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This work looks at how contemporary global economic policies are made: by which institutions, under what ideologies, and how they are enforced. The author reveals the central roles played by organizations such as the IMF and the World Bank in supervising the livelihoods of over 2.5 billion people. He shows that neoliberal economic policy is enforced by a few thousand unelected and unaccountable experts in the North and has failed to deliver tolerable living conditions for the poor. The book argues for a new geographic theory of power, exercised through dominant institutions, concentrated in hegemonic power centers. It seeks to transform the existing geography of policy-making power by exposing its structures, centers and mechanisms, critiquing its intellectual foundations, uncovering its un-democratic justifications, and passionately supporting its opponents. The conclusion makes a further positive contribution by exploring policy alternatives that point the way forward.
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About the Author
Richard Peet is Professor of Geography at Clark University in Worcester, Massachusetts.
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Geography of Power
The Making of Global Economic Policy
By Richard Peet
Zed Books LtdCopyright © 2007 Richard Peet
All rights reserved.
Introduction: concepts for a geography of power
§ Power means control, by a person or an institution, over the minds, livelihoods and beliefs of others. Power accumulates into systems. With the term 'geography of power' I refer to the concentration of power in a few spaces that control a world of distant others. My argument is that a new kind of economic power system has arrived on the world scene. Power has increasingly been accumulated at the global level by governance institutions – the G7/G8, the European Union, the Bretton Woods Institutions and the United Nations. These institutions control the economies and livelihoods of people the world over through policy devices like structural adjustment, the 'conditionalities' accompanying loans or debt relief, annual inspections by teams of experts, and other similar strategies. This book looks at types of power accumulation – economic, ideological, political – and the forms taken by power in global space. And the book examines popular resistance to concentrated power by alternatives constructed by social movements and organic intellectuals.
Let me begin by dissecting the term 'global governance institution'. 'Global' implies that governance power transcends national commitment in favour of some kind of 'universal interest'. On the surface, this interest is humanitarian concern about global poverty. Yet global institutions condition 'aid to poor countries' on their adopting a set of neoliberal policies. These insist on an exaggeratedly market-organized, export-oriented economy. Such an economy is said to produce the economic growth that creates jobs and reduces poverty. Yet these policies also favour free enterprise, private capital investment and the extraction of profit from poor countries. Global governance institutions therefore act, at least in part, in the interests of global capital. Humanitarian governance has a class bias. It favours private investment and global financial integration. And, while 'global' in their sphere of operations, governance institutions cluster their headquarters in relatively few places. The resulting centres of global power are exclusively cities in Western capitalist countries: either the capitals of leading national powers, overwhelmingly New York (for example, the United Nations) and Washington, DC (the International Monetary Fund and World Bank), or definitely Western, but officially neutral, political spaces, as with Geneva, Switzerland (the World Trade Organization and many UN agencies). So in terms of its geography, 'global' has come to mean the spatial expansion of the field of the exercise of power accompanied by the spatial concentration of control in a few Western cities. In the twin terms of class and space, a few thousand people, clustered in a small space, control the lives of billions of others, the world over.
In this light too, 'governance' in the above phrase ('global governance') means regulation, management and control of national economic policy by institutions that are, at best, indirectly elected (i.e. through governments). In this undemocratic context, policy is legitimized as true and correct more by science and expert opinion than by electoral consent. This may sound fine – a kind of global Plato's Republic, wisely directed by modern-scientific, rather than classical-philosopher, kings. More critically, scientific, humanitarian governance may be read as a new, kindly faced version of Western imperialism. Global governance and expert-designed economic policy have a power-geography in two of main senses of this originally Foucauldian term. First, the world cities where governance institutions congregate, and experts co-mingle, display landscapes imbued with the trappings of Western power – locating the headquarters, and much of the bureaucracy, in such centres lends the policies they prescribe the aura of Western authority. Second, this ambient content is released as 'power effects' as policies extend over space, from power centres to dependent peripheries, and are adopted, under varying conditions of compulsion, in capital cities all over the world. The two power-geographies, place and space, reinforce each other in symbiotic embrace. As a result, the main international financial institutions (IFIs), the International Monetary Fund (IMF) and the World Bank, have become powerful institutions indeed. This book describes the geography of the power system formed from the undemocratic concentration of power over others in a few small spaces.
