How Will Capitalism End? Essays on a Failing System – Wolfgang Streeck.

Capitalism is subject to ‘a long-term structural weakness’, namely ‘the technological displacement of labor by machinery. Electronicization will do to the middle class what mechanization has done to the working class, and it will do it much faster.

Only one thing is certain: that capitalism will end, and much sooner than one may have thought.



Capitalist society may be described in shorthand as a ‘progressive’ society in the sense of Adam Smith and the enlightenment, improbable social formation, full of conflicts and contradictions, therefore permanently unstable and in flux, and highly conditional on historically contingent and precarious supportive as well as constraining events and institutions.

Capitalist society may be described in shorthand as a ‘progressive’ society in the sense of Adam Smith and the enlightenment, a society that has coupled its ‘progress’ to the continuous and unlimited production and accumulation of productive capital, effected through a conversion, by means of the invisible hand of the market and the visible hand of the state, of the private vice of material greed into a public benefit.

Capitalism promises infinite growth of commodified material wealth in a finite world, by conjoining itself with modern science and technology, making capitalist society the first industrial society, and through unending expansion of free, in the sense of contestable, risky markets, on the coat-tails of a hegemonic carrier state and its market opening policies, both domestically and internationally.

As a version of industrial society, capitalist society is distinguished by the fact that its collective productive capital is accumulated in the hands of a minority of its members who enjoy the legal privilege, in the form of rights of private property, to dispose of such capital in any way they see fit, including letting it sit idle or transferring it abroad.

One implication of this is that the vast majority of the members of a capitalist society must work under the direction, however mediated, of the private owners of the tools they need to provide for themselves, and on terms set by those owners in line with their desire to maximize the rate of increase of their capital. Motivating non-owners to do so to work hard and diligently in the interest of the owners requires artful devices, sticks and carrots of the most diverse sorts, that are never certain to function that have to be continuously reinvented as capitalist progress continuously renders them obsolescent.

The tensions and contradictions within the capitalist political economic configuration make for an ever present possibility of structural breakdown and social crisis. Economic and social stability under modern capitalism must be secured on a background of systemic restlessness, produced by competition and expansion, a difficult balancing act with a constantly uncertain outcome. Its success is contingent on, among other things, the timely appearance of a new technological paradigm or the development of social needs and values complementing changing requirements of continued economic growth.

For example, for the vast majority of its members, a capitalist society must manage to convert their everpresent fear of being cut out of the productive process, because of economic or technological restructuring, into acceptance of the highly unequal distribution of wealth and power generated by the capitalist economy and a belief in the legitimacy of capitalism as a social order. For this, highly complicated and inevitably fragile institutional and ideological provisions are necessary. The same holds true for the conversion of insecure workers kept insecure to make them obedient workers into confident consumers happily discharging their consumerist social obligations even in the face of the fundamental uncertainty of labour markets and employment?

In light of the inherent instability of modern societies founded upon and dynamically shaped by a capitalist economy, it is small wonder that theories of capitalism, from the time the concept was first used in the early 1800s in Germany and the mid-1800s in England, were always also theories of crisis. This holds not just for Marx and Engels but also for writers like Ricardo, Mill, Sombart, Keynes, Hilferding, Polanyi and Schumpeter, all of whom expected one way or other to see the end of capitalism during their lifetime? What kind of crisis was expected to finish capitalism off differed with time and authors’ theoretical priors; structuralist theories of death by overproduction or underconsumption, or by a tendency of the rate of profit to fall (Marx), coexisted with predictions of saturation of needs and markets (Keynes), of rising resistance to further commodification of life and society (Polanyi), of exhaustion of new land and new labour available for colonization in a literal as well as figurative sense (Luxemburg), of technological stagnation (Kondratieff), financial-political organization of monopolistic corporations suspending liberal markets (Hilferding), bureaucratic suppression of entrepreneurialism aided by a worldwide trahison des clercs (Weber, Schumpeter, Hayek) etc., etc.

While none of these theories came true as imagined, most of them were not entirely false either. In fact, the history of modern capitalism can be written as a succession of crises that capitalism survived only at the price of deep transformations of its economic and social institutions, saving it from bankruptcy in unforeseeable and often unintended ways. Seen this way, that the capitalist order still exists may well appear less impressive than that it existed so often on the brink of collapse and had continuously to change, frequently depending on contingent exogenous supports that it was unable to mobilize endogenously.

The fact that capitalism has, until now, managed to outlive all predictions of its impending death, need not mean that it will forever be able to do so; there is no inductive proof here, and we cannot rule out the possibility that, next time, whatever cavalry capitalism may require for its rescue may fail to show up.

A short recapitulation of the history of modern capitalism serves to illustrate this point. Liberal capitalism in the nineteenth century was confronted by a revolutionary labour movement that needed to be politically tamed by a complex combination of repression and cooptation, including democratic power sharing and social reform. In the early twentieth century, capitalism was commandeered to serve national interests in international wars, thereby converting it into a public utility under the planning regimes of a new war economy, as private property and the invisible hand of the market seemed insufficient for the provision of the collective capacities countries needed to prevail in international hostilities.

