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Capital & Class
The online version of this article can be found at:

DOI: 10.1177/030981680709300102
2007 31: 7 Capital & Class
Magnus Ryner
of integration
US power and the crisis of social democracy in Europe's second project

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by Pepe Portillo on July 29, 2014 cnc.sagepub.com Downloaded from by Pepe Portillo on July 29, 2014 cnc.sagepub.com Downloaded from
cs power and the crisis of social democracy in Europes second project of integration ;
US power and the crisis of
social democracy in
Europes second project of
Magnus Ryner
This article draws on the work of Poulantzas to argue
that European social democracy is in crisis because
European integration since the 1980s has been
articulated within a relationship of structural
subordination to US-led globalised financial capital, to
which European capital has itself increasingly
gravitated. This has also been the determining
parameter of the state-as-social-relation, and
contradicts the post-war welfare settlement. Against this
backdrop, Europe has struggled to rearticulate a new
social compromise and politics of social mediation. The
attendant crisis of legitimisation has primarily
benefited right-wing populism, which does not augur
well for the health of Europes synthesis of capitalism
with democracy.
conomic and monetary union (c:c) is often seen
as spearheading a European challenge to cs
supremacy (e.g. Kupchan, zoo; Leonard, zoo), and
reinvigorating a self-transformation of Europes social
model (Hutton, zooz; Rhodes, zooz; Hemerijck, zooz).
However, such assessments are based on highly problematic
basic force conceptions of power that ignore the structural
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Capital & Class 8
quality of fundamental power relations. These assessments
also rest on functionalist conceptions that are overly
concerned with questions of systems reproduction, without
adequate regard to the social forces that these systems are
supposed to integrate and represent. By contrast, this article
returns to major insights of Poulantzas in order to analyse
the implications of Europes second project of integration
for European social democracy. The second project of
integration is understood here as having begun with the
Fontainebleau summit of 18(, which followed in the wake
of Mitterands U-turn in 18, and which facilitated a modus
vivendi of social and Christian democrats with Thatcherism,
and the neoliberal paradigm of economic management. The
cornerstones of this project are the single market, c:c (which
followed the realignment of the European monetary system
[c:s] and the exchange-rate mechanism [cn:] in 18), and
more recently, the Lisbon and Cardiff agendas (containing
the financial-services action planrsai) as well as the failed
constitutional treaty.
The analysis contained in this article draws less sanguine
conclusions than those referred to above. European social
democracy entails, above all, two things: first, a historic
compromise with capital based on the production and
distribution of relative surplus value, which has made mass
consumption, welfare-state expansion, and even a fair degree
of decommodification of labour possible. This essentially
Fordist politics of productivity has been essential in
ensuring what T. H. Marshall called social citizenship, which
in turn stabilised political and civic citizenship (inter alia
Lipietz, 18;; Esping-Andersen, 1o). This brings us to the
second defining feature of European social democracy. As
the historic compromise was forged, European social-
democratic parties became what in German is called
Volksparteien; that is, mass, catch-all or peoples parties.
While still depending on an industrial-working-class core of
support, social-democratic parties no longer sought to
challenge the political construction of subjects on terms other
than class. Instead, they sought to appeal to a broader range
of social identities in order to thus address a broad range of
social (economic, religious, linguistic) cleavages, and in this
process they sought to mediate between them. The immediate
cause of this was consistent defeats at the hands of, for the
most part, Christian-democratic parties, and attempts to copy
the winning strategies of the latter. In truth, social-democratic
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cs power and the crisis of social democracy in Europes second project of integration
parties never consistently outperformed Christian democracy
in this politics of mediation. The established left remained
a junior partner in most European societies throughout the
period of the second world war (van Kersbergen, 1). Be
this as it may, the conditions of these two defining features of
social democracy are being undermined by the second project
of European integration. Hence European social democracy,
along with Christian democracy, is facing a crisis from which
it seems unlikely to recover. At the same time, the conditions
are not ripe in Europe for a neoliberal social hegemony.
