Is Capitalism Fighting Back Against the European Union?

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What Karl Marx might say about UK Prime Minister David Cameron's veto of a euro-saving treaty: capitalism made him do it

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Britain's Prime Minister David Cameron is flanked by Chancellor of the Exchequer George Osborne and Leader of the House of Commons George Young during a parliamentary debate on last week's European Union summit / Reuters

Europe is still reeling over British Prime Minister David Cameron's veto last week of a new European Union treaty, meant to save the euro. Cameron stood against the 27 other EU member states, refusing to sign on to the new plan because, apparently, it might lead to damaging regulation of the UK's -- or, more specifically, London's -- financial services industry.


As discussed in a previous post, there's been a lot of frustration in Europe recently over the way market forces, and particularly the ratings agencies, seem to be able to push politics around. Some of the debaters in the media seem to think greater European integration would produce a political unit better able to resist market pressure. How frustrating, then, to see a plan for greater integration thwarted by, again, concern for a financial market! 

There's already been a lot of physical and digital ink spent on this topic, i.e. why Cameron did what he did and what it means. The Economist's writers have made a pretty good case for seeing this more as a matter of Cameron's own precarious position in British politics than a cut-and-dried London financial sector vs. EU standoff.

Since the European papers' op-ed sections have had such a strong 19th-century-style anti-market theme in the past few months, though, why not go whole-hog at this point? Wacky though Marxist and neo-Marxist theory may be, the virtue of heading down the Marxian path is that it's got a very neat and tidy explanation for what's going on right now. In fact, Marxist thought is designed almost exactly for this type of situation; little backlashes in the political superstructure (e.g. Cameron's veto) are treated as evidence of how our particular economic setup -- in this case, capitalism, or the capitalist mode of production -- dictates the rest of what's going on in society and politics.

One particular modification of Marxist theory that might apply to this case comes from an American academic named Immanuel Wallerstein. Wallerstein's idea of "world-systems analysis" is based on the Marxist notion that our political structures -- in this case, our entire system of states and international relations, our "world-system" -- are all driven by the capitalist "world-economy" we live in. In other words, the political system exists to serve the market system. International relations reproduce an international division of labor. Let's set this up and then return to David Cameron to see how it all fits together.

One common element between Marx and Wallerstein is that profit pretty much depends upon exploitation of some variety. Marx's argument, considerably simplified, includes the claim that once you get rid of technological advantage, the only way for a factory-owner to turn a profit while competing against other factory-owners is to squeeze so-called "surplus value" out of the factory workers, i.e. pay them less relative to what they are required to produce. What Wallerstein argues is that profit, on an international scale, depends upon temporary "quasi-monopolies" that allow a company or industry to squeeze some other element of the economy. You only get quasi-monopolies in strong states. Thus, the profitable industries get located in strong states, and in fact encourage the development of strong states. The truly competitive processes -- for example, cotton production in India in the 18th and 19th centuries -- get located in the "periphery," where weak or nonexistent state structures mean the territory is dominated by state or corporate agents from the core states.

So what does this have to do with David Cameron and the EU? Well, there are two ways it fits in. One lies in Wallerstein's explanation for why we have the current, multi-state-system world-economy that we do, instead of a "world-empire," i.e. a single political structure dominating the economy. Here's how Wallerstein put it in World-Systems Analysis: An Introduction, his 2004 summary of decades of previous work:

We have seen that the peculiar structure of a world-economy (a single division of labor, multiple state structures albeit within an interstate system [...] ) is peculiarly consonant with the needs of a capitalist system. A world-empire, on the other hand, would in fact stifle capitalism, because it would mean that there was a political structure with the ability to override a priority for the endless accumulation of capital. This is of course what had happened repeatedly in all the world-empires that had existed before the modern world-system. Thus, whenever some state seemed intent on transforming the system into a world-empire, it found that it faced eventually the hostility of most important capitalist firms of the world-economy.

