarters in the imperial centers. These decisions depend on the political and economic conditions created by the imperial state and its representatives in the IFIs. Mobility is contingent on inter- state relations.

Thirdly, evasion of taxes and regulations, is possible because of deliberate policies in the imperial states and their multi-national banks. Non-enforcement of laws against transfers of illicit earnings from the neo-colonial countries to the imperial countries is a form of state activity favoring large scale transfers of wealth that strengthen external accounts. The MNCs' flouting of neo-colonial state regulations is part of a broader set of power relations anchored in the imperial, neo-colonial state relations.

Assumption 2: The old nation-state governments have been superseded by a new world government, made up of the heads of the IFI, the WTO, and the heads of the MNCs (p. 326). This is an argument that is based on a superficial discussion of epiphenomena, rather than a deeper analytical view of the structure of power. While it is true that the IFIs make many important decisions in a great many geographical locations affecting significant economic and social sectors, these decisions and the decision-makers are closely linked to the imperial states and the MNCs which influence them. All top IFI officials are appointed by their national/imperial governments. All their crucial policy guide lines that dictate their loans and conditions for lending are set by the finance, treasury and economy ministers of the imperial states. The vast majority of funds for the IFIs come from the imperial states. Representation on the executive board of the IFI is based on the proportion of funding by the imperial states. The IMF and the WB have always been led by individuals from the U.S. or E.U.

Hardt and Negri's vision of IFI power is based on a discussion of derived power not its imperial states source. In this sense, international power is based in the imperial states not on supra-national entities. The latter concept grossly overestimates the autonomy of the IFIs and underestimates their subordination to the imperial states. The real significance of the IFIs is how they magnify, extend and deepen the power of the imperial states and how they become terrain for competition between rival imperial states. Far from superseding the old states, the IFIs have strengthened their positions.

Assumption 3: One of the common arguments of globalist theorists like Hardt and Negri is that an information revolution has taken place that has eliminated state borders, transformed capitalism and created a new epoch (p.145) by providing a new impetus to the development of the productive forces. The claims that information technologies have revolutionized economies and thus created a new global economy in which nation states and national economies have become superfluous is extremely dubious.

A comparison of productivity growth in the U.S. over the past half century fails to support the globalist argument. Between 1953-72, before the so-called information revolution in the U.S. productivity grew an average 2.5%; with the introduction of computers, productivity growth between 1973-95 was less than half. Even in the so-called boom period of 1995-99, productivity growth was 2.5% about the same as the pre-computer period. Japan which makes the most extensive use of computers and robots has witnessed a decade of stagnation and crises. During the year 2000-01, the information sector went into a deep crises, tens of thousands were fired, hundreds of firms went bankrupt, stocks dropped in value some 80%. The speculative bubble, that defined the so-called information economy, burst. Moreover, the major source of growth of productivity claimed by the globalists was in the computerization of the area of computer manufacture. Studies have shown that computer use in offices is directed more toward personal use than to exchanging ideas. Estimates run up to 60% of computer time is spent in activity unrelated to the enterprise. Computer manufacturers account for 1.2% of the U.S. economy and less than 5% of capital stock.

Moreover, the U.S. population census provides another explanation for the higher productivity figures - the 5 million illegal immigrants who have flooded the U.S. labor market in the 1990s. Since productivity is measured by the output per estimated worker, the 5 million uncounted workers inflate the productivity data. If the 5 million are included the productivity figures would deflate.

With the decline of the information economy and its stock valuations it becomes clear that the "information revolution" is not the transcendent force defining the economies of the major imperial states, let alone defining a new world order. The fact that most people have computers and browse, that some firms have better control over their inventories does not mean that power has shifted beyond the nation-state. The publicists' claims about the "information revolution" ring hollow, as the investors in the world stock markets move funds toward the real economy and away from the high tech firms which show no profits and increasing losses.

