There is a strong case to be made that the rise of China is the most important political-economic process of the late twentieth and early twenty-first centuries. A country which is home to around one-fifth of the world’s population has doubled its gross domestic product (GDP) every seven to eight years since the beginning of Deng Xiaoping’s reforms, in 1978. In that year, China’s economy was smaller than that of the Netherlands, in current U.S. dollar terms (World Bank, World Development Indicators). By 2017, it was the second only to that of the United States and was two and a half times bigger than that of Japan. In recent years, however, it has become increasingly clear that the consequences of an ascendant China’s externalization may be of even greater significance than its remarkable domestic transformation. A now well-established literature has pointed to a crucial (though perhaps dysfunctional) symbiosis between the U.S. and Chinese economies as well as China’s growing influence in various parts of the global South, as investor, trading partner, and creditor. Excited media reaction to these developments has portrayed China as anything from a new champion against the neocolonial designs of the United States to simply the latest (and most rapacious) manifestation of imperialism (Mawdsley 2008; Telesur 2015; Larmer 2017).
Most serious studies, of course, provide a more nuanced account of China’s return to global prominence and its implications for development in the rest of the South. Nevertheless, with some important exceptions, a majority focus on the impact of direct relations between the People’s Republic of China (PRC) and particular states or regions (Brautigam 2009; Gallagher and Porzecanski 2010; Fernandez Jilberto and Hogenboom 2012; Glassman 2010), whether in terms of loans, investments, trade, geopolitics, or migration (French 2015; Brautigam and Gallagher 2014; Mohan and Lampert 2013; Large 2013). In contrast, this book examines the impact of China’s rise on the shape of the world economy as a whole. China has restructured some of central processes that power global capitalism, producing profound consequences for those states whose developmental prospects depend upon the functioning of these circuits. Nowhere is this strengthening of China’s gravitational pull more evident than in commodity markets, and for this reason, this is where the book’s focus lies.
The principal argument is that, over the period 2002 to 2013, such China-driven disruption to the structures of commodity markets shifted the circumstances of insertion into the global economy for dozens of Southern natural resource–exporting states. Ballooning Chinese import demand for a range of metals and minerals was the primary driver behind a boom in prices, which presented Southern resource exporters with access to significant new flows of revenue, largely under the discretionary control of their governments. In turn, this loosened the disciplinary power exercised by the international financial institutions (IFIs) and global capital markets and provided states with a level of policy autonomy that allowed (but did not compel) them to substantively break with neoliberal economic orthodoxy for the first time in a generation.
Despite the PRC’s relative abundance of domestic resources, after around 2002, the import demands of an ever-expanding economy reached the point where they began to have a major impact upon global markets across a range of commodities, especially in the metals and energy sectors. More than any bilateral links of trade or finance, it is here that China’s rise has had the most profound effect upon the global South and, arguably, upon the global political economy as a whole. With China in the driver’s seat, the longest and most pronounced commodity boom in a century transformed developmental prospects for exporters of these products. As demand rose amid constricted supply, governments found themselves in a much-improved bargaining position with transnational resource firms, facilitating their appropriation of a larger proportion of the extractive surplus via taxes, royalties, or ownership. Where states moved to press these advantages (and it should be noted that not all did), a larger slice of an expanding revenue pie meant the securing of a large new fiscal resource, substantially lessening or entirely negating the need for engagement with IFIs, Organisation for Economic Co-operation and Development (OECD) donor countries, or global capital markets—the three main transmission belts of neoliberalizing policy discipline.
Largely freed from such constraints, and with burgeoning national accounts, these states possessed the autonomy to pursue nationally defined development models. In some cases, such as that of Ecuador, much of the resource surplus was directed toward redistribution. In other countries, such as Argentina, programs that recalled earlier developmentalist strategies, favoring domestic industrialists, were attempted. Angola’s government funneled its oil wealth into massive reconstruction projects, which blurred the lines between elite predation and nascent accumulation. Finally, other states—for instance, Zambia or Peru—did not experience any definitive break, as dominant elites (whether capitalists or state managers themselves) saw no reason to shift course. Crucially, however, in all these states and several more, political-economic strategy throughout the boom years was set domestically and was no longer circumscribed from without.
