IAN McAULEY. What lies beyond capitalism?

Feb 6, 2017

This a review of Wolfgang Streeck’s book ‘How will capitalism end?’.

Communists of the world, relax! Don’t spend your efforts trying to bring down capitalism, because it’s going to bring itself down.  

That’s the well-reasoned view of the German sociologist Wolfgang Streeck, in his book How will capitalism end?. His work has come to prominence because he outlines many of the economic and political issues that have been contributing to voter discontent in Europe and the USA. Because his book – really a collection of essays – was published just a few weeks before the Trump victory, it has achieved a certain prophetic status.

To paraphrase his argument, capitalism is like a dumb parasite: lacking the good sense to understand that its survival and its host’s survival are intertwined, it over-exploits its host and contributes to its own demise.

Capitalism and democracy, he asserts, are fundamentally antagonistic. There was a brief period – the period we in the west know as the “postwar” years after 1945 –  when capitalism and democracy got along well. Indeed, anyone old enough to remember the Cold War at its height would recall that it was beyond question that capitalism and democracy were inseparable.

Streeck’s argument, in line with an orthodox view of history, is that in the postwar era the destructive forces of capitalism were kept in check by the countervailing powers of trade unions and the presence of strong social-democratic and labour parties.

He fails to mention the power of the Bretton Woods settlement in contributing to this period of prosperous co-existence, but Streeck is deeply sceptical of supranational institutions, because in his view they are too removed from democratic processes and subject to capture by the interests of global finance. Four chapters of his book are dedicated to his presentation of the European Union as a dangerously anti-democratic arrangement. Unlike other Germans of the left whose consciousness has been conditioned by the horrors of the 1914-45 period, such as Jürgen Habermas, he almost completely disregards the risks of European fragmentation and consequential trade and currency conflicts.

Other than this excursion into isolationism his economic arguments are straightforward and well-supported with data. Capitalism, if it is not to run out of puff (Marx’s prediction of declining profits), needs to keep on exploiting new markets. There is no such thing as a stable zero-growth capitalism, he argues. The postwar period gave capitalism a growth opportunity with new technologies, reconstruction in Europe and Japan and a huge pent-up demand following years of depression and war.

But this period was atypical, and it gave way to neoliberalism, which gave the market opportunities to expand into realms once provided by or regulated by the state, in a process he calls Landnahme – literally “land taking”, or enclosing the commons. Privatization of child care, airports, provision of electricity and water, and education are a few of the many cases in point.

As Karl Polanyi predicted in his 1944 work The Great Transformation, we are seeing the market intrude into areas of our life once kept off limits from commercialization. Rather than living in a society in which the market is contained by and subject to society’s norms, we are coming to live in a “market society”.

One consequence of the winding back of the state is widening income and wealth disparities, which have their own destructive consequences – economically in depriving capitalism of its mass market of well-paid workers and politically in undermining the legitimacy of capitalism and the governments that support it. Also the “small government” fetish has seen a depletion of the public goods on which capitalism depends and for which markets do a poor job – education, infrastructure, research and so on.

Another adverse phenomenon is increasing government debt – a problem where at first sight Streeck seems to align with the right. But he sees increasing government debt arising not from profligate and irresponsible public expenditure (the line from the right including our own Treasurer) but from a failure to tax the well-off. To the well-off, debt is an ideal substitute for taxes because bond holders are guaranteed re-payment whereas what is spent on taxes is gone (its benefits come back in the form of public goods, which have to be shared with the poor).

He sees government debt reaching its limit, but capitalism can go on expanding with private consumption financed by private debt. (Any dispassionate observer of Australia, a country with low government debt, would see confirmation in our huge and growing private debt).De facto, the finance sector is taking over from the state.

Here is where Streeck, like Vance Packard back in 1957 (The Hidden Persuaders) pulls together economics and sociology. Capitalism keeps itself going by creating “wants”. He goes beyond Packard’s analysis, pointing out that the cornucopia of choice offered by the market is presented as more exciting than the vanilla uniformity offered by the public sector. The private sector is cool, the public sector uncool, and in an extension of this proposition he links it to disengagement with elected politics, particularly among young people. If the public sector has shrunken its offerings, and if what it has left to offer is boring, why bother?

This dynamic is convenient to capitalism, particularly if that consumption is financed by debt, because debt is what keeps many people attached to the labour force.

The threat to capitalism is not from angry crowds storming Trump Towers or the Melbourne Club. Rather it is from those who may choose to turn their backs on the market and live a “post-materialist” lifestyle.

Few people – other than those employed in marketing and advertising – would disagree with Streeck’s depiction of the absurdity, and ultimate unsustainability, of this consumption-debt-work treadmill.

Streeck asserts that there has been nothing to replace trade unions as a force to countervail capitalism’s self-destructive excesses, and as for the broader “left” he says it has become obsessed by the way:

… culture wars, ‘family values’, lifestyle choices, ‘political correctness’, the age and sex of politicians, and the way they dress and look and speak deliver an unending supply of opportunities for pseudo-participation in pseudo-debates, never allowing for boredom to arise: whether the foreign minister should or should not have his male companion accompany him on a state visit to the Middle East; if there are enough women cabinet members, and in sufficiently powerful positions; how female ministers attend to their small children, too little or too much; whether the president of the Republic should use a motor cycle when visiting his lover; and how often a week the minister of economic affairs takes his daughter to kindergarten in the morning.

Public debate about public policy, he says, has given way to “politainment”. Most listeners to news programs and daily commentaries, even those on the ABC, would readily agree.

In my view his analysis is sound, but his dismal prognosis falls down, because, as Allan Patience has written on this same blog, Streeck is captured by a “melancholia”, a “massive failure of imagination” to perceive new economic models to contain capitalism within society.

He does not allow for the development of capitalist models other than the European-American (and Australian) one he describes: China and other countries using different capitalist models get hardly a mention. He does not allow for the possibility of rejuvenation of traditional left parties or the emergence of new ones: as we are seeing all over the world, there is a great deal of political fluidity, and it’s not only about the emergence of far right populism. Nor does he allow for the growing influence of non-partisan bodies that seek to contain capitalism, such as Stephen Mayne’s shareholder activism and Getup!.

Brexit and the Trump election provide a wake-up call for the left around the world (literally a wake-up call for those British and American progressives who didn’t bother to get out of bed and vote). In many ways the Brexit and Trump campaigns appealed to voters who were once attracted to parties of the left.

The challenge for the left is to re-engage with economics and to reach to those people who will soon realize that they have been duped – in Britain’s case by a re-assertion of traditional Tory conservatism and anti-European militarism, and in America’s case by the re-emergence of crony capitalism. In fact, Trump’s behaviour may even be enough to restore socialism’s good name.

See also Allan Patience’s blog: ‘The End is Nigh! Anticipating a Post-Capitalist World‘.

Ian McAuley is an adjunct lecturer in public sector finance at the University of Canberra, a fellow of the Centre for Policy Development, and co-author with Miriam Lyons of Governomics: Can we afford small government?, which covers much of the same ground as Streeck’s, but with a vision of more optimistic possibilities.


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