Assumption 4: Related to the prior assumption, globalists NH argue that we are living in a New Economy that has superseded the Old Economy, of manufacturers, mining, agriculture and social services (pp. 3-21). According to the globalists the 'market' creates new efficiencies produced by the new technologies and ensures high growth. The recession of late 2000-2002 certainly refutes the claims of the New Economy ideologues: the business cycle continues to operate and, moreover, the cycle is particularly accentuated by the highly speculative nature of the 'New Economy'. As it turns out, the 'New Economy' demonstrates all the features of a volatile speculative economy, driven by exorbitant claims of high returns. In the absence of profits or even revenues, it turns out that much of what was touted as a 'New Economy' was a colossal financial swindle, where the high returns to the early investors led to financial ruin to the later investors.

The "new efficiencies" promised did not overcome the logic of the capitalist business cycle. "Just in time production" was premised on stable and continuous growth of demand. The recession of 2000-2002, the sudden decline in demand, led to an accumulation of inventories among producers and sellers, and the resultant lay-offs. Cash-flow problems, increased indebtedness and bankruptcies characteristic of the "Old Economy" reappeared with a vengence.

It is clear that the so-called "New Economy" does not transcend capitalist crisis, in fact it is more vulnerable and has fewer resources to fall back on since most of its cash flow depends on speculative expectations of continuous high returns. The sharp decline in commercial advertising earnings on the web sites and the saturation of the computer market has led to a structural crisis for both producers of hardware and software, leading to a giant shake-down in the 'industry' -- the exorbitant 'paper value' of the stocks have tumbled to a fraction of their value and the major Internet companies are struggling to survive, let along define the nature of a 'new capitalist epoch'.

Assumption 5: Globalist theorists like NH write of an 'imperial system' as opposed to imperialist states (preface), as if one could not exist without the other. The 'system' has no 'center' since all states have lost their special significance before the all powerful MNC who dominate markets. Systems approaches fail to recognize the class and institutional power of nationally owned and directed banks and industries. Even more fatal, the systems theorists fail to link the structures, operations, legal codes and linkages between imperial states, the multi- national corporations and their offspring in the IFI's and the vast reach of their power and concentration of profits, interest, rents and royalties in the imperialist countries. The 'system' is derived from and is sustained by the combined forces of the imperial state and its MNCs. To abstract from the specificities of ownership and state power in order to describe an imperial system is to lose sight of the basic contradictions and conflicts, the inter-state imperial rivalries and the class struggles for state power.

Assumption 6: NH operate at such a level of abstraction in defining the configurations of power that they obscure the most significant variations in regimes, states, and class configurations. As a result, they do not have a very convincing conception of socio-economic change. Their concept of empire resembles the world system approach. Instead of core, semi-periphery and periphery, they write of "empire" and "multitudes." This type of simplistic abstract stratification of the world economy and power, subordinates the dynamic of class relations to a static distribution of market shares. The abstract categories obscure fundamental differences in class interests between nations in each category, differences that determine how market shares are distributed, the ownership of property, living standards, as well as differences between dynamic an stagnant countries. More fundamentally, by looking at market positions, the NH overlook the ubiquity of the state in preserving and challenging the relationship between states and economies and reconfiguring the world economy.

The Myth of the Third Scientific Technological Revolution

N and H's second major argument is that we are living in a totally new epoch. A new capitalism thanks to the third scientific technological revolution (TSTR). Detailed empirical studies on the 1990s economy has effectively refuted the argument that IT, fiber optics and biotechnology inaugurated a "new epoch of capitalism" by revolutionizing the forces of production.

Japan which early on "robotized" its factories and engineered and applied many of the new IT products has been stagnant (average growth of about 1 percent for the past 11 years) and entering a deep recession in 2001). The U.S. manufacturing sector has been in negative growth since the end of August 2000 and continues for 12 consecutive months - the longest period of negative growth on record since the end of the World War. The recession is expected to continue for an uncertain period - estimates run from 1 to 3 years. The IT growth rates were negative throughout 2001. The prospects for an early recovery are dim as negative savings rates, huge deficits, a strong dollar inhibit domestic or export powered growth. As structural and cyclical crises coincide it is highly likely that the recession will continue for some time ahead. The recession totally undermines the IT ideologues who declared that the "New Economy" has made the business cycle obsolete. In fact, the IT companies have been the hardest hit in the current downturn. Over 80 percent of the dot.coms are not profitable.

