Category Archives: Europe

Wolfgang Streeck explains how to reform capitalism for a better 21st century

Summary: We have hundreds of ideas for small reforms of America, but few for radical reform of the capitalist system that runs it. As a demonstration of this problem, Wolfgang Streeck gives a profound critique of capitalism and Adam Tooze  one of the most powerful essays I have seen in a long time. This is part two; part one discussed how we drifted into this crisis of capitalism.

 

A General Logic of Crisis

By Adam Tooze,
London Review of Books, 5 January 2017.

Posted with his generous permission.

Review of Wolfgang Streeck’s How Will Capitalism End?: Essays on a Failing System.

Part two of two: looking at the end of capitalism, and beyond.

The publication of How Will Capitalism End?: Essays on a Failing System thus comes when Streeck has positioned himself as the leading intellectual proponent in Germany of a Gaullist vision of Europe from the left. Now that his cards are fully on the table it is a good moment to try to answer the question: how did Streeck turn critical theory into a vehicle for the assertion of the primacy of the nation?

In one respect at least the national turn has allowed Streeck to subsume what might once have been seen as a fatal weakness in his analysis into a consistent part of the argument. A truly remarkable thing about his work is that he discusses the future of capitalism entirely without reference to the place where the future of capitalism will surely be decided: Asia. That no doubt reflects the limitations of his professional specialisation – OECD industrial relations. China and India are beyond his ken.

But given the arguments he has been making, his Eurocentrism takes on a new meaning. If you are going to articulate the basic tension of the crisis as existing between a superficial, utilitarian universality on the one hand, and a ‘grandiose jointly produced diversity’ on the other, then Europe is, indeed, the classic terrain on which to make your case. Not that there isn’t nationalism elsewhere. But nowhere else has as many different nationalisms in such a tiny space and nowhere else has tried to merge them the way the EU has. India and China never subordinated themselves entirely to the dictates of neoliberalism, nor arguably has the United States: compared to the EU, Nafta was integration-lite. So if the EU stands for a peculiarly pure form of neoliberal capitalism – a basic contention of the Lexit camp – where better to make one’s stand than Europe? In rejecting the false capitalist homogeneity of the EU, one is saving Europe’s essence, namely its diversity. What could be a better expression of that grandiose diversity, after all, than the battle of Brexit, another round in the centuries-old cross-Channel struggle?

But Streeck is a political economist, so he isn’t content with civilisational arguments. He wants to talk about nuts and bolts, the real power behind the scenes. The particular vector of globalisation that has seized his imagination since 2008 is finance. As a somewhat surprised Martin Wolf remarked in the Financial Times, Streeck worries so much about debt you could mistake him for an Austrian economist. Debt, for Streeck, is an index of the unsustainable balance between democracy and capitalism. It’s the way the system borrows time. At times he takes this metaphor quite literally, describing credit as a mechanism through which ‘not-yet-existing virtual resources … are pulled forward from the future.’ Taken at face value that would suggest a very odd view of economic reality indeed.

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Wolfgang Streeck asks “How will capitalism end?”

Summary: Lost in the trivia of the daily news, we can easily lose sight of the great issues shaping our times.  Such as the future of capitalism, tested by demographic change, slowing growth, rising inequality, and political turmoil. Here is the first of two posts with insights by Wolfgang Streeck and Adam Tooze; one of the most powerful essays I have seen in a long time. This post examines how we came to this point, on the brink of great events. In tomorrow’s post they discuss the forces that will test and perhaps break capitalism.

 

A General Logic of Crisis

By Adam Tooze,
London Review of Books, 5 January 2017.

Posted with his generous permission.

Review of Wolfgang Streeck’s How Will Capitalism End?: Essays on a Failing System.

Part one of two: how we got here.

 

‘Whatever it takes.’ These words, spoken by the president of the European Central Bank, Mario Draghi, to a crowd of investors in the City of London on 26 July 2012, have come to represent the symbolic end to the acute phase of the global financial crisis. In the political sphere, by contrast, where words are supposed to be everything, we have not yet been able to draw the line. More than four years on, we know that in 2012 the political fallout was only just beginning.

It was in December 2011 that David Cameron reopened the European question by opting out of the new ‘fiscal compact’ drawn up by Angela Merkel and Nicolas Sarkozy with the aim of enforcing budget discipline across the EU. In the US in spring 2012, Mitt Romney emerged as the candidate from the Republican primaries, but the freakshow anticipated the Trump campaign to come. In Italy the ousting of Berlusconi in a backroom coup in November 2011 and the installation of the ‘unpolitical’ economist Mario Monti as prime minister set the stage for the emergence of Beppe Grillo and Five Star in the local elections of May 2012. In France as the fiscal compact began to bite, François Hollande’s presidency was dead almost before it had started.