After the First World War, restoration of a liberal-capitalist economy failed to produce a viable social order and had to give way in large parts of the industrial world to either Communism or Fascism, while in the core countries of what was to become ‘the West’ liberal capitalism was gradually succeeded, in the aftermath of the Great Depression, by Keynesian, stateadministered capitalism. Out of this grew the democratic welfare-state capitalism of the three post-war decades, with hindsight the only period in which economic growth and social and political stability, achieved through democracy, coexisted under capitalism, at least in the OECD world where capitalism came to be awarded the epithet, ‘advanced’.

In the 1970s, however, what had with hindsight been called the ‘post-war settlement’ of social-democratic capitalism began to disintegrate, gradually and imperceptibly at first but increasingly punctuated by successive, ever more severe crises of both the capitalist economy and the social and political institutions embedding, that is, supporting as well as containing it. This was the period of both intensifying crisis and deep transformation when ‘late capitalism’, as impressively described by Werner Sombart in the 1920s, gave way to neoliberalism.

Crisis Theory Redux

Today, after the watershed of the financial crisis of 2008, critical and indeed crisis-theoretical reflection on the prospects of capitalism and its society is again en vogue. Does Capitalism Have a Future? is the title of a book published in 2013 by five outstanding social scientists: Immanuel Wallerstein, Randall Collins, Michael Mann, Georgi Derluguian and Craig Calhoun. Apart from the introduction and the conclusion, which are collectively authored, the contributors present their views in separate chapters, and this could not be otherwise since they differ widely. Still, all five share the conviction that, as they state in the introduction, ‘something big looms on the horizon: a structural crisis much bigger than the recent Great Recession, which might in retrospect seem only a prologue to a period of deeper troubles and transformations’. On what is causing this crisis, however, and how it will end, there is substantial disagreement which, with authors of this calibre, may be taken as a sign of the multiple uncertainties and possibilities inherent in the present condition of the capitalist political economy.

To give an impression of how leading theorists may differ when trying to imagine the future of capitalism today, I will at some length review the prospects and predictions put forward in the book.

A comparatively conventional crisis theory is probably the one offered by Wallerstein, who locates contemporary capitalism at the bottom of a Kondratieff cycle (Kondratieff B) with no prospect of a new (Kondratieff A) upturn. This is said to be due to a ‘structural crisis’ that began in the 1970s, as a result of which ‘capitalists may no longer find capitalism rewarding’.

Two broad causes are given, one a set of long-term trends ‘ending the endless accumulation of capital’, the other the demise, after the ‘world revolution of 1968’, of the ‘dominance of centrist liberals of the geoculture’. Structural trends include the exhaustion of virgin lands and the resulting necessity of environmental repair work, growing resource shortages, and the increasing need for public infrastructure. All of this costs money, and so does the pacification of a proliferating mass of discontented workers and the unemployed. Concerning global hegemony, Wallerstein points to what he considers the final decline of the U.S.-centred world order, in military and economic as well as ideological terms. Rising costs of doing business combine with global disorder to make restoration of a stable capitalist world system impossible.

Instead Wallerstein foresees ‘an ever-tighter gridlock of the system. Gridlock will in turn result in ever wilder fluctuations, and will consequently make short term predictions both economic and political ever more unreliable. And this in turn will aggravate popular fears and alienation. It is a negative cycle’. For the near future Wallerstein expects a global political confrontation between defenders and opponents of the capitalist order, in his suggestive terms: between the forces of Davos and of Porto Alegre.

Their final battle ‘about the successor system’ is currently fomenting. Its outcome, according to Wallerstein, is unpredictable, although ‘we can feel sure that one side or the other will win out in the coming decades, and a new reasonably stable worldsystem (or set of world-systems) will be established’.

Much less pessimistic, or less optimistic from the perspective of those who would like to see capitalism close down, is Craig Calhoun, who finds prospects of reform and renewal in what he, too, considers a deep and potentially final crisis. Calhoun assumes that there is still time for political intervention to save capitalism, as there was in the past, perhaps with the help of a ‘sufficiently enlightened faction of capitalists’. But he also believes ‘a centralized socialist economy’ to be possible, and even more so ‘Chinese-style state capitalism’: ‘Markets can exist in the future even while specifically capitalist modes of property and finance have declined’. Far more than Wallerstein, Calhoun is reluctant when it comes to prediction.

His chapter offers a list of internal contradictions and possible external disruptions threatening the stability of capitalism, and points out a wide range of alternative outcomes. Like Wallerstein, Calhoun attributes particular significance to the international system, where he anticipates the emergence of a plurality of more or less capitalist political-economic regimes, with the attendant problems and pitfalls of coordination and competition. While he does not rule out a ‘large-scale, more or less simultaneous collapse of capitalist markets not only bringing economic upheaval but also upending political and social institutions’, Calhoun believes in the possibility of states, corporations and social movements reestablishing effective governance for a transformative renewal of capitalism. To quote,

The capitalist order is a very large-scale, highly complex system. The events of the last forty years have deeply disrupted the institutions that kept capitalism relatively well organized through the postwar period. Efforts to repair or replace these will change the system, just as new technologies and new business and financial practices may. Even a successful renewal of capitalism will transform it. The question is whether change will be adequate to manage systemic risks and fend off external threats. And if not, will there be widespread devastation before a new order emerges?