Though there are several twentieth-century examples of economic ascent comparable in speed to the rise of China, it is the combination of scale and rapidity that marks the latter as uniquely significant in world history (Coates and Luu 2012). The growing global strength of China, and a rising South generally, has, since the beginning of the century, led various observers to contrast a dynamic PRC with a United States in apparent decline (Wallerstein 2003; Jacques 2009; National Intelligence Council 2012, 2017; Rachman 2016). To some, the U.S. position looked threatened, even in the early to mid-2000s, with the wars in Iraq and Afghanistan, spiraling debt, and heavy dependence on China—and other “Asian drivers”—as creditors and as markets (Kaplinsky and Messner 2008; Arrighi 2007; compare to Hung 2008). The global financial crisis of 2008 to 2009 and the related European debt crisis which followed served to speed up the sense of a changing balance of economic power, with the GDP share of emerging and developing economies having exceeded that of the advanced economies for the first time in 2007, and with China becoming the world’s largest economy, at least in terms of purchasing power parity, by 2015 (International Monetary Fund n.d.).
Though an increasing number of states aspire to emerging power status, the sheer heft of China’s rise, its thirst for imports, and its huge currency reserves has given it a far more significant role than any of the other Southern nations as an actor and investor in the developing world, something which has not escaped scholarly attention. Literature that addresses the global significance of China’s rise has been slower to arrive than studies focused on regional interactions, though some important steps have been taken in the former direction (Arrighi 2007; Frank 1998; Hung 2009, 2016) and recognition of the distinctive features and potential impacts of China-centered globalization is growing (Pieterse 2011; Henderson 2008; Henderson, Appelbaum, and Ho 2013; Bonini 2012; Jenkins 2018). My intention here is to build upon this work by giving a more detailed delineation of the recent and potential future developmental implications of China’s rise, couched in terms of a world-historical perspective, which can incorporate both a theoretical sense of how change occurs at the global or systemic level with an empirical investigation of the uneven and particular national manifestations produced by, and in reaction to, these broader shifts.
Commodity markets and the states that supply them are my chosen focus, since it is here that China’s transformative impact on the world-system and the developmental fortunes of the South has been most obvious to date. No claims are advanced as to the future directions of these relationships. However, illustrating the connections between Chinese ascendancy and the commodity boom (and then, in turn, the boom’s political-economic implications for resource exporters) may serve as a demonstration of larger potential shifts to come, should the PRC continue to develop at anything like the pace of recent decades.
In this regard, it is now widely, if not universally, thought that China’s continued economic development depends upon navigating a process of rebalancing—of shifting away from currently high levels of export and investment dependence toward a larger role for domestic consumption (Yang 2014; Pieterse 2015), a topic that has been on the agenda within China for longer than many appreciate (Breslin 2011a, 2011b). Taken together with a somewhat slowing GDP growth rate (from an average of 8.9 percent in 2010–2013 to 6.9 percent in 2014–2018), the force China exerts on commodity markets is unlikely to continue to strengthen at the pace that was observed over the boom years. Nevertheless, the fate of many of these markets is now tightly bound to that of China, which at this point is the world’s number one energy consumer and oil importer and accounts for more than half of world metal consumption (Enerdata 2018; World Bank Group 2018a). Economic growth in the PRC is more resource intensive than in most other countries and will likely continue to be so, even if resource intensity declines, as is expected with efforts to rebalance and improve efficiency (Crowson 2018; Humphreys 2018).