Amid all these events, Germany can easily seem like a bastion of stability, with ‘Merkel über alles’ its anthem. But beneath the smooth surface, Merkel’s grip on the chancellorship has since she took office in 2005 been supported by three successive coalitions. And by early 2013 it was clear that her partners since 2009, the free-market, libertarian, liberal FDP, were in trouble. They were being outflanked on their right-wing by a new formation, the AfD, the Alternative für Deutschland, whose focus in 2013 was not immigration but passionate opposition to the euro. Like much of the German right the AfD was indignant not about austerity, but about the failure of Merkel to back an even harder line. The AfD didn’t break the 5 per cent threshold required to enter parliament at its first try, but it took enough votes from the FDP to drop it out of the Bundestag, leaving Merkel to form a new coalition with the Social Democratic Party (SPD).

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Stratfor: Italy After the Referendum. What comes next?

Summary:  Brexit and Trump’s election were followed by hysterical predictions of doom by experts, helping journalists manufacture exciting news for their apathetic audiences. Italy’s citizens defied their centrist technocratic leaders, producing yet another round of ominous forecasts. For those who like their news straight and sober, here is an analysis of Italy’s situation by Stratfor.

Stratfor

Italy After the Referendum
Stratfor, 6 December 2016.

Introduction

Italy’s voters have spoken loud and clear. During Sunday’s referendum on constitutional reforms, more than 65% of the country’s electorate turned out. Nearly 60% of voters rejected the measures, prompting Prime Minister Matteo Renzi to resign immediately after the results were announced, as promised. Renzi’s quick resignation, coupled with the international market’s staid response to the vote’s outcome, suggests that the immediate repercussions will not be as dramatic as some in Italy and abroad had expected. Nevertheless, Italy’s political and financial troubles will endure, as will its threat to the eurozone.

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Stratfor: China’s Economy is Living on Borrowed Time

Summary: Ripples of Trump’s win rock the boats of

Stratfor

China’s Economy: Living on Borrowed Time
Stratfor, 21 November 2016.

Forecast

  • Barring a decision to loosen government controls on credit, investment and home purchases, China’s housing and construction sectors will slow in 2017.
  • Industries that hold the bulk of China’s outstanding corporate debt, including commodities, building materials and other sectors related to construction, will bear the brunt of a sustained housing slump.
  • Sluggish construction growth and skyrocketing debt, coupled with sharp reductions in debt maturity periods, could cause corporate defaults and bankruptcies to spike next year, testing Beijing’s legal and institutional abilities to cope with them.
  • Meanwhile, increasing U.S. protectionism and other international developments could put even more pressure on the Chinese economy, forcing Beijing to trade its economic reforms for greater spending to keep the economy afloat.

Analysis

Next year is shaping up to be a decisive one for China’s economy. In the eight years since the global financial crisis struck, the vitality and importance of low-cost exports — the kind the Chinese economy used to rely on — have steadily declined. Scrambling to prop up the country’s growth and protect its near-universal employment, China’s leaders have embraced monetary and fiscal stimulus measures, causing the country’s outstanding debt to balloon to almost 250% of gross domestic product. Corporate debt, by far the largest share of China’s total debt, has likewise surged by more than 60% to top 165% of GDP. Now, a nationwide debt crisis looms at Beijing’s doorstep amid business defaults and bankruptcies, low industrial profits, winnowing returns on investment and the very real prospect of yet another slowdown in the real estate sector. How well Beijing manages these problems in the months ahead will, to a great extent, determine China’s economic, social and political stability for years to come.

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Stratfor Explains How Trump’s Victory Galvanizes Kindred Spirits in Europe

Summary: Ripples of Trump’s win rock the boats of politicians around the world. Europe’s politics were already unsettled, with the far-right profiting from the mainstream parties’ obsession – flooding Europe with immigrants, despite their people’s objections.

Stratfor

How Trump’s Victory Will Galvanize Kindred Spirits in Europe
Stratfor, 13 November 2016.

Donald Trump’s victory in the U.S. presidential election was cause for celebration among Europe’s largest anti-establishment political forces. Party leaders from France’s National Front, Italy’s Five Star Movement and the Netherlands’ Party of Freedom offered congratulations to the president-elect, thrilled by his demonstration that the political and media establishment can be thwarted. Like Trump, they hope to ride the wave of anti-establishment fervor building on both sides of the Atlantic to power in 2017, when some of the European Union’s biggest economies will hold national elections.

