Financializing state capitalism: Exchanges, financial infrastructures & the active management of capital markets in China

DCE trading floorThe development of capital markets has been a core focus of financialization research. For Epstein, financialization ‘means the increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies’, while Pike and Pollard define financialization as the ‘growing influence of capital markets, their intermediaries and processes in economic and political life’. Other scholars also attribute a significant role to capital markets in financialization processes, be it in the dissemination of market-based financial activities and practices, the rise of shareholder value-oriented corporate governance, or ‘the increased ability to trade risk’. At the heart of and as a precondition of many aspects of financialization stand capital markets and their development. 

This is not only the case when it comes to financialization in advanced economies, but also with respect to the study of financialization in developing and emerging economies. Financialization processes are not uniform, they are rather variegated and refracted by national institutional settings that lead to different trajectories of financialization. As Lapavitsas and Powell emphasized, ‘both the form and the content of financialization vary according to institutional, historical and political conditions in each country’. This has also been picked up in debates about the relationship between financialization and the state. Previously, many scholars argued that financialization often results in a relative loss of state power vis-à-vis finance and the effects on developing economies are often described as potentially negative with financialization for instance decreasing their borrowing capacity and thereby policy space or deepening existing power asymmetries between states. But stemming from earlier discussions on transformations of the developmental state, more recent scholarship has highlighted that financial market development has often been actively facilitated by states. It argues that an increasing hybridization of financialization processes takes place in which state and (quasi-)state institutions often co-constitute financialization processes. 

Contributing to the growing literatures on variegated financialization and the state, in a paper titled ‘Financialization with Chinese characteristics? Exchanges, control and capital markets in authoritarian capitalism’ (recently published in Economy & Society) I argue that states are not only important actors facilitating financialization but can also exercise a considerable degree of control over financialization, thereby shaping its very form. Instead of a financialization process that follows a neoliberal logic and constrains state power, what we see in China is a ‘financialization with Chinese characteristics’ where the state actively tries to manage financialization and its social outcomes. Read More »

Is Postcolonial Capitalism a Thing to Itself? Reviewing Sanyal’s Rethinking Capitalist Development

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Kalyan Sanyal’s Rethinking Capitalist Development (2007, 2014) is a rare work of political economy for many reasons. It is written by an economist, but it’s so interdisciplinary that you won’t be able to tell. It is an attempt to theorize capitalism in the postcolonial context from the inside-out rather than outside-in, i.e. with no reference to an ideal type. It refuses to sit neatly in theoretical boundaries — it is not entirely Marxist, not entirely Postmarxist, not entirely neo-Gramscian, not entirely Foucauldian, but a strange concoction of all. Perhaps the only thing that is not rare is that like most interesting and influential works that emerge from the Global South, it too has been largely ignored in the academic circles of the Global North, especially in Economics. Read More »

RMB internationalisation as an extension of Chinese state capitalism

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Why has the RMB gone global?

More than a decade has passed since the launch of what is now widely known as ‘RMB internationalisation’, or the strategic attempt by the Communist Party of China (CPC) to expand the global reach and usage of the Chinese currency, the renminbi (RMB). Such is the scale and ambition of this strategy, some policymakers and scholars have proclaimed RMB internationalisation as a form of reserve currency succession – as a challenge to the US dollar as the world’s preferred currency for market exchange. This development is especially intriguing given how the financial system within China remains relatively insulated in spite of market oriented reforms since 1978. Could RMB internationalisation truly be about global currency supremacy when financial flows in and through China continue to be highly scrutinised?Read More »

Corporate Planning in the Coronavirus Economy

woman-wearing-mask-in-supermarket-3962289The global pandemic and associated developing global recession are calling into question a whole range of economic truths and demanding novel solutions to various interlinked societal problems. In this blog post, I want to connect what we’re currently seeing in the retail sector during this pandemic to deep-seated narratives about the nature of economic exchange, in particular to the notion of “the market”. 

The market is one of the most dominant concepts for making sense of the social world, primarily because of the prestige of the economics discipline and the elevation of the market concept by the discipline (albeit in a highly abstract manner). At its most basic, it paints the economic sphere as akin to a marketplace, where there is a level playing field and rivals compete for custom primarily through having the keenest of prices. Other, more complex, ideas often get laid over this concept, such as the market pricing mechanism allowing supply and demand to equilibrate, price signals communicating complex information to market participants, and, as such, the market allowing for decentralised decision making led by consumer demands. (For a much (much) fuller account of the market concept, see here.)

