World Out of Joint: Wolfgang Streeck’s Vision of the End of Capitalism

In The Communist Manifesto of 1848 two youthful firebrands named Karl Marx and Friedrich Engels, riding the high wave of revolutionary zest, announced to the world that capitalism created its own gravediggers. And the shovels were now in the gnarled hands of the proletariat. Miraculously, though beaten up and working and living in hellish conditions, this wretched bunch was to be the revolutionary agent to usher in the “better world” beyond capitalism.

Capitalism was a historical creation. It had a beginning. It had an end. And the firebrand revolutionaries thought it could well end pretty soon. Capitalism as a form of society with inherent contradictions wired into its DNA lived in the extended care unit of history. It didn’t have long to go, and Marx and Engels, smart young guys that they surely were, with a glint of Hegel in their eyes, thought they could see the graves being dug by the Immiserated Ones.

Both revolutionaries died in the late nineteenth century, Marx in 1883, Engels in 1895. They could not have imagined that capital was a “fatal attraction” that kept rising with knife in hand to defeat its enemies and keep itself alive for yet another day or year or century or two.

Nor could they have anticipated the kind of argument that Wolfgang Streeck, a professor of sociology at the Max Planck Institute for the Study of Societies in Cologne, Germany, would make 130 years after their passing in our outrageous age of austerity.

Here we are in 2016, the second decade of the twenty-first century. Since the “golden age of the social democratic welfare state” (1945-1975), capitalism has endured three major crises (1970s: high inflation; 1980s: rising public debt and 1990s: fiscal consolidation and steep increase in private debt).

I will examine Streeck’s works Buying Time: the delayed crisis of capitalism (2014, a) and two essays, “How will capitalism end?” in New Left Review 87, May-June 2014 (b) and “The crisis in context: Democratic capitalism and its contradictions,” in A. Schafer and W. Streeck (Eds.) Politics in the Age of Austerity (2013) to articulate his innovative framework for understanding the dialectical movement of these cascading crises.

Turning Marx and Engels’s gravedigger thesis on its head, he argues incisively that the Left in the late 1960s and 1970s “underestimated capital as a political actor and a strategic social force” (p. 2).

The Left were totally unprepared—shell-shocked may be a more appropriate depiction–for the rapid unravelling of post-war social democracy to self-regulated markets. They underestimated the way a looming motivational crisis would be swept away in the unimaginable expansion and seductions of the consumer paradise. They were aghast that the high inflation and public debt of the 1980s did not trigger a massive legitimation crisis in itself.

Wasn’t the post-war fusion of capitalism and democracy—steady growth, sound money and a pinch of social equity here and there—supposed to continue forever?

In effect, capital as an actor in its own right had appropriated the gravedigger’s shovels and was hard at work digging its own grave through the horrific ways they were resolving their own engendered crises with most of us standing by watching.

Capital and not the vanished proletariat was the grave digger. In the 1960s and 1970s critical theorists like Claus Offe and Jurgen Habermas had assumed that the masses (or citizens) were the ones who had (or would have) legitimation problems.

This is another unexpected theoretical reversal. We, the citizens, were not the ones who de-legitimated the social democratic model of how capitalism and democracy could live without tearing each other’s throats out. Indeed, the Left may have been so enamoured with social democracy, so in love with it, that they didn’t see what was coming.

Streeck suggests that the New Left of the 1960s was in the vice grip of utopian over-confidence: material needs had been fulfilled, and thought that “non-materialist demands such as those of self-fulfilment, emancipation, recognition or authentic community will be released and demand to be satisfied” (p. 14).

Indeed, democratic and communication theory won the day as attention to markets, capital and capitalist economic engineering slid into the background. Buoyant talk circulated in New Left circles about the possibilities of workers’ control and the democratization of associational life. For a flickering moment, I was part of left grouplet in Toronto that was so nervous about vanguardism that they sat round the room frozen, waiting for the first person to speak.

Capital had other cards up its sleeve. It decided by the mid-1970s that it wanted out of the social contract (or marriage) established through the sustained struggle of citizens and the working class for fair taxation, collective bargaining, full employment and distributed benefits. “Contrary to neo-Marxist theories,” Streeck (2014a) observes, “a legitimation crisis may therefore grow out of discontent on the part of ‘capital’ with democracy and its associated obligations” (p. 21).

This left the Left reeling and out of joint. The social democratic deal had seemed that it could last a very long time. It seemed that peace had been made with capital. But by the late 1970s scholarly cries from the right that there was “too much democracy” and “too many demands” coming from citizens reverberated in the unsettled cultural air. The social democratic state couldn’t meet the needs. The greedy people had emptied the “common pool.”

Citizens had better scale back their demands for distributional benefits and decent wages. Unions had better learn to live with less. No more wage increases. The age of Lazarus was upon us: the workers were on their knees under the table looking for crumbs.