Even more agnostic on the future of capitalism is Michael Mann (‘The End May Be Nigh, But for Whom?’). Mann begins by reminding his readers that in his ‘general model of human society’, he does ‘not conceive of societies as systems but as multiple, overlapping networks of interaction, of which four networks ideological, economic, military and political power relations are the most important. Geopolitical relations can be added to the four …’ Mann continues:

Each of these four or five sources of power may have an internal logic or tendency of development, so that it might be possible, for example, to identify tendencies toward equilibrium, cycles, or contradictions within capitalism, just as one might identify comparable tendencies within the other sources of social power.

Interactions between the networks, Mann points out, are frequent but not systematic, meaning that ‘once we admit the importance of such interactions we are into a more complex and uncertain world in which the development of capitalism, for example, is also influenced by ideologies, wars and states’. Mann adds to this the possibility of uneven development across geographical space and the likelihood of irrational behaviour interfering with rational calculations of interest, even of the interest in survival. To demonstrate the importance of contingent events and of cycles other than those envisaged in the Wallerstein Kondratieff model of history, Mann discusses the Great Depression of the 1930s and the Great Recession of 2008. He then proceeds to demonstrate how his approach speaks to the future, first of U.S. hegemony and second of ‘capitalist markets’.

As to the former, Mann offers the standard list of American weaknesses, both domestic and international, from economic decline to political anomy to an increasingly less effective military, weaknesses that ‘might bring America down’ although ‘we cannot know for sure’. Even if US. hegemony were to end, however, ‘this need not cause a systemic crisis of capitalism’. What may instead happen is a shift of economic power ‘from the old West to the successfully developing Rest of the world, including most of Asia’. This would result in a sharing of economic power between the United States, the European Union and (some of) the BRICS, as a consequence of which ‘the capitalism of the medium term is likely to be more statist’.

Concerning ‘capitalist markets’, Mann believes, pace Wallerstein, that there is still enough new land to conquer and enough demand to discover and invent, to allow for both extensive and intensive growth. Also, technological fixes may appear any time for all sorts of problems, and in any case it is the working class and revolutionary socialism, much more than capitalism, for which ‘the end is nigh’. In fact, if growth rates were to fall as predicted by some, the outcome might be a stable low-growth capitalism, with considerable ecological benefits. In this scenario, ‘the future of the left is likely to be at most reformist social democracy or liberalism. Employers and workers will continue to struggle over the mundane injustices of capitalist employment […] and their likely outcome will be compromise and reform …’

Still, Mann ends on a considerably less sanguine note, naming two big crises that he considers possible, and one of them probable, crises in which capitalism would go under, although they would not be crises of capitalism, or of capitalism alone, since capitalism would only perish as a result of the destruction of all human civilization. One such scenario would be nuclear war, started by collective human irrationality, the other an ecological catastrophe resulting from ‘escalating climate change’. In the latter case, capitalism figures together with the nation state and with ‘citizen rights’, defined as entitlements to unlimited consumption as one of three ‘triumphs of the modern period’ that happen to be ecologically unsustainable. ‘All three triumphs would have to be challenged for the sake of a rather abstract future, which is a very tall order, perhaps not achievable’. While related to capitalism, ecological disaster would spring from ‘a causal chain bigger than capitalism’. However, ‘policy decisions matter considerably’, and ‘humanity is in principle free to choose between better or worse future scenarios and so ultimately the future is unpredictable’.

The most straightforward theory of capitalist crisis in the book is offered by Randall Collins, a theory he correctly characterizes as a ‘stripped-down version of a fundamental insight that Marx and Engels had formulated already in the 1840s’. That insight, as adapted by Collins, is that capitalism is subject to ‘a long-term structural weakness’, namely ‘the technological displacement of labor by machinery’. Collins is entirely unapologetic for his strictly structuralist approach, even more structuralist than Wallerstein’s, as well as his mono-factorial technological determinism. In fact, he is convinced that ‘technological displacement of labor’ will have finished capitalism, with or without revolutionary violence, by the middle of this century earlier than it would be brought down by the, in principle, equally destructive and definitive ecological crisis, and more reliably than by comparatively difficult-to-predict financial bubbles.

‘Stripped-down’ Collins’s late Marxist structuralism is, among other things, because unlike Marx in his corresponding theorem of a secular decline of the rate of profit, Collins fails to hedge his prediction with a list of countervailing factors, as he believes capitalism to have run out of whatever saving graces may in the past have retarded its demise. Collins does allow for Mann’s and Calhoun’s non-Marxist, ‘Weberian’ influences on the course of history, but only as secondary forces modifying the way the fundamental structural trend that drives the history of capitalism from below will work itself out. Global unevenness of development, dimensions of conflict that are not capitalism-related, war and ecological pressures may or may not accelerate the crisis of the capitalist labour market and employment system; they cannot, however, suspend or avert it.

