Social Europe Journal Vol. 4 No. 3

Volume 4 • Issue 3Summer 2009www.social-europe.eu

Social EuropeJournal

Contributions byErhard EpplerJonathan RutherfordFriedhelm HengsbachAlexis BrasseySam WhimsterKarl-Heinz KlärGavin RaePeter NeumannChristian TenbrockStephen Barber

The Ethicsof Capitalism

Social Europe Journal • Volume 4 • Issue 3 • Summer 2009

Editorial Board

Giuliano Amato Former Italian Prime Minister

Stephen Barber Book Review Editor, The Global Policy Institute

Karl Duffek Director Renner Institute

Stephen Haseler Chief Editor, The Global Policy Institute

Klaus Mehrens The Global Policy Institute

Henning Meyer Editor, The Global Policy Institute

Poul Nyrup Rasmussen Former Danish Prime Minister

Angelica Schwall-Dueren Vice Chair SPD Bundestag Group

Dimitris Tsarouhas Bilkent University Ankara

Giuseppe Vacca President Gramsci Foundation

Editorial Team

Jeannette Ladzik Assistant Editor

Ben Eldridge Design & Layout

Social Europe Journal is publishedby the Global Policy Institute atLondon Metropolitan University

In cooperation with / supported by:


Editorial

Henning MeyerHead of the EuropeanProgramme at the Global PolicyInstitute at London MetropolitanUniversity and Editor of SocialEurope Journal

CAPITALISM IS BACK atthe centre of the politicaland intellectual debate.

In the wake of the current eco-nomic predicament, whichclearly accentuated some of themajor flaws of capitalism, this ishardly surprising. With this dis-cussion the discourse about thenature of the state and its taskto effectively regulate the econ-omy has resurfaced too.All too often, however, the

capitalism–state relationship isexamined in too superficial amanner. The daily politics weread about on the internet andin newspapers invites us to takea superficial look at fundamen-tal issues that have a deepercomplexity. We hear aboutemergency measures govern-ments implement and argu-ments about systemic shortcom-ings in one place or the other.But one rarely hears from com-mentators who analyse the cur-rent situation beyond practicalpolitics and broad criticisms ofcapitalism.Therefore our goal in this issue

of Social Europe Journal (SEJ) isto go a step further and addressthe deeper analytical level ofthe capitalism–state relationshipagainst the backdrop of theunfolding economic events.For this discussion of the eth-

ical principles of capitalism andsociety we have assembled a

fascinating group of authorsranging from academics andpublic intellectuals to practi-tioners and politicians.Also, we have published

book reviews for the first timein the Journal’s history. ChristianTenbrock of DIE ZEIT reviews anew book on the EuropeanSocial Model that was the resultof a project of the Friedrich-Ebert-Stiftung Warsaw. And ourbook review editor StephenBarber examines one of themost ambitious books ondemocracy published in the lastdecades: The Life and Death ofDemocracy by John Keane.Please also visit our website

www.social-europe.eu. Thereyou can debate all articles ofthis journal issue with otherreaders and browse our web-only content such as myEditor’s Blog.As always, we hope you

enjoy your reading.


Contents

Tasks of the New European CommissionThe Berlin Study Group Europe of the Friedrich-Ebert-Stiftung

Capitalism and Christian EthicsErhard Eppler

An Economy without EthicsJonathan Rutherford

A New Start in Economic Policy – Beyond Financial CapitalismFriedhelm Hengsbach

Ethics, Capitalism and the Managerial AristocracyAlexis Brassey

Morality and Capitalism in Sociological PerspectiveSam Whimster

The Ethics of CapitalismKarl-Heinz Klär

No Freedom without SolidarityGavin Rae

Old and New TerrorismPeter R. Neumann

What does Brussels Want?Christian Tenbrock

The Fragility of DemocracyStephen Barber

58131823273237414547

THE STUDY GROUP Europe ofthe Friedrich-Ebert-Stiftung hasdrawn up a list of tasks to be

incorporated in the programme of thenew European Commission over thenext few years. Its detailed proposalsshould serve as a blueprint for politicaldecision-making, as well as a set ofbenchmarks for the EuropeanParliament and the European Council.The following central policy areas

are addressed: the social dimension;economic policy; taxation; financialmarkets; public service provision; ener-gy and climate; a culture of civil rights,security and freedom; migration andintegration; a Common Foreign andSecurity Policy (CFSP); and EuropeanNeighbourhood Policy (ENP).The financial and economic crisis

represents a window of opportunity foran active European Commission. TheBarroso Commission has largely con-fined itself to managing the EU ratherthan acting as a driver of reform. Thenew European Commission will haveto be measured by whether it will gobeyond the necessary crisis manage-

ment. What the EU needs is a long-term paradigm shift towards a socialEU with a sustainable approach to theeconomy and a global presence. This iskey to the EU maintaining its viability,playing a role on the world stage andre-inspiring EU citizens about theEuropean project.

1. The EU’s economic and social pol-icy needs a paradigm shift.Economic, social and environmen-tal integration should no longer beregarded as in conflict. TheEuropean Commission ought toproduce a report laying out ‘TheCosts of a Non-Social Europe’ andpresent proposals for a change ofcourse. This includes equal wagesand working conditions for thesame work at the same place.Protection of employment rightsand the social dimension must bebrought to the top of the EU’sagenda. Besides the PostedWorkers Directive this should alsobe reflected in a social progressclause in primary law.

2. Employment policy and economicpolicy must be given equal statusin a reorientation of the LisbonProcess after 2010. The IntegratedGuidelines should be oriented inparticular towards promotingresearch and development, aswell as fair and high quality edu-cation systems, environmentalmodernisation of the economy, apositive linkage between wage

Tasks of the NewEuropean Commission

‘The EU’s economic and socialpolicy needs a paradigm shift.Economic, social and environ-mental integration should nolonger be regarded as in conflict’

5 Social Europe Journal Summer 2009

The Berlin StudyGroup Europe ofthe Friedrich-Ebert-Stiftung

development and productivityincreases, and the concept of‘decent work’. The need fornational minimum wages mustalso be enshrined in theGuidelines. Particularly in a timeof crisis it is important tostrengthen economic democracy.The maintenance and promotionof high standards of workers’ par-ticipation should be developedinto a trademark of the EU.

3. Tax competition between EUmember states undermines a fairtax policy. This is why we need auniform basis of assessment andminimum rates for corporatetaxes. As cross-border trading offinancial products is becomingincreasingly opaque, it must beregulated through the introduc-tion of a Europe-wide tax onfinancial transactions.

4. The EU must set up an effectiveEuropean supervision of thefinancial markets that overcomesthe fragmentation of toothlesssupervisory structures. As a firststep, cooperation between nation-al supervisory authorities must beimproved. On top of that, theestablishment of a centralEuropean regulatory authorityshould be seriously considered. Inparticular, business policy shouldbe more tightly bound to theattendant risk. To that end theCapital Requirements Directiveshave to be formulated more strict-ly and oriented towards long-termstability. Secondly, rating agen-cies, hedge funds and privateequity funds have to be effectivelyregulated and controlled as far aspossible at international level, butcertainly at European level.

5. Since municipal provision of pub-lic services often conflicts withEuropean competition and single

market regulations, greater legalcertainty must be established atEuropean level. It is fundamentalfor a social Europe that localauthorities can continue to ensure,efficiently and cost-effectively, theextensive provision of essentialservices and high quality goods onan equal and non-discriminatorybasis. In cases in which publicservices and other legal domains –such as subsidies and public pro-curement legislation – impinge onone another, priority should begiven to the proper functioning ofpublic services.

6. Security of energy supply must beenhanced by extending infrastruc-ture such as electricity cables andgas pipelines, gas storage and ter-minals for liquefied natural gas.Besides the establishment of a sol-idaristic energy single market anenergy security concept must alsobe developed in order to reduceone-sided dependencies. The EUfinally has to make a determinedeffort to tackle the environmentalreorganisation of the industrialsociety, as well as continuing toplay a leading role in global cli-mate policy.

7. In order to promote a commonarea of justice in the EU and tocreate a shared culture of civilrights the current DirectorateGeneral Justice and Home Affairsshould be divided into two sepa-rate Directorates General presidedover by their own Commissioners.A Directorate General for HomeAffairs should be responsible forpolice cooperation, border con-trols, asylum and migration poli-cy, and integration activities. ADirectorate General for Justiceshould press ahead with the har-monisation of procedural rules incriminal law, the implementationof common guidelines in the pro-


tection of fundamental rights anddata protection and better cooper-ation between judicial authoritiesin the EU member states.

8. The European Commission needsto give new momentum to thedevelopment of the European asy-lum system. This requires the fur-ther standardisation of the legalframework and procedures, aswell as specific criteria for granti-ng asylum. In addition, the con-cept of circular migration needs tobe advanced. In order to avoid‘brain drain’ effects in developingcountries, migrants should beallowed to return to their homecountries for longer periods with-out losing their residence status inthe respective EU member state.

9. The EU needs a comprehensiveand long-term foreign and securitypolicy strategy that is supportedby all the EU member states. Itmust take its bearings from theconcepts of ‘human security’ and‘effective multilateralism’. TheEuropean Commission shouldplay its part in the necessaryreform measures within the frame-work of its competences. Aboveall, the European Parliament hasto be involved in the decision-making process at an early stagein order to enhance the democrat-ic legitimacy of the CommonForeign and Security Policy.

10.The European Commissionshould develop a coherent strate-gic approach to the EuropeanNeighbourhood Policy thatreflects the interests of the EU asa whole. The EuropeanNeighbourhood Policy should beturned into a more attractiveopportunity for cooperation espe-cially for neighbouring states thathave no immediate prospects ofaccession. A flexible approach tospecific circumstances in the ENPpartner countries should be asmuch of a priority here as thepromotion of regional coopera-tion. A clear conditionality shouldbe built into the process by whichthe ENP partner countries comecloser to the EU, oriented towardsthe implementation of ENP actionplans.


TRIBUNE

Read and subscribe online atwww.tribunemagazine.co.uk

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Labour’s shameful smear

l It can only getmessier

l Fresh claims inselectionsshenanigans

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Social justice or anincomes policy –he said there couldn’tbe one withoutthe otherWhat we got wasThatcher

Robert Taylor delves intojust-releasedofficial paperson the“winter ofdiscontent”

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TRIBUNEEstablished 1937 www.tribunemagazine.co.uk 5 June 2009 £2

Edward Pearce:Empowering ParliamentPaul Routledge:Town Hall timebomb

Roderick Clyne:Malaysia’s malaiseArts:Poets cornered on the BBC

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The perfect political storm:

They think it’s all over...they could be right

I. As recently as 2003, in a – pur-portedly critical – introductionto neoliberalism, we read the fol-lowing: ‘The left/socialist andchurch-based critiques of neolib-eralism are in agreement that themarket encourages a “destructiveegoism”. Resistant to learning,the churches cultivate the ideaof the fundamentally good,socially responsible individual,and look with biblical aversion(“You cannot serve God andMammon”, Matthew 6, vv. 24-34) upon an economic order thatis founded on – indeed, is pre-sumably designed to produce –the selfish individual.’1

Quite apart from the fact thatthe churches have been accusedfor centuries – and with morereason – of preaching that manis not ‘fundamentally good’ atall, but intrinsically sinful, thisquotation shows how marketradicals felt themselves to be inpossession of a truth to whichevery system of ethics, includ-ing that of the churches, had to

submit. If the churches insistedon sticking to what they hadbeen preaching for 2000 years,they were ‘resistant to learning’.They had closed their minds tothe one and only truth.So market-radical ideology

fell foul of the churches withgrowing regularity, even thoughthe latter’s usual attempts toreconcile conflicting ideas werenever entirely abandoned. Fromthe very beginning there was aconflict between Christianethics and capitalism in anyform. A visible sign of this wasthe medieval ban on usury.All forms of capitalism are

‘founded on the selfish individ-ual’. Capitalism consciouslyappeals to the individual’s incli-nation to acquire goods, toaccumulate wealth, whether inorder to be better protected, tohave the wherewithal to lead acomfortable life in the future, orto count for something in socie-ty. The inclination can becomean addiction, the accumulationof wealth an end in itself. Thisis what Christian ethics definedas covetousness, cupidity, oravarice (from the Latin avaritia).The other driving force

behind capitalist economics,apart from the individual’s striv-ing for personal gain, is compe-tition. Our fellow human beingsare either our helpers or ourcompetitors. As family mem-

Capitalism andChristian Ethics

Erhard EpplerFormer German Minister forInternational Development andfounding chairman of the SocialDemocratic Party’s Commissionon Fundamental Values

‘Paul summarises the ethics ofChristian charity thus: “Bear ye oneanother’s burdens, and so fulfil thelaw of Christ.” To the capitalist thismust appear nonsensical’


mises were unavoidable. TheChurch acquired power, itbecame wealthy, it adopted astrictly hierarchical structure;orders were given and obeyed,advancement and punishmentwere meted out as the Churchsaw fit, tithes were exacted, andwhen it came to collecting themfrom impoverished peasants,charity was not the only motiveat work. It was only ever indi-viduals or monastic orders likethe Franciscans who made aserious attempt to live out theethical principles of Jesus.These principles were always

about the individual, not aboutsociety and certainly not aboutthe state. It was fine for theindividual to try and live by theprecept that he should not takethought for the morrow – or fornext year. But ruling a countryrequired people to do preciselythat. Gouverner, c’est prévoir.The temporal authority, sup-ported by the Church, adminis-tered justice and enforced thelaws of the land. People wereoften hanged for minor offencessuch as theft. This was farremoved from the Jesuanic sys-tem of ethics: but then thesewere matters for which theChurch was not directly respon-sible. It simply tolerated – andlegitimised – what the ‘seculararm’ deemed right. From thisflowed Luther’s doctrine of thetwo kingdoms or realms.When the Industrial

Revolution created the newlabouring class, first in GreatBritain and then in western andcentral Europe, the churches’response for a long time was tofocus on the needs of the indi-vidual. The poor were givenalms, as they had been in thetime of Jesus. The churchauthorities did not feel obliged

ply and demand. Not so in theNew Testament. Jesus tells thestory of a ‘householder’ andowner of a vineyard, who goesout early in the morning to hirelabourers to work in his vine-yard. He promises them pay-ment of one denarius for theday’s work – the sum that afamily needs to live on.Throughout the day, until theearly evening, the householdercontinues to hire more labour-ers who are standing aroundwaiting for work. He says hewill give them ‘whatsoever isright’. At the end of the day hepays them all one denarius,regardless of whether they haveworked for twelve hours or onehour. This annoys the earlybirds in particular. The house-holder asks: ‘Why be jealousbecause I am kind?’.2 Eachreceives what he and his familyneed. To give any less would bemean. But this runs counter notonly to the rules of capitalism,but also to the workers’ ownsense of justice.For Erich Fromm, capitalism

is about having, whereas theNew Testament is about being.There could hardly be twovalue systems more diametrical-ly opposed than the capitalistand the Jesuanic. Jesus evenrejects the notion of takingthought for the morrow. Thebirds of the air do not troublethemselves about the future,even less so the lilies of thefield: ‘Yet your heavenly Fatherfeedeth them.’

III. Right from the beginning,the ethical radicalism of Jesus ofNazareth was too much even forthe Christian churches. WhenChristians became responsiblefor a state church – and there-fore also for a state – compro-

bers, employees or customersthey can help us, as competitorsthey can harm us and put thewhole company at risk. Workersand employees, even whentreated well, are still a ‘cost fac-tor’. And if they set up in busi-ness on their own, they becomeour competitors.

