Financialised capitalism and emerging economies
Photo by © Mimi Mollica - From the series Moon City
In April 2021, at the height of the pandemic-induced production slowdown and economic stagnation, global apparel giant Nike gave its head office paid leave for a week to ‘rest and recover’ from lockdown fatigue. In stark contrast, millions of workers in Nike’s subcontracted plants in Cambodia, India, Pakistan and Indonesia saw their livelihoods devastated by order cancellations, and to this day are still waiting for $71 million in unpaid wages (FT.com). This case provides an illustrative example of the highly unequal economic realities and the role of finance in creating and transferring value from emerging capitalist economies (ECEs) to advanced capitalist economies (ACEs), as theorised in a CLaSP seminar led by Jeff Powell in March 2023. The seminar was based on Jeff’s new publication, co-authored with fellow economists Bruno Bonizzi and Annina Kaltenbrunner, and titled Financialised capitalism and the subordination of emerging capitalist economies.
The authors’ conceptualisation of financialised capitalism (FC) refers to the current stage of mature capitalism, the ‘inherently global and uneven nature of which accounts for the shared experience of subordination of ECEs while, at the same time, allowing for spatial variegation’ (652). Whereas much of the literature on financialisation and Critical Macro Finance has drawn attention to the transformation of finance into a US dollar market-based system, Bonizzi et al. re-centre the material basis of structural transformations that can explain how the ‘concurrent rise of global market-based finance’ represents the reorganisation of global production (655). In other words, economic relations reproduce existing unequal power dynamics in the world between the core and periphery, connected by the internationalisation of production that has created ‘channels for the extraction and transfer of value from workers in ECEs to agents disproportionately located in advanced capitalist economies’ (652). This value is increasingly captured by financial capital ‘thanks to its supporting role and strategic position in relation to the international circuits of productive capital’ (652). The authors also stress the need to distinguish between financialisation as a cyclical process, which involves short-term speculative bubbles like the Dot Com crisis in the late 1990s, and FC as a secular stage, which refers to the ‘secular increase in the relative size and weight of finance […] both underpinned by, and crucial to, the process of accumulation’ (652).
FC provides a compelling argument for understanding how nations, especially those whose economies could be considered as not ‘fully financialised’ are drawn into extractive relations with more powerful nation-states. For example, the extent of the financialisation of the economy of the Democratic Republic of Congo may be very limited by most measures, but its mineral resource extraction industries controlled by firms based in the EU and North America play an important role in financialising their respective national economies.
FC has important political and sociological implications linked to the constraints on the agencies of actors in ECEs in framing domestic policy and the perpetuation of exploitative labour conditions and wage-oppression as Global Production Networks (GPNs) have expanded. Powell presented a table summarising different authors’ hypothesised causal drivers of financialisation and their policy correlates. For example, where rising monopoly is argued to drive financialisation, the recommended policy response often includes legal remedies such as anti-trust legislation; however in Bonizzi et al.’s analysis linking FC to the affordances for value extraction created by GPNs, the argument is for greater emphasis on defending workers’ pay and working conditions in ECEs and the monitoring of intra-GPN corporate relationships. Secondly, Powell points out that we can understand how the surplus value captured between product design, monopoly distribution and branding and marketing that is in the production process is ‘to a significant extent a materialization of surplus value extracted from super-exploited workers in low wage countries’ (Smith 2016, 299). This aligns with Marxian critiques of super-exploitation where workers in ECEs are remunerated below social reproduction costs which foreground gendered dimensions of surplus value transfers that are directly exploitative of women’s labour and indirectly exploitative of their role in social reproduction (see Mezzadri 2017; Selwyn 2018).
Powell’s thought-provoking presentation evoked generative responses from participants. Particularly his concluding remarks that emphasised the scope and direction for future research in understanding the micro and macro dynamics linking GPNs to market-based finance systems and orienting efforts to counter FC where changing labour conditions in ECEs are equally important as financial regulations in ACEs. Pertinent questions were raised on: the validity of ‘rent’ as the appropriate category to describe value extracted considering its diffuse understandings in economic literature; the limitations on policy instruments to bring about substantive improvements in labour conditions or alleviating wage-oppression on the ground; the historic recurrence of financialization preceding massive infrastructure projects; and the applicability of FC to explain ecological exploitation alongside expansion of market-based finance systems and GPNs.
Dr Jeff Powell, Senior Lecturer in Economics at the University of Greenwich, spoke at the CLaSP seminar series at the School of Business and Management, Queen Mary University of London on March 9 2023.
Jeff is a member of the Institute of Political Economy, Governance, Finance and Accountability (PEGFA), as well as a founding member of Reteaching Economics. He completed doctoral studies in economics at SOAS, University of London. His research looks at the distinctive subordinate nature of the financialization of emerging capitalist economies, and the distributional implications of contemporary monetary policy. Previously, Jeff worked as Policy & Campaigns Director of UK development NGO War on Want, and was Director of the UK NGO the Bretton Woods Project, scrutinising the policies and projects of the international financial institutions. He has extensive experience in community-led economic development projects from Southeast Asia to Latin America.
Suyash Barve is a PhD Student at the School of Business Management, Queen Mary University of London.