political economy

The Future of Capitalism with Wolfgang Streeck

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In this special edition of the CURA podcast we talk to Wolfgang Streeck, Director of the Max Planck Institute for the Study of Societies, about his works “Buying Time” (2013) and “How Will Capitalism End?” (2016). You can listen and download the podcast here , on soundcloud, itunes, and most major podcast platforms.

Drawing widely on classics from Schumpeter, Polanyi and Marx, Streeck offers an account of the lineage of democracy, capitalism and the state since the post-war period, identifying the deeply de-democratising and self-destructive trajectory in contemporary capitalist development. Against liberal received wisdom, Streeck argues that democracy and capitalism are anything but natural partners or easy bedfellows, but have in fact been in constant historical tension. The post-war social democratic settlement represents an unusual “fix” to this tension that was relatively favourable to the popular classes, or “wage dependent”, parts of the population. However, this fix unravelled in the 70’s as the capitalist, or “profit-dependent”, class rediscovered its agency and, with neo-liberal globalisation and financialisation, began to shape a world in its interests.

Streeck argues that these processes are putting in danger not only the existence of democratic politics, which is increasingly circumscribed by the need for states to appease financial markets, but also the future of capitalism itself. Streeck’s vision for what is to come is gloomy. Capitalism continues to erode the social foundations necessary for its own sustenance, as well as the resources needed to collectively construct an alternative order. Institutional and policy fixes to capitalist contradictions are running out. We can expect the result to be the development of an increasingly uncertain and under-institutionalised social order, reminiscent of a Hobbesian state of nature, where individual agency and creativity becomes fundamental to meet basic needs and achieve even minimal goals. Politics offers hope of rupture, but is itself increasingly constrained and defiled by capitalist development and rationality.

In this podcast CURA‘s Adrian Bua talks to Wolfgang about his work on the trajectory of capitalism and democracy.

The Logic and Practices of Austerity Governance in Dublin

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GIF RGB 150 Pixels with BorderThis post outlines the main findings from the second round of research carried out by Dr Niamh Gaynor and Ms Nessa Ní Chasaide in Dublin as part of the Collaborative Governance under Austerity project. It forms part of a second series of eight blogs from the covering the comparator cities in the project.

Dublin has often been hailed as ‘the poster child of Europe’ for its discipline and compliance in managing austerity.  The Irish Finance Minister’s repeated mantra that ‘Ireland is not Greece’ serves to reinforce this image of social cohesion and stability so crucial to the attraction of foreign investment.  With property prices rising once again in the city and investors returning, there is much talk these days of economic recovery and growth.

However, as my previous post highlighted, this narrative masks the more complex and variegated experiences across the city.  In that post I outlined the socio-economic, administrative and political impacts of austerity throughout the city – the ‘what’ of austerity. In this post I would like to turn to the ‘how’ of this – the logic and the practices employed in governing Dublin’s communities and neighbourhoods in such challenging times.

The logic

Austerity governance in Dublin, as in many cities worldwide, is underpinned by a strong orientation to ‘the market’.  This manifests in two principal ways.  The first is the close relationship between property developers and city officials.  As the housing crisis escalates – a 117 per cent increase in homeless children last year alone – many properties lie vacant and unused across the city with no pressure on owners to sell them on.  Any proposals to tax vacant properties are reported to have met with strong resistance from council and national officials.  Indeed, in a recent (January 2017) response to a parliamentary question on council powers to tax vacant sites, the Minister for Housing stressed that no tax be imposed ‘in order to help alleviate the financial burden faced by owners of vacant sites’. This is in marked contrast to Barcelona where the council introduced legislation to fine banks that keep empty houses on their books.  In addition, spiralling rents are pushing many residents in the rental market out onto the streets as efforts to introduce rent controls are consistently blocked.  With little or no control over housing costs, many can no longer afford to live in the city.

The second manifestation of the city’s market fetish is the adherence to market-based solutions in service provision, including housing, water and refuse.  According to the long-awaited Housing Strategy, the city’s housing crisis – the product of failed public-private partnerships where developers reneged on contracts following the crash in 2008 – is to be addressed by more public private partnerships as the City Council is not permitted to build houses itself.  The city’s aging water infrastructure was to be tackled by a new company established in 2013 called ‘Irish Water’.  The fiasco surrounding this – cronyism on the board, over Euro 50 million awarded in consultant fees; widespread confusion over changes to charges; widespread billing errors; and a lack of accountability for the ensuing chaos – led to a general election in early 2016 and, over a year on, it remains unclear to date how the botched water privatisation is to be resolved.  It seems little or nothing has been learned from past experiences.  The privatisation of waste collection across the city over the past decade, resulting in a chaotic service for residents and eroded working conditions for staff, has already offered valuable lessons on the subject of market-based approaches.

The practices

Our research has uncovered four principal practices of austerity governance.  The first concerns control over information particularly and the overall narrative more generally.  The dearth of systematic information available on both the impacts of the spending cuts and their spatial and sectoral breakdown has been noted by many research participants, including city councillors.  Indeed, one of our respondents (a councillor) reported that his request for a breakdown on spending cuts was denied on the grounds that resources were not available to carry out this additional work.  The annual council budget meeting in 2016, which we observed as part of the fieldwork, began with an announcement that the overall figure councillors were being asked to debate and vote on had now changed.  The meeting collapsed into disarray as it became clear that some councillors had been appraised of this development while others had not.  While these information gaps could be benignly interpreted as symptoms of a poorly organised system, the dearth of systematic socio-economic data cannot.  Systematic cuts in central government funding to key research institutes from 2007 forward has left the city bereft of important socio-economic data – most particularly relating to the impacts of austerity policies in specific neighbourhoods.

The second facet of austerity governance in Dublin is the erosion of power and continued de-legitimisation of local authorities.  Despite much talk of local government reform and the renewal of local accountability and democracy, the hollowing out of local government continues apace with cuts to the city council of between 20 and 25 per cent reported to affect principally services and personnel at the coalface.  The result is an ageing and somewhat demoralised workforce.  While recruitment is reported to have recommenced, local community based personnel report that this remains limited to more senior, centralised positions.

