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For a democratic polarization
by Jurgen Habermas and Robert Misik
Sunday Sep 12th, 2021 5:10 AM
The financial markets in particular require a tight regulatory framework. A "good capitalism" is not one in which the "law of the jungle" determines income distribution, and where governments increasingly become "night watchmen" that save bankers when they run the system into a brick wall but otherwise keep out of long-term investment decisions.
For a democratic polarization
by Jürgen Habermas
[This article was published in Blaetter, 2018.]
Blätter für deutsche und internationale Politik:

After 1989, all the talk was of the ‘end of history’ in democracy and the market economy; today we are experiencing the emergence of a new phenomenon in the form of an authoritarian/populist leadership – from Putin via Erdogan to Donald Trump. Clearly, a new ‘authoritarian international’ is increasingly succeeding in defining political discourse. Was your exact contemporary Ralf Dahrendorf right in forecasting an authoritarian twenty-first century? Can one – indeed must one – speak of an epochal change?

Jürgen Habermas: After the transformation of 1989-90, when Fukuyama seized on the slogan of ‘post-history’, which was originally coined by a ferocious kind of conservatism, his reinterpretation expressed the short-sighted triumphalism of western elites who adhered to a liberal belief in the pre-established harmony of market economy and democracy. Both of these elements inform the dynamic of social modernisation, but are linked to functional imperatives that repeatedly clash. The balance between capitalist growth and what was accepted by the populace as a halfway fair share in the average growth of highly productive economies could be brought about only by a genuinely democratic state. Historically speaking, however, such an equilibrium, one warranting the name of ‘capitalist democracy’, was the exception rather than the rule. That alone made the idea of a global consolidation of the ‘American dream’ an illusion.

The new global disorder, the helplessness of the USA and Europe with regard to growing international conflicts, is profoundly unsettling; the humanitarian catastrophes in Syria or South Sudan are unnerving, as are Islamist terror acts. Nevertheless, I can’t recognise in the constellation you indicate a uniform tendency towards a new authoritarianism; rather, I see a variety of structural causes and many coincidences. What connects them is nationalism in its various shades, which has now begun to appear in the West. Even before Putin and Erdogan, Russia and Turkey were by no means ‘unblemished democracies’. Had the West pursued a somewhat cleverer policy, the course of relations with both countries may have been set differently – and liberal forces in their populaces may have been strengthened.

Aren’t we retrospectively over-estimating the West’s capabilities here?
Of course, given the sheer variety of its divergent interests, it wouldn’t have been easy for ‘the West’ to choose the right moment to deal rationally with the geo-political aspirations of a relegated Russian superpower, or with the expectations of a tetchy Turkish government as regards European policy. The case of the egomaniac Trump, highly significant for the West over all, is of a different order. With his disastrous election campaign, he has brought to a head a process of polarisation that the Republicans have been running with cold calculation since the 1990s. They are escalating this process so unscrupulously that the ‘Grand Old Party’ – the party of Abraham Lincoln, don’t forget – has utterly lost control. This mobilisation of resentment is giving vent to the social dislocations of a superpower in political and economic decline.

What I do see as problematic, therefore, is not the model of an authoritarian international that you hypothesise, but the shattering of political stability in our western countries as a whole. In any judgment of the retreat of the USA from its role as the global power ever ready to intervene to restore order, one has to keep one’s eye on the structural background – which is affecting Europe in similar manner.

The economic globalisation that Washington, with its neoliberal agenda, introduced in the 1970s, has – measured globally against China and the other emergent BRIC countries – caused a relative decline of the West. Our societies must come to terms with this global decline, together with the technology-induced, explosive growth in the complexity of everyday life, at a domestic level.
Nationalist reactions are gaining ground in social milieus that have either never or only inadequately benefited from the prosperity gains of the big economies, because the ever-promised ‘trickle-down effect’ failed to materialise over the decades.

Even if there is no unequivocal tendency towards a new authoritarianism, we are clearly experiencing a massive shift to the Right, indeed a rightwing revolt. The Brexit campaign was the most prominent example of this trend in Europe. As you yourself recently put it, you ‘did not reckon with a victory for populism over capitalism in its country of origin’. Every sensible observer cannot but have been struck by the irrational nature not just of the outcome of the referendum but of the campaign too. One thing is clear: Europe is also increasingly being seduced by populism, from Orban and Kaczynski to Le Pen and the Alternative for Germany. Are we are going through a period in which irrational politics becomes the norm in the West? Some parts of the Left are already making the case for reacting to right-wing populism with a left-wing version of the same.