In other words, when the political system gets too close to being able to resist the economic system, the economic system fights back. No one would really call the EU an empire. But in an earlier post I reviewed how a number of intellectuals in Europe right now, among them famed social theorist Jürgen Habermas, seem to think supranationalism is exactly the way to help political structures keep up with market forces -- be they corporations, ratings agencies, or investment patterns -- that increasingly transcend national boundaries. "The 'democracy of a single country' is no longer able to defend against the injunctions of a mad capitalism, which themselves cross national boundaries," Habermas has argued.

If "mad capitalism" is a real problem that's something to "defend" against, and if greater supranationalism (such as with the strengthened EU treaties that are under discussion) is the way to fight it off, the clear lesson from Wallerstein is that we should expect "mad capitalism" to fight back. We should particularly expect capitalism to push back against the political system when the supranational structure starts to look too strong, and instead of removing regulation, starts to reimpose it. Vetoes in the name of protecting financial sectors shouldn't be all that surprising, nor should we be astounded if leaders who don't veto -- to the detriment of such a sector -- wind up political trouble.

The second way Wallerstein's ideas fit into the current situation in Europe is in the fact that Europe seems to be struggling so hard to define itself, politically, in the first place. Wallersteinian theory obliquely addresses why such a fascinating new structure like the EU has come into being in the past decades as well as why it's having some trouble. It also explicitly addresses the increased financial volatility that has gotten the euro zone into such a nasty financial situation that this new treaty is deemed necessary.

In his 2004 work, Wallerstein, announced that he thought the current world-system was in crisis. The whole world has been gradually incorporated into the world-economy. The periphery has become semi-peripheral and technology and political structures are spreading. The world is becoming less rural. As a result, it's getting harder for firms to exploit weaker areas by outsourcing labor to where labor is cheaper. It's also getting harder for firms to "externalize" the true costs of production by leaving someone else to worry about resource exhaustion or pollution. In other words, the capitalist system depends on having new areas to exploit, but it has run out of new areas. Increased taxes, increased debt, and even increased financial speculation -- think derivatives, Fannie Mae, Freddie Mac -- are part of the chaotic transition period: "More and more," Wallerstein wrote in 2004, "capitalists sought profits in the arena of financial speculation rather than in the arena of production. Such financial manipulations can result in great profits for some players, but it renders the world-economy very volatile and subject to swings of currencies and of employment. It is in fact one of the signs of increasing chaos."

Prescient stuff. But this notion that the world-system is in crisis does not necessarily negate that those profiting from capitalism resist change. "Just because a system is in crisis does not mean that it does not continue to try to function in its accustomed ways," Wallerstein was careful to point out.

If you don't buy all this, you're in good company. To start with, classical economists tend to think Marxist and neo-Marxist conceptions of capitalism are pretty skewed, if not straight-out balderdash. Even non-economist social scientists wouldn't necessarily swallow this kind of explanation whole. Some of you, reading through, may already have noticed that an explanation like this, so system-based and so convinced that corporate interests trump politics, doesn't leave all that much room for individual agency, and is a little hazy on which actors, specifically, are pushing for what. How do we know that the interests of major firms are necessarily what's driving political action?

Marx, of course, would have dismissed arguments that Cameron's veto was about domestic politics or British nationalism. "The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie," he declared in the Communist Manifesto (i.e., nationalism and domestic politics are really a cipher for economic interests). But that's a pretty far-left position, and it would take an ideologue to believe that Marx's data sets for that declaration were 100% conclusive. Without knowing the mechanism by which pressure is being exerted on the British government and, by extension, Cameron himself -- without knowing exactly whose interests are at work, and how -- it's hard to prove that Cameron's veto is anything other than, well, Cameron's veto.

These are the sorts of criticisms that have been leveled at Marxist thought and its takeoffs for decades, though. At the extreme ends, Marxist-style explanations look, to those already wary of corporate influence, like truisms; or, to those disinclined to see financiers' hands in every government decision, like lunacy. The real lesson here is for those who do think strengthening structures like the EU is a way to fight "the injunctions of a mad capitalism." If you want to read Habermas, toss in some Marx or Wallerstein while you're at it. And if you expect the EU to fight capitalism, expect capitalism to fight back.
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Heather Horn is a former senior associate editor at The Atlantic.

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