Consequently, there is a crisis of social representation, which
has given increased room for manoeuvre to authoritarianism
and populism, in which the far-right increasingly thrives,
either directly through electoral success, or indirectly as
established parties address their own crises of representation
by adopting far-right policies in a more respectable guise.
The interiorisation of European capital
Caricatures and stereotyped understandings of Poulantzass
social theory have led to its dismissal, at great cost to critical
analysis. Panitch (1() has demonstrated that closer
attention to a brief essay by Poulantzas (1;() could have
avoided inhibiting either/or-isms in the globalisation debate
that follow from poorly posed questions such as: has the
power of the nation state waned as a result of the globalisation
of markets? In capitalism, the state always exercises power
through its structural relation to the capitalist economy, and
the central function of such power is to reproduce the social
conditions of the latters existence. Hence the question is not
so much about the retreat of the state as it is about its
structural transformation. What is more, in advanced
capitalism, social reproduction is so fundamentally dependent
on state intervention that any transnationalisation is
dependent on state action for that purpose. Globalisation is
fundamentally authored through the sovereignty that resides
in nation states (Panitch, 1(; Panitch & Gindin, zoo).
However, this essay by Poulantzas offers not only
enduring insights about the role of and implications for the
state in the transnationalisation of circuits of capital
accumulation; but being one of the very few sustained and
comprehensive Marxist analyses of European integration,
it also offers clues of a more concrete kind concerning the
nature of European integration in a transatlantic context,
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Capital & Class 1o
which are critical for understanding the prospects of
European social democracy.
Poulantzas developed his argument by juxtaposing two of
the dominant tendencies in Marxist theory at the time. On
the one hand, he contrasted his position with the Kautskyite
ultra-imperialist position of Sweezy and Baran (168) and
Magdoff (168), who (as precursors to the strong globalisation
thesis) implied, according to Poulantzas, that the dominant
role of the csa among the capitalist countries had eliminated
inter-imperialist contradictions to such an extent that the only
relevant line of demarcation within the imperialist chain is
between centre and periphery (Poulantzas, 1;(: 1().
As more empirically careful studies indicate is indeed still
the case (Ruigrok & van Tulder, 1; Hirst & Thompson,
1; Dicken, zoo), these kind of arguments vastly
underestimate the extent to which distinct groupings of
European (and east Asian) capital still maintain an
autonomous base of capital accumulation in a context of
monopolistic (oligopolistic) competition.
But this did not, for Poulantzas, validate the other
theoretical tendency from which he distanced himself, i.e.
that which argued that these distinct centres of capital
accumulation were indicative of a qualitative continuity of
inter-imperialist rivalry between the distinct monopoly-
capitalist or state blocs that had been characteristic of
capitalism since the late-nineteenth century. Mandel (1;o)
had published a provocative piece arguing that the
development of the forces of production in Europe was
resulting in the concentration of a distinct, integrated,
European monopoly capital emerging as a rival to cs capital.
The tendencies towards supra-nationality in what was then
the cc were, for Mandel, superstructural expressions of this.
Apart from pointing to obvious gaps and contradictions in
Mandels political analysis (with its curious mix of inter-
imperialist continuity on the world level, and complete ultra-
imperialist transcendence on the European level), Poulantzas
argued that Mandel underestimated the qualitative
transformations resulting from cs post-second-world-war
Poulantzas (1;(: 1616(, 1666) argued that a peculiar
European dependence on cs capital had developed despite
European capital having its own base for capital accumulation.
This dependence was due to the novel way in which cs capital
had become directly imbricated in the social relations of
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cs power and the crisis of social democracy in Europes second project of integration 11
European capital. Clearly influenced by the French
industrialist intellectual Jean-Jacques Servan-Schreiber (16;)
on this point, Poulantzas pointed towards the particular form
of foreign direct investment (rbi) that the export of cs capital
had taken after 1(. This was not only a matter of the official
percentages of cs rbi in Europe (Mandel had used such
figures against the Servan-Schreiber thesis). Even though
official statistics underestimated these (by not taking into
account the extent to which investments through the
eurodollar market and intermediaries such as Swiss-based
multinational corporations actually expressed direct strategic
control of cs capital), far more significant was the extent to
which cs direct investments were dominant in leading sectors.
