International monetary and currency relations are among the most glaring manifestations of imperial power in contemporary society. Money is necessarily a crucial attribute of state sovereignty and yet power over money is not equally shared. As one moves from the (financial) centres to the periphery, state control over money is significantly limited by the respective position within the hierarchy of the international monetary system. State control is doubly constrained by the pressures of international capital ‘disciplining’ the use of money against the pursuit of social goals. 

The question of money and currency hierarchy then raises deeper issues of capitalism, political economy and international law. In this post, I suggest that revisiting the work of Rosa Luxemburg helps us untangle some of the structural questions about the nature of money and its relationship to capitalist accumulation. It also helps us look beyond the veil of monetary neutrality and unravel the many ties of monetary dependence underlying the international monetary framework. 

Rosa Luxemburg and the Crisis of Accumulation

The lasting relevance of Rosa Luxemburg lies in her premise that capitalism and imperialism share an inevitable relationship. Capitalism, being an inherently unstable phenomenon, ‘is unable to exist by itself’ and needs an indispensable ‘outside’ to sustain the extraction of surplus value. The relationship between the inside and the outside of capital, although intrinsically linked, is neither static nor unidirectional; rather, it is contradictory, problematic, and a source of crisis. For capital to be internally stable, it needs to expand externally, leaving in its wake systematic destruction of non-capitalist systems, and assimilating these spaces into circuits of global capitalist production. Imperialist expansion and colonial violence in different parts of the world is the story of capital managing its own internal crisis of accumulation. 

Luxemburg was surely not the only Marxist writing about imperialism. Marx himself, along with Hilferding, Bukharin and Lenin, critically understood capital’s relationship with imperial relations of power. Yet, what distinguishes Luxemburg’s account is her insistence that imperialism was not a particular stage of capitalism, but that capital’s relationship with imperial expansion permeates every stage of capitalist accumulation. The process of ‘primitive accumulation’, i.e. the violent separation, dispossession and expropriation of colonial land, cultures and institutions then, Luxemburg reminds us, is not a thing of the past, but is a ‘permanent weapon […] down to the present day’. 

For Luxemburg, capitalism was a set of political, economic and social relationships which was inherently exploitative, violent and prone to crisis. Even in its ‘full maturity’ capital constantly depends on the ‘labour power of the whole globe for untrammeled accumulation’. Today, such varied social relations as the ‘war on terror’, forceful displacement of Indigenous populations, land grabs and privatisation of the commons arguably reveal the contestation of capital against non-commodified spaces. Law and the ‘modern state machinery’ make possible the social constitution of capital by transforming pre-capitalist social forms into the image of capitalist modernity.   

Luxemburg had a keen eye for how imperial expansion was mediated not only through direct forms of political control, but also through economic forms of coercion. Writing about the international loans system in The Accumulation of Capital preceding WWI, she explains how finance capital from advanced capitalist states to ‘young’ capitalist states performed a dual function. Even as these loans created the conditions for the ‘emancipation of rising capitalist states’, they were also the ‘surest ties’ through which the former reinforced their material control over the latter. The brunt of over-indebtedness in the periphery fell entirely on the peasant community faced with rising taxes, forced labour and, ultimately, the very ‘collapse of the peasant economy’. The predatory nature of foreign debt and international loans performed the task of structural transformation in the periphery and was a tool of subordination and exploitation. 

Monetary Dependency and Capitalist Accumulation 

For Luxemburg, the struggle between capitalist social spheres and non-capitalist ones was mediated, at least in part, through international credit. Foreign loans advanced to the periphery were aimed at coercive integration of these spaces into the world market. Luxemburg’s thesis illustrates that money and finance are not neutral instruments of economic activity, but are crucial tools for political and social control. They come with tremendous distributive consequences in terms of how the benefits and burdens of adjustment are ultimately shared. It is more appropriate then to view money as a social institution within which a range of class and intra-class struggles transpire over key distribution and allocation of resources. Control over money is control over an important dimension of social power and a crucial aspect of political self-determination. It matters, then, who wields this power and against whom.   

At the global level, ties of dependency and subordination between the core and periphery is a fundamental feature of the international monetary system. At one end of the spectrum, we have direct forms of subordination through the use of ‘colonial currencies’ in peripheral regions which have adopted the currency of their former colonial power. The CFA francfor instance, which originated in 1945, still operates in 14 countries in West and Central Africa and is strictly pegged to the Euro (formerly the French franc). This makes monetary policy making in the region almost entirely dependent on monetary movements in the Eurozone. Here, money operates as a ‘neocolonial’ tool which binds the prospects for growth, economic development and social transformation of the periphery to the economic and political imperatives of the core.

