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The crisis in context democratic capitalism and its contradictions

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  • Streeck, Wolfgang

Abstract

The 'financial crisis' and its sequel, the current sovereign debt crisis, appear to be the latest permutations of an old conflict between capitalism and democracy that forcefully reasserted itself after the end of the postwar growth period. Today's calamities were preceded by high inflation in the late 1960s and 1970s, rising public deficits in the 1980s, and growing private indebtedness in the 1990s and 2000s. In each case, governments were faced with popular demands for prosperity and security that were incompatible with market allocation. Inflation, deficits and financial under-regulation should not be understood as results of faulty economic management but rather as temporary stopgaps to simultaneously satisfy democratic-political claims for social justice and economic claims for profitability. As the site of distributional conflict moved with time from the labor market and industrial relations to the politics of public spending, then to the provision of credit to private households, and from there to international fiscal diplomacy, it became increasingly insulated against popular democratic pressures. At the same time, the political and economic risks associated with the contradictions of democratic capitalism have increased, with potentially disruptive consequences for the social integration of democratic polities as well as for the system integration of advanced market economies.

Suggested Citation

  • Streeck, Wolfgang, 2011. "The crisis in context democratic capitalism and its contradictions," MPIfG Discussion Paper 11/15, Max Planck Institute for the Study of Societies.
  • Handle: RePEc:zbw:mpifgd:1115
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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 1065-1188, November.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
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    1. repec:ilo:ilowps:480595 is not listed on IDEAS
    2. Regan, Aidan., 2013. "The impact of the eurozone crisis on Irish social partnership : a political economy analysis," ILO Working Papers 994805953402676, International Labour Organization.
    3. Bresser-Pereira, Luiz Carlos, 2015. "After the demise of neoliberalism but not of conservatism, a third developmentalism?," Textos para discussão 394, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).

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