That is, in leading sectors in terms of the (Fordist)
socialisation of labour, and in sectors that fed strategic inputs
to other sectors, thus defining the standardisation of base
materials and articulating those other sectors in terms of
subcontracting arrangements. To this, Poulantzas added the
cs-centred international concentration of money capital,
which at that time was beginning to have an effect on the
terms under which access to credit was granted. Finally,
Poulantzas argued that this imbrication of cs capital in
European capital determined a whole series of corporate
practices, know-how, modes and rituals to do with the
economic sphere; that is, ideology in a broad and materialist
sense (Poulantzas, 1;(: 16(). Hence while the existence of
distinct, competitive European groupings by no means
justified an understanding of the European bourgeoisie as a
peripheral comprador bourgeoisie, these dependencies
nevertheless indicated that we were no longer talking about
the national bourgeoisie of old, eithernor a European
supranational bourgeoisie in Mandels sense. Instead,
Poulantzas suggested the category of interior bourgeoisie to
describe a European capital that was increasingly articulated
with cs capital and its distinct cs social formation and power
bloc (ibid: 16(6;). The result of this was a complex
disarticulation of distinct and autonomous European circuits
of (industrial, banking, and commercial) capital, and a
complex articulation of the same into a cs-centred circuit. In
addition, this imbrication with cs capital increasingly alienated
European capital from the specificities of the various
European social formations, exacerbating the difficulty, for
European states, of performing its functions as factors of
social cohesionthat is, its functions of reproducing the
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Capital & Class 1z
distinct European power blocs through the mediation of
capital accumulation and social legitimisation imperatives.
In retrospect, it can be argued that Poulantzas
overestimated the implications of cs foreign direct
investments, and that he underestimated the prospects of
European capitals developing internally cohesive, distinct as
well as competitive groupings. Since the launch of the single
market, interlocking directorships of strategic control have
assumed less of a transatlantic spatial fix. Instead, more
distinctly European configurations congealing around
German capital can be discerned (Holman & van der Pijl,
zoo: 8(8; van der Pijl & Raviv, zoo;). However, at the
same time, these European groupings no longer seek to
competeas they seemed to in the early 18oson the basis
of ideologically distinct Rhineland capitalist accumulation
strategies, but rather on the basis of Anglo-American
neoliberal strategies (see also van Apeldoorn, zooz: ;88z,
1z;). This is not a purely ideological development. It
has rather to do with another development that Poulantzas
identified, but which has become much more important since
his time: the tendential increase in the dominance of financial
capital over productive capital (Dumnil & Lvy, zoo(a: 6
1(z), even within the very corporate organisation of the latter
(Grahl, zoo1; Aglietta & Rebrioux, zoo). Thus, while the
inter-personal links of directors have a more cohesively
European spatial fix, they operate within a context determined
by cs-centred finance-led capital accumulation.
