Handbook on Critical Political Economy and Public Policy 1800373775, 9781800373778

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HANDBOOK ON CRITICAL POLITICAL ECONOMY AND PUBLIC POLICY

HANDBOOKS OF RESEARCH ON PUBLIC POLICY Series Editor: Frank Fischer, Rutgers University, New Jersey, USA The objective of this series is to publish Handbooks that offer comprehensive overviews of the very latest research within the key areas in the field of public policy. Under the guidance of the Series Editor, Frank Fischer, the aim is to produce prestigious high-quality works of lasting significance. Each Handbook will consist of original, peer-reviewed contributions by leading authorities, selected by an editor who is a recognised leader in the field. The emphasis is on the most important concepts and research as well as expanding debate and indicating the likely research agenda for the future. The Handbooks will aim to give a comprehensive overview of the debates and research positions in each key area of focus. For a full list of Edward Elgar published titles, including the titles in this series, visit our website at www​.e​-elgar​.com​.

Handbook on Critical Political Economy and Public Policy Edited by

Christoph Scherrer Professor Emeritus of Globalization and Politics, Department of Social Sciences, University of Kassel, Germany

Ana Garcia Assistant Professor of International Relations, Institute of the Pontifical Catholic University of Rio de Janeiro and Professor, Graduate Program in Social Sciences, Federal Rural University of Rio de Janeiro, Brazil

Joscha Wullweber Heisenberg Professor of Politics, Transformation and Sustainability, Department of Philosophy, Politics and Economics, Witten/Herdecke University, Germany

HANDBOOKS OF RESEARCH ON PUBLIC POLICY

Cheltenham, UK • Northampton, MA, USA

© The Editors and Contributors Severally 2023

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library Library of Congress Control Number: 2023931483 This book is available electronically in the Political Science and Public Policy subject collection http://dx.doi.org/10.4337/9781800373785

ISBN 978 1 80037 377 8 (cased) ISBN 978 1 80037 378 5 (eBook)

EEP BoX

Contents

List of figuresviii List of tablesix List of contributorsx Acknowledgementsxiv 1

Introduction to the Handbook on Critical Political Economy and Public Policy1 Christoph Scherrer, Ana Garcia and Joscha Wullweber

PART I

THEORIES OF POLITICAL ECONOMY WITH PUBLIC POLICY IMPLICATIONS

2

Plurality of political economy approaches to the global division of labor Christoph Scherrer

20

3

The cultural political economy approach to public policy Bob Jessop and Ngai-Ling Sum

36

4

Institutionalist, regulationist and dependency approaches to transition countries’ economic policies Joachim Becker

49

5

COVID-19 and the gender dilemma: blind spots in both macroeconomics and feminist economics Brigitte Young

65

6

Ordoliberalism’s advice for economic policymaking Pavlos Roufos

80

7

What is neoliberal about new public management? Sahil Jai Dutta, Samuel Knafo and Ian Lovering

95

PART II

METHODS

8

Historical-materialist policy analysis of climate change policies Etienne Schneider, Alina Brad, Ulrich Brand, Mathias Krams and Valerie Lenikus

110

9

Beyond methodological Fordism: the case for incorporated comparisons Alexander Gallas

127

v

vi  Handbook on critical political economy and public policy PART III ENVIRONMENT 10

Land grabbing, financialization and dispossession in the 21st century: new and old forms of land control in Latin America Karina Kato and Sergio Leite

144

11

Extractive economies and public policies: critical perspectives from Latin America Bruno Milanez and Ana Garcia

159

12

Ecological perspectives on sustainability in China Lau Kin Chi

176

13

Looking south: megaprojects, borders and human (in)mobilities Ana Esther Ceceña and Sergio Prieto Díaz

186

PART IV FINANCE 14

Challenges for monetary policies in the 21st century: financial crises and shadow banking Joscha Wullweber

15

Governance of the eurozone in the face of transnational crises dynamics Hans-Jürgen Bieling

16

Chinese capitalism and the global economic order: the impact of China’s rise on global economic regulation Jenny Simon

17

Taming dollarization hysteresis: evidence from post-socialist countries Ia Eradze

PART V

204 219

232 247

LABOUR

18

Global exploitation chains in agriculture Praveen Jha and Paris Yeros

262

19

The development of labor policies in China: from passive revolution to eroding hegemony Elaine Sio-ieng Hui

20

The political economy of minimum wage policies Hansjörg Herr

293

21

Just transitions: a historical relations analysis Dimitris Stevis

310

279

Contents  vii PART VI TAXATION 22

Critical political economy of taxation Hanna Lierse

327

23

Global tax governance Matti Ylönen and Lauri Finér

341

24

Globalization, international tax policy and the OECD Lyne Latulippe

356

PART VII TRADE AND ECONOMIC DEVELOPMENT 25

Postcolonial critique of economic development Aram Ziai

374

26

Economic cycles and rural policies in the People’s Republic of China Sit Tsui, Yan Xiaohui, He Zhixiong and Wen Tiejun

387

27

Trade and investment agreements from a critical international political economy perspective Luciana Ghiotto

402

28

South Africa’s failed privatization, commercialization and deregulation of network infrastructure Greg Ruiters and Patrick Bond

413

PART VIII WELFARE 29

Care in global value chains Christa Wichterich

430

30

The cultural political economy of housing policy in the era of the Islamist Justice and Development Party in Turkey Ismail Doga Karatepe

31

The financialization of social policy: an overview Lena Lavinas, Lucas Bressan, Pedro Rubin and Ana Carolina Cordilha

461

32

The political economy of global health and public policies Jameson Martins and Deisy de Freitas Lima Ventura

476

446

Index489

Figures

10.1

Cultivated areas with soybean production in Brazil (in hectares), 1973–2018

149

10.2

Conflicts in the Brazilian rural context, 2002–20

154

11.1

Real price variation of industrial minerals, 1970–2020 (index number)

164

13.1

Pacific–US East Coast connection

192

13.2

Wealth in the Mayan Train–Transisthmian Corridor region

193

14.1

Global credit hierarchy

208

20.1

The neoclassical labour market

297

20.2

Monopoly and minimum wage increases

300

20.3

Employment effects of compression of the wage structure by minimum wages 301

20.4

Kaitz index and unemployment rates in OECD countries, average values, 2015–19

304

22.1

Development of tax rates and revenues in the OECD (%)

332

22.2

Spread of global CO2 pricing instruments

333

28.1

Rhythms of infrastructure investment, 1946–2010

416

viii

Tables

11.1

Neoliberal institutional changes, selected countries, 1976–99

164

11.2

Legal changes aimed at extractive income appropriation, 2005–13

169

17.1

De-dollarization policies

253

18.1

Average hourly compensation per worker engaged in agriculture, hunting, forestry and fishing for select countries as a percentage of compensation in the USA, in 1995 and 2009

273

18.2

Compensation for high-skill labour in select countries, 1995 and 2009 (constant 2017 USD)

274

19.1

A summary of labor policies in three different periods in China

289

32.1

Contrasting characteristics of the universal health coverage (UHC) and universal health system (UHS) models

479

ix

Contributors

Joachim Becker is an economist and political scientist. He works as an Associate Professor at the Department of Economics at Vienna University of Economics, Austria. Hans-Jürgen Bieling is Professor of Political Economy at the Institute of Political Science, University of Tübingen, Germany. Patrick Bond is a political economist, political ecologist and scholar of social mobilization. He is Distinguished Professor in the Department of Sociology at the University of Johannesburg, South Africa. Alina Brad is a political scientist and Senior Scientist in the Department for Political Science at the University of Vienna, Austria. Ulrich Brand is a political scientist and Professor of International Politics at the University of Vienna, Austria. Lucas Bressan is a PhD Candidate at the Institute of Economics, Federal University of Rio de Janeiro, Brazil. Ana Esther Ceceña holds a PhD in International Economic Relations from University Paris I-Sorbonne and is the coordinator of the Latin American Observatory of Geopolitics at the National Autonomous University of Mexico, Mexico. Ana Carolina Cordilha is an economist with a PhD in Economics from Université Sorbonne Paris Nord and member of the Center of Economics of University Paris Nord (CEPN) at Sorbonne Paris Nord University, France. Sahil Jai Dutta is Lecturer at the Centre for Political Economy Research at City, University of London, UK. Ia Eradze has a PhD in Social and Economic Sciences and is a researcher at the Institute for Social and Cultural Research, Ilia State University, Georgia. Lauri Finér is a Doctoral Researcher in Law at the University of Helsinki and the Director of the Kalevi Sorsa Foundation, Finland. Alexander Gallas is Assistant Professor in the Department of Political Science at the University of Kassel, Germany. Ana Garcia is Assistant Professor at the International Relations Institute of the Pontifical Catholic University of Rio de Janeiro, Executive Director of the BRICS Policy Center, and Professor of the Graduate Program in Social Sciences of the Federal Rural University of Rio de Janeiro, Brazil.

x

Contributors  xi Luciana Ghiotto is Professor of International Relations at the National University of San Martín (EPyG/UNSAM) and Assistant Researcher at the National Scientific and Technical Research Council (CONICET), Argentina. He Zhixiong is Senior Research Officer, Green Ground Eco-Tech Centre, Beijing, China. Hansjörg Herr is Emeritus Professor of Supranational Integration at the Institute for International Political Economy, Berlin School of Economics and Law, Germany. Elaine Sio-ieng Hui is Assistant Professor of Labor and Employment Relations and Asian Studies at Pennsylvania State University, USA. Bob Jessop is Emeritus Distinguished Professor of Sociology at Lancaster University, UK, and is best known for his contributions to critical governance studies and state theory, the regulation approach in political economy, studies of state restructuring, and contributions to critical realism. Praveen Jha is Professor of Economics at the Centre for Economic Studies and Planning (CESP) in the School of Social Sciences at Jawaharlal Nehru University (JNU), Delhi, India, and editor of Agrarian South: Journal of Political Economy. Ismail Doga Karatepe is a researcher at the International Center for Development and Decent Work (ICDD), University of Kassel, Germany. Karina Kato is Professor at Graduate Program in Social Science in Development, Agriculture and Society, Federal Rural University of Rio de Janeiro (CPDA/UFRRJ), and a junior researcher at Research Foundation of the State of Rio de Janeiro – FAPERJ and at the National Council for Scientific and Technological Development – CNPq. Samuel Knafo is a Senior Lecturer in the Department of International Relations, University of Sussex, UK. Mathias Krams is a Doctoral Researcher in the Department of Political Science at the University of Vienna, Austria. Lyne Latulippe is a Professor in the Department of Taxation, and Senior Researcher for the Research Chair in Taxation and Public Finance at the School of Management, Université de Sherbrooke, Canada. Lau Kin Chi is coordinator of the Programme on Cultures of Sustainability at the Centre for Cultural Research and Development and an Adjunct Associate Professor of Cultural Studies at Lingnan University, Hong Kong, China. She is a founding member of the Global University for Sustainability. Lena Lavinas is a Professor at the Institute of Economics at the Federal University of Rio de Janeiro, Brazil, and currently an Associate Researcher in the Economics Department at SOAS, University of London, 2022–24. Sergio Leite is Full Professor in the Graduate Program in Social Science in Development, Agriculture and Society/Federal Rural University of Rio de Janeiro (CPDA/UFRRJ), Brazil.

xii  Handbook on critical political economy and public policy He is also Senior Researcher at the Research Foundation of the State of Rio de Janeiro (FAPERJ) and the National Council for Scientific and Technological Development (CNPq). Valerie Lenikus is a Doctoral Researcher in the Department of Political Science, University of Vienna, Austria. Hanna Lierse is a Researcher at the Centre for Sustainability Management, Leuphana University Lüneburg, Germany. Ian Lovering is a Lecturer in International Political Economy in the Department of European and International Studies at King’s College London, UK. Jameson Martins holds a Master’s in International Relations and is a PhD Candidate in the Global Health and Sustainability Program at the School of Public Health (FSP), University of São Paulo (USP), Brazil. Bruno Milanez is an Associate Professor and works in the Politics, Economics, Mining, Environment and Society (PoEMAS) research group at the Federal University of Juiz de Fora, Brazil, in the School of Engineering, Department of Production and Mechanical Engineering. Sergio Prieto Díaz, PhD, holds a Research Chair of the National Council of Science and Technology-CONACYT, and coordinates the Transborder Studies Laboratory-LIT at the College of the Southern Border, México. Pavlos Roufos was a graduate student in the Department of Political Science, University of Kassel, Germany. He submitted his PhD on Ordoliberalism and the Economic Constitution in December 2022. Pedro Rubin is a Master’s student at the Institute of Economics, Federal University of Rio de Janeiro, Brazil. Greg Ruiters is Chair of Citizenship and Democracy, based in the University of the Western Cape School of Government, South Africa. Christoph Scherrer is Professor Emeritus of Globalization and Politics, University of Kassel, Germany, and a founding member of the Global Labour University. Etienne Schneider is a political scientist and University Assistant (PostDoc) in the Department of Development Studies at the University of Vienna, Austria. Jenny Simon is a Post-Doctoral Researcher in International Political Economy, Germany, and is editor of the journal PROKLA. Sit Tsui is Associate Professor at the Rural Revitalization Strategy Research Institute, Southwest University, Chongqing, China. She is a founding member of the Global University for Sustainability. Dimitris Stevis is a Professor in the Department of Political Science at Colorado State University, USA. Ngai-Ling Sum retired as a Reader in Cultural Political Economy in the Politics, Philosophy, Religion Department, Lancaster University, UK. She is now an Honorary Research Fellow in

Contributors  xiii Sociology and the Co-director of the Cultural Political Economy Research Centre, Lancaster University. She is best known for her work in regulation approach and cultural political economy, which combines critical discourse studies and political economy. Deisy de Freitas Lima Ventura is Professor of Ethics at the School of Public Health (FSP), Coordinator of the PhD Program in Global Health and Sustainability at the University of São Paulo (USP), Brazil, and President of the Brazilian Association of International Relations. Wen Tiejun is Professor and Executive Dean at the Institute of Rural Reconstruction of China, Southwest University, Chongqing, and Executive Dean of the Institute of Rural Reconstruction of the Straits, Fujian Agricultural and Forestry University, Fuzhou, China. Christa Wichterich is a sociologist, currently freelance researcher and author, previously Guest Professor of Gender Politics at the University of Kassel, Germany; Lecturer at Gilan University, Iran; Jawaharlal Nehru University, New Delhi, India; and at universities in Switzerland, Austria and Germany. Joscha Wullweber is Heisenberg Professor of Politics, Transformation and Sustainability, and Director of the International Center for Sustainable and Just Transformation at Witten/ Herdecke University, Germany. Yan Xiaohui is Senior Research Officer, Centre for Cultural Research and Development, Lingnan University, Hong Kong, China. Paris Yeros is Professor at the Federal University of ABC (UAFBC), Brazil, and member of the faculties of Economic Sciences, Sciences & Humanities, and World Political Economy. He is also an editor of Agrarian South: Journal of Political Economy. Matti Ylönen is a University Lecturer of World Politics and Global Political Economy at the University of Helsinki, Finland. Brigitte Young is Emeritus Professor of International Political Economy at the Institute of Political Science at the Westphalian Wilhelms University in Münster, Germany. Aram Ziai is Full Professor Development and Postcolonial Studies and Executive Director of the Global Partnership Network (GPN) at the University of Kassel, Germany.

Acknowledgements

We are grateful to the many colleagues who have shared our objective to apply a critical political economy perspective to important policy fields. At Edward Elgar Publishing, we were fortunate to have a team that supported us through the various stages of the Handbook. We also thank series editor Frank Fischer for encouraging us to assemble a wide spectrum of political economy issues for the Handbooks of Research on Public Policy. Since most of us are not native English speakers, we are very thankful to Madhuparna Banerjee for a superb job in copy-editing. Special thanks to Nicole Magura for formatting the chapters and Ujan Natik for checking and formatting the references and keeping track of the contributions. Financial support was granted by the International Center for Development and Decent Work (ICDD), Kassel, Germany. Christoph Scherrer, Ana Garcia and Joscha Wullweber Berlin/Rio de Janeiro/Witten August 2022

xiv

1. Introduction to the Handbook on Critical Political Economy and Public Policy Christoph Scherrer, Ana Garcia and Joscha Wullweber

Since the first decade of the present century, the field of political economy has seen a significant resurgence of interest not only in the wake of the 2008–09 financial crisis and the euro crisis, but also in response to the deep economic crises triggered by climate catastrophes and the COVID-19 pandemic. Competition among the new great powers, not least in the field of economics, has further reinforced this interest. But what exactly is it that distinguishes the field of political economy? Is there really a need to bring together what divergencies long ago separated into two major disciplines: economics and political science? And what about the emphasis on the word ‘critical’? Are not all scientific endeavors called upon to critically examine the phenomena they study? Finally, has not public policy always been the subject of analysis and focus of contributions in the field of political economy? Ever since governments have emerged, people have conceived of policies that regulate the livelihood strategies of their respective populations, including policies for securing labor and/ or monetary or in-kind contributions for carrying out government activities and supporting the lifestyles of government personnel and ruling elites. Nevertheless, the term ‘political economy’ with reference to such activities did not appear until 1615 when the French author Antoine de Montchréstien coined the phrase in his Traicté de l’oeconomie politique [Treatise on Political Economy]. The work, which today we would call a policy brief, was written as advice to the monarch on how to increase the wealth of France by promoting industry, trade, and exports. Referring to the monarch’s governance of his subordinates and their livelihood activities, Montchréstien used the Greek word oikonomía to refer to the material management of a patriarchal household. In countries such as England and the Netherlands, where the powers of a monarch were constitutionally limited, a preference developed for terms such as ‘national treasure,’ ‘national interest’ or ‘national happiness’ due to the fact that ‘police,’ the English equivalent of politique, carried a negative connotation. However, by the late 18th century, after the Journal Economique had popularized the term économie politique in France, ‘political economy’ also came to be adopted in Great Britain as the name for a scholarly discipline (Muldrew, 2018, pp. 95–120). Until the 18th century, intellectuals who offered advice on aspects of political economy dealt primarily with issues pertaining to the financial resources of a monarch, not least of which involved their capacity to wage war. They advocated the promotion of industry and exports to facilitate access to precious metals as the means to maintain standing armies and fund war campaigns at a time when the financial system was not yet sufficiently developed to provide the large amounts of credit required to pay for such ventures (ibid., pp. 105–6). Although modern states are no longer feudal, the focus on strengthening state capacities has survived to the present and is found in the writings of geopolitical, nationalist, and even developmentalist political economists (Helleiner, 2021). 1

2  Handbook on critical political economy and public policy During the 18th century, political economists, especially in the classical Anglo-Saxon tradition, turned their attention to strategies for increasing the wealth of property-owning ‘free men.’ In the words of James Steuart, who wrote the first book in English under a title containing the term ‘political economy’: The principal object [of political economy] is to secure a certain fund of subsistence for all the inhabitants, to obviate every circumstance which may render it precarious; to provide everything necessary for supplying the wants of society, and to employ the inhabitants (supposing them to be free-men) in such a manner as naturally to create reciprocal relations and dependencies between them, so as to make their several interests lead them to supply one another with their reciprocal wants. (Steuart [1767] 1966, p. 17)

Adam Smith’s definition of political economy and its purpose expanded the focus, adding the securing of sufficient revenue for public services to the task of enabling people to provide for themselves: Political economy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects: first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services. It proposes to enrich both the people and the sovereign. (Smith [1776] 1976, Book IV intro.)

Over time, this classical tradition of liberal political economy narrowed its analytical scope and evolved into neoclassical economics focusing on market transactions. With some delay the separate discipline of political science, the study of politics, emerged. While sharing key assumptions of neoclassical economics such as utility maximization and market equilibrium, and applying methods from its microeconomic toolbox, some authors have reverted to the analysis of politics, policies, and polities, thereby establishing the field of political economy within the discipline of economics. The editors of the Oxford Handbook of Political Economy, for example, defined political economy as ‘the methodology of economics applied to the analysis of political behavior and institutions’ (Weingast & Wittman, 2008, p. 1). The approach that deals most explicitly with politics, the public choice approach, focuses on how individual preferences shape institutions as well as policies and how individuals interact with political rules and institutions (Buchanan, 1999). While most studies guided by the public choice approach are theoretical, abstract, and deductive, the relatively new field of behavioral economics makes extensive use of experiments with human participants (Banerjee & Duflo, 2011). An interest in assessing connections between individual behavior and the effectiveness of policy decisions is widely shared among the political economists in the realm of economics (Cardinale & Scazzieri, 2018). After World War II, at least in Germany and France, political economy became synonymous with Marxism, although Karl Marx himself had actually formulated a critique of the political economic thought of his time. His criticism was directed against nationalist as well as liberal approaches to political economy for their neglect of history, exploitation, and the endogenous tendencies of crisis (Marx, 1887). Historical materialism as conceived by Frederick Engels and Karl Marx does not share the belief in the primacy of the individual that is common to the liberal tradition. Central to their theory is the concept of class and capitalism as the main feature of the contemporary relationship between state and economy. Societies are historically divided along class lines, which are defined by the division of labor and the ownership of the

Introduction   3 means of production. These divisions are the key drivers of social change, and, accordingly, the chief determining factors in the political sphere (politics, polity, and policies) as well as in the economic sector (the material reproduction of humankind). The original Marxist concern with the working class and its suffering as well as its emancipatory potential has nowadays been supplemented, expanded, and sometimes replaced by analyses of a variety of other issues and forms of domination. As can be seen in this Handbook, while capitalism and a multitude of different capitalist relations remain an important part of the broader stream of critical political economy, scholars have meanwhile also begun to explore other lines of societal division such as gender and race. These three different strands of political economy – economic nationalism, economic liberalism, and critical political economy – cover a broad spectrum of societal topics, causal explanations, and methods as well as ontological and epistemological positions (Wullweber, 2019). The economic nationalist strand that takes the nation-state as its primary unit of analysis (and the respective government as addressee for its advice) is primarily concerned with strengthening the material base (and competitiveness) of the respective nation-state with regard to other nation-states and their subjects (especially corporations domiciled in these other countries). For the most part, it adheres to a positivist epistemology and is open to the integration of mixed quantitative and qualitative methods. The primary unit of analysis for the liberal strand is the individual, whose preferences and behavior are generally modeled after the ideal of the white, property-owning or at least highly skilled male (Homo oeconomicus; Habermann, 2008). Its key concern is maximizing individual wealth and purchasing power regardless of economic inequalities. The liberal strand is also wedded to a positivist epistemology. Its methods are mostly quantitative and in recent times also experimental. The critique of political economy, which today also goes by the label of critical political economy (with roots in the Marxist tradition) or heterodox political economy (with roots in the Keynesian tradition), is primarily concerned with analyzing and overcoming economic inequalities among different groups on diverse social levels, from the individual household to the global community. A common ontological position is that humans are social beings that cannot be understood outside their social context. It follows that economics and political economy are an integral part of the social sciences. There is a plurality of epistemological positions, spanning the gamut from the original historical dialectics to positivist and post-positivist approaches, which all seek to gain insight into human societies (Wullweber, 2015; Wullweber & Scherrer, 2011). In critical political economy, therefore, a wide variety of methods can be found, ranging from regression analysis, triangulation, and comparative approaches, to retroduction and ethnographic methods. For all their differences, these three major strands of political economy share the same conviction that the spheres of the economy (accumulation of wealth in spaces governed by market exchange) and the political (accumulation of power and legitimation of coercion), while analytically separable, are in practice intertwined and thus require interdisciplinary analysis. The prominent member of the French l’école de la regulation, Robert Boyer, has succinctly explained the interdependence of the two domains: [T]he proper operation of each of the fields makes use of resources coming from the other field, for reasons that are not purely contingent. On the one hand, economic logic in order to operate requires preconditions that can only come from another sphere: a stable monetary and credit regime, commercial and labor laws, a legitimate public authority preserving national sovereignty, and the required collective infrastructures, as many institutions which the economic logic left to itself is incapable of

4  Handbook on critical political economy and public policy engendering or even sustaining in the long period. On the other hand, without financial resources and integration into the economy, polity will not be able to satisfy its primary objective, the accumulation of power, which is not directly economic, but needs to be realized through a tax system and public spending. (Boyer, 2018, p. 556)

Citing the failure of a command economy as practiced in the Soviet Union and pointing out the far-reaching implications of the financial crises, Boyer argues that ‘the political regime and the economic regime are condemned to coevolve, since any of the two extreme configurations (i.e., “all is polity” or “all is economy”) are unable to prevail in the long run’ (ibid.). Our selection of chapters for this Handbook sides with the critical tradition among these three strands of political economy. This is not to deny critical scrutiny of research designs, theoretical elaborations, and findings in the other traditions. As elaborated above, however, their focus concentrates on increasing the wealth and competitiveness of nations and/or enhancing the allocative efficiency of markets. And although topics addressed in a number of more recent writings in the other two strands do also include environmental concerns, the question of how to overcome structures of economic inequality and power asymmetries beyond mere remedial action against egregious forms of poverty does not figure in their agenda. But our preference for the critical tradition is not based on normative grounds alone. Its openness to other social sciences and sensitivity towards societal inequalities without neglecting either interstate rivalries or individual agency promises a more holistic approach and therefore more convincing insights into political economies. A primary concern of this Handbook is to illustrate ways in which critical political economy finds practical application in everyday life by informing public policies. In areas ranging from the environment and the use of land and water to health, labor, and other factors that affect the quality of life, critical political economy can show how public policies impact different social groups and social classes differently. Policies remain gendered and racialized even when formulated in universal terms (in areas such as environment or health, for example). Moreover, their implications and ramifications vary greatly depending on whether they are implemented in the Global North or the Global South. The key factors to uncover here are for what and for whom public policies are elaborated and implemented. Indeed, it is precisely in the area of public economic policy that the particular strength of critical political economy comes to bear. For this to happen, it is not only necessary but also indispensable to critically engage with various market-liberal dogmas. The idea that the market will reach equilibrium on its own must be abandoned. At the same time, the view that the state should refrain as much as possible from economic activity needs to be questioned. And the often proclaimed dichotomy between state and market must be discarded. The economy does not function without the state, but neither does the state function without the economy. Further, the state is not a monolithic entity, nor is it simply an instrument of the dominant classes. Rather, the state is criss-crossed by class relations and struggles. Specific correlations of forces and struggles materialize in institutional structures and agencies, for the state is the ‘material condensation of the relationship of forces and class fractions’ (Poulantzas, 2000, p. 127) that is tasked with reflecting on how and for whom public economic policies should be designed and applied. Unlike mainstream economics, critical political economy does not provide policy recommendations that disregard the social context in which the proposed policy is to be implemented. And in contrast to mainstream public policy analysis, it does pay attention to issues of policy compatibility with prevailing capital accumulation strategies. Taking these approaches seriously can open up completely new perspectives and reveal new paths for eco-

Introduction   5 nomic policy to lead society out of the explosive dilemmas it currently faces. Critical political economy provides the analytical tools and the conceptual framework to probe conditional relationships among relevant variables while disentangling specific intertwinements between state, economy, and society, and examining their underlying power relations. Herein lies its particular strength. The aim of our Handbook on Critical Political Economy and Public Policy is to showcase this strength with examples of policy studies covering the fields of economic development, environment, finance, labor, taxation, trade, and welfare at the local, national, and international levels.

BOOK STRUCTURE Theory Our Handbook begins by introducing a diverse range of theories of political economy applicable to the field of public policy. In the first contribution in Part I, Chapter 2, ‘Plurality of political economy approaches to the global division of labor,’ Christoph Scherrer highlights the relevance of the international division of labor for a critical politico-economic analysis of public policy. Traditionally, three analytical approaches have competed for dominance in the interpretation and evaluation of the international division of labor: liberal international political economy, economic nationalism, and historical materialism. Since the 1970s, a fourth approach has been gaining ground: feminist political economy. Scherrer shows that the global division of labor is analyzed quite differently within each of these theoretical frameworks. Not surprisingly, liberal international political economy is very much in favor of the division of labor. Strongly rooted in Ricardian thought and often based on neoclassical economics, liberal approaches hold that the more international division of labor there is, the better it will be for everyone. In contrast hereto, economic nationalism takes global power structures into consideration. Economic nationalist approaches, which go back to Friedrich List, are not critical of economic liberalism per se, but argue that an international division of labor based on free trade primarily serves industrialized states. They take the view that developing countries and ‘latecomers’ should protect their (infant) industries until they are able to compete internationally. The third strand, historical materialism, or Marxian political economy, focuses on power relations embedded in the capitalist mode of production in general. Here, the home domain of analysis is not the unequal power relations among states, but the distribution of power within societies and the capitalist mode of production with a focus on classes – traditionally the owners of the means of production and the wage earners or working class. For the final line of approach, feminist political economy, gender relations are the starting point for analysis. Feminist approaches insist that the international division of labor is already always a gendered division of labor. Through this lens, they are able to shed light on topics such as unpaid labor, the feminization of the workforce, and the gender differential impact of trade liberalization. In conclusion, Scherrer emphasizes the significance of deciding on a certain theoretical framework when it comes to the analysis of public policies. Each approach and school of thought offers very different ways of interpreting and problematizing the global division of labor. In Chapter 3, ‘The cultural political economy approach to public policy,’ Bob Jessop and Ngai-Ling Sum present cultural political economy (CPE) as a distinctive social science approach to the analysis of public policies that combines critical semiotic analysis and critical

6  Handbook on critical political economy and public policy political economy. They argue that the overall CPE approach extends beyond these fields and encompasses cultural and social analysis in general. The chapter illustrates this claim with critical reflections on historical-materialist policy analysis (see Chapter 8) and shows how this approach can be improved by considering the broader theoretical contributions of CPE. With reference in particular to Foucault and his concepts of problematization, objectification, subjectivation, power/knowledge, and dispositive, the authors explain that CPE aims to expand the microphysics of power to macro-level questions of political economy and the state. They then elaborate on these concepts, incorporating Gramscian terms of analysis such as the workings and logics of hegemony, passive revolution, and domination. Bob Jessop and Ngai-Ling Sum point out that CPE is not a closed theory but a ‘grand-theoretical paradigm’ that offers a useful heuristic for empirical research rather than a set of pre-given hypotheses that apply universally. In this way, CPE is especially useful for analyzing policy responses to social problems and crises. The authors conclude by delineating some implications for research in critical policy studies, suggesting four methodological steps. First, such an analysis should begin with a reasoned critique of policy proposals based on flaws in their internal assumptions, categories, problematizations, and argumentations. Second, it is important to identify the ideal and material interests favored by certain political proposals or strategic lines in certain times or constellations. Third, such an analysis should include an account of the role played by politics, the political paradigm or the general strategic line in the reproduction of one or more permanent, structured forms of social domination. Fourth and last, critical policy analysis should produce proposals for alternative interpretations, policies, and strategies to facilitate the emancipation of subordinate social forces (and perhaps dominant forces) from the harmful effects of the pattern of domination naturalized or legitimized by those who are the subject of said critique. Chapter 4, ‘Institutionalist, regulationist and dependency approaches to transition countries’ economic policies,’ contributed by Joachim Becker, brings forward institutionalist and regulationist approaches to public policy. Arguing that these approaches offer a variety of middle-range concepts that can be directly applied to different policy fields, Becker illustrates this in an application of those theories to the economic policies of countries in transition from a socialist mode of production toward a capitalist economic system. He demonstrates how institutionalist and regulation theory approaches enable an analysis that focuses on the subordinate form of international integration and the resulting peripheral position of transition and post-transition economies in the European division of labor. Of special importance for these approaches is the relationship between growth models, the state, and economic policymaking. Continuities in economic development patterns and institutional structures of the different capitalist regimes are the home domain of institutionalist theories. Regulation theory places the emphasis on different forms of accumulation, making a fundamental distinction between productive and financialized accumulation. Accumulation, in turn, can be either introverted – that is, primarily oriented towards the domestic market – or extraverted – that is, heavily based on exports or imports of goods and capital. In combination with dependency theory, these approaches provide the tools to explore the asymmetric relations between core and peripheral economies. In a comparison of institutionalist approaches with regulation theory, Becker points out that the latter places more emphasis on crises as junctures in economic policy. The broader conceptualization of lines of social conflict, power relations, and the state makes it possible to use regulation theory together with dependency theory to more systematically

Introduction   7 analyze shifts in the relationship between different capital fractions, conflicts over strategic state selectivity, and resulting economic policies. Brigitte Young’s contribution, Chapter 5, ‘COVID-19 and the gender dilemma: blind spots in both macroeconomics and feminist economics,’ holds that many if not most traditional economists rely on macroeconomic approaches that are both gender-blind and data-driven. Arguing that the ‘silencing’ of women in macroeconomic accounting leads, among other things, to the exclusion of household-produced goods and services in economic growth measurements, she sees this lack of gender sensitivity reflected in policy programs. As an example, she cites the EU Recovery Fund, which mainly supports male-dominated industries such as digital technology, energy, agriculture, construction and transport, while underrating or simply ignoring areas of the economy such as care and health, accommodation and food services, social work, the arts, culture, and recreation. This situation is all the more surprising considering the applause received by (mainly) women care workers at least at the beginning of the COVID-19 epidemic. As Young also observes, however, even though many feminist economists do include household activities, the labor market and the care sector in their analyses, they nonetheless demonstrate macroeconomic blindness when they neglect such issues as monetary policy and the global finance sector. While emphasizing the micro level, they largely ignore important shifts in global finance and the new normal of unconventional monetary policies. This, as Young contends, is unfortunate, considering how strongly such macro-policies affect the micro- and meso-levels. At the same time, however, she calls attention to several economists who do, indeed, include all the different levels in their analyses, and concludes by suggesting several strategies to strengthen gender-sensitive economic approaches in more encompassing and holistic ways. In Chapter 6, ‘Ordoliberalism’s advice for economic policymaking,’ Pavlos Roufos engages with ordoliberalism as a concept and an approach to political economy while exploring the different ways in which this approach relates to public policy. He explains how ordoliberal thought shapes the elaboration and creation of institutional and constitutional instruments intended to provide the overall framework for market-compliant policies. Through the reconstruction of key theoretical concepts developed by ordoliberal theorists, Roufos scrutinizes the crucial role meant to be played by the state in constructing and maintaining a liberal competitive market order. At the same time, he argues that ordoliberalism has never been a self-contained concept but has always also functioned as an ideological and pragmatic underpinning of specific market-liberal policies. Ordoliberals envisioned a state based on a strong administrative and legislative apparatus that would shield it against the influence of particular interest groups including strong capital factions that might undermine competition by establishing oligopolies, for example, or trade unions that could threaten price and monetary stability with excessive wage demands. The goal for ordoliberals, according to Roufos, was to de-politicize economic policy in order to preserve a market-liberal order capable of ensuring the full effectiveness of the market and price mechanism. The final chapter in Part I on theory, Chapter 7, ‘What is neoliberal about new public management?,’ contributed by Sahil Jai Dutta, Samuel Knafo, and Ian Lovering, explores the concept of new public management. The term describes a deep restructuring of the state involving the weakening of the classical welfare state under the guise of increased efficiency and necessary structural adjustments. The authors argue that although the term new public management is widely perceived as the neoliberal approach to public administration, to problematize the notion of new public management and to elaborate its political dimension, the

8  Handbook on critical political economy and public policy contribution critically discusses different explanations of its association with neoliberalism. The authors argue that the relation between new public management and neoliberalism is rather diffuse: first, in many cases, center-left governments have been strong supporters of new public management, both before and after New Right governments of the 1980s. Second, in many respects, public choice ideas and new public management are not compatible. Third, purported ‘business-like’ methods that are often associated with new public management are rather fuzzy and the dualistic framing of private versus public management has always been conceptually empty. To bring deeper insight into the role and politico-economic significance of new public management, Dutta, Knafo, and Lovering trace the emergence of the approach in the 1950s and 1960s. Against this background it becomes clear that the success of the new public management approach was based on its ability to create a market-like environment in public administration. The authors conclude that while the neoliberal context was crucial to the development of new public management, the governance practices introduced with this approach had little to do with neoliberal ideas. Methods Part II introduces two different methods, based on critical political economy, to specific realms of public policy. In Chapter 8, ‘Historical-materialist policy analysis of climate change policies,’ Etienne Schneider, Alina Brad, Ulrich Brand, Mathias Krams, and Valerie Lenikus discuss historical-materialist policy analysis (HMPA) to understand, and tackle, climate change. They argue that the aim of HMPA is to analyze how specific policies are formulated against the background of competing and contradictory interests of different social forces and how, if at all, they contribute to social reproduction and the regulation of contradictory social relations and crisis tendencies. As a way to operationalize HMPA for empirical research, they propose a three-step process: (1) context analysis; (2) actor analysis; and (3) process analysis. As they analyze negative emission technologies (NETs), the authors argue that the integration of NETs into EU climate policy is not just a result of ‘rational’ decision-making or the efficacy of sociotechnical imaginaries, but is also shaped by actors, strategies, and interests. Thus, one can observe how fossil capital, and how other capital fractions, contribute to the ‘normalization’ of NETs by adopting ambitious ‘net-zero’ or even ‘climate-negative’ targets. They conclude that HMPA sensitizes us to the inherent contestedness of such policymaking processes and alternative political initiatives to counteract attempts at mitigation deterrence through NETs. In Chapter 9, ‘Beyond methodological Fordism: the case for incorporated comparisons,’ Alexander Gallas offers a discussion on the limitations of ‘methodological Fordism,’ and argues for an alternative approach, showing us how to conduct empirical research in political economy from a global vantage point. He draws upon McMichael’s (1990, 2000) notion of ‘incorporated comparison’ and outlines a distinct research design for the field of the political economy of labor. For this, Gallas points to critical problems in the process of doing empirical research from a global vantage point: the dangers of subsumptionism; the limitations of approaching global issues from a quantitative angle; the challenge of reconciling analytical breadth and depth; and the need for selecting suitable cases and data. The method of ‘incorporated comparison’ deals with the need to connect a global perspective with a sensitivity to context-specific divergences. The author proposes categories for assessing class formation on the grounds of materialist class theory, putting them to use by mapping non-industrial strikes

Introduction   9 around the world, and supplementing this mapping with detailed case studies of large-scale strikes or strike waves. He concludes that this research design and the criteria developed for case and data selection ensure that the research process remains open and enables us to move beyond methodological Fordism with its focus on the national state, a small number of core countries and on manufacturing. Environment Part III features different analyses on critical issues concerning environment, ‘extractivism,’ development strategies, and its geopolitical implications. In Chapter 10, ‘Land grabbing, financialization and dispossession in the 21st century: new and old forms of land control in Latin America,’ Karina Kato and Sergio Leite examine land grabbing and contemporary capitalist dynamics, the commodification of land and nature, and intensification of dispossession processes. The authors focus on three analytical dimensions: the expansion of extractive corporations in rural areas accompanied by processes of dispossession; the reconceptualization of land as a financial asset by the accelerated financialization of extractive global chains, with impact on regional land markets and on mechanisms of expropriation; and the configuration of a new global governance of land transactions. Thus, the chapter points to how financialization mechanisms related to agriculture and land have resulted from a complex arrangement derived from capital accumulation processes at the international scale with direct impact on different territories and populations in countries in the ‘Global South,’ in particular those located in Latin America. This process relied on the participation of states and multilateral agencies. In an attempt to minimize the strong environmental, social and economic impacts, they ‘contemporize’ these investments by qualifying them as ‘responsible.’ The authors conclude that land has gained a central role in the international political-economic agenda, which prompts a revision of the character and significance of agricultural activity for capitalist accumulation. The rural sector is not just the location of food production. Both land and commodities have also become the object of ever-more sophisticated financial arrangements. It leads to permanent tension in rural areas. In defense of territory, social movements advance different modes of development that provide spaces for differentiated forms of lives and livelihoods. Chapter 11 takes up the issue of land use and offers a closer look into extractive economies in Latin America. In ‘Extractive economies and public policies: critical perspectives from Latin America,’ Bruno Milanez and Ana Garcia argue that the emergence of neoliberalism and the economic rise of Asia have driven the restructuring of nation-states and public policies towards a deepen dependence on extractivism in Latin American countries. This dynamic resulted in new and complex territorial impacts and conflicts. The chapter points to the main schools of thought on extractivism and economic development; it addresses the main issues involving the economic and political context of mining in Latin America, providing examples of public policies in the extractive sector; and concludes with a synthesis of new conceptual propositions on ‘post-extractivism’ and ‘post-development,’ based on recent Latin American intellectual debates. It argues that, from the public policy point of view, most countries governed by center-left leaders did not achieve substantive changes in their socioeconomic structure, and there were no significant modifications in the tax or land ownership configurations. In some cases, these policies even intensified aspects of inequality, either through tax incentives for extractive projects, or through land concentration in the hands of agribusiness or mining corporations.

10  Handbook on critical political economy and public policy In Chapter 12, ‘Ecological perspectives on sustainability in China,’ Lau Kin Chi examines issues of air pollution and water diversion, and reflects on the ways China may confront the dangers of modernization. The author argues that it is necessary to take subaltern and ecological perspectives in challenging statist, elitist and anthropocentric discourses and practices in relation to the question of sustainability in China. The chapter updates data and discusses air pollution and lung cancers in China, and the South-to-North water diversion project. It argues that the modernization paradigm that China pursues has been characteristically privileging industry over agriculture, urban over rural, and middle class over subaltern, hence growth statistics and resource emphases are all geared to such a development paradigm. ‘Modernization’ itself is not questioned, and it justifies the ‘price’ that needs to be paid. In the modernization discourse in China, ‘de-growth’ is almost unthinkable. It concludes that it is necessary to articulate socioeconomic justice with ecological justice, and consider the cultural dimensions of Chinese society and political economy as part and parcel of the development paradigm. Chapter 13 discusses the geopolitical dimension of nature and development strategies. In ‘Looking south: megaprojects, borders and (in)mobilities,’ Ana Esther Ceceña and Sergio Prieto Díaz reconstruct an image of the territories of the so-called southern border of Mexico, relating the geostrategic character of the megaprojects projected for the region. The authors show the links these megaprojects have with respect to the processes of geopolitical ordering and human (in)mobility, in order to clarify the meanings and implications of the current development policies and its risks. To this end, the traditional notion of border is de/reconstructed in a long-term perspective, which incorporates the analysis of the conjunctures with the historical structures that define this territory, and its sovereign/hegemonic relations with the northern neighbor. Through this problematization, defining elements of the territorial reordering policies are presented and analyzed, with special emphasis on those corresponding to the Mayan Train and the Transisthmian Corridor, but without losing the continental context, as well as their foreseeable impacts in terms of population redistribution and changes in the ways of life. Finance Capitalism cannot do without a well-functioning global financial system. Accordingly, the question of state regulation and the way this system is governed plays a crucial role in being able to analytically classify and evaluate the current capitalist system. In this respect, Joscha Wullweber’s contribution in Part IV, Chapter 14, ‘Challenges for monetary policies in the 21st century: financial crises and shadow banking,’ assumes a radical change in both the functioning of the global financial system and the way in which the governance of this system is carried out on the part of central banks. Within the financial system, the importance of the shadow banking system has greatly increased. This implies that the part of the financial system that is little or not regulated at all by the state – the shadow banking system – is gaining strongly in relevance. As a result, the crisis-ridden nature of the financial system as a whole has increased sharply and continues to do so. The global financial crisis of 2007–09 forced central banks to react to this new constellation, as well as the financial crisis caused by COVID-19. In both crises, the leading central banks created a whole series of radically new, unconventional and powerful monetary policies to keep the overall system reasonably stable. The problem is, however, that while these measures stabilize the financial system in the short term, they also lead to a strong increase in overall crisis vulnerability. The fundamental problem is that there is no deviation from market-liberal assumptions within monetary policy. The belief in a finan-

Introduction   11 cial market that stabilizes itself and tends towards equilibrium continues to dominate. Such an approach, however, is not capable of permanently stabilizing the crisis-ridden financial system. Chapter 15 by Hans-Jürgen Bieling, ‘Governance of the eurozone in the face of transnational crises dynamics,’ argues that the governance of the eurozone has originally been guided by the view that the European Central Bank is responsible for monetary policy and that national governments can confine themselves to modernizing national models of capitalism and making them fit for the requirements of the single currency. Since the late 2000s, transnational crisis processes – first the financial and sovereign debt crisis, most recently the coronavirus pandemic – have challenged this view. Accordingly, to save the euro and the Economic and Monetary Union, there were repeated negotiations about ‘crisis constitutionalist’ reforms – that is, comprehensive institutional and procedural reforms of economic governance. While these reforms in the so-called sovereign debt crisis were still primarily oriented towards austerity policies, in the coronavirus pandemic, elements of a jointly organized and maybe even solidary management gained in importance. Jenny Simon’s contribution ‘Chinese capitalism and the global economic order: the impact of China’s rise on global economic regulation,’ Chapter 16, analyzes the impact of China’s rise on global economic regulation in the fields of trade and finance from a process-oriented neo-Gramscian perspective. The analysis shows that the Chinese state neither followed a grand strategy to overthrow the global economic order, nor did China’s rise lead to its fundamental transformation. However, below the level of the grand order, China’s rise led to an incremental transformation of the hegemonic nexus of global economic regulation based especially on China’s development of parallel regulatory arenas and regimes with a regulatory rationale shaped by the Chinese mode of development. This not only limited the reach of the market-liberal paradigm and rulemaking capacities of US or EU actors. It also led to a more fragmented, multipolar nexus of regulating global capitalism. The final chapter in Part IV, Chapter 17 by Ia Eradze, ‘Taming dollarization hysteresis: evidence from post-socialist countries,’ critically explores dollarization processes in post-socialist countries from a political economy perspective. Although the political processes and dynamics and the economic structures and dependencies are specific to each country, the chapter systematically elaborates common trends, roots, and trajectories of dollarization processes. The analysis is based on a methodological critique of the dollarization literature that mostly draws on neoclassical economics. These studies struggle to capture and understand the problem of dollarization and de-dollarization processes. One of the biggest problems of these approaches is that the role of the state is not or only insufficiently included in the analyses. Accordingly, the author brings the state back into the analysis based on an analytical framework inspired by peripheral state theory, regulation school and dependency theory. In this way, the chapter demonstrates the responsibilities of the state and the role of the central bank. Moreover, it brings the underlying power relations and conflicts of de-dollarization policies to the fore. The author also suggests policies that are more likely to support successful de-dollarization processes. Labor The cleavage between capital and labor in modern society raises numerous policy issues. Four chapters in Part V address this divide in different ways. The first chapter traces the increas-

12  Handbook on critical political economy and public policy ing power of capital through the organization of global value chains, using agriculture as an example. The second chapter looks at the intertwining of state and capital in regulating the world’s largest labor force. The third chapter looks at the controversies surrounding minimum wage policies, and the final chapter critically examines the concept of ‘just transition,’ the idea that the transition to an environmentally sustainable system of production and consumption should be humane and equitable for the workers and communities affected. Chapter 18 by Praveen Jha and Paris Yeros, ‘Global exploitation chains in agriculture,’ describes and theorizes the significant acceleration of the transnationalization of production and distribution systems. It places these developments in the context of the emergence of capitalism in the era of colonialism when key raw materials and intermediates were sourced from subjugated territories in the South and production took place in the North. While production is geographically dispersed in the current phase of globalization, value appropriation still resides with transnational corporations (TNCs), most of which are headquartered in the Global North. These TNCs engage in ‘labor–nature–regulation arbitrage’ to the detriment of workers and nature. The resulting divergence between labor productivity trends and wages deepens the processes of exploitation for working people in general, but disproportionately in the South. The authors illustrate these processes using agriculture in the Global South as an example. They show how gross inequalities in the level of government support for agricultural activities, the rules of the current trade regime, and control over intellectual property facilitate and reinforce the impact of global agricultural value chains on the exploitation of peasants and agricultural workers in the South. Elaine Sio-ieng Hui’s Chapter 19, ‘The development of labor policies in China: from passive revolution to eroding hegemony,’ analyzes class politics in the country with the largest working population in the world. Her key question concerns the strategies of the party-state to keep this huge working class under control. Inspired by Antonio Gramsci, she shows that the Chinese economic reform initiated since 1978 was a passive top-down revolution, not a bottom-up revolution led by the bourgeoisie as has emerged in some Western countries. Labor policies during this economic reform period went through three phases: passive revolution, emerging hegemony, and eroding hegemony. Drawing on her many years of field research in the People’s Republic of China, Hui traces these changes, focusing on the largest group of the working population in China, rural migrant workers. During the passive revolution to integrate China into the world economy under party leaders Deng Xiaoping and Jiang Zemin (late 1970s to 2003), Chinese labor policies served the purpose of introducing capitalism into the country. Thereafter, under the governments of Hu Jintao and Wen Jiabao (2003–13), many labor policies were aimed at mitigating the negative effects of economic reforms on workers and securing their approval of the ruling bloc. According to Hui, these welfare measures contributed to the emergence of an incipient hegemony of the Chinese ruling class. In the current era under Xi Jinping, labor protections have been softened and labor relations made more flexible. In addition, the party-state is tightening control over civil society actors and suppressing independent workers’ groups, compromising the previous hegemonic base. In Chapter 20, ‘The political economy of minimum wage policies,’ Hansjörg Herr addresses one of the most debated and controversial labor market issues: minimum wages and their adjustment. Since this is also a matter of dispute between economists belonging to different economic paradigms, he presents the two opposing paradigms: neoclassical economics and Keynesianism. According to the neoclassical paradigm, minimum wages and collective bargaining distort the functioning of labor markets. Herr advocates a Keynesian approach based

Introduction   13 on original Keynesian thinking rather than the post-war neoclassical synthesis. In this view, labor markets are dominated by asset and goods markets and therefore do not have their own mechanism by which they can increase employment. Nevertheless, labor markets are important for the stability of economies. Leaving the labor market to the market mechanism, combined with flexible wages, leads to a permanent destabilization of the price level and greater inequality. Minimum wages can thus contribute to more stable labor markets. Herr’s chapter also provides an overview of empirical studies on the effects of minimum wages and discusses the political choices involved in setting minimum wages. Chapter 21, ‘Just transitions: a historical relations analysis,’ by Dimitris Stevis, critically examines various approaches to climate change. Based on the historical relations approach, which pays attention to the power asymmetries inherent in the social division of labor, Stevis historicizes and politicizes the concept of just transition. It was the US Oil, Chemical and Atomic Workers International Union (OCAW) that first raised the idea of a transition program for workers in the 1970s in response to environmental regulations and increased automation. The narratives of the Anthropocene and planetary boundaries largely avoided questions of power and justice in the years that followed. The idea of a just transition resurfaced in the context of green economy proposals following the 2007 financial crisis. While the ecological transition may create more jobs, such as in renewable energy, the shift away from the fossil-fuel-based production and consumption may have a detrimental effect on the labor force. The new jobs may be in other fields, require different skills, and capital may keep unions out of the new jobs. While the just transition discourse recognizes the need to ensure that workers are not disproportionately burdened by the transition, the policies proposed in the name of just transition differ in ambition based on their breadth and depth. Stevis assesses key policy recommendations for just transition against these categories, as well as the range of actors challenging just transition and their worldviews. In the end, he argues for a transformative just transition that goes beyond addressing the (un)just transitions inherent in the capitalist political world economy to an ecosocial political economy in which differences over transitions are a matter of democratic deliberation, not survival. Taxation A central issue in public policy is, of course, how to finance the modern state, and it is therefore not surprising that taxation has long been a subject of study in political economy. Because of its distributional effects, taxation is a highly contentious issue. The increasing opportunities for tax avoidance and evasion arising from the privileged position of corporations in the era of neoliberal globalization have elevated the traditional national issue to the international level. In Part VI, we have therefore included three chapters dealing with tax trends at the national level, cross-border tax evasion, and responses to the erosion of the national tax bases at the supranational level. Hanna Lierse’s contribution, ‘Critical political economy of taxation,’ Chapter 22, introduces the key theoretical debates about taxation, outlining the different and competing forms and goals of taxation and how they have evolved throughout history. It also explains key concepts such as progressive and regressive forms of taxation and shows how different tax policies can contribute to different goals. This is followed by a descriptive overview of some of the major tax changes and transformations that have taken place in advanced post-industrial societies in recent decades. She then shows how these changes are explained from different

14  Handbook on critical political economy and public policy political economy perspectives and what further insights can be gained from the perspective of a critical political economy. She is skeptical about the extent to which policy preferences can be derived from theoretically determined constellations of interests. Instead, she argues for paying attention to the dominant discourses that shape the perceptions of politicians and the population on tax issues. Her focus is on two main trends in recent decades: the decline of redistributive direct taxation and the recent introduction of regressive carbon taxes. These trends expose the currently dominant understanding of taxation in capitalist societies and highlight how governments prioritize certain societal goals, particularly economic growth, over others, such as curbing inequality or climate change. Tax avoidance and tax evasion through tax havens is the topic of Chapter 23, ‘Global tax governance,’ by Matti Ylönen and Lauri Finér. The authors illustrate aggressive tax planning with a case study of a British company that eroded the tax base in its countries of operation, demonstrating how tax base erosion undermines states’ revenues and hinders redistribution. This kind of tax avoidance or aggressive tax planning is often legal, taking advantage of differences in national laws and benefits from tax treaties. In contrast, tax evasion means exploiting loopholes in tax control by illegally hiding tax income. So-called tax havens facilitate international tax avoidance and evasion. They thrive, the authors explain, from the loopholes of the international corporate tax system, which relies on bilateral and multilateral tax treaties that determine tax bases and the mechanisms of administrative cooperation. The international corporate tax system rests on the separate entity doctrine and the arm’s-length principle that allow multinational enterprises to transfer profits to jurisdictions with lowest taxes. In recent years, data leaks from tax havens and the fiscal deficits caused by the 2007–09 financial crisis have contributed to calls for greater transparency, information exchange, and tackling tax base erosion. The authors conclude their chapter by recommending, among other things, that the Organisation for Economic Co-operation and Development (OECD) should intensify its cooperation with non-OECD countries to prevent tax base erosion and to strengthen information exchange. Lyne Latulippe’s Chapter 24, ‘Globalization, international tax policy and the OECD,’ addresses the central role of the OECD in the globalization of tax policymaking. The OECD has developed international tax standards since the mid-20th century. It designed and promoted to both members and non-OECD member countries a model for bilateral tax treaties and provided resources to continuously improve and adapt it to new issues. Since then, a network of over 3000 bilateral treaties has become the basis of today’s international tax system. However, these treaties do not address the problem of tax competition among governments seeking ways to attract capital and investment. The international tax regime has proven very robust over the past 40 years despite increasing failures to deal with tax evasion or avoidance, the financialization of the economy, and the exponential growth of digital economy. It was not until the 2010s, after the financial crisis, that the OECD initiated a more ambitious base erosion and profit shifting (BEPS) project. The BEPS project culminated in 2019 with proposals for a global minimum tax and the allocation of taxing rights to market jurisdictions. Latulippe points out that the OECD’s tax policy analysis and recommendations remain embedded within the economic liberalization discourse and comprise intrinsic limits for the participation of all stakeholders. Furthermore, even if implemented, these recent proposals will be limited to solving some issues related to the taxation of multinationals and leaving other issues also requiring international coordination, such as wealth taxation and environmental taxation, untouched.

Introduction   15 Trade and Economic Development In his contribution to Part VII, ‘Postcolonial critique of economic development,’ Chapter 25, Aram Ziai presents perspectives on postcolonial thinking about development. He begins with an overview of postcolonial concerns such as the impact of the ‘legacies of colonialism,’ the ‘persisting cultural and political ramifications of colonialism in both colonizing and colonized societies,’ and the ‘critique of the process of producing knowledge about the other.’ Ziai then addresses the critique of ‘development’ voiced by some of the postcolonial approaches, especially those known as post-development. The latter challenge the postwar concept of development as a promise of affluence intended to keep decolonizing countries from joining the communist camp based on an interpretation of difference from the US and Western European experience as backwardness. Ziai ends his chapter with a presentation of policy alternatives that build on the preceding critique. While mainstream development recommendations assume an omnipotent and benevolent actor such as the ideal state, post-development recognizes the richness of social relations and is oriented toward communities’ worldviews and priorities. It aims at more emancipatory alternatives. Chapter 26, ‘Economic cycles and rural policies in the People’s Republic of China,’ by Sit Tsui, Yan Xiaohui, He Zhixiong and Wen Tiejun, traces the changes in agricultural policies since the founding of the People’s Republic of China, the various shifts between supporting rural villages and exploiting them for industrialization and urban growth. Their account begins with the equal distribution of land for nearly 90 percent of the population and moves on to successive policy changes: collectivization, the policy of allowing small parcels of privately cultivated land, granting farmers the right to the rural surplus, the establishment of township and village enterprises (TVEs), the integration of TVEs into the export economy, the recognition of environmental degradation, and finally the trend of capital flow into the rural sector. The account of these changes is placed in the context of urban developments and the challenges of rapid industrialization and militarization in response to external threats from the USSR and US-led capitalist alliances. The chapter concludes that rural China played an important role in cushioning the shocks of cyclical economic crises caused by urban industrial capital. In Chapter 27, ‘Trade and investment agreements from a critical international political economy perspective,’ Luciana Ghiotto offers a Marxist perspective on international trade and investment protection treaties. The analytical starting point is social antagonism. From there, she describes how the reshaping of state–market relations driven by the internationalization of production has spurred the development of legal mechanisms that provide a measure of security for capital accumulation. These contracts are a legal form by which states guarantee the freedom of capital and private property. In particular, the investor–state dispute settlement (ISDS) mechanism is an extraterritorial form of jurisdiction that provides greater security for capital by guaranteeing protection of investors’ property when states have been unable to fulfill it. Thus, the chapter makes a profound contribution to the development of a critique of international political economy. In Chapter 28, ‘South Africa’s failed privatization, commercialization and deregulation of network infrastructure,’ Greg Ruiters and Patrick Bond discuss the results of various forms of privatization and commercialization of network infrastructure that occurred in post-apartheid South Africa. These experiences, they argue, confirm the most serious concerns expressed about current weaknesses in state management, ideology, and service delivery. Any socially, economically, and environmentally sound infrastructure project carries significant public

16  Handbook on critical political economy and public policy benefits. However, instead of positive multipliers, many more negative externalities have been generated. While social and environmental externalities were increasingly socialized, deregulation allowed for an increase in privatized monopoly profits in areas that were supposed to be provided by the state as ‘natural monopolies.’ However unsuccessful, megaprojects continued to motivate a supposedly developmental approach to state-building, even though the harsh project-based realities exposed systemic corruption as a driver of class formation. Welfare Part VIII deals with different public policies regarding the social welfare system. In Chapter 29, ‘Care in global value chains,’ Christa Wichterich discusses the reconfiguration of social reproduction across borders and boundaries. She argues that feminist political economists coined the notion of global care chains by extending the perspective on labor and trade chains across countries from the productive sector to the reproductive sphere. The chapter highlights how the global care chain emerged in the context of a crisis of social reproduction and the transnational supply of care; the policies of both ‘sending states’ and receiving countries; and the patterns of migration, care drain and the construction of transnational families. The author concludes by pointing to policy recommendations and to the necessity to address the multidimensional inequalities that cause the export and import of care workers. From the perspective of migrant workers, it is necessary that receiving states offer opportunities regarding labor rights, minimum wage, equal payment, social protection, and organizing to migrant care workers as they provide for citizens of the country; in turn, sending states profiting from outmigration should enable migrant workers and their communities to make informed choices and access legal information and social protection. Thus, it is necessary to rethink the economy from a caring perspective in terms of responding to people’s needs and human rights. In Chapter 30, ‘The cultural political economy of housing policy in the era of the Islamist Justice and Development Party in Turkey,’ Ismail Doga Karatepe analyzes the Mass Housing Administration of Turkey (TOKİ). Since the conservative AKP came to power, TOKİ’s share in housing provision has drastically increased. The author employs the CPE approach developed by Bob Jessop and Ngai-Ling Sum in Chapter 3, which combines culture with political economy. He considers that CPE represents an ontological turn, defending that the world has semiotic and material properties that are equally important. Yet, the author goes beyond the vocabulary provided by Jessop and Sum’s CPE, and argues that, for a more nuanced analysis, a context-dependent conceptual-theoretical integration is required. The author applies the concept of patronage to highlight the discretionary and preferential treatment in exchange for political and economic support. He points out that the extensive state involvement through the housing provisions of TOKİ was the outcome of a certain discourse that disparaged the gecekondu (squatter) mode of housing provision. Also, it is the outcome of a certain Islamist imaginary that aims to change the urban landscape in a modernist way. Karatepe concludes that the long-standing commitment of Islamist politics to a rapid reconstruction/development through government intervention has finally been realized with TOKİ’s operations. Chapter 31 discusses the financialization of social policies, with particular emphasis on education and healthcare. In ‘The financialization of social policy: an overview,’ Lena Lavinas, Lucas Bressan, Pedro Rubin, and Ana Carolina Cordilha argue that the concept of financialization is central to understanding current transformations in social policies. The chapter maps some of the ways in which these transformations are occurring across key sectors of social

Introduction   17 provision, such as pensions, education, and healthcare. The authors show how the advance of this new paradigm of social policy in financialized capitalism is connected to a growing dependence of households on financial markets, especially through mounting levels of debts. They point to the corrosion of social ownership and collective identities that sustained the development of a wide variety of welfare systems in central and peripheral economies, which now engenders an accelerated process of recommodification and re-individualization. Rather than promoting socioeconomic security over the course of individuals’ life cycle, social policy now regulates access to financial markets while it is simultaneously regulated and reconfigured by them. The result of the financialization of social policy is therefore the production of families’ growing dependence on deregulated financial markets. The discussion carried out throughout the chapter aims to critically examine how this paradigm undermines the fundamental goals of social policy by deepening different forms of inequalities and exclusions among individuals, while feeding financial accumulation. Finally, in Chapter 32, Jameson Martins and Deisy de Freitas Lima Ventura discuss ‘The political economy of global health and public policies.’ The authors argue that global health has emerged as a wide and heterogeneous set of both public and private institutions and their respective agendas concerned with health issues around the world, which has been defined as an ‘open-source anarchy.’ In such a context, we may observe multiple sources of conflict between such forces, which ultimately expose the inextricably political nature of health, beyond its mere biomedical definition and data-based metrics. Among the most overt of those conflicts, one may consider the contemporary debate on the feasibility of health systems: more specifically, the financial foundation to universal health coverage; the disparate landscape of institutions shaping the global governance of health, at the center of which the World Health Organization plays a paramount role; the increasing influence of private institutions, particularly those engaged in what has been defined as philanthrocapitalism, such as the Bill & Melinda Gates Foundation; and, no less relevant, the securitization and politicization of global health issues, such as the latest Public Health Emergency of International Concern (PHEIC) due to the COVID-19 pandemic. The authors argue that an underlying thread of continuity between those phenomena is the persisting tension between the neoliberal market-oriented and the public-funded approaches to health, which has accompanied the expansion and complexity of global health issues from the onset of the field. They consider that the securitarian approach, pervasive in the response to all major global health crises in the early 21st century, focuses too much on the containment of diseases, instead of tackling their structural causes on the ground in the first place. The authors conclude that socioeconomic inequalities and the lack of access to basic health conditions of large swaths of people do not come to the fore when an acute crisis emerges. The neoliberal policymaking cannot deliver on the needs for equity in health and accountable leadership to overcome such challenges.

BIBLIOGRAPHY Banerjee, A.V. & Duflo, E. 2011, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, New Delhi: Random House. Boyer, R. 2018, ‘Comparative political economy,’ in I. Cardinale & R. Scazzieri (eds), The Palgrave Handbook of Political Economy, London: Palgrave Macmillan, pp. 543–604.

18  Handbook on critical political economy and public policy Buchanan, J.M. 1999, ‘The domain of constitutional economics,’ in J.M. Buchanan (ed.), The Logical Foundations of Constitutional Liberty, Vol. 1, The Collected Works of James M. Buchanan, Indianapolis, IN: Liberty Fund, pp. 377–95. Cardinale, I. & Scazzieri, R. 2018, ‘Political economy: outlining a field,’ in I. Cardinale & R. Scazzieri (eds), The Palgrave Handbook of Political Economy, London: Palgrave Macmillan, pp. 1–28. Habermann, F. 2008, Der homo oeconomicus und das Andere: Hegemonie, Identität und Emanzipation, Baden-Baden: Nomos. Helleiner, E. 2021, ‘The diversity of economic nationalism,’ New Political Economy, 26 (2), 229–38. Marx, K. 1887, Capital: A Critique of Political Economy, Moscow: Progress Publishers. McMichael, P. 1990, ‘Incorporating comparison within a world-historical perspective: an alternative comparative method,’ American Sociological Review, 55 (3), 385–97. McMichael, P. 2000, ‘World-systems analysis, globalization, and incorporated comparison,’ Journal of World-Systems Research, 6 (3), 68–99. Muldrew, C. 2018, ‘Politics and economics of markets,’ in I. Cardinale & R. Scazzieri (eds), The Palgrave Handbook of Political Economy, London: Palgrave Macmillan, pp. 91–132. Poulantzas, N. [1978] 2000, State, Power, Socialism, London: Verso. Smith, A. [1776] 1976, An Inquiry into the Nature and Causes of the Wealth of Nations, Vols. I–II, edited by R.H. Campbell, A.S. Skinner & W.B. Todd, Oxford: Oxford University Press. Steuart, Sir J. [1767] 1966, An Inquiry into the Principles of Political Economy: Being an Essay on the Science of Domestic Policy in Free Nations, in Which Are Particularly Considered Population, Agriculture, Trade, Industry, Money, Coin, Interest, Circulation, Banks, Exchange, Public Credit, and Taxes, London: A. Millar and T. Cadell. Weingast, B.R. & Wittman, D.A. 2008, ‘The reach of political economy,’ in D.A. Wittman & B.R. Weingast (eds), The Oxford Handbook of Political Economy, Oxford: Oxford University Press, pp. 3–25. Wullweber, J. 2015, ‘Post-positivist political theory,’ in M.T. Gibbons (ed.), The Encyclopedia of Political Thought, Chichester: Wiley, pp. 2932–42. Wullweber, J. 2019, ‘Monism vs. pluralism, the global financial crisis, and the methodological struggle in the field of International Political Economy,’ Competition and Change, 23 (3), 287–311. Wullweber, J. & Scherrer, C. 2011, ‘Postmodern and poststructural international political economy,’ in R.A. Denemark (ed.), The International Studies Encyclopedia, Oxford: Blackwell, accessed 20 December 2022 at https://​doi​.org/​10​.1093/​acrefore/​9780190846626​.013​.468.

PART I THEORIES OF POLITICAL ECONOMY WITH PUBLIC POLICY IMPLICATIONS

2. Plurality of political economy approaches to the global division of labor Christoph Scherrer

The question of the international division of labor, the foundation of international trade, stands at the beginning of the field of international political economy. After all, the benefits and dangers of the division of labor have been argued about at least since Adam Smith’s detailed description of pin production based on the division of labor in the 18th century. Regarding the cross-border division of labor, three paradigms developed as early as the 19th century that still guide the debate on the international division of labor today: the liberal, the economic nationalist, and the Marxist ‘schools.’ The first welcomes the cross-border division of labor, the second makes its benefits contingent on the fulfillment of certain conditions, and the third rejects the mode of division of labor. In recent decades, these views have been supplemented by the feminist critique of the gender division of labor. The international division of labor is therefore an ideal entry point for providing an overview of the different strands in international political economy (IPE) and their respective policy positions on trade. By taking note of these paradigms, I hope to gain a better understanding of today’s global economic policy debates. Therefore, I will first present these theoretical traditions individually in order to compare them systematically in a second step with regard to their attitude towards the societal division of labor. Given its mainstream status, the liberal IPE receives less space in this contribution to the Handbook on Critical Political Economy and Public Policy.

THE LIBERAL INTERNATIONAL POLITICAL ECONOMY From the outset, classical political economy advocated the emergence of an international division of labor, with Adam Smith (1723–90) recommending specialization on the basis of absolute advantages (especially climatic or resource), and David Ricardo (1772–1823) on the basis of comparative cost advantages (countries should specialize in those industries in which they have comparatively the highest cost advantages). Accordingly, they advocated the dismantling of government control of foreign trade, especially through tariffs. Ricardo’s theory of comparative advantage remained the basic theorem of foreign trade theory (Krugman, Obstfeld & Melitz, 2018, pp. 52–78), which, abstracting from differences in power and development among nations, examines cross-border economic activity. From this ‘purely’ economic perspective, the political is primarily an obstacle to the realization of free world markets or the addressee of recommendations based on model theory. In the postwar period, liberal IPE raised the political to an independent object of study based on the insights of foreign economic theory. The central issues relate to developmental differences and to conditions of stability in the world economy, with the liberal tradition taking up economic nationalist critiques on the one hand, and Marxist critiques of the international division of labor on the other (see below). 20

Plurality of political economy approaches to the global division of labor  21 The development policy debate was shaped by modernization theory (protagonist: W.W. Rostow, 1960), which saw the catching-up and, thus, the modernization of ‘traditional’ societies with regard to the Western industrialized countries within a liberal world economy as only a question of time, but which could be accelerated by appropriate measures – for example, by advising the respective decision-making bodies, by technology and capital transfer. While Keynesian modernization theory focused on the development of a single market and the transfer of administrative knowledge, technology and capital through state or supra-state organizations (Lewis, 1966), the neoliberal variant that dominated from the 1980s onward (Lal, 1983) adopted the microeconomic view of the prevailing foreign trade theory. Its recommendations include export orientation and strengthening of market forces, leaving transfers primarily to private enterprises (closing the so-called savings gap through private capital imports) and advice to consulting firms and the International Monetary Fund (IMF). Due to the discrediting of this so-called Washington Consensus (Williamson, 1990) in the wake of the Asian crisis (1997) and the permanent crises in the countries advised by the IMF, a post-Washington Consensus emerged that takes greater account of the stability conditions of markets: through so-called good governance (infrastructure, education, functioning administration and rule-of-law institutions) in the respective nation-state and through certain restrictions on risky financial operations at the world level (Herr & Priewe, 2005). Another central issue of liberal IPE relates to the conditions of stability of the world economy, and these are dealt with primarily using the example of the monetary system. The dollar crisis, which began in the 1960s and led to the end of the Bretton Woods fixed exchange rate regime in 1971, gave rise to an ongoing debate about the extent to which a stable liberal world economy needs a strong leader (hegemon). An analysis by Charles Kindleberger (1910–2003) of the world economic crisis of 1929 had shown that it had been aggravated by the refusal of the US to act as a stabilizer (Kindleberger [1973], 1986). After World War II, the US had assumed a ‘benevolent’ leadership role, but with the end of the Bretton Woods system, this came to an end. Kindleberger’s observation was called the ‘theory of hegemonic stability’ by American political scientists, who countered it with the thesis that stability as a public good could also be provided through cooperation between individual nation-states. This insight was taken up by regime theory, which holds that international agreements, insofar as they are based on broadly shared values and have stood the test of time, are of their own weight with regard to individual nations, including the dominant nations. Offers from various paradigms can be found in support of it: liberal (Keohane, 1984), rational choice (Axelrod, 1984), institutionalism (Krasner, 1982), and constructivism (Wendt, 1992). In the 1990s, this debate was continued under the term global governance, with the inclusion of international civil society actors representing the innovation. The content of global governance is controversial. From a social-ecological perspective, it is supposed to contribute to the management of global problems such as climate change (Rosenau, 1995). The neoliberal version gives priority to securing private property rights (Ohmae, 1990). What both have in common is that power imbalances and exclusion mechanisms are subordinated to the search for the stability conditions of global governance. Since the early 1980s, the liberal IPE paradigm has become predominant in the United States and its adherents have increasingly employed methods borrowed from neoclassical economics (Maliniak & Tierney, 2009). Those liberal IPE scholars with an interest in international trade address questions concerning domestic actors’ constellations influencing trade decisions (e.g., Grossman & Helpman, 1995; Milner & Judkins, 2004) or the impact of trade agreements on

22  Handbook on critical political economy and public policy various issues such as the flow of foreign direct investment (e.g., Malesky & Milner, 2021) or labor rights (e.g., Short, Toffel & Hugill, 2020). The policy-oriented strand in liberal IPE has expressed concerns about the rise of a ‘populist’ backlash against globalization, especially after Donald Trump’s ascendancy to the US presidency (e.g., Barattieri & Cacciatore, 2020; articles on US–China relations in Foreign Affairs 2018–2021). President Biden seems to allay these fears, although he seems to pursue a foreign economic policy that I call the intersection of Obama’s encircling strategy of the People’s Republic of China (PRC) and Trump’s direct confrontation strategy (Scherrer, 2022).

ECONOMIC NATIONALISM Economic nationalism is mostly attributed to Friedrich List (1789–1846; on List, see Szporluk, 1988; Tribe, 1995), but his protective tariff argument had been developed before him in many other countries that wanted to emulate the British model of industrial development – for example, in France by F.L.A. Ferrier (1805) and in the USA by Alexander Hamilton’s Report on Manufactures (1791) and Henry Carey (1837; on Carey, see Dawson, 2000). As a liberal expelled from the country by the king of Württemberg, he and the emerging German bourgeoisie faced the central challenge of overcoming the small German states. In his main work, The National System of Political Economy (1841), he accordingly did not reject in principle the free trade arguments of the classics (which he called the ‘school’), but these would only be valid when the world was no longer divided into nations. As long as nation-states still existed, however, ‘the result of general free trade would not be a universal republic, but, on the contrary, a universal subjection of the less advanced nations to the supremacy of the predominant manufacturing, commercial, and naval power’ (List [1841], 1909, p. 101). Accordingly, he advised the ‘less advanced nations’ to introduce protective tariffs for as yet undeveloped industries and to dismantle all measures that hinder the development of industries within the nation-state (in the case of Germany, especially the internal customs borders). In addition, countries should focus on the development of their productive forces, especially through education. However, in his colonialist worldview he saw the introduction of protective measures as justified only if certain preconditions were met – namely, ‘the highest degree of civilisation, and development of material prosperity and political power’ (ibid., p. 134), taking the ‘civil liberty’ of Britain as a model (ibid., p. 220). Overall, List very much admired Britain’s protective and developmental policies that helped its rise to industrial pre-eminence, as these were contrary to the ‘cosmopolitan’ policies propagated by the liberal tradition (for Britain’s policies, see also Nye, 2007). Today’s most prominent representative of the Listian tradition, Ha-Joon Chang, who argues just like List based on historical precedents, has shown how other early industrializing countries have used a similar set of protective policies and once they were successful switched to propagating and enforcing liberal policies (Chang, 2002). While today’s orthodox foreign trade theory emphasizes primarily the benefits of free trade for consumers, List clearly gave priority to production over consumption: ‘It [the nation] must sacrifice some present advantages in order to insure to itself future ones’ (List [1841], 1909, pp. 112–13). In other words, for the good of the nation as a whole, individual needs should be subordinate. Nevertheless, List’s liberalism set him apart from romantic German nationalism, which, with Johann Gottlieb Fichte (The Closed Commercial State [1800], 2012), placed the all-encompassing nation before the individual and adhered to the ideal of national autarky. In

Plurality of political economy approaches to the global division of labor  23 the form of the concept of a large-scale economy (political-economic control over continental Europe), this idea was to become a guiding principle for the German National Socialists in the wake of the Great Depression. Autarky, or politically controlled foreign trade and state-led industrialization, was also the credo of the state socialist countries and Eastern European agricultural states (Manoilescu, 1931). After World War II, free trade became the universal guiding principle of trade policy in the Western advanced capitalist camp. But List’s plea for exceptions to the rule remained relevant. On the one hand, with the establishment of the Generalized Agreement on Tariffs and Trade (GATT), the United States realized List’s call for multilateral negotiations on foreign trade facilitation committed to the reciprocity principle of comparable trade concessions (as opposed to the unconditional opening of borders to trade). On the other hand, in view of the large mass of ‘inferior civilization(s)’ (List [1841], 1909, p. 124), his protective tariff argument was widely received; it also found its way into the liberal tradition under the heading ‘infant industry protection.’ In the postwar period, it was pragmatically applied, especially with success, by Japan and other East Asian countries, but also by West Germany, whose industrial reconstruction was state-supported and flanked by exchange controls (Streeck & Yamamura, 2001). In particular, the Bundesbank’s interest rate policy and the obligatory involvement of the collective bargaining parties can be characterized as elements of an economic nationalist strategy that curbed domestic demand and thus imports in favor of a foreign trade surplus (Germann, 2021). More explicitly, List’s ideas found their way into the development discourse of the postwar period. Pointing to the deteriorating terms of trade for agricultural products and natural resources (the price index of these products rose more slowly than that for industrial goods), adherents of the Economic Commission for Latin America and the Caribbean’s (ECLAC) economic theory of unequal trade argued that the dependence of former colonies on capitalist centers was inscribed in the traditional international division of labor. First, demand for primary goods would not increase proportionally with income growth in the industrialized countries. Second, productivity increases in developing countries would not lead to wage increases because of the massive release of labor in subsistence agriculture, but only to production expansion, while in industrialized countries wages kept pace with productivity increases. Thus, in terms of income, productivity gains in the developing countries would primarily benefit the industrialized countries via the worsened terms of trade. Raul Prebisch, the leading intellectual of this trend and the first Secretary General of United Nations Conference on Trade and Development (UNCTAD), advocated, in line with List, the development of domestic industry under the protection of tariffs (substitution of imports of industrial goods by domestic production) and with the help of state infrastructure. In addition, however, Prebisch also called for the opening of the markets of the industrialized countries to the industrial goods of the developing countries, whose export capacity he wanted to see strengthened (Prebisch, 1950). Other authors of this current did not share Prebisch’s liberal credo and, similar to the nationalists in Europe before them, called for a stronger decoupling (dissociation) from the world market (Frank, 1967). Unlike many Asian countries, many in Latin America failed to use tariff protection to build up an industry capable of competing on the world market, so that, contrary to List’s proposals, the respective educational tariff became a permanent tariff (see Burnell, 1986 for economic nationalism in the Third World). The catching-up and selective opening strategies of the PRC in the post-Maoist era were inspired by Sun Yat-sen (Sun, 1922) and the Chinese tradition of the ‘self-strengthening’

24  Handbook on critical political economy and public policy movement following the Second Opium War of 1856–60, though not by the Listian tradition (Helleiner, 2018). Even in the capitalist centers, some of List’s ideas remained current. As the US unions were the first to be affected on a broad front by the increasing relocation of labor-intensive production steps to low-wage countries, they raised comprehensive demands for a restriction of transnational companies in 1971. Labor-friendly senators enlisted the support of Robert Gilpin for a study of the national impact of transnational corporations. His studies, The Multinational Corporation and the National Interest (1973), U.S. Power and the Multinational Corporation (1975), and especially his later work, The Political Economy of International Relations (1987), became the standard reference point for the so-called realist tradition in IPE – that is, with an overt emphasis on the role of nation-states. While tariff protection and restrictions on transnational corporations were subsequently rejected in the US, calls for industrial policy measures (e.g., research subsidies) gained attraction (Thurow, 1985). The theoretical rationales for tariff and industrial policy did not move beyond List until the 1980s. The ‘new’ or ‘strategic’ trade theory incorporated insights from industrial economics that led to consideration of imperfect markets, heterogeneous products, increasing returns to scale, learning curves, and externalities in the design of partial equilibrium models (Krugman, 1986). For international trade, it has been known at least since Adam Smith that it can lead to increasing returns to scale – that is, decreasing production costs per unit as production volumes increase (for example, due to high development costs). Thus, the classical model assumption of diminishing returns to scale is not always fulfilled. However, taking into account increasing returns to scale led, under certain further model assumptions, to the result that trade barriers for one’s own country can have a welfare-enhancing effect. This is because the domestic firm can enjoy the economies of scale more quickly if foreign competition is kept out of the market during the introductory phase. It then has an initial advantage in third markets. However, the results of this more ‘realistic’ modeling of the international division of labor are also used to justify further steps toward foreign trade liberalization in two ways. First, the strategic trade concepts can be employed to redirect interest in closing off one’s own market in favor of opening foreign markets. Second, the theory’s insights allow for the justification of further liberalization steps of one’s own markets. The maximization of economies of scale is only possible with further specialization within the framework of intra-industrial trade. However, this requires the dismantling of non-tariff trade barriers. This argument is used particularly effectively to justify deregulation measures in the context of free trade areas (see, for example, Cecchini’s 1988 report on the benefits of a European Single Market and the envisaged Transatlantic Trade and Investment Partnership; also Felbermayr, Heid & Lehwald, 2013). The exit of Great Britain from the European Union in 2020, the so-called Brexit, and the tariff policies of the US President Donald Trump (2017–21) are seen by some to be informed by the tradition of economic nationalism, though not necessarily by the more nuanced writings of List (Helleiner, 2021). In light of the British government’s pursuit of new free trade agreements and the American use of tariffs on Chinese products to force the PRC to limit its state support for industrial catch-up, this interpretation does not seem so convincing (Scherrer & Abernathy, 2017).

Plurality of political economy approaches to the global division of labor  25 The immense industrial success of the PRC has renewed interest in industrial policy among advanced capitalist as well as catching-up countries (Belton, Mandel & Duesterberg, 2020; Otsubo & Otchia, 2021; Rodrik, 2004).

CRITIQUE OF POLITICAL ECONOMY – HISTORICAL MATERIALISM The Marxist critique of political economy is being increasingly recognized again, especially in the North–South discourse, but not only limited to it. It is critical insofar as Karl Marx (1818–83) developed his own approach, historical materialism, explicitly in the debate with the liberal classics (Heinrich, 2012). The Marxian approach is ‘historical’ because it focuses on the developmental dynamics of societies. In contrast to the liberal and national economic tradition, capitalist society is not seen as the end point of the development of human societies. The central moment of development is seen as the social conditions that ensure the material reproduction of society – that is, the securing of the basis of life for the next generation. In contrast with the idealistic notion, common in Germany at that time, that societies develop on the basis of ideas, or are even only expressions of the unfolding of specific ideas, historical materialism focuses on the practice of people to create their livelihoods over and over again from scratch (see also Schneider et al., Chapter 8 in this Handbook). This understanding of materialism, however, is not to be equated with the everyday understanding – namely, that the disdainful greed for the accumulation of possessions drives humankind and its societies. Rather, it is assumed that the way in which a respective society reproduces itself is contradictory and that the conflicts resulting from these contradictions cause the social dynamics. In capitalism – that is, in those societies in which individuals primarily (not exclusively) enter into a relationship with one another mediated by capitalist property relations and become part of society (‘socialized’) – the contradiction is inherent in the act of exchange that brings together people producing in a division of labor. In capitalism, the exchange of goods is based on the idea that it takes place among legally equal persons who exchange goods of equal value. This would apply to commodity markets, but not to the labor markets that characterize capitalism. The latter could only arise where, as Marx put it, there are the doubly free wage laborers. On the one hand, they must be able to dispose freely of their labor power – that is, be free from obligations to others (feudal lords, slave owners), otherwise they could not sell their labor power. On the other hand, they are forced to sell their labor power because they do not have their own means of production – that is, they are ‘free’ from them (Marx-Engels-Werke [MEW], vol. 23, ch. 6). Wage workers would create more value with their labor power than is paid to them in the form of wages. They would also produce, unpaid, the means needed to reproduce the means of production owned by the capitalist that were used up during production, plus the luxury consumption of the owners of the means of production who buy their labor power, of course only as far as they are successful in the market. In this division of labor between owners of the means of production and wage earners, the Marxist tradition sees a relationship of exploitation. While the liberal tradition advocates this kind of division of labor and wants to see it universally enforced, while the national economic tradition accepts it as well but concentrates

26  Handbook on critical political economy and public policy on its realization in the respective nation-state, the Marxist tradition problematizes it with a view to overcoming it. With this view of the wage relation, Karl Marx was more interested in Ricardo’s labor theory of value than in his theory of comparative advantage. The only chapter in Das Kapital that explicitly deals with ‘foreign trade’ explores the consequences of foreign trade for the law of the tendential fall of the rate of profit (MEW, vol. 25, pp. 247–50). For Marx, the creation of the world market lay as a tendency directly given in the concept of capital itself: accumulation for the sake of accumulation itself. He saw in foreign trade both the historical origin of the capitalist mode of production and its consequence due to the need for an ever-expanding market (ibid., p. 247). Moreover, the economic laws revealed by the classical economists ‘would become more true, more exact, and cease to be mere abstractions to the same extent that free trade asserts itself’ (MEW, vol. 4, p. 307). Politically, Marx and Friedrich Engels (1820–95) evaluated foreign trade by its impact on class relations. At one point, they advocated free trade because it would exacerbate the contradictions of the capitalist mode of production, and that from these contradictions ‘will emerge the struggle that will end with the emancipation of the proletariat’ (ibid., p. 308). In another passage, Engels likewise welcomed the protective tariff in revolutionary terms: ‘But since…the bourgeoisie in Germany needs protection against foreign countries in order to clear up the medieval remnants of the feudal aristocracy…the working class also has an interest in that which helps the bourgeoisie to undiminished rule’ (Engels, ‘Protective tariff or free trade system,’ ibid., 59ff.) Consequently, they did not share the classics’ belief that free trade ‘will make the opposition between industrial capitalists and wage laborers disappear’ (ibid., p. 456), that free trade is peacemaking (‘All the destructive phenomena which free competition produces in the interior of a country are repeated to an even greater extent on the world market’; ibid.), and in the naturalness of the international division of labor. The revolutionary perspective also shaped their criticism of List. On the one hand, the protective tariff system was only a means ‘to raise industry in a country – that is, to make it dependent on the world market’ (ibid., p. 457). On the other hand, it represented an attempt to blur the opposition between capital and labor by an opposition between nations (ibid, p. 461). The latter argument was to prove true, contrary to Marx’s intentions, in World War I. Accordingly, for the first generation of Marxists after Marx, the main question was to what extent the imperialist ambitions of the leading capitalist nations of the time helped or hindered the revolutionary spirit of the proletariat. For Rosa Luxemburg (1871–1919), imperialism resulted from capital’s need to seize regions not yet thoroughly capitalized (external land grabs). Since she did not take into account advances in productivity, she could not imagine how the capitalist economy could continue to grow if only the capitalists and wage earners were available as buyers of goods. Growth could only be secured if there was demand from outside capitalist relations. The violent character of the subjugation of non-capitalist areas, however, would rebound into the capitalist centers (Luxemburg [1912], 2003; Patnaik & Patnaik, 2016).1 Vladimir Ilyich Lenin (1870–1924), like Rudolf Hilferding (1877–1941) and Karl Kautsky (1854–1938),2 derived imperialism from the process of concentration of capital. He contributed an idea that was later echoed by some Marxist-oriented adherents of the dependency theory (Emmanuel, 1972): the monopolistic profits of imperialist countries ‘creates the economic possibility of bribing the upper strata of the proletariat’ (Lenin [1916b], 2000, p. 173). The social catastrophe of imperialist war, however, would bring about the realization of the necessity of revolution, especially since monopoly, through the socialization

Plurality of political economy approaches to the global division of labor  27 of production, would create the basis of the historical possibility of socialism (Lenin [1916a], 1964, p. 107). This view became fundamental for the further development of Soviet-style theory, which resulted in the theory of state-monopolistic capitalism (stamocap). The different variants of the latter shared the following assumptions: (1) capitalism progresses lawfully until it is overcome; (2) a few large capitals dominate; and (3) the state apparatuses fall into the hands of the monopolies (Boccara, 1973). A resolute critique of stamocap was developed by a leading representative of Trotskyism, Ernest Mandel (1923–95), who was convinced of the validity of the law of value and the tendency toward the emergence of an average rate of profit even in ‘late capitalism’ (Mandel, 1972). His work provided an important pole of reference and friction for the West German reception of Marx for an analysis of the world economy, which began in the late 1960s. This world economic debate produced a theoretical approach based on Marx’s ‘modification’ of the law of value on the world market (MEW, vol. 23, ch. 20). This ‘law’ states that the socially average labor time required to produce a commodity determines its value. If the labor time used is above the social average for the commodity in question, the time above the average is not socially recognized in exchange – that is, it creates no value. If the time is below it, extra surplus value is created. Instead of assuming, as Lenin did, the monopolies’ striving for profit and power, this value-law approach assumed that ‘according to the logic of the concept of capital, the development of capital on the world market basically takes place in the same forms as the development of capital in the space delimited by the nation-state’ (Neusüß, 1972, p. 96; own translation, original emphasis). From this it followed that the monopolies on the world market still meet as competing individual capitals, that they therefore do not cancel out the law of value, that development phases do not represent simple repetitions, and that capitalism is not yet at its end. In contrast to the notion of ‘unequal exchange’ on the world market (Frank, 1967; in its Marxist variant: Emmanuel, 1972), popular not least because of the dependency theory (Dos Santos, 1970), Christel Neusüß (1937–88) argued with the category of extra surplus value, which would accrue to those nations whose labor intensity is above the national averages of labor intensity. A transfer of value would not take place, since the concept of social labor loses its economic meaning beyond the borders of the respective society (Neusüß, 1972, pp. 138–41). The theoretical debate petered out toward the end of the 1970s, not least because of the high degree of abstraction and the neglect of political action. However, its insights informed quite a few empirical works on the world market (e.g., Altvater, 1987). The world systems theory developed in the USA and the regulation theory from France essentially inherited these debates. In direct confrontation with modernization theory, the world system theory assumes a world market interrelationship mediated by the sphere of circulation since the European conquest of America, which brought the European and Asian world economies into an increasingly intensive exchange via the silver and gold deposits there. This developing modern world system, with an association of sovereign national states, constitutes the basic unit of analysis. It is driven by capital accumulation, dissected into a center and a periphery by a division of labor mediated by unequal exchange (with the semiperiphery in between), dominated by hegemonic states in cyclical, crisis-like succession, and shaped by technological cycles (Wallerstein, 1982). From this perspective, development and underdevelopment are mutually constituted in the world system. While it is possible for individual

28  Handbook on critical political economy and public policy countries to move from the periphery to the center via the semiperiphery, for systemic reasons it is not possible for most countries in the periphery. However, the absolute level of development can increase for the periphery. Overall, following Marx, the division of labor is generally problematized, but the focus is on the spatial dimension of hierarchized division of labor, as in economic nationalism. Some called for a delinking from the capitalist world economy to give space for domestic development priorities, creating ‘autocentric’ development (but not autarky; Amin, 1976). Informed by the world system theory, Gary Gereffi was one of the first to analyze the emerging global supply chains that make use of differences in wage levels, environmental standards, and infrastructural spending (Gereffi, 1994). The question of who is capturing most of the value created along the supply chains and how one can improve one’s position has become a mainstream management and development discourse (Fuller & Phelps, 2018). Class-based IPE has highlighted the role of working-class resistance in the spatial configuration of the global supply chains (Selwyn, 2015; Silver, 2003). Works in the tradition of Antonio Gramsci have highlighted the embeddedness of the supply chains in the neoliberal hegemony of global economic governance (Levy, 2008; Scherrer, 2021). Although the Marxist tradition assumes the crisis-proneness of capitalist socialization, it is the special merit of regulation theory to have pointed out the coordination problems of the market-mediated division of labor. The term regulation stands neither for a state of equilibrium nor for state regulation, but refers to the precarious reproduction of commodity and wage relations. Growth would be accompanied by ruptures in production methods and ways of life (Aglietta, 1979). If capital accumulation nevertheless takes place, then there is a relation of correspondence between the regime of accumulation and the mode of regulation. Regulation is thus system change with system preservation. Regulation is not the result of conscious control because of the competition of interests inscribed in these relations (Lipietz, 1985; see also Chapter 4 by Becker in this Handbook). The post-2000 emerging field of cultural political economy (CPE) has added a sensitivity to the analysis of capitalist dynamics concerning the role of semiotics (see Jessop and Sum [Chapter 3] and Karatepe [Chapter 30] in this Handbook). The policy recommendation of these more recent strands in Marxism concerning the global division of labor are usually reformist – that is, strengthening the agency of labor through international solidarity, renegotiating trade agreements in favor of labor and the environment as well as more economic policy space, and closing of tax havens and offshore financial centers.

FEMINIST CRITIQUE Gender relations first came into view within IPE in the sociological development literature, pointing out, on the one hand, the leading role of women in agriculture, which had been overlooked until then, especially by development policy (Boserup, 1970). On the other hand, the relationship of women in domestic work and subsistence agriculture to the enforcement of the wage–labor relationship for men was examined (Federici, 2004; Mies, 1986). In the wake of the ‘new’ international division of labor, many dimensions of this division were analyzed, such as the feminization of the proletariat in the world market factories of the textile, garment, and electronics industries (Seguino, 1997; Tejani & Milberg, 2016); the impact of structural

Plurality of political economy approaches to the global division of labor  29 adjustment measures dictated by the IMF on gender relations (Haddad et al., 1995); the division of labor between the academically educated ‘mistress’ and the ‘servant’ who usually comes from a different class and country (Young, 2001); the gender differential impact of trade liberalization (Van Staveren et al., 2007); the conditions and causes of women’s labor migration (Schwenken, 2018); and care supply chains and reproductive technologies (Fraser, 2017; see also Wichterich, Chapter 29 in this Handbook). The issue of care work has led to a Marxist theory of social reproduction (Bhattacharya, 2017). This now highly differentiated research on gender relations in the world of work does not always receive the attention it deserves. Epistemologically, feminists questioned the liberal IPE’s notion that truth claims could be redeemed through rationality in terms of a separation of subject and object. The separation of subject and object is seen as fundamental to thinking that reproduces patriarchal domination. In this dichotomous worldview, on the one hand, the manifold forms of reality are forced into two opposing poles. On the other hand, one pole is privileged over the other, according to a gendered coding. The poles of the many dichotomies such as public and private, (material) production and reproduction (of people), autonomy and dependence, which are counted to the ‘male’ side, enjoy a higher valence (Peterson, 1992). A particularly pronounced gender-coded binary view was demonstrated by Ann Tickner (1992) to those works that favor a ‘masculinely’ constructed rationality – namely, by having actors in the international sphere respond to system constraints as utility-maximizing individuals. An obvious consequence of this thinking is the exclusion of the ‘feminine’ from IPE, not only of women as persons, but also of those behaviors that do not belong to the behavioral canon of an autonomous, competitive, and power-maximizing individual/company/state. Just as a society consisting only of utility-maximizing individuals is inconceivable, human economic activity could not be reduced to the production of market goods. The forms of interactions in the international sphere would, despite all conflictuality, also include non-competitive behavior and other forms of economy (especially the household economy) (Peterson & Runyan, 1999). Since the 1990s, feminist research has become more attentive to the intersection of gender with other social hierarchies and the resulting qualitatively different forms of discrimination (Collins, 2019; Crenshaw, 1989; Schwenken, 2018). Feminist economists call for making trade rules subordinate to commitments to achieving gender justice, undertaking full gender impact assessments, and ensuring trade agreements do not increase women’s unpaid domestic and care work.

DISTINGUISHING CRITERIA OF APPROACHES: ATTITUDE TOWARD THE INTERNATIONAL DIVISION OF LABOR The four traditions presented here, which dominate the field of IPE, share a central question: how is the international division of labor to be shaped? Their answers, however, vary widely. The spectrum ranges from a general advocacy of division of labor to its fundamental problematization. Criticism is based on essentially two arguments, which are emphasized differently by the respective traditions. On the one hand, the division of labor goes hand in hand with a hierarchy of the value of individual work, be it between nations, between owners of the

30  Handbook on critical political economy and public policy means of production and wage earners, or between the sexes. On the other hand, the division of labor gives rise to coordination problems; coordination via the market is susceptible to crises. Liberalism is the ‘discoverer’ of the productive power of division of labor (Adam Smith). It wants to see this principle extended across the globe, even between countries of unequal starting levels. Accordingly, this tradition calls for the removal of all barriers to the further division of labor – that is, restrictions on trade. Its units of analysis – that is, the actors in its analyses – are owners of commodities, be it the individual in possession of one’s labor or a large corporation selling complex machinery. In the usual models designed to illustrate the benefits of the international division of labor, however, these units of analysis are presented in aggregate terms, workers as the factor labor and firms as well as industries as the factor capital. The two are each aggregated into countries that differ in terms of the relationship between the two factors and, relatedly, in terms of labor productivity. However, this approach has only a heuristic value: countries, industries, factories have no weight of their own beyond the fact that they aggregate the respective individual actors for analytical reasons. Liberalism does not question these units of analysis, they present themselves as given, they are its ontological basis. The behavior of the units of analysis among themselves, be it on the individual or on the aggregation level, is assumed to be market rational; each of them try to maximize their utility. The market-rational actions of some do not limit the possibilities of others to increase their own welfare by equally market-rational actions. The works in this tradition mostly proceed analytically, on the one hand, by examining in the model the effects of international division of labor under specific conditions in each case, and prescriptively, on the other hand, by mostly proposing the removal of trade barriers. Epistemologically, this tradition assumes that there is an objective truth independent of human society. The goal of this ‘positivist’ scientific cognition is to come closer to this truth, while acknowledging that this is a lengthy and not straightforward endeavor. The notion of an objective truth is accompanied by the claim to gain universally valid insights that are universal for time and space. Politics and economics are also seen as separate spheres, at least in the desired ideal state. Politics should not interfere with economics, if possible. However, the liberal institutionalist tradition confronts the coordination problem. It looks for the optimal institutions that provide stability. List’s economic nationalism, which criticized ‘cosmopolitan’ liberalism, recognized the welfare-enhancing effects of the division of labor. But he pointed out that collective efforts were needed to secure for one’s own collective – that is, the nation – privileged places in the division of labor. These efforts included, above all, the deepening of the national division of labor, which, however, could only be achieved through protection against foreign competition, to the extent that this protection remained partial and temporary. The primary unit of analysis in this tradition is the nation, which competes and sometimes struggles with other nations. Nevertheless, actors are also identified within the respective nations that can contribute to the welfare of the nations, including entrepreneurs (in the sense of creating something), but primarily technocrats and scientists, whose actions are based on a planned rationality to optimize national economic performance. The ontological basis in economic nationalism turns out to be more complex than in liberalism. On the one hand, a nation is seen not merely as a random collection of citizens, but as a collective with a willfulness that is more than the sum of its parts. On the other hand, the nation and the social actors contributing to its greatness are conceived of as in the process of becoming or of proving themselves in struggle with other nations. In the works of these traditions, description plays a greater role, as the particularities

Plurality of political economy approaches to the global division of labor  31 of each nation are recognized, and economic policy proposals are guided by the example of other nations. Epistemologically, this tradition is equally positivist, but the focus on the less economically powerful nations in each case limits the claim to universal generalization. Politics and economics are seen as more intertwined: government intervention can promote economic activity, and this in turn should contribute to the greatness of nations. Thus, at the heart of the critique is the hierarchization of the division of labor in spatial-collective terms. In contrast, an entrenched hierarchy of the value of the respective work between persons and the problem of coordination are not addressed. Marxism also recognizes the potentially productive power of the division of labor, but it sees hierarchies inscribed in this division of labor (especially capital owners – wage earners) and, in its private and thus market-like form, a destructive crisis. Therefore, this uncontrolled division of labor based on private property should be overcome and replaced by a consciously planned one. The units of analysis are relations, especially capital and wage relations. The classes confronting each other in these relations are the central actors. Depending on the specific Marxist tradition, these classes behave according to the precepts of the internal laws of motion of the central relations, or they are seen as capable of rational action, but do not always act rationally, and therefore are to be guided to rational action by means of scientific knowledge. The mainstreams of Marxism also assume an ‘objective’ truth, which, however, is considered specific to the dominant relations in most contexts – that is, the explanatory claim is mostly limited to capitalist societies. Thus, the separation of politics and economics is treated as a fiction peculiar to capitalist society. Politics and economy are always complexly interconnected, but in time and space as well as in the self-understanding of the societies in different ways. The most radical criticism of the division of labor comes from feminism. Feminism denounces the consolidation of the gender division of labor and the resulting higher social valuation of activities that are considered male. The problem of coordination, on the other hand, receives little attention. The other axes of the hierarchization of the division of labor, nation, class, skin color, and ability, are considered depending on the respective variety of feminism (e.g., on black feminism; Collins, 2000). Since feminist approaches are found in the respective disciplinary paradigms, their ontological and epistemological foundations also differ. The poststructuralist gender perspective, which has become popular especially among the younger generation of feminists, gives ontological status to the social construction of truths, to discourse (e.g., Cavaghan, 2017). This is matched by a relativist epistemology that de-objectifies truth through contextualization. This allows it to question the naturalness of any form of division of labor. In the light of these paradigmatic differences in the analysis of the socio-spatial division of labor, the question arises, in conclusion and with regard to the second critical argument on the international division of labor, whether, from a theoretical-historical perspective, today’s debates on globalization, global supply chains, migration patterns and so on, are a continuation of a controversy about the opportunities and dangers of the market-mediated division of labor that has been going on since Adam Smith.

NOTES 1.

Patnaik and Patnaik (2016) forcefully restated this argument.

32  Handbook on critical political economy and public policy 2.

Unlike Lenin, Kautsky predicted that the concentration of capital would lead to a peaceful cartel-like ultra-imperialism (1914).

BIBLIOGRAPHY Aglietta, M. 1979, A Theory of Capitalist Regulation: The US Experience, London: New Left Books. Altvater, E. 1987, Sachzwang Weltmarkt: Verschuldungskrise, blockierte Industrialisierung, ökologi-sche Gefährdung – der Fall Brasilien, Hamburg: VSA. Amin, S. 1976, Unequal Development: An Essay on the Social Formations of Peripheral Capitalism, New York and London: Monthly Review Press. Axelrod, R. 1984, The Evolution of Cooperation, New York: Basic Books. Barattieri, A. & Cacciatore, M. 2020, ‘Self-harming trade policy? Protectionism and production networks,’ NBER Working Paper No. 27630, July, National Bureau of Economic Research. Belton, K., Mandel, M. & Duesterberg, T. 2020, ‘Policies to enhance the resilience of US manufacturing’, accessed December 4, 2022 at https://​dx​.doi​.org/​10​.2139/​ssrn​.3693461. Bhattacharya, T. (ed.) 2017, Social Reproduction Theory: Remapping Class, Recentering Oppression, London: Pluto Press. Boccara, P. 1973, Etudes sur le capitalisme monopoliste d’état, sa crise et son issue, Paris: Editions sociales. Boserup, E. 1970, Women’s Role in Economic Development, London: Allen & Unwin. Burnell, P. 1986, Economic Nationalism in the Third World, Brighton: Wheatsheaf Press. Carey, H.C. 1837, Principles of Political Economy: Part the First: Of the Laws of the Production and Distribution of Wealth, Philadelphia, PA and London: Carey, Lea & Blanchard, and John Miller. Cavaghan, R. 2017, Making Gender Equality Happen: Knowledge, Change and Resistance in EU Gender Mainstreaming, New York: Taylor & Francis. Cecchini, P. 1988, The European Challenge: 1992: The Benefits of a Single Market, Aldershot: Gower. Chang, H. 2002, Kicking Away the Ladder: Development Strategy Under Historical Perspective, London: Anthem Press. Collins, P.H. 2000, Black Feminist Thought: Knowledge, Consciousness, and the Politics of Empowerment (2nd edition), New York: Routledge. Collins, P.H. 2019, Intersectionality as Critical Social Theory, Durham, CT: Duke University Press. Crenshaw, K. 1989, ‘Demarginalising the intersection of race and sex,’ University of Chicago Legal Forum, 1989 (1), 139–67. Dawson, A. 2000, ‘Reassessing Henry Carey (1793–1879): the problems of writing political economy in nineteenth-century America,’ Journal of American Studies, 34 (3), 465–85. Dos Santos, T. 1970, ‘The structure of dependence,’ The American Economic Review, 60 (2), 231–6. Emmanuel, A. 1972, Unequal Exchange: A Study of the Imperialism of Trade, New York: New Left Books. Federici, S. 2004, Caliban and the Witch: Women, the Body and Primitive Accumulation, New York: Autonomedia. Felbermayr, G.J., Heid, B. & Lehwald, S. 2013, Transatlantic Trade and Investment Partnership (TTIP): Who Benefits from a Free Trade Deal? Part 1: Macroeconomic Effects, Gütersloh: Bertelsmann Stiftung. Ferrier, F. 1805, Du gouvernement considéré dans ses rapports avec le commerce ou l’administration commerciale opposée aux économistes du 19e siècle, Paris: Perlet. Fichte, J.G. [1800] 2012, The Closed Commercial State, Albany, NY: State University of New York Press. Frank, A.G. 1967, Capitalism and Underdevelopment in Latin America: Historical Studies of Chile and Brazil, New York and London: Monthly Review Press. Fraser, N. 2017, ‘Crisis of care? On the social-reproductive contradictions of contemporary capitalism,’ in T. Bhattacharya (ed.), Social Reproduction Theory: Remapping Class, Recentering Oppression, London: Pluto Press, pp. 21–36.

Plurality of political economy approaches to the global division of labor  33 Fuller, C. & Phelps, N.A. 2018, ‘Revisiting the multinational enterprise in global production networks,’ Journal of Economic Geography, 18 (1), 139–61. Gereffi, G. 1994, ‘Capitalism, development and global commodity chain,’ in L. Sklair (ed.), Capitalism and Development, London: Routledge, pp. 211–31. Germann, J. 2021, Unwitting Architect, German Primacy and the Origins of Neoliberalism, Stanford, CA: Stanford University Press. Gilpin, R. 1973, The Multinational Corporation and the National Interest, Ann Arbor, MI: University of Michigan Press. Gilpin, R. 1975, U.S. Power and the Multinational Corporation: The Political Economy of Foreign Direct Investments, New York: Basic Books. Gilpin, R. 1987, The Political Economy of International Relations, Princeton, NJ: Princeton University Press. Grossman, G. & Helpman, E. 1995, ‘The politics of free trade agreements,’ American Economic Review, 85 (4), 667–90. Haddad, L., Brown, L.R., Richter, A. & Smith, L. 1995, ‘The gender dimensions of economic adjustment policies: potential interactions and evidence to date,’ World Development, 23 (6), 881–96. Hamilton, A. 1791, ‘Alexander Hamilton’s final version of the Report on the Subject of Manufactures (December 5, 1791),’ Founders Online, National Archives, accessed December 4, 2022 at https://​ founders​.archives​.gov/​documents/​Hamilton/​01​-10​-02​-0001​-0007. Heinrich, M. 2012, An Introduction to the Three Volumes of Karl Marx’s Capital, New York: New York University Press. Helleiner, E. 2018, ‘Sun Yat-sen as a pioneer of international development,’ History of Political Economy, 50 (S1), 76–93. Helleiner, E. 2021, ‘The diversity of economic nationalism,’ New Political Economy, 26 (2), 229–38. Herr, H. & Priewe, J. 2005, The Macroeconomics of Development and Poverty Reduction: Strategies Beyond the Washington Consensus, Baden-Baden: Nomos. Kautsky, K. 1914, ‘Imperialism and the war,’ trans. William E. Bohn, International Socialist Review, 15 (5), 282–6. Keohane, R.O. 1984, After Hegemony: Cooperation and Discord in the World Political Economy, Princeton, NJ: Princeton University Press. Kindleberger, C.P. [1973] 1986, The World in Depression: 1929–1939 (revised and enlarged edition), Berkeley, CA: University of California Press. Krasner, S.D. 1982, ‘Structural causes and regime consequences: regimes as intervening variables,’ International Organization, 36 (2), 185–205. Krugman, P. (ed.) 1986, Strategic Trade Policy and the New International Economics, Cambridge, MA: MIT Press. Krugman, P., Obstfeld, M. & Melitz, M. 2018, International Economics: Theory and Policy (11th edition), London: Pearson Education. Lal, D. 1983, The Poverty of Development Economics, London: Institute of Economic Affairs. Lenin, V.I. [1916a] 1964, ‘Imperialism and the split in socialism,’ in Lenin Collected Works, Vol. 23, trans. M.S. Levin, Moscow: Progress Publishers, pp. 105–20. Lenin, V.I. [1916b] 2000, Imperialism, the Highest Stage of Capitalism, with an Introduction by P. Patnaik, New Delhi: LeftWord Books. Levy, D. 2008, ‘Political contestation in global production networks,’ Academy of Management Review, 33 (4), 943–63. Lewis, W.A. 1966, Development Planning: The Essentials of Economic Policy, New York: Harper & Row. Lipietz, A. 1985, The Enchanted World: Inflation, Credit and the Global Crises, London and New York: Verso. List, F. [1841] 1909, The National System of Political Economy by Friedrich List, trans. S.S. Lloyd, with an Introduction by J. Shield Nicholson, London: Longmans, Green & Co. Luxemburg, R. [1912] 2003, The Accumulation of Capital, London: Routledge. Malesky, E. & Milner, H.V. 2021, ‘Fostering global value chains through international agreements: evidence from Vietnam,’ Economics & Politics, 33 (3), 443–82.

34  Handbook on critical political economy and public policy Maliniak, D. & Tierney, M.J. 2009, ‘The American school of IPE,’ Review of International Political Economy, 16 (1), 6–33. Mandel, E. [1972] 1975, Late Capitalism, London: New Left Books. Manoilescu, M. 1931, The Theory of Protection and International Trade, London: P.S. King & Son. Marx, K. & Engels, F. (1956–2018), Marx-Engels-Werke (MEW) [The collected works of K. Marx and F. Engels in 44 volumes], Berlin: Dietz Verlag for the Institute for Marxism-Leninism at the Central Committee of the SED (Vols. 1–42), Institute for the History of the Labor Movement (Vol. 43) and Rosa Luxemburg Foundation (Vol. 44). Mies, M. 1986, Patriarchy and Accumulation on a World Scale: Women in the International Division of Labor, London and Atlantic Heights, NJ: Zed Books. Milner, H.V. & Judkins, B. 2004, ‘Partisanship, trade policy, and globalization: is there a left–right divide on trade policy?’ International Studies Quarterly, 48 (1), 95–119. Neusüß, C. 1972, Imperialismus und Weltmarktbewegung des Kapitals, Erlangen: Verlag Politladen. Nye, J.V.C. 2007, War, Wine, and Taxes: The Political Economy of Anglo-French Trade, 1689–1900, Princeton, NJ: Princeton University Press. Ohmae, K. 1990, The Borderless World: Power and Strategy in the Interlinked Economy, New York: Harper Business. Otsubo, S.T. & Otchia, C.S. 2021, Designing Integrated Industrial Policies Volume II: For Inclusive Development in Africa and Asia, London: Routledge. Patnaik, U. & Patnaik, P. 2016, A Theory of Imperialism, New Delhi: Tulika Books. Peterson, V.S. 1992, ‘Security and sovereign states: what is at stake in taking feminism seriously?’ in V.S. Peterson (ed.), Gendered States: Feminist (Re)Visions of International Relations Theory, Boulder, CO: Westview Press, pp. 31–64. Peterson, V.S. & Runyan, A.S. 1999, Global Gender Issues, Boulder, CO: Westview Press. Prebisch, R. 1950, The Economic Development of Latin America and its Principal Problems, New York: United Nations Department of Economic Affairs. Rodrik, D. 2004, Industrial Policy for the Twenty-First Century, Cambridge, UK: Cambridge University Press. Rosenau, J.N. 1995, ‘Governance in the twenty-first century,’ Global Governance, 1 (1), 13–43. Rostow, W.W. 1960, The Stages of Economic Growth: A Non-Communist Manifesto, Cambridge, UK: Cambridge University Press. Scherrer, C. 2022, ‘Biden’s Foreign Economic Policy: Crossbreed of Obama and Trump?’, International Review on Public Policy, 4 (1), 129–138. Scherrer, C. 2021, ‘Power relations in global agricultural value chains,’ in I.D. Karatepe & C. Scherrer (eds), The Phantom of Upgrading in Agricultural Supply Chains: A Cross-Country, Cross-Crop Comparison of Smallholders, Stuttgart: NOMOS, pp. 261–96. Scherrer, C. & Abernathy, E. 2017, ‘Trump’s trade policy agenda,’ Intereconomics, 52 (6), 364–9. Schwenken, H. 2018, ‘Intersectional migration regime analysis: explaining gender-selective labor emigration regulations,’ in A. Pott, C. Rass & F. Wolff (eds), Was ist ein Migrationsregime? What is a Migration Regime?, Wiesbaden: Springer, pp. 207–24. Seguino, S. 1997, ‘Export-led growth and the persistence of gender inequality in the newly industrialized countries,’ in J. Rives & M. Yousefi (eds), Economic Dimensions of Gender Inequality: A Global Perspective, London: Praeger, pp. 11–34. Selwyn, B. 2015, ‘Twenty-first-century International Political Economy: a class-relational perspective,’ European Journal of International Relations, 21 (3), 513–37. Short, J.L., Toffel, M.W. & Hugill, A.R. 2020, ‘Improving working conditions in global supply chains: the role of institutional environments and monitoring program design,’ ILR Review, 73 (4), 873–912. Silver, B. 2003, Forces of Labor: Workers’ Movements and Globalization Since 1870, Cambridge, UK: Cambridge University Press. Streeck, W. & Yamamura, K. (eds) 2001, The Origins of Nonliberal Capitalism: Germany and Japan in Comparison, Ithaca, NY: Cornell University Press. Sun, Y.-S. 1922, The International Development of China, New York: G. Putnam’s Sons. Szporluk, R. 1988, Communism and Nationalism: Karl Marx versus Friedrich List, Oxford: Oxford University Press.

Plurality of political economy approaches to the global division of labor  35 Tejani, S. & Milberg, W. 2016, ‘Global defeminization? Industrial upgrading and manufacturing employment in developing countries,’ Feminist Economics, 22 (2), 24–54. Thurow, L.C. 1985, The Zero-Sum Solution: Building a World-Class American Economy, New York: Simon & Schuster. Tickner, J.A. 1992, Gender in International Relations, New York: Columbia University Press. Tribe, K. 1995, Strategies of Economic Order: German Economic Discourse, 1750–1950, Cambridge, UK: Cambridge University Press. Van Staveren, I., Elson, D., Grown, C. & Cagatay, N. 2007, The Feminist Economics of Trade, New York: Routledge. Wallerstein, I. 1982, The Capitalist World-Economy, Cambridge, UK: Cambridge University Press. Wendt, A. 1992, ‘Anarchy is what states make of it: the social construction of power politics,’ International Organization, 46 (2), 391–425. Young, B. 2001, ‘The “mistress” and the “maid” in the globalized economy,’ in L. Panitch & C. Leys (eds), Socialist Register 2001: Working Classes: Global Realities, 37, 315–27.

3. The cultural political economy approach to public policy Bob Jessop and Ngai-Ling Sum

Cultural political economy (hereafter CPE) is a post-disciplinary approach that highlights the contribution of the cultural turn (a concern with semiosis or meaning-making) to the analysis of the articulation between the economic and the political and their embedding in broader sets of social relations.1 Explicit arguments for CPE as such emerged in several contexts in the 1990s as part of and/or in reaction to the then prevailing cultural turn. It was also prefigured in classical political economy, the German historical school, and some versions of critical political economy and/or ‘old institutionalisms’, and there are similar currents in other fields of social scientific inquiry. In addressing the analysis of public policy, CPE draws on other theoretical and empirical schools to supplement the cultural turn. Cultural turns can be thematic, methodological, ontological, or reflexive. In other words, one could examine hitherto neglected research themes, propose a new method of analysing the social, argue that ‘culture’ is foundational to the social world, or apply a methodological or ontological turn to the development of CPE itself. Our version of CPE includes all four turns and is presented in detail in Towards a Cultural Political Economy (Sum & Jessop, 2013). But it treats the ontological turn as primary, stressing the basic character of semiosis alongside structuration in cultural and social analysis. It synthesizes the work of Marx, Gramsci and Foucault to produce an integrated micro-macro analysis. In effect, it seeks to Gramscianize Marx, governmentalize Gramsci, and Marxianize Foucault (ibid., pp. 205–14). We take Marx’s analysis of capital as a social relation as the material base of the critique of political economy but argue that he also practised critical semiotic analysis (Jessop & Sum, 2018). We use Gramsci’s vernacular materialism, based on his philological studies and interests, to expand the Marxian critique of the capital relation and state power (on vernacular materialism, see Ives, 2004). Gramsci was more interested in hegemony as political, intellectual and moral leadership but, like Marx, he neglected the micro-disciplinary and governmental bases of class powers. Indeed, as Richard Marsden explains, Marx explains why, but cannot explain how, Foucault explains how, but cannot explain why. ‘To marry “why” and “how” it is necessary to explicate “what”: to synthesize Marx’s description of relations of production and Foucault’s description of the mechanisms of disciplinary power’ (Marsden, 1999, p. 135). Accordingly, we use Foucault to explain key aspects of the how of exploitation, domination and hegemony. His analysis of governmentality can be linked to Marxian and Gramscian insights into the why and what of political economy. Thus, our approach to CPE involves a novel synthesis of critical semiotic analysis and critical political economy that is reflected in five features that together distinguish it from other versions on similar terrain: (1) the manner in which it grounds the cultural turn in political economy in the existential necessity of complexity reduction; (2) its emphasis on the role of evolutionary mechanisms in shaping the movement from social construal to social construction and their implications for the production of hegemony; (3) its concern with the interde36

The cultural political economy approach to public policy  37 pendence and co-evolution of the semiotic and extra-semiotic in all fields of social relations; (4) the significance of technologies, in a broadly Foucauldian sense, to the consolidation of hegemony and its contestation in the remaking of social relations; and (5) its de-naturalization of economic and political imaginaries and, hence, its contribution to Ideologiekritik and the critique of specific forms of domination. Even within this version of CPE, different authors give more weight at different times to different features depending on the object of analysis.

A CPE APPROACH TO POLITY, POLITICS AND POLICY A basic distinction in political analysis is that between polity, politics and policy (Heidenheimer, 1986). The polity covers the institutional architecture of the political field, including the forms of its separation and modes of boundary maintenance with regard to non-political spheres, and the asymmetric effects of this architecture on political practice. Its constitution involves material and discursive lines of demarcation between the state qua institutional ensemble and other institutional orders or ‘civil society’. The institutional architecture of the polity frames actors’ capacity to introduce policies that influence these other spheres. Politics, in turn, comprises an inherently dynamic, open-ended and heterogeneous ensemble of political practices that are directly oriented to, or otherwise shape, the exercise of state power. It can occur within the formal political sphere, on its margins, or well beyond it. The set of activities included within politics ranges from practices concerned with transforming the scope of the political sphere, defining the nature and purposes of the state, modifying the institutional integration and operating unity of the state, exercising direct control over the use of state powers, shaping the form and function of apparatuses, influencing the balance of forces inside the state, blocking or resisting the exercise of state power from ‘outside’, or modifying the wider balance of forces that shapes politics as the art of the possible. Such issues are raised in competing political imaginaries and can be studied in terms of our CPE approach, which includes a Foucauldian concern with governmentality as well as a Gramscian interest in the articulation of political society and civil society. Finally, policy concerns a wide range of issues: the aims and content of particular decisions and non-decisions in particular policy fields, the appropriate modes and fields of state intervention and non-intervention, the changing responsibilities of different branches and scales of its apparatuses, and the overall strategic line of the state. CPE can illuminate the various modes (discursive, structural, technological and agential) that are deployed and/or operate unwittingly to place specific policies, policy-making and policy-taking approaches, and detailed policy implementation within the field of open political contention or, conversely, to depoliticize them. Sedimentation is a key mechanism here because it removes many taken-for-granted themes from the political field, from the scope of contentious politics, or from policy considerations (for further discussion, see Jessop, 2014).

THE DIALECTIC BETWEEN SEMIOTIC AND STRUCTURAL SELECTIVITIES Social structuration and, a fortiori, the structuring of capitalist social formations, have three general semiotic aspects. First, semiotic conditions affect the differential reproduction and

38  Handbook on critical political economy and public policy transformation of social groups, organizations, institutions and other social phenomena. Second, they also affect the variation, selection and retention of the semiotic features of social phenomena. And, third, semiotic innovation and emergence is a source of variation that feeds into social transformation. In short, semiosis can generate variation, have selective effects, and contribute to the differential retention and/or institutionalization of social phenomena. Simplifying the analysis of evolutionary mechanisms given in Fairclough, Jessop and Sayer (2004) and extending it to include material as well as semiotic factors, these mechanisms can be said to comprise: ● Selection of some available, including emergent, discourses for interpreting events, legitimizing actions and (perhaps self-reflexively) representing social phenomena. Semiotic factors operate by influencing the resonance of discourses in personal, organizational and institutional, and broader meta-narrative terms and by limiting possible combinations of semiosis and semiotic practices in a given semiotic order. Material factors also operate here through conjunctural or institutionalized power relations, path-dependency and structural selectivities. ● Retention of some resonant discourses – for example, inclusion in an actor’s habitus and personal identity, enactment in organizational routines, integration into institutional rules, objectification in the built environment, material and intellectual technologies, and articulation into widely accepted accumulation strategies, state projects, or hegemonic visions. The greater the range of sites (horizontally and vertically)2 in which resonant discourses are retained, the greater is the potential for effective institutionalization and integration into patterns of structured coherence and durable compromise. The constraining influences of complex, reciprocal interdependences will also recursively affect the scope for retaining resonant discourses. ● Reinforcement insofar as procedural devices exist that privilege these discourses and their associated practices and also filter out contrary discourses and practices. This can involve both discursive selectivity (e.g., genre chains, styles, identities) and material selectivity (e.g., the privileging of certain dominant sites of discourse in and through structurally inscribed strategic selectivities of specific organizational and institutional orders). Such mechanisms recursively strengthen appropriate genres, styles and strategies, selectively eliminate inappropriate alternatives, and are most powerful where they operate across many sites in a social formation to promote complementary discourses within the wider social ensemble. ● Selective recruitment, inculcation, and retention by relevant social groups, organizations, institutions and so on of social agents whose predispositions fit maximally with the preceding requirements. Such path-shaping is mediated semiotically as well as materially. Crises encourage semiotic as well as strategic innovation (see below). They often prompt a remarkable proliferation of alternative visions rooted in old and new semiotic systems and semiotic orders. Many of these will invoke, repeat or re-articulate established genres, discourses and styles as a poetry of the past; others may develop, if only partially, a ‘poetry for the future’ that resonates with new potentialities (Marx, 1979, p. 106). Which of the proliferating alternatives, if any, is eventually retained and consolidated is mediated in part through discursive struggles to define the nature and significance of emerging crises. If a crisis can be interpreted as one in the existing order, then minor reforms and a passive revolution will first be attempted to re-regularize that order.

The cultural political economy approach to public policy  39 If this fails and/or if the crisis is already interpreted initially as one of the existing order, a discursive space is opened to explore more radical changes. In both cases, conflicts also involve how the costs of crisis management get distributed and the best policies to escape from the crisis.

HISTORICAL-MATERIALIST POLICY ANALYSIS Our version of CPE fits well with historical-materialist policy analysis (HMPA). They both explore the semiotic and extra-semiotic dimensions of the variation, selection and retention of polity, politics and policy and both adopt a historical-materialist reading of political economy that respects the institutional differentiation of the economy and politics. In addition, CPE can also address known criticisms of HMPA regarding its analysis of the state, its representational rather than constructivist logic, and calls for a better use of Foucauldian theory in terms of dispositives and de-centred knowledge production (e.g., Paul & Haddad, 2015, pp. 47–50; Spash, 2014, pp. 402–9). Ulrich (Uli) Brand introduced HMPA in 2013 and it has been developed mainly by German-speaking historical-materialist scholars (see Chapter 8 by Schneider et al. in this Handbook). It is distinct from rationalist policy analysis that adopts a technocratic approach, and it also seeks to escape the risks of discursive reductionism or the problems of understanding policies as the sheer result of dynamics at the level of politics and polity. It attempts ‘to call attention to the fact that policy analysis needs to look beyond mere policies’ (Brand, 2013, p. 427) and seeks to show ‘how societal reproduction works beyond discourses’ by linking discourses to macro-perspectives (ibid., p. 430). In this sense, it focuses on ‘the dimension of politics (societal and political forces and their strategies, conflicts, and compromises) and on that of the polity (political institutions and governance structures, i.e., the state in its narrow and integral sense) rather than on policy, i.e., the concrete contents and functioning of institutionalized politics’ (ibid., p. 426; original emphasis). HMPA is a theoretically informed heuristic that guides empirical analysis rather than a fixed paradigm to interpret pre-given data. It starts from specific problems that confront actors and traces the process of problematization in terms of the situated context, actors’ construals of problems, and the situated practices that engender results. It asks which discourses and/or practices produce problems and could become political issues in the sense that they reinforce, shape or create particular policies. Whether certain issues become the subject of policies is an open question but, if they do, concrete forms of hegemony will determine how they become policies – that is, in which corridor of the reasonable and viable they are addressed (ibid., pp. 433–4). HMPA does not assume that the problem construals are accurate, that actors have the necessary resources to translate their solutions into the internal structures of the political system, and that these solutions solve problems as diagnosed. The ‘context’ depends on the concrete constellation in which certain events or policies take place and strategic action is situated in relation to specific socio-historical discourses and institutional practices. The context varies with the forms of institutional separation of social fields and the form of the state understood in its Gramscian sense of political society plus civil society. While its construal by particular actors or groups is important, the context is also reproduced independently of that construal, and needs to be theorized in order to understand its effects in concrete constellations (ibid., p. 433).

40  Handbook on critical political economy and public policy HMPA proceeds in three steps. First comes an analysis of the context in which problems emerge; second is an analysis of the specific interpretation of problems by particular sets of actors; third comes the process analysis of the strategic balance of forces and the account of how specific policies can be understood as unstable compromises among social forces that are formulated through specific state apparatuses or even groups or alliances in particular apparatuses (ibid., p. 436). The central aim of the context analysis is to reconstruct this conflict as a specific historical situation to which social and political forces reacted differently and in opposition to each other, and which was brought about by a complex set of historical conditions and processes. The context analysis first identifies the specific problems to which social and political forces reacted differently. Second, it situates these problems in their broader historical context. Third, it illuminates the central historical and material conditions that gave rise to the problems at the heart of the investigated conflict (Kannankulam & Georgi, 2014, p. 63). The heterogeneity of the state apparatuses is one central element of the overall policy analysis. This is not due to any lack of coherence but reflects the form in which the state operates. Since particular structures and power relations exist in different conflict or policy fields, their material condensations in state apparatuses are specific, which illustrates the reason for tensions among various political institutions (Brand, 2013, p. 436). Process analysis in turn aims to reconstruct ‘the dynamic process in which the investigated conflict between the identified hegemony projects unfolded through different phases and turning points, and against the background of its broader historical context’ (Kannankulam & Georgi, 2014, p. 67). In this respect, HMPA scholars after Brand suggest distinguishing between already successful hegemonic projects and ‘hegemony projects’ – that is, societal projects that aspire to hegemonic status but have not reached it yet. They use hegemony projects to aggregate the myriad of actions, practices, tactics and strategies that are pursued by diverse actors in any given societal conflict, and actors choose against the background of their vastly different, specific power resources (ibid., p. 64). HMPA can be located within critical policy studies, interpretive policy analysis, and CPE. Relevant issues include the following: (1) the historical and materialist dimensions of policy analysis are path-shaping as well as path-dependent; (2) HPMA does not assume that class interests are primary but studies a wide variety of material conflicts and contradictions in social reproduction; (3) the internal differentiation of the state – in its Gramscian integral sense – does not ensure that the state policies are coherent enough to produce an overall viable state project; and (4) the role of knowledge production within the state can be linked to the role of intellectuals as well as parties and lobby groups (cf. Buckel et al., 2017).

SUGGESTIONS TO IMPROVE HMPA Brand’s paper attracted four comments in the Austrian Journal of Political Science. Andreas Bieler (2014) called for a more rigorous analysis of the constraints of capital accumulation rooted in the logic of valorization and for a more class-based analysis of social forces. This orthodox Marxist critique is less relevant for a CPE analysis of public policy analysis. Bernhard Leubolt (2014) proposed improving the analysis of the context of policy-making. First, he wanted to include a broader range of theoretical currents than Brand’s interpretive accounts; second, he suggested a strategic-relational interpretation of historical institutional-

The cultural political economy approach to public policy  41 ism; third, he advocated a more advanced concept of ‘periodization’ for a systematic account of historically evolving structures; and, fourth, he wanted a more refined concept of ‘selectivities’ that would better grasp the workings of the ‘institutional condensation of the correlation of forces’ in the policy cycle (Leubolt, 2014, p. 309). This critique is more relevant to CPE and, indeed, draws on our earlier work. Clive Spash argued that Brand has an uncertain position in relation to weak and strong constructivism and would benefit from a more rigorous engagement with Foucault’s analysis of power/knowledge regimes (2014, pp. 401–10). His remarks on constructivism ignore the difference that Sayer makes between construal and construction and its mediation through semiotic and material relations. He is correct on the use of Foucault’s analysis of governmentalization. Finally, Katharina Paul and Christian Haddad (2015) criticized Brand’s type of interpretive policy analysis as being informed by a critical realist understanding of the real and also suggested a more Foucauldian account of statecraft, emphasizing the importance of decentred dispositives as opposed to Brand’s alleged assumption of a central, unified state (Paul & Haddad, 2015, pp. 47–51). Their account is compatible with our attempt to use Gramsci’s integral analysis of the state as political society plus civil society and our proposal to governmentalize Gramsci’s analysis of hegemony. It also ignores the extent to which Brand himself analyses the state in Gramscian and Poulantzasian terms and emphasizes the selective constitution of the state as a decentred apparatus and the range of relevant social actors (Brand, 2013, p. 435). Writing in Critical Discourse Studies, Daniela Caterina (2017) has suggested that one can integrate CPE, HMPA and critical discourse analysis of practical argumentation into a transdisciplinary research framework to explore conflicts over the making and challenging of hegemony. She suggests that analysis of practical argumentation can improve HMPA’s analytical strength in investigating strategies within the broader context of hegemony struggles. Indeed, she argues that both CPE and HMPA imply a process of practical reasoning – concrete practical arguments for or against a certain course of action in the face of political problems and conflictual situations – as a key element in their respective approaches to questions of strategy. She adds that HPMA pays attention to the availability and relative weight of four main kinds of resources that shape the balance of power in the process of struggle over competing hegemony projects. These include organizational resources (e.g., money, bureaucracies, use of force); systemic resources referring to actors’ ability to take (mainly economic) decisions with relevant consequences for the overall system; discursive, ideological and symbolic resources concerning how far actors can make their own perspective broadly accepted; and institutional or strategic-structural selectivities concerning the degree of complementarity between actors’ strategies and their respective social (politico-economic) context (Kannankulam & Georgi, 2014, p. 65, cited in Caterina, 2017, p. 216).

CPE AND CRITICAL POLICY ANALYSIS We now introduce some key concepts from Foucault that are especially relevant to critical policy analysis. These are problematization, objectification, subjectivation, power/knowledge and dispositive. In this regard, CPE follows Foucault in scaling up the microphysics of power to macro-level questions of political economy and the state (Foucault, 2008, p. 186) and combines this with Gramscian interests in the forms and mechanisms of hegemony, passive revolution, and domination. It asks how micro-technologies get assembled and articulated to

42  Handbook on critical political economy and public policy form more encompassing and enduring sets of social relations that are embedded in everyday life but also provide the substratum of institutional orders and, in some cases, even broader patterns of social domination. Problematization concerns the construal of social problems and proposed solutions. Many construals and solutions are arbitrary, irrational and short-lived; but some are more plausible and stand more chance of being selected. This depends in part on emergent, non-semiotic features of social structure as well as inherently semiotic factors. What matters here is the resonance (and hence capacity to reinterpret and mobilize) of the discourses with the key forces able to translate them into policy matters. This explains the nature of the dispositives that get consolidated around specific construals of a social problem and its corresponding set of policy solutions. A dispositive is used critically to disclose how heterogeneous sets of instituted social practices (including their discursive as well as ‘material’ aspects) instantiate, reflect and refract power relations. Dispositives are contingent ‘discursive–material’ fixes that emerge in response to specific (and specifically problematized) challenges to social order (with a referent in the ‘real world’) and that thereby create a strategic imperative to address and, if possible, solve the challenge (cf. Brand, 2013, pp. 427, 430, 437). A dispositive is a strategically selective, problem-oriented assemblage that comprises (1) a dispersed apparatus, including institutions, organizations and networks; (2) an order of discourse, with corresponding thematizations and objectivations – that is, constructed objects of intervention; (3) diverse devices and technologies involved in producing various forms of power/knowledge that contribute to the realization of the strategic imperative; and (4) subject positions and subjectivation – that is, constructions of subjects to occupy these positions. In short, dispositive analysis provides a fruitful conceptual framework for a critical exploration of policy dynamics. One approach to analysing the assembling and consolidation of dispositives in response to specific ‘problematizations’ is to study the interaction of different modes of variation, selection and retention. In addition to the semiotic and structural moments that provide the two principal alternative starting points of CPE analyses, there are two cross-cutting modes of selectivity: technological and agential. All four involve different kinds of variation, selection and retention. How they are articulated, when condensed into diverse fixes or dispositives, shapes both the semiotic and ‘material’ moments of the dynamic of social relations. Although many plausible narratives may be advanced, their narrators will not be equally effective in conveying their messages and securing support for the proposed solutions. Powerful resonance does not mean that these construals and solutions should be taken at face value. All narratives are selective, appropriate some arguments, and combine them in specific ways. So, we must also consider what goes unstated or silent, repressed or suppressed, in specific discourses. Interpretive power depends on the ‘web of interlocution’ (Somers, 1994) in different fields. It is also shaped by discursive selectivities, the organization and operation of the mass media, the role of intellectuals in public life, and the structural biases and strategically selective operations of various public and private apparatuses of economic, political and ideological domination. This is mainly an issue of political contestation. An important CPE hypothesis is that the relative importance of semiosis declines from the stage of variation in policy proposals based on different (policy-relevant) imaginaries through the stage in policy development when they are selectively translated into specific material (policy) practices to the stage when they may become integrated into a strategically codified, structurally coherent, and mutually supportive (or, at least, negatively integrated,

The cultural political economy approach to public policy  43 non-disruptive) set of dispositives within a given spatio-temporal envelope. Technologies have a key role in the selection and retention of specific imaginaries insofar as they provide reference points not only in meaning-making but also in the coordination of actions within and across specific personal interactions, organizations and networks, and institutional orders. In this sense they are important meaning-making instruments deployed by agents to translate specific social construals into social construction and hence to structure social life. Policies, policy decisions techniques, policy instruments and policy evaluation are important technologies in this regard because each, in its own way, contributes to the selection and retention of its associated policy discourses, often transforming them at the same time (cf. Sum, 2009, on policy technologies relating to competitiveness). This is why one must look beyond agenda-setting, policy discourses and policy formulation to examine how policies actually get implemented and with what effects, whether intended or not. Success/failure in this regard also depends on how specific construals correspond to the properties of the ‘raw materials’ (including social phenomena such as actors and institutions) that provide the target and/or tools of attempts to construct social reality. Finally, the CPE approach posits that the relative weight of semiotic and extra-semiotic mechanisms varies across social fields and, a fortiori, policy fields. For example, the scope for semiosis to shape policy would be greater in the long run in fields such as education in the arts and humanities than it would be in infrastructure and technology policy.

A CRISIS-THEORETICAL ANALYSIS OF POLICY ANALYSIS Our approach to CPE implies that crisis is never a purely objective process or moment that automatically produces a particular response or outcome. Instead, a crisis emerges when established patterns of dealing with structural contradictions, their crisis tendencies, and dilemmas no longer work as expected and, indeed, when continued reliance thereon may even aggravate the situation. Crises are most acute when crisis tendencies and tensions accumulate across several interrelated moments of the structure or system in question, limiting room for manoeuvre in regard to any particular problem. Changes in the balance of forces mobilized behind and across different types of struggle also have a key role in intensifying crisis tendencies and in weakening and/or resisting established modes of crisis management (Offe, 1984, pp. 35–64). This creates a situation of more or less acute crisis, a potential moment of decisive transformation, and an opportunity for decisive intervention. In this sense, a crisis situation is unbalanced: it is objectively overdetermined but subjectively indeterminate (Debray, 1973, p. 113). This situation opens up space for strategic interventions to significantly redirect the course of events rather than ‘muddle through’ in the (perhaps forlorn) hope that the situation will eventually resolve itself. Moreover, as Milton Friedman (1962, p. 32) put it hyperbolically but tellingly: ‘Only a crisis produced real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.’ This indicates that preparing the cultural and social ground for crisis-induced strategic interventions will also prove important to the nature and outcome of crisis management and crisis response. Crises often create profound cognitive and strategic disorientation and trigger proliferation in interpretations and proposed solutions. As the critical policy studies literature emphasizes, a crisis is never a purely objective, extra-semiotic moment or process that automatically produces a particular response or outcome. A CPE approach combines semiotic and material

44  Handbook on critical political economy and public policy analyses to examine: how (1) crises emerge when established patterns of dealing with structural contradictions, their crisis tendencies, and strategic dilemmas no longer work as expected and, indeed, when continued reliance thereon may aggravate matters; and (2) how contestation over the meaning of the crisis shapes responses through processes of variation, selection and retention that are mediated through a changing mix of semiotic and extra-semiotic mechanisms. A crisis is most acute when crisis tendencies and tensions accumulate across interrelated moments of a given structure or system, limiting manoeuvre in regard to any particular problem. Shifts in the balance of forces may also intensify crisis tendencies by weakening or resisting established modes of crisis management (Offe, 1984, pp. 35–64). Crisis construals can be assessed in three ways (Jessop, 2018). The first is in terms of their scientific validity – that is, their conformity with prevailing scientific procedures and rules of evaluation. This depends on specific protocols of investigation and acknowledges that conclusions may be fallible. Even the origins of the Great Depression in the 1920s and 1930s are still contested within and between theoretical paradigms. The second is in terms of the narrative plausibility of a given construal in identifying and explaining the (symptoms of) crisis relative to the prevailing discourses in circulation among relevant social forces. Narrative plausibility depends on rules of argumentation oriented to persuasion rather than apodictic truth. In this context, while scientific argument has its rhetorical features, these should be subordinate to scientific analysis; conversely, the plausibility of crisis narratives may be enhanced by reference to facts, but these are selected to lend credibility to the overall narrative with the result that the factual elements are less rigorous and comprehensive and will often screen out inconvenient details. The third is in terms of the pragmatic correctness of construals – that is, their ability to read a conjuncture, discern potential futures, provide a plausible narrative, and guide action that transforms the conjuncture (Lecercle, 2006). Pragmatically correct construals are epistemologically different again because they involve what currently exists (if at all) only in potentia, may never be actualized, and cannot therefore be analysed in the same ways as the past and present. Narrative Plausibility Narratives have structure and purpose that are different from scientific explanations. They emplot selected past events and forces in terms of a temporal sequence with a beginning, middle and end in the form of a story that embodies causal and moral lessons. The plausibility of narratives and other construals and their associated crisis-management solutions (including inaction) depends on their resonance with (or capacity to reinterpret and mobilize) key social forces. For example, neoliberals narrated how trade union power and the welfare state undermined economic growth in the 1970s and called for more market, less state. The Tea Party and Occupy Wall Street movements offered different narratives about the financial crisis of 2008 and reached radically different conclusions. The former offered a pseudo-grassroots or ‘Astroturf’ conservative story, the latter a radical critique of inequality and precarity. Narratives play a key role in strategic action because they can simplify complex problems, identify simple solutions, connect to common sense and mobilize popular support. To be effective in the long run, however, they should correspond to the objective conditions and the real possibilities of action. Yet strategies based on ‘inorganic’ narratives can have adverse path-shaping effects, making recovery from a crisis harder or shifting its forms and effects.

The cultural political economy approach to public policy  45 Pragmatic Correctness While scientific validity concerns the genealogy of the crisis as an event and/or continuing process, pragmatic correctness is judged in the light of future developments, including counterfactual analysis, and depends on social agents’ ability to read present and future conjunctures in terms of what exists in potentia and how it might be realized. Plausible narratives are typically an important moment of pragmatic correctness. This is mediated through language as well as through social practices and institutions beyond language. Indeed, since the development of print media at least, crisis construal is heavily mediatized, depending on specific forms of visualization and media representations, which nowadays typically vary across popular, serious and specialist media. Pragmatic correctness depends on: (1) the strategically selective limits to action set by the objectively overdetermined form of a crisis conjuncture; (2) the interpretive and mobilizing power of crisis construals and strategic perspectives – notably its ready communicability to relevant audiences – which affects the capacities of strategic forces to win hegemony; and (3) the balance of forces associated with different construals or, at least, the ability of some forces to impose their preferred construals, crisis-management options and exit solutions (Debray, 1973, pp. 106–7; Lecercle, 2006, pp. 40–41). Considered in these terms, to paraphrase Gramsci, ‘there is a world of difference between conjunctural analyses [he writes of ideologies] that are arbitrary, rationalistic, or “willed” and those that are organic’ (Gramsci, 1971, pp. 376–7). The former analyses misconstrue the crisis – minimizing or exaggerating its scale and scope and its system-threatening qualities – and misidentify necessary or feasible solutions. An organic analysis is an at least minimally adequate analysis of the objective dimensions of the crisis and its manageability or transformability in terms of a possible attenuation of crisis symptoms, muddling through, displacement or deferral and so on, and in terms of the correlation of forces and the strategic horizons of action of the social forces whose ideal and material interests it represents. This raises the key issue of the (always limited and provisional) fit between imaginaries and real, or potentially realizable, sets of material interdependencies in the real world. Proposed crisis strategies and policies must be (or seen to be) effective within the spatio-temporal horizons of relevant social forces in a given social order. In all cases, how a crisis is managed has path-shaping effects: responses affect how subsequent crises will develop. This corresponds to the idea that crises are moments where a decisive intervention can mark a turning point in the progress of a disease or other critical conjuncture. Indeed, a ‘correct’ reading creates its own ‘truth effects’ and may then be retained thanks to its capacity to shape reality. Getting consensus on an interpretation about which of different aspects of a crisis or, alternatively, which of several interlocking crises matters is to have framed the problem (variation). Nonetheless this consensus must be translated into coherent, coordinated policy approach and solutions that match objective dimensions of the crisis (selection). Effective policies adapt crisis-management routines and/or discover new routines through trial-and-error experimentation and can be consolidated as the basis of new forms of governance, meta-governance and institutionalized compromise (retention). Only crisis construals that grasp key emergent extra-semiotic features of the social world as well as mind-independent features of the natural world are likely to be selected and retained. Effective construals therefore also have constructive force and produce changes in the extra-semiotic features of the world and in related (always) tendential real mechanisms and social logics.

46  Handbook on critical political economy and public policy

TOWARDS CRITICAL POLICY STUDIES Drawing on the CPE approach outlined above, we suggest that four steps are required to promote critical policy studies: 1. A reasoned critique of policy proposals based on deficiencies in their internal assumptions, categories, problematization and argumentation, with a view to disclosing empirical inadequacies or anomalies and, perhaps, practical failings, and relating these to inconsistencies in the underlying theoretical paradigms, policy paradigms, or knowledge brands (on knowledge brands, see Sum, 2009). 2. Identification of the ideal and material interests favoured by specific policy proposals or strategic lines in specific periods or conjunctures, whether this privileging of some interests over others is motivated by bad faith or results from the naturalization, reification or fetishization of specific social facts. 3. An account of the role, if any, of the policies, policy paradigm or overall strategic line in reproducing one or more durable, structured forms of social domination. 4. The proposal of alternative interpretations, policies and strategies to facilitate the emancipation of subordinate social forces (and, perhaps, dominant forces too) from the harmful effects of the pattern of domination that is naturalized or legitimated by those subjects to this critique. All four steps are required to deliver a CPE critique that has practical policy relevance as well as theoretical appeal. Immanent critique shows the historicity of a given dispositive along with its policy discourses and practical implementation. It should also analyse the polity, politics and policy in terms of how these reflect and refract the discursively and institutionally mediated condensation of a changing balance of forces. It examines struggles to shape the identities, subjectivities and interests of the forces engaged in struggles to maintain or transform the political system, the forms of politics, and specific policies and their various modes of selectivity. Thus, CPE goes beyond the critique of ideology to explore the semiotic and extra-semiotic mechanisms involved in selecting and consolidating the dominance and/or hegemony of some meaning systems and ideologies over others. This offers more solid foundations from which to understand forms of social domination, develop a critique of domination, and contribute thereby to critical policy studies.

CONCLUSIONS As a ‘grand-theoretical’ paradigm, many of the insights of CPE can be applied far beyond its original home domain in the critique of political economy. The challenge of avoiding both a voluntarist, idealist constructivism and a reified, mechanical structuralism is not confined to the analysis of differential capital accumulation and its regularization and governance. On the contrary, many types of social scientific inquiry could gain from a reflexive, critical engagement with the meta-theoretical assumptions that inform CPE, its emphasis on the equal foundational importance of sense- and meaning-making and efforts to limit compossible variation among social relations, and its attention to the articulation and interaction of discursive, structural, technological and agential selectivities. Whether or not a scholar is interested in the critique of the polity, politics and policy approaches to this task, as we have tended to do, in

The cultural political economy approach to public policy  47 terms of their relevance to differential accumulation and class domination, they can still gain intellectual and critical value from an evolutionary approach to the movement from construal to construction in terms of the respective contributions of discursive, structural, technological and agential selectivities in the transition from variation through selection to retention. The CPE approach developed by the present authors has not as yet elaborated an equivalent set of substantive concepts for social fields, institutions and institutional complexes, and system dynamics beyond the profit-oriented, market-mediated economy. This challenge to develop an appropriate ‘conceptual dispositive’ is one for us but also for all of those interested in CPE’s potential in other fields.

NOTES 1. This chapter draws on discussions with Ulrich Brand, Daniela Caterina, Norman Fairclough, John Kannankulam, Andrew Sayer and Christoph Scherrer. We alone are responsible for remaining errors. 2. Horizontal refers here to sites on a similar scale (e.g., personal, organizational, institutional, functional systems) and vertical refers to different scales (e.g., micro-macro, local-regional-national -supranational-global).

BIBLIOGRAPHY Bieler, A. 2014, ‘What about class struggle? Critical reflections on Uli Brand’s HMPA’, Austrian Journal of Political Science (OZP), 43 (3), 305–8. Brand, U. 2013, ‘State, context and correspondence. Contours of a historical materialist policy analysis’, Austrian Journal of Political Science (OZP), 42 (4), 425–42. Buckel, S., Georgi, F., Kannankulam, J. & Wissel, J. 2017, The European Border Regime in Crisis: Theory, Methods and Analyses in Critical European Studies, Berlin: Rosa Luxemburg Stiftung. Caterina, D. 2017, ‘Investigating hegemony struggles: transdisciplinary considerations on the role of a critical discourse analysis of practical argumentation’, Critical Discourse Studies, 15 (3), 211–27. Debray, R. 1973, Prison Writings, London: Allen Lane. Fairclough, N., Jessop, B. & Sayer, A. 2004, ‘Critical realism and semiosis’, in J.M. Roberts and J. Joseph (eds), Realism, Discourse and Deconstruction, London: Routledge, pp. 23–42. Foucault, M. 2008, The Birth of Biopolitics: Lectures at the Collège de France, 1978–1979, London: Palgrave Macmillan. Friedman, M. 1962, Capitalism and Freedom, Chicago, IL: University of Chicago Press. Gramsci, A. 1971, Selections from the Prison Notebooks, London: Lawrence & Wishart. Heidenheimer, A.J. 1986, ‘Politics, policy and policy as concepts in English and Continental languages’, Review of Politics, 48 (1), 1–26. Ives, P. 2004, Language and Hegemony in Gramsci, London: Pluto Press. Jessop, B. 2014, ‘Repoliticizing depoliticization: theoretical preliminaries on some responses to the American and Eurozone debt crises’, Policy & Politics, 42 (2), 207–23. Jessop, B. 2018, ‘Valid construals or correct readings? On the symptomatology of crises’, in B. Jessop & K. Knio (eds), The Pedagogy of Economic, Political and Social Crises, London: Routledge, pp. 49–72. Jessop, B. & Sum, N.-L. 2018, ‘Language and critique: some prefigurations of critical discourse studies in Marx’s work’, Critical Discourse Studies, 15 (4), 325–37. Kannankulam, J. & Georgi, F. 2014, ‘Varieties of capitalism or varieties of relationships of forces? Outlines of a historical materialist policy analysis’, Capital & Class, 38 (1), 59–71. Lecercle, J. 2006, A Marxist Philosophy of Language, Leiden: Brill.

48  Handbook on critical political economy and public policy Leubolt, B. 2014, ‘History, institutions, and selectivities in historical-materialist policy analysis: a sympathetic critique of Brand’s State, context and correspondence,’ Austrian Journal of Political Science (OZP), 43 (3), 309–18. Marsden, R. 1999, The Nature of Capital: Marx After Foucault, London: Routledge. Marx, K. 1979, The Eighteenth Brumaire of Louis Bonaparte, in Marx & Engels Collected Works, Volume 1: Marx and Engels 1851–53, London: Lawrence & Wishart, pp. 99–197. Offe, C. 1984, Contradictions of the Welfare State, London: Hutchinson. Paul, K.T. & Haddad, C. 2015, ‘Marx meets meaning: a critical encounter between historical materialism and interpretive policy analysis’, Austrian Journal of Political Science (OZP), 44 (1), 46–52. Somers, M.R. 1994, ‘The narrative constitution of identity: a relational and network approach’, Theory and Society, 23 (4), 605–49. Spash, C. 2014, ‘Policy analysis: empiricism, social construction and realism’, Austrian Journal of Political Science, 43 (3), 401–10. Sum, N.-L. 2009, ‘The production of hegemonic policy discourses: “competitiveness” as a knowledge brand and its (re-)contextualizations’, Critical Policy Studies, 3 (2), 184–203. Sum, N-.L. & Jessop, B. 2013, Towards a Cultural Political Economy: Putting Culture in its Place in Political Economy, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing.

4. Institutionalist, regulationist and dependency approaches to transition countries’ economic policies Joachim Becker

What transition countries have in common is their transition from a (state-)socialist mode of production to a capitalist one. Neither their state-socialist experiences nor their economic, social and political transformation processes have been uniform, however. The transition to capitalism went hand in hand with a deeper subordinate integration into international markets. Several currents of political economy have provided frameworks for analysing the different forms of emerging capitalism and economic policies in the Europe’s Eastern periphery. Institutionalist and regulationist approaches highlight the subordinate form of international integration and the resulting peripheral position of the (post-)transition economies in the European division of labour. Thus, they have conceptual affinities with dependency theory. Regulationist theorists have drawn more explicitly on the Latin American dependency theories and their later adaption to the European context. Dependency has also been highlighted as a key characteristic of the Eastern European region from the perspective of world-systems theory, although this theory is less interested in comparing different post-socialist trajectories. Institutionalist, regulationist and dependency theories have developed concepts of middle-range abstraction in order to analyse the trajectories and key characteristics of post-socialist countries. The institutionalist concepts generate typologies from empirical research. Regulation and dependency approaches have a fundamental, systemic concept of capitalism, which is informed by a non-determinist reading of Marxism. For the analysis of concrete cases, they have developed time- and space-sensitive concepts of middle-range abstraction. In all these three approaches, institutions matter for economic policymaking. Different from these approaches, the world-systems approach focuses on the systemic features of uneven capitalist development and its conditioning of economic policy. In this chapter, we will focus on the theories with a strong focus on institutions. Thus, the world-systems theory will remain at the margins. The institutionalist, regulationist and dependency approaches conceptualize the relationship between the economic and political sphere. They have taken a critical stand against the shock therapies of the early 1990s, which had been prevalent in many transition countries, their scant regard for institution-building and their blind faith in the spontaneous emergence of self-regulatory capacities of the market (e.g., Chavance, 1995, p.  433; Mlčoch, 2000, p. 36ff.). Nevertheless, they show differences in their concepts, foci and policy perspectives. For institutionalist perspectives of the (European) transition countries, the conceptual frameworks of Myant and Drahokoupil and Bohle and Greskovits published briefly after the global financial crisis (GFC) have been path-breaking and based on a particularly broad comparative empirical analysis. They have remained a core reference for critical institutionalist theorizing on the region. The approaches of Myant and Drahokoupil engage critically with the ‘varieties 49

50  Handbook on critical political economy and public policy of capitalism’ approach (Hall & Soskice, 2001) and provide a modified framework for the comparative analysis of transition economies that highlights the form of their international economic insertion. Bohle and Greskovits blend a Polanyian institutionalism with mainstream transition literature. At the same time, approaches combining elements of regulationist and dependency approaches have emerged. This contribution will focus on how these approaches conceptualize the relationship between accumulation or growth models, the state and economic policymaking in European transition countries. Attracting foreign direct investment (FDI) as a key component of industrial upgrading has been at the forefront of economic policymaking in almost all transition countries – and is viewed as a crucial element by most institutionalist currents. Nevertheless, it has encountered limits and is increasingly critically discussed in the region. Finally, economic policy options highlighting diversification and selective de-linking, which are informed by a regulationist-dependency perspective, will be discussed as a possible alternative to FDI-led and extraverted development. Before discussing the theoretical approaches, a brief review of key challenges for transition economies will be provided, drawing partially on the rich empirical studies of the institutionalist and regulationist approaches.

KEY CHALLENGES FOR TRANSITION ECONOMIES From the point of view of the newly emerging power blocs in the transition economies, the priority issue was the transformation of property relations – that is, privatization. Economic development strategies did not play any significant role in their deliberations and policymaking. Existing planning, coordination and supply mechanisms were rapidly abolished. Trade links within Eastern Europe were severed on a massive scale. Export specialization did not fit Western European demand, and relatively rapid trade liberalization proved to have quite negative consequences for local production. Following the predominant international policy consensus, governments squeezed domestic demand through harsh austerity policies. The result was a steep decline in production and a deep recession (cf. Berend, 2009, p. 65ff.; Myant & Drahokoupil, 2011, p. 49ff.). With the recovery in the late 1990s, the economic trajectories of the European transition countries took increasingly different directions. After an economic and political consolidation in Central Eastern Europe (CEE – Czech Republic, Hungary, Poland, Slovakia, Slovenia) and the commencement of EU accession talks, Western European manufacturing companies, especially German firms, began to massively relocate parts of their production to CEE due to low wages, well-trained labour forces and geographic proximity (Celi et al., 2020, p. 152ff.). In Southeast Europe (SEE – Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Montenegro, Northern Macedonia, Serbia) and the Baltic countries (Estonia, Latvia, Lithuania), the de-industrialization of the 1990s had lasting effects. Manufacturing recovery was slow (Becker, Ćetković & Weissenbacher, 2016). FDI, rather focused on banking and a household-based financialization, took off. These credits were usually denominated in foreign currency (Becker & Ćetković, 2015, p. 74ff.; Myant & Drahokoupil, 2011, pp. 261ff., 319). In the post-Soviet countries (with the major exception of Belarus), the manufacturing fabric remained weakened, although industries slowly recovered from a low level. Domestic demand was to some extent sustained by increasing household debt. Financialization was part of the

Institutionalist, regulationist and dependency approaches  51 regimes of accumulation up to 2008, often in foreign currency (Myant & Drahokoupil, 2011, pp. 261ff., 319). In some of the post-Soviet countries – in particular, Russia, Azerbaijan and Kazakhstan – raw material exports turned into the main pillar of the accumulation regime. Thus, the European transition countries are plagued by different developmental problems. The narrow specialization of the CEE countries renders them highly vulnerable. For the de-industrialized SEE periphery, the extreme weakness of the production sectors is the key economic problem.

INSTITUTIONALIST APPROACHES As approaches of a medium level of abstraction, institutionalist approaches aim to provide concepts with which to understand this type of diversity. The institutionalist approaches, which have been used to analyse transition countries, often discuss their understanding of institutions implicitly rather than explicitly. They can be loosely affiliated with old institutionalism. The old institutionalist economists and their current continuators understand institutions as social arrangements (rules, norms, organizations) that regulate conflictive as well as cooperative relations between individuals and collectives (Sojka, 2010, pp. 209, 218). Bohle and Greskovits (2012) refer in their influential study more explicitly to the institutionalist understanding of Karl Polanyi. In particular, they take up Polanyi’s key concept that institutions in market societies are either linked to marketization or to protective countermoves (ibid., p. 13). The principal aim of the institutionalist approaches is to understand differences in economic performance. The yardstick is international competitiveness, as Drahokoupil and Myant (2013, p. 92) formulate quite explicitly. In line with this, the institutionalists focusing on transition economies pay particular attention to export performance. They are concerned with aspects of social equity. This is particularly explicit in the case of Bohle and Greskovits (2012, p. 19ff.) with their references to Polanyi. These socially progressive orientations are in line with the broader institutionalist tradition – at least in its Anglo-Saxon variant (cf. Sojka, 2010, p. 210f.). The institutionalist approaches share an emphasis on developing typologies for economies. The key comparative institutionalist concepts on the European transition countries take the latter’s international insertion as their point of departure. They view the form of integration into the international economy as the key variable for understanding economic performance and success (Myant & Drahokoupil, 2011, p. 300; see also Bohle & Greskovits, 2012, p. 44ff.; Nölke & Vliegenhart, 2009, p. 676ff.). In many of the transition economies, the investment decisions of transnational corporations are perceived as the key drivers of the economic dynamics. These are informed by location-specific factors, often of an institutional nature (Nölke & Vliegenhart, 2009, p. 676). The institutionalists relate the forms of international integration with the institutional features of the individual countries (Bohle & Greskovits, 2012, p. 25ff.; Myant & Drahokoupil, 2011, p. 302; Nölke & Vliegenhart, 2009, p. 679ff.). Factors like the endowment of raw materials may also play an important role in the international insertion. Since the typologies are derived from actual forms of international specialization, the individual typologies are partially shaped by the geographic scope of the studies. The broader the geographical scope, the higher the identified number of forms of international integration. The institutionalists discuss four key elements of international insertion: exports, FDI, financial-

52  Handbook on critical political economy and public policy ization and labour migration/remittances. Regarding exports, both the strength and the composition of the export sector matter. Among the industrial export economies, both Myant and Drahokoupil (2011, p. 304ff.) and Bohle and Greskovits (2012, p. 44ff.) distinguish between complex manufacturing exports and simple manufacturing subcontracting to transnational corporations (TNCs). They regard the former as a more successful form of international insertion. Another form of export specialization, observed particularly in the post-Soviet space, is raw material exports. The analytical frameworks refer exclusively to exports; import dependency is not an issue. FDI is a second feature of international insertion. There is a broad consensus among the institutionalists that FDI critically shapes the transition economies in CEE and SEE countries (Bohle & Greskovits, 2012; Myant & Drahokoupil, 2011; Nölke & Vliegenhart, 2009). The sectoral patterns of FDI, however, differ among the transition countries and might produce different dynamics. In post-Soviet countries, FDI is at times less relevant, and export-oriented complex sectors might also exist without FDI, as Myant and Drahokoupil write (2011, pp. 293f., 304f.). A third form of international insertion might occur through financialization. In most countries, foreign banks control the banking sector and often relied on external refinancing for rapid credit expansion. Finally, a strong reliance on outward labour migration and remittances is identified as a possible relevant element of international insertion. The institutionalists relate the types of economic international insertion to the institutional set-up. They pay particular attention to institutional features of the state. The transition from state socialism to capitalism led to massive institutional dislocation and transformation in the early transformation phase. As Myant and Drahokoupil (2011) point out, state restructuring and institution-building processes were very uneven among the transition economies. Where, as in the Soviet Union and Yugoslavia, capitalist transformation and conflictive state disintegration went hand and hand, state capacities were often strongly impaired. Here, reconstruction of state capacities often took many years. The disorder in the political sphere deepened and prolonged the economic crisis, and at times even led to collapse. The extent of economic destruction in the early transformation period had long-term implications for the economic performance and development options. In the first phase, fundaments for the new institutional set-up were built. Both domestic and international actors played a role, whose interaction the institutionalists depict. In a second phase, the EU played a crucial role in shaping institutions in CEE and SEE countries through, respectively, accession and talks on Stabilization and Association Agreements. Myant and Drahokoupil (2011, p. 141) underline that a crucial factor explaining the differences in state capacities and more generally the institutional set-up between CEE and most of the post-Soviet space is the pressures of the EU’s conditions. While Bohle and Greskovits and Myant and Drahokoupil acknowledge international influences on the institutions of the nation-states, questions of the international insertion or the external autonomy of the nation-states are not an explicit part of their institutional matrixes (Bohle & Greskovits, 2012; Drahokoupil & Myant, 2013, p. 95ff.). In this regard, there is a tension between acknowledging the relevance of international pressures and the nation-state focus of their institutional matrixes in their analytical framework. Drahokoupil and Myant (2013, p. 94ff.) identify specific (institutional) pre-conditions for the forms of integration: state capacities (especially the rule of law and the separation of politics and business), state activities (policies), the financial system and types of firms. Thus, the state is of particular importance to their conceptual scheme. They do not aim to develop a comprehensive state theory but limit themselves to identifying specific institutional traits of the state that are requirements for specific forms of integration. From a perspective

Institutionalist, regulationist and dependency approaches  53 informed by Weberian concepts, Myant and Drahokoupil place particular emphasis on state capacities, which they define ‘as an ability to make and enforce collectively binding decisions across a territory’ (Myant & Drahokoupil, 2011, p. 123). Derived from this are ‘“strategic capacities” to make and enforce strategic decisions’ (ibid.). A related aspect refers to the rule of law, where they refer to a composite index developed by the World Bank that focuses on aspects like the enforcement of property rights and contracts, the autonomy of courts and so on (ibid., p. 135f.). While Drahokoupil (2008, pp. 29f., 123ff.) highlighted the importance of the power asymmetries among social actors in shaping policies, these issues, apart from the business–state connections, are not part of the institutional matrix of Myant and Drahokoupil (2011, p. 123ff.). Bohle and Greskovits (2012, p. 19ff.) look at institutions in post-socialist countries from a slightly different angle: how they balance the search for efficient markets and social protection. State institutions are at the core of their institutional matrix. The elements of their state concept are somehow heterogeneous. They include references to theories of neo-corporatism and the involvement of organized labour and business, and Polanyian concerns with embedding markets, mainstream democracy theories with an emphasis on formal indicators like voter volatility and the Freedom House index, as well as the aspect of state capacity. In discussing state capacity, they rely heavily on World Bank indicators such as regulatory quality, government effectiveness, rule of law and control of corruption (Bohle & Greskovits, 2012, p. 36ff.). At times, a question emerges of how compatible the concepts are. The World Bank concept of regulatory quality, whose details they do not discuss, might with its neoliberal slant not really fit with Polanyi’s idea of good state regulation. The state concept of Bohle and Greskovits builds heavily on liberal elements. The institutionalists combine economic and institutional features to define, respectively, the different ‘varieties of capitalism’ (Drahokoupil & Myant, 2013; Myant & Drahokoupil, 2011) and ‘regimes’ (Bohle & Greskovits, 2007, 2012) of post-socialist countries. Although institutionalists recognize changes and crises in the regimes, their approach focuses rather on longer-term continuities. It is, thus, not very well suited to understanding ruptures. Economic policies are formulated within the context of these varieties of capitalism or regimes, their insertion into the international economy, their institutional features and actor constellations. The institutionalist focus is particularly on economic policy fields linked to the key forms of international integration of the respective varieties. For the countries relying strongly on FDI-based export industrialization (in particular, Czech Republic, Hungary, Poland, Slovakia and Slovenia), policies aiming at attracting (industrial) FDI have been regarded as crucial since the late 1990s. The governments of this group turned the attraction of FDI into the main instrument for industrial development (Myant & Drahokoupil, 2011, p. 172ff.), offering specific incentives and designing low corporate taxation regimes. As Bohle and Greskovits (2012, p. 168ff.) emphasize, the governments tried to outbid each other in their offers, which led, inter alia, to a tax-cutting competition. Regarding growth performance, institutionalists regard the FDI-led industrialization as successful. Nevertheless, there are nuances in their evaluation. In contrast with the industrialized CEE periphery, financialization played a more prominent role in the pre-financial crisis development of the less industrialized countries of the Eastern European periphery. Here Bohle and Greskovits (2012, p. 104ff.) emphasize the strategic emphasis on building independent monetary institutions and very rigid exchange rate regimes in order to attract foreign loan capital. During the GFC, the governments stuck to this priority and later sought refuge in the eurozone, while this was not necessarily the case in more

54  Handbook on critical political economy and public policy diversified growth regimes (Ban & Bohle, 2021). The institutionalist frameworks enable the analysis of the commonalities and the differences between economic policy foci and measures in the transition countries. As far as alternatives are discussed, they are confined to different options of integration into the international economy.

REGULATIONIST AND DEPENDENCY APPROACHES Regulation theory is another important approach to analysing the political economy of Eastern Europe. To analyse the region, it has increasingly been combined with the dependency approach (Becker, 2019; Delteil, 2018; Magnin, Delteil & Vercueil, 2018). Both approaches have roots in Marxism but have also drawn on other theoretical currents. In the case of regulation theory, these currents include the French historical Annales school and post-Keynesianism (Boyer, 2015). With regard to dependency approaches, the influence of Latin American structuralism has been strong (Kay, 1989). In both approaches, some researchers have remained closer to Marxist conceptions, while others opted for stronger institutionalist or structuralist directions. Both approaches operate with concepts of a medium level of abstraction with specific attention to time and space and institutional configurations. Both concepts regard capitalism as being inherently driven by the need to accumulate and beset by structural contradictions. The state deals with these contradictions (see also Schneider et al., Chapter 8 in this Handbook). For a more refined analysis of capitalist social formations, these approaches see the need to develop middle range concepts. They do so in complementary ways. Regulation theory provides a framework for analysing different forms of accumulation. It makes a basic distinction between predominantly productive and financialized accumulation (Becker, 2002, p. 74ff.). Productive accumulation can occur in manufacturing or in activities based on ground rent like agriculture, mining and construction (Becker & Weissenbacher, 2015). Regarding productive accumulation, early regulation literature focused primarily on core countries and manufacturing. Aglietta (1982, p. 60ff.) distinguished between primarily extensive accumulation based on the increase in the number of workers, working hours and so on, and primarily intensive accumulation based on increased labour productivity. The existence of a strong manufacturing sector still makes a difference for accumulation dynamics. For Eastern Europe (and beyond it), a basic distinction can be made between industrialized peripheries on the one hand and de-industrialized or hardly industrialized peripheries on the other (Becker, 2019). In Eastern Europe, current peripheral industrialization usually rests strongly on integration in international production chains (Myant, 2018; Pavlínek, 2017). Only the post-Soviet economies of Belarus, Ukraine and Russia depart significantly from this pattern and show more autonomous forms of accumulation. In parts of Eastern Europe, the productive side of accumulation rests strongly on ground rent, like raw material production in Russia or construction/tourism activities in SEE countries. The differential ground rent provides a certain form of location-dependent protection for specific economic activities in the periphery. Some of these activities have a strong link to financialization – in particular, construction and real estate, which are often financed by credits and might be initiated in view of expected real estate prices. Financialization takes off when the productive accumulation slackens, and economic insecurity increases. In such a situation, capital looks for flexible and liquid forms of investment. Financial investments fulfil this requirement (Arrighi, 1994, p. 221ff.). It can take

Institutionalist, regulationist and dependency approaches  55 different forms. One form is based on the price increases of ‘fictitious capital’ (Marx, 1979, pp. 482ff., 510) – that is, shares and other securities. In Eastern Europe, as in most of the global peripheries, the second form based on interest rates and loans is prevalent (Becker et al., 2010). Lending is targeted primarily at households that incur debts in order to acquire flats or consumer durables. In that regard, it can be characterized as mass-based financialization. If the expansion of credits is massively refinanced abroad, banks usually push for lending in foreign currency. Euroization and dollarization are a phenomenon of peripheral financialization, which renders the economies more vulnerable to exchange rate fluctuations and the GFC (Becker et al., 2010; see also Eradze, Chapter 17 in this Handbook). Accumulation can be introverted – that is, primarily geared toward the domestic market – or extraverted – that is, relying strongly on exports and imports of goods and capital. Regarding external economic relations, regulationist and dependency approaches can be easily combined. The dependency approach, which originated in the 1960s in Latin America, underlines the asymmetric relations between core and peripheral economies. As Cardoso and Faletto (1979), whose approach employing a ‘historic-structural analysis with a nonmechanistic conception of history’ (Weissenbacher, 2019, p. 21) possibly shows the strongest conceptual affinities with regulation theory, point out, the forms of dependency and the weight of various elements of asymmetric economic relations, like trade, external credit, FDI, as well as the economic trajectories and strategies, vary over time (Cardoso & Faletto 1979, pp. xii, xivff.). The asymmetric economic and political external relations are an integral part of ‘situations of dependency’ as Cardoso and Faletto call them (ibid., p. xviiiff.). External and domestic social forces form alliances and enter into conflict depending on the constellation of interests and political strategies. External interests are internalized (ibid., p. xvi). In major crisis situations, the constellation of forces changes and fundamental shifts in accumulation and economic policy strategies might occur. In the 1970s and 1980s, dependency concepts were adapted to the European context (Weissenbacher, 2019). In recent years, a renewed interest in the dependency approach can be observed – not least regarding Eastern Europe, where the asymmetric relations are analysed from a peripheral, dependent position. Recent publications (e.g., Becker, 2019; Becker, Weissenbacher & Jäger, 2021, p. 226ff.; Delteil, 2018; Krpec & Hodulák, 2019; Magnin et al., 2018; Richet, 2019; Scheiring, 2019) highlight the following features of economic dependency: ● Commercial dependence: this aspect refers to the dependence on key imports – in particular, machinery and key intermediate goods. The massive reliance on machinery imports reflects technological dependence. ● Productive capital and more generally FDI: through FDI, foreign capital is able to strongly shape accumulation dynamics. In manufacturing, it defines the role of its subsidiaries in supplying the domestic market or in production chains. In CEE, manufacturing plants are located in the subordinate parts of the production chains (cf. Myant, 2018; Pavlínek, 2017). In banking, foreign banks define the basic contours of their subsidiaries. FDI leads to the outflow of profits, especially after the maturing of investment. This is a drain on the current account. ● Finance: this refers to the reliance on foreign loans in order to finance current consumption, productive investment and the expansion of credit. The strong reliance on foreign refinancing is often a key characteristic of dependent financialization. Foreign indebtedness leads to the outflow of interest payments.