However, as a result of the coronavirus pandemic increased demand for basic goods – such as toilet roll, hand sanitiser and flour – has put a strain on the distribution of these goods and has engendered a response quite dissimilar to the narrative of the economic system as a competitive, decentralised, profit-maximising market. What we have seen, instead, is retailers working as sites of governance in order to ensure a degree of equity in the distribution of resources. Read More »

When does state-permeated capitalism work?

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In recent years, state capitalism has become an important buzzword in the development economics discussion (again). In view of the very different ways in which this term is used, Ilias Alami and Adam Dixon recently highlighted the dangers of using the term too loosely in an article in Competition and Change. In view of its recent popularity, state capitalism could suffer a similar fate to the terms “neoliberalism” or “financialisation” by becoming a very loose rallying cry without any significant analytical value. To overcome this problematic situation, Alami and Dixon propose that future research should (1) develop a theory of the capitalist state, (2) circumscribe the time horizons of state capitalism, and (3) locate state capitalism more precisely in territorial and geographical terms.

Although I am not sure whether the genius can be put back into the bottle by developing a unified theory of the state (too many different theoretical traditions are involved by now), I am very sympathetic to the latter two demands. Our recently published book “State-permeated Capitalism in Large Emerging Economies” (Routledge) is a modest contribution to the latter goals. It deals with the economic development of Brazil, India, China and South Africa between 2000 and 2015. Departing from a comparative capitalism perspective, we have developed an ideal type of state-permeated capitalism as opposed to liberal, coordinated and dependent capitalism – and examined to what extent large emerging markets are approaching this ideal type. Read More »

The Coronavirus and Carceral Capitalism

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From a prison cell in 1930, Antonio Gramsci wrote “The crisis consists precisely in the fact that the old world is dying and the new cannot yet be born; in the interregnum a great variety of morbid symptoms appear.” The political economic and biological relevance of Gramsci’s words and the conditions under which they were written extend well beyond historical parallel and literary metaphor. A crisis has metastasized from the micro-biological to the political economic. Now, neoliberalism is dying. In the interregnum, a great variety of morbid symptoms have appeared: social distancing, crisis policing, death camps, and pandemic labor. Of what disease are these symptoms? Not coronavirus. Carceral capitalism. Read More »

Facing a liquidity tsunami? Profit, risk, and discipline in emerging markets

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In April 2012, at the White House on her first visit to the United States since her election in 2010, Brazilian president Brazil Dilma Rousseff scolded advanced capitalist economies for unleashing a ‘tsunami de liquidez’, a ‘liquidity tsunami’, onto the developing world. The expression liquidity tsunami suggests that the sheer scale and volume of financial capital flows to developing and emerging markets had become an issue. It indicates that these quantities were overwhelming and could trigger devastating damages. 

This in itself is puzzling. Have we not been told by development economists and practitioners that financial capital flowing into the poorer areas of the world economy is something good and desirable? That one of the main causes of underdevelopment is actually the lack of capital and domestic savings in developing countries, and that this should be compensated with foreign capital inflows? Following this line of reasoning, vast swathes of financial capital flowing into emerging markets surely should be seen as a boon.

And there was some truth to that. The capital flow bonanza from the mid-2000s to late 2013 (coupled with the primary commodity super-cycle) did deliver some benefits to emerging markets. It helped governments fund themselves at better conditions. It provided the material basis for significant redistribution via a number of social policies. It contributed to economic growth performances much higher than over the previous decade. It also made a minority of people much richer in a very short period of time. In sum, the capital flow boom temporarily helped deliver some economic and social gains, and this was instrumental in consolidating social contracts between governments and their populations.Read More »

The Sacrificial Generations of Capitalism

Screenshot 2020-02-11 at 09.28.58In this article I remind readers about the existence of “sacrificial generations” within global capitalist history. By sacrificial generation I mean a group of people at a point in time that experiences suffering with the immanent or intentional effect of changing economic, political or social conditions, which are in turn disproportionately enjoyed by another group of people at a later period in time. I identify four areas in which there systematically exists sacrificial generations:  three stages of capitalist development (state formation, capitalist property rights transition and early industrialization) and a cyclical aspect of capitalism (Polanyian-Marxian cycles). It could also be argued that the future generations which would disproportionately experience the environmental costs of past and present generations’ consumption are “climatic sacrificial generations”, but this will not be explored. Read More »