How Will Capitalism End?: Essays on a Failing System Hardcover – November 29, 2016

Wolfgang Streeck is a German economic sociologist, and Emeritus Director of the Max Planck Institute for the Study of Societies. Streeck contends that today's capitalism is plagued by five ultimately potentially fatal problems: declining growth, oligarch, short-changing the public sphere, corruption and international anarchy - for which no political arm/process exists to confront them. A central problem of capitalism is that insecure workers (kept that way to make them obedient workers) must also be confident consumers.

Per Streeck, the 2008 'Great Recession' was the latest in a long sequence of political and economic disorders that began with the end of postwar prosperity in the mid-1970s. Successive crises have proven ever more severe. Global inflation in the 1970s was followed by rising public debt in the 1980s, and fiscal consolidation in the 1990s accompanied by a steep increase in private-sector indebtedness.

Streeck also identifies three long-term trends in first industrialized, now increasingly deindustrialized capitalist countries. The first is a steady decline in the rate of economic growth, the second is an equally persistent rise in overall (governments, private citizens, financial and non-financial firms) indebtedness in those same states, and the third is ascending income and wealth inequality.

Streeck fears these three trends may be mutually reinforcing. Inequality impedes improvements in productivity and weakens demand, low growth reinforces inequality by intensifying distributional conflict as concessions to the poor become more costly, and rising debt compounds inequality caused by stagnant wages and reductions in public services. Despite innumerable demands and blueprints for 'reform' to prevent recurrence, little has changed. Governments (especially in the U.S.) have firmly remained in the grip of the money-making industries - while they in turn continue to be showered with cheap cash created by central banks. Yet, unprecedented liquidity has failed to jumpstart the economy, and inequality marches upwards - what little growth there is appropriated by the top 1%.

Several attempts were made in 2013 to reign in monetary expansion, both in Japan and the U.S., but when stock prices plunged, 'tapering' (as it was caused) was postponed. Central bank balance sheets were then at about 3X pre-crisis levels, and rising. Continued low interest rates etc. made it easy for the private sector to postpone deleveraging, easy for the government to finance deficits, and easy to delay needed reforms.

Capitalism and democracy has long been considered adversaries, until the postwar seemed to have reconciled the two. Owners of capital had feared democratic majorities abolishing private property, while workers and their groups expected capitalists to finance a return to authoritarian rule in defense of their privileges. These fears were alleviated for awhile. Today, doubts about the compatibility of capitalism with democracy have returned. Among the ordinary people, there is now a pervasive sense that politics can no longer make a difference - perceptions of deadlock, incompetence and corruption among what seems to be an increasingly self-contained and self-serving political class, manifested by declining electoral turnout.

At the same time, government debt has risen while participation rates have fallen, tax revenues as a percentage of GDP have risen, and top marginal income tax rates have declined. Institutional protection of the market economy from democratic interference has advance greatly - trade unions are on the decline everywhere, economic policy widely turned over to democratically unaccountable central banks - concerned above all with the health of goodwill of financial markets, and in Europe, national economic policies, including wage-setting and budget-making, are increasingly government by super-national agencies like the European Commission and Central Bank, also beyond the reach of popular democracy. (Likewise, TPP.) Elites are also losing faith in democratic government and its ability to reshape societies in line with market imperatives - countries like China are complimented for authoritarian political systems being so much better equipped than majoritarian democracy to deal with the challenges of globalization. Elite pressures for economic neutralization of egalitarian democracy takes the form of continuing relocation of political-economic decision-making to supranational institutions such as the European Central Bank and summits of government leaders.

Both radical critics of capitalism (Marx, Polanyi) and bourgeois theorists such as Weber, Schumpeter, and Keynes have predicted its impending end. For a long time, political protests are likely to remain local, dispersed, uncoordinated.

Global mobility enables employers to replace unwilling local workers with willing immigrant ones.

The conspicuous failure of even negative real interest rates to revive investment coincided with a long-term failure to even negative real interest rates to revive investment coincided with a long-term increase in inequality. They may be one of the causes of the financialization of capitalism that began in the 1980s. This does not preclude high profits in the financial sector, essentially from speculative trading with cheap money supplied by central banks. Money generated to prevent stagnation from turning into deflation causes inflation. The only inflation in sight now is that of asset-price bubbles.