At this point, it remains to be seen how successful China’s efforts to grapple with rebalancing and reducing emissions will be, leaving future trends in commodity prices very much uncertain. It may be that other large Southern countries are able to pick up the baton in terms of driving demand, though India, for example, currently has a much less energy- and materials-intensive economy than China’s, at a comparable level of GDP (Humphreys 2018). A recent World Bank study focusing on China as part of an “emerging market 7” group of developing states projects a baseline scenario to 2027 in which global metals demand continues to grow, albeit somewhat more slowly than in recent years, while energy demand growth is maintained at similar rates (Baffes et al. 2018). Of course, these states, and the rest of the world, will need to plan their development around a need to limit carbon emissions to avoid catastrophic climate change, which may have significant negative consequences for fossil fuel markets in particular (International Energy Agency 2015).
Some evidence suggests that the well-beaten path to development, which relies on the growth of manufacturing industries, is becoming much more difficult to traverse (Rodrik 2016). If this is the case, then it may call into question some important commonplace assumptions about how development can be achieved—and may make natural resource sectors even more significant. The hypothesis formulated by Raul Prebisch (1949) and Hans Singer (1950), which posits that, over the long run, prices for commodities will continue to decline relative to prices for manufactured goods, is a key plank in the established wisdom that manufacturing constitutes a much more promising basis to foster development and growth.1 This trend, though, went into reverse during the boom, and, as of 2016, commodity terms of trade, overall, remained better than at any time from the early 1980s until the boom (Farooki and Kaplinsky 2013; Geronimi, Anani, and Taranco 2017). Figure 0.1 illustrates the trend for four metals (copper, aluminum, zinc, and lead), showing that, for all except aluminum (a special case, which is discussed in more detail in chapters 1 and 9), gains since the early 2000s have been historically exceptional—and prices remain considerably higher than in the two decades prior to the boom.
While it is too soon to tell whether such a situation is likely to endure, this apparently gloomy outlook for manufacturing and promising conditions for some commodities have prompted a serious effort to consider how to best use extractive industries in support of diversification and industrialization, especially in the African context (Morris, Kaplinsky, and Kaplan 2012; Morris and Fessehaie 2014; Corkin 2012; Tordo et al. 2013; Ovadia 2016). This literature has grappled with some of the problems common with reliance on resource-powered growth, in that such sectors tend to be rather “enclavic” in nature. That is, they often create few jobs and operate as part of value chains in which most upstream activities (such as the manufacture of machinery) and downstream activities (such as processing and distribution) are undertaken in other parts of the world, leading to very few positive local impacts beyond the generation of revenue from extraction itself. In response, the literature recommends “local content” policies under which, as far as possible, backwards and forward linkages are created between the resource industry and the local economy—by, for example, stipulating minimum quotas for the proportion of goods and services to be supplied by domestic firms.
Figure 0.1 Terms of trade for selected metals versus manufactures, 1960–2016. Calculated from CEMOTEV “Primary Commodities” Access.
This book, however, is not principally aimed at identifying and mapping out the precise policy mix that resource-rich states ought to employ to make a success of their development. Nor is this a book about the “resource curse” thesis, which comes in various flavors but in most versions posits resource wealth as a developmental pathology, encouraging corruption and profligacy on the part of state elites (Auty 2002; Sachs and Warner 1995; Karl 1997; compare to Schrank 2004; Rosser 2007). The use and misuse of resource wealth—and strategies to maximize its developmental benefits—will certainly play an important role in the case studies presented in chapters 5 through 9. However, the main aims of this book are, first, to demonstrate the way in which the pull of Chinese commodity demand created the conditions for policy autonomy among resource-exporting states; second, to explain why, for better or worse, some of these states took advantage of their new circumstances to make a substantive break with neoliberal policy orthodoxy, while others did not; and third, to map out what I identify as five distinct patterns of policy response to the boom (three that involve a break with neoliberalism, two that do not), each corresponding to a particular complex of domestic forces, which can be categorized into five ideal types. In short, this is not, in the main, a book about which states succeeded and which failed in turning the boom to their developmental advantage, but about the nature of the forces—first at the global level and then at the local level—which created the space for the various attempts to do so.