Before reacting purely tactically, the puzzle has to be solved as to how it came about that rightwing populism stole the Left’s own topics. The last G-20 summit delivered an instructive piece of theatre in this regard. One read of the assembled heads of government’s alarm at the ‘danger from the Right’ that might lead nation states to close their doors, raise the drawbridge and lay waste to globalised markets. In line with this mood is the astonishing change in social and economic policy that one of the participants, the British prime minister Theresa May, announced at the last Conservative party conference, which caused waves of anger as expected in the pro-business media. May had clearly studied the social reasons for Brexit thoroughly; in any case, she is trying to take the wind out of the sails of rightwing populism by reversing the previous party line and setting store by an interventionist ‘strong state’, in order to combat the marginalisation of the ‘abandoned’ parts of the population and the increasing divisions in society. Given this ironic reversal of the political agenda, the Left in Europe must ask itself why rightwing populism is succeeding in winning over the disaffected and disadvantaged for the false path of national isolation.

Socially acceptable globalisation through supranational co-operation

What should a leftwing response to the rightwing challenge look like?
The question is why leftwing parties don’t go on the offensive against social inequality by embarking on a co-ordinated and cross-border taming of unregulated markets. The only sensible alternative – both to the status quo of feral financial capitalism and to a völkisch or left-nationalist retreat into the supposed sovereignty of long-since hollowed-out nation states – is, I suggest, a supranational form of co-operation that aims to shape a socially acceptable, political reconfiguration of economic globalisation. International treaty regimes are insufficient; aside from their dubious democratic legitimacy, political decisions over questions of redistribution can only be carried out within a stable institutional framework. That leaves only the stony path of institutional deepening and embedding of democratically legitimised co-operation across national borders. The European Union was once such a project – and a political union of the eurozone could still be one. But the hurdles within the domestic decision-making process are rather high for that.

Since Clinton, Blair and Schröder, social democrats have swung over to the prevailing neoliberal line in economic policies because that was, or seemed to be promising politically; in the ‘battle for the centre ground’, these political parties thought that the only way to win majorities was by adopting a neoliberal course. This meant tolerating long-standing and growing social inequalities. This price – the economic and socio-cultural abandonment of ever-greater parts of the populace – has since become so high that the reaction to it vents itself on the right. And where else? If there is no credible and pro-active perspective, then protest must retreat into expressive, irrational forms.

Even worse than the rightwing populists themselves seems to be the risk of ‘contagion’ among the established parties throughout Europe. Under pressure from the Right, the new British prime minister has undertaken a hard-line policy of deterring and even expelling foreign workers and migrants; in Austria, the Social Democrat chancellor wants to restrict the right to asylum by emergency decree and, in France, François Hollande has been governing for nearly a year in a state of emergency, to the delight of the Front National. Is Europe strong enough to counter this rightwing revolt, or are republican achievements being irreversibly eroded?

As I see it, domestic politicians mishandled rightwing populism from the start. The mistake of the established parties lies in acknowledging the battlefront that rightwing populism is defining: ‘Us’ against the system. It hardly matters whether this mistake takes the form of an assimilation or a confrontation with the ‘Right’. Take the strident, would-be French president Nicolas Sarkozy, who is outbidding Marine Le Pen with his demands, or the sober-minded German justice minister Heiko Maas, who forcefully confronts (AfD co-founder and spokesman) Alexander Gauland in debate – both strengthen their opponents. Both take them seriously and raise their profile. Here in Germany, all know the studiously ironic grin of (AfD leader) Frauke Petry and the behaviour of the rest of the leadership of her ghastly troupe. Only by ignoring their interventions can one can pull the ground from under the feet of the rightwing populists.

But this requires willingness to open up a completely different front in domestic politics, by making the aforementioned problem the key issue: how do we regain the political initiative vis-à-vis the destructive forces of unbridled capitalist globalisation? Instead, the political scene is predominantly grey on grey; for example, it is no longer possible to distinguish the leftwing, pro-globalisation agenda of giving political form to a global society growing together economically and digitally, from the neoliberal agenda of political abdication in the face of blackmail by the banks and unregulated markets.

Political contrasts therefore need to be made recognisable again, including the contrast between the ‘liberal’ open-mindedness of the Left – in a political and cultural sense – and the nativist drivel of rightwing critiques of unfettered economic globalization. In a word: political polarisation again needs to crystallise between the established parties on substantive issues. Parties that give rightwing populists attention rather than contempt should not expect civil society to disdain rightwing slogans and violence. Therefore, I regard the greater danger to be a very different polarisation towards which the hard-core of the opposition within the CDU seems to be tending when it comes to what happens after Merkel. It sees in Alexander Gauland the pivotal figure of the (national conservative) Dregger wing of the old Hesse CDU, in other words its own flesh and blood, and toys with the idea of winning back lost voters through a coalition with the Alternative for Germany.

