Prof. Harvey continues his discussion of the geographical movement of capital over time and how it has shaped power relations.
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Anti-Capitalist Chronicles: The Geopolitics of Capitalism, Part 2
Transcript edited by Jake Keyel
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.
This is part two of a conversation I want to have about the geopolitics of capitalism. Last time, I was talking about the mobilities of the different forms of capital and how territorial logic of power relates to what is a more fluid motion and incorporation of power within the financial and commodity production system. I want to attack that whole thing from a slightly different angle by using a theoretical construct, which is the idea of what I call a “spatial fix.” Capital develops, and as it develops, so we get an expansion. The geography of capital is actually always about something that is constantly expanding. Within a particular territory, the possibilities for expansion are to some degree limited by the resources, by the population, by the dynamics of the infrastructures and the like. So, you will get capitalist development in a particular place and time, where the accumulation process will build cities, and will build production capacity, and will deliver wealth and well-being to the population and all the rest of it. But, at a certain point within that territory, it reaches a limit.
That limit leads to an expansion in which the surplus of capital, which exists in a particular part of the world, and it can be accompanied or not accompanied by a surplus of labor, the surplus of capital needs somewhere to go. Where does it go? Well, it can go in a colonial direction, that is it can develop colonies, or it can simply export capital to some other place in the world. The way in which that export of capital works—and Marx has actually a very interesting description of this—is that you lend money to some other place in the world, and then that other place in the world uses the money it has borrowed to buy your commodities to either satisfy the wants [and] needs of the population, or to build infrastructures elsewhere.
In the British case for example, in the middle of the nineteenth century about 1870 or so, there clearly was a lot a surplus of capital around, and nobody knew what to do with it because Britain was always kind of already highly developed, and there were not those profitable opportunities within Britain. So, Britain started to export capital. The typical game it would play would be this: it would lend money to Argentina, and say to Argentina you can build the railroads and will lend you money to build the railroads. You build the railroads and you then pay us, because the railroad equipment is all going to be made in Britain and the steel is all going to come from Britain. That will then support our surplus productive capacity at the same time as it will then allow you to develop, because you need to develop the Pampas, and have railroad connections in the Pampas so that you can get the wheat to the ports and then you can sell us your wheat and this kind of thing will go on.
What this means is that surpluses of capital in one part of the world are used to develop an expansion of the capitalist system elsewhere. In the nineteenth century, the centers of capital surplus were very few and far between; it was mainly Britain and some parts of Europe. A lot of it flowed to the United States. There are two things that can happen with this surplus of capital. It can be controlled, and I think here the British relationship to the rest of the world in the 19th century is instructive. Essentially Britain needed to expand its markets. So, one of the things it did in terms of its occupation of India, and the absorption of India into the British Empire, was that it destroyed Indian industry and replaced Indian industry by imports from the textile factories of Britain. What this did was to say essentially the logic of India in relationship to this spatial reorganization, was as a market primarily.
India had to pay for the imported textiles and the like. How was it going to do that? Well, something had to be exported from India in order to be able to pay for it. India did have some exports: tea and jute, and things like that. But they weren't really enough. One of the things that the British did, was to say one of the ways we can deal with this is to get India to produce opium, and then we'll send opium to China. Then China will play for the opium with silver, so the silver will come to India, and then the silver will go from India to Britain. It's a wonderful kind of system, which Rosa Luxemburg outlines by the way in her little book on the accumulation of capital. The special fix to the problem of the British textile industry having surplus productive capacity, rested upon the destruction of Indian industry, the transformation of the market into a sort of export market for British product, and then the creation of these other forms of production, which were then going to generate enough silver to pay. So, you can see how the system worked. And this is what I call a spatial fix.
