Global Finance Capital and Third World Debt
KeywordsFinancial system Empire Money Monetary system Debt Neocolonialism Capital flows Speculative finance Financial centers Financial crises
This essay provides a historical geographical political economy of the deep connection between global capitalist finance, global flows of capital in the form of money, and modern imperialism. It argues that the money-power of capital to appropriate living labor and extra-human natures has expressed itself in particular violent ways in the spaces of the global capitalist economy successively referred to as the peripheries, the colonies, the Third World, and the Global South. The essay suggests that a crucial factor of explanation for the violence of the money-power of capital in those spaces is that they have retained a subordinate positionality in the network of space and power relations within which money-capital flows. This has been largely due to a multitude of imperialist policies and practices on the part of advanced capitalist economies and powerful agents and institutions located within them.
The 1980s Third World debt crisis was a painful reminder of the tight link between the operations of capitalist finance, global flows of capital in the form of money, and modern imperialism. As is well known, the “resolution” of the crisis entailed the brutal disciplining of Third World states via the imperialist imposition of structural adjustment plans designed by the Bretton Woods Institutions (the International Monetary Fund and the World Bank), large private commercial banks, and advanced capitalist economies (the Paris Club of creditors), significantly contributing to the extension and deepening of capitalist property relations in the Third World. While often welcomed by local ruling elites, the policy prescriptions largely benefitted transnational capitalist firms, mining and extractive companies, global banks, and the interests of advanced capitalist countries. The consequences in terms of social and human costs, socio-ecological destruction, and globally organized dispossession across much of the Third World are well documented (e.g., Saad-Filho and Johnston 2005).
There is no doubt that much has changed in the global capitalist economy since this dramatic historical episode, including in terms of the organization and workings of capitalist finance, global patterns of financial capital flows to the Global South, and the political, institutional, and regulatory arrangements that underpin them. Developing economies have received extremely large volumes of global financial flows since the early 2000s, reaching a high of USD12 trillion (an equivalent of over 20% of world GDP) in 2007 (IMF 2016a: 5). Financial markets in emerging capitalist economies have become increasingly open, deep, liquid, but also well-supervised and regulated. Financial centers such as São Paulo, Johannesburg, Shanghai, Mexico City, Istanbul, and Beijing have become deeply integrated in the global financial system and are now key sites of financial innovation, particularly at the regional level. Moreover, growing volumes of financial capital is now flowing into so-called “frontier” markets (countries in this group include Bangladesh, Bolivia, Cote d’Ivoire, Ghana, Kenya, Mongolia, Mozambique, Nigeria, Papua New Guinea, Senegal, Tanzania, Uganda, Vietnam, and Zambia (IMF 2016b: 24)). According to Bloomberg figures, stock market capitalization in frontier market, driven by global financial inflows, has reached more than USD700 billion in 2017. The global financial architecture has also experienced significant transformations (Grabel 2018). There has been a growing participation and assertiveness of emerging economies in multilateral financial governance (for instance, in the G20). Emerging economies have designed a variety of bilateral, subregional, and regional financial and monetary mechanisms, including currency swaps, reserve pooling arrangements, credit lines, bilateral aid, and development finance, often with the explicit aim to seek independence from the IMF (see Alami 2018a). They have also expanded the capacities of their national development banks, many of which now dwarf the volume of lending of the World Bank and regional multilateral development banks. As a whole, then, and though narratives about “the decline of the West” and “the rise of the rest” are often largely exaggerated and the recent hype around the BRICS (Brazil, Russia, India, China, South Africa) and other groupings of so-called “emerging” markets has gradually died down, it is clear that developing economies across the Global South play an increasingly important role in the reproduction of the financial world market (Marois 2012).
And yet, despite those remarkable geographical transformations, there is also still much in common with the 1980s Third World debt crisis, both in terms of the specific conditions and modalities that led to its buildup and in terms of the power relations involved in its resolution. In June 2018, the IMF returned to Argentina, despite the fact that its policy “recommendations” in the early 2000s triggered one of the worst capitalist crises that the country experienced. Argentina is currently implementing austerity and structural reforms to restore the confidence of international investors. A couple of years earlier, a US court forced Argentina to pay billions of dollars to its creditors. This was because six hedge funds (based in tax heavens and world financial centers such as New York and London and representing only 7% of Argentina’s creditors) had refused the proposed deal to restructure Argentinian sovereign debt and sued Argentina in New York federal courts. The Argentinian state agreed to pay billions in order to regain access to global financial markets. In 2018, the IMF also returned to a number of developing countries including Haiti, Guinea, and Egypt. In exchange for emergency lines of credit, it forced governments to lift energy subsidies – despite the fact that those are vital for the daily life of much of the population – and to privatize state-owned companies. The social unrest and spontaneous riots that ensued led to the death of dozens of people. The Congo republic is currently negotiating a deal with the IMF, which has insisted that its financial package will only be delivered “once compliance with all relevant IMF policies has been established” (quoted in Reuters 2018, emphasis added). Critical commentators have denounced a return to “classic forms of conditionalities” (CADTM 2018). In Puerto Rico, which declared bankruptcy in May 2018, a draconian austerity plan is being imposed by a nonelected US-appointed fiscal control board, to the benefits of the large US mutual and hedge funds that hold much of the debt and despite the fact that the territory was recently devastated by two hurricanes. Emerging economies have not been immune either: many have recently experienced severe financial issues associated with volatile global financial capital flows, often dramatically worsening domestic sociopolitical crises (for instance, in Brazil, South Africa, and Ukraine). Due to large-scale and sustained capital flight from Turkey, the Turkish lira fell to a record low in August 2018. Turkey is in the midst of its worst financial crisis since the early 2000s. This poses risks of wider financial contagion to other emerging markets – bond markets in South Africa and Mexico have already been affected – but also to other developing economies. Indeed, developing economies across the income range have recently experienced a rapid buildup of external debt, partly due to economic difficulties associated with the end of the primary commodity super-cycle (since 2013 or so), but also due to the strong international investors’ demand for developing countries’ debt: in a context of abundant international liquidity fueled by quantitative easing programs in advanced capitalist economies, international investors have been searching for high yields, and financial capital flows have poured in developing economies. There are concerns that mounting levels of external debt could lead to a generalized debt crisis across the developing world, with potential consequences for global systemic financial stability (IMF 2018).
