This interview was originally published in German in the special issue on financialisation and development policies of the journal Peripherie, September 2021, No. 162/163. Frauke Banse and Anil Shah (both based at Kassel University) spoke with political economist Ilias Alami (Maastricht University) about some of his recent work on the relationship between geopolitics, financial flows for development and emerging forms of ‘state capitalism,’ as well as related new imperialist formations. The interview was conducted via email in May 2021.
The interview covers a series of International Political Economy topics. Ilias first locates the emergence of the Wall Street Consensus in the long and turbulent histories of the relation between finance and development as well as in secular capitalist transformations. He then outlines some of the conceptual tools he’s developed in his work in order to make sense of the contemporary interconnections of money and finance and the reproduction of imperialism and race/coloniality. Next, he situates these interconnections within broader scholarly debates about financialisation and highlights the similarities and differences between ongoing sovereign debt crises in the global South and the so-called 1980s ‘Third World debt crisis.’ Finally, Ilias discusses the recent emergence of new forms of ‘state capitalism’ and their complex relation to the extension and deepening of market-based finance.
Q1: You are part of a critical scholarship that claims finance and development have become fundamentally re-organised in recent years. What are the most crucial features of this shift from your perspective?
A fundamental shift we are witnessing is the rise of what Daniela Gabor has aptly termed the ‘Wall Street Consensus’ [see keyword, editor’s note]. This emerging paradigm promotes the mobilisation of private financial capital as a political and developmental priority, notably to fund the Sustainable Development Goals and the construction of large-scale infrastructure in developing countries. Southern states are encouraged to re-engineer their domestic financial systems around securities and derivatives markets, create ‘investable’ opportunities in sectors such as infrastructure, water, climate adaptation, health and education, as well as deploy policies that specifically ‘de-risk’ investment for global investors, including by leveraging public finances. The hope is that by providing attractive investment opportunities for global institutional investors, the vast amounts of liquidity that they control will be ‘escorted’ into the global South, thereby matching the funding needs of developing countries while providing handsome financial returns for investors in some sort of win-win scenario (“doing well while doing good”). In our brave new world ‘beyond aid’ (Mawdsley 2018), the Wall Street Consensus promotes state-supported private finance in the very name of development.
In my view, developing politically attuned readings of the Wall Street Consensus requires situating it in the long and turbulent histories of the relation between finance and development. From this perspective, the Wall Street Consensus displays elements of remarkable historical continuity. Gabor firmly locates the Wall Street Consensus as the heir to the (Post-)Washington Consensus. In their work on how the Wall Street Consensus manifests in the World Bank’s discourses and policy prescriptions in the realms of climate-resilient urban infrastructure, Patrick Bigger and Sophie Webber argue that it amounts to a sort of “Green Structural Adjustment”: “If the old structural adjustment was, to a large extent, about reinscribing core–periphery relations through uneven terms of trade, limiting the possibilities for endogenous development in the Global South, and securing Northern access to primary resources (…), Green Structural Adjustment aims to accomplish a similar reinscription by allowing capital to flow into urban built environments, thereby extracting rents from Northern-financed, -owned, and -operated infrastructure while ameliorating structural overaccumulation that has inflated Northern asset prices and driven down financial yields” (Bigger and Webber 2021: 47).
In other words, yes, the rise of the Wall Street Consensus is indeed a fundamental shift (as your question intimates), but it is one that must be understood within broader historical patterns: at least since the birth of development as a project of modernisation and intervention, finance and development have been about the restructuring and reordering of states in the developing world in order to entrench the centrality of market rule and globally impose the social relations and disciplines central to capitalist reproduction. The methods, discourses, technologies, and practices which have been deployed to achieve this overall, long-term objective have had strong (neo)colonial overtones, leveraging and reinforcing asymmetrical relations between advanced capitalist economies and postcolonial states. The Wall Street Consensus, then, might well be the next iteration in this fail-forward, crisis-ridden, and often violent project. As such, and while it celebrates private financial capital and the figure of the global investor as heroes of development, it risks deepening what Nina Kaltenbrunner, Ingrid Kvangraven, Kai Koddenbrock, Jeff Powell, Carolina Alves, Bruno Bonizzi, and myself have referred to as the “international financial subordination” of developing countries in the world capitalist economy (2021), with its lot of crises and dramatic consequences in terms of social and human costs and environmental destruction.
