The World Market, Variegated Capitalism, and the Crisis of European
Integration
Bob Jessop
This chapter critiques world system theory and early work on varieties of capitalism
and proposes an alternative account that ‘sublates’ both approaches.1 Specifically,
drawing on Marx, the regulation approach, and critical international political
economy, this alternative posits the existence of a fractally variegated capitalism
within a world market that is currently organized in the shadow of a financedominated neo-liberalism backed by imperial power. On this basis it further argues
that, even in crisis, the distinctive dynamic of this form of neo-liberalism remains
'ecologically dominant’ insofar as it continues to cause more problems for the other
socio-economic regimes with which it is coupled2 than they can cause for it. The
fractal character of the ecological order constituted in and through the world market
creates space for other regimes to develop their own regional hegemonies or
dominance but their overall impact depends on their insertion into the world market.
Two examples of ecological dominance are, first, the pathological co-dependence of
the US and Chinese economies and their respective zones of influence and its
cumulative repercussions on a global scale; and, second, the primacy of Modell
Deutschland in the economic and political dynamics of European economic space
and its contribution to the Eurozone crisis, its wider ramifications, and the
associated crisis in crisis-management. This chapter illustrates the potential of the
proposed alternative approach by analyzing the European Union’s development
from the initial integration of six complementary ‘Rhenish’ economies to today’s
relatively incoherent, crisis-prone variegated capitalist (dis)order. It also asks
(without providing a conclusive answer) whether the Eurozone crisis can be solved
through greater economic, fiscal, and political integration – the usual response to
crises in the European Union – or involves a more lasting structural, perhaps
terminal, incompossibility.
THE WORLD MARKET
All those laws developed in the classical works on political economy, are
strictly true under the supposition only, that trade be delivered from all fetters,
that competition be perfectly free, not only within a single country, but upon the
whole face of the earth. These laws, which A. Smith, Say, and Ricardo have
developed, the laws under which wealth is produced and distributed – these
laws grow more true, more exact, then cease to be mere abstractions, in the
same measure in which Free Trade is carried out. ... Thus it can justly be said,
that the economists – Ricardo and others – know more about society as it will
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be, than about society as it is. They know more about the future than about the
present.
(Marx 1976: 289, italics added).
One could add that Marx, too, knew more about our recent past, present, and
immediate future than about his present. For he argued that ‘the most developed
mode of existence of the integration of abstract labour with the value form is the
world market, a place in which production is posited as a totality together with all its
moments, but within which, at the same time, all contradictions come into play’
(Marx 1973: 227). While this was correct theoretically when Marx was writing
Capital, capitalism was still being formed, production had not yet become a totality,
and the world market was weakly integrated in terms of trade, production, and
finance. Despite some reversals, its present level and form of integration make
Marx’s analysis more relevant today than in the mid- to late nineteenth century.
Indeed, the current crisis of a global economy organised in the shadow of neoliberalism, with so many contradictions coming into play in such diverse, but
interconnected, ways, seems to vindicate his deep-rooted, far-sighted analysis. For
neo-liberal globalisation systematically privileges profit-oriented, market-mediated
economic calculation at the expense of wider concerns with use-value, sustainable
development, or social cohesion.
Marx emphasised that the world market ‘is directly given in the concept of capital
itself’ because it constitutes the presupposition of social reproduction ‘as well as its
substratum’ (1973: 163, 228). In analyses developed over four decades, he argued
that the world market develops on the basis of foreign trade, the consolidation of big
industry, the full development of the credit system, and the generalisation of
competition. In this spirit, we can note that, while financial innovation has been
especially significant in enabling the logic of capital to operate more completely than
ever on a global scale, the rise of finance-dominated neo-liberalism in recent
decades has greatly intensified its contradictions and brought them more visibly,
more forcefully, and more disastrously into play.
The increased relevance of Marx’s analysis is often disguised by use of
‘globalisation’ to describe recent economic trends, especially when this implies
qualitative differences from earlier periods of mercantilism, free trade imperialism,
and imperialism based on territorial conquest and trade blocs. Increasing integration
does not exclude uneven development across space and time, with some economic
spaces leading the movement and others getting decoupled. This is an inevitable
feature of accumulation on a world scale but cannot obviate the true limits to capital
accumulation, which, as Marx emphasized, reside in the capital relation itself rather
than in short-term fluctuations, medium-term cycles and crises, and long-term
waves of accumulation. Capital’s expanded reproduction has long constituted the
most pervasive and powerful influence over the dynamic of the world market. But
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does this imply that the logic of capital operates at the level of the world market qua
world system?
The formation of the world market must be seen as ‘doubly tendential’ on the
grounds that, first, it is itself a tendential process, subject to leads, lags, and
reversals; and, second, the world market, insofar as it is formed, provides the global
context in which all the laws of capital accumulation and their overdetermination
come to operate. Marx and Engels note both tendencies. For example, in The
German Ideology (1845-46), they remark:
The movement of capital, although considerably accelerated, still remained,
however, relatively slow. The splitting up of the world market into separate
parts, each of which was exploited by a particular nation, the exclusion of
competition among themselves on the part of the nations, the clumsiness of
production itself and the fact that finance was only evolving from its early
stages, greatly impeded circulation'
(Marx and Engels 1976: 56).
They add that this limitation was overcome in part by the rise of big industry, which
‘universalised competition, established means of communication and the modern
world market, subordinated trade to itself, transformed all capital into industrial
capital, and thus produced the rapid circulation (development of the financial
system) and the centralisation of capital’ (Marx and Engels 1976: 73).
Marx also examines uneven development in diverse remarks on differences in the
national intensity and productivity of labour, the relative international values and
prices of goods produced in different national contexts, the relative international
value of wages and money in social formations with different degrees of labour
intensity and productivity, the incidence of surplus profits and unequal exchange,
and so on (e.g., Marx 1967: 317-325). Such issues still retain their full significance
today, as evidenced in, inter alia, the Eurozone crisis.