This raises a series of questions: What makes developing and emerging economies particularly vulnerable to the movement of money-capital across the world market? What makes financial crises so recurrent and violent? What is it about the operations of capitalist finance that continues to reproduce deeply unequal power relations between national states across the world market, at the expense of developing and emerging economies? How and why is financial fragility and vulnerability exported to those spaces of the global capitalist economy? This essay suggests that the answer to those questions lies in what Patel and Moore have aptly called the deep entanglement of “the rhythms of world money and world power” (2017: 96). Put differently, this essay is concerned with the remarkable historical continuity of capitalist finance as a key vector of imperialism. It explores the mechanisms through which the fundamental relation between the operations of capitalist finance, the global flow of capital in the form of money, and modern imperialism has been historically entrenched and reproduced. In order to do so, the essay provides a historical geographical political economy of the entanglement of world money and world power. Historical, in the sense that it takes a longue durée approach: it provides an overview of the various historical cycles of global financial capital flows to the spaces of the global capitalist economy successively called peripheries, the colonies, the Third World, and the Global South, since the early days of the world market in the sixteenth century to the contemporary period. It examines their changing drivers, patterns, composition, and crisis dynamics, with a focus on the spaces at the receiving end of those flows. The analysis if also geographical, inasmuch as it is concerned with how the spatial-territorial dynamics of expansion/contraction of capitalist finance, the geographical organization of the circuits of financial capital (the financial system), and the functional/spatial configuration of convertibility between different currencies (the global monetary system), has shaped changing geographical patterns of global financial capital flows to developing economies. The historical geographical political economy is grounded in the Marxian theory of money and the central role it plays in capitalist social relations of production. This is absolutely fundamental for the purpose of this essay, because at the most basic level, the global financial system is about “the assemblage and dispensation of money-power” (Harvey 2010: 52). As Marx was at pain to emphasize, the self-movement of capital in the form of money (thereafter, money-capital) represents “the common capital of a class”; it expresses the disciplinary power of “capital-in-general” (Marx 1894/1991; Clarke 1988). Indeed, it embodies the essential social relation of power and inequality between those who possess money and those forced to sell their labor power in order to get access to money and reproduce themselves. Money, or rather the lack thereof, endlessly coerces workers back into the act of market exchange and compels them to sell their alienated labor (Hampton 2003). Consequently, despite its appearance as a neutral object, money is the most preeminent, abstract, and “autonomous” social incarnation of class power (Clarke 1988; McNally 2014). When money is converted into capital, it stops being a “rational means to satisfying social needs” and becomes a forceful and “irrational” general form of social regulation, subjecting social reproduction to the discipline and logic of capital, i.e., to the money-power of capital to appropriate surplus labor time and extra-human natures such as land, natural resources, and biodiversity (Clarke 2003; Arboleda 2017). Indeed, “inevitably, payments to banks [and other financial institutions] happen by exploiting workers and appropriating the rest of nature’s work as much as possible” (Patel and Moore 2017: 98). Adopting such an approach, the essay shows, is crucial to understand the operations of capitalist finance, patterns of money-capital flows, and the global relations of power, value, exploitation, and dispossession that underpin them.
The central argument developed in the essay is the following: the money-power of capital to appropriate living labor and extra-human natures has expressed itself in particularly violent ways in the spaces of the global capitalist economy successively referred to as the peripheries, the colonies, the Third World, and the Global South. The essay suggests that a crucial factor of explanation – though it is certainly not the only one – for the violence of the money-power of capital in those spaces is that they have retained a subordinate positionality in the network of space and power relations within which money-capital flows or in what have been called the “relational geographies of money-power” (Alami 2018b). Importantly, spaces of the Global South have remained in a subordinate positionality in those geographies because of the weakness of capital accumulation (for instance, in terms of the heavy dependence of some developing economies on primary commodity exports to the world market), but also because of a multitude of imperialist policies and practices on the part of advanced capitalist economies and powerful agents and institutions located within them. The essay shows that there has been nothing natural about the concrete and distinct geographies of money-power, which have been socially constructed and enforced in a variety of ways that benefit core advanced capitalist economies. As a result, the subordinate positionality of developing economies has been a phenomenon of remarkable historical continuity. Those arguments are substantiated throughout the essay by an examination of seven historical periods and cycles of money-capital flows to the developing world. The essay concludes by discussing questions of strategic-political organizing for emancipatory struggles.
From Sixteenth-Century Merchant Capital in the “Age of Discoveries” to 19th Industrial Capital
The early sixteenth century saw “the emergence of capitalism as a system of accumulation on a world scale” (Arrighi 1994/2010: 33). The process started with extremely vast and coerced transfers of wealth and resources across the globe. Expeditions led by European “explorers” and motivated by trade and treasure-seeking initiated the brutal conquest of the New Worlds by Portugal and Spain. This allowed the creation of gigantic territorial empires. In Asia and Oceania, sea trade monopoly by the Portuguese and then the Dutch was the main source of wealth extraction. In Latin America, wealth in the form of precious metals was savagely plundered and transferred to Europe, where they were used as commodity moneys. Imperial colonies also became a privileged outlet for Spanish and Portuguese exports (Dunn 2009). Those waves of money and capital flows during the early days of capital colonial expansion, notably on the part of commercial capital, set up important “path-dependence and locational lock-in” that importantly shaped subsequent cycles of money and capital flows (Martin 1999).
From the sixteenth to the eighteenth century, during what is often termed the mercantilist era, international capital exports were performed by state-sponsored merchant capital with the double objective of supporting trade activities (establishing outposts; setting up banking, insurance, and financial services; ship maintenance) and furthering strategic economic and political goals (Dunning and Lundan 2008). The main actors of these investments were colonial merchants from Holland, Britain, France, Spain, Portugal, and the American colonies. Famous examples of joint-stock companies created at the time by wealthy merchant capitalists include the British East India Company, the Dutch East India Company, and the Royal African Company. These companies were granted foreign trade monopolies in particular regions of the world by royal charter. A significant part of these international investments was to develop overseas trade backed by naval power and to bolster colonization and land development – particularly in the Americas – with the development of plantations (Arrighi 1994/2010). The so-called transatlantic slave trade epitomized this period of large flows of capital, labor, and wealth, organized and controlled by merchant capitalists with the support of imperial powers. The vast accumulation of wealth associated with imperial dispossession (what Marx refers to as “primitive accumulation”) contributed, though not systematically, to the development of capitalism in some of the metropolitan countries, particularly Britain. As Marx put it:
The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalized the rosy dawn of the era of capitalist production. (1863/1981: 905)
The eighteenth to nineteenth centuries saw the forceful incorporation of vast new regions into the world market and its division of labor, such as the Russian empire, the Ottoman Empire, India, and West Africa. Meanwhile, declining profitability due to overaccumulated commercial capital triggered an increasing penetration of capital into the sphere of production (Clarke 1988). This paved the way for the industrial revolution and brought about changes in the motivations for capital exports, not least because industrial capitalists became important actors. Global capital flows became driven by the need to secure access to raw materials and conquer/protect foreign markets (Dunning and Lundan 2008). For instance, the development of textile manufacturing in Britain heavily relied on the colonial empire as both sources of raw materials (imported cotton from the American colonies and Egypt) and markets to export surplus commodity production (Dunn 2009). As such, global capital flows were strongly associated with the politics of empire building. Britain, the leader of world trade, rapidly became the main capital exporter, as it recycled the large liquidities accumulated as a result of the industrial revolution (Dunning and Lundan 2008). Powerful merchant banks such as Rothschild, soon followed by joint-stock banks, were managing world trade and finance from London, which hosted international capital markets (Stallings 1987). Most money-capital flows from Britain consisted in portfolio investments (bonds and debt instruments) primarily in railway, shipping, and public utilities, predominantly in European countries and white settler colonies (Bloomfield 1968).
