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Democratic institutions are not under stress–they’re under aggressive attack, as unconstrained financial greed overrides democratic decisions, says economist John Weeks

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SHARMINI PERIES: It’s The Real News Network. I’m Sharmini Peries coming to you from Baltimore. The concept of the liberal democracy is generally based on capitalistic markets along with respect for individual freedoms and human rights and equality in the face of the law. The rise of financial capital and its efforts to deregulate financial markets, however, raises the question whether liberal democracy is a sustainable form of government. Sooner or later, democratic institutions make way for the interests of large capital to supersede.
Political economist John Weeks recently gave this year’s David Gordon Memorial Lecture at the meeting of the American Economic Association in Philadelphia where he addressed these issues with a talk titled, Free Markets and the Decline of Democracy. Joining us now is John Weeks. He joins us from London to discuss the issues raised in his lecture. You can find a link to this lecture just below the player, and John is, as you know, Professor Emeritus of the University of London School of Oriental and African Studies and author of Economics of the 1%: How Mainstream Economics Serves the Rich, Obscures Reality and Distorts Policy. John, good to have you back on The Real News.
JOHN WEEKS: Thank you very much for having me.
SHARMINI PERIES: John, let me start with your talk. Your talk describes a struggle between efforts to create a democratic control over the economy and the interest of capital, which seeks to subjugate government to the interest, its own interest. In your assessment, it looks like this is a losing battle for democracy. Explain this further.
JOHN WEEKS: Yeah, so I think that Marx in Capital, in the first volume of Capital, refers to a concept called bourgeois right, by which he meant that, you said it in the introduction, that in a capitalist society there is a form of equality that mimics the relationship of exchange. Every commodity looks equal in exchange and there is a system of ownership that you might say is the shadow of that. I think more important, in the early stages of development of capitalism, of development of factories, that those institutions or those factories prompted the growth of trade unions and workers’ struggles in general. Those workers’ struggles were key to the development, or further development of democracy, freedom of speech, a whole range of rights, the right to vote.
However, with the development of finance capital, you’ve got quite a different dynamic within the capitalist system. Let me say, I don’t want to romanticize the early period of capitalism, but you did have struggles, mass struggles for rights. Finance capital produces nothing productive, it doesn’t do anything productive. So, what finance capital does basically is it redistributes the income, the wealth, the, what Marx would call the surplus value, from other sectors of society to itself. And it employs relatively few people, so that dynamic of the capital, industrial capital, generating its antithesis…So, that a labor movement doesn’t occur under financial capital.
In addition, financial capital leads to inequality, and that inequality, as you’ve seen in the United States and in Europe and many other places, it increases. And suddenly, not suddenly, but bit by bit, people begin to realize that they aren’t getting their share and that means that the government, to protect capitalism, must use force to maintain the order of financial capital. And I think Trump is the fulfillment of that, and I think there are other examples too which I can go into. So, basically, my argument is that with the rise of finance and its unproductive activities, you’ve got the decline in living standards of the vast majority, and in order to maintain order in such a system where people no longer think that they’re sort of getting their share, and so justice doesn’t become, a just distribution doesn’t become the reason why people support this system, increasingly it has to be done through force.
SHARMINI PERIES: All right, John. Before we get further into the relationship between neoliberalism and democracy, give us a brief summary of what you mean by neoliberalism. You say that it’s not really about deregulation, as most people usually conceive of it. If that’s not what it’s about, what is it, then?
JOHN WEEKS: I think that if you think about the movements in the United States, and as much as I can, I will take examples from the United States because most of your listeners will be familiar with those, beginning in the early part of the twentieth century, in the United States you have reform movements, the breaking up of the large monopolies, tobacco monopoly, a whole range of Standard Oil, all of that. And then of course under Roosevelt you began to get the regulation of capital in the interests of the majority, much of that driven by Roosevelt’s trade union support. So, that was moving from a system where capital was relatively unregulated to where it was being regulated in the interests of the vast majority. I also would say, though, I won’t go into detail, to a certain extent it was regulated in the interest of capital itself to moderate competition and therefore, I’d say, ensure a relatively tranquil market environment.
Neoliberalism involves not the deregulation of the capitalist system, but the reregulation of it in the interest of capital. So, it involves moving from a system in which capital is regulated in the interests of stability and the many to regulation in a way that enhances capital. These regulations, to get specific about them, restrictions on trade unions, as you, on Real News, a number of people have talked about this. The United States now have many restrictions on the organizing of trade unions which were not present 50 or 60 years ago, making it harder to have a mass movement of labor against capital, restrictions on the right to demonstrate, a whole range of things. Then within capital itself, the regulations on the movement of capital that facilitate speculation in international markets. We have a capitalism in which the form of regulation is shifted from the regulation of capital in the interest of labor to regulation of capital in the interest of capital.