THE WORLD SYSTEM
Wallerstein developed an innovative analysis of the modern world-system, i.e., a
world economy integrated through the market rather than a world empire organised
by a dominant political centre. He posits a single, internal logic of capital based on
the reproduction of a unitary world-system with a single division of labour but
multiple political and cultural systems. Moreover, within this system, capitalist
powers compete economically and militarily to capture surplus produced through the
global division of labour. Wallerstein regards exploitation as occurring at a world
scale, based on the division of the world economy into a centre, semi-periphery, and
periphery. The centre comprises economies associated with independent (or ‘free’)
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states: the economies are technologically advanced, produce capital-intensive
goods and advanced services, and enjoy a relative monopoly in the export of these
goods and services to the semi-periphery and periphery. The semi-periphery
comprises industrialised economies that have significant urban areas (such as
Brazil or South Africa) but have significant areas of rural poverty and, more
generally, lack the power and dominance of the core economies. In turn the
periphery provides raw materials, primary products, and cheap labour power to the
semi-periphery and the core. While this threefold division is fixed, positions therein
are not. Economic and social formations can move in this hierarchy (albeit typically
in single steps). Mobility is shaped by the overall logic of the system plus players’
strategies. It involves military as well as economic competition and, because the
strength of core states depends on weakness elsewhere, peripheral formations are
vulnerable to intervention through war, subversion, and diplomacy. Wallerstein
added that some economies, thanks to their reliance on internal commerce, might
stay outside this system and escape its logic of dependency and underdevelopment
(Wallerstein 1975, 2000; see also Goldfrank 2000).
World system theory is often presented as superior to more methodologically
nationalist political economy and/or modernisation theories because it seeks to
explain the development of a given national or regional socioeconomic formation in
terms of how it fits into an overall global logic and, hence, rejects a unilinear
conception of modernising catch-up and convergence on the most advanced
economic, political, and socio-cultural model. The fate of individual economies
depends on the scope for favourable integration into (or, sometimes, de-coupling
from) a stratified world system and, especially in the case of the periphery, on their
vulnerability not only to economic exploitation and dependent (under-)development
but also to military domination and diplomatic divide-and-rule strategies. This
theoretical advance presupposes the relative constancy of the logic of the world
system rather than seeing it as emergent and variable. Yet, while there may be a
broad direction to capital accumulation, it does not entail a specific, pregiven
threefold division of international labour. This would involve a crude a priori
simplification relative to Marx’s more nuanced view that, although the world market
is the ultimate horizon of capital accumulation and must be posited at the beginning
of an analysis of capitalism, it could only be fully understood in all its complexity at
the end of his analysis when all its multiple determinations have been included.3
Referring to the world market in Marxian terms implies that capital accumulation can
be commensurated and even integrated on a world scale. It does not entail a single,
generic, unified mode of production. Wallerstein justified the existence of the world
system in terms of a logic of exchange rather than production. If we begin with the
latter, however, we must recognize that there is 'no production in general' or 'general
production': production is always a 'particular branch of production' or it is the
'totality’ of production (Marx 1973: 86, italics in original). Moreover, particular
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production is always associated with 'a certain social body, a social subject' (ibid).
While world trade might connect different branches and their respective social
bodies, the diversity of production relations and their social bodies is analytically
prior to exchange. An institutionalist version of this insight has led some to
investigate competing varieties of capitalism (VoCs) and their interaction within a
global economy. But is this more pluralistic approach actually superior to the theory
of a singular world system with a pregiven dynamic?
VARIETIES OF CAPITALISM
This term covers a range of approaches that address the variability of capitalism
tout court (Bohle and Greskowits 2009). These include work on varieties of
capitalism, the diversity of capitalism, cultures of capitalism, national business
models, national systems of innovation, and so on. Space constraints rule out a
critique of all approaches so I will focus on the best-known account: the initial
varieties of capitalism approach inspired by Hall, Soskice, and their collaborators
(Hall and Soskice 2001). However, while this approach highlights the plurality of
logics in capitalism, there are four grounds for rejecting it.
First, the VoC approach is overly concerned with distinct (families of) national
models of capitalism, treating them as rivals competing on the same terrain for the
same stakes. This is, of course, a form of methodological nationalism in which
national states and their frontiers define the scope of different models. This invites
explanations of international crises (such as that in the Eurozone) in terms of ‘good’
versus ‘bad’ national models (e.g., Germany versus Greece). This focus on
territorial logics also clearly conflicts with the logic of the space of flows associated
with the world market (cf. Harvey 2003) and its role in crisis dynamics.
Second, these supposed varieties of capitalism are often studied in terms of their
respective forms of internal coherence on the assumption that they exist in relative
isolation from each other. This cannot be justified, although the attempt has been
made, by noting the key role of national states in shaping institutional and regulatory
frameworks for all players in a national economy. For state apparatuses on other
scales – along with networked international regimes – have gained important roles
in these frameworks and in efforts to steer the insertion of national economies into
more encompassing sets of economic and political relations.
Third, and relatedly, this approach tends to study the temporal rhythms and horizons
of VoC as internal, specific, short- or medium-term, unrelated to capital’s long-term
global dynamic.
And, fourth, the VoC approach tends to assume that all varieties are equal and, if
one is more ‘productive’ or ‘progressive’, it could and should be copied, exported, or
5
even imposed elsewhere. Some versions of the VoC claim that self-consistent
models (liberal market or coordinated market economies) are more stable than
hybrid models (Hall and Soskice 2001).
If the initial VoC approach risks reducing world market dynamics to a mechanical
juxtaposition and interaction of ‘varieties of capitalism’, could we synthesise the
world system thesis and its apparent VoC antithesis? A possible sublation is offered
by the concept of ‘variegated capitalism’. Understood as a synthesis, this would
highlight how changing patterns of institutional and strategic interaction in an
increasingly integrated world market tend to create a single variegated capitalism
rather than reproducing a more or less enduring set of national varieties that fill
potentially independent niches (cf. Becker 2009). This has four advantages
compared to the VoC approach.
