Jonathan Story, “Setting the parameters”, extracts from Chapter 2 in Strange Power: Shaping the Parameters of International Relations and International Political Economy, Ashgate Publishing Limited (19 Sep 2000), edited by Thomas C. Lawton, James N.Rosenua, Amy C.Verdun

During the decades when Strange was most active as an international relations scholar (from the 1960s through to the 1990s), the world political economy prompted four related transformations. The first of these was the transformation of the state system as the United States grew in to its eminence as the world’s sole great power, the number of states multiplied as former European colonies claimed political independence, and the major powers sought to minimise the risks of war between themselves. The second component was the relentless retreat of any alternative forms of government to  ‘market democracy’, as oligarchies, military juntas, or various forms of fascism and communism failed the test of time, as illustrated by the long line of failures, defeats, and disasters that accompanied their often turbulent demise. The third of these transformations was the recreation of the world market by the western powers, and by theUnited Statesin particular, to reach a level of integration unknown since the first decade of the century. But unlike the earlier period, trade and investments after 1945 were overwhelmingly by large industrial corporations, financed by the explosive growth of global financial markets. These financial markets would never have reached the size they did, without the expansion in government debt which accompanied the move by all industrial countries to fund expenditures through the issue of bonds, and by the related development of speculative foreign exchange markets. The fourth of these transformations was the growth of the industrial or service corporation, initially based in a home country, and with subsidiaries or market outlets in host countries, towards becoming a transnational group with subsidiaries and markets located around the globe, and with a widely dispersed shareholder community, and a non-national recruitment policy. All available indicators, such as the estimated global sales of foreign subsidiaries, pointed to the continued expansion of international production and the deepening of interdependence in the world economy, beyond that achieved by international trade alone.

These four, inter-related strands of a global transformation were simultaneous in that they interacted in a myriad of ways over the years, but they were not synchronised. Unravelling cause and effect thus became an arduous task and generated much theoretical exploration in the field of international relations. A key feature of Strange’s writings was her argument that states were not the sole authorities in the world political economy. This statement was directed back to some, but not all of the realists, such as Morgenthau[1] and Bull[2], who dominated debates in the decades following the second world war, and focused their writing on states as the key units in the international system or society of states; but it was directed much less at other writers, usually associated with the realist school, such as Aron[3] and E.H.Carr[4]. Aron and Carr, unlike Morgenthau and Bull, took into consideration the ideological, social and industrial dimensions of power in world politics. Waltz discussed the limits to market interdependence as rooted in the state system, but underplayed market dynamics on his state structure[5]. Strange’s statement was then directed against US interdependence/regime theorists who came to dominate IR discourse from the mid-1970s on, and who incorporated market transactions in to the heart of their thinking. Strange approved of their cross-disciplinary approach, but attacked them for developing theories which exonerated the US from acting responsibly in world affairs, and that failed to address the crucial links between the international political system, economic disorders, and diverse values.

To Strange, the defining characteristic of the late twentieth century was that humanity was undergoing major structural change, and that conventional frameworks of analysis failed to take these dynamics into account. Strange’s writings are haunted by memories of the 1930s, the breakdown of the world economy, the slide to war, and the disasters that ensued (1986, p.192; 1998, pp.90-95). Hers was an appeal to recognise the urgency of developing a theory to bring politics and economics together to guide policy in a dynamic world system. Her world system was not composed of two political and economic systems gliding by like ships at night; they are one and the same system (1976,p.20), and their core is the modern corporation, markets and technology (1991). Her ‘new realist’ approach is based on an empirical study linking state policies to corporate strategies, the new diplomacy transforming world politics and markets. The following sections discuss Strange’s theoretical objectives, her analysis of the dynamics of change, her warnings about the traps to avoid in the prolonged US debate on hegemons, and finally her model of structural power and its applicability to international political economy.

Strange Objectives

Reforming the agenda of international relations was Strange’s prime objective. In Sterling and British Policy, she concludes that British policy-makers connived with successive US administrations and economists in misdirecting attention to sterling and the alleged weaknesses of the British economy and the British balance of payments, when in effect the root of the British problem lay in its vulnerability to the policies of the US, the world’s top currency country. In part this was the result of a failure inWhitehall to appreciate that traditional reflexes were no substitutes for carefully crafted policies in a post-war world. But the failure was also due to the atrophy in the study of international relations. Instead of developing as a modern study of international political economy, its protagonists had allowed a yawning gulf to widen yearly between international politics and international economics. International economic relations were left to the economists whose writings were both partial and naïve (1970, p.304). They were partial because their focus on the mechanics of market transactions derived from the methods taught in US universities, the headquarters of the economics profession, and served to direct attention away from more fundamental questions. They were naïve because they wrote as if political factors did not exist, as if economic policies were made after careful analysis of economic costs and benefits, and not out of ambition, fear or ‘totally irrelevant considerations and irrational emotions’ (Ibid.p.314). Political science was no better. The focus in international relations was resolutely on the diplomatic-strategic arena of the cold war, despite the paramount significance of economic development to the poorer countries, and of international economic relations to the members of the West’s ‘affluent alliance’. European integration studies, too, were dominated by neo-functionalists, whose assumptions about international organisations filching the sovereignties of states by stealth had recently received rude treatment at the hands of President de Gaulle. Abstract theories, such as systems analysis and game theory, could only be applied by political sophisticates; in the hands of the uninitiated, they were nitro-glycerine.  ‘Vague and woolly words’ (1997, p.xii) were no substitute for placing political factors once again at the heart of economic analysis.

