As J. P. Nettl reminded us in his pioneering essay on the state, regulating relations with the external world is the classic locus of state power. States as institutions have always had to look outward as well as inward, not just because success in political and military competition with other states has been a prime requisite of survival, but also because markets have always been transnational. In the contemporary period the transnational character of economic activity has become much more pervasive.

The increasing role of transnational flows of goods and capital has been a universal feature of postwar economic growth for all countries that participate in the capitalist world system. In the poorest countries, development has meant shifting from relatively autarkic subsistence production to the export of primary commodities into international markets. For industrializing Third World countries, the achievement of an increasingly differentiated domestic economy has meant, first, the increasing domination of leading industrial sectors by transnational corporations (TNCs) and, more recently, an ever-heavier reliance on international finance capital. In center countries, such as the United States, leading industrial and financial corporations derive an increasing proportion of their profits from foreign activities, and the productive investment undertaken by these corporations is increasingly foreign rather than domestic.

Over the past twenty years, all categories of countries have seen an increase in the share of production and consumption that is devoted to international trade. Trade as a percentage of gross domestic product (GDP) increased 50 percent for industrial market economies and for the poorest Third World countries.