However, the Wall Street Consensus is not only embedded in these deep historical and structural processes, it is also a product of contemporary capitalist transformations. I already mentioned that it is explicitly framed as a means to implicate global institutional investors in development and to harness the large volumes of liquidity they control. As such, the Wall Street Consensus mirrors, or at least refracts, the rise of asset manager capitalism and the expansion of shadow banking, particularly since the 2008 global financial crisis (Braun 2020; Musthaq 2020, Dafermos et al. 2021). But I think that we also need to look at capitalist transformations beyond the realms of money and finance to understand the Wall Street Consensus. For instance, I would argue that its heavy emphasis on infrastructure is no coincidence. A number of commentators have claimed that we have entered a ‘logistics age’, where optimising the circulation of capital has taken a distinctly strategic character (Cowen 2014; Chua et al. 2018; Bernes 2013). With the acceleration of the unfolding of a New International Division of Labour (Charnock and Starosta 2016), we are also witnessing a major shift in the centre of gravity of the world capitalist economy from the North Atlantic to the Pacific rim (Arboleda 2020), which requires massive needs in terms of infrastructure in order to mediate this new pattern of uneven geographical development. Hence, the return of spatial planning and a renewed emphasis on large-scale connective infrastructure (such as ports, canals, railways, and integrated systems of logistical connectivity) in development policy and practice, as documented by Seth Schindler and Miguel Kanai (2019), in order to integrate distant territories, facilitate the flow of capital, and facilitate the strategic coupling of firms with global value chains.
Q2: What do you mean by “money power” and how does this concept allow you to understand the perpetuation, renewal, and contestation of colonial and imperial relations of power and oppression (give examples please)?
I have borrowed the concept “money power” from a number of authors writing in the tradition of the Marxian critique of political economy, such as Simon Clarke, whose work has been a great inspiration. The concept suggests that money is not a neutral, technical instrument which simply fluidifies economic exchange between free and equal individuals (as per neoclassical economic theory). Money in capitalism expresses a ‘seemingly transcendental power’, to borrow an expression from Marx, the power of subjecting social reproduction to the discipline and logic of capital. As Clarke puts it, in capitalist society, ‘the circulation of money is not subordinated to the requirements of exchange, rather the possibility of exchange is subordinated to the demands of the expansion of money as capital’ (Clarke 2003: 37). Therefore, and despite its appearance as a neutral object, money is the most preeminent, abstract, and “autonomous” social incarnation of class power (Clarke 1988).
To my mind, the concept money power is particularly interesting for two reasons. First, it emphasises that the circulation of capital in the form of money and finance represents “the common capital of a class”; it expresses the disciplinary power of “capital-in-general” (Marx 1894/1991; Clarke 1988). This is important because this means that what is often referred to in scholarship, political commentary, and public debate as the undue influence of financial markets, Wall Street financiers, and moneyed capitalists, is in fact a form of expression of the disciplinary logic of capital. This is not to say that the actors and institutions of “high finance” do not wield immense power and authority (they obviously do!), but that this power expresses a much more general form of social regulation in capitalist societies. In other words, money in capitalism is a form of class struggle (Bonefeld and Holloway 1996). This also means that money instruments and financial claims ultimately rely on the exploitation of labour and the appropriation of nature. In my view, this is the necessary starting point of any attempt at critically theorising money and finance, and the basis of any sort of progressive politics in their respect.