My argument consists of two main claims. Claim A is derived from a view of the rise of China that is couched in a world-historical perspective and traces a path of causation from PRC industrialization and spiraling demand for resources to the disruption of world commodity markets, which in turn engenders change in the global structural conditions that constrain developmental possibilities among indebted resource-exporting states in the global South. Claim B entails a jump in scale to examine the ways in which national processes, actors, and structures respond to these shifting global conditions as they appear within the domestic sphere of resource-exporting countries.
Claim A. For states in the global South with substantial levels of public debt, a high export concentration in point-source natural resources (particularly fuels and minerals), imported in large and growing quantities by China, was a necessary but not sufficient condition for a break with neoliberal policy orientation during the years 2002 to 2013.
Claim B. For each resource-exporting state, whether such a break occurred—as well as its form and direction—depended primarily upon the dynamics of its domestic state–society relations.
The logical steps that underpin claim A are as follows:
1. Chinese demand was the principal force behind the commodities boom of 2002 to 2013.
2. Price increases were most significant in the metals, minerals, and fuel sectors, which can be linked to the profile of Chinese commodity demand and the nature of global supply constraints.2
3. High commodity prices tended to significantly improve resource-exporting states’ fiscal and current account balances through increased sales and higher returns (and thus increased tax revenue) per unit.
4. Higher prices and constrained supply also made extractive industries more attractive for investment, even in regions previously ignored because of difficulties and high costs in extraction, poor infrastructure, or political instability. This strengthened the bargaining power of Southern governments relative to extractive firms and opened up the possibility of their retaining a greater percentage of the surplus from extraction. This was accomplished in many states by full or partial nationalization, joint ventures between parastatals and multinationals, or higher proportions of royalty and taxation revenues per unit on extracted products.
5. Governments that acted to maximize their resource revenues in this way saw markedly improved fiscal and balance of payments environments, ameliorating the need for engagement with IFIs. This effect was likely enhanced by the prospect of new investment and loans from China and other emerging economies, allowing governments to achieve better terms on loans and aid by triangulating between creditors and investors, both old and new.
6. This new fiscal space allowed governments of resource-exporting states to reject pressures toward neoliberalization—whether applied directly, via IFI and donor conditionality, or indirectly, via the preferences of global capital markets—and to adopt their own policies and national development strategies, which in many cases made for a substantive break with neoliberalization.
7. Not all resource-exporting states reacted to these new conditions by making such a break—meaning that natural resource exports were a necessary but not sufficient condition for this kind of shift. Reasons for this variation among resource-rich countries are taken up in the latter chapters of the book.
8. The argument for resource exports as a necessary condition for breaking with a neoliberalizing trajectory applies mostly to Southern states with high levels of public debt at the start of the boom, since these states were most dependent upon IFI loans and aid and therefore were most exposed to neoliberal discipline via the imposition of policy conditionality. States in the global South that have remained relatively debt free are likely to possess more leeway to autonomously set policy (as in the case of China itself).
9. Highly indebted Southern states that are not resource exporters, such as those that rely on exports of manufactured goods or agricultural products, did not experience these export price effects and so, all things being equal, will not have had any opportunities to move away from neoliberalism. One exception here is the special case of soybeans, which will be explored in chapter 5. Several agricultural commodities did experience a China-driven boom, to varying extents. But soy is the only one in which both the scale of impact and the particular structural features of the sector made it comparable to metals and fuels in terms of potential for generating policy autonomy.
Chapters 1 to 3 mainly concern claim A and aim to establish the theoretical and empirical basis for the steps outlined here. In first place, claim A relies upon the argument that commodity prices were substantially higher during the boom than in preceding decades and that this phenomenon was mainly due to rising Chinese demand. Chapter 1 looks at this claim by examining trends in China’s industrialization and resource consumption, together with patterns in global commodity markets. The chapter also frames China’s rise in a world-historical perspective, adopting Giovanni Arrighi’s secular cycles of accumulation model as a lens through which the context of Chinese development and its consequences for the rest of the global South might be understood.
