Upload
owen
View
36
Download
6
Tags:
Embed Size (px)
DESCRIPTION
Public Debt, Finance and Imperialism. RamaaVasudevan Colorado State University. Political Economy of Public debt. Intersection of state and financial markets State-credit standard: basis of monetary system Key currency system: instrument for extending and preserving imperial power - PowerPoint PPT Presentation
Citation preview
Public Debt, Finance and Imperialism
RamaaVasudevanColorado State University
Political Economy of Public debt Intersection of state and financial markets
State-credit standard: basis of monetary system
Key currency system: instrument for extending and preserving imperial power
Draw on two lines of analysis in Marx: Fictitious capital Primitive accumulation
Public Debt as Fictitious Capital Contradictions of the money form: general equivalent
and financial asset
Separation of finance from commerce: development of an artificial system of settling payments
Fictitious capital: Valuation on the basis of capitalization of future earnings Transformation of claim on future earnings into a tradable
asset
Wealth accumulates from such capitalization relatively autonomously from from real investment
Public debt is fictitious capital:
Public Debt as lever of primitive accumulationPublic debt depends on and fosters the growth
of financial markets
The emergence of financiers, speculators … international credit system
Social relation between finance and enterprise
Management of public debt and class relations
Evolution of the monetary base of the financial system from bullion to state credit - fictitious capital
Monetary Roots of financial systemDevelopment of credit and financial system
Basis of “two price model”: distinct form of valuation of money
Money as a financial asset comes into contradiction with its role as a general equivalent
Crisis: Collapse to monetary roots
Public debt as a successful ponzi scheme? Enrichment simply through the accumulation of
public debt? subject to volatile logic of finance.
Role of Central Bank Significance of the role of the central bank in managing public debt
assumes greater significance.
Pivotal organ or an ally of the state playing an important role in shaping the changing balance of class forces within a country.
Equally important in managing relations between countries
Hoarding of reserves: “Measure of power between nations”
Autonomy of central banks - monetary power of state – constrained by that of other states
Key currency system: monetary liability of a dominant state becomes the basis for the international financial system.
Instability inherent in this two –price framework are resolved and extended
Elasticity of international credit system, Export of fragility
UK Public Debt
Sterling Standard
Divergence between financial evolution in France and England Increasing role of public debt in war financing ( 250% of GDP at the end of the
Napoleonic Wars) Thriving bond markets alongside growing public debt: growth of financial elite
Strengthened central role of London and sterling bills (precursor to modern securitization)
Expansion of international liquidity beyond metallic basis of gold reserves
Transcend deflationary consequences of an international monetary system based on gold reserves
Bank of England played pivotal role in calibrating international capital flow
Power was not absolute…
Increasing engagement of Bank of England in the market for bills Liquidity and depth and breadth of markets Class basis of commitment to convertibility
Debt and DominanceRole of military interventions in sterling
dominance
Napoleonic Wars and the Franco-Prussian Wars
National rivalries not abolished: came to head with First World War
Rise of the US: debt as an instrument of power Inter Ally debt payments and German reparations Lend Lease agreement and imperial preference Suez crisis
Bretton Woods: establish dollar standard
Marshal and Dodge plans, Korean War
Problem of Willing creditorsBritain drew on the resources of the colonial
empire and special depositors like Japan.
Dollar crisis and the collapse of Bretton Woods
Rival capitalist countries- France, Germany.
The floating dollar standard: OPEC Japan and the Plaza Accord
Debt and the PeripheryDebt used to incorporate developing countries
and emerging markets into the international financial system
Sterling standard: colonies and primary exporters in the periphery
Safety Valve: Export of crisis to periphery (Argentina, Brazil, Australia)
Gunboat diplomacy and sanctions for debt default Egypt 1882, Venezuela 1902 Barings and Argentina 1890
…Debt and the PeripheryCurrent context: IMF conditionality deployed to
integrate emerging markets ( Not that different!)
Debt crisis in Latin America: enforcement of neoliberal program
Asian Crisis: similar enforcement
United States as the world banker: taps into the surpluses of creditor countries in the periphery and recycles surpluses through financial markets to emerging markets in the periphery.
Emerging markets have borne the brunt of speculative attacks : safety valve role
Banker to the World The state credit standard is linked to imperial policy and
helps sustain tremendous growth of liquidity
However this role entails the generation of growing global Imbalances: shift of production base
Hegemony of finance is the outcome of the inherent logic of use of debt as international money
Pre War Britain: No longer workshop of the world
Competition from Europe, US and Japan
Growth of finance with London and Bank of England as the “center of gravity”
Investment income from foreign investments critical to current account surpluses
British Balance of Payments £ millions
Banker to the World: Dollar standardGlobal imbalances linked to Floating Dollar
standard
Outsourcing of manufacture and dominance of finance
US is in a peculiar position: positive net earnings from foreign investments despite being a net debtor country
Return premium: The exorbitant privilege of being banker to the world (Venture Capitalist? Ponzi scheme?)
Securitization machinery
Current Account Balances ($ billions)
USA: Net International Income Receipts (Share of GDP)
Tensions in the Dollar standard Changing structural position of Latin America and Asia
Current account surpluses: and accumulating war chest of reserves
Less vulnerable to capital flight: breakdown of safety valve mechanism
Reversal of recycling pattern- capital was drawn from the rest of the world to the US markets: including to the sub prime markets
Debt fuelled bubble: weak link in international financial system
Collapse of international credit system: financial disintermediation
USA: Capital Flows, Current Account Deficit
The credit crisis Paradox: Crisis caused by Implosion of US financial markets
precipitated a flight to safety to US treasury bills
Monetary roots of crisis: clamor for “money” : US treasuries at apex of credit pyramid
Federal Reserve and Treasury have to deal with changing financial landscape
Quantitaiveeasing: taking on more toxic assets in the Fed balance sheet
Market maker of last resort: Assert control over market Fostering another bubble
Glut of treasuries - Management of public debt:
State hostage to finance
Federal Reserve Assets
Federal Reserve Liabilities
US Public Debt
Sovereign debt CrisisDistinctive nature of US public debt: fiscal backing
of US state
Asymmetric response to crisis in other deficit countries Iceland, Baltic countries, Hungary. Greece, Ireland Severe fiscal cutbacks and austerity measures
Euro-zone crisis: Fragmented market for Euro-zone debt ECB does not have the same tools as the Fed to
manage public debt. Bailout Mechanism, ECB purchases of sovereign debt
Currency war Dollar remains anchor of the system
Quantitative easing: fuelling capital flows to emerging markets
Appreciation of currency in Brazil, Korea…
Defensive policies: capital controls, currency interventions
Relapse to protectionism?
Also reflects the constraints facing the US state
US –China relations Global reserve currency Quantitative targets for current account balances
The present junctureMountain of debt
Power of finance Recovery through new asset bubbles?
Beyond the question of sustainability of debt to investigate the political economy of debt
Relation between US state and private finance and the balance of class forces within the US
Relation between US and the rest of the world, the manner in which US exercises its hegemony
US: International income receipts and payments
Latin America and Asia: Trade and Reserves ($ billions)