A breeding ground for a new fascism
Even verbally, much seems to be giving way these days: politicians are increasingly denounced as ‘enemies of the people’ and openly abused; Alexander Gauland calls Angela Merkel a ‘dictatorial chancellor’. Along the same lines is the gradual rehabilitation of Nazi jargon: Frauke Petry wants to return the concept of völkisch to everyday speech, (the AfD politician) Björn Höcke refers to ‘degenerate politics’, and a CDU MP from Saxony reverts to classic Nazi diction about ethnic cleansing – and all of this without consequence.

The only lesson democratic parties should draw as regards dealing with people who use such language is: stop pussyfooting around with these ‘concerned citizens’ and dismiss them curtly for what they are – the breeding ground for a new fascism. Instead of which, we are still witnessing the comic ritual, well-practised in the old FRG, of a compulsive balancing-act: every time ‘right-wing extremism’ is mentioned, one feels obliged to point hastily to a corresponding ‘left-wing extremism’, as if to avoid embarrassment.
How do you explain the receptivity to the AfD’s rightwing populism in eastern Germany and the sheer number of far-Right crimes there?

Of course, one should be under no illusions about the electoral success of the AfD in western parts of Germany, for example Baden-Württemberg – even if the aggression of (the AfD politician) Jörg Meuthen towards the liberal-left legacy of the ’68 generation suggests not so much rightwing extremism as a leftover from the old Federal Republic. In the west, the rightwing prejudices of AfD voters seem mainly to be filtered through a conservative milieu that had no chance to develop in the former GDR. The west also has to answer for those right-wing radicals who, immediately after 1990, moved from the old FRG to the east in their droves, bringing with them the necessary organisational talents. However, judging by the familiar statistical data, an unfiltered susceptibility to diffuse authoritarian prejudices and ‘old continuities’ is definitely greater in eastern Germany. Insofar as this potential emerged from people who were not non-voters anyway, it remained more or less inconspicuous until the recent refugee policy, which acted as a catalyst: until then, these voters had either been attracted by the selective view and national goodwill of the eastern CDU or to a large extent absorbed by the Left Party. Up to a point, that may have served a positive purpose. But it is better for a democratic body politic when questionable political mind-sets are not swept under the carpet for good.

On the other hand, the west – in other words the former government of West Germany, which defined the mode of reunification and the reconstruction and that now bears political responsibility for the consequences – might even end up as the villain in terms of how history judges these facts. Whereas the population of the former West Germany had, under good economic conditions, the chance, in public discussions lasting over decades, to free itself from the legacy of the Nazi period and from contaminated mind-sets and elites continuing in office, the population of the former GDR had no opportunity after 1990 to make their own mistakes and be forced to learn from facing the Nazi past.

In Germany, the AfD has placed the above all the CDU/CSU into strategic turmoil. Politicians from the CDU and CSU recently drafted a formal appeal for a ‘core’ national culture to preserve the inherited cultural framework, in order to prevent ‘patriotism being taken over by the wrong people.’ The appeal stated that: ‘Germany has a right to stipulate what should be self-evident’ and called for promotion of ‘rootedness in a homeland one has come to love and a lived experience of patriotism’. In the old FRG, with the growing acceptance of democracy, the Basic Law increasingly acted as the ‘core’ culture; its recognition became the standard for successful integration. Are we experiencing today the transference of this constitutional-patriotic core culture into a new mainstream German culture consisting of habit and custom, such as the duty to shake hands on greeting somebody?

We assumed, clearly over-hastily, that Angela Merkel’s CDU had left the backwards-looking debate of the 1990s behind it. Refugee policy has brought to the surface an internal opposition that combines the descendants of the national-conservative wing of the old western CDU/CSU with the converts of the eastern CDU. Their appeal marks the seam at which the CDU would split apart as a party if forced to decide between conducting the integration of refugees according to constitutional standards, on the one hand, and according to the ideas of the national majority culture on the other. The democratic constitution of a pluralistic society provides cultural rights for minorities so that they have the opportunity to practice their culture within the limits of the law. The obligation upon immigrants of a different background to subordinate themselves to an inclusive majority culture is therefore incompatible with a constitutional integration policy. This demands the differentiation between a traditional majority culture rooted in the country, and a political culture equally accessible to all citizens.

However, this political culture also includes the historical context of the country, which influences how citizens understand themselves and interpret constitutional principles. Civil society must expect of the immigrant citizens that they grow into this political culture, without being able to enforce it legally. The report published in Der Spiegel by Navid Kermani, a German of Iranian origin, about his visit to the former concentration camp at Auschwitz is a moving and illuminating example: in the language-mix of visitors from many countries, he opted to join the silent group of the Germans, the descendants of the perpetrator generation. At any rate, it was not the German language of the group that moved him to do so.

