In this current moment some of those who are standing up to the EU’s austerity packages have shouted about the attack on democracy. They think that the EU is attacking democracy so that it can push through its spending cuts. So it is. But much more so it is using the debt crisis to push through the abolition of national sovereignty. So often it has.

Two and a half years ago a very prescient sociology professor Ulrich Beck wrote ‘The crisis cries out to be transformed into a long overdue new founding of the EU’. Beck went on: ‘until now there has been no joint financial policy, no joint industrial policy, no joint social policy – which, through the sovereignty of the EU, could be pooled into an effective response to the crisis’. The only real barrier, thought Beck was ‘the national self-delusion of its intellectual elites’ who ‘bewail the faceless European bureaucracy’. (Guardian, 13 April 2009)

December’s Brussels summit, drawing its moral imperative from the sovereign debt crisis, ended with a commitment to create a much-greater coordination of economic and financial policy. Under the agreement national governments must submit balanced budgets, and face ‘automatic penalties’ if they do not. The thesis behind the agreement is that the southern European countries’ spending and indebtedness has undermined confidence in them and because of that in the Euro.

Shifting the blame onto Greece, Spain and Italy for the Euro crisis twists the truth. Throughout the buoyant years of the noughties the success of the European periphery was cited proof that the European Union was working. More, exporting countries, including Germany, were glad that easy credit boosted Greek and Spanish buying of their goods.

Apart from the economics, though, the important shift is towards ‘stronger economic union’. When the crisis began Greece’s troubles suggested to many that the European Union would ‘fall apart’.Professor Beck’s intuition that the crisis would drive the greater integration of economic policy proved to be as insightful as the fears that the whole thing would fall apart. Where he misleads us is in portraying this movement as a greater democratisation ofEurope. On the contrary, the trajectory is towards a much-diminished role for democratic oversight, and a much enhanced role for unelected officials dictating terms to elected governments. ‘Automatic penalties’ is European code for ‘not subject to political negotiation’.

The reason for the ‘automatic penalties’ is that as national elites European governments do not have the authority to see through tough measures. For many years now, governments have leaned on the European Union as an extra-national source of authority. Governments that are not willing to make the case for tighter budgets honestly in their own terms, have hid behind the claim that they must make adjustments to meet the external restraints imposed by Europe.  That is what Italian Minister Guido Cali meant when he said that ‘the European Union represented an alternative path for the solution of problems which we were not managing to handle through the normal channels of government and parliament’.

Not just Italy or Greece, but Britain and Germany sought again and again to ‘tie’ or ‘bind’ themselves into European Union rules that would limit the political temptations of excessive spending. Quite why sovereign states should choose to bind themselves and their successors in obligations that they cannot change or renegotiate is a conundrum for students of international relations. The answer to the puzzle is that these elites no longer derive the same authority that they used to from national electorates or constituent assemblies that once they did. Instead it is in the international summits, most notably the European summits that leaders feel secure, bound together in their mutual fear of the unruly electorates.

Fear of economic crisis is driving the integration of European policy, and it is not being consolidated as a democracy, but as a technocracy, where officials follow procedures, rather than make policies. Six years ago the voters of France and Holland voted down the centralisation of Europe under its then proposed constitution – which was abandoned soon after. Now, using fear of economic collapse, European elites have talked themselves into submitting to a more onerous set of impersonal and bureaucratic rules.

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Europe’s Soft Coup d’Etat Part 1

Winter 2011/12. The Greek parliament is besieged from without by angry protestors. They riot burning down banks and government buildings. The Italian government, too, faces mass opposition – a general strike in protest at government €450 billion spending cuts. InIreland,Spainand many other European countries there are angry protests. But the Greek and Italian governments are not only under pressure from the public. They are answerable to other masters than the electorate.

Greek Prime Minister Lucas Papademos took office on 11 November 2011, though he stood in no election. Before becoming Prime Minister Papademos had been a senior official at the European Central Bank, and an advisor to the outgoing PM George Papandreou. Italian Prime Minister Mario Monti was appointed on 12 November 2011, having been made a life senator three days earlier by President Giorgio Napolitano. Before becoming Prime Minister Mario Monti had been an economics professor and a member of the European Commission. On the face of things, both Papademos and Monti draw their authority from their own parliaments – but everyone knows that is not so. Both of these unelected experts came to power in a ‘Soft Coup’; both deals were brokered by the European Union, in the middle of a harsh public debt crisis.