The third practice mirrors findings reported from Leicester in relation to the reconfiguration of civil society.  The narrative and climate of austerity has accelerated the state’s process of cutting, shaping and disciplining publicly funded civil society organisations.  As a number of our respondents note, the 38 per cent cuts in funding to community and voluntary sector organisations primarily affected small, community-based groups with strong linkages within their communities.  Moreover, funding has become restricted to service provision and training only, and important research and advocacy functions now secure no state support.  As one state official noted ‘we’re funding groups to deliver frontline services in the main, not to be there with megaphones leading…’.  And, as respondents from surviving civic groups note, this has narrowed if not closed important spaces for critique and dissent within local communities.

This reconfiguration and reshaping of civil society extends to a fourth practice which aims at (re)constructing citizen-subjects as responsible, dutiful and ‘active’ citizens diligently working in a voluntary capacity within their local communities to plug the gaps arising from austerity cuts.  An intolerance of public questioning and dissent has long been a feature of social life in the city.  While the reasons for this are clearly complex and diverse (ranging from the historical legacy of a particularly bitter and divisive civil war in the 1920s; the strong influence of the Catholic church and its privileging of conservatism and consensus; the prevalence of clientelist politics at local levels; the lack of sharp left-right political divisions; and the relative weakness -or co-option- of the trade union movement), the homogenous branding of all activists mobilising against austerity policies as ‘unpatriotic’ and ‘violent’ has exacerbated this trend.

Reactions

While the logic and practices of austerity governance in Dublin certainly resonate with those of other cities grappling with similar crises of welfareism, the various and diverse public reactions to them perhaps highlight some particularities.  While the official discourse promotes images of a dutiful and compliant public, our research has uncovered a range of mechanisms of resistance – from traditional protest to innovative, social media driven acts of solidarity and support – taking place across the city.  Possibly the most significant factor in these is the range and number of ‘new’ activists of all forms, together with the multiplicity of tactics and techniques they employ – many of which fall under the radar of those focusing narrowly on the more traditional model of ‘angry protestors’.  Although this resistance is rooted in the city’s working classes, many of these new activists are middle class and female, reflecting both the broad-based impacts of austerity and its highly gendered nature.  While much of their efforts are either miss-represented or not reported at all, they have been and continue to be highly effective.  The privatisation of water services has been effectively abandoned and the housing crisis – surely a misnomer as the quality and affordability of housing in the capital has long been an issue – has become the number one political issue (notwithstanding that the various proposals and strategies to address this remain ambiguous and unclear).  And although there are attempts by some left-wing parties to channel these ‘new’ activists into formal politics, our respondents report that many prefer alternative political avenues in their quest for social justice.

As Dublin’s ‘water wars’ have demonstrated, hegemonies are never victorious.  They are always contested and contestable and subject to change.  Pressures to reverse the severe damage of ongoing austerity policies and to build a more equitable city may well come from outside rather than inside the formal governance system.[i] Therefore, a more systematic, honest and open form of state engagement (with disaffected, yet innovative and determined citizens and communities) may well be what is needed.

Dr Niamh Gaynor is Senior Lecturer in Development Studies at Dublin City University.  Nessa Ní Chasaide is an independent researcher and Research Assistant for this phase of the research.

[i] Austerity in Dublin is far from over.  In his last budget, the Finance Minister announced that government debt is to be reduced from its current target of 74 per cent of GDP to 45 percent over the next 10 years.   There is no way to achieve this other than through more austerity cuts

Labour-Centred Development in Latin America: Two cases of alternative development

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The_hand_that_will_rule_the_worldIn todays post, Adam Fishwick offers an overview of the main arguments and highlight some of the key empirical findings of research published recently in Geoforum. Co-authored with Ben Selwyn, the article discusses alternative models of development that go beyond the neoliberal and statist paradigms that dominate debate, and is based on two cases– the cordones industriales in 1970s Chile and empresas recuperadas in Argentina today – of “labour-centred development”.

The rise of the ‘Pink Tide’ of progressive left and left-of-centre governments in Latin America briefly offered us a set of seemingly new alternative models – from buen vivir in Ecuador to ‘Socialism in the 21st Century’ in Venezuela to ‘growth with equity’ in Argentina.

Yet with the stagnation and apparent collapse of these models, critics on the Left have begun to highlight the many underlying contradictions that the Pink Tide failed to address.

Whilst the ‘neo-developmentalist’ strategies adopted throughout the region have seen a growing level of state intervention favouring increased growth in domestic industrial sectors and some social welfare improvements, they have embedded deepening relations of exploitation, blocked and co-opted social movements that brought these governments to power, and sustained a socio-economic order over-written by neoliberal macroeconomics.

Put simply, the statist strategies of the last decade have – despite limited gains in distribution, welfare, and industrial restructuring – made little progress in overcoming many of the regressive features of the neoliberal development strategies of the 1980s and 1990s.

From this starting point, then, we offer a critique of Elite Development Theory (EDT) as it informs the neoliberal and statist political economy paradigms in Latin America (see Selwyn 2015, 2016 for a wider critique of EDT in development studies). Second, we present two cases of what we term labour-centred development (LCD) in its nascent forms.

Regarding the first, elite development theory can be identified with two dominant trends that run parallel to and have to some extent informed the last three decades of Latin American development.

The emergence of the Washington Consensus formalised in the 1980s and 1990s much of the emerging practice of development across Latin America, bringing with it a firm commitment to reducing states’ welfare spending and the removal of ‘labour market inflexibilities’. The result was a sharp reduction in redistribution towards the labouring classes and the direct and indirect repression of their capabilities to mobilise collectively across Latin America.

The response of Statist Political Economists to this position offered a stark challenge to the Washington Consensus that, for many, offered a real alternative model for development.

But the progressive claims of these statist approaches are problematic. Alice Amsden (1990), for example, describes how South Korean state-led development relied on ‘the world’s longest working week’ and ‘cheap labour’, also noting how ‘labour repression is the basis of late industrialization everywhere’. And, in his comparison of Brazil, South Korea, India, and Nigeria, Atul Kohli (2004) notes the significance of strict workplace discipline.

Recent state-led development in Latin America can also be seen in this light. Although led by left and left-of-centre governments, it often remains reliant on the restriction of workers’ mobilisation in the service of a state-led national development strategy.

