Making the best of a good crisis?

A recent debate has emerged around the use European elites can make of the Eurozone crisis. According to the Naomi Klein theory of social change, backed up recently by Paul Krugman, crises are used by capitalists as opportunities to reform economies in their favour. Whether such crises, or “disasters” to use Klein’s turn, are wars provoked by outside interventions (Iraq) or financial crises of the kind we are seeing today in Europe and elsewhere, the point is that crises are good for those who favour neoliberal policies.

In the context of the austerity versus stimulus debate, Krugman suggests that the reason why austerity is preferred is not that it works (it clearly isn’t working) but it is because stimulus might work. If European economies begin to grow again, then the window of opportunity to replace “social Europe” with a neoliberal alternative will have gone. Successful stimulus will only strengthen the case against deeper structural reform. Krugman notes that this view is already entering into the evaluation of Japan’s recent attempt at monetary stimulus: cautious voices are pointing out that if this works, then there will be no incentive to tackle the country’s underlying problems.

There is quite a bit wrong with this explanation for austerity, however compelling it may seem at the intuitive level. Everyone likes to bash those far-sighted capitalists – the elusive 1% – who conspire behind closed doors to get what they want at the expense of everyone else, the 99%. But this is more a conspiracy theory than it is an explanation of why governments are committed – for the time being – to the austerity agenda. Profiting from a crisis is one thing. Creating a crisis in order to implement a cunning plan is another. In Europe, there is no doubt that authors of the bail-outs have tried to calibrate carrot and stick, using the difficulties of the present crisis in countries like Greece and Portugal as a way of encouraging structural reform. They have also cautioned against any suggestion that the crisis is over, believing that such talk will undermine the commitment of national elites to the reform programme. All this, however, is a far cry from the notion that crises are manufactured as opportunities for neoliberally inspired reforms.

Krugman makes the added point that elites chose austerity over stimulus because they feared the latter could be too successful. He invokes the work of the Polish Marxist Michal Kalecki and his notion of the political business cycle. According to Krugman, Kalecki’s idea explains why businessmen don’t like Keynesian economies. In fact, Kalecki argues something much more specific. At issue for Kalecki is not the ability of Keynesian deficit spending to return crisis-ridden capitalist economies to the status quo ante, which is what Krugman and others imply. Kalecki’s point is not about the stabilizing effects of Keynesianism but rather about its transformative and radical political effects. These are not internal to Keynesianism itself – Keynes was far from being a radical on this point – but are part of the political consequences of Keynesian policies (hence the title of Kalecki’s famous 1943 essay, ‘Political Aspects of Full Employment’).

Kalecki argues that full employment, as a policy goal, is both feasible and attainable. However, politically, the problem with maintaining full employment is that it empowers the working class to the point that it begins to challenge the basic contours of the capitalist economy itself. Full employment has a creative effect by way of ideas and actions that threatens the fabric of capitalist society. It holds up the prospect of a better society and stimulates people to think about how that alternative could be achieved. Kalecki’s point is that stimulus makes a return to the status quo ante more difficult and that is why owners of capital will do everything to frustrate governments who identify full employment as their main goal.

In today’s context, what is striking is that the austerity versus stimulus debate is had against a backdrop of consensus around the nature of the economic system. Both are means to an agreed end and Krugman’s argument for stimulus is that it works better than austerity in this regard. Kalecki’s point about stimulus was that it throws open, because of the mobilisation and politicisation of workers, the question of what the ends are and of what kind of economic system we would like. If we want to bring back Kalecki to the present discussion, it is this aspect that we should emphasize. And to resist Krugman and Klein’s conspiratorial accounts of intended crises and infinitely cunning capitalist elites.

The Blonde Beast in the Boardroom

A familiar left-wing critique of libertarianism and the wider school of classical liberalism is that it defends only formal not actual freedom. Everyone is formally free to accumulate property because the law protects everyone’s property rights in whatever they have acquired legally. In practice this means some end up with much more property than others, leaving most people economically dependent on the wealthy few. In fact, a person’s formal freedom to own things is consistent with him not actually owning anything at all. The defense of formal freedom is therefore a particular way of concealing and reproducing radically inequality, in the name of equal freedom itself. There are endless refinements and variations of this argument, but it is the basic and long-standing left-wing critique, and it continues to have strong appeal today as an argument against the current distribution of wealth and income.

This week, Corey Robin published a remarkable and decidedly different take on the inegalitarian features of modern libertarianism and its marginalist origins. On Robin’s view, there is nothing concealed or even mysterious about this intellectual tradition. It is explicitly and self-consciously inegalitarian. In a passage worth quoting at length, Robin unpacks the aristocratic seeds of Hayek’s worldview

In fact, Hayek continues, it is not really my freedom that I should be concerned about; nor is it the freedom of my friends and neighbors. It is the freedom of that unknown and untapped figure of invention to whose imagination and ingenuity my friends and I will later owe our greater happiness and flourishing: “What is important is not what freedom I personally would like to exercise but what freedom some person may need in order to do things beneficial to society. This freedom we can assure to the unknown person only by giving it to all.”

Deep inside Hayek’s understanding of freedom, then, is the notion that the freedom of some is worth more than the freedom of others: “The freedom that will be used by only one man in a million may be more important to society and more beneficial to the majority than any freedom that we all use.” Hayek cites approvingly this statement of a nineteenth-century philosopher: “It may be of extreme importance that some should enjoy liberty…although such liberty may be neither possible nor desirable for the great majority.” That we don’t grant freedom only to that individual is due solely to the happenstance of our ignorance: we cannot know in advance who he might be. “If there were omniscient men, if we could know not only all that affects the attainment of our present wishes but also our future wants and desires, there would be little case for liberty.”

As Robin tells it, this vision of everyone’s freedom only gaining value through the heroic efforts of the few who use it to create new values can be traced back to a surprising source: fin-de-siecle Vienna, and in particular the subterranean cultural and social philosophical connections between Nietzsche and the marginalist economic revolution. The article is not easily summarized. It traces unexpected connections and elective affinities, but the basic point is that seeing value as subjective, and seeing freedom as an act of choice that endows goods with value – the basic, boring, seemingly value-neutral starting point for modern microeconomics – has to be understood as not just a methodological but a cultural and political revolution. It became, in the hands of figures like von Mises, Schumpeter and Hayek an argument for why neither art nor politics but the market was the real site for the creation of value, in which a few heroic figures exercised their virtues and reinvented culture, while the masses made the free choice to be led by the captains of industry.

Moreover, it was a way of turning political questions about human needs into millions of isolated ethical dramas, played out separately in the market. Here again, a passage from the article is worth quoting at length:

For those choices to reveal our ends, our resources must be finite—unlimited time, for example, would obviate the need for choice—and our choice of ends unconstrained by external interference. The best, indeed only, method for guaranteeing such a situation is if money (or its equivalent in material goods) is the currency of choice—and not just of economic choice, but of all of our choices. As Hayek writes in The Road to Serfdom:

So long as we can freely dispose over our income and all our possessions, economic loss will always deprive us only of what we regard as the least important of the desires we were able to satisfy. A “merely” economic loss is thus one whose effect we can still make fall on our less important needs…. Economic changes, in other words, usually affect only the fringe, the “margin,” of our needs. There are many things which are more important than anything which economic gains or losses are likely to affect, which for us stand high above the amenities and even above many of the necessities of life which are affected by the economic ups and downs.