In the case of Greece, the European Union had been dealing with Prime Minister George Papandreou, leader of the largest, and best-polling political party in the last democratic elections, PASOK, twisting his arm to agree spending cuts. Talks were held between the Greek government, and the ‘Troika’ of the International Monetary Fund, the European Central Bank and the European Commission. Having agreed one round of cuts after another, Papandreou baulked at just how unpopular these were, and in October said that he would let the people vote on more cuts in a referendum. The European Union was outraged at the idea that the voters should be asked.

‘The announcement has surprised the whole of Europe,’ said French President Nicolas Sarkozy. ‘Giving the people a way to express themselves is always legitimate, but the solidarity of all the euro-zone countries cannot be exercised unless everyone agrees to make the necessary efforts.’ In a parliamentary session in The Hague, Dutch Prime Minister Mark Rutte called the threatened vote a ‘very unfortunate development’ and said ‘we have to do everything to prevent it.’ (Wall Street Journal Europe, 2 November, 2011) After crisis talks Papandreou agreed to cancel the public vote and to suspend normal party politics in favour of a government of ‘national unity’, and to stand down as Prime Minister in favour of Papademos. Robbed of a voice Greek people were more willing to protest and even to riot. German Finance Minister Wolfgang Schäuble wants the Greeks to cancel future elections and have a government without any politicians, only ‘experts’.

Around the same time another European leader – of the right in this case – was forced to stand down. Silvio Berlusconi had often been attacked by the European Commission, charged with corruption. But each time the question was put to the polls the wily Berlusconi won over voters. In November 2011, though, the debt crisis gave the Commission the lever it needed to prize Berlusconi out, and he resigned. European Council President Herman van Rompuy told Italians on 11 November 2011 that ‘the country needs reforms, not elections.’ Mario Monti was appointed Prime Minister and, in turn, appointed a ‘Professors’ Cabinet’, or ‘technocratic government’. Monti’s first reforms were to cut spending and to attack trade unions.

In a single week the elected governments of two of Europe’s democracies had been swept aside. At the very moment that Italian and Greek people needed to deal with the problems they faced, they were robbed of the chance. Before they could see their own political representatives argue out the best outcome on party lines, with the parliamentary contest mirroring the contest for votes. The party political system was a lever for ordinary people to push their goals right into the centre of government. But without it, public administration stopped being democratic, or even political. It was called ‘technocratic’ – government as technique, not as a negotiation; mechanical, not through dialogue. Instead of leaders there were experts. Instead of a contest ‘national unity’ was imposed (though many outside did not feel they were a part of it).

The events of November 2011 were called a ‘Soft Coup’, or a ‘coup without tanks’. But what Junta was taking over? Even the angriest protestors were not sure who to blame. If there were no tanks, where was the confrontation?

It would be hard to avoid the role that private financiers played appearing at every corner to warn against any backsliding on cuts. The ‘technocrats’ were not experts in juggling or medicine, but in finance. Mario Monti has been an advisor to Goldman Sachs, Coca Cola and the listing agency Moody’s as well as European Commissioner responsible for the Internal Market, Financial Services and Financial Integration, Customs, and Taxation. Massachusetts Institute of Technology graduate Papademos taught economics at Columbia University and even served as senior economist for the Federal Reserve Bank of Boston in 1980, before taking up positions at the National Bank of Greece and the ECB. Not surprisingly the anti-cuts protestors have been outraged to learn that Monti is a member of the secretive Bilderberg Group – all of which adds to the sense that government has been subverted by a secret coup led by high finance. Still, pointing the finger of blame at ‘capitalism’ or finance seems too vague. Down with capitalism, for sure, but does that really tell us any more about the forces arraigned against democracy?

Greek protestors have seen a German hand behind the changes, and they are not wrong. Chancellor Angela Merkel has called loudly for tighter rules on government spending, and for wayward governments to be reined in. In Athensthe protestors have even burned the German flag (and alongside it the Swastika flag to heap on the insults) while the newspaper Demokratia reports the new austerity agreement with a parody of the sign over the gates at the Auschwitz Concentration Camp ‘Memorandum macht frei’. Greeks talk more often of the wartime occupation when the German Wehrmacht starved the country. Pointing the finger at Germanyseems to make sense, except that Angel Merkel is not alone in her demands for Greek probity. Nicolas Sarkozy (whose country was also occupied by Germanyin the Second World War) is so close to Merkel that the press have coined a collective noun Merkozy. Just before he was bundled out of office, Silvio Berlusconi, too was lecturing the Greeks on the need to stick to their promises. Greek protestors wish that their enemy was justGermany’s leaders.

