Critical Encounters. Wolfgang Streeck
and benefit potential competitors’; and (3) ‘a sudden surge in labour’s bargaining power’. The investment house considers none of these possibilities likely. But as Greenspan himself noted at an American Enterprise Institute conference in February 2018, under present conditions rates can move in only one direction, upwards, and when they do, they will have devastating consequences for stock prices. The organizer of the event, Desmond Lachman, a former economist at the IMF, predicted a catastrophic economic and financial crisis in the near future as a result of rising interest rates.
In a final chapter titled ‘Reserves of Sovereignty’, Vogl deals with the submersion of nationally organized financial sectors – rendered politically unmanageable by financial innovation and the internationalization of capital – into an emerging global regime. Here again, Vogl’s command of his conceptual apparatus enables him to make sense of a highly complex process, conceived as yet another permutation of the relationship between the public and the private, and amounting to the conversion of ‘regulation’ into ‘governance’ – in particular, ‘global governance’. Financialization for Vogl essentially involves the transfer of financial oversight to the financial markets themselves, ultimately establishing oversight of states by markets. Subjected to the dictates of capital accumulation, the relations that make up the infrastructure of social life are financialized, depoliticized and indeed de-socialized. Responsibility for economic order shifts from constitutional, potentially democratic, governments to ‘a patchwork of public entities, international organizations, treaties and private actors which superintends the privatization of regulation and, as a consequence, the marketization and informalization of law and legal institutions’. As governance is privatized, finance becomes the sole remaining sovereign. ‘Global governance’, Vogl writes,
is neither a straightforward liberation of market freedoms nor a suppression of state institutions, nor is it a rigid dichotomization of market and state. Since the 1990s, a mutual embedding has taken place; permeability has been created, allowing credit conditions to dictate the rules of political restructuring. In this process, state institutions function as bodies for the anchoring of market mechanisms.
Vogl’s critics, many of them from the ‘public choice’ crowd, have argued that central bank autonomy-cum-supremacy constitutes the only effective precaution against frivolous democratic politicians recklessly spending their way into office and thereby emptying the public purse. Democratic governments paying for schools and roads are equated with absolutist rulers combating personal boredom by making war. Vogl wastes no time arguing with this. Still, it might have been worth his while to place the evolving relationship between public spending, public debt, taxation and interest, and the public-choice rhetoric surrounding this, in a larger political-economic context transcending institutional analysis proper. What if the pressure for ever-higher public spending was a reflection, not of democratic ‘irresponsibility’, but of what in Marxian language would be described as a secular tendency toward the ‘socialization of production’, giving rise to a functional need for private profit-making to be supported by an increasingly elaborate, and correspondingly more expensive, public infrastructure?
It is here that Vogl’s institutional analysis of the bipolar world of his zone of indeterminacy might have benefited from being embedded in a political economy of contemporary capitalism, a context in which it would greatly contribute to our understanding of a, shall we say, dialectical ‘contradiction’ between the limited supply of tax revenue on the one hand – caused by capital’s reluctance to be taxed – and on the other, the growing demands, including capitalist demands, for public prepare-and-repair work, from education to environmental clean-up; for public security, from citizen surveillance in the centre to anti-insurgency on the periphery; and for public compensation of citizens for loss of income and status due to capitalist creative destruction. Too little public spending might keep capital away, but too much taxation might have the same effect, while too much public spending would unacceptably narrow the corridor for private profit-making.
Privatization of public provision can, of course, be of help, and has been for some time. But there are limits to it, not least those set by citizen resistance. The remaining option is to finance the growing demands on the state by swelling the public debt – and indeed, if capital must decide between a debt-free tax state and a low-tax debt state, it doesn’t find the choice difficult. For under-taxed capital, public debt is a convenient opportunity to lend to the state as private investment what would otherwise be confiscated by the state through taxation. Money lent to the state remains private property, yields interest – at least in normal times – and can be passed on within the family to the next generation. For this to occur, of course, states must be willing and able to service and repay their debt reliably, and it is here that central banks still seem to play an important role in the management of ‘financialized’ capitalism. Not only can they mediate between states and the financial industry – bankrolling the former and allowing the latter to trade government debt for profit – they also help to keep public debt at a level where states can still be trusted by their private creditors. They do this, for example, by warning the public, with all the authority of their pseudo-scientific theories, about the dangers of excessive government debt – inflation and other maladies – and by advocating a move to balanced budgets through ‘austerity’ on everything except debt service. Whether this will be enough to close the gap between the maximum taxability of a globally embedded national-capitalist economy, and the rising demands for public infrastructures and services under advanced capitalism, is an open question. It probably falls some distance short, and like privatization, simply postpones the coming clash between private profit-making and its public underwriters.
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* Joseph Vogl, The Ascendancy of Finance, trans. Simon Garnett, Cambridge: Polity, 2017
December 2016
NEOLIBERALISM HAS MANY FACETS, and so there is no lack of books on the subject. David Kotz, professor of economics at Amherst, states right at the outset that his perspective is on neoliberal capitalism, that is, on the political economy of the beast, leaving its culture and ideology – its Foucauldian as distinguished from its, if you will, Marxian aspect – to others to deal with.* This is fair enough, and indeed Kotz has done an outstanding job within the confines of his remit. His book is well-written, accessible far beyond the economics profession without sacrificing empirical and theoretical precision, and in its first five chapters full of the right kind of data, summarized in well-designed descriptive diagrams of which there are not too many and not too few – excellent material not just for graduate teaching but for the political-economic debate at large.
As one would expect from someone proudly hailing from the social structure of accumulation school, Kotz places his subject in a historical context, more specifically that of the history of capitalist development, and the narrative he offers reads just right, written true to the spirit of Einstein’s famous recipe for good theory, ‘Make it simple but not too simple’. Kotz begins with the early liberalism of America’s post–Civil War nineteenth century, moving on to the organized capitalism of the Progressive Era and the early neoliberalism of the Roaring Twenties; the state-administered and unionized ‘Keynesian’ economy of the New Deal and the ‘Golden Age’; and the subsequent rise of neoliberalism and its fall in the crash of 2008. History is central to the economics of David Kotz, as it should be but is not in economics in general, and it is framed as a succession of (what else?) social structures of – capitalist – accumulation. Each structure, according to the theory, ‘works’ for a while but then breaks down from internal conflicts and contradictions, giving way to a new structure bound ultimately to collapse in its turn as well.
Kotz’s story is not necessarily new, but it is certainly well told, and with many interesting details. It cannot in any case be told often enough, given