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A review by stephencampbll
Buying Time: The Delayed Crisis of Democratic Capitalism by Wolfgang Streeck
Streeck’s account of the financial crisis and its aftermath posits that our current predicament is far from temporary. Democratic capitalism, Streeck argues, is suffering from a legitimation crisis. This legitimation crisis comes not from the discontent of waged-workers (as predicted by the crisis theories of the Frankfurt School) but from the discontent of capital itself. Though the Keynesian consensus temporarily benefitted capital with its promise of endless growth without boom and bust, capital was unwilling to continue paying so high a price to uphold its end of the social contract created after 1945. Government commitments to full employment ended the power of the sack and capital feared a ‘revolution of rising expectations’ it would be unable to satisfy without sacrificing its profits. This fear was fuelled by the wildcat strikes of the late 1960s.
To maintain profits capital had to wrest control of the economy away from national polities and democratic governments. The mechanism for this was ‘neoliberal’ economic reforms. Ironically, the neutralization of economic democracy required political allies – most notably Thatcher and Reagan – who were willing to trade mass unemployment for the return of ‘sound money’ after the inflation of the 1970s, and to crush the inevitable social resistance. However, far from freeing government of its responsibilities the return of an unfettered market economy required curative measures to assuage the damage (e.g. social benefits increased with the return of structural unemployment). Thus, though state revenue began to stagnate (due to tax cuts and the difficulty of collecting tax from increasingly mobile capital) expenditure continued to increase, and governments had to plug the gap with increasingly high levels of borrowing. The ‘tax state’ thus began transforming into the debt state.
Of course, the long-term debt-financing of governments made those with financial assets increasingly powerful. Streeck takes this argument as far as it can go, arguing that alongside national polities these creditors have come to represent a ‘second constituency’ of the modern state. Their control “appears alongside the democratic control of the state by its citizenry, with the possibility of overlaying it, or even […] eliminating it.” Economic crises are not technical disturbances in the market, but crises of ‘confidence’ from this group (who Streeck refers to as the Marktvolk – the people of the market). This means that “low growth and unemployment are the results of ‘investment strikes’” on a part of this group, “who could invest their capital but refuse to do so because they lack the necessary confidence.” But debt-financing can only continue while creditors are sure governments will be able and willing to repay their debts and so, in the endless quest to retain market ‘confidence’ (in the form of lower interest rates and new loans), the ‘debt state’ transformed into a state of fiscal consolidation to reassure ‘the markets’ that “in case of doubt their claims can and will have priority over those of citizens”.
This second constituency of the modern state obviously presents problems for the notion of democracy. Though Buying Time was written in 2013, once read it hard to view the 2015 Greek Crisis through anything but this lens. Individuals may have the opportunity to declare bankruptcy but even as sovereign debtors states such as Greece are ultimately forced to declare war on their own national polities in order to satisfy ‘the markets’. Despite the SYRIZA government’s ultimate capitulation, the Greek crisis nonetheless still represents an eternal nightmare for the Marktvolk – insofar as national governments are still determined by democratic elections, creditors can never be certain that a state will not unilaterally restructure or cancel their debt. The solution has been “to integrate national governments into a non-democratic supranational regime – a kind of international superstate without democracy”. This is represented by the European Union and especially the European Monetary Union, where national governments surrender any semblance of democratic control over their currency, and the debt state transforms into a system of international fiscal consolidation.
The main goal of Buying Time is to emphasis the increasingly widening gap between capitalism and democracy, and to offer a warning that the transformation of the European project into a post-democratic ‘neo-Hayekian regime’ is not only possible, but likely. This is a convincing argument. Indeed, one is struck by the fact that – despite lingering Cold War rhetoric – the relationship between capitalism and democracy is neither very old nor very strong. From the time of universal enfranchisement to the present day, the post-war period is the only period characterised by some semblance of democratic control over the economy (due to mass party membership, strong trade unions, and an institutionalised bargaining system to determine the proceeds of economic growth). By the 1980s this forced marriage of democracy and capitalism had run its course and neoliberal reforms began to insulate the economy from politics once more.