First, rather than describing and interpreting different forms of capitalism as if each
occupied a separate silo within a segmented world market or world society,
variegated capitalism highlights the scope for rivalry, competition, antagonism,
complementarity, or co-evolution across different forms (cf. Crouch 2005) and their
spatio-temporal fixes within a global division of labour.
Second, a focus on internal coherence ignores the extent to which comparatively
successful performance in certain economic spaces depends on external as well as
internal conditions and – crucially – on a given model’s ability to offload its negative
externalities. This includes the ability to displace or defer contradictions, conflicts,
and crisis-tendencies to other places and times (on such spatio-temporal fixes, see
Jessop 2002, 2006). In other words, zones of relative stability are typically linked to
instability in or beyond national spaces in a complex ecology of accumulation
regimes, modes of regulation, and spatio-temporal fixes. Lest this gives the
misleading impression (associated with mainstream VoC work) that competition
among different models is essentially pacific because it is market-mediated, one
should note that differential accumulation also occurs via predation, structural
domination, and military might. Spatio-temporal fixes are rarely purely pacific but
usually also involve have conflictual and/or coercive geo-economic and geo-political
bases.
Third, the methodological nationalism in much VoC research raises two problems.
National economies often have quite varied sectors and/or regions that may be
integrated into divisions of labour that transcend national frontiers, casting doubt on
the validity of the national economy as an analytical unit. In addition, if this holds
when national states have a key role in accumulation, it matters even more when
the primacy of the national scale has been lost or is being challenged by other
scales of political intervention. In addition, a focus on national economies ignores
other socio-spatial patterns such as emerging supranational blocs, global city
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networks, or global commodity chains. Thus, whereas the VoC literature privileges
the relatively short duration (in world-historical terms) of the primacy of the national
scale, work on variegated capitalism highlights the historically variable inter-scalar
articulation of accumulation and its dependence on government and governance at
scales above, below, and transversal to the national.
Fourth, concern with varieties of capitalism may lead to neglect of the marketmediated competitive pressures and political initiatives that encourage convergence
among them, whether through European integration and harmonisation and/or USsponsored expansion of networked, world market-friendly international economic
regimes. In this context, neo-liberalism is not just one variety among others that has
proved more or less productive and progressive (or more or less inefficient and
exploitative) and could be adopted elsewhere with the same results, as if the whole
world economy could be organised along these lines. An emphasis on ‘horizontal’
comparisons and/or competition among varieties of capitalism diverts attention from
the ‘vertical’ relations between core and periphery (Radice 2000; Wallerstein 1975)
and ignores important asymmetries in the capacities of different VoCs to shape the
world market. In short, to paraphrase Orwell (1945), while all varieties of capitalism
are equal, some are more equal than others. We must reject claims about the
suprahistorical superiority of one or another disembedded model of capitalism that
could then be adopted elsewhere. The dominant model cannot be universalised. For
example, not all economies can establish their national money as the world currency
and run massive and growing trade deficits, not all national states can be military
masters in a unipolar world, and so on. This is not just a matter of logical
compossibility. It also concerns discursive-material, spatio-temporal compossibility,
i.e., the substantive fit (or otherwise) among varieties of capitalism. This involves not
only the economic competitiveness of a given economic regime but also the
capacity of its corresponding political order to promote this regime by re-articulating
the relations among places, interscalar relations, and networks within and beyond its
territorial borders.
In sum, to re-interpret the world market in terms of 'variegated capitalism' improves
on the claims that: (a) there is a single world system that, operating through the
logic of capitalist competition, pushes all capitals and their associated 'space
economies'4 to converge on a single model of capitalism; or (b) there are only
separate varieties of capitalism that co-exist within an inevitably heterogeneous
world economy. The growing integration of the world market makes it especially
inappropriate to study ‘varieties of capitalism’ as distinct, self-sufficient forms that
engage in external competition. Expressed in terminology developed elsewhere
(Jones and Jessop 2010), this involves exploring variegated capitalism in terms of
the structural coupling, co-evolution, and mutual complementarities-compossibilities
as well as the contradictions and mutual exclusivities among varieties and stages of
capitalism and their implications for the future dynamic of accumulation on a world
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scale. In short, ‘variegated capitalism’ offers an important theoretical and practical
horizon for studying the capital relation. This casts new light on Marx’s emphasis on
the world market. He did not refer thereby to a singular logic operating with singular
directionality at the global level (the mistake in crude versions of world system
theory) but to an emergent, tendential, and synthetic logic. Such analyses can be
found in more nuanced versions of world system theory (such as Arrighi 1994,
recently revisited by Robinson 2011) and in recent attempts to expand the analysis
of varieties of capitalism or, better still, to disclose the diversity of capitalism (for
recent reviews on these lines, see Hancké, Rhodes and Thatcher 2007; Jessop
2011; and Streeck 2010).
THE UNEVEN DEVELOPMENT OF VARIEGATED CAPITALISM
A dialectical analysis need not stop with the first synthesis – this would be too easy
and limit its critical potential. The move from a ‘world systems’ thesis and a ‘varieties
of capitalism’ antithesis to a variegated capitalism sublation risks reproducing the
assumption that all varieties are equal even though casual observation and
theoretical first principles suggest otherwise. I have already criticized this
assumption in the preceding section and will now develop my critique in three steps.
First, I introduce the argument, new only in the present context, that the world
market is not an exclusively capitalist reality. Second, I elaborate my earlier claim
that variegated capitalism on a global scale is currently organised in the shadow of
finance-dominated neo-liberalism. And, third, in a subsequent section, I emphasize
the fractal nature of variegated capitalism, i.e., the fact that variegation is not just a
property (presupposition, result, and horizon) of the structural coupling and coevolution of varieties of capitalism at the level of the world market but exists at many
other scalar and interscalar levels of analysis. This step is already implicit
theoretically in the preceding critique and will be illustrated through variegated
capitalism in European economic space.
