_Journal of World-Systems Research_, 1995, Volume 1, Number 4
                   http://jwsr.ucr.edu/
                      ISSN 1076-156X

     The Commitment to a Liberal World Market Order as a Hegemonic 
                   Practice: The Case of the USA


                       Christoph Scherrer
                     J.F. Kennedy-Institute
                     Free University Berlin
                         Lansstr. 5-9
                         14195 Berlin 
                         
             e-mail: CSCHERR@fub46.zedat.fu-berlin.de
              Copyright (c) 1995 Christoph Scherrer


An earlier version was presented at the XIII World Congress of
Sociology, Bielefeld, July 18, 1994

                        Abstract:

The ability of a nation to exert hegemony in world markets rests on
the hegemony of a group of "internationalists" within that nation.
In the USA the hegemony of the internationalists was based on their
control of the most productive segments of the economy, on the
trade surpluses of the early post-war years, on the their ability
to secure raw materials from abroad, on the belief that the Great
Depression had been deepened by protectionism, and on anti-
communism. Since 1971 trade deficits and, more recently, the end of
the Cold War, have undermined some of these foundations of their
hegemony. Yet they were able to contain protectionist challenges
and even to achieve further liberalization (e.g. NAFTA).

The internationalists maintain their hold on U.S. foreign economic
policies by strategic behavior which is supported by the  fact that
their hegemony is inscribed in the structure of the American state,
that the process of internationalization increases the number of
actors interested in liberal policies, that Keynesian policies have
been discredited (and that therefore alternative policies lack
theoretical support), that one of the main social forces against
liberalization -- the trade unions -- has been severely weakened,
and that the American public supports U.S. leadership in world
affairs.


---page 1---

In the immediate post-war period, the American commitment to a
liberal world market order rested on its economic predominance and
the perceived need to strengthen the ties with its Western allies
in an effort to contain communism and the Soviet Union.  Since 1971
trade deficits and, more recently, the end of the cold war have
undermined these foundations.
 
Yet, American public policy remained committed to opening up U.S.
markets for imports and foreign investments.  In fact, the
free-market direction of public policy has just been confirmed by
NAFTA and will be extended once the recently completed
Uruguay-Round of the General Agreement on Tariffs
and Trade (GATT) is ratified.  The result has been a considerable
increase in foreign trade and investment:  the ratio of imports and
exports to GNP increased from 6.7% in 1950 to 25% in 1990.  In this
paper I want to explore the reasons for the adherence of the United
States to a liberal world market order despite the erosion of the
foundations for its original commitment.  My research will be
guided theoretically by the Gramscian concept of hegemony, by the
strategic-relational approach to political processes, and by the
regulation approach to the political economy.

--page 2--

A Framework of Analysis

In the immediate post-war era, "pluralists" and "realists" were at
ease in explaining the dominance of free-traders.[1] Most
industries displayed a foreign trade surplus and the United States
of America reigned supreme among nations. After 1970, when the
trade surplus turned into a huge deficit and when the United
States' international predominance eroded, however, the American
government continued to espouse a free trade rhetoric. 

This continued commitment to a liberal world market order is no
surprise to world-system theorists.  It is claimed to be typical
for a declining hegemonic core state.  The shift toward financial
services, the export of capital, and the transformation of the
capitalists from entrepreneurs to rentiers is said to assure an
internationalist outlook even in the face of declining industrial
competitiveness.  Furthermore, it is argued, that "once a national
economy becomes organized in a certain way there is a tendency to
crystallization around patterns which are then not easy to
change"[2].  This line of argument can also point to historic
precedent. 

In a comparable situation of relative decline and mounting trade
deficits, accentuated by rising tariffs in competing nations,
neither the National Fair Trade League in the 1880s nor Joseph
Chamberlain's idea of a "British Zollverein" around the turn of the
century were able to change British free trade policy.  Even the
modest proposal of Prime Minister Arthur Balfour to impose 

--page 3--

selectively retaliatory tariffs sufficient to force concessions
from trading partners did not fare any better. In fact, not the
least on account of the campaign for tariff reform, Balfour went on
to one of the worst electoral defeats in modern British political
history.[3] About 20 years later, another Prime Minister, the
Conservative Stanley Baldwin, was chastened out of office on
the issue of tariff-reform.[4] Only in the course of the Great
Depression did Britain finally adopt protectionist policies.[5]

Given the arguments of the world-system theorists and the
historical precedent, any further research might seem superfluous. 
However, while the world-system arguments are very plausible, they
have not been elaborated in any great detail.  They also stand in
an unresolved tension to the assertion that conflicting class
interests over international economic policy do not allow the
declining hegemon to engineer a core-wide alliance.[6] Furthermore,
historical precedent, even if the situations are fairly comparable,
can at best make one aware of a possible response to particular
circumstances.  The antecedent itself does not predetermine
subsequent events.  While the awareness of general tendencies in a
capitalist world-system as well as of historical precedent can
sensitize the research for recurrent phenomena, it cannot
substitute for an analysis of the specific circumstances and causal
factors.  For such an analysis a theoretical concept has to be
developed that can account for the political processes at stake. 

