Dodgy dealings

To what extent is the neoliberal paradigm limiting in the study of ‘offshore’?

this essay was written in 2007 for International Political Economy II, an International Relations course at Sussex University

Neoliberal economists typically ignore the existence and role of the offshore economy in their analysis. This is an extraordinary omission, which speaks volumes about their political values.

(Christensen 2007:216)

This essay first critically examines the construction of ‘offshore’ both within the parameters of a neoliberal analysis (1)  and in light of some of its critiques, looking initially at the broader context of economic globalisation’s supposedly inexorable advance, and then at offshore understood as a competitive state strategy in natural response to the exigencies of the global market. I then explore moments of disjuncture that threaten the smooth functioning of the neoliberal narrative, arguing that a genealogical or more broadly poststructuralist/constructivist methodology is far more useful to the study of offshore than neoliberalism’s ideological postulations. I specifically interrogate the notions that offshore represents an outcome or phase of a linear teleology of global finance, and indeed that the phenomenon of offshore is a mechanistic, ‘automatic’ development taking place outside of human or political volition. Finally, I consider the role of the neoliberal framework in the process of offshore’s ‘moral dislocation’, concluding that neoliberalism seeks to frame highly political and morally-charged operations within a bland discourse that insists on the neutrality of the market. Thus it is necessarily flawed in its contribution to the study of offshore, because it attempts to disguise the invariably political and pragmatic functions of offshore in the contemporary global political economy.

I

[neoliberal narratives, and other stories]

The present preoccupation with the theme of ‘globalisation’ among IPE scholars and other contemporary discourses tends to construct offshore as something which reflects, or indeed exemplifies, the increasing pressures towards deregulation, the rise of finance, and the corresponding decline of the state (in other words, the increasing subservience of the once sovereign state to global capital). An observable demarcation is drawn: first, the postwar Bretton Woods international order of “embedded liberalism” (Ruggie 1982), characterised perhaps somewhat nostalgically as the era of regulation and the general ability of states to exert some form of control over capital; the Fordist ‘social-compromise’ in which state sovereignty could be used to secure certain obligations from business and finance. Second, the international order’s subsequent evolution from the late 1970s onwards to the present neoliberal or post-industrial era, in which global capital has thrown off its state-imposed shackles to become the “mastering force” (Helleiner 1993:20) in world politics. According to one prominent commentator, “[l]ike a phoenix risen from the ashes, global finance took flight and soared to new heights of power and influence in the affairs of nations” (Cohen 1996:268). This development is presented as a natural progression, in distinctly linear terms; from the local to the national to the transnational (for such an evolutionary narrative, see for example Martin 1994:255). It is something bound up with the inevitable advancement of humankind and its increasingly efficient and superior technologies of communication. Furthermore, to a great extent, globalisation is seen as something apolitical and beyond our control – either as individuals or as national governments.

[T]he evolution of the international financial system… characterized by the acceleration of international capital movements … [has] challenged the capacity of the state to provide effective governance not only of financial markets themselves, but also of economic affairs generally.
(Cerny 1994:332)

Within this broader structure, then, the presence of offshore centres and tax havens – characterised by low regulation and low taxation – is understood to exert a downward pressure on governments, compelling them to keep regulation and corporate taxation low (Johns and Le Marchant 1993). This naturally undermines the sovereign ability of the nation-state to make policy, wherever policy objectives conflict with the need to maintain conditions that attract investment. In business circles and neoliberal thought generally, this development is welcomed as global capital’s somewhat automatic response to the “myriad of taxes and regulations” it is forced to negotiate (Hampton and Abbott 1999:13), and as evidence of governments’ slow adaptation to the requirements of global business. Though it is not necessarily accurate to claim that neoliberal scholars and policy-makers ‘ignore’ the presence and role of offshore, it is certainly true that, as far as possible, offshore is incorporated into existing frameworks of analysis – it becomes “part of the neo-liberal ideology of ‘deregulation’” (Picciotto 1999:64) – rather than presenting a reason to revise those frameworks. For example, despite the obvious logical inconsistencies that arise from a simplistic analogy between the firm and the state, prominent neoliberal economists like Milton Friedman seek to apply unproblematically the notion of free ‘competition’, as a mechanism to maximise efficiency, to the state.