II. In the New Testament ourfellow man is not our competi-tor but our ‘neighbour’. The eth-ical code of the New Testamentrevolves entirely around thisrelationship with our ‘neigh-bour’. Not because man isintrinsically a social animal, butbecause he is dependent on hisfellow men, and cannot livewithout them, because this isthe relationship that shapes hislife. ‘Thou shalt love thy neigh-bour as thyself.’ Asked the ques-tion ‘Who is my neighbour?’,Jesus replies by telling the para-ble of the Good Samaritan. TheSamaritans were not Jews, butdespised foreigners. So ourneighbour is not necessarily ourbiological brother or someone oflike mind, but the individualwho is most in need of our helpand care.In his Letter to the Galatians,

Paul summarises the ethics ofChristian charity thus: ‘Bear yeone another’s burdens, and sofulfil the law of Christ.’ Thecontrast with the capitalistcredo could not be more starklyformulated. To the capitalist thismust appear nonsensical. Howcan an economy even function,let alone grow, if everyone isintent on bearing the burdens ofothers? Surely it is much moreproductive and cost-effective ifeveryone looks out for himself?In capitalism everything has

its price. And that price isdetermined by the law of sup-


Preferably one that is ethicallysound? With the striving forpersonal gain, but without thegreed and the avarice? Drivenby a healthy egoism, but not atthe cost of consideration forothers, for the company work-force, for environmental sus-tainability, for the proper func-tions of the state?Countless lectures, seminars

and books have been devoted tothe subject of business ethicsover the years. Even those whotake seriously such efforts toestablish ethical guidelines forbusiness, and do not dismissthem as corporate window-dressing, have to admit thatthey have done little to checkthe excesses unleashed by mar-ket-radical ideology.Philosophers from Kant toRawls, not to mention Catholicencyclicals and memorandafrom the Protestant churches,have struggled to make head-way against the tide of unfet-tered market capitalism.Sermonising seldom achievesits intended purpose. Whyshould this be any different in asociety where the only thingthat counts is success, andwhere it is sometimes not theworthiest individuals who suc-ceed, but the most cunning?Of course, moral reflection

can be helpful. But it cannotturn a society that wants to winat any price, and by anymeans, into a society that val-ues real achievement. It cannoteven prevent the former fromclaiming to be the latter. Moralhomilies are probably mosteffective when directed againstmanifest abuses.At one time there was less

corruption associated with theaward of contracts. The game ofseeking out tax loopholes has

the real world’ – the idea beingthat it should not exist for muchlonger. For the rest, the marketradicals promised everyone alife of affluence, in the longterm at least. Of course, the richneeded to get richer first, but intime the ‘trickle-down’ effectwould kick in and wealthwould eventually trickle downto the poor. The new moralitywas assertively self-confidentand aggressive. In contrast tothe liberalism of a hundredyears earlier, no apologies werefelt to be necessary: greed wasnecessary and therefore good,even if many former comradeson the Left could not compre-hend this. In 1900 a slogan likeGeiz ist geil! (Avarice is sexy! –the slogan of Germany’s Saturnappliance-retailing chain)would have been ditchedamidst public protest. ForCatholics avarice is still a mor-tal sin – both the avarice thatrefuses to give and the avaricethat cannot get enough. Thesurprising thing is that Geiz istgeil! met with so little protest.

IV. By now only hopelessdreamers still believe that ifonly we let the markets ruleunchecked, a blissful future formankind is assured. Now thatthese markets have lost unimag-inable sums of money and ourmighty financial institutionshave had to be rescued by thestate, that particular dream isover. Or it is for those who cantell the difference betweendream and reality.Now would really be the time

to question the whole system.But the question is only everput in a very tentative way,because nobody has an alterna-tive functioning system to offer.A different kind of capitalism?

or entitled, nor indeed compe-tent, to ponder – let alone judge– the fairness or otherwise ofeconomic systems. And contem-porary philosophers had otherthings to worry about.Added to this was the fact

that Christian morality in the19th century increasinglybecame a pillar of middle-classrespectability, to the pointwhere it was difficult to distin-guish between the two. Andthere was a clear dividebetween this middle-classrespectability and the strugglefor survival of the proletariat,which was seen either as athreat or as a charitable cause.The Papal Encyclical RerumNovarum was not promulgateduntil 1891. That same decadesaw the emergence within theProtestant church of a Christiansocialism that no longer soughtto protect the monarchy fromthe workers, but instead to pro-tect the workers from those whowould exploit them.There is at least a clear recog-

nition now that even economicsystems need to be legitimisedby ethical values. Although KarlMarx was interested in thedialectic of history and not inethical judgements, all forms ofsocialism have seen themselvesas morally superior to capital-ism. Even the social marketeconomy of Ludwig Erhardmade some claim to moralauthority. And when, towardsthe end of the 20th century, amarket-radical ideology that hadits roots in Great Britain and theUSA spread throughout theworld, it brought what might betermed a new morality intoplay. The principal catchwordof this morality was ‘freedom’,especially in the confrontationwith ‘socialism as it exists in


politically responsible demo-cratic majorities.In actual fact we are talking

about three frameworks – legal,social and environmental. Thelegal framework has to defineprecisely what is lawful andwhat is not, and what penaltiesawait the law-breaker, in areassuch as advertising, paymenttransactions, business procure-ment and corporate mergers.This framework now includeschecks and controls designed toensure that financial risks can-not be so cleverly masked bycomplex financial instrumentsthat they are wrongly assessedby rating agencies, either delib-erately or because even highlypaid finance professionals can-not understand them.The second framework is the

social one. In Germany work onconstructing such a frameworkwas begun by Otto vonBismarck, when he made busi-ness enterprises contribute tothe cost of insuring their work-ers. Henceforth they were toshare the responsibility forensuring that their employeeswere financially protected in ill-ness and old age. Some arguetoday that these ‘non-wagelabour costs’ should be shiftedonto the taxpayer. But as long asthe nation states continue to viewith each other in offering thelowest business taxes, this isnot a good idea. Tax fundingwill only make sense if the EUmember states, at least, canagree to set a minimum rate forbusiness taxes across the Union.A decade after Bismarck, the

National Liberal banker andPrussian Minister of FinanceJohannes von Miquel draftedanother piece of the socialframework by introducing pro-gressive income tax to Germany.

in primary school from becom-ing our competitor. What it can-not do is prevent a businessmanfrom distinguishing betweenhelpers and potential helpers,competitors and potential com-petitors. We can and must pre-vent the commodification of allareas of life. But all attempts tode-commodify the economy aredoomed to failure.

V. So as we contemplate theway ahead after the failure ofmarket radicalism, statutory reg-ulation will be more importantthan moral debate or preaching.Not because businessmen aredeaf to moral arguments, butbecause all too often they (haveto?) subordinate their laudableintentions to competitive con-straints. At the end of the daythey are also responsible for thepeople who have found workwith them and want to stay inemployment. Voluntary agree-ments undertaken by industryhave not been brilliantly suc-cessful, on the whole. Marketradicals were not trying to freecapital from ethical restraints,but from legal checks. Their aimwas not to do away with ethicalprinciples – they had their own,after all – but to remove theability of the state to construct aframework for the economy andthe markets that was deemedappropriate to the needs of

not always been so popular.And there were times whenbankers knew what they had intheir vaults, when they under-stood financial instruments andwere able to assess the value ofwhat they were buying. There isan ethical dimension to all this,and it can certainly do no harmif managers and entrepreneurs,and employees and customerstoo, are encouraged to reflect ontheir actions and choices. But itis not in itself a solution.There is in fact no ‘problem’

here that could ever be satisfac-torily ‘solved’. Capitalism isconstrained by reality and by itsown mindset, which has alwaysenjoyed a strained relationshipwith what is regarded in Europeas ethically permissible or desir-able – even if St. Paul’s ‘Bear yeone another’s burdens’ is nowonly a dimly discernible pres-ence in contemporary moraldiscourse. The capitalist eco-nomic system would be incon-ceivable without the selfishdesire for personal gain. TheEuropean ethical tradition,whether Christian or not, hasalways been about our fellowman and neighbour, about manliving in community with others– from the family to the localtown or parish to the communi-ty of nations.This ethical tradition can pre-

vent the child sitting next to us


‘Capitalism is constrained by realityand by its own mindset, which hasalways enjoyed a strained relation-ship with what is regarded in Europeas ethically permissible or desirable’

the market radicals. It is nowclear that this is not even goodfor the markets. And even lessso for society, which can end upsplit and divided.The capitalist economic sys-

tem, especially in its modernglobalised form, wields a greatdeal of power. It needs to becounterbalanced by some otherform of power. This could be acivil society that is not subjectto the laws of the market. Buteven a healthy civil societyneeds a functioning state that iscapable of effective action. Thefact that the market radicalswanted to dismantle the stateand starve it of resources showsthat they did not view it as theirtool, but as an opposing powerwith its own agenda, its ownsources of strength, its owngoals and values. The importantthing now is for the state toregain the strength to create theframeworks we need. Andwhere the nation state is nolonger capable of doing so, theEuropean Union must step in.Before the 21st century entersits second quarter.

Endnotes

1 Willke, Gerhard (2003),Neoliberalismus, Campus,Frankfurt/Main, p.151.

2 Matthew 20, v 15 – here in theNew English Bible version.

option. Outright prohibitionsare the exception.This framework remains very

much a work in progress. Thisis evidenced in the half-heartedattempts to reform the car tax,and in the furious opposition toenvironmental taxes which isbacked by a majority of themedia. The end of the market-radical era – which has not yetarrived for some, of course –creates an opportunity to estab-lish an environmental frame-work that is strong enough andeffective enough to make sus-tainable development more thanjust an abstract ideal.

VI. There are of course moralreasons why such frameworksshould be established – andtherefore why the necessary leg-islation should be put in place.At the Protestant ChurchCongress in Düsseldorf in 1985the physicist and philosopherCarl Friedrich von Weizsäckerappealed for an ecumenicalcouncil for ‘Peace, Justice andthe Integrity of Creation’. If‘peace’ is taken to include thecivil peace that is increasinglyunder threat in many countries,and if ‘justice’ is also under-stood to mean social justice,then the ‘conciliar process’ thatleads to peace, justice and theintegrity of creation can be seenas the ethical basis for actionthat will only be timely andeffective, as far as one can see,if it is enshrined in legal norms.Law needs to be underpinnedby ethical standards. The busi-ness of politics, if it wishes toavoid a headlong rush into dis-aster, is to enact binding lawand enforce it. That is what thestate is for.Capitalism with a minimal

state presence was the aim of

Those who earned more wouldpay a higher percentage of theirincome for the benefit of thecommunity at large. For most ofthe 20th century the progressiveincome tax model was acceptedwithout question across thewhole of Europe. The only argu-ment was about how steep theprogression should be. But inthe age of market radicalism thegangsters, especially in the for-mer communist states, have suc-ceeded in dismantling thisimportant part of the socialframework. And to this day allthe fine words of those whowant to ‘simplify’ the tax systemboil down to the same thing: theabolition of progressive taxation.Naturally the social framework

also covers everything designedto protect employees, includinglabour legislation, which bal-ances the interests of employersagainst those of employees.Another aspect of the frameworkin Germany is co-determinationin the workplace, which hasonce again proved its worth at atime of crisis.And finally, the environmen-

tal framework. Its purpose is toslow down global warming, pre-vent soil pollution and erosion,safeguard food standards, stopoverdevelopment of the coun-tryside and halt the extermina-tion of wildlife species. Buteven this framework wasviewed by market radicals likeGeorge W. Bush as just afiendish plot by left-wing ide-alogues to put obstacles in theway of the free market. In actualfact this framework operates onmarket principles: anything thatis environmentally harmfulmust be made economicallyunattractive, i.e. expensive. Andwhat is environmentally desir-able becomes the cheaper


Jonathan RutherfordProfessor of Cultural Studies atMiddlesex University and editorof Soundings. His latest book isAfter Identity, Lawrence andWishart 2007

IN THE PARK across the roadthe boys hang out on thebenches. Throughout the

day and long into the night,when the call comes in one willcycle off up the road and returnwith the small wrap. It is a justin time, overheads free, net-worked, post post-fordist econo-my of primitive accumulation.A life selling crack or heroin isstripped down to exchange,profit, conspicuous consump-tion. It is a quick but dangerousroute up the status seeking lad-der of respect and a short cutfor the excluded to the capitalistgood life. Demand is inelasticand insatiable. Drug taking isdriven by the two impulses thatpropel consumerism: desirefreed from obligation to others,and the never to be satisfiedsearch for peace of mind.As Max Weber describes it,

the impersonal, economicallyrational relations of businessfollow their ‘own objectified

laws’.1 The drugs trade is theirpurest expression. In this parkon an autumn evening a marketoperates in the to-ing and fro-ing of the bike and the comingand going of strangers. At itscentre is the absence of law andmorality. What holds togetherits relations of exchange is thethreat of violence. It is an econ-omy without ethics and in thisrespect it exemplifies in extrem-is the neoliberal model of capi-talism that has transformed thesocial order in Britain over thelast three decades.

An Economy without EthicsThe historic crisis of Britain’sold model of mass industrialproduction and the systemicfailure of capital accumulationin the 1960s provided an oppor-tunity for the right to establish anew hegemony. The 1979Conservative government ofMargaret Thatcher engineeredthe deregulation and restructur-ing of the economy, opening itup to the rapidly growing globalfinancial markets. Its hegemonywas secured by the sale of coun-cil housing and the promise of aproperty owning democracy. Anew kind of popular compactbetween the individual and themarket aligned the economicinterests of individuals with theprofit-seeking of financialisedcapitalism. Its individual market

An Economywithout Ethics

‘As Max Weber describes it, theimpersonal, economically rationalrelations of business follow their“own objectified laws”. The drugstrade is their purest expression’


Traditional moral collectivitieshave been undermined as indi-viduals reject imposed and uni-versalist sets of rules and obli-gations in favour of an ethicswhose styles are more in keep-ing with the ancient Stoicphilosophers and their injunc-tion to ‘spend your whole lifelearning how to live’.2

The individualisation of classand culture around these lead-ing edges of technology drivenproduction and consumptionhas been accompanied by thedestruction of more collectiveways of life. The collapse of themanufacturing industry, its out-sourcing to low wage economiesoverseas and the emergence of aglobal division of labour haveundermined the income base ofthe working class. In 1976 thebottom 50 per cent of the popu-lation owned 12 per cent of thenation's non-housing wealth. By2003 it had fallen to 1 per cent.In parts of the country theworking class has lost its pro-ductive role. Sections of thepopulation exist as a reservearmy of labour either economi-cally inactive or in casualisedand temporary jobs. The declineof traditional forms of employ-ment and the creation of classsegments superfluous to theneeds of capital have destroyedtraditional working class cul-tures and their virtues.Over the last three decades,

the neoliberal model of capital-ism has created a utilitarianismwhose rational, economic calcu-lation has contaminated allsocial relationships. Its creativedestruction, its integration ofpersonal life into market rela-tions, the aggressive selling ofcheap credit, and the destructionof cultural and moral inheritancehave led to an economy without

tion of wealth from labour tocapital; it has been central to themodernisation of capitalism inits new phase of technologicaldevelopment. In the financial,knowledge and cultural sectorsof the economy, new practices ofcapital accumulation co-optedthe values of the 1960s counter-cultures of the young middleclasses. The cognitive and emo-tional capacities of the individ-ual are its productive forces.Self-expression, anti-establish-ment sentiment and emotionalattunement to the world areforms of economic potential.The expanding universities

sector provides the communica-tive labour for productionprocesses that extend beyondoutput to incorporate con-sumers in the co-creating ofsymbolic meaning. In this neweconomy, consumption involvesthe pursuit of experience andthe aesthetic practice of assem-bling objects and meaning inthe process of self-becoming.The economic raw materials ofthis effervescent form of capital-ism are intangibles like informa-tion, symbolic meaning, soundsand images, sensibilities, socialconnections and styles of living.Its economic activities generatea cosmopolitan modernity ofdifference that is deepeningpeople’s sense of individuality.

nexus displaced the old socialwelfare contract and provided afoundational structure for thenew liberal market society ofconsumers. Change was facili-tated by a state that was itselfbeing privatised, outsourcedand marketised. Where thenation state had taken a moralresponsibility for the welfare ofits citizens, this new kind ofmarket state promised theminstead the economic opportu-nity to take care of themselves.In Britain’s low wage, low skill

economy of limited opportuni-ties, individual aspiration andeconomic growth were bothdriven by consumerism and sus-tained by the cheap credit of adominant financial sector. Thehousing market became the epi-centre of a casino economy thatturned homes into assets forleveraging ever-increasing levelsof borrowing. The lives of mil-lions were integrated into theglobal financial markets as theirsavings, pensions and personaland mortgage-backed debt wereexpropriated by financial capital.A similar compact between thebusiness elite and shareholdervalue engineered a massivetransfer of wealth to the rich andbecame the unquestioned busi-ness model of the period.The neoliberal compact not

only accelerated the redistribu-


‘Where the nation state had taken amoral responsibility for the welfareof its citizens, this new kind ofmarket state promised them insteadthe economic opportunity to takecare of themselves’

defenders of the status quo,while pursuing utilitarian val-ues that destroy it. These con-tradictions lie in the origins ofcapitalism and the emergence ofa middle and trading classsteeped in the culture ofPuritanism. John Bunyan’sPilgrim’s Progress (1678) beginswith a man called Christian cry-ing out, ‘What shall I do?’. It is aquestion which symbolised thetransition from a traditionalsociety governed by providenceand fate to the modern idea ofpersonal destiny. The Puritanrevolution initiated an idea ofhuman community radicallydifferent from the Catholicismwhich bound individuals to thechurch through their bodies andemotions. Each individual wasalone with a god who wasrecast as a transcendent andunknowable deity. The meaningof life was no longer fixed, butbecame a task of individual self-reflection and the examinationand interpretation of god’sword. It was a revolution whichgave rise to a self-conscious-ness, and usurped the divineright of patriarchal authority.From the days of the

