clase 3 wai-chung yeung - contestando un mundo sin fronteras

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Capital, State and Space: Contesting the Borderless WorldAuthor(s): Henry Wai-chung YeungSource: Transactions of the Institute of British Geographers, New Series, Vol. 23, No. 3 (1998),pp. 291-309Published by: Blackwell Publishing on behalf of The Royal Geographical Society (with the

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C a p i t a l , s t a t e a n d s p a c e : contesting t h eborderless w o r l d

Henry Wai-chung YeungThe globalization of economic activities and transnational corporations (TNCs) hasled us to think that we are entering a 'borderless' world. Some prophets ofglobalization argue that it has led to the end of geography. To them, the state hasceased to be an institution capable of exerting influences on the activities oftransnational capital, which has also become increasingly 'placeless'. This paperaims to contest the issue of the alleged end-state discourse of a 'borderless' world. Itargues that, despite the accelerated processes of globalization, national boundariesstill matter in the decision-making and global reach of capital. The notion of a'borderless' world is more folklore than reality. Based on theoretical and empiricalliterature in international political economy and business studies, the paper offers adialectical perspective that examines the changing relationship between capital andthe state, and the embedded relationship between capital and space in theorganization of the global space-economy. Together, both arguments point to theimportance of understanding dynamic transformations of the global economy, beforeconsidering its globalization tendencies.key words globalization global space-economy borderless world nation statetransnational capital geographical embeddedness

Department f Geography,NationalUniversityof Singapore,10 KentRidgeCrescent,Singapore119260email:[email protected] eceived27 February 998

Globalization is not flattening civil societies around theworld but, rather, combining with local conditions indistinctive ways, accentuating differences, and spur-ring a variety of social movements seeking protectionfrom the disruptive and polarizing effects of economicliberalism. (Mittelman 1996c, 196-7)

IntroductionThe late twentieth century has witnessed extensiveglobalization of economic activities, typically throughcross-border investments and trade spearheaded bytransnational banks and transnational corporations(TNCs). Dunning (1993, 129) observes that

one of the most distinctive features of the worldeconomy of the early 1990s is the ease with which thekinds of assets and intermediate products that deter-mine a nation's prosperity and growth are able to move

Trans nst BrGeogrNS 23 291-309 1998

across national boundaries. As a vehicle for housingand controlling the organization and location of theseresources and competencies, MNEs [multinationalenterprises] remain in a class of their own.

The global economy today has become more func-tionally integrated and interdependent than ever(Perraton et al 1997; Dicken 1998; cf Hirst andThompson 1996). It is defined asan economy in which there is close economic inter-

dependence among and between the leading nations intrade, investment, and cooperative commercial rela-tionships, and in which there are relatively few artificialrestrictions on the cross-border movement of people,assets, goods or services. (Dunning 1995, 135)1

Because of this increasing integration and inter-dependence of national economies at a globalscale, it is now fashionable among business gurus,

ISSN0020-2754? RoyalGeographical ociety(withThe Instituteof BritishGeographers) 998


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292international economists and liberal politicians toassert that the world is 'borderless' (Ohmae 1990;1995a; 1995b;Julius 1990;Reich 1991;O'Brien 1992;Horsman and Marshall 1994;Levy 1995).2In such a'borderless' world, they claim, the fortunes of indi-viduals, firms, industries and even nation states areso intertwined with ongoing events in the globaleconomy that it becomes almost impossible todefine the nation state without reference to thebroader economy (Baylis and Smith 1997; Brown1997; Dunning 1997). To them, the nation stateceases to be a political institution capable of exert-ing influences on the activities of capital, which hasalso become increasingly 'placeless'. The conver-gent effects of globalization and cross-borderorganizational learning have rapidly outpaced thedivergent effects of cultures, national institutionsand social systems (Mueller 1994). Because of thisincreasing convergence of production, circulationand consumption over space, the geopolitics ofcapitalism have become irrelevant n an allegedly'borderless' world. The end result is the demise ofgeography and national boundaries, which nolonger make a difference in the 'borderless' world.3Such 'borderless world' and 'end of geography'theses may seem inevitably valid in today'sglobalizing world. Amidst such 'globalizationfervour', however, it is worthwhile to pause for amoment and re-examine critically the analyticalconstructs in these theses. Although the neoliberal'end-state' view of globalization has been criticallyrefuted in recent literature (Boyer and Drache 1996;Hirst and Thompson 1996; Mittelman 1996a;Sassen 1996a; Cox 1997; Scott 1997; Dicken 1998;Weiss 1998; Olds et al forthcoming; Keller et alforthcoming), relatively little has been said aboutthe underlying logic(s) and tendencies of global-ization as an ongoing process. Instead, muchcounterglobalization literature has focused on pro-viding evidence to show that the world is not yetglobalized. While not denying some of the broaderempirical global trends identified by Ohmae4 andother ultraglobalists, this paper aims to analyse theunderlying logic(s) of globalization and to showthat globalization tendencies neither result in a'borderless' world nor lead to the end of geogra-phy. Globalization is conceptualized as a complexprocess of interrelated tendencies (Dicken et al1997). Though it invades local contexts of action,globalization does not destroy them; instead, newforms of local resistance and local expressionemerge, reinforcing the interconnectedness of the

HenryWai-chungYeunglocal and the global, and the multiplicity andhybridization of social life at every spatial scale(Amin 1997;Cox 1997). Globalization can thereforebe seen as a dialecticalprocess of homogenizationand differentiation, constituted by the relativiz-ation of scale. The end-state of globalization isoften perceived as an economically, socially andculturally homogenized world; however, the dia-lectical response to this has been the affirmationofdifference,which is equally present as, if lacking thematerial force of, the apparently dominant homog-enizing tendencies (Cox 1996). These tendenciestowards homogenization and differentiation reflectcontinuous tensions between capital and the statein the (re)production of space. Such tensions, how-ever, are not materialized at the polar scale of theglobal and the local, much to the disappointmentof global-local dialecticians. Rather,they transcendthe global-local scale and are problematized by therelativization of scale, when what appears to bea local phenomenon can simultaneously be aregional or global event elsewhere. There seems tobe a continuous transformation of global flows andlocal embedding through the relativization ofscale.5This dialectical framework of globalization seeksto unravel how underlying tendencies and causalmechanisms produce the global space-economy, byexamining the intricate relationships between (a)capital and the capitalist state and (b) capital andspace.First, in any capitalist system, the state mustperform certain functions in order to enable capitalaccumulation, which in turn legitimizes its ownexistence. The state therefore provides the con-ditions of existence for capital. This is a key argu-ment in the theory of the capitalist state (seeMurray 1971;Jessop 1990).6When capital expandsbeyond its territorial limits and engages in inter-nationalization, it presents a contradiction for theindividual state, whose ability to continue to pro-vide its conditions of existence becomes con-strained. To the ultraglobalists, the local/nationallogic of capital is transformed into a global logic, towhich all nation states must succumb. A conven-ient conclusion is that the capitalist state has lost itscontrol over capital, which causes a breakdown inthe territoriality of the global economy, which inturn becomes 'borderless'.I argue, however, that this is an overtly simplis-tic understanding of the capital-state relationshipin a globalizing era. Rather,the internationalization


