Global Corporate Capitalism and the State

From the editorial for no. 156 of ROAPE, Peter Lawrence discusses an issue that deals with the state and its function within the economy. ROAPE has since its inception engaged with issues relating to the nature and role of the State in Africa. In 1976, ROAPE focused on the class character of the state, debating which factions of the petty bourgeoisie, or the ‘bureaucratic bourgeoisie’, or a ‘political class’ dominated it. While the Debates section of this issue is devoted to the ROAPE/Third World Network workshop on radical political economy and industrialisation in Africa held in Accra last November. This is the first of a series of three workshops which ROAPE has sponsored across the continent in cooperation with local organisations. Readers can access these debates for free from our website by registering and logging in here.

By Peter Lawrence

The articles in this issue are in one way or the other concerned with the state and its function within the economy. ROAPE has since its inception engaged with issues relating to the nature and role of the State in Africa. ROAPE no. 5, published in 1976, focused on the class character of the state, debating which factions of the petty bourgeoisie, or the ‘bureaucratic bourgeoisie’, or a ‘political class’ dominated it. The state itself was variously labelled by the contributors to that issue as ‘relatively autonomous’, ‘overdeveloped’, ‘unsteady’ or in the case of Amin’s Uganda, ‘unhinged’. In the Global North, the state was not regarded as Marx and Engels’s executive committee of the bourgeoisie, but rather as relatively independent of class forces, acting as a referee between capital and labour and ensuring some degree of fair distribution of income and effective provision of health, social welfare and education services. This view fitted well with the idea of a capitalism declining under the weight of its own contradictions and socialism being on the agenda for the near future. In Africa, as in most of the Global South, the state, was seen as the necessary principal actor in mobilising resources for investment for development.

However, over the period in which neoliberalism became the dominant ideology buttressing capital’s political fight back against labour’s increasing share of value and the ensuing falling rate of profit, especially from manufacturing, the order of the day has been to force the state to retreat. Financial liberalization, the privatization of state assets, the subcontracting of public functions to private enterprises, curbs on public expenditure, and laws curtailing the rights of trades unions were the building blocks of a process that saw capital recapture a greater share of value. These policies were not only pursued by governments but also became the key parts of the policy instructions to countries of the Global South seeking help from the international financial institutions, along with other ‘liberalisation’ measures concerned with exchange rates, capital flows and trade. Yet these recommendations flew in the face of the history of the very successful East Asian economies, especially South Korea, examples of a ‘developmental state’ in which investment was directed by a technocratic elite to specific productive activities as part of a manufacturing industrial and rural development growth strategy involving parallel state investment in education, skills and social welfare.

The state under neoliberal capitalism has been undergoing a process of what can best be called colonisation by capital such that the interests of the dominant global capital, both financial and industrial, were effectively aligned with those of the state. Now commonly known as ‘state capture’, this alignment has been enabled by the ‘revolving door’ in which political figures move into business and back into politics and vice versa, by business lobbying, by business funding of political parties at election time, and, as a consequence of privatisations and sub-contracting of public services, by an increasingly systemic relationship between capital and the state. There have always been close relations between powerful business lobbies and governments, but nowhere near as blatant and corrupt as they have become.

Today, the neoliberal project is under attack as never before, especially in the Global South as its failure to achieve real structural change becomes increasingly evident. Even in the global North, it is clear that especially since the 2007-8 financial crash, there has been a failure to deal with the causes of that crisis and a new one is predicted to be imminent. For the countries of the African continent, the ‘developmental State’ is looking an attractive label to adopt, even if the policies that are being pursued by those countries that adopt it, with the possible exception of Ethiopia, do not encompass the range and intensity of execution that characterised East Asian developmental states.

The research articles in this issue relate to many of these themes, and especially in the case of the first three, to the ways in which global corporate power manipulates the state in its own interest, supplanting previously national capitalist class influence over government policy. In Malawi, Julia Smith and Kelley Lee show how the colonial and post-colonial states have pursued policies that have been in the interests of the tobacco industry.  In the colonial period, policy detrimental to the growing number of smallholder growers was determined in favour of estate owners and tobacco companies. With independence, as some of the estates passed to political allies of President Hastings Kamuzu Banda, policy reinforced their new economic power once again to the disadvantage of the small holders, both in terms of the price they received and the quality of leaf they were permitted to grow. The increasing domination of the global industry by a few tobacco corporates then led to the state supported growth of contract farming, once again ensuring that the estate producers and the global corporates took a larger share of value. They also gained sufficient power to prevent the state from challenging them by changing policies in favour of smallholders. The authors point to another aspect of state capture which emphasises the importance to the Malawian economy of tobacco cultivation even though Malawians receive little of the value, with the corporates blaming the anti-smoking lobby for falling demand and lower prices.