Actually, the reality was that capital as an actor with profit-seeking sensors didn’t want to meet these demands. They wanted to expand their profits as much as they possibly could. They wanted to create the conditions whereby their intentions were immunized “against pressure from below, so as to win back the confidence of ‘the markets’ in the system” (p. 4). In Marx’s words in the Grundrisse of 1857 capital “wanted to conquer the whole earth for the market.”

But it traveled down this treacherous pathway of de-democratizing society at the same time as it entangled itself in a “threefold crisis, with no end in sight: a banking crisis, a crisis of public finances, and a crisis of the ‘real economy’” (p. 6).

The shovels were now in the hubristic hands of capital. But they imagined that they were digging their way to solutions and not preparing their own demise.

The crises of post-war democratic capitalism

The first crisis struck in the late 1970s when inflation rates began to rise rapidly throughout the western world. Sustained growth faltered. Caught with their pants down, western governments could not maintain the promise of a “continuously rising standard of living unchecked by fears of unemployment” (Streeck, [2013], p. 268). Working class demands for both a higher share in their country’s income and employment security could not be met without a monetary p0licy that paid for redistributive wage settlements.

By the 1980s inflation had been conquered. But with interest rates massively increased, unemployment rates jumped to levels not seen since the Great Depression in the US and elsewhere. We now enter the gates of the neo-liberal house of horrors as Ronald Reagan and Margaret Thatcher strutted on to the global stage. Hayek was dusted off and readied for action. Thatcher smashed the National Union of Mineworkers and Reagan crushed the Air Traffic Controllers. These iconic events sent collective shivers through the crumbling trade union movement that the “golden era” of social democratic welfare capitalism had ended.

Inflation receded, but public debt began to increase significantly. The movement (or shift) from the democratic capitalist tax state to the debt state was underway. Left theorists such as James O’Connor wrote lucidly about the “fiscal crisis of the state” in the 1970s. He was certainly on to something. The neo-liberal state had to borrow to accommodate demands for benefits and services from citizens. Lurking in the shadows, the temporary peace contract between capital and democracy of the post-war period was in danger of fracturing and disintegrating.

Capital was only “buying time.” It was digging a pretty deep hole: debt had to be serviced and financial markets were stealing considerable economic clout. They wanted to be paid and society disciplined and returned to fiscal consolidation.

In 1992 Bill Clinton assumed the presidency of the U.S. Under his regime, he developed a “policy of austerity.” The crisis of public debt spiralling out of control was countered with deep cuts in public spending (both in domestic economies and throughout the Third World through OECD and IMF policies).

Essentially, during the 1990s—and continuing into our contemporary period—rapidly rising income inequality (caused by the manipulation of financial markets, de-unionization and cuts to social services and grand opportunities for citizens to indebt themselves) characterized the 90’s and first decade of the twenty-first century.

Here the crisis of public debt and the pain of cuts was temporarily resolved through “privatized Keynesianism” (that is, public debt is replaced by private debt).

Those neo-liberals strutting the global stage were deluded and desperate actors in a gigantic farce that was playing itself out while wreaking havoc everywhere in the world. Clinton’s de-regulation (following in Reagan’s footsteps) enabled the rich, spared from high taxation, to gain massive profits from byzantine financial services.

George W. Bush’s much despised, weird and bizarre sub-prime mortgages were dished out like Christmas hampers to the poor who imagined that their new house would expand in value so much that they could borrow on delusory earnings to enjoy life in the consumer paradise forever.

But this farce, while transferring enormous wealth to the 1%, was a crass substitute for social policy that had promised secure “wage increases” and “benefits.” In Streeck’s (2013) words, “Individual debt replaced public debt, and individual demand, constituted for high fees by a rapidly growing money-making industry, took the place of collective demand governed by the state in supporting employment and profits in industries far beyond ‘financial services’, such as construction” (p. 275). Catastrophe and ruin for millions lay just down the road.

In 2008 the international credit pyramid collapsed. At the moment when appeared ready to fall into the yawning grave, the financial industry staged a “full recovery.” They twisted our pliable minds into believing that they could not fail. Otherwise, the global economy would slide like a cleaving glacier into the sea. Did we want that to happen? NOOOOO-we all screamed back.

The very criminals who were responsible for the crisis in the first place even re-financed themselves using our money, and then were able to make billions through the free and fancy printing of money. Capital’s hegemonic pedagogical re-education of the world faced the giant task of indoctrinating us into believing that “market justice” was the only form of justice imaginable.

Streeck remarks grimly that capitalism has won; democracy has been defeated. From his European vantage-point, he informs us that the European Commission and European Bank now make decisions at a level beyond and above the nation-state. These agencies hiding in the “burning bush” decided Greece’s fate. Greece could not make decisions about their national finances.

