In a recent op-ed, Martin Sandbu of the Financial Times argues that “the conversion by the IMF and World Bank to support the activist state would put Saul of Tarsus to shame.” According to him, we may be witnessing the rise of a new Washington Consensus, which embraces deficit spending (by rich countries), “temporary solidarity surtaxes” on the rich and businesses, green public investment, and other forms of government intervention. This is not only to address the short-term effects of the pandemic, but also to stimulate demand across the world economy. Sandbu finds evidence of this new consensus in the benign view that the IMF has taken on Biden’s “rescue package”, and claims that “the new Washington consensus could prove as politically powerful as the old one.” In another op-ed in October 2020,
Sandbu characterised this new consensus as follows:
“After 1945, the guiding assumption was, first, that the state knew best, then that the private sector was best. We are about to transcend both, in favour of an economic worldview based on finding ways in which government intervention can guide the private sector to perform better. In that sense, economic planning and the activist state are back.”
It is indeed striking that the IMF, the World Bank, the OECD, the G20, and other multilaterals, have adapted their discourse on the role and place of the state in development. This predates the COVID-19 pandemic. In an open access paper recently published in Antipode, we document the emergence of this new vision of the state in development and outline its key features. Since the early 2010s, these institutions have produced a remarkable wealth of material explicitly concerned with old and new forms of state ownership and intervention. Witness, for instance, this November 2020 EBRD Transition report titled The State Strikes Back, or this chapter dedicated to state-owned enterprises in the IMF 2020 Fiscal Monitor. Our analysis of such policy documents and others suggests that we are witnessing a gradual yet fundamental reorientation of official agendas and discourses about the state. This emerging vision embraces a fuller role of the state in development (than the post-Washington Consensus), including as promoter, supervisor, and owner of capital. Our analysis expounds the material context in which this vision is emerging. Two interrelated transformations are particularly important.
First, there is the current rise of state capitalism, which we understand as a world-historical phenomenon rooted in the development and geographical remaking of capitalism. Five capitalist transformations are particularly noteworthy: (1) the accelerating unfolding of the second-wave New International Division of Labour since the early 2000s; (2) technological modernisation and industrial upgrading culminating in the Fourth Industrial Revolution; (3) an historically unprecedented concentration and centralisation of capital; (4) a secular shift in the centre of gravity of the global economy from the North Atlantic to the Pacific Rim, and the massive needs this requires, such as a dense network of connective infrastructure to integrate distant territories and to facilitate the flow of capital; and (5) the extension of financial and debt relations. The political mediation of this process of capitalist restructuring by the state (at multiple scales and across the global North/South divide) has resulted in the uneven and combined development of more muscular forms of statism and the expansion of various forms of state-owned capital (sovereign wealth funds, state enterprises, and so on).
Second, the rapid development of China, and the intensification of competition between traditional powers and emerging contenders, have increasingly politicised the rise of state capitalism and escalated geopolitical tensions. Combined, these two global transformations have partially fractured the global geographies of production, development finance, infrastructure, and policymaking (cf Figure 1), prompting traditional development actors such as multilaterals to react to this new “state capitalist normal”.
Figure 1: The rise of state capitalism in development geographies. Source.
Our key contention is that such reaction has taken the form of a strategic discursive and ideological adjustment, involving a certain re-legitimation of the state in development, and a limited embrace of state-owned capital (including state enterprises, sovereign wealth funds, and state-owned banks), one which nonetheless remains resolutely within the liberal ambit. We show in the paper that this adjustment has been buttressed by a deep liberal anxiety concerning the direction in which the political form of global capital accumulation may be heading: multilaterals are concerned that the unchecked proliferation of statism and non-market conforming state-capital hybrids may blunt competitive value-disciplines, trigger a certain move away from liberal (western-dominated) market-centric governance, politicise economic relations, and intensify geopolitical and geoeconomic tensions between nation-states, which may in turn erect drastic barriers to the circulation of capital as a whole.
Our argument has implications for debates on the nature of contemporary state capitalism, notably the various forms of ideological transformations currently at play. Indeed, preserving and further enshrining the centrality of market regulation in development in an age of rising state capitalism and turbulent geopolitical reordering requires heavy ideological work, especially with respect to what is considered the appropriate scope of state intervention as well as the normal separation between the economic and the political. We highlight a particularly interesting aspect of this ideological adjustment in the paper: the partial embrace of state-owned capital by multilaterals is not so much a relaxation of the liberal stance on state ownership (even less so a move away from it) as a mutation of it, one that allows preserving and reaffirming a clear-cut separation between the economic and the political under a new guise, and one that simultaneously (supposedly) establishes a clear distinction between liberal and illiberal forms of state ownership. By presenting certain types of state‐capital hybrids as post‐ideological, depoliticized creatures, the vision can delineate a liberal role for the state as owner of capital in development, legitimating some uses and forms of state‐capital hybrids, while delegitimating others (such as China’s) and negating their role in development.
Our argument also has implications for how we understand ongoing transformations in the global development regime. We would argue that such transformations are neither simply a product of the current pandemic, nor of the (neoliberal) failures to deal with previous crises. These transformations, particularly concerning the role of the state, must be located within global dynamics of capital accumulation and geopolitical forcefields, and the contradictions, struggles, and crises that accompany them.
As a final comment and word of caution, and returning to Martin Sandbu’s new Washington Consensus discussed earlier, it is crucial that we remain aware of gaps that may exist between discourse and practice. For instance, as Daniel Munevar and Farwa Sial have powerfully argued (here and here), a double standard is fast emerging: at the very same time as the IMF is preaching for expanding fiscal space as a means of stimulating demand in rich countries, it is asking for “fiscal consolidation” (a euphemism for austerity) in heavily indebted developing countries. In sum, the strategic adjustment concerning the role of the state that we have identified may well reproduce deeply entrenched inequalities and power asymmetries across the world economy, notably concerning what the state can and should do.