Readings:
Martinelli A. & N.J.Smelser “Economic Sociology: Historical Threads and Analytical Issues” in Martinelli & Smelser eds. Economy and Society, Sage,1992, p.1-49.
Martinelli A., Global Modernization. Rethinking the Project of Modernity,,137 pages.
Martinelli A., When Populism meets Nationalism, Ispi, 2019, p.13-45.
Martinelli A. “The Global Financial Crisis”, ch.14 of A. Martinelli & A.Cavalli, The European Society, Brill, forthcoming (17 pages).
For students who do not attend the lectures, one at your choice among:
Polanyi K. The Great Transformation, Beacon Press,1944.
Rajan R. The Third Pillar: how markets and state leave the community behind, Egea, 2019.
Economics and society - Lecture 2
Prof. Martinelli
Introduction
Bachelor at Bocconi in economics, phd was from Berkeley (california), professor of economy and sociology, after political science. Dean of social political economic sciences. Teaching for short periods like at Berkeley and Stanford. Also thought at Bocconi and San Rafaele. President of Economic sociological Organisation. And president in Unesco council that coordinates activities of all international organisations of social sciences. Collaborated with life sciences to merge. Now called ‘ International science council’. Research predominantly in modernity and modernization, studies on global governance, history of sociological thought, other fields like organisation, entrepreneurship. He is also been active in ‘ the third mission’ = way in which knowledge can contribute to know better, or provide solution to certain key problems. Foundation AEM (energy group) in this capacity he manages social and cultural system programs. Fight against poverty and inequality.
The wealth of nations (more often quoted then actually read) by Adam Smith.
Urge to read. Full of interesting stories and examples. It lays the ground for modern economics. Adam Smith went through Switserland to meet important figures, and Grrece. Upon his return he started life, study and work. 1776 he published his book, which was immediately well received and praised by political leaders, such as Edward Gibben, Ferguson (historian). William Peter.
Adam Smith
Greatest effect on economy is labour, and the division of labour. Trifling example, pin maker. Adam Smith starts before the industrialization. It already got the basic idea. First thesis: Centrality of division of labour.
Second one: What drives economic activity is the pursuit of individual self interest. This is also an important point because it means that ‘It is not from the benevolence of the butcher, baker that we expect our dinner, but for their regard for their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages. ’ There is also a 3rd famous. Outcome of multitude by several individuals is collective wealth. The individual is led by ‘ invisible hand’ to promote a goal that was not included in his intentions. This is a major turning point, because until that time the individual that wanted to enrich themselves, was more the object of suspicion and decadence both in Christianity and in other world religion, like Islam. Lending money against an interest was prohibited. Effort to enrich oneself was considered manifestation of greed, not something to be legitimized. Center of economics was on rational individual that did a analysis of costs and benefits. Arrow, said ironically that there is a perfect statistician. There is this idea of economic actor as rational, self-interested actor. Outcome of this multitude self interest is a common welfare. Although this is not the purpose of the individuals, this is how wealth of nations is produced. How? The product was distributed. Here, Smith had to go with complicated question of how income is distributed is distributed in wages, interest and grants, and how wages relate to prices in the market. THere was a paradox in this relation of price and cost, related to value. We know that there are very useful (use value) water, and diamonds that are of no or low use value, they’re appreciated but people can survive without. There is a difference between use value and exchange value. Smith saw a problem and set aside use value, and focussed on exchange value. (Not original but very important). The range of goods is grounded on productive labour incorporated. Chapter 5. Every man is rich or poor in the sense he can afford the joys of life. There is a very small group of services and goods that man can supply to himself. He must rely on other men. The value of any commodity to the person to possess it, without intending to consume it himself is responsible fo the choice. Value of all goods produced is equal cost of production, profit does not exist. Iron law of wages. Workers would be paid minimal surviving rate, but if amount of workers outweighs demand, workers might not be paid survival rate.
Represented by ‘ bronze law of labours’. Adam smith is not main character in this course. Important to keep in mind that his thought (and other major representatives) has been a foundation for modern economic science. Their thought was dominant paradigm in economics for a century. End of 19th century with neo classical economics, marginalist school. Problem of value between exchange r use value. The value of goods is related to their scarcity. The price where demand and supply meet is the marginal point. Notion of scarcity is intriguing. Marginal point is where supply and demand curve meet.
Volta to Weber from homo economics, to werd (als in normen en waarden).
Karl Marx
Marx is the first scholar who is discussed here, because he gave fundamental contribution to analysis of economics and society. Marx theory is radically different from the classical economics. His aim is to generate a new theory of society and historical change. Considered as foundation for praxis, revolutionary action. Theory can be the ground for action. He incorporated many of David di Ricardo’s insights, but he historizes them by regarding the natural law as applicable only to a specific phase of capitalism. Classical economics presented their findings as natural laws, like laws of physics. Marx considered them as laws of specific historical frame. Political economy is the anatomy of political society, because in capitalism social relations depend on dominant mode of production. First, let’s look at his life experience and intellectual influence. Marx is very interesting person. We can not just attach a level or discipline to marx (the sociologist, economist, historian, he would deny the label). Interpreters of marx are different from him (schumpete distinguishes between sociologist, economist, profeet). If you have a chance to go on the web, look for movie ‘ Young Marx’. The communist manifesto is mandatory reading.
Social and cultural context of marx thought
We can divide marx life into 3 main periods, which take place in 3 different places. Time, space, action. First period: German Period. The son of Jewish parents who were living with napoleon laws which abolished the limits for activity of jews in christian society. He studied in Berlin. Shortly after Hegels death, he was part of the Hegelian left. He had a solid philosophical ambition. Berlin was the philosophical capital at the time. His dissertation was on (inaudible). Member of the Doctor Club. He was a radical in the liberal tradition, part of the radical left. His stance on the Prussian prevented him from following an academic life or career. For this reason, 2nd period: He moved to Paris with Jenny van Westfallen (daughter of aristocratic family). He was there in 1848. Intuition was on point. He had to leave Paris because of his radical stance. He went to Brussels where he was also sent away, then went back to Paris, and he was expelled. Then he went to London, because London was interested in him, it was the lavatory of capitalism. He went to study. It was also the most democratic country (as in tolerating descend), he could live there. Similar to todays world. You can be expelled if you are a dissident to dominant power. Third phase is the longest 1848 to 1883, the year he died. Could be divided in 3 sub-periods. First subperiod is 15 years, most difficult. Life of very hard work, poverty, Marx can survive by writing articles for news papers (Daily Tribune, major events of the day) and through help of Friedrich Engels, son of successful german entrepreneur with factories in England. Second period of most intensive political work, becomes president of workers international. In the first subperiod is the period in which the work of Marx makes major improvements. He has a very rigid schedule. He goes to the British Library everyday. He was sure that the research work is as revolutionary as revolutionary action. Then he moves to become a political organizer. Final phase, again difficult, he has to suffer family members deaths, but he is renowed as a great figure of the revolutionary left. Pretty intense life with very strong will power.
In terms of experience, the direct knowledge of the events of his time. He was an participant observer. His presence in various capitals of Europe (philosophical, economical, revolutionairy). He was very curious and followed events. Verification of his own ideas and theoretical schemes. Compare to August Compte (founding father of sociology) his old age said ‘i don’t read anything because it brings me away from my own thinking’. Marx was opposite and read everything. Constant condition of marginality and deviance. He always lived in the margins of society (not so much in childhood, but jews were almost normal citizens. He got secular education). Then he was left radical which was at the margins of the Prussian political system. As leader of first international, he had solidarity of uniting workers around the world, but a lot of opponents of his work in de Bourgeoisie camp and conservative milieu, but also in the left, where he had conflicts with sociolists like Lassalle and anarchists). He lived like proletarian. He symphatized with them and developed a strong sense of justice and inequality. Third element was his specific linkage between scientific work and political engagement. Marx was not a scholar (advancing knowledge for knowledge, rather an instrumental view of knowledge). Evolution of other causes if it can contribute to his own causes, not being to rigorous about the interpretation of certain scholars. He was an intellectual. Serious intellect and collective political struggle are both important. Laws of movement of capitalist accumulation is as important as a strike or political battle. As intelectual he was influenced by others. Three major currents in his own intellectual formation. German philosophy and Hegel. Considered by marx as the final stage of western philosophy. Then there is contribution of French proto socialists (saint simone, follier) and also the French historians, and off course there were political economists such as Ricardo. We must also consider Rousseau. Mostly his contribution to the Volunte. Most important relationship is with Hegel and Ricardo and other british. From Hegel Marx derived a few main concepts. Transformative, change, modify, subverted into his own theoretical system, of which there are many examples. Concept of dialectical totality and historical determinism. Historical proces is necessary sequence of stages, in which the absolute spirit realizes itself. Humanity moves towards self-consciousness. FE Subordnate in universities. Interests are sacrificed and conducted to the general design of reason (canning of reason). Opposite to self interest and individual. The state entirely provades over citizens lives. In classic economic society prevails on the state. From Hegel the idea arrives of society that every storical society is a dialectical totality in which components (war, technology, etc) can not be seen seperate from eachother but have a dialectical relation to eachother. Opposition of civil society (burgerlijke gezelschaff). (in german civil and bourgeouisie its burgelijk, it is the same). Civil society is made by laws, working conditions, the individual is closed in his particalrity The state is the expression of the universality of the citizen. Distinguish between Burgelijke gezelschaff and Staat. Ficticious liberty of citizens and the real exploitation of the worker. Formal vs real democracy in the capitalist society. Other examples: Aufhebung means to more or less manage something. If something is heavier then the other, i can balance it out, and then they are equal. In philosophy its a philosophical concept that bypasses a certain category, but at the same time elevates and maintains it in a further moment. It moves it away but recooperates in a further moment. You bypass and elevate at the same time. Bypassing and making true, bypass it but don’t lose it. What has been bypassed is incorporated. The spirit (Geist) manifests itself in humanity, nations and history. The spirit will be conscious master over all works and historical past. Alienation is the alienation of men from his own worth or means. Work is separated from the instance of work and product that is made. Capitalist is also alienated, he is subordinated to the uncheckable competition of market.
Key takeaways: Hegel is most important figure, but also Kant. The notion of antagonistic cooperation of individuals on collective history. Make people conscious of their experiences in life. The problem now is not to study but to change the world. Not only interpreter the world but to change the world. Critical theory.
Next thursday: Read first part of communist manifesto.
Lecture 3
Manifesto
Central point is class struggle and prediction of globalization. Materialistic base is clear, the naturalism of classical economy is replaced by a political perspective. Other elements are missing as explaining factors; the theory of labour as a commodity as the driving force for economic reality.
Revolutionary document. The revolution in France fails under Napoléon, but Marx and Engels already predict a development.
“A spector is haunting Europe. The spector is communism”.
“The history of all struggles in society, is the history of class struggle.”
“Modern bourgeousie that sprouted from feudal society has not ended this class struggle. It has been replaced by new class class struggle”
“This simple feature has amplified class antagonism. Bourgeoisie and proletariat.” Class antagonism has simplified. Also hints at rising world market, opens ground for bourgeousie. Feudal system has been monopolized. No longer suffice for the growing wants for the new market. Another important change, the Industrial Revolution. Steam and machinery revolutionized production. Production and industrial middle class replaced by industrial millionaires- centralization of capital by the few.
Modern industry has established the world market and world market foster modern industry. Again, we can not see this as a ‘new’ phenomen. It is the product of a long chain of events, it is just a phase. Result of series of revolutions. Mode of production has changed and coming to the forth. Each step is advancement of a given class and is accompanied by growing political power of that class. Bourgeousie excerts power through the bourgeois state. Executive of modern state is government, is committed to manage common affairs for the bourgeois. We have class state. State is not result of competing of different political parties but represents the interests of the ruling class. Bourgoisie has played historically a most important part. Ended idyllic relations of partiarchal relations. Pitlessly severed ties that bound men to master. It has drawn exodus of religious fervor and chivalry for egoistic self interest. Specific feature of bourgoisie (dominant class of mode of production). Bourgoisie is compelled to revolutionize political system. Usually dominant class tries to maintain structure. Bourgoisie can not help changing instruments of production, and the instruments of production and with them the relations of society. Uninterrupted disturbance of social production, distinguish this ruling class from historical ones.
Pace of change is extremely rapid; brings sense of uncertainty. What is produced and changed (economic relations) have impact on all other relations. Picture is exaggerated (it is a political manifesto) but sketches the economic and with it political change.
Implies global interdependence in economic relation but also in intellectual life. Intellect of nations become common property. National onesideness and narrow mindedness become more improbable. Urbanisation increases. Prejudice also arrived. Bourgeoisie created enormous cities. Greatly increased urban population and rescued them from idleness from countryside.
There is a hit to ‘ nation building’ . Countries are lumped together as one nation state. (Germany and italy form nations’ not yet the case in marx time). There is also a sketch of a theory of economic crises. In das capital marx will work out at least two theories of capitalist crises. Here one of them is sketched. Epidemic of overproduction. Because crises erupts; there is too much indutstralization and industry. No longer furthers condition for bourgoisie. They bring disorder. How does the bourgoisie get over this crises? By destruction of productive forces and also by entering new markets. Capital accumulation implies concentration of capital, increasing exploitation of working class and increased poverty of the large mass. Underwritten also is the Bronze Law of wages; cost of production of workman is restricted entirely to subsistence. (sustaining life and nothing more).
He also highlights increasing role of women and children because machinery and the need to lower labour costs.
Organization of factories; workers are just managed like soldiers. Industrial army. Intermittent strata tend to fall into proletariat as they can no longer compete with industrial production.
Final part is more on fact on concentration on proletariat causes them to become aware of common condition and gives way to political instruments such as trade unions. Brings some ‘ improvements’ but marx predicts revolution. Proletariat is growing. Also bourgeoisie changes side. Portion of bourgeoisie that aligns themselves (engels and marx are sons of industrialists). Propose political course that destruct bourgoisie; they are idealogists that understand the process. To this struggle (between two camps) even more and more restricted bourgoisie excludes a section of society which was despised by marx and engels. Passively rotting mass thrown off by lowest strata of society might be sucked into revolution. (Criminal choices that can lead to corrupt or be used against working class struggle).
Condition of capital is wage labours.
We can trace key aspects of Marx theory.
Move away from natural law. History of mankind is seen a sequence of stages, characterized by specific mode of production. Two pairs of concepts.
Dialectical relationship between structure (forces of production vs social relations of productions). Structure vs superstructure. The most synthetic description of this pair of concepts can be found in very important short writing by marx (1859 Preface to a contribution to the critique of political economy) - preface of Das Capital. Marx tries to give synthetic account of what is his theory:
“In the social production of their existence (makes clear the materialism of marx, not result of ideas but of material action. What people do to satisfy their wants. Reproduce mankind.) many inevitable enter into relations independent of their wills. Appropiate to given state of mode of production, fe technology. Totality of relations of production prodcue structure of society, which arrives with a political and societal superstructure.” Specific concpetion of relation between economy - economic structure of society and the superstructure, which is all the rest, all other aspects of society such as politics, law, conditions. Accusation arrives at deterministic view. Contested; not determination but setting conditions. Not the consciousness of men that dictate society, but society dictating consciousness of men. Static. It becomes dynamic with: “At certain stage of development the economic structure conflict with relations of production, or property relations”. Within structure at certain point there is a contradiction. (conflict) between material force of production and social relations. From force of development these relations turn into their fetters. Social revolution transforms whole immense superstructure. In studying such transformation its necessary to distinguish material because these changes have the same nature of laws in studying natural phenomena. Ideological form where men become conscious of this structure and fight it out. Just as one does not judge individual by what he thinks of himself, you don.t judge a stage on itself. No social order is ever destroyed before conditions are fulfilled in material conditions for transformation. Debate after marx death rises in political streams. The ‘real’ interpretation. Not yet the moment to start revolution, because material stage has not arrived yet. Lenin thought there was no reason to wait for conditions to be mature, it was important to cease the moment. This explains why he commences revolution. Not developed yet as capitalist country but serfdom. German idealogists were reformist. In any case there are two major spheres of concept. Forces of production + social relations. Play role of anatomy in human body. Immense superstructure that is produced by material mode of production. They are not just aspects of same reality, they are components of totality. In dialectical relationships. In contradiction with eachother.
