I just finished reading Adam Tooze’s masterful account of the financial crises that plagued the previous decade from 2008-18. The book is too long, but it needs to be to support his claim that failed geopolitics, financial crises, and populist insurgencies are intimately interlinked. In Tooze’s view, the missing link of many popular understandings of the financial crisis as an economic problem is that “the foundations of the modern monetary system are irreducibly political.”
The reemergence of democratic politics into capitalist governance should not be interpreted merely as “disturbing factors but as vital reactions” to systemic malfunctioning financial engineering. The stated aim of neoliberalism —to restrain the demos from interfering in economic activity subject to strict rules— was always a lie. Schaube, the Chair of the Eurogroup, may believe it when he is lecturing Yanis on the fact that elections will not interfere in economic policy of the Eurozone, but is not in fact a reality. First, the pressures to discipline Greece with austerity were not informed by ideal economic policy, as acknowledged by the IMF’s own economists, but were rather dictated by everyday libertarianism within the democratic publics of surplus nations. Second, the Greek drama and the foreclosure crisis on the other side of the Atlantic reveals that the rules held in such esteem by neoliberal doctrines are only for the weak; discretion is ultimately given to the powerful.
One could argue that the Fed’s expansion of the balance sheet to provide global liquidity support to the Transatlantic financial system represented unprecedented discretion—discretion that naturally couldn’t afford calls for transparency. Ditto for the meetings of the Eurogroup, which Yanis believes could change European politics forever if only the people were allowed to hear the things European finance ministers say behind closed doors. Both examples fit perfectly with economist Robert Reich’s pithy phrase—socialism for the rich, rugged capitalism for the poor and weak.
The imprint left by politics can be seen most visibly in the constellation of unconstrained monetary policy with constrained fiscal policy, or quantitative easing with austerity. QE was needed as a political weapon against left wing opposition. Tooze emphasizes the same historical parallels Woodruff cites, Great Britain in 1930’s and France in the 1980’s, to Syriza in Greece, echoing the same thesis of weaponization. QE was also needed to make the conservative insistence on austerity palatable. Tooze writes that the bond buying program, “freed them up to fight the battle of political containment.”
Here, in the irreducibly political nature of political economy, lies the key to interpreting the current post-Truth moment. Trump, and the post-fact discourse he so readily embraces, are just a symptom. Comforting euphemisms acted as barriers to understanding of the crisis as limited to Anglo-America, a problem of national account imbalances, or a categorical split between Eurozone deficit and surplus nations, but we should not let those narratives obfuscate our post-crisis response, Tooze argues.
In accepting the dogma that the world is governed by market forces, we have unwittingly adopted a post-truth approach to global governance. Restoring the demos that subjects global capitalism to transparency and Polanyi’s countermovement is the only course of action to restoring sanity to the governance of capitalism, allowing principles rather than rules to be applied to strong and weak alike.