The Defective State

Author(s): Susan Strange

Reviewed work(s):
Source: Daedalus, Vol. 124, No. 2, What Future for the State? (Spring, 1995), pp. 55-74
Published by: The MIT Press on behalf of American Academy of Arts & Sciences
Stable URL: http://www.jstor.org/stable/20027297 .
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Susan

Strange

The Defective State

in this essay is based on three

is that the
the most
important

be developed

to

Argument

The

Perhaps
propositions.
between
of the competition

simple
nature

states

in the international

system has fundamentally changed. The second proposition is largely

as the form of competition
consequential:
so have their nature and their behavior

third proposition, which

over

states has changed,

one another. The

between
towards

is hardly new or original, is that authority

is undergoing
another
of diffu
and economy
period
society
or
in which
it became
three centuries
after two
increasingly

sion,
centralized

in the

institution
two

suggest
together
tacit premises
about
The

sitions

offer

may

The

three

propositions
based on
One,
unit of analysis,

conclusions.
important

social science is obsolescent,

news?is

second?the

studies,

if not yet quite

the three propo

of opposed
synthesis
that

good
for a Cartesian

the basis

in international

paradigms

state.

the

important
quite
the state as the most

is thatmuch ofWestern
out-of-date.

of

a synthesis

which

could

resolve,

at long last, a jejune dialogue of the deaf between apparently

schools

incompatible
has bedeviled

academic

of thought
about
discussion?and

international

puzzled
of the twentieth

most

relations

that

a great many

stu

of the latter half

century.
states has
I say that the nature of the competition
between
mean
states
in
I
the
that
for
past
competed
fundamentally
changed,
over territory and the wealth-creating
resources within
ter
control

dents?for
When

ritories,

whether

competing

natural

for market

or man-created.
shares

in the world

they are increasingly

In this compe
economy.

Now

is Professor
Political
Susan Strange
of International
Economy,
London
School
and Political
Emeritus,
Professor
of Economics
Florence.
sor, European
Institute,
University
55

University
of Warwick;
Science; External
Profes

56

Susan Strange

is no longer the main

basis
tition, territory
more
than the amount
of land in cultivation

no
for wealth-creation,
determines
the value

min
of an agricultural
Resources?water,
enterprise.
an
asset
in
the competition
be
for market
etc.?may
erals, forests,
and a handicap.
shares, just as the lack of them may be a constraint
in the
But they, too, are no longer the major
of success
determinant
added

output

competition
or Argentina,
which
have
South

Korea,

between

states.

Indeed,
with
endowed

richly
often been
to win

far slower

are states,
like Australia
land and natural
resources,
like
than resource-poor
states,
or

in products

shares

market

there

services

where

high value-added output offers better profit margins.

And when I say that as a direct consequence of this largely
economic

competition,
Imean
that

the nature

of

states
and

industrial

and

their

behavior

trade policy

has

are becom

policy
are
States
and foreign
than defense
important
policy.
to
seek
allies
commercial
rather
than
structural
change
by
obliged
ones. Some of these allies will be other states, as in regional
military
will be foreign-owned
Others
firms. And
economic
associations.1
changed,
ing more

and bargaining
for interstate discussion
the agendas
as
are
in
domestic
issues
the
arising
politics.
ing,

are also

chang

The third proposition needs less explanation. The concept of the

"new medievalism"2
has been around
consensus
a developing
that the state

for some

years now; there is

to share authority
is coming
in my
entities. These
include,

other
society with
not
transnational
(TNCs),
companies
only
including
interpretation,
institutions
like
and law firms, and international
banks, accounting
or
non
but
Fund
also
the International
(IMF)
Inmarsat,
Monetary
or the Olympic
like Amnesty
International
organizations
governmental
associations
of
and
transnational
sports organization
professional
in economy

and

economists,

doctors,
central

of
the state the authority
local
shared
with
and
is, perforce,
increasingly
in short, is that state author
The proposition,
and

scientists.

government
authorities.
regional
ity has leaked away, upwards,
it seems even to have
matters,
realm

of anarchy

in society

Within

sideways,

and downwards.

gone nowhere,
has
and economy

In some

The
just evaporated.
exten
become more

sive as that of all kinds of authority has diminished.

two tentative
the study of economics,
conclusions,
or
continues
for the most part to
and
government
politics
sociology,
as
the social seien
unit
Either
of
the
take the nation-state
analysis.
As

to

the

State

The Defective

57

issues within
tist studies and analyzes
social, or economic
political,
to make
of two
a specific state, or he is content
studies
comparative
or
in
or more national
economies,
societies,
systems of government
in the
forces at work
structural
of the common
blithe disregard

global political economy.

I am not

that states

arguing

themselves

in the world

system.
institutions.

or defective,
hollow,
the inner core of
transactions

But they are increasingly

To outward
appearances

in society
and
authority
borders
territorial
their defined

is seriously

paired. They are like old trees, hollow in themiddle,

of weakness

and

to grow

continuing

to storm,

vulnerability
leaves,

new

shoots,

becoming

unchanged,
over economic

their

within

Collectively

influential and therefore critical sources of

they are still the most

authority

are obsolete.

im

showing signs

or disease,
drought,
Some
and branches.

yet
are

clearly more defective in terms of their ability to play their roles in

in decrepitude,
than others.
further advanced
society,
of state
about
the hollowing
tural forces bringing
a reversal
common
to all, and it is hard to envisage

Finally, the jejune dialogue, which

But

the struc

are
authority
of the trends.