The basic tenet of international relations theories challenged by Strange is the assumption of the state as the sole unit to be taken into account in world affairs (1981, pp.4-5). The tenet is predicated on the presumption of the seperability of the domestic domain of the territorial state, and the system of states where no authority is endowed with a monopoly of violence. Within its frontiers, the politics of a state is a complex affair, arranged differently according to the country’s political culture, the degree of loyalty paid by citizens to the state, the nature of the political system, and the control exercised by the state over citizens and territory alike. Externally, states co-exist in rivalry with other states, fed by the insecurity that is endemic to the condition of membership in this ‘anarchical society’ of states. The major political issue is how to preserve some minimal order and to prevent or to minimise the risk of war between states. The behaviour of states among each other is thus different in nature to domestic politics. Confronting a hostile world, states demand loyalty of their citizens and act as a unitary front in relations with others. They seek to supplement their weaknesses by making alliances in order to draw on the strengths of others.  But as all states seek to maximise power and wealth, their calculations on the expected benefits and costs rarely coincide. To the extent that alliances can be harnessed to the service of a temporary order, they have to be the instruments of the great powers, differentiated from lesser states by their capabilities. Great powers rise and fall, but world politics only shifts from one structure to another. According to this view, all that has happened over the course of the last century is that, with the collapse of the Soviet empire, the world is back to an unstable multipolar order. In place of the bipolar balance between the two superpowers and their respective alliances, there are five great powers – the US, the EU, Japan, China, possibly Russia – much as there were five or six great powers in Europe, prior to the outbreak of war in 1914 (1994a. p.5.). It is against this position that little fundamental has changed in the nature of world politics that Strange rebels; and the ‘fiction’ she attacks is the seperability of national and international politics, which makes it possible to argue that the study of national and international politics are different in kind.

Why then did Strange differ from the theorists of transnational relations and of economic interdependence who successfully recorded the permeability of state authority in an increasingly integrated world economy? Their conclusions after all were compatible with Strange’s position that the state-centred paradigm was not an adequate foundation for the study of a world in transformation. Nor was there much to distinguish between their respective positions regarding ‘the end of sovereignty’ thesis. ‘And what, anyway, do we understand by this “economic sovereignty”?’, she asks rhetorically. ‘Is it not, after all a concept which never could be defined in any absolute terms, and which in contemporary terms is increasingly drained of meaning?’ (1976, p.21). The answer of where she differed lies in the very different emphases of the two studies conducted in parallel on international economic relations in Chatham House and in Boston. The Chatham House study on the international economic relations of the western world in the 1960s insisted on challenging the assumptions of both international (liberal) economics, and international politics, whereas the Boston study on cooperation and conflict in a system of ‘complex interdependence’ borrowed from neo-liberal institutional theory, and placed states once again centre stage[6]. Neo-liberal institutionalists maintained that organisations or regimes arose in response to the unequal distribution of information between agents in conditions of imperfect competition. Keohane and Nye went on to theorise that regimes changed as a function of the overall power structure, the economic process, the relative powers of states in particular ‘issue areas’, and bargaining within international organisations.  Strange’s position in the Chatham House volumes was to warn against illusions that people and governments would develop a sense of collective responsibility, and drew attention to ‘the nature of the limiting factors, the reservations and qualifications which were attached on various occasions to international co-operative actions’ (1976, p.24). This scepticism then developed into two central arguments. The first held that regime theory helped to explain how states sought to control outcomes abroad and at home, but failed to explain non-decisions to allow non-regimes to survive (1986, pp.25-59).  The second argument drew attention to the fact that states and societies do not subscribe just to liberal economic values of efficiency, based on the individual pursuit of private interest, but to other values also such as security, equality and justice (1988a, pp.9-22).

