Towards a socialist finance

a look to the past, for the future

From the article “Concrete Utopia,” on Yugoslavian Architecture.

I’m trying to understand finance as a socialist. The pandemic is a good opportunity because I’m stuck waiting at home, and capital’s belly is cut wide open. Good time to look inside.

I want to be conversant in the language of power. The ruling class speaks in terms of charts, finance, policy. They talk about monetary policy, fiscal policy, reserves. But these are just words. And there are concepts behind words.

Being a socialist going into finance, it’s important to maintain socialist concepts. We’ve got to stay socialist. It’s easy to get interpellated into the capitalist concepts behind words like ‘fiscal policy’, ‘bond’, or even the word ‘finance’ itself.

One of the best ways to stay socialist about finance is reading about socialists who have worked in finance before. The easiest, ready to hand examples of course are communist countries like Soviet Union, Cuba, and China. But these are controversial cases to say the least. The Soviet Union is long dead, Cuba has been starved by blockades (like Venezuela and its sanctions), and China is…state capitalist run by communists?

In terms of historical examples, another option is Yugoslavia and the nonaligned countries. Yugoslavia is lesser-known in the US, though it forged its own complex and successful socialist economy as a bridge between global capitalism and communism. It was a federation between distinct countries, like the US. It also placed a high emphasis on solidarity with the international working class, particularly in the third world.

The Yugoslavian socialist economy had its own socialist approach to finance. There’s a lot to read about it so I’m going to start with just one essay: Johanna Bockman’s recent work on socialist structural adjustment by Yugoslavian economists.

Bockman reads back into the history of neoclassical economics and those influenced by it to find examples of socialists using the paradigm to craft policy. (I’m currently reading her book on this history.)

Adjusting together

You might remember the term ‘structural adjustment’ as a tactic used by the International Monetary Fund to impose austerity on poor countries.

Basically, to get a loan from the IMF or the World Bank, countries had to neoliberalize their economies: weaken state programs, weaken unions, and make it easier for capital to come and go. It’s a lynchpin of globalization. To get much needed credit for financing government projects, countries have to adjust their social structures to accommodate global capital.

But Bockman argues that the term ‘structural adjustment’ was actually first conceived by socialists trying to do something very different.

Rather than accommodate global capital, Yugoslavian economists “argued instead that the entire world should structurally adjust together.” (258) This collective, cooperative adjustment process “viewed international finance and international interdependence as essential to socialism.” (263)

These economists believed in the

abolition of the domination of capitalist principles in international exchange and in international economic relations in the world and their replacement with new relations is a process dependent on the increase in the share and significance of socialist countries and socialist elements in international trade and international economic relations in general. (265)

In this sense, “structural adjustment meant the redistribution and reorganization of the means of production…with each country having its own comparative advantage.” (259) Inevitably, that project meant going against “colonial pathways.”

Bockman gives the example of the economist Avramović, who in 1952

argued not only for the change of the structure of exports and imports in individual countries but also for countries worldwide together to adjust the balance of payment system in order to reach a new world equilibrium. (262)

Avramović and others called for an “end [to] trade discrimination,” (265) by enacting policies that created “horizontal trade channels” between developing and developed countries.

In a lecture Bockman gave at the City University of New York in 2018, she mentions the example of a Yugoslavian factory that opened in Tanzania. What mattered to the Yugoslavians was that Tanzanians could work, produce, and sell goods—ultimately bringing in revenue.

What mattered in this case was not the ‘development’ of Tanzania such that it became more open (and indebted) to global capital from imperial centers, but rather to realize an “effective international division of labour.” (267)

The economists used other policies, largely through bank projects at the United Nations:

To support new trade routes and avoid the high fees charged by large corporate banks in the global North, UNCTAD encouraged the creation of multilateral export insurance and re-insurance institutions, export credit and export credit guarantee agencies, regional development banks, and monetary unions controlled by countries in the global South (268)

Socialist structural adjustment, this “adjusting together” to enhance the productive capacity of the international working class along anti-colonial pathways, implies a host of other national and international financial policies involving banks, imports, exports, and multi-lateral relations.

One-sided liberalization

So what happened? How did structural adjustment become the capitalist and neocolonial project we hear about today?

Basically, Anne O. Kruger came into the IMF and interpreted the term ‘structural adjustment’ with a capitalist concept. She render it a one-sided, Hayekian “liberalization” where the IMF

did not force developed countries to end protectionism or to shift their industries to the global South. Therefore, structural adjustment became a requirement for individual developing countries and not a global project required of all countries. (268)

The Yugoslavians disagreed of course, arguing that “capitalist structural adjustment required a strong state, as well as legitimization through superficial democracy, and strong multinational corporations” (270).

Towards a new socialist finance

I’m interested in this history because, when you read it, you suddenly start thinking about finance differently. Just the possibility of a socialist understanding of structural adjustment—and the policy it implies—gets the wheels turning. It’s like opening a window and getting some much needed fresh air.

What would it mean to govern Socialist America, specifically the Federal Reserve, with the Yugoslavian concept of structural adjustment? Would it be possible to use national and international finance to build up the working class? Put productivity and cooperation before capital?