56  Handbook on critical political economy and public policy ● Labour migration and reliance on remittances. Accumulation is impossible without the reproduction of labour. This aspect has long been neglected by regulationist (and other institutionalist) approaches. More recently, researchers inspired by dependency and world-systems theory have included this aspect more prominently in their research (Czirfusz et al., 2019). In capitalist economies, reproductive labour is remunerated and depends to a significant extent on wages and the opportunity to buy reproduction-related commodities with them. Reproductive labour also comprises unpaid, non-waged care work, mostly done by women, in the analysis. A third form of reproductive labour is provided (in an at least partially decommodified form) by the state (cf. Becker, 2017, p. 57ff.). Accumulation strategies of individual capitals may be in conflict. Capitalist production relies directly on the exploitation of wage labour, but also requires (often unpaid) reproduction work. The social relations are beset by contractions and conflicts. The state is a fundamental social relation within a wider dispositive or mode of regulation, which deals with the social contradictions and conflicts. The mode of regulation includes as structural forms the wage and competition relations, and the monetary and the ecological constraints (cf. Aglietta, 1982, pp. viiif., 10ff., 275ff.; Becker, 2002, p. 122ff.). Conflicting and contradictory social interests are organized by civil society, which is characterized by huge power asymmetries. In civil society, social norms are formed and options for state policies are pushed forward. Civil society and political society – that is, the state apparatuses and political parties – are closely interlinked (Gramsci, 1971, p. 12). The access of social forces to decision-making centres of the state is uneven; they try to mould the institutional set-up of the state to their own advantage. According to Jessop, the state displays a strategic selectivity – that is: the ways in which the state considered as a social ensemble has a specific, differential impact on the ability of various political forces to pursue particular interests and strategies in specific spatio-temporal context through their access to and/or control over given state capacities – capacities that always depend for their effectiveness on links to forces and powers that exist and operate beyond the states formal boundaries. (Jessop, 2002, p. 40)

Strategic selectivities differ according to the territorial level of states – national, subnational and supranational. A strategic bias of the state towards capital is inscribed in the dependence of its fiscal revenues and, thus material base, on well-functioning accumulation (Jessop, 1990, p. 178f.). Accumulation in the periphery is crucially dependent on foreign exchange revenue. This renders the state in the capitalist periphery particularly dependent on capital groups engaged in the external economic relations, as Tilman Evers (1977, p. 80ff.) points out in his path-breaking study on the peripheral state. The availability of foreign exchange as a crucial bottleneck for accumulation significantly influences the fiscal revenue sources. Another significant factor of external dependence of the peripheral state is access to international loans and to grants (Becker, 2008, p. 12ff.; Evers, 1977, p. 80ff.). The material scope for consensual policies is smaller than in core states. Therefore, clientelist (and often also repressive) practices tend to play a major role (Becker, 2008, p. 19ff.). States show different degrees of relative autonomy with regard to the dominant bloc (Poulantzas, 2013, p. 196ff.) and individual capitals. For peripheral states, the degree of the external relative autonomy is particularly crucial. Thus, a key distinction between states in Eastern Europe would involve the degree of their internal and external relative autonomy.

Institutionalist, regulationist and dependency approaches  57 Interest constellations differ according to the accumulation strategies of businesses, the strength of trade unions and social movements. Economic policy is subject to conflicts in civil society (and the scientific field; cf. Lordon, 1999) – and in political society – among political parties and potentially between different apparatuses of the state. Social and political actors might try to find international backing for their proposals in order to increase their domestic leverage. The result of these struggles is not necessarily coherent economic policies or strategies. Economic and political crises are potential turning points for economic policies. Such junctures are usually moments of intensified conflict over economic policies. They have been policy junctures for transition countries, too. The late 1980s was a time of systemic crisis for the state socialist countries. It opened the way for the capitalist transformation, which implied ruptures in the functioning of the state, a change of property relations and a profound transformation of class relations. In the 1990s, privatization was the main economic policy priority of the new emerging power blocs throughout the region. Developmental issues did not play a role. It was primarily from the late 1990s onwards that development models became more neatly defined. They differed with the region – and with them economic policy patterns. In CEE, EU accession talks implied a loss of external autonomy of the state. At the same time, the autonomy of the state with regard to domestic capital groups remained limited (Šitera, 2020, pp. 78ff., 84). At that time and in line with EU priorities, the attraction of FDI became the key priority economic policy, paving the way for export industrialization on the one hand and financialization on the other. Regarding the attraction of FDI, economic policy patterns in this group of countries were fairly uniform (cf. Becker, 2019). They regard attracting FDI as their main industrial policy. However, a more nuanced picture emerges regarding policies pertaining to financialization. Here, different interest constellations, but also risk perceptions of central banks played a role in shaping different policy attitudes – for example, in regard to foreign exchange credits. Through housing credits, financialization had a link to domestic real estate and construction companies. For these companies, urban development regulations were crucial. Otherwise, domestic companies partially relied heavily on public tenders. Here, often, political links proved to be crucial – a mirror of the limited state autonomy. The great financial crises had only a short and rather uniform impact on industrial export production. Due to the different structures of financialization partially resulting from different regulations, financialization in the region was unevenly hit by the crisis. Post-crisis policy responses differed too. At least in some of the non-eurozone countries of the group (Hungary and Poland), nationalist right-wing parties perceived the crisis as an opportunity to increase the external autonomy of the state to strengthen the role of domestic capital groups and to create economic policies for pursuing this aim (cf. Becker, 2020; Gerőcs & Jelinek, 2018). Thus, in the wake of the crisis, economic policy patterns among the industrialized peripheral countries of CEE increasingly diverged. States in the de-industrialized periphery (SEE and the Baltic countries) also lost external autonomy through, respectively, EU accession and pre-accession talks. Like the CEE countries, they banked increasingly on policies to attract FDI. They attracted, however, little industrial FDI. FDI remained concentrated in services, especially banking. In the years before the GFC, the increasingly foreign-owned banking sector engaged in expanding household credits. Due to the external refinancing, the banks pushed foreign exchange credits. This strategy was accommodated by very rigid exchange rate policies (Becker & Ćetković, 2015, p. 74ff.). Financialization was massively affected by the crisis. The governments stuck to the

58  Handbook on critical political economy and public policy rigid exchange rates. The EU countries of the group intensified efforts to enter the eurozone. In the face of weak productive structures, there has been a strong tendency of domestic capital groups, especially in SEE, to engage in ground-rent-based sectors like construction, tourism and real estate. Public tenders and land-use regulations have been of crucial importance for many of them. They could use their political connections in the context of a state with weak autonomy with regard to capital groups and deeply rooted clientelist practices (Becker, 2019, p. 202ff.). Regulation theory helps to understand different patterns of economic policies not only between different subgroups of transition economies, but also diverging patterns within these groups. Regulationist economic policy analysis for the transition countries goes beyond the prism of international insertion and also looks at inward-looking activities and places greater emphasis on crises as economic policy junctures than the institutionalist framework. The broader conceptualization of social lines of conflict, power relations and the state enables the regulation plus dependency approach to analyse shifts in the relationship between different fractions of capital (e.g., mining and manufacturing capital, domestic and foreign capital) conflicts on the strategic selectivity of the state and resulting economic policies in a more systematic way than the institutionalist approaches.

KEY ECONOMIC POLICY: ATTRACTING FDI AS ERSATZ INDUSTRIAL POLICY For many transition countries, attracting FDI has become a prime economic policy. In CEE, it became the ersatz industrial policy. Institutionalists have viewed it as a successful policy – at least under specific circumstances. Therefore, FDI as ersatz industrial policy will be highlighted here. The political breakthrough for unilaterally banking on FDI occurred in different junctures in the CEE region. In the early 1990s, Hungary was the CEE pioneer in banking unilaterally on attracting FDI. This strategic decision of the then Hungarian government was partially due to the high external debt and high foreign exchange needs, the already relatively strong international integration into the capitalist economy already during state socialism, and pro-FDI forces in the state apparatus – in particular, the central bank. In the other CEE (and SEE) countries, governments still aimed at building national capitalists. With the beginning of EU accession talks, the strategic selectivity of the states in the region changed. The EU pushed heavily for opening up to foreign capital. In the changed political and economic juncture, interests closely linked to foreign capital were strengthened, and branches of the state geared towards attracting foreign capital became increasingly influential (Drahokoupil, 2008). Only Slovenia continued to pursue a more selective strategy towards FDI for a few more years. In the wake of the eurozone crisis, the EU institutions pushed successfully for privatizing Slovenian banks, but also other sectors (including manufacturing) (Podvršič, 2019, p. 230f.). Thus, the EU has played a crucial role in changing the strategic selectivity of the states in favour of foreign capital. ‘As the developmental prospects in CEEC became dependent on investment decisions by foreign investors, providing the infrastructure and support became the most important state role in development of the manufacturing industry’, state Myant and Drahokoupil (2011, p. 173). The governments created specialized agencies catering for FDI. They provided

Institutionalist, regulationist and dependency approaches  59 specific incentives and infrastructural support for foreign investors (cf. Drahokoupil, 2008). However, policies were more generally geared towards foreign investors. Governments in the region lowered corporate taxes in order to lure foreign investors (Myant & Drahokoupil, 2011, p. 176). They flexibilized labour legislation in order to make their country more attractive to foreign investors, at times with the direct influence of bi-national chambers of commerce (cf. Delteil, 2018; Gerőcs & Pinkasz, 2019, p. 193). Delteil (2018) argues that macro-institutional influence is particularly strong in weaker or less externally autonomous states. Gerőcs and Pinkasz (2019, p. 192) show, however, that the industrial lobby and bi-national chambers have exercised strong influence on various macro-institutional policies (like taxes and education) in the current Fidesz era. Institutionalist approaches have generally not regarded the Hungarian state as weak, and the Hungarian state currently enjoys at least partial external autonomy. After the GFC had revealed the vulnerabilities of the FDI-based and strongly extraverted industrialization, experts (often with an institutionalist background) started to discuss limits of the FDI-led industrial strategy like low research and development expenditure and the subordinate position in international production chains in local and international fora (e.g., Baláž, 2013; Myant, 2018; Nölke, 2018, p. 276ff.). They emphasize the need for the strengthening of innovation. Thus, Drahokoupil and Galgóczi (2015, p. 34) propose ‘to combine utilization of capabilities in the foreign-controlled sector with reliance on domestic sources of innovation and growth’. Thus, institutionalists acknowledge limits to the hitherto pursued FDI-led strategies and propose modifications, which are to enhance innovation. Their alternatives do not question the primacy of international competitiveness and export orientation. As far as adaptions of production patterns to ecological constraints are discussed, they remain confined to technological adaptions – for example, a switch to electrical car production (Drahokoupil et al., 2019). In some countries in the region, governments have taken up the debate on the limits of the FDI-led industrialization (e.g., Vláda České republiky, 2014 in the Czech Republic or Ministerstwo Rozwoju, 2016 in Poland). As far as they have taken remedy action, international competitiveness has remained paramount in their thinking. In CEE, the PiS government in Poland has been the most ambitious in charting more autonomous industrial policies, although with rather limited success so far. In Hungary, the promotion of domestic capital by the Fidesz governments has been confined to the service sector, construction and agriculture, while Fidesz has continued to bank on FDI in manufacturing (Becker, 2020, p. 157ff.).

SPACES FOR ALTERNATIVES: POLICIES FOR A MORE INWARD-LOOKING MODEL From a regulationist cum dependency perspective, the limits of the FDI-based industrial strategy are inherent in the approach. They reflect the interests of the TNCs. In addition, the reliance on FDI cements the unequal development patterns within the industrial periphery because FDI is regionally highly concentrated (Medve-Bálint, 2015). FDI is not a solution for the socioeconomic problems of the peripheral regions. Since dependency theorists identify ‘external dependencies as the roots of problems’, ‘remedies cannot come from prevailing (dominant) external sources but need to be endogenous’ (Weissenbacher, 2019, p. 198). This implies at least a partial break with the unilateral outward orientation. From a regulationist plus dependency perspective, they argue for combining the

60  Handbook on critical political economy and public policy building of more inward-looking economic activities mobilizing domestic resources with a stronger ecological orientation. This would point in the direction of selective self-reliance and imply providing selective protection to inward-looking sectors (cf. e.g., Stöhr, 1985). Taking Slovakia as an example, Becker and Lesay suggest complementing the accumulation regime based on export industry and financialization by a third pillar (Becker & Lesay, 2019, p. 148ff.; also more broadly, Becker, 2019, p. 205ff.). This third pillar would consist of building or enlarging more inward-looking (productive) activities, the creation of more micro-regional production and consumption circuits. Such steps would diversify the economic structure, rendering it less vulnerable to crisis. In addition, the transport intensity of production would be reduced, which would render production patterns more ecological. Such a reorientation of production would require a change in the strategic selectivity in the state and a more active role of the public sector. In the poorer Slovak areas, there would be support for such a reorientation and for a more active economic role of the state, as qualitative research has shown (Báboš, Világi & Oravcová, 2016, p. 126ff.). The competition and state aid rules of the EU impose limits to a strategy of selective self-reliance, but do not necessarily block initiatives for more autonomous national and local development in the periphery completely. For example, tenders could be used in creative ways in order to promote local, more ecological, productive initiatives. After the 2016 elections that brought about a breakthrough of the far right particularly in several poorer areas, the government led by the mildly social-democrat-oriented Smer-SD saw the need for a stronger emphasis on regional development in the poorer areas. While the strategy still attributed a key role to FDI, it nevertheless stressed the need for the promotion of small and medium enterprises and public investment (Úrad vlády Slovenskej republiky, n.d., p. 59ff.). The then head in charge of the programme, Anton Marcinčin argued that ‘real change must come from below’ (Marcinčin, 2018a, n.p.) and for the inclusion of local actors in planning the programmes (Marcinčin, 2018b). The programme retained an experimental character and seemed to have run up against existing clientelist structures of the state (Becker, 2018, p. 69f.). In the draft reform programme prepared by the present more right-wing coalition in Slovakia, there are brief remarks on regional development, recycling, and alternative energies in the chapter on the green economy (Ministerstvo financii Slovenskej republiky, 2020, p. 34ff.), but it does not even discuss the general thrust of Slovakia’s economic development, its narrow specialization, external vulnerability and high reliance on FDI (Schmögnerová et al., 2020, p. 2). The Slovak example shows how spaces are small and precarious for even limited adaptations of the development strategy. The foreseeable crisis of the car industry as the main manufacturing sector in many countries in the region, in particular CEE, will make changes mandatory. Beyond the building of a more inward-looking sector, there is a more general need for conversion strategies for key export sectors and putting the economy on a more ecological footing. The debate on that in the region has hardly begun; political forces pushing in that direction are very weak.

CONCLUSIONS The strength of the institutionalist, regulationist and dependency approaches is that their analytical framework is well suited to the different economic and political trajectories of the

Institutionalist, regulationist and dependency approaches  61 European transition countries and to their subordinate international insertion. The analysis of economic policies is, thus, contextualized. From this theoretical perspective, the identification of supposedly universal best practice economic policies is not feasible. The institutionalist approaches focus on the continuities of economic development patterns and institutional set-ups of different regimes of varieties of capitalism, although they do admit that they are subject to changes and crises. Thus, they are not well suited for analysing crises, which might open up space for different accumulation and economic policy strategies. The institutionalists analyse economic trajectories, institutions and economic policies through the lens of the success of international insertion. Therefore, the strategic economic policy options are confined to strategies enhancing international competitiveness and deepening international insertion. To institutionalists, the compatibility of economic policy strategies and social equity matters. The regulationist cum dependency approach has a more encompassing vision. It looks at the combination of outward- and inward-looking accumulation strategies and places more emphasis on the strategically relevant elements of dependence (e.g., not only on goods exports, but also imports). It treats the strategic selectivity of the state in a more explicit way than the institutionalist approaches. Crises are explicitly theorized as moments of opportunity for economic and political alternatives. Different from the institutionalist view, selective protection measures and selective de-linking are possible strategic economic policies, although it is very difficult to proceed in this direction under the present circumstances.

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Institutionalist, regulationist and dependency approaches  63 Jessop, B. 1990, State Theory: Putting the Capitalist State in Its Place, University Park, PA: Pennsylvania State University Press. Jessop, B. 2002, The Future of the Capitalist State, Cambridge, UK: Polity Press. Kay, C. 1989, Latin American Theories of Development and Underdevelopment, London/New York: Routledge. Krpec, O. & Hodulák, V. 2019, ‘The Czech economy as an integrated periphery: the case of dependency on Germany’, Journal of Post-Keynesian Economics, 42 (1), 59–89. Lordon, F. 1999, ‘Croyances économiques et pouvoir symbolique’, L’Année de la regulation, 3, 169–210. Magnin, E., Delteil, V. & Vercueil, J. 2018, ‘La dépendance dans les relations entre capitalismes nationaux: quelle portée analytique?’, Revue de la régulation: Capitalisme, institutions, pouvoirs, 24 (2), accessed 21 January 2019 at https://​journals​.openedition​.org/​regulation/​14340. Marcinčin, A. 2018a, ‘Skutočna zmena musí isť zdola’, Hospodárské noviny, 7 March, accessed 8 April 2018 at https://​komentare​.hnonline​.sk/​komentare/​1706381​-skutocna​-zmena​-musi​-ist​-zdola. Marcinčin, A. 2018b, ‘Ako ďalej s regiónmi?’, Pravda, 11 April, accessed 16 April 2018 at https://​ nazory​.pravda​.sk/​analyzy​-a​-postrehy/​clanok/​465288​-ako​-dalej​-s​-regionmi. Marx, K. 1979, Das Kapital: Kritik der Politischen Ökonomie, Vol. 3., in Marx-Engels-Werke (MEW) [The collected works of K. Marx and F. Engels], Vol. 25, Berlin: Dietz Verlag for the Institute for Marxism-Leninism at the Central Committee of the SED. Medve-Bálint, G. 2015, ‘Changes still below the surface? Regional patterns of foreign direct investment in post-crisis Central and Eastern Europe’, in B. Galgóczi, J. Drahokoupil & M. Bernaciak (eds), Foreign Investment in Eastern and Southern Europe After 2008: Still a Lever of Growth? Brussels: European Trade Union Institute, pp. 71–101. Ministerstvo financii Slovenskej republiky 2020, Moderné a uspešné Slovensko. Národny integrovány reformný plan, Bratislava: Ministerstvo financii Slovenskej republiky. Ministerstwo Rozwoju 2016, Strategia na rzecz Odpowiedzialnego Rozwoju – projekt do konsultacji społecznych. Projekt z dnia 29 lipca 2016 r., Warsaw: Ministerstwo Rozwoju. Mlčoch, L. 2000, ‘Restrukturalizace vlastnických vztahů: institucionální pohled’, in L. Mlčoc, P. Machonin & M. Sojka (eds), Ekonomické a společenské změny v české společnosti po roce 1989/ alternativní pohled, Prague: Karolinum, pp. 20–96. Myant, M. 2018, ‘The limits of dependent growth in East-Central Europe’, Revue de la régulation: Capitalisme, institutions, pouvoirs, 24 (2), accessed 21 January 2019 at https://​journals​.openedition​ .org/​regulation/​13351. Myant, M. & Drahokoupil, J. 2011, Transition Economies: Political Economy in Russia, Eastern Europe, and Central Asia, Hoboken, NJ: Wiley. Nölke, A. 2018, ‘Dependent versus state-permeated capitalism: two basic options for emerging markets’, International Journal of Management and Economics, 54 (4), 269–82. Nölke, A. & Vliegenhart, A. 2009, ‘Enlarging the varieties of capitalism: the emergence of dependent market economies in East Central Europe’, World Politics, 61 (4), 670–702. Pavlínek, P. 2017, Dependent Growth: Foreign Investment and the Development of the Automotive Industry in East-Central Europe, Cham: Springer. Podvršič, A. 2019, ‘Slovénie: du success story à la peripherie industrialisée de la zone euro’, in V. Delteil and X. Richet (eds), L’Europe, une fracture à retardement: intégration asymétrique, dépendances, fragmentation, Paris: L’Harmattan, pp. 213–39. Poulantzas, N. 2013, L’état, le pouvoir, le socialisme, Paris: Les Prairies ordinaires. Richet, X. 2019, ‘Capitalisme importé et dépendance: le rôle des investissements directs étranger en Europe central et du sud est’, in V. Delteil and X. Richet (eds), L’Europe, une fracture à retardement: intégration asymétrique, dépendances, fragmentation, Paris: L’Harmattan, pp. 163–88. Scheiring, G. 2019, Egy demokrácia halála: az autoriter kapitalizmus es a felhalmozó állam felemelkedése Magyarországon, Budapest: Napvilág. Schmögnerová, B., Becker, J. & Csefalvayová, M. et al. 2020, Solidárne, ekologické a modern Slovensko: Sociálno-demokratická alternative sociálno-ekonomickej transformácie v novom viacročnom finančnom rámci Európskej únie, Bratislava: Friedrich Ebert Stiftung. Šitera, D. 2020, ‘Trilema demokratického kapitalismu na východní periferii Evropy’, in P. Barša & M. Dokupil Škrabaha (eds), Za hranice kapitalismu, Prague: Rybka, pp. 69–92.

64  Handbook on critical political economy and public policy Sojka, M. 2010, Dějiny ekonomických teorii, Prague: HBT. Stöhr, W. 1985, ‘Selective self-reliance and endogenous regional development – pre-conditions and constraints’, in D. Nohlen & O. Schultze (eds), Ungleiche Entwicklung und Regionalpolitik in Südeuropa: Italien, Spanien, Portugal, Bochum: Brockmeyer, pp. 229–49. Úrad vlády Slovenskej republiky n.d., Aktualizácia národnej stratégie regionálneho rozvoja Slovenskej republiky, Bratislava: Úrad vlády Slovenskej republiky. Vláda České republiky 2014, ‘Odliv výnosů jako symptom vyčerpaného hospodářského modelu’, 27 October, accessed 20 December 2014 at www​.vlada​.cz/​scripts/​detail​.php​?id​=​123870​&​tmplid​=​50. Weissenbacher, R. 2019, The Core-Periphery Divide in the European Union: A Dependency Perspective, Cham: Springer.

5. COVID-19 and the gender dilemma: blind spots in both macroeconomics and feminist economics1 Brigitte Young

The COVID-19 crisis catapulted women health and care workers to a newfound public visibility. During the first general lockdown in March 2020, women workers were serenaded from European balconies for providing ‘essential’ economic services in sectors such as health, social care, hospitality, and home care, working in retail as cashiers at supermarkets, as cleaners, and as school personnel. In addition, women leaders were extolled as the better decision-makers in managing the crisis. The erstwhile euphoria putting women center stage soon crashed with reality. The applause of the spring did not usher in a transformative rethink of society’s inequalities. That the ‘essential’ and largely invisible workers are undervalued, underpaid, and under-protected worldwide did not start with the COVID crisis. This fact has been analyzed and critiqued by many feminist economists for some time (Bakker & Gill, 2003; Elson, 2013; Ghosh, 2021; van Staveren, 2017). Particularly in the health arena, the gender imbalance has become acutely visible during the pandemic. On a global scale, female doctors, nurses, and care workers account for about 70 percent of personnel. Many of them work in precarious conditions on minimum wages and with poor protection despite the fact that they are at a higher risk of being exposed to the virus (Bijl, 2020). Largely invisible to the larger public is the fact that gender intersects with other forms of inequality. Many profit-oriented health and social care centers rely on informal workers in the form of immigrants, refugees, migrants, and members of ethnic minorities to provide the ‘essential’ services for those who are dependent on assistance (European Economists, 2021). That the precarious working conditions of health and care personnel have not received sufficient political recognition is all the more surprising since the United Nations’ 17 Sustainable Development Goals (SDGs) have called for action by all countries to end poverty and improve health and education in addition to tackling climate change (United Nations, 2015). Yet, the ‘social’ aspect has been overshadowed by environmental and governmental issues. While the oil, gas, mining, and auto industries have been heavily criticized by social movements such as ‘Fridays for Future’ for their slow transition to renewable energy, there has not been a similar public outcry on protecting workers in the healthcare and service sectors, such as offering paid leave, additional safety measures, higher wages, and ensuring economic security for ‘essential’ staff. Paul Krugman (2020) stated the obvious: there are ‘billions for oil, but nothing for nurses and teachers.’ Similarly, he criticized private hospitals for receiving government bailouts while they paid huge sums of dividends to their CEOs and subsequently furloughed many of their staff (cited in Silver-Greenberg, Drucker & Enrich, 2020, n.p.). Given the conundrum of the serenading of ‘essential’ women workers during the COVID pandemic and the subsequent silencing of gender inclusivity, I pose the question of why 65

66  Handbook on critical political economy and public policy the issue of gender inequality is largely absent in public high-level recovery plans issued to cope with the economic and health impacts of the pandemic, and subsequent agendas for a transformation to a post-COVID era. To deal with this question, I will first investigate some of the plans and reports issued by the European Union, the Organisation for Economic Co-operation and Development (OECD), and Chatham House to illustrate the gender blindness in these reports. In the second section, I will try to offer some explanations as to why traditional macroeconomists have largely neglected to include a gender lens in the recovery plans. Subsequently, I turn to some of the feminist economic studies and discuss their shortcomings in offering a transformative systemic shift of capitalist production and global finance for a post-COVID recovery. It seems obvious that gender equality will not happen within a finance-dominated capitalist system. As a tentative hypothesis, I suggest that many traditional economists rely on gender-blind data-driven macroeconomic approaches, while many feminist economists demonstrate a macroeconomic blindness in terms of excluding monetary policy and the global finance sector in their analysis of the micro- and meso-levels of the household, the labor market, and the care sector.2 These two approaches produce distinct outcomes for men and women. What is missing in both perspectives is a link between the two interconnected levels of the economy. Empirically, this can be demonstrated in that gender differences may negatively affect economic outcomes, while gender equality may contribute to higher rates of economic growth and greater macroeconomic stability. As such, macroeconomic policy is one of the feedback loops that contributes to gender (in)equality, which then influences economic growth. By disregarding the relationship between gender relations and macroeconomics, both approaches may unintentionally undermine the goal to achieve gender equality (van Staveren, 2017; Young, 2019). In the final section, I will focus on the weaknesses in feminist economics and introduce some transformative new approaches by economists such as Mariana Mazzucato and her mission-oriented approach that sees the state and not the private sector as the primary actor to tackle the challenges in modern societies, as well as Maja Göpel and Kate Raworth who focus on the public purpose of the economy and not just the profit motive inherent in capitalist production. While these authors do not identify as feminist economists, nevertheless they look at the economy from a systemic and holistic perspective and suggest thinking in terms of a circular economy (Raworth, 2017, p. 8). The purpose of introducing these transformative visionaries is to suggest that the transformative power embedded in a major crisis should not be wasted again, as was the case after the financial crisis in 2007–08.

THE GENDER BLINDNESS IN COVID-19 CRISIS RECOVERY PLANS The following section draws on some of the insights provided by scholars who have undertaken gender assessment reviews of the ‘NextGenerationEU’ recovery plan (Klatzer & Rinaldi, 2020) and the European Semester (Antonucci & Corti, 2020); an OECD (2020) study focusing on global efforts to tackle the coronavirus; and a report from the Chatham House Gender and Inclusive Growth Initiative (Isele & Dubois, 2020), sharing the urgency that women need to be included in the taskforces on tackling COVID-19 around the world. But as

COVID-19 and the gender dilemma  67 Klatzer and Rinaldi (2020, p. 8) bluntly state: ‘The (EU) Recovery Plan, and especially the legislative proposals, are gender blind.’ The EU, however, did learn from the disastrous handling of the euro sovereign debt crisis. In March 2020, as the COVID-19 virus suddenly made landfall on the European continent, the various European institutions reacted swiftly to the social and economic fallout from the pandemic. The European Central Bank (ECB) announced in the spring of 2020 a €750 billion pandemic emergency purchase program (PEPP). Recognizing the mistakes of responding with fiscal austerity measures to the sovereign debt crisis, this time around Angela Merkel could be persuaded to agree with Emmanuel Macron to initiate a fiscal European Recovery Fund, which the EU Council after four days and nightly negotiations passed on July 21, 2020. It is widely seen as a fiscal turning point in Europe, moving from a strategy of national self-interest to European fiscal solidarity measures. The EU Commission could thus raise €750 billion of debt on capital markets in a recovery plan entitled ‘NextGenerationEU,’ which some even called a ‘Hamiltonian’ moment for Europe, referring to a situation in the United States that turned the US into a bond-issuing state backed by the US Federal Government. The entire package, which is part of the multiannual financial framework (MFF) for 2021–27, has at its disposal the remarkable sum of €1.074 trillion. In addition, on the tax-raising side, the EU can enact its ‘own resources’ such as plastic tax, carbon border adjustment mechanism (CBAM), and a digital levy to help finance the debt. Jointly with the MFF and the recovery program, the total financial support of the EU budget amounts to €1.85 trillion (Saraceno, Semmler & Young, 2020). Assessing the more detailed programs and instruments from the overall package, including the European Recovery Instrument, the European Recovery and Resilience Facility, InvestEU, the Strategic Investment Facility and the EU4Health program, Klatzer and Rinaldi (2020) criticize these programs for reinforcing existing gender roles and norms. In particular, the authors stress that the economic stimuli in the EU Recovery Fund are geared mainly to industries with a high male employment rate such as the digital, energy, agriculture, construction and transport industries, while neglecting the sectors with high female employment in the health and care sectors, accommodation and food services, social work, arts, culture and recreation. In these latter sectors, women make up 93 percent of childcare workers and teachers’ aides, 86 percent of personal care workers and health services, and 95 percent of domestic cleaners and helpers in the EU (European Institute of Gender Equality [EIGE], 2020). Surely, one can applaud the goal toward a green and digital transformation for a post-COVID era, but the plans are without binding gender equality objectives. The large share of funds in these stimuli programs will benefit male employment without targeting gender inequality in many of these industries. Klatzer and Rinaldi (2020, p. 9) fear that these gender-blind plans counteract the EU goals to increase gender equality in the labor markets. Equally disappointing is the fact that while ‘essential’ workers are recognized as indispensable to the functioning of a modern economy, the recovery plans lack any reference to a transition towards a more resilient care economy. Klatzer and Rinaldi encourage EU policymakers to expand their instruments proposed by the recovery plan to invest in care infrastructure and combat gender-based violence, to provide equal opportunities for women and men so that they can fully enjoy their fundamental rights (2020, p. 8). The strong mobilization in the EU Parliament against the gender blindness in the recovery plan did subsequently lead to changes in the MFF for 2021–27. The budget now includes a tracking mechanism on the different spending targets for women and men, establishing

68  Handbook on critical political economy and public policy binding budget lines for inserting gender equality objectives into the specific programs and instruments. Incorporating the gender dimension in the EU budget is not new, however, since previous annual budgets had relied on the insights of the European Gender Budgeting Network and incorporated gender-inclusive budgetary targets. The EU parliamentary group was able to refer to the report entitled Purple Pact (European Women’s Lobby, 2019) already criticizing before the pandemic the present conventional economic models, and suggesting the construction of a caring economy, the creation of an inclusive society, and building a feminist future. In addition, the European Commission issued its new Gender Equality Strategy 2020–2025 in March 2020, where, under the subheading ‘Towards a Gender-equal Europe,’ the Commission proposes that in all its activities the Union will aim to eliminate inequalities and to promote equality between men and women. The Commission further proposed a Child Guarantee in 2021 that will focus on the most significant barriers preventing children from accessing the necessary services for their well-being and personal development, to break the poverty cycle and reduce inequalities (EU Commission, 2020a). Given the dire economic, social and health consequences of the pandemic, Antonucci and Corti (2020) suggest that with an estimated loss of 13 percent of working hours in Europe and 20 percent of youth out of work, it is no longer sufficient that the forward-looking investment, protection of incomes and quality of public services can remain as temporary measures to respond to the crisis. Even more forcefully, they suggest that ‘we must dare to change the economic paradigm once and for all’ (p. 3). The battle to include gender objectives and targets in COVID-19 recovery plans and taskforces is not just restricted to the European Union. Both the OECD report (2020) and the Chatham House Gender and Inclusive Growth Initiative report (Isele & Dubois, 2020) remind global leaders in developed and developing countries to include women in the decision-making process of recovery plans and that all policy responses to the crisis must embed a gender lens and account for women’s unique needs, responsibilities, and perspectives (OECD, 2020, p. 1). Not only is gender equality considered a social and human right, it also contributes to economic growth. This has both a demand and supply component. High female labor force participation rates mean that women are integrated into the economy, have access to bank credits to purchase goods and services, and thus contribute to economic growth. In contrast, gender inequality may contribute to a lack of demand for credit by women, leading to aggregate low saving rates, low investment rates, and lower aggregate demand. Similarly, if people do not have the required level of education or skills, companies may find that they are short of the human capital needed to manufacture the material and immaterial goods and services to attain desired outcomes. Gender relationships thus have an impact on the economy, and economic processes at the same time shape gender relations through feedback loops. The mutual influence between gender and the economy has been theorized by feminist economists for some time, arguing that gender equality would foster greater stability and resilience in the economy, and it would further facilitate socio-ecological growth strategies (van Staveren, 2017). In the next section, I will turn to the conundrum of why ‘essential’ workers were serenaded and applauded for their vitally important services at the beginning of the crisis and why economists and economic policymakers have in their subsequent recovery plans ‘silenced’ the largely female-staffed care and social service sectors at the micro- and meso-levels. The

COVID-19 and the gender dilemma  69 silence is also due to the fact that the crisis has only unmasked but not caused the deficiencies in the health and other social services.

THE GENDER BIAS IN MACROECONOMIC DATA ‘Silencing’ women in macroeconomic accounting is nothing new. It starts with the prerogative of economists to select the data that make up statistical accounting, such as in the metrics of gross national product (GNP), in which the contribution of care work and household production remains ignored or undervalued. At a more fundamental level, the selection of data is based on the experiences of men as the norm or default and these gender-blind realities reflect the general reality of how an economy works (Criado Perez, 2019). It is thus not surprising that recovery plans prioritize economic growth and market logics over other goals of life-sustaining processes (Bakker, 2020; Bakker & Gill, 2003). This is also due to the fact that there are few female macroeconomists in the decision-making process of monetary institutions. This is particularly apparent when one looks at the overwhelming male appointment processes for the ECB and for the European Banking Authority.3 In her award-winning publication, Criado Perez (2019) exposes many examples of data bias that underpins the collection of statistics in a world designed for men. She cites gender-biased data in areas as disparate as healthcare, humanitarian disaster response, agriculture, peace talks, and industrial policy. The consequence is that the so-called objective data silences ‘the economy’s other half’ (Heintz, 2019) and can lead to wrong resource allocation in many areas such as education, health, and other public goods. According to Criado Perez, ‘the gender-gap is both a cause and a consequence of the type of unthinking that conceives of humanity as almost exclusively male’ (2019, p. xv). Nor can we hope for more inclusivity due to the shift to big data. Since algorithms are based on the inputs of (mostly male) designers, the built-in bias is replicated in algorithms using, for example, speech recognition, which is more likely to recognize male than female speech. But the examples of gender bias are not due to deliberate manipulation by male scientists, rather they are due to the simple fact that many economists start from the assumption that the world is designed for and by men. It is thus not surprising that inadequate metrics have led to wrong policies and widened the gender gap. Nor is it surprising that women are made hyper-visible when it comes to applauding their essential services during the coronavirus crisis but remain invisible when it counts to be included in the metrics. These findings in which male experiences are the default are most visible in how economists measure economic growth as an indicator of national economic stability and well-being. In response to the financial crisis in 2008, the Nobel laureates Joseph Stiglitz and Amartya Sen, and Jean-Paul Fitoussi (2010) warned that GNP is not an adequate measure of well-being. Yet, economics students in their first semester start with the largely unchallenged idea that the measurement of national income equates to the market value of goods and services produced within a nation’s border in a year. The higher the growth metric at the macroeconomic level, the more this is correlated with social and economic progress. However, there is much that this metric does not cover. Simon Kuznets himself, who devised the national income metric in the 1930s, was aware that it excludes the goods and services produced in the household. In fact, he became an ardent critic of his own gross national product/gross domestic product (GNP/

70  Handbook on critical political economy and public policy GDP) metric in the 1960s, warning that ‘the welfare of a nation can scarcely be inferred from a measure of national income’ (cited in Raworth, 2017, pp. 39–40). As no other crisis before, the COVID health pandemic has demonstrated that the paid and unpaid labor in the household and care economy are essential resources for economic and social stability. Feminist economists have shown that incorporating gender into macroeconomic models improves both the explanatory power of macroeconomic theory and yields better policy results. Gender is thus not only a micro-level variable, but also an endogenous macroeconomic variable that has an impact on aggregate demand and on economic stability (Bakker, 2020; Heintz, 2019; van Staveren, 2017; Young, 2019). In contrast with these insights, statistical metrics used by macroeconomists only measures the operational costs of paid labor, such as in the medical profession, low-paid workers at the supermarket, the care personnel in old-age homes, the invisible night-cleaners at large corporations, or the food-delivery workforce, yet the risks, uncertainties, and precariousness these workers face in their daily tasks remain invisible in the statistics. Equally invisible in these metrics are the unpaid activities in private households and the many hours (mostly) women spent in addition to the home-office with children’s homework, often curtailing their formal working hours, which invariably sets them back in their career goals and their subsequent pension entitlements, a process Jutta Allmendinger (2021) has called the ‘re-traditionalization’ of women, forcing them back to a role they so valiantly fought to escape since the 1950s. The precariousness of working conditions for many women (also some men) is not new, but it has multiplied during the COVID-19 crisis and has created health and economic risks that are not counted in the economic metrics of GNP, to the detriment of society’s well-being. Failing to integrate women’s unpaid labor into the metrics of national economics is an economic blind spot that has so drastically come to the fore during the pandemic. The market power of the many private profit-oriented health and care facilities, which is also duplicated in public care facilities, is particularly evident in wage renumeration. Despite the high demand for health and care personnel, it has not resulted in higher wages. The profit motive in both public and private facilities has not only accelerated a race to the bottom in terms of wages and working conditions, but has also put pressure on these institutions to maximize profits over the interests of care workers and, in many cases, also over patients in such facilities.

THE MACROECONOMIC BLIND SPOT IN FEMINIST ECONOMICS Once again, the COVID-19 pandemic has turned a spotlight on the low or even non-existent female representation in the top decision-making process of important global and EU institutions (Schuberth & Young, 2011). This time around, feminist academics, climate, digital and gender activists, social and print media have highlighted that the pandemic hit women hardest, widening the gender–wage gap, the gender–care gap, and the gender–position gap (Allmendinger, 2021; Bakker, 2020; Klatzer & Rinaldi, 2020). The numerous Zoom webinars organized since the outbreak of the pandemic by global, national, local feminist organizations, academic institutions, non-governmental organizations, think tanks, and political parties in national and EU parliaments have highlighted the need to focus on women’s unique needs and perspectives. Yet, while this public engagement is laudable, the feminist lens in ameliorating the social consequences of the pandemic is equally blind in its neglect of how the macroeconomy

COVID-19 and the gender dilemma  71 fundamentally influences the productive capacity of the economy. Much of the writing of feminist economists and sociologists is located at the micro-level of the care economy, focusing on the decline of public goods, shifting the burden to female household members to increase non-market production in terms of unpaid labor and care work (Bijl, 2020; efas, 2021; Gender5+, 2020; Isele & Dubois, 2020; Women’s Budget Group UK, 2020). I will first briefly highlight some of the changes in fiscal and monetary policy, how these policies are discussed in feminist economic texts, and subsequently show how monetary and fiscal policies are likely to impact women’s and men’s economic lives. Fiscal policy refers to the national parliaments’ power over taxation and expenditures as well as issuing debts for government deficit financing. Monetary policy, as defined in conventional economic textbooks, is set by central banks targeting the supply of credit, thereby influencing the resources available to financial institutions that extend credit and loans. Through targeting the rate of interest and the exchange rate, central banks influence aggregate demand (Heintz, 2019). Yet, these textbook prescriptions have lost their desired effects since the financial crisis. Targeting price stability has failed to come close to or near the 2 percent annual inflation target. In recognition of this failure, Jerome Powell, the Chair of the US Federal Reserve (the Fed), has recently announced a move to a ‘flexible average inflation targeting regime’ (Powell, 2021, n.p.). Flexible means that the Fed is no longer tied to a formula of 2 percent inflation annually, and that maximum employment is a broad and inclusive goal (ibid.). The shift to a largely privatized finance-dominated capitalism has not only resulted in the largest financial crash in 2007 since the Great Depression, but has also put into question the control central banks have over inflation targets. While there is much disagreement as to why the inflation rate has not responded despite central banks injecting the markets with huge amounts of liquidity, hoping to accelerate economic growth and financial stability, the fact remains that the ‘new normal’ (El-Erian, 2016) of low growth, rising inequality, political dysfunction, and social tension has been made worse as a result of the pandemic. Thus, it is imperative that feminist economists link the everyday gender challenges of high unemployment and rising inequality, the disintegration of trust in political institutions and the growth of right-wing radicalism to the changing landscape of macroeconomics to understand how the shift to a finance-dominated capitalism has affected different classes of women and men in dissimilar ways (Bakker, 2020; Young, 2019). In response to the introduction of quantitative easing (QE) by the Fed, its former chair, Ben Bernanke, pointed to a possible link between the increase of asset prices and inequality: The claim that Fed policy has worsened inequality usually begins with the (correct) observation that monetary policy works in part by raising asset prices, like stock prices. As the rich own more assets [on average more men – B. Young] than the poor [on average more women – B. Young] and the middle class, the reasoning goes, the Fed’s policies are increasing the already large disparities in wealth in the United States. (Bernanke, 2015, n.p.)

We can thus assume that boosting equity prices drives wealth inequality in times of unconventional monetary policy measures (Domanski, Scatigna & Zabai, 2016). Only a detailed analysis can demonstrate that in the euro area, the UK and the US, bonds, stocks, and mutual funds may figure more prominently in the portfolio of high-income quintiles than in low-income quintiles. Given the large changes in the arena of macroeconomics and finance, it is startling that in a recent publication, Advanced Introduction to Feminist Economics, Jacobsen (2020) states

72  Handbook on critical political economy and public policy in a sparse two-page overview of fiscal and monetary policy that ‘monetary policy consists of changes in the interest rate, which are caused by increasing or decreasing the supply of money or by direct regulation of the interest rate’ (p. 104). Such a mechanical explanation of monetary policy can be found in any introductory traditional economic textbook. It should have become apparent to any feminist economist that since the financial crisis of 2007–08, central banks in industrial countries have been confronted with a zero-bound interest rate and have largely run out of ammunition to regulate it, except for unconventional monetary policies such as QE. QE is used when the interest rate is close to zero, and when the normal tools of monetary policy are no longer effective. Buying government and commercial bonds on the secondary market adds new money to the economy to provide banks with more liquidity. At the same time, the fall in interest rates has reduced banks’ profitability, measured in terms of net interest income over total assets (Braun & Deeg, 2020) and has also led to virtually zero interest rate returns for deposit owners, negatively affecting many small savers (Metzger & Young, 2020; Young, 2021). In fact, bank customers had to shoulder additional costs since many financial institutions did not lower their overdraft interest rates despite the fact that the prime market interest rates had been close to zero for some time. Given the shift to unconventional monetary policy and its distributive impact, it is thus bewildering why feminist economists have not included these huge macroeconomic shifts in their analyses. A loose monetary policy has rather different effects on women and men than a restrictive or austerity policy. Yet, Seguino (2020) in her recent publication on the gender impact of macroeconomics refers to the handful of papers that have explored the impact of contractionary monetary policy on gendered outcomes. While Seguino mentions that monetary policy is one of the feedback loops that explains gender inequality, there is little information on how finance-dominated capitalism in times of zero-bound interest rates and huge liquidity infusion into the market has changed the distributive effects for women and men. While the increase in asset prices is not exclusively triggered by unconventional policy, nevertheless, studies show that QE may have contributed to higher wealth inequality. Given the uneven distribution of assets within private households and with higher-income households accumulating a disproportionate share of total assets, QE may increase wealth inequalities. Considering that ownership of stocks is in the hands of around 5 percent of the EU population, it may well be that wealth inequality is more prevalent for women and minority groups. If we assume that the rich own more assets than the poor, unconventional monetary policy benefits the wealthier quintile (on average, comprising more men) at the expense of the poorer strata of society (on average, comprising more women; Metzger & Young 2020; Young, 2021). Accordingly, the distributional impacts of QE should be of concern to central banks, but also to feminist economists, since the role of money is one of the most important transmission channels between monetary policy and household wealth. That more work must be done on monetary policy to understand the transmission channels that affect women and men differently is surely an understatement (see Heintz, 2019; Jacobsen, 2020; Seguino, 2020). The theoretical and structural neglect of gender and intersectional linkages needs to be explored further to deepen our understanding of the transmission channels of monetary policy, and in particular QE, to identify the different impacts it has on income and wealth inequality among different gender and minority groups, different countries and regions, and different economic structures.

COVID-19 and the gender dilemma  73

‘TODAY’S CAPITALISM IS INCOMPATIBLE WITH FEMINISM’:4 HOW TO ENVISION A POST-PANDEMIC WORLD? To rescue the shortcomings in traditional macroeconomics and feminist economic approaches, economists such as Mariana Mazzucato, Kate Raworth, Stephanie Kelton, Maja Göpel, Ann Pettifor, Jayati Ghosh, Carlota Perez, and Katharina Pistor, who share a mission to reimagine the present finance-dominated capitalism for a post-COVID recovery, have received widespread media attention. While these authors do not identify as feminist economists, nevertheless, they strongly support putting life at the center of the economy, suggesting a new kind of economy with a public purpose. As such, they provide a holistic and systemic view of the global economy rather than restricting the analysis to the care or social economy. Putting more women into top decision-making positions at every level of public and private institutions and implementing the EU Commission’s Gender Equality Strategy 2020–2025 is without a doubt an important step towards closing the gender care and pay gaps, but this narrow focus does little to link the micro- and meso-level of the care economy to a well-defined macroeconomic mission-oriented strategy to achieve sustainable economic growth beyond the metrics of GNP/GDP accounting design. To reimagine capitalism, we need to redefine the relationship between markets and the state, to democratize finance so that it again serves the real economy, give local actors a ‘voice,’ change the hierarchal structure of international organizations to reflect the concerns of developing countries, and fully integrate the costs of externalities in the accounting statistics of multinationals to achieve outcomes that produce values at a global level. Such a new mission-oriented transformation of a post-COVID capitalism has, not accidentally, put women academics at the forefront of such an endeavor. As a caveat, such an endeavor presupposes a political will and a broad consensus to provide the public goods for the general public. While this section is not the place to provide a detailed account of the respective positions of these new thinkers, nevertheless, the authors show some commonalities. First, they challenge the static linear rationality assumptions and debates rooted in the 1950s, which in turn draw on economic theories of the 1850s (Raworth, 2017, p. 8). Starting from this premise, the market is abstracted as a natural entity, rather than seen as the outcome of variegated capital power constellations existing along different spatial and temporal dimensions. Thus, as Mazzucato (2018b) reminds us, markets need to be seen as embedded in institutions and legal structures and specific interaction in producing market outcomes. Second, creating financial wealth for the few who speculate on stocks and bonds is not the same as creating value. Mazzucato (ibid.) refers to the modern myth that has allowed an immense amount of value extraction in the economy, enabling some individuals to extract resources, but draining societal wealth in the process. The assumption that if you earn a lot, you must be a value creator, is based on the assumption that value-extracting activities, such as rent, is confused with value-creating activities. The upshot is that this has far-reaching consequences, since how we interpret things shape subsequent behavior. In addition, restricting value creation to the usual sectors of the market, the state, finance and trade, excludes the sectors of the household, the commons, and the society, that have come to play such an essential role in providing the necessary goods and services for the entire economy during the pandemic (Raworth, 2017). Even after the financial crisis of 2007–08, the financial sector remained the epitome of a country’s success in terms of contributing to GDP. Thus, feminist economists need to analyze

74  Handbook on critical political economy and public policy the care economy in the larger context of financialization and its monopolistic value extraction at the expense of the value creation of the ‘real economy.’ Many feminist economists point to the negative effects of finance on women and the poor in precarious positions, but this insight does not provide an understanding of how monetary theory and policy have changed as a result of financialization. What is needed is to analyze the transmission channels that have a structural effect on the balance sheets of financial intermediaries and on the company and private household sector via changes in the supply and demand for credit finance and asset acquisition (for more detail on the role of the transmission channels of monetary policy under QE, see Metzger & Young, 2020). However, there is some uncertainty linking QE to wealth inequality since there are indirect effects such as a reduction of the unemployment rate and the increase in the labor income of the poorer segment of society. What is needed is a feminist research project that deconstructs the black box of finance (including monetary theory and practice) to better understand and transform the narrative of national accounting practices that neglect activities that contribute value to the economy but whose output is not priced. At the other end of the spectrum, profits are included from asset price speculation that are unproductive to society at large. Given these diametrically opposed ideas of what contributes to and extracts value from the economy, the financial sector still celebrates the high contribution it makes to national accounting (in the US, 7.3 percent in 2016), but, in fact, the ‘contribution to output is zero, or even negative’ (Mazzucato, 2018b, p. 106). Third, the warning that we have reached the ‘limits of economic growth’ (Göpel, 2020) has become urgent with the devastating impact of the natural disasters of the last decade and the realization of an impending ecological collapse. Raworth introduces a new compass for human progress for the 21st century – to see the world as a ‘doughnut.’ Conceptualizing the doughnut as different rings within an embedded or circular economy, she visualizes an inner ring, the social foundation, which sets out 12 basics of life that are essential for guiding people’s needs. The important aspect of redrawing the economy in this symbolic doughnut shape is the ecological ceiling of the planetary pressures that set the boundaries for a sustainable 21st century. While mainstream economists have largely reduced economics to capital and labor, Raworth and many others suggest that the economy depends on the Earth as a source relying on the inflows and outflows of energy. As long as economic actors can externalize the costs of raising CO2 emissions towards ever more unsustainable levels, the less traditional cost–benefit analysis reflects the critical planetary degradation and the possible tipping point of no return (Schnabel, 2020). In addition, the new visionaries agree on the vitally dynamic role of the state to advance the goals of a new, energized 21st-century economy. Due to the state rescue of private banks in 2007–08, but before the COVID-19 pandemic, Mariana Mazzucato achieved wide acclaim for her message in her publication The Entrepreneurial State (2015), in which she debunks the myth about the dynamic private sector and the fabricated image of the lazy state that is widely believed by the general public. State failure became the mantra against the narrative of the spirit of private entrepreneurs first espoused in the libertarian Mont Pelerin Society of the 1940s, which entered discourse in public choice theories within university courses, and was finally accepted as ‘the truth’ in the political circles of Margaret Thatcher in the UK and Ronald Reagan in the US to implement this anti-state rhetoric against Keynesianism demand management in the 1980s. The hype about the negative impact of the state had disastrous consequences for social, labor, and environmental protection in global trade deals. In fact, corporations were able to lobby for the inclusion of clauses and private dispute settlement

COVID-19 and the gender dilemma  75 systems in trade agreements to demand financial compensation if states shielded their citizens with protective climate or labor laws that, so went the argument of the lobbyists, reduced the profits of their private extraction of profits (Göpel, 2020, p. 140). State interference became the dominant narrative and was debunked as restricting the freedom of private actors, hindering innovation and thus progress. Even more problematic is that this narrative was expressed repeatedly through the media and in university courses so that the public soon internalized this discourse and adjusted their behavior accordingly. But if we take off the veil of this anti-state mantra, the government with its administrative capacity must be seen as a co-creator of value and as a producer of public goods. Mazzucato’s greatest contribution is to demonstrate that from the moon shot (now the Mars shot) to the invention of the Internet, and virtually every technological innovation, stem from government contributions in terms of finance and early support, and not just from the entrepreneurial spirit of the private sector. This innovative focus of these mostly female academics sets a new direction for gender experts to devise mission-oriented well-defined goals as well as the instruments necessary to achieve a more level-playing field with (mainly male) economic policymakers. This may involve stepping outside the normative advocacy approach for more gender equality and create strategic coalitions that call for new taxing regimes (such as a wealth tax, regulation to stop money laundering, tax evasion and avoidance) which could add millions of much needed capital to the public coffers to finance a transformative gender-equal and ethnically diverse economy.

INSTEAD OF A CONCLUSION: A WAY FORWARD Judging from the scores of global, regional, and national Zoom discussions on issues of macroeconomics and feminist economics, one is left with the feeling that they occur in parallel universes, speaking to their own already committed fan base. While macroeconomists focus on how to pay for the increasing sovereign debt due to the coronavirus liquidity injections, whether the central banks can devise an exit strategy for QE without increasing financial volatility, whether inflationary pressures are a near future possibility, how to navigate the risk and opportunities of the introduction of a digital currency, and the role of new geopolitical tensions with China and Russia, feminist economists remain at the level of appeals and demands to finally include the care sector in the larger macroeconomic debates.5 However, both groups remain in their respective silos. So, what can be done about this? First, feminist economists need a well-defined strategic goal for how to achieve their demands. Mazzucato’s mission orientation (Mazzucato, 2018a, 2021; Mazzucato, Kattel & Ryan-Collins, 2019) can function as a model to define corrective actions and solutions and to engage with strategic actors and decision-makers to start a discussion about how to link the macroeconomic level to the microeconomic concerns of the ‘essential’ sectors. To engage these actors, as Mazzucato suggests in her outline on a mission-oriented research for the EU Commission, ‘missions must outline exciting opportunities for bold innovations – while being connected to debates in society about what the key challenges are’ (2018a, p. 14). She defines mission-oriented policies as systemic public policies that will require proactive political leadership and mission-driven public investment. As the COVID-19 crisis has demonstrated, ‘business as usual’ is unfit for this purpose. What is needed is that the state – and not private

76  Handbook on critical political economy and public policy companies – must be given a permanent, continuing role in guiding, stabilizing, and even steering production and investment toward a more sustainable, innovative, and inclusive economy. Crucially, the state should create budgets to balance the economy, ensuring full capacity utilization and reversing the misguided policy of austerity that was implemented after the financial crisis of 2007–08. Questions need to be addressed on how well-articulated missions can help to solve challenges, how missions can be best designed with clearly stated indicators that can be evaluated and controlled, and how they can be designed so that participation can be ensured across different stakeholders. These missions should be targeted as ‘hard laws’ but should not specify solutions. Rather, they should advance a range of different ideas from actors across the globe. Again, to paraphrase Mazzucato, mission projects should strive to obtain a high degree of flexibility and adaptability to allow the possibility of change if the objective cannot be achieved (2018a, p. 18). Feminist economists need to design a concrete ambitious strategy on social and economic well-being and suggest how to tackle the gender blindness in the macroeconomic instruments. Such a strategy would tie in with the opportunity to achieve the SDGs and a ‘Social Economy Europe’ in order to achieve ‘real’ changes in the recovery proposals rather than accept a symbolic narrative of ‘greenwashing’ or ‘genderwashing.’ One possible mission project where both macroeconomists and feminist economists share common ground is how to stop the massive losses of taxes that governments are facing due to tax avoidance of large tech and multinational companies who are not paying even the minimal rate of taxes of local companies. That inequality in the global system has massively increased is no longer a contested arena. However, there is little consensus among national leaders, as the discussions currently demonstrate on US President Biden’s suggestion to increase the corporate tax level on a global scale in order to design an inclusive global framework for tax jurisdictions on a level playing field (Ghosh, 2020; Meinzer, 2019; Saez & Zucman, 2019). Feminists can build on their experience of incorporating gender targets in budgetary decisions, as has been championed by the various Women’s Budget Groups around the globe, in which activists proposed to allocate budgets lines to strengthen gender equality and carry out gender impact assessments in terms of the distributive impacts of budgetary decisions. However, these activities remain at the expenditure level and do not address the revenue side of the budget. But the important question is not how to make the pie more gender equal, but how to gain additional revenues for a vision of a fairer equitable economy no longer based on the traditional mantras of economic growth, efficiency, and productivity to meet the challenges of an inclusive post-COVID era. Creating a fairer global tax system is surely one of many missions to propagate more gender and ethnic inclusivity.

NOTES 1.

I wish to thank Isa Bakker, Ismail Erturk, Friederike Maier, Brigitte Preissl, Christoph Scherrer, and Joscha Wullweber for their insightful comments and helpful feedback. 2. Rare exceptions are the macroeconomist Jayati Ghosh (2021), who analyses developing countries from a systemic macro- and microeconomic perspective within a global economic and financial context; also Isabella Bakker (2020), who analyzes the issue of social reproduction within the context of global capitalist production; and Irene van Staveren (2017) whose theoretical work con-

COVID-19 and the gender dilemma  77 vincingly demonstrates that the macroeconomy shapes the micro-level, but also inequality impacts macroeconomic outcomes. 3. The EU Commission has violated its own gender balance rules in the nominating process in the arena of EU finance, but it hardly led to a feminist mobilization when François-Louis Michaud was nominated for the European Banking Authority in July 2020 despite a strong protest by the European Parliament to advance a female candidate. Similarly, ECON (the Economic and Monetary Affairs Committee) appointed Frank Elderson as successor to Yves Mersch to the Executive Board of the ECB, against the wishes of the Greens, Social-Democrats and the Left. These male elections are a setback for gender equality, particularly as there was also no gender balance in the nominations of Yves Mersch (2012), Luis de Guidon (2018), Philip Lane (2019), and Fabio Panetta (2020). 4. Mariana Mazzucato, in a New York Times article, ‘An “electrifying economists” guide to the recovery,’ November 20, 2020. 5. However, it is not just macroeconomists who have sidelined the demands of parents and teachers during the pandemic. While the German chancellor, Angela Merkel, has (digitally) invited the auto industry several times to discuss their concerns, her first online meeting with mostly very frustrated mothers in their home-offices happened only in February 2021. The same happened with German teachers, who had little direct access to political decision-makers and were not even considered ‘essential’ for early vaccination until mid-February 2021.

BIBLIOGRAPHY Allmendinger, J. 2021, Es geht nur gemeinsam! Wie wir endlich Geschlechtergerechtigkeit erreichen?, Berlin: Ullstein Verlag. Antonucci, L. & Corti, F. 2020, Inequalities in the European Semester, Brussels: Foundation for European Progressive Studies. Bakker, I. 2020, ‘Variegated social reproduction in neoliberal times: mainstream silences, feminist interventions,’ Nordic Journal of Feminist and Gender Research, 28 (2), 167–72. Bakker, I. & Gill, S. (eds) 2003, Power, Production and Social Reproduction, London: Palgrave Macmillan. Bernanke, B. 2015, ‘Monetary policy and inequality,’ Brookings, June 1, accessed December 15, 2022 at https://​brookings​.edu/​blogs/​ben​-bernanke/​posts/​2015/​06/​01​-monetary​-policy​-and​-inequality. Bijl, M. 2020, ‘The Covid-19 crisis is exacerbating gender inequalities – but who cares?,’ SocialEurope. eu, May 5, accessed December 15, 2022 at https://​www​.socialeurope​.eu/​the​-covid​-19​-crisis​-is​ -exacerbating​-gender​-inequalities​-but​-who​-cares. Braun, B. & Deeg, R. 2020, ‘Strong firms, weak banks: the financial consequences of Germany’s export-led growth model,’ German Politics, 29 (3), 358–81. Criado Perez, C. 2019, Invisible Women: Exposing Data Bias in a World Designed for Men, London/ New York: Vintage. Domanski, D., Scatigna, M. & Zabai, A. 2016, ‘Wealth inequality and monetary policy,’ BIS Quarterly Review, March 6, 45–64. efas (economy, feminism and science), 2021, ‘Bericht von der 18. efas-Fachtagung “Geschlechtergerecht durch die Pandemie? Ökonomische Analysen aus feministischer Perspektive”,’ January 14, accessed December 15, 2022 at https://​efas​.htw​-berlin​.de/​?p​=​4381. El-Erian, M.A. 2016, The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse, New York: Random House. Elson, D. 2013, ‘Economic crisis from the 1980s to the 2010s: a gender analysis,’ in G. Waylen & S. Rai (eds), New Frontiers in Feminist Political Economy, London: Routledge, pp. 189–226. European Commission 2020a, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: A Union of Equality: Gender Equality Strategy 2020-2025. COM/2020/152 final, Brussels, accessed December 15, 2022 at https://​eur​-lex​.europa​.eu/​legal​-content/​EN/​TXT/​?uri​=​CELEX​%3A52020DC0152. European Economists for an Alternative Economic Policy in Europe 2021, A Post-Covid 19 Global-Local Agenda for a Socio-ecological Transformation in Europe: EuroMemorandum 2021, accessed

78  Handbook on critical political economy and public policy December 15, 2022 at http://​www2​.euromemorandum​.eu/​uploads/​euromemorandum​_2021​_updated​ .pdf. European Institute of Gender Equality (EIGE) 2020, Research Note: Gender Equality and Long-time Care at Home, Vilnius: EIGE, accessed December 15, 2022 at https://​eige​.europa​.eu/​publications/​ gender​-equality​-and​-long​-term​-care​-home. European Women’s Lobby (EWL) 2019, Purple Pact: A Feminist Approach to the Economy, accessed December 15, 2022 at https://​www​.womenlobby​.org/​IMG/​pdf/​purplepact​_publication​_web​.pdf​#page​ =​9​&​zoom​=​400​,​-2​,6. Gender5+, 2020, ‘Towards a gendered recovery in the EU: launching of the G5+ report’ [Webinar], Brussels, October 1. Ghosh, J. 2020, ‘Reform of global taxation cannot wait: the huge fiscal pressures occasioned by the pandemic mean global tax-gaming by corporations and the wealthy is a luxury we can no longer afford,’ Socialeurope.eu, December 7, accessed December 15, 2022 at https://​www​.socialeurope​.eu/​Reform​ -of​-global​-taxation​-cannot​-wait/​. Ghosh, J. 2021, Informal Women Workers in the Global South: Policies and Practices for the Formalisation of Women’s Employment in Developing Economics, London/New York: Routledge. Göpel, M. 2020, Unsere Welt Neu denken: Eine Einladung, Berlin: Ullstein Verlag. Heintz, J. 2019, The Economy’s Other Half: How Taking Gender Seriously Transforms Macroeconomics, Newcastle upon Tyne: Agenda Publishing. Jacobsen, J.P. 2020, Advanced Introduction to Feminist Economics, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Isele, E. & Dubois, S. 2020, The Covid-19 Gender Gap: How Women’s Experience and Expertise Will Drive Economic Recovery, London: Chatham House. Klatzer, E. & Rinaldi, A. 2020, “#NextGenerationEU” Leaves Women Behind: Gender Impact Assessment of the European Commission Proposals for the EU Recovery Plan, study commissioned by The Greens/EFA Group in the European Parliament, initiated by Alexandra Geese, MEP, accessed December 15, 2022 at https://​alexandrageese​.eu/​wp​-content/​uploads/​2020/​07/​Gender​ -Impact​-Assessment​-NextGenerationEU​_Klatzer​_Rinaldi​_2020​.pdf. Mazzucato, M. 2015, The Entrepreneurial State (Revised Edition), New York: Public Affairs. Mazzucato, M. 2018a, Mission-oriented Research and Innovation in the European Union: A Problem-Solving Approach to Fuel Innovation-led Growth, Brussels: European Commission. Mazzucato, M. 2018b, The Value of Everything: Making and Taking in the Global Economy, London: Penguin UK. Mazzucato, M. 2021, Mission Economy: A Moonshot Guide to Changing Capitalism, London: Penguin UK. Mazzucato, M., Kattel, R. & Ryan-Collins, J. 2019, ‘Challenge-driven innovation policy: towards a new policy toolkit,’ Journal of Industry Competition and Trade, 20, 421–37. Meinzer, M. 2019, Countering Cross-border Tax Evasion and Avoidance: An Assessment of OECD Policy Design from 2008 to 2018, Ridderkerk: Ridderprint. Metzger, M. & Young, B. 2020, ‘No gender please, we’re central bankers: distributional impacts of quantitative easing,’ Working Paper No. 136/2020, Institute for International Political Economy Berlin, accessed December 15, 2022 at https://​www​.hwr​-berlin​.de/​fileadmin/​institut​-ipe/​Dokumente/​ Working​_Papers/​ipe​_working​_paper​_136​.pdf. Organisation for Economic Co-operation and Development (OECD) 2020, ‘Women at the core of the fight against Covid-19 crisis,’ Oecd.org, April 1, accessed December 15, 2022 at https://​www​.oecd​ .org/​coronavirus/​policy​-responses/​women​-at​-the​-core​-of​-the​-fight​-against​-covid​-19​-crisis​-553a8269/​. Powell, J. 2021, ‘A conversation with Federal Reserve Chair Jerome Powell,’ January 14, Youtube.com, accessed December 15, 2022 at https://​www​.youtube​.com/​watch​?v​=​TEC3supZwvM. Raworth, K. 2017, Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, London: Random House. Saez, E. & Zucman, G. 2019, ‘Progressive wealth taxation,’ Brookings Papers on Economic Activities, conference draft, Fall, accessed December 15, 2022 at https://​gabriel​-zucman​.eu/​files/​ SaezZucman2019BPEA​.pdf. Saraceno, F., Semmler, W. & Young, B. 2020, ‘European economic, fiscal, and social policy at the crossroads,’ Constellation, 27 (4), 573–93.

COVID-19 and the gender dilemma  79 Schnabel, I. 2020, ‘When markets fail – the need for collective action in tackling climate change,’ speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the European Sustainable Finance Summit, Frankfurt am Main, September 28, accessed December 15, 2022 at https://​www​.ecb​.europa​ .eu/​press/​key/​date/​2020/​html/​ecb​.sp200928​_1​~268b0b672f​.en​.html. Schuberth, H. & Young, B. 2011, ‘The role of gender in governance of the financial sector,’ in B. Young, I. Bakker & D. Elson (eds), Questioning Financial Governance from a Feminist Perspective, London/ New York: Routledge, pp. 132–54. Seguino, S. 2020, ‘Engendering macroeconomics: theory and policy,’ Feminist Economics, 26 (2), 27–61. Silver-Greenberg, J., Drucker, J. & Enrich, D. 2020, ‘Hospitals got bailouts and furloughed thousand while paying C.E.O.s millions,’ The New York Times, 8 June, accessed December 15, 2022 at https://​ www​.nytimes​.com/​2020/​06/​08/​business/​hospitals​-bailouts​-ceo​-pay​.html. Stiglitz, J., Sen, A. & Fitoussi, J. (eds) 2010, Mismeasuring Our Lives: Why GDP Doesn’t Add Up, New York: The New Press. United Nations 2015, ‘The 17 Goals,’ United Nations Department of Economic and Social Affairs, accessed December 15, 2022 at https://​sdgs​.un​.org/​goals. van Staveren, I. 2017, ‘Beyond stimulus versus austerity: pluralist capacity building in macroeconomics,’ European Journal of Economics and Economic Policies: Intervention, 4 (2), 267–81. Women’s Budget Group UK (2020), ‘What would a feminist Green New Deal look like?’ [Zoom seminar], May 20, 2020. Young, B. 2019, ‘A macro-level account of money and credit to explain gendered financialization,’ New Political Economy, 25 (6), 944–56. Young, B. 2021, ‘Roundtable: Monetary policy in the EU. The distributive impact of central banks’ quantitative easing program,’ Justmoney.org, February 10, accessed December 15, 2022 at https://​ justmoney​.org/​the​-distributive​-impact​-of​-central​-banks​-quantitative​-easing​-program/​.

6. Ordoliberalism’s advice for economic policymaking1 Pavlos Roufos

Broadly speaking, ordoliberalism can be defined as a liberal tendency initially developed during the interwar period (with a strong presence in Germany but which quickly spread to more countries) that purported the need for a state-created ‘order’ (Ordnung) as a prerequisite for the proper functioning of the market. Its correlation with the post-war West German ‘social market economy’ of the 1950s and 1960s rendered it a subject of wider scholarly attention at the time, but ordoliberal ideas largely receded from public view during the 1970s. After a short-lived renaissance following the collapse of the Soviet Union and contemporaneous deliberations around the possibility of integrating former socialist countries into the Western market economy, ordoliberalism returned to the spotlight with the outbreak of the global financial crisis and its mutation into a European ‘sovereign debt’ crisis between 2008 and 2010. This time, it was ‘rediscovered’ as the ideological framework that dictated German political economy and crisis management. ‘Re-nationalized’ in the press as a ‘particularly German tradition’ (The Economist, 2015), ordoliberalism became a common explanatory reference for German insistence on austerity and fiscal consolidation (Blyth, 2013; Dullien & Guérot, 2012; Dyson, 2010; Nedergaard & Snaith, 2015; White, 2017). Evocations of a German-originating obsession with austerity and inflexible rule-abiding methods of crisis management appeared to be, for all intents and purposes, quite easy to sell. Leading figures of the crisis management process did, after all, often claim that their policy choices were inspired by ordoliberalism, its intellectual foundations in the Freiburg school and Walter Eucken’s ordoliberal policies for a competitive order (Draghi, 2013; Merkel, 2011; Schäuble, 2012, 2014; Tusk, 2015; Weidmann, 2014). Furthermore, the widespread view of ordoliberalism as explicitly anti-Keynesian (Feld, Köhler & Nientiedt, 2020) made it an easy target for those (mostly, though not exclusively, Keynesian) voices who proposed fiscal expansion as a path out of the crisis. The portrayal of ordoliberalism as standing at the conceptual epicentre of German political economy during the eurozone crisis was, however, quickly challenged, not only from the perspective of self-identified ordoliberals (Dold & Krieger, 2020; Feld, Köhler & Nientiedt, 2015) but also from scholars outside and/or critical of the ordoliberal tradition (Cafruny & Talani, 2019; Jacoby, 2015). As Feld et al. (2015) argued, despite the presence of ordoliberal elements in the European Monetary Union (EMU) architecture, the crisis response included the endorsement of policies that would be, strictly speaking, incompatible with ordoliberal teachings. Furthermore, the policy choice of austerity and competitiveness enhancement through wage cuts was, the argument went, far beyond ‘any specific type of ordoliberal heritage or anything else specifically German’ (Feld et al., 2015, p. 57).2 Ordoliberalism, concluded Dold and Krieger (2019, p. 4), was being ‘used and abused as an ideology’. From a perspective critical of ordoliberalism but drawing similar conclusions, law professor Christian Joerges would quip that looking for ordoliberalism behind the crisis management 80

Ordoliberalism’s advice for economic policymaking  81 is tantamount to ‘the discovery of a culprit who is not alive’. Such an approach represented, instead, a form of camouflage against ‘deep uncertainties on the part of the critics about the causes of the European crisis and the means which could cure it’ (Joerges, 2016, p. 144). Other critics of the ‘ordoliberalization’ narrative pointed at the misleading conflation between German ‘egoistic’ national interests and (misrepresented) ordoliberal positions (Young, 2017). More recently, Julian Germann has argued that German responses to the crisis should be understood as attempts to protect the export-led growth model and the particular domestic stability-producing class compromise of Germany. ‘Efforts to construe ordoliberalism as a meta-narrative of the German political economy are’, he claims, ‘historically unconvincing’ (Germann, 2021, p. 30). Approaching the question from a critical, open Marxist perspective, Bonefeld’s extensive work on ordoliberalism has mounted a distinct challenge on various assumptions of the ‘ordoliberalization’ thesis. Recognizing the suggestive element in describing the EMU as an ‘ordoliberal iron cage’ (Ryner, 2015), Bonefeld rejects the portrayal of Europe (or Germany, for that matter) as an ‘ordoliberal administrative apparatus’. Taking a broader view, he has insisted instead that ‘the ordoliberal argument is not about this economic policy and that economic technique [but] an argument about the liberal state as a market constituting and preserving power’ (Bonefeld, 2017, p. 2). Construed around the need to defend the liberal market order against various challenges (state planning, collectivism, laissez-faire) through a recalibration of the role of the state, Bonefeld’s analysis emphasizes the significance of ordoliberalism as a framework-building, rather than a policy-producing, project. Building on such critical commentaries, this chapter aims to explore the relation between ordoliberalism and public policy. Challenging the interpretation of ordoliberalism as a policy-producing apparatus with an eye to protecting specific German interests, this contribution will approach ordoliberalism as a liberal state theory with a framework-building intent. From this perspective, instead of trying to find an ordoliberal footprint in any specific policy choice, the aim will be to highlight the influence of ordoliberal thinking in the drawing up and creation of institutional and constitutional forms whose existence is meant to provide the overall framework within which market-conforming policies are made. To properly elaborate on this, the next section of the chapter will begin with an exposition of the key theoretical concepts developed by ordoliberal thinkers that have retained a consistency throughout different periods. With a focus on clarifying the crucial role meant to be played by the state in constructing and maintaining a competitive market order, this section will offer a preliminary account of ordoliberalism as a state theory. Having explored what is consistent within ordoliberalism, the second section will examine the various conflicts and tensions within its historical trajectory, utilizing this exposition as a means for highlighting a certain plasticity and pragmatism that accompanies ordoliberalism while preserving its core structure. The argument advanced is that, despite such divergences, the shared belief that the market economy can only function when encased within specific institutional/constitutional forms that limit political discretion has never been undermined. The third section will take a critical look at various attempts at policy recommendations by ordoliberals and evaluate their efficacy, while the fourth section will assess the contemporary significance of ordoliberalism by evaluating its influence on recent policies, such as the Fiscal Compact EU legislation of 2012.

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KEY CONCEPTS OF ORDOLIBERALISM Key elements of the ordo project can already be found, as Bonefeld (2012) has shown, in classical liberalism and, more specifically, the work of Adam Smith. In Smith’s formulations, liberal society is conceptualized as oscillating between the market and the necessary ‘government’ (i.e., state) that can create the conditions that allow the market to function. Contrary to a popular reading, Smith’s ‘invisible hand’ was not seen as single-handedly creating a framework for a functioning society. Rather, the ‘invisible hand’ represented an internal dynamic of the market that, when left to itself, was seen as incapable of integrating and maintaining (i.e., ordering) the social world. For that order to exist, an ‘exact administration of justice’ (Smith [1776], 1977, p. 915) needed to be in place, a certain ‘practice of government’ (Bonefeld, 2019). For Smith and the ordoliberals, ‘Economy is political economy’ (Bonefeld, 2014, p. 169; original emphasis). Adapting this starting point to their contemporaneous predicament, ordoliberals initially visualized such a functional order as stemming from a ‘strong state’ (Goldschmidt, 2004; Kolev, 2019). This represented an administrative and law-based apparatus that would be in the position to resist succumbing to ‘particular interests’, whether in the form of private capital attempting to ensure profits by distorting competition and the signals of the price mechanism (as the phenomena of monopolies or cartels indicated), or in the form of labour militancy and class war that threatened the foundations of private property and sound money. Closely related was an early distrust of mass democracy that, in the aftermath of World War I and the expansion of universal suffrage and democratic pluralism, was seen as providing the working class with the opportunity to ‘take hold’ of the state apparatus. For ordoliberals, a strong state was one able to insulate itself from these pressures and to ‘de-politicize’ economic policy. The state, Eucken argued, required the ‘strength to free itself from the influence of the masses and in some way distance itself from the economy’ (Eucken [1932], 2017, pp. 68–9). Echoed by fellow ordoliberal Alexander Rüstow, the ordoliberal approach saw ‘the strength and independence of a state [as] interdependent variables’, adding that ‘only a strong state is powerful enough to preserve its own independence’ (Rüstow, 1942, p. 276). The conceptualization of the need for a strong state was further strengthened by the consequences of the 1929 crash and the ensuing economic depression. Rejecting the vision of the state as a ‘night watchman’, ordoliberals also attacked the ‘identification…of liberalism with the Manchesterian theory of laissez-faire, laissez-passer’ (Rougier [1938], 2018, p. 10). In their view, the ‘theological-metaphysical origin’ of the laissez-faire dogma had unfortunately become ‘so powerful that it was regarded as self-evident and beyond all discussion’ (Rüstow, 1942, p. 272). The result, according to Röpke, was that ‘the market economy was endowed with sociological autonomy and the non-economic prerequisites and conditions which must be fulfilled if it is to function properly, were ignored’ (Röpke, 1942, pp. 51–2). Despite placing effective competition at the centre of the market order, ordoliberals saw it as inherently unable to produce a social order, making it a potentially destabilizing force. For competition to be truly effective, it had to be legally organized through state action. ‘Appealing as it does solely to selfishness as a motivating force’, Rüstow would point out that ‘[competition] can neither improve the morals of individuals nor assist social integration’ (Rüstow, 1942, p. 272). ‘The fundamental flaw…of laissez-faire politics’, Eucken would explain, is that ‘the “invisible hand” does not create forms in which individual interest and overall interest are aligned’ (Eucken, 1952, p. 260). Especially so in periods of crisis, such an approach proved to

Ordoliberalism’s advice for economic policymaking  83 be ‘impracticable since it is obvious that something has to be done to overcome this depression and to prevent the recurrence of another’ (Röpke, 1936, p. 195). Nonetheless, and having established that the state mechanism needs to be insulated from social and private pressures in order to police market competition, it was crucial for ordoliberals to clarify that the regulative activity of the strong state stood in opposition to state planning. With the looming influence of the ‘socialist calculation debate’ in the background, it was paramount to ensure that abandoning laissez-faire would not promote the belief that business cycle disruptions and crises could be avoided through economic planning. ‘The uncompromising Liberal is right in his recommendation to stick to the essential principles of our competitive market system’, Röpke would exclaim, ‘but he may be wrong in relying on the automatic mechanism of this system for overcoming the secondary depression.’ In the same breath, Röpke would add that ‘the Planner is right in demanding an active policy against depression, but irremediably wrong in suggesting Planning as the right method’ (ibid., pp. 197–8). In contrast to state planning and intervention in the economic process, the regulative function of the state is only meant to create the conditions under which the true capacity of competition can be unleashed. When institutionally regulated, competition could then act as ‘a mechanism that leads to the equilibrium of the economic process and, therefore, also brings stability to the economic order’ (Eucken, 1952, p. 198). In his diagnosis of the central contradictions plaguing the Weimar Republic, Eucken would point out that it was the absence of competition that led to the ‘formation of autonomous power-blocs in industry, agriculture and labour’, which, together with ‘the particularly dangerous instability of the monetary order’, undermined ‘the rationality of the economic processes, leading to depression, unemployment and undersupplied markets’ (ibid., p. 224). A properly functioning competitive order, however, could reduce the concentration of particular, private power and undermine both crises and the demand for planning that they generate, as complete [vollständigen] competition ‘submits one to the control of the market [and] largely disempowers him’ (ibid., p. 237). Alongside the defence of property rights and the freedom of contract, ordoliberals considered price and monetary stability as equally central constitutive principles of a competitive order. ‘Contained within the framework of regulating and controlling measures’, Böhm would explain, ‘is the provision for a stable currency, which is indeed of central importance because price stability determines the aptitude of market prices to guide the production process in an economically correct way and to secure prices against speculative disturbances’ (Böhm, 1966, p. 56). For the price system to act as an effective signalling mechanism and for wealth and property accumulation to be protected, sound money and anti-inflationary policies were indispensable. The interdependence of all these elements is contextualized in the ‘assumption that the economy forms an integrated system, that the market and the state can exist in a complementary relation’ (White, 2017, p. 2). Finally, in the ordoliberal vision, these regulative and constitutive concepts come together under the conceptual umbrella of an ‘economic constitution’ [Wirtschaftsverfassung] which ensures the supremacy of the ‘competitive order’ [Wettbewerbsordnung].

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CONFLICTS AND STRANDS WITHIN THE ORDOLIBERAL TRADITION In the context of distancing themselves from laissez-faire and conceptualizing a regulative role for the state, ordoliberals developed the concept of ‘liberal interventionism’.3 While sharing the dedication to preserve and secure the private property order (Mises [1929], 1996), ordoliberals believed that ‘sitting back and doing nothing’ would increase ‘anticapitalistic sentiment and [make] capitalism untenable’ (Röpke, 1931, p. 450). Their attempts to balance out a form of intervention within a ‘market-conforming’ framework, however, brought them into conflict with thinkers like von Mises and Hayek. For the latter, such an approach represented ‘an unnecessary and dangerous concession to interventionism’, with Hayek going as far as claiming that they represented a form of ‘proto-Keynesianism’ – a position he would, however, withdraw in later years (Kolev, 2016, p. 14ff.). For their part, ordoliberals came to regard the liberalism of von Mises as a ‘purely abstract exercise’, ‘extreme and antiquated’, representing a form of ‘paleo-liberalism’ to which they contrasted their ‘neo-liberalism’ (ibid., pp. 6, 7). In the immediate aftermath of World War II, sympathizers and proponents of ordoliberalism like Ludwig Erhard and Alfred Müller-Armack would find themselves in key government positions, designing and implementing pro-market policies with the backing of think tanks and publicity campaigns orchestrated by fellow ordoliberals like Röpke and Walther Muthesius (Bank, 2013). This represented the first direct engagement of ordoliberals with public policy. It was, however, no easy task. Not only had Germany experienced more than 12 years of central planning and fixed prices, but the dominant policies advanced by the post-war hegemon (the US) were also structured around the Keynesian-influenced ‘global new deal’ plan of state-building and intervention, with fixed exchange rates anchored around the dollar. However, as Allen (1989) has shown, the US authorities in charge of the economic administration of West Germany (and Japan) remained unaffected by the Keynesian consensus, retaining a preference towards supply-side policies, strict adherence to balanced budgets and the desire to transplant US anti-trust legislation in Germany. The appointment of Joseph Dodge, ‘a banker with properly orthodox views’ (Hadley, 1989, p. 297; see also Savage, 2002), facilitated the convergence between the US Office of Military Government and those German economists and policymakers who wanted to push towards market-oriented policies. In this context, ordoliberals found themselves directly involved in the debates around the monetary reform of 1948 and the freeing up of prices,4 the anti-cartel legislation (discussed in the next section of this chapter) and the eventual inauguration of the Bundesbank as an independent central bank with price stability as its only mandate.5 Such direct engagement with policymaking resurfaced the previous conflicts with the ‘paleo-liberals’, exemplified in von Mises’s evaluation of the ‘social market economy’ as ‘ordo-interventionism’ (Kolev, 2016). Symbolic of this friction was the rejection of Müller-Armack’s 1947 concept of ‘social market economy’ (soziale Marktwirtschaft; Müller-Armack, 1947, ch. 2). Famously, Hayek considered the term social a ‘weasel word’ (Hayek [1978], 1988) which allowed the notion of ‘social justice’ to creep in through redistributive welfare policies, dissolving the essence of the market economy. Responding to such accusations, ordoliberals felt forced to explain that in their vision, the only truly social policy is economic growth, an approach that precluded wealth redistribution. If welfare provisions existed, their essential aim was to establish a link between ‘human beings and private property’ (Müller-Armack, 1976, p. 133). From an ordoliberal perspective, in fact, only a market-based

Ordoliberalism’s advice for economic policymaking  85 ‘total mobilization of the economic forces allows us to hope for social improvements, [achieving] real social contents by means of increased productivity’ (Müller-Armack, 1981). Nevertheless, the unease remained. Müller-Armack’s perceived willingness ‘to consider interventionist measures to stimulate demand or ensure that economic development was socially beneficial’ (Nicholls, 1994, p. 140) raised concerns even within the camp of ordoliberals, a scepticism further propounded by unacceptable compromises such as the Pension Reform of 1957 (Kloten, 1989; Nicholls, 1994, pp. 351–4; Röpke, 1960). What appears to have generated the most long-standing conflict, however, was the creation of the European Economic Community (EEC) with the signing of the Treaty of Rome of 1957. Ordoliberals such as Röpke and Michael Heilperin (Feld, 2012; Slobodian, 2018) objected to the European Community in the name of free trade, perceiving it as a project that was doubling down on trade barriers and extending protectionism (the Common Agricultural Policy – CAP – was the most indicative sign of this direction), while also suspiciously geared towards central planning through the expansion of bureaucratic administration. An advocate of Swiss-style federalism, Röpke supported what he saw as the erosion of national sovereignty but not ‘its transfer to a higher political and geographical unit’ (Röpke, 1955, p. 250, cited in Feld, 2012, p. 6) such as the EEC. For a different set of ordoliberals like Ernst-Joachim Mestmäcker and Hans von der Groeben who belonged to the so-called ‘second generation’, however, the rejection of the EEC was a crippling and premature assessment. The European Community might be objectionable on some counts (the CAP being the most obvious one), but it was a work in progress and the task of ordoliberals was to engage with and push the project in their direction. However incomplete it might have appeared, the EEC represented the best attempt thus far to ‘scale up’ Eucken’s concept of the economic constitution beyond the confines of the nation-state. Disentangling themselves from the narrow focus of the national economy and seeking a wider operationalization of framework-building for a competitive order, ordoliberal influence would turn out to be decisive in the design of the EEC’s competition law (discussed in more detail in the next section) and in the constitutional framework that permeated the transition of the EEC into the European Monetary Union (discussed in the fourth section). Summarizing such achievements in 2012, Feld would conclude that, among other things, the ‘denationalization of money’ and the insulation of the monetary authorities from ‘the pressure of national fiscal and labour market policies’ were achievements that even Röpke would have appreciated (Feld, 2012, p. 11).

ORDOLIBERAL POLICY RECOMMENDATIONS After the completion of the 1948 currency reform and the freeing of prices in West Germany, ordoliberals focused on attempts to devise ‘a thorough-going anti-trust and anti-cartel legislation’ (Giersch, Paqué & Schmieding, 1992, p. 85). Already from 1947, Erhard had created a task force within the bi-zonal Economics Administration to look into anti-cartel legislation, giving the ordoliberal Franz Böhm the task to prepare the draft law. When this was eventually published in 1950, Böhm’s proposals were met with great opposition from the Federation of German Industries (FDI) and the German Industry and Trade Association (DIHT). Attacking the plans as ‘ordo-liberal laissez faire purism’ (Nicholls, 1994, p. 333), they warned of the potential of exposing the already weak German economy to crippling foreign competition.

86  Handbook on critical political economy and public policy Erhard and Böhm tried to counter such arguments by mobilizing support from small and medium entrepreneurs, hoping that smaller-sized businesses would welcome the freedom from artificially high prices imposed by heavy industry cartels (ibid., p. 330), while at the same time portraying cartels as nationalist residues and harbingers of inflation. Erhard even went as far as claiming that cartelization was against the Grundgesetz (i.e., German Basic Law; ibid., pp. 332–4), while Böhm pledged state protection ‘against abuses of power by “market-dominating” firms’ (ibid, p. 330), a position that would draw further accusations of ‘ordo-interventionism’. Already, the main outlines of the ordoliberal approach to policy can be traced: legislative measures to limit private power; a reluctance to concede any favourable position to particular German sectors despite their economic output; and the belief that an institutional form can better provide overall price stability. The cartel law was eventually passed in 1958. Erhard retained a positive attitude towards its final form by emphasizing its contribution in the direction of a market competitive economy, while Müller-Armack congratulated Böhm for a law that ‘bore the imprint’ of his hand (ibid., p. 336). Böhm, however, was reportedly dissatisfied with it (Peacock & Willdgerodt, 1989, p. 8). Nonetheless, by that time, a different stage of potential ordoliberal influence had begun. Erhard had initially been sympathetic to the objections against the EEC by earlier generation ordoliberals. As time progressed, however, he came to view its inauguration as a potential expansion of market principles in the European continent. Urging for ‘the first priority…to be price stability and the free convertibility of currencies’ (Mierzejewski, 2004, p. 167), he made Müller-Armack state secretary for European integration and in charge of the negotiations around the Treaty of Rome. For Müller-Armack, the aim was clear: establishing a European ‘stability community’ [Stabilitätsgemeinschaft] founded ‘on law over and above its constitutive political entities’ (Müller-Armack, 1971, p. 162). ‘A law-based order’, in other words, ‘committed to guaranteeing economic freedoms and protecting competition’ (Joerges, 2004, p. 461; see also Bonefeld, 2019). Central to this attempt was EEC competition law, a field seen as ‘the first supranational policy of the European Union’ (McGowan & Wilks, 1995). Walter Hallstein, ‘an avowed ordoliberal’ (per Joerges, 2016, p. 147) and first president of the European Commission, created the Directorate-General for Competition (DG IV) with the aim of fleshing out a ‘common line in European cartel policy’ (Seidel, 2009, p. 139) assigning it to Erhard’s appointee, von der Groeben. Repeating Müller-Armack’s remarks almost a decade later, von der Groeben would, in a lecture delivered at the Aktionsgemeinschaft Soziale Marktwirtschaft,6 describe the EEC as an ‘achievement of an order based on law’ (von der Groeben, 1965, p. 152). As Seidel (2009) has shown in her seminal paper on the DG IV, under von der Groeben’s leadership, ‘competition came to be, and still is considered, one of the central means to promote European integration and to realize the goals laid out in the treaty establishing the EEC’ (Seidel, 2009, p. 130). Presented as an indispensable barrier to state planning and French ‘dirigisme’, early drafts of the law specified that ‘rules were necessary to prevent competition in the future common market from being distorted’ (ibid.). For von der Groeben and his advisor Mestmäcker (a student of Franz Böhm and future editor of the ORDO journal), competition law would be the means to bring the ‘economic constitution of the EEC Treaty to life’ (Slobodian, 2018, p. 204). As Mestmäcker put it, ‘the EEC Treaty embodies an economic constitution. Its substantive foundation is constituted by the freedoms of traffic in goods and services and of personal movement, the prohibition of national discriminations and the system of undistorted competition’ (Mestmäcker, 1973, p. 190). This,

Ordoliberalism’s advice for economic policymaking  87 Seidel adds, laid the foundations for ‘a European competition order, or Wettbewerbsordnung’ (Seidel, 2009, p. 132). The practical aim was that EEC competition policy would act as a framework within which each member enjoys social permission ‘to act as an entrepreneur’ (Böhm, 1966, p. 56), free to ‘plan and implement their own economic decisions by relying only on prices and legal rules’ (Mestmäcker, 2007, p. 22). In typical ordoliberal fashion, the underlying aim of competition policy was to curtail the power of both private interests and the working class to distort the price mechanism and markets.7 Contrary to the early ordoliberal critics of the EEC, von der Groeben and Mestmäcker understood its inauguration as a process of embedding market principles into an economic coordination beyond national boundaries that would eventually expand (as in fact did happen). The task of competition law was creating a framework that would eliminate protectionist measures and market-distorting policies. As Mestmäcker would eventually argue, ‘the system of undistorted competition – extending far beyond the traditional field of cartel law – is one of the constitutional foundations of the Community’ (Mestmäcker, 1973, p. 182). Its competition law was binding ‘not only on the behaviour of firms, but also on that of the member countries as entrepreneurial units’ (ibid., p. 190).

THE FISCAL COMPACT AS ORDOLIBERAL FRAMEWORK-BUILDING Eucken had already declared that ordoliberalism is concerned with providing ‘an appropriate constitutional framework for the economic process’ (Eucken, 1952, p. 289). In this context, the role of the state was not to ‘intervene in the mechanisms of the competitive economic process’, but to ‘set up and maintain the institutional framework of the free economic order. That is the purpose of Ordnungspolitik’ (ibid, p. 339). The significance of institutional forms was directly related to their ability to create path dependency. Within this context, for example, the conceptualization of member states as ‘entrepreneurial units’ within EEC’s competition law was crucial in setting the stage for what Michael Wilkinson (2019, p. 6) describes as a ‘reconfiguration of the “constitutional imagination”’. Under these terms, and with an upscaling of the market order in mind, the ‘legitimising device for the whole constitutional order’ of the EU shifted from that of a ‘sovereign constituent power’ to that of individual economic freedom – that is, ‘the freedom to participate in the market’ (ibid., pp. 15–16). The relative stabilization achieved in the post-war era had reflected a delicate balance between an external exchange-rate anchor (the Bretton Woods system) and member states’ fiscal and economic policy coordination, a process of policymaking that fell short of the macroeconomic institutional regulation that ordoliberals promoted. The eventual collapse of the Bretton Woods regime in the early 1970s, however, provided the appropriate opportunity to reconceptualize the institutional framework. As Mestmäcker had put it shortly after the downfall of Bretton Woods, if the existence of the EEC had already undermined the maintenance of ‘far-reaching differences between the economic orders of the member countries…a common monetary policy would mean finally giving up any such possibility’ (Mestmäcker, 1973, p. 190). The process of conceiving and designing the structure of the EMU from the 1970s until its final inauguration in the early 1990s could, from such a perspective, be understood as an

88  Handbook on critical political economy and public policy attempt to shift focus towards a specific macroeconomic model and the appropriate constitutional structure that could maintain its market conformity. At the time, this was formulated by assigning control over monetary policy to the European Central Bank (ECB), while outlining specific fiscal rules (instead of coordination) in the EMU’s constitutional layout, the Maastricht Treaty. Modelled on the Bundesbank, ECB design reaffirmed the ‘de-politicization’ consensus of insulating monetary policy from majoritarian control and accountability, institutionalizing the impossibility of central bank monetary financing of state spending. In parallel, the fiscal regulations of the Maastricht Treaty reflected the orthodoxy of balanced budgets and anti-inflationary sensitivities, a direction further strengthened with the introduction of the Stability and Growth Pact (SGP) in 1997. Split into a ‘preventive’ and a ‘corrective’ arm, the SGP was meant to concretize the penalties resulting from any member state’s failure to pursue ‘sound public finances’. Initially undermined by the decision of France and Germany to suspend the SGP in 2003 as too restrictive in the face of their declining economic performance, the weaknesses of the regulatory framework of the fiscal aspects of the EMU were dramatically exposed with the outbreak of the eurozone crisis. Officially set in motion by the revelation that Greece had a deficit four times the amount, and a debt twice the size, of Maastricht Treaty/SGP rules, the assumption that ECB monetary control and supranational fiscal supervision was enough to ensure fiscal discipline was significantly impaired. Responding to this perceived gap, a constitutionally anchored form of fiscal regulation was widely perceived as indispensable, finding its form in the Fiscal Compact of 2012. The Fiscal Compact (FC) legislation has been widely described as an ordoliberal idea par excellence (Biebricher, 2017; Cafruny & Talani, 2019; Jessop, 2019; Nedergaard, 2019b; White, 2015). Embedding strict budgetary constraints within national constitutions corresponds, after all, to the strategy of creating a legal framework within which macroeconomic decisions are stringently constrained. Avoiding any direct intervention in the economic process, while at the same time circumventing potentially obstructive democratic legitimation processes, the FC represented ‘a shift from a process-based management of budgetary issues in the political domain to a legal entrenchment of substantive fiscal rules’ (Adams, Fabbrini & Larouche, 2016, p. 12). Echoing Mestmäcker’s vision of a process of ‘[legitimizing] both European law and the existence of a European Constitution without requiring additional “traditional” democratic developments’ (Maduro, 1998, p. 128), the FC captures a particular dynamic at the core of the European project: strengthening supranational integration by enhancing member-state-level competence in imposing macroeconomic discipline. As German ex-Finance Minister Schäuble would explain in a speech at the Freiburg ‘Stiftung Ordnungspolitik’ in 2014, ‘enforcing the rules you have given yourself is not a violation of sovereignty. Otherwise…European competition law…would not be possible. It is not a violation of national sovereignty that if you enter into legal commitments you will be forced to comply with them’ (Schäuble, 2014, n.p.). The reception of the FC by ordoliberals testifies to its affinity to their overall vision, with Feld and others praising its role as an institutional anchor for ‘reinforcing budget discipline’ (Feld et al., 2015, p. 58) and for supplementing the functional principle of market discipline. In a more detailed and illustrative account, Walter Eucken Institute members Heiko Burret and Jan Schnellenbach (2013) wrote a report on the FC for the German Council of Economic Experts (Sachverständigenrat, 2016/17, 2017/18). Laying out its main perimeters and proceed-

Ordoliberalism’s advice for economic policymaking  89 ing to evaluate the diverse process of implementation in different Eurozone member states, the authors point out how despite ‘considerable consolidation progress in recent years…the Maastricht deficit criterion that restricts the public deficit to 3 per cent of GDP was only met occasionally’ (Burret & Schnellenbach, 2013, p. 2). Consequently, the report also praises the adoption of the FC as representative of an appropriate response to the eurozone crisis and the overall institutional deficit of the European Union. Having explained the underlying principles behind the FC and its main structure, the report then zeros in on what it calls ‘legal ambiguities and loopholes’ (ibid., p. 6), which threaten the potential efficacy of such legislative action. Loyal to ordoliberal thinking, the objections point out that a certain amount of (political) discretion is, unfortunately, still perceptible. Lamenting the fact that the constitutional anchoring of the budgetary constraints remains voluntary rather than mandatory, Burret and Schnellenbach deplore the fact that monitoring compliance with the FC remains an ex post facto activity, based as it is on a corrective rather than preventive structure. Further criticizing the corrective mechanism as unable to provide a ‘fast adjustment’ (ibid., p. 7), they suggest making it ‘compulsory to submit fiscal forecasts to an independent fiscal council for review’ (ibid., p. 6). In more ways than one, the Burret and Schnellenbach report echoes a Deutsche Bank report issued one year earlier, authored by another member of the Walter Eucken Institute, Nikolaus Heinen. Saluting the FC as a ‘fire protection regulation’ complementary to the ECB’s monetary ‘firewall’, Heinen had also added his objection to the discretionary space still allowed. In his view, the FC was undermined by the fact that ‘members states are still politically and materially responsible for the implementation of national debt brakes – and thus they must also bear the burden of proof that they are serious about the institutional anchoring of sound fiscal policy’ (Heinen, 2012, p. 1). Finally, he remained sceptical about the efficiency of legal action against deviations (and, by extension, implementation of the FC), as the European Court of Justice assigned with the responsibility would be, until 2016, dominated by countries that are not ‘stability-conscious’ and have ‘a traditionally lax budget policy’ (ibid., p. 4).

CONCLUSION This chapter has focused on an exposition of ordoliberalism’s relation to policymaking as one based on framework-building rather than direct policymaking. Concerned with institutionally embedding a market-conforming direction, ordoliberalism is viewed here primarily as a state theory that tries to grasp the appropriate institutional and constitutional regulative principles for releasing the full effectiveness of the market and price mechanism. If early ordoliberal depictions of this arrangement were formulated around the concept of the ‘strong state’, the post-war predicament produced a discursive shift towards the promotion of a ‘constitutional order’. The aim, however, remained the same: to constitute and regulate an ‘economic order’ through depoliticization. What makes ordoliberalism a state theory is precisely the formulation that the market economy cannot function (or will function imperfectly) in the absence of a legal/institutional framework created and protected by the state. At its core, this vision can be described as an attempt to utilize a specific discretion (state regulative activity) to end all other discretions. In other words, the political activity of the state as one of de-politicization: providing the legal framework that limits the influence of particular pressures has to be performed by ‘placing at

90  Handbook on critical political economy and public policy one remove the political character of decision-making’ (Burnham, 2001, p. 128). ‘Embedded with sufficient autonomy to resist the pressure from special interests’, Nedergaard informs us, the ordoliberal framework suggests ‘a permanent and subtle dialectic between politicized and non-politicized factions of the state’ (Nedergaard, 2019a, p. 20). Nonetheless, translating such a vision into policy has proved a complicated and contradictory process; ‘de-politicization’ can never be fully realized. The purpose of this chapter was to illustrate that from the perspective of framework-building, ordoliberalism has indeed been quite effective in promoting specific institutional forms as safeguards of the market economy. The practical orientation of ordoliberalism, as set out in its foundational Ordo Manifesto of 1936 (Böhm, Eucken & Großmann-Doerth [1936], 2017) to ‘speak to the actual practical problems of economic policy’ through principled thinking anchored around an ‘economic constitution’ persists to this day, as the examples of EU competition law and the FC presented here demonstrate. But the capacity to exert influence at this level remains, however, Janus-faced. Institutional and constitutional frameworks can reduce discretionary space, but they cannot make social antagonism disappear. As ordoliberals themselves reluctantly admit, the market economy has an inherent tendency to produce social conflict, making compromises (as the cartel law in West Germany demonstrated) or even, occasionally, defeat (as the Pension Reform of 1957 suggests) inevitable.

NOTES 1. Translations into English are by the author. 2. Rather than a German imposition, eurozone crisis management policies reflected a shared project across euro area political and economic elites. See Moury and Standring (2017); Roufos (2018). 3. Röpke participated in Chancellor Brüning’s ‘Braun Commission’ on unemployment during the Great Depression. For Röpke, however, the aim was to examine the overall question of ‘the possibilities and limits of state intervention in a period of crisis and depression’ (Commun, 2016, p. 47). Feld et al. (2020, p. 3) make a similar argument, pointing out that Eucken had also ‘supported a fiscal stimulus program at the height of the Great Depression’. 4. Both Nicholls (1994) and Mierzejewski (2004) describe the collaboration of Erhard with Eucken in the drafting of a currency reform plan in 1947 within the Sonderstelle Geld und Kredit (Special Bureau for Monetary and Currency Matters). 5. The apparent consensus on the topic is that ordoliberals were against central bank independence (CBI), preferring instead a revival of the gold standard or, in Eucken’s case, a ‘commodity reserve currency’ (Bibow, 2012; Feld et al., 2015). While the gold standard and/or a commodity reserve currency were closer to ordoliberal theory, the case can be made that the impossibility of either of these choices materializing forced ordoliberals to embrace (and eventually even campaign for) CBI as the best alternative. The Bundesbank’s eventual structural set-up as a counter-majoritarian institution with a limited mandate and a price stability orientation can be seen as concomitant to ordoliberal preferences. 6. The Aktionsgemeinschaft Soziale Marktwirtschaft (ASM – Action Group for Social Market Economy) was established in 1953 by Otto Lautenbach (whom Eucken would call ‘the German Keynes’) but was already taken over by Alexander Rüstow in 1954 and transformed into an ordoliberal think tank with prominent ordoliberals such as Franz Böhm and Wilhelm Röpke on its advisory board. 7. The task of ‘compelling enterprises to act in the public interest is assigned to market competition and, by extension, to the legislature, who should protect competition from restraints created by enterprises’ (Mestmäcker, 1993, p. 71) and powerful unions, as Bonefeld adds (Bonefeld, 2017, p. 91).

Ordoliberalism’s advice for economic policymaking  91

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Ordoliberalism’s advice for economic policymaking  93 Moury, C. & Standring, A. 2017, ‘Going beyond the Troika: power and discourse in Portuguese austerity politics’, European Journal of Political Research, 56 (3), 660–79. Müller-Armack, A. 1947, Wirtschaftslenkung und Marktwirtschaft, Hamburg: Verlag für Wirtschaft und Sozialpolitik. Müller-Armack, A. 1971, Auf dem Weg nach Europa – Erinnerungen und Ausblicke, Tübingen: Wunderlich. Müller-Armack, A. 1976, Wirtschaftsordnung und Wirtschaftspolitik, Stuttgart: Paul Haupt. Müller-Armack, A. 1981, Genealogie der Sozialen Marktwirtschaft, Stuttgart: Paul Haupt. Nedergaard, P. 2019a, ‘An ordoliberal theory of the state’, German Politics, 28 (1), 20–34. Nedergaard, P. 2019b, ‘The ordoliberalisation of the European Union?’, Journal of European Integration, 42 (2), 213–30. Nedergaard, P. & Snaith, H. 2015, ‘As I drifted on a river I could not control: the unintended ordoliberal consequences of the eurozone crisis’, Journal of Common Market Studies, 5 (5), 1094–109. Nicholls, A.J. 1994, Freedom with Responsibility: The Social Market Economy in Germany 1918–1963, Oxford: Clarendon Press. Peacock, A. & Willgerodt, H. 1989, Germany’s Social Market Economy: Origins and Evolution, New York: Palgrave Macmillan. Roufos, P. 2018, A Happy Future Is a Thing of the Past: The Greek Crisis and Other Disasters, London/ New York: Reaktion Books. Röpke, W. 1931, ‘Praktische Konjunkturpolitik: Die Arbeit der Brauns-Kommission’, Weltwirtschaftliches Archiv, 34 (2), 423–64. Röpke, W. 1936, Crises and Cycles, London/Edinburgh: William Hodge & Company. Röpke, W. 1942, The Social Crisis of Our Times, Chicago, IL: University of Chicago Press. Röpke, W. 1955, Economic Order and International Law, Leyden: A.W. Sijthoff. Röpke, W. 1960, A Humane Economy: The Social Framework of the Free Market, Chicago, IL: Henry Regnery Company. Rougier, L. [1938] 2018, ‘Foreword and opening lectures of the Walter Lippmann Colloquium’, in J. Reinhoudt & S. Audier (eds), The Walter Lippmann Colloquium: The Birth of Neoliberalism, London: Palgrave Macmillan, pp. 93–117. Rüstow, A. 1942, ‘Appendix: General sociological causes of the economic disintegration and possibilities for reconstruction’, in W. Röpke, International Economic Disintegration, London/Edinburgh: William Hodge & Company, pp. 267–83. Ryner, M. 2015, ‘Europe’s ordoliberal iron cage: critical political economy, the euro area crisis and its management’, Journal of European Public Policy, 22 (2), 275–94. Sachverständigenrat 2016/17, Internationale Konjunktur: Geldpolitik Nicht Überfordern, Prognosen zur Konjunkturellen Entwicklungen. Sachverständigenrat 2017/18, Für eine zukunftsorientierte Wirtschaft, Jahresgutachten. Savage, J.D. 2002, ‘The origins of budgetary preferences: the Dodge line and the balanced budget norm in Japan’, Administration and Society, 34 (3), 261–84. Schäuble, W. 2012, ‘Auf dem Weg aus der Krise – was haben wir gelernt? Was muss sich ändern?’, final lecture by Federal Minister of Finance Dr Wolfgang Schäuble at the 17th annual Handelsblatt Conference, Frankfurt am Main, 9 September. Schäuble, W. 2014, ‘Noch nicht über den Berg: Zur Krise in der Eurozone’, speech by Dr Wolfgang Schäuble at the Stiftung Ordnungspolitik in Freiburg im Breisgau, 11 July, accessed 9 December 2020 at https://​www​.wolfgang​-schaeuble​.de/​noch​-nicht​-ueber​-den​-berg​-zur​-krise​-in​-der​-eurozone/​. Seidel, K. 2009, ‘DG IV and the origins of a supranational competition policy: establishing an economic constitution for Europe’, in W. Kaiser, B. Leucht & M. Rasmussen (eds), The History of the European Union: Origins of a Trans- and Supranational Policy 1950-72, London: Routledge, pp. 129–47. Slobodian, Q. 2018, Globalists: The End of Empire and the Birth of Neoliberalism, Cambridge, MA: Harvard University Press. Smith, A. [1776] 1977, The Wealth of Nations: An Inquiry into the Nature and Causes of the Wealth of Nations, ed. Edwin Cannan, Chicago, IL: University of Chicago Press. The Economist 2015, ‘Germany and economics: of rules and order’, 9 May. Tusk, D. 2015, ‘Donald Tusk interview: the annotated transcript’, Financial Times, 18 July, accessed 9 December 2020 at https://​www​.ft​.com/​content/​ff50e5a9​-7b15​-3998​-a9f1​-c11359dc01b8.

94  Handbook on critical political economy and public policy von der Groeben, H. 1965, ‘Competition policy in the common market and in the Atlantic partnership’, The Antitrust Bulletin, No. 1–2, 125–53. Weidmann, J. 2014, ‘Market economy principles in monetary union’, speech by Dr Jens Weidmann, President of the Deutsche Bundesbank, at the Wolfram Engels Prize ceremony, Kornberg, 28 March, accessed 9 December 2020 at https://​www​.bis​.org/​review/​r140404b​.htm. White, J. 2015, ‘Emergency Europe’, Political Studies, 63 (2), 300–318. White, J. 2017, ‘Between rules and discretion: thoughts on ordo-liberalism’, LEQS Paper No. 126/2017, London School of Economics and Political Science. Wilkinson, M.A. 2019, ‘Authoritarian liberalism in Europe: a common critique of neoliberalism and ordoliberalism’, Critical Sociology, 45 (7–8), 1–12. Young, B. 2017, ‘Ordoliberalism as an “irritating German idea”’, in T. Beck & H.H. Kotz (eds), Ordoliberalism: A German Oddity, London: CEPR Press, pp. 31–40.

7. What is neoliberal about new public management? Sahil Jai Dutta, Samuel Knafo and Ian Lovering

The notion of new public management (NPM) was developed in the late 1980s and early 1990s to capture a profound restructuring taking place in the public sector. Building on a critique of state bureaucracies as inefficient and hostage to special interest groups, New Right governments in Organisation for Economic Co-operation and Development (OECD) countries overhauled public service provision (Dawson & Dargie, 2002, p. 34). They adopted a series of measures to cut costs, increase efficiency and impose greater accountability, such as the widespread use of contracts, payment-by-results and audits. These initiatives came to be known as a new form of public management to express a paradigmatic shift taking place in the organization of the state (Ferlie & Fitzgerald, 2002, p. 342). Given the fact that NPM was implemented in the 1980s, in particular by the British neoliberal government of Margaret Thatcher, it became widely seen as the neoliberal approach to public administration (Connell, Fawcett & Meagher, 2009; Dean, 2014). This chapter explores the different ways in which we associate NPM with neoliberalism and some of the problems that this association poses. What makes the relationship intriguing is that public administration scholars have long pointed to tensions between the neoliberal rhetoric that drove public sector reforms and the managerial practices that were then implemented. The fact that neoliberals were highly critical of public officials never sat easily with the promotion of discretionary managerial power that often seemed to accompany NPM. Moreover, the fact NPM was partly initiated by centre-left governments (like Paul Keating’s Australia and Roger Douglas’s New Zealand) and was later easily picked up by other centre-left governments (like Tony Blair’s Britain) raised various questions about NPM’s relationship to neoliberalism. As we point out, these facts create considerable ambiguity regarding how these managerial practices relate to neoliberalism and more specifically to neoliberal political programmes. In problematizing this relationship, we aim to shed a sharper light on the nature of the paradigmatic shift of NPM and its political implications. As we argue, one way out of the conceptual problems that surround NPM lies in the history of public management, for the innovations that directly shaped the practices of NPM have a history that differs from that of those ideas that fuelled the rise to power of neoliberals. As we show, public management was born out of a new managerial approach to governance that emerged initially in the 1950s and 1960s in the US defence sector. This managerial approach was characterized by the framing of policy-making as a practice of optimization that uses performance assessments as a means to help determine what course of action to take. Out of this tradition emerged new practices of systems/policy analysis, the use of quantified social indicators, performance management, cost–benefit analysis and strategic policy-making. These practices revolutionized both business studies and public administration and provided new tools of empowerment for corporate, financial and public managers. 95

96  Handbook on critical political economy and public policy In developing this argument, we build here on a growing body of academic work that has emerged in recent years demonstrating the profound imprint of systems analysis and other innovations in the US defence sector on the world of business and public governance (e.g., Amadae, 2016; Erickson, 2015; Light, 2003; Mirowski, 2008; Rindzevičiūtė, 2016). These ‘technical’ developments have often been downplayed in studies of politics because we underestimate their profound political impact. Yet they provided the institutional mechanisms behind the rise of a new managerial class that uses these practices in both the corporate and public sector as tools to further managerial authority. With the consolidation of a vast network of think tanks, consultants and academic institutions with vested interests in these managerial practices of governance, a powerful lobby came to promote the ideas and practices of managerial governance, bolstered, of course, by the systematic campaign to increase managerial pay and power. It only furthered the interests of an increasingly self-aware managerial class. This class stretches from the corporate boardrooms of global accountancy firms and outsourcing conglomerates extracting profit from the public sector, across new regulatory bodies administering privatized public services, down to policy professionals re-socialized as managers of public services. The chapter is divided into two sections. The first explores three different ways in which neoliberalism has come to be associated with NPM and the problems this association generates. This will set the stage for a second section that shows how public management was born out of a radically new conception of managerial governance that goes back to the US defence sector and the rise of systems analysis in the 1950s and 1960s. We conclude by showing how the success of managerial governance under neoliberalism was partly tied to the ability of proponents of these practices to present their managerial planning as a way for managers to mimic the operations of the market or more specifically to create a market-like environment. Cast in this historical light, we are better able to navigate through some of the complex problems that surrounds the relationship between neoliberalism and public management. It will lead us to argue that while the neoliberal context was vital to the development of NPM, the practice of governance then adopted with NPM had in fact little to do with neoliberal ideas.

CONCEPTUALIZING NPM AS A NEOLIBERAL PRACTICE There are three aspects that are often invoked to link NPM with neoliberalism: the historical context for NPM’s emergence; the widely observed influence of neoliberal ideas on NPM, particularly public choice theory; and the depiction of NPM as importing corporate practices into the public sector. In this section, we present these three points in turn before raising various conceptual issues related to each. The first connection between NPM and neoliberalism stems from the fact that NPM emerged in a historical context where neoliberalism was politically dominant. The late 1970s and 1980s was a time of profound dissatisfaction with public administrations. The sprawling interference of the state in the economy was criticized for crowding out private initiative. The public sector was deemed to be unresponsive to political interventions and the cost of welfare as out of control. It was in this context that neoliberalism rode to power, driven by a critique of Keynesian economic governance and the welfare state. Given this context, NPM was read as the administrative form of neoliberal governance. From this perspective, NPM was the product

What is neoliberal about new public management?  97 of the arrival of neoliberals in government who set out to make the public service leaner and more efficient as a form of ‘cutback management’ (Dunsire et al., 1989). A second connection commonly drawn between NPM and neoliberalism relates to the ideas that informed public sector reform. Numerous scholars have pointed to the influence of neoliberal ideas, and more specifically public choice theory, over NPM. Public choice theory was initially developed in the 1950s and 1960s by James Buchanan and Gordon Tullock (among others). Its basic idea was that public servants are not all that dissimilar to market actors in that they pursue their own selfish interests. Given the fact that all people should be expected to act in their own self-interest, public choice theorists argued that the best way to limit abuses was to allow people to choose freely between providers (i.e., in a market). The reason for this is that bureaucratic structures in the public sector shield public officials from the need to be efficient and attentive to the needs of consumers. Without competition or a concrete mechanism to punish or reward public servants according to their performance, they are left unaccountable and liable to exploit their position for their own interest. By contrast, market competition acts as a disciplinary mechanism to force service providers to respond to people’s preferences. The solution then, for public choice theorists, is to create market pressures on state bureaucracies. This involves not only multiplying service providers, opening the door for private sector provision, but also changing the mindset of people to turn them into proper consumers who dynamically compare options over who provides them better public services. This agenda of consumer choice in public services, inspired by public choice theory, has often been part of the rhetoric that surrounds NPM. The multiplication of options by creating charter schools or expanding the private provision of health care has been rhetorically promoted as a means to ensure the power of consumers in shaping how public services were organized. The proliferation of audit and league tables, ranking schools or doctors on various grounds, have also become a hallmark of NPM and are widely interpreted as a means to generate the information for users to make informed choices over where to send their children to school or which hospital to go to for surgery. More generally, the adoption of performance management practices has been seen as a means to organize quasi-markets in the public sector, thus recreating administratively the working of market competition. Assessing the performance of public providers and putting pressure on them to improve by making these evaluations public would thus represent a means to put into practice a neoliberal norm of competition in building a market society (Brown, 2015; Peck, 2010). A third point often invoked to highlight the links between NPM and neoliberalism is the celebration of corporate management that was often used to justify public sector reform. NPM is thus often presented as the product of an attempt by the state to learn market-tested practices from the corporate sector and adopt a more ‘business-like’ approach to government. In the words of Pollitt (1990, p. 48), ‘managerialism became the acceptable face of the new right concerning the state’. If there was to be a public sector, then it should be governed in managerial terms. The transplantation of techniques and jargon drawn from the world of business into government, like mission statements, performance pay or contractualization was thus read as a neoliberal effort to denigrate the value and distinctiveness of the public service. These three points have all contributed to highlighting the ways in which public management has been shaped by neoliberal forces. While they suggest at first glance that there is value in qualifying NPM as a neoliberal approach to governance, each of these points raise their own set of issues cautioning against accepting too readily that NPM is best understood as a neoliberal practice of governance.

98  Handbook on critical political economy and public policy NPM’s Social Democratic Connection The first set of issues relates to the context for the adoption of NPM. As numerous scholars have pointed out, the striking feature of NPM’s implementation is that centre-left governments have in fact been stronger supporters of managerial reform, both preceding and succeeding the New Right government of the 1980s. Paralleling the NPM reforms of Thatcher’s New Right government in Britain, there were centre-left governments who pushed managerial reforms in Australasia in the 1980s, spearheaded by Paul Keating as Australia’s Treasurer and Roger Douglas as Minister of Finance in New Zealand. These became highly influential prototype NPM cases, with key protagonists in the New Zealand reforms going on to push NPM in the OECD. That these two Labour governments would develop NPM has been raised as a point that muddies the link between neoliberalism and NPM (Hood, 1991). More importantly, a significant number of scholars saw NPM as only coming into its own in the 1990s with the arrival of Bill Clinton as US president (Barzelay, 2002). The publication in 1992 of Reinventing Government by Osborne and Gaebler became emblematic for this new managerial movement closely attached to Third Way social democracy. The literature on neoliberalism has often thought little of this development and largely interpreted it as evidence that so-called centre-left governments of the 1990s simply consolidated the neoliberal turn focused on a market-centred view of governance, conceding to the New Right’s undoing of the post-war welfare consensus (Mudge, 2018). However, the vast investment in the public sector, especially in Britain under the New Labour government of Tony Blair, suggested a departure from neoliberal discourses about governance. While the neoliberal Thatcher government had used NPM to invoke the use of ‘business-like’ methods to squeeze efficiency out of the state and discipline bureaucrats deemed out of control, New Labour intensified similar techniques of NPM for seemingly opposite ends. In New Labour’s hands, tools like audit, performance targets or contractualization were not meant to diminish the public sector but to drive a ‘modernization’ project of expanded provision led by a new managerial class that remade the fabric of the public sector. The new managerialism was now perceived as a means to make further investments and develop the public sector. As a result, scholars such as Osborne and McLaughlin argue that we need to be careful not to conflate NPM too closely with the market-based model of Thatcher (Osborne & McLaughlin, 2002, p. 10). Indeed, public administration scholars rarely accept the idea that NPM should be reduced to the agenda of the New Right. According to Hood, the ‘political rise of the “New Right”…does not explain why these particular doctrines [of NPM] found favour’ (Hood, 1991, p. 6). Similarly, Pollitt argues that ‘NPM is definitely NOT just a neo-liberal and still less a neo-conservative doctrine’ (Pollitt et al., 2007, p. 112), and elsewhere that ‘managerialism is not identical to neo-liberalism, or the programme of the “new right”’ (Pollitt, 2016, p. 433). For Hughes, NPM ‘was more about management and responding to economic crisis than new Right ideology’ (Hughes, 2012, p. 270). The Gap Between NPM and Public Choice A second set of conceptual problems relates to the influence of neoliberal ideas (especially public choice theory) on NPM. For while NPM was initially promoted as a means to implement market-based approaches to hold civil servants accountable, beginning in the 1990s there was a marked shift away from such a critique of the bureaucracy, as proponents of NPM

What is neoliberal about new public management?  99 called for unleashing the entrepreneurial spirit of the public sector. As a result, NPM diverged significantly from public choice ideas (Broadbent & Laughlin, 2002, p. 96). The result was a growing gap between a public choice discourse that emphasized choice for service users and the reality of NPM practices that enforced instead the power of managers. While public choice had promised decentralization and free competition, the result was instead growing state monitoring and managerial oversight through a proliferation of targets, contracts and audits. It is interesting to note in hindsight that early scholars of NPM had already insisted on the tensions that existed at the heart of NPM between the ideas ‘of the New Right and those of managerialism’ (Clarke & Newman, 1997, p. 34). The reason for this was that public choice was predicated on the need to limit the margin of manoeuvre of civil servants, while the managerial discourse that promoted NPM celebrated instead the discretionary power of managers. Already in 1990, Aucoin made an influential contribution that pointed to the fact that public choice was based on a profound suspicion of managers in the public sector and pushed for limits to be imposed on them (Aucoin, 1990). By contrast, the managerial discourse that would later be found in Osborne and Gaebler’s (1992) Reinventing Government insisted on the need to provide freedom for managerial initiatives. While it was clear that both managerialism and public choice informed NPM, it remained unclear how one could understand this curious marriage of seeming opposites (Hood, 1991). While a wide range of authors point to this tension, few have clarified how the two principles could be made compatible. As a result, scholars often underspecify the ideational foundations by looking for broader common denominators that could accommodate or overlap such different traditions of thoughts. This may account for why, as Triantafillou argues (2017, p. 2), the ideational foundations of NPM remain poorly understood. With a fundamental ideological contradiction at the heart of this movement, it is difficult to get a clear picture of what NPM is all about. Scholars have generally adopted two responses to this tension. The first, broadly associated with the political economy literature (Block & Somers, 2014; Bruff, 2014), uses this contradiction as a way to reveal the ‘true face of neoliberalism’. For these scholars, growing managerial power simply demonstrates the authoritarian face of neoliberalism and the fact that, behind the rhetoric of free markets, stands a project of social engineering. Since people do not think like the Homo economicus that populates neoliberal writings, it takes considerable incentives and discipline to induce or force people to act like neoliberal theory says they should. Managerialism is thus seen as the means for pursuing a neoliberal project of market-based governance to mould people to the ideals of neoliberal theory.1 The second interpretation of this ideational tension between managerialism and public choice can be loosely connected to the public administration literature. Here, the circle is squared by arguing that NPM (and public choice rhetoric) is something of the past, bound up with the New Right governments of the 1980s in the Anglo-Saxon world, while managerialism lives on (Dunleavy et al., 2006). According to Osborne, ‘NPM has actually been a transitory stage’ to what he calls new public governance (Osborne, 2006, p. 377), a longer-lasting and broader-based paradigm that grew from the field of public management itself. The latter, he argues, was ‘rooted firmly within organizational sociology and network theory…[with] the potential to tap into a more contemporary stream of management theory’ instead of neoclassical economics and public choice theories that were ultimately foreign to public administration (ibid., pp. 382, 384).

100  Handbook on critical political economy and public policy Stylizing NPM as a neoliberal obsession with private sector governance techniques, and a zealous pursuit of markets and austerity, has thus led numerous public administration scholars to declare the normative and historical death of NPM. From this perspective, NPM appears as a passing fad that undermined the credibility of the public sector but failed to deliver on its promises for efficiency and effectiveness (Lynn, 1998; Pollitt, 2000). By 2000, Jones was arguing that ‘NPM-type reform is coming to a close in many parts of the world’ (Jones, 2001, p. 3). This view has often supported a process of paradigm-naming as scholars of public management looked for what replaced this neoliberal form of public management. O’Flynn (2007) pointed to the resurgence of a value orientation to public administration such that NPM was replaced by a new ‘public value management’. For O’Flynn (2007, p. 363), ‘under NPM, broader notions of public value were marginalized in the quest for efficiency and, consequently, the adoption of a public value perspective will represent a further paradigmatic change’. While NPM was obsessed with results, O’Flynn pointed to a form of public administration in the 2000s concerned with relationships, flexibility and multiplicity in the models of service delivery and accountability. From a different perspective, Dunn and Miller (2007) declared that NPM was being replaced by a ‘neo-Weberian state’ approach to public administration. The neo-Weberian state conceded many of the managerial orientations of NPM, while attempting to retain the ethics-driven professionalism of Weberian bureaucracy. In this way, Dunn and Miller argued that ‘the “bureaucrat” becomes not simply an expert in the law relevant to their sphere of activity, but also a professional manager, oriented to meeting the needs of their citizen/users’ (Dunn & Miller, p. 352). As these examples highlight, proclamations of NPM’s death often focused on the alleged changes in the values that inform public management. Yet those promoting these new ideas have at times exaggerated the sea change in the hope of promoting their own solutions. For this reason, numerous scholars have warned us about the ideological nature of these pronounced paradigmatic shifts (Dunleavy & Hood, 1994; Kearney & Hays, 1998; Pollitt, 1993). More generally, a number of scholars have pushed back against such readings found in the public administration literature and lamented the fact that we have lost sight of NPM simply because its practices have become normalized and are now largely taken for granted. According to Pollitt (2007, p. 113), ‘NPM is not dead or even comatose… Elements of NPM have been absorbed as the normal way of thinking by a generation of public officials’. Hyndman and Lapsley go further in describing this trend as the rise of a ‘“denial lobby” which asserts that NPM is no more’ (Hyndman & Lapsley, 2016, p. 404). In our view, the more interesting point to take away from such contributions is the widespread emphasis on the fact that managerialism has essentially triumphed over the market commitment of public choice. It suggests that the key to understanding public management is to be found at the level of the practices it advances, rather than the neoliberal rhetorical package in which they were initially wrapped. The Emptiness of ‘Business-like’ Methods This brings us to the third connection between NPM and neoliberalism: the idea that public management was a product of a fixation on the private sector. Scholars of NPM have frequently taken at face value the presentation of NPM as mobilizing ‘business-like’ methods – the most obvious source of evidence being Margaret Thatcher’s appointment of Marks &

What is neoliberal about new public management?  101 Spencer CEO Derek Rayner as chief of the Efficiency Unit in the UK. It generated a strong reaction from public management scholars who lamented the foreign invasion of private sector methods into the field of public administration. According to Savoie, this was ‘flawed… [because] private sector management practices very rarely apply to government operations’ (Savoie, 2006, p. 595). However, this framing of the critique of NPM is odd in light of the fact that public administration has long drawn on and aimed to learn from private management practices. Already in the early 20th century, Woodrow Wilson’s field-defining intervention in public administration was built on the idea that state bureaucracies were comparable to the corporate world. By stating that ‘the field of public administration is a field of business’, Wilson (1887, p. 209) was concerned to demarcate public office from the machinations of the political party machines of early 20th-century USA. Wilson conceptualized the ideal government as the pursuit of efficiency and general welfare by legally sanctioned and professional bureaucrats in opposition to the politicized and corrupted public offices that dominated the US. The critique of NPM has thus come full circle on Wilsonian public administration, although now public administration scholars lament the same process casting NPM as an attack on an ethical and legally minded ideal of public service. Moving beyond the critique made by public administration scholars targeting the use of private sector practices in running state bureaucracies, a more fundamental point can be made that the dualistic framing of private versus public management has always been conceptually empty. Corporate practices (as well as public management) can take, and have taken, a lot of different forms. It thus makes little sense to simply invoke the ‘influence of corporate practices’ because this does not specify what type of practices we are referring to (Knafo, 2020). In short, NPM does not apply generic corporate practices onto the state, but stands instead in a long tradition of public sector reform that invokes the private sector as a standard-bearer. The scientific management of the early 20th century informed by Taylorism had a significant impact on public administration in the early 20th century in the same way that the divisional organization of corporations usually attributed first to innovations at General Motors were also implemented in the state in the 1950s. For this reason, interest in the impact of corporate thinking cannot be the defining feature of NPM. We need to move forward and specify what form of practices are key to NPM, and trace their lineages more specifically (corporate or otherwise). As we will see below, a historical lineage of these practices reveals in fact that much of the framing of managerialism has been informed by a more generalized revolution in governance that took place in the late 1950s and early 1960s, which was informed by systems thinking and the emergence of information technologies. While this transformation swept through business schools and management consultancies, it cannot be reduced to a ‘corporate’ approach to organization or to the idea that the state should be run as a firm. In fact, the managerial forms of governance that have shaped NPM were initially pioneered in the US defence sector. As will become clearer below, this longer history is of great importance because it offers vital clues about what is the nature of the transition brought about by NPM and what are the political stakes of contesting it. As these three sets of concerns illustrate, the association between NPM and neoliberalism is not as straightforward as it may seem. This has resulted in divergent views on the matter. For scholars of neoliberalism, NPM is simply a conceptual referent for the remaking of the public sector in the name of the market, where private corporations insurge into public services and corporate jargon is parroted. In contrast, much of public administration as a discipline

102  Handbook on critical political economy and public policy has attempted to put NPM behind it, writing the neoliberal 1980s off as a foreign incursion into its domain connected to abandoned public choice theory and a celebration of mythologized business methods. While the former subsumes managerial governance too easily under a neoliberal outlook, the latter is too happy to downplay the paradigmatic shift of the 1980s by reducing it to a fleeting development of the era. As we show here, modern managerialism is rooted in a history that has much more to do with the dynamics of post-war planning than neoliberal concerns and one that brought a lasting paradigmatic shift with the rise of managerial governance.

THE RISE OF PUBLIC MANAGEMENT In this second section, we explore more concretely the historical lineages of public management. We show how it stems from broader transformations in the way we think of governance with the rise of what we have called managerial governance (Knafo et al., 2018). This approach became characterized by the way it frames policy issues in managerial terms, essentially using tools of optimization and mathematical modelling in order to frame policy-making. This has often lent an economistic aspect to this practice of governance because of its emphasis on maximizing the uses of resources in relation to a given objective. Yet it would be more accurate to speak of a managerial approach since it relies mainly on managerial techniques of optimization. The key is that management, long seen as a practice focused on finding the best way to implement a policy decreed from above, was now redeployed as a means to determine what this policy should be in the first place. By calculating which option could make the best use of resources one could then select the best course of action. This offered a new grammar of decision-making that favoured the experts who possessed the data about performance and knew how to manipulate its parameters. It also involved a dramatic extension of managerial oversight, since optimization must quantify everything that it wishes to take into consideration in order to process it. Managerial governance can thus be defined both by the way it frames policy-making (as a practice of optimization) and by the managerial processes it requires to operate (i.e., the multiplication of audits and the systematic measurements of policy outputs). What we now understand as public management stems directly from this transformation of governance. Before the early 1980s, public management had been understood in a much more generic sense to refer to what is done to manage the public sector. However, this term then became inflected so as to denote a distinct approach to the operations of the public sector, one that was directly counterposed to the more traditional approach of public administration. The latter was criticized for being passive and for conceiving of public servants as mere executors of policy decisions handed from above. From this perspective, the old studies of public administration had little to offer for the making of policy or for the bigger questions of governance. By contrast, the new approach of public management challenged this divide in order to recast operations more directly in relation to the making of policy. The objective was to offer an action-oriented and prescriptive approach inspired by managerial tools of optimization and new data about outputs to help public officials think about policy-making. With time we have come to think of this managerial approach to governance as an application of corporate management to the public sector. As we pointed out, however, the roots of this transformation have little to do with neoliberalism or even the corporate sector. They were tied to new practices of planning developed in the 1950s and 1960s, and came out of the

What is neoliberal about new public management?  103 defence sector. At the centre of this development was a think tank, the RAND Corporation, that brought together economists, mathematicians, engineers, psychologists and computer programmers to research military strategy. RAND developed a new science of war-making known as systems analysis. Its aim was to facilitate decision-making about what strategy to pursue in uncertain conditions. To achieve this, RAND researchers set out to compile data about how tactics and weapon systems had performed in given circumstances. They would then create mathematical models, processing them through the latest advances in digital computing, to simulate how different courses of action would play out given what was known about past performances and the various parameters that had affected it. Rather than the speculative intuitions of experienced on-the-ground professionals reflecting on the wisdom of possible policy choices, systems analysis thus completely formalized the process, turning strategy-making into a highly mathematical and seemingly objective science. The new practice rapidly became controversial as decorated military generals found themselves challenged by youthful polymath academics whose claims to expertise lay precisely in their lack of on-the-ground experience. The rise of systems analysis culminated in Charles Hitch and other RAND intellectuals being tasked by Robert McNamara with restructuring the US Department of Defense in the early 1960s along RAND lines. This became known as the Planning, Programming, and Budgeting System (PPBS). In the process, military strategy was transformed into a quantitative ‘science’ that sought to quantify policy performance, the most notorious example of which was the ‘body count’ used to assess progress during the Vietnam War. Extending Systems Analysis from ‘Warfare to Welfare’ One of the key developments for the rise of public management was the fact that RAND economists quickly realized that there was great potential for systems analysis techniques to be used beyond military strategizing. Amorphous and multifaceted questions of ‘policy’ could be transformed through systems analysis into clearly demarcated quantitative problems. In keeping with the emergence of game-theoretical ideas of constrained optimization, the goal of policy-making was reoriented to make the best use of the limited (information) resources at hand, understanding that every option comes with opportunity costs. Optimizing – an organization doing the best it can within its restraints – was the goal, and the quantified assessment of systems analysis would determine the best way to optimize. This broad idea informed the creep of PPBS from, as Jennifer Light (2003) puts it, ‘warfare to welfare’. Starting in 1965, it became the driving force behind governmental interventions in health care, education, housing and urban development. The impact of these new practitioners of policy/systems analysis went beyond PPBS. John Lindsay, mayor of New York 1966–73, called in RAND researchers to radically overhaul city administration, policing, transport and fire services. Internationally, PPBS-style approaches were taken up under the banner of rationalisation des choix budgétaires in France in 1968, Programme Analysis and Review (PAR) in Edward Heath’s Britain in 1971, and likewise informed the early 1970s’ social reforms of Willy Brandt’s West Germany. In a similar spirit, British cybernetician Stafford Beer travelled to Allende’s Chile to develop Cybersyn – a radically ambitious project for a data-driven socialist planning system. Altogether, these transformations contributed to the creation and consolidation of a powerful network of promoters of managerial governance. Its impact on the policy-making environment

104  Handbook on critical political economy and public policy would prove particularly important because of the creation of a wide range of consultancies and think tanks seeking to fill the great demand in the late 1960s for the analytical skills of systems analysis. It also played a key role in the renovations of business schools in the 1960s that would become crucial to the formation of a new wave of corporate and financial managers. More importantly, for our purpose, systems analysis would also play a key role in the rise of public management and in new public policy schools that were established in the late 1960s and 1970s in the United States (Lynn, 2006). It was deemed at the time that there was a dearth of ‘managerial’ planning in the public sector. Of particular concern was the lack of expertise in social policy on microeconomics, mathematical modelling and computational skills. In response, new public policy schools were set up to produce a different type of civil servant trained in the analytical methods associated with managerial governance instead of the old ‘bureaucratic’ ways of public administration schools. The notion of public management itself has been credited to scholars at the Harvard Policy School, most notably to Mark Moore, who used it as a label for new courses focused on recasting the traditional issues of public administration from this new standpoint. He based his approach on the recognition that the operations of the civil service directly shape policy decisions and the making of policy more generally. How to think of public administrations if, to use a popular formulation in this approach, ‘policies are implemented when they are formulated and formulated when they are implemented’ (Peters & Pierre, 2012, p. 3). This rejection of the dichotomy traditionally opposing public policy to administration would, with time, become a widely accepted idea associated with public management (ibid.). Remaking Managerial Governance for the Neoliberal Age Scholars of public administration have often underestimated the impact of these developments despite recognizing that many themes from public management reforms in the 1980s had already been trialled in the 1960s (Gruening, 2001, p. 2; Kramer, 1983; Lynn, 2006). The reason for this is that PPBS, and its immediate imitators, rapidly collapsed, thus creating the impression that proponents of managerial governance and systems analysis simply moved on to new things. As a result, much more stock has been put into the influence of neoliberals, with the resultant conceptual problems we identified above. However, the researchers invested in managerial governance as well as the institutions mobilized for its promotion did not go away with the demise of PPBS. Instead, they developed further many of these ideas, seeking to address some of the limitations they experienced and, more importantly, repackage these ideas for a new political context. In particular, the planners inspired by RAND gradually reframed their ideas to respond to the growing critiques of planning by realigning their message with the pro-market rhetoric of neoliberals. Mirowski and Nik-khah (2017) have documented the process by which the architects of systems analysis evolved, gradually assimilating the rhetoric of markets as a means to present these practices under a different guise. In particular, it became convenient to recast the planning activities of managers as if their optimizing techniques of decision-making were simply mimicking the workings of markets rewarding well-performing initiatives and punishing those that performed badly. A good example of this mutation can be found in the trajectory of Alain Enthoven. After having a key role in developing PPBS in the US, Enthoven later developed the idea of managed competition to capture the important role of management planning in selecting the best-performing options for health care. Managed competition was a governance

What is neoliberal about new public management?  105 structure aimed at empowering managers in health care to assess performance data and make decisions for others (who generally do not have the time or the resources to research) about which service providers to select for services. This practice of managed competition was later picked up by neoliberal reformers, driving the creation of the ‘internal market’ of the UK NHS as an infamous example of NPM reforms. By focussing on ‘cost saving’, ‘value for money’, and ‘choice’, public management as it developed from system analysis proved highly influential in the age of neoliberalism. Yet, this apparent convergence of managerial governance with the (rhetorical) celebration of the market is what continues to mislead us in discussions about the actual practices of NPM today. The fact that public management quickly drifted away from public choice concerns from the 1990s onwards simply suggests instead that from the beginning public management had little to do with neoliberalism.

CONCLUSION The variety of practices associated with NPM, and the different ways in which they have been used, has often led scholars to raise doubts over whether we can really treat NPM as a specific phenomenon. A growing literature has thus become suspicious of the term, seeing it effectively as another vogue term that can be used for everything and nothing at the same time. Dawson and Dargie (2002, p. 34) lament the fact that it is now used to capture such broad social transformations that it makes it difficult to determine what it actually covers. Martin sees NPM as a ‘slippery concept susceptible to a multitude of overlapping and sometimes contradictory statements’ (Martin, 2002, p. 291), while Pollitt (1995, p. 133) advocates that we should simply think of NPM as a ‘kind of shopping basket for those who wish to modernize the public sectors of Western industrial societies’. By contrast, we have insisted on the importance of a clear historical lineage between changes in business management, public management and public policy to show that there was a deep paradigmatic shift. The fact that managerial governance mushroomed into a wide array of practices tailored to different problems, we contend, should not be read as a proof of the vacuity of this notion. On the contrary, it represents a sign of the powerful impact of systems analysis and managerial governance on a wide range of fields. Building on a tradition of scholars who have pointed to the links between managerialism and NPM, we have argued that the best way to understand this shift is not to frame it as an instance of corporate practices applied to the public sector, but instead as a paradigmatic transformation in the practice of governance that affected both the public and corporate sector and which stem from an earlier transformation connected to the rise of a paradigm that we have called managerial governance. Taking stock of this lineage can be disorienting since the political implications of this turn are not easily reducible to our traditional political reference points. Most notably, the fact that managerial governance has been used for seemingly divergent political ends (and by various social forces in different context), may blur the politics involved in the rise of NPM. Yet, we have argued that the managerial turn has nonetheless had a clear political impact. The implementation of managerial-friendly infrastructures along with the systematic consolidation of managerial authority and the dramatic rise in compensation for managers point to a broader phenomenon of great importance: the rise of a new managerial class that has shifted the coordinates of current political struggles (Dutta et al., 2018). NPM may have arisen amidst a market euphoria, but it has materialized as an emboldened managerial class flexible to shift-

106  Handbook on critical political economy and public policy ing political currents and an entire industry of public service provision that has profited from the outsourced state. Contesting NPM therefore means not just re-establishing the traditional ethics of public service, as public administration scholars might suggest, nor straightforwardly reversing the marketization of the public sector in the ways scholars of neoliberalism think. Rather, it means to address the political economy of NPM in terms of the conflicts it has opened between those who plan public services and those who receive them, and the forms of exploitation NPM makes possible by opening new avenues for accumulation.

NOTE 1.

This is also broadly the response of the literature inspired by Foucault (2008).

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What is neoliberal about new public management?  107 Foucault, M. 2008, The Birth of Biopolitics: Lectures at the Collège de France, 1978–1979, London: Palgrave Macmillan. Gruening, G. 2001, ‘Origin and theoretical basis of new public management’, International Public Management Journal, 4, 1–25. Hood, C. 1991, ‘A public management for all seasons?’, Public Administration, 69 (1), 3–19. Hughes, O.E. 2012, Public Management and Administration, London: Palgrave Macmillan. Hyndman, N. and Lapsley, I. 2016, ‘New public management: the story continues’, Financial Accountability & Management, 32 (4), 385–408. Jones, L. 2001, ‘Symposium on public management reform and e-government’, International Public Management Review, 2 (1), 1–52. Kearney, R.C. & Hays, S.W. 1998, ‘Reinventing government, the new public management and civil service systems in international perspective: the danger of throwing the baby out with the bathwater’, Review of Public Personnel Administration, 18 (4), 38–54. Knafo, S. 2020, ‘Neoliberalism and the origins of public management’, Review of International Political Economy, 27 (4), 780–801. Knafo, S., Dutta, S., Lane, R. and Wyn-Jones, S. 2018, ‘The managerial lineages of neoliberalism’, New Political Economy, 24 (2), 235–51. Kramer, F.A. 1983, ‘Public management in the 1980s and beyond’, The ANNALS of the American Academy of Political and Social Science, 466 (1) 91–102. Light, J.S. 2003, From Warfare to Welfare: Defense Intellectuals and Urban Problems in Cold War America, Baltimore, MD: Johns Hopkins University Press. Lynn, L.E. 1998, ‘The new public management: how to transform a theme into a legacy’, Public Administration Review, 58 (3), 231–7. Lynn, L.E. 2006, Public Management: Old and New, New York: Routledge. Martin, S. 2002, ‘The modernization of UK local government: markets, managers, monitors and mixed fortunes’, Public Management Review, 4 (3) 291–307. Mirowski, P. 2008, Machine Dreams: Economics Becomes a Cyborg Science, Cambridge, UK: Cambridge University Press. Mirowski, P. & Nik-Khah, E. 2017, The Knowledge We Have Lost in Information: The History of Information in Modern Economics, Oxford: Oxford University Press. Mudge, S.L. 2018, Leftism Reinvented: Western Parties from Socialism to Neoliberalism, Cambridge, MA: Harvard University Press. O’Flynn, J. 2007, ‘From new public management to public value: paradigmatic change and managerial implications’, Australian Journal of Public Administration, 66 (3), 353–66. Osborne, D. & Gaebler, T. 1992, Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector, New York/London: Plume. Osborne, S.P. 2006, ‘The new public governance?’, Public Management Review, 8 (3), 377–87. Osborne, S.P. & McLaughlin, K. 2002, ‘The New Public Management in context’, in K. McLaughlin, S.P. Osborne & E. Ferlie (eds), The New Public Management: Current Trends and Future Prospects, London: Routledge, pp. 7–15. Peck, J. 2010, Constructions of Neoliberal Reason, Oxford: Oxford University Press. Peters, B.G. & Pierre, J. 2012, The SAGE Handbook of Public Administration, London: SAGE. Pollitt, C. 1990, Managerialism and the Public Services: The Anglo-American Experience, Oxford: Oxford University Press. Pollitt, C. 1993, Managerialism and the Public Services: Cuts or Cultural Change in the 1990s?, Oxford: Blackwell Business. Pollitt, C. 1995, ‘Justification by works or by faith’, Evaluation, 1 (2), 133–54. Pollitt, C. 2000, ‘Is the emperor in his underwear? An analysis of the impacts of public management reform’, Public Management, 2 (2), 181–200. Pollitt, C. 2007, ‘The new public management: an overview of its current status’, Administratie si Management Public, No. 8, 110–15. Pollitt, C. 2016, ‘Managerialism redux?’, Financial Accountability and Management, 32 (4), 429–47. Pollitt, C.C., Thiel, S.V. & Homburg, V. (eds) 2007, The New Public Management in Europe: Adaptation and Alternatives, London/New York: Palgrave Macmillan.

108  Handbook on critical political economy and public policy Rindzevičiūtė, E. 2016, The Power of Systems: How Policy Sciences Opened Up the Cold War World, Ithaca, NY: Cornell University Press. Savoie, D.J. 2006, ‘What is wrong with the new public management?’, in E.E. Otenyo & N.S. Lind (eds), Comparative Public Administration, Research in Public Policy Analysis and Management, Bingley: Emerald, pp. 593–602. Triantafillou, P. 2017, Neoliberal Power and Public Management Reforms, Manchester: Manchester University Press. Wilson, W. 1887, ‘The study of administration’, Political Science Quarterly, 2 (2), 197–222.

PART II METHODS

8. Historical-materialist policy analysis of climate change policies Etienne Schneider, Alina Brad, Ulrich Brand, Mathias Krams and Valerie Lenikus

The world is increasingly riven by the effects of accelerating climate change such as unprecedented heatwaves, wildfires, storms, floods and droughts. In addition, we are experiencing an immense loss of biodiversity, amounting to an extinction crisis (Hayden, Fuchs & Kalfagianni, 2020; IPBES, 2019). At the same time, 2019 saw an unprecedented eruption of a global climate protest movement (Fridays for Future, Extinction Rebellion, but also the Climate Justice Now! movement that started in 2007). Against this background, the yearly Conferences of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) have been widely considered a failure (Gills & Morgan, 2020; Newell & Taylor, 2020), as it has not been possible to reach an agreement on decisive measures to tackle the climate crisis. Instead, climate engineering, particularly so-called negative emissions technologies (NETs) supposed to remove carbon dioxide from the atmosphere, are increasingly discussed as the only option left to prevent (even more) catastrophic effects of climate change (Carton, 2019). The failure of international climate policy seems to be paradoxical as there is a strong global consensus that the climate crisis seriously affects conditions of stable social life in many parts of the world, and that adequate public policies need to be formulated and implemented to cope with climate crisis-induced problems (Harris et al., 2018; Ripple et al., 2017). So far, however, the dominant growth-oriented, resource-intensive mode of production and living that lies at the heart of the climate crisis has remained largely intact, particularly as the formulated and potentially implemented policies themselves are insufficiently designed to address and effectively transform this mode of production and living (Brand & Wissen, 2021). The main argument of this contribution is that these insufficiencies cannot merely be remedied through better policy formulation, stronger political will, or stricter implementation. Instead, based on historical-materialist policy analysis (HMPA), they need to be understood as shaped by historically developed social power structures and contradictory social interests. The aim of HMPA is to analyse how specific policies are formulated against the background of essentially competing and contradictory interests of different social forces and how, if at all, they contribute to social reproduction and the regulation of contradictory social relations and crisis tendencies. The approach thereby focuses analytically on the institutionalized polity itself and its dynamic political-economic context. HMPA was first introduced by Brand (2013) and, as historical-materialist analysis of politics, by Buckel et al. (2017; see also Kannankulam & Georgi, 2014). Since its initial formulation, HMPA has instigated critical discussions and a lively debate (Bieler, 2014; Leubolt, 2014; Paul & Haddad, 2015; Spash, 2014). The approach has also sparked a variety of empirical studies, particularly in the German-speaking area (cf. Caterina, 2018; Georgi, 2019; Haas, 2019; Holzner, 2017; Syrovatka, 2021; Wissel, 2015). 110

Historical-materialist policy analysis of climate change policies  111 HMPA radically departs from conventional approaches to policy analysis, which have regarded policies as rational action to solve given problems and perceived power as a necessary resource (Greven, 2008, pp. 27–8), focusing on a set of public actors and the so-called policy cycle, conceptualized as a process of agenda-setting, policy formulation, decision-making, policy implementation and evaluation (Howlett & Giest, 2015). At the same time, it also differs significantly from interpretative policy analysis (IPA), which, with its focus on discourse and meaning, language and argumentation and rhetoric as essential elements in the policy process, has challenged the rationalist and positivist conception of problem-solving and the dichotomy of knowledge and policy in conventional approaches (Fischer & Gottweis, 2012; Fischer et al., 2015; Hajer & Wagenaar, 2003; Paul & Haddad, 2015; Wullweber, 2019). While both HMPA and IPA critically interrogate policy-making in its embeddedness in societal contexts and power relations and share an emancipatory interest in democratizing political and social processes, HMPA assumes material structures to be effective relatively autonomously from the social construction of knowledge and discourses (in the sense of a ‘weak constructivism’; Spash, 2014). This makes HMPA a ‘close relative’ of cultural political economy (see Jessop and Sum, Chapter 3 in this Handbook), paying closer attention to the role and constellation of political actors and projects, their strategic orientations as well as of conflicts in specific policy processes (cf. Caterina, 2018). This contribution first introduces some key theoretical concepts from historical-materialist theory that underpin HMPA and outlines their implication for a historical-materialist understanding of public policies in the second section. Subsequently, in the third section, it provides a necessarily very general discussion on how climate policy can be approached through the lens of these theoretical concepts and this specific understanding of public policies. Against this background, in the fourth section, it explains how HMPA can be operationalized for empirical research, relying in particular on but also going beyond the three-step process of context, actors and process analysis suggested by Buckel et al. (2017) and Kannankulam and Georgi (2014) from the research group ‘State Project Europe’. To make the approach of HMPA more palpable, the contribution illustrates how each of these steps of HMPA can be conducted by taking the contested integration of NETs into EU climate policy as an example.

KEY CONCEPTS UNDERPINNING HISTORICAL-MATERIALIST POLICY ANALYSIS1 In contrast to most approaches to policy analysis, HMPA assumes that the researcher needs a theoretically well-founded understanding of society in general and its modes of material reproduction. Such a comprehension allows researchers to understand the dynamics, contradictions and crisis tendencies of the investigated policy fields and policies and their interlinkages with other policy areas. Therefore, HMPA builds on a long tradition of historical-materialist theory development from which this chapter introduces some crucial concepts for HMPA. Beyond these main concepts, the analysis of specific public policies and their respective contexts – for example, migration, financial, family or environmental policies – require additional theoretical concepts deriving from the critical debates within the field.

112  Handbook on critical political economy and public policy Societal Reproduction, Relationships of Forces, Hegemony and the State On the most fundamental ontological level, HMPA builds on a pivotal assumption in the Marxist tradition of social theory: the existence of certain ‘relations which human beings enter into during the process of social life, in the creation of their social life’ (Marx [1887], 1998, ch. 51, p. 878). Within the capitalist mode of production, these social relations of production and reproduction are characterized by the following structural principles: private ownership of the means of production; wage labour; competition between individual owners of means of production; and imperative of accumulation (also referred to as profit maximization) in order to continue in this competition (Bieler, 2014; Heinrich, 2012; Marx [1867], 1996, sections 1.3, 5, 21, 23). These principles also imply certain societal relations with nature, as nature tends to be subordinated to the expansion of accumulation (e.g., in the form of exploitation of natural resources and sinks) irrespective of its specific qualities and finiteness (O’Connor, 1998; Pichler, Brand & Görg, 2020). To be clear, the core structural principles do not exist in ‘pure’ form. For instance, in many so-called ‘capitalist’ societies, certain means of production are owned by the public; various economic activities within the dominant gendered division of labour are not performed as wage labour (particularly reproductive tasks); and competition is often weakened by oligopolies and state regulation. Nevertheless, a key assumption is that in capitalist societies, the structural principles constitute and characterize the dominant mode of production. A second crucial assumption of HMPA is that capitalist societies and their specific relations with nature are inherently contradictory and crisis-prone. The contradictory element lies in the fact that the imperative to accumulate tends to continuously exacerbate the exploitation of nature as well as waged and unwaged (reproductive) labour, thus undermining their own preconditions. Therefore, interests between social groups, such as social classes, class fractions or genders, are not only competing, but are partly even antagonistic – that is, irreconcilably opposed. Capitalist societies are crisis-prone because the basic contradictions have continuously destabilizing effects. Moreover, as private production and accumulation by individual capitals are in principle not mutually coordinated, the propensity to crises of overproduction or overaccumulation always exists. Consequently, as regulation theory argues, capitalist societies require a form of regulation through specific institutional forms in which these contradictions and crisis tendencies can be anticipated, expressed and processed (Aglietta, 1979; Lipietz, 1988). Apart from securing the functioning of capital accumulation (which would be an economistic misrepresentation of the regulation approach), regulation additionally means stabilizing antagonistic and contradictory social relations. The third assumption of HMPA concerns the central role of the state. Most policy analyses focus generally on the policy-making process and related governance institutions of societal significance, respectively. However, the common notion of governance tends to reduce the role of the state to one actor among others. From a historical-materialist perspective, one pivotal, albeit certainly not the only way in which capitalist contradictions and crisis tendencies are dynamically processed and regulated, is the contested identification and construal of specific problems (‘problematization’) as well as the formulation, implementation and evaluation of public policies through the state. Following Nicos Poulantzas’s ([1978] 2000) approach to materialist state theory, HMPA assumes that the state is neither neutral nor simply an instrument in the hands of the ruling class. In fact, it is relatively autonomous, which provides the capitalist state under conditions of more or less functioning liberal democracy with

Historical-materialist policy analysis of climate change policies  113 the capacity to enable, articulate and express specific compromises between different social forces. In doing so, the state does not simply cumulate pre-given interests of different social forces. Rather, it translates the latent interests of social forces into specific policies. These policies then have the potential to contribute to the regulation of the contradictions and crisis tendencies in a social formation in line with particular interests (Hirsch, 2000; Lipietz, 1988). This translation through the state allows different social forces and political actors to represent themselves and to articulate their specific competing and contradictory political interests towards certain policies. Accordingly, the state is a strategic terrain in which rivalrous and opposite interests of social forces are being organized, articulated and translated into specific policies that contribute to the regulation of contradictions and crisis tendencies. The key point is that this terrain is highly asymmetric because, as Poulantzas claims, the state itself is a social relation – ‘a relationship of forces, or more precisely the material condensation of such a relationship among classes and class factions, such as this is expressed in the state in a necessarily specific form’ (Poulantzas [1978], 2000, p. 159; see also Aronowitz & Bratsis, 2002; Gallas et al., 2011; Jessop, 1990). The notion of material condensation means that social relations of forces are historically embedded in the material structure of the state (its institutional set-up, the law, the political orientation of state officials) – that is, in its various branches and apparatuses (ministries, central bank, etc.). This implies specific, asymmetric selectivities – that is, filter mechanisms with regard to the strategies, interests, discourses and forms of action of different social interests and political actors in their possibilities to access the state and shape public policies (see also Jessop, 1990; Krams, 2019; Leubolt, 2014; Offe, 2006, pp. 95–126). In this setting, the concept of hegemony is quite instructive for a historical-materialist understanding of policy-making. Hegemony according to Gramsci refers to the mechanisms through which dominant social forces universalize their particular interests (Gramsci, 1991, p. 101; Thomas, 2011). This includes asymmetric material compromises between classes and class fractions, establishing a system of moral beliefs and forms of knowledge (including subjectivities and identities; Sum, 2009). The system also ensures ‘a long-term durability of a certain power constellation, which makes it possible to settle “conflicts” in a rule-guided manner among the parties to a compromise’ (Demirović, 2007, p.  121, own translation). These compromises, convictions and conflict management mechanisms are embedded in the state and its apparatuses, but they also permeate the entire social formation and institutions of civil society (Gramsci, 1996, p. 1267). In this respect, the current forms of hegemony are an essential feature of the corridor of policy-making. The making and maintaining of hegemony and functioning forms of regulation imply a complex process of knowledge and knowledge production. To bring the socioeconomic and the state-political spheres together, the crucial question is how the state – as a decisive instance for the formulation of public policies – can know about the manifold social problems that need to be addressed (Brand, 2013; Lenhardt & Offe, 1977). In other words, how can a certain form of ‘correspondence’ (Álvarez Huwiler & Bonnet, 2018 use the term ‘adequacy’) be established between the object of policies and the subject? One answer is that the state is also an apparatus of knowledge. As it is not obvious which policies actually contribute to social reproduction and to the successful regulation of ongoing contradictions and crisis tendencies in the medium and long term, policy-making is a constantly contested process of searching for ‘adequate’ forms of regulation. This means forms of regulation that respond to and process underlying crisis tendencies in a way that is compatible with or even conducive to the interests

114  Handbook on critical political economy and public policy of dominant social forces. Therefore, and even though the eminence and relevance of scientific knowledge is often contested among state actors and drawn upon highly selectively – particularly regarding climate change – the state must constantly produce and evaluate knowledge through so-called knowledge apparatuses. This includes research departments in their own apparatuses as well as (semi-)public research institutions, think tanks, and so on (Lenhardt & Offe, 1977; Stützle, 2011). Consequently, struggles over public policies not only take place on the institutional terrain of the state, but also cross the entire complex networks of civil society (in this respect, policies are ‘relatively autonomous from the state’, as argued by Paul & Haddad, 2015, p. 50). Nonetheless, HMPA still insists that the state is a specific terrain that condenses (and thus also centralizes) power relations and social conflicts through the process of policy-making. Any critical policy analysis therefore requires a differentiated understanding of the state in capitalist societies.

IMPLICATIONS FOR A HISTORICAL-MATERIALIST POLICY CONCEPT These theoretical concepts from historical-materialist social theory provide the basis for a notion of public policy that takes the historical materiality of capitalist social relations into account, and, as a result, provides a better understanding of the context and corridors of policy-making and formulation. Four features of a historical-materialist concept of policy deserves to be highlighted. First, based on the concepts introduced earlier, public policies can be understood as unstable compromises between social forces formulated by specific state apparatuses or even groups or alliances within specific apparatuses. Fundamentally, HMPA therefore seeks to examine how specific policies are formulated against the backdrop of competing and contradictory interests of different social forces and their strategies, and how, if at all, they contribute to social reproduction and regulation of underlying contradictions and crisis tendencies. In this sense, our approach entails two different understandings of context: at an abstract level, context in the sense of the overarching structures of capitalist economies, societies and the state; and, more specifically, the specific policy context, for instance, of certain financial, migration or environmental policies (see also the subsection on context analysis). Second, it must be emphasized that there is no ‘grand strategy’ of the state due to its sectorization into different branches and state apparatuses. Rather, the material condensations in the state apparatuses are specific, as certain structures and power relations exist in the different policy fields and conflicts, and there are tensions among various political institutions. As a result, diverse and often contradictory policies are formulated by different state apparatuses with different selectivities. In other words, the heterogeneity of the state apparatuses is a central feature of the policy process. This multiplicity of contradictory and contentious policies, whose incompatibility can potentially destabilize the process of social regulation and reproduction, raises further questions: one might ask why and how specific policies could contribute to a more or less coherent alignment of state policy and, in a more general sense, how they maintain or create a degree of consistency within the state. Accordingly, Jessop has introduced the notion of ‘state projects’, ‘which give some operational unity to the state as an apparatus’, the ‘essential theoretical function [of which] is to sensitize us to the inherent improbability of the existence of a unified state’ (1990, p. 161).

Historical-materialist policy analysis of climate change policies  115 Third, specific procedures are declared as necessary, and particular apparatuses as competent for dealing with specific policy issues. In other words, the state claims competence for dealing with many societal conflicts and problems and gives a certain durability to the act of defining and dealing with conflicts and problems. Fourth and finally, a historically sensitive perspective enables an analysis of how particular forms of policy-making become hegemonic themselves. For instance, a comprehension of policies formulated and implemented by a centralized state during Fordism will be different from one that understands public policies as parts of broader structures and modes of governance in the post-Fordist era.

APPROACHING CLIMATE CHANGE POLICY THROUGH HMPA The theoretical notions and the concept of policy sketched above open a distinct perspective on climate change policies. The climate crisis is arguably one of the most paramount examples of the contradictory character of capitalist social relations and capitalist relations to nature. Most crucially, while the specific characteristics of fossil energy were pivotal to the ascent of capitalism in the first place (Malm, 2016), their ever-growing exploitation and use driven by the imperative to accumulation and growth has led to a sustained and by now dramatic surge in atmospheric greenhouse gas (GHG) concentrations. Ensuing extreme weather events such as heatwaves, wildfires, storms, floods or droughts have increasingly destabilizing effects, which not only incur mounting economic costs but also threaten capital accumulation in important sectors such as the insurance industry or construction and real estate. Against this background, climate change policy can be understood as attempts at dealing with and processing these underlying contradictions in a process of regulation that is inherently contested, unstable and dynamic. Climate change policies are formulated across a variety of institutional terrains and scales with distinct selectivities, ranging from the local and regional level to the national and EU level up to the level of international climate policy under the UNFCCC. A large body of research has focused on the trajectories and workings of international climate policy and diplomacy in particular (cf. Gupta, 2010), where the 2015 Paris Agreement now sets the goal to limit global warming to well below 2°C, preferably to 1.5°C. However, from the perspective of HMPA, the negotiations and agreements in international climate policy and diplomacy are but the ‘tip of the iceberg’ (Aykut, 2016). They cannot be adequately understood in an isolated manner but only against the background of structuring context and corridor of capitalist social relations and related competing and contradictory interests of different social forces. On a very general level, this pertains to the way the climate crisis is construed as a problem, or ‘problematized’, through the dominant international climate policy terrains. To be sure, in the sense of ‘weak constructivism’ (Spash, 2014), HMPA holds that the biophysical reality of anthropogenic climate change exists relatively independent from the way it is perceived and construed. However, the specific ways in which climate change has been constructed and perceived is relatively contingent and has far-reaching implications for how it is addressed politically. One of the most prominent hegemonic representations of climate change in this respect is the notion of the Anthropocene (Crutzen, 2002), referring to a geological epoch in which humankind has become the determining force for the earth system. Like other notions that address climate change predominantly from a global perspective in terms of ‘planetary boundaries’ (Rockström et al., 2009) or in terms of responsibilities of the entire collective

116  Handbook on critical political economy and public policy of earth population, the notion of the Anthropocene obscures that both the responsibility for causing climate change as well as its adverse effects are distributed highly unequally across the globe but also within societies of the Global North and South. As such, hegemonic representations of climate change foreclose a deeper understanding of specific social relations, interests and structures that lie at the heart of the climate crisis, such as emission-intensive processes of accumulation and related corporate interests or emission-intensive patterns of consumption as part of an ‘imperial mode of living’ (Brand & Wissen, 2021; Lövbrand et al., 2015; and on the alternative notion of ‘Capitalocene’, Moore, 2016). In a similar vein, the focus of international climate policy on global carrying capacities and temperature targets is highly abstract and overrides the discussion on which climate change impacts are tolerable in specific regions and how social relations would need to be transformed on the ground to effectively mitigate climate change (Bauriedl, 2015). The Intergovernmental Panel on Climate Change (IPCC), the most important ‘knowledge apparatus’ in international climate policy tasked with compiling and synthesizing existing knowledge about climate change and its consequences, has played a decisive role in this framing. By relying predominantly on highly complex integrated assessment models to assess the effects of specific mitigation scenarios and trajectories, it has become ‘an important player in making futures, not just forecasting them – in putting certain options on the table, while potentially obscuring others’ (Beck & Mahony, 2018, p. 12). Besides exploring hegemonic representations of climate change and how they are produced through specific knowledge apparatuses with respective selectivities, HMPA also offers an understanding of the associated hegemonic forms of climate policy-making. Both international and national climate policies have relied predominantly on market- and technology-based strategies that – at best – promote ecological modernization and ‘techno-fixes’ but are limited in addressing underlying social relations that drive climate change (Low & Boettcher, 2020; Markusson et al., 2017). A classic example of market-based ‘solutions’ are emission accounting and trading systems such as the international or EU Emissions Trading System (ETS), deemed to achieve climate targets in the most cost-effective way. International transfer of carbon credits has been facilitated by instruments such as ‘Joint Implementation’ or the ‘Clean Development Mechanism’, which help to compensate for failed emissions reductions by implementing or financing sink projects elsewhere (Røttereng, 2018). In terms of technology-based ‘solutions’, hegemonic climate policy-making has heavily relied on approaches such as carbon capture and storage (CCS) or biofuels. What all these strategies have in common is that they ‘functionally permit the delaying of comprehensive decarbonization’ (Low & Boettcher, 2020, p. 1) – not just by failing to trigger the disruptive destabilization of entire socio-technical systems actually needed (as in the case of emissions trading and carbon pricing; Rosenbloom et al., 2020), but also by permitting the ‘offset’ of failed emission reductions (Joint Implementation, Clean Development Mechanism) and even locking in carbon infrastructures and generating new accumulation potentials for fossil capital (CCS, biofuels). In a still rather general sense, these forms of climate policy-making can be understood as asymmetric, unstable compromises to address climate change without, however, challenging core vested interests or underlying dynamics such as economic growth. At the same time, they also seek or promise to unlock new fields for ‘green’ accumulation, based on the myth of decarbonized growth – that is, that economic growth can be absolutely decoupled from material throughput and GHG emissions (Haberl et al., 2020). Crucially, though, as these policies are formulated and implemented in a variety of international policy terrains and state appara-

Historical-materialist policy analysis of climate change policies  117 tuses that condense specific constellations of interests and relations of forces (Brunnengräber, 2013), they do not form a coherent overarching strategy. Rather, there are competing policies and strategies that in part undermine each other. For instance, while the EU ETS in principle aims at making emission-intensive production more costly, the German economics ministry makes sure that certain energy-intensive industries received comprehensive compensating state aid, thereby effectively thwarting the mechanism in this respect. Such policy incoherence implies a fundamental inconsistency between goal formulation and climate policy action (Geden, 2016) and has led to continued attempts to strengthen policy coherence through state projects such as climate policy integration frameworks (Adelle & Russel, 2013). Ultimately, since the hegemonic forms of climate policy-making have proven largely inadequate or insufficient to mitigate climate change, there is a constant and contested process of searching for new forms of regulation and compromise. As it is increasingly recognized that emission reduction targets can no longer be reached simply through at-source emission reduction and existing sink capacities, so-called NETs have been integrated into international and EU climate policy – a recent development that we will use below to illustrate how to operationalize HMPA for empirical research. NETs, also referred to as carbon or greenhouse gas removal technologies, also encompasses more recent ideas around using technological interventions such as bioenergy with CCS or direct air CCS to compensate for future residual emissions as well as an eventually inevitable overshooting of the CO2 budget (Minx et al., 2018). While prevalent in both IPCC and EU mitigation scenarios and strategies, NETs remain ‘largely technological imaginaries’ thus far (McLaren, 2020, p. 2412) and major uncertainties exist whether carbon dioxide removal through NETs can adequately substitute for at-source emissions reduction as well as whether sustainable and socially acceptable delivery of NETs is possible at all on a large scale (Anderson & Peters, 2016). Therefore, the inclusion of NETs in climate policy is highly controversial and deeply political. For instance, using NETs may not only help the fossil fuel industry reduce its amount of stranded assets but may also allow for higher residual emissions across various economic sectors, thus reducing the pressure to cut emissions (Carton, 2019), resulting in what has been discussed as ‘mitigation deterrence’ through NETs (Markusson, McLaren & Tyfield, 2018).

OPERATIONALIZING HISTORICAL-MATERIALIST POLICY ANALYSIS Based on the theoretical foundations introduced in the second section above, HMPA analyses public policies against the background of complex social relations of (re-)production (including societal relations with nature) that are contradictory, dynamic, crisis-prone and lead to latent or manifest conflicts. HMPA thereby understands conflicts as clashing of competing or antagonistic interests of two or more collective actors. These conflicts over particular societal problems and their political management through policies are, in turn, the point of departure in HMPA. To be clear: policy processes do not necessarily lead to manifest conflicts. Accordingly, not every social or political conflict results in policies. The decision to depart from conflicts in policy processes is therefore first and foremost a heuristic one. It is based on the assumption that policy processes that are associated with social and political conflicts are most likely to provide information about the crucial underlying interests and constellations of

118  Handbook on critical political economy and public policy forces that shape the contested reproduction of social relations (for a more detailed elaboration of how to operationalize HMPA, cf. Brand et al., 2022). As the key concepts of HMPA are mostly situated at a high level of abstraction, practical research with HMPA can rely on retroduction as a method of data analysis, a ‘continuous, spiral movement between the abstract and the concrete, between theoretical and empirical work, involving both an interpretative and a causal dimension of explanation’ (Belfrage & Hauf, 2017, p. 260). Retroduction consists of an inductive moment in the form of various methods of fieldwork, and of a deductive moment whereby the researcher applies existing theories to the research object to create an understanding of the context and processes of an investigated policy (Belfrage & Hauf, 2017; Kempster & Parry, 2014, p. 88). As a way to further operationalize HMPA for empirical research, a three-step process, consisting of (1) context analysis; (2) actor analysis; and (3) process analysis (as suggested by Buckel et al., 2017; Kannankulam & Georgi, 2014) has proven highly instructive in many analyses relying on HMPA. In the remaining subsections, we will introduce this three-step approach and illustrate it through the empirical case of NETs in climate policy. At the same time, we will also provide some suggestions on how to develop the three-step approach further. An HMPA analysis of the contested integration of NETs into climate policy radically differs from other approaches to policy analysis: while conventional approaches would focus on how rational policy-making actors judge the substitutability of NETs for mitigation in terms of climate solutions and design climate policies accordingly, IPA would specifically pay attention to how framings and sociotechnical imaginaries – that is, pictures, visions and promises of social futures that inform and shape research and technology development – mould climate policy-making in the context of NETs. HMPA, by contrast, provides the analytical tools for a granular exploration of the actors, strategies and interests that shape the integration of NETs into climate policy against the background of social relations that are contradictory, dynamic and crisis-prone. In terms of methods, the three steps of analysing the contested integration of NETs into EU climate policy with HMPA could rely on in-depth qualitative document analysis, focusing on and systematically classifying and analysing policy-relevant studies, policy papers, public statements, policy proposals and official policy documents (regulations, legislative texts). This should be combined with expert interviews with close observers of EU climate policy from think tanks, non-governmental organizations (NGOs), academia, EU policy advisers and policy-makers selected on the basis of document analysis. The exclusive knowledge obtained through these interviews will serve to uncover realms and dynamics of the policy-making process that are inaccessible through document analysis. It is crucial to note that the circular, iterative research process based on the three-step HMPA differs from the final presentation of results. The latter often suggests a high degree of coherence, while in reality the research process can be much messier. For example, the extended three-step method could also start with a process analysis, followed by context and actor analysis. The research interest defines the scope and role of each part of the analysis. The research may focus on the problem definition of certain policies to mitigate the impacts of climate change or on the power relations within an institution regarding a certain conflictual policy. Accordingly, the importance of one part of the analysis – process, context or actor analysis – increases in relation to the others. Hence, there is certainly no ready-made template for HMPA that can be reproduced regardless of the specific policy process being examined and the particular research interest.

