2416 – Financial Empire w/ Daniela Gabor and Ndongo Samba Sylla (Jacobin Radio 2023)

“Olúfẹmi Táíwò guest hosts an interview with Daniela Gabor and Ndongo Samba Sylla on how financial power has shaped the global economic order under capitalism from colonialism through Bretton Woods, the Washington Consensus, and today’s Wall Street Consensus. 

Read Daniela’s work: people.uwe.ac.uk/Person/DanielaGabor

Read Ndongo’s work: rosalux.de/en/profile/es_detail/N8SVHTS8SA/ndongo-samba-sylla?cHash=ccf0c8d371bde0fecbac8337bbc6f832

Support The Dig at Patreon.com/TheDig“

Here is 2h of the most intense and informative talk I got to listen to recently. I totally recommend both of them to follow in TW/X – if you are still on that platform. We had some previous posts on economy and political economy and inflation, but this one is truly essential for everyone interested in how global financial institutions came to exist and how the dollarisation of the world after WWII came to dominate our lives. It is also a very good introduction into two important theories that have lost the battle in the market of ideas – but are increasingly resuscitated in order to make sense of the rising unequal exchanges, dependencies, and monetary imperialisms that structure the Global North/Global South axis in capitalism: Dependency theory and World-systems theory. What is important is that both of them (one from Eastern Europe and the other from Equatorial Africa) advocate for a new global economic system where the Global South is at its center (the so-called “Bandung Woods” named after the Afro-Asian or Asian-African Bandung Conference in 1955 Bandung, Indonesia) to replace the Washington (or now Wall Street) Consensus.

Most of what I am saying here tries to approximate what the two eminent (imho opinion) macroeconomists and monetary sovereignty experts spell out. I am going to quote in full Gabriela Gabor (who happens to be a Romanian born) from the written version of the interview (available here).

DANIELA GABOR:

The Washington Consensus is in a sense a marker of who makes the rules in the global economic system, and that was Washington. Its intellectual father was John Williamson. He was quite reluctant to recognize himself as an intellectual father, because very quickly, the Washington Consensus was dubbed as a neoliberal consensus. I think it’s best described as a holy trinity of economic policies that were prescribed to countries, particularly in Latin America. This was a “what’s-happening-in-our-backyard” type of arrangement for the United States.

The three pillars of the Washington Consensus were economic stabilization, privatization, and liberalization [my emphasis). Economic stabilization basically meant the central banks have to target inflation and to keep prices stable; privatization meant trying to reduce the footprint of the developmental state in the economy by preventing the state from allocating capital or getting involved in production through state-owned companies or enterprises; and liberalization of international trade meant removing trade barriers, but also liberalization of prices domestically by not using price controls and removing subsidies as much as possible.

This is interpreted as an attempt to change the balance between the state and the market. Of course the states vs. markets framework is a crude description because the state had to construct certain markets. But it is true that the Washington Consensus was a policy paradigm and a political project to kill off the developmental state. In the 1950s and ’60s, the developmental state, under what we describe now as heterodox economic ideas, attempted to design a national development strategy in a context of  deteriorating terms of trade.

For developing nations, the question was, how do we make sure that we will get paid better for our exports than what we have to pay for our inputs? That typically meant industrial upgrading. That typically meant having a good industrial policy. It typically meant having some form of financial repression, which subordinated the domestic banking system to the needs of the industrial policy. It meant some form of a social contract with domestic capital and also with foreign capital, but mostly domestic capital, to make sure that domestic capital worked together with the state for industrial policy purposes.

The Washington Consensus is basically a political project to dismantle this developmental state and instead to bring in the market as the mechanism to allocate resources. The state doesn’t disappear of course. But what we know is that the state that is useful for citizens in a sense disappears because you have an increasing removal of the state from the provision of public goods, one way or another, under the idea that the market can do things better than the state.

In the postwar era, you have the Bretton Woods institutions that are pushing this Washington Consensus all over the world. Wherever the IMF or the World Bank go, they leave a trail of structural adjustment programs. You have the IMF pushing for stability and particular forms of monetary and fiscal austerity under the Washington Consensus. There is an increasing recognition toward the end of the 1990s that this has meant a lost decade for Latin American countries, that it produced a lot of poverty across African countries that were forced to adopt them. Of course there are certain domestic political constituencies that preferred the Washington Consensus rules simply because they align well with the aims of right-wing politics.

