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How the expansion of capitalism destroys state and society



Werner Ruf,

Storm coming up
Storm coming up CC BY-SA 2.0, marfis75 on flickr

The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilisation. The cheap prices of commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilisation into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image.

The Communist Manifesto

A Foretaste of Theory

This quotation impressively describes the dominance of the capitalist mode of production and the power of capital to transform world society. Of course, a closer examination of the theory underlying these sentences from the Communist Manifesto would require more explication of the basis of changes in the organic composition of capital and the law of the decline of the profit rate. That must be left for another seminar on Marxist political economy. Here, Marx and Engels refer to the seemingly contradictory fact that highly sophisticated machine-produced goods are cheaper than hand-made commodities. This observation was the basis for the development of the theory of imperialism elaborated by Lenin, and of Rosa Luxemburg’s famous work The Accumulation of Capital. In order to understand what happens in our world today, those books are still worth reading.

At the time when Marx and Engels wrote the Communist Manifesto, a harsh economic struggle was raging in Europe: manufacturers in continental Europe were unable to compete with the highly capitalized British industry and British products, notably textiles, which were flooding the continental markets. In order to protect their nascent industries, the European states built huge customs barricades against the British exports: sheltered behind those barricades, continental European economies (and those of the United States) were able to grow and to develop so they could become competitive. It is therefore unsurprising that the British at that time called for a system of free trade: to their own advantage and to the disadvantage of the Europeans and the US. Marx elaborates on this in detail in Volume I of Capital.[1] Demands for free trade or a free market economy therefore represent a struggle for economic—and political and military—dominance. This makes it clear that liberalism is not just an economic theory but also and above all an ideology that is harnessed to underscore and legitimate economically strong powers’ pursuit of dominance.

A paradigmatic example of this policy is found in the 19th-century policies of Great Britain, the leading capitalist (and imperialist) power of the time, not only towards continental European countries but also towards the Ottoman Empire. This empire, which was essentially founded on agricultural production, desperately needed capital to modernize its army, which constituted the basis of its internal and external strength. As early as 1838 the Sultan was obliged to sign an initial agreement with Great Britain, called a “capitulation”, in which he granted the British free trade exempted from any customs, free foreign investment, and the free flow of capital. The consequence was that British products flooded the markets of the Ottoman Empire while private capital poured out of the country. A series of conventions followed substantiating these principles. In 1875 the Ottoman state went into bankruptcy.

It looks like an irony of history: the exact principles of these capitulations—namely free trade, no customs, free investment, and free flow of capital—are the principles that underlie the Washington Consensus and the European Union’s guidelines on foreign economic and trade policy.

The Victory of Neoliberalism

The Anticolonial Intermezzo: Bandung, the “Third World”, and the Non-Aligned Movement

After World War II anti-imperialist and anti-colonial movements in the colonies gained ground, sometimes engaging in armed struggle to enforce their demands for political independence. The Bandung Conference in 1955 was the first political move taken by former colonies that had already gained independence, and was conducted under the leadership of India (Nehru), China (Zhou Enlai), Egypt (Nasser), and Indonesia (Sukarno), who together called for the independence of countries that were still under colonial rule. As well as insisting on the recognition of human rights for all people, the interdiction of atomic weapons was called for. Those who attended defined themselves as the “Third World” or “non-aligned movement”, independent of the two largest world powers and their allies. All non-aligned countries were invited to participate in the organization, which eventually comprised 77 members. Yugoslavia (Tito), Cuba (Castro), and Algeria later became prominent in the organization’s leadership.

Many of those states tried to set up some kind of socialist economic system. Theoreticians of the anti-imperialist struggle like Frantz Fanon and the late Samir Amin proposed uncoupling the economies of Third World countries from the world market and setting up an economic exchange system in order to free them from economic dependence on and assimilation into the economies and markets of their former colonial rulers. This important goal was never reached—historically established links with the (former) imperialist countries proved to be too strong, the constraints on the world’s financial system imposed by the World Bank and the International Monetary Fund (IMF) forced them to stay in a system of economic, and consequently political, dependency.