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Contesting he borderlessworldof capital creates a response from the state tointernationalize itself, to enable the (re)productionof capital. Whereas the state may lose some of itstraditional functions in the capital accumulationprocess (eg control of capital flows), it may alsogain other strategic functions through engagingwith wider networks of political actors in global-ization (eg regional and international organiz-ations). This dialectical process of existencebetween capital and the capitalist state does notguarantee an end-state of complete domination ofthe state by capital in the global economy. There isthus no a priori reason for the world to become'borderless' as envisaged by those ultraglobalists. Iwill substantiate this argument by looking at thedynamic strategies and shifting capacities of thecapitalist state in a later section.

Second, a proper theorization of the spatialdynamics of globalization should address the fun-damental relationship between capital and space.In the radical literature, four dimensions of spatialpractice by capital are suggested (Gottdiener 1987;Harvey 1989; Lefebvre 1991; Swyngedouw 1992;Yeung 1998a): accessibility and distanciation;appropriation and use of space; domination andcontrol of space; and (re)production of space. Spacetherefore remains integral to the (re)production ofcapital and capital accumulation. This is particu-larly true during the internationalization of capital,when space is seemingly commanded and 'con-sumed' by capital (represented by TNCs) for fur-ther accumulation. This 'consumption' of space bycapital is manifested in the spheres of circulation(transport and communication) and production(factors of production). Harvey (1985, 145) notesthat,

[b]y increasingthe range of possible substitutionswithin a given productionprocess,capitalistscan in-creasinglyree hemselves romparticulareographicalconstraints.When this 'consumption' of space by capital iscompleted, Ohmae's end-state of a 'borderless'world is achieved, in which capital becomes 'state-less' and 'placeless'.I argue, again, that there is a contradiction in the'borderless world' argument, because the reduc-tion of spatial barrierspresents a dialectical oppor-tunity for capital to exploit differences betweenplaces on much smaller scales. The homogeniz-ation of space by the internationalization of capitalcreates an inherent tendency towards greater

293spatial differentiation and territoriality. Instead ofan overwhelming and irreversible convergenceof production, distribution and consumption, adiverse mosaic of geographical patterns in thesedifferent spheres of economic and social life isobserved today. The geography of capitalist accu-mulation continues to be uneven and subject todynamic transformations. No single and constantgeographical patterns can be observed in thisglobal economy bounded by national territoriality.7The notion of territoriality is best encapsulated inthe geographical embeddedness of capital, becausecapital's (re)production and conditions of existencerequire the creation of relatively fixed, secure andlargely immobile social and physical infrastruc-tures (Harvey 1982; 1985). I will revisit this argu-ment for territorial embeddedness later in thepaper.The paper is structured into four parts. The nextsection briefly expounds Ohmae's (1990) thesis onthe emergence of a 'borderless' world. This isfollowed by a critique of the 'borderless' worlddiscourse. The remaining two sections elaboratethe twin arguments of this paper by reasserting theenduring importance of the state and space in the(re)production of capital. Other than drawing fromthe theoretical literature in international politicaleconomy and international business studies, thepaper also presents some empirical evidence onactions taken by individual states in their attemptto consolidate power and market shares in a vola-tile global economy.8 The concluding section offerssome implications for future studies of globalpolitical economy and its interaction with capital.There are also some practical implications forpolicy-makers in relation to individual states'competitive strategies for transnational capital.Towards a 'borderless' world? Theglobalization discourseThe geography of the world to which we areaccustomed is made up of supranational regions,nation states, subnational regions, cities and so on.These conventional geographical units are differen-tiated by territorial boundaries that have beenartificially erected to define their spatiality.Regions, for example, are spatial entities that com-prise various nation states, which in turn containsubnational regions and cities. A region may bea geographical reality (eg North America) or ahistorical legacy (eg South-East Asia). Unlike


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294nation states, which embody political institutionsand economic vehicles, regions do not have thepower and legitimacy to influence human activi-ties, because they are a product of geography andhistory. Although regions may be powerful struc-tural features with profound influences on formalpolitics and cultural identities (eg Europe), it iscommon to identify territorialitywith nation states,which have the formal power and legitimacy toorganize people and institutions spatially, bydemarcating and maintaining territorial bound-aries. In this traditional world of regions andnation states, information, people, goods andinvestment are mobile only to the extent that theyare subject to the tyranny of national barriers andgeographical differences.Recent new developments in the globaleconomy, however, have obliterated some of thesespatial barriers, thus facilitating the movementsof information, people, goods and investment.Scholars have begun to question the effectivenessand, eventually, the existence of national bounda-ries. To them, today's global economy has wit-nessed the emergence of a 'borderless' world.Kenichi Ohmae, through his forceful writings, hasbeen one of the most influential proponents of thisidea of a 'borderless' world. He claims that wehave entered into a world in which investment,industry, information flow and individuals moverelatively unimpeded (or 'effortlessly': Reich 1991)across national borders. It is worth noting thatthese changes are not necessary new. They areinstead episodic over the history of capitalism (seeHarvey 1989;Carnoy et al 1993;Castells 1996;Hirstand Thompson 1996). It is during the last twodecades that these globalization tendencies haveachieved heightened intensity, driven primarily bythe champions of market mechanism, technologicalchange and time-space compression. Thesedynamic forces and globalization tendencies areempirically manifested in the 'global reach' ofTNCs in recent decades (Barnet and Cavanagh1994; UNCTAD 1996; 1997). According to Ohmae(1990; 1995a), this 'borderless' world has severaldistinctive tendencies:1 Investment is no longer geographically con-strained, so that capital can flow to placesthat generate the highest return or best

opportunities.2 Industry is much more global in orientationtoday. The state has lost control over the where-

HenryWai-chungYeungabouts of capital, because regulations and incen-tives are no longer effective in a 'borderless'world in which transnational capital can flowalmost effortlessly across national boundaries.3 Revolutions in information and transportationtechnologies have enabled global corporationsto operate virtually everywhere in the worldwithout reproducing clones of managementstructures (see also Ashkenas et al 1995).4 Individual consumers are becoming increasinglyglobal in their tastes and orientation.

