How Will Capitalism End? Wolfgang Streeck. 2016.
Professor Streeck, Director of the Max Planck Institute for Social Research in Cologne, begins with a review of the 2013 book Does Capitalism Have a Future? He notes that post-World War II democratic capitalism was based upon the shotgun marriage of markets to pursue economic growth and democracy to prevent market excesses, such as soaring inequality, financial crises, hardship of market losers, and externalities like pollution. Since the 1970s, the reasonable balance between these contradictory forces has shifted to market dominance that has resulted in decreasing legitimacy and increasing distributional conflict. Consequently, the five authors of the book share the conviction that a structural crises bigger than the recent Great Recession looms for capitalist society, and each presents his view of how it may come about:
1. Wallerstein sees resource depletion, growing need for infrastructure, and demise of centrist liberal dominance as causing the final decline of the US-centered world order followed by a global confrontation between defenders and opponents of capitalism. 2. Calhoun sees the possibility of a large-scale collapse of capitalist markets followed by centralized socialist economies or Chinese-style state capitalism, although intervention by enlightened capitalists is still possible. 3. Mann sees US weakness leading to a shift of economic power from the West to the rest of the world with a move toward more statist economies still jeopardized by unsustainable consumption and possibly even catastrophic change like escalating climate change or nuclear war. 4. Collins sees automation as having destroyed the manual working class in the twentieth century and about to destroy the middle class in the twenty-first century with unemployment of 50-70% finishing capitalism by mid-century and probably leading to socialism with or without violent social revolution. 5. Derluguian sees internal political dysfunction from institutional and economic decline leading to fragmented social movements pitted against economic elites in the transition to post-capitalism.
The author sees all of these scenarios as contributing and reinforcing each other as capitalism collapses from its own internal contradictions. He suggests that what comes after capitalism in its final crisis, now under way, is not socialism or some other defined social order, but a lasting interregnium. This is defined as a breakdown of system integration that deprives individuals of institutional structuring and collective support and that shifts burdens for security and stability to the individuals themselves. Neoliberal ideology glorifies this breakdown of structured order and de-institutionalization as the arrival of free society built on individual autonomy. This neoliberal narrative neglects the very unequal distribution of risks, opportunities, gains, and losses that comes with de-socialized capitalism, including the “Mathew effect” of cumulative advantage. When this narrative no longer works, perhaps some crisis in middle class employment, as predicted by Collins, or some other wide-spread disorder will bring about the end of the post-capitalist interregnium and the emergence of a new order.
The trajectory toward financial crisis began in the 1970s, after three decades of successful democratic capitalism, when the profit-dependent classes reacted to declining post-war growth by rejecting the redistribution that provided the system with its legitimacy. With the loss of sufficient taxation, costs of dealing with the resultant distributional conflict were projected into the future, first by inflation in the 1970s, next by rising public debt in the 1980s, and then by increased private debt (with increased financialization) in the 1990s and 2000s, until the crisis of 2008. This was followed by central banks turning private debt into public assets, while overall indebtedness remained higher than ever.
Thus the post-war standard model of democracy transitioned to the neoliberal Hayekian model that substituted economic discipline for political legitimacy. This process was augmented by globalization that undermined labor’s bargaining power, increased the difficulty of taxation of mobile capital, and limited state control of finance. Consequently, stagnation, oligarchic redistribution, plundering of the public domain, corruption, and global anarchy have befallen capitalism. Some of the rich already consider their fate as independent from the fates of the societies from which they extract their wealth. Hence, they no longer care to contribute to those societies. The ratio of average income between the top 400 taxpayers and the bottom 90% is 10,327 to 1, and the ratio of wealth between the top 100 households and the bottom 90% is 108,765 to 1. Corruption extends beyond the legal definition to gross violation of rules, systematic betrayal of trust, and monopolization of political power by extreme wealth.
All of this is discussed in the long introduction of How Will Capitalism End? The following chapters are separate essays that considerably enlarge on these subjects and others, such as the European Union, the Euro, and the views of other authors. Selected excerpts from these chapters are listed below:
1. How Will Capitalism End? Crisis symptoms for the industrialized countries featured slowing growth, rising debt, and rising inequality. Increasing government debt was related to declining overall levels of taxation rather than excess redistributive democracy. The capitalist victory over democratic oversight is Pyrrhic because it has destroyed the only agencies that could save capitalism by limiting its excesses.