SHARMINI PERIES: John, give us a brief summary of the ways in which neoliberalism undermines democracy.
JOHN WEEKS: Well, I think that there are many examples, but I’m going to focus on economic policy. For an obvious case is the role of the Central Bank, in the case of the United States’ Federal Reserve System, in which reducing its accountability to the public, one way you can do that is by assigning goals to it, such as fighting inflation, which then override other goals. Originally, the Federal Reserve System, its charter, or I’ll say its terms of reference, if you want me to use that phrase, included full employment and a stable economy. Those have been overridden in more recent legislation, which puts a great emphasis on the control of inflation. Control of inflation basically means maintaining an economy at a relatively high level of unemployment or part-time employment, or flexible employment, where people have relatively few rights at work. And that the Central Bank becomes a vehicle for enforcing a neoliberal economic policy.
Second of all, probably most of your viewers will not remember the days when we had fixed exchange rates. We had a world of fixed exchange rates in those days that represented the policy, which government could use to affect its trade and also affect its domestic policy. There have been deregulation of that. We now have floating exchange rates. That takes away a tool, an instrument of economic policy. And in fiscal policy, there the, here it’s more ideology than laws, though there are also laws. There’s a law requiring that the government balance its budget, but more important than that, the introduction into the public consciousness, I’d say grinding into the public consciousness, the idea that deficits are a bad thing, government debt is a bad thing, and that’s a completely neoliberal ideology.
In summary, one way that the democracy has been undermined is to take away economic policy from the public realm and move it to the realm of experts. So, we have certain allegedly expert guidelines that we have to follow. Inflation should be low. We should not run deficits. The national debt should be small. These are things that are just made up ideologically. There is no technical basis to them. And so, in doing that, you might say, the term I like to use is, you decommission the democratic process and economic policy.
SHARMINI PERIES: John, speaking of ideology, in your talk you refer to the challenge that fascism posed or poses to neoliberal democracies. Now, it is interesting when you take Europe into consideration and National Socialist in Germany, for example, appeal mostly to the working class, as does contemporary far-right leaders in Poland and Hungary, that they support more explicit neoliberal agendas. Why would people support a neoliberal agenda that exasperate inequalities and harm public services that they depend on, including jobs?
JOHN WEEKS: I think that to a great extent it is country-specific, but I can make generalizations. First of all, I’m talking about Europe, because you raised a case in some European countries, and then I’ll make some comments about the United States and Trump, if you want me to. I think in Europe, a combination of three things resulted in the rise of fascism and authoritarian movements which are verging on fascism. One is that the European integration project, which let me say that I have supported, and I would still prefer Britain not to leave the European Union, but nevertheless, the European Union integration project has been a project run by elites.
It has not been a bottom-up process. It has been a process very much run by elite politicians, in which they get together in closed door, and they make policies which they subsequently announce, and many of the decisions they come to being extremely, the meaning of them being extremely opaque. So, therefore, you have the development in Europe of the European Union which, not from the bottom up, but very much from the top down. You might suggest from the top, but I’m not sure how much goes down. That’s one.
The second key factor, I would say, for about 20 years in European integration, it was relatively benign elitism because it was social democratic, it had the support of the working class, or the trade unions, at any rate. Then, increasingly, it began to become neoliberal. So, you have an elite project which was turning into a neoliberal project. Specifically, what I mean by neoliberal is where they’re generating flexibility rules for the labor market, austerity policies, bank, balanced budgets, low inflation, the things I was talking about before.
Then the third element, toxic, the most toxic of them, but the other, they’re volatile, is the legacy of fascism in Europe. Every European country, with the exception of Britain, had a substantial fascist movement in the 1920s and 1930s. I can go into why Britain didn’t sometime. It had to do with the particular class struggle of the, I mean, class structure of Britain. Poland, ironically enough, though, is one of them. It was overrun by the Nazis, and occupied, and incorporated into the German Reich. Ironically, it had a very right-wing government with a lot of sympathies towards fascism when it was invaded in the late summer of 1939.
France had a strong fascist movement. Of course, Italy had a fascist government, and Hungary, where now you have a right-wing government, a very strong fascist movement. The incorporation of these countries into the Soviet sphere of influence, or the empire, as it were, did not destroy that fascism. It certainly suppressed it, but it didn’t destroy it. So, as soon as the European project began to transform into a neoliberal project, and that gathered strength in the early 1990s, I mean, the neoliberal aspect of the European Union gathered strength in the early 1990s, exactly when you were getting the “liberation” of many countries from Soviet rule. And so, when you put those together, it led to, It was a rise of fascism waiting to happen and now it is happening.
