After the Euro, the Avra

Would we have a better chance of reconciling democracy and capitalism if we had a rethink on Europe?

In the best tradition of critical theory, in his 2012 Frankfurt Adorno lectures sociologist Wolfgang Streeck traced the causes of the current global financial crisis to fundamental contradictions between the capitalist economy and democratic politics.¹ The publication of Streeck’s subsequent book in 2013 generated a lively public debate in Germany, in which the author was chided on various points by the likes of Jürgen Habermas and Claus Offe. Meanwhile Robert Salais, the leading figure of the French ‘conventions’ school of heterodox economics, also published a book in 2013 with some very similar diagnoses and policy recommendations - Le Viol d’Europe.² All of these scholars, along with wider intellectual communities in their countries, are passionately concerned with the future of Europe. That none of them pay much attention to Britain is understandable, especially given that the Euro has been central to the recent drama.

Although I greatly value these recent contributions and accept their radical diagnoses, my argument here is that that the vision of Europe with which these scholars are operating is itself distorted, and inadequate to address the problems at hand. The second strand of my argument is that a common currency should remain a central component in future forms of international co-operation and redistribution. The regulation of this currency in a unified Eurasian polity would form the crucial prelude to a global, post-capitalist world society.

Capitalism, democracy and money

Wolfgang Streeck’s book offers a sophisticated analysis of the breakdown of the post-war Keynesian consensus, as embodied in the Bretton Woods accords of 1944, which regulated global capitalism until the 1970s. As he argues, since the 1970s struggles between capital and labour have intensified, in new guises. There once was a time when European welfare states redistributed income through progressive taxation of their citizens. This has largely disappeared, as these states have come to finance their expenditure through selling off public assets and borrowing on financial markets. Together with a huge rise in private indebtedness, triggered by the same neoliberal ideology and made possible by a virtual abdication of bank regulation, this doubly bloated financial bubble was eventually bound to burst. In Europe the present crisis was accentuated by the introduction of the Euro, which for weaker members of the currency zone effectively removed elementary economic discipline and incentives to improve economic performance on world markets. Social inequalities have increased massively in the last generation, and the financial meltdown has made things worse. Recent problems in the Eurozone have exposed a north-south cleavage within Europe, which has largely supplanted the cold war East-West axis. No individual state - not even Germany - has the power to counter the power of ‘the markets’; but the collective institutions which ought to be playing this role are not doing so, either because they are singing the tunes of the international bankers or because they are politically ineffectual, given that the central institutions in Brussels and Strasbourg still lack basic democratic legitimacy.

This analysis is very widely shared in continental Europe. However, some of Streeck’s reviewers seem to be embarrassed by its similarities to ‘old left’ analyses of the terminal contradictions of capitalism. They have thus preferred to focus on the recommendations he makes at the end of his book - for the resolution of present dilemmas by breaking up the Eurozone and replacing it with a pan-European version of the proposals originally formulated by Keynes for the meeting at Bretton Woods. Streeck proceeds from the assumption that within such a framework a nation-state that is able to fix the level of its currency via devaluation will have the chance to sell its goods competitively on international markets. The great merit of Keynes’s original plan (in addition to its proposal for a new unit of account, the bancor) was its insistence on the need to create incentives for creditor as well as debtor nations to re-establish harmony in international trade. On this count the Bretton Woods accords as eventually...