--page 4--

Specifically for the United States in the 1980s,
Neo-Institutionalist have tried to find an explanation for the
apparent contradiction between trading position and free trade
rhetoric. This contradiction is explained in the tradition of Max
Weber through the independent status of policy-makers. For example,
Stephen Krasner has argued state actors try to represent the
national interests.  When confronted by a choice of interests,
state actors would usually give priority to broader foreign policy
concerns over more narrow economic interests, such as the
inexpensive supply of raw materials.[7]

Similarly, Judith Goldstein has argued "that continued support for
the liberal economic regime is a function of the acceptance by the
policy-making community of a set of rules and norms."[8] This
ideological consensus of decision makers rests on the belief that
free trade is beneficial as long as all participants respect the
rules. The recent increase in exceptions to the free trade rule,
while upholding the rule in principle, fits well with these statist

--page 5--

arguments.  These types of arguments, however, cannot explain how
the ideological consensus of state actors is formed and how it is
reproduced. Furthermore, the assumed coherence and internal
cohesiveness of the state bureaucracy in this Weberian tradition
contradicts the institutional structure of the U.S. state, commonly
described as decentralized, fragmented and relatively responsive to
social forces.  Even in the area of foreign policy, where
according to Krasner a "strong state" exists, numerous state
agencies and actors compete vigorously for policy authority. All
attempts to create an effective, centralized trade ministry have so
far failed.[9]

The belief that capitalist elites instrumentalize the state for
their foreign economic interests dominates what might be called a
heterodox political science tradition.[10] The free trade ideology
of the state actors would therefore be the result of their
dependence on dominant capital fractions. While the influence of
dominant capital fractions must be considered in any explanation, 

--page 6--

the power elite theory falls short for at least three reasons.
First, like pluralist approaches, it does not question state
capacity. Second, it neglects unintended consequences of
state actions as well as the unraveling of economic logic.  Third,
the state remains a "black box": this approach does not explore the
relationship between society and the structure and functions of the
state. 

Materialist approaches seem to be more promising, since they
examine the state as a system of political domination in the
context of a mode of production.  Yet, they risk interpreting the
state as the ideal collective capitalist whose functions are
determined "in the last instance" by the imperatives of economic
reproduction.[11] I believe such economic reductionism can be
avoided, however, by transcending the general concept of the
capitalist state.  This involves positioning the concrete political
processes within state institutions in relation to dominant regimes
of accumulation and modes of regulation.[12] Such an analytical
approach requires the analysis of
 (a) the role of state structures and activities for the
constitution and reproduction of specific forms of regulation; 
 (b) the "strategic selectivity" of the state within a specific
mode of regulation; and 

--page 7--

 (c) the strategies directed at the state by various social forces
for the maintenance, modification, or transformation of specific
forms of regulation. 

The following discussion is informed by this framework.  Given the
exploratory stage of this study, however, more attention will be
given to strategies deflecting challenges to the U.S. government's
commitment to a liberal economic world order. 


The Hegemony of the "Corporate Liberal Establishment"

Free traders and advocates for broad-scale American international
activism had gained dominance only during the administration of
Franklin D. Roosevelt.[13] By the end of World War II they became
hegemonic.  The "conversion" of erstwhile isolationist Senator
Arthur Vandenberg, chair of the Foreign Affairs Committee from 1947
to 1949, signaled the beginning of a bipartisan foreign policy
consensus.  The internationalists had become hegemonic in the
Gramscian sense of leadership through the active consent of other
classes and groups.[14] Several economic and political interests
converged: bankers eager to finance the reconstruction of

--page 8--

Europe; major corporations happy to supply overseas markets with
raw materials (especially oil) and machinery; policy elites
concerned about a postwar depression, the defense of the U.S.A. in
a "Grand Area," or the containment of communism.  Since
productivity was so much higher in the United States than
elsewhere, the establishment of a liberal world trading
regime held the promise of creating jobs in the U.S. by exporting
goods to the rest of the world.  In fact, almost all branches of
the U.S. economy showed trade surpluses in the immediate postwar
period.  The transnational companies also served the national
interest by securing raw materials for the U.S. economy.  The
internationalists' project was facilitated by the common belief
that the Depression had been deepened by protectionist measures. 

The internationalists were also among the primary protagonists of
the fordist project, i.e. the dynamic mode of growth that
integrated the working class as consumers of durable goods.[15]
Because of their control of the most productive segments of the 
U.S. economy, the internationally oriented capital groups were
capable of integrating the material interests of important parts of
the working class and other capital fractions. 

--page 9--

Anti-communism served to functions: it tied together the
ideological bonds between the diverse classes and class fractions,
and it satisfied diverse material interests through state
intervention in the accumulation process via a "military
Keynesianism." "Organic intellectuals" advanced the hegemony of the
"corporate liberal establishment."  They were especially prominent
in the Council on Foreign Relations and among the anti-communist
labor leadership.[16]

Alternative foreign economic policy concepts and especially
protectionist demands had difficulties in reaching the executive.
Most protectionist initiatives were effectively blocked by the
"interaction mechanism" between congress and the
administration.[17] The responsibility for the exchange rate policy
rested in the hands of the Federal Reserve System and the
Department of the Treasury.  Both agencies were insulated from
particularistic interests outside the financial community.[18]

--page 10--

Trilateralism: A Response to the Nixon Shocks

The hegemony of the corporate liberal establishment, however, did
not imply a tight rule over the business community, nor did the
ruling block have exclusive access to the state.  The influence of
the internationalists on foreign economic policy was subjected to
changing fortunes.  Until the end of the 1960s, they dominated
foreign policy thinking.  Most social forces consented to the
establishment of a liberal world market order.  The support of most
trade unions was, however, lost in the late 1960s when foreign
producers scored their first great successes. 