In the 1820s Latin America received large money-capital inflows, as newly independent states sought financing in international capital markets (Marichal 1989). State-issued bonds denominated in foreign “hard” currency (often sterling) on the London Royal Exchange. On the demand side, investors in London capital markets (particularly London banking houses) were highly tempted to invest in the gold and silver mines, recently freed from Spanish and Portuguese control. Latin American sovereign debts soared: “In this irrationally exuberant climate, Latin American states raised more than 20 million pounds during 1822–1825” (Reinhart and Rogoff 2009: 93). This ended up in these states almost all defaulting in 1826–1828, following a financial crisis in Britain and resulting in their exclusion from international capital markets until the 1850s (Marichal 1989). A second wave of money-capital flows happened in 1850–1870, with the return of Latin American states to international capital markets in the context of rapid world trade expansion. The stock of British investments in the region soared to 179 million pounds (Della Paolera and Taylor 2012). These developments further accelerated during 1870–1914, a period often dubbed the “first wave of financial globalization.”
“High Imperialism” and the First Wave of Financial Globalization
The period 1870–1914 saw an unprecedented surge in world trade and international capital mobility. The stock of foreign assets grew from 7% to about 20% of world GDP (Obstfeld and Taylor 2004: 55). A series of innovations in the realms of transport (especially railway and steamship, triggering a sharp decline in both land and maritime transport costs) and communications (such as the invention of the telegraph) provided the technical backdrop for rapid growth in world trade and increasing global financial market integration. The growth of trade and money-capital flows was also facilitated by the almost complete absence of capital controls (Eichengreen 2008).
The continuous industrialization process in core capitalist countries demanded increasing amounts of raw materials, minerals, and agricultural products such as tea, cocoa, coffee, tobacco, rubber, tropical fruits, sugar, and meat (Dunning and Lundan 2008: 175). Capital was therefore invested in both the “direct” exploitation of these resources (in mining, plantations, farming) and the transport infrastructure (ports, railway, bridges, and other facilities) to enhance the flow of the exploited resources toward the world market (Bloomfield 1968). According to Dunning and Lundan, “about 55% of the global foreign direct investment stake in 1914 was directed to the primary product sector, 20% to railroads, 15% to manufacturing activities, and 10% to trade, distribution, public utilities and banking” (2008: 174). The new forms of capitalist organization that emerged to manage these foreign investments and operations were the forefathers of the modern transnational corporation such as “…Colt, Singer, Coca-Cola, Gillette, Heinz, Ford, United Fruit …Siemens, Bayer, Bosch” (Dunn 2009: 120–121).
The direction of money-capital flows changed in the 1880s, in part due to a rise in tariff barriers and other protectionist measures in industrializing countries (European countries, the USA, and Japan) (Hobsbawm 1999; Dunn 2009). This surge in protectionism, coupled with a lack of economic dynamism in the core capitalist countries due to a major capitalist crisis (the first Great Depression 1876–1896) and to the growing power of the organized labor movement, pushed Britain to redirect part of its trade and capital exports to the peripheries and particularly to the regions under its political and economic control (both formal and informal empires). Money-capital flows further expanded during the 15 years that followed (1897–1913) as Britain and other core capitalist countries embarked on a new phase of imperialism (mainly in the form of colonization), leading to the “division of the world among the great powers” (Lenin 1917). Major capital exporters in this period were Britain, the USA, France, and Germany, though the rise of Paris, Berlin, and New York as important financial centers in the early twentieth century did not threaten British financial hegemony. By 1913, “Britain owned perhaps £4,000 million worth abroad, as against less than £5,500 million owned by France, Germany, Belgium, Holland and the USA put together” (Hobsbawm 1999: 125).
While money-capital flows to the peripheries were highly geographically concentrated (according to Bloomfield (1968), as much as 75% of Britain’s stock of foreign investments in 1913 was concentrated in the USA, Canada, Australia, New Zealand, India, South Africa, and Argentina), Latin America attracted growing volumes of flows in the 1880–1890s. Investment stocks reached unprecedented levels:
British investments in the region were £426 million, more than double the 1880 total. Of this, £194 million sat in government bonds, now for the first time surpassed by a slightly higher amount, £231 million, in securities issued by private enterprises. (Della Paolera and Taylor 2012: 4)
Thirty-seven percent of total flows went to Argentina, 17% to Mexico, 14% to Brazil, 7% to Chile, and 5% to Uruguay (Taylor 2003). Much of those flows were driven by speculative operations, resulting in growing difficulties by national monetary authorities in debtor countries to maintain monetary stability and service their debt. Those countries were hit by severe financial crises, with consequences much worse than previous ones, as banking and financial systems in these countries had significantly grown since the 1880s, particularly in Argentina and Brazil. The crisis in Argentina in the 1890s was “arguably the world’s first example of a modern ‘emerging market’ crisis, combining debt crisis, bank collapses, maturity and currency mismatches, and contagion” (Della Paolera and Taylor 2012: 5). Money-capital exports from France and Germany remained largely directed to Europe, but flows to their colonies (especially in Africa) rapidly increased as well in the early 1900s. Overall, this early period of financial globalization was characterized by a remarkable integration of international capital markets: “Prior to World War One, a vibrant, free-wheeling [sic] capital market linked financial centers in Europe, the Western Hemisphere, Oceania, Africa, and the Far East. A nineteenth-century reader of The Economist newspaper could track investments in American railroads, South African goldmines, Egyptian government debt, Peruvian guano, and much more” (Obstfeld and Taylor 2004: 16).
