Monday, November 4, 2013

Wolfgang Streeck — The Crises Of Democratic Capitalism

The collapse of the American financial system that occurred in 2008 has since turned into an economic and political crisis of global dimensions. [1] How should this world-shaking event be conceptualized? Mainstream economics has tended to conceive society as governed by a general tendency toward equilibrium, where crises and change are no more than temporary deviations from the steady state of a normally well-integrated system. A sociologist, however, is under no such compunction. Rather than construe our present affliction as a one-off disturbance to a fundamental condition of stability, I will consider the ‘Great Recession’ [2] and the subsequent near-collapse of public finances as a manifestation of a basic underlying tension in the political-economic configuration of advanced-capitalist societies; a tension which makes disequilibrium and instability the rule rather than the exception, and which has found expression in a historical succession of disturbances within the socio-economic order. More specifically, I will argue that the present crisis can only be fully understood in terms of the ongoing, inherently conflictual transformation of the social formation we call ‘democratic capitalism’.
Democratic capitalism was fully established only after the Second World War and then only in the ‘Western’ parts of the world, North America and Western Europe. There it functioned extraordinarily well for the next two decades—so well, in fact, that this period of uninterrupted economic growth still dominates our ideas and expectations of what modern capitalism is, or could and should be. This is in spite of the fact that, in the light of the turbulence that followed, the quarter century immediately after the war should be recognizable as truly exceptional. Indeed I suggest that it is not the trente glorieuses but the series of crises which followed that represents the normal condition of democratic capitalism—a condition ruled by an endemic conflict between capitalist markets and democratic politics, which forcefully reasserted itself when high economic growth came to an end in the 1970s. In what follows I will first discuss the nature of that conflict and then turn to the sequence of political-economic disturbances that it produced, which both preceded and shaped the present global crisis.
New Left Review
The Crises Of Democratic Capitalism
Wolfgang Streeck | Director of the Max Planck Institue for the Study of Societies, Cologne
(h/t Jan Milch on FB)
Like I said, capitalism and democracy are incompatible and it's a bad marriage with a lot of problem and periodic dysfunction. Socialism threatens from the left and fascism from the right.

Right now. fascism is winning.
Social science can do little, if anything, to help resolve the structural tensions and contradictions underlying the economic and social disorders of the day. What it can do, however, is bring them to light and identify the historical continuities in which present crises can be fully understood. It also can—and must—point out the drama of democratic states being turned into debt-collecting agencies on behalf of a global oligarchy of investors, compared to which C. Wright Mills’s ‘power elite’ appears a shining example of liberal pluralism. [22] More than ever, economic power seems today to have become political power, while citizens appear to be almost entirely stripped of their democratic defences and their capacity to impress upon the political economy interests and demands that are incommensurable with those of capital owners. In fact, looking back at the democratic-capitalist crisis sequence since the 1970s, there seems a real possibility of a new, if temporary, settlement of social conflict in advanced capitalism, this time entirely in favour of the propertied classes now firmly entrenched in their politically unassailable stronghold, the international financial industry.
A couple of interesting notes:
[5] In a seminal essay, Michał Kalecki identified the ‘confidence’ of investors as a crucial factor determining economic performance: ‘Political Aspects of Full Employment’, Political Quarterly, vol. 14, no. 4, 1943. Investor confidence, according to Kalecki, depends on the extent to which current profit expectations of capital owners are reliably sanctioned by the distribution of political power and the policies to which it gives rise. Economic dysfunctions—unemployment in Kalecki’s case—ensue when business sees its profit expectations threatened by political interference. ‘Wrong’ policies in this sense result in a loss of business confidence, which in turn may result in what would amount to an investment strike of capital owners. Kalecki’s perspective makes it possible to model a capitalist economy as an interactive game, as distinguished from a natural or machine-like mechanism. In this perspective, the point at which capitalists react adversely to non-market allocation by withdrawing investment need not be seen as fixed and mathematically predictable but may be negotiable. For example, it may be set by a historically changeable level of aspiration or by strategic calculation. This is why predictions based on universalistic, i.e., historically and culturally indifferent, economic models so often fail: they assume fixed parameters where in reality these are socially determined.
[21] For example, political appeals for redistributive ‘solidarity’ are now directed at entire nations asked by international organizations to support other entire nations, such as Slovenia being urged to help Ireland, Greece and Portugal. This hides the fact that those being supported by this sort of ‘international solidarity’ are not the people in the streets but the banks, domestic and foreign, that would otherwise have to accept losses, or lower profits. It also neglects differences in national income. While Germans are on average richer than Greeks (although some Greeks are much richer than almost all Germans), Slovenians are on average much poorer than the Irish, who have statistically a higher per capita income than nearly all Euro countries, including Germany. Essentially the new conflict alignment translates class conflicts into international conflicts, pitting against each other nations that are each subject to the same financial market pressures for public austerity. Ordinary people are told to demand ‘sacrifices’ from other ordinary people, who happen to be citizens of other states, rather than from those who have long resumed collecting their ‘bonuses’.

