By Fred W. Riggs

Information from Jeffrey Winters about his research into "zonal capitalism" in Indonesia and other Southeast Asian countries (citation) opened my eyes to a potential future scenario for the world that I had not previously imagined. However, it fits into patterns of change I have been thinking and writing about, putting them into a new focus. This is a first effort to spell out some of these ideas for discussion with colleagues in the hopes that some useful notions may result.

1. Zonal Capitalism. Winters outlines the structure of what he calls a "second generation zone" in the design of industrial parks or estates -- these are enclaves in a third world country like Indonesia which maximize opportunities for investors to accumulate profits in the production of manufactures (from shoes, fabrics and garments to cars, furniture and electronics) for which demand on a global level is escalating while costs can be reduced maximally by minimizing social and environmental accountability. During the period from 1989 to 1994, the number of these estates in Indonesia has escalated from about a half-dozen to almost 100, while at the same time their capital costs have shifted almost completely from the state to private capital. The trends apparent during this 5-year period seem destined to continue in Indonesia, and parallels in neighboring countries, as well in widely scattered parts of the third world, appear likely to mushroom, with implications that stagger the imagination.

These industrial estates are self-contained zones, surrounded by formidable walls, that can be entered only through a single controlled gateway that insulates them from their surroundings and heighten the possibility for owner/managers to provide optimal facilities for investors to establish productive facilities that maximize their profits. What I find most disturbing about this development is the implication that, instead of industrialization flowing from the development of democratic national states and reinforcing their vigor, it can also occur in a perverse way that undermines political and administrative development and reduces the viability of states as organized communities. This reverses the trends of modernity as they have evolved during the last two or three centuries and as we had hoped they would develop in the new states formed out of the collapsed possessions of the great industrial empires of the Western world. If my fears are well founded and a mushrooming of industrial estates throughout the world really occurs, a highly negative global trend may well undermine many of the proudest achievements of modernity.

2. Basic Parameters. Two fundamental parameters need to be taken into account -- the internal and the external environment of these parks. They deeply affect what will go on inside them as well as outside. In order to understand this result, we need to remember that the dynamics of modernity rests on the ability of modern states to link three explosive trends: industrialization, democratization, and nation-building. Not only does each need the other, but without them, each of these forces can be highly destructive -- at least, this is true of both industrialization and ethnic nationalism. The essential property of the post modern (not post-modern) world that I visualize is that the essential strands of this integrating rope are untwined and, stringing themselves out as separate fibers, they will conflict with each other and generate a new form of global breakdown that might well be identified as "neo-feudal."

3. The Internal Design. The core parameter in this disturbing vision can be found in the design of these new industrial parks. In order to provide an insulated safe haven for capital investment and productive enterprise, they are self-contained in several vital respects, and deliberately permeable in others. The most conspicuous of the internal features arises from the physical propinquity of central services and management. All personnel responsible for directing and supervising the plants located in an estate are offered attractive housing, a golf course and other clubby facilities. Office space for the management and marketing of a wide variety of industrial activities is provided, together with central power sources, water treatment facilities, and shopping services. Perhaps equally important, industrial activities are not clustered together by type, as they were in earlier models, but they are intermingled so that workers engaged in similar operations find themselves widely separated from each other. As a result neighboring workers are engaged in quite unrelated activities and share few common bonds that might facilitate unionization.

By contrast, no housing for workers is provided, as had been the case in earlier models of an industrial estate. Instead, shuttle buses carry workers to and from transport nodes where public transportation is available to take them to their widely dispersed home sites. Entrance is closely guarded to make sure that only employees can enter the compound and outsiders likely to promote trade unionism or political activism are strictly excluded. Global information via the INTERNET and more conventional sources is freely available, but screened, to make sure that it goes to authorized personnel for approved purposes only. Perhaps most importantly, the capital required to finance development is provided externally by investors who not only recognize the profitability of industrial activities made possible by these estates, but they can also sanction management by withdrawing funds if they are not fully satisfied.