Second, and to return to your question, I would argue that money power as a concept provides productive ways of exploring how, in the words of David McNally, ‘money and finance are enmeshed within matrices of social power [irreducible to capital/class] and tend to reproduce them’ (2020: 1). In my work, I have been particularly interested in two such matrices of social power, namely, on the one hand, imperialism, and on the other, race/coloniality. These two matrices are of course very much intertwined. Concerning the former, I have tried to show that the operations of capitalist finance and the global flow of money are mediated by relations of imperialism, which has been the case since the birth of the world market in the long sixteenth century. My argument is that the geographical organization of the global financial system, and the spatial arrangement of the global monetary system (both of which fundamentally structure the operations of money and finance), have been ‘consistently underpinned and enforced by imperial power, at the expense of the spaces of the world market successively referred to as the peripheries, the formal and informal colonial territories, the Third World, and the global South’ (Alami 2019a: 16). As a result, these spaces have retained a subordinate positionality in the network of space and power relations within which money and finance flows, or in what I called the “relational geographies of money power” (Alami 2018, 2019b). These geographies have been politically constructed and enforced in a variety of ways that benefit core advanced capitalist economies. I contend that this is fundamental for understanding how financial fragility and vulnerability, as well as the costs of deflationary adjustment during crisis, are unevenly distributed across the world market, largely at the expense of workers, peasants, the poor, and non-human natures in the Global South. This is also important for grasping the global relations of value, exploitation, and dispossession that underpin the operations of capitalist finance and how those contribute to the reproduction of pervasive inequalities on a planetary scale. Recursively, the operations of global finance also contribute to reproducing imperial-hierarchical relations between spaces across the world market.
In my book I developed this argument a little bit more and looked at how contemporary geographies of money power are also shaped by relations of race/coloniality. For instance, drawing on the brilliant work of Lisa Tilley (2020), Paul Gilbert (2018) and others, I scrutinised how social relations of race, coloniality, gender, and sexuality are deeply implicated in the social construction of emerging markets as investment destinations, with important implications for processes of risk valuation and investment decisions (Alami 2019b). Far from revealing and rationally processing economic data in a value-neutral manner, financial techniques and technologies such as credit ratings, political risk assessments, benchmark indexes, and so on, are profoundly shaped by sedimented imaginaries of colonialism and empire, either because they originate in colonial enterprises (merchant companies such as the East India Company) and in the anxieties of postwar decolonization and the end of Empire, or because they are founded upon racialised categories (such as ‘good governance’, etc.). Relations of race and coloniality therefore continue to play a constitutive role as a means of enforcing discipline and continuous subordination, and as a means of profiting in and trough capitalist finance. This affects all developing and emerging economies, albeit unevenly (depending on their specific histories of race and empire).
I looked in particular at how this affects patterns of investment in Sub-Saharan African frontier and emerging markets (Alami forthcoming). Even mainstream economist and business pundits have noticed that these countries are often perceived by global investors, credit rating agencies, and other financial actors, as being atypically risky. As a result, the borrowing costs of these countries are generally unjustifiably high (after controlling for factors such as volatility and financial returns, macroeconomic fundamentals, the ‘quality’ of institutions and policy framework, political stability, the business environment, and so on). I have tried to show that this is (at least partly) due to how racist imaginaries shape how Sub-Saharan African countries are socially constructed as investment destinations. In particular, these countries are imagined as the geographical embodiment of unruly Black populations, exotic wilderness, governmental incompetence, and weak (if not failed) Black African states in the making. I contend that this is not simply an issue related to the individualised racist behaviours of specific financial actors. If that were the case, then educating investors about the realities of the continent and propagating more positive views of Africa would solve the problem. By contrast, I argue that the source of this lies in the racialised power relations that structure the operations of capitalist finance and money power. Indeed, what we see here is a process through which the production and mobilisation of racialised difference, contributes to representing Black African countries as highly risky investment destinations, which not only affects the pricing, amount, and quality of the financial capital that these countries receive, but also provides justification for demanding very high financial returns, thereby sustaining processes of value extraction. In other words, this is not simply a problem of biased investors holding negative stereotypes about Africa. This is a problematique of racial capitalism (Bhattacharyya 2018).
To sum up and link back to a point made earlier, this means that race and coloniality (as well as other social relations such as gender, sexuality, and so on) play a fundamental role in the subordinate positionality of developing countries in the global geographies of money power. I think that this type of argument is important because there has been a certain ‘colour-blindness’ in studies of development finance, which it is urgent to remedy.
Q3: You plead for a long durée approach to grasp the relation between money and imperialism. How do you place the debate around ‘financialisation’ into this long-term perspective? What’s really new about this trend, and what is not?
