Rough Road to Empire1 by Giovanni Arrighi The beginning of the 21st century has been marked by a renewed interest in empire-building. The purpose of this paper is to examine this renewed interest in the light of the interpretative scheme proposed in The Long Twentieth Century (Arrighi 1994) and in Chaos and Governance in the Modern World System (Arrighi and Silver 1999). After summing up the main features of this scheme, I will trace present US imperial ambitions to the growing dependence of the United States on foreign capital to prop up its centrality in the global political economy. US attempts to use its seemingly unchallengeable military supremacy to stave off economic decline have nonetheless run into serious problems. The paper analyzes these problems and then concludes by revisiting the contentions of The Long Twentieth Century and Chaos and Governance in light of recent trends and events. I. After US Hegemony A surprising number of readers have attributed to The Long Twentieth Century two contentions it never made. One is the contention, in the words of Michael Hardt and Antonio Negri, that “in the context of Arrighi’s cyclical argument it is impossible to recognize a rupture of the system, a paradigm shift, an event. Instead, everything must always return, and the history of capitalism 1 Revised version of a paper presented at the conference “The Triad as Rivals? U.S., Europe, and Japan,” Georgetown University, Washington, D.C., April 25-26, 2003. Forthcoming in Faruk Tabak, ed., Triadic competition? U.S., Europe and Japan. Boulder, Colorado: Paradigm Press, 2004. 1 thus becomes the eternal return of the same” (2000: 239).2 And the other is the contention that Japan was poised to replace the United States as the new hegemonic power–a contention that in retrospect is dismissed in light of the Japanese economic crisis and US economic resurgence of the 1990's. 3 In reality, The Long Twentieth Century makes neither claim. The four systemic cycles of accumulation constructed in the book–each consisting of a phase of material expansion and a phase of financial expansion–neither prevent a recognition of systemic ruptures and paradigm shifts, nor describe the history of capitalism as an eternal return of the same. On the contrary, they show that systemic ruptures and paradigm shifts occur precisely when the “same” (in the form of recurrent system-wide financial expansions) appears to return. Moreover, by comparing successive periods of return/rupture, the book shows how the motor of restructuring and renewed expansion has changed over time, making the present crisis and financial expansion novel in key respects. The novelty on which The Long Twentieth Century focused was an unprecedented bifurcation of financial and military power. What is new in the present configuration of power is that Japan has done so well by specializing in the pursuit of profit in the East Asian region and letting the US specialize in the pursuit of world power... as to wrest from the West one of the two most important ingredients of its fortunes over the preceding five hundred years: control over surplus capital. For each of the successive systemic cycles of accumulation that made the fortunes of the West has been premised on the formation of ever-more powerful territorialist-capitalist blocs of governmental and business organizations endowed with greater capabilities than the preceding bloc to widen or deepen the spatial and functional scope of the capitalist world-economy. The situation today seems to be such that this evolutionary process has reached, or is about to reach, its limits. (Arrighi 1994: 353-4) 2 For the most recent criticism along the same lines, see Detti (2003: 551-2) 3 Most recently, Benigno (2003: 557) and Maione (2003: 564-5). See also Hardt (1996). 2 The evolutionary process that underlay the recurrence of material and financial expansions was approaching its limits because “the state-and-war-making capabilities of the traditional power centers of the capitalist West have gone so far that they can increase further only through the formation of a truly global world-empire.” And yet, the “realization [of such an empire] requires control over the most prolific sources of world surplus capital--sources which are now located in East Asia.” It was not clear to me at the time–nor, as we shall see, is it clear to me today–“by what means the traditional power centers of the West can acquire and retain this control” (Arrighi 1994: 354-5). I therefore concluded by sketching not one but three quite different scenarios as possible outcomes of the ongoing crisis of the US regime of accumulation. First, the old centers may succeed in halting the course of capitalist history. The course of capitalist history over the last five hundred years has been a succession of financial expansions during which there occurred a change of guard at the commanding heights of the capitalist world-economy. This outcome is present at the level of tendency also in the current financial expansion. But this tendency is countered by the very extent of the state-and-war-making capabilities of the old guard, which may well be in a position to appropriate through force, cunning, or persuasion the surplus capital that accumulates in the new centers and thereby terminate