Democracy or capitalism?


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THE constraints placed by ‘the markets’ on the state’s political decision making power can be observed in a perverse way in the European Monetary Union. Here the transformation of the tax-based state into a debtor state forms the backdrop for the vicious circle formed by the rescue of ailing banks by states, which are in turn being driven to ruin by these same banks, with the result that the reigning financial regime is subjecting their populations to supervision. What this means for democracy could be observed under a microscope during the summit in Cannes at which Prime Minister Papandreou of Greece was forced by his back-slapping colleagues to call off a planned referendum.1 Wolfgang Streeck2 is to be commended for demonstrating that the ‘debtor state policy’ being pursued by the European Council since 2008 at the urging of the German government is essentially a continuation of the capital friendly policy model that led to the crisis in the first place.


Under the special conditions of the European Monetary Union, the policy of budgetary consolidation subjects all member states, regardless of the differences in their levels of economic development, to the same rules and, in order to impose these rules, is concentrating rights of intervention and control at the European level. Without simultaneously strengthening the European Parliament, this concentration of competences in the Council and the Commission reinforces the uncoupling of the national public arenas and parliaments from the aloof, technocratically self-propelling concert of governments in bondage to the markets.

Wolfgang Streeck fears that pushing through executive federalism in this way will lend the exercise of political authority in Europe an entirely new quality: ‘The consolidation of the European public finances being undertaken in response to the fiscal crisis amounts to a reorganization of the European state system by financial investors and the European Union – a reconstitution of capitalist democracy in Europe in the sense of a solidification of the results of three decades of economic liberalization’ (164).

This pointed interpretation of the reforms currently being carried out captures an alarming trend that will probably prevail even though it marks the end of the historical connection between democracy and capitalism. The gates of the European Monetary Union are being guarded by a British premier for whom the welfare state cannot be wound up fast enough through neo-liberal policies and who, as the true heir of Margaret Thatcher, cheerfully goads a willing German Chancellor into wielding the whip within the circle of her colleagues: ‘We want a Europe that wakes up to this modern world of competition and flexibility.’3


There are two alternatives – at the negotiation table – to this crisis policy: either the defensive option of winding down of the euro, for which purpose a new party has just been founded in Germany (i.e. the ‘Alternative für Deutschland’ or ‘Alternative for Germany’), or the offensive option of extending the monetary union into a supranational democracy. Given corresponding political majorities, the latter could provide the institutional platform for reversing the neo-liberal trend.

Unsurprisingly, Wolfgang Streeck opts for reversing the trend toward de-democratization. This means ‘constructing institutions through which markets could once again be brought under control: markets for work that leave room for social life, markets for consumer goods that do not destroy nature, markets for credit that do not become the large-scale production of irredeemable promises’ (237). But the concrete conclusion he draws from this diagnosis is all the more surprising. It is not that a Union stuck in midstream should be extended in a democratic way in order to bring the relationship between politics and the market that has been thrown out of joint back into an equilibrium that is compatible with democracy. Instead of expansion, Wolfgang Streeck recommends dismantling. He favours a return to the defensive constellation of nation states of the 1960s and 1970s in order ‘to defend and restore as far as possible what remains of those political institutions that could perhaps help up to modify and replace market justice with social justice’ (236).


This nostalgic preference for sequestering ourselves within the sovereign but overwhelmed and impotent nation is surprising when we consider the époch making transformation undergone by nation states – namely, from states that still exercised control over their territorial markets into disempowered co-players who are themselves embedded in globalized markets. The need for political governance to which a highly interdependent world society is giving rise today is at best being cushioned by an increasingly dense network of international organizations. But the asymmetrical relations of the much-vaunted ‘governance beyond the nation state’ are far from a match for this problem.

In view of the pressure being generated by the problems of a world society that is growing together at a systemic level but remains anarchic at the political level, the initial reaction to the outbreak of the global financial crisis in 2008 was understandable. The aghast G-8 states hastened to include the BRIC states and a couple of other countries in their round of consultations. On the other hand, the fact that the resolutions adopted at the first G-20 conference in London remained without consequences documents the defect that would only be exacerbated by restoring the breached national bastions – the political fragmentation of a world society that is nevertheless economically integrated would undermine the ability to cooperate.


