Abstract
A fairy-tale world ending in a labyrinth
Looking at the crisis of democratic capitalism, this book has caused quite a stir in Germany. In it, Wolfgang Streeck, director of the Max Planck Institute for the Study of Societies and former social-democratic advisor of Chancellor Schröder’s Social-Democrat/Greens coalition, evolves his well-known scepticism vis-à-vis European integration, pleading for the re-introduction of national currencies and thus for the abandonment of the euro. This focus on a retreat to national boundaries however prevents the book from being a major discourse on capitalism in its present state. Instead Streeck ends up in a political no-man's land between left and right. What remains is a polemic against neoliberalism, a political pamphlet against European integration and a call for a revival of national sovereignty. As with any good polemic, Streeck’s book lives from exaggerations, one-sided views and simplifications, compounded by a narrow theoretical base and with little interest for history – in short, from the gift of ignoring anything which does not suit him or contradicts his views. He himself states that his thoughts have been ‘painted on a large-sized canvas with a wide brush’ (p.18). This leads to a number of facts being coated over, differentiations disappearing and in-depth analysis becoming the victim of generalization. The wide-ranging European policy discourse, especially in intellectual circles, ends up in the paint-pot.
Streeck’s view of neoliberalism
His core hypothesis is that an ongoing ‘process leading to the dissolution of democratic capitalism’ (10) is nearing its end. Reaching back to the 1970s, this started as a ‘revolt against the mixed economy of post-war years’ (26). The transformation of Keynesian post-war capitalism with its goal of enabling the political and social participation of workers occurred via a neoliberal societal project that can only be defined as ‘releasing capital from its strait-jacket of social regulation’ (45) and a ‘fundamental redefinition of the welfare state’ (57). A large-scale neoliberal experiment was unleashed ‘through deregulation, privatization and market expansion of all kinds’ (25). The success of the ‘neoliberal revolution’ (84) was reflected in the complete restructuring of Europe, ‘the heartland of the modern welfare state’ (76), going hand-in-hand with a ‘political disempowerment of mass democracy’ (84). This neoliberal restructuring was only possible through massive state support. The greatest benefit of Streeck’s book lies in his explanation of the twin character of a state in a neoliberal society: neoliberalism needs a strong state both to repulse the social and democratic demands of its citizens, and to ensure that market forces can develop without impairment. Neoliberalism thus has nothing to do with reducing state power as much as possible. Instead it requires the state to underpin the neoliberal framework. Streeck avails himself of an article of Friedrich A Hayek, the godfather of market disciples, published in 1939, to underline the innate tendency of neoliberalism in favour of authoritarian social structures. Looking at the current situation, Streeck distinguishes between two population cohorts: ‘upholders of the state’ and ‘upholders of the market’ (212). Wide swathes of the population are confronted with an upper class hungry for returns on their investments and for whom the financial markets have become the instrument of neoliberal domination.
Although there is a certain charm in describing the state as under the rule of neoliberal markets, such a hypothesis is one-sided, with a tendency, a danger, of becoming an omnipotent reality in Streeck’s closed-circuit model of neoliberalism. There is even the danger of it becoming a substitute religion and an ideology based, to use the language of Marx, on a false consciousness.
Rediscovery of the national state
Domestic disputes and rifts, as well as contradicting interests are unknown in Streeck’s model. Streeck invests little effort in explaining the ‘counter-revolution against social capitalism’ (111), and similarly has only a few words of explanation for the systemic causes of the repeated crises which should not happen at all, were the neoliberal transformation to be a long-term success. But these crises are real, and Streeck sees the neoliberal system swinging its way from one crisis to the next, each time adopting a different strategy to buy time. One day the system is ‘mastering’ the crisis through inflation, the next day through deficit spending (‘capitalism on borrowed money’), only to then do a U-turn and go all out for budget consolidation. The most recent reaction involves euro area interventions, referred to by Streeck as ‘rescue Keynesianism’ (81).