Should the government decide which of our needs are “merely economic,” we would be deprived of the opportunity to decide whether these are higher or lower goods, the marginal or mandatory items of our flourishing. So vast is the gulf between each soul, so separate and unequal are we, that it is impossible to assume anything universal about the sources and conditions of human happiness

On Robin’s striking reading, difference and inequality are the essence of the ideology, not aspects concealed by a formal commitment to the freedom and equality of all persons. There is much more to say about the article, but it is worth noting two things in particular. First, both the left and libertarians often note that the myth of the market fails to correspond to reality. If anything, libertarians see this better than the Left, the latter often taking free market ‘neoliberal’ ideology to describe reality – something we were reminded of in recent Thatcher obituaries. But Robin’s article suggests a different reading. Practice does match ideology if we stop thinking of this ideology as a thesis prescribing perfectly free markets, limited regulation, with low barriers to entry, fully rational actors, and the rest of it. Robin instead invites us to see the heart of the ideology as an argument about the market as an sphere of agonistic struggle, in which the few battle it out in a contest of wits, foresight and pure will, while Hayek’s “great majority” use their freedom for considerably more mundane purposes.

Second, the left has often taken issue with the seemingly bourgeois or rationalistic assumptions of neo-classical economics and its marginalist forefathers. It has attacked its individualism and its scientism. But Robin makes us see the passionate cultural and political side of some of the markets most ardent defenders. Their intellectual roots lie just as much in a kind of inegalitarian cultural anxiety, irrationalism, and celebration of the will as they do in the dull grey-in-grey of the dismal science. Keynes was not the only one interested in animal spirits, though in this case, the animating spirit is the blonde beast in the boardroom.

François Hollande, a year on

A year into his Presidency, François Hollande is struggling. Of all the analyses made of his first year in office, very few have been positive. At The Current Moment, we commented extensively on the elections a year ago and on Hollande as a leader (see here, here and here). A few points are worth reiterating to make sense of today’s widespread disappointment.

It is important to remember that what secured Hollande’s victory a year ago was the prevailing anti-Sarkozy sentiment. Some of that feeling came from a rejection of the substance of Sarkozy’s presidency and so signalled a real endorsement of Hollande’s agenda. But much of the anti-Sarkozy feeling came from a reaction against his style: showy, celebrity-focused, hyperactive, lacking the gravitas expected of the President of the Republic. This list could go on.

Far from challenging this superficial rendering of politics as a matter of competing styles and personalities, the Socialists launched their own brand: normality, embodied in the rotund (but much-slimmed) cheeriness of François Hollande. He enjoys football, he makes jokes, he will govern through the country’s institutions and not above or alongside them. The notion of the ‘normal presidency’ never really stuck, not least because it lacks any capacity to inspire. But it did just enough to give Hollande the election victory on May 6^th. Other factors counted too of course: his promise of a 75 per cent tax on incomes above 1 million Euros was timed perfectly to play on the anger felt towards high earners living in luxury at a time of social crisis. Even then, Hollande’s victory was wafer thin. He edged in front of Sarkozy by very little in the first round (28.63% to Sarkozy’s 27.08%) in comparison to Sarkozy’s thumping victory against Ségolène Royal back in 2008. In the second round, Hollande secured 51.64% of the vote, to Sarkozy’s 48.36%.

Throughout the campaign, the gap narrowed between the two leading contenders, transforming what many thought would be a sure victory for the Socialists into a very narrow one indeed. Hollande, an unremarkable figure until then, tipped by few as a likely winner for the presidency, certainly held his nerve. More than anything else, though, he was in the right place at the right time. This explains why his popularity has plummeted. Constructed on the back of the antipathy towards Sarkozy, the fading memory of the latter brings with it a steady erosion in Hollande’s popularity. This is not a problem of voters forgetting the past too easily. It is a product of the negative and opportunistic campaign of the Socialists in 2012.

Hollande’s difficulties today are also to do with what has happened since May 2012. The gay marriage bill has been pushed through but at the expense of a widespread societal mobilization against it, one that brought many people out of their provinces and onto the esplanades of the country’s capital. This author remembers seeing dozens of coaches, all full to the brim, tearing through the Bois de Boulogne on a Sunday morning on their way to an anti-gay marriage demonstration and all coming in from well outside of the capital and its surrounding suburbs.

One event that hit the government particularly hard was the Cahuzac affair: the admission by a government minister, the minister for the budget no less, after many months of denial, that he had a bank account in Switzerland which he kept hidden from the French taxman. The reason the Cahuzac affair has been so damaging for the government is that Hollande’s critique of capitalism, and in particular those private companies and private individuals that escape paying taxes, was always a moralistic one. Hollande presented his case against finance as a moral crusade: it was a war against the vulgar anti-egalitarian materialism of the financial class, fought in the name of the republican values of common good and a sense of patriotic duty attached to contributing to the public coffers.

Cahuzac’s secret Swiss bank account struck at the heart of this moral crusade by bringing those corrupt values into the heart of Hollande’s cabinet. In some ways, Hollande can’t be blamed for having trusted someone who then betrayed him. To misjudge someone’s character is something we have all done at some point. For Hollande, the difficulty was that there was nothing other than this moral crusade underpinning his critique of capitalism. What could have been dismissed as a mere personal failing on the part of an individual, had Hollande’s critique been more substantial, has had the effect of a devastating blow.

This crusade against finance has also been exposed to the harsh winds of the continuing national and European crisis. On this, the French government has managed to achieve very little. A central plank of Hollande’s campaign was his promise to rewrite the European Fiscal Compact, notably by injecting into it a strong growth component. Even at the time, it seemed improbable that Hollande – after the election – would travel to Berlin and tell Angela Merkel what to do. Unsurprisingly, very little in the Compact was changed and Hollande has so far struggled to dent Merkel’s determination to stick to her austerity agenda in the run up to elections in Germany in the Autumn. Promising a radical shake up of France’s sclerotic economy, Hollande commissioned a report from prominent industrialist, Louis Gallois. Focused on competitiveness, Gallois suggested a number of ‘shock’ measures which the government chose to ignore. Hollande may still pursue a reform agenda, by bringing Gallois or someone like Pascal Lamy into a more technocratic cabinet after a summer reshuffle. But there is little momentum in either the reforming or the staunchly anti-austerity direction, leaving all sides unhappy at the government’s immobilism.

Hollande has tended to make his case by courting fellow travellers, latching onto Southern European leaders like Rajoy, or more recently Enrico Letta, whose national difficulties expose the limits of the German austerity agenda. Alliance-building, however, is no substitute for a programme. As remarked upon by Current Moment co-founder Alex Gourevitch, the fact that the case for austerity is currently unravelling has more to do with the pain it is inflicting on European societies and rather less to do with any political alternative being proposed by its growing army of critics.