I hope my three propositions

to anyone who
in the last twenty or
resolve, will be familiar
might
in studying and teaching
international
thirty years has been engaged
to others. Actually,
it is a very old
But not, perhaps,
relations.
the realists and idealists, but a triangular
debate, not only between
one

in which

whether

Marxist

both

are contested
or Gramscian.

by the radicals
But from
the

or
late

structuralists,
1930s
until

perhaps the 1960s the old debate was eclipsed asWorld War II and
then the Cold War gave the field to the realists, the analysts of
power politics. They despair of changing an international political
system based on territorially defined authorities (states)which claim
from others. They use research
and
and independence
own?to
to
better
with
their
enable
cope
argument
states?usually
use research
in it. Idealists,
the system and to survive
by contrast,
to reduce conflict
to change
the system,
and foster
and argument
sovereignty

to trans
states and by these means
between
gradually
cooperation
are
inter
liberal
labeled pluralists,
form the system. They
variously
The
neofunctionalists.
nationalists,
Basically,
they are reformers.
of
economic
and
radical
structural
social
radicals,
change
favoring
relations,
unjust

system as one facet of an

political
regard the interstate
structure of power. Although
critical of the status quo, they

58

Susan Strange

are less certain

now

than ever of how

to engineer

the kind

of change

like. The threeway dialogue is barren, jejune, and un

they would

the three paradigms

have no common
because
basis for
productive
have
been
debate. A great many
students,
consequently,
presented
a la carte menus
out for
and left to puzzle
three different
with
whether

themselves

and how

a sensible

synthesis

between

is science

and

the three

is possible.
BETWEEN STATES

THE COMPETITION
The

starting

an

aspect
economists

of

point for this proposition

often
human
relations

taken

for

technology?
by both

granted
sense will

scientists. Our common

and political
confirm
the pace of scientific
that since the Enlightenment
advance
and
to
It
is
has
accelerated.
do
steadily
continuing
technological
change
see an even
so. There
is every reason to expect
that the future will

faster
is one

rate of change. The nature

very obvious
example. No

thirty would
1960s

or

recognize the technically unsophisticated world of the

even

the

1970s?no

no video
mobile
phones,
no satellite communication
Advances

of telecommunication
technology
man or woman
under the age of

in science

ital costs?in

fax, no
no DNA

shops,
networks.

and

the research

no
computers,
cable television,

personal
tests, no

have
technology
and development

involved
of new

increased
products
to deliver

cap
and

of the means
them
and then in the installation
processes,
to the market.
for investment,
The added capital needed
combined
of the product
life in the market,
with
the shortening
(or process)
meant
in
the sales that could be made
after business
that in business
the national
were

not

within
economy,
to
amortize
enough

the

territorial

the capital
was overtaken

borders

debt

before the product or process

by
This was true even of large national markets;
ones.
is an example
Sweden
and developing
and
firms (i.e., Asea,
whose
Alfa-Laval)
SKF,

of

the

(in whatever

state,
form)

technological
change.
even more
so of small
of

a small

realized

economy
early on that

their only hope of survival lay in the wider world market.

South

is an example
of a developing
that is too small?
economy
even with
a highly protected
home market?to
absorb
the output,
or
or
car
on
of
shoe
factories
economies
of
based
scale,
shipyards

Korea

using

up-to-date

technology.

State

The Defective
Thus,

accelerating

technological

not

change,

(as economists

blindly argued) any internal preference within

transaction

costs,
in the world

tion
relaxes

internationalization
a process which,
economy,
the state over the enterprises

of

the authority

have

firms for reducing

the rapid

explains
market

59

of produc
inevitably,
based
and

directed from inside their territorial borders. This "globalization" is

more

rise of multinationals,
time. Rather, what

the

than

for a long

around

so-called.

have been
They
is
that
changed
products

has

and processes mostly designed and developed for national markets

mar
for a multinational
developed
not the enterprises,
It is the markets,

are now mostly

and
designed
ket?for
the reasons
just given.

that are multinational.

some

sectors

firms

or services

products

This is not inconsistent with the fact that in

to use

need

to local

new

to adapt

technologies

their

conditions.

The statistics are impressive?35,000

large TNCs with 150,000
a
total stock of foreign investment worth some $1,700
affiliates,
they are only

billion3?but

the roughest

indicators

of what

has been

happening. Firms may derive the bulk of their profits from foreign
ever

sales without
faster among
giant
which

small,

The

specialist

enterprises
and
Licensing

and

is
growth
than among

conglomerates.
franchising,
are the growth
involve
any transfer of funds,
only rarely
areas in international
production.
are even more
And
the political
The
consequences
important.
a firm goes into foreign markets
is the symbi
break involved when

otic

corporations

abroad.

up production

setting
the uncounted

one

between

national

government
political masters

and

national

enterprise.
of one, and once
a "good citizen" of host states other
in a political
it becomes
than its state of origin,
engaged
juggling
with
labor
and suppliers
and
act, negotiating
ministries,
organizers,
once.
at
in several countries
distributors
for their
Governments,
the firm has many
it senses that it has to appear

