Money and Power: Great Predators in the Political Economy of Development (Third World in Global Politics) - Softcover

Bracking, Sarah

Softcover

ISBN 10: 0745320112 ISBN 13: 9780745320113

Publisher: Pluto Press, 2009

Synopsis

Sarah Bracking explores the role of governments and development finance institutions in managing the markets in which the poorest countries operate. These institutions -- the 'Great Predators' -- are trapping the populations of the south in a permanent cycle of austerity.

Bracking examines the political economy relations between states. She shows how pseudo-public 'development' institutions retain complete economic control over Southern markets, yet the international system is itself unregulated. Operating in the interests of North America and the European Union, they have a political purpose, and yet serve to cloud the brute power relations between states.

This book will be of interest to anyone studying debt and development, global financial institutions, and the way the world economy is regulated and governed.

About this title

About the Author

Sarah Bracking is a Senior Lecturer in Politics and Development at the University of Manchester. She is the editor of Corruption and Development (2007) and a member of the Review of African Political Economy editorial working group.

Excerpt. © Reprinted by permission. All rights reserved.

Money and Power

Great Predators in the Political Economy of Development

By Sarah Bracking

Pluto Press

Copyright © 2009 Sarah Bracking
All rights reserved.

ISBN: 978-0-7453-2011-3

Contents

Abbreviations, ix, 
Preface, xiii, 
1. The political economy of development, 1, 
2. Money in the political economy of development, 17, 
3. Making markets, 35, 
4. International development banks and creditor states, 53, 
5. The British market makers, 66, 
6. Poverty in Africa and the history of multilateral aid, 92, 
7. Derivative business and aid-funded accumulation, 111, 
8. Private sector development and bilateral interventions, 140, 
9. Taking the long view of promoting capitalism, 159, 
10. Aid effectiveness: what are we measuring?, 181, 
11. Conclusion, 196, 
Bibliography, 214, 
Index, 233, 

CHAPTER 1

The political economy of development

Every day tens of thousands of workers and 'beneficiaries' toil to make development happen: to feed hungry children, to vaccinate against disease, to build schools, roads and airports, to promote good governance and civic education, and to do a host of other activities on an ever-increasing list. Development competes with the great religions of our time, motivating and disciplining, providing moral leadership and proving a clarion call against the neglect of the poor, diseased and incapable. As a social project it carries all the great meanings of the modern age, from the Enlightenment to now, of human progress and the civilising mission of human intervention. After the eclipsing of the socialist project in the early 1990s, it has also become a harbour and home for radicals of all persuasions, and has provided activities for well-meaning people more generally, who care about the welfare of others, to work, volunteer or donate their money for the greater human good. In short, the common view of development is of a 'great collective effort to fight poverty, raise standards of living and promote one or other version of progress' (Ferguson 1990: 9). In this view progress and 'modernisation' will be the result of all this human effort, because '"win-win" solutions are available to development problems and an inclusive and globalising market economy contains no intrinsic obstacles to a better life for all' (Mosedale 2008: 21).

But an alternative view also exists, where the collective efforts of the mass of development workers can be blighted by relations of power in society. The privileged and wealthy, in short, may not want to give up their position, or share global resources more equitably. This is particularly the case when it comes to those development interventions which affect the economy directly. That is to say, even the wealthy may support greater childhood vaccinations and pay a charitable contribution to see that happen, but will resist a large-scale rise in their taxes. This confirms the gift as a palliative at most, within a global social and economic system which constantly reproduces marginality and destitution: just as one child is helped, another, or two or more, becomes vulnerable. In this view continued poverty is produced by an imperialistic relation between the centre of the global economy and the edges, or periphery (Ferguson 1990: 13), and this imperialist relation is part and parcel of capitalist development (Bernstein 2005: 118; reviewed in Mosedale 2008: 21). This book is in the second tradition. It goes further than is normal practice, however, in explaining the intimacy between the development industry and the promotion of capitalism, through detailing the interventions made in the private sector.

In other words, it is not just that a virtuous development industry exists which is blighted and confounded by immanent processes of capitalism, thwarted by social forces beyond its control. This in itself is a fairly radical position. It is also that interventions in the private sector in particular have come to reproduce and mirror those of the capitalist global economy. A development bank, in short, does very little that is different in meaning than a generic private bank. And it has the bonus of the charitable label. A development project, like the Chad–Cameroon oil pipeline, looks similar to a private sector initiative, and indeed in this case, takes venture capitalism to new boundaries of the possible in negotiating with authoritarian governance structures in order to 'get things done'. In other words, development is intimately connected and implicated in capitalist process and imperialist logic.