What exactly does this crisis consist of? While labour has gradually been replaced by technology for the past two hundred years, with the rise of information technology and, in the very near future, artificial intelligence, that process is currently reaching its apogee, in at least two respects: first, it has vastly accelerated, and second, having in the second half of the twentieth century destroyed the manual working class, it is now attacking and about to destroy the middle class as well in other words, the new petty bourgeoisie that is the very carrier of the neocapitalist and neoliberal lifestyle of ‘hard work and hard play’, of careerism-cum-consumerism, which, as will be discussed infra, may indeed be considered the indispensable cultural foundation of contemporary capitalism’s society.

What Collins sees coming is a rapid appropriation of programming, managerial, clerical, administrative, and educational work by machinery intelligent enough even to design and create new, more advanced machinery.

Electronicization will do to the middle class what mechanization has done to the working class, and it will do it much faster.

The result will be unemployment in the order of 50 to 70 per cent by the middle of the century, hitting those who had hoped, by way of expensive education and disciplined job performance (in return for stagnant or declining wages), to escape the threat of redundancy attendant on the working classes. The benefits, meanwhile, will go to ‘a tiny capitalist class of robot owners’ who will become immeasurably rich. The drawback for them is, however, that they will increasingly find that their product ‘cannot be sold because too few persons have enough income to buy it. Extrapolating this underlying tendency’, Collins writes, ‘Marx and Engels predicted the downfall of capitalism and its replacement with socialism’, and this is what Collins also predicts.

Collins’s theory is most original where he undertakes to explain why technological displacement is only now about to finish capitalism when it had not succeeded in doing so in the past. Following in Marx’s footsteps, he lists five ‘escapes’ that have hitherto saved capitalism from self-destruction, and then proceeds to show why they won’t save it any more.

They include the growth of new jobs and entire sectors compensating for employment losses caused by technological progress (employment in artificial intelligence will be miniscule, especially once robots begin to design and build other robots);

the expansion of markets (which this time will primarily be labour markets in middle-class occupations, globally unified by information technology, enabling global competition among educated job seekers);

the growth of finance, both as a source of income (‘speculation’) and as an industry (which cannot possibly balance the loss of employment caused by new technology, and of income caused by unemployment, also because computerization will make workers in large segments of the financial industry redundant);

government employment replacing employment in the private sector (improbable because of the fiscal crisis of the state, and in any case requiring ultimately ‘a revolutionary overturn of the property system’);

and the use of education as a buffer to keep labour out of employment, making it a form of ‘hidden Keynesianism’ while resulting in ‘credential inflation’ and ‘grade inflation’ (which for Collins is the path most probably taken, although ultimately it will prove equally futile as the others, as a result of demoralization within educational institutions and problems of financing, both public and private).

All five escapes closed, there is no way society can prevent capitalism from causing accelerated displacement of labour and the attendant stark economic and social inequalities.

Some sort of socialism, so Collins concludes, will finally have to take capitalism’s place. What precisely it will look like, and what will come after socialism or with it, Collins leaves open, and he is equally agnostic on the exact mode of the transition. Revolutionary the change will be, but whether it will be a violent social revolution that will end capitalism or a peaceful institutional revolution accomplished under political leadership cannot be known beforehand.

Heavy taxation of the super-rich for extended public employment or a guaranteed basic income for everyone, with equal distribution and strict rationing of very limited working hours by more or less dictatorial means a la Keynes, we are free to speculate on this as Collins’s ‘stripped-down down Marxism’ does not generate predictions as to what kind of society will emerge once capitalism will have run its course.

Only one thing is certain: that capitalism will end, and much sooner than one may have thought.

Something of an outlier in the book’s suite of chapters is the contribution by Georgi Derluguian, who gives a fascinating inside account of the decline and eventual demise of Communism, in particular Soviet Communism. The chapter is of interest because of its speculations on the differences from and the potential parallels with a potential end of capitalism.

As to the differences, Derluguian makes much of the fact that Soviet Communism was from early on embedded in the ‘hostile geopolitics’ of a ‘capitalist world-system’. This linked its fate inseparably to that of the Soviet Union as an economically and strategically overextended multinational state.

That state turned out to be unsustainable in the longer term, especially after the end of Stalinist despotism. By then the peculiar class structure of Soviet Communism gave rise to a domestic social compromise that, much unlike American capitalism, included political inertia and economic stagnation. The result was pervasive discontent on the part of a new generation of cultural, technocratic and scientific elites socialized in the revolutionary era of the late 1960s. Also, over-centralization made the state based political economy of Soviet Communism vulnerable to regional and ethnic separatism, while the global capitalism surrounding it provided resentful opponents as well as opportunistic apparatchiks with a template of a preferable order, one in which the latter could ultimately establish themselves as self-made capitalist oligarchs.

