Marxist Geopolitics 2: Neoliberalism and Dispossession

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Marxist Geopolitics (2) Neoliberalism and
Dispossession
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Tuesday in geopolitics

• Primitive accumulation - expropriation and
  privatization of public assets
• Labor Theory of Value - exploitation of workers
• Crisis of accumulation - 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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From the early 70s onwards there is a long
downturn in the major economies as manufacturing
markets stagnate and profits decline
From Brenner, 2002
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Question

• How does Harveys view of crisis differ from that
  of Luxemburg?

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The 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.
• 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
  pressure on growing deficit and dwindling gold
  reserves
• Declining recession in manufacturing
• 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 US banks in London
• Banks loan the money at low variable interest
  rates to governments in developing nations
• Inflation, financial volatility, and economic
  stagnation sets into the global economy

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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)
• - Tax cuts (flattening tax rates)
• - Export-led growth
• - Deregulation of finance and labor markets
• All of which releases new assets on to the market
  for investment
• accumulation by dispossession

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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
Leaving behind
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Devalued capital
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What is Redlining?
Redlining is the withholding of credit from
neighborhoods considered to be a poor economic
risk. In the 1940/50s it became associated with
racial segregation and urban inequality in the US
and legislation was passed to try to prevent
it However, financial risk-rating or
redlining has become increasingly globalized
over the last 20 years
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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 increasingly 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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Financialization

• In the 1980s
• - 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 or increasing taxes
• - 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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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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Wall Street and the disciplining of democracy

• 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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• Treasury secratery 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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• According to Klein p.257, in Canada the
  business community tried to persuade Moodys to
  lower their credit rating so they could then
  press for neoliberal reforms

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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. Friedman, 1996

Thomas Friedman
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Neoliberalism, for Klein and Harvey, works
through a combination of consent and coersion

• 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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Conclusions

• A Marxian approach sees capitalism as a system
  driven
• by a relentless expansion in pursuit of higher
  profits
• Barriers to economic liberalization are often
  eliminated
• through illiberal means - during disasters
• It is the unrelenting pursuit of new and cheaper
  assets
• that drives poverty, environmental degradation
  and
• conflict on a global scale

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Question

• What examples of resistance do Harvey, and Klein,
  identify?