In the Nixon-administration, the internationalists had to share
power with groups of a more domestic-market orientation.  This
became painfully clear when, in 1971 -- the year of the first trade
deficit since the turn of the century -- President Nixon abandoned
the Bretton Woods Monetary Order and unilaterally imposed a ten
percent import surcharge.  The latter policy alarmed the
internationalists since unilateral U.S. protectionist action
would have seriously undermined the credibility of the free trade
gospel. Several transnational liberals resigned their posts within
the Administration and joined the effort of David Rockefeller to
found the Trilateral Commission.  The Commission set daunting tasks

--page 11--

for itself, namely "to oppose a return to the mercantilist policies
of the 1930s, to integrate Japan into the core of the American
alliance system; and to change the orientations of the foreign and
domestic policies of the major capitalist powers so that they might
become congruent with a globally integrated economic
structure."[19] The Commission explicitly included CEOs and
political consultants from Western Europe and Japan.  Its credo
was to overcome the nation state: "The public and leaders of most
countries continue to live in a mental universe which no longer
exists -- a world of separate nations -- and have great
difficulties thinking in terms of global perspectives and
interdependence."[20]
 
The objectives of the Trilateralists went further than criticizing
Nixon for a lack of concern for the liberal world market order. 
Those Commission members affiliated with the Democratic Party were
trying to regain domestic consent to and international legitimation
for U.S. international activism that had been lost by the Vietnam
war and by the cynical use Nixon and Kissinger made of Realpolitik.

Their solution was most forcefully articulated by Zbigniew
Brzezinski (the Trilateral Commission's first director): engage in
a human rights campaign, share power with the Western allies, and
respond to Third-World aspirations "within a framework of generally
cooperative relations."[21]

--page 12--

The Trilateralists were successful at first.  The import surcharge
was rescinded.  With the demise of Nixon -- speeded, as Walter R.
Mead suggests, through the influence of the foreign policy
establishment on the Washington Post and the New York Times[22] --
the access of the Trilateralists to the executive was greatly
improved.  At the end of 1975, President Ford realized the idea of
closer coordination among the Western powers by attending the first
summit of the seven most powerful Western nations held at
Rambouillet.  In 1976, Richard Ullman of the Council of
Foreign Relations could even claim that: "Among elites (...)
trilateralism has become almost the consensus position on foreign
policy."[23] The apex of the Trilateralists triumph was reached
when their fellow member Jimmy Carter became President.  Carter
recruited most of his foreign policy staff from within the
Commission and started in earnest the experiment to
manage the world market (and world politics) in close collaboration
with the most important allies.[24]

--page 13--

The Limits of Trilateralism

At the end of Carter's tenure, the Trilateralists considered their
own project as a failure.  The revolution in Iran and the Soviet
intervention in Afghanistan were both interpreted as resulting from
a lack of Western determination.  A decision-making structure built
on consensus, they argued, could not adequately avert the
challenges to the capitalist world order.[25] The allies also
displayed little willingness to share in the costs of maintaining
the Pax Americana.  West Germany's Chancellor Helmut Schmidt showed
little inclination to support the Carter-administration's
policies of economic expansion.  He refused to defend the U.S.
dollar. The Dollar's subsequent precipitous decline in 1979
encouraged Carter to impose budget austerity and the Federal
reserve to increase interest rates.[26] The world of nation states,
which supposedly had already been overcome, had shown its nasty
face. 

These foreign developments did not simply challenge the idea of
trilateralism.  They also posed an immediate threat to the
interests of the Commission's corporate members.  Third World
assertiveness translated into higher prices for raw materials,
threatened their steady supply, and led at times to expropriation
of assets.  The weakness of the U.S. dollar imperiled the
privileged role of U.S. banks in the world capital markets. 

--page 14--

The critique of trilateralism on an international scale coincided
with the rejection of tripartism in the domestic arena.  The Carter
Administration had developed the concept of tripartite
re-industrialization to manage the impact of growing foreign 
competition.  This was to be jointly conceived and implemented by
representatives of capital, labor, and the state.  From
management's perspective, however, tripartism perpetuated precisely
what was perceived to be the main cause of uncompetitiveness: the
accommodation of labor's interests.  In contrast, political action
"against" the state held the promise of improving industry's
conditions of accumulation at the expense of the state.  It would
also give firms the freedom to pursue strategies to weaken labor
or, if these failed, to move out of production altogether.  The
managers of industries in distress, with the exception of
Chrysler, rejected Carter's offers for tripartite crisis
management.[27]

In response to the international challenges and the new domestic
agenda, many internationalists abandoned trilateralist
"accomodationism" and turned to the unilateralist position espoused
by the supporters of Ronald Reagan.  U.S. interest were to be
furthered by the "free play" of market forces.  International
cooperation was no longer considered necessary. Complaints of other
countries, that the U.S. budget deficit and high dollar were
distorting the international monetary and financial system,
went unanswered.[28] 

--page 15--

Instead, it was hoped that the unilateral actions would force other
countries to pursue "structural (i.e., microeconomic)
policy reforms to bring down inflation and free up labor, capital,
and product markets."[29] Thus Reagan's unilateralism was not a
rerun of Nixon's "domesticism," but a conscious attempt to project
America's structural economic power abroad and set the conditions
for its economic relations with other states.  Internationalism was
not abandoned.  Rather, it was stripped of its "cosmopolitan"
rhetoric and became firmly rooted in "national interests." 

The limits of unilateralism, however, became apparent shortly after
its adoption.  When Mexico threatened to default on its loans, the
liquidity crisis threatened U.S. banks.  In response, the Reagan
Administration negotiated a common debt crisis strategy with other
creditor nations. 

