A time of debt

February 15, 2019 6:16 AM

Two years after global economy crashed in 2008, austerity politics swung into action. Using Greece as its example, a transatlantic alliance of right-wing fearmongers, conservative political entrepreneurs and centrist fiscal hawks abandoned stimulus and instead turned the screw. Adam Tooze reconstructs the spread of the austerity epidemic and recalls how decision-makers in Europe ploughed their course even after the US had begun to pour money back into the system (Eurozine). (This is an extract from Tooze’s book "Crashed", London: Allen Lane 2018.)
posted by sapagan (4 comments total)

Nice feint.
posted by infini at 6:25 AM on February 15, 2019

This summary incorrectly describes the position of most of the "centrist fiscal hawks" I'm familiar with. As Tooze writes, they believed "The crucial thing was to separate the short and medium term. Continued short-term stimulus should be accompanied by a realistic plan as to how to end deficits in the medium term. The combination would provide both an immediate prop to the economy and a comforting lift to investor confidence."

For example, from the Committee for Responsible Federal Budget in 2009: "The challenge is how to best meet the seemingly contradictory goals of providing the economy with sufficient stimulus, yet doing so in a fiscally responsible manner. The answer is to continue with stimulus policies as necessary, but, in order to regain the country’s fiscal credibility, to promptly develop and announce a plan to reduce the deficit and close the long-term fiscal gap. This plan would be implemented as soon as the economy is strong enough to absorb it."
posted by Mr.Know-it-some at 7:27 AM on February 15, 2019 [2 favorites]

Austerity is the runaround capital developed in order to subvert or exploit the weaknesses in European social democracy, by both expanding groups of people who don’t qualify for services, cutting those services, and forceing everyone into an easily exploitable precarity.
posted by The Whelk at 10:46 AM on February 15, 2019 [4 favorites]

@adam_tooze: Framing Crashed (10): "A New Bretton Woods" and the problem of "economic order" - also a reply to Adler and Varoufakis

When the balance of power shifts, how does one engineer a peaceful adjustment of international order? This is not merely a matter of brute force, but power cannot be eliminated from the equation. In thinking about the problem of order dividing our intellectual options between realism and “idealism” or “liberal internationalism” is as unhelpful now as it was when Carr refused that alternative. What he tried to do in his Twenty Years’ Crisis was to articulate a synthesis. Surely that is the minimum to which we should aspire both intellectually and practically.

The kind of power shift that Carr had in mind was preeminently a question of nation states and empires. Today that is articulated above all around the Sino-US relationship. No new global order can emerge without at least the tacit consent of both of them. But it is not just geopolitics and security that are at stake. What talk of Bretton Woods foregrounds is the relationship between geopolitics and geoeconomics and the question of political economy i.e. the relationship between private economic interests and the state system.

In ruminating on this question I found myself drawn back not only to Carr, but also to the intellectual tradition of the Frankfurt school.

Starting out as a historian of Germany, I learned to be skeptical about talk of economic orders by reading Franz L. Neumann and his colleagues on the political economy of interwar Germany and above all Neumann’s Behemoth: The Structure and Practice of National Socialism 1933-1944.

The basic insight of the Frankfurt school legal theorist – that there is no natural harmony between developed capitalism and legal, political and social order; that modern capitalism is a fundamentally disruptive force that constantly challenges the rule of law as such – could hardly be more germane today. As William Scheuermann puts it in Frankfurt School Perspectives on Globalization, Democracy, and the Law (Routledge Studies in Social and Political Thought) (p. 2-5).:

“As a first step, we need to allow that structural attributes of neo-liberal economic globalization, as Neumann would have predicted, engender deep impediments to the establishment of the rule of law, despite the fact that most scholars on both the left and right tend to expect otherwise. If we interpret the rule of law as requiring that state action should rest on norms that are relatively clear, general, public, and prospective, the emerging legal substructure of economic globalization suffers from a paucity of rule of law qualities.”[7]

The basic insight developed by Neumann, Kirchheimer and their colleagues was that:

“the transition from competitive or classical liberal capitalism to contemporary monopoly or organized capitalism, in which large corporations gained a quasi-oligopolistic status and many traditional “free” market functions declined, inexorably undermined clarity, generality, publicity, and stability in the law. ….

As the social presuppositions of the modern rule of law in competitive capitalism decayed, large corporations increasingly tended to favor legal regulations having a vague and open-ended character. Given their power advantages vis-a-vis other social actors, vagueness and ambiguity in the law were best exploited by them, and loopholes in parliamentary legislation permitted privileged economic actors to subvert the intent of the lawmaker.”[8]

In Franz Neumann’s work, the problem of order is conceived above all in relation to law. But the characteristics of “clarity, generality, publicity, and stability” that define the ideal of the Rechtsstaat can also be seen as features characterizing the system of economic order more generally. And Neumann’s basic intuition that the alignment between advanced capitalism and order is anything other than obvious, can be fruitfully brought to bear on the problem both of the Bretton Woods era and our contemporary world.

posted by kliuless at 11:18 AM on February 16, 2019 [1 favorite]