4. The External Context. The most important and specific external parameter may well be the state and society in which industrial parks are located. Initially, as the Indonesian case reveals, a high level of state ownership and control may have assured at least co-dependency such that estate policies and practices might benefit the state and its citizens. The radical privatization of operations during a short two- year period (1989-91) however, turned control over estate fuctions to private capital, much if not most of which was foreign. Nevertheless, one might assume that public policies could retain effective control over the practices followed inside the estate so as to enhance the interests of all citizens. Perhaps in a democracy this would normally be the case. However, in an autocratically run state, with a powerful bureaucracy including its armed forces, the political dynamics of such estates can be reversed.

In any poor country lacking the civic culture that can link the non- governmental organizations formed by citizens with the apparatus of the state, bureaucrats have the power and authority to deal directly with those whom they govern, including the granting of permits for activities permitted by the government. When, for various reasons, such officials find that it is in their interest to support or ignore activities that violate public policies, they may easily be tempted to sacrifice the general interest to their personal advantage. Without speculating about the specifics of how this is done, let me only say that my own experiences in Thailand, the Philippines and several other "third world" countries suggests that very powerful interests, such as those involved in the management of an industrial estate, can assuredly find ways to secure the cooperation of key officials and prevent interference from those who might wish to monitor or regulate their activities. Moreover, the internal design of such estates and the gatekeeping functions can be managed so as to minimize the amount of information the government and the general public gets about what goes on within their protecting walls.

The term "industrial estate" is too neutral to convey an adequate impression of the politico-economic strength and potential of the new form such estates have taken, as described by Winters. We would understand the situation better if we reserved this term for their traditional forms, or used modifiers to distinguish the new from the old type of industrial state. To be more specific, I shall use the phrase, "subvisible industrial estates," (SIE) to characterize the new and dangerous form. Subvisible is used to speak about miniscule items that can only be seen through a microscope -- by contrast with "invisible" referring to what can never be seen. The basic idea is that of a type of industrial estate which is so organized as to maximize its own power position and autonomy within a state incapable of exercising effective control over its activities, while rendering its activities virtually invisible to outsiders, such as journalists or academic researchers.

An important indicator of the properties of an SIE is its capacity to insulate itself from critical attention by the outside world, e.g. by preventing the entry of journalists and researchers intent on learning about their practices -- and even, I suspect, from government officials who might object to what they found. A wall of silence not only protects these estates from pressure by neighboring communities and their host state, but it also shields them from world public opinion and international organizations.

Finally, and perhaps most importantly, the requirement that ordinary workers commute on a daily basis hampers and may well prevent them from organizing trade unions or taking other steps to protect their own interests. In effect, having a docile and poorly paid labor force can be assured. I do not assume that plant owners are evil men who wish to exploit their workers, but I do consider that the capacity of industrialists to produce goods substantially exceeds the existing market for them on a global basis. Moreover, these corporations are engaged in a highly competitive struggle against their rivals making price competition keen. The most profits will accrue to those who can produce at the lowest cost -- with wage rates a major factor.

One might argue that by raising wages, industrialists would thereby increase the size of the market for their products and this would motivate them to offer higher wages. However, I imagine that the marginal increase in the market for its products that any company could attribute to higher wages in its plants is trivial compared to the increased costs it would have to absorb. Consequently, the only mechanisms that will lead corporations to increase wages must either be the pressure of organized workers through their trade unions, or the requirements of government imposed by minimum wage laws. These forces do operate in the industrial democracies but not in third world countries. At least, it seems apparent that SIEs (subvisible industrial estrates) are able to nullify any wage standards their host governments might impose, and their design features are calculated to prevent the establishment of labor unions. Moreover, the political weakness of unorganized industrial workers in any country means the prospects for governmental controls that might raise wages is almost nil.

