Macrodynamics of globalisation, uneven urban development and the commodification of water.

• Author: Bond, P.
• Position: Report

Abstract

There are crucial relationships between global capitalist stagnation and volatility, neoliberal public policies, and uneven urban development that require explanation so as to develop appropriate progressive strategy. This is especially true in the water sector, where both rights discourses and global movement building are at advanced stages. On the one hand, the imposition of privatised urban water services is being challenged in many cities; on the other, though, ongoing pressure for commercialisation means that even after a multinational firm has left, the adverse implications of its reign may be durable. Johannesburg illustrates the problem. Working out contrasting discourses in political-economic analysis, as above, is crucial to any resolution of the problem in public policy via social struggle.

Keywords

Water, globalisation, economic crisis, decentralisation, urban services, tariffs, public health, social movements

1. Introduction

   The period of globalisation has been characterised by stagnation, periodic bouts of economic volatility, and extreme uneven development. In this process, goods once considered part of the 'commons' have been commodified. Water is illustrative. Those concerned with law, social justice and development will need to address the difficulties faced in initiatives aiming for rights-based strategies, drawing from local to global scales, given how hard it is to establish model decommodified water systems under conditions of globalisation.

   The problems are not new, of course. Rosa Luxemburg's 1913 book The Accumulation of Capital noted how 'relations between capitalism and the non-capitalist modes of production start making their appearance on the international stage'. She condemned not only that era's military tensions but also 'an international loan system ... fraud, oppression, looting [which] are openly displayed without any attempt at concealment.' (1) I will argue that these colourful phrases capture the core dynamics particularly as capitalism has suffered bouts of crisis tendencies since the early 1970s, one reaction to which was the move to more intensive commodification of natural assets, including water. For Luxemburg, a principle concern was 'the deep and fundamental antagonism between the capacity to consume and the capacity to produce in a capitalist society, a conflict resulting from the very accumulation of capital which periodically bursts out in crises and spurs capital on to a continual extension of the market.' (2) The crisis tendencies in turn generate a renewed reliance upon 'primitive accumulation'; this is not merely an original feature of the transition from feudalism to capitalism, but remains one of capitalism's persistent and permanent tactics, which, as we will see, even affects the way cities deliver their water supplies. Following from these insights, David Harvey has shown that an extreme form of 'accumulation by dispossession' characterises market penetration of the Third World, including water, given the 'conversion of various forms of property rights (common, collective, state, etc) into exclusive private property rights'. (3)

   To properly understand the link between global capitalist crisis macrodynamics and water commodification trends requires, however, a discussion of the crucial intervening public management strategy, namely decentralisation of service delivery functions without decentralisation of sufficient resources. Hence uneven urban development worsens simultaneously, as some regions and cities do well in the competition for resources, and others fare poorly. The crucial linkage between these processes emanates from core multilateral institutions, even the United Nations Development Program, which in its Human Development Report in late 2006 also posited 'water as a right'. The seeming contradiction can be understood, however, by paying attention to the details associated with market logic in the water sector, for example as are unfolding in 2008 in Johannesburg (subject of an earlier LGD analysis). (4)

   Institutions like the UN are terribly important, for macrodynamic processes are driven by the crisisridden character of corporate capital accumulation, are lubricated by international financial institutions, aid agencies and trade treaties, and receive codification and legitimation at the UN. Moreover, the power of the Washington and Geneva multilateral agencies is typically combined with the persistence of neoliberal conditionality in donor aid. It is here that not only neoliberal macroeconomic conditions are imposed, especially entailing fiscal contraction--i.e., funding shortfalls that would otherwise have paid for water investments and operations--but in addition, a microdevelopmental neoliberalism is fostered.