Merchant Venturers of StuartEngland, Protestantism and itsmessage of predestination wasinextricably linked to the spiritof capitalism. Contracts estab-lished new forms of social rela-tionships between men andreplaced the rights, duties andreciprocities which had been apart of the family. Society wasconstructed on the rationaldeliberations of its male citi-zens, defined by relationshipswhich were associational andsecular rather than communaland sacred. ‘Man’ was governedby reason. But this defeat ofdivine rule provoked the ques-

have all been scapegoats foranxieties about social disorderand incivility. The discourse ofan underclass has been used toshift the blame for the structuralredundancy and social exclu-sion of sections of the workingclass onto the excluded them-selves. The humiliation of cul-tural defeat and economic dep-rivation has precipitated genera-tional self-destructive addic-tions, mental illness, criminalityand dysfunctional behaviour.But these are symptoms of ourincivility, not its root causes.The metropolitan middle

class has also been accused ofbeing the cause of nationalmalaise. In 1970, the right wing,nationalist Tory, Enoch Powellaccused the liberal intelligentsiaof being an ‘enemy within’ anddestroying the moral fabric ofthe English nation with its pro-motion of cultural differenceand ‘race’.3 Margaret Thatcherfollowed his example, laying theblame for moral decline on thecounter cultures and permissivevalues of the 1960s. Tony Blairmimicked her in an opportunistattack on the ‘Swinging Sixties’and its ‘freedom withoutresponsibility’.4 Most recently‘Red Tory’, Phillip Blond hasaccused ‘a self-hating culturalelite’ and ‘a newly decadentmiddle class addicted to its ownpleasure’ of having a contemptfor tradition and virtue.5

Pilgrim’s ProgressThe middle classes play a con-tradictory role in modernity.They are the class agents of eco-nomic modernisation that his-torically undermines traditionalcommunity. At the same timethey enforce the moral normsand social structures of theirclass privilege. They are the

ethics. Modernisation and theerosion of civic culture haveopened a cultural and economicgulf between the liberal middleclasses and the mainstreamworking-class population. Thebreakdown of trust and a senseof disenfranchisement amongstthe electorate have led to a crisisin political representation.Anxiety and uncertainty areexpressed in a sentimentalmythology about the nationalpast, and a populist intoleranceof cultural difference.

The Enemy WithinIn the wake of economic crisis,the neoliberal compact thatpromised freedom through indi-vidual market choice no longercommands popular confidence.The sense of a shared moral andcultural national life has beeneroded. The old nation statesocial welfare contract is in tat-ters. What now is the ethicalrelationship of individuals toone another, to community andto the wider social order?The neoliberal model of capi-

talism has accelerated the longhistorical decline of the puritanmoral economy that under-pinned the culture of Britishcapitalism. Individual self-con-trol, hard work and a willing-ness to delay or forego rewardand gratification provided asocial glue and the purposeful-ness of a national, imperial des-tiny. In its place neoliberalismhas produced a multitude ofindividual stories without con-nection. Both Conservative andLabour governments haveresponded to this social frag-mentation with an authoritarianpopulism and a search for ‘ene-mies within’. The poor, welfarerecipients, single mothers,immigrants, and young people


diversity of economic struc-tures, business models andforms of ownership. The effer-vescent quality of wealth cre-ation will require diversity, flex-ibility and complexity. It willneed to secure social founda-tions, but as a society we arepolitically demobilised andsocially divided. A new politicsof the left must galvanise thevitalism of the cosmopolitancultures of difference whilebeing an advocate for main-stream conservative culture.The two sensibilities are notnecessarily mutually exclusive.They can divide along differ-ences in age, class and region,but they also constitute the con-tradictory desires for freedomand security, the unpredictableand the familiar, desire andneed, which exist within eachof us. The philosophical debateson the individual and our rela-tionship to society which inau-gurated modernity remain cen-tral to contemporary politics.Today we good citizens share

a predicament with the boys inthe park. We live our liveswithout moral guarantees.There can be no return to acommon Christian culture asEnoch Powell would havewished. Nor can we secure asocial cohesion through the

‘Culture is Ordinary’.6 It beginswith an elegy to his workingclass boyhood in the farmingvalleys of the Black Mountainsand the generations of his fami-ly who had lived there.Williams describes a way of lifewhich emphasised neighbour-hood, mutual obligation andcommon betterment. Hebelonged to a class that gavehim his personal resilience andsocial anchorage. It gave him aculture and political representa-tion through the Labour Partyand a trade union movement.Williams knew that culture

was shaped by the underlyingsystem of production. He recallshow from the mountains hecould look south to the ‘flare ofthe blast furnace making a sec-ond sunset’. He wrote at a timewhen his class was alreadyundergoing momentous change,but he could not have imaginedthe day when there would be nosecond sunset and the system ofproduction that had shaped hisclass and culture was turnedinto scrap. After that, whatwould come next?We need to find answers to

this question. Across Europesocial democracy is in crisis. Inthe decade ahead the new tech-nologies will continue to trans-form the economy creating a

tion of what now held individu-als and society together.Thomas Hobbes warned thatunless another form of authorityreplaced it, life would not beworth living. Society would beprecipitated into a war-likestruggle of all against all.The Scottish philosopher

David Hume responded toHobbes in his Treatise of HumanNature (1739-40). Social bondswere founded in feelings.Sociability and moral valueswere inaugurated by the flow ofemotions – sympathy – betweenpeople. His friend, the philoso-pher Adam Smith disagreed. InTheory of Moral Sentiments(1759), Smith argued that sym-pathy – compassion, fellow-feel-ing – was necessary for themoral foundation of a commer-cial society. However, unmediat-ed emotions of sentimentusurped reasonable behaviourand undermined the ties whichbound people together.Sociability requires self-interestwhich distances the subjectfrom both himself and from oth-ers: ‘We must imagine ourselvesnot the actors, but the specta-tors of our own character andconduct’. By 1776 and the pub-lication of The Inquiry into theNature and Causes of the Wealthof Nations, Smith is moredoubtful of the social value ofhuman feelings. The well beingof all would be ensured by theemergence of disinterested com-petitive markets and contractualrelations. Justice and the rule oflaw, not sociability, would bethe ties which bound citizens tosociety.

Socialism and Ethical LifeFifty years ago the socialistwriter Raymond Williams pub-lished a short essay called


‘In the wake of an economy withoutethics and in an age of secular indi-vidualism there is a need for allegorythat will restore ethical meaningand cultivate representations ofour commonality’

occupy it. Making them will notbe religious, but it will be acivilisational achievement.

Endnotes

1 Löwy, Michael (1998), ‘CatholicEthics and that the Spirit ofCapitalism’, Instituto de EstudosAvancados da Universidadede Sao Paulo,www.iea.usp.br/english/articles.

2 Seneca (1997), Dialogues andLetters, Penguin Books, London.

3 Wood, John (ed) (1970), Powelland the 1970 Election, ElliotRight Way Books, Surrey,pp.104-112.

4 The speech was delivered inJuly 2004.

5 Blond, Phillip (2009), ‘Thenecessity of virtue’, The Tablet,23 May. See also Blond, Phillip(2009), ‘Rise of the red Tories’,Prospect, issue 155.

6 Williams, Raymond (1989),‘Culture is Ordinary’, in, Williams,Raymond, Resources of Hope:Culture, Democray, Socialism,Verso, London.

7 Hobhouse, Leonard T. (1911),Social Evolution and PoliticalTheory, Columbia UniversityPress, New York, p.85.

8 Taylor, Charles (1991), TheEthics of Authenticity, HarvardUniversity Press, Boston.

9 Ricoeur, Paul (1991), ‘Ethicsand Politics’, in, Ricoeur, Paul,From Text to Action: Essays inHermeneutics II, NorthwesternUniversity Press, Evanston, p.334.

tion of ‘the political’ to includeaesthetic and cultural work. Theimportance of media, intellectu-al knowledge, art, music, poetry,image making, the spectacle, isthat they give form to new sensi-bilities and forms of conscious-ness. They can give voice to thesilenced and they create mean-ing where none has existedbefore. The aesthetic work ofplaying, dreaming, thinking andfeeling makes the individual feelthat life is worth living. What isit in music that exceeds its com-modification? The Left does notask such questions. Our philoso-phies have been shaped by ametaphysics that seeks to under-stand something by reducing itinto separate elements for analy-sis. We have created an instru-mental, technical and objectify-ing mode of thinking, in whichthought attempts to assert mas-tery and control over the world.But the world, society, individu-als, are more than the sum oftheir parts and we must findways of speaking to them.In the wake of an economy

without ethics and in an age ofsecular individualism there is aneed for allegory that willrestore ethical meaning and cul-tivate representations of ourcommonality. In the past, intu-itive attunement to the worldwas expressed in religious sym-bols and spaces of the sacred.They were constructed as time-less, changeless and undifferen-tiated representations of homo-geneous ethnic cultures. Todaythe search for a new ethicalrelationship between the indi-vidual and society requires non-absolutist objects, practices andspaces in which our inner beingfinds an emotional connectionto the world, and which fostercoexistence with the others who

object of god as the theologicalorthodoxy of Phillip Blondseeks. We will only ever gethold of the world indirectlythrough representation in lan-guage. God, the sacred, thetranscendent, the immanent areall simply metaphors for the‘unthought known’, the excessof world over word. The Leftdied when it failed imagina-tively, creatively, aestheticallyand politically to help us inthis act of reaching beyond ourknown selves.A new left politics must

return to first principles andaddress the big questions ofhow we live. We need a materi-alist politics of the individualliving and producing in societythat values the social goods thatgive meaning to people’s lives:home, family, friendships, goodwork, locality, and imaginarycommunities of belonging. Itsethic of socialism is simple: ‘thebest life for each is understoodto be that which is best forthose around him’.7 Thephilosopher Charles Taylorechoes this belief in his argu-ment that the desire for self-realisation lies deep in our cul-ture. It involves the right ofeveryone to achieve their ownunique way of being human.But it is not selfish individual-ism. To dispute this right in oth-ers is to fail to live within itsown terms.8 It is an example ofwhat Paul Ricoeur calls an ethi-cal intention – ‘the requirementof mutual recognition whichmakes me say: your freedom isequal to my own’.9

The progressive futurebelongs to a politics which canachieve a balance between indi-vidual self-realisation and socialsolidarity. It will be one thatgoes beyond a narrow concep-


‘GERMANY MUST GETmoving’, the formerGerman President

Herzog demanded in 1997. Tenyears later, this move hasencompassed not only Germany,but gone through the entireworld – but not in the wayRoman Herzog imagined. Thosewho for thirty years preachedthat we should trust the self-regulating power of the marketsand worshipped the lean stateas the best of all possible statesnow suddenly have moved todoubt the markets’ power toheal themselves and call for thestate to be their saviour.

Financial Experts search for theErrors‘Certainly the banks have mademistakes’, Klaus-Peter Müller, theformer boss of Commerzbank,admitted in an interview. But hestated exactly the same thingfive years ago. He never saidwhat the mistakes were.However, he sees the real causeof the crisis in a twofold failureby the state. After the specula-tive bubble of the 1990s, AlanGreenspan should never haveoperated such an expansionistmonetary policy. And the Bushadministration should not havelet Lehmann Brothers go to thewall. But for the collapse of thatbank, Commerzbank would haveposted good results.

‘I can hardly bear to hear theword greed any more.’ That sen-tence is by Hilmar Kopper (for-mer CEO of Deutsche Bank). Ifby these words he means that toexplain away the financial crisissimply as the result of individ-ual mistakes is itself mistaken,then one can agree with him.Because the moral outrage ofvoters stirred up by politicianswith their broadsides of insults,or the pillorying of individualactors, are just as misguided asthe fixation of public debate onthe bonus payments to financialmanagers who have driven theirbanks to the wall.Financial experts are right to

direct attention to the miscalcu-lation of risks which had grownexponentially alongside theinnovative financial services,shadow banks, bank-free zonesand the immeasurable extent ofnetworking among the actors inthe monetary sphere. Homeowners, it was claimed, hadmiscalculated their long-termability to keep up payments;dealers had forced mortgages onthem in a wildly over-optimisticmanner. Departmental heads incommercial banks allegedlyfailed to supervise and supporttheir subordinates adequately.Trading in derivatives, securi-

tising loans and structuringthem outside the banking super-visory body, founding off-bal-

Friedhelm HengsbachA Jesuit and Professor Emeritusof Economics and Ethics atthe Philospohical-TheologicalUniversity St. Georgen (Frankfurt).He is one of the best known Germancommentators on ethical issues


A New Start in EconomicPolicy – Beyond FinancialCapitalism

Translated from the originalGerman by the Friedrich-Ebert-Stiftung London

expectations of the owners offinancial capital that its valuewill automatically increase,have pushed one another uphigher and higher. Thus theexpectations of fictitious, credit-financed increases in assetswere able to spiral speculativelyupwards and divorced them-selves from the economics ofthe real world.Thirdly, the limitations on lia-

bility which were granted toPublic Limited Companies(PLCs) were further underminedby the investment banks andfinancial investors, leading tosystematic under-capitalisation.On the basis of an extremely lowproportion of own capital, andthe leverage effect of a high pro-portion of external capital, theyield on own capital could beexpanded considerably.International accountancy rulesdisplayed values close to thoseof the market, but they werebased more on fictitious expecta-tions than on real capital gains.Fourthly, the rivalry between

two financial styles, the conti-nental European and the Anglo-American models, has con-tributed to the crisis throughthe hegemonial dynamic of theUS financial model. MichelAlbert has called ‘Rhenish capi-talism’ bank-dominated: Privatecommercial banks controlindustrial companies throughgranting loans, their own hold-ings and personal relationships.Companies are managed by

the interplay of all the groupsactive within them, which areoriented towards reaching amutual understanding. Themanagers work at balancing theinterests of staff, customers,shareholders, banks and localauthorities. Systems based onsolidarity and financed on a

its on the growth of the real pro-duction potential.And for wealthy sections of

the population in economicallyaffluent societies, money is nolonger used simply as a meansof exchange, but also hasassumed the function of a capi-tal asset. As a means of storingand increasing value, it com-petes against property, con-sumer durables and stocks.Secondly, the means for con-

trolling the markets for goodsand for capital are now diverg-ing from one another.Controlling the markets forgoods, as reflected in price lev-els, is restricted by real factorsof production and real purchas-ing power. Controlling the capi-tal markets, especially thoseinvolving financial assets, isdetermined on the demand sideby subjective future expecta-tions, which are not restrictedby any real barriers.On the supply side, there is

an absence of restraints on thepotential of the banking systemto create credit, especially asthe limits imposed by the cen-tral bank, which previously alsohad constituted a barrier withinthe real economy, are beingevaded. The results havebecome evident in recent years:The interplay between theexpansive granting of credits bythe banks and the explosive

ance sheet companies as specialpurpose vehicles, insuringdefault risks and securitisingthem, and channelling suppos-edly innovative, but actuallyincomprehensible, uncontrol-lable financial services into theglobal financial cashflows to theextent they did, are now seen asdemonstrating gullibility,naivety and irresponsibility.Nevertheless, public supervisorybodies had also largely toleratedsuch practices and assessedthem in an unduly lax manner.