My impression from Winters' report is that not only the workers but also the various plants operating inside an estate are offered no opportunity to organize themselves to deal with the general management of the facility. In effect, the management of estates is hierarchical and authoritarian throughout -- its owner/managers are free, therefore, to deal with their external environment as suits their interests, and to establish internal facilities that will please but not empower the owners and managers of the plants they host. The main constraint on estate owners to treat firms well, therefore, is not based on any intra-estate democracy but rather on the capacity of mobile capital to vacate their plots in any estate that does notr treat them well enough.

5. An Ancient Pattern. The political topology of SIEs resembles that of ancient cities as described by Gideon Sjoberg (citation). In them a power elite lived and ruled from an imperial reserve (easily seen today in the Forbidden City of Peking). Around the gardens and pleasure palaces of the core site could be found separate quarters for the administrators, soldiers, merchants, craftsmen, monasteries and temples that supported the imperial rule. Extending outside the walls of a capital city could be found the peasant masses whose agrarian pursuits supported the imperial establishment -- on a smaller scale, the mega-site of China's imperial city was replicated in a host of ancient kingdoms and chiefly towns where cosmological visions of the universe were replicated in an urban setting designed to assure by magical means all the human benefits that other-worldly forces could engender -- and, of course, to enhance the power position of the rulers and their elites.

Although the underlying logic of contemporary industrial estates is secular and profit-oriented rather than cosmological or sacred, the basic topological design is similar -- it represents a newly invigorated and cloistered hierarchy of power that depends on industrial production rather than supernatural forces to legimize its growing power.

Migdal's STRONG SOCIETIES AND WEAK STATES makes, I think, a different kind of contrast between the surviving strength of traditional forms of organization where the ancient kith and kin bonds of gemeinschaft communities have survived and the new governments generated by the collapse of industrial empires remain essentially limited in their capabilities, especially when they have a weak form of autoritarianism. Such communities have remarkable resilience and are able to cope with many contemporary problems without relying on the government and often, indeed, in spite of governmental efforts to control them.

Subvisible industrial estates have nothing in common with such communities, however. Far from traditional in character, they are clearly a result of industrialization and modernity. Moreover, their capacity to hamper and sabotage the political and administrative development of the states that host their activities goes far beyond the essentially benign ability of traditional peasant societies to survive despite their government's weaknesses. Instead of shaping a "strong society" in relation to a "weak state," they have the potential, I believe, to become parasites (if not predators) on the states which host them -- a kind of modern Trojan Horse that will erode both the states and the societies in which they can root themselves.

6. The Macro-Level Impact. The insulation of industrial estates from the communities that surround them may soften their impact on these populations who may long subsist as they have in the past -- except, no doubt, that family members employed on the estates are able to bring home some new resources that may help them deal with their economic needs. However, SIEs will scarcely enhance the emergence of vigorous civic organizations capable of mobilizing a population, supporting political processes and providing an infrastructure for democratization. Lack of media access to these estates also hampers the ability of neighboring communities to learn about conditions and opportunities that might lead them to respond in a positive way.

At the governmental level, the systematic corruption of officials which, I assume, may well be a pre-condition for the maintenance of indo-powerd estates can contribute to the systematic deterioration of governmental operations and the suffocation of efforts to democratize. Although the word, capitalism, is often used to characterize the operations of these estates, I feel that the word has so many meanings that it is quite likely to misinform those who hear it. As I see it, capitalism is an ancient reality, generated by traders whose primary aim was secular, not sacred -- they sought to maximize their profits by transporting goods and offering them for sale. (Curtin) In premodern societies, they were politically marginalized everywhere except in small trading cities tolerated by their royal neighbors because they were seen as useful suppliers of valued products. (Polanyi et al, Tradeand Markets) INDUSTRIAL AUTOCRACY AND ANARCHY