Once

part,

have

become

acutely

aware

that

they

instead

are competing,

as rival

suitors, for the favors of foreign firms. These firms often have
attractive

assets

that native

ones

lack. They

better technology and therefore are more

may

have

command

of

likely to gain and keep

to give employment
to local citizens. They
to
and they may have established
may have better
capital,
distribution
them instant access to foreign custom
systems giving
to foreign
set up a local
if they will
ers?and
therefore
exchange
market

shares?and

also

access

60

Susan Strange

production

The

plant.

tion system was

Chrysler

worldwide

Corporation's

distribu

the one clinching factor that in the 1960s

led

to agree?despite
allow at least
past official
policy?to
cars and parts into the Japanese market.
some American
The result
an
states
is
of competition
between
of state/firm
process
ongoing

Mitsubishi

in which
often offer greater
induce
may
governments
bargaining
more
a
to
to
enter
firm
waive
its
rules
and
ments,
demands,
foreign
a
one
to
to
it
native
The
will
native
stay.
firm, finding
territory than
its market
share eaten away by foreign competition,
may scream for

protection. But there is evidence, from the 1930s, 1970s, and 1990s,
states is often cosmetic,
if only because
of home
the response
in more
and cheaper products
there are other interests
competition
that will cancel out the protectionist
lobby.4
that

The

from

offers

in newly

governments

countries

industrializing

(NICs) are likely to be more generous and seductive than those

of developed
countries.
from governments
First,
and
market
for
the
technology,
grier
capital,
countries.
than are the industrialized
command
rate of growth,

of market

are hun

the NICs
access

that TNCs

In addition,
their
is apt to be at least twice that

expansion,

of the industrialized countries; typically, itwill be 6 or 7 percent, as

to at most

opposed

3 or 4 percent

in the United

States,

Europe,

and

host states?including
the competition
the
Second,
among
state of any firm?is
effect on two
apt to have an eroding
sources
to tax and the
the power
of state authority:
important
to
labor
and
financial
markets.
power
including
regulate markets,
Japan.
home

can
In order to show how
of interstate
the nature
competition
of states towards
each
and the behavior
alter the use of state power
we
contrast
must
kind
of
that
the
with
present
other,
competition
the interstate
for centuries?millennia
even?characterized
which

system.5 The fact that there are differences between neighboring

in culture,

societies

social

institutions,

religion,

folk memories,

and

traditions

is enough to account for the pursuit and defense of

autonomy.
differences.

The wish

is almost

that cannot

But
does

not

come

shared
universally
be achieved without
for

perquisites

force

to maintain

that go with

those

And
government.
free. Rulers,
whoever
they are,
over the means
of coer
command

government
demand
payment.
They
require
cive force for internal and external
coercive

to maintain

they need
Internally,
rivals
the
and
against potential
privileges
coercive
need
government.
they
Externally,
purposes.

State

The Defective
forces

Shakespeare's

after the long civil War

to charge

command
as

of the Roses,

and eliminate

"traitors."

can

then

Only
to acquire
power

military

to their autonomy.
of the two needs:

or repel threats from other states

V is a vivid demonstration
Henry

to deter

the king needs military

rivals?those

suspected

safely
a larger realm?more

he brands

to use

set out

he

61

the

same

land to tax?across

the English channel.

The

source

main

maintain

of

revenue

of coercive

command

that

has

force has,

to
government
of human history,

allowed
for most

been farming. Conquest of neighboring lands offered one means of

revenue.

increasing
peasant

The
larger the territory of the state,
to work
available
the land. Marriage,

labor was

the more
if custom

required the bride to bring a dowry of valuables and of land, was

another. (HenryV found both new land and a new bride in France).
Commerce

could

the government.

also be taxed
In North

political economist

Ibn Khaldun discovered

their route

traders

as a supplement
to the resources
in the fourteenth
century,

Africa

changed
nue dried up, the local rulers

that when

that supplementary
encountered
resistance

and

source
from

of
the

the gold
of reve
the peas

ants if they taxed them too hard. A rapid turnover of rulers resulted
because

the revenue

from

land was

insufficient

to give

the rulers

command of enough military power to quell potential rebels.6

gives rise to the
states. Military
of govern
power under the control
to that end. It is also necessary
to keep control over
a monopoly
of government
and to maintain
the institutions
of the
and
of
When
is
there
government.
perquisites
privileges
competition
as we can see from
for both control
and privilege,
there is conflict,
To

reiterate,
of
multiplicity
ment
is a means

the wish

for autonomy

from others

in the former

Soviet Union
since 1989, and in Rwanda,
and
other
it seems likely that
many
Vietnam,
Somalia,
places. Thus,
a greater
civil conflict
is becoming
threat to personal
security than
is interstate
states are aware that their afflu
conflict. The affluent
ence depends
on a continued
world
market
share rather than a
the conflicts

of territory or resources. War

could destroy
that source
so
now
a major war
of affluence,
show every sign of regarding
they
as unthinkable,
themselves
between
and not only because
of the
It is only a few states?like
destructiveness
of nuclear weapons.7
command

Iraq and Iran?with

highly
who
are, for the time being,

authoritarian,
repressive
immune to the moderating

governments
influence of

62

Susan Strange

a middle

class

disregard

the

with

material
of costs

imbalance

and whose
aspirations,
in going
and benefits

rulers

can

to war.

states
the affluent
Yet,
States, Britain,
(i.e., the United
France,
to
continue
and Germany)
their
spend vast sums on maintaining
comes
Part
of
the
from
the
mili
explanation
military
capabilities.
This was perceived more
than thirty years
tary-industrial
complex.
ever
in
meantime
and
the
has become
ago by President
Eisenhower,
more
in the US economy.
But part also comes
firmly entrenched
of the new game of competition
from the very nature
between
states.

of
industries,
by means
can hope to gain market
shares both for the
contracts,
in the markets
for arms but
for the state, and not only

State

government
firms and

firms

for

support

in defense

also inworld markets for civilian goods and services which benefit
the same

The rationale
for this rather expensive
technology.
as to
in
is
of
market
shares
found
uncertainty
popular
acquisition
war
societies
advanced
industrial
between
whether
really is
major
from

obsolete.
defense

as long as they remain,

time will
still such doubts;
Only
revenues
and defense
will command
ministries
government

industries will be protected and maintained.