Outside this context of ‘colonial currencies’, indirect ties of dependency and subordination arise from the different positions that peripheral currencies occupy in the international hierarchy of money. Some currencies operate globally, act as a store of (safe) value and are fundamental to international trade and capital. In contrast, being at the lower end of the currency pyramid comes with tremendous consequences of instability and a loss of monetary policy autonomy. The US Dollar for instance, enjoys what is known as the ‘exorbitant privilege’, i.e., the ability to borrow and settle transactions in its own currency. The inability of peripheral currencies to act as either a medium of exchange or store of value internationally, forces the latter to borrow in currencies that are not their own, increasing the likelihood of balance-of-payments crisis. 

The use of the US Dollar as the global reserve currency further means that central banks in the periphery are inevitably subjected to the monetary policy decisions of the Federal Reserve (Fed) – a process known as creeping dollarisation. This is most visible in large scale ‘monetary policy spillovers’ from the Fed and other core country central banks to central banks in other parts of the world. Over the last decade, expansive (and now contractionary) monetary policies spearheaded by central banks in advanced market economies have exposed emerging and developing markets to sudden ‘stops’ and ‘reversals’ of capital flows, speculative trading, exchange rate volatility and currency depreciations. This ties peripheral country monetary authorities to coercive liquidity facilities of international financial institutions as well as to the largesse of core central bank swap lines, neither of which are necessarily forthcoming or institutionally unencumbered. 

These relations of imperialism and subordination have also become part of the legal and political infrastructure of domestic monetary regulation. The law and practise of central banking in most parts of the world, at least since the 1970s, operate under rigid prescriptions of ‘stability’ and ‘discipline’, enforced especially by the International Monetary Fund. Class contestation over money has given way to the overriding emphasis of ‘price stability’ as the only proper objective of monetary policy, policed by an ‘independent’ central bank shielded from political contestation. Money and monetary policy which was an important tool for redistribution and instrumentalised towards a number of social goals such as development, financial inclusion and poverty reduction, largely became a means to preserve the stability of capital. From this perspective, monetary standards of ‘price stability’ and central bank independence serve as instruments of market civilisation transforming non-capitalist institutional spaces, primarily in the Global South, into spaces considered safe for capitalist accumulation. In this, money and central banking straddles along ‘imperial divides’, entrenching bonds of subordination between the core and periphery. 

Luxemburg and the Project of Critique 

To revisit Luxemburg is to fundamentally reevaluate this complex interaction between money, law and the global economy as a historically contingent and materially conditioned process. It is to understand that notions of process, equality, freedom, and the rule of law come embedded within structures of domination and exploitation. Luxemburg also points to the urgency of a critical discourse which takes the structures of political economy seriously, especially in the way these structures are constitutive of capitalist social relations. 

Luxemburg’s thesis did not go unchallenged. She was charged with crude economic determinism, criticised for ‘distorting’ Marx, and faulted for her misunderstanding of expanded reproduction. Regardless of how one might evaluate these observations, her historical claim of capital unfolding in the shadow of Empire remains highly valuable and accurate for the study of international law and political economy. Indeed, Third World Approaches to International Law (TWAIL) and Marxist scholars have drawn on Luxemburg’s explanation of imperialism to reflect on the relationship between capitalist accumulation and international law. Similarly, some within the field of political economy have repositionedLuxemburg as ‘among the pioneers of critical finance’. In this sense, one can think of Luxemburg as a bridge between a number of critical disciplines, opening up further possibilities of dialogue and collaboration.

All of this is not to suggest that revisiting the work of Rosa Luxemburg is an easy task. She was clearly writing in the context of a specific historical moment. We must then cast aside any simplistic aspirations that Luxemburg’s contributions might speak directly or unequivocally to the faultlines of our current social order. Yet, the nature of her enquiry and her fundamental critique of capitalism as a contradictory global system of accumulation and exploitation can hardly be confined to the annals of history. Perhaps, then, the lasting endurance of her work lies precisely in the kind of questionsshe was asking about ‘capital’, its (violent) relationship with the outside and how the latter is constantly created, remade and transformed. 

Research fellow, Max Planck Institute for Comparative Public Law and International Law, Heidelberg.