During modern times, however, when European burghers in their safe havens were able to subsidize ambitious kings during the mercantilist period and, subsequently, to become politically powerful during the process of democratization and nation-building, industrialists became poweful but not dominant in modern states. We may see their role as that of "industrial capitalists" but after the Industrial Revolution, under state socialism, industrialism became an independent force no longer dependent on private capitalism. In today's world, it is industrialism that drives the SIEs, although capitalist investors and weak states contribute to their power. We have here a new form of power that needs to be recognized and understood as a rising force in world affairs. What should we call it? "Zonal capitalism," used by Winters, strikes me too weak a term. "Zonal industrialism" might be preferable, but even this term fails to capture the ultimate threat posed by this new form of industrial organization. How about "sheltered industrialism"? Normally, we may assume, the great risks of anti-social and anti-environmental consequences from industrial activities are, at least to some extent, mitigated by political and social controls imposed on their managers. Sheltered industrialism is able to create safe havens in which it can insulate itself from these social safeguards and act irresponsibly but with impunity.

7. Dualism. At the international level, two parallel processes may be expected to evolve during the coming decades. At the governmental level, existing regimes will increasingly support and participate in regional and global associations that offer assistance, humanitarian and technical support, and interventions designed to cope with boundary threats and some other vital interests of states. Simultaneously, and quite separately, the subvisible industrial estates (SIEs), supported by the corporations and investors who finance them, will become increasingly well organized both to protect their interests, and to optimize the flow of information and capital required to maintain and expand their operations.

As a result, a new global form of dualism will arise to separate the growing informal network of SIEs and the emerging formal world system oriented primarily to modern states and their relationships. At the formal level, we will assume that states, inter- governmental organizations and international NGOs will not only sponsor democratic institutions and nation-building, but they will also monitor and regulate industrial production and market operations in democratic and powerful states. At the informal level, by contrast, an increasingly powerful network of indo-powered estates will provide opportunities for the rapid accumulation of wealth by a global financial elite. Increasingly, decisive powers will shift to this shadow-world that is largely invisible, resting on industrial operations carried on behind a veil of secrecy. Unfortunately, the monitored industrial activities carried out in advanced democracies may find themselves increasingly strained by the pressure of competition from the informal indo- powered sector, and more and more of their top owners and managers will shift their capital from the formal to the informal realms.

Both the formal and the informal world systems will be asymmetrical. The formal state apparatus of power and public policies will persist for some time in the more industrialized democracies where bureaucracies held accountable to institutions of representative governance will continue to maintain some degree of effective control over the operations of industrial production and marketing and over banking and the flow of credit and money. By contrast, the large number of weak "quasi-states" (Jackson) that are unable to control their bureaucracies will increasingly find themselves infiltrated by SIEs able to shelter themselves from the exercise of public authority. Capital and jobs will flow from the more affluent countries -- where costs remain high due to safeguards imposed on industrial production to protect workers, the environment, and public order -- to weak countries unable to enforce such regulations (even when they are promulgated, they will be widely ignored).

This trend, I believe, has already started but it has not yet created a truly dualistic world system -- the state system remains more powerful, but it erodes under a mounting attack. Simultaneously, however, although for different reasons, the world system of states is losing power while the global network of sheltered industrialism, although still in its infancy, is bound to increase at an escalating rate. The comments offered above provide evidence, I think, for the coming expansion of the shadow world of sheltered industrialism. Meanwhile, the formal world community of states will probably decline.

8. The Decline of States. Karl Marx' predictions about the "withering of the state" were premature and exaggerated. Modern states remain powerful and will, surely, persist as important contexts for much of the world's population. However, their power will also decline in the coming decades, weakening the formal networks of the global state system. Nor can any super-power expect to exercise the kind of hegemony that will sustain and nurture this system. To explain this expectation, two major tendencies affecting the design of modern states may be considered: they involve the simultaneous loss of state power to higher and to lower levels of governance -- what Majid Tehranian calls "glocalization" (citation).