The first historical action is the creation of means (of production) for satisfying their needs. Human beings are always living in groups. What human beings are depends on what and how they produce. Satisfaction of basic needs created new needs, and so the need for new instruments, and then the reproduction of daily life (food, shelter, etc) and is necessary for the reproduction for the species. The need for what we call family, which regulates sexual and intergenerational relations. But both the creation of production means and the reproduction of species requires type of division of labour. Any mode of production is also a mode of (antagonistic) cooperation. At the start, division of labour is simple and spontaneously, division of roles in sexual activity. Roles in terms of natural disposition, f.e. Natural force (men are stronger). Division of labour tends to crystalize into roles with different power. Distribution of power comes with it. Increase in manual and intellectual labour. More and more spiritual activity is distinguished from material activity, production and consumption. Simple family and larger social organisation to the state. Finally, at top of superstructure there is the sphere of ideas. Ideas are produced in the context of structure. Ideas of dominant class, and dominant class disposes the means of intellectual production.
There is no doubt that this model creates problems, along the lines of being dialectical, but at the same time it is difficult to underplay the role of aspects of the superstructure on the structure itself. (fe, language, and the role of science and technology). So, on one hand we can reject deterministic view of marx theory, because of condition rather then determinant. Mostly underlied by Engels, even after death of Marx. On the other, we have to say that this dominant role of structure and superstructure is open to criticism. In Marx intention, his theoretical construction should have been much more complicated then what he was actually capable to produce and or fulfill in his life, despite his discipline and hard work. I examine system bourgeois in following order, capital, property and wage labor, assembly (post mortem by Engels). Capital is first part of first book. In mind he had a full theme of scholars and series comprises following chapters. Key topics of classes and the state.
Chapter on social classes is last interrupted chapter. Marx is ready to move on to class antagonism and the state, some other chapters are not present and derived from other works.
The ideas of the dominant class in any epoch are the dominant ideas. Social relations of production are at the basis of ideas, although a dominant class, at least in the phase in which productive forces and social relations work together, the ideas of the dominant class must have a kind of universal character. But then, more and more, they tend to legitimize and foster the specific interests of that class. (For example; libertarian ideas in silicon valley).
Lecture 4
Marx is a master for dialectical historicism, a theory of historical change and a thorough analysis of the functioning of capitalism. To him, this system was contradictory. This is the most distinctive character. In capitalism, there is inherent cotnradiction. It is doomed to pass from one crisis from the next, until a total collapse. Why? Any other mode of production which we can find in history, there is an inherent contradiction between productive forces and social relations of production. Class who owns / controls production methods and who produces. It is most evident in capitalism because it is the most developed mechanism. If you understand how it functions, the more complex form of society and economically. It is inherently contradictory because the mechanism of contradiction and of exploitation. Capitalists are compelled to compete with one another in a market that is anarchic. Competition becomes more harsh and severe, because profits tend to diminish. Because of law of capitalist accumulation, according to which the value of goods produced is made by quantity of productive labour to produce it. There is a difference between value of a good, and the value of the wage given to the worker. In the value of the worker is absorbed into profit of capitalist, which is necessary for investing and competing with other capitalists. In order to increase productivity, capitalists uses more and more technology. The fixed capital (portion of capital invested in machinery) is greater and greater to the variable value and value given to the worker. Amount of surplus value is diminished. Then monopolizing and concentration in capitalism. These dominate the market and continue to compete in the market. Most cpaitalists are victims because they are subordinated to the law of competition. To survive they have to compete, to compete they have to increase the value of labour. From workers perspective, workers tend to be more and more exploited. COncentration of capital into giant firms means more and more workers are dismissed. Huge industrial reserve army. They are a basic factor that keep wages low. The mass of exploited / unemployed workers increases, and with it its misery. Workers in factory are grouped together, this enables them to recognize the misery and form a union. They compete in market for a job, but they can see they have common interests. One hand increasing concentration of capital, and increase in poverty and of the poor.
Context: Industrial capitalism in times of marx. First prediction (larger firms and monopolies) came true. Some middle shops remain. Second prediction (poverty under capitalism) was not true. Capitalism as a system with inherent contradiction. Series of crises.
Correct is that capitalism becomes global. Mode of production of entire world, even with other political idealogies. These two basic aspects (global, contradiction and passing through series of crises) of Marx thought are absolutely validated by historical development after marx. Relation between economy and society is not peaceful, because mechanism of capitalism creates class antagonism. Capitalism breeds inequality.
Not proved; Inevitable collapse, inevitable revolution of class struggle, inevitable poverty. Difficult to prove that profit must fall because of increased machinery, probably not true. Theory of labour value is full of mistakes. (Universal impoverishment mechanism of entire population is not a true prediction. You can say there is inequality, and poverty within capitalism, but not that everyone is increasingly pulled into povery ).
Critique by Martinelli himself:
Thesis and arguments very relevant. Notion of industrial reserve army (labour supply exceeds demand, wages tend to be low). In the wrong prediction of marx (most important quick collapse of capitalism) is the fact that he did not take seriously enough some of the basic changes introduced by revolution of modernity, political revolution of modernity. In french revolution (liberte, fraternity, solidarite) is our values, and Benthem (utilitarianism). He did not take serious the cultural revolution of modernity. Let’s take freedom. In communist manifesto refer to small victories (less hours to work etc). Little adjustments that don’t make a difference, but they do. The rights, although limited for working class for long time, and political rights, and political organisation carried results. It made workers lives better but less likely their revolutionary action. By making powerful parties and unions in liberal society liberals were able to satisfy class needs throughout other means then revolution.
Labour party finally comes to power or leftist liberals develop welfare state, which is outcome of union struggles. On one hand (bismark) we give something to the labourer, the structure produces the superstructure. You can say that this is still acknowledged. Marx must be read. The writings of marx have long history, it took decades to know the writings of the young marx. The interpretation of marx thought changed over time. As any important theory it was object of many disputes among factions and scholars to claim the real marx. Blessing and curse of marxism, it is widely read intellectual but became a kind of frozen ideology. In sovjet union, leninism was certain interpretation but didn’t do marxism any favors.
Marx and Nietschze influence Weber. Schumpeter. List marx as the great.
Marx has gone through phases of high popularity and phases of neglect. Depends of intesity of social conflict. In conflict, marx is an important voice. Less popular after fall of USSR.
Capitalism as a process of creative destruction. From that, other capitalist forces come out. After all, process of capital concentration is true. In traditional industries you have new firms, small, that take advantage of third technological revolution
The new class - leaders of communist party (later inspired by Cech thinker).
Max Weber
Both widened the boundaries of economic or political ocenomy instead of classical economy.
Historiczed capitalism
Relation between economic and social forces and capitalism as contradictionary (Weber sees it as mutual conditioning).
Marx understood capitalism under modes of production and capitalism in most advanced form. The laws of functioning are ontdekt. He wanted to see the laws so he could collapse the capitalism. He believed he served the class struggle by sort of providing it with solid base. Weber has strong scientific base contrary to anarchists. He only identified certain factors in capitalism.
Weber drove comparisons with non capitalist societies and forms of civilisation, without developing model of explanation of historical evolution or encompassing theory as capitalist society in a whole. He tried to understand how capitalism was possible or born. For marx it was instrumentalist. For weber, purpose of science is knowledge which is a goal in itself. For marx moral necessity for downfall of system was as clear as historical necessity. Weber was aware that scientific findings had moral insinuations, but he separated values and convictions vs fact finding. A third difference is: Marx was concerned with capitalism, weber with the genesis of capitalism. (there is chapter 25 of das capital, after the summary of general law of capitalist accumulation. After this, it is on primitive accumulation. It is well analysed how capital through labour and competition grows). But where it starts_ early capitalists, where did it start? Interesting chapter on feudal system and rent).
Weber focuses precisely on historical genesis , the generation of capitalism. He is looking for other then economic factors. Important like fe religious. Then, final one, for marx has a more monolithic formulation. Structure is basis (economic aspect is predominant). Weber consider economic interest, but as only one factor, class antagonism over production is superseded by the struggle for political dimension. Both were prolific writers on a lot, like commercial law, agrarian relations, pyshcophyics of work, comperative studies of religion, to late lectures of economic history. Wide ranging intellectual interest and production. Most important threat is link between economic religious ethics, economic mentality and economic action you discover importance of rationalism which is seen as major aspect of modern capitalism.
Including market, public credit, stock exchange. Each institution has own history and relations with other institutions. Is tied and gets tied together by common mentality. Related to religious ethics. Calvinism.
Webers life had 5 years of mental illness, made recovery (wrote most important books afterwards). Formation (bildung) at uni of Berlin and in his family. Professional experience as lawyer and docent at uni. Economic history and sociology. Precautious academic ideas. Became young professor at heidenberg. After the mental break, is the period of ever greater intellectual influence in german culture, (Sociology of religion and wissenschap en gezelschaft). First period, weber was descendant of family of textile entrepreneurs. Well to-do. Father did not follow father because he wanted to become a politician. Started political career, elected into city council of berlin, in prussia, en after member of parliament. His home was attended by important figures. Liberal bourgeois family. In 1895 in uni of preburg ‘nation state and economic policy’ weber states he is member of bourgeoisie and that he has been raised by its ideal. It was coherent. He behaved according to liberal values. Individual freedom but also responsibility, right to develop his own personality, defend private sphere from state. Moral imperative of responsibility and commitment to work (berouff). Set of bourgeoisie values (positive). Bourgeoisie culture contains liberal values but also some lifestyles or cultural moments which are diverse, idealistic. Notion of individual freedom can be understood as responsibility, as member of community, or inclination to satisfy ones own drives and or material wishes. There is a fragmentation in his family circle. Webers mother has uncle who was more in line with responsibility liberal. Father was more authoritarian and selfish person who wanted to impose his own will. He had a double model. Identify with mother for work, but material success of father. With age, max became intolerant of father. Dramatic confrontation when webers parents were visiting him, and there was a big fight. Soon after, father died. This fostered guilt complex which was at the source of his methods. He was cured an capable of going back with renewed vigor. Last 17 years (1903, died 1920). In 17 years he made an amazing amount of work. Institution builder, he made a lot for developing sociological research in germany. He founded institutions and fostering that research. Active in politics (after the war) and pubic debate. Was member of german representatives for peace of versailles. Published in news papers. One of most important social scientists. Not elected into politics. We may understand this results. In two of his most important essays (one as science as a vocation vs politics as vocation). (Beruff - calling). Here weber outlines the major distinctive features of both vocations. He had of the politicians passionate dedication of a cause. But not the availability to compromise or to take the opportunity in a pragmatic way. The scientist instead he had rigorous search for truth. Moral tension. Independence of judgement. Made it difficult for him to accept party discipline. He had to dispute with the conservatives and with the social democrats. He was not a party man but had ability to analyse different phenomenon. Political writings are intersting. This two different personalities and scholars, but both important because they provide brilliant interpretations of capitalism. And relation between economy and society.
Protestants ethics and spirit of capitalism.
Lecture 5
Max Weber made a lecture on politics as a ‘calling’ / vocation. Not written by himself but by his students lecture notes. His students requested just his ideas and views in a less complex way as a background on his work on economics and society.
Every day wants (accounting for everyday wants, rational capital accounting. Manifestation of rationalism as a core value of capitalist culture and system). Such rational capital accounting involves a game;
first appropriation of all physical elements of production as disposable everyday enterprises. (Marx would say: control over means of production). This is unique for our time, in the past only army had this position.
Freedom of the market, absence of irrational limitations in the market. Free market is basic picture.
Third capitalistic accounting supposes rational technology, which implies mechanismalion. Rational knowledge applied to work.
Fourth element is calculable law. Capitalist form of indutstrianizeld relies on rational rule of law.
Fifth: free labour, legal in the position and economically compelled to send labour to market without restriction.
Sixth is commercializiation of social life.
Speculation only happens when property takes form of finance. Simplified account of what max weber accounts for.
His most famous little book, Protestant work ethic and capitalism. Discusses basic thesis, famous and controversial. States that event of aesthatic protantasism provided fruitful foundation for capitalism. Strong correlation between given religious ethic and given economic ethic and behaviour. For rational economic behaviour and values and action. Rational action becomes possible when human beings postulate natural reality free from magical or ritual elements, on absolute transcendence of God. Calvinism and protestanism. Why many elements are found in jewish monism and early christian tradition, we found many elements of this aesthetic in the bible, and early christian traditions such as monestries. THese elements came to fruition. In this branch humanity stands alone before god, without ceremony or rights or repentance. The sacred is not immediately apparent like in primitive religions. Human beings behave and there is for example spirit in tree, mountain or sun. Salvation is not reachable through sacrament, rather catholicism believes in pre-determination, determined out of time by God. By Gods inexorable choice. Defined in these terms, the problem of salvation is a source of anxiety and anguish. You don’t know if you are among those saved or not. It is painful. One can draw from that the idea that if I don’t know, it makes no sense to act morally. This is not the case in protestant religion. Each person must see themselves as chosen, and reject idea that they are not chosen, as doubt is rejected, it’s a convention by the devil. You must have good faith, lack of confidence is a sign of insufficient faith. You must have faith on the fact that you have been chosen by God. At the same time; human beings are desperately looking for signs. You are effectively among the chosen. The persuade themselves that the rational organization of life, an methodological work towards a goal is a sign you are among the saved. There is this sequence of consideration which bring to the persuasion that if you are capable of obtaining results by following your college or calling, professional succes is a sign you are among the chosen. It’s important to have in mind the German word ‘ beruff’ or calling. To realize your potentiality. Foster your self confidence that you are among the chosen. Complex formula but arrives at final iron; material succes is a sign of aesthetic salvation. Re-invest profits into betterment into a aesthatic life. Different from material class of the past who chose to show it. In development of this claim he shunned deterministic claims. THis is not necessarily the cause of rational behaviour, but it is a factor. It is the outcome of very many different processes. Formation of medieval cities with middle class, universal ethical trade, have also influenced movements of reformation. Reformation was also outcome of other processes. Weber is aware that values and ethics can play a function of legitimization for the power of the entrepreneur. But there is a correlation, one of the many manifestations of what we call ‘western rationalism’. Also seen in fe science, rational legal state, in many other ways. Distinctive element of this civilisation.
In order to clarify this approach, which is not confused with a general theory in which there is a relation-cause effect of religion and behaviour, we must spend a few words on webers methodology. We can state that a great achievement of Weber methodology, maybe the greatest, was integration of interpretive approach and the explanatory approach in the cultural and social sciences. Interpretative approach is the approach of history or student of culture, which tries to understand and interpret phenomena, and cover the meanings of collective and individual action. Behaviour with intentions and believes. Texts are interrelated meanings that can be elucidated on their own terms. Social sciences rely on explanatory approach trying to formulate empirical, constant conjunctions. Neo-positivist approach, to explain event we have to explain conditions and try to specify what occurred or why. Weber interprets and explains. Weber influenced not so much by Hegel but by Kant.