Strange’s ambition was either to develop herself, or to cajole colleagues in international relations departments, to develop a theoretical approach that could be used by people with different value preferences. The essential condition for such an approach was that it took in to account the dynamics of change in the international system, and therefore of the state. What she proposed was a Cartesian synthesis of opposed paradigms in international studies: the realist, the idealist, and the structuralist (1995, p.55). Since the 1930s, she argued, there had been a triangular dialogue of the deaf between realists, idealists and Gramscian structuralists.  From the 1930s to the 1960s, and then in revived form in the subsequent two decades, the debate had been dominated by the realists, who despaired of changing an international political system based on states. So the most they could recommend was awareness of the institutions that sustained, and moderated state behaviour in ‘the anarchic society’, or to develop ideas, such as regime theory, to enable states to cope better. Idealists sought for ways to reduce conflict and to foster cooperation between states through the creation of international institutions, agreement on general principles of conduct, and the elaboration of rules, regulations and procedures. Their aim was, and is, gradually to transform the international system, so as to bring the ‘anarchic society’ of states more under a common law, similar to domestic law in individual states. The structuralists, named after the Italian communist party leader, Gramsci, favour radical structural change of social and economic relations in the world, and regarded the state system as one facet, and one facet only, of an unjust structure of power. That structure was based on what Robert Cox has called the ‘production structure’ of how the world does its work[7]. For Cox, reform of that structure also entails going beyond the existing state system to a ‘post-Westphalian’ design where state sovereignties no longer serve as an excuse for predatory conduct internationally[8]. Strange’s contribution lies in bringing this Marxian and post-modern vision of world politics to the centre of her analysis.

 Dynamics of Change

The dynamics of change in the second half of the twentieth century, and especially from the 1960s on, were not located in states and international organisation – the focus of realist and idealist approaches to the study of international relations – but in markets and corporate organisations. That is Strange’s central thesis. Most of the ‘string of vague and woolly words’ conceived to describe the diffusion of power in the world economy are state-centric or plain euphemisms for the export of American culture and preferences. ‘Globalisation’, for instance, means anything from the sale of hamburgers to the internet, but in effect is associated with americanisation, just as the word ‘multi-national’ corporation was coined by IBM, a quintessentially US corporation, to present a non-national image to the world. ‘Global governance’, by contrast, is state-centric in that it refers to cooperation and harmonisation or standardisation of practice between governments of territorial states, just as ‘interdependence’ stands for asymmetric dependence of smaller states on the world’s hegemon. They are therefore partial descriptives, and cannot serve as an objective vocabulary to develop a viable theory for international political economy. Yet Strange acknowledges that theUS, with its federal law, huge state sector, large corporations and financial institutions, universities and publicly as well as privately funded research laboratories and vast internal market, is the epicentre of a world market, reconstituted underUSpatronage after 1945. It is:

‘…the impersonal forces of world markets, integrated over the postwar period more by private enterprise in finance, industry and trade than by the cooperative decisions of governments, (that) are now more powerful than the states to whom ultimate political authority over society and economy is supposed to belong’ (Strange 1997, p.4).

From this flow a number of propositions central to her conception of international political economy.

The first is that war and peace between states is no longer a prime concern, compared to the economic and political dimensions of world markets. Governments of all major states have to deal with materialist societies. Their demands can only be pursued by the pursuit of wealth within their own territory, and definitely not by engaging in war for power over more territory. Populations want trade, not because it brings co-operation between peoples, but because without trade wealth could not be achieved. Indeed, governments can only fund the development costs of weapons by sales on world markets, thereby greatly altering the prospects of achieving a reasonable degree of world order. But at the same time, citizens of the affluent alliance are increasingly rejecting war with other major states as too dangerous an option. All these developments have shifted the agenda of governments from the political concerns of foreign offices to conduct relations of power and prestige between states, to business concerns for market access, product promotion or foreign exchange regimes. If states compete, it is not over territory, but for market shares as success in the pursuit of wealth may contribute to cementing the domestic consensus. States are concerned primarily to ensure that business conditions within their own jurisdiction are sufficiently attractive to foster wealth-creating activities and to attract inward investment by multinational corporations. This requires changing the economic policy framework away from offering priveleged conditions to ‘national champions’, and towards forging alliances with multinational corporations.

The second proposition is that the power of states is in decline. States, she argues, are not obsolete, and the boundaries of states have not disappeared yet to allow us to talk of a global society (1997, p.33). But all states have found their power and authority hollowed out, as they have had to share functions with an ever wider range of interested parties. Their powers to ensure the security and wealth of their citizens are shared with other governments, and with firms; they share powers with the financial markets to set the value of their currencies; their powers to raise revenues are shared in many countries with political parties and maffias, while the development of the internet threatens to provide citizens with the means to place their incomes outside the state’s territorial jurisdiction. States in other words are one among many actors on the world stage, but it nonetheless remains the case that the authority of states has been differently affected by the spread of market exchanges (1995). Consider the case of theUnited States. TheUS, she argues, has lost authority to the world markets whichUSdiplomacy so assiduously encouraged. But theUShas not lost power to other states, nor to other international organisations. It is other states which have become more vulnerable to the forces of world markets, the global reach ofUSauthority, and the determination ofUSeconomic diplomacy to create more open access around the world for the products, patents and services of US enterprises.  In the EU, by contrast, states have lost powers to international organisations, seen powers seep downwards to local authorities and bargained with firms to meet the materialist aspirations of citizens. In the wider world, many traditional functions of the state to provide for their citizens are no longer discharged at all, given the combination of circumstances created by the dispersion of authority between states and other actors and the integration of the world economy.