Reasons against a Political Union: The first and comparatively strongest argument is directed against the effectiveness of regional economic programmes given the historical heterogeneity of business cultures that must be taken as given even in core Europe. Policy within a monetary union must in fact be geared to balancing out, or at least containing, structural disparities in competitiveness between the national economies in the long run. As counter-examples, Wolfgang Streeck mentions the former GDR since the reunification and the Mezzogiorno. Without doubt, these two cases remind us of the chastening, medium-term timescale that always has to be reckoned with when it comes to promoting economic growth in backward regions through targeted programmes. For the regulative problems that a European economic government will have to contend with, however, the two examples cited are too untypical to justify unreserved pessimism. The reconstruction of the East German economy involves the historically completely unprecedented problem of an ‘assimilating’ system change, one not undertaken by the system itself but steered by West Germany elites, within a nation that was divided for four decades. The relatively large transfer payments seem to be having the desired success in the medium-term.

The situation is different with the more stubborn problems posed by the economic stimulation of the economically and impoverished South of Italy, which exhibits socially and culturally premodern traits alien to the state and is politically debilitated by the Mafia. Because of its special historical background, this example is also not very informative for the anxious gaze being directed today by northern Europe at certain southern European countries. For the problem of the division within Italy is interwoven with the long-term effects of the national unification of a country that had lived under alternating periods of foreign domination since the end of the Roman Empire.


The historical roots of the present-day problems can be traced back to the failed Risorgimento that was conducted as a military campaign from Savoy and was experienced as usurpation by the South. The more or less unsuccessful efforts of postwar Italian governments were also situated within this context. As Streeck himself observes, these efforts became ensnared in the corrupt relations between the governing parties and local power structures. The political implementation of the development programmes was thwarted by an administration susceptible to corruption and not by the resistance of a social and economic culture that derived its force from a form of life worthy of preservation. In the extensively legally codified European multilevel system, however, the bumpy administrative road from Rome to Calabria and Sicily can scarcely provide the pattern for the national implementation of programmes originating in Brussels in whose realization sixteen other wary nations would be involved.

The second argument refers to the fragile social integration of ‘imperfect nation states’ like Belgium and Spain. With his reference to the festering conflicts between Walloons and Flemings and between Catalonia and the central government in Madrid, Wolfgang Streeck draws attention to integration problems that, in view of regional diversity, are already difficult to master within a nation state – and how much more difficult would this be in a Greater Europe! Granted, the complex state formation process did in fact leave behind lines of conflict between older and historically superseded formations. One need only think of the Bavarians who rejected the German Basic Law in 1949, of the peaceful separation of Slovakia from the Czech Republic, the bloody disintegration of Yugoslavia, the separatism of the Basques, the Scots, the Northern League, and the like.


But conflicts always arise along these historical fault lines when the most vulnerable sections of the population are caught up in economic crises or historical upheavals, become insecure, and process their fear of a loss of status by clinging to supposedly ‘natural’ identities, whether it be ‘tribe’, region, language, or nation that promises to provide this supposedly natural basis of identity. The nationalism that was to be expected in the central and eastern European countries following the collapse of the Soviet Union is in this respect a social-psychological equivalent of the separatism observable in the ‘old’ national states.

The supposedly ‘organic’ character of these identities is equally fictive in both cases4 and is not a historical fact from which an obstacle to integration can be deduced. Regression phenomena of this kind are symptoms of a failure of political and economic systems that no longer produce sufficient social security. The sociocultural diversity of the regions and nations is a valuable heritage that sets Europe apart from other continents, not a barrier that restricts Europe to a small state mode of political integration.


The first two objections concern the viability and stability of a closer political union. With a third argument, Wolfgang Streeck also wants to question its desirability: A politically enforced assimilation of the economic cultures of the South to those of the North would also mean the levelling of the corresponding forms of life. One can indeed speak of an enforced homogenization of social conditions in the case of a ‘grafting on of a market liberal economic and social model’ pushed through by technocrats. But in this regard in particular, the difference between democratic decision making processes and decision making processes in conformity with the market must not be blurred.

Democratically legitimized decisions at the European level concerning regional economic programmes or country specific measures to rationalize public administrations would also involve a standardization of social structures. But to expose all politically promoted modernization measures to the suspicion of enforced homogenization would be to turn family resemblances between economic systems and forms of life into a communitarian fetish. Besides, the diffusion of similar social infrastructures throughout the world that today is turning almost all societies into ‘modern’ societies is triggering individualization processes and the replication of forms of life everywhere.5


Finally, Wolfgang Streeck shares the assumption that the egalitarian ethos of constitutional democracy can be realized only on the basis of national solidarity, and thus within the territorial limits of a nation state, because otherwise minority cultures would inevitably be outvoted. Even aside from the extensive discussion of cultural rights, this assumption is arbitrary when viewed from a long-term perspective. Nation states already rest on the highly artificial form of solidarity among strangers that is generated by the legal status of citizen. Even in ethnically and linguistically homogeneous societies, national consciousness is not a natural phenomenon but an administratively promoted product of historiography, the media, universal conscription, and so forth. The national consciousness of heterogeneous immigrant societies demonstrates in an exemplary way that any population can assume the role of a ‘national state’ capable of forming a common political will against the background of a shared political culture.