Europe’s can-kickers

This week, Reinhart and Rogoff gave a non-walkback walkback of their debt research somewhat reminiscent of Michael Ignatieff’s apology for supporting the war. Roughly ‘but my opponents are still even more wrong!’ In RR’s case, just plug in “ultra-Keynesians” for Ignatieff’s anti-war “academics and commentators” and you get, in fewer and less tortured sentences, the same thing.

Meanwhile, the reality of austerity continues unfold. This week, James Meek reports in the LRB on the consequences of the Cyprus ‘bail-in.’ Turns out, unsurprisingly, that evil Russian oligarchs were not the only ones who got screwed, and that they were another bogeyman trotted out in the European attempt to refuse collective solutions to a systemic problem. Though he doesn’t provide us general numbers, Meek notes that many depositors with more than 100,000 euros in Cypriot banks were retirees who had to live off the interest, not high-flying spenders. Moreover, the key thing about the strategy for dealing with the Cyprus was that it localized the solution.

“Was there anything else the IMF and the Northern Europeans could have done? Yes; they could have rescued the Cypriot banks directly, from pooled European funds, as a trial of what is due to happen in future Eurozone bank emergencies. That would have got Cyprus off the hook. But there was never the will in Northern Europe to do this.”

Meek is referring to the proposed banking union, which would give the ECB power to resolve bad banks directly. The proposal is stalled for a number of reasons, including the status of so-called ‘legacy assets,’ or toxic assets – like the loads of mortgage-backed securities that banks took on during the bubble – currently on bank balance sheets.

Meek’s piece is worth the read just for the reporting alone, and especially for some of the pieces it adds to the puzzle of the Cypriot financial system, but largely for the reminder that the European strategy remains ostrich-like. Each banking system – Portuguese, Spanish, Greek, Irish, Icelandic, Cypriot, not to mention French, German, and Dutch – is being treated as if it were non-systemic, in either its origins or ongoing effects. The world of finance loves the public health metaphor of ‘contagion’ but this time their metaphors are the opposite – it is as if each country has a different, local disease that the in-house doctors can treat on their own. It’s true that everyone has a bad case of austeritis, and, as TCM editor Alex Gourevitch noted last week, austerity fatigue is increasing. In fact, at this point, austerity is seeming less like a recipe for resolving the crisis and more like an attempt to kick the can down the road. After all, the one thing Meek doesn’t point out is that nobody has enough money to bail out existing European banks. They are, as Mark Blyth reminds us in his new austerity book, “too big to bail.” What good is a banking union if it will cost so much to bail out all the bad banks? At the very least, the pain of even less radical solutions, like systematic financial repression, will be severe and will run its own major risks. Austerity and the attempt to localize the problem isn’t just a product of German cussedness or ECB ordoliberal ideology. It is a displacement exercise. Europe’s current rulers simply have no answers to the problems they have created, and don’t want responsibility for the risks of changing their dead-end course.

Buying time and running out

Guest book review of Wolfgang Streeck’s „Gekaufte Zeit: Die vertagte Krise des demokratischen Kapitalismus“. Berlin: Suhrkamp, 2013.

By Philip Mader, Governance Across Borders editor and postdoctoral fellow at the Max Planck Institute for the Study of Societies in Cologne, Germany

Democratic capitalist societies have been “buying time” with money for the past four decades – first via inflation, then public debt, then privatised Keynesianism – but are running out of resources for postponing the inevitable crisis. As a result, we now find ourselves at a crossroads where capitalism and democracy part ways. That in a nutshell is the thesis of Wolfgang Streeck’s new book, currently only available in German, but being translated for publication with Verso.

The book is based on a series of three “Adorno Lectures” given by the director of the Max Planck Institute for the Study of Societies in the summer of 2012 at the renowned Institut für Sozialforschung in Frankfurt (other lecturers in recent years included Judith Butler and Luc Boltanski). Its radical language and conclusions may be surprising for those who remember Streeck’s days as advisor to the “Bündnis für Arbeit” initiated by Germany’s former Chancellor Gerhard Schröder, which precipitated far-reaching labour market and social security reforms, or of Streeck’s demands for institutional reforms to forge a more competitive and flexible low-wage service sector in Germany modelled on the USA (Der Spiegel, 1999). But crises bring new beginnings, and Streeck’s defense of democracy against its subjugation to the market is auspicious. His analysis of the economic, political and ideological straightjacket that states have found themselves in, not just since the crisis but certainly more pronouncedly in its wake, ties together a revamped analysis of capitalism with a compelling critique of the “frivolous” politics of European integration. With some wit, a characteristic taste for good anecdotes, and above all great clarity, Streeck studies the processes of the moyenne durée which produced the “consolidation state” as the supreme fulfilment of a Hayekian liberal market vision, and which brought us to the impasse of the current period.

The book begins with a critical appraisal of how useful the Frankfurt School’s crisis theories from the 1960s and 1970s still are for explaining today’s crises. While their works are by no means invalidated, Streeck contends that yesteryear’s crisis theorists could scarcely imagine how long capitalist societies would be able to “buy time with money” and thereby continually escape the contradictions and tensions diagnosed by their theories of late capitalism. He explains the developments in Western capitalism since the 1970s as “a revolt by capital against the mixed economy of the postwar era”; the disembedding of the economy being a prolonged act of

successful resistance by the owners and managers of capital – the “profit-dependent” class – against the conditions which capitalism had had to accept after 1945 in order to remain politically acceptable in a rivalry of economic systems. (p. 26)*

By the 1970s, Streeck argues, capitalism had encountered severe problems of legitimacy, but less among the masses (as Adorno and Horkheimer had expected) than among the capitalist class. Referring to Kalecki, he suggests that theories of crises have to refocus on the side of capital, understanding modern economic crises as capital “going on strike” by denying society its powers of investment and growth-generation. The 1970s crisis, and the pathways that led out of it, thus were the result of capital’s unwillingness to become a mere beast of burden for the production process – which many Frankfurt theorists had tacitly assumed would happen. Capital’s reaction to its impending domestication set in motion a process of “de-democratising capitalism by de-economising democracy” (Entdemokratisierung des Kapitalismus vermittels Entökonomisierung der Demokratie). This ultimately brought about the specific and novel form of today’s crisis and its pseudo-remedies.

The rest, as they say, is history. In the second part, Steeck outlines how public debt rose with the neoliberal revolution, something mainstream economics and public choice quickly and falsely explained away as an instance of the “tragedy of the commons” with voters demanding too much from the state. However, the rise in debt came in fact with a curtailment of the power of democracy over the state and the economy. First, the good old “tax state” was ideologically restrained – starving the beast – and gradually found itself rendered a meek “debtor state” increasingly impervious to any remaining calls for redistribution by virtue of its objective impotence. Then, the resulting power shift to what Streeck calls the state’s “second constituency” – the creditor class, which asserts control over its stake in public debt and demands “bondholder value” – generated a standoff which Streeck observes between the conflicting demands of Staatsvolk und Marktvolk. The fact that the debtor state owes its subsistence less to contributions from the taxpaying “state people” and more to the trust of its creditor “market people” leads to a situation in which debtor states must continually credibly signal their prioritisation of creditors’ demands, even if it harms growth and welfare. Creditors, in their conflict with citizens, aim to secure fulfilment of their claims in the face of (potential) crises. The ultimate power balance remains unclear, but the “market people’s” trump card is that they can mobilise other states to fulfil their demands, leading to a kind of international financial diplomacy in their interest.