Ohmae (1990; 1995a) argues that, taken together,these four globalization tendencies have contrib-uted to an increasing homogenization of localdifferences and the emergence of a 'borderless'world. To him, the state ceases to be a meaningfuland effective institution for regulating and manag-ing economic activities within national boundaries.As investment, industry, information and individ-uals flow across national boundaries with greatease, the state has lost its traditional role as anintermediary and arbitrator of activities. The nec-essary relationship between capital and the state isdecoupled. Instead of nation states, Ohmae (1995a)argues, the 'borderless' world in the late twentiethcentury has witnessed the emergence of 'regionstates' (eg northern Italy, Baden-Wiirtemberg,Wales, San Diego/Tijuana, Hong Kong/southernChina and the Silicon Valley), which owe theireconomic success not so much to state policies,which preserve sovereignty, but more to their roleas natural economic zones.9

On the other hand, because of the breakdown inthe regulatory nexus of nation states and the spa-tial barriers of national boundaries, transnationalcapital (represented by TNCs) has become increas-ingly 'placeless' in Ohmae's formulation.10Globalcorporations are defined as 'placeless' when theybear no resemblance to the characteristics of othernational firms from their country of origin, andare oriented towards the global economy in allcorporate functions such as marketing, finance,management, strategic planning, human resourcesdevelopment, production, distribution and so on.

Country of origin does not matter. Location of head-quarters does not matter. The products for which youare responsible and the company you serve havebecome denationalized. (Ohmae 1990, 116)

These 'placeless' TNCs are able to transcendnational boundaries and penetrate different


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Contestingthe borderlessworldmarkets. In a 'borderless' world, they are notconstrained by any factor of production and regu-latory regime. They cease to be national firms andhave no allegiance to any place or country oforigin. All these developments have led Ohmae(1990, 13) to conclude that, 'for a growing popu-lation of firms that serve global markets or faceglobal competition, nationality will disappear'.Global TNCs will be attracted to operating inany environment that favours their globalizationstrategies.

Contesting the borderless world discourseThe story that today's global economy is still madeup of distinct national territories (as defended bythe state) and local distinctiveness (as constitutedby the spatiality of local people, cultures and socialpractices) may seem outdated, given the growinginterpenetration of goods, capital and people,and the interdependence of national economies.There are, however, serious reasons to retell thestory. First, there is the fundamental relevance ofgeography as an academic discipline; second, thegeneral dynamics of globalization and its specificgeographical implications are little understood.Rather, they are caricatured by such one-off 'end-state' readings of global economic changes as thoseof Ohmae and other ultraglobalists (see the collec-tion of essays in Ohmae 1995b). Their globalizationrhetorics are subsequently deployed prescriptivelyby both political leaders and business strategists tolegitimize a particular neoliberal ideology that hasgained rapid ascendancy in many Westernsocietiestoday. This neoliberal ideology is used to justifythe annihilation of localities by global forces, andterritorial states by capital, as evidenced in the callfor putting the global logic of capital above thelocal interests of real people." As noted by Cox(1996, 23),

Globalizationbeganto be represented s a finality,asthe logicaland inevitableculmination f the powerfultendenciesof the marketat work. The dominanceofeconomicforces was regardedas both necessaryandbeneficial. tatesand theinterstate ystemwouldservemainlyto ensure he workingof market ogic.In this discourse of 'business civilization', businessis held to perform a civilizing mission, through theoperation of the 'invisible hand' of market compe-tition at the global scale and the ceaseless searchfor profit (Gill 1995; 1996; Piven 1995). Capital,

295represented in institutional form by TNCs, haspotentially planetary reach and is akin to the forcesof nature. It is represented as beyond or abovethe state, and forms the basic structure of aninterdependent global economy. This neoliberaldiscourse suggests that,through the growth of an 'enterpriseculture' andthrough'marketdiscipline'the virtues of prudence,responsibility, ood governance,and social progresswill arise, n partlyspontaneous ashion,giving shapeand direction o a 'new' world order in the so-called

post-ColdWarera.(Gill1996,211)As reviewed critically by Leyshon (1997, 143),

[m]ostof the globalizationdiscourseswhich emergefromwithinpoliticalcommunitiesendto be farmoresimplistic n theirgeneraltenor, f not evangelical ntone, and display a burning faith in the 'natural'benevolenceand 'obvious'utilityof markets.

What is misleading in this neoliberal ideology isthe lack of recognition that specific markets are not'natural' or 'spontaneous'. Their appearance ofbeing self-equilibrating mechanisms is the result oftheir adherence to sophisticated regulations con-cerning the quality of the goods exchanged, theinner organization of transactions, the legal penaltyfor non-compliance and so on. The state, legiti-mized by real people at the national and local level,provides such surveillance mechanisms as ensurethe smooth adjustment process of supply anddemand.

Another critique of this neoliberal discourse ofglobalization is that the world has not become'borderless' through globalization, but ratherthrough the process of representation or 'globaliz-ation folklore' (Spich 1995; Roberts forthcoming).The notion of the 'borderless' world is whatLefebvre (1991) terms 'representation of space' (seealso Kirsch 1995). Protagonists of the 'borderless'world have used the metaphor as if it were reality:they have forgotten that the 'borderless' worldmetaphor remains representational rather thanreal, and they have overlooked the underlyingrelations in the production of this 'borderless'world. The 'borderless world' label has become a'Tower of Babel', ie a metaphor gone awry (Greenand Ruhleder 1995). A fundamental questionremains as to what constitutes this tendencytowards the production of a 'borderless' world?These are the spatial practices in the production ofspace that concern Lefebvre (1991). It must beremembered that the world is made up of a


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296dynamic space that is a product of constant nego-tiation and contestation over time: it is everchang-ing, subject to the dynamics of causal mechanisms,so that the global economy is always in the processof becoming,rather than completed and produced.There is thus no end-state of a truly 'borderlessworld' in this dynamic conceptualization of theglobal economy. All these point to the inherentlimits in the romanticized end-state view of glo-balization (that the process is becoming increas-ingly inevitable and effecting convergence anduniformity across national boundaries).

The enduring importance of nationalboundaries: the changing role of thecapitalist state in the global economyContrary to the claims of Ohmae and other ultra-globalists, globalization does not obviate the needfor the capitalist state. According to the 'capitallogic' school, the state is seen as an ideal collectivecapitalist, and hence is subordinate to the laws ofmotion of capitalism. It is trapped within thecapitalist mode of production and cannot escapefrom its contradictions and crises. However, recentstate theories view the capitalist state as being notmerely a political instrument set up and controlledby capital: as argued by Jessop (1990, 37),

the capitalist tateis an essentialelement n the socialreproduction f capital a political orcethatcomple-ments theeconomic orceof competition etween ndi-vidual capitalsand assuresthe immanentnecessitiesthatcannotbe secured hrough he latter.In a globalizing era, the capitalist state continues toprovide institutional arrangements and strategiccapacities, which assure some minimal levels ofinternational economic governance, thus facilitat-ing the capital accumulation objectives of trans-national capital (Boddewyn and Brewer 1994;Murtha and Lenway 1994; Berger and Dore 1996;Gupta 1997;Weiss 1997). This section of the paperanalyses the underlying foundations of the powerof the capitalist state and its dynamic strategic rolein today's global economy. It argues that, despitechanges in its formal power and controlling role,the capitalist state remains a significant governancestructure in today's global economy and continuesto reinforce the role of territorialityas an importantorganizing principle.The premise that the internationalization ofcapital has led to the loss of state autonomy is