Understanding the sources, mechanisms and relations of power with any degree of adequacy requires a set of analytical concepts. My idea, in this book, is to resuscitate some existing concepts, reorient others and add new versions of still more. But as Marx may once almost have said, new theoretical approaches are sought not to further knowledge for 'its own sake', whatever that might be. Rather, the objective is to develop concepts whose logic, style and passion are so appealing, at least to people of conscience, that merely encountering them is an inspiration to resistance. The book examines power at a number of levels, from the abstract to the concrete, and a number of scales, from the global to the national to the local. But I favour an intermediate level of analysis, an institutional geography of power, drawing on broader concepts – ideology, hegemony, discourse – to give critical thinking more accuracy and believability. To this end, I try to specify: what kinds of institutions, in what arrangements, bound by what power relations, produce what specific kinds of global economic policy? I try to break power into its main types, as with economic power, ideological power and political power. And I look at the main groupings of power: hegemonic, sub-hegemonic and counter-hegemonic. The book's general, political objective is to uncover the interests served by global economic policy. Those of the super-rich global elite, who already have so much money they do not know what to do with it, except reinvest and accumulate even more? Or those of the masses of poor workers and peasants, who have so little that they must watch, helpless, as their children fade and die? Should it be the case that the poor die because the rich get more, then I believe we must advocate fundamental change, no matter the forces against us – 'we' and 'us' meaning people who care about others, close or distant, like us, or not. We must open the possibility for the peoples of the world to theorize their own economic destinies. And we must offer our help in formulating their wishes without imposing our own policy designs. In the end, issues of global economic policy are questions of political ethics and humane values.
What are concepts?
Thinking deeply about complex issues requires minds filled with insightful, analytical concepts. Let me begin, therefore, by saying (very briefly!) what I think an analytical concept is. The notion of a 'concept' is best understood in the semiotic tradition, as a signifier (a combination of idea, model, picture and words) that represents a signified (a piece of the presumably separate, material world) in a certain way (within a political stance). Theoretical analytical concepts differ from most other signifiers in that they are denser (represent more reality in fewer terms) and more rationalized (components of the sign-concept are arranged in defendable, logical sequences). For reasons that will soon become clear, this book does not assume that theoretical concepts are scientifically accurate in anything like the positivist sense of representational truth – that is, the analytical terms correspond exactly to identifiable, bounded pieces of a separate reality. Even a moment's thought shows the impossibility of anything like this kind of 'accuracy'. For reality is originally physical, while concepts are ideational. And the conversion of the real into the ideal is little more than a modern form of intellectual alchemy, despite the pretensions of scientific method. In saying this, however, I do not abandon hope that, occasionally, fragments of analytical reasoning may bear the imprint of truth in two of the other ways that word is used: as deep insight into causal mechanisms; and therefore as a base for taking ethical, normative, political positions.
Questions of accuracy and truth become murkier when we analyse the economic policies prescribed by experts. For then we deliberately use theoretical concepts to critically examine concepts that also were consciously theoretical as they were expertly elaborated. In this instance, critical analysis becomes the collision of theoretical consciousnesses. In effect, concepts developed already, as summaries of understanding from the vantage of one political tradition in thought (critical social theory), are employed to criticize concepts from other political traditions (mainstream economics, for instance). I should repeat that this is essentially a political, rather than a scientific, exercise. And I need to say, from the beginning, that I take a pretty dim view of conventional economic theory. Indeed I will demonstrate, with some validity, that classical, neoclassical and mainstream economics, and the policies based on these theories, are fundamentally flawed – with disastrous results for the peoples ruled by expert opinion, and with rich rewards for the rulers and the experts.
In this book I am not so much interested in particular economic policies, such as 'fiscal responsibility' or 'lower marginal tax rates', as in more general 'policy regimes' formed in centres of global power. What is a policy regime? Let me start by comparing the term to similar, existing ideas.
The concept of 'policy regime' proposed here resembles a concept used by the French Regulation school. My notion of 'regime' is similar to the 'mode of regulation', understood as a 'situated rationality, illuminated by a dense network of institutions' (Boyer and Saillard 2002: 41) that influences the trajectory of an economy, or what the regulationists call 'accumulation'. This is a little dense. What I am alluding to, with the regulationists, is the notion that economic growth is directed by an institutionally produced rationality, rather than growth being 'natural' or 'endemic'. Of particular interest is one aspect of regulation, the 'regime of economic policy', defined by the regulationists to include: the specific forms of state intervention in an economy; the institutional frameworks of intervention (national, international or supranational); and the conditions of validation of policy by private economic agents, such as investors (Lordon 2002: 132–3). In other words, economies are directed by policies, policies reflect rationalities, and rationalities are developed through the quest for power. The notion of 'policy regime' is also similar to that employed by neo-Gramscian international relations theory, in the sense of: social, cultural and political structures of accumulation (Cox 1987); cemented together by a post-war 'international historic bloc' of social forces centred on the USA (Gill 2003); and led by a new congruence of ideas, institutions and policies in a system of 'embedded liberalism' (Ruggie 1982). Again, these are similar ideas to my own. But both lines of thinking are vague about: the connections between accumulation and regulation, such as the social, political and economic forces producing new modes of regulation (as with the people thinking up neoliberalism); and the geographic location of the sources of economic transformation (as with power centres, with their clusters of institutions). Clearly policy regimes are political-economic mechanisms of power through which governmental and governance institutions direct economic growth. Less clearly, and more controversially, policy regimes are interest-based interpretations of the contradictions and problems experienced in earlier phases of growth, stagnation or decline which then redirect the economy, in a system that combines structural necessity with political-economic agency. I apologize if this is dense. But what I am saying is that policy regimes are innovative responses to past problems, innovations in thought that create somewhat new futures. This ability to redirect the economy is the source of expert power.