To a great extent, Trump’s victory and the success of the United Kingdom’s referendum to leave the European Union are the result of the same trend. Emerging political forces in the United States and Europe blame globalization for the loss of jobs and present immigration as a threat to national identity and security. Their message resonates with people who do not see a benefit in free trade or flexible migration and who feel as if traditional parties do not understand their plight. Mainstream media outlets and opinion polls largely underestimated that segment of the electorate in the runup to both the U.S. election and the Brexit referendum. That they failed to foresee Trump’s victory or that of the “leave” camp demonstrates the extent to which these emerging social and political trends have been minimized, disregarded or misunderstood.

The same political upheaval could manifest again over the course of Europe’s busy 2017 electoral season. In March, the Netherlands — a prominent economic and political power in Northern Europe — will hold general elections. (Italy could join them if constitutional reforms fail in a December referendum, triggering early elections.) France, which boasts the Continent’s second-largest economy, will hold presidential votes in April and May, followed by legislative elections in June. Toward the end of the year, the European Union’s greatest political and economic force, Germany, will hold general elections in October.

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Stratfor: the EU faces painful budget battles after Brexit

Summary: Europe’s elites warned that Britain would suffer for daring to leave the EU. Suffer severely and soon. Four months have passed since the June 23 vote and Britain has felt no ill effects. Britain might have the last laugh, since the EU has to redo its budget following the loss of its second largest contributor. The EU is already under stress. Cutting the budget and raising taxes will make it worse. Perhaps sparking more exits.

Stratfor

A Bitter Budget Battle Looms in the EU
Stratfor, 13 October 2016.

Forecast

  • Because of the Brexit, the European Union will lose a net contributor to its budget, forcing the remaining members to rethink the bloc’s spending limits and priorities.
  • EU members will have three options for dealing with the loss of the United Kingdom’s income: increase national contributions, trim the budget or look for new revenue sources. Each choice carries political risks.
  • Budget-related issues will create new sources of friction in the European Union as national interests shape the negotiations.

Analysis

When Britain leaves the European Union, it will take with it the sizable financial contributions it makes to the bloc’s budget. That will leave remaining member states with some difficult choices to make about how big future budgets should be, what they should pay for and how much members should pony up for them. In all likelihood, key policies — from agricultural subsidies to development funds — will have to be redesigned. And as members decide how to proceed, new sources of conflict will arise that will do little to help reverse the bloc’s political fragmentation.

The EU budget is organized around the Multiannual Financial Framework, which establishes spending priorities and limits for a seven-year period. (The current one lasts through 2020.) Every year, the European Commission, the European Parliament and EU member states negotiate annual budgets based on the spending limits and priorities established by this framework.

About 75% of the EU budget comes from payments made by member states, calculated based on their gross national incomes. This means that, in absolute numbers, the largest economies make the largest contributions. But not all member states contribute the same proportion of that income, which leads to imbalances in contributions per capita. Moreover, since the budget is used to finance most EU programs, many countries give more money to the bloc than they get from it. In 2015, for example, 10 of the bloc’s 28 members were net contributors to the budget. The others received more in program spending than they paid in.

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“PARIS 2016: Scenes from the Apocalypse”

Summary: The effects of mass immigration are undernews, ignored by the mainstream media. This looks at the streets of the Paris that tourists seldom visit, home to generations of immigrants. Here they live, many in poverty, some without hope, most alienated from French society (famous for its inability to assimilate foreigners, as the Jews learned).

 

“PARIS 2016: Scenes from the Apocalypse –
Mass Immigration ruins streets of France.”
Source: unknown.

“The Paris you know or remember from adverts or brochures no longer exists. While no part of Paris looks like the romantic Cliches in Hollywood movies, some districts now resemble post-apocalyptic scenes of a dystopian thriller. This footage, taken with a hidden camera by an anonymous Frenchman in the Avenue de Flandres, 19th Arrondissement, near the Stalingrad Metro Station in Paris as well as areas in close proximity, shows the devastating effects of uncontrolled illegal mass immigration of young African males into Europe.

“If it weren’t for the somewhat working infrastructure, the scene might as well have been the setting of movie shooting – or a slum in Mogadishu. The streets are littered in garbage, the sidewalks are blocked with trash, junk and mattresses, thousands of African men claim the streets as their own – they sleep and live in tents like homeless people.

“If no portable toilets are in reach, open urination and defecation are commonplace. Tens of thousands of homeless Illegal immigrants, undocumented or waiting for a decision of their asylum application, waste away trying to pass the time in the city. Although their prospects of being granted asylum as Africans are bleak, they’re hoping for a decision that would grant them an apartment, welfare and make France their new home.

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