Alternatively, then, we propose a view on development that directly privileges the agency of labour in pursuing and constructing what we term labour-centred development:

‘the core concerns for LCD analysis are not those of capital (how to secure accumulation), but those of labouring classes. These include workers’ ability to reproduce their wage labour outside work (i.e. to earn enough wages and have enough time to secure the basic necessities of life and to engage in culturally-enhancing activities such as socialising and education), extending to more free time (shorter working days) and more decision-making ability within the workplace (to reduce the burden of work)’ (Fishwick & Selwyn 2016)

We distinguish our perspective from the two strands of EDT inasmuch as we perceive the interests of the labouring classes as the starting point for alternative strategies of development. We highlight the often invisible and obfuscated dynamics of labour’s collective action and its role in producing unique developmental dynamics from within what Michael Lebowitz (1992, 2001) has termed ‘the political economy of the working class’.

Second, the two cases of LCD we discuss are drawn from distinct contexts – the revolutionary moment of the Allende government from 1970 to 1973 in Chile and the deep crisis and recovery of the Argentinian economy from 2001 to present – but both are demonstrative of the capability of labouring classes to construct real alternatives from below.

In assessing these cases, we highlight four factors: (1) growth and productivity (2) employment data (3) workplace organisation (4) production priorities. In each of these we analyse the contributions made by workers themselves, as well as the limitations that derive not from the internal failings of these cases of LCD, but from capital mobilising against them.

The cordones industriales in Chile were a powerful example of LCD that emerged under the socialist government of Salvador Allende in the early 1970s. Comprised of a small occupied factories and large plants incorporated into the state-led nationalisation programme – the ‘Area of Social Property’ – they saw workers organise against a growing employer boycott to establish new forms of control over process of production and distribution.

Mobilising under the Communist Party-inspired ‘battle for production’ slogan, they revitalised output and productivity levels in a range of leading industrial sectors, transforming work, the workplace, and the priorities of production in the process.

Drawing on examples from the textile sector with data gathered from a range of trade union publications and political pamphlets from the time, we show how large and small plants saw increased levels of output under workers’ control, raised employment and wage levels, and even the establishment of facilities aimed to support workers and their families.

Strict Taylorist and paternalist management hierarchies were rapidly replaced by participatory forms of organisation, with workplace assemblies and councils building on the participation programmes promoted by Allende to produce genuine worker participation and control over decisions ranging from output to supply and credit to production priorities. Factories even transformed their produce in direct service of the poor communities and neighbourhoods from which their workers came and which surrounded these workplaces.

Nevertheless, despite these embryonic forms of LCD, pressures both from the socialist government of Allende and pressures from outside restricted the expansion of these strategies. And, on 11 September 1973, they were directly targeted as nascent ‘Soviets’ by the military as it violently reversed many of the gains that had been achieved in these years.

The empresas recuperadas in Argentina are a crucial contemporary example of LCD, in which several hundred workplaces have been transformed into legal and semi-legal cooperatives by workers pushed to the brink of unemployment. Often established following a long period of struggle with first the original owner and later the state, these enterprises first emerged en masse in the aftermath of the 2001 financial crisis in the country.

Typically involving workers with little or no political experience or affiliation, the transformations to work and the workplace have been profound – from the introduction of equitable pay to cooperative networks of financing and supply to the transformation of work.

Drawing on a range of sources and data gathered by the Open Faculty Programme in Buenos Aires, we show how, in recent years, there have been some significant improvements in productivity and output under workers’ control, how wages and employment have improved in most these workplaces, and how, most importantly, workplaces have been transformed.

There has been an increase in democratisation on the factory floor, whilst the introduction of job rotation and new divisions between labour processes and the organisation of the working day have ‘humanised’ these workplaces. Links established between the factories and the neighbourhoods, moreover, have had a tangible impact on the lives of the labouring classes across these communities, as well as contributing to the defence of factory occupations.

Nevertheless, despite these important gains, pressures on the initial formation of the empresas recuperadas, as well as the ongoing influence of their relationship with the wider capitalist marketplace points to the limitations of these examples of LCD. There have been attempts to overcome these through new networks and institutions, but they remain in their early stages.

To conclude, then, in our paper we show that the paradigmatic perspectives on development fail to capture these important dynamics that can – and, as we show, often do – provide fertile ground for genuine alternative development strategies favouring the labouring classes.

To identify these processes, and to correctly situate and overcome their limitations, we argue for the need to look beneath both the regressive logics of neoliberal development and the ostensibly progressive strategies pursued by states. By identifying the independent practices of workers in seeking to shape their own world around them, we can begin to identify how a real ‘political economy of the working class’ can emerge in theory and in practice.

Adam Fishwick is a Senior Lecturer in Urban Studies and Public Policy in the Department of Politics and Public Policy and a core member of CURA at De Montfort University.

This post was originally published on the ‘Progress in Political Economy’ Blog and has been re-published here with their permission.

Austerity in time and space: the case of Germany

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germany-96590_960_720In today’s post Felix Wiegand, Tino Petzold and Prof. Bernd Belina argue that while austerity policies have often been implemented as part of a short-term, often authoritarian political offensive (a “shock strategy” as Naomi Kline put it) in (West) Germany this was carried out “piecemeal” over a thirty- to forty-year-time frame, which also included the subsequent adaptive and normalising effects. The authors discuss several important historic markers and dynamics to illustrate this process while emphasising the multi-scalar and spatially unequal nature of implementing austerity.

The history of austerity in (West) Germany, following the Allied victory over Nazi Germany, began during the first half of the 1970s as the Fordist development model started to come apart not just politically, socially and culturally, but in particular economically. Two decades of relative stability of German society and the “brief dream of never-ending prosperity” were followed by a cycle of economic crises that had reached its temporary high point in 1974/75. During the first years, the (West) German state reacted to the effects of the crisis with counter-cyclical fiscal and economic policies based on Keynesian ideas. However, a turn to austerity policies was soon after carried out – at a time when power relations in German society shifted and a “national state characterized by market competition” was created.

This was started by the social democratic-liberal government coalition led by Helmut Schmidt, German Chancellor from 1974 to 1982. During his first government policy statement on May 17, 1974, Schmidt announced a change to how government debt will be managed. He said that “[t]he Federal Government will use all constitutional and political measures at its disposal to their fullest extent in order to commit federal, state and local authorities to cost-cutting budgetary policies starting in 1975.” The following year’s Budgetary Structure Law substantively implemented this announcement by putting the Federal government on a restrictive fiscal path.