Secondly, the IT economy today is less competitive and more concentrated than ever, where a few giants have survived and many have failed. While thousands of dot.coms went under, the top 5 IT companies retained their position among the top 10 rankings world-wide.

The productivity revolution - growth of 2.5% - was based on a short interval of four year (1996-2000) and was followed by a decline in productivity to a negative 1.2% during the first quarter of 2001.

The multi-billion dollar investment in IT drained investment from more productive uses, led to vast overcapitalization in one sector that had low returns and little spill-over effects. Moreover, the biggest boost for IT came from the Y-2 scam - the hype of a system breakdown, with the onset of the new Millenium. Hundreds of billions were spent on IT between 1996 through 1999 to avoid a dubious project with virtually no long term effects. No serious critical evaluation and comparative analysis was conducted between countries like Russia, China, Finland and a few others which spent a fraction of what was spent in Europe and North America on Y-2, without suffering a "catastrophic breakdown." This raises the question of whether the IT bubble was itself an artifact of a massive promotional fraud. In any case, the data base for IT claims of a productivity revolution are extremely limited and problematical.

A recent study by Paul Strassman, a leading critic of IT ideologues, based on a study of 3,000 European companies demonstrates no relationship between investment in computers and profitability. Thus the three basic claims of the IT revolution, that it has put to rest the business cycle, has generated a sustained productivity revolution and produces high profits are not in accordance with reality. In fact, the irrationalities of capitalism have been amplified by the IT bubble: the business cycle operates in full force, productivity tends to stagnation and there is a tendency for the rate of profit to decline.

A recent article by Robert Gordon which analyzes the increase in productivity (between 1995-99) raises serious doubts about the claims of the Hardt and Negri of a "new epoch." He argues that almost 70% of the improvement in productivity can be accounted for by improved measurements of inflation (lower estimates of inflation necessarily mean higher growth of real output, thus productivity) and the response of productivity to the exceptionally rapid output growth of the 3 year period. Thus, only 30% of the 1% increase in productivity (or .3%) during the 1995-99 period can be attributed to computerization of the so-called "information revolution", hardly a revolution.

According to Gordon's longitudinal study of technical progress covering the period between 1950-1996, the period of maximum technical progress as manifested in annual multi factor productivity growth was in the period between 1950-64, when it reached approximately 1.8%. The period of lowest multi- factor productivity growth in this century was during 1988-96, approximately .5% growth (a half of one percent)!

A recent detailed empirical study by McKinsey Global Institute demonstrates that the sharp improvement in economic performance of the U.S. economy between 1995-2000 was accounted for by just a handful of business sectors and was not principally the result of the surge of investment in information technology. The study demonstrates that in most sectors of the economy large increases in IT investment did not produce any improvement in productivity ( ). The study provides data which shows that 53 sectors representing 69% of the economy contributed just .3% productivity growth. These 53 sectors accounted for 62 percent of the acceleration in IT spending. Many of them even experienced productivity deceleration. Among the sectors which showed accelerated growth, IT was only one factor among many.

It is clear that the innovations in the early and middle 20th century were far more significant sources of economy-wide productivity improvement than the electronic, computerized information systems of the late 20th century.

Computer manufacturers account for 1.2% of the U.S. economy and only 2% of capital stock (1997). While corporations spend substantial amounts on computers it is largely to replace old ones. There is no evidence to back up the NH claims of a "new capitalist epoch".

The claim of Hardt and Negri of a new capitalist era has no basis in any purported Third Scientific Information Revolution.