By the early 2000s, Bretton Woods institutions become a bit more unwilling to promote the more radical elements of the Washington Consensus. This leads to what is called now the Post–Washington Consensus, which is a recognition that there are market failures. The idea is that if there are market failures, then of course the state is necessary. So you don’t have the resurrection of the developmental state, but you have the resurrection of the state as a regulator that tries to correct market failures but doesn’t allocate capital or doesn’t interfere with market signals. It corrects the signals if those have gone wrong one way or another.

In some ways we still have that now, because all discussions about carbon prices, for example, have to do with how to achieve the low-carbon transition; they rest on the idea that the state doesn’t need to do a lot more than just correct the failure of the market to price the climate crisis.

NDONGO SAMBA SYLLA (who has written a book on the history of CFA – Africa’s last colonial currency):

I am from the generation whose parents suffered the consequences of the IMF and World Bank austerity policies. You could see concrete impacts because many people were fired from their jobs, for example, because one of the ways to implement these structural adjustment policies was for the state to clean up its own budget. That means limiting its spending, and one way to limit the spending is to cut health expenditures and education expenditures and also to get rid of some civil servants.

Reduced state budgets also meant less investment and less open-door immigration policies. That has been the impact. That’s why if you look at the development trajectory of Africa and compare that to Asia, you would see that the most significant difference came after the 1980s. This is because Asian countries were not subject to IMF and World Bank policies in the 1980s and 2000s.

Some countries, for example, Cote d’Ivoire, Senegal, and Niger — their real GDP per capita in, say, 2015 was lower than their best level of real GDP per capita before implementing the IMF and World Bank’s policies.

That’s a clear indicator of the failure of these kinds of policies. But their primary aim was to prevent the emergence of the developmental state. There are many things people say about Africa, but the first two decades were developmental decades, despite all the shortcomings and despite the many proxy wars. But the leaders were really committed to creating some development, and you can see that in the work by the African economist Thandika Mkandawire.

On that final note, what is the Wall Street Consensus? (paper by Gabriela Gabor here)

he Wall Street Consensus (WSC) is an elaborate effort to reorganize development interventions around selling development finance to the market. The Billions to Trillions agenda, the World Bank ‘Maximizing Finance for Development’ or the G20 ‘Infrastructure as an Asset Class’ all call on international development institutions and governments of poor countries to ‘escort capital’ – the trillions of institutional investors – into ‘investable development bonds’, preferably in local currency. For this, the 10 WSC commandments aim to simultaneously reorganize local financial systems around bond market-based finance and forge the de-risking state. The state derisks bond finance for institutional investors by extending guarantees and subsidies to cover (i) demand risks attached to user-fees for (PPP) infrastructure, (ii) political risk attached to policies such as nationalization, higher minimum wages and climate regulation, (iii) climate risks that may become part of regulatory frameworks as material credit risks and (iv) bond market (liquidity) risks that complicate foreign investors’ exit from development assets. The WSC narrows the scope for a green developmental state that could design a just transition to low- carbon economies.

2276 – The Age of Uncertainty with JK Galbraith (BBC series 1977)

What better counterpart to a decade where the rich won (2020s) and quantitative easting (short QE) seems to rule them all than to watch a documentary on how it all began. And also to understand what bugged free market libertarians like Milton Friedman’s than to watch the documentary that ‘triggered’ his response. Today we speak of ‘triggering’ in terms of what right wing is good at (Fox News etc) – and how easy it is to push their critics into ridiculous postures and very predictable behaviors, basically in what became a Pavlovian show. Who is going to make his opponent react in a knee-jerk way? And even better, who will make the other adopt one’s own tactics and meme first?

Well, before all that, we can place these two documentary series. Both very personal, with two key players. Big influencers supr in terms of statal policies and ideas. Do not get me wrong, these documentaries are about one of the most hated subjects around: economics (prove eme wrong!). Who does not hate the history of economics or the principal ideas deriving from that? A majority seems to suffer and endure under economicsl hardships even if money amd investment or financial system seem tok haunt us. What os a recession, what causes it, what are the class politics behind austerity measures? Who gets tok pay for inflation?