The Coup d’État against democracy inGreeceandItalydoes have a shape, however soft it looks. Its shape is the European Union. The pressure brought to bear on both countries came through the European Union. The ‘Troika’ of the European Central Bank, the European Commission and the International Monetary Fund brought pressure to bear on the Greek government to change its policies and make-up. Though an ad hoc body, the Troika is reported to be renting an office inAthensto keep an eye on spending there.

The Troika does not just oversee Greek spending. There is a Troika looking at Portugal’s budget, too. Jürgen Kröger, Head of EC mission, Rasmus Rüffer for the ECB and

Poul Thomsen of the IMF visited in May 2011, returning in February 2012 to spend two weeks looking at the budget there before deciding whether to release the latest batch ofPortugal’s €78 billion rescue loan.

In January 2012 all but two of the 27 heads of state at the European Summit agreed to German Chancellor Angel Merkel’s new fiskalpakt with binding limits on budget deficits and quasi-automatic sanctions on countries that breach deficit and debt limits enforced by the European Court of Justice. ‘The debt brakes will be binding and valid forever,’ said Merkel: ‘Never will you be able to change them through a parliamentary majority.’ (Guardian, 31 January 2012). From the European Union viewpoint to put questions of government beyond democratic control is a great success. Binding limits, with automatic sanctions, policed by unelected officials is what they want. ‘Parliamentary majorities’ overriding the expert officials is what is to be avoided.

Nor is it always the case that the enemy is the left. In the same month that the European Council was cooking up the fiscal compact, the European Commission wrote three separate letters of warning to Hungarian President Orban charging him with bringing in ‘undemocratic’ laws. By ‘undemocratic’ they meant that the new constitution put the Central Bank under the control of the democratically elected government, instead of leaving it in the hands of the expert technocrats, while threatening, too, that judges and information commissioners would be subject to the rule of parliament. Step through the looking glass into the EU-world where the rule of the people is dictatorial, but the rule of unelected experts is democracy.

Ex-sixties radical Daniel Cohn-Bendit stood up in the European Parliament to demand that Orban’s constitution be investigated for breaching the EU’s Lisbon Treaty. The man once known as Danny the Red ranted on that the Hungarian leader was striving to beEurope’s equivalent of Hugo Chávez or Fidel Castro (Guardian, 18 January 2012).

Cohn-Bendit as a student radical wrote

“The emergence of bureaucratic tendencies on a world scale, the continuous concentration of capital, and the increasing intervention of the State in economic and social matters, have produced a new managerial class whose fate is no longer bound up with that of the private ownership of the means of production.” (Obsolete Communism, the Left Wing Alternative, London, Penguin, 1969, p 249)

It was far-sighted indeed to spot the very trend towards bureaucratic-managerial rule for which Cohn-Bendit himself would become a spokesman. The only thing he did not foresee was that the bureaucracy that was emerging would be transnational, not just national.

The context for the banker’s comments was a discussion of the austerity measures being rammed down the throats of the Greek public. The measures are but one of the preconditions for a bailout package that will include other disciplinary measures, like international monitors of Greek spending decisions. The ‘people to be scared’ that B-S had in mind were, most immediately, the Greeks. They were to be scared into believing that there was one way and only one way to resolve their debt crisis, and that if everyone did not get in line, the withdrawal of European help would lead to even worse consequences. But it became clear that Bini-Smaghi’s comments applied to more or less the whole European public, perhaps minus the ‘sensible’ Germans. At another choice moment, LBS said “The Italian situation is different from the Greek one, but don’t tell the Italians. That is only something you say outside Italy. Inside, you say the opposite.” In other words, you want them to be scared, even if you have to lie to them.

Why? Because otherwise two things will happen. For one, the majority of Italians or Greeks might get the crazy idea that they don’t have to screw themselves in order to save themselves. There might be alternatives to massive austerity and a bailout of the banks. For another, the greater the fear the greater the limits on political outrage, or at least, the more the local ruling political parties will feel pressure not to attend to local outrage.