The archetype of such a transnational financial diplomacy, Streeck contends in the third and final part, is Europe under the Euro, where we encounter an even more wretched type: the “consolidation state”. Consolidation, Streeck argues, is a process of state re-structuring to better match the expectations of financial markets, and the consolidation state is a sort of perverse antithesis to the Keynesian state, acting in vain appeasement of the financial markets in hope of one day again being permitted to grow its economy. Its story begins with Friedrich Hayek, whose 1939 essay The Economic Conditions of Interstate Federalism Streeck presents as a strikingly accurate blueprint for the modern European Union, complete with references to the common market as assuring interstate peace. The European “liberalisation machine” slowly and successively reduced national-level capacity for discretionary intervention in markets; but it was European Monetary Union which ultimately rendered one of the last powerful (yet blunt) instruments available to states impracticable: currency devaluation. The resulting multi-level regime, a regime built on an unshakable belief in European “Durchregierbarkeit” (roughly: the capacity to govern Europe) and driven by a bureaucratic centre (or centres) increasingly well-insulated from democratic meddling, completes the actual European consolidation state of the early 21^st century. Within this kind of hollowed-out supra-state individual countries have to fulfil their duties to pay before fulfilling any duties to protect, and recent “growth pacts” like Hollande’s are mere political showmanship. In the present framework even more substantial programmes would be likely to fail, Streeck argues with reference to Germany’s and Italy’s huge and hugely unsuccessful regional growth programmes. Stemming the decline of the southern Europe with transfer payments while adhering to monetary union with Germany is as much an impossibility as it is fuel for future discord.

Now, with tighter financial means, the cohesion of the Brussels bloc of states depends on hopes invested in neoliberal ‘structural adjustment’ with a parallel neutralisation of national democracies by supranational institutions and a targeted cultivation of local support through ‘modern’ middle classes and state apparatuses, who see their future in western European ways of business and life. Additional packages for structural reform, stimulus and growth from the centre are mainly of symbolic value, serving as discussion fodder for the greater public and for the mise-en-scène of summit decisions, as well as for politically and rhetorically absorbing whatever is left over of social democracy. Finally, puny as these may be financially, they can also be used to distribute loyalty premiums and patronage to local supporters: instruments of elite co-optation by doling out advantages in the Hayekisation process of European capitalism and its state system. (p. 203)

What can be done? It would be wrong to describe Streeck’s conclusions as optimistic. The capacity of populations or politicians to resist the imperatives of the consolidation state appears small, even where he argues that popular opposition is key, pointing to some rays of light in recent social movements. Streeck characterises present capitalist society as a “deeply divided and disorganised society, weakened by state repression and numbed by the products of a culture industry which Adorno could hardly have imagined even in his most pessimistic moments” (p. 217). It is furthermore politically held in check by a transnational plutocracy which has far greater sway over parliaments and parties than citizens. Given the likely failure of the consolidation state at restoring normality, we have thus arrived at a crossroads where capitalism and democracy must go their separate ways.

The likeliest outcome, as of today, would be the completion of the Hayekian social model with the dictatorship of a capitalist market economy protected against democratic correctives. Its legitimacy would depend on those who were once its Staatsvolk learning to accept market justice and social justice as one and the same thing, and understand themselves as part of one unified Marktvolk. Its stability would additionally require effective instruments to ensure that others, who do not want to accept this, can be ideologically marginalised, politically dis-organised and physically kept in check. […] The alternative to a capitalism without democracy would be democracy without capitalism, at least without capitalism as we know it. This would be the other utopia, contending with Hayek’s. But in contrast, this one wouldn’t be following the present historical trend, and rather would require its reversal. (p. 236)

Small acts of resistance, Streeck notes, can throw a spanner in the works, and the system is more vulnerable than it may appear; the Draghis and Bernankes still fear nothing more than social unrest. For Streeck, projects for democratising Europe, calls for which have recently gained momentum, can hardly work in a Europe of diverging interests. They would have to be implemented top-down, and furthermore have to succeed both amidst a deep (public) legitimacy crisis of Europe and against an already firmly embedded neoliberal programme with a decades-long head-start.

Streeck places his highest hopes in restoring options for currency devaluation via a kind of European Bretton Woods framework; “a blunt instrument – rough justice –, but from the perspective of social justice better than nothing” (p. 247). Indeed, a newly flexible currency regime would re-open some alternatives to so-called “internal devaluation” – nothing but a euphemism for already-euphemistic “structural adjustment” – and thereby permit a more heterogeneous political economy within Europe which could better match cultural differences (the book’s references to which sometimes seem to teeter on the edge of calls for national liberation). The Euro as a “frivolous experiment” needs to be undone, Streeck claims. But would that really mean a return to social justice? States like Great Britain or Switzerland hardly suggest a linkage, least of all an automatic one. Furthermore, declines in real wages from currency devaluation can mirror those of internal devaluation, merely with the difference of how politically expensive the process is (and it would still likely be central bankers, not democratic institutions, taking the decision). A return to national currencies looks like an all too easy way out, falling short of political-economic transformations for restoring some semblance of social justice to capitalism – let alone social justice as an alternative to capitalism.

Nonetheless, Streeck’s is a forceful argument in favour of preserving what vestiges remain of national sovereignty in face of capitalism’s attacks on democracy, as tools for gradually pushing back the transnational regime of market sovereignty. He concludes that the greatest threat to Western Europe today is not nationalism, but “Hayekian market liberalism” – whether the one could be the dialectical product of the other remains another question. Above all his analysis of capital as a collective player capable of acting with guile (Williamson) to ensure capitalism remains in its better interests – intellectual traces of Streeck’s days as a scholar of collective bargaining, perhaps – is clearly one of the most innovative approaches to understanding the class dimension of the political economy of the present crisis. His anatomy of the type of regime we increasingly have to deal with, the consolidation state moulded to address capital’s own legitimacy crisis yet sacrificing democratic legitimacy in the process, perhaps offers the most cogent picture of the present multi-level political economy of debt in Europe (and beyond). Taking back the consolidation state and re-appropriating democracy from capitalism’s clutches at the crossroads, of course, is a task beyond the reach of any book.

(*All quotations are the reviewer’s own translations from the German original.)

The time inconsistency of austerity politics

 

At his last European Council summit meeting, at least for the time being, Italian Prime Minister Mario Monti gave some parting advice to his fellow leaders. Written up as a four page letter and reported on in the FT, Monti argued that the main problem with austerity policies is that there was too big a lag between the positive effect of reforms and their negative bite. Giving his own version of the old adage that things have to get worse before they get better, Monti explained that this doesn’t fit very well with the rules of the electoral cycle. The promise of austerity and supply-side reforms is that they bring gains by way of employment and growth in the long term. The difficulty is that politicians are judged according to pain they bring in the short-term. Something needs to be done to bridge the gap in order that reform agendas are not derailed, as he thinks they have been in Italy. From the perspective of the European Commission or the German Bundesbank, the issue is how to make sure that in the time in between enacting reforms and feeling their positive effects, susceptible policymakers are not tempted to give up on earlier promises and go for quick fixes, like expansionary fiscal policy or other Keynesian pump-priming tricks.

