The Crisis in Context: Democratic Capitalism and Its Contradictions

Max-Planck-Institut für Gesellschaftsforschung Discussion Paper No. 11/15

28 Pages Posted: 12 Nov 2011

See all articles by Wolfgang Streeck

Wolfgang Streeck

Max Planck Institute for the Study of Societies

Date Written: September 19, 2011

Abstract

The “financial crisis” and its sequel, the current sovereign debt crisis, appear to be the latest permutations of an old conflict between capitalism and democracy that forcefully reasserted itself after the end of the postwar growth period. Today’s calamities were preceded by high inflation in the late 1960s and 1970s, rising public deficits in the 1980s, and growing private indebtedness in the 1990s and 2000s. In each case, governments were faced with popular demands for prosperity and security that were incompatible with market allocation. Inflation, deficits and financial under-regulation should not be understood as results of faulty economic management but rather as temporary stopgaps to simultaneously satisfy democratic-political claims for social justice and economic claims for profitability. As the site of distributional conflict moved with time from the labor market and industrial relations to the politics of public spending, then to the provision of credit to private households, and from there to international fiscal diplomacy, it became increasingly insulated against popular democratic pressures. At the same time, the political and economic risks associated with the contradictions of democratic capitalism have increased, with potentially disruptive consequences for the social integration of democratic polities as well as for the system integration of advanced market economies.

Keywords: Financial Crisis, Capitalism, Democracy, Polity, Politics

JEL Classification: G1, G15, G28, P1, E5

Suggested Citation

Streeck, Wolfgang, The Crisis in Context: Democratic Capitalism and Its Contradictions (September 19, 2011). Max-Planck-Institut für Gesellschaftsforschung Discussion Paper No. 11/15, Available at SSRN: https://ssrn.com/abstract=1950558 or http://dx.doi.org/10.2139/ssrn.1950558

Wolfgang Streeck (Contact Author)

Max Planck Institute for the Study of Societies ( email )

Paulstr. 3
Cologne, 50676
Germany

HOME PAGE: http://www.mpifg.de/people/ws/index_de.asp

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