The purpose of this book has been to show the scale of disruption to commodity markets caused by the rise of China since the early 2000s, and, in turn, to illustrate the opportunity that this process presented for Southern resource-exporting states to break with the disciplinary constraints of global neoliberalism and autonomously define their own development strategies, for better or for worse. Though the theoretical bedrock for these explorations has been provided principally by Giovanni Arrighi’s secular cycles of accumulation model, my goal has not been to suggest that the changes seen in resource-exporting states amount to a new global regime of accumulation, replacing neoliberalism, or to advance a case for China as the coming hegemon. Such predictions are at best highly premature.
China’s economy has been expanding at pace for so long that it is easy to take this for granted and to extrapolate high gross domestic product growth figures for decades to come. In fact, it appears that it is extremely rare for any state to sustain growth of 6 percent or more (which is well below China’s average in the postreform era) for any period longer than fifteen years (Pritchett and Summers 2013). While it must, then, be remembered that China’s record is exceptional—if not entirely without precedent—it remains an open question whether we should therefore expect the People’s Republic of China to continue bucking the historical trend, or whether either regression to the late-developer mean or perhaps a major forthcoming crisis are likely (see, for example, Babones 2011; Gulick 2011; Fischer 2015; Hung 2016; Li 2016).
As of 2019, China’s economy certainly has decelerated from its previous breakneck speed, averaging 6.75 percent from 2015 to 2018 and currently projected to slow further over the coming years (International Monetary Fund n.d.). World prices for natural resources began to fall around 2013, as Chinese demand growth slowed and the prior wave of investment in new production, triggered by the boom, resulted in supply surpluses. These price drops have had debilitating impacts on the economies of many of the countries surveyed in the previous chapters. An array of looming political-economic problems in several of the largest Southern economies seems, if anything, to signal a reversal of many of the trends of the previous decade, around which the arguments advanced in this book are built.
Perhaps surprisingly, though, there has been considerable variety across resource exporters, both in how well they have weathered the storm and in the strategies they have pursued in reaction to it. Venezuela, for example, has descended into severe economic and political crisis—in part due to shortfalls in oil revenue but partly, too, because of damaging policy decisions by the Nicolas Maduro government (Weisbrot 2014a; Buxton 2016) and because of U.S. sanctions (Rathbone and Pan 2018). Argentina and (especially) Brazil also have seen their share of turmoil and have recently experienced swings back toward neoliberalism. In Argentina, Mauricio Macri’s government inherited a troubled economy but began with measures—cutting taxes and devaluing the peso while maintaining public spending—that only deepened the problems, before eventually agreeing to a return to the International Monetary Fund, with a $57 billion bailout, in 2018 (Gillespie and Oliveira Doll 2018). The lava jato scandal combined with recession to upend Brazilian politics, first presenting an opening for the removal of Dilma Rousseff by impeachment and then undermining all the other established parties in the 2018 vote, which culminated in the election of far-right outsider Jair Bolsonaro (Anderson 2019). Angola, too, looks to be moving toward a somewhat more orthodox path for now.
On the other side of the ledger, Bolivia has so far endured in relative stability, even if negative reaction to Evo Morales’s decision to run for president again in 2019, ignoring a referendum result on term limits, means that he is by no means certain to win. In Kazakhstan protests greeted the retirement of longtime president Nursultan Nazarbayev and the apparently stage-managed election of his handpicked successor Kassym-Jomart Tokayev (Al Jazeera 2019). Meanwhile, the government has actively pushed back against negative external conditions by pursuing a significant countercyclical spending program (Brown 2018).
All this suggests that, should prices decline or stagnate in the longer term, the consequences for the states examined in this book are unlikely to be simple or unidirectional, just as they were not during the boom years. Because many resource exporters increased their borrowing during the recent period of high global liquidity, any significant hike in U.S. interest rates may well tip many more commodity producers into crisis. Such a course of events would seem, in many senses, to echo the sequence of the 1970s, whereby assertions of political-economic independence on the part of several Southern resource exporters were bound up with a commodity price boom that was brought to a decisive end (following a second, temporary peak, in 1979) by the Volcker shock, the debt crisis, and the rollout of structural adjustment programs.
From here, a rather similar trajectory is possible, though by no means inevitable. There has been much talk that, following the financial and then European debt crises, a third phase of reverberations from the 2008 crash may be coming to a head. This time, the epicenter lies in the South and the emerging markets, which, to this point, had seemed to offer something of a crutch for the wounded global economy in the face of instability and then stagnation in the North (Cameron and Stanley 2017; Economist 2015). If growth in China proves no longer able to prop up commodity markets, and should the costs of debt financing suddenly rise, the situation would quickly become critical for many resource producers.
With Chinese state-owned banks playing an ever-increasing role in development finance, concern has been raised in some quarters that Chinese lending associated with the Belt and Road Initiative may be pushing some states’ debt burdens to dangerous levels (Hurley, Morris, and Portelance 2018), though in many cases the proportion owed to Chinese creditors appears relatively low (Eom, Brautigam, and Benabdallah 2018). A novel and unwelcome element in the current conjuncture is a brewing U.S.–China trade war, which might do major damage to the global economy, should it continue to escalate. Finally, there has been speculation for decades now about the possibility of a Chinese “hard landing”—and a major crisis certainly seems possible at some point, given the buildup of bad debts and a still-inflating asset bubble.
The turn toward austerity as postcrash “common sense” across much of Europe (Arestis and Pelagidis 2010; Blyth 2013) foreshadows the potential consequences for resource exporters should their ability to service debts begin to falter. As events in Greece have shown, the imposition of severe austerity programs has proceeded even in cases where public opinion, and the country’s government, were clearly opposed. If unsustainable levels of debt mean that resource-exporting states feel the need to once again turn to international financial institutions for assistance (as has already happened in the case of Argentina), it seems extremely likely that such help would come with renewed conditionalities that would threaten any post-neoliberal programs developed over the previous decade. In some cases, of course, domestically led reliberalization has already started to occur, without the need for IFI insistence.