Because classical international law stands in a complementary relation to the modern state system, a similarly radical metamorphosis of the nation state is reflected in the decisive innovations in international law since the end of the Second World War. The room for manoeuvre of popular sovereignty has shrunk along with the actual substance of formally guaranteed state sovereignty. This is especially true of the European states that have transferred part of their sovereign rights to the European Union.


Even though their governments still regard themselves as ‘sovereign subjects of treaties’, the qualification of the right to secede from the Union (introduced in the Lisbon Treaty) already betrays a restriction of their sovereignty. This is becoming a fiction in any case on account of the functionally grounded priority of European law, because the intermeshing of the national legal systems at the horizontal level is progressing ever further as legislation enacted at the European level is implemented. This makes the question of the sufficient democratic legitimization of this lawmaking all the more urgent.

Wolfgang Streeck is wary of the ‘unitarian-Jacobin’ traits of a supra-national democracy because it would inevitably lead to a levelling of the ‘economic and identity communities founded on geographical proximity’ (243) through a permanent outvoting of minorities. In so arguing, he underestimates the innovative, creative legal imagination that has already found expression in the existing institutions and valid regulations. I have in mind the ingenious ‘double majority’ decision making procedure or the weighted composition of the European Parliament that makes allowances for the sharp differences in size of population between smaller and larger member states precisely under the aspect of fair representation.6

Above all, however, Streeck’s fear of a repressive centralization of competences is nourished by the false assumption that the institutional deepening of the European Union would inevitably lead to a kind of European federal republic. The federal state model is the wrong one. For a supra-national, but transstate democratic political community that permits shared governance also satisfies the conditions of democratic legitimation. In such a political community all political decisions are legitimized by the citizens in their double role as European citizens, on the one hand, and as citizens of their respective national member states, on the other.7 In such a political union, which must be clearly distinguished from a ‘superstate’, the member states, as the guarantors of the level of law and freedom that they embody, would retain their very strong status by comparison with the subnational components of a federal state.


However, all that speaks for a well founded political alternative, as long as it remains abstract, is its perspective-forming force – it indicates a political goal but not the path leading to it. The manifest obstacles along this path support a pessimistic assessment of the chances of survival of the European project.

It is the combination of two facts that must disturb the proponents of ‘More Europe’. On the one hand, the consolidation policy (modelled on ‘debt brakes’) aims to establish a European economic constitution that lays down ‘the same rules for all’ and is supposed to remain beyond the reach of democratic will-formation. By uncoupling technocratic orientations with far-reaching implications for the European citizenry as a whole in this way from opinion- and will-formation in the national public arenas and parliaments, it devalues the political resources of these citizens who only have access to their national arenas. As a result European policy makes itself de facto increasingly invulnerable – and thus, from the perspective of democracy, increasingly vulnerable.


This trend toward self-immunization is being reinforced, on the other hand, by the disastrous fact that maintaining the fiction of the fiscal sovereignty of the member states is steering public perceptions of crisis in the wrong direction. The pressure exerted by the financial markets on the politically fragmented national budgets fosters a collectivizing self-perception of the populations affected by the crisis – the crisis is turning the ‘donor’ and the ‘beneficiary countries’ against each other and fomenting nationalism.

Wolfgang Streeck draws attention to this demagogic potential: ‘Nations conceived in monistic terms feature in the rhetoric of international debt policy as integral moral actors who bear collective liability. Internal class and power relations are not taken into consideration’ (134). In this way, a crisis policy whose successes enable it to immunize itself against critical voices and the distorted mutual perceptions of the ‘peoples’ in national public arenas reinforce each other.

This impasse can be overcome only if pro-European parties join together in transnational campaigns against this falsifying representation of social questions as national questions. Ralf Dahrendorf’s dictum that German questions were always in a fatal way national rather than social questions acquires unforeseen relevance here. The only explanation I can think of for an absence of conflicts of opinion triggered by properly conceived political alternatives from all of our national public arenas is that the democratic parties are afraid of the potential of the political Right. Controversies over the course to be pursued within core Europe will have clarifying and not just inflammatory effects only if all sides concede that there are no alternatives without risks or costs.8 Instead of opening up false fronts along national borders, the task of these parties would be to differentiate between the winners and the losers of the policies adopted to address the crisis according to more and less encumbered social groups independently of their nationality.