   In the former category are removal of import/export barriers, financial liberalisation, currency devaluation, lower corporate taxation, export-oriented industrial policy, austere fiscal policy (especially aimed at cutting social spending) and monetarism in central banking (with high real interest rates). In the latter category, in microdevelopmental terms, neoliberalism implies not only three standard microeconomic strategies: deregulation of business, flexibilised labour markets and privatisation (or corporatisation and commercialisation) of state-owned enterprises and state service provision (where water is a common target). In addition there are also mandates specifically for social sectors: the elimination of subsidies, promotion of cost-recovery and user fees, disconnection of services to those who do not pay, means-testing for social programs, and reliance upon market signals as the basis for local development strategies (again, water is often at the cutting edge of marketisation).

   In sum, for more than three decades beginning with Chile in 1973 and gathering momentum during the 1980s under the Thatcher, Reagan and Kohl governments, neoliberal policies were applied by states that were often also so repressive and shrunken that redistributive social benefits withered away. As we see next, the broader context for this regression was an epoch of stagnation and financial volatility within the Northern advanced industrial countries. In turn, these features guaranteed ever-lower commodity prices (and unequal exchange), high debt repayments, and vast capital flight. After considering the global evidence, we will be in a position to evaluate the implications for water.

2. Global stagnation, financial volatility and Third World underdevelopment

   The world economy has witnessed a long slowdown in capitalist growth punctuated by extreme financial volatility. A decisive problem, signifying the beginning of neoliberal dominance and financial power, was the dramatic rise in the US interest rate in 1979-80 imposed by Federal Reserve chair Paul Volcker to halt inflation, restore the value of the US dollar, and in the process discipline labor. Very rapidly, by 1982, the high interest rate drove much of the Third World inexorably into debt crisis, austerity, decline and conflict.

   However, an ever deeper process of stagnation was underway. The world's annual per capita GDP increase was already in decline: from 3.6% during the 1960s, to 2.1% during the 1970s, to 1.3% during the 1980s to 1.1% during the 1990s and 1% during the first half of the 2000s. (GDP measures are notorious overestimates, especially since environmental degradation became more extreme from the mid-1970s, the point at which a typical 'genuine progress indicator' went into deficit.) We must also acknowledge the extremely uneven character of accumulation across the world, with many sites suffering rapidly declining per capita GDP. With stagnation came lower demand for Third World exports, especially cash crops and minerals (until a recent but probably temporary upturn in commodity markets), and likewise there was increasing competition from a few sites of manufacturing export production (Mexico, Brazil, East Asia), hence diminishing the possibilities for Africa to grow through industrialisation.

   The world macroeconomic context in the most recent period, since around 2000, includes some incongruent symptoms, especially in the US, Euro Area and Japan:

   * a temporary recovery in trade, foreign investment flows (especially mergers and acquisitions) and stock market values after the late 1990s downturns, but now potentially ending in 2008 as financial paralysis hits credit markets;

   * rising US and Japanese fiscal deficits, and an unprecedented US trade deficit (especially due to increased Chinese imports), while nearly all emerging market economies--aside from Turkey, Mexico, South Africa, the Czech Republic and Poland--ran large current account surpluses;

   * an upturn in raw material prices from early 2002 (especially in energy and minerals/metals);

   * an uptick in corporate profits as a share of GDP accompanied by sluggish private fixed investments, even though real US interest rates have been below 1 percent since 2001 (notwithstanding 17 small rate increases by the US Federal Reserve since 2004);

   * a fast-rising household debt/income ratio in the US, causing greater uncertainty in global property markets--especially US housing--after apparent mortgage-driven peaks in 2005 and a subsequent collapse whose devaluation might reach $3 trillion in scale;

   * a substantial fall in the value of the dollar from its early 2002 high; and

   * the ongoing role of emerging Asian economies as the engine of world growth, accounting for half of global GDP since 2000. (5)

   Can incongruities within these macrodata be reconciled with political-economic analysis? Interestingly, in what is otherwise an excessively upbeat prognosis of 'the next wave of globalisation', even the World Bank recently acknowledged significant 'downsides', namely 'growing inequality, pressures in labor markets and threats to the global commons'. These are not only 'evident in the current globalization' but 'are...