Over the past thirty years or so, global financial market integration and financial (re)regulation have largely contributed to the increased vulnerability of Developing and Emerging Capitalist Countries (DECC) to the volatile cross-border movement of money and capital. Repeated financial crises have recently sparked a series of innovative institutional and policy initiatives at various scalar levels of governance across the Global South:
- The deployment of ‘self-insurance’ strategies at the national level, such as large foreign reserve accumulation, different forms of capital controls, sustained foreign exchange market interventions, the upgrading and tight regulation of domestic financial systems, and the use of state-owned banks for counter-cyclical policies;
- The multiplication of bilateral, sub-regional, and regional financial and monetary mechanisms, including currency-swaps and reserve-pooling arrangements, credit lines, and development finance; and
- Growing assertiveness and calls for more inclusivity and representativeness in the Bretton Woods institutions, G20, and other multilateral organisations.
This raises a series of questions: what is the historical significance of these new forms of socio-spatial regulation of monetary and financial issues for contemporary capitalism, and what is their role in the reproduction of capitalist class rule across the Global South? In a recent article published in New Political Economy, I draw upon Marxist political economy and radical geography in order to explore those questions.
My main claim is that the aforementioned policy initiatives need to be understood in light of much broader transformations in geographies of state power across the Global South, in the context of considerable expansion of what I call the spaces of money-power. Over the last thirty years or so, this expansion has been extensive: the removal of capital-account regulations, the liberalisation of exchange controls, the opening and privatisation of domestic financial systems, have contributed to increasing the spatial reach of money-capital. It has also been intensive: growing volumes of interest-bearing money-capital have been created and have circulated across the financial world market in the form of fictitious capital. This has been accompanied by the extension of debt relations at a variety of spatial scales (to national governments, regional and municipal governments, private and public sector corporations, households and workers) and to areas of social reproduction that were previously relatively protected from their reach, resulting in the deepening of the rule of money over social life. These dynamics of financial expansion have been inseparable from the acceleration of the spatial reorganisation of global production, the huge expansion of the reserve army of labour and the relative surplus population on a global scale, and the growing marketisation and financialisation of land and ecological commodities: the spatial expansion of the money-power of capital and the deepening of its reach has been a key mechanism in the appropriation of growing pools of living labour and extra-human natures by capital.
In that context, the Global South has received growing volumes of money-capital. According to World Bank Debt Statistics, net private money-capital flows increased from about $50 billion in 1990 (the equivalent of about 2% of GDP) to about $510 billion in 2010 (4.4% of GDP), with a peak of more than $1.1 trillion in 2007 (about 8% of GDP). Yet, DECC have retained their subordinate position in the financial world market and the global monetary system, and have remained highly vulnerable to the volatile cross-border movement of money-capital. This has led to acute difficulties in managing monetary and financial affairs, violent crises, and posed growing problems in terms of the management of class relations at national and sub-national scales, because of the multiplication of forms of resistance to crisis deflationary adjustments, dispossession, displacement, and ecological destruction. To paraphrase Neil Brenner, expanding spaces of money-power engendered contextually specific forms of socio-spatial dislocation and crisis formation.
My key contention is that this in turn sparked transformations in socio-spatial state configurations in order to facilitate the expansion and deepening of monetary disciplines, and the appropriation of growing pools of living labour and extra-human natures by capital, while politically mediating the contradictions and social conflicts that have emerged at various scalar levels, from the world market to bodies and subjectivities. In the article, I identify and discuss at length 5 types of transformations in socio-spatial state configurations: the rescaling of the spaces of monetary, fiscal, and exchange rate policies and the growing direct involvement of the state in the cross-border circulation of money-capital; the internationalisation of financial and monetary state apparatuses and their prioritisation over other forms of socio-spatial regulation; an intensification of states’ management of monetary flows across space, between regions and sectors; and the growing involvement of the state in processes of financial subjectification.
Making sense of these socio-spatial transformations is crucial because they are far from being neutral. It is clear that the great winners have been those classes and social subjects, both in the Global North and the Global South, capable (due to access to specific monetary, cultural, social resources) of commanding over the expanding spaces of money-power. Through strategies of portfolio diversification, that is, the holding of assets with different risk/reward ratios, those social subjects have been able to tap into larger pools of labour and extra-human natures than ever. This constant spatial rearrangement of financial assets (facilitated by the aforementioned state transformations) across uneven geographies with different magnitudes of risk/reward, has allowed those social actors to take advantage of enhanced competition between particular places and leverage small differences in socio-environmental conditions of labour exploitation at various scales.
The state transformations have also had clear distributional impacts, by shifting the social costs of crises onto labour, and by providing handsome rewards to the application of capital in its money-form. Here we can think of how policies associated with monetarist imperatives and tight public finances, have transferred large amounts of surplus to particular classes within and across territorial borders. For instance, in South Africa, high real interest rates have provided handsome financial returns to both local ruling classes and international investors, who owned about 35% of government debt in 2013. According to recent IMF figures, more than $1trillion of DECC government debt is held by foreign investors in local and hard currency. The production of new state configurations, then, has largely contributed to safeguarding the financial assets and income streams of particular social groups, and to channelling value across the global capitalist space economy.