Importantly, this process of global financial integration was facilitated by a particular functional/spatial configuration of convertibility between different currencies that deserves further elaboration. It was underpinned by the establishment of the first global monetary system, the classical gold standard, where currencies were convertible into predetermined quantities of gold. The system, which was first adopted in 1821 in Britain and some of its colonies (Ireland, Mauritius, New Zealand, and South Africa), was a “mechanism of class control” (Hampton 2006: 147). Indeed, by linking the quantity of money in circulation to the amount of gold hoarded in the coffers of the central bank (and then to the total global supply of gold when the gold standard became internationalized), the gold standard ensured that economic adjustment was guided by the rule of money in its most abstract form. Its purpose was to push the costs of adjustment onto labor, with wages, employment, and working-class consumption and living standards being the variables of adjustment (Kettell 2004; Hampton 2006).
The gold standard then internationalized. By the 1880s, most European capitalist economies and large chunks of their empires had adopted it. This led to the establishment of a global monetary system characterized by fixed exchange rates (currencies were pegged to the same metal standard) and high capital mobility: exchange rates were determined by international private flows of gold and credit (Hampton 2006). The internationalization of the gold standard was gradual and negotiated, but underpinned by the power of British capital and the British state (Clarke 1988). This is because Britain was the leading power in both finance and international trade. London was the dominant international capital market, and it provided clearing facilities for sterling-denominated bills of exchange (mainly the Bill of London) that served as the main means of payment and purchase in international trade. Sterling became the main reserve currency: at the end of the nineteenth century, sterling accounted for 40% of foreign exchange reserves (Eichengreen 2008). In that context the British state and the Bank of England actively managed the internationalization of the gold standard, using a mix of cooperation with metropolitan capitalist economies and imperialism, with the double objective of enforcing the money-power of capital in the world market while maintaining sound money at home. Put differently, the whole international financial system was managed with the overall purpose of maintaining monetary stability and limiting value destruction in its core.
Consequently, the relative overall stability of the international financial system and its ability to weather crises over the period masked considerable geographical unevenness. While financial stability was relatively successfully maintained in the core, the costs of adjustment and capital devaluation were disproportionally borne by the peripheries. The export of financial fragility, a result of active policies by Britain and to a lesser extent France, Germany, and the USA, provided a “buffer” for core economies (Vasudevan 2009: 479). For instance, Britain imposed the “colonial sterling exchange standard” in its colonies and informal empire, in order to prevent the outflow of gold from Britain to the regions with which it carried trade deficits (Vasudevan 2009; Knafo 2013). Colonies had to fully back their currencies with reserves in pound sterling. In order to convert their currencies into gold, they were forced to first convert them into sterling. A portion of these sterling reserves had to be placed in London (Berlin and Paris for the other imperialist powers) under the form of British treasury bonds and bank deposits (De Cecco 1984; Eichengreen 2008). British financial institutions could then recycle these liquidities through money-capital exports to countries on the peripheries, providing them liquidity to buy capital goods from British capitalists and generating considerable income from interests and dividends for Britain. Furthermore, during crises, and thanks to its privileged position of main global creditor and capital exporter, Britain could shift the brunt of devaluation costs to the peripheries by withdrawing British deposits and reducing loans and investments (“pulling capital away”) (Gallarotti 1995: 38; Vasudevan 2009). The Bank of England was also able to direct international movements of gold and credit by manipulating its base interest rate (De Cecco 1984). Increasing the base rate could attract capital flows from the peripheries and trigger liquidity crises in countries that had otherwise balanced accounts and/or strong fiscal positions. These imperialist practices were relentlessly implemented, in part because of the shared view among core capitalist economies that “problems at the periphery would not threaten systemic stability” (Eichengreen 2008: 38).
In sum, while the international gold standard enforced the disciplinary money-power of capital over labor and extra-human nature in its most abstract form, the brutal adjustment mechanism was highly asymmetrical, and its costs were unevenly spatially distributed (Vernengo 2003). The very money-capital flows necessary to preserve stability in a few core capitalist countries and their financial centers (London, Paris, Berlin, and New York) were highly destabilizing to the peripheries (Gallarotti 1995). The following figures clearly illustrate this unevenness. During the period, core capitalist countries were hit by seven financial crises, while countries on the peripheries experienced 25 crises (Bordo and Eichengreen 2002). Britain maintained the gold standard for more than a century, other core capitalist economies for about 39 years on average, and countries on the peripheries about 14 years only (Vernengo 2003: 16). The financial history of poorer countries during the gold standard era was a history of volatile capital flows, financial instability, monetary crises, and repeated convertibility suspension. This was a key manifestation of the deep entanglement of capitalist finance and modern imperialism.
Hegemonic Decline, Capitalist Crisis, and the Fall of the Gold Standard
Global money-capital flows to the peripheries resumed in the early 1920s, led by the growing financial power of the USA and its booming capital markets (Eichengreen 2008: 67). After WWI, the USA emerged as the new global creditor, and Britain financial and commercial hegemony was increasingly eroded (Hobsbawm 1999). International banking gradually moved from London to New York (Marichal 1989). The international status of sterling was seriously challenged by the US dollar, which became the main reserve currency in the 1920s. US capital exports expanded first in nearby regions such as Central America and the Caribbean and then further south. US banks gained influence in the region at the expense of British banks (Stallings 1987). The period marked the beginning of US imperialism in Latin America and the so-called dollar diplomacy, whereby banks’ activities became closely linked to US imperialist policy. More systematically than British imperialism in its informal empire, the central objective of US imperialism was to “[establish] the political conditions for capital accumulation in what was now defined as the American sphere of influence” (Panitch and Gindin 2012: 39). Increasing volumes of US capital were invested in railroads, plantations, mining, and oil extraction (Stallings 1987).