Historical-materialist policy analysis of climate change policies  119 Context Analysis As societal or political conflicts serve as the main analytical point of departure of HMPA, the context analysis aims at reconstructing the particular conflict under investigation ‘as a specific historical situation to which social and political forces reacted differently and in opposition to each other, and which was brought about by a complex set of historical conditions and processes’ (Kannankulam & Georgi, 2014, p. 63). To this end, Buckel et al. (2017) and Kannankulam and Georgi (2014) suggest first locating these conflicts ‘in their broader historical context’ and explicating ‘the historical and material conditions that gave rise to the problems at the heart of the investigated conflict’ (ibid.). The guiding research question here is, why and due to what circumstances did a particular conflict arise at a specific time and in a specific form? Taking the contested integration of NETs into EU climate policy as an example, the context analysis would trace why and how NETs have occurred in climate policy discourse and policy-making in the context of major developments in international and EU climate policy. This would have to consider main trajectories of international climate policy as outlined above, particularly its focus on market-based and technological ‘solutions’, and how they have informed and shaped EU climate policy, relying particularly on critical literature on the dominant forms of international climate policy (cf. Moe & Røttereng, 2018). It would also identify the role of the main institutional terrains and apparatuses in EU climate policy as well as their specific selectivities, based on the literature on the multilevel and polycentric institutional architecture of EU climate policy (cf. Rayner & Jordan, 2013) as well as critical political economy (CPE) contributions on European (economic) integration more generally (cf. Cafruny & Ryner, 2017). The context analysis also pays attention to particular events and their impact, such as the issue-specific deliberations within the UNFCCC or the publication of the IPCC’s (2018) special report on the impacts of global warming of 1.5°C whose mitigation scenarios reinforced growing perception that targets can no longer be reached by means of ‘conventional’ mitigation only, while deep decarbonization is increasingly perceived as an existential threat to specific industries, particularly fossil industries. Actor Analysis The actor analysis starts by identifying the relevant political actors (see also Buckel et al., 2017): How and why have they reacted differently and oppositely to the conflict situation identified in the context analysis? Which actors became active, how do they perceive the upcoming key problems and how have they positioned themselves? Second, the actor analysis aims at analysing the entire actor constellation by clustering different groups or coalitions of actors. In particular, the following questions are addressed: Which groups of actors with similar positions and overarching goals can be identified? What is the main strategic orientation of these groups or coalitions, and with which political initiatives and projects do these actors follow their goals? What power resources – organizational, discursive, and symbolic as well as financial power resources, access to media and state apparatuses, systemic conflict capacities – do these actors possess or have access to? Third, the actor analysis examines the underlying interests of social forces and classes that significantly shape the conflicts between individual actors or actor coalitions. Linking political actors to social forces and their material interests is arguably one of the biggest challenges in HMPA. While HMPA presumes that con-

120  Handbook on critical political economy and public policy flicts over policies are part and product of social struggles and conflicts between social forces such as classes, class fractions and other social forces, political actors do not represent class interests and usually not even the interests of individual class fractions in any ‘pure’ or direct form. Rather, they generally already articulate and represent specific compromises between different social interests in a mediated form that involves complex intersections with lines of racism, gender and sexual orientation. Regarding the contested integration of NETs into EU climate policy, the actor analysis would look at policy-relevant actors, focusing not only on EU institutions and branches within these institutions, political groups in the European Parliament and member states, but also business actors of different industries (e.g., agribusiness, bioeconomy, fossil fuel industry, emissions-intensive non-energy industries and the ‘green economy’), NGOs and think tanks. The goal is to reveal which actors are the driving forces behind the integration of NETs into EU climate policy, why and through which political projects they promote NETs, and which actors are the key obstructors to this integration. This enables the assessment of lines of conflicts in the politics of NETs in the EU, alliances of actors in terms of shared framings, overarching strategic orientations as well as underlying material interests of social forces. Even though solid actor constellations do not exist yet (but see Geden & Schenuit, 2020), the fossil fuel industry will arguably be among the staunch supporters of NETs, as they not only allow the further delay of the devaluation of fossil assets (Carton, 2019), but also open new accumulation potentials, such as running CCS facilities or using captured CO2 as a tool in enhanced oil recovery (McLaren, 2020). They may enter political alliances with large agribusiness, benefitting from surging demand for biomass, or more generally with emissions-intensive industries such as the car and steel industry seeking to delay deep decarbonization. Progressive environmental NGOs but also ‘green industries’ whose business model is premised on providing infrastructures and technologies for deep decarbonization are likely to form resistance to the integration of NETs as a way to delay decarbonization, albeit for different reasons and with very different strategies and political projects. Process Analysis The process analysis ‘reconstructs the dynamic process in which the investigated conflict… unfolded through different phases and turning points, and against the background of its broader historical context’ (Kannankulam & Georgi, 2014, p. 67). As a first step, it is crucial to identify the key events and decisions in the policy process and derive a periodization from them. Second, the central questions are: How and why were certain actors or groups of actors able to prevail over others? Did relevant conflicts occur within the groups of actors or hegemonic projects identified in the actor analysis? What compromises emerged, who articulated them and how did they mediate the relevant conflicting positions and interests? Which selectivities of institutional terrains were decisive in this regard – that is, which structurally inscribed mechanisms of filtering were crucial in this process in that they determined priorities and favoured certain paths of action over others? Were there conflicts over which actors and apparatuses will be responsible for the implementation of specific policies and how they are evaluated, and how were these conflicts resolved? In the case of the integration of NETs into EU climate policy, the process analysis explores the decisive moments, turning points and important conflicts across different stages of the policy process. It identifies the role of crucial institutional terrains in this process (e.g.,

Historical-materialist policy analysis of climate change policies  121 ‘pre-institutional’ expert and civil society discourse, within the European Commission, in the European Parliament, the European Council and the Council of Ministers as well as the formal and informal trialogue process) and how their selectivities have shaped the policy process. In particular, it would seek to understand the selectivities through which specific expert knowledge over NETs is considered relevant and how specific political approaches and strategies towards NETs condition, and are translated into, policy formulation and implementation. This enables the understanding of which specific policy options regarding the integration of NETs were selected over their alternatives and how this occurred. In so doing, the process analysis traces across the different phases of the conflict how the relevant actors opposed or promoted specific framings and actions to introduce NETs into EU climate policy. Even though the integration of NETs into EU climate policy is still in its infancy, we could already discern some potential strategies in our initial research on the subject. For instance, actors promoting NETs may initially seek to dissociate NETs from largely negative connotations of geo- or climate engineering (Minx et al., 2018, p. 13). Another strategy is to refer to generic notions of ‘carbon dioxide removal’, which intentionally blurs the boundaries between ‘natural’ land-use sinks and ‘engineered sinks’ (Geden, Peters & Scott, 2019). These strategies could possibly provide the basis from which to forge broader political coalitions or split actor coalitions advancing ‘conventional’ climate change mitigation approaches in the near future. When analysing strategies to promote or prevent the integration of NETs into EU climate policy, it is also crucial to understand how actors in favour of NETs attempt to establish links to existing forms of EU climate policy. For instance, a pivotal political project in this regard, already elaborated by individual think tanks or knowledge apparatuses, could be the integration of NETs into the EU ETS, so that price dynamics determine how much emissions reduction is substituted by carbon dioxide removal through NETs (Rickels et al., 2020). If this political project gains traction, this may help to forge broader political coalitions behind NETs as important elements of ‘cost-efficient’ climate change mitigation. Thereby, the process analysis step takes into account the fact that the distribution of competences in climate policy between the EU institutions and the member states is essentially contested, paying attention to scalar strategies of up- or downscaling and forum-shifting in multilevel EU climate policy-making (Jessop, 2005).

CONCLUSION In this chapter we argued that HMPA is a theoretically informed research perspective that brings together CPE and a critical analysis of public policies. It focuses primarily on the socioeconomic and political context of particular policies: it pays particular attention to the dynamic ‘corridor’ of policy-making that must be taken into account without denying contingencies and the relative openness of political processes. The state is to be seen less in its problem-solving function, but rather as an ordering and structuring mechanism of policy against the background of essentially competing and contradictory social interests. HMPA is not primarily interested in the effective design of policy, but in its contested constitution and its role in the reproduction of societal relations of domination as well as in the regulation of structural contradictions and crisis tendencies. We have therefore suggested four key features of a historical-materialist notion of (public) policy. First, policies are unstable compromises among social forces, which are formulated

122  Handbook on critical political economy and public policy through specific state apparatuses. Second, (public) policies are formulated through different state apparatuses, making their heterogeneity a key element of the policy process. Hence, different structures and power relations exist in policy fields, resulting in tensions among different state apparatuses and political institutions. In this context, HMPA can detect, third, a contradiction between the state claiming competence in dealing with societal conflicts and being divided into specific policy fields, in which social actors must articulate demands, interests and values. Fourth, certain forms of policy-making themselves become hegemonic. Regarding NETs, such a perspective can reveal that the integration of NETs into EU climate policy is not just a result of ‘rational’ decision-making or the efficacy of sociotechnical imaginaries, but is shaped by actors, strategies and interests. Even though the integration of NETs into EU climate policy is still in the early stages, we can already observe how fossil capital such as Shell advance NETs (Carton, 2019), and how other capital fractions contribute to the ‘normalization’ of NETs by adopting seemingly ambitious ‘net-zero’ or even ‘climate-negative’ targets (Data-Driven EnviroLab & NewClimate Institute, 2020). At the same time, it discloses how key state apparatuses with distinct selectivities such as the European Commission (2018) or knowledge apparatuses such as Kiel Institute for the World Economy (Rickels et al., 2020) articulate different and in part competing approaches to how to introduce NETs into EU climate policy, both primarily within the confines of hegemonic market-based climate policy-making (i.e., by integrating NETs into the EU ETS). But HMPA also sensitizes us to the inherent contestedness of such policy-making processes and alternative political initiatives such as the political initiative of separate targets for emission reduction and negative emissions (McLaren et al., 2019) to counteract attempts at mitigation deterrence through NETs. We believe that HMPA offers important theoretical perspectives and methodological landmarks that can inform studies of policy-making processes that, while sometimes imponderable, can be highly instructive and compelling. Particularly important in the case of climate change policy, it enables us to go beyond narrow conceptions of policy failure in terms of inadequate implementation or poor design and provides opportunities to understand the structural, underlying determinants of such insufficiencies. As such, it offers important insights not only into how climate policy needs to be changed to become effective, but also how the terrains and apparatuses that formulate and implement them and the hegemonic forms of policy-making themselves need to be altered in the process of a comprehensive and radical social-ecological transformation.

NOTE 1.

This section as well as parts of the fourth section are a revised version of passages from Brand et al. (2022).

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Historical-materialist policy analysis of climate change policies  125 Malm, A. 2016, Fossil Capital: The Rise of Steam Power and the Roots of Global Warming, London: Verso. Markusson, N.O., Dahl Gjefson, M., Stephens, J.C. & Tyfield, D.P. 2017, ‘The political economy of technical fixes: the (mis)alignment of clean fossil and political regimes’, Energy Research & Social Science, 23, 1–10. Markusson, N., McLaren, D. & Tyfield, D. 2018, ‘Towards a cultural political economy of mitigation deterrence by negative emissions technologies (NETs)’, Global Sustainability, 1, e10, accessed 20 December 2022 at https://​doi​.org/​10​.1017/​sus​.2018​.10. Marx, K. [1867] 1996, Das Kapital, Vol. 1, in Marx-Engels-Werke (MEW), Vol. 23, Berlin: Dietz Verlag for the Institute for Marxism-Leninism at the Central Committee of the SED. Marx, K. [1887] 1998, Das Kapital, Vol. 3, in Marx-Engels-Werke (MEW), Vol. 25, Berlin: Dietz Verlag for the Institute for Marxism-Leninism at the Central Committee of the SED. McLaren, D. 2020, ‘Quantifying the potential scale of mitigation deterrence from greenhouse gas removal techniques’, Climatic Change, 162, 2411–28. McLaren, D.P., Tyfield, D.P. & Willis, R. et al. 2019, ‘Beyond “net-zero”: a case for separate targets for emissions reduction and negative emissions’, Frontiers in Climate, 1 (4), accessed 20 December 2022 at https://​doi​.org/​10​.3389/​fclim​.2019​.00004. Minx, J.C., Lamb, W.F. & Callaghan, M.W. et al. 2018, ‘Negative emissions – part 1: Research landscape and synthesis’, Environmental Research Letters, 13 (6), Article 063001. Moe, E. & Røttereng, J.-K.S. 2018, ‘The post-carbon society: rethinking the international governance of negative emissions’, Energy Research and Social Science, 44, 199–208. Moore, J.W. (ed.) 2016, Anthropocene or Capitalocene? Nature, History, and the Crisis of Capitalism, Oakland, CA: PM Press. Newell, P. & Taylor, O. 2020, ‘Fiddling while the planet burns? COP25 in perspective’, Globalizations, 17 (4), 580–92. O’Connor, J. 1998, Natural Causes: Essays in Ecological Marxism, New York: Guilford Press. Offe, C. 2006, Strukturprobleme des kapitalistischen Staates: Aufsätze zur Politischen Soziologie, Frankfurt am Main/New York: Campus-Verlag. Paul, K.T. & Haddad, C. 2015, ‘Marx meets meaning: a critical encounter between materialism and interpretative policy analysis. A reply to Brand’s State, context, correspondence’, Österreichische Zeitschrift für Politikwissenschaft, 44 (1), 46–52. Pichler, M., Brand, U. & Görg, C. 2020, ‘The double materiality of democracy in capitalist societies: challenges for social-ecological transformations’, Environmental Politics, 29 (2), 193–213. Poulantzas, N. [1978] 2000, State, Power, Socialism, London: Verso. Rayner, T. & Jordan, A. 2013, ‘The European Union: the polycentric climate policy leader?’, WIREs Climate Change, 4 (2), 75–90. Rickels, W., Proeßl, A. & Geden, O. et al. 2020, ‘The future of (negative) emissions trading in the European Union’, Working Paper No. 2164, Kiel Institute for the World Economy. Ripple, W.J., Wolf, C. & Newsome, T.M. et al. 2017, ‘World scientists’ warning to humanity: a second notice’, BioScience, 67 (12), 1026–8. Rockström, J., Steffen, W. & Noone, K. et al. 2009, ‘Planetary boundaries: exploring the safe operating space for humanity’, Ecology & Society, 14 (2), Article 32. Rosenbloom, D., Markard, J., Geels, F.W. & Fuenfschilling, L. 2020, ‘Why carbon pricing is not sufficient to mitigate climate change – and how “sustainability transition policy” can help’, Proceedings of the National Academy of Science (PNAS), 117 (16), 8664–8. Røttereng, J.-K.S. 2018, ‘The comparative politics of climate change mitigation measures: who promotes carbon sinks and why?’, Global Environmental Politics, 18 (1), 52–75. Spash, C.L. 2014, ‘Policy analysis: empiricism, social construction and realism’, Österreichische Zeitschrift für Politikwissenschaft, 43 (4), 401–10. Stützle, I. 2011, ‘The order of knowledge: the state as a knowledge apparatus’, in A. Gallas, L. Bretthauer, J. Kannankulam & I. Stützle (eds), Reading Poulantzas, Pontypool: Merlin Press, pp. 170–85. Sum, N.-L. 2009. ‘The production of hegemonic policy discourses: “competitiveness” as a knowledge brand and its (re-)contextualization’, Critical Policy Studies, 3 (2), 184–203. Syrovatka, F. 2021, ‘Labour market policy under the new European economic governance: France in the focus of the new European labour market policy’, Capital and Class, 45 (2), 283–309.

126  Handbook on critical political economy and public policy Thomas, P. 2011, The Gramscian Moment: Philosophy, Hegemony and Marxism, London: Haymarket Books. Wissel, J. 2015, Staatsprojekt Europa: Grundzüge einer materialistischen Theorie der Europäischen Union, Münster: Westfälisches Dampfboot. Wullweber, J. 2019, ‘Constructing hegemony in global politics: a discourse-theoretical approach to policy analysis’, Administrative Theory and Praxis, 47 (3) 148–67.

9. Beyond methodological Fordism: the case for incorporated comparisons Alexander Gallas

In the field of political economy, single-country case studies or comparative studies of a small number of countries are common currency. Both have contributed significantly to our understanding of different capitalist social formations and the fact that institutions and configurations of actors at the national level matter and differ. Through establishing differences and communalities across nation-states, they enhance our understanding of what the capitalist mode of production is, and what specificities of macro-regional or national contexts are. Many of those studies (see, for example, Esping-Anderson, 1990; Hall & Soskice, 2001; Streeck, 2009) exhibit a research strategy that can be called ‘methodological Fordism’. With this term, I refer to a set of methodological choices starting from the implicit assumption that Fordism is the standard mode of capitalist development. This does not mean that all research in this mould studies ‘Fordist’ or ‘post-Fordist’ configurations or uses the corresponding terminology. My point is that it has a family resemblance with much of the scholarship that explicitly does so (see, for example, Aglietta, 1979; Baccaro & Pontusson, 2016; Koch, 2006; Lipietz, 1996) and shares with it a number of guiding assumptions: the primary unit of analysis is the nation-state; the study of manufacturing and of the labour relations in the sector – frequently referred to as ‘industrial relations’ (see Nowak, 2021) – are key to understanding national political economies; and contemporary capitalism can be deciphered by focussing on a relatively small number of highly industrialized core countries. Notably, ‘methodological Fordism’ entails a specific mode of comparison. It starts from the presumption that capitalism consists of a collection of capitalist nation-states that form ‘discrete bounded units’, and whose relationship is ‘external’ (Hart, 2018, p. 376). In Philip McMichael’s words (1990, p. 389), these units are subjected to an ‘analytic comparison’ – clearly delimited cases are compared with the aim of identifying and separating case-specific and common traits. Due to this being research in the field of political economy, these traits are either national or macro-regional specificities or transnational invariances. They often refer to ‘varieties of capitalism’, the title of Peter Hall and David Soskice’s influential edited volume on the ‘comparison of national economies’ (2001, p. v). Due to its interest in institutions and regulation, research of this type tends to exhibit ‘a normative orientation to social democracy’ (Bruff, 2021, p. 1278). In a nutshell, it enhances our understanding about historical or geographical variation within capitalism, but also invites what often prove to be, on closer inspection, inadequate generalizations about its nature from a small number of cases. In particular, analyses that explicitly commit to examining ‘Fordism’ and ‘post-Fordism’ are indicted for making sweeping statements about the nature of capitalism in the second half of the 20th century. According to critics (Baca, 2004; Gambino, 2007), they have a tendency to disregard its instabilities, the specificities of different geographical and historical settings and the ‘path-shaping’ role of workers’ struggles. And conversely, important traits of capitalism become visible only if one takes a longer historical 127

128  Handbook on critical political economy and public policy and a broader geographical view – for example, the important fact that labour in capitalism often was, and still is, informal and bounded (Gordon, 2019; van der Linden, 2008). An alternative is offered by the assumption that there is one and the same global and capitalist social order, which exhibits a degree of ‘variegation’ (Jessop, 2014, 2015; Peck & Theodore, 2007), reflected in specificities located at the macro-regional, national, regional or local level. In the research process, this translates into a commitment to study together global political-economic mechanisms and tendencies as well as case-specific configurations. Against this backdrop, I discuss in this chapter how to conduct empirical research in the area of political economy from this global vantage point. I approach this challenge by drawing upon McMichael’s notion of ‘incorporated comparison’ and outlining a distinct research design based on it, which, in line with my own research interests and expertise, is located in the field of the political economy of labour. Accordingly, I will discuss, in the next section, a research problem concerning class relations in post-industrial settings, which serves as an exemplar for discussing general, methodological questions. I am going to present a research question, but I am not going to give a definite answer to it. Instead, I will use it to discuss, in the succeeding sections, critical problems that often occur in the process of doing empirical research from a global vantage point: the dangers of subsumptionism, an opportunistic mode of investigation where empirical research is reduced to seeking out evidence in line with one’s theoretical assumptions; the limitations of approaching global issues from a quantitative angle; the challenge of reconciling analytical breadth and depth; and the need to select suitable cases and data.

THE RESEARCH PROBLEM: WHERE IS THE WORKING CLASS IN POST-INDUSTRIAL SETTINGS? Materialist approaches to labour studies highlight the intrinsic link between the organization of work in capitalism and class relations; they look at labour relations as class relations. Karl Marx ([1867] 1976, p. 416) famously argued that the historical emergence of the working class as a collective actor was a reaction to the emergence of industrial production along capitalist lines and the tendency of capitalist competition to extend the working day ever more (‘the production of absolute surplus value’). In an age where parts of the world are marked by sustained processes of de-industrialization (Kollmeyer, 2018; Rodrik, 2016), this raises the question of what happens to the working classes in those areas. There are broadly two positions in the literature on this issue. One side argues that the type of collective agency that Marx and his followers used to ascribe to industrial workers is vanishing. This position can be found, for example, in Manuel Castells’s classic study The Rise of the Network Society ([1996] 2010; see Gorz, 1980; Mason, 2015). Castells argues that we have entered a ‘post-industrial period’ (p. 225) characterized by the emergence of ‘informational capitalism’ (p. 18) – and that class relations have changed fundamentally in the process: ‘Capital tends to escape in its hyperspace of pure circulation, while labor dissolves its collective entity into an infinite variation of individual existences’ (pp. 506–7). The counterargument is that the decline of manufacturing does not amount to an end to waged work, and that working classes are being reconstituted outside industrial production. Among others, Leo Panitch takes this position (2001, p. 367): ‘in the advanced capitalist world the decline in the size of the traditional industrial labour force is accompanied by the proletarianization of many service and professional occupations and the

Beyond methodological Fordism: the case for incorporated comparisons  129 spread of more unstable, casual and contingent employment’. This creates space for new forms of collective agency – or ‘new strategies for labour’, as Panitch puts it (ibid.; also see Arruzza, Battacharya & Fraser, 2019, p. 24; Moody, 2017). This debate may sound scholastic at first, but has far-reaching political implications: if the working class is in terminal decline thanks to de-industrialization, recent attempts to revitalize class politics (see, for example, Ainsley, 2018; Blanc, 2019; Candeias, Dörre & Goes, 2019; Demirović, 2020; Devine & Sensier, 2017) are futile; if new working classes are emerging, the opposite may be the case. To advance in both the class theoretical and political debates, it makes sense to resort to systematic empirical research. This may tell us whether it is possible to identify processes of class formation outside manufacturing, which would suggest that Panitch is right, or whether this is not the case, which would lend credence to Castells’ point of view. One possible area where this can be examined systematically is strike research. If we follow the Marxian line of argument, labour disputes are catalysts of class formation. Consequently, a research question worth investigating in this context is what the class effects of strikes in non-industrial sectors are – or in how far they contribute to working class formation.

THE TRAP OF SUBSUMPTIONISM The research question raised in the preceding section is not at the forefront of this chapter. Rather, it serves me as a reference point for a discussion on how to conduct empirical research from a global vantage point in the field of the political economy of labour. Arguably, such research is only possible if one operates on the grounds of a global conceptualization of capitalism (see Bieler & Morton, 2018, p. 94; Jessop, 2015, pp. 69–72). If we see the capitalist mode of production as a global phenomenon from the start – and if our conceptualization comprises the ‘world market’ as ‘the ultimate horizon of competition’ between capitals (Jessop, 2015, p. 66) – we are unlikely to mistake specificities of 21st-century capitalism in North America or Western Europe as general characteristics of capitalism. And yet, a new critical problem emerges. By definition, research from a global vantage point is further away from macro-regional, national, regional or local specificities than research based on theories with a more limited spatial field of validity (see McMichael, 1990, p. 391). From the perspective of research pragmatics, it is only possible to examine a global research field if one disregards a lot of information and resorts to abstraction and simplification. It is tempting to deal with the wealth of information one is exposed to by equating one’s abstract-simple conceptualization of global capitalism with its observable reality – that is, to see observations that conform to one’s theoretical assumptions about the nature of capitalism as ‘proof’ that the latter are full descriptions of social reality. This is often the case with ‘encompassing comparisons’ (Tilly, 1984, cited in McMichael, 1990, p. 386), which start from global structures and, in a second step, situate cases in them. Using a Jessopian turn of phrase (Jessop, 1982, p. 73; 1990, p. 251), research designs of this type run the risk of falling into the trap of subsumptionism. With this concept, I refer to a specific type of methodological opportunism: the function of empirical research is reduced to identifying cases and data sets that are fully in line with the predictions that follow from one’s theoretical assumptions; research becomes a tick-box exercise where cases and data are ignored that go against one’s assumptions. A classic example of subsumptionism provided by Bob Jessop (1982, pp. 71–2) is the ‘state monopoly capitalism’ (stamocap) literature from the 1970s. It presumed, at the

130  Handbook on critical political economy and public policy level of theory, the existence of a prescribed path of capitalist development, culminating in the emergence of state monopoly capitalism and, eventually, socialism (ibid., p. 51). Due to the multifaceted nature of the social world and the seemingly endless stream of information contained in it, one will usually find it easy to produce some evidence that appears to confirm one’s own hunches, preconceptions and predictions (see Sayer, 1992, pp. 60–61). But as any generic detective story tells us, some leads are not enough to demonstrate conclusively that a suspect is guilty. In these stories, new information tends to surface all of a sudden that throws into doubt what the protagonists have been assuming up to that point, which forces them to reconsider their assumptions. The practical experiences of social scientists resonate with this genre of literary fiction. Research is rarely a linear process in which we first describe our theoretical assumptions and then amass more and more data providing evidence that these assumptions are right. It is quite likely that there will be data directly challenging them, and other data that are contradictory and ambiguous and thus difficult to interpret (see Sayer, 1992, pp. 173–4, 222; 2000, p. 40). The critical problem with subsumptionism is not that researchers make propositions about the social world that are based on theoretical assumptions, but that they select cases and data with a view to preventing such challenges from occurring. In this sense, it is a highly biased practice. Taken to its logical conclusion, subsumptionism renders empirical research superfluous because everything there is to know has already been identified at the level of theory. This can be illustrated with reference to my research problem. A ‘subsumptionist’ approach following Castells’s observations would select non-industrial strikes that are occupation-driven and thus can be understood as signalling the absence of solidarity with workers from other sectors. These strikes could be used to show that there is fragmentation among workers and a relative absence of class-based solidarity. A strike that could serve as an example because it has been interpreted in this manner is the labour dispute between Vereinigung Cockpit (VC) [Cockpit Association], a pilots’ union in Germany, and Lufthansa, the national carrier. VC staged 13 strikes at Lufthansa in the years 2014 and 2015, leading to the cancellation of 8500 flights (Raehlmann, 2017, pp. 34–6; Wissenschaftlicher Beirat, 2016, p. 114). The reason was that the company was threatening to exit the existing pensions agreement for pilots. Commentators in the media claimed that the pilots were a small band of highly paid employees abusing their capacity to disrupt air traffic in order to defend their privileges (Obertreis, 2016; Sauer, 2014). If we follow this interpretation – and be it just for the sake of the methodological argument developed here – the strikes had limited expansive effects in the sense of creating ties with other groups of workers, in particular, outside aviation. In contrast, the Panitch position is, at the level of theory, that non-industrial labour disputes facilitate class formation. If one acted in a subsumptionist manner, one would select non-industrial strikes appearing to confirm this assumption – that is, strikes led by people with an uncompromising stance towards management and a radical, class-based rhetoric. One could focus, for example, on the frequent stoppages in recent years at London Underground, which are usually led by the National Union of Rail, Maritime and Transport Workers (RMT) (see Connolly & Darlington, 2012; Gallas, 2018, p. 248; Gordon & Upchurch, 2012). Importantly, the RMT is a union known for its deep hostility to austerity and neoliberal modes of public sector management – plus its commitment to militancy and socialist class politics. At the same time, it is a comparably successful union when it comes to winning concessions for its members. This turns the RMT strikes into a model case for arguing that processes of class formation are taking place in non-industrial labour disputes: its representatives use a language

Beyond methodological Fordism: the case for incorporated comparisons  131 of class and class struggle, and its demands are expandable beyond a narrow constituency of members. Arguably, the RMT is the most clear-cut example of a militant, socialist union in present-day Britain. Importantly, looking exclusively at the VC or the RMT is not a very good case for assessing the class effects of non-industrial strikes precisely because of the danger of subsumptionism. Both are specific cases in their national context and in the context of non-industrial trade unionism in de-industrializing countries. Ambiguities and contradictions are not visible to the same degree as in the cases of other unions, which are often less clear about their political agenda or more hesitant when it comes to militancy. The Union of German Train Drivers (GDL), for example, is a militant organization, but it also has an image of a conservative, occupational union when it comes to its politics. In contrast, the Railway and Transport Union (EVG), also from Germany, has been cooperating with management for a long time, but it has become more open-minded about strikes in recent years – and unlike the GDL, it is affiliated with the German Trade Union Confederation (DGB), the main union umbrella in Germany, which, compared with other confederations in the country, has by far the broadest base among workers (Birke, 2018; Deutsche Welle, 2018; Hürtgen, 2016). These examples show that we risk overriding contradictions and ambiguities if we try to settle the debate on the working class with reference to VC or RMT. Both unions may form part of the picture, but they (or similar cases) should not be the only objects of interest. My critique of subsumptionism gives rise to the question of what a sound conceptualization of the relationship between theory and empirical research would look like. Scholars operating on the grounds of a critical realist ontology (Bhaskar, 1979, p. 45; Sayer, 2000, p. 15) highlight that social systems are open systems. This corresponds with my critique of the biased, ‘locked’ nature of subsumptionist research. In a nutshell, critical realism is based on an anti-deterministic understanding of social determination: social systems do not have unavoidable effects that can be determined in advance; they exhibit tendencies with potential effects, but it may be the case that these tendencies remain ‘dormant’ due to countertendencies, contextual factors, coincidences and countermeasures taken by actors. This suggests that there is a degree of determinacy and contingency to any social setting, which is why theory (usually understood by critical realists as conceptualization) needs to be complemented with empirical research and vice versa (see Blaikie & Priest, 2017, p. 177; Collier, 1994, pp. 7–8; Sayer, 2000, pp. 121–4). Correspondingly, it is plausible to assume, at the level of an abstract-simple conceptualization of global capitalism, that strikes facilitate class formation. At the same time, however, this is only a general tendency, which means that the outcomes of any particular strike cannot be predicted firmly on its grounds. It is equally plausible to assume that there are mechanisms, processes and events working against this tendency, which is reflected in the fact that there are strikes deeply dividing workforces and different groups of workers. It follows that if we want to find out about outcomes, we need theory to provide us with guidance on what to look for, and empirical research for finding out about what is happening. This research should reflect, in the way it is designed, the openness of social systems and the difficulty of predicting their effects on actual, concrete social settings (see Sayer, 1992, pp. 138, 142, 190; 2000, p. 19). Taking the openness of social systems seriously has important implications for case and data selection: one must not look for ‘outcomes’ that are predicted by one’s theoretical assumptions. In this one respect, critical realist perspectives on empirical research resemble standard ‘comparative politics’ approaches. While ‘comparative politics’ usually rest on positivist ontological assumptions that critical realists do not share, it still offers methodological insights

132  Handbook on critical political economy and public policy from which critical realist scholars can learn. The debate on ‘selection bias’ is a case in point. Comparatists argue against ‘selection on the dependent variable’ – that is, the identification of suitable cases on the grounds that they fit with the purported explanation (Burnham, 2004, pp. 74–8; Landman, 2003, pp. 43–7). The critical problem with operating this way is that cases are excluded by default that could falsify the basic assumptions underpinning the research design. If selection takes place on the grounds of identifying the expected outcomes, researchers will only ever find what they know already. In my own terms, they operate in a subsumptionist manner.

THE LIMITATIONS OF QUANTITATIVE RESEARCH DESIGNS The existence of the subsumptionist trap underscores the need to carefully reflect on how to reconcile the need for a global vantage point of one’s research with the need to take into account a wealth of data about different strikes that allows us to capture context-related specificities. A standard way to proceed would be to conduct a statistical analysis based on large-N datasets concerning strike incidence that cover a great number of countries. In principle, they leave room for national specificities to deviate from global trends; it is possible for individual items that are compared to diverge significantly from predictions made at the theoretical level. Accordingly, important contributions to strike research operate on the grounds of quantitative research designs (Franzosi, 1992; Silver, 2003). However, there are practical obstacles to conducting such endeavours, which result from the specificity of different contexts and the difficulty of making generalizable observations. For many historical periods and geographical spaces, data are not available, and if they are, there are serious doubts over their reliability and comparability (Dribbusch, 2018; Gall, 2012, pp. 680–82; Hopkin, 2010, pp. 297–300). To choose two random examples, there were, in recent years, strikes for higher wages at the main Alaskan public ferry operator as well as political strikes against the authoritarian regime in Belarus. In both cases, people refused to work. But importantly, they engaged in this practice of protest under fundamentally different political, economic and cultural conditions and had very different goals. In the Alaskan case, it may be easier to discern class effects than in the Belarus case: the dispute concerned the conditions of the extraction of surplus labour. In contrast, the stoppages in Belarus were part of a broad popular protest movement, and the object of the dispute was not labour relations as such but a conflict over the mode of government (DeManuelle-Hall, 2019; Deutsche Welle, 2020). Would it be adequate to see both as instances of strikes that facilitate class formation? Notably, this is a point not just about strike research. The more global a research project becomes, the more difficult it is to ensure that data are measured in a similar manner across time and space, and that the categories used are capturing similar events. Large-N quantitative research struggles with temporal and spatial specificities. There is a danger of subsuming diverging events or practices under one and the same category (see Burnham, 2004, pp. 72–3; Hopkin, 2010, pp. 299–300). If one was interested in the degree to which liberalism as a political ideology shapes the policy of governments in different parts of the world, for example, one would quickly find that definitions and interpretations of what liberalism is vary hugely across countries, and that the political demands of self-professed ‘liberals’ in the US and Germany in the area of economic policy can be construed as opposites – in US politics, liberalism is commonly associated with state interventionism; in Germany, it is usually linked to the idea of

Beyond methodological Fordism: the case for incorporated comparisons  133 a ‘free’ market. One is then faced with a dilemma: one can either use a neatly defined category, which runs contrary to everyday understandings to such a degree that it becomes incomprehensible for political practitioners and non-experts in at least parts of the world (‘liberalism is a political ideology that is advocating state interventions in the economy for the common good’), or one can interpret a category in a broad manner, which may encompass a lot of cases, but may have little meaning and may be hard to distinguish from neighbouring categories (‘liberalism is a political ideology that is committed to fostering democracy’). In this context, it is important to highlight that strikes are, to a degree, contradictory events with contradictory effects: while some people are mobilized together in a strike effort and strong bonds between them emerge, others may be frightened by the consequences, unconvinced that it is possible to win or hostile either to individuals involved with the strike or to the idea of using collective force. Sometimes, the motives and strategic calculations of one and the same person can be fairly contradictory; the same goes for groups and organizations (see Bergmann, Bürckmann & Dabrowski, 2002, pp. 72–7; Fantasia, 1988, pp. 79, 116; Herkommer et al., 1979, p. 57). In a nutshell, strikes tend to polarize social forces along class lines, which contributes to making class relations visible, but they can simultaneously fragment such forces. Examples are the 1984–85 miners’ strike in Britain (Gallas, 2016, pp. 166–93) and the strike wave at French car maker Talbot from 1982 to 1984 (Najiels, 2019; Piciotto, 1984). It is practically impossible to build a strong base for a strike without excluding, to a degree, individual workers who are against walking out, which means that an expansive mobilization tends to be accompanied by a deepening of some divisions. This explains why militant labour activists are often in favour of both an expansive, class-based strategy and, at the same time, of isolating groups of workers who are not fully behind a strike. It is possible to see this as both an expansive and divisive – and, thus, a contradictory – approach. Such contradictions are hard to capture with quantitative data, which are generated by assigning numeric values to clearly defined variables (Sayer, 1992, pp. 176–8). This leads on to a more general point. If we follow Althusser ([1965] 1959), the capitalist mode of production is characterized by contradictions – that is, structurally inscribed mechanisms that work against one another. Most importantly, there is a need for capital to accumulate and for labour power to be reproduced, which creates the antagonism between capital and labour. Consequently, practices and perceptions emerge in capitalist surroundings that lead to conflict and sometimes defy neat categorization. This line of argument is at odds with the determinism implicit in a great number of contributions to quantitative research. Research designs based on quantitative data usually rest on a deductivist and positivist understanding of causation in the form of ‘a relationship between discrete events’ (Sayer, 1992, p. 104). They are based on a clearly defined, causal relationship between an independent and a dependent variable (A causes a, or A → a). The implication is that the social world is constituted by a set of causes that can be isolated from one another through analysis, and that produce clearly defined outcomes (A → a; B → b; C → c; D → d…). In other words, the causal relation itself is imagined as a natural force that can be identified in isolation through experimental research – for example, the force assumed to be behind the swing of a pendulum or the movement of a billiard ball that is hit by another. It follows that the social world, just like the natural world, is governed by laws that are clearly separable from one another. This also means that it is characterized by atomism and a strong degree of determinacy (Blaikie & Priest, 2017, pp. 67–71; Sayer, 1992, p. 173; Wullweber, 2019, pp. 290–91).

134  Handbook on critical political economy and public policy In contradistinction to positivist positions, critical realists highlight that there is structural causation, and that forces can be present without being actualized or activated. Accordingly, they highlight the systemic and tendential nature of the social world and the openness of social systems. It follows that research is an open-ended, exploratory process (see Blaikie & Priest, 2017, p. 177; Collier, 1994, pp. 7–8; Sayer, 2000, pp. 121–4). Accordingly, critical realists often use qualitative research techniques like interviews, participant observation or textual analysis. These are better suited, all in all, to capture the contradictions of capitalism social formations because they share a ‘naturalistic approach’ (Blaikie & Priest, 2019, pp. 159–61; Yilmaz, 2013, p. 312). Put differently, they allow for detailed, linguistic representations of social reality that are descriptive in nature and limit the need for the abstraction and simplification characterizing the generation of quantitative data. Consequently, they are far more context-sensitive. But this comes at a price, which is that they only ever present a very limited sample of the different processes, relations and interactions that constitute a case, and that they do not lend themselves to producing broad overviews (see Landman, 2003, p. 81). As a result, generalization is a serious challenge for qualitative research (see Blaikie & Priest, 2019, pp. 211–13; Rapley, 2014, pp. 52–3). This raises the question of how to reconcile the need to produce general observations with the specificities of the contexts in which social interactions take place.

THE METHOD OF INCORPORATED COMPARISON The method of ‘incorporated comparison’, developed by McMichael (1990, 2000), deals with the need to connect a global perspective with a sensitivity to context-specific divergences – or with the challenge of reconciling analytical breadth and depth. In contrast with the country comparisons common in political science (see Burnham, 2004; Landman, 2003), it sets out to achieve generalizability by examining global settings as well as comparing cases and considering their specificity. The attribute ‘incorporated’ refers to the fact that the objects of comparison form part of a larger social setting that is being mapped simultaneously and does not exist independently of the former. In this sense, ‘incorporated comparison’ is a multi-scalar method. Importantly, McMichael is aware of the dangers of subsumptionism. He stresses that our understanding of global capitalism cannot be fixed at the level of theory to be refuted or confirmed, in a second step, through empirical analysis: Rather than using ‘encompassing comparison’ – a strategy that presumes a ‘whole’ that governs its ‘parts’ – it progressively constructs a whole as a methodological procedure by giving context to historical phenomena. In effect, the ‘whole’ emerges via comparative analysis of ‘parts’ as moments in a self-forming whole. I call this incorporated comparison. (McMichael, 1990, p. 386; also see Hart, 2018, p. 380)

Accordingly, the three main assumptions anti-subsumptionist (McMichael, 2000, p. 671):

guiding

incorporated

comparison

are

First, comparison is not a formal, ‘external’ procedure in which cases are juxtaposed as separate vehicles of common or contrasting patterns of variation. Rather comparison is ‘internal’ to historical inquiry, where process-instances are comparable because they are historically connected and mutually conditioning. Second, incorporated comparison does not proceed with an a priori conception of

Beyond methodological Fordism: the case for incorporated comparisons  135 the composition and context of the units compared, rather they form in relation to one another and in relation to the whole formed through their inter-relationship. In other words, the whole is not a given, it is self-forming. This is what I understand we mean by historical ‘specificity.’ Third, comparison can be conducted across space and time, separately or together.

In my understanding, this approach resembles archaeological fieldwork. I am not referring here to Michel Foucault’s general observation ([1972] 1989, p. 8) that history is marked by discontinuities and ruptures, and that an ‘archaeological’ approach to history consists in drawing out the specificities of different ‘strata’ layered on top of each other. My point refers to the research practices of archaeologists. In Foucault’s terms, these consist in excavating ‘a mass of elements that have to be grouped, made relevant, placed in relation to one another to form totalities’ (ibid.). Archaeologists chart, compare and systematize traces and remnants of past human settlements and activities – and from doing so, draw broader conclusions about social formations of the past. In other words, they make inferences about wholes by looking at parts – and must deal with the fact that these parts are, to a large degree, incomplete. This means that they address significant gaps in information by making plausible assumptions about missing parts on the grounds of what has been found. Correspondingly, social scientists who make incorporated comparisons attempt to produce insights of a global nature on the grounds of incomplete information – that is, through the comparison of a limited number of objects. This can be done by (1) linking empirical research to social theory in the way described above; and (2) by zooming in and out – that is, by combining fine-grained case studies with broad-brush descriptions providing overviews. With reference to my object, I propose developing categories for assessing class formation on the grounds of materialist class theory, putting them to use by mapping non-industrial strikes around the world, and supplementing this mapping with detailed case studies of large-scale strikes or strike waves. Importantly, this mode of comparison is anti-subsumptionist because it does not start from presuming the existence of a functionally integrated whole, whose workings are illustrated by the cases. McMichael says that an incorporated comparison serves to reconstruct an ‘emergent totality’ (1990, p. 391), which implies that a full picture is not the precondition, but the outcome of a detailed research process. The role of theory in the research process is not to give full explanations of what is going on, but to guide researchers in the search for such explanations. The reference to ‘emergence’ demonstrates McMichael’s implicit affinity with critical realism. It implies that we are dealing with a whole at what critical realists call the level of the actual, which is constituted by the activation (or lack thereof) of deep structures through concrete practices in settings conditioned by institutions. This corresponds with McMichael’s critique of the positivist assumption that cases used in a comparison can be seen as discrete, separate entities (1990, p. 389; 2000, p. 672). Following him, they are always conditioned by a whole that connects them and has effects on how they evolve. At the same time, the workings of this whole are not presupposed in a strong sense. This means that there is space for an open-ended research process.

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LARGE-SCALE STRIKES AND MULTIPLE DATA TYPES: REFLECTIONS ON CASE AND DATA SELECTION My general observations on incorporated comparison as a method bring me to the question of what criteria should be used for case and data selection. Concerning cases, one could focus on Western Europe. This is not an arbitrary choice, or a choice reflecting research pragmatics – namely, the fact that I am based in Germany. It is an ideal research setting for my question because, globally speaking, it was the first macro-region around the world to become industrialized and, likewise, the first to witness sustained processes of de-industrialization. Accordingly, the country at the forefront of both processes is located in the region: Britain spearheaded the Industrial Revolution, but in technologically advanced areas, it fell behind Germany and the US as early as the second wave of industrialization starting in the late 19th century, and went through a sustained decline in manufacturing output and employment relative to other sectors from the 1960s onwards (Hobsbawm, 1968, pp. 172–94; Kitson & Michie, 2014, p. 10). Since my aim is to identify developments concerning class relations, the most important criterion is generalizability – that is, a choice of cases where it is reasonable to assume that they are somewhat typical and contribute to larger tendencies. In light of this, it makes sense to go for a ‘most different’ comparison, examining country cases varying greatly in terms of strike incidence – namely, a country with low (Germany), medium (Britain) and high strike incidence (Spain).1 Furthermore, these countries are also useful choices because each of them is described in the literature (see, for example, Frege & Kelly, 2004 or Hall, 2018) as standing for one of the three varieties of capitalism dominating in the macro-region: Germany is a coordinated market economy; Britain a liberal market economy; and Spain a Mediterranean mixed type. The case studies need to offer thick descriptions of strikes in the three countries (see Vromen, 2010), but these must be complemented with a less detailed mapping of strike activities not just in other Western European countries, but also around the globe. This is necessary to ensure that it is possible to differentiate potential macro-regional from truly global developments, and to check whether observations made with reference to the cases can also be made elsewhere. The aim is to produce a comprehensive picture of dominant patterns concerning the links between workers emerging in strike efforts. Importantly, comprehensive does not mean complete. What emerges is a globally informed account of strikes in Western Europe – and a broad-brush, rough description of strikes around the world substantiated with reference to the Western European cases. Put differently, the mode of incorporated comparison proposed here has global ambitions, but modest ones. It allows one to lend credence to tentative observations on worldwide developments with the help of more detailed and saturated analyses of specific cases in a macro-region. In terms of the actual strikes chosen, one could opt for choosing strikes and strike waves with pertinent effects. This is the case, in the area of strike research, if stoppages involve a lot of people – and if they are discussed in the political scene and the news media (see Gallas, 2018, p. 239). The latter point matters because it is plausible to assume that strikes have a significant social impact if they become politicized and an object of public debate. This is because one can assume that such strikes (1) are visible to workers outside the sector where they originate, which is important for arguing that they have the potential to expand beyond a narrow constituency of workers; and (2) affect society as a whole. In my view, these represent two necessary, but insufficient conditions for strikes to contribute to class formation.

Beyond methodological Fordism: the case for incorporated comparisons  137 Conversely, it is hard to argue that they have a significant impact on class relations if they do not reach other workers and do not have effects beyond local settings. It can be gauged whether the first criterion is met by assessing how striking workers reach out to other groups of workers, how these other groups react, and how all of this affects organized labour. For example, it can be argued that a strike is visible to other workers if union leaders from other sectors comment on it, or if there is evidence of responses from other groups of workers – be they supportive, dismissive or indifferent – in the form of conversations on picket lines or among colleagues belonging to other unions or other occupational categories or in the form of collective responses like demonstrations. The purpose of the second point is to ensure that the significance of strikes goes beyond local effects. This criterion is met if there is extensive coverage in the national news media of the strike, and if its effects reach the political scene. For this purpose, it is useful to check whether a dispute has been covered at least three times in three different national newspapers with a conservative, liberal and socialist orientation, respectively, and whether leading politicians representing conservative, liberal and socialist worldviews have commented on it. Admittedly, it may very well be the case that strikes taking place ‘under the radar’ and not meeting these criteria have a profound impact on class relations at the national level, but this may be very hard to gauge. In keeping with the general theme of de-industrialization, it makes sense to examine stoppages that diverge from the image of the ‘classical’ industrial strike in at least one crucial respect. Concerning the model of trade unionism, the 2014–15 strike in the German railway sector is a suitable case. Behind it was an occupational and not an industrial union, the GDL. As regards the social base, the 2016 junior doctors’ strike in England and Wales springs to mind. It was carried out by professionals, not by blue-collar workers. When it comes to demands, the general strikes in Spain in the 2010s are highly relevant because their goals were not primarily economic in the sense of concerning wages and working conditions, but political in nature. The aim is to identify, through a systematic comparison of disputes in these countries, general trends concerning strike activities in the research space. Furthermore, the identification of suitable data should not follow the subsumptionist template. In qualitative research based on case studies, this means that in principle any kind of available information relevant to the research topic needs to be considered (see Blaikie & Priest, 2017, p. 192), and that sources of information – for example, interview partners, descriptive statistics or observations – should not be selected on the grounds of fitting particularly well with one’s theoretical assumptions. Accordingly, I propose to research (1) statistics on strike incidence and key socio-economic markers (wage levels, inequality, unemployment etc.) that help elucidate the context in which strike take place; (2) online accounts of strike action – for example, social media postings, newsletters or blogs; (3) coverage of strikes in the news media; (4) press releases from political parties, employers’ associations and trade unions; (5) public statements from people involved with strikes; and (6) interviews with workers actively involved in organizing strikes. To avoid subsumptionism, it is also important to terminate data collection only once a degree of saturation of one’s analysis is reached – that is, if there is a repetition of patterns across different materials and the gains in knowledge made through adding material are limited (see Kvale, 1996, pp. 101–3; Rapley, 2014, p. 60). This is the point when we can say that evidence has been produced. Importantly, however, this does not mean that the resulting analysis is set in stone once and for all, as Norman Blaikie and Jan Priest point out: ‘The argument for affirm-

138  Handbook on critical political economy and public policy ing evidence rests on the preponderance of confirming data and the absence of contradictory data, notwithstanding the possibility of as yet undefined alternative explanations’ (Blaikie & Priest, 2017, p. 192). Through examining these cases and data, it becomes possible to give a meaningful response to the research question. A good indicator of the existence or absence of processes of class formation in the context of strikes are the forms of solidarity prevalent in them. If there are demands that address the conditions of workers in general as well as ties with workers that are not part of the constituency of the strike and a mobilizing dynamic characterized by broad popular support, one can see this as signs of expansive solidarity, which speaks for processes of class formation being in evidence. The opposite is the case if exclusive solidarity predominates – that is, whether the demands and activities of workers engaged in a strike effort focus on their interests as a clearly defined ingroup, there are no connections to other groups of workers and popular support is limited. Consequently, it is necessary to centre the comparison of the three cases and the mapping of strikes around the world on the forms of solidarity visible in them and establish what kind of pattern dominates across cases and countries. In the light of the contradictions surrounding strikes, it is necessary to carefully weigh up whether expansive or exclusive forms of solidarity predominate and leave room for ambivalences by allowing oneself, in principle, to give a qualified response.

CONCLUSION The research design and the criteria developed here for case and data selection – based on an ‘incorporated comparison’ and in line with critical realist assumptions – ensure that the research process remains open. It is possible, on their grounds, to circumnavigate the trap of subsumptionism and address the challenge of reconciling generality and specificity. With the help of McMichael’s approach, one can move beyond methodological Fordism with its focus on the nation-state, a small number of core countries and manufacturing. As I demonstrated with reference to my research design concerning non-industrial strikes and class formation, it is possible to capture, in one’s research, the global yet variegated nature of contemporary capitalism. Unsurprisingly, this creates new challenges. For one – and in contrast with positivist comparative politics approaches – incorporated comparisons are not based on easily transferable frameworks such as the ‘most similar’ and ‘most different’ research designs often used in political science. This is not an argument against using their underlying logic in processes of case selection, which I employed when I chose the cases compared in the project presented in this chapter. But to overcome the limitations of analytic comparisons, this logic must be embedded in a multi-scalar approach to analysis: each project requires a unique approach to ‘zooming in and out’ and working across scales; detailed case studies must be combined with less detailed descriptions of key institutions, events and developments from a global vantage point. Second, the aspiration to conduct global research is also a burden for researchers. They need to acquaint themselves both with highly abstract-simple theories with a global field of validity plus a wealth of empirical material, which is difficult to handle from a pragmatic point of view, and there are bound to be large gaps in their projects. A mapping of non-industrial strikes around the world combined with a comparison based on detailed cases in Western Europe produces a comprehensive account of what is going on, but comprehensive does not

Beyond methodological Fordism: the case for incorporated comparisons  139 mean without gaps. Nevertheless, this chapter is also a plea for scholarship that is trying to shoulder this burden. In an age marked by global economic, health and ecological crises, the social relevance of critical political economy hinges on the ability to produce analyses that move beyond the national and macroregional level.

NOTE 1. See the data supplied by the German Economics and Social Science Institute (WSI) (Schulten et al., 2019, p. 61); the British Office for National Statistics (ONS) (https://​www​.ons​.gov​.uk/​ employ​mentandlab​ourmarket/​peopleinwork/​workplac​edisputesa​ndworkingc​onditions/​datasets/​ lab​ourdispute​slabourdis​putesannua​lestimates); and the Spanish Ministry of Labour and Social Economy (MITES) (https://​www​.mites​.gob​.es/​estadisticas/​Hue/​welcome​.htm). Accessed 19 December 2022.

BIBLIOGRAPHY Aglietta, M. 1979, A Theory of Capitalist Regulation: The US Experience, London: New Left Books. Ainsley, C. 2018, The New Working Class: How to Win Hearts, Minds and Votes, Bristol: Bristol University Press. Althusser, L. [1965] 1969, ‘Contradiction and overdetermination’, in L. Althusser, For Marx, London: Allen Lane, pp. 87–128. Arruzza, C., Battacharya, T. and Fraser, N. (2019), Feminism for the 99 Percent: A Manifesto, London: Verso. Baca, G. 2004, ‘Legends of Fordism: between myth, history, and foregone conclusions’, Social Analysis, 48 (3). 169–78. Baccaro, L. & Pontusson, J. 2016, ‘Rethinking comparative political economy: the growth model perspective’, Politics & Society, 44 (2), 175–207. Bergmann, J., Bürckmann, E. & Dabrowski, H. 2002, ‘Krise und Krisenerfahrungen: Einschätzungen und Deutungen von Betriebsräten und Vertrauensleuten’, Arbeitsheft No. 25, Otto-Brenner-Stiftung, accessed 21 May 2021 at https://​www​.otto​-brenner​-stiftung​.de/​fileadmin/​user​_data/​stiftung/​02​_​ Wissenscha​ftsportal/​03​_Publikationen/​AH25​_Krisenerfahrung​_Bergemann​_2002​_03​_03​.pdf. Bhaskar, R. 1979, The Possibility of Naturalism: A Philosophical Critique of the Contemporary Human Sciences, London: Routledge. Bieler, A. & Morton, A. 2018, Global Capitalism, Global War, Global Crisis, Cambridge, UK: Cambridge University Press. Birke, P. 2018, ‘The strike wave of 2015 in Germany’, in P. Birke, M. Dutta & J. Nowak (eds), Workers’ Movements and Strikes in the 21st century, London: Rowman & Littlefield, pp. 221–6. Blaikie, N. & Priest, J. 2017, Social Research: Paradigms in Action, Cambridge, UK: Polity. Blaikie, N. & Priest, J. 2019, Designing Social Research, 3rd edition, Cambridge, UK: Polity. Blanc, E. 2019, Red State Revolt: The Teachers’ Strike Wave and Working-Class Politics, London: Verso. Bruff, I. 2021, ‘The politics of comparing capitalisms’, EPA: Economy and Space, 53 (6), 1273–92. Burnham, P. 2004, ‘Comparative methodology’, in P. Burnham, K.G. Lutz, W. Grant & Z. Layton-Henry (eds), Research Methods in Politics, London: Palgrave Macmillan, pp. 58–79. Candeias, M., Dörre, K. & Goes, T.E. 2019, Demobilisierte Klassengesellschaft und Potenziale verbindender Klassenpolitik, Berlin: Rosa-Luxemburg-Stiftung. Castells, M. [1996] 2010, The Information Age: Economy, Society, and Culture, Volume 1: The Rise of the Network Society, 2nd edition, Oxford: Blackwell. Collier, A. 1994, Critical Realism: An Introduction to Roy Bhaskar’s Philosophy, London: Verso.

140  Handbook on critical political economy and public policy Connolly, H. & Darlington, R. 2012, ‘Radical political unionism in France and Britain: a comparative study of SUD-Rail and the RMT’, European Journal of Industrial Relations, 18 (3), 235–50. DeManuelle-Hall, J. 2019, ‘“We believe in ferries”: Alaskan ferry workers walk off the job’, Labor Notes, 1 August, accessed 20 May 2021 at https://​labornotes​.org/​2019/​08/​we​-believe​-ferries​-alaska​ -ferry​-workers​-walk​-job. Demirović, A. 2020, Undoing class: warum von Klasse, Klassenkampf und Klassenpolitik reden?’, Prokla: Zeitschrift für Kritische Sozialwissenschaft, 50 (3), 429–38. Deutsche Welle 2018, ‘Deutsche Bahn stellt Fernverkehr vorübergehend ein’, 10 December, accessed 18 May 2021 at https://​www​.dw​.com/​de/​deutsche​-bahn​-stellt​-fernverkehr​-vor​%C3​%BCbergehend​ -ein/​a​-46661473. Deutsche Welle 2020, ‘Belarus strike action begins’, 26 October, accessed 20 May 2021 at https://​www​ .dw​.com/​en/​belarus​-strike​-action​-begins/​a​-55396530. Devine, F. & Sensier, M. 2017, ‘Class, politics and the progressive dilemma’, The Political Quarterly, 88 (1), 30–38. Dribbusch, H. 2018, ‘Das Einfache, das so schwer zu zählen ist: Probleme der Streikstatistik in der Bundesrepublik Deutschland’, Industrielle Beziehungen, 25 (3), 301–19. Esping-Anderson, G. 1990, Three Worlds of Welfare Capitalism, Cambridge, UK: Polity Press. Fantasia, R. 1988, Cultures of Solidarity: Consciousness, Action, and Contemporary American Workers, Berkeley, CA: University of California Press. Foucault, M. [1972] 1989, The Archaeology of Knowledge, London: Routledge. Franzosi, R. 1992, The Puzzle of Strikes, Cambridge, UK: Cambridge University Press. Frege, C. and Kelly, J. (eds) 2004, Varieties of Unionism: Strategies for Union Revitalization in a Globalizing Economy, Oxford: Oxford University Press. Gall, G. 2012, ‘Quiescence continued? Recent strike activity in nine Western European economies’, Economic and Industrial Democracy, 34 (4), 667–91. Gallas, A. 2016, The Thatcherite Offensive: A Neo-Poulantzasian Analysis, Leiden: Brill. Gallas, A. 2018, ‘The politics of striking: on the shifting dynamics of workers’ struggles in Britain’, in P. Birke, M. Dutta & J. Nowak (eds), Workers’ Movements and Strikes in the 21st Century, London: Rowman & Littlefield, pp. 237–54. Gambino, F. [1996] 2007, ‘A critique of Fordism and the regulation school’, The Commoner, 12, 39–62. Gordon, A. & Upchurch, M. 2012, ‘Railing against neoliberalism: radical political unionism in SUD-Rail and RMT’, European Journal of Industrial Relations, 18 (3), 259–65. Gordon, T. 2019, ‘Capitalism, neoliberalism, and unfree labour’, Critical Sociology, 45 (6), 921–39. Gorz, A. 1980, Farewell to the Working Class: An Essay in Post-Industrial Socialism, London: Pluto Press. Hall, P.A. 2018, ‘Varieties of capitalism in light of the euro crisis’, Journal of European Public Policy, 25 (1), 7–30. Hall, P.A. & Soskice, D. (eds) 2001, Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, Oxford: Oxford University Press. Hart, G. 2018, ‘Relational comparison revisited: Marxist postcolonial geographies in practice’, Progress in Human Geography, 42 (3), 371–94. Herkommer, S., Bischoff, J. & Lohauß, P. et al. 1979, Gesellschaftsbewusstsein und Gewerkschafen: Arbeitsbedingungen, Lebensverhältnisse, Bewusstseinsänderungen und gewerkschaftliche Strategie, 1945 bis 1979, Hamburg: VSA. Hobsbawm, E.J. 1968, Industry and Empire, London: Penguin. Hopkin, J. 2010, ‘The comparative method’, in D. Marsh and G. Stoker (eds), Theory and Methods in Political Science, 3rd edition, London: Palgrave Macmillan, pp. 285–307. Hürtgen, S. 2016, ‘Authoritarian defence of the German model?’, Workers of the World, 1 (8), 56–70. Jessop, B. 1982, The Capitalist State: Marxist Theories and Methods, Oxford: Martin Robertson. Jessop, B. 1990, State Theory: Putting the Capitalist State in its Place, Cambridge, UK: Polity. Jessop, B. 2014, ‘Capitalist diversity and variety: variegation, the world market, compossibility and ecological dominance’, Capital & Class, 38 (1), 45–58.

Beyond methodological Fordism: the case for incorporated comparisons  141 Jessop, B. 2015, ‘Comparative capitalisms and/or variegated capitalism’, in I. Bruff, M. Ebenau & C. May (eds), New Directions in Comparative Capitalisms Research: Critical and Global Perspectives, London: Palgrave Macmillan, pp. 65–82. Kitson, M. & Michie, J. 2014, ‘The deindustrial revolution: the rise and fall of UK manufacturing’, Working Paper No. 459, Centre for Business Research, University of Cambridge. Koch, M. 2006, Roads to Post-Fordism: Labour Markets and Social Structures in Europe, Farnham: Ashgate. Kollmeyer, C. 2018, ‘Trade union decline, deindustrialization, and rising income inequality in the United States, 1947 to 2015’, Research in Social Stratification and Mobility, 57, 1–10. Kvale, S. 1996, InterViews: An Introduction to Qualitative Research Interviewing, London: SAGE. Landman, T. 2003, Issues and Methods in Comparative Politics: An Introduction, 3rd edition, London: Routledge. Lipietz, A. 1996, ‘The new core–periphery relations: the contrasting examples of Europe and America’, in C.W.M. Naastepad & S. Storm (eds), The State and the Economic Process, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing, pp. 112–50. Marx, K. [1867] 1976, Capital: A Critique of Political Economy, Volume One, trans. B. Fowkes, London: Penguin 1976. Mason, P. 2015, Postcapitalism: A Guide to Our Future, London: Allen Lane. McMichael, P. 1990, ‘Incorporating comparison within a world-historical perspective: an alternative comparative method’, American Sociological Review, 55 (3), 385–97. McMichael, P. 2000, ‘World-systems analysis, globalization, and incorporated comparison’, Journal of World-Systems Research, 6 (3), 668–90. Moody, K. 2017, On New Terrain: How Capital is Reshaping the Battle Ground of the Class War, Chicago, IL: Haymarket. Najiels, Y. 2019, ‘The demise of the international proletariat of France’, Salvage, 2 April, accessed 10 February 2021 at https://​salvage​.zone/​in​-print/​the​-demise​-of​-the​-international​-proletariat​-of​-france​ -talbot​-as​-political​-turning​-point/​. Nowak, J. 2021, ‘From industrial relations research to Global Labour Studies: moving labour research beyond Eurocentrism’, Globalizations, 18 (8), 1335–48. Obertreis, R. 2016, ‘Die Zeit der Privilegien ist vorbei’, Tagesspiegel, 23 November, accessed 18 May 2021 at https://​www​.tagesspiegel​.de/​wirtschaft/​pilotenstreik​-bei​-lufthansa​-die​-zeit​-der​-privilegien​-ist​ -vorbei/​14884258​.html. Panitch, L. 2001, ‘Reflections on strategy for labor’, Socialist Register 2001: Working Classes: Global Realities, 37, 367–92. Peck, J. & Theodore, N. 2007, ‘Variegated capitalism’, Progress in Human Geography, 31 (6), 731–72. Piciotto, S. 1984, ‘The battles at Talbot Poissy: workers divisions and capital restructuring’, Capital & Class, 8 (2), 5–17. Raehlmann, I. 2017, Streiks im Wandel, Wiesbaden: Springer. Rapley, T. 2014, ‘Sampling strategies in qualitative research’, in U. Flick (ed.), The SAGE Handbook of Qualitative Data Analysis, London: SAGE, pp. 49–63. Rodrik, D. 2016, ‘Premature deindustrialization’, Journal of Economic Growth, 21 (3), 1–33. Sauer, S. 2014, ‘Die Privilegien der Lufthansa-Piloten’, Frankfurter Rundschau, 1 December, accessed 18 May 2021 at https://​www​.fr​.de/​wirtschaft/​privilegien​-lufthansa​-piloten​-11048921​.html. Sayer, A. 1992, Method in Social Science: A Realist Approach, 2nd edition, London: Routledge. Sayer, A. 2000, Realism and Social Science, London: SAGE. Schulten, T., Bauer, G. & Föhr, M. et al. 2019, Statistisches Taschenbuch Tarifpolitik 2019, Düsseldorf: Hans-Böckler-Stiftung. Silver, B. 2003, Forces of Labor: Workers’ Movements and Globalization since 1870, Cambridge, UK: Cambridge University Press. Streeck, W. 2009, Re-Forming Capitalism: Institutional Change in the German Political Economy, Oxford: Oxford University Press. Tilly, C. 1984, Big Structures, Large Processes, Huge Comparisons, New York: Russell Sage Foundation. van der Linden, M. 2008, Workers of the World: Essays toward a Global Labor History, Leiden: Brill.

142  Handbook on critical political economy and public policy Vromen, A. 2010, ‘Debating methods: rediscovering qualitative approaches’, in D. Marsh & G. Stoker (eds), Theory and Methods in Political Science, 3rd edition, London: Palgrave Macmillan, pp. 249–66. Wissenschaftlicher Beirat beim Bundesminister für Verkehr und digitale Infrastruktur 2016, ‘Streiks und die Zuverlässigkeit der Verkehrsbedingung’, Wirtschaftsdienst, 96 (2), 114–21. Wullweber, J. 2019, ‘Monism vs. pluralism, the global financial crisis, and the methodological struggle in the field of International Political Economy’, Competition & Change, 23 (3), 287–311. Yilmaz, K. 2013, ‘Comparison of quantitative and qualitative research traditions: epistemological, theoretical, and methodological differences’, European Journal of Education, 48 (2), 311–25.

PART III ENVIRONMENT

10. Land grabbing, financialization and dispossession in the 21st century: new and old forms of land control in Latin America Karina Kato and Sergio Leite

The turn of the 21st century in Latin America was marked by intense political, economic and environmental transformations. Within a short time (2003–08), prices of energy, metal and agricultural products increased rapidly during the period termed the commodity boom. It was the result of a combination of multiple factors (climate change, decrease in agricultural innovations, devaluation of dollar, increase in oil price and energy crisis). In addition, it was linked to the financial dimension: lower interest rates promoted by the US Federal Reserve (Fed) at the start of 2000 and the search for profitable alternatives to replace financial investments strengthened strategies that relied on commodities (Fairbairn, 2020). This ‘financialization’1 of agriculture gained importance as institutional investors played a more prominent role in the monetary system in areas such as pension funds and sovereign wealth funds that are responsible for administering and channeling considerable amounts of resources into the market. The growing price of commodities led Svampa (2013) to characterize the period as a kind of new ‘consensus’ during the ‘left turn’ in a number of Latin American countries. The greater dependence on commodities (minerals, fuels, metals, agricultural raw materials, food, etc.)2 was great, especially in developing countries (UNCTAD, 2019). For Ocampo (2017), this resulted in reprimarization, with export agendas in Latin America returning to primary commodities as their core revenue as well as deindustrialization of a great part of the economy. Greater focus on the commodities sector in the economies of Latin America prompted relevant changes in the rural areas as well. The production, distribution and commercialization of food and raw materials through global chains transform landscapes and change the ways through which land and natural resources are appropriated. With reference to the literature from Latin America, we suggest a theoretical-analytical framework that examines land grabbing and contemporary capitalist dynamics, the commodification of land and nature and intensification of dispossession processes. We will focus on three analytical dimensions of this contemporary phenomenon. The first demonstrates that the capitalist turn in the 21st century was accompanied by the expansion of extractive corporations (agribusiness and mining enterprises, in particular) in rural areas and by processes of dispossession (first two sections). The second seeks to problematize how the accelerated financialization of extractive global chains reconceptualized land as a financial asset, with impact on regional land markets and on mechanisms of expropriation (third section). Finally, we point to the configuration of a new global governance of land transactions (fourth section).

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Land grabbing, financialization and dispossession in the 21st century  145

FINANCIALIZATION AND LAND GRABBING: COMMODIFICATION OF LAND (AND NATURE) AND DISPOSSESSION Fueled by the valorization of commodities and natural resources at a global scale, the recent race for land has attracted the attention of social movements, the media and academia, prompting a plethora of headlines and articles about the phenomenon, which came to be known as land grabbing (Edelman, 2013; Oya, 2013; Sassen, 2016; Sauer & Borras, 2016). It did not take long for the theme to enter the agenda of public institutions and international organizations such as the World Bank and Food and Agriculture Organization of the United Nations (FAO). In Latin America, this movement was called appropriation (Sauer & Borras, 2016) or açambarcamento de terras (Sassen, 2016). There were two landmarks in this discussion: the report written in 2008 by the organization GRAIN, titled ‘Seized! The 2008 land grab for food and financial security’, and the World Bank document titled ‘Rising Global Interest in Farmland: Can It Yield Sustainable and Equitable Benefits?’ (Deininger & Byerlee, 2011). The former denounced global land grab, seeing it as a result of the financial and food crises and as an important driver of privatization and concentration of land in the Global South. The latter sought to reply to those denunciations by highlighting the opportunities for large-scale investment in land (through technology transfers, job generation and increased public revenues) and advocating regulation to mitigate risk. While related academic studies have become more sophisticated regarding their methodological perspective over the last few years, there is still a great deal of contradiction around the definition and characterization of these processes (how to identify, characterize and account for these transactions) and little consensus regarding methodological and epistemological aspects (Edelman, 2013; Oya, 2013). Land grabbing refers to the recent process of appropriation of land and natural resources through the transfer of property rights and/or control over land and production. Borras et al. (2012) highlight that it resulted from a combination of crises (food, climate, energy and financial), which magnified the importance of land and natural resources in the capitalist dynamics. These processes triggered a series of mechanisms that enabled dispossession of land – for example, land purchase through legal tenure and property deeds; transfer in the rights of use through concession agreements; leasehold and production contracts that intensify new rentier-based strategies in rural areas; or even illegal transactions whereby public land was transferred to private hands (grilagem, in Portuguese), a common practice in Latin America where there are still large stretches of public land that have not as yet been mapped out. Attention has been given to land transactions involving both governmental and foreign actors (commonly, but not always, this involves the purchase of land in the Global South by countries in the Global North) leading to land foreignization (Chouquer, 2012; Flexor & Leite, 2017). The process of land and resources expropriation is not a new phenomenon in Latin America but a result of colonization. Part of a Latin American tradition, this historical dimension is emphasized, for example, in the perspective that focuses on neoextractivism (Svampa, 2019). Understood as a means of appropriation, neoextractivism, broadly speaking, emerges as an analytical category for transactions and land expropriation, and for transformations in the rural context. Land dispossession is therefore intrinsic to successive economic cycles, which in turn have been shaped according to trends in the foreign market, including the advancement of extractive boundaries and commodification of natural resources. As we will see later, besides

146  Handbook on critical political economy and public policy certain continuities, the 21st century has added new dimensions to old processes of land dispossession, in particular regarding the role of the state and that played by land and natural resources during the many crises of contemporary society (ibid.). We emphasize the historical dimension not only to relativize the ‘novelty’ of recent processes of dispossession, but also to reveal how such processes are motivated by former land disputes, by traditional patterns of land use and tenure, and by social and cultural configurations that predate all these later activities. This historical dimension debunks the assumption that such transactions are taking place in ‘empty’ areas. The field of political economy has been a fertile ground for these analyses. In particular, perspectives that converse with theories on imperialism are noteworthy, as are some analyses on the expansion of capitalism in the rural context, with relevant readings about expropriation, primitive accumulation, and the commodification of natural assets (Borras & Franco, 2012; Edelman, Oya & Borras, 2013). Thus, a great part of these analyses, informed by authors such as Lenin and Rosa Luxemburg, in particular, have problematized the structural role of areas external to the reproduction of capitalism, highlighting the perennial and structural character of the processes of primitive accumulation. The best-known elaboration on the matter is arguably that by the geographer David Harvey (2004, pp. 73–6). For this author, since the 1970s, a persistent crisis of capitalist over-accumulation has forced capitalists to constantly seek new arenas for accumulation. The author draws on Marx’s primitive accumulation, re-conceptualizing it. The search for accumulation alternatives creates permanent expulsion logics (Sassen, 2016) prompted by the material transformation of increasingly larger areas; and by the increasing mediation of opaque and complex financial networks, which intensify the financialization (and securitization) of land, agriculture and natural resources. These acquisitions and control are particularly taking place in countries in Latin America and Africa.3 Moving beyond property relations and land control, Edelman et al. (2013) call attention to the need for studies to address the dynamics of labor regimes in the rural contexts. Anseeuw and Ducastel (2013) remark that besides land purchase, new forms of highly financialized investment in agriculture have expanded both control over land and production processes (vertically and horizontally), which translates into an even more subordinated inclusion of farmers (who may own land) and gives rise to production grabbing (Chouquer, 2012). In line with these broader perspectives, and moving beyond discussion on land per se, land grabbing processes are, most importantly, about the access to natural assets seeing that land is the basis for the control of resources such as water, minerals and forests, hence the growing use of concepts such as water grabbing, green grabbing and resource grabbing. The focus on control, rather than exclusively on property, enables a broader understanding of contemporary dispossessions and transaction chains not limited to the property owner with the deeds. This broader reading includes financial and corporative networks that control the land without necessarily having title deeds or tenure. Thus, production and leasing contracts translate into loss of control over land, even if title deeds remain unaltered, and they may include spoliation or loss of control over a particular resource without necessarily evicting communities or transferring property ownership. Land transactions can obstruct the access by communities to public or collective areas where resources were previously extracted, even if land was not occupied. Furthermore, the synergic nature of such transactions is noteworthy: extractive projects benefit from economies of scale and of scope when implementing other projects.

Land grabbing, financialization and dispossession in the 21st century  147 Regardless of the differences in how to define land grabbing, the fact is that this phenomenon has accelerated in the 21st century. Sauer and Borras (2016) systematize the new mechanisms or processes of accumulation that drive land transaction: 1. Expansion and greater power by the agribusiness sector at a global scale, and capacity to incorporate new territories to its value chain. Countries such as Brazil and Argentina are the destination for transnational investment in agriculture and land and also promoting this type of investment in other developing countries in Latin America and Africa. 2. Extensive building of infrastructure through public and multilateral institutional investments, similar to the Initiative for the Integration of Regional Infrastructure in South America (IIRSA, in Portuguese), which sketches out economic corridors to open up yet-to-be-explored areas and guide national policies. 3. Need for new energy strategies with lower environmental impact (biofuel, as well as wind and solar power projects). 4. Concerns with food sovereignty in a world with a growing population and increasing homogenization of food habits, especially in developing countries. 5. Creation of new financial instruments that are increasingly focusing on land, commodities and nature as assets (agribusiness bonds, funds specialized in land and natural resources and other financial instruments that use land as collateral). 6. New environmental demands and mechanisms to address environmental mitigation and compensation needs. 7. Greater engagement by multilateral organizations such as the World Bank, which promote the organization of local and regional markets based on the logic of the individual private property. Contemporary processes of dispossession cannot be understood without taking into account the legal and regulatory component, or the state. Sassen (2016) reminds us that acquisitions take place in a scenario of independent states. For the author, measures by the International Monetary Fund and by the World Bank, particularly through cycles of debts and structural adjustments in the 1990s, work as disciplinary regimes in peripheral states. Subsequent weakening is due to the alignment of policies with neoliberal agendas and higher debts by the states, associated with greater legitimacy and interference by foreign institutions and global corporations in the national political agenda. When Levien (2014) conceptualizes dispossession regimes, he is interested in contemporary processes of accumulation by dispossession while also placing expropriation at the center of his theoretical analysis. He sees dispossession as a political process, which is in many ways extra-economic: it depends on a state to redistribute assets from one class to another. Fraser (2016) also highlights the political nature of expropriation and the structural role of the racial element (and we could also add the gender and ethnic elements). The imperative of infinite capitalist expansion requires a combination of strategies around exploitation (and appropriation of surplus value) and expropriation (mechanisms that involve the acquisition of labor force and means of production at lower than cost value or for free). The latter is particularly salient in moments of crisis. It is up to the state to organize these processes.

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STATE, EXPANSION OF BOUNDARIES AND DISPOSSESSION IN LATIN AMERICA Over the first decade of the 21st century, land transactions and farming investments became more attractive not only for actors already operating in the rural and agricultural sector, but most importantly, also for those who, until then, were unfamiliar with that type of investment (Wilkinson, Reydon & Sabbato, 2012). One of the main features of the current economic scenario is capital’s renewed interest in natural resources. Construction companies, oil and mining corporations, governmental companies of countries lacking natural resources, investment funds, sovereign funds, pension funds and administrators of financial portfolios are some examples of stakeholders investing in land and speculating on the valorization of commodities. According to the UNCTAD report (2019), the stronger dependence on commodities (more than 60 percent of export value results from transactions in this type of asset) could represent serious limitations for economic development. Between 2013 and 2017, 102 out of the 189 countries relied on commodities. Most of these countries are located in the Global South, as illustrated in Figure 10.1. In Latin America, the majority of the countries rely on export of agriculture, energy and mineral commodities. The degree of dependence on commodities is reflected on the way the level of development relates to the expansion of extractive projects (Svampa, 2019). In Latin America, Brazil is one of the main players in the market of agricultural commodities. The recent boom of these products strengthened extractive sectors and prompted the rewriting of the Brazilian export agenda (and the economy) centered around reprimarization (Flexor & Leite, 2017). The intensification of agribusiness in Brazil accelerated the expansion of this sector across different territories. Delgado (2012) examines the Brazilian case and demonstrates that the liquidity crisis in the late 1990s was the key for the prioritization of agribusiness in the Brazilian macroeconomic policy agenda, contributing to what he describes as the political economy of the agribusiness. The boost in agribusiness was prompted by (1) priority projects of public investment in regional infrastructure; (2) the channeling of public funds to agriculture and farming research; (3) the ‘loose’ regulation of the land market with little regulation of public land; and (4) changes in macroeconomic policies – in particular, in exchange rate policies (ibid.). This relaunching provided an institutional framework that supported the expansion of agribusiness, especially around border territories, with impact on the expansion of agribusiness in the national territory of Brazil, as can be seen in Figure 10.1. In Brazil, the areas with soybean cultivation went up from 1.3 million to 35.9 million ha between 1970 and 2019, subsequently occupying more than 50 percent of the area earmarked for temporary crops (Companhia Nacional de Abastecimento – CONAB, 2020). The soy production that in the 1980s was concentrated in the southern part of the country expanded towards the Brazilian Cerrado, initially in areas located in the center-west (the state of Mato Grosso in particular). Between 1990 and 2000, soybean crops expanded to the northeast and north, consolidating areas traditionally used for production, as in the case of the south and center-west, alongside the opening up of new areas for agriculture. On that note, it is worth highlighting the Matopiba region (which includes areas in the states of Maranhão, Tocantins, Piauí and Bahia, all located in the northeast) and areas in the Amazonian region, such as the south of Pará and Amazonas, and Roraima. Figure 10.1 clearly shows how the production sites on the map become progressively darker over the years, especially after 2000.

Land grabbing, financialization and dispossession in the 21st century  149

Source:  Data from PAM/IBGE (over time). Elaboration by Valdemar Wesz Jr.

Figure 10.1

Cultivated areas with soybean production in Brazil (in hectares), 1973–2018

For Frederico and Gras (2017) the agribusiness expansion coincides with the arrival of a new stream of capitalists in rural areas in Latin America, which will be seen in greater detail in the next section. Increasingly, financial actors and mechanisms are transforming the agribusiness sector, configuring new modes of financing, accelerating the expansion of areas for commodity production, and transforming landscapes (Ducastel & Anseeuw, 2017; Harvey, 2004; Knuth, 2015). This process is accompanied by an important set of policies endorsed by the state. State and governmental agencies set in motion the ‘accumulation by spoliation’ in areas with similar characteristics throughout Brazil (Harvey, 2004; Levien, 2014). Levien (2014) highlights the little attention given in the literature to disappropriation and dispossession of land. The author underpins the importance of considering dispossession regimes, the means through which expropriation is carried out. To intensify expropriation, the state uses coercion and persuasion to enable asset transfer (land and natural resources) from one social group to the benefit of another. To understand the role of the state we need to look at different dimensions. The first is tied to the construction of an ideology associated with a narrative that justifies expropriation of a ‘commodity consensus’ (Svampa, 2013). The extractive activities in Latin American economies, now under the new guise of modernity and high capital investment, are promoted by the

150  Handbook on critical political economy and public policy government as the main requirement in the execution of policies for the promotion of social and economic development. Once extractive activities are perceived as vital items on balance sheets and subsequently in the national macroeconomy, they are promoted by national and local government through several sectorial mechanisms and public policies. The first step is to consolidate a safe and attractive environment for foreign investment, guaranteeing substantial fiscal exemptions and low taxes over capital, interest and dividends, and ensuring economic stability and contract guarantees. The elaboration of maps, administrative areas, and zoning of land ‘destined’ for extractive activities is another way to direct investments (special economic zones or land reserve zones). In addition, ‘empty’ and ‘unproductive’ areas are created, justifying the promotion of land transactions (Dwyer, 2013). More often, in several countries in Latin America we observe changes in legislation and in regulatory landmarks for land and natural resources aiming to facilitate land grabbing and privatization. To guarantee the legal protection of investments, many countries change their land regulatory framework to encourage the establishment and growth of the land market, the expansion of policies related to land regularization, and the concession of public land to private actors. We highlight the promotion of diversified sectorial public policies to support extractive activities as the concession of subsidized credit; deregulation of financial instruments tied to land and commodities; expansion of public investment in research and development; and elaboration of programs and plans to support public investment in logistical infrastructure. Furthermore, given that expropriation is always a violent phenomenon as it withdraws assets from a specific social group, the state must act during the process of disappropriation. This could be through the creation of settlements and the overseeing of compensation due to expropriated communities, or by criminalizing protests and putting the police force into action to ‘pacify’ manifestations (Muñoz & Villamar, 2018; Svampa, 2019).

THE CONSTRUCTION OF LAND AS A FINANCIAL ASSET: LAND MARKETS AND NEW FORMS OF DISPOSSESSION The application of this analytical framework to the rural sector is not trivial and is gaining more significance in recent times. The pioneering book by Guilherme Delgado (1985), titled Capital financeiro e agricultura no Brasil: 1965–1985 [Financial Capital and Agriculture in Brazil: 1965–1985] is an example of a ‘classic’ study on the agrarian thematic field in Brazil. In a recent book (Delgado, 2012), he developed this analytical framing in the light of new movements. As early as the 1980s, the author noted the role of rural credit and the characteristic ‘financial interference’ in the process of ‘conservative modernization’ in Brazilian agriculture. In fact, in the context of Brazil, the topic has been favored by researchers in the area of geography (Frederico & Gras, 2017; Pitta, Boechat & Mendonça, 2018; Pitta & Mendonça, 2014), even if studies in the area of social sciences have been increasing (Balestro & Lourenço, 2014; Kato & Leite, 2020). Beyond Brazil, there has also been an increase in research on related topics, particularly in the areas of sociology and economic sociology, of which two authors deserve special mention – Jennifer Clapp with studies focusing on agricultural products and commodity markets (Clapp, 2013, 2017; Clapp & Isakson, 2018), and Madeleine Fairbairn with several works about the financial dimension more specifically (Fairbairn, 2015). Her latest book, Fields of Gold: Financing the Global Land Rush (Fairbairn, 2020), in particular, is a noteworthy contribution.

Land grabbing, financialization and dispossession in the 21st century  151 Following on from these more recent works and considering research investment in the rural area per se (both in Brazil and abroad), the return to the ‘classics’ and their formulations of categories and concepts that were essential for a better understanding of movements related to land and the rural sector, has been timely. Though it is not within the scope of this chapter to delve into Karl Marx and his interpretation of land income and fictitious capital, especially as discussed in the third volume of Capital (Marx, 1984), as well as Karl Polanyi and his studies on the ‘market’ and the economy as a social process, their contributions cannot be overstated. Polanyi is particularly relevant, with his observation about the meaning and reach of land as a ‘commodity’, and its centrality for a broader understanding of social processes, as seen in the extract below: The rise of the market to the condition of dominant force in the economy is noticeable, which illustrates the extent to which land and food were mobilized by commercial exchanges and labor was transformed into a commodity that can be freely purchased in the market. This may help to explain the importance of theory, historically unsustainable, of the distinct stages of slavery, serfdom, and wage labor, a tradition in Marxism – an idea that results from the conviction that the type of the economy depended on the labor characteristics. The integration of land into the economy, however, is no less vital. (Polanyi, 2012, p. 310)

We have also included amongst the ‘classics’ an original Brazilian thinker who deserves more recognition for his contributions to the theme. Amongst his many works, Rangel (1986) is noteworthy for his innovating concept of a land ‘fourth income’, which he sees as a financial quasi-asset. Thus, he rehashes an approach that until then was restricted to well-known elaborations by David Ricardo on differential rent I and II, and by Marx on absolute rent. This opening to an elaboration of a ‘financial and speculative explanation’ of land is rather strategic, having already been formulated by Rangel even prior to David Harvey’s works, for example, who is well-aligned with Marx. As we update our perspective to the recent context, it is noticeable how the conjuncture of the 2000s with a confluence of crises (environmental, energy, food, climatic and financial), was accompanied by the surge of new markets and financial assets related to agriculture and land. The social construction of these new financial markets and instruments resulted from institutional innovations, the proliferation of conferences specialized in agricultural investments, and the strengthening of narratives that praise the land as an accessible and desirable component of institutional investment portfolios (Fairbairn, 2014a). While this is still a relatively minor phenomenon compared with the size of financial markets, the process is gaining ground due to its velocity and transformational potential regarding property and control over land (Fairbairn, 2014a, 2014b; HighQuest Partners, 2010). This is evident when we look at the exponential increase in the number of foreign investment funds with a focus on rural areas (Valoral Advisors, 2020). Frederico and Gras (2017) highlight that, in this process, alternative financial investments that deal with land and farming projects become the most important type of investments. They are considered alternative assets because they are based on financial investments that are not tied to traditional financial markets enabling investors to diversify their portfolios. They include a diversified set of instruments applied to the sector (future markets, hedge funds, bonds etc.) and they may involve investments in real assets such as agricultural, forestry, infrastructure projects and so forth. They attracted attention especially after the 2008 financial crisis (Kato & Leite, 2020). The works by Gomes (2020) and Siviero Vicente (2020)

152  Handbook on critical political economy and public policy provide detailed accounts of how pension and donation funds of American universities entered Brazilian territory, appropriating land in the northeast and using it to produce commodities. In addition, we could argue that a new ‘rural–urban relation’ is forged from these financial connections in an involuntary manner – in other words, through an association between pension funds of university professors, and the eviction of peasant farmers and subsequent establishment of new production plants. The resources are obtained in the financial market and invested in productive projects through partnerships with companies and specialized producers. Generally speaking, the institutional structure for land investment involves three groups of actors: different types of investors (who provide capital); companies that manage the assets (which create financial instruments such as funds); and companies operating in the farming sector (producers or production managers). These investments demonstrate unprecedented integration between the financial capital and land tenure. Funds with specialization in the agribusiness sector had a boom from 2005 to 2014, reaching a total of US$100 billion in investment value in 2013 (Frederico & Gras, 2017). In 2014, these investments cooled off, but the estimate for 2018 is that they will have surpassed US$31 billion (Steinweg, Kuepper & Piotrowski, 2018). In 2010, HighQuest Partners identified 54 private investors dealing with land and agriculture-related assets, a phenomenon described by Frederico and Gras (2017, p. 12) as the arrival of a ‘new crop of capitalists in Brazil’. These arrangements have proved to be significant drivers for contemporary land grabbing (Frederico & Gras, 2017; Knuth, 2015). Large transnational corporations continue to play a key role in the promotion of land transactions, with the creation of chains that are increasingly more financialized and oligopoly-oriented. However, non-banking institutions – in particular, institutional investors – are gaining ground. In a context of growing liberalization, these actors manage to seize large proportions of capital at the same time as they are subject to fewer regulations (Fairbairn, 2014a, 2014b, 2020).

NEW LAND GOVERNANCE, SOCIO-ENVIRONMENTAL CONFLICTS AND LAND INEQUALITY Alongside greater visibility of trades in land and land grabbing, discussions about the need to establish a global governance of these transactions also become more prominent (Borras et al., 2012). One of the perspectives is related to the strengthening of a narrative based on the need of a global regulatory framework to facilitate land transactions. The argument is based on the perception that there is a great deal of empty and marginal land in the world, particularly in poor countries, that could be approached as opportunities for development. Governance in this case is based on two assumptions: clear guarantee of property rights, which is a key aspect of the so-called legal protection of these investments; and greater support of land markets, particularly through private ownership rights. One example of the latter is the way the World Bank positions itself (Deininger & Byerlee, 2011), encouraging the establishment of property rights, compliance with environmental and labor standards, and undertaking consultations to facilitate transactions. The state has the key responsibility of creating these instruments and developing tools to identify, quantify, acquire and dispose of marginal land, thus promoting commercial land transactions.

Land grabbing, financialization and dispossession in the 21st century  153 The second narrative is supported by the fact that the design of certain regulatory instruments facilitates land-related transactions while mitigating risks. Borras et al. (2012) draw attention to how this strand is grounded in an understanding that large-scale land transactions are inevitable and land-related redistributive policies and those that promote small-scale rural development are impossible. They try to lower the risks and emphasize the urgency of promoting rural development in poor countries. Foreign investment is usually seen as an opportunity to carry this out. These actors defend the use of governance instruments such as the strengthening of property rights, particularly for poor communities and farmers, and of mechanisms that facilitate consultation of affected communities; and the establishment of environmental and labor legislations that impose conditions for such investments. According to Borras et al. (2012), Oxfam and other civil society organizations have been adopting this tactic approach in communities where the land transaction area is already under way. As for the third stream of narrative, it seeks regulatory instruments that can curb or revert land transactions. These actors argue that current solutions for the production of food, commodities, biofuel, fodder and other products are not addressing the problems of hunger, poverty or environmental degradation. In fact, they make problems worse because they follow the logic of large-scale agricultural models, evicting whole communities and creating ‘dead land’ (Sassen, 2016). They emphasize the use of governance instruments to paralyze and revert land transactions, protecting the rights of peasant farmers, and traditional communities, and their access to land. They defend the use of mechanisms that guarantee land rights for small producers, particularly those that are not restricted to the Western category of private property, including collective and communal regimes, high environmental and labor standards, and the undertaking of consultation through participatory and transparent mechanisms. This strand is embodied in the Global Alliance against Land Grabbing created by Via Campesina and its allies in 2011 (in Mali), to give one example. To foster a particular type of land governance, we have recently observed the creation of several voluntary international initiatives that promote ‘responsible’ private investments (Clapp, 2017). In 2010, the World Bank, the FAO and UNCTAD presented the ‘Principles for Responsible Agricultural Investment’ (PRAI). In 2011, a group of global investment funds signatory to the ‘Principles for Responsible Investment’ (PRI) supported by the United Nations, created the ‘Principles for Responsible Investment in Farmland’. In 2012, FAO defined its ‘Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of the National Food Security’, endorsed by the International Committee for Food Security. In 2014, this same committee elaborated the ‘Principles for Responsible Investment in Agriculture and Food Systems’ (PRIAFS). Clapp (2017) observes that these initiatives tend to become less effective because of their voluntary nature and low participation from private actors, which is made worse by the number of initiatives with similar aims. In addition, the author remarks that these guidelines end up being used ‘cosmetically’ and as a marketing tool, and not as effective principles to actually change production systems and corporate codes of conduct. The accelerated increase of land transactions, already discussed in previous sections, and the attempts to establish a global governance of land, unfold in a context whereby there is a permanent and persisting level of inequality in terms of access to and tenure of land in rural Latin America. Land inequality is a persistent and structural feature of Latin American societies (Frankema, 2009). While over the last few years, land inequality in the world appears to have increased, as shown in the latest report by the International Land Coalition (Anseeuw &

154  Handbook on critical political economy and public policy Baldinelli, 2020), Latin America continues to have the worst ranking in terms of land distribution. A study by Oxfam (2016) demonstrates that 1 percent of the largest rural enterprises in the 15 countries in Latin America control more than half of all arable land (with an average size of 2000 ha). In that context, we can observe a scenario of permanent tension in rural areas. Land conflicts in the rural context are characterized by dispossession, destruction of houses and fencing, killing of domestic and farm animals, violent action of gunmen, murders and threats, to name a few. Losekann (2016) highlights that in Latin America, the increase in socio-environmental conflicts is associated with the rise in export of agricultural and mineral commodities. Out of the 21 countries with recorded murders of environmentalists, most of them occurred in countries in Latin America (including Colombia, Brazil, Mexico and Honduras). The Global Atlas of Environmental Justice (EJAtlas, 2020) reveals conflicts in Latin America resulting from the expansion of commodity production and land investment. In Brazil, the Pastoral Land Commission (Comissão Pastoral da Terra – CPT) provides the total figure for the annual number of land conflicts in the country. Data collected by the organization shows that between 2002 and 2020, there was a significant increase in the number of conflicts related to land, water, rights and standards of labor or means of production in Brazil. In the first years of 2000 and from 2010 onwards (particularly, after 2014), there was a surge in land conflicts, which is also tied to the growth of extractive activities in the Brazilian rural context. Figure 10.2 is striking in terms of the increase in the number of conflicts over water (since 2011), which is directly related to agribusiness, mining, logging and dams, to name a few. Conflicts over water were prominent in the states of Maranhão, Pará and west of Bahia, areas where agriculture was advancing.

Sources:  Canuto, Luz and Santos (2012) and Centro de Documentação Dom Tomás Balduíno (2021).

Figure 10.2

Conflicts in the Brazilian rural context, 2002–20

Therefore, as extractive activities and the dispute for control of assets and territory advance, a new language of territory valorization emerges, which Svampa (2019) calls the eco-territorial turn. The defense of land and territory enables the articulation of different perspectives such as

Land grabbing, financialization and dispossession in the 21st century  155 those from peasant farmers, indigenous peoples and other rural communities, feminists, environmentalists, as well as other rural and urban social disputes. These movements operate with strategic links to translate and interpret the territorial agendas and demands in order to influence governmental apparatuses, the implementation of these governance instruments, and the fate of these transactions. Because of its territorial size and agribusiness and mining sectors, combined with the remaining extensive forests and diversity of social groups inhabiting rural areas, Brazil has a central role in the future.

FINAL CONSIDERATIONS Throughout this chapter we have pointed out how recent financialization mechanisms related to agriculture and land have resulted from a more complex arrangement derived from capital accumulation processes at the international scale with direct impact on different territories and populations in countries in the ‘Global South’ – in particular, those located in Latin America, the area we focused on in this analysis. Such transformations were accompanied by a movement of dispossession, motivated by a number of entrepreneurial and governmental strategies, which dislocated, in a compulsory manner, traditional peoples and peasant farmers situated in these areas, which are now being explored for the production of agricultural, mineral and energetic commodities. This process was not voluntary; on the contrary, it relied on a decisive participation of multilateral states and agencies, despite the initiatives to ‘contemporize’ these investments by qualifying them with new adjectives, such as being ‘responsible’, in an attempt to minimize the strong environmental, social and economic impacts. This process was particularly marked after the strong expansion of these activities between the late 1990s and early 2010. Thus, moving beyond financialization per se, these changes in the rural landscape were fueled by the growing participation of foreign capital in the process of large-scale land appropriation, which came to be known as land foreignization. The financialization of these natural resources and assets is not something new strictly speaking, but with the emergence of the financial, food, energy and environmental crises after the second half of the 2000s, a significant number of rural territories became the object of speculative activities, including requirements of valorization of different forms of investment as evidenced in the growing number of funds specializing in this type of activity between 2005 and 2020. In that context, this financial dimension and the trend of dispossession that characterizes it acquires new meaning. With a greater number of transactions after 2000, it also gains in intensity, be it for the ways new actors get involved with farming and agricultural investments or the new conflicts that emerge, being triggered by the dispute over land and natural resources (including water). These practices gave rise to new narratives about global land governance in an attempt to better understand the different processes of dispossession, in Harvey’s words, or eviction, to use the well-known elaboration by Sassen, or even expropriation, a concept that encompasses extra-economic means of coercion and violence to meet the intended ends, as stressed by Levien. Thus, we have shown how the land dimension gained a central role in the international political-economic agenda, with the latter becoming a key area in the new set of ongoing strategies, prompting a revision of the former, and relatively dated perspectives about the character

156  Handbook on critical political economy and public policy and significance of agricultural activity for capitalist accumulation. If, on the one hand, it is not only a problem of food production and supply in domestic and/or international markets given that both land and commodities are the object of ever more sophisticated financial arrangements, on the other, it is not simply a matter of approaching the rural sector as a locus of production (usually for export). Instead, the rural context must be understood as vital for differentiated forms of lives and livelihoods, and for the preservation of natural resources, which implies the prevalence of a different mode of development that opposes the first formulation above (production/financialization). This tension explains in certain ways the emergence of new projects related to the rural sector that are in dispute within the international context.

NOTES 1. In this chapter, inspired by Epstein (2005), we use the term financialization to mean the increasing importance of financial markets, financial motives, financial institutions and financial elites in the operation of the economy, at international, national and local levels. Van der Zwan (2014) notes that the body of financialization studies are diversified, corresponding to at least three different approaches: a group that considers financialization as a regime of accumulation; studies that focus on the financialization of modern corporations (shareholder value); and a group that analyzes the social and cultural impacts of financialization (financialization of the everyday). As Clapp and Isakson (2018) stress, in recent decades, financialization profoundly affected food systems and agriculture in a process in which financial actors, markets and motivations are transforming agriculture and food provisioning. The financialization of agriculture is an ongoing process that transforms agrifood supply chains. 2. According to the United Nations Conference on Trade and Development (UNCTAD, 2019), a country is considered dependent on commodities if the latter represents more than 60 percent of the country’s export (in terms of value). 3. According to Land Matrix (2020), which has recorded land transactions of areas with more than 200 hectares since 2000, out of the 1610 land transactions across the world, 36 percent related to African countries and 21 percent to Latin American countries.

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158  Handbook on critical political economy and public policy HighQuest Partners 2010, ‘Private financial sector investment in farmland and agricultural infrastructure’, OECD Food, Agriculture and Fisheries Working Papers No. 33, Paris: OECD Publishing. Kato, K. & Leite, S.P. 2020, ‘Land grabbing, financeirização da agricultura e mercado de terras: velhas e novas dimensões da questão agrária no Brasil’, Revista da ANPEGE, 16 (29), 452–83. Knuth, S. 2015, ‘Global finance and the land grab: mapping twenty-first century strategies’, Revue canadienne d’études du développement, 36 (2), 163–78. Land Matrix 2020, ‘Brazil’, accessed 15 November 2021 at https://​landmatrix​.org/​map/​. Levien, M. 2014, ‘Da acumulação primitiva aos regimes de desapropriação’, Sociologia e Antropologia, 4 (1), 21–53. Losekann, C. 2016, ‘A política dos afetadospelo extrativismo na América Latina’, Revista Brasileira de Ciência Política, 20, 121–64. Marx, K. 1984, O Capital, São Paulo: Abril Cultural. Muñoz, E. & Villamar, M. 2018, ‘O desenvolvimento extrativista na América Latina e no Caribe: impactos, disputas e alternativas’, paper presented at the 42nd ANPOCS Annual Meeting, Caxambu (MG). Ocampo, J.A. 2017, ‘Commodity-led development in Latin America’, in G. Cabonnier, H. Campodonico & S.T. Vásquez (eds), Alternative Pathways to Sustainable Development: Lessons from Latin America, Leiden: Brill, pp. 51–76. Oxfam 2016, Desterrados: tierra, poder y desigualdaden America Latina, Oxford: Oxfam International. Oya, C. 2013, ‘Methodological reflections on “land grab” databases and the “land grab” literature “rush”’, Journal of Peasant Studies, 40 (3), 503–20. Pitta, F.T., Boechat, C.A. & Mendonça, M.L. 2018, ‘A produção do espaço na região do MATOPIBA: violência, transnacionais imobiliárias agrícolas e capital fictício’, Estudos Internacionais, 5 (2), 155–79. Pitta, F. & Mendonça, M.L. 2014, ‘O capital financeiro e aespeculação com terras no Brasil’, Mural Internacional, 5 (1), 46–55. Polanyi, K. 2012, A subsistência do homem e ensaios correlatos, Rio de Janeiro: Contraponto. Rangel, I. 1986, ‘A questão da terra’, Revista de Economia Política, 6 (4), 71–7. Sassen, S. 2016, Expulsões: brutalidade e complexidade na economia global, trans. Angélica Freitas, Rio de Janeiro/São Paulo: Paz e Terra. Sauer, S. & Borras Jr., S.M. 2016, ‘“Land grabbing” and “green grabbing”: uma leitura da “corrida na produção acadêmica” sobre a apropriação global de terras’, Campo-Território, 11 (23), 6–42. Siviero Vicente J. 2020, ‘Uma nova safra de proprietários rurais? O caso dos investimentos da Universidade de Harvard em recursos naturais no Brasil’, master’s dissertation, CPDA/UFRRJ, Rio de Janeiro. Steinweg, T., Kuepper, B. & Piotrowski, M. 2018, Foreign Farmland Investors in Brazil Linked to 423,000 Hectares of Deforestation, Washington, DC: Chain Reaction Research. Svampa, M. 2013, ‘Consenso de los commodities y lenguajes de valoración en America Latina’, Nueva Sociedad, No. 244, March/April, 30–46. Svampa, M. 2019, Las fronteras del neoextrativismo en América Latina: conflictos socioambientales, giro ecoterritorial y nuevas dependencias, Bielefeld: Bielefeld University Press. United Nations Conference on Trade and Development (UNCTAD) 2019, State of Commodity Dependence 2019, Geneva: UNCTAD. Valoral Advisors, 2020, Mapping the Global Opportunities in the Food and Agriculture Investment Space Post Covid-19, Luxembourg: Valoral Advisors. Van der Zwan, N. 2014, ‘Making sense of financialization’, Socio-Economic Review, 12 (1), 99–129. Wilkinson, J., Reydon, B. & Sabbato, A. 2012, ‘Concentration and foreign ownership of land in Brazil in the context of global land grabbing’, Canadian Journal of Development Studies, 33 (4), 417–38.

11. Extractive economies and public policies: critical perspectives from Latin America Bruno Milanez and Ana Garcia

Mining and extractive industries are usually presented as significant contributors to national economies. Yet, empirical and analytical studies developed throughout the 20th century have revealed the limits and challenges that they must deal with to ensure long-term economic growth. More recently, some works have focused on the territorial aspects and conflicts at the subnational scale, involving specific social groups around extractive projects (Graulau, 2008; Saes & Bisht, 2020; Santos & Milanez, 2020). In this chapter, we argue that despite the risks of resource-based growth, the emergence of neoliberalism and the economic rise of Asia have driven the restructuring of nation-states and public policies, which in turn has deepened the dependence on extractivism in several Latin American countries. This dynamic has resulted in new and complex territorial impacts and conflicts. It presents new challenges to the economic critiques formulated between the 1950s and the 1990s such as structuralism, dependence theory and the resource curse, among others, opening up a space for the construction of new paradigms that sought to complement such critiques as well as question some of their proposed solutions, including the development discourse itself. This chapter is organized into three main parts. We begin by briefly describing the main schools of thought on extractivism and economic development in the 20th century. Then, we address the main issues involving the economic and political context of mining in Latin America at the beginning of the 21st century, providing examples of public policies in the extractive sector. We conclude with a synthesis of new conceptual propositions on ‘post-extractivism’ and ‘post-development’, based on recent Latin American intellectual debates. Our analysis is based on our experience as academics with participatory research in extractivism and mining in Brazil and Latin America, as well as in international networks on mining multinationals in Brazil, Mozambique and Canada, of which the Articulação Internacional de Atingidos e Atingidas pela Vale [International Articulation of those Affected by Vale] is a major example.1 Although focused on Latin America, the debates presented here are applicable to other regions that experience the expansion of the mineral frontier, either to meet the infrastructure demands of emerging countries (Edwards et al., 2014; Rubbers, 2020) or to ensure the energy transition of countries of consolidated industrialization (Bazilian, 2018; Church & Crawford, 2020). In our view, despite the alleged legitimacy of extractive-oriented activities (mainly generated by promises of employment, infrastructure and modernization), the territorial nature of conflicts that emerged from them reveal the limitations of natural resource-based growth, and challenge social movements and academics to rethink the relationship between nature, society and economy.

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160  Handbook on critical political economy and public policy

NATURAL RESOURCES AND GROWTH: MAIN CONCEPTUAL PERSPECTIVES IN THE 20TH CENTURY The Neoclassical School Neoclassical economics is based on theoretical principles of utilitarianism and equilibrium. It understands the economic system based on individuals seeking to maximize individual welfare. Its application in the field of environmental economics tends to understand environmental values from individual preferences, attributed mainly to market values (Amazonas, 2009). A subfield of environmental economics is natural resource economics. According to Devarajan and Fisher (1981), it can be traced back to Hotelling’s seminal paper of 1931 that debated the choice between immediate or future extraction, considering opportunity costs and future values. In another important work, Solow (1974) started from the premise that welfare is a function of consumption, whether it is produced by natural or manufactured capital. Since he saw the two as interchangeable, the depletion of mineral resources would not imply an obstacle to development. The welfare of future generations would be guaranteed if non-renewable resources were replaced by reproducible capital. On this assumption, he argued that under certain conditions, a competitive market could allow a time-efficient allocation of non-renewable resources since the price of resources would increase as their reserves became scarce. Further, as he considered that a mineral resource would not generate dividends while it was underground, the only way to create value would be to extract and trade these resources. Therefore, the main problem to ensure development would be to define the right time to extract a certain resource. As explained by Davis and Tilton (2005), when considered a capital asset, mineral resources would integrate production functions, together with other variables, such as labor and financial capital. In these functions, natural and technological characteristics would define the so-called ‘mineral rent’.2 Following this rationale, whenever the mineral rent was positive, mining would contribute to economic growth, therefore, the more ore extracted, the greater the wealth generated. Ross (1999) argues that in the 1950s, most economists assumed that poor countries were experiencing an imbalance between variables of the production functions (e.g., large amounts of mineral resources and scarcity of financial capital). They recommended that an equilibrium could be achieved by exporting the minerals and attracting international direct investment. According to Graulau (2008), this was also the path outlined by Rostow’s classic work of 1960 on stages of economic growth, added to borrowing international loans for the development of extractive projects (Rostow, 1960). This reasoning can still be identified in national mining policies in Latin American countries such as Brazil (Ministério de Minas e Energia, 2011) and Peru (Ministerio de Energía y Minas, 2010). Structuralism and Dependence Theory In the Latin American context, the first critiques of the neoclassical perspective were elaborated in the 1950s, largely conceived around the Economic Commission for Latin America and the Caribbean (ECLAC, known as CEPAL in Spanish and Portuguese), on the debate of structuralist economists and dependency theory (cf. Furtado, 1965; Prebisch, 1949). Although

Extractive economies and public policies: critical perspectives from Latin America  161 these theories were not developed to specifically discuss the role of mining, both were very critical of the subordinate position of the peripheral countries in the global market and their specialization in the commodities export, among which minerals would be included. Structuralism sustains that structural asymmetries in international trade would hinder the economic development of the peripheral countries. Raul Prebisch’s seminal works in 1949 identified that there would be, in the long run, a deterioration in the terms of trade between basic products (agricultural and mineral) and industrialized products that would benefit central countries in international trade (Prebisch, 1949). This deterioration would be associated with low labor productivity, reduced demand rate, limited elasticity of basic goods and high competition among raw material suppliers (Sachs & Warner, 1995; Wick & Bulte, 2009). Given this condition, to buy the same amount of manufactured goods, peripheral countries would need to export increasing amounts of basic products (Saes, 2017). Celso Furtado (1965) developed the concept of structural dualism. He identified that in peripheral countries, two very distinct sectors would coexist: on one hand, there were low-productivity sectors focused on supplying the domestic market; on the other, there were more dynamic and more productive sectors oriented towards the external market such as mining and agribusiness. The contradiction of this duality would occur because these countries would import technology, contract debts and invest in infrastructure that favor the export sector, relegating to second place the meeting of national needs and their capacity to increase productivity in other areas (Graulau, 2008). Dependency theory emerged under the influence of the ECLAC thinkers and, despite a strong developmentalist bias, proposed to counter the ideas of modernization theory that had been developed by neoclassical thinkers such as Rostow (1960). It refuses to see underdevelopment as the result of the inability of peripheral countries to reach the same productivity level of central countries, but as a consequence of the very expansion of capitalism in the periphery (Coelho, 2016). In one of his synthesis works, Theotônio dos Santos (1970) defined dependence as a situation in which the economy of a country is conditioned by the expansion of another country to which it is subordinated. In part, this situation is a result of monopolistic relations of foreign control of commodity, consumer goods and capital goods sectors in dependent economies. This context would generate an imbalance in trade, resulting in the transfer of surpluses from dependent to dominant countries. In addition, there is a domestic component: the dependent countries’ productive systems would also be defined in such a way as to guarantee the maintenance of such relations. In this way, both the structuralists and dependentists showed that among the key elements in this process, the value and power associated with the type of goods produced by each group of countries would maintain or even worsen the subordinate position of the peripheral economies. Ecological Unequal Exchange Built upon the complexification of the structuralist debate of the 1950s, the ecological unequal exchange proposal added to it elements of ecological economics and world-systems theory (Roberts & Parks, 2009). Based on the reflections developed by the economist Georgescu-Roegen in 1971, ecological economics seeks to present a systemic vision between environment and economy, defining the economy as a subsystem of a finite physical ecosystem. In general, ecological economics was

162  Handbook on critical political economy and public policy developed upon criticisms of instrumental proposals of monetary valuation of ecosystem services. Among its debates are the development of new metrics for assessing (in)sustainability (Martínez-Alier, 2002) and discussions concerning the conditioning of economic thinking to physical and moral limits (Daly & Farley, 2004). According to Hornborg (1998), another theory that was incorporated by the proponents of ecological unequal exchange was world-systems theory, based on the seminal works of Immanuel Wallerstein. According to Graulau (2008), world-systems theory would explain how the capitalist system involves an extensive division of labor that goes beyond territorial and political units. Looking from this angle, development and underdevelopment would not be two phases of a continuous process, but the manifestation of an unequal exchange relationship of products characterized by having differentiated quantities of labor. Rice (2007) points out that the beginning of the ecological unequal exchange proposal can be identified in the studies of Stephen Bunker (1985), who analyzed the global insertion of the Brazilian Amazon in the world economy, particularly the structuring of the iron ore export system, and warned that the extraction of natural resources would destroy values that could not be measured in economic terms. By combining different perspectives, the ecological unequal exchange proposal complements the economic unequal exchange concept, which looked at value exclusively through the metrics of wages, prices and profit. It suggests that this purely monetary view underestimates the value of the energy and natural resources embedded in such an exchange, as well as the specific direction of material and energy flows from peripheral to central countries. Processes, such as the undervaluation of natural resource flows, the transfer of environmental costs and the appropriation of environmental space end up granting central countries a disproportionate use of ecological systems, while imposing environmental damages on peripheral countries, where extractive activities are concentrated (Rice, 2007). The Resource Curse Rice (2007) points out that the junction of the environmental economics debate with the literature on development gave rise to the resource curse hypothesis. It states that those economies whose exports are highly dependent on natural resources, particularly oil and minerals, tend to have lower growth rates than others, where natural resources have a smaller share (Ross, 1999). Wick and Bulte (2009) trace the origin of this debate to three main works: Gelb (1988), who studied six oil-exporting countries and assessed that economic losses during periods of low prices did not offset the growth that occurred in the positive stages of economic cycles; Auty (1993), who studied the behavior of six peripheral countries (Chile, Peru, Jamaica, Bolivia, Zambia and Papua New Guinea) that were mineral (bauxite, copper and tin) exporters, and who underperformed economically compared to other peripheral countries that did not depend on minerals, thus suggesting economic diversification in those countries; finally, Sachs and Warner (1995), who analyzed the behavior of the economies of 97 countries, and identified that those with a large share of natural resources in their exports presented lower growth rates in subsequent years. Based on these studies, a large literature was established to understand which aspects were responsible for such performance. Some authors returned to the question of deterioration in terms of trade, as already identified by the structuralists (Ross, 1999). A second element was the high volatility of mineral prices, which would negatively impact economies by making the

Extractive economies and public policies: critical perspectives from Latin America  163 trade balance and government revenues unstable (Auty, 1993; Davis & Tilton, 2005). Finally, it would be associated with exchange rate impacts, often called the Dutch disease, which would negatively impact the economic competitiveness of other sectors, leading to an increasing dependence on the extractive export sector and to a reduction in local economic dynamism (Sachs & Warner, 2001; Wick & Bulte, 2009). Counter to these structural arguments, some authors have tried to point to domestic problems of ‘bad governance’. According to Davis and Tilton (2005), authors following this line argue that if there were ‘good governance’ and less corruption, this would reduce the risks of rent-seeking and ensure that mineral income is invested in a way that ‘promotes economic development’, which would include economic diversification and increase of labor productivity. This approach is, however, limited, because it treats the institutional aspects as if they were isolated from the other characteristics of these countries, such as high social inequality, small elites and concentrated economic power. For example, Leite and Weidmann (1999) argue that corruption is determined within the economic system, that it should be seen from the interaction between economic interests and the use of political instruments, and that the existence of capital-intensive extractive activities are important determinants of corruption.

PUBLIC POLICIES AND NEOEXTRACTIVISM Neoliberalism, Globalization and the Emergence of Asia Dependency theory and structuralist thought both had strong influence on the economic policies in Latin America between the 1950s and the 1970s, giving rise to the import substitution industrialization model. States sought to create a productive structure that would allow them to implement an industrial base and reduce the import of manufactured goods. These policies were largely based on protectionist import taxes, foreign investments, credit and state intervention. State-owned companies also had a special role, particularly in the extractive sectors (Sikkink, 1991). This model faced some wear and tear during the 1970s, particularly due to increasing public indebtedness. This became unsustainable with the rise in international interest rates in 1979, as a result of the new restrictive US monetary policy (Mattei & Santos Júnior, 2009). Important changes in economic policies occurred since the 1980s, with a reorientation of economic strategies for debt repayment. This movement was greatly influenced by the structural adjustment programs, promoted especially by the International Monetary Fund and the World Bank. These programs were deepened throughout the 1990s in what was conventionally called the Washington Consensus. From this standpoint, governments were seen as facilitators of foreign investment for which they were needed to guarantee institutional stability, reduce economic risks and facilitate the capture of mineral rent by international companies. In the mining sector, these changes referred to modifications in the legal framework for further market liberalization, reduced state intervention, privatization of state-owned companies, foreign investment protection and lower tax for commodities export (Graulau, 2008; Svampa, 2013). In Table 11.1 we present some of the main legislation and institutional changes in Latin America.

164  Handbook on critical political economy and public policy Table 11.1

Neoliberal institutional changes, selected countries, 1976–99

Country

Changes Aimed at Stimulating Private Activity Changes Allowing/Facilitating Foreign Investments

Argentina

Ley 24498/1995 de Actualización Minera

in Mining Alteração da Ley Nº 21382/1976 de Inversión Extranjera (Decreto Nº 1853/1993) Bolivia

Código de Minería (Ley 1777/1997)

Brazil

Privatization of Companhia Vale do Rio Doce Emenda Constitucional 6/1995

Ley de Inversiones (Ley 1.182/1990)

Chile

Código de Minerí (Ley 18.248/1983)

Estatuto de la Inversión Extranjera (Decreto Ley 600/1976)

Ecuador

Ley de Minería (Ley 126/1991)

Ley 12 de Cámaras de Minería (Decreto Nº 415/1993)

Peru

Ley General de Minería (Decreto Legislativo

Ley de Promoción de la Inversión Privada (Decreto Legislativo

(1996)

Venezuela

109/1992)

757/1991)

Decreto con rango y fuerza de ley de minas

Regulación de la inversión extranjera (Decreto 2095/1992)

(295/1999)

Source:

The authors based on Chaparro (2002).

Latin American countries went through a process of rapid government downsizing and a reversal in development strategies. The focus on the domestic market was reduced, a concern for outward growth was adopted, and exports were once again seen as the ‘new’ development strategy (Barton, 2006). Due to the recession in North America and Western Europe, the 1980s and 1990s were a period of a historically low commodity prices (Graulau, 2008), as shown in Figure 11.1. Even so, these products formed the basis of Latin America’s exports, given the lack of competitiveness of industrialized goods (Albavera, 2004).

Source:

The authors based on World Bank (2021a).

Figure 11.1

Real price variation of industrial minerals, 1970–2020 (index number)

Consequently, the adoption of neoliberal measures led to a specialization of the region in the production and commercialization of resource-intensive products, with significantly depreci-

Extractive economies and public policies: critical perspectives from Latin America  165 ated prices. The expectation was to guarantee the inflow of foreign exchange necessary for the import of technology-intensive goods (Schaper & Vérèz, 2001). The global trade scenario changed, however, in the early 2000s, with the exponential growth of China. The Asian country became one of the main industrial centers in the world, both transforming large amounts of raw materials into products for export and carrying out large internal infrastructure works (Saes, 2018). Global demand for mineral commodities increased exponentially, coupled with financial speculation, resulting in extremely appreciated prices during the period 2003–11 (Figure 11.1). In this context, relations between China and Latin America were intensified. The region became a supplier of minerals and agricultural commodities to China, which in turn became the second largest trading partner and the main source of credit and financing for the region (Myers & Gallagher, 2020; Ray & Wang, 2019). Thus, Chinese demand for ores, metals and fossil resources boosted export-oriented commodity producers in Latin America, generating debates about the (re)primarization of the region’s economic base. In 2017, only five products accounted for 70 percent of Latin America’s exports to China: soyabeans, copper and iron ores, refined copper, and oil (CEPAL, 2018). Regarding investments, data collected by the China Global Investment Tracker point out that 74 percent of the total Chinese investment in Latin America between 2005 and 2019 was directed to agriculture, energy and mining.3 The energy sector (oil, gas and renewables) accounted for more than half of it, with Brazil as the main destination, and Peru and Chile for mining projects. Additionally, credits provided by the China Development Bank and Exim Bank have strengthened these sectors, particularly oil and related infrastructure, mainly in Venezuela, Brazil and Ecuador (Myers & Gallagher, 2020). The extractive sectors and their infrastructure are precisely those that present social and environmental conflicts in the territories, as we will discuss in the next section. In previous work, we’ve identified 57 cases of socio-environmental conflicts involving Chinese companies in Latin America, concentrated in the energy (44 percent), mining (37 percent) and infrastructure (10 percent) sectors (Pereira & Garcia, 2021). The official Chinese narrative is one of complementarity between the regions, which we consider to be, in fact, a deepening of the international division of labor. The literature indicates that China seeks, in its relations with Latin America, to meet its strategic needs that respond to its development project (Slipak, 2014; Wilson, 2013). However, China alone cannot be held ‘responsible’ for the concentration of the production matrix in Latin America in extractive primary products. As shown in Table 11.1, Latin American governments have undertaken efforts to restructure their legislation and institutions to facilitate the entry of foreign capital, as well as to stimulate the export of agricultural and mineral commodities with tax exemption, as exemplified by the Lei Kandir of 1996 in Brazil. In turn, the commodity cycle in the 2000s, related to Chinese demand, generated development strategies based on extractivism by ‘progressive’ governments in the region, as we will see in the next section. In assessing the mineral commodity price fluctuations of the 2000s, Cooney et al. (2008) put forward two explanations that would complement each other: first, a demand shock would have occurred due to the increase in consumption; conversely, the reduction in the Chinese growth rate, starting in the early 2010s, would have led to an increase in supply and a consequent reduction in prices. A second explanation would be associated with the increasing financialization of the commodity sector. The development of increasingly complex and diversified financial instruments, as well as the growth of commodity index funds, would have caused a speculative bubble, leading to artificially high prices. As of 2012, with the reduction in profit

166  Handbook on critical political economy and public policy expectations, such financial market operators have migrated towards other options, leading to falling prices (Milanez, 2017). Despite the significant drop in prices, the ten-year boom showed that, in the new global context of Asian expansion, high mineral profitability rates were to be expected. At the same time, the ephemeral nature of these profits no longer frightened investors, already accustomed to the volatility of the financial system. Moreover, the possibility of extraordinary new gains from the increased demand for strategic (rare) minerals to ensure the energy transition in central countries (Klare, 2012), created an expectation for new high demand cycles. Thus, the sharp variation in prices resulted not only in the consolidation of the centrality of the extractive sector in Latin American economies in the 2000s, but also in the deepening of these countries’ dependence on the export of raw materials. ‘New’ Development Strategies: Extractivism Back to the Center Within the Latin American literature, this ‘new stage’ of a development strategy is commonly referred to as neoextractivism:4 rapid economic growth based on the appropriation of natural resources, undiversified production networks and subordinate international insertion. The concept usually refers to the extraction of mineral resources and oil, as well as agrarian, forestry and fishing activities (Acosta, 2011; Gudynas, 2015). It describes ventures structured in export-oriented enclaves with low economic linkages and high social and regional fragmentation (Svampa, 2013). Gudynas (2015) differentiates two main variations of neoextractivism. One would be the readjusted ‘conservative neoextractivism’, which means a deepening of the neoliberal model of the 1980s and 1990s, still present in countries governed by the center-right in the 2000s such as Colombia, Peru and Mexico. In these countries, there were adjustments to reduce social control and environmental regulations, in order to facilitate even more foreign investments in the extractive sectors, without any compensation in terms of social policies expansion. The other variation is identified as ‘progressive neoextractivism’ among countries identified as the ‘pink tide’ in the 2000s (Argentina, Bolivia, Brazil, Ecuador, Venezuela). In this case, the state would be responsible for ‘controlling access’ to natural resources, either through regulation, nationalization of reserves or the operation of state-owned companies. The state would also act as a ‘compensator’, capturing part of the extractive rent to implement programs to diminish poverty and reduce social inequalities. In this narrative, the fight against social inequality would end up being used to legitimize extractive projects, overshadowing social and environmental impacts of such activities (ibid.). Both have failed in terms of a long-term development strategy that could improve the livelihood of the majorities. The failure of ‘progressive extractivism’ has led to the post-development critique that will be discussed in the next section. Svampa (2013) argues that Latin America has replaced the ‘Washington Consensus’ with the ‘Commodities Consensus’, centered on the large-scale export of primary goods. For the author, ideas such as ‘economic opportunities’ and ‘comparative advantages’ overflowed the political-ideological frontiers, as even for leftist governments, neoextractivism consists of a resignation to ‘progressive capitalism’, and the acceptance that there would be ‘no alternatives’ to extractive development. Slipak (2014) points to the ‘Beijing Consensus’, which refers to the idea that deepening trade relations with China would have become an ‘inevitable path’ for the region’s economic growth. The consensus manifested itself through strategies of ‘cooperation’, marked by

Extractive economies and public policies: critical perspectives from Latin America  167 a pattern of subordination and dependence. Such strategies were adopted both by conservative governments, based on a liberal vision of foreign trade, and by progressive governments, which would defend to break with the omnipresence of Western powers. Even after the drop in mineral prices after 2012, the importance of minerals continued to grow in Latin America’s export agenda. Between 2010 and 2018, the amount of iron ore exported by Brazil grew by 25 percent, mostly controlled by the mining company Vale. In the same period, Chile’s copper exports increased, in quantity, by 570 percent, and Peru’s by 366 percent. Similarly, Chile’s gold sales, in tonnage, to global consumers increased by 1556 percent, Mexico’s by 226 percent, and Argentina’s by 130 percent (ITC, 2021). To ensure this growth, significant changes have occurred in public policies, promoting further spoliation of land, territories and natural assets (Svampa, 2013). Consequences for Public Policies and Territories The rise in commodity prices and the prospect of export as a source of quick revenues reinforced a convergence of interest between mining companies and states. Tacit partnerships were created in the formulation of environmental public policies that had impacts on the role of the state, the construction of legitimacy for extractive activities, conflict resolution, disaster management, (non-)remediation of impacted areas and damage to workers’ health. To a large extent, these policies were primarily aimed at stimulating and facilitating extractive activities, and not to lessen their social-environmental impacts. An important element of this process was the institutionalization of public–private partnerships in the formulation of public policies. For example, in Colombia, the Canadian Energy Research Institute, linked to mineral and energy-based companies, was one of the institutions that actively participated in changes to environmental, mineral and petroleum legislation in the early 2000s (Gordon & Webber, 2016). Similarly, when the Brazilian government made the proposals to change its Mining Act, all director positions in the Secretariat of Geology and Mineral Transformation of the Ministry of Mines and Energy were held by former employees or former consultants of mining companies (Milanez, Coelho & Wanderley, 2017). Consequently, governance changes were advocated to downsize states’ responsibilities and to turn them into self-regulated activities of mining companies. In Peru, Bebbington (2010) identifies that as mining industries installed their activities in remote areas, they began to assume the role normally attributed to the state, such as territorial planning, conflict management and provision of public services. The author also noted that these initiatives went beyond the immediate vicinity of the mines and could include regional or even national actions. This process would result in a greater legitimization and acceptance of the mining companies’ projects. An emblematic case of this ‘responsibility transfer’ in Brazil took place after the collapse of the Fundão dam of the mining company Samarco S.A. in 2015. According to Santos and Milanez (2017), this case presents elements of the transition from a ‘weak’ model of state regulation to self-regulation: a private foundation (Renova) was created by the company and given the responsibility to identify affected people and define the amount of compensation (Milanez, Ali & Puppim de Oliveira, 2021), which ended up establishing a regime of captured regulation (Mattli & Woods, 2009). Expropriation of territories to ensure the expansion of extractive activities ended up intensifying territorial conflicts in the region. By analyzing data compiled by EJOLT (2016) up

168  Handbook on critical political economy and public policy to 2016, González (2019) identified that, of the 526 environmental conflicts located in Latin America, about 40 percent were involved in mining projects. According to the author, these conflicts were mainly derived from unequal use of natural resources, unfulfilled expectations about the distribution of project benefits, differences in worldview and perspectives of development models, and the lack of state capacity to regulate this sector. By the same token, the main causes of conflict involving Chinese multinationals in extractive projects in Latin America were water pollution, failure to conduct an environmental impact study or public consultation, as well as operation in protected areas or indigenous territories (Pereira & Garcia, 2021). To deal with an increase in conflicts, governments began to adopt conflict resolution methods based on mediation and arbitration. Such instruments would be justified by the idea of ‘mutually beneficial alternatives for communities, businesses, and public institutions’ (González, 2019, p. 368). However, Ferreira (2020) explains that the adoption of these instruments may result in disqualification of the jurisdictional sphere, reinforcing the principle of a ‘minimal state’ advocated by neoliberal canons. Thus, one of the main motivations for the adoption of such instruments would be cost reduction (for companies and the state) and not the full reparation of damages suffered by the affected people. One of their results would be the construction of a ‘coercive harmony’ (Nader, 1990), guaranteeing the acceptance of extractive projects. In this context, agreements on the liberalization of extractive activities in indigenous territories stand out. Both the United Nations Declaration on the Rights of Indigenous Peoples from 2008, and the American Declaration on the Rights of Indigenous Peoples from 2016 state that in order to authorize extractive activities, states need to obtain their free and informed consent. However, these standards are non-binding and are rarely followed. Aranibar, Avila and Pavez (2011) conducted an evaluation of legislations on extractive activities in indigenous lands in Bolivia, Colombia, Peru and Ecuador. The results showed that in these four countries, the legal framework was limited to following International Labour Organization (ILO) Convention No. 169, which provides only for consultation with these indigenous peoples, ignoring the possibility of veto. Consequently, it indicates the removal of the decision-making power of indigenous peoples and the transformation of their participation into a merely bureaucratic process. The expansion in number and size of extractive projects in Latin America has drawn attention to the problems associated with abandoned mines and other activities halted without proper environmental control, with consequent safety problems for communities and the environment. According to Miguel and Pereira (2019), few countries have regularly updated inventories of mining environmental liabilities, such as abandoned tailings dams and open pits. Past studies have identified 449 environmental liabilities in Colombia (2015), 492 in Chile (2014), 973 in Bolivia (2011), and 8854 in Peru (2016). This situation, in large part, would be a consequence of the companies’ decision to abandon exploited areas, or to declare bankruptcy when the projects no longer proved profitable, coupled with poor control by governments. One way to prevent mines in operation from being abandoned in the future is to require financial guarantees from the companies (e.g., trust funds, letter of credit or insurance). However, these instruments are rarely used in the region, with some exceptions in Argentina, Chile and Peru (ibid.). The convergence of private and governmental interests to guarantee extractive activities also seem to overlap against the protection of workers’ health. With the emergence of the COVID-19 pandemic, many risks were identified for workers (Bainton, Owen & Kemp, 2020;

Extractive economies and public policies: critical perspectives from Latin America  169 F.F. Castro et al., 2020). Despite this, just over a month after the first alerts of the disease in Latin America, the governments of Argentina, Brazil, Chile, Colombia and Ecuador, among others, declared mining an essential activity (BNamericas, 2020), preventing operations from being interrupted. The only field where some disagreement between companies and governments has arisen was in the dispute over the distribution of mineral revenues. Throughout the 2000s, it was possible to identify the rise of ‘resource nationalism’, defined by Haslam and Heidrich (2016a, p. 1) as ‘a wide range of actions and policies through which the state seeks to enhance its influence over the development of the resource sector’. Table 11.2 illustrates some of the legal initiatives implemented with these objectives. Table 11.2 Country

Legal changes aimed at extractive income appropriation, 2005–13 Legal Changes

Argentina

Nationalization of energy firm YPF’s shareholding control (Ley 26741/2012)

Bolivia

Creation of a direct tax on hydrocarbons (Ley 3058/2005) Hydrocarbon nationalization (D.S. Nº 28701/2006)

Brazil

Modification of the royalty calculation basis (Lei 13540/2017)

Chile

Creation of the new specific tax regime for the operating income from mining activity (Ley 20.469/2010)

Ecuador

Hydrocarbons Reform Law (Ley 85/2007)

Peru

Percentage increase and change in the royalty calculation basis (Decreto Supremo 209/2011)

Venezuela

Law for a tax on extraordinary prices in the international hydrocarbon market (Ley 40114/2013)

Source:

The authors based on Viale and Cruzado (2012).

In Latin America, the manifestation of resource nationalism could be identified in its radical (Bolivia and Venezuela), moderate (Brazil and Peru) and limited (Colombia and Mexico) modality (Haslam & Heidrich, 2016b). Three factors have motivated and made this movement possible: the price of commodities, changes in the dynamics of countries’ international integration (international trade and direct investments) and sectoral aspects (existence and quality of reserves, participation of extractive sectors in national economies, among others). Depending on these factors and the institutional capacities of governments, they would be able to capture adequate income from extractive corporations (ibid.).

FINAL CONSIDERATIONS: THE CONSTRUCTION OF POST-EXTRACTIVISM Despite promises of employment, infrastructure and modernization, mining activities have generated conflicts centered on the defense of nature, territories and traditional modes of life. From the perspective of resistance movements, this has resulted in a greater rapprochement between social movements, environmental organizations, peasant and traditional communities. As a result, there is a growing number of national and regional organizations in Latin America that directed their struggles to the extractive sector. Some examples are the Movimento Pela Soberania Popular na Mineração (Brazil); Red Mexicana de Afectados por la Minería (Mexico); Observatorio de Conflictos Mineros de América Latina (regional); Red Iglesias y Minería (regional); Alianza Centroamericana frente a la Minería Metálica (regional); Articulação Internacional de Atingidos e Atingidas pela Vale (global). In addition, other exist-

170  Handbook on critical political economy and public policy ing movements have given more centrality to the discussion of extractive activities in their agendas such as Centro de Documentación e Información Bolivia (Bolivia); Observatorio Latinoaméricano de Conflictos Ambientales (Chile); CENSAT Agua Viva (Colombia); Acción Ecológica (Ecuador); and CooperAcción (Peru) (OCMAL, 2021). The adoption of ‘progressive neoextractivism’ by countries in the region has generated considerable disappointment among social movements with directions taken by center-left and left governments. These frustrations occurred both in the practical field of public policies and in the sphere of theories and ideologies. From the public policy point of view, most countries did not achieve substantive changes in their socioeconomic structure. There were no significant modifications in the tax or land ownership configurations. In some cases, these policies even intensified aspects of inequality, either through tax incentives for extractive projects, or through land concentration in the hands of agribusiness or mining projects. In part, with the end of the commodity cycle, compensatory social measures, which were guaranteed by the rent from commodity exports, were reduced. Consequently, these governments lost some of their social support (Peters, 2016). Theoretical proposals, elaborated throughout the 20th century, centered on economic growth and the nation-state (Burchardt, 2016), were contested by many social movements. In general terms, the prescription for overcoming problems identified by those theories involved the verticalization or thickening of production chains, adding value to raw material and industrialization. While this made sense in some situations, within the new political-economic context and the territorial expansion of extractive projects, some of these ‘solutions’ further deepened existing impacts and conflicts, such as, for example, the implementation of steel mills along the Carajás Railroad in the Brazilian Amazon (Monteiro, 2005). Therefore, they failed to identify socio-ecological effects on a subnational scale, or differentiated impacts on the livelihoods of specific social groups, such as women, indigenous people, black people, and so on (Peters, 2016). In contrast, Latin American thinkers elaborated on concepts such as ‘post-development’. Escobar (1995) understands development as an instrument of thought and action characterized by three main axes – forms of knowledge, systems of power and forms of subjectivity – all of which would lead people to recognize themselves as ‘developed’ or ‘underdeveloped’. In this way, according to Escobar (1995), reality has been colonized by the discourse of development. To break this cycle, it would be necessary to build alternatives to development that take into account local knowledge and cultures, adopt critical perspectives to exclusively positivist discourses, and promote local and plural movements for a deeper analysis on the post-colonial critique of development (see Chapter 25 by Aram Ziai in this Handbook). Svampa (2013) argues that the construction of post-development would be based on three fundamental challenges: (1) to advance the construction of a ‘horizon of desirability’; (2) to identify successful experiences in the construction of alternatives at the local and regional levels; (3) and to create a transition agenda to ‘post-extractivism’. In this sense, post-development would unite a number of currents in decolonial thought and become a meeting point for distinct debates that would seek to build another relationship between society, nature and economy such as good living, common good, rights of nature, ecofeminism, environmental justice (Svampa, 2018), and popular sovereignty (Alves et al., 2020). Such elements are fundamental to deconstruct ideas like ‘mineral vocation’, ‘locational rigidity’, and ‘essentiality of mining’, among others.

Extractive economies and public policies: critical perspectives from Latin America  171 Another relevant challenge concerns the identification of successful alternative experiences. Although still limited, it is important to consider that there is a large accumulation of concrete experiences in Latin America such as solidarity economy, family farming, agroecology, and community-based tourism, among others (Alves et al., 2020; Svampa, 2013). Many of these initiatives began to recognize themselves as ‘mining-free territories’ (G.F. Castro et al., 2020), generating a new political meaning for these organizational forms. In building a transition to post-extractivism, Gudynas (2012) argues for the need to break with depredatory extractivism and create a transition to ‘sensible extractivism’, in order to achieve ‘indispensable extractivism’. To this end, the author proposes the promotion of territorial zoning according to social, environmental and economic criteria; the recognition of the rights of traditional communities; the guarantee of effective participation of society; the internalization of environmental and social externalities; and the review of subsidies, among others. Finally, we highlight the important debate on popular sovereignty in mining, which proposes strategies and policies for deepening popular participation, both in areas where there is no mining and in those where extractive activities already occur. In the first case, the ‘right to say no’ is defended as well as the primacy of direct participation in the licensing of projects through consultation protocols designed by the communities themselves. In areas where extractive projects already exist, the population should be able to decide on the scale, pace, technologies and limits to extraction. Also proposed are the possibility of transferring assets to workers; support for community-based mining; the correction of tax injustices; social control over the use of mineral royalties; as well as the reduction of economic dependence and the conversion of workers to other activities (Alves et al., 2020). In this context, the dispute over the renationalization of extractive companies and assets, which were privatized during the neoliberal period, remains relevant, as is the case of the mining company Vale, privatized in 1997, undervalued, in a bid that was contested in court (Articulação Internacional de Atingidos e Atingidas pela Vale, 2010). In this chapter, we sought to show a renewal of Latin American social thought and initiatives with respect to political economy and public policies aimed at extractive economies. Critical theories elaborated in the 20th century were fundamental in presenting the problems and contradictions of the liberal ideology. For the most part, their analyses remain valid and contribute much to the debate. However, they also began to present limitations in dealing with the increased complexity of extractive chains within the neoliberal context and the diversity of actors involved, the ideological domination of development, as well as the increasing expansion of extractive projects into territories not previously incorporated into the dynamics of global capitalism. If there is a ‘new cycle’ of extractivism in Latin America, there is also a renewal of debates, theoretical constructions and social action strategies that attempt not only to prevent the expropriation of territories, but also to guarantee an improvement in the quality of life of the communities that live there.

NOTES 1. See https://​atingidosvale​.com; last accessed December 12, 2022. 2. The World Bank (2021b) defines mineral rent as the difference between the value of production of a mineral at world prices and its total costs of production.

172  Handbook on critical political economy and public policy 3. Calculations based on data from the American Enterprise Institute and the Heritage Foundation (2020). 4. Although we describe (neo)extractivism as a ‘development strategy’, it has not been proposed as a normative development program. On the contrary, the concept was created as an analytical framework to describe the set of initiatives adopted by some Latin American countries.

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174  Handbook on critical political economy and public policy Mattei, L. & Santos Júnior, J.A. 2009, ‘Industrialização e substituição de importações no Brasil e na Argentina: uma análise histórica comparada’, Revista de Economia, 35 (1), 93–115. Mattli, W. & Woods, N. 2009, ‘In whose benefit? Explaining regulatory change in global politics’, in W. Mattli & N. Woods (eds), The Politics of Global Regulation, Princeton, NJ: Princeton University Press. Miguel, C. & Pereira, M. 2019, ‘Pasivos ambientales mineros: retos para la sostenibilidad’, in R.J. Sánchez (ed.), La bonanza de los recursos naturales para el desarrollo: dilemas de gobernanza, Santiago: CEPAL, pp. 373–94. Milanez, B. 2017, ‘Boom ou bolha? A influência do mercado financeiro sobre o preço do minério de ferro no período 2000–2016’, Versos – Textos para Discussão PoEMAS, 1 (S2), 1–18. Milanez, B., Ali, S.H. & Puppim de Oliveira, J.A. 2021, ‘Mapping industrial disaster recovery: lessons from mining dam failures in Brazil’, The Extractive Industries and Society, 8 (2), Article 100900. Milanez, B., Coelho, T.P & Wanderley, L.J.M. 2017, ‘O projeto mineral no Governo Temer: menos Estado, mais mercado’, Versos – Textos para Discussão PoEMAS, 1 (2), 1–15. Ministerio de Energía y Minas 2010, Plan estratégico institucional del viceministro de minas 2021, Lima: Ministerio de Energía y Minas. Ministério de Minas e Energia 2011, Plano nacional de mineração 2030, Brasília: Ministério de Minas e Energia. Monteiro, M.A. 2005, ‘Meio século de mineração industrial na Amazônia e suas implicações para o desenvolvimento regional’, Estudosavançados, 19 (53), 187–207. Myers, M. & Gallagher, K. 2020, China-Latin America Finance Databases, accessed June 2021 at https://​www​.thedialogue​.org/​map​_list/​. Nader, L. 1990, Harmony Ideology: Justice and Control in a Zapotec Mountain Village, Stanford, CA: Stanford University Press. Observatorio de Conflictos Mineros de América Latina (OCMAL) 2021, ‘Miembros OCMAL’, accessed June 2021 at https://​www​.ocmal​.org/​miembros​-ocmal/​. Peters, S. 2016, ‘Fin del ciclo: el neo-extractivismo en suramérica frente a la caída de los precios de las materias primas. Un análisis desde una perspectiva de la teoría rentista’, in H.J. Burchardt, R. Domínguez, C. Larrea & S. Peters (eds), Nada dura para siempre: neo-extractivismo tras el boom de las materias primas, Quito/Kassel: Universidad Andina Simón Bolívar and International Center for Development and Decent Work, pp. 21–53. Prebisch, R. 1949, El desarrollo económico de la América Latina y algunos de sus principales problemas, Santiago: CEPAL. Ray, R. & Wang, K. 2019, China-Latin America Economic Bulletin 2019 Edition, Boston, MA: Boston University. Rice, J. 2007, ‘Ecological unequal exchange: consumption, equity, and unsustainable structural relationships within the global economy’, International Journal of Comparative Sociology, 48 (1), 43–72. Roberts, J.T. & Parks, B.C. 2009, ‘Ecologically unequal exchange, ecological debt, and climate justice: the history and implications of three related ideas for a new social movement’, International Journal of Comparative Sociology, 50 (3–4), 385–409. Ross, M.L. 1999, ‘The political economy of the resource curse’, World Politics, 51 (2), 297–322. Rostow, W.W. 1960, The Stages of Economic Growth: A Non-Communist Manifesto, Cambridge, UK: Cambridge University Press. Rubbers, B. 2020, ‘Mining boom, labour market segmentation and social inequality in the Congolese copperbelt’, Development and Change, 51 (6), 1555–78. Sachs, J.D. & Warner, A.M. 1995, ‘Natural resource abundance and economic growth’, NBER Working Paper No. 5398, National Bureau of Economic Research. Sachs, J.D. & Warner, A.M. 2001, ‘The curse of natural resources’, European Economic Review, 45 (4–6), 827–38. Saes, B.M. 2017, ‘Comércio ecologicamente desigual no século XXI: evidências a partir da inserção brasileira no mercado internacional de minério de ferro’, PhD dissertation, Universidade Estadual de Campinas. Saes, B.M. 2018, ‘El boom de las commodities ante la fragmentación internacional de la producción: una perspectiva ambiental desde el Sur global’, Puentes: análisis e información sobre comercio y desarrollo sostenible, 19 (6), 8–11.

Extractive economies and public policies: critical perspectives from Latin America  175 Saes, B.M. & Bisht, A. 2020, ‘Iron ore peripheries in the extractive boom: a comparison between mining conflicts in India and Brazil’, The Extractive Industries and Society, 7 (43), 1567–78. Santos, R.S.P. & Milanez, B 2017, ‘The construction of the disaster and the privatization of mining regulation: reflections on the tragedy of the Rio Doce Basin, Brazil’, Vibrant: Virtual Brazilian Anthropology, 14 (2), Article e142127. Santos, R.S.P. & Milanez, B. 2020, ‘Corporate power and economic action: considerations based on iron ore mining’, in W. Laube & A.R.B. Pereira (eds), ‘Civilizing’ Resource Investments and Extractivism: Societal Negotiations and the Role of Law, Vienna/Zurich: LIT Verlag GmbH & Co. KG, pp. 255–76. Schaper, M. & Vérèz, V.O. 2001, Evolución del comercio y de las inversiones extranjeras en industrias ambientalmente sensibles: Comunidad Andina, MERCOSUR y Chile (1990–1999), Santiago: CEPAL. Sikkink, K. 1991, Ideas and Institutions: Developmentalism in Brazil and Argentina, Ithaca, NY: Cornell University Press. Slipak, A.M. 2014, ‘América Latina y China: cooperación sur-sur o Consenso de Beijing?’, Nueva Sociedad, No. 250, 102–13. Solow, R.M. 1974, ‘The economics of resources or the resources of economics’, The American Economic Review, 64 (2), 1–14. Svampa, M.N. 2013, ‘Consenso de los commodities y lenguajes de valoración en América Latina’, Nueva Sociedad, No. 244, 30–46. Svampa, M.N. 2018, ‘Latin American development: perspectives and debates’, in T.G. Falleti & E.A. Parrado (eds), Latin America Since the Left Turn, Philadelphia, PA: University of Pennsylvania Press, pp. 13–32. Viale, C. & Cruzado, E. 2012, La distribución de la renta de las industrias extractivas a los gobiernos subnacionales en América Latina, Lima: Revenue Watch Institute. Wick, K. & Bulte, E 2009, ‘The curse of natural resources’, Annual Review of Resource Economic, 1 (1), 139–56. Wilson, J. 2013, Governing Global Production: Resource Networks in the Asia-Pacific Steel Industry, London: Palgrave Macmillan. World Bank 2021a, ‘Commodity markets: Pink sheet data – annual prices’, 2 February, accessed June 2021 at https://​www​.worldbank​.org/​en/​research/​commodity​-markets. World Bank 2021b, World Development Indicators, accessed June 2021 at https://​databank​.worldbank​ .org/​reports​.aspx​?source​=​2​&​type​=​metadata​&​series​=​NY​.GDP​.MINR​.RT​.ZS.

12. Ecological perspectives on sustainability in China1 Lau Kin Chi

The People’s Republic of China’s spectacular growth has been regarded as a miracle to be emulated by countries on the periphery or semi-periphery. However, in terms of the global division of labour, China is still playing the role of the world factory, importing raw materials and exporting material goods. This has meant that the contamination and pollution in physical production have burdened China. While China’s total carbon dioxide emissions in 2019 topped the world, at 10.5 billion tons, its per capita carbon dioxide emissions were 7.3 tons, in contrast to the per capita figure of 16 tons for the USA. Furthermore, trade-adjusted consumption-based carbon dioxide emissions for China in 2019 were 10 per cent lower than its production-based carbon dioxide emissions, while for the importing USA the figure was 7 per cent higher.2 According to the Inclusive Wealth Report 2014 produced by the United Nations Environmental Programme (UNEP), between 1990 and 2010, China’s growth in terms of gross domestic product (GDP) was 523 per cent, but only 47 per cent in terms of inclusive wealth, taking environmental factors into consideration. The Inclusive Wealth Index (IWI) adjusted average growth rate for China was negative during this period. In the Inclusive Wealth Report 2018, the IWI adjusted growth rate for China had somewhat improved, with IWI-adjusted per capita growth rate at 10.2 per cent for 1990–2014. China’s Ministry of the Environment had estimated that redressing and preventing water contamination would cost US$320 billion and take at least 40 years, and experts estimated that the three most severe contaminations – water, air and soil – would take US$960 billion to remedy. In 2017, China invested a total of RMB953.9 billion (US$146 billion) in decontamination of the environment, an approximately 7.2 times increase on 2001, and an annual increase of 14 per cent (State Statistics Bureau, 2019). These severe contaminations foreground not only the question of remedial expenses, but also the ways different social sectors are impacted by both the contaminations and the responsive efforts by the government. It is therefore necessary to take subaltern and ecological perspectives in challenging statist, elitist and anthropocentric discourses and practices in relation to the question of sustainability in China. This chapter will examine issues of air pollution and water diversion in China and reflect on the ways China may confront the dangers of modernization.

AIR POLLUTION AND LUNG CANCER In the last two months of 2017, two news items related to Beijing drawing popular attention and causing massive anxiety were the expulsion of over 3 million so-called ‘low-end’ members of the population within a few days after the Daxing fire in Southern Beijing, and the coercive conversion of combustion of solid fuels for cooking from coal to gas in Northern 176

Ecological perspectives on sustainability in China  177 China, causing massive numbers of people in towns and villages to go without heating in the freezing cold. The former was a move to expel migrant workers, as well as small and medium industries, from Beijing. The latter was a move to improve air quality with the immediate consequence of hitting the poor hard. Both moves could find a justifiable rationale. In the first case, the Daxing fire taking 19 lives exposed the risks of fire hazards in slum-like sites in peripheral Beijing, where migrant workers at the ‘low end’ of society lived in cramped but inexpensive lodgings. After the fire, in the name of assuring safety, residents were speedily evicted, and the slum-like structures were demolished. Among the reported millions of migrant workers forced to move further away to the periphery, or to return to their home village, for example, were scavengers. It was estimated that there were 3.5 million scavengers all over China, with 150 000 to 300 000 working in about 400 garbage sites around Beijing. In 2008, there was only one waste incinerator in Beijing; by 2018, there were 11, with a capacity to annually incinerate 5.97 million tons of garbage. According to the Social Cost Assessment Report on Beijing Municipality Livelihood Garbage Incineration published in March 2017, the dioxin produced caused 3779 persons in Beijing to contract cancer every year, at a social cost of over RMB37.3 billion yuan, estimated at 1.3 per cent of Beijing’s GDP in 2018. It is not known what percentage of scavengers had left Beijing after the eviction and if they would return; Beijing had a target of containing its population within 23 million, hence the eviction was not an interim measure, but a long-term policy (Han, 2018). The paradox is, while more and more incinerators pump dioxin into the air, the Beijing government had vowed to improve air quality. Thus, in the second case, the rationale was more convincing: there was a dire need to clean up the air. A documentary, Under the Dome, produced by Chai Ling, became a major cultural and political event in March 2015. In the first 48 hours after its posting on major websites in China, it received over 200 million online hits, which meant that one in three of the 637 million netizens in China had watched the documentary. The documentary was about particulate matter levels of PM2.5 and lung cancer and heart diseases related to the catastrophic pollution. The World Health Organization (WHO) stated that China, home to 19 per cent of the global population, accounted for 30 per cent of world cancer deaths. Disability-adjusted life years (DALY) globally was 53/100 000 persons in 1990 and 77/100 000 persons in 2017, while for China, the two figures, respectively, were 75/100 000 and 220/100 000 (WHO, 2020, pp. 118, 253). The burning of coal was identified as one main cause of air pollution. In 2017, an estimated 40–50 million population in Hebei Province and 1.2 million families in Beijing and Tianjin relied on an estimated 10 million small coal burners for heating in the winter. This means that 300 000 tons of coarse coal would be burnt in 24 hours. The annual amount of coarse coal burnt in this region was 36 million tons. Central heating was not available to scattered rural households. To eliminate 80 per cent of small coal burners, 300 million of the rural population from Northern China need to be ‘urbanized’. In addition, the cost of replacing coal by gas as fuel would be tripled, hence a burden for the 150 million population whose monthly livelihood expenses were between 600 and 1000 yuan (75 to 125 euros). Heating for four cold months per year would cost around 6000 yuan (750 euros) (Hualiang, 2017). The Beijing government’s Five-year Plan (2013–17) to do away with all coal burners was to be accomplished in December 2017, hence a bureaucratic directive was issued to implement, by the end of October, a ‘no-coal zone’ for Beijing, Tianjin and 26 cities in the provinces of

178  Handbook on critical political economy and public policy Hebei, Shanxi, Shandong and Henan (the ‘2+26’ scheme), involving 3 million families (ibid.). An official from the Energy Department of Hebei Province estimated a 26 per cent shortage of gas supply.3 By the time the government relented on 4 December 2017 on the hitherto uncompromising policy of banning all coal burning, conceding that heating for the population should be prioritized,4 most coal burners had already been destroyed. The good news, at least for those who had access to heating, was that air quality in Northern China seemed to have improved.

THE SOUTH-TO-NORTH WATER DIVERSION PROJECT If the conversion of coal to gas reveals bias against the rural population and the urban poor, the question of water diversion demonstrates the bias in favour of metropolitan centres at the expense of provincial regions. The South-to-North Water Diversion Project is a marked example. It is, like the Three Gorges Dam project, a mega project that is potentially catastrophic, but launched with a deep faith in what benefits science and technology can bring (He et al., 2012; Hui et al., 1997). The modernization paradigm that China pursues has been characteristically privileging industry over agriculture, urban over rural, and middle class over subaltern, hence growth statistics and resource emphases are all geared to such a development paradigm. ‘Modernization’ itself is not questioned, and it justifies the ‘price’ that needs to be paid. What underpins the modernization fantasy is science and technology, which is nothing but ‘progressive’. Emanating from a mindless exploitation of nature is an arrogance and vanity coming from an anthropocentric urge to control. There is an exhilaration about human control over nature, and ‘science and technology’ hides such arrogance under the guise of progress. Building a dam at the Three Gorges of the Yangtze River had been in the minds of leaders since Sun Yat Sen in the early 20th century. One deterrent was a strategic concern of national defence – the fear that a mega dam would be an obvious military or terrorist target. The consequence would be devastating: the population along the Yangtze River is around 400 million, one-third of China’s total. Average population density is 220 persons/sq km, 600–900 persons/ sq km in downstream regions, and 4600 persons/sq km in Shanghai. There have been many disagreements among scientists and engineers on the pros and cons of the project. When the project was finally put to a vote at the National People’s Congress (NPC) in April 1992,5 the approval rate was the lowest in NPC history: of the 2633 deputies, 67 per cent voted in favour, and 33 per cent against, in abstention or no vote. Three Gorges Dam was built to be the largest in the world: the dam is 185 m high and 2.15 km long, with the dam reservoir extending 600 km in length and on average 1.12 km in width. There was conjecture as to whether the Wenchuan earthquake of 2008 was a consequence of the Three Gorges Dam, although ‘scientifically’ it is difficult to prove. The Three Gorges Dam project is for hydroelectricity, while the South-to-North Water Diversion Project is about concern for water. China’s per capita access to fresh water is only 25 per cent of the world average. Climate change and weather extremities in the last two decades, with droughts in the north and floods in the south, add to the severity of the uneven distribution of water. Furthermore, since the early 1980s, the decentralization of industries and mining to be run by township and village enterprises (TVEs) was for some time seen as an impetus for developing China’s manufacturing sector and giving the rural regions an opportunity for ‘development’. Per capita income in many rural regions increased from the mid-1980s

Ecological perspectives on sustainability in China  179 onwards. However, rural industries exploit not just local labour, but also water resources, a consequence of which is soil contamination. Apart from industrial contamination, which is the first major source, untreated urban sewage disposal, and excessive use of pesticides and chemical fertilizers, are the second and third major sources of water contamination. The quality of water resources has deteriorated rapidly since the early 1980s, and by the mid-1990s, the situation was so grave that the state announced the first major clean-up initiatives. According to Environmental Quality Standards for Surface Water in China, surface water is classified into five grades. Grade I stands for the best quality, while ‘Worse than Grade V’ represents the worst. Grade III or above cannot be used for drinking. Water quality reached an alarming level in 2001–02, when 40 per cent of water from the seven main rivers in China was worse than Grade V. Even with state efforts to clean up, in 2010, 20 per cent of the water quality was still worse than Grade V, and 42 per cent of water was Grade III or above. In the case of Beijing, the seven rivers it relied on half a century ago are now almost dried up or so polluted that they can no longer provide its consumption of 3.6 billion m3 per year. Excessive drawing of underground water had caused the underground water level of Beijing to drop from around 12 m in 1999 to around 24 m in 2010. In Northern China, the proportion of water surface to land area had dropped from 5 per cent 50 years ago to 0.35 per cent. According to the China Statistical Yearbook 2020, of China’s 31 provinces, around half were below the water stress line – that is, less than 1700 m3 per capita – with nine provinces having access to per capita water resources below the severe water scarcity line – that is, less than 500 m3. This was the background to the argument for the mega South-to-North Water Diversion Project. With construction beginning in 2002, the water to be diverted for all three Eastern, Central and Western Routes was planned to amount to an annual 44.8 billion m3 by 2050 on the eventual completion of the entire project. The Central Route is 1264 km long and takes one-third of water from the Han River to the north; Beijing and Tianjin will each get over 1 billion m3 per year, while Hebei and Henan Provinces will also have a share of 3 billion m3 each. The first phase of the Eastern Route began diverting water in November 2013, and the first phase of the Central Route started in October 2014. The Eastern Route covers 1476 km. The challenge is to channel Yangtze water upwards by 65 m, through 13 pumping stations, to Dongping Lake in Shandong Province, before sending it flowing downwards to the north, crossing the Yellow River through an underground tunnel, and then one route would go north to Beijing, Tianjin and Hebei, while another route would go east to Shandong Province. One positive consequence of this project was remedial work to clean the water. Nansi Lake, the main water collection nexus of the Eastern Route, had water quality worse than Grade V when the project started. To turn it into Grade III water quality, a major project was introduced to remove highly polluting industries, such as 700 paper factories in Shandong Province, which together accounted for 70 per cent of the province’s pollution (Weiqi, 2016). Water diversion would not be possible until water quality could be improved to Grade III. In the first three years, a total of 18.766 billion m3 of water had been pumped from the Yangtze River for the Eastern Route. Of this, a total of 1.1 billion m3 was channelled to Shandong Province. By contrast, water along the Central Route does not have to climb before it flows down to the north. The main difficulties of this Central Route of 1400 km are raising the dam height of the Danjiangkou Reservoir to 162 m, and channelling the water under the Yellow River. Water flowing into the reservoir had to be above 150 m before the downward flow could start. Water flowing into the reservoir was 40 billion m3 but it varied with the years; in 2014, it was

180  Handbook on critical political economy and public policy 32 billion m3, bringing with it 100 million tons of silt. An estimated 95 per cent of silt would settle in the reservoir.6 As was the case with the Eastern Route, decontaminating the water was an arduous task. Before the project started in December 2003, water flowing into the Danjiangkou Reservoir was rated Grade IV. Over the three years of the operation of the Central Route, a total of 10.858 billion m3 of water was supplied to the north. Government official statements on the project were mostly reassurances that the project was effective, acknowledging, for example, that there would be a 16 per cent loss of water; water evaporation indeed happened, but this would not qualify as ‘wastage’. At the end of 2019, the government reported that the diversion of water to Beijing had resulted in an obvious benefit, with the underground water level rising by 2.88 m as compared with five years earlier, now reaching 22.78 m.7 The Western Route of the project was even more controversial, not only in that its disruption on the environment would be even more serious, but it would also substantially reduce the hydroelectricity generation capacity in Southwest China. A 2006 book contesting the project by 60 experts managed to convince the government to be more prudent (Lin & Liu, 2006). Some high-ranking government officials had articulated their reservations about the project. Chou Baoxing, vice-minister of the Construction Ministry, said in 2006 that if the cities could recycle one-third of the water they were consuming, it would be equivalent to the total water supply of the South-to-North Water Diversion Project.8 This is a classic example of metropolitan cities being unsustainable in terms of water and energy resources, and instead of reducing metropolitan population, deurbanization, or finding local alternatives, the supreme human will is asserted, and resources are mobilized to the centres to cater for their needs. In March 2018, the government announced a plan for another mega water diversion project, which, in the government’s words, would have to encounter even more challenges. The project to divert water from the sources of the Yangtze River to the northwestern regions of Xinjiang is estimated to cost ten times that of the Three Gorges Dam. The entire distance is 6188 km, including 200 km of current river segments, and the expected volume of water diversion is 60 billion m3, constituting 21 per cent of water taken from major rivers. The project is planned to irrigate the northwestern arid region of Xinjiang, Inner Mongolia and Yan’an, creating an oasis of 200 000 sq km (length 10 000 km and width 20 km.) The project is named the ‘Red Flag River Project’. The second assessment conference of experts was convened in Beijing in January 2018, and reports about experts’ views were positive. The main goal of the project, according to experts, is to develop over 50 000 hectares of irrigated farmland. They also conceded that the cost of 1 trillion yuan would be exorbitant.9 Beyond its huge cost, the project is founded on a contempt for nature that is sure to invite nature’s revenge. The south-to-north diversion crosses over 7000 rivers, tributaries and streams that flow largely from west to east. It is not difficult to imagine the huge disruptions and engineering challenges involved in channelling the water to run above, below, or across west–east flowing rivers. In some regions, water will flow in a tunnel under the Yellow River, while in others elevated pipes will hang in the air, and if they were to break, these areas would face catastrophic floods. Some scientists also warn that the mixing of river waters entailed by such diversions could cause disastrous contamination. Supply to Beijing and cosmopolitan cities causes huge disruption in the habitats sustaining the livelihood of rural and provincial populations. Yet, as long as Beijing and cosmopolitan cities continue to obtain enough water, these projects are considered ‘sustainable’, however

Ecological perspectives on sustainability in China  181 irrational the project may be in terms of its costs, technological flaws, or burden on other sectors. The ‘sustainability’ of Beijing is vital to the vision of the state leadership and urban middle class, the upper echelons of the social and political hierarchy: the partial ‘sustainability’ in the power centre is presented as universal ‘sustainability’ for the rest of the nation. The rural, the marginalized, and those who cannot afford to live in cities and pay for highly priced water do not come into the picture. The only value is Beijing’s sustainability in its supply of water, energy, clean air and clear skies.

THE DANGERS OF MODERNIZATION China’s single-minded pursuit of modernization and GDP growth is thus fraught with paradoxes. For example, its investment in pollution control increased steadily: according to the Chinese Academy of Environmental Planning, the total investment in environmental pollution management (including investment in urban environmental infrastructure construction and industrial pollution source management) increased from RMB557.9 billion in 2010 to RMB663.3 billion in 2019. Nevertheless, the proportion of GDP is still very low, from 1.36 per cent in 2010 to 0.67 per cent in 2019 (CAEP, 2020). The reality of the ecological crisis is thus too grave for the ruling elite to ignore. In response, however, they resort to technocratic management by experts serving the status quo. These experts come with a very different agenda from that of the communities worst affected by these problems. Where will the experts lead us in their effort to avoid any disruption in the steady rise in national ‘affluence’? According to André Gorz, the exit from capitalism will happen one way or another. ‘De-growth is…imperative for our survival. But it presupposes a different economy, a different lifestyle, a different civilization and different social relations. In the absence of these, collapse could be avoided only through restrictions, rationing and the kind of authoritarian resource-allocation typical of a war economy’ (Gorz, 2010, p. 27). In the modernization discourse in China, ‘de-growth’ is almost unthinkable, even as China’s vaunted ‘growth’ under the market reforms of the last 40 years has undeniably fostered gross economic and social injustice, incurred environmental devastation that renders large sections of the population vulnerable, and undermined the quality of life for the majority. Human-made ecological catastrophes could in one moment wipe out the gains of these decades of so-called ‘progress’. In the discourse of the ruling elite and mainstream intellectuals, these policies are often justified with a litany of familiar slogans: that China must rise above its humiliation and violation by imperialist powers; its only salvation lies in movements starting in the late 19th century, unequivocally articulated during the May 4 Movement of 1919 under the banner of ‘For Science and Democracy’, and practically pursued after 1949. Especially since the 1980s, with a modernization path modelled on that of the West, Deng Xiaoping reinforced the national policy of Four Modernizations – that is, to strengthen the fields of agriculture, industry, defence and technology in China. In other words, the ambition to resume being a strong power takes the development paradigm of the Western powers as virtually its only point of reference, and the only viable path for China’s nation-building. The mentality is crystalized in the popular documentary River Elegy by China Central Television in 1988, which portrayed the decline of the Yellow River as symbolizing traditional Chinese culture, in contrast to the triumph of blue

182  Handbook on critical political economy and public policy or marine economy symbolizing the Western ‘progressive’ model. There needs to be an ‘exit’ from capitalism if serious efforts are to be taken to avoid ecological collapse. China’s situation is one in which, as C.A. Bowers writes, ‘what appears to be a progressive development may contribute to destructive consequences that generally go unrecognized’ (Bowers, 2001, p. x). To understand how the negative consequences of development in China ‘generally go unrecognized’ by the ruling elite, we must question the shaping of subjectivity. This implies much more than a question of knowing what was previously unknown, which rarely requires any deep change of mindset, or a redrawing of the boundaries of one’s perspective. In the words of Gregory Bateson, the challenge is to change the unconscious rules that govern one’s ways of relating to others and to the self, critiquing the rules that govern one’s ways of thinking, seeing and experiencing, as well as facilitating the breaking of such rules and the forming of new rules (Bateson, 2000, pp. 274–8). This radical change must address what Felix Guattari (2000) calls the three ecologies: not only the ecology of the social and of nature, but also the ecology of the self. From the subject position of the ruling elite, China is forced to modernize itself to protect its national pride and sovereignty. But China’s forced modernization is not simply a cure with calamitous side-effects. It is destructive such that those made to embrace it are also made oblivious to its destructive power, deprived of any other vantage point except those permitted by the dominant forces of capitalist development. Indeed, the dangers of modernization in China today should be obvious enough for anyone willing to confront them, yet those who so identify with the criteria, norms and values of the discourse of developmentalism still allow their capacity for experience and imagination to be held captive by notions of modernity and linear progress, the benevolent power of science and technology, and monetized notions of ‘wealth’ and ‘poverty’. In China’s development paradigm, ‘wealth’ is increasingly a monetary term, and the determining factor of poverty is the simple absence of money. Under marketization, money is the ‘god’ that produces poverty. Markets determined by capitalist relations can only thrive on the basis of socioeconomic polarization, deprivation and marginalization. Such polarizations and inequalities have increased in China, concurrent with ‘growth’ and ‘poverty reduction’. With marketization as the driving force of the country’s modernization and development, greater growth can only bring deeper socioeconomic and ecological injustice. Antonio Negri and Michael Hardt argue that ‘modernity must be understood as a power relation: domination and resistance, sovereignty and struggle for liberation’ (Negri & Hardt, 2009, p. 67). They further argue that: the project of modernity and modernization became key to the control and repression of the forces of antimodernity that emerged in the revolutionary struggles. The notions of ‘national development’ and the ‘state of the entire people,’ which constantly held out an illusory promise for the future…merely served to legitimate the existing global hierarchies. (Ibid., pp. 92–3)

Indeed, they observe that ‘“really existing socialism” proved to be a powerful machine of primitive accumulation and economic development’ (ibid.). It is no accident that the ruling elite in China succumbed long ago to the developmentalist ideology of ‘growth’ and ‘development’; the pursuit of modernization after the fashion of ‘the West’ provides powerful tools to establish hierarchical structures that produce and maintain inequality, privilege and systems of inclusion and exclusion. The forces of the state and capital that gain from and defend such a development paradigm represent power blocs with deep

Ecological perspectives on sustainability in China  183 vested interests. The ways that finance capital has permeated China’s economy and wreaked havoc deserve intense scrutiny and analysis.10

ARTICULATING SOCIOECONOMIC JUSTICE WITH ECOLOGICAL JUSTICE Rather than being relegated to the level of ‘superstructure’ or a place of secondary or complementary importance, the cultural dimensions of Chinese society and political economy should be considered part and parcel of the development paradigm. A radical change in the perceptions, values and preferences of the popular majority is necessary for any meaningful reversal of the current developmentalist trajectory. Most people might subscribe to the idea of ‘sustainability’ because this buzzword is so much in vogue in the mass media, in education, and in official discourse. The questions we have to probe are: How is this term so widely accepted but so little heeded? How do we enable the majority to see how in the hegemonic interpretation of ‘sustainability’, the interests of an elite minority displace those of the majority, thus rendering ‘sustainability’ void of ‘justice’? How can people be convinced to struggle instead for a paradigm of sustainability with justice, seeing the two as interdependent? How can the relations between humans, and relations with nature, be de-monetized? In debates among progressive intellectuals in China, discussion of the issue of modernization itself remains inadequate. The evils of modernization may be considered or regarded in a specific way: it is a logic of an elite minority plundering the majority within and among nations; it is savagery clothed in suit and tie; it is taking the human species, along with the earth itself, toward imminent destruction – yet, modernization is still largely accepted as a necessary evil. Perhaps this is a Marxist formulation of ‘revolution by stages’: that only after passing through a period of capitalism can the foundation be laid for socialism and communism; or a nationalist formulation: that only through modernization can China become strong enough as a nation-state to rival the imperialist powers; or a Darwinist formulation: that the faster China is modernized, the higher it goes up the global chain. Even a utopian formulation is conceivable: that when China is sufficiently modernized, it can progress to an ‘alter-modernity’ or even ‘anti-modernity’. The examples elaborated above show that the path of modernization has left China deeply mired in the mud of ecological and socioeconomic injustice. The question confronting China is not one of more progress or more growth, but of the multiple tasks of reversing the dire damage already done to its ecology, society and culture. In 2002, the Law of the People’s Republic of China on Promoting Clean Production was promulgated, signalling the state’s attention to the question of contamination. Since then, laws related to the clean-up of the environment had been promulgated in the Five-year Plans. For example, while the Law of the People’s Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste was passed in 1995, it was only in July 2017 that the State Council issued a notice on Prohibiting the Entry of Foreign Garbage. In 2018, the total import of solid waste in China was 22.64 million tons, a 46.5 per cent decrease from the previous year. Zero import was effective in January 2021. This has helped improve China’s environment. As for the decontamination of rivers, in 2018, water of Grades I to III amounted to 71 per cent, an increase by 3.2 percentage points compared with 2016.11

184  Handbook on critical political economy and public policy Alternative ways of reading history and defining sustainability are needed. Besides pressurizing the government on policies and funding, the movements and struggles for socioeconomic and ecological justice require the active participation of the people, not as individuals but as communities. The last two decades have seen the rise of people’s initiatives to counter adverse effects of developmentalism and marketization, through self-organized peasant cooperatives, local trading of organic food products, community-supported agriculture, food safety campaigns, rural–urban interactions, and environmental protection efforts (Wong & Sit, 2015). The rural reconstruction movements that began some 20 years ago have involved tens of thousands of people. In particular, urban youth voluntarily moved to the countryside or took up organic farming (Wen et al., 2012). Nevertheless, these efforts are inadequate if they cannot be articulated as part of an agenda for ecological justice with socioeconomic justice (Herrera & Lau, 2015).

NOTES 1. The author would like to thank Jin Peiyun for assisting with research. 2. See https://​ourworldindata​.org/​co2/​country/​china​?country​=​CHN​~USA; accessed 30 December 2020. 3. Caixin (2017, 12 December), ‘Hebei admits “excessive” conversion of coal to gas, this winter’s gas demand is 234% of last year’s’, accessed 12 December 2017 at http://​china​.caixin​.com/​2017​-12​-12/​ 101183936​.html [in Chinese]. 4. Caixin (2017, 9 December), ‘An ill calculated coal to gas conversion scheme: an environmental protection battle losing on all fronts’, accessed 9 December 2017 at http://​china​.caixin​.com/​2017​-12​ -09/​101182801​.html [in Chinese]. 5. In the immediate aftermath of the repression of the 1989 pro-democracy movement, when dissent was generally silenced, the Three Gorges Dam project was pushed through at the NPC in 1992, while it was only in March-April 1989 that an NPC meeting decided to postpone consideration of the project for five years after the book Yangtze, Yangtze was published in February 1989 by prominent intellectuals and scientists to publicly lobby against the project. 6. Xinhua News (2014, 27 December), ‘South-North water transfer failure’? Academician responds to three major questions”, accessed 27 December 2014 at http://​www​.xinhuanet​.com//​politics/​2014​ -12/​27/​c​_1113798357​.htm [in Chinese]. 7. Xinhua News (2019, 22 November), ‘Five years of “moistening Beijing” with the southern water: groundwater in the Beijing plain area rebounded by 2.88 meters’, accessed 22 November 2019 at http://​www​.xinhuanet​.com/​politics/​2019​-11/​22/​c​_1125262657​.htm [in Chinese]. 8. Wang, Y. (2014, 20 February), ‘South-North water transfer project not sustainable, says Chinese official’, China Dialogue, accessed 22 February 2014 at https://​chinadialogue​.net/​en/​cities/​6737​ -south​-north​-water​-transfer​-project​-not​-sustainable​-says​-chinese​-official/​. 9. Sina News (2019, 18 February), ‘The largest project in history, radically changing Xinjiang, changing China!’ accessed 20 February 2019 at https://​k​.sina​.com​.cn/​article​_1455428062​ _56c011de02700joej​.html​#/​[in Chinese]. 10. Wen (2021) has conducted an excellent review of the ten crises in China’s economic development in the seven decades of the People’s Republic of China. An evaluation of China as an emerging country compared with six other emerging countries is a project I have been part of, and the Chinese edition of the book was published in January 2021. For related research reports, please see www​.our​ -global​-u​.org. 11. State Statistics Bureau, 18 July 2019, accessed 20 July 2019 at http://​www​.stats​.gov​.cn/​ztjc/​zthd/​ bwcxljsm/​70znxc/​201907/​t20190717​_1676715​.html [in Chinese].