With the collapse of socialist systems in Eastern Europe and the end of the bipolar world there was no space left for an alternative “Third Word” or non-aligned movement. Francis Fukuyama proclaimed the “end of history”, which for him meant the unchallenged rule of global democracy and the market economy. Almost at the same time, the neoliberal principles of the “free market” were championed by the Chicago economist and Nobel Prize winner Milton Friedman and put into political praxis by Ronald Reagan and Margaret Thatcher. With the disintegration of the Soviet Union and its alternative economic model, neoliberalism became the only model left in world economics.

EU Free Trade Policy

As we have seen, since the very beginning of imperialism economic measures have never been free from interests of power, and are never limited to economics but always have political consequences. Financial institutions like the World Bank and the IMF, established after World War II, became the instruments that structured the world to establish an international economic order serving the interest of capital. These institutions, which are economically and politically dominated by the US, shape financial and economic systems globally. EU policies towards so-called “High-Risk Third Countries” are based on these principles because free trading relations with economically weak partners put EU countries at an advantage. And the EU has a strong position from which to enforce them.

In their negotiations with African, Caribbean, and Pacific states (ACP states)—all former colonies of European imperialist powers—the core countries of the EU reinforced their dominant position despite the formal independence of their former colonies. If we look at the implementation of the principles of liberalism that were inscribed in the Yaoundé (1963 and 1996) and Lomé (1975, 1979, 1984, 2000) Conventions immediately after most of the African states won independence, it becomes clear what consequences were imposed upon the formerly colonized countries:

  • Abolition of customs: This constitutes a significant loss of income for the respective state. The lost income is then unavailable for activities urgently needed for state infrastructural and social programmes: the construction of schools, hospitals, roads, and other infrastructure. In other words, states are rendered unable to provide for the elementary needs of their populations. This makes states lose their legitimacy in the eyes of their people, who ask themselves, “What is the state good for?”
  • Free flow of goods: This not only applies to certain luxury goods for the comprador element of the local bourgeoisie that are not necessarily needed, but also affects essentially all goods immediately needed for the population such as construction materials, clothing, or food. As has been explained theoretically above, these elementary commodities can be produced more cheaply and efficiently in highly developed industrialized countries. The consequences for dependent countries are that new factories producing textiles, shoes, etc. go bankrupt because they cannot compete with imported foreign products. Attempts to achieve some autonomy in basic food production fail because European meat and milk are cheaper than local production.
  • Free investment: The investment of foreign capital follows the rule of profit. Foreign investors are generally attracted by the low wages in formerly colonized countries. Therefore, investment is often limited to certain sectors characterized by the need for intense human labour; for example, the production of clothing or electro-technical products. These specialized goods neither address local needs nor do they contribute to the building up of an autonomous national economy. The products of these industrialized segments of the economy are exclusively directed towards foreign markets. Furthermore, the low wages paid cannot create the kind of purchasing power that could build up a national market. Since production is oriented towards the world market, constant pressure is exerted on the concerned state to maintain international competitive capacity. This means that wages have to be kept at a minimal level, and trade unions—if they even exist—must be kept under strict control.
  • Free transfer of capital: The possibility to freely transfer capital at any given moment is an important complement to the principle of free investment. Not only does it guarantee that foreign investors can freely transfer profits, it also safeguards the mobility of capital, enabling foreign investors to quickly move investments from one country to another if a different location appears more profitable.
  • Exemption from taxes: This is one more element that makes investment attractive for foreign capital. But here again, the state concerned cannot draw any income from such investment. On the contrary: very often states themselves are obliged to invest in advance to build roads, provide electricity, water and other utilities. Tax exemption does not apply for the local/national bourgeoisie who, therefore, can never compete with foreign investors.[2]

