The Book in (super) Brief

Characters and Setting

The bad guy: “the capital” (translated: capitalists). In his own words “a corporate plutocracy spanning the globe, which seems to have no difficulty in buying not only politicians, parties and parliaments but also public opinion.”

The helpers: politics/politicians

The bad means: Neoliberal reforms  they bought times for delaying the incumbent collapse of capitalism. They consist of:

·      inflation of the money supply

·      accumulation of public debt

·      lavish credit to private households

The bad goal: To insulate economics from mass democracy; the separation of economics from politics. From an economic perspective, this shift symbolizes “the transformation of the Keynesian political-economic institutional system of post-war capitalism into a neo-Hayekian economic regime.”

The victims: wage-dependent class

The setting: Europe after 2008. Everything started in 1945 (contract); first diseases in 1970s, apex in 2008 and 2012

(Level 3 – plot)

Book’s summary

1.     Starting point: we are now (in 2012) facing a new crisis, the crisis between capitalism and democracy. This crisis is the result (or the summation) of three different past crises. Namely,

·      the banking crisis  after 1945 banks had extended too much credit. When they realized it, they suddenly stopped lending

·      fiscal crisis   as private and public banks stopped lending, the government replaced them and started running budget deficits, rising government debt, and borrowing. To address this new huge debt, governments imposed austerity on themselves and on citizens

·      crisis of the “real economy”  high unemployment and stagflation (as a result of difficulty in obtaining bank loans/easy credit and government austerity). Low growth and “investment strikes”

Note that all these crises are “capital-legitimation” crises, not crises for an excess of democracy. Which means, capitalism does not have the administrative capabilities to maintain or establish structures effective in achieving their end goals.

2.     When did it all start?

From 1945 to 1970s “the capital” gained legitimacy because it was under government control. Politics dominated capitalism with government intervention in the business cycle (state planning to provide for growth, full employment, social redistribution and protection from market unpredictability, etc. in the medium run; goal of establishing low permanent interest rates and profit margins in the long run). This period was called “political-economic post-war settlement of democratic capitalism” because democracy had a say on capitalism.

3.     What happened in the 1970s?

 This period of crisis-free growth and secure full employment fueled excessive expectations in workers. In the 1970s it became clear that the capitalist economy could not remain forever as able or willing to deliver the goods as it had been since the end of WWII. Economic growth was drying up!!

 the only way to cope with diminishing growth was for government to withdraw its promises: it escaped into the market through the liberalization of services and the expansion of markets at home and abroad. It revoked politically guaranteed full employment, trade union relevancy in wages negotiations, state control on industries, social rights protected from competition, etc.

 This withdrawal of the state from the control of the economy is called “neoliberal revolution.” State past promises were replaced by:

·      encouragement of low-paid employment

·      acceptance of high structural unemployment

·      privatization of public services

·      elimination of trade unions from the wage formation process

·      whatever you may think of when you hear the n-word (just kidding, “neoliberalism”)

With all this hay in the barn, Neoliberalism arrived at its logical conclusion.

4.     What happened in 2008?

In 2008 the “Neoliberal reform” went into crisis and “the capital revolted.” The potential collapse of the international banking system compelled public authorities to re-enter the economic fray by saving private banks. Unfortunately for the author, public money saving private banks did not mean democracy controlling capitalism, as it was in the past. Rather, it ended the distinction between private and public money – “it is not clear whether banks were nationalized, or the government privatized.”

5.     In light of this failure, How is it possible for the Neo-liberal project to keep going?

Essentially, neoliberals use the excuse of “social justice” to say that political intervention in the market has been the obstacle to economic growth. They say that politics should be separated from the economy, and social justice be replaced by the only correct justice that can ensure economic growth, that is, market justice. Social justice confuses the market process and obstacles economic growth. As a result, the ultimate goal, the “completion of a program of Hayekian liberalization” is to de-politicize the economy.

6.     What’s wrong with economics without political controls?

The problem of neoliberalism is that promises long term economic growth at the expenses of democracy. The liberal ideal is the primacy of markets over the claims of citizens. Indeed, democracy at the national level presupposes nation-state sovereignty, but this is impossible today because debt states depend on financial markets (international borrowing and lending is an error that politics made when passing from the tax state to the debt state. In this sense politics helped capitalism and politics delayed the collapse of capitalism). As a result, debt management takes place at the international level, increasingly insulated from national democracy. They advocate suspension of democracy and government by experts until economic growth is reestablished.

7.     Sooooo… What about decisions taken by supranational organizations such as the EU?

Streeck here is strongly Eurosceptic.

Management of member states debt and economy by the EU is the witness that reveals the incompatibility of democracy with capitalism. While being insulated from citizens and nation-states, the EU is a machine for liberalization of European capitalism enabling governments to impose any manner of pro-market reforms against resistance of their citizens (e.g., it imposes the common currency, budgetary discipline, and other forms of alienation of sovereignty).

8.     Concluding afterthoughts: How can “the capital” keep buying time?

Streeck suggests that the only way capitalism can keep buying time is by persuading people that democracy must not have a say on economic growth. By keeping capitalism outside political control and in the hands of the “corporate plutocracy spanning the globe” it will survive as the socio-economic system of our time.

9.     The gloomy prospect

Democracy (or politics) as the system which rules over “the capital” will disappear. Democracy is about to be sterilized as redistributive mass democracy and rendered to a combination of the rule of law and public entertainment. Just voting for the presidents of EU organs is not democracy, Streeck reassures.