Implications for social democracy
On the basis of this exposition, we can begin to discern
implications for European social democracy. Poulantzass
analysis was undertaken at a turning point. Prior to this
turning point, the early stages of the interiorisation of
European capital in cs capital had, if anything, been beneficial
to the conditions of European social democracy. As is now
well researched and known, the diffusion of Fordist technique
norms f acilitated propitious conditions for capital
accumulation based on relative surplus value. Furthermore,
it facilitated a restructuring and reorientation of European
capital towards ex ante integration or mass production with
mass consumption. cs-led agreements (such as Bretton
Woods, ca11 and the Marshall Plan), or agreements forged
with the tacit support of the csa (the European Coal and
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cs power and the crisis of social democracy in Europes second project of integration 1
Steel Community [ccsc], the European Economic
Community [ccc]) created the international conditions for
this development (Cocks, 18o: pp. z(-; van der Pijl, 18(:
pp. 18-;;). However, equally importantly, these agreements
deliberately regulated the transnationalisation of capital in
order to enable discretionary policy action on the national
level, and so as to facilitate the regulation of Fordist
constellations and the build-up of the welfare state in a manner
consistent with the distinct characters of distinct social
formations (Aglietta, 18z: 61; Ruggie, 18: zo1(). In
this regard, cs hegemony was an integral hegemony which,
in the process of forging consent, redistributed benefits and
provided a certain level of autonomy to subordinate social
However, at the time of Poulantzass analysis, the Bretton
Woods agreement had just collapsed when the csa unilaterally
decoupled the dollar from gold in 1;1. What is more, whether
because of socio-technological exhaustion (Lipietz, 18;: z
(o), the effects of east-Asian competition (Brenner, zoo6:
z;(o), or both, Fordist capitalism had at this time entered a
crisis as productivity and profit rates fell, ushering in a period
of stagflation. In retrospect, it is clear that the structural
relations between cs and European capital that Poulantzas
began to discern (albeit misinterpreting the relative
significance of their elements) have shaped the response to
the crisis. cs-centred financial capital has decisively favoured
the flexible liberal organisation of post-Fordist productive
forces as the pressure of shareholder value and lean corporate
organisation has undermined corporate strategies based on
own resource (Grahl, zoo1: z, ), which was an essential
precondition for Europes productivity bargains (labours
acquiescence to technological change in exchange for training
and ex ante wage rises integrated with productivity growth).
This has made it increasingly difficult to maintain the
conditions of relative-surplus-value augmentation and its
distribution, on which social democracy depends. But in
addition, the cs state is increasingly using the structural power
it can mobilise from global finance to displace the
contradictions entailed in its own socioeconomic
transformation to other parts of the world, including Europe.
This intensifies the contradictions in Europe, since as the
second project of integration has proceeded through the single
market and the c:c to the financial-services action plan
(rsai), it is increasingly clear that it is built around these
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Capital & Class 1(
structures (Gill, 18) (serving Europes interiorised capital),
with little regard to what is required in order to reproduce
the terms of legitimacy as defined by the distinct social accords
and power blocs of Europes national societies.
US structural power; European self limitation
During the post-war era, cs monetary and financial power
derived in large part from industrial supremacy.
But after
1;1, such power resulted increasingly from the csas
extraordinary ability to create capital through credit. The size
and power of the cs economy made it possible for it to pursue
economic policies according to the logic of domestic politics
a capability connected to the progressive dominance of
financial capital over industrial capital. The csas structural
power enabled it to transform indebtedness into a strength
by creating the need to develop financial innovation, thereby
enabling the cs, essentially, to tax the resources of major
holders of cs debt. Expansion of the eurodollar market
provided a way of increasing the attractiveness of dollar
holdings to foreigners while facilitating the spread of off-
shore financial markets. The cs sought to avoid undertaking
adjustment measures by encouraging foreign governments
and private investors to finance these deficits (Seabrooke,
zoo1: 1o). Beginning in the 18os, the csa began to attract
massive capital inflows from the rest of the world. By the end
of zoo(, the cs current-account deficit had grown to $6obn.
cs financial and monetary power, while still institutionalised
in the formal monetary regime, is exercised through a
combination of international passivity and national activism
resulting from the interactive embeddedness of Washington,
Wall Street and the main street retail credit and debit
transactions of the cs upper-middle class (ibid: 1; Dumnil
& Lvy, zoo(b).
According to Seabrooke, the origins of cs structural power
lie in the advantages that the dollars numeraire status gave cs
international banks in the Bretton Woods period. It offered
those banks the opportunity to monopolise the issue of dollar-
denominated liabilities with zero exchange risk, increasingly
demanded on the commercial loan, investment-services and
foreign-exchange markets because of the expansion of
international trade (Seabrooke, zoo1: (8). At the same time,
in sharp contrast to most European states, the more market-
oriented Fordist settlement in the csa encouraged the
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cs power and the crisis of social democracy in Europes second project of integration 1
development of a securitised domestic financial market
(encouraging ordinary Americans to invest in the stock
market and to take on personal debt). Significantly, the cs
government created incentives for cs banks to set up foreign
subsidiaries in order to exercise control over domestic
monetary policy while providing reserve currency for
international trade, and also ensuring cs control over the
emerging transnational financial networks (ibid: 6o).