This discussion raises a number of issues. As a trained economist, Monti no doubt knew that his argument was a restatement of what macro-economists call the problem of time inconsistency. This is the notion that policy rules – such as a commitment to balance budgets over the medium term – lack credibility when they are made sequentially. As soon as a firm commitment is spread over a length of time, the possibility arises that short-term considerations will assert themselves. Such policy commitments are thus time inconsistent – they fail to hold over time and thus need to be insulated as much as possible from political pressures.

If this is Monti’s analysis, two questions arise. The first is what if the policy rule has no credibility in the first place – irrespective of whether we are talking about the short, medium or long-term? The commitment of EU member governments is that austerity combined with supply side reforms equals a return to growth. We are into our fifth year since the outbreak of the current crisis in 2008, austerity policies have themselves been in place for a number of years, up to three to four years in some countries. Austerity is nothing new, nor is the idea that supply side reforms boost growth and employment, and yet these policies are not being seen to deliver. Monti’s analysis of current difficulties in Italy and elsewhere, that rests upon the idea of extended lag between introducing reforms and securing their rewards, in fact places a great deal of faith on the idea that these reforms will eventually work. At issue today is not people’s short-termism. It is the more fundamental issue of whether cutting spending and raising taxes in a recession is any way to stimulate growth.

The second question is about what Monti suggests we should do. If we return to the idea of time inconsistency, then we find a very clear recommendation. Institutions should be created that make it as difficult as possible to renege on a policy commitment. This is the famous recommendation to favour rules over discretion. These institutions should be given the responsibility for contentious political agendas – like keeping down government spending, being hawkish on inflation, reform labour markets – in order that legislatures and electorally accountable executives are not tempted to go for short-term fixes.

The problem is that we are not in the 1970s anymore. Profligate legislatures have not been driving today’s budgetary crises. The contrary is true, as we see from the Netherlands through to the UK and Spain. Moreover, today’s crisis happened in a world of rules, not of discretion. Problems of sequential policymaking were hived off to independent central banks, independent budgetary offices, fiscal councils and an array of European rules and regulations in the field of macro-economic policy. As a result, the problem surely lies in something deeper and more fundamental than simply the institutional environment for elected policymakers. This won’t stop European commissioners and national politicians arguing for the strengthening of European rules. In fact, as the Fiscal Compact has shown, this seems to be the dominant framework with which European policymakers are working today. We should be wary of such explanations. A policy framework dedicated towards the curtailment of expansionary policies has given us a European continent saddled with debt and a global debt crisis. There is something more to this than the theory of the time inconsistency of optimal policy rules.

Work is (potentially) one good thing: A response to Livingston and other post-workists

In today’s post, TCM co-editor Alex Gourevitch replies to Jim Livingston and other anti-workists, a debate that heated up after Ross Douthat’s op-ed on the subject. For the earlier iterations of this discussion see our earlier post, along with Peter Frase, Evan Burger, and Jim Livingston’s – and some older posts by Seth Ackerman, Chris Maisano, and Kathi Weeks.

Leisure is one good thing, but work is another

Leisure is a good thing. But it is not everything. That is one problem with the post-workists. The other problem is that they have a very one-sided view of work, one that, ironically, comes from adopting rather than overcoming a distinction that the constraints of this society impose on us: the distinction between production and consumption.

Consider Jim Livingston’s most recent foray into the work debate, in which he argues that work is culturally obsolete. The “renunciation of desire,” which Jim sees as the hallmark of work, was once useful insofar as it led to massive increases in human productivity. Once it became possible for machines to do the work of humans, however, the historical mission of the work ethic was exhausted:

What if the deferral of desire is no longer the condition of life because the socially necessary labor of the proletarian has receded?  What if the realization of desire (yes, the consumption rather than the production of values) has become the condition of life as such—of human development, as Hegel would say?  Then the morality of the slave, the Stoic, the worker—the repression of desire—becomes a constraint on human development, a fetter on the growth of the forces of production.

The real possibility available to us, if we overcome our inner compulsion to work and free our desires, is that “man is able to step aside and install machines in his place (Hegel).”

Jim offered these thoughts in the name of “trying to slow us all down,” but he was far too quick. First, the identification of work with the “renunciation of desire” is just wrong. Second, discipline and desire are not opposites. And third there are many different kinds of discipline, some good some bad. If we get our thinking straight about this we’ll see that we should not be seeking to “abolish work” but to change it.

To begin with, to condemn work as the “renunciation of desire” is slipshod. After all, if the very renunciation of desire, whatever exactly that means, were the thing that was bad about work, work would not be the only bad thing. Many activities people engage in during their free time would be bad – like training for a sport or practicing music. It is hard to think of anything but purely non-instrumental activities – like playing games, hobby-painting, revelry, hanging out, and maybe religious worship – as having any value if all renunciation of desire is bad. All purposeful activities require some discipline. So one problem is that the abolish work position, by attacking “discipline” or the “renunciation of desire” isn’t really identifying something specific to work, at least as Livingston defines it. But there’s more.

Livingston wants to celebrate rather than renounce desires, forgetting that the development of many desires is only possible over the course of a life in which there is also discipline. Livingston’s delight in the razzle-dazzle of textual interpretation, his desire to synthesize Hegel-Marx, has required decades of disciplined study; indeed, mere reading itself requires years of discipline and development. It is only after we have developed an ability that we desire its skillful exercise and enjoy its realization.

One would think someone with a fondness for Hegel would be sensitive to this fact, but Livingston’s world is weirdly techno-primitivist. On the one hand, society is brimming with machines, which are a product of a very advanced stage of historical development that presumes a radical transformation and expansion in human needs and relationships. People in this modern society are not born into their occupations and, for that same reason, do not have a fixed or given set of needs defined by hereditary social roles. We define our needs, and have the relative freedom to do so both because our roles are not fixed and because of the massive increase in the technical ability to do so. Further, our way of organizing our desires is stamped by this historical development. The very conception of leisure as free time starkly opposed to productive activity, upon which post-workists lean so heavily, is not a natural one. It is the product of the capitalistic organization of work, in which daily work is radically separated from the satisfaction of needs. The average worker gains access to a wage on condition that she gives up control over her work to a boss – her free time is time spent consuming. Thus our very way of relating to work, leisure and desire is the unwitting and not immediately visible product of a long historical process and specific social constraints. Livingston’s celebration of machines would seem to require acknowledgement of this, and to develop an argument for consumption out of these historical facts.