Contemporary capitalism, of course, is much less dependent on the geopolitical good fortunes of a single imperial state, although the role of the United States in this respect must not be underestimated. More importantly, capitalism is not exposed to pressure from an alternative political-economic model, assuming that Islamic economic doctrine will for a foreseeable future remain less than attractive even and precisely to Islamic elites (who are deeply integrated in the capitalist global economy).

Where the two systems may, however, come to resemble each other is in their internal political disorder engendered by institutional and economic decline. When the Soviet Union lost its ‘state integrity’, Derluguian writes, this ‘undermined all modern institutions and therefore disabled collective action at practically any level above family and crony networks. This condition became self-perpetuating’. One consequence was that the ruling bureaucracies reacted ‘with more panic than outright violence’ when confronted by ‘mass civic mobilizations like the 1968 Prague Spring and the Soviet perestroika at its height in 1989’, while at the same time ‘the insurgent movements failed to exploit the momentous disorganization in the ranks of dominant classes’.

For different reasons and under different circumstances, a similar weakness of collective agency, due to de-institutionalization and creating comparable uncertainty among both champions and challengers of the old order, might shape a future transition from capitalism to postcapitalism, pitting against each other fragmented social movements on the one hand and disoriented political-economic elites on the other.

My own view builds on all five contributors but differs from each of them. I take the diversity of theories on what all agree is a severe crisis of capitalism and capitalist society as an indication of contemporary capitalism having entered a period of deep indeterminacy, a period in which unexpected things can happen any time and knowledgeable observers can legitimately disagree on what will happen, due to long-valid causal relations having become historically obsolete. In other words, I interpret the coexistence of a shared sense of crisis with diverging concepts of the nature of that crisis as an indication that traditional economic and sociological theories have today lost much of their predictive power. As I will point out in more detail, below, I see this as a result, but also as a cause, of a destruction of collective agency in the course of capitalist development, equally affecting Wallerstein’s Davos and Porto Alegre people and resulting in a social context beset with unintended and unanticipated consequences of purposive, but in its effects increasingly unpredictable, social action.

Moreover, rather than picking one of the various scenarios of the crisis and privilege it over the others, I suggest that they all, or most of them, may be aggregated into a diagnosis of multi-morbidity in which different disorders coexist and, more often than not, reinforce each other. Capitalism, as pointed out at the beginning, was always a fragile and improbable order and for its survival depended on ongoing repair work. Today, however, too many frailties have become simultaneously acute while too many remedies have been exhausted or destroyed. The end of capitalism can then be imagined as a death from a thousand cuts, or from a multiplicity of infirmities each of which will be all the more untreatable as all will demand treatment at the same time.

As will become apparent, I do not believe that any of the potentially stabilizing forces mentioned by Mann and Calhoun, be it regime pluralism, regional diversity and uneven development, political reform, or independent crisis cycles, will be strong enough to neutralize the syndrome of accumulated weaknesses that characterize contemporary capitalism. No effective opposition being left, and no practicable successor model waiting in the wings of history, capitalism’s accumulation of defects, alongside its accumulation of capital, may be seen, with Collins, as an entirely endogenous dynamic of self-destruction, following an evolutionary logic moulded in its expression but not suspended by contingent and coincidental events, along a historical trajectory from early liberal via state administered to neoliberal capitalism, which culminated for the time being in the financial crisis of 2008 and its aftermath.

For the decline of capitalism to continue, that is to say, no revolutionary alternative is required, and certainly no masterplan of a better society displacing capitalism. Contemporary capitalism is vanishing on its own, collapsing from internal contradictions, and not least as a result of having vanquished its enemies who, as noted, have often rescued capitalism from itself by forcing it to assume a new form.

What comes after capitalism in its final crisis, now under way, is, I suggest, not socialism or some other defined social order, but a lasting interregnum, no new world system equilibrium a la Wallerstein, but a prolonged period of social entropy, or disorder (and precisely for this reason a period of uncertainty and indeterminacy).

It is an interesting problem for sociological theory whether and how a society can turn for a significant length of time into less than a society, a post-social society as it were, or a society life, until it may or may not recover and again become a society in the full meaning of the term. I suggest that one can attain a conceptual fix on this by drawing liberally on a famous article by David Lockwood” to distinguish between system integration and social integration, or integration at the macro and micro levels of society. An interregnum would then be defined as a breakdown of system integration at the macro level, depriving individuals at the micro level of institutional structuring and collective support, and shifting the burden of ordering social life, of providing it with a modicum of security and stability, to individuals themselves and such social arrangements as they can create on their own. A society in interregnum, in other words, would be a de-institutionalized or under-institutionalized society, one in which expectations can be stabilized only for a short time by local improvisation, and which for this very reason is essentially ungovernable.

Contemporary capitalism, then, would appear to be a society whose system integration is critically and irremediably weakened, so that the continuation of capital accumulation for an intermediate period of uncertain duration becomes solely dependent on the opportunism of collectively incapacitated individualized individuals, as they struggle to protect themselves from looming accidents and structural pressures on their social and economic status. Undergoverned and undermanaged, the social world of the postcapitalist interregnum, in the wake of neoliberal capitalism having cleared away states, governments, borders, trade unions and other moderating forces, can at any time be hit by disaster; for example, bubbles imploding or violence penetrating from a collapsing periphery into the centre.