Consequently, cs banks came to dominate the eurodollar
markets, which made it possible to expand dollar-
denominated assets on a sufficient scale to facilitate
international trade without imposing adjustment constraints
on the cs economy (ibid: 6(, 66;o). The uncertainties of
exchange rates and interest rates favoured the cs social
formation, in part because the dollar remained the worlds
reserve currency and in part because market uncertainties
promoted direct financing and the favouring of the social
formation with the deepest and most capitalised domestic
financial market. Deep market capitalisation had a social base
in the cs that was lacking in European states, given their
Christian- and social-democratic social accords. The latter
were based on relatively decommodified, pay-as-you-go
income-replacement programmes and, following the
Bismarckian legacy, were emphatically not to have a role as
financial actors. Nevertheless, the csas highly capitalised
market progressively became an attractive place for Japanese
and European banks, given the exchange- and interest-rate
risks associated with the debt crisis. Asian and European
corporations were progressively attracted towards the cs stock
market as a source of finance, as an alternative to their
traditional house-bank links at home (Seabrooke, zoo1: ;
1o6, 111, 118).
In this context, cs assets are seen as less risky. From the
large government deficits of Reagan to the massive expansion
of private debt during Clintons presidency and the even greater
governmental deficits under George W. Bush, capital
accumulation has been sustained despite relatively low yields
on capital invested in the cs compared to the return on cs
investments abroad (Dumnil & Lvy, zoo(b: 66(6), and
despite the credit crises in Latin America, the former communist
states and east Asia. Indeed, the cs-centred system has managed
to turn these crises into strengths by extending its control over
and progressively subsuming disintegrated and weakened
particularistic domestic systems (Grahl, zoo1: ((;).
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Capital & Class 16
One objective of Europes second project of integration has
been to create a similar pole of finance-led capital accumulation
in Europe (Bieling, zoo). However, by not challenging a
structural configuration that serves the predatory exercise of
power by the csa, the single-market project, structured by a
monetarist design of the c:c, has resulted in a self-limiting
mode of regulation and development, at least in the euro zone.
The very design of c:c and its credibility in financial markets
depends on a macroeconomic framework locked into a mode
of competitive austerity. This has prevented productivity-
inducing Kaldor-Verdoorn effectspropitious conditions for
expansive and stable demand that induce investment levels
and learning-by-doing effects adequate for productivity growth,
which in turn provide the basis for further economic
expansionthat is, in short, the conditions for an accumulation
regime based on relative-surplus-value augmentation. This is
reflected in the absolutely abysmal developments, since the
1;os, in productivity in what now is the euro zone, which
have not improvedquite the contrarysince the inception
of the single market and the c:c (occb, 1; Gordon, zooz;
European Commission, zoo). In contrast to Europe, the csa
has used its structural power to pursue much more
expansionary macroeconomic policies. This is in part because
of its seigneurial status, but also because of the links of mutual
complementarity that exist between global money markets,
corporate finance and retail finance in the csa, as discussed
above. Of course, it is very much part of the rsai and, more
broadly, of the Cardiff and Lisbon agendas to develop these
sorts of corporate and retail banking through financial reform
as well as through the reform of pension systems. But even on
the basis of the dubious assumption that the euro zone would
have the same capacities as the csa to pursue expansionary
macroeconomic policies, it is here that social democracy faces
an essential contradiction, as does Christian democracy. This
is because such reforms contradict the very nature of the models
of capitalism and the norms of inter-class mediation and social
citizenship upon which their social formations and political
legitimacy rests.