He completely rejects the single currency with its monetary policy managed at European level and the ECB, as well as the current crisis management with its fiscal pact, banking union and stability mechanism, as in his eyes this concentration of competences at a European level further restricts the political and economic leeway of individual Member States. It follows that he is calling for the euro to be abandoned. As an alternative to the currency union and the ‘euro as a frivolous experiment’ (237) he puts forward the proposal of establishing what he calls a ‘European Bretton Woods’ (250), i.e. a return to national currencies with the possibility of devaluation. In his chapter eulogizing devaluation (246), he accords constitutional character to the ‘right to devalue’, considering it to be the ‘institutional expression of the respect for nations, represented by their states, each one an economic community governed by its own rules and regulations and subject to its own fate’ (246–247). Having one’s own currency together with the possibility of devaluation is seen as a way of protecting national sovereignty against the ‘totalitarianism of the Single Market’ (247), against a ‘market-driven state without democratic legitimation’ (256). In addition, he views devaluation as an economic panacea, correcting the ‘distribution relationships in an asymmetrical system of international trade’ (247), improving competitiveness, protecting the ‘pensions of its lower-earning citizens’ (248), facilitating higher employment and raising workers’ wages. This does not however coincide with the historical reality of the post-war period with its recurring currency upheavals. Were devaluation to be such a magic potion, Italy and a number of other countries would have long achieved competitiveness. Between 1975 and 1995, the French franc lost 48 per cent of its value against the German mark, the Spanish peseta 73 per cent, the Italian lira 78 per cent and the Greek drachma 93 per cent, without anything being corrected. Instead, these countries continue to suffer from the same phenomena. Devaluations – which in the past were always accompanied by restrictive wage policies – are a monetary measure only promising short-term relief and not tackling such structural problems as bureaucratic statism, clientelism, ineffective administration, corruption, tax evasion, a shadow economy or chronic youth unemployment. Devaluations are no panacea, but instead nothing but – alluding to the title of Streeck’s book – bought time allowing a country to prolong the status quo, i.e. perpetuation instead of renewal. One should further not forget that currencies threatened by devaluation in a system of fixed exchange rates are a popular target for professional speculation. Moreover, countries belonging to a Bretton Woods system would only de jure possess currency and monetary sovereignty. De facto this always was and remains nothing but an ‘empty shell’, as fixed exchange rate systems are always controlled by the dominant nations. This has very little to do with independence.
Europe as the transmission belt of neoliberalism
In Streeck’s view, the EU is not a suitable integration subject on account of the deep-rooted political and cultural heterogeneity of its Member States. It therefore comes as no surprise that the European integration process keeps on ending in crisis. Streeck’s argumentation in this area shows great gaps, though these are pasted over with linguistic dexterity and intellectual insouciance. His recommendation to return to national states, as these promise greater democratic involvement, is in stark contrast to his finding that ‘all governments of the capitalist world, whether conservative or social-democratic’ (113) have allowed the neoliberal landslide. In a number of cases, Streeck is to be found criticizing the variety-of-capitalism literature, arguing that the commonalities and parallels between the capitalist countries are much greater than the differences, with uniformity prevailing over diversity (13, 98, 102). Though there are good grounds for this view, one cannot then go on to claim that the EU is bound to fail on account of the insurmountable heterogeneity of its Member States.
European integration is a non-starter for Streeck. He decries all EU regulatory measures as belonging to an ongoing neoliberal transformation intent on undermining national sovereignty and replacing it with non-democratic EU institutions. Within this process, a key role is played by ‘agents of influence’ (80), who have been infiltrated by the upholders of the market under the leadership of Goldman Sachs into government administrations and the top echelons of the ECB. The talk here is of a ‘secret society’ (222), made up of national politicians, international organizations, global financial institutions and the ‘Brussels technocracy’ (162). One of the leading players in this respect is the Court of Justice of the European Union (150, 159). The ‘so-called European Parliament’ (162) on the other hand merely sits on the side-lines, looking at what is happening.
Conclusion and outlook
The EU’s ‘reality according to Streeck’ is just as false as the labelling of the EU by English conservatives as a bureaucratic and over-regulated market. The neoliberal EU world corresponds more to the fairy-tale world of the author than to European reality. But this is the result of a one-sided political assessment devoid of serious analysis. Readers are left disoriented in an unaccustomed vacuum. It does not speak in Streeck’s favour that he hardly takes any notice of the broad debate on Europe by 1 :
historians, united across borders in their praise of the EU’s integration achievement;
alternative economists acknowledging the repair work being conducted on the single currency as setting the right course;
sociologists who see more potential in a united Europe than in separate national states;
authors who hold the competence of EU politicians in greater esteem than that of national officials;
or intellectuals such as György Konrád, who sees the EU making progress in its learning curve towards a ‘completely new type of national community’.