At the higher level, the growing interdependence of the world system, including the spread of industrial production and finance capital to proliferatiing SIEs in weak countries, will generate an increasing number of international organizations (both governmental and non-governmental) which will progressively assume burdens hitherto carried by individual states. These organizations may cluster along regional lines, as best illustrated by the European Union, but some will also flourish at the global level, both inside and outside the United Nations system. When the European Union establishes its own currency to replace state-generated currencies, the tide will have turned in that region -- a fact that explains the bitter controversy in Great Britain between the Europiles and Europhobes -- it's a vital question for the survival of the British state that transcends party politics: the depth of this cleavage in the Conservative Party helps explain the recent landslide victory of the Labor Party which will, it appears, continue the Europeanization of the UK started by the Conservatives.

9. Industrializaton. The root cause of the upward shift of power from states to international organizations can be explained primarily by the first strand of modernity: i.e., industrialism. Mass production, high energy power, spreading consumerism, and the information revolution are all, in various ways, aspects of the Industrial Revolution and the contemporary industrialization of the world. These processes have generated massive problems and produced solutions for some of them that are reflected in the goals of the UN agencies established to focus on Health, Agriculture, the Environment, Development, Labor, Atomic Energy, Education and other related themes. All of them, I think, have become global problems as a result of industrialization -- previously, such problems either did not exist or could be viewed as intra-state problems whose international consequences could be handled by diplomacy or wars. Increasingly, since World War II, all of these problems have become globalized and produced an increasingly urgent need for regional and world-wide mechanisms to cope with them -- they cannot be solved at the intra-state level.

Simultaneously, radical downward shifts in power within existing states are under way. More urgently and conspicuously, the demand for local autonomy, sovereignty or independence which led to the breakup of the Soviet Union, the Chechen uprising, the war in Bosnia, and a growing number of sovereignty movements around the world, is evidence of a global trend that has followed the liberation of imperial possessions and the establishment of a crush of states in the "third" and "second" world.

10. Nationalism. To explain this trend, consider that the second strand in the rope of modernity involves nationalism -- the growing effort of modern states to create a sense of shared culture and purpose among the heterogeneous peoples under their jurisdiction. This type of state nationalism was able to transform a congeries of feudal domains and immigrant populatons into state nations during the formative years of modernity in the nineteenth and twentieth centuries. Among the most serious negative costs of modernity was the rise of industrial imperialism, movements that enabled a few great powers to conquer the rest of the world but not to assimilate their new subjects. Instead, the victims of imperialism organized themselves to become liberated and to create their own states.

Unfortunately, the boundaries established by these empires for purposes of colonial administration and exploitation were transformed into the boundaries of new regimes, producing a wildly disparate set of multi-ethnic states and divided nations. Within many of these states, following their independence, movements for secession and boundary revision have arisen among dissatisfied minority communities, leading to conflicts, revolts, terrorism and civil warfare that has already led to the fragmentation of some of the new states, with a strong likelihood that more will follow. Ethnic nationalism generated by modernization inverts the process whereby state nations emerged during the early stages of modernity. The consequences of these movements are strikingly different: state nationalism generated increasingly powerful states, some of which became empires; by contrast, ethnic nationalism fragments states and leads, potentially, to the proliferation of more and more weak states. The transition from feudalism to state-nation building of the post-Westphalian era is now replaced by a transition from large to small states, from powerful to weak polities rooted in ethnonationalist dreams based on deep discontents and injustices, that will occur during the coming decades.

11. The First World. The growth of ethnic nationalism presents a major problem for the post-imperial successor states, but it is also taking place within heartlands of the most developed industrial powers. A futuristic look at this dynamic can be found in the Nine Nations of North America which points to the eventual fragmentation of the United States and Canada (citation). A contemporary sign of this possibility can be seen in the abortive effort to constitute an independent "Republic of Texas." I suspect, however, that the most important changes in the "first world" countries will not involve their actual fission into separate sovereign states. Instead, it will produce strong pressures to devolve more political power and responsibility to local authorities -- as evident in the current drive in the American Congress to transfer powers from the Federal to the State government. In some countries, as in Belgium and Spain, moves toward confederalism, as long established in Switzerland, will be strengthened.