Having established the framework of overlapping cycles of global accumulation, chapter 2 applies this schema to trace the fortunes of resource exporters, and of Southern states more generally, through successive regimes of accumulation since the colonial era. I detail the features of the developmentalist consensus following World War II, under which Southern states exercised a degree of autonomy in setting developmental strategies and priorities behind walls of national regulation. I then discuss the circumstances leading to developmentalism’s replacement by neoliberalism, which differed from the previous regime in attempting to regulate national political economies within far more constrictive parameters of liberalization.
For states that had become highly indebted during the 1970s—many resource exporters prominent among them—IFIs and international donors acted as the avatars of neoliberalization, pressuring for policy reform in exchange for loans and aid. Structural adjustment programs (SAPs) formalized these liberalizing constraints, which persisted (later in modified form, as Poverty Reduction Strategy Papers, or PRSPs) for as long as indebted states relied upon continuing lifelines from IFIs and donors. This sequence sets the scene for the onset of the commodity boom and claim A, where a hypothesized return to conditions of relative national autonomy appears to have been produced among hard commodity exporters by the fiscal consequences of the rise of China. Speculatively, it may be possible that these processes are merely one of the first indications that a larger reorientation of the global political economy is afoot, perhaps even of the same magnitude as that which produced the shift from Fordism–developmentalism to neoliberalism in the 1970s.3 I return to these questions in the conclusion.
Chapter 3 assesses the merits of claim A through an application of the qualitative comparative analysis (QCA) Boolean analysis technique. QCA is a means of maximizing both the number of cases and the number of comparisons which can be made between cases, while maintaining a case-based approach that allows for an examination of each state in its own right (rather than a series of data points). Following a brief summary of the QCA process (which is discussed more extensively in the appendix), I then show that the findings support claim A—that a high export concentration in natural resources is a necessary condition for a break with neoliberalism on the part of a given Southern state. I also find that an absence of dependence on aid and concessional loans from OECD donors, or official development assistance (ODA), is a second necessary condition for this outcome, a theme I pick up again in chapter 8.
Chapters 4 through 9 explore the arguments around claim B, which states that whether a break with neoliberalism takes place—and the form and direction of any post-neoliberal turn that does occur—depends primarily upon the nature of relations between the state and social forces in a given country. I use this proposition as the basis for the formation of a typology of political-economic trajectories observed in resource-exporting states under the conditions of the commodity boom, which I introduce in chapter 4, before devoting a separate chapter to each of the five identified types. My concern is less with which of these possible paths may be better or worse for the countries in question than with mapping out their directions and how they came to be taken in the first place. The arguments that underpin this formulation are as follows:
1. Flowing from the consequences of claim A, highly indebted resource-exporting states in the global South have, since the beginning of the commodity boom, possessed a newfound ability to reorient their political-economic trajectories away from neoliberalization in pursuit of nationally defined development strategies. Any such shift depends upon successful efforts by the state to increase its share of extractive revenues, thus equipping itself with a substantial fiscal resource (and, often, hard currency reserves) that is independent of IFIs, donors, or capital markets.
2. During the neoliberal era of the 1980s and 1990s, the structural power of transnational forces acted to substantially shape and constrain both political-economic decision-making and the range of possible interactions among domestic social forces in Southern resource-exporting states. This is not to deny a role for local actors in struggles over the pace and form of neoliberalization, but it is an argument for pervasive parameterization toward neoliberal outcomes by IFIs, donors, and capital markets.
3. In effect, the autonomous fiscal resource provided by increasing state revenues from commodity exports may be employed as a kind of “force field,” behind which domestic groups and configurations thereof struggle for ascendancy, free from the overriding structural leverage of transnational forces.4
4. The nature of the social group(s) able to gain political ascendancy in a given national space and to influence the flow of resource revenues to their own benefit will determine whether any break with neoliberalism occurs—and the direction it takes if it does.