3 comments:

Matt Franko said...

"Kalecki identified the ‘confidence’ of investors as a crucial factor determining economic performance: ‘Political Aspects of Full Employment’, Political Quarterly, vol. 14, no. 4, 1943. Investor confidence, according to Kalecki, depends on the extent to which current profit expectations of capital owners are reliably sanctioned by the distribution of political power and the policies to which it gives rise. Economic dysfunctions—unemployment in Kalecki’s case—ensue when business sees its profit expectations threatened by political interference. ‘Wrong’ policies in this sense result in a loss of business confidence, which in turn may result in what would amount to an investment strike of capital owners. "

This is textbook confidence fairy 101 from Kalecki here..... this is because he came of age in the academe during the era of metallic standards like Marx himself...

My assertion is that 'capitalism' is Marxist and can only be understood as a system that existed under the metallic standards...

today under a system that uses a state currency, this system is characterized by both public and private investment where the public side LEADS the private side... iow we CANNOT have increasing private that is NOT preceded by increasing public investment...

rsp,

Matt Franko said...

"Inflation was conquered after 1979 (Figure 1) when Paul Volcker, newly appointed by President Carter as chairman of the Federal Reserve Bank, raised interest rates to an unprecedented height, causing unemployment to jump to levels not seen since the Great Depression. The Volcker ‘putsch’ was sealed when President Reagan, said to have initially been afraid of the political fallout of Volcker’s aggressive disinflation policies, was re-elected in 1984. Thatcher, who had followed the American lead, had won a second term in 1983, also in spite of high unemployment and rapid de-industrialization caused, among other things, by a restrictive monetary policy. "

All wrong.

This is another example of a neo-Marxian analysis that speaks nothing of what was happening to the monetary systems of the subject countries involved in the analysis.

The monetary system details matter.

More out of paradigm nonsense of course follows here:

" The experiments conducted by Reagan and Thatcher on their electorates were observed with great attention by policy-makers worldwide. Those who may have hoped that the end of inflation would mean an end to economic disorder were soon to be disappointed, however. As inflation receded, public debt began to increase, and not entirely unexpectedly. [7] Rising public debt in the 1980s had many causes. Stagnant growth had made taxpayers more averse than ever to taxation; and with the end of inflation, automatic tax increases through what was called ‘bracket creep’ also came to an end. The same held for the continuous devaluation of public debt through weakening national currencies, a process that had first complemented economic growth, and then increasingly substituted for it, reducing a country’s accumulated debt relative to its nominal income."

Introductory Reihhart-Rogoff 101.

Matt Franko said...

contd

More:

"Just like inflation, however, accumulation of public debt cannot go on forever. Economists had long warned of public deficit spending ‘crowding out’ private investment, causing high interest rates and low growth; but they were never able to specify where exactly the critical threshold was. In practice, it turned out to be possible, at least for a while, to keep interest rates low by deregulating financial markets while containing inflation through continued union-busting."

LOL!

More this is rich:

"The quantum leap in public indebtedness after 2008, which completely undid whatever fiscal consolidation might have been achieved in the preceding decade, reflected the fact that no democratic state dared to impose on its society another economic crisis of the dimension of the Great Depression of the 1930s, as punishment for the excesses of a deregulated financial sector. Once again, political power was deployed to make future resources available for securing present social peace,...

[HA! 'We're borrowing from the future! LOL!]

...in that states more or less voluntarily took upon themselves a significant share of the new debt originally created in the private sector, so as to reassure private-sector creditors. But while this effectively shored up the financial industry’s money factories, quickly reinstating their extraordinary profits, salaries and bonuses, it could not prevent rising suspicions on the part of the same ‘financial markets’ that, in the process of rescuing them, national governments might have over-extended themselves."

LOL!

"Given the amount of debt carried by most states today, even minor increases in the rate of interest on government bonds can cause fiscal disaster. [15] At the same time, markets must avoid pushing states into declaring sovereign bankruptcy,"

Who wrote this? Some Peterson moron?

Looks like a lot of "New Left" rubes can remain so thanks to this paper...

I guess what he thinks the left should do is re-unionize and fight it out with the owners of capital for the paltry and scarce metal-based "money" in the world...

imo any macro economic analysis cannot be legitimate if the analysis does not demonstrate a working knowledge of the nations monetary system....

Which this one does not.

rsp,