political economy

China and Ecuadorean Oil

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In an ongoing attempt to sketch the borders of China’s challenge to the Left, some brief thoughts/quotes on Ecuador and resource extraction.

Patrick Iber in Dissent on the “Pink Tide” in Latin America:

With the benefit of hindsight, it becomes clearer that the Pink Tide was made possible by a boom in the global price of commodities. That boom structured both its achievements and its limitations. Latin-American economies have long been exporters of primary products and importers of finished ones; most industrial production is destined for internal markets. In the early 2000s, rapid growth in India and China drove up the price of primary products, from oil to lithium to soybeans. This gave governments the ability to spend money on social welfare and development, satisfying—at least in part—the needs of their political bases without making fundamental structural changes to their economies or their position in the global system of trade…

Policies under Rafael Correa’s government [in Ecuador] have frequently strengthened the state while weakening organizations in civil society. Correa preferred initiatives that provided reliable support to his political project rather than ones that could advance democratic and egalitarian goals. But the organizations created by the state to compete or replace more self-organized associations have not succeeded, and they have the potential to become instruments of control and demobilization.

And from Jacobin’s Pink Tide retrospective in 2017:

In Ecuador during the boom years, this model provided crucial revenues for social spending. But in the context of an economy like Ecuador’s, which is still dominated by oligopolistic markets, these revenues were mostly transformed into private-sector profits.

They provided people with spending money, but they spent it in private-sector controlled markets. It was the private sector that truly reaped the benefits of that increased social spending.

The continuing reliance on oil revenues seems to have left it both a first and last resort to continued government financing. The main benefactor of this has been China:

Last November, Marco Calvopiña, the general manager of Ecuador’s state oil company PetroEcuador, was dispatched to China to help secure $2 billion in financing for his government. Negotiations, which included committing to sell millions of barrels of Ecuador’s oil to Chinese state-run firms through 2020, dragged on for days. Calvopiña grew anxious and threatened to leave…

Shunned by most lenders since a $3.2 billion debt default in 2008, Ecuador now relies heavily on Chinese funds, which are expected to cover 61 percent of the government’s $6.2 billion in financing needs this year. In return, China can claim as much as 90 percent of Ecuador’s oil shipments in coming years, a rare feat in today’s diversified oil market.

“This is a huge and dramatic shift,” said Rene Ortiz, a former Ecuadorean energy minister and secretary general of the Organization of the Petroleum Exporting Countries. “Never before has Ecuador committed its oil to a lender.”

This is the nexus of several trends at once: fossil fuel dependence, a non-diversified resource extraction-intensive economy, a lack of internal markets sufficient to generate revenues to support a good and robust social safety net (and as the Jacobin piece makes clear, the failure to create a more vigorous political project). China is there to take advantage of it. So why is that sub-optimal?

  1. It surrenders control of its own production to China, by ensuring the diversion of its oil to them for a period of years
  2. It constrains budgets by diverting government funds to repayment for loans
  3. It further enriches speculators and enlarges the oil market as the province of traders rather than simply producers and consumers (with all the commodity disruption that portends)

The U.S. Department of Defense’s Assessment on U.S. Defense Implications of China’s Expanding Global Access cites Ecuadorean oil as one example of an “unfair” economic deal that offers some benefits but “also carr[ies] costs to host country sovereignty.” In the case of Ecuador, that might well mean constraining the ambitious welfare and social justice programs begun under Rafael Correa. It’s further proof that social programs will have to be accompanied by decarbonization, and soon.

Individual Limits

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Nils Gilman has a great review essay in the LA Review of Books on Samuel Moyn’s Not Enough: Human Rights in an Unequal World, and it’s definitely worth your time.

In short, Moyn’s book traces the parallel development – at least from a rhetorical perspective – of “human rights” coupled with the language of “individual freedoms” associated with neoliberalism as a political project. Or, in Gilman’s words:

The book takes the form of an intervention into two huge historical debates, the first about the history of neoliberalism and the second about the history of human rights, a field whose current contours Moyn helped to define with his 2010 book The Last Utopia: Human Rights in History. The puzzle he seeks to explain is: How is it that the era of neoliberalism, commonly said to have begun in the mid-to-late 1970s, coincides almost perfectly with the triumphant rise of a discourse of human rights? In other words, how can it be that an era whose ethical self-conception was rooted in a transnational movement to prevent abuses such as torture, disenfranchisement, and political imprisonment has also been an era in which national and global economies were remade in ways that have allowed wealthy capital owners to capture the large majority of economic productivity gains, creating in-country inequalities not seen since the late 19th century?

Like many books of this nature, however, where it comes up a little short is in the realm of recommendations. Which isn’t to say every accurate diagnosis requires a treatment as well – in many (if not most) cases, the remedies are obvious and what’s lacking is political will – but the proliferation of this particular vocabulary throughout the establishment is pernicious, and lends itself to certain mindsets that would likely be difficult to shift.

If individual freedoms – and mostly freedoms to, rather than freedoms from – are the essential building blocks of modernity, how then to advance a project predicated on finally meeting more than just basic needs as a matter of due course, of restoring egalitarianism to the world stage on a massive scale? As Gilman explains it, even just conceiving of a way to address this will require a tremendous shift in the realm of the imaginable:

…In a globally integrated economy, only a global-scale regulatory entity has a serious chance to tame the power of global capital. In short, if the re-autarkization of national economies, as proposed by some nationalists and populists, is to be avoided, we may wish to revisit another largely forgotten intellectual episode from the protean postwar moment of the 1940s — namely, the idea of a world government.

To propose the idea of a planetary-scale state, in a time of backlashes against globalization and surging populist nationalisms, may seem less a utopian delusion than a form of political madness. To date, as Moyn himself notes, “there has been no serious erosion of the assumption that states are on their own to fulfill the economic and social rights of their citizens. […] [I]n the neoliberal age, international law furnished no redistributive tools among states, and few activists or governments tried to build them.” But we live in a time of collapsing political limits, and many things that seemed impossible or inconceivable just a few years ago have been achieved or surpassed. Who is to say that the future may not belong to a world state? Indeed, as hard as it is to imagine how such a state might come into existence, it may be even harder to imagine how the world’s immense demographic, environmental, and political challenges can possibly be addressed without one.

The hardest part, and the one that involves the deepest uprooting of American sentiments, is getting away from the cult of individuality and rediscovering the power of collective demands. An individual right is, in many ways, no right at all; it is the right to imagine a better future without securing one; the prohibition on Anatole France’s rich and poor alike to sleep under bridges; the right to express as loudly as you like how unjust the world is – but not to actually see any remedy.

I’ll have more to say on this later, but given the radical challenges facing us (and the utter failures of incrementalism on display in the past few years), it is telling that a clear-eyed assessment of the situation leads almost inexorably to solutions that, until only the past few years, were inconceivable. The current state of international political economy requires profound change if we are all to survive.

Anyways, read Gilman’s essay (and Moyn’s book)!