Competition among national governments in the public services they provide and in the taxes they impose, is every bit as productive as competition among individuals or enterprises in the goods and services they offer for sale and the prices which they offer.
(Friedman 2001)

Outside of neoliberal and business circles, such developments are often lamented rather than celebrated; however, significantly, even critical accounts tend to lapse into the same determinism exhibited in the analyses cited above. Global capital remains the prime mover, its internal dynamic propelling it further and further from any state control, rendering it increasingly able to “effectively to cast judgement on the fiscal and monetary policies of nation states themselves through the disciplinary fear of capital flight” (Hampton and Abbott 1999:2). This notion of the “capture of the state” (Christensen and Hampton 1999) or the “competition state” (Cerny 1997) resonates with Simmel’s Philosophy of Money, in which he treats ‘money’ as something essentially abstract and which can therefore manipulate human geographies and territorialities – it “has no definite relationship to space: it can exercise its effects upon the most remote areas” (1990:504). Offshore, Picciotto notes, is understood as “an expression of the limits that capital can impose on the forms and functions of the state” (1999:48).

The danger of such representations, however, is their tendency to dichotomise ‘state’ and ‘capital’ too simplistically, without serious investigation into the historicity and complexity of these two naturalised categories. They also seem to characterise the market, finance, or capital more broadly “as an autonomous powerful agency” (de Goede 2005:4) – in other words, as something separate from the human and collective subjectivities which produce and sustain it (see Roberts 1994:91). This is both ahistorical and disempowering, since it seeks to present as natural or ‘technical’ certain power practices which not only find their legitimation in human discursive practices, but also clearly benefit certain groups of people at the expense of others – as Scholte notes, “offshore finance has been largely reserved to large corporations and so-called high net worth individuals” (2005:21; see also Palan 2003:187). Any meaningful critique of this system, then, must interrogate not only the material practices of a system which appears unjust or amoral, but also the discursive practices which reinforce and legitimise it. Narratives of ‘globalisation’ and offshore finance lose their analytical value once they become ideologies or “legends”, identifiable because they run “far too smoothly” (Auerbach, cited in Shapiro 1993:56).

II

[the pertinence of poststructuralism]

International Political Economy remains one area of IR which has yet to embrace poststructuralist thinking wholeheartedly, or even engage with it in a serious way (de Goede 2003). Many IPE scholars do not recognise its value, arguing that postmodernist preoccupations with discourse and knowledge practices are of limited use to a discipline characterised and constrained by certain empirical and material realities (see, for example, Laffey 2000:441). As Campbell notes, power has become conceptualised in mainstream IPE as “a commodity to be wielded by agents” (1996:18), in contrast to poststructuralist theorisations which understand power as constitutive of social relationships and bound up with knowledge and discourse. Yet scholars who dismiss poststructuralist approaches on the grounds that they deal exclusively with discourse present a mistaken characterisation of one central tenet (2): namely that discourse is constitutive of material practices – “[t]o understand it simply as a discourse is to misunderstand discourse’s materiality” (Thrift 2001:430). For example, neoliberal narratives which posit the actuality (and inevitability) of the ‘globalisation’ process in fact materialise and legitimise that very process through the normalisation and repetition of otherwise banal concepts such as ‘going global’ or ‘global strategies’, therefore having a ‘real’ effect on actual processes and decisions made in business models, financial practices, law, and government. These discourses are then validated by a constructed ‘reality’ which, in circular fashion, then reinforces the validity of the discourse. The appearance of ‘truth’ thus “resides in the enhancement of the feeling of power” (Nietzsche 1967:290), which masks the utilitarian meanings of truths.

Orthodox approaches to historical phenomena – which construct such ‘legends’ as those described above – tend to first typologise a particular structure or reify a particular process or idea, before reading history backward in order to provide the teleological narrative to explain its realisation. This kind of approach “aims at dissolving the singular event into an ideal continuity… events are reduced to accentuate their essential traits, their final meaning… We want historians to confirm our belief that the present rests upon profound intentions and immutable necessities” (Foucault 1987:231). Genealogy, by contrast, (see Nietzsche 1998 [1886]; 1969 [1887]; and Foucault 1987) as a historical method developed by poststructuralist scholars, seeks out the suppressed alternatives; the historical contingencies; the discursive foundations for what is now perceived as natural or inevitable. Thus if ‘offshore’ can be revealed to be the production of conscious, deliberate and ongoing reconstructions of statehood, then uncritical narratives of globalisation and deregulation can be greatly undermined. Furthermore, this may enable a radical understanding of knowledge/power practices in the global political economy that invests criticism and discursive deconstruction with transformative potential.