Two crucial formulations:
1. Reformulation, and developing a flexible scheme of singular causal analysis. Historical changes and outcomes are traced to their casaluity, placed in a sequence. Based on counterfactual comparison between what could happen and what happened, we think what could happened if those conditions have not been present. Not dedication from causal laws, but on fact that a happened, because there was a correlation with b, c or d to the point that a would not have happened if b was not there. This method takes seriously what we can do as a form of intellectual play.
The thesis of correlation between religious ethics and culture of capitalism, like rationalism. Two great works published after, as single part chapters Wirschaft und Gesellschaft (Economy and society) and wissenschaft + Sociology of religion in 1920 (after his death). In these works Webers thesis is developed. It dealt with directly comparable to his studies in the modern. Ancient palestine, judaism, chinese religion and the economic structure of that area. In order to demonstrate is an ac of trial, it is not directly present. Can explain late or non development in those countries. Although there are very different. In the second major work economy and society he dealt with the problem more indirectly, as systematic reality of relations of social life and most social organization (ethinic, political, family). Presented of two relations: gemeinschaft (community) gesellschaft (society). This systematic exploration of multiple relationships. This supplies larger theoretical base for sociological understanding of unique historical phenomenon of bourgeois capitalism. Placed in larger economic and social frame. One has directly an organisation.
In sociology of religion there are different ways in which a religious ethic correlates with economic life. There are religions which are indifferent to economic life (Confucianism) which states norms for appropriate conduct within the family, for example authority of elders, and in political community, affirming legitimate authority of the emperor. In classical historical society, artisans and traders were at the bottom of the hierarchy, lower then the peasants. There is not a remarkable influence by Confucianism ethic, but shapes ethic of bureaucrats, the members of the imperial administration. Other religions play negative role for development of economic society. Buddhism or even christianity in the most original message (Jezus Christ) praise the poor as a virtue. Creates mistrust towards the rich or too concerned with material or mondaine concerns. They are taking people away from what is really valuable, the spiritual aspect of life. Other religious ethics foster capitalist accumulation. The element ‘ aspect of rationalism’ is crucial for this understanding. Weber did not study Islam. Notion of rationalism is central in his analysis of the way in which first early religious forms were abandoned. The main element of the book is rational prophecies; element of redemption in jewish christian tradition in mysticism, then the dualism between the morality. For Weber these prophecies allows bypass of magical linkage between charisma and observable reality. Brotherhood that develops with this prophetism get more and more in conflict with the development of the worldly activity, which become more intertwined in each others spheres. In the aestacism of gymnastic orders, there is a kind of linkage between religious values and economic reality. St Benedict is one of the most important orders in christianity. Lavora est … . More emphasis on economic aspect of your life. Most favourable rel. Ethic is protestantism. THis attitude makes religious ethics compatible with a material goal. Life of a monk is well organised for achieving a goal. It is reached with reformation, because no longer the attitude of minorities like monks, but generalised for society. Among innovations brought by my reformation is the formation of monastic orders. Believer and God have direct relationships not fostered or mediated by monks.
gemeinschaft (community) gesellschaft (society) syntax of social relations.
First part main sociological concepts are rigorously defined. Precise definition of concept is major requirement for proper analysis.
Here we find the definition of economic action. Specific exercise of pacific exercise economically oriented towards cause. Rational economic action as typical type of action in capitalism which is the kind of economic action that is rationalised by goal pursuing.
Community and association. A social relation can be community if and to the degree to which the deposition to act relies on a common sense of belonging. Effective or traditional. Whereas in social relation can be defined, association in the deposition relies on an identity of interest which is rationally motivated. Various forms of association are those of a group whose members act together because they pursuit the same interests. Gemeinschaft is based on a sense of belonging to the same group. Therefore the form of social relation (association) is more related to capitalism. Both communities and associations can be conditioned by economic, or relevant to economic action. THere is a twoway correlation. Through empirical research we can classify different types of relation to work out a typology that can be defined through economic communities stricto senso, economically active communities where action is defined economically because it is defined as the means of economic objectives. Economically relevant communities or economy regulating communities where actions can not be defined in economic means-terms, but significantly determines economy. FE the relation of the state. For instance, the family or the neighbourhood, or ethnic community, community belong to economic community that are conditioned by economic goals but at the same time regulate the economy.
What is power and the basic distinction between what is or not is power. It can be exercised on someone, someone has to accept because they have no other choice, but legitimate power is exercised with acceptance of the subject.
MACHT - power - potere or potenza
(traditional + charismatic ) HERSCHAFT - ruling or authority - potere or autorita
There are forms of power that are to some extend considered legitimate by the subject. MW distinguishes between traditional power (accepted bc force of tradition). No need or possibility to change. Patriarchy, King is King bc of Gods.
Another form of authority is charismatic. Charismatic power is power exercised by specific individuals who are believed to possess supernatural power. The perception or belief is enough (don't have to be superman). In early religion there was a link between charisma and object. For example, a totem. For example prophets that speak the word of god. This authority relies on the fact that there are believers. For this reason, a major problem for charismatic leadership is succession. The routinization of charisma. The church as some kind of religious organisation.
Lecture 6
Joseph Schrumpeter
Background story
A generation after Weber, they share some traits. Both were born in the Austrian-Hungarian empire in the last year of the nineteenth century. Although economists have a priority in claiming his work, historians and sociologists can include him in their greatest figures. He was an economist maverick; he can’t be considered the pupil of established schools in economy, he stands alone but as a giant he contributed to history and sociology. His greatest achievement was attempt to integrate concept theories into sociology. Second, he created a complementarity between economy and history. We summarise his contributions in three major ways:
He specified and made more complex some analytical categories in his economic model, like the main concept of the entrepreneur. He made the concept more sociological and historically complex.
He considered some questions like that of rationality, spontaneous equilibrium of the economic system.
When he could not just explain a phenomenon in economic turns, he looked to other disciplines, like the crisis of capitalism. He could not just explain that strictly economic.
Social and intellectual milieu of Schumpeter. Born in 1883 in Moravia (Chech Republic). The son of a small entrepreneur who died when he was a baby. His mother was ambitious and beautiful and remarried the Marshall, commander in chief in the Hungarian army. He had affection for Joseph and attended the Theresianum. The school of Austrian aristocracy. Humanistic education. The elite was formed in universities with humanistic education. This experience was important because Schumpter had to prove his value by being an excellent student, gaining respect through his merits rather then birth. He was influenced by the lifestyle of the aristocracy. He went to university of Vienna where he studied law. He had a chance to start studying economics. He had exceptional intellectual quality. After the degree he was 24, he started an interesting life, full of travel and experiences. He spent two years in London and he entered the English aristocracy. He met famous economists like Marshall and Hensworth. He married for the first time. After he spent two years in Egypt and became the treasurer of a local princess. His vocation was teaching and science. He made his first work, Wezen und Haubtingheit (main substance). . On the basis of the recognition of his work he got invited to teach in VIenna, and after he became a professor, first in a small and later in a bigger university. He went to Japan and Colombia University. After the war the Austrian Hungarian empire collapsed, Austria became a interesting place. Social government at the time, Otto Bauer was fellow student of Schumpeter. He suggested Schumpeter to become the finance minister. He was liberal, he was against nationalisation. Only lasted a few months as minister as he wanted austerity rather then social spending. He also disagreed with the establishment of close ties with the Weimar republic. He said we should strengthen ties with Western countries like England. He left and became president of a bank in a very tumultuous time. This bank went bankrupt. It was admirable that he took on the debts of the bank as personal debt. He spent many years paying of in full all the creditors of the bank. Unusual behaviour of the banker. These unsuccessful experiences in politics and banking and finance, combined with personal dramas (loss of his mother, loss of his wife) determined his decision to remain in Vienna. The university chair in Bonn that he held, and he was invited to Harvard. It was 1932, he spent the last 18 years of his life there, it was quiet. He resumed his research in a positive atmosphere, he married for a third time and he gained respect from his colleagues. He was able to write two of his four major works, which are ‘business cycles’, ‘history of economic analysis’, ‘history, sociology and economy’.
There were no important intellectual influences; not an orthodox member of the marginalist Austrian economist school. German historicist school and Austrian school. Was influenced by Capitalist school. He was indebted to Valars (French economist of general economic theory) from whom he got the idea of the economic system as an interdependent system, and Marx, with the inherent contradiction of the capitalist system. The economy as a system in aesthetic perspective, unlike Marx, which was more dynamic. Intrinsic vitality and inherent contradiction. The ability to apply abstract logical schemes to concrete phenomena. He stripped the ideological components; they might be useful to raise relevant questions, but then adopt a scientific method to erase any prejudices. As mentioned, in his history of economic analysis, Marx is deeply analysed.
Economic theory
At the center of Schumpter is the entrepreneur. Economic development is precisely an analysis of the dynamic role played by entrepreneurship in the economic system. ‘The entrepentaruial function is defined as innovation. The introduction of a combo of productive factors such as labour and land (and access to capital, by owning or persuasion). There is normal working of econ system which is called circular flow, where aesthetic equilibrium exists. This equilibrium is broken by the dynamic factor of entrepreneurship. This changes conditions of supply, thereby sets up new production feature. This innovation can be related in various ways. It can be a new production method, a new marketing strategy, the conquering of new markets, but it has an element of rupture. Colourful metaphor is: You can add stagecoach to a stagecoach, but you will never get a railway. ’ At more abstract level, entrepreneurship is a function. Function performed by human beings, so can also be viewed as psychological type. Elements brought from sociology and psychology used to explain economics. In order to have economic development, you must have something qualitatively different and deeply disturbing the existing order. Endogenous, inherent character of capitalism. In a sense, Schumpter brings in the entrepreneur as the new ‘proletarian’ as in he is a revolutionary. There is ambiguity as entrepreneur as function vs as social conduct.
As a function it means innovation. This function does not imply requisite ownership, can also be credit. The 4th introduced a productive force (entrepreneurship). The function is not linked to willingness to accept economic risk nor does it require being a member of a firm. Entrepreneurs can come from other corners of society. With this difference, Schumpteter distinguishes manager (routine) and entrepreneur (innovation). If this is the case, entrepreneurship implies a new type of social conduct and behaviour, which differs from rational conduct of economic actor. Entrepreneurship calls for personality type and conduct which is different from a common man; he is a bold leader. We need to break through ordinary constraints. This sets him off from being a routine manager. And what is leadership? Leadership involves the capacity to think the new and to grasp the essential. To set the incidental aside. (to be focussed). To act quickly. To understand by intuition. Here, with some sociological considerations, the entrepreneur acts through its will and personal authority (charisma). He must be willing to forego the criticism when new behaviour is deemed dangerous. (Think about Machiavelli's innovator in politics). Many people stand to lose from new things or changed ideas. In this sense, the fact of being a leader brings the entrepreneur in some way close to the religious leaders of the past, but with great difference. The entrepreneur is a leader in a rational and anti-heroic civilization. As a result, it does not incite the charismatic feelings of those who make whole civilizations. The entrepreneur operates in a more limited sphere. Theory must be historically determined. In previous epochs the entrepreneurial function was fused with other, with religious or aristocratic. In modern capitalist society, entrepreneurship is the form of leadership that appears in capitalism. Essential element of capitalist dynamism. In this sense, entrepreneurship involves a mix of emotional and rational elements. It causes a great measure of planning. Rationalism according to Weber it is planning adjusting your conduct in light of a goal. It is rational but it rests on an autonomous drive to achieve and to create in its own sense. It requires a kind of creative and artistic character. It rests on a dream to ultimately establish a family dynasty. The entrepreneur takes advantage of the elements in his milieu, but he has an advantage because he exists in rational society, but he has something more. E. innovation is a creative act, goes over one owns short term advantage. Based on desire to think on the new and act on those thoughts. Not utilitarian rationalism, but dynamic. A type of person, function or personality which can not be considered rational in the limited sense.
Two additional influential sociological essays that were source of popularity and academic prestige. One on social class, the other on imperialism. In these two essays Joseph developed view of social stratification. The class structure is the hierarchical order of families. Individuals belong to class independently of their own wills and the class structure is the order, in this order there are continuous and intense processes of social mobility, upward and downward. The fundamental factor which explains the rise of one of the mobility of families within classes, is the same which explains the one from one to the other. It is the ability /capacity to adapt to the basic needs of a given historical society and to demonstrate the abilities to perform the function, satisfying the needs by exerting a leadership role. Family are the basic units of the social structure. Classes as undifferentiated whole are less concrete. Social classes change slowly over time, like hotels occupied by different populations. Examples include f.e. German aristocratic families. He engages in historical analyses. The performance of socially relevant functions is the core element of families because it divides society into ranks. Once established, the social prestige of a class gets a life of its own. Often, prestiges survive long after the functions have eroded. (Again, aristocracy no longer vital for society, but aristocratic families still enjoy prestige). Also, the status of the elite or upper classes is consolidated between solidarity ties between families, f.e. Through marriage. In capitalist society, leading class is the bourgeoisie. Members of bourgiosie have performed leadership functions in economy, they have provided power, wealth etc to future generations, but also explains decline, as ownership etc also come from other social strata. Any element which reduces the importance of entrepreneurship has resonance in the bourgeoisie. The development of monopoly capitalism doesn't impede directly on capitalist system, but does erode role of private property and the role of entrepreneurship. For instance, in present digital economy and society, if the transformation of these entrepreneurs into giant corporations does not allow for new entrepreneurs coming up, this would weaken capitalism. Because it makes entrepreneurship less and less likely. No direct relation between bourgeoisie as a whole and monopolistic capitalism, but does weaken the class. This is the first way in which monopoly capitalism (late capitalism) weakens capitalist system as such, not directly but indirectly. Late capitalism generates social crisis, the decline of institution like families, the decline of protective of social strate, and worsening to cultural climate. Corrosion critique of economic institutions. It is due on hìone hand by monopolies, as they leave less space for entrepreneurial activity. It also weakens social institutions like bourgeois family, persistence of protective of social strata, and decline of favourable social climate.
He writes very clearly ‘The thesisI endeavour to establish is the performance of the capitalist system is such to negatively engage, break down under the weight of capitalist system. Inevitably creates conditions for rise of socialism, which weakens social institutions that protect capitalism. The main elements for crisis of capitalism are the destruction of protective strata, or first the crisis of the bourgeois family (Thomas Mann - Gudenbrock) , and the changing social climate, which becomes less favorable to bourgeois lifestyles. Due to the fact that capitalism breeds social unrest. At the same time it holds out hope for betterment and improvement for everyone, for growth and development, but also generates high level of personal insecurity. Besides, this creates a lot of frustration among many people, mostly young people who are dissatisfied. They can express their uneasiness, they can protest. In capitalist societies there is a wider and larger space for dissent. More political freedom and tolerance for dissent then in other systems. ‘
Differs from Marx, he sees creative destruction. He thinks capitalism can survive by coping with the negative effects of capitalism.
You can also the trait of conservatism. He is astonished that so much room is given to corrosive critique of the system. His argument overestimates employment of capital. It looks like he is not happy with the tolerance for political dissent, but tolerence is more effective coping strategy then authoritarian way. Last major work is written in the late 1940’s. It appeared that in 1942, a breaking point, the start of the decline. It was not easy to be pessimistic about contemporary society in that time. Reflected in the book (can capitalism survive, can society survive, crumbling walls). It is not the succes of capitalism that brings it directly to a crumble by making innovation impossible, it is indirect. The rise of new entrepreneurs is less likely, and by fostering social changes in society that will weaken the capitalist system.
Note from Martinelli: ‘ Why does he not consider that instead of economic entrepreneurs, we will get new political leaders or political institutions_ They can help in destroying capitalism, or facilitate the continuation of capitalism?’
