Brand new dependency

Paul Klee, Rocky Temple with Fir Trees, 1926.
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By LUIZ GONZAGA BELLUZZO*

Preface to the book by Lucas Crivelenti e Castro

I'm going to dare to scribble down some ideas about the book by Lucas Crivelenti e Castro Brand new dependence: Brazilian subordination to imperialism in the context of financialized capitalism.

I beg you, a top lawyer would say, to start with globalization, a concept that is too imprecise, misleading and full of ideological contraband. Among the most notorious contrabands is the attempt to exclude power relations between national States, that is, to abolish relations between Empires and their subjects.

Still, if we intend to advance in the analysis and understanding of the transformation processes that shake the contemporary economy and society, we are condemned to undertake a critique of the concept of globalization.

There are many who defend, from a supposedly “scientific” position, the benign nature of the so-called globalization process. Two assumptions are implicit in this formulation: (i) globalization will lead to the homogenization of national economies and convergence towards the liberal market model; (ii) this process occurs beyond the reaction capacity of policies decided within the scope of national States.

The liberal-conservative recipes, in vogue, recommend popular deductions for emerging countries, in a direct line, from the abstract models of neoclassical theory. Let us see: the broad trade opening is supported by the old theory of comparative advantages, without the timid modifications of the “new trade theory”; privatizations and state non-interventionism emanate from a competitive model of general equilibrium; financial liberalization arises from the hypothesis of efficient markets.

When we talk about the financial stage of capitalism, financial capitalism, we often do not realize the meaning that this word has. Karl Marx treated the financial form as the most developed form of capital. “More developed” in the Marxist conception concerns the realization of the concept of capital as a process of accumulation of abstract, monetary wealth. The capital economy is a regime whose objective is not the production of merchandise, nor even the submission of labor, even though in its metamorphosis – Money-Commodity-Money – capital is necessarily forced to go through such hardships.

Karl Marx works with the simultaneity of two movements: the reiteration of the basic mechanisms of economic and social reproduction of capitalism and the transformation, the change, driven by the incessant drive to overcome these limits. This is the story of capitalism. Self-identity and difference, in the sense that the mechanisms of despotic control imposed by the capitalist machine continue to operate at all times, facing the methods of resistance and alternatives created by the working classes in the class struggle. Let's repeat: the capital regime has a single purpose: accumulation of abstract wealth, embodied in money. Therefore, in capitalism, any act only acquires economic meaning when it begins and ends with money.

Financialization is, therefore, not a deformation of capitalism, but an “improvement” of its nature. Improvement that exasperates its contradictory movement: in the incessant search for “perfection”, that is, the accumulation of money from money – without the mediation of labor exploitation – the capital regime is forced to devalue labor power and expanding fixed capital beyond the limits permitted by production relations, which engenders periodic crises of realization and overaccumulation.

In capitalism, finance is the instance of control and domination. It is through the financial form that the so-called allocation of resources is carried out, a process seen by neoclassical economics as the great feat of competitive markets. In the Marxist view, capitalist competition takes place within the scope of financial markets that promote, in fact, the distribution of resources through the “unfreezing” of capital immobilized in the different spheres of production, in search of the best opportunities and the most profitable applications.

Regarding the topic of resource allocation, I will allow myself to reproduce an excerpt from the book Money: The Power of Real Abstraction, written in partnership with Gabriel Galípolo: “Under the auspices of financial capital and an asymmetric international monetary system, the brutal centralization of control over production decisions, spatial location and use of profits occurred in a small nucleus of large corporations and financial institutions on a global scale. The centralization of control drove and was driven by the spatial fragmentation of production.”

The centralization of command in financial capital profoundly changed the strategy of large productive companies. Accumulated profits are primarily allocated to treasury operations. The new loans finance the repurchase of the shares themselves to guarantee the “valuation” of the company. Data Federal Reserve (FED) reveal that, in the period 2003-2008, the volume of credit intended to finance positions in existing assets was four times greater than credits intended to create jobs and income in the productive sector.

In the aftermath of the 2008 crisis, the reiteration of the dominance of the financial form of wealth and income of companies and wealthy families is anchored “ultimately” in the swelling of national public debts.

Let's repeat a banality: public debt is private wealth. To understand the enrichment and reproduction of inequalities, it is necessary to evaluate the role of public debt in the current cycle of “asset inflation”. The “markets” support a new escalation of prices on the stock exchanges, supported by the FED's operations with public bonds aimed at regulating liquidity and keeping long rates low. American government bonds therefore constitute the last resort, guarantor of “quantitative easing” monetary policies and their consequences for the deformation of wealth and the expansion of inequalities.