Examples abound in which the simplistic neoliberal narrative is called into question or, alternatively, rendered entirely irrelevant. We can point, for instance, to Abbott’s (1999) investigation into the offshore financial centre Labuan, the “pet project” of Malaysia’s ex-prime minister Dr. Mahathir. He details how the Malaysian government poured resources into Labuan’s development, and yet how its central motivations are not primarily rational-economic; nor can they simply be attributed to a strategy of accommodation to global financial exigencies as implemented by the archetypal ‘competition state’. Rather, key ideological factors must be acknowledged, such as the fact that East Malaysia (where Labuan is located) is thought to lag behind the west of the country in terms of economic development, or more broadly the context of ‘Vision 2020’, Mahathir’s expressed intention to make Malaysia a fully ‘developed’, ‘modern’ and industrialised nation by the year 2020. Reputation also remains a primary concern – as one commentator put it, “if you’re not one of the top 200 banks in the world, they’re not interested” (cited in Abbott 1999:195) – and potential operators are subjected to strict criteria to establish their credentials. Further motivations include the development of Islamic banking and Islamic offshore finance, and also certain nationalistic or developmental concerns: namely, particular benefits generated for the Malaysian economy, such as the creation of a captive market and the improvement of Malaysia’s financial system more generally (1999:197-202). The significance of such factors is highlighted by the relatively negligible impact of Labuan’s OFC status for island employment, or by the (similarly negligible) proportional contribution of offshore finance to both Labuan’s economy and Malaysia’s economy on the whole. In turn, the motivations behind international banks’ decisions to commit to the Labuan OFC project should also not necessarily be viewed in purely economistic terms; in fact many were concerned to show visible support for the project in order to demonstrate political commitment to Malaysia’s (or Mahathir’s) overall developmental vision.

Indeed, any investigation committed to disturbing the too-smooth narratives of globalisation and deregulation will find that such pragmatic, non-economistic considerations are not, as the orthodox neoliberal might have you believe, an exception. Sovereignty is not necessarily being undermined; the state is not necessarily becoming subservient to the exigencies of global capital. In fact, as Palan (1998) argues, offshore exemplifies and makes explicit the palimpsest of pragmatic – and manifestly political – processes by which statehood and sovereignty are being continually reconstructed. ‘Sovereignty’ itself, which in contemporary discourses tends to be conceptualised as having a fixed (or fixable) meaning, is shown to have gone from representing a religious claim to the land, to embodying an independent, secular right over a certain territory. Later still it became bound up with emerging ideas about the ‘nation’ – the “imagined community” (Anderson 1981) – as agentive force, the symbol of national ‘self-determination’. And this was further combined with juridical capabilities, or ‘the right to write the law’. The present moment of ‘offshore’ marks yet another reconstruction of sovereignty, characterised by the “increasing use of sovereignty as a commercial asset” (Palan 1998:629-30). Palan introduces the notion of “sovereign bifurcation” (1998:627) to describe the strategy states employ in order to simultaneously pursue two contradictory objectives: the “traditional” forms and functions of statehood, and the “commitment to transnational capitalism” (2003:11) – without undermining state ‘sovereignty’ itself.

The very concept of abstracted (rather than literally geographical) ‘shores’ is also revealed to have developed over time in a piecemeal and instrumental fashion (Palan 1998:635-7). The principle of the Law of the Sea, which only became widely accepted around the beginning of the nineteenth century, was preceded for several centuries by actual claims and unilateral assertions over particular waters – thus, and for quite pragmatic reasons, the notion of sovereignty came to incorporate the important precedent of separation between literal, physical boundaries and juridical or ‘fictional’ boundaries. This also provided a model for the division, alteration, and limitation of ‘sovereignty’. A further example of particular import for the study of offshore is the concept of corporate ‘residence’, which originates in the fragmentary legal-pragmatic response to the proliferation of corporations towards the beginning of the twentieth century, and the need for the state (in this case, the UK) to demand taxes from companies conducting their “real business… where the central management and control actually abides” (Lord Loreburn [1906), cited in Picciotto 1999:49). However, such definitions are contestable from place to place, and the system has to be negotiated using a sort of trial-and-error methodology, in order to deal with flexible avoidance tactics of increasing complexity. “The tax authorities of the developed countries have done their best to combat each device as it became known… [but] they have hardly challenged the fertile minds and flexibility of the ‘tax planning’ industry” (Picciotto 1999:59). Significantly, the developments outlined above do not represent an evolutionary narrative; no latent telos underlies each progression. Rather offshore “took shape over time in bits and pieces and in a series of discrete policy decisions” (Palan 1998:640).