5. Where productive and nationally oriented domestic capital gains primacy, a post-neoliberal settlement that directs extractive surplus toward these groups is likely, producing a model with some similarities to the developmentalist projects of the post–World War II era, though with adjustments for the fact that multilateral economic regulation retains its neoliberal features. I label this configuration the neodevelopmentalist type (chapter 5).
6. Where movements based on popular class coalitions are able to win control of the state, the result is not a rejection of capitalism but a more favorable settlement with transnational extractive capital, with a significant proportion of extractive rents funneled toward social spending of various kinds and something of a move away from neoliberal regulatory forms. This trajectory is designated as the extractivist-redistributive type (chapter 6).
7. In cases where no large and autonomous local business class exists, reaction to the opportunities provided by the commodity boom depends principally upon the actions of state elites. Two distinct trajectories may result.
First, in those states where political elites are not influenced by a legacy of dependence upon flows of aid, state managers will be less cautious in attempting to control and allocate larger quantities of resource rents. In such cases, which in some respects resemble the rentier state model, rent-seeking and predation may be prevalent, but this does not rule out the operation of circuits of accumulation as a consequence of the level of resource revenue flowing through the global economy. This is the extractivist-oligarchic type (chapter 7).
In the other type of state-led case, a form of neoliberalism driven by the priorities of donor agencies will persist where political elites’ power has historically been built upon a web of patronage flowing through the state from international aid, loans, and nongovernmental organization activities. Here, state managers will be reluctant to risk these relationships, which have to this point provided the material basis for their rule. This is the donor-dependent orthodoxy type (chapter 8).
8. In those states where a domestic capitalist class fraction with extensive ties to transnational (particularly Northern) capital attains or retains dominance, neoliberalism will persist, in line with the interests of this domestic–transnational alliance. This I call the homegrown orthodoxy type (chapter 9). Chapter 9 also considers the important case of Jamaica, an exporter of bauxite (the raw material used to produce aluminum). Because China, over the boom years, was able to meet a large proportion of its bauxite and aluminum demand with domestic sources, the aluminum market did not experience the same boom conditions as was seen with other metals. Jamaica thus serves as a counterfactual case, demonstrating that the key condition enabling breaks with neoliberalism was not natural resources per se but a natural resource sector that experienced a surge in import demand from China.
Chapter 10 concludes by placing China’s rise in the context of the longue durée, as a means of assessing its significance alongside other historical shifts in the topography of global capitalism and of pointing to possible future directions. Clearly, there is absolutely no guarantee that the PRC’s long run of rapid growth will continue, and predictions of a so-called hard landing have become increasingly common in recent years. In the short to medium term, China faces worries over stock market turbulence and the inflation of a real estate bubble. On a longer timescale, the task of rebalancing the PRC’s economy toward a domestic consumption–driven model seems more pressing than ever, though this involves multiple challenges. Should the current leadership or its successors succeed in squaring this circle, or in finding alternative means of sustaining rapid accumulation—massive infrastructural investment abroad appears to be a key new strategy—it seems likely that the processes highlighted in this research would constitute simply the first stirrings of a pervasive disruption to the circuits of capitalism across the world-system.
Even so, given the various barriers that lie ahead, it would be premature to assert that China will continue to grow at pace, pulling commodity exporters—and perhaps others—along in a manner that would foster their policy autonomy and bankroll their development strategies in the long run. As of 2018, with prices having softened in the past half decade, several natural resource exporters are finding themselves once again in need of external financial assistance—and once more exposed to the discipline of donors and IFIs. Nevertheless, China’s pivotal role in the longest and largest commodity boom since the nineteenth century has established that resource exporters now depend upon this new pole of the global economy not just for markets or investment capital but also for their very ability to set policy independently of Northern demands.