Who will Benefit from the Bitcoinization of El Salvador?

On 8 June, El Salvador’s Legislative Assembly voted to pass the Ley Bitcoin(Bitcoin Law), with a majority vote of 62 out of 84. The legislation was presented to the Assembly days after President Nayib Bukele announced his intention to make bitcoin legal tender, speaking via video broadcast to the Bitcoin 2021 Conference in Miami. Effective from 7 September, all businesses in the country will be required to accept bitcoin alongside the United States dollar, El Salvador’s current currency. Since the bill’s passing, legislators in Panama and financiers in Mexico have expressed interest in recognizing bitcoin as legal tender.

Rather than China’s digital renminbi or Venezuela’s petro, El Salvador will not be pursing the creation of its own cryptocurrency. Bukele is adamant that at this stage Bitcoin will not make up any of the nation’s reserves, held in the Central Reserve Bank of El Salvador. Rather, a trust in the country’s development bank (BANDESAL) worth US $150 million will guarantee convertibility to dollars as a safeguard against bitcoin’s volatility. In doing so, the BANDESAL trust would make sure that the price of a commodity does not widely fluctuate between point of purchase and completion of transaction.

In Bukele’s address he made mention of the lack of financial inclusion for Salvadorans being a motivation for the law. In a country where informal employment makes up around 70% of the labor force, anonymous peer-to-peer cash transfers without the formal requirements of a bank account or the high charges of Western Union make sense as an alternative. Bukele has also expressed his hope that the move will make El Salvador “less dependent” on the United States, given that dollarization ceded monetary independence to the Federal Reserve. But given the increasing centralization of Bitcoin and its reliance on big tech money, it is far more likely that bitcoinization will merely make El Salvador dependent on a different section of US capital.

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Struggles Over Value: Suppression of locally-led capital accumulation in the Congo

By Ben Radley and Sara Geenen

Over the last few decades, African governments have liberalised and privatised their mining industries, attracting significant foreign direct investment. Transnational corporations (TNCs) have become the dominant forces. Their en masse arrival across the continent has been accompanied by the displacement and marginalisation of artisanal and small-scale mining (ASM). This has been a political process not just to create value, but to transfer value to foreign firms. In this same process, particular production modes are devalued. According to Jennifer Bair and Marion Werner (2011), this is a deliberate process linked to ‘everyday practices and struggles over value’, whereby certain forms and logics of value creation are prioritised and asserted over others.

Yet a consideration or even acknowledgement of these everyday practices and struggles is generally absent from the Global Value Chain (GVC) analysis which dominates the African mining literature (especially the more influential policy papers and flagship development agency reports). This literature is mainly preoccupied with how African firms can integrate into and ‘upgrade’ within TNC-led industrial mining GVCs. It remains largely blind to a consideration of how and from whom value is transferred when recently established TNC-led mines interact with pre-existing and more locally-anchored ASM economies.

Locally driven mechanisation and capital accumulation in the Congo (Sara Geenen).

In our recently published research in ROAPE’s journal looking at the case of South Kivu Province in the eastern Democratic Republic of the Congo (DRC), we redress this imbalance by documenting precisely these ‘everyday practices and struggles over value’. We demonstrate how a coalition between foreign corporate capital and the Congolese state has marginalised and held back locally-led processes of technological assimilation, capital formation and mechanisation in ASM. By so doing, we direct attention towards the developmental potential of domestically embedded networks of African mining production, and how these networks are disrupted by incoming TNCs.

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Neoliberalism on Trial: Jokowi 2.0, Omnibus Bill and the New Capital City

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When the majority of Southeast Asian countries began to enact more aggressive responses to the novel coronavirus, Indonesia turned a deaf ear to virus mitigation efforts. As it had no confirmed cases of the coronavirus as of February, Joko Widodo’s (Jokowi) government instead kept pushing extensive economic reform agendas. It submitted a 1,028-page Job Creation Omnibus Bill on 12 February, calling the bill the country’s third great structural reform program after the  1998 International Monetary Fund’s (IMF) Letter of Intent and the 1967 Foreign Direct Investment Law. Despite criticism from the opposition, the president insisted on this neoliberal agenda, claiming that the objective of the bill is to promote more foreign direct investment (FDI) in the manufacturing sector and thus create more jobs. 