A different trajectory is at least possible, however. First, prices for metals and minerals are still above their preboom levels, and in most cases are higher than any time before that, back to the 1980s. Indeed, for a number of commodities, prices have strengthened in the past two years, with some (very tentative) indications that they may continue to do so, as demand fundamentals remain reasonably strong (Baffes et al. 2018). If China’s prospective shift toward greater domestic consumption is managed successfully, this is likely to lead to a less resource-intensive path of growth overall, but in all probability it also will have a differential impact on commodity markets—as demand is likely to shift away from coal and toward natural gas and oil, for example. Currently marginal commodities such as lithium might well experience a boom as demand for electronic vehicles and storage for renewables-produced energy increases over time.
Recent stimulus measures in China also signal that the investment-led growth path, which many assume to be a dead end, may not be quite finished just yet, whatever further economic imbalances it continues to pile up (Reuters 2019). Externalization of China’s capital-intensive investment model via the BRI (Chin and Gallagher 2019), as well as the rollout of various other large transnational infrastructure initiatives (Kanai and Schindler 2018), also may play some role in future commodity demand.
Even should prices crash and debt levels become unsustainable, however, and a new wave of liberalizations roll across the resource exporters surveyed in this book, the post-neoliberal turns of the commodity boom era will remain significant phenomena in their own right, for two main reasons. First, the social structures that have underpinned these divergent political-economic trajectories—and which, in turn, are both reproduced and transformed by them—will provide distinct and in many respects novel contexts within which any forthcoming turbulence, crisis, or other changes to the global dynamic will manifest and play out in these states. We can already see nascent patterns emerging as states and societies have begun to confront harder times during the past five years.
Second, as the embodiment of a world-historical moment in which prevailing global dynamics were challenged from the South, the commodity-based post-neoliberalism of the first decade and a half of the twenty-first century is, as noted in the introduction, of at least comparable significance to the period of the New International Economic Order. Both involved (rather different) attempts on the part of formerly weak Southern states to parlay favorable external market conditions into new political-economic settlements, and both are illustrative of the possibilities for social and economic change that arise at moments of global structural shift.
It is entirely possible that the material factors that acted as midwife to resource-based post-neoliberalism in the South are now fully played out. Nevertheless, the circumstances of the current conjuncture imply coming global turbulence of one sort or another, whether this is produced by, for instance, a deceleration or perhaps crisis in the PRC’s economy; a longer-term rebound, and perhaps reorientation, of Chinese growth; continuing growth and increasing resource needs of India, Indonesia, Nigeria, and others; the escalation of impacts from climate change; a reassertion of U.S. power; or some as yet unforeseen vector of transformation. With all this in mind, it is hoped that the dialectic of global and local structural change traced in this book may serve as a departure point from which some possible future trajectories may perhaps be anticipated, though not predicted.
For now, I aim to accomplish two tasks. The first of these is to restate the book’s principal arguments in making the case for the 2000s commodities boom as a demonstration of the global and national political-economic possibilities that can open up when structural change occurs within the capitalist world-system. Second, I will draw upon the dynamics of interaction between China and the global South—which the book has explored over the period 2002 to 2013—in an effort to suggest possible scenarios for the medium- and long-term outlook for commodity markets, and with it the prospects for the maintenance, elaboration, and emergence of new, resource-grounded breaks with neoliberalization. I also will look at the challenges faced by the Chinese economy, and the likely implications for commodity markets, as the PRC grapples with the growing but perhaps not insurmountable contradictions in its development.
The foundation of this book’s argument is the claim (detailed in chapter 1) that the 2002–2013 commodity boom was to a substantial degree driven by industrialization in the PRC and China’s consequent demand for imported raw materials. There are, of course, other elements to this story. Constrained global supplies of many extractive commodities, following an era of low prices and thus low investment levels, provided a context within which Chinese demand began to make itself felt, in the early 2000s. Commodity speculation, linked to larger trends of financialization, seems to have amplified the extent and volatility of price movements, but such speculation essentially responded to, rather than created, an underlying upward trend in fundamentals (Farooki and Kaplinsky 2013, 161–62).
By far the most significant of these fundamentals was the rapidity, scale, and persistence of Chinese economic expansion, which was highly resource intensive. Of course, the Chinese economy had been growing swiftly since well before the early 2000s. However, as chapter 1 demonstrated, the beginning of the commodity boom coincided with the point at which the PRC—despite itself being a major producer of oil, coal, copper, iron ore, and other resources—began to outstrip domestic supplies and depend upon world markets for key energy and hard commodities. As tables 10.1 and 10.2 show, at the peak of the boom, in 2012, China accounted for more than 40 percent of global consumption of copper, nickel, and aluminum and 30 percent of soybeans. Even in oil, where China’s global weight is less significant, the impact of Chinese industrialization on global markets is clear, with the demand from the PRC accounting for almost half of total consumption growth in the decade beginning in 2002.1
China’s share of global consumption, 2012
|
Copper |
Nickel |
Aluminum |
Oil |
Soybeans |
||||
|
43% |
48% |
45% |
12% |
30% |
Source: Calculated from United Nations Conference on Trade and Development, UNCTADStat data center.
China’s contribution to global consumption growth, 2002–2012
|
Copper |
Nickel |
Aluminum |
Oil |
Soybeans |
||||
|
113% |
132% |
81% |
48% |
60% |
Source: Calculated from International Monetary Fund, World Economic Outlook Database; United Nations Conference on Trade and Development, UNCTADStat data center.
At this point, it is worth briefly retracing the course of price movements since the beginning of the boom, around 2002, to emphasize the magnitude of this China-led, decadelong transformation in commodity markets. Figure 10.1 shows real annual prices for the two most important commodity groups—energy and metals. Despite some volatility, metals prices remained stagnant through the 1980s and 1990s (and much lower, on average, than during the 1970s), until the boom commenced in 2003. Prices peaked in 2007, before falling sharply with the global financial crisis. Following this dip, however, a strong rebound in 2010 and 2011 coincided with the Chinese investment stimulus and indicates that metals prices were not, by this point, primarily driven by demand in the still-struggling North. Prices then began to fall again, beginning in 2012, seemingly influenced by moderating import demand from China and the commencement of production from several large extractive projects whose development had been prompted by the high prices of the mid-2000s (International Monetary Fund 2014, 36; World Bank 2014, 8).
