Capital flows and nations

The previous post doesn’t imply that resistance to nation-based solutions has been the only response to the crises. That’s not been the case, as the recent explosion of nationalist idiocies — to use just some of the proper names: tea parties, Germany’s program of austerity in defense of its exports, and France’s explusions of the Roma — show clearly enough. Not surprisingly, the twin crises, of the economy and of finance, have produced autarkic fantasies everywhere, and not just on the political right.

The key word here, I think, is produced. It’s become standard analysis to describe nationalist upsurges in the last few decades as reactions to the increasing borderlessness of capital. The implication is that older economic forms that used the nation as the primary determining economic and political boundary actually tamed, or at least rationalized, these latent tendencies, while globalization’s deterritorializations have loosened them. But even though such views give the nation a certain amount of autonomy that is missing in economistic accounts, they still assume that nationalism is natural, eternal even, and overlook how it is created and maintained, however fragilely and imperfectly. It would be better to investigate how the global movement of capital has produced these nationalisms — in both their quotidian and evental expressions — rather than relegate them to the status of mere anachronism.

Of course that’s a big project, one definitely worth researching but more than I will or can do here. For now I’d like to look at just one aspect of the recent crises and its relation to a nation: the flow of foreign capital into the United States. Obviously it’s impossible to draw definitive conclusions from these very partial figures, but I think the flow of money is certainly a matter worth investigating.


As this first chart shows, at the onset of the crises, the flow of private capital into the United States completely stopped. Of course in one sense this is hardly a revelation: as everyone already knows, in 2008 private credit flows completely froze. But less frequently acknowledged is that their immobility was due in large part to the fact that the multibillion dollars coming into the United States each day, which was required to sustain the current world dynamic, dropped to below zero. (Significantly, it was also at this time that another incoming flow turned negative: the flow of labor.) Nonstate investors everywhere held on to their cash.

In the absence of flows, the world economy started living off its stock.


The next chart shows this in more detail: In 2008 and 2009, there was no incoming capital from private sources for private investment. But notice also that as total inflows dropped off massively, the levels remained the same or increased dramatically in three areas: foreign official (i.e., government) purchases, U.S. Treasuries, and U.S. currency. In other words, though foreign private capital fled away from the United States (and back to its “home”), foreign states still invested strongly in the United States and they did so by resorting to safe-haven investment: government bonds and currency. (This turn to certainty was mirrored by domestic private investors, who either hoarded their money or parked it in nationalized instruments.)

The intertwinement between the U.S. government and foreign governments grew ten-fold in five years, and this relation became almost exclusively based on conservative modes of investment, became directly correspondent with and even determinative of national regimes of production and accumulation, and became the primary mover of capital. Without the government’s direction of flows, there would have been almost no movement of capital at all. So Tea Party delusions about Obama’s socialistic expansion of government are not entirely fanciful, but they ignore that their beloved market turned to government, not vice versa, and that the state only performed its historic role both as chief reterritorializer, and added to its resume the role of only efficient allocator of capital.

It’s probably also worth pointing out that also in 2008 foreign ownership of total U.S. Treasuries decisively topped 50%, after hovering around 35-40% for most of the aughties.

So private capital is largely staying to its national territory while public capital seeps more fully into the pores of global capitalism, looking primary for safe, nation-based investment. Meanwhile, within the United States something else notable is happening: an immense increase in the rate of domestic/household savings, and to a lesser extent business savings. As the following chart shows, U.S. households underwent an epochal transformation from huge deficit spender (“the consumer of last resort”) to huge saver almost overnight.


As soon as the crises hit, Americans withdrew from the world, holding onto their cash and not spending either on investment or consumption. This hoard of money became, I think, the basis for the moral revulsion of government debt and of the foreign lenders who enabled it.

So what does this very brief statistical sketch indicate? Well, as I said, drawing exact conclusions directly from the figures would elide the contingencies of politics, but it might be possible to draw a (segmented, perhaps convoluted) picture from the flow of money. As private capital stopped flowing productively, as it either sought safe (i.e., national) foreign investments or (along with the flow of labor) returned home, the U.S. government became the de facto receiver and director of capital flows. This increase in state-directed investment was largely underwritten by foreign investors, particularly foreign governments. It’s not coincidental that this (foreign-financed) state became so hated in the political imaginary, a hatred no doubt magnified by the U.S. president’s race and complicated, enigmatic national history. Rhetoric about Kenyan-Islamist-Marxist-Nazis crept in, but what produced it was as much the decisiveness of foreign capital in the U.S. economy as a president with suspect loyalties.

As the state became so despised, questions about national orientation became primary. There are right-wing versions (kill state socialism!) and left-wing versions (where’s the new New Deal?) of the questions, but the aspirations of independence and self-renewal were fueled by the huge surge in the household savings rate and the government’s increased role in directing industrial policy.

And so from this something like the current situation emerges: a bunch of material (monetary) factors have increased the importance of national economies, which has given rise to politics that are bounded by those national dynamics. The increase in nationalism is not limited to the exceptional varieties I listed at the beginning of this post. The everyday mechanisms of national difference — currency differentials, central bank policy, etc. — which never disappeared even during the high point of “globalization,” are becoming more, not less, decisive. As the recent quantitative-easing flap between the United States, China, and Germany shows, nations’ function of projecting or protecting their economies remains a central element in the world economy. It’s no surprise that political programs would follow from these national requirements.

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