The third proposition is that ‘the pace of development in the international economic system has accelerated, is still accelerating and will probably continue to accelerate; and that in consequence, it is outdistancing and outgrowing the rather more static international political system’ (1970, p.305). This pace of development, and the resulting shift in the balance of power between states and markets, is generated by two key factors: one is the accelerating pace of technological change and the second is the development of financial markets capable of funding the capital cost of most technological innovations (1997, p.7). The key agent of change is the multinational corporation and the globalisation of production that has been the result of the corporations need to recuperate the cost of investment in new technologies. Corporations need access to world markets and have to negotiate the terms with governments. States may deny access, but once the go-ahead has been granted, the corporation decides where, how and when to invest (1991b, p.246). The wider the spread of its facilities around the globe, the more that the corporation becomes a diplomatic partner with many states, and has to engage in a complex juggling act with many ministries, many labour unions, and many suppliers or distributors. Indeed, it is the corporation that is transforming the world political system by establishing transnational networks of alliances and arrangements with other corporations, and by entering bargains on a bilateral basis with states. This ‘new diplomacy’ (1991b, pp.1-31) is quite distinct from traditional economic diplomacy between states. The new diplomacy is characterised by bargains between states and corporations, where control over outcomes can be negotiated; by contrast, traditional economic diplomacy is unable to control the outcomes decided by the global financial markets. The US used these traditional channels and its powers to make crucial non-decisions to create what Strange calls the Frankenstein of the world market, with the result that the markets have escaped US control, and the pretensions of the Group of Seven industrialised countries to manage them are hollow (1988b, p.16).

The fourth proposition thus holds that the world polity is pluralist. After three centuries in which state authority over society was centralised, the trend is in the opposite direction with the world moving forward to a ‘new medievalism’ (1988a, pp.229-232; 1997, pp.30-43). Strange means by this that competing authorities co-exist in world politics and markets, as power has become more dispersed: the problem is that this ‘new medieval’ world has no pope and no emperor.  The world is materialist, driven by greed and self-interest, while the emperor – the US- is unwilling or unable to behave responsibly. Consequently, the principles of pluralist (domestic) politics developed in the 1950s and 1960s to challenge the old view of the state as in charge of its domestic affairs, she suggests, should be applied to world politics. These principles are best suited, she contends, to a world more than halfway to a world economy and a world society. A pluralist perspective reduces the significance of the traditional distinction between domestic and international, and populates the world system with more authorities than states. Politics, the pluralist school argues, is not just what politicians do. Politics occurs whenever individuals seek support from others to achieve objectives. This definition presents politics as ubiquitous, and populates its arena with a broad fauna of organisations and individuals. Following Easton’s famous definition of politics as ‘the authoritative allocation of values in the system’ [9], Strange defines politics as those processes and structures through which the mix of values in the system – freedom, equality, security, justice – are distributed among groups and individuals. She also deploys Lasswell’s formulation, of politics as who gets what, when and how,[10] and refers to Dahl and Lindblom’s[11] concept of ‘polyarchy’ – the power structures of public officials and societal elites and their ability to define ‘issue areas’ in promotion of particular interests. If these are the definitions to work with, then any study of politics must examine the sources of authority, the process and the values by which these ‘issue areas’ are defined.  Who defines the ‘what’ – the contested issues – and how the process is decided is the task of the political economist (1994a, p.7).

 Obfuscations and Hegemons

Like the pluralists, Strange asks the question what is power in human relations and who has it?  Her answer, like theirs, is that we should look at objectives and outcomes if we are to identify where power lies. If government wants X, and people want Y, but the outcome is X, then it is government that has power. Converting this definition from the domestic arena to the world system, and ending up in a ‘new medieval’ interpretation of world affairs, requires her to venture out on to the field of ideas and do battle. And the reason is simple: converted to interstate affairs, the objectives-outcome definition of power is as absolutist a definition of asymmetry between sovereign states as can be imagined. State A wants X, state B wants Y, and the outcome is X, so state X has power. State A is the greater and state B is the lesser power. For Strange, this is not adequate to define the complexity of world affairs. ‘Better’, she writes, ‘catholic complexity than protestant parsimony’ (1994b. p.218). ‘The whole point of studying international political economy rather than international relations is to extend more widely the conventional limits of the study of politics, and the conventional concepts of who engages in politics, and of how and by whom power is exercised to influence outcomes’ (Ibid). International relations studies, by definition, emphasise the relational power of one state directly to another. If B cedes to A, it can only be for one of two reasons. A’s capabilities exceed those of B, which does not wish to risk confrontation, so cedes; or A’s will prevails over B. As capabilities alone are not automatically translated into outcomes, then we are left with ‘will’. But ‘will’ is not quantifiable, like resources are. Its invocation amounts purely to a statement that state A has will if its outcomes triumph, and that state B lacks will. Or its absence can be deployed as a prayer:  ‘if only’, the sigh goes up, member states had shown more ‘will’, the League of Nations would have been fine (1970, p 309).

