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How Will Capitalism End? by Wolfgang Streeck
accounting loophole / creative accounting, Airbnb, Ben Bernanke: helicopter money, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, market bubble, means of production, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, winner-take-all economy, Wolfgang Streeck
CHAPTER THREE 1This chapter first appeared in: New Left Review 76, July/August 2012, 27–47. 2R. Joseph Monsen and Anthony Downs, ‘Public Goods and Private Status’, National Affairs, vol. 23, Spring 1971, pp. 64–77. 3See Wolfgang Streeck, Industrial Relations in West Germany: The Case of the Car Industry, New York: St. Martin’s Press 1984. 4This was described at the time as a transition from mass production to ‘flexible specialization’ (see Michael Piore and Charles Sabel, The Second Industrial Divide: Possibilities for Prosperity, New York: Basic Books 1984) or ‘diversified quality production’: see Wolfgang Streeck, ‘On the Institutional Conditions of Diversified Quality Production’. In: Matzner, Egon and Wolfgang Streeck, eds, Beyond Keynesianism: The Socio-Economics of Production and Employment, London: Edward Elgar 1991, pp. 21–61. 5So at least it appeared to many ‘critical theorists’ in the 1970s.
How Will Capitalism End? How Will Capitalism End? Essays on a Failing System Wolfgang Streeck First published by Verso 2016 © Wolfgang Streeck 2016 Translation of Chapter 5 © Tessa Hauswedell 2016 Translation of Chapter 7 © Rodney Livingstone 2016 A version of Chapter 1 was delivered as the Anglo-German Foundation Lecture at the British Academy on 23 January 2014. Published in: New Left Review 87, May/June 2014, 35–64. Chapter 2 was first presented as the 2011 Max Weber Lecture at the European University Institute, Florence. I am grateful to Daniel Mertens for his research assistance. Published in: New Left Review 71, September/October 2011, 5–29. Chapter 3 was first published in New Left Review 76, July/August 2012, 27–47. Chapter 4 first published as MPIfG Discussion Paper 15/1, Cologne: Max-Planck-Institut für Gesellschaftsforschung, 2015.
., The Social Divide: Political Parties and the Future of Activist Government, Washington, DC: Brookings Institution Press and Russell Sage Foundation 1998, pp. 126–178. 48This refers to the passage of the Personal Responsibility and Work Opportunity Act in 1996. 49Pierson, ‘From Expansion to Austerity’. 50Or, in Mertens’ term, an export-and-saving regime (Privatverschuldung in Deutschland: Institutionalistische und vergleichende Perspektiven auf die Finanzialisierung privater Haushalte, Dissertation, Cologne: University of Cologne 2014). 51Lukas Haffert, Freiheit von Schulden – Freiheit zur Gestaltung? Die politische Ökonomie von Haushaltsüberschüssen, Dissertation, Cologne: University of Cologne 2014. 52Wolfgang Streeck and Daniel Mertens, ‘Politik im Defizit: Austerität als fiskalpolitisches Regime’, Der moderne Staat, vol. 3, no. 1, 2010, pp. 7–29; Wolfgang Streeck and Daniel Mertens, Fiscal Austerity and Public Investment: Is the Possible the Enemy of the Necessary? MPIfG Discussion Paper 11/12, Cologne: Max Planck Institute for the Study of Societies 2011. 53Streeck and Mertens, Fiscal Austerity and Public Investment. 54Nathalie Morel, Bruno Palier and Joakim Palme, eds, Towards a Social Investment Welfare State?