Buying Time has several strengths. Despite Streeck’s obvious (and confessed) political leanings his account remains nuanced enough to avoid painting a picture of capital merely imposing its will on a resistant public. To break out of the institutional cage of Keynesian bargaining and to ‘free’ the markets capital in fact rode a wave of enthusiasm for ‘alienated’ wage-labour as women flooded into the market to escape household drudgery, while the young welcomed the new ‘flexible’ working conditions on offer. Streeck also admits that the citizenry embraced the new ‘consumer society’ to a degree unimaginable in Adorno’s worst nightmares.
The book would have been all-the-more convincing for explaining exactly how and why financiers became more powerful than traditional industrial capitalists (i.e. due to advantages capital has over all other sectors due to its mobility, whereas flows of trade and labour face a multitude of barriers e.g. geographical, regulatory, physical, etc.). Nonetheless this remains a minor criticism – we do not need evidence of first-cause to recognise that this group has power, that they have had it for some time now, and that their power represents a significant distortion of democracy. In this sense Streeck’s diagnosis remains invaluable, and his greatest achievement lies in humanising our notion of ‘the market’. The market(s) are not naturally occurring phenomena: they are driven by human activity and hence subject to human desires, whims and moods – and this is especially true of the financial markets. Any successful diagnosis of the problem or suggestion of what is to be done must recognise this fact.
While works of political economy can often stray too far into one field or the other, Buying Time deftly analyses the economics while doggedly keeping things tethered to their political context. When it comes to the economics, Streeck’s analysis offers a refreshing antidote to the ‘varieties of capitalism’ approach of political economy. Though the varieties of capitalism approach is not without merit, it ultimately has little to tell us about the European crisis because, as Streeck argues, “the parallels and interactions among the capitalist countries far outweigh their institutional and economic differences.” Despite institutional variations, the underlying dynamic of capitalist economies remains the same, and any analysis of the European crisis must acknowledge as much.
Buying Time’s political analysis is also compatible with several trends found in wider political science research in recent years. For example Streeck argues that the ceding of democratic powers to the European level (and, by extension, economic power to ‘the market’) has come about due to a coalition of national governments and their middle-class voters who enjoy the rewards of freedom of movement and capital. Meanwhile turnout of poor voters – who do not enjoy these benefits and who instead lose the public services they rely on due to ‘fiscal consolidation’ – is in terminal decline as national elections exert less and less influence over the distribution of wealth.
Relatedly, Streeck’s argument that the Marktvolk prefer fiscal consolidation to be supported by both government and opposition (and especially by Grand Coalitions) to better ensure that newly elected governments will continue servicing their debts chimes well with Katz and Mair’s (2009) famous thesis of the cartelization of party politics. This thesis posits that political parties have become increasingly detached from civil society and evermore reliant on state funding for their own survival. If parties are more reliant on the state than the people for survival, it follows that they will be less responsive to the citizenry and more responsive to those who provide state funding – the Marktvolk.
I argue that Streeck’s account even helps to explain the rise of populist parties (of both the right and the left) in Western Europe. Whatever one thinks of the likes of e.g. the Front National in France, the appeal of such parties lies in the fact that they are not entirely wrong when they claim that the mainstream parties have collaborated to keep certain issues off the political agenda. This is but one example of how ‘ever closer union’ at the European level has often provided national governments with convenient excuses to avoid winning consent for neoliberal reforms which are unpopular at home (Thatcher, 2013).
Streeck manages to avoid a conspiratorial account of political elites unambiguously enthralled to the Marktvolk. Plenty of governments have at least partially sided with their populations and have proved unwilling to completely submit to the whims of ‘the market’. Where politicians do advocate neoliberal reforms as a panacea for economic crises, these are largely panicked tactical responses not attached to any higher Machiavellian strategy of robbing the people of democracy. This is an important observation – if only to help us recognise the power of institutional norms and how they shape policy responses. However this line of argument would be improved if Streeck offered a similar examination of the Marktvolk's motivations. Does the financial class act merely as atomised, autonomous individuals? Or are they – on some level, at least – aware of their particular class interest?