Ecological perspectives on sustainability in China  185

BIBLIOGRAPHY Bateson, G. 2000, Steps to an Ecology of Mind, Chicago, IL: University of Chicago Press. Bowers, C.A. 2001, Educating for Eco-Justice and Community, Athens, GA: University of Georgia Press. Chinese Academy of Environmental Planning (CAEP) 2020, National Environmental Economic Policy Progress Assessment Report 2020, Beijing: CAEP. Gorz, A. 2010, Ecologica, London: Seagull. Guattari, F. 2000, The Three Ecologies, London: Athlone. Han, Z. 2018, ‘Where are 200,000 scavengers gone after the “Beijing eviction”?’, Initium.com, 8 January, accessed 10 January 2018 at https://​theinitium​.com/​article/​20180109​-mainland​-beijing​ -scavengers​-after​-eviction/​ [in Chinese]. He, G., Lu, Y., Mol, A.P.J. & Beckers, T. 2012, ‘Changes and challenges: China’s environmental management in transition’, Environmental Development, 3, 25–38. Herrera, R. & Lau, K.C. (eds) 2015, The Struggle for Food Sovereignty: Alternative Development and the Renewal of Peasant Societies Today, London: Pluto Press. Hualiang, L. 2017, ‘Winter in Northern China: no more coal burning even if the policy is relaxed’, Weixin, 12 December [in Chinese]. Hui, P.-K., Lau, K.-C. & Yiu, C.S. et al. 1997. ‘Three Gorges Dam: case study’, in V. Raina, A. Chowdhury & S. Chowdhury (eds), The Dispossessed: Victims of Development in Asia, Hong Kong: ARENA, pp. 37–44. Lin, L. and B. Liu (eds) 2006, A Memorandum on the Western Route of the South-to-North Water Diversion Project, Beijing: Economic and Science Press [in Chinese]. Negri, A. & Hardt, M. 2009, Commonwealth, Cambridge, MA: Harvard University Press. State Statistics Bureau 2019, ‘The effect of environmental protection continues to appear, and the construction of ecological civilization is increasingly strengthened – the fifth report of the series of reports on the achievements of economic and social development for the 70th anniversary of the founding of the People’s Republic of China’, accessed 18 July 2019 at http://​www​.stats​.gov​.cn/​ztjc/​ zthd/​bwcxljsm/​70znxc/​201907/​t20190717​_1676715​.html [in Chinese]. United Nations Environment Programme (UNEP) 2014, The Inclusive Wealth Report 2014, Nairobi: UNEP. United Nations Environment Programme (UNEP) 2018, The Inclusive Wealth Report 2018, Nairobi: UNEP. Weiqi, Y. 2016, ‘Survey on the third anniversary of the launch of the first phase of the Eastern route of the South-to-North Water Diversion Project’, Jinji Daily, 15 November [in Chinese]. Wen, T. 2021, Ten Crises: The Political Economy of China’s Development (1949–2020), Singapore: Palgrave Macmillan. Wen, T., Lau, K.C. & Cheng, C. et al. 2012, ‘Ecological civilization, indigenous culture, and rural reconstruction in China’, Monthly Review, 63 (9), 4–8. Wong, E. & Sit, J.T. 2015, ‘Rethinking “rural China”, unthinking modernization: rural regeneration and post-developmental historical agency’, in R. Herrera & K.C. Lau (eds), The Struggle for Food Sovereignty: Alternative Development and the Renewal of Peasant Societies Today, London: Pluto Press, pp. 83–108. World Health Organization (WHO) 2020, World Cancer Report: Cancer Research for Cancer Prevention, Geneva: WHO.

13. Looking south: megaprojects, borders and human (in)mobilities1 Ana Esther Ceceña and Sergio Prieto Díaz

WHEN NATURE BECOMES RESOURCE From the beginnings of modernity, the force of nature and the relative weakness of humans to control it, instead of coupling with it, led to the search for tools, technical knowledge and the production of technology that would contribute to its disciplining, placing it at the service of humanity. Nature ceased to be the vital environment of human beings, their natural home, to become the other that limits and threatens them. Rational thought, typical of modernity, seeks to eradicate the magic of the inexplicable and uncontrollable natural, and throughout history, of the 500 plus years of capitalist modernity, it has reached the point of modifying the climate, changing the vocation of the earth, altering the geography and even penetrating the genetic essence of living beings to alter, replicate and correct it, or even pretend to replace it by artificially generating living beings. Modernity is erected on societies that are considered backward and superstitious (read non-scientific), victims of the magic of natural phenomena, which are signified by intersubjective and plurisubjective relations, in many points conflicting, but intrinsically with horizontal rather than hierarchical tensions. The conception of the human as one more of the creatures that inhabit the Earth and the particular home habitat of the human subject effectively supposes the recognition of a necessary complementarity towards which the human is not always disposed. There is no unidirectionality but intertwining and interaction, not binary but complex, crossed, interwoven and with multiple possible paths and drifts, which from the Western perspective is understood as a disordered and chaotic reality. One of the central lines of modernity consists, precisely, in putting things in order, as James Scott refers to it in his research Seeing Like a State (1998). This is one of the most eloquent studies of the process of ordering, which he observes in the forests of Northern Europe. Forests that, paradoxical as it may sound, are transformed into forests by the capitalist hand. It may well seem absurd, but the natural, primary forests, chaotic as they are, enter into a dynamic of disciplining in order to be exploited and managed: the trees are aligned by type, the so-called weeds or plants of no apparent use – that is, unprofitable – are eliminated, and in the end we have a productive forest in which, however, its components have been individualized and weakened by the impoverishment of their interactions with the other members of the collective. Hence, this produced forest must be subjected to artificial fertilization to maintain its value. The forest, or the individuals that compose it, have been converted into resources; they have ceased to be, in fact, nature. From that moment on, they are objects that can be valorized. The concept of useful nature as a resource that can be appropriated and used at will is in tune with the founding principles of modernity that exalt the subject–object relationship, assuming as an absolute universal the verticality, hierarchy, subjugation and de-subjugation of life. 186

Looking south: megaprojects, borders and human (in)mobilities  187 Now, everything is a potential resource: energy resources, water resources, and even human resources, everything appears as an appropriable object susceptible to becoming merchandise. Based on this conceptual edification, and taking into account the increasing dimensions of the process of material reproduction of capitalism, which reveals the threat of scarcity in various fields (of course, always relative and as a function of capitalist reproduction itself), the term strategic resources was coined in the mid-20th century. It operates, with this, a hierarchization in the general field in which everything can be considered a useful object or resource, to identify among that wide universe that whose qualities give the possessor some kind of power over the rest. Hence the status of strategic resources. Strategic resources are the indispensable elements for guaranteeing the broad reproduction of capitalist materiality and the reproduction of its innovative capacity or, in other words, that of the technological avant-garde. The qualitative criteria by which to define them come then from the massiveness and essentiality of their use (Ceceña & Porras, 1995). Possessing them allows us to place ourselves in a position to impose conditions on the rest of the world, since they are indispensable elements for life, or for general reproduction. Considering that competition has been organized around the state apparatus for the protection and promotion of capital and not only the direct capital of companies, and that global disputes take the form of disputes between nations, another geopolitical criterion linked to the geographical location of these resources is added to the above-mentioned criteria. The case of rare earths in China and Afghanistan, cobalt in the Democratic Republic of Congo or oil in Iran, Iraq or Venezuela moves the pieces on the chessboard to the point of provoking wars or various interventions, imposing sanctions, generating financial asphyxiation or any other form of harassment of the countries where these resources are located. The awareness of the importance of possessing these resources was very present in the German military leadership. The circumstances of the two World Wars of the 20th century and the importance of metal supplies for the war industry and communications, as well as the defeat of Germany, led the United States to create an institutional apparatus organized around what could be called the preventive supply of strategic goods. Politicians, military, geographers, geologists and the like, grouped in the so-called think tanks, design the best methods to ensure the control of such resources and the listing of them, which varies over time according to the needs of the productive apparatus, technological leaps or with the incorporation of new elements, as may be the case of lithium today. Public policy, responsible for guaranteeing social welfare within the prevailing structural, political and cultural circumstances, is organized around the material axis of reproduction and focuses primarily on ensuring the supply of strategic resources, nodal in the dispute for world hegemony, and indispensable resources for common use. Given the dimensions acquired by the process of global reproduction, the extraction of resources requires large-scale works that reorganize territorial logics to make the best use of them. Hence the proliferation of large projects, which propose the articulation of a set of sectoral, local or specific policies to redesign lifestyles, reproductive alternatives, care and environmental disciplines. Public policy is thus presented as a package. These large integrated projects or megaprojects are implemented in regions whose wealth justifies and attracts large investments. From the public policy discourse, megaprojects are large territorial redesign projects justified by the promotion of development and the attraction and support of public and private investments that translate into processes of dispossession of common goods (land, territory,

188  Handbook on critical political economy and public policy language, culture, seeds) for their accumulation as private goods. Some of the evident forms that these megaprojects can take, which threaten both the territories and the populations that inhabit them, are large-scale mining, oil exploitation, fracking, gas pipelines, hydroelectric plants, renewable energies with dependent technologies, nature conservation programs, agroindustry and the use of agrochemicals, transgenic monocultures, real estate and tourism developments, highways, but with an irreversible and definitive impact on territorialities and ways of life. In other words, they mark the frontiers of coloniality. The critique of political economy in contemporary times requires addressing the dynamics of life in its broadest complexity, discovering its diversities, folds, counterpoints and bifurcations. Hence, our starting point is the complex territory (Ceceña, 2004, 2017) and the territorialities generated in the interacting of societies and the natural, cultural, geographical and political environments in which they unfold. In this framework, we will focus on the study of a large megaproject, presented in two parts, which covers a broad region of South-Southeast Mexico: the Tren Maya Integrated Development Project and the Interoceanic Corridor of the Isthmus of Tehuantepec.

TERRITORY, GEOGRAPHY AND ECOSYSTEMS: THE CASE OF MEXICO Southeastern Mexico2 is part of the Mesoamerican Biological Corridor that unites the tropical rainforests of the north and south of the continent through the Central American isthmus to the Darien in Panama, which is home to 10 percent of the world’s biodiversity (Comisión Nacional para el Conocimiento y Uso de la Biodiversidad [CONABIO], 2020). Adjacent to the northern temperate strip, it closes the tropical territory of the continent, which extends to the Amazon Basin, forming a jungle continuum of immense biological richness and diversity. The Maya Forest, which extends 42 300 km2 from Southeastern Mexico to Guatemala, contains 20 different ecosystems and a great variety of endemic species. In a large cave called the ‘El Volcan de los Murcielagos’ [Volcano of the Bats], very close to Calakmul, the splendid archeological site, there are around 3 million bats (Medellín, 1996), known to be seed dispersers and pollinators of great importance, as well as pest controllers, since they feed on insects. The Yucatán Peninsula, representing only 6.9 percent of the national territory, is home to 24.3 percent of the vertebrates, 38 percent of the birds, 22.3 percent of the mammals, 10.7 percent of the plants and 14.1 percent of the reptiles in Mexico (Domínguez, 2020). The second largest coral reef in the world and the largest bacterial reef on the planet, this one inside Bacalar Lagoon, are both located on the eastern coasts of the peninsula (Hernández, 2020). The region is also very culturally diverse: of the 61 ethnolinguistic groups recognized by the National Institute of Indigenous Peoples, 44 have their communities in this area (Comisión Nacional para el Desarrollo de los Pueblos Indígenas & Programa de las Naciones Unidas para el Desarrollo [CDI-PNUD], 2006), where some of the most significant pre-Columbian civilizations of the American continent flourished. Three years ago, when the megaprojects we will analyze were presented and put into execution, the National Institute of Anthropology and History (INAH) recognized 7274 points of archaeological value, among which are large and extensive buildings of housing or ceremonial sites that have yet to be fully explored, indicating the magnitude of the sociocultural organizations and structures subsumed by the establishment of colonial rule since the 15th century. Surprisingly, 528 years after the conquest and

Looking south: megaprojects, borders and human (in)mobilities  189 the beginning of colonization on these lands, monuments, habitation or ceremonial centers (e.g., El Universal, 2020) and cultural manifestations are still being discovered throughout Southeastern Mexico.

CONTINENTAL TRANSIT MEGAPROJECTS IN SOUTH AMERICA The turn of the millennium coincided with the launching of two major infrastructure and territorial reorganization projects for the great American continent. In the south, the construction of an entire system of interoceanic and transcontinental routes was proposed to incorporate the region more fully into the world market. The Initiative for the Integration of Regional Infrastructure in South America (IIRSA) designed routes that connected the many natural riches with the markets that demanded them, as well as the manufacturing centers with the ports. The idea was to make the heart of the jungles or the depths of the mines flow towards the industrial centers and, conversely, to bring the industrial and competitive spirit to the furthest reaches of the territories. Unlike Panama, which is the narrowest part of the continent at 80 km long, one of the most promising and ambitious IIRSA routes crosses the 20 000 km of the Amazon region from side to side (Ceceña, Aguilar & Motto, 2007). Evidently, the aim was not to speed up transit but to take advantage of it. A mercantilist vision, at the height of the commodities boom, condemned the territory to a profitable and productivist reconversion that immediately generated a large number and variety of conflicts. Simultaneously, in Mexico, the Plan Puebla Panama (PPP) was announced with the objective of eliminating poverty and promoting employment and development, installing a maquiladora (offshore) region from the Central American strip to Puebla, in the center of Mexico, but with an organizing axis in Tehuantepec (Presidency of the Republic, 2002). The PPP was markedly energetic: oil in the region of Tabasco and the Gulf of Mexico and a great hydroelectric potential in the area of Chiapas and part of Central America. It took up the essence of the Megaproject of the Isthmus of Tehuantepec, launched by President Ernesto Zedillo in 1996, which consisted of a multimodal corridor of interoceanic passage that would turn the isthmus into a hub of world stature (Ceceña, 1997; Ochoa & Asociados, 1996), with wide strips of maquiladoras on the sides to territorially fix the local population, or those passing through the area on their way to the United States. The two projects focused primarily on interoceanic transit, the installation of hydroelectric plants along the routes and the extraction of the natural wealth of the entire region, which has historically been linked to the North American economy. The routes in the PPP flowed northward and in the IIRSA to the oceans, to reach the markets of the Global North. Both projects failed, partly because their ambition exceeded realistic calculations of economic feasibility; partly because they unleashed a territorialized social effervescence, which combined with anti-neoliberal protests and the emergence of indigenous subjects who questioned the capitalist system of domination and organization of life and, with it, the megaprojects of development and the idea of progress. However, although circumstantially they did not prosper, in part because of their ambitious dimensions and impacts, much broader than the national capabilities of their proponents, governments have continued to seek to revive them with new names and styles.

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MEGAPROJECTS IN THE SOUTHEAST OF MEXICO The Mayan Train (Tren Maya, TM) is part of a large infrastructure and economic and population planning project in the southeast of Mexico, a ‘territorial reorganization project’ as the official discourse highlights. The National Development Plan (PND) 2019–2024 includes it among the six regional programs ‘guaranteeing employment, education, health and welfare’, so that the TM is only one piece of a broader project (Presidency of the Republic, 2002, p. 20). According to the PND, the project includes 1525 km and will require an investment of between 120 and 150 billion pesos (between 5.8 and 7.3 billion dollars)3 to connect the states of Yucatán, Quintana Roo, Campeche and Tabasco in cargo transportation, tourists and local people, although the heart of the project is to detonate the creation and articulation of new development poles (industrial, productive, urban), which would reach the coast of Chiapas. The TM would connect the entire Yucatán Peninsula with its twin project, the Transisthmian Corridor (TC), planned between the ports of Salina Cruz in Oaxaca (Pacific) and Coatzacoalcos in Veracruz (Gulf of Mexico). These two projects are articulated by the connection of railroads and highways, by the port network and by the economic activities projected for the area, among which the transfer of cargo and manufacturing processes linked to the transit of goods stand out. They have, at the same time, continuity with a long-standing project that seeks the colonization of the peninsular territories and their subordinate insertion into global commercial circuits (Prieto Díaz, Benítez & Leal Gómez, 2020; Rajchenberg & Héau-Lambert, 2002). The purpose of the TC, an updated version of the 1996 Isthmus Megaproject, is to complement and substitute in some cases for the overwhelmed Panama Canal as the main interoceanic passage connecting the Atlantic and the Pacific.4 Panama’s geographical characteristics, open coasts and a narrow passage of 82 km, once so favorable to accommodating the huge flow of commercial vessels transiting between the two great oceans, have begun to be insufficient for the trade volumes reached by the world economy as the wait time ranges between seven and 15 days and the canal is already at its maximum dredging level. In 2018, it received 13 795 vessels with a cargo of 255 049 145 long tons, of which 155 993 881 transited from the Atlantic to the Pacific and 94 404 596 in the opposite direction (Centro de Estudios Sociales y Opinión Pública [CESOP], 2019). However, while Salina Cruz is an open coast, Coatzacoalcos is an enclosed port. An activity of the magnitude of Panama, with 40 cargo ships and 698 765 tons of cargo per day, would be unthinkable in the TC. A quarter of that would already be intense, and it is necessary to calculate the constant increase in demand due to the growth of physical exchange of goods. In these circumstances, more than the port of Coatzacoalcos, we must think of a hypothetical system of ports on the inner coast of the Gulf of Mexico from there to Cancun, which could disembark containers to be transported in the TM to Coatzacoalcos and the same the other way around.5 The Environmental Impact Assessment (EIA) Phase 1 presented by Fondo Nacional de Fomento al Turismo (FONATUR), despite the fragile soil,6 registers a load for the Palenque to Izamal route of 2.5 million tons per year at the beginning and a growth of up to 10 million tons per year when the train is operating (FONATUR, 2020). In addition to the socio-ecological, cultural, territorial and geological impacts that such a project would have, the structural economic impact must be considered. The dimension reached by transit activities in Panama, which is the immediate reference, has oriented the economic dynamics of that country towards services or activities related to the operation of

Looking south: megaprojects, borders and human (in)mobilities  191 the Panama Canal. This type of economic organization and logic has been characterized as transitist, highlighting its fragility and almost no self-sufficiency. Transitism is understood as an economic logic organized around the quality of a link or passage that some territories such as Panama or Suez have. Actually, this economic modality refers to rent and not to profit; it comes from a particular pre-existing geographic condition that grants the possibility of organizing the economy and survival based on the right of passage. This feature, which is characteristic of isthmian territories, is what allows Tehuantepec to be valued geopolitically to the detriment of its cultural history and the exploitation/devastation of its environmental riches. If world trade were to change its path, the Panamanian economy would be ruined, as could happen in any of the other similar transit routes. Strategically, from the perspective of continental territorial organization, the interoceanic corridor is of great importance. Although a good part of the raw materials comes from the southern countries, the world is grouped into three large economic blocs that trade with each other: the United States with a gross domestic product (GDP) of 20 894 billion dollars; the Pacific Basin with 23 726 billion dollars; and the European Union with 15 292 billion dollars in 2020 (World Bank, 2021). Throughout the 20th century, trade was mostly organized around the Atlantic Basin; however, with the emergence of the Asian tigers (Singapore, South Korea, Hong Kong and Taiwan), with the development of California (15 percent of US GDP) and with the power of Japan and China, economic dynamism shifted definitively towards the Pacific Basin, leaving the East Coast of the United States – responsible for 38 percent of the country’s GDP – geographically disconnected. The most expeditious connection between the Eastern United States and the Asian bloc is undoubtedly that of the Isthmus of Tehuantepec, which is reached through the Gulf of Mexico, a sort of internal sea of the North American region, where a route connecting the Mexican port of Coatzacoalcos, Veracruz and the US port of Mobile, Alabama, has already been established (Figure 13.1). The south-southeast region of Mexico (92 billion dollars of GDP in 2019; 123 billion dollars in 2020; Instituto Nacional de Estadística, Geografía e Informática [INEGI], 2022) does not represent any economic interest compared to the size of the three aforementioned blocs. However, what may be of interest is not only Mexico’s oil wealth located in Tabasco and the surrounding area of the Gulf of Mexico, going up the coast towards the United States, and the mineral wealth located in that area and the country’s very important cultural and biotic wealth, which is concentrated in that region, but also, and perhaps of most interest, the infrastructure of passage between economic blocs that would reduce the costs of going down to Panama and facilitates the transfer between regions of the United States itself without having to cross the Rocky Mountains. The very rich south-southeast region, with these megaprojects, will be a strategic transit route for the world market (Figure 13.2).

192  Handbook on critical political economy and public policy

Source:

Ceceña et al. (2021).

Figure 13.1

Pacific–US East Coast connection

MEXICO’S SOUTHERN BORDER Strictly speaking, the southern border, understood as the territory that defines Mexico’s limit, has an extension of 1138 km, 962 km bordering Guatemala and the remaining 176 km with Belize, established in boundary treaties at the end of the 19th century. From south to north, with respect to Guatemala, it involves the Mexican states of Chiapas (654 km), Tabasco (108 km) and Campeche (194 km), and the Guatemalan departments of San Marcos, Huehuetenango, Quiché and Petén. With respect to Belize, Quintana Roo (193 km) and Campeche (14 km) border the Belizean districts of Corozal and Orange Walk. This border stands out for its diversity and richness both in natural resources and in cultures, peoples and traditions. On the Mexican side, in addition to Spanish, are Cakchiquel, Chol, Jacalteco, Konjabal, Lacandon, Mame, Mochó, Tojolabal, Tzeltal, Tzotzil and Zoque (Chiapas); Zoque, Tzotzil, Tzeltal, Chontal and Chol (Tabasco); and Maya (Campeche and Quintana Roo). In Guatemala, Mayan, Quechí, Chuj, Mam, Kanjobal and Ixil, in addition to Spanish. And in Belize, Spanish, English, the Mennonite variant of Flemish, Mayan and a variant of Chinese (Fábregas Puig, 2005). The 1990 census (INEGI, 1990) reflected a total of 1 336 312 people living in these territories: 61.3 percent in Chiapas, 7.1 percent in Tabasco, 18.6 percent in Campeche and 12.9 percent in Quintana Roo. The 2010 census (INEGI, 2010) estimates a population of 1.6 million

Looking south: megaprojects, borders and human (in)mobilities  193

Source:

Ceceña et al. (2021).

Figure 13.2

Wealth in the Mayan Train–Transisthmian Corridor region

people, with 74 percent in Chiapas (42 percent in Tapachula and Ocosingo alone), 7 percent in Tabasco, 4 percent in Campeche and 15 percent in Quintana Roo. When comparing these data, the internal population displacement from Campeche is striking, as well as the progressive relative population concentration in Chiapas and, to a lesser extent, in Quintana Roo. A detailed analysis of other characteristics indicates that the population in the region is unrepresentative in relation to the territory it occupies, being 8 percent of the national total in the four states, which cover 11 percent of the territory (Comisión de Asuntos Fronterizos Sur, 2016). In contrast, the region has a very high value in terms of natural wealth: 19 of the 50 priority rivers and hydrological regions; 70 percent of the biodiversity of North America (reaching 80 percent of all biodiversity in Mexico); 69 percent of the available fresh water; 99 percent of hydrocarbons; 90 percent of the diversity in cultivated species of American origin (CONABIO, 2020; Comisión Nacional del Agua [CONAGUA], 2018). This context of low population density and high diversity in valuable resources awakens the eagerness to promote the profitable occupation of territories. Meanwhile, the space of Mexico’s southern border, historically catalogued, like other border spaces of the Global South, as ‘nature’, ‘source of resources’, ‘demographic vacuum’, ‘backward/unproductive region’, stands out for its complex ecosystemic, historical, social and cultural diversity: the control of the territory and the exploitation of its riches entails complex demographic dynamics and conflicts over its occupation. This merits problematizing the

194  Handbook on critical political economy and public policy processes that impact the territories in order to understand the dynamics and characteristics of their respective geopolitical projects, as well as the results of territorial, ideological, social, political, cultural, economic and even cosmogonic struggles, tensions and conflicts, each with its own uses and understandings of spaces, biodiversity and social relations, and whose encounter and definition entail an accelerated socio-geographic transformation and multiple processes of re-territorialization.

FRONTIERS OF THE SOUTHERN BORDER The continental geography that gives Mexico the virtue of a narrow interoceanic passage also provides it with optimal conditions as a border to contain human displacements, the only transit still ‘controllable’ by the different nation-states in the context of neoliberal globalization. With a length 15 times shorter than that of the northern border, the Isthmus of Tehuantepec is ideal as a dike in the migrant crossing to the United States. Borders constitute privileged spaces for the analysis and approach of multiple phenomena and social processes, as they are historically disputed territories that reflect the complexity, flexibility, dynamism and secular conflict between nations and regions. These boundary spaces for the exercise of sovereignty and the definition of citizenship are defined more or less arbitrarily as a result of the great conflicts and tensions of all historical evolution, and although their political delimitation may not change, their scope and concrete expressions are under permanent reconstruction. The border(s) are paradox and paradigm, as they delimit and differentiate constructions between the ‘us’ and the ‘others’ that seem to have no place in the ‘global village’, between what is socially established and admitted, and what at any given moment is to be ignored, despised or feared. Together with walls, they seem to be remnants of a past world. Perhaps to a greater extent in the context of contemporary globalization, which advocated its dissolution (Appadurai, 1996), the traditional idea of border has given way to a multiplication of resignified and complex borders-others (Szary & Fourny, 2006). For this reason, it will make sense to think of Mexico’s southern border in terms of borders within the southern border. The notion of frontier (and the border) has a central value as a relational category as a space of articulation of the geopolitical, and as a semantic space that gives meaning to the processes that take place in it (Nail, 2016). Among other regions of the Global South, borders in the Americas were imposed as a way of ordering the ‘New World’ (Popescu, 2011), so it is essential to consider their epistemological reconstruction. Furthermore, it is necessary to consider the relevance of their extreme geographies in territories usually far from the centers, sparsely populated, with lower development indexes and considered empty (Szary & Rouvière, 2009), as constructions that justify and legitimize centralist interventions without consideration of their local realities. In many ways, and more so in the case of the borders of the Global South, they are understood as spaces of ‘ungovernability’, in which the lack of capacity or interest in the presence of the states involved is made explicit. This allows the emergence of ‘other borders’ not specifically linked to state power and control, or where the state tries to control the uncontrollable. In this sense, borders defined in terms of geopolitics, linked to the distribution of territories, such as that which occurs with megaprojects, are particularly relevant. And if we talk about the results of geopolitical territorial conflicts, ‘uncontrollable’ border transits, and paradoxes of globalization, a paradigmatic case is undoubtedly the migrant populations

Looking south: megaprojects, borders and human (in)mobilities  195 from the Global South, which have originated, transit, or are detained and controlled in the territories of Mexico’s southern border.

BORDERS AS GEOGRAPHIES OF DEVELOPMENT It is necessary to reflect on the meanings and scope of the notion of frontier, since it is around it that we define the territories on which we focus our attention, being the spaces where the ways of life and human (in)mobilities7 of our interest are generated, attracted or transformed, as well as the public policies and megaprojects. Reconstructing the notion of frontier implies considering the dialectic that occurs between the parts that this frontier separates, between the ‘we’ and the ‘others’, the known and the unknown, the sovereign and the strange. The reconfigurations and their role as a differentiating mark, allow the articulation and better understanding of the relationships between the central categories of our theoretical perspective: territory, territorialities, geopolitics and (in)mobilities. Throughout the history of humanity, territories have been geo-graphed (Porto Gonçalves, 2003) by all the creatures that inhabit them. With modernity, the human creature stands as an index to deploy its organizing criteria on the territories, on the rest of the creatures and on the physical dimensions of the planetary matter. The civilizing principles of modernity grant the human species the privilege of designing territory and society. Materiality and territoriality are written (graphed), adapted, subjected to the illustrious task of controlling what has since been called nature, in order to place it at the service of the progress of humanity. As territory is a historical-cultural and not only geographical concept, territoriality indicates the way of inhabiting, geo-graphing and signifying the space of construction of social life. Capitalist territoriality, as the basis of an expansive world-system, differs, contradicts, subjugates or confronts the territorialities that are pre-existing or that resist, are actualized and coexist with it. The materiality of a way of life or of a civilization marks its possibilities and its limits; the way of molding, using, enhancing or relating to the material elements and reorganizing them on the basis of the epistemological criteria (worldview) on which the way of life is based. The powerful forces of that material, geological, ecological and even cultural complex that was circumscribed in the idea of nature were converted into resources, into useful objects. It was the human being overcoming the magic of uncontrollable events, multiplying the reproductive cycles of species, manipulating the climate, modifying genetic or molecular structures and denying the humanity of peoples with different cultures and visions: semi-human, superstitious or simply backward for not understanding the march of progress. The systematization of these structuring principles of modern civilization, in relation to the occupation and design of territories, is called development. Development is then only a way of mapping territories, of constructing territorialities or ways of life and coexistence with and in the physical, biological and astrological environment. It is a territorialization criterion, for now dominant, but certainly not unique or superior. In the epistemic framework of modernity, which permeates all spheres and dimensions of human life, development has been positioned as an unappealable purpose, unequivocally linked to an idea of unlimited growth. Synonymous with urbanization, when cities are the main emitters of greenhouse gases; synonymous with capital investment, when investments are increasingly destructive and toxic for society and the environment; and synonymous with

196  Handbook on critical political economy and public policy order and well-being at the expense of the processes of collective disciplining necessary so that the victims of development cannot question it. Development within the framework of capitalist modernity sets itself up as the only way of producing materiality. It ignores the epistemic and cultural diversity present in the ways of life and social dynamics with different civilizing principles, which negotiate with modernity in a tense and conflictive manner. The advance of the megaprojects of (this) development over the territories also implies the advance of an unfinished colonization process, as perhaps the last step in the de-structuring of the so-called indigenous worlds: Mayan, Zoque, Olmec and all those who coexisted and coexist in these lands. This idea of development, and the ways in which it is made explicit, justified and naturalized, is the clearest exponent of the quadruple characterization of Western modernity with its hierarchies and discriminations of class; race, ethnicity or culture; gender and species. Under this same logic, the expansion of the frontiers of this hegemonic imaginary unequivocally entails the expulsion of populations that lived outside its influence. Within this broad perspective, it is interesting to focus on the dimension of forced (in)mobility and its link with the historical processes of expansion of modernity-coloniality to border territories. This dynamic inexorably entails different processes of expulsion and relocation, both of the people who inhabit them and of the new populations that embody and lead these processes. In particular, certain territorial reorganization initiatives, such as megaprojects, inevitably operate as mechanisms of expulsion, attraction, retention and instrumentalization of populations in a situation of local, national, regional and global (in)mobility. It could be argued that every territorial reorganization project has at least a couple of population redistribution processes associated with it, one of expulsion and the other of attraction (which are undoubtedly much more complex and diverse within themselves). It is, therefore, a matter of a historical structurality that is analytically relevant for the Mesoamerican region and territories (Prieto Díaz, 2017). From this logic inherent to megaprojects, a historical pattern is identified that integrates the creation, justification and instrumentalization of human (in)mobilities. Once displaced, the marginality of these populations is constituted through a double movement that first barbarizes them and then incorporates them into the various social spaces in which they will be useful. Their displacement must first be justified (for the sake of development), then their control (for their own security), and finally their subordinate instrumentalization (for the common good).

FROM THE PLUG TO THE VORTEX:8 NEW FRONTIERS OF CONTINENTAL MIGRATION In the territories of the southern border of Mexico, millenary cosmovisions, ways of life, global interests and public policies that actualize inherent and constitutive conflicts of the modern-colonial system meet and intertwine in complex ways. The conjunctural and the structural are related in diverse and changing ways, making it necessary to look at and use tools that bring together particularities and generalities, and at the same time consider the ‘human’ in its intimate interrelationship with the socio-environmental context in which it develops (Lander, 2000). With the Isthmus of Tehuantepec as its border, the region encompassed by the two megaprojects in the southeast aims to become a confinement zone in which it is proposed to develop

Looking south: megaprojects, borders and human (in)mobilities  197 conditions for the retention (or immobilization) of both the local population with a migrant spirit and the caravans passing through between any other place and the United States. Urbanization projects, industrial parks, maquiladoras, tourist services, construction work at first, and even the sale of handicrafts in the train stations, are activities that are announced as anchorage destinations for those displaced by labor, ecology, culture and violence who, like migratory birds, will have to pass through the Strait of Tehuantepec. In this sense, Mexico’s traditional border with Guatemala and Belize, which due to its own geographical characteristics has never been considered a border (as a space of separation and control), has been deterritorialized and reconceptualized on at least three occasions. First, considering Mexico, in its entirety, as a border country, or vertical border (Varela Huerta, 2018), in which migratory control policies are not applied on the horizontal line of national separation, but along the entire territory, from south to north. Subsequently, as a buffer country: a characterization emanating from the application of the Southern Border Plan, in the six-year term of President Enrique Peña Nieto, which armored the surveillance of ‘The Beast’9 and exacerbated the control policies focused on migratory detention south of the Isthmus, immediate antecedent of the militarization policies of the current six-year term. And more recently, as a ‘migratory vortex’ (Prieto Díaz & Camargo, 2021), given the confluence of policies that affect the emergence, multiplication and interrelation of a broad set of (in)mobilities: internal displacement of native settlers, control and deportation of migrant populations from the Global South, attraction of new migrants, both internal and international, destination of large contingents of tourists, alienation of national territories for foreign use, destination space for repatriations from the United States and other similar ones. This notion does not focus on highlighting as structuring any particular type of displacement, but rather defines the region of this new southern border of Mexico according to the articulation and simultaneity of a diversity of articulated and complementary transits in a territory undergoing a process of permanent (de)borderization, to which the definition of the megaprojects underway as projects of ‘territorial reordering’ refers. This territorial, political and socially complex context between the political borders and the new isthmian frontier heralds a confluence of all these elements of tension. It grows there a kind of enclosure zone or territory of population containment in which imaginary, institutional, political or other borders are built, including those imposed by organized crime, which together guarantee confinement. In the case at hand, these confinement zones are permeable to entry but, in the meaning of migrants policy, not to exit. They cannot be transited. They are confinement spaces. The attraction of workers to the industrial parks has as its counterpart the disarticulation of communities and a profound change in lifestyles, which will significantly alter the region. Displacements are inevitable in projects of this nature and will move populations that will not necessarily be incorporated into the activities of the industrial parks or the new services, but will foreseeably lose their previous places of settlement. In turn, the external migrants who will be detained in the isthmus will have to find a place to settle and some remuneration that will allow them to endure an exile in which they are forced to remain in the intermediate space, unable to return to their place of origin, but unable to reach their intended destination. Their conditions of documentation and displacement point to their instrumentalization in new undocumented and highly precarious labor markets. These classic mobilities, with decades (if not centuries) of recurrence, will not be the only ones that are detonated and framed in the process of multiplication of megaprojects in the region: the concession of large infrastructure

198  Handbook on critical political economy and public policy works to foreign capital companies promises the arrival of qualified personnel from the places of origin of these companies, as well as other specialized workers from other parts of the Republic. The surveillance and control needs that will be required not only for border supervision, but also for the protection of ongoing infrastructure, threatens to multiply the militarization of the region, most likely with troops from the new National Guard, most of whom are not from the region but from other parts of the country.

RISKS A process of this nature, such as the one that will be generated by the Tren Maya Integrated Development Project, will inevitably – and even deliberately – produce profound, substantial and irreversible modifications in the ways of life and in the ecological dynamics and equilibrium of the affected region, with repercussions for the territories with which it maintains connectivity relations (Mesoamerican and Amazon biological corridor; or Mayan peoples on both sides of the border, among others). In particular, the impacts in terms of (in)mobility of regional and immigrant populations announce an increase in the levels of conflict and tension that even before starting the project have led to the military occupation of the area, aggravated by the presence of paramilitary groups that threaten the inhabitants of places with locations of great geostrategic value (Ocosingo, Chiapas; Xpujil, Campeche; or Bacalar, Quintana Roo would be some examples). In addition to the militarization of the region promoted by the Mexican state, the economic, migratory and strategic interests that would be crossed in these territories, belonging to the North American area, jurisdictionally integrated by treaties such as the T-MEC and the Merida Initiative, could justify the presence of personnel from the security forces of the other countries that make up this macro-region. Even more so when the TC is destined to become a strategic step in the world market and, with it, a space of dispute of the first order in the international competition for planetary hegemony. In this case, the sovereignty of the nation over the entire territory and the processes that take place in it would surely be subjugated. In such circumstances, and in a situation such as the one that seems to be emerging for the southeast of Mexico with these modernizing projects, the resistance of communities, peoples, researchers and scientists who warn of the risk of crossing, or continuing to cross, the points of no return, both in the environmental and socio-cultural fields, is understandable, which would make the damage irreversible and contribute to aggravate the global socio-environmental catastrophe manifested in climate change, in the pandemics resulting from the profound ecological imbalances and the varied alterations to the environment, as well as in the massive, recurrent and growing migrations of displaced laborers, environmentalists and those fleeing from the multiple incidences of expropriating violence. What is happening today on the southern border of Mexico is a relevant example of the complexity in which the processes of global population (in)mobility and the disjunctions between ways of life inspired by different civilizational keys are generated, developed and characterized in a remarkable way; where the native people of the place and those expelled from the historically dependent countries meet with the geopolitical interests of the great hegemonic powers (national or mercantile). In the middle (not mediating), the United Nations, the International Organization for Migration, the Economic Commission for Latin America and the Caribbean (ECLAC, or CEPAL in Spanish), insist on a ‘right to migrate’ in a ‘legal,

Looking south: megaprojects, borders and human (in)mobilities  199 orderly and safe’ way. This rhetoric defends a functional logic of territorial occupation, the multiplication of extractivist projects, and the generalization of precarious labor markets, specifically oriented to the migrant population. In the face of this discourse, a true policy to combat the causes of migration would have to guarantee the ‘right to remain’, ‘safe, calm and happy’ wherever one chooses, not where one is pushed. In the middle, too, is the unresolved conflict of the colonization of all non-capitalist organization of life and the desire to transform ways of life, unilaterally, with the justification of development as the only possible entrance to the future. The non-profitable territorialization present in the south-southeast of Mexico, which has allowed the maintenance of complementary and creative relationships among all the species that make up the socio-ecosystems of the region, are today confronting the policies of progress characteristic of modernity in the process of crumbling. It is still pending, in the face of the imaginaries of this modernity in decadence, to think of territorial projects for our continent that are not based on the precariousness, violence and forced displacement of those who have resided, sometimes for millennia, in these lands, and that, instead, raise their sights towards a formulation of life organization capable of recognizing the creative power of diversities and mobilities and of stopping the socio-ecocide to which modernity in development has led us. It is interesting to review, given the magnitude of the projects that claim to seek the welfare and development of the south-southeast, the essential and realistic requests of the communities and populations of this region, who understand welfare in other terms and with other epistemologies: ● ● ● ● ● ● ● ●

address basic needs such as health and education; remedy ecological damage and stop devastation; establish the rule of law and fight corruption; promote socio-environmental care and the ways of life that have preserved it; eradicate transgenic crops and the use of agrochemicals; eradicate harmful and polluting projects such as poultry and pig farms; discourage the growth of urban concentrations; respectfully and adequately consult with indigenous communities, in accordance with ILO Convention 169 signed by Mexico; and ● use scientific knowledge and community knowledge to achieve a healthy environment and social milieu.

CONCLUSION Public policies have been designed based on different criteria: they do not identify the real problems that communities, academics, social activists and the local population are pointing out, nor are the proposals included in the megaprojects related to their requests or demands for public services. They ask for remediation works for the damages already caused by progress in the region and in exchange they offer to deepen those same dynamics of progress or development. There is no correspondence between local needs and the projects undertaken. Instead, this eagerness to bring development to what are recognized as backward areas, with a clear colonizing bias, is destructuring local societies and territories and placing the region at risk of

200  Handbook on critical political economy and public policy becoming a zone of large-scale devastation and plundering, and a zone of passage and dispute for the great world powers. From the critical political economy, it is unavoidable to discover and assume the complexities of the system drawn both in the territories and in the institutionalities, treatment of borders and public policies, but also to open the horizons to the discovery of other worlds or systems of life coexisting with the modern capitalist system. Systemic bifurcations are not an imaginable future but a vigorous present that resists the onslaught of coloniality and developmentalism and struggles to preserve, recreate and defend life. However global and omnipresent the modern capitalist world-system may be, its borders and limits are increasingly evident. Every complex system is finite. We have our own development. On the coast we have fishing, we have cornfields, handicrafts, a little tourism… We don’t need jobs, we want our freedom. We live well, we just want the government to comply with good health care, education, that there is no corruption when it comes to the MIAs.10 (Alberto Rodríguez Pisté, Organización Chikin Ha)

NOTES 1. This is part of wider research developed at the Observatorio Latinoamericano de Geopolítica (Project AG300318, DGAPA-UNAM). Our thanks to Sandy Ramírez for helping with calculations. 2. For this chapter, the term includes the states of Chiapas, Oaxaca, Tabasco, Campeche, Yucatán and Quintana Roo, leaving out the area of Los Chimalapas in Oaxaca, particularly rich in biodiversity, and Los Tuxtlas, Veracruz (Ceceña et al., 2021). 3. The initial amount presented by the PND has gradually increased to more than double for the time being. However, CG/LA Infrastructure’s magazine, an important reference for potential investors, reports an initial cost of 6.3 billion dollars for the TM (CG/LA Infrastructure, 2020/21). 4. We did not consider in the analysis the Nicaraguan interoceanic canal project because it is no longer pursued. Its Chinese infrastructure construction company, CCCC Second Harbour Consultants, is part of the China Communications Construction Company Ltd, which has obtained contracts for the construction of Section 1 of the TM despite being accused of corruption in other contracts. 5. On a smaller scale is the so-called ‘Escalera náutica’, a network of ports in the same territory for American yacht tourism. 6. Yucatán soil is particularly fragile. It’s a calcareous and porous soil in a karst landscape, hit by a meteorite impact around 70 million years ago. It presents as many underground sinkholes called ‘cenotes’ that could cave in because of train weight and velocity. 7. The notion of ‘(in)mobility’ (Gustafson, 2009) covers the whole range of possible population movements: internal displacement, international migration (temporary and definitive), forced mobility, pendular and cross-border mobility, tourism, and so on; and its counterpart, non-displacement, voluntary or forced. 8. Vortex is a concept in the natural sciences that refers to the movement of circulation or rotation of large scales of air or fluid around a point or area. The sense in which we transfer this concept refers precisely to the connection, circulation and rotation of different types, scales and intensities of human (in)mobilities attracted, contained and retained in the regional space delimited by the large megaprojects/frontiers in the southern border region of Mexico. 9. The train that connects the southern and northern borders of Mexico used by migrants, mostly undocumented, on their journey to the United States. It is called ‘The Beast’ because it is a very dangerous train for these migrant populations, as they can be murdered, enslaved or extorted along the way. The route of part of ‘The Beast’ (particularly the sections known as Chiapas and Mayab) is the same as that of the TM project. 10. Manifestación de Impacto Ambiental, an environmental impact statement by a developer.

Looking south: megaprojects, borders and human (in)mobilities  201

BIBLIOGRAPHY Appadurai, A. 1996, Modernity at Large, Minneapolis, MN: University of Minnesota Press. Ceceña, A.E. 1997, ‘El Istmo de Tehuantepec: frontera de la soberanía nacional’, La Jornada del Campo, May, 11–22. Ceceña, A.E. 2004, ‘Estrategias de construcción de una hegemonía sin límites’, in A.E. Ceceña (ed.), Hegemonías y emancipaciones en el siglo XXI, Buenos Aires: CLACSO, pp. 35–56. Ceceña, A.E. 2017, ‘Poder, emancipación, guerra y sujetidad’, in E.L. Hernández (ed.), Efraín, Praxis espacial en América Latina: lo geopolítico puesto en cuestión, Mexico City: UNAM-Itaca, pp. 21–60. Ceceña, A.E., Aguilar, P. & Motto, C. 2007, Territorialidad de la dominación: Integración de la Infraestructura Regional Sudamericana (IIRSA), Buenos Aires: Observatorio Latinoamericano de Geopolítica. Ceceña, A.E., Barrios, D. & Franco, A. et al. 2021, El Istmo de Tehuantepec en Riesgo, Mexico City: Observatorio Latinoamericano de Geopolítica. Ceceña, A.E. & Porras, P. 1995, ‘Los metales como elemento de superioridad estratégica’, in A.E. Ceceña & A. Barreda (eds), Producción estratégica y hegemonía mundial, Mexico City: Siglo XXI, pp. 141–6. Centro de Estudios Sociales y Opinión Pública (CESOP) 2019, El proyecto del tren transístmico, Mexico City: CESOP. CG/LA Infrastructure 2020/2021, Top 100 North American Strategic Infrastructure Projects, Washington, DC: CG/LA Infrastructure. Comisión de Asuntos Fronterizos Sur 2016, Programa de trabajo LXIII legislatura, Mexico City: Cámara de Senadores. Comisión Nacional del Agua (CONAGUA) 2018, Estadisticas del Agua en México, edición 2018, Mexico City: Secretaría de Medio Ambiente y Recursos Naturales. Comisión Nacional para el Conocimiento y Uso de la Biodiversidad (CONABIO) 2020, ‘El Corredor Biológico Mesoamericano México’, Biodiversidad Mexicana, 17 December, accessed 1 June 2022 at https://​www​.biodiversidad​.gob​.mx/​region/​cbmm. Comisión Nacional para el Desarrollo de los Pueblos Indígenas & Programa de las Naciones Unidas para el Desarrollo (CDI-PNUD) 2006, Informe sobre Desarrollo Humano de los Pueblos Indígenas de México, New Mexico: CDI-PNUD. Domínguez, C. 2020, ‘Presentation at the “Foro Virtual de discusión y análisis sobre el futuro de la Península de Yucatán”’, YouTube, 28 August, accessed 1 June 2022 at https://​ youtu​ .be/​ YNZs9WOQnpM. El Universal 2020, ‘Descubren seis pirámides mayas en Yucatán’, 26 September, accessed 1 June 2022 at https://​www​.eluniversal​.com​.mx/​cultura/​descubren​-seis​-piramides​-mayas​-en​-yucatan. Fábregas Puig, A. 2005, ‘Vivir la frontera sur de México’, in P. Bovin (ed.), Las fronteras del istmo: fronteras y sociedades entre el sur de México y América Central, Mexico City: Centro de Estudios Mexicanos y Centroamericanos, pp. 343–9. Fondo Nacional de Fomento al Turismo (FONATUR) 2020, Manifestación de Impacto Ambiental Modalidad Regional (MIA-R). Tren Maya Fase 1. Palenque-Izamal. Mexico City: FONATUR. Gustafson, P. 2009, ‘Mobility and territorial belonging’, Environment and Behavior, 41 (4), 490–508. Hernández, J. 2020, ‘Presentation at the “Foro Virtual de discusión y análisis sobre el futuro de la Península de Yucatán”’, YouTube, 28 August, accessed 1 June at 2022 https://​ youtu​ .be/​ YNZs9WOQnpM. Instituto Nacional de Estadística, Geografía e Informática (INEGI) 1990, El Censo General de Población y Vivienda 1990, accessed 1 June 2022 at https://​www​.inegi​.org​.mx/​programas/​ccpv/​1990/​. Instituto Nacional de Estadística, Geografía e Informática (INEGI) 2010, El Censo General de Población y Vivienda de 2010, accessed 1 June 2022 at https://​www​.inegi​.org​.mx/​programas/​ccpv/​2010/​. Instituto Nacional de Estadística, Geografía e Informática (INEGI) 2022, ‘Sistema de Cuentas Nacionales de México’, accessed 1 June 2022 at https://​www​.inegi​.org​.mx/​programas/​pibent/​2013/​ #Datos​_abiertos. Lander, E. 2000, La colonialidad del saber: eurocentrismo y ciencias sociales. Perspectivas lationamericanas, Buenos Aires: CLACSO. Medellín, R. 1996, ‘La Selva Lacandona’, Arqueología Mexicana, IV (22), 64–9.

202  Handbook on critical political economy and public policy Nail, T. 2016, Theory of the Border, New York: Oxford University Press. Ochoa & Asociados 1996, Consultoría Maestra para el Programa de Desarrollo Integral del Istmo de Tehuantepec, Veracruz: Transport and Communications Ministry/Government of Oaxaca/ Government of Veracruz. Popescu, G. 2011, Bordering and Ordering the Twenty-first Century: Understanding Borders, Washington, DC: Rowman & Littlefield. Porto Gonçalves, C.W. 2003, ‘Geo-grafias – movimientos sociales, nuevas territorialidades y sustentabilidad’, Revista Geographia, 5 (9), accessed 1 June 2022 at https://​doi​.org/​10​.22409/​GEOgraphia2003​ .v5i9​.a13451. Presidency of the Republic, 2002, Avances y perspectivas del Plan Puebla-Panamá, México City: Presidency of the Republic. Prieto Díaz, S. 2017, ‘Cartografías de la subalteridad migratoria: bestialización, inhumanidad y contrahegemonía en la frontera México’, doctoral dissertation, Universidad Iberoamericana, Mexico City. Prieto Díaz, S., Benítez, J.A. & Leal Gómez, A. 2020, ‘Vías de comunicación, reordenamiento territorial y reconfiguración de las (in)movilidades humanas en la península de Yucatán y la frontera sur de México’, in J. Benítez & G. Escalona (eds), Impacto de las vías de comunicación terrestre sobre la fauna silvestre de áreas naturales protegidas, Chetumal: El Colegio de la Frontera Sur, pp. 166–205. Prieto Díaz, S. & Camargo, A. 2021, ‘Fronteras de la Frontera Sur: entre (re)ordenamientos territoriales y (re)distribuciones poblacionales’, in G. Castillo (ed.), Migración centroamericana en el México contemporáneo: procesos socioespaciales y dinámicas de exclusion, Mexico City: Instituto de Geografía, Universidad Nacional Autónoma de México, forthcoming. Rajchenberg, E. & Héau-Lambert, C. 2002, ‘En la antesala del Plan Puebla-Panamá: Tehuantepec en el siglo XIX’, Chiapas 14, accessed 1 June 2022 at https://​chiapas​.iiec​.unam​.mx/​No14/​ch14rajchenberg​ -heau​.html. Scott, J. 1998, Seeing Like a State, New Haven, CT: Yale University Press. Szary, A.L.A. & Fourny, M.C. 2006, Après les frontières, avec la frontière: nouvelles dynamiques transfrontalières en Europe, Paris: Editions de l’Aube. Szary, A.L.A & Rouvière, L. 2009, ‘Des dynamiques transfrontalières au bilan d’aménagement du territoire: innovations et blocages dans les Andes centrales (Chili-Pérou-Bolivie)’, Mosella: revue du Centre d’études géographiques de Metz, 32 (1–4) (Special Issue: ‘Frontières et Aménagement’), 181–96. Varela Huerta, A. 2018, ‘Migrants trapped in the Mexican vertical border’, Border Criminologies, 21 June, accessed 14 June 2022 at https://​www​.law​.ox​.ac​.uk/​research​-subject​-groups/​centre​-criminology/​ centreborder​-criminologies/​blog/​2018/​06/​migrants​-trapped. World Bank 2020/21, World Development Indicators, accessed 14 June 2022 at http://​ databank​ .worldbank​.org/​.

PART IV FINANCE

14. Challenges for monetary policies in the 21st century: financial crises and shadow banking Joscha Wullweber

Monetary policy today bears little resemblance to central banking at the end of the 20th century. Interest rate policy, the main policy tool until the global financial crisis (GFC), is mostly irrelevant. Instead, central banks buy assets on a large scale (quantitative easing), and act as dealers of last resort – that is, they shape markets and asset prices as active market makers. The reason for this radical shift in monetary policy is that since the GFC, the financial system has been in deep crisis. The main source of instability comes from the shadow banking system. Shadow banking implies money lending by non-bank institutions via repurchase agreements (repos). Repos, in turn, are short-term contracts for the sale of securities with the seller’s obligation to repurchase the securities at the end of a specified term (usually overnight) at a predetermined price. In this way, shadow banking interrelates the money market and the capital market. For the past 20 years, the shadow banking system has been growing at a steady pace. Short-term repo market funding has been greatly accelerating. The crisis susceptibility of today’s financial system can mainly be explained by the fact that the stability of this financial system is strongly grafted on the stabilization of the shadow banking system, and that although the shadow banking system, is inherently prone to crisis, it nevertheless remains largely unregulated. While the paucity of financial reforms of the last 30 years confirms the assumption of a crisis-driven status quo (Helleiner, 2014; Moschella & Tsingou, 2013; Scherrer, 2014; Stellinga & Mügge, 2017), something radical has changed: the leading central banks have meanwhile become the only institutions that take forceful action to guarantee the stability of the financial system. To stabilize the system, however, central banks must stabilize the shadow banking system. This implies that central banks must regularly act as market makers of last resort to secure market liquidity in collateralized securities to stabilize the market for repurchase agreements. Although the legal frameworks regulating the financial system remain weak, the highly unconventional measures taken by the leading central banks to safeguard the system have substantially strengthened the security framework in which the financial system is embedded (Mehrling, 2011; Pozsar & Sweeney, 2015; Tett, 2019; Wullweber, 2021a). Nevertheless, as the chapter demonstrates, these measures also have problematic side-effects, which, in turn, increase the likelihood of further crises (IMF, 2019). The chapter starts with a short introduction to the notion of liquidity, money as well as a taxonomy of credit relations. This section is necessary in order to provide a basic understanding of the prevailing logics in the financial system. Furthermore, without a basic knowledge of money creation the instruments of central bank policy are incomprehensible. In the following section, the chapter engages with different forms of monetary policies. It starts by reviewing the traditional policies. However, these forms of monetary policy are no longer sufficient to stabilize the global financial system. For this reason, the main section of the chapter will deal with unconventional central bank policy. The final section discusses from a critical 204

Challenges for monetary policies in the 21st century  205 political-economic perspective how this new dimension of central bank intervention is to be classified politically and what policy implications follow from it.

LIQUIDITY, MONEY AND CREDIT In general, when banks grant credit, they book the amount borrowed in the form of a deposit. In this way, money is created out of thin air. As demonstrated below, the function of banks as intermediaries between lenders and borrowers is almost negligible (McLeay, Radia & Ryland, 2014a, p. 15). Any institution that borrows short and lends long is vulnerable (a private bank or a non-bank creditor institution). The central bank is an exception, for it can create as much liquidity as needed, at least in its own currency. This is because the central bank is located at the top of the credit hierarchy. The very moment a run occurs on private banks or shadow banking entities, such institutions tend to collapse, because the cash available almost never meets all liabilities, in the form, for instance, of deposits. A bank run can become contagious, and contagion, in turn, can lead to the breakdown of the entire financial system. In such a situation, the central bank is the ultimate source of liquidity – the lender and market maker of last resort. Why is that the case? Why can private banks create money anew? And finally, why can financial liquidity suddenly vanish and when does this situation pose a risk to the system? Liquidity Stable financial markets are a fundamental condition for a functioning domestic and global economy. The indicator for measuring the functionality of financial markets is liquidity. A liquid market is one that functions smoothly and optimally: ‘Liquidity, like efficiency, is considered one of the great virtues of perfectly competitive markets’ (Carruthers & Stinchcombe, 1999, p. 353). Until the GFC of 2007–09, regulatory intervention on the part of the state was regarded with scepticism based on a market liberal understanding of government responsibilities that guided most of the policy programmes. According to the prevailing assumption at the time, the less those markets are regulated, the more liquid they become: ‘[Liquidity] is associated with free and laissez-faire markets, and hence with the absence of an intrusive institutional or regulatory apparatus. If exchange constitutes the elementary form of market life, liquidity means that exchange occurs easily and frequently – markets are operating smoothly and properly’ (ibid.). This predominant notion of self-regulating market forces further assumes that it is impossible to centralize the complexity of the information required to understand market conditions, and that consequently the market should be left to operate as freely as possible: ‘Markets aggregate diffuse information more effectively and set prices more efficiently than any central planner possibly could’ (Bernanke, 2007, p. 1). Before the GFC erupted, it was believed that such intervention would most likely distort market rationality (Dowd & Hutchinson, 2010; Taylor, 2009; Wullweber, 2019a). This changed in the course of the crisis when it became clear that central banks were the only institutions capable of stabilizing the financial system. During the COVID-19 crisis, intervention on the part of central banks has been very welcome. At first glance, hardly any market conforms as closely to the postulates of general equilibrium theory as some sectors of global financial markets, especially the stock markets. General equilibrium theory assumes that as long as the state does not intervene, equilibrium will

206  Handbook on critical political economy and public policy establish itself on a market with rational actors through the price mechanism, which quantitatively balances out the supply and demand of goods. In this way, the market becomes cleared. According to this assumption, prices are an exact reflection of the relation between supply and demand, and consequently represent an equilibrium. As the Turner Report of the UK’s Financial Authority Services observes, regulatory authorities had long been convinced of the soundness of the concept of market equilibrium: ‘The predominant assumption behind financial market regulation – in the US, the UK and increasingly across the world – has been that financial markets are capable of being both efficient and rational…and that the overall level of prices as a result has a strong tendency towards a rational equilibrium’ (Financial Services Authority, 2009, p. 39). The GFC, however, revealed the shortcomings of these market concepts and showed that ‘efficient markets can be irrational’ (ibid.). In times of economic upswing, all possible forms of assets seem to be highly liquid. This perception can have dramatic consequences. When confidence turns into uncertainty over the future value of assets, their liquidity decreases (Minsky, 1982). The outbreak of the COVID-19 pandemic was marked by a sharp reduction in the high level of liquidity that prevailed shortly before the crisis began. In a crisis, liquidity can quickly vanish. Within days after the outbreak of the COVID-19 crisis in March 2020, a bull market developed into a credit crunch. Without massive government intervention led by the central banks, financial markets would have collapsed. In uncertain times, the demand increases for assets that are still perceived as having a high level of liquidity. This refers primarily to money, but normally also to assets such as gold and other precious metals as well as government bonds. Even such assets, however, can lose liquidity, as was demonstrated in mid-March 2020 by the COVID-19 financial crisis. Liquidity in financial markets exists as long as confidence prevails. Confidence – market confidence – thus constitutes a core element of the financial system (Bernanke, 2008, p. 1; Wullweber, 2016). This confidence strongly depends on the ability of promisors to convince others that their promises will be kept and that payment will be made when it falls due: ‘Promises form the core of finance. One party promises to pay a sum of money to another. Much financial activity involves, one way or another, the design, production, distribution, evaluation, acceptance (or rejection), enforcement, and modification of promises’ (Carruthers & Kim, 2011, p. 240). Besides performance criteria, confidence in financial markets is largely dependent on global socioeconomic and political factors such as the monetary policy of central banks, particularly that of the US Federal Reserve (Fed), the political regulation of financial markets, economic decisions made by governments and especially by ministries of finance and economy (Gill, 2003). Money Banks are often regarded as intermediaries that bring together creditors and debtors and act to optimally match the supply of and demand for money (Mankiw, 2017). According to this interpretation, banks are neutral, cost-reducing intermediaries. As Schumpeter ([1954] 1986, p. 303) points out, however, banks not only lend the money they have received, but they also, much more importantly, create new money via the loans they grant. Nowadays, all central banks confirm this statement (Bundesbank, 2017; McLeay et al., 2014a, 2014b). In modern-day economies, money is mainly created by way of debt contracts between banks and borrowers. Within this context, the state-backed private system of money creation can react quite flexibly to the demand for money. Privately issued debit notes and state-issued money

Challenges for monetary policies in the 21st century  207 are linked through state-guaranteed convertibility. The banking system thus turns private debt into public money: ‘[W]hat the banker does with money cannot be done with any other commodity…for no other commodity’s quantity or velocity can be increased in this way’ (Schumpeter [1954], 1986, pp. 304–5). This is a complex link between the banking system and the state, and between the state and its creditors (the owners of state bonds). It is mediated by the central bank, which accepts private bank credit for central bank money at par on demand. As the Bank of England clearly states: ‘Rather than banks lending out deposits that are placed with them, the act of lending creates deposits’ (McLeay et al., 2014a, p. 15). When a bank issues a loan, both sides of the balance sheet change. The newly issued bank credit increases the assets of the borrower on one side of the balance sheet in the form of a new deposit entry. The borrower’s obligation toward the bank to pay back the debt is recorded on the other side of the balance sheet as an increase in liabilities. In terms of the bank balance sheet, the book entries are simply mirrored. The new credit appears on the asset side of the bank’s balance sheet, while the new deposit shows up on the liability side. The bank’s money is a promissory note – an IOU (I owe you) from the bank to the borrower. Keynes observed that bank money is ‘simply an acknowledgement of a private debt, expressed in the money of account, which is used…to settle a transaction’ (Keynes [1930], 1971, p. 5). A special feature of a bank loan that sets it apart from a simple credit between two persons is the fact that the promissory note issued by the bank is recognized as legal tender. In this way the bank loan becomes money that can be used as a universal equivalent for all assets within the given currency area. It comes to represent ‘a debt owing by the State’ (ibid.). There are no natural limits to the creation of money. In practice, however, a bank with too little equity capital and too many high-risk investments has no sound basis for investor confidence in the bank’s capacity to make disbursements or meet its payment obligations. Apart from this, ‘it is evident that there is no limit to the amount of bank money which the banks can safely create provided they move forward in step’ (ibid., p. 23). The limits of money creation are, again, subject to investor confidence and trust, and above all to policy restrictions that lie mostly within the framework of statutory regulations and therefore within the domain of the state. Credit Hierarchy Although money is a form of credit, it is obvious that not all forms of credit constitute money (Wullweber, 2019b). Where does the dividing line lie between money and credit? In other words, when does a credit become money? A credit is considered money if it can be used to settle debts. It follows that no clear distinction can be drawn between money and credit, considering that this depends on the level at which the credit is located in the hierarchy of money (Mehrling, 2013; Pozsar, 2014). During the era of the gold standard, the hierarchy was designed so that gold was regarded as the only real money, and cash represented the promise to be converted into gold at any time. At this level, gold is money, while cash is credit. At the present-day bank level, money is represented by the reserves that banks hold at the central banks, since banks can only settle their debts with each other by drawing on central bank reserves. For consumers or the productive economy, in turn, deposits at the bank and cash represent money. Market actors make payments through deposits. Deposits imply a promise on the part of the bank that the deposited assets can be exchanged at any time for central bank money. In the absence of the gold standard, central bank reserve money today is no longer backed by gold. Reserve money has now come to serve as base money that is underpinned by

208  Handbook on critical political economy and public policy confidence in the ability of the central bank or the state to maintain stability in the value of money (again: confidence and trust!). Internationally, however, the US dollar represents the primus inter pares. The dollar is the global currency. It is situated above the other currencies (see Figure 14.1). This becomes evident during global financial or economic crises when there is a great need for US dollars on behalf of corporations and financial players all over the world. In such situations, central banks that have a standing currency swap line with the Fed are in a privileged position. This refers specifically to the ‘C5’ group, which includes the European Central Bank (ECB), the Bank of England, the Bank of Japan, the Swiss National Bank and the Fed. The general conclusion that money represents a form of credit can now be expressed in more precise terms depending on the form it takes: money in the form of cash is an IOU from a central bank to a cash holder. Reserves at the central bank are an IOU from a central bank to a private bank. A bank deposit is an IOU from a commercial bank to an account holder. These IOUs, however, are not equivalent. Rather, they can be represented as standing in hierarchical relation to one another and, in a more general sense, in their relation to various assets insofar as concerns their potential for being converted into money at the next higher level in the hierarchy at a desired point in time without loss in value (Bell, 2001; Mehrling, 2013; Figure 14.1).

Note:  C5: Fed, ECB, Bank of England, Bank of Japan, Swiss National Bank. Source:  Adapted from Wullweber (2021b).

Figure 14.1

Global credit hierarchy

Central bank money stands at the top of the hierarchy. Bank deposits follow central bank money at the level just below the top. Despite the fact that there is a direct relation through bank reserves between bank deposits and central bank money, bank deposits are not central bank money (Mehrling, 2013). The next level down in the hierarchy is occupied by the different types of assets that represent a promise to pay at a specified time in the future. According

Challenges for monetary policies in the 21st century  209 to Bell (2001, p. 159), the degree to which a given asset approximates the money-form of value depends on the extent to which that asset can be converted, upon need, without substantial loss of the value paid – that is, at its original nominal value (= book value) – into the money issued by the next higher level in the hierarchy – in other words, the degree to which said asset can be traded at par on demand (Wray, 1990). As a rule, deposits with banks in the form of demand deposits can at any time be converted into (central bank) money at least as long as the bank has access to central bank reserve money. This means that through the central bank, the state accepts the convertibility of bank deposits into money: ‘Because the central bank guarantees that demand deposits will trade at par with government currency and because they are accepted in payment of taxes, bank promises (demand deposits) are nearly as liquid as state money’ (Bell, 2001, p. 160). The factor that determines the special features of today’s monetary system is the elastic and dynamic manner in which the system responds to the demand for liquidity. Liquidity is vital for maintaining financial stability. While cash is the most liquid asset, it does not generate any interest (Keynes [1930], 1971). In their quest for yields, financial players try to hold on to as little money as possible and prefer to invest in less liquid assets. In a bull market, all assets tend to become highly liquid. Some of them become almost money-like. Especially in times when asset prices keep rising, financial players grow confident that they will be able to sell such assets on demand with profit. When a bull market turns into a bear market, however, investors with highly illiquid investments have a problem. As they cannot settle their debt contracts with securities, they suddenly find themselves in great need of money (see Figure 14.1). When this happens, financial players must sell their assets at any price they can get in order to avoid insolvency. This, in turn, exerts downward pressure on asset prices, and the acquisition of money becomes even more complicated. The inevitable consequence is a run on liquidity that can then lead to a financial crisis.

CONVENTIONAL MONETARY POLICY The traditional crisis reaction of central banks consists of lowering the key interest rate. Reducing key interest rates is based on the hope that lower rates will stimulate lending. The explanation lies in the need on the part of commercial banks for central bank money to settle transactions between one another, and also, in some jurisdictions, to meet the minimum reserve requirements: ‘For banks, the survival constraint takes the concrete form of a “reserve constraint”’ (Mehrling, 2011, p. 13). As a rule, a central bank’s interest rate influences the rate at which commercial banks lend money to one another and to private individuals. Other factors being equal, it is assumed that the lower the interest rate, the higher the demand for credit. Central banks seek to achieve a macroeconomic effect on lending practices by adjusting their interest rates, and thus the price for central bank money (Bank of England, 2015; McLeay et al., 2014a). When key interest rates approach the zero lower bound, however, the control effect from interest rate cuts is lost. When the COVID-19 financial crisis struck, the leading central banks were confronted with the problem that key interest rates were already very low. This is because after the 2007–09 financial crisis, the global financial system never really emerged from crisis mode, and interest rates were already hovering around zero. The ECB and a few other central banks had set negative interest rates for reserve deposits. The Bank of England had fixed its key rate at 0.75 per cent. The Fed had only raised its rates modestly to 2.5 per cent. At the beginning of March

210  Handbook on critical political economy and public policy 2020, the Fed decided to react in a very traditional manner and cut rates to a modest half a percentage point. This had no positive effect. Shortly thereafter, the Fed and also the Bank of England lowered their rates to 0.25 per cent – once again, however, to no avail (Wolf, 2020). Central banks quickly realized that they would have to make use of much stronger monetary ammunition than interest rate policies, and that above all they would have to expand their policies relating to lender of last resort, quantitative easing, market maker of last resort, and the provision of liquidity swaps. Central banks are able to pursue these powerful tools because they occupy a unique position among financial players. Unlike other financial institutions, central banks do not have a liquidity problem during a crisis, at least not in their own currency, because they are located at the top of the credit hierarchy. For this reason, during times of crisis, central banks have the capacity to act as lenders of last resort, and – at least theoretically – to provide unlimited amounts of credit (Giannini, 2011). The idea behind the concept of lender of last resort is to provide liquidity to credit institutions that are solvent in principle, but which have longer-term liabilities that make it impossible for them to meet short-term obligations. Under certain circumstances, institutions in this position may then be forced to pay a high price for the funds they need. Especially in times of crisis, however, it is difficult to distinguish between insolvent and illiquid financial players, considering that periods of prolonged illiquidity can lead to bankruptcy (BIS, 2014). One of the most important monetary policy decisions at the very beginning of the COVID-19 financial crisis was the provision of emergency liquidity assistance as a short-term measure to help institutions cope with money shortages and to prevent a credit crunch on the financial markets. At the beginning of April, the Fed set up a new facility to provide term financing in order to buy loans made by banks to support small businesses (Fed, 2020a). This programme, which included 454 billion US dollar loan guarantees provided by Fed lending facilities, was meant to support the fiscal stimulus package that the US Congress had passed. The Fed had also started to buy commercial papers from business concerns under the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF), the Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF). All these policies were highly unconventional and provided credit of up to 2.3 trillion US dollars to support the economy (Boyarchenko et al., 2020b). While some monetary policies were similar to the financial crisis of 2007–09, the purchase of corporate loans and commercial paper provided credit directly to non-financial firms. These policies once again moved Fed policies into a new domain where it began providing liquidity directly to the productive economy. This underscores how serious the situation was. The same is true for the ECB, the Bank of England and the Bank of Japan, the Bank of China and many other central banks that have implemented similar programmes. In effect, central banks around the world provided a huge amount of money to financial players as well as to non-financial players to stabilize financial and economic systems (Tett, 2020). In addition to these measures, the Fed had gone even one step further, and for the first time in its history had launched a Fed-backed vehicle to buy investment-grade exchange-traded funds to counter over-reactions in equity trading (Ablan, Greeley & Henderson, 2020).

Challenges for monetary policies in the 21st century  211

UNCONVENTIONAL MONETARY POLICY When financial markets panic, market players themselves are not capable of curbing the crisis. The stakeholders are deeply entangled, myopic and driven by emotions of fear, panic and irrational behaviour. Given that many investments are linked to indices or bound to track certain assets or portfolios, the freedom of investors is diminished. Even if ratios suggest otherwise, they are forced to execute operations in the way their algorithms dictate because they are obliged to replicate the object of their fund guidelines. In panic situations, the downward spiral of asset prices affects most assets (MacKenzie & Spears 2014a, 2014b). Today’s financial assets are mostly rated mark to market. This means that falling prices are factored into asset value almost in real time. Accordingly, as long as investors follow the profit logic of shadow banking, in a crisis, they have little choice but to follow the path from hedge finance to speculative finance and last to Ponzi finance. They are not in full charge of the destiny of their investments. The steeper the journey becomes, the more it endangers the financial viability of the investment: bid–offer spreads widen, bids and/or offers disappear entirely, and the exit door for common investors closes. Assets become unsaleable, and the whole system grinds to a halt. Since assets – in the form of collateral – are the lubricant of repo markets, and hence the cornerstone of shadow banking financing, this translates into a massive squeeze on shadow bank liquidity. Credit lines are pulled, collateral is pledged, there is no new financing available and financial markets become dysfunctional. Market makers in the repo market are especially prone to illiquidity spirals because they do not regularly have access to central bank reserves or other short-term central bank lending emergency facilities. If these institutions reduce or even cease trading, the entire shadow banking sector is affected. As the shadow banking system is now at the heart of the financial system, it can bring the overall global financial system to collapse. The stress tests for banks in recent years appear rather weak in light of what took place in March 2020 during the COVID-19 financial crisis. What is more, during the month preceding the crisis, the Fed began to relax the capital, liquidity and stress test obligations for banks in a move that in retrospect appears to be a case of bad timing (Systemic Risk Council, 2019). The only institutions that do not have a liquidity problem (in their own currency) are central banks, which makes them the stabilizer and lender of last resort in times of crisis. When the COVID-19 financial crisis hit, central banks acted forcefully in an attempt to halt the crisis and curb the economic impact of the crisis. They advanced into uncharted and unconventional monetary terrain even further than they did in the wake of the 2007–09 financial crisis, crossing the red line that has strictly separated fiscal and monetary policies since the 1980s. The fear that government access to the central bank balance sheet might lead to overspending was replaced – and rightly so – by the much greater and more imminent fear of a total collapse in world trade and a subsequent severe deterioration of all economic activities. Prevailing ideology over the past three decades has not allowed central banks to directly finance government spending. This was based on the assumption that governments might abuse such a privilege as an opportunity to increase public debt in unsustainable ways. It was argued that central banks should instead act independently from governments as neutral guardians of their respective currencies and keepers of price stability. The neutrality of central banks, however, has always been a political myth, making it possible to delegate complicated and unpopular political decisions regarding monetary policies to seemingly apolitical central bank technocrats (Krippner, 2007; McNamara, 1998, 2002; van’t Klooster & Fontan, 2020). In the light of a historical

212  Handbook on critical political economy and public policy effort to curb a global pandemic without destroying entire branches of industry, this approach is no longer tenable (Wullweber, 2021a). Quantitative Easing Already during the GFC of 2007–09, the policy of quantitative easing (QE) was introduced in order to complement key interest rate policies. QE is a form of open market operations by central banks, albeit a very special and unconventional form. In open market transactions, money is made available to financial actors – both banks and non-banks – through the purchase of securities – for the most part, government bonds. The key difference in QE is the scale of asset purchases. End of 2021, balance sheets of leading central banks amounted to 25 trillion US dollars, around six times higher than in 2007 (Wullweber, 2021a, p. 238). Central banks finance such transactions by creating money. This implies that they can create money at will and bring it into circulation by purchasing assets, in most cases domestic government bonds, but ultimately by buying an asset of their choice (Stigum & Crescenzi, 2007). Unlike in the case of interest rate policy, when central banks purchase government bonds or other assets from private holders of those bonds, it has a direct impact on the amount of money in circulation. The idea behind QE, besides the purchase of otherwise illiquid securities, is that the money acquired through the sale of securities will be reinvested, and the seller will use the funds to purchase assets such as shares or corporate bonds. It is assumed that this will increase the value of the shares, and, in turn, will facilitate access to money on the markets for business concerns, which they can then invest in areas such as production (Bank of England, 2015). Optimally, this should stabilize the financial markets and stimulate the economy. However, in the case of the USA, the goal was also to stabilize the Treasury market. Financial players as well as business entities in the productive economy were in such great need of cash that they even sold their safest and most liquid assets – assets such as Treasury bonds and other government bonds that previously counted among the most sought-after securities: ‘We may be witnessing the biggest dash for cash the world has seen’ (Financial Times, 2020, n.p.). In response to this dilemma, central banks around the world had again launched or intensified their QE programmes. Besides creating the 750 billion euro Pandemic Emergency Purchase Programme (PEPP), the ECB, for example, had initiated a new round of QE measures that involved the purchase of bonds in an amount of more than 1 trillion euros (ECB, 2020). Similarly, the Bank of England had set up a term funding scheme for small and medium-sized firms, and a COVID Corporate Financing Facility to support larger firms. In addition, it was also providing liquidity to the financial sector (FSB, 2020). Market Maker of Last Resort In mid-March 2020, when the security market became dysfunctional, and there was a breakdown in typical relationships – for example, between Treasury yields and stock prices – and the Treasury market, which is the largest and most important government securities market in the world, became progressively more illiquid, the Fed once again adopted a strategy employed for the very first time during the GFC: alongside its role as lender of last resort, it began to serve as dealer of last resort (Kaminska, 2020). This implies that the Fed has stepped in to trade on both sides of the repo market by dramatically increasing the size and the terms of its repo transactions. Cash-rich vehicles such as money market funds, which had retreated

Challenges for monetary policies in the 21st century  213 from the market as money suppliers, are on one side. On the other are financial players such as security dealers and hedge funds that are in need of cash. The expansion of open market operations along with liquidity support, through auctions, for example, presents an alternative to the bilateral provision of liquidity, and in this way has also reduced the risk that financial operators will be stigmatized. The Commercial Paper Funding Facility (CPFF) was set up in mid-March 2020 to enhance the liquidity of the commercial paper market and provide a liquidity backstop for this market by supporting financial players to roll over outstanding commercial paper (Boyarchenko et al., 2020a). Most of the primary dealers do not have a reserve account, and, accordingly, are not eligible for the Fed’s discount window. To obtain funding, these financial players are able to access another debt instrument that has been revived, the Primary Dealer Credit Facility (PDCF) (Martin & McLaughlin, 2020). Especially for the shadow banking sector, the Fed has strengthened its overnight reverse repo facility (ON RRP) as well as its overnight repo facility (ON RP) (Bernanke & Yellen, 2020). It has also established two further debt instruments: the Money Market Mutual Fund Liquidity Facility (MMLF), which is very similar to an instrument initiated during the GFC but with a broader range of eligible assets (Cipriani et al., 2020; Politi, 2020), and the Term Asset-Backed Securities Loan Facility (TALF), which is designed to tackle the capital market by enabling the issuance of asset-backed securities collateralized, among other things, by student loans, auto loans, or credit card loans (Fleming, Sarkar & Van Tassel, 2020). Both facilities are specifically geared to shadow banking institutions, making it possible for the Fed to serve as a counterpart for both borrowers and lenders on the money market and on the capital market (Wullweber, 2020). As in 2008, the Fed has once again moved the wholesale money market onto its own balance sheet (Mehrling, 2011). The Fed also announced that it would purchase Treasuries, agency mortgage-backed securities (MBS), and agency commercial MBS to the extent necessary (Fed, 2020b). Between 15 and 31 March 2020 alone, the Fed bought 775 billion dollars in Treasury bonds and 291 billion dollars in agency MBS (Fleming & Ruela, 2020). These policies helped to calm the market, which bounced back very quickly (Cipriani et al., 2020). It was also possible to narrow the spreads for the one-week overnight indexed swap (OIS), a further sign that the financial markets have once again regained a semblance of calm (Boyarchenko et al., 2020a). The US Treasury market also calmed down (Fleming, 2020). Liquidity Swaps Global crises are often associated with US dollar funding problems (Pozsar & Sweeney, 2020). With demand and revenues dominated in US dollars falling worldwide, many firms (and also countries) have been struggling to meet their dollar-denominated liabilities. For this reason, the Fed has established new currency exchange agreements (swap lines) with other central banks to facilitate their access to US dollars and to ensure US dollar liquidity. Currency swap lines that the Fed had already set up with several central banks in 2008 were once again revived in March 2020. In the current crisis situation, however, the Fed has taken its policies even one step further. With so many businesses around the globe in dire need of US dollars, and with banks outside the USA holding nearly 13 trillion dollars’ worth of dollar-denominated assets (Aldasoro, Ehlers & Eren, 2019), the Fed has opened a new temporary facility for Foreign and International Monetary Authorities (FIMA). FIMA will enable foreign central banks to access US dollars by using their existing stocks of Treasury bonds to transact repurchase agreements

214  Handbook on critical political economy and public policy with the Fed (Fed, 2020c). Accordingly, the Fed has revived and significantly strengthened swap lines with other central banks while at the same time broadening the range of eligible central banks. Eligibility has now been extended to include central banks in large emerging markets such as Brazil and Mexico, for example, as well as to central banks in European countries such as Denmark, Norway and Sweden.

OUTLOOK More than ever before, the demand and supply of credit, and thus the functioning of financial markets as a whole, are determined by central bank monetary policy. Monetary policies, needless to say, cannot stop a virus pandemic like COVID-19. But they are able to keep the measures that are required to curb such an event from causing a financial crisis. And there is no doubt that they can mitigate economic crises and fight global recession. This, of course, changes central bank balance sheets. The Federal Reserve balance sheet, for example, has reached a record amount of 8.8 trillion dollars in January 2022 (Fed, 2022). Similar numbers may be found for the ECB and the Bank of England (Bank of England, 2021; ECB, 2021). Central banks must now intervene in markets to an extent never previously imagined. They must also employ measures that were unthinkable before the COVID-19 crisis. In the current situation, they reacted with unparalleled speed, power, and variety of policy measures. They cut interest rates, introduced government bond and security buying programmes, created liquidity facilities, and opened credit lines for various financial and non-financial actors. Will the immense expansion of central bank balance sheets become a problem for financial stability? Central banks can create money at will in their own currency. In the wake of the COVID-19 crisis, this money can be used to revive the productive economy, support people who have lost their jobs, strengthen health care systems, plus a whole lot more. Although central banks all over the world have exercised their power to implement a diverse range of monetary policy options to counteract the effects of the COVID-19 crisis, the measures they have introduced have been complemented only in part by forceful fiscal policies. Unlike fiscal policies, however, monetary policies do not directly translate into economic activities. When monetary measures introduced by central banks fail to reach the productive economy and, as has happened before, are diverted instead into the financial sector as excess reserves, the pattern of boom-and-bust cycles is bound to continue, with serious negative implications for the entire productive economy. The implications of the COVID-19 crisis for economy and society have led to the most severe global recession since the global depression of the 1930s. And yet, since April 2020, financial markets all over the world have begun to rally, again, reaching peak records in 2021 (Samson & Smith, 2021). Hence, even if central bank intervention does manage to stabilize financial markets, that stability will remain highly precarious. However, some central banks have recently come under strong political pressure. This applies first and foremost to the ECB. As the only institution capable of stabilizing the eurozone in the uncertain times of COVID-19, the ECB is currently undergoing a deep legitimacy crisis itself, owing to the very measures it has taken to stabilize the eurozone. Several governments, including that of Germany, have accused the ECB of overstretching its mandate and illegitimately financing weak Member States by buying too many of their government bonds. This is particularly astonishing considering that when the scale of the COVID-19

Challenges for monetary policies in the 21st century  215 pandemic became apparent, the EU was not in a position to take concerted action to buffer the impact of the ensuing economic downturn. Instead of being based on European-wide coordination and joint economic policies, responses to the coronavirus crisis were organized almost exclusively on the national level. Possibilities for countering the economic downturn in the EU, however, vary widely from country to country. While some Member States have considerable capacity to offer the various branches of industry and commerce as well as wage and salary earners financial support, other countries have only limited financial flexibility. As a result, already existing weaknesses within the eurozone have led to an increase in inequality among the Member States, driving the eurozone further into severe crisis. It was only the swift and forceful action on the part of the ECB with a diverse set of unconventional policy measures that made it possible to at least provisionally restabilize the eurozone. National governments continue to wrangle over possible EU-wide instruments and programmes. Back in March 2020, for example, the EU was asked by the president of the ECB to consider issuing so-called ‘corona bonds’, a version of Eurobonds designed to finance government recovery programmes. Even this proposal, however, is no longer on the table. The ECB is the only institution left that is currently capable of and willing to enforce stabilizing euro-wide measures in the face of the COVID-19 crisis. At the same time, as an institution that remains largely independent of democratic control, its increasing power and influence have given rise to such notions as unelected power, technocratic exceptionalism, and central bank-dominated order. The overall problem remains that financial markets are not adequately regulated. The weak regulation of the financial sector is not solely, but at least partly, based on the market-liberal monetary policy of the central banks. Mass hysteria tends to govern how financial markets react, both in good times and bad. And that explains the build-up of asset bubbles. It is the demand created by consumers, employees, state institutions and private firms that vitalizes supply chains. To ensure the stability requisite to meet this demand and to avoid recurrent crises, urgent action will be needed to establish strong and appropriate rules for financial markets, and to distribute the world’s wealth more justly. Monetary policies alone cannot realize these tasks. They must go hand in hand with fiscal policies, and regulatory policies. The Bank of England has taken an important step in this direction: for the first time in its history, it has directly financed government spending to fight the coronavirus pandemic (Giles & Georgiadis, 2020). If we expect the financial system to cushion the impact of unforeseen disasters and public emergencies such as the COVID-19 pandemic, it will be necessary to create a much more comprehensive framework of safety buffers in the form of equity, excess reserves, emergency funds and other collective crisis management instruments. The maintenance of such buffers will be costly. Moreover, they will exert considerable pressure on bank profitability, and the profits by other financial players. But in the end, it is not a question of whether costs will arise, but of who will have to bear the expense – public or private institutions.

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216  Handbook on critical political economy and public policy Bank for International Settlements (BIS), 2014, ‘Re-thinking the lender of last resort’, BIS Paper No. 79, September, accessed 6 July 2017 at http://​www​.bis​.org/​publ/​bppdf/​bispap79​.pdf. Bank of England 2015, The Bank of England’s Sterling Monetary Framework, accessed 17 December 2022 at https://​www​.bankofengland​.co​.uk/​-/​media/​boe/​files/​freedom​-of​-information/​2016/​sterling​ %20monetary​%20framework​%20june​%202015​.pdf. Bank of England 2021, ‘Bank of England balance sheet and weekly report’, accessed 5 January 2022 at https://​www​.bankofengland​.co​.uk/​weekly​-report/​balance​-sheet​-and​-weekly​-report. Bell, S. 2001, ‘The role of the state and the hierarchy of money’, Cambridge Journal of Economics, 25 (2), 149–63. Bernanke, B.S. 2007, ‘Financial regulation and the invisible hand’, speech at the New York University Law School, New York, Board of Governors of the Federal Reserve System, April, accessed 12 September 2014 at http://​www​.federalreserve​.gov/​newsevents/​speech/​bernanke20070411a​.htm. Bernanke, B.S. 2008, ‘Liquidity provision by the Federal Reserve’, remarks at the Federal Reserve Bank of Atlanta Financial Markets Conference, Sea Island, Georgia, 13 May, accessed 7 October 2014 at https://​fraser​.stlouisfed​.org/​scribd/​?item​_id​=​8994​&​filepath​=/​docs/​historical/​bernanke/​bernanke​ _20080513​.pdf. Bernanke, B. & Yellen, J. 2020, ‘The Federal Reserve must reduce long-term damage from coronavirus’, FT.com, 18 March, accessed 18 March 2020 at https://​www​.ft​.com/​content/​01f267a2​-686c​-11ea​-a3c9​ -1fe6fedcca75. Boyarchenko, N., Crump, R. & Kovner, A. 2020a, ‘The Commercial Paper Funding Facility’, Liberty Street Economics, Federal Reserve Bank of New York, 15 May, accessed 30 May 2020 at https://​li​ bertystree​teconomics​.newyorkfed​.org/​2020/​05/​the​-commercial​-paper​-funding​-facility​.html. Boyarchenko, N., Crump, R. & Kovner, A. et al. 2020b, ‘The Primary and Secondary Market Corporate Credit Facilities’, Liberty Street Economics, Federal Reserve Bank of New York, 26 May, accessed 2 June 2020 at https://​li​bertystree​teconomics​.newyorkfed​.org/​2020/​05/​the​-primary​-and​-secondary​ -market​-corporate​-credit​-facilities​.html. Bundesbank 2017, Geld und Geldpolitik, Frankfurt am Main: Deutsche Bundesbank. Carruthers, B.G. & Kim, J.-C. 2011, ‘The sociology of finance’, Annual Review of Sociology, 37, 239–59. Carruthers, B.G. & Stinchcombe, A.L. 1999, ‘The social structure of liquidity: flexibility, markets, and states’, Theory and Society, 28 (3), 353–2. Cipriani, M., La Spada, G., Orchinik, R. & Plesset, A. 2020, ‘The Money Market Mutual Fund Liquidity Facility’, Liberty Street Economics, Federal Reserve Bank of New York, accessed 10 May 2020 at https://​li​bertystree​teconomics​.newyorkfed​.org/​2020/​05/​the​-money​-market​-mutual​-fund​-liquidity​ -facility​.html. Dowd, K. & Hutchinson, M. 2010, Alchemists of Loss: How Modern Finance and Government Intervention Crashed the Financial System, New York: Wiley. European Central Bank (ECB) 2020, ‘Pandemic Emergency Purchase Programme (PEPP). ECB announces €750 billion Pandemic Emergency Purchase’, accessed 2 April 2020 at https://​www​.ecb​ .europa​.eu/​mopo/​implement/​pepp/​html/​index​.en​.html. European Central Bank (ECB) 2021, ‘Annual consolidated balance sheet of the Eurosystem’, accessed 5 January 2022 at https://​www​.ecb​.europa​.eu/​pub/​annual/​balance/​html/​index​.en​.html. Federal Reserve (Fed) 2020a, ‘Federal Reserve will establish a facility to facilitate lending to small businesses’, 6 April, accessed 5 January 2022 at https://​www​.federalreserve​.gov/​newsevents/​ pressreleases/​monetary20200406a​.htm. Federal Reserve (Fed) 2020b, ‘Federal Reserve issues FOMC statement’, 23 March, accessed 30 March 2020 at https://​www​.federalreserve​.gov/​newsevents/​pressreleases/​monetary20200323a​.htm. Federal Reserve (Fed) 2020c, ‘Federal Reserve announces establishment of a temporary FIMA Repo Facility’, 31 March, accessed 5 January 2022 at https://​www​.federalreserve​.gov/​newsevents/​ pressreleases/​monetary20200331a​.htm. Federal Reserve (Fed) 2022, ‘Recent balance sheet trends’, accessed 5 January 2022 at https://​www​ .federalreserve​.gov/​monetarypolicy/​bst​_recenttrends​.htm. Financial Services Authority 2009, The Turner Review: A Regulatory Response to the Global Banking Crisis, March, accessed 17 December 2022 at http://​www​.actuaries​.org/​CTTEES​_TFRISKCRISIS/​ Documents/​turner​_review​.pdf.

Challenges for monetary policies in the 21st century  217 Financial Stability Board (FSB) 2020, COVID-19 Pandemic: Financial Stability Implications and Policy Measures Taken, 15 April, accessed 20 April 2020 at https://​www​.fsb​.org/​wp​-content/​uploads/​ P150420​.pdf. Financial Times 2020, ‘The Fed must act to keep markets functioning’, 18 March, accessed 18 March 2020 at https://​www​.ft​.com/​content/​3608d546​-691e​-11ea​-800d​-da70cff6e4d3. Fleming, M. 2020, ‘Treasury market liquidity and the Federal Reserve during the COVID-19 pandemic’, Liberty Street Economics, Federal Reserve Bank of New York, 29 May, accessed 4 June 2020 at https://​li​bertystree​teconomics​.newyorkfed​.org/​2020/​05/​treasury​-market​-liquidity​-and​-the​-federal​ -reserve​-during​-the​-covid​-19​-pandemic​.html. Fleming, M. & Ruela, F. 2020, ‘Treasury market liquidity during the COVID-19 crisis’, Liberty Street Economics, Federal Reserve Bank of New York, April 17, accessed 27 April 2020 at https://​li​ bertystree​teconomics​.newyorkfed​.org/​2020/​04/​treasury​-market​-liquidity​-during​-the​-covid​-19​-crisis​ .html. Fleming, M., Sarkar, A. & Van Tassel, P. 2020, ‘The COVID-19 pandemic and the Fed’s response’, Liberty Street Economics, Federal Reserve Bank of New York, 15 April, accessed 20 April 2020 at https://​li​bertystree​teconomics​.newyorkfed​.org/​2020/​04/​the​-covid​-19​-pandemic​-and​-the​-feds​ -response​.html. Giannini, C. 2011, The Age of Central Banks, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Giles, C. & Georgiadis, P. 2020, ‘Bank of England to directly finance UK government’s extra spending’, FT.com, 9 April, accessed 9 April 2020 at https://​www​.ft​.com/​content/​664c575b​-0f54​-44e5​-ab78​ -2fd30ef213cb. Gill, S. 2003, Power and Resistance in the New World Order, New York: Palgrave Macmillan. Helleiner, E. 2014, The Status Quo Crisis: Global Financial Governance after the 2008 Meltdown, Oxford: Oxford University Press. International Monetary Fund (IMF) 2019, Global Financial Stability Report, October, Washington, DC: IMF. Kaminska, I. 2020, ‘When central banks take over securities markets’, FT.com, 26 March, accessed 27 March 2020 at https://​ftalphaville​.ft​.com/​2020/​03/​25/​1585143723000/​When​-central​-banks​-take​-over​ -securities​-markets/​. Keynes, J.M. ([1930] 1971), A Treatise on Money, London: Macmillan. Krippner, G.R. 2007, ‘The making of US monetary policy: central bank transparency and the neoliberal dilemma’, Theory and Society, 36 (6), 477–513. MacKenzie, D. & Spears, T. 2014a, ‘The formula that killed Wall Street: the Gaussian copula and modelling practices in investment banking’, Social Studies of Science, 44 (3), 393–417. MacKenzie, D. & Spears, T. 2014b, ‘A device for being able to book P&L: the organizational embedding of the Gaussian copula’, Social Studies of Science, 44 (3), 418–40. Mankiw, G.N. 2017, Macroeconomics, 9th edition, New York: Worth. Martin, A. & McLaughlin, S. 2020, ‘The Primary Dealer Credit Facility’, Liberty Street Economics, Federal Reserve Bank of New York, 19 May, accessed 2 June 2020 at https://​li​bertystree​teconomics​ .newyorkfed​.org/​2020/​05/​the​-primary​-dealer​-credit​-facility/​. McLeay, M., Radia, A. & Ryland, T. 2014a, ‘Money creation in the modern economy’, Bank of England Quarterly Bulletin, 54 (1), 14–27. McLeay, M., Radia, A. & Ryland, T. 2014b, ‘Money in the modern economy’, Bank of England Quarterly Bulletin, 54 (1), 4–13. McNamara, K. 1998, The Currency of Ideas, Ithaca, NY: Cornell University Press. McNamara, K. 2002, ‘Rational fictions: central bank independence and the social logic of delegation’, West European Politics, 25 (1), 47–76. Mehrling, P. 2011, The New Lombard Street: How the Fed Became the Dealer of Last Resort, Princeton, NJ: Princeton University Press. Mehrling, P. 2013, ‘The inherent hierarchy of money’, in L. Taylor, A. Rezai & T. Michl (eds), Social Fairness and Economics, New York: Routledge, pp. 394–404. Minsky, H.P. 1982, Can ‘It’ Happen Again? Essays on Instability and Finance, Armonk, NY: Sharpe. Moschella, M. & Tsingou, E. (eds) 2013, Great Expectations, Slow Transformations: Incremental Change in Financial Governance, Colchester: ECPR Press.

218  Handbook on critical political economy and public policy Politi, J. 2020, ‘Federal Reserve sets up facility to make loans to banks’, FT.com, 19 March, accessed 5 January 2022 at https://​www​.ft​.com/​content/​0e6029be​-6995​-11ea​-800d​-da70cff6e4d3. Pozsar, Z. 2014, ‘Shadow banking: the money view’, Working Paper No. 14-4, Office of Financial Research. Pozsar, Z. & Sweeney, J. 2015, Global Money Notes #3: Flying Blind, Credit Suisse Economic Research, accessed 27 May at 2020 at https://​research​-doc​.credit​-suisse​.com/​docView​?language​=​ENG​&​format​ =​PDF​&​source​_id​=​csplusresearchcp​&​document​_id​=​1056163871​&​serialid​=​nJE​4HbsOHC8EO​ jrRyzTJUUM​TRzwRyi9dZj03jBgPdfI​%3D​&​cspId​=​null. Pozsar, Z. & Sweeney, J. 2020, Global Money Notes #27: Covid-19 and Global Dollar Funding, Credit Suisse Economic Research, accessed 15 March 2020 at https://​ research​ -doc​ .credit​ -suisse​ .com/​ docView​?language​=​ENG​&​format​=​PDF​&​sourceid​=​em​&​document​_id​=​1082246841​&​serialid​=​0b2M​ %2FIR​v1F1JMLaFo​Ty3mEGVTSi​%2B3ukuNkZS​%2F9SbuUw​%3D​&​cspId​=​null. Samson, A. & Smith, C. 2021, ‘Wall Street stocks close week at record highs’, FT.com, 16 April, accessed 5 January 2022 at https://​www​.ft​.com/​content/​863f1a6c​-c612​-467d​-ad35​-ea9bf0bdea76. Scherrer, C. 2014, ‘Neoliberalism’s resilience: a matter of class’, Critical Policy Studies, 8 (3), 348–51. Schumpeter, J.A. ([1954] 1986), History of Economic Analysis, London/New York: Routledge. Stellinga, B. & Mügge, D. 2017, ‘The regulator’s conundrum: how market reflexivity limits fundamental financial reform’, Review of International Political Economy, 34 (3), 393–423. Stigum, M.L. & Crescenzi, A. 2007, Money Market, New York: McGraw-Hill. Systemic Risk Council 2019, ‘Comment on Federal Reserve and FDIC proposals to relax resolvability requirements for US regional banks’, 16 July, accessed 22 February 2020 at https://​www​.federalreserve​ .gov/​SECRS/​2019/​October/​20191008/​R​-1660/​R​-1660​_071719​_134341​_534842034749​_1​.pdf. Taylor, J.B. 2009, Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis, Stanford, CA: Hoover Press. Tett, G. 2019, ‘The repo markets mystery reminds us that we are flying blind’, FT.com, 19 September, accessed 19 September 2019 at https://​www​.ft​.com/​content/​35d66294​-dadc​-11e9​-8f9b​ -77216ebe1f17. Tett, G. 2020, ‘Markets contemplate a future in which stimulus does not work’, FT.com, 13 March, accessed 13 March 2020 at https://​www​.ft​.com/​content/​0f511530​-64cd​-11ea​-a6cd​-df28cc3c6a68. van’t Klooster, J. & Fontan, C. 2020, ‘The myth of market neutrality: a comparative study of the European Central Bank’s and the Swiss National Bank’s Corporate Security Purchases’, New Political Economy, 25 (6), 865–79. Wolf, M. 2020, ‘The virus is an economic emergency too’, FT.com, 17 March, accessed 18 March 2020 at https://​www​.ft​.com/​content/​348e05e4​-6778​-11ea​-800d​-da70cff6e4d3. Wray, R.A. 1990, Money and Credit in Capitalist Economies, Aldershot, UK and Brookfield, VT, USA: Edward Elgar Publishing. Wullweber, J. 2016, ‘Performative global finance: bridging micro and macro approaches with a stratified perspective’, New Political Economy, 21 (3), 305–21. Wullweber, J. 2019a, ‘Monism vs. pluralism, the global financial crisis, and the methodological struggle in the field of International Political Economy’, Competition and Change, 23 (3), 287–311. Wullweber, J. 2019b, ‘Money, state, hegemony: a political ontology of money’, New Political Science, 41 (2), 313–28. Wullweber, J. 2020, ‘Embedded finance: the shadow banking system, sovereign power, and a new state-market hybridity’, Journal of Cultural Economy, 13 (5), 592–609. Wullweber, J. 2021a, Zentralbankkapitalismus: Transformationen des globalen Finanzsystems in Krisenzeiten, Berlin: Suhrkamp. Wullweber, J. 2021b, ‘The politics of shadow money: security structures, money creation and unconventional central banking’, New Political Economy, 26 (1), 69–85.

15. Governance of the eurozone in the face of transnational crises dynamics Hans-Jürgen Bieling

With the establishment of the Economic and Monetary Union (EMU), the European Union has undergone major changes. This process of change did not start suddenly, nor did it come as a surprise. It was already inherent in the negotiation process on the mode of operation of the EMU. Different views clashed (Verdun, 2000, pp. 5–6). The so-called ‘monetarists’, represented by France, saw monetary union as a first step, to be followed by a subsequent communitarization of economic policy, up to and including a European economic government. In contrast, the so-called ‘economists’, represented by Germany, advocated first aligning economic policy strategies and then, as a ‘crowning touch’, introducing a common currency. After the convergence towards neoliberal concepts during the 1980s (McNamara, 1998, pp. 122–58), the path to the EMU, as concretized in the Delors Plan, represents a compromise between these two views. Through the fulfilment of the convergence criteria defined in the Maastricht Treaty, the member states made certain advance contributions. But it was also clear that even after the institutionalization of the EMU, further instruments and resources were needed – hence the Stability and Growth Pact, the Employment Strategy and Lisbon Strategy or the Cohesion Fund – to organize economic policy convergence. With a certain time lag, it can be seen that the instruments and resources originally envisaged are far from sufficient to balance the uneven development in the eurozone (Stiglitz, 2016). Especially in times of crisis – such as the financial and sovereign debt crisis, but also the coronavirus pandemic – uneven capitalist development becomes a problem and threatens to destroy the EMU (Jäger & Springler, 2015). To prevent this, political decision-makers have repeatedly agreed in tedious and cumbersome negotiations to provide additional resources, competences and steering instruments. Whether these are sufficient remains uncertain. So far, however, the governance of the eurozone has undergone a crisis-mediated transformation. In the following, it will be shown that this transformation is not only a functional adjustment, but also at the same time an interest-led and discursively framed process that corresponds to a change in transnational power relations and forms of domination. To this end, the first step is to explain (1) how the governance of the eurozone presents itself from a critical political economy perspective, inspired by neo-Gramscian and regulation theoretical concepts. (2) The focus is then on the processes of crisis and transformation inscribed in the eurozone. (3) These are reconstructed as an expression of a ‘European crisis constitutionalism’ by reference to the financial and sovereign debt crisis and (4) the coronavirus pandemic. (5) The chapter concludes with some reflections on the changed character and perspectives of European economic governance.

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UNEVEN CAPITALIST DEVELOPMENT IN THE EUROZONE In the process of negotiating and establishing the EMU, a so-called ‘Brussels–Frankfurt consensus’ emerged in the 1990s (De Grauwe, 2006, pp. 724–5). This consensus referred to a specific division of tasks that was considered appropriate and sufficient for the EMU’s mode of operation. Thus, the economic union, narrowed to the internal market, was to be shaped by the Brussels apparatuses – the European Commission, the European Parliament and the Council of Ministers. The monetary union, on the other hand, was to be the primary responsibility of the European Central Bank (ECB) based in Frankfurt. This division of labour was based on three assumptions: first, that the ECB – combining inflation and money supply management – can concentrate on primarily fighting inflation and achieving the goal of stable prices; second, that temporary disturbances in the EMU can be countered sufficiently effectively by the fiscal policy requirements of the Stability and Growth Pact (SGP); and third, that structural imbalances or asymmetric shocks in the EMU can be absorbed by strengthening the flexibility of national capitalist models – that is, structural reforms within the framework of the internal market. In the financial crisis of 2007–08 at the latest, these assumptions about the effectiveness of the available instruments proved to be incorrect. This came as little surprise to many economists (Stiglitz, 2016). Some had pointed out early on that the EMU did not meet the criteria of an Optimal Currency Area (OCA), in which participating countries have a similar economic structure and in which the processes of uneven economic development are balanced by a common budget and high labour mobility (Jager & Hafner, 2013, pp. 315–16). This assessment can certainly be agreed with from the perspective of a critical political economy. However, the inherent instability of the EMU cannot be explained by macroeconomic imbalances alone, as they existed for quite a while. They only became a serious problem under conditions of the financial crisis, when it became evident that political institutions and decision-makers were ill-prepared and not ready to rapidly adapt to the crisis by changing the overall approach and generating the resources and instruments for an effective and solidaristic European economic and monetary policy management. This highlights that next to the macroeconomic imbalances the interests, discourses and power relations play an important role as well. In some regards, they have been decisive for the trajectory of the EMU. To include these dimensions in the analysis, it makes sense to look at the crisis-ridden development of the European economy, especially the eurozone, from a neo-Gramscian, expanded regulation-theoretical perspective. At the centre of this perspective is the specific – hegemonic – articulation of economic, societal and political processes. To grasp these, the structures and organizational forms of capitalist accumulation and regulation in the national space must be considered. In regulation theory, capitalist development models are characterized by the interplay between the regime of accumulation and mode of regulation, an interplay that has repeatedly changed because of technological and work-organizational innovations, shifts between economic sectors and industries, and changing hegemonic patterns of interpretation. Important foci of discussions in regulation theory have been the processes of transnationalization and financialization of national development models (Bieling & Guntrum, 2020; Brown, Spencer & Passarella, 2017). In this regard, regulation theory has generated numerous insights. Nonetheless, most regulationist work came up against analytical limits insofar as it clung to a nation-state–world-market dichotomy that proved ill-conceived to consider the manifold political-economic, societal, and political-institutional dynamics in the trans- and

Governance of the eurozone in the face of transnational crises dynamics  221 supranational space. To compensate for this analytical weakness, a neo-Gramscian extension of regulation theory seems appropriate. By such an extension the transnational patterns and forms of accumulation and regulation within the EU can also be captured, including the hegemonic interpretive struggles that affect them, without suggesting that national capitalist models of development have simply become obsolete. For some time now, national development models have been overlaid by elements of a ‘Euro-capitalism’ (Bieling & Deppe, 2003) or ‘European financial market capitalism’ (Bieling & Guntrum, 2020). In a way, the genesis of this capitalism was inherent in the process of European integration from the very beginning, as it represents an arena in which the contradiction between the narrowness of national markets and the limits of the nation-state on the one hand and the requirements of the internationalization of capital on the other could be mediated (Bieling, 2010, pp. 57–84). The extended re-launch of European integration since the 1980s has significantly strengthened the elements of European financial market capitalism. Supported by economic integration projects, above all the EU internal market, EMU, eastward enlargement of the EU, and financial market integration, transnational value chains have been promoted. Hence, the national regimes of accumulation – that is, the forms of organization and distribution of social value creation – took on an increasingly cross-border character, especially since the forms of regulation subsequent to European law-making – directives, regulations and decisions – have also been harmonized or converged in many areas. This applies particularly to commodity, money and capital relations, but also indirectly to wage relations through the competition-induced change in the organization of work and production and the operation of the welfare state systems. The market-driven convergence, but even more the shift of political-institutional and legal competences to the supranational level – that is, to the European Commission, the European Parliament, the European Court of Justice, the ECB and many regulatory or supervisory committees – signifies the evolution of a European mode of regulation. The shaping of these regulations is also partially subject to the influences of an emerging European civil society, which is, however, very much limited to transnational associations, especially business associations and business-related think tanks. The processes of economic, political and social-discursive transnationalization, which have been stimulated by major integration projects such as the single market or the EMU or by broadly discussed strategies such as the Employment Strategy or the Lisbon Strategy or more recently the European Green Deal, are quite remarkable. However, they should not be misinterpreted as an expression of a comprehensive and substantial material convergence and political harmony. Rather, within the common European setting, transnational interdependence has a hierarchical character and generates specific conflicts resulting from the persistence of the different profiles of national models of capitalism as well as from the dynamics of uneven development. Both aspects – the hierarchical character of transnational interdependence and the dynamics of uneven development – become apparent when the specifics of the national models of capitalism are examined more closely (Becker & Jäger, 2012; Hall, 2017). Then it becomes clear that some of the national accumulation regimes occupy a very dominant position on the basis of their high-tech, productive-intensive orientation and active integration into the international and European division of labour – that is, current account surpluses. This holds even more as these surpluses are accompanied by capital outflows – to a large extent in the form of loans – corresponding to cross-border creditor–debtor relationships. In turn, other accumulation regimes are less productive, sometimes more financialized and oriented

222  Handbook on critical political economy and public policy towards the national domestic market, which often entails current account deficits and external indebtedness. The centre–periphery relations constituted in this political-economic way are constitutive for the mode of operation of the EMU (Bieling, 2013; Marks, 2012). They are based on the specific material profile – the most important industries, the technological know-how, the infrastructural conditions – of the national economies and partly on divergent economic, social and collective bargaining strategies, which can no longer be balanced within the framework of a uniform monetary policy and an abolished realignment of the currencies within the eurozone. Even before the outbreak of the financial crisis, many conflicts over the further political development and design of the EMU were sparked by the question of how to deal appropriately with the accumulating imbalances. Basically, two concepts and strategies confronted each other (Bellofiore, Garibaldo & Halevi, 2010; Heine & Sablowski, 2015): on the one hand, those political actors – for example, the governments of Germany, the Netherlands, Austria and the Scandinavian countries but also influential Directorates-General within the European Commission and parts of the European Parliament and the ECB – who represented the interests and views of the transnational export economy and creditors pushed to force and channel the pressure for reform on the national models of capitalism through various procedures of European coordination such as the Employment Strategy or the Lisbon Strategy. On the other hand, the representatives of the deficit and debtor countries – the governments of Greece, Italy, Spain, Portugal and also France – tried to alleviate this pressure through additional common instruments and resources – above all, through the mechanism of transnational transfers and credit flows. Transnational credit relations thus counteracted market-based disciplinary pressures and political economy centrifugal forces in the eurozone for a time. Ultimately, however, this mechanism reached its limits: namely, at the time when the outbreak and management of the transatlantic financial crisis – the economic stimulus packages and the costly bailout of many banks – caused the government debt burden in many countries to skyrocket, raising doubts about the stability of the financial systems and the guarantee of debt service.

CRISIS-CONSTITUTIONALIST TRANSFORMATIONS With the outbreak of the financial crisis, especially the transition to the so-called ‘sovereign debt crisis’, the conflicts over the appropriate transformation of European economic governance intensified. This is hardly surprising, since crises suggest a change in existing conditions. By definition, they are phases of deep uncertainty – that is, periods of decision or turning points, in which, from a medical point of view, in the course of a disease the patient either gets well or dies, or more generally formulated: ‘the old dies [while]…the new…cannot yet come into the world’ (Gramsci, 1991–99, vol. 2, p. 354). According to the motto, ‘Never let a serious crisis go to waste’ (Mirovski, 2014), different groups of actors responsible for the governance of the eurozone tried to use the crisis constellation in their own interest. The crisis diagnoses and crisis narratives they launched were mostly presented in the form of a functional solution to the problem, but at the same time they were always guided by particular social interests (Jessop, 2010, p. 343). Different social groups suggested specific policy choices to push the transformation of European economic governance in the desired direction.

Governance of the eurozone in the face of transnational crises dynamics  223 Very roughly, the proposals introduced into the discussion were oriented towards two different models (Schneider & Syrovatka, 2019, pp. 24–5): on the one hand, the model of a European ‘fiscal union’, which, in the sense of practising cross-border solidarity, envisages a further communitarization of competences, instruments and resources in order to make the potentials of the EMU usable in economic and socio-political terms; and on the other, the model of a European ‘stability union’, which is primarily defined by the goals of austerity policy consolidation and improved competitiveness. This shows that the euro, as any other official currency is by no means only a socially ‘neutral’ means of payment, but to the extent that it always functions as capital and credit at the same time, constitutes social relations of power and domination, the use, protection or weakening of which is being fought over. The compromises negotiated in the sovereign debt and euro crisis, in the shadow of ordoliberal principles (Ryner, 2015), were overall more oriented towards the model of the stability union, but also contained elements of stronger political control and correction of market dynamics. The latter aspects in particular make it clear that the ‘new constitutionalism’, which as an ‘international governance framework’ locked in neoliberal reforms by separating ‘economic policies from broad political accountability in order to make governments more responsive to the discipline of market forces and correspondingly less responsive to popular-democratic forces and processes’ (Gill, 1998, p. 5), gave way in the euro crisis to a changed mode of crisis constitutionalism (Bieling, 2013). European crisis constitutionalism implies a further strengthening of the disciplinary elements of the legal and institutional order in terms of economic and financial policy. In doing this, however, it breaks away from just technocratically flanking the processes of market integration. Instead, in view of a permanent economic state of emergency (Žižek, 2010), a multitude of new intervention instruments – often with strong authoritarian features (Oberndörfer, 2020) – have been created to manage the instability of European financial market capitalism.

THE POLITICAL MANAGEMENT OF THE FINANCIAL, SOVEREIGN DEBT AND EURO CRISIS The activities and focal points of European crisis management generally correspond with the course of the financial crisis and the subsequent transition to the so-called sovereign debt and euro crisis. Roughly speaking, two phases can be distinguished. The first phase began in 2007 with the bursting of the subprime bubble in the USA. The economic ‘earthquake’ triggered by this burst spread very quickly from there to Europe via two contagion channels – the capital and credit markets and trade relations. The reactions of European political actors were prompt and relatively comprehensive (Schelkle, 2012, pp. 42–9). In 2008 and 2009, most national governments launched stimulus packages to cushion the economic slump. In addition, rescue funds were set up in almost all EU states to stabilize distressed banks through state recapitalization, mostly in the form of share purchases, loans or guarantees. Both processes were supported by the ECB, which reacted in particular to the drying up of the interbank market, with a significantly loosened, liquidity-securing monetary policy (Bieling & Heinrich, 2015). The European Commission flanked these elements of discretionary state interventionist crisis management with a targeted mobilization and reallocation of funds from the Structural and Cohesion Fund, set up a small fund to secure the liquidity of Central and Eastern European

224  Handbook on critical political economy and public policy states, but otherwise limited itself to accompanying the national activities with communicative and coordinative mediation. The second phase of crisis management began with the transition to the so-called sovereign debt and euro crisis – the public debt burden had risen dramatically due to the costs of bailing out banks in some countries – and implied the threat of an existential shake-up of the EMU. At the same time, political priorities changed. From then on, the primary concern was no longer to prop up the financial sector and employment, but to save the euro. Attention was accordingly focused on rising sovereign debt and the increasing fragility of the EMU (Overbeek, 2012, pp. 38–40), although the exact link between the two phenomena of the sovereign debt crisis and the euro crisis remained disputed: some saw the causes of the crises primarily in the instability of the financial system and the structural current account imbalances – that is, the problem that one group of surplus and creditor countries was confronted with a second group of deficit and debtor countries that had growing difficulties in refinancing government debt on capital markets through new loans (Becker & Jäger, 2012). Others, however, held primarily unsound budgetary policies of national governments and a too loosely defined European framework of economic, fiscal and monetary policy coordination responsible for the increasing tensions in the EU (Heinemann, Moessinger & Osterloh, 2012). Divergent considerations and strategies for reforming European economic governance corresponded with the different crisis diagnoses. Somewhat simplified, the initiatives taken since 2010 can be assigned to the aforementioned reference points or guiding principles of the stability union and fiscal union (Schneider & Syrovatka, 2019). Numerous initiatives were oriented towards the guiding principle of the stability union, which aimed above all at austerity policy consolidation and improved competitiveness. They were already at stake following the continuation of the Lisbon Strategy by the ‘Europe 2020 Strategy’ and in the more comprehensive discussions of a working group chaired by Herman Van Rompuy (2012), the then president of the European Council. Only a little later the implementation of stability-oriented reforms took place. It was decided to coordinate and control national budgetary policies at an earlier stage in a European Semester by the Commission and the Council of Ministers. The criteria of the SGP were made even more restrictive through the adoption of a so-called ‘Six Pack’, consisting of five regulations and a directive, and partially related to the problem of current account imbalances. But that was not all: the ‘Fiscal Compact’ transferred the German debt brake to the eurozone; and with the ‘Euro plus Pact’ – although only a discursive declaration of intent – it was agreed to extend the competition-oriented reform agenda to further areas of labour and social policy. The reform conditions and controls imposed by the so-called ‘troika’ of the Commission, the ECB and the International Monetary Fund (IMF) in some highly indebted countries dependent on external loans proved to be much stricter. This process affected Ireland, Portugal, Cyprus, and especially Greece, but only partially Spain, which was able to limit conditionality to financial sector reforms. Other proposals can be assigned to the guiding principle of the fiscal union, such as the creation of Eurobonds or the establishment of a European economic government, which were introduced in the crisis discourse, but were ultimately rejected (Matthijs & McNamara, 2015). Some other proposals, however, were realized. This applies above all to the European Stability Mechanism (ESM), which emerged in summer 2012 from the previously established European Financial Stability Facility (EFSF). It has a considerable intervention volume of €750 billion and allows highly indebted countries to receive additional loans. Likewise, the transformation of the ECB (Bieling & Heinrich, 2015) also partially points in the direction of a fiscal union.

Governance of the eurozone in the face of transnational crises dynamics  225 Thus, to counteract the euro crisis, the ECB has not only stabilized the credit system through interest rate cuts and active liquidity management up to specific purchase programmes of securities. It has also taken on ‘lender-of-last-resort’ tasks for public institutions – that is, it actively supported states in payment difficulties. It is also involved in the Banking Union, as it is now responsible for the supervision of transnational systemically relevant banks. The Banking Union also includes a European procedure for the reorganization or resolution of credit institutions, although its third element, the European communitarization of national deposit guarantee schemes, has not yet been realized. Some initiatives to re-regulate the financial markets have also been averted or watered down (Bieling, 2014). Ultimately, however, it has been partially possible to make the financial market players take responsibility in this area as well. These two guiding principles or reference points for the reform of European economic governance – that is, the fiscal union and the stability union – have been introduced into the discussion and supported by different political alliances (Heinrich, 2015; Syrovatka, 2022). The governments, trade unions and social movements in the highly indebted crisis countries – with partial support from parts of the European Commission, especially DG Employment – argued primarily for strengthening elements of joint liability – also through the provision of additional competences, resources and instruments such as Eurobonds or a European economic government – but rejected the disciplinary requirements of the stability union. The position of the governments of the surplus countries and the associations of (trans)national industrial and financial capital, which was supported by DG Finance and Single Market in the European Commission, was a mirror image. This second group of actors emphatically demanded stricter guidelines for austerity and further structural reforms to strengthen competitiveness. It conceded elements of the fiscal union only to the extent that these were indispensable to avoid a collapse of the eurozone. If one looks at the results so far – that is, the composition of the European reform packages – it is difficult to overlook the asymmetry inscribed in the negotiated compromises. Obviously, the supporters of the stability union have won the day on key points, while the supporters of the fiscal union have been fobbed off with rather modest concessions. Given the existing balance of power within the EU, this is hardly surprising. At the same time, however, it cannot be overlooked that the governance of the eurozone has changed significantly because of the above-mentioned reform steps in the course of crisis management. The original procedures and practices institutionalized with the establishment of the EMU have not disappeared but have certainly been modified. If this modification is interpreted here as an expression of a European crisis constitutionalism, then this is done not least to highlight the structural ambivalence of the process. On the one hand, the elements of the stability union underline that the austerity- and competition-oriented elements of European economic governance have been further strengthened in a quasi-constitutional way and that the individual member states – especially when they become dependent on capital inflows and European financial support – hardly succeed any more in evading the tightened European specifications and procedures. On the other hand, however, the steps in the direction of a fiscal union also show that additional community instruments and resources were mobilized in the process of ‘rescuing the euro’, including the unconventional monetary policy measures of the ECB. Thus, a certain expansion of the scope for political action has been initiated, which for the time being, however, has only been used to a very limited extent. This signals that the reform of European economic governance was primarily concerned with stabilizing European financial market capitalism and the power relations inscribed in

226  Handbook on critical political economy and public policy it, but not with organizing a medium- and long-term sustainable, broadly accepted, and thus hegemonically supported development of European integration. The effect of the economic and monetary policy measures taken to stabilize the European political economy thus remained precarious. Thus, it was possible to temporarily balance the existential shock to the eurozone. However, in the wake, or rather in the aftermath, of the crisis-constitutionalist reforms outlined above, further crisis dynamics unfolded. They can be interpreted as the expression of a third phase, which had already been initiated in 2012/13 and thus overlapped with the second phase of crisis management. The further crises dynamics result not only but also from the fact that the ad hoc interventions and initiated reforms of economic governance generated considerable economic, social and democratic costs. The economic effects were particularly severe and long-lasting in Southern Europe due to a long phase of economic stagnation – in most countries from 2009 to 2013, sometimes even longer – and a considerable increase in public debt. Compared to the United States, the stagnation phase lasted a relatively long time due to a lack of competences, resources and instruments. Apart from the early economic stimulus packages, other crisis interventions were relatively late, hesitant, and partly incoherent, thus perpetuating the uncertainty for the economic actors. Furthermore, the European actors almost exclusively relied on concepts of austerity – that is, on a reduction of public spending, which had the consequence that economic activities were not stimulated but additionally slowed down. The long phase of stagnation implied that the economic potentials of many countries were not being used or were even being destroyed (McBride, 2015) – through insufficient investments or processes of deindustrialization. In some countries of the Southern European periphery, the public debt burden increased despite all austerity efforts, as tax revenues plummeted due to the economic situation. The economic crisis – mediated through the slump in employment and the crisis of the social security systems – ultimately affected the working and living conditions of many people. While the crisis-related cuts in the countries of the European centre – that is, the internationally competitive economies – could still be absorbed to some extent, they were in part very dramatic in the countries of the Eastern European, but especially the Southern European periphery (Bieling & Buhr, 2015; Lehndorff, Dribbusch & Schulten, 2018). The combination of austerity policies and structural reforms forced the sharp rise in unemployment and youth unemployment, so that existing qualifications were devalued over time. At the same time, comprehensive labour and social policy cuts were made. On the one hand, these affected the public sector, where investments were reduced, jobs were cut and wages and employment relationships were made more flexible. On the other hand, the cuts were directed at the social systems, especially old-age security, which not only affected the everyday life of the older population, but also reduced the possibilities of family support. As a result of these structural reforms, working and living conditions became more precarious in many cases; and social inequality continued to increase in most societies (Perez & Matsaganis, 2018). This combination of economic stagnation and increased social inequality and insecurity had quite different effects in the political arena. In most societies in Eastern Europe, these reform processes were mostly accepted without major resistance, while in the Southern European periphery – at least during the culmination of austerity – public waves of protest were articulated (Bailey et al., 2017). The central actors of these protests – social movements and trade unions – primarily represented social democratic or left-wing populist positions in their critique of reform policies. In contrast, the political discussion developed quite differently in the Nordic surplus countries of the centre. There, and even more so in the Eastern European

Governance of the eurozone in the face of transnational crises dynamics  227 societies, right-wing populist parties and movements gained in importance (Hopkin & Blyth, 2019). The EU and the euro became the focus of criticism, as they appeared to the right-wing populist actors as the symbol, often even the decisive cause, of national disempowerment and a future transfer union, an assessment that has been further reinforced by the crisis of the European migration regime since 2015.

THE CORONAVIRUS PANDEMIC: ON THE WAY TO MORE SOLIDARITY? The economic, social and political implications of the crisis management condensed into an ‘erosion crisis’ marked by tendencies of a gradual weakening of European integration through processes of discursive or de facto – keyword Brexit – renationalization. The existential threat to the EMU and the EU could be averted, but dissatisfaction with national and European policies remained at a relatively high level in many countries. In response to the economic stagnation and the social and political disintegration tendencies, as well as to the escalation of the global conflict between the USA and China, the European Commission under Jean-Claude Juncker set some new political accents. First, it initiated an ‘Investment Plan for Europe’, of which one element is the European Fund for Strategic Investments (EFSI, so-called ‘Juncker Fund’) that aimed to mobilize about €315 billion in private and public investment until 2018 (European Commission, 2014). Second, it has significantly upgraded ‘industrial policy’ – that is, a selective political promotion of individual sectors or companies through tax breaks, subsidies, research institutes, modernized infrastructure, and so on. The national industrial policy pushes such as the Altmaier-Le Maire paper, the programmes at the European level (European Commission, 2014, 2020) as well as the strengthening of national and European development banks (Mertens & Thiemann, 2018) are an expression of the effort to counteract the processes of uneven development and deindustrialization in the EU and to harness the positive experiences in other countries. Third, the Commission also launched a social policy offensive from 2017 onwards (Syrovatka, 2022) by advocating a ‘European Pillar of Social Rights’, promoting a socially progressive revision of the Posted Workers Directive and flanking the institutionalization of a European Labour Authority (ELA), as well as supporting discussions on a European Unemployment Insurance and a European Minimum Wage. It could certainly be argued to what extent the initiatives and measures mentioned are only symbolic or whether they have a substantial effect. Irrespective of this, they first and foremost testify to the fact that the crisis-constitutionalist transformation of economic governance was perceived as insufficient. Not only the European Commission, but also most national governments saw the need for further integration steps to put the EMU and the EU as a whole on a more sustainable footing and discussed at least flanking procedures of a solidarity-based reconciliation of interests to this end. In other words: compared to the 1990s and 2000s, not all, but many, of the actors involved in the governance of the euro area had become more politically aware of the economic and social foundations of the EMU. This was also evident in the management of the coronavirus pandemic (Seikel, 2020; Syrovatka, 2022). Some of the steps taken, such as the national design of the aid and stimulus packages (Anderson et al., 2020), may well be reminiscent of the crisis management of the financial crisis, but there are also clear differences. A first difference, for example, is the smoothness by which governments decided very quickly to launch extensive economic stimu-

228  Handbook on critical political economy and public policy lus programmes. These were supplemented as early as April 2020 by European credit lines provided by the ESM (€240 billion) and the European Investment Bank (EIB) (€200 billion). The ECB also reacted very quickly to prevent a possible destabilization of the eurozone, as early as March 2020, with the Pandemic Emergency Purchase Programme (PEPP), a non-standard monetary policy instrument, the volume of which was increased from €50 billion to €1850 billion in the following months (Wullweber, 2020, pp. 57–8). Second, on the initiative of the European Commission, the fiscal rules of the SGP were lifted for the time being. Likewise, the Commission worked to suspend the prohibition of state aid under competition policy for the time being. The recommendations defined in the European Semester procedure were also much more moderate than in previous years. In addition to these pragmatically motivated procedural differences, a third difference is that two new Community instruments and resources will be made available to combat the economic and social consequences of the pandemic. One instrument, already decided in May 2020, is called SURE (Support to Mitigate Unemployment Risks in an Emergency) and provides €100 billion in loans to member states to finance national short-time work programmes. The other programme is a Community Recovery Fund (NextGenerationEU, NGEU), which the EU member states agreed on in July 2020 and which has a total volume of €750 billion. The money will flow from 2021 – €390 billion in grants €360 billion in loans – to those countries and sectors that are particularly suffering from the economic consequences of the coronavirus pandemic. The allocation of the funds remains conditional on the recipient countries’ compliance with the established procedures and reform requirements of the European Semester. Nevertheless, the Recovery Fund is an unusual step towards communitarization (Saraceno, Semmler & Young, 2020, pp. 583–94). It is part of the EU’s multi-annual financial framework, which is increasingly tailored to the promotion of ecological projects in the sense of a ‘European Green Deal’. In financial terms, the fund represents an innovation in that it allows the EU to take on debt. The Commission takes out its own loans on the financial markets, which will only be paid off again from the end of the 2020s through additional revenues – for example, a digital tax or through emissions trading. The institutionalization of both funds can be understood as an expression of changed political priorities and power relations in the EU. The modified strategy of the Commission under Juncker has already been pointed out; it is in principle continued by the new Commission under Ursula von der Leyen and extended to ecological issues. Equally, perhaps even more importantly, the German government, above all the Ministry of Finance, positioned itself differently in the coronavirus pandemic (Schoeller & Karlsson, 2021, pp. 201–2). The tough, authoritarian-disciplinarian strategy of Wolfgang Schäuble has given way to a more Keynesian-inspired strategy of Olaf Scholz. This change in strategy was cautious. It reflected the view that the costs of the coronavirus pandemic are difficult to manage alone in many countries and that instead a joint effort is needed to strengthen the eurozone through a common investment policy, including the modernization of central sectors and infrastructures. However, the changed balance of power should not be interpreted as meaning that the EU has abandoned its old development path and is now being reprogrammed in solidarity. In the negotiations on the Recovery Fund, the opposition between the creditor and donor countries on the one hand and the debtor and recipient countries on the other was still quite tangible. The so-called ‘frugal four’ – Austria, Denmark, the Netherlands and Sweden – had gone out on a limb and pushed up the share of loans and demanded greater conditionality in the use of the funds. However, due to the change in the German government’s attitude, this resistance

Governance of the eurozone in the face of transnational crises dynamics  229 was much weaker and ultimately had only limited success. This can be seen as an indication that the solidarity elements of European crisis constitutionalism have been strengthened in the coronavirus pandemic. Whether this is a temporary or longer-lasting development will depend on whether the newly established funds will not be abolished after the pandemic, but last in the long run.

CONCLUSIONS: PROSPECTS FOR EUROPEAN ECONOMIC GOVERNANCE The crisis-constitutionalist development of the governance of the eurozone presents itself differently in the constellations outlined. In the transition from the financial to the so-called sovereign debt and euro crisis, an austerity policy agenda with authoritarian and disciplinary elements was implemented. At the same time, however, new instruments and resources had to be provided to keep the EMU alive. It is precisely on this second aspect, the provision of additional instruments and resources, that the management of the coronavirus pandemic has most recently focused. The reasons for this lie in the economic, social and political consequences of austerity, or more precisely – in the change in the balance of power and political priorities triggered by the erosion crisis of European integration. The turn away from neoliberal concepts of European economic governance is not sweeping, but moderate. It is only partially the product of social movements – such as Fridays for Future – that initiate new social and European policy discourses and thus push in the direction of a paradigm shift in economic and monetary policy. In most debates on the future of the EU and the eurozone, the basic problem that the still very influential Brussels–Frankfurt consensus outlined at the beginning does not work in European policy practice, is rarely openly addressed. When this does happen, it is often with opposing perspectives: very competitive sectors and surplus countries tend to harden the governance mode in neoliberal and austerity terms – that is, to make the Brussels–Frankfurt consensus even more rigid; and the less competitive sectors and deficit countries, with an eye to the economic and social consequences, push for the development of instruments of joint burden-sharing. In the coronavirus pandemic, larger parts of the public and politicians seem to realize that only the latter perspective will allow for a sustainable eurozone. If this is the case, however, the question of democratic control on the additional instruments and resources of European economic governance needs to be discussed more intensively soon.

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16. Chinese capitalism and the global economic order: the impact of China’s rise on global economic regulation Jenny Simon

The perception of China’s role in the global economy changed drastically at the peak of the global crisis starting in 2008, not only in terms of China’s economic weight, but also as an actor in global economic rule-making. The People’s Republic of China (PRC) not only stands for a mode of development deviating from market-liberal principles in central aspects, but the Belt and Road Initiative (BRI), the Asian Infrastructure Investment Bank (AIIB), and the Regional Comprehensive Economic Partnership (RCEP) – currently the world’s largest, though shallow, free trade area – have also provoked discussions about China’s growing influence on global economic governance. In the rapidly developing literature, two opposing views dominate. One view proposes that China with its growing economic role and resources threatens the global role of the US and undermines the market-liberal economic order (e.g., Allison, 2018; Kurlantzick, 2016). The opposing perspective sees China as a rule-taker and expects its (dependent) integration within the hegemonic market-liberal order. Here, the focus lies on structural problems of China’s economy, its dependence on global markets, or China’s considerable adaption to and participation in international institutions (Ikenberry, 2018; Liu & Tsai, 2021; Zeng & Liang, 2013). It is against the background of these contradicting interpretations that this chapter analyzes the impact of China’s rise on global economic regulation since 2008. Following a process-oriented power-sensitive perspective and by building on Antonio Gramsci, I focus on the impact of China’s integration with global economic regulation in two central fields: global trade and finance. This allows one to go beyond the analysis of China’s behavior in international institutions, consider the impact of existing structures and changing dynamics in the global economy as well as the strategies pursued, and enables a nuanced analysis of different rules and sectors. In terms of method, the chapter integrates results from qualitative document analysis, expert interviews in China and the US (finance case), and a secondary analysis of descriptive statistics and recent empirical studies. I first describe the theoretical perspective and analyze the context of China’s integration into processes of global economic rule-making from two aspects (which I consider have a decisive impact on how China integrates): the prevailing configuration of global economic regulation and China’s development model and its integration into the global economy. Third, I discuss the empirical results of the process analysis of China’s integration into global economic regulation in global trade and finance. The analysis shows that the Chinese state neither followed a grand strategy to overthrow the global economic order, nor did China’s rise lead to its fundamental transformation. On the contrary, China’s increasing integration into the global economy and economic regulation resulted in an expansion of capitalism and a reproduction of the prevailing economic order on both fields. However, below the level of the grand order, China’s rise clearly had an impact: 232

Chinese capitalism and the global economic order  233 I argue that it led to a profound incremental transformation of the hegemonic nexus of global economic regulation based especially on China’s development of parallel regulatory arenas and regimes with a regulatory rationale shaped by the Chinese mode of development. This limited the reach of the market-liberal paradigm and rule-making capacities of US or EU actors. It also led to a more fragmented, multipolar nexus of regulating global capitalism.

ECONOMIC REGULATION AS POWER RELATION To investigate the impact of China’s rise on global economic regulation, it is necessary to reflect on what economic rules are and how they are enforced. Building on Antonio Gramsci, economic regulation can be understood as the actions involved in establishing, enforcing, and securing worldviews, norms, and interests that regulate economic activities in (global) capitalism. This includes institutionalized rules and visible actions as well as informal practices or the ideational orientation in what the economy is and how it should be organized. While, on an abstract level, the capitalist mode of production is characterized by specific regulatory logics, it concretizes in different modes of development – (inter)nationally as well as historically. Within these modes of development, economic regulation is shaped by power struggles over the generalization of particularist interests of social forces, interests and especially the accumulation strategies of dominant class fractions (Cox, 1987; Scherrer, 2001). For a successful generalization, economic capacities, such as the ability to organize a profitable accumulation regime, are just as central as (structural) means of coercion. Moreover, the consent of others to a specific form of economic regulation promotes its enforcement and stability. If such a consensus-based generalization succeeds, Gramsci speaks of hegemony as a specific form of rule. The generalized interests inscribe into the concrete institutional arrangements and regulative rationalities, solidifying into a more or less stable structure (Gramsci, 1991–99, vol. 1, pp. 101–18; vol. 4, pp. 771–83; vol. 7, pp. 1561–84). To grasp the inner workings of such a configuration of economic regulation, I introduce the concept of hegemonic nexus. It maps the ways in which hegemony is articulated in the particular modus operandi of a specific field of global economic regulation along different dimensions, such as the material configuration, the ideational paradigm, and the concrete institutional and regulatory arrangements (Simon, 2019, pp. 105–12). However, hegemonic formations and their articulation at the level of the hegemonic nexus are not static. Even a relatively stable configuration is subject to the necessity for a process of continuous political reproduction implying the possibility of change. From this perspective, the Chinese economy, understood as a specific capitalist mode of development with particular regulative logics, integrates into a pre-structured terrain of global power relations and related forms of economic regulation shaping the terrain for economic competition and conflicts over the regulation of global capitalism. It impacts not only the Chinese development model but can also be changed vice versa in China’s integration process. Neo-Gramscian authors operationalize this interrelation in terms of three analytical levels: the historic bloc, the (hegemonic) power bloc, and political projects with a transformative or reproductive impact on the historic bloc and power bloc (Bieling & Steinhilber, 2000). I study how far and in which form the respective political projects of China’s integration reproduce, contest, or transform the global hegemonic configuration of economic regulation and focus on the regulative hegemonic nexus in trade and finance to grasp how far and in what way China’s rise impacts specific dimensions of global economic regulation more concretely.

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THE MARKET-LIBERAL ECONOMIC ORDER China’s rise takes place in the context of the historical bloc described as neoliberalism or financial capitalism (Bieling, 2013; Gill, 2002). It is roughly characterized by an accumulation regime that tends to be globalized and is asymmetrically structured with different modes of development, pronounced international economic interdependencies, and the expansion of the market-liberal economic order as well as transnational and supranational patterns of stabilizing it. This expansion is organized, among other things, through an offensive transnationalization of the property order and (market-)liberal principles characterizing the state–civil society complexes of the Global North led by the US, the ‘Lockean heartland’ (van der Pijl, 2006), a legal structure that separates the private and the (self-)limiting state, privileges property and contract law, and safeguards entrepreneurial freedom and competition. For actors in the heartland, these principles create the basis for economic activities within competing economies, especially with regard to what van der Pijl calls the Hobbesian contender states. In these state–civil society complexes, dominant social forces strive for an economic catch-up strategy to prevent subordination or expropriation and to compete with heartland economies. To support domestic accumulation, mobilize resources, steer investment, and protect emerging industries from global competition, economic policies follow, at least partially, a Listian strategy in which state apparatuses exert far-reaching influence on the organization of the economy and economic regulation is oriented towards developmental and economic policy goals (van der Pijl, 2006, pp. 6–21). Against the backdrop of persistent problems of valorization in the manufacturing sector, structural excess liquidity, and the shift of capital to financial markets, financial relations developed into a social control center whose rationalities considerably changed the functioning of the global economy. At the same time, global production was increasingly relocated to (semi-)peripheral economies such as China. On the level of ideas, the historical bloc is secured, above all, by the neoliberal paradigm that defines the discourse terrain for struggles over economic regulation. The transformation to financial capitalism was related to a shift in the power bloc in favor of capital fractions oriented towards global markets, asset owners, and financial market-oriented groups. In this process, an entanglement of the hegemony of the market-liberal heartland led by the United States, the US bourgeoisie led by financial capital, and the interests of transnationally oriented capital fractions can be observed (Scherrer, 2001; van Apeldoorn & de Graaff, 2012). The hegemonic nexus of rule-making in global trade is characterized by a private corporate agenda strengthening (intellectual) property rights and the free trade paradigm aiming at reducing or eliminating trade barriers. As the share in global trade, the absolute purchasing power, and the relative dependence on foreign trade impact the bargaining power in trade policy issues, the US and later the EU were the primary states to advance initiatives pushing the expansion of the liberal trade regime by using market access as leverage (Scherrer, 2016). Since 1994, the World Trade Organization (WTO) has been the institutional backbone of regulating global trade through which market-oriented principles were generalized and enforced internationally. While WTO agreements are formally reached by consensus and equal vote of member states, the most significant negotiations take place between an inner circle of states – until recently, the so-called Quad – the US, EU, Canada, and Japan. However, coalitions between countries of the Global South increasingly rejected further liberalization. In particular, the so-called Singapore issues, behind-the-border issues, such as competition policy, government procurement rules, investment regulations, or the protection of intellectual prop-

Chinese capitalism and the global economic order  235 erty rights, became increasingly contested (Hopewell, 2015, p. 317; Scherrer, 2016). While these enable transnational companies to expand their accumulation strategies by influencing economic regulation behind the borders of other economies, from the perspective of many (semi-)peripheral economies behind-the-border issues tackle important regulatory strategies to support domestic accumulation, mobilize resources, steer investment, and pursue economic policy goals. The US, and later also the EU, reacted to the blockade of the WTO negotiations by focusing on bilateral and regional deep free trade agreements (FTAs) to enforce the generalizing of market-liberal behind-the-border regulations (Claar & Nölke, 2013). The hegemonic nexus in global finance is based on the Dollar-Wall Street Regime (DWSR) and the related market-liberal mode of financial regulation attaching particular importance to the liberalization of international capital movements (Gowan, 1999, pp. 19–25). At the level of ideas, the hegemonic nexus is secured especially by a monetarist reading of the neoliberal paradigm. The associated hands-off mode of regulation focuses on the abolition of restrictions of international capital movements, the introduction of flexible, market-based exchange rates, the generation and regulation of liquidity via capital markets and international organizations (e.g., the International Monetary Fund [IMF]), and structures and measures to prevent or mitigate financial crises (Armijo, 2002, p. 3ff.; Drezner & McNamara, 2013, pp. 156–7). At the national level, it aims at introducing a monetary policy supporting monetary value and price stability as well as regulation of national financial markets oriented toward the functioning of the heartland’s financial systems with a far-reaching leeway for financial market players. These regulative approaches opened up markets of (semi-)peripheral economies, secured the repayment of loans of the private sector in case of crisis, and via IMF loan conditionality presented an important mechanism to further generalize a market-liberal form of regulating finance on the global scale (Peet, 2009). However, individual economies, most notably China, continued to use capital controls and the regulation of currencies as a central element of their mode of development. While the regulative nexus of global trade and finance expanded in geographical scope until 2008, growing tensions and instabilities in the global economic order became visible. On the field of trade, these are fueled by the increasing importance and competition by rising economic powers. On the field of global finance, the structurally crisis-ridden nature of the DWSR particularly poses problems for the stability of the global economic configuration. In terms of global economic regulation, these tensions increased the contestation of the market-liberal approach by important players such as China.

CHINA GOING GLOBAL To understand the Chinese state’s approach to economic regulation, we must consider the character of China’s mode of development and international integration. Today’s competing modes of market-liberal and Chinese development came into being not in rivalry, but in an asymmetrical interdependency. The crisis-driven transition of capitalism in the 1970s was accompanied by a deepening of the free trade regime, the liberalization of capital flows, and the restructuring of global production. While the latter promoted deindustrialization in the centers and the import of cheap consumer goods from the new production locations, the inflow of capital, the relocation of production and know-how in the context of China’s market economy reform processes contributed significantly to the emergence of an export-oriented

236  Handbook on critical political economy and public policy industrialization and growth strategy (ten Brink, 2019, p. 56ff.). The liberalization of capital flows enabled growing foreign direct investment (FDI) in the new production locations and later the investment of foreign exchange reserves of China and other semi-peripheral economies in US government bonds. This, in turn, contributed significantly to the expansion of US financial markets and indirectly financed the import of Chinese goods (Hung, 2008; Ivanova, 2013, p. 65). The market-liberal development model and China’s mode of development emerged in a reciprocal relationship and, to a certain extent, enabled each other. Against this background, China increasingly integrated into the global economy, albeit with a clearly different mode of development. While the organization of China’s economy is in flux and various hybrid economic forms were developed with market mechanisms playing a central role, a strong coordinating role of state together with a strategy of investment-driven industrialization and growing export surpluses have been important features of China’s mode of development. Value creation took place based on a low-wage regime in a setting of heterogeneous types of companies that were mainly dominated by national capital. While the state sold off state-owned enterprises (SOEs) on a large scale, central sectors remained in the state’s hands (Nölke et al., 2015, p. 546ff.). The highly regulated financial system, largely shielded from the global financial markets, was geared to support development and industrial policy goals. The export strategy was underpinned by a managed exchange rate (Naughton, 2007, pp. 449–81). The Chinese state followed a strategy of asymmetrical integration into the world economy: domestic market and key sectors initially remained protected and were only gradually internationalized (ibid., p. 181ff.). Exports have grown at double-digit rates since the mid-1980s, with a significant share coming from foreign companies, which remain dominant in the Chinese export sector. In the 1990s, China also experienced an FDI boom. A diversified industrial structure gradually emerged, ranging from labor-intensive industry to capital goods and a high-tech sector. In 1999, the ‘Going Global’ strategy – the promotion of Chinese companies’ involvement abroad, and growing lending to (semi-)peripheral states – deepened internationalization of China’s mode of development. China joined the WTO in 2001. To do so, substantial adaption to the hegemonic nexus in trade-related regulation was necessary. China abolished its system of state-planned foreign trade, admitted private sector players, and lowered import tariffs and the quotas of goods subject to import restrictions drastically. The SOEs, as well as the intellectual property rights and competition law, were reformed fundamentally (Cho, 2005, pp. 166–97). However, the Chinese government rejected liberalization demands that contradicted central policy objectives and made the pace of trade liberalization dependent on domestic economic objectives. Despite the partial adaption to the market-liberal rules, key characteristics of the Chinese development model were reproduced. Based on its gradual and selective world market integration, China – though still in a subordinate position and depending on foreign technologies in important fields – developed into one of the most important locations of global capitalism. However, the Chinese mode of development was by no means free of contradictions and crises. In addition to social conflicts, tendencies toward overinvestment and overproduction arose as a result of the specific growth strategy. Growing indebtedness, the emergence of speculative bubbles, and minor financial crises also posed a problem. In addition, strong export orientation was associated with a high dependence on global economic developments and foreign trade policies of other economies (Simon, 2018).

Chinese capitalism and the global economic order  237 While on the one hand, the market-liberal global economic order, the accelerating globalization, and China’s selective integration and partial adaptation were an important basis for China’s dominant accumulation strategy and economic success, the coordinating role of state apparatuses and the form of their micro- and macropolitical regulation guided and secured China’s specific path of economic development. However, state–market relations are in flux and the degree of market reforms contested within China (Simon, 2019, pp. 377–420). Economic growth and stability together with the control of central economic sectors and resource flows constitute a central momentum in the retention of China’s political elites’ power. The concrete form of power relations within the Chinese state civil society complex, China’s development model and its regulatory rationales, and the form of China’s international integration are inextricably linked.

CHINA’S CHANGING ROLE IN GLOBAL ECONOMIC REGULATION Until the outbreak of the global crisis in 2008, the Chinese state was barely actively involved in global economic rule-making. This changed with conflicts over the regulatory responses to the global crisis, a shift in China’s internationalization strategy, and its growing economic importance. China’s Integration in the Regulation of Global Trade Since the Chinese state has made considerable concessions in adapting to WTO regulations and has kept a low profile in the early rounds of the Doha negotiations, China’s role changed after the outbreak of the global crisis. The material basis was further increasing China’s importance in global trade as well as the changing pattern of global competition. With 14.7 percent global exports, the Chinese economy developed into the largest exporter in merchandise trade in 2021. In commercial service trading, China ranked third. China has also grown into one of the most important domestic markets globally, not only for resources and intermediate products, but also for consumer goods (WTO, 2021, pp. 58–61). China today is among the most important trading partners of the US and the EU, Latin American and several African economies as well as the most important destination for exports from Asian countries and ASEAN’s most important trading partner and largest export market. In addition to China’s continued rise as a trading power, the composition of the goods traded by the Chinese economy changed. The share of imported capital goods declined significantly, while the share of consumer goods increased. China has also shifted its exports from labor-intense consumer and low-tech products to those with higher added value (Eurostat, 2021). The industrial policy ‘China 2025 Strategy’ also signals China’s goal to gain higher shares in key high-tech industries (Schmalz, 2019, p. 27). With this shift, China is competing more directly with the US and EU capital. This is accompanied by increasing conflicts over market access, strategic objectives of Chinese SOEs, or state support of Chinese companies. Within the WTO, these disputes were reflected in conflicts over different approaches to the regulation of trade and production. In 2008, China was invited to join the core group in the WTO. This was mainly motivated by expectations that China could function as an ally for further liberalization if it were granted a seat at the table. However, China, in alliance with

238  Handbook on critical political economy and public policy other (semi-)peripheral economies, rejected the Quad’s demands concerning the liberalization of the Singapore issues, which was interpreted as an escalation in the blockade of trade liberalization and a weakening of the Quad (Hopewell, 2015, pp. 328–31). Nevertheless, the Chinese government tended to agree to a traditional approach to liberalization focusing on reciprocally reducing tariffs, such as the expansion of the WTO Information Technology Agreement in 2015 (Weinhardt & ten Brink, 2020, p. 269). This approach of agreeing to traditional liberalization strategies focusing on reciprocal tariff reduction while mostly rejecting the liberalization of behind-the-border issues was also visible in China’s involvement in trade conflicts and dumping claims. Most important topics were the system of state subsidies for Chinese companies, the organization and role of SOEs, and the regulation of government procurement, services, e-commerce, and technology transfer (European Commission, 2017; Weinhardt & ten Brink, 2020, pp. 258–9; WTO, 2018). However, practices such as subsidies, support of SOEs, the regulation of services, or technology transfer are often not covered by WTO rules or are vaguely formulated in the Chinese protocol of WTO accession (Choukroune, 2012, p. 52f.). Also, the distinction between public and private entities in WTO law is ambiguous and does not reflect the ways in which Chinese SOEs are organized (Wu, 2016, pp. 265–8). While the US and the EU argue that these practices keep prices of Chinese products low and distort international trade, Chinese officials defend China’s economic regulation as compatible with WTO rules (Weinhardt & ten Brink 2020, pp. 266–7). In turn, Chinese officials criticized the heartland for legitimizing measures against Chinese imports with its ongoing treatment as a non-market economy (NME) initiating own anti-dumping proceedings with the EU and the US (Choukroune, 2012, pp. 52–3). While Chinese officials called for an acceptance of China’s SOEs and the legitimacy of state intervention following developmental and industrial policy goals within the WTO (Weinhardt & ten Brink, 2020, pp. 265–8), the US, the EU and Japan started a trilateral initiative to reform the WTO regulation of subsidies, SOEs and technology transfer alongside their interests. This was, however, blocked by China and other semi-peripheral economies. The track of record of the WTO’s Dispute Settlement Body rulings shows a pattern of ‘selective contestation’ (Weinhardt & ten Brink, 2020) along the same lines. While in general, China was largely complying or changed regulations even before a formal dispute (Zeng & Liang, 2013, pp. 145–8) and agreed to a traditional liberalization focusing on reducing tariffs, the Chinese state tended to contest the liberalization of behind-the-border issues. This applied above all to sectors that were central for the reproduction of the Chinese development model, domestic economic policy goals or national autonomy (Weinhardt & ten Brink, 2020, pp. 260–68). Outside the WTO, the Chinese state increasingly integrated into processes of global economic rule-making by concluding a growing number of FTAs with countries around the world (Ministry of Commerce, n.d.). In 2020, China together with 14 Asia-Pacific states also signed the RCEP, which came into force in 2022. With its member states accounting for around 30 percent of the global trade, the RCEP is the largest free trade area. While the FTAs concluded by China aim at securing a stable market and supplies of raw materials and intermediate products (Tay, 2010, p. 35), the approach differs from most Organisation for Economic Co-operation and Development (OECD) countries. The FTAs negotiated by China focus on reciprocal reduction of tariffs and the facilitation of cross-border trade in goods while systematically lacking clauses on labor standards. The more recent agreements also include investment and the service sector, albeit to a rather limited extent. Moreover, the Chinese government uses FTAs to enforce the recognition of the One China policy1 as well

Chinese capitalism and the global economic order  239 as China’s status as a market economy, directed against China’s NME treatment by the Quad (Tiezzi, 2018, pp. 41–53). A specialty of the RCEP is the support of the reorganization and deepening of regional supply chains. In bilateral treaties, especially with Latin American and African economies but also in the context of the BRI, China tended to negotiate agreements that are linked to investment agreements and contracts on long-term commodity supply. The network-oriented strategy supports the creation of an infrastructure of production, trade, and investment (Schmalz, 2018, p. 34). This is supported by the Chinese export-credit regime, conflicting with and undermining OECD regulations (Hopewell, 2021). In 2017, the Trump administration turned to an aggressive strategy to enforce an opening of Chinese markets and their adjustment to market-liberal rationales, leading to an escalation in global trade conflicts. The US government introduced high punitive tariffs, partly considered illegitimate by the WTO, and sanctions against Chinese companies, such as supply bans or depriving them of market access. This was also motivated by domestic policies. However, the strategy was not successful. The Chinese government reacted by also installing punitive tariffs and did not fundamentally shift its economic regulation on the contested fields. Despite the Phase 1 Agreement signed in 2020, most tariffs remain effective in 2022 and China did not meet the negotiated increase in US imports (Scherrer, 2022). Altogether, China’s impact on the hegemonic nexus of regulating global trade is ambivalent: on the one hand, China’s considerable adaptation to WTO regulations, its active participation within the WTO, and far-reaching compliance with existing WTO regulations mirror the heartland’s successful expansion of the generalization of the free trade regime. This is especially true for the traditional liberalization approach focusing on reciprocal tariff reduction and also applies to China’s strategy to regulate trade outside the immediate reach of the WTO. On the other hand, however, China’s selective rejection of liberalizing behind-the-border issues, the demand to accept the regulation of its SOEs or export credits, or the request for the legitimacy of developmental and industrial policy goals reflect not only China’s resistance to being incorporated in and its contestation of the ‘deep’ approach to trade liberalization. With China becoming a central player in global trade and increasingly also in trade regulation, there has been a partial transformation of the hegemonic nexus: against the background of growing economic competition, conflicts over the global regulation of trade increased while the capacities of the heartland’s trade-related regulatory initiatives within the WTO and further liberalization of behind-the-border issues became restricted. This contributes to a deepening of the already existing blockade of the WTO and the fragmentation of the universalist approach to trade regulation, which is further fueled by the heartland’s shift to regional FTAs and the aggressive trade policies of the US. At the same time, the Chinese state’s trade-related regulatory strategies are increasingly inscribed into the patterns of global economic regulation. China’s Integration into the Regulation of Global Finance While China’s outward-oriented economic strategy was based on the DWSR from the very beginning, China continuously deviated from its rules – for example, by maintaining capital controls or the regulation of the renminbi (RMB) as a central feature of its development model. Against the background of the global crisis, the Chinese state started to actively engage in the regulation of global finance. On the field of global monetary relations, the Chinese state actively stabilized the dollar-based order during the global crisis, started to engage in different fora of global monetary regulation,

240  Handbook on critical political economy and public policy such as the IMF and the G20, and supported their initiatives to counter the crisis (Simon, 2019, pp. 285–9, 364–74). At the same time, Chinese representatives offensively criticized the dollar-based monetary order and US monetary policies and proposed reforms – for example, introducing a more multipolar monetary system by strengthening the IMF’s special drawing rights as a supra-sovereign reserve unit (Zhou, 2009). However, the initiatives failed due to the blockade of the G7 and its allies (Chin, 2014; Simon, 2019, pp. 285–302). As a reaction, the Chinese government focused on the internationalization of the RMB to reduce its dollar dependency. Despite increasing pressure to adapt to market-based regulation, the Chinese state used a unique, policy-driven strategy of an offshore internationalization of the RMB without fully abandoning the regulation of the RMB exchange rate or the capital controls. It focused on a selective and controlled expansion of possibilities for cross-border capital flows and foreign investment, a RMB-based trade policy, and the development of an RMB offshore market (McNally, 2015). To achieve the inclusion into the IMF’s basket of currencies, effective in 2017, the Chinese state initiated gradual monetary policy reforms including concessions to the IMF’s demands to move to a more market-based determination of the RMB exchange rate (People’s Bank of China, 2015; Simon, 2019, pp. 308–15). In 2021, China systematically anchored the use of home currencies in FTAs or investment treaties and developed a financial infrastructure that enables the settlement of RMB-based transactions. The RMB ranked third in trade finance market with a 2 percent share while the US dollar ranked first with 86.6 percent. As a global payment currency, the RMB ranked fourth with 2.7 percent, while the US dollar ranked first with 40.5 percent (SWIFT, 2021). While its relative share remained low, the RMB expanded significantly in international trade and China increasingly trades in its own currency, circumventing the US dollar. In Asia, the RMB developed into the second most important reference currency after the US dollar. The emergence of a new RMB-led currency bloc in Asia is also being discussed (Eichengreen & Lombardi, 2017, p. 43). While the heartland was clearly able to reproduce the hegemonic configuration of global monetary relations, and the regulation of China’s domestic finance gradually transformed towards an increasing role of market mechanisms, the Chinese state rejected outright incorporation into DWSR’s regulatory approach, and reduced China’s dollar dependency by RMB internationalization, leading to a relative pushback of the role of the US dollar in global trade, especially within Asia. In international organizations of global finance, the Chinese state also moved towards active integration after the outbreak of the crisis in 2008. In the IMF, China considerably increased its financing beyond its formal obligations and supported the IMF’s measures to contain the crisis while trying to reach endogenous reforms – for example, by pushing the IMF voting-share reform (Simon, 2019, pp. 285–302). After the US Congress abandoned its blockade, China increased its formal power and now holds around 6 percent and the BRICS countries (Brazil, Russia, India, South Africa, including China) 14.5 percent of the total voting shares (IMF, 2021, p. 17). Although the US maintained its veto power, important semi-peripheral economies are now able to form their own veto bloc if they include other allies. Also, the Chinese government started to use the fund as a policy forum problematizing rules of the IMF and in a wider sense also the DWSR. While the US representatives, in particular, increased the pressure to introduce a more market-based monetary policy and liberalize its capital to account within the IMF or the G20 (Chin, 2014, p. 195ff.; Simon, 2019, pp. 302–14), the Chinese government allied with other semi-peripheral economies to propose a more multipolar monetary

Chinese capitalism and the global economic order  241 system and argued for the legitimacy of capital controls and monetary policies oriented on macroeconomic goals (see above). During the blockade of the IMF reform, the Chinese state shifted to a strategy of creating alternative organizations and mechanisms outside the existing governance structures shaped by the heartland: China pushed the institutionalization of the BRICS Forum, the founding of the New Development Bank (NDB) and the AIIB. Within the heartland, this was interpreted as competition to the Bretton Woods Institutions (BWIs). In 2021, the AIIB has more than 80 members and focuses on promoting infrastructure projects and regional financial cooperation especially in Asia and Eurasia. China has the largest share of voting rights and a blocking minority (AIIB, 2016). While governments of the heartland became involved in developing the institutional design of the AIIB, the Chinese state succeeded in placing its interest in infrastructure investment and its credit-based financing on a multilateral footing while assuming a leading position in the organization and institutionalizing economic policy rationales of China’s development model. These include a focus on infrastructure investment, the acceptance of capital controls, regulated currencies, and a prominent state role in the projects to be financed. In addition, the AIIB supports the regionalization of the RMB and the diversification of Chinese assets and investment opportunities for Chinese companies (Simon, 2019, pp. 315–42). China’s active integration into the institutions of global finance thus led an incremental transformation of the hegemonic nexus. While the power relations within international institutions did not change fundamentally and China’s engagement during the crisis even contributed to a stabilization and legitimization of the IMF and the G20, the establishment of alternative international organizations institutionalized a terrain outside the immediate influence of the heartland and successfully integrated other (emerging) economies. It also institutionalized economic policy rationales of China’s mode of development and thereby changed the landscape of international organizations of global finance. This is related to China’s rise as international investor and creditor. The growing opportunities for cross-border capital flows, a state-supported internationalization of Chinese companies and diversification of investment away from the US led to an increase of and shift in capital flows from China. In 2019, China accounted for approximately 10 percent of global outward foreign direct investment (OFDI). The possibility of acquiring shares in ailing companies at favorable prices during the crisis supported the growing investment in European and US enterprises, especially in the logistics and infrastructure sector, but also in high-tech companies (Schmalz, 2019, pp. 26–8). China’s investment in Latin America, Africa, and Asia also continued to grow. Here, the commodities sector and infrastructure projects played an important role (China Power Project, n.d.). Of particular importance, however, is the BRI. Initiated in 2013, the project bundles the development of infrastructure, trade, and production networks in Asia, Africa, and Europe. The BRI reduces China’s dependence on traditional trade routes and supports the internationalization of Chinese infrastructure and investment policy (Hoering, 2018). Over the past decade, China has also emerged as one of the world’s most important donors in development finance with a policy approach that differs from that of the center. Central is the principle of non-interference in the political affairs of recipient states, as well as a focus on infrastructure development, China’s access to resources, and the expansion of sales markets for China’s export industry (AIDDATA, 2017; Bräutigam, 2011). China’s growing role as creditor and investor is supported by a range of political activities. Accompanied by a discourse on win–win options and soft power diplomacy, the Chinese state

242  Handbook on critical political economy and public policy supports OFDI through bilateral agreements and investment contracts of SOEs negotiated at the government level. The Chinese state and state-led banks also cooperate in developing financing mechanisms for which the Chinese state supports financing indirectly via guaranties and the creation of markets for the newly created instruments, while the capital is mainly provided by the Chinese interbank bond market (Chen, 2020). Together, these strategies established a new regime of international investment and development finance parallel to that of the heartland. The approach produced a material lock-in effect within the investment destinations, without pursuing deep integration with rules considered universally valid (Schmalz, 2018, p. 34). China’s international lending and investment exceeding that of the BWIs has led to implicit competition. China offers an alternative access to liquidity limiting the potential enforcement of market-liberal principles – for example, related to IMF loans and structural adjustment programs. Even though Chinese investment into the US and the EU accounts for a low share of their total inward FDI, China’s changing role also caused political conflicts and regulatory responses by the heartland. Several economies introduced systems to monitor Chinese investment, and the US government, partly also EU economies, increasingly blocked Chinese FDI, especially in the high-tech sector. The US and EU governments also established support programs to strengthen the competitiveness of domestic tech companies as well as large-scale financing projects to counter China’s role in infrastructure financing (Grieger, 2021; Schmalz, 2019, pp. 28–32), reflecting on the increasing competition and conflict over the forms of regulating global access to liquidity. Altogether, the political project of China’s integration into rule-making in global finance did not lead to a fundamental shift in the hegemonic nexus of the DWSR; the Chinese state even contributed to its stabilization during the global crisis. China’s support can largely be explained by the lack of alternatives and the structural power anchored within the DWSR. While the heartland’s strategy aimed at integrating the Chinese economy by asserting its adaptation to the principles of the DWSR, China’s rejection to do so, and the obvious attempts to change specific features of the DWSR, clearly mirror the limited success of the generalization of DWSR’s rationales with regard to the Chinese state. The central resource to withstand the pressure was the financial capabilities of the Chinese economy. They also formed an important basis for the strategy to establish parallel structures and arenas in global finance. While the success of the Chinese government to reform the DWSR from within was limited, the strategy of establishing parallel structures outside the immediate reach of the heartland caused a profound incremental transformation of the hegemonic nexus in global finance: the hegemonic structures have been complemented by new arenas and an alternative approach to regulate the access to liquidity linked to the Chinese development model and related economic strategies and interest. With China’s growing importance in global investment and lending, this resulted in a tendential fragmentation of the regulative hegemonic nexus in global finance.

CHINA’S IMPACT ON GLOBAL ECONOMIC REGULATION Albeit the political projects of China’s integration into global economic rule-making clearly impacted the economic order and its regulative hegemonic nexus, their analysis showed that the Chinese state neither pursued a grand strategy to overthrow the market-liberal economic order nor did China’s rise lead to its fundamental transformation. On the contrary, China’s increasing integration into the global economy, its adaptation of its rules and involvement in

Chinese capitalism and the global economic order  243 global economic rule-making resulted in an expansion of capitalism and globalization dynamics as well as the reproduction of the prevailing economic order on both fields analyzed. This can largely be explained by the impact of the pre-structured terrain of the market-liberal global economic order and the structural power and constraints inscribed in it. However, interests of Chinese capital factions and those within the Chinese state to pursue the Chinese mode of development and related economic strategies based on the market-liberal global economy also played a crucial role. This was particularly evident with regard to China’s approach towards global trade. However, a shift in the reproduction of global capitalism becomes visible: the Chinese economy has not only developed into a gravity pole for global accumulation, but also profoundly impacted the hegemonic nexus of global economic regulation below the level of the historic bloc. While the strategy of the heartland’s power bloc aimed at integrating China into the global economic order, and further generalizing market-liberal rationalities, the outbreak of the crisis in 2008 can be interpreted as a critical juncture for the integration strategy of the Chinese state. It not only integrated into the existing fora of global economic rule-making actively and showed an own agenda to reach reforms. The Chinese state also developed a second track of integration by establishing parallel structures, institutions, and an alternative investment and lending regime linked to the Chinese development model and related economic strategies outside the immediate reach of the heartland – often in cooperation with other (semi-)peripheral economies. While the attempts to reform existing institutions had a limited impact, China’s parallel strategy of establishing alternative governance mechanisms has been profoundly transforming the landscape of global economic regulation. China’s state-mediated integration strategy developed a network of regulatory infrastructures for production, trade, and investment that was stabilized by a material lock-in effect (Schmalz, 2018, p. 34) and also created new dependencies within the (semi-)periphery. The regulatory rationalities of the Chinese mode of development and the related accumulation strategies became inscribed in the global economy and its regulation. Besides the emergence of new institutions and regulatory regimes organized along the rationales of China’s mode of development, the shifts led to more limited rule-making capacities of the heartland within the WTO and the deepening of its already existing blockade, and also limited the heartland’s structural power – for example, to impact the regulation of other economies through the IMF’s role as the lender of last resort or to regulate export credit via the OECD. At the same time, the scope and proclaimed universality of market liberalism has become limited as the approaches to economic governance promoted by the Chinese state have gained importance and present an alternative – for example, in (regulating) the access to liquidity. These shifts result in a more conflict-ridden, fragmented, and multipolar regulative nexus. The conflicts over different approaches to regulate the global economy accompanied by these dynamics, as reflected in the recent trade disputes or the shift to a more aggressive approach in asserting trade and investment-related interests of the US and European companies in opening Chinese markets and hampering its high-tech catch-up strategy, cannot be explained by a Chinese exceptionalism disturbing a generally desirable market-liberal order. From a power-sensitive perspective of international political economy (IPE), such a view follows the generalization of the market-liberal order as universally valid, othering alternative approaches. It renders invisible that different approaches in organizing capitalism are linked to power relations, dominant accumulation strategies, and powerful economic interests within the respective state–civil society complexes. Rather, the current conflicts mirror power struggles

244  Handbook on critical political economy and public policy for the generalization of regulative interests against a background of changing global competition dynamics between different ways of organizing capitalism. Free movement of capital, market access, and the possibility of unimpeded engagement abroad are central prerequisites of the accumulation strategies of leading capital factions of the heartland. However, these regulative approaches are conflicting with regulative strategies of the Chinese state and other (semi-)peripheral economies that aim at supporting domestic accumulation, pursuing developmental and economic policy goals and catching up in global competition. The regulation of the capital account and domestic financial relations, the (regulatory) support for (state-owned) enterprises and an active industrial and technology policy, or a controlled internationalization are central elements for China’s mode of development and related accumulation strategies – but limit the expansion of heartland’s capital. The tension of the competing regulatory rationales is accompanied by increasing geoeconomic and geopolitical competition. We are in a phase of a restructuring of global capitalism. What the competing approaches share, however, is the surge for securing profitable accumulation for (domestic) capital.

NOTE 1. The One China principle reflects the position that there is only one China, which includes the Chinese mainland, Hong Kong, Macao, and the Republic of China (ROC) – as opposed to two states, the PRC and the ROC.

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17. Taming dollarization hysteresis: evidence from post-socialist countries Ia Eradze

Dollarization has a long history, and it is widely spread among developing countries. Financial dollarization refers to the replacement of the functions of a national currency (NC) by another currency, where the dollar is used as a general term for all the foreign currencies (FCs). Dollarization can be expressed in terms of currency and asset substitution, where an FC is either used for exchange or savings and lending (Levy-Yeyati, 2006, pp. 63–4). Dollarization has been one of the top policy challenges in the post-Soviet space, as well as Central and Eastern European (CEE) countries since the 1990s. It not only increases financial risks for numerous households and firms, who borrow in FC, but it also hinders the economic development and wealth creation in the NC, while restraining the function of the central bank as a lender of last resort, increasing liquidity risks and limiting monetary sovereignty of dollarized states. Even though post-socialist economies differ in terms of economic and political structures, and historical and cultural preconditions, one can observe a common trend, the roots and trajectory of dollarization. This chapter focuses on one common pattern of dollarization in this region – FC lending to households. The domination of foreign-owned banks and their access to hard currencies such as the dollar and the euro has encouraged lending in FC, especially towards households (mostly mortgages and consumer loans), which led to a credit boom and rising debt of unhedged borrowers in euros, US dollars or Swiss francs. After the financial crisis of 2008, CEE countries started to implement de-dollarization policies than were mostly directed at the stronger regulation of banks and their lending policies, empowerment of borrowers through financial education and legal changes, as well as attempts to develop local currency markets to reduce the dependence of banks on foreign financing. However, these policies have not turned out to be very effective, and dollarization still remains a challenge in the region. In 2016, loan dollarization reached 70 per cent in Serbia, while it exceeded 60 per cent in Croatia and was around 60 per cent in Belarus and Albania (International Monetary Fund [IMF], 2019a, p. 3). While the share of FC debt among the total debt was 16 per cent in the euro area in 2014, this indicator reached almost 50 per cent for the CEE countries (Kolasa, 2021, p. 2). Successful de-dollarization policies have a high relevance for dollarized countries. Therefore, this chapter engages with two inter-related questions: why does dollarization persist and how can the political economic conceptualization of dollarization contribute to de-dollarization policies? The persistence of dollarization is a well-known phenomenon, which has been referred to as dollarization hysteresis in the academic literature. It is mostly perceived as a direct result of macroeconomic and financial instabilities, and it is expected to decline after the improvement of the macroeconomic situation. Yet, this assumption has been proved to be false over recent decades (Havrylyshyn & Beddies, 2003; Oomes, 2003; Uribe, 1997; Valev, 2007; Winkelried & Castillo, 2010). Common explanations of dollarization hysteresis remain trapped within the logic of neoclassical economics. The dominant literature identifies such major factors as 247

248  Handbook on critical political economy and public policy inflation, network externalities and under-development of the financial system as reasons for the persistence of dollarization. These explanations are reflected in de-dollarization policies, as well. This chapter argues that the disregard of historical, political, social and cultural issues, as well as the importance of the positioning of dollarized economies and their currencies in the global hierarchy, hinders the understanding of dollarization and accordingly constrains the success of de-dollarization policies. Therefore, this chapter engages with the methodological critique of the dollarization literature, and develops an alternative analytical framework, which conceptualizes dollarization within a peripheral state theory. The state and state institutions appear in terms of their regulatory role in the dollarization debate only. Yet, the state is not just an external factor that interferes in monetary affairs from time to time, but is also the vessel for currency relations. Such a conceptualization of dollarization helps to unravel currency-related power relations and struggles on national and global levels, which are embedded within political and socioeconomic historical structures. It also provides guidance for successful de-dollarization policies.

FOREIGN CURRENCY LENDING IN THE CEE AND POST-SOVIET COUNTRIES A high level of dollarization is a common issue in the post-Soviet and CEE countries. The roots of this phenomenon lie in the early transition policies, which were in line with the requirements of the Washington Consensus: abolishment of restrictions on currency convertibility, liberalization of interest and exchange rates, privatization of former state banks and the emergence of new types of commercial banks (Buiter & Taci, 2003, p. 14), as well as the opening of capital accounts. The liberalization of balance of payments and increased capital inflows drove these economies into import dependency and made exchange rates of national currencies vulnerable to trade shocks (Gabor, 2010, p. 819). Thus, most countries in the region turned out to be dependent on imports, foreign capital and FC. Moreover, the idea of a minimal state within the transition paradigm and the retreat of the state from social spheres such as health, education or housing led to the increased demand for household loans. For example, ‘the tightening of eligibility criteria for housing subsidies in Hungary in 2004 is believed to have induced consumers to switch to cheap foreign currency loans’ (Rosenberg & Tirpák, 2008, p. 10). Unofficial dollarization limits the monetary sovereignty of dollarized countries, weakens the power of local central banks as a lender of last resort, disables the usage of exchange rate as a policy tool (for example, boosting exports through currency depreciation), creates barriers for the development of local economies, hinders the accumulation of wealth in NC, increases risks of financial crisis and makes households, firms and governments vulnerable to exchange rate fluctuations. Even though the region is rather diverse economically and politically, one can still identify common trajectories and driving forces of dollarization. While the dollar has played an important role in many post-Soviet states, euros and Swiss francs have been prominent in the CEE, where, by 2007 more than half of the loans and around 40 per cent of savings were denominated in FC. Even after the financial crisis and the depreciation of local currencies, retail loans in FC did not decrease significantly (Brown, Kirschenmann & Ongena, 2014, p. 1502), CEE states experienced rising loan dollarization in the early 2000s.