Biotechnology industry, along with IT and optical fibers were seen as the three driving forces of the New Economy. The biotechnology industry is over a quarter of a century old and it has yet to deliver a consistent flow of new treatments and profits. According to Arthur Levinson, Chairman and Chief Executive of Genetech, the biggest and most successful of the biotech companies - "there has been no revolution in medicine in the past 25 years." According to another CEO from another biotech company, Kevin Sharer of Amgen, of the billions of dollars invested in the sector, only 63 new drugs have been brought on the market. Market analysts point out that just 25 of the U.S.'s 400 plus bio-pharmaceutical companies will make money. Most groups founded over a decade ago have yet to achieve profitability. Most biotechnology groups of the 1980s no longer exist. All the promotional publicity surrounding human genome sequences currently attracting more billions are likely to be disappointed according to Levinson. Like the IT scam, the biotech revolution attracted billions of dollars, deflecting investment from productive uses, while leading many down the road of bankruptcy.

In the 1990s President Clinton and Western European leaders, investors and academics saw a bright future for optical fibers - the third force in the "new capitalist epoch." Between 1999-2000, over 100 million miles of optical fiber were laid around the world as companies spent $35 billion to build Internet inspired communication networks. Today only 5% of the fiber on the ground is "on", but the astronomical costs of lighting and delivering it to the end user has led to a dramatic decline in investment in the communications industry. As in biotech, the collapse has had an impact on the rest of the economy: billions invested in telecommunication companies appears to be wasted. The drying up of capital investment is one reason that the economy has come to a stop. The giants in communication equipment like Lucent Technologies and Nortel have reported losses in the billions, Nortel announced a $19 billion loss in the first quarter of 2001. In the first half of 2001 companies defaulted on $13.9 billion of telecommunication bonds resulting in investor losses of $12.8 billion. Once again the Technical Scientific Revolution ended up bursting like a speculative bubble.

U.S. and European "global supremacy" is built on 3 unstable and unsustainable legs. On one leg it rests on a highly vulnerable and speculative sector prone to great volatility and entering into deep recession. The second leg is the high level of transfers of profits, interest payments and royalties from their respective colonized areas. In the case of Latin America alone over $700 billion was transferred as payments to Europe and U.S. banks and multi-nationals from 1990-98. The third leg of the empire is political power (including the power to print money to cover deficits) and the security that Euro-U.S. states provide to foreign nationals who transfer funds, including billions illicitly secured from their home countries. Political power and the security of the imperial states depend on the acquiescence or consent of strategic economic sectors who are vulnerable to free market competition by rival imperial and non-imperial countries. For example, because of the strong dollar, U.S. steel corporations are having a hard time exporting goods or even competing in the U.S. market.

The problem for Euro-U.S. rulers is how to manage their empires in the face of a growing recession, a deflated IT sector and rising unemployment in economic sectors which are not competitive in the world market.

The New Imperialism: Alternative to "Empire"

Neo-liberalism was always a myth: the imperial states have never completely opened their markets, eliminated all subsidies or failed to intervene to prop up or protect strategic economic sectors, either for political or social reasons. Neo-liberal imperialism always meant selective openness to selective countries over specified time periods in selective product areas. Markets were opened by the U.S. government to products produced by U.S. affiliates in overseas countries. "Free trade" in the imperial country was not based on economic but political criteria. On the other hand Euro-U.S. policymakers and their employees in the IMF-World Bank preached "market fundamentalism" to the Third World: elimination of all trade barriers, subsidies and regulations for all products and services in all sectors. Imperial states' selective free market practices allowed their multi-nationals to capitalize on market opportunities in target countries practicing market fundamentalism while protecting domestic economic sectors which included important political constituencies. Conflict erupted when the two imperial rivals, the U.S. and Europe (both selective free marketers) attempted to pry open the others' markets while protecting important political constituencies.

With the advent of the triple crises of recession, speculative collapse and intensified competition, the imperial countries have resorted to greater state intervention in a multiplicity of sectors: increased agricultural and other state subsidies - $30 billion in the U.S. in 2001.; increased resort to interfering in trade to impose "quotas" on imports (Bush's commitment to the U.S. steel industry) and intensified exploitation of Third World regions to increase the flow of profits, interests and trading advantages (the U.S. "Free Trade of the Americas" proposal) and war, military Keynsianism as in the US attack on Afghanistan.