As I intimated earlier, finance has played a central role in the histories of imperialism, transatlantic slavery, and (neo)colonialism (see for instance McNally 2020 for a recent account). In my view, this fundamental insight must be put front and centre of our research efforts, including concerning financialisation. Moreover, I mentioned that it is important to think about contemporary finance and money as products of both these long and brutal histories, but as also embodying elements of newness. This, too, informs my understanding of financialisation. That being said, and generally speaking, I would say that my view on financialisation is rather agnostic. I confess being dissatisfied with much writing on financialisation, especially when it is loosely conceived as “more finance”, or when it is somehow suggested that capitalism was previously not financialised. People like Brett Christophers (2012) and Nick Bernards (2020) have highlighted very important limits to financialisation, notably concerning questions of geography and labour. I certainly share many of their views.
I find it useful to see financialisation as a form of expression of an inherent capitalist tendency, which is capital’s drive to reduce human life and lifeworlds to economic resources and money abstractions, through privatisation, commodification, and marketisation, as part of its compelling impulse to valorise. Needless to say, various forms of money and finance play a very important role in facilitating this process. Now, we also know (as I suggested earlier) that money and finance can also be tools of (geo)political power. Raj Patel and Jason Moore have an expression (which I like very much) to capture this: “the rhythms of world money and world power are deeply entangled” (2017: 96). In my view, such understanding must feature prominently in studies of financialisation. Or, to put differently, we must unpack the dynamics of class power and value extraction at the heart of financialisation, as well as how it is inhabited by the ‘Ghosts of Empire’ (Bourne et al. forthcoming).
There seems to be a growing understanding that a number of phenomena which scholars have tended to explain by resorting to the category financialisation might actually be best comprehended by using other categories, such as rent (see, for instance, Christophers 2020, Schwartz 2021). This is welcome, in my view, insofar as this encourages us to examine the sources of the value from which various forms of financial income and revenue streams are generated, and ask: how is this value created, circulated, captured, and distributed in the form of rents? By locating these rents within the broader context of antagonistic class relations of capitalist development, we may be able to unearth how certain financialisation techniques/practices contribute to the penetration of rent-extraction mechanisms into new spheres of social reproduction and everyday life (Purcell et al. 2020). This may well be necessary in order to substantiate the claim that some of the financial income-generating activities we associate with financialisation are indeed novel.
Q4: Many countries in the Global South are currently witnessing severe sovereign debt crises, which is intensified through the unfolding COVID-19 pandemic. Where do you see the similarities and differences to the so-called ‘Third World debt crisis’ in the 1980s?
To use a concept introduced earlier, the fact that so many countries across the Global South were so badly hit by the financial effects of the pandemic is a symptom of their subordinate positionality in the global geographies of money power, which manifests as a set of features which by now we know quite well, such as, inter alia, an extreme pro-cyclicality in the patterns of cross-border capital flows, a build-up of various forms of financial vulnerability and fragility, and capital flight often worsening periods of financial distress. What looks new (at first sight) is that, after a period of extremely brutal capital flight early on in the unfolding of the pandemic (the worse in the history of many developing countries), many developing countries gained access to global financial markets again and could borrow at very low costs (by historical standards, and even close to or below pre-crisis levels). As Daniel Munevar underlines in a recent Eurodad report, “for at least 35 out of 57 countries with outstanding sovereign bonds, borrowing costs have fallen below pre-crisis levels” (Munevar 2021: 1).
But even that can be linked back to the subordinate positionality of developing countries in the global geographies of money power, inasmuch as the prompt return to global financial markets showed the extent to which developing countries are subordinated to ‘push’ factors, such as global liquidity, global market sentiment, and the monetary policy choices of financial authorities in advanced capitalist economies (cf Naqvi 2019; Bonizzi & Kaltenbrunner 2019). Furthermore, this new round of borrowing (without significant debt relief and restructuring) is simply like kicking the can down the road. In fact, it might lead to a significantly worse situation down the line, because of the rapid build-up of financial fragility which it is fuelling. Furthermore, this may “aggravate the net transfer of resources from public borrowers to external creditors” (Munevar 2021: 1).
