Nicholas Hildyard: Licensed Larceny: Infrastructure, financial extraction and the Global South (Manchester: Manchester University Press, 2016).
I discovered Nicholas Hildyard’s work at Corner House in 2005, and was heavily influenced by it. thecornerhouse.org.uk He’s one of the best writers around on the false pretensions of so-called “free market” policies like privatization and deregulation in the global South (I wrote about some of his previous work here and here). So naturally I snapped up a review copy of this book as soon as I heard of it.
There’s a lot of radical analysis of infrastructure “privatization” (more aptly described as “enclosure” or “looting”) out there — some of the best of it by Hildyard himself — but this new book from him focuses on a phenomenon that’s become relevant more recently: “public-private partnerships” in providing infrastructure.
Hildyard addresses three major functions of public-private infrastructure partnerships (although he treats them in pretty much opposite the order of importance I discuss them below): 1) The vital importance of public-subsidized infrastructure in propping up the bottom line of corporate enterprise in late capitalism; 2) its importance as a guaranteed profitable outlet for surplus investment capital in a time of chronic overaccumulation; and 3) it commodifies new areas of life and incorporates them into the cash nexus.
State-subsidized transportation and other support infrastructures have been vital to industrial capitalism since the beginning, and were central to the structure corporate capitalism took from the late 19th century on. But they became even more important as the 20th century wore on, as a way of countering capitalism’s chronic tendency towards falling direct rates of profit by socializing an ever greater share of the operating costs of big business.
And “public-private partnerships” are just the latest outcome of
deeper structural forces that have their roots in a centuries-long trend that has massively increased both the scale and the costs of the physical infrastructure — roads, railways, ports, airports, waterways, energy facilities and the like — that dominant forms of industrial capital need in order to expand.
This steady tendency towards socializing increasing shares of the operating costs of capital was the subject of James O’Connor’s book Fiscal Crisis of the State.
And globalization in particular — the expansion of industrial capital into the global South, along with the extraction of natural resources from those countries — relies heavily on enormous expenditures on transportation, water and power infrastructure. This has been true since the British built a railway system in India, literally for the purpose of hauling stolen loot to ports to be taken back to Britain (and that system was financed with guaranteed rates of return, resulting in a massive transfer of wealth from Indian peasants taxed to pay off the bonds to British rentiers). It amounts to the people paying to screw themselves. Jawaharlal Nehru wrote a book correlating povery levels in the various regions of India with the length of time the British had been there, starting with Warren Hastings in Bengal (aka modern-day Bangladesh).
Since the former European colonies achieved nominal independence after WWII, the main function of foreign aid and of World Bank loans has been to subsidize the road and utilities infrastructures necessary to make foreign capital investment — like offshored factories — profitable. A great deal of transportation infrastructure was built in the Global South for the explicit purpose of facilitating a shift from food production for subsistence or local markets to cash crop production for the export market — an adjunct, obviously, to other policies like enclosure, eviction and proletarianization. As Kwame Nkrumah put it, most Western “foreign aid” in the neocolonial era is what would simply have been called “foreign capital investment” under colonialism.
And as Hildyard points out, the main purpose of these “massive infrastructure corridors” being built around the world today is to facilitate the extraction of wealth on a larger scale.
The priority is thus to construct a global network of interconnected infrastructure corridors, logistics hubs and new cities aimed at speeding up the circulation of commodities between sites of resource extraction, production and consumption.
In region after region around the world — sub-Saharan Africa, southeast Asia, South America — these new “infrastructure corridors” are being built on a continental scale, with massive new port facilities and high-capacity highways and railroad lines across continental interiors. The projects for Africa, with its corporate-enclosed mineral resources, are especially ambitious. The effect will be to further increase the regional lockdown of global resource extraction companies, which have already terrorized and evicted indigenous populations.
And in every case, whatever the location, the model of “development” that’s being promoted is not one of local manufacturing economies serving local populations, but the movement of extracted resources through global supply chains and of goods produced by cheap sweatshop labor through global distribution chains.
The comment of one official in the Initiative for the Integration of Regional Infrastructure in South America (IIRSA) is telling: “Without this kind of planned network of physical integration, South America would not stand a chance in the 21st century.” The various regions of the Global South are in a race to the bottom, in which they have to compete with imposed top-down development elsewhere. But what’s needed for everybody to “stand a chance” is to stop subsidizing infrastructure and abolish subsidized global supply and distribution chains, eliminate corporate control of mineral resources and production facilities, and reorient production to serving local markets everywhere — including in the West.
