BUYING TIME: THE DELAYED CRISIS IN DEMOCRATIC CAPITALISM by Wolfgang Streeck

Verso Books 2014. ISBN 978-1781685488

In this useful book Wolfgang Streeck presents images of post 2008 democratic capitalism around his Tax State/ Debt State idea.

Speaking of the West, the Tax State covers the post WW2 period to the late 1970's showing manageable budget deficits, government spending on infrastructure, balanced corporate and union power and general national unity policies with a leftist slant that he clearly approves of.

The Debt State is a different animal involving what he calls the financialization of society. Basically he sees a radically changed world of instant communication and enormously increased competition with Western states unable to afford the welfare commitments that date from their industrial leadership. So what to do?

Streeck sees Neoliberalism giving birth to a Debt State in which private and government deficits are "financed" at low interest rates and savers are more or less obliged to take on more debt and speculate in the face of near zero returns on their capital. He records the way that public debt ballooned until 1993, private debt led to the internet (2000) and housing/banking (2008) collapses and how oceans of government QE credit are now giving us the current "recovery".

The core of the book is an interesting discussion of the way in which the Debt State interacts with Democracy.

Essentially debtors lose freedom whether they are individuals of governments, and he shows the neoliberal totemization of Market Confidence above all else, and the absolute abuse of this concept to cow politicians into accepting the whole neoliberal package of unrestricted movement of capital (with the associated threat), unlimited freedom to outsource, and the requirement that the public give 100% backing to the craziest leveraged Wall Street bets.

So far so good, but the author then suggests a dubious solution in returning to the Tax State when (in the opinion of this reviewer) he could have devoted more space to the fundamental issues of outsourcing and economic efficiency + a more positive views of the European Union. Just because it's been captured by "Marktvolk" doesn't mean that it's a bad idea.

This reviewer personally witnessed the Tax State of Great Britain in the early 1970's with high personal taxation, out of control government spending, Keynesianism, nationalization and a Social Contract in the context of an activist Socialist/ Marxist government. As Burk and Cairncross show in their worthwhile book "Goodbye, Great Britain: The 1976 IMF Crisis" it was a spectacular failure. Great Britain (1974-76) had the highest inflation in Europe, the lowest rise in GNP, the highest unemployment and the lowest output per man/hour in manufacturing and was seen to fail on all counts.

The author is somewhat surprised that Germany still has a successful manufacturing sector and could maybe have incorporated this observation into a broader discussion of outsourcing. (top)

 Outsourcing (complete international economic freedom) is a central plank of Neoliberalism and is arguably the root cause of structural Western unemployment (and record corporate profits) and the collapse of the Tax State. If CEO's like Jack Welch have for years been applying his 70/70/70 rule (70% of research and development should be outsourced, 70% of that should be outsourced offshore, 70% should be outsourced overseas and sent to India) then surely this reduces employment and skills and generates budget and trade deficits.

The author seems to be too focused on Keynesianism vs Neoliberalism when in reality the debate has probably moved on. For example Joseph Heath in his interesting book "Economics Without Illusions: Debunking the Myths of Modern Capitalism" suggests that the Left and Right have both developed a malignant form of their respective ideologies. The Left has extended costly government "care" to whole sections of the adult population that like it but shouldn't receive it. The Right tries to dispense with government altogether and doesn't recognize that it is a vital framework for growth.

Heath also observes that at a fundamental level, societal/economic efficiency is not a Left/Right issue at all and is basically non-political. Your chosen system either gives you good value health care or it doesn't.

On page 172, Streeck says that, "In the Social World one never steps in the same river twice", which is probably true but there are still some striking similarities between the USA of 2014 and Germany of 1918 and his book has a notable Spengler like feel in its opposition of Staatsvolk (social justice) and Marktvolk (market justice). Both countries had/have intractable debts, a dominant market class, democratic gridlock, out of control special interests and failed taxation and both are resorting/resorted to covering current spending with money printing.

The difference is that Streeck sees salvation in a return to a Tax State whereas Spengler saw it in, "the final battle between Democracy and Caesarism, between the leading forces of dictatorial money-economics and the purely political will-to-order of the Caesars". An interesting difference.

With regard to Europe he seems unduly pessimistic. The EEC has brought peace, the free movement of labour and a single currency which do have some positive aspects which he ignores. Also, even the strongest critics of Europe (such as Nigel Farage of the UK Independence Party) are often not at all personally hostile to their fellow Europeans. They actually quite like Europe and only object to the grossly inefficient special interest Neoliberal Market Construction that has taken control of the project.

Nevertheless, this is certainly a key book in the conversation about the Debt State/ Democracy and is highly recommended.