There are also striking similarities with previous crises in how the current sovereign debt crisis is being addressed. There is, sadly, the double standard of the IMF which is lecturing the world on how governments should spend more to address the effects of the crisis, while already pushing for austerity measures in developing countries where it is negotiating structural adjustment plans. In the middle of a pandemic! Daniel Munevar warns that “in a post-crisis context marked by debt and austerity, developing countries will be left with even less resources to invest in public services to protect the lives and livelihoods of local populations. A large number of countries in the developing world are already allocating more resources to debt service than to either public health care or education. External public debt service was larger than health care expenditure in at least 62 countries in 2020. Furthermore, external public debt service was larger than education expenditure in at least 36 countries in 2020” (Munevar 2021: 2). I recommend reading the whole report.
In addition, most sovereign debt relief efforts have been organised under the aegis of the G20’s Debt Service Suspension Initiative (DSSI). Shaina Potts has shown that the institutional framework of this initiative remains profoundly shaped by the “resolution” of previous debt crises. She argues that “the limited success of the DSSI is rooted in its replication of long-standing international approaches to sovereign debt crisis resolution that are designed to promote contract rights and creditors’ interests over substantial debt relief” (Potts 2021). Notably, there are concerns that debt suspension will benefit private creditors (with resources earmarked to guarantee payment to them). We are far from the debt relief effort that would be absolutely necessary. There are hopes in some corners that liquidity provision in the form of Special Drawing Rights (just approved by IMF members) will give fiscal space for developing countries to deal with the crisis and avoid a recession (Gallagher, Ocampo, Voltz 2020). But concerns have been raised that the amounts would be limited, and that, in any case, the initiative might be killed by the US congress (there has been lots of opposition to it from both Democrats and Republicans).
Q4: Regarding the geopolitics of finance and development, you have highlighted the important role of ‘state capitalism’ in your work. What does ‘state capitalism’ mean and how does it inform our understanding of the geopolitics of financialisation and development?
State capitalism generally designates capitalist social formations where the state plays a particularly significant role in the organisation of economy and society, by supervising and administering capital accumulation, or by directly owning, controlling, and allocating capital (cf Alami and Dixon 2020a). Recently, witnessing the proliferation of state-sponsored corporate entities across the world economy (such as development and policy banks, state-owned enterprises, sovereign wealth funds, and state-supported national champions) as well as the emergence of muscular forms of statism (such as economic patriotism, strategic protectionism, techno-nationalism, neo-mercantilism, various forms of industrial policy and national development plans), a number of commentators have wondered: is this the rise of a new form of state capitalism?
Drawing upon the Comparative Capitalism tradition, academics (but also, and increasingly, strategic analysts, political leaders, foreign policy professionals) tend to understand this phenomenon as the rise of a national or regional variety of capitalism, which allegedly prevails in large emerging economies such as Russia, Turkey, Indonesia, Brazil, India, Hungary and others, with China often seen as a prime example of such variety of capitalism. From this perspective, state capitalism is seen as an increasingly potent rival of liberal free-market capitalism. I distance myself from such explanation (cf Alami and Dixon 2020b). My co-author Adam Dixon and myself prefer to conceive of state capitalism as a genuinely global and polycentric process of state restructuring, characterised by the uneven and combined aggregate expansion of the state’s role as promoter, supervisor, and owner of capital, resulting in highly diverse institutional landscapes and configurations of state-capital relations across the world capitalist economy (Alami and Dixon forthcoming). This process unfolds at various scales and across territorial borders and is grounded in the historical development and geographical remaking of capitalism. Moreover, if these new global landscapes of state capitalism have gradually emerged at the turn of the millennium and further expanded in the post-2008 global financial crisis environment, they may well deepen and consolidate in the post-COVID-19 world, as states will devise strategies to adapt to the new political economic environment and to reconfigure their participation in regional and global value chains.
The rise of state capitalism is fundamental to the Wall Street Consensus (and the broader geopolitics of finance and development) for at least three reasons. First, large state-sponsored corporate entities like sovereign wealth funds are important actors in the coalition of actors which is driving this emerging paradigm (multilaterals, institutional investors, and so on) (Kanai and Schindler 2019). It is telling that, since 2012, executives and representatives of major sovereign wealth funds have been invited to the biennial World Investment Forum (the main global platform for investment and development, organised by UNCTAD) to enhance their participation in SDG and infrastructure sectors.