First, recognition of variegated capitalism can only be an initial, albeit important,
step to analyzing the world market in terms of an uneven and combined
development that integrates not only particular branches of capitalist production but
also diverse pre- or non-capitalist forms of production and their respective social
bodies. The totality of production includes subsistence production, petty commodity
production, household production, informal productive and reproductive labour and,
a fortiori, their dynamic interrelations with capitalist production in all its variety.
These modes of production and forms of labour are unified, to the extent that they
are, through the increasing global ‘ecological dominance’ of capital accumulation.
Indeed, the more tightly integrated is the world economy, the more strongly do
capital’s contradictions come into play on a world scale. This has positive and
negative effects. Uneven development can drive world market integration forward
and also fetter it. How this works out will depend not only on the relative strength of
8
different circuits of capital and their articulation to so-called varieties of capitalism
but also on the forms, extent, and intensity of resistance that this generates from the
local to the global scale.
Second, ecological dominance refers to the capacity of one system or institutional
order within a complex self-organising ecology of systems or orders to cause more
problems for others than they can cause for it. It can be understood in terms of the
relative weight of varieties of capitalism and/or the relative impact of different circuits
of capital. Thus one can ask about the uneven development and structural coupling
of different capitalist regimes in a regional or global division of labour (e.g., the
Rhenish, Nordic, and liberal market models in European economic space or the
dominance of the liberal market model in the global economy); or about the relative
dominance of commercial, industrial, or financial capital within circuits of capital on
different scales. These aspects are typically inter-related. Thus one could argue that
the ecological dominance of neo-liberal market coordination reflects the relative
predominance of finance-dominated accumulation in neo-liberal economies in the
world market and of the relative ecological dominance of financial capital within the
global circuits of capital in an emerging world society.
The logic of financialisation (wherever it occurs) transforms the role of finance from
its conventional, if always crisis-prone, intermediary function in the circuit of capital
to a more dominant role oriented to rent extraction through financial arbitrage and
innovation. This mode of differential accumulation weakens the primacy of
production in the overall logic of capital accumulation and eventually runs up against
the limits of a parasitic, rather than intermediary, role. In contrast with the relative
structured coherence of Fordism and the alleged coherence of the once widelyheralded post-Fordist ‘knowledge-based economy’, the finance-dominated regime
that developed after the crisis of Fordism works against the long-term stability of
accumulation and its regulation. In particular, it weakens the spatio-temporal fixes in
and through which regimes based on the primacy of productive capital (such as
Fordism or a knowledge-based economy) produce zones of relative stability by
managing general and regime-specific contradictions between fixity and motion.
This can be seen in the impact of financialisation not only in Atlantic Fordism or the
failure of the EU’s Lisbon project to transform the European Union into the most
competitive knowledge-based economy in the world; but also in the export-oriented
economies of East Asia, the viability of import-substitution industrialisation strategies
in Latin America and Africa, and the problems in several post-socialist economies in
Central and Eastern Europe. The destructive impact of financialisation is reinforced
through neo-liberal accumulation through dispossession (especially the politicallylicensed plundering of public assets and the intellectual commons) and the dynamic
of uneven development (enabling financial capital to move on when the disastrous
effects of financialisation weaken those productive capitals that have to be valorised
9
in particular times and places). It is also supported by the growing markets opened
for the ‘symbionts and parasites’ of the ecologically dominant fractions of capital in
their heartlands – associated in turn with their own forms of uneven development on
regional, national, and global scales (for further indications, see Jessop 2007).
VARIEGATED CAPITALISM AND EUROPEAN INTEGRATION
The gradual formation, enlargement, and integration of the European Union reflects
efforts by economic and political forces to restructure national states and economies
in the hope of solving long-standing structural ‘problems’ of competitiveness within
regions, national economies, and wider European economic space. The resulting
policies, their sequencing, and recurrent crisis-tendencies show that not everything
that is possible is compossible. To understand this, we should examine the scope
for incompatibility, antagonism and contradiction within and between VoCs in their
(compossible) articulation in specific socio-spatial contexts, including their
associated zones of (in)stability. The following remarks on European economic and
political integration within a changing world market indicate the potential of such an
analysis; they do not yet amount to a robust case.
The six founding members of the European Economic Community (EEC) had
modes of growth and regulation belonging to what first wave ‘varieties of capitalism’
scholars would classify as ‘coordinated market economies’ (with Germany as the
prime exemplar) or as hybrid cases with strong elements of coordination. They have
also been described as ‘Rhenish’ economies (Albert 1993) or as comprising a mix of
corporatist, dirigiste, and, for Italy, hybrid models – with none conforming to the
liberal market model (see Schmidt 2000). Specific labels apart, they can certainly be
described as variants of regulated rather than liberal capitalism and as having
conservative-corporativist or, in Italy's case, a clientelist Mediterranean welfare
regimes (cf. Hantrais 2000; Ruigrok and van Tulder 1996). Italy’s depiction as an
‘outlier’ in these typologies hints at future problems, especially when other Southern
European or non-Rhenish economies joined the European Union (see below).
The initial steps towards European integration aimed to establish the conditions for
peaceful co-existence among former belligerents and to integrate Western Europe
into Atlantic Fordism (Cafruny and Ryner 2007; Milward 1992; van der Pijl
1984).The 'Monnet mode of integration' was concerned to create a 'Keynesiancorporatist' (sic) form of statehood on the European level favourable to various
national Fordist modes of development (Ziltener 1999). Market integration was
expected to have spillover effects that would consolidate regulated capitalism on a
wider scale and promote deeper political integration. Thus the early stages of
integration enabled the European Communities to develop as relatively compatible
instances of variegated regulated capitalism based on institutionalised compromise
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between capital and labour and reflected in social or Christian democratic
Keynesian welfare settlements.