That spatial fix also required something else: infrastructures. Marx had again some very interesting things to say about India in this regard, because one of the ways in which you could unify the Indian market was through investment in transport and communication structures. So, Britain built the railroads in India. You go to India these days and you'll see this wonderful Victorian station in Mumbai, which is a sign of this British colonial activity. Again, the export of surplus productive capacity to some other part of the world, require that part of the world have some means to pay for it. One of the ways in which that was paid for was by lending them money to buy, and lending them money to put into the infrastructures. If the infrastructures improved the productivity in India, or the ability in India to be able to work through the market. There was there was that style of spatial fix, which was really a form of colonial domination of a territory, and the utilization of that territory as a source of raw materials, as a source of extraction of monetary wealth, and as a market.
The other form of export of capital, was really, I think, most clearly represented by the United States. Surplus British capital came to the United States because there was an open territory, but in the United States it was not used simply to create a market, some of that went on. It was so used to create an alternative form of capital accumulation, that is, to invest in productive activity, rather than to simply invest in consumerism. In effect, what happened was that British capital played a very important role in funding the creation of an alternative market, which was very vibrant, because capital accumulation takes off inside of the United States. As it takes off in the United States, is making big demands over machinery, and production, and so on, and that is putting a lot of demand into the global market, some of which is going to be met by the expansion of British production for the US market. But notice, what happens in this case, is that you create a territorial rival. The United States, because it was initially [a] colonial and [then] postcolonial kind of structure, because it was a productive form at some point, it developed its own form of capital accumulation, and that form of capital accumulation began to produce surpluses of capital. So, the United States at some point or other, competes with Britain and it defeats Britain in competition. In a sense, Britain played the key role in financing the agent of its own demise.
This is a form of the spatial fix, but the spatial fix plays a very important role in relationship to crisis formation, because the spatial fix is a very long-term temporal system. I mean, investment in railroads in the United States, it's not as if you get a rate of return within six months. If there’s going be a rate of return, it's going to be because the productivity of the US economy is going to rise and it's going to be over a period of 10, 15, 20 years, so you need long-term investment. Long-term investment means appeal to some sort of credit system, which allows you to mobilize money, power, or what Marx would even call fictitious capital for a while, to be able to build a new infrastructure, so that you build the new infrastructures and those infrastructures then become the basis for an alternative form of accumulation and alternative dynamics. Now, this system has an interesting history.
What I would want to do is to point out that actually, this spatial fix, and this perpetual kind of movement, has been going on at considerable speed in the global economy since 1945, but particularly since 1970 or so. Actually, what happened was that surplus US capital, and surpluses of capital from other parts of the world, were beginning to be used to create alternative production systems; but, the alternative production systems were different from simply creating markets. One of the arguments I make, and I know I get into trouble about this, is that actually as far as Britain was concerned, the Indian venture was less profitable to British industry than the US venture was because in a sense what you're doing in the Indian case is you're suppressing the inherent dynamism of capitalism. You're trying to prevent a production system developing very radically in India. There was some of that going on, but it was constantly under British rule being repressed, because Britain did not want to create a competitor to itself in India. It wanted to keep India in its pocket as a market. This at a certain point ran out of dynamism, and so the Indian case became less and less profitable for the British enterprise; whereas, in the United States, Britain did not control it, could not control it, and the dynamism was always there, and the dynamism was really pushed so that we have this dual character of the special fix.
Here we have after 1945, a real problem in the global economy. The U.S. actually understood that [it] would benefit most from decolonization, which is taking colonial possessions out of the control of Britain, of France, and all the rest of it, and preventing them being captive markets. U.S. did not have captive markets, and so in its own interest, it said open all those markets up, because the US figured it could colonize those markets just as easily as Britain and France could. So, decolonize, but then also open up the world to alternative structures of development. This was the genius, if you like, of the Marshall Plan, because the Marshall Plan was not simply about trying to use Europe as a convenient sink for surplus commodities from the United States. It was actually about rebuilding sites of capital accumulation. To the degree that surplus capital was relocated to Japan and to Europe, so it led to the revitalization and revival of the Japanese and the European economies. As you will probably know, that period from 1945 until 1970 or so, was one of astonishing growth in the global economy, and much of that was built upon the creation of these alternative centers of capital accumulation in Japan and in Western Europe.
