A Cultural/Cultureal Political Economy of the Eurozone Crisis

Bob JessopLancaster University

Outline

• Cultureal political economy• Economic imaginaries• Critical political economy• Variegated capitalism• North Atlantic Financial Crisis• Shadow of neo-mercantilism• The incompossible Eurozone• Eurozone crisis• Crises of crisis-management• Conclusions (and appendices)

Cultureal Political Economy

• Studies role of semiosis in construing and constructing economic, political (and social) ‘realities’

• Notes that, while all construals are equal, some are more equal than others; aims to explain this through dialectic of cultural (semiotic) and social (extra-semiotic) factors

• Applies evolutionary approach to both sets of factors: starting from variation in construals, what factors shape their differential selection and subsequent retention?

• V-S-R mechanisms are not purely semiotic: they may be extra-semiotic (structural, technological, agential)

Putting the ‘C’ into CPE

• CPE makes ontological turn: studies role of semiosis in reducing the complexity of a world pregnant with many possibilities for action (or inaction)

• This role includes construal and construction of ‘political economy’, which is itself a simplifying concept: The economy as object of observation, calculation, management, or governance never comprises all economic activities but is an enforced selection of a more or less coherent subset thereof

• Semiosis is causally effective and meaningful. Events and processes and their effects can be interpreted and, in part, explained by form and content of its practices

Ideas and Economic Policy

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. …

I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. … the ideas that civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil

John Maynard Keynes

Seventy Years LaterREP. WAXMAN: Do you feel that your ideology pushed you to make decisions that you wish you had not made?

MR. GREENSPAN: remember what an ideology is: a conceptual framework for people to deal with reality. Everyone has one. You have to - to exist, you need an ideology. The question is whether it is accurate or not. ... I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact ... A flaw in the model that I perceived as the critical functioning structure that defines how the world works, so to speak (Congressional Hearing, 23 Oct 2008)

Chair, Federal Reserve, 1987-2006

Complexity and Social Imaginaries

• What Waxman and Greenspan call ‘ideologies’ are personal frameworks shaping ‘lived experience’ and, for Greenspan, are instituted ‘social imaginaries’ (broadly defined) for dealing in a simplified way with reality

• Imaginaries have key role in struggle not only for ‘hearts and minds’ but also over exploitation and domination

• Social forces try to make one or another imaginary the hegemonic or dominant ‘frame’ in given contexts and/or to promote complementary or opposed imaginaries

• Complexity is also reduced via social structuration, i.e., limiting compossible sets of social relations in time-space

Selection of “Social Imaginaries”

• Selection/retention are shaped by four forms of selectivity that operate on imaginaries: discursive, social structural, technical, and agential (they also work on other kinds of ‘raw material’)

• Discursive: genre chains, styles, identities) and inter-discursive resonance

• Social structural: some sites of enunciation are more influential than others

• Technical: some means of advancing discourses are more effective than others

• Agential: some agents are more skilled in arts of rhetoric, argumentation, articulation, etc.

Four Selectivities in General

StructuralStructurally-inscribed strategic selectivities plus structurally-oriented strategic calculation

Form analysis and critical institutionalism; focus on uneven distribution of constraints/opportunities

Discursive

Semiosis as enforced selection with signs as raw material of meaning making. Discursive selectivities plus strategic use of language

Critical semiotic analysis of text, intertext, and context to see how semiosis construes, guides action, and constructs

Techno-logical

Technologies for appropriating and transforming nature and/or for the conduct of conduct

Material, social, and spatio-temporal biases inscribed in technological capacities for action and their effects

Agential

Attribution of interpretive and causal powers to agents to make a difference in specific conjuncture by virtue of specific capacities unique to them

Conjunctural analysis oriented to individual and social agents in a changing balance of forces

How to interpret this figure• Not everything that is possible is compossible• A set of elements that are individually possible viewed in

isolation and can be combined in a single possible world in a given spatio-temporal matrix are compossible in this regard (e.g., actually co-existing, relatively durable VoCs)

• A set of such elements that can’t be combined in a single possible world in a given spatio-temporal matrix are incompossible in this regard (empty cells in VoC grid)

• Some compossible sets comprise mainly complementary elements and are stable/adaptive; others include major contradictory elements that are destabilizing in long run

Putting the ‘PE’ into CPE• The field of ‘political economy’ has at least some

distinctive properties in the form, content, ‘logics’ and/or tendential dynamics of its instituted relations

• As enforced selection, economic imaginaries ignore key features of actually existing economies, which continue to have real effects, including:– contradictions, dilemmas, trilemmas, and paradoxes– extra-economic conditions of existence and wider effects– spatio-temporal depth, breadth, rhythms, sequencing , etc

• So we must study the structuration and dynamic of PE to facilitate the critique of ideology and domination