The budget situation of states and municipalities worsened during the subsequent years of deindustrialisation processes as a consequence of the crisis and because of tax law changes such as the elimination of the payroll tax in 1979. As the local state experienced a fiscal crisis, local political projects were established that combined cost-cutting measures with early types of entrepreneurial urban policies – events that put in motion the long-term transformation of urban politics.

Also on the federal level, the focus shifted to austerity and neo-liberal supply-side politics towards the end of the social democratic-liberal coalition government (“Budget Operation 82”) and in particular during the conservative-liberal governments under the leadership of Chancellor Helmut Kohl (1982-1998). In his first government policy statement, Kohl put fiscal policy at the center of the attack on the Keynesian welfare state consensus by announcing his vision of a “well-managed country through well-managed budgets.” During the 1980s, the German government consolidated the federal budget and lowered public spending – similarly to developments in the UK under Thatcher’s leadership, albeit without the same intensity of conflict with organised labor.

The unification of the two German states in 1990 opened a window of opportunity for continuing the policies of the 1980s.  On the one hand, the policies of the German transitional privatisation agency supported an enormous privatisation project for making formerly publicly owned East German companies competitive for the global market. On the other hand, expectations for a speedy global market integration of these now privatised companies led to the (neoliberal) decision to forego tax hikes for financing German unification. Instead, the government opted for not interfering in the market in hopes of covering the cost of unification by an economic upswing.

After it became obvious early on that these hopes would not materialise, the German government responded with a classic “failing forward”, in Peck’s terms, of neoliberal policies. The growing public debt increased the pressure on the government for limiting new borrowing. As a result, municipal “budget consolidation plans” became popular during this time. The Maastricht Treaty (1992) and the Stability and Growth Pact (1997) implemented similar policies on the European Union scale. The federal Savings, Consolidation and Growth Program (1993) aimed at cutbacks of around 35 billion Deutsche mark by slashing unemployment and social welfare payments by 1996. This policy was, however, only the beginning of a comprehensive reduction of welfare state services under the banner of budget consolidation characterized by a roll-back of the welfare state, cuts of public sector jobs and reduction of public investments.

There are similar connections between attempts at shrinking the welfare state and the policies of Chancellors Gerhard Schröder (1998-2005) and Angela Merkel (since 2005). Massive tax cuts during the social democratic-green coalition governments under Schröder’s leadership, adopted with the intention of improving the competitiveness of German companies, exacerbated the structural underfunding of the state. Under Merkel’s leadership, public debt continued to increase during the peak of the 2008-2009 financial and economic crisis, as bailout packages for failing and troubled financial institutions worth billions of euros and further tax cuts were adopted. At the same time, Germany introduced several constitutional regulations and mechanisms such as the balanced-budget amendment (2009), the European Fiscal Compact (2012) and municipal “budget consolidation programs.” The constitutional changes institutionalised the neoliberal ideal of a balanced budget on various scales and further limited the financial scope of public expenditures. In recent years, this politics of constitutional austerity has been reflected, for example, in the German government’s 2010 austerity package, in public service staff reductions and inadequate compensation levels for state and municipal employees and – despite some concessions regarding social spending – in a new round of municipal cost-cutting measures.

The diverse nature of the individual measures enacted on the various scales of the state shows the significance of the spatial dimension in the process of implementing austerity in the Federal Republic of Germany. On the one hand, financial burdens that mainly arise from the delivery of welfare and public services, which have been funded through Germany’s federal system, have increasingly been shifted to lower levels of government – a classic scalar dumping. German states such as Bremen and the Saarland as well as many municipalities in the former industrial heartland have experienced the full brunt of de-industrialisation processes – in addition to the limited opportunities of income generation and the negative repercussions of tax cuts on government revenues. This has left many levels of government exposed to a form of structural underfunding and has established austerity as the norm even in the absence of cyclical crises. It becomes apparent that the spatial hierarchy within Germany’s government system has been used on a regular basis for imposing specific budgetary consolidation requirements and austerity policies onto subordinate levels of government – often against their will and beyond their capabilities. This practice has taken on a new quality with the institutionalised balanced-budget regulations that have been introduced at all levels of government since the 1990s and in particular after the 2008-2009 financial crisis. The scalar linking and reinforcing of the individual mechanisms and policies across various government levels has created a tightly laced corset of austerity in Germany.

In a sense, all levels of government are impacted by austerity. A geographic perspective, however, shows that austerity’s tangible effects and the remaining room for action are unequally distributed across Germany. The local scale suffers the most from austerity. Within the federal government structure, municipalities are the lowest level of the spatial hierarchy and possess, despite their constitutional right to home rule, particularly little room for action. Especially (larger) cities are the focal points where public service agencies and poorer as well as marginalised populations are spatially concentrated. Cost-cutting measures are directly experienced by urban residents on a day-to-day basis and, more often than not, lead to an extensive crisis of social reproduction. As a result, austerity is hurting municipalities and, in particular, cities the most – although the extent differs from city to city and from municipality to municipality. The politics of austerity has affected first and foremost economically disadvantaged municipalities during the last decades and has even further reduced the already few resources that are locally available for addressing economic and social needs. On the other hand, prosperous cities and municipalities have been in the position to further improve their locational qualities through low taxes or exciting social and cultural attractions. This is one of the main reasons for why spatial disparities as well as the level of socio-spatial inequality between (and also within) municipalities has further increased in Germany during the last decades.

The case of the Federal Republic of Germany illustrates that scholarly research on austerity must draw its attention to the big picture of multi-scalar and spatially unequal processes whenever possible. This insight should prompt not only researchers in academia, but also all those who envision and organise an emancipatory politics, to meet this challenge. The everyday politics of austerity  and the associated incremental implementation of normalisation and adjustment processes force us to develop emancipatory strategies based on everyday experiences. At the same time, however, the spatially unequal nature of austerity impedes the development of political projects that would be comprehensive and far-reaching enough for confronting the multi-scalar linkages of institutionalised austerity. But that’s another blog post.

Felix Wiegand is a researcher and lecturer at the Department of Human Geography (Goethe University Frankfurt, Germany) and works on (urban) austerity, crises and the transformation of statehood; Tino Petzold is a researcher and lecturer at the Department of Human Geography (Goethe University Frankfurt, Germany) and works on multiscalar austerity in Germany; and Bernd Belina is professor at the Department of Human Geography (Goethe University Frankfurt, Germany) and works on critical geography, austerity and criminology.

