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A review by johnclough
Buying Time: The Delayed Crisis of Democratic Capitalism by Wolfgang Streeck
4.0
Unusually long review...
jdcloughblog.wordpress.com/2018/07/08/wolfgang-streeck-buying-time/
I picked up Buying Time after reading a couple of chapters for one of my modules last semester and finding Streeck to be one of the stand-out authors included on that course. Streeck is a critical theorist writing in the tradition of crisis studies from the 1960s and 1970s, from which came the idea that we exist in a period of ‘late’ capitalism, and that the system is always on the brink of being toppled by a population increasingly alienated from the benefits of global capitalism. Streeck, however, totally reinvents and reinvigorates this theory by focusing on the power of market forces which earlier theorists like Habermas and Adorno had disregarded. In doing so, he describes how capitalism has clung on since the 1980s, and why it may now face crisis again. He also sets his sights on the EU and delivers a powerful argument from a left-wing perspective against the EU and particularly against the euro. While at times I felt Streeck’s arguments to be a little one-sided if not polemical, Buying Time is nonetheless an extremely powerful and passionate text that definitely got me stirred into a rage at times.
Habermas and Adorno had argued that the political system had become bound up with the economic system and that when the economic system failed to deliver on its promise of prosperity for all, this would not only discredit the economic system but the political system too. What would follow is a legitimation crisis, in which the existing paradigm becomes untenable in the eyes of the citizenry. This crisis should have happened around the early 1970s when the productivity increases that had seen unprecedented pay rises of the previous decades began to slow down. Streeck suggests that the capitalist system has essentially ‘bought time’ since then to prevent a crisis, in three artificial and essentially unmaintainable ways. The first of these was inflation, in which governments basically printed money to meet workers’ demands for pay rises above the level of productivity. This proved unsustainable in an economy that wasn’t returning to high growth, because the rapid inflation of the money supply was rapidly devaluing assets whose valuation was bound to pre-inflation levels, most importantly, government bonds. Inflation essentially devalues government debt. On the one hand, this is excellent as it makes the debt easier to repay, and indeed, national debts dropped rapidly in this period. Streeck focuses, however, on the fact that it can spook the market and lead to spiralling interest rates. Streeck’s reading of the so-called ‘stagflation’ crisis of this period, then, is that it may have allowed governments to ‘buy time’ from the citizens, but in so doing they alienated market forces. In response, these market forces began flexing their muscles, beckoning in the era of neoliberal deregulation through which we continue to suffer. While the factors Streeck identified certainly were central, and certainly credible in their own regard, there did seem to be a tendency for Streeck to focus too closely on his own narrow argument as though it was a total explanation for events. While he wasn’t attempting a comprehensive history of the stagflation crisis, his argument would have seemed more balanced if there had at least been more acknowledgement of the broader factors at play. In trying to rehabilitate political economy to critical theory, I think he may have gone too far and ignored social factors. Need we forget that Thatcher was swept to power by the electorate with an unprecedented mandate, suggesting the rise of neoliberalism wasn’t quite an anti-democratic coup.
It is following stagflation that Streeck’s arguments really come into their own, however. His core argument is that the monetarist, neoliberal paradigm that swept in across the West around the start of the 1980s at no point offered any genuine solutions to the fundamental issue that market capitalism was unable to deliver on its promise of affluence for all – the issue which threatened a legitimation crisis. Instead, for Streeck, what neoliberalism offered was a new toolkit of ways to placate the people, only this time in such a way that also enriched rather than alienated the capitalists. This toolkit essentially boiled down to bottomless credit, enabled by a deregulated finance sector. Streeck splits this into two stages. Firstly, the expansion of government debt, followed eventually by a massive expansion of private indebtedness, the latter of which really peaked in 2007 on the brink of the crisis of 2008. I found this element of Streeck’s argument quite convincing and also quite depressing. Neoliberalism is characterised as something of a reverse Robin Hood – take from the poor give to the rich. Wages became untethered from productivity, and pay increasingly concentrated in the hands of the top, while salaries at the top of the scale exploded. Streeck tells us (p. 53-4) that 93% of all new income in the USA in 2010 – $288billion – went to the top 1% of taxpayers. Moreover, 81.7% of the asset increase between 1983-2010 went to the top 5%, while the bottom 60% made a 7.5% net asset loss over the same period. Even as someone reasonably aware of the extent of inequality in modern economies, I found these figures shocking and deeply angering. It’s hard to imagine any justification of this merciless redistribution of wealth to the tiny minority of financial elites.