Structuralist Scylla Constructivist Charybdis

Grasps distinctiveness of specific economic categories and their structured/ structuring nature in wider social formations

Grasps semiotic-material construction of social relations, reveals social embedding, notesits performative impact

But reifies such categories, fetishizes economic structures as natural, and views agents as mere Träger of economic logics

But finds it hard to define specificity of economic relations relative to other relations – because they are all discursive

Strong risk of economic determinism, explaining economic processes in terms of ‘iron laws’

Strong risk of idealism, definingeconomic relations in terms of their manifest semiotic content

“Hard Political Economy” “Soft Economic Sociology”

complexity

enforced selection structurationsense-making

sedimented meaning

structured complexity

improbability

paradoxes, lack of closure, scope for repoliticization

contradictions, unstable fixes, and crisis-tendencies

VSR

institutional and spatio-temporal fixes

A Marxian View of ‘Capitalism’

• Wealth appears as immense accumulation of commodities• Commodity form is generalized to labour-power (which is a

fictitious commodity but treated as if it were a commodity)• Commodity as ‘stem cell form’ of capital relation, with different

forms of use- vs exchange-value contradiction for each form• A political economy of time and essential role of competition in

dynamic of capitalism, leading to treadmill effects• Key role of money as social relation in mediating profit-oriented,

market-mediated accumulation process• Contradictions, social antagonisms, and crisis-tendencies can be

managed partially and provisionally through unstable ‘fixes’

CAPITALISM

Rational Capitalism

Political Capitalism

Traditional commercial capitalism

Mode #1

Trade infree markets & capitalist production

Mode #2

Capitalist speculation and finance

Mode #3

Predatory political profits

Mode #4

Profit on market from

force and domination

Mode #5

Profit from ‘unusual’ deals with

political authority

Mode #6

Traditional types of trade

or money deals

Weber’s Modes of Capitalist Profit Orientation (Based on Swedberg 1998)

A partially alternative approach

Variegated Capitalism in World Market

• Break with pre-given logic of world system and study its more open-ended logic, which changes as modes of integration of world system change

• Break with the parsimony of Hall/Soskice approach and consider other varieties plus their interaction with other (sub-)types of capitalism and the mutual, often asymmetrical, constraints that this imposes on each

• One way to do this is via analysis of variegated capitalism in emergent, changing world market that may exist in shadow of a dominant “variety”

Variation versus Variegation

Varieties of Capitalism

Distinct (families of) local, regional, national models seen as rivals on same scale or terrain for same stakes

Describe the forms of internal coherence of distinct VoC on false assumption that they can and do exist in relative isolation from each other

Variegated Capitalism

Possible complementarities (or not) in wider division of labour in a tendentially singular, global but variegated capitalism

Zones of relative stability linked to instability in or beyond national spaces in a complex ecology of accumulation regimes, modes of regulation, spatio-temporal fixes

Variegated Capitalism

Analyse costs imposed on other spaces and/or future generations by uneven capacities to displace or defer contradictions, conflicts, and crisis-tendencies,

Some varieties are more equal than others, with neo-liberalism tending to ecological dominance in the world market. Not all economic spaces can adopt dominant model.

Varieties of Capitalism

Study temporal rhythms and horizons of VoC as internal, specific, short- or medium-term, unrelated to long-term global dynamic of capital

All varieties are equal and, if one is more “productive” or “progressive”, it could and should be copied, exported, or even imposed elsewhere

Global Shadow of Neo-LiberalismShadow of neo-liberalism in variegated world market is to the role of finance-dominated accumulation in neo-liberal economies, to ‘ecological dominance’ of the latter in world market, to general place of finance in global circuits, to rolling out of competition law based on neo-liberal view of market, and to other factors

Variegated world market in crisis. Theintegration of the world market generalizescapital’s contra-dictions

Variegated Capitalism in Crisis …• The NAFC emerged directly from “capitalist speculation and finance” rather than from a specific type of “free trade in markets and capitalist production”• It was enabled by “unusual deals with political authority” (de-regulation of finance via legal changes and regulatory capture) and “predatory political profits” (tax cuts for rich, welfare cuts, privatization, “disaster capitalism”)• But NAFC has specific form due to hyper-financialization of advanced neo-liberal economies and, in particular and most immediately, practices of de-regulated, opaque, and sometimes fraudulent financial institutions

... and the Wider Context

• Five sets of crises are crucial contextually (in order of importance)– Global environmental crisis (plus energy, food, water)– Crisis of US hegemony within post-1975 global order– Crisis of neo-liberalism as economic and state project– Crisis of finance-dominated growth regimes– Crisis in particular strategic sectors (e.g., automobiles)

• These are superimposed on more local (regional, national, meso-regional, local crises) and other types of crisis (fiscal, rationality, crisis in crisis-management, legitimacy, organic, etc.). These shape spatial repercussions of NAFC and the manner in which they unfold in space-time