Taming dollarization hysteresis: evidence from post-socialist countries  249 For example, in Bulgaria, from 2000 to 2004, FC deposits were declining (from 54 per cent to 43 per cent), while loans in FC were on a rise (from 35.5 per cent to 47.6 per cent). The same trend took place in the same time period in Romania (Duenwald, Gueorguiev & Schaechter, 2005, p. 8). Thus, FC loans have led to rising levels of dollarization in the region (Rosenberg & Tirpák, 2008, p. 4). One of the key factors that explains the rise of FC lending is the presence of foreign-owned banks (Duenwald et al., 2005; Mihaljek, 2007), and commercial banks dominate the region’s financial markets (Bonin & Wachtel, 2003, pp. 7–9). Not just transition countries but also developing countries experienced a significant increase in the share of foreign-owned banks, from 24 per cent to 46 per cent between 1995 and 2009 (Beck & Brown, 2015, p. 467). From the end of the 1990s, international organizations such as the IMF and the World Bank called for the presence of foreign-owned banks to improve the performance and stability of the financial sector (Stein, 2010, p. 270). During the transition, introduction of good governance and banking practices was one of the main reasons for selling banks to foreign investors. By 2013, more than 50 per cent of bank assets were in foreign ownership in the CEE, while in some states (Estonia, Albania, Croatia, Macedonia) almost all domestic banks were taken over by foreign investors (Škarica, 2014, p. 46). Austrian, Italian, Belgian, French and German banks are most present in the region (Beckmann, Roitner & Stix, 2015, p. 25). In some cases, international institutions and development banks such as European Bank for Reconstruction and Development (EBRD), International Financial Corporation (IFC), Dutch Entrepreneurial Development Bank (FMO), and Deutsche Investitions- und Entwicklungsgesellschaft (DEG) also appear as major shareholders of local banks (for example, in Georgia; European Investment Bank [EIB], 2013, pp. 7–8). The domination of foreign-owned banks in transition economies led to mass lending to households in FC since the early 2000s (Backé & Zumer, 2005, p. 94; Beck & Brown, 2015, pp. 467–8; Duenwald et al., 2005, p. 3; Enoch, 2007, pp. 3–7; Sõrg & Tuusis, 2009, p. 4). FC lending was mostly financed by the international interbank market and not with local savings (Buszko & Krupa, 2015, p. 125; European Central Bank [ECB], 2010, p. 162). Capital inflow from abroad – encouraged by high global liquidity and low interest rates, as well as the expectation of EU membership – stimulated credit booms in FC in the CEE in the beginning of the 2000s (Duenwald et al., 2005, p. 13). A similar trend unfolded in post-Soviet countries a while later. For example, in Georgia, the credit boom and mass lending to households in FC started in 2005 and resulted in the over-indebtedness of households by 2015 (IMF, 2015, p. 18). Along the deregulation of financial markets, the guarantee of stable exchange rates by currency boards (for example, in Bulgaria or pegged exchange rate in Ukraine) and interest rate differentials between national and FC loans encouraged borrowing in FC (Backé & Zumer, 2005, p. 94; Duenwald et al., 2005, p. 14). Moreover, FC lending has been stimulated not only through carry trade activities of foreign-owned banks, but also by securitization. A case study of FC loans of Bulgarian small firms demonstrates that banks preferred to issue euro loans (especially long-term loans) to make them eligible for securitization. The study also revealed that around one-third of FC loans of these firms were requested in a local currency, but securitization motivated banks to issue loans in FC instead (Brown et al., 2014, pp. 1503–4). Aggressive lending by European banks also contributed to the credit boom (Smith & Swain, 2009, p. 3). Unhedged household borrowers were often not informed about interest rate risks related to exchange rate fluctuations (Barrel et al., 2009, p. 12; Enoch, 2007, p. 9; Mihaljek, 2007, pp. 277–9), and currency risks were shifted towards borrowers (Józon, 2015, p. 87).

250  Handbook on critical political economy and public policy Most loans were composed of mortgages (Beck, Kibuuka & Tiongson, 2010, p. 2). In Poland, Romania and the Baltic States, household debt in FC was increasing faster than that of the corporations until the financial crisis (Rosenberg & Tirpák, 2008, p. 6). Before adopting the euro, Estonia and Latvia demonstrated very high shares of FC loans for households, 85.2 per cent in 2010 and 88.8 per cent, respectively, in 2013 (Kolasa, 2021, p. 33). By 2010, more than 80 per cent of private sector loans in Belarus, Latvia and Serbia were in or linked to an FC, and in Bulgaria, Hungary and Romania were only slightly lower (Brown & De Haas, 2012, p. 59). Before adopting the euro, countries like Estonia and Latvia demonstrated very high shares of FC loans for households, 85.2 per cent in 2010 and 88.8 per cent, respectively, in 2013 (Kolasa, 2021, p. 33). The household debt constituted 32.56 per cent of gross domestic product (GDP) in Hungary in 2012, of which FC loans were 18.5 per cent of GDP. Hungarian households with a mortgage were spending 19 per cent of their income on loan payments (Józon, 2015, p. 85). In Georgia, around 30 per cent of retail borrowers spent more than half of the income on serving loans in 2015 (IMF, 2015, p. 18). Rising lending in FC and, accordingly, dollarization, created threats to macroeconomic instability (Backé, Égert & Zumer, 2006, p. 112), inflation, negative impacts on international competitiveness of exports, and damage to trade balance in the region. Yet, the growth of demand for credit was often framed as a ‘natural’ development (Detragiache, Tressel & Gupta, 2006; Duenwald et al., 2005; Kiss, Nagy & Vonnák, 2006; Sõrg & Tuusis, 2009) or contextualized within the framework of democratization of finance (Erturk et al., 2007) and financial deepening (Beck et al., 2010, p. 3), and the threat of increasing dollarization was underestimated.

DOLLARIZATION DEBATE Dominant approaches to dollarization – a portfolio view, a market failure view and an institutional view – explain the phenomenon through the decisions of rational agents, market imperfections and improper regulation, as well as the quality of institutions (Levy-Yeyati, 2006, pp. 82–3). These approaches offer a limited scope of understanding of dollarization, as they assume that actors are rational and markets are efficient. The dollarization literature treats actors as a homogeneous group, not as persons with diverse rationalities (Winkelried & Castillo, 2010, p. 1598) who are supposed to be perfectly informed about the possible risks and returns of their portfolios and make currency choices accordingly. A further methodological issue of the dollarization literature is the focus on deposit dollarization (for some exceptions, see Geng, Scutaru & Wiegand, 2018; Luca & Petrova, 2008; Naceur, Hosny & Hadjian, 2015; Winkelried & Castillo, 2010). However, deposit and loan dollarization do not always match (Geng et al., 2018, p. 4). It has been empirically proven that foreign ownership of banks and lending in FC strongly encourage loan dollarization in the CEE as well as in the post-Soviet space (Basso, Calvo-Gonzalez & Jurgilas, 2011; Luca & Petrova, 2008). Government debt in FC, and the issue of ‘original sin’ – that is, borrowing in foreign currencies (Eichengreen & Hausmann, 1999) – also make dollarization inevitable for developing countries (Priewe & Herr, 2005, pp. 167–8). Most dollarization studies are rather economistic with quantitative empirical premises and positivist epistemology (Kubo, 2017; Ozsoz & Rengifo, 2016; see Eradze, 2022, p. 12). Even though the institutionalist view integrates the role of institutions into the analysis, it is still limited to the economic institutions. Dollarization’s persistence – so-called hysteresis – is the

Taming dollarization hysteresis: evidence from post-socialist countries  251 best manifestation of these shortcomings. It remains puzzling why dollarization persists after macroeconomic and financial stability is achieved (Havrylyshyn & Beddies, 2003; Winkelried & Castillo, 2010). Theoretical approaches to dollarization’s persistence can be clustered into two groups: models where inflation rate or its volatility plays a key role and those that are based on network externalities. Even though these models offer heterogeneity of actors and asset portfolio diversification (Winkelried & Castillo, 2010); transaction costs (Guidotti & Rodriguez, 1991); lack of confidence in local currency in the long term (Havrylyshyn & Beddies, 2003); negative past experiences of inflation and crisis (Winkelried & Castillo, 2010); network externalities in currency usage (Oomes, 2003; Valev, 2007); the rate and volatility of inflation (Brown, De Haas & Sokolov, 2017; Duffy, Nikitin & Smith, 2006; Ize & Yeyati, 2003); fear of depreciation (Feige et al., 2003); and under-development of the financial system as reasons for dollarization persistence, they do not provide a comprehensive explanation for the ‘hysteresis’. Gaps in the understanding of dollarization are also reflected in de-dollarization policies. Macroeconomic and financial stability is widely seen as a solution in the literature (Levy-Yeyati, 2006; Naceur et al., 2015). As effective de-dollarization measures, scholars also suggest the creation of future foreign exchange markets for banks to hedge against the exchange rate risks (Luca & Petrova, 2008, pp. 868–9), the introduction of reserve requirements for both deposits and loans in FC, as well as interest rate ceilings for loans in domestic and foreign currencies (Havrylyshyn & Beddies, 2003, pp. 352–3). Some authors argue for the prohibition of deposits in FC (Aslanidi, 2008; Havrylyshyn & Beddies, 2003). Measures such as capital controls and forbidding FC loans are considered effective, ‘but clearly undesirable’, as it could lead to capital flight (Havrylyshyn & Beddies, 2003, p. 352). These de-dollarization policies are in line with suggestions of the IMF for the dollarized countries in the region: prudential regulation for banks (through reserve requirements), flexible exchange rates, and central bank liquidity management, fiscal consolidation, public debt management and the development of a local currency bond market (IMF, 2019a), as well as the ‘unbiased taxation of foreign currency instruments’ (Horton et al., 2016, p. 28). Finally, confidence-building towards the NC is perceived as one of the central factors of successful de-dollarization (Stix, 2013, p. 4094; see Eradze, 2022, pp. 11–13). Thus, most de-dollarization policies focus on macroeconomic stability through introducing new regulations on FC loans and deposits, fiscal consolidation and increasing trust in the NC. However, these approaches are underestimating the importance of the fundamental structural change, readiness of the political and civil societies to de-dollarize, re-thinking of central bank mandates, dependence on foreign capital, global currency hierarchy, and the functioning of the accumulation regime.

A POLITICAL ECONOMIC CONCEPTUALIZATION OF DOLLARIZATION The state is usually missing in the economic models of dollarization, and if it enters the debate then it should only be in terms of the prudential regulation. Yet, national currencies have been historically entangled with nation-states, and they have been used as a tool of governance and communication (Cooper, 2009; Gilbert & Helleiner, 2011; Helleiner, 1998, 2011). Therefore, an analytical linkage between dollarization and the state draws on the historical interconnect-

252  Handbook on critical political economy and public policy edness of nation-states and the national currencies. The state is both a context and a structure, where a currency takes shape. Moreover, the state has an agency – expressed in various forms on different levels of action – and it should not be reduced to its monetary power (Eradze, 2022). Furthermore, the meaning and power of currencies depends on their positioning in the currency hierarchy, and also in global power relations, where both state and non-state actors participate. Even though it is crucial to acknowledge global power asymmetries in monetary affairs (Helleiner, 2008; Strange, 1971b, 1971a), it is misleading to view states and (financial) markets as opposite categories (Wullweber, 2020). Therefore, the analysis of dollarization in this chapter is not guided by the question – how much power do national governments have in currency affairs against the global pressures? (Cohen, 2011; Hayek, 1990; Robinson, 2009; Strange, 1996). The aim is rather to show the entanglement of states with currency relations, where a state is simultaneously an actor and a terrain for currencies to be produced and reproduced. The state is conceptualized here within a peripheral perspective of the state (Becker, 2008; Bohle, 2018), drawing on the regulation school and dependency theory. The state is understood as a social power relation – embedded in production and other types of social relations. The regime of accumulation and the state are entangled and mutually dependent on each other (Becker, 2008, p. 10). ‘Each regime of accumulation represents a distinct pattern of economic evolution which…is relatively stable… Each mode of regulation is constituted by a historically developed, relatively integrated network of institutions, [that] governs the accumulation process’ (Brenner & Glick, 1991, pp. 47–8; original emphasis). The concept of regulation dispositive broadens the meaning of the mode of regulation, where dispositive is ‘a thoroughly heterogeneous ensemble consisting of discourses, institutions, architectural forms, regulatory decisions, laws, administrative measures, scientific statements, philosophical, moral and philanthropic propositions’ (Foucault, 1980, p. 194; on regulation dispositive, see Becker, 2002, p. 277). Moreover, a successful regulation is not intentionally created by the capital or the state, but through hegemony, which is neither independent nor completely determined from societal structures. The logic of capital accumulation is embedded in social struggles. These hegemonic struggles underlie the mode of regulation along with other social relations (Brand, 2005, pp. 31–4), and take place simultaneously on local and global levels, where currency-related struggles are also embedded (Scherrer, 2011). An important terrain for these relations is a civil society, where struggles take place ‘over social norms and over the pre-formation of legal norms and forms of state intervention’ (Becker et al., 2010, pp. 226–7). The concept of peripheral state highlights the asymmetry of power relations between the Global North and the Global South, which is reflected in the currency hierarchy, as well. Most dollarized countries are peripheral economies that struggle with a myriad of dependencies on the core – technologies, know-how, goods and services, capital and hard currency. Therefore, most of these states face challenges of trade and current account deficits (Becker, Jäger & Weissenbacher, 2013). Import dependent accumulation regimes, referred to as passive extraversion in the regulation theory, require foreign capital to deal with the mentioned deficits. This explains the domination of foreign-owned banks in the CEE and post-Soviet space, where local economies and financial systems are dependent on foreign capital. These banks enjoy easy access to international money markets via parent banks and engage in carry trade; they borrow money in hard currency at low interest rates, and issue loans in FC at higher interest rates, without bearing exchange rate risks. Yet the increasing foreign debt (mostly denominated in FC) leads to further increase of the level of dollarization, and enables creditor coun-

Taming dollarization hysteresis: evidence from post-socialist countries  253 tries or organizations to shape their political and economic policy field via debt-restructuring programmes (Becker, 2008, p. 14; see Eradze, 2022, pp. 20–26). As the dependence on foreign capital is one of the key common patterns of dollarization in post-socialist economies, the issue cannot be solved through strict rules on FC loans and deposits only. The reasons for capital scarcity in national economies, underdevelopment of production base (in post-Soviet economies), political instabilities (that have spillover effect on the trust placed in the central bank and the NC), negative historical experiences with hyperinflations, improper housing policies within neoliberal states (that triggers demand for mortgages) cannot be tackled through local central bank regulations in the economies with liberalized capital accounts and floating exchange rate regimes. Conceptualization of dollarization within a state theory opens up new terrains of analysis of dollarization hysteresis beyond central bank or government regulations. A political economy understanding of dollarization helps to identify the long-term and sustainable de-dollarization policies, which can be embedded within institutional changes, accumulation regime and its mode, political and civil societies, as well as global power dimensions.

DE-DOLLARIZATION POLICIES The financial crisis of 2008 was a turning point in terms of de-dollarization policies in the CEE countries. Yet, in some post-Soviet states, like Georgia, it took longer until dollarization was acknowledged as an issue (after the currency crisis of 2015). While in 2004 hardly any policies were designed to decrease FC borrowing in Czech Republic, Estonia, Hungary, Latvia, Poland, Slovakia, Slovenia, Bulgaria, Croatia and Romania, in 2007 half of these countries (Czech Republic, Hungary, Latvia, Romania, Croatia) had started to monitor foreign exchange risks in loans and also increase reserve requirements for FC for the banks (Latvia, Romania, Croatia) (Rosenberg & Tirpák, 2008, p. 11). Even though Bulgaria, Romania and Ukraine tried to tackle the credit boom already before the financial crisis through tight fiscal policies, prudential regulation, interest rate hikes, stricter rules for households to access loans in FC (e.g., stricter requirements for a collateral), increased reserve requirements on FC liabilities for banks, these measures were not effective. Interest rate hikes led to further increase in loans in FC due to lower inflation and increased capital inflows (Duenwald et al., 2005, pp. 28–9). While Latvia, Estonia, Slovenia and Slovakia overcame the issue of dollarization by adopting the euro, in countries like Serbia, Bosnia Herzegovina, Romania and Bulgaria the share of FC loans did not decrease between 2006 and 2015 (Geng et al., 2018, p. 4). Table 17.1

De-dollarization policies

Empowerment of Borrowers

Limitation of FC Loan Supply

LTV and PTI indicators

Increase of FX reserve requirements

Development of NC Money Resource Capital market reform

Financial education

Interest rate ceilings

Pension fund

Disclosure of exchange rate risks to

Price de-dollarization

Inflation targeting

Conversion of FC loans into NC

Prohibition of FC loans

 

Purchase of FC debt by the government

Higher risk weights for FC loans

 

Personal bankruptcy law

Monitor risks of FC lending

household borrowers

Ceiling for sanctions on delayed payments  

Note:  PTI = payment to interest; LTV = loan to value.

   

254  Handbook on critical political economy and public policy Common de-dollarization policies in the CEE countries and the post-Soviet space after the financial crisis can be grouped into three main categories: strengthening the rights of borrowers, limiting the supply of foreign currency loans, and developing local currency markets (Table 17.1). Thus, dollarized states tried to tackle the domination of foreign currencies through legal changes and macroprudential regulations without tackling the core issues, such as the responsibilities of the state or rethinking the mandate of the central bank. New laws were introduced in the frame of responsible finance, and consumer protection for the empowerment of borrowers. For example, Latvia issued a new personal bankruptcy law, while Hungary provided a guarantee for the repayment of mortgages for those who were struggling to service their debt. The Hungarian government started to work on a mortgage relief plan, so that borrowers would be able to increase the time of mortgage repayment by five years, without paying additional fees. Also, a bank solidarity tax was introduced for large banks that were mostly foreign owned (Brown & Lane, 2011, p. 40). Hungary started obligatory conversion of FC loans after the appreciation of the Swiss franc. The Hungarian government made banks convert FC loans (in Swiss francs) into the NCcal at an exchange rate that was below the market rate (Buszko & Krupa, 2015, p. 126). In 2013, the Polish financial authorities issued a recommendation to the banks, suggesting they should not issue FC mortgages to those who did not earn in an FC, which had a positive impact on reducing the level of dollarization of mortgages (Kolasa, 2021, p. 2). Georgia introduced a ceiling for annual effective interest rate on all loans (at 100 per cent) and a maximum penalty on delayed payments was defined (National Bank of Georgia, 2017a). Moreover, payment to interest (PTI) and loan to value (LTV) indicators were introduced for household borrowers in the frame of responsible finance (National Bank of Georgia, 2016, pp. 61–3). Financial education was also widely perceived as a de-dollarization policy (National Bank of Georgia, 2017b, pp. 15–17). Some other measures related to empowering borrowers include FC loan conversions into national currencies, or ‘purchase of debt by the state with the possibility of use and subsequent repurchase of the immovable by the debtor’ (Józon, 2015, p. 94). For example, in Georgia, a charity fund of the political leader Bidzina Ivanishvili bought the debt of hundreds of thousands of Georgians in 2018 who were blacklisted due to difficulties in repaying the loans (Civil.ge, 2018). Even though it is important to introduce consumer protection laws and regulations to limit aggressive lending to unhedged households in FC, these measures are a late reaction to the credit boom and in some cases to over indebtedness. Furthermore, getting the lending conditions right or providing more information to the borrowers on possible currency risks rests on the assumption that the choice to make on debt is solely a matter of the availability of the right kind of information (Duenwald et al., 2005; Detragiache et al., 2006; Kiss et al., 2006; Sõrg & Tuusis, 2009). This does not address the reasons for the increased demand for FC loans, such as unaffordable housing or health treatments. Moreover, loans in the NC remain expensive due to the underdevelopment of the local bond market and the lack of long-term savings in NC. The second set of de-dollarization policies aims to limit the supply of FC loans. Poland, Hungary, Latvia, Croatia, Kazakhstan and Romania decided to set strict rules on FC lending after the crisis, and obliged banks to disclose currency-related risks to customers (Brown & De Haas, 2012, p. 60). In Georgia, a floor was set for loans in FC, and FC reserve norms were increased by the central bank. Prices had to be announced in the NC and a special programme was launched to encourage real estate transactions in the NC (National Bank of Georgia, 2016, pp. 61–3). Countries like Hungary, Moldova and Ukraine went for more radical measures and prohibited certain loans in FC after the financial crisis. In Ukraine, households could not

Taming dollarization hysteresis: evidence from post-socialist countries  255 borrow in FC anymore. In Hungary, mortgages were forbidden in FC (Brown & Lane, 2011, p. 40). Belarus also banned household borrowing in FC for households in 2009. Moreover, differentiated reserve requirements on deposits in NC and FC, stricter rules for FC corporate lending, and limits for open foreign exchange positions were adopted. Despite achieving macroeconomic stability, low inflation, and increase in trust in the NC, the share of FC deposits in Belarus were still at the highest level (70 per cent) in the CEE, and lending in FC was around 60 per cent in 2016. According to the IMF, the country still lacks a national de-dollarization strategy, and the domestic capital market remains underdeveloped (IMF, 2019a, p. 3). In Armenia, strict rules were set on FC transactions, reserve requirements were adjusted asymmetrically for NC and FC liabilities, FC loans were attributed to higher risk weights and the monitoring on currency mismatches was also improved (Horton et al., 2016, pp. 29–30). In Serbia, the dinarization strategy of 2012 was updated in 2018 to tackle the issue of euroization. This strategy is based on three pillars: macroeconomic stability, development of the dinar bond market, and promotion of hedging instruments. Moreover, higher reserve requirements were set for deposits in FC and the society was informed about the risks of borrowing in FC, as well as the benefits of saving in NC. The government has increased the public debt share in the local currency through dinar securities at longer maturities. However, the level of euroization reached 67 per cent in 2019 (IMF, 2019b). Limiting the supply of FC loans might be effective for a short period, yet it does not address the core issues, such as the ownership structure of banks or the accumulation regime of dollarized countries, which remain dependent on foreign capital and imports in most cases. When banks are predominantly in foreign ownership, they are neither responsive towards central bank policy rates, nor sensitive to the overall macroeconomic developments in the country. Therefore, it is difficult to limit the FC loan supply in the long term if banks have access to the cheap money in FC; they usually continue mass lending even during the crisis. Moreover, current account deficits drive dollarized countries towards further indebtedness and national currencies, volatile to trade shocks. Here, the development of local capital markets can be helpful to reduce the dependence of banks on foreign funding. Even though the CEE countries started to put emphasis on these issues after the crisis (Brown & Lane, 2011, p. 40), the question is how exactly the local market will be developed and which specific measures will be deployed. For example, in Georgia, a set-up of a pension fund is perceived as an important measure for de-dollarization and the creation of long-term money resources in NC (Ministry of Economy of Georgia, 2017, p. 18). Yet the success of de-dollarization through such a policy is rather doubtful. The establishment of an investment fund, where the conditions of investments are not transparent, can encourage capital flight through investing abroad instead of creating long-term resources or the accumulation of wealth in NC. The above-discussed de-dollarization measures do not question institutional structures and do not lead to the re-thinking of the mandate and functions of such an important institution as the central bank. Quite the opposite, in several countries, the inflation targeting regime is considered as a way of de-dollarization (for example, in Armenia, Georgia, Kazakhstan and Kyrgyz Republic, with a high level of dollarization of around 60 per cent in 2014; Horton et al., 2016). Yet, there are no clear-cut results of empirical studies that would prove positive impacts of inflation targeting on de-dollarization (see Epstein & Yeldan, 2008; Lin & Ye, 2013). In fact, inflation targeting hinders de-dollarization as it obliges central banks to focus on price stability as their primary policy aim and the stability of the exchange rate becomes subordinated to the predefined inflation targets (Bonizzi, Kaltenbrunner & Powell, 2019;

256  Handbook on critical political economy and public policy Kaltenbrunner & Painceira, 2017). Therefore, one cannot expect successful de-dollarization policies from a central bank that does not primarily focus on the stability of the NC.

ALTERNATIVE POLICY OPTIONS: HOW TO DE-DOLLARIZE? Even though post-financial crisis de-dollarization policies were important, they did not address the core causes of dollarization and, most importantly, they did not question the neoliberal state. The de-dollarization discourse in the transition countries mirrored the blind spots of the dollarization literature. First, most of the policies were implemented as a reaction to financial crises, currency depreciations, or over-indebtedness of households and thus were reactive and not proactive. Second, regulations on FC lending are important, but legal changes and stricter rules are usually not sufficient for tackling dollarization, as they mostly address technicalities of lending and borrowing. These regulations do not lead to fundamental changes in institutions like technocratic central banks or rethinking of the state as a ‘watchdog’. They do not overcome import and FC dependency and thereby fail to strengthen the NC. Moreover, these policies do not address the root causes of the demand for loans: increased need of households to borrow for housing, education, or health issues due to the retreat of the state. Third, responsible finance and financial education is necessary, but not sufficient, as even financially educated borrowers might decide to borrow in FC as loans in national currencies are either too expensive or not accessible. Thus, even though strict regulations on FC lending are important to limit loan dollarization and, thereby, the vulnerability of firms and households to exchange rate fluctuations, these de-dollarization measures constitute just a temporary fix. Fourth, dollarization needs a solution on the global level to address the issues of the ‘original sin’, domination of foreign banks and dependency of dollarized countries on foreign capital. The role of the state is crucial in all the above-mentioned issues. Dollarization is, to a great extent, a product of ill-functioning states, which enable FC domination through deregulating financial markets. The neoliberal state’s denial of social responsibilities drives the demand for mortgages or loans for education and health. Therefore, if dollarization is perceived in political economic terms and conceptualized within the state theory, de-dollarization policies will go beyond the (re)regulation of banking. The state is not an outsider that solves the issue of FC domination through new laws, but changes will have to occur at the level of political and civil societies, within the accumulation regime, as well as in terms of global power imbalances. First, it is up to political and civil societies to acknowledge dollarization as an issue and debate its deeper causes. This implies a recognition of the importance of currency stability and its entanglement with political stability, as well as trust in government and state institutions. Furthermore, the government and political society groups can play a crucial role in enforcing structural institutional changes – for example, in rethinking the mission of the central bank – so that it will primarily focus on currency stability and consumer rights. Moreover, if the central banks of dollarized countries manage to overcome the pressure of inflation targets, unconventional central bank policies, such as quantitative easing, can be helpful for boosting the economic output and supporting the value of the NC. Second, changes in the accumulation regime are needed to tackle dollarization in the long term. Especially for import-dependent economies, it is crucially important to develop local production, reduce trade and current account deficits to decrease their dependence on foreign capital and strengthen their national currencies. Otherwise, import-dependent economies with

Taming dollarization hysteresis: evidence from post-socialist countries  257 current account deficits can hardly extricate from the dollarization spiral or reduce vulnerability to exchange rate fluctuations. Third, a rearrangement should happen on the global level. It is difficult to tackle the domination of FC in the context currency hierarchy, free capital flows and liberalized capital and currency accounts in developing countries. Therefore, dollarized countries should consider measures such as capital controls, which have been acknowledged lately as necessary by the IMF as well (Independent Evaluation Office of the International Monetary Fund, 2015, p. 16). A global coordination of the monetary policy is important, in terms of dealing with the implications of FC lending, as local monetary policy can affect FC lending only to a very limited extent (Ongena, Schindele & Vonnák, 2020). Moreover, the issues of the ‘original sin’ will be addressed on a global level, so that the developing countries have the possibility to borrow in their national currencies.

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PART V LABOUR

18. Global exploitation chains in agriculture Praveen Jha and Paris Yeros

Global agriculture has undergone a range of profound changes in its structure, composition and drivers during the post-World War II era. Since the early 1960s, global agricultural production has approximately tripled, driven in large measure by the so-called Green Revolution, which promoted technological packages of seed–water–fertilizer–pesticide combinations, accompanied by large-scale expansion of areas under cultivation. Despite these efforts, however, output expansion as well as access to food security, as defined by the Food and Agriculture Organization, has been quite uneven across the globe, with close to 800 million people reported to be chronically hungry, many more millions malnourished, and almost 2 billion suffering from micro-nutrient deficiencies. In other words, the trajectory of agricultural growth during the last half-century or so has been quite uneven, and large sections of the population in the Global South continue to be food insecure and vulnerable. Furthermore, the increase in aggregate output has come with massive costs to the overall natural environment, which is reflected in the erosion of biodiversity, depletion and contamination of sources of water, large-scale deforestation and soil degradation. It is obvious that an appropriate understanding of such vulnerabilities and developments must come to terms with the fact that the problem lies not in the technology per se, but in its embeddedness in deep-rooted structural and other critical changes at the global and national levels, broadly within the framework of the combined and uneven development of capitalism. We need to engage with these transformation trajectories to understand the changes in the nature of global agriculture and its outcomes; in particular, shifts in overall macroeconomic policy regimes, especially during the ascendency of neoliberalism since the early 1970s. Our focal concern in this chapter is with the significant acceleration of transnationalization of agricultural systems, with remarkable extension of supply, procurement and other channels along with intensification of the global division of labour, with respect to so-called backward and forward linkages. In other words, the structure of ‘farm to plate’ has been considerably globalized with new power equations, largely driven by big capital and agri-corporations. In fact, the big story in global agriculture for more than half a century, in particular during the last three decades, has been the phenomenal rise of corporate agri-businesses, from one end of the sector to the other, driven largely by the transnational corporations (TNCs), headquartered in the Global North. This is not only with respect to agriculture, of course, but also every important sector of contemporary capitalism. A dramatic restructuring of economic arrangements between the Global North and Global South has taken place through a reordering of the relations of production, trade, investment and employment. This is what analysts have often described as the ascendency of global commodity chains (GCCs). One of the core features of these so-called chains, as already mentioned above, is ever-growing transnationalization of economic activities and deepening of integration across the North and South in almost every sphere. As we have suggested elsewhere, ‘[e]ssentially, this restructuring of world economy implies that components of a single end-use commodity/final output are conceived, designed, produced, procured and processed in different parts of the globe, before being assembled together at 262

Global exploitation chains in agriculture  263 a specific destination for ultimate consumption, which again may have a global reach’ (Jha & Yeros, 2019, p. 15). This is, operationally speaking, the essence of what we conceptualize as global value systems (GVSs), which go by many other names in the contemporary scholarship such as GCCs, global supply chains (GSCs), global value chains (GVCs), or global production networks (GPNs). As with other major sectors, agriculture has been subjected to significant restructuring along the above-mentioned lines. Growing industrialization of agriculture and ascendancy of agribusinesses became quite prominent by the mid-20th century in advanced capitalist countries, where a process of profound global reach was already underway. This has gained further momentum during the ascendancy of neoliberalism since the 1970s. The current phase of capitalism is marked by an aggressive push by agribusinesses to integrate agriculture in the Global South on uneven and unequal terms; such a development is best contextualized as the strengthening of imperialism, one of whose hallmarks is financialization of accumulation. Neoliberal globalization through its multiple strategies and processes – in particular, the ascendancy of finance capital and deepening of transnationalization driven by large corporations – has impacted on petty producers and smallholder farmers in every part of the world, especially in the Global South, in a range of adverse ways. At the heart of the process of adverse incorporation of agriculture at large in the Global South is the system of increased value capture by TNCs, mostly headquartered in the Global North. This chapter engages with some of these core issues pertaining to contemporary global agricultural value systems (GAVSs); our central claim is that the neoliberal GVSs are intensifying exploitation chains for agriculture in the Global South. The chapter investigates a couple of important features pertaining to the contemporary GAVSs and, in doing so, highlights some of the specific channels and conduits of adverse incorporation through some illustrations from the Global South. The analysis emphasizes the overarching role of the neoliberal macroeconomic policy regime, which is organically connected with contemporary imperialism. But before we come to the current juncture, a peep into the past and some analytical considerations are in order to get a better grip over the present; we do so in the next section.

PAST IN THE PRESENT It is important to emphasize that the contours of globally connected value systems, in their rudimentary forms, have a long history, going back to at least the early days of capitalism itself; we highlight this point here, as such an understanding is either absent or seriously inadequate in much of the literature outside political economy discourses. For an appropriate engagement with the relevant issues, it is absolutely critical to locate these in the longue durée of capitalism, and its immanent tendencies, as is typically done in Marxian political economy. As we have suggested elsewhere (Jha & Yeros, 2019), colonial excursions from approximately the late 15th century onwards by European powers to several regions, most of which constitute the contemporary Global South, were significant in creating and shaping early forms of GVSs. It is quite evident that the early prototypes of worldwide and systemically intertwined processes of value generation and appropriation, going beyond hitherto-known arm’s-length channels of trade, started taking root with the transition to capitalism. Insertion of merchant capital into production processes through multiple channels, for instance, putting-out (subcontracting) systems, may be considered a significant moment in this respect. Through advancing

264  Handbook on critical political economy and public policy raw materials or its costs, contracts pertaining to intermediate products or finished goods at predetermined prices, and other aspects of production processes, European merchants managed to increase their worldwide economic control during what is generally identified, in Marxist scholarship, as the mercantilist phase. As is well documented, during approximately the first couple of centuries of capitalism, a number of trading houses headquartered in Europe, such as the British East India Company, the Hudson’s Bay Company, the Dutch East India Company, the Dutch West India Company, the Royal African Company, among others, became extremely influential in shaping the global trade and consequently production systems (Bagchi, 2005; Chaudhri, 1978; Prakash, 1997; Subramanian, 2016; Thomson, 1994; Tracy, 1991). Raw materials or semi-processed intermediate goods were sourced from colonies for final processing/manufacturing in Europe or colonial outposts, and some of these finished commodities were traded globally. Much of it was on the back of crusades and wars of plunder in the 16th and 18th centuries, and well beyond that, which, as Marx suggested, were central to the processes of primitive accumulation, and signalled ‘the rosy dawn of the era of capitalist production’ (Marx [1887], 1995–96, p. 555). Thus, it should be evident from a basic familiarity with the evolution of capitalism that since its early days, we had global supply/commodity/value chains, with merchant capital from the Global North as the key actor, straddling continents, and hence it is difficult to comprehend that, outside Marxist discourses, such a recognition remains muted/absent. Furthermore, to the extent that there is passing acknowledgement in some of the non-Marxist literature of these supply chains as ‘internationally integrated networks of production operations’ or ‘global interdependencies’, recognizing that such arrangements go back at least a couple of centuries (e.g., see contributions in Elms & Low, 2013), explanations are often framed in superficial ways, such as significant technological changes – for example, see Baldwin (2013) – with little engagement with the relevant issues in a systemic sense. These analyses remain seriously innocent of starkly uneven and hierarchical consequences historically engendered by these commodity chains that contributed significantly to stratifying the world into North and South. To put it simply: since the inception of capitalism, these globally connected ‘networks’ and ‘chains’ have been a most powerful vehicle as global exploitation chains, with the South at the receiving end, and also continue to be so in the present, albeit in substantially and radically different ways, as we discuss later. The key argument underscored here is: the metaphors such as ‘chains’, ‘networks’ and so on need to be contextualized as GVSs by locating these processes in the deeper and systemic tendencies of capitalism, instead of remaining trapped in firm- or industry-specific attributes in particular market structures, or aspects of ‘governance and relationships’ in superficial, techno-managerial ways, as is common in much of the mainstream economic analyses. To be sure, there are considerable and valuable insights to be gained from these approaches – for instance, about ‘power imbalances’ linked to market structures, asymmetry in bargaining power between different parties, the shots being called either by the ‘sellers or buyers’, and several other market-related attributes – but these remain seriously inadequate in the comprehension of structural and holistic accounts of capitalism, its immanent tendencies, institutions, and class contestations locally and globally. At best, most of these accounts are akin to counting the trees while missing the forest. Our claim is that the range of theoretical apparatus and contributions in critical political economy tradition are substantially more rewarding, by going beyond fetishism of appearances, and investigating systemic determinants of GVSs in historical capitalism, and within the current stage when a handful of large corporations, mostly headquartered in Global North, wield immense power.

Global exploitation chains in agriculture  265 Thus, ceaseless transformation of capitalism across centuries has obviously implied that the nature, content and underlying processes shaping global connectedness have been evolving continually, and the so-called supply/value chains indeed reflect these in profound ways. With the transition from the broad phase of merchant capitalism to that of industrial capitalism, there were significant reconfigurations in the constitution of these networks, and ever-more deepening of these with the maturing of the latter phase through growth of multinational/transnational (MNC/TNC) corporations with relatively greater emphasis (compared to the prominent trading houses in the earlier phase), on production-related activities in their operations. After World War II, there was a burgeoning of literature focussing on these issues, and the crux of some of the important Marxist contributions has been to explore ascendency of TNCs/MNCs, reconfiguration of channels of appropriation and exploitation between North and South, and strengthening of imperialism (Amin, 1974; Bagchi, 1982; Baran, 1957; Hymer, 1979; Magdoff, 1978; Patnaik & Patnaik, 2021; Sweezy & Baran, 1966). In Marxian political economy, analytical engagement with transnationalization of capital has a long and distinguished history, and several first-generation major Marxist scholars – Lenin, Bukharin, Luxemburg, among others – made pioneering contributions to evolving GVSs and MNCs/ TNCs; this theoretical history has been continually nourished in profound ways by the subsequent generation. With these brief remarks pertaining to the historical backdrop, we now sketch a couple of critical features relating to the currently dominant forms of GVSs, and concomitant exploitation processes, in the next section. As indicated at the outset, our core concern here is with agriculture. A couple of brief words may be in order to locate it in the currently dominant regime of accumulation on a global scale.

GLOBAL VALUE SYSTEMS AT THE CURRENT JUNCTURE An Analytical Sketch It is generally well acknowledged that the global capitalist system started transitioning to a new episode of globalization by the early 1970s, after a brief high-tide of regulated regimes post-World War II, which was also coupled with spates of decolonization across the South. With the progressive weakening/demise of regulated regime, checks and balances on TNCs’ operations have largely disappeared, and there has been a dramatic surge in forces strengthening centralization and concentration of capital worldwide, mostly led by the TNCs headquartered in the North; thus, with the ascendancy of neoliberalism, a major feature that the global economy has to contend with is a phenomenal, and ongoing, increase in the power of TNCs across all economic sectors. In fact, it would be appropriate to use Samir Amin’s expression, ‘capitalism of generalized monopolies’, to capture the essence of the contemporary context (Amin, 1997, p. 116). The accelerated transnationalization of capital has assumed different trajectories and forms, and both its broad categories – namely, ‘capital-in-production’ and ‘capital-as-finance’ – have become significantly far more mobile, both in terms of scale and speed, than ever before in the history of capitalism, but it is the latter that has witnessed a disproportionately large increase in its magnitude, influence and power, compared to the former. Thus, it has become common for analysts within critical political economy and heterodox traditions to characterize con-

266  Handbook on critical political economy and public policy temporary global regimes of accumulation as predominantly financialized (see Lavinas et al., Chapter 31 in this Handbook), which tends to undermine/subordinate the ‘real economy’ and its positive spinoffs through a range of macroeconomic outcomes for the well-being of citizens at large (Amin, 2013; Epstein, 2005; Magdoff & Sweezy, 1987; Mazzucato, 2017; Patnaik, 2016; Pollin, Baker & Epstein, 1998; Sweezy, 1994). The dramatic transformations in the overall technology regime have been extremely critical in shaping the contemporary global regimes of accumulation. To use the standard Marxist concept, these ‘productive forces’, in transportation and communication, have taken quantum leaps, and have reconfigured in fundamental and dramatic ways economic structures and processes, and consequently mechanisms underlying valorization of capital on a global scale. The last point we wish to flag here is that with the ascendancy of neoliberal globalization, there has been an intensification of the depth and breadth of imperialism, by which we mean global capitalist accumulation driven by monopoly capital located in metropolitan countries and characterized by extra-national spheres of influence and exploitation, in peripheral countries through multiple economic mechanisms. Starting with this elementary conception, the relevant details across time and places, with appropriate complexities, can easily and suitably be accommodated in such a framing of imperialism as is common in Marxian theoretical tradition. With these brief remarks, we now highlight a couple of core features pertaining to the current phase of connectedness underlying GVSs. Most obvious, aspects have to do with the overall intensity and speed of interactions; scale, depth and breadth across countries between North and South, and within regions, have been of a much higher order and acquired huge significance during the last half-century or so. Global interdependencies pertaining to major economic indicators such as national gross domestic product (GDP), trade and so on have intensified way beyond what existed prior to the last quarter of the 20th century. The current phase of economic interactions is characterized by hugely enhanced mobility of capital in production from the North to select destination in the South, on a scale hitherto unknown in the history of capitalism; this relocation from core to periphery, or de-centring of production on a significant scale, is a novel and profound feature of the current phase. It is important to recall that prior to the 1970s, there was rarely any significant investment in production from North to South,1 as it remained confined to metropolitan countries and its ‘colonies of settlement’. Furthermore, the de-centring – that is, a shift from centre to periphery – of production is not always accompanied by mobility of capital, and it is through incorporation of the producers in the South across a whole range of activities; these suppliers generally cater to the requirements specified by the transnational actors located in the North, with pre-specified tasks and responsibilities, without any external investment support. Thus, through both these channels – namely, investments in production and incorporation of suppliers without any capital flows – producers in the South have been integrated across almost all economic sectors, including quite a few high-end manufacturing and services, which have been central to the reconfiguration of GVCs at the current juncture. Finally, with regard to mobility of capital, untrammelled and increasingly larger flows of finance since the demise of the Bretton Woods monetary system in the 1970s have been among the most important features of contemporary capitalism, and thus reconfigured GVSs across sectors in dramatic ways. Essentially, it has meant increasing power of capital-as-finance over real economy, and financialization as the key driver of the architecture of accumulation; financialization has resulted in fundamental and unprecedented restructuring of contemporary GVSs, with financial markets and actors playing

Global exploitation chains in agriculture  267 a profound role in all aspects of economy and, in fact, expanding the scope of commodification incessantly (Amin, 2019). It needs to be stressed here that the above-mentioned current forms of the scale and nature of direct engagement by the metropolitan capital in the South has implied profound weakening of the division of labour that had accompanied evolution of capitalism until the middle of the 20th century, and this has had very important implications for the world of work, and mechanisms of surplus appropriation, everywhere. We must note that a powerful tendency central to the phase of neoliberal capitalism has been a strong divergence between the vector of labour productivity and the vector of wages across the globe, along with a decline in wage share almost everywhere in the world (Basu, 2016; Patnaik, 2009); in short, there has been a deepening of exploitative processes, for working people at large, but disproportionately so in the South, and these are inscribed, in multiple ways, on forms and textures of current GVSs. As we see it, central to the neoliberal project since the 1970s has been the reconstitution of class power, nationally and globally, through the changing mechanisms of imperialism, in which globalized monopoly-finance, particularly international finance capital, is the key actor. Within the broad analytical frame sketched above, we would like to mention one issue that has drawn considerable attention – namely, huge differences in wage costs worldwide, which has become central to the overall accumulation strategy in the arsenal of global corporations. The argument, as such, has a long ancestry, going back to Marx’s address to the First International Workingmen’s Association in 1864, and in several allusions in his writings related to relative surplus population; these are also further echoed in important contributions among the first generation of Marxist scholars. However, the relevant arguments are engaged with in a much more focused and rigorous manner in the post-World War II seminal contributions by Barnet and Muller (1974), Hymer (1979) and Sweezy and Baran (1966), among others. Their analyses examined the deepening of transnationalization of capital, and evolving strategies of accumulation by MNCs, often highlighting the search for low unit labour costs internationally as a key element in oligopolistic rivalry and a powerful mechanism to extract super-profits and rent, especially from the Third World. Since the 1980s, there has been a large body of work by several Marxist scholars investigating the importance of global wage hierarchies, and marshalling impressive evidence to buttress the argument that significant differences in wages between North and South have indeed been critical to the accumulation strategies of TNCs in the recent decades.2 All major data sources corroborate that comparable unit-level costs in the South are a fraction, often in single digits in percentage terms, of those in the North (Ness, 2015; Suwandi, 2019), which has been critical in extraction of rents and super-profits by the global corporate giants in the recent years. We may also note that global wage hierarchy is generally considered the key factor in explaining mobility of capital from North to South in non-Marxist discourses (Baldwin, 2013, 2016; Roach, 2004). In fact, the expression ‘global labour arbitrage’ is frequently attributed to Stephen Roach (2004), erstwhile chief economist of Morgan Stanley, who emphasized the huge differences in wages across countries as the major explanation for mobility of capital and global dispersion of production as well as procurement. The fact that resorting to lower unit cost for labour or substituting relatively high-paid workers from the North with low-paid workers in South, assuming that several other prerequisites such as relevant infrastructure, political climate and so on are conducive is obviously a potent and significant element in the armoury of capital. However, it is important to analyse the larger context of structural and other constellations of features and processes that have

268  Handbook on critical political economy and public policy propelled global labour arbitrage as a hugely significant component of overall strategy of accumulation by the TNCs in the current episode of globalization. After all, wage hierarchy between North and South has been a prominent feature of capitalism for a considerable part of its history, without any significant transnationalization of capital from the former to the latter; if anything, the direction of flows, as noted above, was in the opposite direction. Furthermore, not only with reference to differences in unit labour costs, but also overall cost advantages, it would have been economically ‘rational’ for capital from the North to invest in the South, when it was looting and plundering the latter of its abundant resources and raw materials, to transport these to the North; such rational calculations with respect to cost hierarchies would have implied that the global economic system would have escaped the division between North and South, in general, or as we know it for sure. In short, without a deeper contextualization of wage hierarchy, in the overall architecture of accumulation, in the past or at the present juncture, phrases like ‘global labour arbitrage’ remain superficial if not empty slogans from the point of view of making sense of the important processes underlying different phases of historical capitalism. Additionally, search for low labour unit costs has worked in tandem with several other significant attributes pertaining to the current neoliberal era. Essentially, transition from regulated to neoliberal macroeconomic regimes has changed the rules of the game everywhere, but also with very significant differences in the ways in which these function (Phillips & Mieres, 2015), both in a de jure and de facto sense, between North and South. This has resulted in a variety of ‘arbitrage’ beyond labour along multiple axes. In an earlier work (Jha & Yeros, 2021), we have suggested that it would be much better to use the expression, ‘labour-nature-regulation arbitrage’ to contextualize some of the core elements in contemporary GVSs. Through accelerated primitive accumulation, and thus grabbing of natural resources including land at throwaway prices, weakening of environmental, industrial and social regulations and so on, the landscape of checks and balances has been greatly damaged in several countries of the South compared to the North, thus aggravating the gap in the costs between the two; in short, the overall regulatory regimes in the South have become dramatically weaker, compared to the North, around many critical ‘social cost axes’, and are important elements of the arbitrage at the current juncture. Some Implications for Agriculture in the South In many ways, transformations within agriculture and food systems have been cataclysmic, as the power of agribusiness corporations has grown by leaps and bounds, and the whole spectrum of extremely influential forces has been unleashed with respect to not only several dimensions connected with the well-being of working people, directly and indirectly dependent on the sector, but also that of the biodiversity of planet earth, if not its survival. Our focus below is primarily on a couple of key channels through which contemporary GAVSs increase vulnerability and exploitation of small farmers, agricultural labourers and many other working people, via so-called forward and backward linkages, to use a common jargon amongst economists. Essentially, through a brief discussion of the data pertaining to differences in unit labour costs, we flag how the current phase of global connectedness and transnationalization of capital, via the different routes mentioned above, facilitates super-exploitation of agricultural workers in the South. However, before we come to a couple of these indicators, it would be useful to point

Global exploitation chains in agriculture  269 out a set of significant markers relevant to a better understanding of contemporary agricultural value systems. We discussed earlier that GVSs have a long lineage, certainly from the beginning of colonialism, with each historical phase having its major attributes. And, as it happens, agriculture was very much at the centre of global appropriation/accumulation strategies by the European powers, via multiple mechanisms (e.g., triangular trade patterns across continents, straightforward appropriations etc.) that were critical in heralding capitalism and the Industrial Revolution in the Atlantic world; it was precisely the ensemble of these strategies that were predecessors of subsequent GAVSs. Post-decolonization, mostly after World War II, countries in the Third World generally adopted dirigisme, while metropolitan countries typically pursued policies of Keynesian demand management, and such a conjuncture resulted in significant alterations in GVSs. Specifically with respect to agriculture, politics and policies of the post-war context, in most countries in the Third World, facilitated a degree of protection for the peasantry and petty production in general, even though the extent and trajectories across countries were significantly different from each other. However, ascendancy of neoliberalism since the 1970s has put severe strains on prospects of development trajectories that were relatively autonomous (although certainly not independent) of global capitalism and imperialism; this has contributed to significant reconfiguration of GAVSs, which has quite a few mechanisms reminiscent of the colonial era but is also characterized by several novel features, driven by global monopoly capital. Whatever limited protection was available to the peasantry and petty producers in these countries has been subjected to sustained dismantling, thus putting agriculture and related activities to huge adverse outcomes (Amin, 2010; Jha, Moyo & Yeros, 2017; Patnaik, Moyo & Shivji, 2011; Patnaik & Patnaik, 2021), and threatening the working people in the countryside with a spectre of mass marginalization. There is indeed a huge literature on these aspects, and also on the evolution of GAVSs from the colonial phase to the current juncture.3 It is obvious that quite a few important features of contemporary GAVSs have been in the making at least since the beginning of the 19th century, with the deepening and spread of capitalist agriculture, and in due course, from the 20th century onward, with growing significance of large-scale industrial agriculture. However, these trends were confined largely to the North, and a few select enclaves in the South until almost the middle of the 20th century. Subsequently, with the ascendancy of neoliberal globalization from the 1970s, these long-term trends have acquired accelerated momentum globally, albeit the pace has been quite uneven across regions and countries. Thus, by the early 21st century, agriculture and food systems in the Third World have come under increasing sway of corporate investments, both domestic and metropolitan (and the two frequently working in tandem with each other), with vast sections of the peasantry facing multiple pressures for survival, often getting semi-proletarianized, circulating within, and across, both rural and urban economic spaces. In other words, a prominent outcome associated with accumulation strategies in agriculture is increasing labour reserves or relative surplus population in the South, which is an important causal correlate of relatively low unit labour costs (see also Scherrer, 2018, 2021). In general, the most important attributes of contemporary GAVSs are the following: ● Along with very significant compression of the overall architecture of government support and public policies in the South, there has been an increased transnationalization of agribusinesses and subjugation of farmers and food systems, not only in the North but also in the South, by corporate capital.

270  Handbook on critical political economy and public policy ● Significant and accelerated increases in concentration of corporate ownership over all aspects of farming, and related activities in the so-called backward and forward linkages, including the entire range of input provisioning such as seeds, fertilizers, pesticides and so on, and food processing, trading and retail activities. Increased consolidation is observed along both vertical and horizontal axes within specific sectors (e.g., processing, retail, inputs) and across these. ● Phenomenal expansion in the so-called biotech or genetically modified crops, and increasing share of monocropping, heavily dependent on the patent regimes, along with massive increases in chemicalization and other industrial-agricultural practices. ● Apart from increased control over agrifood systems through the above-mentioned mechanisms, corporations are tightening their grip on farming and related activities through several interventions such as pre-specified contracts, or by directly undertaking many of these tasks themselves in several areas, whether in cereals, livestock segments or horticulture and so on. Thus, it is hardly surprising that there has been a renewed intensified scramble for land, which is very much at the centre of current GAVSs. ● Given the massive increase in financialization in overall accumulation strategies, there has been a near explosion in financial flows into agrifood systems through a range of global investment funds. ● Substantial diversion in production of cereals and basic food crops in the South to a range of other produce, including exotic crops, for exports to the North and diversion of cereals from human consumption to feed livestock, poultry and so on for increased meat production, largely for the better-off sections of society. This has led to notable shifts in cropping patterns for biofuels and other industrial purposes. ● Finally, apart from farmers being effectively reduced to being labourers at an alarmingly increasing rate due to some of the key changes noted above, the overall thrust of major trends noted here clearly underscore the fact of a complex web of persistent, and aggravated, exploitative mechanisms with regard to agriculture and agriculturally dependent populations, particularly in the South. These have huge implications for livelihoods, employment, food security, quality of nutrition and so forth Each one of the tendencies has generated considerable literature.4 It may be useful to present some data here, pertaining to some of these trends. First, as per several recent studies, during the last couple of decades, especially after the financial crisis of 2008, institutional, predominantly private, fund flows into food and agriculture have soared; the number of private equity funds alone targeted at food and agriculture increased from barely seven in 2004 to 300 in 2019. Further, the scale of these funds, targeting profits through agribusiness, has witnessed astronomical growth; for 2019, estimated value of assets under management by some of the leading categories – namely, pension funds, sovereign wealth funds, private equity funds and hedge funds – stood at US$40 trillion, US$8 trillion, US$4 trillion and US$3 trillion, respectively. Incidentally, many of these funds are not legally mandated to publicly report about their operations, and hence the above-cited numbers may well be considerable underestimates. Further, for the entities registered officially, the gap between net asset value of public and private equities has increased dramatically, with the former remaining stagnant for well over a decade. Second, of approximately 300 private equity funds operating globally, close to 200 focus directly on acquisition or operation of farmland, along with other agribusiness-related activi-

Global exploitation chains in agriculture  271 ties, and are well entrenched across the South. And, of course, there are many other investors in land outside these equity funds. In an earlier work, focusing largely on land grabs in Africa (Moyo et al., 2019), we examined in considerable detail issues pertaining to accelerated primitive accumulation by global corporates and escalated geopolitical rivalry among major states. Using the Land Matrix data, we found that almost half of international land acquisition in Africa was by companies headquartered in Western countries, and less than a quarter from the so-called ‘emerging power’ countries. In recent years, between 4 and 11 million hectares of land have been snapped up annually in commercial land deals by foreign investor firms, which surpassed the annual rate of peak colonial land grabs at the end of the 19th century in settler colonies of Southern Africa. As mentioned earlier, financial actors are almost the new lords of the agribusiness ring currently, as land, food, feed and so on are being converted into ‘financial asset classes’, and it is in the mysterious, often hidden and virtual domains of financial operations through which much of the profits and losses accrue. We must stress here that a great deal of finance in agribusiness is speculative capital, forever seeking ‘casino returns’ through whatever means their operations may require. Third, an increasing capture of almost every market in agriculture and food systems has been powerfully evident for the last few decades, especially since the 1980s. As noted earlier, hard information for many important variables is absent, inadequate or slippery. With this caveat, let us note a few statistics about market penetration of leading corporates in specific segments: ● Among agricultural commodity trading firms, a small bunch of corporates headquartered in the North – namely ADM, Bunge, Cargill and Louis-Dreyfus, or the so-called ABCDs – each of them with a long history going back to the 18th and 19th centuries, and starting as modest grain trading companies, have evolved as global giants and have diversified into a wide range of trade circuits within agriculture, and well beyond, through horizontal and vertical integrations. In global grain trade alone, the combined share of ABCDs is estimated at over 70 per cent, and as indicated, they have made significant inroads into every aspect of GAVSs, including land acquisitions and contract farming in a range of crops central to the current agri-industrial system (Clapp, 2015; Murphy, Burch & Clapp, 2012). ● With regard to global markets in seeds, and a few other industrial inputs, only three corporate giants – Bayer, Chem China-Sygenta and Dow-Du Pont – have a combined market share of 70–90 per cent internationally. Likewise, a handful of corporations are major players in food processing, retailing and service companies, such as Nestlé, Unilever, Wal-Mart, Tesco, Carrefour, McDonald’s and KFC, among others, have become household names. Currently, a substantial share of expenditures by clients in particular segments globally is cornered by these giants! ● As per estimates of GRAIN (2010), way back in 2005, the average annual figure of annual sales for the 20 global retail giants stood at US$75 billion, compared with the average GDP of US$49 billion for 135 countries, outside the elite club of relatively rich countries. As one would expect, the gap between these average numbers is likely to have increased substantially in the subsequent period. The basic point is that international capital is pushing very hard to subjugate whatever remains outside its logic of profit, via ever more complex mechanisms of control through GAVSs, regardless of persistent dramatic levels of hunger and malnutrition, disappearing livelihoods, climate calamities and so on. Arguably, among the most profoundly distressing outcomes

272  Handbook on critical political economy and public policy of the entire architecture of neoliberal capitalism, of more than half-a-century now, through so-called economic liberalization, structural adjustment and so on, mediated by global institutions such as the World Bank, the World Trade Organization, the International Monetary Fund, the Asian Development Bank and others, has been the relentless squeeze of farmers and workers and growing share of capital surplus, particularly of the corporates. As we have indicated in the preceding discussion, the web of exploitation is manifold and complex, with the peasantry, petty production and labourers in the South hit the hardest. Central to the current phase of imperialist exploitation, via GAVSs, through reconstitution of class power on a global scale in which the comprador allies from the South play a critical role, is the strengthening of control over tropical and sub-tropical agricultures along with other natural resources, squeezing producing classes as much as possible, while taking maximum advantage of global relative surplus population, largely located in the South (Jha, Chambati & Ossome, 2021; Jha et al., 2017; Moyo et al., 2019; Patnaik, 2016). In passing, we may note that farmers in the Global North are obviously not immune to the predatory logic of neoliberal markets, even though they get considerable protection from their respective governments. It may be useful to look at some evidence from advanced countries on the farm shares of final expenditure on food commodities. For the United States, the US Department of Agriculture’s food dollar series breaks up domestic final expenditure on food into the share that accrues to farms and that which accrues to post-farm activities. The former has been low and consistently falling. In the year 2009, only 16.2 cents in the dollar spent on a final food commodity (that used as input agricultural goods produced domestically) accrued to farms; 83.8 cents accrued to various post-farm sectors including transport, packaging, advertising and retailing. In 2019, the comparable figure for farm share had fallen to 14.3 cents in the dollar. For the European Union, in the decade between 1995 and 2005, the share of agriculture had fallen significantly from 31 to 24 per cent of the total value generated, while the shares of the food industry, food retail and food wholesale trade increased. This suggests that even in advanced countries, asymmetry of power in value systems has led to a squeeze in the shares of income that accrue to farming. As noted below, further evidence from the World Input–Output Database (WIOD) shows that once these value-added shares are further broken down into factor incomes, labour compensation for agricultural workers and others engaged in agriculture for different countries has not improved over time. Further, despite significant increases in exports of agricultural commodities, the value addition (the excess of output of agricultural commodities over intermediate inputs) or the combined incomes of capital and labour in agriculture lags significantly behind, more so for countries of the Global South. For instance, from a comparative picture of India and the US, using the United Nations Conference on Trade and Development (UNCTAD) EORA database, it is clear that for India the growth in exports for a range of commodities between 1990 and 2015 has been quite large, while the growth in total value-added (in absolute terms) for these crops was negligible. This holds for all the individual agricultural commodities as per the above-mentioned data. In contrast, in the US, the difference between the two growth ratios is not as stark, and for some subsectors such as cotton farming, cattle ranching and milk production, the growth in value-added has outpaced growth in exports. In general, acceleration of exports of agriculture under current GAVSs does not lead to commensurate improvements in agricultural incomes; rather, for countries in the South, improvements in total incomes from farming relative to exports perform generally more poorly than in the Global North.

Global exploitation chains in agriculture  273 We now come very briefly to the issue of differences in unit labour costs in shaping the current GAVSs. Labour compensations in agriculture differ significantly among the countries of the North and the South, and there is no evidence that this gap is reducing, despite increased openness and as some mainstream economic theories would have us believe. Table 18.1 provides some useful summary statistics relating to hourly wages paid to labour in agriculture. Table 18.1

Countries

Average hourly compensation per worker engaged in agriculture, hunting, forestry and fishing for select countries as a percentage of compensation in the USA, in 1995 and 2009 1995 (%)

2009 (%)

Brazil

4.74

6.15

China

2.84

7.38

Indonesia

6.35

5.12

India

1.20

1.48

Mexico

5.20

5.50

Turkey

13.42

32.06

Taiwan

45.15

36.94

Britain

117.76

135.84

Canada Luxembourg

70.24

63.18

230.39

229.55

Sources:  Feenstra, Inklaar and Timmer (2015); Sahr (2018); Timmer et al. (2015); WIOD (2013).

As is evident from Table 18.1, not only is the hourly compensation per worker in Global South countries significantly lower than in the countries of the North, there is also no secular move toward closing the gap in this sector. This result is by no means limited to agriculture. The more capital-intensive sector of manufacturing food, beverages and tobacco products shows the same behaviour in labour compensation (Feenstra et al., 2015; Sahr, 2018; Timmer et al., 2015; WIOD, 2013). When this difference in compensation is decomposed for differences between high- and low-skill workers’ compensation, the same pattern holds. Lower average compensation in the South cannot be attributed to lower average skills of workers employed relative to the North. In other words, both high- and low-skill workers as distinguished in the WIOD, received significantly lower wages in the South as compared to the North, which is an important factor in shaping contemporary GAVSs. Like compensation, employment within GAVSs has not shown any overall improvement. Of the 43 countries that make up the 2016 report on the WIOD’s Socio-economic Accounts, the number of persons engaged in agriculture only increased in five countries between the years 2000 and 2014. Similarly, while the number of persons engaged in the manufacture of food, beverages and tobacco products increased in 17 countries, it decreased in 26. While such a freeing up of labour from production is often seen as a net gain because of the release of ‘superfluous resources’ in the production process, the loss in employment without an accompanying increase in avenues of employment elsewhere for those displaced is a substantial welfare loss: it aggravates poverty and adds to the reserve army of labour, allowing for the persistent suppression of wages (Lenzen et al., 2012; Phillips & Mieres, 2015; Suwandi, Jonna & Foster 2019). The squeezes on the shares of incomes in food supply chains for agriculture, the inability of exports to generate growth value-added for Southern countries, and the dismal levels and

274  Handbook on critical political economy and public policy growth of labour compensation are powerful markers of the exploitative processes in contemporary GAVSs. Some of the relevant numbers are listed in Table 18.2. Table 18.2

Compensation for high-skill labour in select countries, 1995 and 2009 (constant 2017 USD)

 

Manufacture of Food Products

 

Agriculture and Related Activities

Countries

1995

2009

 

1995

Brazil

14.08

17.67

 

6.87

5.62

Canada

25.40

34.09

 

11.58

11.46

2009

China

0.87

2.85

 

0.67

1.69

Britain

52.44

73.24

 

28.41

30.62

Indonesia

5.30

18.66

 

3.80

2.93

India

0.70

1.28

 

0.31

0.40

Mexico

5.32

3.89

 

1.77

1.72

Taiwan

21.88

9.88

 

9.76

8.77

USA

44.79

50.44

 

22.76

22.72

Note:  Calculated by dividing the ratio of LABHS to H_HS by the ratio of H_EMP to LAB as presented in the Socio-Economic Accounts (SEA) of WIOD Release 2013.5 Source:  WIOD (2013).

Millions of people dependent on agriculture for a livelihood are pushed into precarious, unreliable conditions of work. Lower compensation for workers, higher requirements and costs of inputs (that also suffer from serious public under-provisioning), and increasing shares of value attributed to retailing, marketing and other activities after farm production have made agriculture-dependent livelihoods unviable. Finally, public support or budgetary outlays for the agricultural sector in some advanced countries have emerged as a partial ameliorant of such distress. On the one hand, neoliberal architecture of international trading regimes places serious constraints on national governments in the South. On the other hand, the same neoliberal architecture has allowed advanced countries to provide large subsidies to agriculture, which is indeed an example of duplicity and Orwellian doublespeak. Recent estimates suggest that, on average, the subsidy support per farmer in the US is over US$60 000 each year. The European Union dishes out close to US$100 billion to agriculture, and approximately half of this as direct income support to farmers. The People’s Republic of China, where a substantial segment of population is dependent on agriculture, has become, in absolute terms, the biggest subsidy provider to agriculture, at US$212 billion in 2016 (different methodologies for calculating overall support for agriculture do not change the huge difference between the Global North and the South in terms of funds for agriculture; Organisation for Economic Co-operation and Development [OECD], 2021). Gross inequities in levels of government support for agricultural activities, in the rules of the current trading regime, and control over intellectual property, facilitate and compound the impact of GAVSs on exploitation of farmers and agricultural workers in the South.

CONCLUDING REMARKS In spite of the huge complexities, and an intricate web of drivers, issues and so on, the core conclusion of our engagement with contemporary GAVSs is simple and straightforward: the

Global exploitation chains in agriculture  275 ascendancy of corporate power in agribusiness and food systems in recent decades is historically unprecedented, and the TNCs, mostly headquartered in the North, are in a commanding position. Relentless commodification and ruthless accumulation, central to spontaneous capitalism, have acquired new muscle and urgency to devour whatever space and possibilities have existed for petty production and the peasantry. Extreme asymmetries in economic power between North and South, backed by the current rules of the game, are taking a heavy toll on peasants and agricultural workers in the latter; in relatively unfashionable strands of literature, it is still known as imperialism/neocolonialism! We are reminded of a perceptive quip by Richard Levins: ‘[A]griculture is not about producing food but about profit. Food is the side-effect’ (Levins, 2010, p. 3). But even the ‘side-effect’ becomes an unattainable luxury for close to a billion human beings under the global economic dispensation. As we had concluded in a recent paper (Jha & Yeros, 2019, p. 27), currently hegemonic GAVSs are massively ‘stacked against the overwhelming majority of the agricultural population in the South…resulting in the transfer of assets, wealth and incomes from the vulnerable masses to richer classes and countries’. Neoliberal models of agribusinesses, which are central to contemporary GAVSs, are part of the problem, and can never be a solution if the overwhelming majority of humanity must have the opportunity for a dignified economic and social existence in the foreseeable future. Of course, there is also the matter of survival of Planet Earth, which can hardly be brushed aside as exaggerated hysteria!

NOTES 1. There were occasional doses of investments from the former to the latter, largely limited to infrastructure – for instance, in the railways in India by the British – to facilitate extraction of resources. But, in general, any investments in productive activities were largely absent. 2. For a sample of recent important contributions, interested readers may refer to several articles by Foster and his colleagues in Monthly Review. Further, there are quite a few impressive books within Marxist political economy engaging with this theme during the last two decades; see Amin (2010, 2011), Barrientos (2019), Foster and McChesney (2012), Nathan, Tiwari and Sarkar (2016), Screpanti (2014) and Suwandi (2019). 3. Several important journals such as Agrarian South, Review of Agrarian Studies, Journal of Peasant Studies and Journal of Agrarian Change, among others, are important repositories with detailed engagements on these issues. In 2019, an issue of Agrarian South focused on contemporary GAVSs. For recent books that provide overviews of global trajectories in the longue durée and for recent periods, see Magdoff, Foster and Buttel (2000); Magdoff and Tokar (2010); Mazoyer and Roudart (2006); Moyo, Jha and Yeros (2019). 4. For a couple of recent helpful overviews of these issues see Agrarian South (2019); Magdoff and Tokar (2010); Moyo et al. (2019); Patel (2007); Scherrer and Radon (2019). 5. LABHS: high-skilled labour compensation (share in total labour compensation); H_HS: hours worked by high-skilled persons engaged (share in total hours); H_EMP: total hours worked by persons engaged (millions); LAB: labour compensation (in millions of national currency).

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276  Handbook on critical political economy and public policy Amin, S. 2010, The Law of World Wide Value, New York: Monthly Review Press. Amin, S. 2011, Global History: A View from the South, Cape Town: Pamazuka Press. Amin, S. 2013, The Implosion of Contemporary Capitalism, New York: Monthly Review Press. Amin, S. 2019, ‘The new imperialist structure’, Monthly Review, 71 (3), 1 July, accessed 4 November 2021 at https://​monthlyreview​.org/​2019/​07/​01/​the​-new​-imperialist​-structure/​. Bagchi, A.K. 1982, Political Economy of Underdevelopment, Cambridge, UK: Cambridge University Press. Bagchi, A.K. 2005, Perilous Passage: Mankind and the Global Ascendancy of Capital, London: Rowman & Littlefield. Baldwin, R. 2013, ‘Global supply chains: why they emerged, why they matter, and where they are going’, in D.K. Elms & P. Low (eds), Global Value Chains in a Changing World, Geneva: WTO Publications, pp. 13–60. Baldwin, R. 2016, The Great Convergence: Information Technology and the New Globalization, Cambridge, MA: Harvard University Press. Baran, P. 1957, The Political Economy of Growth, New York: Monthly Review Press. Barnet, R. & Muller, R. 1974, Global Reach: The Power of Multinational Corporations, New York: Simon & Schuster. Barrientos, S. 2019, Gender and Work in Global Value Chains, Cambridge, UK: Cambridge University Press. Basu, K. 2016, ‘Globalization of labor markets and the growth prospects of nations’, Journal of Policy Modelling, 38 (4), 656–69. Chaudhri, K. 1978, The Trading World of Asia and the English East India Company 1660–1760, Cambridge, UK: Cambridge University Press. Clapp, J. 2015, ‘ABCD and beyond: from grain merchants to agricultural value chain managers’, Canadian Food Studies, 2 (2) 126–35. Elms, D.K. and Low, P. (eds) 2013, Global Value Chains in a Changing World, Geneva: WTO Publications. Epstein, G. 2005, Financialization and the World Economy, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Feenstra, R.C., Inklaar, R. & Timmer, M.P. 2015, ‘The next generation of the Penn World Table’, American Economic Review, 105 (10), 3150–82. Foster, J.B. & McChesney, R. 2012, The Endless Crisis: How Finance Capital Produces Stagnation and Upheaval from USA to China, New York: Monthly Review Press. GRAIN 2010, ‘Global agribusiness: two decades of plunder’, Seedling, 13 July, accessed 19 December 2022 at https://​grain​.org/​article/​entries/​4055​-global​-agribusiness​-two​-decades​-of​-plunder. Hymer, S. 1979, The Multinational Corporation, Cambridge, UK: Cambridge University Press. Jha, P., Chambati, W. & Ossome, L. 2021, Labour Questions in the Global South, London: Palgrave Macmillan. Jha, P., Moyo, S. & Yeros, P. 2017, ‘Capitalism and labour reserves’, in C. Chandrasekhar & J. Ghosh (eds), Interpreting the World to Change It: Essays for Prabhat Patnaik, Delhi: Tulika Books, pp. 205–37. Jha, P. & Yeros, P. 2019, ‘Global agricultural value systems in the South: some critical issues at the current juncture’, Agrarian South: Journal of Political Economy, 8 (1–2), 14–29. Jha, P. & Yeros, P. 2021, ‘Labour questions in the South: back to the drawing board, yet again’, in P. Jha, W. Chambati & L. Ossome (eds), Labour Questions in the Global South, Delhi: Springer, pp. 19–48. Lenzen, M., Kanemoto, K., Moren, D. & Geschke, A. 2012, ‘Mapping the structure of world economy’, European Science and Technology, 46 (15), 8374–81. Levins, R. 2010, ‘Why programs fail’, Monthly Review, 61 (10), accessed 19 December 2022 at https://​ m​onthlyrevi​ewarchives​.org/​index​.php/​mr/​article/​view/​MR​-061​-10​-2010​-03​_3. Magdoff, H. 1978, Imperialism: From Colonial Age to Present, New York: Monthly Review Press. Magdoff, F., Foster, J.B. & Buttel, F.H. 2000, Hungry for Profit: The Agribusiness Threat to Farmers, Food and the Environment, New York: Monthly Review Press. Magdoff, H. & Sweezy, P. 1987, Stagnation and Financial Explosion, New York: Monthly Review Press.

Global exploitation chains in agriculture  277 Magdoff, F. & Tokar, B. 2010, Agriculture and Food in Crisis: Conflict Resistance and Renewal, New York: Monthly Review Press. Marx, K. [1887] 1995–96, Das Capital, Volume 1: The Process of Capitalist Production, Moscow: Progress Publishers. Mazoyer, M. & Roudart, L. 2006, A History of World Agriculture: From Neolithic Age to the Current Crisis, London: Earthscan. Mazzucato, M. 2017, The Value of Everything: Making and Taking in the Global Economy, New York: Public Affairs. Moyo, S., Jha, P. & Yeros, P. 2019, Reclaiming Africa: Scramble and Resistance in the 21st Century, Singapore: Springer. Murphy, S., Burch, D. & Clapp, J. 2012, Cereal Secrets: The World’s Largest Grain Traders and Global Agriculture, Oxford: OXFAM International. Nathan, D., Tiwari, M. & Sarkar, S. 2016, Labour in Global Value Chains in Asia, Cambridge, UK: Cambridge University Press. Ness, I. 2015, Southern Insurgencies: The Coming of the Global Working Class, London: Pluto Press. Organisation for Economic Co-operation and Development (OECD) 2021, Agricultural Policy Monitoring and Evaluation 2021: Addressing the Challenges Facing Food Systems, Paris: OECD Publishing. Patel, R. 2007, Stuffed and Starved: The Hidden Battle for the World Food System, New York: Melville House Publishing. Patnaik, P. 2009, The Value of Money, Delhi: Tulika Books. Patnaik, P. 2016, ‘Capitalism and its current crisis’, Monthly Review, 67 (8), 1 January, accessed 19 December 2022 at https://​monthlyreview​.org/​2016/​01/​01/​capitalism​-and​-its​-current​-crisis/​. Patnaik, U., Moyo, S. & Shivji, I. 2011, The Agrarian Question in a Neoliberal Era: Primitive Accumulation and the Peasantry, Cape Town: Pamazuka Press. Patnaik, U. & Patnaik, P. 2021, Capitalism and Imperialism: Theory, History, and the Present, New York: Monthly Review Press. Phillips, N. & Mieres, F. 2015, ‘The governance of forced labour in the global economy’, Globalizations, 12 (2), 244–60. Pollin, R., Baker, D. & Epstein, G. 1998, Globalization and Progressive Economic Policy, Cambridge, UK: Cambridge University Press. Prakash, O. (ed.) 1997, European Commercial Expansion in Early Modern Asia, London: Routledge. Roach, S. 2004, ‘How global labour arbitrage will shape the world economy’, Global Agenda, 27 August, accessed 19 December 2022 at http://​www​.​globalagen​damagazine​.com/​2004/​stephenroach​.asp. Sahr, R. 2018, Conversion Factors: Individual Year Conversion Factor Tables, 2017, Corvallis, OR: Oregon State University. Scherrer, C. 2018, ‘The disrupted passage from an agrarian-rural to an industrial-urban workforce in most countries in the Global South’, Agrarian South: Journal of Political Economy, 7 (3), 301–19. Scherrer, C. 2021, ‘The “nested” power of TNCs: smallholders’ biggest challenge’, Agrarian South: Journal of Political Economy, 10 (2), 391–403. Scherrer, C. & Radon, K. 2019, Occupational Safety and Health Challenges in Southern Agriculture, Munich: Rainer Hampp Verlag. Screpanti, E. 2014, Global Imperialism and the Great Crisis: The Uncertain Future of Capitalism, New York: Monthly Review Press. Subramanian, L. 2016, The Sovereign and The Pirate: Ordering Maritime Subjects in India’s Western Littoral, Delhi: Oxford University Press. Suwandi, I. 2019, Value Chains: The New Economic Imperialism, New York: Monthly Review Press. Suwandi, I., Jonna, J.R. & Foster, J.B. 2019, ‘Global commodity chains and the new imperialism’, Monthly Review, 70 (10), 1 March, accessed 19 December 2022 at https://​monthlyreview​.org/​2019/​ 03/​01/​global​-commodity​-chains​-and​-the​-new​-imperialism/​. Sweezy, P. 1994, ‘The triumph of finance capital’, Monthly Review, 46 (2), 1 June, accessed 19 December 2022 at https://​monthlyreview​.org/​1994/​06/​01/​the​-triumph​-of​-financial​-capital/​. Sweezy, P. & Baran, P. 1966, Monopoly Capitalism: An Essay on American Economic and Social Order, New York: Monthly Review Press.

278  Handbook on critical political economy and public policy Thomson, J. 1994, Mercenaries, Pirates, Sovereigns: State Building and Extra Territorial Warfare in Early Modern Europe, Princeton, NJ: Princeton University Press. Timmer, M.P., Dietzenbacher, E. & Los, B. et al. 2015, ‘An illustrated guide to the World Input–Output Database: the global automotive production’, Review of International Economics, 23 (3), 575–605. Tracy, J.D. 1991, The Political Economy of Merchant Empire: State, Power and World Trade, Cambridge, UK: Cambridge University Press. World Input–Output Database (WIOD) 2013, Socio Economic Accounts, 2013, accessed 19 December 2022 at https://​web​.archive​.org/​web/​20211102093658/​http://​www​.wiod​.org/​release13. World Input–Output Database (WIOD) 2016, Socio Economic Accounts, 2016, accessed 19 December 2022 at https://​www​.rug​.nl/​ggdc/​valuechain/​wiod/​wiod​-2016​-release/​.

19. The development of labor policies in China: from passive revolution to eroding hegemony Elaine Sio-ieng Hui

Since China transitioned from a state-socialist economy into a market-driven one in 1978, the country’s labor policies have witnessed characteristic changes over the past four decades. Drawing on the insights of Antonio Gramsci (1971, 1988), this chapter periodizes the development of labor policies in China into three stages: passive revolution, emergent hegemony, and eroding hegemony. My major argument is that under the rule of Deng Xiaoping and Jiang Zemin (from the late 1970s to 2003), the party-state pushed forward a passive revolution in the process of integrating China into the global economy. China’s labor policies at the time served the purpose of introducing capitalism to the country. During the Hu Jintao and Wen Jiabao administration (from 2003 to 2013), China’s economy, based on a labor-intensive and export-oriented model, continued to grow. Many labor policies were oriented toward ameliorating the negative impact of the economic reform on workers and securing their consent to the ruling bloc. This had contributed to the emergence of the incipient hegemony of the ruling class in the country. In the Xi Jinping era (from 2013 onward), the party-state has weakened labor protection, flexibilized employment relations, shrunk the social space opened up by the former administration, tightened control over actors outside the party-state, and re-emphasized the role of party organs. This has impaired the hegemonic foundation built by the ruling class previously. The issue of securing hegemony by the Chinese ruling class is important for students of labor and class politics. China has the rapid development of the world’s largest working class as part of the transformation of China into the workshop of the world, with the potential for mass social upheaval that could shake the foundations of Chinese society. To what extent the ruling class can sustain hegemony is key to the working-class formation and the stability of the political regime in the world’s second largest economy. This chapter examines labor policies concerning rural migrant workers, who have constituted the largest segment of working population in China. I define labor policies broadly as rules, regulations, and laws made by the government that directly or indirectly affect workers. Specifically, I focus on policies in four major areas: (1) employment relations, which concern conditions under which workers sell their labor power; (2) conflict resolution mechanisms, which concern class conflicts between the capitalist and working classes; (3) trade unions, which concern working-class organizations; and (4) non-union labor organizations, which are also related to working-class organizations. In the rest of the chapter, I first explain my analytical framework in the next section, followed by an elaboration on the periodization of China’s labor policies in the following three sections. In the final section, I summarize my main arguments and conclude the chapter by underscoring labor policy recommendations that befit the current socio-political and economic situation of China. Some of the arguments I put forward in this chapter were explicated in my past writings (see, Hui, 2016, 2017, 2018, 2020; Hui & Chan, 2012); this chapter provides a more holistic view of these arguments. My findings and analyses are drawn from data collected from my long-term research on China 279

280  Handbook on critical political economy and public policy from 2009 onward, including over 200 interviews with workers, scholars, labor activists, trade union officials, labor lawyers, participant observations, and documentary research.

THEORETICAL FRAMEWORK Gramsci’s ideas of passive revolution and hegemony are useful for understanding the development of labor policies in China. Comparing the French Revolution and the Italian Risorgimento, Gramsci argued that the former was actively initiated by the popular masses and led by the bourgeoisie, resulting in a transition into a capitalist state. In contrast, the Italian Risorgimento was a passive revolution, marked by state-engineered social and political reform that was built upon the ruling class’s domination rather than popular support; it led to ‘an institutional framework consonant with capitalist property relations’ (Morton, 2007, p. 610). According to Gramsci, a passive revolution leading to a capitalist social formation is usually backed by the domination and forces of the ruling class, which is, however, without strong hegemonic capacity to acquire the subordinate class’s consent to capitalist development. Cox (1983, p. 167) highlighted that passive revolution is a concept that is ‘particularly apposite to industrializing Third World countries,’ wherein a hegemonic dominant class that is supported by the subordinate class is usually absent. China’s economic reform can be considered a passive bourgeois revolution, guided by strong state intervention that has resulted in the emergence of a capitalist class, an exploited working class, capitalist property relations, and social relations of production (Hui, 2017). In the next section, I show that labor policies during the Deng and Jiang periods aimed to boost this passive revolution. Hegemony is a concept that contrasts with the idea of passive revolution. Gramsci explained how class power is organized by the state in political society and civil society with his theorization of ‘coercion’ and ‘hegemony.’ Following the argument of Marx, Engels, and Lenin, he held that the coercive machinery of the state (what Gramsci called political society) helps maintain the capitalist class’s domination (Gramsci, 1971, 1988). At the same time, the dominant class seeks to obtain the active consent of the working class to its leadership by establishing ‘its own moral, political and cultural values as conventional norms of practical behavior’ (Femia, 1987, p. 3). This capitalist class ideological ascendency over the subaltern classes is what Gramsci called hegemony. Due to the intricate workings of coercion and hegemony, working class anti-capitalist consciousness and rebellions against capitalism do not appear as automatically as vulgar Marxism1 in Gramsci’s time predicted. Many subsequent scholars have delved into Gramsci’s insights on hegemony; some have analyzed Asian countries utilizing his theories (Glassman, 2011; Landau, 2008; Sim, 2006). Building on these works, I define hegemony as involving six key elements. First, the exercise of hegemony is to sustain the long-term dominance of the ruling class. Second, hegemony is the active consent obtained by the dominant and ruling class over the subordinate classes by influencing their intellectual, moral, and political worldviews. Third, the capitalist class needs to create a national-popular appearance for its parochial interests in order to acquire workers’ allegiance to their leadership. Fourth, the reproduction of hegemony involves compromises by the dominant class on secondary issues – short-term concessions made to the subaltern class are not unusual. Fifth, hegemony is bulwarked by the application of state coercion; even the most hegemonic state cannot rule without the support of military and physical forces. Sixth, the ruling class’s hegemony is exercised in the unstable and fragile field of socio-political

The development of labor policies in China  281 relations; this means the possibility of a working class counter-hegemony exists. In the third section, I explain how labor policies during the Hu-wen era helped transform the passive revolution into capitalist hegemony by offering workers concessions in exchange for their consent to the leadership of the political and economic elites. In the fourth section, I elaborate on how this hegemonic foundation has been eroding in the Xi era.

A PASSIVE REVOLUTION: FROM DENG TO JIANG (THE LATE 1970S–2003) In the aftermath of the Cultural Revolution, the Chinese Communist Party (CCP) suffered shrinking legitimacy due to a long-stagnant economy and serious unemployment (Gray, 2010; McNally, 2008). Therefore, Deng considered it imperative to embark upon the economic reform from above – a passive revolution. The opening up of China coincided with the overproduction crisis that began in the West in the 1970s. Serving as a spatial fix for Western capitalists, China attracted many foreign corporations (Hung, 2009). This top-down passive revolution has since transformed China into a global manufacturing hub, with an abundantly cheap and unorganized labor force. Capitalist economic achievement and integration into the global economy was a cardinal agenda forcefully put forward by Deng and Jiang. This involved creating a market economy and a capitalist class that were absent in the state-socialist era (for detail, see Hui, 2017, 2018). This also warranted the commodification of labor power, the creation of a labor market, and a capitalist wage-setting mechanism, all of which were achieved partly through labor policies pertinent to employment relations. First, the party-state demolished socialist protections, such as the work unit (danwei) and the rural communes (renmin gongshe) that were responsible for workers’ and farmers’ welfare. Workers and peasants were forced to sell their labor power and to depend on capitalist wage labor relations. Second, the party-state implemented the labor contract system in state-owned enterprises (SOEs) during the 1980s, replacing their life-long employment systems, as well as in the newly emergent non-state sectors (Lau, 1997; Zheng, 1987). Third, by the mid-1990s, the central allocation system was abolished (Yueh, 2004), meaning that all recruitment in SOEs would now be mediated by the once non-existent labor market. Under Jiang’s rule, the 1995 Labor Law was enacted to legalize open-ended contracts, fixed-term labor contracts, and contracts for specific tasks, which offered workers less protection. Fourth, the party-state had executed policies to introduce capitalist wage setting that allows employers to maximize surplus value extraction and minimize the variable capital for production. The 1995 Labor Law formally discarded the socialist values that guided wage setting in Maoist China. Instead, it endorsed the principle of flexibility and efficiency, and linked wage levels to firms’ economic performance. Thus, workers’ wages changed from state-fixed to market-determined, and enterprises were allowed to determine the wage distribution and wage levels of workers (Hui, 2017). To drive the passive revolution, the party-state also had to ensure the passivity and submissiveness of the working class so that the conditions for capital accumulation and political stability can be maintained. This was achieved through labor policies seeking to break down workers’ collective identities and organizations and atomize their struggles. Regarding resolutions of labor conflict, the party-state during this period restored the labor dispute resolution system abolished in 1955 (Zhao, 2009). In 1993, the Regulation on Settlement of Labor

282  Handbook on critical political economy and public policy Disputes in Enterprises was enacted to establish how enterprise-level mediation and arbitration should be conducted. It stated: ‘Emphasis is given to mediation and prompt handling’ (Article 4). The 1994 Labor Law established a unified procedure for handling labor disputes, which includes mediation, arbitration, litigation, and appeal (Chapter X). Overall, the labor dispute settlement mechanisms favored mediation over arbitration and litigation, and mostly relied on an individual-based legal framework. China’s labor laws stress workers’ individual rights (such as those related to wages, pensions, and labor contracts), but their collective rights (such as the rights to strike, to collectively bargain, and to organize) have not been provided for in any meaningful ways (Chen, 2007). Considering the fact that workers’ right to strike was removed from the 1982 Constitution and their rights to collective bargaining have not been properly legalized, it is evident that the restored labor dispute settlement mechanisms were intended to discourage workers from undertaking collective means to resolve conflicts and to enclose them within the atomized legal sphere. Regarding trade unions, during the Maoist era they did not represent workers with regard to management. Rather, the trade unions acted as transmission belts between the party-state and workers. In the stage of passive revolution, the party-state continued to co-opt unions into its ruling structures and ban independent unions. The 1992 Trade Union Law states: ‘Trade unions must abide by and safeguard the Constitution and use the Constitution as the standard for their basic activities, focus on the economic development, adhere to the socialist road and people’s democratic dictatorship, insist on the leadership of the Chinese Communist Party and the guidance of Marxism Leninism’ (Article 4). This reflected the party-state’s trasformismo strategy (Gramsci, 1971): co-opting the subaltern class’s leaders in such ways that the exploited class is put into a passive position. China’s unions have assumed a ‘double institutional identity’ (Chen, 2003, p. 1006), simultaneously playing the role of state apparatus and labor organizations. However, whenever the two roles are in conflict, their function as state apparatus prevails. Added to this, the higher-level trade unions have been incorporated into the government bureaucracy, while the workplace unions remain susceptible to managerial manipulation. Concerning non-union labor organizations, the party-state’s policies had some gray areas. Following the Zhili Toy Factory fire in 1993 and the UN Fourth World Conference on Women held in China in 1995, labor non-governmental organizations (NGOs) targeting rural migrant workers started to emerge. During the period of passive revolution, it was extremely difficult for labor NGOs, which were outside the party-state structure, to register as social organizations. Many of them were unregistered or registered as business units. They were not welcome politically, but the party-state did not eradicate them all. They were mostly service-oriented during Deng and Jiang’s era, providing free legal consultation, labor law education, and so forth. I will end this section with a remark not directly related to labor policies, but relevant to class politics in China. In the period of passive revolution, not only was the capitalist class created, but their political status was also elevated significantly. In 2001, Jiang put forward the principle of ‘Three Representatives,’ which eventually led the party to grant permission for capitalists to join the CCP. Subsequently, capitalists have constituted the largest component of the CCP when compared with other social classes (Hui, 2017). The party-state has abandoned the working class and peasants as its key social class alliance (as during the Maoist period), choosing to instead forge a ‘transformed regime alliance’ with the capital class (Solinger, 2006, p. 178). This is the party-state’s strategy to co-opt the rising capitalist class and create

The development of labor policies in China  283 ‘a new, homogeneous, political-economic historical bloc’ in the reform era (Anderson, 1976, p. 19).

EMERGENT HEGEMONY: THE HU-WEN ERA (2003–13) The Hu-wen administration had different governing strategies from Deng and Jiang; it shifted from a focus on economic development alone to a greater concern with social development. Since the kickstart of its economic reform, China has depended on labor-intensive export industries, fueled by a large inflow of foreign direct investment and abundantly cheap and unorganized workers. This has resulted in serious exploitation of workers, especially after China joined the World Trade Organization in 2001, which in turn has triggered tremendous labor unrest at various points (Chan, 2010; Chan & Hui, 2012; Lee, 2007). The legitimacy of the party-state and the market economy was increasingly contested. As a result, the Hu-wen government became more concerned about social inequality and the wealth gap. It thus implemented more social and labor policies to pacify workers and secure their consent to the leadership of the political and economic elites. Post-Mao China initiated a tremendous slew of economic policies, but its social policies were mainly implemented after the mid-1990s; most were put into place during the Hu-Wen regime (Wang, 2008). I have elaborated elsewhere on two ways through which the party-state built hegemony during this stage (Hui, 2016, 2018; Hui & Chan, 2012): the political project of ‘harmonious society’ (hexie shehui) and the labor law system. First, the Hu-wen government emphasized the construction of a harmonious society, defined as a society ‘in which all the people will do their best, each individual has his/her proper place, and everybody will get along in harmony with each other’ (Holbig, 2006, p. 27). Stemming from the harmonious society idea, ‘harmonious labor relations’ (hexie laodong guanxi) have become a central part of the dominant labor relations discourse. In 2006, then vice-chairman of the All-China Federation of Trade Unions (ACFTU) Xu Zhenhuan said: ‘Labor relations are among basic social relations. Harmonious labor relations form the basis of a harmonious society while social harmony underpins the prosperity and rejuvenation of a nation and the well-being of its people’ (Hui & Chan, 2012, p. 161). Harmonious society and harmonious labor relations are not simply political slogans, but the party-state’s hegemonic effort to shape the political and moral worldviews of workers and to safeguard the ruling class’s dominance by incorporating the working class’s short-term concerns into different social and labor policies (for details, see Hui & Chan 2012). Second, the party-state has built hegemony through the labor law system, which has exercised a double hegemonic effect with regard to capital–labor relations and state–labor relations. According to my research (Hui, 2017, 2018), the labor law system has been able to buffer both the market economy and the party-state from workers’ radical and fundamental criticism through four mechanisms: (1) the normalizing mechanism, which guides workers to see laws as legitimate barometers for measuring employers; (2) the countervailing mechanism, which makes workers believe that laws counteract economic injustice; (3) the concealing mechanism, which makes workers consider the party-state willing to curb economic misdeeds with laws; and (4) the transmuting mechanism, which attributes workplace injustice to local governments, rather than the central government. That said, the hegemonic impact of the labor law system on workers has been uneven. Some workers have granted active consent to the ruling class leadership; some have only rendered passive consent; and some have refused to give any consent at all.

284  Handbook on critical political economy and public policy During the period of emergent hegemony, labor policies largely served a hegemonic purpose. Regarding employment relations, for a long-time Chinese workers’ wages were driven by the race-to-bottom logic. In 2004, the party-state implemented the minimum wage system, which protected workers with a legal wage floor, albeit a low one. Also, workers were often hired without a contract; they thus had no way to prove their employment relations with their bosses when filing labor cases in courts. In 2008, the government promulgated the Labor Contract Law, which makes it the legal obligation of employers to sign labor contracts with their employees. Moreover, despite workers’ rights to pension and other types of social insurance enshrined by the constitution, these rights were rarely fulfilled as employers often did not comply with them (Chan, 2010). In 2011, the Hu-wen government enacted the Social Insurance Law, which stipulates that employers must buy social insurance for their workers. Since the implementation of these laws, increasingly, more employers have lived up to the legal obligations of paying legal minimum wages and social insurance fees and signing contracts with their workers (Rickne, 2013). Because of the legal concessions given to workers through these laws, many workers believed that the party-state was protective of workers and that it hoped to mitigate the negative impacts of the market on the working class (Hui, 2018). Regarding conflict resolution, the Hu-wen administration’s line was not much different from their predecessors’. The conflict resolution system still relied heavily on mediation and arbitration and emphasized individual rights rather than collective ones. However, to deal with labor discontent more effectively, in the period of emergent hegemony, the Hu-wen government passed the Labour Dispute Mediation and Arbitration Law in 2007. The law simplifies the legal procedure of mediation and arbitration, reducing financial and time costs of workers using these procedures. It also specifies details of the four-stage system (i.e., mediation, arbitration, litigation, and appeal). Concerning trade unions, the policies implemented in this phase sought to pacify aggrieved workers. For many years, rural migrant workers were not considered to have a proper worker status and were thus ineligible to join the official trade unions. In 2003, this policy was changed to allow them to join unions. Also, beginning in the late 1990s, the ACFTU made greater effort to establish union branches in foreign-owned enterprises (FIEs), which tended to have a high concentration of rural migrant workers. However, these policies were not enough to tame workers’ collective actions, which continued to grow in the country (Chan, 2010). The 2010 Honda strike and subsequent strike waves it triggered put strong pressure on ACFTU and its affiliates to reform themselves. To forestall workers’ collective bargaining by riot, trade unions started to promote a party-state-led approach to collective negotiation (Hui & Chan, 2015). They also promoted pilot democratic union elections at the plant level, though many of these elections were only indirect and quasi-democratic. Additionally, worker representatives independent of the official trade unions were allowed to negotiate collectively with employers on behalf of workers in collective actions (Chen & Yang, 2017). Concerning labor organizations other than the official trade unions, this period witnessed a stronger tolerance of such organizations by the party-state, especially in Southern China. After the 2010 Honda strike, labor NGOs’ involvement in collective labor actions increased. This strike, of an unprecedented nature in reform China, was settled with a legal scholar representing the strikers bargaining with the factory (Chan & Hui, 2012). Thereafter, the Guangdong government was more tolerant of external actors’ involvement in labor strikes because they helped to coordinate loosely organized workers in wildcat actions and to transform the uncontrollable strikes into manageable negotiations. As a result, labor NGOs were able to intervene

The development of labor policies in China  285 in workers’ collective fights at lower political risk, though they were still constantly subjected to harassment and surveillance by local governments. Additionally, since the early 2010s, the Guangdong government began to make it easier for social organizations to register themselves under the Bureau of Civil Affairs, as they were no longer required to attach to a supervisory unit from the government. Generally, China witnessed a growth of civil society in this phase, with the growth of labor NGOs coinciding with a similar flowering of civil rights groups, feminist organizing, and student activism, among others. Furthermore, the Ministry of Civil Affairs had started to use the strategy of ‘welfarist incorporation’ to govern social groups (Howell, 2015). It subcontracted the provision of services for the elderly, disabled, youth, and others to non-profit organizations. It also subcontracted welfare and educational services for workers to labor organizations that were deemed politically manageable. However, although they operate independently of the unions and the party-state, the growth of labor NGOs may not necessarily be detrimental to the construction of capitalist hegemony. As highlighted in my work (Hui, 2020), some labor NGOs only played the role of semi-organic intellectuals or unqualified intellectuals by focusing on helping workers exercise their individual or collective rights within the hegemonic boundaries. These NGOs often do not fundamentally challenge the political and economic status quo. There are, however, some labor NGOs that acted as what Gramsci refers to as organic intellectuals of the working class, in that that they challenged the kind of common sense associated with capitalist economic relations and the juridico-political common sense the state reproduces, constructed a kind of good sense and enhanced workers’ class and political consciousness, and built up workers’ collectivity, encouraging workers to take concerted actions and engage in system-transforming initiatives. The Hu-wen era was characterized by incipient capitalist hegemony achieved partly through the policies outlined above, but such hegemony was not robustly established. Studies showed that workers were not completely following the leadership of the ruling class; some have actively staged protests to defend their interests (Chan, 2010; Lee, 2007) (though labor protest does not necessarily equal a self-conscious challenge to capitalist hegemony). As previously mentioned, my own research also showed that workers had given varying degrees of consent (or dissent) to the party-state and the market economy.

ERODING HEGEMONY: XI’S REGIME (2013 ONWARD) The Xi regime is characterized as ‘encapsulating authoritarianism’ (Howell & Pringle, 2019, p. 236) because power has been centralized in the hands of a few political elites (through, for instance, anti-corruption campaigns that have removed alternative centers of power, and the repeal of presidential term limits), the government has become more controlling of social actors, and social space opened up in the previous phase has been closed down. The Xi administration has continued to emphasize the ‘harmonious society’ and attempted to mobilize the popular masses’ support for capitalist development by propagating the discourses of pursuing a ‘moderately prosperous society’ and the ‘Chinese dream.’ However, the incipient hegemony built during the Hu-wen era has become more fragile under the Xi administration. The latter has not been as willing to offer concessions to the working class and has implemented policies to flexibilize work arrangements, thereby harming the interests of workers and weakening the foundation of hegemony.

286  Handbook on critical political economy and public policy Pertinent to employment relations, the Xi government has reversed the material concessions given to workers as guaranteed by the 2004 Provision on Minimum Wages. Article 10 of the Provision states that ‘the standards on minimum wages shall be regulated at least once every two years,’ but in 2015 the Ministry of Human Resources and Social Security issued a notice highlighting that provincial governments should ‘properly slow down the adjustment frequency.’2 The notice said the legal minimum wage should be adjusted every two to three years, instead of every two years. Afterward, the Guangdong government increased the minimum wage rate in 2018, instead of 2017 (two years from when the rate was last adjusted). Twenty-one of 31 provinces were supposed to adjust the legal minimum wage levels in 2019 or 2020 but had not done so as of November 2020.3 Moreover, the Xi government has flexibilized employment relations and work arrangements to favor employers. Workers with flexible employment went up from 4 percent in 2003 to 18.7 percent in 2017 (Wen, 2020). During the pandemic, the trend of labor flexibilization has worsened, reflected by the rise of labor sharing between firms.4 Firms started to lend their redundant work force to other firms that needed labor power. For example, it has become common during the pandemic for businesses to share their workers with companies in the delivery, retail, and service industries.5 The Ministry of Human Resources and Social Security did not criticize this trend but stated in February 2020 that labor sharing should not be based on making profit. In September 2020, the Ministry issued a Notice on Guidelines and Services Related to Labor-Sharing [Guangyu zuohao gongxiang yonggong zhidao he fuwu de tongzhi]. The Notice provides a basic regulatory framework for labor-sharing, but the Ministry’s previous emphasis on not making a profit through labor-sharing was conspicuously absent. Despite the government’s claim that labor-sharing can reduce unemployment, there have been increasing worries that labor-sharing is ‘an outgrowth of “labor dispatching” and other flexible employment methods’ (Wen, 2020, n.p.) and that labor-sharing will be used to undermine labor standards over the long term. In October 2020, the General Office of the CCP Central Committee and the General Office of the State Council issued the Implementation Plan for the Pilot Comprehensive Reform of Building a Pilot Demonstration Zone of Socialism with Chinese Characteristics in Shenzhen. Among other things, the Implementation Plan provides guidance on how to make the labor mobility system in Shenzhen befit that of a mega-city. It authorizes the Shenzhen government to revise the 2008 Regulations for the Promotion of Harmonious Labor Relations in the Shenzhen Special Economic Zone to extend the application of the special working hours system to more industries and positions. Upon the approval and supervision from the labor bureau, currently employers can use a special work hours system, which includes the comprehensive work hour system (CWHR) and non-fixed work hour system (NFWHS). CWHR allows employers to count workers’ accumulated working hours over a period (e.g., weekly and monthly), instead of on a daily basis as in the standard work hour system that is more commonly used.6 Overtime compensation is based on the extra hours worked during the specified period, with the overtime hours usually less than when based on a daily basis under the standard work hour system. Under the NFWHS, employees obtain a fixed salary and are not entitled to overtime compensation. The Implementation Plan’s instruction to extend the application of the special work hours system is seen as a stronger effort to make work hours flexible in more industries and firms.7 Concerning conflict resolution, thus far, the Xi government has not implemented any new, major policies, even though working conditions of workers have not improved significantly

The development of labor policies in China  287 and labor protests are still commonplace. This has distinguished the current government from the Hu-wen government, which executed new policies on conflict resolutions to pacify workers. Concerning trade unions, during the period of eroding hegemony there has not been major union reform as in the emergent hegemony period. The union election and collective bargaining initiatives started by the Hu-wen administration have been slowed down, if not halted altogether. The Xi government does not tolerate labor intervention from actors outside the party-state structure and has considered the official trade unions as the only legitimate actor to handle labor conflicts on behalf of workers. The party-state has, however, repeatedly ordered ACFTU top officials to improve representation of workers. In 2015, Xi highlighted that trade unions should eradicate their ‘regimentation, bureaucratization, elitism and frivolousness’ and increase their ‘political consciousness, progressiveness, and popular legitimacy.’8 In 2018, Xi demanded that ACFTU’s new leaders ‘focus on the most pressing, most immediate issues that concern employees, and fulfil the obligation of safeguarding workers’ rights and interests.’9 However, ACFTU and its affiliates have not made any significant progress to reform themselves, and their lack of representativeness has continuously weakened the foundation of hegemony, as is explained below. Concerning labor groups, the Xi government has tightened control over these organizations (and other social groups). In 2017, the government enacted the Law on the Management of Foreign Non-Government Organizations Activities, which stipulates that social organizations may receive financial support from overseas NGOs only if the latter are registered in China. This means that they would be managed by both the police and a supervisory unit from the government. This is a measure to restrict the financial income of labor and social groups. Additionally, the Xi government has continued to use welfarist incorporation, a strategy first developed under the Hu-wen regime, to tame labor groups. The government subcontracts services to the elderly, the disabled, youth, and others to non-profit organizations. It also subcontracts welfare and educational services for workers to labor organizations that are deemed politically manageable. The venture philanthropy program (gongyi touchuang) has become common in Guangzhou, Shanghai, and other parts of the country (Jing & Gong, 2012). Through welfarist incorporation, the Xi administration has restricted labor organizations to ‘acting as apolitical service providers rather than campaigners and organizers’ (Howell & Pringle, 2019, p. 238). If labor groups were not converted by the welfarist incorporation strategy, the Xi government has shown a willingness to use consolidated repression to deal with them (Fu & Distelhorst, 2018). In 2015, after the high-profile arrests of five feminist activists and over 200 rights lawyers and legal assistants, seven labor NGO activists from Guangdong were also arrested. In 2018, the government repressed an effort by workers at the Jasic welding equipment factory in Shenzen to build a workplace union, arresting the worker leaders and over 50 members of a network of supporters across the country. In 2019, four labor activists from various labor organizations and the former editor of the Collective Bargaining Forum, a website promoting collective bargaining, were arrested. At the end of 2019 and in early 2020, another labor activist and two volunteers running a website to advocate for the rights of sanitation workers in Guangzhou were detained for 15 days (Hui, 2021). During the Xi era, the foundation of the emergent hegemony has been eroding in several ways. First, the unevenly developed economy and growing social inequality has sown seeds for the erosion of hegemony. To acquire a universal appeal, the capitalist class needs to

288  Handbook on critical political economy and public policy address and incorporate the subaltern class’s interests into theirs. Capitalist hegemony is at its strongest when it is built upon economic concessions given by the dominant class in such ways that the working class feels ‘shared’ interests with the former, and as a result render their allegiance to it. The Hu-wen government had rendered more concessions to workers through various labor laws and policies, but the Xi regime is less concessionary and has flexibilized employment relations, as previously explained. Because of this, it is possible that latent worker dissatisfaction with the economy and social inequality will burst into overt resistance against the ruling bloc’s leadership should enabling conditions emerge in future. Second, the foundation of emergent hegemony is further weakened by trade unions in the Xi era. Trade unions in Western capitalist societies have helped reproduce capitalist hegemony. In both the post-war US and Britain, trade unions were incorporated into the production politics of mass production. Acting as the ‘partners’ to capitalists, they sought to defend worker interests within the capitalist framework. By concentrating on collective bargaining and agendas compatible with capitalism, they were able to wrest a certain degree of short-term material gains from employers (Rupert, 1995; Vicars, 2000). In contrast, Chinese trade unions have not performed such functions. While trade unions in the Hu-wen era started to promote more effective collective bargaining and implement pilot union elections to boost their representativeness, these efforts have been aborted in the Xi period. All in all, Chinese trade unions have not developed a hegemonic capacity in the same way as their Western counterparts, and they have become a key factor in contributing to the precariousness of capitalist hegemony. Third, labor NGOs to a certain extent could play some roles of trade unions through, for example, facilitating strike settlement and collective bargaining, and providing legal consultation. However, the Xi government has excluded and repressed them. Although labor NGOs had helped resolve many collective labor disputes in the Hu-wen era, the Xi regime no longer permits them to undertake such activities and has restricted the domain within which they could operate. Many labor groups were eradicated. As a result, the material discontent of workers could not be ameliorated with the support of labor NGOs (nor by trade unions). Workers’ discontent could more easily be turned into distrust or opposition to the leadership of the ruling class.

CONCLUSION Drawing upon the theoretical insights of Gramsci (1971, 1988), this chapter establishes that the Chinese economic reform inaugurated since 1978 has been a top-down passive revolution, rather than a bottom-up and bourgeoisie-led revolution akin to those that had emerged in some Western countries. This passive revolution was started by Deng and had been carried on in the Jiang’s era. Having carried out capitalist economic reforms for decades, the Chinese state under the Hu-wen government had changed its role from forcefully steering the country’s passive revolution through coercive tactics to establishing capitalist hegemony in such ways that the working class was led to render its acquiescence to the ruling class’s leadership. The emergent hegemony constructed during this period, however, has started to weaken under the Xi regime. In this eroding hegemony period, workers still face tremendous social inequality and are subjected to the trend of labor flexibilization, but the party-state has become less concessionary. Trade unions are unable to address worker grievances effectively. Labor groups are repressed and forbidden to intervene in collective labor disputes.

The development of labor policies in China  289 The development of China’s labor policies has corresponded to this periodization. Under Deng and Jiang’s rule, labor policies were used to support the implementation of capitalism. In the Hu-wen era, labor policies were oriented to mitigate the negative impact of the economic reform on the working class and to secure workers’ consent to the ruling bloc. In the Xi era, labor policies are less concessionary and more pro-employer, and are used to shrink the social space opened up in the former stage, tighten control over actors outside of the party-state, and re-emphasize the role of party organs. This has weakened the hegemonic foundation built previously. Table 19.1 summarizes the labor policies implemented in these three different stages). Table 19.1  

A summary of labor policies in three different periods in China Passive Revolution

Emergent Hegemony

Eroding Hegemony

(Deng to Jiang)

(Hu-wen)

(Xi)

Employment

Laws and policies seeking to

Implemented the minimum wage

Regressive minimum wage

relations

implement capitalism. For instance,

system; enacted the Labor Contract policies; policies that flexibilize

demolishing socialist protection;

Law and Social Insurance Law

work arrangements

No major new policies

abolishing the life-long employment system and central allocation system; introducing the labor contract system and capitalist wage-setting mechanism Labor dispute

Restored labor dispute resolution

Enacted the Labor Dispute

resolution

mechanism; unified procedures

Mediation and Arbitration Law

concerning mediation, arbitration, litigation, and appeal Trade unions

Trade unions controlled by the

Allowed migrant workers to join

Efforts to promote union

party-state and management; not

unions; unionization campaign in

elections and collective

many reform programs

FIEs; promoted democratic union

bargaining have slowed down;

elections and collective bargaining

emphasis on the central role of

Allowed to intervene in strikes and

unions in labor relations No room for labor groups to

recognized but were allowed to

collective bargaining; registration

intervene in strikes and collective

operate without proper registration

of social organizations made easier; bargaining; escalating state

Labor organizations Labor groups’ status not properly

subcontracting services to labor

suppression; enactment of the

organizations and other social

Foreign NGO law; continued

groups (welfare incorporation

use of the welfare incorporation

strategy)

strategy

In China today, there are both opportunities and challenges for labor activism. Regarding opportunities, Xi’s policies seeking to flexibilize employment relations are likely to weaken the concessionary base of hegemony and sow seeds for workers’ distrust of the ruling class. Moreover, while the Anglo-Saxon ruling class converted class antagonism into class compromise through concessionary mechanisms associated with trade unions (Rupert, 1995; Vicars, 2000), such mechanisms are malformed in China. Implementation of democratic trade union elections and a meaningful collective bargaining system at China’s workplaces are still largely absent. As a result, the working people in China are more likely to overcome the hegemony of the ruling class to stage resistance. Paradoxically, as the Xi regime has chosen to govern civil society in a highly repressive manner, the room for organizing struggles has become more limited and the cost higher. However, experiences of other authoritarian countries in Asia, such as South Korea and Taiwan, show that resistance is not totally impossible (Ho,

290  Handbook on critical political economy and public policy 2006; Koo, 2001). Activists with divergent backgrounds (e.g., students, intellectuals, leftists, religious groups, among others) in these countries had formed historical blocs to organize workers, educate the public, advocate for political and economic justice, and initiate protests when political opportunities presented themselves. How labor activists and workers should build such a historical bloc in current China is a subject worthy of further deliberation.

NOTES 1. Vulgar Marxism refers to the idea that there is a deterministic relation between the structure and superstructure and that this relation has driven the development of human society in law-like ways. 2. See https://​www​.ndrc​.gov​.cn/​xwdt/​ztzl/​gdqjcbzc/​guangdong/​201801/​t20180119​_1209687​.html, accessed November 22, 2020. 3. See https://​serviceworkercn​.com/​informalization​-2020/​?fbclid​=​IwAR1k6hR​_W​TDfdLYLxhh​U mf5hH1R0B​_​_bFI​-qumJXoe9yl6​-tgLh​_8MSOYIg, accessed November 22, 2020. 4. S. Qui & T. Munroe (2020, August 27), ‘We share workers: Chinese factories redeploy staff to weather pandemic blow,’ Reuters, accessed November 22, 2020 at https://​www​.reuters​.com/​article/​ us​-health​-coronavirus​-china​-labour/​we​-share​-workers​-chinese​-factories​-redeploy​-staff​-to​-weather​ -pandemic​-blow​-idUSKBN25N0XL. 5. X. Cai (2020, February 5), ‘“Employee sharing” an emerging trend amid COVID-19 epidemic,’ Sixth Tone, accessed November 22, 2020 at https://​www​.sixthtone​.com/​news/​1005235/​employee​ -sharing​-an​-emerging​-trend​-amid​-covid​-19​-epidemic. 6. H. Butcher Piat (2018, June 27), ‘Work hour systems in China,’ China Briefing, accessed November 23, 2020 at https://​www​.china​-briefing​.com/​news/​work​-hour​-systems​-china/​. 7. See https://​matters​.news/​@​timianlaodon, accessed November 23, 2020. 8. China Labour Bulletin (2020, February 17), ‘Holding China’s trade unions to account,’ accessed November 25, 2020 at https://​clb​.org​.hk/​content/​holding​-china​%E2​%80​%99s​-trade​-unions​-account. 9. M. Lau (2018, November 25), ‘Xi Jinping tells China’s trade union to put workers first, but will it take any notice?,’ South China Morning Post, accessed November 25, 2020 at https://​www​.scmp​ .com/​news/​china/​politics/​article/​2173824/​xi​-jinping​-tells​-chinas​-trade​-union​-put​-workers​-first​-will​ -it.

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292  Handbook on critical political economy and public policy Vicars, R. 2000, Manipulating Hegemony: State Power, Labour and the Marshall Plan in Britain, London: Macmillan. Wang, S. 2008, ‘The “great transformation”: the double movement in China (Karl Polanyi),’ boundary 2, 35 (2), 15–47. Wen, X. 2020, ‘When companies “share” staff, workers lose out,’ Sixth Tone, May 21, accessed October 2, 2020 at https://​www​.sixthtone​.com/​news/​1005690/​when​-companies​-share​-staff​%2C​-workers​-lose​ -out Yueh, L.Y. 2004, ‘Wage reforms in China during the 1990s,’ Asian Economic Journal, 18 (2), 149–64. Zhao, Y. 2009, ‘China’s new Labor Dispute Resolution Law: a catalyst for the establishment of harmonious labor relationship?’, Comparative Labor Law & Policy Journal, 30 (2), 409–30. Zheng, H.R. 1987, ‘An introduction to the Labor Law of the People’s Republic of China,’ Harvard International Law Journal, 28 (2), 385–432.

20. The political economy of minimum wage policies Hansjörg Herr

Minimum wages and their adjustment are one of the most debated and controversial labour market issues, not only among trade unions, employers’ organizations and governments, but also between economists belonging to different economic paradigms. This should come as no surprise, as minimum wages potentially affect production and employment, price levels and structures, distribution among wage earners, and the difference between wages and profits. In most countries, trade unions and employers’ associations are in one way or the other involved in minimum wage development. In almost all cases, governments play the key role in minimum wage development (see below). Changes to minimum wages are a significant intervention in labour markets that are based on political decisions influenced by different interests and theoretical convictions. Minimum wages are fixed as wages per hours worked or the work performed during a given period of time. They cannot be reduced by collective agreements between employers and trade unions or by individual contracts, and they are legally enforceable (International Labour Organization [ILO], 2014). The ILO reports that, in 2020, of its 187 member states, 90 per cent had a minimum wage: 100 per cent of countries in Europe and Central Asia; 94 per cent in the Americas; 87 per cent in Africa; 86 per cent in the rest of Asia and the Pacific; and 64 per cent in Arab States (ILO, 2020, p. 64). Minimum wages are widespread and an endogenous feature of a capitalist economy. This empirical fact contradicts the arguments of mainstream economic thinking. In the neoclassical paradigm, which is the backbone of modern neoliberal thinking, minimum wages (as well as wage bargaining by trade unions) are disturbing factors in labour markets and are useless or cause unemployment. In the following sections, the arguments of the neoclassical approach will be presented and criticized. As an alternative theoretical approach to understanding minimum wages, a Keynesian approach will be presented, which is based on original Keynesian thinking and not on Keynesian versions that, after World War II, were integrated as cases of short-term distortions in the neoclassical paradigm. In the next section, from a Keynesian point of view, it is discussed why minimum wages are important to stabilize economies. This explains why almost all countries in the world have minimum wages. The second section discusses minimum wages in the traditional neoclassical model. The third section looks at minimum wages in two specific market forms: monopsonies, which means firms that have a demand monopoly in the labour market, and monopolies, which means firms that dominate markets where they sell their products. In these market forms, minimum wages have specific effects that are important for the overall debate. In the fourth section, different theoretical elements are brought together in order to analyse the overall effects of minimum wages. A short overview of empirical investigations in the field of minimum wages is provided in the fifth section. The sixth section discusses different questions 293

294  Handbook on critical political economy and public policy related to minimum wages – who decides the minimum wages, frequency of adjustment and so on. The final section concludes.

THE ECONOMIC AND SOCIAL FUNCTIONS OF MINIMUM WAGES Karl Polanyi (1944) correctly pointed out that money, nature and labour are very specific goods that need specific regulations to prevent the self-destruction of capitalism. In the case of the labour market, the problem is that labour is not a good that can be produced quickly or, in case of oversupply, destroyed. In capitalist economies, the volume of employment is not determined in the labour market. In a very simple model, macroeconomic output is given by aggregate demand, which is determined by consumption demand, investment demand, government demand and net foreign demand. Given the technology, a certain output volume leads to a certain employment. Of course, in cases of very high demand, output can be restricted by the available labour force. If GDPr is real gross domestic product, D aggregate demand, N employment, Nmax the available workforce and Kmax the physical capital stock including nature, we obtain: GDPr = GDPr (D, Nmax, Kmax)(20.1)

and N = N (GDPr)(20.2)

This approach shows a demand constraint system, as Kornai (1979) called it, which is typical of capitalism and very much fits with the basic idea of Keynes’s General Theory ([1936] 1978; see also Herr, 2014). The theory notes that the labour market, in the hierarchy of markets, is subordinated to the goods market and asset market, and full employment is only created by chance. In most historical constellations, demand does not hit the maximum of physically possible production given by labour and the capital stock. Additionally, if full utilization of the capital stock in very specific constellations is reached, there may still exist surplus labour and unemployment. This implies that unemployment is the normal state of affairs. Even a superficial look at reality shows that unemployment has existed in many developed capitalist states, and an enormous surplus of labour is the normal state of affairs in most developing countries. In spite of the fact that employment, and therefore unemployment, is not determined in the labour market, unemployment triggers several market processes that destabilize the economy and/or the social system. Minimum wages can help to prevent such negative developments. First, in the case of unemployment, the competition between workers has the tendency to reduce wages. In such a competition, wages for workers who have, in the eyes of employers, a disadvantage – lack of skills, certain gender, belonging to a certain ethnic group, disability and so on – can fall to extremely low levels. A sector with unacceptably low wages develops, which does not enable the reproduction of workers. Productivity of societies suffer, and social tensions increase. Several mechanisms can prevent such an unacceptable low-wage sector. (1) Trade unions can reduce the competition between workers and prevent an unacceptable low-wage sector. There are not many countries in which trade unions in all sectors can take over this function. Scandinavian countries, with their very high union density, are an

The political economy of minimum wage policies  295 exception. (2) A social welfare system can establish a soft lower boundary of wages. In this case, workers can reject wages that are substantially below the level of social transfers. (3) If workers have the possibility to reproduce themselves and their families via an agricultural subsistence economy, this has the same effect. Social welfare systems and subsistence economies are not available in all countries or for all workers. Moreover, they are not very efficient boundaries for unacceptably low wages. This explains the need for statutory minimum wages to prevent the explosion of a sector with extremely low wages. In almost all countries, a statutory minimum wage is the most efficient instrument to establish a wage floor. Second, income inequality depends on functional income distribution between wages and profits, wage dispersion, which households gain from profits and government redistribution policies. Wage dispersion is one of the major factors that lead to high income inequality. Let us take South Africa as an example, one of the most unequal societies of the world. Statistics show that labour markets were the main driver of inequality. Between 1993 and 2008, wage inequality accounted for more than 80 per cent of total inequality. The Gini coefficient for wages has increased from 0.58 in 1995 to 0.69 by 2015 (Haroon et al., 2020, p. 1). Increasing wage dispersion also played a key role in rising inequality in the US. In 2016, Americans in the top tenth of the income distribution earned 8.7 times as much as Americans in the bottom tenth (US$109 578 versus US$12 523). In 1970, when the analysis period began, the top tenth earned 6.9 times as much as the bottom tenth (US$63 512 versus US$9212) (DeSilver, 2018). The higher the income inequality, the more unlikely are longer periods of high growth. Short-term growth periods can be driven by factors such as real estate bubbles, increasing foreign debt or higher indebtedness of households, but such factors destabilize economies and are not sustainable (see Organisation for Economic Co-operation and Development [OECD], 2015; Ostry, 2015; Ostry et al., 2014). Developments including crises in many developing countries, but also in the US or Europe, serve as examples of this (see contributions in Hein, Detzer & Dodig, 2015). In their comprehensive meta-analysis, Neves, Afonso and Silva (2016) concluded that there is a negative relationship between higher inequality, especially at the lower end of income distribution and growth. The reasons are obvious. (1) With more equal income distribution, the reproduction of the power of labour improves. For example, better health care is possible, better housing, better education and so on, and productivity increases. (2) With more equal income distribution, mobility measured as the likelihood of people to move out of the income class they are born into during their lives – expressed by the so-called ‘Great Gatsby Curve’ – increases with positive productivity effects. When the bottom 40 per cent of households lose in relation to the rest of the society, spending in education and social mobility suffers, with the outcome that talented young people are unable to sufficiently fulfil their potential. The same argument holds true for gender inequality and other forms of discrimination (OECD, 2015, pp. 71–2). (3) Greater equality promotes social coherence and political stability. (4) Last but not least are demand arguments. High inequality reduces aggregate demand, as high-income and high-wealth groups have a lower propensity to consume than low-income groups (see for details, Gallas et al., 2016). Third, regarding unemployment, competition in labour markets can lead to a general decrease in the nominal wage level. The most important factor for the determination of the price level is nominal unit labour costs (Herr, 2009). Given macroeconomic productivity

296  Handbook on critical political economy and public policy development (ᴨ) and the nominal wage level (w), then unit labour costs (u) are given by u = w/ᴨ. This implies: u  w   ,(20.3) changes in the level of unit labour costs ( u ) are equal to changes in the nominal wage level ( w ) minus changes in the productivity level ( Π � ). Higher wage costs directly increase costs for the firm, but also indirectly, as costs for intermediate and capital goods also increase. Of course, other costs also play a role. Strong currency depreciations can substantially affect the price level via higher import prices. But even in such cases, the response of nominal wages to the fall in real wages triggered by higher import prices plays a key role in price level changes. Autonomous price effects caused by developments in natural resource markets, changes in the tax system, or, for example, higher rents because of real estate bubbles, also influence prices. Another source is demand inflation, which occurs when increasing demand hits full capacity utilization and/or full employment, and output cannot be increased in the short term (see Equation 20.1). Despite all these factors, empirically, there is a very close relationship between changes in the price level and changes in nominal unit labour costs (Heine & Herr, 2021; Keynes, 1930).1 To give examples: between 2000 and 2019, unit labour costs in the USA increased, on average, by 1.54 per cent annually, while the corresponding changes in consumer prices (CP) were 1.97 per cent, producer prices (PP) 2.22 per cent, and the GDP deflator (GP) 1.96 per cent. The values for the European Monetary Union were u 1.42 per cent, CP 1.74 per cent, PP 1.51 per cent, and GP 1.93 per cent. The values for Japan are noteworthy, with u –1.01 per cent, CP 0.10 per cent, PP –0.10 per cent, and GP –0.56 per cent (OECD, 2021). The deflationary tendencies in Japan were clearly caused by inordinately low nominal wage increases, including an insufficient use of minimum wages to enforce higher wages. The deflationary development during the Great Depression in the 1930s, to give another example, was clearly caused by rapidly falling nominal wages in all important industrial countries at that time (Dodig & Herr, 2015). Deflation leads to disastrous economic developments. The most dangerous effects of deflation are increasing real debt levels for liabilities in domestic currency, exploding non-performing loans, and financial crisis (Fisher, 1933; Keynes [1936], 1978, p. 265). From Equation 20.3, it follows that nominal wages should increase according to trend productivity development plus the target inflation rate of the central bank (or a low inflation rate): w target  Ptarget   trend (20.4) When the wage level increases according to this formula in the medium term, the inflation rate will fluctuate around the target inflation rate. Important for the stability of an economy is that, instead of using annually measured productivity development (which is influenced by the business cycle) as a guideline for wage development, states opt for medium-term productivity development. If trend productivity increases are 1.5 per cent and the target inflation rate is 2 per cent, then nominal wages should increase by 3.5 per cent. This leads to an increase in unit labour costs of 2 per cent, and a medium-term inflation rate of 2 per cent as well. Development of the nominal wage level cannot be left to the market: ‘In fact we must have some factor, the

The political economy of minimum wage policies  297 value of which in terms of money is, if not fixed, at least sticky, to give us any stability of values in a monetary system’ (Keynes [1936], 1978, p. 304; original emphasis). If wage increases are too high, with unwanted inflationary effects, the central bank, via restrictive monetary policy, can reduce growth, employment and wage increases. In the event of inordinately low increases in wages, monetary policy, which has asymmetric power, can fail to increase wages. Here, statutory minimum wages come into play, which become a dam against deflation. To fulfil this function, minimum wages should never increase below the wage target given in Equation 20.4. In many countries, especially those with very weak trade unions, minimum wage development becomes a substitute for wage bargaining. This is, for example, the case in Eastern European countries and many developing countries (Du Caju et al., 2008; Van Klaveren, Gregory & Schulten, 2015). In such countries, minimum wage increases give a strong signal for the whole wage round. Here, the wage formula in Equation 20.4 must become the guideline for minimum wage policy, and other policies are needed to compress the wage structure from below. To summarize, minimum wages, and their effective use, are essential for the stability of a capitalist economy and society. They are necessary to prevent an exploding low-wage sector that does not allow for the reproduction of the workforce; prevent high inequality with the danger of low growth; and finally, prevent deflationary developments.

MINIMUM WAGES IN THE NEOCLASSICAL LABOUR MARKET The neoclassical standard model assumes that employment is determined in the labour market. There is a demand function for labour, a supply function, and a price, the real wage, which equalizes demand and supply. Pure competition is assumed, meaning that single workers or firms cannot influence wages or prices, and must adjust with the quantities offered or demanded. The microeconomic logic of one firm, according to the approach, can be directly transferred to the macroeconomic level.

Figure 20.1

The neoclassical labour market

298  Handbook on critical political economy and public policy In Figure 20.1, there are two labour market segments, one for skilled (NS) and one for unskilled workers (Nu). Supply of unskilled labour (NSu) depends on real wage per hour (wr). If real wages increase, households will follow their utility-maximation strategy, and will sacrifice some leisure time and offer more work. This increases their total satisfaction. Demand for unskilled labour (NDu) by firms also depends on the real wages. Given a certain capital stock and a certain technology, it is assumed that each additional hour worked produces a smaller additional output – the marginal product of labour is therefore falling. Responsible for this is an ‘overcrowding’ effect – more and more workers share the same stock of capital. Given the wage and the price of the product, the profit maximum of a firm is reached when the marginal product of labour (MPL) multiplied by the price of the product (p), the value of the marginal product, equals wage costs to produce the marginal product.2 MPL∙p = w or MPL = w/P(20.5)

Firms will employ workers until the value of the marginal product is equal to the wage or the marginal product is equal to the real wages (w/P). It follows that the demand curve for labour is identical to the curve of the marginal product. In Figure 20.1, in the case of flexible real wages, full employment is reached for unskilled workers at Nu* at the real wage level wru*. For each labour market segment based on education, experience and any other factor, a similar market exists. The wage structure is determined according to the equilibria in the different labour market segments. Based on productivity, skilled workers typically have higher wages than unskilled workers. In Figure 20.1, skilled workers have a wage of wrs* with full employment at NS*. A minimum wage above the equilibrium wage of unskilled workers creates unemployment. In Figure 20.1, unemployment for unskilled workers becomes NSu2 – NSu1. The market for skilled workers is not affected. Then, usually the argument is added that minimum wages increase inequality, as they make the poorest wage earners jobless. To fight poverty, Friedman (1962) recommended a negative income tax, which means that households under a certain income get transfers from the government. The neoclassical model has fundamental shortcomings. First, price changes in the labour market have strong income effects. In a situation of very low real wages, a cut in wages leads to increasing labour supply – that is, workers simply have to work longer to stabilize their income. In a situation of very high wages, further increasing wages may reduce labour supply, as leisure time now becomes more valuable. The supply curve of labour can become S-shaped, creating three equilibrium points. In such a situation, in accordance with the neoclassical paradigm, minimum wages can prevent a ‘bad’ equilibrium with very low wages and long working time.3 Second, the neoclassical paradigm denies the possibility of demand constraints. It argues, based on Say’s Law, that, apart from structural problems, supply always finds its demand. In substance, it assumes a barter economy without money.

The political economy of minimum wage policies  299

MINIMUM WAGES IN THE CASES OF MONOPSONY AND MONOPOLY The monopsony case shows that, even under the very restrictive assumption of the neoclassical model, minimum wages do not have negative employment effects. This is very much in line with the empirical situation, as most econometric investigations show no negative employment effects after increases of minimum wages (see the section on ‘Empirical analyses of minimum wage increases’ below). Monopsonies in the Labour Market The monopsony model in the labour market assumes that employers have the possibility to influence the wage they pay. In the extreme case, firms have a demand monopoly in their labour market (Bhaskar, Manning & To, 2002; Robinson, 1933). An example of this is a steel factory as the main employer in a small city that is exposed to pure competition in the steel market. The factory can cut wages without immediately losing all its workers. This implies that the factory is confronted with a labour supply curve with the usual neoclassical shape. Firm-specific labour supply curves exist because of mobility costs of workers or imperfect information. Under this condition, firms have the variation of wages as an additional variable to maximize profits. A monopsony starting with employment under pure competition will now reduce wages, with the effect of reducing employment and output. Yet, the cost-cutting effect is bigger than the reduction of revenue, and profits increase. A firm will cut output, employment and wages until it reaches it profit maximum. It was Stigler (1946) who stressed that, under a situation of monopsony, minimum wage increases have positive employment effects. If minimum wages in case of a monopsony are increased and wages become higher, the strategy of the firm to cut wages and output to increase profits is no longer possible. Increasing minimum wages leads to higher employment – until a certain wage level is reached, higher wages then reduce employment again. The monopsony model became very popular because it allowed neoclassical economists to explain that, under certain conditions, moderately higher minimum wages do not lead to negative employment effects, and could even increase employment (see Card & Krueger, [1995], 2015; Manning, 2020). In the case of monopsonies, there are two distributional effects. First, profits of firms go down, and functional income distribution increases in favour of workers. Second, distribution among the working class becomes more equal as the wage structure is compressed from below. Monopoly and Minimum Wages In this section, we discuss the case of a monopoly, a firm that is the only supplier of a certain product. The analysis can be transferred to oligopolies, which can influence the price of the product they sell. Oligopolies can even create a cartel and act jointly as a monopoly. In the case of companies under pure competition, which earn low profits and will roll over all costs in the event of monopolies or oligopolies, minimum wage increases can reduce profits. In the upper part of Figure 20.2, the demand curve for the sold product, the price–sales function, of a monopoly is shown. The firm can only sell more products (Q) if it reduces the price (p).

300  Handbook on critical political economy and public policy Total revenues (TR) of a firm are quantity sold multiplied by the price. Starting with a price of zero and then increasing the price, TR initially increases and then decreases once again to zero. Given the capital stock, the quantity produced depends on labour input (N). Then, TR can be made dependent on labour input (see the lower part of Figure 20.2). Total costs increase with labour input, while the slope depends on the marginal productivity of labour and the price of labour. Given the cost function TC1, the monopoly chooses employment N2 with the price p1. This is the level of employment that maximizes profits – the difference between TR and TC1 is the biggest (see point B and point A). Now, let us increase minimum wages and assume the monopoly is affected by this. The total cost function becomes steeper. Under the new condition, the profit-maximizing employment is reduced to N1 with the higher price p2 and the now lower profit between points C and D.

Figure 20.2

Monopoly and minimum wage increases

The monopoly will respond to higher wages with increasing prices and a lower rate of production. Kalecki (1971, p. 161) discussed this effect using the example of trade unions: High mark-ups in existence will encourage strong trade unions to bargain for higher wages since they know that firms can ‘afford’ to pay them. If their demands are granted but…[the mark-up is] not changed, prices also increase… But surely an industry will not like such a process making its products more and more expensive and thus less competitive with the products of other industries. To sum up, trade-union power restrains the mark-ups.

Kalecki’s argument can be transferred to minimum wages. However, it should be noted that many monopolies and oligopolies typically do not have many workers who are paid the minimum wage.

The political economy of minimum wage policies  301

THE OVERALL EFFECTS OF WAGE STRUCTURE COMPRESSING MINIMUM WAGES It should be kept in mind that minimum wage increases, which determine the whole wage round in the extreme case, do not change the wage structure, only the price level. If all wages increase at the same rate, absolute wage differences become even bigger. In this section, we analyse the effects of minimum wage increases that compress the wage structure from below. Figure 20.3 gives an overview of the different effects, which, in the following, will be discussed one by one (see also Heise, 2017; Herr et al., 2017). The section on the neoclassical standard model already made clear that minimum wage increases most likely lead to price increases in strongly affected sectors. In these sectors, in a first-round effect, demand will be reduced according to existing price elasticity of demand. There will be a price-level effect reflecting the increasing prices as well, but there are numerous spillover effects on other sectors. The result will be a second-round effect that leads to a new structure of relative prices. In a third-round effect, the structure of consumption and production in the whole economy will change. Under the new condition, firms will choose new technologies in an unpredictable manner. The total effect on employment is open and extremely difficult to predict. In the neoclassical world, wage dispersion depends on the marginal productivities of labour in equilibrium conditions in the different labour market segments. In the approach followed here, productivities, together with wage dispersion (which is influenced by minimum wages, bargaining systems, conventions, and many other sectors) determine relative prices, while employment depends foremost on aggregate demand.

Source:

Partially based on Herr et al. (2017).

Figure 20.3

Employment effects of compression of the wage structure by minimum wages

302  Handbook on critical political economy and public policy If monopsonies exist, higher minimum wages trigger higher production and employment. In the monopoly/oligopoly case, production will decrease. In both cases, functional income distribution changes and the wage share will increase. Higher minimum wages stimulate productivity growth, which reduces the cost pressure of minimum wage increases, but reduces, given output volume, employment (Rehm & Pusch, 2017; see above). Also, ‘shirking’ and high labour turnover, which increase costs, can be reduced (Shapiro & Stiglitz, 1984). Higher wage costs lead to technical improvements, but also lead to attempts to intensify work. Minimum wage increases change income distribution, which adds to changes in the system of relative prices, the structure of consumption and production, and the technology. Changing distribution independent of price changes modifies patterns of consumption. Finally, as lower-income households now have a higher propensity to consume, higher minimum wages most likely lead to higher aggregate demand, production and employment. Keynes ([1936], 1978, p. 324) previously argued that the remedy for a lack of demand ‘would lie in various measures designed to increase the propensity to consume by the redistribution of incomes’. Minimum wage policy belongs to one of the measures intended to achieve a more equal income distribution. The main redistribution effect of higher minimum wages will most likely be caused by changing wage dispersion and redistribution among employees. Higher minimum wages increase prices, especially those of productions and services that employ low-wage workers. These price increases reduce real income of all households. Let us assume that minimum wages increase the price for a haircut. All households now have to pay a slightly higher price for the haircut and have to accept a slight reduction in real income. Beneficiaries of this are the employees in hair salons, who earn more as a result. Increasing wage shares can be expected in the event of monopsonies and monopolies/oligopolies. But, with respect to minimum wages, this effect must be considered relatively small, as minimum-wage earners usually work in smaller companies that do not have much market power. However, there are exceptions – for example, big online retailers and logistic companies.

EMPIRICAL ANALYSES OF MINIMUM WAGE INCREASES There is an enormous number of empirical investigations into the effects of minimum wages. Most follow the logic of partial equilibrium. For example, effects of a minimum wage increase in one sector of a country are analysed when minimum wages in comparable sectors remain unchanged. In the 1990s, publications by Card and Krueger ([1995] 2015) became very famous when they found no negative effects of a minimum wage increase in fast-food restaurants in New Jersey compared with Pennsylvania, where minimum wages did not increase. Another method is to compare what happens with workers who are affected by minimum wage increases and those who are not affected. Following this method, Stewart (2004), for example, did not find negative employment effects of the minimum wage introduction in the UK in 1999 (see also Hafner et al., 2016). Doucouliagos and Stanley (2009) conducted a meta-study of 64 minimum-wage studies published between 1972 and 2007, concentrating on teenage employment in the United States, a group of workers that is seen as especially affected by minimum wages. They found ‘overall…an insignificant employment effect (both practically and statistically) from

The political economy of minimum wage policies  303 minimum-wage raises’ (p. 422). Belman and Wolfson (2014) surveyed studies since 2000. In the 27 minimum wage studies, there were no statistically significant negative employment effects of minimum wage increases. A recent empirical experiment was the introduction of minimum wages in Germany in 2015, which became necessary as collecting bargaining coverage in Germany has been decreasing continuously. For example, Knabe, Schöb and Thum (2014, p. 34) counted all jobs in Germany that, before the introduction of minimum wages, earned wages below the later minimum wages, and argued that these jobs could be eliminated. They predicted job losses of up to 900 000 workplaces in Germany, including 160 000 full-time jobs (1.6 per cent of full-time employment in East Germany and 0.5 per cent in West Germany). However, until the COVID-19 crisis in 2020 in Germany, unemployment rates had been brought down to historically low levels. Econometric analyses showed that part of the increasing employment was actually caused by the minimum wage increase (Herr et al., 2017; Herzog-Stein et al., 2018). This example shows that a partial equilibrium approach is not sufficient to analyse effects of minimum wages. Even if negative effects in some industries can be found, the effects for the whole economy can be positive, nonetheless. It is surprising that, even in partial analysis, in most cases, no negative employment effects can be found. Affected firms obviously react with a wide range of policies: increasing training, changing composition of employment, higher prices, promoting efficiency, trying to stimulate demand, decreasing labour turnover and so on, but also intensifying work, reducing working hours and reducing non-wage benefits (Schmitt, 2013). For the function of minimum wages to influence income distribution, the level of minimum wages is important. To measure the relative level of minimum wages, usually the ratio of minimum wages to medium wages (the Kaitz index) is used. The ILO reports that, according to the latest available data, the Kaitz index was around 55 per cent in developed countries and around 67 per cent in developing and emerging economies. In some countries, the Kaitz index is extremely low – for example, 16 per cent for the lowest minimum wage in Bangladesh. The ratio of minimum wages to average wages is substantially lower. In developed countries, it is around 36 per cent, while it is 37 per cent in developing and emerging countries (ILO, 2020, pp. 110–12). Figure 20.4 shows, for all OECD members for which the data are available, the relationship between the Kaitz index and unemployment rates. There is ultimately no systematic relationship. Between minimum wages and average wages, or the size of the low-wage sector and unemployment rates, there is also no systematic relationship (OECD, 2021). Neoclassical economists could argue that the figure shows the dispersion of productivities of the labour force in different countries. However, this is not convincing. The correct conclusion is that the wage structure, to a large extent, is determined by conventions, institutions, power relations between different segments of employees, and political decisions. Countries can choose the ratio between minimum wage and median wage as they see fit without fearing unemployment. High wage dispersion is not a strategy to combat unemployment. In a survey of 72 countries (mainly omitting Arab countries) in 2019, the ILO (2020, pp. 66–70) estimates that 327 million (19 per cent of all) wage earners receive the minimum wage or below. Globally, 47 per cent of wage earners receiving the minimum wage or less are women and 53 per cent men. Since the labour force participation rate worldwide for women in 2021 was 46 per cent and for men 72 per cent (World Bank, 2022), this implies that the share of employed women earning the minimum wage or below is much higher than for men. Active minimum wage policy without doubt reduces the gender pay gap (see ILO, 2020 p. 66).

304  Handbook on critical political economy and public policy

Note:  Employees earning the minimum wage are defined as those earning between 95 and 105 per cent of the minimum wage value. Source: OECD.

Figure 20.4

Kaitz index and unemployment rates in OECD countries, average values, 2015–19

DIMENSIONS OF MINIMUM WAGE ADJUSTMENT In this section, several important dimensions of minimum wage adjustments are discussed (Herr & Kazandziska, 2011). As mentioned in the introduction, 90 per cent of ILO member countries have a minimum wage. In 2020, in over 93 per cent of these countries, the minimum wage was set by the government, and in the remaining cases by collective bargaining (ILO, 2020, p. 64). In most countries, the minimum wage is fixed by government after consultations with social partners. In many countries, tripartite bodies exist that make proposals for how the minimum wage should develop. In almost all cases, the government, in the event of conflict, makes the final decision. Tripartite bodies are usually made up of trade union representatives, employers’ organizations, the government and, in some cases, experts (ILO, 2014; Van Klaveren et al., 2015). For example, the UK Low Wage Commission seems to be a good model, with members from trade unions, employers and experts. One positive development here is that the Commission writes an annual report and carries out research about the low-wage sector in the country. What Kaitz level and wage dispersion should be aimed at should be decided by society. Especially in developing countries, a basket of goods that gives the culturally given subsistence minimum is used to fix the minimum wage. In developing countries, this may make sense, but there are great difficulties in fixing a basket. For example, should the basket include the subsistence minimum of a family or a single household, how many children should be

The political economy of minimum wage policies  305 taken into account, and so on? Ideally, an acceptable wage dispersion and desired Kaitz index are achieved through societal consensus. Annual increases in minimum wages should at least be according to trend productivity growth plus the target (or a low) inflation rate (Equation 20.4). If minimum wages take over the signalling for the whole wage round, this formula is of paramount importance to establishing a nominal wage anchor for the price level. In these countries, additional steps to control a low-wage sector must be taken. In countries in which minimum wages determine the Kaitz level, minimum wages should be adjusted to the desired level in a medium-term process. If minimum wages influence the wage structure, and general wage increases are higher than in Equation 20.4, minimum wage should increase according to the general increase of the price level with the aim not to change the ratio of minimum wages to median wages. This implies that in an inflationary process minimum wages should not increase less than the general wage level to fight inflation. In a situation of inflationary wage development, incomes policy or other policies to realize a development of the wage level according to trend productivity plus the inflation target of the central bank should be used. But these are difficult political decisions. Covering 85 countries, in the period 2010–19, minimum wages were adjusted, on average, every 2.0 years in high-income countries, and every 5.1 years in low-income countries. Today, in 49 countries, minimum wages are adjusted every three to five years, in 20 countries even less frequently. Belonging to the last group concerning the national minimum wage are, for example, Burundi, Rwanda, Uganda and the USA (ILO, 2020, p. 113). If minimum wages stay the same for long periods, a low-wage sector can explode and/or deflationary developments cannot be fought. To fulfil their functions, minimum wages should be adjusted frequently, in the ideal case every year. For the sake of transparency, only one clearly defined minimum wage should exist for all sectors in the economy. In around 50 per cent of the countries with minimum wages, this is indeed the case. In the other countries, minimum wages are differentiated according to geographical regions, economic sectors or occupations. For example, Australia, Argentina, China, Indonesia, Mexico, Russia, South Africa and the United States have more than 50 minimum wages, while India notably has more than 1500 (ibid., pp. 72–3). In the USA and Brazil, for example, a national minimum exists, but regions, and even cities, can decide whether to have a higher minimum wage. Alternatively, minimum wages are decided at a regional level – for example, in China. In several countries, in the most extreme case in India, minimum wages are given for certain occupations. Such complex systems emerge and can be functional, especially in big countries, when productivity levels of different regions are very different or minimum wages, to a large extent, substitute for wage bargaining. A system with one minimum wage or, in case of high regional productivity differences, a small number of minimum wages appears ideal. Wages above the established minimum, and the wage structure as a whole, should be the outcome of wage negotiations between trade unions and employers’ associations. Minimum wages, in order to fulfil their functions, should cover all sectors of the economy. Unfortunately, this is not the case. In 2020, in 29 countries with statutory minimum wages, either agricultural workers and/or domestic workers (or part of the groups) are excluded from minimum wage regulations. Such different countries, such as the USA, Japan, China, El Salvador and Pakistan, belong to this group (ibid., pp. 92–5). In the informal sector, minimum wages, to a large extent, do not apply or are not enforced. Analysis of this development must consider the background of the informal sector. The ILO (ibid., pp. 96–7) estimates that, in the informal sector, 61.2 per cent of the world’s employed

306  Handbook on critical political economy and public policy population works. Over 75 per cent of them work in businesses employing fewer than ten workers. There is a ‘lighthouse effect’, meaning that minimum wage levels also have a signalling effect for wages in the informal sector (see Boeri, Garibaldi & Ribeiro, 2010). However, this effect is weak and always insufficient. This implies that minimum wage policy must include, besides sufficient inspections, the reduction of the informal sector.

CONCLUSION Labour markets, in capitalist economies, are at the bottom of the market hierarchy, meaning that they are dominated by asset and goods markets, and lack their own mechanism whereby they can create high or even full employment. Nevertheless, labour markets are important for the stability of economies. Leaving the labour market to the market mechanism, in conjunction with having flexible wages, is the worst thing that can happen: the result would be a permanent destabilization of the price level and an explosion of inequality – both would add to the instabilities of capitalism. Minimum wages can play an important role in containing the destabilizing potential of labour markets. Minimum wages do not lead to unemployment. Of course, sharp minimum wage increases can lead to a reduction of employment, especially in affected sectors, but for the economy as a whole, negative employment effects caused by minimum wages cannot be expected. On the other hand, moderately increasing minimum wages cannot be expected to lead to substantially higher employment, since effects on aggregate demand are not large enough. As such, substantial minimum wage increases should be implemented in the medium term to avoid structural shocks in the economy. Looking at the distribution effect, minimum wage increases that compress the wage structure from below lead at first to redistribution among wage earners, but also to increasing wage shares. The latter effect must be judged as small overall. In the ideal case, strong trade unions, together with strong employers’ organizations, and based on intensive vertical and horizontal wage coordination, lead to a nominal wage development that links wage increases in all sectors to macroeconomic productivity development, along with the target inflation rate. Minimum wages prevent the emergence of a low-wage sector in areas wherein collective bargaining is insufficient. This implies a macroeconomic understanding by trade unions, and solidarity among trade unions across different economic sectors. The weaker trade unions become, the more minimum wage development (via broad signalling effects) becomes a substitute for wage bargaining. In any case, minimum wage policy should play an important and active role in the macroeconomic management of an economy and society. To be an effective means of influencing income distribution, three requirements must be met. First, legal coverage and level of compliance must be high, which means that all workers are covered by minimum wage law, and the law is enforced in practice. Second, the level of the minimum wages must be sufficiently high in order to compress the wage structure. Third, the structure of the workforce is important. If, for example, a large informal sector exists, with mostly own-account workers or a workforce whose majority consists of minimum-wage workers who are secondary earners in well-off households, then minimum wages will not significantly affect income distribution. Nevertheless, in a literature review and empirical investigation, the ILO (2020, pp. 86–7)

The political economy of minimum wage policies  307 shows that minimum wages in developed and developing countries, in almost all cases, have positive distributional effects. To be effective as an element of a nominal anchor for price-level development, minimum wage increases should follow trend productivity, alongside the target inflation rate of the central bank. Minimum wage adjustments should be frequent, and in the ideal case, an annual practice.

NOTES 1. The quantity theory of money, which links price-level changes to the quantity of money, is empirically and theoretically discredited. Also, central banks have relinquished the theory (Heine & Herr, 2021). 2. Let us assume the wage per hour of a baker is €12 and the price of a loaf €3. If more bakers are employed according to the assumption of falling marginal products, each additional baker-hour produces less bread, 10 loaves, 8 loaves until 4 loaves are reached. Then Equation 20.5 becomes: 4 loaves/hour,∙€3/loaf = €13/hour. If the wage drops to €10, more bakers become employed until Equation 20.5 is realized again. 3. In the almost forgotten ‘two Cambridges debate’, it was proved that the smooth demand curve for labour is only guaranteed if one capital good exists (or alternatively, the capital intensity in all industries is the same) (Herr, 2020).

BIBLIOGRAPHY Belman, D. & Wolfson, P.J. 2014, ‘What does the minimum wage do?’, Journal of Labor Research, 36, 462–4. Bhaskar, V., Manning, A. & To, T. 2002, ‘Oligopsony and monopsonistic competition in labor markets’, Journal of Economic Perspectives, 16, 155–74. Boeri, T., Garibaldi, P. & Ribeiro, M. 2010, ‘Behind the lighthouse effect’, IZA Discussion Paper No. 4890, Institute of Labor Economics, Bonn. Card, D. & Krueger, A.B. [1995] 2015, Myth and Measurement: The New Economics of the Minimum Wage (Twentieth-Anniversary Edition), Princeton, NJ: Princeton University Press. DeSilver, D. 2018, ‘For most U.S. workers, real wages have barely budged in decades’, Pew Research Center, accessed 20 December 2022 at https://​www​.pewresearch​.org/​fact​-tank/​2018/​08/​07/​for​-most​ -us​-workers​-real​-wages​-have​-barely​-budged​-for​-decades/​. Dodig, N. & Herr, H. 2015, ‘Financial crises leading to stagnation – selected historical case studies’, in E. Hein, D. Detzer & N. Dodig (eds), The Demise of Finance-Dominated Capitalism: Explaining the Financial and Economic Crisis, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing, pp. 162–218. Doucouliagos, H. & Stanley, T.D. 2009, ‘Publication selection bias in minimum-wage research? A meta-regression analysis’, British Journal of Industrial Relations, 47, 406–28. Du Caju, P., Gautier, E., Momferatou, D. & Ward-Warmedinger, M.E. 2008, ‘Institutional features of wage bargaining in 23 European countries, the US and Japan’, Banque de France Working Paper No. 228. Fisher, I. 1933, ‘The debt-deflation theory of great depressions’, Econometrica, 1, 337–57. Friedman, M. 1962, Capitalism and Freedom, Chicago, IL: University of Chicago Press. Gallas, A., Herr, H., Hoffer, F. & Scherrer, C. (eds) 2016, Combating Inequality: The Global North and South, London: Routledge. Hafner, M., Taylor, J. & Pankowska, P. et al. 2016, The Impact of the National Minimum Wage on Employment: A Meta-Analysis, report for the UK Low Pay Commission, Cambridge, UK: RAND Europe.

308  Handbook on critical political economy and public policy Haroon, H., Lilenstein, K., Oosthuizen, M. & Thornton, A. 2020, ‘Wage polarization in a high-inequality emerging economy: the case of South Africa’, WIDER Working Paper No. 2020/55, UNU-WIDER. Hein, E., Detzer, D. & Dodig, N. (eds) (2015), The Demise of Finance-dominated Capitalism: Explaining the Financial and Economic Crises, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Heine, M. & Herr, H. 2021, The European Central Bank, Newcastle upon Tyne: Agenda Publishing. Heise, A. 2017, ‘Reconciling facts with fiction: minimum wages in a post-Keynesian perspective’, Zentrum für Ökonomische und Soziologische Studien Discussion Paper No. 64. Herr, H. 2009, ‘The labour market in a Keynesian economic regime: theoretical debate and empirical findings’, Cambridge Journal of Economics, 33, 949–65. Herr, H. 2014, ‘An analytical framework for the post-Keynesian macroeconomic paradigm’, Izmir Review of Social Sciences, 1, 73–116. Herr, H. 2020, ’Functional income distribution in economic paradigms: the failure of the neoclassical approach and alternatives’, in S. Decker, W. Elsner & S. Flechtner (eds), Principles and Pluralist Approaches in Teaching Economics, London: Routledge, pp. 229–42. Herr, H., Herzog-Stein, A. & Kromphardt, J. et al. 2017, Makroökonomische Folgen des gesetzlichen Mindestlohns aus keynesianisch geprägter Perspektive: Studie im Auftrag der Mindestlohnkommission, Düsseldorf: Institut für Makroökonomie und Konjunkturforschung in der Hans-Böckler-Stiftung. Herr, H. & Kazandziska, M. 2011, ‘Principles of minimum wage policy – economics, institutions and recommendations’, Global University Working Paper No. 11. Herzog-Stein, A., Logeay, C. & Nüß, P. et al. 2018, ‘The positive economic impact of Germany’s statutory minimum wage – an econometric analysis’, IMK Report No. 141e-2018, Macroeconomic Policy Institute, Düsseldorf. International Labour Organization (ILO) 2014, General Survey of the Reports on the Minimum Wage Fixing Convention, 1970 (No. 131), and the Minimum Wage Fixing Recommendation, 1970 (No. 135), Geneva: ILO. International Labour Organization (ILO) 2020, Global Wage Report 2020–21: Wages and Minimum Wages in the Time of COVID-19, Geneva: ILO. Kalecki, M. 1971, Selected Essays on the Dynamics of the Capitalist Economy, Cambridge, UK: Cambridge University Press. Keynes, J.M. [1930] 1978, Treatise on Money, 1. The Pure Theory of Money: Collected Writings of John Maynard Keynes, Vol. V, edited by D. Moggridge, London: Macmillan for the Royal Economic Society. Keynes, J.M. [1936] 1978, The General Theory of Employment, Interest and Money: Collected Writings of John Maynard Keynes, Vol. VII, edited by D. Moggridge, London: Macmillan for the Royal Economic Society. Knabe, A., Schöb, R. & Thum, M. 2014, ‘Der flächendeckende Mindestlohn’, Diskussionsbeiträge No. 2014.4, Freie Universität Berlin. Kornai, J. 1979, ‘Resource-constrained versus demand-constrained systems’, Econometrica, 47, 801–19. Manning, A. 2020, ‘Monopsony in labor markets: a review’, Industrial and Labor Relations Review, 74, 3–26. Neves, P.C., Afonso, Ó. & Silva, S.T. 2016, ‘A meta-analytic reassessment of the effects of inequality on growth’, World Development, 78, 386–400. Organisation for Economic Co-operation and Development (OECD) 2015, In It Together: Why Less Inequality Benefits All, Paris: OECD Publishing. Organisation for Economic Co-operation and Development (OECD) 2021, OECD data, accessed 12 December 2021 at https://​data​.oecd​.org/​. Ostry, J.D. 2015, ‘Inequality and the duration of growth’, European Journal of Economics and Economic Policies, 12, 147–57. Ostry, J.D., Berg A., Charalambos, G. & Tsangarides, C.B. 2014, ‘Redistribution, inequality and growth’, IMF Staff Discussion Note No. 14/02, International Monetary Fund. Polanyi, K. 1944, The Great Transformation, New York: Farrar & Rinehart. Rehm, M. & Pusch, T. 2017, ‘German minimum wage – not just the money’, Social Europe, 11 July, accessed 20 December 2022 at https://​www​.socialeurope​.eu/​german​-minimum​-wage​-not​-just​-money. Robinson, J. 1933, The Economics of Imperfect Competition, London: Macmillan.

The political economy of minimum wage policies  309 Schmitt, J. 2013, Why Does the Minimum Wage Have No Discernible Effect on Employment?, New York: Center for Economic and Policy Research. Shapiro, C. & Stiglitz, J. 1984, ‘Equilibrium unemployment as a worker discipline device’, American Economic Review, 3, 433–44. Stigler, G. 1946, ‘The economics of minimum wage legislation’, American Economic Review, 46, 358–65. Stewart, M.B. 2004, ‘The impact of the introduction of the U.K. minimum wage on the employment probabilities of low-wage workers’, Journal of the European Economics Association, 2, 67–97. Van Klaveren, M., Gregory, D. & Schulten, T. (eds) 2015, Minimum Wages, Collective Bargaining and Economic Development in Asia and Europe, London: Palgrave Macmillan. World Bank 2022, World Bank Open Data, accessed 20 December 2022 at https://​data​.worldbank​.org/​.

21. Just transitions: a historical relations analysis Dimitris Stevis

Just transition, the idea that environmental or other transitions should be humane and equitable for the workers and communities affected, is an intriguing concept because it is one of the few labour strategies to find its way to the center of global environmental politics. A related reason it invites further analysis is its adoption, in discourse if not in practice, by a wide variety of social forces, including business. Finally, it is intriguing because, like sustainable development, it combines the social and the environmental by foregrounding justice and change. For these reasons it offers itself for a critical political economy (and ecology) analysis. In the short first section, I outline the historical relations approach I employ. Consistent with that approach I historicize and politicize just transition in the second and third sections. I close with some short reflections.

CRITICAL POLITICAL ECONOMY The critical political economy approach employed here is that of historical relations (Bruch, 2017; Bukharin [1915], 1973; Cox, 1981; Dos Santos, 1970; Frank, 1966; Ollman, 1976; Wright, 2016; for an earlier version, see Stevis & Assetto, 2001).1 It is relational because the parts and the whole are mutually constituted. The generative dynamics behind this are not interactions amongst ontologically different entities, as realist and liberal international relations scholars would suggest (Jackson & Nexon, 1999). Nor are they functional divisions of labour as assumed by systems analysts particularly, for our purpose, ‘socioecological systems’ analysts.2 Rather, these relations are based on social divisions of labour, and enabling rules, that constitute and empower differentially. Who they empower and how is an empirical question. These relations are historical in the sense that the social divisions of labour and enabling rules can be traced across time as the products of political strategies and contestations. They are not ahistorical structures or organisms. Human views and practices, therefore, must be understood within the historical unfolding of these relations. While we may now consider capitalism as a threat to democracy and equality, it was considered as an emancipatory force during the 19th century when it displaced the ascriptive hierarchy of aristocracy. The historical relations approach, as a result, is holistic in that it must map the full spatial and temporal reach of the social divisions of labour and enabling rules within which people and nature are constituted and within which people act.3 Historical relations cannot be mapped if we limit our analysis to jurisdictional boundaries. Thus, a historical relations approach to critical political economy seeks to reveal all involved and affected, including those who have power and those who suffer its impacts. Towards that end, analysts have used various analytical tools, ranging from supply chains to production networks to world-systems. Accordingly, a first task of a historical relations analysis is to historicize an idea or practice by placing it within the historical context in which it was developed. This is useful because 310

Just transitions: a historical relations analysis  311 the proliferation of just transition (JT) proposals may well lead some to associate it with transformative change and others to dismiss it as a useless concept. The second task is to examine how it seeks to affirm, reform or transform the relations, and associated rules, that differentially empower and discipline individual and social categories within those totalities – that is, to politicize the idea. But what does historicizing entail? While it requires it, it is not limited to the intellectual genealogy of the idea and its association with particular social forces. It also explores why and how social forces develop and use an idea at a particular point in time (Gismondi, 2018). Perhaps their goals are limited to the solution of a specific kind of problem or perhaps they seek to replace the rule that produced the problem. The other face of historicization, therefore, is the politicization of an idea. In line with the above, politicization involves mapping who is participating and how successful they are in terms of getting their ideas to prevail. But it is also about the historical relations within which they operate and which they challenge or reproduce (Healy & Barry, 2017). JT offers itself as a strong case for this kind of critical political economy analysis for a number of reasons. First, the dominant approaches to climate change, such as those associated with the Earth system narratives of the Anthropocene and planetary boundaries, have largely avoided questions of power and justice because they employ non-generative systems ontology (for overviews, see Biermann et al., 2016; Felli, 2021; Malhi, 2017). Second, its recent popularity may suggest a convergence by states and capital towards a more egalitarian and ecological world and, thus, an important victory for labour. Third, and related, it offers us an opportunity to examine change within relations, and associated rules, and of relations, and associated rules.

HISTORICIZING JUST TRANSITIONS Several years ago, I interviewed a labour environmentalist because he had been a pioneer in promoting JT in Canada. Before I could voice my first question, he told me that the discussion would have meaning if I understood the historical context within which JT emerged. In his view, its rise in the USA and Canada was involved with the decline of the post-World War II regulatory state, limited as it was in these rather liberal capitalist countries, from the 1970s on. In his view, this was an inspiring if defensive strategy to stem the flow of deregulation and capital’s determination to untether itself from unions and social responsibility. As I have done more research on the subject, his insights have been proven accurate. I am unable to provide here a history of labour environmentalism whose roots are being explored by environmental historians around the world (e.g., Barca, 2012; Burgmann & Burgmann, 1998; Dewey, 2019; Gil, 2013; Gordon, 2004; Räthzel, Uzzell & Elliott, 2010), but it was certainly evident during the 1960s and 1970s in a variety of industrial countries and beyond. The focus of labour environmentalism was diverse, including opposition to nuclear power and urban sprawl, support for clean air and water, the protection of natural resources for communities and peasants, environmental innovation and more. While many of these views were and are directly related to the industries of the unions involved, they often diverge from those of capital. In still other cases, the views of labour environmentalists apply to society and nature as a whole, seeing themselves as having a voice beyond the workplace. Labour environmentalism, and the broader environmental labour studies within which it belongs, have

312  Handbook on critical political economy and public policy now become an identifiable and important tendency within the world of work (Räthzel, Stevis & Uzzell, 2021; Räthzel & Uzzell, 2013). But many unions have not adopted environmental views, and many are bitterly hostile to some or all aspects of environmentalism. Labour environmentalism, in short, is engaged in a difficult double project – insert nature into the labour movement and insert work and workers into the broader environmental politics. While the mobilizations of the late 1960s and early 1970s produced some of the major environmental and social policies in the history of the USA, they also produced a major reaction by capital and its allies within the state in the direction of deregulation. This was partly a conscious response to the radicalization of the country and partly due to the temporal resurgence of hyperliberal globalization driven by the trade and financial changes that had started during the 1960s and continued into the decades that followed. Increasing global competition led US companies to adopt automation and location strategies that left behind workers and communities. In doing this they employed a strategy of ‘job blackmail’, justifying automation and relocation on grounds of environmental and social costs and rules (Kazis & Grossman [1982], 1991).4 The Nixon administration, moreover, successfully blocked any rules that would stem this abuse, such as standing to sue by communities or unions (see comments by United Auto Workers president Leonard Woodcock, 1972). Several labour environmentalists responded by arguing that the environmental transition would create more jobs, whether in renewable energy, green chemistry or in environmental mitigation and remediation (Grossman & Daneker, 1979). There is good evidence that, on balance, this has been true (e.g., International Renewable Energy Agency [IRENA], 2021), but it obscured, then and now, two dynamics. First, ‘job blackmail’ exerted and exerts an existential impact on workers and communities because of the power of capital and the business unionist and anti-socialist leanings of US unions. Second, many workers and communities were and are affected negatively by specific transitions – even if more so by automation and relocation rather than environmental regulation. In general, the changes that took place in the USA from the 1970s to the 1990s were so broad and diverse that they cannot be attributed to environmental factors alone. As capital’s discretion and flexibility grew, labour rights and union membership in the private sector declined.5 As a result, workers lost, and continue to lose, the protections that were included in collective agreements between powerful unions and business, many of which provided for transitional assistance to their overwhelmingly male and white members.6 The Oil, Chemical and Atomic Workers International Union (OCAW), one affected a great deal by automation and, more than others, by environmental regulation, had raised the idea of a transitional program during the 1970s, evoking that which had helped returning soldiers after World War II (for a history, see biography of labour leader Tony Mazzocchi by Les Leopold, 2007). The United Automobile Workers also called for transitional policies (Woodcock, 1972). During the 1980s, the OCAW called for a Superfund for Workers, evoking the 1980 Superfund policy intended to clean up polluted areas (OCAW, 1991). It was not until 1995 that the term JT was used. In all cases it called for a large and profound public policy that would expand the limited social welfare state in the USA. Many of the measures that it called for, such as retraining, relocation, wage replacement, healthcare and related, can be considered as integral elements of the social welfare state in its most advanced forms. But the social democratic politics of the OCAW did not appeal to US unions, most of which remained anti-environmentalist and avoided anything that suggested ‘socialism’. Major unions that did

Just transitions: a historical relations analysis  313 move in an environmental direction, such as the United Steelworkers, chose to emphasize that environmental problems could be addressed through green industry (Stevis, 2021). By the end of the 1990s, the strategy of JT had fallen into disuse in the USA and Canada, but through various identifiable routes it found its way to the global level, and by 2007 it had become central to the climate negotiations strategy of the International Trade Union Confederation (ITUC) (for background, see Morena, 2018; Stevis, Morena & Krause, 2020; Rosemberg, 2020). During the period from 2007 to 2012, it appeared as part of green economy proposals emanating from a collaboration between the United Nations Environment Programme (UNEP), International Labour Organization (ILO) and the ITUC (Renner, Sweeney & Kubit, 2008; UNEP, 2009). The tenor was similar at the Conferences of the Parties (COPs) but the justice component was increasingly highlighted, along with the growth of the climate justice movement. Finally, the term was included in the Preamble of the 2015 Paris Agreement (United Nations Framework Convention on Climate Change [UNFCCC], 2015). Subsequent to that symbolic inclusion there has been such an explosion of JT interest and proposals that one would be justified in being optimistic about the move towards the global social regulation that JT reflects (e.g., ILO, 2015; Just Transition Centre, 2017; Morena, Krause & Stevis, 2020). That optimism, however, is not justified by the current configurations of power within and across countries. The most serious obstacle is the fact that the major countries of the world are opposed to the kind of social regulation that labour environmentalists hope for. The context within which the proliferation of JT proposals and policies is taking place is not one of global mobilization towards social regulation similar to what happened after the two World Wars or during the 1960s and 1970s due to a confluence of social movements in the Global North and the New International Economic Order proposals in the Global South. It is probably also fair to say that the mobilizations of the 1990s and early 2000s, associated with the World Trade Organization and the World Social Forum, were also more profound than any current mobilizations in favor of social regulation. While there have been fluctuations towards and away from socialist politics in South America and some Southern European countries, these have been temporary. On balance, neoliberal globalist capitalism remains dominant, with a major threat, perhaps, coming from nativist and authoritarian neoliberal capitalisms such as those in Eastern Europe, China, USA and Brazil (see Brand & Wissen, 2021; Felli, 2021; Przeworski, 2021).7 The hegemony of neoliberal globalist capitalism is underscored by the second pillar of the labour environmentalist strategy – that is, collaboration with socially responsible business. Since the 1990s, global labour has tried to redirect corporate social responsibility (CSR) towards better labour and environmental relations. While the experience of the Global Framework Agreements shows occasional and limited examples of success at the level of individual corporations, it has not affected the broader labour practices around the world (Fichter & Stevis, 2013). Participation in various voluntary social reporting initiatives has been even less productive (for a critical view of CSR, see Shamir, 2010, 2011; for a liberal institutionalist view, see Ruggie, 2018). With respect to climate, unions have sought to approach those industrial and financial companies that, for various reasons, have decided that climate change is a problem as well as an opportunity, and that inaction will have deleterious effects on their economic activities (see Felli, 2021). Labour’s strategic effort to ally with this wing of capital is evident in the collaboration of ITUC with The B Team8 and We Mean Business Coalition,9 through the Just Transition Centre (Just Transition Centre, 2017; Just Transition Centre and The B Team,

314  Handbook on critical political economy and public policy 2018). The diffusion of JT within capital may be attributed to the tenacity of labour environmentalists. However, it may also be a response by the more globalist capitalists to the threat of nativist and authoritarian capitalists.10 To conclude this section, then, JT has been a response to capitalism. That of the earlier period was more hyperliberal and determined to break the power of unions. Currently, hyperliberalism coexists with ‘socially responsible’ capitalism as well as nativist and nationalist capitalism. These are real differences and conflicts within capitalism but that is not a new phenomenon. These tensions, however, involve movement and changes within capitalism rather than of capitalism (Nayyar, 2016; Stephen, 2014). Historicizing JTs, or any political strategy for that matter, by placing it within its historical context is necessary and useful. As things stand, egalitarian JT proposals are still part of a war of position that may or may not translate into the profound ecosocial change promised by the strategy. Until it becomes part of a broader ecosocial strategy, supported by labour, environmentalists, other social movements but, also, by political parties committed to a common narrative, it will not fulfill its promise.11 The Green New Deal proposals offer such a promise, provided they are not limited to the Global North and not reduced to a green economy strategy in which social and ecological justice are collateral benefits employed to temper the resistance of some energy workers, environmentalists and communities (Kolinjivadi & Kothari, 2020a, 2020b; Zografos & Robbins, 2020). The politicization of JT that follows aims at differentiating JTs that are limited to modifications within capitalism from those that aim to reform capitalism or transform the political economy and ecology.

