When looking at the way contemporary global value chains/global production networks (GVCs/GPNs) and the articulations of globalised capital have been studied, it is clearly visible that the hegemonic power of Multinational Corporations (MNCs) has monopolised the empirical and theoretical analysis. Indeed, their ability to maintain control over the technological, financial and commercial flows through private-led governance has impacted most of the industrial development and underdevelopment of the Global South. Such footloose private operations have often caused undesired consequences such as eroded environmental standards, low wages and scrapped social protection rights. Governments have joined in a race to the bottom on fiscal and labour deregulations in order to attract foreign direct investment in exchange for low and semi-skilled jobs, resulting in very low fiscal revenue, low productivity, balance of payment imbalances and poor social outcomes.
The underpinning theory was that countries should follow their comparative advantages and let the market determine prices of labour (costs) and goods in order to be competitive in the world market and maximise returns. Yet, such losing game has been criticised since the start by heterodox development economists who widely denounced how theories and policies of development forgot the role of the state in history and in the present. In other words, public institutions have always played a key role not only in the quantitative making of capitalist accumulation, but also in its qualitative distributional and developmental outcomes.
Building upon the heritage of such scholarship, and in view of multiple and overwhelming ‘market failures’ in the global South and beyond, a new wave of Marxist-institutionalist inter-disciplinary literature spanning from Geography to International Economics and Finance has been trying to untangle the potential synergies between the public and the private domains by connecting the GVCs/GPNs and Developmental State approach.
In this debate, it has been emphasised that the state should be seen as a facilitator (i.e. assisting firms in smoothing market transactions); a regulator (combined with distributor to mitigate inequality and negative market externalities); a buyer (i.e. public procurement); a producer (i.e. state-owned enterprises) and a financer as a result of state-capital reconfigurations through sovereign wealth funds and development banks. Therefore, such functions should be foregrounded in analyses of development, because they are key to understanding developmental sources and processes within GVCs. Read More »
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 »
From Quantitative Easing to neo-mercantilist policies, the renewal of industrial policy, the multiplication of sovereign wealth funds and marketized state-owned enterprises, increased state participation in global value chains and global networks of corporate ownership, the state seems to be ‘back in business’ everywhere. This raises a series of questions:
- Are we witnessing a shift to state-led development? A return of ‘state capitalism’ under a globalised and financialized form? Are these processes challenging market ascendance and/or neoliberalism as a global development regime?
- Has there been a transformation of the developmental state and of the logics and instruments of ‘catch-up’ development? New tools of state intervention for industrial and innovation policy?
- What are the implications of the resurgence of ‘state-capital hybrids’ (state-sponsored investment funds, state-owned enterprises, development banks, etc.) as key actors in development? Are these transforming the global development finance architecture? What is the relationship between, on the one hand, state-owned, state-controlled, and state-directed capital, and on the other hand, private capital?
- What are the wider geopolitical and geo-economic shifts in which the rise of the new state capitalism is embedded? What is new about the recent ‘wave’ of state capitalism across the global economy? What are the strategic, structural/epochal, and contingent drivers of its emergence?
- What is the progressive potential of these developments, both in the global South and in the global North? What are the limits to the new state capitalism, and the various forms of resistance to it?
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By Ilias Alami and Adam Dixon
Recent transformations in the global economy have sparked renewed interest in the role of the state in capital accumulation. Such transformations include a ‘return’ to various forms of state-led development across the global South since the early 2000s (in China, Russia, and other large emerging economies), extensive state intervention following the 2008 global financial crisis in the global North, and the multiplication of various forms of state-capital entanglements such as sovereign wealth funds (SWFs) and state-owned enterprises (SOEs). For instance, the number of SWFs increased from 50 to 92 between 2005 and 2017, while assets under management grew to over $7.5 trillion worth of assets, which is more than hedge funds and private equity firms combined. According to a recent study, ‘SOEs generate approximately one tenth of world gross domestic product and represent approximately 20% of global equity market value’. SOEs now dwarf even the largest privately-owned transnational corporations, with PetroChina currently leading the list with a market value of more than $1 trillion. Three of the top five companies in the 2018 Fortune Global 500 are Chinese SOEs (State Grid, Sinopec Group, and China National Petroleum Corp). Significantly, these state-capital hybrids have also become increasingly integrated into transnational circuits of capital, including global networks of production, trade, finance, infrastructure and corporate ownership. Does this renewed state activism – and its remarkably outward orientation – indicate a changing role of the state in capital accumulation and the emergence of new political geographies of capital?Read More »