capitalist history through the formation of a truly global world-empire. Second, the old guard may fail to stop the course of capitalist history and East Asian capital may come to occupy a commanding position in systemic processes of capital accumulation. Capitalist history would then continue but under conditions that depart radically from what they have been since the formation of the modern interstate system. The new guard at the commanding heights of the capitalist world-economy would lack the state-and-war-making capabilities that, historically, have been associated with the enlarged reproduction of a capitalist layer on top of the market layer of the world-economy. If Adam Smith and Fernand Braudel were right in their contentions that capitalism would not survive such a disassociation, then... [c]apitalism... would wither away with the state power that has made its fortunes in the modern era, and the underlying layer of the market economy would revert to some kind of anarchic order. Finally--to paraphrase Schumpeter--before humanity chokes (or basks) in the dungeon (or paradise) of a postcapitalist world-empire or of a postcapitalist world-market society, it may well burn up in the horrors (or glories) of the escalting violence that has accompanied the liquidation of the Cold War world order. In this case, capitalist history would also come to an end but by reverting permanently to the systemic chaos from 3 which it began six hundred years ago and which has been reproduced on an ever increasing scale with each transition. Whether this would mean the end just of capitalist history or of all human history, it is impossible to tell. (Arrighi 1994: 355-6) These conclusions were reached on the basis of a research agenda that focused almost exclusively on state-capital relations in the European- and eventually US-centered world capitalist system. Chaos and Governance confirmed the significance of the bifurcation of financial and military power identified in The Long Twentieth Century. But by investigating the role of social and inter-civilizational conflicts in shaping hegemonic transitions, it added important new dimensions to the diagnosis of the ongoing hegemonic crisis. For what concerns the continuing significance of the bifurcation of military and financial power, we argued that the inability of the Japanese economy to recover from the crash of 1990- 92 and the region-wide financial crisis of 1997-98 in themselves did not support the conclusion that the “rise of East Asia” had been a mirage. We noted that in previous hegemonic transitions, it was the newly emerging centers of world-scale processes of capital accumulation that experienced the deepest financial crises, as their financial prowess outstripped their institutional capacity to regulate the massive amounts of mobile capital flowing in and out of their jurisdictions. This was true of London and England in the late eighteenth century and even more of New York and the United States in the 1930's. No one would use the Wall Street crash of 1929-31 and the subsequent US Great Depression to argue that the epicenter of global processes of capital accumulation had not been shifting from the United Kingdom to the United States in the first half of the twentieth century. Nor should we draw any analogous conclusion from the East Asian financial crises of the 1990's (Arrighi and Silver 1999: especially chapter 1 and Conclusion). 4 Nonetheless, through the 1990's the economic expansion of China at rates without parallel or precedent for an ensemble of comparable demographic size had continued unabated.4 We accordingly de-emphasized the importance of the Japanese component of the rise of East Asia to underscore the deep roots of the Chinese ascent, not just in the social and political reconstitution of China in the Cold War era under communism, but also in the achievements of late imperial China in state-and-national-economy-making prior to its subordinate incorporation into the European-centered world system. From this standpoint, the increasing centrality of China and of the overseas Chinese diaspora in promoting the region’s economic integration and expansion was seen as building upon a long-standing East Asian practice of relying more heavily than in the West on trade and markets to regulate relations among sovereigns and between sovereigns and subjects. This practice constituted a serious handicap in preventing the forcible subordination of the China-centered regional system within the structures of the European- centered globalizing system. Over time, however, it became the foundation of renewed competitiveness in the highly integrated global market that emerged under US hegemony (Arrighi and Silver 1999: especially ch. 3; see also Arrighi, Hamashita and Selden 2003: especially Introduction and ch. 7). This interpretation of the increasing centrality of China in the East Asian economy, and of East Asia in the global economy, has two important implications for the prospective outcome 4 Suffice it to mention that China’s GNP per capita as a percentage of the world average, which had increased by 28% in the 1970's and by 84% in the 1980's, rose by 95% in the 1990's (calculated from World Bank 1984 and 2002). As we shall see, the Chinese ascent has in fact been even more significant than these figures imply. For persistent current account surpluses in the balance of payments of the “China Circle” (Mainland China, Singapore, Hong Kong and Taiwan) on the one side, and large and growing US current account deficits on the other, have turned the China Circle, and the PRC in particular, into the second main financier after Japan of the escalating US deficit. 