The situation changed as the European Community expanded to include members
with different modes of growth, regulation, and welfare. Initially the United Kingdom
was relatively isolated as a liberal market economy (an anomaly behind de Gaulle’s
earlier veto on UK membership) but nonetheless helped to spread the influence of
de-regulated international finance into the Continental heartland. The problematic
co-existence of different varieties of capitalism was aggravated by the differential
impact of the emerging crises of Atlantic Fordism and contrasting responses within
and across national models in Europe. Since crisis has been an important
mechanism in driving forward European integration, these developments were not
fatal. They would certainly have made it harder to re-scale demand management
and indicative planning from the national to the European level and/or to establish a
tripartite Euro-corporatism (on Euro-corporatism, see Falkner 1998 and Vobruba
1995; on its limits, Streeck 1995). But this project was marginalized in favour of a
neo-liberal turn based on radical neo-liberal regime shifts in some economies and
neo-liberal policy adjustments in others, thereby increasing the economic and social
heterogeneity among member states (on types of neo-liberalism, see Jessop 2007).
In this context the Monnet mode of coordinated market integration was replaced by
the more liberal internal market project, which involved different kinds of adaptation
in neo-liberal, neo-corporatist, and neo-statist regimes without ensuring mutual
convergence towards a single variant of capitalism. Rather, despite the prescriptive,
‘hard law’ nature of the internal market project at this stage, there were different
national responses (Menz 2005) and variegation was reproduced in new forms.
Eastwards expansion further increased the heterogeneity of the EU and reduced the
scope for a concerted EU-wide coordinated market economy approach, especially
as new member states were largely committed to the neo-liberal project. This effect
was not accidental but promoted by neo-liberal forces both within the European
Union (notably the United Kingdom ) and beyond it (notably transnational capital
and international agencies dominated by US imperialist interests that saw postsocialist states as potential economic, political, and security allies).
The increasing variegation of European economic space contributed to the search in
the 1990s for another mode of integration. This is seen in the turn from policies of
harmonisation in economic and, to a lesser extent, social policy towards negative
rather than positive integration. Measures to eliminate restrictions on ‘the four
freedoms’ (the free flow of goods, services, capital, and labour) tend to weaken the
coherence of the respective national cores of coordinated market economies and to
advantage mobile capital (on the neo-liberal bias of negative integration, see
Altvater and Mahnkopf 2007; Scharpf 2010; van Apeldoorn 2002;). Governance
methods also became more flexible. Movement toward Economic and Monetary
11
Union (EMU), for example, set convergence criteria but allowed member states to
decide within limits on the measures (including, it turns out, deception) required to
meet them. Still more flexible is the open method of coordination (OMC), which was
introduced stepwise in several policy areas and then officially consolidated in the
Lisbon agenda. The OMC involves neither a rescaling of Westphalian sovereignty
nor an advanced form of liberal intergovernmentalism. Instead it emphasises efforts
at continuing collibration in a changing equilibrium of compromise that depends on
'super-vision' and 'supervision', i.e., a relative monopoly of organised intelligence
plus overall monitoring of agreed governance targets procedures across diverse
fields (Willke 1997). This combination of ‘super-vision’ and supervision of
decentralized measures to realize agreed targets helps to mediate the increasing
variegation in European economic space, with its different modes of growth and
regulation and different modes of insertion into the European and wider world
markets, without imposing a one-size-fits-all economic and political programme or
relying purely on negative integration. In principle, it does this by allowing states to
pursue different approaches to shared EU objectives, thereby facilitating the
extended reproduction of a variegated capitalism through a co-evolutionary dynamic
of structural coupling.
But these new forms of governance can only compensate partially for the problems
of economic and political incompossibility in an expanding EU that is itself located in
an increasingly heterogeneous world market and polity. The OMC is not (and could
never have been) a purely technocratic fix that would harmoniously integrate
European economic and political space. Rather, reflecting the complex position of
the European Union within a variegated capitalism that is not confined to European
economic space but extends to the world market, EU collibration and metagovernance have become another site on which conflicting economic strategies,
political projects, and hegemonic visions have been pursued – not only by
competing interests within that space but also by outside forces with a more or less
strongly interiorised presence inside the EU, other international bodies, and key
transnational agencies and forums (cf. Bieling 2010; van Apeldoorn 2002; Ziltener
2000). Thus in addition to struggles among member states over the overall strategic
direction and/or specific economic and social policies, the emerging system of
‘multi-scalar metagovernance in the shadow of post-national statehood’ has also
been a vector for American neo-liberal pressures to redesign the world order.
Rather than providing an adequate institutional architecture for governing the
European Union, then, negative integration plus more flexible methods of
coordination have created a variegated free market that lacks strong governance
capacities, especially in periods of crisis. This structural flaw was partially hidden
during the ‘Great Moderation’ (the NICE years of non-inflationary continuing
expansion) and the initial boost to growth (especially in the Southern periphery)
consequent on the introduction of the Euro5 but failure to address it in the good
times has made crisis-management harder in periods of crisis, as is amply
12
illustrated by the continuing travails engendered by the global financial crisis, the
Eurozone crisis, and issues of sovereign debt.
The Lisbon Agenda had strong support from the EEC’s founding members and from
Austria, Denmark, Portugal, and Sweden. It combined a commitment to international
competitiveness (based on promoting a knowledge-based economy) with retention
of the European social model and reflected a compromise between neo-liberal and
social democratic variants of capitalism. In this sense, the Lisbon project was
closely tied to the shift from a Keynesian-welfarist mode of integration to a more
Schumpeterian-workfarist mode (cf. Ziltener 2000). From one viewpoint, given the
ecological dominance of neo-liberalism on a world scale from the 1980s onwards
(cf. Jessop 2007), the pursuit of neo-liberalism within the EU might have appeared
as the line of least resistance given the co-existence of several ‘varieties of
capitalism’ with their complex contradictions.6 But one-sided pursuit of neoliberalism has its own contradictions and pathologies that, following the familiar
phases of neo-liberal roll back of earlier accumulation regimes and modes of
regulation and roll-forward of new institutional arrangements to consolidate and
reinforce the resulting shift in the balance of forces and the momentum of neo-liberal
transformation, have now produced neo-liberal blowback as these contradictions
and pathologies have matured.
