Crisis Resistance of Inequailty

Transcription

1 Crisis Resistance of Inequailty Lars Bräutigam & Stephan Pühringer Wien, AK-Conference, The Future of Capitalism: Development, Un(der)employment and inequality, Wien.

2 Part I Crisis Policies and its Origins Lars Part II Crisis Narratives Stephan

3 Part I - Crises Policies and its Origins

4 Crises in Modern Times economic and financial crises were common from the very beginning and the first traces of modern capitalism South Sea Bubble (1720) the collapse of excessive financial speculation induced a large and lasting recession first institutional actors developed around that time, such as the Bank of England (1693)

5 Development of Crises Interventions (1) the history of economic and financial crises in modern times is also the history of a learning process of important institutional actors in the early stages, the rigid pursuit of financial stability could add to the severity of a crisis or even cause it over a sequence of economic and financial crises the first central banks in Europe discovered important tools adaptions of the rate of discount could prevent capital drains and the financial instability connected with it

6 Development of Crises Interventions (2) next to central banks, governments experienced a growing importance in fighting economic crises the most prominent and outstanding example is the worldwide recession in 1929, which brought about Roosevelt s New Deal in the United States of America state interventions became necessary because market forces needed a very long time to return to economic growth and full employment (Minsky 2008, 136)

7 Development of Crises Interventions (3) the positive effects of state intervention and anti-cyclical financial policies were first described by J. M. Keynes Hyman Minsky analysed the interplay of central banks and additional state expenditures ( Big Government ) public expenditures can bridge a recession and bring the economy back to a path of growth in general

8 Effects of Crises Interventions (1) However, Minsky also described some of the side effects of crisis intervention inflationary tendencies only minor economic growth financial agents soon proceed to risky behaviour after interventions and thus can trigger the next crisis new strategies of financial agents, who internalize government and central bank policy into their economic decisions and actions excessive risk-taking, guarantee of survival (too big to fail, ) the return of financial instability is somehow connected to state interventions

9 Effects of Crises Interventions (2) the economic system in general gets unstable because institutional actors try to stabilize it short-term stability vs. long-term instability (Minsky 2008, 106) Wray (2009) argues that the whole sequence of developments and crises analysed by Minsky are connected and brought about the general transformation of the financial system and its final collapse in 2007 he calls this period a Minsky-half-century

10 Effects of Crises Interventions (3) within this 50 years there have been tremendous changes within the economic system which also affected the importance and influence of financial agents the costs of the welfare state and crises policy measures transformed governments and public households to large debtors, which depend more and more on the judgement and benevolence of financial actors (and rating agencies) experience a huge rise of debts in economic crises while they are forced to consolidate their overall expenditures, thereby reducing social services and transfers (a source of rising inequality)

11 Effects of Crises Interventions (4) a sequence of crises, or at least the past 50 years of economic development have decreased the standing of governments as good and reliable debtors they have to demonstrate the will to consolidate financial misbehaviour of governments is sanctioned by financial agents the misbehaviour of financial agents is indirectly supported by the superiority of other goals such as systemic stability

12 Effects of Crises Interventions (5) the growing dependency on financial agents has caused the subordination of all other social and economic goals of governments the markets denoting an anonymous group of actors, have even gained authority over public discourse certain topics are automatically evaded one of these topics is the discourse on growing inequality in a crisis and the constant redistribution from the bottom to the top due to the typical crisis intervention scheme

13 Crisis and Inequality (1) What happens if financial agents are bailed out? main focus (even in theory) is on the debt side if governments or central banks rescue financial agents, they always prevent defaults and losses of other agents debts are not reduced but maintained and/or redistributed income flows of creditors get stabilized directly or indirectly financing by additional public debt is one of the crisis-related reasons for the consolidation of public expenditures ratio of public debt to GDP reached 87 percent at the end of 2010, representing an increase of more than 20 percentage points from where it was prior to the crisis (Bach 2011)

14 Crisis and Inequality (2) If there is already a high concentration of property, financial assets and private wealth, it can be stated, that the incomes of the rich are conserved, while the short-term economic effects related to the crises brings income losses, because of rising unemployment fiscal consolidation (cuts in social services and transfers) limited credit supply (banks use cheap money to clean their balance sheets) in addition: elaborated tax evasion strategies add to the financial burden of lower income classes

15 Crisis and Inequality (3) while incomes of creditors widely remain stable, lower income groups have to carry the costs of the crisis spread of inequality occurs through various ways redistribution strategies from top to button, such as a property taxes and effective bail-in-clauses are either cancelled or are getting diluted in legislative processes preserving debt structures obstructs economic recovery policies that could push private demand for example by lowering or redistributing tax burdens do not even enter public and scientific discourses it is all about debts

16 Part II - Crisis Narratives Stephan Pühringer

17 Struggle for political power struggle for discursive power (1) Balance of political power 1. European crisis policies made austerity measures legally binding (European Fiscal Compact) (Truger/Will 2012) 2. Severe consequences especially for South-European crisis states (Kentikelenis et al. 2014) 3. (Ambitious) efforts for financial market regulation have been prevented (Financial Transaction Tax) (Schulmeister 2014) 4. Wealth and income of the (super) rich were not affected by the crisis. (Valluga 2009ff., Trend 2010ff.)

