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This is not a blog which expresses instant opinions on current events. It rather uses incidents, books (old and new), links and papers as jumping-off points for some reflections about our social endeavours.
So old posts are as good as new! And lots of useful links!

Saturday, March 14, 2015

How governments have bought - and used up - time

It’s significant that the best expositions of the global economic crisis and its causes do not come from economists……..somehow the framework within which the modern economist operates precludes him/her from even the vaguest of glimmerings of understanding of the complexity of socio-economic events. Their tools are no better than adequate for short-term work…..
For real insights into the puzzles of the modern world, think rather David Harvey (a geographer); John Lanchester and James Meek (novellists and writers); Susan Strange and Susan George (political science); or Wolfgang Streeck – a Koeln Professor of Sociology. All have extensive and eclectic reading; a focus on the long-term; and the ability to provoke and write clearly. 

Streeck is also Director there of the Max Planck Institute and an unlikely scourge of capitalism – but his texts are becoming ever more apocalyptic. 
For my money, his analysis offers much more than everyone's current favourite Thomas Pikety - whose 700 page magnum opus I suspect few have actually read.

The New Left Review is the favoured outlet for Streeck’s long, clear and incisive articles eg one in 2011 on “The Crisis of Democratic Socialism” and then one last summer on “How Will Capitalism End?” introducing an English audience to the arguments of the short book Buying Time – the delayed crisis of democratic capitalism which had appeared in Germany in 2013. European Tribune offered the following useful summary -
Capitalism and democracy were a powerful couple during the "trente glorieuses" post-WWII years. Expectations of economic growth, full employment and increasing prosperity became so entrenched that the fundamental antagonisms between the two were overlooked, or even deemed to have been definitively relegated to the dustbin of history. This, indeed, was the dominant view of the Frankfurt School during Streeck's formative years.
The book's introduction, "Crisis theory : then and now" deals with this historically embarrassing mis-analysis. Jürgen Habermas, in particular, developed the notion of the "legitimation crisis", postulating that people expect governments to intervene successfully in the economy to try and ensure economic prosperity, and that failure would cause the validity of the capitalist system to be questioned, thus undermining its legitimacy.
Streeck presents his book as an attempt to rehabilitate crisis theory, explaining that the postulated legitimation crisis is now upon us... forty years later, having been pushed back by our governments' successive, and moderately successful, attempts at buying time.In fact, the end of the post-war boom indeed led to a legitimation crisis - but it was not the workers/ consumers / electors who revolted. It was capital.
The notion of "Late Capitalism" has been around since the beginning of the 20th Century. But the predicted demise of capitalism is late, and keeps getting later. The error committed by the neo-Marxian Frankfurt thinkers, in Streeck's analysis, was to have considered capital as a resource, more or less biddable and accountable to democracy. Of course, as they should have known, capital is an actor, particularly in class struggle.
Streeck outlines several phases in the attempts by governments to buy time for their socio-economic model subsequent to the boom years : 
Inflation In the 70s, productive investment started to fall short of what was required for full employment. Inflationary monetary policy was the first ploy to buy time, accommodating wage rises in excess of productivity growth. But the replacement of real growth with nominal growth lost its charm with stagflation in the late 70s, which put a squeeze on profits and threatened to lead to a capital strike. 
Public debt The monetarist revolution of Reagan, Thatcher and imitators put capital back in the driver's seat. The recession they provoked, with its mass unemployment, did however require additional revenue to keep the wheels turning, and governments resorted massively to borrowing.
Private debt In the 1990s and 2000s, slashing of public services and reduction of public debt was accompanied by an explosion of private debt. 
Each of these phases is seen by Streeck as a means of conjuring money out of nowhere, in order to enjoy the benefits of growth in excess of growth itself.
The financial crisis of 2008 is seen as the final reckoning, the democracy/capital nexus being confronted with its contradictions.According to Streeck, democracy and capital were forced by circumstances into an arranged marriage after WWII. But each successive crisis entailed the progressive emancipation of capital from democratic constraints. Self-regulated markets were alleged to function efficiently, and government intervention in economic matters was de-legitimised. This ideology is now so dominant that it is hardly even questioned after the massive nationalization of private losses which was imposed on the citizen/taxpayer as the price to prevent economic collapse in the recent crisis.

The expansion of the financial sector, and the ever-increasing mobility of capital, have made the capital markets a harsh and fickle mistress for democracy. In fact, Streeck identifies the fact that governments are now accountable to two distinct constituencies : their citizen electors, or people of the nation (Staatsvolk), and their creditors, or people of the market (Marktvolk). The characteristics of these two constituencies of what he calls the “debt state” can be portrayed thus -
Staatsvolk
Marktvolk
National
international
Citizens
investors
civil rights
claims
Voters
creditors
elections (periodic) 
auctions (continuous)
public opinion
interest rates
Loyalty
"confidence"
public services
debt service

Other useful resources on the book are -

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