With individuals deprived of collective defences and left to their own devices, what remains of a social order hinges on the motivation of individuals to cooperate with other individuals on an ad hoc basis, driven by fear and greed and by elementary interests in individual survival. Society having lost the ability to provide its members with effective protection and proven templates for social action and social existence, individuals have only themselves to rely on while social order depends on the weakest possible mode of social integration, Zweckrationalitat.

As pointed out in chapter 1 of this book, and partly elaborated in the rest of this introduction, I anchor this condition in a variety of interrelated developments, such as declining growth intensifying distributional conflict; the rising inequality that results from this; vanishing macroeconomic manageability, as manifested in, among other things, steadily growing indebtedness, a pumped-up money supply, and the ever-present possibility of another economic breakdown; the suspension of post-war capitalism’s engine of social progress, democracy, and the associated rise of oligarchic rule; the dwindling capacity of governments and the systemic inability of governance to limit the commodification of labour, nature and money; the omnipresence of corruption of all sorts, in response to intensified competition in winner take all markets with unlimited opportunities for self-enrichment; the erosion of public infrastructures and collective benefits in the course of commodification and privatization; the failure after 1989 of capitalism’s host nation, the United States, to build and maintain a stable global order; etc., etc.

These and other developments, I suggest, have resulted in widespread cynicism governing economic life, for a long time if not forever ruling out a recovery of normative legitimacy for capitalism as a just society offering equal opportunities for individual progress, a legitimacy that capitalism would need to draw on in critical moments and founding social integration on collective resignation as the last remaining pillar of the capitalist social order, or disorder.

Moving Disequilibrium

In my own recent work, much of it assembled in this volume, I have argued that OECD capitalism has been on a crisis trajectory since the 1970s, the historical turning point being when the postwar settlement was abandoned by capital in response to a global profit squeeze. To be precise, three crises followed one another: the global inflation of the 1970s, the explosion of public debt in the 1980s, and rapidly rising private indebtedness in the subsequent decade, resulting in the collapse of financial markets in 2008.

This sequence was by and large the same for all major capitalist countries, whose economies have never been in equilibrium since the end of post-war growth at the end of the 1960s. All three crises began and ended in the same way, following an identical political-economic logic: inflation, public debt and the deregulation of private debt started out as politically expedient solutions to distributional conflicts between capital and labour (and, in the 1970s, between the two and the producers of raw material, the cost of which had ceased to be negligible), until they became problems themselves: inflation begot unemployment as relative prices became distorted and owners of monetary assets abstained from investment; mounting public debt made creditors nervous and produced pressures for consolidation in the 1990s; and the pyramid of private debt that had filled the gaps in aggregate demand caused by public spending cuts imploded when the bubbles produced by easy money and excessive credit blew up.

Solutions turned into problems requiring new solutions which, however, after another decade or so, became problems themselves, calling for yet other solutions that soon turned out to be as short-lived and selfdefeating as their predecessors. Government policies vacillated between two equilibrium points, one political, the other economic, that had become impossible to attain simultaneously: by attending to the need for democratic political legitimacy and social peace, trying to live up to citizen expectations of steadily increasing economic prosperity and social stability, they found themselves at risk of damaging economic performance while efforts to restore economic equilibrium tended to trigger political dissatisfaction and undermine support for the government of the day and the capitalist market economy in general.

In fact, the situation was even more critical than that, although it was not perceived as such for a long time, since it unfolded only gradually, over roughly two political generations. Intertwined with the crisis sequence of the post 1970s was an evolving fiscal crisis of the democratic-capitalist state, again basically in all countries undergoing the secular transition from ‘late’ to neoliberal capitalism. While in the 1970s governments still had a choice, within limits, between inflation and public debt to bridge the gap between the combined distributional claims of capital and labour and what was available for distribution, after the end of inflation at the beginning of the 1980s the ‘tax state’ of modern capitalism began to change into a ‘debt state’. In this it was helped by the growth of a dynamic, increasingly global financial industry headquartered in the rapidly de-industrializing hegemonic country of global capitalism, the United States.

Concerned about the power of its new clients who were after all sovereign states to unilaterally cancel their debt, the rising financial sector soon began to seek reassurance from governments with respect to their economic and political ability to service and repay their loans. The result was another transformation of the democratic state, this time into a ‘consolidation state’, which began in the mid-1990s. To the extent that consolidation of public finances through spending cuts resulted in overall gaps in demand or in citizen discontent, the financial industry was happy to step in with loans to private households, provided credit markets were sufficiently deregulated. This began in the 1990s at the latest and ultimately caused the financial crisis of 2008.

Unfolding alongside the crisis sequence and the transformation of the tax state into a consolidation state were three long term trends, all starting more or less at the end of the postwar era and running in parallel, again, through the entire family of rich capitalist democracies: declining growth, growing inequality, and rising debt public, private and overall. Over the years the three seem to have become mutually reinforcing: low growth contributes to inequality by intensifying distributional conflict; inequality dampens growth by restricting effective demand; high levels of existing debt clog credit markets and raise the prospect of financial crises; an overgrown financial sector both results from and adds to economic inequality etc., etc.