Henry Wai-chungYeungmisleading in two senses (Panitch 1996). In the firstplace, there is often an overestimation of the extentto which the capitalist state was capable of control-ling capital and other countervailing forces in anearlier era. Just how effective Keynesian demandmanagement ever was has recently been ques-tioned (Weiss 1997). The issue here is that, hadthe state been very effective in controlling capitalearlier, capital would not have managed to escapethe state's clutches by internationalization. Murray(1971) argues that, as capital expanded territorially,one of the key problems it had to confront was howto ensure that state economic functions continuedto be performed. Some of these functions includedguaranteeing property and contract, standardizingcurrency and other measurements, ensuring avail-ability of key factors of production and so on. Theinternationalization of capital is critically depend-ent on the internationalization of the state in orderto secure the continued reorganization of socialrelations in favour of capital accumulation on aworld scale (Picciotto 1991;Pooley 1991). To a largeextent, the state provides the necessary conditionsand institutions for the internationalization of capi-tal. Panitch (1996, 85-6, my emphasis) thereforeargues that

there s the problemof tendingto ignorethe extenttowhichtoday'sglobalizations authoredy statesand isprimarilyabout reorganizingrather than bypassingthem ... We areliving throughsomething ike this inour own time.Capitalist lobalization lso takesplacein, through, and under the aegis of states; it is encodedby them and in important respects even authored bythem; and it involves a shift in power relations withinstates that often means the centralization and concen-tration of state powers as the necessary condition ofand accompaniment to global market discipline.

Moreover, the premise reflects a continuous theor-etical misconception that the state and capital (rep-resented on a global scale by the TNC) must beseen as two independent spheres, rather than asintegral parts of the totality of capitalism. The statenot only has initiated the necessary conditions (egfactors of production, property rights, social order,etc) to enable the accumulation and international-ization of capital, but also continues to providesuch conditions, albeit under different time-spacecircumstances. It is not a question of whethercapital's internationalization results in the declineof the state, but rather of how the state continues toparticipate in capital's internationalization in orderto sustain the reproduction of capitalism itself. In


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Contesting he borderlessworldso doing, the state relies on the legitimating powerderived from its citizens. It also depends, to acertain extent, on power derived from collusionwith capital. The capitalist state is dynamic in itsstrategies to counteractthe rising influence of trans-nationalism. Indeed, individual states are capableof constantly reformulating their national policiesand 'regulatory surfaces' to meet the challenges ofglobalization. They are both the 'engineers' and the'recipients' of globalization. They can promoteglobalization through neoliberal politics (eg the US),just as they can contain globalization throughinward-looking protectionist policies (eg India). Thereal question is not whether the state is subsumedunder global forces, but rather how the state adaptsand reorganizes its capacities to meet the challengesof globalization (Palanand Abbott 1996;Evans 1997;Weiss 1997).What remains of the role of the capitalist state intoday's global economy? We witness changingroles of the capitalist state from merely a 'policing'role to a more proactive role in global competition.Some of these state functions are not new at all (seeMurray 1971; Cox 1987), but represent dynamicstrategies of the capitalist state in a globalizing era.Firstly, the state continues to serve as the ultimateguarantor of the 'rights' of global capital, iethe protection of contracts and property rights,through deregulation and establishment ofnational legal regimes (Sassen 1995; 1996a; 1996b).Evans (1997, 72) notes that

transnationalnvestorstrying to integrateoperationsacross a shifting variety of national contexts needcompetent,predictable ublicsectorcounterpartsvenmore than do old-fashioneddomestic investors whocan concentrate heir time and energy on buildingrelations with a particularindividual governmentapparatus.Because of its legitimizing role, the state sometimesintervenes in the behaviour of its domestic capital(eg home-country TNCs) when an investment orproduction decision affects 'national interests'.Alternatively, the state may extend its help todomestic capital so that it may gain a better pos-ition in the global competitive market. Forexample, when the geography of global competi-tiveness in the semiconductor industry wasincreasingly transformed in favour of JapaneseTNCs during the 1980s, the US government facedsevere pressures (and a legitimation crisis) to act onbehalf of American firms. The implementation of a

297strategic trade policy was the tangible response ofthe US government to the challenge of globaliza-tion. For example, the threat of Section 301 andSuper 301 provisions of the 1988 Trade Act, andPresident George Bush's Structural ImpedimentsInitiative in recent US-Japan trade negotiation,helped to open up the Japanese market forAmerican semiconductor TNCs (Angel 1994).

Secondly, the state continues to provide thenecessary conditions for the growth of domesticcapital globally (Murtha and Lenway 1994; Paulyand Reich 1997). Based on a comprehensiveempirical study, Carnoy et al (1993, 49, originalitalics) found that:

[e]venthoughthe internationalmarketvariations hatcontribute o slower or morerapid growthof differentsectorshave animportant ffecton who wins andwholoses in the internationaleconomy,some countries'multinationals regrowingmuchmorerapidly rrespec-tiveof sector.It is shown that Japanese TNCs have outgrowntheir Western counterparts since the mid-1970s, tobecome major competitors in the global economy.During the period between 1975 and 1990, therapid growth and internationalization of largeJapanese TNCs in automobile and electronicsindustries, both of which are crucial industries inthe new, high-tech global economy, was the singlemost important change. Several studies havefound that the unique competitive advantage andcapabilities of many of these Japanese TNCs areenhanced by their national economic and politicalinstitutions (Johnson 1982; Wade 1990; Womacket al 1990;Castells 1996;Weiss 1997). Other studieshave acknowledged the importance of home-country governments in the internationalization ofnational firms from Asia (Yeung 1994a; 1998b).Thirdly, the state is directly engaged in trans-national economic activities to become a 'collectivecapitalist'. The state becomes the ultimate ownerand manager of the so-called state-owned TNCs(Anastassopoulos et al 1987). Ownership of majordomestic TNCs is another way in which the capi-talist state influences the transnational corporatearena. State-owned TNCs are not, of course, anentirely new phenomenon. The East India Com-pany, for example, was largely controlled by theImperial British government. The main differencein today's state-owned TNCs is that they are estab-lished largely for strategic economic reasons. Inview of the drive towards global competitiveness


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298and scale economies, some states realize that theprivate sector alone is unable to compete success-fully against TNCs that are linked to their respec-tive host-country governments. The outcome ofthis dynamic competition between capitalist statesis the rapid emergence and growth of state-ownedTNCs in today's corporate arena. Most such state-owned or state-influenced TNCs are located out-side the US and Japan. Many of them are in thepetroleum and high-tech industries. In 1985, forexample, approximately 41 of the world's largest200 industrial enterprises were state-owned; 18 ofthem were TNCs and seven were French, includ-ing Elf-Aquitaine, Renault, CGE, St Gobain andThomson. In 1989, two of the world's top tenlargest banks were also state-owned: France'sCredit Agricole and Banque Nationale de Paris(Carnoy et al 1993, 91). In addition, many AsianTNCs outside Japan are influenced or owned bythe state, in particular government-linked corpor-ations from Singapore (Yeung 1998b) and state-owned Chinese TNCs in Hong Kong (Gang 1992;Fung 1996).

