We are honoured and delighted to receive the 2019 Richard Higgott Journal Article Prize and thank the AIPEN community and the judging panel for their interest in and support of our work. We appreciate the opportunity to reflect here on the essence of our article.
We start by taking issue with a powerful view in IPE that uses US corporate power as a proxy for US state power (as if re-imagining the notion that ‘what is good for GM is good for America’). This elision is most evident in the claim that because America’s global corporations are the world’s most profitable, the American state is as strong as ever. After all, the US is in a position to set the global rules that matter (above all in intellectual property) and in so doing sustain the wealth of its global corporations. The upshot is that the US has structural power – and this is all that matters.
We find this position flawed twice over. First, it remains totally blind to the domestic sources of structural power, specifically the state’s infrastructural power. Our key theoretical contribution is to explain why infrastructural power matters and how it relates to structural power: infrastructural power is the mother of structural power. Rather than emerging sui generis, structural power is grounded in the state’s extractive and transformative capacities at home. In the specific case of the United States, the ability to extract and deliver resources domestically (extractive capacity), and to effect techno-industrial innovation (transformative capacity), has been critical to its ability to project power abroad both economically and militarily (structural power). In combination these are the three faces of infrastructural power (Figure 1).
Figure 1: The Three Faces of Infrastructural Power
Our article is a call to IPE analysts to take seriously the idea of state capacity (qua infrastructural power), and thus to recognise the distinctive power of the state and what is required to sustain it. We see this call as more than an academic exercise because, as our paper shows, the domestic sources of US structural power are now in disarray. And to the extent that the slow erosion of infrastructural power continues, the profitability of US corporations will eventually prove irrelevant to US preeminence. The world will then be forced to confront the geopolitical and geoeconomic reality of a United States in decline.
This brings us to the second flaw: the neglect of the power paradox that now lies at the heart of the government-business relationship in the United States. We point to a growing divergence between the interests of the state (as an institution) and the interests of global corporate actors. On one hand, the state has helped create the conditions that underpin the unparalleled profitability of its corporations (above all in intellectual property, our focus). On the other, these same IP-intensive companies are weakening the state’s infrastructural power at home by shifting abroad both their profits and production.
Corporate profit shifting produces economy-wide effects such as falling business investment, declining labour force participation, stagnant wages, sluggish economic growth. By reducing overall tax revenue, profit shifting thereby erodes the state’s extractive capacity. In response to its revenue shortfalls, the state has turned to issuing debt (e.g. Treasuries). Ironically, this has given debt holders (mainly America’s super rich) the ability to promote their private preferences for tax and spending cuts, exacerbating the problems of crumbling infrastructure, and parlous health, education and social security systems that today buttress images of US decline.
For its part, corporate production shifting impedes innovation, in turn eroding the state’s transformative capacity. By transformative capacity we refer to the state’s ability to catalyse radical technological breakthroughs in collaboration with private enterprise. In the postwar period, this unprecedented capacity helped the United States emerge as the world’s undisputed economic and military superpower. However, as a consequence of production shifting offshore, the slow uncoupling of production and innovation is now compromising the transformative capacity essential to American primacy.
In sum, our paper offers a layered view of state power that connects both its external and domestic faces. It explicates how two opposing images of the United States – externally powerful, domestically challenged – are in reality deeply interconnected. In the process, we offer a way of thinking about how the prioritisation of external power is eating away at the domestic foundations of US capacity to project power in the future. In this respect, it is wise to remember the Owl of Minerva.