A Cultural/Cultureal Political Economy

of the Eurozone Crisis

Bob Jessop
Lancaster University
Outline
Cultureal political economy
Economic imaginaries
Critical political economy
Variegated capitalism
North Atlantic Financial Crisis
Shadow of neo-mercantilism
The incompossible Eurozone
Eurozone crisis
Crises of crisis-management
Conclusions (and appendices)



Cultureal Political Economy
Studies role of semiosis in construing and constructing
economic, political (and social) realities
Notes that, while all construals are equal, some are more
equal than others; aims to explain this through dialectic
of cultural (semiotic) and social (extra-semiotic) factors
Applies evolutionary approach to both sets of factors:
starting from variation in construals, what factors shape
their differential selection and subsequent retention?
V-S-R mechanisms are not purely semiotic: they may be
extra-semiotic (structural, technological, agential)
Putting the C into CPE
CPE makes ontological turn: studies role of semiosis in
reducing the complexity of a world pregnant with many
possibilities for action (or inaction)
This role includes construal and construction of
political economy, which is itself a simplifying concept:
The economy as object of observation, calculation,
management, or governance never comprises all
economic activities but is an enforced selection of
a more or less coherent subset thereof
Semiosis is causally effective and meaningful. Events
and processes and their effects can be interpreted and,
in part, explained by form and content of its practices

Ideas and Economic Policy

The ideas of economists and political
philosophers, both when they are right
and when they are wrong, are more
powerful than is commonly understood.
Indeed the world is ruled by little else.

I am sure that the power of vested
interests is vastly exaggerated compared
with the gradual encroachment of ideas.
the ideas that civil servants and politicians
and even agitators apply to current events
are not likely to be the newest. But, soon
or late, it is ideas, not vested interests,
which are dangerous for good or evil

John Maynard Keynes
Seventy Years Later
REP. WAXMAN: Do you feel that your ideology
pushed you to make decisions that you wish you
had not made?

MR. GREENSPAN: remember what an ideology is:
a conceptual framework for people to deal with
reality. Everyone has one. You have to - to exist,
you need an ideology. The question is whether it
is accurate or not. ... Ive found a flaw. I dont
know how significant or permanent it is. But Ive
been very distressed by that fact ... A flaw in the
model that I perceived as the critical functioning
structure that defines how the world works, so
to speak (Congressional Hearing, 23 Oct 2008)
Chair, Federal Reserve, 1987-2006
Complexity and Social Imaginaries
What Waxman and Greenspan call ideologies are
personal frameworks shaping lived experience and, for
Greenspan, are instituted social imaginaries (broadly
defined) for dealing in a simplified way with reality
Imaginaries have key role in struggle not only for hearts
and minds but also over exploitation and domination
Social forces try to make one or another imaginary the
hegemonic or dominant frame in given contexts and/or
to promote complementary or opposed imaginaries
Complexity is also reduced via social structuration, i.e.,
limiting compossible sets of social relations in time-space
Selection of Social Imaginaries
Selection/retention are shaped by four forms of selectivity that
operate on imaginaries: discursive, social structural, technical,
and agential (they also work on other kinds of raw material)
Discursive: genre chains, styles, identities) and inter-discursive
resonance
Social structural: some sites of enunciation are more influential
than others
Technical: some means of advancing discourses are more
effective than others
Agential: some agents are more skilled in arts of rhetoric,
argumentation, articulation, etc.
Four Selectivities in General
Structural
Structurally-inscribed strategic
selectivities plus structurally-oriented
strategic calculation
Form analysis and critical
institutionalism; focus on
uneven distribution of
constraints/opportunities
Discursive
Semiosis as enforced selection with
signs as raw material of meaning
making. Discursive selectivities plus
strategic use of language
Critical semiotic analysis of
text, intertext, and context to
see how semiosis construes,
guides action, and constructs
Techno-
logical
Technologies for appropriating and
transforming nature and/or for the
conduct of conduct
Material, social, and spatio-
temporal biases inscribed in
technological capacities for
action and their effects
Agential
Attribution of interpretive and causal
powers to agents to make a difference
in specific conjuncture by virtue of
specific capacities unique to them
Conjunctural analysis
oriented to individual and
social agents in a changing
balance of forces
How to interpret this figure
Not everything that is possible is compossible
A set of elements that are individually possible viewed in
isolation and can be combined in a single possible world
in a given spatio-temporal matrix are compossible in this
regard (e.g., actually co-existing, relatively durable VoCs)
A set of such elements that cant be combined in a single
possible world in a given spatio-temporal matrix are
incompossible in this regard (empty cells in VoC grid)
Some compossible sets comprise mainly complementary
elements and are stable/adaptive; others include major
contradictory elements that are destabilizing in long run
Putting the PE into CPE
The field of political economy has at least some
distinctive properties in the form, content, logics
and/or tendential dynamics of its instituted relations
As enforced selection, economic imaginaries ignore key
features of actually existing economies, which continue
to have real effects, including:
contradictions, dilemmas, trilemmas, and paradoxes
extra-economic conditions of existence and wider effects
spatio-temporal depth, breadth, rhythms, sequencing , etc
So we must study the structuration and dynamic of PE
to facilitate the critique of ideology and domination
Structuralist Scylla