Buying Time: The Delayed Crisis of Democratic Capitalism by Wolfgang Streeck
banking crisis, Bretton Woods, capital controls, Carmen Reinhart, central bank independence, collective bargaining, corporate governance, David Graeber, deindustrialization, Deng Xiaoping, Eugene Fama: efficient market hypothesis, financial deregulation, financial repression, full employment, Gini coefficient, Growth in a Time of Debt, income inequality, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, labour mobility, late capitalism, means of production, moral hazard, Occupy movement, open borders, open economy, Plutonomy: Buying Luxury, Explaining Global Imbalances, profit maximization, risk tolerance, shareholder value, too big to fail, union organizing, winner-take-all economy, Wolfgang Streeck
This English-language edition first published by Verso 2014 Translation © Patrick Camiller 2014 First published as Gekaufte Zeit © Suhrkamp Verlag Berlin 2013 All rights reserved The moral rights of the author have been asserted Verso UK: 6 Meard Street, London W1F 0EG US: 20 Jay Street, Suite 1010, Brooklyn, NY 11201 www.versobooks.com Verso is the imprint of New Left Books eBook ISBN-13: 978-1-78168-619-5 (US) eBook ISBN-13: 978-1-78168-551-8 (UK) ISBN-13: 978-1-78168-548-8 (PBK) ISBN-13: 978-1-78168-549-5 (HBK) British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Streeck, Wolfgang, 1946– [Gekaufte Zeit. English] Buying time : the delayed crisis of democratic capitalism / Wolfgang Streeck; translated by Patrick Camiller. pages cm ‘First published as Gekaufte Zeit, Suhrkamp Verlag, Berlin, 2013.’ ISBN 978-1-78168-549-5 (hardback) — ISBN 978-1-78168-619-5 (ebook) 1. Capitalism. 2. Neoliberalism. 3. Democracy—Economic aspects. 4. Economic policy. 5. Financial crises. I. Title. HB501.S919513 2014 330.12’2—dc23 v3.1 Contents Cover Title Page Copyright INTRODUCTION: Crisis Theory, Then and Now 1 FROM LEGITIMATION CRISIS TO FISCAL CRISIS A new type of crisis Two surprises for crisis theory The other legitimation crisis and the end of the postwar peace The long turn: from postwar capitalism to neoliberalism Buying time 2 NEOLIBERAL REFORM: FROM TAX STATE TO DEBT STATE Financial crisis: a failure of democracy?
Schäfer, Armin, ‘Krisentheorien der Demokratie: Unregierbarkeit, Spätkapitalismus und Postdemokratie’, Der modern Staat, vol. 2/1, 2009, pp. 159–83. ———. ‘Die Folgen sozialer Ungleichheit für die Demokratie in Westeuropa’, Zeitschrift für vergleichende Politikwissenschaft, vol. 4/1, 2010, pp. 131–56. ———. Republican Liberty and Compulsory Voting, MPIfG Discussion Paper No. 11/17, Cologne: Max-Planck-Institut für Gesellschaftsforschung, 2011. ———. and Wolfgang Streeck, ‘Introduction’, in Armin Schäfer et al. (eds), Politics in the Age of Austerity, Cambridge: Polity, 2013. Scharpf, Fritz W., Crisis and Choice in European Social Democracy, Ithaca, NY: Cornell University Press, 1991. ———. ‘Negative and Positive Integration in the Political Economy of European Welfare States’, in Gary Marks et al. (ed), Governance in the European Union, London: Sage, 1996, pp. 15–39. ———.
Schmidt (eds), Welfare and Work in the Open Economy, Vol. 1, From Vulnerability to Competitiveness, Oxford: Oxford University Press, 2000. ———. and Vivien A. Schmidt (eds), Welfare and Work in the Open Economy, Vol. 2, Diverse Responses to Common Challenges, Oxford: Oxford University Press, 2000. Schlieben, Michael, ‘Die wählen sowieso nicht’, Zeit online, 13 May 2012. Schmitter, Philippe C. and Gerhard Lehmbruch (eds), Trends Towards Corporatist Intermediation, London: Sage, 1979. ———. and Wolfgang Streeck, The Organization of Business Interests: Studying the Associative Action of Business in Advanced Industrial Societies, MPIfG Discussion Paper No. 99/1, Cologne: MaxPlanck-Institut für Gesellschaftsforschung, 1999. Schor, Juliet, The Overworked American: The Unexpected Decline of Leisure, New York: Basic Books, 1992. Schularick, Moritz, Public Debt and Financial Crises in the Twentieth Century, Discussion Paper, No. 2012/1, Berlin: Free University, School of Business and Economics, 2012.
