22 Global Political Economy
Oatley
Mainstream American international political economy (IPE) has gradually lost relevance as a framework for understanding developments in the global political economy. It offers little help for understanding the impact of the China Shock, the development and consequences of the Global Financial Crisis, or the anti-system politics that began to emerge in 2016. These are the three developments that largely defined global political economy during the first quarter of the twenty-first century. It is even less helpful for explaining the climate crisis and the energy transition, the issues that will increasingly shape the global political economy for the next quarter century and beyond. Restoring relevance to American IPE will require the development of theoretical frameworks that are intrinsically systemic and dynamic. I suggest that the Uneven and Combined Development, and the Political Economy of Complex Interdependence, perspectives, supplemented by greater attention to system parameters, provide a strong foundation upon which to build such frameworks.
Thomas Oatly: Regaining relevance (paywall) Thomas Oatley: Blog
22.1 Self-destructive Finance Capitalism
Hudson
Finance capitalism is the economic doctrine of deindustrialization
finance capitalism is the tactic of economic warfare by the United States against Europe and the global south to sort of draw all of the economic surplus of these countries in the form of debt service and the debt service is supplied by basically economic rent seeking from land rent, natural resource rent, and just plain interest charges on economy.
Finance capitalism is not based on surplus value like industrial capitalism was. In fact, it destroys industry and in this cannibalizing of industrial capital, it basically dries out the economy and makes it unable to break even or even to function and in the United States today, for instance, if you look at the balance sheets of corporate revenue much of it is spent on stock buybacks. You buy back your own stock or dividend payouts. Only eight percent of corporate earnings are spent on new capital investment research and development: factories, machinery, and means of production to employ labor.
How did General Electric (GE) go broke? Basically, Jack Welch said let’s use our income not to continue to invest in making more electronic goods and services and appliances, let’s use it to buy our own stock that’ll push up our stock and essentially, we’ll just sell off our divisions and we’ll use the money of selling off our washing machine companies and stoves and sell it off and we’ll just pay it to the stockholders. That’ll push it up and by the way his salary was based on how much he could push up the stock of GE and he was paid in the form of stock options. Well, all of this is now the normal corporate behavior in the United States and corporations are no longer led by industrial engineers as they were a few centuries ago in the nineteenth and twentieth century.
They’re led by financial engineers of the chief financial officer and the ideal of these corporations is to make money financially not by industrial investment….. so on the narrow microeconomic level finance capitalism is a way of basically selling out a company and giving the proceeds to the stockholders and the bondholders but as a political system, because it is so destructive of the economy as you’ve seen in the United States and you’ve seen in Britain through de-industrializing it, it becomes belligerent in an attempt to make other countries just as equally paralyzed by making these countries pay tribute to the U.S. and England and the financialized economies by means of financial engineering, by means of debt service, by means of selling their mineral resources, their public utilities, their land, their roads all to foreign investors–basically to who borrows the money that’s just simply created in the U.S. and to save all of their money in their central bank reserves in the forms of loans to the U.S. treasury holding treasury bonds which is how the international monetary system worked until just a few months ago when everything changed.
Finance capitalism is a predatory international economic policy aimed at draining the rest of the world all to pay the leading one percent of wealth holders in the U.S. and their satellite oligarchy in England and a few European countries.
The way to make money in finance capitalism is to buy up the monopolies.
22.2 US - China Competition
On March 25 at his first press conference President Biden declared: “China has an overall goal … to become the leading country in the world, the wealthiest country in the world, and the most powerful country in the world,” he told reporters at the White House. “That’s not going to happen on my watch because the United States is going to continue to grow.”
On 2021 Jan 26, CEO James D. Taiclet, CEO of Lockheed Martin #1 defense contractor remarked on an earnings call: “…we’re back into a world of great power competition, it’s important to look I think beyond our own defense industrial base structure but outward to those of the competitors, which are China, Russia, Iran, and North Korea for example and compare our capabilities in the defense.” Lockheed was hoping that, in future, its acquisition of smaller rivals would be looked upon favorably in light of the Chinese competition, “vertical integration concerns from a classic antitrust perspective are dwarfed by the lack of velocity and inability to integrate and added cost frankly that comes from the existing defense industrial base structure that is stratified with a supply chain that’s quite fragmented …we cannot predict the decisions of individual regulators and those coming into office, but I do think that it’s critical that those decisions look through the lens of great power competition and how we compare to the defense industrial base certainly of China. …the Biden administration is reinforced and elevated the criticality of alliances to actually meet this kind of situation. And that again is a positive for international defense cooperation. The third item that I note is that there’s a very experienced and capable foreign policy national security cadre … And then fourth, there’s going to be some process alignment between the White House, the Department of the State Department of Defense and Congress on how to actually conduct all of this. … that would benefit Lockheed Martin I expect.”
On June 8 the first fruit of the bipartisan consensus on confronting China emerged from the Senate in the form of the US Innovation and Competition Act of 2021 approved by a vote of 68 to 32. The bill headlined spending of US$250 billion into American semiconductor manufacturing, boosting the National Science Foundation, creating regional technology hubs, and spurring 5G innovation. In the month since its introduction, lawmakers have debated a slew of amendments, as many sought to attach their own China-focused measures. The U.S. Innovation and Competition Act, or USICA, combines “as many of the “stop the China rise” and “lift the U.S. game” ideas that had been floated in the Senate in recent memory. As sharp-eyed critics at the Niskanen Center pointed out, it was in fact far from an adequate or coherent technology policy. America was getting the worst of both worlds. A confrontation geopolitics combined with an inadequate industrial policy.