Given that political culture does not remain static in a living democratic culture of debate, naturalized citizens as much as those of longstanding German descent have the right to bring their voice to bear on the process of developing and changing this common political culture. The defining power of these voices is best exemplified by the successful writers, film directors, actors, journalists and scientists from the families of former Turkish ‘guest workers’. Attempts to legally conserve a national core culture are not only unconstitutional but also unrealistic.

The Chancellor’s career as a political poster child
In Die Zeit of 7 July, you criticized, from the perspective of an ‘engaged newspaper reader’, a ‘certain conformity of the Press’, without which Merkel’s ‘policy of lulling everybody to sleep’ would not have worked. Clearly, since Merkel’s refugee policy, we are experiencing a new polarisation. Do you think this offers a chance of finally thinking in political alternatives?

On the contrary, given the fixation on the Alternative for Germany, I fear a further levelling of the differences between the parties. When I spoke about the policy of lulling people to sleep, I was referring to Europe. Regarding the future of the European Union, nothing has changed since Brexit. For example, you read virtually nothing about the new escalation of the conflict between finance minister Wolfgang Schäuble and the IMF, which has quit the aid programme for Greece. Without an initiative that changes the crippling policy of austerity, the readiness inside Europe for co-operation will equally fail to develop in other policy areas.
After Brexit, in an interview with Die Welt, Wolfgang Schäuble publicly recanted on his forward-looking proposal for a pro-active core Europe that he and (CDU politician) Karl Lamers had drafted at the start of the 1990s. Angela Merkel, who has gained the reputation both as a pleasantly rational, pragmatic politician as well as a short-sighted, power-driven opportunist, surprised me with her constructive refugee policy. Her latest trip to Africa shows that she does have the capacity and willingness to act in a strategic and far-reaching manner. But what does it mean when – and this has been the case since 2010 – her policy on Europe is determined by the narrow perspective of national economic selfishness. She seems to think only in terms of national interest in the very policy area where it is incumbent on our government to provide the impulse for building and developing the EU. Merkel’s short-sighted austerity policy, which sticks rigidly to the status quo, has prevented the necessary progress and has hugely deepened the splits within Europe.

You have long demanded a trans-nationalisation of democracy, in other words the strengthening of the EU, in order to compensate for nation states’ loss of control in a highly interdependent global society. Yet the longing for a retreat into the cocoon of the nation state is clearly growing. Given the current state of the EU and its institutions, do you see even the remotest realistic chance of fighting back against this re-nationalisation?

The negotiations over Brexit will certainly bring this issue back onto the agenda. I do still endorse the internal differentiation between a political euro-union that works ever closer together (keyword: core Europe) and a periphery of member-states that prefer to wait things out and that can join the core at any time. There are so many political reasons and economic facts that speak for this that I think politicians would do better to believe in people’s ability to learn, rather than to justify their abandonment of political intervention by fatalistically referring to unalterable systemic forces. With her withdrawal from nuclear energy and her path-breaking refugee policy, Angela Merkel’s career offers two remarkable counter-examples to the notion that no room exists for political manoeuvre.
Translation by Social Europe
World improvement reloaded
by Robert Misik
[This article was published in Blaetter, 2021.] j

Bild: "Capitalism Kills Love" (Attribution License)
Many people have lost the belief that the world can be put on a better track. Since the Enlightenment, people or groups of people – political parties, revolutionaries, subversives, utopians or reformers – have tried again and again, but often not much good has come of it. In this respect, we are once bitten, twice shy.
Of course, when we consider the history of our world, we know that political engagement has also very often done some good. African-Americans in the USA would not have won their civil rights had people not joined together in a movement. In Austria and Germany, universal suffrage was pushed through by labour movements, which also fought for better labour laws, the eight-hour working day, fair wages and proper social insurance. This was only possible because people banded together in large numbers and formed political parties, which in turn exerted extra-parliamentary pressure and influenced the political process. However, we also unfortunately know that today hardly anyone cares about these parties – and that what their leaders want is above all peace and quiet. They like activists, provided that they help them with their canvassing, but they don't want starry-eyed idealists bothering them while they are "professionally" politicking.
Basically, we can't see how improving of the world is supposed to work on a practical level. Even if we have a rough idea about what reforms, laws and measures would make our society that little bit better, more just and more efficient, in a political system characterized by bloodless careerists or old-style apparatchiks hijacked by powerful lobby groups, it seems unthinkable that these could be implemented in the foreseeable future. That's why it seems more obvious simply to be "anti". And occasionally, in a very vague way, "anti it all". Or to cynically avoid the whole game entirely[1].