Lecture 7
Polany
Karl Paul Polanyi (/poʊˈlænji/; Hungarian: Polányi Károly [ˈpolaːɲi ˈkaːroj]; 25 October 1886 – 23 April 1964),[1] was an Austro-Hungarian economic anthropologist, economic sociologist, and politician,[2] best known for his book The Great Transformation, which questions the conceptual validity of self-regulating markets.
Founded galilea club. He chose London because of his affinity with the British Labour. In 1940 he started the writing of what is his measurebook. The great Transformation. The opportunity to do this was a fellowship granted by the Rockefeller Foundation. He was quiet and it was the right place for him to study, work and write for three years. The book was a success; not a bestseller but well accepted. He went back to London in the last years. In 1947 he went to New York to become a professor. He had some family problems as his wife was a communist so she did not get a visa. She lived on the border of Canada. He was old (47) so he only thought for six years. It was enough to form around him a group of researchers which was multidisciplinary, sociologist, anthropologists and historians of ancient history. He directed a interdisciplinary research group. There was a collective volume titled trades and markets in the early empires. Then, no longer teaching at Colombia, he continued research. He published other books, Dahomey and the slave trade. Some of his essays were published by Walton posthumously. In the last phase of his life he became a passionate proponent of peaceful co-existence. It is not a life full of events, but of a coherent man who was capable of combining serious scholarly work with political passions. Why is he important for this course? He has a specific and original view of the relation of economy and society about what market capitalism means in the history of mankind.
Polanys conception of relation of E&S can be syntactically presented as: In most of modern history the economy is embedded in social relations and institutions. Economic agents do not act to maximise economic interests, but to maintain their social status. Market capitalism is the exception: the economy has freed itself from societal controls, now society is embedded in the economy. THis conception implies a radical critique of neo-classical and classical economy. Classical economists have mistaken this exceptionalism as a historical accident. Classical economics have mistaken this as manifesting universal economic laws. THey consider laws of capitalism as economic laws to any time in any historical context. This occurs because of the economist fallacy. They have mistaken the substantive aspect they distinguished between substantive aspect of economic life and the formal aspect of economic life. Substantive is the satisfaction of human needs. Economics studies the ways in which human satisfy their needs. FOrmal aspect is the logical relationship between means and ends. The link market, money, price, private property, free contracts which were absent in most of human history have become traits always present.
In this way Polany develops a critique of classical economies that is not a critique of the internal logic of the theory, or hypothesis, but the underlying assumptions and postulates. That is; utilitarian individualism and the rationality of homo economicus.
Critique to Polony: Formal and substantive, he actually distinguishes the model that studies the object and the object, the object of studying econ is certainly the way humans satisfy their needs, and the other is a model for interpreting this. One can not critique a model just by proposing it to the object, because scientific reasoning always works with assumptions, postulates, which dont have to be demonstrated. A theory is more acceptable if assumptions are realistics. But theories in physics work with basic unrealistic assumptions, which does not prevent it from creating interesting theories.
This has to do with one of the three major research questions of Polany: The limitations of the claims to universal validity of the paradigm of classical economic theory.
The most important contribution of Polamy has to do with the origins of market capitalism, self regulating market capitalism. This question is fully analysed in his greatest book, which has origin in the great depression of the 1930’s. This is considered by Polany as the failure of free-market (liberal) capitalism. Polany calls this as the 19th century civilization. It has collapsed in the following century followed by a great crisis. It is sometimes misunderstood, does not have to do with the industrialism. It is about the crisis of the free market. ‘19th century civilization has collapsed. This book is concerned with the origins of this event and the great transformation it has ushered in. 19th century rested on four institutions:
The balance of powers system (for century prevented long and devastating wars) between Napoleon's defeat at Waterloo and Sarajevo without generalised war.’ Balanced by the UK which was the strongest power, which acted as a guarantor of the balance of power.
International gold standard which symbolized a unique organization of world economy. There is the pound, which can be converted to gold. Converted to a very specific exchange rate. All other currencies are rated with regard to the power. This provided stability but had some negative consequences too.
The self-regulation market which produced an unheard amount of weel-fare.
THe liberal state or liberal democracy. Classifying between economic and state, international and national.
The fall of the golden standard was crucial was a proximate source of the fall. These 4 institutions are not on equal footing but they are not. The fault of the system was the Self-regulation market. It fostered international exchange. The balance of power system was a superstructure eractd on the gold standard. The key to the is the laws for self-regulating market. After this became in a synthetic way the thesis of his book. Our thesis is that the idea of self-regulating implied a stark utopia. Such institutions couldnt exist for length of time without regulating the human related substance in the market. But rather new is the fact of reference to the ‘natural’ self regulating market. It would have destroyed men and turned its surroundings into a wilderness. Society this took matters to protect itself. Whatever measures took impaired the self-regulating market. This dilemma which forced the existence of the market, and thus raptured the ..?.
The crisis of 1930-s must appear all to simple, but he disagrees. He will explain his thesis. In the book there is a part that concerns about the causes of srm and another part with the consequences.
Causes:
Technological revolution. The role played by technology, use of decline of technology to production, which increases productivity and then goes on by showing how a longer process than the IR freed labour and land form many constraints that existed in previous epochs. The role of gilded, the role of relationship between lord and peasants, and many constraints set by power of the king and church.
Consequences:
Here Polany makes a detailed analysis based on historical material, mostly early 20th century stability in which he shows how the srm can not help threatening human labour and the national environment which stimulates a response. (Defence of society). Governments and or unions tend to approve laws which attempt to weaken the consequences of the srm, they set constraints to the free working market. This has the effect of making the mechanics of the srm less efficient. It creates a problem from another POV. Also in regard to capital market, labour and land.
Critique
He critiques universalism of classical economy, but treats srm as exception of other universal laws. Polany thinks that capitalism will survive but foresees the end of srm capitalism. Market economy but with more prominent role for the state. Polany thought he could find different version of this type of market capitalism; in the US it was different in nazi germany. Attempts to surpass the conflict of srm. This role is compatible with free market economy, or liberalism? In his view yes. THere is no reason why a market economy should not be controlled in a better market. He was not against state intervention as long as it could benefit individual freedoms. There are many instances, varieties of capitalism which have proved to combine a market economy with the state. Another major question addressed by Polany was a comparative affirmation are forms of regulation of forms of production, distribution of economic integration. Regulation of economic activities. One is the SRM. The other are reciprocity and redistribution. Why did he do that? He had a physical view of planning his economic activity.
Each 3 of types entails different forms of distribution in space. Reciprocity is between symmetrical groups. This type is based mostly on anthropological studies on fe the aganotes of the western pacific. Complicated set of relationships, for instance, a male was not responsible for his own family, but provided necessities for the life of his wife's brother. This was reciprocal .The husband of the sister was responsible for his own family. This set would inform the relationships between tribes on other islands. Value of gifts was to reinforce alliances and confirm peaceful relations; status related, not to economic interests. It is an idea type, which is present to more or less degrees in various historic relations.
Predominant in for example in family ties.
Second major type is redistribution. Here, it indicates approximate transactions from and to a centre. (From periphery to centre and vice versa). This was a mode which tends to predominate in the empire. In an empire (multi-ethnic) the emperor collects taxes by territories and also redistributes them. Again, it is a mode predominant in certain contexts, but which also exists in contemporary society. The state collects money from the @tax payers and uses them to redistribute; allocate capital to institutions, targeted groups.
Thirdly exchange; transaction between hands through the medium of money. This is a catology, a heuristic value applied to certain situations.
Useful contribution to understand that all three modes survive, even though exchange is predominant. Here, there is space open to criticism. The first is that the typology is incomplete. Political organisation (mobilisation) of goods and services for collective action. Second and more important critique: the typology is static, not dynamic. How does the shift from one to another predominant mode happen? Later on, there have been attempts to dynamise the ecstatic model. (North who tried to dynamise the model with the notion. Any time transaction costs exceed the benefit of the transaction, the allocation of goods and services can take place other than market, price or exchange. For example, public goods. It is not possible to exclude those who do not bear the cost. It is not possible to distribute the cost of the use of the goods that are made. In this case a better form of regulation is redistribution).
The third criticism is that Polany has overestimated the disruptive and disintegrative implications of the market principle, and underestimated the influence of the others. The repository system is exposed to one sided exploitation. There might be symmetry, but this relation, which can be seen as an example of the reciprocity mode, sees one party not giving and only receiving. In a relation of reciprocity can be dangerous, like in a maffia type of way. You gain favour, and you will have to do something back. It is not necessarily better.
For redistribution, centralism. This central power can be despotism in the autocracy. Any typology can be used, but with some caution and wisdom.
Lecture 8
Conception between economy and society by Parsons and Smelser . Titan of famous book. Parsons has been prominent american sociologist. He was the most important sociologist in the world, from a generation after generation of Weber and Workheim. Parsons himself was teaching for a few years at the same uni where Schumpeter taught, after WWII. Polany and Parsons were contemporaries of different generations.
Smelser. When the book economy and society was published, Parsons was mature and smelser just 26, brilliant young scholar. He had a succesful career in American higher education. He was a professor for Berkeley and universities. In that quality Martinelli met him, he was the chair of martinelli’s phd. He has more important place in contemporary sociology.
Parsons is most famous of the so-called functionalist / structural school. Hegemonic paradigm in economics and influenced other disciplines as well. In the words of David Easton is an American political scientist.Major influences in formation of parsons thinking were the family background (he was the son of a pastor. He was protestant. Reform oriented type of protestant. Also president of small college in Ohio. Atmosphere was academic and oriented towards social reform to improve the condition of the poor. Then, since he had academic aptitude, he won a fellowship for a much higher quality college then his fathers in Massachutests. He went to Harvard. He attended prominent scholars' lectures. Clarence Heirs. Institutionalist economists. Economic institutionalism give importance to wider context in which economic action takes place, with a more broad focus, among other sociology. (Veblen). Then he continued studying American social science, getting acquainted with the most important sociologists. In the other grander theories, American students can choose a major and minor. He chose social sciences and biology. From the study of biology, he also studied economic institutionalism, he gained the idea to study economy from a larger and broader context. From biology he got acquainted with main functions and structures of human body. A second group of influences came from other fellowship, to study in Europe. Many American intellectuals went to Europe to refine their cultural apprehension. Parsons went to study at the London School of Economics and political science. LSE. In 1925 was the place where there were historians like Tawney and political scientists and philosophers like Lashki, Hobhause, sociologists like Ginsburgh, anthropologists like Malinowski. Then, Parson decided to spend the second year in Heidelberg, were Webers influence was still very strong. There was a very active Wberian circle, like Zimmel (sociologists). Roberto Michels. Historians like Zombert and Trosch, like Krikke (neo kantian).
In Heidelberg, Parson was fascinated by Weber, but developed key interest in other major social scientists of Wbers generation, like Dukheim and Parecchi. Whereas in the LSE he had been more acquainted with neo classical economists like Alfred Marshall. He developed good knowledge of Kant under lectures of Jaspers. These years were very fruitful. For different generations, migration over the Atlantic takes different directions. When Parsons returned he had written a dissertation with theories on capitalism. When he returned to Harvard and started teaching, he concentrated on the concept of capitalism in recent German literature. He worked on his first major book entitled ‘The structure of social action’ which had its foundation in European thinking. In 1935 he was above all things a major institution builder. He spent a lot of time and passion to the building of institutions of higher learning where it was possible for scholars of different discipline to teach and research together. The outcome of this was the department of social relations of harvard, where a rather important groups were formed and became the protagonist of this discipline in the last few years. The third type of influence was psychology and anthropology. First Freud, psychoanalysis, specifically the concept of personality as a dynamic functional system, and the idea that in the superego are internalised various values and norms from society. Also, important other psychological schools such as the american society of tolman. Finance behaviourism. Empirical observation of human behaviour. Also the so called Gestahlt … . Other influence is anthropologists, of structural functionalism. Kreuber, Malinowski. Populistic idea of culture with emphasis on values. All these influences were important to shape his thoughts. Reelobarated a lot of different systems and bringing his own theoretical system.
Three + 1 phases:
Starting point:
Economic theory, the rational relation between means and ends. The sources and .. .
From the study of Paretto, Eber, Workheim he saw it different. Parson got the notion of a vountaristic theory of action. Any action must be conceived as having meaning and an act of will. As an act of a will, which does not take place in a void but in a social-cultural context. In ths view, there are 4 elements.
1: The agent
2. The purpose of the voluntary action
3. The situation including choice of means, all factors which favour or abstract the action chosen
4. Set of norms
Not only an abstract theory of work, but also empirical research in which he changes his scheme. He researched the medical profession. On the basis of this and cultural influences, he made his scheme much more complex. In which ways? First, in a way that human behaviour is analysed within scheme of organised scheme of actions. Interested in building a general theory of action, but working on key concepts like that of ‘’system’.
Study of system
1. The personality is studied as system
2. The social is the society
3. The culture.
Parson examines major aspects of motivation to act. We act motivated by a certain element. In order to act we have to look at 3 major aspects.
1. Cognitive aspect. A clear definition of the situation has to be made.
2. Then there is an aspect which is cathartic. We take into consideration how actions can be gratified (satisfaction) or sanctioned (punishment). We can be rewarded or punished by our actions.
3. Evaluative, we can consider other elements. We might not want to buy shares from weapon production because of moral convictions, nothing to do with means-ends.
Role is a key element. We play different roles when we act. Theory of action or system of action. Theory is ‘people play the role they play in different situations.’ We use the words to talk about the single member of society we can say individual or person. It is different in democracy. Individuals are what can not be cut in different parts. Persona comes from the Latin word mask. We can show different masks. Or in other ways, a famous French writer from the 16th century, Montaigne, thought about many different I’s. Many roles played by the same person.
In was one phase in Parsons' ambitious program to create a theory of society. They did not expose a general philosophical theory or a theory of history. They did not partake in a study of different societies or a general theory of capitalism. They tried to lay out, in abstract forms, major needs that confront societies. Try to identify exhibances of needs. Societies must satisfy some basic requirements. Differentiate subsystems that can meet one of those basic needs. The human body is specialised, it has to meet basic needs, in order to do so for survival, it has specialised functions. Similarly, society does something similar. The special relation between econ and society were to be spelled in the context of this major work, a general theory of social systems, within a general theory of action. This implies developing a special view between relations in disciplines of subsystems. Parsons was working in explicitly functionalist framework. Interdependence of different roles and institutions has a certain equilibrium of a system. All factors that put into question this system, and mechanisms that restore an equilibrium. They work with a causal measure of functional interdependence. Third, in contrast with many of their predecessors (not weber) they accepted many factors of formal economic theory as a legitimate framework. However, they view economic theory as a special case of a more general theory of action. They came to this by accepting the notion of Paretto. There is the idea that the economy is just one of more societal sub systems. The social systems (in order to meet basic needs), the survival of the system requires meeting basic needs. AGIL.
(1) Adaptation (A). The legitimized and institutionalized goals - for example, warfare, maximization of the aesthetic, economic productivity - are not realized automatically, and the society has to devote some of its energies to providing generalized facilities - a reservoir of societal means. It is this adaptive function
around which the economy is structured.
(b) Goal-attainment (G). This function refers to the ways in which the society establishes specific goals - legitimized by the dominant values — and mobilizes the population to attain these goals. Parsons and Smelser identified this subsystem as society's 'polity', which was constituted mainly but not exclusively by the institution of government, the main mobilizing agency in society.
