Bruno Amable
University of Paris I Panthéon – Sorbonne
The crisis of the past two years is not simply a crisis of ‘deregulated finance’ or even a crisis of ‘finance-led capitalism’. It is a crisis of the neoliberal model of capitalism, i.e. a model of capitalism whose characteristics cannot be limited to the peculiarities of the financial system of the US or the UK. As a consequence the possibilities for using the crisis as an opportunity to reverse the transition toward the neoliberal model cannot be limited to initiatives toward a ‘re-regulation’ of finance.
The financialisation of the economy is but one aspect of the neoliberal model of capitalism. It has been instrumental in the break-up of the social-democratic alliance between firms and workers and for the emergence of a new alliance between financiers, firms’ management and skilled workers. It also plays an important role in the global coherence of the neoliberal model; by imposing short term constraints on firms, it makes them depend on flexible labour markets for their competitiveness; by increasing income inequalities, it divides the wage-earning classes and reinforces the power of the economic and political elites. But other institutions than the financial system are more important for the stability or instability of the socio-political compromises upon which the European models of capitalism are based: social protection or labour market institutions for instance.
Over the past couple of decades, the European models of capitalism have been undermined by a series of neoliberal structural reforms affecting many institutional areas: welfare state retrenchment, labour market flexibilisation, privatisations, etc. The consequences have been an increase in inequalities and a weakening of the collective capacities of wage-earners. Reversing this trend implies action that is directed toward the different areas affected by neoliberalisation and the building of a new socio-political alliance.
Two connected trends of the neoliberal model of capitalism, in particular, should be fought: the growth of income and status inequalities and the weakening of institutions protecting workers. Labour market flexibilisation, decentralisation of bargaining and welfare state retrenchment have increased the divergence of interests among workers and made the less skilled groups more fragile. Decreasing these inequalities cannot be limited to the use of the fiscal instrument. This could at best redistribute income but would leave power inequalities unchanged. A new economic system must not simply make the income distribution less unequal but break-up the dominant alliance of financiers, firms’ managers and skilled workers and substitute a new compromise based on the majority of wage-earners. The emergence of such a compromise demands a radical transformation of political strategies on the left. In particular the fiction of a social-liberal strategy must be ditched and new structural policies should be implemented in the direction of the homogenisation of the various wage-earning groups.
Homogenisation concerns of course income. It implies that centralised solidaristic wage bargaining should be substituted for individualisation and decentralisation. Such a change would have the twin advantage of enabling the implementation of an incomes policy and helping the construction of a common interest among workers, a necessary condition for rebuilding a coherent social alliance able to support a progressive political strategy.
A new model will call for a reinforcement of the institutions of social protection.
This implies dumping the so-called ‘modern’ approach to the question and putting the objective of equality of outcomes, not of opportunities, at the centre of the new politics. The socialisation of welfare expenditure should be an objective too. Regarding pensions, it should not be too difficult, given recent events, to convince the general public that pay-as-you-go systems are in fact more financially stable than supposedly ‘funded’ systems. The financial crisis is therefore an opportunity for reinforcing the former type that should not be missed.
Labour markets should be regulated. In particular, the idea that employment protection is detrimental to employment will most certainly lose much credibility if the crisis endures and brings persistent high unemployment. This is an opportunity to re-establish a reasonably high level of employment protection where this protection has been most diminished, by prohibiting the most precarious jobs where a sizeable proportion of the workforce finds itself trapped. This would also help the building of common interests among wageearners.
This institutional transformation calls for a regulation of competition and its strict containment where public services are concerned. If the crisis is the opportunity to celebrate the ‘return of the State’, this opportunity should be seized to limit the extent of market-based coordination of activities and give a genuinely strategic role to the State in activities that are considered crucial for the future. This is particularly the case for research and scientific activity.
The connection of such activities with industrial policy does not mean that research must submit to the demands of industrial production, but that the economy must make the best possible use of the possibilities opened by the advancement of knowledge. This means that the vision of a service-based society that keeps only high-tech activities in developed countries and leaves the bulk of industrial production for the world market to emerging economies must stay what it is: a fantasy.
Such a programme is not the restoration of the institutions of Fordism. The post-war models of capitalism were built on a compromise between capital and labour that left the power of decision to the former in exchange for a steady growth of real income for the latter. The new compromise that is sketched here does not leave such power to capital. On the contrary, workers must have important decision-making powers and not mere consultation.
The implementation of such a program will require the building of new social alliances and compromises. These will be the outcome of political and social initiatives that have exploited the opportunities given by this period of uncertainty
and indecision brought on by the crisis.
Further reading
Amable B. [2009] Structural reforms in Europe and the (in)coherence of institutions.
Oxford Review of Economic Policy. Vol 25(1), 17-39.
Amable B., L. Demmou and I. Ledezma [2009] The Lisbon Strategy and
Structural Reforms in Europe. Transfer: European Review of Labour and
Research, vol.15 n°1 pp.33-52.