The monetary system that underpinned this expansion was the result of a joint endeavor of the USA and Britain to establish a new international gold standard, to make sure that states were submitted to the discipline of gold, in a context of growing popular unrest, labor militancy, and trade unionism, and the rise of parliamentary social democratic parties in core capitalist countries’ domestic politics (Panitch and Gindin 2012; Eichengreen 2008). The system established in the 1920s was a gold-exchange standard, as countries held their reserves in gold and in foreign exchange (mainly dollar and sterling), reflecting the previously mentioned reconfigurations in the hierarchy of the world market. The system performed poorly during its short existence, as gold and money-capital flows ended up worsening macroeconomic global imbalances instead of adjusting them (Eichengreen 2008). The global capitalist crisis of overaccumulation of 1929 sounded its death knell. The monetary regime was first suspended in the (more financially vulnerable) peripheries in 1929. Countries in the peripheries were severely hit by deflationary crises when capital inflows suddenly stopped and the revenues from primary commodity exports fell due to the collapse of world trade. Several states (Argentina, Brazil, Chile, Paraguay, Peru, Venezuela, Uruguay, Australia, Canada, and New Zealand) suspended the gold standard in order to service their debt and tame severe deflationary crises. Other countries soon followed, resulting in the complete disintegration of the gold standard at the peripheries, which in turn “further undermined its stability at the center” (Eichengreen 2008: 70). In core capitalist countries, the gold standard also proved particularly unfit for crisis management, aggravating deflationary spirals. Investors lost confidence in states’ capacity to maintain the value of their moneys and sought refuge in gold (ibid). Britain abandoned the gold standard in late 1931, effectively marking the collapse of the international monetary regime (Panitch and Gindin 2012).
This meant a return to manage floating exchange rates, with the widespread deployment of exchange and capital controls and a collapse in global capital flows: the stock of foreign assets fell from about 20% of world GDP in 1914 to about 8% in 1930, 11% in 1938, and 5% in 1945 (Obstfeld and Taylor 2004: 55). This had far-reaching implications in terms of the geographical distribution of financial risk and adjustment costs. Indeed, Vasudevan (2008) interestingly remarks that during this period (1919–1939) of “hegemonic decline, war, and economic instability in the center, the incidence of crisis in countries in the periphery was less than that in the core …[as] the imperial countries lost much of their control over their possessions, the absence of the safety valve that the countries of the periphery provided led to the concentration of financial crises in the countries of the capitalist core itself.”
Postwar State-Led Development and the Bretton Woods System
The postwar period saw the establishment of a system that aimed at facilitating world trade and international investment, which were deemed essential to restore accumulation on a world scale after a devastating world war. The Bretton Woods agreement, signed in 1944, was a coordinated attempt (though largely under the hegemonic leadership of the USA) to establish a framework for the regulation of money and cross-border money-capital flows that allowed significant scope for domestic economic policy-making. More precisely, it established a gold-dollar exchange standard: a fixed but adjustable exchange rate regime, whereby currencies were convertible into US dollar at a specific parity and the dollar was in turn convertible into gold at the defined rate of 35 dollars per ounce of gold. As such, the USA could create money that would flow into the world market, facilitating trade and rapid capital accumulation, while huge gold reserves allowed maintaining it “as good as gold” in value terms. The framework was complemented by the creation of international financial institutions to manage international monetary affairs: the IMF was created in order to correct imbalances by providing short-term liquidity during balance-of-payment crises and overseeing exchange rate adjustments. The World Bank was set up to fund longer-term development projects, first in the context of Europe reconstruction and then in what became the Third World.
This particular functional/spatial arrangement of convertibility between different currencies was associated with a change in the geographical pattern and composition of global capital flows. Two important trends can be identified. Firstly, within the framework of the Marshall Plan, a significant component of these flows were US government loans (recycled trade surpluses, denominated in dollar) to Western Europe and Japan and then increasingly to Third World countries (Soederberg 2005). Contrarily to previous waves of loans to the peripheries, the power of imposing sanctions and incentives was mediated by the IMF and the World Bank (ibid). Secondly, private capital flows mainly consisted in foreign direct investment. As Swyngedouw puts it, “the spatial expansion of commodity production became the preferred ‘spatial fix’ in which financial capital was intimately link with the need to transnationalize commodity production and exchange” (1992: 44). Indeed, by insuring relatively stable foreign exchange markets, the global monetary regime deterred “speculative geographical currency arbitraging,” reduced risks and uncertainties associated with currency fluctuation, and “stimulated location strategies based on considerations of cost and of spatial differences in workers’ resistance and working-class power” (Swyngedouw 1992: 46). Foreign investment from US firms was first chiefly directed to Western Europe and Japan. From the mid-1950s, foreign investment also flowed to Latin America and Southeast Asia, as US, European, and Japanese capital sought to invest in these regions in order to re-export the finished product, profiting from a low-wage workforce heavily repressed by collaborative and authoritarian regimes (ibid). On the receiving end of the flows, the state and local bourgeoisies actively encouraged (and, in some cases, managed) these flows. This was facilitated by the Bretton Woods system, under which various forms of capital and exchange controls played an important role in allowing states to nationally process class relations in relative isolation from the speculative movement of money-capital (Holloway 1995). In the Third World, the system (temporarily) allowed enough autonomy for the consolidation of the modernist developmental project and for the construction of “centralized capitalist states, to counter possible revolutions from below and to preside over the formation of exploitable laboring classes” (Selwyn 2015: 529). Many countries across the Third World also opted for a variety of development strategies of industrialization by import substitution, which included a combination of subsidies and tariffs and a mix of capital controls which allowed for a multiple exchange rate system promoting devalued currencies for exporters and appreciated currencies for importers.
From the mid-1960s, changing power relations between capital and labor precipitated a mounting global capitalist crisis. An international cycle of working-class struggles, both in the realms of production and reproduction, ruptured global capitalist accumulation and broke the Keynesian class compromise (Cleaver 1989; Holloway 1995). In advanced capitalist countries, struggles in the workplace were complemented by various emancipatory political struggles, such as civil rights and anti-war movements and student protests. Struggles also raged in the socialist bloc and in the Third World, including insurgencies and late anti-colonial struggles (ibid). Industrialization by import substitution strategies and developmentalism were reaching their limits as well. Their reliance on acute forms of exploitation and heavy labor suppression, while failing to provide public infrastructures; the exclusion of the majority of the population from development gains; and increasing inequalities were generating more and more resistance. The crisis soon manifested itself as declining profit rates, generalized inflation, slowdown in productivity gains and investment, balance of payment deficits, and a crisis of the welfare state in advanced capitalist countries (Clarke 1988). As a result, the global demand for and the supply of credit grew enormously. This importantly transformed the geographical pattern and composition of capital flows to the Third World (as discussed in the next section) and increasingly undermined the geographical foundations of the Bretton Woods system.