Welfare retrenchment and the crisis of social democracy
The account given thus far in this article might raise the
question of why the cc actively and at its own volition
constructed a single market and monetary union that was
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cs power and the crisis of social democracy in Europes second project of integration 1;
consistent with Europes subordination to the csa. This is
less of a puzzle than it might first appear if we follow another
major insight of Poulantzas (1;6; 1;8); namely, that the
state is not a thing but rather a particular crystallisation of
social relations manifesting itself as a complex ensemble of
distinct state apparatuses, and that the configuration of this
ensemble itself reflects prevailing power relations. As the
factor of social cohesion in a social formation that mediates
capital accumulation and legitimisation imperatives, the state
must counteract the potentially disintegrative functions of
commodity-economic logics in order to save capitalism from
itself through practices of socialisation (which Marx, in the
Grundrisse, called Vergesellschaftung [Marx, 18;: 8z, cited in
van der Pijl, 18: 8z1]). However, contrary to the Weberian
interpretation, the state does not do so in a neutral manner,
but rather state socialisation reflects inter alia the prevailing
structure and power relation in the capitalist economy, as
well as prevailing power relations among social forces in
society at large, and these forces determine the configuration
of the ensemble of apparatuses that constitute the state.
In this context, the central role given to the European
Commission, and especially to the competition commission
and the directorate general in the forging of the single market;
and the pivotal role given to the central banks in the forging
of the c:c, are of central importance. Given Europes problem
with competitiveness and inflation in the 1;os (Sandholtz
& Zysman, 18), an overarching ideology of authorisation
(Therborn, 18o) assigned those state agencies a monopoly
of competence in addressing these questions (van Apeldoorn,
zooz: 6;1; Verdun, 1). However, these apparatuses have
always been particularly geared towards capital-accumulation
imperatives with a particular emphasis on transatlantic
openness, as opposed to mass legitimation imperatives (Cocks,
18o: z). If one adds the direct agential pressure that
organisations such as the European Round Table of
Industrialists exerted, increasingly dominated by Atlanticist
corporations (van Apeldoorn, zooz: 1(z-;), it is no wonder
that the design has primarily been in accordance with the
interests of Europes interiorised transnational capital. Its
room for manoeuvre for mergers and its healthy profit rates,
which contrast sharply with the sluggish figures of Europes
national accounts, also suggest that these interests have been
well served (European Commission, 16). In this context,
we should also add that monetarist monetary policy norms
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Capital & Class 18
had been integral to the social mercantilist stance of the
economically most powerful state in the cc, West Germany,
and it had served to anchor a corporatist incomes policy based
on export-led growth, which reproduced a rather labour-
inclusive welfare state in that particular country (Lankowski,
The active participation of European social democracy in
the second European project of integration has also been
based on the premise that progressive competitiveness
strategies, such as that of West Germany in the 18os, are
sustainable in the long term and that they provide the basis
for a general concept of governance. However, while uneven
development makes it possible to pursue such strategies in
certain locales in certain conjuncturesaside from West
Germany, one can point to the Dutch Polder model in the
early 1os, Nordic models since the late-1os, and
capitalist development and social-policy expansion in Portugal
and Spainaggregate development trends clearly point to
the limits of these policies. Indeed, they are beggar-thy-
neighbour policies in the sense that they undercut aggregate
demand growth, and promote surplus production. What is
more, as Dutch and above all German developments in the
late-1os have shown, these corporatist growth strategies
are to an increasing extent unstable. Stagnant aggregate
output and productivity growth has also gone hand in hand
with mass unemployment, as well as with a marked
retrenchment of welfare-state entitlements in Europe (Korpi,
zoo: z;).
The concurrence of increased profit rates and the room for
expansion of mergers of European transnational corporations
alongside declining growth and output rates, high unemployment
and welfare-state retrenchment is an expression of current cc
arrangements serving a European capital increasingly interiorised
with cs capital, but also increasingly alienated from European
social formations. This, in turn, feeds into the second dimension
of the crisis of European social democracy: namely, the narrowing
room for manoeuvre of its politics of mediation, whereby it has
engaged in electoral political competition with Christian
democracy in order to maximise electoral appeal among the
range of groups that constitute the electorate. This competition
has been essential for the reproduction of social-political
legitimacy in Europe, and the narrowing scope to pursue this
competition goes beyond social democracy and expresses a crisis
of political society as a whole.