This is the root of Strange’s attack on hegemonic stability theory. It is prayer disguised as analysis. This ‘loose and ambiguous’ theory (1987, p.554) means different things, points to different conclusions, and diverts attention from its assumptions. The theory has two variants: the strong version has the hegemon produce stability in world order when it uses power to enforce order on others[12]; a weak version states that the hegemon is a necessary, but not sufficient condition for world order. In other words, the presence of a hegemon is a partial explanation as to why order prevails some times, but not others. The weaker version became popular in the early 1970s, when US diplomacy was seeking to extricate the troops from Vietnam and President Nixon announced the end of the dollar’s convertibility in to gold at $35 an ounce. US scholars elaborated on Kindleberger’s study, The World in Depression, 1929-1939, which came out in 1973, to advance the case of disorder in world affairs as due to the hegemon’s relative decline. Great Britain had been unable, and the US had been unwilling in the inter-war years, to play the role of the hegemon, and provide open markets, counter-cyclical spending and a stable currency to the world economy. Disorder on a world scale was the result. The pattern, the theoreticians argued, was being repeated in the 1970s, as the US lost power, measured in terms of capabilities (Keohane, Nye, Gilpin[13]), relative to the economies of rivals, or as economic and social sclerosis set in as vested interests came to enjoy special benefits.[14] The basic assumption of all this literature was that power was associated with the resources of a territorial state: as the hegemon’s relative capabilities declined, the capabilities of others rose and challenged the hegemon. Its conclusions were contradictory: one set of conclusions predicted a free-for-all; others, like Keohane,[15] proposed co-operation between the advanced industrial states. Its two basic propositions went unchallenged: that theUS had lost power in and over the system; and that this decline accounted for disorder in the system.

Hegemonic stability theory begets international regime theory. This holds that the hegemon’s preferences in international relations are injected through international organisation into the world financial or trade regimes, or into bilateral regimes, defined as ‘sets of implicit or explicit principles, norms, rules and decision-making procedures around which actors expectations converge in a given area of international relations’.[16] Strange castigates the theory for being too value-biased, too static, too state- and too US-centric (1981, 1982). It is value-biased in that regime means rule, implying a value preference for order, whereas the ‘anarchic society’ of states is characterised by the precariousness of the international order, the dispersion of authority, the weakness of international law, and a large number of unresolved problems and conflicts. All international arrangements that go by the name of regime are easily upset, for instance because some parties may consider that the regime does not provide security, justice or wealth for them. In other words, the theory assumes that order is a value that has priority over others. It understates the dynamics in world affairs, and pays too much attention to the end result, and too little to determining factors originating in markets and technology which are apt to bring it about.  The theory is too state centric, and pays too much attention to what governments can do or agree, rather than to what they cannot do and do not agree. It therefore leaves in shadow all areas where regimes do not exist, tends to present regimes as areas of agreement rather than as agreements to disagree, and reflects the touching belief that international institutions can somehow change state behaviour.  Finally, it is too US-centric in that the theory understates the asymmetries of states’ dependence on regimes. Given the inter-state and market hierarchy, with theUS at the pinnacle, the less regime or governance there is, the more vulnerable will groups be in lesser states to the power structures of the market. It cannot serve, in short, as an adequate guide for international political economy.

Hegemonic decline and regime theories both suggest that there is little than can be done in a world where political authority is fragmented. Strange has no truck with such obfuscations. There never has, nor ever is likely to be, an abundant store of international collective responsibility on which leading states can draw in their efforts to sustain world order. Management of common concerns in the ‘anarchic society’ has always been improvised, and crisis-ridden, especially when ‘the most powerful and most ruthless member of the affluent alliance’ (the US) neither proposes regimes which are binding on itself, nor is prepared to impose ‘a measure of tyranny’ (1976, p. 359) on the Europeans or the Japanese. Rather, successive US governments have been swayed by short-term considerations, rather than by awareness of the long-term national interest in building a healthy, well-ordered and stable financial system, ‘capable of sustaining a healthy, stable and prosperous world economy’ (1986, p.23). This proclivity to the short-term has shown up in a series of non-decisions by US authorities, not so much in relations with other states, as in their own relations to markets. The failure to bring order into the US regulatory jungle, the financing of both warfare and welfare through the double budget and current account deficits, the support for offshore tax havens, or the non-regulation of foreign exchange markets have prompted the emergence of ‘casino capitalism’ and the merry-go-round of ‘mad money’.  On closer inspection, theschoolofUSdecline has grossly overdone the Cassandra act (1988b, p.3). What has happened, Strange maintains, is that there has been no decline at all, ‘only a change in the basis of American power, as when a person shifts weight from one foot to another’ (Ibid, p.1). Simply, theUS‘corporation’ Empire spills out over its frontiers, and is consolidating an entirely new kind of nonterritorial empire. It is this nonterritorial empire (of corporate investment, financial institutions, the media, the dollar markets, the military bases, the oil pipelines) that is truly the ‘flourishing economic base’ ofUSpower, not the goods and services produced in theUS.