Maybe this will also answer some of the curiosities and questions regarding the 1970s when the great Golden Age of Capitalism in the West came to an end after a series of shocks. Several counter-measures culminating with the switch from liberal democracies where Big Government Keynesianism (both left or later on right-wing brands of Keysianism) finally gave way to the Austro-libertarian school of Economics represented by Friedman and the Chicago boys. While some may feel emboldened to say that today in the midst of the polycrisis we have a Keynesian moment coming around and neoliberalism is on the wane, I would rather say (with Quinn Slobodian and others in mind) that neoliberalism has mutated itself in the time of decoupling, de-risking and ethnopolitics. Maybe it is capitalism as usual – an upside down world that cannot get the right side up and will only get more lopsided.

John Kenneth Galbraith (1908-2006) was perhaps one of the most interesting characters and appreciated social scientists of his time. There are echoes of Galbraith everywhere today, even in his admonishment of militaristic Keynesianism where the military-industrial-entertainment complex simplex in Washington begins to use all the levers of power to transform its Big Tech into a national asset amd industrial policy. Frmerly free-trade radicals feeding on nationalism start to recast themselves as anti-Chinese US stalwarts. All this is put into stark contrast by a new generation of Keynesian economists (Gabriela Gabor and Isabella Weber come to mind). Forgotten lessons seems valid again. To prevent inflation after WWII JK Galbraith was recommending strategic price controls (anathema to the free market radicals!)

As John Kenneth Galbraith explained “the role of price controls” would be “strategic.” “No more than the economist ever supposed will it stop inflation” … “But it both establishes the base and gains the time for the measures that do.” 4/

— Isabella M. Weber (@IsabellaMWeber) June 17, 2023

John Kenneth Galbraith is a representative of classical liberalism that also enjoyed tremendous influence & honed his skills & experience being active at the center of the US establishment. He was active in Democratic Party politics, serving in the administrations of Franklin D. Roosevelt, Harry S. Truman, John F. Kennedy, and Lyndon B. Johnson. He also had relations to the Global South – being an ambassador to India (the biggest democracy on Earth) during the JFK administration. At the same time, he was red-baited by his opponents and considered by conservative think tanks the man who “made socialism mainstream“. So when he is saying that the powerful US Farmer lobby is still hailing back to the physiocrat thinkers in France, he knows what he is saying from direct experience. He pokes fun at everybody, especially at the privileged members of the ‘leisure class’. He does not miss an opportunity to constantly question the very thinkers he mentions according to their own principles or tax them when they employ theories or easy justifications in their own favor.

Yeah it looks oldskool and peak boomer in a way, at the same time all episode 1  The Prophets and Promise of Classical Capitalism is a tremendous effort to stage the history or economic ideas, the larger background, or the assumptionsof behind it all, including all the major thinkers. The stage is set by unsettling the stage – in a Brechtian manner, all the illusionist art, all the stagecraft, and the scaffolding of history is shown to be a BBC studio. He quotes John Maynard Keynes (Galbraith himself is regarded as a post-Keynesian) at the very beginning:

“The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”

What can be blander than pretending to be free of any influence or any previous antecedent thinker or just acting according to practical reason, bootstrapping yourself? Then we risk like Kant’s dove to think that we can fly faster and more frictionless if we would prefer a vacuum instead. Yet this vacuum strikes back. Many intellectuals prefer to ignore schools of thought that have spawned the economics and politics that they prefer to think is the result of practical decisions & spontaneity. On the other end, you have professional economists being absolutely adamant that you have to stick with what works. They are eminently disinterested and ignorant of the history of their trade. Well, then maybe that is why we need historians of the economy.

Other than most Galbraith recovers those very fragments from the texts cherished economists that are not usually quoted or followed. This makes us see how fragmentary and prejudiced our reading of them is. The ideas and abstractions he visits are constantly pulled from their pedestal – with historical examples that seem to show the way they were misused. If he gets us to visit Adam Smith and the writing of the Wealth of Nations, at the same time notices that Smith in his self-interest and critique of tenured academics have also chosen private tutoring as a more profitable income over his university career. Eps 1 is a journey through the Scottish Enlightenment and Smith’s friendship with philosopher David Hume who woke Kant fromhis dogmatic slumber! Galbraith stops at French markets to talk about the theories of the French physiocrats or observe that not even Smith’s disdain could make us dismiss the Tableau économique of Quesnay sonde the input-output analysis later developed by Russian economist Wassily Leontieff (1905-1999) or the planned economy of the Soviet Union is a direct descendent of that very table. Principles such as laissez-faire and free trade are paraded, while the importance of the division of labor gets exemplified with the help of a pin-making process.