Yet, paradoxically, the current economic crisis has reinforced calls to further
entrench neo-liberalism within the European framework. This can be seen in the still
evolving, hotly contested set of immediate emergency measures, short-term crisismanagement, medium-term crisis-mitigation, and longer-term crisis-avoidance
policies. There are significant differences between the economies that undertook the
most marked neo-liberal regime shifts (Eire, Iceland, the UK, Spain, the Baltic
Republics, and Eastern and Central Europe) and those that inclined more towards
neoliberal policy adjustments (notably the Benelux economies, France, Scandinavia,
Germany, Austria, and Switzerland). This reveals basic limits to their compossibility
within current constitutional, institutional, and meta-governance arrangements. And
it is reflected in disputes about the most appropriate way to resolve the crisis in the
Eurozone and its integration into the world market.
EUROPEAN ECONOMIC AND POLITICAL SPACE(S) IN THE WORLD MARKET
The recent and continuing global financial crisis has finance-dominated, neo-liberal
accumulation at its core; it was made in the USA and first broke out there, spreading
via a mix of contagion and endogenous crisis-tendencies to other parts of the world
market, even when these had not undergone neo-liberal regime shifts or had even
taken defensive measures against the effects of neo-liberalism. Yet the ecological
dominance of neo-liberalism in the world market has survived the global financial
crisis and its ramifications. This reflects the global weight of the American economy,
13
the continued dominance (despite declining hegemony) of the US federal state in
the world political order, the lobbying power of financial interests in an increasingly
corrupt US legal and political system, and the ecological dominance of the world
market within world society. In other words, the crisis in global neo-liberalism
originating in the USA is causing more problems for other forms of economic
organisation at scales from the urban and regional through the national to supraregional economies than their dynamics (and crisis-tendencies) can cause for neoliberalism. This is exemplified by the pathological co-dependency of the US and
Chinese economies and its global ramifications. In turn, the overall logic of the world
market, organised in the shadow of neo-liberalism, causes more problems for other
systems and everyday life than they can cause for it.
Here, however, I turn to another form of ecological dominance that is instantiated
mainly on a European scale but is also central to the global dynamic of variegated
capitalism. This is the ecological dominance of Modell Deutschland as an export-led
accumulation regime that, despite significant neo-liberal policy adjustments, has
remained firmly inside the ‘co-ordinated market economy’ camp – partly because of
the continuing need to coordinate complex material interdependencies in the
German space economy7 and partly because of the legacies of Ordoliberalism.
Nonetheless, reflecting the ecological dominance of the US on a global scale, even
Germany’s ecological dominance in shaping European integration is constrained. As
Cafruny and Ryner state:
The EU’s aspiration to build a monetary union to promote competitiveness,
sustained growth, regional autonomy and social cohesion is self-limiting
because the Maastricht design of the EMU is inherently connected to a neoliberal transnational financial order that displaces socio-economic
contradictions from the US to other parts of the world, including Europe.
Europe’s subordinate participation within this order pre-empts the possibility of
resolving structural problems of post-industrial, or as we prefer post-Fordist,
society in a manner consistent with Europe’s social and Christian-Democratic
accords. Economic stagnation, uneven development, and the widening gap
between new forms of governance and social citizenship amplify legitimation
problems and political conflicts, with adverse effects on the EU’s political ability
to mobilize as a counterweight to the US.
(Cafruny and Ryner 2008: 60).
Germany’s ecological dominance (or, phrased differently, the asymmetrical codependence of the German and other EU economies) is especially notable in the
operation of the highly variegated Eurozone. A long-term deflationary bias in
economic policy was not just a reaction to hyperinflation in the years of the Weimar
Republic but was also crucial for Germany’s capacity to renew its export
competitiveness in capital goods and diversified quality production after post-war
14
reconstruction (cf. Cesaratto and Stirati 2010; Porter 1990; Simonis 1998; Streeck
2009). This has been coupled with a neo-mercantilist approach by German capital
and its state to foreign economic policy and European integration (Bellofiore,
Garibaldo and Halevi 2010; Lapavitsas et al., 2010; Schlupp 1980). Thus, as EU
integration has encompassed more member states and been deepened, conditions
considered essential for Germany’s export-competitiveness have been imposed on,
or otherwise affected, the economic resilience and potential for growth of other
economic spaces in Europe.
Other Rhenish economies in Northern Europe are closely linked to the German
model. For example, alongside its own export strengths, the Netherlands provides
important commercial and business services that support Modell Deutschland;
Austria and the new, post-socialist member states in Central Europe also fit into this
accumulation regime. The French economy has different specializations in the world
market and different growth dynamics, which depended more on dirigisme than neocorporatism and, until common currency policies developed, more on competitive
devaluation than deflation (Aglietta 1982; Deubner et al., 1992; van der Pijl et al.,
2011). While it has long been a geo-political rival to Germany, certain
complementarities in their growth dynamics have enabled a Franco-German axis to
promote a shared approach to European economic strategy and state-building.
This structural coupling of EU economies has been reinforced through the adoption
of the formally demanding Stability and Growth Pact and the introduction of the
EMU, innovations that were expected to produce convergence in economic
performance through effective political action to extend (hypothetically) efficient free
markets. Serious doubts on this score prompted four German professors to petition
the German Constitutional Court in 1998 to get the Euro declared unconstitutional
on the grounds that its certain failure (given the inability of its prospective members,
including Germany, to meet the fiscal requirements for entry) would invalidate EMU
and require further unconstitutional measures to rescue it (see Hankel et al., 2010).