POLITICIZING JUST TRANSITIONS In one sense, the politicization of JT means that we identify the social forces contesting JT, such as unions, environmentalists, corporations, states, indigenous peoples and so on. This is definitely necessary. But we must also examine how their views about JT addresses the historical relations, and associated rules, within which these contestations are taking place. Expanding the universe of those constituted within particular historical relations renders visible the weak and unorganized (Young, 2006). These could be the small-scale miners of cobalt and other industrial minerals used in the renewable energy industry. They could be the immigrants cleaning hospitals or industrial installations; they could be workers enslaved through violence or immigrant visas that denude them of any power while building Teslas. They could be the wives of manufacturing and extraction workers who are fully dependent on their husbands while their household work is unwaged and taken for granted. But expanding the universe of those recognized12 and allowed to participate may well hide the fact that the historical relations and associated rules organizing that totality remain largely the same. Interrogating this possibility is all the more necessary when policies and proposals promise an egalitarian and ecological world. Alternatively, we are destined to confuse change within with change of the totalities involved (Agarwal, 2001; Fraser, 2017). In what follows I outline and provide examples of an analytical scheme whose aim is to map and account for all affected by (un)just transitions, as well as differentiate amongst their views of these transitions (for further elaborations, see Just Transition Research Collaborative, 2018; Stevis & Felli, 2020). The analytical scheme differentiates amongst policies in terms of their ambition, based on their breadth and depth. The ambition of a policy depends on the hopes

Just transitions: a historical relations analysis  315 and expectations of a social actor. For a national socialist, a very ambitious policy would be one that organizes society in terms of race and hierarchical governance. For a liberal it would be the disruption of aristocracy and the generalization of wage labour. For a liberal feminist it would be equality with men within that order. For an ecosocialist it would be an egalitarian and ecological society. Accordingly, what may be a transformative policy for some may be regressive for others. Breadth – Who Is Covered The breadth of a policy refers to who is covered or included in the policy, and it is examined in terms of scale and scope (Chandler, 1994). Scale refers to the spatial and temporal domain of a policy. Scope refers to its social and ecological domain. I submit that if our analysis stops at the level of scale, we may end up seeing the desirable elements of a policy while missing its less desirable ones. The national-scale National Labour Relations Act of 1935 that gave a lot of unskilled workers in manufacturing the right to unionize – and became the backbone of the US labour movement until the 1990s – excluded from its scope agricultural, domestic and care workers – most of them women and African Americans (Perrea, 2011). Scale For the most part, policies are based on jurisdictional scales. In federal countries contestations between federal and sub-federal units are very important. In the USA, for instance, Colorado has a JT policy but the USA, as whole, does not. The Trump administration sought to strip California of its right to require higher gasoline standards in an effort to roll back pollution standards. Regardless of the scale of the tradition we must ask whether its jurisdictional scale is commensurate with the geographic scale of the transition itself. In fact, Colorado, where a JT from coal is unfolding, may be partly paying for its JT by exporting coal, thus protecting some miners but not coal plant workers. In general, the interface between the spatial scale of a transition and a JT policy is the subject of serious contestation and may be synergistic or antagonistic. Transitions also have temporal scales (Adam, 1998; Nixon, 2011). A decarbonization policy, for example, may take place much faster than a JT policy or the JT policy may be reactive, leaving a significant number of places destitute. Similarly, a proactive transitional policy, one that anticipates the transition, may be commensurate with the temporal impacts of decarbonization or may only remediate mines for just a few years, creating serious intergenerational inequities. Scope A JT policy may cover a particular scale but be narrow in scope. Canada’s and Colorado’s coal transitions leave out their major sources of fossil fuels – natural gas in Colorado and tar sands oil in Canada (Mertins-Kirkwood & Deshpande, 2019). In the case of Colorado, the state policy prescribes a net-zero economy by 2050, which means that the transition from natural gas will have to take place in a much shorter time frame. But it is not only the sectoral scope that we should be paying attention to. It is also the demographic one. JTs that cover only frontline miners and coal power plant workers, mostly white men in the USA and Canada, leave out those transporting coal as well as those that do all

316  Handbook on critical political economy and public policy the service work that keeps mines, plants, and the corporations that own them, operating. The numbers of these workers, in fact, is much higher than frontline workers and most of them are women.13 Attention to scope forces us to avoid generalities that obscure gaps, such as assuming that a national decarbonization policy is covering all fossil fuels and all affected workers and communities. It also requires us to map the scope of the JT policy against the scale and scope of the transition policies and practices. In the historical section, I made the case that there is nothing that limits JT to climate and energy. In dealing with the breadth of JT, however, I may have given the impression that JT is only about sunsetting industries associated with toxins or fossil fuels. But the scale and scope of JT must also include renewables because a transition from fossil fuels means a transition to other forms of energy, rather than the disappearance of the energy sector. Given the fact that the two kinds of energy are necessarily related, an unjust transition to renewables produces an unjust energy transition. But why limit ourselves to transitions from old industries and transitions to new industries? Are JTs not necessary for existing and growing industries such as health, transportation or education (Anderson, 2021a, 2021b)? In one poignant example, Medicare for All in the USA will result in almost 2 million private sector office workers, mostly processing insurance, losing their jobs. But a JT is also necessary to bring the vast number of low-paid elder- and childcare workers, mostly women and many women of color, to a living income (Winant, 2021). That cannot happen without a massive JT from precarity to a living income. It is worth noting that the current Biden administration had proposed US$400 billion towards upgrading the wages of eldercare workers in the USA, a proposal too radical for mainstream US politics. Depth – Social, Environmental and Ecological Justice As noted in the introduction, what makes JT a useful case for employing a historical relational political economy (as well as political ecology) approach is the fact that it seeks to fuse the social with the ecological, as was the case with sustainable development. In the same way that sustainable development produced questions about the balance between the social (development) and the environmental (sustainability), JT raises question about justice (relationship between social and environmental justice) and transition (towards a more ecological society or just putting a problem behind us). Justice, in fact, is central to the social welfare state and has been so from the very beginning. The measure of the welfare state is not only how well it distributes benefits and opportunities amongst employed people but, also, how it treats those that find themselves vulnerable. That is the case with healthcare, child- and eldercare, pensions, unemployment benefits, disability, re-education and so on. We do not provide children and the elderly, for example, with opportunities for employment. The bottom line is that JTs cannot be limited to the availability of green jobs that are necessary but not sufficient. They must also provide social protections to those that need them. With the above in mind, I now turn to social, environmental and ecological justice to explore the depth of JTs. In general, analysts distinguish between procedural and substantive justice. Procedural justice addresses questions of recognition and participation, while substantive justice refers to the distribution of benefits and harms (for discussion of various aspects of justice, see the contributions in Coolsaet, 2020). Historical power relations permeate both

Just transitions: a historical relations analysis  317 dimensions. For the sake of this chapter, and because of how I employ procedural justice here, the discussion is limited to procedural justice. My approach to procedural justice includes the range of possible outcomes within procedure. Accordingly, I ask who has voice and who has choice in JT policies. By voice I refer to who can participate to advance their views. By choice I refer to the policy outputs that are considered to be a legitimate subject of negotiation. A union may have strong voice with respect to managing occupational health and safety risks but not with respect to negotiating the standards employed. For many analysts and unionists, one of the major accomplishments of unions at the European Union level has been the formation of European Company Councils. Even in the case of the few ‘joint agreements’, however, unions have limited choice because managerial prerogatives are not subject to negotiation (Pulignano & Waddington, 2019). In the USA, the so-called ‘Treaty of Detroit’ bargained away the right of unions to participate in location and automation decisions in exchange for higher wages and workplace rights (Loomis, 2018). In fact, this came to haunt unions in the 1970s because they had given management the right to automate and locate. Social justice Social justice refers to justice amongst humans. Can JTs, particularly environmental ones, be only social? One can envision an environmental transition that is fully just for the humans affected. And, also, one can assume that when the environment is not at stake, a JT can justifiably be limited to people. But would a transition to artificial intelligence that satisfies a union’s top priorities, but excludes women, be socially just? The point here is that social justice cannot leave out those with less voice, whether humans or nature. While there are policies and transitions that may have less environmental impact, we cannot assume that seemingly social transitions are only social (in the same way we cannot assume that environmental transitions are only environmental). The analytical scheme proposed, therefore, is not intended to adjudicate whether social or environmental transitions are just but to explore whether transitions are comprehensively just. Environmental justice During the 1980s, the realization that social injustice took place through the uses and abuses of the environment produced environmental racism and eventually environmental justice as we know it.14 Environmental justice deals with the distribution of environmental harms and benefits, whether air pollution or parks, amongst people. At its narrowest sense, environmental justice can be the fair allocation of harms and benefits across wealth and demographic attributes. As we look at what environmental harm and benefit denote, we start broadening and deepening environmental justice. First, it can be harmful to workers, hence the emergence of occupational health and safety. In fact, it can be so harmful that society decides to abandon certain work processes, whether the use of white phosphorous for matches or radium for the hands of clocks. Second, it can be harmful to people living near a mine, factory or commercial facility because of noise, traffic and emissions. Third, it can be harmful to distant people, in space and time, because wastes are disposed far away from the source or have a very long lifetime. Finally, it can be harmful to people because it pollutes what they need to use, whether forests, water, food, or air. As we move from the first to the last category we are moving from a limited number of stakeholders – workers, their families, and employers – to an increasingly wider range of stakeholders. One can argue that if we transition out of all of those categories of

318  Handbook on critical political economy and public policy harms, and distribute benefits equitably, both humans and their world will be healthier. In my view, such a strong version of environmental justice that recognizes that humanity and nature are intertwined can deliver a much better world (Shrader-Frechette, 2002). However, it may still be limited to certain aspects of nature (those involving human harms and benefits), and it remains anthropocentric since the measure of success is quality of life for humans. This brings us to ecological justice. Ecological justice Like environmental justice there are varieties of ecological justice ranging from those that focus on protecting nature from an undifferentiated humanity (Celermajer et al., 2021) – thus avoiding the socially variable interface between nature and humanity – to those that seek to fuse social and environmental justice into what is called ecological justice (Low & Gleeson 1998)?15 Is it a middle-class luxury to introduce elements of ecosocial justice into a JT – that is, to argue that the measure of the JT is not only how it improves that part of the environment within which people live, work and play but, also, whether and how it extends standing16 to nature? Let us assume, for example, that carbon capture and storage can solve our climate problem, certainly an environmental justice problem, by injecting CO2 into underground formations. Can we argue that such a practice is ecologically acceptable, even though we do not know what the impacts of injection are on underground ecosystems, now and in the future? For some time, and increasingly now, analysts and activists argue that we are so intertwined with nature as to be part of it (e.g., Celermajer et al., 2021; Moore, 2019). Destroying nature destroys us. I agree with this view but want to add an important consideration. How we understand and live in our natural world rests on our own knowledge, agency and politics. As a result, there are competing ways in which we see the nature–humanity nexus and these reflect different worldviews not only about our place in nature but also about who decides about our place in nature. How then can we extend standing to nature even though the non-human world does not have a voice we can currently recognize? How can we avoid colonizing nature, starting with the animals closer to us, inserting what we value and know, whether the avoidance of pain or some degree of sentiency? I suggest two starting points for this (Malm & Warlenius, 2019; Stevis, 2000). First, because our impacts on nature reflect human inequalities, with the more powerful causing the most harm and enjoying the most benefits, we should reduce their voice and choice while increasing that of the less powerful. Will that solve the problem? Unfortunately, we will not know until that happens but some tempering of unequal social divisions of labour is central to any ecosocial vision. But, even in an ecosocial democracy I believe that we need to employ a strong precautionary principle both about how we act in nature and about how we know nature. Ambition During the last several years there has been a proliferation of the term ‘transformation’ in various permutations. What becomes apparent, as one looks closely, is that there are varieties of transformation (e.g., Bennett et al., 2019; Temper et al., 2018). Accordingly, I prefer to use the term adjectively when dealing with JTs or change. A transformative JT must include all affected people and nature and across space and time. A JT that does not address nature will inevitably harm humanity’s relations with nature, because historical relations organize both society and nature. The question, of course, is

Just transitions: a historical relations analysis  319 whether there can be a transformative JT at all given the global divisions of labour. Difficult as it may be, one can imagine a social or ecological turn in one place, country or region, such as the turn to the social welfare state in Western Europe. The analytical scheme employed here forces us to ask whether this desirable outcome is paid for by the rest of the world, as would be the case of a socialized healthcare system that depends on immigrant workers, thus depriving their country of origin of their skills (see Brand & Wissen, 2021). In historicizing JT, I made the argument that we live in an era of neoliberal capitalist hegemony, despite the tensions between its globalist and nativist tendencies. What we are called upon, therefore, is to identify and choose amongst less-than-transformative JT policies on the road to an ecosocial society. This requires the differentiation between those that reinforce capitalism and those that allow the kinds of change that can possibly shift the political terrain towards transformation – what have long been called structural or non-reformist reforms (for recent examinations, see Bond, 2008; Brand & Wissen, 2021, p. 35; Just Transition Research Collaborative, 2018, pp. 11–15; Przeworski, 2021). In the United States, this could be socialized healthcare for all. First, it would cover all citizens and it would be a right rather than a benefit. Consequently, it would eliminate the fear of losing healthcare that exerts a disciplining effect on US citizens, as a recent project in which I participated highlighted. Healthcare for all would be the cornerstone of any JT. Second, it would signify that a particular constellation of social forces has prevailed politically, thus expanding the realm of the possible in the USA. Those that aim for a transformative ecosocial society must decide whether a particular reform is a step towards that goal or the end of the road. But they must also decide how to separate structural reforms from managerial and compensatory reforms that involve the state and whose goals are to address instability and ensure that the labour force is reproduced and trained as required by capital. Most analysts would not call the massive infusions of funds during the pandemic, even though they emanated from the state, as examples of structural reform that broadens and deepens the public sphere. However, many may think that they are prefigurative of them, while, in fact, they are alternatives to them. But the difference is not always easy to discern during the crisis itself. A fourth cluster of JTs, discussed in the historicization section, explicitly stays within the parameters of CSR. Accordingly, its goal is to find policies that transition selected workers and communities in financially appropriate ways and as a way of enhancing the profile of the corporation. While CSR can be criticized because it reinforces social divisions of labour and associated historical relations, it should not be underestimated in terms of promoting capitalist hegemony. Finally, JT policies and proposals are not the only transitional policies and proposals. In fact, they are a very small minority. Most transitional policies are regular economic or even sustainable development policies, while in many cases, probably most, there are no transitional policies to speak of.

CLOSING COMMENTS The purpose of this chapter has been to apply a critical political economy approach to JTs, including those emanating from unions and environmental organizations. I have argued that a critical political economy approach must historicize the concepts being investigated. This

320  Handbook on critical political economy and public policy helps to better understand their purpose at particular points in time and prevents them from becoming empty signifiers. I have also argued that we need to politicize JTs. This requires that we address both the range of actors contesting JT as well as the worldviews of these actors. In much of conventional political science and international relations, social actors are denuded of their social purpose or are treated as if constituted atomistically or functionally and not within social divisions of labour. The atomistic ontologies may well employ the language of power but do not accept that the power of an employer or a state is based on disempowering workers or other states. The functionalist systemic approaches recognize that we live within totalities and that one’s actions reverberate through the system. However, the relations that they employ are not generative and, thus, do not capture social power. For ‘socioecological systems’ analysts, JTs are about keeping the system resilient, rather than just. These considerations are particularly important today and for a number of reasons. I close by raising two issues. The systemic narratives of the Anthropocene and planetary boundaries employ rapid and existential threats to highlight the need for rapid transitions that are not complicated by questions of justice, as if justice had been the major obstacle to needed planetary policies. While some, from within this metanarrative, have started addressing justice (Rockström, 2015), this has not been central to their approach while they are hampered by the fact that social power is not built into ‘socioecological systems analysis’ (Malm & Hornborg, 2014). As in the past, the aggregate approach creates a Manichean dilemma of ecological survival vs human needs, sometimes limiting justice to the demands of Southern elites. Their solution to the survival vs justice dilemma is not an ecosocial reorganization of our world but, rather, some aggregate change in our collective ways. Transformative and structural JTs keep differential responsibility and impacts, and thus relational power, front and center. But what do we do when workers do not want to abandon their jobs, even if these jobs are leading them to their early grave? Is it just for us to tell them that they must be just-transitioned? This is a difficult question to adjudicate without taking the power of the employer and thus ‘job blackmail’ out of the equation. The preferences of a worker facing uncertainty and unemployment are nested in and shaped by the social divisions of labour that empower capital. What would happen if workers, on their own and without any fear about their well-being and that of their families and communities, were to still decide that they preferred jobs that are damaging to them, those near them, and to society and nature, more broadly? In my view, workers that do not have to worry about their survival and future employment – that is, workers nested within an ecosocial political economy – do not have any privileged standpoint when compared to others affected by their activities. In its more transformative versions JT aims to move us beyond managing the unjust transitions inherent in the capitalist world political economy and towards an ecosocial political economy in which differences over transitions are the matter of democratic deliberation rather than survival.

NOTES 1. My approach to political economy is influenced by historical materialist thought – for example, Bukharin’s ([1915] 1973) conceptualization of the world economy; the applications of Gramsci’s thought on international relations – for example, Cox (1981); Ollman’s (1976) work on internal relations; and the more historical approaches to dependency – for example, Dos Santos (1970) and Frank (1966).

Just transitions: a historical relations analysis  321 2. The socioecological systems approach is a line of thought adopted by many ecologists who focus on the connections between humanity and nature. A major node in this approach is the Stockholm Resilience Centre, also a major force behind the planetary boundaries hypothesis. In this chapter, I use socioecological to refer to them and ecosocial to refer to the historical and relational approach to humanity–nature relations. 3. In line with critical realism, I argue that, at this point in our knowledge, we can assume that some, but not all, of nature acts. How it acts, and how we can prevent our views from colonizing nature, remains a formidable challenge (for an older elaboration, see Stevis, 2000; for a recent elaboration on the new materialism, see Gamble, Hanan & Nail, 2019). 4. It is worth noting that corporations and states also employed ‘job blackmail’ in response to laws mandating the demographic integration of the workplace. This explains the popularity of Governor of Alabama George Wallace and later Reagan amongst white workers. 5. That was not the case in the public sector, where unionization grew precipitously because of specific policies. This divergence demonstrates that globalization is based on policies rather than some metaphysical force. 6. Because the social welfare state in the US is so thin, these collective agreements provided what a social welfare state would – for example, healthcare, unemployment benefits, pensions and many other protections. 7. These comments are not to deny the many valiant and continuing efforts towards a more egalitarian and ecological world, including those by global union organizations, which this author supports. Rather, it is to underscore that the hegemony of capital remains strong, with nativists challenging its cosmopolitan dimensions currently. 8. The B Team is, in their own words, a group of global business leaders who are committed to catalysing a better way of doing business, for the well-being of people and planet. 9. The We Mean Business Coalition is a business-funded umbrella organization for the purpose of accelerating an inclusive transition to a net-zero economy. 10. Here we must note that manufacturing and energy unions caught in global competition routinely employ nationalist, if not nativist, strategies. These, however, can very well slide into nativism, as evidence from the USA and other countries suggests. 11. What is surprising to this author is both the limited ambition of many socialist political parties but, also, the lack of attention by labour and environmental scholarship on parties, the major links between state and society. 12. The trivalent approach to justice consists of recognition of those affected, participation in decision-making, and equitable distribution of harms and benefits. For more discussion, see various chapters in Coolsaet (2020). 13. Attention to scale and scope is particularly important in global or heavily traded commodities. Global commodities, such as oil, converge around a global price. On the other hand, not all heavily traded commodities converge towards a global price. 14. The origins of environmental justice go back to the 1970s. Progressive religious activists, unions and urban community organizers played a key role (Hessel, 2007; Purdy, 2018; Rector, 2018). 15. This can be confusing as some analysts use the term ‘ecological justice’ to refer to socioecological justice. Some others, however, do not. 16. I am using the term ‘standing’ because it allows various ecocentric approaches.

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Just transitions: a historical relations analysis  323 International Renewable Energy Agency (IRENA) 2021, Renewable Energy and Jobs: Annual Review 2021 – Special Issue: Labour and Policy Perspectives, accessed 23 November 2021 at https://​www​ .irena​.org/​publications/​2021/​Oct/​Renewable​-Energy​-and​-Jobs​-Annual​-Review​-2021. Jackson, P.T. & Nexon, D. 1999, ‘Relations before states: substance, process and the study of world politics’, European Journal of Industrial Relations, 5 (3), 291–332. Just Transition Centre 2017, Just Transition. A Report for the OECD, accessed May 2019 at https://​www​ .oecd​.org/​environment/​cc/​g20​-climate/​collapsecontents/​Just​-Transition​-Centre​-report​-just​-transition​ .pdf. Just Transition Centre and The B Team 2018, Just Transition: A Business Guide, accessed April 2019 at https://​www​.ituc​-csi​.org/​IMG/​pdf/​just​_transition​_​-​_a​_business​_guide​.pdf. Just Transition Research Collaborative 2018, Mapping Just Transition(s) to a Low-Carbon World, Rosa-Luxemburg-Stiftung, University of London Institute in Paris and United Nations Research Institute for Social Development, accessed April 2019 at http://​www​.unrisd​.org/​jtrc​-report2018. Kazis, R. & Grossman, R.L. [1982] 1991, Fear at Work: Job Blackmail, Labor and the Environment, New York: Pilgrim Press. Kolinjivadi, D. & Kothari, A. 2020a, ‘No harm here is still harm there: the Green New Deal and the Global South (I)’, Jamhoor, No. 4, 20 May, accessed 19 December 2022 at https://​www​.jamhoor​ .org/​read/​2020/​5/​20/​no​-harm​-here​-is​-still​-harm​-there​-looking​-at​-the​-green​-new​-deal​-from​-the​-global​ -south. Kolinjivadi, D. & Kothari, A. 2020b, ‘No harm here is still harm there: the Green New Deal and the Global South (II)’, Jamhoor, No. 4, 21 May, accessed 19 December 2022 at https://​www​.jamhoor​.org/​ read/​2020/​5/​21/​no​-harm​-here​-is​-still​-harm​-there​-the​-green​-new​-deal​-from​-the​-global​-south​-ii. Leopold, L. 2007, The Man Who Hated Work but Loved Labor: The Life and Times of Tony Mazzocchi, White River Junction, VT: Chelsea Green Publishing Company. Loomis, E. 2018, ‘This day in history’, Lawyers, Guns & Money, accessed 23 November 2021 at https://​ www​.​lawyersgun​smoneyblog​.com/​2018/​05/​day​-labor​-history​-may​-23​-1950. Low, N. & Gleeson, B. 1998, Justice, Society and Nature: An Exploration in Political Ecology, London: Routledge. Malhi, Y. 2017, ‘The concept of the Anthropocene’, Annual Reviews of Environment and Resources, 42, 77–104. Malm, A. & Hornborg, A. 2014, ‘The geology of mankind? A critique of the Anthropocene narrative’, The Anthropocene Review, 1 (1), 62–9. Malm, A. & Warlenius, R. 2019, ‘The grand theft of the atmosphere: sketches for a theory of climate injustice in the Anthropocene’, in K.-K. Bhavnani, J. Foran, P. Kurian & D. Munshi (eds), Climate Futures: Re-Imagining Global Climate Justice, London: Zed Books, pp. 32–9. Mertins-Kirkwood, H. & Deshpande, Z. 2019, Who is Included in a Just Transition? Considering Social Equity in Canada’s Shift to a Zero-carbon Economy, Canadian Centre for Policy Alternatives, 28 August, accessed 14 November 2019 at https://​www​.policyalternatives​.ca/​publications/​reports/​who​ -is​-included​-just​-transition. Moore, J. 2019, ‘Capitalocene and planetary justice’, Maize, 6, 49–54. Morena, E. 2018, ‘Securing workers’ rights in the transition to a low-carbon world: the just transition concept and its evolution’, in S. Duyck, S. Jodoin & A. Johl (eds), Routledge Handbook of Human Rights and Climate Governance, New York; Routledge, pp. 292–8. Morena, E., Krause, D. & Stevis, D. (eds) 2020, Just Transitions: Social Justice in the Shift Towards a Low-Carbon World, London: Pluto Press. Nayyar, D. 2016, ‘BRICs, developing countries and global governance’, Third World Quarterly, 37 (4), 575–91. Nixon, R. 2011, Slow Violence and the Environmentalism of the Poor, Cambridge, MA: Harvard University Press. Oil, Chemical and Atomic Workers International Union (OCAW) 1991, Understanding the Conflict between Jobs and the Environment: A Preliminary Discussion of the Superfund for Workers Concept, Denver, CO: OCAW. Ollman, B. 1976, Alienation: Marx’s Conception of Man in Capitalist Society, 2nd edition, Cambridge, UK: Cambridge University Press.

324  Handbook on critical political economy and public policy Perrea, J. 2011, ‘The echoes of slavery: recognizing the racist origins of the agricultural and domestic worker exclusion of the National Labor Relations Act’, Ohio State Law Journal, 72 (1), 95–138. Przeworski, A. 2021, ‘Revolution, reform, and resignation’, in M. Adereth (ed.), Market Economy, Market Society: Interviews and Essays on the Decline of European Social Democracy, New York: Phenomenal World Volumes. Pulignano, V. & Waddington, J. 2019, ‘Management, European Works Councils and institutional malleability’, European Journal of Industrial Relations, 26 (1), 5–21. Purdy, J. 2018, ‘The long environmental justice movement’, Ecology Law Quarterly, 44 (4), 809–64. Räthzel, N., Stevis, D. & Uzzell, D. 2021, ‘Introduction: the expanding boundaries of environmental labour studies’, in N. Räthzel, D. Stevis & D. Uzzell (eds), The Palgrave Handbook of Environmental Labour Studies, London: Palgrave Macmillan, pp. 1–31. Räthzel, N. & Uzzell, D. (eds) 2013, Trade Unions in the Green Economy: Working for the Environment, London: Routledge. Räthzel, N., Uzzell, D. & Elliott, D. 2010, ‘The Lucas Aerospace experience: can unions become environmental innovators?’, Soundings, 46, 76–87. Rector, J. 2018, ‘The spirit of Black Lake: full employment, civil rights, and the forgotten early history of environmental justice’, Modern American History, 1 (1), 45–66. Renner, M., Sweeney, S. & Kubit, J. 2008, Green Jobs: Towards Decent Work in a Sustainable, Low-Carbon World, Nairobi: UNEP/ILO/IOE/ITUC, accessed April 2019 at www​.ilo​.org/​wcmsp5/​ groups/​public/​@​dgreports/​@​dcomm/​documents/​publication/​wcms​_098504​.pdf. Rockström, J. 2015, Bounding the Planetary Future: Why We Need a Great Transition, Great Transition Initiative, April, accessed 5 July 2020 at https://​greattransition​.org/​publication/​bounding​-the​-planetary​ -future​-why​-we​-need​-a​-great​-transition. Rosemberg, A. 2020, ‘“No jobs on a dead planet”: the international trade union movement and just transition’, in E. Morena, D. Krause & D. Stevis (eds), Just Transitions: Social Justice in the Shift Towards a Low-Carbon World, London: Pluto Press, pp. 32–55. Ruggie, J. 2018, ‘Multinationals as global institution: power, authority and relative autonomy’, Regulation & Governance, 12 (3), 317–33. Shamir, R. 2010, ‘Capitalism, governance and authority: the case of corporate social responsibility’, Annual Review of Law and Social Science, 6, 531–53. Shamir, R. 2011, ‘Socially responsible private regulation: world-culture or world-capitalism?’, Law and Society, 45 (2), 313–36. Shrader-Frechette, K. 2002, Environmental Justice: Creating Equality, Reclaiming Democracy, Oxford: Oxford University Press. Stephen, M. 2014, ‘Rising powers, global capitalism and liberal global governance: a historical materialist account of the BRICs challenge’, European Journal of International Relations, 20 (4), 912–38. Stevis, D. 2000, ‘Whose ecological justice?’, Strategies: Journal of Theory, Culture and Politics, 13 (10), 63–76. Stevis, D. 2021, ‘Embedding just transition in the USA: the long ambivalence’, in N. Räthzel, D. Stevis & D. Uzzell (eds), The Palgrave Handbook of Environmental Labour Studies, London: Palgrave Macmillan, pp. 591–619. Stevis, D. & Assetto, V. 2001, ‘Conclusion: history and purpose in the international political economy of the environment’, in D. Stevis & V. Assetto (eds), The International Political Economy of the Environment: Critical Perspectives, Boulder, CO: Lynne Rienner Publishers, pp. 239–55. Stevis, D. & Felli, R. 2020, ‘Planetary just transitions? How inclusive and how just?’, Earth System Governance Journal, 6, Article 100065. Stevis, D., Morena, E. & Krause, D. 2020, ‘Introduction: the genealogy and contemporary politics of just transitions’, in E. Morena, D. Krause & D. Stevis (eds), Just Transitions: Social Justice in the Shift Towards a Low-Carbon World, London: Pluto Press, pp. 1–31. Temper, L., Walter, M. & Rodrigues, I. et al. 2018, ‘A perspective on radical transformations to sustainability: resistances, movements and alternatives’, Sustainability Science, 13, 747–64. United Nations Environment Programme (UNEP) 2009, Global Green New Deal: Policy Brief, March, accessed April 2009 at https://​wedocs​.unep​.org/​bitstream/​handle/​20​.500​.11822/​7903/​A​_Global​ _Green​_New​_Deal​_Policy​_Brief​.pdf​?sequence​=​3​&​amp​%3BisAllowed​=​.

Just transitions: a historical relations analysis  325 United Nations Framework Convention on Climate Change (UNFCCC) 2015, Report of the Conference of the Parties on its twenty-first session. Decision 1/CP.21 Adoption of the Paris Agreement, United Nations, Paris, 29 January, FCCC/CP/2015/10/Add.1. Winant, G. 2021, ‘Manufacturing isn’t coming back: let’s improve those jobs instead’, The New York Times, 17 March, accessed 19 December 2022 at https://​www​.nytimes​.com/​2021/​03/​17/​opinion/​ health​-care​-jobs​.html. Woodcock, L. 1972, ‘Labor and the economic impacts of environmental control requirements’, Jobs and the Environment: Three Papers, 28 November, accessed 23 November 2021 at https://​calisphere​.org/​ item/​ark:/​28722/​bk0003s9447/​. Wright, E.R. 2016, ‘Two approaches to inequality and their normative implications’, Items: Insights from the Social Sciences, 5 July, accessed 24 November 2021 at https://​items​.ssrc​.org/​what​-is​-inequality/​ two​-approaches​-to​-inequality​-and​-their​-normative​-implications/​. Young, I.M. 2006, ‘Responsibility and global justice: a social connection model’, Social Philosophy & Policy, 23 (1), 102–30. Zografos, C. & Robbins, P. 2020, ‘Green sacrifice zones, or why a Green New Deal cannot ignore the cost shifts of just transitions’, One Earth, 3 (5), 543–6.

PART VI TAXATION

22. Critical political economy of taxation Hanna Lierse

Taxes are a key theme in the history of revolutions, democracy and capitalism. They are obligatory payments to governments, which need financial resources not only for their own existence but also to finance public goods and services including wars and welfare. The extractive capacity of taxation, which underlies all other state capacities, is the reason Schumpeter (1954) referred to the modern state as the tax state. Even a neoclassical economist, who generally opposes a strong tax state, acknowledges that some taxes are necessary. However, this necessity of taxes for the functioning of state activity is disputed and the size and the distribution of the financial burden is highly contested. How much taxes should states raise? And should the financial burden be levied such that it is redistributed amongst different socioeconomic groups? After all, taxes can act as a powerful method of redistribution, which tap into the incomes and wealth of the rich and thereby ensure reallocation of wealth amongst the haves and the have-nots (Musgrave, 1959). While taxation is an economic instrument, the decision about how and who to tax is certainly not (only) an economic one; rather, it is a highly political decision, shaped by competing ideas, interests and power structures. For political economists, the most important task is to uncover the societal forces that shape the taxes imposed by the state and their related distributional implications. The goal of this chapter is to provide an overview of the critical political economy literature on taxation. Political economy, in the context of this contribution, refers to the political and economic causes, ideas, interests, power structures and institutions that drive patterns of taxation as well as consequent socioeconomic measures. Amongst post-industrial economies and beyond, how can we explain origins, transformations and the varieties of the taxes that a state implements? Both normative and empirical political economy approaches justify and explain taxation. Normative political economists theorize about how tax policies influence society and deduce optimal forms and levels of taxes (Keen & Konrad, 2012; Piketty & Saez, 2013). This approach is outcome oriented rather than process oriented (Hettich & Winer, 2005). How can taxes contribute to goals of economic stability, mitigate climate change, or reduce tax avoidance? To what extent do trade-offs and synergies exist between different goals? In turn, empirical political economists do not debate how the tax state should be or operate in an ideal world, but based on empirical data they uncover the political and economic interests, ideas or institutions that influence tax policies (Aidt & Jensen, 2009a; Beramendi & Rueda, 2007; Genschel & Schwarz, 2011; Limberg, 2019; Seelkopf & Lierse, 2020). Although normative and empirical accounts are often discussed separately, a key contribution of the critical political economy literature is to show that normative paradigms have empirical implications. They guide our understanding about good and bad, and right and wrong forms of taxation. Such normative paradigms do not, however, simply ‘float around’, but the emergence of dominant economic paradigms of taxation can be attributed to economic, political and institutional causes. The aim of the critical political economy of taxation, therefore, is to empirically uncover such normative taken-for-granted ideas that shape our understanding of taxation, question them, and shed light on possible alternatives. For instance, Saez and Zucman (2019) show how the 327

328  Handbook on critical political economy and public policy belief that taxing multinational corporations is impossible in the context of economic globalization has spread, and also suggest several paths towards a global corporate minimum tax rate. The next section of the chapter discusses important theoretical debates about taxation, outlining the different and competing forms and objectives of taxation and how they have evolved through history. It also explains key concepts such as progressive and regressive forms of taxation and shows how different tax policies can contribute to different goals. The second section provides a descriptive overview of some of the main tax changes and transformations that have occurred globally and in advanced post-industrialized societies, particularly over the last few decades. The third section highlights the main political economy explanations that can account for these developments and emphasizes how our knowledge can be extended from the perspective of a critical political economy. The final section outlines possible directions for future research. It must be noted that this chapter is not exhaustive and cannot account for all possible tax transformations and patterns. The main focus throughout the chapter is on two main trends that have taken place during the post-Bretton Woods era – the decline of redistributive direct forms of taxation and the recent adoption of regressive carbon taxes. While these two examples may appear random at first, they illustrate some common trends and conflicts inherent to taxation. They uncover our current dominant understandings of taxation in capitalist societies and highlight how governments prioritize certain societal goals, particularly economic growth, over others, such as mitigating inequality or climate change.

GOALS AND FORMS OF TAXATION In this section, I describe the rise of the modern tax state and explain key goals and concepts of taxation. Besides clarifying different kinds of taxes – that is, progressive and regressive forms – I also discuss the main goals of taxes, particularly those of revenue generation, redistribution and regulation. Taxes are no invention of modern times. The first record of organized taxation comes from Egypt around 3000 BCE, and during the Middle Ages it was common to collect taxes. However, forms and objectives of taxation have changed considerably. What we consider the tax state nowadays finds its origin in the 19th century and differs in several ways from previous forms of revenue collection (Seelkopf, Lierse & Schmitt, 2016). One of the main objectives of taxation is to finance government activities such as warfare, welfare and infrastructure – that is, public goods and services that are usually not provided for by the market. However, until the 19th century, taxes were only raised for national emergencies or extraordinary expenditures such as warfare and coronations. Hence, contributions were limited in time and often only covered a small fraction of the population (Braun, 1975). Moreover, while it was the feudal lords and churches that raised taxes from the peasants during the Middle Ages, the 19th century marks a turning point – thereafter, tax collection was no longer sporadic but became a permanent civil obligation. With the transformation towards the modern tax state, not only forms but also objectives changed: taxation was no longer only a means to raise revenue, but also an objective to equalize income differences (Seelkopf et al., 2016). For instance, the main Prussian tax reforms of the 19th century aimed to mitigate the social costs of economic changes that accompanied industrialization. In particular, the introduction of a personal income tax in 1851 was a means

Critical political economy of taxation  329 to tap into the incomes and wealth of the rich (Braun, 1975). In fact, modern tax states tend to rest on two main equity goals: horizontal and vertical equity (Seelkopf & Lierse, 2017). Horizontal equity refers to the objective that people with the same level of income but from different sources – for example, capital income or wages should be taxed equally. In turn, vertical equity suggests that those who have more should also pay higher taxes, as reflected by the ability-to-pay principle. To achieve this form of tax equity, governments adopt progressive direct forms of taxation such as those on income and wealth (McLure, Neumark & Cox, 2022). Usually, for these taxes, the tax rate increases with higher levels of income, so that richer people not only absolutely but relatively pay higher taxes. This differs from regressive indirect taxes such as consumption taxes, with value-added tax (VAT) being the most prominent current form. While the rich tend to pay more consumption taxes because they consume more (e.g., they have bigger houses and need more energy to heat their houses), this is only more in absolute terms, but is not relative to their ability to pay. Progressive taxes, therefore, are a key policy to redistribute incomes from the rich to the poor. They complement social spending insofar as taxes tap into the incomes and the wealth of the rich and can address inequalities that are driven by the high concentration of capital at the top. In contrast, social spending tends to alleviate inequalities at the bottom through public housing and minimum income schemes. They are both redistributive tools, but taxes are particularly useful for tapping into the wealth of the rich. Besides the two tax goals of revenue generation and redistribution, taxes also contribute to regulating production and consumption patterns (Barnett & Yandle, 2005). While the main idea is that taxes should be raised in a way that secures ‘natural’ production and consumption, they are also commonly levied to de-incentivize harmful behaviour. For instance, to create a fiscal environment that does not distort the market – that is, does not alter market-based decisions of savings, investments or work – many governments have adopted tax-cut base-broadening income tax reforms (Organisation for Economic Co-operation and Development [OECD], 2010) – that is, governments have cut the top income tax rates while reducing special tax exemptions. However, taxes are also levied to deter harmful production and consumption decisions. For example, excise taxes on cigarettes, alcohol and sugar increase the cost for the consumption of such health-damaging products. Similarly, green or environmental taxes increase the cost for environment-damaging behaviour by setting a price on pollution, waste or greenhouse gas emissions (Milne & Andersen, 2012). Such pollution costs are called externalities because they are side-effects of the production and consumption of most goods and services. By raising a carbon tax, which is a levy on the emissions of carbon-equivalent greenhouse gases per ton, governments increase the cost of harmful consumption patterns. Even if the demand for such products does not decline with the rise of prices, governments can recycle the revenue produced from it to subsidize green investments and technologies. As such, environmental taxes help to implement the principle of polluter pays, as they confront polluters with the costs of their environmentally damaging activity. The three tax objectives of revenue, redistribution and regulation characterize the modern tax state and are widely acknowledged in the tax literature. Yet, although scholars agree that taxes can contribute to these objectives, it is disputed whether governments should strive for these goals at all. Should we achieve goals of economic growth, redistribution and climate neutrality? Are these socially desirable? And if so, how can we best achieve them and can they be achieved simultaneously? Such questions are addressed by normative political economists. In the following paragraphs, I briefly turn to two such questions that have been high

330  Handbook on critical political economy and public policy on the political agenda during the post-Bretton Woods era: Can taxes be raised to contribute simultaneously to goals of economic growth and equality and economic growth and climate neutrality? And, if not, which of these objectives should be prioritized? With regard to the compatibility of taxes for economic growth and redistribution, two main competing economic paradigms exist that have influenced the discussion on tax policymaking since the post-war era: the progressivity approach and the economic neutrality approach (Hettich & Winer, 1985; Martin, 1991). Until the 1970s, the progressivity approach was dominant, according to which redistribution and economic growth are compatible goals. This approach lays out some mechanisms, mainly built-in stabilizers, through which progressive taxes promote economic stability and growth as per Keynesian economics (Keynes [1933], 1973; Pechman, 1977). For example, during times of crisis, when an economy is hit by a recession and incomes drop, a progressive tax rate ensures that incomes do not fall as far as they would with a flat tax. Taxation serves as a counter-cyclical instrument that cushions the fall of incomes, hence, stabilizes spending and consumption patterns during crisis times. However, economic ideas have shifted towards a new efficiency-oriented story, which highlights how taxes affect people’s decisions to work, save and invest. While taxation is still considered necessary because states need revenue to provide public goods and to compensate for market failures, redistribution from high incomes and wealth are considered as a deterrent to economic growth according to neoclassical economics such as Hayek (Spicer, 1995). The argument is that economic growth is welfare enhancing, thus, concern about redistribution is secondary. Moreover, particularly the upper income-class and the business sector, where the amounts to be saved are high, should be taxed at low levels to spur growth and innovation. Low top income taxes lead to increased investment and may even generate more taxable income due to increased output, as demonstrated by the Laffer curve (see, for instance, Shoup, 1981). The tax neutrality approach is largely in line with the neoliberal turn of the state, which regards state intervention in the markets as a deterrent to economic growth. Growth is the main undisputed objective, which is considered necessary for public revenues and welfare, as illustrated by trickle-down arguments. However, an investigation into the history of the normative political economy on taxation shows that such taken-for-granted ideas can be challenged, and different theories exist, which illustrate how growth and redistribution are compatible. However, a new conflict has entered the political debate – that is, the question of whether goals of economic growth are desirable and compatible with reaching goals of climate neutrality. In fact, the current design of the tax state is highly based on the pursuit of economic growth and investments (OECD, 2010). At the same time, however, governments around the world strive to reduce harmful greenhouse gas emissions to avert a climate catastrophe. But is it possible to decouple economic growth from global warming? The general consensus is based on the Green New Deal, which suggests that green growth is possible by extending the usage of renewable energy and technologies and by moving towards a circular economy based on sharing, reusing and recycling (Green, 2022). However, post-growth and de-growth scholars remain sceptical as there is increasing empirical evidence that decoupling economic activity from global warming is impossible and might not allow attainment of the 1.5°C goal of the Paris Agreement (Hickel, 2021; Hickel & Kallis, 2020). Moreover, while the rich (groups and countries) are the main contributors to global warming, carbon taxes are regressive taxes and push the main financial burden on to poorer groups of society (Büchs, Duwe & Bardsley, 2011). Several policy alternatives have been proposed to make carbon taxes socially more just: for instance, a luxury carbon tax and revenue recycling through green vouchers have

Critical political economy of taxation  331 been proposed, but have not caught much attention in real-world politics (Büchs, Ivanova & Schnepf, 2021; Gough, 2017). At some point though, governments will have to cautiously consider whether and how goals of economic growth, redistribution and climate neutrality are compatible and how taxation can support a sustainable transition. Research in this field is still new and there is the need to better understand – both normatively and empirically – how taxes can support a sustainable, circular and post-growth economy. Before we turn to the empirical scholarship, which attempts to understand and explain the transformation of taxation, the next section briefly covers some descriptive patterns of taxation characteristic of the post-Bretton Woods era and describes how different kinds of indicators and data can help to illustrate and compare patterns of taxation.

DESCRIBING PATTERNS OF TAXATION To describe the transformation of taxation, political economy scholars can use quantitative or qualitative data. I briefly introduce different kinds of data and show some key developments. The illustration is by no means supposed to be a comprehensive account, but rather serves to illustrate some noticeable cross-national tendencies. With regard to quantitative data, tax revenues, tax rates and adoptions are common indicators. The revenue indicator considers the overall amount of taxes collected as a percentage of gross domestic product (GDP) or of a certain tax type also as a percentage of overall taxation. While the tax revenue shows the overall amount of taxes collected, it is not a good policy indicator as it is also determined by factors other than deliberate governmental decisions. For instance, during times of economic crises when economic activity declines, tax revenue decreases even though governments do not change their taxes. Similarly, when states successfully attract investments and businesses from abroad, they will experience an increase in corporate income tax revenues not because governments actively increase the tax burden on corporations, but because there is more corporate income to be taxed (Ganghof, 2006a, 2006b). Hence, if one wants to capture policy decisions, a study of the tax rate can be helpful. An increase or decrease of a tax rate is a deliberate policy decision and shows how governments try to alter the distribution of the tax burden. However, just looking at tax rates also disregards possible tax base changes in terms of exemptions and credits, which can decisively alter the tax burden (Lierse & Seelkopf, 2016). Yet, tax revenues and rates are commonly applied to illustrate the tax structure as they are useful for cross-national and over-time comparisons. Similarly, tax adoptions have been used to show broad tax patterns, historically and globally (Aidt & Jensen, 2009b; Seelkopf et al., 2016). Although it is does not say much about the tax burden, it is the first indicator of governments’ willingness and ability to raise taxes through such means, and illustrates the spread of a policy. First, Figure 22.1 illustrates the development of OECD average tax rates since the 1980s. It shows that governments have cut tax rates on high incomes and capital. For instance, the corporate income tax rate was cut from a little over 40 to 20 per cent and the top personal income tax rate from 58 to about 40 per cent. Similarly, inheritance tax rates at present have diminished to half the levels of the 1980s. It suggests that the tax burden on high incomes and capital has drastically declined since the 1980s. In fact, several countries such as Sweden and Austria have not only cut such taxes, they have also completely abolished their inheritance and net wealth taxes (Lierse, 2022). In Europe, there are only three countries – Switzerland, Spain and Norway – with a net wealth tax (OECD, 2018). By contrast, the tax rate on consumption,

332  Handbook on critical political economy and public policy which is a regressive tax rate, has risen by about two percentage points. This suggests that direct taxes have experienced a considerable decline in comparison to taxes on consumption. As mentioned earlier, tax rate changes can certainly be compensated by base changes; thus, they do not necessarily affect the revenue collected from each tax type. Yet, they are likely to have significant distributive implications.

Source:

OECD (2020).

Figure 22.1

Development of tax rates and revenues in the OECD (%)

The developments depicted in Figure 22.1 suggest that governments’ redistributive goals of taxation are increasingly subordinated to goals of efficiency and economic growth. While the development of top tax rates indicates a shift from progressive taxes to more regressive consumption taxes, revenue data tends to be less clear-cut on this finding (Seelkopf & Lierse, 2017). As discussed above, this is because revenue data includes base changes and other economic developments. To get a better idea of policy reforms one could also use a more detailed and qualitative description of policy developments, which are difficult to capture with revenue or rate changes. Such accounts tend to describe reforms in one or a few countries only, but provide a more detailed analysis of the changes involved (Beckert, 2008; Ganghof, 2006a; Rademacher, 2022). Such qualitative data go beyond showing numbers and shed light on the actual policy aims and goals articulated by the policymakers. Figure 22.2 illustrates another key development – the rise of carbon taxes around the world. It indicates that, particularly since the Paris Agreement in 2015, the number of carbon pricing systems has expanded from about 20 to 80, which include both taxes and emission trading systems. While they differ in their ways of operating, their goals are similar – increase the price of carbon-equivalent emissions to reduce global warming (Dolphin, Pollitt & Newbery, 2020). This new trend is interesting in two ways. First, it is likely that carbon taxes will further increase if governments want to achieve the ambitious climate goals. Second, these policies can potentially conflict with the earlier-mentioned goals of economic efficiency and growth. Setting a price on carbon emissions implies that most goods and services become costlier,

Critical political economy of taxation  333 possibly leading to a reduction of consumption and production. Moreover, certain sectors and industries, which are more heavily affected by such a tax, fear that international competition leads to lower production and possibly unemployment. As such, the rise of carbon taxes somewhat contradicts the growth-oriented policy agenda. However, it is largely in line with Figure 22.1 that shows that a shift to more regressive consumption taxes has taken place. After all, carbon taxes tend to place a higher financial burden on low-income groups (Büchs et al., 2011). Several scholars have questioned how one could increase public acceptance of ecological modernization and show that more progressive forms of carbon taxes – for example, through a luxury tax or revenue recycling – could be a good way forward (Beiser-McGrath & Bernauer, 2019; Carattini, Carvalho & Frankhauser, 2018). However, little is known about how governments address such issues and how carbon tax reforms are legitimized. This requires additional qualitative insights.

Source:

World Bank (2020).

Figure 22.2

Spread of global CO2 pricing instruments

This section discussed different ways of describing and comparing patterns of taxation over time and between countries. In particular, it illustrated two noticeable contemporary transformations – first, the decline of progressive tax rates and second, the rise of regressive carbon taxes. The following section will briefly introduce how such transformations can be explained from a critical political economy perspective.

EXPLAINING PATTERNS OF TAXATION How can we explain the transformation of taxation? Why have governments cut and abolished income and wealth taxes? And how can we explain cross-national differences? There is an extensive literature on the (empirical) political economy of taxation from a micro- and macro-level perspective that attempts to explain patterns of taxation. Scholars that adopt a micro-level perspective shed light on why some individuals are more or less supportive of different kinds of taxes (Atria, 2022; Ballard-Rosa, Martin & Scheve, 2017; Barnes, 2014; Gross, Lorek & Richter, 2017; Limberg, 2020). Questions that are relevant from this perspective, for instance, point out the factors that influence people’s attitudes towards progressive taxation. Scholars have highlighted different explanations including economic concerns of

334  Handbook on critical political economy and public policy self-interest and norms of fairness (Ballard-Rosa et al., 2017). While micro- and macro-level perspectives are important supplements to each another, the focus of this contribution is on the macro level, which does not explain individual preferences for taxation, but throws light on broader policy patterns of taxation (Beramendi & Rueda, 2007; Dolphin et al., 2020; Ganghof, 2006b; Garrett & Mitchell, 2001; Lierse, 2022). They build upon a number of factors that drive tax patterns and often distinguish between political, economic and institutional factors, both at the national and global levels. That is, national tax decisions are not exclusively determined by national power struggles, institutions and economic changes, but are also highly influenced by decisions of other states and international organizations. The following provides an overview of the empirical political economy literature on taxation, which is by no means exhaustive, but rather can be seen as an introduction to current debates. First, taxation is the outcome of a political struggle between different socioeconomic groups of society (Ballard-Rosa et al., 2017; Lierse, 2022; Martin, 1991). A popular approach that highlights the importance of the political conflict between socioeconomic groups is power resource theory (Esping-Andersen, 1990; Hibbs, 1977; Huber, Huo & Stephens, 2017; Korpi, 1983). It suggests that different forms and intensities of class organization influence how the tax burden is distributed. Low-income and labour groups are assumed to favour progressive income and wealth taxes, while capital owners and high-income groups are more supportive of regressive consumption taxes. Their political representatives – that is, labour and conservative parties, respectively – then adopt these policies once they are in office. There is some empirical evidence that shows that left-wing governments have a positive influence on progressive taxes (Banting, 1991; Quinn & Shapiro, 1991; Scheve & Stasavage, 2012). However, several studies also point out that the influence has declined since the 1980s and that not only conservative but also labour governments are increasingly cutting or even abolishing progressive income and wealth taxes (Lierse, 2022; Lierse & Seelkopf, 2016). How can we explain such a shift away from progressive taxes also among the political left, which seems to suggest that a broad societal consensus exists for cutting redistributive taxes? There are several analytical approaches that shed light on the question of why governments around the world have cut or abolished progressive taxes. First, so-called economic or functional explanations exist. While both political groups, labour and capital owners, can gain political power, capital owners also possess structural power. This means that they have a dominant structural position in capitalist economies as states are highly dependent on the private sector for investments, economic growth and employment. Accordingly, governments in capitalist societies are to some extent forced to respect the claims of capital owners without them having to actively lobby for them (Culpepper, 2015; Fairfield, 2015; Przeworski & Wallerstein, 1988). If governments anticipate that a tax reform has negative repercussions on economic activity, they are likely to abstain from such decisions. In the context of open capital markets, their structural power increases as they can withdraw their investments to a lower-tax jurisdiction. This argument is usually captured by the literature on tax competition, which suggests that global financial markets lead to a race to the bottom in corporate taxation (Genschel, 2002; Genschel & Schwarz, 2011; Wallerstein & Przeworski, 1995). The rise of offshore wealth and tax havens reflect this trend. They provide legal and illegal means to move capital abroad and to avoid paying taxes through, for instance, offshore accounts, fake invoices and shell companies (Saez & Zucman, 2019). Besides structural power, capital owners also have political power, forming business groups and influencing political parties. For instance, business groups bundle and coordinate the joint

Critical political economy of taxation  335 interests of different economic sectors and represent them with regard to the state and trade unions (Brandl & Lehr, 2019; Crouch, 1993; Pontusson, Rueda & Way, 2002; Wallerstein, 1999). Besides formal consultation and coordination, these groups also lobby for policies through financial donations, ties with politicians and shaping media discourse. By engaging in political campaigns they influence the public discourse and, as such, alter the diffusion of norms about the appropriateness and understanding of wealth and capital in contemporary capitalist societies (Emmenegger & Marx, 2019). Certainly, political and structural power have a self-reinforcing relationship (Fairfield, 2015). As policymakers become worried about capital flight, they are more likely to take the policy concerns of business groups into account (Fairfield, 2015; Hacker & Pierson, 2010). In turn, political concerns shape the public discourse and reinforce the idea that progressive taxes are harmful for growth and employment. However, certain economic factors can also push in the opposite direction – namely, towards higher progressive taxes. Governments have budget rigidities with fixed long-term costs and are therefore restricted in lowering taxes (Plümper & Troeger, 2009). Particularly during times of fiscal crises, such as the 2008 financial crisis, countries that were highly under fiscal pressure not only raised consumption taxes, but also corporate and personal income taxes to address their budgetary constraints (Lierse, 2012). After all, income taxes constitute a large share of public revenues, hence, public finance is highly dependent on generating incomes from such sources. For instance, during the 2008 financial crisis, loans from the capital market became extremely expensive for some countries, creating pressure to reduce their long-term debt to regain access to cheap international finance. In this context, several European governments’ priorities temporarily switched to reducing the deficit and turned to domestic taxpayers to discharge their payment obligations (Lierse & Seelkopf, 2016). With regard to political and economic arguments, the literature also points to a number of (neo-)institutionalist arguments to explain tax patterns. Despite immense differences regarding their institutional understandings, they share the interpretation that institutional structure matters. This literature is very diverse and ranges from sociological institutionalist explanations of norms and discourses to rational-choice interpretations of institutions. Rational-choice institutionalists are interested in how actors strategically align their policy preferences with the decision-making system – for example, democracy, federalism and electoral institutions – and have a rather deterministic understanding of institutions (Genschel, Lierse & Seelkopf, 2016; Iversen & Soskice, 2006). For instance, it has been suggested that neo-corporatism has a positive influence on the adaptability of the tax system to new challenges. In this institutional context, political representatives from different groups regularly meet and jointly take decisions on important socioeconomic policy reforms, including taxation (Kenworthy, 2003; Lierse, 2022). The corporatist consensus allows for a stable and long-term agreement between employers and unions (Beramendi & Rueda, 2007). In the context of globalization, the political left, for instance, can agree to abstain from taxing the rich and in return receive stable investments, long-term growth and employment, which are critical to sustaining generous welfare states. In contrast, sociological institutionalists argue that interests cannot be taken for granted, that they are subjective responses to the material conditions within a specific historical context. Such explanations pay attention to how discourses and norms of taxation change over time or differ between countries (Lierse, 2011). Consequently, it is crucial to make actors’ perceptions of a situation and their responses subject to inquiry themselves. For instance, Keynesian ideas

336  Handbook on critical political economy and public policy changed the intellectual climate of policymaking during the post-World War II era (Hall, 1989; Ruggie, 1982). His theory offered a set of new ideas for understanding the functioning of the economy and for providing new solutions to existing problems. Such theories can also determine the rights and wrongs of taxation and constrain the search for feasible policy solutions. For instance, if a dominant discourse suggests that taxing capital and wealth will lead to lower investments and possibly to employment losses, then the majority of the population is likely to regard wealth taxes as a problem for the economy rather than a positive instrument to redistribute from the rich to the poor. After all, it deters innovation, prosperity and jobs. From this perspective, scholars have argued that economic theories have a powerful and practical influence on policy change. In sum, different kinds of theories exist to explain tax patterns. While the focus in the overview has been on explaining common tax trends, political, economic and institutional accounts can also be adopted to explain cross-national differences. Certainly, this overview is not a comprehensive one and a discussion of all approaches is beyond the scope of this chapter. For instance, for more historical accounts, the role of wars and colonialization are highly relevant, but they have not been discussed here (Kiser & Linton, 2001; Scheve & Stasavage, 2010). Finally, several important topics have not found much attention in the tax literature; in addition, the role of gender, digitization and climate change are important topics that have received too little attention in the political economy of taxation.

CONCLUDING REMARKS: UNDERSTANDING TAXATION IN CAPITALIST SOCIETIES Taxation is a key public policy for capitalist societies. It contributes to public revenue, income and wealth redistribution, as well as to the regulation of the economy. The necessity of taxes as a policy instrument are widely acknowledged for their role of revenue generation. However, how much revenue should be raised by states and how the tax burden should be distributed among different groups of society are factors to be contested. The distribution of the tax burden not only shapes inequalities but also steers the economy by serving as built-in stabilizers and by motivating or deterring certain kinds of production and consumption behaviour. The question of whether these goals should be achieved and with which tax policies they can be supported, however, is highly debated. Two examples showing how different goals can be in conflict with one another have been discussed. First, in the context of the neutrality paradigm of taxation, the main goal of tax policies is to support economic growth. Progressive taxes, which levy a higher burden on the rich and capital owners, are regarded as deterring investments, hence, largely incompatible with economic growth. Second, whether goals of economic growth are compatible with achieving global climate goals is increasingly questionable (Hickel & Kallis, 2020). Whether governments perceive such conflicts and how they address them highly depends on economic, political and institutional factors, as outlined in the third section. A first step towards a good explanation is to understand and unpack key developments and patterns. As discussed in the second section of this chapter, it is possible to revert to several different indicators to illustrate tax patterns. However, the pros and cons of different quantitative and qualitative evidence should be thoroughly considered and made transparent. While quantitative indicators are useful for understanding broad cross-national and over-time devel-

Critical political economy of taxation  337 opments, they cannot shed light on the ideas, discourses and legitimizations on which reforms rest. For this, more detailed and qualitative empirical accounts are needed. As such, scholars should not disregard different methodologies, but rather use them as a means to approach a topic from different perspectives and to openly discuss limits and contributions. Similarly, there is a large variety of political economy approaches for explaining tax patterns. A key distinction tends to be between political, economic and institutional approaches, while normative theories are often discussed separately from these more empirical accounts. However, it is critical to understand that such normative theories have empirical implications. A key question, therefore, is when and why certain theories enter the political debate. This question is taken up for sociological institutionalist perspectives, which tend to describe and explain the institutionalization of a certain tax discourse. They show how actors themselves make sense of a historical context and participate in the emergence of new understanding and tax norms. An emerging and largely unresolved issue is whether and how the possible conflict between growth, redistribution and climate neutrality will be resolved.

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340  Handbook on critical political economy and public policy Seelkopf, L. & Lierse, H. 2020, ‘Democracy and the global spread of progressive taxes’, Global Social Policy, 20 (2), 165–91. Seelkopf, L., Lierse, H. & Schmitt, C. 2016, ‘Trade liberalization and the global expansion of modern taxes’, Review of International Political Economy, 23 (2), 208–31. Shoup, C.S. 1981, ‘Economic limits to taxation’, Atlantic Economic Journal, 9 (1), 9–23. Spicer, M.W. 1995, ‘On Friedrich Hayek and taxation: rationality, rules and majority rule’, National Tax Journal, 48 (1), 103–12. Wallerstein, M. 1999, ‘Wage-setting institutions and pay inequality in advanced industrial societies’, American Journal of Political Science, 43 (3), 649–80. Wallerstein, M. & Przeworski, A. 1995, ‘Capital taxation with open borders’, Review of International Political Economy, 2 (3), 425–45. World Bank, 2020, State and Trends of Carbon Pricing 2020, Washington, DC: World Bank.

23. Global tax governance Matti Ylönen and Lauri Finér

Global tax governance has evolved into a major research field (Christensen & Hearson 2019; Dietsch & Rixen, 2016). Much of the discussion has focused on tax base erosion through profit shifting by multinational enterprises (MNEs) and tax evasion by private investors through offshore tax havens. Inability to tackle these problems could be considered the greatest failure of the international tax regime, as there is a growing consensus that international tax avoidance and tax evasion undermine social welfare (Alston & Reisch, 2019; Dietsch & Rixen, 2014). The discrepancy between the ideals of financial market liberalization and its discontents have also been increasingly noticed in international political economy (IPE) scholarship. While the new research agenda on tax havens and MNEs had started to emerge around the turn of the 2000s (e.g., Abbott & Hampton, 1999; Hampton, 1996; Palan, 2003; Sharman, 2006), its major expansion occurred in the 2010s. The fiscal impact of profit shifting and tax evasion is considerable. Gabriel Zucman (2015) has estimated that the fraud perpetuated through unreported foreign financial accounts for approximately $200 billion to governments globally, although this figure has been criticized as too cautious (Christensen & Henry, 2016). The Organisation for Economic Co-operation and Development (OECD, 2017) has estimated that annual tax losses caused by MNEs’ profit shifting are in the range of $100–240 billion. Subsequent academic studies have produced even higher estimates, with Cobham and Janský (2017) suggesting that the real number is probably closer to $500 billion globally.1 Tørsløv, Wier and Zucman (2021) use a different methodology, estimating that profit shifting reduced global corporate income tax revenue by more than $200 billion in 2017, which accounts for about 10 percent of corporate income tax receipts. Overall, tax haven-related financial flows have grown considerably in the context of economic globalization (Palan, Murphy & Chavagneux, 2010; Zucman, 2015). A key issue relates to the friction between the transnational nature of capital and national tax laws, which generates spillover effects between jurisdictions (Baker & Murphy, 2019). The risk of such spillover effects is higher when a country attracts disproportionate amounts of wealth from individual investors or as profitable subsidiaries of major MNEs. Financial hubs that rely on extreme forms of such activities are typically called tax havens. These jurisdictions have essentially commercialized parts of their sovereignty to cater to the needs of international capital (Palan, 2003) and to support the disjunction of wealth chains from the underlying economic processes (Seabrooke & Wigan, 2017b). The present chapter traces the recent evolution of the global tax governance agenda and discusses its relationship with the broader frameworks of global economic governance. A thematic expansion in one governance field can also generate spillover effects in others (Eskelinen & Ylönen, 2017), calling attention to interconnections between tax governance and the boundary conditions that shape national policy spaces. The expansion of tax governance agenda has been driven by several factors. First, the 2007–09 financial crisis underscored the role of tax havens in helping firms and investors to hide risks related to their financial investments (Eccleston, 2012; Moore, Prichard & Fjeldstad, 341

342  Handbook on critical political economy and public policy 2018). Second, the ensuing economic crisis facilitated policy-level debates on global wealth inequalities and budget deficits, which motivated states to seek new ways for taxing MNEs and well-off investors (Zucman, 2015). Third, the proliferation of digital economy and platform companies created a new kind of urgency for reforming the arcane rules of tax governance (Atal, 2021; Thomson & Grandjouan, 2018). A final, less-discussed reason is that there has simply been more space in the global governance agenda in the new geopolitical and economic situation (cf., Christensen & Hearson, 2019). Multilateral trade policy has been in a virtual deadlock since the early 2000s (Stephen & Parízek, 2020). With the exception of the European debt crisis of the early 2010s, sovereign debt-related governance issues have received scant attention in recent years. In contrast, the 2010s brought with it a new sense of opportunity for advancing major international tax reforms, amidst the broader global reconfiguration of economic policy thinking. This development was also recently hastened by the COVID-19 pandemic (Bregman, 2020). The pandemic also emphasized the role of states and public policy, as reflected in President Joseph Biden’s notion that ‘trickle-down economics has never worked’ (O’Donnell, 2021). The rest of this chapter progresses as follows. The next section defines the key concepts. The second section focuses on the modern evolution and the current state of global tax governance, while the third discusses IPE-specific attempts to contextualize these phenomena. The fourth section illuminates these debates with a case study vignette on tax avoidance practices of a British hygiene product company RB. We conclude by discussing policy-level reforms.

DEFINING TAX HAVENS, TAX AVOIDANCE AND TAX EVASION Taxation performs four key functions in a society, which can be summarized as ‘four Rs’ (Cobham, 2012). First, taxation is used to finance public spending – that is, services, social benefits and other subsidies and public investments (revenue). Second, it helps in tackling wealth and income inequality (redistribution). Influencing individual-level and corporate behavior – for example, through environmental taxes – constitutes the third main function of taxation (repricing). Fourth, taxation acts as glue in the social contract between citizens and the sovereign, sustaining the state’s interests in the well-being of its citizens and citizens’ interest toward the state (representation). The erosion of tax bases impedes the four Rs of taxation directly and indirectly. Ownership of MNEs and other financial assets is heavily tilted toward the wealthy, which corrodes states’ revenues and hampers redistribution. Tax avoidance and evasion helps especially the wealthy to reduce their tax burden and the transparency of their investments (Cronin et al., 2013; Saez & Zucman, 2019). Erosion of the fourth function of taxation – representation – is particularly nuanced in countries suffering from the ‘resource curse’, where economic rents from extractives (such as oil or metal ores) gain a disproportionate role in the economy and as a source of public revenue (Ronzoni, 2016). Recently, it has been suggested that many tax havens suffer from similar dynamics, with political systems that are dominated by fiscal interests of the financial industry (the so-called finance curse, see Shaxson, 2018). Tax avoidance and evasion have also fueled an international race to the bottom in tax rates and tax bases. This tendency is often associated with tax competition, even though one can ask whether competition is a correct metaphor for a development that erodes basic functions of our democracies (Christensen & Shaxson, 2016). For example, in trade policy, we are accustomed

Global tax governance  343 to speaking about ‘trade wars’. In similar fashion, tax competition could also be addressed as tax wars (ibid.). The OECD (1998) uses the concept of harmful tax competition in a somewhat similar sense to stress its corrosive impact on welfare and sovereignty of democracies. In its influential 1998 report Harmful Tax Competition: An Emerging Global Issue, the OECD (1998) defined a tax haven as a jurisdiction that (1) allows foreigners to pay little or no taxes for certain incomes; (2) lacks financial transparency; and (3) engages in only limited cooperation with foreign authorities. However, tax havens can also be classified further to mirror their diversity. Tax evasion related to private investment generally relies on lack of transparency and exchange of information with investors’ residence jurisdictions. These havens fit the aforementioned OECD definition and they have also been labelled secrecy jurisdictions (Beard, 1985; Tax Justice Network, 2021). The term describes traditional financial sector hubs such as Switzerland, the Cayman Islands and Jersey relatively well, although many such jurisdictions have recently committed to expanding automatic information exchange (OECD, 2021a). Secrecy jurisdiction is a less fitting term for relatively transparent holding company centers that MNEs utilize to avoid corporate income taxes. The Netherlands and Ireland are key examples of jurisdictions that are not particularly secretive but that still act as major instigators of tax spillovers (Chasaide, 2021; Clausing, 2021; Tørsløv et al., 2021; Weyzig, 2014). Their systemic role has been recently highlighted by the ways in which Big Tech firms have structured their European operations by shifting their regional profits through these jurisdictions to avoid taxes (Sikka, 2018; Ting, 2014; Tørsløv et al., 2021). These kinds of corporate hubs are sometimes called corporate tax havens (Tax Justice Network, 2021). Importantly, several OECD countries also harness secrecy jurisdictions, with London and the state of Delaware in the United States being prime examples (Finér & Tokola, 2017; Palan et al., 2010; Tørsløv et al., 2021). Varying types of tax havens are also often addressed collectively as offshore, which can also be used as an analytical category (see the ‘Conceptualizing tax governance’ section below). Resulting gaps and mismatches are often called loopholes in tax bases of MNEs’ countries of operation. They enable firms to artificially shift profits and achieve tax-related or regulatory benefits (Baker & Murphy, 2019; OECD, 2021b). Tax avoidance or aggressive tax planning is often legal as it utilizes asymmetries in national laws and tax treaty benefits (so-called treaty shopping).2 The problem could be tackled by securing tax bases with stronger national laws, such as anti-tax avoidance rules and by ensuring that international tax treaties promote this goal. The impact of these loopholes goes beyond eroding the progressiveness of taxation, as they also hamper attempts to finance budgets equitably (Reisch, 2020). Greater transparency could also indirectly support these efforts by illuminating aggressive tax planning, which often violates corporate social responsibility commitments and societal fairness (Ylönen & Laine, 2015). Critical discussion on tax avoidance can influence customers, investors and firm executives, acting as a coolant for aggressive corporate tax practices. In contrast to tax planning by MNEs, tax evasion related to private investments exploits loopholes in tax control by hiding tax income illegally. States have tackled this problem by improving transparency and cross-border exchange of information between tax authorities that allow local tax administrations to collect taxes more effectively (Finér & Tokola, 2017). The political economy of tax havens has been shaped by historical path dependencies, such as those related to the British Commonwealth (Eden & Kudrle, 2005). Many tax havens have stuck to their economic models over decades, in the hope of gaining short-term benefits

344  Handbook on critical political economy and public policy by registration fees or other small revenue streams. The RB case study below demonstrates how three corporate tax havens have amassed corporate income tax revenues to the cost of the rest of the world. Such economic models often contribute to rising real estate prices and living costs for the normal people in tax havens, which complicates assessing the costs and benefits of the economic models from the perspective of particular tax havens (Hampton & Christensen, 2002). Developing countries have been particularly vulnerable to tax base erosion, given their greater dependency on corporate tax revenues and their low levels of welfare spending (Gaspar, Jaramillo & Wingender, 2016; OECD, 2020). Considering that the wealthiest and largest economic actors are best equipped to benefit from the loopholes of the global tax regime, the system also instigates major market failures (European Commission, 2017). Multinational enterprises gain unwarranted competitive advantage by utilizing profit-shifting arrangements that are not available to their smaller, local competitors. These failures undermine trust in societies, in the context of the fourth function of taxation (Bräutigam, Fjeldstad & Moore 2008).

THE EVOLUTION OF THE GLOBAL TAX GOVERNANCE AGENDA As mentioned, policy-level debates on global tax governance have been characterized by a two-fold focus on corporate tax avoidance and tax evasion related to financial investments. A contemporary regime of corporate income tax and administrative cooperation in tax matters was developed in the League of Nations negotiations in the 1920s (Picciotto, 1991). The system relies on bilateral and multilateral tax conventions that address tax bases and administrative cooperation. They, in turn, are based on model tax conventions designed by major international organizations (IOs). For instance, the first League of Nations’ draft Convention on Administrative Assistance in Matters of Taxation (1927) already covered exchange of tax information between tax authorities (Seer & Kargitta, 2020). Subsequently, the OECD and the United Nations (UN) became important forums for global tax governance (Picciotto, 1991). However, the international framework underwent only small changes until the beginning of the 21st century. The international corporate tax system rests on two pillars: the separate entity doctrine and the arm’s-length principle. According to these principles, individual entities belonging to the same MNE are separately liable for their taxes and should use arm’s-length prices in their mutual transactions – that is, transfer pricing. These doctrines facilitate tax avoidance, as MNEs are able to shift profits from a country to another by manipulating transfer prices, corporate structure, or both. Many countries also employ anti-tax avoidance regulation that restricts, for example, the use of artificial structures to avoid tax. Concerns about leaking tax bases became an issue in the 1960s, fueled by the growth of international trade and investments after World War II (OECD, 2013; Ylönen, 2016). Profit shifting from the Global South motivated the UN member states to establish the United Nations Centre on Transnational Corporations (UNCTC) in 1974, which produced abundant important analytical and policy work for understanding this thematic for a decade. However, these inputs did little to alter the fundaments of the international tax regime. In the 1980s, the Reagan administration defunded the UNCTC as part of its broader reconfiguration of the

Global tax governance  345 global economy, effectively deconstructing key policy and epistemic communities of the time (Ylönen, 2016). What followed was a long period of deregulation and regulatory non-action, characterized by a spiral of tax cuts and the proliferation of deliberative loopholes in tax laws, as states hoped to lure foreign investments (Finér & Ylönen, 2017; Hearson, 2018a; Linsi, 2020). The average statutory corporate income tax rate in OECD countries in 1980 was nearly 50 percent. Three decades later, it had fallen to approximately 23 percent (OECD, 2020). The contemporary revival of global tax governance differs from the previous era in important respects. Post-1980s’ economic globalization was characterized by a shift from vertically integrated MNEs to chained forms of production (Henderson et al., 2002) and the subsequent growth of intangible and digital economy (Seabrooke & Wigan, 2017b; Wigan, 2021). Technological progress has enabled major firms and investors to easily channel investments and trade through offshore jurisdictions, while allowing more automated tax control and electronic exchange of information (Finér & Tokola, 2017). However, technical capacity and other capabilities to collect taxes vary greatly between countries (Leaman & Waris, 2013) and multilateral solutions to tackle profit shifting and exchange information on offshore investment are not without loopholes. To be effective, global tax governance needs to better address legislative and technological innovations. Flaws remain: for example, the insufficient transparency of firm- and investor-level data and the prevalence of the separate entity principle that facilitates profit shifting of MNEs (Finér & Ylönen, 2017). While the term global tax governance carries an internationalist undertone, much tax governance is legislated at the state level, given the central role of state sovereignty in taxation and the role of bilateral tax treaties in dictating taxing rights in cross-border situations (Hearson, 2018b). The design of bilateral tax treaties typically follows the model agreements of the OECD and the UN, but, ultimately, states are responsible for formulating their specific contents. One of the first signs of change in the modern tax governance agenda was the OECD’s aforementioned 1998 report on harmful tax competition. It proposed a number of ambitious reforms to tackle corporate tax avoidance, including sanctions for countries with harmful tax practices. Ultimately, the recommendations backfired after the United States turned against them (Sharman, 2006). Subsequently, the model Tax Information Exchange Agreements that the OECD developed in 2002 emerged as the next – modest – phase in tackling international tax evasion. In the EU, the Savings Directive of 2003 became the first important multilateral treaty on automated information exchange, albeit only for bank savings. The policy shift accelerated after the financial crisis, with an introduction of the Base Erosion and Profit Shifting (BEPS) project that began in 2013, as well as the OECD’s (2021a) Common Reporting Standard for facilitating information exchange of financial accounts agreed in 2014. The latter standard was influenced by the bilateral Foreign Account Tax Compliance Act (2010) of the United States, which obliges foreign financial institutions to report their foreign US account holders or impose withholding taxes on them (Finér & Tokola, 2017). Several policy initiatives that were deemed unrealistic in the early 2000s have recently been ratified, and the role of multilateral conventions in global tax governance has grown. More than 100 jurisdictions have committed themselves to the OECD Common Reporting Standard of automatic cross-border information exchange on financial income and accounts (Ahrens & Bothner, 2020; Lesage, Lips & Vermeiren, 2020). Automatic information exchange means that officials can access foreign financial account data of their residents without cumbersome procedures. It can be contrasted with information exchange by request facilitated by the

346  Handbook on critical political economy and public policy Tax Information Exchange Agreements. They enable officials to acquire information about particular taxpayers from otherwise non-transparent jurisdictions, but only if officials know beforehand what kind of information they are after (Genschel & Rixen, 2015; Hakelberg, 2016). Governments have also agreed on a series of new rules to tackle profit shifting within MNEs. With the backing from major countries of the Global North, the OECD has been at the forefront of this development. Important guidelines and best practices were designed to tackle corporate tax avoidance within the OECD’s BEPS project (OECD, 2021b). These best practices aim at improving primarily national legislation and bilateral tax treaties. Many countries have adopted them, including the European Union (EU), which implemented many key BEPS recommendations collectively with the 2016 Anti-Tax Avoidance Directive (Seabrooke & Wigan, 2017a). States also engage in other forms of tax cooperation through a number of IOs. The balance of power between IOs that address international tax issues is a political choice, typically influenced by the preferences of the countries in Global North. Besides the OECD and the UN, other key institutions include the International Monetary Fund (IMF) and the Financial Action Task Force (FATF). Given that the United States has traditionally often resorted to more unilateral approaches (e.g., Sharman, 2006), the EU has been an important driver of multilateral cooperation in this field. Its regulations and directives have harmonized several laws regarding corporate income tax bases and administrative cooperation. Actions of the EU also have a global exemplary function.

CONCEPTUALIZING TAX GOVERNANCE Academic interest toward tax havens, international tax avoidance, tax evasion and global tax governance has grown in tandem with policy-level attention. Early IPE scholars followed closely the policy-level discussions of the UNCTC and were influenced by them (Ylönen, 2018). Concerns related to tax flight and the structural power of MNEs featured strongly in the early IPE textbooks and other canonical texts of the discipline (Blake & Walters, 1976; Spero, 1977; Strange, 1970). The post-financial crisis era has also seen major inroads in the scholarship of facilitators of the tax haven economy. The result has been a body of empirical research, complemented by important attempts toward developing conceptual and theoretical approaches. Providing a comprehensive overview of these studies would go beyond the scope of this chapter (c.f., Christensen & Hearson, 2019), and we will focus instead on a few selected strands of studies. Several studies have highlighted the ways in which corporations, wealth-owners and their lobbying organizations corrode tax systems (e.g., Christensen, 2020). Studies have also underlined the role of tax advisory firms as lobbyists for loopholes in tax laws. The Big Four auditing and tax advisory companies (Deloitte, EY, KPMG and PwC) and their smaller competitors help MNEs and wealthy individuals by developing tax planning arrangements as well as harmful tax practices for tax havens (Sikka, 2008, 2013; Sikka & Willmot, 2013). Research has stressed how the influence of the wealthy and their advisers is bolstered by the epistemic nature of tax expert communities, which also involve scholars and civil servants (Anesa et al., 2019; Genschel & Rixen, 2015).

Global tax governance  347 The central role of intermediary firms has also been highlighted by various tax haven-related scandals (Christensen, 2020), beginning with the 2008 data leak from the LGT bank in Liechtenstein (Hakelberg & Rixen, 2021). In 2014, the LuxLeaks scandal created shockwaves by documenting the central role of tax advisory firms in selling tax products that allowed MNEs to use Luxembourgian tax rulings to avoid taxes in third countries (Marian, 2017; Ylönen, 2022). Finally, in 2016, the Panama Papers exposed a staggering 11.5 million files from the database of a major shell company provider Mossack Fonseca (Eskelinen & Ylönen, 2017). These kinds of leaks have been accompanied by a strand of IPE-related studies on such intermediaries (Jones, Temouri & Cobham, 2018; Latulippe, 2018; Morgan, 2017). In other words, intermediary firms act as important facilitators and nodal points between tax havens and their clientele. In this role, they help tax havens to commercialize their sovereignty to cater to the needs of major firms and investors. Following the work of Ronen Palan (2003), the privileged position of state sovereignty in the international law is a key factor that also enables and protects such commercialization. Commercialization of sovereignty ultimately shapes the global division of value derived from economic activities. It relocated significant parts of global economic activities offshore in a sense that enables them to escape normal regulatory and tax-related responsibilities. To some extent, states can commercialize their tax sovereignty with unilateral decisions. However, the trans-border nature of capital and its regulation implies that international tax matters typically depend on actions of more than one country. Tax treaties in particular introduce a negational aspect to the commercialization of sovereignty. Reciprocal tax treaties are never neutral, in that they involve choices about what activities are preferred over others when granting tax rights (Quentin, 2017). For example, the UN model treaty has traditionally given somewhat more taxing rights to countries engaged in production activities and source countries of income, while the OECD model treaty puts more emphasis on the taxing rights of countries where the MNEs headquarters are located and immaterial assets are registered (Avi-Yonah, 2009; Picciotto, 2022). These policy-level debates reflect fundamental issues related to the nature of contemporary MNEs and the global political economy within which they operate. The political agency of MNEs has traditionally been a neglected topic in IPE (Mikler, 2018), even though recent literature has somewhat alleviated this gap (Babic, Fichtner & Heemskerk, 2017; May, 2015). Yet, IPE scholarship still often puts primacy focus on states and their mutual interactions (Walker, 2010), reflecting strict distinctions between the spheres of politics and markets (Ylönen & Teivainen, 2017). However, as the long tradition of evolutionary research on the firm has underlined, distinctions between seemingly market-based forms of private economy and public politics are often highly problematic (e.g., Galbraith, 1973). Large firms have no option but to plan their prices and other operations as a global entity, and the ensuing prices almost always include also arbitrary elements (Ylönen, 2018). IPE scholarship has seen recently significant progress in conceptualizing the divide between MNE-level business operations and the underlying, often tax-driven flows of wealth (Finér & Ylönen, 2017). Of particular importance has been the global wealth chains framework, which has highlighted the ways in which MNEs separate their value creation processes from the sites in which they declare their profits (Seabrooke & Wigan, 2017b). The framework builds on Mihari Desai’s (2009) notion of decentered firms, which refers to the geographical separation of the key functions (marketing, headquarters, research and development, finance) within geographically dispersed firms. These tendencies complement the dispersion of production

348  Handbook on critical political economy and public policy activities from MNEs to complex production networks around the globe (Gereffi, Humphrey & Sturgeon, 2005; Henderson et al., 2002). Combined, the aforementioned shifts have been particularly nuanced when compared with the vertically integrated firms that formed the powerful American ‘military-industrial complex’ of the 1960s (Galbraith [1967] 2007). Hence, there is a need for research agendas that would analyze both unilateral and relational aspects of commercialization of sovereignty while paying close attention to the ways in which MNEs steer these processes – both as mediators and as agents of change. Such approaches could allow for analyzing the political economy of global wealth chains in terms of causal relations between the political actions of states, MNEs and IOs. To better understand the power of aforementioned conceptual openings, we will next discuss these concepts through an illustrative vignette that focuses on the major hygiene company RB.

A VIGNETTE: RB’S PROFIT SHIFTING One of the key realizations of the global wealth chain agenda is that we cannot understand the operational logic of contemporary MNEs by just focusing on the flow of goods within production networks. The ability to redirect the underlying financial flows almost anywhere in the world gives MNEs significant power to decide where and when they show their profits that essentially determine where they pay their corporate income tax, while also having a direct impact on the capacity of states to regulate them. The tax arrangements of the UK-based corporate group RB illustrate this ability and the associated deficiencies of the global tax regime (Oxfam, 2017). Civil society organization Oxfam Great Britain first revealed the arrangements in 2017 in a report we co-authored (ibid.). RB is a leading UK-based firm specializing in products for health, home and hygiene, with products sold in over 200 countries. An investigation into the firm’s group- and subsidiary-level financial accounts revealed that it had engaged in aggressive tax planning that eroded the tax bases in countries where it operated, including in Africa. Specifically, RB restructured its business in 2012 and 2014 by establishing regional hubs. According to Oxfam’s estimate, these hubs enabled the company to reduce its global tax bills by approximately £200 million between 2014 and 2016, including by up to £60 million in developing markets. The first restructuring in 2012 involved the establishment of regional hub companies in the Netherlands, Singapore (terminated in 2014) and Dubai – all of which are recognized as corporate tax havens that offer special tax treatment or tax-free zones for MNEs (Clausing, 2021). These hubs became the regional headquarters (HQs) of RB, from which the hygiene enterprise managed its business. Besides placing executives and a few employees at these hub companies, the hubs played only a marginal role in RB’s actual business. For instance, the annual reports of the RB Group omitted any mentions of investments or other business activities in these regional hubs. Yet RB claimed that the restructurings were motivated by a wish to ‘be close to our customers’ (Oxfam, 2017, p. 3). No observable, meaningful business reasons seemed to exist for locating the hub companies and executives in these three countries. The hubs were used to channel much of the profit derived from countries with actual operations to low-tax countries, significantly reducing the overall tax burden. While the lack of financial transparency prevented the study from establishing a precise cause and effect in each country where RB operated, RB’s consolidated data on its effective tax rates confirmed this trend, with a decline from a 26.5 percent effective

Global tax governance  349 tax rate in 2011 to 21 percent in 2015 and 23 percent in 2016. Globally, statutory tax rates decreased by less than 1 percentage point during this period. Given that the hubs were highly profitable, these profits were most likely generated by supplying RB products from group companies engaged in manufacturing to distributing companies, or by charging other group companies for internal services. Such regional HQs are indeed often artificial, as products are not physically transferred through them. RB could have arranged its distribution without these hubs. Hence, their main financial rationale seems to have been reducing tax burden. The way RB re-modelled its business illustrates a broader global trend. For example, many US-based companies (especially technology companies) have engaged in profit-shifting to low-tax hubs like Ireland (Ting, 2014; Tørsløv et al., 2021). The tax structure of RB could be replicated by virtually any major firm, utilizing incentives that countries provide to attract taxable profits away from countries with real economic operations. Even the tax avoidance rules developed within the OECD’s BEPS project fail to comprehensively address such arrangements. The economic stakes are significant. In the case of RB, the Netherlands hub generated nearly a third of the firm’s global profits in 2014 and 2015, compared to zero in 2012, when the hubs where established. The total corporate income tax revenue that the firm paid in the Netherlands was £138 million in the first three years after the restructuring. RB’s effective corporate income tax rate there was just above 7 percent, which is a very low figure compared with both the global average and the Dutch nominal tax rate of 25 percent. The Oxfam report also revealed that the tax advisory firm PwC had received an estimated £3 million for planning the structures in 2012. This compensation likely reflected the associated tax savings of RB. This example highlights not only the financial interest of the Big Four advisory companies in assisting tax avoidance, but also their interest in lobbying for gaps, mismatches and lack of transparency that facilitate tax avoidance. Finally, the case study illustrates how harmful tax practices of corporate tax havens undermine the international governance system. RB first created a regional hub to Singapore, but later shifted its hub operations to Dubai and the Netherlands. These locations provided even more favorable tax treatment than the 10 percent effective tax rate offered in Singapore. In conclusion, this vignette helps us to grasp the artificial nature of internal wealth chains of major MNEs and the ways in which they can be separated from the underlying value chains. This dissociation process is driven by: (1) the commercialization of sovereignty in countries that offer suitable laws and tax regimes for establishing intra-firm hubs; (2) a successful alignment of national tax regimes and international treaty networks in these countries; (3) intermediary firms that facilitate and design the tax structures; and (4) MNEs that are eager and able to exploit such constellations. In broader terms, the case study also underlines the ways in which tax laws by countries with relatively little world political importance can shape the capacities of states to independently design the ‘four Rs’ of taxation, given the strong protection that international law and the international governance system warrants to state legislative sovereignty even when it formally limits sovereignty elsewhere.

CONCLUSIONS AND POLICY RECOMMENDATIONS As described in the ‘The evolution of the global tax governance agenda’ section above, the past two decades have seen a major turn in efforts to tackle profit shifting of MNEs and

350  Handbook on critical political economy and public policy international tax evasion of private investors. The OECD has played a key role by facilitating automatic cross-border information exchange in tax matters, which has hindered tax evasion that takes place by hiding assets. Moreover, the BEPS project has provided effective legislative tools for states to protect their tax bases from profit shifting. Many countries have adopted the associated anti-tax avoidance rules, although, as also demonstrated by our case study, they are not a panacea (cf., OECD, 2020). The lack of political will and an insufficient capability of governments to use the available tools to protect their tax bases also sustain these gaps and mismatches, undermining public welfare. However, there are grounds for optimism, as the debate has recently progressed to more structural and multilateral reforms, such as replacing the arm’s-length principle by new kinds of formulas to divide the taxing rights of MNEs’ incomes between countries (Picciotto, 2022). The growing importance of Big Tech firms and other digital businesses has further amplified these debates, given the widespread use of corporate tax havens by these firms (Shaviro, 2020). Proposals for unitary taxation have suggested dividing taxing rights based on the actual economic activities (such as location of employees, fixed assets and sales) between countries, effectively bypassing artificial financial and contractual arrangements through countries that may otherwise have little value for the firm (ibid.). While it will take years before unitary taxation could be realized even on a regional level, significant global reforms could be achieved in a shorter timeframe. In July 2021, over 130 jurisdictions arrived at a preliminary agreement on broad-ranging two-pillar reform package on international corporate taxation principles within the OECD/G20 Inclusive Framework on BEPS (OECD, 2021c). Pillar I would include a relatively small structural change in the global division of taxing rights where a small part of the income of the largest and most profitable MNEs in certain sectors would be taxed in the location of their sales. This would indicate a minor step towards unitary taxation. Pillar II would introduce a global minimum corporate income tax rate of at least 15 percent. Such a tax rate will be conducive to tackling the race to the bottom and harmful tax competition that are facilitated by effective tax rates far below 10 percent (Tørsløv et al., 2021). Supported by a broad tax base and widespread adoption, a sufficiently high minimum tax rate would reduce the benefits of profit shifting. A major step towards implementation of the 15 percent minimum corporate income tax was accomplished in December 2022, when the European Council agreed on a minimum tax directive that has to be transposed into national laws of the EU member states by the end of 2023 (European Council, 2022). Minimum tax rates for offshore profits as well as other anti-tax-avoidance BEPS measures could also be adopted by states unilaterally. Increased transparency and effective independent research are also needed to facilitate effective policy-making and to better understand the fiscal impact of profit shifting. The adoption of country-by-country tax reporting of some MNEs has already provided new insights into the phenomenon, even though the coverage and publicity of such information remains limited (Garcia-Bernardo, Janský & Tørsløv, 2021). Transparency is also vital in tackling tax evasion by private investors. Tax authorities need tools to identify all recipients of income, as well as beneficiary owners of entities. The automatic withholding of taxes should also be advanced. Modern technology allows the development of such procedures in a way that could even decrease administrative costs for intermediaries and investors that pay their taxes according to law. Many countries have already adopted such methods, as also recommended by the OECD (2013).

Global tax governance  351 As the example of RB showed, major multinationals are well positioned to exploit the loopholes in the international tax system. These leakage points effectively erode the national policy space, particularly in smaller and developing countries that lack opportunities to build well-functioning tax administrations and to fully participate in international negotiations (Leaman & Waris, 2013). Luckily, the past decade has also seen a significant reconfiguration in the global governance structures of international taxation. Of particular importance has been the creation of the OECD’s Inclusive Framework in 2016, which today includes 137 jurisdictions. The establishment of this framework was supplemented by two binding global conventions that facilitated mutual assistance and the implementation of tax treaties beyond the OECD (Hearson, Ndubai & Randriamanalina, 2020). Moreover, the G20 Summit of 2009 established the Global Forum on Transparency and Exchange of Information for Tax Purposes to strengthen cooperation in exchanging tax information globally. After its inception, it has endorsed a new global Common Reporting Standard for automatic exchange of information on savings and a number of other financial assets (African Tax Administration Forum [ATAF], 2019). However, many African countries cannot afford to attend the Inclusive Framework meetings frequently, and they struggle to influence fast-moving processes in Paris (ATAF, 2019; Christensen, Hearson & Randriamanalina, 2020). The problem is familiar from trade policy negotiations, (for example, Narlikar, 2002). Another important change has been the strengthening of regional cooperation. In particular, the African Tax Administration Forum (ATAF), the Intergovernmental Group of Twenty Four (G-24) and the African Union have emerged as important forums for voicing the concerns of non-OECD countries (Hearson et al., 2020). The related institutional change has been rapid, considering, for example, that the ATAF was established only in 2010. Yet it has managed to influence, for example, issues such as commodity pricing in the OECD’s Transfer Pricing Guidelines. Two regional tax organizations from the Global South – Inter-American Center of Tax Administrations and African Tax Administration Forum – are also invited observers in the OECD’s Committee on Fiscal Affairs (ATAF, 2019). The elevation of the OECD as the de facto global forum has been a highly political decision shaped by the interests of the Global North. For example, many non-governmental organizations have called for strengthening the role of the UN system (especially its Tax Committee) to balance the scales. In 2015, the UN’s Addis Ababa Action Agenda somewhat alleviated this problem by establishing new subgroups under the Committee (ibid.). However, the Committee still comprises individuals, while the OECD members are states and its work is supported by a well-resourced secretariat.

NOTES 1. Data limitations make estimates uncertain. No direct financial data exists on tax avoidance or tax evasion structures. Even the availability of financial accounts data is limited in most countries (Finér & Ylönen, 2017). 2. Aggressive tax planning generally utilizes gaps and mismatches in national tax laws and tax treaties, sometimes operating in the gray area of law. At times, assessing the legality of such tax arrangements requires conducting a tax audit or instigating a juridical process in courts. However, not all such structures are ever challenged by tax authorities in court, and even if they are, many countries omit firms’ names from such court decisions (Finér & Ylönen, 2017).

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BIBLIOGRAPHY Abbott, J.P. & Hampton, M.P. 1999, Offshore Finance Centres and Tax Havens: The Rise of Global Capital, London: Palgrave Macmillan. African Tax Administration Forum (ATAF) 2019, ‘The place of Africa in the shift towards global tax governance: can the taxation of the digitalised economy be an opportunity for more inclusiveness?’, African Tax Administration Forum Paper. Ahrens, L. & Bothner, F. 2020, ‘The big bang: tax evasion after automatic exchange of information under FATCA and CRS’, New Political Economy, 25 (6), 849–64. Alston, P. & Reisch, N. 2019, Tax, Inequality, and Human Rights, Oxford: Oxford University Press. Anesa, M., Gillespie, N., Spee, A.P. & Sadiq, K. 2019, ‘The legitimation of corporate tax minimization’, Accounting, Organizations and Society, 75, 17–39. Atal, M.R. 2021, ‘The Janus faces of Silicon Valley’, Review of International Political Economy, 28 (2), 336–50. Avi-Yonah, R. 2009, ‘Double tax treaties: an introduction’, in K.P. Sauvant & L.E. Sachs (eds), The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows, Oxford: Oxford University Press, pp. 99–106. Babic, M., Fichtner, J. & Heemskerk, E.M. 2017, ‘States versus corporations: rethinking the power of business in international politics’, The International Spectator, 52 (4), 20–43. Baker, A. & Murphy, R. 2019, ‘The political economy of “tax spillover”: a new multilateral framework’, Global Policy, 10 (2), 178–92. Beard, P. 1985, ‘Offshore financial centers in Caribbean Basin secrecy jurisdictions: current trends and developments in United States anti-tax haven policy’, Syracuse Journal of International Law and Commerce, 12 (3), 520–51. Blake, D.H. & Walters, R.S. 1976, The Politics of Global Economic Relations (2nd edition), Upper Saddle River, NJ: Prentice-Hall. Bräutigam, D., Fjeldstad, O. & Moore, M. (eds) 2008, Taxation and State-Building in Developing Countries: Capacity and Consent, Cambridge, UK: Cambridge University Press. Bregman, R. 2020, ‘The neoliberal era is ending. What comes next?’, The Correspondent, 14 May, accessed 4 September 2021 at https://​thecorrespondent​.com/​466/​the​-neoliberal​-era​-is​-ending​-what​ -comes​-next/​61655148676​-a00ee89a. Chasaide, N.N. 2021, ‘Ireland’s tax games: the challenge of tackling corporate tax avoidance’, Oxford University Press and Community Development Journal, 56 (1), 39–58. Christensen, J. & Henry, J. 2016, ‘The offshore trillions’, The New York Review, 10 March. Christensen, J. & Shaxson, N. 2016, ‘Tax competitiveness – a dangerous obsession’, in T. Pogge & K. Mehta (eds), Global Tax Fairness, Oxford: Oxford University Press, pp. 265–97. Christensen, R.C. 2020, ‘Elite professionals in transnational tax governance’, Global Networks, 21 (2), 265–93. Christensen, R.C. 2022, ‘Transparency’, in L. Seabrooke & D. Wigan (eds), Global Wealth Chains: Asset Strategies in the World Economy, Oxford: Oxford University Press, pp. 220–41. Christensen, R.C. & Hearson, M. 2019, ‘The new politics of global tax governance: taking stock a decade after the financial crisis’, Review of International Political Economy, 26 (5), 1068–88. Clausing, K. 2021, ‘Testimony of Kimberly A. Clausing, Deputy Assistant Secretary, Tax Analysis, before the Senate Committee on Finance’, U.S. Department of the Treasury, 25 March [press release], accessed 22 June 2021 at https://​home​.treasury​.gov/​news/​press​-releases/​jy0079. Cobham, A. 2012, ‘Tax havens and illicit financial flows’, in P. Reuter (ed.), Draining Development? Controlling Flows of Illicit Funds from Developing Countries, Washington, DC: World Bank, pp. 337–72. Cobham, A. & Janský, P. 2017, ‘Global distribution of revenue loss from tax avoidance – re-estimation and country results’, Wider Working Paper No. 2017/55, UNU-Wider, Helsinki. Cronin, J.A., Lin, E.Y., Power, L. & Cooper, M. 2013, ‘Distributing the corporate income tax: revised U.S. Treasury methodology’, National Tax Journal, 66 (1), 239–62. Desai, M.A. 2009, ‘The decentering of the global firm’, World Economy, 32 (9) 1271–90. Dietsch, P. & Rixen, T. 2014, ‘Tax competition and global background justice’, The Journal of Political Philosophy, 22 (2), 150–77.

Global tax governance  353 Dietsch, P. & Rixen, T. 2016, ‘Global tax governance: what it is and why it matters’, in P. Dietsch & T. Rixen (eds), Global Tax Governance: What Is Wrong With It and How to Fix It, Colchester: ECPR Press, pp. 1–23. Eccleston, R. 2012, The Dynamics of Global Economic Governance: The Financial Crisis, the OECD and the Politics of International Tax Competition, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Eden, L. & Kudrle, R. 2005, ‘Tax havens: renegade states in the international tax regime?’, Law & Policy, 27 (1), 100–127. Eskelinen, T. & Ylönen, M. 2017, ‘Panama and the WTO: new constitutionalism of trade policy and global tax governance’, Review of International Political Economy, 24 (4), 629–56. European Commission 2017, Communication from the Commission to the European Parliament and the Council: A Fair and Efficient Tax System in the European Union for the Digital Single Market, Document 52017DC0547, 21 September, Brussels. European Council 2022, International taxation: 'Council reaches agreement on a minimum level of taxation for largest corporations', 12 December, accessed February 3 2023 at https://​www​.consilium​ .europa​.eu/​en/​press/​press​-releases/​2022/​12/​12/​international​-taxation​-council​-reaches​-agreement​-on​ -a​-minimum​-level​-of​-taxation​-for​-largest​-corporations/​. Finér, L. & Tokola, A. 2017, ‘International/United States/European Union/OECD – the revolution in automatic exchange of information: how is the information used and what are the effects?’, Bulletin for International Taxation, 71 (12), 688–96. Finér, L. & Ylönen, M. 2017, ‘Tax-driven wealth chains: a multiple case study of tax avoidance in the Finnish mining sector’, Critical Perspectives on Accounting, 48, 53–81. Galbraith, J.K. 1973, Economics and the Public Purpose, Boston, MA: Houghton Mifflin. Galbraith, J.K. [1967] 2007, The New Industrial State, Princeton, NJ: Princeton University Press. Garcia-Bernardo, J., Janský, P. & Tørsløv, T. 2021, ‘Multinational corporations and tax havens: evidence from country-by-country reporting’, International Tax and Public Finance, 28 (8), 1–43. Gaspar, V., Jaramillo, L. & Wingender, P. 2016, ‘Tax capacity and growth: is there a tipping point?’, IMF Working Paper No. 16/234, International Monetary Fund. Genschel, P. & Rixen, T. 2015, ‘Settling and unsettling the transnational legal order of international taxation’, in G. Shaffer & T. Halliday (eds), Transnational Legal Orders, Cambridge, UK: Cambridge University Press, pp. 154–86. Gereffi, G., Humphrey, J. & Sturgeon, T. 2005, ‘The governance of global value chains’, Review of International Political Economy, 12 (1), 78–104. Hakelberg, L. 2016, ‘Coercion in international tax cooperation: identifying the prerequisites for sanction threats by a great power’, Review of International Political Economy, 23 (3), 511–41. Hakelberg, L. & Rixen, T. 2021, ‘Is neoliberalism still spreading? The impact of international cooperation on capital taxation’, Review of International Political Economy, 28 (5), 1142–68. Hampton, M.P. 1996, The Offshore Interface: Tax Havens in the Global Economy, London: Palgrave Macmillan. Hampton, M.P. & Christensen, J. 2002, ‘Offshore pariahs? Small island economies, tax havens, and the re-configuration of global finance’, World Development, 30 (9), 1657–73. Hearson, M. 2018a, ‘The challenges for developing countries in international tax justice’, The Journal of Development Studies, 54 (10), 1932–8. Hearson, M. 2018b, ‘Transnational expertise and the expansion of the international tax regime: imposing “acceptable” standards’, Review of International Political Economy, 25 (5), 647–51. Hearson, M., Ndubai, J.W. & Randriamanalina, T. 2020, ‘The appropriateness of international tax norms to developing country contexts’, FACTI Background Paper No. 3, Financial Accountability, Transparency & Integrity Panel, New York. Henderson, J., Dicken, P. & Hess, M. et al. 2002, ‘Global production networks and the analysis of economic development’, Review of International Political Economy, 9 (3), 436–64. Jones, C., Temouri, Y. & Cobham, A. 2018, ‘Tax haven networks and the role of the Big 4 accountancy firms’, Journal of World Business, 53 (2), 177–93. Latulippe, L. 2018, ‘Large accounting firms and tax planning in a “fair tax” era’, in R. Eccleston & A. Elbra (eds), Business, Civil Society and the ‘New’ Politics of Corporate Tax Justice: Paying a Fair Share?, Cheltenham, UK and Northampton, MA, USA, pp. 128–54.

354  Handbook on critical political economy and public policy Leaman, J. & Waris, A. (eds) 2013, Tax Justice and the Political Economy of Global Capitalism, 1945 to the Present, New York: Berghahn Books. Lesage, D., Lips, W. & Vermeiren, M. 2020, ‘The BRICs and international tax governance: the case of automatic exchange of information’, New Political Economy, 25 (5), 715–33. Linsi, L. 2020, ‘The discourse of competitiveness and the dis-embedding of the national economy’, Review of International Political Economy, 27 (4), 855–79. Marian, O.Y. 2017, ‘The state administration of international tax avoidance’, Harvard Business Law Review, 7, 201–65. May, C. 2015, Global Corporations in Global Governance, London/New York: Routledge. Mikler, J. 2018, The Political Power of Global Corporations, Hoboken, NJ: Wiley. Moore, M., Prichard, W. & Fjeldstad, O.H. 2018, Taxing Africa: Coercion, Reform and Development, London: Zed Books. Morgan, J. 2017, ‘Taxing the powerful, the rise of populism and the crisis in Europe: the case for the EU Common Consolidated Corporate Tax Base’, International Politics, 54 (5), 533–51. Narlikar, A. 2002, ‘The politics of participation: decision-making processes and developing countries in the world trade organization’, The Round Table, 91 (364), 171–85. O’Donnell, T. 2021, ‘Biden attempts “to put a dagger in the Reagan era” by arguing “trickle-down economics has never worked”’, The Week, 29 April. Organisation for Economic Co-operation and Development (OECD) 1998, Harmful Tax Competition: An Emerging Global Issue, Paris: OECD Publishing. Organisation for Economic Co-operation and Development (OECD) 2013, ‘Treaty Relief and Compliance Enhancement (TRACE)-Implementation Package approved by CFA’, accessed 22 June 2021 at https://​www​.oecd​.org/​ctp/​exchange​-of​-tax​-information/​t​reatyrelie​fandcompli​anceenhanc​ementtrace​ .htm. Organisation for Economic Co-operation and Development (OECD) 2017, Background Brief: Inclusive Framework on BEPS, Paris: OECD Publishing. Organisation for Economic Co-operation and Development (OECD) 2020, Corporate Tax Statistics, Second Edition, Paris: OECD Publishing. Organisation for Economic Co-operation and Development (OECD) 2021a, ‘Automatic Exchange Portal’, accessed 22 June 2021 at https://​www​.oecd​.org/​tax/​automatic​-exchange/​. Organisation for Economic Co-operation and Development (OECD) 2021b, ‘Base erosion and profit shifting’, accessed 22 June 2021 at https://​www​.oecd​.org/​tax/​beps/​. Organisation for Economic Co-operation and Development (OECD) 2021c, ‘Statement on a two-pillar solution to address the tax challenges arising from the digitalisation of the economy’, 1 July, accessed 4 September 2021 at https://​www​.oecd​.org/​tax/​beps/​statement​-on​-a​-two​-pillar​-solution​-to​-address​ -the​-tax​-challenges​-arising​-from​-the​-digitalisation​-of​-the​-economy​-july​-2021​.pdf. Oxfam 2017, Making Tax Vanish, Oxford: Oxfam Great Britain. Palan, R. 2003, The Offshore World: Sovereign Markets, Virtual Places, and Nomad Millionaires, Ithaca, NY: Cornell University Press. Palan, R., Murphy, R. & Chavagneux, C. 2010, Tax Havens: How Globalization Really Works, Ithaca, NY: Cornell University Press. Picciotto, S. 1991, International Business Taxation: A Study in the Internationalization of Business Regulation, Cambridge, UK: Cambridge University Press. Picciotto, S. 2022, ‘Technocracy in the era of Twitter: between intergovernmentalism and supranational technocratic politics in global tax governance’, Regulation & Governance, 16 (3), 634–52. Quentin, C. 2017, ‘Corporate tax reform and “value creation”: towards unfettered diagonal re-allocation across the global inequality chain’, Accounting, Economics and Law, 7 (1), Article 20160069. Reisch, N. 2020, ‘Taxing for justice: fiscal policy, inequality, and human rights’, in K. Mehta, E. Shubert & E. Dayle Siu (eds), Tax Justice and Global Inequality, London: Zed Books, pp. 254–77. Ronzoni, M. 2016, ‘Tax competition: a problem of global or domestic justice?’, in P. Dietsch & T. Rixen (eds), Global Tax Governance: What Is Wrong with It and How to Fix It, Colchester: ECPR Press, pp. 201–14. Saez, E. & Zucman, G. 2019, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay, New York: W.W. Norton & Co. Seabrooke, L. & Wigan, D. 2017a, ‘Brexit and global wealth chains’, Globalizations, 14 (6), 820–29.

Global tax governance  355 Seabrooke, L. & Wigan, D. 2017b, ‘The governance of global wealth chains’, Review of International Political Economy, 24 (1), 1–29. Seer, R. & Kargitta, S. 2020, ‘Exchange of information and cooperation in direct taxation’, in C.H.J.I. Panayi, W. Haslehner & E. Traversa (eds), Handbook on European Union Taxation Law, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing, pp. 489–510. Sharman, J.C. 2006, Havens in a Storm: The Struggle for Global Tax Regulation, Ithaca, NY: Cornell University Press. Shaviro, D. 2020, ‘Digital service taxes and the broader shift from determining the source of income to taxing location-specific rents’, New York University, Law & Economics Research Paper No. 19-36. Shaxson, N. 2018, The Finance Curse: How Global Finance is Making Us All Poorer, London: The Bodley Head. Sikka, P. 2008, ‘Globalization and its discontents: accounting firms buy limited liability partnership legislation in Jersey’, Accounting, Auditing & Accountability Journal, 21 (3), 398–426. Sikka, P. 2013, ‘No accounting for tax avoidance’, The Political Quarterly, 86 (3), 427–33. Sikka, P. 2018, ‘Combating corporate tax avoidance by requiring large companies to file their tax returns’, Journal of Capital Market Studies, 2 (1), 9–20. Sikka, P. & Willmot, H. 2013, ‘The tax avoidance industry: accountancy firms on the make’, Critical Perspectives on Accounting, 9 (4), 415–43. Spero, J.E. 1977, The Politics of International Economic Relations, New York: St Martin’s Press. Stephen, M.D. & Parízek, M. 2020, ‘New powers and the distribution of preferences in global trade governance: from deadlock and drift to fragmentation’, New Political Economy, 24 (6), 735–58. Strange, S. 1970, ‘International economics and international relations: a case of mutual neglect’, International Affairs, 46 (2), 304–15. Tax Justice Network 2021, ‘Corporate Tax Haven Index – 2021 results’, accessed 27 April 2021 at https://​cthi​.taxjustice​.net/​en/​. Thomson, A. & Grandjouan, L.D.C. 2018, ‘Digital economy taxation: the OECD’s report and European Commission’s draft directives’, Journal of Taxation of Investments, 35 (4), 23–34. Ting, A. 2014, ‘iTax – Apple’s international tax structure and the double non-taxation issue’, British Tax Review, 1, 40–70. Tørsløv, T., Wier, L. & Zucman, G. 2021, ‘The missing profits of nations’, accessed 17 August 2021 at https://​missingprofits​.world/​. Walker, R.B. 2010, After the Globe, Before the World, London/New York: Routledge. Weyzig, F. 2014, ‘The capital structure of large firms and the use of Dutch financing entities’, Fiscal Studies, 35 (2), 139–64. Wigan, D. 2021, ‘Uber global wealth chains’, in B. Unger, L. Rossel & J. Ferwerda (eds), Combating Fiscal Fraud and Empowering Regulators, Oxford: Oxford University Press, pp. 194–214. Ylönen, M. 2016, ‘Back from oblivion? The rise and fall of the early initiatives against corporate tax avoidance from the 1960s to the 1980s’, Transnational Corporations Journal, 23 (2), 33–65. Ylönen, M. 2018, ‘Planned economies? Corporations, tax avoidance and world politics’, PhD dissertation, University of Helsinki. Ylönen, M. 2022, ‘Advance pricing agreements, in L. Seabrooke & D. Wigan (eds), Global Wealth Chains: Asset Strategies in the World Economy, Oxford: Oxford University Press, pp. 68–88. Ylönen, M. & Laine, M. 2015, ‘For logistical reasons only? A case study of corporate tax planning and social responsibility reporting’, Critical Perspectives on Accounting Journal, 33, 5–23. Ylönen, M. & Teivainen, T. 2018, ‘Politics of intra-firm trade: corporate price planning and the double role of the arm’s length principle’, New Political Economy, 23 (4), 441–57. Zucman, G. 2015, The Hidden Wealth of Nations: The Scourge of Tax Havens, Chicago, IL: University of Chicago Press.

24. Globalization, international tax policy and the OECD Lyne Latulippe

The internationalization of policymaking in the area of tax policy has occurred since the beginning of the 20th century and has grown steadily since then. While globalization and the market economy perspective have guided the evolution of international tax policy, the increasing pace of globalization since the 1980s has revealed significant international tax problems. In addition, globalization influences the ideas and actors that may prevail to meet these challenges. Tax policy is a national prerogative and there is no coercive supranational organization overseeing tax regimes. Nevertheless, external conditions influence states’ decisions and international commitments constrain tax policy choices. Furthermore, to face global challenges, tax policy is largely framed at the international level and the Organisation for Economic Co-operation and Development (OECD) is central in the process (Christensen & Hearson, 2019). International tax generally refers to the combination of domestic tax rules and international agreements that deal with the taxation of foreign income or foreign taxpayers. Common norms and standards emerge through these rules and agreements and adherence to these norms in many countries allows some coordination among domestic tax regimes. According to Avi-Yonah (2007, p. 1): [A] coherent international tax regime exists, embodied in both the tax treaty network and in domestic laws, and…it forms a significant part of international law… The practical implication is that countries are not free to adopt any international tax rules they please, but rather operate in the context of the regime, which changes in the same ways international law changes over time.

The international tax regime has proven very robust over the past 40 years despite increasing failures to deal with tax evasion or avoidance, the financialization of the economy and the exponential growth of digital economy. Over decades, adjustments to the regime were implemented. More recently, governments and international organizations struggled to deal with the growing challenges and public scrutiny on fairness issues within the existing regime. The OECD has tackled some issues through the Base Erosion and Profit Shifting project (BEPS) since 2013. With the most recent OECD proposals in 2019, the allocation of taxing rights to market jurisdictions and infrastructure for a global minimum tax, changes that are more fundamental are foreseen. The objective of the chapter is to underline, through examples, how globalization forces shaped the international tax system in combination with the involvement of an actor, the OECD, and how challenges are being dealt with. Also, the role of the OECD in the globalization of the policy space with regard to international tax policy is discussed. This chapter offers a partial foray into international tax policymaking and addresses some issues of policymaking at the global level to face global challenges. 356

Globalization, international tax policy and the OECD  357

GLOBALIZATION AND THE OECD SHAPING THE INTERNATIONAL TAX REGIME An International Tax Regime Embedded in a Global Market Economy Discourse The rapid growth of international trade in the early 20th century, coupled with the creation of tax regimes in a number of countries to fund war efforts, was the launching pad for the development of an international tax regime. The simultaneous application of rules in many countries led to the overlapping of tax regimes, leading to potential double taxation issues. The League of Nations initiated discussions to solve the issue to encourage economic recovery (Kolm, 2005). The experts determined that bilateral tax agreements would be an appropriate solution to attribute taxing rights between countries of the residence of the taxpayer or the source of the income. To do so, experts also agreed that legal constructs such as the creation of a legal entity (Picciotto, 2011) to determine residency and the legal form of transactions to qualify the type of income and its source should be the basis on which to attribute taxing rights between countries. In the mid-20th century, the OECD continued the work on international tax standards, and its Fiscal Committee had a clear mandate to facilitate the expansion of Bilateral Tax Treaty (BTT) network. The OECD developed a treaty model and dedicated resources to work continually on making the model the most comprehensive and up-to-date and adapt it to emerging issues. It promoted this model to members as well as non-OECD member countries. Since then, a network of bilateral treaties became the foundation of the current international tax system that now comprises over 3000 similar bilateral tax treaties that rely heavily on choices made by the League of Nations. The general role of the OECD has evolved over time and despite the absence of coercive power, its crucial role in international tax policy is recognized (Woodward, 2004). Many studies have highlighted the important role played by this organization in policymaking or governance (Armingeon & Beyeler, 2004; Mahon & McBride, 2008; Marcussen, 2005; Woodward, 2009). In the past decades, research depicts an active and autonomous role for the organization with regard to tax policy governance (Marcussen, 2001; Porter & Webb, 2004; Rixen, 2008; Woodward, 2009). This organization, which could have been seen before the 1980s simply as a forum for discussion and as a research institute or statistic provider to support the discussion in the forum at the beginning of its existence, has gained a more autonomous role in the global economy. The organization addresses the challenges of globalization while supporting globalization as it was created with the aim of supporting economic growth and the development of the world economy. The acceleration of globalization in the 1980s lends even more credibility and support to the work of this organization since its objective is to support the market economy. The organization has been dealing with international tax policy issues for more than 50 years and it gained knowledge and expertise by its many involvements in tax policy and through the development and regular update of its BTT model more particularly. The OECD can take advantage of the dominance of this standard and its lock-in effect. Other issues of international taxation, such as e-commerce, transfer pricing and exchange of information, have been connected to existing norms and standards supporting the current international tax policy reinforcing the dominance of these norms and standards. Globalization challenges, financial

358  Handbook on critical political economy and public policy crisis, public scrutiny and tax activism have challenged the OECD technocratic dominance on international tax that manages to maintain a pivotal role nevertheless. Challenges to the International Tax System Since the 1980s, the rapid pace of globalization and liberalization of trade and capital opened up opportunities for individuals and businesses to take advantage of favourable tax systems in other countries. It facilitated the transfer of capital, profits and activities from one country to another, challenging the infrastructure of the international tax regime. Taxpayers could more easily hide income because domestic tax administration lacked the access to information related to taxpayers outside its border. The original intent behind the norms was to facilitate global trade and investment abroad; however, multinational enterprises (MNEs) could now use the rules and the loopholes created by the superposition of multiple domestic rules and some variation in bilateral tax treaties, to reach the point of double non-taxation (Rixen, 2008). Effectively, globalization and the transformation of the economy offer opportunities for the transfer of profits and activities from one country to another. The increased number of MNEs, and the transformation of their organizational and operational structure as a result of technological and other advances, has created problems for the international tax system more consistently since the end of the 1990s. Globalization has led to failures in the efficiency of international tax rules. More specifically, the failures are caused by international tax evasion opportunities, the manipulation of tax rules to reduce or even eliminate overall taxes (double non-taxation), and the transformation of business models towards intangibles and the digital economy. The reaction of countries to globalization at the domestic level constrained by the global market economy discourse further supported rather than addressed these failures. Globalization brings challenges to international tax policy but at the same time, its dominant underlying ideology narrows the path for ideas and actors contributing to the evolution of the regime. To face the challenges, ideas and actors that fit the globalization discourse, or at least that are not opposed to it, will be more influential. This also explains the dominance of the OECD as an important actor in designing international tax policy. In terms of ideas, global liberalization of trade and investment also shaped the evolution of the principles upon which countries design their tax system. To classic and fundamental tax policy objectives such as equity and redistribution and funding of the state, concerns for economic neutrality have been added (Stewart, 2002) because of the economic distortion that tax policy was seen as creating for investment and business activity choices. Furthermore, in order to provide a favourable climate for business growth and the expected global economic growth that should follow, competitiveness made its way to the forefront of policy decision-making (Krugman, 1994), and particularly in the case of tax policy (Latulippe, 2016). While, these objectives fit well with economic liberalization ideas, they have the potential to disturb the taxation of corporate income considerably. Ultimately, a more competitive tax system leads to the elimination of corporate income tax. A trend for lowering the statutory corporate income tax rate was observable since the 1980s at the global level, particularly for the OECD member countries (Clausing, 2016). Globalization entailed that countries were competing to attract capital and investment and they used tax policy to do so by offering preferential tax treatment of tax incentives. Thus, during this same period, opportunities to reduce the tax burden of MNEs were created and seized by these taxpayers.

Globalization, international tax policy and the OECD  359 Tax evasion and tax avoidance can be seen as both having a similar impact on the tax basis. However, views from tax professionals and business about the acceptability of these phenomena vary considerably from those of civil society organizations and the public. Tax evasion, mostly done by individuals, is said to be illegal because it disregards the law; tax avoidance (manipulation, optimization, planning) refers to legal planning using, although sometimes bending, the existing rules. In both cases, tax havens can be used. On the one side, non-governmental organizations (NGOs) and the public often treat evasion and avoidance similarly since in both cases it results in taxpayers unfairly reducing their taxes paid. However, businesses and their consultants will generally justify tax planning and tax avoidance by the legality of these structures and transactions (Latulippe, 2018). The argument is that the law allows this planning, and taxpayers should not pay more tax than the law requires. Furthermore, this argument relates to the assumption that the money is better spent through private investment than by public spending. Their argument entails that if tax planning is unacceptable, then governments should change the law. While changing tax laws in a purely domestic context is a struggle, changing tax laws targeting international elements is even more complex. Certain features of the international tax system rooted in trade liberalization have allowed MNEs flexibility to structure their operations, but this has led to inappropriate results in terms of taxation and abuse in some cases. The most fundamental features, such as considering each entity in a multinational group as a separate entity and taxing it accordingly, are now being questioned. Picciotto (2011, p. 235) observes that the possibility for MNEs to combine synergies and economies of scale resulting from the structure of their operations is incompatible with considering each legal entity in the group as a separate and independent entity. MNEs have benefited from the existing system by manipulating its underlying system of legal constructs, such as by creating legal entities in tax-favourable countries. To correct major flaws in the system, incremental changes are insufficient – a reform is required.

TAX COMPETITION Despite global norms and standards, domestic tax rates, tax bases and incentives continued to vary across countries. The abridgment of numerous barriers to the movement of capital has levelled the investment environment in many countries. When the legal, financial, political and economic conditions are similar in two countries, the weight of the elements that differ increases in deciding on the location of an investment. Thus, tax rules may have played a more important role over the past 20 years when choosing the location of an investment. As Bird and Wilkie (2013, p. 303) summarize: In recent decades, the increased mobility of business inputs, primarily capital, across national borders as well as changes in consumption and production patterns have reduced the significance of national borders. Taxes have become a more important factor in location decisions. There is increased tax competition for direct investment, portfolio investment, qualified labour, financial services, markets, and business headquarters. A country whose tax system differs substantially from other countries with which it has important economic connections, may suffer (benefit) as a result.

In addition, the geographical route through which funds pass to invest in a country and to repatriate profits often depend on tax policy.

360  Handbook on critical political economy and public policy In this context, countries fear that high taxes (or ‘unfriendly’ policies) may cause capital to leave the country and believe that favourable tax policy attracts investment. On the one hand, external elements pressure countries to adopt favourable tax rules for businesses and, on the other hand, countries internalize competitiveness as a tax principle elevated to a similar rank as equity in order to provide a tax-competitive environment for businesses particularly (Latulippe, 2016). Competitiveness is a well-nested idea within the liberalization of trade and movement of capital that is valued by governments as a norm to follow. In many areas, competitive policies may justify reducing compliance costs for business or may provide useful infrastructure or support healthy and trained workforce. However, as mentioned earlier, considering competitiveness as a fundamental principle when designing tax policy leads to a reduction in corporate taxes in one country and pushes other countries to do so in return, thus generating a race to the bottom. Countries can also compete with characteristics other than rates, and Clausing observes that ‘governments increasingly compete with respect to tax-regime characteristics, although this facet of tax competition is not as well developed in the literature’ (Clausing, 2016, p. 31). Using Tax Policy as a Tool to Compete Dietsch notes that ‘[t]ax competition takes a variety of forms. It operates not only through lower tax rates but also through the definition of the tax base, preferential tax regimes for foreigners, loopholes, or other regulative measures such as bank secrecy’ (Dietsch, 2015, p. 36). Philipp Genschel and Peter Schwarz (2011) also identify four policy options that lead to competition: reducing statutory tax rates, shrinking the tax base, loosening tax compliance controls, and protecting tax compliance, confidentiality and banking secrecy. For the purposes of this chapter, the statutory tax rate and three types of preferential tax regimes are identified as tools that create or enhance tax competition between countries looking to maintain or increase the economic presence of MNEs in their territory. The implementation of any of these types of measures by some countries may affect the tax base of others. In reaction, the latter may perceive that it is necessary to adopt measures that may be of the same nature. Furthermore, policymaking at the global level (through recommendations and the development of norms and standards) can shape these tools and their impact. It can support and increase competition but in some instances reduce it. The statutory corporate income tax rate determines the ceiling of the taxes to pay. Income taxes actually paid will generally be lower than the statutory tax rate because of preferential treatment or incentives and disparities between accounting and taxable income. In that sense, the statutory tax rate is a signal, but it does not tell the whole story. Less publicly visible, the effective tax rate is what businesses and investors will be interested in. Specific rules or incentives offered to specific industries or activities may reduce the taxable income or the taxes. Preferential tax treatments can be subdivided into three categories. First, they can be implemented to attract investment along with activities. Typically, tax incentives for research and development require some form of research and development activities in the country. Second, these preferential tax treatments can serve to attract capital without any real economic activities, providing opportunities for profit shifting without requiring that an MNE undertake activities within the country. This was the case of the original patent box regime, where the multinational could transfer a patent in a country to ensure that the income derived from the patent would be taxable in this other country offering a low tax rate on this type of income.

Globalization, international tax policy and the OECD  361 Finally, countries can offer preferential tax treatment to their MNEs to support their expansion abroad by offering reduced income taxes or exemption on foreign income while allowing that this income be taxed in a jurisdiction with low or no income taxes. Desai, Foley and Hines (2006) point out that high-tax countries may choose not to reduce their general tax rate, instead letting MNEs use tax havens through tax strategies in order to shift profits there and thus avoid paying tax. The OECD’s Response to Tax Competition Before the accelerating pace of globalization in the 1980s, tax competition was not identified as a problem by the OECD: The decision to have a high rate of tax and a high level of government spending or low taxes and limited public outlays, the mix of direct and indirect taxes, and the use of tax incentives, were all matters which were decided primarily on the basis of domestic concerns and had principally domestic effects. While there were some international spillover effects on other economies, those effects were generally limited. (OECD, 1998, p. 13)

The OECD has been addressing issues related to some forms of tax competition since the mid-1990s. However, it reiterated the importance to respect countries’ tax sovereignty so they can decide on the level of taxation according to their needs and socioeconomic choices. In 1996, the OECD launched the Harmful Tax Competition (HTC) project. The project targeted tax havens and preferential tax regimes ‘on income from geographically mobile activities, such as financial and other service activities’ (ibid., p. 19). To justify the necessity to address these regimes, the OECD mentioned that these ‘generally provide a favourable location for holding passive investments or for booking paper profits. In many cases, the regime may have been designed specifically to act as a conduit for routing capital flows across borders’ (ibid., p. 25). The HTC project evolved, and the OECD created the Forum on Harmful Tax Practices (FHTP) in 1998 and the Global Forum on Taxation in 2000. Over time, the work of the FHTP continued to focus on harmful tax regimes, while the Global Forum addressed harmful tax competition by tax havens. In the context of a dominant discourse about economic liberalization and tax sovereignty, the achievements of these projects were limited. On the one hand, it ended some preferential tax regimes; however, with regard to tax havens more broadly, it only led to the development of a norm for more formal but limited exchange of tax information, in particular to control tax evasion (Webb, 2004). Exchange of information between countries is essential to support compliance with the international tax rules, and since 1963 the OECD model for bilateral tax treaties included an article for the exchange of information on request. Following the work on HTC, the OECD developed a model agreement specifically for the exchange of information in tax matters in 2002, and recommended that countries sign exchange of information agreements with countries considered tax havens. Tax havens did sign such treaties in order to be taken out of the list of non-cooperative countries. Because the OECD did not provide details on with which countries these agreements should be signed, many agreements were signed among tax havens. Agreements provide for the exchange of information upon request, meaning that the country who wishes to obtain tax information regarding one of its citizens from another country must provide many details. These details include the identity of the taxpayer under investigation and

362  Handbook on critical political economy and public policy all relevant background information, including the reasons for the request and the grounds for believing that the other country holds the information requested.1 Following the financial crisis, tax transparency was back on the agenda and the OECD worked on developing automatic exchange of information as a new standard. In 2013, in the wake of the implementation of the Foreign Account Tax Compliance Act (FATCA) by the USA with several countries (including the major European countries and tax havens), the OECD obtained consensus on a common reporting standard (CRS) for the automatic exchange of financial account information. In 2014, more than 50 jurisdictions signed the Multilateral Competent Authority Agreement (CRS MCAA), an international framework agreement to permit the automatic exchange of tax information under the common reporting standard.2 Within a few years, more than 100 countries had signed the agreement, leading to the first automatic exchange of information in 2017. The growing concern about corporate tax avoidance, and frustration with how the current international tax regime inadequately deals with new business models in the context of globalization and dematerialization of the economy, also forced the OECD to reconsider fundamental issues with international corporate income taxation. Among other things, it put the issue of harmful preferential regimes back on the global priority list in 2013. The OECD BEPS project, an initiative to strengthen multilateral cooperation between governments for the taxation of MNEs, continued the work on harmful tax practices through some of its 15 action plans. Also, the OECD introduced a discussion to circumscribe tax competition using preferential tax treatment without a requirement for real economic activities. Analysis through the BEPS project involved discussion about the relationship between taxation and real economic activity and value creation. At this time, the OECD recommendations attempted to restrain some form of tax competition, but still did not aim at controlling tax competition as a whole. Concerning the statutory corporate tax rates, the OECD repeated regularly that there was no intention to pressure countries to adopt a specific tax rate. In 1998, it said that the work on HTC ‘is not intended to explicitly or implicitly suggest that there is some general minimum effective rate of tax to be imposed on income below which a country would be considered to be engaging in harmful tax competition’ (OECD, 1998, p. 41). In 2006, the OECD reiterated its intention not to interfere with general corporate tax rates: The decision on the appropriate rate of tax is a sovereign decision of each country. OECD member countries do not seek to dictate to any country, either inside or outside the OECD, whether to impose a tax, what its tax rate should be or how its tax system should be structured. The aim of this work is to create an environment in which all countries, large and small, OECD and non-OECD, those with an income tax system and those without, can compete freely and fairly thereby allowing economic growth and increased prosperity to be shared by all. (OECD, 2006, p. 3)

In 2008, Ault stated that ‘while a low rate of tax may be potentially harmful, this cannot be enough – at least at this stage of international cooperation – to constitute harmful tax competition’ (Ault, 2008, p. 766). The BEPS project led to another stage of international tax cooperation opening up to concerns about a race to the bottom and considering low tax rates as a potential negative impact of tax competition. The BEPS project culminated in 2019 with proposals for a global minimum tax and the attribution of taxing rights to market jurisdiction, which have since then received the support of the G7, G20 and more than 130 countries (OECD/G20, 2021). These proposals aim at ensuring that very large multinationals, particularly in the digital economy, cannot structure their affairs

Globalization, international tax policy and the OECD  363 to reduce, if not eliminate, taxes, and that market jurisdiction can tax profits generated through sales on their territory. In broad terms, the OECD recommends a solution based on two pillars requiring a coordinated implementation among countries. Pillar I provides for the attribution of taxing rights to the market jurisdiction for multinationals with global turnover above 20 billion euros and profitability above 10 percent, even if it does not have any physical presence in the market jurisdiction. Market jurisdictions will share a portion (25 percent) of the excess profit of these multinationals, on which their domestic tax rules will apply. Pillar II includes a set of rules to ensure multinationals are taxed at a minimum rate of 15 percent. When a country does not tax income earned by an entity at the minimal rate, a country where another entity in the group resides can charge taxes on this income. Despite a consensus on these proposals, the OECD reiterates that ‘[t]he global minimum tax agreement does not seek to eliminate tax competition, but puts multilaterally agreed limitations on it’ (OECD, 2021a, n.p.). Tax competition is both a feature of and a problem caused by globalization. More recently, the OECD struggles to find the right balance between accepting some form of tax competition while controlling its negative consequences. While the work of the OECD may have restricted forms of harmful tax competition, at times the desire to maintain tax competition amounts to promoting the use of specific policies to compete, such as in the case of intellectual property (IP) regimes. Limiting and Promoting Tax Competition – the Example of IP Regimes3 In the early 2000s, a few countries adopted the patent box regime to provide a favourable tax treatment on income earned on intangibles. The transfer of intangibles, such as patents, from one country to another in order to book royalties earned in the group in such countries could reduce taxes paid on this income. These regimes incentivize intangible property holders to transfer the income-producing asset to an entity in another country. Between 2000 and 2003, Ireland, Turkey, France and Hungary adopted such regimes. Following the work on HTC at the OECD that did not identify these regimes as harmful, many countries implemented a patent box regime between 2006 and 2012 (Belgium, Netherlands, China, Spain, Luxembourg, Greece, Malta, Israel, Lichtenstein, Switzerland, Cyprus). In 2012, the OECD started to analyze these regimes within the BEPS project. The focus of the BEPS project on value creation and real economic activity was incompatible with the fact that the preferential tax treatment in these regimes was granted despite the absence of any real or substantial activities. In February 2015, the OECD announced that an agreement had been reached to adopt an approach requiring substantial activities in countries that had an IP regime (OECD, 2015b). In its 2015 report, the OECD recommended ending these regimes unless preferential treatment be granted on the condition that real and substantial activities take place in the country where the income is booked. Following this recommendation, many countries adapted their regime and others decided to implement a ‘compliant’ regime’ (Finley, 2016). This opened up opportunities for businesses to benefit from preferential tax regimes by restructuring their activities to transfer real economic activities along with IP in countries offering a favourable tax treatment. Countries that feared businesses would transfer income producing intangible assets now also fear losing economic activities that create value to the benefit of another country offering such a regime. The OECD’s recommendation resulted in replacing a tool used for tax competition purposes to attract capital without real economic activities, with another tool to attract investment and activities together.

364  Handbook on critical political economy and public policy Over the last decades, the position of the OECD with regard to tax competition has evolved. Within the broad work of the BEPS project, the OECD reaffirmed that its work on harmful tax practices is not ‘intended to promote the harmonization of income taxes or tax structures generally within or outside the OECD, nor is it about dictating to any country what should be the appropriate level of tax rates’ (OECD, 2015a, p. 14). However, more recently facing persistent unsolved challenges with taxing the digital economy and multinationals, the OECD recognized that tax competition entails a form of race to the bottom and is now proposing a global minimum tax for very large MNEs.

DEMATERIALIZATION OF THE ECONOMY Digitalization has changed the global economic landscape and increased the challenges for tax policy. Income taxation generally result from the source of the income or the residence of the taxpayer, the legal entity in the case of corporate tax. Therefore, if an entity can reside anywhere (and perhaps even nowhere as the case of Apple revealed) and earn income that cannot be attached to a source in a specific country, then it is almost impossible to tax it with the international tax rules that have been put in place in the early 20th century. Interestingly, the first OECD e-commerce tax conference was held in 1998, more than 20 years ago. At the time, the focus was on the profit generated in a territory by the sale of goods without a physical presence. It was then agreed that the principles that guide governments in taxing conventional commerce should also guide them in taxing electronic commerce. Therefore, the intention was to maintain the current rules and principles and adapt them when necessary. Very little progress followed this summit in terms of corporate income tax, and the loopholes have only widened the more technologies and digital economy have developed. Combined with popular pressure especially in times of crisis, it has become imperative to address these issues. The OECD undertook an in-depth analysis of digital economy taxation in its Action 1 of the BEPS project, but the report published in 2015 did not produce specific solutions or recommendations. Since 2016, many countries have announced the implementation of unilateral measures regarding the taxation of the digital economy for market jurisdiction to tax sales occurring on their territory4 These countries were considering that sales from foreign enterprises not only did not provide tax revenues but also created an unfair advantage to foreign corporations compared with domestic entities liable to pay corporate income tax on their profits from sales on the same territory. In many cases, the announcement to adopt a digital sales tax (DST) was not followed by an actual implementation of the rules and most of these countries indicated that this was a temporary measure until an international consensus on how to deal with this issue could be reached. This trend and concerns from the US about the potential for double taxation for its MNEs, forced the OECD and other countries to seriously reconsider old norms to attribute taxing rights and cooperate towards a solution. As work continued and despite the initial objective of the OECD to rely on the existing system to deal with digital economy, issues brought about by digitalization were so important that they led the OECD to consider proposals that the organization had kept outside its discussion for many years. The global minimum tax and the attribution of taxing rights to countries on a basis other than the traditional concepts of source or residence, clearly depart from the

Globalization, international tax policy and the OECD  365 usual ideas that the organization analyzes or even considers. These proposals submitted in 2019 innovate by reviewing the long-time attribution of taxing rights between the source and the residence country to provide some taxing rights to the market jurisdiction. Therefore, after more than 20 years of trying to deal with the vast expanding digital economy, it is undeniable that the old system is not working and needs to be revised. Despite major challenges brought about by globalization, the OECD managed to maintain its status as a pivotal actor with regard to international tax policy. Through a discourse still supporting global liberalization of trade and investment, it opened the door for significant modifications that are outside the usual realm of ideas considered within the organization – that is, ideas that fit the norms and standards that have been in place for a century. The implementation of an automatic exchange of tax information standard among a large number of countries was a first step that may have provided the required confidence that a large consensus was also possible for other major changes, such as a global minimum tax. These ground-breaking proposals are complex; they concern only very large MNEs and there are still many uncertainties about the amounts of revenue that will be collected and which countries will benefit from these rules. These major reforms are impossible to implement without a broad international consensus that necessitates some form of global dialogue.

GLOBALIZING THE DIALOGUE ON INTERNATIONAL TAX POLICY While the OECD had 20 member countries in 1962, with only six other countries admitted until 1994, the membership grew considerably after that with the addition of 12 members to reach 38 members in 2021. About half of the 2021 budget of 398 million euros is financed by a fixed contribution from member countries. While a proportion of the contributions is divided equally among member countries, each country’s contribution is also based on the relative size of their economies. Given this, the contribution of the United States represents 20 percent of the total and the contribution of four other countries (Japan, Germany, United Kingdom and France) is between 5 and 10 percent each (OECD, 2021b). All other member countries’ contributions are less than 5 percent each. The work of the OECD secretariat is carried out by about 3300 employees, including experts such as economists and lawyers, and through the participation of numerous officials from member and non-members countries to the more than 300 committees.5 The OECD is a pluridimensional institution and while it is an actor itself, as seen in the previous section, with the expertise to develop and promote norms, it also acts as an arena (Centeno, 2021). As such, the OECD provides a place to discuss tax matters, develop common practices and challenge participants (Centeno, 2021, p. 110). The influence of the organization depends on its capacity to ensure adherence by the largest number of countries possible, not only OECD members. Since the financial crisis, the support of the G20 increased the legitimacy of the reform proposals from the OECD (Eccleston, 2014). While some argue that an international tax organization is required as a supranational organization for the coordination of international tax, others are of the view that the OECD is well positioned to play that role (Kudrle, 2014). The structure of the OECD allows some form of participation by other major stakeholders, such as representative from civil society, in the discussion, and this can improve the perceived legitimacy. The OECD offers a forum for the exchange of ideas although in

366  Handbook on critical political economy and public policy a controlled environment allowing discussion to remain within the boundaries of its work, and existing norms and standards, and generally focusing on technical aspects. The Centre for Tax Policy and Administration is a part of the OECD Secretariat responsible for the work on taxation. Member countries supervise the activities of the organization, but once large goals are determined, the secretariat of the OECD develops the strategy and manages the tasks to reach these objectives. The Committee for Fiscal Affairs (CFA) is a member-driven committee. The CFA mandate is ‘to contribute to the shaping of globalization for the benefit of all through the promotion and development of effective and sound tax policies, international tax standards and guidance that will allow governments to provide better services to their citizens while maximising economic growth and achieving environmental and social objectives’ (OECD, 2013, p. 5). In doing so, the CFA is expected to cooperate with non-member countries, other international organizations and major stakeholders. The CFA relies on the work delegated to advisory groups, forums, task forces and working parties presided over generally by representatives of member countries and reuniting representatives from member and non-member countries. International experts are recruited, either as employees working within the secretariat or consultants. Furthermore, consultation processes allow for the input from a variety of stakeholders. To highlight constraints and limits of the arena provided by the OECD with regard to international tax policy, examples of the relationship between the OECD and non-member countries as well as with non-governmental actors are presented. This illustrates that the policy space offered by the OECD is useful for achieving its goals, but it has intrinsic limits for the participation of all stakeholders. OECD Members and Beyond The OECD has had relationships with countries outside its membership bases since the mid-1900s. However, this relationship revolved mainly around providing support and technical advice to transition economies to ensure their adherence to standards for a market economy. Taxation was among the main topics for knowledge transfer and the diffusion of standards (Hearson, 2021). Before 1990, the relationship amounted to OECD countries supporting less developed countries with financial assistance and opening up of their market. The OECD Development Centre established in 1960 was given the mandate to undertake research activities to transfer technical knowledge from advanced to less developed countries (Aubrey, 1967). The Development Assistance Committee of the OECD was created in 1962 to coordinate cooperation on the aid provided to developing countries. At that time, the involvement with developing countries regarding international tax policy occurred mainly through some OECD countries negotiating bilateral tax treaties with a few countries (often their colonies) and using the OECD model as the basis for signing them. The major changes in the world political economy in the late 1980s led the council to reconsider the OECD’s role. Member countries asked the OECD to develop linkages with non-member countries in order to support their transition to a market economy. Through the implementation of specific centres and programs (e.g., a Centre for Co-operation with Non-Members), experts from the OECD or from member countries provided technical training and assistance in many areas, including taxation, to establish the required institutional foundation to move to a market economy.

Globalization, international tax policy and the OECD  367 The relationship between the OECD and non-member countries has its roots in the entrepreneurial approach from the OECD to diffuse norms and standards, to transfer knowledge and to promote the use of tools developed previously by and for member countries and within a global market economy perspective (Christians, 2016). Efforts to create inclusive forums and more permanent relationships with non-member countries with regard to taxation on an ongoing basis were seen from the early 2000s. Since 2001, Global Forums operate in eight areas: sustainable development, knowledge economy, governance, trade, international investment, international taxation, agriculture, and competition policy. The Global Forum on Taxation is responsible for carrying out dialogue around the core work of the Committee on Fiscal Affairs on tax issues between tax policymakers and administrators from member and non-member countries ‘allowing for the development of models, standards and guidelines on international tax issues in the mutual interest of all parties’ (OECD, 2009, p. 42). In 2016, to broaden the consensus and gather support for its major reform proposals, the OECD announced that it was bringing together a: broad range of countries, representing varying levels of development…on an equal footing in the OECD’s Committee on Fiscal Affairs, and inaugurates the new inclusive framework on BEPS implementation… Through their participation in the decision-making as well as the technical working groups of the OECD’s Committee on Fiscal Affairs, the members of the inclusive framework will now have a direct influence in shaping international tax rules to tackle BEPS and ensuring a level playing field.6

From 80 countries in 2016, 140 are members of the inclusive framework in 2021. However, many limits remain to the actual participation of these countries on an equal footing. Participation seems to happen mostly at the implementation phase of the BEPS recommendations. This is not surprising given the origins of the relationship with non-member countries and the fact that the organization remains accountable to its members. Many barriers remain to the actual participation in the development of tax norms and standards to the benefit of all, especially with the current sense of emergency for an international tax reform. It is unlikely that ideas that would either be against the perceived interest of member countries, that would not fit the global market economy ideology, or that would depart from the norms and standards that are central to the organization’s expertise and credibility, would gain momentum within this arena. Disparities in capacity and resources are also an impediment to the actual participation of every country. Therefore, questions remain as to the possibility to achieve participation ‘on an equal footing’ that would take into consideration the particularities of each country (Pushkareva, 2021). Despite the shortcomings of this arena, non-member countries can nevertheless consider it in their interest to join the inclusive framework. Also, participation in other forums and other parallel international forces such as EU blacklisting explain adherence to this framework (Oei, 2021). The history of the involvement of the organization with non-member countries and its central role in designing the current system does not help to provide an arena for an entirely open dialogue. An inclusive framework is an essential element in reaching a global consensus to move forward with international tax reform. However, to ensure major reforms take into account various perspectives and interests, other forums may be essential to influence the work of the OECD from the outside.

368  Handbook on critical political economy and public policy Non-governmental Actors While the OECD controls the agenda for international tax policy (Eccleston & Woodward, 2014), it often needs to adjust this agenda to address politicized issues following pressures from civil society and NGOs, for example. Furthermore, in some instances, civil society can undermine the required political support for an OECD recommendation to be implemented (Warkentin & Mingst, 2000). Activists can take an issue out of the strictly technical realm into the public space. Following the 2008 financial crisis, a popular movement combined with a campaign from the Tax Justice Network, Oxfam and Christian Aid contributed to putting tax avoidance and tax evasion on the agenda for a corporate tax reform (Elbra, 2018). Also, activists promoted a solution outside the realm of the OECD – country by country reporting – that led to a recommendation by the OECD (Seabrooke & Wigan, 2018). While this influence can occur from the outside, Article 12 of the OECD Convention of 1960 states the obligation for the organization to consult with civil society. The central role of the OECD in framing and developing tax policy may render it crucial for civil society to engage with the OECD (Woodward, 2008). For the OECD, NGOs such as Business at OECD (BIAC) and the Trade Union Advisory Committee (TUAC) officially represent civil society in its internal process. Businesses and their consultants constitute a very different segment of civil society than any other group (Latulippe & Proulx, 2021). Their interests and preferences are very connected to ideas related to global market economy, which can explain why their participation in the work of the OECD is facilitated. ‘During the 1970s, the “house that Keynes built” was dismantled in favour of market-oriented supply-side models. Increasingly BIAC’s agenda was in vogue, and it progressively assumed a privileged ideational position within the OECD’ (Woodward, 2008, p. 82). In the case of international tax policymaking, participation by non-business sector civil society representatives in the OECD process seems scarce. More specifically, when looking at 35 consultations in the BEPS project from 2015 to 2020, 38 percent of the submissions were from businesses and 33 percent from professionals, while only 5 percent were from civil society and NGOs. In these consultations, BIAC made a submission in 31 cases, while the TUAC participated only five times.7 Many barriers may prevent the participation of civil society representatives (other than business representatives) in consultation about international tax policy. Consultation processes tend to frame the discussions on highly technical and specialized knowledge that are mainly the preserve of professionals. Businesses either have in-house experts (in particular, large MNEs) or the resources to hire the services of consultants to provide support in preparation of their submission or the submission of a group or association. On the other hand, civil society groups do not necessarily have the resources to analyze the consultation paper and elaborate a submission to assert their points of view within the short deadline usually provided. In addition, when disagreeing with the principles, to participate in a consultation focusing on detailed technical rules that apply these principles is a daunting task. Consultations about specific proposals can therefore be seen as the inappropriate forum within which to discuss disagreement with principles. A process open to civil society representatives is useful to challenge critics of the legitimacy of the OECD’s recommendations, but may be inefficient for the actual participation in the design of international tax policy. The bias in favour of the business sector within the

Globalization, international tax policy and the OECD  369 processes of the organization and its impact should be assessed in more detail. Civil society representatives and activists can have more influence in shaping international tax policies by putting issues on the agenda or when they promote ideas both from outside and from within the processes at the OECD.

CONCLUSION Globalization and the underlying liberalization of trade and capital have shaped and continue to challenge the international tax system. This influence is also combined with that of the OECD, a crucial actor in the design of international tax norms and standards that also controls an arena fostering global discussion on international taxation. The BEPS project undertaken by the OECD managed to make important adjustments to the international tax system in only a few years and has now reached a large consensus on two proposals for fundamental changes to MNEs’ taxation: a reattribution of taxing rights and a global minimum tax. International tax reforms require some form of consensus and controlling the discussion may be inevitable for efficiency purposes. However, questions about the consequences and the constraining effect of the reform on a large number of countries as well as concerning the possibility for all stakeholders to influence the process will remain. Despite the importance of the current reform underway with Pillars I and II, it concerns only a few very large MNEs, and it deals only with corporate income taxation and complements the current flawed regime that remains in place generally. This means that even when implemented, analysis of international tax policymaking process and consequences will continue to be relevant. It remains to be seen whether keeping both regimes is sustainable. Political analysis should also be concerned with cases other than the highly publicized taxation of multinationals. Further public pressures may put issues such as wealth taxation or other forms of capital taxation as well environmental taxation on the international tax policy agenda. How can ideas and actors influence international tax policymaking to address justice and environmental challenges? Will the OECD continue to lead coordination efforts when dealing with these challenges and how will this affect the outcome?

NOTES 1.

For a detailed list of information to be provided in support of a request under these agreements, see https://​www​.oecd​.org/​ctp/​exchange​-of​-tax​-information/​36647905​.pdf; accessed 4 January 2023. 2. See ‘CRS information’, accessed https://​www​.oecd​.org/​tax/​automatic​-exchange/​international​ -framework​-for​-the​-crs; accessed 4 January 2023. 3. This section is based on data from previous research (Latulippe & St-Cerny-Gosselin, 2020). 4. Countries that have implemented a digital sales tax (DST) are India, Hungary, France, Austria, Italy, Tunisia, Turkey, UK, Kenya, Sierra Leone and Spain. Also, Czech Republic, Canada and Belgium adopted a DST to be implemented later and other countries such as Israel, Slovakia, Latvia, Brazil and New Zealand are considering the adoption of a DST. 5. See ‘Organisational structure’, accessed https://​www​.oecd​.org/​about/​structure/​; accessed 4 January 2023. 6. ‘First meeting of the new inclusive framework to tackle Base Erosion and Profit Shifting marks a new era in international tax co-operation’, 30 June 2016, https://​www​.oecd​.org/​tax/​beps/​first​ -meeting​-of​-the​-new​-inclusive​-framework​-to​-tackle​-base​-erosion​-and​-profit​-shifting​-marks​-a​-new​ -era​-in​-international​-tax​-co​-operation​.htm; accessed 4 January 2023.

370  Handbook on critical political economy and public policy 7.

Compilation updated by the author from Latulippe and Proulx (2021).

BIBLIOGRAPHY Armingeon, K. & Beyeler, M. 2004, The OECD and European Welfare States, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Aubrey, H.G. 1967, Atlantic Economic Cooperation: The Case of the OECD, New York: Frederick A Praeger. Ault, H.J. 2008, ‘Reflections on the role of the OECD in developing international tax norms’, Brooklyn Journal of International Law, 34 (3), 757–81. Avi-Yonah, R.S. 2007, ‘Tax competition, tax arbitrage, and the international tax regime’, Olin Working Paper No. 07-001, University of Michigan Law & Economics, Ann Arbor. Bird, R.M. & Wilkie, J.S. 2013, ‘Designing tax policy: constraints and objectives in an open economy’, eJTR, 11, 284–320. Centeno, V.G. 2021, ‘The OECD: actor, arena, instrument’, Globalisation, Societies and Education, 19 (2), 108–21. Christensen, R.C. & Hearson, M. 2019, ‘The new politics of global tax governance: taking stock a decade after the financial crisis’, Review of International Political Economy, 26 (5), 1068–88. Christians, A. 2016, ‘BEPS and the new international tax order’, Brigham Young University Law Review, 6, 1603–48. Clausing, K.A. 2016, ‘The nature and practice of capital tax competition’, in T. Rixen & P. Dietsch (eds), Global Tax Governance: What’s Wrong with It and How to Fix It, Colchester: ECPR Press, pp. 27–54. Desai, M.A., Foley, C.F. & Hines Jr, J. 2006, ‘The demand for tax haven operations’, Journal of Public Economics, 90, 513–31. Dietsch, P. 2015, Catching Capital: The Ethics of Tax Competition, Oxford/New York: Oxford University Press. Eccleston, R. 2014, The Dynamics of Global Economic Governance: The OECD, the Global Financial Crisis and the Transformation of International Tax Regulation, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Eccleston, R. & Woodward, R. 2014, ‘Pathologies in international policy transfer: the case of the OECD tax transparency initiative’, Journal of Comparative Policy Analysis: Research and Practice, 16 (3), 216–29. Elbra, A. 2018, ‘Activism and the “new” politics of tax justice’, in R. Eccleston & A. Elbra (eds), Business, Civil Society and the ‘New’ Politics of Corporate Tax Justice: Paying a Fair Share?, Cheltenham, UK: Edward Elgar Publishing, pp. 68–89. Finley, R. 2016, ‘Innovation box necessary to protect Israel’s technology sector, official says’, Tax Notes – Worldwide Tax Daily, 8 December. Genschel, P. & Schwarz, P. 2011, ‘Tax competition: a literature review’, Socio-Economic Review, 9 (2), 339–70. Hearson, M. 2021, Imposing Standards: The North-South Dimension to Global Tax Politics, Ithaca, NY: Cornell University Press. Kolm, E. 2005, ‘The emerging system of double taxation agreements in the late 19th and 20th century’, Development & Finance, No. 2, 66–75. Krugman, P. 1994, ‘Competitiveness: a dangerous obsession’, Foreign Affairs, 73 (2), 28–44. Kudrle, R.T. 2014, ‘The OECD and the international tax regime: persistence pays off’, Journal of Comparative Policy Analysis: Research and Practice, 16 (3), 201–15. Latulippe, L. 2016, ‘Tax competition: an internalised policy goal’, in P. Dietsch & T. Rixen (eds), Global Tax Governance. What Is Wrong with It and How to Fix It, Colchester: ECPR Press, pp. 77–100. Latulippe, L. 2018, ‘Large accounting firms and tax planning in a “fair tax” era’, in R. Eccleston & A. Elbra (eds), Business, Civil Society and the ‘New’ Politics of Corporate Tax Justice, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing, pp. 128–54.

Globalization, international tax policy and the OECD  371 Latulippe, L. & Proulx, N. 2021, ‘Unravelling the relationship between tax policy and business: theory, evidence and facts’, in A. Kellow, T. Porter & K. Ronit (eds) 2008, Handbook of Business and Public Policy, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing, pp. 156–76. Latulippe, L. & St-Cerny-Gosselin, J. 2020, ‘Comment la condamnation d’une forme de concurrence fiscale peut en favoriser d’autres?’, Politique et Sociétés, 39 (1) 41–63. Mahon, R. & McBride, S. (eds), The OECD and Transnational Governance, Vancouver: UBC Press. Marcussen, M. 2001, ‘The OECD in search of a role: playing the idea game’, paper presented at the European Consortium for Political Research (ECPR), Grenoble. Marcussen, M. 2005, ‘The OECD: soft regulation and solid reputation’, paper presented at the Annual Meeting of the International Studies Association, Honolulu. Oei, S.-Y. 2021, ‘World tax policy in the world tax polity? An event history analysis of OECD/G20 BEPS inclusive framework membership’, Yale Journal of International Law, 47, 199–307. Organisation for Economic Co-operation and Development (OECD) 1998, Harmful Tax Competition: An Emerging Global Issue, Paris: OECD Publishing. Organisation for Economic Co-operation and Development (OECD) 2006, The OECD’s Project on Harmful Tax Practices: 2006 Update on Progress in Member Countries, Paris: OECD Publishing. Organisation for Economic Co-operation and Development (OECD) 2009, Directory of Bodies of the OECD, Paris: OECD Publishing. Organisation for Economic Co-operation and Development (OECD) 2013, Resolution of the Council [C(2013)84, Annex and C/M(2013)17, Item 173] Revising the Mandate of the Committee on Fiscal Affairs, Summary Record of the 1286th Session, Paris. Organisation for Economic Co-operation and Development (OECD) 2015a, Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5–2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, Paris: OECD Publishing. Organisation for Economic Co-operation and Development (OECD) 2015b, ‘Explanatory paper: agreement on modified nexus approach for IP regimes’, accessed 27 December 2022 at https://​www​.oecd​ .org/​ctp/​explanatory​-paper​-beps​-action​-5​-agreement​-on​-modified​-nexus​-approach​-for​-ip​-regimes​ .pdf. Organisation for Economic Co-operation and Development (OECD) 2021a, ‘International community strikes a ground-breaking tax deal for the digital age’, 8 October, accessed 4 January 2023 at https://​ www​.oecd​.org/​tax/​international​-community​-strikes​-a​-ground​-breaking​-tax​-deal​-for​-the​-digital​-age​ .htm. Organisation for Economic Co-operation and Development (OECD) 2021b, OECD Secretary-General’s Report to Ministers 2021, accessed 4 January 2023 at https://​doi​.org/​10​.1787/​8cd95b77​-en. Organisation for Economic Co-operation and Development (OECD)/G20, 2021, ‘Base Erosion and Profit Shifting project: statement on a two-pillar solution to address the tax challenges arising from the digitalisation of the economy’, 1 July, accessed 4 January 2023 at https://​www​.oecd​.org/​tax/​beps/​ statement​-on​-a​-two​-pillar​-solution​-to​-address​-the​-tax​-challenges​-arising​-from​-the​-digitalisation​-of​ -the​-economy​-july​-2021​.pdf. Picciotto, S. 2011, Regulating Global Corporate Capitalism, Cambridge, UK: Cambridge University Press. Porter, T. & Webb, M. 2004, ‘The role of the OECD in the orchestration of global knowledge networks’, paper presented at the Canadian Political Science Association annual meeting, Saskatoon. Pushkareva, N. 2021, ‘Reforming international taxation: participation and collaboration of developing countries’, in B. Alepin, L. Latulippe & L. Otis (eds), Coordination and Cooperation Tax Policy in the 21st Century, Alphen aan den Rijn: Wolters Kluwer, pp. 107–21. Rixen, T. 2008, The Political Economy of International Tax Governance, London: Palgrave Macmillan. Seabrooke, L. & Wigan, D. 2018, ‘Tax justice activists in global wealth chain’, in R. Eccleston & A. Elbra (eds), Business, Civil Society and the ‘New’ Politics of Corporate Tax Justice: Paying a Fair Share?, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing, pp. 90–108. Stewart, M. 2002, ‘Global trajectories of tax reform: mapping tax reform in developing and transition countries’, Public Law and Legal Theory Research Paper No. 29, University of Melbourne, Faculty of Law. Warkentin, C. & Mingst, K. 2000, ‘International institutions, the state, and global civil society in the age of the World Wide Web’, Global Governance, 6 (2), 237–57.

372  Handbook on critical political economy and public policy Webb, M.C. 2004, ‘Defining the boundaries of legitimate state practice: norms, transnational actors and the OECD’s project on harmful tax competition’, Review of International Political Economy, 11 (4), 787–827. Woodward, R. 2004, ‘The Organisation for Economic Cooperation and Development’, New Political Economy, 9 (1), 113–27. Woodward, R. 2008, ‘Towards complex multilateralism? Civil society and the Organisation for Economic Cooperation and Development’, in R. Mahon & S. McBride (eds), The OECD and Transnational Governance, Vancouver: UBC Press, pp. 77–95. Woodward, R. 2009, The Organisation for Economic Co-Operation and Development (OECD), London/ New York: Routledge.

PART VII TRADE AND ECONOMIC DEVELOPMENT

25. Postcolonial critique of economic development Aram Ziai

Not all studies that deal with formerly colonized societies are postcolonial studies. The term postcolonial (as opposed to post-colonial, McClintock 1992) refers to a heterogeneous approach that gained prominence since the 1980s and puts colonialism and its aftermath at the centre of inquiry. Because the prominent works of postcolonial studies (Bhabha, 1994; Said, 1978; Spivak [1988], 1994) originated in literary studies, its focus was often perceived to be on ‘discursive practices’ and ‘cultural strategies’ (Ashcroft, Griffiths & Tiffin, 1995, p. xv). This gave rise to the criticism that they would merely focus on representations, subjectivity and epistemology and lose sight of material structures, contemporary figurations of (neo)colonialism and relations of power in the capitalist world economy (Dirlik, 1994, p. 356; Sylvester, 1999). This criticism is justified for several works in postcolonial studies (notably those of Bhabha). Yet even scholars from literary or cultural studies in postcolonial theory were usually critical of relations of power and positioned themselves against all forms of colonialism and imperialism. Consequently, they often adopted a broader focus on the ‘legacies of colonialism’ (Loomba, 1998, p. 12) and the ‘continuing cultural and political ramifications of colonialism in both colonizing and colonized societies’ (Young, 2016, p. 6) or even integrated Marxist perspectives like Hall or Spivak. Stuart Hall also mentioned as a feature of postcolonial studies the rejection of a ‘politics of binary oppositions, where clear lines can be drawn in the sand between goodies and baddies’ (Hall, 1996, p. 244). Authors like Bhabha and Spivak clearly show that the relations of power in colonial and postcolonial figurations are more complex than that. Whether decolonial approaches (e.g., Grosfoguel, 2011; Mignolo, 2009; Quijano, 2000) can usefully be differentiated from postcolonial approaches is a contested question. Proponents would argue that they are more political and more materialist than postcolonial studies, focus more on the colonization of the Americas than on the British and French empires and insist that modernity cannot be conceived of without the formative experience of colonialism. Opponents would argue that these features are not alien to postcolonial studies, that the talk of contemporary coloniality downplays the achievements of anticolonial movements (and possibly that the need to distinguish oneself in modern academia played a role in the inception of decolonial studies) (Bhambra, 2014). Certainly, postcolonial theory’s focus on the ‘critique…of the process of production of knowledge about the other’ (Williams & Chrisman, 1994, p. 8) can usefully be combined with a critical focus on political economy as it can be found in theories of dependency, imperialism or world-systems. The analytical strategies of postcolonial approaches are diverse, and the following selection is not conclusive. The most common strategy is to look for continuities between the colonial and the postcolonial era in the discursive or material relations between North and South. The strategy to point out the ‘entangled histories’ (Bhambra, 2007; Randeria, 2006) of Europe and other continents since colonialism serves to reveal the idea that Europe’s transformation to modernity occurred independently of the massive transfer of wealth and resources from the colonies, but also from learning and exchange taking place between cultures, as myth. The analytical strategy of ‘othering’ is derived from Said’s examination of the cultural construction 374

Postcolonial critique of economic development  375 of the ‘other’ in English and French literature, based on an ontological distinction between ‘Orient’ and ‘Occident’ (Said, 1978, p. 2). The construction of the other, usually through ascription of negative features, is linked to the construction of the self, usually through the implicit ascription of positive features: ‘they’ are uncivilized, irrational, despotic and so on, while ‘we’ are civilized, progressive, rational, democratic and so forth. Thereby the construction of identities is also linked with political claims and exclusions: because they are uncivilized and despotic and we are civilized and democratic, it is our right or even duty to expand our rule to include their territory – the classic legitimation of colonial rule through the ‘white man’s burden’ or the mission civilisatrice (Hall, 1992). An implicit form of othering is at work if similar phenomena – for example, corruption or genocide (Césaire [1955], 1972) – are interpreted and treated differently depending on whether they are taking place in the North or the South. Whether corruption is seen as inherent to a culture or whether a genocide leads to its unequivocal condemnation by the international community often depends on colonial difference and, thus, on an implicit construction of some perpetrators or victims being different from others. While silencing and denying the agency of the colonized can also be a useful focus for postcolonial analytical strategies (Trouillot, 1995), Spivak’s concept of subaltern representation ([1988] 1994) illustrates how the voice of the subaltern can be instrumentalized by more powerful discourses – for example, the voice of women oppressed either by British colonizers or Indian patriarchs. But beyond that she also problematizes the idea that their voice would be authentic and the oppressed would naturally be able to articulate their interests. Spivak, coining the phrase ‘white men are saving brown women from brown men’ as a standard legitimation of colonialism, introduced a feminist perspective in postcolonial studies, as did Mohanty (1984) in her rejection of white feminists’ ideas of universally oppressed ‘Third World woman’ and a global sisterhood that neglected the oppression these women were suffering in common with their (possibly patriarchal) husbands and fathers in a capitalist world-system. Intersectionality of race, class and gender can thus be identified as another analytical strategy of postcolonialism. While Said’s othering focuses on the power of ruling discourses, Bhabha’s ‘hybridity’ (1994, pp. 145–74) focuses on the way the oppressed appropriate colonial discourses for their own ends and their subversive inscriptions lead to unintended consequences – that is, on the ambivalences, incoherencies and limits of these discourses. The concept of ‘provincializing Europe’ (Chakrabarty, 2000) points out that in social science, European thinkers have coined concepts based on European experiences but claiming universal validity. Although they often prove useful for non-European thinkers as well, to treat these concepts as universal has limiting effects, excluding non-European alternatives (Dabashi, 2015; Ndlovu-Gatsheni, 2018). To provincialize Europe would thus mean to reveal the historicity, contingency and particularity of these concepts. The chapter next focuses on the critique of development articulated by some of these approaches outlined above, notably those known as post-development. Then, the critique will be illustrated regarding specific policies and projects and finally, policy alternatives building on this critique will be sketched.

THE POSTCOLONIAL CRITIQUE OF ‘DEVELOPMENT’ Not only the political but also the academic debates on ‘development’ are ridden with misunderstandings because of heterogeneous definitions and even heterogeneous types of defini-

376  Handbook on critical political economy and public policy tions. Some people use the term to describe a process perceived as positive, some in a more neutral fashion; some use it to describe social change according to the model of ‘developed’ societies in Western Europe and their settler colonies in North America and elsewhere, others to describe social change in general; some definitions describe evolutionary processes of social change, others planned processes. An orthodox definition (positive social change according to the Western model) would measure development primarily through economic growth and a high per capita income, possibly complemented by a long life expectancy and a high level of school education. An example of the latter would be the Human Development Index used by the UN Development Programme. Sen (1999, p. 3) gives an alternative definition of positive social change: ‘a process of expanding the real freedoms that people enjoy’. Nederveen Pieterse (2001, p. 3) provides a neutral definition referring to planned social change: ‘the organized intervention in collective affairs according to a standard of improvement’. The postcolonial critique of development attacks mainly the Eurocentrism of orthodox definitions. The most prominent postcolonial critique in this area comes from the post-development school of thought (Escobar, 1995; Rahnema & Bawtree, 1997; Sachs, 1992), which questions the whole paradigm and thereby also more alternative or socialist approaches. In this perspective, development is a specific discourse or, in the words of Ferguson, ‘a dominant problematic or interpretative grid through which the impoverished regions of the world are known to us. Within this interpretative grid, a host of everyday observations are rendered intelligible and meaningful. The images of the ragged poor of Asia thus become legible as markers of a stage of “development”’ ([1990] 1994, p. xiii). The post-development school argues we should reject the discourse of development for the following reasons: 1. The invention of ‘underdevelopment’. The critique claims that the concept of underdevelopment has become prominent in the post-World War II era, as part of a neocolonial campaign to maintain or increase Western influence in Africa, Asia and Latin America (now dubbed ‘underdeveloped areas’) in the historical context of the Cold War and processes of decolonization. The ‘programme of development’ promised improvements in the standard of living through investments, technical knowledge and aid but defined the majority of the world’s population as deficient in relation to the West and its supposedly universal scale of development (Esteva, 1992, p. 6f). This promise of development thus was an attempt to legitimize a capitalist world order and its division of labour in the Global South at a time where colonialism was increasingly discredited. In terms of the postcolonial analytical strategies, the concept of development, which reads difference as backwardness (Melber, 1992, p. 32). is exposed as universalizing European experiences, as continuing the colonial gaze to see one’s own society as ideal and those in the South as inferior, and (at least implicitly) othering people living in the latter. 2. Amoeba concept. After the promise of development had at best mixed success – the Pearson Report by the UN revealed at the end of the 1960s that poverty had not been significantly reduced during the First Development Decade – the concept underwent a number of frequent redefinitions, acquiring prefixes like ‘sustainable’, ‘participatory’, or ‘endogenous’. Yet all redefinitions still assumed tacitly that societies in Africa, Asia and Latin America were in need of development, that ‘development experts’ possessed privileged knowledge on how to approach this goal and their interventions, thus were legitimate (Escobar, 1995), and usually also that economic growth was a requirement in this process (Esteva, 1992, pp. 7, 10; Sachs, 1992, p. 4).

Postcolonial critique of economic development  377 3. Opposing capitalist growth. The necessity of economic growth for improving lives is denied on the grounds that the ‘law of scarcity’ was not tenable as it assumed infinite needs of human beings, ignoring the idea of sufficiency (Esteva, 1992, p. 19). The discipline of economics was not a universal science, but a cultural construct of capitalist societies (Escobar, 1995, p. 58f; Latouche, 1993, p. 202f; Rist, 2008, p. 14), one that failed to differentiate between frugality and destitution, attached dignity only to a life with consumer goods (Rahnema, 1992) and disvalued everything that could not be bought or sold on the market (Esteva, 1992, p. 18). This construct legitimized the spread of capitalism and the privatization of the commons in a ‘war against subsistence’ that was globalized during colonialism: ‘massive poverty in the modern sense [destitution] appeared only when the spread of the market economy broke down community ties and deprived millions of people from the access to land, water, and other resources’ (Escobar, 1995, p. 22). As above, economic concepts are ‘provincialized’ – that is, de-universalized by the critique. 4. Depoliticizing poverty. By suggesting that the problem of poverty (destitution) can be solved by technocratic means (transfer of capital, knowledge and technology) without transforming relations of power and by constructing it as exclusion from market and the state, not as exploitation within the market and the state, the apparatus of ‘development’ and its discourse depoliticizes global inequality and side-lines more radical responses (Escobar, 1995, pp. 143–50; Ferguson [1990], 1994). 5. Masculine and anthropocentric bias. Feminist post-development authors like Shiva point out that the mainstream discourse of development privileges rationality, productivity, technology and mastery over nature and thus has clearly masculine connotations. According to Shiva (1992, p. 211), the ‘treatment of nature as a resource which acquires value only in exploitation for economic growth has been central to the project of development’ and is closely related to the secular, instrumental and anthropocentric view of nature that has been a crucial feature of European modernity at least since Bacon and is fundamentally rejected by many indigenous cosmologies. 6. End of development era. In 1992, Sachs gave four reasons for an imminent demise of the era: the ecological predicament that a universalization of the industrialized societies would ruin the planet; the end of the Cold War would render the promise of development superfluous; the project of ‘developing the underdeveloped regions’ seemed to have failed utterly because the gap between rich and poor countries had been widening during the development decades; and, finally, more and more people would realize that successful ‘development would mean a Westernization of the world that they would not want’ (Sachs, 1992, pp. 2–4). 7. For these reasons, people at the grassroots would start to disbelieve the promise and invent ‘alternatives to development’, recovering their own definition of needs and autonomous ways of living through resorting to pre-colonial cultural traditions and creating ‘new commons’ in politics, the economy and knowledge (Esteva, 1992, pp. 20–23). It becomes clear that some elements of this rich critique overlap with certain Marxist, feminist, degrowth or deep ecology positions, and that some are directed at the ‘development apparatus’, some question the ideal of modern capitalist society, and others the general idea of comparing societies according to a universal scale. It also becomes clear that questioning the model of the ‘developed’ societies as based on a ‘imperial’ way of production and consumption (Brand

378  Handbook on critical political economy and public policy & Wissen, 2013) leads to a broader focus that also includes investigating social movements promoting alternatives in the North (Bendix, Müller & Ziai, 2019). While a number of criticisms have been raised against post-development (for the debate, see Ziai, 2015, 2018), the most important is probably that articulated by Matthews (2017, pp. 2654–8): when confronted with subjects in poorer countries desiring to live like people in the West, the response to blame this on colonized minds is in no way satisfactory – at least when articulated from a position enjoying the conveniences of modernity (Ferguson, 2006, pp. 18–19). However, not all postcolonial critique of development policies necessarily leads to subsistence communities as the only way out, as will be shown in the next section.

CRITIQUE OF SPECIFIC DEVELOPMENT POLICIES The term ‘development policies’ mostly refers to policies of international aid and official development assistance (ODA), but it can also refer to the international political economy that more decisively shapes the processes of impoverishment and improvement of standards of living. Some examples of specific development policies and their postcolonial critique will be described here, illustrating the analytical strategies outlined above (see also Kapoor, 2008; McEwan, 2009; Rutazibwa, 2018). To address the materialist critique of postcolonial studies outlined above and poignantly expressed by Christine Sylvester (‘Development studies does not tend to listen to subalterns and postcolonial studies does not tend to concern itself with whether the subaltern is eating’; Sylvester, 1999, p. 703), there will be a focus on examples combining discursive and material practices. The first example illustrates that also purely discursive critiques can be insightful, while the last makes the same point concerning purely economic critiques: ● Identities and othering in development aid. Based on postcolonial theory and a number of interviews with European development aid workers in Tanzania, Maria Eriksson Baaz (2005) analyses how identities are constructed in development discourse. Despite allegations of partnership, she regularly finds constructions of a superior self and a backward African other consistently portrayed as unreliable, passive and irrational, and sometimes even as ‘situated at a different stage of development and enlightenment’ (Baaz, 2005, p. 167). Yet she also notes ambivalences in the discourse in the form of efforts to avoid Eurocentrism – stemming from the influence of the post-development critique on the aid institutions (neglected by the critics themselves to maintain the distance between critical self and mainstream other) (ibid., p. 169). Bendix (2018) and Schöneberg (2019) have also provided interesting critiques of othering in development aid and its interaction with material practices. ● Displacement and othering in India. The violence exerted by states in the name of development (symbolizing the common good) becomes visible in the immense numbers of people displaced by infrastructure projects like dams. Studies estimate that annually between 10 and 15 million people become victims of development-induced displacement (de Wet, 2005, p. vi; Terminski, 2013, p. 11). The most prominent example is the Sardar Sarovar dam in the Narmada valley in India displacing several hundred thousand people, primarily Adivasi forest dwellers (Roy, 1999). Dispossessing them of their lands was made possible by laws originating in British colonialism that exclusively relied on modern ideas of legal

Postcolonial critique of economic development  379 property alien to the Adivasi – their alleged backwardness legitimated ignoring their own concepts (Marino, 2012, p. 711f). Here, as in many other examples, the ‘trusteeship’, the right to intervene in the lives of people defined as ‘less developed’ for their own good originally claimed by the colonizers, was taken over by the elites after decolonization (Cowen & Shenton, 1996; Nandy, 1988). Yet the battle against displacement (and later for rehabilitation) by the Save the Narmada movement (Narmada Bachao Andolan) was not entirely without success: through international non-governmental organizations (NGOs) and pressure by US Congress they forced the World Bank to introduce a mechanism of accountability, the Inspection Panel, which allows people affected by its projects to file claims re-accessed by an independent committee that directly reports to the executive directors of the World Bank, bypassing the management (Clark, Fox & Treakle, 2003; Shihata, 2000). The oppressed managed to inscribe their demands in the most powerful institution of development (hybridity), allowing their voice to be represented (albeit not directly heard) in its superior body (subaltern representation). ● Depoliticization in Indonesia. While examining an integrated development project aiming at improving livelihoods and conserving nature in Lore Lindu National Park in Central Sulawesi (Indonesia), Li (2007) finds that trusteeship and the claim to know how others should live are manifest in attempts to evict indigenous communities from the park on the grounds that their agricultural practices (monocropping cacao and collecting rattan) were not sustainable. (Their successful resistance led to farmers occupying land in the park, also claiming indigenous rights: questions of identity interacted with material needs.) The power relation implicit in this claim was ignored by the apparatus of development, just like the facts that state authorities did not operate in the public interest (the police and the army collaborated in the illegal extraction of timber from the park) and capitalist enterprise was often the cause of poverty and not its solution (Li, 2007, pp. 134, 267, 275): the apparatus neglected political-economic causes of poverty and reframed ‘social and environmental problems in terms amenable to a technical solution’ (ibid., p. 126), depoliticizing poverty. ● Hybridity and subaltern representation in Belize. Wainwright (2008) shows similarly that the colonial claim about the agricultural system of the Maya – that their slash and burn cultivation is primitive, inefficient and destructive and therefore needs to be fundamentally changed in order to achieve sustainable development despite population growth – can still be found nearly untransformed in the later discourse of development as the legitimation for trusteeship-type interventions to settle the indigenous people and introduce new agricultural practices. These interventions brought about a privatization of communal lands and over-indebtedness of many farmers as a result of capital-intensive agriculture, but also led to a protest movement that achieved some redistribution of land and the production of a ‘Maya atlas’ in which the indigenous people portray their land, their way of life and their worldview – in order to oppose the hegemonic perspective that disavows their culture and their territorial claims. Wainwright shows how no ‘authentic indigenous’ discursive elements may be found in the atlas, like nationalism, sustainable development, international law and feminized nature, and how the self-representations of the Maya blank out ambivalences in favour of a romanticized picture stamped by Mayanism, where, for example, rice, wage labour, chain saws and Christianity and other external influences simply do not appear. The most visible exclusion concerns gender relations, especially in the focus on male activities, the reproduction of traditional roles and the neglect of widespread marital violence (Wainwright, 2008, p. 253).

