Marxist Geopolitics 2: Neoliberalism and Dispossession

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Marxist Geopolitics (2) Neoliberalism and
Dispossession
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Yesterday in geopolitics

• Primitive accumulation - establishing capitalist
  relations through the expropriation and
  privatization of public assets
• Labor Theory of Value - exploitation through the
  working day
• Capitalism and underconsumption - the search for
  new markets in the non-capitalist world
• The spatial fix - offshoring to cut production
  costs

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Aims of todays lecture

• The globalization of neoliberalism
• Links to accumulation by dispossession
• The role of the Wall Street-Treasury-IMF

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What is (neo)liberalism?

• As an ideology founded on the belief that the
  market is the most efficient way of organizing
  social, political, economic life
• As a form of government it asserts the rights
  (and responsibilities) of individuals to look
  after themselves
• Policies include
• - Privatization of public industries
• - Deregulation of finance and labor markets
• - Rolling-back of welfare programs

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Chilean experiment

• In 1970, socialist Salvador Allende is
  democratically
• elected as President in Chile
• I dont see why we need to stand by and watch a
  country go communist due to the irresponsibility
  of its own people. The issues are much to
  important for the Chilean voters to be left to
  decide for themselves.
• Henry Kissinger, 1973
• In 1973, the Chilean army - backed by CIA - ousts
  Allende
• General Pinochet takes power. He violently
• crushes dissent, dismantles social programs and
• turns to a group of neoliberal economists,
• trained in Chicago under Milton Friedman,
• for a new economic order

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The end of the Gold Standard

• In 1973, Nixon abandons the -Gold system due to
  growing deficit and dwindling gold reserves
• Declining profits in US manufacturing
• Social justice movements seeking full citizenship
  rights
• and
• Spiraling cost of Cold War, especially Vietnam
• Federal Reserve prints s -- no longer
  regulated by gold standard
• The value of the ?

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OPEC crisis, 1973-74

• In response to Arab-Israeli war and the falling
  OPEC dramatically increases the price of oil
• Oil revenues from the Middle East are recycled
  through Offshore banks in London
• Banks loan the money at low variable interest
  rates on to governments in developing nations
• Rampant Inflation, financial volatility, and
  economic stagnation sets into the global economy.

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NYC goes bankrupt, 1975

• NYC suffering from recession and loss of
  manufacturing jobs. Fed warns no bail-out as
  bond-ratings plummet.
• Government has to
• Cut public spending
• Attract more private investment

May 1988 A December 1985
Baa1 November 1983 Baa November 1981 Ba1 May
1977 Ba October 1975 Caa October
1975 Ba December 1972 A
As social inequality increased so did the
credit-ratings
See Hacksworth, J. 2002
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The rise of the New Right
Thatchers 1979 government seeks to naturalize
inequality and individualism It is our job to
see that talents and abilities are given vent and
expression for the benefit of us all. There is
no such thing as society, only individuals and
their families.
Huge shift to the Right in US 1980
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The Debt crisis

• After taking over as chairman of Federal Reserve
  in
• 1979, Paul Volker more than doubles interest
  rates
• So do US banks, including those in London
• In 1982, Mexico and Argentina default
• on their dollar-denominated loans
• The IMF reschedules their loans once
• structural adjustments are made

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SAPs

• Structural Adjustment Programs are based on
• - Privatization
• - Fiscal austerity (cutting public spending)
• - Export-led growth
• - Deregulation of finance and labor markets
• All of which further helps business and finance
  elites to invest transnationally

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Investing in industries
Cheaper fuel, rent

?

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cheaper raw materials
and cheaper labor!
?
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Debt markets
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infrastructure
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natural resources
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Accumulation by Dispossession
With neoliberalism wholly new mechanisms of
accumulation have opened upthe emphasis on
intellectual property rightsthe escalating
depletion of the global environmental commons and
proliferating habitat degradations that preclude
anything but capital-intensive modes of
agricultural production (2003148)
David Harvey
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From Rogue States to Emerging Markets
Bond rating agencies and the Wall
Street-Treasury-IMF complex
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What is Redlining?