There were other grounds for scepticism too. In particular, the scope of EMU
membership did not meet the standard neo-classical criteria for a common currency
zone (indicating that less competitive economies would sooner or later be forced
into recession and deflation) and there were no credible institutional arrangements
to enforce long-term fiscal discipline, compensate for uneven development and
economic performance, or coordinate crisis-management in a situation where
conventional crisis responses such as devaluation were ruled out. Although the
successes of the Eurozone and the status of the Euro as a world currency were
being celebrated (prematurely) 10 years after the EMU was introduced (e.g., PisaniFerry and Posen 2009), structural incompatibilities and institutional design flaws
were already quite evident by 2009 and had become acute in 2010-2011.
Even disregarding the deceptions practised by several sovereign states to meet the
convergence criteria and the deliberate fudges introduced to allow Italy and Belgium
15
(and others through the principle thereby established) to sidestep the national debtto-GDP hurdle, the fiscal austerity and other measures taken by Eurozone members
to produce convergence led to structural weaknesses (hidden public debt, cuts in
vital infrastructure spending) and to reduced expenditure on education, health, and
welfare. More generally, future structural problems were inscribed into the Eurozone
at its inception because of the inherent tensions among member states originating in
incompatible accumulation regimes, patterns of insertion into European and world
markets, modes of regulation, and governance capacities. Yet these tensions were
overlooked in the assumptions and operations of the European Central Bank, which
largely derived its policy paradigm from the German model and placed undue faith
in the capacity of market forces to produce upward convergence in economic
performance from this next step towards market completion. This led Heise (2005)
to argue that Germany’s impact on the EMU governance regime is so great that the
term ‘Germanic Europe’ would seem appropriate. Because member states cannot
legally use exchange rate adjustments and/or lax domestic fiscal policy to mitigate
the deflationary impact of shocks, the operation of the Stability and Growth Pact and
EMU has locked the Eurozone economies into a politics of disinflation and
competitive deflation. The European Central Bank has policed this lock-in and, in
general, has served the interests of Modell Deutschland and transnational financial
capital (cf. Lapavitsas et al., 2010).
These remarks indicate that the Eurozone crisis is not primarily a liquidity crisis or
rooted in state insolvency but originates in what Dadush and Stancil 2011 term,
euphemistically, ‘misaligned economic structures and lost competitiveness’. This
misalignment is reflected in a wide range of micro- and macro-economic
divergences in productivity, unit labour costs, competitiveness, trade surplus and
deficit positions, and other imbalances (e.g., European Commission 2010;
Lapavitsas et al., 2010). Indeed, it seems that each new shock highlights further the
structural incoherence within the Eurozone as well as the contagious
interconnections with crisis-tendencies and crisis dynamics elsewhere in the world
market, making it harder to rely on fisco-financial ‘extend and pretend’ (more politely
called reprofiling) and/or on political ‘muddling through’. This has produced a crisis
of crisis-management on many scales with open fights among financial officials and
government ministers over how to rescue the Eurozone and the European project.
There are wider struggles over the balance of sticks and carrots, the distribution of
gains and losses, and the best way to manage political fallout. It has also underlined
the contrasting interests of different fractions of capital, of centre and periphery, of
deficit and surplus economies, of capital and workers, of insiders and outsiders, in
Europe’s variegated capitalism. It has also intensified the institutional crises in
European governance structures and undermined the legitimacy of the European
project.
16
These deeper structural flaws motivated the hotly disputed Franco-German draft
proposal in February 2011 for a ‘competitiveness pact’ based on coordinated
austerity measures, real wage cuts, mandatory public debt and spending limits,
corporate tax reform, and investment in education, R&D, innovation, and
infrastructure to enable the EU to compete its way out of recession (Merkel and
Sarkozy 2011). This prompted a counter-proposal from the Party of European
Socialists for a ‘European Employment and Social Progress Pact for Fair Growth’
that combined modest austerity with a financial transactions tax, fair carbon tax, and
the issue of Eurobonds with receipts from all three invested in education, green
technologies, infrastructure, and social policy (Party of European Socialists 2011).
Another response came from Jean-Claude Trichet, President of the European
Central Bank, who demanded deeper integration based on the introduction of an EU
ministry of finance with powers to monitor national fiscal and competitiveness
policies, a veto over specific spending decisions, and supervision of the EU’s
integrated financial sector (Trichet 2011).
These three examples (from many) illustrate how divisions in Europe’s variegated
capitalism are reflected in continuing struggles with important economic and political
stakes over how best to solve the Eurozone crisis. One proposal is separation
between a strong Northern European bloc centred on Germany and a weaker ‘Club
Med’ bloc centred on France; another is the expulsion or self-exclusion of Greece as
the ‘weakest link’ in the EMU chain; a third is a unilateral return to the Deutsche
Mark by Germany. An occasional sub-plot is that exit from EMU should be
temporary, with member states rejoining after economic restructuring, labour market
reform, fiscal austerity, and longer-term welfare retrenchment have returned them to
robust neo-liberal good health and realigned them with the stronger economies.
Contra-indicating all three proposals is the dense web of bank loans and credits that
makes it hard to disentangle any concerted European action to assist some
sovereign states to manage their respective fiscal and sovereign debt crises from
the efforts of some member states to reduce or defer the risks of insolvency of their
respective private and public financial institutions. The reaction of the mighty bond
markets and rating agencies as well as the risks of contagion, speculation, and
moral hazard are also frequently invoked sources of constraint. Thus, although
devalorization is a normal mechanism of crisis recovery in capitalism, there are still
intense struggles over how this should be achieved, over which time horizon, and at
whose cost. On balance, market forces and political pressures have discouraged
weaker member states from exiting the Eurozone even though partial default and
competitive devaluation might provide some relief from savage austerity measures
and facilitate restructuring. With or without withdrawal, the weaker economies could
well take measures that would trigger or reinforce debt-deflation-default dynamics
(Rasmus 2010) with contagion effects within and beyond the Eurozone.