David Ricardo (1772 – 1823) advanced a Labor Theory of Value that was also going to have a long history ahead. In this climate of the British Empire, you had the first stirrings of the Industrial Revolution and the experiments in social responsibility at New Lanark cotton mills in Scotland established by industrialist David Dale. Capitalist charity (which was not charity at all), since children and women became the first recruits and disciplined workers of the new era, worked just 1h less than in the other mills. Socialist Utopian experiments in collective living such as New Harmony, Indiana established by Robert Owen also get mentioned – an episode that rests in my heart because of Marguerite Young’s magnificent literary rendition of that in An Angel in the Forest: A Fairy Tale of Two Utopias (1945).

Early eviction and land-grabbing in the name of ‘agricultural improvement’ also get staged under the Highlander Clearances, where Scottish tenants were pushed out of homes to make room for more profitable (and aesthetically pleasing) sheep. The Irish Famine – and its Malthusian instrumentalization by the British State, as well as the migratory working class trails across the Atlantic, are important references. For Galbraith, it is also an example of how easy it is to abstract from the misery of others and decide to ignore their plight when one life and calculates remotely at a safe distance from their troubles. Or ordering bombs to drop on unknown others from above. The Irish had to pay with their lives and with their wheat to the landlords while the Corn Laws blocked the import of cheap corn. The Hamlet of Marie Antoinette that somehow modeled pastoral life of the education of princely offspring also gets mentioned.

Eps 2 Manner and Morals of High Capitalism – makes pretty obvious how Social Darwinism became the secular religion of the rich industrialists and robber barons (today’s oligarchs and Big Tech billionaires) of the Gilded Age. Put simply Social Darwinists embraced both racism and laissez-faire capitalism. The survival of the fittest dogma fitted their own socially privileged positions and even if they were not biologists, they used a biological language and twisted Darwin’s idea of natural selection to position themselves as the finest and most adaptable representatives of the species. The popularity of Herbert Spencer in the US is proportionate with the amount of capital accumulation and ruthlessness of the American ruling class. Carnegie and Rockefeller become thus prime representatives of this ideological thinking. Galbraith presents a bizarre series of such US apostles of Darwinism that were sometimes even predecessors of the pro-capitalist Prosperity Gospel. One of them is laissez-faire advocate and clergyman William Graham Sumner. Galbraith also illustrates the thin line separating the capitalist from the criminal, the hoodlum and rascal in the 19th century by recounting in detail the Eerie War – a bloody conflict between US financiers to control the Eerie Railway Company in an effort to corner the market. This is not very far from the current crypto kings. Galbraith also remarks something interesting – that the poor have always been a preferred subject of sociological research, with investigators going to the slums to study their existence, mores and sexual life, while the rich have not attracted this selfsame attention at the time. That was to be the task of Thorstein Veblen -that did exactly some reverse safari on them, depicting the rich as no more than Big Man, and explaining their luxurious living and excess in terms that are still familiar to us today: conspicuous consumption (think Trump, think Berlusconi, space billionaires and basically every other fat cat). There’s one of the most sympathetic views of Marx and that chapter also makes it even more clear than the internecine wars of western liberalism would make neoliberalism or even current secessionist anarcho-capitalists completly at odds with what went on for much of the post war period in the western world. There’s a lot to be desired in the series perhaps none more than the chapter on colonialism – and the anti colonial, transatlantic slavery trade, and all the current struggles and long shadow of colonialism that still ontinues to this day.

The rest of the episodes you can find here

imdb

Goodreads

1777 – Can’t Get You Out Of My Head: An Emotional History of the Modern World (2021 documentary series by Adam Curtis)

directed by Adam Curtis (Pandora’s Box, The Century of Self, The Power of Nightmares, All Watched Over By Machines of Loving Grace + many more)

Synopsis

Can’t Get You Out of My Head: An Emotional History of the Modern World is a six-part series that explores how modern society has arrived to the strange place it is today. The series traverses themes of love, power, money, the ghosts of empire, the history of China, opium and opioids, the strange roots of modern conspiracy theories, and the history of Artificial Intelligence. Inspired by the 2016 apex of populism—the political ideology which presents The People as morally good, and The Elite as morally bad—the underlying aim of the series is to show why the critics of Donald Trump and Brexit were unable to offer an alternative vision for the future.