Global capitalism assumed its most advanced form as a monetary economy, whose agents holding the powers to create social wealth are influenced by the empire of abstract wealth accumulation. This does not depend on the evil or goodness of these agents, but on systemic forces that impose on them the need to always desire more to survive in their capitalist nature. This behavior drives systemic dynamics and, at the same time, is reinforced by it. It is necessary to emphasize the word form because the understanding of capitalist dynamics as a movement of transformed forms allows us to give a precise meaning to the word contradiction. Contradiction as negation of negation in the movement of building new positivities, later denied.

It is under this criterion that we must observe the concomitance between technological advancement, poor evolution in labor productivity, dissolution of wage relations, fall in workers' average earnings, shrinking wage bill, precarious jobs, reduction in investment rates, explosive growth of private and public debt, the incessant appreciation of financial assets and, finally, the rapid worsening of environmental conditions.

These transformations in financial markets that have occurred over the last two decades are, in fact, subjecting national macroeconomic policies to the tyranny of volatile expectations. There were many speculative attacks against exchange rate parities, episodes of sudden deflation in the prices of real and financial assets, as well as situations in which banking systems were in jeopardy. It is needless to reaffirm that these episodes are the inevitable result, in most cases, of the free movement of floating capital.

These situations have been overcome by last resort action by governments and central banks in the triad (United States, Germany and Japan). Despite this, it is not uncommon for even countries without a tradition of inflation to be subjected to exchange rate and financial crises, the exit from which required sacrifices in terms of the well-being of the population and the renunciation of sovereignty in the conduct of their economic policies.

 The insertion of countries in this globalization process was hierarchical and asymmetric. The United States, taking advantage of its military and financial power, has the luxury of imposing the dominance of its currency, while maintaining a high and persistent current account deficit and an external debt position. This means that the financial markets seem willing to accept, at least for now, that the United States exercises, within elastic limits, the privilege of “segniorage".

This polarization of trust translates into limitations on the autonomy of other countries' national policies. The intensity of the restriction depends on the form and degree of articulation between national economies and financial markets subject to unstable expectations. Japan and Germany, for example, are surpluses and creditors and therefore have more freedom to practice fiscal expansionism and low interest rates, or tolerate wide fluctuations in the value of their currencies, without attracting the distrust of speculators.

Countries with a turbulent monetary past need to pay high risk premiums to refinance their current account deficits. This represents a serious constraint on the maneuverability range of monetary policy, in addition to cornering fiscal policy due to the growth of financial burdens on public budgets.

“Tramp capital” has, in the United States, a broad and deep market, where it imagines being able to rest from adventures in exotic places. The existence of a respectable volume of American government securities, known for their low risk and excellent liquidity, has allowed the reversal of speculative episodes, with shares, real estate or foreign assets, to be cushioned by a compensatory movement in the price of American public bonds. .

American public debt securities are therefore seen as a safe haven in times when global investor confidence is shaken. This means that the strengthening of the function of universal reserve of value, performed by the dollar, derives fundamentally from the already mentioned characteristics of its financial market and the crucial role played by the American State as a lender and debtor of last resort.

This is why fluctuations in long-term interest rates, which express the price variations of 10-year US Treasury bonds, are today, in the world of deregulated and securitized finance, the most important indicator of the mood of the markets. globalized. Their movements reflect the anticipations of managers of large masses of financial capital regarding the evolution of the value of their portfolios, who take variations in the prices of Treasury bonds as a basis for making anticipations about the likely evolution of prices and liquidity of different assets, denominated in different currencies.

The new markets are obsessed with liquidity, as Professor Michel Aglietta says. This obsession, in fact, is the natural and inevitable result of markets whose operation depends on conjectures regarding the evolution of asset prices. Despite all the hedging and risk distribution techniques among agents, or even because of them, these markets have developed an enormous aversion to illiquidity and long-term commitments.

Furthermore, and very important: the sensitivity of new financial markets to imagined increases in inflation rates has significantly increased. Even though the predicted change in the inflationary level may be considered negligible – if evaluated using the criteria of previous decades – the market reaction tends to be very elastic to pessimistic expectations.

Therefore, it is unwise to say, as the BIS report did, that current levels of inflation (or creeping deflation) are reasonable and that governments should address growth. It is worth asking: are they reasonable for whom? The dominant opinions, at this stage of capitalism, are those that cling to the defense of the real value of existing wealth, or “old wealth”, to the detriment of the entrepreneurial spirit that seeks to create new wealth. We live in a world where the “ethos” of rent-seeking prevails and high real interest rates prevail.

Sensitivity to inflation and aversion to illiquidity, which are expressed through the reactions of long rates, function as automatic brakes, whose function is to contain the growth of the real economy, before it proves to be “inconvenient” for holders of financial wealth.