Figure 10.1 Real price indexes for energy and metals, 1980–2018.
Source: World Bank, Commodity Price Data—Pink Sheet Data.
In energy, following the falloff in oil prices during the mid-1980s, which was brought about by OPEC’s decision to ease supply constraints, price movements have, for the most part, mirrored those of metals, though without the 2012–2014 decline. Empirical data relating to the typology cases, presented in chapters 5 through 9, reveals the scale of the 2002–2013 boom’s impact on the revenue, export purchasing power, and GDP growth of resource-exporting states. Principally because of the China effect, previously stagnant export sectors would now provide the material basis for states to end dependence on IFIs and donors and to break free of their neoliberal constraints.
Over the period 2002 to 2013, then, China’s rise and consequent impact on commodity markets shifted the circumstances of insertion into the world economy for those Southern states reliant upon exports of natural resources. There are two main component parts to this effect. One of these, all things being equal, occurred in every resource-exporting state regardless of policy, whereas the second has required governments to act in order to reap the benefits.
First and most obviously, rising demand in a context of relatively inelastic supply meant an increase in prices and thus in revenue for the state in absolute terms. Of more significance than this largely automatic effect, though, was the growing attractiveness of resource sectors as destinations for investment. As prices rose, extraction still could be profitable for multinationals, even with the imposition of new taxes. These new operating conditions, coupled with the risk, delay, and expense involved in developing new mining ventures elsewhere, meant that states acting as the landlords of their subsoil resources now possessed greater power to bargain with extractive capital and were able to secure a larger slice of the expanding pie. Thus, where state managers were politically disposed to exploit this opening, gains in the relative share of extractive revenue could often be highly significant.
In most of the cases presented as part of the typology in chapters 5 through 9, governments did act to raise tax or royalty rates on their natural resource exports. In Zambia, for instance, the commodity boom prompted a reexamination of secretive development agreements, which provided concessions to private copper miners within the country and, in some cases, allowed these firms to operate at an effective tax rate of zero percent. Other governments, however, went much further in pressing their claim to resource revenues, in ways that would have been inconceivable during the previous era of low prices. Both Northern and Chinese oil firms, for example, continued to operate profitably in Ecuador under the government of Rafael Correa, despite a step change in the state’s take of revenues from a new per-barrel flat fee. States like Ecuador sought to overhaul the balance of public and private gains from extraction, while others were able to reap the full benefits of the boom via control of existing, often revitalized state-owned mining and energy enterprises. In such cases, the growth of revenues was sufficient to provide a potential fiscal basis for a break with neoliberal policy constraints, opening the way for the formulation and implementation of new, nationally defined development strategies.
Chapter 2 outlined the conceptualization of neoliberalism employed throughout the book: as a (contradictory and uneven) global regime of accumulation, identified with the financial phase of a U.S.-led cycle of the capitalist world-system and observable in national policy orientations across the world. As has been well rehearsed in the literature, the rise of the neoclassical paradigm as economic orthodoxy, the faltering of the Fordist–developmentalist project, the increasing ascendancy of finance capital, and the post–Volcker shock Southern debt crisis all combined to set the scene for the globalization of neoliberalism. Despite variations in form, extent, and process, a standard laundry list of policies flowing from the watchwords of liberalization, privatization, and deregulation was widely implemented across most regions of the global South during the 1980s and 1990s, with notable exceptions.
These policies were not simply imposed upon an unwilling South by the North. In many cases, Southern elites trained in Northern economics departments enthusiastically jumped on the neoliberal bandwagon. Nevertheless, state managers in the large proportion of Southern countries struggling under the weight of severe indebtedness had little choice but to accept neoliberalization, no matter how grudgingly. Most obviously, chronic dependence upon IFI loans meant acquiescing to the conditionalities demanded as part of each structural adjustment program.2 Where highly indebted states attempted to carve a path independent of IFIs, experiments with heterodox policy approaches resulted in severe punishments from creditors, triggering economic chaos, as in Argentina and Peru during the 1980s. A case like Jamaica, with its fractious history of relations with the IMF, could still, at times, reject engagement with the fund, though only while assiduously cultivating creditors’ trust via a homegrown neoliberalization program.
In this environment of indebtedness, the requirement to secure constant fiscal inflows from abroad, whether from IFIs, capital markets, or donors, therefore functioned as a powerful disciplinary force which mandated the adoption of a neoliberalizing political-economic orientation, whether willingly or via the lever of conditionality. As often occurred, governments might find ways to resist or stall implementation; the removal of subsidies or axing of public sector jobs might prompt protest and riots. What could not and did not occur, however, was any thoroughgoing reversal of the underlying neoliberal policy trajectory—not without almost complete dislocation from the global economy as the consequence. In this sense, and in the context of highly indebted states of the global South during the 1980s and 1990s, there really was little, if any, alternative.
In these cases, the emergence of any plausible alternative would clearly have to involve an end to chronic dependence upon IFI loans and Development Assistance Committee aid and thus an escape from neoliberalizing conditionality (barring a sea change in economic thinking among creditor and donor nations). By allowing for huge increases in state revenues from resource exports (in both absolute and relative terms), the China-led commodity boom of 2002 to 2013 provided the building blocks for such alternatives. For the first time in decades, resource-rich highly indebted states in the South had access to a fiscal resource independent of IFIs, donors, and finance capital, and of sufficient weight to negate or at least mitigate the need for help from these external sources. Brazil’s early payoff of IMF debts in 2005, Argentina’s break with the fund following the 2002 collapse, and Angola’s refusal to enter the Poverty Reduction Strategy Paper process after the civil war all are manifestations of a declining need for IFI assistance on the part of natural resource exporters. Less assistance, of course, meant less in the way of conditionality and supervision, paving the way for deviations from political-economic orthodoxy, while commodity revenues helped to pay for the emergent heterodoxies.