Fourthly, the state remains one of the mosteffective regulators in the global economy. Dicken(1992b, 305) notes that 'governments may operatescreening mechanisms to filter out those invest-ments which do not meet national objectives,whether economic, social or political'. There areample examples of such investment policies, whichaim specifically at regulating the activities ofTNCs in the Asia-Pacific region. These regulatorypolicies are pertinent to ownership requirements,transfer of technology, domestic trade and borrow-ing, remittance restrictions, foreign exchangerestrictions, local content requirements, exportlevels and so on. When China first inaugurated its'open door' policy in 1979, several special eco-nomic zones (SEZs) were designated, in whichforeign TNCs could locate their manufac-turing factories (Chen 1995). Locations outsidethese SEZs were not open to foreign investmentuntil the mid-1980s, when the Chinese govern-ment saw that clear benefits were brought intoChina by these foreign TNCs. Even so, foreignfirms in China are still subject to mounting layersof regulations at local, regional and national levels.In many South-East Asian countries (eg Indonesiaand Malaysia), foreign firms are also subject tosimilar regulations imposed by host nation states(Yeung 1997;1998c), albeit simpler ones than thosein China.

Henry Wai-chungYeungMoreover, the regulatory asymmetry created bydifferent states also constitutes an uneven surfaceof transaction costs, which reinforces the competi-tive advantage of one place over another. The

development of the Eurodollar market in London,for example, rested on a regulatory asymmetry,because regulation was more liberal in Londonthan in New York(Budd 1995;Helleiner 1995). Thepolitical geography of nation states therefore re-inforces spatial differences on which global TNCscapitalize, in order to advance their capital accu-mulation strategies. Even in the realm of moneycapital, the state continues to influence globalizingtendencies. This is an important point, because

it is within the financialspherethat globalization sarguablymostdeveloped,reflecting he muchgreaterfungibilityand convertibilityof the money capitalform. (Martin 1994, 254)

Through detailed historical research, Helleiner(1995) has argued for three distinct roles of nationstates in the globalization of capital and financeover time:1 granting freedom to market actors throughliberalization initiatives;2 preventing major international financial crises;and3 choosing not to implement more effective

controls on financial movements.Global financial integration occurs not because ofthe decline of nation states, but rather because oftheir regulatory activities. As pointed out recentlyby Evans (1997, 72),

the internationalfinancial system would descendquickly nto chaoswithoutresponsibleiscalandmon-etary policies on the part of international ctors ...Thosewho sitastride he internationalinancial ystemneed capable egulators.Although nation states in the 1990s are more opento neoliberal economic policies, they are not neces-sarily willing to give up their national economicsovereignty in favour of transnational economicand financial systems. It is a question of the nationstate's willingness to take advantage of globaliz-ation, rather than of the nation state's inability toconfront globalizing tendencies.Fifthly, the role of the state in internationalizingpolitics is equally critical in today's globaleconomy. According to some scholars of inter-national organizations (eg Cohen et al 1979;


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Contesting he borderlessworldMcGrew and Lewis 1991; Pitelis 1993; Baylis andSmith 1997), the increasing complexity of theglobal economy has necessitated the formationof regional and international institutions for theco-ordination and regulation of the global opera-tions of capital.12These supranational institutionsare needed because

[t]hetensionbetween the territorially asedsystemofpolitical organization and economic globalizationembodyingthe marketprinciplecreatesa disjuncturein governanceat both the regionaland world levels.(Mittelman 996c,197)Herod et al (1998) argue, for example, that the rulesgoverning the global economy today are morestrictly enforced by international organizations andrhetoric than ever before. The emergence of thesesupranational institutions, however, does not sug-gest the end of the state because the former lackthe important controlling/legitimizing device ofnationalism (Pitelis 1991; 1993). Together with thestate, international institutions are more likely toremain in support of the continuous globalizationof economic activities, as spearheaded by TNCs.International organizations and institutions areimportant to the coexistence of both the state andcapital: to the state, supranational institutions rep-resent concerted actions and efforts to bring capitaland its actions in line with the interests of nationstates; TNCs, on the other hand, support inter-national institutions because they can providesomething that individual nation states cannot, egthe defence of Europe, the regulation of financialsystems, market stabilization and so on.Last but not least, nation states still have sub-stantial power over their domestic economies ina globalizing world. Although 'Keynesianism isdead', post-Keynesian states continue to operatewelfare systems and implement fiscal policiesthrough public spending programmes (Martin andSunley 1997). Despite immense competitive pres-sures, the economic fortunes of regions and locali-ties within these nations are still dependent on theeconomic policies and expenditures of their centralstates. Through prudent fiscal policies (eg interestrates, credit controls and infrastructural spending)and industrial policies (eg targeting national cham-pions), nation states are able to create nationalcompetitive advantages (Porter 1990). During the1980s, Reagan's expansion of the US budget deficitand Thatcher's tax cuts in the UK both producedthe classic Keynesian effect of boosting national

299consumer demand. On the issue of domesticlabour markets, Reich (1991), for example, arguesstrongly for the direct involvement of the USgovernment in skilling and upgrading domesticlabour force to compete in the twenty-first century.The transformation of the UK from a Keynesianwelfare state into a Schumpeterian workfare statehas also had a significant impact on its labourmarkets (Peck 1996).The geographical embeddedness of capitalThe dialectical relationship between the state andcapital described above sheds light on only oneside of the picture. The other side is the dialecticalrelationship between space and capital. I argue thatit is equally important to understand the extent towhich capital can respond to and take advantage ofspatial differences as space remains integral to the(re)production of capital. Amin and Thrift (1994,16, original italics) argue that 'this means takingseriously the contention that the economic life offirms and markets is territorially embedded insocial and cultural relations'. This section of thepaper continues to contest Ohmae's notion of a'borderless' world by examining the ways throughwhich capital is geographically mbedded in distinctnational social or institutional structures (eg on-going networks of social relationships, politicalideologies and so on). Geographical embeddednessof capital refers to complex and ongoing processesof articulation of its home-country characteristicsand host-country operating environments. I arguethat capital is not 'placeless' as alleged in the 'bor-deress world' thesis, because the production andreproduction of capital is location-bound. Capitalnot only needs relatively immobile and fixed infra-structures for its reproduction, but also depends onits home bases for strategic advantages. In addition,production locations for capital are not perfectlysubstitutable because 'global capitalism is beingconstructed through interactions between floweconomies and territorialeconomies' (Storper1997c,31;see also Gereffiand Hamilton 1996).The interna-tionalization of capital is not only measured byincreasing intensities of flows, but also subject toplace-specific conditions of production that areeither unavailable or difficult to reproduce else-where. Capital is thus certainly 'place-sticky'.Embedding capital in placesLet me tackle the first point about the geo-graphical embeddedness of capital in places. In