Streeck argues that the population has essentially been bought off with credit. What this equates to is that most workers get paid less so the top minority can get paid more, and that tiny minority then loans the shortfall back to these people to ensure that people are still buying stuff, both to keep the economy stimulated and to prevent them literally storming down Wall Street with violent intent. This argument Streeck essentially adapts from Crouch’s concept of ‘privatised Keynesianism’ in which it is private citizens, rather than the state, that incurs huge debt to ensure aggregate demand is maintained in the economy. Streeck suggests that the 2008 crisis indicates that the privatised debt paradigm is becoming increasingly unstable as a resolution for capitalism’s shortfalls. Moreover, Streeck suggests that the massive expansion of public indebtedness is not only symptomatic of a wholesale redistribution of wealth to the top, but a wholesale redistribution of political power away from democratic citizens and to the creditors. Creditors have enormous power over-indebted governments in terms of the interest they are willing to charge to continue lending to governments. If they believe that a government is no longer a safe investment, interest will shoot up, and governments who have relied on cheap credit to keep themselves afloat will quickly find themselves insolvent. Democratic citizens have no such equivalent power. Thus, all across Europe, the system driven by creditors’ interests has essentially imposed massively socially damaging austerity all over Europe, whether or not the people want it, as seen most vividly in Greece.
Indeed, Streeck then goes on to attack the euro, which he construes as a means for powerful exporting countries (read: Germany) to maintain their surpluses by constraining weaker countries’ ability to devalue their currency. One of the strengths that the UK and the US have over the eurozone is national ownership over their currency. This means that, if push comes to shove, they can print money to pay debts. This limits the total power of creditors, though there is still a culture of fear surrounding unlimited cash printing, as it can easily lead to spiralling inflation and decreased creditworthiness. If carefully controlled, however, devaluing currency also has the advantage of making goods a country exports cheaper, and imported goods more expensive. This means that it can create an equilibrium between countries, overcoming productivity gaps. This would be an extremely helpful trick for Greece, Italy, and Spain at the moment, as it could enable their export industry to return to health, but the euro prevents them from doing this, meaning German productivity advantage remains. The only way left for euro nations to improve competitivity is to slash wages. In countries already ravaged by years of employment strife, this is understandably not welcome news.
While I found his attack on the eurozone a powerful critique, I was a little less convinced by his broader attack on the EU as a whole. In short, he attempts to paint a picture of the EU as an anti-democratic, pro-market tool of neoliberal advancement, essentially attempting to undermine nationally implemented controls. There’s an element of truth in Streeck’s portrayal, especially when it comes to democracy. The EU really does suffer from a democratic deficit; the overwhelming majority of the power is held by unelected technocrats massively disconnected from the lives of the overwhelming majority of EU citizens. Streeck himself acknowledges that there is no easy solution to this; there are massive socioeconomic differences between EU member states that pose a huge problem for democratic rule. Herein lies a genuine issue for international relations in the coming decades; there is an ever-increasing need for cross-national cooperation, to tackle the issues of globalised markets, but the more disparate the threads that form the union, the less stable that union will be. The EU’s solution to this seems to have been to sideline democracy and consolidate their strength among their own elite. Streeck’s solution is continued cooperation but less of the consolidation. Neither of these options seems like they will yield the best result. The EU’s because it risks becoming increasingly antagonistic to democratic interests, Streeck’s because it risks watering down cooperation to a level below that which can deliver meaningful results.
Beyond the issue of democracy, it’s also somewhat questionable just how “neoliberal” an organisation the EU truly is. A great deal of how much this seems to be the case is determined by what country you happen to be in when considering the question. As was made clear around the time of the Brexit election, much of the EU’s influence in the UK has been regulatory restraint of the free market, and one of the main concerns about leaving the EU is that we may lose some of those regulatory protections. While at the bottom line, the free movement of labour, goods, and services that defines the modern EU are fundamentally motivated by free-market ideology, from a UK perspective it’s hard to see the EU as the nefarious enemy of the people that Streeck seems to wish to portray it as.