18 Struggle for political power struggle for discursive power (2) Balance of political power What remains of neoliberalism after the financial crisis, the answer must be virtually every-thing. The combination of economic and political forces behind this agenda is too powerful for it to be fundamentally dislodged from its predominance (Crouch 2011)

19 Struggle for political power struggle for discursive power (3) Balance of discursive power Political language and discourses (Lakoff 2005, Lakoff/Wehling 2008) Crisis narratives (causes, characterization and political and economic consequences of the crisis) Discourse profiles of political leaders (patterns of argument, rhetorical strategies and metaphorical content of language) (The root of the crisis) is quite simple. One should simply have asked a Swabian housewife here in Stuttgart, Baden-Württemberg. She would have provided us with a short, simple, and entirely correct piece of lifewisdom: that we cannot live beyond our means. This is the core of the crisis. (Angela Merkel, December 2008)

20 Methodology and research design Critical Discourse Analysis (CDA) approach (Fairclough 1999, Wodak 2013, Wodak/Chilton 2006) Time period: Sept June 2014 Text corpus: 32 Speeches and addresses of Angela Merkel to core economic actors, in which she refers to the crisis

21 Merkel s crisis narratives (1) Causes and characterization of the crisis living beyond ones means The debt crisis has emerged over the years, over a long period of time almost all Europeans have lived beyond their means. crisis as a consequence of debt policies in the European debt union. market excesses and irresponsible behavior of few market actors Personalization and negation of systemic causes Moral framing of economic responsibility Ambivalent role of speculation Potential threat for economic recovery but enforces rules of the market These speculation have a real background, because we give occasion to speculation ( ) the reason for the speculations is the high indebtedness of states

22 Merkel s crisis narratives (2) Consequences of the crisis for economic policies Transfer the debt union to a stability union German culture of stability Fiscal rules as a mechanism of self-conditioning, which allows no excuses Re-establishment of market forces Predictable politics : we shall find ways to shape parliamentary co-determination so that it nonetheless conforms to the markets (I am) looking forward to the day, when everything is working again on its own, only managed by the forces of the market. Even in times of crises it is necessary that the disciplining function of the market forces may not be distorted Free markets within the ordo-liberal framework ( Social Market Economy ) government should lay the foundations for free as possible framework conditions I focus on the forces of a society, which alone can create growth, and these are enterprises.

23 Merkel s crisis narratives (3) Inequality and wealth distribution Comeback of the millionaires and Crisis resistance of the rich Wealth of millionaires in Germany, Austria and Switzerland went up by 9.5%, number of millionaires by 8.2% in 2009 Crisis resistance of the rich is indirectly supported by leaving out such topics in discursive manifestations Wealth concentration, inequality, the rich are hardly addressed by Merkel Economic powerful as source of economic recovery We consider this (wealth taxes, remark SP/LB) as wrong ( ), because we know about the volatility of capital. We have to be careful that we don t touch ( ) the substance of companies, because we would then bite the hand that feeds us.

24 Conclusion (1) European crisis policies is almost exclusively focused on growing sovereign debts, while measures aiming at economic powerful actors were hardly present in political debates. In Merkel s speeches, markets are attributed with strong natural and vital metaphorical analogies therefore economic policies are discursively subordinated to market forces and market mechanisms Processes of wealth concentration in combination with stagnating or even decreasing real wages reflect imbalances of political and discursive power in favor of economic powerful agents in and after the crisis.

25 Conclusion (2) Rising inequality needs to be addressed as a main problem of low demand Banks that have to consolidate their balances with cheap central bank money instead of investing money indicate that market-based recovery from a market-based crisis takes too long Even though systemic failure could be prevented, a variety of economic problems remains, they do not cease to exist because we do not talk about them Challenging the dominant narrative of superiority of natural market forces Persistence and social and economic consequences of the crisis have to be interpreted as results of power imbalances in political discourses and in economic science explicit focus on processes and consequences of wealth concentration and social inequality in discourses and economic research

26 Thank You!