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300its globalizing processes, transnational capitalincorporates home-country characteristics and hasgeographical specificity built into the logic of itsinternationalization (see also Dicken et al 1994;Dicken 1998).Applied to the globalization of TNCs,home-country embeddedness can be measured by:their geographical spread; their ownership and cor-porate governance patterns; and locations of theirtechnological innovations. First, measured by geo-graphical spread and scope, most of the world'sTNCs are not global corporations as envisaged byOhmae (1990) and others (eg Julius 1990). At most,they are regional in their operations and markets.Moreover, most of their assets, employment andturnover come from home countries. For example,major American TNCs such as IBM, GeneralMotors, Du Pont and General Electric have morethan 50 per cent of their assets and employment inthe US (Hu 1992, Table 1). This results in the de-pendence of American TNCs on the fortune of theUS market (cf Reich 1991). Following an analysis ofthe activities of more than 500 TNCs for 1987 and5500 TNCs for 1992-93, Hirst and Thompson (1996)and Allen and Thompson (1997) conclude that, interms of sales and assets, the home country remainsdominant in TNC activities (also Carnoy et al 1993).For the top five home countries for TNCs (the US,the UK, Japan, Germany and Canada), the home-country/region sales comprise at least two-thirdsof the total company sales. The same intraregionaltendency is also observed in the outward invest-ment by TNCs from Asian NIEs (Yeung 1994a;Dicken and Yeung forthcoming). There is thus apronounced tendency towards the regionalizationof TNC activities (Morrison et al 1991; Morrisonand Roth 1992). There is certainly no fully fledgedglobalization of TNC activities as observed byOhmae (1990; 1995a) and others.

Second, the ownership and corporate govern-ance of allegedly 'global' corporations remainnational rather than global. Shares are held byindividuals and entities from the home countryrather than from foreign countries. Most seats onthe board of directors are held by home countrynationals, enabling the retention of control withinthat country. Hu (1992, 111) therefore argues that'there is no doubt that a company like Siemens isGerman, a company like IBM is American, or acompany like Toyota is Japanese'. Even in the caseof Nestle, Swiss law allows Swiss companies toexclude foreigners from holding registered sharesthat carry voting rights. Nestle thus limits non-

Henry Wai-chungYeungSwiss voting rights to 3 per cent of the total. It iscertainly a national (Swiss) firm rather than a'stateless' firm. Today, few global TNCs havesignificant foreign ownership and foreign seniormanagement. Budd (1995, 347) notes that

many of these companiesare seen as national andcontinental hampionsby theirgovernments.Nationaleconomic egulationmaybe a thingof thepastbutthedegreeof state ntermediationn the formof systemsofcorporate overnance,inancial egulations ndgeneralbusiness environment is the means of maintaining anational interest.In a comprehensive study, Pauly and Reich (1997,8-12; also Keller et al forthcoming) found signifi-cant differences in corporate governance amongAmerican, Japanese and German TNCs. WhileAmerican TNCs are highly constrained bydynamic and deep capital, their Japanese counter-parts are effectively bound by complex but reliablenetworks of domestic relationships, and theirGerman counterparts retain a relatively highdegree of operational independence. These differ-ences persist and are reflected in the varying pri-orities that TNCs from differentnationalities assignto the maximization of their shareholders' value,the autonomy of their managers and the stabil-ization of employer-employee relations. Their pat-terns of shareholding also provide a starting pointfor understanding key differences in their corpor-ate governance. In the early 1990s, nearly 90 percent of the voting shares of publicly listed corpor-ations in the US were held by individual house-holds, pension funds and mutual funds. In Japan,the ratio was closer to 30 per cent and in Germany,15 per cent. In contrast, banks held less than 1 percent of shares in the US but nearly 10 per cent and25 per cent respectively in Germany and Japan.The nature and mobility of shareholding explains,to a certain extent, the varying degrees of controland performance requirements among TNCs fromthese three major economic powerhouses of theglobal economy.Third, contrary to predictions by Ohmae (1990;1995a) and others (Pearce 1990; Pearce and Singh1991; Howells and Wood 1993), the technologicalactivities of global corporations are firmly rooted inhome countries, as indicated by the location andnature of R&D activities. These firms derive theirfirm-specific technological advantages from home-country environments and vice versa (Cantwell1989;1995;Porter 1990;Patel and Pavitt 1991;Patel


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Contesting he borderlessworld1995; Angel and Savage 1996; Pauly and Reich1997;Storper 1997c). Based on patenting records of686 of the world's largest firms from 1981 to 1986,Patel and Pavitt (1991, 11)conclude that, 'in spite ofconsiderable variations amongst the large firmsbased in different countries, their technologicalactivities remained far from globalised'. Morerecent studies (Cantwell 1995; Patel 1995; Angeland Savage 1996; Pauly and Reich 1997) have notvalidated the universal trend towards the globaliz-ation of technological activities. Angel and Savage(1996) found that, despite the growing number ofJapanese R&D laboratories in the US, the phenom-enon of 'global localization' is only observedamong Japanese automobile firms in the US thathave closer ties between local R&D and produc-tion facilities. In computer, electronics and otherindustries, however, the principal linkage ofR&D laboratories in the US is to R&D laboratoriesin Japan. Divisional R&D laboratories in Japanremain the key anchor for emerging interna-tional technological-development networks amongJapanese TNCs. Other studies (eg Castells 1996;Pauly and Reich 1997) have found that the world'sleading TNCs remain fundamentally rooted in dis-tinct national systems of innovation. Nationalityand country of origin still make a decisive impacton the extent and capabilities of R&Damong globalTNCs.The territorial tendencies of capitalMy second point is concerned with the territorialtendencies of capital. The importance of place n theembeddedness or 'spatial anchoring' of TNCactivities is underscored by the necessary relationsbetween place and capital. In theoretical terms,capital depends on place for material conditions(eg infrastructure and resources) and social rela-tions (eg business networks and labour processes),in order to reproduce successfully in an era ofglobal competition. For example, although tele-matics has made possible the spatial decentraliza-tion of economic activities and the overriding ofconventional jurisdiction and boundaries, Sassen(1995, 31) argues thatthere s also a space economywhich revealsthe needforstrategic iteswith vast concentrations f resourcesand infrastructure,ites that are situatedin nationalterritories and are far less mobile than much of the

generalcommentary n the globaleconomysuggests.Even within the realm of financial globalization inwhich TNCs in financial services and their capital

