The 'privatized Keynesianism'
Jun. 22nd, 2011 09:16 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
mahnmutIn a late vote in parliament last night, the Greek PM Georgios Papandreou narrowly won the support of the Parliament for his efforts to pull the country away from the path of bankruptcy. Whether this has given him a second political life is still to be seen. But meanwhile Greece’s financial woes are far from over.
As a EU and Eurozone member, Greece's survival in those European institutions still looks very unceartain. Last week the debate among the Euro leaders and their finance ministers about the issue of more aid for Greece went very tough and controversial. They eventually reached an agreement on another multi-billion Euro injection (mostly from France and Germany), which will probably keep Greece floating for another couple of months.
The most controversial point was the question, how far the private sector banks should be part of the solution. Germany, whose banks are exposed at some €20 billion right now (which is much less than France's exposure by the way) insisted on more involvement from the banks, but France opposed this approach, fearing that its banks could see their rating being downgrated by rating agencies. A compromise was eventually reached, which was to "appeal" to banks to "voluntarily" become involved. But you could easily guess that it's hard to say whether those banks have actually taken this "invitation" seriously. ;-)
Now watching the footage from the street protests in Athens and the civil unrest all across Greece, it's clear that further "austerity" measures (which is essentially cutting public services), let alone outright bankruptcy of the state, would create serious threats to the democratic institutions in the country. Many (not all, but many) of Greece's troubles are following the pattern of the global financial crisis. Greece is maybe just the most visible example of what many people in North America and Europe already realize: that governments tend to pile up huge debts to fix the irresponsible behavior of wealthy bankers and reckless investors, then asking the common tax payers, the middle- and working-class folks to put up with reduced public services, or, like it happened in the UK, higher prices for those services.
All this is related to a recent debate which was initiated by one Colin Crouch, a prominent sociologist. He argued that capitalism has been able to co-exist along democrac in most countries of the West only because there were some mechanisms which allowed it to deal with two inherent problems of the market economy: 1) The cyclical ups-and-downs of the economy which expose particularly severely the middle- and lower-income groups to economic hazard. 2) The relatively harmonious co-existence of both systems would only be possible if the inherent inequality of income distribution in the capitalist system could be properly addressed in a way that would allow at least some income from the top end to be re-distributed to those at the bottom. (Re-distribution of the wealth!? OMG...)
Yes, that's the (in)famous Kenesianism that we're talking about here. Government spending during recession plus progressive taxation and a welfare state helped addressing these two problems, Crouch says. However this system was almost completely wiped out in the 80s with policies most visibly related to Reagan and Thatcher, which were often referred to as "neo-liberalism" at the time (ironically). However Crouch argues that those changes in fact created a policy regime of "privatized Keynesianism". By encouraging and extending home ownership, pension plans that were based on investments in capital markets and some other models of making the saving middle-class into small-scale investors on the market, the above two inherent contradictions between capitalism and democracy were basically re-faced into basically turning lower-income citizens into "mini-capitalists". So far, so good.
In comes the so-called "financial crisis" in the late 2000s, and this whole system began to show some big cracks, and started falling down, until it eventually proved no longer as effective as its authors had been hoping for. Many lower- and middle-income people in the Western countries lost their homes and pensions, or at least suffered a drastic reduction of their value. So currently, Crouch suggests, we're seeing this whole mechanism of "privatized Keynesianism" being further weakened, if not even completely absent from the scene, and what's worse, there don't seem to be any viable alternatives in sight anywhere around.
So, in this dire situation we're facing two stark options. The first possibility is similar to the 20s/30s, where this absence of a mediating policy regime may pave the way to the emergence of political extremism, anti-democratic movements and outright an resurrection of fascism or left-wing authoritarianism (in a somewhat modified form, granted). So the events in Greece, plus the current rise of the political extreme far-right across Europe and the US, give us some hints of a possible storm to come. Surely, may not be quite there yet, but the signs of far-fetching unrest and rising despair about the effects of a globalized, but largely unregulated and often chaotic capitalist system, are starting to become visible, or at least are on their way.
Option two, in Crouch's argument, is that one group among the winners of the global capitalist "game" (the most powerful and adaptive players) would step up for the role of addressing these two inherent tensions between democracy and capitalism. That's exactly the point where corporate social responsibility could kick in (the so-called "corporations as good citizens"). In fact this perspective could see private corporations turning into puvotal actors in addressing those two inherent tensions. So I'm far from the thought that corporations are a bad thing per se. No, they aren't. They could actually turn this thing around. If they wanted to.
Back to Greece. Unfortunately, the reaction of the European banks to the call for support of the efforts of saving Greece from bankruptcy so far are showing very little sign of such awareness and sense of this broader context of corporate responsibility. The Greek bailout situation is probably an eloquent example of a country at the brink of enormous political unrest, where direct involvement of the private sector might really prevent it from sliding into total anarchy and political extremism. It's obviously not the state that the Greeks should be looking for in this case - it has failed them badly over all those years, but they liked their fairy tale for as long as it lasted. And now they're angry. As for the private sector, I'm afraid the European banks don't seem to have thought about their broader role in society at all. It looks like the same old story - they're trying to lay down low until the turmoil passes, then resurface and continue doing business as usual, for the sole purpose of making profit (sure, for the benefit of their shareholders), and little else beyond that. Maybe because that's the easier way, and the alternative, the business case for corporate social responsibility is just too hard to make...