Systemic ErrorsThe search of the financialexperts for errors does gobeyond the normal microeco-nomic perspective, but itremains within the boundariesof the established financial sec-tor. For that reason, there shouldinstead be a search for thestructural deficits of the capital-ist financial regime.The first point to mention is

the ‘monetary revolution’. Theelastic money supply, alongwith an unrestrained grab for‘the earth as a global piggybank’ is a crucial explanation ofthe dynamics of capitalism. Thenatural limits of a barter ormetal currency have been over-come since the banking systemgained unrestricted power toprint and lend money, which inturn no longer imposes any lim-


‘The natural limits of a barter ormetal currency have been overcomesince the banking system gainedunrestricted power to print andlend money’

free. Hedge funds were permit-ted in the form of umbrellafunds, and the securitisation ofloans was fiscally supported.These moves to relax the

rules were justified by EUguidelines and the need to pro-tect investors, but they werealso rooted in the desire tomake Germany competitive inworld financial markets. Thenthe Grand Coalition (since2005) did its best to supportinnovative financial servicesand sales channels and to givefiscal privileges to venture capi-tal companies.The German government was

also quick to react to the howlsof anguish from the financialelites. Did it feel itself a helplessvictim to the pressures comingfrom the Irish, British andFrench governments? Did it fallfor the apocalyptic picturepainted by the mega-banks andthe public financial supervisoryauthorities?The way it reacted was simi-

lar to the excited performanceof the stock exchange investors,that is, it acted in isolation, in aknee-jerk, exaggerated and spec-tacular manner. Hardly anyonecontradicted Finance MinisterPeer Steinbrück, whose firstdesire was to tidy up the sceneof the accident before interview-ing any of those responsible forthe damage. And Steinbrückpledged that he would put outthe fire immediately, even if ithad been caused by arsonists.But there was an alternative

to passing round the umbrellaswhich were unfurled over anaccident scene lost in fog. Thepolitical elites have becomeaccustomed to using this clichéto cover up their notoriousshortage of new ideas. Insteadof attempting an across the

minimum for mere existence. Atthe same time, private, capital-financed provisions were advo-cated. There was a tendency toput the burden of social risksonto the individual, to privatisesecurity which had been basedon solidarity and to commer-cialise basic rights to work,income, involvement in societyand appropriate access to edu-cational and health goods.Since the Otto Graf

Lambsdorff/Hans TietmeyerPaper of 1982, bourgeois eliteshave demanded flexible wageagreements, a reduction in jobsecurity and the establishmentof a low wage sector. The Red-Green Coalition gave in to thesedemands – through a successionof laws to encourage employ-ment, agency work, part-timeand temporary work, and theundermining of job security.The result has been docu-

mented by the 3rd Report onPoverty and Wealth of 2008: Anincreasing risk of poverty, thedramatic increase in non-securejobs and in poverty even whenpeople are in full-time paidemployment. The divergencebetween income from profits onthe one hand, and from wageson the other, and the diver-gence in amounts of capitalowned, have further increaseddue to an asymmetricallydesigned fiscal policy.More or less parallel to the

deregulation of employmentcame the deregulation of thefinancial sector. During the sec-ond legislative term of the Red-Green coalition, the restrictionson stock market trading wereloosened, trading in derivativesand special purpose vehicleswas permitted, and the banks’profits from sales of their indus-trial holdings were made tax-

pay-as-you-go basis provideassurance against the risks tosociety posed by old age, pover-ty and unemployment.Anglo-American financial

capitalism, on the other hand, isdriven by capital markets.Markets for stocks and deriva-tives predominate, and collec-tive actors (big banks, insurancecompanies, investment firmsand financial investors) operatein them. Companies are a capi-tal investment in the hands ofthe shareholders. Their value isdetermined using a purelyfinancial indicator: the ‘share-holder value’, the balance offuture financial streams, dis-counted to the present.The managers work exclu-

sively in the interests of theshareholders and therefore basedecisions (and their salary) onthe stock market price, whichallegedly provides an authenticreflection of the company’svalue. The interests of staff,customers, local authority andstate institutions are seen assecondary.

The State: Part of the CrisisThe state is neither the saviourfrom the crisis, nor the solutionto it. The social crisis and thefinancial crisis are two aspectsof the same failed economic,financial and social policy.In Germany, the negligence of

the Red-Green Coalition(1998–2005) reduced socialsecurity and deregulated the jobmarket. It distorted the pen-sions, health and unemploy-ment insurance schemes to theextent of destroying the system.Security systems which weresupposed to guarantee a stan-dard of living acquired duringyears of work, was cut back tothe level of a socio-cultural


‘Should the state have guaranteed notthe banks, but only the savings heldin the accounts of citizens who willnever have the chance to live justfrom the interest on their capital?’

social service provision and theundermining of public finances– that just cannot be justified.Giving the kiss of life to finan-cial capitalism will trigger justi-fied unrest among sections ofthe population.Secondly, large sections of the

population are living in poverty.Elementary material needs arein short supply on a worldwidescale, and vital needs are noteven being satisfied in affluentcountries. Public goods to satis-fy basic needs and rights are notavailable to an adequate extent.Financial capitalism servesmainly a private minorityamong the capital-owning class.Increasing economic value-

added and providing decentjobs should therefore be the pri-mary objective of state policy.To achieve a fair distribution ofthe value-added, collective bar-gaining and social securityfinanced on a pay-as-you-gobasis of solidarity should bestrengthened. In matureeconomies, the extreme depend-ence on exports and industryshould be reduced, and ambi-tious ecological reconstructionalongside (public) work to helppeople should be expanded con-siderably.Thirdly, a fair distribution of

the economic value-added tothose actors who worked togeth-er to create it is not possible

The state could have put itstrust in liquidity assistance tobe provided by the centralbanks, and pressed the powers-that-be among the financialinstitutions to make their ownadvance payments as a sign ofmutual confidence, and as ameasure of subsidiarity, toorganise support among them-selves and show solidarity.Obviously when FinanceMinister Steinbrück quoted thephrase: ‘When the heavens cavein, all the sparrows are dead’,he was simply parroting therhetorical clichés of the finan-cial elites.

Scenario for the FutureThe state’s decision-makersshould as a first step be pre-vented from mobilising publicfinancial resources which donot belong to them, and fromstuffing them down the throatsof those financial companieswhich provide them with thelabel of ‘systemic relevance’.Distributing state stimulants

to private banks so that theycan restart those credit dealingswhich serve principally toincrease the capital assets of anexclusive club of rich elites,subjecting successful companiesto the dictates of instant profitsfrom financial investors and atthe same time forcing through areduction in wage levels, cuts in

board rescue operation, theindividual sources of the fireshould first have been identifiedand extinguished in the mostappropriate ways.A careful search for evidence

would have demonstrated thatthe ‘counterfeiters’ includedmainly private investmentbanks, German Landesbanken(publicly owned regional banks)and those institutes which hadalready been hived off andabandoned by the banks whichhad owned them. The fact thatthe German government invitedthe arsonists to drive the fireengine gave them a privilegedposition in drawing up the staterescue package and thus pro-tected them and the ministerialsteering committee against anyobjections from the GermanParliament. This cannot be rec-onciled with the basic norms ofpublic opinion in a democracy.The citizens’ suspicion of the

collaboration between the gov-ernment and the financial elitesis well-founded. For the oftenquoted phrase ‘too big to fail’would have justified the break-ing up of the mega-banks andinsurance companies, ratherthan the setting up of newmergers and take overs withpublic funds to create even larg-er financial giants.Were there really no alterna-

tives to the government’s res-cue packages? Should the statehave guaranteed not the banks,but only the savings held inthe accounts of citizens whowill never have the chance tolive just from the interest ontheir capital? Should it havepermitted rich households tosuffer financial losses, andindeed reintroduced progres-sive taxation of their incomeand capital?


currencies should be stabilisedand short-term cash flowsshould be taxed in a similar wayto the movement of goods.Angela Merkel, the German

Chancellor, declares that the cri-sis is an opportunity. But thisopportunity cannot amount torestoring financial capitalism.Economic democracy is theappropriate name for a newpolitical start.

answer is: ‘A human alternativewould be: To order the marketthrough social forces andorgans of the state and to ordercompanies so that they becomeplaces of free work and partici-pation. The western countriesrun the risk of seeing the fail-ure of socialism as the unilater-al triumph of their own eco-nomic system, and therefore ofnot bothering to undertake thenecessary corrections to thatsystem.’Fourthly, financial markets

should be de-globalised. Thusthe hegemony of the US dollarmust be replaced by a multilat-eral currency regime.Nationally, successful economicdevelopment depends on theexistence of micro-banks, whichnetwork agricultural companies,manufacturing industries andcompanies providing servicetogether – in a financial andcooperative way.Fifthly, the G20 nations

should regulate the financialmarkets more strictly, so thatthe money supply, the stabilityof the monetary sphere and thefunction of financial companiesonce again becomes a quasi-public good. The internationalfinancial structures thus servethe objective of improving thewellbeing and quality of life ofthe world’s population, andespecially of the world’s poor.In a global financial architec-

ture, it follows that all financialservices, all financial companiesand all the locations wherefinancial services are demandedand supplied, must be subject topublic supervision and control.The possibilities for banks tocreate credit must be tied tostrict conditions. To avoid spec-ulative attacks on currencies,the exchange rates of the reserve

without tackling the imbalanceof economic power in capitalistcompanies. Those who own themeans of production of coursecannot make profitable use ofthem without employing thelabour power of others. As aresult, the labour force has theright to codetermination in eco-nomic and social matters. Theelementary right to take deci-sions should belong to an equalextent to employees, sharehold-ers and local authority or socialbodies.Social control of companies is

the alternative to control byshareholder value and financialinvestors. A capitalism capableof being democratic in a societyof equals beyond financial capi-talism is the motto for a globalnew start, for the good of eachand every one of us.There are important grounds

and respectable models onwhich to base such a new start.In 1947, the CDU in the Britishoccupation zone formulated itsAhlen Programme, followingeconomic collapse and in themidst of social turbulence. Itspreamble states: ‘The capitalisteconomic system has not donejustice to the vital state andsocial interests of the Germanpeople. The content and objec-tive of the new social and eco-nomic order can no longer bethe capitalist striving for profitand power, but only the wellbe-ing of the people.’After the peaceful revolution,

the fall of the Berlin Wall andGerman unification, Pope JohnPaul II. asked in 1991: ‘Is capi-talism the only victorious eco-nomic and social system whichis worthy of the efforts of thetransformation countries, andwhich can be recommended tothe developing countries?’ His



WEARE ALL capitalists, in thesense that we may point toone thing or another and call

it ‘mine’. The Marxist notion that ‘pri-vate property is theft’ is all but deadoutside of the most extreme and chron-ically naive positions.It is often said that communitarian

or communist ideology whichespoused the principle of ‘commonownership’ was great in theory butineffective in practice. This sentiment,however is self-evidently false. Anypolitical ideology which does not workin practice is de facto a poor theory.Having established that we are all

capitalists in this particular sense, thisarticle argues that in order to maximiseethical value within the macro-econo-my the private sector and its chiefoperating principle, the market mecha-nism, must be encouraged within awell regulated framework.This article initially considers what

it is we mean when we talk about‘ethics’, followed by a discussion set-ting out how the democratic and legal

system in effect puts our sense of ethi-cal values into a practical set of laws.This is followed by a positive assess-ment of utilitarianism explaining howcapitalism is the only effective mecha-nism to achieve the optimum level ofefficiency within any given economicparadigm.Finally I offer a critique of the emer-

gent managerial aristocracy whichappears to be strangling private sectorprogress. I argue that this class of eco-nomic agent presents the greatest dan-ger to the efficient progress of themacro-economy.

What are ‘Ethics’?Attend a course of moral philosophy orethics at a University in the developedworld and it would be explained thereare three central theories. Firstly theschool of deontology, led principally byKant which suggests ethics are aboutduty and obligations. In order to beethical one should ‘love thy neigh-bour’, for example.The second major school of

ethics is that of utilitarianism led byBentham and Mill in the late 19thcentury. The crucial maxim here,being that ethics are simply about themaximisation of happiness for thegreatest number.The final system, if one can call it

that, is described as ‘virtue ethics’.This more vague construal, dates backto Aristotle’s ‘Nichmachean Ethics’and offers the idea that in order todetermine what is ‘ethical’ or ‘good’one has to do the right thing at the

Ethics, Capitalismand the ManagerialAristocracy

‘In a modern liberal capitalisteconomy, private enterprise,despite the more recent market-ing phenomenon of alleged‘social concerns’, has onesimple goal: profit’

Alexis BrasseyManaging Directorof Cramer PelmontSolicitors, SeniorPartner of The SchoolsEnterprise Partnershipand ManagingDirector of LiverpoolResidential Ltd


right time for the right reasons. Inorder to determine what might be theappropriate course of action in anygiven situation, one would be advisedto consult a ‘moral expert’ who onewould consider had the requisite skillto elicit what that might be on a caseby case basis.Of course there are many more con-

ceptions of ethical value including thenihilisits, the atheistic existentialists,the prescriptivists and the intuitionistsas well as the anti-realists. What iscommon to a majority of the major the-ories, aside from nihilism is the ideathat in order to gain an understandingof appropriate ethical behaviour onehad to be able to either experienceempathy for others or understand situ-ations when one ought to have empa-thy for others.This distinction is important given

that there are a minority of individualswho have an impairment in theirempathetic response, but who never-theless understand that there are cer-tain situations in which one ought to atleast act as if one had empathy in agiven situation.

The Capitalist SystemAdam Smith points out in The Wealthof Nations that it is individuals collec-tively acting in their own self interestthat creates an efficient economic sys-tem. The idea that acting selfishly is ineveryone’s best interest appears on theface of things to be counter intuitive,however, the idea can be explained inmore modern terms.What is evident from an analysis of

Smith’s economic model is its commit-ment to the principles of utilitarianism,indicating that this paradigm will giverise to the greatest happiness to thegreatest number. In a modern liberalcapitalist economy, private enterprise,despite the more recent marketing phe-nomenon of alleged ‘social concerns’,has one simple goal: profit.All private commercial activity,

regardless of sector or geographical

region pursues the goal of profit to thebest of its ability. In order to maximiseprofits, however, one must be able toservice the ‘client’ of any given enter-prise to the best of one’s ability andnot only that, it must provide the bestproduct at the most competitive price.This concept is known as ‘productiveefficiency’.Companies who provide a substan-

dard service or who charge too muchfor their goods or services will simplyfail. In short, capitalism ensures thatfirms, in the pursuit of their own self-interest, must have the highest regardfor their customer’s wants and needs.The most successful enterprisesattempt to ‘delight’ the customer inorder to grow.In addition to the benefits derived

from ‘productive efficiency’, the marketmechanism also benefits from the prin-ciple of ‘allocative efficiency’. Thisprinciple ensures that what is pro-duced by companies is determined bythe customers. Customers signal theirpreferences by either expressingdemand for particular goods and serv-ices or not.Producers are aware of customer

behaviour in virtue of their economicactivity and adjust their supply inaccordance with those preferences. Inshort, the market mechanism producesthe goods and services which aredemanded by the customers at the bestquality and at the best prices.It would, however, be incorrect to

suggest this is the end of the story. Themarket mechanism does fail in a num-ber of crucial areas.Firstly, the only demand which will

be taken into account is ‘effectivedemand’. In other words the only peo-ple who are able to express theirdemand are those economic agentswith money. Those who do not haveany money, namely those in the devel-oping world or those less economicallyadvantaged have little to ‘express’.Secondly there will be a gross under-

supply of ‘public goods’ such as heath


and education and a potential oversup-ply of other goods such as drugs, ciga-rettes and alcohol. The capitalist sys-tem also has a tendency to polarisewealth by over-rewarding success andcruelly punishing failure with starva-tion, crime and death.The problems of market failure and

the cruel fatal effects of economic fail-ure can to a certain extent be arrestedby the introduction of the governmentsector. The raising of taxation effec-tively redistributes wealth from indi-vidual agents within the economy inorder to provide crucial provision suchas the police, fire and ambulance serv-ices as well as the army, education andhealth services.

Ethics and LawThe interplay of ethics and law withinthe economy delineates the extent towhich economic agents are able tooperate freely. One example of this isthe development of the ‘neighbourprinciple’ developed by Lord Atkin inthe establishment of tort law. Prior tothe case of Donoghue v Stevenson1932, it was not possible for a thirdparty to a contract to sue a manufactur-er for damages suffered as a result ofnegligence.The law, however, accommodated

the growing sense of unfairness at thisstate of affairs and was subsequentlyamended, initially in the Courts andeventually in statute. Another exampleis the establishment and legal recogni-tion of Trade Unions, the plethora ofdiscrimination legislation including theSex Discimination Act 1975, the RaceRelations Act 1976 and the DisabilityDiscrimination Act 1996.As society develops a moral sense of

fairness, laws are introduced to ensurethat the capitalist agents within thesystem must comply with the new leg-islation. It appears that the moderncapitalist system, with its recognitionthat self-interest requires a degree ofredistributive taxation has the answersto all economic problems.