Yet, on the other hand, though Livingston knows all this, his argument approaches desires as spontaneous and ‘natural,’ not impulses that we develop and refine over a lifetime and a history. Desires have an odd, childlike immediacy for Livingston – direct impulses that we either repress or satisfy. Somehow, in Livingston’s world, we at once heroically bestride the world, consuming with unreflexive gusto all of the amazing technological outputs, yet do so with the simplicity and innocence of a child, for whom any and all constraint is the “renunciation of desire,” the oppressive residue of a bygone era holding us back like a stern father. It is not even clear how Livingston suggests we will maintain just that level of know-how to keep machines running (they do break down!), let alone why this is a way of thinking about desire and consumption that is in any way appropriate for us modern creatures. Alternatively, we could acknowledge that we are reflexive about our desires, that we shape and define them – which involves a more complex dialectic between discipline and development than Livingston’s “renunciation of desire” allows.

Though Livingston pretends to a kind of romanticism, the actual Romantics suffered for their art.  They sometimes exercised quite intense discipline (and took exquisite, often perverse, pleasure in it). Balzac wrote every day for hours at a time, denying himself food and sleep, just to improve and develop his art, even if he then discarded that day’s labor. What he strived for, what he most desired, was the virtuosic display of his abilities, not just any old verbal expression. Nor is this just a point about artists and writers. All human skills, from engineering to teaching to cooking, require patience and discipline to develop. Once developed, they produce in us a host of new desires for their skillful exercise, and we take real pleasure in that. Surely a great part of the pleasure in exercising these abilities is the satisfaction of a job well done, of having achieved something that was difficult, which took foresight, effort and directed energy.

Though the examples so far have been individualistic, we can say the same for collective activity: achieving collective aims requires discipline, and the satisfaction and joy in achievement is related to that discipline. Post-workists frequently mention painting and other artistic activities as the truly creative, free activities, but why not also see, say, the design and execution of a mass transit system as an act of collective creativity? True, it will require certain restraints, like at least a temporary division of labor among participants, and thus a certain amount of individual discipline in order to achieve that long-term end. And there are many undesirable ways for that discipline to be organized (more on that below). But the very fact that discipline is required can’t be what’s bad about them. Surely, one of the things that people find satisfying about cooperative work is that each person restricts some personal desires to one side to participate in and realize a shared a project. If the aim of designing a mass transit system is a democratically defined purpose, and participants can exercise equal control in the design and execution of this work, why not see it as a collective work of art? A full expression of human creativity and productive powers? True, it may only be possible to find pleasure in such activities if we have developed certain ideas about the nature and necessity of social cooperation, about the value of creating and recreating the world around us, about recognition of others as a condition for the exercise of our own powers. But I can see nothing slave-like in any of that. Moreover, those ideas and values already exist in all kinds of work, even those kinds of work shot through with domination and injustice. And that enjoyment of collective endeavors is, among other things, the source of some of that solidarity that has formed the necessary basis of left wing movements.

That we train, refine and expand our impulses is evident even in those desires that Livingston favors: the non-productive or passive desires. I love watching soccer, but I most love watching good soccer. If nobody makes the effort to become a good soccer player, there will be little to appreciate. That desire simply goes unsatisfied. We can say the same thing about a movie, a meal, or anything else we passively consume. Further, when I used to play soccer, a wholly unproductive activity, I got the greatest pleasure from playing well. But to get there, I had to put in hours of training. It was not productive, and what I consumed was the activity of playing. But I could only get that full pleasure after a long period of training my body and mind. In fact, it was only through the process of training that I gained a full appreciation for and desire to play well. Once again, the relevant desire that seeks satisfaction depends upon prior discipline. Discipline is not necessarily or inherently the “renunciation of desire.” It is, or at least can be, the restriction and shaping of impulse, and one that can produce a whole new set of refined and novel desires.

There are many kinds of discipline

I can hear the post-workists sharpening their knives, ready to thrust all kinds of contemporary examples, from creepy workplace surveillance to inhuman working conditions, into the heart of my argument. How could I ignore all the oppression and coercion in so much actually existing work? What good is all that restriction of desire? Why put people in conditions where, in order to satisfy basic needs they have to take shitty jobs, thereby renouncing their deeper longings and desires. And they are right, those are terrible forms of discipline.

But they are right in a way that identifies a problem with Livingston’s post-workism, not my position. The forms of worker coercion and social discipline that are most objectionable are not eternal facts about work but specific to the organization of work under capitalism. It is Livingston who naturalizes many of the negative features of work under capitalism, thereby backhandedly displacing criticism from historically specific relations of political and economic power. Livingston turns a social problem into a problem with, in Livingston’s words, “the ontology of work.”

In fact, some of the absurdity of the position that identifies work with the “renunciation of desire” comes from this unwillingness  to differentiate among different kinds of discipline. The discipline that economic need exercises on a poor worker and the discipline that a boss exercises on an employee are not inherent features of work. Surely we can imagine a society in which people’s basic consumption needs are unconditionally satisfied, and in which all possess equal control over work. But this would not be a society that had “abolished work”; it would be a society that had abolished the class relationships that condemn people to a lifetime of economic need, crappy bosses, and stultifying work. The abolition of the ‘working class’ is not, as the post-workists believe, the abolition of work. It is the reorganization of control over work, and the machines and materials we use to work, so that everyone has the chance for self-developing, better work, should they want it. It is perfectly reasonable to imagine people needing high quality work to feel fulfilled; that it be a central desire in a highly productive society. That is not something a basic income and mechanization of thoroughly unpleasant work could satisfy. There is no obstacle to defending the value of work while still criticizing many forms of worker coercion and social discipline (see here for a piece that I co-authored on just that subject with Corey Robin and Chris Bertram).

Work will not set you free. It is not the only good thing in life. But opportunities for self-developing work are one good thing in life, just as unproductive free time is another good thing. Post-workists, however, tend to be single-minded and therefore one-sided in their conception of a free society. That is why they gravitate towards things like basic income and mechanization, but put less emphasis on the value of collectively controlling the aims and organization of work. Rather than give us a picture of the future, they just take one side of the present and use it beat up on the other side. That is what Livingston does when he argues for the “consumption rather than the production of values.” Surely there are many sides to a full and flourishing existence. In a future society we would not replace producers with consumers but would see the expansion and transformation of both in a way that would see a dissolving, or at least easing, of the contrast between the two things. Work would be something less instrumental and less frequently limiting, but rather freer and self-developing – a productive activity that we can consume. Leisure would be more experimental and wide-ranging, less dominated than it is now by the requirements of recharging for another day at a bad job.

This is not just an argument over utopian ethical ideals. As post-workists themselves have recognized, there is a political problem with the ‘abolition of work.’ As Peter Frase says, “by asking workers to give up not just their chains but their identities as workers, anti-work theorists relinquish the forms of working class pride and solidarity that have been the glue for many left movements.” This problem is clearest in Livingston’s own position, which condemns the desire to work as a slave morality, and which sees discipline as the renunciation of desire, rather than also as the path to achievement and further self-development. If I am right, or even in the ballpark, then there is no reason to discard outright these important sources of solidarity. Nor is there reason to see the kinds of personality required to engage in sustained and organized political struggle as, at best, regrettable necessity, and at worst, slaves on the march. Unless, of course, the post-workists really believe that radical social change is mere child’s play.