 The US Empire

USpower has no historic parallels, and has created a nonterritorial empire ‘the likes of which have never been seen before’ (Ibid., p. 13). As this empire is the definitive feature of the world political economy for most of the past century and as far as the eye can see in to the next, it is not adequate to analyse the world system equipped with outdated tools from the past. That is not to say that the history of world politics or economics is to be discarded, that the comparative analysis of states is not to be encouraged, that the foreign policy process of states is not to be studied, or that the ‘anarchic society’ of states is not to be analysed. Quite the contrary, Strange considers them all relevant to the study of the world system. But they have to be subsumed, she suggests, in a new construct more appropriate to the world as it is, and as it is becoming. Taking aim at theUSschool of hegemonic stability and regime theorists, she proposes to replace regime with structures, issues with values, and capabilities with outcomes (1981; 1988).

Let us start with the last first. The objectives-outcome definition of power dispenses with capabilities as a sufficient condition for answering the question who-gets-what: it is not enough to know that X is well endowed with resources relative to Y to anticipate the outcome. The way resources are distributed does not tell us what X or Y’s policy choices will be: Strange is no determinist, Marxist or ‘econocrat’. For her, outcomes are shaped in part by bargaining, where bargaining skills are not uniformly distributed between participants and during which value preferences may be modified. Bargaining furthermore is inter-group, including state-state relations. In other words, the arena of bargaining is pluralist and dynamic. That is where values trump issues. In a pluralist world of many authorities, issue areas are not likely to be decided in a consensual mode. There will be some broad symbolic, motherhood and apple pie areas of agreement, and a consensus on a few issue areas among some participants. But in a wide community of authorities, there will be very different value preferences, and consequently major tensions among them. The same point is made by Bull or Aron when they argue that the world system of states no longer shares the same values as its European predecessors in previous centuries. Under such conditions, many authorities are more likely to reach non-decisions, or if they have reached decisions, they are likely to be incomplete or temporary or both. Different value preferences, Strange suggests, is a key source of change in regimes, which, by contrast to structures, are as solid as the last treaty or as substantial as an international organisation. Structures are defined as basic political functions, which authorities may exercise in relation to the system of production, exchange and distribution of goods and services.  Power is thus exercised in terms of the relationship of authority to market. Those who hold power decide the mix of values, and the source of their power, structural power, “is the power to shape and determine the structures of the global political economy within which other states, their political institutions, their economic enterprises, and(not least) their scientists and other professional people have to operate”(1988a.pp.24-5). Those who hold structural power decide on the mix of values and the sort of outcomes.

Strange’s definition of structural power, already discussed in Chapter 1, leads her to argue that whoever possesses or controls all sources of the power structure is able to shape the choices of others, without directly putting pressure on any of them. These four sources are control over security, production, credit and knowledge, beliefs or ideas.

The security structure is state-centred, but greatly affected by the dynamics of technologies and markets, and provides or withdraws security from individuals, social groups and corporate enterprises. The main threat to security arises from disagreements among the many authorities in the international political economy about the limits of their respective authority. It is advisable, she suggests, to reject use of the concept of legitimacy, implying the existence of counter-societies, and to consider the security structure as jeopardised when one authority challenges the domain rights of another. In the state system, conflicts arise when the decline of great powers, such as the Ottoman empire, open up opportunities for misperceptions about the tolerated limits of competing authorities, or when status quo powers are challenged by revisionist powers. What counts is the belligerency of a state, not the nature of its domestic arrangements. World economic order depends greatly on what happens in the security structure.

The production structure is how people at work are organised, with the key change being the accelerated internationalisation of production (see Chapter 4), the combined result of state policies, technological innovations, management strategies and market trends. In terms of values, the dominant production structure scores well on efficiency, having allowed a sharp average rise in living standards alongside an unprecedented rise in world population. Clearly, it has wrought fundamental changes in the security structure, and affects class relations and corporatist arrangements. She is on sure ground in suggesting that the production structure’s record on justice is highly controversial, as its affects on distribution of benefits and costs have been highly uneven, complex and subjective. But she is unsure whether the difficulties that corporations pose for states should be taken as an indication that they are filching power from states. This ambiguity about whether or not state powers are or are not in decline is a permanent feature of her thought, despite forceful assertions to the contrary.

The financial structure is defined as the way credit is created, and the monetary system through which relative values of the different monies in which credit is denominated are set. It is composed of a global market linking financial centres and a series of national credit and money systems. Its key feature is its instability, which Strange equates with the trend to market liberalisation, while castigating theUSfor its series of non-decisions in promoting it. Not surprisingly, her financial structure scores high in US values of efficiency and freedom, but very poorly on security and distributional justice. The workings of the financial structure prompt citizens to clamour for more welfare handouts, engendering a state hyper-activism. This is a trend that Strange warns against confusing with effective state execution of its traditional functions as a sovereign. In similar vein, Strange considers the debates between Keynesians and monetarists in the 1970s and 1980s as being too state-centric, particularly in the case of theUS, to account for the workings of what is a global financial structure.

