Anti-Capitalist Chronicles: The Geopolitics of Capitalism - Part 1 of 2

[S1 E09]
Prof. Harvey explores the geographical movement of capital over time and how it has shaped power relations.

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Transcript edited by Victor Vulovic

            This is David Harvey, and you're listening to the Anti-Capitalist Chronicles, a podcast that looks at capitalism through a Marxist lens. This podcast is made possible by Democracy at Work.

            Today, I want to get into the topic of geography and geopolitics of capital. I do that, of course, because, in part, I come from a geographical background, so I've always got to insert some geography into it, but actually, it's a very important topic and one, which is very relevant to understanding the contemporary condition. Now, in order to approach this from a Marxist standpoint, it's always important to recognize that Marx started [The] Capital with the argument that a capitalist mode of production is a mode of production in which wealth is actually measured [in], or appears in the form of, commodities, and so Marx starts The Capital with the “Theory of the Commodity”.

            And one of the things I found very interesting in the last book I did was that there's a lengthy discussion of “the commodity” in one of Shakespeare's plays, and since Marx loved these kinds of references, I thought I would actually start by doing a little Shakespearean reading of this topic from King John:

"Mad world! Mad Kings! Mad composition! / […] / That smooth-faced gentleman, tickling Commodity, / Commodity, the bias of the world, / The world, who is of itself is peised well, / Made to run even upon even ground, / Till this advantage, this vile drawing bias, / This sway of motion, this Commodity, / Makes it take heed from all indifferency, / From all direction, purpose, course, intent, / And this same bias, this Commodity, / This bawd, this broker, this all-changing word, / And why rail I on this Commodity? / But for because he hath not woo'd me yet: / Not that I have the power to clutch my hand, / When his fair angels would salute my palm; / But for my hand, as unattempted yet, / Like a poor beggar, raileth on the rich. / Well, whilst I am a beggar, I will rail / And say there is no sin but to be rich; / And being rich, my virtue then shall be / to say there is no vice but beggary. / Since kings break faith upon commodity, / Gain, be my lord, for I will worship thee."

            Now, Shakespeare was writing this at a very interesting time in history when capital was just beginning to assert itself, and commodity culture was just beginning to enter into the scene, and the monetization of everything began to be very significant. Before that, people, in effect, address their thinking and their loyalties to kin and to family, and this difference between loyalty to family and the chase and pursuit of monetary gain-- this distinction is something, which becomes very strong, of course, in many of Shakespeare's plays. And it's something that is, of course, registered today. If you watched the TV series, Game of Thrones, it's all about loyalty to family and family name. It's the Lannisters versus the Starks, versus the Tyrells, etc., and people's loyalty was to the house, to a person, or to a family. And this was very different from gold, which does enter into the game of Thrones, but was also entering in, of course, in Shakespeare's time.

            But this distinction between two foci of interests-- the family, which was located in a particular place, and space and time, and therefore, was often defined territorially... (so the Starks are in the north, and the Lannisters are in the South, and all those kinds of things)... So, there is a territorial structure to those loyalties, and, of course, though there were wars going on all of the time between these different territorial structures (and in the European situation these wars were incoherent and they were bouncing in different alliances, a bit like the things you see in the game of Thrones, which gets very confusing because you're not quite sure who's backing who and when/why they're switching sides and the like). But this was all settled in the European context by the Treaty of Westphalia in 1648, which brought the end of a long period of wars of religion, wars of ethnicity, wars between clans, wars between everybody, and basically, settled on the idea there should be something called “the state”-- the nation-state-- within which there would be sovereignty.

            And the sovereignty was such that people will be citizens of that state, so you can clearly understand. And the general idea behind the Treaty of Westphalia was that every state should actually respect the integrity and the borders of every other state. Now, that didn't always hold in subsequent history, obviously, but nevertheless, this was a very important settlement, which actually clarified the territorial structures of power.

            Now, this led me to think quite a lot in my work about the distinction between what I call a territorial logic of power, which is the attempt to create within a territory, under the rubric of a nation state or a state, some configuration of power, which would be able to project itself onto the world around it. And therefore, that logic of power was going to be about military presence, it was going to be about superior education, it was going to be about superior culture, and it was going to be about trying to actually create a perfect state; an ideal state if you want to call it that. And in order to do that, you had to develop institutions, you had to develop certain hierarchical structures of command and control within the state, and this became then one of the features of capitalist power.