Indeed, transnational corporations, global banks, and other financial institutions became growingly involved in “speculative geographical currency arbitraging” and in the use of Euromarkets in order to escape national regulation and find profitable opportunities (Swyngedouw 1992). Euromarkets are offshore financial markets for currencies, loans, bonds, and other financial instruments. They originated in the dollar-denominated bank deposit liabilities held in foreign banks or in foreign branches of US banks. US banks set up branches in London, which first emerged as a “hub,” but offshore markets then developed in other countries, including Singapore, Hong Kong, Switzerland, and the Bahamas (Roberts 1994). Consequently, the space of circulation of the US dollar became increasingly distinct from its space of regulation (Corbridge and Thrift 1994; Martin 1994). Increasing international capital mobility further aggravated the outflow of dollars from the USA. Moreover, there were growing pressures on the US balance of payment pressures as a result of growing competition from countries such as Japan and West Germany. US gold reserves melted away, which meant that the gap between the quantity of dollars in circulation and the quantity of gold hoarded by the USA was growing (Dunn 2009). As a result, the USA had growing difficulties maintaining the dollar-gold parity, and a generalized speculative run was more and more threatening (Vasudevan 2008). Printing more dollars became increasingly inflationary, especially in the context of spiraling military expenditures associated with the Cold War. Eventually the Bretton Woods system collapsed, after Nixon’s unilateral decision to suspend the dollar convertibility in 1971.
The collapse of Bretton Woods and a series of political economic transformations had far-reaching consequences for the geographical patterns and composition of capital flows to the Third World over the period. The global geographical reorganization of production, accompanied by the unfolding of a new international division of labor, led to growing imbalances in international payments which were financed by massive expansion of international credit (Charnock and Starosta 2016). International credit creation was compounded by mounting global conditions of capital overaccumulation and by the collapse of the Bretton Woods system of fixed exchange rates (which removed the “metal limit” on credit creation), resulting in speculative movements of liquidity across the world market. In that context, growing volumes of overaccumulated capital and “petrodollars” flowed into the Third World under the form of syndicated bank loans – mostly from large American and European banks – and public bond issues on Euromarkets (Vasudevan 2008). As state-led development strategies of industrialization by import substitution were increasingly reaching their limits (including a slowdown of economic growth, balance-of-payment problems, inflation, intense social unrest), states across the Third World increasingly tapped into abundant and cheap international liquidity and resorted to large money-capital inflows in order to sustain productive capital accumulation and finance the brutal repression of working-class struggles (Clarke 1988; Cleaver 1989). This “bout of uncontrolled lending in the 1970s and early 1980s’ catastrophically ended up with the Third World debt crisis, after the huge hikes in interest rates triggered by the ‘Volcker shock’ in 1979–1982” (Corbridge and Thrift 1994: 13). Sovereign debt levels doubled from 8% of GDP at the beginning of the 1970s to about 22% in 1982 (Vasudevan 2008). Mexico defaulted on its sovereign debt in August 1982. This provoked a generalized loss of confidence in international financial markets, a sudden stop of commercial lending and capital flight from the Third World to the USA. The crisis soon spread to more than 40 countries, prompting the international financial community to elaborate a plan to prevent a general financial collapse.
Neoliberal Restructuring and the Basis for Subordinate Financialization in the 1990s
A series of plans were therefore implemented in order to organize the devaluation of capital, but also to ensure that debtor states remained within the bounds of the international financial system (Soederberg 2005). As discussed in the introduction, the imperialist imposition of structural adjustment plans designed by the Bretton Woods Institutions and advanced capitalist countries was a crucial aspect of crisis resolution, at heavy social and environmental costs. Importantly, a number of neoliberal policy prescriptions – including full convertibility of the current account and a unified exchange rate system, the lifting of capital controls on both inflows and outflows and nondiscrimination between local and foreign investors, the opening of banking systems to foreign banks, and domestic financial liberalization – deepened the financial integration of Third World countries and further subordinated them to the money-power of capital.
Other aspects of the crisis resolution also had momentous consequences for the relationship between capitalist finance, global patterns of capital flows, and the particular form of subordination of the Third World to the money-power of capital. The first one is the 1989 Brady plan, which consisted in securitizing debt claims by turning them into Brady bonds that could then be traded in secondary markets (Vasudevan 2008). While this allowed international investors to diversify sovereign risk, this also established developing countries’ dependence on international financial markets and encouraged short-term foreign borrowing in order to finance fiscal deficits (Painceira 2012; Kaltenbrunner and Karacimen 2016). As a result, the imperative of maintaining “creditworthiness” became an absolute priority in policy-making, at the expense of working-class interests, especially in areas of fiscal and monetary policies, exchange rates, but also labor and environmental standards and political stability (leading to the violent repression of social movements and forms of state authoritarianism) (Soederberg 2005). Rolling over state debts also meant that developing states had to ensure the generation of high financial returns to international investors. Secondly, the development of capital markets in Third World countries, promoted by international financial institutions, and their growing integration into global markets, created new opportunities and needs for local capitalists in order to fund their operations, access foreign exchange, and hedge financial risks, increasing the dependence of nonfinancial firms upon international financial markets (Kaltenbrunner and Karacimen 2016). Those forms of financial dependence have shaped the particular form of “subordinate” financialization that has unfolded across developing states since then (Powel 2013; Kaltenbrunner and Painceira 2015, 2017).
These processes deeply transformed the geographical pattern and composition of money-capital flows to the developing world, which recovered in the early 1990s. Firstly, capital inflows became driven by portfolio investment (often dubbed “hot money” due to their volatility) and foreign direct investment rather than official and bilateral loans. Portfolio flows have been largely driven by interest rate spreads between advanced capitalist economies and developing economies, providing an incentive for speculative carry trade and geographical currency arbitrage. Indeed, the deregulation of interest rates in developing economies has resulted in the tendency for high interest rates in order to attract money-capital flows. The composition of debt flows also changed from a dominance of sovereign debt to private debt (banks and corporations). Foreign direct investment flows have been motivated by the ongoing process of geographical reorganization of capitalist production on a planetary scale, but also by the opportunities provided by the large-scale privatization of state-owned enterprises and opening of public sectors in developing economies.