Thus a policy regime indicates: a systematic approach to policy formation by a set of government or governance institutions, dealing with a definable, limited range of issues, which prevails, as the dominant interventionary framework, over a historical period lasting at least several decades. Policy regimes, I argue, are lent coherence by an underlying political-economic interpretation of the causes of a set of related socio-economic problems. This interpretation is not scientifically neutral. Instead it represents the interests of a certain element of power, such as a fraction of capital, as with a set of financial institutions, and a certain group of people, such as investment bankers. Further, the ideologies that lend consistency, cohesion and believability to policy regimes are constructed over long time periods by experts residing in geographic centres of ideological power, with new regimes thought up in prestigious, elite institutions. There is, however, considerable freedom of the proximate agency and the space of ideological power in the reconstruction of regimes. Change often comes from elite institutions that were previously peripheralized – as with the Chicago School of Economics. Then again, several policy regimes may coexist in time, as past, present and future versions of a given approach to solving a limited range of problems. Regimes may coexist in space, as regionally variant approaches to somewhat differently experienced problems, with relations of dominance and subordination between the approaches. Indeed, the coexistence in time, but separation in space, of more than one policy regime makes the dominant dynamic and coherent – any effective policy regime contains elements of its alternatives as co-opted, but potentially conflictive, elements – the concern for poverty in contemporary neoliberalism, for instance. All this produces a policy regime that has been well described, in the case of neoliberalism, as a contradictory process, existing in historically and geographically contingent forms, produced during a period of institutional searching (Peck and Tickell 2002: 383; Tickell and Peck 1995).
Since the Second World War, the capitalist world has seen two main political-economic policy regimes: Keynesian Democracy, predominating between 1945 and 1973; and Neoliberal Democracy, predominating between 1980 and the present; the years 1973–80 represent a transitional period, when the two regimes contended for dominance. The Keynesian policy regime was characterized by counter-cyclical macroeconomic management by an interventionist state committed to achieving full employment and high incomes for everyone. This regime responded to the Depression of the 1930s, a crisis that delegitimized the theoretical rationality and the persuasive claims of the previous, long-lasting Liberal (free trade) regime, by using state authority to stabilize accumulation and democratize economic benefits. Regional differences in theoretical-interpretative and political-economic tradition informed three main variants: Social Democratic Keynesianism in western European countries and their former settler colonies; Liberal Democratic Keynesianism in the USA; and Developmental State Keynesianism in Japan and many industrializing Third World countries (Chang and Rowthorn 1995; Kohli 2004). The convention is that in the 1970s Keynesianism entered into a crisis characterized by problems associated with stagflation – high rates of inflation coinciding with high rates of unemployment (I discuss this in Chapter 4). Its successor, the Neoliberal policy regime, revives late-nineteenth-century, free-trade Liberalism by partially withdrawing the nation-state from macroeconomic management within an upward displacement of power to the IFIs, yet with an increased reliance on market mechanisms. Neoliberalism employs monetarist economics under the conceptual belief that macroeconomic problems, such as inflation and debt, derive from excessive government spending (fiscal deficits). While regional variations in speed of adoption, and level of commitment, persist, the neoliberal regime responded positively to the globalization of economy, society and culture of the late twentieth century. Indeed, neoliberalism helped to organize the emergence of a particular kind of globalization that benefits a newly re-emergent, super-wealthy, financial-capitalist class, mainly living in the leading Western countries, especially the USA, but operating transnationally in terms of investment activity.
What happened to the global economy under these two policy regimes? The measure used by conventional economists to measure economic well-being is economic growth – let me, for a moment, accept this measure at face value – i.e. 'growth is good'. Economic growth in the OECD countries, the richest countries in the world, averaged 3.5 per cent a year in the period 1961–80, basically during Keynesianism, and 2.0 per cent a year in 1981–99 (basically during neoliberalism). In developing countries excluding China, the equivalent figures were 3.2 per cent and 0.7 per cent (Pollin 2003: 133). In other words, Keynesianism vastly outperformed neoliberalism. At the same time as economic growth slowed under neoliberalism, global inequality increased. In 1960 the 20 per cent of the world's people living in the richest countries had thirty times the income of the 20 per cent of the world's people living in the poorest countries; in 1973 the ratio was 44 to 1; and in 1997 74 to 1 (UNDP 1999: 36–8). According to the World Bank (2004a: 246–7), 971 million people living in the 'high-income' countries and making up 15.5 per cent of the world's people now receive $27.7 trillion in income, or 80.4 per cent of the global income of $34.5 trillion, while 2,310 million people in the 'low-income' countries, making up 36.8 per cent of the world's people, receive $1.04 trillion, or 3.0 per cent of global income. Putting this a little differently, the 'average person' living in the high-income countries receives 63.5 times as much as the 'average person' living in the poor countries. National poverty rates in the low-income countries are in the range of 45–70 per cent of the population, while the percentage of people living on less than $2 a day varies from 50 to 90 per cent, depending on the country.
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Table of Contents
1. Introduction: concepts for a geography of power
2. Economic power
3. Ideological power
4. Political power
5. Sub-hegemony: South Africa
7. The three neos