As a EU and Eurozone member, Greece's survival in those European institutions still looks very unceartain. Last week the debate among the Euro leaders and their finance ministers about the issue of more aid for Greece went very tough and controversial. They eventually reached an agreement on another multi-billion Euro injection (mostly from France and Germany), which will probably keep Greece floating for another couple of months.
The most controversial point was the question, how far the private sector banks should be part of the solution. Germany, whose banks are exposed at some €20 billion right now (which is much less than France's exposure by the way) insisted on more involvement from the banks, but France opposed this approach, fearing that its banks could see their rating being downgrated by rating agencies. A compromise was eventually reached, which was to "appeal" to banks to "voluntarily" become involved. But you could easily guess that it's hard to say whether those banks have actually taken this "invitation" seriously. ;-)
Now watching the footage from the street protests in Athens and the civil unrest all across Greece, it's clear that further "austerity" measures (which is essentially cutting public services), let alone outright bankruptcy of the state, would create serious threats to the democratic institutions in the country. Many (not all, but many) of Greece's troubles are following the pattern of the global financial crisis. Greece is maybe just the most visible example of what many people in North America and Europe already realize: that governments tend to pile up huge debts to fix the irresponsible behavior of wealthy bankers and reckless investors, then asking the common tax payers, the middle- and working-class folks to put up with reduced public services, or, like it happened in the UK, higher prices for those services.
All this is related to a recent debate which was initiated by one Colin Crouch, a prominent sociologist. He argued that capitalism has been able to co-exist along democrac in most countries of the West only because there were some mechanisms which allowed it to deal with two inherent problems of the market economy: 1) The cyclical ups-and-downs of the economy which expose particularly severely the middle- and lower-income groups to economic hazard. 2) The relatively harmonious co-existence of both systems would only be possible if the inherent inequality of income distribution in the capitalist system could be properly addressed in a way that would allow at least some income from the top end to be re-distributed to those at the bottom. (Re-distribution of the wealth!? OMG...)
Yes, that's the (in)famous Kenesianism that we're talking about here. Government spending during recession plus progressive taxation and a welfare state helped addressing these two problems, Crouch says. However this system was almost completely wiped out in the 80s with policies most visibly related to Reagan and Thatcher, which were often referred to as "neo-liberalism" at the time (ironically). However Crouch argues that those changes in fact created a policy regime of "privatized Keynesianism". By encouraging and extending home ownership, pension plans that were based on investments in capital markets and some other models of making the saving middle-class into small-scale investors on the market, the above two inherent contradictions between capitalism and democracy were basically re-faced into basically turning lower-income citizens into "mini-capitalists". So far, so good.
In comes the so-called "financial crisis" in the late 2000s, and this whole system began to show some big cracks, and started falling down, until it eventually proved no longer as effective as its authors had been hoping for. Many lower- and middle-income people in the Western countries lost their homes and pensions, or at least suffered a drastic reduction of their value. So currently, Crouch suggests, we're seeing this whole mechanism of "privatized Keynesianism" being further weakened, if not even completely absent from the scene, and what's worse, there don't seem to be any viable alternatives in sight anywhere around.
So, in this dire situation we're facing two stark options. The first possibility is similar to the 20s/30s, where this absence of a mediating policy regime may pave the way to the emergence of political extremism, anti-democratic movements and outright an resurrection of fascism or left-wing authoritarianism (in a somewhat modified form, granted). So the events in Greece, plus the current rise of the political extreme far-right across Europe and the US, give us some hints of a possible storm to come. Surely, may not be quite there yet, but the signs of far-fetching unrest and rising despair about the effects of a globalized, but largely unregulated and often chaotic capitalist system, are starting to become visible, or at least are on their way.
Option two, in Crouch's argument, is that one group among the winners of the global capitalist "game" (the most powerful and adaptive players) would step up for the role of addressing these two inherent tensions between democracy and capitalism. That's exactly the point where corporate social responsibility could kick in (the so-called "corporations as good citizens"). In fact this perspective could see private corporations turning into puvotal actors in addressing those two inherent tensions. So I'm far from the thought that corporations are a bad thing per se. No, they aren't. They could actually turn this thing around. If they wanted to.
Back to Greece. Unfortunately, the reaction of the European banks to the call for support of the efforts of saving Greece from bankruptcy so far are showing very little sign of such awareness and sense of this broader context of corporate responsibility. The Greek bailout situation is probably an eloquent example of a country at the brink of enormous political unrest, where direct involvement of the private sector might really prevent it from sliding into total anarchy and political extremism. It's obviously not the state that the Greeks should be looking for in this case - it has failed them badly over all those years, but they liked their fairy tale for as long as it lasted. And now they're angry. As for the private sector, I'm afraid the European banks don't seem to have thought about their broader role in society at all. It looks like the same old story - they're trying to lay down low until the turmoil passes, then resurface and continue doing business as usual, for the sole purpose of making profit (sure, for the benefit of their shareholders), and little else beyond that. Maybe because that's the easier way, and the alternative, the business case for corporate social responsibility is just too hard to make...