Moreover, the policy of strengthening the dollar had made imports
ever more cheaper and ubiquitous.  Hard-pressed domestic industries
cried for protectionism.  The Administration deflected these calls
by a devaluation strategy.  Yet, this presupposed cooperation with
the other central banks, for unilateral action would have risked an
uncontrollable flight out of the dollar.  Thus, by the mid-1980s,
the United States returned to cooperation. (Cooperation here should
not be confused with harmony of interests).[30] 

--page 16--

Despite these obvious limits of unilateralism, the return
to a more cooperative strategy at least towards the Western allies
was made possible precisely because unilateralism had achieved its
main objective: averting the challenges to capitalist rule.  The
power of labor, both inside and outside of the United States, had
been weakened. The terms of trade for raw materials deteriorated
and the debt crisis forced many countries in the periphery to adopt
a more 'welcoming' attitude to foreign enterprises.[31]


Using the Trade Deficit to Uphold Free Trade

The devaluation of the Dollar, however, did not bear the expected
fruits. The trade deficit with Japan, in particular, kept rising. 
In order to deflect domestic protest, then-Secretary of the
Treasury, James Baker, started a campaign to open-up markets for
U.S. products worldwide.[32] The Trade Act of 1988 gave the
Administration tools to retaliate against foreign discriminiation:
Section 301 created a "'crowbar' that could, with the aid of
threatened tariff retaliation, pry open foreign markets 
determined by the United States to be closed to its exports."[33] 

--page 17--

The trade deficit and the comparatively low level of export
dependency have thereby provided bargaining power to U.S. trade
negotiators.  The economies of Japan and Western Europe have become
addicted to exporting to the United States.  An exclusion from this
market would cause severe domestic problems.  Some companies have
already bowed to this pressure tactic.  For example, the German
electric company Siemens was threatened with expulsion from the
U.S. telephone market if it did not cease to oppose the opening of
the West European markets for telecommunication equipment.[34] Most
efforts, though, were directed against Japanese practices.  They
culminated in the Structural Impediment Initiative of 1990 which
obliged Japan to make sweeping changes in domestic commercial
practices.  Thus, Baker's strategy aimed at placating domestic
producers while regaining leadership initiative among OECD nations
by spearheading the trade liberalization efforts.  In other words
the late Reagan and early Bush administrations tried to renew U.S.
hegemony by furthering the hegemonic project of transnational
capital. 

By the summer of 1990, however, the American foreign policy
establishment feared that the Structural Impediment Initiative
might not suffice to suppress the calls for protectionism, since it

--page 18--

was unlikely to produce rapid results.  It was alarmed about
reinvigorated isolationist forces given both the recession and the
end of the Cold War.  It urged domestic reforms to stem the tide. 
According to the president of the Council on Foreign Relations,
Peter Tarnoff: "If ... the United States is consumed by its failure
to resolve internal social problems, American leaders will have
little political support for an activist international role."[35]
On the foreign front, these voices called for more intensive
tripartite consultation and even suggested that "the United States
has to make the difficult adjustment from hegemon to partner."[36]

These suggestions went unheeded, as the decisive defeat over Iraq
in March of 1991 temporarily reversed the relationship between
domestic and foreign policy.  For a short time, it appeared that
international activism no longer required domestic prosperity and
that it compensated for domestic failures. The victory over Saddam
Hussein had symbolically rewarded the  U.S. population for its
support of the foreign activism of its elites. In addition, many
U.S. companies were awarded lucrative contracts from Kuwait and
Saudi Arabia.  The foreign policy establishment had thus won a new
license for international activism which it put to use by obtaining
"fast-track" authorization from Congress for the negotiation of a 

--page 19--

free trade agreement with Mexico.  This "window of opportunity" for
active internationalism, however, was threatened to be shut by the
beginnings of the Presidential campaign of 1992, in which all
Democratic candidates were espousing some kind of "It's time to
take care of our own!" theme.  Pat Buchanan, the Republican
challenger of President Bush, assumed a clear isolationist "America
First" stand.[37]


Clinton's Industrial Policy Internationalism

Bill Clinton, the Democratic challenger most perceptive to
internationalism, won the election on a platform that promised to
reconcile the concern for domestic jobs with an internationalist
agenda. Since taking office, Clinton has, on the one hand, more
forcefully pursued the market access strategy with Japan.  While
his administration has not achieved commitments to specific market
shares for U.S. products in Japan (a goal that was very much
contested by the free trade community within the USA), Japan is
about to agree to extend the semiconductor agreement to other
industries such as automobiles, auto parts, and 

--page 20--

telecommunications.  The semiconductor agreement of 1991 had set a
numerical goal - but not a requirement - for improved market
access.[38]

To what extent these agreements will reduce the growing trade
deficits with Japan has to be seen. On the other hand, Clinton
claimed strategies which would increase the competitiveness of U.S.
businesses so that they could better take advantage of
opportunities in world markets.  This position had been ridiculed
by the Reagan free-marketeers throughout the 80s.  Even before
Clinton made Robert Reich, the foremost proponent of such an
industrial competitiveness strategy, head of his transition team
on domestic issues and subsequently Secretary of Labor, this
position had gained some elite acceptance.[39] A major reason for
this change of heart may be the need to address the public's
concern with jobs in a period of economic stagnation.  Still, the
envisaged business-government partnership cannot be compared to the
tripartism of the Carter era for the simple reason that labor and
other subaltern interests have become so enfeebled that they are
unlikely to play a major role in any industrial policy scheme. 
Labor can no longer be blamed for the competitive problems of
U.S. industries.  In the high-tech industries organized labor has
never gotten a foothold.  For the fordist core industries studies
such as MIT's "The Machine that Changed the World" have shown that 

--page 21--

"lean production" requires a lot more changes in management
practices than the removal of work rules on the shop floor.[40]
Thus, the idea that research and development as well as the
training of workers are "public goods" has gained acceptance among
businesses which want to be competitive on a global scale. 
Government has to either provide or subsidize these "public goods."