Then, came this really strange situation in the 1980s, where those alternative areas of accumulation suddenly started to out compete the United States. The US suddenly found it had helped create its own rivals. If I was giving this talk back in the 1980s, I would be talking about Japan and West Germany as being hegemonic in terms of global capitalism. They're the ones that are really racing ahead and the US had encouraged that, because it was to the benefit of the US to encourage it. But, then it's faced with then how does it deal with [that] fact. Well, one of the answers to that then starts to be this whole kind of globalization. The US says, if this is the way the world is going to be, we're going to institute a world order of a certain kind, rules-based world order, where we can all compete, and we can all benefit from open trade with each other. So, this was the solution that began to be set up, and that was the neoliberal order of free trade, the reduction of tariff barriers, the creation of a global financial system where it became very easy to move things around from one part to the other, the creation of new technologies of transport and communications, and so on. A lot of things went into this.
One of the things that then happened was, you started to find the development of all of these alternative centers of capital accumulation. Japan, for example, develops very strongly and has huge quantities of surplus capital at the end of the 1970s and it's been building it since the 1960s. What is it going to do with it? So, the Japanese do all sorts of things like, there was this Japanese invasion of the US economy. They bought the Rockefeller Center, they bought Sony, they got into Hollywood. So, all this surplus capital is flowing from Japan back into the United States, and the Japanese economy therefore is looking for modes of expansion. It begins to expand around the world and starts to actually have a mini-imperialist kind of presence in many parts of the world. Suddenly, we see a whole sequence of exactly the same thing going on throughout Asia. Korea, South Korea develops. It develops not a free market economy. It develops under military rule and military dictatorship, but the US. is prepared to allow South Korea to develop for one very simple reason, which was again the geopolitics. That is, this is the only way in which you could contain Communism and the containment of Communism was terribly important, not only was it Russia, but also China. In order to contain Russian and Chinese expansionism, what did you need? You needed a prosperous capitalist, pro-capitalist South Korea. So, the United States supported the development of the Korean economy.
When you get to the end of the 1970s, suddenly you find that Korea has surplus capital, because it's developed this incredible productive apparatus. And what does it do? Well it can try and set up an automobile company in the United States and do those kinds of things; and it did do those kinds of things. But, actually, a lot of capital suddenly starts flowing out of Korea like crazy right the end of the 1970s; it needs a special fix. Suddenly you find all of these sub-contracting firms appearing in Central America, Africa and so on run by the Koreans. When you start to look at the labor practices and human practices they're pretty brutal. The same thing happens to Taiwan. The US supports Taiwan and it wants a prosperous economic development in Taiwan to make sure that it remains in the US orbit rather than being absorbed back into China. So, Taiwanese industry starts to become very important. But again, about 1982 you suddenly see capital was being exported from Taiwan. Where is it going? Well, again it's going all around the world and this was the moment when Foxconn, which is one of the big ones, originated and started at that point to move into China. Actually, Korea started to move into China. Japan started to move into China. Taiwan started to move into China. They all started to move into China and the Chinese development then is very much based upon Taiwanese, Japanese, South Korean and Hong Kong, which is a special kind of part of this.
Hong Kong was a very interesting case because in 1978 before China opened up, Hong Kong had already defeated British textile industry and the British textile industry was already being deindustrialized. It could not compete with Hong Kong textile products. But, Hong Kong was running out of labor. They wanted to expand; they needed labor [and] they haven't got enough within the territory. Then, thank God, China suddenly opened up and Shenzhen open[ed]. Hong Kong flew into there like crazy with a different labor force there available to it and it then played a very important role. In fact, much of the early phase of reindustrialization in China from the 1970s 1980s was the result of all of these imports from Hong Kong, Taiwan, South Korea and Japan. But, what did they do? They created an incredible productive economy within China.