These peculiarities of contemporary finance, based on the pre-eminence of broad and deep markets for trading securities and their derivatives, have given rise to a very wide variety of interpretations. The spectacular growth of financial wealth (relative to other forms of accumulation by large corporations and high-income families) and the corresponding development of sophisticated and comprehensive markets for the daily valuation of this mass of securities wealth are significantly affecting the behavior of investment, consumption and public spending.

Regardless of the good intentions or virtuous reforms sought by governments, the logic of asset appreciation is taking over all spheres of the economy, imposing its criteria as the only acceptable ones in any decision regarding the possession of wealth. It is not just that the calculation of the present value of productive investment is affected by the state of preference for liquidity in financial markets (an old but little understood Keynesian problem), but rather that productive accumulation has been “financialized” as, in fact, , Professor José Carlos Braga has been trying to explain it in his pioneering works.

The generalization and intensification of competition, led by large companies, which operate in multiple sectors and in many markets, can only be correctly understood in light of these financial transformations.

Questions relating to the localization strategies of the modern transnational corporation or its morphological mutations (constitution of network companies, with concentration of decision-making and innovation functions and dispersion of commercial and industrial operations) must be evaluated from this perspective. The phenomenon appears, first faction, in the form of “challenging” the “stabilized” oligopolistic structures that regulated competition in the previous period. Analyzed in more depth, this generalization of competition explains a new stage of reconcentration and recentralization of capital blocks, under the aegis and discipline of financial capital.

The world economy is going through a moment of intensification of intercapitalist rivalry (which does not exclude agreements and coalitions, but presupposes them) and, in this climate, no protagonist is capable of guaranteeing the position achieved. Therefore, everyone feels compelled to gain the upper hand.

To the scandal of liberals, the large company that is thrown into the uncertainty of global competition increasingly needs the support of the National States of the countries of origin. The State is increasingly involved in sustaining the conditions required for the good performance of its companies in the arena of generalized and universal competition. They depend on the support and political influence of their National States to penetrate third markets (investment guarantee agreements, patents, etc.), they cannot do without public financing for their exports in the most dynamic sectors and would be displaced by competition without the benefit of national science and technology systems.

Instead of the victory of the markets, in which the automatism of perfect competition prevails, we are witnessing the reiteration of the “politicization” of the economy. The ongoing transformations are not intended to reduce the role of the State, nor to streamline it, but rather aim to increase its efficiency in creating positive “externalities” for the large company involved in widespread competition. The disparity in national and regional situations and projects, between developed countries and between them and developing countries, has been increasing in recent years.

The UNCTAD report Trade and Development Report from 2003 has the subtitle “Capital accumulation, growth and structural change”. This is a historical-comparative study on the performance of developing countries throughout the transformation of the global economy in the 1980s and 1990s.

(i) those with mature industrialization such as Korea and Taiwan, which have already achieved a high degree of industrialization, productivity and per capita income, but have a declining rate of industrial growth; (ii) those with rapid industrialization, such as China and perhaps India, which – through policies that favor high rates of domestic investment and technological graduation – present a growing share of manufacturing in products, employment and exports; (iii) those with enclave industrialization, such as Mexico, which, despite increasing its share of manufactured exports, have poor performance in terms of investment, manufacturing added value and total productivity; and (iv) finally, the countries in the process of deindustrialization, which includes the majority of Latin American countries.

The typology designed by UNCTAD is the arrival point of the complex game. In all stages of capitalist expansion, this game involves financial, technological, patrimonial and spatial transformations that result from the interaction of two movements: (a) the process of competition driven by large companies, under the tutelage of nuclear “governance” institutions. of the system: finance and the hegemonic State; and (b) national strategies for the “insertion” of peripheral regions. The transformations we observe today are driven by the strategic game between the “dominant pole” – in this case the American economy, its technological capacity, the liquidity and depth of its financial market, the power of seignorage of their currency – and the “response” capacity of developing countries to changes in the international environment.

It goes without saying that peripheral economies have very dissimilar social, economic and political structures and trajectories, which makes the so-called “competitive integration” difficult for some and easier for others in the various stages of capitalism’s evolution. Thus, for example, Brazil's success, until the beginning of the 1980s, triggered the crisis that would cause its repeated “failure” in the attempt to adjust to new international conditions. On the opposite side, Chinese failure until the 1980s provided more favorable initial conditions for the success of the reforms undertaken since then.

The 1970s was a time of China-USA rapprochement, promoted by Nixon and Kissinger. From a geopolitical and geoeconomic perspective, the inclusion of China within the scope of American interests is the starting point for expanding the borders of capitalism, a movement that would culminate in the conflict between the protectionism of Republican (liberal?) Donald Trump and the “free -commerce” by communist Xi-Jinping. Ironies of history: one thing is one thing, another thing is the same thing.