EU Shadow of Neo-Mercantilism

Shadow of neo-mercantilism in Euroland due to relative weight of export-led accumulation in the “Modell Deutschland”, to the ‘ecological dominance’ of German economic Grossraum in European Economic Space, esp. in Eurozone, to institutional flaws in design of Euro, and to Germany’s hegemonic position in EU and wider EES

Das deutsche Modell

• For VoC, Germany is the exemplar of Rhenish capitalism (Albert) or coordinated market economy (Hall/Soskice)– Limited role of financial markets compared to Hausbanken– Emphasis on coordination through sectoral and regional

associations and networks of firms– Ordoliberal social market economy rather than neoliberal

market economy– Multiple stakeholders rather than emphasis on delivering

shareholder value– Less flexible labour markets, more emphasis on reskilling

Constance School

• Politics and the state were central to their analyses• Economic focus is on institutionalized class

compromise rather than the micro-economics of the firm

• When studying firms, look at relations of capital fractions

• Rather than assume equilibrium and stability of pure varieties of capitalism, examine phases of growth, stagnation, crisis, crisis-resolution, etc.: – post-war reconstruction, – relatively stable Wirtschaftswunder 1950s-early 1970s, – domestic and foreign challenges thereafter.

Das Modell Deutschland

• Virtuous circle of economic (growth, competitiveness), social (social integration, low unemployment), and political (crisis management) factors

• Facilitated by export-oriented, neo-mercantilist German growth model, i.e., its insertion into European and world markets, based on specialization in high quality diversified production, capital goods, and, especially, capital goods for producing capital goods

• Related to hierarchy and core-periphery relations in international division of labour

Export-Modell Deutschland

Germany’s International Investment Position

Neo-Mercantilism and its Shadow

Variegated Capitalism and the EEC

• Founding members were “Rhenish” and backed the “Jean Monnet mode of integration” to create conditions for an integrated European economic space supporting this model

• Initial steps to European integration aimed to integrate W. Europe into circuits of Atlantic Fordism, with a certain spatial division of labour; prevailing mode of integration aimed to build a “Keynesian-corporatist” form of statehood on European level favourable to national Fordist modes of development (see Ziltener 1999, 2000)

• Spillover of market integration would consolidate variegated regulated capitalism and deepen EEC political integration

Variegated Capitalism and the EU

• As new members with other modes of growth, regulation, and welfare joined EC, initial coherence decomposes

• UK initially isolated as liberal market economy but played key “Trojan horse” role in facilitating entry of de-regulated international finance into Continental heartland

• Got harder to establish a tripartite Euro-corporatism, let alone to re-scale state planning from national to EU level

• Monnet mode replaced by a more liberal internal market project, based on negative integration, prompting conflicts among neo-liberal, neo-corporatist, neo-statist currents

• Uneven impact of Atlantic Fordist crises on “national models” aggravates latent incompossibility of EU’s VoCs

Variegated Capitalism and Lisbon

• Diverse neo-liberalisms (regime shifts vs policy adjustments) magnify heterogeneity in original core, intensify integration crisis, and prompt search for new mode of integration

• New “comprehensive concept of control” arose in 1990s, namely, embedded neo-liberalism based on German model This is neo-liberal at its core and reflects the outlook of the

most globalised sections of European capital, while at the same time seeking to accommodate the orientations of other social forces (Ziltener 2000; cf. van Apeldoorn 2002)

• New compromise organized around “competitiveness” and involved uneasy balance among different crisis-responses, biased towards neo-liberalism (Maastricht, then Lisbon)

Eurozone Crisis and Neo-Liberalism• Eastward expansion aggravated incoherence of EU – an

effect promoted by neo-liberal forces in and beyond EU• Failure of Lisbon Agenda (KBE, European social model,

with neo-liberal bias) plus global crisis (made in US and broke out there) weakens EU economic space

• Reinforced by crises in UK and Ireland and in new member states, then by sovereign debt crises in Greece and Spain

• Eurozone crisis is latest expression of latent incompossible variegation of EU and its EEA partners (unless new mode of economic and political integration is found) as these economies are inserted into world market as a whole

What is incompossibility...?

• Compossibility and incompossibility are key principles in natural theology and critical realism alike:

Not everything that is possible is compossible• Compossibility: different (sets of) social relations do or could

co-exist for a time in the same spatio-temporal matrix• Incompossibility: (sets of) social relations that may exist

independently of each other in different spatio-temporal matrices (based on theoretical first principles and/or on empirical observation) cannot co-exist in the same matrix

• Both concepts must be studied relationally and over time: allow for super- and subordination, complementarities, zones of indifference, compensating cycles within larger periods.....