(d) Integration (I). While the L function deals mainly with the
function of legitimation, all social life entails a great deal of individual and group conflict, and a certain level of its institutionalised arrangements are devoted to handling this and promoting social solidarity. The main institutional complexes involved here are the legal system, the 'peacekeeping' aspects of the state, and the differential allocation of facilities and rewards and the maintenance of a system of stratification. (Peace keeping, fe legal and social system)
(a) Latent pattern-maintenance and system-management (L).
Every society has a system of values and beliefs that operate as legitimising and sustaining arrangements for its major institutions and as structured motivational patterns for its members. Part of the institutionalised energy of society goes towards the maintenance of the consistency and integrity of these values and to providing outlets for the 'tensions' that arise in connection with conformity with them. Institutions that specialise in this "latency' function are religion, science, the family and education.
For any subsystem, the other subsystems are responsible for providing major resources. For economy, for example motivated labour (from family) is exchanged for goods and services. Mediated by medium, in this case money. But there is catalogue of these mediums, social media: (money or wealth, power, influence, value commitments).
A specific concept of economic theory we are given new meaning as values of system selection. This type of theorising received major criticism at the time. It grew to the point that, starting in the 70’s in the last century, this was no longer the hegemonic paradigm. Major critique was that being a theoritcal paradigm that explains static functins of system in a point in time, but not for change. How a system changes, social change. It was attacked by sociologists of the conflict school in sociology. Another major critique was Mills, who put a very synthetic criticism in a phrase ‘the parson general theory is drunk iwht syntax (linguistics) but is very poor in semantics.’ He is good in drawing a theoretical architecture of exchanges and subsystems, but it is not useful in understanding concrete phenomena. Not very generous but it gets the point.
Lecture 10
Wallerstein
Published over a few decades. Followed a school of scholars of economic development. Based on a reappraisal of two theoretical approaches: Theories of imperialism, mostly by marxists but not exclusively. Evolved a theory which specified three ideal types that characterise the relation between economy and society:
1. Empire
2. World system economy
3. Socialism (undefined)
Egypt, China, Russia, Ottoman empire were studied. Multiplicity of social and cultural incorporated into dominion under single government. Ensure economic corporation by military domination, centralised administration and taxation. Cappalri’s mode of distribution. Main factor of their decline is difficult to pinpoint, but vast territories require huge bureaucracy which makes it difficult to rule such an empire.
War system is the war economy. Multipilicty of multiple entities are integrated by common economy. Coincides with what others define as modern civilisation and capitalism. Wallerstein is critical of modernization, but has something similar with different claims. The state is regulating the market. Predominance of the market instead of the empirical state. The EUropean world economy was established, not as an empire but shares features with empire. It was social system that the world hadnt known before .It was an economic but not a civil system. (page 72). It is a world system, not becaus eit encompasses the whole world. It is a world economy, because factor is economic, reinforced by cultural link and federal structures.
Focus on dynamics of system. Core countries, peripheral and semi peripheral countries.
Capitalist market requires competition. In empire it is difficult but within empire is conductive if it is constituted of different nation states competing to an extent.
Modernity and its future
The question of modernity and modernization as a process toward and through modernity of a society was coming forth again towards the end of last century. Focus was on advanced modern countries, instead of developing countries. The reason why is probably related to the implosion of the USSR and the end of the cold war. Risk of mutual destruction. After collapse of USSR 1991, first reaction was kind of western euphoria (the idea that the west won - liberal democracy won). The most known expression of this attitude was ‘The end of history’. (did not mean it but said it for selling reasons). What was over was the great historical confrontation between two different systems. These had basic differences. State planning vs market economy. Liberal democracy vs peoples democracy (one party democracy). It was political and economic liberalism. The euphoria was short lived- basic confrontations between people and countries with different cultures and interests, and the conflict of hegemony with different actors. The link between new modernisation and post modern studies said that it is not true that this winning civilization is so strong and coherent in it’s part, without major contradictions. What does modernity mean? THey questioned modern society, culture and economy. Post modernity had the merit of fostering a reassessment of what modernity means. THe contribution to understanding modern society is limited- Martinelli is sceptical about choosing a post-something. It is clear what is ending, but they are confused about what is coming. The roots of pm is found in architecture. Las vegas is seen as prototype for future; kitsch, melting of cultures, function of city is games. At the same time there was also a stream in French philosophy. There post modernism is more soundly based, tied to Lyotard. The Grand Narratives - the great accounts. The great historical schemes of progress, and meta theories which claim to discover universal truths. The abandonment of this great narrative translates to petits recits. Roots can be recognized in Nietschze; Foucault (antropologization of reality); elements in Weber (iron cage of rational organisation) ; Adorno and Horkheimer (Frankfort school). What is disappointing in PM theory is the fact that they make the same mistake that theories of early modernization make. It is opposing two types of reality. The second major critique is the fact that in oder to define modern and postmodern as different societies they have to ignore the aspects of continuity in the time before that. 130 years before PM society we find a famous essays by Baudelairre (1863) the painter of modern life where he argue that modern society had made a radical rapture with the past. He argued that modernity is the theatre of the transient. One half of art, the other being eternal and immutable. Alternative to PM are those authors that argue we still live in modern age, but in an age of radical, unaccomplished modernity. Popularised by exhibition in Berlin. It was entitled. The whole century needed to be embedded.
Third and final critique of PM approach is that they have a week epistemifal position. They reject science. .
PM are not concerned with empirical proof, but with illustrating societies.
Berman
Sociologist of culture - major critics of PM. (Derrida, Baudrilliard). His vision of modernity: ‘To be modern is to live a life of paradox and contradiction. To be overpowered by immense bureaucratic organization that the immense bureaucratic organizations that have the power to control and often destroy communities, values, lives; and yet to be undeterred in our determination to face these forces, to fight to change their world and make it our own. It is both revolutionary and conservative: alive to new possibilities for experience and adventure.’ There is tension between bureaucracy and free will- it is unsolved. In modern society it is possible to pursuit their own goals, even in a context that is ruled by the bureaucratic organisation.
Similar to Habermas has transformed the Weberian concept of modernity into an abstraction full of consequences – it is separated from its modern European ori-gins and is outlined in a model of general social processes that disregards its temporal and spatial determinations.
This, in Habermas view, has implied the interruption between modernity and the historical european concept of rationalism. This involved the interruption of connections between modernity and the historical context of Western rationalism, impeding the self-comprehension of the modernization process, which appears functionally autonomous, self-sufficient and crystallized. This induced postmodernists to talk about the end of modernity as the end of the capacity of rational comprehension of the processes, as the conclusion of the history of ideas. Habermas doe snot agree, it is to early to abandon modernity as a cultural project. It is marked by enlightened rationality. He recognises it involves many risks, seeking to understand reality from the pov of the individual, can lead to purely instrumental and utilitarian notion of rationlity, which encourages dominion and exploitation of nature and society. This is just instrumental rationality. There is another form of rationality, which is that of communicative rationality or reason. Extremely synthesized, Habermas’s theory is that the ‘omniscient’
94 Modernity and its Future
individual subject is subordinated to the consensual accord that is reached in the communicative interaction between equal and conscious subjects
People can act as a rational individual, only because they exist in a community. Subjects are socialised rooted in their own societal context. There is a deficit in communicative rationality to utilitarian rationality.
Their exchange is within the context of social norms, legal institutions (property, contract, enforcement rules). It is in this context that the act of exchange can take place. The problem arises wherever the utilitarian version of rationality is too strong. Economic liberalism without cultural liberalism will cause problems. Modern revolution of 18th century is interpreted by stressing very much the economic dimension (industrial revolution, technology, market revolution) but underplaying the other basic revolutionary elements (like the affirmation of individual rights, the liberal democratic part).
Touraine
Dual establishment between reason and subject. Rationalism and subjectivism or individualism are two core values. So, on one hand, you have this idea that everything needs to be super logical and efficient. (rationality) On the other hand, because people felt suffocated by this, they started clinging really tightly to their own identities and ideas, which made things even more chaotic.
Touraine disagrees with postmodernists arguing that everything is subjective because it leaves room for fundamentalists, and creates a lack of common shared reality.
Wagner
Basically says the same as Touraine, but uses liberty and discipline. They are interconnected.
Ulrich Beck and the risk society
Hazardous use of nuclear, global warming, produciton of food products are all risks created by us. Beck compares two stages in the modernization. We have indulstrialisation and modernization. The nature of social conflict has con- sequently changed: the distributional conflicts over ‘goods’ (such as property, income, and jobs) that characterized industrial society have given way to distributional conflicts over ‘bads’, such as the risks of nuclear technology, genetic research, and the threat to the environment.
Classic model was over output (the goods), now over the ‘ bads’ : THe bads effect different types of people.
Lecture 11
Modernization & modernity
Globalization
Catch-all’s which cover large quantity of phenomena that they don’t explain much, but they are necessary as a basic feature of our present. People in various parts of the world leave. Two concepts of globalisation & modernization are tightly linked to eachother. The process of formation of societies that we can interpreter in the ideal type of modernity. We can place this process over the last 500 years. Any process towards modernity takes place in a global context. Not all societies become the same. Global condition with different societies with different features, that share common problems but have different responses.
Increasing financial, technological interdependence and increasing social connectedness. Persisting cultural and political fragmentation that increases. System of international relations is higher then a few decades ago. This explains many conflict that are difficult to manage and solve. International organizations are weaker and the fragmentations are higher. THe degree of interconnectedness is increasing. We have a basic contradiction.
Globalization has been defined as:
Time- space compression (Harvey - 1989) . Global media allows us to follow and attend in real time events. Space also because of transformation. Advancement in non material communications.
(Tony Giddens - 1990): Action at a distance.
Ohmae (1990): Accelerating interdependence.
Castells (author of huge publications on network society).: Networking.
Synthetically: The growth of networks of interdependence.
Extensively: We can define it as a set of related processes that involve a stretching of economic, social, cultural and political activity and interconnect the individuals, groups, communities, states, societies, markets, corporations, international governmental and non-governmental organisations in complex webs of social relations, intensifying their interdependence and increasing the conscious- ness of what is happening.
Increase in the consciousness of what global networks are.
Factors driving:
Technological (ICT), economic and financial (restructuring of capitalist economy through growth of multinational corporations, consolidation of world financial market).
Social and cultural (global village, mass media, international migrations)
Political: USSR collapse, protectionist economies). Van Marrewijk: Nation-state vs multinational firms.
Hyperglobalizers: Think of it as an irreversible process that changes every aspect of life. Usually scholars with a focus on economic and financial globalisation. Something unique.
Sceptics: Nothing new. If we confront and compare present globalisation with the turn of last century, we find the percentage of foreign investment is almost the same.
The second dimension which overlaps with the first is the opposition between those that say the goods are greater then the bads. (Neo-liberal) or against neo-marxists. The negative impact is greater then the positive one. They argue that globalisation is an expression of the hegemonic power of the west or US.
Third dimension: Homogenising culture and economics, and heterogenization of culture. Also sometimes referred to as We can define it as a set of related processes that involve a stretching of economic, social, cultural and political activity and interconnect the individuals, groups, communities, states, societies, markets, corporations, international governmental and non-governmental organizations in complex webs of social relations, intensifying their interdependence and increasing the conscious- ness of what is happening.
This is an interesting opposition. ‘The world is flat’ or Fukuyama ‘ end of history’.
Reaction was to revitalise local identities and cultures. Hybridization. This dimension focuses on cultural dimension of globalisation.
Increasing interdependence of some aspects of social life and decreasing … in others.
We live in a world system, but not in a world society. A system is made of interdependent elements. We are interdependent. (Think of covid 19 or Huthi’s in middle east- we are vulnerable to the interruption or difficulties in global supply chains.) but at the same time we don’t live it in our society. Society is defacto network with social relations with mutual expectations. One of the arguments of hyberglobalists has been ‘the notion of the demise of the nation state’. This is also a thesis that has been falsified in many ways; what has happened, and still happening, is an erosion of national sovereignty. This does not mean that the nation state seized to be the core actor in international politics. Tony Negri (nation states vs multinational corporations) - it is a view but not the case. Nation states are very strong. One has to ask- which nation states. There are more and less powerful nation states. Less powerful nation states might be influenced more by corporations than more powerful nation states.
We do not have empirical verification of the declining nation state in general. We do have evidence for erosion of national sovereignty. The constraints set by monetary institutions (IMF, NYSE can set regulations). This can also be positive; f.e. Labour regulations more strict in their base countries force them to better the conditions in producing countries.
Permeability of national frontiers to illegal immigrants is also an example of loss of sovereignty. International law prescribes everyone can leave their country, but no international law except (asylum seeking Genova) promises entry into other country).
Possible developments and futures of this globalised world?
Key contradiction between growing interdependence and fragmentation. What is globalisation today?
What happened in the almost 80 years since the end of WOII? This period can be divided into two sub periods. They do not coincide entirely. We consider the economic and political dimension. Economic: End of WOII to the seventies. This was the period L’entrante glorieuze. GLorious for the west, but also for the soviet world. Decades of high rates of growth and basic transformations. In the seventies, there was a majr crisis. There was a rapture / crisis of stagflation. Unusual combination of stagnation and inflation. Usually, inflation is more frequent in periods of economic growth. Low rate of growth with high rates of inflation. Rising costs of all major factors of production; land (including minerals, energy, agricultural). There was a very increase of price of oil whi9ch created a situation in which development economies could no longer profit from low energy prices. The OPEC was formed (cartel of oil producing countries). Then, more or less in the same period, there was a season of wage increases in almost all developed economies. Even faster then productivity. The other, labour, was creating tensions in the labour market. Capital; capital had a problem because it was the time of the end of the gold standard for the dollar. The cost of money increased. What happened was that in economic theory there was a shift from a paradigm focusing on aggregate demand to supply side economic theory. The problem was in the factors of production cost. What was more important, a change of paradigm in economic policy. Demand side problems included mainting demand side would guarantee growth and entrepreneurial attitude. In the declining phase of economic cycle, government should intervene with public investment. Keynes. Rising wages implies rising purchasing power. The economic theory focuses on demand side. Rising prices of factors of production made supply side more important. Reagonomics, Thatcher. Liberalisation of financial markets.
A second subperiod started: contemporary globalisation. Increasing power for multinationals and global finance. This second subperiod ends with the 2008 global financial crisis. Form then on, we enter a period which is not very clear. One hand, neo liberal global economy goes on and continues. Major economic powers have implemented exit strategies from the crisis. We have not entered another phase of economic growth. If we look at the last 80 years of history from politics, we see something else. The critical juncture takes place ten to 15 years later with regard to economic development. We first have the phase of cold war (bipolarism), both USSR + USA compete. The ‘third world’ was not very powerful in world politics, but was a heterogeneous group of countries that did not want to identify with one or two contenders, like India, Yugoslavia, etc. The bipolar order was an order at work. It implied a stable equilibrium or balance of power. This ends with the collapse of the USSR. At this point there was a short period that was ‘unipolar’. USA as the winner. Very brief, more illusion than reality. After, we get a multipolar world. Form political pov, the world is increasingly multipolar. Adding a declining and weaker American hegemony. THere are several great powers which have the basic resources of power. These are diverse; economic, financial, technological, soft power, cultural, land, population, territory. Many different things. If you compare, select criteria, chose indicators and calculate power. Multipolar world with the declining American hegemony and rising Chinese power in confrontation with hegemony. We have entered a phase of multi polarisation with american hegemony and a main challenger. Only local specific factors have to be interpreted in this basic confrontation.
