By Adam D. Dixon
In early April 2014 Greece returned to the sovereign bond market raising 3 billion Euros, following a four-year hiatus. This marked a turning point in the global financial and economic crisis that began in 2008 with the collapse of the subprime mortgage market in the United States and the advanced-economy recessions that ensued. The Greek economy is certainly not healed, with unemployment still exceeding 25%, and a government debt burden still unnervingly high — it is expected to reach 175% of GDP this year. That the Greek government was able to issue bonds to international investors, likely didn’t provide any degree or sense of solace for the many Greeks still struggling to get by.
This story has been repeated across much of the advanced industrialized economies, from the United States to the United Kingdom, from Spain to Italy. We are told that most economies have turned the corner, even if there is some way to go before life feels normal again — hopefully before some other crisis takes hold. Now we can get back to focusing on crises of the longue durée. Will anything be done to reduce wage and wealth inequality? Will labor markets adjust to increasing automation and artificial intelligence? How will we adapt to climate change? Are we prepared for the peak of the baby boom retirement?
Some countries and some regions within countries will certainly fair better than others. There will be winners and losers. This is largely a reflection of the core-periphery model that characterizes the geography of capitalism and its developmental logic. The drivers of economic growth and development are not nation-states, but large regional agglomerations, which often span different countries, and the global production networks and global financial markets that connect them. But what does it mean to be a resilient country or region in an increasingly integrated and interdependent global economy?
The global financial crisis struck a blow to globalization, leading to some speculation that we could see the reemergence of a more fragmented world economy comparable to periods following other major crises (e.g. the Great Depression). For those critical of global capitalism, it was a chance for alternatives to emerge. Yet, if one looks at life in the major world cities or the boardrooms of multinational firms, the powerhouses of global capitalist integration, the remnants of crisis are hardly visible. Capitalism marches onward.
In the last few decades the barriers to cross-border capital flows and trade have been progressively removed, leading to growing opportunities for firms to outsource and offshore production. Moreover, the integration of capital markets has opened up financing possibilities that are global in scope. For multinational firms, and those in the service of multinational firms, history and geography are no longer constraints. Is the core anymore resilient than the peripheries, if they can’t ultimately claim and contain the drivers of growth? Are the winners this time around going to be the winners next time around?
At the height of the Eurozone crisis it was not uncommon to hear suggestions (and even outright demands) that periphery countries (e.g. Greece and Spain) leave the euro. Exit would facilitate recovery, resetting prices to competitive levels with trading partners. And it wouldn’t mean the end of the European project. But Greece nor any other periphery country has left the Eurozone. Even if they wanted to, would they have been allowed? Market expansion and integration is at the heart of capitalism. To be sure, a currency union is not a prerequisite to market expansion and integration.
The countries on the periphery didn’t leave, because they’ve become too integrated with the core. Economies do not start and stop at the political borders of the nation-state, even if the nation-state is still a crucial site of governance and regulation. There is certainly diversity among capitalist economies, reflecting history and geography. But increasing interdependence and integration mutes diversity. Yet, what increasing interdependence and integration means for capitalist diversity is less important than what it means for the losers of capitalist crises. As market expansion and integration is at the heart of capitalism, losers aren’t left to some alternative. They are re-integrated in the fold, even though they may be left on the periphery.
Adam D. Dixon is a senior lecturer in economic geography at the University of Bristol. His research focuses on comparative economic geography, the geography of finance, and the political economy of institutional investors. He is author of The New Geography of Capitalism: Firms, Finance, and Society, co-author with Gordon L. Clark and Ashby H.B. Monk of Sovereign Wealth Funds: Legitimacy, Governance and Global Power (2013, PUP), and co-editor with the same of Managing Financial Risks: From Global to Local (2009, OUP).
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