What went Wrong?The increasing complexity of the post-industrial West led to the demise ofthe classic Marxist/Riccardian analysisof political economy. Capitalist enter-prises developed in such a way as tocreate a new class of economic opera-tor, an evolution from the owner/worker split of 18th, 19th and early20th century model.This managerial class became a nec-

essary component of a system whichrequired specialist ‘executive’ power tobe delegated. The growth of multi-national companies and the increase of‘shareholders’, led to a shift in econom-ic power away from owners to man-agers. Most ‘owners’ of the largest com-panies in the world are now the ‘work-ers’ themselves via their pension fundsand life insurance policies.The shift of power from owner to

this new class of management eventu-ally led to a hiatus of accountability.The massive increase in shareholdersalso led to a significant decrease in theextent to which managers were held toaccount. The rates of executive remu-neration soared to grotesque multiplesrendering Chief Executive Officersearning several hundred times thesalaries of other company employees.Executive incentive schemes were cre-

ated by a cabal of insiders designed sole-ly to enrich themselves at the expense ofother employees and shareholders.Government attempts to constrain therapid growth of these managerial aristo-crat packages such as the Cadbury andGreenbury Reports were swept aside.In 2008 it became apparent there

had been insufficient regulation of theprivate sector managerial aristocrats.The government had lacked the politi-cal will or the understanding of theconsequences of unchecked power inthe boardrooms of our major commer-cial institutions. The consequences ofunrestrained greed from a new eco-nomic class had wrought massive dam-age to a system envisaged by Smith,Hayek and other classical economists.


ConclusionUtilitarianism or capitalist economicsis the most efficient system for theallocation of scare resources, however,it must be constrained by a legal sys-tem which expresses the ethical will ofthe people. The politicians who medi-ate the will of the people and createlaw which reflects our moral senti-ments must work harder to ensure thatthe amorality of capitalism is con-strained within those boundaries.Those commentators who believe

that we have witnessed the death ofcapitalism and long for a more social-ist/communitarian mechanism havemisunderstood the fundamentals ofboth human nature and the purposeand function of regulation. Capitalismwith its ability to deliver both alloca-tive and productive efficiencies hasthe capacity to ensure ever greaterwealth creation, mediated by a sys-tem which encourages economicincentives.

However, a system which allows themanagerial aristocracy to personallywithdraw $300 million from a bank(as in the case of Dick Fauld, CEO ofLehman Brothers) will ultimately fail.This failure is not due to Dick’s greed,for there will always be amoral agents inthe economy, but rather due to the fail-ure of the regulatory system which per-mitted him and others to do it.

To order, free phone 0800 243 407www.politybooks.com

Independent Thinking from Polity

Jürgen Habermas, Johann Wolfgang Goethe University of Frankfurt

192 pages / May 2009978-0-7456-4640-4 HB £50.00 / 978-0-7456-4649-7 PB £15.99

The future of Europe and the role it will playin the 21st century are among the mostimportant political questions of our time. Theoptimism of a decade ago has now faded butthe stakes are higher than ever. The way thesequestions are answered will have enormousimplications not only for all Europeans but alsofor the citizens of Europe’s closest and oldestally – the USA.

In this new book, one of Europe’s leadingintellectuals examines the political alternativesfacing Europe today and outlines a course ofaction for the future. Habermas advocatesa policy of gradual integration of Europe inwhich key decisions about Europe’s future are

put in the hands of its peoples, and a ‘bipolarcommonality’ of the West in which a moreunified Europe is able to work closely withthe United States to build a more stable andequitable international order.

This book includes Habermas’s portraits of threelong-time philosophical companions, RichardRorty, Jacques Derrida and Ronald Dworkin. Italso includes several important new texts byHabermas on the impact of the media on thepublic sphere, on the enduring importancereligion in “post-secular” societies, and on thedesign of a democratic constitutional order forthe emergent world society.

EUROPETHE FALTERING PROJECT


WHETHER neoliberalscan claim that theirform of free-market

capitalism is a moral force isdebatable (which from a deonto-logical viewpoint is very debat-able), but they certainly claim itis superior to all other formscapitalism as well as socialism.This stands in contrast to socialdemocratic and Christian demo-cratic conceptions of capitalismwhich regard capitalism at besta pragmatic solution for the ful-filment of economic needs andat worst a source of immoralexploitation that has to beopposed and controlled. Theeconomic historians, sociolo-gists and commentators whotraced the emergence of moderncapitalism were in no doubtthat a monstrous force wasbeing unleashed upon theworld. It was a beast that had tobe tamed by passionate andorganised commitment to social

justice, the redistribution ofwealth, and the moral advocacyof politicians, religious leadersand social commentators. Thisled to the insistence that educa-tional, religious and culturalinstitutions were at a minimumneutral in regard to the work-ings of market capitalism, andat maximum indispensablecounterweights to the power ofthe market and human avarice.Over the last two decades the

argument which has dominatedboth economic and political dis-course is that capitalism is at itsbest when left unconstrained.The stridency of ‘greed is good’might have attenuated some-what since the late 1980s, butthe dogma of neoliberalism hasbecome entrenched in NorthAmerica, the European Unionand its international satelliteorganisations like the WorldBank and the IMF. If the marketknew best, as the dogmatists ofChicago and the London Schoolof Economics insisted, then thebig beasts of capitalism had tobe given their freedom, untram-melled as far as possible by reg-ulations, taxes and politicaloversight. Neoliberalism justi-fies itself by its outcomes. It hasproduced sustained growth inthe western world for almosttwo decades, and claims foritself a globalisation model thatallowed capitalism and growth

Morality and Capitalism inSociological Perspective

Sam WhimsterProfessor of Sociology andDeputy Director of the GlobalPolicy Institute at LondonMetropolitan University

‘The neoliberal world view, welcom-ing of capitalism as beneficial socio-economic process, has forced out aprevious, social democratic agendathat saw capitalism as inherentlyconflictual’


quite diverse – to recall, forexample Welsh non-conformismand widespread Methodism. ButTawney exemplified the assertionof a public good and of publicduty as the antidotes to the self-ishness of interests and merepecuniary wealth.Other more politically

detached sociologists, likeDurkheim and Max Weber,made considerable efforts tochart the effects of a moderndynamic capitalism on thesocial division of labour. From amoral point of view bothDurkheim and Weber offerintriguing but differentapproaches. Weber deployed anextremely sharp cultural cri-tique of modern capitalism. LikeTawney, he saw the origins ofmodern capitalism as beingforged by a Puritan sensibilitythat raised hard systematicwork into a Lebensführung thatcame to define modernity. Forreasons of salvation, thePuritans adopted a rational andsystematic approach to life, notfor economic purposes but as away of immunising themselvesfrom sinful temptation.Puritanism, said Weber, createda monastic regime in the pro-fane everyday world. Thiscaused a step change in thealready developing world ofcapitalist enterprise in the latemedieval period. Modern indus-trial capitalism replicated therationality structures laid downby the Puritans. Entering thetwentieth century, Weber sawmodern capitalism as anunstoppable global force.Modern capitalism triumphedbecause its practitioners stillexercised a set of virtues inher-ited from their Puritan fore-bears. This is probably bestdescribed as an accountant’s

bility. The Puritan revolution ofthe sixteenth and seventeenthcenturies eventually establishedreligious toleration and with thispolitical rights. The AnglicanChurch lost its old authority inholding the needs of communityas sacrosanct over the desires ofindividuals. Despite its asceticorigins, the new Protestant reli-gious liberty came to befriendcommercial interests and theinstitutional restraints on thepursuit of wealth were loosened.Henceforward the moral econo-my was a contradiction in terms,especially after the upheavals ofthe industrial revolution and thelicence given to the entrepreneur.But if economy was no longermoral, politics and the labourmovement became a moral cru-sade for Tawney. The Christianethic became a politicalGesinnungsethik. What had beenrooted in community insteadbecame a profession of con-science articulated in politics,education and social reform.Tawney wrote: ‘Poverty is anIndustrial problem, the Industrialproblem is a moral problem’; ‘thesocial problem is a problem notof quantities, but of proportions,not of the amount of wealth, butof the moral justice of your socialsystem’; ‘we need to choose (afterthe bosses are off the back of theworkers) between less and morewealth and less and more civili-sation’. This is a politics inspiredby Christian moral imperativesthat had to be vigorouslydeployed against a soullessindustrialism. There is an explic-it Christian morality here thatTawney realised in the educa-tional community of the ToynbeeHall where he worked withWilliam Beveridge and ClementAtlee. The religiously sectarianroots of the Labour Party are

to flourish in southern hemi-sphere societies. While thismight have been detrimental toolder social solidarities, creatednew divisions between rich andpoor, and operated workingpractices that were solely drivenby profit maximisation, the endproduct – economic growth –justified the means by whichthis was achieved.The neoliberal world view,

welcoming of capitalism as ben-eficial socio-economic process,has forced out a previous, socialdemocratic agenda that sawcapitalism as inherently con-flictual and as something thatneeded to be harnessed forother moral and political ends.Consider the fate of the ‘old’Labour Party in Great Britain.One of its leading intellectualsfrom 1910 to 1970 was R.H.Tawney. As an economic histori-an his research into the originsof modern English capitalismitemised the dismantling of latemedieval society and communi-ty, allowing commercial inter-ests amounts of freedom thatpreviously would never havebeen tolerated. Tawney showedthat medieval economic life wasbased on notions of a moraleconomy. One manifestation ofthis was the canon laws thatprohibited usury. It was morallyabhorrent for one Christian tolend aid to another Christianand to benefit from that transac-tion by charging a sum ofmoney in excess of the originalloan. The force of this moralinjunction lay in agriculturalcommunity where it was con-sidered unjust for one farmer orpeasant to profit from the mis-fortune of another.The dynamics of modern capi-

talism uprooted a moral economybased on traditionalism and sta-


chological motivation, butWeber would have regarded itfatal if carried through as anorm determining businesspractice. Greed and the acquisi-tive instinct are universal attrib-utes. Modern capitalism suc-ceeded by banishing the all toohuman and ushering in a bunchof business ascetics – the so-called Protestant virtues of hardwork, delayed gratification andselflessness.For Durkheim, economics

and sociology are in conflictwith each other in modernsociety. The modern marketeconomy promotes individual-ism and egoism. But thisdynamic increased the necessi-ty for a counteracting moralcommunity. Society, at someessential level, was defined byDurkheim as a moral communi-ty. Only moral forces act on theindividual as an effective exter-nal control of behaviour. Themodern individual has her owninternal desires and, indeed, agreater freedom to pursue thosedesires, but it is the collectiveidea of morality that in a prop-er society is inculcated into theindividual’s thinking that pro-duces moral actions. Collectiveideas of nation, patriotism,family, religion, and civic sensefostered by education keepindividual behaviour withinmoral boundaries.However, capitalism itself is

without morality, and in thisDurkheim followed the Englishsociologist Herbert Spencer whoargued that the rise of marketcapitalism followed an evolu-tionary logic. Spencer did notdistress himself over the individ-ualising effects of market society.For him they belonged to theprocess of social evolution. Moreindividualism meant greater dif-

turning out to have a diverserange of re-enchantments, indi-cating that capitalism was nowcompatible with hedonism andexpressiveness.From where we stand now,

Gellner’s benediction mighthave been premature. While the1960s and 1970s did offer thepossibility of high levels of con-sumption and its pleasures on amass scale, the political con-juncture that produced thoseconditions no longer function inthe same way. De-industrialisa-tion, shifts in inequality, stag-nant wages for both workingand middle class occupationalgroups are characteristic oftoday’s finance driven capital-ism. Also, Weber’s diagnosis ofcapitalism was based on anassumed affinity between therational requirements of indus-trial capitalism and the personalqualities of those who led anddirected that capitalism.Bernard-Henri Levy recentlycommented that capitalism hasnot failed, but rather we havefailed capitalism, and this hassome resonance here. Moderncapitalism and rationality werealmost interchangeable terms inWeber’s discourse. The financecapitalism of today has somestartlingly irrational featuresand is no longer led by thosewho possess the requisite moralprobity. Greed might be a psy-

mentality based on probity,restraint, and a self-denyingasceticism in the face of wealth.Prior to modern capitalism, aform of base capitalism orientedto immediate gratification andacquisition had existed through-out the world. The Puritan dis-ciplined himself, and so trans-formed capitalism into an enter-prise with rational budgeting,investment, and the calculationof return.Weber’s critique of this sys-

tem was that it was soulless,that it rationalised and compart-mentalised life itself, and in afamous phrase produced the‘iron cage’ of modernity. In thissense capitalism was the prod-uct of an overdetermined orexaggerated moral habitus. Yetmodern machine age capitalismwas a thing apart from itshuman and extremely moralprogenitors. Weber’s realisminsisted that modern capitalismwas irremovable and he consid-ered Marxist and all other revo-lutionary schemes as a form ofromanticism. Nevertheless hedid belong to the wider schoolof thought that saw capitalismas alienating some essentialhuman spirit of spontaneity andexpressiveness. Weber used theterm disenchantment todescribe this feeling. ErnestGellner, in the 1970s, was ableto point out that modernity was

‘In Durkheim’s account of the func-tional nature of moral outrage, thedeviant and the criminal are publiclypunished, if not cast out. This hasnot happened, so far’


She reformulated Durkheim’smoral community as a boundaryproblem. There is not anabsolute divide between thenormal and the pathological.Instead societies reward thoseactivities that maintain theboundaries of a society andpunish those that threaten itsboundaries. All societies, shereminds us, exist in a state ofpotential danger. Morality is theenforcement of social processesthat protect the boundaries of asociety. In simpler societies thisamounts to preserving theintegrity of the group or thetribe, and various rituals andtaboos are observed to maintainthe exogamy of the groupagainst outsiders, and whenthese taboos are infringed thepenalties are savage.In complex modern societies

there is no such thing as a sim-ple group. Or rather there maybe many separate simple groupsco-existing alongside complexlarge groups. When Douglas,writing together with AaronWildavsky, analysed attitudes toenvironmentalism in the 1970s(in their book Risk and Culture),they came up with a culturalexplanation of why certaingroups showed little concern onenvironmental issues whereasothers saw the protection ofenvironment as fundamental.The latter group was absolute intheir beliefs and recalled theboundary-maintaining mecha-nisms of primitive societies.Modern society is characterisedby a variety of what may betermed circulating process –transport, the exchange of goods,the media – in a word, the com-plex mobility of modern society.Certain social groups are organ-ised for the continuation andexpansion of those activities.

taxation. In all those countriesthat have undertaken financialliberalisation and openednational borders to free capitalflows, the banking industry issuffering devastating losses.Many of these banks wouldhave gone into administrationas insolvent, had not the priori-ty of central banks been to pri-oritise liquidity and to pourcash into the financial system.In the European Union the bankbailouts will cost the equivalentof 10 per cent of the EU's GDP.The opportunity costs of suchbailouts, i.e. what else couldhave been done with suchfunds, are colossal.Inevitably the moral outrage

has centred on the greed, stu-pidity and hubris of businessleaders in the banking industryand the failure of regulators andgovernment to provide effectiveoversight. Few top bankers havelost their jobs and the public’sindignation is further riled bythe bankers maintaining theirprivileged position of influenceon governments as the latterreact desperately to the crisis.What has been clearly a patho-logical experience to societyremains unpunished, which byany standards remains a strangephenomenon. In Durkheim’saccount of the functional natureof moral outrage, the deviantand the criminal are publiclypunished, if not cast out. Thishas not happened, so far. Insocial democratic and Christiandemocratic countries, the moralreflexes of citizens have certain-ly been exercised, but justicehas yet to be seen to be done.However, it is worth pursuing

a Durkheimian analysis a stepfurther. One of the foremostneo-Durkheimians is the socialanthropologist Mary Douglas.

ferentiation, and this evolutionrepresented progress. Progress istaken for granted as a ‘goodthing’ but whether it constitutesmoral behaviour is another ques-tion. The egoistic interest ofindividuals produces beneficialoutcomes at the level of society.In this way, Spencer couldignore the moral concerns asarticulated by Durkheim andTawney. Spencer dispenses withmorality since evolution pro-duces progress and residualproblems of morality belong tothe sphere of interpersonalethics. Certainly there is no justi-fication for the state or govern-ment to interfere in the workingsof the market and still less thecalling forth of moral and socialentities to combat an impersonalcapitalism. Continuities betweenSpencer and contemporaryneoliberalism may of course bedrawn. In fact it was Spencerwho came up with the idea ofthe self-organising capacitiesexisting within society, an ideawith as many deleterious conse-quences as Hayek’s subsequentuse of the idea.Crises of capitalism trigger

the moral question. The financeled economic crisis, which real-ly gathered pace in the lattermonths of 2008, has caused animmediate response of moraloutrage. Economic growth in allthe major economies of theworld has been stopped dead inits tracks and threatens toimpose approximately 5 percent drops in the current outputof OECD countries. Taxationrevenues are severely reducedbecause of the downturn, sothat over the standard five-yearforecast period all OECD gov-ernments will (after 2010) haveto reduce their expendituremassively as well as increase


denying and sober features ofthe entrepreneur. Somethingakin to Weber’s moral disciplinehad been achieved in thedecades after 1945 – in contrastto the adventurous and specula-tive capitalism before the war.Corporate America in the 1950sand 1960s had established well-functioning organisational hier-archy, it produced the companyman and a structure of the firmthat respected to an extent thedistinction between sharehold-ers and managers. What heespied in the cultural condi-tions was a loosening of the pro-fessional group because of theenchantments of the counter-culture. This was perceptiveand predicted the coming of theyoung urban professional as aparticularly new type of deraci-nation. What it did not do wasto predict the irresistible rise of

These groups are complex, arecharacterised by loose and flexi-ble association, and are termed‘grids’ by Douglas. The attitudesof members of ‘grids’ did notdemonstrate strong feelingstowards the protection of theenvironment and were reason-ably complacent about danger-ous activities such as drivingfast. Simpler, more homogeneouslike-minded groups, by contrast,can generate considerable out-rage towards those activities theysee as threatening to society.Daniel Bell’s Cultural

Contradictions of Capitalism,written in the early 1970s,prophesised that the threat tocontemporary capitalism wouldnot come from the labour move-ment but from within the pro-fessional cadres of capitalismitself. Bell was steeped in MaxWeber’s analysis of the self-

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the investment bank which didso much to break the old corpo-rate structure and to transformit, in Will Hutton’s terminology,from a stake holding capitalismto a stock and option holdingcapitalism. Wall Street and theCity of London became the epit-ome of the grid, the networkingsociety of smart urban profes-sionals. What is noteworthyabout Bell’s critique, especiallynow, is his real sense of horrorand recoil against the pleasuresand ways of enchantment. Thiswas the revulsion of theabstemiously pure in the face ofdanger. Since the financial cri-sis has impacted upon justabout all groups in society, weawait to see whether a sense ofcollective group morality nowemerges to protest against thosewho endanger livelihood andcommunity.