Just as maximizing the state’s share of revenue from resource exports required conscious policy change on the part of governments, so too did the formulation and implementation of any policy program attempting to move away from the neoliberal status quo. It is for this reason that the first major claim of this research is framed in terms of necessity but not sufficiency. That is, a high export concentration in natural resources subject to increasing Chinese import demand is a necessary but not sufficient condition for a break with neoliberalism on the part of a given Southern state. The rise of China has not compelled states to follow post-neoliberal trajectories, but it did open the door—previously sealed shut by debt and conditionality—for them to do so.
Chapter 3 tested this proposition, using qualitative comparative analysis on a set of eighteen country cases from the global South during the 2002–2013 period. Within the specified scoping conditions (the most important being a high level of indebtedness), the findings give strong support for the proposition that post-neoliberal turns were possible only in those states affected by Chinese-driven shifts in the markets for energy commodities, metals, and soybeans. They further suggest that a lack of dependence on official development assistance was also a necessary condition for a break with neoliberalism to take place—a finding which I picked up again in chapter 8.
If a high degree of reliance upon these China-disrupted markets is a necessary but not sufficient condition for a state to break with neoliberalism, this raises the question of why such breaks occurred in some but not all states subject to this China effect. The second half of the book is concerned with this topic. In chapters 5 through 9, I presented a typology of resource-dependent Southern states whose export markets have been heavily affected by Chinese demand and where, therefore, according to the qualitative comparative analysis, the necessary condition for a break with neoliberalism was present during the 2002–2013 period.3 From a subsequent detailed survey of fifteen such cases, I conclude that whether a post-neoliberal turn occurred or not in each case depends primarily upon the nature of state–society relations, particularly the balance of domestic social forces.
Building on transnational capitalist class theories and the work of Brent Kaup, I conceptualize neoliberal-era dependence upon external flows from IFIs and donors as corresponding to the ascendancy of transnational capital within the domestic sphere. The degree to which such dominance was directly exercised by external forces varied, though, and always involved partnership with transnationally oriented domestic capital whose interests lay broadly in tune with the neoliberal agenda demanded by the IFIs. Any significant deviance from the neoliberalizing path would prompt a withdrawal of external flows, with the ensuing economic meltdown making such maneuvers politically impossible, even for governments that had proposed breaking with neoliberalism while in opposition (as happened in much of Latin America). The political necessity for governments to maintain creditors’ and donors’ trust thus narrowed the bounds of the possible in terms of economic policy, even where constraints were not directly imposed via SAPs. In this way, the hegemony of transnationally oriented fractions of capital, both domestic and foreign, was maintained, placing the state out of bounds as a site of contention for possible rival fractions.
Seen in these terms, the impact of the commodity boom on resource-rich but indebted countries was to reignite competition for the state among the various arms of domestic society. The boom presented the potential for those in control of the state to capture new revenue flows independent of IFI and donor control. These new revenue potential streams were of sufficient size that, if tapped, they generally obviated the need to secure further IFI loans, while also reducing aid dependence in the poorest states. Control of the state under the new conditions, therefore, meant the possibility of policy change within a now far expanded spectrum, since creditors and donors no longer had the power to trigger a disastrous withdrawal of funds in response to departure from orthodoxy. With the capacity of their external allies to influence the domestic sphere drastically reduced, domestic transnationally oriented capital could no longer guarantee that the tools of the state would be deployed in the service of their interests. Instead, any social force or coalition capable of securing control of the state might plausibly use its new freedom of action to institute a new, and likely non-neoliberal, project of accumulation attuned to its needs above others.
On this theoretical grounding, I divided the fifteen cases of Southern resource-exporting states into five groupings, based on degree of family resemblance to five ideal types. These types consist of two major elements: the configuration of domestic social relations and a corresponding political-economic orientation, expressed via a set of policies that, for the most part, act to advance the interests of dominant classes and class fractions. For the purposes of the typology, I consider a break with neoliberalism to be the formulation and pursuit of a set of political and economic policies that conflict in substantive ways with orthodox goals of deregulation, privatization, and liberalization. While I judge it unnecessary for these programs to amount to a coherent, competently implemented, and theoretically informed vision in order to meet the definition of a post-neoliberal break, I did not include cases where only ad hoc reversals of neoliberal policies have occurred. My contention, essentially, is that a government’s policy program should be considered post-neoliberal if it would have been infeasible under IFI supervision during the pre–commodity boom era.
Of the five types, three are identified as representing this kind of break: the neodevelopmentalist, extractivist-redistributive, and extractivist-oligarchic types. In ideotypical terms, the ND type denotes a state in which the receding power of transnationally oriented fractions of capital has allowed industrial capital to move back to the fore, in a coalition with popular class groups. It is no surprise that the two cases I include within the type, Argentina and Brazil, are two of the Latin American states that saw the most extensive industrialization and growth of urban classes under import substitution industrialization programs during the mid-twentieth century. Though diminished by the withdrawal of state support and the opening of markets during the neoliberal era, a sufficiently large industrial sector endured in these countries to provide the basis for an alternative, post-neoliberal accumulation project under commodity boom conditions. These programs built upon neodevelopmentalist thought developed in Brazil and, to a lesser extent, in Argentina, which sought to adapt the lessons of successful East Asian industrialization to the realities of a globalized economy. Following its decisive break with the IMF in 2002, Argentina was able move more quickly and decisively in implementing its version of neodevelopmentalism, compared to the gradualism seen in Brazil, and so Argentina was used in chapter 5 as the exemplar case for the type.
In many senses, the governments of both Nestor and Cristina Kirchner represented a return to the original Peronist program. State revenues, significantly aided by increasing taxes on booming soybean exports, were redistributed to domestic productive capital via a range of production and consumption subsidies, with some gains also for largely co-opted forces of industrial labor and the unemployed. Devaluation of the peso after the 2002 abandonment of the dollar peg (the centerpiece of previous agreements with the IMF) meant that an already high-productivity soy sector was given a major boost just as Chinese demand for soybeans as feedstock began to take off. The story of Argentina’s impressive economic rebound after 2003 cannot be accounted for, in direct terms, by soy alone, and producers of goods for the domestic market were certainly also aided by the devaluation, which made imports of many consumer goods uncompetitive. The ability of soy exporters to turn a profit even as export taxes rose to levels of 35 percent, however, meant that the government was able to treat the sector much like an extractive industry. The ensuing rents were employed to reduce producers’ energy costs as well as to grow the domestic market via wage increases and transport subsidies.