Constructivist Charybdis

Grasps distinctiveness of specific
economic categories and their
structured/ structuring nature in
wider social formations
Grasps semiotic-material
construction of social relations,
reveals social embedding, notes
its performative impact
But reifies such categories, fetishizes
economic structures as natural, and
views agents as mere Trger of
economic logics
But finds it hard to define specificity
of economic relations relative to
other relations because they are all
discursive
Strong risk of economic determinism,
explaining economic processes in
terms of iron laws
Strong risk of idealism, defining
economic relations in terms of their
manifest semiotic content
Hard Political Economy Soft Economic Sociology
enforced
selection
structuration sense-making
sedimented
meaning
structured
complexity
improbability
paradoxes, lack of
closure, scope for
repoliticization
contradictions,
unstable fixes, and
crisis-tendencies
VSR
institutional and spatio-temporal fixes
A Marxian View of Capitalism
Wealth appears as immense accumulation of commodities
Commodity form is generalized to labour-power (which is a
fictitious commodity but treated as if it were a commodity)
Commodity as stem cell form of capital relation, with different
forms of use- vs exchange-value contradiction for each form
A political economy of time and essential role of competition in
dynamic of capitalism, leading to treadmill effects
Key role of money as social relation in mediating profit-oriented,
market-mediated accumulation process
Contradictions, social antagonisms, and crisis-tendencies can be
managed partially and provisionally through unstable fixes

CAPITALISM

Rational
Capitalism

Political
Capitalism
Traditional commercial
capitalism
Mode #1

Trade in
free markets
& capitalist
production
Mode #2

Capitalist
speculation
and finance
Mode #3

Predatory
political
profits
Mode #4

Profit on
market from
force and
domination
Mode #5

Profit from
unusual
deals with
political
authority
Mode #6

Traditional
types of trade
or money
deals
Webers Modes of Capitalist Profit Orientation (Based on Swedberg 1998)
A partially
alternative approach
Variegated Capitalism in World Market
Break with pre-given logic of world system and study its
more open-ended logic, which changes as modes of
integration of world system change
Break with the parsimony of Hall/Soskice approach and
consider other varieties plus their interaction with other
(sub-)types of capitalism and the mutual, often
asymmetrical, constraints that this imposes on each
One way to do this is via analysis of variegated capitalism
in emergent, changing world market that may exist in
shadow of a dominant variety
Variation versus Variegation
Varieties of Capitalism
Distinct (families of) local,
regional, national models seen as
rivals on same scale or terrain for
same stakes

Describe the forms of internal
coherence of distinct VoC on
false assumption that they can
and do exist in relative isolation
from each other
Variegated Capitalism
Possible complementarities (or not)
in wider division of labour in a
tendentially singular, global but
variegated capitalism

Zones of relative stability linked to
instability in or beyond national
spaces in a complex ecology of
accumulation regimes, modes of
regulation, spatio-temporal fixes



Variegated Capitalism

Analyse costs imposed on other
spaces and/or future generations by
uneven capacities to displace or
defer contradictions, conflicts, and
crisis-tendencies,

Some varieties are more equal than
others, with neo-liberalism tending
to ecological dominance in the
world market. Not all economic
spaces can adopt dominant model.