OF THE STATE

THE NATURE
For

neither

new

of

individual

state

The

federal

nor unusual.

the Empire
ideologies,
state under
States

an

to change
is
very radically
after
the
The French Republic
Revolution,
in their
both radically
different
after the Terror, were
and strategic
from
the
French
institutions,
objectives

the nature

the Bourbons.

underwent

almost

as radical

it became,
II, when
and
substantially
planned

War

great

change,

demographic
or
inflation

depression,

government
a transformation

temporarily,
state-owned
enrichment
even

climatic

manager

of

the United

during World
of a largely state

revolution,
economy.8 War,
or sudden
impoverishment,
can
or ecological
change

account for profound political change.

But

that

all?or

nearly

all?states

should

changes of roughly the same kind within

time

is really
from
Europe,
duction
tion, was

a new

spread

substantial

in
Even
the last big change
phenomenon.
based on a feudal system of agricultural
pro
based on a capitalist
system of industrial
produc
over two or three centuries.
It did not take place

states

to states

undergo

the same short period of

The Defective

State

63

as quickly
or as evenly as the changes
recently
experienced
by the
vast majority
of states over the last twenty or so years.
reasons
rate of scientific
here?the
The
accelerating
suggested
the shift from land, labor, and
and technological
change;
discovery

capital (in that order of importance) as the key factors of produc

to capital,
for local

tion
tion

and energy; and the shift from produc

to worldwide
markets
markets?were

information,
and national

economic
society that experienced
changes. No national
remained
and development
insulated
from these changes.

structural
growth

Only the least developed of the poor countries (mostly in Africa)

few

experienced

of

these

Even
the states with
changes.
planned
in the process
of joining
the world
the same experiences.

are now

which
economies,
market
economy,

shared

these

structural
the authority
Just how
changes have undermined
I believe,
the legitimacy
of the state can be summa
and ultimately,
one. The first major
rized in three major hypotheses,
and one minor
a
is
that
in the asymmetries
there
has
been
increase
great
hypothesis
state
In other words,
while
of
the US government
may
authority.

have suffered some loss of authority, the loss has been to the
not

markets,

to other

for other

states; whereas,

their vulner

states,

ability not only to the forces of world markets but also to the
greater global reach of US authority has markedly increased.
The second hypothesis is that some authority over less politically
sensitive
authorities
and

of various

commercial

"upward"
The minor
has

has

issues

been

shift

shifted

from

national

kinds,

both

interstate

organizations.
of authority

hypothesis?not
states
in many

There

states

to

international

institutions
and private
been, one could say, an
as the first "sideways"
one.
has

as well
so universally
a "downward"

that there
experienced?is
shift of authority,
from

central authority to local and regional authority. And the third

major hypothesis is that, as a result mainly of the integration of the
in finance,
as well
and communication,
economy,
transport,
as production,
there are some important
of political
responsibilities

world

authority that no one in a system of territorially defined states is in

a position fully to discharge.
If each of these is taken in turn, it becomes apparent that the
nature
enced

power

of

all

states

structural

as a result of
changed
commonly
experi
The
of increased
changes.
hypothesis
asymmetric

is one which

has

academic opinion

in the United

States has

64

Susan Strange

to accept.
it has been nearly
Indeed,
twenty
a
to
social scientists
of
loss of
years since American
began
complain
in
in
American
world.
And
it
the
has
been
the
last
three
power
only
found

most

difficult

or four years that the stillwidespread belief inAmerican decline has

been challenged and questioned.9 Outside the United States, where
the global reach of US political decisionmakers was often palpable
and

have

perceptions

painful,

been

always

very

even

different,

though some academic writers followed the American intellectual

way of thinking. It is the toads beneath the harrow who are bruised
by

its passage.

ASYMMETRIES OF STRUCTURAL POWER

The

study
Concerned

of

international

with

relations

relations

between

think of power in relations?what

in the balance

and

states,

Iwould

between

of power

not

has

states,

on

helped
it naturally

this

issue.
to

tended

call relational power?

not between

states

and

other political authorities on the one hand and markets and society
on

among Marxists
Except
over
both markets
exercised
power
over the way
influence
structures,
by

the idea of
and dependistas,
social relations
through
are made,
decisions
agendas
are conducted,
and negotiations
has not

the other.

are

and

set, and transactions

taken hold. Yet, only by looking at the structural power exercised?
other states, markets,
often unconsciously?over
individu
private
can
extent
of
States
firms
the
the
United
the
of
and
als,
by
agencies
the asymmetries
The difference
two

from

Gulf War,

state power
be appreciated.
can best be illustrated
by some

of

simple examples:
In the
and two from world markets.
politics
on
to
when
and
how
attack
decisions
the key
Iraq were

international

made by the US government and were backed and implemented by

its former

Cold War

exercised

in a series

allies

as a consequence
relations.

of the relational

power
the funda

In Yugoslavia

of bilateral

mental imbalance of military force between the Serbs and the Bosnians
was indirectly the result of two ways in which the United States
exercised

its structural

its Cold War

government,

power

in matters

of security.