Modalities of Relational Compossibility

Impossible as Element Possible as Element

Incompossible Compossible Incompossible as set member as set member as set member

Benign Pathological

Compossibility Compossibility (sustainable) (unsustainable)

Latent

Incompossibility

How to interpret this figure• Not everything that is possible is compossible• A set of elements that are individually possible viewed in

isolation and can be combined in a single possible world in a given spatio-temporal matrix are compossible in this regard (e.g., actually co-existing, relatively durable VoCs)

• A set of such elements that can’t be combined in a single possible world in a given spatio-temporal matrix are incompossible in this regard (empty cells in VoC grid)

• Some compossible sets comprise mainly complementary elements and are stable/adaptive; others include major contradictory elements that are destabilizing in long run

Eurozone Crisis?• Since euro began, average unit labour costs have

risen 25% less in Germany than in Mediterranean economies (PIGS), creating massive trade imbalances with Germany

• To restore balance requires: – very rapid German wage gains – or sharp wage and employment cuts in other economies– or a change in the exchange rate.

• Resolving credit crisis without tackling competitiveness will prolong PIGS misery as workers stay unemployed, and create more credit crises

• Politicians’ choices are unpalatable: inflation in Germany, depression in periphery, the end of the Euro

Source: Jeremy Beckwith, letter to Financial Times, 2nd December 2010

Euro and Currency PyramidForm Euro Weaknesses, crisis-tendencies

Top CurrencyEU is not the world economic leader. Euro is not the established currency of a normal state with usual set of powers (coercion and tax monopoly)

EU economies do not meet economic requirements of top currency; also lack military-political power to encourage and/or enforce adoption of euro

Master Currency

Circulates in EU as geo-political bloc due to political as well as economic dominance of (quasi-)issuing state (Franco-German axis, DM model)

EMU is part of state project linked to variegated European capitalism in shadow of neo-mercantilism in world market in shadow of neo-liberalism

Negotiated or Political Currency

Based on international regimes with strong emphasis on mutual benefits rather than coercion

Negotiation to join EU also linked to negotiation to join EMU. Request or demand depending on economies

Passive or neutral currency

Circulates domestically, no major role in international regimes

National currencies of candidate states with limited economic clout and/or political stability.

The View from Davos

Debt-Default-Deflation Crisis?

• Eurozone crisis is not just another Minsky-induced recession nor another crisis of competitiveness in individual economies – for both, there are routine crisis-management responses

• Crisis evolved into an epic recession, based on financial and consumption fragility, that created a debt-default-deflation trap (e.g., Eire, UK, PIGS). This has aggravated the credit and competitiveness crises in EU, requiring massive ECB action.

• Rigidities of EU and Eurozone plus strong interdependencies create pathologically compossible variegation, impossible choices, and risk that EU becomes an incompossible dream

Fundamental Forces and Relations of

“Epic Recession”

Adoption of Mal-Designed EurozoneIn EU Marked by Latent Incompossibility

Speculative Investing and Unproductive Consumption Shift

Debt Deflation Default

Financial Institutions Asset Prices Banks and Finance Non-Financial Business Product Prices Non-Bank Business Consumer-Household Labour Wages Consumer-

Household

Financial Fragility Consumption Fragility

Declining Real Economic IndicatorsReal Asset Investment Household Consumption Global Trade and Exports Industrial Production Employment ....

Modified for Eurozone from Rasmus , 2010: 16

From Debt Crisis to Sovereign Debt?

• De-regulation, internationalization, shadow banking lead to excess credit created via hyperfinancialization and new instruments, such as derivatives, in search of high and quick rewards (financial speculation > financial intermediation)

• Much of excess credit was fictitious capital (capital as property rather than functioning capital) with little relation to growth potential of ‘real economy’

• Liquidity and solvency crises resolved via state fiat money (backed by tax capacities of states) and rise of public debt then leads via bond markets to demand for austerity politics

• Crisis generalized through contagion effects of crisis in top currency and euro as negotiated currency

http://cdn1.creditwritedowns.com/wp-content/uploads/2011/11/Future-of-euro.jpg

Or muddling through!

… just saying!

A Miracle for Whom?

Conclusions

• Global crisis is one of variegated capitalism in world market organized in shadow of neo-liberalism, with many variations that are remaking uneven development

• In EU, it is a crisis of variegated capitalism organized in shadow of Modell Deutschland (not a classic case of neo-liberalism) but still dependent on broader dynamic of world market organized in shadow of neo-liberalism

• There is pathological co-dependency of US and PRC in world market (but no formal framework or regime); and emerging pathological incompossibility of German model and Club Med economies inside non-adaptive EU regime

Acknowledgement

• This presentation derives from research conducted within the framework of an ESRC-funded Professorial Fellowship, ‘Great Transformations: a Cultural Political Economy of Crises of Crisis-Management’.

• Award: RES-051-27-0303