III

[offshore as moral dislocation]

Why, then, should neoliberal (and other) accounts present the construction of offshore as a natural development? Why intentionally relinquish control over a system of such manifest importance? The answers to these questions appear just as instrumental, pragmatic and discrete as those motivations which ultimately contributed to the very creation of the offshore world. It has already been noted that offshore finance is in practice almost exclusively reserved for the extremely wealthy; high net wealth individuals and successful corporations display a remarkable tendency to consider themselves somehow above, or external to, national or social (and, some would say, ‘moral’) obligations such as taxation (Christensen and Hampton 1999:170). One commentator (Baker 2005) estimates the ‘uphill’ flow of capital – that which flows from poor to rich countries through the activities of wealthy individuals and companies – at roughly US$500 billion every year, dwarfing the volume of aid flowing ‘downhill’. Another study (Boyce and Ndikumana 2005) asserts that sub-Saharan Africa is in fact a net creditor to the rest of the world, since “external assets (i.e. the stock of flight capital), exceed external liabilities (i.e. external debt)” (Christensen 2007:218-9). Christensen explains this apparent paradox by noting that whilst the assets are privatised, largely channeled through or existing within offshore finance and banking centres, the debts exist in the public realm, falling upon the public institutions of government. He further highlights how activities traditionally understood as ‘corrupt’ and ‘criminal’ account for approximately 35 per cent of transnational “dirty-money” flows from poorer states; and yet how ‘acceptable’ practices such as “illicit commercial activity, incorporating mispricing, abusive transfer pricing and fake and fraudulent transactions account for 65 per cent of such flows” (Christensen 2007:219). Clearly, what Thrift and Leyshon term the “regulatory dislocation” of offshore (1997:61) may aptly be called a ‘moral dislocation’ also. As Roberts notes, “[f]ast-paced and complex international financial practices can slide between something that may be illegal according to one jurisdiction’s laws but perfectly legal according to another’s” (1999:133).

The moral dislocation of offshore, however, goes beyond this relativism created by the inconsistencies between different jurisdictions. What characterises the neoliberal conception of offshore is its framing of the kinds of processes outlined above as non-moral, as governed and motivated by basic market logic, or the logic of capital. This logic is seen to be “fairer”, as Einaudi (1928:35-6) asserts, in reference to the example of tax havens exerting pressure on other jurisdictions to reduce tax levels to the lowest rate possible. “Tax is a cost of doing business so, naturally, a good manager will try to manage this cost and the risks associated with it. This is an essential part of good corporate governance” (P.J. Henehan, senior tax partner of Ernst & Young, cited in the Irish Times, 7/5/04). Indeed the whole discourse of offshore and global financial investment, despite being presented as rational, even mechanical, is couched in a particular ethic of rights and freedoms which transcend the nation-state and its particular jurisdiction. As Palan (2003:14) emphasises, highly ideological assumptions underlie presentations of natural ‘rights’: of human ‘rights’ (the absolute freedom of the investor); sovereign ‘rights’ (the freedom of states, even little ones, to make their own laws); and even corporate ‘rights’ (the freedom to move elsewhere to avoid what is deemed to be excessive regulation or taxation). The global political order becomes “premised upon the dominance of the investor and reinforcing the protection of his or her property rights. The mobile investor becomes the sovereign political subject” (Gill 1998:25). Tax becomes a “cost” rather than a fundamental social obligation.

It is to this depoliticisation of finance, necessitating not “some sort of lapse or mistake but an express operation of… technologization: a reduction to calculability” (Edkins 1999:1), and the willful disregard to the social and political implications of financial activity, that I refer when I speak of the ‘moral dislocation’ of offshore. The insistence that offshore represents the subordination of the state to financial markets is itself ideological: as with the very origins of modern accounting and bookkeeping, the materiality of offshore structures – and not just the knowledge about it – has been discursively constituted “through the reiteration of norms” (Butler 1993:10). In other words, these are performative discourses; they tend “to create what [they] purported to describe” (Poovey 1998:56; original emphasis). Attempts to present it otherwise, to dislocate material practices from discourse and morality, have a clear ideological motive:

offshore provides the perfect legitimization of the goals of neoliberalism in terms of pragmatic social aims, defined as “what we can reasonably expect under the circumstances,” conveniently forgetting that the realm of possibility is a socially constructed one.
(Palan 2003:15)