State managed trade that combines protection of home markets and aggressive intervention to secure monopoly market advantages and investment profits defines the content of neo-mercantilist imperialism. Neo-liberal imperialism with its free market rhetoric and selective opening of markets is being replaced by a neo-mercantilism that looks toward greater monopolization of regional trading zones, greater unilateral political decisions to maximize trade advantages and protection of domestic producers and greater reliance on military strategies to deepen control over crises ridden neo-liberal economies run by discredited clients and to increase military Keynsianism.

Just as the U.S. was the leader in developing its neo-liberal empire and Europe was a follower region so with regard to the transition to a neo-mercantilist empire the U.S. plays a leading role.

In substance, if not in style, the transition to neo-mercantilism began during the Clinton regime and became the dominant strategy of empire building during the Bush Administration.

During the Clinton era, the U.S. "shared" the takeover of Latin America markets and enterprises with the Europeans. For example U.S. banks, energy and telecommunication companies competed with Spanish multi-nationals in the buyout of formerly public enterprises and national banks. The Clinton regime however, sought to weaken European and Japanese competition by signing the North American Free Trade treaty which privileged U.S. business in Canada and Mexico. Washington's success in monopolizing the Mexican market contrasted with the relative decline of its share of newly privatized Latin American enterprises and markets.

Clinton's proposal to extend U.S. monopoly control via Free Trade Area of the Americas (FTAA) was given greater impetus by the Bush Administration - particularly at the Quebec summit of the Americas in April of 2001. The purpose of FTAA is to privilege U.S. companies and exporters operating in Latin America while restricting Latin American access to U.S. markets. While FTAA is presented as a reciprocal trade doctrine, the Bush Administration refused to concede any concessions regarding the so-called anti-dumping regulations which are habitually evoked to restrict entry of competitive Latin products which would take market shares from U.S. companies. Moreover "reciprocity" is a meaningless concept when the two trading regions have such vast inequalities in productive capacity and size in many economic sectors and when infant industries are forced to compete with established giant enterprises. In these circumstances "reciprocity" becomes a formula for U.S. takeovers and the bankruptcy of Latin American enterprises. As we have seen U.S. enterprises in banking, energy, telecommunications, mining, and transport industries have a massive advantage which they have used to displace Latin American competitors. FTAA will decisively obliterate what remains of the Latin American national economies and impose an economic decision-making structure which will be centered in the headquarters of the U.S. multi-national banks and corporations.

Equally important the U.S. state will dictate the rules and regulations that govern trade, investment and patent laws which will reign in the Americas. This will enable the U.S. government to be in a position to combine protectionism at home, European exclusion in Latin America and free markets in Latin America.

A clear example of the protectionist elements of the neo-mercantilist empire is the White House promises to protect U.S. steel plants from overseas competition - including Brazil. In the first week of June (2001) the Bush Administration launched action (a Section 201 investigation into "unfair trading practices") to protect U.S. steel producers from overseas competition. Both Donald Evans the U.S. Commerce Secretary and Robert Zoellick the U.S. Trade Representative publically defended state intervention to protect uncompetitive U.S. steel producers form "unfair trade". The real reason for loss of competitiveness of U.S. manufacturing is the strong dollar and the higher operating costs in the U.S. As the U.S. National Association of Manufacturers stated in a letter to the U.S. Treasury Secretary [the current levels of the exchange value of the dollar were] "having a strong negative impact on manufacturing exports, production and employment." The letter noted the U.S. dollar had risen 27% since early 1997 thus "pricing products out of markets both at home and abroad."

The strong dollar however, is a favored strategy of the powerful financial sector of the U.S. and vital in maintaining the vast flow of overseas capital into the U.S. to finance the ballooning merchandise trade deficit.