Nonetheless, as the length of this review in itself shows, I found Streeck’s text fascinating and engaging, not to mention provocative. It raises a lot of difficult to answer questions about the future of democracy in our increasingly globalised and capitalised world. It’s the sort of stuff that is going to shape the political and economic landscape for the decades to come, and so it’s absolutely material that needs engaging with.
jdcloughblog.wordpress.com/2018/07/08/wolfgang-streeck-buying-time/
I picked up Buying Time after reading a couple of chapters for one of my modules last semester and finding Streeck to be one of the stand-out authors included on that course. Streeck is a critical theorist writing in the tradition of crisis studies from the 1960s and 1970s, from which came the idea that we exist in a period of ‘late’ capitalism, and that the system is always on the brink of being toppled by a population increasingly alienated from the benefits of global capitalism. Streeck, however, totally reinvents and reinvigorates this theory by focusing on the power of market forces which earlier theorists like Habermas and Adorno had disregarded. In doing so, he describes how capitalism has clung on since the 1980s, and why it may now face crisis again. He also sets his sights on the EU and delivers a powerful argument from a left-wing perspective against the EU and particularly against the euro. While at times I felt Streeck’s arguments to be a little one-sided if not polemical, Buying Time is nonetheless an extremely powerful and passionate text that definitely got me stirred into a rage at times.
Habermas and Adorno had argued that the political system had become bound up with the economic system and that when the economic system failed to deliver on its promise of prosperity for all, this would not only discredit the economic system but the political system too. What would follow is a legitimation crisis, in which the existing paradigm becomes untenable in the eyes of the citizenry. This crisis should have happened around the early 1970s when the productivity increases that had seen unprecedented pay rises of the previous decades began to slow down. Streeck suggests that the capitalist system has essentially ‘bought time’ since then to prevent a crisis, in three artificial and essentially unmaintainable ways. The first of these was inflation, in which governments basically printed money to meet workers’ demands for pay rises above the level of productivity. This proved unsustainable in an economy that wasn’t returning to high growth, because the rapid inflation of the money supply was rapidly devaluing assets whose valuation was bound to pre-inflation levels, most importantly, government bonds. Inflation essentially devalues government debt. On the one hand, this is excellent as it makes the debt easier to repay, and indeed, national debts dropped rapidly in this period. Streeck focuses, however, on the fact that it can spook the market and lead to spiralling interest rates. Streeck’s reading of the so-called ‘stagflation’ crisis of this period, then, is that it may have allowed governments to ‘buy time’ from the citizens, but in so doing they alienated market forces. In response, these market forces began flexing their muscles, beckoning in the era of neoliberal deregulation through which we continue to suffer. While the factors Streeck identified certainly were central, and certainly credible in their own regard, there did seem to be a tendency for Streeck to focus too closely on his own narrow argument as though it was a total explanation for events. While he wasn’t attempting a comprehensive history of the stagflation crisis, his argument would have seemed more balanced if there had at least been more acknowledgement of the broader factors at play. In trying to rehabilitate political economy to critical theory, I think he may have gone too far and ignored social factors. Need we forget that Thatcher was swept to power by the electorate with an unprecedented mandate, suggesting the rise of neoliberalism wasn’t quite an anti-democratic coup.
It is following stagflation that Streeck’s arguments really come into their own, however. His core argument is that the monetarist, neoliberal paradigm that swept in across the West around the start of the 1980s at no point offered any genuine solutions to the fundamental issue that market capitalism was unable to deliver on its promise of affluence for all – the issue which threatened a legitimation crisis. Instead, for Streeck, what neoliberalism offered was a new toolkit of ways to placate the people, only this time in such a way that also enriched rather than alienated the capitalists. This toolkit essentially boiled down to bottomless credit, enabled by a deregulated finance sector. Streeck splits this into two stages. Firstly, the expansion of government debt, followed eventually by a massive expansion of private indebtedness, the latter of which really peaked in 2007 on the brink of the crisis of 2008. I found this element of Streeck’s argument quite convincing and also quite depressing. Neoliberalism is characterised as something of a reverse Robin Hood – take from the poor give to the rich. Wages became untethered from productivity, and pay increasingly concentrated in the hands of the top, while salaries at the top of the scale exploded. Streeck tells us (p. 53-4) that 93% of all new income in the USA in 2010 – $288billion – went to the top 1% of taxpayers. Moreover, 81.7% of the asset increase between 1983-2010 went to the top 5%, while the bottom 60% made a 7.5% net asset loss over the same period. Even as someone reasonably aware of the extent of inequality in modern economies, I found these figures shocking and deeply angering. It’s hard to imagine any justification of this merciless redistribution of wealth to the tiny minority of financial elites.