Rather than attributing the creation of offshore to a depersonalised dynamic – the transcendental power of capital – a poststructuralist approach demonstrates a constructivist insistence on human agency. This is crucial to any critical interpretation of offshore, since it necessitates a historicity which “means that global changes are not an inexorable economic process” (Picciotto 1999:43; emphasis added). To answer the question posed at the beginning of this section – why consciously seek to remove human agency and control from the global financial system? – it is clear that neoliberal discourses serve to obscure the pragmatic and manifestly political functions of offshore in the global political economy, whilst legitimising certain practices and ideological assumptions which they seek to present as natural and apolitical. As such, the neoliberal paradigm is not merely of limited use to the study of offshore; in fact, it must be decisively contested.


(1) In using the term ‘neoliberalism’ I refer only intermittently to individual ‘neoliberal’ writers: throughout the essay I use the expression more generally to denote certain elements of neoliberal doctrine of particular pertinence to this study, such as the belief in deregulation and minimal state intervention, the abstraction of finance from social or political volition, or the adamantly materialist approach to a system manifestly more “fictitious” than any before it (see for example Roberts 1991:91; Picciotto 1999:48). These of course influence and characterise other theoretical approaches that would be loth to find themselves under the ‘neoliberal’ banner; these may too come under criticism, though I refer to them as ‘orthodox’ or ‘mainstream’.
(2) Although ‘poststructuralism’ and ‘postmodernism’ are at best umbrella terms used to describe a broad range of theories and theorists (some of whom reject such labelling outright) and cannot therefore accurately be said to collectively present any coherent central “tenets”, it is possible to attribute certain key themes or preoccupations common generally to ‘poststructuralist’ IR and IPE. Namely, the notion that power and knowledge mutually produce one another, and the rejection of a universal or objective reality or truth – intellectual and other endeavours are held to be “battlefields of contending representations” (Devetak 1996:185). Thus dominant discursive ‘truths’ constitute material ‘realities’.

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Is Marx relevant to international relations today?

this essay was written in 2007 for Classical Political Theory and International Relations at Sussex University

Marx – and by implication, Marxism – is frequently disregarded, arguably needing “to be returned to the nineteenth century where many suspected he had always belonged” (Gamble 1999:128). This opposition comes not only from those who have an interest in perpetuating capitalist social relations, but also more recently from the Left, contending that the materialist premise of historical materialism makes it ill-equipped to conceptualise other forms of exploitation and domination. However, there is clearly no definitive Marxism, and there may not even be a definitive Marx. This essay focuses specifically on a ‘neo-Marxist’ theorisation of the capitalist manifestation of power, evaluating its implications for international relations. I first outline the capitalist redefinition of power, arguing that the economic/political divide constitutes a systemic continuity making Marx’s critique still highly relevant. I then assess the quite formidable implications for contemporary international relations, both as a critical interrogation of the norms of orthodox IR, and for the way we presently theorise the ‘international’, looking specifically at the ‘globalisation debate’. I conclude that one central problem remains regarding this Marxist theorisation of the international: namely that the normative concern of historical materialism can engender hostility towards contemporary ‘postmodern’ themes, which may ultimately prove an intractable obstacle to further intellectual enquiry.

I

Power depoliticised: the uniqueness of capitalism

Capitalism’s redefinition of the ‘political’ derives from a real shift in the nature of power, which formed a fundamental part of the historical transitions to capitalism in those European societies that were first to do so. Recent scholarship, using Marx’s understanding of the economic/political dichotomy as an artificial differentiation of capitalist power, has begun to theorise alternative accounts of the process of modern state-formation and its attendant concepts of ‘state’, ‘civil society’ and ‘market’, situating their construction within the historically specific development of the capitalist system. Teschke’s analysis emphasises the uniqueness of this manifestation of power, noting that in pre-capitalist Western Europe social relations of property were at once both ‘political’ and ‘economic’. Those who exercised direct control over production processes were part of a system of “vertical relations of subordination and horizontal relations of co-ordination” (2006:536) forming a highly complex power-system that was far more precarious than the later manifestation of capitalist power, since sovereignty was fragmented or “parcellised” (Anderson 1974) and authority was “personalised” or direct (Teschke 2006:538). The construction of the English state, the formative moment of which Teschke locates in the Glorious Revolution making ‘sovereign’ power conditional on parliamentary approval, embodied the exceptional conditions of the capitalist configuration of power relations – namely the economic/political or private/public split. It enabled a “de-personalization of public authority… as accumulation was prosecuted increasingly in the private sphere of production, whereas the British state assumed, if not overnight, the role of the general public guardian of a private property regime” (2006:539).

