Capital Punishment

How Will Capitalism End?: Essays on a Failing System BY Wolfgang Streeck. Verso. . .

For as long as people have written about capitalism, they've been fascinated by its fragility. Many of the first theories of capitalism, which appeared in the early nineteenth century, focused on its crises, which had, many noted, a mysterious tendency to return on a strict schedule—every five, seven, or ten years. At first, most political economists saw capitalism's more-extreme fluctuations as economic reactions to non-economic events, like wars or bad harvests, and assumed their cyclical recurrence must have an astronomical explanation. But by the end of the century, a new consensus had developed: Crisis was an inextricable (and unavoidable) feature of the capitalist system. This wasn't just the view of Marx and his followers. It formed the basis of the most popular new research topic in economics: the business cycle. Regular expansions and contractions, punctuated by panic, were "not like tonsils, separable things that might be treated by themselves," as the conservative Joseph Schumpeter later wrote, but "like the beat of the heart, of the essence of the organism that displays them." Once this view was accepted, it started to seem reasonable to assume that capitalism might someday collapse.

This idea had gone out of fashion by the late-twentieth century. It was socialism, after all, not capitalism, that appeared to have broken down on account of its internal
contradictions. But since 2008, the idea of capitalism as a historically bounded phenomenon (one that would have an end, just as it had a beginning) has returned, and with it the question of what has so far allowed this system to cheat death, time and again. According to the German sociologist Wolfgang Streeck, one of today's leading political economists, capitalism has depended for its survival on the existence of social and institutional forces—the labor movement; Keynesian macroeconomic management—that could tame its excesses and guarantee its legitimacy in the face of the instability and inequality it creates. Today, Streeck argues in How Will Capitalism End?, these forces are exhausted. Capitalism has been too successful for its own good: Having thrown off its regulatory shackles, and killed the ideological rivals that once forced it to reform, it is devouring itself.

How did we get here? According to Streeck, we're living in a period of major political-economic indeterminacy, in the wake of a four-decade sequence of crisis and improvised response. In the late 1960s, as economic growth slowed, the postwar compromise that had been reached throughout the rich capitalist world between capital and labor began to fray. A new "peace formula" was needed. But the solutions that were found could only postpone the reckoning. In the 1970s, the underlying conflict was tamed through inflation; in the 1980s, through public debt; in the 1990s, through private debt. This last effort to "buy time," as Streeck has put it elsewhere, collapsed in 2008.

The rise of neoliberalism had played a key role in limiting the ability of governments to respond to and stave off crisis. By the 1990s, the tools once used to preserve class peace—redistribution funded first by taxes and then by public debt—were no longer available. As states began to worry about their ability to attract foreign capital and pay off their debts, they embarked on a long-term process of fiscal consolidation via spending cuts (but not tax increases, which were now considered politically toxic). National policy-making was shaped more by the demands of foreign creditors than by those of citizens, moving out of the arena of democratic contestation and into the hands of unaccountable technocrats in central banks and international bodies like the IMF and the EU. What Streeck calls the "shotgun marriage" of capitalism and democracy—made possible after 1945 by phenomenal economic growth—fell apart. The two have now returned to their natural state of competition, Streeck writes, as governments are transformed into "debt–collecting agencies on behalf of a global oligarchy of investors" and "technocratic-authoritarian market dictatorships." The rule of the Staatsvolk, the national body of citizenry, has been displaced by that of the Marktvolk, a de-territorialized global elite of financiers, bondholders, and corporate managers who wield effective veto power over the decisions of sovereign democracies.

It's no coincidence that this model looks more like the eurozone than anywhere else. Since 2011, Streeck has become one of Europe's most sophisticated and pessimistic left-wing Euroskeptics. (When asked recently what European idea he believed in, Streeck admitted, "I don't care much for beliefs.") Many features of the EU correspond to his vision of an emergent "consolidation state": the fiercely guarded independence of the European Central Bank (ECB); the rules binding EU member states to fiscal discipline and, when necessary, austerity; the troika's treatment of Greece after 2010—the clearest instance of a supranational regime overriding national democracy for the sake of foreign bondholders.