Already the last growth cycle before 2008 was more imagined than real, and post 2008 recovery remains anaemic at best, also because Keynesian stimulus, monetary or fiscal, fails to work in the face of unprecedented amounts of accumulated debt. Note that we are talking about long term trends, not just a momentary unfortunate coincidence, and indeed about global trends, affecting the capitalist system as a whole and as such. Nothing is in sight that seems only nearly powerful enough to break the three trends, deeply engrained and densely intertwined as they have become.

Phase IV

Since 2008, we have lived in a fourth stage of the post-1970s crisis sequence, and the by now familiar dialectic of problems treated with solutions that turn into problems themselves is again making itself felt. The three apocalyptic horsemen of contemporary capitalism, stagnation, debt, inequality are continuing to devastate the economic and political landscape. With ever lower growth, as recovery from the Great Recession is making little or no progress, deleveraging has been postponed ad calendas graecas and overall indebtedness is higher than ever. Within a total debt burden of unprecedented magnitude, public debt has climbed again, not only annihilating all gains made in the first phase of consolidation, but also effectively blocking any fiscal effort to restart growth.

Thus unemployment remains high throughout the OECD world, even in a country like Sweden where it has for some time now settled on a plateau of around 8 per cent.

Where employment has to some extent been restored it tends to be at lower pay and inferior conditions, due to technological change, to ‘reforms’ in social security systems lowering workers’ effective reservation wage, and to deunionization, with the attendant increase in the power of employers. Indeed, often enough, ‘recovery’ amounts to replacement of unemployment with underemployment.

Although interest rates are at a record low, investment and growth refuse to respond, giving rise to discussions among policymakers about lowering interest rates further, to below zero. While in the 1970s inflation was public enemy number one, now desperate efforts are being made throughout the OECD world to raise it to at least 2 per cent, hitherto without success. By comparison with the 1970s, when it was the coincidence of inflation and unemployment that left economists clueless, now it is very cheap money coexisting with deflationary pressures, raising the spectre of ‘debt deflation’ and of a collapse of a pyramid of accumulated debt by far exceeding in size that of 2008.

How much of a mystery the present phase of the long crisis of contemporary capitalism presents to its would-be management is nowhere more visible than in the practice of ‘quantitative easing’, adopted, under different names, by the leading central banks of the capitalist world. Since 2008, central banks have been buying up financial assets of diverse kinds, handing out new cash, produced out of thin air, to private financial firms. In return they receive titles to future income streams from debtors of all sorts, turning private debt into public assets, or better: into assets of public institutions with the privilege unilaterally to determine an economy’s money supply. Right now, the balance sheets of the largest central banks have increased in the past seven years from around eight to more than twenty trillion dollars, not yet counting the gigantic asset buying programme started by the European Central Bank in 2014.

In the process, central banks, in their dual roles as public authorities and guardians of the health of private financial firms, have become the most important, and indeed effectively the only, players in economic policy, with governments under strict austerity orders and excluded from monetary policymaking. Although quantitative easing has completely failed to counter the deflationary pressures in an economy like Japan where it has been relied upon for a decade or more on a huge scale it is steadfastly pursued for lack of alternatives, and nobody knows what would happen if cash-production by debt-purchasing was ended.

Meanwhile in Europe, banks sell their no-longer-secure securities, including government papers, to the European Central Bank, either letting the cash they get in return sit with it on deposit, even if they have to pay negative interest on it, or they lend it to cash strapped governments in countries where central banks are not allowed to finance governments directly, collecting interest from them at a rate above what they could earn in the private credit market. To this extent, quantitative easing at least serves to rescue, if nothing else, the financial sector.

Decoupling Democracy

As the crisis sequence took its course, the postwar shotgun marriage between capitalism and democracy came to an end. Again this was a slow, gradual development. There was no putsch: elections continue to take place, opposition leaders are not sent to prison, and opinions can still by and large be freely expressed in the media, both old and new. But as one crisis followed the next, and the fiscal crisis of the state unfolded alongside them, the arena of distributional conflict shifted, moving upwards and away from the world of collective action of citizens towards ever more remote decision sites where interests appear as ‘problems’ in the abstract jargon of technocratic specialists. In the age of inflation in the 19703, labour relations were the main conflict arena, and strikes were frequent throughout the OECD world, offering ordinary people an opportunity to engage with others in direct action against a visible adversary. In this way, they could experience conflict and solidarity directly and personally, with often life-changing consequences. When inflation ended in the early 19803, strikes came to an end as well, and the defence of redistributive interests against the logic of capitalist markets shifted to the electoral arena where the issue of contestation was the social welfare state and its future role and size. Then, when fiscal consolidation got under way, income gains began to depend on access to credit, as determined by increasingly loose legal regulations of financial markets and by the profit interests of the financial industry. This left little if any space for collective action, also because it was hard for most people in financial markets to understand their own interests and identify their exploiter. Today, in Phase IV, with monetary expansion and fiscal austerity coinciding, the prosperity, relative and absolute, of millions of citizens depends on decisions of central bank executives, international organizations, and councils of ministers of all sorts, acting in an arcane space remote from everyday experience and entirely impenetrable to outsiders, dealing with issues so complex that even insiders often cannot be sure what they are to do and are in fact doing.