Bini-Smaghi’s comments speaks volumes both about a certain technocratic vision or political method and its limits. The method is based on the thought that central bankers and related technocrats possess the technical expertise and know-how to know what the rational response is to an economic crisis. This knowledge is supposedly value-free, and a matter of pure economics. However, most people not only lack this knowledge, they take to the streets in a mistaken, irrational pursuit of their own interests. BS dismissively called this ‘politics.’

So far, so familiar. But the most striking thing about Lorenzo’s BS is that the technocratic vision of control is far more expansive. It is not an attempt simply to apply expert economic knowledge to economic policy. It is a more radical ideological project. The delusion is that the political domain can be subject to the kind of fine-tuned control ‘at the margins.’ It is not just that technocrats ought to run national governments, or at least monitor their spending, but that national publics themselves can be pushed, pulled and cajoled with precision. Bini-Smaghi was talking about incremental doses of austerity until public outrage boiled over, and then stepping off the gas. And if outrage becomes too threatening to the background project, then more and more fear of a withdrawal of bailout funds to scare political leaders into imposing budgets and repressing unrest. One almost wonders if there isn’t some model floating around technocratic circles in which the relevant variables are ‘fear’ ‘austerity’ ‘bailout money’ and ‘outrage.’ The policy strategy being a kind of optimization function in which the aim is to get as close to ‘outrage’ without it boiling over into revolution.

Of course the dream of total social control is nothing new. It rattles around in the mental recesses of any expert claiming a monopoly on the legitimate possession of pure knowledge. But it is in play here in a substantial way. The coyness of the troika – demanding one package of reforms one day, another the next, promising money then imposing more terms, softening stances when protests get too dicey but putting the screws to national leaders, and above all playing a long game of amorphous indecision so as to maximize the space for deception – is all part of this managerial political approach.

Aims are not the same as success. The aim of total social control, especially when it becomes ideological, and especially when it sees politics exclusively as a domain of irrational, emotional behavior that has to be manipulated by various techniques, is its own foolishness. For one, it leaves actors without the ability to acquire actual political knowledge – there appears to be no knowledge to acquire, beyond that of the techniques of manipulating irrational publics. For another, the social world simply is not amenable to that kind of technical, fine-tuned control. Tweaking with the margins of outrage in relation to doses of austerity and fear is not just a creepy and outrageous political project, it is a fool’s game.

As already commented on this blog, the current crisis in Europe has pushed political life towards both technocracy and populism: more technocracy at the national and the European level, with large swathes of policymaking bound up with pan-European rules and regulations, and more populism at the national level as charismatic individuals rally against the loss of national sovereignty and the seeming capitulation of mainstream parties to the diktat of markets and private investors. National leaders in Europe tie their budget-setting powers to increasingly complex European deals: excessive spending becomes the concern of the European Court of Justice and governments expose their fiscal policies to a kind of pan-European naming and shaming exercise. Governments also inscribe into their constitutions rules about what they can and cannot do with the national purse and technocratic administrations rule in Italy and in Greece. At the same time, populist claims about challenging this hegemonic pan-European consensus proliferate at the national level. From the street violence and protests in Athens and Madrid to the anti-Euro rhetoric of the French National Front, the political fringe is growing in volume.

Greece is the extreme example of how the crisis is transforming national political life. The most recent vote on reforms intended to guarantee the next chunk of EU bail-out money has pushed political parties into freefall: around 40 MPs were thrown out of their parliamentary group because they refused to tow the party line on the vote. According to one report in Le Monde (15/02/12), the two main Greek parties – the rightwing New Democracy (ND) and the centre-left Pasok party – are splitting down two lines: support for the technocratic government on the one side, and a rejection of the whole bail-out/austerity package on the other. Legislative elections in April have been the focus of the ND leader, Antonis Samaras, whose criticisms of the EU package in the past have annoyed EU officials and other European governments. Samaras has moved from opposing the EU deal to supporting it in the most recent vote, his calculation being that this would be most likely to help him win the next elections. But it has cost him the support of many of his close collaborators and the party is deeply split.