Second, harnessing large amount of state-controlled liquidity circulating in the world market is presented as a priority by the Wall Street Consensus. For instance, a key policy document, the 2015 Development Committee paper From Billions to Trillions: Transforming Development Finance, argues that ‘emerging pools of capital (such as sovereign wealth funds…) could be important financing sources for emerging markets, particularly for large infrastructure and energy investments’ (2015: 14). Similarly, The UNCTAD 2020 World Investment Report submits that a central aim of investment promotion policy in developing countries should be to attract ‘[t]he large amounts of institutional capital [sovereign funds but also public pension and insurance funds] looking for investment opportunities in global markets’ (UNCTAD 2020: iv).
Third, the contemporary advent of state capitalism has prompted multilateral development banks, international governmental organisations, and traditional development actors to adapt. Drawing upon research papers and policy documents released by key multilaterals (OECD, IMF, World Bank, UNCTAD, and others) since the early 2010s, we have shown in recent work that these actors have reluctantly acknowledged some of the developmental successes of state capitalism (notably in funding infrastructure in the developing world), while expressing the need to adapt to this new “state capitalist normal” (Alami, Dixon and Mawdsley 2021). Such reaction has taken the form of a strategic discursive and ideological adjustment involving a certain re‐legitimation and fuller role of the state in development (than the Post‐Washington Consensus), and a limited embrace of state‐owned capital (including state enterprises, sovereign wealth funds, and state‐owned banks), even as it critiques China’s use of similar instruments. Our argument is that the Wall Street Consensus is embedded in this emerging vision of the state.
Q5: You claim that we see an increase of state-led industrial planning, as a one of the features of the ‘state capitalism’. At the same time, we witness a shrinking possibility for exactly this industrial planning in other countries, which is partly attributable to the push for market-based finance by leading development agencies. Equally, the enhanced role of state-owned enterprises and public development banks is paralleled by the rapid expansion of public-private partnerships (PPPs) and market-based finance more generally. Certainly, state institutions play a crucial role also in these processes (for de-risking those investments as well as channel processes along geopolitical and geo-economic interests). But given the focus on marketability and bankability of these infrastructure projects: Isn’t it exaggerated to talk about a global paradigmatic turn to ‘state capitalism’? How do you make sense of these contradictory dynamics?
To be clear, my claim is that the current advent of state capitalism should be seen as a world-historical process of state restructuring, not a policy paradigm. The determinate processes pertaining to the historical development and geographical remaking of capitalism which underpin such restructuring are: the accelerating unfolding of the new international division of labour and, connected to this, a secular shift in the centre of gravity of the global economy from the North Atlantic to the Pacific rim; technological modernisation and industrial upgrading culminating in the Fourth Industrial Revolution; a historically unprecedented concentration and centralisation of capital; and the extension of debt and financial relations. The source of contemporary state capitalism lies in the variegated ways in which states have politically mediated these capitalist transformations and their crisis tendencies. Of course, this has happened very unevenly, depending on a country’s position in the international division of labour and power differentials in the inter-state system, i.e., not all states have had the opportunity and/or capacity (or political will, for that matter) to drastically expand modalities of intervention and direct ownership of capital.
So, the first point I’d like to make in response to your question is that there is no necessary contradiction between ‘more state capitalism’ and ‘more market-based finance’ or, more generally, ‘more private sector participation’. There is a tendency in discussions of contemporary state capitalism to read contemporary developments through binary dichotomies such as states vs markets, liberal vs illiberal, profits vs (geo)political objectives, which I think is not helpful. An expansion of state-owned capital and strong state intervention does not necessarily mean hostility to capitalist markets. And as your question suggests, there are many ways in which ‘state capitalist’ instruments, such as, say, policy and development banks or international development agencies, can be used to de-risk private sector investment. So, what looks like a paradox (at first sight) may not be one. As Daniela Gabor also mentioned in a twitter exchange, it is not useful to construct yet another oppositional binary such as state capitalism versus Wall Street Consensus. I certainly agree.