Part 1 — Bloodshed on Wolf Mountain

We are living through strange days. Across Britain, Europe, and America, societies have become split and polarised. There is anger at the inequality and the ever growing corruption—and a widespread distrust of the elites. Into this has come the pandemic that has brutally dramatised those divisions. But despite the chaos, there is a paralysis—a sense that no one knows how to escape from this. Can’t Get You Out of My Head tells how we got to this place. And why both those in power—and we—find it so difficult to move on. At its heart is the strange story of what happened when people’s inner feelings got mixed up with power in the age of individualism. How the hopes and dreams and uncertainties inside people’s minds met the decaying forces of old power in Britain, America, Russia, and China. What resulted was a block not just in the society, but also inside our own heads, that stops us imagining anything else than this.

Part 2 — Shooting and F**king are the Same Thing

This next part traverses the story of what tore the revolutions in the 1960s apart. Jiang Qing in China, Michael X in London, Afeni Shakur in New York believed that millions of people’s minds were haunted by the corruption and the violence of the past. They wanted to show people how to escape those ghosts. But they hadn’t reckoned with the fact that the old structures of power still haunted their minds too. They too had been scarred by the past, and some of them wanted violent revenge. While psychologists and neuroscientists were starting to discover what they said were hidden forces inside the human brain that really controlled what they did. But the people weren’t aware.

Part 3 — Money Changes Everything

This is the story of how in the 1970s, those in power set out to create a world free of the dangerous big ideas of the past. They banished the grand dreams of changing the world. And replaced them with money. People would live from now on in their own heads—in their own dreams. And the banks would lend them the money to create those dreams. While China would supply a wave of cheap consumer goods on a scale never seen before in the world. But then money broke free across the world. And people started to get frightened that things were out of control. Not just money—but the world’s climate too seemed to be behaving in a strange, unpredictable way. The systems seemed to have a life of their own. Beyond the ability of anyone to shape and predict.

Part 4 — But What If the People Are Stupid?

No one trusted politics or politicians any longer. Instead we were all one world of free individuals. And we could intervene to save other individuals around the world without bothering with old politics and power. And people became what they as individuals truly were—emotionally and sexually. But power was mutating and finding ways to work its way back into our heads. The politicians realised that they no longer had the support or the trust of the people. So they switched sides and gave up being our representatives who would challenge the powerful on our behalf. Instead they began to tell us what to do on behalf of the powerful. And they made new alliances—with the psychologists who said that human beings were irrational and needed to be managed. But we didn’t notice because we were too busy shopping.

Part 5 — The Lordly Ones

It wasn’t just the Slave Trade: 150 years ago Britain had wrecked China by forcing opium on the country. It made Britain the richest and most powerful country in the world. But it enslaved the minds of millions of the Chinese and helped destroy the society. But then the British got frightened of what they had done and created a dream image of a Britain that had never existed, to hide from the fear. This film tells the story of how from the end of the 19th century a magical vision of Britain’s feudal past was created by artists and writers. How folk music and folk dancing was invented to create a kind of safe dream of the nation that could hide the violence and the horrors. The dream persisted under the surface of the 20th century. But as the fears and uncertainties and the chaos of the last few years rose up millions of people started to believe that dream: that it was real.

Part 6 — Are We Pigeon? Or Are We Dancer?

The final episode tells how the strange paralysis that grips us today was created. How all the different forces of our age—that started out as separate have come together to create what is a block against imagining another kind of future than this. How, money and debt, melancholy over the loss of empire, the strange roots of modern conspiracy theories, the history of China, opium and opioids, Artificial Intelligence, and love and power have all fed into creating the present time of anxiety and fearfulness about the future. And whether modern culture, despite its radicalism, is really also part of the rigid system—in the West and in Russia and China—where those in power have run out of all ideas. The film also lays out what are the different possible roads from here into the future, and the choices we will have to make about the very different futures we will have to choose very soon.

Read a review on Guardian