Were You Born on the Wrong Continent? by Thomas Geoghegan
Albert Einstein, American Society of Civil Engineers: Report Card, banking crisis, Berlin Wall, collective bargaining, corporate governance, cross-subsidies, dark matter, David Brooks, declining real wages, deindustrialization, ending welfare as we know it, facts on the ground, Gini coefficient, haute cuisine, income inequality, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, labour market flexibility, laissez-faire capitalism, low skilled workers, Martin Wolf, McJob, minimum wage unemployment, mittelstand, offshore financial centre, payday loans, pensions crisis, Plutocrats, plutocrats, purchasing power parity, Ralph Waldo Emerson, Robert Gordon, Ronald Reagan: Tear down this wall, Saturday Night Live, Silicon Valley, The Wealth of Nations by Adam Smith, Thorstein Veblen, union organizing, Wolfgang Streeck, women in the workforce
He looked tanned, rested: I bet he spent his twenties on the beaches of Sri Lanka. At this time, there was a common view in Germany that the world would no longer need its high-quality goods. Somehow the fact that they kept selling them was just a fluke. Thanks to Americans, many Germans—intellectuals, businessmen—had talked themselves into thinking German-type capitalism wouldn’t work anymore. On the left, Wolfgang Streeck had presented this case in a much-buzzed-about paper: “German Capitalism: Does It Exist? Can It Survive?” He said there were vanishing investment opportunities because the Germans were running out of new things to make. It was The Decline of the West all over again. It was inevitable. Mr. Z. seemed to take this view. “We don’t have any ideas! That’s the problem in Germany. We need more ideas, more new enterprises.”
Somehow I got a two-month grant from Fulbright and a chance to teach at Humboldt. So in April 2001, I was headed to Berlin. At O’Hare, I was still trying to settle the Dickieson case and set up a deposition when I got on Lufthansa and had to turn off my cell phone. And we were up in the air—and soon they were bringing brötchen and I was already in Europe. I pulled out some of my notes from 1997, and I had packed my trusty copy of Wolfgang Streeck’s “German Capitalism: Does It Exist? Can It Survive?” I expected in Berlin people would argue about the German model as they had before. But what I read on the plane was Jared Diamond’s Guns, Germs, and Steel: The Fates of Human Societies. Yes, I know, it was a bestseller, so I broke my rule in buying it. But in a way it gets at part of the difference between the European and American models.
Even in “sales,” which is Sennett’s bugaboo, Willy Loman has a “career,” a sense of craft that is practically medieval, literally doing the same job, learning the product, going deeper into it every year. And to a labor lawyer like me, the paradox about the American emphasis on “team” is that, in the U.S., there is no real sense of “team.” Take a look at their depositions: there are so many hostile, sullen people. Based on what I’ve seen, I’m inclined to believe Wolfgang Streeck when he makes a standard point about the U.S. and German models. While Streeck was pessimistic about the German model, he still notes its advantages. In the U.S., for example, where the corporation is authoritarian and undemocratic, it’s easy to make decisions. The hard thing is to implement them. The people at the bottom aren’t involved. That’s partly why, to compensate, we put so much effort in telling business majors: “Be a team player.”
Reskilling America: Learning to Labor in the Twenty-First Century by Katherine S. Newman, Hella Winston
blue-collar work, collective bargaining, deindustrialization, desegregation, factory automation, interchangeable parts, invisible hand, job-hopping, knowledge economy, low skilled workers, performance metric, reshoring, Ronald Reagan, Silicon Valley, two tier labour market, union organizing, upwardly mobile, War on Poverty, Wolfgang Streeck, working poor
What is more, public investments in vocational training are not as effective in lowering youth unemployment as are high levels of firm involvement, but they have a negative effect when wage bargaining is highly centralized. This finding resonates well with the sociological literature on labor market transitions.” Wolfgang Streeck, “Successful Adjustment to Turbulent Markets: The Automobile Industry,” in Industry and Politics in West Germany: Toward the Third Republic, ed. Peter J. Katzenstein (Ithaca, NY: Cornell University Press, 1989), 113–56; Wolfgang Streeck, “Beneficial Constraints: On the Economic Limits of Rational Voluntarism,” in Contemporary Capitalism: The Embeddedness of Institutions, ed. J. Rogers Hollingsworth and Robert Boyer (Cambridge, UK: Cambridge University Press, 1997), 197–219. Wolfgang Streeck, Social Institutions and Economic Performance: Studies of Industrial Relations in Advanced Capitalist Economies (London: Sage, 1992), 1–40. See also Jutta Allmendinger, “Educational Systems and Labor Market Outcomes,” European Sociological Review 5, no. 3 (1989): 231–50; Walter Müller and Markus Gangl, eds., Transitions from Education to Work in Europe: The Integration of Youth into EU Labour Markets (New York: Oxford University Press, 2003). 4.