First,

as part of

strategy it had supplied arms to the former Yugoslav

making

that

army

the

second

largest

in Europe.

Sec

ond, the United States used its influence with other allied govern
ments

to institute

and maintain

an arms embargo

against

the Bosnians.

State

The Defective

65

it is doubtful whether this

Without leadership from Washington,
unevenhanded treatment of the civil conflict would have persisted
for so long. True, the divided opinions and policies of the Europe
ans prevented
stand on this matter,
them from taking any concerted
to
as on others,
and for this inaction and indecision
they are much
on
as
the
afflu
whose
other
But
the
blame.
superpower
protection

ent allies have so long depended,

matters

of

power,

is a major

the United States' influence in

to resist.

is hard

security
once called
the "arms ba
what
Moreover,
Sampson
Anthony
trade by manufacturers,
the private
and govern
dealers,
zaar,"
ments
in weapons
of great technical
and
destructive
sophistication
feature

of the global

structure.

security

hardly have developed to the extent it has without

and manufacturers
States, whose
taxpayers
in expanding
And this lethal
sales.
marginal

the United

of

interest

vested

portrayed in John Le Carre's The Night Manager

It could

the tacit consent

have

trade,

as

and many other

level the prevailing

clearly reflects at the global
consumer
to be
that guns are just another
good
the market.

current

bestsellers,
American
attitude
sold
The

freely on
oil market

is another

of

example

a world

market

that

is

much influenced by political decisions made by the United States.

The oil market was effectively liberated by the US government in
the 1950s from liability to normal corporate taxation. The result
that throughout

has been

the world

states have

given

extraordinarily

free financial rein to the oil majors. Only after the Exxon Vaidez oil
spill inAlaska did the US government, through the courts, demand
more

accountability
states
other

which

business

civilization

decisionmakers
on

modeled

My

Here,

have

not

that now

of the oil business?an

example
the
Altogether,
the world
for the
prevails
throughout
is one shaped by and
and in business
been

in government
the business
civilization

slow

to follow.

of America.10

last example is taken from what I describe as the knowledge

structure?the
what

in the conduct

knowledge

structure
are made
in which
choices
about
power
to
is acquired,
and
and
whom.
stored,
disseminated,

there can be little doubt that power

universities

and American

lies with American

The number
of
professional
in
US
and
universities
foreign
colleges
compared
or Japanese
in European
with
those
enrolled
universities
is an
in
of the American
indication
dominance
of the world
market
students

enrolled

associations.

66

Susan Strange
The

higher

education.

rights
world

in medicine

and pharmaceutical
a structural
demonstrates

similarly

In the financial

there has been much

structure,

the tremendous

that directly

power

affects

or bad?of millions of people.

the life chances?good

of

laws on patents
and property
research
the
throughout

of US

influence

in trade

growth

in futures,

discussion

recently
and

swaps,

options,

other so-called "derivatives." The chief officials of the Federal

the US Treasury,
and the Securities
and Exchange
Com
was
no
all denied Congressional
There
misgivings.
to the system and no need to tax, restrict, or control
the
the integration
of financial markets world
they said. Given

Reserve,
mission

have

danger

practice,
wide
and

the transnational
no other

in the market,

of banks and other players

competition
state can reverse the deregulatory
trend. It

was clearly set by US decisions in the mid-1970s,

has

ensured

at national

it has

that

attempt
gathered
speed. Any
the United
States would
only move

regulation
offshore.

outside

There

are many

structural

and competition

other
on

power

to

ways

the unequal

the business

the consequences
of
of national
governments

illustrate
ability

first to develop different perceptions of how a market

should
sures

be managed
to implement

and

to devise

then

national

economy
and mea

policies

For example,
those perceptions.11
while
the
on Taiwan
to put pressure
to revalue
the power
or even to improve
its protection
its currency
of native wildlife,
over
or environ
US
Taiwan
has no countervailing
power
monetary

United

States

mental

policies.

human
fact of
This

has

as with
on China over
the US pressure
Sometimes,
rights, there are seen to be limits to the global reach. But the
states is undeniable.
increased
among
asymmetry
sovereign

means

that

the notion

of

the

sovereignty

of

state

the

in

matters of domestic jurisdiction?though

enshrined in Article 2,
even more of a fiction
7
UN
the
become
Charter?has
of
paragraph
than itwas in 1945. The concept of the equality of states before the
legal fig leaf for the realities of power.
always a convenient
case before
in 1948,
in a now-forgotten
the United Nations,
to prevent
the Indian invasion
law was powerless
and occupa

law was
Even
the
tion

of the state

of Hyderabad.

Forty

years

later, no one

seriously

queried the legal propriety of the US hijacking of Noriega

"sovereign"
succeeded

state of Panama.
in creating

Now

an open

that the United

world

economy

States has
in its own

in the
largely
liberal

State

61

preferences

and

The Defective
and

image,

to

according

patterned

its own

value

judgments, the fig leaf of equal sovereignty even before the law has
more

become

flimsy

than

ever.