Strange’s knowledge structure (discussed further in Chapter 3) is defined in terms of what knowledge is discovered, how it is stored, who communicates it by what means and to whom on what terms. This is an area where she prefers to lay down a marker for future investigation, rather than to make any original statements. In many ways, her concept of a knowledge structure is similar to Nye’s concept of ‘soft’ as compared to hard power, which enables states through cultural attraction, ideologies or international organisations to get others to do what they would want. The workings of the knowledge structure within the state system create, she suggests, competition between states for the acquisition of knowledge, and a growing asymmetry between them. But she also notes the growth in the flow of information, which stimulates the growth of service jobs, facilitates global production and marketing, underpins the spread of financial markets, and transforms the security structure, as the ability of states to monopolise the channels of media communication wither away.

These four sources of the overall power structure interact, and shape what she terms the ‘secondary issue areas’ of transport, trade, energy and welfare, where there is always an interaction of authority and market, and a transnational dimension containing other authorities. This structure is Strange’s Cartesian synthesis, bringing together the world’s political and economic systems into one. It contrasts singularly, she suggests, to the prevalent discussion in international political economy where states and markets relate one to another. This prevalent formulation she presents in the form of a simple equation: States (S) + Markets (M) = IPE, where states affect the production and distribution of wealth, and markets affect the distribution of power and wealth among states. In her definition of multiple authorities with power to allocate values and multiple markets in a pluralist world where politics reaches beyond states, her equation presents the two worlds of states and markets as one. Replace S, she suggests, with multiple authorities (An); the generic M with multiple markets (Mn), and add the variable mix of values, Vn. These values are allocated among social groups (Sn), understood as states, classes, generations, genders or multiple social groups. The alternative equation is thus: An/Mn+Mn/An = Vn/Sn.

These four structures cannot be dealt with in isolation one from another, but interact, so that changes, say in the security structure will interact with different changes in the other structures. These changes will affect the balance of power over outcomes between authorities and markets, and will have distributional implications in terms of who wins and loses. Only then is it possible to gauge the implications of structural changes for the secondary issue areas of trade or welfare.

 Intermediary Conclusions

What intermediary conclusions may be drawn from this presentation of Strange’s suggested approach to the world system? Let us answer the question in the light of the four related transformations, sketched in the introductory paragraph of this chapter. Strange’s structural power approach definitely accounts for the transformation of the state system: for Strange, the US, to use George Orwell’s terms, is much more equal than any other animal in the world farmyard, definitely than any other member state of the affluent alliance or, for the foreseeable future, any coalition of them. The proliferation of states accompanying the world’s fragmentation has multiplied the number of states whose claims to sovereignty are often, but far from always, fictional. The second transformation of the world system is the spread of ‘market democracy’. Strange often indicates scepticism about claims that the nature of domestic regimes affect state behaviour in the inter-state system. Nonetheless, ‘market democracy’ encapsulates the values of the affluent alliance, that in the course of the past thirty years have become nearly universal in scope. The third component transformation is the emergence of the world market, recreated in Strange’s view largely by the exercise ofUSpower. In particular, the world credit system and money markets are stamped ‘Made in the U.S.A’. The fourth, and for Strange the most significant component is the emergence of the corporation, and the internationalisation of production. The bargains struck between states and corporations have created a ‘new diplomacy’, placing theUSat the hub of a transnational network of power. In every dimension of the power structure, the US is pre-eminent, and therefore influences the balance of power between authorities and markets in a ‘new medieval’ world to affect outcomes that sooner or later tally with US values and interests. For Strange, theUSis the territorial centre of a new and unprecedented non-territorial empire. This ‘new medieval’ world has a defective emperor, she suggests, and no pope. Given the peerless position she bestows on theUS, she could have argued from her position that the world has for the first time ever an emperor that anointed itself pope.

Perhaps the major paradox of Strange’s approach is to seek to escape the clutch of state-centric realists, interdependence and regime theorists, or one-world society evangelists, but to always come back to presenting what realists would readily recognise as a uni-polar world. TheUS, she is saying, is not ‘one among equals’, but equal to none. Dominant values since the collapse of the Soviet Union may be arguably presented as some mix of liberal/social democrat/national/conservative ideas, familiar to US traditions, while the ‘new medieval’ world of many authorities and many markets is one where the US most of the time – and definitely where the stakes are high – calls the shots, with a sharp eye to ensuring outcomes compatible with US values and interests.  Simply, theUSposition at the summit of Strange’s power structure allows the manifold manifestations ofUSpower to condition a world to its own, often malevolent and short-term interests. Her prayers, recommendations and fears flow from this. Her prayer is for the US to change its ways and act in less predatory, less destabilising a fashion; her recommendation is that, failing that, the US be counter-balanced by a more cohesive Europe, and a more assertive Japan; her fears are that the present world system may experience, in new form, the disasters of the 1930s. Better then for theUSto act as world tyrant than for lawlessness to dominate as the ‘new medieval’ world takes on the familiar characteristics of the real medieval world, from which the Europeans emerged through the device of state sovereignties. If tyranny runs against theUSgrain, then the alternative at which she only hints, is that the states reclaim their (unequally) exercised sovereignties, and that the dispersion of authorities and markets which she records as a central feature of the last decades, is brought to a halt or at least greatly curtailed. We are back in a different, more state-centric world of fragmented authority, one where the fundamentals of the politics of different sovereignties is unchanging.