380  Handbook on critical political economy and public policy ● Othering and racism in population policy. Population policies aiming at preventing pregnancies of women in the Global South have been a standard element in development aid since the establishment of the UN Fund for Population Activities, now the United Nations Population Fund. Their rationale is that poverty, hunger and environmental degradation was the result of too many poor children, shifting the responsibility away from exploitative processes of production, unequal distribution of land or the ‘imperial mode of living’ (Brand & Wissen, 2013). While at the UN Conference on Population and Development in Cairo 1994, feminist movements achieved a victory in centring reproductive rights of women instead of authoritarian state interventions to lower fertility rates, Wilson (2017) and Bendix and Schultz (2018) have shown that even in the age of UN Sustainable Development Goals, these policies persist. They have also shown that private foundations (above all the Gates Foundation) and the interests of pharmaceutical companies such as Pfizer, Merck and Bayer play a crucial role – and that concerns about safety and health regarding injectable or implantable contraceptives like Depo-Provera or Implanon are regularly muted when those who take the risk and suffer the consequences are women of colour. ● Neocolonialism in Ghana. Neocolonialism (the control of the economic and political system by foreign actors despite formal decolonization) is in fact a regular feature in the global economy (Langan, 2018; Ziai, 2020), visible, for example, in the effects of free trade in Ghana on smallholder farmers and the efforts to uphold it against resistance. Due to subsidized imports from the EU, the market share of Ghanaian poultry farmers dropped from 95 to 11 per cent within a decade. As a reaction to ensuing protests, the parliament passed a law doubling the import duties to protect local farmers in 2003. However, the law was withdrawn by the government after consultations with the International Monetary Fund (IMF) because the tariff would allegedly damage poverty reduction efforts (Atarah, 2005; Issah, 2005, p. 21). While the Paris Declaration on Aid Effectiveness promised to adhere to the principle of ownership and the new instrument of budget support is supposed to increase the control of the recipient countries, as untied ODA funds are directly transferred to the government, a closer look reveals that here aid funds are again linked to free trade and liberalization policies. The Multi-Donor Budget Support (MDBS) group (including the EU) has actively discouraged the then Kufuor government’s interventionist policies and withheld funds until subsidies were removed – despite evidence that liberalization has in fact undermined efforts to reduce poverty in Ghana to no small extent and led to unrest and riots (Langan, 2015, p. 110f).

POLICY RECOMMENDATIONS FOR ALTERNATIVES The postcolonial critique of development has rightly pointed out that policy recommendations that assume an omnipotent and benevolent actor like the ideal state are useless and that alternatives should be oriented towards concrete struggles of specific groups (Ferguson [1990], 1994, p. 280). It is also clear that the answer to the question about alternatives to development can take very different forms depending not only on the question of reform vs fundamental change, but also on what exactly is identified as the problem: Eurocentrism and relations of power in development cooperation or the discriminatory logics and oppressive structures of modern capitalist societies in general? Therefore, this section will first sketch reformist alternatives

Postcolonial critique of economic development  381 relating to development cooperation on the one hand and international political economy on the other before arriving at more fundamental alternatives. Reforms in development cooperation concerning participation, ownership and empowerment are by no means new, but they have always remained within the limits of the institutional setting. In recent years, demands for reforms have included awareness training concerning colonialism and racism (Arbeitskreis Globale Entwicklung der Friedrich-Ebert-Stiftung [AKGE], 2020) or the distribution of vouchers to communities that they can spend on projects by development agencies, thus creating a genuine market for these actors (Easterly, 2014) – the latter being in line with an empowerment understood as that of a paying customer demanding value for money already used as a justification for privatization in the World Development Report 2000/2001 (World Bank, 2000). But this, just like far more radical demands (such as from AKGE), have to confront the question of how the power relations in development cooperation – between different normative orders, between donors and recipients, and between experts and supposed beneficiaries – should be changed and by whom and why, avoiding the idea of the benevolent and omnipotent state. If one is serious about poverty reduction, however, one has to take the unavoidable step from reforming development cooperation to reforming global capitalism. The massive net transfer of wealth from the South to the North, which amounts to 1 trillion dollars annually according to estimates (Griffiths, 2014), cannot be stopped or compensated by that part of ODA that actually goes to the recipient countries, and which is no more than one-tenth of this sum. Thus, to ameliorate global inequality, one would have to deal with questions of world trade, debt service, repatriated profits by multinational corporations and illicit financial flows by elites on the one hand, and remittances through labour migration and reparations for colonialism on the other. On this level, the only actor that comes close to embracing this agenda is the global justice movement that came to the fore in the 1990s and in part is still active, and which can certainly claim some success in terms of achieving debt relief, preventing free trade agreements and making the institutions of the global economy more accountable (O’Brien et al., 2000; Sen, 2018). Yet also more moderate attempts of a normative global governance have been difficult to implement (Ziai, 2010). It should be mentioned that the rise of new donors, notably China, has given recipients of development aid more opportunities and some room for manoeuvre to evade unwanted conditionalities (Hernandez, 2017). China has repeatedly emphasized its respect for national sovereignty, in contrast with Western good governance policies. The emergence of the Asian Infrastructure and Investment Bank (AIIB) and the New Development Bank has even affected World Bank policies regarding infrastructure projects and its social and environmental standards: the latter have weakened in the recent safeguard review as a reaction to the Bank’s new competitors (Accountability Counsel, 2019). So what might alternatives look like in the field of development cooperation? The Senegalese NGO Enda Graf Sahel critically reflected its past work as part of the development apparatus from a post-development perspective and abandoned its orthodox frameworks in favour of those of the local communities they worked with. Building on the wealth of social relations and oriented towards the worldviews and priorities of the communities, they engaged in a different form of cooperation, which included organizing skill-sharing workshops as well as providing access to microcredit (Matthews, 2017, pp. 2652, 2657; N’Dione et al., 1997). Another example of an alternative international cooperation is given by Gibson-Graham, whose project in Jagna municipality in the Philippines starts with focusing on the assets that

382  Handbook on critical political economy and public policy are available instead of what is lacking in the local community (e.g., skills, practices, associations, institutions and infrastructure). These assets include economic alternatives in terms of alternative- or non-capitalist labour, transactions and enterprises, such as the remittances of overseas contract workers (migrants) which are invested in community enterprises and public infrastructure with the help of NGOs like the Asian Migrant Centre and Unlad Kabayan (Gibson-Graham, 2005). While in both cases the existing structures of international development cooperation and the wage hierarchies of the international political economy are used for the benefit of local communities, a less pragmatic position could argue that dependency on the Global North is still reproduced by these approaches. More fundamental alternatives in terms of self-reliance and independence from the dominant order also exist and deserve to be mentioned. The states of Ecuador and Bolivia have adopted the principle of buen vivir in their constitutions in 2008 and 2009, respectively, a post-development concept that stems from indigenous cosmologies of the Aymara and Quechua (suma qamana/sumak kawsay) and which links a good society to living in harmony with other people and nature, also recognizing rights of nature. However, in both countries there have been conflicts concerning the political implementation of the concept on a national scale, especially in relation to extractivist policies used to finance social policy in Ecuador, culminating in the decision to drill oil in the Yasuní National Park (Acosta, 2013; Caria & Domínguez, 2016; Gudynas, 2011; Villalba, 2013; Walsh, 2010). Not aiming at taking over the state (Holloway, 2002), some movements are trying to overcome (neo)colonialism through democratic autonomy. The self-organized Zapatista movement of Chiapas, Mexico has gained prominence since its uprising in 1994 directed at defending community lands (ejido) against the imminent reforms of the North American Free Trade Agreement, but emphasizing that it was located in a history of five centuries of indigenous struggle. The Zapatista movement has managed to build its own education and health system taking into account indigenous values and knowledge, without any support from the Mexican state and under conditions of low-intensity warfare, but with support of civil society and solidarity groups (Esteva, 2005; Forbis, 2016; Melenotte, 2015). A similar though even more contested and threatened example can be found in the Kurdish territories in Rojava, Syria. Based on ideas of decentralized democracy and women’s liberation, the Kurdish liberation movement is trying to establish an alternative model of society across ethnic and religious divides in the territory occupied after the defeat of the Islamic State in Syria. One of its features are peace and justice committees of the neighbourhood assemblies responsible for solving conflicts (Knapp, Flach & Ayboğa, 2016; Leezenberg, 2016; Üstündag, 2016). According to post-development, the claim to know how others should live is a colonial one, so any policy recommendation for alternatives must originate in participatory grassroots debates. In India, the NGO Kalpavriksh has organized such debates in the last years in the context of the Vikalp Sangam process (‘confluence of alternatives’), in which 10 000 people active in social movements have collaborated to establish a political platform of alternatives. It strives for sufficiency and environmental protection, well-being and the rejection of exclusion based on religion, gender, class, ethnicity and so forth, consensus-based decision-making and direct or accountable delegated democracy, local economies controlled by the producers and consumers themselves, and a cultural and knowledge democracy respecting plurality and participatory knowledge production (Singh, Kulkarni & Broome, 2018). It clearly shows that while many people may still dream of development in the orthodox sense, many others have

Postcolonial critique of economic development  383 turned away from the hegemonic models of politics, the economy and knowledge and are exploring alternatives, successfully provincializing the Western notion of development. The postcolonial critique of economic development thus highlights the contingency of orthodox ways of conceptualizing global inequality, their Eurocentric and colonial implications, and their entanglement with capitalist interests, paving the way for more emancipatory alternatives.

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Postcolonial critique of economic development  385 Mohanty, C.T. 1984, ‘Under Western eyes: feminist scholarship and colonial discourses’, boundary 2, 12 (3), 333–58. Nandy, A. (ed.) 1988, Science, Hegemony and Violence. A Requiem for Modernity, Delhi: Oxford University Press. N’Dione, E., de Leener, P. & Perier J.-P. et al. 1997, ‘Reinventing the present: the Chodak experience in Senegal’, in M. Rahnema & V. Bawtree (eds), The Post-Development Reader, London: Zed Books, pp. 364–76. Ndlovu-Gatsheni, S. 2018, Epistemic Freedom in Africa: Deprovincialization and Decolonization, London: Routledge. Nederveen Pieterse, J. 2001, Development Theory: Deconstructions/Reconstructions, London: SAGE. O’Brien, R., Goetz, A.M., Scholte, J.A. & Williams, M. 2000, Contesting Global Governance: Multilateral Economic Institutions and Global Social Movements, Cambridge, UK: Cambridge University Press. Quijano, A. 2000, ‘Coloniality of power, Eurocentrism, and Latin America’, Nepantla: Views from the South, 1 (3), 533–80. Rahnema, M. 1992, ‘Poverty’, in W. Sachs (ed.), The Development Dictionary: A Guide to Knowledge as Power, London: Zed Books. pp. 158–76. Rahnema, M. & Bawtree, V. (eds) 1997, The Post-Development Reader, London: Zed Books. Randeria, S. 2006, ‘Entangled histories: civil society, caste solidarities and legal pluralism in post-colonial India’, in J. Keane (ed.), Civil Society: Berlin Perspectives, New York/Oxford: Berghahn Books, pp. 213–42. Rist, G. 2008, The History of Development: From Western Origins to Global Faith, London: Zed Books. Roy, A. 1999, The Cost of Living, London: Flamingo. Rutazibwa, O. 2018, ‘On babies and bathwater: decolonizing international development studies’, in R. Icaza, O. Rutazibwa & S. de Jong (eds), Decolonization and Feminisms in Global Teaching and Learning, London: Routledge, pp. 158–80. Sachs, W. (ed.) 1992, The Development Dictionary: A Guide to Knowledge as Power, London: Zed Books. Said, E. 1978, Orientalism, New York: Vintage Books. Schöneberg, J. 2019, ‘Manoeuvring political realms: alternatives to development in Haiti’, in E. Klein & C. Morreo (eds), Postdevelopment in Practice: Alternatives, Economies, Ontologies, London: Routledge, pp. 263–75. Sen, A. 1999, Development as Freedom, New York: Knopf. Sen, J. (ed.) 2018, The Movement of Movements (2 vols), Oakland, CA/New Delhi: PM Press and Open Word. Shihata, I.F.I. 2000, The World Bank Inspection Panel: In Practice (2nd edition), Oxford: Oxford University Press. Shiva, V. 1992, ‘Resources’, in W. Sachs (ed.), The Development Dictionary: A Guide to Knowledge as Power, London: Zed Books, pp. 206–18. Singh, N., Kulkarni, S. & Broome, N.P. (eds) 2018, Ecologies of Hope and Transformation: Post-Development Alternatives from India, Pune: Kalpavriksh and SOPPECOM. Spivak, G.C. [1988] 1994, ‘Can the subaltern speak?’, in P. Williams & L. Chrisman (eds), Colonial Discourse and Post-Colonial Theory, London: Routledge, pp. 66–111. Sylvester, C. 1999, ‘Development studies and postcolonial studies: disparate tales of the Third World’, Third World Quarterly, 20 (4), 703–21. Terminski, B. 2013, ‘Development-induced displacement and resettlement: social problem and human rights issue’, University of Geneva Research Paper No. 9/2013. Trouillot, M.-R. 1995, Silencing the Past: Power and the Production of History, Boston, MA: Beacon Press. Üstündag, N. 2016, ‘Self-defence as a revolutionary practice in Rojava, or how to unmake the state’, South Atlantic Quarterly, 115 (1), 197–210. Villalba, U. 2013, ‘Buen vivir vs development: a paradigm shift in the Andes?’, Third World Quarterly, 34 (8), 1427–42. Wainwright, J. 2008, Decolonizing Development: Colonial Power and the Maya, Oxford: Blackwell.

386  Handbook on critical political economy and public policy Walsh, C. 2010, ‘Development as buen vivir: institutional arrangements and (de)colonial entanglements’, Development, 53 (1), 15–21. Williams, P. & Chrisman, L. 1994, ‘Colonial discourse and post-colonial theory: an introduction’, in P. Williams & L. Chrisman (eds), Colonial Discourse and Post-Colonial Theory: A Reader, Ithaca, NY: Columbia University Press, pp. 1–20. Wilson, K. 2017, ‘Re-centring “race” in development: population policies and global capital accumulation in the era of the SDGs’, Globalizations, 14 (3), 432–49. World Bank 2000, World Development Report 2000/2001: Attacking Poverty, Washington, DC: World Bank. Young, R. 2016, Postcolonialism. An Historical Introduction (2nd edition), Oxford: Blackwell. Ziai, A. 2010, ‘German development policy 1998–2005: the limits of normative global governance’, Journal of International Relations and Development, 13, 136–62. Ziai, A. 2015, ‘Post-development: premature burials and haunting ghosts’, Development and Change, 46 (4), 833–54. Ziai, A. (ed.) 2018, The Development Dictionary @25: Post-Development and its Consequences, London: Routledge. Ziai, A. 2020, ‘Neocolonialism in the global economy of the 21st century: an overview’, Momentum Quarterly, 9 (3), 128–40.

26. Economic cycles and rural policies in the People’s Republic of China1 Sit Tsui, Yan Xiaohui, He Zhixiong and Wen Tiejun

In the past 70 years, China has completed primitive capital accumulation and proceeded to industrial expansion and financialization. During this period, it experienced many economic cycles: first (1949–51), second (1952–60), third (1965–70), fourth (1971–75), fifth (1979–80), sixth (1985–89), seventh (1991–95), eighth (1997–98), ninth (2007–09), and a tenth cycle is still unfolding (2013–). The concomitant economic crises have tended to break out in the urban sector. Their impact on the cities, and hence on industrialization and social progress in general, depended on the extent to which the cost of the crisis could be transferred to the rural sector and peasants. Unlike the US, China could not transfer institutional costs and crises abroad by staging wars and printing money. In terms of social stabilization at large, rural China has played an important role in absorbing the shocks of cyclical economic crises created by urban industrial capital. The agrarian sector has functioned as a vehicle of ‘soft landing’ in case of crisis. Since 1949, it has almost become a rule that Chinese leaders adopt rural policies of land distribution in favor of the small peasantry and promise to defend the agrarian sector – comprising three irreducible dimensions: peasants, rural society, and agriculture, together known as sannong – against the background of macroeconomic crises. Under Mao Zedong, land was redistributed to peasants on a massive scale, and a total of 40 million educated youth were sent to live and work in the countryside in three waves: during 1960–62, 1968–70, and 1974–76. In the Deng Xiaoping era, the Household Responsibility System was implemented to guarantee collective land ownership and rights of land use of peasants, and to sponsor the recovery of the rural economy, in which township and village enterprises (TVEs) played a major role. Jiang Zemin followed suit. Then Hu Jintao announced a multiyear initiative dubbed the New Socialist Countryside, including ‘An Integration of the City and the Countryside’ in 2002, ‘Scientific View of Development and Harmonious Society’ in 2004, ‘New Countryside Construction’ in 2005, ‘Multi-function Agriculture’ in 2006, ‘Ecological Civilization’ in 2007, as well as ‘Inclusive and Sustainable Growth’ in 2009. The policy of building a new socialist countryside mainly referred to putting peasants, agriculture, and rural areas more prominently on the agenda of China’s development. Apart from the cancellation of agricultural taxes, China implemented a policy of getting the industry to support agriculture, and cities to support the countryside, strengthening support for agriculture, rural areas, and peasants. It was to focus on developing modern agriculture and improving the comprehensive agricultural capacity. In particular, the rights of peasants in land contracting and management were guaranteed. In line with the previous path, Xi Jinping has continued to implement various policies of supporting rural society and improving local livelihood. He promoted ‘Amazing China’ in 2012, ‘Nostalgia for the Home Village’ in 2013, ‘New Rural Governance by Local Talent’ in 2014, and ‘Precisely Targeted Poverty Alleviation’ in 2015. At the Nineteenth Congress of the Communist Party of China in 2017, with the country’s economy burdened by indus387

388  Handbook on critical political economy and public policy trial overproduction and financial instability, Xi urged for ‘rural revitalization’ and declared a commitment to renewing Peasants’ Rights of Land Use for 30 more years. Moreover, the collective ownership of rural land resources is still in the hands of village committees (Sit et al., 2018). On December 28 and 29, 2020, the central rural work conference of China was held. Xi claimed that ‘solving issues related to agriculture, rural areas and farmers is the top priority for the Communist Party of China,’ which is of great significance because ‘China is about to enter its 14th Five-Year Plan period (2021–2025) and embark on a new journey of building a socialist modern country in an all-round way.’ Xi further emphasized that ‘the world is undergoing unprecedented changes, and to safeguard and stabilize the work related to agriculture, rural areas and rural people are the “stabilizer” to deal with the current situation and prepare for the new situation’ (People’s Daily, 2021, n.p.). In recent decades, China has enjoyed a long period of comparative stability on the strength of the two pyramidal structures. The majority, 60 percent of the population, are small property owners in rural areas. This is not only a legacy of the land revolution, but also the foundation of Chinese society, which acts as a social stabilizer during economic crises. We will discuss these issues in detail below. This chapter is a review of the rural policies that China has formulated to respond to global and local crises.

‘LAND REVOLUTION DIVIDEND’ – OLD CRISIS PLUS NEW CRISIS (1949–52)2 The seven crises that occurred before the mid-1990s had arisen from introductions of foreign capital, resulting in structural imbalances in the domestic economic system. China has embraced an ‘open policy’ of introducing foreign capital, whether it was investments of the USSR, or the West and Japan, which has led to a relatively passive condition of debt and deficits. It was undoubtedly related to China being subjected to the shifting parameters of global geopolitics and the international economic landscape. As for the three subsequent crises, they could be broadly attributed to China’s rapid integration into a globalized economy and can be thus considered ‘imported’ crises. The economic turbulence of the early years (1949–52) of the People’s Republic of China created new problems on top of the existing ones. In addition to persistent hyperinflation, which had beset the country since the old republic, a new crisis had to be tackled – namely, the innate contradictions of primary capital accumulation for the development of ‘national capitalism.’ Clearly, for a revolutionary regime whose success was marked by the occupation of cities, the enormous institutional costs of modernization, and urban hyperinflation, could not be resolved using the same old economic policies. The fledgling People’s Republic instead sought to resolve this crisis (the result of a half-century of modernization efforts since the late Qing dynasty) by fully restoring the traditional peasant economy through agrarian reform, thus yielding what was known as the ‘land reform dividend.’ Colloquially, this was expressed in the slogan ‘Nine Peasants Are Capable of Supporting One Urban Citizen.’ Land reform aimed not only to relieve the crisis of modernization through the restoration of a traditional institution but also to extend the revolution from its rural base to the surrounding cities. Moreover, it laid the foundation of the three-dimensional agrarian sector, referring to peasants, agriculture, and villages, as a means of resolving the urban industrial capital crisis under a persistent dual urban–rural structure.

Economic cycles and rural policies in the People’s Republic of China  389 The substance of the land revolution in China is even distribution of land and tax exemption, which every founding emperor sought during dynastic changes. As long as the rulers maintained the basic economic institution of ‘land to the tillers,’ rural society could secure about two centuries of stability in a dynasty cycle. This historical experience was once again embodied in mainland China in the 20th century. The land revolution, which had been interrupted by World War II and then resumed during 1946–49, can therefore be called the Third Agrarian Revolutionary War.3 The new post-revolutionary government instituted an agrarian reform across the entire country, achieving even distribution of land for nearly 90 percent of the population. Nevertheless, to extract agricultural surplus for industrialization, the central government deliberately delayed tax exemption, which most new dynasties had immediately implemented. The transformation of property relations by means of a revolutionary war achieved three results. First, it created a vast and diversified economy, allowing about 100 million rural households to return to traditional agricultural structures and de-link from modernization, so that the subsistence of urban residents (then about 10 percent of the total population) could be secured. Accordingly, it greatly ameliorated the hyperinflation that had prevailed in China’s cities since the last years of the old republic. Second, as long as peasants could be mobilized by the ideology of land reform, sufficient material products could be collected and transported to the cities; this represented the first triumph of state capital over private capital through revolutionary mobilization. Third, the state established its fiscal and financial system, which was necessary for economic regulation of the real economy. The experience gained in the process became the foundation on which the state constructed its basic economic institutions. Land reform thus represented an economic diversification of the revolution, from villages to cities. It was the institutional heritage of so-called rural socialism with Chinese characteristics that took shape through developing the real economy by self-reliance in the ‘liberated’ regions long before the communists’ final victory (Dong & Wen, 2019). However, China also faced a new crisis. The old crisis of developing national capitalism, as led by the Kuomintang, was yet to be overcome as the communist government faced an internal crisis in the effort to develop its own version of national capitalism. It was old wine in a new bottle and led to the same problems. Under the pressure of imperialist invasion, previous modern Chinese governments would unswervingly pursue modernization, whatever its ideology. Nevertheless, as long as the institutional costs incurred by the primary accumulation of capital necessary for industrialization could not be transferred outward, internal crises were bound to occur. The social structure of so-called New Democracy, as promulgated by the new government, was aptly represented by the national flag of the People’s Republic of China. The large star signified the leadership of the Communist Party (including party-controlled state capital). The other four stars represented the working class (less than 5 percent of the population), the peasant class (petty landowners or rural small property owners, 88 percent of the population), the urban petty bourgeoisie, and the national capitalists. State capital, private capital, and small property owners constituted the major political sectors of the country. Workers and the urban poor, which according to classical Marxism would lead any socialist revolution, were less than 7 percent of the total population. In short, China had long been an agricultural country composed mainly of geographically scattered peasants. What took place in 1949 was thus a pre-capitalist peasant revolution, as asserted by both the Soviet-led Communist International and the Chinese Communist Party.

390  Handbook on critical political economy and public policy Both agreed that China should develop national capitalism (that is, capitalism of and for the nation, as opposed to domination by foreign capital). Only after establishing industrial mass production could China be transformed into a socialist country. According to the current party leadership, China has entered a new development stage, which remains in the primary stage of socialism. Accordingly, the new government, which was midwifed by a violent revolution to overthrow the oppressive old system, not only openly advocated market capitalism (as Mao said, ‘New Democracy is national capitalism under the leadership of the Communist Party’), but also took accelerating industrialization for granted, just as regimes since the late Qing dynasty might have pursued modernization. China, therefore, inevitably had to face the internal contradictions of a peasant country striving for ‘socialist primitive capital accumulation’ with a scarcity of resources, no matter how this predicament was presented ideologically. To summarize, in the years after the success of the revolution, China faced severe crises in the cities, where capital was concentrated. It was a great challenge to the new regime whose supporters included many peasants moving into cities. At the same time, the government struggled with political problems including bureaucratization and cadre corruption, which could be viewed as the internal crisis of peasantry politics. Subsequent political campaigns were derived from this fraught situation. The hyperinflation resulting from budget deficits and money oversupply was quickly contained, partly because about one-third of the oversupplied money was absorbed by the peasant household economy. However, as a result, the rural economy was monetized and polarized, which would lead to problems within the cooperative movement.

‘SELF-RELIANCE’ AND THE THIRD FRONT China’s involvement in the Korean War (1950–53) consolidated its alliance with the USSR. With Soviet aid, China had rapidly laid the groundwork of heavy and military industry. However, the aid also strengthened the model of state capitalism. The tension between the state monopoly capital and the private capital became aggravated during the war time economy. Private capital was eventually disbanded in 1956 when the state capital controlled three essential factors: land, labor, and capital, which was known as the socialist transition. In order to accommodate Soviet aid, China had to promote institutional transition according to the Soviet model in government, army, and higher education, which was later known and criticized as ‘total socialization.’ The short-lived alliance with the USSR soon turned sour as China insisted on an intact sovereignty. As a punishment, the former cancelled all financial and technological aid. Chinese economy, already dependent on the Soviet model, immediately dived into recession. The aid turned into foreign debt and became a source of fiscal deficits. This was the second crisis (1952–60) incurred by domestic industrialization, a process initiated by the introduction of Soviet capital. In the late 1960s, known in China as the ‘ultra-leftist period,’ the third cyclical crisis (1965–70) since the post-1949 industrialization took place. Beyond general economic factors, the origins of this crisis lay in the reaction of the superstructure to the economic base. At the time, China was operating under a complete blockade by the USA and the Soviet Union, but the administrative structure built during the 1950s according to the Soviet management model of heavy industry proved incompatible with the guiding principle of ‘self-reliance

Economic cycles and rural policies in the People’s Republic of China  391 and recalcitrant struggle,’ which relied on the laboring masses. As China moved to reorient its economy from USSR investment toward national autonomy, the external geopolitical situation and internal bureaucratism proved to be barriers. Under these pressures, and after paying off an enormous foreign debt, the urban economy suffered from a third crisis in the form of ‘fiscal deficit plus unemployment.’ After the abortion of the 2nd Five-Year Plan due to the withdrawal of Soviet aid in the early 1960s, communist leaders began discussing a 3rd Five-Year Plan. Some officials responsible for economic policy suggested that the plan’s guiding principle should be balancing the weight of agriculture and light and heavy industries in economic development at a time when China’s industrial structure was dominated by military manufacturing and heavy industry. Given the necessity of economic reconstruction, this strategy was entirely understandable. However, the most pressing problems China faced were geopolitical. During the Cold War, China had become entangled in a series of regional ‘hot’ confrontations, including the plan of counterattack by the Kuomintang regime in Taiwan, the Sino-Indian War, repeated incursions by US battleships and aircraft into Chinese territorial waters, and threats of a nuclear attack by the United States and the USSR. To many observers, China seemed to be on the verge of a ‘hot’ war with the USSR and the West. For this reason, Mao’s ideas came to dominate policy discussions in the early 1960s, despite the diversity of opinions about China’s economic construction. Mao felt that the country should focus all its technological power on building a nuclear bomb. Meanwhile, basic industrial facilities in the coastal regions were transferred to the hinterland, to minimize the consequences of military attack, even at a significant economic cost. The result was an economy preparing for war. The overall structure of national industry was marked by the development of a Third Front,4 referring to three major layers of frontlines, while regional industry comprised three layers of minor frontlines. Meanwhile, the National Planning Committee responsible for the 3rd Five-Year Plan was replaced, and proposals to transplant a foreign planned-economy model – as proposed by officials and experts who had studied in the USSR – were aborted. The economic divisions established in the time of Soviet investment were now totally blocked. Without foreign investment or external markets, the system clashed with the new principle of ‘self-reliance and recalcitrant struggle’ (Wen, 2021). This urgently called for a reconstruction of the Chinese economy along different lines. According to the later cost-efficiency analyses, the construction of the Third Front was extremely expensive and yielded few economic benefits. From 1965 to 1975 (including the 4th Five-Year Plan period), half of domestic infrastructure expenditure was going toward the construction of the strategic hinterland. It is estimated that from 1964 to the 1980s, investment in the Third Front cost about RMB205.2 billion (Li & Jiang, 2005). Yet the Third Front structure was merely a spatial re-allocation of national industrial investments without adjustment of the economic structure. Based on military considerations, new industrial facilities were transferred deep into the hinterland or to the mountain regions. It was therefore difficult to form a comprehensive industrial chain in any one region. Accordingly, the cost of infrastructure during the 1960s increased dramatically, resulting in higher fiscal deficits, which would lead to economic crisis. Their cost, after all, had to be transferred to the rural sector.

392  Handbook on critical political economy and public policy

EDUCATED YOUTH GOING TO THE COUNTRYSIDE Since the beginning of national industrialization in 1958–60, China had emphasized decentralization as a means of mobilizing domestic resources to replace lost foreign capital investment. Consequently, it could barely maintain a relatively high accumulation rate. An experience that emerged out of this period involved the total mobilization of the whole nation through the popular idea of ‘class struggle’ and the instrumental concept of ‘continuous revolution.’ Peasants, workers, intellectuals, and officials alike were involved in the process of primary accumulation for national industrialization. It was a process of intensively substituting labor for capital, which had become extremely scarce. Large quantities of economic resources were invested in large-scale infrastructure necessary for national industrialization, which in turn created the demand for state-owned machinery and equipment manufacturing. Under Mao, the state used an incomplete system of rural land ownership to institute a collectivized rural economy. The project was not motivated by productivity considerations, nor was it obviously beneficial to the interests of individual peasants. However, in practice, collectivization provided an unexpected boon to primary accumulation for national industrialization. What was formed in the rural areas was a so-called ‘peasant socialism with Chinese characteristics.’ Its main feature was equal and even distribution of land without an incentive mechanism. It contained characteristics of the traditional village community and small peasant system, in which external risks could be resolved through internalization. During 1968–70, millions of educated youths were sent to the countryside, in part to deal with the problem of insufficient employment in cities. New employment was limited to military industry and construction of the three-layer frontline structure. The industrial economy in the coastal regions was maintained in a mode of simple reproduction. In sum, the third urban crisis caused by fiscal deficits had found a soft landing once again by transferring the costs to rural communities. This ‘peasant socialism’ system accepted 40 million educated youth who were sent to the countryside in three waves over 20 years. During these movements, China’s tripartite agrarian sector silently shouldered at least three times the enormous costs of cyclical economic crises caused by the state capitalist system concentrated in cities. The recovery of 1962–63 was not due to urban industrial growth and increased employment, as is widely supposed. It was instead attributable to the fact that peasants could ‘retreat.’ Crisis compelled the government to adjust the policy of collectivization. The traditional peasant economy was partly allowed to retreat from the highly collectivized economy serving the state’s industrial capital. First, the overarching people’s commune system was transformed into a production brigade-based village economy. Production brigades were formed with the village as the basic unit of accounting. This meant that traditional village economies could partly withdraw from the collectivized economy at the county level. Second, the peasants could engage in autonomous production within a production brigade. This too permitted elements of the traditional peasant household economy to retreat from the strictly controlled collectivized economy. In practice, the state relaxed the total control it had wielded over the peasants since the ‘all-round Sovietization’ of the 1950s. Peasants took back about 15 percent of the arable land at their disposal in the form of ‘reserved land,’ ‘marginal plot,’ and ‘courtyard.’ Agricultural production subsequently resumed, and output increased (Wen, 2017).

Economic cycles and rural policies in the People’s Republic of China  393

RECOVERY OF THE RURAL ECONOMY6 When the state suspended subsidies for rural areas, it returned to the peasants the right to the rural surplus, together with the right to capitalization of resource factors like arable land and labor. In the early 1980s, primary accumulation in rural industry and commerce mainly depended on the mechanism of internalization within the rural community and peasant households. It was a process of extensive accumulation through self-exploitation, using labor to substitute capital. It is self-exploitation at the township and village levels, as rural people could keep extra surplus and profits for themselves, apart from taxation. This stood in contrast to the state-owned industrial sector, which required national revenue and loans. In the 1980s, the demand for consumer goods in China’s market generally exceeded supply, giving rural enterprise room for growth. The comprehensive development of the rural economy increased peasant incomes, which in turn stimulated the national economy to allow a rapid recovery. In 1981, the state recorded no fiscal deficit, but instead a revenue surplus of RMB3.74 billion. With the outbreak of a new crisis in the cities, the government could no longer transfer urban surplus labor to villages through ideological mobilization, as it had during the 1960s and 1970s. Instead, the tens of millions of educated youths who had been sent to the countryside returned to the cities. The crisis was thus bound for a ‘hard landing’ in the cities. At the same time, the Communist Party had embraced rural reforms to increase rural productivity. Since 1982, the rural economy had been growing rapidly, especially before TVEs were suppressed by unfavorable policies serving the vested interests of the urban sectors. Indeed, after 1984, the TVEs became the main thrust of economic recovery. During this process, three features of the Chinese polity stood out. The first was the peasant population. Their rising purchasing power as a result of increased cash income made up for diminished demand in the urban sectors. The booming rural economy buoyed the national economy as a whole. After sharing the initial benefits of reform, the peasants increased investment, in expectation of higher returns. This pushed up demand for industrial goods and supplied many downscale consumer goods. Increments in the circulation of physical commodities absorbed the monetary expansion and fiscal deficit that would otherwise have led to inflation. The second factor was the village community. In the 1980s, about two-thirds of villages still owned collective assets and the right to distribute gains. Rural collectives, making use of the factors of production (collective capital, high-quality labor force, and land resources) newly under their control, could begin industrial primary accumulation at low cost by internalizing the external risk, a traditional feature of rural communities. The third factor was the market. Market reforms and China’s preliminary economic opening led to an explosion in demand for downscale consumer goods. The urban industrial sectors were then still lopsided in favor of military and heavy industries and not yet able to meet this demand. Almost free of major rivals, rural industry could therefore take a large share in production for the downscale consumer goods market. Many studies have concluded that China’s reforms during the 1980s represented an incremental adjustment. In fact, the reform was a stock adjustment, whether viewed in terms of land reform (which fundamentally altered property relationships) or changes to the national distributive structure. In essence, it was a sea change in the stock asset’s structure. If there is any aspect of this process that can be called incremental, it was that the marginal returns on investment to the rural sector were much higher than those for the urban industrial sectors. Given an opportunity for autonomous investment and capital support, the rural

394  Handbook on critical political economy and public policy economy could generate far higher rates of return compared with the urban industry, with the same amount of fiscal infusion. Despite a macroeconomic policy that favored urban industry, this autonomous rural development soon showed its institutional advantage. From the rural industrialization in the late 1970s until 1988, the output from TVEs generally grew at an annual rate of over 30 percent, 10 percent higher than that of state-owned industry and nearly 10 percent higher than the general social gross production growth rate. It was the major driving force behind rural development and national economic growth in general. In summary, during the 1980s, rural regions had completed primary capital accumulation for industrialization. So-called primitive capital accumulation is generally a bloody process. Yet in the 1980s, the rural industrialization process in China was far from violent, though no less laborious. Even petitions were very rare at that time. That was because peasants had the right to autonomous development, which brought them higher income, and in turn drove the domestic consumption growth that helped the urban economy. Therefore, it could be said that for a time, the country suffered no serious urban–rural disparity. Yet toward the end of the 1980s and into the 1990s, new policies began to erode peasants’ right to autonomous development.

REBALANCING THE THREE MAJOR DISPARITIES7 The government’s counter-crisis measures relied once again on transferring institutional costs to rural society. In the name of the coastal economic development strategy, TVEs were asked to import raw materials from overseas and focus on production for foreign markets and, accordingly, to retreat from domestic raw materials and product markets. The mainly state-owned and debt-ridden urban enterprises thereby managed to avoid competition with the emerging rural enterprises, which were not so burdened. However, it was devastating to TVEs still at an early stage of development, as they gradually became heavily dependent on overseas markets with fluctuations, but without any governmental support. Furthermore, state investment in public goods such as education, medical care, and local governments and party organizations was cut. From 1989, peasants’ per capita cash income declined for three consecutive years. A huge number of rural laborers had no choice but to move to cities to seek employment. By 1993, the outflow of rural labor had soared to 40 million. At the same time, local governments and grassroots organizations transferred the costs to peasants by imposing heavy taxes and levies, such as land tax, poll tax, and animal slaughter tax, among others. As a result, social conflicts in rural regions increased greatly and tensions were intensified. A dramatic consequence of orientation toward urban interests was the suppression of the rural economy and consumption by peasants, who still comprised a majority of the population. As a result, national domestic demand declined, and the internal contradictions of the economic structure worsened. The Chinese economy was forced to turn from domestic demand to export-led growth. Such a change explains in part why China in the 1990s was so eager to embrace globalization, and be integrated into the global capitalist economy. During that period, the actual problem China encountered was the first wave of overproduction. One of the first experts to propose policies to address this issue had been Lin Yifu of Beijing University, who stated as early as 1997, when the East Asian economic crisis erupted,

Economic cycles and rural policies in the People’s Republic of China  395 that China’s problem was ‘a vicious cycle under double-surplus (surplus production and surplus labor)’ (Wen, 2021, p. 348). Consequently, 400 000 state-owned enterprises closed, and 40 million workers were laid off. Those who bore these costs were the rural peasants due to heavy taxation, and the urban industrial workers as they were laid off. The government’s response to the crisis had been based on policy proposals by China’s senior economists, including Lin Yifu, Ma Hung and Lu Baifu. Chinese officials in charge of economic policies also sensed the seriousness of the problem. As a result, strong adjustment measures were adopted starting in 1998. To stabilize economic growth, the central government had directly issued national debts to support investments. In 1998, the commercialization reform of financial institutions was rapidly reshaping China’s economy. The four major banks – Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China, and China Construction Bank – all carried bad debts totaling more than one-third of their capital fund. The banks lacked sufficient funds to finance investments. That was why the central government had to directly issue national debts to support infrastructure investments; for example, of RMB33.6 trillion invested in Great Western development, more than two-thirds had been national debt investments. Many people have wondered why China was fortunate enough to be spared in the Asian Financial Crisis. In fact, it was not spared at first. Given that throughout the 1990s, China had an export-driven economy that relied on overseas demand to support its growth, the sudden decline in that demand threatened imminent crisis. The so-called ‘China experience’ – that is, government control over cross-border capital flows that helped avert the crisis – was no more than a ‘call move made directly by the government’s visible hands’ (Sit et al., 2018, n.p.) as a counter-cyclical adjustment. The measures in response to the first wave of overproduction were not only effective but also addressed the issue of unbalanced regional development. The Great Western development that began in 1999 had a total investment of RMB3.6 trillion. The rise of Chongqing would not have been possible without the state’s large-scale infrastructure investments in the mountainous regions. In 2020, Chongqing is among the leaders in gross domestic product (GDP) growth, not only in Western China but in the nation (J. Wang, 2020). This growth was made possible by state investment during the Great Western development. In 2001, the Northeast Revitalization project brought a total investment of RMB2.4 trillion, and in 2003, when former premier Wen Jiabao took office, new growth policies for the country’s central regions were put forward. The government’s investments were all aimed at adjusting unbalanced regional development.

THE SANNONG NEW DEAL OF 2006 In the late 1990s, macroeconomic fluctuation led to deterioration and crisis in rural governance (Dong & Wen, 2008). Beginning in 2003, the ruling party reiterated the importance of the sannong (three irreducible agrarian sectors: peasants, rural society, and agriculture), highlighting it as the most important problem then faced by the country. In 2005, the New Socialist Countryside policy was listed as the top major strategy in China’s future development. Thereafter, a series of pro-rural policies were implemented, the rural sector was given a chance to recover, and the regulatory function of its labor pool was partly restored. These policies played a positive role in rectifying the long-lasting structural imbalance in the national

396  Handbook on critical political economy and public policy economy (industrial overcapacity, excess capital, labor surplus, disparities between coastal regions and the interior, rural–urban polarization, and income inequality) and enhanced the sustainability of China’s development. They did so in three major ways. First, during 2003–08, investment in the rural sector totaled over RMB1473.1 billion. The fiscal investment in the three agrarian sectors during 2003–09 amounted to RMB3096.752 billion – averaging RMB15 000 per household. It substantially increased the capital stock in the rural capital pool and brought infrastructure investment that greatly increased local non-agricultural employment opportunities. The once weakened regulatory function of the rural labor pool was thus restored. Second, pro-rural investment stimulated rural consumption demand. During 2000–03, the annual increase in retail sales volume for the rural consumer goods market below the country level was only about RMB100 billion. By 2004, the number had more than doubled, to RMB231.2 billion. It was estimated that the big push by the New Rural Reconstruction initiative would further increase the rural retail sales volume of consumer goods by RMB400 billion annually, amounting to an increase of over 2 percent in GDP (Du, 2005). Third, the flow of significant resources back to the rural sector helped ease tensions between peasants and rural governments. Now the main conflict was over the distribution of benefits within rural communities. The rural sector became more stable – which was necessary, as it formed the social base of the sannong. These were the essential conditions affording China ample leeway to deal with the 2008 Global Financial Crisis.

A COMPARISON OF RESPONSES TO THE CRISES OF 1997 AND 2008 After the mid-1990s, China grew increasingly dependent on external markets. During the country’s integration into globalization, foreign capital became a dominant factor in the structural adjustment caused by overseas expansion of China’s industrial capital. Both the Asian Financial Crisis of 1997–98 and the Global Financial Crisis of 2008 were crises ‘imported’ from abroad. These two exogenous events were very similar in their symptoms and in the responses they provoked. First, the symptoms. Before each crisis, the national economy had heavily depended on export-led growth. Once the crisis broke out, the sudden drop in exports instantly led to a decline in the growth rate and increased unemployment. When evaluating the official response, it is important to note that in contrast to the deflationary measures adopted in previous crises, the Chinese government in 1997 and 2008 embraced a large-scale expansionary policy to enlarge investment and stimulate domestic demand to keep economic growth from sharply declining. However, despite their success in resuscitating the economy, the rescue measures of 1997–98 were skewed in favor of urban interests, leading to an over-appropriation of rural resources. The rural sector was made to bear much of the living costs as they were more heavily taxed and received proportionally fewer government funds, like education and medical subsidies, further inflaming social conflicts. In contrast, the rescue measures of 2008–09 emphasized investments in the rural sector, a continuation of the government’s sannong policy, in place since 2003. Two of the three factors of production (namely, capital and labor) have flowed back into the rural sector in a significant way and partly restored the regulatory

Economic cycles and rural policies in the People’s Republic of China  397 function of the rural labor pool. Moreover, a second capital pool (the first being in the urban sector) was under construction in the rural economy at the county level. These policies were thus mutually beneficial for both urban and rural sectors. However, it was also around this time that the whole society had to shoulder the enormous cost of national industrialization. For the first time, China’s secondary industry comprised more than 40 percent of the national economy. From China’s experiences in dealing with crises, it is evident that sannong had been the primary bearers of the economic and social pressures caused by macroeconomic cyclical fluctuations. They also served as a shock-absorber regulating economic instability. The importance of sannong to economic security and sustainable development in China is beyond question. However, during 1990s, in the stage of late industrialization, the socioeconomic structure of rural China, which had served as the stabilizing foundation and a regulator of economic development, was undergoing drastic and fundamental change.

INTERNAL CIRCULATION The Xi Jinping administration has adjusted its policy by returning to demand-enhancing counter-cyclical measures that had been given up between 2013 and 2015. In July 2020, to deal with the break-up of global supply chains and the economic downturn because of the COVID-19 pandemic and the US sanctions, the central government proposed establishing ‘a new development pattern centered on “internal circulation,” and speed up a “dual circulation” growth model in which “internal circulation” and “international circulation” promote each other’ (China Daily, 2020, n.p.). Internal circulation implies the domestic economy, particularly the rural economy. Local governments invested about RMB34 trillion (US$4.9 trillion) into ‘new infrastructure’ projects such as 5G, Internet, industrial Internet, cloud computing, blockchain, data centers, smart computing centers, and smart transportation (China Global Television Network, 2020). Another important policy is that of rural revitalization, which aims to foster an eco-friendly economy as an alternative development strategy. Hence the slogan, ‘Green Mountain is Gold Mountain; Clean River is Silver River.’ One of the major strategies of rural revitalization is the valuation of natural resources in villages as well as what is referred to as the ‘capital-deepening of the eco-economy’ to resolve the crisis of excess money supply caused by the trade surplus and inflow of foreign capital. China’s current moves on the economic and monetary front are part of its proactive efforts to steer away from decades of developmentalism in line with the Western model of modernization. Many ‘beautiful villages’ are understood to constitute a ‘beautiful China.’ The national development strategy is gradually adjusted toward inclusive sustainable development that is resource-efficient and eco-friendly. The official policies of ecological civilization, rural revitalization, and poverty eradication are among the essential strategies of transformation. In March 2021, China announced that it would address the centrality of environmental issues, promote green development, and facilitate the harmonious co-existence between human and nature during the 14th Five-Year Plan (2021–25) (Xinhuanet, 2020). The urban economy comprising concentrated profit-seeking capital is characterized by risk. In comparison, rural society is based on household and community cooperation – effective means to internalize negative social externalities. While the urban economy is driven by eco-

398  Handbook on critical political economy and public policy nomic rationality, which often leads to irrational behavior, the rural community is maintained by what can be considered cooperative rationality. For decades, Chinese rural society has served as the buffer to absorb negative externalities generated by the urban economy and as the vehicle for soft landings for crises (Wen, 2021).8 However, in recent years, the foundation of rural society’s capability to absorb negative externalities has been eroded for several reasons, including the draining of production factors, such as labor and capital out of rural communities; the disorganization of peasants, and thus the deterioration of rural governance; and the under-development of the rural household economy compared with the capital-intensive urban economy. In terms of food sovereignty, China is completely dependent on foreign soybean imports but has enough land resources to be self-sufficient in the production of rice and wheat, two major staple crops. Due to limited land resources, China sets a minimum level of 120 million hectares (297 million acres) for the country’s total cultivated farmland. However, China must leverage imports to demand because of a domestic planting area shortage of 90 million hectares (O. Wang, 2020). Developing a cooperative economy is key to rebuilding a robust rural society, which again serves as an antidote to the risk-based and risk-accumulating urban economy. Based on principles and practices of a cooperative economy, peasants can organize themselves, which in turn can consolidate the foundations of rural governance. The localized capitalization of rural resources based on cooperatives may also help shape a strong and healthy domestic demand.

RURAL REVITALIZATION The legacy of the Chinese Land Revolution of 1949 – that is, small peasantry and village ownership of land resources – stills exist. On March 1, 2019, when explaining a policy for integrating small peasants into the modernized agriculture, Han Jun, the Vice-Minister of Agriculture and Rural Affairs, admitted that ‘China is still a big country with millions of small peasants.’ Now there are 230 million peasant households. Each household has on average 7.8 mu of arable land.9 The number of small peasants accounts for 98 percent of the agency of agricultural activities, and 90 percent of agricultural workers. The amount of arable land that small peasants cultivate accounts for 70 percent of all arable land (The State Council of PRC, 2019). From 2017 to 2019, the Central Agricultural Commission and Ministry of Agriculture and Rural Affairs organized an assessment and verification process of rural collective properties countrywide. As of the end of 2019, there were 5695 townships, 602 000 villages, and 2 385 000 production groups, amounting to a total of 2 992 695 units across the country with collective assets. It is reported that the rural collectives, with a total area of 6.55 billion mu, have enormous assets. The book value of assets was RMB6.5 trillion. There were 10 000 wholly owned enterprises of rural collectives, with total assets of RMB1.1 trillion. Moreover, the proportion of fixed assets was close to half: fixed assets were RMB3.1 trillion – of this, two-thirds were fixed assets used for public services such as education, technology, culture, and health. Furthermore, the assets were highly concentrated at the village level, with village-level assets totaling RMB4.9 trillion, or 75.7 percent of total assets (Ministry of Agriculture and Rural Affairs of the People’s Republic of China, 2020).

Economic cycles and rural policies in the People’s Republic of China  399 In 2017, the Chinese government proposed the strategy of rural revitalization, claiming it had adjusted its agrarian policies, including: ● a diversion from the policy of accelerating urbanization in recent years and instead beginning to prioritize agriculture and the countryside; ● an assertion that rural revitalization is the most creative aspect of China’s development in the 21st century; and ● an abandonment of the path dependence of quantitative growth and a turn toward eco-friendly growth and development. The policymakers are turning their attention to rural China and once again emphasizing the importance of the rural sector. From the vantage point of 2021, the government has continued to strengthen this strategy. Compared with other advanced economies, China is characterized by many assets in rural regions that have not yet been valued and priced, or their value remains implicit. Capital in the urban sectors is currently in excess and seeking opportunities for the capitalization of resources. For this reason, the trend of capital flowing into the rural sector seems to be irreversible. Viewed another way, it may well be a chance to reverse the decades-long draining of production factors from the rural sector. The problem then becomes how to avoid the malicious and destructive enclosure of rural resources by capital and finance. The formation of cooperatives becomes a key element in this process. An organized group has more negotiating power, especially when dealing with outsiders. Supported by the national strategy of ecological civilization and rural revitalization, community cooperatives could become effective agents in the valuation of ecological and cultural assets. Through appropriate institutional innovations, parts of property rights could become exchangeable assets on a well-designed, special market, while the fundamental ownership of vital resources like land could remain with the community cooperative. This may attract capital flowing into the rural sector healthily and constructively. Factors like labor, capital, technology, and land may contribute to localized rural revitalization. The fiscal pressure of ecological infrastructure and rural reconstruction could be partly relieved through this form of financing while excess liquidity in the urban sector could be channeled into the rural sector. This could promote peasant income growth while preventing the formation of financial bubbles in the national economy. Income increment could serve as a foundation for economic reproduction, the provision of public services for rural communities, the protection of ecology, and the nurturing of rural governance. If institutional arrangements and innovation are appropriate for investing in rural improvements, the excessive monetary liquidity could be absorbed. In the post-globalization crisis, China is facing double excess: excess of both industrial capacity and of capital. Chinese political and economic elites therefore feel compelled to expand their presence in the world – but the world has changed. After decades of globalization and neoliberalism, worldwide social reactions have raised vociferous and strong protests against their progress. Ecological degeneration and climate catastrophe demonstrate the limits of the prevalent growth model. Even if Chinese elites emphasize that China is merely seeking equal and bilateral cooperation for development opportunities, the United States, as the unchallenged unipolar power of the last 30 years, naturally regards it as a challenge to its hegemony. Every move by a big country like China will be understood as a transgression against the presence of the dominant geopolitical power. Advancing with an expansionist

400  Handbook on critical political economy and public policy strategy in the post-globalization age, China is facing vicious competition and the hostilities of a new Cold War. The alternative options are neither isolationism nor autarky. A more intelligent strategy would be to turn inward and narrow the gap between the urban and the rural, the rich and the poor, and different regions and different sectors. If China persists in its strategy of rural revitalization, determined to pursue the path of ecological civilization, its heretofore capacity to deal with global crises might remain intact.

CONCLUDING REMARKS The rural policies of land redistribution, tax exemption, as well as collective ownership have long been an effective means of resolving urban crises, implemented for the last 70 years. Clearly, the dual rural–urban structure remains of basic importance. Those dynasties that implemented a policy of land distribution and tax exemption generally sustained long-term stability. Only neoliberal reformers in mainland China have attempted to fundamentally change this institution. As China has entered the global capitalism system, the key factors in its economic success have been the capacity of the central government to enact counter-cyclical measures, as well as the ability of low-level governments to sustain the rural base to ensure a ‘soft landing.’ This in turn is why China is now seeking to address lingering deficiencies in its development, from reforming the supply side in industries and agriculture, to going further toward realizing the state’s major strategies of ecological civilization, as well as the central policies of international circulation and rural revitalization.

NOTES 1. The authors would like to thank Erebus Wong and Alice Chan for translating parts of this chapter from Chinese. This work is supported by ‘Innovation Research 2035 Pilot Plan of Southwest University’ (SWUPilotPlan02). 2. This section is based on Wen (2021), translated by Wong and Chan. 3. The Third Agrarian Revolutionary War or War of Liberation (1945–49) followed the First Revolutionary War or National Liberation War (1924–27), and the Second Revolutionary War or Agrarian Revolutionary War (1927–37). 4. The Third Front Movement built a massive military-industrial complex in China’s interior starting in 1964. ‘First’ and ‘Second’ Fronts were those areas where foreign attacks were believed to be more likely (Meyskens, 2020). 5. This section is based on Wen et al. (2014) and Wen (2021). 6. This section is based on Wen et al. (2014) and Wen (2021). 7. This section is based on Wen (2021). 8. See also Wen Tiejun’s E-Lecture series, Ten Cyclical Economic Crises in China (1949–2016), produced by the Global University for Sustainability at https://​our​-global​-u​.org/​oguorg/​en/​series​-no​ -5​-chinas​-real​-experiences​-professor​-wen​-tiejun​-on​-ten​-cyclical​-economic​-crises​-in​-china​-1949 ​ -2016/​. Accessed May 30, 2017. 9. Fifteen mu is equivalent to 1 hectare.

Economic cycles and rural policies in the People’s Republic of China  401

BIBLIOGRAPHY China Daily 2020, ‘China to form new development pattern centered on “internal circulation”,’ August 7, accessed August 12, 2020 at https://​global​.chinadaily​.com​.cn/​a/​202008/​07/​WS5f2c​fde0a31083​ 481725ef3f​_3​.html. China Global Television Network 2020, ‘Getting to know China’s new infrastructure projects,’ May 6, accessed May 30, 2020 at https://​news​.cgtn​.com/​news/​2020​-05​-06/​Getting​-to​-know​-China​-s​-new​ -infrastructure​-projects​-QfIOLy9khq/​index​.html. Dong, X. & Wen, T. 2008, ‘Macro economic fluctuations and crisis of rural governance,’ Management World, 2008 (9), 67–75. Dong, X. & Wen, T. 2019, Delinking: The Truth Experiences of How China Resolved the First Economic Crisis (1949-1952), Beijing: Dongfang Publishers. Du Q. 2005, ‘Vigorously develop modern agriculture and solidly promote the construction of a new socialist countryside – speech at the National Agricultural Work Conference’, December 28, accessed January 6, 2005 at http://​www​.moa​.gov​.cn/​gk/​tzgg​_1/​tz/​200602/​t20060207​_546660​.htm [in Chinese]. Li, C. & Jiang, D. 2005, ‘Historical experiences and lessons of the policy of “Construction of Third Front”,’ Journal of Northeast Normal University (Philosophy and Social Sciences), 2005 (4), 85–91. Meyskens, C. 2020, Mao’s Third Front: The Militarization of Cold War China, Cambridge, UK: Cambridge University Press. Ministry of Agriculture and Rural Affairs of the People’s Republic of China 2020, ‘Solidly carry out the national rural collective assets inventory verification work,’ July 10, accessed July 17, 2020 at www​ .moa​.gov​.cn/​xw/​zwdt/​202007/​t20200710​_6348455​.htm [in Chinese]. People’s Daily 2021, ‘China to advance work related to agriculture, rural areas, farmers with concrete efforts,’ January 5, 2021, accessed January 6, 2021 at http://​ en​ .people​ .cn/​ n3/​ 2021/​ 0105/​ c90000​ -9805926​.html. Sit, T., Qui, J. & Yan, X. et al. 2018, ‘Rural communities and economic crises in modern China,’ Monthly Review, 70 (4), accessed September 5, 2018 at https://​monthlyreview​.org/​2018/​09/​01/​rural​ -communities​-and​-economic​-crises​-in​-modern​-china/​. The State Council of PRC 2019, ‘The State Council Information Office held a briefing on the situation of “Opinions on promoting the organic linkage between small farmers and modern agricultural development”’, March 1, accessed March 11, 2019 at http://​www​.gov​.cn/​xinwen/​2019​-03/​01/​content​ _5369578​.htm​#1 [in Chinese]. Wang, J. 2020, ‘Chongqing, Nanjing post impressive GDP growth in H1,’ China Daily, July 28, accessed August 5, 2020 at https://​www​.chinadaily​.com​.cn/​a/​202007/​28/​WS5f1f​c5a8a31083​481725c947​.html. Wang, O. 2020, ‘China food security: how’s it going and why’s it important?,’ South China Morning Post, November 20, accessed November 28, 2020 at https://​www​.scmp​.com/​economy/​china​ -economy/​article/​3111623/​china​-food​-security​-hows​-it​-going​-and​-whys​-it​-important. Wen T. 2017, ‘E-Lecture series No. 5: “Wen Tiejun on Ten Cyclical Economic Crises in China (1949–2016)”’, Global University for Sustainability, accessed May 30, 2017 at https://​our​-global​-u​ .org/​oguorg/​en/​series​-no​-5​-chinas​-real​-experiences​-professor​-wen​-tiejun​-on​-ten​-cyclical​-economic​ -crises​-in​-china​-1949​-2016/​. Wen, T. 2021, Ten Crises: A Political Economy of China’s Development (1949-2020), trans. E. Wong & A. Chan, London: Palgrave Macmillan. Wen, T., Dong, X., Qui, J. & Du, J. 2014, ‘China’s real experience: the crises with subsequent soft landing after the Reform of 1978,’ in J. Li & L. Wang (eds), China’s Economic Dynamics: A Beijing Consensus in the Making?, London and New York: Routledge, pp. 42–72. Xinhuanet 2020, ‘Recommendations of the Central Committee of the Communist Party of China on Formulating the Fourteenth Five-Year Plan for National Economic and Social Development and Long-Term Goals for 2035,’ November 3, accessed November 11, 2020 at http://​www​.xinhuanet​ .com/​politics/​zywj/​2020​-11/​03/​c​_1126693293​.htm [in Chinese].

27. Trade and investment agreements from a critical international political economy perspective Luciana Ghiotto

During the past 30 years, states have signed an enormous number of trade and investment treaties. Further, in the 1990s, they negotiated entry into a new international organization – the World Trade Organization (WTO) – which would regulate global trade. On 1 January 1994, the first major free trade agreement (FTA), the North American Free Trade Agreement (NAFTA), came into force, and this format became the model for subsequent trade agreements. The WTO agendas, as agreed upon in the Uruguay Round of the General Agreement on Trade and Tariffs (GATT) and the NAFTA, established the fundamental commitments that states are to follow in terms of trade, but both included other issues ‘associated’ with trade, such as intellectual property rights, services, public procurement, and the protection of foreign investments. In recent years, new topics and negotiating agendas have been added, according to the most recent needs of capital accumulation such as digital trade, technical barriers to trade, trade facilitation and customs matters. The negotiation of these treaties, especially for the less industrialized economies, was associated with the promise of enormous benefits for the states – the arrival of investments, economic growth, diversification of exports, technology transfer and increased employment, among others. However, more than two decades later, it became clear that these promises were not fulfilled (Ghiotto, 2021). In state terms, the entry into force of these treaties meant the loss of sovereignty and space for public policy. The treaties were signed at the same time as the privatization processes took place in the early 1990s, and the effect was the pull-back of states from economic activities. The trade agreements push for free investment in areas that were reserved for state regulation, such as public services (health, education, water services, telecommunications, postal service, transport, etc.) and public procurement. But then, why did the states agree to cede part of their sovereignty and decision-making capacity by signing these treaties, thus pushing the reconfiguration of their own state functions? International political economy (IPE) addresses this problem by establishing the relationship between states and the global market as the central axis of the analysis. The shrinking of policy space has been one of the main concerns for IPE academics, including their precursors such as Susan Strange, Robert Keohane and Robert Gilpin. However, IPE, with both realist and liberal roots, starts from the state and the market as separate entities without identifying an internal relationship between the two. Classic IPE reifies the state (Burnham, 1994). This chapter, on the contrary, develops lines to understand the new international legal architecture as an expression of antagonistic social relations. In other words, we consider the legal form as the crystallization of a particular configuration of capital and labour relation at a given moment. Therefore, it is a contingent form, determined historically. Trade and investment treaties of the last 30 years respond to changes in the antagonistic relationship between capital 402

Trade and investment agreements  403 and labour, from the crisis of the so-called welfare states in the 1960s and 1970s to the process of internationalization of capital known as ‘globalization’. A critique of IPE starts from class relations, particularized in separate states that compete with the objective to attract, territorialize and retain a portion of global capital with the aim of guaranteeing class relations within their borders. States are permanently ‘involved in the mediation and resolution of domestic and international social and economic crises through political regulation, economic intervention, diplomatic accommodation and war’ (Teschke & Heine, 2002, p. 172). Thus, crisis and conflict are central to the critique of IPE. This process must be understood in its historical evolution – that is, the historical and contingent way in which class antagonism manifests itself. This means that the legal superstructure cannot be understood (only) because of the interstate struggle to obtain greater power, nor because of pressure and lobby from transnational corporations. A critique of IPE that observes the constitution of global rules, of what is known as governance of trade and investment, must establish a conceptual apparatus that accounts for the way in which the capital–labour relationship manifests itself in international relations. This we can see inside and outside the states in a dialectic relation that cannot be separated – externally, in the commitments that the states make and which limit their capacity for regulatory action (monetary policy, labour policy, management of public services, etc.) at the domestic level; internally, how these limitations in a regulatory policy have a direct impact on the capacity of the state to manage (from the perspective of the reproduction of capital) class struggle within the territory satisfactorily. From this perspective, the transfer of sovereignty to the global level is no longer an attribute that makes states weak. On the contrary, entering the WTO can be understood as an exercise that strengthened their sovereign power since it reinforced their ability to command work in the territory (Pascual, 2020). The same can be understood for trade and investment protection treaties; these legal frameworks limit the ability of states to freely impose regulations on a national scale and allow states to better impose the law of value inside the territory, for which labour must be daily reproduced as a labour force to be sold in the market. As Peter Burnham (2002, p. 114) puts it: Class relations, in this sense, are of course antagonistic relations. Class struggle therefore lies at the heart of Marx’s account of accumulation as capital must not only extract surplus from labor daily in the production process but must also ensure the successful reproduction of the total social circuit of capital… This calls for constant intervention from state managers for the establishment of various forms of international regimes and institutions.

Thus, the complex of modern trade and investment agreements are here analysed as legal forms that express the configuration of capital–labour antagonism in the period of the internationalization of capital.

SOME ELEMENTS FOR A CRITIQUE OF INTERNATIONAL POLITICAL ECONOMY The process known as globalization, which became evident in the 1970s, has been the focus for the analysts of IPE. Scholars from both British and North American schools identified the existence of a tension between the state and the market; this was the crucial problem in the

404  Handbook on critical political economy and public policy study of political economy. A central point of agreement between both schools was the diagnosis that neither economics nor international relations separately could theoretically respond to the internationalization of production (Cohen, 2007). For this reason, the pioneer authors of IPE identified the centrality of the analysis of the interaction between economics and politics, involving both state and non-state actors at the national and international levels, where one of the main focuses would be the actions of transnational companies (Saguier & Ghiotto, 2018). Within the IPE, the tradition of Marxist studies has had a vast development, with Robert Cox as one of the referents of the neo-Gramscian approach. There are also other perspectives that in recent years have enriched the critical view of IPE, although their analyses have focused on different scales of abstraction, concentrating on the mode of deployment of capital and the forms in which the internationalization of capital is presented, or on the struggles for global power, or on corporate processes (Jäger, 2020). Even though various Marxist perspectives were incorporated late in the debate on international relations, today they have established a field of development for these studies (Kan, Jaquenod & Pascual, 2020). It can be understood that the very root of Karl Marx’s thought and his understanding of the inherently global expansion of capital and its relationship with the international state system makes IPE a natural space for Marxist debates. Unlike the dominant vision of IPE, the Marxist perspective does not start from presupposing the separation of the economic (the global market) and the political (the state and the rules) but rather starts from the paradox existing in that relationship. Marxist analysis departs from the contradictory way the economic and the political appear as separate spheres in capitalism, unlike the feudal period (Burnham, 1994; Holloway, 2003). As Jaquenod (2020) points out, the subdiscipline of IPE has been successful in problematizing the relationship between the political and economic spheres, seeking points of contact between the two; however, the various schools of IPE have not been able to understand the internal connection between the political and the economic. They cannot see that in capitalism, both spheres are an expression of the same antagonistic social relations. In this view, state and market are not external entities that ‘interact’, ‘influence each other’, or ‘do not operate independently of one another’, as Robert Gilpin (1987) argues in his landmark work on realist IPE, The Political Economy of International Relations. In capitalist society, the state and the market are two forms that emerge from the social relations of production. They are two socially necessary forms whose connection is not produced through the overdetermination of one instance by another (politics over economics and vice versa), but rather the economic and the political, the market and the state, as emerging forms of the same social relationships. State and market, in effect, constitute a separate but united expression of class antagonism (Bonefeld, 2013; Holloway, 2003). The starting point, then, is the antagonism between capital and labour that necessarily exists in the form of states and the market. As we have said, this is a fundamental difference from classic IPE that understands the state and the market as two instances that are related externally. Thus, the basis of the legal superstructure is struggle and crisis. Law is essential to regulate disputes in commodity-producing societies, because without disputes, law would not be necessary. As Evgeny Pashukanis (in Mieville, 2005, p. 149) puts it: ‘The law is the regulatory mechanism generalized in an economy based on commodity production. The legal form is that form which regulates the legal relationship: dispute is central, because without dispute there would be no need of regulation’.

Trade and investment agreements  405 The presupposition of law in capitalist society is the separation of the producer from the means of production and subsistence, which Marx describes in Volume I, Chapter 24 of Capital. Without generalized exchange, without the transformation of peasants into labour force, free workers, there is no universal law and there is no freedom or equality. Therefore, the legal form must be logically derived from the commodity form. It becomes evident then that the starting point of a critique of IPE is not the instituted forms of capital, such as the state and the market, but rather the social antagonism itself. Class relationship shapes these expressions. And the way in which the class relationship unfolds is a historical, contingent process that shapes how law and regulations develop. In other words, the historical way in which social antagonism unfolds gives law and the state their specific forms.

TRADE AND INVESTMENT TREATIES FROM THE CRITIQUE OF IPE The signing of trade and investment treaties has skyrocketed since the 1990s, constituting a new international legal architecture that regulates trade and investment relations on a planetary scale. The signing of these treaties became massive and not an exception. This has created a global economic constitution (Fernández Ortiz de Zárate, 2018; Gill, 2002), comprising 1000 international treaties, conventions, dispositions and national laws, creating a legal framework that has accompanied the process of internationalization of capital and the creation of global value chains. As Stephen Gill puts it, the central objective of this global constitutionalism is to prevent future governments from undoing commitments to a disciplinary neoliberal pattern of accumulation (Gill, 2002). In capitalism, states develop various strategies to attract part of the global capital to their territories and retain it there. In the 1980s and 1990s, states agreed to be part of an Americanized international law (Panitch & Gindin, 2015) with the aim of generating incentives for a portion of capital to settle in their territories, in the context of internationalization of production. For this reason, central issues for the global expansion of capital were incorporated into the FTAs through the ‘new trade issues’ (Estay & Sánchez Daza, 2005) or ‘beyond borders’ (Rodrik, 2018). These are intellectual property rights, services, telecommunications, public procurement and the protection of foreign investments that includes the investor–state dispute settlement (ISDS) mechanism. At the same time, thousands of bilateral investment treaties (BITs) granted new rights to foreign investors with regard to the states, including clauses that protect the investor in the event of state policies that modify the contractual conditions or endanger the possibility of profit. As with most FTAs, these treaties also include the ISDS mechanism. This legal architecture, made up of a very diverse typology of legal instruments, has given rise to the constitution of a lex mercatoria that stands above the international framework of human rights, giving rise to an architecture of impunity for transnational corporations (Fernández Ortiz de Zárate, 2018). This occurs in the most notable regulatory asymmetry that shields the rights of transnational companies, while diluting their obligations (Hernández Zubizarreta & Ramiro, 2015). While international treaties bind states to provide legal security and facilitate the circulation of global capital to their territories, the companies, as embodiments of the most concentrated capital, have no obligation or responsibility within the international legal framework.

406  Handbook on critical political economy and public policy Understanding treaties as determined legal mediations of the capital–labour relationship allows us to review the evolution of treaties in the last 30 years. The ‘new-generation treaties’ or ‘21st-century treaties’ are the deployment of an adequate institutional device (Harvey, 2012) that expresses the need for certainty for accumulation in a context of growing uncertainty, especially in a context of the great recession after the 2008 crisis (Chesnais, 2020; Holloway, 2020). We can see an example of this in the Trans-Pacific Partnership (TPP). This treaty incorporates clauses that regulate unregulated aspects of economic activity that are central to the process of capital accumulation. The TPP incorporates mechanisms of good regulatory practices where states are expected not to regulate economic activity in any way, while rearming their administrative apparatus to facilitate the circulation of capital (Ghiotto, 2022). This shows that the TPP is an instrument that is promoting a reconfiguration of state regulatory functions, above and beyond what the FTAs of the 1990s operated. Thus, when we make the social relations of production as our starting point, it allows us to understand that treaties are legal forms (modes of existence) of the capital–labour relationship at a historically determined moment. Or, better said, they are an expression of social antagonism (Dinerstein, 1999; Holloway, 2002). Critical theory helps understand these treaties not as closed and ahistorical legal documents, but as legal mediations that express a particular configuration of the relationship between capital and labour at a given time. That turns them into political elements because they legally crystallize certain power relations.

INVESTMENTS AND LEGAL CERTAINTY The new international legality tries to deny the uncertainty produced by the unstable nature of the social relationship of capital. In other words, this new legality crystallizes capital’s attempt to escape from class struggle. However, that instability, manifested in the form of crisis, is inherent in social antagonism. Even if capital tries to escape from labour to sustain accumulation, seeking legal certainties for profit, it cannot escape from the antagonistic relationship that shapes it. Neoliberalism condenses the new pattern of capital accumulation, built on the liquidity of money and its free flow. Thus, the way in which this circulation is produced has become central. So, it becomes imperative to guarantee the free circulation of capital. If we assume the antagonistic character of capitalist social relations, we must thereby understand that capital is a relationship of crisis (Holloway, 2002, 2003). This means that the insecurity of capital is internal to its very constitution. We can never know ex ante how a relationship of antagonism or struggle is going to be resolved. Hence, capital builds mechanisms that allow it to obtain certain levels of certainty. The fact that today capital moves freely throughout the world does not imply that it did not do so before, at least as a trend. Throughout the history of the 19th and 20th centuries, states have limited this free circulation, as in the period of mercantilist economies and nationalist governments. But after World War II, in the Keynesian period, the welfare states erected various restrictions on the movement of capital, creating an adequate environment for the development of national industries. Due to the uncertainty about the continuity of the system itself and owing to movement restrictions, capital remained for long periods inside state boundaries. In that context, states’ welfare policies guaranteed a high profit rate for companies. This is also why certain companies are associated with certain nation-states (such as Volkswagen

Trade and investment agreements  407 with Germany). At that stage, the predominant type of capital was productive, and a mode of accumulation based on effective demand and full employment was erected above it. But those limits to capital were the expressions in the political and economic spheres of the struggle of labour against capital. That struggle shaped a pattern of accumulation that did not even last the ‘glorious 30 years’ sponsored by its defenders. Starting in the late 1960s, both capital and labour put the unstable post-war equilibrium in crisis, breaking the special accumulation pattern of the Keynesian period (Holloway, 2003). The constitution of the command of money-capital is, in this sense, the most complete expression (until now) of the trend towards the liberalization of capital (Bonnet, 2003). As Teschke and Heine (2002, p. 169) explain, ‘Globalization is neither a techno-economically induced, nor a purely politically driven, phenomenon, but the result of a dialectical, that is class-contested and consciously mediated, re-formulation of private and public strategies of reproduction under conditions of long-term negative growth’. Already in neoliberalism, the command of money-capital is expressed in a new type of legal framework that is clearly in favour of capital. On the national scale, money commands the accumulation of capital through wage flexibility, freeing the market from the rigidities of collective bargaining and laws with high labour standards (Bonefeld, 1996). This implied the ending of the way labour had been politically integrated after World War II, leading to a dramatic increase in the cost of living for workers. Market freedom was declared as the basis of all democratic and economic freedom, and the role of the state was to guarantee this market freedom. But the guarantees for capital are expressed not only in national laws but also in a new type of international regulation. The ‘deregulated’ neoliberal world requires new regulations that guarantee the imposition of labour. Thus, trade and investment treaties have as their main objective the denial of accumulation uncertainty for capital. In other words, these treaties come to legally guarantee what in practice has become more difficult: to maintain reasonable profit rates for companies that invest abroad. The treaties grant several guarantees to foreign capital, where the epicentre is property rights. These property rights are covered against eventual political excesses or actions of governments that do not respect the free profit of foreign capital. Security, then, is a keyword. Investment protection treaties guarantee capital a wide range of rights and guarantees, which we mention here. It should be noted that the very definition of investment is already broad enough so that any movement of money can be considered an investment: 1. National treatment: the host state of the investment will offer investors from another state a treatment no less favourable than that given to nationals. In other words, the state agrees, through these clauses, not to interfere in any way with the investment, as well as to facilitate its realization as much as possible. 2. Fair and equitable treatment: each state will grant the investments of other states a treatment in accordance with international law and will not harm their management, maintenance or enjoyment through unjustified or discriminatory measures. 3. None of the states may adopt measures that impose an obligation or responsibility on investments from another state. Foreign capital thus maintains its total freedom of action. 4. No state shall oblige an investor to reach a certain degree or percentage of national content, nor to grant preference to goods produced in its own territory, nor to carry out technology

408  Handbook on critical political economy and public policy transfers. Likewise, it cannot force any investor to have a certain number of citizens of that state as a portion of its employees. 5. No state will be able to expropriate or nationalize any investment, whether directly or indirectly. This includes almost any action a state takes on the investor’s property. Compensation must be equivalent to the market value of the expropriated investment, paid without delay and fully payable and quickly transferable. In turn, the investor has the right to a prompt review of their case by a judicial authority. 6. Compensation for losses includes security in case an investor suffers losses as a result of war, armed conflict, revolt, state of emergency, insurrection or riot, ‘or equivalent situations’. This can include almost any type of natural and/or social situation for which the investor may require compensation, since it is not specified which cases it includes. In this way, business risk is zero, while the state assumes the losses (as well as guarantees the profits). 7. Dispute settlement related to investments includes the ISDS mechanism where companies and/or private investors can file claims against the state in international arbitral forums. A variety of possible jurisdictions are offered to settle disputes, including the International Centre for Settlement of Investment Disputes (ICSID). 8. All BITs include clauses that establish a lock-in effect. These clauses ensure that investment protection is prolonged, even if the treaty is no longer in effect or if the country is no longer a signatory to the ICSID Convention. Most investment treaties last ten years or more, but they continue to apply for ten or 15 more years. So, the investor enjoys stability for their investment for as long as possible. This means that if a progressive government desired to implement new rules for foreign investments, these treaties would be imposed on them for longer than a presidential period, as they would survive for over a decade. This clause is critical, as it shows how the guarantee of stability and security for private property is the actual core of these treaties. The ICSID as a Mechanism Against Uncertainty Practically all the treaties signed in the 1990s allow foreign investors to make use of international arbitration as a mechanism for settling disputes with states.1 They allow investors to bring their claims to the ICSID, the most widely used arbitration forum. The ICSID was created in 1966 and there are currently 164 member states (as of April 2022). The ICSID operates within the purview of the World Bank Group, although it is an autonomous organization. Its purpose is to be a centre for arbitral tribunals to resolve issues of private investment contracts. In the ICSID, each case is resolved by a specially constituted tribunal to resolve that single issue. This is made up of three arbitrators: one chosen by the plaintiff, another by the defendant, and the third by both parties in common agreement. The latter will be the one who presides over the tribunal. The fact that the parties choose who will resolve the issue is intended to provide a certain halo of transparency and ‘equal defence’. However, they do not operate as ‘defenders’ of the party that has elected them. It has become usual to find cases in which an arbitral tribunal decides unanimously against one of the parties, even if one of them ‘represents’ the losing party (Eberhardt & Olivet, 2012). In the arbitration system, states never win. Even when the state is favoured by the award, it has to cover the expenses for the law firms and the costs of the arbitration. These expenses

Trade and investment agreements  409 generally average US$4.9 million per claim. Until 2013, Ecuador, for example, had spent US$155 million on its defence and on arbitration costs (Ecuadorian Citizens Commission on Investment Protection [CAITISA], 2017). Furthermore, states can never initiate a lawsuit in arbitral institutions if, for example, an investor does not respect labour rights or the environment; only investors can initiate arbitration claims, and states are exposed to receiving such claims. Arbitration implies a one-way street: the system is set up so that investors initiate a claim because the source of the law is the treaties whose objective is the protection of investments, not the protection of human or labour rights or the environment. Investors demand extraordinary amounts as compensation for unrealized profits. The total claimed against Latin American countries up to the year 2020 amounted to US$231 117 million (Transnational Institute [TNI], 2021). These states have been ordered to pay investors the amount of US$32 141 million. With only a third of that amount, the UN has estimated that extreme poverty would be overcome in 16 Latin American countries. In turn, this amount is greater than the flow of foreign direct investment received by Argentina, Colombia and Chile together in 2018. The possibility of investors suing states in the ICSID implies a noteworthy change in the ways in which justice is administered within the national territories. It is a legal form that has circumvented the precepts of the national constitutions. The appeal to the ICSID implies, in fact, a privatization of justice (Olivet & Ghiotto, 2021). Previously, the existing supranational dispute resolution mechanisms were only for state use – that is, state versus state, both with the same international legal status. With the ICSID and arbitral forums available for private actors, investors have become subjects of international law, being able to sue the states in the international arena, a prerogative previously of the states. In short, the ICSID legally crystallizes the search for certainty by capital. Of course, the fact that a corporation can sue the public power of a given territory (a state) is not new. But usually, who guarantees the investment (property) is the local, national jurisdiction. What is new here is the supranational instance that opens with the existence of organizations such as the ICSID (Ghiotto & Pascual, 2008). The ICSID appears as the ‘international guardian’ of investments, protected by the signing of thousands of BITs and FTAs throughout the planet.2 The search for certainty operates in a double modality, referring to the two institutional levels that oversee guaranteeing (or, better said, where it is expressed, in the legal field) the right to certainty that the investors have. On one side, we find the national judicial institutions and their different lower levels, while on the other, we observe the supranational instances. So, the two levels are those that will guarantee capital accumulation in the territories. Property rights operate at the national level through the ‘local guardian’ (state) of the capital–labour relationship, while other institutions such as the ICSID carry out, at a supranational level, that which at the state level would not be fully guaranteed due to class struggle, which is the guarantee of the investor’s property. Thus, we see that the states self-reduce their capacity to judge, allowing for a supranational instance to resolve conflicts related to foreign investments. This allows capitals to seek in these bodies a guarantee of the realization of their investments outside the scope of the state. In this way, a parallel justice system is created (Olivet & Ghiotto, 2021), extraterritorial, and towards which the state’s functions are outsourced. By this means, the power of capital over labour is strengthened. From a classical IPE perspective, this implies that states are weakened. From a critique of the IPE perspective, this movement can be understood as a strengthening of the state’s ability to control labour, now imposing global rules on the territory (Pascual, 2020).

410  Handbook on critical political economy and public policy Globalization and new international law seem to be ‘imposed’ on the states. Rules appear to be something that comes from outside the state, something that affects or hits public policy, and so states see their functions reduced, such as monetary policy, national purchase policies, or social policies like those of the post-war period. But states are not the victims of globalization. On the contrary, they can impose the law of value within the territory more directly, and by doing so, try to catch a portion of global capital. The problem then, as Teschke and Heine put it, is not the continuity of the state, but rather the form of political legitimacy within the national territory: ‘If anything is withering away today, it is not the state as such, but rather its democratic legitimacy’ (2002, p. 170). In other words, what is strengthened is capital as a relationship of domination and exploitation of labour.

SOME FINAL REMARKS This chapter has explained the difference between classical IPE and a critique of IPE from a Marxist perspective. For a critical understanding of the international system, the starting point cannot be the forms of capital, as state and money. On the contrary, to understand the relation between state and the global market, we start the analysis from class relations, which are global but are particularized in different nation-states. States compete to attract, territorialize and retain a portion of global capital, to guarantee class relations within their borders, which are historically defined. From a critique of the IPE perspective, the starting point is social antagonism. It is capital– labour relations that shape state and market, and not the way around. The state system and the global market are historical forms of the fundamental relation of capitalism, a relation of conflict and crisis, which is why it is an antagonism. States and global markets are differentiated forms of the same social relation, and they have become different spheres because of the historical process of separation of producers from the means of production and subsistence. The law, as such, is derived from the commodity form. Trade and investment protection treaties become a legal form by which states guarantee capital freedom and private property. These treaties have as their main objective the denial of uncertainty in the accumulation process, and states will be the last-instance guardian of private profit. These treaties and their special clauses can be explained from a historical perspective: they respond to the capital– labour relation reconfiguration that took place in the globalization process. The internationalization of productive capital made it necessary for corporations that operate abroad to have their property rights and profit guaranteed. The ISDS mechanism is an extraterritorial way of justice administration that has become a parallel system to national judicial systems. This mechanism provides more certainty for capital, as it ensures the protection of private property where states were unable to perform as property protectors.

NOTES 1.

Almost all the investment treaties signed during the 1990s include the ISDS mechanism. An exception are the treaties signed by China during that decade, where ISDS is included but the claim was limited to compensation for expropriation (Bath, 2018). This policy changed anyway in the treaties signed after 1998.

Trade and investment agreements  411 2.

It must be acknowledged that after 2010 especially, and due to many critiques coming from governments, academia and international organizations such as the United Nations Conference on Trade and Development (UNCTAD), some states have ended some (or all) of their investment treaties (the cases of Ecuador, Bolivia, Venezuela and South Africa). New treaty models have been born since then, although the big majority of the 1990s’ treaties remain (UNCTAD, 2021).

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412  Handbook on critical political economy and public policy Harvey, D. 2012, El enigma del capital y las crisis del capitalism, Madrid: Akal. Hernández Zubizarreta, J. & Ramiro, P. 2015, Contra la lex mercatoria: propuestas y aternaticas para desmantelar el poder de las empresas transnacionales, Madrid: Icaria. Holloway, J. 2002, Cambiar el mundo sin tomar el poder: el significado de la revolución hoy, Buenos Aires: Herramienta. Holloway, J. 2003, ‘Surgimiento y caída del Keynesianismo: se abre el abismo’, in J. Holloway (ed.), Keynesianismo, una peligrosa ilusión; un aporte al debate de la teoría de cambio social, Buenos Aires: Herramienta, pp. 45–75. Holloway, J. 2020, ‘Curso La Tormenta (2020) – Coronacrisis I’, Comunizar, accessed 15 January 2023 at http://​comunizar​.com​.ar/​john​-holloway​-curso​-la​-tormenta​-2020​-coronacrisis​-i/​. Jäger, J. 2020, ‘From Marx to critical international political economy’, in E. Vivares (ed.), The Routledge Handbook to Global Political Economy, London: Routledge, pp. 247–61. Jaquenod, A.M. 2020, ‘Lo político y lo económico en el sistema internacional: hacia una perspectiva crítica de “lo internacional”’, in J. Kan, A.M. Jaquenod and R.F. Pascual (eds), Entre lo global y lo internacional: perspectivas críticas sobre el Estado, el mercado mundial y las relaciones internacionales, Buenos Aires: UNQUI/UNTDF, pp. 175–206. Kan, J., Jaquenod, A.M. & Pascual, R.F. 2020, ‘Introducción’, in J. Kan, A. Jaquenod & R.F. Pascual (eds), Entre lo global y lo internacional: perspectivas críticas sobre el Estado, el mercado mundial y las relaciones internacionales, Buenos Aires: UNQUI/UNTDF, pp. 175–207. Mieville, C. 2005, Between Equal Rights; A Marxist Theory of International Law, Leiden: Koninklijke Brill NV. Olivet, C. & Ghiotto, L. 2021, ‘Justicia paralela: ¿Cómo el sistema de protección de inversiones pone en riesgo la independencia del Poder Judicial en América Latina?’, Transnational Institute, May, accessed 15 January 2023 at https://​www​.tni​.org/​es/​justicia​-paralela/​. Panitch, L. & Gindin, S. 2015, La construcción del capitalismo global: la economía política del imperio estadounidense, Madrid: Akal. Pascual, R. 2020, ‘Conflicto/cooperación, intergubernamentalidad/supranacionalidad: antagonismo social de clase y relaciones interestatales’, in J. Kan, A. Jaquenod & R.F. Pascual (eds), Entre lo global y lo internacional: perspectivas críticas sobre el Estado, el mercado mundial y las relaciones internacionales, Buenos Aires: UNQUI/UNTDF, pp. 151–75. Rodrik, D. 2018, ‘What do trade agreements really do?’, Journal on Economic Perspectives, 32 (2), 73–90. Saguier, M. & Ghiotto, L. 2018, ‘Las empresas transnacionales: un punto de encuentro para la Economía Política Internacional de América Latina’, Desafíos, 30 (2), 159–90. Teschke, B. & Heine, C. 2002, ‘The dialectic of globalization: a critique of Social Constructivism’, in M. Rupert & H. Smith (eds), Historical Materialism and Globalization, London: Routledge, pp. 165–87. Transnational Institute (TNI) 2021, ‘Impactos de las demandas de arbitraje de inversores contra Estados de América Latina y el Caribe’, ISDS Impactos, accessed 15 January 2023 at https://​isds​-americalatina​ .org/​. United Nations Conference on Trade and Development (UNCTAD) Policy Hub 2021, ‘International Investment Agreements Navigator’, Investment Policy Hub, accessed December 2021 at https://​ investmentpolicy​.unctad​.org/​international​-investment​-agreements.

28. South Africa’s failed privatization, commercialization and deregulation of network infrastructure Greg Ruiters and Patrick Bond

The South African state is commonly said to be ‘failing’ and a fiscal crisis allegedly prevents the kind of institutional rescue and expansion of services typical of prior eras of developmentalor welfare-state construction. The solutions are typically either to outsource functions to the private sector, to close state and parastatal institutions down entirely, to sell off assets to the highest bidder, or to have corporations manage the state assets and services. When applied to vitally needed ‘network infrastructure’ – especially electricity, commuter rail, freight rail and port-management, highways, water and sewage treatment, or pipelines for water or petroleum products – the problems associated with state mismanagement are supposedly amenable for resolution through privatization or some form of public–private partnerships (PPPs). Privatization is the sale of state assets to private firms. Partial privatization through PPPs often involves transferring management and operational functions into private hands, while the assets are still state owned. Corporatization or commercialization entail running state-owned enterprises (SOEs) using principles associated with private profit-making, even if this merely represents a surplus returned to the SOE or to the state. The varying kinds of PPP arrangements are complex, as the bidding, procurement process, and performance and service delivery contracts, as well as monitoring and evaluation, cost considerable amounts of scarce money and take up much of officials’ time and managerial attention. Management-oriented PPP contracts vary from short term to 30 years, but in some cases, infrastructure concessions are up to a century in length, given the large-scale investments involved. Yet more complexity is introduced even where total divestiture of assets occurs, because the state may still claim to regulate privatized or commercialized firms in the public interest. Among African countries, South Africa stands out for the extent of its privatizations, but others in infrastructure occurred between 2000 and 2008 in Nigeria, followed by Kenya and Ghana. Very little privatization (in the narrow sense) took place in the rest of Africa, and much of that was local capital buying in rather than the foreign direct investment that international neo-liberal advocacy suggests is necessary and desirable (Nellis, 2005). The slow uptake in privatization in the 1990s was due to strong opposition from entrenched vested interests (senior bureaucrats in ministries and SOEs themselves, as well as public sector workers concerned about their job security) (Bennell, 1997). This chapter considers, first, the conceptual bases for various forms of privatization and commercialization that have been experienced in post-apartheid South Africa; second, the history of state infrastructure investment and divestment.

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MANY FORMS OF PRIVATIZATION Over the past 40 years, many governments – among them South Africa during its period of democratic transition – have divested themselves of airlines, railroads, telephone services, electricity companies, water services, health facilities and other functions, thereby unlocking a new phase of capitalist expansion and innovation. Divestiture, as this form of privatization is formally known, was the model of privatization adopted in the United Kingdom under Margaret Thatcher in the late 1980s, with entire systems of public services delivery being sold to private firms (Bakker, 2003; Schofield & Shaoul, 1997). Less easy to classify are the many forms of privatization that involve the downloading of service responsibilities to individuals, communities and non-governmental organizations (NGOs). Represented in the pro-privatization literature as ‘active citizenship’ and ‘community empowerment’ – as a supposed antidote to welfare dependency – this transfer of decision-making and responsibility also constitutes a move from the public (i.e., the state) to the private (in this case an individual or community), even if the profit motive is not a central objective. Although not necessarily acting with the same institutional or economic incentives and frameworks as a private company, the transfer of decision-making power to individuals and communities nevertheless constitutes an abdication of responsibilities on the part of the state (McDonald & Ruiters, 2007, p. 10). Capital, as Joel Kovel (2002, p. 42) argued, sees ‘each boundary/barrier as a site for commodity formation’, but this process is not always consciously pursued since some opportunities arise perversely. Examples of this are the business of cleaning up pollution, or making drugs to fight the effects of over-eating and to cure new diseases unleashed by industrial emissions and ecological decay. Bottled water is another good example: a response to the (perceived) contamination and unreliability of (public) water supplies and thus a self-fulfilling prophecy. The various activities that now make up the ‘service sector’ – from bereavement and psychological services to private security firms to child-care to fast food – attest to capital’s reckless addiction to growth and its uncontrollability. Firms compete with each other to get faster and newer services and gadgets to the ever receptive, ideal-type consumer. Nationalization occurs when the state assumes ownership of a private company or several companies. The process may be negotiated so that compensation is paid to the private company. In some cases, nationalization might occur without compensation. When very large firms face bankruptcy, for example, they may ask to be nationalized or bailed out. Nationalization can be an ‘amicable business’ because in cases where even the World Bank supported public ownership, they insisted that governing boards be ‘autonomous agencies’ and that ‘the private sector be well presented on its governing boards’, as World Bank critic Cheryl Payer (1982, pp. 106, 112) remarked. But most nationalized firms must exist within markets for investments and products, so their ability to cross-subsidize to assist the entire society becomes quite limited. Payer (1982, p. 112) concludes that the World Bank arranges matters in poor countries such that if nationalization does occur, the Bank will ensure that ‘consumers will see that they get no benefit from nationalization’. There are cases where Third World governments appear to be ‘revolutionary’ by nationalizing all foreign assets, as did Gamal Abdel Nasser Hussein in Egypt in 1957. But nationalization provided the new military elite with instruments for the local bourgeois class to consolidate, and by the last years of Nasser’s rule, Egypt faced widespread corruption. Nasser’s successor Anwar Sadat reopened the gates to foreign investors to enable the fusion of the new bureau-

South Africa’s failed privatization  415 cratic bourgeoisie and foreign capital (Lowy, 1981, pp. 179–80). In many other cases, the state and private capital share ownership in ‘mixed corporations’. South Africa also witnessed what was ‘mixed economy’ obfuscating rhetoric during its transition to democracy. Ultimately, nationalization without worker control and democracy is yet another capitalist policy. In the context of the drive to privatize, commercialize or deregulate, ‘corruption’ can be seen as a global phenomenon and historical in nature, since it is bound up with both original accumulation and ruling-class formation. It is also a continuous process, leading David Harvey (2003) to coin the term ‘accumulation by dispossession’ as an ongoing process, distinct from primitive, original and one-off theft by a new capitalist ruling class pushing out the feudal order.

SOUTH AFRICAN STATE INFRASTRUCTURAL EXPANSION The critical period for nationalization and SOE expansion began in the late 1920s, with electricity, iron and steel, rail and postal services and other functions vital to capital. During the 1930s, the state also built much more public infrastructure, and to support the infant industries, tariff protection was introduced and played an important role in the import-substitution industrialization that followed (Fine & Rustomjee, 1996). As a result, manufacturing capitalists expanded beyond the older forms of deep mining equipment. The rate of growth of black workers’ wages was also dramatic due to the labour demands of industrialization, as their share in relation to white wages rose by more than 50 per cent (from 11 per cent to 17 per cent), the fastest ever recorded. Overall, gross domestic product (GDP) grew 8 per cent per year from 1931 to 1946. National debt to GDP had risen to 125 per cent by early 1932, the highest level in recorded history. Yet in spite of that unprecedented debt, or indeed because of it, the national state – run by racist whites – solved the ‘poor white problem’, and birthed what became a generous welfare state for white citizens. The conditions were ripe for a much greater role for mega-project network infrastructure after World War II ended, with two major spurts of construction works recorded during commodity price upticks above and beyond an average 2.5 per cent annual growth (Figure 28.1). Most were the result of the minerals–energy complex’s expansion, and nearly all had major SOE involvement (ibid.). But with apartheid formally adopted as an ideology in South Africa in 1948, public enterprises were also bastions of white privilege. SOEs served capital and secured employment for white workers, who became the support base of the racist regime. After democracy was won in 1994, the ruling African National Congress (ANC) restructured the SOE sector, in part to deploy its leading cadre in top jobs and open up new patronage routes for corrupt syndicates – as the arms deal and the Judicial Commission of Inquiry into Allegations of State Capture (Zondo Commission, 2022) showed – but unlike the apartheid state, it failed to ensure a growing employment pool for black public sector workers, and instead permitted large shares of SOE jobs to be rationalized, as commercialization proceeded. As in the case of many South African SOEs, a form of privatization may also happen when public entities are ‘corporatized’ by becoming stand-alone business units operating at arm’s length from a government, and allowed to take the form of pure profit-making ventures. The ‘public good’ features of state services are negated because of commodification. Governments retain a stake in the new business. Privatization means that commercial considerations are primary: profit maximization, cost recovery, turning a profit in a short time, downsizing

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Source:

Consulting Engineers of South Africa (2010), p. 4.

Figure 28.1

Rhythms of infrastructure investment, 1946–2010

the workforce, charging higher prices, disconnecting supplies to those who do not pay. Privatization may also include downloading duties performed by the state onto households or citizens (redefined as customers). Deregulation and privatization are related but different processes. The former enables the latter. It is also critical to define privatization as a broad phenomenon, not merely as the sale of state assets, but also as ‘green field’ privatization in new areas of commerce such as sale of telecommunications bandwidth, as well as the marketization of social and public life more generally. Corporatization and commercialization of public entities are also within the ambit of privatization. Nominally public entities are thereby recognized as essentially capitalistic and hence effectively operating as businesses, at arm’s length from the state. Cross-subsidization and other means of serving the public interest become exceedingly difficult given such pressure. SOEs have been increasingly understood as commercial entities, and the idea of public ownership itself was delegitimized. Janet Newman and John Clarke (2009, pp. 7–8) argued that ‘public services are not only public because of their material basis in public funding or being located in a public sector’. They serve a public interest, but the recent era has entailed ‘erasure of the publicness of public services resulting from the introduction of markets, contracts and a consumerist focus’. Similar observations have been made in analyses of mission drift in public banks, where the mission of these banks has been eroded as they increasingly function like private banks (Scherrer, 2017). In 1940, when living in Mexico City under the then 11-year old Institutional Revolutionary Party, Leon Trotsky (1940, p. 43) pointed to left-wing illusions associated with nationalization, even when accompanied by progressive, anti-imperialist rhetoric:

South Africa’s failed privatization  417 The nationalization of railways and oil fields in Mexico has of course nothing in common with socialism. It is a measure of state capitalism in a backward country, which in this way seeks to defend itself on the one hand against foreign imperialism and on the other against its own proletariat. The management of railways, oil fields, etc, through labour organizations has nothing in common with workers’ control over industry, for in the essence of the matter the management is effected through the labour bureaucracy which is independent of the workers, but in return, completely dependent on the bourgeois state. This measure on the part of the ruling class pursues the aim of disciplining the working class, making it more industrious in the service of the common interests of the state, which appear on the surface to merge with the interests of the working class itself.

SOUTH AFRICAN NARRATIVES OF NATIONALIZATION In South Africa, the African National Congress (ANC) and its supporters in the 1980s – such as the United Democratic Front and affiliates of the Congress of South African Trade Unions (COSATU) – originally appeared to favour the principle of further nationalization, of at least the commanding heights of the economy. Their 1955 ‘Freedom Charter’ included the demand that ‘[t]he mineral wealth beneath the soil, the Banks and monopoly industry shall be transferred to the ownership of the people as a whole’ (emphasis added). In 1987, the National Union of Mineworkers (NUM), led by Cyril Ramaphosa as its general secretary, proposed that COSATU adopt the Freedom Charter but the National Union of Metalworkers of South Africa (NUMSA) opposed this in favour of a more explicitly anti-capitalist Workers’ Charter. The NUM won. One reflection of the durability of the Freedom Charter’s promise to share the wealth is the way Nelson Mandela himself, still in jail, wrote to his supporters in early 1990: ‘The nationalization of the mines, banks and monopoly industries is the policy of the ANC, and a change or modification of our views in this regard is inconceivable’ (Mandela, 1990, n.p.). But after a meeting with Chinese and Vietnamese delegates to the Davos World Economic Forum in early 1992, he moved the ANC away from state ownership. By May 1994, Mandela even wrongly claimed that the ANC’s ‘Reconstruction and Development Programme’ (RDP) campaign document contained ‘not a word about nationalization’ – which suggested that neither Mandela nor his Sunday Times interviewer had read as far as page 80, where the RDP cited the need for ‘increasing the public sector in strategic areas through, for example, nationalization’ (Bond, 2014, p. 90). In the anti-imperialist and national liberation struggles, economic narratives have often been reduced to building an amorphous ‘pro-poor economy’ in which the state would limit foreign capital’s prerogatives and play a redistributive role. Third-Worldist ‘Marxists’ and Moscow-aligned parties subordinated themselves to the ‘radical’ nationalists, especially after a 1928 Comintern order to forge alliance with the latter. In the case of the SA Communist Party, for example, a two-stage theory of revolution was declared in which non-racial democracy was the overarching objective and (much much) later, a socialist economy would emerge. Many Third-Worldist Marxists refused to recognize the reality that behind slogans such as ‘Unity of the oppressed!’ and ‘Power to the people!’, the radical nationalists had their own class project that would do the opposite. In South Africa, this class project took an aggressive form after 1994 when the ANC and its allies adopted a ‘Black Economic Empowerment’ assimilation strategy for corporations, using SOEs and privatization to create almost instant black millionaires. Leading comrades quickly

418  Handbook on critical political economy and public policy became capitalists, as they were ‘deployed’ to SOEs and private corporations, but typically in a financialized manner (loaded with debt that could only be repaid with rising stock market values), and sometimes in a manner that also entailed subtle forms of corruption via the influence over the state (and particular politicians) that the business elite enjoyed. They were, however, often accused of a ‘fronting’ process, in which a genuine bourgeoisie was impossible to create. This instant wealth acquired through political manoeuvres and tacit support of older-order capital has even overshadowed the privatization–nationalization debate. Without working-class control, both are simply floating-signifier strategies because they are not linked to changing the character of power relations. Radicals both within and outside the ANC were disoriented by these processes. Even Harold Wolpe (1988, p. 104), the leading ANC intellectual (though often an independent neo-Marxist), had firmly believed as late as 1988 that a negotiated settlement between the apartheid regime and the ANC ‘seems not possible’. But by the early 1990s, Wolpe – along with Eddie Webster, Karl von Holdt (1987), Jay Naidoo, Alec Erwin, Stephen Gelb and others mainly in the white left intelligentsia – defended their efforts at ‘structural reform’, arguing the left was too weak (and then attacking independent socialists as ‘ultra-left’) (Callinicos, 1992). The rapid dilution of ANC liberatory promises and its alliance with big capital coincided with the USSR’s collapse, which was especially traumatic for leadership from the Stalinist traditions of South African communism. The South African Communist Party (1989) spelt out the self-limiting role of the working class in the projected two-stage revolution, stressing the importance of postponing the socialist revolution. On this basis, those on the left who opposed the ANC were condemned as reactionary. The neo-Marxists advocated social compacts between labour and capital, but expected far more SOE interventions. Yet the existing SOEs, municipalities and other infrastructure providers have been exceptionally inefficient, corrupt and unjust, which in the spirit of hegemonic ideology associated with the ascendence of neo-liberalism (Scherrer, 2017), allowed government to promote privatization at all levels of the state. What state investments there were after 1994 fused durable privileges of white-owned capital with a new black bourgeoisie whose ‘Black Economic Empowerment’ shares contributed to amplification of wealth for a tiny fraction of society, leading to what became the world’s most unequal country (World Bank, 2022). Debates continue to rage over how to address SOE shortcomings, in both short-term capitalist terms – a more efficient service delivery of existing state services of importance to the economy – as well as in the public interest, so as to serve the needs of 60 million residents, including long-term ecological stewardship. Indeed, investment in built-environment infrastructure remains exceptionally important for climate adaptation and resilience in the context of worsening extreme-weather events. But from October 2020, austerity was declared by the Treasury, because the state budget deficit soared due to Covid, leaving the aggregate debt to rise from 28 per cent of GDP in 2006 to more than 70 per cent in 2021. Notwithstanding a vast surplus in South Africa’s public-asset balance sheet thanks mainly to mineral wealth – making the state far richer in relative terms than Western Europe (International Monetary Fund [IMF], 2018) – Treasury and Reserve Bank officials refuse to tap into national resources or engage in quantitative easing strategies (aside from a brief period in March 2020 when local financial markets were temporarily shut to further state borrowing). The state is under constant pressure from credit rating agencies that, from 2017, began judging South African bonds as ‘junk’ quality (Ngwane & Bond, 2021).

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CORRUPTION AND NEO-PATRIMONIALISM Corruption should also be forthrightly addressed, for the term is a vague moral signifier that associates breaking or circumventing rules as the work of a few rotten apples in an otherwise rule-governed system whose basic structure is fair. But since extra-economic force was inherent to capitalism since its origins – marked as they were by extremities of wars, violence, slavery and other coercive powers – the state form depended upon violent destruction, rebuilding and expansion as a necessary part of capital’s dynamism. Harvey (1982) poses this process as exhibiting tendencies towards both overaccumulation crisis and – as the main mode of crisis resolution – towards the devaluation of capital. In this, the state operates in both defensive and offensive mode to defend its constituencies’ interests, with its success or failure reflecting the correlation of class and territorial forces. The world’s victorious capitalist classes typically have powerful, violent states capable of managing, and benefiting from, such destruction. This violence extends to all sentient life and the earth itself. In other words, the basic system’s rules are not set up for the sake of fairness and justice but instead to meet the needs of capital accumulation and the reproduction of class power, as the amplification of so many ongoing global-scale socioeconomic and environmental crises illustrate. Taking this perspective, Western liberal rhetoric regarding the need to combat ‘neo-patrimonialism’ is profoundly hypocritical, since a great deal of the Global South’s ‘Big Man’ post-colonial phenomenon and of the associated degeneration of the neo-colonial state reflects their Western origins and the broader international context in which their ruling classes operate, as Frantz Fanon (1963) had pointed out in The Wretched of the Earth. Moreover, a related problem emerges from Western analysis of the African state: cultural explanations for macroeconomic dysfunctionality. In South Africa, for instance, the Oppenheimer mining tycoon family’s Brenthurst Foundation in Johannesburg (e.g., Mills et al., 2017) promotes cultural analysis without a hint of political-economic awareness: ‘The system that many African leaders have preferred thrives on corruption and nepotism…a primordial lust for wealth and power along crude racial, tribal, party, and familial lines’, according to Brenthurst CEO Greg Mills (2011, p. 4). Yet in the history of official white-settler thievery, corruption has undergirded the accumulation of capital since the days of slavery and colonial wars of dispossession. Most important was the period in which forced proletarianization became vital to the consolidation of a white-settler supremacist society. The formation of white class society is based on 370 years of corruption in which European settlers – first Dutch, then the English and Dutch-descendant Afrikaners – formed a ruling class, full-fledged capitalists, middle classes, a proletariat and at one stage even a Boer white small-farmer quasi-peasantry. When the ANC took power in 1994, it engineered its own share of this system: in 1997, the country’s future (2005–08) deputy president (then Deputy Minister of Trade and Industry Phumzile Mlambo-Ngcuka) declared that ‘blacks should not be ashamed to be filthy rich’ (News24, 2005, n.p.), while in 1999, the new president (Thabo Mbeki) explained, ‘As part of the realization of the aim to eradicate racism in our country, we must strive to create and strengthen a black capitalist class’ (Mbeki, 1999, n.p.). In 2004, the party’s official spokesperson, Smuts Ngonyama, declared that he ‘did not join the struggle to be poor’ (cited in Breytenbach, 2008, n.p.). One problem was never acknowledged, however: joining the white bourgeoisie meant assimilating into a network that the biannual PwC ‘Economic Crime and Fraud Survey’ of 2018 reports has ‘the highest instances of economic crime in the world with

420  Handbook on critical political economy and public policy economic crime reaching its highest level over the past decade. At 77 per cent South Africa’s rate of reported economic crime remains significantly higher than the global average rate of 49 per cent’ (PwC, 2018, n.p.). After 1994, the small black middle class also took a great leap forward, through high-paying civil service jobs and direct forms of accumulation via patronage politics and privatization. Family businesses were set up to benefit from the outsourcing process that soon hollowed out the state, including tender fraud, nepotistic appointments and other forms of influence peddling. To join white counterparts who enjoyed deep pockets – hence residential real estate wealth that also affected school locational decisions – the new black middle class took on excessive amounts of debt, which by late 2008 led to a ‘credit impairment’ problem for 40 per cent of the country’s borrowers, once interest rates rose rapidly as a result of the way the first stage of the global financial meltdown occurred, prior to global quantitative easing (IMF, 2014, p. 56). For the black majority, the flip side of the ‘negotiated settlement’ between the nascent black bourgeoisie and their former white enemies has been the descent into greater poverty (reaching two-thirds of the population under an ‘upper-bound poverty line’ of $3.25/day), soaring inequality, worsened spatial apartheid (since new low-income housing estates are further away due to cheaper land in a private developer-led model) and social barbarism. The day-to-day experience of the average township dweller in SA is one of violent crime, insecurity, poor services, dysfunctional schools, decaying townships, taxi wars, rapid spread of shack settlements, xenophobia and mass unemployment. These symptoms of the problem of broader societal corruption are never named as such, however, and indeed the only genuine immediate antidote – much more expansive state social policy – is typically precluded in part because of state failure. How deep is this sort of problem? The most widely cited data on state corruption ‘perceptions’ – from Transparency International – suggest that just as sharp a decline could be observed during the Mandela and Mbeki presidencies. This era of blatantly corrupt profiteering – including from network infrastructure – coincided with the renewed fiscal crisis and resurgent ideology of privatization, from 2008. But the seeds had been sown well before, in an ideological shift towards state outsourcing and outright privatization.

IDEOLOGIES, SITES AND TEMPOS OF PRIVATIZATION In contrast to the new public management (NPM) standpoint – explored below – based on seeking greater efficiency of state services as the primary objective for restructuring, we adopt an approach drawing on political economy traditions. This approach is not to adopt a general theory of the form of the capitalist state, which is a product of uneven and combined development and is a strategic relationship that unveils class forces at various levels. It is incorrect to claim ‘laws of motion’ in state formation as one would expect from an underlying theory, or to see state strategies as linear and transhistorical, ignoring the different modalities and forms that the state could take depending on the context and class forces. In the same vein, liberal democracy or a welfare state might be the best shell for capital during certain conjunctures, but at other times, capital has also periodically turned to fascism as a form of rule in response to intense class contradictions. As Bob Jessop (2022, p. 94) argues:

South Africa’s failed privatization  421 I rejected a general theory of the state because this would have been transhistorical, ignoring the ways in which the emergence of the territorialization of political power, which defines the general characteristic of state power, varies with social formations and their dominant relations of production. There is a limit to what one can say about states in general in these terms even if the importance of territorial sovereignty is recognized. It is more important to examine state power than to examine the territorial form of the state apparatus as such and this was emphasized in the form-analytical work of Marx and Engels, the ideas of Lenin and Trotsky, the writings of Gramsci on the state in its inclusive sense (political society + civil society, or hegemony protected by the ‘armour of coercion’), as well as the arguments of Poulantzas and other relational theorists.

In this respect, we need to be precise about the state’s role in the phasing of capitalism’s development. The movement towards privatization and the campaigns for PPPs of various kinds began with first-wave deregulation and privatization during the 1980s, promoted by Western governments and institutions associated with business (e.g., London’s Adam Smith Institute). Neo-liberalism was imposed on the Third World via IMF and World Bank ‘Structural Adjustment Programmes’, and the process was rapidly advanced by the transition from centrally planned to market economies in Eastern Europe and the former Soviet Union. With the global financial crisis of 2007–08, the push for privatization and PPPs to lower global public debt loads gained new momentum, particularly shaped by corporate think tanks and international financial institutions. The public sector is seen to be too weak to meet the challenges of the UN 2030 Agenda for Sustainable Development and most governments face huge debt. Yet over the last few decades, corporate income tax rates have plummeted by more than 20 percentage points (see the Part VI ‘Taxation’ in this Handbook). In South Africa, the peak was 52 per cent in 1992, but it dropped to 27 per cent in 2021. In spite of lower taxes, corporations’ ‘illicit financial flows’ amounted to 3–7 per cent of GDP (i.e., $25 billion) according to Treasury officials (Planting, 2019). Neo-liberalism is conceptualized not only as a policy paradigm and a hegemonic ideology but also as a distinctive form of governmentality (Scherrer, 2017). Hence NPM advocates specific changes such as restructuring of civil service departments into arm’s-length agencies or corporate entities mainly through contracts and competitive mechanisms such as contracting out and internal markets and performance-based accountability. In general, NPM has meant new governance arrangements with different roles for the ‘hollowed out’ state as an ‘enabler’ rather than as implementer and bigger roles for consultants and external agents. NPM typically depicts organized labour as inflexible and resistant to change (Mpofana & Ruiters, 2019). It argues for an ever-expanding consultant industry. Leading bureaucrats receive bonuses and subsequent appointments in the private sector in what is termed ‘a revolving door’ (Beetham, 2013). From the private sector’s standpoint, policy churn in the form of changes of policies and PPPs is ‘rational’ since this allows for enormous profits (see also Dutta et al., Chapter 7 in this Handbook). But even the World Bank recognizes that if not adequately regulated, privatization frequently leads to corruption and fails to deliver improvements, greater competition or increased foreign direct investment (Rose-Ackerman, 1996). The World Bank and other privatization advocates acknowledge that a strong, autonomous state with independent policymakers and a robust regulatory apparatus are ‘preconditions’ for successful privatization – an irony given that ‘state failure’ is one of the premises of marketization (Estrin & Pelletier, 2018).

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PERPETUAL NEO-LIBERAL REFORM One of the key reasons for institutional instability and policy churn, according to Peck (2001, p. 452), is a neo-liberal dynamic of almost ‘perpetual reform…there is always another solution over the hill’. Additionally, David Beetham (2013, pp. 4–5) notes, instead of governments controlling the excesses of the corporate sector in the public interest, they have become increasingly its ‘chief promotional agent’. Diane Stone (2004, p. 561) argues that: [NPM] spread around the globe because of the existence of a global ‘fashion-setting’ network of management consulting firms and growth in the use of external consulting services by governments (and) large consulting firms such as PriceWaterhouseCoopers, KPMG or Andersen Consulting established ‘government consulting divisions’ advocating the adoption of a more managerial approach in government.

But all states are ‘captured’ to one degree or another and in various forms or by coalitions of capitalists, highly paid consultancies that form a shadow state, with collaborationist trade unionists and NGOs. This leaves the ideal ‘autonomous’ state as a largely mythical construct. The state, as Marx argued, is a moving contradiction. How might we reframe the debate? For Marx, the commodity form (money) become the ‘battering ram’, destroying old norms. Capital became the measure of all things. Privatization and deregulation are rather like extended primitive accumulation and commodification. Commodification entails the transformation of community relationships, formerly untouched by commerce, into commercial relationships. Under capitalism, many goods and services that previously had no market value or were self-provided within households and communities have been brought into the market fold and mass production. New commodities are created with expanding markets to new geographic areas and new sectors that may not yet have been marketized, while a deepening of commodification is accomplished through the deregulating exchange mechanisms, allowing further penetration of market principles into under-marketized spheres. The extent and pace of commodification and decommodification over the longue durée can be seen as part of a larger, dynamic process of change, one that is unique to capitalism and central to an understanding of uneven development and capital accumulation and class struggles (Bond & Ruiters, 2017). We also need to situate de-commodification within class struggles (Esping-Andersen, 1990; Fraser, 2013; Polanyi, 1956). Capital is repeatedly bailed out by the state (public money serving private ends in the name of a false universal called the ‘economy’), especially under circumstances considered ‘too big to fail’. The most extensive state bailouts of capital yet recorded are in fossil fuel subsidies given to companies guilty of high greenhouse gas emissions. Using a conservative measure of the damage done by such emissions ($60/tonne of CO2), the IMF (2021) records $5.9 trillion in current annual subsidies, mostly implicit insofar as climate damage goes untaxed. In South Africa, which has the world’s lowest carbon tax ($0.42/ton for most polluters from 2019–25), the annual subsidies are $50.6 billion. Other estimates are $3000/tonne, putting these mainly implicit subsidies at five times the country’s GDP (Kikstra et al., 2021). But aside from the sphere Marx called ‘free gifts of nature’, at the heart of the capitalist mode of production is the commodity labour power. Its transformation within the system of wage labour is the source of profit, hence, ‘Our investigation must therefore begin with the analysis of a commodity’ (Marx [1867], 1978, pp. 302–3). Primitive accumulation, while seen

South Africa’s failed privatization  423 as an ‘original phase’, continually prepares the ground for the commodification of human bodies and nature, and has been shown – starting with Rosa Luxemburg’s Accumulation of Capital in 1913 – to be a more or less permanent process, especially via imperialism and re-colonization, for which privatization remains a vital tool (Harvey, 2003). This requires that we re-imagine what public and the state means as a form of civilization and solidarity. Public service bodies act as channels through which public culture is sustained, reproduced and reframed, and environmental values are conserved. In Africa, such notions of community, solidarity, ‘Ubuntu’ (i.e., ‘we are who we are through each other’), and African socialism – as well as Pan Africanist sensibilities – have long animated progressive political culture and justified the need for SOEs.

POST-APARTHEID INFRASTRUCTURE COMMERCIALIZATION AND MEGA-PROJECT CRISES Before reviewing the crises associated with these projects, especially those currently supplying network infrastructural services, it is important to remember how many of the post-apartheid investments were aimed at finding PPPs in financing, operations and ultimately ownership, with many featuring commercialization. These were especially evident in telecommunications, transport, electricity and water. In 1997, when a 30 per cent share in the state-owned Telkom telephone system was sold to a Houston/Kuala Lumpur alliance, problems soon arose. For fixed-line telecommunications, the cost of local calls skyrocketed as cross-subsidization from long-distance (especially international) calls was phased out. As a result, out of 2.6 million new lines installed, at least 2.1 million disconnections occurred, due to unaffordability. Immediately, 20 000 Telkom workers were fired, leading to ongoing labour strife. A second fixed-line operator was first discouraged then encouraged under pressure from competing commercial interests, and a regulator (with integrity) was ultimately dropped from the selection process. Attempts to cap fixed-line monopoly pricing by the regulator were rejected by the Texan/Malaysian equity partners via both a court challenge and a serious threat to sell their Telkom shares in 2002. Telkom’s 2003 initial public offering on the New York Stock Exchange raised only $500 million, with an estimated $5 billion of Pretoria’s own funding of Telkom’s late 1990s’ capital expansion lost in the process. A collusion pact on pricing and services gave windfall profits to the two main private cellular operators. And persistent allegations of corruption stymied the introduction of a third cellular operator. Similar problems arose in the transport sector, also characterized by private operators and partial privatizations. The commercialized toll roads across the country were often unaffordable to the poor, especially those living in the immediate vicinity. Private ‘kombi’ minivan taxis remain extremely dangerous, unregulated and ungovernable, due to profitability pressures. Air transport privatization included the collapse of the first regional state-owned airline following privatization, South African Airways’ disastrous corporatization mismanagement by a chief executive imported from the US and subsequent renationalization of the 30 per cent share owned by (bankrupted) SwissAir, and major security glitches and labour unrest at Airports Company South Africa. There was constant strife with the ANC-aligned trade union that threw port privatization into question. The increasingly corporatized passenger rail service shut

424  Handbook on critical political economy and public policy down many feeder routes (originally based on migrant labour routes prior to kombis); although unprofitable, they had been crucial to rural economies. The electricity sector commercialized more slowly, but Eskom fired 30 000 workers as it transitioned to a public corporation with a profit motive. Much higher tariffs were imposed on residential customers, and the rural electricity grid’s expansion was slowed. Then came widespread disconnections – affecting millions annually – of households who fell into arrears on inflated bills, leading to resistance transcending marches and protests, and extending into illegal reconnections that in Soweto alone reached 86 per cent of all households the utility was supplying. Water and sanitation outsourcing began with fanfare but ultimately affected only 5 per cent of municipalities. In the spirit of privatization, however, local governments adopted a 100 per cent cost recovery policy during the late 1990s at the urging of central government and the World Bank. Where there had been commercialization, it was a failure – for example, in the small town of Nkonkobe and nearby Queenstown and Stutterheim (Ruiters, 2002). In the city of Mbombelo (Nelspruit), London-based Biwater departed in disgrace after not extending services to most poor people and disconnecting many other low-income residents. In Johannesburg’s black townships (not white suburbs), Paris-based Suez was attacked by communities for imposing pre-paid water meters, substandard sanitation and refusal to disclose basic information about the utility (Ruiters, 2007). Sufficient counter-pressure – including mass protests and vandalism of water meters – disrupted cost-recovery systems by 2006. But across South Africa, the 100 per cent cost-recovery dogma led to mass disconnections of water, and in 2000–01, to the continent’s worst-ever cholera outbreak. A parallel albeit quite different set of problems emerged in the electricity sector, for by the early 1990s, the new Eskom generators were suddenly producing a third more capacity than needed. That saw Eskom finally roll out electricity to low-income households, and provide subsidies to the aluminium smelters – extremely generous to mop up the surpluses. This proved a headache for decades to come. Columbus steel was privatized, but when ownership was taken by Vladimir Putin’s oligarch ally Roman Abramovich (Evraz Highveld Steel), it was milked, and by 2005 run into bankruptcy. A final point in relation to PPPs within a highly-corrupted South African capitalism, is the in-built incentive to destroy crucial aspects of major public infrastructure when outsourcing arrangements also include maintenance and repair contracts. This was witnessed increasingly in the Eskom electricity and Transnet rail parastatals under the name of ‘sabotage,’ which implies malevolent political intent (and to be sure, this is often a factor within South Africa’s profoundly fractured ruling party). In the main case of allegedly factional attack, supposedly ‘well-orchestrated economic sabotage’ was, President Ramaphosa claimed, associated with ‘insurrectionary’ (in reality, spontaneous) mid-2021 rioting that destroyed $3.5 billion of property – including Transnet rail lines and Eskom power substations – and left 350 dead (Bond 2021). But in many cases, the wreckage of network infrastructure appears as a straightforward situation in which very substantial physical assets are not maintained or are broken outright, so the same PPP arrangements for outsourced repair become even more lucrative. One Business Tech report confirmed that when an Eskom power plant was partially wrecked in 2022, after lubricating oil was improperly drained, “the perpetrator confessed, saying he intentionally removed the plug to cause the trip to ensure that his employer would be awarded additional maintenance and repair jobs at the station.” As another example, the coal-export rail line in 2022 achieved only 65 per cent capacity – i.e. 1992-levels of volume – due to

South Africa’s failed privatization  425 sabotage. Reasons included cable theft, severed rail lines and even an overseas locomotive supplier’s refusal to fulfill a $5 billion contract that was, in its 2013 origins, rife with corruption. A decade later, reported Abram Masego (2023), “There are at least 161 locomotives that remain stuck and cannot be returned to the rail lines as Chinese state-owned rail supplier CRRC E-Loco Supply refuses to provide Transnet with spare parts after it was implicated in alleged wrongdoing during the investigation into the acquisition.” In the more recent period, all the mega-privatization projects are considered failures. The Gauteng electronic tolling system was charged by the SOE Sanral at far too high a rate, which immediately led to mass payment boycotts (reaching 73 per cent of users, thus destroying the tolling system). The fast Gautrain from Johannesburg to Pretoria ended up needing major unanticipated operating subsidies. The government’s National Planning Commission (2020) took a hard look at the cost (and time) overruns on the main 2010s’ mega-projects, and declared nearly all far in excess of originally estimated costs: for instance, an Eskom Pumped Storage Scheme was four years late and cost 290 per cent of the original budget. The new airport at Durban cost 242 per cent of the original budget, although it opened on time for the 2010 World Cup. The main oil pipeline was six years behind schedule and cost 250 per cent more than originally budgeted. The most expensive mega-projects – Eskom’s Medupi and Kusile coal-fired power plants – were 293 per cent more expensive than expected and were eight years behind schedule, costing the economy much more in lost output due to electricity blackouts. There are two directions out of the broader quagmires of state network-infrastructure failures described above. The first is to continue blaming the state as an intrinsically inefficient, corrupt site for goods and services vitally needed in South Africa’s economy, especially export-oriented minerals. The second was to recognize that South Africa’s failed privatization, commercialization and deregulation of especially network infrastructure was not a function of the state, per se, but of its management, its leadership’s ideological orientation and the milieu of widespread private sector corruption, neo-liberal public policy, the business sector’s gross fixed capital formation strike, and austerity. By adopting the first line of argument, ANC leadership confirmed in mid-2022 that the ruling party was rapidly moving to an even more explicit endorsement of private-sector operations, as large parts of network infrastructure continued to fail (Omarjee, 2022). Activists in the left-wing labour federation and its social movement allies – the ‘Cry of the Xcluded’ movement – adopted the second argument, but the balance of forces was unfavourable to their interests.

CONCLUSION The South African case of privatized, commercialized and deregulated network infrastructure confirms the most serious concerns expressed over the past few decades about contemporary state managerial, ideological and service-delivery weaknesses. The concerns discussed above are readily articulated in class terms, but broader principles are at stake. In any socially, economically and environmentally sound infrastructure project, there are important public benefits (whether under the label ‘pro-poor’ or having characteristics of ‘public goods’ or ‘merit goods’ or ‘positive externalities’ or ‘multipliers’). But over time in South Africa (and many other sites), especially after the 1990s’ era introduction of neo-liberal state logics, the public interest has been largely downplayed. Aspects

426  Handbook on critical political economy and public policy of state services recognized as universally desired or required by society, and especially those considered to offer a potential ‘commons’ of mutual interests in decommodifying ever more features of life, were replaced by individualized consumption norms. Providing network infrastructure is now dominated – especially within states suffering NPM ideology – by the profit-centred strategy of commercialization and, once full-fledged privatization then kicked in, by the profit motive. Instead of positive multipliers, many more negative externalities were generated, just as in the private sector. When it came to emissions of greenhouse gases (or transport of coal), for example, South Africa’s SOEs Eskom and Transnet (and former state oil firm Sasol) were exceptionally irresponsible. Moreover, while socio-environmental externality costs were increasingly socialized, deregulation allowed these tendencies to generate a rise in privatized monopolistic profits, from what should have been ‘natural monopolies’ provided by the state. When it came to social demands for network infrastructure such as household water and energy, there were occasionally breakthroughs won mainly by social movements whose resistance strategies and tactics rose to fierce levels – for example, illegal reconnection of disconnected electricity in townships such as Soweto (where by the early 2020s, fewer than 15 per cent paid their bills in contrast to the vast majority whose connections were illegal). Labour’s resistance to privatized state services was often expressed – and was occasionally successful – when trade unions declared strikes (e.g., NUMSA against Eskom). Environmentalists also forced energy supply to be renewable in the face of state strategies still favouring coal generation as recently as February 2022 (in the country’s northernmost Special Economic Zone). In that case and many others, however, South Africa’s rulers pushed forward with the most notable form of state failure: the mega-project. No matter how unsuccessful, mega-projects continued to motivate an allegedly developmental approach to state building, though the harsh project-based realities revealed systemic corruption as a driver of class formation. These are the contradictions and socioeconomic-ecological struggles that can be found in a South Africa where simply removing white settler-colonial rule in 1994 was only a fraction of the struggle for a genuinely democratic, developmental state. The period of state degeneration was most acute during the Zuma era but in many respects even more blatant forms of neo-liberal corruption – a more rapid rush to privatization, commercialization and deregulation of network infrastructure – were recorded in the Ramaphosa era. No version of a workers’ party or a genuinely left-wing political organization appeared on the horizon. So it would be up to critical forces in civil society to stiffen their own resistance to these processes, while envisaging a future state they could control and not just pester from the side lines, one committed to supplying far-reaching network infrastructure, but of an eco-feminist-socialist character.

BIBLIOGRAPHY Bakker, K. 2003, An Uncooperative Commodity: Privatizing Water in England and Wales, London and New York: Oxford University Press. Beetham, D. 2013, ‘How widely should we define “corruption”?’, Criminal Justice Matters, 94 (1), 4–5. Bennell, P. 1997, ‘Privatization in sub-Saharan Africa: progress and prospects during the 1990s’, World Development, 25 (11), 1785–803. Bond, P. 2014, Elite Transition: From Apartheid to Neoliberalism in South Africa, London: Pluto Press. Bond, P. 2021, ‘Spin-doctoring the July chaos: Dangers of conspiratorialism’, Amandla! 78, accessed 2 February 2023 at https://​aidc​.org​.za/​download/​amandla​-78/​?wpdmdl​=​13534​&​refresh​=​63c​ 7eb10d56a21674046224

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PART VIII WELFARE

29. Care in global value chains Christa Wichterich

Global value chains, nurtured and driven by transnational trade, are the lifelines of globalization and ensure its reproduction. They are based on a new international division of labour between the Global North and the Global South, between more and less wealthy countries and households. Global care chains are the core structures for the reconfiguration of social reproduction across borders and boundaries in the wake of a global crisis of reproduction. Since the 1960s, transnational care chains emerged as a labour regime in post-colonial situations due to a severe lack of care workers in countries of the Organisation for Economic Co-operation and Development (OECD), and persisting poverty and surplus of young un- and underemployed women in the so-called ‘developing’ world. The key mechanism is that a shortage of caretakers in one place, reflected in the labour market as a high demand for caretakers, is managed by the transnational supply and transfer of care labour force from another place. Feminist political economists coined the notion of global care chains by extending the perspective on labour and trade chains across countries from the productive sector like manufacturing and trading of textiles, electronics and cars to the reproductive sphere. The analogy of production and service chains points at the feminist assumption that care work is labour as much as industrial work and creates social as well economic value. Being integrated into the global labour market, care work as waged work is characterized by low valuation in terms of remuneration and recognition. The root cause of the little value attributed is the gendered division of labour and women’s unpaid reproductive work in the private sphere of the household and the family. This connotation places paid care work in a dilemma between unskilled and skilled, ‘natural’ feminine and professional, emotional and rational, much needed and disregarded. Feminist political economics explore these contradictions and patterns of unequal exchange in the context of interacting power relations at household, national and international levels. Being inextricably linked to the socio-economic inequalities between nation-states, an intersectional analysis of global care chains is necessary, which unravels the hierarchical regimes of gender, class/caste, race/ethnicity and migration. Intersectionality refers as well to the interwovenness of the political economy and the socio-cultural economy of social reproduction, meaning the narratives, norms and images informing the work of caring, providing and nursing.

CRISIS OF SOCIAL REPRODUCTION AND TRANSNATIONAL SUPPLY OF CARE The conceptualization of global care chains took place in the late 1990s in the wake of unfolding regimes of a new international division of labour after the implosion of the bipolar world. The concept links globalization of markets and labour with gender and migration studies. The 430

Care in global value chains  431 theoretical building blocks of the concept were Saskia Sassen’s concept of ‘feminization of wage labour’ by and in globalization processes (Sassen, 1998, pp. 81–111), Nakano Glenn’s analysis of the ‘racial division of reproductive labour’ (Glenn, 1992), and Arlie Hochschild’s analysis of emotional work and of the commercialization of intimate life (Hochschild, 2000). Transnational and transcontinental care chains are an extension of care chains between rural and urban areas within nation-states, between poor and wealthy classes, lower and upper castes, black/coloured people and white elites. The ‘return of the housemaid’ (Young, 2001) was caused by the rise of middle classes in many countries, and middle-class women entering the labour market in urban areas as professionals. These dual-earner households can afford a low-cost domestic worker or caretaker for the kids or elderly family members. Arlie Hochschild (2000) was the first to use the notion of global care chains, referring to empirical studies on Filipina domestic workers in Los Angeles by Rhacel Parreñas. Parreñas (2000) researched the ‘international transfer of caretaking’ by Filipina migrant workers to Italy, the outsourcing of domestic work by middle-class families to migrants, and the filling of the care gap by unpaid female relatives or a poorly paid neighbour in the Filipino household. Gendered migration and remittances link such inequalities in the receiving and the sending country (Parreñas, 2001; for Poland, see Lutz & Palenga-Möllenbeck, 2011). On a global macroeconomic level, the gendered export and import of waged care labour are driven by uneven development and capitalist market dynamics. On the national level of receiving countries, they are driven by various crisis situations in social reproduction and a shortage of caretakers, while in sending countries a lack of employment opportunities and income propel labour migration. Being built on structural inequalities, global care chains construct a social stratification of reproduction on a national and international level (Razavi & Staab, 2010). Due to care chains, migration became increasingly feminized in the sense that women went on their own and not for family reunion. For migrants from Eastern Europe or the Philippines who graduated in their home country or obtained professional training, the employment in the care sector led to deskilling and ‘conflicting class mobility’ (Parreñas, 2001). They experience a downward class mobility in the destination country while the remittances construct an upward social mobility in their home countries. Transnational care chains and reproductive networks draw care capacities and emotional work from the Global South and shift care from poorer to more affluent households, from poor to richer countries. Going beyond the Marxian concept of labour exploitation, the notion of care extractivism highlights the intensified commodification and trade of a valuable social and economic resource, which has been embedded socially and culturally in a community (Wichterich, 2019). Similar to resource extractivism – for example, through mining from the earth – care extractivism is exaggerated to manage crisis situations like the prevailing shortage of care. As much as resource extractivism privatizes common natural resources, degrades the environment and depletes limited resources, care extractivism depletes emotional bonds and social capital, reciprocity and solidarity, which still constitute a common of social reproduction and a social (re)source for survival in societies of the Global South (Widding, Devi & Hochschild, 2008). In the opposite direction, care chains shift a local crisis in social reproduction and a shortage of caretaking from the receiving place and receiving class to the sending place and class, to the home countries of the recruited care workers, a kind of spatial fix of the crisis (Harvey, 2001). Due to care extractivism, care and emotional capacities are missing in the households

432  Handbook on critical political economy and public policy and countries of origin. Production and reproduction being spatially and socially separated and mitigated by remittances, the care worker from the Global South, as an entrepreneur of herself, must reconcile her job and family work. At the beginning and the end of the chain, waged caretaking and unpaid care work, informal and formal labour markets are interlocked based on the assumption that care work is ‘naturally female’ and an extension of mothering and housework, even in the case of skilled nursing. While initially the focus of studies on the globalization of care was on domestic work and childcare, Nicola Yeates (2010), highlighted nursing as another significant cross-border care chain. Nursing as skilled labour requires education, skill training and professionalism regarding medical technology. In neoliberal, highly privatized economies, private nursing colleges are mushrooming and paradigmatic for the financialization of education and other public services. The students and their parents have no choice but to go into debt to finance the education. Repayment of this debt forces young nurses to take up any odd job and sometimes a kind of bonded labour. Thus, indebtedness is generally a driver of the vulnerabilization and precarization of care workers (Walton-Roberts & Irudaya, 2022). Yeates (2009, p. 178) calls the growing number of private entrepreneurs in the production of migrant nurses the ‘nursing labour migration-industrial complex’. Some labour exporting and importing governments organized the recruitment, training and placement of care workers as a public–private endeavour with training centres, travel and visa agents, and financial institutions. The chain of brokers, agents, intermediaries and traffickers has become more extended and diverse, a lucrative business machinery producing and distributing migrant care workers. The migrants run into debt, and often the repayment forces them to migrate a second and a third time. The political and the socio-cultural economy co-construct migrant workers in global care chains (Sum & Jessop, 2013). A key factor in the valuation and recognition of migrant care workers is the dimension of ethnicity and race. As highlighted by Glenn’s concept of racialized care labour (Glenn, 1992), in several countries like Brazil, South Africa and the US, waged domestic work has a strong connotation of coloniality because it goes back to the exploitation of slaves and coloured people in colonial and apartheid regimes. The othering of the class of servants and the forceful construction of specific forms of families, intimacy and affection still have strong repercussions today (Brites, 2014). The ascription of theft to domestic workers based on the inequality in property and assets of have and have-nots is still a prevailing feature of devaluation and stigmatization of the ‘others’ in many countries and legitimizes permanent surveillance of domestic workers. On the side of the receiving country and households, a strong element of culturalization and ethnicization in terms of attribution of ethnic and racial stereotypes legitimates the subordination of the worker and the low valuation of care work. In Western Europe, a popular way of obscuring the indecent work relations – for example, in a live-in 24-hour home care for the elderly – is the narrative that women from Southern and Eastern countries are more loving and respectful towards the elderly than people from Western individualistic cultures (see for Sweden, Torres & Lindblom, 2020; see for Switzerland, Schilliger, 2015). This ethno-racist, culturalistic discourse attributes care ethics to ‘other’ women and shifts responsibilities, ‘dirty’ and bodily work to them. Private actors like brokers play an important role in the construction of subjectivities and stereotypes for job placement. In Ghana, brokers shape and filter care workers for employer groups, middle-class citizens of Accra, expatriates, or families in the Gulf states. They con-

Care in global value chains  433 struct the ideal worker or ‘good girls’, sometimes very young, train them to be subservient, docile and polite, and settle their market value accordingly. Girls from poor regions in North Ghana are channelled into the most precarious jobs (Awumbila et al., 2019). In Taiwan, a destination for domestic workers from Indonesia and the Philippines, Filipinas are considered to be clever because they are better educated and English-speaking, but cunning and troublesome, while Indonesians are praised as loyal, loving, hardworking, honest but simple (Loveband, 2006). Filipinas are preferred as caretakers for children, Indonesians as caretakers for sick and old people. Thus, ethnicity- and nationality-based stereotypes not only structure the labour market and placement strategies operated by brokers, they also divide up the care labour force and make organizing and unionizing more difficult. In Hong Kong, Singapore and Taiwan, recruitment agencies attempt to create docile migrant workers and the ideal caretaker in so-called guestworker programmes (Lan, 2018). In Japan, care workers from Southeast Asia are expected to be professional, but at the same time authentic, warm and cheerful, meaning distinct from the cold professionalism in Japanese workplaces (ibid.). Migrant women whose care work is commercialized in transnational chains often get treated as disposable labour so that the boundaries to other commodified forms of migration and intimacy such as marriage migration or sex work become fluid. Domestic workers in Hong Kong pursue the goal to improve their living and livelihood situation by getting involved with sex tourism, search for a long-term partner, marriage brokerage or – after having a baby – with the adoption industry (Constable, 2016). Commercialization of these entangled forms of informal labour generates its own intimate industrial complex governing sex work and sex tourism, marriage and adoption. The political economy of intimate work is part and parcel of development strategies in some countries, in particular in Asia, and constitutes a profitable business for brokers, agents, pimps and traffickers. However, most of the time, sexual services disappear from migration studies (Agustín, 2006), and feminists’ positions manoeuvre between victimization of women and a perception of them as entrepreneurs of their own body. Whether sex work should be governed by labour rights or by morality informs controversies over regulating the agency of women and the business, or prohibiting it. Due to the globalization of assistant reproductive technologies like in-vitro fertilization, surrogacy motherhood and reproductive tourism by want-to-be-parents also operate as an industrial complex, including transnational bodily care work by surrogate mothers and egg cell providers (Pande, 2010). Like other care chains, they reproduce inequalities – namely, they co-construct a social stratification of (engineered) biological reproduction within nation-states and transnationally (Ginsburg & Rapp, 1995, p. 3).

POLICIES OF LABOUR-SENDING STATES In the early 1970s, Philippine President Marcos adopted an export-oriented development strategy that comprised the export of goods and people. Justified by a high demand for health professionals and caretakers in the global labour market, the main objectives of the strategy were to reduce the large number of unemployed people and to receive remittances in foreign currency that were used to service the country’s debt. Therefore, the state engaged in ‘labour brokerage’ (Rodriguez, 2008) and fostered a migration industry including pre-departure training institutions and control of the quality of board exams to maintain the good reputation of

434  Handbook on critical political economy and public policy the exported services. While Filipino men represent the majority of seamen in international shipping under flags of convenience, the majority of emigrant women work as nurses and domestic workers. As a result, for decades, the Philippines as well as Sri Lanka and Indonesia have relied heavily on remittances as a substantial part of their gross domestic product. In Indonesia, the Suharto regime made emigration a part of the national development plan in 1984 and regulated migration in close cooperation with the private migration industry. The state oversees quality control, including medical checks and pregnancy tests of young women. Young women are legally obliged to undergo preparatory courses in secluded training camps, for weeks isolated from their families and peers, and prohibited to use social media. For recruitment, training, travel and placement they have to take up loans that are later deducted from their wages. They are instructed to represent the nation abroad, morally upright, loyal to their families, hardworking and accepting harsh conditions (Dinkelaker, 2018). While the state mobilizes them and praises them as ‘heroines of the nation’, it tries to regulate and control their movement and behaviour. The construction of morally respectable, hardworking, docile ‘ideal’ migrant workers functions as a competitive advantage in the wake of more countries – for example, from Africa – engaging in labour brokerage of care workers (Fernandez, 2011). Like in the Philippines, the strategies of labour export and the narrative of the migrant worker as ‘heroine’ is revitalized in each economic crisis. However, most of the time, the sending states do not protect the migrant workers abroad, and do not help stay-behind families regarding childcare and household chores, gender trouble and problems of the transnationalization of motherhood and parenthood. Only after many reported incidents of sexual violence and forced labour in receiving countries, did the Philippine, Indonesian and Indian governments claim moral responsibility for the domestic workers abroad and promised protection (Gaur, 2019; Gueverra, 2006; Wiyayanti & Windiani, 2016). In some cases, labour export to specific countries was restricted or stopped for a certain time, forcing eventual migrants into illegality. However, as communities are affected structurally by the labour export and care drain, this is not a private problem but a public issue. Most of the sending countries do not have a reintegration policy after the return of the migrant workers. However, sometimes experiences and skills acquired by returnees in the West are considered to be an asset or a brain gain for the country – for example, ‘foreign-trained’ nurses attract medical tourists in the health sector. Identity formation as ‘migrant citizen’ implies the construction of an ‘ideal migrant worker’ with duties, rights, moral and standardized conduct. Pre-departure programmes aim to shape the ideal migrant before they leave the country so they can meet expectations abroad (Rodriguez & Schwenken, 2013). In India, the outmigration of nurses is called ‘business process outsourcing’, like the migration of IT professionals, and is officially channelled through six state-run recruiting agencies in different regions of the country (Walton-Roberts & Irudaya, 2022). Normally, state institutions charge fees for bureaucratic procedures, further contributing to the indebtedness of the migrant workers. As care extractivism by sending countries initially took the form of state-led labour export for development purposes and debt servicing, it is obvious that governments prioritize state revenues in terms of remittances over the creation of employment opportunities and a functioning public health and education system in the country itself (Yeates, 2009). The severe shortage of healthcare workers results in an alarming nurse–patient ratio. To cover the HIV/ AIDS epidemic, the South African government introduced the ‘occupation-specific dispensa-

Care in global value chains  435 tion’ new remuneration structures as an incentive for the migrant health professional to stay or to return (Labonté et al., 2015). During the COVID-19 crisis, President Duterte stopped outmigration of Filipina healthcare workers.

POLICIES OF LABOUR-RECEIVING COUNTRIES In higher-income destination countries, imports of care work and care extractivism are governed by the interest of states and private households to manage a shortage of caretakers. Many states actively recruit healthcare workers and service providers from lower-income countries: the Gulf States in Southeast Asia and Africa, Great Britain in South Africa and South Africa in India and Cuba, for example. At their destination, migrant care workers cushion the lack of public care institutions and austerity policies, and function as a low-cost neoliberal strategy to relieve the state of social responsibilities (for Hong Kong, see Constable, 2016). In many cases, the state is also a major employer in public health and education. Migrant care workers face biopolitical restrictions through immigration policies, residence, work and family reunion permits. These policies regulate their placement, their movements, their bodies, the duration of stay and potential repatriation, and operate as control, surveillance and devaluation mechanisms. Already in the 1960s, governments in the Global North recruited nurses from the Global South to cope with a shortage of healthcare personnel in hospitals in Europe and the US. In 1963, the West German government entered into an agreement on ‘technical development aid’ with South Korea and imported within a decade 10 000 highly skilled nurses as so-called ‘guest workers’. However, their diplomas were not recognized in Germany. At the same time, through Catholic networks, 6000 young women – called ‘brown angels’ – from Kerala, India, among them many Catholic nuns, came to Germany and underwent nursing training (Goel, 2014). When German hospitals had overcome the shortage of nurses in 1977, the migrant nurses were told to return home. The South Koreans protested, arguing that their services in Germany were ‘reversed development aid’ and that they were ‘not a commodity’ (Cho-Ruwwe, 2016, p. 16). In the 1970s, the Asian high-income countries turned to importing care workers due to a growing demand. The Hong Kong government introduced a domestic helpers policy corresponding to the Philippine labour export policy. Based on their Confucian family ideology, the governments of Hong Kong, Singapore and Taiwan deployed migrants as 24-hour live-in workers for domestic work, care for children, sick or elderly people in private households. Instead of financing public institutions, these governments offer tax relief and concessions to their citizens to employ migrants. The British-introduced Central Provident Fund in Hong Kong, the ElderShield Program in Singapore or the Long-term Care Insurance in South Korea and Japan support private households to hire low-cost migrant care workers (Peng, 2018). A regulatory Instrument to devalue migrant workers is the non-recognition of exams from foreign countries. This denial constructs nurses and other caretakers as trainees and unskilled workers. It devalues their work. In Denmark, domestic workers get one-year contracts as au pairs only. The US offers the J-1 visa to nannies and au pairs under the heading of ‘educational and cultural exchange’ (Romero, 2018). Domestic workers entering the country with A-3 and G-5 visas are tied to the employer and are supposed to leave the country after the end of the contract. Thus, they are not free market agents who can choose their employer and work-

436  Handbook on critical political economy and public policy place. This binding mechanism is a legal vehicle to control and to illegalize migrant workers who overstay after the end of their term with their assigned employer or change employer. Illegalization is a proven method of vulnerabilization and precarization of migrants and their work. Many migrants tried to survive in illegality until 9/11 2001 when restrictions towards undocumented migrants in the US and border controls were intensified (Assis, 2014). Also in Singapore, Malaysia and Thailand, the work permit of domestic workers binds them to an employer, and they depend on that employer for insurance. Employers can reduce costs by not insuring or underinsuring the employee. In these countries, domestic workers are either excluded from national labour laws or these are hardly applied to them (Torre & Figge, 2018). Trade unionizing of domestic workers is systematically obstructed; in Singapore, only Singaporean citizens can register a union; Thailand and Malaysia deny the registration of migrant domestic workers’ unions unlike other migrant workers’ unions (ibid., p. 125). Legal bondage to a specific employer-sponsor is also the outstanding feature of the Kafala system in several Middle Eastern countries. Private agencies recruit employers who sponsor the domestic worker’s entry permit, flight, agency fees and medical check-up. Most of the time, employers confiscate the migrant’s passport, confine their movement, and treat them like an asset they own. Runaways who quit the job or look for another employer are illegalized and must pay a huge fine to the state and the costs of repatriation (Pande, 2013; Romero, 2018). While the states provide a legal framework for the sake of cheap services, the operation of the Kafala system is entirely privatized, meaning in the hands of employer-sponsor. The state facilitates exploitation and catapults migrant workers into a spiral of human rights violations – namely, bondage, vulnerability and illegality. With the help of the Kafala system, Middle Eastern states guarantee their middle-class citizens low-cost reproductive labour in exchange for political loyalty (Fernandez, 2011). Due to international pressure, Qatar and Saudi Arabia started to reform the system by heading for a minimum wage and freedom to search for another employer or leave the country. Illegalization of migrant workers is a means to create a cheap, vulnerable and docile workforce that has no rights and can be easily exploited or deported. In South Africa, Basotho migrant domestic workers are illegal as they do not have identity documents. Although in 2008, the labour court extended labour rights to migrants working illegally in South Africa, these migrant women workers find labour institutions and trade unions inaccessible. If they are not legalized, their highly precarious status will not improve (Griffin, 2011). Due to ideas of cultural exclusivity in Japan, Joseonjok, ethnic Koreans who migrated in the 19th century to China and came in the 1980s to Japan, were preferred to foreign care providers. However, due to Japan’s aged population and the lack of domestic care workers, the Japanese government accepted skilled nurses, certified care workers and entertainment providers based on Economic Partnership Agreements (EPAs) with Indonesia, the Philippines and Vietnam. The government has channelled them into medical and care institutions after elaborate training to adjust their personal and professional behaviour to Japanese culture (Lan, 2018). Since 2017, a new immigration policy fosters the transnational marketization of care as it allows private agencies to import foreign housekeepers (Peng, 2018). Meanwhile, Japan tries to reduce its dependency on migrant care workers by deploying robots that substitute for physical trainers, instructors and social companions. In many countries – also in the Global South – the need for elderly care is growing due to increased life expectancy. Post-Fordist, neoliberal societies based on a dual-earner model in households need either public or private provisions to take over the care work needed for

Care in global value chains  437 social reproduction. In post-socialist states, where public care institutions were a precondition for the universal participation of women in industries and professional work, care responsibilities have been individualized once again. Scandinavian states provide a public sector-centred social security system and introduced already in the 1970s advanced provisions for parental leave as part of comprehensive gender equality policies. Norway is an outstanding example of high esteem and remuneration of nursing and skilled caring work, and migrant care workers have access to the universal welfare system (Christensen, 2017). In contrast, in conservative, family-centred social security systems like in Italy, France, Spain and Germany, and in market-centred social security systems in the USA, Canada, Australia and the UK, the demand for private provision of care services and caretakers is high (see Esping-Anderson, 1990 for the classification of social security systems). This higher demand for care triggered trade and border liberalization to further commodify care work and smooth transnational care chains according to needs and crisis situations. Against this background, European states increasingly legalized migrant care work; Italy and Spain pardoned undocumented migrant workers and issued stay permits. Spain regulates work permits through quotas for certain sectors of the labour market, through quotas prioritizing migrants from Central America and through restrictions to family reunification of non-EU citizens (Gil Araujo & González-Fernández, 2014). The German government legalized shuttle and circular migration from Poland and allowed partial provision of social security to mobile EU citizen care workers. In 2006, the EU service directive contributed to the creation of a single market and eased administrative procedures to cross borders for service providers. After the financial crisis in 2009, Germany used the high unemployment rate in Greece and Spain to recruit health professionals for the German health system. The neoliberal restructuring of health systems, including new public management in public care facilities, and the prevailing austerity and growth imperatives prompt governments to deregulate and accept or even promote modes of employment like live-in 24-hour care in private homes, or ambulant services for elderly people. These forms of services for the elderly shape care very much according to market principles of cost saving, efficiency, competition and quantitative measurability. States give preference to private care providers and the marketization of elderly care instead of covering the costs of long-term care through their welfare systems and promoting decent work and labour rights of migrant workers (for Switzerland, see Schwiter, Bernd & Truong, 2015). Transnational care chains provide a neoliberal solution to what is actually a common concern and need, and requires socially just policy measures by welfare states. While public health insurance partially pays for long-term care services in a nursing home or at home, the German government has adopted a two-fold strategy. First, the state tries to refamilize elderly care by mobilizing family members as unpaid caregivers with the help of incentives and rewards. This form of voluntarism based on family ties or emotional bonds primarily targets women and relieves the social welfare system. From the viewpoint of the state, familization is a well-calculated form of care extractivism at the intersection of kinship obligation, affection and moral economy. Second, the German state has once again normalized transnational care extractivism and officially seeks to recruit nursing staff across Europe and transcontinentally in several Asian states, North Africa and Mexico. This so-called ‘triple-win’ arrangement obscures the privileges of the Global North assuming that the care-receiving wealthy country ‘wins’ as much as the migrant worker and the country of origin. (Bundesagentur für Arbeit & GIZ, 2020). Although the World Health Organization

438  Handbook on critical political economy and public policy (WHO) strongly suggests refraining from recruiting healthcare personnel from countries that suffer themselves from a shortage of healthcare staff, during the COVID-19 pandemic the commodification of nurses intensified further. In 2020, the German government contracted with the Philippine government to directly exchange nurses for vaccines despite appalling conditions in hospitals in the Philippines. When in 2021 India disappeared from the WHO list, Germany immediately entered into a triple-win-contract with the south Indian state of Kerala.

PATTERNS OF MIGRATION, CARE DRAIN AND THE CONSTRUCTION OF TRANSNATIONAL FAMILIES Migration in corridors of transnational care chains and the politics of labour export and import developed since the 1970s within Asia, from Asia to Europe and from Latin America to the US. Migration can be by choice, driven by economic need, or by blunt force; formal, semi-formal or informal recruitment mechanisms, regulated by emigration and immigration policies by the sending and the host countries, securitization of borders; contracts and biopolitics regarding entry, residence and work permits of foreign citizens. The collapse of the socialist economies triggered a new wave of migration from Eastern to Western and Southern Europe with short-term and circuit migration as the new normal (Morokvasic, 2004). As South–South migration is on the increase and routes become more complex, several countries like South Africa, Turkey, Russia, Mexico or Malaysia are sending and receiving care workers at the same time (Kofman & Raghuram, 2012). The boost toward foreignization of care work and transnationalism due to care chains and trade in services has challenged and strengthened the function of the nation-states to control cross-border movement. When states restrict or ban migration, this often results in the illegalization of migrants and the payment of large bribes to government officials, brokers and smugglers by those willing to migrate (UN Women, 2013, p. 21). There is a vast body of literature on the migration–development nexus and recently on global care chains in this context. Tied to modernization and to globalization, some scholars stress migration either as an output of underdevelopment in terms of un- and underemployment and the erosion of agricultural livelihoods, or development as an output of migration in terms of remittances and brain gain (Raghuram, 2009). Ever since the World Bank report on global development finance in 2003 stated that the value of remittances exceeded the value of foreign aid, remittances appear to be a significant driver for development and poverty reduction. The migrant remitters are seen in an overly optimistic manner as development agents. Lee and Piper (2017) criticize that this economistic view takes neither the diversity of migrants and different migratory patterns into account, nor the social costs of migration and construction of precarity and vulnerability. The welcomed shift away from the stereotyped victimization of women migrant workers takes a neoliberal turn through the assumption of a multiple win–win situation and the ability of the individual migrant to remit large amounts of money. Many scholars highlight that migrant workers must cover the social costs and struggle to reconcile work and their own family life, while the families and countries at the destination benefit in terms of care gain and reconciliation of work and family (Lutz & Palenga-Möllenbeck, 2012; Widding et al., 2008). Social and cultural remittances in terms of new ideas and practices brought home often run into the paradox of modernization of gender

Care in global value chains  439 roles related to the breadwinner role and empowerment of women, and resilience or import of conservative patriarchal norms (Parreñas, 2005; UN Women, 2013, p. 24). Part of migrant care workers’ agency is the development of new social capital in the form of informal social networks, a feminized ‘survival circuit’ based on reciprocity and solidarity (Sassen, 2000). This kind of network mobilized women during an economic crisis in Brazil in the 1980s, organized their travel with tourist visas via Mexico to New England, facilitated job placement as cleaners or domestics and their everyday lives in a foreign culture and society (Assis, 2014). Polish women organized in self-managed networks a system of shuttle migration and job rotation, wherein three or four women take turns in providing services in private households – for example, in Germany for three or four months. Hailing from all social strata, many highly skilled, they complement their meagre income in their home country or compensate for job loss. They took advantage of legislation gaps and ‘settled in mobility’, making commuting to a Western or Southern European country a life- and livelihood style (Morokvasic, 2004). These social networks, sometimes religion-based like the Catholic Polish caretakers of the elderly in Switzerland, the Catholic nurses from Kerala, India, in Italy, or queer Filipina/o caretakers in Israel, support the migrant workers in their everyday lives at the destination place, in particular if they end up in illegality. Recent actor-centred research stresses individual agency in transnational mobility beyond push-and-pull mechanisms of migration. While driven by economic stagnation, crisis situations and poor income opportunities, women decide themselves to become breadwinners for their families, sometimes as the sole earner. Brazilian migrant workers in the US gain and enjoy autonomy, plan to return after a few years to Brazil and invest their remittances in a small business (Assis, 2014). In South Africa, skilled healthcare workers and nurses embark on short-term migration to earn money for investment in business or their families, knowing that their departure contributes to the shortage of nurses in South Africa (Labonté et al., 2015). Moldavian care workers in Turkey who are mothers, return after some years to Moldavia, but single or widowed women prefer to stay in Turkey (Çelik, 2011). In some cases, waged care work becomes a kick-off point for income generation in other informal sectors such as sex work or a search for a marriage abroad (Kim, 2010). Migration can be perceived as a livelihood strategy and as a collective strategy of informal social protection that seeks to reduce social risks in the kinship group and to balance inequalities (Faist et al., 2015). In the Global South, most of the decisions to migrate are a family affair, and remittances are used to pay off family debt, to cover health expenses or education of relatives, to pay for dowry and weddings, to buy property and build a house when welfare provisions by states are inadequate. Migration of care workers implies the decision to temporarily separate from the family of origin for the sake of economic advantages for the individual worker and the kinship at home. Different from male migrant workers, destination countries mostly do not allow family reunions for women migrant care workers, which amounts to a partial denial of living their own family life (Gil Araujo & González-Fernández, 2014, p. 21). Rhacel Parreñas (2005) studied households of migrant workers from the Philippines, and the gender division of work in the absence of the mother. She encountered the paradox that migration of the mother and her new role as income earner for the family did not cause a substantial change in the gender division of labour in the household. Fathers did not significantly increase their contribution to house and educational work. Aunts, grandmothers and sometimes the eldest daughter take on tasks of the absent mother and free male family members

440  Handbook on critical political economy and public policy from housework. The conventional gender stereotypes are reproduced, with women being overworked at both ends of the care chain. In post-socialist countries where women migrate temporarily to Western Europe, gender role swapping does not occur automatically or easily in the left-behind households when the women adopt a breadwinner role. Fathers get involved but find emotional care difficult and land up in an identity crisis of masculinity (Lutz & Palenga-Möllenbeck, 2012). In Kerala, India, Uma Devi found that for the children, the absence of the mother never normalized or was never fully compensated by the grandmother, father or an aunt. They missed their mother bitterly during their entire childhood and youth. As a substitute for physical closeness, transnational motherhood manifests itself first in regular material gifts, money and goods sent to the children and other relatives in addition to the normal remittances (Widding et al., 2008). For staying in touch permanently, migrant workers perform ‘Whatsapp mothering’ by video-calling the children often or sending text messages, giving them instructions, asking about performance in school, friends and so on (Lutz & Palenga-Möllenbeck, 2012; Parreñas, 2005). Bridging the physical gap, migrant nurses in the Middle East fulfil their duties as caring children by frequently communicating with their parents in Kerala, asking about their well-being and whereabouts and extending long-distance care for them in terms of giving medical advice (Ahlin, 2020). Thus, global care chains facilitate a ‘new world domestic order’ (Hondagneu-Sotelo, 2006) and transnational care regimes across the macro-, mezzo- and the microeconomic levels (Lutz & Palenga-Möllenbeck, 2011). These new regimes of social reproduction organize a foreignization and racialization of care work and another stratification of social reproduction between countries, but they do not significantly revise the feminization of care, the gender division of work and the related low esteem of care work.

POLICY RECOMMENDATIONS FOR CARE GOVERNANCE Policies must address the multidimensional inequalities that cause the export and import of care workers. Public provision of health and education, parental leave, day care for children, and elderly care, decent work and decent pay for caretakers are key building blocks for the construction of social reproduction as a common, a public good. These commons must be shaped strategically to break up the patriarchal, class and the ethnicized division of labour in care chains. In 2018, the International Labour Organization (ILO) called for urgent action to prevent a looming global care crisis caused by an acute shortage of caregivers in many countries. The ILO asked states to double their investments in the care economy as the demands are increasing, and the sector is one of the fastest growing all over the globe due to longer life expectancy in most parts of the world. An estimated 269 million additional jobs could be created worldwide in care sectors (ILO, 2018). In 2020, during the COVID-19 crisis, the WHO estimated that 5.9 million professional care workers were ‘missing’. Currently very unequally distributed over the world and within countries, nearly 28 million people work in nursing and caring professions, two-thirds are skilled, 90 per cent are female. The WHO stresses that investments in the nursing profession are a benefit to societies, not a cost, and recommends – like the ILO – that governments must fund education and employment of, for example, more nurses (WHO, 2020).

Care in global value chains  441 More public investment in care, health and education systems has been a common demand by care workers who became increasingly organized and struggled against lack of recognition and remuneration, and intensified care extractivism. Strikes of nurses and caretakers are highly controversial because most of the countries have strict regulations on essential services that deny care workers the right to strike. After an outstanding bottom-up mobilization of domestic workers’ organizations and trade unions, in 2011 the ILO adopted the Convention on Domestic Workers. Core of the Convention is the recognition of domestic workers as workers who deserve secured labour rights, social security provisions, and a right to organize (Marchetti, 2018). In July 2022, the Convention was ratified by only 35 countries. The International Convention on the Protection of the Rights of all Migrant Workers and Members of their Families from 1993 is ratified by 56 states – none from Western Europe or North America – but lacks an enforcement mechanism. Other agreements and treaties – for example, the Declaration on the Protection and Promotion of the Rights of Migrant Workers in the ASEAN region, also suffer from a binding or an implementation gap. From migrant workers’ perspective, it is necessary that receiving states offer the same opportunities regarding labour rights, minimum wage, equal payment, social protection and organizing as they provide for citizens of the country. Rampant power imbalances between employer and worker must be reduced. This regularization of migrant work must imply free choice of an employer and workplace, and portability of social protection. Host states should regulate the formal and informal labour market and clamp down on employers, agencies and traffickers who attempt to pull the migrants into debt or any form of bondage. Sending states profiting from outmigration should enable migrant workers and their communities to make informed choices, access legal information and social protection. Furthermore, they must overcome the contradiction between celebrating migrant care workers as heroines and blaming them as bad parents. They must support the children left behind, single parents and other kin carrying the social costs of migration and performing reproductive tasks (Lutz & Palena-Möllenbeck, 2012). However, questioning transnational transfers of care work based on gender, class, race and post-colonial inequalities, the governance of social reproduction and welfare policies in sending and receiving states must be fundamentally challenged. Nancy Fraser (2016) claims that a tendency towards crises of social reproduction is deeply enshrined in the logic of capital accumulation, which depletes social, human and natural resources at the same time as depending on these resources. Thus, substantial changes in the regimes of social reproduction require a reorganization of the neoliberal and financialized subjugation of reproduction to production. For financing public institutions and implementing global social rights, political will for the redistribution of resources within countries and between North and South is needed (Widding et al., 2008, p. 15f). The ‘National Integrated System of Care’ in Uruguay is considered a model for social security in the 21st century in the Global South. It was approved in 2015 in the wake of a growing ageing population and after time-use surveys revealed the gendered nature of care labour. The law carries a universal right to quality long-term care services for children, the disabled, and the elderly people (Matus-Lopez & Pedraza, 2016). The COVID-19 pandemic worsened the situation of migrant workers. Care extractivism was intensified, and the migrant workers’ labour and human rights were greatly violated. Many could not go home due to lockdowns and closure of borders. In particular, Asian migrants were stigmatized as spreaders of the virus. Some governments from the Global North

442  Handbook on critical political economy and public policy recklessly intensified recruitment of nurses from the Global South in order to secure provisioning for their citizens and ignored the deepening of the crises of social reproduction in sending countries. The COVID-19 crisis has painfully shown that organizing care along the principles of neoliberal globalization and according to national interests only is not sustainable. There is an urgent need to hold recruiting and sending governments accountable for the well-being of migrant workers, and to change public policies to a caring perspective with regard to care workers, domestic workers and migrants alike. The visionary perspective of rethinking the economy from a perspective of care and solidarity in terms of responding to people’s needs and human rights, comprising a right to be cared for, must include migrant workers. ‘Solidarity cities’ or ‘cities for all’ like Barcelona, Bern and Toronto are initiatives on the municipality level whose leading principle is to care for all inhabitants, explicitly including documented and undocumented migrants.

BIBLIOGRAPHY Agustín, L. 2006, ‘The disappearing of a migration category: migrants who sell sex’, Journal of Ethnic and Migration Studies, 32 (1), 29–47. Ahlin, T. 2020, ‘Frequent callers: “good care” with ICTs in Indian transnational families’, Medical Anthropology, 39 (1), 69–82. Assis, G. 2014, ‘Gender and migration from invisibility to agency: the routes of Brazilian women from transnational towns to the United States’, Women’s Studies International Forum, 46, 33–44. Awumbila, M., Deshingkar, P. & Kandilige, L. et al. 2019, ‘Please, thank you and sorry – brokering migration and constructing identities for domestic work in Ghana’, Journal of Ethnic and Migration Studies, 45 (14), 2655–71. Brites, J. 2014, ‘Domestic service, affection and inequality: elements of subalternity’, Women’s Studies International Forum, 46, 63–71. Bundesagentur für Arbeit (BA) & Deutschen Gesellschaft für Internationale Zusammenarbeit (GIZ) 2020, Projekt Triple Win: Vermittlung von Pflegekräften aus dem Ausland, Eschborn: BA and GIZ. Çelik, N. 2011, ‘Everyone wants to live in their home countries if possible: transnational labor and living practices of women of post-socialist states’, in S. Parashar & Y. Wang (eds), Inequality in a Globalizing World: Perspectives, Processes, and Experiences, Dubuque, IA: Kendall Hunt Publishing, pp. 252–68. Cho-Ruwwe, K.N. 2016, ‘Koreanische Krankenpflegerinnen in Deutschland – Erfahrungen aus fünf Jahrzehnten’, in Friedrich-Ebert-Stiftung, Ankommen, Anwerben, Anpassen?, conference documentation, Berlin: FES, pp 13–20. Christensen, K. 2017, ‘Life trajectories of migrant care workers in the long-term care sectors in Norway and the UK’, Social Policy and Society, 16 (4), 635–44. Constable, N. 2016, ‘Reproductive labor at the intersection of three intimate industries: domestic work, sex tourism, and adoption’, Positions: Asia Critique, 24 (1), 45–69. Dinkelaker, S. 2018, ‘National belonging and violent norms of gendered migrant citizenship: Indonesian migrant domestic workers’ appropriation of a national ritual’, Gendered Thoughts: New Perspectives in Gender Research, Working Paper Series 2018, Volume 1, Göttinger Centrum für Geschlechterforschung. Esping-Anderson, G. 1990, The Three Worlds of Welfare Capitalism, Princeton, NJ: Princeton University Press. Faist, T., Bilecen, B., Barglowski, K. & Sienkiewicz, J.J. 2015, ‘Transnational social protection: migrants’ strategies and patterns of inequalities’, Population, Space and Place, 21 (3), 193–202. Fernandez, B. 2011, ‘Household help? Ethiopian women domestic workers’ labor migration to the Gulf countries’, Asian and Pacific Migration Journal, 20 (3–4), 433–57. Fraser, N. 2016, ‘Contradictions of capital and care’, New Left Review, 100, pp. 99–117.

Care in global value chains  443 Gaur, S. 2019, ‘Policies for protection of Indian migrant workers in Middle East’, in S.R. Irudaya & P. Saxena (eds), India’s Low Skilled Migration to the Middle East, Singapore: Palgrave Macmillan, pp. 125–63. Gil Araujo, S. & González-Fernández, T. 2014, ‘International migration, public policies and domestic work: Latin American migrant women in the Spanish domestic work sector’, Women’s Studies International Forum, 46, 13–23. Ginsburg, F. & Rapp, R. (eds) 1995, Conceiving the New World Order, Berkeley, CA: University of California Press. Glenn, E.N. 1992, ‘From servitude to service work: historical continuities in the racial division of paid reproductive labor’, Signs: Journal of Women in Culture and Society, 18 (1), 1–43. Goel, U. 2014, ‘Heteronormativity and intersectionality as perspective of analysis of gender and migration: nurses from India in West Germany’, in S. Poma Poma & K. Pühl (eds), Perspectives on Asian Migration: Transformations of Gender and Labour Relations, Berlin: Rosa-Luxemburg-Stiftung, pp. 77–83. Griffin, L. 2011, Unravelling rights: “illegal’ migrant domestic workers in South Africa’, South African Review of Sociology, 42 (2), 83–101. Guevarra, A.R. 2006, ‘Managing “vulnerabilities” and “empowering”: migrant Filipina workers: the Philippines overseas employment program’, Journal for the Study of Race, Nation and Culture, 12 (5), 523–41. Harvey, D. 2001, ‘Globalization and the “spatial fix”’, Geographische Revue, 2, 23–30. Hochschild, A. 2000, ‘Global care chains and emotional surplus value’, in W. Hutton & A. Giddens (eds), On the Edge: Living with Global Capitalism, London: BCA, pp. 130–46. Hondagneu-Sotelo, P. 2006, ‘Narrating the new world domestic order’, IIIS Discussion Paper No. 150, Institute for International Integration Studies. International Labour Organization (ILO) 2018, Care Work and Care Jobs for the Future of Decent Work, accessed 19 December 2020 at http://​www​.ilo​.org/​wcmsp5/​groups/​public/​-​-​-dgreports/​-​-​-dcomm/​-​-​ -publ/​documents/​publication/​wcms​_633135​.pdf. Kim, M. 2010, ‘Gender and international marriage migration’, Sociology Compass, 4 (9), 718–31. Kofman, E. & Raghuram, P. 2012, ‘Women, migration, and care: explorations of diversity and dynamism in the Global South’, Social Politics, 19 (3), 408–34. Labonté, R., Sanders, D. & Mathole, T. et al. 2015, ‘Health worker migration from South Africa: causes, consequences and policy responses’, Human Resources for Health, 13 (92), 1–16. Lan, P.C. 2018, ‘Bridging ethnic differences for cultural intimacy: production of migrant care workers in Japan’, Critical Sociology, 44 (7–8), 1029–43. Lee, S. & Piper, N. 2017, ‘Migrant domestic workers as “agents” of development in Asia: an institutional analysis of temporality’, European Journal for East Asian Studies, 16 (2), 220–47. Loveband, A. 2006, ‘Positioning the product: Indonesian migrant women workers in Taiwan’, in K. Hewison & K. Young (eds), Transnational Migration and Work in Asia, London and New York: Routledge, pp. 75–90. Lutz, H. & Palenga-Möllenbeck, E. 2011, ‘Care, gender and migration: towards a theory of transnational domestic work migration in Europe’, Journal of Contemporary European Studies, 19 (3), 349–64. Lutz, H. & Palenga-Möllenbeck, E. 2012, ‘Care workers, care drain, and care chains: reflections on care, migration, and citizenship’, Social Politics: International Studies in Gender, State & Society, 19 (1), 15–37. Marchetti, S. 2018, ‘The global governance of paid domestic work: comparing the impact of ILO Convention No. 189 in Ecuador and India’, Critical Sociology, 44 (7–8), 1191–205. Matus-Lopez, M. & Pedraza, C.C. 2016, ‘New long-term care policies in Latin America: the National System of Care in Uruguay’, Journal of the American Medical Directors Association, 17 (7), 663–5. Morokvasic, M. 2004, ‘“Settled in mobility”: engendering post-wall migration in Europe’, Feminist Review, 77 (1), 7–25. Pande, A. 2010, ‘Commercial surrogacy in India: manufacturing a perfect mother‐worker’, Signs: Journal for Women in Culture and Society, 35 (4), 1–25. Pande, A. 2013, ‘The paper that you have in your hand is my freedom: migrant domestic work and the sponsorship (Kafala) system in Lebanon’, International Migration Review, 47 (2), 414–41.