A key question in France is to what extent any of these trends and pressures will reshape electoral politics. As already commented upon on this blog, the current economic crisis is having an uneven and erratic impact upon national politics and upon national electoral outcomes. Before the campaign kicked off in France, there was some suggestion that the real contest would be fought between Jean-Luc Mélenchon and Martine Le Pen: the populist of the Left versus the populist of the Right. With the main parties indistinguishable in their fight for the political centre-ground, attention would turn to more colourful figures. In 2002, the surprise result of the first round was the success of the far Right National Front and the marginalisation of the Socialist Party. In 2007, it was the success of the centrist candidate Françcois Bayrou, who with over 18% in the first round, promised a radical shake-up of traditional French party politics.

In the end, the surprises of the elections did not translate into any fundamental change in the nature of the party system: the eruption of new faces was short-lived. So far, in 2012, a striking feature of the campaign has been return of traditional bipartisanship. This, of course, is the wish of Hollande and Sarkozy: they both want the campaign to become a two-horse race where from the start voters have to choose between their different programmes. A more varied landscape only makes their job more difficult. But the dominance of the Socialists and Gaullists thus far owes itself to more than campaign strategy. A feature of the current crisis has been the way it has struggled to give rise to fundamentally new political ideas or movements. 2011 was a year of protest in Europe: demonstrators filled the streets of Athens, Madrid, London and Amsterdam. But the electoral results have empowered mainstream figures and parties.

This is unfortunate give that neither side will really engage with the key questions of our time. Neither Hollande nor Sarkozy challenge the dominant reading of the European crisis as a problem of deficit spending. The Socialists want more focus on growth and to combine austerity programmes with a measure of Keynesian pump priming. Their justification, however, is tied to deficit reduction: only growth can cut government deficits, not austerity. The Gaullists are using the crisis as an opportunity to reform France’s labour market and to shift the burden of social contributions from the employer to the general taxpayer (Sarkozy’s famous “social VAT” proposal). Their commitment to the pan-European deficit reduction deal is demonstrated by Chancellor Merkel’s support for Sarkozy’s re-election.

At The Current Moment, we’ve argued that the debt problems faced by Western European and North American governments are not just problems of government profligacy, to be solved either by imposing more stringent rules on elected representatives or by trying to stimulate the economy through some kind of neo-Keynesianism. These problems express a particular set of social relations that form the basis of contemporary society, one rooted in both public and private debt. Debt is a relationship between individuals and collectivities, not just an amount that can be measured and quantified in an impartial way. Focusing merely on debt reduction policies leaves us none the wiser about how and why debt has become such a fundamental feature of contemporary capitalist societies. A Hollande vs Sarkozy election is unlikely to shed much light on these issues.

The attraction of the view we associated with Lincoln is that it presented the economic order with a different task. Its purpose was to make available to all the possibility of economic independence, a condition understood as control over work activity, not just ability to sell one’s labor. Lincoln called this truly free labor, and contrasted it not just with slavery but with wage-labor too (or at least with being a permanent wage-laborer). The overall emphasis is not on selecting the talented few but on freedom for all. Lincoln himself, of course, was limited by a somewhat agrarian vision of what free labor would look like – an individuated condition of personal autonomy. Each individual owned a small share of the ownership of the means of production – land. We live on the other end of the industrial revolution, and any translation of this conception of economic independence has to take account of the collective character and scale of most work. But to get to that conversation, we first thought it necessary to draw the general contrast between the inegalitarian, meritocratic view of equal opportunity, whose purpose is to generate a ‘natural aristocracy’, with another view whose aim is to secure the equal freedom of all.

A response to a few critics of the piece:

‘Equality of opportunity’ v. ‘equality of outcomes’

More than one commenter has argued we are proposing to replace ‘equality of opportunity’ with ‘equality of outcomes.’ First, this forgets the basic factual point that ‘equality of opportunity’ never existed, we did not replace it with anything, and even if you think it at one point existed, it certainly does not exist in any reasonable measure in the United States at present. The gap between the rewards to positions for those ‘natural aristocrats’ and the rest has widened radically, and this economy is creating two kinds of jobs – a few very high paying, high status positions that come with significant amounts of power and influence, and the rest fairly crappy ones. As we noted, in this supposed knowledge economy, “according to the Bureau of Labor Statistics, of the 20 occupations projected to grow rapidly over next decade, just five require an associate’s degree or more. Just two require a doctorate or professional degree.” And everyone knows the direction of the wealth and income statistics.