IN THE LAST couple ofyears, the world economyhas been rocked by uncon-

trollable increases in agricultur-al commodities worldwide, therollercoaster ride of crude oilprices and the global creditcrunch that has led to the globaleconomic crisis, plunging intonegative growth even the mostrobust economies.The EU economy has not

been shielded against the effectsof such profound crises, nowbeing dragged into its deepestand most widespread post-warrecession. With unemploymentexpected to rise to 27 million in2010, statements by right-wingpoliticians such as formerCzech Prime Minister MirekTopolanek, who recentlywarned against the dangers of ‘apaternalist state that will takecare of everything at the cost ofdebts and higher taxes’, encap-sulate the spirit of misleadingfree market ideology, refuting

the responsibility of individualmember states and the EU as awhole vis-à-vis the millions ofunemployed Europeans.Yet, since its inception just

over half a century ago, theEuropean integration project hasbeen growing broader and deep-er, creating a continent of peace,democracy, stability and pros-perity. With its single marketand currency, the EU hasbecome a major player in theglobal economy. In today'senlarged Union, citizens canafford goods and services thatwould have been reserved forthe rich only a few decades ago.Higher relative wealth and easi-er access to credit have largelycontributed towards this devel-opment. So, what has gonewrong with the EU economy inthe last few months?A first tentative answer lies in

the EU's growing role in theglobal economy and the closeinterdependence amongst worldeconomies. What started in2006 as a sub-prime mortgagecrisis in the US, caused by thesharp rise in foreclosures, laterresulted in a severe creditcrunch and finally, in the pres-ent global financial and eco-nomic contagion.

A burning QuestionSo, whose fault is it? Is it capi-talism in itself or a series of

The Ethicsof Capitalism

Karl-Heinz KlärFirst Vice-President of the PESGroup in the Committee of theRegions and State Secretary forFederal and European Affairs ofRhineland-Palatinate, Germany

‘In a capitalist system, goods andservices are not produced in orderto satisfy desires of consumers or togive work to employees. It is theother way round’


and its capacity of law-making,even in decent democracies. Infact, non-economic systemswithin society, with strong anddistinctive values of their own,such as education, science,health care and even religionsor political parties of the left,have capitulated in the face ofthe capitalist rationale and its‘free market’ ideology. Now,amidst the crisis, our societiesmay lack the intellectual andmoral resources necessary tobring about change.By this, I do not insinuate

that the answer to the malfunc-tions of the capitalist system isregression to state-controlledmarkets. We need to considerlong-term changes in order toupdate the current economicsystem so that it should nolonger hamper the realisation ofsocial values. Establishing atrue social market economy is ajob that remains to be done. Todate, it is mostly a shallownotion, void of any true content.The issue is both ethical andeconomic: although the crisishas destroyed substantial for-tunes, it has primarily affectedthose who were already vulner-able and it is the state throughits different levels of governancethat is called to remedy the situ-ation. Before coming to concretesuggestions, let me give you anoverview of what current capi-talism, dominated by an exces-sively oversized financial indus-try, has cost European local andregional authorities.

Capitalism without Ethics:The Price paid by Local andRegional AuthoritiesThe most severe malfunction ofthe banking system since the1920s has had dramatic eco-nomic, social and political con-

contributions to welfare eco-nomics, the current economiccrisis is generated by 'a hugeoverestimation of the wisdomof market processes'. This high-ly questionable wisdom hasallowed for the commoditisa-tion of food, with speculationin agricultural commodity mar-kets running in parallel withthe rising costs of gold, oil andessential metals. Amartya Senhas pointed out that faminesoccur because of the collapse ofpurchasing power rather thanthe lack of food availability.Last year's food riots triggeredby food price increases weredue to the greed of speculators,taking advantage of the lax reg-ulatory system.Indeed, people all over the

world are paying the price forblind faith in market forces andunfettered speculation. It is alsoclear that the current crisiscould only have been avoided ifthe existing economic systemdid not have such serious short-comings. Which puts into ques-tion the very nature of capital-ism in its current form and callsfor its thorough overhaul.I am not suggesting to throw

out the baby with the bathwater. Nor do I deny that thereare some or even many ethicallydriven capitalists out there. Buttheir individual stance is onething and the relentlessdemands of the capitalist sys-tem is another.In societies whose economies

are organised according to thecapitalist model, ethics emanatefrom different layers of society.However, regulation of capital-ism beyond profit is introducedby the political process. Themisery of the past 30 years isthat the capitalist system hasweakened the political system

short-term economic problemstriggered by bad governance? Isthe economic model to beblamed or the unethical behav-iour of individual profiteers,driven by greed and collusion?Before attempting to respond,

this is what experiences goingback nearly 250 years havetaught us: capitalism is a profit-generating system, inherentlyregulated by profit. In a capital-ist system, goods and servicesare not produced in order tosatisfy desires of consumers orto give work to employees. It isthe other way round. In capital-ism, the workforce is used, pro-duction is organised and con-sumers are shaped in order tomake profit. In capitalism, thereis no other goal than profit, andthere can be no other goalbecause profit-making is theessence of capitalism, it is itsstrength and advantage over allother economic systems in his-tory. So capitalism is a simpleone-goal system stimulatingself-interest and exploitingsome elements of humannature, not necessarily the best.Within this context, it is

worth acknowledging twoextremely powerful forcesbehind the world economy: therelentless pressure on organisa-tions to continually maximiseearnings and the fiercely com-petitive markets superchargedby the internet. As this combi-nation puts to the test the man-agement skills of market stake-holders, the true question iswhether the existing economicmodel allows for the protectionof people from crises such asthe one we are currently experi-encing. I am afraid that theanswer to this is negative.According to Amartya Sen,

1998 Nobel Prize winner for his


in my country, Germany, havenot been spared from the effectsof financial engineering and thebankruptcy of this incredibly'innovative' financial industry.With most Landesbanken(German regional banks) closeto collapse without the injectionof billions of public subsidiesand with the value of financialassets all too often tumblingdown, it has been hard for thosebanks to withstand the addi-tional losses resulting from thedecline in economic output. Asunemployment figures rise andmore people depend on socialbenefits, German regional andlocal authorities are put underconsiderable financial pressuresince social support for the pooris one of their key responsibili-ties. Despite the fact that theGerman federal government'seconomic stimulus package hasearmarked around €10 billionfor education and infrastructureexpenditure at local level, thereare even harder times to comefor German local and regionalauthorities.Amidst the crisis, the chal-

lenge for all EU member stateslies in ensuring that central gov-ernments guarantee the provi-sion of public services to theircitizens and do not curtail pub-lic expenditure earmarked forlocal and regional authorities.

The Way forwardThe lesson we should havelearned from the financial andeconomic crisis is that financialmarkets are unable to operatesmoothly in a poorly regulatedenvironment. The ‘EfficientMarket Theory’ has proved to bea fairy tale and the expectationthat markets best regulate them-selves when left to their owndevices and without interfer-

shared by the local or regionalgovernment in a given memberstate (personal income tax, com-pany income tax, etc.), and theproportion of this income intotal budget revenues.Local and regional authorities

have also suffered losses oninvestments. Although this hasnot been a widespread trend inthe EU, it has had a devastatingimpact where it occurred. Takefor instance the UK where thebankruptcy of Icelandic bankscost local governments €1 billionin financial investments, withfurther losses in unrealisedincome from interests. Likewise,local governments in Belgiumwere hit by the crisis of Dexiabecause they were shareholdersof the bank through theCommunal Holding. It is worthreminding that the Belgian DexiaSA received support worth €3billion from the Belgian federalgovernment, the three regions(Flemish, Walloon and Brussels-Capital) and the three institution-al shareholders. For local govern-ments, this translated into adecrease of share market value,weakening of their share in thebank and the loss of unrealisedincome from dividends. For thosemunicipalities that had heavilyinvested in Dexia, the losses havebeen very substantial.Moreover, as public and pri-

vate investments in infrastruc-ture and development projectshave slowed down because ofthe crisis, local and regionaldevelopment has alsoineluctably slowed down. Lastbut not least, cuts in the staff oflocal and regional authoritieshave had a negative impact onlocal job markets, aggravatingthe social repercussions of thecrisis.Local and regional authorities

sequences for individuals andhouseholds, workers and busi-nesses, including small andmedium enterprises, the linch-pin of local economies, as wellas all levels of government.Local and regional authorities

have been doubly affected: Asborrowers, they have sufferedthe repercussions of creditbecoming less available andmore expensive; as creditproviders, they have been calledto take part in large bailoutplans to salvage national andeven regional financial institu-tions on the brink of bankruptcy.It is worth noting that the situa-tion has been exacerbated insome member states wherebanks that traditionally providedloans to the municipal sector,have been affected by the crisis(e.g. Kommunalkredit in Austria,Kommunekreditt in Norway,Dexia in Belgium, France andLuxembourg). This situation hasjeopardised the very solvency oflocal and regional governments.As a result, it is the provision ofessential public services that isput at risk. Not surprisingly, amajor effect of the crisis hasbeen greater demand for socialand welfare services. This hasput local and regional authori-ties in the EU under significantfinancial pressure as they haveto provide for citizens who haveseen their income curtailed orhave lost their jobs. What ismore, payments on tax leviedforward in 2008 now need to bereimbursed to tax payers whoreport losses and claim back theexcess tax paid. It is self-evidentthat severe economic downturnssuch as the one we are currentlyexperiencing engender loss ontax revenues. The volume of theactual loss very much dependsupon the type of tax levied or


the real economy, their deficien-cies cannot be tackled in isola-tion. The current unprecedentedcrisis has huge social repercus-sions across the entire EuropeanUnion and the world. As far asthe EU is concerned, the wayforward is coordinated action bythe member states and the EUinstitutions in order to safeguardjobs and prevent mass unem-ployment. Promoting greengrowth will help us not only toreduce the impact of climatechange and transform Europe'straditional economy to a carbonfree economy, but also to createnew jobs and increase the com-petitiveness of EU economies.We also need economic solidari-ty in order to better supportthose European regions sufferingparticular difficulties. This isessential at times of severedownward spirals with wagecuts and mass lay-offs squeezingconsumption, the credit crunchblocking investment and publicdebts rocketing sky high.European solidarity is key todefending our European integra-tion project, our Single Marketand Economic and MonetaryUnion, undermined by nationalprotectionism. Leaving memberstates on the brink of insolvencyto their own devices has an

gambling at the service of casi-no capitalism. Such institutionsare highly dangerous for thehealth of the economic systemand public finances. Therefore,pertinent regulation of thesefinancial institutions, includinghedge funds, private equity andall kinds of investment banking,is crucial. The same should alsoapply to derivatives and some ofthem, such as most of CreditDefault Swaps, should be for-bidden since no serious finan-cial industry needs them.Let us also not turn a blind

eye to food speculation, a highlycondemnable phenomenon. It isvital to call for the compulsoryregistration of hedge funds thatinvested in agricultural com-modities futures and the estab-lishment of a global food reserve,to be used in case of emergency.Rating agencies are another

burning problem. I believe thatthe EU should create a ratingagency with a public statute soas to protect the agency's inde-pendent nature and avoid anyconflict of interest, currently cre-ated by the fact that credit ratingagencies are paid by issuers.But it is not just the function-

ing of financial markets world-wide that needs to be revisited.Since they are interrelated with

ence by law and state regulationhas paved the way to disaster.We will certainly be able torecover from this crisis, but notby sticking mindlessly to oldhabits and the spirit of a failedideology. Therefore, what isurgently needed is a clear andpertinent regulatory frameworkboth at national, European andinternational level.Risk-taking has always been a

quintessential ingredient for thesuccess of capitalist entrepre-neurship and productivity. Afterall, risk-taking is necessary foreconomic progress and growth,and as such, it should not behampered unnecessarily but besoundly encouraged. However,in order for risk-taking to bemanageable, there is a need for atrustworthy and transparentfinancial industry withoutobscure derivatives, untouchabletax havens and a shadow bank-ing system that has grown on themargins of the official one and isout of regulatory reach.The financial industry has

grown exponentially since the1980s, and this is an issue.Dealers and traders at stockexchanges around the worldexert major not just economicbut also political influence thatgoes against the principles ofmodern democracy. It is unac-ceptable that the fate of entirecountries is in the hands of WallStreet or the City of London.Even a well functioning bankingsystem cannot remedy imbal-ances in the allocation ofresources, caused by an over-grown financial industry. ‘Toobig to fail’ financial institutions,which are those most prone toreckless risk-taking, have provedto be innovative only in devel-oping ‘unusual’ financial toolsand establishing worldwide

‘In order for globalisation to workeffectively and in the best interest ofmankind, it must be protected fromthe excesses of freewheeling capital-ism and its financial industry in itscurrent ugly form’


in global governance – corporateas well as public – are both nec-essary and feasible. Time is ripe,but the opportunity must beseized courageously by social-ists and social democrats.Otherwise, the predominance ofthe capitalist thinking in mod-ern society will keep growingbigger, polluting even the lastcorners of independent socialand intellectual life.

impact upon the entire EUand weakens its position as aglobal player.