5 of the ongoing crisis of US hegemony. First, to the extent that these tendencies are indeed the expression of a region-specific historical heritage, they can be expected to be far more robust than if they were simply due to policies and behavior that could be replicated elsewhere in the world. Second, China’s demographic size means that its continuing economic expansion is far more subversive of the global hierarchy of wealth than all the previous East Asian economic “miracles” put together. For all these miracles (the Japanese included) were instances of upward mobility within a fundamentally stable hierarchy. The hierarchy could and did accommodate the upward mobility of a handful of East Asian states (two of them city-states) accounting for about one-twentieth of world population. But accommodating the upward mobility of a state that by itself accounts for about one-fifth of world population is an altogether different affair. It implies a fundamental subversion of the very pyramidal structure of the hierarchy.5 The subversive implication of the Chinese ascent is closely related to another dimension of the ongoing hegemonic crisis that was not explored in The Long Twentieth Century but figures prominently in Chaos and Governance: the crisis’ peculiar social character in comparison with earlier hegemonic crises. In past hegemonic transitions, the massive redistribution of resources and the even greater social dislocations entailed by financial expansions provoked movements of resistance and rebellion by subordinate groups and communities whose established ways of life were coming under attack. Interacting with interstate power struggles, these movements eventually forced the dominant groups to form a new hegemonic social bloc that selectively included previously excluded groups and 5 Indeed, to the extent that recent research on world income inequality has detected a statistical trend towards declining inter-country inequality in the 1990s, this is due entirely to the rapid economic growth of China (Arrighi, Silver and Brewer 2003). 6 communities. In the transition from British to US hegemony–under the joint impact of the revolt against the West and working-class rebellions–the hegemonic social bloc was expanded through the promise of security of employment and high mass consumption for the working classes of the wealthier countries of the West, and of rights to national self-determination and “development” for the elites of the non-Western world. It soon became clear, however, that this package of promises could not be delivered on. Moreover, it engendered expectations among the world's subordinate strata that seriously threatened the stability and eventually precipitated the crisis of US hegemony (Arrighi and Silver 1999: 153-216; Silver 2003: 149-167). Thus, while in previous hegemonic crises systemwide social conflict escalated in the wake and partly as a consequence of financial expansions, in the crisis of US hegemony the system-wide explosion of social conflict of the late 1960s and early 1970s preceded and thoroughly shaped the subsequent financial expansion. Indeed, in a very real sense the present financial expansion has been primarily an instrument of the containment of the combined demands of the peoples of the non-Western world and of the Western working classes. Financialization and the associated restructuring of the global political economy have undoubtedly succeeded in disorganizing the social forces that were the bearers of these demands in the upheavals of the late 1960s and 1970s. At the same time, however, the underlying contradiction of a world capitalist system that promotes the formation of a world proletariat but cannot accommodate a generalized living wage (that is, the most basic of reproduction costs), far from being solved, is a constant source of tensions and conflicts within, between, and across political communities (Arrighi and Silver 1999: 282-6; Silver 2003: 20-25; 177-179). It follows that the confrontation between the tendency towards the formation of a world 7 empire centered on the West and of a world market society centered on the East, is not occurring in a social void. Rather, the chances that one or the other tendency will prevail largely depend on whether the agencies of either tendency can provide feasible and credible solutions to the system-level problems left behind by US hegemony. It seemed to us then, and it still seems to me now, that the most serious of these problems is “the seemingly unbridgeable gulf between the life-chances of a small minority of world population (between 10 and 20 percent) and the vast majority” (Arrighi and Silver 1999: 289). As noted above, the continuing rapid economic expansion of China was recognized as a major force subverting that seemingly unbridgeable gulf. Chaos and Governance nonetheless concluded on a cautionary note by pointing out two major