Why the euro divides Europe

16 October, 2015 at 11:56 | Posted in Economics | 1 Comment

The ‘European idea’—or better: ideology—notwithstanding, the euro has split Europe in two. As the engine of an ever-closer union the currency’s balance sheet has been disastrous. Norway and Switzerland will not be joining the eu any time soon; Britain is actively considering leaving it altogether. Sweden and Denmark were supposed to adopt the euro at some point; that is now off the table. The Eurozone itself is split between surplus and deficit countries, North and South, Germany and the rest. At no point since the end of World War Two have its nation-states confronted each other with so much hostility; the historic achievements of European unification have never been so threatened …

Anyone wishing to understand how an institution such as the single currency can wreak such havoc needs a concept of money that goes beyond that of the liberal economic tradition and the sociological theory informed by it. The conflicts in the Eurozone can only be decoded with the aid of an economic theory that can conceive of money not merely as a system of signs that symbolize claims and contractual obligations, but also, in tune with Weber’s view, as the product of a ruling organization, and hence as a contentious and contested institution with distributive consequences full of potential for conflict …

NLR95coverNow more than ever there is a grotesque gap between capitalism’s intensifying reproduction problems and the collective energy needed to resolve them … This may mean that there is no guarantee that the people who have been so kind as to present us with the euro will be able to protect us from its consequences, or will even make a serious attempt to do so. The sorcerer’s apprentices will be unable to let go of the broom with which they aimed to cleanse Europe of its pre-modern social and anti-capitalist foibles, for the sake of a neoliberal transformation of its capitalism. The most plausible scenario for the Europe of the near and not-so-near future is one of growing economic disparities—and of increasing political and cultural hostility between its peoples, as they find themselves flanked by technocratic attempts to undermine democracy on the one side, and the rise of new nationalist parties on the other. These will seize the opportunity to declare themselves the authentic champions of the growing number of so-called losers of modernization, who feel they have been abandoned by a social democracy that has embraced the market and globalization.

Wolfgang Streeck

[h/t Jan Milch]


1 Comment

  1. Interview: capitalism, neo-liberalism and democracy
    Wolfgang Streeck, Ben Jackson

    “The recent work of the German social scientist Wolfgang Streeck provides a powerful and salutary analysis of the recent history, and likely future trajectory, of capitalism. Building on his long-standing and highly influential writings on political economy, corporatism, and European integration, Streeck has produced a provocative series of interventions that incisively challenge the conventional wisdom about the global economic crisis and the travails of the eurozone. Streeck traces their origins to a fundamental tension between democracy and capitalism, a tension which he sees as being decisively resolved in recent years in favour of capitalism. His writings offer no quarter to those who hope to see a more egalitarian model of capitalism emerging from the crisis, but they pose fundamental questions about the left’s prospects that demand the closest attention from social democrats. In this interview Streeck discusses his analysis of the financial crisis, his concerns about the neo-liberal implications of European integration, and his criticisms of the ‘varieties of capitalism’ school.


    You are very critical of the recent direction of European integration, describing the EU as today presiding over an essentially Hayekian political economy. What is Hayekian about the EU?

    The European Union was from the beginning a ‘common market’ exercise. National social policies were increasingly perceived as protectionist impediments to the ‘internal market’, or alternatively as ‘state aids’ that had to be eliminated for the sake of a free play of market forces. The attempt in the early 1990s to complement the European market with a European ‘social dimension’ failed dismally; nobody speaks about the ‘social dimension’ any more. With monetary union, economic management, including national economic and fiscal policies, became subject to strict supranational regimentation. Now national parliaments have to show to the European Commission, an unelected bureaucracy, that their budgets are in conformity with international agreements and policies imposed on them during the financial crisis. Political democracy remaining located at the national level, the European Central Bank has become the most independent central bank in the world – not even facing a corresponding treasury department – and indeed functions as the secret government of Europe. Sooner or later it will begin dictating neo-liberal ‘reforms’ to the countries that it sustains with current infusions of cheap money. The whole package is as Hayekian as it can possibly be.

    You conclude in Buying Time that the euro should be seen as a ‘frivolous experiment’ which strengthens capitalism at the expense of democracy. Instead you advocate a return to national currencies organised into a European Bretton Woods-style system of fixed but adjustable exchange rates, a move that you argue will strengthen democratic popular sovereignty. In response to the German edition of Buying Time, Jürgen Habermas argued that the left shouldn’t seek such a return to national currencies, but rather aim to create an effective European level of democracy that could constrain the transnational power of capital (Habermas, 2013). How do you reply to his argument?

    As to democracy, we are essentially talking here about a problem of scale. Democracy at the level of a European super-state, if it was possible at all, would be unable to ‘constrain the transnational power of capital’: like the US it would still lag behind the reach and the speed of ‘globalisation’. Only a global super-state would be of the same scale as the global super-market – but if we think about such a state only for a second, we know that it would be entirely illusory. I am convinced that the problem for the future is not to extend the scale of democratic rule, so that it becomes coterminous with a global economy, but to contain, or if you want: manage the spread of free markets to bring them under, inevitably territorially subdivided, democratic control. Subdividing the market into democratically manageable territorial subunits is a more realistic project than a democratic world government. I am clearly more on the side of the anti-globalisation movement than on that of ‘global governance’.

    Secondly, as far as Europe is concerned, a democratic constitution for Europe as a whole (leaving open where its borders are to be – will it include Turkey, Armenia or Ukraine, for example?) cannot be of a Jacobin-majoritarian sort; for this Europe is far too diverse, culturally as well as economically and institutionally. If at all, Europe can only be what political scientists call a ‘consociational democracy’: with a great deal of national and indeed subnational and local autonomy and indeed veto power. Nobody, not even Jürgen Habermas, has any idea as to how governance is to be shared between the Union and its member states and regions. If this is discussed at all, it is only in technocratic and never in democratic theory terms. This holds in particular for economic affairs.

    In the latter respect, and thirdly, I would like to object to your reading of my book that I want a ‘return’ to national currencies. I use Bretton Woods as an example of a monetary regime that leaves enough flexibility for countries with very different institutions to participate in an international trading regime, without being forced to subject their way of doing things to a ‘one size fits all’ economic and social policy. My intention, which I might have made clearer, is not a ‘return’ to the past but to stimulate a debate on a future monetary regime for Europe that does not penalise the way Mediterranean countries have traditionally settled their distributional and class conflicts, while putting a premium on the German export-saving regime that thrives on foreign rather than domestic demand and is therefore highly inflation-averse.

    Generally I think it is high time to think about the sort of money on which we want to run our economies and societies in the future. Monetary regimes are social and political institutions, not God-given, and there are always alternatives – see the 1920s and 1930s when there was a broad debate worldwide on ‘the nature of money’ (Keynes). Unlike Adam Smith, Max Weber saw the way money is institutionalised in a political economy as an outcome and an instrument of power struggles, rather than a neutral medium of exchange, or a means of symbolic communication as in Parsons and Habermas. If we are willing to explore what a humanly acceptable political economy of the future should be like, I think more than ever before that we have to put money in the centre. Who will be entitled to create money, and how? What sort of interest should be allowed? What sort of credit? Can we find a monetary regime that rules out bubbles while allowing for egalitarianism in a more stationary economy? Could alternative moneys play a role, for example local moneys, and how will local and general moneys be related? The more you think about it, continuing in Europe with a capitalist monetary regime of the sort that had almost blown up our societies in 2008 is a really bizarre project. So is, I believe, speculating about European or global democracy without reference to European and global capitalism.”

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