But more than that the distinction between ‘equality of opportunity’ and ‘equality of outcomes’ is too vague to be meaningful. What is meant by opportunity or outcomes here? Even on current ‘meritocratic’ interpretations, equality of opportunity requires equality of certain outcomes. Minimally, certain laws must be in place, from equal civil rights to anti-discrimination statutes. More, everyone must have a certain level of educational achievement, range of skills, amount of mobility, and access to certain basic social goods; otherwise they won’t be able to compete for the available opportunities. Lack of education leaves individuals unqualified; lack of basic social goods makes individuals unable to take the risks, or at least not feel the pressure of the labor market so intensely that they cannot wait for something better to come up. If the relevant opportunities include something like starting a business, then some access to capital is necessary. But all of these preconditions – education, welfare, access to capital – are ‘outcomes.’ They are conditions that individuals have to actually achieve before we can say they enjoy anything like equality of opportunity. But those achievements or outcomes are not conditions that create themselves. They have to be maintained by social policy. So even on its own terms, the quest for equal opportunity is not the opposite of equal outcomes. Of course, the opportunities for economic freedom that we were talking about would require more radical economic reorganization than all that – the creation of a much different set of opportunities, of transformed work and economic structures. But that is not replacing ‘opportunities’ with ‘outcomes,’ it is an argument for the creation of different kinds of opportunities.

The vagueness in the contrast between ‘outcomes’ and ‘opportunity’ is not a product of lazy thinking, it is purposeful. Its rhetorical purpose is to associate any attempt to intervene in or manage an economy, especially redistribute property, with ‘outcomes’, and thus with unjust, authoritarian coercion. The thought is that all attempts to give people at work a say in the conditions of their own employment means the repudiation of “excellence” and “innovation” by the talented few. Such a view implies that equal opportunity is about individual “free choice” – where those that succeed were the “innovators” – even if the range of individual free choices is nominal, radically unequal, and indifferent to the resulting distribution of social and political power. It is a conservative talking point whose function is to redirect a serious discussion even of the minimal ideal the United States claims to uphold.

Lincoln v. Jefferson

Other critics were unhappy with our use of Lincoln and Jefferson, but mainly Jefferson. Let it first be said that our purpose was not to give an exhaustive interpretation of Jefferson, Lincoln and the differences between them. It was heuristic, to present two different ideals, one which saw the economy organized to reward those deemed fit to rule, and another whose purpose was to create conditions in which everyone could enjoy economic independence. We called one inegalitarian and the other egalitarian, but are well aware that the specific individuals can be found making other kinds of statements. Lincoln himself, even in the very speech we quote, pairs his egalitarian vision of an economy that makes equal independence for all possible, with the idea that people will fail because of their own lack of virtue. Some post-Civil War liberals used this idea to blame the working class for its poverty. These liberals made the deeply troubling jump of blaming individuals for outcomes that were the product of economic structure – a structure that, anyhow, in agrarian Wisconsinin 1859 (where Lincoln gave his speech), was not nearly as vivid as it would later become.

Perhaps there is a further problem. As one of our critics argued, Lincoln appears to assume the existence of a working class – “the prudent penniless beggar” – who rises through hard work. This is a vision of interclass social mobility, but there is no social mobility among classes unless we first assume class. So Lincoln is spouting mere class ideology. Here again, the criticism too quickly reads the vagaries of industrial society backwards. In fact, it is a reproduction of an ideological victory. That ideological victory is the one that wipes out alternatives that existed in the past, but were defeated. Permanent wage-labor and industrialization had developed in parts of the US northeast, but it was post-bellum America that saw explosive industrialization. In those social conditions, a particular assumption about the necessity and permanence of a working class became widespread, and was dressed up in the language of the nominal freedom of each ‘free laborer’ in contrast to the unfreedom of former slaves. In the minds of newly mobilized industrial workers, their nominal freedom paled in comparison to the old Lincolnian ideal of economic independence.  It also meant that such independence could not be achieved through a self-regulating commercial society or on laissez-faire grounds; independence would require a dramatic rethinking of economic relations.  This is why so-called “labor republicans” called for the creation of a cooperative commonwealth as the key instrument for fulfilling long-standing goals of equal freedom.  Importantly, for Lincoln, although it may have been a tenuous position even on the eve of the Civil War, he still assumed that economic independence was perfectly compatible with small-scale capitalism (of homesteading, shop owning, and even petty manufacturing).  Unlike later post-war liberals he was not forced to confront as fully the incompatibility between the goal of independence and the limitations of free market relations.