This economic “disarticulation” (or rearticulation?) unveiled a new phase, marked by conflicts and contradictions between the way globalized markets function and national legal-political spaces.

From the 1980s onwards, the liberalization of capital accounts and financial and commercial deregulation reinvigorated the universalist vocation of American companies. In the desire to reduce wage costs and escape the valued dollar, the “competitive” shift of American manufacturing production sought regions where low wages, devalued exchange rates and prospects for accelerated growth prevailed.

This promoted “arbitration” with wage costs on a global scale, encouraged the flexibilization of labor relations in developed countries and subordinated family income to the increase in hours worked. Open and disguised unemployment, precariousness and income concentration have grown in the wealthy world.

On the other side of the same process, Chinese leaders took advantage of

“opening” the economy to foreign investment eager to take advantage of the abundant supply of labor. They bet on the favorable combination between a competitive real exchange rate, low interest rates to undertake national investment strategies in infrastructure, absorption of technology with exceptional gains in scale and scope, densification of industrial chains and growth in exports.

In the shadow of rapprochement with the United States and other Western countries, Deng Xiaoping combined domestic reforms with openness to foreign investment. At that time, the strength of the dollar and the conditions offered by the US financial market favored the migration of Uncle Sam's companies to take advantage of the new expansion space.

Simultaneously with the controlled opening, “the market became a government instrument to reinvigorate its material base”. The reopening of the market in China begins with the permission for peasants to trade their surplus production, a fact that can be compared to the uncapping of a pressure cooker that was the basis of the development of Chinese society for around three thousand years. and which had been temporarily banned. The result was increased agricultural productivity and mass “manufacturing of manufacturers.” Currently, 80% of Shenzhen's entrepreneurs were middle peasants in 1978.

The strategic formulation of the Communist Party of China is anchored in a system of consultations from the base to the top and vice versa, a system that follows a sequence of assessment and decision instances. Once the decision has been taken, state bureaucracies, managers of state-owned companies, provincial governments, the People’s Bank of China, everyone takes care to implement the guidelines.

During the first decade of the new millennium, the average annual growth rate of the Chinese economy was 10,5%, compared to 1,7% in the USA and 0,9% in Germany. By the end of the decade, China accounted for 42% of the world's production of color televisions, 67% of video products, 53% of mobile phones, 97% of PCs and 62% of digital cameras.

The book China versus The West, by Ivan Tselichtchev, gives the dimension of the transformation that occurred. In the 1980s, the Chinese economy had the same 1% share as Brazil in world trade, in 2010 its share jumped to 10,4%, compared to 8,4% in the USA and 8,3% in Germany.

Chinese growth advanced supported by the favorable exchange rate/wages ratio, growing economies of scale and rapid technological development. China faced the challenges of globalization with concepts and objectives that belie the publicized loss of importance of national and intentional industrialization and development policies.

The Chinese strategy successfully promoted the attraction of foreign direct investment in partnership with local, private and public companies. The determination of the exchange rate escaped the moods of the financial markets. It was used as an instrument of competitiveness and attraction of foreign investment.

In 2013, President Xi Jinping launched the “New Silk Road” project, a long-term program to promote investment and connections with all regions of the world. This project reveals that, in just a few decades, China changed the game. Before the Silk Road, the Middle Kingdom had transformed from a recipient of capital to a major promoter of investment abroad.

In an opening speech at the 19th Congress of the Communist Party of China, Jinping spoke about the economy with Chinese characteristics. The president announced policies to “expand the role of the market and strengthen state-owned companies”. When evaluating Jinping's words in its July 22, 2017 issue, the magazine The Economist, published an article with the title “Unnatural Selection”. The magazine imagines that “natural selection” is promoted by free competition, a process that only survives in introductory economics textbooks. Capitalism abolished it long ago. Inspired by this anachronism, The Economist, lamented the Chinese state-owned enterprise merger program (Soes): “The government agency organized the merger of ports, railways, equipment producers and shipping companies… These actions seem designed to promote national champions.”

The Chinese government undertook a harsh reform of its state-owned companies in the last years of the 1990s. Preparing its economy to comply with the standards for admission to the World Trade Organization, which took place in 2001, required designing a type of company with a strong tendency towards conglomeration, ultramodern, commercially aggressive administration methods with the core function of developing a National Innovation System.

* Luiz Gonzaga Belluzzo, economist, is Professor Emeritus at Unicamp. Author, among other books, of Keynes's time in the times of capitalism (countercurrent).
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Reference


Lucas Crivelenti and Castro. Brand new dependence: Brazilian subordination to imperialism in the context of financialized capitalism. São Paulo, Editora ialética, 2021, 234 pages. [https://amzn.to/3Luhi5Y]


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