Wolfgang Streeck, Taking Back Control? *** 1/2

I heard about the German political economist Wolfgang Streeck in a New York Times opinion piece with the humble title "This Maverick Thinker Is the Karl Marx of Our Time." The thesis of his new book Taking Back Control? is that governments, led by the United States, have ceded management of the world economy to a neoliberal free-market technocracy, thereby preventing the state from performing one of its most important functions, "the protection of its citizens from capitalism's risks and adverse side effects." The resurgence of nationalist populism represents attempts to bring people's economic destiny back under democratic control.

In Streeck's account, the post-war system of managing the world economy (Bretton Woods, Keynes) began to falter in the 1970s resulting in "stagflation." The United States started promoting neoliberal globalization, which really took off after the collapse of the Soviet Union.

The United States of America pushed for a worldwide return to the fundamental principles of economic liberalism, becoming increasingly disinclined to allow its client states to pursue different national economic and social policies… Its new objective was to convert the world into a field of expansion for the American version of capitalism... It amounted to using the United States' international power to open up the world… to its giant domestic companies.

In this neoliberal regime, responsibility for managing economic matters goes to specialist international organizations like the WTO and the IMF, working with politically independent central banks. Theoretically, this setup removes politics from the proper management of the economy, replacing it with rule-based global governance by experts. In reality, economic management is never politically neutral; neoliberalism simply removes it from democratic political control.

Democratic politics dissociated itself from political economy by preventing itself from discretionary intervention into market opportunities and outcomes... Democracy was redefined from a regime for egalitarian correction of market outcomes into a practice of public deliberation among citizens guided by 'post-material' middle-class social values... All the new social policy could and would do was to urge workers at risk to take more responsibility for themselves, as the state now had to provide for international economic competitiveness rather than social equality.

Neoliberalism failed to deliver on its promise of ever-expanding prosperity, even before the twin blows of COVID and the war in Ukraine finished it off. We don't yet have a replacement model.

A theory, related to the increase in inequality and the incapacity or unwillingness of governments to combat it through either tax or wage policy, is that low interest rates after all did have inflationary effects, not in markets for goods or labor but in asset markets.

To replace the resulting gap in demand and avoid social unrest, but also to help the financial sector grow to be the lead sector of a de-industrializing political economy, financial markets were de-regulated, such that even low- and non-income earners could take on debt as a substitute for income from work and social benefits. In principle, this amounted to a relocation of debt from public to private, in analogy to the privitization of public services… Public debt declined while private household debt increased.

Taking Back Control? provides a productive way to think about recent political economic history. I was particularly intrigued by Streeck's insights about the financialization (and de-industrialization) of the United States economy. He notes, for example, that "public debt [has] declined while private household debt increased; ... this amounted to a relocation of debt from public to private, in analogy to the privatization of public services."

The first half of the book (diagnosis of the situation) was more compelling than the second half (which advocates for small states rather than large ones). The prose is academic, its jargon exacerbated by being translated from the German. ("I aim to merge a political theory of the state with a political-economic theory of capitalism and capitalist development, on terms that are not functionalist, not economically deterministic....")