2. The Crisis in Democratic Capitalism. Neoliberal economics is basically the theoretical exaltation of a political-economic social order serving those well-endowed with market power, in that it equates their interests with the general interest. Today’s democratic states are being turned into debt-collecting agencies on behalf of a global oligarchy of investors.
3. Citizens as Consumers: Considerations on the New Politics of Consumption. Neoliberal capitalism makes the claim that privatization is superior to standardized collective action by government. However, collective goods like distributive justice and general rights are indivisible and cannot be commoditized.
4. The Rise of the European Consolidation State. In the 1990s, neoliberal politics cut taxes and the state by offering citizens private credit as a substitute for previously free public services. This was facilitated in the US due to powerful anti-taxation politics and a constitutional commitment never to compromise its “full faith and credit.” Consolidation in Europe had the additional disadvantages of continued popular support for distributive democracy and the lack of a hegemonic currency.
5. Markets and Peoples: Democratic Capitalism and European Integration. Globalization, financialization, and European integration (the EU) have strengthened authoritarian market liberalism so that it is now entirely shielded from democratic pluralism.
6. Heller, Schmitt and the Euro. In this system, multistate authority protects markets from state-level egalitarian-democratic infringement. Consequently, the European Central bank is the most independent central bank in the world, and egalitarian redistribution has been replaced by stronger incentives for the winners and more severe punishment for the losers.
7. Why the Euro divides Europe. When the Euro replaced national currencies and the EU replaced national governance, southern countries were no longer able to deal with inflation and budget deficits by occasional devaluations. Instead, northern countries that controlled the EU imposed austerity in the name of reform. Natural laws of the economy cited in the north are in reality nothing but projections of social-power relations which present themselves ideologically as technical necessities.
8. Comment on Wolfgang Merkel, “Is Capitalism Compatible with Democracy?” Post-World War II democratic capitalism came about as a historical compromise between a then powerful working class and a then weakened capitalist class. As it recovered, capitalism broke through this democratic containment. In a 2014 essay, Merkel identifies many problems which could be addressed by re-embedding capitalism in democracy and de-globalizing capitalism, such as by fixing the EMU.
9. How to Study Contemporary Capitalism? An understanding of both sociology and economics is required. An extensive discussion notes capitalism’s instability, dependence on expansion, overly simplistic rational action theory, and competing social and market justice. Fear and greed in capitalism lead to continuous uncertainty, which in turn leads citizens to demand political intervention for stability and social justice. A key concept is “investor confidence” which is capital owners’ pronouncement of their self-diagnosed psychological condition to signal whether expected returns conform to what they feel entitled to. Political economy should be able to expose the market mechanism for what it is: the outcome of a struggle between conflicting concepts of and claims to justice, rather than between subjective morality and objective laws of what is technically possible.
10. On Fred Block, “Varieties of What? Should We Still Be Using the Concept of Capitalism?” When social constraints led to the profit squeeze of the 1970s, political control over capitalism began to decay. Democracies at the level of the nation state were helpless against capitalism’s new international opportunities for evading those constraints. Fred Bock’s relatively optimistic view of capitalism as embedded in democracy and subject to its political control is not supported by the experience of the last four decades. This raises the question of whether intellectuals should search for reasonable ideas to repair democratic capitalism or instead begin to seriously think about alternatives to it?
11. The Public Mission of Sociology. The author believes the moment is approaching in which the foundations of modern society will again have to be rethought, like they were in the New Deal and after the Second World War. Since the 1980s, the victory of market-liberalism over the market-correcting capacity of popular democracy has had disastrous results, including unprecedented financial uncertainty, soaring inequality, and threats to the global commons. Yet sociology remained on the sidelines while market-liberalism economics (that happened to serve elites) dominated policy with the claim that it was a skilled trade like dentistry with a toolkit of proven techniques. Sadly, this brand of economics lacks concern for the social impact of its policies and overstates its status as a science, given its simplistic models, unrealistic assumptions, lack of empiric validation, and inability to foresee the 2008 financial crisis. Obviously, a balance must be struck between the needs of people and the needs of capital. Sociologists and political scientists, in alliance with heterodox economists of different stripes, have begun working on a new sort of political economy, a socio-economics that would again make the economic subservient to the social rather than vice versa. It is high time for the mainstream of the discipline to remember its roots and join the battle.
8. How Will Capitalism End (Speculation)