The hollowness of GDP: The case of Ireland

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In today’s post Dr Daniel Bailey and Professor John Barry argue that Ireland’s GDP statistics highlight the disconnect between ‘official’ growth and the real economy, and raise questions about the nature of growth itself. This post was originally published by SPERI Comment and republished with their permission.

In the last decade, the prominence afforded to Gross Domestic Product (GDP) in political discourse has increasingly been challenged by a series of social and environmental critiques. These critiques – made by the likes of Wilkinson and Pickett, the Stiglitz Commission, theILO, and the New Economics Foundation – argued that policy-making ought to be sensitised to alternative metrics better suited to the socio-economic and ecological conditions of the present day. Recent GDP announcements in Ireland have only added to the contestations surrounding the political centrality of economic growth in political economy.

The credibility of the GDP statistic in Ireland was strained when the Central Statistics Office (CSO) announced that its growth rate for 2015 was 26.3%; far superior to any of the figures recorded during the ‘Celtic Tiger’ years of the 2000s. This figure was met with widespread ridicule, including by Nobel Prize-winning economist Paul Krugman who described it disparagingly as ‘Leprechaun Economics’.

The drivers of this growth spurt, according to official sources, were a series of ‘inversions’ whereby companies re-locate their official headquarters to Ireland, where only a minority of their business operations take place, in order to benefit from subjecting their profits to Ireland’s low corporation tax rate. This has included companies re-structuring in such a way that sees them legally transfers its assets or its intellectual property to Ireland despite the country only fleetingly hosting the economic activity of these companies. As a consequence, there was a simultaneous boost in net exports in 2015 as these multinational companies contracted non-Irish companies to carry out certain operations.  Such volatility in the GDP numbers is facilitated by the small and open nature of the Irish economy and its reliance on foreign direct investment, and by its 12.5% corporation tax rate which attracts multinational corporations looking for a foothold in the Eurozone.  The Irish Times have reported that Apple – whose exact tax arrangements with Ireland have been under some scrutiny recently – was one company responsible for the rise in Ireland’s capital stock, as well as AerCap in the aircraft-leasing sector. In addition, the robust defence of Ireland’s corporate tax arrangements by the current Irish government, and most of the opposition in the Irish Dáil (parliament), is telling and revealing in demonstrating the alliance and common interests between global corporations and nation-states such as Ireland.

In other words, although Ireland’s 2015 growth rate has some impact on governmental income and the debt-to-GDP ratio, it has only a diminishing connection to the performance of the ‘core economy’ and the reduction of unemployment. Prime Minister Enda Kenny, lost his parliamentary majority in February’s General Election not least because his appeal to the electorate on the campaign trail to ‘keep the recovery going’ was met with a response of: ‘what recovery?’.  The eroding credibility and meaning of the GDP statistic in Ireland was evident in such a debate, and the subsequent data released by the CSO will only further these perceptions.

The susceptibility of the Irish economic model to accountancy practices such as those seen in the ‘inversion’ strategies above mean that further volatility and the financial risks associated with it cannot be ruled out. Indeed, the 2016 economic data thus far forms an ironic postscript to the 2015 data as it shows that the economy has contracted so far this year. The volatility of the GDP measurement – an inherent component of the internationalised Irish economic strategy – means that it is highly problematic for either public spending or deficit reduction to be planned reliably on the basis of growth projections.  The contraction, however, tells us similarly little about economic trends such as the unemployment rate which have become increasingly disconnected from GDP levels; just as GDP has become disconnected from well-being, economic security or global poverty reduction.

Following Tom Healy, the methodological nationalism of GDP is disguising the existence of two economies operating within Ireland today. One is a very high-productivity, relatively low-labour intensive, export orientated and highly profitable economy.  The other is a low-productivity, high-labour intensive, domestically orientated and relatively less profitable economy.  Clearly this is a stylised depiction, but it does capture the misleading character of ‘single country’ and undifferentiated analyses of the ‘recovery’.

Therefore, alongside the credibility or usefulness of GDP we have to ask a connected but larger and more crucial question for modern political economy: who wants ‘jobless economic growth’? Posing the idea that GDP growth can be compatible with continuing joblessness does open up a possibility of delegitimising GDP growth.  This is based on the idea that for most people their support for ‘economic growth’ is not based on corporate profit-making or reducing government debt-to-GDP ratios, but based on strategies for growth producing jobs, and ideally high-paying, good quality jobs at that.

This is not a problem unique to Ireland. To differing extents, capital flows in many countries distorts the original premise of its ascension in political discourse.  The increasing mismatch between economic structures and the conventional statistical framework developed more than 70 years ago has recently prompted Diane Coyle to suggest that the ‘path dependency’ of the latter is now threatened more than ever by a coalition of interests seeking to develop alternative indicators more suited to the ecological, economic and societal challenges and opportunities of the 21st century.

Ireland, however, is a particularly extreme example of GDP serving an increasingly misleading and irrelevant measurement not only wellbeing, but also for the wealth of the nation. As such, the GDP growth figure has rarely been as ethereal or mythical as it is in Ireland today. But more than that, the hollowness of the statistic for the lives of the Irish people means that it is even more important for Ireland to develop a notion of national prosperity or success which goes far beyond conventional understandings of economic growth.  If ‘jobless economic growth’ is not working, can we begin to move our political economy thinking beyond GDP growth to envisage political economies of job rich non-economic growth?  If the Irish experience of ‘jobless growth’ is a discredited form of ‘Leprechaun economics’ (which should really perhaps be called ‘corporate profit shifting economics’), what do we put in its place in a ‘post-growth’ political economy?

Dr Dan Bailey is a Researcher as the Sheffield Political Economy Research Institute, and John Barry is Professor in Politics and International Studies at Queens University, Belfast.

Devolution after Brexit: 3 things that need to change

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In this post, originally published on the New Economics Foundation’s blog, Adrian Bua argues that devolution should deliver a genuinely more equal, decentralised and balanced political economy in the UK following the Brexit vote.

Brexit has cast doubt over much of UK economic policy – including the Treasury’s pledged support for a ‘devolution revolution’.

Many areas that voted in favour of Brexit were those left behind by a decline in British industry since the late 1970s and those suffering the most from government spending cuts.

They’re the areas that need effective devolution the most, but they’re also the areas standing to lose the most from a Brexit.