Despite mounting support, a number of factors suggest skepticism
about whether these targeted state policies to enhance
international competitiveness can be implemented and deliver the
desired results.  U.S. managers continue to dislike "government
interference." With the exception of the Pentagon, the executive
lacks the capacity for carrying out a coherent policy.  In some
fields, e.g. computer chips, technology is advancing so fast that
many companies fear that any exclusive national technology strategy
may risk access to the latest international developments.[41] As
desirable a federally funded or mandated retraining offensive would
be, it will take a strong labor movement to fight for it. 
Organized labor, however, does not show any sign of recovery. 
Furthermore, any significant spending on industrial policy projects
faces strong budget restraints. The record of the Clinton
administration so far does not dispel this skepticism.[42] However,
even if Clinton manages to implement a meaningful industrial
policy, its fruits could not be harvested in the short term.  His
industrial policy internationalism may soon loose its expediency in
placating the public's wariness of the world markets. 

--page 22--

NAFTA: Free Trade against the Democrats

The recent battle over the ratification of the North American Free
trade Agreement (NAFTA) suggests, however, that a major trade
liberalization initiative may nevertheless be politically feasible,
even if it does not provide specific safeguards for jobs or
comprehensive retraining opportunities.  Clinton succeeded in
obtaining Congressional approval to NAFTA against the majority of
his own party members and against the vocal opposition of one of
his key constituencies, organized labor.  He did so without
offering strong enforcement mechanisms against violations of each
participating country's labor and environmental laws and without a
commitment to a broad retraining offensive. Clinton's achievement
can be interpreted in terms of interest group politics and
Presidential bargaining power.[43] His feat can also be read as a
reflection of elite consensus and effective discursive practices. 
Though the political struggle over NAFTA deserves a more in-depth
analysis, a few observations based on a study about public opinion
on free trade have to suffice here.[44] Public opinion polls on
NAFTA revealed a significant gulf between elite and public opinion.

In 1990, 86% of the total Chicago Council on Foreign Relations 

--page 23--

elite sample expressed support for opening negotiations on NAFTA,
and after they were completed in 1992 this support remained firm,
at 84%, and did not change during Congressional deliberations.  The
public's opposition to NAFTA grew to a high of 63% in March of
1993. Public debate over NAFTA mobilized protectionist forces. 
In a March 1991 poll, while only 32% had "read or heard anything
about the recent proposal to create a so-called 'North American
free trade zone'," astounding 72% thought that NAFTA "would be
mostly good for the U.S."  By September 1992, however, only 54%
thought NAFTA to be "mostly good" and the positions "mostly bad"
and "don't know" gained about evenly.  In a survey taken in March
1993, opposition to NAFTA had grown to 63%.  Concern about jobs
drove opposition to NAFTA.  In March of 1991, a full 50% of
respondents to one survey feared the loss of American jobs.  In a
September 1993 poll, this number increased to 74%. After White
House efforts to rally public opinion many opponents became
"undecideds".  Where a September 1993 poll revealed that 33% were
in favor and 29% in opposition to NAFTA, two months later, shortly
before the televised debate between Vice-President Albert Gore and
billionaire Ross Perot (November 9) the percentage of those
favoring the pact had risen to 48%, while 41% remained opposed. 
The debate increased support considerably among viewers: from 34%
to 57%. The administration scored on the crucial issues of jobs and
leadership.  Post-debate attitude surveys revealed that 50% of
the general population thought NAFTA would create more jobs than it
would destroy (up from 42% in October), and more than half said 

--page 24--

that the views of former presidents and secretaries of state had
made them feel more positive toward NAFTA.  In trying to overcome
the public's apprehension that American jobs might disappear south
with a "giant sucking sound" (Perot), Al Gore did not only pointed
out that in recent years the United States enjoyed trade surpluses
with Mexico, but he also reminded the TV audience of the
significant role high tariffs played in bringing about the
Great Depression.[45] Furthermore, President Clinton attacked
unions for using "roughshod, musclebound tactics" and "naked
pressure" to intimidate Democratic lawmakers.[46] By so
stereotyping unions, Clinton fed the widely-shared belief that high
labor costs reduced American competitiveness.[47] Aware of the fact
that the American public has been generally inclined to support
U.S. leadership in world affairs, the administration consciously
framed NAFTA as a grand foreign policy issue.[48] President Clinton
kicked-off his NAFTA campaign by convening all living former
Presidents, with the exception of Ronald Reagan, for a dramatic
public endorsement.  In the debate with Ross Perot, Al Gore
emphasized America's unique international leadership role and
played on American's self-image as an optimistic, can-do people. 
He thereby came across as more "presidential," in contrast to
Perot's inability to escape his image as a protectionist
displaying, in the words of Phil Duncan, a "testiness that bordered
on anger."[49] 

--page 25--

In sum, the deep seated skepticism of the public towards a free
trade agreement with Mexico was neutralized by portraying NAFTA as
a job creator, by discrediting trade unions as parochial
fear-mongers unable to adapt to the new imperatives of the market
place, and by invoking American leadership in the Western
Hemisphere. 


Prospects for a Sustained Internationalism

Beyond this elite consensus and effective discursive practices, the
internationalists benefit from the consequences of their previous
policies.  First, the internationalists can ground their politics
on the growing integration of the American economy into world
markets.  More companies face competitive imports, but the volume

of exports, the number of exporters, and the importance of exports
to some companies has considerably increased in the last decade. 
More companies have become dependent on foreign suppliers and would
feel threatened in their competitive position if protectionism
would force them either to pay tariffs or to switch back to
domestic supply sources.  In sum, the fear of retaliatory measures
by foreign countries has grown. 