The limits to this strategy were laid bare in 2008, when an agriculturalist-led mobilization in rural areas led to the defeat in Congress of further export tax increases. Cristina Fernandez de Kirchner’s government then sought to maintain its bankrolling of industrial policy, using a variety of alternative measures, in an effort to avoid reengagement with the IFIs, an outcome which would almost certainly have necessitated abandonment of the neodevelopmentalist model. Direct Chinese involvement, in the form of loans for infrastructure and, latterly, currency swap lines, were undoubtedly of use here. With mounting economic turbulence during the final years of Cristina Fernandez de Kirchner’s administration, however, it was the unorthodox move to use central bank reserves to bridge fiscal imbalances that allowed her government to see out its second term without recourse to the IFIs and, most likely, the renewal of neoliberal conditionality. Though the decision to rely on reserves for this purpose may have been born of desperation, even having this policy instrument available depended upon the swelling of central bank coffers effected by the boom in soy exports, which was caused, in turn, by surging Chinese demand.
The extractivist-redistributive type—which includes Ecuador, Venezuela, and Bolivia—comprises a state with a weak and divided domestic bourgeoisie juxtaposed with relatively strong, if heterogeneous, popular class groups centered on a populist leader. Infighting among local capitalists allowed these populist rulers to gain and maintain power during the commodity boom via nearly constant campaigns of referenda and elections, frequently renewing their mandates and using this legitimacy as a basis from which to undermine traditional elites. In policy terms, an aggressive renegotiation of the state share in extractive revenues or ownership provided the fiscal base for redistribution, infrastructure development, and increased social spending.
Given the leading role played by popular classes, some observers on the left have been disappointed by both the failure on the part of ER governments to move beyond capitalism and the fact that extraction and sale of natural resources on the world market remains the fundamental dynamic of these economies. Certainly, this resource export has brought contradictions, as in Bolivia and Ecuador, where an expanding extractive frontier placed governments in conflict with previously supportive social movements. Nevertheless, capitalism in general should not be confused with its neoliberal form in particular, and labeling any of the ER cases as neoliberal in orientation seems to fall squarely into this trap.
In Ecuador, Rafael Correa’s administration oversaw the funneling of much-expanded oil revenues toward the Human Development Bond payment, which provided $80 per month to the poorest 40 percent of the population. Major public sector initiatives in transport and energy generation, backed by Chinese financing, sparked a boom in construction. Correa was able to implement these plans—as well as measures to disempower unpopular domestic financial groups and a vociferously conservative media—while simultaneously achieving a highly favorable renegotiation of Ecuador’s debts to international creditors. There is every reason to believe that a counterfactual Ecuador, which did not experience a surge in oil revenue, would have remained chronically dependent upon IFI loans. As such, an agenda such as Correa’s would remain beyond the realm of possibility, since, in this scenario, the IMF would retain the ability to engender economic chaos via the withdrawal of credit—a tool which held little force under commodity boom conditions.
The third group that I judge to merit the label post-neoliberal, in terms of political-economic direction of travel, is the extractivist-oligarchic type, which includes Angola and Kazakhstan. In these states, an absence of powerful and autonomous domestic class fractions produced a situation in which the state managers themselves formed the dominant social force, via their control of the external rents that passed through the domestic sphere. Even prior to the commodity boom, state elites in such cases would tend to use their centralized control of rents as a means through which to distribute patronage to various tiers of supporters, thus cementing their rule. During the neoliberal era, a large proportion of the external flows on which this system rested were conditional upon acceptance of neoliberal reforms. With the onset of the commodity boom, however, this was no longer the case, with rising resource rents allowing for an expansion of patronage networks while obviating the need to follow IFI-mandated policy.
In Angola, the exemplar case for the type, decades of civil war meant that, unusually, the country had never fully experienced direct IFI or donor supervision, up to the end of hostilities in 2002. With a dire need to repair public finances in the aftermath of the war, it seemed likely that the government’s resistance to donor demands for liberalization would soon falter and Angola would join almost every African state in agreeing to a PRSP process. The failure of this to occur is often ascribed to China’s entrance onto the scene and the signing of several of the loans-for-oil deals that have become synonymous with Angola. However, as chapter 7 showed, the accelerating rise in oil revenues, which began during the same period, is almost certainly of greater causal significance in explaining the Popular Movement for the Liberation of Angola government’s ability to turn its back on donors and IFIs.4
Without externally imposed policy constraints, Angola’s postwar economic strategy, rhetorically at least, rested upon a pre-neoliberal developmentalist vision of state-led reconstruction and the creation of a national bourgeoisie. These plans mainly existed to justify a highly inequitable distribution of oil-derived patronage to an urban elite. A huge program of infrastructure reconstruction may, in reality, have had more to do with opportunities for predation than with any genuine developmental ambitions. Nevertheless, extensive new road and rail networks were created. Other projects, in agriculture, food distribution, and manufacturing, have apparently failed as developmental initiatives. However, the sheer quantity of oil rent passing through the Angolan economy had the potential to shift elite strategies from sheer plunder and patronage toward accumulation. Here, I draw on the sequence of historical growth of a domestic capitalist class in the Gulf states as a point of possible comparison.
The other two types identified are populated by states that have not moved to break with neoliberalism, despite possessing the natural resource sectors that would have allowed them to do so under boom conditions. I ascribe the three distinct post-neoliberal trajectories in the first three types discussed to differences in domestic social configurations; likewise, I argue that these factors largely explain the maintenance of the neoliberal status quo for the remaining two types. In terms of social forces, however, the first of these remaining types, donor-dependent orthodoxy, is similar to the EO type. I explain the divergence between EO and DDO cases since 2002 in terms of an additional factor: the experience of aid dependence.