Demands for more and more autonomy will also arise from indigenous communities in the United States and other Western countries. Recognition of their right to organize gambling cassinos has brought great wealth to some of them, thereby also enhancing their effective political power. Claims for Hawaiian sovereignty in Hawaii parallel similar claims made by indigenous peoples throughout the industrialized world. The international organizations created by indigenous peoples movements are now recognized by the UN and have become an increasingly visible force that undermines the authority of existing states. Transnational and sub-national movements reinforce that tendency for power to shift from existing states to other centers.

These trends are reinforced by the growing ability of cities and sub-states to establish their own international networks. In Hawaii, an important state function involves trade and tourist promotion throughout the Asia-Pacific Region, an effort augmented by such agencies as the East-West Center which also has its own extensive network for interaction throughout the region. Parallel activities can be found in almost every important city and state of the United States - - and parallels can be found in almost all other countries. A little noticed fact of the American administrative system involves the emergence of many departments and agencies which conduct their own foreign policies and engage in overseas projects -- starting with the Agency for Interntional Development, the CIA, and the Defense Department. The coordinating powers of the State Department in foreign affairs has been seriously eroded. Increasingly, states will not be able to act as integrated entities in the world system -- instead, they will host a congeries of actors each able to have its own "foreign policy" and interntional networks.

12. Migrations. The world's population has not remained sedentary during all of these transformations. Instead, all the processes of modernity have both generated and been affected by migrations. Industrialization led to massive movements from rural areas to the cities, as SIEs will attract workers from both domestic and foreign sources to work in their sheltered sites. Immigrants drawn to new lands by economic opportunities could fairly easily become citizens of their new host lands. Today, however, rising ethnonational conflicts and genocide produce torrents of refugees who cannot easily be assimilated but provoke unrest and zenophobia wherever they flee. They impose heavy burdens on the countries and humanitarian organizations that strive to alleviate their distress, but they may also provide sources of cheap labor for SIEs.

All migrants are not poor nor do they intend to settle in the countries where they may temporarily work. Among them we find many "cosmopolitans," persons who freely travel from country to country around the world and often avoid establishing permanent domiciles. No doubt, many of them are the agents of humanitarian organizations, journalists, artists, and scholars who identify themselves with the formal structures of the world state system.

By contrast, however, consider the growing number of managers, financiers and technicians found in SIEs who are also recruited from such cosmopolitans. It would be unfair to use the old Soviet label, "rootless cosmopolitans," to mark them, but it seems fair to suppose that they will have little sense of commitment to the development of the countries where they work or its natural environments. Instead, they will be preoccupied with the exercise of their managerial, technical or professional skills, the accumulation of wealth, and ultimately, making plans to settle comfortably in some golden ghetto of privilege and pleasure. Thus migrants can enhance the performance of the world system of states, but also undermine its viability. At the same time, they may contribute to the growth of sheltered industrialism while also becoming its victims.

Paradoxically, many diaspora communities are also playing an increasingly active and influential role in world politics. Both immigrants and temporary visitors remain attached to their original homelands and involve themselves in its struggles. The more unwelcome they may feel in their hostlands, the stronger will be their incentives to contribe to or even take the lead in organizing ethnonational revolts and movements. Moreover, although I have no facts to back this suggestion, I imagine that many people in diaspora who do not feel truly comfortable in an alien environment may welcome invitations to join the staffs of subvisible indusrtrial estates where they can enjoy elite privileges and acquire wealth in a hospitable cosmopolitan environment. The managers of these estates may feel that well-qualified indigenous personnel are not available -- or, perhaps, they may fear that the local attachments of such people will make them potentially subversive -- foreign staff will always, I suspect, be viewed as less risky from the managerial perspective.

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Updated: 19 May 1997

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