This book explains how the development industry and its institutions such as development banks contribute to the governance and regulation of global capitalism. This in turn affects prospects for political and economic development in the South. It contends that mass poverty is a consequence of the system of regulation that development contributes to. After nearly 70 years of effort to 'do development' at an intergovernmental level, Northern states still help capitalism prosper, while simultaneously claiming to help the victims of the inequalities it produces. And development has failed: there are ever more instances of victimhood and blight. Now there is a subtle point to be made here, to distinguish this book from the many other neoliberal economists and neoconservatives who claim that development is a waste of time because it never works. My purpose is to show why the efforts of so many right-minded people are being wasted in a system that channels them wrongly. At present, they can't work hard enough to keep cleaning up after capitalism, and one way of making their job easier is to stop powerful states making more social and economic inequality in the first instance. The cruel irony being, that development institutions often have a particular place in activities in the private sector which take away people's assets and livelihoods, impoverish them, and then stymie the people's efforts, alongside development workers, to help themselves recover. If this remark strikes you as particularly 'off-message', or suggestive of an indefensible tendency to conspiracy theory, you need only take a look at the evidence that has been recorded, against the odds, from people displaced and abused by development, such as the anguish of the people of the Lesotho Highlands who were made destitute by a dam and hydroelectric complex (at 'Mountain Voices' on the internet).

Thus, contrary to most books on development you may read, 'failure' in development will not be assessed here by looking at the so-called deficiencies and absences of various attributes – skills, money, political will, capacity and so on – within the South. This is the bread and butter, and misguided product, of development studies, and has been critiqued before by authors in the post-development and radical development traditions. Instead, the book will examine bilateral and multilateral political economy relations between states, in order to illustrate the nonsense that is the claim of benevolence in the post-colonial practice of international aid. To clarify, individual acts of charity in terms of food or vaccinations may sometimes be worthy of the term benevolent, but the overall system is not. Not least because the larger picture is dominated by transfers of public funds to private companies, not by bowls of food to children. Who has the 'development dollar', and what they choose to do with it, profoundly matters to people's lives. Therefore, the focus of this book is on this larger, mean sibling of the welfarist public face of aid. It is about the 'Great Predators' in particular, a term used here to refer to the development finance institutions (DFIs) of Europe, North America and elsewhere, who, under the guise of assistance, act as a Trojan horse, transporting the world's biggest companies and local 'Big Men' into a dominant position in the economies of poor countries. But why 'Great Predators'?

The metaphor relates to a classic construction of capitalism proposed by Braudel, which is contrary to the conventional view of capitalism that sees it as synonymous to the market with the state positioned antithetically to both (Arrighi 1994: 10). Braudel, instead, and in a way which turns the classical formulation on its head, saw capitalism as absolutely dependent on state power and as antithetical to the market. For Braudel capitalism is a three-tiered construction, the bottom layer of which is material life, the 'stratum of the non-economy, the soil into which capitalism thrusts its roots' (Braudel 1982: 229). The second tier is the market economy, where a degree of automatic coordination occurs which links supply, demand and price. Most economics roots itself in explaining this level, but there is another, higher level, 'the zone of the anti-market, where the great predators roam and the law of the jungle operates. This ... is the real home of capitalism' (Braudel 1982: 229–30).

This zone is 'on the top floor of the house of trade' (Arrighi 1994: 25), a 'shadowy zone' where financiers operate, using a 'sophisticated art open to only a few initiates at most' to decide where foreign exchange should go (Braudel 1981: 24). Given that capitalism, for Braudel, was absolutely dependent on state power, it is not an abuse of his construction to examine the role of pseudo-public sector financiers in particular, the DFIs, as a sub-group of his class of 'great predators'. This book has done just that, cognizant that the DFIs work with, and alongside, finance companies operating more fully in the 'private sector'.

The argument of this book is that regulation of markets through the use of public liquidity is central to managing the aspirations of Southern populations in a permanent austerity cycle, and that the people that do this job largely work in DFIs. Others have argued that poverty in the South, and in Africa in particular, is constructed by people from the North, using institutional systems that have been built historically to benefit the rich (Bush 2007; Bond 2006). For example, Bush (2007) wrote a trenchant critique of existing processes of global capital accumulation, and showed how poverty is constantly created and remade daily by processes inherent to the system: privatisation, trade liberalisation and market 'reform'. Bond (2006), following in the footsteps of Walter Rodney's seminal treatise, How Europe Underdeveloped Africa (1972), systematically assessed the routes and systems through which Africa is looted of her resources and wealth. He provides empirical data and examples to illustrate the inequities of the trading system, the persistence of unequal exchange, the myths surrounding the benevolence of aid, phantom aid and the degree of capital flight and brain drain afflicting Africa. This book focuses on the institutions that actually move the money around and create the iniquitous flows that Bond (2006) outlines and the poverty that Bush (2007) examines.

The book examines the political economy of global capitalism as it particularly affects the poorest, by examining the mystified institutions of the global concessional financing system (see also Gélinas 2003) and the narratives in political economy which explain what they do. It examines obscure and peripheral parts of the Northern states where large and significant amounts of 'aid' money are vested to be used and circulated in Southern countries for the benefit of the North, although this is rarely said in these terms. We also see how development institutions contribute to regulating the global economy and managing social order and aspiration. The book ends by comparing the political economy of development, as described here, with two predominant narratives concerning development in sub-Saharan Africa. These are, first, the 'crisis but salvation' narrative found in neoclassical economics and used by the Bretton Woods institutions (BWI) and mainstream development economists, which argues that 'underdeveloped' countries are in a crisis of poverty that needs external intervention in order to transport the poor to their salvation. Second, the 'resistance but subordination' narrative of radical or heterodox alternatives used in the dependency theory tradition and by social movements, in which workers and peasants in the South nobly resist the encroachments of global capitalism but are nonetheless relatively powerless because they are dependent on it.