But what about the principles of the free market? Contrary to its claimed faithfulness to neoliberalism, European agricultural production is highly subsidized—to the tune of over 250 million euro annually.[3] This is irreconcilable with the holy principle of free competition and impedes the establishment of efficient national agricultural systems. Furthermore, and also contrary to the principles of a free market, agricultural products from the ACP states are subject to various restrictions, as exemplified by the Mediterranean countries with the “most advanced” integration into the EU. The export of their agricultural goods is regulated according to a strict calendar: certain products such as olive oil, oranges, or tomatoes are only admitted into the EU during seasons when EU member states like Spain, Italy, or Greece do not produce such goods because of the climatic differences between countries north and south of the Mediterranean. The subsidies for European agriculture serve to artificially open up additional markets for EU products in countries of the Global South. Clearly, when it is in the interest of dominant economies the principles of the free market economy simply evaporate.

To sum up: guarantees of free investment and transfer of capital are only upheld when it is in the interests of economically dominant foreign investors. Tax exemptions for foreign investors leave local states obliged to provide security and other services, without receiving any income from such investments. As far as the principles of free trade are concerned, these are suspended when the exportability of European products is at stake. The “invisible hand of the market” is clearly a myth, yet the highly visible fist of capital ensures the perpetuation of underdevelopment in the Global South—and the erosion of states there.

Demolishing the State

It follows from the previous analysis that states in the dependent countries are under extreme stress. The main purpose of a state is to ensure its population has access to elementary requirements: food, shelter, health, education, transport, etc. How can this be achieved when a state’s income is shrinking while its population is growing? The legitimacy of such a state is at stake. Not only is it rendered unable to provide elementary services for its population, but the unbalanced structure of its relationship to dominant economies and states also incentivizes corruption and repression (as foreign interests become invested in sustaining inequalities of power). Contrary to widespread portrayals in the Global North, these phenomena are all but “natural” appearances in such states—they are often supported from outside. Dictatorial rule facilitates the implementation and maintenance of exploitative structures at a global level.

Let me just recall the classical definition of the state, in political science, as an entity that has the monopoly on the legitimate use of physical force within a given territory. Yes, such states use their force—exerted by the police and the military (who must be granted privileges to keep them loyal to the rulers). But: Can this use of force be legitimate in the sense that it is accepted and supported by the state’s citizens? When the economically dominant Global North supports authoritarian rule, it is simply hypocritical to call for democracy or to cite a lack of democracy as justification for military intervention.

There has been a great deal of discussion about failed states. According to the UN definition, a “failed state” is a state that is “unable” or “unwilling” to protect its own population—in other words, a state that is unable to perform its fundamental functions. This means that the state may be able to repress its own population but not provide it with essentials like water, shelter, or food. What this means concretely has been aptly described by Hans von Sponeck, who as special envoy of the General Secretary of the UN to Iraq after the second Gulf War was in charge of implementing international sanctions against that country. When he saw the enormity of the consequences of these sanctions for the Iraqi people, von Sponeck stepped down in protest. The term “failed state” is often used to describe the situation in states like Somalia, Afghanistan, Iraq, or Libya, where foreign military interventions have destroyed the states that once existed. In these cases, I would rather speak about state destruction, recognizing that the process leading to the status of failing usually starts much earlier. Currently, the majority of states diagnosed as failing to fulfil their fundamental functions are territories that were formerly colonized.