SHARMINI PERIES: John, earlier, you said you’ll factor in Trump. How does Trump fit into this phenomena?
JOHN WEEKS: I think that as The Real News has pointed out, that many of Trump’s policies appear just to be more extreme versions of things that George Bush did, and in some cases not that much different from what Barack Obama did. Now, though I wouldn’t go too deeply into that, I think that that is the most serious offenses by Obama that have been carried on by Trump have to do with the use of drones and the military. But at any rate, but there’s a big difference from Trump. For the most part, the previous Republican presidents, and Democratic presidents, accepted the framework of, the formal framework of liberal democracy in the United States. That is, formally accepted the constraints imposed by the Constitution.
Now, of course, they probably didn’t do it out of the goodness of their heart. They did it because they saw that the things that they wanted to achieve, the neoliberal goals that they wanted to achieve were perfectly consistent with the Constitution’s framework and guarantees of rights and so on, that most of those rights are guaranteed in a way that’s so weak that you didn’t have to repeal the first 10 Amendments of the Constitution in order to have repressive policies.
The difference with Trump is, he has complete contempt for all of those constraints. That is, he is an authoritarian. I don’t think he’s a fascist, not yet, but he is an authoritarian. He does not accept that there are constraints which he should respect. There are constraints which bother him, and he wants to get rid of them, and he actually takes steps to do so. What you have in Trump, I think, is a sea change. You have a, we’ve had right-wing presidents before, certainly. What the difference with Trump is, he is a right-wing president that sees no reason to respect the institutions of democratic government, or even, you might say, the institution of representative government. I won’t even use a term as strong as “democratic.” That lays the basis for an explicitly authoritarian United States, and I’d say that we’re beginning to see the vehicle by which this will occur, the restriction on voting rights. Of course, that was going on before Trump, it does in a more aggressive way. I think the, soon, we will have a Supreme Court that will be quite lenient with his tendency towards authoritarian rule.
SHARMINI PERIES: All right, John. Let’s end this segment with what can be done. I mean, what must be done to prevent neoliberal interests from undermining democracy? And who do you believe is leading the struggle for democracy now, and what is the right strategy that people should be fighting for?
JOHN WEEKS: Well, one thing, I think, where I’d begin is that I think progressives, as The Real News represents, and Bernie Sanders, and all the people that support him, and Jeremy Corbyn over here, I’ll come back to talk about a bit about Jeremy. We must be explicit that we view democracy, by which we mean the participation of people at the grassroots, their participation in the government, we view that as a goal. It’s not merely a technique, or a tool which, what was it that Erdoğan so infamously said? “Democracy is like a train. You take it to where you want to go and then you get off.” No. Progressive view is that democracy is what it’s all about. Democracy is the way that we build the present and we build a future.
I’m quite fortunate in that I live in perhaps the only large country in the world where there’s imminent possibility of a progressive, left-wing, anti-authoritarian government. I think that is the monumental importance of Jeremy Corbyn and his second-in-command, John McDonnell, and others like Emily Thornberry, who is the Foreign Secretary. These people are committed to democracy. In the United States, Bernie Sanders is committed to a democracy, and a lot of other people are too, Elizabeth Warren. So, I think that the struggle in the United States is extremely difficult because of the role of the big money and the media, which you know more about than I do. But it is a struggle which we have to keep at, and we have to be optimistic about it. It’s a good bit easier over here, but as we saw, and you reported, during the last presidential election, a progressive came very close to being President of the United States. That, I don’t think was a one-off event, not to be repeated. I think it lays the basis for hope in the future.
SHARMINI PERIES: John, I thank you so much for joining us, and this has been a very insightful discussion, and I hope to continue it as opportunities arise. I think there are some interesting developments in the UK with the Labour and Jeremy Corbyn’s leadership, and I think people here, in terms of our revolution and followers of Bernie Sanders, hasn’t really capped the revolution yet. It’s an ongoing struggle. As you say, there are some possibilities with López Obrador in Mexico leading in the polls now, leading up to their July election. So, there’s many opportunities to discuss this further and I hope you can join us then.
JOHN WEEKS: I would very much like to. Thank you.
SHARMINI PERIES: And thank you for joining us here on The Real News Network.

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John Weeks is Professor Emeritus and Senior Researcher at the Centre for Development Policy and Research, and Research on Money and Finance Group at the School of Oriental & African Studies at the University of London.