Austerity policies in the EU are often presented as having no alternative. Many leftists, on the other hand, hope for a better life from Keynesianism. Jungle World spoke with the political scientist and publicist Ingo Stützle about the euro crisis, austerity, and Keynesianism. Stützle’s study Austerity as a Political Project was just published this Autumn.
Interviewer: Axel Berger
JW: What do you mean by “austerity as a political project”?
IS: The title refers to contemporary developments in the eurozone. I raised the question as to how the financial policy model of the balanced budget could be europeanized with the creation of the euro. Ultimately, such policies don’t just fall from the sky, nor can they simply be derived from the dynamic of accumulation. A political project integrates disparate social and political forces that do not necessarily consciously follow the same goal. But within a specific historical constellation, their activity converges upon a common result. That was the case with the euro and the model of the balanced budget. Since then, Canada also wants to legally codify this principle, and US President Obama, after the budget conflict, called on the Republicans to make common cause with him, despite all their differences, in order to present a balanced budget.
JW: But wasn’t the increasing indebtedness of states the dominant trend in the last few decades, which was also continued in the crisis?
IS: That’s true, but a “regime of austerity” and high sovereign debt are not necessarily a contradiction, but are rather two sides of the same coin. The idea of using fear of the consequences of debt in order to pursue austerity policies is not only familiar to the political class in Germany. It was familiar to Ronald Reagan as well. His director of the office of management, David Stockman, coined the term “strategic deficit.” By that he meant a useful indebtedness of the state, which made the case for saving plausible. One achieves such a deficit by cutting taxes on wealth, top earners, and big industry. The case is similar for Great Britain, the second country to play a pioneer role in the implementation of neoliberal politics. Margaret Thatcher’s leading economic adviser, Alan Budd, told the newspaper The Observer in the 1990s: “the 1980’s polices of attacking inflation by squeezing the economy and public spending were a cover to bash the workers.”
JW: Public debt is a promise based upon future tax revenues. Doesn’t every government eventually reach a point where it has to admit that redeeming this claim is unrealistic? Isn’t the course of austerity just a logical consequence of the fact that crises can only be solved by devaluation?
IS: German finance minister Wolfgang Schäuble was asked during the currency conference in Washington this past October when Germany would pay back its debts. He answered: “When are we ever without debt? Hopefully never.” What is decisive, according to Schäuble, is reducing debt in proportion to economic performance. This statement shows that increasing public debt is not a problem, as long as creditors are serviced by increased tax revenues on the basis of a growing economy and that they can assume they will be able to find a purchaser for their bonds. If a country can replace old debt with new debt, the mountain of debt theoretically has no limit. Many critics of capitalism would like to determine such a limit in an abstract way, but that’s not possible.
JW: So debt is a game without bounds?
IS: Of course not. On the one hand, one has to ask who is burdened with interest payments, and that is without doubt a question of class. The tax burden in the last few decades was increasingly shifted onto wage laborers. But the people who pocket interest payments are primarily bond holders. And of course capitalist development is crisis-prone, which leads to periodic devaluations of both productive and fictitious capital, which includes both stocks and government bonds. But a sovereign default can also effect a modernization. That was the case in Argentina in 2001. After a few years, the country voluntarily began to service its debts again, which it had temporarily stopped doing. Russia after the end of the Soviet Union also started to service loans suspended in 1917. There is a reason for that: so-called “original sin.” If a country or a city goes bankrupt, it has to pay a risk premium, meaning it has to pay higher interest rates. That is the case with the city of New York.
JW: In light of concerns about long-term competitiveness and credit-worthiness one could say provocatively that the Merkel government is something like the ‘ideal total capitalist’ within the EU and the eurozone in particular.
IS: No. That would assume for one thing that austerity policies are the only conceivable possibility for reorganizing European capitalism. For another thing, it assumes that the German state expresses the disparate interests of capital in all other European countries. But that is only the case in a limited sense. The fact that Germany calls the tune is due, among other things, to the circumstance that in the last few years increasingly more decision-making power has passed to the European Council, the body in which the strength of a state is relevant above all else. The European Commission was disempowered, and the European Parliament has never played a big role. Already at the end of the 1980s, Germany insisted upon limiting and controlling the possibilities of incurring public debt by other member countries. Within the framework of monetary integration, Germany’s economic dominance was transformed into political dominance. The European Central Bank (ECB) and the euro are constructed according to German conceptions.
If anybody is playing the role of an “ideal total capitalist” right now, then it’s the ECB. Only the ECB is capable of implementing policy against all euro-states. That is also true to a limited extent with regard to Germany. That can be seen in the case of the ECB buying up government bonds, which the Bundesbank did not want. It’s being done anyway, but under strict constraints that only strengthen the austerity course. Bonds are only being purchased by countries that have submitted to the fiscal pact.
JW: In your book, you discuss the difference between French Keynesianism and German Ordo-liberalism. Would an EU dominated by France constitute an alternative to the austerity course? Or are those ideological schemas that are irrelevant against the background of real interests?
IS: I wouldn’t speak of a French Keynesianism, but rather of a variant of neoliberal development – at least for the period since 1983. Cultural specificities exist for individual countries as always, but they’ve been smoothed out, primarily on the terrain of monetary policy, in the last few years. They’re not irrelevant, but interestingly enough, it was France – not Germany – that pleaded for the goal of balanced state budgets and a debt limit of zero percent, rather than three percent. France hoped to economically integrate Germany by means of the euro, but to do so it had to accept a euro under German conditions. The fact that it’s a racist stereotype to accuse politicians from Southern Europe of having a tendency to loose monetary policy isn’t just demonstrated by the example of ECB President Mario Draghi.
JW: The answer to the crisis was initially strongly influenced by Keynesianism, i.e. stimulus programs and loose monetary policy. Despite the obvious lack of success, for many leftists the struggle for a new Keynesianism and against austerity policies offers a new hope not only for better living conditions; they also connect it with a stabilization of capitalism. What do you have to say about that?
Even though I have nothing against higher wages and social benefits – quite the opposite – it’s a bit skewed if these leftists want to deploy means of saving capitalism from itself. If you look at the historical constitution of Keynesianism in the USA as a consequence of the big crisis of 1929, it was preceded by a phase of heavy class struggles and the self-organization of workers and the unemployed. At the same time, what Johannes Agnoli refers to as an institutional strategy occurred: the integration of subversive forces. Class struggle becomes social partnership.
But of course, for neoclassical economists wages are primarily a cost factor for businesses, social expenditures are unproductive expenditures, and high taxes have a suffocating effect upon private initiative. Economists with a Keynesian orientation understand wages and social expenditures to be an element of social demand. That’s why unions and social democrats – including the party Die Linke – think those things are great. With Keynes, they can reconcile wage increases and an expanded welfare state with “economic reason.” That’s why Sabine Nuss has coined the term “User’s Manual Capitalism” for such conceptions.
But there are also two short-circuits here: for one thing, it’s not necessarily leftist, since Keynesian policies do not aim at transcending capitalist forms. A good life is only possible when capitalism has become a chapter in history books. For another thing, Keynesian policies aren’t able to assert themselves because they appear to be more reasonable – that’s a bourgeois conception of social change. Which policies are able to finally assert themselves is the result of economic conditions, but also of social struggles.
Translated from the German by Alexander Locascio