Microfinance and European Crisis Management

Guest post by Phil Mader, a researcher at the Max Planck Institute for the Study of Societies in Cologne, Germany, and an editor of the Governance Across Borders blog, http://www.governancexborders.com

Microenterprises galore in India, soon too in Italy?

Well-established in low-income countries, microfinance is recently on the ascent as a crisis management tool in Europe. The parallels to Structural Adjustment in Latin America in the 1980s and 90s, where it played a key role in helping the bitter pill of austerity go down, are striking. But the experience of the global South over the past three decades warns against expectations of microfinance in the EU bringing anything but a glut of tiny, low-productivity, poverty-push enterprises which are likely to become entangled in debt traps.

2006 was the year small loans in developing countries were knighted as “the vaccine for the pandemic of poverty”, with the Nobel Peace Prize for Grameen Bank and its founder Muhammad Yunus bringing international fame to the idea that financial markets could effectively combat poverty. But loans for peace? Staunch supporters like Bernd Balkenhol (formerly ILO) argue the Nobel prize actually honoured the effectiveness of small loans at upholding social peace – an idea which is gaining new traction in erstwhile-affluent countries whose social peace is threatened by crisis and austerity.

As the “pandemic” of poverty spreads to Southern Europe, policymakers are seeking to apply the lessons learned in Asia, Latin America, and Africa, where microfinance has been established as a permanent pillar of social policy in many countries. As with prior aspects of neoliberalism, policies are often first tested in the Global South before their successive deployment in more advanced capitalist economies.

Microfinance is one of the instruments for “addressing inertia and social fragility, which is essential in safeguarding the quality of democracies” in order to prevent “material distress from encouraging populist deviation and citizen regression,”

the Italian Ministry of Foreign affairs recently quoted its minister, Giulio Terzi di Sant’Agata. The ministry noted Italy acting as a forerunner in Europe, having adopted a law on microfinance. The EU runs a number of microfinance programmes, expanded since 2010, aiming at getting the unemployed – particularly youths and ethnic minorities – into work through self-employment. A 2012 report argued that EU public funding should catalyse “the entry of private capital in order to create a self-sustainable market in the long run” – building new markets in times of crisis whilst keeping the poor busy and mollified via private credit; a most practical combination.

“People with ideas and projects they cannot realise as a result of not having access to credit need concrete answers; those who have lost their jobs and are having a hard time finding another; immigrants who risk social exclusion”, Terzi explained, underscoring how microfinance “expands business opportunities as it encouraged citizens’ participation in economic life”. Moreover, it “can also help contain public spending by contributing to the reduction of social buffers, the cost of which rises in times of recession”.

Terzi, of Monti’s interim crisis management committee/government, could hardly have made the case for microfinance as a device for austerity facilitation more clearly. Tiny loans may not work at creating economic growth or significantly alleviate poverty, as the experiences of microfinance-saturated countries like Bangladesh or Bolivia show and numerous scientific studies have underscored; but they have certainly proven their worth at tempering redistributional demands while facilitating structural adjustment. They work to “contain public spending” while preventing “material distress from encouraging populist deviation” (Terzi), tiny loans are a handy “political safety net” to uphold consumption and provide alternative (self-)employment, as political economist Heloise Weber observed more than a decade ago.

Working – up to a point, that is. India, with its focus state Andhra Pradesh (AP), in 2010 joined the ranks of Nicaragua and Bosnia as countries whose microfinance sectors recently melted down. Popular unrest and agitation forced the government of AP to curb all microfinance operations following a wave of suicides among borrowers. AP used to be India’s most microfinance-friendly state, earning the nickname “Mecca of Microfinance”, to whose highly profitable lenders international investors flocked like pilgrims.

While the microloan industry – which is now in protracted decline in India – has accused the government of foul play, the crisis’ causes ultimately lay not in a political attack, but rather in the original political support for microfinance as a tool in facilitating AP’s ambitious neoliberal restructuring. The loans placated the affected populations for some time, while opening up new outlets for capital markets, this recent paper finds, which led to the widespread overindebtedness which ultimately caused the suicides.

Politically enticing as a tool for austerity politics as the tiny loans may be, the experience of the Global South with microfinance doesn’t bode well for European countries attempting to bolster low incomes and drive economic growth. Perhaps this is why Terzi only claims that microfinance “expands business opportunities as it encouraged citizens’ participation in economic life”, rather than bringing real material benefits for borrowers. For the time it takes to embed reform agendas and austerity politics, at least, the expectation is that microfinance may serve as a regime-consistent tool of seemingly doing something for impoverished and precarious segments – keeping them busy and competitive as entrepreneurs – while preventing them from getting all too uppity.

Italy: populism versus technocracy?

Article originally published here with Le Monde Diplomatique

Written by The Current Moment co-founder, Chris Bickerton, and Carlo Invernizzi Accetti

Italian politics has reached an impasse. In last month’s elections, the vote split three ways. A roughly equal proportion of votes (almost 30%) went to the centre-left coalition led by Pier Luigi Bersani and to Silvio Berlusconi’s centre-right coalition. Ahead by a fraction of the votes for deputies, the centre left won a majority of the seats in the lower chamber. But with the regional basis for the senatorial elections, no corresponding majority was produced in the upper chamber. The third block, which secured roughly 25% of the vote in both chambers, is Beppe Grillo’s Five Star Movement (M5S). Since the other two blocks are coalitions, M5S actually stands as the single largest political party in the parliament. Mario Monti, who headed the Civic Choice party and whose decision it was to have early elections, secured just over 10% of the vote, leaving him far behind in fourth place.

How will this impasse be overcome? The media are full of speculation. Some predict new elections, others some sort of political bargain between the main players. Grillo is so far refusing to strike deals with any side, making new elections likely. But beyond the political quid pro quos, we can draw broader political lessons from Italy’s election, which also illustrate more general structural trends in European politics.

Several commentators have pointed out that the traditional left-right axis appears to be ceding ground to a different polarity, structured around the opposition between populism and technocracy. The successes of Grillo and Berlusconi were denounced by the leader of the German social democrats, Peer Steinbruck, as the victory of two “clowns” – an assessment taken up by the German media and by The Economist. Yet, opposed to the “clowns” are figures like Bersani and Monti, considered more serious and reliable. More than any concrete difference over policy, at issue is the competence, seriousness and expertise of the political actors: Mario Monti is cast as Italy’s technocrat-in-chief, Grillo as his populist nemesis. Even Bersani himself played the card of the responsible centre-left leader. In an effort to distinguish himself from Berlusconi’s campaign, which blamed Italy’s ills on Monti’s EU-backed austerity agenda, he firmly committed himself to respecting Europe’s fiscal rules.

While this opposition between populism and technocracy is emerging as a fundamental dividing line in Italian politics, the electoral campaign illustrated something further: it suggested that populism and technocracy entertain a far more complex relationship with each other, which involves some unexpected points of contact and elements of complementarity. Many of the key players and party coalitions actually seem to display several of the distinctive features of both.