I can also think of a hundred reasons to join in the lament. For more than two years, the global economy has been mired in the deepest economic crisis since the 1980s, an economic crisis provoked by mistaken deregulation in the financial sector, and still no noteworthy regulatory measures have been introduced that could famish the financial beast. Our national economies are as rich as never before, but young people can't reckon with attaining a level of prosperity even close to that of their parents' generation. Wealth is becoming increasingly concentrated, yet many firms pretend not to be able to guarantee young trainees even a minimal income. There's enough money around for every imbecility, but still we have an education system that spits out more than eight per cent of our children onto the labour market without a school-leaving certificate. In the countless TV talk shows, the same old purveyors of neoliberal sophistries proclaim that we need more egotism and "self-responsibility" – except the banks, which pay their bonuses from national bailout money. Savings are supposed to come from employment benefits and social services. The bankers, meanwhile, have gone back to gambling – with the cheap money pumped into the markets by the central banks and the bailout billions "donated" to them with our tax money. In brief: things go on and on and on.

This won't change as long as people are given the feeling that, even though they know what they are against, it's virtually impossible to improve anything. That's why it's necessary to strike a blow for progressive reforms in our time. Central are proposals for a progressive economic policy. Absurdly enough, although it is the recipes of market fundamentalists that have brought capitalism to the brink of collapse, the preconception stubbornly persists that it is economic liberals and conservatives who "understand the economy", while all the Left does is pile up debt and strangle growth. Yet an economic policy with a fairer society in mind is also a better policy in an economic sense: the economic incompetence of the conservatives consists precisely in the fact that they have no understanding of this whatsoever. The reason is not even because are especially stupid. Rather, as Upton Sinclair put it: "It is very difficult to get a man to understand something when his salary depends on him not understanding it."

Economic fairness and a reasonably equal distribution of income not only make the economy more stable, they also make societies more liveable as a whole. The social stress that goes along with large discrepancies in wealth causes unhappiness – while more equality makes people happier, as Richard Wilkinson and Kate Picket have proven in their groundbreaking study The Spirit Level: Why Equality Is Better for Everyone[2].

The defensiveness trap or Why it's necessary think about the future
Progressive reform also means setting our sights on the future. Formerly, the Left naturally saw itself as the force of progress while conservatives were perceived as backward-looking. However this distinction has long ceased to be clear-cut – one can even argue that progress has switched sides. Now it is conservatives and neoliberals who are for the whirlwind of change – though now, the "reforms" they plead for make the lives of ordinary people more difficult. The result is that many on the Left have been put on the back foot, defending existing social-welfare standards against the sustained attack of market fundamentalists.
Imagining themselves to be in league with the zeitgeist, the world-improvers once assumed that societal change, though not automatically and in every detail, would on the whole move in the direction of more justice and social progress. This certainty has begun to totter in a big way. Today, "progress" is often flatly equated with business-friendly innovation, which causes normal people more stress and certainly doesn't make them any happier. This has forced the Left onto the defensive mentally.

This is a trap, however. On one hand, because it is impossible to restore past conditions; the clock can't be turned back. On the other hand, because we need new answers to new challenges – to problems such as ecological crisis, climate change, the finiteness of fossil resources. The same holds true for the inner emaciation of democracy, the frustration with political parties, the disinterest in politics. These can only be countered with more democracy in Democracy. All these things demand not defence but improvement. Many on the Left have lost their orientation on the future, and their optimism along with it. This is no small matter: hope results from optimism and, from hope, resolution and the will to take a stand. It has always been the optimists who have changed the world, never the pessimists, with their serene certainty that everything will get worse – or at least remain as bad. The Left, in other words, must reclaim progress.

And they have to know what they are standing for. For fair social welfare for everyone and against the undeserved privileges of those who monopolize all the opportunities and most of the riches, power and influence, who block important reforms and corrupt politics and media to protect their advantages. For a world in which a great diversity of people can develop their different talents, but in which all have the same chances and a sufficient degree of security. For a society that is equal again. It's that simple. If these aren't the terms that leftwing or social democratic parties are talking in, then something has gone seriously wrong.
Of course, there are no shortages of explanations for why "the Left" – the left-liberal milieu, progressive NGOs, parties of the democratic Left – is in the state it's in. However, to paraphrase Karl Marx: it is not enough to interpret the political forces of the Left. The point is to change them.

Prosperity for all: The economic competence of the Left
A society that shares its prosperity with all its citizens also functions better economically. The economic competence of progressives consists in their understanding this.

In practice, however, others have been calling the shots in the last thirty years. Neoliberal economists have brought into the world the thesis that says that the more freedom one concedes to the markets, the more wealth will be created. "Behind every cynical (or merely incompetent) banking executive or trader sits an economist, assuring them (and us) from a position of unchallenged intellectual authority that their actions are publicly useful and should in any case not be subject to collective oversight", notes the great social democratic historian Tony Judt, who died prematurely in 2010[3].