obstacles to a non-catastrophic transition to a more equitable world order. The most immediate obstacle was traced to US resistance to adjustment and accommodation. Paraphrasing David Calleo (1987: 142), we noted that the Dutch- and the British-centered world systems had broken down under the impact of two tendencies: the emergence of aggressive new powers, and the attempt of the declining hegemonic power to avoid adjustment and accommodation by cementing its slipping preeminence into an exploitative domination. Today, we maintained There are no credible aggressive new powers that can provoke the breakdown of the US- centered world system, but the United States has even greater capabilities than Britain did a century ago to convert its declining hegemony into an exploitative domination. If the system eventually breaks down, it will be primarily because of US resistance to adjustment and accommodation. And conversely, US adjustment and accommodation to the rising economic power of the East Asian region is an essential condition for a non- catastrophic transition to a new world order. (Arrighi and Silver 1999: 288-9) Less immediate but equally important was the second obstacle: the still unverified capacity of the agencies of the East Asian economic expansion to “open up a new path of 8 development for themselves and for the world that departs radically from the one that is now at a dead-end.” This, we claimed “is an imposing task that the dominant groups of East Asian states have hardly begun to undertake.” In past hegemonic transitions, dominant groups successfully took on the task of fashioning a new world order only after coming under intense pressure from movements of protest and self-protection from below. This pressure from below has widened and deepened from transition to transition, leading to enlarged social blocs with each new hegemony. Thus, we can expect social contradictions to play a far more decisive role than ever before in shaping both the unfolding transition and whatever new world order eventually emerges out of the impending systemic chaos. But whether the movements will largely follow and be shaped by the escalation of violence (as in past transitions) or precede and effectively work toward containing the systemic chaos is a question that is open. Its answer is ultimately in the hands of the movements.(Arrighi and Silver 1999: 289) The issue raised in this passage is different from that raised at the end of The Long Twentieth Century. The three alternative scenarios sketched at the end of The Long Twentieth Century concerned possible developments of the global political economy after the US regime of rule and accumulation had experienced its “terminal crisis.” The United States was said to be living through one of those belle epoques that historically had marked the closing phase of capitalist world hegemonies. That the US regime would sooner or later experience its own terminal crisis was taken for granted. But nothing was said concerning the process of transition from the belle epoque of the US regime to the scenarios that were thought to be its most likely successors. Chaos and Governance, in contrast, focused on the role that social conflict and systemic chaos–understood as a situation of severe and seemingly irremediable systemic disorganization– have played in the transition from one world order/hegemony to another. Like The Long Twentieth Century, it interpreted the revival of US wealth and power of the 1980s and 1990s as 9 the typical belle epoque of closing phases of capitalist world hegemonies. Unlike The Long Twentieth Century, however, it raised the question of whether it was necessary for this particular belle epoque to be followed, like previous belles epoques, by a long period of systemic chaos and unspeakable human sufferings. The answer given in the concluding passage quoted above was that this time around social movements of protest and self-protection had a better chance to act preemptively in the containment of chaos. Whether or not this was wishful thinking is an issue to which we shall return in the paper’s concluding section. II. Domination Without Hegemony One year after the publication of Chaos and Governance the US-centered “new economy” bubble burst. Shortly afterwards came the shock of 9/11. For a brief moment, through the war on Afghanistan, it seemed that the United States could strengthen its global hegemonic role by mobilizing a vast array of governmental and non-governmental forces in the War on Terrorism. Within another year, however, the United States found itself almost completely isolated in waging a war on Iraq that was generally perceived to have little to do with the War on Terrorism and to defy generally accepted rules and norms of interstate relations. What is the meaning of this sequence of events? Does it mark the end of the US belle epoque and, if so, what is the new condition of the global political economy? Almost daily the media provide evidence that we may indeed be witnessing the terminal crisis of US hegemony. One of the most telling pieces of evidence is a report in The New York Times on the eve of the Asia-Pacific Economic Cooperation (APEC) meeting in Bangkok. According to the report, political and business leaders in Asia see US hegemony “subtly but 10