Throughout the 1990s, money-capital flows to the developing world proved to be extremely volatile. They followed a highly destabilizing boom-and-bust pattern and catalyzed a number of macroeconomic dynamics, including the formation of asset price bubbles in real estate and capital markets, as well as credit-fueled consumption. They provided incentives for short-term borrowing denominated in foreign currencies, with high foreign exchange risk due to maturity and currency mismatches. They also contributed to the tendency for exchange rate overvaluation, often deteriorating external competitiveness, worsening trade deficits, and aggravating dependence on short-term money-capital inflows. Periods of boom inevitably ended in busts (i.e., a sudden stop and/or capital flight), triggering rapid currency depreciation and difficulties servicing external debts. In many cases, this resulted in a generalized financial crisis spreading to other developing economies, forcing the deployment of violent state-enforced bouts of austerity in order to restore creditworthiness and regain the confidence of international investors, largely at the expense of workers, peasants, the poor, and environmental protection. As Corbridge and Thrift put it, “the victims of sound money policies [were] rarely the same as the progenitors of the earlier round of easy money” (1994: 4). According to IMF figures, “in Mexico the 1994–1995 crisis cost 20% of GDP, Brazil’s 1994 crisis cost 13%, Thailand’s 1997 crisis cost 44%, Russia’s 1998 crisis 6%, Argentina’s 2001 crisis 10% and Turkey’s 2001 crisis 30%” (Marois 2015: 30). International financial institutions and advanced capitalist economies blamed those costly and recurrent financial crises on developing countries’ alleged high corruption levels, poor monetary and fiscal management, and lack of political stability and robust institutions for the protection of property rights. Moreover, the very same international financial institutions and advanced capitalist economies used those crises as political opportunities to push for further domestic and international financial liberalization across the Global South. In order to boost credibility and enhance investor confidence, developing economies were also “strongly encouraged” to let exchange rates freely float, build high primary budget surpluses to signal fiscal responsibility, adopt inflation-targeting frameworks to maintain price stability, and accumulate vast amounts of foreign exchange reserves to self-insure against sudden capital flight.
Commodity Super-Cycle, Money-Capital Flow Bonanza, and the Post-2008 “Brave New World”
Money-capital flows to developing countries increased considerably in the 2000s, driven by large volumes of liquidity on international financial markets and by the primary commodity boom. They skyrocketed from an average of 487 billion USD in 2003–2005 to more than USD12 trillion in 2007. Over the same period, many developing economies across Asia, Latin America, and Africa streamlined and consolidated their domestic financial and banking systems to mitigate the risks associated with volatile cross-border money-capital flows. This is what Thomas Marois calls the institutional development of more “muscular” state financial apparatuses (2012, 2015). This has included a variety of the “self-insurance” policies such as large reserve accumulation, but also the empowerment of central banks and treasury departments and other state institutions involved in the management of financial and monetary affairs; the design of policies and institutions to socialize financial risks and the costs of financial crises, such as funds earmarked for bank bailouts and the recapitalization of foreign banks, credit, and deposit guarantees; and active state intervention to rationalize and strengthen failed domestic financial and banking systems, their upgrading to international norms such as Basel I and Basel II. As mentioned in the introduction, this also involved the design of a variety of bilateral, subregional, and regional financial and monetary mechanisms, including currency swaps, reserve pooling arrangements, credit lines, bilateral aid, and development finance, often with the explicit aim to seek independence from the Bretton Woods Institutions and to avoid the type of external crises that had plagued their development in the 1990s early 2000s.
The 2008 global financial crisis sparked a brief but brutal episode of capital flight, with money-capital flows to developing economies contracting to less than 500 billion USD in 2009. In a context of drying up of liquidity, international investors sought refuge in what are deemed “safe” and “high-quality” assets, mostly in the USA and other core advanced capitalist countries, which triggered sharp currency depreciations in developing and emerging economies. Global money-capital flows to the Global South rapidly recovered between 2009 and 2013, amidst much enthusiasm within the international financial community: developing and emerging economies had weathered the 2008 global financial crisis relatively well, the postcrisis economic recovery had been swift, growth prospects looked much better than in advanced capitalist countries (the so-called “two-speed” recovery), and primary commodities and asset prices were booming. There was also much talk of geographical rebalancing of power in the global capitalist economy and of emerging economies becoming the new engine of global growth. Developing and emerging economies’ sovereign credit ratings and funding conditions improved. In addition, vast interest rate differentials between developing countries and advanced capitalist economies provided a highly lucrative opportunity for speculative carry trade and geographical currency arbitrage operations (interest rates in the latter group of countries being close to zero or negative in the context of quantitative easing programs). Put differently, cheap money borrowed in the core was invested in spaces across the Global South that provided both opportunities for short-term capital gains and better prospects of exploitation of living labor and extra-human natures. Large volumes of money-capital flows poured in.
A combination of factors, including the end of the commodity boom, the worsening of the Euro crisis, the US Fed “taper tantrum,” and a looming crisis in China, led to a deterioration in global economic conditions and rapidly changing global risk aversion from 2013 onward. Developing and emerging economies were badly hit, and money-capital inflows sharply slowed down or reversed, in a context of sovereign credit downgrades, falling currencies, and financial distress. State authorities implemented violent bouts of austerity, in desperate attempts to restore international investor confidence, often dramatically worsening domestic sociopolitical crises (for instance, in Brazil, Turkey, South Africa, Ukraine). As discussed in the introduction, many countries have called the IMF again to the rescue. In order to understand the mechanisms at play in this particular historical sequence, it is necessary to examine the contemporary geographical organization of the circuits of money-capital and the functional/spatial configuration of convertibility between different currencies and how they have shaped postcrisis geographical patterns of global money-capital flows to the Global South.
The Global South in the Contemporary Geographies of Money-Power
Since the collapse of the Bretton Woods system in the 1970s, the deregulation of exchange rates, and the widespread liberalization of the capital account, the functional/spatial configuration of convertibility between different currencies is defined by “the right to switch currencies at will” (Hampton 2003: 5). This means that the relative value of currencies (the exchange rate) is, in principle, determined by supply and demand on foreign exchange and currency markets. The structure of the current global monetary system, though, is ridden with power relations and is underpinned by the international hierarchy of national states and imperial power. As such, it is best described as a pyramid of currencies. Those currencies have different “liquidity premiums” which depend on their “degree of convertibility” (Andrade and Prates 2013). This degree relates to currencies’ ability to perform internationally the functions of money, such as unit of account, means of payment, and store of value. The currencies of core capitalist states are at the top of the hierarchy, with the US dollar in leading (though contested) position, given that it “serves as a universal unit of account, while the monetary liabilities of the U.S. state function as a universal means of purchase, means of payment and a key reserve asset” (Ivanova 2013: 63). The currencies of developing and emerging economies lie at the bottom of the pyramid, due to their extremely poor ability to perform the functions previously mentioned. There is therefore a built-in structural and spatial asymmetry in the contemporary global monetary system. This asymmetry translates into the unequal capability of states to attract global money-capital flows, systematically penalizing developing economies. This is most blatant in crisis contexts. As the geographical unfolding of the global financial crisis has shown, “drying up” of liquidity during crises amounts to capital flight from developing countries (and currency collapse) and a rush to “safe” assets denominated in advanced capitalist countries’ currencies. It is worth highlighting that this “flight to safety” to assets in advanced capitalist countries reinforces the “safe haven” character of the latter’s currencies. Put differently, during crises, currency instability in developing countries contributes to maintaining currency stability in advanced capitalist countries, as well as the value of the assets in which they are denominated. This is a key manifestation of contemporary imperialism, and it entails a highly uneven spatial distribution of financial vulnerability and deflationary adjustment. Consequently, the crisis-driven bouts of state-enforced austerity and labor disciplining in order to maintain/restore creditworthiness and confidence in the national money have been harsher in developing countries, crucially shaping their trajectory of capitalist development and incurring high social costs disproportionately borne by the working class.