Another example: Syria. Starting in 2004, Syria implemented a series of reforms in order to generalize the principles of free trade by reducing the state monopoly in economic and financial affairs. In 2004 private banking, and in 2006 private insurance were allowed. Customs where partly dismantled and almost all sectors of the economy were opened for foreign investment. The purpose of the foundation of the Damascus Security Exchange was to stimulate foreign investment; in April 2006 a Syrian stock exchange was established. A free trade agreement with the European Union was planned. The Handelsblatt newspaper observed: “The liberalization of the market has enriched a few families, sharp class differences are appearing which formerly did not exist in Syria.”[4] And Eberhard Kienle states:

By favoring and tying parts of the private sector closer to the regime, it temporarily stabilized the position of the latter before alienating its less well-off constituencies. Strengthening crony capitalism on the one hand and economic marginalization on the other in the long run, the second infitah … eroded the social fabric of the country and thus contributed to the contestation that began in 2011.[5]

Additionally, Syria had to cope with nearly four million refugees from Iraq after George W. Bush’s war in 2003. Three years of terrible drought harmed agricultural production and led to a general rise in living costs. The fact that the protest started in a Sunni area opened old wounds and reminded people of the terrible massacre by Bashar al-Assad’s father, Hafez, in 1982 in the city of Hama. The regime’s repressive reaction almost inevitably paved the way for a Sunni-Alawite showdown.

Sectarianism and the Political Economy of Violence

The existence of or people’s belonging to ethnically or confessionally defined groups has become a popular explanation for conflict. For example, the longstanding difference between Sunnis and Shi’ites has become an easy and seemingly self-explanatory paradigm popularized by Samuel Huntington’s ahistorical and simplistic concept of “the clash of civilizations”, in which he asserts that “conflicts between cultures have produced the longest and most violent conflicts” over centuries.[6] Consequently, cultures—or religions (the two remain unclearly distinguished in his analysis)—are represented as political actors with agency. We need to ask: why does this concept become all but a self-fulfilling prophecy? When, as described above, a state becomes unable to fulfil its functions, when in an economy of scarcity the reproduction costs of daily life become unaffordable, people organize themselves to survive. In a state where law and law enforcement is suspended, more or less openly criminal acts become “normal”: under- or unpaid policemen may ransack citizens, soldiers may threaten physical force to obtain money or goods from unarmed people.

At a higher level, people may organize into gangs to secure what they require. In order to justify their criminal acts, they will try to legitimate themselves by referring to “superior” norms derived from notions of ethnic superiority or religious morals. Such constructions serve on the one hand to lend a kind of legitimacy to their organized activities, and on the other hand to establish demarcations for the inclusion and exclusion of groups of people. For example, the so-called Islamic State’s use of the term “infidels” to describe all non-Sunnis—or Sunnis who did not practice their religion according to IS’s stipulations—enabled them to establish systems for confiscating the property of “infidels”, refusing them access to public services, abducting other groups for slavery, organizing human trafficking, imposing road blocks, and extorting “taxes”. These mechanisms of exclusion were applied to all non-Salafist groups and minorities, whether Shi’ites, Christians, Yezidi, or Kurds. The income IS extorted from these sources (more than four million US dollars per day at its peak) were greater than the funds they received from supporters in the Gulf, from the export of oil, or from other kinds of traffic. As kinds of mercenaries, IS, Ahrar esh-Sham, Djeich al-Islam, Jabha Tahrir esh-Sham, the al-Nusra Front, and other groups in the Syrian war received extensive financial support from foreign states and certain private actors.[7]

The so-called AQIM (Al Qaeda in the Islamic Maghreb) or its part-time rival MUJAO (Mouvement pour l’Unité et le Jihad en Afrique Occidentale) control the most important drug smuggling route in the world: cocaine from Columbia is transported by air and cargo to the West African coast and then through the Sahel states and the Sahara to Europe. Other important sources of income are the smuggling of cigarettes, weapons, and people through the Sahara, and the taking of hostages for ransom (technicians from oil wells, tourists, journalists, and even diplomats). Yes, in territories they control they impose their own strict version of Islam—not for the sake of religion, but to terrorize the population and extort fines from “sinners”. These are the real motives behind the violence of groups like the jihadist as well as Shi’ite gangs and militias in Iraq and Syria, AQIM and others in Mali, or Boko Haram when they attack Christian villages, Arab merchants, Tuareg minorities, and others.