With puffed-up chests and more than a dash of arrogance, neoconservative and free-market politicians influenced by these economists have insisted on their "economic competence" and brushed off all those who dared point out that unregulated markets not only produce social injustice but also massive instability. These politicians cultivate the impression that they understand a thing or two about "the economy", conceding to progressives "expertise on social matters", at the most, as if the latter only wanted to redistribute wealth without knowing how to produce it.

The new world economic crisis has shown yet again that one can't leave it to the market to provide for a strong economy. In any case, it is a truism that a community with a certain quality of life depends to a great extent on resources that the market does not produce – or that it even destroys; anyone not totally ideologically bull-headed must immediately comprehend this. "Markets, of their own accord, produce too little of some things that are useful for society, such as research, and too much of other things that are harmful, such as environmental pollution", as the American Nobel Laureate for Economics, Joseph Stiglitz, has put it[4].

For this reason alone, an important task of the state must be to regulate things in the interests of society. This includes an education system that gives everybody a chance; a public transport system whose primary goal is not profit but mobility for all; a police force that guarantees public security for everybody and not just for those who can afford to live in "gated communities".

The necessity of the state
With a view to the well-known responsibilities of the state, which the private sector does not or cannot carry out, Keynes once wrote that "the important thing for government is not to do things which individuals are doing already and to do them a little better or a little worse; but to do those things which at present are not done at all." State responsibilities, according to Keynes, are those that lie beyond the zone of the market that markets do not carry out.
However state policy also has a responsibility in the core area of the economy. While the game of supply and demand and price-formation on markets might be the most efficient way to produce goods, the market's short-term perspective always also produces systemic malfunctions. Left to its own devices, the market leads to dead ends that an astute economic policy can anticipate and avoid.

In the crisis, everyone suddenly became a Keynesian again; the crisis was, to a certain extent, a "Keynesian moment". However caution is required: this doesn't mean that instinctive adherents of free-market ideology came to their senses overnight. For them, Keynesianism is an economic policy "for bad times", whose insights one relies on when the economy crashes, but which one forgets again as soon as things start improving.

The result is that injustice is common – which in turn often has economically adverse consequences. Justice – i.e. the fair involvement of as many citizens as possible in wealth – is not a dreary moral injunction that runs counter to the demands of the market economy. Justice is useful economically.

Why injustice is harmful
Chronic injustice is harmful, essentially for four reasons. First: prosperity for everyone bolsters purchasing power and domestic demand, stimulates the economy and makes a national economy less dependent on export demand. This is also the case in an open, globalized world. Second: if all people live in materially secure conditions, then all people are also able to develop their talents and contribute to overall prosperity. Leaving people on the fringes of society, so that their opportunities waste away, isn't only unjust, it's also inefficient. Third: if citizens get the feeling that things aren't fair, they will engage less. If young people from lower social classes don't see a chance, they won't make an effort to do something with their lives. Experience shows that people try harder if they feel they've got a fair chance and that it's worth the effort. Fourth: being underprivileged is hereditary. Whoever is born in poverty gets a worse start in life. Children who have fallen behind by the age of six often never succeed in catching up in adulthood. They are born losers. This isn't only unjust, it also wastes the potential of people who could contribute something to wealth and prosperity.

Good social policy is therefore also good economic policy. Among the most fatal aberrations in the past decades has been that laissez-faire meddlers, these fiscal war-mongers with their cut-and-thrust arguments for more mettle in economic life, for downward "flexibility" in wages, for cutting loose the "social hammock" of the welfare state, have been able claim "economic competence". At the same time, they have portrayed progressive forces as social Romantics who want to distribute the fruits of prosperity fairly but have no idea how to generate wealth.
"Correct" economic management is identified with the kind of simple budgeting a Swabian housewife would understand: save dutifully, since that's the only one gets rich. [Swabians have a reputation for being spendthrift – ed.]. Whoever spends too much, possibly out of misconceived humanitarianism, or allows others to get too much, can't manage money and is ruining themselves.
However this is only true in the world of the Swabian housewife, and perhaps in the small world of the honest-to-goodness tradesman. For such a complicated and multiply entwined thing as a national economy, not to mention the global economy, it is not true. If too many people try to rip-off as many others as possible, they trip themselves up. Those who want to gain advantage at the cost of others might be successful in the short term, but in the long run they make us all poorer. The economic competence of progressives consists precisely in their understanding this. The dangerous political-economic incompetence of neoliberals and neoconservatives consists precisely in their not understanding this. Microeconomic thinking is beneficial only from the perspective of the individual business; if a whole national economy adopts this logic, it leads to a dead end and a downwards spiral that leaves many people worse off.