In the last resort, Strange challenges us to be less optimistic at converting the world system in to a laboratory for experiments for our own pet notions, … Strange was a rebel, but a conservative one.


[1] Hans Morgenthau, Politics Among Nations, 4th ed.New York, Knopf, 1967.

[2] Hedley Bull, The Anarchical Society,London, MacMillan, 1997.

[3] Raymond Aron, Paix et guerres entre les nations, Paris, Calmann-Lévy, 1962.

[4] The Twenty Year’s Crisis, 1919-1939,London, MacMillan, 1939.

[5] Kenneth Waltz, Theory of International Politics,New York, McGraw-Hill, 1979.

[6] Robert Keohane, Joseph Nye, Power and Interdependence,Boston,Massachusetts, 1977.

[7] Robert Cox, Production, Power, and World Order,New York,ColumbiaUniversity Press, 1987.

[8] Robert Cox (ed) The New Realism, Perspectives on Multilateralism and World Order,New York, UN University Press, 1997.

[9] D. Easton, A Systems Analysis of Political Structure,New York, Wiley, 1965.

[10] H.D.Lasswell, Politics: Who Gets What, When and How?New York, P.Smith, 1950.

[11] R.A.Dahl, Chalres Lindblom, Politics, Economics and Welfare, New York, Harper, 1953; Charles Lindblom, Politics and Markets. The World’s Political-Economic Systems,New York, Basic Books, 1977.

[12]  I.Wallerstein, The Politics of the World-Economy: The States, the Movements and the Civilisations,1974.

[13]Robert Keohane, Joseph Nye Jr. Power and Interdependence: World Politics in Transition, Boston, Little Brown, 1977; Robert Gilpin, The Political Economy of International Relations, Princeton (N.J.) :PrincetonUniversity Press, 1987.

[14] Mancur Olson, The Rise and Decline of Nations: Economic Growth, Stagflation and Social Rigidities,New HavenYaleUniversity Press, 1982.

[15] Robert Keohane, After Hegemony: Co-operation and Discord in the World Political Economy,Princeton,N.J.:PrincetonUniversity Press, 1984.

[16] Stephen Krasner, International Regimes,Ithaca,N.Y.,:CornellUniversity Press, 1983.

About Jonathan Story, Professor Emeritus, INSEAD

Jonathan Story is Emeritus Professor of International Political Economy at INSEAD. Prior to joining INSEAD in 1974, he worked in Brussels and Washington, where he obtained his PhD from Johns Hopkins School of Advanced International Studies. He has held the Marusi Chair of Global Business at Rensselaer Polytechnic Institute, and is currently Distinguished Visiting Professor at the Graduate Schoold of Business, Fordham University, New York. He is preparing a monograph on China’s impact on the world political economy, and another on a proposal for a contextual approach to business studies. He has a chapter forthcoming on the Euro crisis. His latest book is China UnCovered: What you need to know to do business in China, (FT/ Pearson’s, 2010) ( His previous books include “China: The Race to Market” (FT/Pearsons, 2003), The Frontiers of Fortune, (Pitman’s, 1999); and The Political Economy of Financial Integration in Europe : The Battle of the Systems,(MIT Press, 1998) on monetary union and financial markets in the EU, and co-authored with Ingo Walter of NYU. His books have been translated into French, Italian, German, Spanish, Chinese, Korean and Arabic. He is also a co-author in the Oxford Handbook on Business and Government(2010), and has contributed numerous chapters in books and articles in professional journals. He is a regular contributor to newspapers, and has been four times winner of the European Case Clearing House “Best Case of the Year” award. His latest cases detail hotel investments in Egypt and Argentina, as well as a women’s garment manufacturer in Sri Lanka and a Chinese auto parts producer. He teaches courses on international business and the global political economy. At the INSEAD campus, in Fontainebleau and Singapore, he has taught European and world politics, markets, and business in the MBA, and PhD programs. He has taught on INSEAD’s flagship Advanced Management Programme for the last three decades, as well as on other Executive Development and Company Specific courses. Jonathan Story works with governments, international organisations and multinational corporations. He is married with four children, and, now, thirteen grandchildren. Besides English, he is fluent in French, German, Spanish, Italian, reads Portuguese and is learning Russian. He has a bass voice, and gives concerts, including Afro-American spirituals, Russian folk, classical opera and oratorio.
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