Now, there is a kind of distorting effect; it seems like USA vs Russia but is the facto between USA and CHina. There are still new versions of the third world countries that try to be independent, but they are more rallying with China, which seems less threatening than the USA. THese powers can follow an independent course, but the higher the tension between them, countries are forced to declare a side. At this moment we don’t see that. Even elements that regard various wars as one; the world war in fragments. These wars are vaguely related but separate. In any case, the situation is more complicated to manage and to predict for two other reasons. The two main contenders are both in trouble in domestic policies. USA is extremely polarised. Power requires stability of political institutions and domestic consensus. The fact that there are also some of the constituent elements of the American institution architecture. The relation between precedent of the union and a strong congress is showing functional problems. When the congress in its entirety is the same as the president, there is no big problem, but otherwise it leads to stalemate. Foreign politics were in the same line; democrats and republicans have very different views on foreign politics. This creates a problem, because the president has to find a way to collaborate with the national security system which is very powerful. The deep state. Not only strong because of the military industrial complex, but also because they are powerful in a bureaucratic sense. If Trump is elected and goes haywire, and if he dismantles it, that harms the hegemony.
China, to some, is moving to a great future, but is full of contradictions. They are at development stage with economic growth leads to higher wage demands. Single party is challenged by worker protests which get repressed. Communist party is managing contradictions to go to modernization, but they will run into major contradictions and conflict. When a union or nation state is played by contradiction and conflict, foreign relations are getting more aggressive and more repression internally. Martinelli is not optimistic about developments in USA (it is deteriorating). Xi Jinping's power has become more suppressive. Can other great powers in the world do something? Can they be more assertive, or will they create other problems? What can be argued is that until now, the Chinese political system is capable of controlling tensions.
Issues with global agenda
Various countries reached agreements; encouraging signs. Not sufficient, but important steps are being made. We live in world system; paris agreement as example. Howeer it is unstable.
Lecture 12
Outline of major interpretations of what kind of political entity the EU is. Secondly, the basic aspects of the political institutional architecture & policy and decisionmaking will be explained.
How the EU became what it is today.
More then 70 year sin the making; can be considered one of the most relevant political innovations of the seocnd half of the 20th century.
It was born out of the will to end the century long wars among European nations. The first expression of this european integration was the community for coal and steel. Why? Because the steel industry was the major war industries of the 20th century.
European Union
After Maastricht treaty, the EU was established. It had to set stringent criteria for new members to be accepted. Not only economic requirements but also political. Member candidates must demonstrate that they respect civil and human rights as well as pluralist democracies. The criteria is strict and the process for new members is rigorous and detailed. Once you are in, there are no provisions to expel countries. Participation can be sterilised or countries can be sanctioned. They can be excluded from decision making processes. This requires the consent of all the other countries; the country under scrutiny will usually have one or two allies. Success Story, but certainly a story full of contradiction and conflict. Nowadays, the EU is living in a complicated phase. THe problems stem from it’s very succes, for example the enlargement. This has created problems because the new members, that were under Soviet area of influence, are countries that have had different economic and political systems. They conceive European Integration in a different way from the original manner. Think of Poland, Romania, Bulgaria, Hungary. THey have had limited sovereignty during the soviet era and are reluctant now to renounce portions of their national sovereignty. The total sovereignty is moved to a higher level, supranational. They have a different idea of what it should be because of their different histories. In cultural terms, there were different lives; different institutions; different books and films. So in the EU today there is a major clash between central western europe and that of the east. There are others; any process of enlargement has consequences. Enlargement due to the fact that a kind of counter common market association emerged, EFTA, which was another area of free market, among countries that are not members of the EU, like the UK, Scandinavia and Austria, When EFTA was dismissed (unable to compete) the new members entered with a conception of EUropean Integration which was more like a free market then a political union. UK pushed for greater free market, and did not want to transfer sovereignty to the supranational level. Even after Brexit, there is this east/west, North/south difference. Also, countries like Germany are more concerned with budget control, fiscal rigor and other countries like French and Spain, that want growth, even taking on more debt.
Supporters of this view sign treaties on the basis of national interest. International organisation that doesn’t strip members of sovereignty. Resource sharing rather then delegation of power. The policies that substitute for the members is very minimal.
Supranational union or community; here we have prominent scholars, like Ernst Haas, who sees European Integration as outcome of 3 factors. Actors with transnational goals, supranational actors to set norms, and normative structure that gives shape to the European polity. This supranational union has been growing through specific process called spillover. Spontaneous incremental feedback stemming from economic interdependence. Implies the need to integrate other industries from different countries. Political spillover; transferring power to supergroups to act on country. Evidence for one or the other approach are plenty. Some scholars argue for a third approach which sees EU as multilevel and multi agency system of governance. Multilevel constitutionalism. Decision making processes takes place at different levels. Actually, this last approach could integrate other two, but is more of a subtype of the second; a supranational multilevel union. Within this approach, like Majone, argue that the specifics of the EU is that it is a regulatory state. Dependent and quasi independent agencies and institutions. Create a space open to normative integration.
What we can draw from this is, that in Martinelli’s view, is not an international organisation. It is much more. It can not be compared to for example the World Trade Organization. At the same time it is not a full fledged union. What is the best approach to study the EU? We have to outline the architecture of the institutions and the basic institutions. The interdevelopmental approach applies better to the Maastricht treaty with the second and third pillars. Second is common foreign defence policy and judicial cooperation. Whereas supranational communicatiarian approach is applied to 1st pillar, the one of the common European space.
Two treaties are at the base, signed in 2007 in Lisbon and enforced in 2009. THe treaty on the EU & treaty on functioning of the EU. THese treaties have put in order systematised and organised all the different treaties, norms and laws passed by European institutions in the last decades. What has been acquired in terms of community norms. (ce qui a été acquis).
The verdicts, laws, treaties, directives. All those were complicated, and these norms were all deemed relevant. This explains why EU decision making is so complicated. SOmetimes long, fatiguing. On many issues and policy matters it is required to get unanimous approval which requires painful compromises.
Five major institutions:
THe European Council / THe council of ministers
THe commission
The parlement
The ECJ
For eurozone member states, the ECB. (19 out of 27).
Council: Formed by members heads of state and governments. It’s necessary to add heads of state (French & Finnish republic presidents have governmental role). THis is according to the TFEU ‘Defines directions and priorities of unions. Applies goals and strategies, even in areas where there are no covering treaties. International crises, coordination and so-on. A collective presidency. One of the specific features of the union as an accomplished union is that there is no president. (in federal union) which is elected by the people. There are 27 heads of government. This is the most important institution. Without the consent of the council, only very limited decisions can be taken. As a different expression as a different institution. The Council, council of the union. Functional configuration of members states governments together with the general affairs council. Different councils composed by ministries that have competence over subject matters. The Ecofin, the council of economic and financial ministries of the states that handle issues of concern to member states. These include the permanent representatives of embassies. The ministries of member states have a lot of things to do. They must be assisted by permanent members.
The role of this character is ambivalent, they have two heads. One is intergovernmental, where they express or pursue national interests. They also have the other hat; communitarian. They prepare council meetings. You can imagine the tendency for national interests. The functioning of the European Council is strongly characterised by national interests. THe members of this council are there because they have a mandate from the national constituency. Of course because they are members of a union council, they also try to make the defence of national interest compatible with wider common interests. It could be, if we push a bit further, a comparison with the full fledged union like the USA. The European council resembles the US Senate. There, each member state has the same representatives. Lisbon treaty has the role of council by permanent political head. European Council President elected by other members for 2,5 years, renewable once.
Commission: Mainly executive. Sort of secretariat of the council, and acting as federal government embryo. It is composed of commissioners. In charge of commission of area of common European affairs. In the Lisbon treaty there is no provision that the number of commissioners equals member states. It is not coherent with a well organised government. To complicate matters the commission also starts the legislative process. This is strange because they are the executive branch. Again, another complication. The president of the commission is acting as a primus interpares. Not a real chancellor. Assisted by an administrative body. Both the president and the other commission members, including the high representative of union affairs and security policy (vague expression of foreign minister kind of). All these roles are appointed by the European Council, by a qualified majority. In the last parliamentary elections, five years ago, for the first time there was this proposal (accepted) to present their candidate. (Lijsttrekker). It was an agreement by most groups was immediately unattended, because the consent is that the party that lead in the elections can present it’s candidate. 5 years ago, this did not happen. It should have been a candidate of the people’s party but the PPE spitzenkandidat was substituted by Ursela von der Leyen. She will represent herself for a second term. The commission can decide by a simple majority vote. It has an administrative apparatus with a certain number of director generals. The commission bureaucracy is too big and too small at once. Too small bc average number (between 200 and 800) must manage complicated issues. Functional conflicts, overlapping consensus etc. Not for reasons from europhobics, but the whole of the European parliament has less officials then the city of Rome. High Representative for CFSP
Parliament: Increased its own powers but differs from state parliaments. It is peculiar because it does not have the single power which is inherent in historically parliament. Parliaments were supposed to control the use of public funds, fiscal oversight. No taxation without representation. Parliament despite lacking traditional powers, but most laws approved on supranational level must be approved both by council and by parliament. SIngle European Act of 1986 (first treaty integrating different communities in one union) gave power to directly create legislation. Veto access of new states. The Amsterdam treaty consolidates the equal status of the European Council, and the right to approve or veto commission president if they do not meet the requirements. Italian person fe was rejected because of his view of LGBT members, French rejected because of potential conflict of interest.
European Court of Justice is fully supranational. 1957 treaty of Rome: Task interpreting community laws and treaties. It has greatly increased over time. A second court has been established. The ECJ has made a fundamental contribution to the constitutionalisation of community law. It has established the superiority of EU law over member state law. Member states have limited (except for free market) sum of rights. Created a set of rights that is binding for citizens. Verdicts of the Court of Justice prevail over the law of member states. In the seventies contributed to the common market. Product made in one member state will be accepted in other member states. Authentic interpretation, law practises compatibility, enforces the law, whenever national government fails to comply. Legal acts (EU act) violates any rights or treaties, ECJ comes into action. Interesting thing is that each European Citizen have a double citizenship. Polish and European citizenship. They can bring their case to the ECJ if they think that they have been subjected to a norm which is in contrast with higher EU law. THe existence of the ECJ responses to the idea of separation of powers. Not like all EU member states.
ECB is not an institution of the whole EU but only for the zone, established by Maastricht treaty. Affirms institutional and financial independence. After an explicit request by German government. Germany accepted the idea of a central bank if it was fully independent. This request was matched by the French request to keep control on policies on the national level. European Central Bank performs 1 of 2 roles. The implementation of monetary and currency policy. The other major role played by central banks (surveillance of banking system) is stil performed by member state central banks. Institution of ECB did not end national central banks. THey are in charge of surveilling banking and financial system.
Lecture 13
Parties & movements in EU member states define themselves as souvereignists. Sovereignism is a different way to say ‘nationalism’. Nationalism is a more conflictual concept, delegitimized by the world wars, they prefer another word for the same concept.
Globalization & Reaction to globalisation
Broad concept with consequences including the uprooting people from their local context. Globalization has steered countermovements and attitudes that affirm the importance of local identity, or a search for it. National identity is the strongest. In the contemporary world, moreso then in the past, we have multiple identities. We can identify with the family, family network, circle of friends, professional colleagues, gender. A very strong identity is the national one; a sense of belonging to a community of those who share my culture, language, ways of life, rights and duties of citizenship. Nations are in a sense a modern phenomena. The development as nationalism as an ideology is linked to nation building and the nation state. Nationalism can be defined as the ideology as the nation state. It can be defined in various ways;
ANthony SMith - 5 different uses
1. The whole process of forming and maintaining nation
2. Consciousness of belong to the nation
3. a language and symbolism of the nation
4. an ideology (including a cultural doctrine) of nations
5. a social and political movement to achieve the goals of nations and realize the national will.
Institution of political sovereignty , entity with supreme jurisdiction with territory and population. Enjoys legitimacy because of support of the community (civil). Community is imagined based on citizen rights or founded of tights of blood, language, shared tradition and collective memory.
Modern product because nationalism developed as a substitute of previous identity (decline of family, village community, secular religion). Strongest ideology on eve of WOI to prevail over the most widespread and strong ideologies and cultures of the time. Prevailed over socialist internationalism.
Imagined community because you can not meet all your fellow country men.
Three dimension of same nationalistic principle
1. Geneological dimension (constructed around origin of the people). Volknation. Rather worrying saying in Serbian: ‘Serbia is wherever there is a grave of a Serbian’. Blutboden. Ancestry and a given territory. Marks of a specific culture.
2. Cultural dimension: Symbolic heritage provided by language, custom and tradition is constructed as the essence of the nation. In german it is Kulturnation.
3. Civil dimension. Members of nation are those who share the rights and duties of a nation. Staatnation.
Understanding the Force of Nationalist Ideology
Anderson's Imagined Community: Anderson's concept underscores the nation as an imagined political community, fostering deep comradeship and overcoming individual fears through identification with an immortal nation.
Albertini's Political Linkage: Albertini emphasizes nationalism's alignment with the nation-state, placing loyalty to the state at the forefront of group values.
Brass's Sociopolitical Appeal: Brass highlights nationalism's ability to merge culture and politics, mobilizing elites and masses through a shared historical destiny, utilizing ethnic identities as tools for elite competition and mass support.
Claim: Foreign policies (negative - deny the same rights to others that are claimed for themselves) but positive: for independence.
The European project was born with the basic aim of putting an end to European wars.
Implosion of soviet union. SU had reconducted various nationalities in the union into one single union. Tied together by one vcentralized power. The nations continued to exist as well as national conflicts. First constitution of SU recognized the independent existence of nations. Aspirations to greater independence of nations were brutally crashed by Stalin through strong authoritarian force.
Another reason for all those ethnic, religious clashes were in some extend sterialised in the great competition between two superpowers, because there was competition for world hegemony. All other conflicts were downgraded to less competition. After Cold War, many of these exploded. Not only from SU but also from Juguslavia. Velvet divorce.
For all these reasons nationalism is back. Nationalism has never disappeared completely from the countries of the European union- various communities were constructed by nation states. Project was to get rid of them over time but the founders or actors were nation states.
Intergovernmental approach in decision making is important. Communities were constructed through intergovernmental agreements (treaties). If nation states stay, nationalism status too.
The European project still has the aim of bypassing nationalism by the nation states by developing a European identity and civilianship, by supplementing the nation identity. Stereotypes and prejudice will last. What is important is that people of different member states also consider themselves members of the same community with shared goals, to do that they must enjoy rights and duties of EU.
Problem is that the growth of the EU has moved ahead through a set of functional processes or ‘spillover’. A Growing transfer of portions of sovereignty to the supranational level in different policy levels.
Anonymous transfer of loyalty of supranational institutions by citizens of various states; even the election for the European Parliament have been a bit less as real elections for supranational body and more as a test of strength for the national parties. Nationalist ideaology (sovereign partisan movements) are one of, or even the, main obstacle to further national integration into the union. In summer of 2022 a manifesto was written to contribute to the debate within the conference of future of europe, signed by EU right wing parties and movements, written by LePen (lega, PVV). In this manifesto it was clear what the target was ‘ The European Super State’ which would impose its will on the free European citizens. There is strong opposition to any change on the unanimous vote (veto) as well as the request to transfer back some policy areas to the national level. In a sense the election for the European Parliament has cleavage not jsut between left and right, but between pro-european and euro sceptics. In line with what 3 Italian supporters of fascism (Spinelli, Rossi) (The ventotene manifesto).
Lecture 14
Next week Friday:
Global financial crisis
European response to two crisis: Pandemic (2019) and Russia Ukrainian war
(chapter 13 + 14)
Proces of European integration has been on the whole succesful in 80 years of life of the European Community (EU). In relative terms what the European economy vs the other major economies in the world it is well. How comprenhensive is the spectrum of economic activity? EU financial strength and strength of the Euro? Role played in most advanced technological chapters?