In brief, we will see how the 'crisis but salvation' narrative, the first of these, couples and conflates 'development' with capitalist growth and then misrepresents political economy in sub-Saharan Africa while serving the interests of powerful people well. Meanwhile, the second narrative, 'resistance but subordination', reflects the radicalism of the independence and nationalist period but in contemporary terms fails to appreciate the critical role of African elites in negotiating with, and participating in, the processes of power and 'subjectification' ensnaring modern African populations. In other words, Anglophone Africa inherited adverse political economy structures which are maintained by contemporary development practice, with the participation of African elites (see chapter 11). This book examines the empirical bases for these narratives of the political economy of development with reference to Africa primarily and focuses on the economies in which the poorest, or the 'Bottom Billion' as Collier (2007) has recently called them, live.

Institutions of the global economy

So, why has social development failed in large swathes of the South (see Chronic Poverty Research Centre (CPRC) 2004; and chapter 6) and how has the profitability of global market capitalism, represented in ostentatious and incredible wealth accumulated by core institutions, states and privileged individuals within them, been perpetuated in the North? The first contention is that the two phenomena are critically related (see Hickey and Bracking 2005; Green and Hulme 2005; Pogge 2001; Milanovic 2003), and not just by illustration or intuition but by purposive action by institutions in support of particular structures of markets, investment and trade. Power is made everyday by the small and large actions and reactions of individuals, groups, communities and institutions, going about their business within the inherited structures of class struggle. So what are the critical institutions representing the power and interests of the rich?

First, it is important to indicate that the global economy is not an even space of regular economic interactions but has lumpy nodes of multiple exchanges and thin areas where less exchange takes place. The powerful nation states are these lumpy nodes and from them economic transactions spring out and reach for, generally, other critical nodes. Thus, the even coverage of colour of a densely sown flowerbed might look like an even canvass but below the canopy there remain only discrete stalks descending into the soil below. Metaphorically, these stalks are the nation states, emerging from the everyday life of their citizens in a discrete locality of global capitalism, while the canopy is the apparently ephemeral space of the globalisation age, promising as it does comprehensive connectivity and inclusion for all. This book has no substantive business with the finer points of the globalisation debate (which can be reviewed in Bisley (2007)) or in studying the dizzying technologies and possibilities of the canopy, since the subject here is the soil below. The methodology of this book is empirical enquiry. It has a similar view to Ferguson's seminal essay 'Seeing Like an Oil Company' (2005), where he talks of capital 'hopping over' large swathes of space to alight only on lucrative hotspots of mineral extraction. Development finance does that too.

The reader must now meet, face to face and unmasked, the externally-oriented institutions of the most powerful states, as these are thrown up and out from the core centres of domestic and territorially based power and authority. The obvious ones that come to mind are the generic ministries of foreign affairs, the Foreign and Commonwealth Office (FCO) in the British case; the departments for trade and investment and/or export such as the Department for Business, Enterprise and Regulatory Reform (BERR) in the British Blair vernacular; or the ministries of foreign aid like the UK's Department for International Development (DfID). These are not, however, the ones which are principally referred to here. These are ministries normally found in a national state, the 'Whitehall' state in the British case, and perform the governance spectacle for the domestic public gaze. Instead, the 'Great Predators', the DFIs, are found on the periphery of the old imperialist regulatory order. We can metaphorically refer to these as being part of the 'frontier state', a regulatory space on the edge of domestic political, social and discursive practice. They are resident in a grey zone where extra territorial, intergovernmental and multilateral institutions of the global order overlap and multilayer their governance activities; a space dedicated to global regulation and social ordering. The institutions which exercise global power and distribute 'development' entitlements belong in this zone.

In the British case, the institutions we need to unmask would be the Commonwealth Development Group plc (CDG), the Export Credit Guarantee Department (ECGD) and the Crown Agents: the bilateral institutions of the 'frontier' state. These financing institutions are direct successors to those of the colonial age, which in turn, for the two latter, had forerunners in service institutions for merchant capital companies in the pre-colonial era. Their role now remains the export of capital, some of which is raised on international markets. Development finance within the capital export regime more generally, is managed on the British 'national' behalf by these bilateral institutions, which we explore more fully in chapter 5, but here we will pursue the general case and describe a generic 'Great Predator'.

(Continues...)

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Edition details

• Publisher: Pluto Press
• Publication date: 2009
• Language: English
• ISBN 10: 0745320112
• ISBN 13: 9780745320113
• Binding: Paperback
• Number of pages: 256