In the DDO states of Zambia, Mongolia, and Laos, as in the EO cases, political rulers have long leveraged control of the state—and thus access to the entry point for externally derived revenue flows—in order to support clientelistic rule. Unlike the EO cases, however, in DDO states, aid made up a significant proportion of these patronage resources and was subject to approval by a donor community wedded to a vision of development that was fundamentally grounded in neoliberal principles. As prices for their resource exports rose, beginning in the early 2000s, aid dependence in DDO states correspondingly declined, opening the path for a possible break with the donors’ agenda.
However, with much of the legitimacy of their rule having been cemented through patronage networks built on the distribution of aid flows, state managers in DDO states appeared hesitant to risk the loss of these rents, which continued to provide an important, if diminished, source of income. In contexts where no domestic class forces of sufficient size or organization existed to push state elites into action, there seemed little reason for elites to act to challenge the status quo. EO governments, by contrast, had little to lose from the assertion of policies running contrary to the wishes of donors, from whom they received very little.
The Zambian case is particularly important because, first, it demonstrates that a post-neoliberal turn was certainly possible in a DDO state during the boom years and, second, it shows the significance of organized social forces for pushing through any break that might occur. The Patriotic Front government in Zambia rose to power on the back of a populist campaign, which activated an alliance of mineworker unions, marginalized groups in the Copperbelt, and rural dwellers linked by kinship to the urban core. Although the Patriotic Front drew support with promises of redistribution to these groups, once in government, they declined to pursue any real challenge to the country’s neoliberal direction of travel, despite some individual policy changes that demonstrated the ability to do so. In chapter 8, I contrasted the situation in Zambia with that seen in Bolivia, arguing that less extensive class formation in Zambia led to a failure of the movement behind the PF to encompass popular classes nationwide. As a result, while mineworkers and their Bemba relatives in the north of the country could secure a narrow electoral victory for the PF, they could not form a broad front capable of formulating a comprehensive political vision for the nation as a whole or of pressuring the new government into substantive change.
The final type, homegrown orthodoxy, denotes a domestically driven continuity in policy direction from the preboom years. Encompassing South Africa, Peru, Indonesia, and Colombia, these are states in which the transnationally oriented elements continued to make up the dominant domestic class fraction through the course of the boom. Thus, whereas in other types boom conditions acted to lift externally imposed neoliberal discipline, such conditions had little effect on the trajectories of HO states. In these cases, neoliberalization had been and continued to be driven primarily by domestic forces. In Peru, for example, the government of Ollanta Humala was staffed with a revolving cast of ministers from across the political spectrum, but, subject to pressure from powerful domestic business interests, they maintained the neoliberalizing course that has remained the constant core of Peruvian governments since the shock therapy of Alberto Fujimori.
Turning toward an analysis of current and future scenarios, significant political-economic impacts flowing from commodity price movements are far more likely to be induced, sustained, or undermined by market trends over the medium to long term rather than by short-term fluctuations. This is evidenced by the relative lack of impact upon post-neoliberal turns of the 2008–2009 price “glitch” following the global financial crisis. It therefore seems of little value to examine in detail the kinds of short-run projections that are commonly published in the financial press.
It is worth remembering that price trends do not automatically follow the mechanics of the global economy. The centrality of oil (and, to a lesser extent, of other hydrocarbons) to industrialized production and consumption has made energy resources a major nexus of geopolitical competition, particularly since the heyday of the NIEO in the 1970s, meaning that political and security issues play a significant role in driving price trends. Though other extractives are less fundamental to the functioning of the global economy, it may be that, should sources become increasingly marginal, risky, and scarce, similar kinds of security issues might arise in, for example, copper or rare earth metals, as extraction becomes a “race for what’s left” (Klare 2012). For slightly different reasons, a similar argument applies equally to agricultural sectors, given a rising global population, the threat to arable land posed by climate change, and the increasing use of land to produce biofuels (White et al. 2012; Cotula 2012).
Even if competition for resources does not reach the point at which its main contours become those of geopolitical struggle, some recent assessments agree that constrained supplies are likely to result in prices remaining at relatively high levels for most commodity categories over the longer term (United Nations Conference on Trade and Development 2014, 12; Canuto 2014). Malthusian predictions of the exhaustion of natural resource reserves have proven incorrect, or at least premature, more than once in the past (Economist 2013), as increasing prices have driven various combinations of conservation, substitution, exploration, and technological advancement. Nevertheless, and especially with the looming threat of climate change, shifts in patterns of production and resource use may well see demand for some commodities diminish significantly (as with fossil fuels), while others (such as lithium or nickel, for example) may become much more important.
While all of these factors seem certain to factor into any future scenarios, the depletion of many of the most accessible reserves means expansions now involve the opening of new and expanding of older resource frontiers, giving rise to a pattern of cyclical swings. Essentially, new production takes time to come on line and meet expanding demand, making for a shortfall and increasing prices, before tending to overshoot with a supply glut, reducing prices and making investment less attractive (and thus sowing the seeds for an eventual new round of shortfall in supply). However, many of the deposits that are newly being exploited have very high operating costs for extractive capital, either owing to technical difficulty, as with shale gas and the deepwater pre-salt Brazilian oil reserves, or to political risk, as in, for example, the Chinese-owned Mes Aynak copper mine in Afghanistan (Loewenstein 2015). A 2013 McKinsey study, whose conclusions are broadly in line with recent work by the IMF and UNCTAD, concluded that long-term supply costs (and, indeed, the costs of locating new reserves) seem set to increase across most commodities, even given likely advances in technology and efficiency (Dobbs et al. 2013).5
Although global commodity supplies may become increasingly constrained, it seems likely, though not certain, that demand for many will continue to rise over the medium to long term, if perhaps not at the same rate as experienced during the commodity boom (International Energy Agency 2018). Moves toward renewable energy (especially hydropower and solar) are starting to ramp up, especially in China (Kong and Gallagher 2017). However, China’s consumption of coal—still its most important fuel source—is shrinking slowly, if at all (Hao and Baxter 2019), and the country is still funding the development of coal plants in other countries, alongside financing for renewable energy under the Belt and Road Initiative (Shearer, Brown, and Buckley 2019). Despite a continued reliance on coal, various initiatives are under way in China to shift toward relatively less-polluting fuels, including natural gas (International Energy Agency 2018).