Barry Eichengreen (2007) compared future European vs American model. The ‘lost ten years’ although GDP and productivity grew less in EU then in USA, he predict that if radical changes continue with same pace and scope, the European Economy will continue to grow slowly and outperformed by uS. In spite of that, in the mid-long term there is no serious competitive cris because the fundamentals are still there. Numerous, well educated and trained labour force, competition rules (legislation / law & order), good corporate governance, efficient and careful state regulations, stable macroeconomic policies. Negative factors: Protectionism, uncertainty in trade tensions and investment, Brexit). After sequence of crisises in the last 50 years (financial, economic, wars, pandemic) can we make the same evaluation?
We can answer this question by assessing the effectiveness and nature of the response to these crisises. Nowadays, the EU economy is still the second or third largest economy. The judgement depends on the type of statistical criteria we employ. Statistical measurement we employ; if we compare economic data we can compare monetary value, or various economic performance in terms of PPP. Purchasing Power Parity. If we use the second type of measurement, the economies of China and India are bigger. Already now, the CHinese economy would be the first, USA second and European third. In a few decades, India is expected to become second. This was a major performance. The first part of this post war, 80 years period. Thirty glorious years in between WOII en crisis in the seventies. THe Eruopean economy grew faster then USA. Second period is globalisation, hegemony os USA, AMerica grew faster. There was the very successful rise of China and emerging economies. (Now, they have been well emerged. Non western economies might be a better term). This growth is difficult to compare because there is a difficulty in the method used. The growth of the European Economy we have to compare a political entity that changes quite a lot. In its formation it is very different- do we compare it as it is now?
Entry into the European Community was always hand in hand with growth rates because of the benefits of single market and aid and FDI. Cohesion policy. Aims at reducing differences between regions and nations in member states. WHy cohesion? Underlying idea is that political entities where there are major inequalities, more serious problems of social and political problems and tensions exist. Four engines (France, Germany, Italy, North Eastern region of Romania, or central Bulgaria).
Indicator
Top 3
Bottom 3
GDP per capita (PPS)
Luxembourg (261%), Ireland (138%), Netherlands (129%)
Bulgaria (51%), Romania (65%), Greece (68%)
Actual Individual Consumption (AIC) per capita
Luxembourg (134%), Germany (120%), Austria (117%)
Bulgaria (56%), Croatia (64%), Hungary (71%)
Unemployment Rate Increase (2008-2012)
Germany (-1.285 million decrease)
Spain (4 million increase), Greece (large increase, not quantified)
The past and point of entry (historical) to the union. Latecomers started from a much lower level and are now catching up. There are also consequences of the exit strategy. The economic growth in the post war period can be divided in three sub periods:
he EU economy’s pace slowed down especially in the so-called ‘difficult’ ten years between 1995 and 2005, then experienced a short recovery that was ended and reversed by the global crisis.
Smith abroad and Keynes at home > Liberalisation of free trade (smith) + intervention to sustain demand and employment. Demand side economics which is substituted to supply side economics. No longer focussed on demand, but trying to control prices of factors of production. Facilitated because of historical compromise (Italian lexicon): free trade and state intervention was made possible between capital and labour organisation. Organised labour through unions with business interest organisations (bourgeois parties). Alliance among producers. It was a time when a specific variety of capitalism was implemented. Major western european countries (France, Germany, Benelux). Social Market Economy. Economic policy that was followed not just by social democrats, but also by people’s parties. Rheinischen Kapitalismus. It is not only market driven. Major differences between two models ?
1) Social capital. In Anglo saxon capitalism, the role of the stock exchange is greater, and credit to firms. In terms of labour negotiation and organisation; unions in the states tend to be strong in certain sectors, but negotiation of wages takes place at the firm level. In the social market variety, these are centralized. Signed at the national level and superseded by corporations. Labour force training: In anglosexon, general education is provided by schools, training takes place within firm. In social capitalist markets there are general school intended to educate for the labour market in the private sphere. They can explain to some extent the effectiveness of the response of the European Union to the various crisises.
Response of EU was slower, but it came. The community effectiveness multiplier; we must maintain certain demand side policy, but the most effective way to restart growth is further integration; at community and regional level. This implies a better way for greater political integration. Further economic integration runs into serious limits if greater political integration does not occur. It starts the process of (Maastricht process) of further economic and political integration. Slow reaction to crisis of the seventies. At Union level integration was for example research, energy, pharmaceutical industry. (later: defence). In front of the cartel of energy producers, the EU as single customer has much greater PP then individual states. Regional examples of regional coordination can include complementarity of certain industry. The EU enters as an active participant in the global economy of the next decade, but did this also importing some aspects of the market driven economy to its own model. The impression was that it was more successful; now we have altered that view, after the global financial crisis. The lost decade (process of change was too slow, Euro took a lot of time to take of. Productivity grew. There were problems related to newcomers.) When this period of slow growth was coming to an end, the situation changed quickly and the global financial crisis came. Europe took a lil’ longer then other countries to respond to the crisis.
Crisis
Starts as crisis in credit default swaps, spreads to largest investment banks in USA, then spread globally. There is a boom in the real estate because mortgages are granted to a wider group of people, including people who are unemployed. (Ninja - no income, no job, no assets). The problem was that incentives for getting new clients was too high, oversight too little. It was clear to the lenders that it was a risky type of financing, they wanted to write insurance. They made constructions with other financial institutions that sold insurances that were actually credits. These products were highly risky and offered high interests. In order to make them attractive, these products were included in investment packages. These problems entered into a lot of banks and financial institutions. Sometimes the institutions included these products without being aware of the nature of the products; they only looked at the interests. These products spread like a fire. It affected the very core of international finance (US Financial System, five of them, one went bankrupt, Lehman Brothers). Two others were incorporated into other banks. Certain countries were more affected then others. It was a structural crisis, not conjunctioal. It had to do with elements of the very structure of the system. It was not a crisis which was going to collapse the world capitalism because the history of capitalism has shown that it goes through series of structural and systemic crisis. Marxian Schumpeterian version. Creative Destruction. It wasn’t changed much because governments of the major economic and political power intervened in order to compensate the market failure. The first great investment bank was left to fall, but then governments intervened with significant aid. Some of the most coherent supporters of free market economics argued that the crisis should go on and the weakest players would persevere. Governments could not do that because of the great social implications that would threaten the stability and political power of those countries. A major demonstration of the fact that we have to consider the strict interdependence of society (politics) and economics.
After all this (crisis, painful consequences of recession). Changes made are not drastic; it made more room for a greater role of the state.
The systemic capitalist crisis was less severe then the one in the 1930’s because it was stopped. Unemployment and stagnation happened but in a lesser extent. Liberal democracies of western crisis are more fragile, because the costs of the crisis were distributed unevenly. There are several movements and parties (national populists) and discontent of people who have been affected the most, lead to more populist movements.
The governments decided and implemented exit strategies; different, more or less successful. In martinelli’s book he compares strategies ebtween usa and europe. Major comparative reality is North America, not China or Brazil. The USA responded quicker. The crisis entered its effects in the second term of George Bush. It was Obama’s task to cope with it. Obama in the short period of 2 years in which he could be an effective president (congress was of his own party), and implemented a successful strategy. Solving or putting an end to the crisis, which consisted in a pro-grow policies at the cost of increasing the national debt. The US could follow this strategy because of the status of the dollar. The Euro could not do the same, and it also did not have the exact same policy. Obama also passed greater regulation of new financial products and financial institutions. New policies imply a intolerable economic level. A level of own means vs indebtedness. 1-100 or 1 to 80, which is too much. If you have debt of 80 million and have 1 million at your reserves. SEC which was previously more for traditional products, were also involved in more exotic products.
For the exit strategy of EU, the EU was in quite a different position. An overtly pro-growth strategy was not possible. The Euro was nor is a hegemonic currency. The monetary union is not yet a full fledged economic union. There are 19 different monetary policies, otgether with one monetary strategy. The exit strategy of the EU was concerned with Fiscal Austerity and monetary austerity. The major risk was inflation and monetary instability. The first reaction, which goes front he effects of the crisis to 2010, was marked by an attempt to rescrict (budgetary measures). The reaction of countries that suffered more (more to suffer from austerity) brought a weakening to this attitude, or at least the application of more flexible regulation, in order to suffer less consequences for growth and employment. The major instrument used for this exit strategies were aimed at preventing crisis, like the European Celeste, in which the European economies must submit their budget laws for evaluation to the commission. They have to adopt and change their laws, and every half year face new scrutiny. Second, we have coping with the crisis when it exists. Fiscal austerity, basic requirements which members must satisfy to be a member of the European Union. Fiscal deficit may not be higher then 3%, a fiscal budget not exceeding 60% of the state debt and not exceeding 60% of the GDP. Aiming at avoiding major systemic crisis. THese rules were made more and more flexible. The procedure to put things in order when broken, but they were delayed and applied in more flexible way. Instruments were created both as the results of communitarian decision making style or through signing new treaties. The communitarian method is prevailing. If new instruments are introduced trough treaties, mechanism is on state level. Mechanisms introduced that help those countries that face state debt crisis. The detailed story of all the negotiation bringing on the signing of new treaties and introducing these mechanisms are extended on in the book.
The ECB: The European Central Bank played a key role. The impact is strictly on European Union states (but also on the others of course). The ECB has mostly during Draghi’s presidency (july 2012) in the time of heavy speculation on the bonds of those countries that were in the Euro, but had weak economies. THey had to face their belief that being into the monetary union would prevent speculation against public debt, was an illusion. THe famous spread (difference between interest rates in ten years in german and weak economies) was increasing and growing. Apparently it was difficult to counteract these speculations. Draghi declared in their mandate to do whatever it takes to preserve the euro- and believe me- it will be enough. Major funds speculating against the Euro. The policy was quantitative easing. Increasing the amount of money invested in asset backed security programmes and bonds. This strategy was effective because the speculation declined rapidly. The strategy was successful and the EU solved the crisis, at a price: It achieved this with low growth rates and greater unemployment.
Quantitative easing continued during pandemic. Cleavage is back: two different strategies which have different aims and outcomes. They have to be arranged into a compromise which takes into consideration both aims.
The way the major social consequences of this crisis play out is discussed tomorrow. Changes in the European welfare state etc. The cleavage between the different economic policies.
Lecture 15
International women's day - strike, which enables
European welfare and the European social model
Differentiated autonomy. Italy is a state with regional decentralisiation. The law, which is discussed next month, is a law which calls for differentiated autonomy. Services can be provided in a cheaper or more efficient way. Supporters say this is good because it can favor a kind of useful competition amongst regions. Opponents say that not all regions have the same conditions and there will be not a level playground, and worry it will lead to greater inequality among reasons.
7% of population, and 22% of global GDP (17% of PPP).
50% of social welfare expenditure. European Social model is a distinct feature of the European Union. One is more general and includes the specific European capitalism + social welfare.
In the second definition it includes the welfare system. European Welfare is one of the most important institutional innovations of the 20th century. European welfare can refer to three different (overlapping) models.
1. SOmetimes the concept is used to define the national welfare regimes of the EU member states.
2. Second meaning refers to set of EU norms and policies coordinate, supersede, integrate policies. The harmonisation of different policies. Adding new supranatural layer to existing regimes.
3. Third, not existing, is a single EUropean welfare state. We do have a set of welfare state regimes * common norms, regulations and policies.
All those regimes have a lot in common, and can be distinguished form other welfare states in the world, because in general, because the European Welfare State rejects the concept of self-regulating market and has a purpose of social cohesion and welfare. It is an institutional device for remedying market failures and ensuring protection. Ensuring a non-violent way of negotiating conflict. In liberal democracies, citizenship rights are related to dialectics.
The rise of cost of welfare threatens the existence of the system, but it has been resilient. It has managed to survive increasing competition, as well as consequences of global financial crisis. The model is ingrained in the founding values of the EU. This principle is considered a key principle. In order to analyse whether the model is really implemented, and to which extent, both in national and supranational, we start from typology of welfare.
Liberal anglo-saxion: benefits only for basic needs. Policies for well-defined social groups (elderly, veterans, absolute poverty). Labour market is unregulated; unemployment is low and temporary. Provision of health and social services are mostly private. Education (great universities, if you are rich). Private foundations. It is harder to be poor in America then in Europe, because the responsibility is laid on a personal level. You are placed on a mental social map. However, society does not function well sometimes and there is little social mobility. Exploitation can happen more easily. Backed by belief of free market & state intervention threatens freedom.
Nordic social democratic:
The second type, Nordic, social democratic, is a universalistic model of so- cial citizenship with high standard government services provided to all, ex- tended public employment, active labour policies, gender equality measures, unemployment benefits directly managed by trade unions, strong decommodification effects, and high taxes to finance all this. Its ideological assumptions are social democracy and Lutheranism with their principles of equality of op- portunities and rewards, full employment, and the centrality of work as the core source of identity (Kautto et al., 2001). The Scandinavian countries are those that come closest to this second ideal type.
Competition of Nordic countries
Top manager of international cooperation. Consider cultural, political and social. You may value political stability, efficiency of public administration, effectiveness of judiciary. Cooperation has less costs. If you have trials that go on for years, or high corruption, it creates unpredictable costs. High level of labour conflicts are unattractive. Stability is an asset.
The third, the communitarian, continental European model
(sometimes also defined corporatist or conservative) relies on employment-based, status- related, social insurance schemes. High employment levels are needed to subsidize services. It was first implemented in Germany at the end of the 19th century by Bismarck’s reforms and concerned only male breadwinners, but was later gradually extended (keeping its professional base, instead of mov- ing toward universal social security). Its ideological assumptions are rooted in Socialist trade unionism and Christian social thinking (communitarian in the Catholic variant, hybridized with some notion of individual responsibility in the Protestant variant), which support communitarian solidarity, autonomy from government of family, Church, and professional organizations, and subsidiarity. Active labour policy included which sees work as dignity. The welfare systems of Germany, Austria, France, the Netherlands, Belgium, Italy, and Spain show various elements of this ideal type, but their differences are so great that it is preferable to distinguish two variants or sub- types: Central European and Mediterranean.
Communitarian - Central European
Status based, employment related welfare. Not as a citizen, but as a worker. Part of cost of labour implies the cost of services. Requires high employment levels (bc if it’s limited, the system has budget problems). This is a first ideal type, which had the first application in the Bismarck. One is top-down, from the government, is also more conservative. The other is bottom-up, coming from unions and from the left. This ideal type was congenial for a labour market with a predominance of male workers in a patriarchy. Other members of the family are entitled because they are members of the family or dependants. Inspired by communitarian Christian thinking. Implies active role of intermediate bodies between government and citizens. Professional and religious associations and unions.
Communitarian - Mediterranean
Strong dependence is characterised by strong dependence on reliance of family, compensating for scarcity of social services. Implies lower participation in labour market. Universal health system, generous pension schemes (foster intergenerational inequality), leaves less for younger, or women who have to console working career and family duties. Advantage is that retired parents provide services to other members of the family. We have to add a fifth system.
Eastern members of the European Union
Poland, Slovakia, Latvia, Lithuania, Romania, Croatia, Bulgaria. Hybridization of elements of four previous types. Under communist rule low labour productivity created poor standards of living. From planned to liberal democracy, a strong demand for better policies, but public spending is low. Some citizens think that certain social services were better in communist soviet time.