THE DIFFUSION OF AUTHORITY

If I have dealt at some lengthwith my first hypothesis, the increased

asymmetry of structural authority in the world society and the
it is because
this is the one given the least recogni
economy,
tion in the literature
either of comparative
science or of
political
are the other two
international
relations. No
less important
hypoth
eses:
that authority
has shifted
from states as a collectivity
of

world

political authority both upward and downward; and that in these

various

of the conventional

modifications

state authority,

and economy

model

are coterminous,

in which
some

territory,
for

authority

merly exercised by states is not really being exercised by any polit

ical authority.
Let us take

first

the

of established,

collectivity

from states as a
away
authority
to
authorities
other sources of
legitimate

shift

of

power. These include intergovernmental organizations like the IMF

or

the Commission

of

the European
and also nongovern
Union,
sans
like Amnesty
M?decins
International,
or
the Children
also
Fund,
Greenpeace.
They

mental

organizations
the Save
Fronti?res,
include the growing
of TNCs
number
engaged
or processing
of traded goods
and the service
and

law, accounting,
associated
with
About

them

consulting
but playing

the "upward"
diffusion
both
intergovernmental

nizations,
little to say. Not

because

in the manufacture

such as
enterprises
the
financial
firms,
operators
a somewhat
different
role.
and

to international
of authority
and nongovernmental,

it is an unimportant

orga
I have

part of the picture

but

because it has been more fully explored elsewhere. There is little

need

to labor

being

either

proliferating

the point that the authority

of the state is, increasingly,
shared with,
sustained
by, or constrained
by these
authorities.

The same, I believe, is true of the "downward" diffusion of the

authority

of

the

central

institutions

of many

states

to

local

or

regional authorities. There is hardly a federal state, with the possi

ble exception of Switzerland (where the decentralization of power
from

Bern

to the cantons

has

always

been

jealously

guarded

and

68

Susan Strange

some tension between

that is not experiencing
federal
maintained),
a
on which
this is
and state authority.
others
Again,
development
a
more
on
view
informed
have
than
and
the
which
evidence
may
I,
I shall not have more
scattered
and stochastic.
Therefore,
on
to say
states
this point than that the nature of devolution
within
calls for more
research
and
structural
comparative
analysis.
More
is the diffusion
controversial
and perhaps more
important
is rather

from states as collectivities of authority based on

of authority
territorial

control

on other

sources
in the

power

to transnational
If one

of power.
international

and associations

enterprises
is heard

saying
it is often
economy,

political
as
that
the
"multinational"
meaning
preted
the
role
of
the
usurped
state?sovereignty-at-bay,
that governments
and all that?so
nationals
hands

of corporate

managers.

firm

have

misinter

has

somehow

footloose

multi

are mere

in the

pawns
sterile debate

is an old and

That

the 1970s, based on the notion

based

that TNCs

from

that the authority of national

are similar

and the authority

of corporate management
government
transferable
from one to the other.
and somehow

is different and goes back to the sources of struc

My hypothesis

in society and economy.

The shift I am concerned
with
tural power
sources
a
not
is between
the
of structural
power,
change of hands
on the levers of that power.
It was explained
and rather extensively

illustrated in Rival States, Rival Firms, Competition for World

Market Shares,12 a book Iwrote with John Stopford, Professor of
we

that the U-turns

1980s

and

ownership,
and export

and

late

tion of

at the London

Business

International

observed
1990s

early
import

of
the operations
and accommodating

coming
came about
changes
firms over the means
governments

We

argued
in the

from

markets,

state

developing
home
protected
to liberalization,

privatization,
or restric
exclusion
antipathetic
more wel
firms to an altogether
foreign
were
no
All these
accident.13
posture,
from

exercised
the control
through
to the end of earning
foreign

desperately

needed

other way

than by negotiation

firms.

"new

This

School.

countries

substitution
and

promotion,

Business

in so many

diplomacy,"

and were

unable

by those

exchange
to achieve

and bargaining with

as we

termed

foreign
which

it, was

any

the foreign
based

on

the

bargaining power exercised by the firms and derived from three

assets
access

by states.
to foreign markets

coveted

asset was
the
the most
important
Perhaps
customers
it would
and
which
take inex

The Defective State

69

perienced domestic firms years of effort and large investments to

The

for themselves.

acquire
to-date

which

technology,

other

asset was mastery

of up
was
not easily
had shown

obvious

experience

transferred to less-developed countries (LDCs) by edict of theUnited

Nations Conference on Trade and Development (UNCTAD) or the
there was

In addition,

Nations.

United

access

to the financial

re

sources made available in global financial markets. Especially in the

1980s, the limited access of indebted LDC governments had been
in the most

demonstrated

or Asea

Matsushita
would
their

Brown

or
But General Motors
way.
no
had
Banks
such problems.

painful
Boveri

to pay, or underwrite
their promises
in the eyes of
issues. They were
creditworthy
as governments
were
countries
of many
developing

lend to them,
shares or bond

the market

securitize

not.14

To

the nature

understand

of

the

shift

to

it is necessary

look

beyond the new diplomacy of state/firm bargaining to the increase

as opposed

in the political,

to the purely

activities

economic,

and

responsibilities of transnational enterprises. Iwill mention just two

such responsibilities: the responsibility for the location of produc
tion; and the assumption of judicial and welfare responsibilities
within

the

When

community.

transnational

firm,

or

German

Japanese, let us say, decides to shift production offshore to Latin

America

or to the Asian

the political management

of the
mainland,
a matter
for the state but for the firm. And the
of such shifts, as Deanne
thousands
Julius has

is not

consequences

of

consequences

be a major
transfer of manufacturing
from
capacity
to
of America,
economies
and
what
Europe,
Japan
as LDCs.
to markets,
to be known
effect
Firms,
responding
will

predicted,
the "developed"
used

more change in less time in the distribution of wealth

all the

have

done

economy

than

programs
this is one
assuming

international
in nearly

aid
organizations
a century. Firms are also?and
of the "Japanese
miracle"?

half

consequence
important
a much
greater political

in the global

and bilateral

role

in the provision

of welfare.