That being said, there are of course many potential sites of tension and conflicts here, notably due to the geopolitical forcefields in which these tendencies are embedded. For instance, and to come back to the point made earlier about multilaterals adapting to the new “state capitalist normal”, what we are seeing is clearly an attempt from them to make sure that state capitalism assumes liberal forms (especially in developing countries). I think that their position is increasingly something along the following lines: state capitalism is here to stay, so we need to make sure that it creates the fewest frictions possible in the global circuits of trade, production, and finance, and that it does not disrupt the competitive operations of the law of value. This is clear in their explicit objective of clearly delineating the parameters according to which things like sovereign funds, development banks, state enterprises should be used and governed: according to the OECD, the IMF and the World Bank, they must be run ‘professionally’ by technocrats, management consultants, or former bankers, they must adopt the techniques of liberal governance, they must mimic the practices and organisational goals of comparable private-sector entities, operate in a business-like manner, adopting “modern risk management practices”, “effective governance frameworks”, and so on.
So in my view, what we are seeing here is some sort of attempt at controlling the proliferation of state capitalism, domesticating it (if possible) by clearly delineating its parameters, and harnessing the expanding state role towards the interests of the private sector (and perhaps chiefly finance). Maybe this is because these institutions are desperately trying to remain relevant in a changing world, and therefore must adapt. More fundamentally, it is probably because, ultimately, these are actors dedicated to the global imposition of capitalist disciplines, with the reordering of states at the core of their task (Cammack 2010). Which is where recent critiques of the Wall Street Consensus may be missing something: as part of the process I just described, an elaborate vision of the state in development is being articulated, which, in my view, cannot be reduced to simply the promotion of the “de-risking state” and the provision of “investible” infrastructure projects (although both are indeed fundamental), nor does this close off entirely the space for industrial policies and spatial planning. At the moment I am doing some work with Seth Schindler and Nick Jepson where we are trying to unpack various forms of entanglement between state capitalism and the Wall Street Consensus. One of the arguments we are developing is that many developing countries are willingly embracing the policy grammar of the Wall Street Consensus, because it allows them to formulate spatialised forms of industrial policy centred on the state-coordinated expansion of infrastructure (Schindler, Alami, Jepson, forthcoming). Thus, the Wall Street Consensus may be constraining the capacity to intervene in some ways, but a significant number of states have been able to pursue their own spatial objectives by framing them in terms of the rules and norms of the Wall Street Consensus.
This would explain a seeming paradox: at the very time where the Wall Street Consensus is rising, which (critiques have argued) is supposed to render obsolete various forms of modernist and developmentalist plans, there actually has been a proliferation of national development plans and industrial strategies. Indeed, according to UNCTAD, “[i]n the decade since the global financial crisis, the number of countries adopting national industrial development strategies has increased dramatically. The rate of adoption of both formal industrial policies and individual policy measures targeted at industrial sectors appears to be at an all-time high” (UNCTAD 2018:128–129). There is therefore a need for much more research to explore the many ways in which state capitalism and the Wall Street Consensus are entangled. This cannot be reduced to matters of competing policy models or paradigms. Also, and to be clear, we are not saying that this means that critiques of the Wall Street Consensus are misplaced (they are not, and we certainly sympathise with them), nor are we claiming that developing countries have at their disposal all the ‘policy space’ they want (that would be absurd). We are also not particularly enthusiastic about how some states in developing countries are trying to harness the Wall Street Consensus in order to pursue their own objectives. Miguel Kanai and Seth Schindler, for instance, have clearly warned that these state-led projects often do not benefit the broader populations, notably because they “rely on ambitious physical planning, with masterplans evincing elite, globalisation-oriented objectives that neglect local needs and trigger displacement” (2019: 302). The problem of these plans and infrastructure projects, then, isn’t simply the ways in which they are funded and by whom, but also, perhaps more fundamentally, who and what objectives they are designed to serve.
Q6: What does the simultaneous rise of ‘state capitalism’ and ‘market-based development finance’ mean for the nature of imperialism? How is finance organised by the US or the EU, aiming to leverage private finance while, at the same time, seeking to achieve objectives beyond pure return (such as geopolitical influence)?