Too many Leftist movements in the Third World, despite rhetorical resistance to corporate globalization and neoliberalism, pursue development agendas that in practical terms dovetail quite well with the model described above. Both the Worker’s Party in Brazil and Ecuador’s President Correa have continued to promote traditional infrastructure projects — usually involving mass relocation of indigenous populations and abrogation of traditional land tenure rights — to facilitate resource extraction.
Whether by neoliberal governments or nominally “Leftist” governments, the facts on the ground — enclosure of water, forest and arable land commons, and the conversion of peasant farmers into agricultural labor, enforced by brutal police repression of resistance — are basically the same. In the Nacala corridor of Mozambique alone, for example, more than 100,000 people will likely be forcibly relocated to develop the Lurio River.
The existence of these artificially cheap long-distance supply and distribution infrastructures promotes artificial “comparative advantages” and “divisions of labor” between nations, based on competition in cheap labor supplies, and makes it artificially profitable to shift capital around the world in search of the cheapest labor. Behind the false Ricardian and Cobdenite language, what we’re really talking about here is global capital existing in a symbiotic relationship with authoritarian states that enforce work discipline and keep labor docile.
Alfred Chandler argued that national-scale manufacturers were only profitable in the U.S. because the American state had subsidized a national system of high-volume trunk rail lines that could support nationwide wholesale and retail networks with high-speed, reliable throughput. The same function by the Interstate Highway System was the basis for Walmart’s and other big-box retailers’ “warehouses on wheels” distribution system. And the “infrastructure corridors” Hildyard writes about serve the same purpose on a global scale.
Far from being an increase in efficiency resulting from “free trade,” this is a net decrease in efficiency from supply and distribution chains and market areas on a scale far beyond the point of decreasing returns. The only reason there are apparent economies of scale is that most of the cost side of the ledger is shifted to the taxpayer.
Besides subsidizing operating costs and putting the corporate bottom line artificially in the black, these public-private partnerships also serve an essential function in countering late capitalism’s chronic tendency towards overaccumulation and a shortage of profitable investment outlets for all the available capital. Because of all the built-in monopolies and artificial property rights in capitalism, an enormous share of the economic output is shifted in the form of rents to propertied classes with a high propensity to save. Meanwhile, the reduced purchasing power of the producing classes result in a chronic problem of idle production capacity in existing industry — let alone the need for investment in new production capacity on a scale remotely comparable to the piles of capital the rentiers are sitting on.
So any state policy that creates artificially profitable outlets for these giant piles of capital is a lifeline.
As Hildyard argues, the bulk of money invested in public-private infrastructure projects may be private, but the public is involved in guaranteeing either a revenue stream or a rate of profit on about 95% of it. “The guarantees typically embedded in PPP contracts” include
guaranteed rates of return; minimum guaranteed income streams; guarantees on loan repayments; guarantees against currency exchange rate risks; guaranteed minimum service charge payments, irrespective of the performance of the PPP; and guarantees of compensation should new legislation affect the profitability of their investments.
Typical guaranteed rates of profit on funds invested in infrastructures range from 15% to 25%, usually over a period of many years. One of the more egregious guarantees is the “Take or Pay” contract, which guarantees the buyer will pay for contracted goods and services regardless of whether they are delivered. Availability payments guarantee payment of a fee for availability of an infrastructure once it’s constructed, regardless of whether it’s actually used.
And private investors are quite clear that they have no interest in projects without guaranteed rights of return. As one investment management firm director put it, “You could have a pipeline that you don’t want to touch because there are are no contractual rights on it and it is completely market-exposed to price.” Remember the claim in all that cheerleading propaganda for “our free enterprise system” that says “profit is the reward for risk”? No. The state exists to absorb risk, shield capital from it, and guarantee profit without risk.
It’s an example of the phenomenon Chomsky described as socializing the costs and risks of capital, but privatizing the profits.