Not only are the pensions, bonuses, and fringe benefits provided by
much more
for their employees
state
the
but more
anything
provides,
firms

is essentially
dispensers

a political
of charity,

role

for

as sponsors

important

in many
firms

cases

than

see what

"progressive"
as
in the community,
themselves
as providers
of sport and culture,

70

Susan Strange
or other

of medical
the factory
By

to the community

services

or

the office

beyond

gates.
with

comparison

the

literature

on

international

production

(especially industrial production of manufactured goods) relatively

little attention has been paid to the political economy of the service
industries.

Political

functions
which

economy,
capitalist
under close state regulation,
service
sectors?accountancy
insurance

of a kind

central

to be exercised

used

are now

being

to any market-based
either by the state or
exercised
by firms in

large transnational
and management
consultants.

companies,

law firms,

firms,

CONCLUSION
of this essay that two conclu
paragraph
the analysis
here. Actu
briefly presented
are
more
nature
con
in the
of questions.
One
ally, they
suggested
clusion was
that Western
social science?and
social sci
especially
I suggested
sions might

in the opening
from
emerge

ence directed at the world

role of the state
probl?matique
that changing
solve
deaf,

at long
between

the violent

and

overemphasized both the

system?had
conflict

between

states

as the core

was
of the system. The second suggested
conclusion
the probl?matique
of international
studies could re
last the opposition
of paradigms,
of the
the dialogue
and
in the
idealists
and
realists,
optimists
pessimists,

study of the international

I have no
tions for which

system. Both conclusions

certain answers.

lead

to ques

or war
is no longer
that peace
the core
not
"If
then
what
the
poses
that,
is, or are,
question,
probl?matique
is on the way out, that is, incidentally,
the issues?"15 If interstate war
one very good reason for the declining
of the state. The
authority
state was once the guardian
its
of national
security;
right to loyalty
The

first

conclusion

and

and obedience

its authority

to levy taxes

rested

fundamentally

on that role. If the role goes, and if it is then insufficiently replaced

role of the state

by the welfare

as guardian

against

economic

inse

and par
illness, pregnancy
unemployment,
is
its
little
wonder
that
declines.
age?it
authority
takes the place of the old. There
is a
But a new probl?matique
a
states
world
but
territorial
and
world
still claim
economy
society,
curity?whether
or old
enthood,

a sovereignty
as they used

from

of exercising
part, capable
they are not, for the most
to. It is also a system, as my first hypothesis
suggested,

The Defective
in which

of power
between
means
that the most

the asymmetry
This asymmetry

creased.

states

State
has

71

in
greatly
are able to

powerful
in
of
exercise
issues of the
veto,
any
block,
authority
global
or
of
of
financial
the
universal
environment,
regulation,
provision
of basic needs for food, shelter, and health care.
even

The question that arises is how to deal with

this asymmetry of

or dominant
If the hegemon,
either will
power.
power,
not or cannot play its stabilizing,
is
role, what
confidence-building
answer
to be done? Ten years ago, my
would
have been that itmust
was
in its own
the
it
be persuaded
that
argument
by
long-term
structural

interest to play the hegemonic role. But that was during the Cold
War, when the balance of power, the need to hold theWestern
affluent

to the centrally
in opposition
together
planned
one strong motive
of the Soviet bloc, provided
for good
Now
from Washington.
there is no such check on the

alliance

economies
government

natural (but destructive) unilateralist tendency in the US political

tentative

system. Today, my answer,

to remove
the present
way

global governance

as it must

hegemonic,

be,

do-nothing

is that
veto

the only
on better

is to build, bit by bit, a compelling opposition

on European-Japanese
but embracing
wherever
cooperation
some
the
Latin
and
who
share
Africans
Americans,
Asians,
possible
of the same interests and concerns
the
future.
for
based

The
a new
and

second

that because

conclusion
of realism

synthesis
idealism
for the future

the probl?matique
has changed
the international
economy
political
of mankind
becomes
raises a
possible

about

series of questions.
These
relate to
rather,
question?or,
over society
the second and third of my hypotheses?that
authority
in a neomedieval
and economy
has become
diffused
and
fashion,
once
now
states
that some necessary
is
exercised
authority
by

different

exercised
mists

by no one.

than

more
first question,
is how much
scientists,

The

by political
and intervention

disputed
by econo
in the way of rules,

is necessary
for
authority
and
would
equity,
stability,
prosperity?I
the issue by saying "growth." What,
in other words,
is the sine qua non of political management
for a capitalist, market
economic
oriented,
system of production,
trade,
credit-dependent

supervision,
the system's
not prejudge

and

investment?

clearly shown
and insecurity,

by political

continued

and the record of history

have
Just as experience
that society can tolerate a certain measure
of violence
can carry on despite a certain
that economies
degree

72

Susan Strange
a measure
of money,
of financial
instability,
to the question,
too
"How much
is
is
much?"
anarchy
in the value

of inflation
the answer
by no means

clear.