For a small factory owner, reducing employees' salaries and producing as cheaply as possible may bring a competitive advantage. But if all factory owners did this, none of them would be happy: they all need consumers who can buy their goods. If people don't have any money, companies don't have any customers. Not only that: because every manager has to keep production costs in mind, proper wages are also an incentive for rationalization, for inventing better machines and so on. Even if this brings job losses, the productivity of the whole national economy grows, so that those who are made redundant don't fall into an abyss but can find new jobs in an economy that constantly produces more wealth. Higher wages constitute an implicit incentive for technological progress; low wages, in contrast, are often responsible for a national economy falling behind.

The neoliberal downward spiral
In Germany – and to a lesser extent in Austria – a dangerous strategy has been pursued in recent decades. Under the influence of economically liberal doctrinaires, the upwards trend in real wages has been reversed and a low-wage sector has been established. Germany's "competitive position" has "improved" in the past years by 14 per cent; Austria's by 6 per cent. "Improved" of course sounds like a good thing, but means nothing else than that unit labour costs in both countries have dramatically decreased in comparison to their economic partners – precisely because wages have fallen, or risen more slowly, in relation to increases in productivity. "Altogether, gross and net earnings per employee in 2008 in comparison to 2000 dropped in real terms by 2.3 per cent and 2.2 per cent respectively", calculates Peter Bofinger, professor of economics at the University of Wurzburg, and one of the five "economic wise men" appointed to assess Germany's "macroeconomic development"[5].

At the same time, income inequality has skyrocketed. In 1987, a board member on average earned 23 times more than an employee; in 2007 it was over 109 times more. The size of the underclass has also risen sharply, increasing from 19.2 per cent to 24.2 per cent of the population. The Organization for Economic Cooperation and Development (OECD), whose members are all "developed" countries with high per capita incomes, came to the withering conclusion that, "since 2000, income inequality and poverty have increased more sharply in Germany than in any other OECD country".

The fact is that fairer distribution of wealth leads not only to more demand, but to greater economic activity. Moreover, it has a range of other consequences that make society more just and at the same time more productive. First, stable prosperity results in more people having jobs and more people having good jobs. As a rule, this doesn't only mean that people receive their pay on the first of the month. They also learn something and are able do something; they develop abilities and generally go through life more optimistically. Plainly and simply, fewer people live in poverty. Children who grow up in poverty have lower school marks and fewer life chances than children who live in materially comfortable conditions. If they receive a better education they will have a productive impact in fifteen to twenty years. There will be fewer social problems and more people with valuable skills and proper incomes, who in turn have an important function in the market economy as consumers.

In other words: economic fairness triggers a series of win-win effects, while economic unfairness brings with it a series of lose-lose effects.

If, for instance, a company opts for low wages, it will have to deal with a de-motivated, poorly qualified workforce. If many companies do this, the productivity and wealth of the national economy at large will soon begin to sink. No only that: if wage dumping is permitted, productive companies with good economic management and innovative business models – if they are to afford good wages for their employees – are "punished". They have to compete with companies that are less economically efficient and that possibly offer worse products, which can only keep pace on the market because they pay their workers miserably. A society that permits low wages thereby subsidizes ineffective, regressive companies to the disadvantage of progressive ones. Not only is this questionable for reasons of fairness, it is also preposterous for economic reasons. Ultimately, it is a false and static presumption to believe that a commodity can only be manufactured in a certain fashion and that, if the wages are "too high", it can no longer be produced. As a rule, companies adjust themselves to the wage level of a society. If that is higher, they have to produce more efficiently in order to remain cost-effective[6].

An economy is dynamic, not static. If one allows for more just distribution – and does what hasn't been done for a long time, namely distribute from the top to the bottom – generated wealth will be distributed differently. But – and this is a big "but" – if a national economy becomes more productive as a result, it will also become richer as a whole, meaning that generated wealth will grow. In short: a dynamic society is not a zero-sum game. Not only are egalitarian societies more liveable societies, they are also more productive. The slogan "prosperity for all" is a guideline for a fairer distribution of wealth as well as for the production of greater prosperity.

Inequality produces (financial) crises
Unjust societies are, in contrast, often more unproductive: they subsidize unproductive sectors through cheap production and they forego important domestic demand by failing to let the large share of the population participate in the prosperity. They are inefficient simply because a large number of people are either unemployed or perform unqualified functions, and because unequal distribution then leads to economic instabilities that harm longer-term prosperity. Instabilities in financial markets, which, as in the recent crisis, can lead to (near) collapse, have a lot to do with inequality. The circle is complete.