Varieties of Capitalism

Study temporal rhythms and
horizons of VoC as internal,
specific, short- or medium-term,
unrelated to long-term global
dynamic of capital

All varieties are equal and, if one
is more productive or
progressive, it could and should
be copied, exported, or even
imposed elsewhere
Global Shadow of Neo-Liberalism
Shadow of neo-liberalism in
variegated world market is to
the role of finance-dominated
accumulation in neo-liberal
economies, to ecological
dominance of the latter in
world market, to general place
of finance in global circuits, to
rolling out of competition law
based on neo-liberal view of
market, and to other factors

Variegated
world
market in
crisis. The
integration
of the world
market
generalizes
capitals
contra-
dictions
Variegated Capitalism in Crisis
The NAFC emerged directly from capitalist speculation
and finance rather than from a specific type of free
trade in markets and capitalist production
It was enabled by unusual deals with political authority
(de-regulation of finance via legal changes and regulatory
capture) and predatory political profits (tax cuts for rich,
welfare cuts, privatization, disaster capitalism)
But NAFC has specific form due to hyper-financialization
of advanced neo-liberal economies and, in particular and
most immediately, practices of de-regulated, opaque, and
sometimes fraudulent financial institutions
... and the Wider Context
Five sets of crises are crucial contextually (in order of
importance)
Global environmental crisis (plus energy, food, water)
Crisis of US hegemony within post-1975 global order
Crisis of neo-liberalism as economic and state project
Crisis of finance-dominated growth regimes
Crisis in particular strategic sectors (e.g., automobiles)
These are superimposed on more local (regional, national,
meso-regional, local crises) and other types of crisis (fiscal,
rationality, crisis in crisis-management, legitimacy, organic,
etc.). These shape spatial repercussions of NAFC and the
manner in which they unfold in space-time
EU Shadow of Neo-Mercantilism
Shadow of neo-mercantilism in
Euroland due to relative weight
of export-led accumulation in
the Modell Deutschland, to
the ecological dominance of
German economic Grossraum in
European Economic Space, esp.
in Eurozone, to institutional
flaws in design of Euro, and to
Germanys hegemonic position
in EU and wider EES
Das deutsche Modell
For VoC, Germany is the exemplar of Rhenish capitalism
(Albert) or coordinated market economy (Hall/Soskice)
Limited role of financial markets compared to Hausbanken
Emphasis on coordination through sectoral and regional
associations and networks of firms
Ordoliberal social market economy rather than neoliberal
market economy
Multiple stakeholders rather than emphasis on delivering
shareholder value
Less flexible labour markets, more emphasis on reskilling