The Extreme Centre: A Warning by Tariq Ali
Affordable Care Act / Obamacare, Berlin Wall, bonus culture, BRICs, British Empire, centre right, deindustrialization, Edward Snowden, Fall of the Berlin Wall, financial deregulation, first-past-the-post, full employment, labour market flexibility, land reform, means of production, Mikhail Gorbachev, Monroe Doctrine, mortgage debt, North Sea oil, obamacare, offshore financial centre, reserve currency, Ronald Reagan, South China Sea, The Chicago School, The Wealth of Nations by Adam Smith, trade route, trickle-down economics, Washington Consensus, Wolfgang Streeck
See ‘In Cold War, US Spy Agencies Used 1,000 Nazis’, New York Times, 26 October 2014. 4 A recent study by Emily Morris, a lecturer at University College London, revealed that Cuba scored higher on all the social indices than the Eastern European states. See ‘The Cuban Surprise’, New Left Review, July–August 2014. 5 Two important books on this subject are the late Peter Mair’s Ruling the Void (London and New York, 2013) and Wolfgang Streeck’s Buying Time: The Delayed Crisis of Democratic Capitalism (London and New York, 2014). Both highlight the processes at work. Mair’s stinging attack on the EU provides a very strong basis for a left critique of the German-dominated bankers’ union. 6 Seumas Milne’s The Enemy Within (fourth edition, London and New York, 2014) has become a classic on the subject, detailing the methods deployed by the State to defeat the miners. 7 In September 2014, Spaniards were startled to learn that their right-wing government – the modernized heirs of Franco currently wrecking their country on behalf of the Troika – had decided to erect a statue to her memory in Madrid. 1 English Questions We live in a country without an opposition.
They’re rather more feisty now, of course, but usually on the side of the right, as in France, Holland, Germany and Italy. Only in Spain and Greece, both countries with a long experience of civil war and dictatorship, have we seen the possibility of something different. A challenge to the extreme centre from the left, but an untried left that has yet to be tested. It would be an error if they simply accepted the legitimacy of the EU and its institutions as presently constituted. The German sociologist Wolfgang Streeck has, in the last chapter of his Buying Time, sketched the outline of what form a new, democratic European Constitution could take, representing as the continent does a culturally diverse and socially heterogeneous reality. The merchants of the status quo have granted the European Parliament some more powers, but not sovereignty. The largest caucus in the Parliament used this to elect the Luxembourger, Jean-Claude Junker, as the new president.
The Social Life of Money by Nigel Dodd
accounting loophole / creative accounting, bank run, banking crisis, banks create money, Bernie Madoff, bitcoin, blockchain, borderless world, Bretton Woods, BRICs, capital controls, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, computer age, conceptual framework, credit crunch, cross-subsidies, David Graeber, debt deflation, dematerialisation, disintermediation, eurozone crisis, fiat currency, financial innovation, Financial Instability Hypothesis, financial repression, floating exchange rates, Fractional reserve banking, German hyperinflation, Goldman Sachs: Vampire Squid, Hyman Minsky, illegal immigration, informal economy, interest rate swap, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, Kula ring, laissez-faire capitalism, land reform, late capitalism, liquidity trap, litecoin, London Interbank Offered Rate, M-Pesa, Marshall McLuhan, means of production, mental accounting, microcredit, mobile money, money: store of value / unit of account / medium of exchange, mortgage debt, new economy, Nixon shock, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer lending, Ponzi scheme, post scarcity, postnationalism / post nation state, predatory finance, price mechanism, price stability, quantitative easing, quantitative trading / quantitative ﬁnance, remote working, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Satoshi Nakamoto, Scientific racism, seigniorage, Skype, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, Wave and Pay, WikiLeaks, Wolfgang Streeck, yield curve, zero-coupon bond
Just as Walter Benjamin once said that history tends to be written by and for its victors (Benjamin 2003b), so the power asymmetries that characterize the relationship between debtors and creditors tend to be viewed—morally—from the perspective of creditors, and debtors are exposed to what Bourdieu (1992) called symbolic violence.7 As Marion Fourcade notes, “nowhere is the entanglement between social position, economic worth and moral worth more obvious than in the case of debt, where the economic standing and character of borrowers are simultaneously constituted as the precondition for the economic relationship and as its essential stake” (Fourcade 2013: 22). Debt underwrites hierarchy and moral order among nations as well as individuals, as if the “price of a country’s sovereign debt (the interest rates its bonds command on these markets) appears as an objectified measure of some sort of underlying moral worth in the eyes of investors” (Fourcade 2013: 22). According to Wolfgang Streeck, this attitude has been especially pronounced during the Eurozone crisis, with Greece cast as the morally dubious debtor: “The moral discourse on Greek public finances focuses on ‘the Greek citizens’ and their presumed duty to pay off debt taken up by their past governments, supposedly to enable their voters to enjoy an easy life on unearned income” (Streeck 2013: 18). Such evaluations of creditors and debtors are by no means universal, however (Gregory 2012).