For metals, the IMF model gives a high current income elasticity of consumption, in a sector where China is clearly already the major driver of demand (see tables 10.1 and 10.2). Interestingly, however, there is a predicted divergence in income elasticity of demand among metals as incomes rise and consumption patterns change. If the PRC shifts toward lower relative levels of infrastructure development and more consumer durables consumption—as the IMF (2014b, 37–39) argues has already begun to happen—rising demand for copper and iron ore may level off in favor of higher-grade metals such as aluminum and zinc. Clearly, this may have important consequences in terms of relative gains for different types of commodity exporters and may offer some hope to bauxite/aluminum-producing states such as Jamaica, which to this point have largely missed out on the China-led boom.
Similar trends are already evident in agriculture. Part of the reason for including soy along with minerals and fuels in earlier chapters’ analysis is the relatively larger price effects of Chinese demand here when compared to other agricultural commodities. Chinese soy consumption is linked to a move toward intensive livestock (particularly pig) farming in order to meet demand for meat as food preferences change with rising incomes (Hansen and Gale 2014). The notion that China has led a “land grab,” buying up arable land in Africa and elsewhere for the purposes of domestic food security, seems to be overblown (Brautigam and Zhang 2013). Nevertheless, with major environmental problems in China, including desertification of fertile land, import demand for food commodities, particularly of protein sources, might well produce a level of impact for certain agricultural exports similar to that seen since 2003 in soy and hard commodities.
As was detailed in chapter 5, soy industries such as those in Argentina and Brazil are, from the point of view of a state, somewhat similar to natural resource sectors in terms of the potential for revenue capture. Even with a major boost to price levels, state retention of a large proportion of the surplus from most other kinds of agricultural exports may prove more difficult, given the greater prevalence in the global South of labor-intensive production dispersed among smallholders or relatively large numbers of individual farmers. It is certainly possible that the spread of industrialized agriculture may alter these variables significantly, though this would be difficult to manage without causing widespread dispossession and unemployment. Another possibility would be a return to something along the lines of the agricultural marketing boards seen in many Southern states during the developmentalist era, which acted as monopsony buyers for export commodities and used this position to save revenues toward development projects.6
Overall, in terms of future demand for commodities within the PRC, most of the IMF, International Energy Agency, World Bank, and UNCTAD projections have been based upon the assumption that Chinese GDP growth will continue broadly within its post-slowdown “new normal” (South China Morning Post 2016) range of perhaps 6 to 8 percent per year until 2030. The accompanying, rather breathless list of postulated implications—a jump from seventy-five to six hundred cars per thousand people by 2030 (Clemente 2015), 1 billion urban dwellers by 2030 (Economist 2014), two hundred new cities with populations between 1 million and 5 million—would perhaps seem highly dubious, had the record of Chinese development in past decades not produced change at a similarly implausible pace. Nevertheless, with the impact of a U.S.–China trade war and a generally slowing global economy, the IMF has revised down its growth projections for China, to around 5.5 percent per annum by the middle of the 2020s (International Monetary Fund n.d.). All of these efforts are necessarily somewhat speculative, but given China’s present weight within the global economy, even a scenario of slower growth in the PRC would seem to suggest rather momentous future requirements in terms of infrastructure, transport, and household consumption, particularly when the Belt and Road Initiative is added to considerations.
In the most direct sense, BRI projects provide a way to absorb at least some of China’s surplus production of steel, cement, and other inputs. But since the BRI is not a single blueprint but an umbrella term under which new projects may continually be proposed and added, it is extremely difficult to come up with reliable estimates of the total financing or the extent of infrastructure development that will eventually be involved (Cai 2017; Dollar 2018; Chin and Gallagher 2019). This is doubly the case when one considers political uncertainties, as there has been considerable controversy in some BRI states around the costs of agreed projects as well as fears of growing Chinese influence (Soeriaatmadja 2019; Mundy and Hille 2019).
Major BRI investments such as the China–Pakistan Economic Corridor (which connects the western Chinese city of Kashgar to the Arabian Sea and includes roads, rail, a gas pipeline, telecom links, dams, and coal power plants) are to a large extent designed to “crowd in” further investment from both Chinese and other sources. As such, the impact of BRI on commodity markets will depend to a significant degree on how far such planned megaprojects are able to stimulate overall development, both in the countries concerned and in more peripheral parts of China to which they are connected (Cai 2017). Related to that possibility, though not entirely dependent on it, is the question of whether rapidly growing economies other than China’s, especially in South and Southeast Asia, might provide a new engine of growth for the global economy, particularly if the Chinese miracle should finally falter. While it seems clear that, as far as commodities go, there is no new China, robust demand from India and other large states, such as Indonesia, could help to ensure that commodity prices do not decline back toward preboom trends, at least (Humphreys 2018).
Nevertheless, as Hung (2008, 150) reminds us, “the experiences of Japan plunging into a decade-long crisis right at the peak of the ‘Japan as No. 1’ talk and the outbreak of the 1997/1998 Asian financial crisis in the middle of the widely envied ‘Tigers miracle’ do remind us of the plausibility of abrupt, unexpected turnabout of a booming economy.” In China’s case, perhaps such a turn of events would not be entirely surprising. Writing before the 2008 crash, Hung identified the factors that, to this day, leave China vulnerable to economic crisis: a disjuncture between high levels of investment and low levels of consumption, with excess capacity met only through the continued growth of export markets. Before 2008, a symbiotic though dysfunctional relationship between China and the United States powered both Chinese and global accumulation, as expanding production in the PRC was soaked up by a credit-fueled consumer boom in the United States. The other side of this huge trade imbalance was the continuing purchase of U.S. Treasury Bills on a massive scale, underwriting the dollar’s hegemonic position and essentially allowing the U.S. government to continue operating without any serious balance of payments constraint (Hung 2013).