Low growth in the future does not provide additional resources with which to settle distributional conflicts and pacify discontent. Easy money provided by central banks to restore growth adds to inequality - inviting speculative rather than productive investment. Plutonomic capitalists no longer have to worry about national economic growth because their transnational fortunes grow without it - hence the exit of the superrich from Russia and Greece.

Finance is an 'industry' where innovation is hard to distinguish from rule-bending or rule-breaking, where payoffs between firms and regulatory authorities is extreme, where revolving doors between the two offer unending possibilities for corruption, where the largest firms are not just too big to fail but also too big to jail - given their importance for national economic policy and tax revenue. Nobody believes anymore in a moral revival of capitalism.

The dollar's function as international reserve currency is now contested - and it cannot be otherwise, given the rising levels of public and private debt, and several highly destructive financial crises. The U.S. has been either defeated or deadlocked in three major land wars since the 1970s.

The end of capitalism can be imagined as a death from a thousand cuts, all at the same time.

[Edit 2/10/2017] Most of my review (following this edit) stands, but I would add that while the end of capitalism is inevitable the form it will take - and how society will be organized afterwards - is uncertain. Thus the title. Dense, fascinating book, due to be read often by me.] This is a collection of essays, which together deliver a very valuable assessment of capitalism's role in our society. It is not a book for wimps; I intend to read it again, after reading several authors referenced in footnotes (e.g. Adam Smith, John Maynard Keynes, Karl Polanyi, Robert Reich, Joseph Stiglitz, Thomas Picketty). Streeck's theme is that capitalism, which harnesses the energy of selfishness to drive innovation and production, is in conflict with social democratic government which is concerned with welfare of the society as a whole and for its citizens. In the passage of time various external and internal forces have given shape to this conflict and required (and continue to require) an ever-evolving project to manage it. He is viewing this whole big picture as a sociologist - indeed, two of the essays are titled "How to Study Contemporary Capitalism?" and "The Public Mission of Sociology". Prior to reading Streeck I had read 'Dark Money' describing the ferocious assault on democracy by the very personification of selfishness, Charles Koch; Streeck's book provides context for understanding our current crisis.

Having read Streeck's work in German for a few years now, I am happy to see his ideas published in English, so that, hopefully, a broader public can appreciate his salient insights into the world we now inhabit. His work should be considered alongside more widely popular critical interventions into neoliberal capitalism, such as those of David Harvey, Richard Wolff, and Tomas Picketty. The essays in this book are, in fact, more concisely presented (while being equally rigorous) than the aforementioned writers. Some highlights:

Introduction: Required reading for anyone seeking to understand the interplay of economics and politics in the current world. So many of the news stories we chalk up to "the way things are" are deconstructed and analyzed with a clarity and range one seldom finds in the mainstream media or, for that matter, in a lot of academic literature.

Chapter 3: Streeck offers a unique reading of how citizens approach questions social solidarity and government provision from the perspective of individualized consumption. While the framework feels forced at first, the chapter does ultimately shed light on why many of look down on government services, and how the business community has used this to their advantage.

Chapter 4: Here Streeck offers an impressive structural analysis of the European Union. While many of the arguments here can be found in his other work (notably Borrowed Time), this chapter, better than any other resource I've found (Yanis Varoufakis' new book comes close), answers the question of "What the hell is going on in the EU?" with amazing precision and insight.

The remaining essays, while interesting, tend to repeat the many of the arguments of the key chapters mentioned above. And again, if you are already familiar with Streeck's work, then perhaps only the intro alone will be of interest. If you are new to Streeck, then this is a great starting point. The diagnosis offered in the book is, it should be noted, incredibility pessimistic and can lead to a deep depression about one's place in today's economy. And yet this unflinching commitment to unraveling the contradictions of modern economics and their consequences is praiseworthy for this very reason. We may be headed for the iceberg, and it may be too late to turn the ship around, but Streeck has the courage to tell us where we are going. And if we are to reverse course, we need exactly this type of analysis to do it.