301flows are proclaimed 'ruthless' and 'placeless',Martin (1994, 255) notes that 'place remains funda-mentally important to the structure and operationof the global financial system'. More than that, thetransnational production of financial instrumentsand services remains fundamentally local,

subject to a socially articulated and culturally con-structed labour process. The economic and socialgeography of financial centres provides an essentialgeography of articulation from the local to the globaland within the local which shapes the conditions foreffective (ie profitable) financial production. (Pryke andLee 1995, 333)

As in the case of the City of London, global citiesconstitute places in which finance capital is embed-ded (Amin and Thrift 1992;Allen and Pryke 1994;Thrift 1994; 1996; Tickell 1996; Clark 1997; Aminand Graham 1997).The social spaces in these placesare made up of complex networks of social andpersonal relationships, which can be translated intoexternal or territorial economies that capital canexploit only in situ. In other words, the realizationof these external economies by transnational finan-cial institutions can be possible only at the locallevel in the so-called 'neo-Marshallian nodes'(Amin and Thrift 1992). There is thus certainly aplace for the geography of capital and globalinvestment flows.

Others may argue that there is some evidence ofthe decentralization of transnational financial insti-tutions (Knight 1995). It is, however, mostly backoffices that are decentralized, not their primaryfunctions (Martin 1994;Sassen 1995; 1996a; 1996b).The top world centres of financial activities, suchas London, New York and Tokyo, show no signs oflosing their overall dominance. They remain as thefundamental nodes through which these trans-national financial institutions obtain their competi-tive advantage and realize their external economies.Capital flows and finance capital are not becomingincreasingly 'placeless'. Rather, they are becomingmore entrenched in specific territorial localities, toserve their global clients on the one hand and torealize the benefits of local embeddedness on theother. As Pryke and Lee (1995, 331) argue,

the influence of place on financial production remainssignificant not only in the context of technical changethat seems to reshape the very parameters of geogra-phy and interaction and to challenge the existence offinancial centres and geographical concentrations offinancial production, but in the context of competitionbetween financial centres as well.


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302In addition, although Ohmae (1995a, 28) recog-nizes the importance of these local variations inconsumers and producers, he still thinks that capi-tal has an inherent capacity to overcome thesespatial variations and to create global products.What he has overlooked are the grave difficultiesin transferring capital's competitive advantageobtained from home countries to host countries.Research in international business has shown that,as a consequence of transnational operations,national firms experience the disadvantage ofbeing 'foreign' or 'outsiders' (Hymer 1976). Thiscompetitive disadvantage arises from a lack of localknowledge of social, political and economic con-ditions in the host country. Local knowledge com-prises information and know-how about the localeconomy, politics, culture and business customs ofa country; local demands and tastes; and how toaccess the local labour force, distribution channels,infrastructure and raw materials required for theconduct of business in a country. Because suchlocal knowledge takes the form of location-basedintangible assets, its acquisition results from localoperating experience, or the local embeddedness oftransnational capital. Some forms of local knowl-edge or resources, however, are difficult to obtainby the cumulative experience of foreign firmsalone, because they are specific to particular localfirms only, eg a local firm's skills and capabilities innegotiating with the local government; its access toand skills in negotiating with the local businessand political elite; its ability to manage the locallabour force and unions; and its competence withrespect to local market access, product quality,branding, market reputation and so on. Theseforms of local knowledge and skills are both geo-graphically and firm-specific in nature (Rugmanand Verbeke 1992a; 1992b;Yeung 1998a).Because of this locational specificity of knowl-edge and experience, capital cannot operate any-where in the world in the same way as predictedin the idea of a 'borderless' world. In order tocompensate for such competitive disadvantages,foreign firms need to acquire a stock of localknowledge, which in turn makes them less 'for-eign' and improves the performance of their sub-sidiaries (Kogut and Zander 1993). The acquisitionof local knowledge can be undertaken throughthree distinct channels: forming a joint venturewith a local firm; transferring a stock of past localexperiences from the foreign parent firm; and theaccumulation of operational experience in the host

HenryWai-chungYeungcountry. Of these three channels, forming a localjoint venture is seen, at least by most host-nationgovernments, as the best way to embed foreignfirms in their respective countries and to bringsubstantial advantages to the local economy.Empirical studies (eg Makino and Delios 1996)have shown that each knowledge-acquisition chan-nel has a significant influence on the performanceof foreign subsidiaries. But the first channel, ie alocal joint venture, is the preferred strategy when aforeign firm invests in unfamiliar markets.For example, even in such allegedly 'global'corporations as Unilever, there is a need to organ-ize global operations according to geography, sothat the group as a whole continues to rely on theknowledge of individual units to judge what prod-uct expertise to use in their local markets (Bartlettand Ghoshal 1989; Maljers 1992). To Unilever,simultaneously achieving global integration ofcorporate functions and local responsiveness oftransnational operations is the key strategic mis-sion. At the corporate strategic level, Unileverseeks to transcend national boundaries in itsstrategic planning and functional activities (egresearch, finance and packaging). In that sense, theworld is 'borderless' to Unilever. But in its verylocal operations, Unilever cannot neglect the vitalimportance of being responsive to local differencesin tastes, preferences, values and attitudes. It has todifferentiate its products to adapt to local markets.Since the early 1940s, Unilever has also beenactively localizing its management of operations invarious countries. This localization process occursin conjunction with a parallel development of amatrix structure at the group level, which com-bines local initiatives with some centralized con-trol. In that sense, the world is not borderless toUnilever, but comprises a mosaic of geographicallydistinctive ensembles, mostly embedded in indi-vidual countries and/or regions within nationstates.13 The assertion of a 'borderless' world isrejected in view of continuous change in the globaleconomy, and the local adaptation of corporatestrategy and organizational structures even amongleading global corporations. Local differences stillexist and continue to exert very powerful influ-ences on the global operations of capital. Thereality of today's global economy is very much aparadoxical and multiple coexistence of globaliz-ing tendencies and localized demands.There are also local conventions, rules, practicesand institutions that combine to produce the