Nor could they do anything about the jackboot on their collective neck forcing them to renounce pensions and decent wages. The EC and EB had, in fact, insulated themselves from democratic participation. Voting for Syriza didn’t amount to a pinch of dung. Once decision-making can be located beyond the nation-state, the game is over for democracy. That’s Streeck’s argument. It is not wrong.

On the German political scene, Angel Merkel’s declaration that Germany would take thousands of refugees was not even discussed with the citizenry who, after all, needed time to assess what this might mean and how it would work pertaining to matters of social solidarity and employment.

This is the spirit of the neo-liberal governing rationality (in politics and in the economy): matters of deep significance are decided by someone else and not poor little us, the miserable once-citizens. We’re all in the bleachers watching the game. We are permitted GMO popcorn and can cheer when told to do so by advertisers. That’s it. That’s all. Even the former Greek Minister of Finance, Yanis Varouvakis, urges the Left to save capitalism from itself (“How I became an erratic Marxist,” The Guardian, February 18, 2015).

Capital’s defeat of its opposition is a pyrrhic victory

Streeck (2014a) springs another unexpected reversal on his readers. If we remain unconvinced that capital’s end is near, then his original argument is worth considering. He writes: “Capitalism as we know it has benefited greatly from the rise of counter movements against the role of profit and of the market. Socialism and trade unionism, putting a break on commodification, prevented capitalism from destroying its non-capitalist foundations-trust, good faith, altruism, solidarity within families and communities, and the like” (p. 17).

This ingenious argument, then, could be read to mean that capitalism’s defeat of its opposition—there exist today no authentic Left opposition parties in Europe or in Latin America—may be a pyrrhic victory because capitalism cannot survive if it remains completely capitalist. “Could it be that victorious capitalism has become its own worst enemy? (p. 18). Streeck thinks it is; he also thinks that capitalism can come to an end without the presence of any alternative on the horizon.

Stripped of our human capacity and learning spaces to deliberate on what the “good society” means for us all, now, with delicious irony, must we look to the mighty corporation for meaning, social solidarity and personality stabilization?

Do they now have to learn to be socially responsible so that they will look below to meet the needs of the suffering citizenry? (C. Crouch, “From markets versus states to corporations versus civil society? Politics in the age of austerity [2013]). They’ve stolen our capacities and responsibilities; hey, it’s up to the mighty gods to look after us now!

Take a look at the mess we are in around the world. Capital broke free from its chains (Capital, all you have to lose are your chains!) and scorched labour of its need to recuperate and preserve its energies, scoured the earth of its resources and devoured the idea of the link between profit and wage-earning. Our world is totally disordered. Neo-liberalism is a wrecking machine committed to speculative rather than productive investment.

The rich have figured out how to increase their profits without bothering about social or economic progress. They have plundered the public domain by tax flight, tax evasion, tax-regime shopping, and extorting tax cuts from government. They reduce public deficits by cutting social services and letting physical infrastructures rot.

Profits soar; productivity doesn’t. This oligarchic economy has decoupled itself from ordinary people. The world is out of joint. One fears that the capitalist elites will get all they can and then run like hell to the last remaining casino on Paradise Island in the turquoise sea.

We, the citizenry of the world, have been forced to live in an absurd and totally insecure world with a criminal economy run by gangrenous gangsters and military monsters who do not think twice about invading a country to destroy its state structures, which make modest well-being possible.

Under the coercive conditions of neo-liberalism, the category of the citizen itself has been hollowed out, gutted like the old cannery worker’s knife slicing through the belly of the salmon.

Neo-liberalism has given the cold shoulder to the demands of the people for active citizenship, good work and secure living space.

Streeck (2014a) thinks that: “If collective opposition is impossible, those who are not content to spend their lives paying off debts incurred by others have no other option than destructive opposition. This is needed to strengthen the delaying effect of what is left of democracy in national societies” (p. 159). At this hysterical moment—dubbed an “age of protest” by some—could just as easily be labelled the “age of futility” as our little stabs of resistance have not changed a thing.

The banished citizenry has become bleary-eyed and bludgeoned almost to death by neo-liberal elite claims that dismantling of the welfare state, endless budget cuts, high unemployment and precarious forms of work are in the “general interests in terms of growth, while incomes soar for ‘experts’ on the executive floor but fall for those lower down who are dependent on wages and social benefits” (p. 160).

No wonder that banks and governments react with horror to even a tiny movement such as Occupy. There may another unexpected reversal awaiting us just over there, across the valley where many fires are burning.

Michael Welton retired from Athabasca University.  His recent books include Unearthing Canada’s Hidden Past: a Short History of Adult Education and Adult Education a Precarious Age: The Hamburg Declaration revisited.