And of course the public ultimately pays the price. “Public-private partnerships” usually result in increased prices (like increased utility rates — for example the Ugandan power distributor Umeme, which raised electric rates 24% in 2005 and sought a further 37% hike in 2007). These guaranteed revenue streams and returns also mean private capital has a lien on large shares of tax revenue, and increase the likelihood of future debt crises that can be used to blackmail governments into “structural adjustment programs” (quite likely involving the “privatization” of public infrastructures at nominal prices).
So — much like government financing of deficit spending with guaranteed-return bond issues — these “partnerships” simply soak up surplus investment capital that would otherwise lie idle, and provide a guaranteed rate of return on them. They’re the functional equivalent of USDA programs that provide giant landlords a guaranteed rent on land they hold out of productive use.
Not only does the financing of the infrastructure itself soak up capital that would otherwise lie idle and reduce the crisis of overaccumulation, but the repackaging of the investments as securitized loans involves an enormous expansion of the FIRE economy with new instruments that carry guaranteed returns.
The new infrastructures built by “public-private partnerships” in the global South are intended as the centerpiece for new regional economic models based on wealth extraction. And these economic models require forcing — literally, by direct or indirect violence — activities currently outside the wage system and the circuit of capital into their control. This means not only repurposing land to production for the cash nexus and dispossessing those currently using it to produce directly for their own needs, but abrogating commons rights and customary possessory rights in the land and replacing them with new property regimes from which rents can be extracted. This is a direct continuation of a long-term project that’s been underway since the beginnings of colonialism.
It takes hard political work to build the social, legal and economic infrastructure that embeds such forms of extraction to the point where they are assumed to be ‘normal’. As long as capital expands, that hard work is never done. Labour must not only be commodified where it is not commodified, but new ways must be found to squeeze more profit from it; previously unexploited forms of social solidarity must be transformed into a form that can yield profit; existing markets must be nurtured and new markets created; old forms of rent expanded and new income streams created from which rents can be extracted; property rights upheld and established in areas where property has not previously been recognized; and so on.
Hildyard’s last chapter, on possibilities for activism, is just as thought-provoking as the rest of the book. The chapter’s epigraph from John Holloway is quite appropriate.
The future of humanity depends now on our being able to bring to life within the old, rotten and increasingly violent capitalism, flashes, intimations, anticipations, fragments of the world of dignity that we want to create.
To be sure Hildyard is not, so far as I know, an anarchist. But while remaining open to state reformist measures as part of a total agenda package for fighting neoliberalism, he expresses considerable skepticism towards a strategy focused on such measures. For example the traditional social democratic remedies of progressive taxation and redistribution, he writes, “arguably threaten to become a regressive end-of-pipe ‘solution’ that perpetuates the violence of capital while retrospectively compensating a few of those from whom capital has looted…” And he takes a similarly reserved view of a global justice focused on “persuading ‘policy makers’ in powerful institutions (the World Bank, the G8, the G20, national governments, corporations and the like) to do the right thing.”
In keeping with the quote from Holloway, Hildyard’s focus is overwhelmingly on prefigurative approaches that involve building the successor society here and now, and stress the role of the producing classes as revolutionary subjects actively involved in liberating themselves and constructing a new society. It’s basically the same approach that autonomists like Toni Negri refer to as “Exodus.”
Although Hildyard doesn’t preclude — again — “making policy demands that are directed at reforming existing institutions.” But the primary focus, from the perspective of the producing classes as revolutionary subject, is on demands that “arise from the pressing need to build alliances and to expand political space.” Justice becomes a matter of discovery by the revolutionary subject — “the process of discovery itself shapes ‘justice’ through the relationships it forms and the new class conflicts that may emerge from those relationships.” And the coalescence of a revolutionary subject on a macro scale is the result, not of organizational mass and central coordination on the Old Left model, but the spontaneous proliferation of horizontal ties of solidarity between movements engaged in the process of combating the injustice where they live and create space for building a new society.
It is a product of those flashes of mutual recognition where people come to see something of their own struggle in someone else’s, and vice versa where they come to identify with others who may have quite different interests and to whom they may previously have been indifferent or even opposed; and where they are drawn together not so much because they come from or are ’embedded in absolute sameness’, but because they come to realise that their life courses are being ‘determined by ultimately similar processes and outcomes’. In this process, they open themselves up to the realisation of something previously unrecognised, shifting the boundaries of what is ‘possible’ in the process.