Reading the Italian election results through this lens may help us to make better sense of them. It also warns us that there is something amiss in the common opposition between European technocrats and national populists.[1] These political categories are part and parcel of the changing nature of national politics and mapping them onto a clash between atavistic nationalists and dry Brussels bureaucrats only reproduces the Eurosceptic discourse.

Let us begin with the figure most widely seen as the victor, Beppe Grillo. It is clear there are several characteristically populist elements in his political style and in his message – the attack against the established political order and elites, the appeal to the wisdom of the ‘ordinary man’ and the central role of Grillo himself as a charismatic authority figure. Yet few commentators have noticed the more technocratic side of his movement. A recurring element of Grillo’s rhetoric is the claim that the Five Star Movement is neither left- nor right-wing but, rather, interested in proposing “effective solutions” to “concrete problems”, thus going beyond “ideological disputes”. And it is in this spirit that Grillo has claimed that even though his movement will not enter into a coalition with any other political party, they are open to giving their support to specific policy proposals, to be evaluated on a case by case basis “on their own merits”. Far from the ideological discourse we are used to associating with traditional populist movements, Grillo’s flaunted pragmatism suggests that if he is to be considered a populist at all, we may have to admit the existence of a new specifically ‘technocratic’ populism. The Five Star Movement’s programme reinforces this impression. It is a long list of concrete measures, backed up with evidence from local experiences: there is no justification of the underlying values or assumptions of the movement, and no political vision. Challenging the empty professionalism of career politicians, Grillo claims that his parliamentarians, selected from all walks of life, are the real experts.

Mario Monti, the great loser in the election, presents the inverse picture. The respect he initially commanded, domestically and internationally, stemmed from his credentials as a competent technician. The moment he decided to forego this a-political stance and enter the electoral contest, he revealed something about the way technocrats understand the notion of politics. For him, becoming a politician meant trying to dumb down his message in an effort to appeal more directly to what he thought were people’s real concerns. This led to several awkward moments in his campaign, where he appeared to be desperately trying to use some of the same theatrical tricks as a Grillo or Berlusconi, without any of the flair. The image of the erstwhile sober European commissioner holding a puppy on TV and trying to endear himself to viewers by saying “I can feel its heart” was perhaps one of the defining moments in his campaign. Just as Grillo appears to be the harbinger of a new kind of ‘technocratic populism’, has Monti created the opposite image, as some kind of ‘populist technocrat’?

Bersani’s failure is different, but falls within the same basic framework. The leader of the centre-left coalition had the opportunity to break out of the technocracy-vs-populism model and present a properly political programme focused on the pan-European debate about austerity versus growth. For the Italian Democrat Party, this would have meant challenging some of the basic assumptions of the austerity framework and contributing, by way of substance, to the question of growth in Italy, and in Europe. But Bersani’s party failed to do this: its overwhelming concern was to reassure doubters of its seriousness and reliability as an enforcer of austerity. During the campaign, the Democrats’ economic spokesman Stefano Fassina said his party was against fiscal stimulus and preferred an EU-level deal in which a softening of austerity measures was the sweetener, received in exchange for handing over extensive powers over national budgets to the EU. The counterpart was his denunciation of both Berlusconi and Grillo as politically and economically “irresponsible”. So the real choice in the election, according to Fassina, was between the populists and Europeanists, a position that avoided criticizing the operating assumptions behind austerity policies. Bersani frequently said that he was not against austerity and had sided with Merkel in her criticisms of Berlusconi in late 2011.

Berlusconi’s own performance deserves some comment. Initially written off as a sure loser, he managed to rally a sizeable part of his previous electorate, preventing a clear victory of the centre left. But this (relative) success did not just come from his populist appeal. Contrary to most foreign media reports, Berlusconi did not transform himself into a German-bashing anti-austerity advocate; his attacks on Merkel were a very small part of his overall campaign. The key to his appeal has long been his capacity to combine a specific brand of populism with a more familiar technocratic discourse. His public persona, his identification with the Italian people, the emptiness of his party and the dependence on his charisma all point to a populist figure. Yet his constant references to himself as a businessman rather than a politician, his managerial and corporate approach to politics, and his emphasis on numbers and ‘practical’ solutions are closer to a technocratic discourse. This combination highlights the similarities between Berlusconi and other prominent political figures in Europe, such as Tony Blair and Nicolas Sarkozy.[2]

This all suggests that populism and technocracy are not two poles of a new political spectrum, replacing the erstwhile contest between left and right. Nor does this division map onto a confrontation between nation-states and supranational bureaucracies. Populism and technocracy amount to complementary political styles, not to different political programmes. In fact, their strength comes from the fact that national political life is no longer organized as a contest between competing world-views. It is because there was little to separate the political programmes of the centre left, centre right and the M5S movement that the opposition between populism and technocracy captured the imagination of the media and analysts. Monti tried his hand – very awkwardly – as a populist whilst Grillo’s adherence to evidence-based policies and refusal to present an integrated, ideological vision of change makes him as much technocrat as populist. Berlusconi has combined these two styles for years. And Bersani – fleeing any real engagement with the debate about austerity and growth in Europe – hid behind comfortable reassurances about the safety of a Democratic Party victory.

Why should populism and technocracy emerge as the dominant political styles of our post-political age? The answer lies in their common affinity over political representation: they share an open hostility to parties and to parliaments. The technocratic vision is based on a very clear critique of the partisanship of elected assemblies and the inherent bias of party cadres. Monti’s strength was his distance from party politics. As soon as this disappeared, his aura evaporated. Grillo’s movement is equally hostile to parties and parliaments. Its operational logic is that of sensible local initiatives raised magically to the level of national policy. Its campaign was not about issues or ends; it was about the veniality of the political class itself. Populism and technocracy are the political styles that best correspond with widespread public cynicism and an elitist disregard for majoritarian democracy. They are symptoms of the demise of politics, not expressions of its renewal.

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[1] See for instance Mark Leonard’s much publicized essay, Four Scenarios for the Reinvention of Europe, published in November 2011.

[2] On the similarities in political style between Berlusconi and Sarkozy, see Pierre Musso’s 2008 book, Le Sarkoberlusconisme (Paris: Aube). On Tony Blair, see Peter Mair’s 2006 essay, ‘Ruling the Void? The Hollowing of Western Democracy’, New Left Review, 42, pp25-51..

The essential recovery trend continues: corporate profits up, personal income down

The New York Times today gives us some of the latest data on the essential recovery trend: a recovery of stock market values, stagnant employment, declining median incomes. Corporate profit rates are at record highs, while personal income shares are considerably down. This is the Obama recovery:

 

This is unlikely to change with the sequestration. As the NYTimes goes on to say:

“But although experts estimate that sequestration could cost the country about 700,000 jobs, Wall Street does not expect the cuts to substantially reduce corporate profits — or seriously threaten the recent rally in the stock markets.

“It’s minimal,” said Savita Subramanian, head of United States equity and quantitative strategy at Bank of America Merrill Lynch. Over all, the sequester could reduce earnings at the biggest companies by just over 1 percent, she said, adding, “the market wants more austerity.”