--page 26--

Second, transnational operations have taken on a new quality.  In
the 1960s, investment abroad aimed either at exploiting a different
national market more profitably or at reducing certain production
costs by comparison with home-country activities.  By the 1980s,
multinationals pursued a strategy of worldwide integration. 
Production sites in various countries were increasingly connected
through complex global sourcing, production and sales networks.  As
a result, transnationals have become ever more dependent on a
liberal world market order.  Technological innovations have become
more capital-intensive while amortization cycles have shortened. 
Therefore, more companies sell globally. 

Third, Japanese and others foreign companies have invested heavily
in the U.S.A. (partially in response to protectionist threats),
thereby creating a domestic constituency for an open American
economy and subverting the protectionists' objectives.  Foreign
companies within the United States contribute increasingly to the
causes and the think tanks of the American internationalists.[50]

Finally, foreign goods and capital have become a functional part of
U.S. macro-economic steering.  Foreign capital has largely financed

--page 27--

the federal budget deficit.  Rising import levels have kept
inflation low.  They have partially compensated the fall of nominal
wages in the low wage sectors of the economy.[51]

Global market forces may have become already so compelling that
individual states, including the United States, have few
alternatives other than to compete "among themselves and with the
rest of the world for talent, trade and capital."[52] States would
thus tend to liberalize their tax, regulatory and social regimes to
a norm established in the freest possible competition.  In the
think-tanks from Washington to Tokyo, this kind of competition
among states is already envisioned for the whole OECD-world.
[53] In this vision the rise of regional trading blocks such as the
European Community or the North American Free Trade Zone will not
lead to a division of the world into separate blocs as an editorial
of the Economist feared.[54] "On the contrary," according to
Rudiger Dornbusch, "it may be a good way to achieve multilateral
liberalization."[55] As with Baker's initiative of opening foreign
markets, a regional trading bloc can be interpreted as a crucial
stepping stone for the realization of the final objective:  a
completely liberal world market order.  The increasing numbers of
"strategic alliances" among Japanese, European and U.S.
corporations (e.g. Mercedes-Mitsubishi) seem to support the vision
of "Triad Power" within an OECD free trade zone rather than a triad
of mutually exclusive trading blocs.[56]
 
--page 28--

These "strategic alliances" and the compelling strength of world
market forces have led numerous observers to suggest the emergence
a new, transnationalist hegemonic project.[57] If realized, some of
the core steering capacities of the nation state would be
transferred to supranational institutions (for maintaining law and
order worldwide) and to the companies themselves.  The latter would
assume control over important infrastructural services like
telecommunication.  Class rule would no longer rely on the
Keynesian, nationally organized compromise, but on the threat of
plant closure or what sociologist Mike Burawoy has called the
"rational tyranny of capital mobility".[58] Consent would be
elicited by internal company ladders of advancement, participation
opportunities ("quality circles"), fringe benefits and
philosophical thoughts on the environment.  Thus, the hegemonic
project of the transnational corporation may be nascent in the
crisis of US-hegemony. 

The bourgeois utopia of a "borderless" capitalism,[59] however, has
yet to be realized.  The nation state is still alive, and not the
least thanks to the transnationals themselves.  Even such an
international company as Ford Motor which earns 50 percent of its
revenues abroad does not hesitate to call for import barriers if it
feels its market shares are threatened.[60] Foreign markets were
supposed to be accessible, but not one's own home turf. 

 --page 29--

Besides, this liberal hegemonic project has an Achilles heel.  It
rests on the premise that a liberal world market order will lead to
a long period of prosperity.  If one does not believe in the
assumptions of neo-classical economics, then little evidence exists
for such a claim. Especially the global financial markets appear
highly vulnerable to self-induced crises and may in turn destroy
the fabric of global commodity exchange.  In that case, the more a
country has become integrated in the global economy, the more it
will be affected.  The liberal market project may then become as
quickly discredited as protectionism some 60 years ago. 

From the perspective of the regulation theory a number of
conditions would have to be met before a new dynamic accumulation
of capital is likely to take place on a global scale.  For example,
no production paradigm is in sight whose productivity increases
would compensate for the concurrent increase in the technical
composition of capital.  If growth can only be gained at the
expense of others, then the ever faster race for competitiveness
may lead to a crisis inducing divergence between productive
capacities and social demand.[61]

Furthermore, the strong belief in the viability of market forces
overlooks the fact that markets function only if they are embedded
in forms of societal regulation.  These forms can be as rudimentary
as the rule of law.  But even the rule of the law needs backing
through force, a force which is still organized nationally.  The
enforcement of the liberal world market order, therefore, still
rest with the U.S. military. For its deployment, the American
transnationals are dependent on popular support. The potent force
of anti-communism will be hard to substitute.  If the public's
desired role in foreign-policy is to wage successful crusades,[62]
then neither Realpolitik nor trilateral "consensus" foreign
policy will gain mass appeal. 

--page 30--

Conclusion

So what are the reasons for the adherence of the United States to
a liberal world market order despite the erosion of the foundations
for its original commitment? In this paper I have focussed on the
strategic behavior of internationalists inside and outside the
American state: trilateralism, unilateralism, dollar devaluation,
Structural Impediment Initiative, Gulf war, competitiveness
policies, plus selective concessions to protectionist interests.
These initiatives served them to integrate the interests of other
relevant groups in the American society and to deflect
challenges to their internationalist agenda.  The
internationalists' strategies were supported by a couple of
structural circumstances. I have suggested following factors:
First, the internationalist's hegemony is inscribed in the
structure of the American state. Alternatives to the liberal agenda
had difficulties in reaching the executive. Second, the
process of internationalization increases the number of actors
interested in liberal policies. Third, one of the main social
forces against liberalization, the trade unions, has been severely
weakened.  The unions have also not been able to formulate a
comprehensive alternative to the liberal agenda. These factors,
however, need further elaboration in future research. 