            Now, Marx didn't do much with this idea of the territorial structures of power. Marx mainly talks about another source of power, which is a source of power that lies with the Commodity; the source of power that lies with money, and gold, and the like. And that source of power becomes terribly important in order to understand the logic of what is happening in the world. We have a phrase when you're stuck with a conundrum, people turn to you and say, “Well, if you want to find out what's going on here, follow the money.” When you follow the money, you'll find out who's really doing what behind where. Now, there are these two logics of power: (1) a territorial logic of power and (2) the other this capitalist logic of power, which is inherent in the accumulation of capital. So as an individual, you can have immense power because you've become one of those eight billionaires that control 80% of whatever it is of the world's resources. And as such, of course, you wield this power, but you wield it in a context where there are these other forms of power around. And so there's often a real bit of a problem about how the billionaires relate to the territorial state power. And of course, one of the ways in which they relate to it is that they turn the state into an agent of their own interest. But state power is more complicated than that because the state houses a population, and the billionaires may not be popular with the population, and so the big question is the legitimacy of who has power within the state? And so there's a contest all the time about how that monetary power is used within the state apparatus.

            So when you think about these two logics of power, you then say, “Well, what's the relationship going on between them”? And it's very important when you do something like this to say they're not separate from each other. They're constantly in relationship to each other. So that, for example, an affluent class will set up international institutions, which will somehow either regulate what's happening in the monetary field, but regulate it in such a way as to somehow rather be significantly influential over who has a territorial logic of power greater than somebody else. So an institution of that sort, which is very important in our contemporary world, would be the International Monetary Fund.

            The International Monetary Fund plays a very important role in regulating how the rule of law on how monetary exchanges shall occur across the globe. There are other institutions like the Bank of International Settlements in Basel, which similarly exercises that power. There is the World Bank, there are many of these institutions. There are interesting forms of what you might almost call “monopoly power” at this level, which are private institutions, but they're actually global in reach.

            One of the most powerful institutions in their own society is McKinsey, which is an accounting firm, but also a consultancy firm. So anybody who comes to power generally calls in McKinsey and says what should we do, and McKinsey gives them the neoliberal recipe, and so everybody then implements the McKinsey program. I've often fantasized with some colleagues about we should have a left-wing McKinsey, so when somebody comes into power as a real left-wing instances, they've got a consultancy organization that can come in and say, “Okay here's the left-wing answer, not the neoliberal answer.”

            This relationship between territorial structures of power and the capitalist logic of power is something that we really have to pay careful attention to. In doing so, one of the things I do is to start to say, “Well when you start to look at the capitalist logic of power, Marx actually argues that capital is 'value in motion'.” And that there's therefore, within capitalism, a motion of money, a motion of commodities, a motion of production, a motion of the factors of production, like labour, and resources, and all the rest of it; so that you're actually dealing with the monetary forms of power-- not something that is static or is contained, but something that's constantly in motion. And one of the things it's very difficult for a state to do is to prevent the motion.

            There was a wonderful moment I remember when Mitterand became president of France and decided he was going to truly try and implement a socialist program. And one of the things he did was to nationalize the banks and the like. And what he had to do was to try to control the flight of capital; that capital just was flashing out of the country like crazy because it didn't want to live in this world, which was controlled by in this socialistic manner. So in order to prevent capital flight, he had to start to put on capital controls, and one of the forms of capital control that he found very difficult to do was the use of credit cards. Now, at that time back in the 1980's credit cards were not quite as popular as they are now, but in France, the “cartes bleu” as it was called (which is a Visa credit card) was very popular in France, and, of course, people used it when they went on holidays and when they went on vacations. They took their cartes bleu and they played with... well, Mittterand had to control the use of cartes bleu.

            Now when you do that, the whole population in France was absolutely outraged, and so within a few months, Mitterrand realized that he couldn't control the flight of capital out of the country, and that he had to reverse. And he then got rid of the nationalization of the banks became a good neoliberal subject. This was a situation where capital flow disciplined the state apparatus, and one of the things we've got a look at right now is the relative form of power between capital flow as a powerful force regulating what happens in the global economy and territorial power. And one of the big arguments that that has to be said about the neoliberal period, is that the state, in many ways, has become an agent of monetary power; that the bondholders actually control the power, not the state itself.