To

the question

put

another

way,

how

much

does itmatter to the system, to the people living in and by it, that
half

of Africa

and

in political

sunk
endemic

disease,

certain parts of Latin America

and Asia
recurrent
economic
chaos,
stagnation,
I do not know
and internecine
warfare?

remain
famine,
the an

swer, but it does seem that social scientists shirk the responsibilities
that go with their privileges if they fail to think about that question.
even harder question
to
is where
is that authority
second,
we
if
that
the
of
diffusion
of
agree
process
from,
centrifugal
to be reversed. The diffu
away from the state is unlikely
authority
The

come

sion is no problem in itself. It only becomes a problem if, in the

there are tasks that someone
of power,
of dispersion
should
process
no
no
nor
institutions
do and
does. Functional
one,
associations,
in technocrats
and
ists, old and new, put faith in the professionals,
more
to
who
believed
be
attentive
bureaucrats
the
they
might
public
interest. The experience
less swayed by personal
of bureau
interest,
in international
in the European
cracies
and notably
organizations,
in Brussels,
sustains
But
their
faith.
could better
Commission
hardly
be devised?
Or can the re
probity
concern
their
for
the health
and
firms,
on which
not of one country but of the global economy
they
in some new form of syndicalist
for survival,
be harnessed
of accountability
transnational

systems
sources

and

of

welfare
depend

as in the settlement

self-government,

of trade, property,

and

liability

disputes? Legal theorists in global jurisprudence have developed the

notion

as the possible
basis for a new
international
or
state
is
the
fails
How
government
by
incomplete.

of autopoesis

order

where

could this be translated into a sufficiently coherent substitute for the

authority
None

of

states?

of these

are easy questions.

But unless

can

the intellectuals

find the courage to abandon the impedimenta of a fast-vanishing

past

and

society,

can
polity,

start
and

thinking
economy,

anew

about

progress

some

of the basic

of any kind

toward

issues

tainable system will be impossible. Figuring out the questions

necessary

first

step.

of

a sus

is a

The Defective

73

State

ENDNOTES
Charles Oman, Globalisation and Regionalism: The Challenge for Developing
Countries (Paris: Organization for Economic Cooperation and Development,
1994).
2Hedley Bull, The Anarchical Society: A Study of Order inWorld Politics (London:
Macmillan,
1977).
3UnitedNations Center on Transnational Corporations, World Investment Report,
1993. The UNCTC is now a part of the UN Economic and Social division, New
York.

4Joseph Davis, The World Between the Wars,

Hopkins University Press, 1975).
5It is hardly

to explain

necessary

1918-1939

a competitive

why

(Baltimore, Md.: Johns

interstate

tempts to substitute aworld empire for it, or tomaintain

other

states,

have

all

failed,

and

neither

tion

between

states,

not

of an

the existence

to interstate

alternative

pears feasible in the foreseeable future. Therefore,

exists.

system

At

indefinite isolation from

competition

ap

it is the nature of the competi

interstate

is the crucial

that

system,

question.

6Yves Lacoste, Ihn Khaldun: the birth of history and the past of the Third World
(London: Verso, 1984; translated from the French, Paris:Maspero, 1966).
7John E.Mueller, Retreat from Doomsday:
York: Basic Books, 1989).
8Harold G. Vatter, The US Economy
versity Press, 1985).

The Obsolescence

of Major War

(New

inWorld War II (New York: Columbia Uni

9Joseph S. Nye, Bound to Lead (Boston, Mass.: Harvard University Press, 1991).
Henry R. Nau, The Myth of America's Decline: Leading the World Economy
into the 1990s (New York: Oxford University Press, 1990). Robert W. Tucker
and David C. Hendrickson, The Imperial Temptation: The New World Order
and America's Purpose (New York: Council on Foreign Relations, 1993).
10Susan

Strange,

"The Name

of

the Game,"

in Nicholas

X.

Changes: American Foreign Policy in aWorld Transformed

on Foreign Relations, 1990).
nSusan Strange, States and Markets,

Rizopoulos,

ed.,

Sea

(New York: Council

2d rev. ed. (London: Pinter, 1994).

12John Stopford and Susan Strange, Rival States, Rival Firms: Competition
World Market Shares (Cambridge: Cambridge University Press, 1991).

for

13Ibid.
14Theremay be a conceptual problem here for political theorists, though not, I think,
for political economists. It iswhether it is possible to talk of the "power of mar
kets" as distinct from the power exercised by foreign-owned firms (FOFs) be
cause

of

their

reputation

in the markets.

Observing

the contests

in recent

years

between themarkets in foreign exchange and the central banks of states, it seems
more sensible to talk of the power of the market than the power of individual
banks or operators (let alone individual prophets and soothsayers like Henry

74

Susan Strange
Kaufman
through

or George
structures

the

The
Soros).
of the market.

latter

only

exercise

power

over

outcomes

15This is not to say that there is no danger at all of nuclear catastrophe; only that it
ismuch less acute a danger. Nor is it to say that there is no threat of violence to
the security of the individual, only that such threats as there are aremore likely to
be civil,
ring

intra-state

factions,

conflict

or between

either
state

between

forces

and

criminals
dissidents

and
or

police
separatists.

or between

war