--page 31--

The implications of my findings for the future of the relations
among the core powers of the capitalist world system are quite
limited. My approach does not lend itself to future projections. It
only shows that so far it was possible to maintain the commitment
to a liberal world market order despite the erosion of the original
foundations. It can, therefore, lend support to any speculation
that suggests a liberal world market order will survive the
relative decline of U.S. economic power and the need for
capitalist cohesion in the face of communist challenges. However,
whether this free market order will soon be consummated by its own
contradictions or whether corporate internationalists will be able
to maintain their hegemony over U.S. foreign economic policy even
when the costs of this commitment keep rising, remain open
questions. 



Endnotes:

1. See, Bauer, Raymond A., Ithiel de Sola Pool, Lewis A.  Dexter,
(eds), 1972: American Business and Public Policy: The Politics of
Foreign Trade, 2nd ed., Chicago, Aldine Altherton, and Keohane,
Robert O., 1980: The Theory of Hegemonic Stability and Changes in
International Economic Regimes, 1967-1977, in: Ole Holsti et al. 
(eds), Change in the International System, Boulder, Col., Westview.


2. Chase-Dunn, Christopher, 1989: Global Formation.  Structures of
the World-Economy, Cambridge, Mass., Basil Blackwell, p. 177. 

3. Friedberg, Aaron L., 1988: The Weary Titan. Britain and the
Experience of Relative Decline, 1895-1905, Princeton, Princeton
University Press, p. 22-88. 

4. Pelling, Henry, 1963: A History of British Trade Unionism,
London, St.Martin's Press, p. 169. 

5. Wurm, Clemens A., 1993: Business, Politics, and International
Relations: Steel, Cotton, and International Cartels in British
Politics, 1924-1939, New York, Cambridge University Press. 

6. Chase-Dunn 1989, supra note 3, p. 187.

7. See, Krasner, Stephen D., 1978: United States Commercial and
Monetary Policy: Unravelling the Paradox of External Strength and
Internal Weakness, in: Peter J.  Katzenstein (ed), Between Power
and Plenty: Foreign Economic Policies of Advanced Industrial
States, Madison: University of Wisconsin Press, p. 51-87. 

8. Goldstein, Judith, 1986: Political Economy of Trade:
Institutions of Protection, in: American Political Science Review,
80(1), 161-184, p. 180. 

9. See, Cohen, Stephen D., 1988: The Making of United States
International Economic Policy, 3rd edition, New York, Praeger, p.
178-190. 

10. See, Shoup, Laurence H., 1980: The Carter Presidency and
Beyond.  Power and Politics in the 1980s, Palo Alto, Cal., Ramparts
Press, and Mills, C. Wright, 1956: The Power Elite, New York,
Oxford University Press. 

11. See, Jessop, Bob, 1990.  State Theory.  Putting Capitalist
States in their Place, Cambridge, UK, Polity Press. 

12. These concepts were developed by the so-called French
regulation school. A regime of accumulation is a dynamically
conceived scheme of reproduction which takes into account both
changes in the conditions of production and conditions of
consumption.  A strategy of accumulation describes the specific
ways in which a single capital entity pursues its accumulation
(work organization, marketing strategy, etc.).  Within a
regime of accumulation different strategies of accumulation can
co-exist. Forms of regulation are internalized rules and social
procedures which incorporate social elements into individual
behavior.  A mode of regulation secures the compatibility among the
different forms of regulation within a specific regime of
accumulation (see, Lipietz , Alain, 1984: Imperialism or the Beast
of the Apocalypse, in: Capital and Class, No. 22, 81-110). 

13. See, Frieden, Jeff, 1988: Sectoral Conflict and Foreign
Economic Policy, 1914-1940, in: International Organization 42(1),
59-90. 

14. See, Gill, Stephen, 1990: American Hegemony and the Trilateral
Commission, New York, Cambridge University Press, p. 41-46. 

15. See, Ferguson, Thomas, 1981: Von Versailles zum New Deal: Der
Triumph des multinationalen Liberalismus in Amerika, in: Amerika,
Traum und Depression 1920-1949, Berlin, 436-450.  For the concept
of Fordism, see Lipietz, supra note 7. 

16. See, Wolfe, Alan, and Jerry Sanders, 1979: Resurgent Cold War
Ideology: The Case of the Committee on the Present Danger, in:
Richard Fagen (ed.), Capitalism and the State in U.S.-Latin
American Relations, Stanford, Cal., Stanford University Press, 41-
75, and Gill, supra note 9. 

17. See, Fuerst, Andreas, 1989: The "Interaction Mechanism" Between
Congress and the President in Making U.S.  Foreign Trade Policy,
in: Carl-Ludwig Holtfrerich (ed.), Economic and Strategic Issues in
U.S. Foreign Policy, Berlin, de Gruyter, 67-86. 

18. See, Cohen supra note 9.

19. Gill, supra note 14, p. 143.

20. Trilateral Commission Task Force Report, "Toward a Renovated
International System," January, 1977, quoted in NACLA Report, 1981:
From Hemispheric Police to Global Managers, July/August, p. 6. 

21. Fred Bergsten, quoted in Sklar, Holly (ed.), Trilateralism. 
The Trilateral Commission and Elite Planning for World Management,
Boston, South End Press, p. 25. 

22. Mead, Walter Russell, 1987: Mortal Splendor: The American
Empire in Transition, Boston, Houghton Mifflin, p. 53-77. 

23. As quoted in Sklar, supra note 21, p. 2.

24. See, Shoup supra note 10.

25. See, Rosati, Jerel A., 1987: The Carter Administration's Quest
for Global Community: Beliefs and Their Impact on Behavior,
Columbia, University of South Carolina Press. 

