4 days ago
Zohran Mamdani — a threat to Wall Street and the US financial empire
Amidst the million hot takes about Zohran Mamdani's victory in the Democratic Party primary for New York City's mayoral race, two stood out. The first involved the undisputed don of the Democratic Party's macroeconomic policymaking and former president Bill Clinton's treasury secretary, Larry Summers, taking to X to berate Mamdani. Summers accused him of advocating 'Trotskyite economic policies… following the most problematic aspects of Britain's Labour Party' and hoped that Mamdani would learn and eventually reassure Americans who are committed to a 'market economy as an American ideal'.
The second: A friend from Delhi posted a half-sarcastic story on Instagram that read, 'Congratulations to all the residents of NYC' — ribbing her fellow South Delhi folks for going gaga over Mamdani.
These disparate reactions highlight two fascinating trends evident in the aftermath of Mamdani's primary win. First, the sudden burst of enthusiasm and hatred (in equal parts) around the world about Mamdani — a name that most, perhaps, didn't know until a month ago. Second, how rattled some sections of Wall Street and the larger mainstream American economic establishment and commentariat seem to be when thinking about the prospects of a Mamdani victory in November. On the face of it, the reasons for both are straightforward.
New York no longer boasts the world's fanciest skyline; kids watching stray reels of Chongqing's infrastructure in interior Uttar Pradesh and Bihar might testify to this fact. Yet New York, with its filthy subway and rat-dominated streets, remains enthroned as the world's cultural capital. When a staunchly left-leaning politician rises in the city, it animates the global left and right in equal parts. This, at least on paper, explains the global fascination with Mamdani.
For Wall Street and the larger US economic mainstream, the idea of rent freezes and a wealth tax might be ones they are used to hearing in the American political discourse, but these need to be kept away from New York City, the heart of the global financial system. New York boasts the broadest, deepest, and most sophisticated financial markets in the world and accounts for a chunk of the US's systemic global power.
Yet, these are just symptoms of a far more structural factor behind New York's disproportionate role in the global imagination.
The late Italian economist and sociologist Giovanni Arrighi presents a masterful analysis in his book The Long Twentieth Century: Money, Power and the Origins of Our Times, of how global financial centres like New York City have risen and fallen for centuries. More substantively, he contends that over the past six centuries, Genoa (the Italian city-state), Holland, Great Britain, and now the US have built capitalist global empires, which he refers to as 'regimes of accumulation'. These have had a few common features.
First, each regime rests on a state-capitalist consensus, where economic sophistication arises from building world-class production and trade capabilities, supported by stable policies and institutions. This phase of development hinges on fixed capital investment driving productivity and mass consumption, seen clearly in early British and American dominance.
Second, when further investments in fixed capital begin to turn less productive and cause rigidities, the state-capitalist consensus facilitates the financialisation of the economy, which leads to a rapid financial expansion across the capitalist global empire. The Genoese made the switch in the 15th century. Around 1740, the Dutch withdrew from commerce and emerged as the bankers of Europe. The British also followed suit and, after accumulating heaps of capital during the Industrial Revolution, shifted to comprehensive financialisation centred around London. Similarly, the Americans, following the industrial success during the pre- and post-war period, shifted to rapid financialisation of their domestic and global economy by the mid-1960s.
Third, while each cycle of capitalist accumulation shares core traits, they differ in institutional complexity and regime sophistication. Genoa monopolised commerce but relied on external security; the Dutch internalised defence costs. Britain industrialised and absorbed both production and security. The US went further, internalising global transaction costs through its unique financial markets. This marks a clear evolutionary arc from Genoa to Holland to Britain to the US.
Lastly, every phase of financialisation has carried with it seeds of the new regime of accumulation. A financial expansion has historically resulted in the flow of capital to another country, allowing it to develop production capacities more sophisticated than the incumbent, resulting in an increase in overall interstate competition and an eventual regime change. According to Arrighi, the shift from trade and production to financial expansion marks the beginning of the end of that regime of accumulation.
As a side note, these four factors would have been quite instructive in predicting the emergence of the US-China rivalry. After all, it was the rise of the US financial system and the flow of its capital and technology to China that eventually allowed Beijing to become a competitor. Albeit significant, it's beyond the focus of our discussion.
By virtue of evolution, the US capitalist global era has produced the starkly financialised form of globalisation, where the losers and winners have never been as apparent. While the current US regime has internalised the greatest number of costs, it is also the one regime that has overlapped the most with actual democratisation. Therefore, over the past six centuries, no other empire has faced such high domestic political costs and discontents. This is precisely what has resulted in the American political system being swept away by politicians like Donald Trump and Mamdani.
How do these recurring patterns of global capitalist regimes explain the international obsession with Mamdani and Wall Street's angst with him? This is because New York isn't just the cultural capital of the world; it is effectively the capital of the US-led global financial empire. If the US created the widest and most comprehensive form of globalisation ever seen, then New York has been at the heart of it. In that sense, a small but significant upwardly mobile population across the world seems to be a part of New York's fabric and its politics. On its part, the city obliges by ensuring even its local election campaign is flooded with foreign policy debates and developments across the world.
For folks on Wall Street and the like, Mamdani isn't some run-of-the-mill social democrat. He at the very least poses a challenge to the capitalist class at the heart of the US economy. He isn't just a threat to New York City but seemingly to the whole US global financial empire. Never mind that he might need some hard bargaining with Albany to fulfil his promises.
The writer is associate fellow, Observer Research Foundation