Laundering illicit funds by major U.S. banks is an important source of external flows to the U.S. Estimates by a U.S. Senate subcommittee run from $250 to $500 billion a year. Like the earlier mercantilist empire which depended in part on sharing the booty of its pirate predators the neo-mercantilist economy thrives on corrupt rulers who pillage their economies and transfer their illicit funds to Euro-American empires. The strong dollar is one of the attractions of predators and corrupt rulers. It is no surprise that the Bush Administration has significantly weakened its support for an international initiative tightening financial regulation to fight money laundering except for "terrorist" funds.

Mercantilist imperialism in which the imperial state combines protectionism at home, monopolies abroad and free trade within the empire is thus the chosen strategy for maintaining empire and sustaining domestic political support at a horrible cost to Latin America and to the dismay of its European competitors. In pursuit of the neo-mercantilist empire, Washington must increasingly rely on unilateral decisions and policymaking. By its monopolistic nature neo- mercantilism depends on excluding competitor allies and maximizing trade advantages via unilateral state decisions.

The Bush Administration's unilateral rejection of the Kyoto agreement, its unilateral decision to proceed with the new missile programs in violation of existing agreements, its increased subsidies to U.S. agriculture, its unilateral declaration of war against Afghanistan and its attempt to accelerate the FTAA are examples of unilateralism at the service of neo- mercantilist empire building.

The terrorist attacks in New York and Washington have led to Washington carpet- bombing of Afghanistan in the best imperialist traditions, Negri and Hardt, notwithstanding, even as conditions on world markets deteriorate. The alliance building strategy particularly with the E.U. has not modified Washington's pursuit of hegemony. On the contrary, the alliance is built on E.U. subordination to U.S. military command and monopolization of all decisions pertaining to the war, even to a greater extent as was the case in Kosova. What is striking in the early phases of the U.S. military intervention is the degree to which its war demands were totally accepted by the E.U., Russia, China and some Middle Eastern Arab regimes without any explicit quid pro quo. Needless to say, the Afghan intervention and the powerful role of the imperial state in defining the issues, alliances and political circumstances for market transactions hammers another nail in the coffin of stateless empires and strengthens the argument for a theory of a new mercantilist style of imperialism.

Mercantilism, with its heavy emphasis on monopoly profits, unilateral action and particularly state intervention to favor business interests against external rivals has historically been accompanied by armed conflicts and large military expenditures. Contemporary neo- mercantilism is no exception. Accompanying FTAA is a major increase in U.S. military expenditures in Latin America, new military bases, the colonization of air space, shore lines, and rivers and estuaries. Plan Colombia, the Andean Initiative and related military expenditures to militarize the frontiers of Ecuador-Colombia and Panama-Colombia involves over $1.5 billion and hundreds of U.S. military operatives. The subcontracting of Latin American military officials, paramilitary forces and U.S. mercenaries is an integral part of the protection and expansion of neo-mercantilist empire-building. The was in Afghanistan has led to vast increases in military expenditures (100 billion), greater protectionism and military threats on all sides. Imperialism and Empire are indeed doing well - only the "multitudes" are suffering.

After reading "Empire" it is no surprise that reviewers for Time and The New York Times welcomed the book. "Empire" in line with general globaloney theory argues that globalization is a progressive movement in history as imperialism is abolished by intellectual fiat and the systemic alternatives are embodied by an amorphous multitude which lacks any of the tools of analysis and political organization identified with contemporary revolutionary struggles. The book's citation of potted quotes from a sweeping array of thinkers provides the formal trappings for a celebration of U.S. constitutionalism - at a time when its leaders are bombing Afghanistan into the stone age, after sending Iraq and Yugoslavia into the iron age. "Empire" is a sweeping synthesis of the intellectual froth about globalization, post-modernism, post-Marxism, all held together by a series of unsubstantiated arguments and assumptions which seriously violate economic and historical realities. "Empire's" thesis of post imperialism is not novel, it is not a great theory and it explains little of the real world. Rather it is a wordy exercise devoid of critical intelligence.

(*) Empire (Cambridge: Harvard University Press, 2000)