Streeck's criticism of the eurozone is powerful and shares certain points in common with other diagnoses of its monetary dysfunction, including that of the economist and former Greek minister of finance Yanis Varoufakis (though unlike Streeck, Varoufakis is a committed Europeanist). But Streeck's Eurocentrism results in a lopsided view of contemporary capitalism and its current crisis, which needs to be understood on the global level. The terror of bondholders he describes isn't universal. After all, neither the US nor Japan took up policies of austerity like those applied in Europe after the financial crisis, and the picture looks even murkier further afield. China, soon to be the world's largest economy, is itself a creditor on a massive scale, and its piled-up savings facilitated the credit boom in the US and certain European countries in the 2000s—the same credit boom that is a turning point in Streeck's narrative. These dynamics are absent from Streeck's book, which avoids discussing capitalism as a global system that involves competition between rival power brokers. He narrows his view instead to what he calls "OECD capitalism," limited mostly to Europe and North America. One of the book's only mentions of China comes when Streeck says that it cannot, "for many reasons" (which he doesn't list), be expected to manage global capitalism, either as a partner with the US or by itself, after the end of American hegemony (which he claims is already over). But surely the future of capitalism will not play out in the West alone.

Why does Streeck think that this future will be short, that capitalism's ills are not just confounding but terminal? Since 2008, he writes, we've been living through a period of deep uncertainty, as historically low interest rates and quantitative easing fail to stimulate demand, employment remains sluggish, and public debt rises. Three "apocalyptic horsemen" have appeared: stagnant growth caused by a long-term productivity slowdown, uncontrollable private and public debt, and rising inequality. These would top any economist's list of the worst ailments of contemporary capitalism. But why can't more time be bought? Because we've run out of ideas, according to Streeck: Today's "master technicians" of capitalism are clueless, and traditional social-scientific models can no longer help resolve crises. Standard policies, like fiscal expansion, are politically untenable, and sustained economic growth is over for good.

But whether growth is over and whether large-scale public investment might help are still open and hotly debated questions, both among economists and politicians. One might well make the opposite case: not that there are no good policies left, but that only bad ones have been tried. Since 2008, as British sociologist William Davies argues, Europe has been implementing neoliberal policies with little theoretical justification in economics. Britain's new anti-welfarist policies, which affect the already vulnerable, have been designed not so much according to a market logic as a moral one—a logic of punishment. The problem is political, in other words, not epistemological; it's not about what we know, but about what we can or are willing to do. Resigning ourselves to the idea that better policy is impossible seems little different from arguing, as the architects of neoliberalism long have, that "there is no alternative." If, by Streeck's own account, it was the rise of neoliberalism that set in motion capitalism's demise, then why doesn't he think its salvation could be found in a robust political response?

To be sure, in Streeck's view, there's nothing better waiting to take capitalism's place once it dies. That is a Marxist "prejudice," he writes. Far from emancipation, the end of capitalism will bring with it a new Dark Age—an ungoverned, violent, and anomic interregnum between a dead social order and one not yet born. Streeck does make a few suggestions for how to prevent this apocalypse, mostly focused, again, on Europe. He calls for replacing the euro with national currencies and instituting a regime of fixed but adjustable exchange rates—a return to a Bretton Woods system. He looks back to the interwar period for inspiration, resurrecting ideas for national and supranational monetary regimes once advocated by economists like John Maynard Keynes and Irving Fisher. The politics of this suggestion, not to mention its technical feasibility, are unclear. More to the point, the radical pessimism of Streeck's analysis seems at odds with his rather conventional imagined solution (retreat from a globalized form of capitalism to a national one). He vacillates between a reluctant embrace of fixes that may buy capitalism more time and a complete, fatalistic rejection of them. Streeck can't accept a Marxist approach, nor the prospect of muddling through a dysfunctional and doomed form of capitalism with the more or less liberal regimes we have now.

Over the past few months, though, Streeck's pessimism may have begun to look more warranted. It could be the case, after the November election, that we've inched closer to collapse—toward an "entropic, disorderly, stalemated" society. Or perhaps the Staatsvolk have rallied to overthrow the Marktvolk in the name of a racialized authoritarian nationalism. Or it may be that this is the dawn of a true neoliberal tyranny, in the service of an empowered oligarchy—one that will put the eurozone to shame. We don't know yet. What is clear is that the arrangements that have guaranteed capitalism's survival for decades are transforming before our eyes, and our models can't predict what's coming next.

Jamie Martin is a postdoctoral research fellow in the Laureate Research Program in International History at the University of Sydney.