The state in capitalist society is therefore defined by its abstraction from ‘civil society’, from private property and the market, and from the processes of production and surplus extraction (Rosenberg 1994:123-8). Parallel to this, the uniqueness of capitalism is also constituted by civil society, as the state’s necessary counterpart, characterised by formally ‘free’ individuals engaging in exchange relations – in other words, the market. This appearance of freedom is caused by the shift in the nature of power from direct domination, which characterised pre-capitalist society, to the impersonal exigencies of the market – “the dissolution of these relations into a general form” (Marx 1973:164). Power is de-personalised, automated, abstracted to the market’s anarchic structure. Under this system, in which “the ‘moment’ of coercion is separate from the ‘moment’ of appropriation” (Wood 1995:30), subordinate individuals are far less able either to comprehend their domination, or to resist it. This differs clearly from comparatively precarious pre- or non-capitalist power structures. Thus it can be seen that the system’s unique strength derives from its depoliticisation of Economy, whereby “the totalizing logic and the coercive power of capitalism become invisible” (1995:245).

This historical transformation of the nature of power has been buttressed, of course, by an accompanying ideology. Yet the conceptual separation of Economic and Political not only constituted a basic assumption of classical political economy, but also continues to be accepted and reproduced in contemporary intellectual discourses, having taken on the appearance of a self-evident truth. This is certainly true of Neoliberal and Realist analyses, but also of many Marxist accounts, particularly ‘base/superstructure’ theories. Yet Marx in fact saw no such separation; he understood Economy as Political, both in terms of the power relation between capitalist and worker, and in the structuring of broader social relations (Wood 1995:20-1). The abstraction of ‘economics’ from processes of domination and exploitation divests economic exchanges of their political content, creating the appearance of a neutral, impersonal market. Furthermore, it necessitates a separate and specialised public realm in which ‘political’ practices are conducted, exemplified by the construction of the modern state as articulated above. Hence power becomes differentiated into the private (market) and the public (state), but “the differentiation of the economic is in fact a differentiation within the political sphere” (Wood 1995:31; emphasis added).

Marx challenged these assumptions of classical political economy in order to explain how these economic processes came to be understood “as the inviolable natural laws on which society in the abstract is founded” (Marx 1973:86), an observation which remains entirely applicable today. The absolute impunity with which actors in the ‘economic’ realm are permitted to carry out market transactions with serious social consequences – companies using sweatshop labour, or IMF ‘structural readjustment’ programmes, to give a few pertinent examples – can only be possible if this false dichotomy remains intact. Thus Wood’s emphasis on the systemic unity of capitalism is clearly justifiable, since this element of Marx’s analysis remains fundamental in explaining contemporary structures of domination. Despite capitalism’s unquestionable evolution and adaptation over time, certain defining elements, including the way in which the exercise of power is redefined and thus obscured (which Marx was first to identify and critique in such a way), continue to characterise social relations even now.

II

Implications: IR theory and the ‘international’ 

Thus the very idea of the ‘international’, and its widely accepted definition as a separate, externalised realm governed by a separate logic to ‘society’, is undermined. If, as this essay argues, ‘state’ and ‘society’ form a constructed (rather than natural) dichotomy; if power is revealed to reside elsewhere than merely the ‘political’: what is to be made of the conception of international relations as inter-state relations, or of the notion of national or state interest? Under this dominant paradigm how can we theorise, for example, the actions of multinational corporations, which exercise their power across ‘state’ boundaries whilst remaining chiefly within the apolitical realm of ‘civil society’ and its market imperatives? In short, we can’t. This theory constitutes a direct challenge to IR’s dominant Neorealist paradigm in which modern categories and social forms are often assumed to be natural, timeless, and universal. ‘Civil society’; ‘the state’; ‘natural law’; ‘individual freedom’: these concepts crumble (or at the very least, quaver alarmingly) under a critical analysis which locates their establishment firmly within the European capitalist experience.