The disintegration or even destruction of states often brought about by the West (states do not simply “fail” of their own accord) is the final consequence of the neoliberal order that facilitates the emergence of violent non-state actors. “Sectarianism” becomes one of its almost inevitable outcomes, because it is in some sense the most basic way that violent actors can secure their own and their followers’ economic survival by distinguishing themselves from imagined or constructed “Others” defined by religion or ethnicity. The structural violence (Johan Galtung) that characterizes the global neoliberal system becomes open violence at the lowest, i.e., economically poorest level of that system, where states have been stripped of their essential functions.

Civil Conflict Resolution

This article has paid great attention to the EU and its foreign trade and investment policy. However, it must be said that the EU is not the only force eroding states in the Global South and inducing misery and despair. Other factors include climate change and land grabbing. Climate change has led to the almost complete decimation of herds in the Sahel region, where rains have failed for nearly thirty years. This has destroyed the livelihood of nomads who have been obliged to turn to smuggling and blackmail. Land grabbing promoted by international financial actors has displaced hundreds of thousands of peasants and fisherman from the Niger valley and put millions of people at risk of malnutrition.

When we talk about conflict resolution, it is important to insist on acknowledging the real causes of conflict: without a serious analysis of these causes, we have no chance of achieving an effective and lasting resolution of conflict or building a society worth living in. All the beautiful models of discursive de-escalation, of communication techniques, of working on an ideological level to combat prejudices are condemned to fail as long as the real causes of conflict remain unaddressed. These causes are definitely beyond the control of the conflicting parties since they are inherent to the current neoliberal world order, an order which is imposed and maintained with great force by international financial institutions, hedge funds, the European Union, and the consequences of climate change.[8]  These causes are at the core of the global capitalist system, an all-embracing system of structural violence. Open physical violence then erupts at its poorest fringes, where violence, conflict, and criminality become the last means by which human beings can secure their material existence. We have to ask ourselves why so much money (and human good will) is invested in various forms of “conflict resolution”, “transformative justice”, and so forth. Are these efforts just cosmetic operations undertaken in order to deflect attention from the roots of the problem? We need to change the entire system radically in order to counter and eliminate the real causes of conflict—which would ultimately render superficial conflict resolution efforts unnecessary.

This assessment does not mean that we should cease to work on local conflict resolution, to demand more social justice, or to call the socio-economic causes of conflict by their name. But in order to become more than superficial, such work has to be done on two levels:

1. Rather than simply attempting to foster (re-)conciliation of violent actors on the ground, such work must be politicized by raising the political consciousness of those actors.

2. The causes of the neoliberal world disorder must be tackled at their roots: this struggle must take place in the Global North, in the centres of capitalist decision-making. This must begin by ceasing the export of weapons and go on to transform the currently dominant – neo-liberal – system in order to put an end to its devastating effects on humanity. The late Samir Amin outlined such a programme for action in one of his last articles.[9]

Werner Ruf is Professor emeritus of International Relations at the University of Kassel and a member of the Rosa-Luxemburg-Stiftung’s Discussion Group on Peace and Security Politics. This article is based on a presentation he gave at the conference "Social and Transformative Justice in Conflict and Post-Conflict Settings – a comparative approach", held by the RLS Beirut office in November 2018.


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[1] Karl Marx, Capital, pp. 873–930.

[2] For more details, especially on North Africa, see Baumgratz et al., Development by Free Trade?.

[3] Friedrich Heinemann, “Milliarden Euro für nichts?”.

[4] Cited in Raoul Rigault, ‘“Planwirtschaft” ade”.

[5] Eberhard Kienle, “The New Struggle for Syria and the Nature of the Syrian State”, p. 60.

[6] Samuel Huntington, “The Clash of Civilizations”, p. 25.

[7] Werner Ruf, Islamischer Staat & Co., pp. 93–100.

[8] Elmar Altvater, Das Ende des Kapitalismus wie wir ihn kennen.

[9] Samir Amin, “It is imperative to reconstruct the Internationale of workers and peoples”.