What effects do neoliberal policies have on political and economic life in Indonesia and state-capital relations in particular? This blog post follows David Harvey (2006) in taking a historical-geographical approach to investigate this question, with a focus on policies put in place in the current president Jokowi’s second term. For many observers, such a bold move to deregulate the economy signals the resurgence of state-led development in a new form. Put differently, what this article would like to argue is that deregulation, an all-encompassing hegemonic ideology rather than simply a policy, has become some sort of ‘banner to unite under’ for the ruling capitalist class in Indonesia. Read More »

Should the African lion learn from the Asian tigers? A comparison of FDI-oriented industrial policy in Ethiopia, South Korea and Taiwan

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The Huajian shoe factory in the Eastern Industrial Zone in Ethiopia. Photo: UNIDO.

Ethiopia is being hailed as one of the most successful growth stories in Africa. Because of the country’s rapid economic growth, the high degree of state intervention in the economy, and the state’s focus on industrialization, people have started to compare Ethiopia to the Asian ‘tigers’ (Aglionby, 2017; Clapham, 2018; De Waal, 2013, Hauge and Chang, 2019; Oqubay, 2015) four countries in East Asia (Hong Kong, Singapore, South Korea and Taiwan) that underwent rapid industrialization and maintained exceptionally high growth rates in the post-WWII era.

However, this emerging literature on Ethiopia-Asia comparisons has not yet sufficiently addressed one of the most important aspects of Ethiopia’s industrialization strategy — the attraction of foreign direct investments (FDI) into the manufacturing sector.

The rationale of my recently published article was this gap in the literature. In it, I ask the question: Should the African lion learn from the Asian tigers with respect to FDI-oriented industrial policy? 

In short, my answer is yes. While Ethiopia’s policies are bringing about short-term economic success and showing promise for further industrialization, the state could arguably bargain harder with foreign investors, like it did in South Korea and Taiwan.Read More »

Hirschman’s Linkages: Passé in the Age of Global Production Sharing?

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How does economic development happen? After World War II, many development economists rose to prominence, such as Paul Rosenstein-Rodan (the big push), Arthur Lewis (the dual-sector model), Walter Rostow (the linear stages of growth) and Albert Hirschman (unbalanced growth and linkages). Given the continued importance of industrial policy, it is particularly worthwhile to revisit the idea of forward and backward linkages — one of the central tenets of development thinking pioneered by Hirschman.Read More »

Rethinking the Failures of Mining Industrialisation in the African Periphery

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The remains of one of SOMINKI’s industrial gold mines (author photo).

The World Bank interpreted the failure of mineral extraction to drive structural transformation in the early decades of African Independence as due to badly managed state-owned enterprises (SOEs), excessive state intervention in the economy, and government corruption. To right these wrongs, since the 1980s, the Bank has loaned hundreds of millions of dollars to the governments of mineral-rich (and mostly low-income) African countries to privatise and liberalise their mining sectors. Spurred on by the most recent commodity super-cycle beginning in the late 1990s, foreign direct investment poured in, and for many low-income African countries today, “the mining sector represents one of the most crucial sources of investment and income in their economies” (Farole and Winkler 2014: 177). A major theoretical assumption underpinning this process has been a belief in the superior expertise and efficiency of experienced transnational corporations (TNCs) compared to corrupt and mismanaged SOEs. In this post, I unpack and question the validity of this assumption, by drawing on some of the findings from my doctoral thesis on mining reindustrialisation in South Kivu Province of the Democratic Republic of the Congo (DRC).     Read More »

From Addis to Davos: International Development Finance gets Conspicuous

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The theme of the 2018 World Economic Forum was, “Creating a Shared Future in a Fractured World.” Its six richest attendees each boasted an estimated net worth of $5.2 billion or more, or the same amount as the total burden of Somalia’s outstanding debt, which, amid the splendor of the event, Somali Prime Minister Hassan Ali Khayre  met with IMF Managing Director Christine Lagarde to discuss clearing. In this era of extreme global inequality, it is estimated that the United Nations agenda of seventeen sustainable development goals (SDGs) known as Agenda 2030, will require 4.5 trillion dollars of investment per year to be realized, or more than twice the amount expected to be available from traditional official development assistance (ODA) alone. Due to the increasing concentration of private wealth in the global economy, discussions around development finance have focused on private sector engagement, rather than more traditional, ODA from predominantly Western donor governments and multilateral institutions.Read More »

Lessons from Kaundanomics

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A story is told that a few years after independence in 1964, Kenneth Kaunda, Zambia’s first president, visited one of the mines in the mineral rich Copperbelt Province and was immediately struck by the complete absence of Zambians in senior management positions. He proceeded to ask the mine owners as to when they reasonably thought Zambians would be ready to occupy positions of influence within the country’s mining sector. With straight faces, the mine owners responded “not before 2003, Mr. President.”Read More »