This is an interesting question – let me try and answer by tying together some of the threads discussed so far. First, both the trajectories of state capitalism and of the Wall Street Consensus are enmeshed within geoeconomic and geopolitical constellations and forcefields (Alami et al. 2021). In many ways, geoeconomic and inter-imperialist competition is a major vector of politicisation of state capitalism. This includes (but is not reducible to) the so called “new Cold War” between the United States and China, but also competition between other state actors (France, Germany, the United Kingdom, Korea, Japan, India, etc.) with important implications for developing countries. For instance, development policy has been increasingly used as a form of “export stimulus”, where the opening of investment opportunities in developing countries is meant to offer an outlet for the surplus capital of respective private sectors (Mawdsley et al. 2018). Such policies have also been geared toward achieving geostrategic objectives, resulting in the return of geographical spheres of influence and the promotion of national interests in international development (ibid.). The Wall Street Consensus is tied to this: by opening investment outlets for surplus capital by escorting and de-risking investment for transnationally oriented segments of capital and finance, it contributes to export stimulus by delivering economic benefits to the private sectors of established powers.
One may also understand the Wall Street Consensus as a means of consolidating the comparative advantage of the United States, the United Kingdom, and other established powers in global finance, by incorporating in development financial actors that are overwhelmingly based in advanced economies, such as global asset managers, institutional investors, credit rating agencies, consultancies (and other firms specialised in producing financial knowledge), as well as the dominance of the major global financial centres of Wall Street and the City of London. Functions of control and authority continue to be centralised in a limited number of world financial centres located in advanced capitalist economies, and the asset management industry, which manages trillions of US dollars, is extremely concentrated and disproportionately located in US financial centres. Thus, the Wall Street Consensus re-centring of private finance in international development can be seen as an attempt at strengthening and deepening the highly uneven global geographies of money power and the influence of traditional actors and centres of power in those geographies. From this perspective, the Wall Street Consensus, under the veil of a “post-political alignment between business, finance, development and sustainability” (Mawdsley 2018: 193) may well be the latest iteration in the long history of imperial power propping up these geographies to make sure the operations of money and finance benefit core advanced capitalist economies, and reinforcing in the process the subordinate positionality of developing countries within these geographies. It’s hard not to see this as a direct response to the rise of China and its extension of state-supported finance in the developing world. The terms according to which Chinese state-supported finance is allocated differ to some extent from western-centric forms of lending, although there are very clear elements of convergence too, such as, for instance, the securitisation of state assets (Chen 2021). How will these inter-imperialist rivalries shape the operations of money power and capitalist finance? This remains an open question.
Another very interesting aspect of current patterns of inter-imperialist and geoeconomic rivalry is what Miguel Kanai and Seth Schindler (2019) aptly called the “infrastructure scramble”, and which refers to the process of competition between states and private actors to redesign territories by financing, constructing, and controlling large-scale infrastructure in the developing world. The objective is to “enhanc[e] economic competitiveness through enhanced connectivity to transnational value chains”, integrating spaces of resource extraction, processing, industrial production, and logistics networks (Kanai and Schindler 2019:303). Recall the point made earlier about capitalism having entered an “age of logistics”, where optimising the circulation of capital has taken a distinctly strategic character. The “infrastructure scramble” and the race to fund and control networked mega-infrastructure connectivity projects in the developing world may well be one of the key features of imperialism in this period of capitalist development. This reintroduces a fundamentally territorial dimension in the logic of inter-imperialist rivalry. And the relevant actors are not just the US and China, but a range of advanced and emerging capitalist economies, as mentioned above. This raises a number of interesting questions: how will this shape future trajectories of state capitalism, and the unfolding of the Wall Street Consensus? How will states in developing countries navigate this context? With what consequences for workers, peasants, and the poor? How to develop progressive forms of political organisation and international solidarity in this new phase of capitalism and imperialism to support popular struggles across North/South lines? My hope is that progressive academics and activists can contribute to finding answers to these challenging questions.
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Money Power and Financial Capital in Emerging Markets is now available in paperback (20% discount available, enter the code SOC21 at checkout).
Ilias Alami currently holds a postdoctoral researcher position at Maastricht University in the Netherlands. @IliasAlami.
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