444  Handbook on critical political economy and public policy Parreñas, R.S. 2000, ‘Migrant Filipinas domestic workers and in international division of reproductive labour’, Gender and Society, 14 (4), 560–80. Parreñas, R.S. 2001, Servants of Globalization, Stanford, CA: Stanford University Press. Parreñas, R.S. 2005, ‘The gender paradox in transnational families of Filipino migrant women’, Asian and Pacific Migration Journal, 14 (3), 243–68. Peng, I. 2018, ‘Shaping and reshaping care and migration in East and Southeast Asia’, Critical Sociology, 44 (7–8), 1117–32. Raghuram, P. 2009, ‘Which migration, what development? Unsettling the edifice of migration and development’, Population, Space and Place, 15 (2), 103–17. Razavi, S. & Staab, S. 2010, ‘Underpaid and overworked: a cross-national perspective on care workers’, International Labour Review, 149 (4), 407–22. Rodriguez, R.M. 2008, ‘The labor brokerage state and the globalization of Filipina care workers’, Signs: Journal of Women in Culture and Society, 33 (4), 794–800. Rodriguez, R.M. & Schwenken, H. 2013, ‘Becoming a migrant at home: subjectivation processes in migrant-sending countries prior to departure’, Population, Space and Place, 19 (4), 1–14. Romero, M. 2018, ‘Reflections on globalized care chains and migrant women workers’, Critical Sociology, 44 (7–8), 1179–89. Sassen, S. 1998, Globalization and Its Discontents: Essays on the New Mobility of People and Money, New York: The New Press. Sassen, S. 2000, ‘Women’s burden: counter-geographies of globalization and the feminization of survival’, Journal of International Affairs, 53 (2), 503–24. Schilliger, S. 2015, ‘Globalisierte Care-Arrangements in Schweizer Privathaushalten Weinheim und Basel’, in E. Nadai & M. Nollert (eds), Geschlechterverhältnisse im Post-Wohlfahrtsstaat, Weinheim: Beltz Juventa, pp. 154–74. Schwiter, K., Berndt, C. & Truong, J. 2015, ‘Neoliberal austerity and the marketisation of elderly care’, Social & Cultural Geography, 19 (3), 379–99. Sum, N. & Jessop, B. 2013, Towards a Cultural Political Economy: Putting Culture in its Place in Political Economy, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Torre, A. & Figge, N. 2018, ‘Women, migration and domestic work in ASEAN: serving “the success story”’, in JustJobs Network, People on the Move: Advancing the Discourse on Migration & Jobs, Delhi: JustJobs Network, pp. 115–34. Torres, S. & Lindblom, J. 2020, ‘Migrant care workers in elderly care: what a study of media representations suggests about Sweden as a caring democracy’, International Journal of Ageing and Later Life, 14 (2), 61–87. UN Women 2013, ‘Contributions of migrant domestic workers to sustainable development’, policy paper for the Pre-GFMD VI High-Level Regional Meeting on Migrant Domestic Workers at the Interface of Migration and Development. Walton-Roberts, M. & Irudaya, R.S. 2022, ‘Nurse immigration from Kerala – brain drain or circulation?’, in M. John & C. Wichterich (eds), Who Cares? Health Workers, Care Extractivism and Struggles Over Care Work in India, New Delhi: Zubaan, pp. 191–218. Wichterich, C. 2019, ‘Care extractivism and the reconfiguration of social reproduction in post-Fordist economies’, ICDD Working Paper No. 25, International Center for Development and Decent Work, University of Kassel. Widding, I., Devi, U. & Hochschild, A. 2008, ‘Global care crisis: a problem of capital, care chain or commons?’, American Behavioral Scientist, 52 (3), 1–22. Wiyayanti, H. & Windiani, A. 2016, ‘Legal protection and advocacy for Indonesian migrant worker’, in Proceedings: The 2nd International Multidisciplinary Conference 2016 at Universitas Muhammadiyah Jakarta, pp. 1003–9. World Bank 2003, Global Development Finance 2003 Vols 1 & 2: Striving for Stability in Development Finance, Washington, DC: World Bank. World Health Organization (WHO) 2020, The State of the World’s Nursing 2020: Investing in Education, Jobs and Leadership, Geneva: WHO. Yeates, N. 2009, ‘Production for export: the role of the state in the development and operation of global care chains’, Population, Space and Place, 16 (2), 175–87.

Care in global value chains  445 Yeates, N. 2010, ‘The globalization of nurse migration: policy issues and responses’, International Labour Review, 149 (4), 423–40. Young, B. 2001, ‘The “mistress” and the “maid” in the globalized economy’, Socialist Register 2001: Working Classes, Global Realities, 37, 315–27.

30. The cultural political economy of housing policy in the era of the Islamist Justice and Development Party in Turkey Ismail Doga Karatepe

Grandiose skyscrapers, gigantic shopping malls, radiant high-rise apartment blocks – the urban landscape of modern Turkey has changed drastically in the last decade. This change is perhaps best represented by the Presidential Palace in Ankara, with its glowing lighting, Ottoman-style roof, and more than 1150 rooms. The palace was erected at the behest of President Recep Tayyip Erdoğan in 2014 on a protected, forested site where all construction activities are prohibited by the law in general.1 The palace is even officially named the AK-Saray (literally ‘White Palace’ in Turkish), which is a wordplay denoting the Islamist/conservative Justice and Development Party (by its Turkish initials, AKP), also referred to by its dedicated followers as the AK-Party. These showy presentations for ‘megaprojects’ were made shortly before elections. Throughout the AKP rule, the government’s direct involvement in the construction industry has drastically expanded. Concerning the increasing government activities in the construction industry, a public agency, the Mass Housing Administration of Turkey (by Turkish initials: TOKİ) deserves special attention. TOKİ – the initial form of which was established to carry out social housing projects in 1984 – became a significant factor in the construction industry in more recent years. TOKİ’s share in housing provisions has increased drastically of late. Since the AKP came to power, TOKİ has built more than 840 000 residential units (as of September 2019). TOKİ is not only building residential units but is also involved in the construction of so-called social facilities, which includes the erection of mosques, universities, and even financial centres. Thus, its operations are not necessarily limited to the provision of dwellings; TOKİ fashions whole built environments.2 The extent of its operation and its authorization has become more influential in the sector. The institutional configuration of TOKİ has been drastically transformed since the AKP has been in office. Under AKP rule, TOKİ’s affluence, power and influence in the industry has grown momentously. Above all, TOKİ, which had been affiliated with the Ministry of Public Works and Settlement, became affiliated with the Prime Minister’s Office in 2004, just after Recep Tayyip Erdoğan became Prime Minister. This affiliation strengthened the hierarchical position of TOKİ within the bureaucracy. The authorities and responsibilities of different institutions were transferred to TOKİ, thereby reinforcing its status within the ranks of the bureaucratic hierarchy. The successive AKP governments’ direct and extensive involvement in dwelling production is not in line with ongoing trends in the world. The substantial withdrawal of direct state involvement in housing provision is evident not only across Europe (Jacobs et al., 2010), but also seems to be occurring everywhere except for a few countries. The withdrawal of the 446

The cultural political economy of housing policy in Turkey  447 state in the overwhelming majority of countries symbolizes ‘the transfer of responsibility for housing provision to the market’ (Rolnik, 2013, p. 1061). However, the forms and strategies of the transfer have been geographically variant. In spite of heterogeneity, the common outcome of the transfer is that the homeowner becomes heavily dependent on the financial markets and more vulnerable to the risks posed by the market itself (Aalbers, 2008). Neoliberal housing policies have been, to a degree, adopted by the so-called developing and underdeveloped countries, where the housing welfare system was not well developed to satisfy the demand (e.g., for the Nigerian case, see Olotuah & Bobadoye, 2011), as well as by the ex-Eastern Bloc countries where residential unit production had been strictly managed by the state itself within the context of planned economy (Pittini & Laino, 2011, p. 25). For most cases in these countries, the state’s role is to encourage market players. It appears that top-down and commanding policies for the provision of public housing units have been abolished, or reduced to a great extent. I argue that we can simply explain neither the involvement of the successive Islamist/ conservative AKP governments in the housing industry with the imperatives of capital accumulation nor with the discourses of the Islamist cadres. I tend to critically assess the benevolent hand as a way of stabilizing domination. Yet, the danger here is running into the pitfall of a functionalist way of explaining, ascribing the reason for the existence of the TOKİ to a single variable. As Ulrich Brand warns us, ‘all too often, concrete policies are understood in a functionalist way by reducing them to their assumed contribution to the stabilizing of domination and societal reproduction and related powerful interest groups and their actions, i.e., as a consequence of polity and politics’ (Brand, 2013, p. 426). Considering Brand’s warning, I suggest going beyond the political economy of housing. To explore the state’s participation in housing provision, this study employs the cultural political economy (CPE) approach developed by Bob Jessop and Ngai-Ling Sum (see their contribution in Chapter 3 in this Handbook). How to make use of CPE is a task for the next section. In the subsequent section, the attention is confined to institutionalization of the involvement of AKP governments in the housing industry. The last section is reserved for concluding remarks. Findings in this chapter are largely derived from my previous research (Karatepe, 2013, 2016, 2021). I updated my findings in the light of recent developments in the political landscape of Turkey.

GOING BEYOND THE POLITICAL ECONOMY AS WE KNOW The political economy provides a wider perspective for the research question in many respects as housing is largely embedded in social relations (Aalbers & Christophers, 2014), yet analysing these social relations may have several pitfalls. One of the most dangerous pitfalls is forcing the development of housing policies into the imperative of capital accumulation (Elicin, 2014) – as if it were a tangible imperative – and thereby overlooking certain political and cultural settings. This is not to refute the fact that there may be a strong correspondence between economic logic and housing policies. However, as housing researcher Michael Ball discusses, housing supply cannot be seen as ‘[the] simply natural [outcome] of economic forces, nor should the forms of provision that were adopted be endowed with a fatalistic inevitability’ (Ball, 1988, p. 174). The cultural and political landscape may play a role and thus the role of economic settings cannot be taken for granted. The second pitfall is accepting the

448  Handbook on critical political economy and public policy economic categories, strategies, practices and institutions without questioning their socially constructed nature. Exploring the historical specificities may provide a wider perspective because it increases the possible entry points to the research. To explore the state’s participation in housing provision, while considering the corollary of these pitfalls, this study employs the CPE approach developed by Bob Jessop and Ngai-Ling Sum. This approach widens the horizon of political economy by introducing critical semiotic analysis into the evolutionary and institutional approaches. In doing so, CPE underlines the historical specificity of economic ensembles (categories, strategies, practices, institutions and their complex relations) and thus aims to reveal their socially constructed nature. Therefore, CPE should be recognized as part of a critical theory. What Cox said about critical theory also applies to CPE. CPE, ‘unlike problem-solving, does not take institutions and social and power relations for granted but calls them into question by concerning itself with their origins and whether they might be in the process of changing’ (Cox, 1981, p. 129). CPE: What Is New Jessop and Sum did not initially coin the term CPE, nor is their approach to CPE the only one. As one observer puts it, ‘as a nascent “post discipline”, CPE is still a wide-open field, making it difficult to set definitive boundaries in what is and what is not CPE’ (Ribera-Fumaz, 2009, p. 457). There are many contested lines that are pertinent to CPE. These lines have been influenced by scholarly works emphasizing, albeit in different shades, the significance of the culture (e.g., of argumentative, linguistic, discursive ideas). Culture matters when talking about political economy. It is the common maxim of these contested strands that are called or self-designate themselves as CPE (or, in a broader sense, cultural economy). Most of the works on CPE per se, or those making use of CPE, have been published since the turn of the new millennium by those who can be associated with the sociology and geography tradition (Amin & Thrift, 2004; Best & Paterson, 2010; Du Gay & Pryke, 2002; Hudson, 2008; Jessop, 2004, 2010, 2013, 2014; Jessop & Oosterlynck, 2008; Jessop, Young & Scherrer, 2014; MacKenzie, 2011; Ribera-Fumaz, 2009; Sum, 2012a, 2012b; Sum & Jessop, 2013). These studies cast off, inter alia, the conventional way of modelling economic life, which naturalizes economic actions, categories, institutions and theories. These studies discuss the relevance of the cultural practices and the constitutive (performative) effects of scientific production for the economic practices. The message then conveyed by CPE is that tying culture to the political economy brings about more explanatory power. Besides its scientific merits, conceding this relationship also has firm political consequences. Robert Babe, in the introductory text of his book, Cultural Studies and Political Economy: Toward a New Integration, asserts the mentioned outcomes with the following telling words: Reintegrating cultural studies and political economy is of some urgency. On the one hand, to study culture without taking into account either the influence of the political-economic base or the political-economic consequences of cultural activities, is to be naive in the extreme. These oversights can cause one to misconstrue oppression as pluralism, persuasion as democracy, and elite control as popular freedom. They also can entail a flight from lived conditions into the safe haven of language or discourse, making thereby the pursuit of social justice (as but one example) impossible. On the other hand, to overemphasize the political-economic determinants to the neglect of human volition

The cultural political economy of housing policy in Turkey  449 and freedom is equally detrimental. Denying or belittling human agency is tantamount to denigrating human dignity and to fatalistically understate the possibility of social reform. (Babe, 2009, p. 5)

Yet saying ‘culture matters’ is not a novel claim at all. As Sayer accurately points out, ‘the classic political economists and philosophers did not separate culture from economy; indeed, they were concerned with their interrelationship’ (Sayer, 2001, p. 702).3 However, the dominant trend that emerged in the course of 19th century has been conducive to dividing the social science into the idiosyncratic disciplines. This trend has regrettably further hampered any dialogue between them (Gulbenkian Commission, 1996). Too much effort has been exerted into drawing boundaries and placing culture, economics and politics in pure disciplinary constraints. The recently emerging CPE, however, intends to infringe on these constraints, which should arguably have never existed. Selectively Unpacking the Jessop and Sum Approach to CPE Both Jessop and Sum’s approach and other approaches to CPE accept the importance of semiosis4 in terms of its possible constitutive role, and thereby take a further step beyond the arbitrary distinction between economic, political and cultural spheres. What drastically distinguishes it from other approaches is the limits to the role of semiosis. Their approach acknowledges, first, the intransitive dimension of the knowledge and generative structures, events and so on. Second, closely related to the first point, Jessop and Sum’s approach to CPE asserts that a concrete social inquiry is not obliged to start with semiosis, as semiosis alone does not exhaust social relations (Fairclough, Jessop & Sayer, 2002). But semiosis should be integrated at one point into the analysis as it is essential for the analysis – recalling that there are no social practices without ‘sense and meaning for their agents: without this, they could not be designated as social’ (Sum & Jessop, 2013, p. 154). CPE provides an adequate conceptual and theoretical framework to explore the question of why and how certain economic imaginaries come to the fore, and ‘co-constitute economic subjectivities, interests, activities, organizations, institutions, structural ensembles, emergent economic orders and their social embedding, and the dynamics of economic performance’ (Jessop & Oosterlynck, 2008, p. 1156). Thereby, this approach might shed more light on this research by going beyond the possible explanations solely considering either the imperatives of capital accumulation or the discourse itself. With this approach, the AKP governments’ involvement in the housing industry can be examined in the framework of the interconnections of various discourses on the problems of the industry (more particularly, housing), the solutions thereof, and distinctive forms and dynamics of institutionalized economic and political settings in Turkey. Even though the path is well defined, the reasons for selection are still theoretically ambivalent. How and why do some imaginaries get selected and retained? Why are the others filtered out? Jessop and Sum’s version of CPE answers this question with the operations of structural, discursive, technological and agential selectivities (Sum & Jessop, 2013, pp. 215–29; also see Jessop & Sum, Chapter 3 in this Handbook): ● Structural selectivity. This refers to structurally inscribed strategic selectivity, which implies the unequal character of social structures (or conjectural dynamics) on some actors, identities, social forces, and so on. Some actors (or social forces) may face more constraints imposed by the configuration of the structure, as they are trying to get their

450  Handbook on critical political economy and public policy imaginaries realized. Meanwhile, some may find more opportunities within this structure. Therefore, structural selectivity makes some imaginaries more privileged within a given period and spatial context. ● Discursive selectivity. Discursive selectivity refers to the possible set of discourses that favour particular genres, styles and discourses while hindering others. What is said, how it is said, who is granted to say, and which genres, styles and discourses are articulated and contextualized, depends on the set mentioned. To put it in Sum and Jessop’s words, ‘semiotic resources set limits to what can be imagined, whether in terms of “objects”, possible statements within a discursive formation, themes that can be articulated within a given semantic field, or subject positions that can be adopted’ (Sum & Jessop, 2013, p. 215). ● Agential selectivity. All agents are not equal; some have more capacity to alter the course of events, social practices, and even structures. Considering modern Turkey, it would not be an unreasonable claim that the capacity of current president Erdoğan in shaping policy is more than (and not even comparable with) the writer of this text. Examples can be multiplied considering social forces, class-relevant organizations, institutions and strategies. In this text, I highlight the importance of the patronage relations: as revealed in the following pages, the patronage relations in Turkey change the capacity of agent. Those who are close to the AKP’s political line are privileged in the distribution of public resources. Thanks to their privileged access to key positions in political and civil society, they also have more capacity to fashion the imaginaries. ● Technological selectivity. This type of selectivity is related to, as its name implies, the role of technologies in the contestation and production of hegemonies. The term technology is adopted from Foucault and neo-Foucauldian studies. Foucault deals with different forms of technologies. With technologies, he first addressed the mechanisms that shape and discipline the body and population (Foucault, 1981). With the ‘technologies of the self’ and ‘political technologies of individuals’, Foucault focused on the relationship between individuals, ethics and society. They denote the processes in which individuals relate themselves to ethics or certain norms as members of a community or a political entity (Lemke, 2007). To explore reasons behind TOKİ’s operations and the way it has been institutionalized, I go beyond the vocabulary provided by Jessop and Sum’s version of CPE. For a more nuanced analysis, a context-dependent conceptual-theoretical integration is required. For instance, the concept of patronage is addressed to the discretionary and preferential treatment in exchange for the political and economic support. Integrating this concept expands the operationalizable capacity of the CPE approach for this case study. I am not using the concept of patronage to indicate a structural feature that hinders development. It is employed to indicate a strategy that has already become institutionalized.

TOKİ AND THE CONSTRUCTION INDUSTRY IN THE AKP ERA The number of non-residential units (mosques, hospitals, etc.) erected by TOKİ and its increasing authorization of, as well as direct participation in, the gentrification of squatter housing areas under the AKP rule enhances the observation that it has become a giant public

The cultural political economy of housing policy in Turkey  451 enterprise. It became more than a public agency that merely seeks to solve the public housing problems (Sönmez, 2011a). The Islamist discourse favouring direct and extensive government involvement in the housing industry has been selected (privileged) and realized during the AKP era, when the institutionalized economic imaginary promoted liberalization, deregulation and privatization. Through empowering TOKİ and innovative institutional techniques to loosen the constraints of binding international agreement on government involvement, the successive AKP governments have expanded the public investments in housing provision. The public provision in Turkey does not imply that AKP governments have not carried out a neoliberal agenda. Undeniably, such an agenda has had an impact on Turkey’s economic, political and cultural landscape over 18 years of AKP rule (Babacan et al., 2021). It actually rather implies that ‘there is always scope for actions to overflow or circumvent structural constraints’ (Jessop, 2007, p. 47). Delving into the institutionalization of state involvement in housing through TOKİ demands a comprehensive analysis of its different aspects. A concrete explanation from CPE’s perspective requires revealing the actors, discourse and structures that have been relevant to the state’s involvement. Structure-related Factors That Are Linked to the Uneven Architecture of Chances for Agents as They Try to Realize Their Imaginaries Inter alia, the role of international agreements, the stance of the Islamist position, patronage relations, the formation of Turkey’s bourgeoisie, loan glut from the international market as well as the availability of the public lands can be listed as structure-related factors. The state’s involvement is not limited by any international organizations since the construction industry in general and housing in particular has not been tightly bound by any international agreements. Housing provision is not subject to the restrictions of other goods and services that are traded internationally (e.g., car, insurance, etc.). This has given leeway to AKP governments to intervene in the housing industry. The solution to the rapid urban expansion proposed by the Islamists in the course of 1990s was to directly involve the mass-housing mode of housing provision. As acknowledged by the several interviewees during my field work in the metropolitan areas of Izmir and Istanbul between 2015, the Islamist cadres, including today’s prominent political figures such as Recep Tayyip Erdoğan, who was the mayor of Istanbul at the time, pronounced this idea so often during meetings in the 1990s. To realize this idea, one of the municipal companies, Istanbul Public Housing Corporation (by its Turkish initials, KIPTAS) was reconfigured. KIPTAS can be regarded as an attempt, in the second half of the 1990s, to solve tumultuous urban expansion, and in many respects as a role model for TOKİ in the AKP era. It can be considered as an experiment that also enabled the realization of the AKP’s TOKİ. The cadres who had been working in the KIPTAS were later employed in TOKİ, including Erdoğan Bayraktar who was appointed as the head of KIPTAS (1994–99) and later on TOKİ (2002–11) before being selected as an MP and becoming Minister of Environment and Urban Planning. Bayraktar similarly argues in his book that TOKİ should be seen as an organization applied at a national level of what was created when Recep Tayyip Erdoğan was the mayor of Istanbul (Bayraktar, 2007, p. 23).

452  Handbook on critical political economy and public policy Patronage relations Patronage relations have always been inherent in Turkey’s politics, but they have been entrenched in the AKP period. Patronage here refers to a strategy to maintain and reinforce the power of the party and power bloc in question. These relations can be seen in the construction industry relatively more often as the industry entails official permits, codes and plans. Extensive and direct state participation in the construction industry has consequences for the bourgeois factions in Turkey, above all for the Anatolian bourgeoisie. Turkey has witnessed the latter’s rise in the age of neoliberalism (Demir, Acar & Toprak, 2004, p. 167). The term ‘Anatolian’ has less geographical and more political connotations, and generally refers to cities such as Konya, Kayseri and Denizli that are identified as ‘the traditional strongholds of Islamist politics in Turkey’ (Öniş, 2009, p. 26). This new form of capital is also named ‘green money’, ‘Islamic capital’ and ‘Anatolian tigers’ (Beriş, 2008; Demir et al., 2004). The first two terms refer to the political position of this bourgeoisie faction. The third term, the Anatolian tiger, is mostly used when the ideological aspect of the firms wanted to be hidden and when these companies introduce themselves (à la East Asian tigers). A significant segment of these companies, which constitute this new form of economic entrepreneurship, is directly and indirectly connected with some Islamic brotherhood organizations (sects), and other similar religious networks. Most noteworthy is the Independent Industrialists’ and Businessmen’s Association (by its Turkish initials, MUSIAD), which was established as the business section of Islamist politics in Turkey in 1990, and plays a crucial role in building the network between different enterprises in different cities (Öniş, 2001). The AKP’s further electoral successes since it came to office and the rise of the Anatolian bourgeoisie, have gone hand in hand. The Anatolian bourgeoisie is an integral part of Islamist politics. It helped the AKP to win the elections through both supportive discourse and financial aid (Beriş, 2008, p. 42). The considerable segment of the bourgeoisie engaging in the construction industry can be labelled ‘Anatolian’ (e.g., Kalyon, Ihlas, Calik as big business groups), since they have been quite influential in the Islamist party, and have been directly and indirectly connected with religious networks (cf. Çavuşoğlu, 2011, p. 45). As Gürakar and Sönmez have documented, among many others, TOKİ has been treating these companies preferentially (Gürakar, 2016; Sönmez, 2011a, 2011b, 2015). The predominance of the patronage networks between the AKP and these awarded companies appears to have been conducive to expanding the financial base of the party. Moreover, the preferential access of certain groups to TOKİ contracts has brought about rapid growth of some construction companies in question. Loan glut by Turkey’s banks allowing developers/contractors to accelerate the construction activities in general and to get more TOKİ contracts in particular TOKİ is not independent of the financial framework; it has mobilized a vast network of contractors and subcontractors to realize its projects. The contractors are selected for every single project, and the awarded contractors hire subcontractors to perform different stages of the construction. The contractors are paid by TOKİ at different stages of construction, but not in advance. The time gap between revenues and expenditure makes some of these contractors very dependent on the credit flows. This argument implies that the activities of the housing administration are not entirely independent from international economic parameters as, at least, some of the contractors are greatly reliant on the credit flows (which have been enabled by hot money flows, thanks to the high interest rate plateau).

The cultural political economy of housing policy in Turkey  453 What enables the administration’s activities is the ample public land, which is an Ottoman Empire inheritance. TOKİ has generated revenue by promoting an innovative public–private partnership model. The model is called the income (revenue) share model, and is based on the revenue for land – that is, on production of housing units by the private sector on publicly owned high-value land. In addition to these revenues, TOKİ is authorized to oversee the sale of land owned by the public. The Factors Germane to the Agents That Are Linked to the Uneven Capacity of Agents to Pursue Structurally Oriented Strategic Calculation to Realize Their Imaginaries Concerning uneven capacity of agents, Erdoğan’s power (his distinguished capacity to pursue his own agenda) should be prioritized – Recep Tayyip Erdoğan has always been one of the influential actors in the AKP and its forerunners. However, his influence has become more pronounced over time as he has eliminated his political rivals within and outside the party. He is the most important figure in the realization of TOKİ. Discretionary and preferential treatment favouring the Anatolian bourgeoisie The Anatolian bourgeoisie is politically close to the conservative/Islamist party in power. The companies that can be associated with the Anatolian bourgeoisie have preferential access to TOKİ contracts – they support the involvement in question. Remunerative business for Istanbul bourgeoisie Apart from this ‘Islamic bourgeoisie’ enjoying the contracts with TOKİ, other factions of Turkey’s bourgeoisie have perceived the direct and extensive housing provision as beneficial for their interests because of the expected backward and forward linkages of the industry (ancillary sectors of construction industry – that is, strong linkages with other industries such as transportation, mining and cement manufacturing, etc.). Housing production through TOKİ also has strong linkages with the financial industry (including real estate investment trusts), and thus has been conducive to lucrative business for large conglomerates, and has been active in the financial sphere. The influential cadres of the Islamists have supported the involvement in question as it has enhanced political support of the AKP by expanding the financial support for the party as well as the constituency’s base through patronage relations: the handover ceremonies of TOKİ houses have been organized as AKP rallies. TOKİ’s activities have been presented as a success of the incumbent party during election campaigns. More houses were promised to the lower-income groups before the elections as well. A recent empirical study demonstrated that ‘distributive politics in the form of TOKİ housing projects is a stronger predictor’ of the AKP’s election successes (Marschall, Aydogan & Bulut, 2016, p. 201). The Discourse-related Factors That Are Linked to the Asymmetrical Constraints and Opportunities Inscribed in the Orders of Discourse The grand discourse favouring global city discourse and urban transformation Turkish Islamist political organization in the 1980s and 1990s, the Welfare Party (RP), did not accentuate global city discourse immediately. The influential cadres of the RP, and Erdoğan who was the mayoral candidate of the RP for the Istanbul local election of 1994, avoided

454  Handbook on critical political economy and public policy articulating the global city imaginary, which became the hegemonic imaginary in the course of the 1980s. This imaginary was, to a substantial extent, articulated and exploited by the different capital factions and almost all political parties, apart from the RP. As noted elsewhere, the RP, ‘with slogans of “just order” and “a new world”, was the only party that alluded to the groups that were excluded by the global city project’ (Bartu, 1999, p. 40). The claim of being a global city was actually a pro-business attitude that promised to integrate Istanbul with the global capital circuits more firmly. The global city imaginary implies the promotion of financial centres and real estate services and also more wide-ranging infrastructure, including international trade centres, congress halls, harbours and airports. This imaginary suggests that a global city should be devised not only for the needs of local inhabitants, but also visitors or tourists in particular, which in turn finances the infrastructural investments. This imaginary, however, identified gecekondu5 as a problem, and not as an emergent solution to meet the needs of popular classes by overcoming the housing costs. The transfer of power at the municipal level to the Islamists brought about the articulation of the global city imaginary to their discourse. The cadres of the RP appeared to discover opportunities inscribed in the different modes of selectivity: embracing the global city imaginary, on the one hand, peeled off the egalitarian features in the Islamist discourse. Indeed, the global city discourse was largely moulded by the prevailing neoliberal discourse regarding the restructuring of big cities, and by the strategies that important actors, inter alia, capital groups, were pursuing. It put certain constraints on pro-gecekondu ‘just’ urban discourses and imaginaries. On the other hand, the influential cadres of the RP found the global city imaginary an opportunity to realize their own projects that could intensify the Islamic character of the city (Tuğal, 2008, p. 73). In this context, the RP, for instance, attempted to erect a mosque in the middle of Taksim Square, but was unsuccessful.6 Yet, its heir, AKP, successfully completed the construction of a giant mosque in this iconic square in 2021. Erection of the mosque represents the victory over space and suppression of dissents, including the Gezi movement of 2013. The discourse declaring gecekondu areas as unwanted The idea of urban transformation has always been on the table in the post-1980 period, in order to dispose of the gecekondu settlements. At first glance, the urban transformation can be simply forced into the neoliberal transformation of the post-1980 period. However, I argue that the urban transformation projects have gained tremendous impetus in the AKP period, as the neoliberal transformation has been accelerated in this time frame. What distinguishes the AKP period in the context of the built environment, however, is not just the pace of urban transformation, but also the transformation that has become hegemonic in character – not merely because it contributes to the AKP’s success, but also because its necessity has almost been taken for granted (Çavuşoğlu, 2011; Marschall et al., 2016; Yeşilbağ, 2015). So pervasive have the ideas and practices of urban transformation become that the denizens of Turkey’s cities barely recognize it as a part of the urban and economic imaginary; the scholarly works, the media reports and so forth have also been zealously promoting it (Uzun & Celik Simsek 2015; Uzun, Çete & Palancıoğlu, 2010). Nonetheless, its hegemonic character cannot be reduced to its victory in the clash of opposing imaginaries, ideas or concepts burgeoned within the sphere of civil and/or political society. For the popular classes, the urban transformation, as pertinently put in an article, ‘became a magic word that promised a bright future’ (C̨ avuşoğlu & Strutz, 2014, p. 135).

The cultural political economy of housing policy in Turkey  455 The Islamist discourse on conquering the cities and a strong commitment to rebuilding them The space has always been subjected and exposed to political struggles. With regard to its discursive aspect, the Islamists’ commitment to developmentalism is striking. Such a commitment may also be surprising, however, for those who naively rely on the common Western narrative that depicts Islamists as rejectionist and rogue. The emergence of Islamist politics – or in other words, its detachment from the right-wing conservative parties – coincided with the 1960s and 1970s when developmentalism was fashioning economic, political, as well as social imaginaries in Turkey. It is by no means particular to Turkey, or even to Third World elites, since developmentalism transcended the capitalist world in the bipolar world system and reconfigured the maxims of socialist thought. Evidently, since the 19th century, economic policies were tailored in a Listian way by Turkey’s policymakers, or its Ottoman predecessors, in order to catch up with the West. However, developmentalism became more prevalent in the 1960s to the extent that different competing imaginaries, from Marxist to Islamist, shared its different shades. This implies that Islamism in Turkey has therefore never been, in Keyder’s words, ‘other-worldly’, as is often depicted in the oriental narratives (Keyder, 1987, p. 122). They have always imagined a particular economic and political order, as well as urban design for this world. Concerning the latter, it is of worthy of note that in the 1980s and 1990s the urban imaginaries have been mingled with the idea of, in Islamist language, conquering cities. Especially in the case of Istanbul, the Islamists, who had their constituency base in the squatters, billed themselves as the conqueror of the city centres that were designed by and for infidels. As eloquently put by observer, ‘both Islamists and their opponents compared the secular inhabitants of the city centre with the Christians of Byzantine times’ (Tuğal, 2008, p. 73). It should also be added that some Islamist intellectuals see the housing as a ‘thing’ that shelters the family, which is regarded as a holy entity among Islamist circles. Adorning it with holy aura, it has been argued that housing cannot be left to the market. The Factors Germane to Technological Selectivity Technological selectivity refers to Foucault and neo-Foucauldian studies. The factors that are linked to the assemblages of knowledge, disciplining and governmental rationalities, sites and mechanism of calculated intervention that may frame discourses and imaginaries can be selectively summarized as follows. Above all, what should be highlighted is the assemblage of knowledge on the benefits of the construction and on the necessary state involvement basing on the premises of developmentalism and modernism – for the sake of creating more modern places that takes the population as an object of governance. The alleged importance of the construction industry has been continuously reproduced in media outlets. The party in power and its branches in civil society have reproduced the idea that the construction industry signifies progress and development. Concomitantly, housing provisions have been justified by highlighting the inadequacy of existing housing supply against a possible earthquake. The danger of earthquake for the old housing stocks has been repeated in different sites, including scientific or business conferences, journals and so on. The activities of TOKİ can be considered as calculated intervention in fashioning family. Strengthening the family ties is a manifest aim of the administration (also see Bayraktar, 2007). It is important to recall at this point that TOKİ develops houses generally for families,

456  Handbook on critical political economy and public policy extended and nuclear. Such intervention is a clear reflection of the conservative understanding of family. Tahire Erman’s astonishing ethnographic work on one of TOKİ’s housing complexes, which hosts former gecekondu dwellers, sheds light on the clear traces of these disciplining mechanisms. For instance, she discusses how denizens of the complex are brought under the domination of workfare, highlighting that the owners of TOKİ dwellings tend to work more to pay back their TOKİ loans. They are ready to reduce other expenses (e.g., food expenses) as much as possible and to work in informal precarious jobs without protesting or objecting, under the burden of the debt. Erman also demonstrates how the conservative/Islamist values are organized in TOKİ’s sites. In this context, perhaps the most striking example that the author gives is the Mistress Clubhouse in the housing complex, in which the women are taught to be ‘good mothers’ and accept the hierarchical gender roles (Erman, 2016).

CONCLUSION: THE WAY TO HELL IS PAVED WITH CONCRETE Of many versions of CPE, the approach developed by Bob Jessop and Ngai-Ling Sum offers a distinct perspective and a more elaborate framework in many respects. Thus, it is one-step ahead among many others striving to combine culture with political economy, because, above all, this approach to CPE represents an ontological turn that defends that the world has semiotic and material properties that are equally real, and matter (Sum & Jessop, 2013). Hence, it is more than the thematic versions of CPE, some of which tend to approach culture in an essentialist manner. If I followed such a version, I would have focused more on the effects of Islamist culture on the housing policy as if it were an Islamist culture that is essential in its nature. Second, on the one hand, the approach acknowledges that semiosis is the foundation of social relations. On the other, it argues against an extreme version of constructivism, which tends to reduce the reality merely to its intersubjective meaning. CPE’s explicit rejection of the overemphasis on the intersubjective meaning is unquestionably related to its strong affiliation with the premises of the philosophical movement of critical realism. In addition, their approach draws largely on Marxism, but not its orthodox version, which tends to take economic actions and institutions as granted. CPE underlines the socially constructed nature and historical specificity of economic actions and institutions. Therefore, from the CPE perspective, the housing provision in question cannot be fully grasped by analysing merely the construals of certain actors or the imperatives of capital accumulation in Turkey. The extensive state involvement through the housing provisions of TOKİ was in part the outcome of a certain discourse that disparaged the gecekondu mode of housing provision. In part, it bears on the outcome of a certain Islamist imaginary that has the aim to change the urban landscape, yet in a modernist way, as a solution for unrestrained urban sprawl. The involvement was believed to bolster the construction industry and thus the whole economy. The state’s involvement has been in stimulating capital accumulation of those business groups who have been enjoying the contracts awarded by TOKİ. The substantial segment of the bourgeoisie engaging in the construction industry has been playing an important role in the AKP and has directly and indirectly related to some religious communities (cemaats) and other similar networks. Nevertheless, other factions of the Turkish bourgeoisie have perceived such involvement as beneficial to their interests because of the expected backward and forward linkages of the construction industry with other industries and services. The

The cultural political economy of housing policy in Turkey  457 long-standing commitment of Islamist politics to rapid reconstruction/development through government intervention has finally been realized with TOKİ’s operations. AKP’s involvement in general appears to be central to reinforcing the party’s election successes. The concrete has paved the way for Islamist power. However, power has always been contested, as observed in the mayoral race in March 2019. The race between the opposition and the AKP-led coalition was neck and neck. Yet, AKP lost almost all key Metropolitan areas, including Ankara, Diyarbakır, Istanbul and İzmir. The most dramatic race perhaps happened in Istanbul, where opposition candidate Ekrem İmamoğlu won the election with a narrow lead. The election was annulled and a new election was scheduled in June 2019 with the AKP’s hope that the party would not lose one of its strongest strongholds, where Recep Tayyip Erdoğan has significantly built up his political career. But things did not go as planned. The result was the landslide victory for the opposition candidate, Ekrem İmamoğlu. When he was nominated as a mayoral candidate for the Istanbul Metropolitan Municipality, he was regarded as a dark horse as a district mayor in Istanbul and not a prominent political figure. For those, who study the political economy of construction industry in Turkey, however, he is not unknown as he runs contracting companies. İmamoğlu, a contractor, challenged AKP’s power, which has been partially derived from the construction industry. That is perhaps just a historical irony.

NOTES 1. The building was erected inside the Atatürk Forest Farm, a first-degree protected zone, which prohibited all construction activities within its territory. 2. As Harvey clearly defines it, the built environment ‘is a complex composite commodity comprising innumerable different elements – roads, canals, docks and harbours, factories, warehouses, sewers, public offices, schools and hospitals, houses, offices, shops, etc. – each of which is produced under different conditions and according to quite different rules’ (Harvey, 1978, p. 115). 3. For a contrasting view, see Babe (2009), pp. 12–14. 4. Sign process, including production of meaning. 5. Informal, squatters’ housing, dwellings without permission from the relevant state authorities, appearing overnight in literal translation. 6. Taksim Square displays no trace of an Islamic city. Taksim has hosted May Days and several bureaus of leftist organizations and parties. Grande Rue de Pera (Beyoğlu) leads up to Taksim Square and houses several churches. Among them, the Hagia Triada Greek Orthodox Church is perhaps the more remarkable, as it looms over Taksim Square. This square reminds the Islamists of their political enemies. Above all, the Republic Monument rises in the middle of Taksim Square.

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458  Handbook on critical political economy and public policy Babe, R.E. (2009). Cultural Studies and Political Economy: Toward a New Integration. Lanham, MD: Lexington Books. Ball, M. (1988). The international restructuring of housing provision. In M. Ball, M. Harloe & M. Martens (eds), Housing and Social Change in Europe and the USA (pp. 169–98). London and New York: Routledge. Bartu, A. (1999). Who owns the old quarters? Rewriting histories of the global era. In Ç. Keyder (ed.), Istanbul: Between the Global and the Local (pp. 31–45). Lanham, MD: Rowman & Littlefield. Bayraktar, E. (2007). Bir İnsanlık Hakkı Konut: TOKİ’nin Planlı Kentleşme ve Konut Üretim Seferberliği [Housing as a Human Right: TOKİ’s Planned Urbanization and Mobilization for Housing Provision]. Istanbul: Boyut. Beriş, H.E. (2008). Türkiye’de 1980 sonrası devlet sermaye ilişkileri ve “parçalı burjuvazi” nin oluşumu [State–capital relations after 1980 and the formation of partial bourgeoisie in Turkey]. Ekonomik Yaklaşım, 19(69), 33–45. Best, J. & Paterson, M. (2010). Introduction: understanding cultural political economy. In J. Best & M. Paterson (eds), Cultural Political Economy (pp. 1–25). London and New York: Routledge. Brand, U. (2013). State, context and correspondence: contours of a historical-materialist policy analysis. Österreichische Zeitschrift für Politikwissenschaft, 4(42), 425–42. Çavuşoğlu, E. (2011). İslamcı neo-liberalizmde inşaat fetişi ve mülkiyet üzerindeki simgesel hale [Construction fetishism in Islamic neoliberalism and symbolic aura on ownership]. Birikim, 270, 40–51. C̨ avuşoğlu, E. & Strutz, J. (2014). Producing force and consent: urban transformation and corporatism in Turkey. City, 18(2), 134–48. Cox, R. (1981). Social forces, states and world orders: beyond international relations theory. Millennium – Journal of International Studies, 10(2), 126–55. Demir, Ö., Acar, M. & Toprak, M. (2004). Anatolian tigers or Islamic capital: prospects and challenges. Middle Eastern Studies, 40(6), 166–88. Du Gay, P. & Pryke, M. (2002). Cultural economy: an introduction. In P. Du Gay & M. Pryke (eds), Culture, Representation, and Identities. Cultural Economy: Cultural Analysis and Commercial Life (pp. 1–20). London: SAGE. Elicin, Y. (2014). Neoliberal transformation of the Turkish city through the Urban Transformation Act. Habitat International, 41(1), 150–55. Erman, T. (2016). ‘“Mış Gibi Site”: Ankara’da bir TOKİ-Gecekondu Dönüşüm Sitesi [As if it were the housing complex: a housing complex of TOKİ-gecekondu transformation in Ankara]. Istanbul: İletişim Yayınları. Fairclough, N., Jessop, B. & Sayer, A. (2002). Critical realism and semiosis. Alethia, 5(1), 2–10. Foucault, M. (1981). The History of Sexuality. London: Penguin Books. Gulbenkian Commission (1996). Open the Social Sciences: Report of the Gulbenkian Commission on the Restructuring of the Social Sciences. Stanford, CA: Stanford University Press. Gürakar, E.Ç. (2016). Politics of Favoritism in Public Procurement in Turkey: Reconfigurations of Dependency Networks in the AKP Era. New York: Palgrave Macmillan. Harvey, D. (1978). The urban process under capitalism: a framework for analysis. International Journal of Urban and Regional Research, 2(1–4), 101–31. Hudson, R. (2008). Cultural political economy meets global production networks: a productive meeting? Journal of Economic Geography, 8(3), 421–40. Jacobs, K., Atkinson, R. & Spinney, A. et al. (2010). What Future for Public Housing? A Critical Analysis. AHURI Final Report No. 151. Australian Housing and Urban Research Institute. Jessop, B. (2004). Critical semiotic analysis and cultural political economy. Critical Discourse Studies, 1(2), 159–74. Jessop, B. (2007). State Power: A Strategic-Relational Approach. Cambridge, UK: Polity Press. Jessop, B. (2010). Cultural political economy and critical policy studies. Critical Policy Studies, 3(3–4), 336–56. Jessop, B. (2013). Recovered imaginaries, imagined recoveries: a cultural political economy of crisis construals and crisis-management in the North Atlantic Financial Crisis. In M. Benner (ed.), Before

The cultural political economy of housing policy in Turkey  459 and Beyond the Global Economic Crisis (pp. 234–54). Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Jessop, B. (2014). A specter is haunting Europe: a neoliberal phantasmagoria. Critical Policy Studies, 8(3), 352–55. Jessop, B. & Oosterlynck, S. (2008). Cultural political economy: on making the cultural turn without falling into soft economic sociology. Geoforum, 39(3), 1155–69. Jessop, B., Young, B. & Scherrer, C. (eds) (2014). Routledge Frontiers of Political Economy, Vol. 189: Financial Cultures and Crisis Dynamics. London and New York: Routledge. Karatepe, I.D. (2013). Islamists, bourgeoisie and economic policies in Turkey. Kurswechsel: Zeitschrift für gesellschafts-, wirtschafts- und umweltpolitische Alternativen, 3, 53–62. Karatepe, I.D. (2016). The state, Islamists, discourses, and bourgeoisie: the construction industry in Turkey. Research and Policy on Turkey, 1(1), 46–62. Karatepe, I.D. (2021). The Cultural Political Economy of the Construction Industry in Turkey: The Case of Public Housing. Leiden: Brill. Keyder, Ç. (1987). State and Class in Turkey: A Study in Capitalist Development. London and New York: Verso. Lemke, T. (2007). An indigestible meal? Foucault, governmentality and state theory. Distinktion: Scandinavian Journal of Social Theory, 8(2), 43–64. MacKenzie, D. (2011). The big, bad wolf and the rational market: portfolio insurance, the 1987 crash and the performativity of economics. Economy and Society, 33(3), 303–34. Marschall, M., Aydogan, A. & Bulut, A. (2016). Does housing create votes? Explaining the electoral success of the AKP in Turkey. Electoral Studies, 42, 201–12. Olotuah, O. & Bobadoye, S. (2011). Sustainable housing provision for the urban poor: a review of public sector intervention in Nigeria. The Built & Human Environment Review, 2, 51–63. Öniş, Z. (2001). Political Islam at the crossroads: from hegemony to co-existence. Contemporary Politics, 7(4), 281–98. Öniş, Z. (2009). Conservative globalism at the crossroads: the Justice and Development Party and the thorny path to democratic consolidation in Turkey. Mediterranean Politics, 14(1), 21–40. Pittini, A. & Laino, E. (2011). The Housing Europe Review 2012: The Nuts and Bolts of European Social Housing Systems. Accessed 15 December 2015 at http://​www​.housingeurope​.eu/​resource​-105/​the​ -housing​-europe​-review​-2012. Ribera-Fumaz, R. (2009). From urban political economy to cultural political economy: rethinking culture and economy in and beyond the urban. Progress in Human Geography, 33(4), 447–65. Rolnik, R. (2013). Late neoliberalism: the financialization of homeownership and housing rights. International Journal of Urban and Regional Research, 37(3), 1058–66. Sayer, A. (2001). For a critical cultural political economy. Antipode, 33(4), 687–708. Sönmez, M. (2011a). TOKİ ve rant dağıtımı [TOKİ and the distribution of rent]. Accessed 7 July 2015 at http://​mustafasonmez​.net/​?p​=​657. Sönmez, M. (2011b). TOKİ’den aslan payı kimlerin? [Who gets the lion’s share from TOKİ?]. Accessed 7 July 2015 at http://​mustafasonmez​.net/​?p​=​684. Sönmez, M. (2015). Ak Faşizmin Inşaat Iskelesi [The Scaffolding of AK Fascism]. Istanbul: NotaBene Yayınları. Sum, N.-L. (2012a). A cultural political economy of transnational knowledge brands: Porterian “competitiveness” discourse and its recontextualization in Hong Kong/Pearl River Delta. In P.A. Chilton, H. Tian & R. Wodak (eds), Discourse and Socio-Political Transformations in Contemporary China (vol. 42, pp. 57–85). Amsterdam and Philadelphia, PA: John Benjamins. Sum, N.-L. (2012b). From regulation approach to cultural political economy: republication of EU Framework 6 Demologos Spot Paper (2005). CPERC Working Paper 2012-01. Cultural Political Economy Research Centre, Lancaster University. Accessed 7 July 2015 at http://​www​.lancs​.ac​.uk/​ cperc/​docs/​Sum​%20CPERC​%20Working​%20Paper​%202012​-01​.pdf. Sum, N.-L. & Jessop, B. (2013). Towards a Cultural Political Economy: Putting Culture in Its Place in Political Economy. Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Tuğal, C. (2008). The greening of Istanbul. New Left Review, No. 51, 65–80.

460  Handbook on critical political economy and public policy Uzun, B. & Celik Simsek, N. (2015). Upgrading of illegal settlements in Turkey: the case of North Ankara Entrance Urban Regeneration Project. Habitat International, 49, 157–64. Uzun, B., Çete, M. & Palancıoğlu, H.M. (2010). Legalizing and upgrading illegal settlements in Turkey. Habitat International, 34(2), 204–9. Yeşilbağ, M. (2015). Hegemonyanın harcı: AKP döneminde inşaata dayalı birikim rejimi [The mortar of hegemony: the construction-led accumulation regime in the AKP period]. Ankara Üniversitesi SBF Dergisi, 71(2), 599–626.

31. The financialization of social policy: an overview Lena Lavinas, Lucas Bressan, Pedro Rubin and Ana Carolina Cordilha

SOCIAL POLICY IN THE 20TH CENTURY The main revolution of the 20th century was turning the right to social protection into a common good – the right of everyone – overcoming the stigma of assistance for the poor. The right to health, education and vocational training, housing, safety and security, and a minimum monetary income for survival in a market economy progressively expanded the scope of protection and enriched the semantic field of social policy. Through social struggles and the needs arising from the expanded reproduction of capitalism itself, social policy moved forward, widening the range of demands for universal provision of decommodified goods and services (which would ensure individuality without subordination, promote equality of opportunities and impede forms of socially devalued status), and the primacy of prevention (which would help to avoid or reduce loss of provisions during systemic crises or personal misfortunes). The hugely diverse welfare systems thus have been ascribed to two main roles. First, they guarantee some degree of socioeconomic security throughout the life cycle to prevent the loss of welfare infringed by certain risks (unemployment, illness, widowhood, poverty, accidents) on families and individuals, which could end up jeopardizing their autonomy and future. Second, they stimulate the development of productive forces by ensuring smooth consumption and economic stability, thereby working to counteract the harmful effects of crises inherent in the expansion and metamorphoses in capitalist accumulation cycles. Throughout the 20th century, the backdrop that engendered collective rights was precisely the prevalence of a wage-earning society. When individuals without property in wage-earning societies acquired rights by virtue of participating in a collective that gave them an identity and protected them, they gained a social existence that assured them autonomy from the markets. The Keynesian welfare state (Jessop, 1993) or the age of welfare capitalism of the 1950s to 1970s was an exceptional innovation, with its logic rooted in the disassociation between individual welfare and revenue from work or assets, to maintain aggregate demand at a satisfactory level in periods of shrinking economic activity and allow for permanent expansion. It enabled full employment consistently. These seminal ideas also echoed in the developing economies, as occurred in many Latin American countries (Fleury, 1994; Mesa-Lago, 2005). However, this occurred with great heterogeneity. In a pioneering region in the introduction of social insurance, the complementarity between social policy and economic policy was never complete to the point of providing universal coverage of the population. These systems remained incomplete and unrefined (Lavinas & Simões, 2015). As highlighted by Lo Vuolo, ‘the importance of the informal economy, the heterogeneity of the production system, the ethos of social insurance, the dilemmas of hori461

462  Handbook on critical political economy and public policy zontal solidarity, the hostility of powerful political actors to universal policies, the regressivity and deficiencies of tax systems and an inability to control evasion and verify incomes’ (2015, p. 34) reinforced negative complementarities between the economy and social protection systems in Latin America. This explains why social policies had a very limited redistributive impact during the state-led industrialization regime in the region. With the end of the Fordist regime and transformations in the labor market due to innovations in the production process and the advent of neoliberal logic, the role played by social policy was progressively redefined on a global scale. Beginning in the 1980s, the idea of social protection retreated in the name of prioritizing the fight against poverty through targeted programs. Rather than directly serving a set of contingencies and needs for the entire population, the new rule was that the state should limit itself to protecting the poor (Lavinas, 2018b), as if a paradigm from the past had been resuscitated into a new context and under moral arguments that preclude criticism: who could oppose the fight against poverty occupying the top of the social agenda? A subsistence monetary income was assured for those truly threatened by acute deprivation, on condition that they prove their sincere intention to enter the labor market and meet other requirements. The purpose of this was to stimulate individual responsibility in the relationship with the market. It was up to the state to merely promote (Gilbert, 2002) this process of ‘autonomization’ by the market,1 and no longer via citizenship. The scope of social policy also shrank considerably with the predominance of targeting and the multiplication of conditionalities and eligibility criteria. The goal was to reduce public spending, giving way to private provision to contain the so-called ‘fiscal crisis’. Given the new difficult-to-predict risks in a globalized economy, the claim was that national social protection systems were no longer capable of providing effective solutions. Instead of decommodifying, the attempt was to recommodify. Social insurance reforms accompanied the flexibilization and precarization of employment. Working families’ savings were gradually shifted to individual capitalization accounts. The coverage of unemployment insurance was limited, while the criteria for qualifying for the benefit increased. Growth was no longer a priority, replaced by the control of inflation and constraints on any expansionist fiscal policy. Redistribution was sacrificed (with overall tax cuts, especially for the wealthy, unburdening capital) and came to be viewed as the cause of major inefficiencies and harmful to competitiveness; now it was regarded as a top priority issue due to globalization (Lavinas, 2018b). The apologia of privatization of public services replaced the ideals of universal and free access. In countries of the Global South, where the state’s fiscal capacity is low since the tax burden is generally small, microcredit became the principal mechanism to discipline individuals (Bateman & Maclean, 2017), holding them accountable for their current choices and future opportunities. Microcredit occupied the vacuum in social protection systems or filled the gaps of their imperfections and incompleteness. Rather than ‘risk-sharing’, ‘risk-taking’, associated with the idea of prosperity, became the rallying cry. While social policy was strongly complementary and expansive in times of Fordism, and residual in times of the Washington Consensus, it now assumed new functionalities with the advent of financialized capitalism. In this new phase of capitalism, dominated by finance, social policy underwent significant transformations as both were affected by and served as a mechanism for the development of this new regime of accumulation. The sphere of social reproduction became one of the new frontiers in capitalist expansion under the dominance of financial markets.

The financialization of social policy: an overview  463

FEATURES OF FINANCIALIZATION Various authors (Fine, 2013b; Mader, Mertens & Van der Zwan, 2020; Sawyer 2013) identify in the works of Harry Magdoff and Paul Sweezy (1987) the first references to a gravitational shift in the economic system towards finance. The primacy of financialized capitalism has governed economic and social restructuring over the last few decades (Fine, 2013a, p. 59). Finance-dominated capitalism tends to inhibit economic growth while exposing the extraordinary progression of financial wealth through the ‘multiplication of the means of organizing claims of indebtedness’ (Durand, 2017, p. 66). Ranging from 100 to 200 percent of world gross domestic product (GDP) in 1975, in 2015, according to estimates, the various forms of fictitious capital (stocks, bonds, dividends, capital gains) reached nearly five times the global GDP. The public debt, private debt of firms and households, and countless forms of capitalization (anticipation of capital valorization) on the capital market, besides financial intermediation (fees and commissions), engender financial profits on an unprecedented scale, grabbed by holders of financial bonds (that is, of a future right). Households were drawn in by the logic of indebtedness when faced by a scenario of relatively stagnated salaries and the state’s pullback from the provision of previously decommodified services. Successive labor reforms that eliminated rights and made employment precarious, in keeping with austerity policies, deteriorated households’ living conditions and pushed them into the heavily expanding credit markets. Even in countries that recorded real wage increases, as in Brazil from 2004 to 2014, the unprecedented growth of countless modalities of individual credit turned the country into a safe place for immediately meeting a set of basic needs via the financial market, thereby sustaining the aggregate demand. In addition to increasing the degree of households’ indebtedness, which became another inherent dimension of financialization, the literature highlights the dissemination of an ideology focused on encouraging ‘self-entrepreneurship’. This ideology not only undermines subjective solidarity-based social foundations, but also holds individuals solely responsible for their eventual successes or failures (Aitken, 2020; Lapavitsas, 2009; Lazzarato, 2012; Montgomerie, 2020). Thus, how does one define financialization, considering it as a multifaceted phenomenon with a rapidly spreading scale and scope? There is agreement today that the field still lacks a robust theory of financialization. This explains why financialization is not defined by any single concept (Stockhammer, 2007; Thomson & Dutta, 2015; Van der Zwan, 2014). Rather, it comprises an array of empirical features and processes that paint the portrait of a new regime of accumulation in which macroeconomics and economic policies are increasingly dominated by the rationale of financial capital (Palley, 2013), with particularly detrimental effects on labor, productive investments, and the economy in general, as well as on daily life (Martin, 2002). Financial markets, actors, and institutions (Epstein, 2005) are seen to gain influence over the real economy. Yet, as highlighted by Ben Fine, financialization is not only a matter of the greater weight of finance, but also ‘its greater scope of application’ (2009, p. 5), thus extending ‘its influence beyond the marketplace and into other realms of social life’ (Van der Zwan, 2014, p. 101). Those directly affected are not only firms, but also ordinary households. Therefore, financialization should be understood as a new dynamic of capitalist relations or a new stage of capitalism’s development (Sawyer, 2016). In Gretta Krippner’s influential interpretation, financialization is ‘the tendency for profit making in the economy to occur increasingly through financial channels rather than through productive activities’ (2012, p. 4).

464  Handbook on critical political economy and public policy The author also recognizes other definitions such as those casting financialization as ‘the ascendancy of shareholder value as a mode of corporate governance’, ‘the increasing political and economic power of a rentier class’, or the ‘explosion of financial trading associated with the proliferation of new financial instruments’ (pp. 27–8). This understanding echoes Giovanni Arrighi’s observations (1994) that capitalism develops in two phases: first, material expansion, then financial expansion, and, at which point, profit-making shifts from trade and commodity production to financial channels. For Maurizio Lazzarato, financialization is also ‘indicative of the increasing force of the creditor-debtor relationship’ in contemporary capitalism (2012, p. 23). As a result, debt-to-income ratios tend to rise sharply to compensate for stagnant or falling labor earnings. Likewise, the composition of the capital share also shifts toward multiple forms of rewards to finance, rather than toward profits (Lavinas, 2017). Financialization is a global phenomenon. The emerging and developing economies are slowly incorporated into financial globalization as they become the destination for massive capital flows in search of higher profitability. This process has its own characteristics, summarized in the expression ‘subordinate financialization’ (Powell, 2013). It is expressed both as the dependent insertion of peripheral economies in global chains and by their participation in trade and capital markets dominated by strong currencies at the top of the currency hierarchy (Bonizzi, Kaltenbrunner & Powell, 2020). This double subordinate insertion, amplified by the dissemination of digital technologies, repeatedly increases the periphery’s economic and financial vulnerability. Thus, the peripheral economies are not isolated from the financialization process, although individually, they present specific characteristics dictated by their subaltern position in the global economic system. It is also necessary to specify the state’s central role in the financialization process, as demonstrated by Yingyao Wang (2020). Besides creating and/or facilitating financial markets’ expansion via regulatory measures, states promote a broad rechanneling of resources by redesigning public policies focused on credit, capitalization, and transformation of their sovereign debt into tradable bonds, which are later used as the basis for issuing securities and derivatives. States, thus, contribute to the extension and continuity of financial accumulation, through the creation and multiplication of quasi-public organizations and regulatory agencies that are essential for the development of financial markets. The growing interdependence of state and finance has also involved shifts in the public policy domain. According to Chiapello (2017), financialization has ‘colonized’ public policies, which have absorbed financialized forms of reasoning and calculations. A ‘financialized technical culture’ has thus dominated the field of public policy through the penetration of logic and forms of assessment used in the financial sector. The author highlights the ideological work done by finance to that end and how public policy issues have been reshaped to respond to an approach in terms of investment, returns, risks, assets, and liabilities. Thus, access to financial markets allowed the depoliticization of social and political dilemmas by ‘transferring’ this responsibility to the market. Far from playing a passive role, the state has shown the capacity to influence events while being simultaneously transformed by the primacy of financial accumulation (Wang, 2020).

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THE FINANCIALIZATION OF SOCIAL POLICY Financialization has a strong impact on the contemporary dynamics of social reproduction. The Marxist approach defines the sphere of social reproduction as a complex set of relations, processes, structures, power, and conflicts of a non-economic or mercantile nature that includes everything related to the reproduction of the labor force (Fine, 2017). For Ben Fine and Alfredo Saad-Filho (2016), this concept became an ‘umbrella’ term for what are considered non-mercantile dimensions of life. Since the capitalist mode of production depends on expanded reproduction, their importance, economically and non-economically, is essential. The non-economic dimension entails a set of services ensured by families – essentially women’s unpaid domestic work – and public policies, through direct or subsidized provision (partially or totally). Social insurance, social assistance, health and education systems, workforce training programs, social inclusion policies, housing and urban infrastructure, the care economy, and other initiatives to promote social justice have been responsible for individuals’ welfare, each with distinct modes of production, distribution, and consumption, and their corresponding norms. Their provision is transformed as a function of the dominant regime of accumulation, through processes of commodification, decommodification, and recommodification (Fine, 2017; Lavinas, 2018a). The state has the power to massively expand the markets for capitalist production by opening spaces for new exchanges, previously outside the mercantile realm. The direct impact of financialization on various dimensions of social reproduction has occurred likewise, transferring to private capital what had been the attribution of families, communities, or state provision. A ‘financial engineering’ is created that leads to the formation of new markets with the provision of goods and services, now the attribution of insurance companies, financial institutions, and private firms (Fine, 2017). Social insurance was one of the first areas to be transformed under the neoliberal order with the dismantling of pay-as-you-go regimes2 and the progression of fully funded schemes, based on individual accounts with defined contributions and undefined benefits. The argument for capitalization is based on the idea that households’ savings would be absorbed by domestic investment,3 stimulating innovation and increased productivity, thus leading to growth in production. With the funds from social insurance contributions applied in asset portfolios, now in the hands of large pension funds, private social insurance would stimulate the capital market’s expansion, notably in the developing countries, where it is the state’s priority to finance private activity. The dismantlement of public pension systems, which is compulsory, based on intergenerational solidarity, and tends to generate larger benefits than contributions in case of real increases in per capita income (Samuelson, 1958), has led to mounting socioeconomic insecurity and even poverty among retired seniors. The retirement replacement rate (retirement benefits/pre-retirement income) has declined in recent decades, especially in countries where the public systems’ reforms have been more radical. However, none of this had significant impact on the level of economic activity by promoting growth and employment; in fact, the results were quite the contrary. The erosion of the value of pension benefits caused by the neglect of public systems and instability resulting from the capital market’s quite volatile dynamics has further expanded elderly people’s dependence on financial markets. On the one side, when they receive regular income flows, paid out and guaranteed by the state, old-age pensioners become easy prey for

466  Handbook on critical political economy and public policy financial inclusion mechanisms (through indebtedness) incentivized by multilateral agencies and national governments, particularly following the crisis of 2008–09. Since retirement income has not been sufficient to meet the basic needs of the elderly population, whose life expectancy has increased progressively, and since the economy of care is not fully integrated into the social protection systems, the inherent costs of aging have been covered through recourse to indebtedness. The Brazilian case illustrates this trend. The heavy expansion of credit supply since 2003 was accompanied by the creation of a special credit line, consigned credit, with more favorable interest rates and payment conditions for borrowers when they have a regular income flow guaranteed by the state, as in the case of public employees, retirees, and pensioners. Although this credit line was later extended to workers in the formal sector in general, public employees and retirees still constitute 93 percent of the consigned credit clientele in 2021 (Banco Central do Brasil, 2021). The state not only participates as quasi-underwriter, since it guarantees the income and shares the client’s information with the financial institutions, reducing the costs and risks of financial intermediation (Lavinas, 2020), the automatic deduction of up to 35 percent of the salary or benefit for payment of the hired debt practically eliminates the risk of default. On the other hand, they are attracted by the recently popularized financial instruments that allow (for those who are homeowners) the conversion of their real estate assets into current income via anticipated sale and subject to heavily negative goodwill to a creditor, usually a bank or other financial institution. This is the case of the reverse mortgage. Reverse mortgage is used in developed countries such as the United States, Spain, United Kingdom, and Canada and has become the object of regulation in many emerging economies. It allows the elderly to sell their real estate in advance, receiving a lump sum pertaining to the full sale value or a monthly remuneration for the period negotiated in the sale contract. This period is defined as a function of the elderly individual’s estimated survival4 at the time of the sale, and the real estate’s negative goodwill varies as a function of this expectation. The longer the estimated survival, the higher the negative goodwill in the purchase price, which may vary from 10 to 40 percent or even more. Reverse mortgage allows elderly persons to continue to live in their home until the period expires as negotiated in the contract or their death. However, if their survival exceeds the years specified in the contract to remain in the residence, the elderly persons not only have no more right to their maintenance income but are also required to turn their former housing over to the financial institution.5 The regulatory details of this form of finance vary greatly from one country to another, and such financing is expected to grow in the coming years. But the basic dynamics are almost the same. For many years, individuals and families have taken on mortgage debt to fulfill their homeowning dream, which gives them a financial asset with constant valorization. However, without the resources to cover their current expenses, which tend to increase with the loss of autonomy imposed by aging and the absence of public provision, elderly individuals find themselves largely dispossessed of this surplus value (which goes to the banks) to be able to remain in their residence. They thus suffer double financial expropriation. For Costas Lapavitsas (2013), the concept of financial expropriation underlines how the appropriation of wages (value) occurs through exploitative credit relations, under the rule of interest-bearing capital. In fact, the necessary consumption for the reproduction of the labor force has become increasingly privatized and mediated by the financial system. Banks and other financial institutions not only finance households’ consumption by furnishing loans, but also channel their savings to the financial markets, thereby extracting financial profits. In the

The financialization of social policy: an overview  467 absence of adequate and accessible public services, consumers’ debts under financialization often become the only mechanism for mitigation of difficult-to-predict adversities. Thus, bill payments during periods of unemployment, insufficient wages to honor current expenses, and exceptional expenses with health or rent turn credit into a necessity and no longer an option (Montgomerie, 2020). In the 21st century, household debt has grown in both developed countries and developing economies. Although the household debt profile differs from one country to another, families’ rising debt-to-disposable-income ratio sent a warning to multilateral agencies. In 2017, the International Monetary Fund (IMF) reported that, since families were over-leveraged with loans, their socioeconomic vulnerability placed them at risk, besides threatening the financial system’s stability.6 The problem is so serious that it has spread to low-income sectors and even to the poorest worldwide, through anti-poverty cash transfer programs (either conditional or unconditional) and microcredit policies implemented in keeping with financial inclusion initiatives. The first step towards financial inclusion includes bankarization of households when they become recipients of cash transfer programs. When they open cash or digital accounts in financial institutions responsible for the payment of the benefit (James, 2018), they become potential clients of a set of financial services and products, ranging from credit lines to small insurance policies (funeral plans, low-income health plans, etc.). According to the World Bank (2017), in 2017, there were more than 2.5 billion persons included in safety nets (one-third of the world population). Although the amounts are small, ranging from US$10 to slightly more than US$100 a month, these cash transfers, underwritten by the state, ensure the extraordinary expansion of monetization in the farthest corners of the planet, made possible by new digital technologies, which allow downward costs and endless scope. For Lutz Leisering, ‘cash transfers have not only reduced poverty, but have turned millions of the poor into rights-holders – an entitlement revolution that has taken place over the past fifteen years’ (2019, p. 140). Although this claim overlooks the fact that not all the target public is reached by these programs, which are not precisely a right and are usually ad hoc programs used at the governments’ discretion, the rise of social cash transfers especially in the Global South has been followed by another structural shift: the revolution of social inclusion via debt (Lavinas, 2020). The so-called ‘democratization of finance’ (Erturk et al., 2007) has occurred through mass financial inclusion – opening of accounts, microcredit policies, flexibilization of credit supply – along with the extraordinary expansion of cash transfers. Thus, the fight against poverty and the financial inclusion and education programs that promote the financialization of development (Mader, 2018) now coexist in symbiosis. These ‘inclusive finance systems’, making a break with discrimination in access to credit for ethnic and racial minorities and women, promote the disciplining of poor and low-income social groups through individual responsibility for honoring the debt. Thus, they dispense gradually with the conditionalities, which were part of the design of cash transfer programs for nearly two decades, and the committed resources important to monitor controls and administrative management. They operate simultaneously in a fundamental turning point in the meaning of social policy. In the form of cash benefits, social policy now serves collaterally to access the financial sector, especially loans (Lavinas, 2018a). As a collateral, it becomes an asset that guarantees loan payment and reduces the risk of default. Thus, a regular flow of income is ensured by the state in the form of retirements, pensions, and all sorts of cash transfers (whether conditional or

468  Handbook on critical political economy and public policy not), establishing a new link with the financial sector via debt and the acquisition of a growing range of financial products. Through public income transfer programs, social policy solves the problem of adverse selection (avoiding financial institutions having to increase interest rates excessively or requiring some hard asset from a clientele marked by dispossession, which would reduce the credit demand). Financialization subsumes the sphere of social reproduction in the pursuit of new and still unexplored assets and that can generate a continuous income flow (Leyshon & Thrift, 2007), amenable to capture by financial instruments. The quantitatively and qualitatively unprecedented spaces allow the emergence of new sources of profit extraction and expropriation by finance. State microcredit policies are other channels by which the financial sector establishes its presence in the life of the most vulnerable segments of society (González, 2020). Such policies theoretically aim to provide small-scale capital to small and micro entrepreneurs (for example, informal workers), seeking to correct what their proponents view as a serious market flaw: the lack of credit to boost entrepreneurship and thus the maintenance of a situation of chronic and hereditary poverty. In practice, however, they prove ineffective in their proposals and harmful in various dimensions.7 Through these mechanisms, finance uses various ways to capture the sphere of social reproduction. The result is the shift of social policy from being a mechanism for equalizing opportunities and preventing risks to becoming an instrument for private companies, especially financial firms, for their expansion, accumulation, and profit, in addition to inequalities.

EDUCATION AND HEALTH IN THE CROSSHAIRS OF FINANCIALIZATION Social policy now assists the financial accumulation regime in other sectors, especially education and health. These sectors are now increasingly in the hands of investment funds and private equity funds, the capital holders of these service-provision companies. Such funds, ultimately, are turned into the real managers of this important share of social policy (Lavinas & Gentil, 2018). The exponential growth of student debt in countries such as Brazil, United States, Chile, and Great Britain, where young people’s access to university has been promoted by special student loans, illustrates the nefarious consequences of the financialization of higher education. Years of austerity policy and cuts in public spending have created a prime niche for the enrichment of private groups that have begun to invest in the promotion of education, the safest path to social ascent. Mass privatization of higher education and its concentration in the hands of large financial groups have favored high monthly tuition fees, thereby tying up access to education to the use of medium- and long-term credit, which again is difficult to access, especially due to high interest rates. The result is the existence of thousands of young adults who begin their working lives heavily indebted. In the United States, this has significantly influenced the economic dynamic itself by reducing households’ consumption capacity (Fullwiler et al., 2018). According to data from late 2020, 42.9 million Americans owe a total student debt of US$1.57 trillion, with an average per capita debt of US$37 000, which is even higher in more vulnerable groups.8 Thus emerges an ‘accounting and financial subjectivation’ (Dardot & Laval, 2016, pp. 30–31)

The financialization of social policy: an overview  469 among students, in which students internalize the idea of investors in themselves, with a discourse of self-administration and risk-taking. Financing is viewed as a wager on a better future, which may leave them in a position of greater social vulnerability if such a future fails to materialize for personal or external reasons. The Brazilian case is illustrative. According to data on FIES,9 in mid-2019, in the country’s public student loan fund, there were 3 million contracts in amortization, totaling BRL24 billion (approximately US46.2 billion) in debts,10 and 47.7 percent of these loan contracts were in default. Benefiting from the expansion of the public student loan program since the early 2000s and the lack of the sector’s greater regulation (which might have restricted foreign participation), a large share of Brazilian private teaching institutions attracted capital from major international conglomerates. Private equity funds played a key role in this market’s growth, with a focus not only on the action undertaken by these institutional funds, but also on the expansion of other forms of assets and equity, especially real estate (Sampaio, 2011). The state thus acted directly by incentivizing students’ indebtedness through public funds, thereby fomenting an increase in the private supply of education. With highly attractive prospects for short-term future gains, now guaranteed by student loans supplied by the public sector, such companies opened their capital on the stock exchanges. Their shares quickly appreciated with the increase in enrollments tied to FIES (Lavinas, 2017). This public policy for social inclusion ended up contributing paradoxically to intense shareholders’ valorization and rapid expansion of the private college education sector’s profitability, as visible in its benchmarks on the stock exchange (Bressan, 2020). Financialization is also redefining every dimension of health care. The design of global health policies, the landscape of private health care services and health insurance provision, and the inner workings of public health systems are all witnessing increased participation of financial instruments and actors and exposure to financial markets (Cordilha, 2021b). First, finance is changing the approach for financing projects addressed at global health challenges. These include initiatives to fight global epidemics, provide primary health care needs in middle- and low-income countries, and achieve health-related targets included in the UN Sustainable Development Goals. Traditional forms of intergovernmental cooperation and development aid to fund such actions are being replaced by novel arrangements such as ‘investment platforms’ (Hunter & Murray, 2019). These are designed to attract private funds, using multilateral and government funding to entice investors who otherwise would not have participated. Despite various possible configurations, they are generally managed by financial experts and draw in money from diverse sources that include financial institutions and investors (Tchiombiano, 2019). Such platforms also sponsor the creation of health bonds, offering attractive compensations for those who want to invest by betting against the spread of diseases (Erikson, 2015; Lavinas, 2018b). The Global Alliance for Vaccines and Immunization (GAVI), which created vaccine bonds, and the World Bank’s Pandemic Emergency Financing Facility (PEF), with its so-called pandemic bonds, are two important examples of platforms and health bonds. They redefine how the universal right to health is being interpreted and pursued (Dentico, 2019), transforming population health into zones for investments (Hunter & Murray, 2019). Health care services and insurance are also undergoing major changes. Here, the process of financialization can be seen through health companies’ increasing reliance on debt and financial markets, along with their ever-greater subordination to investors and financial

470  Handbook on critical political economy and public policy institutions. These occur mainly through processes of ownership restructuring, when financial players acquire shares following health companies’ processes of opening and raising capital on financial markets, direct and fund processes of mergers and acquisitions in the sector and invest in health companies directly via investment funds (Cordilha, 2021b; Vural, 2017). The restructuring now extends to for- and not-for-profit companies across the world and throughout different segments, reaching health insurers (Bahia et al., 2016; Martins, Ocké-Reis & Drach, 2021; Mulligan, 2016; Sestelo, 2018), hospitals and other care providers (Appelbaum & Batt, 2020; Lavinas & Gentil, 2018; Vural, 2017), and pharmaceutical companies (Klinge, Fernandez & Aalbers, 2020; Lazonick et al., 2017). Through these processes, health companies end up listed in financial markets and are integrated within global financial corporations, becoming part of a diversified investment portfolio. This has influenced decisions on the types, quality, and quantity of services and coverage in ways that maximize financial wealth and shareholder value (Bayliss, 2016; Lavinas & Gentil, 2018; Vural, 2017). Besides health provision, finance is also reshaping the demand for services, notably due to individuals’ increasing reliance on health insurance to finance access to services. In the public sector, recent studies have turned to national health systems to demystify the belief that countries with highly consolidated, universal public schemes have been spared from financialization. Looking at the English case, Bayliss (2016) shows how the National Health Service (NHS), a state-funded health system, came into closer contact with systems of financial extraction by welcoming private capital and service providers. One important way in which this occurs is through infrastructure financing. Now it is almost entirely dependent on the private finance initiative (PFI) and the national equivalent of public–private partnerships (PPPs). In PFI arrangements, the public sector delegates the financing, design, building and operation of public hospitals to private agents and repays them over several decades. These projects are heavily dependent on funds from banks and investment firms, and their ownership stakes can be turned into other assets traded in secondary markets. These contracts have proven to be costly for NHS hospitals but highly lucrative for investors. Data suggest that PFI projects in London alone required payments totaling £20.2 billion from the NHS, even though they cost £2.7 billion to build. Another important channel for financialization was via outsourcing. After several rounds of privatization, a significant proportion of NHS services is now contracted out to private health companies. Several of them have been partially or entirely bought by financial firms. Turning to the French case, Cordilha (2021a) examines how the French social security system, which finances the country’s universal social insurance scheme (Assurance Maladie), resorted to different strategies while being on a similar quest for additional resources. The author observes how the emergence of financialized strategies for debt management, financing services, and building public hospitals have allowed financial capital to occupy roles previously played by the public sector. The most important innovation in this case has been the issuance of financial securities. The Social Security system started issuing bonds and commercial papers in domestic and foreign financial markets to raise money for refinancing debts and cover short-term expenditures. From 1996 to 2018, the system raised €208 billion in revenues for debt management alone; in the same period, interest payments to creditors and commissions to banks totaled nearly €72 billion. The turn to the markets allowed investors, financial intermediaries, and credit rating agencies to gain significant influence over the French health system. Financial capital also served to finance public hospitals. Although PPPs made some appearance in the country, the French experience is distinguished by government subsidies so

The financialization of social policy: an overview  471 that public hospitals can borrow directly from private banks to carry out infrastructure projects. The government had to put up €680 million in 2014 to finance the hospitals’ exit from toxic loans provided to them under this strategy. Taken together, the greater participation of finance in all dimensions of health care suggests that health rights and access to services are increasingly subjected to the need to assure investment returns, embodying an inevitable diversion from core values of equity and social justice (Dentico, 2019).

CONCLUDING REMARKS Financialization refers to the restructuring of the production, distribution, and circulation of value rather than its direct creation. In this process, the financial sector has been colonizing non-economic lifeworlds (Fine, 2020). The result is the reconfiguration of social policy, now shifted away from the conception that presided over the formulation and implementation of welfare systems throughout the 20th century. Under the aegis of financialized capitalism, the corrosion of social ownership and collective identities that sustained the development of a wide variety of welfare systems in central and peripheral economies, now engenders an accelerated process of recommodification and re-individualization. Rather than promoting socioeconomic security over the course of individuals’ life cycle as an inalienable right regardless of their income, social status, or equity, guaranteeing smooth consumption, risk prevention, and satisfaction of basic needs for social reproduction, social policy now regulates access to financial markets while it is simultaneously regulated and reconfigured by them. As demonstrated in this chapter, social policy now can serve directly as collateral for individual loans that are needed to finance essential goods and services for families when salaries, old age pensions, anti-poverty programs, and public provisions fail to cover them adequately. Likewise, through financial revenues and private investments by institutional mega-funds, hospitals, local governments, and public administrators seek to fill deficits in financing infrastructure and innovation in the costs of providing universal services previously defined as public budget items. The result of the financialization of social policy is therefore the production of families’ growing dependence on deregulated financial markets. The form of provision that we normally call welfare has changed structurally. Recurrent cycles of indebtedness drive the takeover of social policy by finance. Debt provides the immediate liquidity that allows the purchase of goods, services, and assets that simultaneously protect individuals and entities against unforeseeable risks. The consequence is an increase in households’ socioeconomic vulnerability and a rise in the inherent costs of social reproduction, which now incorporates loan payments, deepening the dependence on financial markets. The artifice of the process of social policy metamorphosis is the state, which sets the rules and regulations that lead interest-bearing capital to become the balance for social reproduction against the common good. This transformation is under way and is still far from unveiling the paths that social policy will take, shackled today by the rationale of financial accumulation.

472  Handbook on critical political economy and public policy

NOTES 1. As put by Gilbert (2002, p. 4), ‘public support for private responsibility’. 2. A social insurance pension system run by the state where pensions, paid to current pensioners, are financed from contributions paid by current workers. 3. This is the orthodox argument par excellence: savings determine the amount of investment through the availability of funds to finance it. Keynes (1936), on the contrary, showed that the relationship was the opposite: investment determines savings through the multiplier mechanism, where there is no reason for pre-financing of capital accumulation. The increase in families’ savings, by reducing consumption, may even reduce investment, since it affects companies’ prospects for profit. 4. Life expectancy after the age of retirement. 5. There are mechanisms in the United States for renegotiating the contract, including the possibility of repurchasing the home by the elderly individual. 6. We can take Brazil as an example. According to the Brazilian Central Bank, 85.3 million Brazilians (one out of two adults) were indebted to the financial sector in late 2019. At the time, the average indebtedness ratio (total debts in relation to accumulated income in the previous 12 months) of Brazilian households was 48.82 percent (Banco Central do Brasil, 2020) but it reached 58.5 percent by early 2021 (Banco Central do Brasil, 2021). In advanced economies, this ratio usually exceeds 100 percent. 7. Incentivized by various public and private international agencies, such policies have been criticized not only as inefficient for overcoming poverty, but also for their various harmful effects. Philip Mader (2015) is one of the main authors to critically address this issue, highlighting its harmful nature and the lack of a scientific basis to sustain this type of policy in terms of poverty reduction. He also underlines the issue’s political nature and its ultimate consequence, leading to the ‘financialization of poverty’. 8. ‘Student loan debt statistics’, Education Data Initiative, accessed 8 November 2021 at https://​ educationdata​.org/​student​-loan​-debt​-statistics. 9. The Student Finance Fund under the Ministry of Education, created in 1999, underwent various reforms before experiencing large-scale expansion starting in 2010, when it greatly increased the credit supply by the government to expand social inclusion of underprivileged youth in universities (black and low-income youth). FIES coexisted with other programs for democratization of access to higher education, such as PROUNI – the University for All Program (scholarships in private institutions) – and REUNI – Restructuring and Expansion of Federal Universities (aimed at expansion of admissions places in public universities and quotas for black and poor students). 10. ABMES (2019), ‘FIES completa 20 anos com 47% dos atuais estudantes inadimplentes’, accessed August 27, 2021 at https://​abmes​.org​.br/​noticias/​detalhe/​3319/​fies​-completa​-20​-anos​-com​-47​-dos​ -atuais​-estudantes​-inadimplentes.

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474  Handbook on critical political economy and public policy Hunter, B.M. & Murray, S.F. 2019, ‘Deconstructing the financialization of healthcare’, Development and Change, 50 (5), 1263–87. International Monetary Fund (IMF) 2017, Global Financial Stability Report: Is Growth At Risk?, Washington, DC: IMF. James, D. 2018, ‘Mediating indebtedness in South Africa’, Ethnos: Journal of Anthropology, 83 (5), 814–31. Jessop, B. 1993, ‘Towards a Schumpeterian workfare state? Preliminary remarks on post-Fordist political economy’, Studies in Political Economy, 40 (1), 7–39. Keynes, J.M. 1936, The General Theory of Employment, Interest and Money, New York: Harcourt Brace. Klinge, T.J., Fernandez, R. & Aalbers, M.B. 2020, ‘La financiarización de las grandes empresas farmacêuticas’, Revista Internacional de Sociología, 78 (4), Article e174. Krippner, G. 2012, Capitalizing on Crisis: The Political Origins of the Rise of Finance, Cambridge, MA: Harvard University Press. Lapavitsas, C. 2009, ‘Financialised capitalism: crisis and financial expropriation’, Historical Materialism, 17 (2), 114–48. Lapavitsas, C. 2013, Profiting Without Producing: How Finance Exploits Us All, London and New York: Verso. Lavinas, L. 2017, The Takeover of Social Policy by Financialization: The Brazilian Paradox, London and New York: Palgrave Macmillan. Lavinas, L. 2018a, ‘How financialization challenges social protection systems’, in P. Rodrigues & I. Santos (eds), Social Risks and Policies in Brazil and Europe: Convergences and Divergences, Rio de Janeiro and São Paulo: Cebes and Hucitec Editora, pp. 175–99. Lavinas, L. 2018b, ‘The collateralization of social policy under financialized capitalism’, Development and Change, 49 (2), 502–17. Lavinas, L. 2020, ‘The collateralization of social policy by financial markets in the Global South’, in P. Mader, D. Mertens & N. van der Zwan (eds), The Routledge International Handbook of Financialization, London and New York: Routledge, pp. 312–23. Lavinas, L. & Gentil, D. 2018, ‘Brasil anos 2000: a política social sob regência da financeirização’, Novos Estudos CEBRAP, 37 (2), 191–211. Lavinas, L. & Simões, A. 2015, ‘Social policy and structural heterogeneity’, in B. Fritz & L. Lavinas (eds), A Moment of Equality for Latin America? Challenges for Redistribution, Farnham: Ashgate, pp. 77–102. Lazonick, W., Hopkins, M. & Jacobson, K. et al. 2017, ‘US pharma’s financialized business model’, Working Paper Series No. 60, Institute for New Economic Thinking, New York. Lazzarato, M. 2012, The Making of the Indebted Man: An Essay on the Neoliberal Condition, Los Angeles, CA: Semiotext(e). Leisering, L. 2019, The Global Rise of Social Cash Transfers, Oxford: Oxford University Press. Leyshon, A. & Thrift, N. 2007, ‘The capitalization of almost everything: the future of finance and capitalism’, Theory, Culture & Society, 24 (7–8), 97–115. Lo Vuolo, R. 2015, ‘The limits of redistributive policies in Latin America: complementarities between economic and social protection systems’, in B. Fritz & L. Lavinas (eds), A Moment of Equality of Latin America? Challenges for Redistribution, Farnham: Ashgate, pp. 31–52. Mader, P. 2015, The Political Economy of Microfinance: Financializing Poverty, London: Palgrave Macmillan. Mader, P. 2018, ‘Contesting financial inclusion’, Development and Change, 49 (2), 461–83. Mader, P., Mertens, D. & van der Zwan, N. 2020, ‘Financialization: an introduction’, in P. Mader, D. Mertens & N. van der Zwan (eds), The Routledge International Handbook of Financialization, London and New York: Routledge, pp. 1–16. Magdoff, H. & Sweezy, P. 1987, Stagnation and the Financial Explosion, New York: Monthly Review Press. Martin, R. 2002, The Financialization of Daily Life, Philadelphia, PA: Temple University Press. Martins, N., Ocké-Reis, C. and Drach, D. 2021, ‘Financeirização dos planos de saúde: o caso das operadoras líderes no Brasil (2007–2019)’, Discussion Paper UFRJ/IE No. 1/2021, Instituto de Economia da Universidade Federal do Rio de Janeiro (UFRJ).

The financialization of social policy: an overview  475 Mesa-Lago, C. 2005, ‘Assessing the World Bank report: keeping the promise’, International Social Security Review, 58 (2–3), 97–117. Montgomerie, J. 2020, ‘Indebtedness and financialization in everyday life’, in P. Mader, D. Mertens & N. van der Zwan (eds), The Routledge International Handbook of Financialization, London and New York: Routledge, pp. 380–89. Mulligan, J. 2016, ‘Insurance accounts: the cultural logics of health care financing’, Medical Anthropology Quarterly, 30 (1), 37–61. Palley, T. 2013, Financialization: The Economics of Finance Capital Domination, London: Palgrave Macmillan. Powell, J. 2013, ‘Subordinate financialisation: a study of Mexico and its non-financial corporations’, doctoral thesis, SOAS University of London. Sampaio, H. 2011, ‘O setor privado de ensino superior no Brasil: continuidades e transformações’, Revista Ensino Superior UNICAMP, 4, 28–43. Samuelson, P. 1958, ‘An exact consumption-loan model of interest with or without the social contrivance of money’, Journal of Political Economy, 66 (6), 467–82. Sawyer, M. 2013, ‘What is financialization?’, International Journal of Political Economy, 42 (4), 5–18. Sawyer, M. 2016, ‘Confronting financialization’, in P. Arestis & M. Sawyer (eds), Financial Liberalisation: Past, Present and Future, London: Palgrave Macmillan, pp. 43–85. Sestelo, J.A. 2018, ‘Dominância financeira na assistência à saúde: a ação política do capital sem limites no século XXI’, Ciência & Saúde Coletiva, 23 (6), 2027–34. Stockhammer, E. 2007, ‘Some stylized facts on the finance-dominated accumulation regime’, Political Economy Research Institute Working Paper Series No. 142, University of Massachusetts Amherst. Tchiombiano, S. 2019, ‘Public health, private approach: the global fund and the involvement of private actors in global health’, Face à face, accessed 14 August 2021 at https://​journals​.openedition​.org/​ faceaface/​1418. Thomson, F. & Dutta, S. 2015, Financialisation: A Primer, Amsterdam: Transnational Institute. Van der Zwan, N. 2014, ‘Making sense of financialization’, Socio-Economic Review, 12 (1), 99–129. Vural, I.E. 2017, ‘Financialisation in health care: an analysis of private equity fund investments in Turkey’, Social Science & Medicine, 187, 276–86. Wang, Y. 2020, ‘Financialization and state transformations’, in P. Mader, D. Mertens & N. van der Zwan (eds), The Routledge International Handbook of Financialization, London and New York: Routledge, pp. 188–99. World Bank 2017, Global Financial Inclusion and Consumer Protection (FICP) Survey: 2017 Report, Washington, DC: World Bank Group.

32. The political economy of global health and public policies Jameson Martins and Deisy de Freitas Lima Ventura

The field of global health has been the object of a lively academic debate on its contours and scope. Far from any consensual definition, it builds on the pillars of the longer history of both the international health and public health fields, encompassing a wide and heterogeneous set of public and private institutions and their respective agendas concerning health issues around the world. Fidler (2007) has described the realm of global health as an ‘open-source anarchy’, meaning that both state and non-state actors have come to shape its initiatives and rendered any sort of well-structured global health governance fragile. Koplan et al. (2009) have tried to provide an overarching definition of global health, acknowledging its multifaceted nature as a notion (the state of global health), a goal (a world of healthy people) and a mix of scholarship, research and practice. According to the authors, the research and practice of global health should aim to achieve equity in health for all people worldwide, combining population-based prevention and individual clinical care in an interdisciplinary fashion. Nonetheless, such a definition still misses the essentially political aspect underlying transnational health interventions and the open dispute for resources among actors in the field. The politics of health ultimately determines whether the goal of providing health to all is actually attained. A critical approach to global health, therefore, should bring power relations in different spheres to the forefront of any debate on health initiatives. This chapter aims to highlight the main debates surrounding these power dynamics between global health actors, as well as the interplay between health conditions and the unequal distribution of political and economic resources. In the next section, the main actors of the field will be presented, along with their conflicting agendas and approaches to global health issues. One of the most prevalent debates of concern in global health is the polarized views on universal healthcare, as discussed in the second section. The third section projects the political and socioeconomic underpinnings during global health emergencies in the 21st century. The unfolding of the COVID-19 pandemic response, which, in some cases, had turned public health affairs into major human rights violations, has been explained in the fourth section. The last section offers concluding remarks.

MAIN GLOBAL HEALTH ACTORS The World Health Organization (WHO) plays a paramount role in the disparate landscape of institutions shaping the global governance of health. Founded in 1946 in the realm of the United Nations, WHO fulfills three major roles as the main intergovernmental coordinating body in the global health field: the historical role of tackling diseases and epidemiological surveillance; drawing up of international health norms and frameworks; and the definition and implementation of health programs, which may also provide scientific and technical 476

The political economy of global health and public policies  477 support to member states (Ventura, 2013). WHO’s normative force relies mostly on ‘soft power’ measures, by which member states do not face direct sanctions for non-compliance with its recommendations, regulations and frameworks. All the same, it tends to find relative consensual support due to the expertise and capillarity of norms, which are usually framed as acceptable and desirable international health standards, particularly by states with lower technical capacities. Over time, WHO has displayed contrasting political orientations molded as per historical circumstances. At first, strongly influenced by US-led campaigns and targeting specific diseases with available technical tools, the focus of the organization shifted to primary healthcare-based interventions, guided by the principles of the right to health and social justice, particularly following the 1978 Alma-Ata Declaration, mainly pushed by the then so-called Third World member states (Birn & Nervi, 2020). This rights-based, integral orientation towards health resonates more recently in the concept of social determinants of health, whose framework encompasses all factors conditioning individuals’ health (housing, labor, income, gender, race, culture, etc.) (WHO, 2008). The rise of neoliberalism in the 1980s represented a major restraint of WHO’s capability to remain at the forefront of global health initiatives. The organization depends largely on both public and private donors from high-income countries, whose contributions are mostly earmarked for particular projects, in which technical tools and decision-making process often benefit the donors’ own interests (Butler, 2019). This trend has prevailed in the last decades, when even major financial institutions such as the World Bank bypassed WHO in their initiatives and determined, to a large extent, the political orientation towards the withdrawal of public healthcare services and the stimulation of private sector entities in the field (Birn, 2014). It is not a coincidence that by the year 2000, philanthropy started playing a major role in global health. Building on the historical precedent of The Rockefeller Foundation, the Bill & Melinda Gates Foundation (BMGF) has become one of the most relevant global health stakeholders and one of WHO’s main voluntary donors, at nearly US$400 million in 2020 alone (WHO, 2020b), out of a nearly US$1.8 billion global health budget (BMGF, 2020). BMGF’s contribution to financing development assistance for health starts in 2000 at US$441.31 million and ascends to US$886.16 million in 2005; US$2049.52 million in 2010; US$2802.16 million in 2015; and US$4584.06 million in 2020 (Institute for Health Metrics and Evaluation, 2021, p. 121). At first, concerned with a few specific disease-control programs as a grant-making agency at the turn of the century, BMGF soon expanded its presence and ever-increasing budget to over 100 countries, where it promotes technically oriented programs with short-term, narrowly defined goals (Birn, 2014). BMGF has earned criticism for its lack of transparency and accountability, often countered by the praise its leaders often receive from the public. In the wake of the massive reorientation of public policy towards privatization in the 1990s, the so-called public–private partnerships (PPPs) became a pivotal element of global health, around which profit-making principles and practices were channeled by health initiatives, under the auspices of organizations like the BMGF. Major global health PPPs such as Stop TB, Roll Back Malaria, the GAVI Vaccine Alliance, and the International Aids Vaccine Initiative, among others, either funded or propelled by BMGF, convey business interests of private players into health policymaking by associating them with UN agencies and public objectives and, not inadvertently, causing major conflicts of interests as they seek to commercialize their own products by involvement in PPPs (Stuckler, Basu & McKee, 2011). Some authors

478  Handbook on critical political economy and public policy have termed this phenomenon ‘philanthrocapitalism’ (Birn, 2014; Butler, 2019), by which the unprecedented economic clout of billionaires and the corporations they lead (in particular, those in Big Pharma) have opened the way for tax-evading practices based on philanthropy and questionable profitable business opportunities in fields of public interest. Besides the BMGF, the Ford Foundation, the W.K. Kellogg Foundation, the Robert Wood Johnson Foundation, and The Rockefeller Foundation are considered the largest global health private players sharing such practices.

COMPETING VIEWS ON UNIVERSAL HEALTHCARE The pervasive neoliberal approach to healthcare and the conflicts of interest posed by philanthropy in global health also manifest in major debates around the provision of health policymaking and services. In recent years, the international debate about the different conceptions of universality in health has become polarized around proposals based on a universal health system (UHS) and ideas of universal health coverage (UHC) (Giovanella et al., 2018). Healthcare systems may be roughly categorized into four major types: (1) the market-oriented systems, as in the United States; (2) the Bismarckian type, based on social insurance (France, Germany and many Latin American countries); (3) the Beveridgean model, funded by fiscal resources and mostly provided by public institutions (United Kingdom, Portugal, Spain, Italy, Brazil, etc.); and (4) state monopoly for both funding and provision (Cuba) (Paim, 2020). Although the Bismarckian, Beveridgean, and state monopoly models are based on universalist principles, an extensive literature showcases how neoliberalism and financial crises have been eroding the public and universal character of most healthcare systems, among other means, by partial privatization or underfunding stemming from austere fiscal policies (Karanikolos et al., 2013). UHC has been considered by one of the most consequential international agendas as being one of the Sustainable Development Goals, broadly diffused by the World Bank and WHO. The UN system has even established 12 December as the International Universal Health Coverage Day defined as ‘the annual rallying point for the growing movement for health for all’, which ‘marks the anniversary of the United Nations’ historic and unanimous endorsement of UHC in 2012’ (Universal Coverage Day, 2022, n.p.). Another crucial landmark was the unanimous approval by the United Nations General Assembly in 2019 of the declaration ‘Universal health coverage: moving together to build a healthier world’ (United Nations, 2019). It is worth underlining this process: ‘the semiotic transformation of the right to health and universal and equal access to healthcare into the concept of “universal coverage”, indelibly associated with “financial risk protection” and the search for alternative mechanisms for health sector financing’ (Noronha, 2013, p. 848). The historian Marcos Cueto explains that in its most ambitious version, UHC would create the conditions for the only egalitarian dimension in a liberal society: equality of opportunity, meaning that the state should guarantee its citizens the same possibilities of access to individual development through a decrease in discrimination due to race, sex, ethnicity, age, religion, or sexual identity (Cueto, 2018). The flaw of such a strategy is to not take the general social inequalities and the great disparities in income distribution into account: on the contrary, this liberal ideal of meritocracy, apart from being unachievable, in fact, aims to mask social injustices. However, since the 2008 economic crisis, the UHC notion has been further under-

The political economy of global health and public policies  479 mined and turned into a set of a limited number of treatments that could be provided to the disadvantaged population. Based on long-form research, Giovanella et al. (2018) have offered a thorough comparative framework between the current UHC understanding and that of UHS (Table 32.1). Table 32.1

Contrasting characteristics of the universal health coverage (UHC) and universal health system (UHS) models

Characteristics

Universal Health Coverage (UHC)

Universal Health System (UHS)

Conception of health

Health as a commodity

Health as a universal right

Role of the state

Minimal. Restricted to the regulation of the

Social welfare. Responsible for the funding,

health system. Explicit separation of financing/

management and delivery of health services

purchasing and service functions Funding

Pooling of public and private funds (insurance

Publicly funded via tax revenues (general taxes and

premiums, social contributions, philanthropy,

contributions for social insurance)

taxes) Emphasis of reforms

Subsidy of demand for health insurance

Subsidy of supply to guarantee equitable access

purchase. Packages of services, selectivity and focalization on the poorest Eligibility/

Segmented access depending on affiliation to

Entitlement

some form of insurance (private or public)

Efficiency of system

Universal access as a condition of citizenship

Increased operational and administrative costs.

Lower operating and administrative costs. Reduced

Higher total expenditure on health

unit costs due to economies of scale. Lower total

Fragmented services without territorialization

Networked, territorialized, primary

expenses due to greater regulation of supply Design of service system

healthcare-orientated services Primary healthcare approach Selective

Comprehensive

Service provision

Services provided mainly by the private sector

Services provided mainly by the public sector

Package of services

Restricted (basic/minimum packages). Explicit

Comprehensive (comprehensive care). Implicit

Integrality

Focused on individual care and biomedical

Integration between individual care and public

services. Dichotomy between individual and

health actions. Integration of health promotion,

Social determinants of

collective care

prevention and care

Does not incorporate the SDH approach.

Incorporates the SDH approach. Facilitated

health (SDH)

Restricted possibility of intersectoral action

possibility of intersectoral action

Role of citizen

Consumer/object

Protagonist/individual

Citizenship

Residual

Full

Solidarity effects

Restricted

Comprehensive

Equity

Crystallizes inequalities of access and use

Guaranteed access to and use of health services

according to income and social insertion. Access between social groups for equal needs, regardless of dependent on individual’s ability to pay

ability to pay

Ideology

Liberal

Social-democrat

Target countries

Low- and middle-income countries

All countries

Source:

Giovanella et al. (2018).

According to the same authors, the issue of funding is central to the idea of UHC, which encourages increased private participation in sector financing and the expansion of the private health market, as seen in The Rockefeller Foundation’s arguments in the defense of UHC: ‘A large proportion of the population is willing to pay for private sector health services’ (The Rockefeller Foundation, 2012, p. 1). The study concludes that the UHC proposal is unclear in terms of its assumptions and strategies: the use of concepts and terms similar to those used for

480  Handbook on critical political economy and public policy UHSs makes it difficult to understand the changes in progress, and the analyzed characteristics demonstrate the contradictory and deleterious aspects of insurance-based models of expansion of coverage; this results in the segmentation, selectivity, focalization and crystallization of inequalities, which violates the universal right to health. According to Arush Lal et al. (2021), the COVID-19 pandemic shows just how fragmented and underfunded health systems are worldwide and the glaring absence of social determinants of health and meaningful community engagement within major frameworks for health emergencies. They sustain that the framework of UHC, building on the UN system, ‘should expand to include multisectoral, multistakeholder, and comprehensive activities at all levels of governance to control outbreaks while maintaining routine health services and addressing social determinants of health’, since ‘further benefits of such a system include diverse decision making, increased public demand for health-care services to facilitate early disease detection, reduced risk of poverty, locally accessible health services, and enhanced trust, which is crucial to collaboration and public compliance with state-led interventions’ (Lal et al., 2021, p. 63).

THE POLITICAL UNDERPINNINGS OF THE LATEST GLOBAL HEALTH EMERGENCIES A robust body of critique has emerged to highlight the asymmetries of power in global health. To begin with, the very historical origins of the field, preceded by so-called international health for most of the last century, were mainly informed by the conceptions of international sanitary cooperation, tropical medicine, colonial medicine and so on. Those different labels reflect the prejudiced priorities of imperial powers and their emphasis on state-centered, vertical relations with regard to colonized territories. The very notion of the ‘tropics’ emerged as a means to address issues specific to the colonies, making them places for ‘tropical’ disease research on, for instance, malaria, yellow fever and even leprosy. This research provided racialized explanations of the susceptibility to disease and suitability for work in favor of the colonial enterprise (Birn, Pillay & Holtz, 2017). Some authors depict global health as the iteration of a postcolonial project, which renews colonial dynamics between governments and private actors from high-income countries and those from the developing world. The uneven academic output (Biehl, 2016) and the consulting and humanitarian interventions flowing from the former to the latter (Pai, 2019) are enough evidence to support that notion. This stream of literature pleads, therefore, for the decolonization of global health. According to Abimbola and Pai (2020), global health needs to be decolonized in future and emerge as one in which there are no longer pervasive supremacist remnants of colonization within global health practice. For them, supremacy should lie with regard to such determining factors as how global health organizations operate, who runs them, where they are located, who holds the purse strings, who sets the agenda and whose views, histories and knowledge are taken seriously. Among such remnants, the authors identify implicit hierarchical assumptions such as considering the headquarters of a global health organization as more relevant than its regional or country offices; the focus on national governments when subnational entities are closer to the ground; or greater value being placed on research by high-income countries or distant experts than the knowledge of those with lived experience. The pandemic response reveals with stark and sobering clarity that current paradigms of global health equity are insufficient to counteract structural oppression (Büyüm et al., 2020).

The political economy of global health and public policies  481 The focus on biomedical solutions in response to the pandemic, led by clinicians, virologists and other infectologists show that ‘the Pasteurians are still in power’ (Ridde & Fillol, 2021, n.p.). Moreover, global universities’ faculty and students dominate research, scholarship and teaching in the health field, and the hegemony of high-income countries manifests in a variety of ways (Naidu, 2021b). The South African researcher Thirusha Naidu coined the concept of ‘Northern ventriloquism’ to define the behavior of certain Global South scholars who enunciate ideas of high-income countries’ researchers to access globally competitive grants and publish in high-impact journals, considering that high-income countries’ scholarship uses its position to dictate structures and set priorities for the content, relevance, and timing of publications (Naidu, 2021a). Therefore, aiming to transcend its origins and effectively fulfill its self-appointed role of reducing or eliminating inequities globally, global health must become actively anti-supremacist, anti-oppressionist, and anti-racist (Pai, 2021). Another line of critique underscores the effects on global health of the neoliberal world order emerging in the second half of 20th century, in the form of stark economic austerity measures that have crippled state capacities to provide solid public healthcare policies in low- and middle-income countries. The prevalence of private-sector actors and philanthropic initiatives supposedly aimed at covering the gap left by public authorities fosters more inequity between suppliers and target populations (Birn et al., 2017). The main beneficiaries of this order, transnational corporations, have also contributed to the deterioration of health conditions worldwide, considering the multidimensional effects of globalized production chains in all industries, particularly those of food, clothes, and raw materials (ibid.). Simultaneously, concerns around global health threats and biosecurity have been one of the major inclinations of political interventions in the field, as the reach and speed of globalized flows of people, goods and pathogens gained unprecedented scales. Yet again, beyond mere biomedical phenomena, disease outbreaks of international reach have entailed unequal responses and health consequences to different groups of people, unveiling the unfair distribution of resources and response capabilities between and within countries. Building on racial, gender and income cleavages dating back to colonial times, the securitarian approach to health threats seeks to preserve the lives and livelihoods of some to the detriment of tackling structural inequality in the first place, which might effectively prevent health calamities (Abimbola et al., 2021; Kerouedan, 2013). The Ebola outbreak in Ghana, Liberia and Sierra Leone in 2014 was an epitome of how a securitarian lens on health issues may distort the concern with those affected by the disease to legitimize extraordinary measures whose aim is to seal off the problem without effectively providing lasting solutions to it. Following a rather sluggish response by the WHO, the outbreak brought about the involvement of other United Nations institutions, particularly the Security Council, which launched the first-ever emergency health mission, the United Nations Mission for Ebola Emergency Response (UNMEER), from September 2014 to July 2015. While UNMEER and the deployment of international military forces served as a catalyst to contain the disease, it could not conceal the racialized neglect of the international community towards the hardest-hit countries, where reportedly over 11 000 people lost their lives to the disease (Nunes, 2016). These countries, besides being devastated by civil wars, had followed strict financial adjustment policies recommended by the International Monetary Fund (IMF), which had deprived them of public health capacities to tackle the disease in the first place. A similar securitarian framing of a health emergency took place when the Zika-related congenital syndrome was declared a Public Health Emergency of International Concern

482  Handbook on critical political economy and public policy (PHEIC) by the WHO, in 2016, in Brazil. The Brazilian government declared a ‘war against the mosquito’, Aedes aegypti, the disease vector, obscuring the underlying precarious sanitation conditions in the communities most affected by the disease and other endemic ailments carried by the same vector, such as dengue, chikungunya and yellow fever. The official emergency response placed the burden of the disease’s consequences on women, who were either cautioned to avoid pregnancy or left mostly unassisted to deal with malformed children suffering from the syndrome, mostly in poor, black-majority communities (Ventura et al., 2020; Wenham et al., 2019). Small-scale initiatives by global health and local actors showcased alternative approaches, which could have boosted women’s sexual and reproductive rights while promoting structural change in sanitation conditions (Ventura et al., 2020). The latest PHEIC due to the COVID-19 pandemic has confirmed the securitarian trend in global health in terms of the immediate and still ongoing responses by national governments, mostly based on measures suspending the circulation of people, across borders and internally, and imposing social-distancing policies (Nunes, 2020). However, it is also worth stressing how these responses have once again failed to tackle the underlying conditions making certain groups of people more susceptible to infection and its consequences, including higher mortality, which preceded the outbreak. Sandset (2021) argues that far from being a ‘great equalizer’, the COVID-19 pandemic has disproportionately affected non-white low-income groups in the UK and the US, due to a combination of necropolitical conditions. Building on the concept of ‘necropolitics’ by Mbembe (2003), the author contends that COVID-19 not only represents a major acute public health crisis, but also reveals how certain communities – that is, poor non-white people – have been made more vulnerable and precarious than others in a ‘state of acceptance’ of their precariousness. Although they have been praised as ‘essential workers’, their exposure to infection and likelier deaths have been taken as an expected and less grievable result of the pandemic. In some cases, the COVID-19 pandemic has also reached unprecedented levels of political mismanagement, which may be regarded as crimes against humanity.

THE ECONOMY AS A MOTIVE FOR CRIMES AGAINST HUMANITY Governmental responses to the pandemic may be classified into three major groups (The Independent Panel for Pandemics Preparedness & Response, 2021). The most successful have opted for an aggressive containment strategy, which has been dominant in Asian and Pacific countries like China, New Zealand, Republic of Korea, Singapore and Thailand and Vietnam. The second group corresponds to an intermediate status, where the great majority of countries aimed for containment, to the greatest extent possible, but were often inconsistent over time; for instance, some countries put in place lockdowns only when incidence exceeded certain thresholds. In contrast, countries with the poorest results in addressing COVID-19 had uncoordinated approaches that devalued science, denied the potential impact of the pandemic and delayed comprehensive action. We believe that it is paramount, by assessing the performance of different states: to contrast (1) the neglect or the missteps at the conception and implementation of containment strategies; and (2) the political decision to let the pandemic follow its natural course. The second

The political economy of global health and public policies  483 hypothesis presents a continuum starting with the omission regarding the role the state should fulfill to protect the health of citizens, directly or indirectly, to promote the spread of the virus. By omission, we refer to governments that have the material and human resources to fulfill their duties and intentionally failing to do so. Among many instances, one may mention the belated transfer of public funds for the healthcare sector; the lagging procurement of essential inputs such as the personal protective gear, tests and vaccines; the slow adoption of measures to protect vulnerable social groups, as well as small and medium-sized businesses to mitigate the impact of halting non-essential activities; the absence of an effective national coordination in response to the pandemic; the lack of specific policies for healthcare professionals, the victims of the disease and their families; and the lack of public campaigns aiming to inform the public of the elementary preventive measures. From a political perspective, the decision to contain or spread COVID-19 did not overlap with any cleavage between right-wing and left-wing governments. Although conservative populisms have displayed common traits during the pandemic (McKee et al., 2021), this fundamental decision was not among them. In the conservative spectrum, Brazil and the US stand out as governments that have actively promoted the spread of the disease (Martins & Ventura, 2020), while other conservative governments tried to contain it, even by taking political and electoral advantage of this decision, such as in Hungary and Israel (Ádám, 2020; Gesser-Edelsburg & Hijazi, 2020). Allegedly progressive governments, for their turn, like Mexico, leaned towards a dissemination response rather than one of containment (Ibarra-Nava et al., 2020). It is worth highlighting that governments that tried to spread the disease have also faced the resistance of other government tiers, public institutions (the Parliament and the judicial branch), the press, organized civil society, scientific community and so on. The checks and balances from other sectors could often avoid or minimize the dissemination strategies, which do not correspond to an intentional shift of the government. Abiding by court rulings or withdrawing certain measures due to their negative repercussions does not change the intention or the systematic character of the dissemination strategy. On the other hand, it is also worth pointing out that economic arguments have been deployed simultaneously by those who have decided to contain and those who have searched to spread the pandemic. One cannot naively believe that conservative governments that decided to contain the disease did it for ethical or humanitarian reasons – that is, that they put the health and life of their citizens above economic concerns – since the control of the disease is itself the most beneficial solution to the economy, mainly in the middle and long terms. A radical control of the disease at the very beginning prevents longer restrictive measures in the future, while public and private expenses on healthcare may be substantially reduced by early prevention. Therefore, although immediate economic interests may have been overruled by most governments during the response to the pandemic – and may even have made that control less radical than it should have been in most countries due to the pressure of several industries – the quicker and more successful economic recovery in countries that managed to contain the disease shows that, to put it simply, pandemic control is good for the economy. Nevertheless, the economy – or more precisely, a certain illusion about the economy and punctual interests of specific groups of industries regarded as non-essential during the pandemic – was broadly used as justification for the decision not to contain the pandemic. This is the case in Brazil, where the federal response to the pandemic has been identified as a crime against humanity, causing the avoidable death of over half a million people (Ventura, Aith &

484  Handbook on critical political economy and public policy Reis, 2021) and as the most radical experience of neoliberalism during the pandemic (Ventura & Bueno, 2021). The Brazilian government measures have followed a deadly course. Officials and the government supporters have promoted agglomerations in rallies and other political demonstrations during the pandemic. There was systematic propaganda (mostly based on fake news) encouraging citizens to expose themselves to the virus, including official media outlets. Technical staff from the government in charge of the response to the pandemic were sacked and replaced by ideological agents lacking any experience or suitable qualification, who dismissed any scientific evidence as a foundation for public health policymaking. The federal government actively opposed other government tiers that adopted measures to contain the disease, even applying legal means. It also resorted to the systematic use of vetoes of laws passed by the Parliament aiming to contain the disease; withheld or manipulated data on the disease; and persecuted scholars, health professionals, professors, journalists, artists and any person criticizing such acts (Ventura, Aith & Reis, 2021). The Brazilian federal government has deployed slogans such as ‘the State cannot take care of everybody’ or ‘the suspension of economic activities kills more than the virus’ to justify a minimal state intervention during the pandemic, always focusing on the assistance to the infected people and never on preventing the infection in the first place (Ventura, Perrone-Moisés & Chenut, 2021, p. 2218). That course of action paradoxically increases the public expenses on healthcare, since the massive demand of serious cases is significantly costlier than implementing preventive measures. The plan to disseminate the disease embodies the falsely scientific form of ‘collective immunity by transmission’ or ‘herd immunity by contagion’, according to which the massive contamination of the population would entail the development of antibodies by individuals and the ultimate control of the disease. However, according to WHO (2020a), the argument for herd immunity by contagion should not be considered because it is unethical, due to the indisputably avoidable number of serious cases and deaths it entails; and from the scientific standpoint, it is utterly inappropriate, as the length and extension of the immunity due to contagion by Sars-CoV-2 are unknown. The issue goes beyond the neoliberal premise of gradual state exemption from its duties regarding social protection of citizens, particularly in the field of healthcare. The pandemic is also perceived as an expression of ‘natural selection’, capable of ‘purifying’ the human race thanks to the ‘survival of the fittest’ (Salles-Djelic, 2020), an ideology commonly described as ‘social Darwinism’. Aiming to legitimize the staggering social inequalities, this questionable interpretation of Darwin’s theories sustains that the differences between human beings are due to the victory of talent, natural and even spiritual capacities of individuals and the sacrifice of the most vulnerable is necessary for the benefit of the whole of society. The false argument for herd immunity by contagion has been called ‘epidemiological neoliberalism’: similarly, the unconditional belief in the free market assumes that the best strategy to tackle the pandemic is to allow it to advance without restraints, just as economic neoliberalism inflicts extreme violence against the most vulnerable, which comprises physical and mental harm and potential after-effects and death (Frey, 2020). The fact that such a strategy has been implemented in a country like Brazil represents a bad omen for the future of global health. A likely shorter interval between future pandemics and the risk of diseases like COVID-19 becoming endemic (exactly due to the failure to contain it, but also due to the uneven distribution of vaccines), the normalization of the decision to simply

The political economy of global health and public policies  485 let the disease follow its course in developing countries may make pandemics another form of extermination of vulnerable populations, justified by a certain perspective on the economy.

CONCLUDING REMARKS We have tried to provide an overview of the most pressing issues of concern of the ever-expanding field of global health. The latter has been broadly defined as an interdisciplinary field of scholarship, a notion and a goal – namely, to attain good health for all in the world. However, one may not disentangle the political and economic dynamics of a globalized world from that goal and the policies by which governmental and non-governmental institutions claim to pursue it. A critical approach to global health, which we stand for, must reveal those dynamics and press for their ethical content. An underlying thread of continuity of those dynamics is the persisting tension between the neoliberal market-oriented and the public-funded approaches to health that has accompanied the expansion and complexity of global health issues since the onset of the field. The underlying tension may help explain WHO’s loss of leadership, cornered by billionaire philanthropic schemes thriving under the leadership of the BMGF and the calls for the establishment of UHC schemes guided by principles of financial feasibility, instead of the protection of the right to health. The early 21st century has been also imbued with a securitarian approach to several policy issues, including health. The interconnectedness of globalized flows has introduced the notion of global health threats whose speed and frequency brought about a global surveillance system based on the International Health Regulations and overseen by WHO. The responses to the PHEICs have focused mainly on the containment of diseases instead of tackling their causes on the ground. It is, therefore, not accidental that chronic structural issues of public health, such as socioeconomic inequalities and the lack of access to basic health conditions of large swaths of people around the world, come to the fore when an acute crisis emerges, as has been the case with Ebola, Zika and the latest COVID-19 pandemic. The latter may represent the epitome of the pervasiveness of neoliberal thinking and policymaking in global health. At first, met with the usual securitarian response based on containment strategies, successive COVID-19 waves have unveiled long-standing inequalities that ultimately determine whose lives can be preserved and protected and whose lives cannot. Yet again, the latter are overrepresented by non-white racial groups, particularly women, in the most precarious and lowest levels of the economic ladder. The disease has certainly affected everybody in terms of our shared human vulnerability, but has also heavily undermined the livelihoods of some to a much greater extent. The result of that disparity in some contexts has been the unashamed and deadly approach of radical neoliberal leaders, such as the US’s Trump and Brazil’s Bolsonaro, whose neglect or actions have been reflected in hundreds of thousands of avoidable deaths, paradoxically leading to poor economic performance, while both claimed to hold the economy as a major priority. Although the COVID-19 pandemic is still ongoing, its palpable consequences call for the ever-increasing need for narrower economic gaps and more accountable leadership. The last decades have shown that neoliberal policymaking cannot deliver on those needs.

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BIBLIOGRAPHY Abimbola, S., Asthana, S. & Montenegro, C. et al. 2021, ‘Addressing asymmetries in global health: imperatives in the wake of the Covid-19 pandemic’, PLOS Medicine, 18 (6), e1003667. Abimbola, S. & Pai, M. 2020, ‘Will global health survive its decolonisation?’, The Lancet, 396 (10263), 1627–8. Ádám, Z. 2020, ‘Ultra-orthodoxy and selective voluntarism: how did the Orbán regime react to the first wave of the pandemic?’, European Policy Analysis, 6 (2), 277–92. Biehl, J. 2016, ‘Theorizing global health’, Medicine Anthropology Theory, 3 (2), 127–42. Bill & Melinda Gates Foundation (BMGF) 2020, Annual Report 2020, Seattle, WA: BMGF. Birn, A.-E. 2014, ‘Philanthrocapitalism, past and present: the Rockefeller Foundation, the Gates Foundation, and the setting(s) of the international/ global health agenda’, Hypothesis, 12 (1), e8. Birn, A.-E. & Nervi, L. 2020, ‘(Re)making a people’s WHO’, American Journal of Public Health, 110 (9), 1352–3. Birn, A.-E., Pillay, Y. & Holtz, T.H. 2017, Textbook of Global Health, Oxford and New York; Oxford University Press. Butler, C. 2019, ‘Philanthrocapitalism: promoting global health but failing planetary health’, Challenges, 10 (24), 1–20. Büyüm, A.M., Kenney, C. & Koris, A. et al. 2020, ‘Decolonising global health: if not now, when?’, BMJ Global Health, 5 (8), e003394. Cueto, M. 2018, ‘The Alma-Ata legacy, 40 years later’, Trabalho Educação Saúde, 16 (3), 845–8. Fidler, D. 2007, ‘Architecture amidst anarchy: global health’s quest for governance’, Global Health Governance, 1 (1), 1–17. Frey, I. 2020, ‘“Herd immunity” is epidemiological neoliberalism’, The Quarantimes, 19 March, accessed 7 January 2023 at https://​thequarantimes​.wordpress​.com/​2020/​03/​19/​herd​-immunity​-is​ -epidemiological​-neoliberalism/​. Gesser-Edelsburg, A. & Hijazi, R. 2020, ‘When politics meets pandemic: how Prime Minister Netanyahu and a small team communicated health and risk information to the Israeli public during the early stages of COVID-19’, Risk Management and Healthcare Policy, 13, 2985–3002. Giovanella, L., Mendoza-Ruiz, A. & Pilar, A. et al. 2018, ‘Universal health system and universal health coverage: assumptions and strategies’, Ciência Saúde Coletiva, 23 (6), 1763–76. Ibarra-Nava, I., Cardenas-de la Garza, J., Ruiz-Lozano, R. & Salazar-Montalvo, R. 2020, ‘Mexico and the COVID-19 response’, Disaster Medicine and Public Health Preparedness, 14 (4), e17–e18. Institute for Health Metrics and Evaluation (IHME) 2021, Financing Global Health 2020 – The Impact of COVID-19, Seattle, WA: IHME. Karanikolos, M., Mladovsky, P. & Cylus, J. et al. 2013, ‘Financial crisis, austerity, and health in Europe’, The Lancet, 381 (9874), 1323–31. Kerouedan, D 2013, ‘Géopolitique de la santé mondiale’, La letter du Collège de France, December, accessed 8 January 2023 at https://​doi​.org/​10​.4000/​lettre​-cdf​.1615. Koplan, J.P., Bond, T.C. & Merson, M.H. et al. 2009, ‘Towards a common definition of global health’, The Lancet, 273 (9679), 1993–5. Lal, A., Erondu, N.A. & Heymann, D.L. et al. 2021, ‘Fragmented health systems in COVID-19: rectifying the misalignment between global health security and universal health coverage’, The Lancet, 397 (10268), 61–7. Martins, J. & Ventura, D.F.L. 2020, ‘Between science and populism: the Brazilian response to Covid-19 from the perspective of the legal determinants of health’, Brazilian Journal of International Law, 17 (2), 66–83. Mbembe, A. 2003, ‘Necropolitics’, Public Culture, 15 (1), 11–40. McKee, M., Gugushvili, A., Koltai, J. & Stuckler, D. 2021, ‘Are populist leaders creating the conditions for the spread of COVID-19?’, International Journal of Health Policy and Management, 10 (8), 511–15. Naidu, T. 2021a, ‘Says who? Northern ventriloquism, or epistemic disobedience in global health scholarship’, Lancet Global Health, 9 (9), e1332–e1335.

The political economy of global health and public policies  487 Naidu, T. 2021b, ‘Southern exposure: leveling the Northern tilt in global medical and medical humanities education’, Advances in Health, Sciences and Education: Theory and Practices, 26 (2), 739–52. Noronha, J.C. 2013, ‘Universal health coverage: how to mix concepts, confuse objectives, and abandon principles’, Cadernos de Saúde Pública, 29 (5), 847–9. Nunes, J. 2016, ‘Ebola and the production of neglect in global health’, Third World Quarterly, 37 (3), 542–56. Nunes, J. 2020, ‘A pandemia de Covid-19: securitização, crise neoliberal e a vulnerabilização’, Cadernos de Saúde Pública, 36, (5) accessed 21 December 2022 at http://​doi​.org/​10​.1590/​0102​-311X00063120. Pai, M. 2019, ‘Global health still mimics colonial ways: here’s how to break the pattern’, The Conversation, 18 August, accessed 8 January 2023 at https://​theconversation​.com/​global​-health​-still​ -mimics​-colonial​-ways​-heres​-how​-to​-break​-the​-pattern​-121951. Pai, M. 2021, ‘Decolonizing global health: a moment to reflect on a movement’, Forbes, 22 July, accessed 8 January 2023 at https://​www​.forbes​.com/​sites/​madhukarpai/​2021/​07/​22/​decolonizing​ -global​-health​-a​-moment​-to​-reflect​-on​-a​-movement/​?sh​=​447814c35386. Paim, J.S. 2020, ‘Os sistemas universais de saúde e o futuro do Sistema Único de Saúde (SUS)’, Saúdeem Debate, 43 (S5), 15–28. Ridde, V. & Fillol, A. 2021, ‘Santémondiale’, Anthropen, 13 June, accessed 10 January 2023 at https://​ revues​.ulaval​.ca/​ojs/​index​.php/​anthropen/​article/​view/​51161. Salles-Djelic, M.-L. 2020, ‘Quand l’idéologie avance masque: immunité collective, néolibéralisme et darwinisme social’, in M. Lazar (ed.), Le monde d’aujourd’hui. Les sciences sociales au temps de la Covid, Paris: Presses de Sciences Po, pp. 293–307. Sandset, T. 2021, ‘The necropolitics of Covid-19: race, class and slow death in an ongoing pandemic’, Global Public Health, 16 (8–9), 1411–23. Stuckler, D., Basu, S. & McKee, M. 2011, ‘Global health philanthropy and institutional relationships: how should conflicts of interest be addressed?’, PLOS Medicine, 8 (4), 1–10. The Independent Panel for Pandemics Preparedness & Response 2021, COVID-19: Make It the Last Pandemic, Geneva: The Independent Panel. The Rockefeller Foundation 2012, ‘Future health markets: a meeting statement from Bellagio’, Rockefeller Foundation, 18 December, accessed 8 January 2023 at https://​assets​.publishing​.service​ .gov​.uk/​media/​57a08​a8140f0b65​2dd00077c/​bellagio​-future​-health​-markets​-statement​-final​.pdf. United Nations 2012, Global Health and Foreign Policy, Resolution 67/81, New York: UN General Assembly. United Nations 2019, Political Declaration of the High-level Meeting on Universal Health Coverage, Resolution 74/2, New York: UN General Assembly. Universal Coverage Day (2022, 12 December), ‘Build the world we want a healthy future for all’, accessed 8 January 2023 at https://​univer​salhealthc​overageday​.org/​. Ventura, D.F.L. 2013, Direito e Saúde Global: o caso da pandemia de gripe A (H1N1), São Paulo: Outras Expressões. Ventura, D.F.L., Aith, F. & Reis, R. 2021, ‘Crimes against humanity in Brazil’s Covid-19 response – a lesson to us all’, BMJ: British Medical Journal, 375 (2625), accessed 11 January 2023 at https://​doi​ .org/​10​.1136/​bmj​.n2625. Ventura, D.F.L. & Bueno, F.T. 2021, ‘De líder a paria de la salud global: Brasil como laboratoriodel “neoliberalismo epidemiológico” ante la COVID-19’, Foro Internacional, 61 (2), 427–67. Ventura, D.F.L, Perrone-Moisés, C. & Chenut, K. 2021, ‘Pandemic and crimes against humanity: the “inhuman character” of health catastrophe management in Brazil’, Direito e Práxis, 12 (3), 2206–57. Ventura, D.F.L., Rached, D. & Martins, J. et al. 2020, ‘A rights-based approach to public health emergencies: the case of the “More Rights, Less Zika” campaign in Brazil’, Global Public Health, 16 (10), 1576–89. Wenham, C., Arevalo, A. & Coast, E. et al. 2019, ‘Zika, abortion and health emergencies: a review of contemporary debates’, Globalization and Health, 15, 49, 1–7. World Health Organization (WHO) 2008, Closing the Gap in a Generation: Health Equity Through Action on the Social Determinants of Health, Geneva: WHO. World Health Organization (WHO) 2020a, ‘WHO Director-General’s opening remarks at the media briefing on COVID-19’, World Health Organization, 12 October, accessed 11 January 2023 at https://​

488  Handbook on critical political economy and public policy www​.who​.int/​director​-general/​speeches/​detail/​who​-director​-general​-s​-opening​-remarks​-at​-the​-media​ -briefing​-on​-covid​-19​-​-​-12​-october​-2020. World Health Organization (WHO) 2020b, Audited Financial Statements for the Year Ended 31 December 2020, Geneva: WHO.

Index

17 Sustainable Development Goals (SDGs) 65 20th Century, main revolution of 461 1929 crash 82 accumulation 54–7 accumulation by dispossession 415 accumulation of capital and the class struggle 403 demand and full employment 407 dispossession, by 147 dollarization and 256 financialization and 40–41 insecurity of capital 406 Marx’s concept of capitalism 26 neoliberalism 406 primitive 146, 182, 264, 268, 271, 387, 394, 422 profit maximization 112 regulation theory and 6, 28 valorization 40 Accumulation of Capital (Rosa Luxemburg) 423 Addis Ababa Action Agenda (UN) 351 Africa 271, 378 African National Congress (ANC) 415, 417–19, 423, 425 see also South Africa African Tax Administration Forum (ATAF) 351 African Union 351 Agenda for Sustainable Development (UN) 421 agriculture 268–75 Africa 271 agribusiness sector Brazil 148 corporate 262, 268–70 expansion of 147 mid-20th century 263 changing practises of 262–3 commodity trading firms 271 exploitation of farmers 270 financialization of 144, 146 GAVs 263, 268 genetically modified crops 270 journals 275 neoliberal capitalism and overall exploitation 272 private equity funds 270 subsidies 274 transnational developments 262 wages 273–4

women in 28 worker numbers 273 Aid Effectiveness (Paris Declaration) 380 Aktiongemeinschaft Soziale Marktwirtschaft (ASM) 90 Alaska 132 algorithms 69 Allende, Salvador 103 Allmendinger, Jutta 70 alternative assets 151 Althusser, Louis 133 Amazon, River 162, 170 Annales school 54 Anthropocene 13, 115–16, 311, 320 Antonucci, L. and Corti, F. 68 appropriation 145, 147, 155, 162, 169, 263, 265, 267, 269, 397, 467 arbitrage 267–8 arbitration 408–9 archaeology 135 Argentina 147 Asian Infrastructure Investment Bank (AIIB) 232, 241, 381 assets agriculture 270 alternative assets 151 asset transfer of land 149 bear markets 209 liquidity and 206 nature as 147 rating of 211 uneven distribution 72 Aucoin, P. 99 audits 97 austerity concept of 226 European stability 223 gender impact 72 German insistence on 67, 80 misguided policy 75 NPM and 100 RMT aversion to 130 squeezing demand 50 Austrian Journal of Political Science 40 autarky 22–3 automation 312 B Team 321 Baaz, Maria Eriksson 378

489

490  Handbook on critical political economy and public policy Babe, Robert 448 Bank of England 207, 212, 215 banking 10, 55, 57 see also central banks Banking Union 225 bankruptcy 210, 414 Base Erosion and Profit Sharing project (BEPS) (OECD) fundamental changes wrought by 369 multilateral cooperation 362 OECD initiates 14, 345 patent box regimes 363 tackling tax avoidance 346, 349–50, 356 bats 188 Becker, J. and Lesay, I. 60 Beer, Stafford 103 behavioral economics 2 Beijing 176–7, 180–81 Belarus 132 Belize 379 Belt and Road Initiative (BRI) 232, 239 BEPS (Base Erosion and Profit Shifting) see Base Erosion and Profit Sharing Bernanke, Ben 71 Biden, Joe 22, 76, 316 Bieler, Andreas 40 Big Four (accountancy) 346, 349 Big Pharma 478 bilateral investment treaties (BITs) 405 bilateral tax agreements 357 Bill & Melinda Gates Foundation (BMGF) 17, 380, 477, 485 Blair, Tony 95, 98 Bohle, D. and Greskovits, B. 49–53 Böhm, Fritz 85–6 Bolivia 382 Bolsonaro, Jair 485 bonds 72, 212 Bonefeld, W. 81–2 borders 194–7 bottled water 414 Boyer, Robert 3–4 Brand, Ulrich (Uli) 39–41, 447 Braun Commission 90 Brazil commodities 148–50 COVID-19 483–4 credit in 466 debt in 472 iron ore exports 167 land conflicts 154–5 ‘new crop of capitalists’ 152 transnational investment in 147 Zika 482 Brenthurst Foundation, Johannesburg 419

Bretton Woods 21, 87–8, 241, 266 Brexit 24 BRICS countries 240–41 Britain civil liberty 22 Commonwealth 343 Edward Heath 103 Industrial Revolution 136 leaves EU 24 miners’ strike 133 ‘political economy’ 1 RMT trades union 131 Thatcher and Brexit 95, 98 Buchanan, James 97 buen vivir 382 built environment 457 bull markets 209 Bundesbank 23, 84, 88, 90 Bunker, Stephen 162 Burret, Heiko 88 business schools 104 C5 group 208 California 315 capital foreign capital 253 free circulation of 406 insecurity of 406 internationalization of 404 mode of deployment 404 social relationship of 406 trade and investment treaties guarantee 407 capital controls 235, 239–41, 251, 257 Capital financeiro e agricultura no Brasil: 1965-1985 (Guilherme Delgado) 150 capitalism 21st century extraction 144 accumulation by 146, 220 antagonism of 410 ceaseless transformation of 265 changing views of 310 commodification and 422 contradictions of 112 crisis-driven transition 235 crisis prone 112 differences and conflicts with 314 Euro-capitalism 221 European trading houses 264 fictitious capital 55 global financial systems and 10 infinite expansion 147 informational capitalism 128 longue durée 263 Marxist view of 2–3, 5 natural resources 148

Index  491 nature of 25 need to accumulate 54 philanthrocapitalism 478 production 133 reimagining of 73 reliance on labour 56 role of state in 27, 112–14 social relations of production and reproduction 112 transition to 49 transnationalization of 265 two stages of 464 world-systems theory 162 car industry 60, 77 carbon capture and storage (CCS) 116–17 carbon credits 116 carbon dioxide China 176 negative emission technologies (NETs) 110, 117, 121 carbon taxes 329, 332–3, 422 Cardoso, F.H. and Faletto, E. 55 care workers 430–42 care of elderly 437–8 effects of COVID-19 441–2 migrants labor 435, 438 ‘National Integrated System of Care’ (Uruguay) 441 new world domestic order 440 public and private sectors 436–7 shortages in countries of origin 440 cartels 86, 90, 299 Castells, Manuel 128–30 Caterina, Daniela 41 Catholic Church 435 central banks 204–10 dollarization and 256 global financial system and 10 intervening in markets 214 monetary policy 71 new radical policies 10 no liquidity problem for 211 quantitative easing 212 role of 206–8 see also banking centre and periphery 27, 222, 266 Chang, Ha-Joon 22 Chatham House 66 Child Guarantee (EU) 68 China 176–84, 232–44, 279–90, 387–400 agricultural policies 15, 387–9 even distribution of land policy 389 agricultural subsidies 274 banks 395 BRICS 240–41

capital flow 236 capitalism and socialism 389–90 Chongqing 395 clean-up programmes 183 coal 177 collectivization 392 cooperatives 399 creation of capitalist class 282–3 crises 396–7 cross-border capital flows 241 Cultural Revolution 281 dollar base of 239–40, 242 economic cycles 387 economic reform 12 exponential growth 165, 176, 237 export growth 236–7 fire hazards 177 food sovereignty 398 Free Trade Agreements 238, 239 going global 235–9 global finance 239–42 global regulation 242–4 Gramsci and hegemony 233, 239, 242–3, 280 growth of civil society 285 Household Responsibility System 387 hyperinflation 388, 389, 390 IMF 240–41 Implementation Plan 2020 286 investor-state dispute settlement 15 Korean War 390 labor issues 279–90 contracts 281, 283 disputes 281–2 flexible employment 286 Honda strike 284 policy summary 289 trades unions 282, 284, 287–9 wages 286 Latin America and 165–8 Lin Yifu 394–5 Mao and the nuclear bomb 391 market reforms 393 modernization, dangers of 10, 178, 181–3 neoliberalism and 234 New Socialist Countryside (Hu Jintao) 387 NGOs 284–5, 288 Obama’s encircling strategy 22 peasants primary accumulation and 393 reversion back to rural areas 395–7 reversion to urban economy 394 sannong 387 statistics 398 three-dimensional agrarian sector 388 pollution 177

492  Handbook on critical political economy and public policy post Mao 23 regional confrontations 391 renmimbi (RMB) 239–41 respect for national sovereignty 381 sannong 387, 395–6 scavengers 177 Second Opium War 24 Shenzhen 286 socialism dismantled 281 SOEs 238–9, 242, 281 South-to-North Water Diversion Project 178–80 Three Gorges Dam 178, 184 township and village enterprises (TVEs) 15, 394 two opposing views of 232 US and 236 USSR and 390–91 village economy 392–3 water issues and projects 176, 178–9 World Trade Organization member 236–9, 283 cities 180 civil society 56, 368 Clapp, Jennifer 150 class China 12 class struggle and the accumulation of capital 403 commodification 422 foreign trade and 26 Germany 81 historical materialism 2, 5, 8 late 1980s 57 materialist class theory 8 neoliberalism and 367 ordoliberalism 87 post industrial states 128–9 Poulantzas and 113 state and 4 strikes 128–33, 135–8 working class 3, 26, 28, 128 climate change climate engineering and 110 dominant approaches to 311 growth and 336 Historical Materialist Policy Analysis 115–22 taxation issues 330 transitions 13 Clinton, Bill 98 coal 177, 315 colonialism 15th century onwards 263 Friedrich List 22–3

legacies of 15 neoliberalism and 269 postcolonial and 374–8, 380–82 Colorado 315 command economies 4 Commercial Paper Funding Facility (CPFF) 213 commodification 422 commodities 144–5, 148, 152, 156, 321 commodity reserve currency 90 Common Agricultural Policy (EU) 85 Commonwealth (British) 343 competition 83, 86, 359–64 confidence 206 constitutional order 87–8 constructivism 41 control of land 146 see also land corporate management 97 corporate social responsibility (CSR) 313, 319 corporate tax 14, 358, 360, 362 COVID-19 65–8 Bank of England action 219 Brazil’s crime against humanity 483–4 central banks countering crisis 214 conservative governments 483 corona bonds 215 effect on migrant workers 441–2 EU and 215, 227–9 financial crisis caused by 10 herd immunity 484 importance of state highlighted by 75–6 interest rates 209–10 lowering of liquidity 206 paid and unpaid labor 70 Pandemic Emergency Purchase Programme (PEPP) 67, 212 Public Health Emergency of International Concern (PHEIC) 17 responses to 482–3 unequal effect of 482, 485 women care workers 7 Cox, Robert 404 creditors and debtors 464 crises 43–5 2000s 151 2008 335 crisis construal 45 dollar and 213 European crisis management 223 HMPA and capitalist societies 112 nature of 222 semiotics and 38–9 sovereign debt crisis 80, 222 taxation and 330 crisis management 80

Index  493 critical analysis 121 Critical Discourse Studies 41 critical policy analysis 41–3 critical policy studies 46 critical political economy 3–5, 8, 13–14, 311, 319 Cueto, Marcus 478 cultural political economy (CPE) 36–47, 448–50 a distinctive approach 5–6 critical policy analysis and 41–3 HMPA and 39–41, 111, 121 housing policy viewed from 447 Jessop, B. and Sum, Ngai-Ling 456 Marxism and 456 polity, politics and policy 37 selectivities 449–50 studies in 46 Cultural Revolution (China) 281 Cultural Studies and Political Economy (Robert Babe) 448 currency commodity reserve currencies 90 depreciation 296 hierarchy of 252 provision for stability 83 Cybersyn 103 dams 378 Darwin, Charles 183, 484 decarbonization 315 decolonization 265 see also colonialism deflation 296 Delgado, Guilherme 150 Delors Plan 219 demand 407 assets, liquidity and 206, 209 central banks 71 credit 214 demand inflation 295–6 gender equality and 68 household loans, for 248 Keynesian demand management 74, 269 labor markets 293 minerals 165–6 dependency theory 54–8 extra surplus value and 27 Latin American origins 55, 161, 163 Marxist origins 54 related approaches 49 roots of problem 59 vision of 61 deposits (bank) 207–9 deregulation 311–12, 416 Detroit, Treaty of 317 development 380–83

borders 195–6 defining 375–8 displacement through 378–9 examples of 378–80 digitalization 364 dioxin 177 dirigisme 269 dispositives 42 dispossession (land) 145–7, 149, 155 division of labor see labor, division of Dodge, Joseph 84 dollar, the crises and funding problems 213 Dollar-Wall Street Regime (DWSR) 235, 239, 242 global financial crises need 208 post-war hegemon 84 dollarization 247–8 debate over 250–51 dedollarization 253–7 demand for loans 256 foreign capital and 253, 255 foreign-owned banks 249 household debt rises 250 ill-functioning states 256 peripheral financialization 55 taming 11 dos Santos, Theotônio 161 doughnuts, world as 74 Douglas, Roger 95, 98 Drahokoupil, J. and Myant, M. 51–3 Eastern Europe 49–50, 54–5 Ebola 481 école de la regulation 3 ecological unequal exchange 161–2 Economic and Monetary Union (EMU) 219–24, 227, 229 see also eurozone economic blocks (three and large) 191 Economic Commission for Latin America and the Caribbean (ECLAC) 23, 160, 198 economic constitution 83, 85–6, 90 economic liberalism 3 economic nationalism 3, 5, 22–5, 30 economies of scale 24 ecosocialism 314–15, 318–21 Ecuador 382, 409 education 468–9 Emissions Trading Systems (ETSs) 116–17 Enda Graf Sahel 381 Engels, Frederick 2, 26 Enthoven, Alain 104 Entrepreneurial State, The (Mariana Mazzucato) 74

494  Handbook on critical political economy and public policy environment built environment 457 labor environmentalism 311–14 see also climate change equity release 466 Erhard, Ludwig 84, 86 Erman, Tahire 456 essential workers 67–8 EU agriculture statistics 272 agriculture subsidies 274 Brussels-Frankfurt consensus 220, 229 Central Eastern Europe 50, 52 Child Guarantee 68 climate change (Emissions Trading System) 117, 119–22 COVID-19 and 215, 227–8 crisis management 223–7 different effects across EU 226–7 DG Employment 225 EMU and 219 Euro-capitalism 221 FDI priority 57 Fiscal Compact 81, 87–9, 224 fiscal turning point 67 ‘frugal four’ 228 Gender Equality Strategy 68, 73 gender issues 66–7 governance 225–6, 229 ‘Investment Plan for Europe’ 227 ‘NextGenerationEU’ 66–7 Recovery Fund 7, 67 Savings Directive (2003) 345 single labour market 437 Southern Europe 226 sovereign debt crisis 67, 219, 224 stagnation 226 Structural and Cohesion Fund 223 tax avoidance measures 346 troika 224 Eucken, Walter 80, 82–3, 85–6 Eurobonds 215 Eurocentrism 378 European Banking Authority 69 European Central Bank control over monetary policy 88 dealing with the economic slump 223 governance of the eurozone 11 legitimacy crisis 214–15 monetary union and 220 pandemic emergency programme 67 transformation 224–5 European Commission anti-COVID-19 measures 228 climate policy 122

crisis management 223 DG IV 86 European Pillar of Social Rights 227 gender equality 68 European Company Councils 317 European Council 224, 350 European Court of Justice 88–9 European Economic Community (EEC) 85–7 European Gender Budgeting Network 68 European Monetary Union (EMU) 80, 85–6 European Recovery Bond 67 European Stability Mechanism (ESM) 224 eurozone 11, 215, 224–5 see also Economic and Monetary Union exchange rates Bretton Woods 21, 87 central banks 71 Dutch disease 163 Eastern Europe 53, 55 Keynes’ influence 84 South Eastern Europe and Baltic 57–8 exploitation China 283, 393 colonial times 432 fossil energy 115 global agriculture 262–75 Kafala 436 Marxism on 25, 36, 431 nature 112, 178, 377 new avenues for accumulation 106 Tehuantepec 191 wage labour 56 exports developing countries 23 FDI and 57, 59 Germany 81 neoliberalism 21 post-Soviet countries 51–3 Slovakia 60 expropriation 147, 149–50, 167, 171, 234, 466, 468 extractive economies 159–72 care extractivism 431 commercial recognition 150 expansion of dedicated corporations 144 mineral rent 160 Fairbairn, Madeleine 150 Fanon, Frantz 419 farm workers 272 see also agriculture Federal Reserve (US) 71, 144, 206, 208–14 feminism Advanced Introduction to Feminist Economics (J. P. Jacobsen) 71

Index  495 can be equally blind 70–71 care work 29, 430 countering pregnancy prevention 380 critique of political economy 28–9 development of gender relations 28–9 division of labour 31 feminist economists 71–2, 75 notions of development and 377 political economy of 5 silencing of women 7 subject/object approach and 29 see also gender issues; women Feminist Economics 71 Fichte, Johann Gottlieb 22 Fields of Gold: Financing the Global Land Rush (Madeleine Fairbairn) 140 Filipinas 431, 433 financial capitalism 234 financial markets see markets financialization 463–71 conditions for 54–5 definitions 463–4 Eastern Europe 53 education 468–9 features of 463–5 health care and 469–71 Latin America 144 of natural resources 155–6 social policy 465–8 state’s role 464 Fitoussi, Jean-Paul 69 food processing companies 271 food security 262 food sovereignty 147 Fordism methodological 8–9, 127 post-Fordism and 115 standard mode of capitalist development 127 foreign direct investment (FDI) 50, 53, 55, 57–60 foreign-owned banks 249 forests 186 fossil fuel 115, 422 Foucault, Michel a better use of 39 CPE and 6 general observation on history 135 governmentality 37, 41 Gramsci, Marx and 36 technology 450, 455 France 219, 280, 470–71 Frankfurt 220 free trade China and 238 classical arguments 22 dealing with global expansion of capital 405

EEC and 85 free trade areas 24 international division of labour and 5 Marxism and 26 Ordoliberalism and 85 post-World War II 23 Freiburg school 80 French Revolution 280 Fridays for Future 65, 229 Friedman, Milton 43 frontiers 195–7 full employment 407 Fundăo dam, Brazil 167 Furtado, Celso 161 Gates Foundation see Bill & Melinda Gates Foundation (BMGF) Gender Equality Strategy (EU) 68 gender issues 66–76 algorithms, effect of 69 COVID, effects of 70 COVID recovery plans 68 Criado Perez 69 gender-coded views 29 gender inequality 295 migrant workers 439–40 Women’s Budget Groups 76 see also feminism; women general equilibrium theory 205–6 General Motors 101 Generalized Agreement on Tariffs and Trade (GATT) 23, 402 Georgescu-Roegen, N. 161 Gereffi, Gary 28 Germann, Julian 81 Germany coronavirus response 228 criticises ECB 214 Emissions Trading System 117 EMU and 219 firms relocate 50 Great Depression 23 ideas-based 25 industrialization 136 internal customs borders 22 liberalism in 132–3 minimum wage introduction 303 Ministry of Finance 228 nurses exchanged for vaccines 438 ordoliberalism 80–81 possession of resources 187 relocation of firms to Central Eastern Europe 50 trades unions 131 Ghana 380, 432–3

496  Handbook on critical political economy and public policy Gilpin, Robert 24, 404 global agricultural value systems (GAVs) 263, 268–75 Global Alliance against Land Grabbing 153 global commodity chains (GCCs) 262 global economic governance 341–51 health 17 land governance 152–5 stability of markets 21 taxation avoidance 342–4 tax governance agenda 344–8 example of 348–9 global exploitation 264 see also exploitation global financial crises (GFC) European transition countries 49 financialization 53 lack of reform 204 ordoliberalism 80 radical changes 10 shadow banking system and 204 global financial systems 10, 204 Global Forum on Transparency and Exchange of Information for Tax Purposes (G20) 351 global health 476–85 Big Pharma 478 Brazil and COVID-19 483–4 pandemic outbreaks 481–2 public-private partnerships and conflicts 477–8, 481, 485 securitarian trend 482 tropical diseases and colonialized medicine 480–81 types of healthcare systems 478 universal healthcare a preferred model 478 universal healthcare coverage and universal healthcare systems 479–80 global justice movement 381 global new deal 84 Global North and South differences between 12, 116 dispossession issues 155 land transactions between 145 migrant populations 194–5, 197 mobility of capital North to South 266 North and neoliberalism 234 North’s merchant capital 264 nurses move South to North 435 peripheral states 252 post colonial studies and 374–5 restructuring between 262 South rejects capitalism 234 South’s agriculture on uneven terms 263

South’s dependence on commodities 148 South’s food insecurity 262 subsidies in North 274 transfer of wealth, South to North 381 unit-level costs 267 wages 268, 273 global value systems (GVS) 263–9, 430–42 connectedness of 266 globalization 265 focus of IPE 403 quoted definition 407 states and 410 tax policy 356–70 digitalization 364 international tax regime 357–9 tax competition 359–64 GNP (Gross National Product) 69–70, 191 gold standard 90, 207 Göpel, Maja 66 GRAIN 145 Gramsci, Antonio articulations 37 Chinese economic reform and 12 conjunctural analysis 45 economic regulation and 233 eurozone in neo-Gramscian terms 220 hegemony 113, 233, 280 internal differentiation of state 40 labor policies in China 279–80 organic intellectuals of the working class 285 separation of social fields 39 six key elements of 280–81 state as political and civil society 41 supply chains 28 terms of analysis 6 vernacular materialism 36 Great Depression 23, 44, 71 Greece 88, 224 Green New Deal 314, 330 Green Revolution 262 ground rent 54, 58 growth as against redistribution 330 China 10, 165, 176, 178, 181–3 climate change and 336 Eastern Europe 53 gender equality and 66, 68 governments prioritize 14 income equality and 295 limits of 74 main undisputed objective 330 a measure of 69 mineral rent and 160 necessity of denied 377 neoliberals on 44

Index  497 no longer the priority 462 ordoliberals on 84 Grundgesetz 86 Gulf of Mexico 181 Haddad, Christian 41 Hall, Peter 127 Hallstein, Walter 86 Harvard Policy School 104 Harvey, David 146, 151, 155, 415 Hayek, Friedrich 84 health systems 17 healthcare 319, 469–71 global health 476–85 hegemony 223–5 China 279–80, 283–4, 287–8 distinctions made 40 European economy 220 Gramsci on 113, 223, 280 hegemonic nexus 233, 239, 242–3 in global finance 235 Jinping, Xi 285–8 research framework for 113 United States 234 Heilperin, Michael 85 Heinen, Nikolaus 88 Hilferding, Rudolf 26 historical materialism 25–8, 39–41 climate change and 110 individuals and 2 Marxian economy, as 5, 25 means of production owners and wage earners 25–6 three steps 40 historical-materialist policy analysis (HPMA) 39–41, 110–22 climate change 110, 115–22 conceptual abstraction 118 context 114, 119 key concepts 111–14 political actors 119–20 historical relations 310–320 Hitch, Charles 103 HIV/AIDS 434 Hobbes, Thomas 234 Hochschild, Arlie 431 Hong Kong 435 household debt 467 housing policy 446–8, 450–57 CPE and 448 Human Development Index (UN) 376 Hungary 58–9, 248 Hu-Wen 283–5, 288 Imamoğlu, Ekrem 457

IMF see International Monetary Fund imperialism changing mechanisms of 267 neoliberal macroeconomic policies and 263, 266 Rosa Luxemburg on 26 inclusive finance systems 467–8 Inclusive Wealth Report (UN) 176 incorporated comparison 134–5 India 272, 378, 434 Kerala 435, 440 individuals 3 Indonesia 379, 433–4 industrial relations 127 Industrial Revolution 136 Initiative for the Integration of Regional Infrastructure in South America (IIRSA) 147, 189 institutionalism 51–4, 59, 61 intellectual property (IP) 363 interest rates Bundesbank 23 crisis reaction and 209 Eastern Europe 55 international rates (1979) 163 no longer so relevant 204 zero bound 72 Intergovernmental Group of Twenty Four (G-24) 351 Intergovernmental Panel on Climate Change (IPCC) 116, 119 International Centre for Settlement of Investor Disputes (ICSID) 408–9 international competitiveness 51 international corporate tax system 14 international division of labor 29–31 crucial importance to political economy 20 highlighting its relevance 5 shaping of 29 see also labor International Labour Organization 168, 199, 440–41 international law 409–10 International Monetary Fund (IMF) 21, 163, 240–41, 251, 380, 481 international political economy (IPE) 20–25, 28–31, 402–5, 409–10 Marxist perspective 28, 404 Robert Cox 404 social antagonisms 405 international shipping 434 International Trade Union Confederation (ITUC) 313 interpretative policy analysis (IPA) 111 investor-state dispute settlement (ISDS) 405, 410

498  Handbook on critical political economy and public policy IOs (international organizations) 344, 346, 348 IOUs 208 Ireland 349 iron ore 162 Islamic State, Syria 382 Islamists 16, 451, 453–5 Italian Risorgimento 280 Jaga, Philippines 381 Japan 23 Jessop, Bob 5–6, 16, 114, 447–9, 456 job blackmail 312 Joerges, Christian 80 Journal Economique 1 Juncker, Jean-Claude 227, 228 just transition 310–20 a response to capitalism 314 transformative 318–19 justice 316–18 ecological 318 environmental 317–18 international law 409–10 parallel systems 410 procedural and substantive 316 quasi-privatization 409 social 316–17 voice and choice 317 Kafala 436 Kalpavriksh 382 Kautsky, Karl 26 Keating, Paul 95, 98 Kerala 435, 440 Keynes, John Maynard bank money 207 changing the intellectual climate 335–6 demand management preferences 269 General Theory 294 heterodox political economy 3 modernization theory 21 opponents of 74 ordoliberalism and 80 original thinking of 12–13 Kiel Institute for the World Economy 122 Kindleberger, Charles 21 Klatzer, E. and Rinaldi, A. 67 Krippner, Greta 463 Krugman, Paul 65 Kurds 382 Kuznets, Simon 69 labor automation 312 capitalist economies 56 Chinese policies 12, 279–90

see also China: labor issues David Ricardo 26 detrimental arbitrage 12, 267–8 division of 20, 23–31, 267 divisions of opinion 20 end of political integration 407 from slavery to 151 household and care economies 70–71 international division of 5 liberalism and 30 Marx and the law of value 27 Marxist class system 2 Mexico 198 minimum wages 12–13 National Labour Relations Act (US, 1935) 315 productivity and wages shift 267 quote from Castells 128 rural labor 146 skilled and unskilled 297–8 unit labor costs 273 women 29, 31, 67–8 Zhenhuan, Xu on 283 laissez faire 82–3 land 144–56 dispossession 145–6, 147, 149, 155 fourth income from 151 governance 152–5 voluntary initiatives 153 International Land Coalition 153–4 investment in 150–52 land grabbing 145–7 Global Alliance against 153 water, conflicts over 154, 168 Latin America 9, 49, 54 China and 165–8 claims against 409 Colombia 167 land 144–55 land distribution ranking 154 mineral resources 163–72 abandoned activities 168 organizations involved in the struggle for rights 169–70 Peru 167 post-development 170 social policy 461–2 see also Brazil Lautenbach, Otto 90 law 404–5 see also justice law of value 27 League of Nations 344, 357 league tables 97 lenders of last resort 210–11, 225

Index  499 lending 55 Lenin, Vladimir Ilyich 26–7, 146 Leubolt, Bernhard 40 lex mercatoria 405 liberal international political economy 20–22 liberalism definitions 132–3 division of labor and 5, 30 individual and 3 liberal international political economy 20–22 see also neoliberalism; ordoliberalism Lindsay, Robert 103 liquidity 204–6, 209–12 List, Friedrich 5, 22–4, 26, 30, 234 London Underground 130 longue durée 422 Lore Lindu National Park (Indonesia) 379 Lufthansa 130 Luxemburg, Rosa 26, 146, 423 Maastricht, Treaty of 88–9, 219 macroeconomics Brazil 148 central banks 209 changing landscape 71 gender issues and 7, 66, 70, 72–3, 75–6 growth 69 ordoliberals 87–8 macro-institutional influence 59 Macron, Emmanuel 67 managerial governance 102, 105 managerialism 99 Mandel, Ernest 27 Mandela, Nelson 417 Mao Zedong 23, 281, 387, 391 Marcinčin, Anton 60 markets capitalism and 182 central bank intervention 214 institutions and legal structures 73 intervention in 84 liquidity and 205 market freedom 407 ordoliberalism 90 states and 402, 410 weak regulation 215 Marx, Karl critique of political economic thought 2 emergence of working class as collective actor 128 First International Workingmen’s Association 267 Gramsci, Foucault and 36 land income 151 law in capitalist societies 405

modification of law of value 27 primitive accumulation 146 systemic concepts of capitalism and 49 Marxism classes 31 contributions to literature on transformations of capitalism 265 CPE and 456 exploitation of wage earners 25 foreign trade and 26 hierarchies 31, 267 individuals and the working class 2–3 IPE and 404 productive forces 266 social theory 112 third-worldist Marxism 417 vulgar Marxism 280, 290 wages 267 Mass Housing Administration of Turkey (TOKĬ) 16 materiality 195 Matopiba region (Brazil) 148 Maya people 379 Mayan Train (TM) 190, 198 Mazzacato, Mariana, 66, 73–6 Mazzocchi, Tony 312 McMichael, Philip 127–8, 134–5, 138 McNamara, Robert 103 megaprojects 187–8, 190–91 mercantilism 264 Merkel, Angela 67, 77 Mesoamerican Biological Corridor 188 Mestmäcker, Ernst-Joachim 85–6 methodological Fordism 127, 138 see also Fordism Mexico 188–200 megaprojects 189–91 notions of border 10 southern border 192–4 Zapatistas 382 microcredit 381, 462, 467–8 micro-technologies 41 middle-range abstraction 49, 51, 54 migration 431–42 conventions and declarations for protection of migrants 441 effects of COVID-19 441–2 gender stereotypes maintained 439–40 Japan’s policies 436 Kafala system 436 migrants’ points of view 439 qualifications not recognised 435–6 remittances 438–9 restricted work permits 436 types of 438

500  Handbook on critical political economy and public policy minimum wages 293–307 determination of 304 economic and social functions of 294–7 empirical analyses 302–4 employment not adversely affected 303, 306 level of 303 monopsony and monopoly 299–300 neoclassical model 297–8 productivity and 302 wage bargaining 293, 297, 305–6 wage dispersion 295, 301–5 mining see extractive economies modernity 186, 195–6 modernization theory 21, 27 monetarism 235 monetary policy 71–2 money 206–8 money-capitalism 407 Money Market Mutual Fund Liquidity Facility (MMLF) 213 monopoly 299–301 monopsomy 299, 301 Mont Pelerin Society 74 Montchréstien, Antoine de 1 Moore, Mark 104 mortgages 466 Müller-Armack, Alfred 84–6 Multi-Donor Budget Support (MDBS) 380 multinational enterprises (MNEs) architecture of impunity 405 double non-taxation 358 global minimum tax proposed 364 OECD’s pillars 363, 369 political sphere and 346 profit shifting 341, 344 structuring operations 359 transparent holding centers 343 Muthesius, Walther 84 Myant, M. and Drahokoupil, J. 49, 52 narrative plausibility 44–5 Nasser Hussein, Gamal Abdel 414 national accounting practices 74 National Development Plan (Mexico) (PND) 190 ‘National Integrated System of Care’ (Uruguay) 441 National Labour Relations Act (US, 1935) 315 National System of Political Economy (Friedrich List) 22 National Union of Rail, Maritime and Transport Workers (RMT) 130–31 nationalization 414–15 nation-states attraction and retention of capital 405 class system differs 410

concepts of 30–31, 252 dollarization and 251–2, 256 economic strand that believes in primacy of 3, 127 free trade and 22 market and 402, 410 no regulation of economic activity 406 sovereignty concepts 347–9, 403 natural resource economics 160 Nazis 23 negative emissions technologies (NETs) 8, 110, 117–22 neoclassical economics 160 neocolonialism 380 neoextractivism 145, 166 neoliberalism accumulation of capital and 406 agriculture and 262–3 China and 234 class and 267 concerns over trade union power and the welfare state 44 imposed on Third World 421 institutional changes 164 monetarist readings 235 nature of 234 new public management (NPN) and 7–8, 95–102 perpetual reform ethos 422 recommendations of 21 shades of colonialism 269 see also liberalism; ordoliberalism Netherlands 349 Neusüß, Christian 27 Neves, P.C., Afonso, Ó. and Silva, S.T. 295 New Development Bank 241, 381 New Labour 98 new public management (NPM) 95–102 neoliberalism and 95–102 New Right 95, 97–9 NGOs 284–5, 288 NHS 470 Nieto, Enrique Peña 197 Nixon, Richard 312 North American Free Trade Agreement (NAFTA) 382, 402 North and South (Global) see Global North and South nursing 432, 435 Obama, Barack 22 objective truth 30–31 Occupy Wall Street 44 Office of Military Government (US) 84 offshore activities 347

Index  501 oikonomia 1 Oil, Chemical and Atomic Workers International Union (OCAW) (US) 13 oligopolies 299 Oppenheimer family (South Africa) 419 Optimal Currency Areas (OCAs) 220 Ordo Manifesto (Böhm, Eucken and Großmann-Doerth) 90 ordoliberalism conflicts within 84–5 Fiscal Compact and 87–9 key concepts 82–3 policy recommendations 85–7 Organization for Economic Co-operation and Development (OECD) activists 368 Centre for Tax Policy and Administration 366 Chinese export credit regime and 239, 243 Committee on Fiscal Affairs 366–7 Common Reporting Standard 345 Development Assistance Committee 366 Global Forums 361, 367 harmful tax competition 361, 364 Inclusive Framework (2016) 351 membership and administration 365–7 New Right governments 95 NGOs 368 tax avoidance measures 346, 350 tax policy generally 356–8, 361–9 Oxfam 153, 348–9 Oxford Handbook of Political Economy 2 Palan, Ronan 347 Panama Canal 190–91 Pandemic Emergency Purchase Programme (PEPP) 67, 212, 228 Panitch, Leo 128–30 paper factories (China) 179 Paris Agreement (2015) 115, 313 Parreňas, Rhacel 439 passive revolutions 280–81 patent box regime 363 Paul, Katharina 41 Payer, Cheryl 414 Pearson Report (UN) 376 Pension Reform (West Germany 1957) 85, 90 pensions 465–6 Perez, Criado 69 performance 95, 97 periodization 41 Philippines 381, 431, 433–4, 436, 438–9 Plan Public Panama (PPP) 189 planetary boundaries hypothesis 311, 320 planning 83

Planning, Programming and Budgeting System (PPBS) (US) 103 Polanyi, Karl 51, 53, 151, 294 policy analysis 40–45, 58, 95, 110–11, 117–21 breadth 315 depth 316–17 scale 315 scope 315–16 policy, politics and polity 37 political economy crucial importance of international division of labor 20 definitions 2 feminist critique 28–9 first book in English 2 history of 1–3 Karl Marx 2, 25 origins of term 1 tension between the state and the market the crucial problem 403–4 three strands 3 Political Economy of International Relations, The (Robert Gilpin) 404 political science 2 pollution 329 postcolonialism 15, 374–83 see also colonialism post-Keynesianism 54 post-socialist countries 49, 53 post-Soviet countries 50–2 Poulantzas, Nicos 112–13 poverty 377, 381 Powell, Jerome 71 pragmatic correctness 45 Prebisch, Raul 23, 161 precious metals 1, 27, 206 prices minerals 164–6 minimum wages and 301, 307 stable currency and 83 supply, demand and 206 unit labour costs and 296 Primary Dealer Credit Facility (PDCF) 213 private equity funds 270, 469 privatization 50, 99–102, 413–26 Prussia 328 public choice theory 96–7, 98–9 Public Health Emergency of International Concern (PHEIC) 17 public management 7–8, 102–6 see also neoliberalism: new public management (NPM) public policy center/left leaders 9

502  Handbook on critical political economy and public policy cultural political economy (CPE) 5–6 mainstream analysis 4 ordoliberalism 7 regulatory approaches 6 taxation 13 public-private partnerships 413, 421, 423–4, 470, 477 public sector and private sector 101 public services 416 public value management 100 Purple Pact (European Women’s Lobby) 68 PwC 349 quantitative easing (QE) 71–2, 74, 204, 212 RAND Corporation 103–4 Rangel, I. 151 raw material exports 51 see also exports Raworth, Kate 66, 74 Rayner, Derek 101 RB Reckitt Benckiser Group plc 348–9 Reagan, Ronald 74, 321, 344 redistribution 330, 462 Regional Comprehensive Economic Partnership (RCEP) 232, 238–9 regulation theory 54–8 basics of economic regulation 233 capitalist development models 220–21 European laws and 221 Gramsci and 233 nature of 28 plus dependency 61 state regulation of economic activity 406 types of accumulation 6 Reinventing Government (Osborne and Gaebler) 98–9 relative autonomy 56 relocation 312 renmimbi (RMB) 239–41 repos (repurchase agreements) 204, 211–13 research 128–39 design 128–9, 132–4 incorporated comparison 134–5 limitations 132–4 post-industrial working class 128–9 strikes 136–8 subsumptionism 129–32 resource curse hypothesis 162–3, 342 resources 187, 195 retroduction 118 reverse mortgages 466 Ricardo, David 5, 20, 26, 151 Rights of Indigenous Peoples 168

Rise of the Network Society, The (Manuel Castells) 128 Rising Global Interest in Farmland: Can It Yield Sustainable and Equitable Benefits? (World Bank) 145 Risorgimento (Italian) 280 River Elegy (China Central Television) 181 RMT (National Union of Rail, Maritime and Transport Workers) 130–31 Rockefeller Foundation 477, 479 Rome, Treaty of 85–6 Röpke, W. 82–3, 85 Rüstow, Alexander 82, 90 Sardar Sarovar dam, India 378 Sassen, Saskia 431 Save the Narvada 379 Say’s Law 298 scavengers (China) 177 Schäuble, Wolfgang 88, 228 Schnellenbach, Jan 88 Scholz, Olaf 228 Schumpeter, Joseph 327 Scott, James 186 sedimentation 37 seed markets 271 Seeing Like a State (James Scott) 186 Seguino, S. 72 Seidel, K. 86 ‘Seized’ (GRAIN) 145 selection bias 132 self-interest 97 semiotics 37–43 relative importance declines 42 resonance 38 role in CPE 28, 449 selectivity 38 Sen, Amartya 69 shadow banking system 10, 204, 211, 213 see also banking: central banks Shell 122 Shenzhen 286 Singapore issues 234, 238 Slovakia 60 Slovenia 58 Smith, Adam defining liberalism 30 definition of political economy 2 economies of scale 24 ordoliberalism and 82 pin production 20 social antagonisms 406 social equity 51 social market economy (West Germany) 80 social policy

Index  503 corrosion of 471 financialization of 461–71 social relationship of capital 406 social sciences 3 social welfare systems 295 socialism China 182–3 Hungary 58 surprise at limited ambition 321 transition from 52 transition to 130 Xiaoping, Deng 281 socioecological systems 321 Soskice, David 127 South Africa 413–26 African National Congress (ANC) 415, 417–18 alliance with big capital 418–19 ‘black economic empowerment’ 417–18 black middle class 420 carbon taxes 422 Communist Party 417–18 corruption 419 examples of privatization 423–5 Freedom Charter 417 GDP 415 HIV/AIDS 434 Mandela, Nelson 417 nationalization 414–15, 417 one of the most unequal countries 295 privatization 413–26 Soweto 426 Telkom 423 South Korea 435 sovereign debt crisis 67, 80, 219, 222, 224 sovereignty 347 Soviet Union 4, 52, 247–8 soybeans 148–9 Spain 136 Spash, Clive 41 Stability and Growth Pact (SGP) (Europe) 88, 220 stable currency 83 see also currency state and economy Drahokoupil, J. and Myant, M. 52 dynamic role of state is required 74–5 markets 404 Marxism treats separation of as a fiction 31 role required of 76 working together 4 state-owned enterprises (SOEs) China 238–9, 242, 281 South Africa 413, 415, 418 states see nation states

Steuart, James 2 Stiglitz, Joseph 69 Stockholm Resilience Centre 321 strategic resources 187 strategic selectivity 56 strikes 8–9, 130–33, 135–8 structural dualism 161 structuralism 161, 163 student debt 468–9 subject and object separation 29 subsumptionism 128–32, 134–5, 137 Sum, Ngai-Ling 447–8, 456 Sun, Yat-sen 23, 178 supply chains 28, 264 sustainability 183 sustainable development 316 Switzerland 85 Sylvester, Christine 378 Syria 382 systems analysis 96, 103–4 Tabasco 191 Taiwan 433 Tanzania 378 tariffs 20–24 taxation 327–37 avoidance and evasion 14, 341–4, 346 avoidance and evasion: the differences 359 Big Four’s role 349 evasion by private investors 350 carbon taxes 332–3 competition between nations 359–64 digital economy 364–5 dominance of owners of capital 334–5 during crises 330, 335 Foreign Account Tax Compliance Act (FATCA) 362 G20 Global Forum 351 global governance 341–51 COVID-19 and 342 Tax Information Exchange Agreements 345–6 technology for 345 growth and/or redistribution 330–31 Harmful Tax Competition: An Emerging Global Issue (OECD) 343, 345 havens competition between 361 definition 343 example of 344, 348–9 profit sharing 341 scandals involving 347 history of 328 horizontal and vertical equity 329

504  Handbook on critical political economy and public policy key functions of 342 loopholes 343–6, 351 massive losses through avoidance 76 Multinational Competent Authority Agreement 362 multinational enterprises (MNEs) 341, 343–4, 346–51 new regime needed 75 normative and empirical approaches 327, 337 political struggle of 334 preferential tax treatment 360–62 progressive and regressive 13, 328–9 purposes of 329 rates of taxation 331–2 redistributive 14 revenues 331 tax advisers 346–7 tax treaties 347 Tea Party 44 technology 450, 455 Tehuantepec, Isthmus of 191, 194, 196 Term Asset-Backed Securities Loan Facility (TALF) 213 territory 195–6 Thatcher, Margaret 74, 95, 98, 100, 414 Third Way social democracy 98 Tickner, Ann 29 trade and economic development 15–16 good governance 21 modernization theory 21 tariffs 20–24 trade and investment treaties 405 capital guarantees 407–8 purpose of 410 trades unions 130–33 American unions 312–13 China Hu Wen, 284 Jinping, Xi 287–9 Zedong, Mao 282 European Union and 317 labor environmentalism 311–12 minimum wages 294, 306 monopolies and 300 Trans-Pacific Partnership (TPP) 406 transition countries 49–52 banking 52 divergent patterns 58 integration into international economy 51 key challenges 50–51 late 1980s 57 transitism 191 transnational corporations (TNCs) 12, 24 treaties, nature of 406

Trotsky, Leon 416 Trump, Donald 22, 24, 239, 315, 485 truth, objective 30–31 Tullock, Gordon 97 Turkey 446–57 AKP 16, 446, 449, 451–3, 456–7 Anatolia 452–3 housing 446–8, 450–7 urban transformation 454 Islamists 451, 453–5 Istanbul and Erdoğan 457 KIPTAS 451 patronage 450–52 Presidential Palace, Ankara 446 Taksim Square, Istanbul 457 TOKI (Mass Housing Administration of Turkey) 446, 450–56 Turner Report (Financial Authority Services, UK) 206 Under the Dome (Chai Ling) 177 underdevelopment 376 unemployment 294–6 United Nations Centre on Transnational Corporations (UNCTC) 344, 346 Conference on Trade and Development (UNCTAD) 23 Framework Convention on Climate Change (UNFCCC) 110, 119 Population Fund 380 United States agriculture statistics 272 defense sector 95–6, 101 financial crisis 212 Foreign Account Tax Compliance Act, 2010 (US) 345 hegemony of 234 industrialization 136 liberalism in 132 subprime crisis 223 Treasury 212–13 Trump, China and 239 university funds in Brazil 152 World Trade Organization and 235 universal healthcare 478 health coverage and a health system 479–80 Uruguay 441 USSR 390 value added tax (VAT) 329 value, law of 27 Van Rumpoy, Herman 224 Via Campesina 153 Vietnam War 103

Index  505 Vikalp Sangam process 382 von der Groeben, Hans 85–6 von der Leyen, Ursula 228 von Mises, Ludwig 84 vortex 196, 200 wages 267–8, 273 see also labor; minimum wages Wallace, George 321 Wallerstein, Immanuel 162 Walter Eucken Institute 88–9 war funding 1 Washington Consensus 21, 163, 166, 248 water China 176, 178–9 conflicts over 154 diverting water 178–81, 183 five grades of surface water 179 Mexico 193 pollution 168 We Mean Business Coalition 321 Weber, Max 53, 100 Weimar Republic 83 welfare as function of consumption 160 financialization of 471 welfare capitalism 461 what is required 199 welfare state measure of 316 neoliberals on 44 restrictions on movement of capital 406 two main roles 461 Wenchuan earthquake 178 West Germany currency reform 85 nurses from South Korea 435 protective tariffs 23 social market economy 80 US authorities 84 see also Germany Western Europe 50 Wilson, Woodrow 101 Wolpe, Harold 418 women agricultural workers 28 Brazil’s response to Zika 482 care workers 316, 430–33 COVID-19 7, 65, 485 Fourth World Conference (UN) 282 Indonesia 434

informal social networks 439 migrant workers 431–3 Mistress Clubhouse 456 mothers 440 nurses 432 prevention of pregnancy 380 sex workers 433 silencing of 69 unpaid domestic work 465 see also feminism; gender issues working class China 279 decline in manufacturing and 128–9 Gramsci’s intellectuals 285 original Marxist concern supplanted 3 wage earners 5 see also class World Bank Chinese banks’ effect 381 farmland document 145 indicators from 53 Inspection Panel (Narvada dam) 379 measures taken 147 nationalization and 414 position on land 152–3 structural adjustment programmes 163 World Development Report 2000/2001 381 World Health Organization 476–8 donors 477 loss of leadership 485 shift of focus 477 World Social Forum 313 world-systems theory 27, 49, 162 World Trade Organization (WTO) 234–9 backbone of regulated trade 234–5 China joins 283 creation of 402 mobilizations 313 Wretched of the Earth, The (Frantz Fanon) 419 Xi, Jinping 279, 387–8 Xiaoping, Deng 181, 279, 281, 387 Yucatan 200 Yugoslavia 52 Zapatistas 382 Zedillo, Ernesto 189 Zika 482 Zoom 70