Like the American Randall Collins, the German sociologist Wolfgang Streeck is a keen observer of the current situation, without too many illusions, and with a plausible analytical framework. An excerpt:

Under an increasingly undemocratic capitalism, the countries of the rich world all confront a similar bundle of crises that have sprung up more or less unnoticed. Underlying them is a long-simmering fiscal crisis of the state that is now finally coming to the fore, where the growing demands placed on society by the evolution of contemporary capitalism are clashing with the declining ability of democratic politics to secure the resources needed to meet them. One of the consequences is the notably parallel rise, across all the countries concerned, of new-model opposition parties, critical of the existing order, which threaten to oust the ageing postwar ruling parties from power….

These crises – in Germany as elsewhere – have two things in common: first, they arise at a time when the states that are supposed to wrestle with them are already deep in debt; and second, that leaders’ promises to solve them are impossible to keep – at least before the next election. There is of course nothing new in the notion that public finances could become the Achilles’ heel of democratically governed capitalism. Since the 1970s, a widening gap has appeared between the overhead costs of capitalism and what capitalist firms are willing – or can be compelled – to contribute towards covering them. These costs arise from the necessary preconditions for capitalist production, as well as its aftermaths – from R&D and the construction of ‘human capital’ to cleaning up the environmental damage – but also from the need to secure legitimacy for a mode of production in which the generated surpluses end up in the hands of a small class of capital owners.

All forms of social wage – that is, state supplements to the market-wage of workers, such as social security and health insurance – serve to buttress this legitimacy. As capitalist development (or ‘modernization’) progresses, and as new needs arise among workers and their families, these expenditures increase, as with nursery schools or care for the elderly. At the same time, the ability to tax both the working classes and the classes that profit from them is reaching its limit: in the former case, because further tax increases jeopardize the work ethic necessary for capitalism and the patriotism necessary for democracy; and in the latter, because increasing globalization and financialization have dramatically expanded capital’s ability to vanish when the tax authorities come calling….

In the 1980s and 90s, in order to bridge the growing gap between the demands placed on the state and the resources at its disposal – or, more concretely, to subsidize the capitalist mode of production in such a way that both the capitalists driving it and the non-capitalists they employed would stay on board – the advanced-capitalist states came up with the idea of borrowing from the deregulated financial sector – cumulatively, rather than in a cyclical Keynesian manner – to satisfy the demands of both classes, in accordance with their relative bargaining power.

This could not continue indefinitely however. The last three decades saw a series of tax cuts for businesses and ‘high earners’, which led to further wealth accumulation among the asset-rich, as well as the rising costs of supporting an ageing population reliant on migrant labour. The result has been soaring debt levels….

The critical point has been reached, however, where the level of debt is so high that, in the assessment of the ‘markets’, the state is at risk of losing its ‘creditworthiness’, meaning there are doubts as to whether it can still service its interest payments from current revenue – and the interest itself has to be borrowed. As a result, interest rates on further debt rise because of the risk of insolvency or a so-called ‘haircut’, democratically mandated by the second sovereign, the electorate. The same follows when interest rates go up for other reasons, such as to curb inflation. This point has already been reached, or is close to being reached, in an increasing number of countries – including the US, where the central government’s current interest burden is now higher than its staggering defence budget, itself the largest in the country’s history, including during the Second World War.

States in danger of losing their creditworthiness – as decreed by the markets’ inscrutable judgement – must now persuade their citizens to accept overt rather than latent austerity. This is precisely what is happening around the world today, with the exception of the US, which as owner of the world’s reserve currency can print dollars at will, at least until the inevitable crash. At present, the policymakers of the large and small countries of still-democratic capitalism are grappling with the question of how to break the news to their populations…..

The problem is no longer simply rising rents and ruinous living costs, shrinking public services, or the fact that ever-larger tranches of the population are reliant on food banks – the sector with the highest growth rate in Germany – but ‘populism’, the AfD and neo-fascism. This makes it necessary for ‘we democrats’ to close ranks once more. Instead of fighting against the growing power of the markets over the people, we are called upon to fight against the right, to take a final stand for ‘our democracy’ – for whose sake we are asked to please set aside our petty squabbles over who should be hit first by the overt austerity demanded by the subsidized capital markets, and who should be saved for later….

‘Democrats’ would do well to remember something that Einstein very likely never said, though he should have done: ‘Insanity is doing the same thing over and over, while expecting different results’. The AfD will not diminish in size with the next demonstration or the next display of partisan TV reporting; quite the opposite. As long as the forces of state and democracy exhaust themselves on the secondary battlefield of ‘democracy versus populism’ – in an effort to distract from the crises over which they have presided – the AfD will have an easy time of it….

What should those on the side of ‘democracy’ do? A first step would be to admit that, after all these years of ‘credit-pump capitalism’, as Ralf Dahrendorf called it, there can no longer be a magic formula….

Above all, questions must be asked – particularly by the left – in front of an audience who, contrary to the advice of PR ‘experts’, we must still regard as capable of reason if democracy is to continue to exist. How do we get capital to foot the bill for the costs it imposes on society and nature? How do we prevent tax avoidance and tax evasion? How do we protect companies that provide good-quality work for the people in our country from a global trade system that shows no regard for working people? How can we halt the decline in our population, through immigration as well as through better family policies? How do we relieve our local administrations of their debt burdens, to allow them to provide the public services that are indispensable for a good life for all in a society in transition such as ours? And how must ‘our democracy’ be restructured so that it can be a democracy for all and give its citizens the opportunity to take control of their own lives, rather than having to beg for help from a state whose coffers are empty and will remain so for a long time to come? The time for playing games is over; the situation is serious, and there is an urgent need to grow up.