Still, for our purposes, the important point is that regardless of his conclusions about the market, Lincoln nonetheless was still working with a vision of economic independence as the goal of an economy, a vision very different that the meritocratic one today. Indeed, this ideal of independence entailed truly radical possibilities – possibilities which became central to the labor movement – precisely because it had not been stamped by the later Gilded Age view that freedom only consisted in the legal self-ownership of the penniless worker. Even for Lincoln, whatever his profound limitations, freedom carried with it the belief that an economy ought to make possible the equal independence of all workers.  That is freedom for all, not power and prestige for some, and it is worth recovering and adapting to our present conditions.

Zizek’s main piece of evidence in favor his his “post-industrial” analysis of this ‘information economy’ is that “any attempt now to link the rise and fall in the price of oil to the rise or fall in production costs or the price of exploited labour would be meaningless: production costs are negligible as a proportion of the price we pay for oil, a price which is really the rent the resource’s owners can command thanks to its limited supply.” But this is a silly argument. For one, it is Marxist economics 101 that value and price diverge. Moreover, all Zizek is really talking about is monopoly rents, which just about any economic theory can grasp, and which disproves none. Finally, any anti-sweatshop campaign can tell us that labor costs “are  negligible as a proportion of” the final price of, say, a $30 Nike cap. There is little monopoly rent there.

More problematic, Zizek’s further point is that we can understand recent protests as the political activity of the “salaried bourgeoisie,” a strata of professionals and managers, whose salaries are paid by the rent-receiver, but who now feel the austerity squeeze. These are not a ‘revolutionary subject’ because they are indifferent to the plight of the real 99%, the globally jobless, the post-proletarians, who don’t even have the right to work.

In his rush to join the time-servers and declare a new era of informational capitalism, based on information and creativity on the one hand, and mass joblessness on the other, Zizek has missed the chance to make a potentially valid point in a more serious way. It is certainly true that the Occupy/Indignado phenomenon has a touch of the petty bourgeois element to it. In fact, as others like Jodi Dean have argued quite powerfully, this class element seems to be inscribed into the politics of Occupy itself: “The refusal to be represented by demands is actually the refusal or inability to make an honest assessment of the social composition of the movement so as to develop a politics in which different forces and perspectives do not simply neutralize each other.” This political analysis is available to us without having to trot out trite nostrums about the new economy.

Moreover, if there really is something new under the sun in the realm of surplus extraction, it probably has more to do with the development of debt and finance over the past thirty or forty years, not the (fake) disappearance of industrial production. The piles of debt under which so many workers sit represent yet another claim on their labor time. It is not just lower wages, but that a substantial amount of what they get paid is not theirs to control. They are paid less than what they produce, and then a further chunk of their means of subsistence is siphoned off. To be sure, debt burdens are a long-standing feature of the capitalist economy, and one should not overstate the novelty of the situation. Capitalism is an extremely dynamic economic system, and it is easy to get caught up in the dynamism and believe that everything has changed. But if we are looking for the distinctive features of surplus extraction in the present, it won’t be found in the heady, but superficial, claims that we have entered an informational age in which surplus is extracted through ‘rents.’ More promising is the attempt to grasp the role of debt and finance, not as replacing, but overlapping with the regular old wage-contract.

He notes that historically, the role of specific economic interests, such as those of finance or of specific sectors of the real economy (export industries, domestic farming interests etc.) have been contained by the wider concerns of governments. The universality of the general interests holds sway against the particularities of individual groups. He makes the good point that this battle has often been fought through national central banks. They have been the main tool used by the executive power to pursue the interests of wider society. This gives us a rather different perspective on what is often assumed to be the narrow partisanship of politically-controlled central banks. In the mainstream economic literature, independent central banks are the guardians of the public interest; central banks directed by national executives are prisoners of political short-termism. This may be the conventional view today but Orléan reminds us that the historical record supports the opposite view: politically-controlled central banks were the vehicles for the articulation of the public interest. The primacy of politics over economics, as Orléan puts it, has had as one of its main tools the power of the central bank. This might shed a different light on the Orban government in Hungary: attacked for its anti-democratic ambitions, one of Orban’s proposed reforms was to curtail the independence of the Hungarian central bank. Rather than welcome this as an attempt to regain political control over macro-economic policy, Orban was criticized for his nascent authoritarianism. In fact, the more powerful assault on the democratic control of macro-economic policy has been waged over the years by the European Court of Justice, particularly its attack on the notion that national public sectors should be shielded from the competitive pressures of the private sector.