The European parties on the Left are in the process of repeating their historical error of 1914. They too are folding out of fear of a social mainstream susceptible to right wing populism. Moreover, in Germany, a lamentable media landscape populated with Merkel devotees is reinforcing all involved in their resolve not to grasp the hot iron of European policy in the election campaign and to play along with Merkel’s cleverly malign game of suppressing the issue. This is why we should wish the ‘Alternative für Deutschland’ success. I hope that it forces the other parties to show their hand when it comes to European policy. Then there might be a possibility of a ‘grand’ coalition forming after the German general election in favour of taking the first overdue step. For, as things stand, Germany alone is in a position to initiate this difficult undertaking.


* Translated by Ciaran Cronin.


1. On this, see my commentary in the Frankfurter Allgemeinen Zeitung, 5 November 2011.

2. Jürgen Habermas’ article, ‘Democracy or Capitalism’, is an excerpt from his longer review of Wolfgang Streeck’s book Gekaufte Zeit (Suhrkamp, Berlin, 2013). Here, the first part and other paragraphs of the original text were left out. Page numbers in the text refer to this edition. See also Streeck, ‘Auf den Ruinen der Alten Welt: Von der Demokratie zur Marktgesellschaft’, Blätter für deutsche und internationale Politik 12, 2012, pp. 61-72, and ‘Was nun, Europa? Kapitalismus ohne Demokratie oder Demokratie ohne Kapitalismus’, Blätter für deutsche und internationale Politik 4, 2013, pp. 57-68. In the original text, Habermas writes as follows: ‘In his book on the deferred crisis of democratic capitalism Wolfgang Streeck develops an unsparing analysis of the origins of the present banking and debt crisis that is spilling over into the real economy. This bold, empirically based study developed out of Adorno Lectures at the Institute of Social Research in Frankfurt. At its best – that is, whenever it combines political passion with the eye-opening force of critical factual analysis and telling arguments – it is reminiscent of The Eighteenth Brumaire of Louis Bonaparte. It takes as its starting point a justified critique of the crisis theory developed by Claus Offe and me in the early 1970s. The Keynesian optimism concerning governance prevalent at the time had inspired our assumption that the economic crisis potential mastered at the political level would be diverted into conflicting demands on an overstrained governmental apparatus and into ‘cultural contradictions of capitalism’ (as Daniel Bell put it a couple of years later) and would find expression in a legitimation crisis. Today we are not (yet?) experiencing a legitimation crisis but we are witnessing a palpable economic crisis.’

3. Süddeutsche Zeitung (SZ), 8 April 2013. See (accessed 8 May 2013).

4. Among the German ‘tribes’, the ‘sedentary’ Bavarians count as the oldest. DNA analysis of bone findings from the late migration period when historical records of the Bavarians as such began have confirmed the so-called ‘Sauhaufen-Theorie’ (motley-crowd theory), ‘which postulates that a late Roman core population combined with large droves of migrants from Central Asia, Eastern Europe, and Northern Germany to form a Bavarian tribe’ (see SZ, 8 April 2013).

5. The growing pluralism of life forms, which confirms the increase in economic and cultural differentiation, contradicts the expectation of homogenized lifestyles. The process of corporatist forms of regulation being replaced by deregulated markets described by Streeck has led to an advance in individualization that has attracted the interest of sociologists. Incidentally, this advance also explains the peculiar phenomenon of the change in sides by those 1968 renegades who succumbed to the illusion that they could live out their libertarian urges under market liberal conditions of self-exploitation.

6. The details are in need of further consideration but, in spite of the misgivings of the German Federal Constitutional Court, the general tendency is correct.

7. I developed this idea of a constitution-building sovereignty that is shared between citizens and states ‘originally’ – that is, already in the constitution-building process itself – in Habermas, The Crisis of the European Union, trans. Ciaran Cronin. Polity, Cambridge, 2012; see also Habermas, ‘Motive einer Theorie’, in Im technokratischen Sog (forthcoming).

8. Among the ‘cheap’ alternatives is, for example, the – in and of itself not at all incorrect – recommendation of Eurobonds currently being rehashed by George Soros, which is rejected with the likewise correct argument, popular in northern European countries, ‘that in the current political system Eurobonds have a legitimation problem, for then taxpayer money would be spent without consulting the voters’ (SZ, 11 April 2013). This stalemate blocks the alternative of creating a basis for legitimizing a change in policy that would indeed include Eurobonds.