Streeck argues that the population has essentially been bought off with credit. What this equates to is that most workers get paid less so the top minority can get paid more, and that tiny minority then loans the shortfall back to these people to ensure that people are still buying stuff, both to keep the economy stimulated and to prevent them literally storming down Wall Street with violent intent. This argument Streeck essentially adapts from Crouch’s concept of ‘privatised Keynesianism’ in which it is private citizens, rather than the state, that incurs huge debt to ensure aggregate demand is maintained in the economy. Streeck suggests that the 2008 crisis indicates that the privatised debt paradigm is becoming increasingly unstable as a resolution for capitalism’s shortfalls. Moreover, Streeck suggests that the massive expansion of public indebtedness is not only symptomatic of a wholesale redistribution of wealth to the top, but a wholesale redistribution of political power away from democratic citizens and to the creditors. Creditors have enormous power over-indebted governments in terms of the interest they are willing to charge to continue lending to governments. If they believe that a government is no longer a safe investment, interest will shoot up, and governments who have relied on cheap credit to keep themselves afloat will quickly find themselves insolvent. Democratic citizens have no such equivalent power. Thus, all across Europe, the system driven by creditors’ interests has essentially imposed massively socially damaging austerity all over Europe, whether or not the people want it, as seen most vividly in Greece.
Indeed, Streeck then goes on to attack the euro, which he construes as a means for powerful exporting countries (read: Germany) to maintain their surpluses by constraining weaker countries’ ability to devalue their currency. One of the strengths that the UK and the US have over the eurozone is national ownership over their currency. This means that, if push comes to shove, they can print money to pay debts. This limits the total power of creditors, though there is still a culture of fear surrounding unlimited cash printing, as it can easily lead to spiralling inflation and decreased creditworthiness. If carefully controlled, however, devaluing currency also has the advantage of making goods a country exports cheaper, and imported goods more expensive. This means that it can create an equilibrium between countries, overcoming productivity gaps. This would be an extremely helpful trick for Greece, Italy, and Spain at the moment, as it could enable their export industry to return to health, but the euro prevents them from doing this, meaning German productivity advantage remains. The only way left for euro nations to improve competitivity is to slash wages. In countries already ravaged by years of employment strife, this is understandably not welcome news.
While I found his attack on the eurozone a powerful critique, I was a little less convinced by his broader attack on the EU as a whole. In short, he attempts to paint a picture of the EU as an anti-democratic, pro-market tool of neoliberal advancement, essentially attempting to undermine nationally implemented controls. There’s an element of truth in Streeck’s portrayal, especially when it comes to democracy. The EU really does suffer from a democratic deficit; the overwhelming majority of the power is held by unelected technocrats massively disconnected from the lives of the overwhelming majority of EU citizens. Streeck himself acknowledges that there is no easy solution to this; there are massive socioeconomic differences between EU member states that pose a huge problem for democratic rule. Herein lies a genuine issue for international relations in the coming decades; there is an ever-increasing need for cross-national cooperation, to tackle the issues of globalised markets, but the more disparate the threads that form the union, the less stable that union will be. The EU’s solution to this seems to have been to sideline democracy and consolidate their strength among their own elite. Streeck’s solution is continued cooperation but less of the consolidation. Neither of these options seems like they will yield the best result. The EU’s because it risks becoming increasingly antagonistic to democratic interests, Streeck’s because it risks watering down cooperation to a level below that which can deliver meaningful results.
Beyond the issue of democracy, it’s also somewhat questionable just how “neoliberal” an organisation the EU truly is. A great deal of how much this seems to be the case is determined by what country you happen to be in when considering the question. As was made clear around the time of the Brexit election, much of the EU’s influence in the UK has been regulatory restraint of the free market, and one of the main concerns about leaving the EU is that we may lose some of those regulatory protections. While at the bottom line, the free movement of labour, goods, and services that defines the modern EU are fundamentally motivated by free-market ideology, from a UK perspective it’s hard to see the EU as the nefarious enemy of the people that Streeck seems to wish to portray it as.
Nonetheless, as the length of this review in itself shows, I found Streeck’s text fascinating and engaging, not to mention provocative. It raises a lot of difficult to answer questions about the future of democracy in our increasingly globalised and capitalised world. It’s the sort of stuff that is going to shape the political and economic landscape for the decades to come, and so it’s absolutely material that needs engaging with.