Orléan also has an interesting reflexion on the nature of finance. Contrasting it with the market for goods or services, he notes that finance has a “directly collective dimension”: it is concerned not just with individual sectors but with the economy as a whole. He gives the example of the infamous downgrading of France’s triple A rating by the agency, Standard & Poor’s. In its report, S&P referred to the EU’s new fiscal compact agreed upon in December 2011 (which the UK and the Czech Republic are today refusing to ratify), which it judged inadequate to meet the demands of the Eurozone debt crisis. Orléan notes that it is exactly this kind of very general judgement that is typical of the financial sector; and yet such generality does not pass through – as with democratic decision-making – a system by which a variety of different views are confronted via the freedom of the ballot box. This curious combination of its very narrow representative claim along with its interest in the economy as a whole can go some way of explaining the rise of technocratic governments in Europe today: they express the same peculiar combination, with individual technocratic leaders such as Italy’s Mario Monti having a history of very close relations to the world of finance.

Orléan’s views on the way out of the current crisis are based around a reassessment of the idea of value in the economy and of value creation. He argues for a much greater focus on the creation of value within the real economy, as this is ultimately where jobs and growth are created. He suggests that a new law should be introduced that firmly separates savings banks from investment banks, an argument included in the French Socialist Party’s programme. There is nothing radically new in Orléan’s arguments but his attack on conventional assumptions in economics is both powerful and welcome.

In the midst of all of this fraud, we have to remember that cheap and easy credit was supposed to solve or at least address the housing problem itself. It was supposed to make access to housing possible for borrowers who otherwise had trouble getting loans. That was one of the justifications for many of the changes in regulations that fraudsters took advantage of. Moreover, so long as cheap credit served its welfare-function of increasing consumption, especially of houses, there was less incentive to look into just how this was all made possible (there were, of course, many other factors contributing to indifference towards systematic fraud, not to mention the perfectly legal ways in which systematic risk was spread around the financial system.) What we can say, first off, is that the tradeoff – of increased homeownership for financial innovation in housing finance – was not worth it. The tradeoff was not even close to worth it. As the graph below shows, there was very marginal increase in home ownership. Even if we arbitrarily choose the year of the lowest rate of ownership (1993), even though it is not the beginning of the housing bubble, and compare it with the peak (2004), we get a 7% rise in homeownership, which can hardly all be attributed to financial innovation itself – and by the time the bubble burst most of the gain was wiped out.

And of course this way of financing access to housing came at the price of an immense credit crunch, doubling of unemployment, years of stagnation or recession, collapse of home values, long-run declining access to homes, declining household formation and, as we noted last week, a massive redistribution of wealth upwards.

But it would be a mistake just to blame those in the financial system who benefited, legally and illegally, from this permissive climate. After all, when it comes to housing, they alone did not create the poverty, and in particular the inability to afford housing, that lies at the root of the housing problem itself. Behind all the fraud is the cold hard fact that many are too poor to be able to securely hold or own a house without fraud. That is the root housing problem.

Looking to innovative credit mechanisms and market ‘incentives’ to make housing available to the poor is one of those neoliberal, post-Cold War ‘solutions’ that ultimately created a bigger problem. It registered, among other things, the fact that there is so little class power at the bottom that direct claims to the social product, in the form of low-income housing, public housing, rent controls and other forms of public provision are supplanted by mechanisms that make claims to housing contingent on becoming subject to the discipline of deeply inegalitarian financial and credit markets. But the inability of poor and middle income workers to control enough social product to meet a basic need like housing is a function not just of the economic power of financiers, but of ownership more widely. It is not just finance capital that keeps workers separate from the means of production. In this sense, the housing problem is wider than and predates the fraud and the legal forms of exploitation that it eventually gave rise to.