The crisis has focused on the large deficits of specific member states, which reflect complex linkages among money, public finances, private debt, and the global banking system. These are combining to enact different aspects of what Strange called overbanking. The complex nexus of public and private debt that defines the parameters of the crisis has torn the democratic integrity of its constituent member states apart. According to Wolfgang Streeck (Streeck 2011), the form of democratic capitalism found in the Eurozone operates according to two conflicting regimes of resource allocation, one based on marginal productivity and determined by market forces, the other based on need or entitlement and determined by democratic politics. These principles almost never align; one usually holds sway until there is a reaction, and such a reaction, e.g., of democracy against the market, was described through Polanyi’s notion of double movement (Polanyi 1957b).
Capitalism: Money, Morals and Markets by John Plender
Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, bonus culture, Bretton Woods, business climate, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, corporate governance, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, Fractional reserve banking, full employment, Gordon Gekko, greed is good, Hyman Minsky, income inequality, inflation targeting, invention of the wheel, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, labour market flexibility, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, means of production, Menlo Park, moral hazard, moveable type in China, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Plutocrats, plutocrats, price stability, principal–agent problem, profit motive, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, We are the 99%, Wolfgang Streeck
While global inequality is falling because the likes of China and India are growing faster than rich countries, the developed world economy has thus become polarised between a small group of the super-rich and the rest. The laggards enjoyed rising living standards before 2007, despite stagnant real incomes, thanks only to increased borrowing on the security of their homes. The German sociologist Wolfgang Streeck rightly points out that subprime mortgages became a substitute, however illusory in the end, for social policy that was simultaneously being scrapped, as well as for wage increases that were no longer forthcoming at the lower end of a more flexible labour market.212 Since the crisis, however, American and British home owners have faced a long and deep squeeze on real living standards, while struggling to service an unprecedented level of indebtedness.
Undoing the Demos: Neoliberalism's Stealth Revolution by Wendy Brown
Affordable Care Act / Obamacare, bitcoin, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, corporate governance, credit crunch, crowdsourcing, David Brooks, Food sovereignty, haute couture, immigration reform, income inequality, invisible hand, labor-force participation, late capitalism, means of production, new economy, obamacare, occupational segregation, Ronald Reagan, shareholder value, sharing economy, The Chicago School, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trickle-down economics, Washington Consensus, Wolfgang Streeck, young professional
.), Governance without Government: Order and Change in World Politics (Cambridge: Cambridge University Press, 1992); Simon Hix, “The Study of the European Union II: The ‘New Governance’ Agenda and its Rivals,” Journal of European Public Policy 5.1 (1998), pp. 38–65; Markus Jachtenfuchs, “The Governance Approach to European Integration,” Journal of Common Market Studies 39.2 (2001), pp. 245–64; and Gary Marks, Fritz W. Scharpf, Philippe Schmitter, and Wolfgang Streeck, Governance in the European Union (London: Sage, 1996). 16. Rhodes, Understanding Governance, p. 47. 17. Ibid., especially chapter 3. 18. Philippe Ryfman “Governance and Policies in Nongovernmental Organizations” in Michel Feher (ed.), Nongovernmental Politics (New York: Zone, 2007), p. 289. 19. Rhodes, Understanding Governance, pp. 48–49. 20. Grammarist.com, s.v. “Governance vs. Government,” http://grammarist. com/usage/governance. 248 n o t e s 21.