Uncertainty has already hit the manufacturing sector with Siemensdeciding to halt investment in Hull, and it won’t be the last case of its kind. Decisions like this will affect poorer regions disproportionately as their industry is generally more dependent on EU demand.

Moreover, these regions have also benefitted the most from EU regional development funding – and therefore stand to lose the most as these funds are discontinued, especially if the British state decides not to compensate the losses.

All this means that poorer regions will suffer from short term disruption and uncertainty, but it does not mean that such regions won’t benefit from Brexit in the long term. For example, supporters of Brexit such as James Wharton, the Minister for local growth and the Northern Powerhouse, say northern businesses now have a huge opportunity to “go global”.

We are concerned however, that rather than leading to a more balanced economy, Brexit risks turning Britain into a full-on ‘hedge-fund economy’ that works for already global finance firms and the City of London.

It’s therefore even more important that the government changes its currently-flawed approach to devolution in the following ways:

1. An industrial strategy for the whole of the UK

The Brexit vote was a loud complaint by those left behind by what Colin Hay has called the ‘Anglo-Liberal’ growth model based on London’s financial services, spending fuelled by private credit and housing price bubbles. This also brought with it the decimation of our public and social services.

We need a new industrial strategy and a plan for regeneration that will boost the incomes and opportunities of these alienated communities that have been left behind.

2. More power to the people

The above, which would include some redistribution of wealth, needs to be accompanied by the redistribution of power.

As Tony Hockley argues, more money and investment can’t reverse the cultural elements of inequality, highlighted brilliantly by Lisa McKenzie’s work on the stigmatisation of working class neighbourhoods in Nottingham, for example.

To tackle this appropriately, as well as offering opportunities for excluded communities to benefit from growth, we need to enable such communities to take an active role in our society and economy. Approaches to ‘Community Economic Development’ such as that being carried out in Preston in their experiment with co-operative industry, have much potential in this respect.

By combining economic development, with the empowerment of citizens, communities can become ‘development makers’, rather than ‘development takers’.

Devolved areas should also engage citizens in forms of participatory public administration, by implementing meaningful and genuine forms co-production in public services, and developing more ambitious approaches to participatory budgeting to give genuine control to people over public investment in their areas.

3. More democratic politics

Our politics also needs to be more responsive to people and the decentralisation of political power needs to occur in political parties and through the electoral system.

Decay in these key democratic institutions is part of what Colin Crouch terms ‘post-democracy’, a condition which I argue elsewhere underpinned many of the pathologies surrounding the EU referendum.

All political parties need a bottom up reinvention based on greater democracy.

How do we do this?

Current attempts by the Labour party to rediscover its roots in social movements are welcome, as are remarks by incoming Prime Minister and Conservative leader Theresa May about a country that works for everyone.

A more proportional electoral system that allowed for a greater plurality of political parties, that could experiment with different organisational models and offer a greater variety of policy platforms without engaging in distracting internal struggles would also be welcome.

Adrian Bua is researcher at the New Economics Foundation and at the Centre for Urban Research on Austerity

The EU Referendum and the ailings of contemporary democracy

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In this post Adrian Bua argues that Brexit highlights fundamental failures in contemporary British democracy.

Democracy was a key element of the debate around whether the UK should exit or remain in the EU. One of the main criticisms of the EU from both right and left is the distant and unaccountable nature of its institutions. And now, calls for the referendum to be repeated by those shocked by the actual and potential future consequences of ‘Brexit’ are increasingly popular. This move is condemned by Brexiteers as an affront to democracy. On the face of it, they make a valid point. The referendum result gave a clear, if narrow, mandate to leave. Ignoring it would further underline the reality of a pro-EU elite that has lost touch with those ‘ordinary people’ that politicians such as Farage argue have been oppressed by migration.

However, contemporary democratic theory places serious doubts on plebiscitary forms of decision making. In deliberative models it is not only the process of aggregating votes that matters, but also the processes of opinion formation preceding the vote. Leaving aside the widely debated, complex and unresolved issue of whether, and when, direct democratic processes are appropriate to make complex decisions – the phenomenon of the EU referendum highlighted clear deficits and inconsistencies in our representative democracy. In characteristically opportunistic fashion, David Cameron called a referendum to avoid a Tory split that could have been fatal for his 2015 election ambitions.  Martin Lodge and Will Jennings argue that this reflects a broader phenomenon whereby referenda are used not to advance democracy but for political leaders to control divisions in their own parties.

These inconsistencies reflect deep rooted problems in our political system. During the post-war consensus, the institutional landscape of British democracy was enriched by collective mass-membership organisations that had close relationships with political parties and kept them grounded in people’s lives. However, the current turmoil is arguably symptomatic of what Colin Crouch termed the UK’s condition of ‘post-democracy’.  The institutions of the social democratic consensus remain, but have been hollowed out by the de-politicising consequences of neo-liberalism and the dominance of politics by privileged individuals and big business. For citizens, elections have become a spectator sport, managed by experts and reported on by private media monopolies. The rise of single-issue politics has been a salutary development, but in no way has it matched the capacity for the institutions of collective action that heralded the social democratic era to channel demands into the political system.

I would argue that the vote in favour of Brexit is a symptom of Britain’s ‘post-democratic’ condition. It is no secret that it is the constituency that suffered the most from the economic re-structuring over the past few decades that favoured ‘Brexit’. The faith that neoliberal policy makers had for entrepreneurial private sector activity to replace the gutting on manufacturing and heavy industry never materialised in peripheral regions. Instead, what Colin Hay has termed an “anglo-liberal growth model” emerged – based on a service industry concentrated in London and consumption fuelled by private credit and a housing boom in the South East. Gordon Brown’s infamous declaration that boom and bust had been abolished revealed the institutionalisation what Colin Crouch termed an “unacknowledged policy regime”. The election-winning machine that was New Labour contributed to the post-democratic condition. Its obsession with “scientific” approaches to evidence based policy making cohered with Fukuyama’s “end of history” thesis – politics becomes a managerial and technical endeavour. Citizen participation becomes limited to focus group and survey research designed to optimise the party’s chances to reflect public opinion and thus win elections. Importantly, this left behind the concerns of those working class constituencies that “have nowhere else to go”, as New Labour architect Peter Mandelson put it.