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cs power and the crisis of social democracy in Europes second project of integration 1
Strains in the politics of mediation
The successful political and electoral strategies of mass parties
have been based on their management of the various
dimensions of socio-political cleavages (especially those of
class, religion and language). However, as economic growth
slows and as welfare-state retrenchment proceeds, the scope
of politics of mediation such as these is restricted, thereby
reducing the range of social forces that can be integrated into
the political mainstream. This in turn requires a change in
the politics of mediation itself. Parties are compelled either
to redefine the terms of redistributive coalitions, or to change
the politico-economic framework, or sometimes both. Here,
we show how this political dynamic has unfolded in Germany
and in France.
It is exceedingly difficult to implement the abstract and
uncompromising neoliberal reforms of flexibility. Such
reforms contravene the very nature of compromise and
mediation, and threaten highly entrenched status groups as
well as the claims to social protection of the most vulnerable
in society. In electoral terms, implementing these reforms is
a hazardous exercise for political movements whose success
has been based on the construction of complex and composite
coalitions such as the Social Democratic Party (sib) and,
quintessentially, the Christian Democratic Union (cbc) in
Germany (Ryner, zoo). French presidentialism seems to give
the state more executive authority to take hard decisions in
a Bonapartist mould. However, there are powerful counter-
tendencies: the dual-executive nature of the French system;
electoral laws that encourage the formation of composite
coalitions; and the semi-autonomous status given to
professional groups and unions in the management of French
social insurance, connected to the Jacobin tradition of street
protests when the executive goes too far. As the emblematic
mass demonstrations of 1 and zooand indeed April
zoo6show, French unions and other social movements have
developed skills in strategically harnessing such outbursts
(greviculture) (Ross, zoo(: ).
Since the 18 Mitterrand U-turn, French politics has
been characterised by a series of neoliberalisation and
welfare-retrenchment thrusts that have provoked organised
resistance, which has in turn led to reversals, symbolic calls
for a compensatory social dimension to European
restructuring and a European economic government, and
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Capital & Class zo
more cautious retrenchment by stealth, which increasingly
challenges the incomes-replacement principle so essential
to French conceptions of republican solidarity and social
citizenship (Beland & Hansen, zooo). This cycle has
produced some rather spectacular phenomena, including
periodic mass demonstrations, Jospins surprise election as
prime minister in 1;, his equally surprising ousting in
the first-round presidential elections in zooz, and the recent
Non in the referendum on the cc constitution. The politics
of austerity and retrenchment has made the Front National
a mainstay in French political society, with strong support
in the white French working class, and has fragmented the
left. France has returned to a political economy of
stagnation in which neoliberal reform is resisted by strong
social groups, but the commitments of c:c and the
impossibility of economic nationalism prevent demand-led
France has always had an ambivalent and difficult
relationship with monetarism, c:s and c:c because of the
difficulty of mediating its economic rationality with social
and political legitimacy. French monetary politics is often
characterised in terms of a long game in which France
acquiesces to monetarist integration pragmatically, from a
defensive position of weakness, in order to push for further
integration in a more interventionist direction at opportune
moments (Clift, zoo). But this long game affirms a sort
of postmodern neoliberalism, in which the promise of a
social Europe remains forever absent and affirms its
Germany had a much less problematic relationship with
the c:s and c:c. However, since the late-1os the German
mass parties have found it increasingly difficult to pursue
successful electoral and governance strategies that reproduce
their coalitions. The cbc and the sib have continually fought
over the allegiance of east-German voters, still in the throes
of post-socialist restructuring, and that of the white-collar
middle classes in western Germany, both of which value their
social benefits, protections and pensions, but which also
support economic competence. Hence the parties have tried
to appeal to these groups together with their core
constituenciesthe blue-collar working class in the case of
the sib, and market-oriented business groups, value
conservatives and Catholic workers in core regions in the
case of the cbc. Cutbacks in transfer payments made under
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cs power and the crisis of social democracy in Europes second project of integration z1
Kohl in 16 and 1;, as Germany faced pressure to meet
the Maastricht convergence criteria, enabled the sib to win
the votes of the latter groups in 18. However, the
abandonment of Lafontaines Keynesianism effectively
deepened Kohls retrenchment. The sib lost power even in
its safest state of North Rhine-Westphalia, and suffered
massive losses in party membership, interrupted only
temporarily by Schrders tactical opposition to the cs
invasion of Iraq. Nostalgia for stability and the competence
factor propelled the cbc into the tenuous leadership of a
grand coalition, which promises continuing retrenchment.
