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Illiberal Finance: Think Globally, Act Locally

Updated: Sep 4, 2021

Nikola Gruevski has been living in exile since 2016, enjoying the hospitality of Viktor Orbán. North-Macedonia’s former all-powerful Prime Minister built his regime on a seemingly unlikely alliance: international investors looking for new profit opportunities after the 2008 crash and domestic oligarchs adept at converting political power to economic power and back. In Dark Finance (Stanford University Press, 2020), Fabio Mattioli shows how this network was constructed at the top, and how it felt at the bottom.

Between 2006 and 2016, Nikola Gruevski was Prime Minister of North Macedonia, called the Former Yugoslav Republic of Macedonia until 2019. The Gruevski-led VMRO-DPMNE (Internal Macedonian Revolutionary Organization – Democratic Party for Macedonian National Unity) government fell in 2016 after leaked recordings revealed the shady and violent side of the regime. Although VMRO-DPMNE won the 2016 elections, it was unable to form a governing majority. At the end of the political stalemate, Gruevski’s supporters — an angry mob of thugs and overzealous nationalists —occupied the parliament. However, Gruevski was eventually forced to resign and leave North Macedonia. He did so undercover, with the help of the Hungarian government which literally smuggled him out of the country to escape corruption charges.

Mattioli’s book shows how Gruevski’s authoritarian regime was “directly connected to the forms of financial expansion experienced at the European periphery.” Gruevski was able to hijack both expectations of profits held by global financial actors, and the desire for recognition expressed by Macedonian citizens. The combination of abundant international liquidity available to the government, and domestic illiquidity squeezing businesses, allowed the Macedonian government to “monopolize the money supply and force businesses and individuals to embrace illiberal politics.” The book’s five empirical chapters offer an exploration of different sites where finance and politics collided.

Constructing oligarchic networks

The first chapter outlines the key players of Gruevski’s illiberal network. The central pillar of this financial architecture was public procurement in the framework of the Skopje 2014 project. Launched in 2010, the project was initially branded as a Keynesian stimulus, with a total cost that ballooned to €683 million by 2017. However, the true goal of the project was to tie the oligarchs to Gruevski. At the same time, construction also operated as a political symbol of development — a symbolism deeply rooted in socialist times, when the construction sector boomed and busy workers built modern Macedonia. The Skopje 2014 project, thus, served a political-aesthetic goal. To the urban middle-class, construction sites were a nuisance; to the working-class, they represented new jobs, access to housing, and an “aesthetic irredentism” that offered them recognition that was denied during the neoliberal transition from socialism to capitalism.

Gruevski’s key ally was Sašo Mijalkov, head of the secret services and owner of the country’s most important private security company. Mijalkov was the son of a socialist-era state company manager, Jordan Mijalkov, Gruevski’s uncle, head of an export-import company in the textile sector. These import-export companies played a central role under socialism in securing hard-to-come-by foreign currencies. The creative and shady financial practices (fake invoices, black currency trading, etc.) of these managers and financial bureaucrats lived on in the post-socialist era, during privatization and the difficult 1990s, paving the way for later illiberal financial practices

The country’s economic and political life had been dominated by VMRO-DPMNE’s key rival, the Social Democratic Union of Macedonia (SDSM), the successor of the state-socialist League of Communists of Macedonia. Because it was the Social Democratic Union who privatized most state assets in the 1990s, Gruevski’s clique occupied a relatively marginal position until 2006. Corruption scandals brought the Social Democratic government down in 1997, leading to the first short-lived VMRO-DPMNE government. Between 1997-2002, Gruevski was minister of finance. However, the oligarchs that rose in the 1990s were hostile to Gruevski’s party. Gruevski and his clique responded to this challenge by reactivating Jordan Mijalkov’s connections inside the Macedonian intelligence community and aggressively building an alternative oligarchic network (later, it turned out that they wire-tapped 20,000 citizens, journalists, politicians, and businesspersons to achieve this). This is the most immediate political context of the VMRO-DPMNE regime. However, it would have been impossible for Gruevski to create his illiberal network without the support of the international financial community.