This asymmetry in the functional/spatial arrangement of the global monetary system is compounded by a second set of geographies that concern the spatiality of the global financial system. The multiple markets and institutions of the financial system are integrated into “distinctive geographical and institutional hierarchies from the local to the global level” (Clark 2005: 99). World financial centers such as London, New York, Frankfurt, and Tokyo dominate this hierarchy, centralize and concentrate the money-power of capital, and exert control functions over the global financial system as a whole (Martin 1999). While financial centers in emerging economies such as São Paulo, Johannesburg, Shanghai, Mexico City, and Istanbul have become important regional sites of financial innovation, this has not challenged the dominance of the aforementioned world financial centers, which remain disproportionately located in advanced capitalist countries and largely control the global orchestration of money-capital flows (Bassens 2012; Clark 2015).
There are at least two ways through which world financial centers exercise huge power on the wider geographies of the global financial system, with important implications for developing and emerging economies. Firstly, powerful actors of the global financial system, such as global investment banks, organize their scale of operations and diversification into other geographical markets, from those world financial centers. This has a considerable impact on patterns of global money-capital flows, particularly in case of financial distress, during which those actors tend to consolidate their activities in advanced economies at the expense of operations elsewhere, shaping the uneven geographical unfolding of crises and often penalizing developing countries. Secondly, world financial centers exercise huge power on the wider geographies of the global financial system because they are the leading sites of production of financial instruments and knowledges. Credit rating agencies and other specialized firms produce financial knowledge that “categorize” the uneven geographies of global finance, shaping the global circuits of money-capital (Lee 2011). The production of this knowledge is permeated by a set of power-laden imaginaries and representations, such as Western- and capital-centric views of history and modernity, stagist/linear conceptions of development, imperial/neocolonial imaginaries, racism, and specific norms of masculinity (see Alami 2018b for a fuller exposition of those arguments). This is reflected in processes of risk valuation, resulting in the representation of developing and emerging economies as a cluster of asset classes with relatively high risk/reward ratios. This, in turn, has four very concrete material consequences which are particularly important for understanding patterns of money-capital flows to developing economies and their shifting financial reputation.
Firstly, money-capital flows to developing economies are extremely pro-cyclical, often worsening periods of financial distress (Lee 2011). Secondly, the clustering together of ECE assets has implications for crisis transmission and contagion between developing countries categorized as “emerging” or “frontier” markets (as the multiple crises during the 1990s and 2010s showed). Thirdly, in order to attract money-capital in a context of international competition between developing economies, states have to deploy economic policies that provide high rewards to the application of capital in its money form, such as extremely high interest rates. Fourthly, this leads to the buildup of particular forms of external vulnerability characterized by the large presence of nonresident investors in short-term financial assets (including bonds, shares, foreign exchange derivatives, etc.), making developing economies highly exposed to capital account reversals (Kaltenbrunner and Painceira 2015, 2017). All four aspects result in developing economies being significantly penalized by the way the global financial system structures and orchestrates the global flow of money-capital. This is essential for understanding the recent global financial crisis, its uneven geographical and temporal unfolding, and associated patterns of global money-capital flows. This is also a key factor of explanation of the violence of money-power, expressed through the operations of global capitalist finance in the global South.
Before concluding, it is worth insisting that those geographies of money-power have been enforced and maintained through various imperialist policies. The collection of essays in Panitch and Konings (2009), for instance, shows how the institutional framework of American finance shaped the global finance system and how “the institutional linkages between the American state and the structural power embedded in the system of global finance have functioned to enhance the power of the US state” (2009: 8). Similarly, Norfield (2016) explores the imperialist policies implemented by the UK to retain control of the global financial system through the City of London since the 1980s.
The essay has provided a historical geographical political economy of the entanglement of world money and world power. As such, it has gestured toward a theoretically informed explanation of the violence of the money-power of capital in the peripheries. The key argument, substantiated throughout the essay by adopting a longue durée view, is that while the global flow of money-capital must be understood in terms of the money-power of capital to appropriate living labor and extra-human natures, the latter has also been mediated by relations of imperialism since the birth of the world market. The essay has shed light on a particularly crucial aspect and manifestation of that process, which is the production of specific spatial relations. Indeed, money-capital does not flow in a void. Its flow is organized and structured by what has been referred to as geographies of money-power, which are constituted by the geographical organization of the global financial system and by the functional/spatial arrangement of the global monetary system. The concrete and distinct geographies of money-power, while experiencing radical transformations throughout the history of global capitalism, 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. In fact, the subordinate positionality of those spaces in the geographies of money-power, and the associated violence of expression of the money-power of capital, has been a phenomenon of remarkable historical continuity. Importantly, the essay has shown that this has in turn contributed to reproducing imperial-hierarchical relations between spaces across the world market.
This analysis of the entanglement of world money and world power is important for three reasons: firstly, for understanding how financial fragility and vulnerability, as well as the costs of 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; secondly, for making sense of the global relations of power, value, exploitation, and dispossession that underpin the operations of capitalist finance and global patterns of money-capital flows and how those contribute to the reproduction of pervasive inequalities on a planetary scale; and finally, it has also implications for questions of strategic-political organizing and emancipatory struggles. Indeed, the analysis suggests that anti-capitalist struggles against capital’s drive to reduce human life and lifeworlds to economic resources and money abstractions (through privatization, commodification, marketization, and financialization practices) must, by necessity, also be anti-imperialist. These must involve struggles for the reconfiguration of the relational geographies of money-power and against the imperialist practices that underpin them. This points to the need for transnational forms of solidarity that can bridge those geographies, involving workers in both countries that receive large amount of money-capital flows and in those that are the source of those flows.
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