Indeed, in opposition to the positivist assumptions that dominate the discipline in its present condition, orthodox IR theory can be better understood “as aspects of contemporary world politics that need to be explained [rather] than as explanations of contemporary world politics” (Walker 1995:6), being part of the institutionalisation and legitimisation of the particular norms and ideas which constitute the capitalist logic. Of course, this criticism of IR has already been made in reference to its establishment as an academic discipline, heavily determined by normative concerns surrounding security, diplomacy and inter-state conduct (Bierstecker 1999:3). It is also evident in contemporary practices whereby ‘political’ determinants limit the direction and scope of intellectual enquiry (Smith 2002). And yet even aside from any ethical concerns about the autonomy of research and education, a deeper problematic emerges. Namely that, as Teschke and Rosenberg demonstrate, the analytical constructs much mainstream IR theory unapologetically employs are revealed to be thoroughly embedded in, and constitutive of, the historical construction of capitalist relations. “Epistemologically, Neorealism’s survival is predicated on its move to cut off the political from the social” (Teschke 2003:274) and thus preserve a relationship which obscures social mechanisms of power, treating these as automatic, whilst maintaining a designated sphere within which IR theorists may theorise. Unfortunately any theory which reproduces existing structures of power ceases to be of explanatory value, and this may be said not only of Neorealism, but of Neoliberalism and a large proportion of political ‘Marxism’ too. Hence whilst these schools constitute the mainstream, the discipline will remain principally a “science of domination” (Teschke 2003:274). The relevance of Marx to international relations theory can therefore be understood primarily in terms of a critical interrogation of the most basic, underlying assumptions of the discipline – even the elemental internal/external analytic divide. By historicising the construction of these assumptions, it becomes possible to relativise and thus completely undermine the universalising claims of orthodox theories of the ‘international’.

How then, having established the critical value of this approach, can it be used constructively to contribute to contemporary debates in IR? According to Justin Rosenberg, it is the approach best equipped to conceptualise ‘globalisation’. For what distinguishes a Marxian analysis from, for example, the postmodernist approach to which Wood so disdainfully refers for its emphasis on fragmentation and heterogeneity (1995:1-4; 256-7) – or indeed from Neorealism’s backward projection of contemporary social forms – is Marx’s conception of capitalism as possessing a uniquely totalising or ‘globalising’ dynamic. “[F]rom the cosmopolitan assertion of the Communist Manifesto onwards… Marxism has seen world affairs confidently in terms of a single world process” (Halliday 1994:50). Building on Trotsky’s notion of ‘uneven and combined development’, Rosenberg (2007) argues that modern capitalism radically transformed the nature of world-history and historical change itself. Pre-capitalist interactive systems of social development should be characterised as ‘inter-societal’ rather than ‘global’ since they were episodic and not worldwide; only under capitalism is it actually possible to speak of the overall logic of a globalising process. The process does not produce equal results in different societies, but this ‘unevenness’ is characteristic of, not contradictory to, the structural unity of capitalist development. Rosenberg rephrases Thomson’s words from, “It happened one way in France, and another way here” (1978:269) to “‘it happened another way’ in France in part because it had already happened ‘here’” (2007:23).

This ‘globality’ is descriptive, certainly, being characterised by the gradual incorporation of every society into a worldwide division of labour, but more significantly it is also constitutive of a shift in the nature of inter-societal interaction – capitalism does not encounter other social systems in an external or superficial way; it penetrates, transforms and incorporates their productive foundations into itself (Rosenberg 2007:4-5). This implies a radical reformulation of the way we understand the processes of historical change. It is a clear improvement on much ‘globalisation theory’ (which Rosenberg distinguishes sharply from ‘theories of globalisation’; see 2000:4), which remains premised on the fallacious state/society analytical divide discussed above, treating the ‘global’ as external to the ‘social’ (Morton 2004:136). This misguided focus – generating such banalities as the observation that globalisation has “deepened and strengthened practices that enhance the state’s role as much as it has generated practices that bypass the state” (Migdal:142) – and preoccupation with the ‘public’ realm of power “obscures the fact that capitalist exchange relations have always been implicitly ‘supra-territorial’” (Rosenberg 2007:14), able to transcend the ‘political’ demarcations of state by marking out a separate space within which to operate the exercise of power. Thus a Marxian approach to the ‘globalisation debate’ can avoid making descriptive and circular claims about the character of inter-societal relations, instead providing an alternative basis for analysis centred on the capitalist dynamic as a uniquely globalising agent. Furthermore, as Wood argues, resistance – the normative premise of all Marxist analysis – is only possible from the perspective of capitalism as a totality, both in terms of the broad spectrum of power relations (rejecting the public/private divide) and in terms of a single, totalising historical process (1995: 1-4; 19-20).