            There was a wonderful moment when Clinton came to power, and there's an apocryphal story: he's just been elected, he starts to outline his economic program, and his economic advisors, most notably a Robert Rubin (who came from Goldman Sachs) looked at him and said, “You can't do that economic program.” And Clinton said, “Why not?”, and Rubin said something like, “Well, Wall Street won't let you.” And Clinton said, “You mean to say that my whole economic program or all my prospects for reelection are dependent on a bunch of fucking bond traders?” And Robert Rubin apparently said, “Yes.” So Clinton came in promising universal health care and all kinds of wonderful things, and what did he give us? He gave us NAFTA, he gave us the reform of the welfare system, so it became much more punitive; he gave us a form of the criminal justice system that started sending people mass into incarceration, he gave us the WTO. At the end of this, they repealed Glass-Steagall, which is one of the things that the financiers wanted. In other words, he implemented a whole program, which was what Goldman Sachs wanted. And it's interesting actually in the United States there's been very few moments in US history since Clinton where the Secretary of the Treasury has not come from Goldman Sachs. And this is a very important indicator of the way in which the bond holders actually contain what can be done in state power.

            Now, when you say this in the United States, of course, everybody looks at you and says, “Well that's a conspiratorial position”, and all the rest of it. And nobody really believes you very much, but you go to Greece, and you ask them, “Does your government control things here, or do the bondholders who actually forced all this austerity down your throat have been doing it since 2011-- are they the ones in control? Who's really in control here?” Well, it turns out, of course, it's the bondholders. And everybody in Greece knows that and, of course, the socialist government there, Syriza, is really stuck with having to implement all the time, measures, which in effect, are demanded by the bondholders. And there are interesting struggles in Europe going on-- in Italy right now, there's this whole struggle because the bondholders are essentially saying one thing, not directly, but through the European institutions.

            Because what happened over the Greece thing was something very again very interesting that the debt indebtedness of Greece-- which was a real serious problem no question about it-- the indebtedness was really indebtedness to European banks, particularly the German and the French banks. Now, if Greece had declared default in 2011, that would have meant that actually, the French and the German banks would have been really screwed, and the German government and everybody else would had to bail out the banks because they had got these really bad debts, which was not being paid by Greece. But there was all this pressure on Greece not to default, and they were promised again and again that they would get help from the European Union. But what really happened was not help from the European Union; the debt out to the banks was transferred from the banks to these international institutions: the European Central Bank, the European Stabilization Fund and  the International Monetary Fund.

            So instead of the banks going bankrupt, what happened was there were a formation of international institutions, which put then the austerity package together and said to Greece, “this is what you have to do: you have to privatize, you have to sell all of these goods, and you have to privatize even the Parthenon” There was even talk about whether we should privatize that. So Greece was put into this situation, so if you said to the to the Greeks, “Look who's in control here, your government or the bondholders?” You would get a very clear answer, and this turns out to be very much the situation globally right now.

            Now, this global situation says that accumulation of capital is going to be dependent upon the way in which territorial governments respond to that accumulation of capital. so what do we see? We see a large corporation-- the most recent example we have in the United States is Foxconn-- and it says to Wisconsin, “We'll come and build a factory in Wisconsin.”, or Amazon says, “We are thinking of setting up a big place so, which place will provide us with all the help and all of the funds we need?” So, in effect what large corporations can do is to sit there and say, “Well, okay, we have all of these places where we can go, which one of you will give us the best deal?” And Amazon actually really set out that way and basically announced it was going to set up some new campus, and it invited bids. Foxconn negotiated with Wisconsin, and Wisconsin was very happy, and they decided they would give Foxconn four billion dollars to come and set up a factory.

            Now, Foxconn is interesting because much of Foxconn's work is in China, but Foxconn is a Taiwanese firm, so it's a Taiwanese firm with major operations in China that is actually now setting up, possibly, in Wisconsin, but only provided that it is given a lot of subsidies. And so these calculations that say [...] “This is costing about [...] four thousand dollars a year per job”, or something of that kind and then, of course, Foxconn having agreed to this then turns around says, “Oh, by the way, we're not actually going to manufacture anything there, but we're just gonna simply use it as a research campus.”