European neoliberal finance meets North-Macedonian illiberalism

In 2006, Gruevski was elected as a pro-European neoliberal by rural and working-class nationalist voters. The second chapter of Fabioli’s book analyzes the role of illiberalism’s neoliberal enablers: EU agencies, global institutions, and foreign investors, eventually zooming in on two Italian entrepreneurs. Connecting micro-stories of adventure-seeking petit entrepreneurs, big investment projects, and financial internationalization, chapter 2 is an excellent description of the dialectics of Europe’s political economy and how it led to a reallocation of investments to Europe’s Eastern periphery after the 2008 crisis. Gruevski’s government set up an investment promotion agency, Invest in Macedonia, and launched an international marketing campaign branding Macedonia as a site of cheap labor for foreign investors. North Macedonia was a latecomer to the competition for Foreign Direct Investment (FDI), so Gruevski started to spend heavily on improving the country’s international reputation.

However, investors were much more cautious when it came to private investments. Gruevski managed to attract a few large investors, but most of them came from other peripheral or peripheralizing countries that were hit hard by the 2008 financial crisis, such as Italy, Greece, or Hungary. Mattioli mentions that Gruevski struck a deal with WizzAir, a low-cost Hungarian airline, to renovate the country’s airport. WizzAir has been dominating North Macedonia’s passenger air traffic ever since. One could add Hungary’s MOL, a key investor in North Macedonia’s oil infrastructure, or the country’s right-wing media landscape, primarily owned and managed by oligarchs connected to Viktor Orbán. Macedonia’s and Hungary’s illiberal financial networks clearly overlap.

Before the global financial crisis, international investors had shown little interest in North Macedonia. However, Gruevski’s neoliberal branding campaign finally caught the attention of international investors squeezed by the crisis. At the same time, private banks remained cautious and had been reluctant to lend money to companies and households, instead preferring the stable profits that state bonds yielded. As a result, between 2007 and 2015, North Macedonia’s public debt grew from 20% to 46% of GDP. This led to a paradoxical situation, where the government had access to abundant external financing, while domestic businesses had to struggle with illiquidity. This constellation allowed Gruevski to deepen his party’s financial embeddedness, tying the most prominent domestic investors and oligarchs to the party, vying to replace the oligarchic networks of SDSM.

Chapter 3 explores the nature of Macedonia’s illiquidity or non-payments crisis, highlighting the role of kompenzacija, in-kind barter-like exchanges that transformed from simple tools of liquidity management into tools of financial oppression, i.e., forced credit. Mattioli shows how barter and other forms of in-kind exchange, such as kompenzacija, were central to the operation of the socialist economy; this legacy of creative financial practices outlived the socialist state. Initially, kompenzacija was a creative way around liquidity problems, but gradually it morphed into forced credit, used for extraction under Gruevski’s regime.

Chapters 4 and 5 explore the experience of this authoritarian financialization from the perspective of construction workers. The lived experience of precarity under Gruevski led to increased competition and micro-hostility among workers. This eventually eroded communal events and evaporated working-class solidarity. Suspicion, competition, and hostility destroyed the communal fabric of the factory where Mattioli did his fieldwork. At the same time, the Gruevski government strategically deployed working-class kitsch and reinforced traditional male-chauvinist moral codes to maintain workers’ support for his party. Mattioli argues that it is no wonder, therefore, that young, urban middle-class women led the protests against Gruevski and the Skopje 2014 project. These two chapters provide an astute analysis of everyday identities; however, the reader wonders whether the changes Mattioli describes could have indeed taken place during the short period — one year — he concentrates on. A historical analysis of post-socialist occupational and gender identities could have covered more ground.

Parallels and insights

The book’s theoretical framework rests on what Mattioli calls “organic political economy” — others might call it cultural political economy — rooted in the heterodox post-Marxist tradition. Mattioli treats finance not in an abstract sense but in terms of how it becomes a constituent part of social life. As such, the book is a cogent demonstration of the power of political-economic anthropology. Combining fieldwork with a deep contextual understanding of the lived experience of class and economic change, combined with cultural political economy, can yield insights into the intricate interplay of authoritarianism and neoliberal finance that would be hard to gain following other approaches.