Constance School
Politics and the state were central to their analyses
Economic focus is on institutionalized class compromise
rather than the micro-economics of the firm
When studying firms, look at relations of capital fractions
Rather than assume equilibrium and stability of pure
varieties of capitalism, examine phases of growth,
stagnation, crisis, crisis-resolution, etc.:
post-war reconstruction,
relatively stable Wirtschaftswunder 1950s-early 1970s,
domestic and foreign challenges thereafter.
Das Modell Deutschland
Virtuous circle of economic (growth, competitiveness),
social (social integration, low unemployment), and
political (crisis management) factors
Facilitated by export-oriented, neo-mercantilist German
growth model, i.e., its insertion into European and world
markets, based on specialization in high quality
diversified production, capital goods, and, especially,
capital goods for producing capital goods
Related to hierarchy and core-periphery relations in
international division of labour
Export-Modell Deutschland
Germanys International Investment Position
Neo-Mercantilism and its Shadow
Variegated Capitalism and the EEC
Founding members were Rhenish and backed the Jean
Monnet mode of integration to create conditions for an
integrated European economic space supporting this model
Initial steps to European integration aimed to integrate W.
Europe into circuits of Atlantic Fordism, with a certain
spatial division of labour; prevailing mode of integration
aimed to build a Keynesian-corporatist form of statehood
on European level favourable to national Fordist modes of
development (see Ziltener 1999, 2000)
Spillover of market integration would consolidate variegated
regulated capitalism and deepen EEC political integration
Variegated Capitalism and the EU
As new members with other modes of growth, regulation,
and welfare joined EC, initial coherence decomposes
UK initially isolated as liberal market economy but played
key Trojan horse role in facilitating entry of de-regulated
international finance into Continental heartland
Got harder to establish a tripartite Euro-corporatism, let
alone to re-scale state planning from national to EU level
Monnet mode replaced by a more liberal internal market
project, based on negative integration, prompting conflicts
among neo-liberal, neo-corporatist, neo-statist currents
Uneven impact of Atlantic Fordist crises on national
models aggravates latent incompossibility of EUs VoCs
Variegated Capitalism and Lisbon
Diverse neo-liberalisms (regime shifts vs policy adjustments)
magnify heterogeneity in original core, intensify integration
crisis, and prompt search for new mode of integration
New comprehensive concept of control arose in 1990s,
namely, embedded neo-liberalism based on German model
This is neo-liberal at its core and reflects the outlook of the
most globalised sections of European capital, while at the same
time seeking to accommodate the orientations of other social
forces (Ziltener 2000; cf. van Apeldoorn 2002)
New compromise organized around competitiveness and
involved uneasy balance among different crisis-responses,
biased towards neo-liberalism (Maastricht, then Lisbon)
Eurozone Crisis and Neo-Liberalism
Eastward expansion aggravated incoherence of EU an
effect promoted by neo-liberal forces in and beyond EU
Failure of Lisbon Agenda (KBE, European social model,
with neo-liberal bias) plus global crisis (made in US and
broke out there) weakens EU economic space
Reinforced by crises in UK and Ireland and in new member
states, then by sovereign debt crises in Greece and Spain
Eurozone crisis is latest expression of latent incompossible
variegation of EU and its EEA partners (unless new mode
of economic and political integration is found) as these
economies are inserted into world market as a whole
What is incompossibility...?
Compossibility and incompossibility are key principles in
natural theology and critical realism alike:
Not everything that is possible is compossible
Compossibility: different (sets of) social relations do or could
co-exist for a time in the same spatio-temporal matrix
Incompossibility: (sets of) social relations that may exist
independently of each other in different spatio-temporal
matrices (based on theoretical first principles and/or on
empirical observation) cannot co-exist in the same matrix
Both concepts must be studied relationally and over time:
allow for super- and subordination, complementarities, zones
of indifference, compensating cycles within larger periods.....
Modalities of Relational Compossibility
Impossible as Element Possible as Element


Incompossible Compossible Incompossible
as set member as set member as set member



Benign Pathological
Compossibility Compossibility
(sustainable) (unsustainable)

Latent
Incompossibility
How to interpret this figure
Not everything that is possible is compossible
A set of elements that are individually possible viewed in
isolation and can be combined in a single possible world
in a given spatio-temporal matrix are compossible in this
regard (e.g., actually co-existing, relatively durable VoCs)
A set of such elements that cant be combined in a single
possible world in a given spatio-temporal matrix are
incompossible in this regard (empty cells in VoC grid)
Some compossible sets comprise mainly complementary
elements and are stable/adaptive; others include major
contradictory elements that are destabilizing in long run
Eurozone Crisis?
Since euro began, average unit labour costs have risen
25% less in Germany than in Mediterranean economies
(PIGS), creating massive trade imbalances with Germany
To restore balance requires:
very rapid German wage gains
or sharp wage and employment cuts in other economies
or a change in the exchange rate.
Resolving credit crisis without tackling competitiveness
will prolong PIGS misery as workers stay unemployed,
and create more credit crises
Politicians choices are unpalatable: inflation in Germany,
depression in periphery, the end of the Euro