Three phases of European Welfare
First phase
Coincides with usual thirty glorious years after WOII. In that period, European Union Membre states were slowly developing their national welfare systems and there were intends to move to the supranational level in a harmonisation of the different systems. Goes on to somewhere in the mid eighties
Second phase
Mid eighties until mid nineties. Period in which major changes take place (Maastricht Treaty). Pillars are added; economic cooperation (single market) and in this period welfare changes; norms and policies at supranational level become more important, but there is also increasing competition in global market. With increasing competition (organisation of production in global supply chains) governments compete amongst themselves to attract foreign investment. Reducing extent of welfare policies. Welfare system is challenged and is forced to move into greater integration. THere is a shift from harmonisation to developing the social dimension of the single market. In the Maastricht treaty (1992) a social chapter is attached. It was not necessary; the aim of the Maastricht treaty was to define the free circulation of goods, capital and people. A social chapter was added, precisely to not to forget the dimension of social integration. Privileged role for organised business and labour. From this, little came out. Directive on parental leave, part time work, fixed time work, and allowing members to make social (labour relation regimes) policies applicable to foreign firms as well. Most important because labour standards can not be lowered. Issue work and welfare became more central, but still far from common welfare system. We also had an important element which was taken up again in the Amsterdam Treaty with the European Social Charter and Chapter, as well as the Treaty of Nice (declaration of social rights for EU Members). European Global Adjustment Fund, and in the nineties also norms to protect status of the worker.
Third phase.
Current. Post Global Financial Crisis. The implications of the GFM and the exit strategies from this was not totally negative for European welfare. Made social investments an integral part of Lisbon strategy. The whole discussion on knowledge economy to retain competitiveness. The social and economic component are both important for competitiveness. Social norms are not compatible with fiscal austerity and lower debt commitment. Approach that Martinelli agrees with is social investment. Fiscal austerity creates constraints. In the debate, as usual, there were those criticising the European Welfare System from both sides. ‘Too expensive, an obstacle to market functioning and growth’ and the others ‘New proposals of reform of social welfare were undermining European welfare.’ There is common ground; European welfare needs to be reformed in order to survive. Hemerijck’s (Dutch influential scholar).
Innovation in welfare policy:
More rigorous fiscal and monetary policies to combat inflation and reduce public debt. Public debt is not to be neglected because it will leave a huge burden to future generations.
Collective bargaining aimed at moderating the demands for wage in- creases, often achieved in tripartite negotiations between unions, employers associations, and governments.
Active labour market policies based on the principle of employment priority. Saving employment rate by creating new jobs (compensating for technological job loss).
Flexicurity. Flexibility for the firm, security for workers.
COnsolidate unemployment relief with social assistance & less generous unemployment benefits with conditions of attending courses of professional retraining.
Reform on social security, pay as you go pension systems, rising pension age, integrating three pillars of social security (state, firm, individual).
Active labour policies (child care, parental leave).
Ways to manage finance and manage social policies. Redefinition of relation between state, market, civil society.
Problem of societies (ageing societies), ageing societies, relies on family. Supported with money and aid; assistants for administrative practice. Choosing the right professional caregivers. Giving aid to buy technological devices.
For education social investment seems evident, but health and old age it also is, indirectly, by utilising labour potential more optimally. As European studies they enjoy common rights. Studying where you want, spending pensions where you want, receiving medical assistance. There are still differences.
What should be avoided: the adoption of minimum standards at a lower level; it should increase the standards on a higher level. Granting minimal standards for all, and allowing member states to add. In any case this is a major testing ground in the process of greater European integration because welfare is a distinctive feature of the European social model. One of the area’s that other countries have more to learn from us.
EU Welfare State: Conclusions
Diverse and Unique: EU welfare combines common principles with national specificities.
Key Areas:
Member countries' social protection systems (coordinated but path-dependent).
EU social policy (funded by EU budget, applies to all EU citizens).
Intra-European mobility space (social services based on residence).
Subnational and trans-border social spaces (regional cooperation, professional organizations).
Challenges:
Integrating these social spaces into a coherent whole.
Developing a European Social Union (ESU) to complement Economic and Monetary Union (EMU).
Reconciling National & Pan-European Levels:
Open method of coordination: EU sets goals/standards, countries define policies.
European Semester recommendations & flexible budget monitoring.
European Pillar of Social Rights (20 principles):
Aims for fair labor markets & welfare systems.
Upward convergence & modernization of existing EU legal framework.
Three areas: work-life balance, social protection, transparent working conditions.
Implementation:
Specific directives based on the principles (e.g., work-life balance).
Recommendations and non-binding communications.
National policy evaluation against the principles.
EU structural funds for social infrastructure (education, health, housing).
Successful program example: European Youth Guarantee.
Social Investment Paradigm:
Effective but challenged by the 2008 financial crisis.
Needs focus on sustainable growth, jobs, and quality welfare.
EU's Basic Choice:
Continue prioritizing fiscal stability over social policy (risks fragmentation and populism).
Invest in the social dimension and gradually move towards a single federal welfare state (more desirable but challenging).
Lecture 16 (final lecture)
Covid
Solidarity within same nation with immediate response: First decided to cope with severe cultural and economic effects with national policies or actions, such as stopping drug and equipment exports, ready medical staff. This first reaction did not last long. Rather soon, there were two complimentary processes taking place. One was a growing sentiment of solidarity across national borders. In this respect, videos like the one showing long queues of trucks taking coffins outside bergamo were shocking to members of other member space, enlarged solidarity and a growing awareness that within the EU we are national, but also European citizens. We enjoy the rights and obligations of both. This provided the necessary consensus for various governments to agree to to measures that were EU-wide. The institutions of European Governance reacted rather fast, after the immediate reaction. The ECB decided to buy further 700 million bonds for health and to prevent economic recessions. The ECB bought a total of 1 trillion of bonds, beyond the maturing of debt refinancing, assuming that liquidity to the market was necessary to fight against recession and to prevent bonds between member states. The commission reacted fast with its decision to suspend the growth pack. Granting member state governments by relaxing state aid rules. If state aid was aimed at compensating citizens and companies affected by the Corona Virus. THis implied a major cultural change. The abandoning the ‘German Dogma’ of zero budget deficit. However, foregoing enforcement of fiscal and state aid rules is different then communal action and pulling resources together. It just allows member states to be more free.
The second wave was the common EU response to the epidemic by pulling resources together. At first; a wider use of the EUropean stability mechanism and the reversal of the veto against Euro bonds. (Coronabonds). In order to come to this agreement, a conflict had to be solved in some way, so that one of the cleavages (northern member states that love fiscal austerity vs south that loves growth and employment). The cleavage was bypassed because of the emergency in an exceptional situation. The German government in a sense change sides and supported the view of Southern states because of the extraordinary character of the crisis.
THe first round of intervention included a rescue package which included an increase in the European Financing Mechanism with the only condition that these were employed to fund healthcare systems.
After, 100 billion euro of the Commission to national plans aimed at helping individuals and firms to redundancy funds. (Prevent dismissal of workers).
Also, a 200 billion loan garantuees of the European Investment Bank for small and medium sized companies.
The most important decision was to create the Recovery and Resillience Fund, charging the Commission to work out the proposal. Composed of both grants and loans. Less then 50% is a grant. Loans were at a low interest rate which must be paid back. What is interesting is that this is an example of EU wide solidarity.
THe key event (few months later) in july 2020, when the European COuncil met and after a long negotiation decided to create a EU ‘NEXT Generation EU’. Portion granted based on GDP, labour force, population but also based on the degree to which a national economy was affected by the virus. Italy received the largest portion.
Investment program of 750 billion euro which could integrate the Eu Budget (7 years budget) is slightly above 1 trillion. Seven years budget of three quarters. (2021 - 2027) 1073 billion (7% of EU budget). Less then 1 euro a day per citizen.
Approval was not easy in the EU; it took 6-7 months. Hungary did not approve; most EU member states wanted to link the distribution of the Next Generation EU Funds to the respect of the Rule of Law. (main criteria for membership; Hungary was not respecting it. Reducing independence of judiciary, granting freedom of religion etc). With negotiation of Mutti a compromise was reached. THis requirement is there, but given the fact that the possibility exists to recur to the ECJ. The Hungarian government was persuaded that there was enough time to receive the first grant before measures were implemented.
Starting in the spring of 2021, the funds started to be distributed according to be redistributed according to national resilience and recovery plans; strictly under rules; specifying where it would be invested; expected outcomes; according to criteria:
In the final version of the Next Generation EU, 6 area’s of priority intervention are defined:
1. Green transition. Including biodiversity.
2. Digital transformation.
3. Smart, sustainable important growth. (pretty free; including employment, research and development, etc).
4. Social and territorial provisions.
5. Health and economic and social resilience. Coping with pandemias.
6. Policies focussing on the next generation. Childhood, youth and also includes education. Fight against demographic decline.
Not only aimed at coping with negative effects of Covid 19, but also to foster a new development model for the Economy and European society. It is a major improvement and innovation in that aspect. Very novice is also the way chosen to finance this program. Could not be increased by increasing the EU Budget by nation states; 2 ways to go about it: Go on the world financial market and get financing there by issuing Euro-Bonds. Bonds guaranteed by the EU as such. Given the strength of the EU, these bonds can be placed in the market at lower interest rates. The second major way, more difficult but growing, is imposing new taxes. They can not be added to their national governments (cause it is against clemicide), like for example the border carbon tax. Taxes imports of goods and services from countries which do not have the same legislation on the environment and protection that the EU has. This way, the price of imports is no longer competitive by the same type of goods that have to abide by the EU which have higher costs. Forces other countries to have stricter criteria for environmental rules. These tariffs are considered to be extended to other areas, like work safety legislation, respect to basic workers rights.
Another, not yet implemented, but proposal for taxation for the world giants. Implemented by some member states; rationale is that this corporations do ‘tax optimization’. The countries that receive the highest percentages are Luxembourg, Netherlands, etc. The EU had to intervene against the Irish government to oblige them to raise the corporate tax. There is a huge area of EU wide fiscal revenues. It is a major point, because a federal union is a political system where at least some of the fiscal entries go directly to the centre. If this is not the case, it means that the centre is subject to the good will of the member states.
The third was: A certain degree of rebalancing power between council and commission. In process of controlling the use made by member state governments of the different tranch of the next generation EU, the commission has a key role. Not in the process of deciding whether a country can receive the recovery fnd, but on the following process of monetary process; deciding if a second or third round can be granted. The communitarian method is more important then the aggregated member states. To conclude this part, as it happens (often) a crisis can also be an opportunity.
The response has been rather successful.
Response to the war in Ukraine
THe EU has to be more autonomous related to factors of production which are mostly imported as well as military autonomy.
The supply chains underwent a series of straints (transportation etc) and some phases of the gloval production process came to a stand still. Basic goods were not coming or halted. Awareness about higher level of strategic autonomy. THis awareness was reinforced by the other crisis; the war in Ukraine. What can be the consequences for the EU, and more specifically, for the process of European integration.
Contrary to what happened to the corona virus, the answer is much more uncertain. On one hand the Russian invasion prompted a unified reaction, most of all are also in NATO, in terms of helping Ukraine. In aid which was providing asylum to Ukrainian refugees, to send economic aid (damages and losses of war) and sending weapons. It was a major break with the European Union history, which had not sent weapons to any belligerent country in the past. On the other hand, as any war, this war fosters and enhances nationalism. Russian nationalism, Ukrainian nationalism and the nationalism of other EUropean states and a strengethed neo-nationalism that runs against a construction of a community. An effect of the war, which has affected not in the same degree different member states. A devisive aspect is that the costs have not been distributed evenly. Neighbouring states (Poland) get a lot more refugees. The German economy (largest) has been most affected because the German economy could draw benefit from the low price of energy from Russia and a good quote of exports into the CHinese market wth drastic reduction of economic relations with Russia. China sided with Russia which has created problems for the German economy, more then other member states. There are also general negative consequences. THe increase of oil and gas prices were a major source of inflation. The recovery was halted because of the consequences of the war. THe very effect of NEXT Generation EU was less positive because of the difficulties of the war. It is difficult to say whether at the end the effects of the war in general will be more in favour or against further integration of the EU. One effect which can be positive or negative, deeper integration or lower or lessened integration is the fact that now the problems (common foreign defence policy) has to be a priority. It is, unfortunately for the first time is at the border of the EU, not only the neighbouring regions (middle east) but truly at the border. A common foreign policy is considered a priority. THere are different views; countries and member states in the EU that think that NATO is enough; others think that NATO is not enough for the very reason that we do not know the presidential election of the US. FOr this reason, a process that was simmering in the background was accelerated. THere was this decision to create a first response military structure. THis is called the Strategic compact is an instrument of defence of security that supplies the capacity to deploy a rapid multinational military force. Not very big, but a few thousand soldiers and well equiped. No member state has the capacity to deploy such an infrastructure and we relied on the US. Even this force, limited to a few thousand, which is necessary to be a global actor, to be used in a crisis situation. ALways with the hope that it is just a deterrent force. Needed, because otherwise we will be unheard. At the same time, a force like this needs to be based on a common foreign policy.
There exists a united force. Even in the next European Parliament election of June, it says a lot that Ursula von der Leyen (president of commission) five years ago put at the centre of her political program the green transition and digital transformation; now has put common defence at the top of her presidential program. Of course not all EU member states have the same view. Few qualifications: countries closer (geographically) and those who were part SOviet Union or in the Sphere of influence (Hungary exception) are more militant. THey also do not trust too much EU common defence, but put more trust in NATO. They have to face the possible policy change in NATO if Trump is reelected. France always thinks the EU must have a common Foreign Defence policy, which explains recent declarations by Marcon of increasing support for Ukraine and so on. The very unexpected shift in LePenns position (in favour of Ukraine; she was financed by the Russian Government before). During the last two decades Russia put obstacles in the integration of the EU; against a strong EU. SHe has taken this turn as an element of French Nationalism. Germany is much more cautious; because of their historical heritage. Germany has a major responsibility in the WOII and suffered a lot in that, but all countries, disregarding the left or rightness of their government, want more strategic EUropean autonomy for providing certain components in key industries, like conductors, energy, and accelerating the green transition. This implies spending more on defence policy and trying to develop a EU-based defence industry.
The problem for European Member states agree to move to common defence policy; the EU people in the majority are against the idea of increasing defence expenduraties. This is a major obstacle for an EU employment. National defence provides good employment; cost of personnel is the largest expenditure item in EU defence. All together this expenditure is higher then Russia’s. The problem is not how to get out of this conundrum; the need to develop a strategic compact and at the other EU pubic opinion is against. What they spend now is enough; the pledge of Germany to come to 2% is enough; they have to spend better. THedegree of fragmentation is crazy. Most money is on salaries and pensions. In Italy amount of generals is enormous- this is not the exception. The American army and Russian army have one type of battletank. They change it often (improvements), but the 27 member states have 17 different tanks. Imagine when they have to coordinate that; takes time and training. This creates maintenance problems, furniture, supply. The navy and airforce have similar problems; they have 180 different platforms vs the 30 of the Uited States. Try to simplify. This however, requires political will and a higher leel of consensus than currently exists. Martinelli predicts that the strategic compact will bring this about; contrary to equipment, the degree of integration of sections of various armies of member states is rather high. There is increased integration. Furthering the growth of defence industry in various member states, some of them are the biggest. Official aim was peace orientated, European member states were exporters of weapons (Sweden, France). The greatest strategic economy would be in sub sectors of advanced industries. Much more difficult will be to achieve a real coordination of foreign policies; but a greater coordination have been taken. Scandinavian countries joined nato which is a step in the right direction. However, differences maintain between Germany and France, two most important member states. Consequences of this war, hoping on the premise that we come as soon as possible to a ceasefire. From the POV of the EU and the peripheral countries the protection and prolonging the war is bad. The negative consequences outnumber the positive effects. On the positive effects, there is an objective self awareness that a political union must develop some coordiantion of foreign policy and defense, at least for one portion of common defence.
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