Wealth inequality also means that big financial players on the markets search for investments, while the real economy grows only slowly. The temptation arises to obtain financial returns not sustained by any real increase in prosperity, by means of elaborate financial instruments, gambling, speculation and fraud. To put it as simply as possible: if banks, investment funds, hedge funds and so on promise returns of 15 or 25 per cent, while the world economy grows at only three per cent, then such profits are only possible if something is taken away from someone else. If one gives someone something one has diverted from others. If one talks citizens into mortgages or certificates with astronomical fees, if one redistributes wealth from the recipients of wage income to the recipients of financial income. And high financial profits are only possible if one takes massive risks. This is one of the backgrounds of the financial crisis.

There is another way in which the massive increase of inequality has contributed to instability and, ultimately, the collapse of the financial system. The fact that the lower classes and large sections of the middle class have been increasingly excluded from increasing prosperity has created a slump in demand. Different national economies have reacted to this in different ways. In the US, the "basic trend towards stagnation resulting from increasing inequality has been compensated by the rise in the indebtedness of private households"[7]. In other words, while the national deficit rose, American citizens were at the same time madly plunging themselves into debt in order to maintain their level of consumption. Financial risk-taking and huge levels of private debt were, together, what caused the massive deficit in the American national budget – the country borrowed money from the whole world in order to buy up the whole world's goods.

The European and Asian countries reacted differently to the growing inequalities: because domestic demand did not suffice, Germany, for instance, but also China, exported much more than they imported. They built up massive export surpluses. The different ways various countries have handled increasing inequality has, in other words, "reciprocally intensified" and led to massive imbalances – an instability that erupted in the crisis.

A "good capitalism" is possible
Some diehard leftists will at this point probably shrug their shoulders and say that all of this only shows that capitalism is "principally evil". However, things aren't that simple. It is possible to make the market economy more just – and in doing so, make it function more efficiently. This is the gratifying lesson to be learned from what a group of German economists has called "good capitalism", in contrast to earlier and later predatory forms[8].

Sure, one can't stop the march of time – and hardly anyone would want to. The Fifties, Sixties and Seventies weren't entirely "golden": although processes of social modernisation indeed made western industrial societies freer and more colourful, they also contributed to societal inequality. In many cases, the liberalisation of markets for products and services was the driving force for innovations that boosted productivity and living standards. It cannot be about "returning the economic system to the level of regulation that existed in the Sixties and Seventies," write the authors of the manifesto for a "good capitalism". "Instead, governmental interventions needs to obey the principle of preserving the emancipatory elements of the liberalisation of the past decades while roping in the destabilising elements of deregulation."[9]

Such a capitalism cannot, however, be one in which "the markets" are simply left to their own devices. The financial markets in particular require a tight regulatory framework. A "good capitalism" is not one in which the "law of the jungle" determines income distribution, and where governments increasingly become "night watchmen" that save bankers when they run the system into a brick wall but otherwise keep out of long-term investment decisions.
Societies need to set ambitious goals in order to manage their economies more fairly and more sustainably. These goals are not set by "the markets" and by companies, who think only in terms of their own economic benefits. Market players don't think long term; for them, all that's important is today and tomorrow's profits, not sustainable economic management in twenty years' time. Even if one assumes, as the free-market faithful do, that markets provide the best "information signals", it is also clear that "people not yet born are also not market participants – they send no market signals whatsoever"[10].

According to Joseph Stiglitz, "the most important production factor of a country is its people, and if a high percentage of people does not realize its potential [...] the country as a whole cannot realize its potential"[11]. A more just society that achieves more equality and enables its citizens to participate in prosperity is also a society that functions more effectively at the economic level. The economic competence of progressives lies in the fact that they understand this. This is a decisive point that the forces of the Left have failed to make sufficiently clear in past decades. Much will depend on changing this in the future.
This is a translated excerpt from Robert Misik's book, Anleitung zur Weltverbesserung, Berlin 2010.
This article was translated by Brian Dorsey; the translation has been provided by Eurozine

[1] See Robert Misik, Genial dagegen. Kritisches Denken von Marx bis Michael Moore, Berlin 2005.
[2] See: The Spirit Level: Why More Equal Societies Almost Always Do Better, 2009.
[3] Tony Judt, Ill Fares the Land, 2010, 105.
[4] See: Joseph Stiglitz, Freefall: America, Free Markets, and the Sinking of the World Economy, 2010.
[5] Peter Bofinger, Ist der Markt noch zu retten? Warum wir jetzt einen starken Staat brauchen, Berlin 2009, 84.
[6] See James K. Galbraith, Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too, 2008.
[7] IMK-Report, 41/2009,
[8] See: Sebastian Dullien, Hansjörg Herr and Christian Kellermann, Der Gute Kapitalismus und was sich dafür nach der Krise ändern müsste, Bielefeld 2009.
[9] Ibid., 139.
[10] J.K. Galbraith, op. cit.
[11] See: Joseph Stiglitz, Making Globalization Work, 2006.
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