Source: Jeremy Beckwith, letter to Financial Times, 2
nd
December 2010
Euro and Currency Pyramid
Form Euro Weaknesses, crisis-tendencies
Top Currency
EU is not the world economic leader.
Euro is not the established currency
of a normal state with usual set of
powers (coercion and tax monopoly)
EU economies do not meet economic
requirements of top currency; also lack
military-political power to encourage
and/or enforce adoption of euro
Master
Currency
Circulates in EU as geo-political bloc
due to political as well as economic
dominance of (quasi-)issuing state
(Franco-German axis, DM model)
EMU is part of state project linked to
variegated European capitalism in
shadow of neo-mercantilism in world
market in shadow of neo-liberalism
Negotiated or
Political
Currency
Based on international regimes with
strong emphasis on mutual benefits
rather than coercion
Negotiation to join EU also linked to
negotiation to join EMU. Request or
demand depending on economies
Passive or
neutral
currency

Circulates domestically, no major
role in international regimes

National currencies of candidate states
with limited economic clout and/or
political stability.
The View from Davos
Debt-Default-Deflation Crisis?
Eurozone crisis is not just another Minsky-induced recession
nor another crisis of competitiveness in individual economies
for both, there are routine crisis-management responses
Crisis evolved into an epic recession, based on financial and
consumption fragility, that created a debt-default-deflation
trap (e.g., Eire, UK, PIGS). This has aggravated the credit and
competitiveness crises in EU, requiring massive ECB action.
Rigidities of EU and Eurozone plus strong interdependencies
create pathologically compossible variegation, impossible
choices, and risk that EU becomes an incompossible dream




Fundamental
Forces and
Relations of Epic
Recession
Adoption of Mal-Designed Eurozone
In EU Marked by Latent Incompossibility

Speculative Investing and
Unproductive Consumption Shift

Debt Deflation Default

Financial Institutions Asset Prices Banks and Finance
Non-Financial Business Product Prices Non-Bank Business
Consumer-Household Labour Wages Consumer-Household

Financial Fragility Consumption Fragility
Declining Real Economic Indicators

Real Asset Investment Household Consumption Global Trade and Exports
Industrial Production Employment ....
Modified for Eurozone from Rasmus , 2010: 16
From Debt Crisis to Sovereign Debt?
De-regulation, internationalization, shadow banking lead to
excess credit created via hyperfinancialization and new
instruments, such as derivatives, in search of high and quick
rewards (financial speculation > financial intermediation)
Much of excess credit was fictitious capital (capital as
property rather than functioning capital) with little relation to
growth potential of real economy
Liquidity and solvency crises resolved via state fiat money
(backed by tax capacities of states) and rise of public debt
then leads via bond markets to demand for austerity politics
Crisis generalized through contagion effects of crisis in top
currency and euro as negotiated currency
http://cdn1.creditwritedowns.com/wp-content/uploads/2011/11/Future-of-euro.jpg
Or muddling
through!
just saying!
A Miracle for Whom?
Conclusions
Global crisis is one of variegated capitalism in world
market organized in shadow of neo-liberalism, with many
variations that are remaking uneven development
In EU, it is a crisis of variegated capitalism organized in
shadow of Modell Deutschland (not a classic case of neo-
liberalism) but still dependent on broader dynamic of
world market organized in shadow of neo-liberalism
There is pathological co-dependency of US and PRC in
world market (but no formal framework or regime); and
emerging pathological incompossibility of German model
and Club Med economies inside non-adaptive EU regime
Acknowledgement
This presentation derives from research conducted
within the framework of an ESRC-funded Professorial
Fellowship, Great Transformations: a Cultural Political
Economy of Crises of Crisis-Management.
Award: RES-051-27-0303