To speak of ‘class interests’ is to admit that the cornerstone of Streeck’s argument rests on little more than a reiteration of the traditional Marxist narrative of class struggle (albeit one distorted and abstracted by the labyrinthine nature of financialization). However, Streeck is certainly correct when he writes that, after 2008:
To maintain profits capital had to wrest control of the economy away from national polities and democratic governments. The mechanism for this was ‘neoliberal’ economic reforms. Ironically, the neutralization of economic democracy required political allies – most notably Thatcher and Reagan – who were willing to trade mass unemployment for the return of ‘sound money’ after the inflation of the 1970s, and to crush the inevitable social resistance. However, far from freeing government of its responsibilities the return of an unfettered market economy required curative measures to assuage the damage (e.g. social benefits increased with the return of structural unemployment). Thus, though state revenue began to stagnate (due to tax cuts and the difficulty of collecting tax from increasingly mobile capital) expenditure continued to increase, and governments had to plug the gap with increasingly high levels of borrowing. The ‘tax state’ thus began transforming into the debt state.
Of course, the long-term debt-financing of governments made those with financial assets increasingly powerful. Streeck takes this argument as far as it can go, arguing that alongside national polities these creditors have come to represent a ‘second constituency’ of the modern state. Their control “appears alongside the democratic control of the state by its citizenry, with the possibility of overlaying it, or even […] eliminating it.” Economic crises are not technical disturbances in the market, but crises of ‘confidence’ from this group (who Streeck refers to as the Marktvolk – the people of the market). This means that “low growth and unemployment are the results of ‘investment strikes’” on a part of this group, “who could invest their capital but refuse to do so because they lack the necessary confidence.” But debt-financing can only continue while creditors are sure governments will be able and willing to repay their debts and so, in the endless quest to retain market ‘confidence’ (in the form of lower interest rates and new loans), the ‘debt state’ transformed into a state of fiscal consolidation to reassure ‘the markets’ that “in case of doubt their claims can and will have priority over those of citizens”.
This second constituency of the modern state obviously presents problems for the notion of democracy. Though Buying Time was written in 2013, once read it hard to view the 2015 Greek Crisis through anything but this lens. Individuals may have the opportunity to declare bankruptcy but even as sovereign debtors states such as Greece are ultimately forced to declare war on their own national polities in order to satisfy ‘the markets’. Despite the SYRIZA government’s ultimate capitulation, the Greek crisis nonetheless still represents an eternal nightmare for the Marktvolk – insofar as national governments are still determined by democratic elections, creditors can never be certain that a state will not unilaterally restructure or cancel their debt. The solution has been “to integrate national governments into a non-democratic supranational regime – a kind of international superstate without democracy”. This is represented by the European Union and especially the European Monetary Union, where national governments surrender any semblance of democratic control over their currency, and the debt state transforms into a system of international fiscal consolidation.
The main goal of Buying Time is to emphasis the increasingly widening gap between capitalism and democracy, and to offer a warning that the transformation of the European project into a post-democratic ‘neo-Hayekian regime’ is not only possible, but likely. This is a convincing argument. Indeed, one is struck by the fact that – despite lingering Cold War rhetoric – the relationship between capitalism and democracy is neither very old nor very strong. From the time of universal enfranchisement to the present day, the post-war period is the only period characterised by some semblance of democratic control over the economy (due to mass party membership, strong trade unions, and an institutionalised bargaining system to determine the proceeds of economic growth). By the 1980s this forced marriage of democracy and capitalism had run its course and neoliberal reforms began to insulate the economy from politics once more.
Buying Time has several strengths. Despite Streeck’s obvious (and confessed) political leanings his account remains nuanced enough to avoid painting a picture of capital merely imposing its will on a resistant public. To break out of the institutional cage of Keynesian bargaining and to ‘free’ the markets capital in fact rode a wave of enthusiasm for ‘alienated’ wage-labour as women flooded into the market to escape household drudgery, while the young welcomed the new ‘flexible’ working conditions on offer. Streeck also admits that the citizenry embraced the new ‘consumer society’ to a degree unimaginable in Adorno’s worst nightmares.
The book would have been all-the-more convincing for explaining exactly how and why financiers became more powerful than traditional industrial capitalists (i.e. due to advantages capital has over all other sectors due to its mobility, whereas flows of trade and labour face a multitude of barriers e.g. geographical, regulatory, physical, etc.). Nonetheless this remains a minor criticism – we do not need evidence of first-cause to recognise that this group has power, that they have had it for some time now, and that their power represents a significant distortion of democracy. In this sense Streeck’s diagnosis remains invaluable, and his greatest achievement lies in humanising our notion of ‘the market’. The market(s) are not naturally occurring phenomena: they are driven by human activity and hence subject to human desires, whims and moods – and this is especially true of the financial markets. Any successful diagnosis of the problem or suggestion of what is to be done must recognise this fact.