That economy starts to defeat [the others]. [The] Japanese economy has been in a slump since about 1990. Taiwan has been struggling even as Foxconn, which is a Taiwanese firm, employs 1.5 million people in China. And also, Foxconn has a productive capacity in Latin America and Africa and as I mentioned earlier it going to have it in Wisconsin. This is the special fix. The spaciality is moving and it's moving from one place to another. What we see right now is that China suddenly has a surplus of capital. What's it going to do? There's a key moment, and I don't know if it's pure coincidence, in 2008 there was this huge crisis in global capitalism. In that year for the first time foreign direct investment into China is less than China's foreign direct investment out of China. So, China gets into export of capital. I have a wonderful map of China's foreign investments in 2000. There was about three little blobs on it. By 2015, it's all over the place. The whole world is being caught. The Chinese start to orchestrate this around something called the “Belt and Road,” which is a geopolitical expansion plan where surplus capital from China is being allocated to rebuild the connectivity of the Asian, Eurasian continent, which has a very interesting history.
There was a man called Halford Mackinder. Mackinder was a professor of geography at the University of Oxford and I taught in Oxford for seven years and I was the Halford Mackinder Professor of Geography. Mackinder was a reactionary, right-wing imperialist but he was also a geopolitical thinker. Geopolitically he came up with the following formulation: whoever controls Central Asia controls the world island, which is Eurasia together. Whoever controls the world island, controls the world. The Chinese have been thinking geopolitically for at least ten centuries and they've read Mackinder. They've read also the American thinker Mann who talked about the role of sea power in history around the 1890s. Mackinder wrote all this stuff back in about 1920s or just before that. In the 1920s, 1930s there was a whole school of German thinking, which was geopolitical thinking. One of the arguments they made was that states are a bit like organisms and they need to feed and they need living space. The theory of Lebensraum was absolutely crucial to Nazi ideology about world domination and the struggle for world domination.
So, what we’re seeing right now is that China is actually through the Belt and Road beginning to assert almost complete control over what's going on in Central Asia. If Mackinder was right, I don't think he was but the Chinese maybe think he's right, and if they're thinking in these terms then they're going to use their surplus. They've got surplus of cement production, they’ve got surplus steel production. What better way to do it than build railroads right throughout Central Asia? The first trains now are going from China to London and actually it takes two weeks instead of four weeks. They kind of figure that they'll be able to reduce the time it takes to get from China into Europe immensely by having this fast railroad network, because right now it's a pretty messy rail network. But, they're building this whole kind of thing.
What happens is that in the West people say this is all wasteful rubbish. Again and again we find Westerners saying this won't work, it can't be profitable. Actually, it's probably not profitable in the short run. But in the long run it’s actually going to reconfigure geopolitically how the whole world is going to be structured. It's no accident that the Chinese, who for many years did not contest the United States anywhere, are contesting US power in the South China Sea, but they've also got a terrain, Central Asia, where they are not contesting anybody. The US has no capacity to do anything in Central Asia and it's interesting one thing you cannot say in China right now is you cannot say anything rude about Russia. Chinese and Russian interests are very much in accord and you're beginning to see them coming to an accord when they start to support Venezuela, Maduro in Venezuela.
Notice how much of this is due to the problem of how to dispose of surplus capital and surplus productive capacity in a capitalist system that is bound towards a 3% compound rate of growth forever, which means a compound reorganization of the global geography of capital and capital accumulation. What we're beginning to see is that these spatial fixes these kind of rolling spatial fixes from the United States to Japan, from Japan to China, from Taiwan and now into this kind of geopolitical thing. This is the world, it seems to me, that we're beginning to see constructed and geographically we've got to be very careful because this is the kind of thing that gives rise to world wars. We have seen world wars around these sorts of things over the last 200 years and so I think we have to be very careful. I'm not arguing that they were bound to [have] a world war or anything of that kind, I'm just saying that this dynamic is something we need to analyze very carefully and to be very careful about how we understand it. So, let me leave it there.
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.