ConclusionThe financial and economic cri-sis currently inflicted upon uswill not end tomorrow. Whilerevealing the defects of the cur-rent capitalist system, it is pro-viding a rare opportunity toexplore enlightened concepts forshaping our globalised world.Globalisation is more than aneconomic fact; it is a way of lifeand a necessity when it comesto addressing fundamentalissues such as the sustainabilityof our planet. In order for glob-alisation to work effectively andin the best interest of mankind,it must be protected from theexcesses of freewheeling capital-ism and its financial industry inits current ugly form. Changes

New from Palgrave Macmillan

For more information please visit:

www.palgrave.com/politics


DOYOU REMEMBER themoment when communism fellin eastern Europe? Most people

will recall the dramatic events inBerlin in November 1989. Perhaps theywill remember the overthrow ofCeaucescu in Romania or when Yeltsindefeated the coup in Moscow twoyears later. Yet communism endedhere, in Poland, when twenty years agothe first semi-free elections were heldin the former eastern bloc, leading tothe creation of the region’s first ‘non-communist’ government. It was herethat the twentieth century ended andthe twenty-first began.On 4th June 2009 Poland commemo-

rated the twentieth anniversary of theend of communism. The elite was des-perate for this to be a time of unity,when the nation remembered its greatachievements and how much life haschanged. The media was filled withgrey images from the past: of emptyshelves and militia brutality. Theywished to remind people, despite the

troubles of the present, of how badthings had been before.In Warsaw exhibitions were placed

in the street, happenings organised andpop concerts put on to draw thecrowds. However, the real events wereoccurring elsewhere. In Gdansk, out-side the shipyards (which have beenunder the threat of closure), the tradeunions gathered to remember the fallof communism. The Prime Minister,Donald Tusk, was absent, althoughPresident Lech Kaczynski was at thehistorical site of the Solidarity struggleto gain political capital and standalongside the shipyard workers.South in Kraków, safely encossed in

Wawel Castle, Tusk was welcoming for-eign guests who would speak warmwords about Poland and Solidarity.Less than 70 kilometres from Kraków,in the industrial city of Katowice, thou-sands of trade unionists were marchingto demonstrate against the inactivity ofthe government in face of the econom-ic crisis. All shows of national unity,behind the façade of Solidarity, hadquickly dissipated.The past two decades in Poland’s

history are told through two conflictingtales. The first is one of victory, free-dom, opportunity and progress.Communism is remembered as a timewhen the creative, dynamic membersof society were held back by the stateand its drive to create a monolithicsocial existence. Communism meantnot just repression and dictatorship butsadness, lost opportunities and absurd-ities – when the government’s claims

No FreedomWithout Solidarity

Gavin RaeProfessor of Sociologyat the KozminskiUniversity in Warsaw.He is author of thebook Poland’s Returnto Capitalism

‘Communism is remembered as atime when the creative, dynamicmembers of society were heldback by the state and its driveto create a monolithic socialexistence’


of industrial greatness conflicted withits inability to regularly provide basicconsumer goods.And so anyone who resists the forces

of free-market capitalism is a conserva-tive relic from the past. Those thatdefend their workplaces, industries,pensions or welfare services arerestricting society’s newly gained free-doms and opportunities. All these col-lectives are dying embers from thepast, while the future belongs to thenew ‘free individual’.This first version of history remained

dominant throughout the 1990s andcontinued into the new millennium.All the main political parties, whetherfrom the right or left, post-communistor ex-Solidarity, were subsumed intothis overarching hegemony. And so itremained, right up until the centre-leftgovernment steered Poland into theEuropean Union in 2004. But the tran-sition had taken its toll. Poland hadbeen the first post-communist countryto recover from the post-transition eco-nomic collapse, inflicted upon all thecountries in the region, and the first toreturn to its pre-1989 level of GDP.However, unemployment soared (ris-

ing above 20% by the end of 1990s),huge social divisions appeared andpublic services crumbled. Those livingin the countryside or declining indus-trial towns found themselves stuck in acycle of poverty and despair, in totalcontrast to the growth that continuedin the urban oases of globalisation. Theslogan of the opposition – ‘There is noFreedom without Solidarity’ (Nie maWolnosci bez Solidarnosci) – had trulybeen forgotten.It was in these conditions that the

second story of Poland’s road fromcommunism gained prominence. Thepolitical consensus had been basedupon an alliance between elements ofthe previous elite (now reincarnated associal democrats) with a section of theSolidarity liberal intelligentsia. The lat-ter had largely been defeated and mar-ginalised in the early 1990s, due to the

role they had played in introducing theshock-therapy economic reforms, withthe ‘post-communists’ becoming themost coherent and stable force inPolish politics.However, the social effects of the

reforms connected to taking Polandinto the EU, along with numerous cor-ruption scandals, reduced this party toa minor political player. The disillu-sionment and anger felt by the ‘losersof transition’ were directed against theelite. Rather than the post-communisttransition being one of freedom andopportunity, it became a story of cor-ruption, nepotism and conspiracy. Theelites of the opposition were seen tohave conspired with those from theformer system to create a new networkof interests (uklad) and secure posi-tions in the upper echelons of govern-ment and business. Anti-communistsentiment mingled with social conser-vatism and xenophobia to create a con-spiratorial description of post-commu-nist deceit.The centre of political power had

shifted back from Warsaw to Gdansk.Not to the mass workers movement,that had attracted the attention of theworld in the early 1980s, but to partiesgrouped around two conflicting fac-tions who had been minor players inthe Solidarity movement. Both werebuilding their support through oppos-ing the arrogant liberal elite in Warsawand espoused replacing the youngThird Republic with a new FourthRepublic. On the one hand, Citizens’Platform (PO) combined a radical free-market ideology with social conser-vatism; on the other, the Law andJustice Party (PiS) proposed a radicalanti-communist policy, which support-ed rooting out those from positions ofpower who had ‘collaborated’ with thecommunist state.In 2005 PiS won the Presidential

election and emerged as the largestparty in the parliamentary elections. Itsubsequently formed a governmentwith the populist agrarian and nation-


alist parties and promised to decisivelybreak from the previous course ofreform taken since 1989. The boot wasnow on the other foot. The governmentdirected its attacks not just against theex-communist elite but also against the‘betrayals’ of former Solidarity leaders.For the first time since the end of

communism the young, aspiring mid-dle class faced a hostile authority. TheFukuyamian reality of post-communistlife had always determined that politi-cal freedoms were synonymous witheconomic liberalism. This inevitablyresulted in liberal tolerance becomingan element of economic privilege. Thesight of the representatives of theprovinces berating the ideals of cos-mopolitanism, sexual freedom or polit-ical pluralism confirmed the cities’prejudices. In the cities we shook ourheads in disbelief as the identicaltwins, who now held the two mostpowerful positions within the state,spoke of revenge and retribution.It was this alarm that mobilised the

urban voters to oust PiS from govern-ment in 2007. PO could activate votersfrom the cities, while PiS, who essen-tially continued the neoliberal courseof economic reform, were unable tosufficiently galvanise the rural areas.Poland had once again stood up to theforces of reaction and division. ForPoland has been misunderstood in theWest. This is not an inward nation thatwants to close itself from the rest ofworld, but one seeking its own domainwithin the global village. Its people

have done more than could have beenexpected to embrace the country’sopening to the international economyand gain the skills needed to survive inits hostile environment.This was given extra impetus after

joining the EU. People moved west andcapital flowed east. The economyboomed, unemployment declined andthe cultures and fashions of the Westbecame part of Polish life. Cheapertravel opened up destinations thatwere once only imagined and broughta new influx of tourists into the coun-try. As a Brit in Poland I could see mystereotype shifting from being someonewho drank tea at five o’clock to a bingedrinker on Kraków Square.The Kaczynski twins and their allies

were not representative of these newoptimistic times. Dissatisfaction wasnow more likely to be expressedthrough gaining work in Ireland or theUK, than raking up the histories ofpast politicians. In these conditionspower was transferred to the morepalatable version of Polish conser-vatism, with Tusk elected PrimeMinister. His image is one that repre-sents a more hopeful post-politicalage. He is better looking, more youth-ful and articulate and is able to holdhis own at international summits andspeak the language of diplomacy.He promised that his government

would create an ‘economic miracle’,through following the example ofIreland. These words are coming backto haunt him. Just as Poland hadseemed to have found the recipe foreconomic and social advancement anew external enemy has arrived. Polandhas not been affected by the global eco-nomic crisis like some of its smallerneighbours, who are more heavilyexposed and dependent upon foreigntrade and capital. In fact Poland is oneof Europe’s ‘tiger economies’ – growingin the first quarter of this year by awhopping 0.8%. But unemployment hasonce again creeped back up into doublefigures and the cold hand of recession is

‘Poland has been misunderstoodin the West. This is not an inwardnation that wants to close itselffrom the rest of world, but oneseeking its own domain withinthe global village’


beginning to tighten its grip.For two decades Warsaw had contin-

ued to develop, even while other partsof the country floundered. The citycontinued along its path of modernity,work remained generally plentiful andthe benefits and rewards of globalisa-tion became evermore available.However, this time it could be differ-ent. One result of the global creditcrunch is that there is now a lack ofcapital moving around the internation-al economy, with this scarce resourceflowing back from the peripheriestowards the centre.The post-communist countries in

central-eastern Europe are particularlyexposed to this trend. Alongside indus-trial workers and agricultural produc-ers, the jobs of the urban middle class,usually employed in the internationalcompanies that swept into the country,are now under threat. At present thisreality is approaching anecdotally: sto-ries of friends who have lost their jobs,companies that are cutting back,salaries that are being reduced. Itsextent and depth is unknown – we sittight and hope for the best.Despite the pleas for unity, the twen-

tieth anniversary of the fall of commu-nism has exposed the divisions thatrun through Polish society. Virtually noone will question the historic role ofSolidarity, the importance of John PaulII, the gains of living in a democraticsystem or the benefits of being part ofan expanded European Union. Themain beneficiaries of the transition tocapitalism repeat these ad nauseumand present them as reasons for nation-al unity. They try to remind societyhow it had stood together against acommon enemy and at how this unity,this solidarity, had helped not just totransform Poland but the world.Yet this is an exaggerated story,

despite the elements of truth that itcontains. By 1989 Solidarity was ashadow of the mass social movementof the early 1980s that had claimed 10million members. The role of

Solidarity was an important factor inthe end of communism, but it was notdecisive. The system was collapsingfrom within, unable to compete with aglobal capitalist economy or keep upwith the arms race instigated byReagan. The Solidarity movement hadarisen with such strength and force,precisely because the economic contra-dictions of this system were felt soacutely in Poland.In face of these hardships a unity

was found not through romanticistnotions of the Polish nation but via asocial force that could exert its owndemands as the general will. ForSolidarity was first and foremost atrade union, an organ of the workingclass. The tragedy of the past twentyyears is that while everyone has want-ed to climb upon the bandwagon ofSolidarity, they have also attempted todilute the real force and meaning ofthis movement. All attempts to repli-cate the unity of Solidarity, whilstexcluding and marginalising the verysocial class that brought it together, areinevitably futile and dishonest. As onetrade union banner read in Katowice:‘We won your freedom, who’s going towin ours?’


Peter R. NeumannDirector of the International Centrefor the Study of Radicalisation andPolitical Violence (www.icsr.info) atKing’s College London. He is theauthor of the recently publishedbook Old and New Terrorism(Polity Press, 2009)

TWOYEARS BEFORE theSeptember 11 attacksagainst the United States

in 2001, the pre-eminent histori-an of terrorism, Walter Laqueur,noted that a ‘revolution’ in thecharacter of terrorism was takingplace. Rather than the viciousyet calculated application of vio-lence that everyone had becomefamiliar with, the world wasnow confronted with terroristswhose aim was ‘to liquidate allsatanic forces [and destroy] alllife on earth’. Terrorism, accord-ing to Laqueur, had become cata-strophic. Not only would the‘new terrorists’ have no inhibi-tions about using nuclearweapons, their aim was to con-struct ‘earthquake machines’ andlaunch ‘artificial meteors withwhich to bombard the earth’.None of Laqueur’s more out-

landish predictions have cometrue. Nevertheless, Laqueur wasnot the only expert who sensed

that the nature of terrorism waschanging. During the 1990s,many of the groups which hadkept governments busy duringthe 1970s and 1980s had decid-ed to abandon violence. ThePalestinian LiberationOrganisation (PLO) recognisedIsrael and renounced the use ofterrorism. The Irish RepublicanArmy (IRA) in Northern Irelandcalled a permanent ceasefireand entered government. Andin April 1998, even the GermanRed Army Faction (RAF) finallydeclared its campaign to beover, announcing that ‘theurban guerrilla in the form ofthe RAF is now history’.At the same time, new and

more dangerous forms of terror-ism appeared to be on the rise.In early 1993, a group ofIslamist extremists led by RamziYousef launched the first attackon the World Trade Center inNew York, aiming to kill thou-sands. Two years later, aJapanese cult, Aum Shinrikyo,attempted to hasten the apoca-lypse by contaminating theTokyo underground with thenerve gas Sarin. Just one monthlater, an American right-wingextremist, Timothy McVeigh, setoff a large truck bomb inOklahoma City which killed168 people.Though undoubtedly shock-

ing in their scale and execution,

Old and NewTerrorism

‘The idea of ‘new terrorism’ wasoften used as a slogan which sig-nalled that things were differentfrom the past but provided no realexplanation of how and why thingshad changed’


the (non-violent) political main-stream. In reality, terrorists’political ideas always reflect agiven society’s radical ideologi-cal currents, with the obviousdifference that terrorists arepursuing their (radical) endsthrough violent means. Itshould come as no surprise,then, that – in the 1960s and1970s – when most of the radi-cal social and political move-ments were either Marxist ornationalist, these ideologieswere also dominant among theterrorist groups of the time.Indeed, almost all of the ‘old’European terrorists were one orthe other – often, in fact, theywere both.In the 1980s and 1990s, how-

ever, religious issues graduallyfound their way back into themainstream political discourse.Many scholars detected a ‘reli-gious revival’ – manifestationsof which could be found on allcontinents and in all religions.As with Marxism and national-ism in earlier decades, the riseof radical religiously inspiredpolitical movements came to bereflected in a number of reli-giously oriented terroristgroups. This included militantChristian anti-abortionists inthe United States, Jewishextremists in the West Bank, theBuddhist inspired cult AumShinrikyo, and various groupsin the Muslim world rangingfrom Hezbollah and Hamas toAl Qaeda. In fact, Hoffmanshowed that, whereas in the late1960s, not a single terroristgroup anywhere in the worldcould be described as religious-ly inspired, the share of reli-giously motivated groups hadrisen to nearly a third by themid-1990s.Finally, terrorism has become

formal hierarchies have beenreplaced with personal relation-ships. What matters is notsomeone’s formal rank butwhom they know and what con-nections they can facilitate.Although truly ‘leaderless resis-tance’ continues to be quiterare, the difficulty in tracing ter-rorist attacks such as Al Qaeda’sbombings in Madrid andLondon to any conventional‘leadership’ illustrates quitehow messy and confused terror-ist group structures havebecome in recent years.Another novelty lies in how

terrorist organisations areincreasingly transnational inorientation, not only reachingacross borders but creating anentirely new kind of socialspace. For the ‘old’, territoriallybased groups such as ETA andthe IRA, everything related backto the struggle in their home-land, even when they wentabroad in order to buy weapons,train, or raise money. Al Qaeda,on the other hand, can bedescribed as truly ‘de-territori-alised’. When studying AlQaeda members, the Frenchscholar Olivier Roy found that –typically – ‘the country wheretheir family comes from, thecountry of residence and radi-calisation, and the country ofaction’ are all different.Furthermore, the group’s ‘centreof gravity’ has constantly shifted– often across continents –depending on where membersand their leaders believe victoryis most likely.The second significant differ-

ence between ‘old’ and ‘new’ isthe rise of religiously motivatedterrorism. The ideologies of ter-rorist groups are often mistaken-ly thought of as existing in aspace completely separate from

the September 11 attacks mere-ly confirmed this trend. Thetrouble was that none of the(self-styled) experts could pro-vide a coherent explanation forwhat was happening. Whatexactly did the ‘new terrorism’consist of? Where did it comefrom? And how should it befought? With the notable excep-tion of the American scholarBruce Hoffman, who tracedsome of the key developmentswith great insight and precision,the idea of ‘new terrorism’ wasoften used as a slogan whichsignalled that things were differ-ent from the past but providedno real explanation of how andwhy things had changed.In my new book Old and

New Terrorism I am trying toshed light on some of the ques-tions which many experts havefailed to answer. My investiga-tion begins with a look at thethree areas in which terrorismhas changed.First, terrorist groups have

become more diffuse.Traditionally, many terroristgroups adopted hierarchical sys-tems of organisation with clearlines of command and control.Even groups like the IRA andthe Basque group ETA, whichhad decided in favour of a sup-posedly more flexible ‘cell’ sys-tem, were fully integrated intothe chain of command. In theIRA’s case, for example, accessto explosives was controlled bythe group’s regional command-ers, thus making sure that noneof the cells could carry out abombing without the leader-ship’s knowledge and approval.By contrast, the structures of

the ‘new terrorism’ are far moredifficult to grasp. They are oftendescribed as networks ratherthan as organisations, because


increasingly define entire popu-lations as ‘infidels’ or ‘others’,remove the ideological con-straints that would have pre-vented terrorists from employ-ing violence against civilians.Of course, it is important to

maintain a sense of perspective.The transformation from ‘old’ to‘new’ has neither been uniformnor has it been universal. Notall terrorist groups have sudden-ly turned into mass-casualtyproducing transnational net-works. Some may have gone allthe way, while others have part-ly transformed, picking andchoosing from the menu of newoptions. This reflects the needsand strategies of particular ter-rorist organisations, and it alsomirrors the peculiar ways inwhich the processes of latemodernity and globalisationhave unfolded. In my view, theconsequences of ‘new terrorism’are best understood not as aquestion of either or (‘new’ ver-sus ‘old’) but, rather, in terms ofdegree (‘newer’ versus ‘older’).The impression – frequently

conveyed in the period immedi-ately following the September11 attacks – that the threat isunprecedented and that nothingcan be learned from previousexperiences is entirely untrue,therefore. Many of the long-established principles of count-er-terrorism remain valid.