26. See, Block, Fred, 1987: Revising State Theory, Philadelphia,
Temple University Press, p. 114. 

27. See, Scherrer, Christoph, 1992: Im Bann des Fordismus. Die
US-Auto-und Stahlindustrie im internationalen Konkurrenzkampf,
Berlin, Sigma. 

28. Gilpin, Robert, 1987: The Political Economy of International
Relations, Princeton, Princeton University Press, p. 155. 

29. Nau, Henry R., 1990: The Myth of America's Decline.  Leading
the World Economy into the 1990s, New York, Oxford University
Press, p. 216. 

30. Cohen, supra note 9, p. 215.

31. Gill, supra note 14, p. 110.

32. Cohen, supra note 9, p. 215.

33. Bhagwati, Jagdish, 1989: U.S. Trade Policy at Crossroads, in:
The World Economy 12(4) 439-479, p. 440. 

34. Projektgruppe, 1988: "...Stueck fuer Stueck verkauft".  Umbau
der Bundespost - Folgen fuer die Beschaeftigten, herausgegeben von
der Deutschen Postgewerkschaft, Bezirk Hessen, Frankfurt, p. 35.  

35. Tarnoff, Peter,1990: America's New Special Relationships, in:
Foreign Affairs, 69(3) 67-80, p. 79; for similar calls, see
Kirkpatrick, Jeane J., 1990: Beyond the Cold War, in: Foreign
Affairs 69(1) 1-16. 

36. Bergsten, C.  Fred, 1990: The World Economy after the Cold War,
in: Foreign Affairs 69(3) 96-112, p. 105. 

37. Gergen, David, 1992: America's Missed Opportunities, in:
Foreign Affairs 71(1), 1-19, p. 11. 

38. International Herald Tribune, May 25, 1994, p1.

39. Early in 1992, a prominent mainstream macro-economist, Fred C.
Bergsten, chaired a panel on U.S. competitiveness appointed by
President Bush and Congress which called for policies to help
specific sectors (Competitiveness Policy Council, 1993: A
Competitiveness Strategy for America. Second Report to the
President & Congress, Washington, DC, U.S. Government Printing
Office). See also: National Academy of Sciences, National Academy
of Engineering, Institute of Medicine, 1992: The Government Role in
Civilian Technology. Building a New Alliance, Washington, D.C.,
National Academy Press. 

40. Womack, James P., Daniel T. Jones, and Daniel Roos, 1990: The
Machine that Changed the World, MIT-Study on the Future of the
Automobile, New York, Rawson Ass. 

41. See the case of SEMATECH in International Herald Tribune, July
15, 1992, p1. 

42. Faux, Jeff, 1993: Industrial Policy.  Will Clinton Find the
High-Wage Path?, in: Dissent 40(4 Fall) 466-474. 

43. For a list of the President's promises to legislators, see
Public Citizen, 1993: NAFTA'S Bizarre Bazaaar. The Deal Making that
Brought Congressional Votes, Washington, D.C., and, Anderson,
Sarah, and Ken Silverstein, 1993: Nafta Price Tag, in: The Nat ion,
Dec. 20, 1993, 752-753. 

44. Scherrer, Christoph, 1994: Freer Trade Elites and Fair trade
Masses. Why Has Public Opinion Mattered so Little?, Freie
Universitaet Berlin, John F. Kennedy-Institut, Working Paper No.
65. All of the following references to survey data are documented
on pages 18 and 19 of this working paper.

45. Duncan, Phil, 1993: Perot Gores His Own Ox in Debate, in:
Congressional Quarterly Weekly Report, 51(45) 3105. 

46. Wall Street Journal Europe, Nov. 8, 1993: 2.

47. Scherrer, 1994, supra note 44, p. 16.

48. Newsweek, Nov. 15, 1993: 33.

49. Duncan 1993, supra note 45.

50. Choate, Pat, 1990: Agents of Influence. How Japan's Lobbyists
in the United States Manipulate America's Political and Economic
System, New York, Alfred A. Knopf. 

51. Bowles, Samuel, David M. Gordon, and Thomas E. Weisskopf, 1990:
After the Waste Land. A Democratic Economics for the Year 2000,
Armonk, N.Y., M.E. Sharpe. 

52. Editorial "How to Tell a Pro-European," Wall Street
Journal/Europe April 26, 1989: 6. 

53. See, Hufbauer, Gary Clyde (ed.) 1990: Europe 1992. An American
Perspective, Washington, D.C., Brookings, and Ohmae, Kenichi, 1990:
The Borderless World, New York, HarperCollins. 

54. Economist April 20, 1991: 3.

55. "Dornbush on Trade" in: Economist, May 4, 1991: 75.

56. Ohmae, Kenichi, 1984: Triad Power, New York, HarperCollins.

57. E.g. Radice, Hugo, 1988: Capital, Labour and the State in the
World Economy, paper presented at the International Conference on
Regulation Theory, Barcelona, 16.-18. June. 

58. Burawoy, Michael, 1985: The Politics of Production, London,
Verso.

59. Ohmae 1990, supra note 56.

60. Wall Street Journal/Europe, Jan.  14, 1991: 3.

61. Boyer, Robert, and Benjamin Coriat, 1987: Technical Flexibility
and Macro Stabilization, CEPREMAP, No.  8731, Paris. 

62. Augelli, Enrico, and Craig Murphy, 1989: America's Quest for
Supremacy in the Third World: An Essay in Gramscian Analysis, New
York, Pinter Publishers, p. 71.