            So the power relation between the territorial entity and the corporation or the money power-- that power relation is constantly moving around us, and, therefore, what this does is not to make territories irrelevant... (and this is one of the big things that were said in the 1980's; territorial power is irrelevant, we don't care about the state anymore, all the power lies elsewhere). Well, actually, in a funny way, by power moving towards finance, and monetary forms, and big corporations; actually, small geographical differences became even more important than they were before. Because what the large corporation would look for would be, “What are the advantages of being located in this space as opposed to that space?”, and if there was just a small tax advantage between this space and that space, you would go to that space, which would mean that this space would then say, “Where we have to change our taxation arrangements so that they will come back from that space and come to this place”. And then so you get actually inter-urban and inter-regional and international competition between states to try to attract foreign investment, and this is one of the big aims of state power right now.

            Now, this was not the case in the 1950's and 1960's because the state at that point was much more socially democratic, so part of what the state was trying to do was to guarantee well-being to the mass of its population. It didn't always work and, yes, indeed; there were certain problems. Also back in the 1960's and 1970's there were strong capital controls so that you couldn't move money around the world as easily as you can now. I remember the first time I went to the continent (I'm old enough to remember this, you see) back in the 1950's the first time I went to France. I had to go to the bank in order to get traveler's checks. I was only allowed 40£ of traveler's checks, and after I took got the 40£ of traveler's checks, they stamped 40£ in the back of my passport, and that meant I could not get another 40£ until the following year. Now, if you say to anybody right now that you lived in a world where that sort of thing went on! But when I was a kid that's what we did. I mean, I have my 40£ of traveler's checks, and that was all I could... So everybody in Britain was living under a regime of capital controls, and capital controls were consistent with that Bretton Woods Agreement that was made in 1945 about how the international monetary system would work. Now, that all broke down at the end of the 1960's into the 1970's, and after that, we started to get much more fluid movement of money.

            Now, this then brings us to the question of the geographical movement of capital. Now, capital assumes three primary forms: one is money, the second is as commodity, and the third is as production. Now, which one of those forms of capital is most easily moved? Well, it turns out it's the money form. The way I think of it is: of money as the butterfly form of capital. It flits around the world, and then it sees a tempting flower, and it lands on that, and then it picks up again, and flies off somewhere else. The commodity is the caterpillar form of capital; it crawls around rather slowly, and it's a bit cumbrous-- when you have a lot of steel rods it just can't flit them around. The third form of capital production is the least mobile. So you've got the three forms of capital-- which one of those forms dominates in a particular historical period, is terribly significant, terribly important.

            Giovanni Arrighi had an interesting theoretical argument. He said, “Capital reaches a point where actually it's got real difficulties of expansion in its production form, and its commodity form is getting very sluggish. So when that happens, there's likely to be a push to create a more fluid financial system”, and he documented that historically by saying, “Well, actually, if you look at Venice and Genoa, you'll see they got to a point where they became basically financiers, and as financiers, they started to actually then be much more interested in the movement of money.” And I was always thinking about this, about the Game of Thrones just to go back to that, because the Iron Bank in the Game of Thrones at some point comes into the negotiations because they've got the money and they therefore come into the thing.

            So the financialization that went on played a very important role in the movement of power in capital from the Italian city-states northward into Holland, and so the second period of this was merchant capital focused on the Netherlands, the power of the Netherlands. And so you have Amsterdam, and you and all of the power of that, and then that reaches its limits and you get another phase of financialization, which actually moves capital to Britain in the 17th or late 18th century, and then of course there is the financialized move from Britain to the United States. And the United States started to reach its limits in terms of its productive capacity in terms of organizing the 1980's, and so we start to see this strong movement into financialization. And the big question right now is, “Where's the finance actually going to go?”, and of course it goes to wherever the production capacities are best, and that happens, of course, to be China, which I talked about a couple of weeks ago. And this is actually one of the situations we're in where a financialized capitalism is very fluid in terms of which flower is it going to alight upon and where are conditions optimal for that development. And so this is the situation we're now in. So it again it's it's the money form of capital now, which is actually re-territorializing structures of economic and political power, and I'll talk more about that next time.

            Thank you for joining me today. You've been listening to David Harvey's Anti-Capitalist Chronicles-- a Democracy at Work production. A special “thank you” to the wonderful Patreon community for supporting this project!


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