The upward shift of conflict arenas during the decades of neoliberal progress was accompanied by a gradual erosion of the postwar standard model of democracy, pushed fonNard by, as well as allowing for, the gradual emergence of a new, ‘Hayekian’ growth model for OECD capitalism. By the standard model of democracy, I mean the peculiar combination, as had come to be considered normal in OECD capitalism after 1945, of reasonably free elections, government by established mass parties, ideally one of the Right and one of the Left, and strong trade unions and employer associations under a firmly institutionalized collective bargaining regime, with legal rights to strike and, sometimes, lock-out. This model reached its peak in the 19703, after which it began to disintegrate23. The advance of neoliberalism coincided with steadily declining electoral turnout in all countries, rare and short|ived exceptions notwithstanding. The shrinking of the electorate was, moreover, highly asymmetrical: those that dropped out of electoral politics came overwhelmingly from the lower end of the income scale ironically where the need for egalitarian democracy is greatest. Party membership declined as well, in some countries dramatically; party systems fragmented; and voting became volatile and often erratic. In a rising number of countries, the gaps in the electorate have begun to be filled in part by so-called ‘populist’ parties, mostly of the Right but lately also from the Left, who mobilize marginalized groups for protest against ‘the system’ and its ‘elites’. Also declining is tradeunion membership a trend reflected in an almost complete disappearance of strikes, which like elections have long served as a recognized channel of democratic participation.

The demise of standard post-war democracy was and is of the highest significance. Coupled to state-managed capitalism, democracy functioned as an engine of economic and social progress. By redistributing parts of the proceeds of the capitalist market economy downward, through both industrial relations and social policy, democracy provided for rising standards of living among ordinary people and thereby procured legitimacy for a capitalist market economy; at the same time it stimulated economic growth by securing a sufficient level of aggregate demand. This twofold role was essential for Keynesian politics-cum-policies, which turned the political and economic power of organized labour into a productive force and assigned democracy a positive economic function. The problem was that the viability of that model was contingent on labour mobilizing a sufficient amount of political and economic power, which it could do in the more or less closed national economies of the post-war era. Inside these, capital had to content itself with low profits and confinement in a strictly delimited economic sphere, a condition it accepted in exchange for economic stability and social peace as long as it saw no way out of the national containers within which its hunting licence had been conditionally renewed after 1945. With the end of post-war growth, however, as distributional margins shrunk, the profitdependent classes began to look for an alternative to serving as an infrastructure of social democracy, and found it in denationalization, also known as ‘globalization’. As capital and capitalist markets began to outgrow national borders, with the help of international trade agreements and assisted by new transportation and communication technologies, the power of labour, inevitably locally based, weakened, and capital was able to press for a shift to a new growth model, one that works by redistributing from the bottom to the top. This was when the march into neoliberalism began, as a rebellion of capital against Keynesianism, with the aim of enthroning the Hayekian model in its place;9 Thus the threat of unemployment returned, together with its reality, gradually replacing political legitimacy with economic discipline. Lower growth rates were acceptable for the new powers as long as they were compensated by higher profit rates and an increasingly inegalitarian distribution.341 Democracy ceased to be functional for economic growth and in fact became a threat to the performance of the new growth model; it therefore had to be decoupled from the political economy. This was when ‘post-democracy’ was born.



How Will Capitalism End? Essays on a Failing System

by Wolfgang Streeck

get it at

2 thoughts on “How Will Capitalism End? Essays on a Failing System – Wolfgang Streeck.”

  1. Greetings friends of TPPA. Talking about the end of capitalism, here is a proposal that might be of interest to you:


    Despite the high quality of life that some of the so-called developed nations have achieved, the truth is that the world, considered as a group of countries located in a fragile and geographically limited biosphere, is threatened with extinction due to human conflicts and the depredation of the environment.
    Notwithstanding the good and very important actions taken by groups and individuals in favor of a better world, deterioration at all levels continues to increase dangerously.
    After more than thirty years dedicated to these matters, and since “an image is worth a thousand words” we have come up with an alternative strategy, which consists of designing a self-sufficient and sustainable model city that has all the characteristics of infrastructure and organization inherent to the peaceful and sustainable society that we want for ourselves and our descendants, whose representation in the form of scale models, animated series, feature films, video games and theme parks, would constitute a model to follow to generate the necessary changes.
    The prototype that we present has some characteristics that are opposed, sometimes in a radical way, to the religious, economic, political and educational traditions and customs that have been transmitted from generation to generation, yet are the causes of the aforementioned problems, and therefore must be transformed.
    If you are interested in knowing about this project, or even participating in it, we invite you to visit our website (written in Spanish and English), where we are working in that sense.


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