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Contestingthe borderlessworldsystemic environment for capital to operate withina world of uncertainty.These 'local elements' in thebusiness system tend to be territorialized, becausethey are found in particular geographic locationsand regions. They can be embodied either inspecific entrepreneurs or in institutional relations(Yeung 1998a). They also frame the new methodsof national economic regulation by nation states.Jonas' (1996) study of local labour control regimesin the spatial fixation of capital shows that trans-national employers in Mexico's northern bordertowns decided to assist employees in response tothe March 1995 devaluation of the peso. Mexico'swage legislation had placed a 10-per-cent limit onwage increases, but the currency devaluation hadleft workers struggling to afford basic necessities.Faced with the prospect of a chronically underpaidand undernourished work force, employersdecided to intervene and offered special incomesupplements, including case benefits, food cou-pons and payments in kind, which enabledemployees to find enough food to make it throughthe gruelling workday. These foreign TNCs firstlocated to take advantage of labour enclaves inMexico's border manufacturing zones, but once inplace, they confronted a crisis in which relocationwas not an option. The maquiladoresemployersfaced a crisis of labour control and the potentialcollapse of the local labour control regime (LCR).Their response represented capital's recognition ofa basic need to foster relations of reciprocity withinthe local LCR. Fujita and Hill (1995) also showthat Japanese TNCs in the US, for example,have actively engaged in reciprocal relationshipswith local businesses, trade unions, state andlocal governments, universities and communityorganizations.So how does a local business system work?Local business systems may be embodied in insti-tutional relations among key actors in the system:business organizations, local institutions, tradeassociations and research institutes (Yeung 1994b).This argument is well exemplified in the geo-graphic literature on the emergence of new indus-trial spaces (Scott 1988; 1996; Storper 1992; Crewe1996). Within these territorial complexes, there isan intense interaction among firms, local institu-tions and other key actors to create a high level of'institutional thickness', which tends to bind firmsto localities (Amin and Thrift 1992; 1994). Localskills and entrepreneurial spirits are also importantto the development of firm-specific capabilities.

303The main influences of local practices on businessorganizations are human interactions, cultural pat-terns, sharing of specific knowledge and the localmilieu (eg industrial districts). For example, entre-preneurship is not a global product. It is very muchembedded in specific social and cultural contexts.Chinese entrepreneurship is strongly rooted in thehistorical background of the transmigration of theOverseas Chinese and their survival strategies inrelatively hostile host environments. The OverseasChinese have become entrepreneurs because theyneed to protect the welfare of their families inoverseas diasporas (Redding 1990; Weidenbaumand Hughes 1996). Chinese entrepreneurship tendsto be much more family-based: personal relation-ships, or guanxi, play a critical role in the trans-national operations of Chinese business firms (egYeung 1997; 1998c). Their entrepreneurship is dif-ferent from American entrepreneurs, who grewout of a sense of self-achievement and enrichment.It would be difficult for American capital to estab-lish themselves in Asian societies if they rely solelyon the sort of individualism that characterizestheir management and business practices. Instead,successful American firms choose to engage anddevelop relationships with local business individ-uals and regulatory institutions.

Conclusion and implicationsThe 'borderless world' discourse must be con-tested, because it has caricatured the intricate andmultiple relationships between capital, the stateand space. First, the capitalist state continues toperform its functions in capital accumulation andto exert influence in the global political economy.Second, capital is more territoriallyembedded nplaces rather than having become 'placeless'.Globalization is a complex process of interrelatedtendencies; there is a dialectical and dynamictension between spatial integration (a result ofthe globalizing of economic activities) and spatialdisintegration (an outcome of localization of thesevery activities). Territorial differences and geo-graphical unevenness remain integral to globaliz-ing processes. The world is made up of a dynamicmosaic of uneven geographical formations that areshifting over time, subject to the interplay of powerrelations among the state, capital and otherforms of social institutions. The analytic logic ofa 'borderless' world becomes absurd in this


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Contesting the borderless world3 The recent and ongoing economic turmoil in Asia is

perhaps a very relevant example of this inter-dependent and 'borderless' world. Ultraglobalistscan easily offer a cursory reading, by stating thatcapital has fled freely from South-East Asiancountries and that the currency turmoil, whichhad originated from the depreciation of the ThaiBaht in August 1997, spread virtually unabatedthroughout the Asian region within months. Such a'strong globalization' reading of the Asian crisiswould clearly misrepresent the central tenet of thispaper - the complex and multidimensional natureof the relationships between capital, state andspace.4 Ohmae's work, in particular his notion of the 'bor-derless world', is used in this paper to represent abroader neoliberal literatureon globalization and itsimpact on the organization and governance of theglobal economy.5 I would like to thank Philip Kelly for bringing to myattention this important point. See Jessop (forthcom-ing) for a conceptual development of 'relativizationof scale' and Kelly (1997) for an empirical analysisof the discursive impact of globalization on thePhilippines, based on that concept. Some parallelsof this idea can also be found in the actor-networktheory (Thrift 1996;Murdoch 1997a;1997b).6 The theory of the capitalist state and the crisis ofcapitalism is well known and will not be repeated infull in this paper. Instead, I will clarify the relation-ship between capital and the state to support myarguments.7 For the concept of territoriality in human geogra-phy, see Sack (1981). A recent critical study ofglobalization defines territoriality as 'the insti-tutional and cultural specificity of nations andregions' (Amin and Thrift 1997, 153). Territorialeconomies are thus constituted by the agglomer-ation of economic activities in close proximity,within the restricted geographical spaces of regions(Storper 1997a; 1997b).8 Because of space constraint, an historical analysis ofthe role of the state and capital in the emergence oftoday's global economy is beyond the scope of thispaper (see Murray 1971; Cox 1987; Gordon 1988;Miyoshi 1993; Hirst and Thompson 1996).9 There is a logical flaw, however, in Ohmae's argu-ments for 'region states' that are often agglomer-ations of adjacent areas in different countries. Ifglobalization crushes state capacities and makesnation states 'transient', there is no reason why thesame 'borderless world' logic could not be appliedequally to 'region states', which are really histori-cally specific reassembled spatial entities. I thankRon Martin for this point.10 Indeed, this idea of a 'stateless' corporationappeared as early as the 1960s (see Ball 1967).

30511 See Taylor (1997) for examples of neoliberal policies

practised by the IMF and the World Bank. A morerecent example can be found in the IMF guidelinesfor 'bailing out' ailing Asian economies.12 For some examples of how actions by internationaland regional institutions shape TNC behaviour, seeDicken (1992a; 1992b; 1994) and Christerson andAppelbaum (1995) on textiles firms; Dicken (1988;1992c) and Casson and Encarnation (1994) onJapanese automobile TNCs in Europe; and Cox(1995) on American automobile TNCs in Mexico.13 As explained earlier, these geographical ensembles(eg markets) may be contained within nation states,but they may also be constituted by supra- orsubnational units (eg regions). There is a relativiz-ation of the scale of globalization.14 This phrase is paraphrased from Kirsch's (1995)critique of David Harvey's idea of 'the shrinkingworld'. The original sentence reads:There comes a point when we must raise ourheads from Harvey's book, look around, andreconsider whether space has really shrunk, andwhether the world is, in fact, collapsing inwardsaround us. (Kirsch 1995, 543, original italics)

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