III

Totalising knowledge vs. the rest of the world

The problem, however, is that the historical materialist understanding of capitalism as “the most totalizing system the world has ever known” (Wood 1995:2) can be interpreted as the approach’s principle strength, or indeed as its fundamental flaw. Certainly, the capitalist system is a globalising process and, as this essay has argued, its unique mechanism of obfuscating power relations by consigning them to a non-political sphere does constitute a rupture with patterns of social relations that had gone before. But the danger in this approach is the hostility it can engender to ‘postmodern’ themes of heterogeneity and fragmentation. Though the two schools are often believed to be diametrically opposed, by both historical materialists (see Wood 1995) as well as by postmodernists, who tend to conflate Marxism with economism and reproduce the misguided dichotomy of discourse/representation versus material reality (Laffey 2004: 460), it is worth considering whether each may in fact benefit considerably from engaging with the other. Reluctance to do so places major limitations on the scope of enquiry, denying Marxism the ability to theorise potential sites of resistance located in the encounter between the totalising dynamic of capitalism and the Other identities with which it is continuously interacting. Using Trotsky’s concept of ‘uneven and combined development’, Rosenberg certainly furthers the potential for theorising how the capitalist dynamic combines with indigenous forces in other societies. Yet even this, as Hobson notes, must be seen as Eurocentric since it includes the analysis of other societies only insofar as they encounter Western capitalism (Hobson 2005:378). After condemning Marx’s consistently Orientalist outlook (1) – an issue which many Marxists will concede as problematic – he outlines a historical account which traces the formative influences on Western capitalism to a “global economy” existing in the East as far back as the year 500 (2005:376-8). Rosenberg responds by charging Hobson with the mistaken conflation of the term ‘global’ with the merely ‘inter-societal’, re-emphasising the point that not until capitalist industrialisation in Western Europe could a uniquely ‘globalising’ process be identified (2007:8-11).

However, the problem with this insistence on historical uniqueness and systemic unity is that it justifies treating capitalism as a totality by virtue of the totalising nature of capitalist development itself. In this sense the argument is tautological, the consequence of which is that the approach is severely limiting. For when Wood stresses that “Marxist political economy and history are intended to challenge capitalism as a totality head-on”, she assumes that only by understanding capitalism as a totalising system can that system be effectively contested. Theories of fragmentation and heterogeneity “clos[e] off critical access to this totalizing power by denying its systemic unity and insisting on the impossibility of 'totalizing' knowledges” (Wood 1995:1-2). Yet the antithesis of capitalism is not an antithetical totality; it must surely be the antithesis of totality – in other words, fragmentation. It seems simplistic, therefore, to accuse identity politics, cultural studies and the like of attempting to skirt around the issue of capitalist globalisation, when what could better counter the totalising, universalising capitalist logic than an approach which renders that uniqueness highly visible by locating where and how capitalist social relations encounter Other epistemologies and alternative bases for organising society? If historical materialism refuses to engage with these ‘postmodern’ themes, it will not shake off its lingering Eurocentric heritage. Though, as this essay has shown, it remains an effective and consistent critique of orthodox theory and norms, a denial that Marxist theory itself is prone to Eurocentric, ‘totalising’ tendencies will limit its potential for theoretical innovation. As Morton notes, it is

crucial to reflect further on whether an account of the rise of capitalism and the modern state can avoid the perils of Eurocentrism. Or whether, by moving away from the genesis of capitalism in Europe, this would merely end up producing conclusions that are “tantamount to rejecting capitalism as a useful notion for analysing world historical social change”.
(2005: 517; citing Arrighi 2003:133)

The question, then, of whether Marx and historical materialism provide useful concepts for international relations today depends quite significantly on the extent to which it is willing (and able) to combine its normative emphasis on challenging capitalism, “the most totalizing system the world has ever known” (Wood 1995:2), with an approach it has hitherto resisted; an approach which attempts to locate both capitalism and Marxism within an Orientalist discourse, but one which may yet prove crucial in understanding – and resisting – capitalism itself.

(1) He defines Orientalism/Eurocentrism as “a discourse that places Europe at the centre of progressive world (dare I say ‘global’?) history” (Hobson 2005:374).

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