17
Attempts at crisis-management are further complicated by political crises at different
scales, including splits in national and transnational power blocs, representational
and legitimacy crises, loss of temporal sovereignty, and problems of institutional
integration. This leads in turn to continued ‘muddling through’ reflected in a chaotic
sequence of ad hoc and poorly coordinated emergency measures, taken in
response to successive shocks and declining confidence, aggravated by divergent
national interests and the growing delegitimation of the European project. In any
case, there can be no ‘one-size-fits-all’ solution because each member state has its
own problem mix. 8 Adopting the terms of the prevailing economic and political
discourse, ‘painful adjustments’ are just as necessary in strong economies, whether
in or out of the Eurozone, as they are in those liable to financial collapse and
sovereign default. Up to the time of writing (mid-June 2011), however, no plan for
such mutuality of sacrifice plan has been able to unify transnational capital, secure
majority backing from member states, and galvanize the key European state
agencies into action.
CONCLUSIONS
This chapter has highlighted the potential for incompatibility, antagonism and
contradiction within and between different varieties of capitalism considered in their
(not always durably compossible) articulation in specific socio-spatial contexts,
including their associated zones of (in)stability. It has also highlighted two examples
(among many) where this potential is being realized with dramatic effects. First, the
global financial crisis has reinforced the loss of US political hegemony (witness the
rise of political paralysis at home and unruly multipolarity abroad) and the decline of
American economic dominance (witness the continuing fiscal, budgetary, and trade
deficits in the US economy). But the US still retains its costly (and increasingly
unaffordable) capacity for military domination and (destructive) power of ecological
dominance. The latter is related to the continuing pathological co-dependence of the
US economy and other major economies (especially China) such that ‘global
imbalances’ (a euphemism for global contradictions and uneven development)
continue to threaten the stability of the world market and world society. This
ecological dominance is so great, indeed, that the blowback effects of American
policies and strategies are more damaging to the USA’s economic future than
policies and strategies associated with other varieties of capitalism. This is not
because other varieties do not impact the USA but because finance-dominated neoliberalism and the overstretch resulting from attempts to extend its global reach
make the USA more vulnerable to their policies and strategies than hitherto. This is
one of the more interesting features of variegated capitalism on a world scale.
Nonetheless, in so far as variegation has a fractal nature, analogous phenomena
occur on other scales and sites of interscalar articulation.
18
Second, as this chapter has suggested, similar problems of pathological codependence are seen in the manner in which the global financial crisis it has
exposed the structural weaknesses, fiscal fragility, and pathological co-existence of
a variegated ‘Eurocapitalism’. Thus the problems of ‘Club Med’ economies in the
Eurozone are partly related to the impact of the German model within European
economic and political space and Germany’s room for manoeuvre in the crisis is
limited in turn by the path-dependent effects of its ecological dominance. The
current impasse (as of June 2011) reflects these problems and it is unlikely that
‘muddling through’ can preserve this increasingly fractured and fractious
arrangement. While some capitalist forces seek salvation in deeper fisco-financial
and political integration, others seek more nationalist solutions, and both are facing
popular resistance. But neither approach will resolve the tendential
incompossibilities at the heart of the European project that reflects, fractally, the
‘impossibility’ theorem that Rodrik has proposed for the global economy. He argued
that electoral democracy, national sovereignty, and global economic integration
cannot all be fully realized at the same time: only paired combinations, with the third
term being neglected or negated, are feasible (Rodrik 2011: 184-207). In our case,
the trilemma is more complex on each dimension: democratic principles are
supposed to operate on at least three scales (local, national, and European); there
are multiple tensions between EU governance mechanisms and the sovereignty of
member states; and competing European integration projects co-exist with the neoliberal aim to create an unfettered world market. In this context it is hardly surprising
that it is proving hard to solve the deep-rooted problems of ‘actually existing’
variegated Eurocapitalism and that most, if not all, its contradictions are coming into
play. How they get resolved, if at all, will depend on politics, not markets alone.
Endnotes
1
This chapter has benefitted from insights and comments from Leo Bieling, Alex
Callinicos, Martin Jones, Bastiaan van Apeldoorn, and the editors. The usual
disclaimers apply. It was written during tenure of an ESRC Professorial Fellowship
and is part of its output: Grant Number RES-051-0303.
2
The extent of this dominance depends on the structural coupling between financedominated neo-liberalism and other economic regimes: where coupling is weak
(whether through crisis-induced reversals in world market integration and/or
because of efforts at decoupling), this dominance will be reduced. Decoupling in the
Great Depression enabled growth in the semi-periphery in the 1930s and we find
similar efforts to create space for post-neo-liberalism in contemporary Latin
America.
19
3
Thus the theme of the world market and crisis were the intended topics of the final
volume of the six book plan for Capital and as such constitute one of its three
‘missing books’.
4
The term ‘space economy’ is compatible with local, metropolitan, regional,
supranational, or cross-border as well as nationally-scaled economies.
5
Eurozone membership temporarily boosted demand in peripheral economies
through lower borrowing costs and investment flows and benefitted German exports
in Europe from higher demand and globally because the Euro traded below the DM
rate.
6
One indicator of this is the changing strategic orientation of the European Round
Table, which is an important site of compromise between contending fractions of
capital and a major vector of the interiorisation of external constraints as well as
intra-European conflicts and contradictions (cf. van Apeldoorn 2002; see also
Macartney 2010).
7
This is not confined to Germany’s national borders but extends beyond them
through various commercial, industrial, and financial linkages.
8
Eichengreen (2010) puts this pithily: ‘the economics [of the eurozone crisis] is
really quite simple. Greece has a budget problem. Ireland has a banking problem.
Portugal has a private-debt problem. Spain has a combination of all three’.
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