expression of – globalisation andlate modernity. Cheap travel andthe information revolution, forexample, have made it possiblefor terrorist groups to establishdiffuse networks, spanning con-tinents and allowing for anunparalleled degree of flexibilityand operational reach. Nodoubt, the same dynamics havealso contributed to differentmindsets and identities thathave permitted terrorists toexpand into transnational space.Furthermore, it is the dialec-

tics of globalisation and latemodernity that need to be con-sidered and understood. Whileproviding immense benefits foran increasingly cosmopolitanelite, they have produced politi-cal paradigms that revolvearound particularist forms ofethnic and religious identity,which reject the universal, secu-lar and liberal aspirations thatlate modernity and globalisationare meant to promote.Religiously motivated terrorismis one of the results.As far as the increasingly vio-

lent nature of terrorist violenceis concerned, media saturationand desensitisation – promptingterrorists to engage in ever morevicious acts of violence in orderto get through to their ‘audi-ence’ – undoubtedly play a role.At the same time, the rise ofparticularist ideologies, which

more violent. Needless to say,even ‘old’ terrorists often killedcivilians, and – occasionally –their operations were aimed atproducing large numbers ofcasualties. But killing people,especially civilians, was second-ary to the communicativeeffects that could be achievedthrough a particular act of vio-lence. In the mid-1970s, theAmerican analyst Brian Jenkinscoined the well-known expres-sion that ‘terrorists want a lot ofpeople watching, not a lot ofpeople dead’. In the era of the‘new terrorism’, the two consid-erations – violence and symbol-ic value – seem to have merged,with mass-casualty attacksagainst civilian populationsbeing routine and intentionalrather than ‘mistakes’ or ‘excep-tions’ to be blamed on splintergroups or renegade elements.There are plenty of statistics

that bear out the rise of mass-casualty terrorism in no uncer-tain terms. Analysts may argueabout exactly how steep the risehas been, but there appears tobe a consensus that – howeverone manipulates the source data– the trend towards more mass-casualty attacks is consistent,significant and well-supported.For example, in the IRA’s thirtyyear campaign, there were justseven incidents in which thegroup killed ten or more people.By contrast, Al Qaeda has anaverage of 16 fatalities perattack, with 9/11 alone killingmore people than the IRA hadkilled in three decades.It seems clear, therefore, that

the ‘new terrorism’ hypothesis –even if sometimes exaggeratedand misused – is not entirelywithout substance. In my view,many of the changes can beattributed to – and indeed are an

‘In the era of the ‘new terrorism’,the two considerations – violenceand symbolic value – seem to havemerged, with mass-casualty attacksagainst civilian populations beingroutine and intentional’


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Laqueur’s idea of terrorists oper-ating earthquake machines isscience fiction, and will remainjust that. This is not to trivialisethe danger or, more importantly,its potential consequences.Policy-makers are right, forexample, in taking every meas-ure possible to avert terrorist useof weapons of mass destruction.But there is nothing to suggestthat apocalyptic terrorism con-stitutes a ‘trend’ based on any-thing we have seen or observedin the past few decades. Thenew terrorism is more lethal andin many ways more dangerousthan its predecessor. But, to par-aphrase Mark Twain, reportsabout the end of the world havebeen greatly exaggerated.

away with some of the hierar-chies that impede lateral think-ing. Counter-terrorism alsoneeds to become more interna-tional, building trust and coop-eration between governmentsacross borders and continents,which poses enormous chal-lenges, especially when thosegovernments are serial humanrights abusers. Governmentsmust engage in the kinds of vir-tual spaces – especially theinternet – in which young peo-ple are being radicalised andrecruited; and they need to findnew ways of promoting mes-sages that counteract and/orsoften the particularist dis-course put forward by violentextremists.The risk of catastrophic or

apocalyptic terrorism remains.This risk, however, is not newnor is it very substantial. Walter

Regardless of whether govern-ments are dealing with ‘old’ or‘new’, the aim must be to pre-vent terrorist attacks whilstmaintaining legitimacy in theeyes of the population. In doingso, governments need to ‘hard-en’ potential targets; developgood intelligence in order todisrupt terrorist structures;bring to bear the full force ofthe law whilst acting within thelaw; address legitimate griev-ances where they can beaddressed; and, not least, con-vey a sense of calm and deter-mination when communicatingwith the public.What’s new is the need for

government structures tobecome more flexible and adap-tive, mimicking – as far as pos-sible – the terrorists’ networkstructures by pooling informa-tion across agencies and doing


Book Review

Diversity andCommonality inEuropean SocialPolicies: The Forgingof a European SocialModel

Editors: Stanislawa Golinowska, PeterHengstenberg and Maciej ZukowskiISBN 978-83-7383-347-0427pp.

MAYBE NOW, IN the midst ofthe slump, is not the rightmoment in time to be ponder-

ing an integrated social policy forEurope, as other issues appear morepressing and the economic downturnseems to dominate everything. Butmaybe now is in fact precisely the righttime to be considering these things: it isa time to remind Europe of its similari-ties, its traditions and its shared values.And it is a time to provide theEuropean Union with a project thatlooks beyond the current crisis.In a new edited volume, the

Friedrich-Ebert-Stiftung has addressedthis issue. In it scientists from westernand eastern Europe describe differentsocial models in seven EU memberstates and ask whether they could formthe basis of a common European model.The continent is tied together by a

set of common values, whose mostfundamental aspect is the striving forsolidarity and equality, writes Peter

Hengstenberg, head of the Friedrich-Ebert-Stiftung in Warsaw and co-editorof the book. The Polish sociologistStanislawa Golinowska takes this evenfurther. She claims that in comparisonto the rest of the world, incomeinequality in Europe is on averagelower and the role of the state in pro-viding social security is far greater thanin most other countries. Europeancountries therefore show ‘similaritiesthat clearly distinguish them fromother developed parts of the world.’However, within these similarities

there are diversities. The EU memberstates have always chosen to followdivergent paths. This does not onlyapply to the way in which they financetheir welfare states. While the Danesdo this predominantly through taxes,the Germans and Czechs instead tendto finance it through social insurancecontributions. Generally speaking,great differences also exist in the wayin which some nations use social poli-cy simply as a means of retroactivelycorrecting problems caused by the fail-ures of the market (Great Britain), aid-ing mainly families and the unem-ployed (Italy, France, Germany) - oractively creating greater social equalitythrough state intervention(Scandinavia).These different approaches can lead

to conflicts when the task of formulat-ing a European social policy arises oreven just when individual commonmeasures are discussed. These con-flicts have been intensified by theaccession of central and eastern

What doesBrussels Want?

Christian TenbrockJournalist with DIEZEIT (Germany)

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icoleSturz

‘The economic and financialcrisis has drastically thrown thecompetence of free markets intoquestion. Thus now should alsobe the time to reassess the pri-macy of the economy amongthe EU’s priorities’


European states to the EU, a processwhich has led to fears of social stan-dards dropping throughout Europe -with Brussels leading the way.Whether this anxiety is justified is

questionable. In Estonia for instance, acountry which is renowned for its eco-nomic liberalism, EU integration hascontributed to maintaining the princi-ple of solidarity and the universal char-acter of the welfare state, according toJolanta Aidukaite from Lithuania. Thefar-reaching social reforms of the pastyears should therefore rather be under-stood as an attempt to overcome theproblems eastern and westernEuropeans alike are facing, writesGolinowska - the ageing society, thechallenges of globalisation and thequestion of how a universal welfarestate can still be financially viable.There are also great similarities in theanswers that have been found to thesedilemmas: Europe’s welfare states aregenerally less generous these days andare demanding more flexibility andindividual foresight from its citizens.But even these reforms are simply

the result of national policies address-ing their own internal issues. Theauthors of the new book agree that inthe search for concrete solutions‘Brussels’ is hardly playing an impor-tant role. The Czech Martin Potuceksums this up by saying that people areunsure what the EU really wants: ‘Oneside (of the EU) is calling for the fur-

ther liberalisation of trade, greaterbudgetary restraint and flexible labourmarkets… the other side talks of socialjustice, social rights and the fightagainst poverty.’ Both sides are difficultto reconcile. Golinowska claims that inEU politics social issues have so farclearly been subordinated to economicones. ‘Free markets are seen as essen-tial for economic success.’But the economic and financial crisis

has drastically thrown the competenceof free markets into question. Thusnow should also be the time to reassessthe primacy of the economy among theEU’s priorities: Does a strong socialpolicy, led by the state, really inhibitEuropean economic competitiveness?Should social policy not be of equalimportance to economic policy? Canthe two not learn from and interactwith each other, for instance in educa-tion? And if this applies to all ofEurope, can the EU really afford tocontinue to leave social issues to theindividual member states?Sustainable economic growth can

only occur when social and economicpolicies jointly provide a basis forsocial justice, concludes PeterHengstenberg. In the crisis few peopleare interested in these connections. Butonce the crisis has passed, Europe willonce again have to address the socialquestion. When this occurs, it wouldhelp if member states learned from oneanother and the EU coordinated andpushed forward this process.


Book Review

The Life and Deathof DemocracyJohn KeaneISBN 978-0743231923992 pp.

JOHN KEANE, PROFESSOR of politicsat the University of Westminster andat the Wissenschaftszentrum Berlin,

calls it ‘serendipity’. A decade in thewriting and the first attempt at a fullscale history of democracy in over acentury, The Life and Death ofDemocracy hits the book shelves withthe sort of timing that no-one can pos-sibly plan and for which many authorswould gladly kill. Global economicdownturn and the MPs’ expenses scan-dal at home in Britain both challengeand reaffirm what democracy means tous and yet John Keane could not haveanticipated their dramatic effects onpolitics when he began this book some-time in 1999.This is an extraordinary book which

tells us almost as much about thefuture of our democracy as it doesabout the past and the present. Itshows us how fragile is democracy andreminds us that, despite its recentshortcomings, we rather like democra-cy and rather take it for granted. Onestartling fact highlighted early on inthe book is that in 1941 there wereonly eleven functioning democracies in

the world. It also challenges our com-mon understanding about its origins,arguing that rather than an inventionof Ancient Greece, evidence of democ-racy can be found earlier in the MiddleEast. He considers the success of theEuropean Union as ‘the world’s leadingexperiment in regional integration, anew multi-layered political communitycommitted… to the principle and prac-tice of fashioning cross-border demo-cratic structures, some of them withoutprecedent’. And the historical setting ofthis book into the present is as elegantas it is intriguing. Despite its near 1000pages, it is bursting with detail, infor-mation, argument and fact not to men-tion quite a few jokes and some splen-did images peppered throughout.But it is the modern context that

intrigues me. The global economic cri-sis has shown us both what can beachieved by the political process andalso the limitations. While concertedefforts of governments across the globehas helped to address the banking cri-sis and recession, the fact is that ourpoliticians no longer have autonomyover economic policy. There are unde-mocratic international bodies whichexercise extraordinary power and influ-ence over policy. And the power ofglobal markets means that capital canflow across the world at the touch of abutton in search of the best returns.Countries now conform to policies inwhich monetary policy is used to con-trol inflation and maintain stable capi-talist economic conditions.Meanwhile, the British expenses row

The Fragilityof Democracy

Stephen BarberSenior Lecturer atLondon South BankUniversity, SeniorResearch Fellow ofthe Global PolicyInstitute (LondonMetropolitanUniversity) and BookReview Editor ofSocial Europe Journal

Pho

to:R

hydianPeters

has shaken our faith in the probity ofpoliticians, just as voters across Europelikewise hold their own representativesin as low regard as at any time sincethe end of war as they learn of theactivities of those who exercise power.One only has to look to the travails ofSilvio Berlusconi to realise this is notan isolated issue. And in its analysis,this gets to a central proposition of thisbook: that we have moved into an eraof ‘monitory democracy’.Monitory democracy is about hold-

ing politicians to account to the extentof their day-to-day actions. For mymind, it does not necessarily hold toaccount politics and raises questionsabout exactly what it is that we aremonitoring. In Britain, we all becamerather interested in the departed HomeSecretary’s choice of pornography aftershe inadvertently claimed a subscrip-tion as a parliamentary expense, buthow much do we scrutinise the erosionof our civil liberties which is surelymore important? The electorate nowknows more about how MPs furnishtheir homes than they could ever pos-sibly have wished, but I suspect theyknow very little about the Regulationof Investigatory Powers Act.One unfortunate (and perhaps

unforeseen) consequence of monitorydemocracy is that rather than making abetter informed choice, the electoratehas a tendency to stay at home on

polling day. Just look at the turn-out atthe recent European elections. There ismore monitoring, but fewer peoplereally care about it. And while some ofthose who did vote, instead pickedfringe parties, I’m not so sure we everget away from elites – even if we findone more palatable than another.I’m also left wondering just who

would be a politician given this moni-toring? We have monitory democracyto thank for uprooting politiciansexpenses in the British Parliament andit might lead to a clear-out of a hun-dred or more of the old guard of MPswho will stand down at the next elec-tion. But who will replace them? Ifrecent years are any indication, it willbe more of the same - this breed of rel-atively young, privately and Oxbridgeeducated, clever, on the whole ratherdecent, middle class, person who hasnever had a real job and who is driveninto politics not through conviction orideology but as a career choice. In theUK and across Europe we now have apolitical class which eschews ideologyin favour of centrist governing. Indeed,politicians across the world now attenda handful of universities and share acommon professional and social net-work. Even if we know what they’re upto in their most private of moments,I’m not sure this is better for democra-cy and I think the book agrees. Inviewing the future, Professor Keane (orrather his muse) imagines a world inwhich ‘parties worked hard to aggre-gate interests. But often they did so atthe price of blandly stated policies,vague, visionless visions, double stan-dards and non-commitments… policyfree politics’. We are of course alreadythere as democracy becomes ‘less andless representative’. One ConservativeMP claimed for the cost of clearing outthe moat around his home. I am surethat moat owners are not representa-tive of the population, but neither isthis political class.The irony is that while politicians

have become less ideological, some of

‘The irony is that while politicianshave become less ideological,some of the largely unaccount-able, international bodies whichexert influence over national pol-icy are dogmatically wedded to aset of politically unpopular ideals’


the largely unaccountable, internation-al bodies which exert influence overnational policy are dogmatically wed-ded to a set of politically unpopularideals.Recent events highlight another dan-

ger the book foresees: the question of‘who monitors the monitors?’ Toassuage the electorate or at least themedia, British MPs are passing overthe self-monitoring role they have fortheir own affairs. An appointed bodywill monitor politicians’ expenses. In asense this is nothing new. GordonBrown’s first act as Chancellor back in1997 was to hand over control formonetary policy to the Bank ofEngland. The Tories now have abizarre idea for doing a similar thingwith fiscal policy. One might well askwhy we need a Chancellor of theExchequer? This, without mentioningthe scores of QUANGOs and otherappointed bodies which have beencreated in particular since the privati-sation programme of the 1980s andindeed European level unelected regu-latory institutions. The implications ofmonitory democracy could be quiteundemocratic as the monitors havemore power than the politicians whoare all too eager to relinquish controlin a Faustian bargain to win office. Thedemocratic ideal is that no single bodyshould rule; the danger is that nobodyat all is responsible.Like all good books, this one gener-

ates as many questions as it answers. Itis full of argument, detailed research,context and thought. But despite itsdire warnings and the rather depress-ing title, it is at its heart an optimisticbook which celebrates our democratictraditions. It is a book which extols thecross-border, democratic, experiment ofthe European Union. And it is a bookwhich encourages the reader to rejoiceand grumble about democracy in equalmeasure if we are to protect a way oflife that we fundamentally value.


Social Europe Journal (SEJ) is the first quarterly journal, deliveredelectronically, addressing issues of critical interests to progressivesacross Europe and beyond. It was founded in late 2004 and hasbeen continuously published since spring 2005.

SEJ is above all a forum for debate and innovative politicalthinking. We not only deal with social democracy and Europeaneconomic policy but also use ‘Social Europe’ as a viewpoint toexamine issues such as globalisation, political economy, industrialpolicy and international relations.

Primarily as an electronic journal, we encourage interactivecommunication between editors, authors, and readers. It is ourgoal to make as many readers as possible active participants of SEJ.By providing opportunities for the exchange of ideas, SEJ is thepioneer of a new form of European public realm – a public realmthat grows and is shaped from the people up; driven by citizens.

We are committed to publishing stimulating articles by the mostthought-provoking authors. Since its founding, SEJ has publishedwriters of the highest calibre including several Nobel laureates,international political leaders and prime ministers as well as someof the best young talent.

All the views expressed in the articlesof this issue are those of the authorsand do not necessarily represent theviews of Social Europe Journal.

All rights reservedSocial Europe Journal© 2009

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Social Europe Journal Vol. 4 No. 3