It is important to emphasise that the grand coalition is a sign
of weakness, not strength. It is the very competitiveness of
the party system that is central to the legitimacy of mass
liberal-democratic political societies, since it helps set the
national system of government above any particular office
holders (Lipset & Rokkan, 1o: z). The formation of a
grand coalition represents a major attenuation of this
principle, since the legitimacy of the system as such becomes
much more intimately connected with the success of the office
The fragmentation of political society in Germany and
France appears to be part of a broader trend away from the
established parties in cc member states (Mair, zoo6).
Examples abound of populist mavericks who thrive in the
political vacuum left when economic stagnation and welfare
retrenchment sharpen policy tradeoffs that make the appeal
to multifarious groups increasingly difficult. Charismatic,
populist political figures claiming to speak directly to the
people and not through the official party and movement
have been increasingly successful in playing on peoples
fear amid increased uncertainties and exposures to risks
(real and imagined): Jrg Haider in Austria; Pim Fortuyn
in the Netherlands; and Silvio Berlusconi in Italy.
Furthermore, established parties are catching on to this.
Schrders outflanking of Lafontaine happened even though
the latter held all the important posts within the party,
because Schrders authority was based on direct mass-
media appeal. The effect of this, as the case of Schrder
shows, is to give blanket mandates to office holders and
the politico-administrative apparatuses. However, when
stagnation continues and retrenchment is exacerbated, this
leads to still further alienation between leaders and the
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Capital & Class zz
This article has argued that the consolidation of Europes
subordination to a cs-centred, finance-led accumulation
regime, as implied in Europes second project of integration,
has undermined the prospects of relative-surplus-value
augmentation in Europe, and this is undermining the material
basis of European social democracy. This, in turn, is
undermining the prospects for European social-democratic
parties along with the Christian-democratic ones, to pursue
their politics of mediation. However, this article has also
argued that there is a deeper structural context for this:
namely, the interiorisation of European capital with cs capital
and the attendant alienation of the former from the distinct
European social formations. I have used insights from
Poulantzas in order to make this point.
Of course, social formations are not static, and political
parties are even less so. Indeed, one can interpret the third
way turn of European social democracy exactly as an attempt
to respond to the difficulties entailed in the politics of
mediation. However, the fortunes of the administrations of
Schrder in Germany, Jospin in France, and Wim Kok in the
Netherlands point to the difficulties in appealing to
unemployed, industrial working-class interests and welfare-
state constituencies, as well as to the potential winners in
Europes articulation with cs-centred, finance-led
accumulation. If anything, Christian-democratic and centre-
right parties are more likely to be successful in reconfiguring
their politics of mediation in a manner that is successful in
this context. Could a Nicolas Sarkozy, for example,
successfully combine further cutbacks in French social
entitlements and labour protection where Jupp and others
failed, creating increased room for manoeuvre for
individualised lending on the basis of the collaterals of
property ownership and pensions savings, and a willingness
to meet social protests with repression in an effort to
marginalise those who are not amenable to such a social
interpellation? What militates against this is the fact that
Caesarist (pace Gramsci, 1;1)or, in the case of Germanys
grand coalition, transformistprojects are also put in doubt
by protracted economic stagnation. In any case, Europes
capacity to combine capitalism with democracy, which
coincided with the golden age of social democracy, seems
to be waning.
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cs power and the crisis of social democracy in Europes second project of integration z
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