Wolfgang Streeck

Afraid of the Capitalist Victory

Klassekampen, Oslo, January 15, 2015 (in Norwegian)

As I understand it one of the main arguments in your book, „Gekaufte Zeit“, is that we now experience a rise of a new form of capitalism in the western world. A form of capitalism which evades democratic procedures. What is the main problem with western democracies? And is it possible to restore the balance between democracy and capitalism?

The so-called postwar settlement in Western capitalist democracies involved a state capable of correcting the distributional outcomes of markets. In exchange for its reinstatement after the disasters of the first half of the century, capitalism had to produce public benefits such as full employment, a growing welfare state, social security, steadily rising incomes, and a gradual reduction of inequality. For several decades now, Western capitalist economies have no longer been able to deliver on these promises. Growth is declining, inequality increasing, public and private debt is rising, so are economic risks, and crises are becoming more severe and disruptive. The new doctrine of economic policy is higher rewards for the winners and greater punishments for the losers – redistribution from bottom to top – rather than growth by stabilizing and expanding aggregate demand through steady increases in mass incomes: from Keynesianism to neoliberalism. For this purpose economic decision-making has to be taken away from democratically elected parliaments and accountable governments, to be relocated in international organizations and institutions as well as in “independent” central banks. As I said, these are trends that have been going on for decades. I cannot see how they could easily be reversed in the near future.

You also argue that classical „tax state“ has been replaced by what you have called the debt state, and that we after the financial crisis in 2008, face the rise of a consolidation state. What are the characteristics of this consolidation state? And what were the benefits of the classical „tax state“? And is it possible to reinstall the „tax state“?

The consolidation state is an attempt to turn around a historical tendency for the public sector in advanced capitalist economies to grow in relation to the economy as a whole. Rising public debt since the 1980s was an attempt to protect public sector growth from rising tax resistance of the middle classes and of international business. In a world of globalized finance tax bases can easily move to tax havens like Singapore or Luxemburg (the home state of the recently appointed President of the European Union). The consolidation state is a response to growing concerns on the part of the financial industry about the capacity of debtor states to repay their loans. A leaner state with fewer obligations to its citizens is a safer place to invest your money. The desire among lenders to make states (again) safe for financial investment is behind the present restructuring of the fiscal regime of the nation-state, in Europe and elsewhere.

Due to your theory about the consolidation state, it seems that you are quite skeptical to the European Union. Why?

This is a long story. The European Union has since the 1990s served as a vehicle of neoliberal “reform” in Europe. Because it is an entirely undemocratic regime, it operates behind the scenes, without much of a public, and governments appreciate this because it makes their lives easier. This explains why so little is known about the EU. For some time now, it has devoted its more important activities to opening up the national capitalist-democratic settlements of the postwar era to international liberalism, eroding democratic rights of the citizens of member countries without replacing them at the European level. In its institutional structure, the European Union has long anticipated the kind of economic regime that it is today spreading to its member countries: decisions behind closed doors, markets trump social protection, a de-politicized central bank ruling supreme, and so on.

People like Jürgen Habermas and Joschka Fischer argue for a further development of European Union. Are they wrong?

Fischer is now a wealthy private businessman; I don’t want to comment on him. As to Habermas, I think he expects “Europe” to do away with one of the worst conflagrations of the eighteenth and twentieth centuries, nationalism, especially its German version. But he forgets that squeezing all European countries under a one-size-fits-all money regime that is essentially designed to open up national economies for German exports, foreign direct investment, and American finance, combined with the elimination of trade unions and the like, does not end nationalism but in fact refuels it. Look at the mutual hatred that is erupting among European nations today. If developing the European Union means more of what we have seen in the last two decades it will be a disaster, politically as well as economically.

A legislative election will take place in Greece on 25 January 2015. Alex Tsipras, the Leader of the Coalition of the Radical Left, stands a good chance of winning. Rumors say that the German government will punish Greece and force the country to withdraw from the Eurozone if Alex Tsipras wins the election. What will be the consequences? Is it possible that it can be an advantage for Greece to withdraw from the Eurozone?

Greece cannot prosper in the Eurozone without major injections of financial support on a current basis by the rich countries of the North; given the condition of the French economy this essentially means injections from Germany. These will not be forthcoming – first, because Greece won’t give up its sovereignty and let its benefactors decide how their subsidies are used; second, because it is not only Greece that cannot live with the Euro but the other Mediterranean countries as well, and this makes it economically impossible to keep them afloat by setting up a transfer union. Germany is simply too small for this. The Mediterranean countries, and also France, never had a hard currency and needed a relatively high rate of inflation plus public deficits (with inflation wiping out part of the accumulated debt) to pacify domestic distributional conflicts; by once in a while devaluing their currencies they could handle the consequences, sometimes more and sometimes less comfortably. Monetary Union makes devaluation impossible; this makes Audi and BMW happy while it upsets the domestic political economies of the Mediterranean countries. I am afraid that for Greece, getting out of the Euro will appear as risky as remaining inside it; and for Germany helping the Greeks out will mean that many others will demand the same treatment. As to expulsion from EMU, remember that there is no such provision in the Treaties; one would have to invent a procedure and all countries would have to ratify it. Impossible.

The Greeks have been accused of being lazy and inefficient. To what extent are the Greeks responsible for their own situation?

This question begins pretty stupid, if I may say that. Greece is in large parts still a semi-feudal country, replete with clientelism, special rights for the Orthodox Church, tax-free status of ship owners, and other bizarreries. It never had a democratic revolution, in part because German occupation, British intervention in the Greek civil war after 1945 and the European Union after the end of the military dictatorship in the 1970s did their level best to prevent it. There also is, to put it mildly, a good deal of corruption in public administration and political parties. The European Union has never made it obligatory for the Greek state to clean up its act or collect taxes from corporations or rich families as a condition, say, of joining monetary union. Perhaps they knew that this could have set in motion a democratic movement that may not necessarily have found it the most attractive idea to give up economic sovereignty at the wardrobe in Brussels.

In 1968 students marched through the streets and protested against capitalism. There’s no sign of them today. Are you disappointed over the younger generation?

I’m a sociologist, not a moralist. The young people of today have grown up in a world of competitive careerism and consumerism; that’s all they know. Capitalism has provided them with Facebook and the exciting advertisements that come with it when they check their news every half hour, preferably in university seminars. Amazon keeps them happy, apparently. If they feel bad they stick their ear phones in and listen to the rapper of the week. Some are beginning to wake up from the dream of unlimited consumption of ever new happy-making gadgets, to join ATTAC or Occupy. Let’s hope the waking up will continue, and above all speed up a little.