Anthropologists of Eastern Europe — often from the West, combining the foreigner’s vantage point with the participant observer’s deep contextual knowledge — had been prescient about the region’s predicament. The Italian-born anthropologist Mattioli follows in the footsteps of Michael Burawoy, David Kideckel, Kristen Ghodsee, Chris Hann, Don Kalb, and many other anthropologists who presented the first in-depth analyses of the contradictions of post-socialist neoliberalism. While most analysts concentrating on macroscopic trends celebrated the expansion of markets, ethnographers have shown the deeply felt dislocations that this process brought. They were also among the first to recognize how this post-socialist marketization can kick-start a Polanyian double movement towards nationalist forms of self-protection. These dialectics are also at the heart of Dark Finance.

Mattioli keeps the focus squarely on North Macedonia. However, Gruevski’s North Macedonia offers unexplored parallels with other instances of illiberalism, such as Hungary, Turkey, India, or even the U.S. in some cases. Hopefully, these similarities will be topics of comparative work in the future.

International financial investors and European money play a crucial role in enabling and stabilizing Hungary’s illiberal regime. Despite the EU’s efforts to build high-quality bureaucracies at Europe’s Eastern and Southern peripheries, EU money is often intercepted by local oligarchs, feeding unsustainable, developmentally counter-productive forms of revenue extraction. In addition to the national bourgeoisie, German car manufacturers are among the biggest winners of Orbán’s regime in Hungary, as I demonstrate in my book. India’s Narendra Modi also combines harsh neo-nationalist hierarchies with a neoliberal branding to attract foreign investors and sell India as the new land of opportunity. For investors looking for new profit opportunities, neoliberalism’s authoritarian and nationalist mutation is not a problem, as aptly captured by the term “neo-illiberalism” coined by Reijer Hendrikse.

The parallels in the story of privatization are again striking. Both in Hungary and North Macedonia, the socialist successor party dominated the privatization in the 1990s, creating the two countries’ first batch of national capitalists. These groups maintained better ties with the ex-socialists than their nationalist challengers, forcing Gruevski and Orbán to embark on an aggressive project to build an alternative economic elite. Even the political timing is almost the same: Gruevski was in government between 1997 and 2002, Orbán from 1998-2002, both using their first stint in power to start to build the financial network around their parties. Then they catapulted back to power in the second half of the 2000s, Gruevski in 2006, Orbán in 2010.

The way in which these neo-illiberal elites manipulate workers to gain their support is again strikingly similar. The disgruntled working-class and rural voters helped Gruevski to power. Although Orbán lost a large segment of his working-class electorate after 2010, left-wing parties are still underrepresented among workers. Regional medium-sized industrial towns used to be the non-metropolitan strongholds of the Hungarian Socialist Party. Now, most of these towns are solidly ruled by Fidesz or its right-wing challenger Jobbik. Working-class neo-nationalism is a potent alternative for workers and the rural post-peasanty left behind by the progressive neoliberalism of the post-socialist left. Again, the parallels concerning working-class nationalism do not end with Hungary. One does not need a PhD in political science to recognize the similarities in how extreme neo-nationalism fed into zealots storming the parliament in Macedonia or the Senate in the US.

Fabio Mattioli has written a vibrant book, mapping the networks sustaining Nikola Gruevski’s power and the lived experience of “authoritarian financialization,” and offering novel insights into Macedonia’s and Europe’s political economy. The book combines ethnographic and an almost-poetic sensitivity, rich in its description of economic, urban, and social landscapes. In addition to being a skillfully executed ethnography, Dark Finance: Illiquidity and Authoritarianism at the Margins of Europe is a fascinating case study, a crime story, a political drama, and a political thriller. Highly recommended not only for those seeking to understand Gruevski’s regime but anyone interested in illiberal finance.

Fabio Mattioli “Dark Finance. Illiquidity and Authoritarianism at the Margins of Europe” Stanford University Press 2020

Collaboration: Oliver Garner


Originally published in the Review of Democracy, on June 4, 2021.


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