But the chickens have come home to roost. The financial crash, and ensuing recession, deepened the economic woes of peripheral regions. Public sector employment and redistribution from the proceeds of the economy in the South East reduced through austerity. This was compounded by the deepening of the, already established, ‘beggar thy neighbour’ politics that generated contempt for a dependency culture. The Brexit campaign deepened a discourse which was already well developed and increasingly propagated by corporate media empires, that blamed immigrants for economic woes – as well as a lack of ‘control’ over our borders and burdensome EU regulation. At the time of writing, the Labour Party which had given hope to so many people that this situation might change with the election of Jeremy Corbyn, is ripping itself apart with internal struggles between its left and right. It is unclear what the outcome will be, that is a debate for another day, but – regardless of whether Brexit materialises – it will certainly be of great importance in the struggle to shape a fairer, more inclusive and democratic Britain. Should the right win, we can expect even more tea mugs and headstones promising to control immigration than in the campaign ran by Ed Milliband.

Inside and outside the Labour Party, the left should counter this discourse by finding improved ways of communicating the message that the difficulties faced by many supporters of Brexit are not due to immigration, EU regulation of lax border controls, but by a deliberate, and by no means irreversible, re-shaping of the UK political economy since the late 1970’s.  An integral part of this is to articulate a left politics based on democratic participation, empowerment and investment in social services. As Adam Przeworski pithily stated “to discuss democracy without considering the economy in which that democracy must operate is an endeavour worthy of an ostrich”. The left needs to develop a coherent and convincing vision for an alternative political economy that delivers genuine equality of opportunity, and meaningfully redistributes wealth and power. In this vein, Jonathan Davies has called for the UK and European nations to develop a “Marshall Plan for the 21st Century”. It is imperative to put flesh on the bones of this idea, and organise for its fulfilment. Social democracy should end its flirtation with neo-liberalism and regain the necessary confidence to regenerate itself on its own grounds. There is a rich legacy of thinking on participatory forms of socialism to draw on here. EU elites seem keen to make an example of Britain through a painful divorce, and the disposition of the likely UK post-Brexit leadership will be to turn the UK (or what remains of it) into some sort of libertarian utopia and international tax haven – “a free-wheeling island nation” as put by one article outlining a terrifying blueprint for a post Brexit Britain. This “scorched earth plan” is the way we are currently headed, and it is not pretty.

Dr Adrian Bua researches for the Centre for Urban Research on Austerity and the New Economics Foundation.

Brexit: the Need for a “21st Century Marshall Plan”

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2000px-marshall_plan-svgProfessor Jonathan Davies argues for a new “Marshall Plan” to fix the broken political economy of the UK, and of Europe.

There are long decades when history barely moves.  And there are times when decades or even centuries fly by in weeks.  Political history in the UK is suddenly moving at breakneck speed.  Our relationship with the EU is sundered, the UK itself fractured along a bewildering tangle of lines.  The possibility of Scottish secession looms once more.  Friends are at each other’s throats.  Terrified remain supporters – and a good few remorseful leave supporters – call for the government to set aside or ignore the referendum.  The Parliamentary Labour Party has turned all its fire on Jeremy Corbyn, while the Liberal Democrats court redemption by making a play for enraged middle class progressives.  The Conservative Party is in turmoil as is the repentant architect of Brexit, Boris Johnson.

In this febrile atmosphere, the battered, embittered and disenfranchised working classes forming the backbone of Brexit has been chosen as the chief villain of the piece – although almost half of them did not vote at all.  Stuck between the rock of racism and the hard place of “progressive” middle class contempt there is, as always, nothing on the table for them.  We must be clear that the grind, hectoring, dispossession and punishment of austerity and several decades of neoliberalism before that lie at the root of these fractures, themselves symptoms of the long durée of economic decline.  The exuberant junketing of our elites cannot disguise the feebleness of British economic growth, the illusion of shared prosperity sustained through astronomical levels of personal and private debt. The costs of this model have been imposed – quite ruthlessly – on those least able to bear them.  The realities of UK PLC for millions of people are, structural unemployment, zero hours contracts, sweat-shop labour, benefit cuts and sanctions and food banks. Brexit is the blowback.  Even so, conditions are far worse in Greece and Spain.

If Britain and Europe’s elites were serious about keeping the ship afloat, they would recognise the appalling vista they have created, abandon neoliberal ideology and austerity wholesale and embark on a massive programme of redistribution and investment in working class towns and cities. Britain and Europe would move to initiate a 21st century Marshall Plan – the post-war reconstruction programme led by the USA after WW2.  We live in very rich societies, but with ever-greater concentrations of wealth and poverty.  The very existence of the United Kingdom and European Union could now depend on the political will to reverse that trend.  Enormous ideological and political resources have been expended on neoliberalism, and such a step looks vanishingly unlikely.  It is much more likely that the reverse will happen and an even heavier price will be exacted from the working class.  Moreover, it is a moot point whether such a programme would be enough reverse the decline of late Western capitalism.  Either way, Britain and Europe can certainly afford it.  If they want the genie back in its bottle, they will have to pay the price.

Jonathan Davies is Professor of Critical Policy Studies and Director of the Centre for Urban Research on Austerity at De Montfort University

Workshop: Local Economic Development and Skills Under Austerity

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In this post, Jonathan Payne reports back on a two day workshop on local economic development (LED) and skills policy under austerity held by the Centre for Urban Research on Austerity (CURA) in May.

The workshop brought together leading UK academics in the areas of LED, governance and skills to debate the changing institutional landscape around LED in England and the opportunities and constraints afforded by policy commitments to ‘localism’. This afforded a rare opportunity for academics interested in economic geography, local governance and skills to come together and discuss how the ‘localisation’ agenda is playing out in practice.

As Ewart Keep argued, for the last thirty years skills policy in England has tended to be a national project, focused on generalised workforce upskilling in pursuit of government targets. With government now promising to devolve more of the adult skills budget to local areas, there are questions around how much autonomy local areas will have and what level of resource they might draw on. Furthermore, past experience would suggest that a narrow focus upon education and training, or boosting the supply of skills, runs up against problems of weak employer demand for skill, linked to the way many firms in the UK compete, design jobs and manage staff. This is reflected in a high proportion of low skill, low wage jobs compared with many other advanced European countries, relatively low productivity, and problems of ‘over-qualification’ and ‘under-utilisation of skills’ within the workplace. As the UK Commission for Employment and Skills has argued, there are limits to what boosting skills supply can achieve on its own without wider measures to influence the ‘demand side’. The latter requires effective measures such as industrial policy, economic development and business improvement to grow the proportion of high skill jobs and upgrade the skill content of work more generally. Skills policy might work better if integrated and joined up with such activity.

