Time to restart the old capitalism death watch
The market has been given more and more freedom to follow its own internal logic, and that logic has led to an inevitable crisis
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The global capitalist system has been having a tough decade. Lots of explanations have been offered for why things have been going so poorly: inadequate regulation, excessive regulation, excessive monetary easing, inadequate fiscal stimulus, inequality, “secular stagnation”.
Wolfgang Streeck has another possibility for you to consider: Maybe capitalism is dying. Streeck is a German sociologist, the emeritus director of the Max Planck Institute for the Study of Societies in Cologne. He went there in 1995 and became involved in efforts to shape economic policy, mainly trying to “defend the German regime of worker participation, which was under pressure from Europeanization and globalization”. From an outsider’s perspective, those efforts seemed to have been moderately successful, but they left Streeck increasingly pessimistic.
“I used to be a reformist, I used to be a social democrat,” Streeck said when I visited him on Friday. “I believed that with good policy you can make the capitalist wealth machine subservient to political objectives.” Nowadays, he thinks the capitalist wealth machine is spinning out of control, and he’s been spelling out this belief in books that, somewhat to his surprise, have garnered significant attention outside Germany.
First came Buying Time: The Delayed Crisis Of Democratic Capitalism, which was published in 2013. Then there’s How Will Capitalism End? —a collection of essays, most originally written in English, that was published last fall.
I haven’t read every word of the two books, but I can say there are no shocking revelations. “There’s sort of a very simple idea there, which is that everything that has a beginning has an end,” Streeck told me about How Will Capitalism End?
In a Financial Times review of the book, Martin Wolf described Streeck’s “defeatism before supposedly unmanageable social forces” as “characteristic of a certain sort of intellectual”. Which is true, but this might actually be a useful sort of intellectual to have around from time to time.
“I believe in trends and in long-term tendencies, not in momentary cross-sectional comparisons,” Streeck told me. “I believe in history, not mechanics.” Economists are the mechanics. My favourite passage in Buying Time, in fact, is probably Streeck’s description of former US treasury secretary Lawrence Summers as “the most influential service mechanic of the stuttering capitalist accumulation machine”—a description that Summers should consider adding to his Twitter bio and putting on his business cards.
What’s nice about mechanics is that they fix stuff. But economic mechanics have been getting a lot of things wrong lately. That’s because, Streeck said, “the world has changed and causal structures have changed”.
Streeck works instead in a tradition that’s most often identified with Karl Marx but could also be traced to Georg Wilhelm Friedrich Hegel or even Ibn Khaldun. It doesn’t offer any repair manuals or even clear predictions, but it may help in understanding what’s going on.
Streeck writes that the three main symptoms of a crisis of capitalism are slowing economic growth, rising indebtedness, and increasing inequality in leading capitalist nations. These trends have been in place since the 1970s; the financial crisis of 2008 merely accelerated them.
Conservative observers have focused on the first two of those symptoms, arguing that the problem is voters demanding handouts and politicians too willing to accede. Streeck doesn’t buy that, writing in How Will Capitalism End?:
“That the fiscal crisis was unlikely to have been caused by an excess of redistributive democracy can be seen from the fact that the build-up of government debt coincided with a decline in electoral participation, especially at the lower end of the income scale, and marched in lockstep with shrinking unionization, the disappearance of strikes, welfare-state cutbacks and exploding income inequality.”
Streeck points instead to tax cuts for high earners and corporations, as well as increasing “institutional protection of the market economy from political interference”, as key culprits. The market has been given more and more freedom to follow its own internal logic, and that logic has led to an inevitable crisis. It’s only when democratic political forces can keep the market in check that it really delivers the goods as far as growth and prosperity are concerned, but in a global economy without a global state, those democratic forces don’t have much power.
At least, that’s my reading of Streeck’s argument. He doesn’t see a global state —or global Bolshevik Revolution—in the offing, and so expects a long, messy period full of Brexits and Donald Trumps. A big question is whether that would threaten to end capitalism. Streeck himself writes that the modern capitalist system has been through repeated revolutions and transformations over the centuries, and that theories of capitalism have always been theories of crisis: “This holds not just for Marx and Engels but also for writers like Ricardo, Mill, Sombart, Keynes, Hilferding, Polanyi and Schumpeter, all of whom expected one way or other to see the end of capitalism during their lifetime.”
They were all disappointed in that expectation. This is no guarantee that Streeck will be too, of course, but it does seem to be a hint that today’s troubles could be something other than harbingers of epochal change. There is another thing Streeck told me that we can probably all agree on, though: “We’re going into a long period where we don’t know what is coming.” Bloomberg
Justin Fox is a Bloomberg View columnist.