In the wake of the 2008 crisis, recession in the United States, and in the global North more generally, effectively meant that one half of this cycle temporarily ceased to function. The Chinese government’s response was to plug the loss of export markets through a huge stimulus package of infrastructure development, cheap credit, and industry restructuring, equivalent to 12.5 percent of GDP (Naughton 2009). This led to a surge in resource imports, which was largely responsible for the quick rebound of global commodity prices following the crash. Annual Chinese GDP growth was duly maintained above 9 percent from 2008 to 2011, though at the cost of deepening the contradictions already evident in the growth model by further widening the tendential gap between overinvestment and underconsumption, with no guarantee of a return to business as usual in export markets (Breslin 2011a).
Much of the stimulus was earmarked for regional authorities’ use on construction projects of various kinds (Naughton 2009). Unusual financing arrangements mean that Chinese regions tend to rely to a great extent upon the sale of long-term land leases to balance budgets, and they increasingly use an unregulated shadow banking sector (Breslin 2014). Some argue that the construction boom has not, overall, misallocated resources on the grand scale that is often alleged or created the apparently useless ghost cities that have often featured in Western media reports of recent years (Anderlini 2014; Reuters 2015). But, more broadly, there can be few doubts about the vulnerabilities inherent in China’s extraordinary credit boom, which a 2018 IMF paper cited as one of the largest, and certainly the longest, on record (Chen and Kang 2018). According to the same article, it took three times as much credit in 2016 as it took in 2008 to achieve the same amount of growth, as new loans are used to repay existing debts and it becomes ever more difficult to find destinations for productive investment.
However, the PRC is less vulnerable to full-blown financial meltdown than many other states, principally because of its enormous currency reserves, capital controls, and state ownership of the banking sector. While this means that the government has ample capacity to prop up the financial system for the foreseeable future, the ability to keep “kicking the can down the road” in this way has drawn comparisons to Japan, where, after the bursting of a speculative bubble in 1989, the government continued to prop up “zombie” banks and firms, moves which are often seen as a major contributor to Japan’s subsequent stagnation (Krugman 1998; Yao 2018).
Whether a crash occurs in China or not, the notion that comprehensive rebalancing away from exports and toward investment in domestic consumption is necessary to the long-term health of the PRC’s economy has become a major theme of non-Chinese media coverage and is clearly also a preoccupation of the current leadership (Heydarian 2015). As Breslin (2013) points out, the crux of the problem has been understood in domestic policy circles for some time, first being raised after the late 1990s Asian financial crisis. Efforts to effect systemic change have been piecemeal, though they do point toward means by which the party leadership may be able to change course. For instance, in the mid-2000s, rural taxes were lifted and the government purchase price for agricultural products increased, easing the pressure on the countryside and, in turn, slowing the flow of rural–urban migration, which had been the foundation of the low-wage manufacturing economy (Zhan and Huang 2013). The result was a modest increase in wages, though any more ambitious plans toward rebalancing that may have existed at this point were shelved in the face of the 2008 crash.
Powerful coastal interests have, it seems, repeatedly acted to slow or stymie any reforms that might undermine the export industries from which they benefit (Breslin 2014; Hung 2008). More broadly, though, any significant reorientation is likely to be a slow and complex process (ten Brink 2014), and it risks unpicking the threads upon which China’s impressive growth record (and, with it, a major source of legitimacy for the Communist Party) rests. Given reports of localized but persistent social unrest (Zhou and Banik 2014), the unemployment that may result from rebalancing is a serious concern for the leadership. Similarly, current high levels of household saving are induced by the lack of social provision on the part of the government. This is despite very low (and often negative) real interest rates, which have effectively meant a massive subsidy from households to the banking sector (Breslin 2014). Thus, it would seem that shifting to a consumption-based growth model would require major—and no doubt, in the short term, painful—structural change across the whole economy.
Switching focus once again to the longue durée, the major contradictions evident in China’s accumulation path do not necessarily point toward its exhaustion, even should a major crash occur. It is worth remembering that, in Arrighi’s schema, such crises, while by no means given, are likely to crop up in rising centers of accumulation that develop, to some extent, outside the full constraints of the prevailing regime of accumulation. In such cases, a period of breakneck, reckless growth terminates in crisis, but this does not significantly affect the rising economy’s deeper-rooted positional advantages, which arose from the contradictions of the prior regime and made the original burst of accumulation possible (Arrighi 2010). On previous, similar occasions, such as the Wall Street crash in 1929, crises in ascending powers have tended to force a search for structures within which growth might be reestablished and stabilized.
It is of course obvious that today’s global economy differs in very many respects from that seen on the eve of the Great Depression. For China, in particular, a closer analogue may well be with the position of the United States toward the close of the nineteenth century. It is a country in the midst of a period of rapid industrialization and on the verge of becoming the world’s largest single economy, though still clearly struggling with apparently anachronistic institutional forms and occupying a subordinate position within global structures centered around an existing hegemon.
Among the many distinctions between today’s China and the United States of the Gilded Age, perhaps one of the most consequential for the rest of the world is the different level of external political–economic linkages seen in the two rising powers. One of the foundations of the rise of the United States in the late nineteenth century lay in its large and relatively autonomous domestic market, fed by raw material inputs largely sourced within the United States or in neighboring countries (Wright and Czelusta 2004; Bonini 2012). The fortunes of a rising China, by contrast, have been intimately linked with the quest for export markets and, increasingly, by the need to source primary commodity inputs from all corners of the globe.
Given the scale of China’s globalization, even while at still relatively low levels of per capita GDP, speculation about the prospects for Chinese hegemony, collapse, or deceleration is not required in order to demonstrate the profound disruption that the PRC has already produced in the structures of the world economy. This book has provided evidence of the scale of this phenomenon, which loosened previously solid transnational constraints and, through shifting the entrenched patterns of global commodity markets, afforded natural resource–exporting states of the South a level of freedom to define their own development strategies—a degree of freedom which most had not enjoyed in decades. Without the rise of China, such autonomy would have remained a distant mirage.