‘State capture’ is a phrase which in South Africa came to be associated with the relationship between the Gupta family and their business activities and the then President, Jacob Zuma. Less attention has been given to other global and local interests that have been given favourable status in that country and which can also be seen as ‘state capture.’ David Masondo documents the way in which the South African motor industry has been subsidised by what he terms the ‘business nanny state’ as opposed to the ‘developmental state’ under which banner this policy sometimes has appeared. Unlike a development state which directs investment, in partnership with enterprises and with the agreement of the capitalist class, to specific areas of the economy in order to, for example, maximise upsteam and downstream linkages, the state in this case can only impact on the levels of production and exports. Masondo argues that what the Motor Industry Development Programme has done is to reinforce the business strategy of the global motor corporations that control the industry, a strategy which ensures their profits by lowering production costs through state incentives, subsidies and lowering of tariffs so that more production is located in the country. Whereas in the case of South Korea, for example, vehicles were produced under licence to begin with, but the developmental state ensured that these domestic producers could acquire and develop the technology not only to produce the whole car, rather than assemble imported parts, but develop automobile technology further so as to produce new locally designed models, thus keeping more of the value within the economy. Masondo shows that the original domestic automobile industry operating under licences from foreign corporates did not follow the South Korean path but was allowed to be subsumed into the strategies of the dominant global firms whose continued presence in the country was assured through state financial support.

The consequence of neoliberal market ‘freedoms’ is that global corporations, like those controlling the South African motor industry, are able to move capital around the world wherever it can generate the highest returns, with the supplicant governments offering financial incentives to compensate for higher start-up or operating costs. Hence there has been a call, especially from progressive quarters, for instituting capital controls. Ilias Alami examines the history of capital controls and in particular their class character in reproducing capitalist social relations. He argues that it is important to discover the class dynamics behind capital controls especially given the calls from trades unions and progressive groups and academics for controls over the flows of money-capital across borders. Whereas previous capital controls under the apartheid state were necessary to maintain state power in the interests of Afrikaner capital, for any new capital controls to be progressive, they would have to have the objective of transformation of social relations with a greater empowerment of labour. The range of policy measures which Alami suggests to achieve this objective, involving as they would substantial regulation of foreign exchange and other financial markets, does raise the question of how far state capture has gone that would prevent such policies even being proposed by a South African government (or most others around the world). The political question of how to mobilise popular support for such policies in the face of global capital mobility remains as yet unanswered.

The state, whether captured or not, interacts with its citizens in many guises. One is through the collection of taxes. In a fascinating account of boat traders and their relations with state agents on the River Congo in the DRC, Maria Eriksson Baaz , Ola Olsson  and Judith Verweijen show how payments to different state authorities on the river by boat traders carrying goods and people along the river are regarded by the traders as legitimate taxes and the extent to which they regard such payments as official, the DRC authorities having made certain payments illegal. In spite of their illegality, many of these payments are still made to recognised state authorities such as military personnel stationed on the river. One factor determining the legality of a payment is whether it provides a service worth paying for, rescue from capsizing for instance, rather than whether it is within the letter of the law or collected by state agents. The authors suggest that our distinctions between official and unofficial, or indeed between legitimate and corrupt, are not necessarily relevant or helpful in understanding how such taxes are accepted and how the money collected is apportioned. In this case we see taxation, both legal and illegal used to fund the provision of services and used to remunerate the service providers directly in the absence of a conventional paid employment system.

The Debates section of this issue is larger than usual as it is devoted to the ROAPE/Third World Network workshop on Radical political economy and industrialisation in Africa held in Accra last November. This is the first of a series of three workshops which ROAPE has sponsored across the continent in cooperation with local organisations. A similar version of the second, held in Dar es Salaam in April of this year will appear in a forthcoming issue. These workshops deliberately avoided an academic character and included a substantial proportion of activists from across the continent as well as academics and those who fit both descriptions. The feedback from participants has been very positive as is evidenced by the response of speakers and other participants alike in respectively submitting their presentations and blogposts. The workshops have been filmed and we are planning for them to be available on our website. Most importantly for ROAPE, they reflected the journal’s original political purpose: to deliver a forum for progressive and socialist activists and academics on the African continent which provides an analysis of African realities that will assist, however modestly, progressive forces in their struggles against corporate imperialism. The workshops also reflect the other founding purpose of the journal: to find or stimulate answers to the question of what is to be done to effect radical change, a question more on the agenda today than ever before.

The full issue can be accessed on the Taylor and Francis website here

Peter Lawrence is Emeritus Professor at the Faculty of Humanities and Social Sciences at Keele University and has taught in Tanzania, Uganda, and Canada and spent periods of research in Tanzania, Hungary, Spain and India. He is a founding member of ROAPE and a member of the EWG.

Featured Photograph: part of the Diego Rivera 1934 mural ‘El hombre en cruce de caminos’ (‘Man at the Crossroads’) in the Bellas Artes building, Mexico City.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.