• Redlining is the withholding of credit from
  neighborhoods considered poor economic risks.
• The term originally refers to US mortgage firm
  practices in 1930s
• ---------?
• Racial segregation
• Urban inequality

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Global Redlining
Standard Poors Emerging Frontier markets in
2000
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What is a bond?

• A bond is certificate of debt used to raise
  money the issuer is required to repay the debt
  (bond), with interest (the yield), until a fixed
  date (maturity)
• Many sovereign, state, city and municipal
  governments auction bonds top raise money for
  services, infrastructure etc.
• In order to attract investors bonds must first be
  rated by a respected agency - Standard and
  Poors (SPs), Moodys, or Fitch

 
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Bond-rating Agencies gatekeepers of capital
markets

• Evaluate governments and publish ratings on how
  likely they are to repay their debts

These ratings largely determine the interest rate
on the debt and, therefore, the cost of borrowing
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Neoliberal Globalization

• - Financial Deregulation
• The rise in speed and volume of transnational
  capital flows
• - Financial Disintermediation
• Govt.s increasingly raise money through global
  debt markets rather than borrowing from national
  banks
• 1989 gt
• - Daily turnover in foreign-exchange markets
  rises from 180
• billion in 1986 to around 1, 200 billion in 1998
• - Rise of 24-hour trading and Global Financial
  Cities
• - In 1993, US investors bought more foreign
  equities than in the
• whole decade of the 1980s, much of it in
  emerging markets

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Finance and the new frontiers

• For Turner, the expansion of the frontier and
  the rolling back of the wilderness read
  socialism and savagery were an attempt to make
  livable and investable space out of an unruly
  and uncooperative nature
• (Neil Smith, 1996)

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The Panopticon
The panopticon of Jeremy Bentham (1859) consists
of a central watchtower in a prison building that
is divided into cells. The occupants of the cells
. . . are thus backlit, isolated from one another
by walls, and subject to scrutiny both
collectively and individually by an observer in
the tower who remains unseen.
Seeing-without-being-seen is the very essence of
disciplinary power in the liberal state for
Foucault because ultimately, the power to
dominate rests on the differential possession of
knowledge (1983223)
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A geofinancial panopticon?

• Global space is increasingly
• subject to the surveillance
• and evaluation of Wall Street
• based financial services,
• analysts commentators
• Public policy can be observed
• judged as to whether it is
• sufficiently normal and, if it
• is not, punished or corrected
• in an impersonal and impartial way
• Politicians become self-disciplined
• in neoliberal norms

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Rating the New World Order

• Bond-rating agencies increase the rating of
  sovereign governments who rely on foreign
  investment for much needed e.g. Brazil
• Lula elected Brazils and ratings fall, yield
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• Paul ONeill financial markets will be closely
  watching Lula for reassurances that hes not a
  crazy person.
• The tough path Brazil will
• have to walk will demand
• austerity in the use of public
• funds Lula

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The new superpower?

• Bond rating agencies now rate more than 30
  trillion worth of debt worldwide!
• There are two superpowers in the world today in
  my opinion. There's the United States and there's
  Moody's Bond Rating Service. The United States
  can destroy you by dropping bombs, and Moody's
  can destroy you by downgrading your bonds. And
  believe me, it's not clear sometimes who's more
  powerful.

Thomas Friedman, 1996
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• Chase Manhattans memo to Salinas
• government on the Chiapas Revolt
• While Chiapas, in our opinion, does not pose a
  fundamental threat to Mexican political
  stability, it is perceived to be so by many in
  the investment community. The government will
  need to eliminate the Zapatistas to demonstrate
  their effective control of the national territory
  and of security policy.
  (January 1995)

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Microfinance new spaces of accumulation?
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Conclusions

• Marxists see capitalism as a system driven by a
• relentless expansion in pursuit of higher profits
• Barriers to economic expansion are eliminated
  through
• economic and non-economic means
• It is the constant pursuit of new and/or cheaper
  inputs
• that drives poverty and conflict on a global
  scale