The role of local enterprise partnerships, city-deals and combined authorities is clearly of relevance here for a number of reasons. First, government is promising to ‘empower’ local communities through these mechanisms to drive LED. Second, skills policy is being localised and skills often figure prominently within this agenda. These claims are controversial, particularly in terms of how ‘real’ localism is at time of funding cuts. However, localism is also a moving picture, and if skills and economic development are to be integrated as part of a more holistic approach, then this is one of the few areas where we might look for examples of progress (or not).

Many issues came to the fore during these discussions: the tendency for LED governance to bounce back and forth between different scales and for policy to ‘keep failing forwards’; the uneven capacity of LEPs; the role of power in devolving ‘risk’; the need to understand how local actors comprehend their situation and what motivates their engagement; the tendency for policy to eschew interventions inside the ‘black box’ of the firm; and the question of what ‘localism’ can tell us about the ‘neo-liberal state’ in a period of crisis management and the narratives it constructs. What is clear, however, is that research will be better placed to address such issues where academics work across disciplinary boundaries. LED, governance and skills are an example of one such interface where collaboration is likely to prove particularly fruitful.

Jonathan Payne is Reader in Employment Studies at De Montfort University and a member of CURA (Centre for Urban Research on Austerity) as well as CROWE (Contemporary Research on Organisations, Work and Employment

Blazing the Neoliberal Trail: Tim Weaver’s Response to Jonathan Davies

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In this post Tim Weaver responds to Jonathan Davies’ review of his recent book ‘Blazing the Neoliberal Trail’.

I would like thank Jonathan for his stimulating reactions to my book and the opportunity of offering this response. I will focus primarily to two key points he raises. The first concerns the question of periodization. As Jonathan rightly points out, I suggest that the 1970s was the “pivotal decade”—to borrow Judith Stein’s phrase—for the shift to neoliberalism. However, Jonathan notes that “the break with the post-war order was implicit in the emerging political and economic zeitgeist of 1960s for both left and right.” He is right to argue that neoliberal ideas were beginning to take root in the 1960s and that business mobilization occurred in the U.K. and the U.S. in the 1960s and 1970s, as elites were forced to consider alternatives to the Keynesian regime of capital accumulation.

That said, my aim in the book—as Jonathan anticipates in his review—was to locate the period at which neoliberal ideas became politically consequential, that is when they became reflected in institutionally and ideologically durable ways. There were examples of experiments with neoliberal policymaking in the 1960s and the book might have been strengthened by illuminating of the connective tissue that links the proto-neoliberal efforts of the 1960s with those that came later as Jonathan suggests. That said, these neoliberal experiments, often proved abortive as leaders of both main parties in both countries became ultimately unwilling to jettison Keynesian approaches to economic policy until well into the 1970s, which drew sharp rebuke from neoliberals. Examples include Nixon’s wage and price controls and Heath’s retreat from proto-neoliberal macroeconomic policy in 1972 when unemployment hit one million—it was not yet a “price worth paying.” Heath’s famous U-turn illustrates the degree to which neoliberal remedies were perceived to be politically untenable by British elites into the 1970s, even on the right. Anecdotally, it is worth noting that Richard Nixon averred in 1971 that “I am a Keynesian in economics” and that Keith Joseph maintained that he was only “converted to conservatism” in 1974. Moreover, in the U.S., redistributive urban spending and all manner of urban programs accelerated markedly during the Johnson administration, with federal aid to cities reaching its apotheosis in the late 1970s, all developments I would characterize as at odds with the neoliberal turn that would follow.

The second major point that Jonathan raises concerns my characterization of the state. He points out correctly that my book draws a distinction between the capitalist class and state actors, who I suggest enjoy a degree of autonomy from societal interests. As such, my analysis allows that the state within the capitalist system may not necessarily operate as “the capitalist state.” By contrast, Jonathan maintains that it may be more fruitful to think about the state as an inherent part of the capitalist system. While this issue regrettably does not receive detailed treatment in the book, my position is that the state under capitalism does indeed act disproportionately in the capitalist interest. However, despite this bias, there is nevertheless space for state actors—operating from their own ideological convictions, or from pressure from anti-capitalist groups (such as trade unions)— to pursue policies that are contrary to the interests of capital. Moreover, I view the state itself as a multifaceted set of institutions that operate in a variety of domains to advance different interests, some of which might not be characterized as capitalist. This is especially evident with respect to the American state, with its multiple, overlapping nodes of authority and cross-cutting purposes. To give an example, in the 1980s, the same “state” was issuing social security checks to the elderly and food stamps to the poor while attacking the air traffic controllers, slashing urban spending, and using monetarism to squeeze the life out of the economy. These contradictory positions risk elision by the “capitalist state” characterization. The theoretical orientation I have followed demands that researchers spell out the processes by which certain policies become adopted and institutionalized rather than assuming that they are necessary a reflection of capitalist imperatives.

On a related note, it is important to consider that even within the capitalist class there is likely to be disagreement about the most effective mode of capital accumulation, especially during periods of uncertainly such as that which emerged in the 1970s (or, for Jonathan, in the 1960s). Hence, even if one were to grant that the state operates throughout the post-war period as an integral part of the capitalist system, the shift from a Keynesian capitalist state to a neoliberal is one that requires examination and explanation. Given the uncertainly among capitalists about how to deal with falling rates of capital accumulation, material explanations of why the neoliberal variety of capitalism took hold fall short. As Mark Blyth has shown a complete account requires an ideational dimension.

My position on the state and the role of ideas brings us finally to the question of whether my analysis might be compatible Marxist analysis. I am not certain. I maintain that politically consequential ideas can emerge independently of material interests. I am leery of accounts that reduce ideology to its function of reflecting materially derived imperatives, though it very often works in this way.  Thus, to the extent that political development can be propelled by ideas that are, or become, unmoored from capital, my account is compatible with Marxist analysis. But would this move not be antithetical to the materialist foundation on which Marxism rests? I hope in future projects to probe this question far more deeply and may enlist Jonathan’s help as I do!

Dr. Timothy Weaver is Assistant Professor in Political Science at the University of Louisville.