We constitute ourselves a revolutionary subject through the relationships we form in process of our local efforts at building a new society.
To the extent that struggles emerge from the process of building counter-institutions at a local level or issue level, and the opposition we face from power structures, the revolutionary potential of stigmergic organization reveals itself in its power to instantly facilitate global awareness, shift resources, and to transform the struggle of each into the struggle of all in an unprecedented manner.
Hildyard shows an especial fondness for the kinds of precedents in working class self-organization described by thinkers like Pyotr Kropotkin, E. P. Thompson and Colin Ward.
In the eighteenth and early nineteenth centuries, when working-class culture was being constructed through myriad relationships that brought an expanded awarnesess of oppression, working class life went on ‘more or less entirely outside of society’: unions, dissenting church groups, workers’ clubs, reading groups, worker-run creches, mutual aid societies and other cornerstones of working-class communities arose partly because wider society ignored working-class needs for schooling, healthcare and childcare…. To survive, workers were reliant on their own institutions and support networks. These were not only a response to the deprivations suffered: they were also a conscious attempt to buld an ‘alternate social and moral order’.
And today, the increasingly precarious and lumpenized working class “is re-emerging to forge new cultures of provisioning, nurturing and mutual support to weather the destruction that the whirlwind of neoliberalism is inflicting.” “Rather than looking for a ‘to do’ list that will be implemented by someone else, they are building their own power ‘to do’….”
This whole general approach, for technological reasons, is more feasible now than ever. What’s more, I would add that technological changes that facilitate stigmergic organization reduce the need for large-scale coordination and organizational mass on the part of activist movements far below what Hildyard himself envisons.
The chief advantage of our side is that while capital relies heavily on organization, organization is less and less necessary for us. Exodus — the use of networked communications and cheap, ephemeral, small-scale production tools to build economies of direct production for use outside the capitalist state — makes it possible to suck resources out of the existing system.
Even in directly combating the old institutions, networked communications technology and ubiquitous platforms act as force multipliers — what John Robb called “individual superempowerment” — that enable small groups, acting independently of one another or only loosely coordinating their efforts, to engage in “open-source insurgency” (Robb’s term, again). Corporations and states are more vulnerable than ever before to monkey-wrenching, culture-jamming, open-mouth sabotage, doxxing, leaks, and similar efforts by thousands of independent groups around the world acting on their own.
For example, the very same strategy by which capital has used production offshoring and distributed global supply chains to bypass labor organization in the imperial core, and thus hollowed out the First World working class, has also rendered it vulnerable to disruption. Stigmergic coordination of thousands of local self-directed nodes, each node relying on technologies of superempowerment, combined with the extreme vulnerability of just-in-time supply chains, offer the possibilty of doing to global manufacturing corporations what a swarm of piranha do to a cow.
And we should remember that, for all the air of triumphalism in neoliberal rhetoric, the phenomena Hildyard describes in this book are mainly reactions to the terminal crises of a dying system. They’re being adopted because the previous stuff wasn’t working to stave off collapse — and this stuff won’t work much longer either. Capitalism’s original foundation and continuing dependence on cheap stolen resource inputs, looming crises like Peak Oil in the supply of those resources, and capitalism’s increasing dependence on cost socialization to remain profitable (with the result that the demand for subsidized inputs outstrips the state’s fiscal capacity to provide them), all point to a system hitting the wall of sustainability.
What’s more, the technologies that facilitate Exodus are a crisis of sustainability in their own right. A revolution in cheap micro-manufacturing tools, advanced small-scale food production techniques that extract enormous amounts of produce from small areas of land, and so forth, mean that capitalism’s original strategy of using physical control of the means of production to extract surplus labor is obsolete. The means of production are becoming so cheap, and so easily replicable, that capital must rely increasingly on state-enforced monopolies like “intellectual property” to prevent us for producing for ourselves. But the very technologies that facilitate Exodus also render those monopolies less enforceable. What The Pirate Bay and SciHub have done for the record, film and academic publishing industries, torrent sites for garage factories to download pirated CAD/CAM files will soon do for global manufacturing corporations.
For anyone interested in prefigurative politics and the building of counter-institutions, reading the last chapter — and mining its references for further reading — is a worthwhile project in its own right. But even without this final chapter, the information in the previous chapters would justify buying the book.