While works of political economy can often stray too far into one field or the other, Buying Time deftly analyses the economics while doggedly keeping things tethered to their political context. When it comes to the economics, Streeck’s analysis offers a refreshing antidote to the ‘varieties of capitalism’ approach of political economy. Though the varieties of capitalism approach is not without merit, it ultimately has little to tell us about the European crisis because, as Streeck argues, “the parallels and interactions among the capitalist countries far outweigh their institutional and economic differences.” Despite institutional variations, the underlying dynamic of capitalist economies remains the same, and any analysis of the European crisis must acknowledge as much.
Buying Time’s political analysis is also compatible with several trends found in wider political science research in recent years. For example Streeck argues that the ceding of democratic powers to the European level (and, by extension, economic power to ‘the market’) has come about due to a coalition of national governments and their middle-class voters who enjoy the rewards of freedom of movement and capital. Meanwhile turnout of poor voters – who do not enjoy these benefits and who instead lose the public services they rely on due to ‘fiscal consolidation’ – is in terminal decline as national elections exert less and less influence over the distribution of wealth.
Relatedly, Streeck’s argument that the Marktvolk prefer fiscal consolidation to be supported by both government and opposition (and especially by Grand Coalitions) to better ensure that newly elected governments will continue servicing their debts chimes well with Katz and Mair’s (2009) famous thesis of the cartelization of party politics. This thesis posits that political parties have become increasingly detached from civil society and evermore reliant on state funding for their own survival. If parties are more reliant on the state than the people for survival, it follows that they will be less responsive to the citizenry and more responsive to those who provide state funding – the Marktvolk.
I argue that Streeck’s account even helps to explain the rise of populist parties (of both the right and the left) in Western Europe. Whatever one thinks of the likes of e.g. the Front National in France, the appeal of such parties lies in the fact that they are not entirely wrong when they claim that the mainstream parties have collaborated to keep certain issues off the political agenda. This is but one example of how ‘ever closer union’ at the European level has often provided national governments with convenient excuses to avoid winning consent for neoliberal reforms which are unpopular at home (Thatcher, 2013).
Streeck manages to avoid a conspiratorial account of political elites unambiguously enthralled to the Marktvolk. Plenty of governments have at least partially sided with their populations and have proved unwilling to completely submit to the whims of ‘the market’. Where politicians do advocate neoliberal reforms as a panacea for economic crises, these are largely panicked tactical responses not attached to any higher Machiavellian strategy of robbing the people of democracy. This is an important observation – if only to help us recognise the power of institutional norms and how they shape policy responses. However this line of argument would be improved if Streeck offered a similar examination of the Marktvolk's motivations. Does the financial class act merely as atomised, autonomous individuals? Or are they – on some level, at least – aware of their particular class interest?
To speak of ‘class interests’ is to admit that the cornerstone of Streeck’s argument rests on little more than a reiteration of the traditional Marxist narrative of class struggle (albeit one distorted and abstracted by the labyrinthine nature of financialization). However, Streeck is certainly correct when he writes that, after 2008:
“No one can understand politics and political institutions without closely relating them to markets and economic interests, as well as to the class structures and conflicts arising from them […] One outcome of historical developments is that we can no long say for sure where, in the effort to shed light on current events, non-Marxism ends and Marxism begins. Besides, social science […] has never really been able to do without recourse to central elements of ‘Marxist’ theories.”
Buying Time: The Delayed Crisis of Democratic Capitalism is a lucid, erudite and entirely convincing account of the European crisis. It provides us with indispensable tools for analysing the mutations of this crisis in future as democratic capitalism desperately tries to ‘buy’ itself more time. In framing the modern state as caught between their national populations and the international Marktvolk, it becomes easy to consider the Greek ‘OXI’ vote, Brexit and even the election of Donald Trump in the U.S. as the deafening roars of revolt from national populations against their governments’ submission to this financial oligarchy. And although Streeck rejects the notion that one should not bother to diagnose without offering a cure, the solutions he does tentatively offer – centred around a return to national currencies and therefore power over devaluation – echoes the famous words of John Maynard Keynes (1933):
“Ideas, knowledge, science, hospitality, travel–these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national.”