German Primacy and the Origins of Neoliberalism
Emerging Frontiers in the Global Economy
Published by: Stanford University Press
304 pages, 152.00 x 229.00 mm
- ISBN: 9781503609846
- Published: January 2021
The global rise of neoliberalism since the 1970s is widely seen as a dynamic originating in the United States and the United Kingdom, and only belatedly and partially repeated by Germany. From this Anglocentric perspective, Germany's emergence at the forefront of neoliberal reforms in the eurozone is perplexing, and tends to be attributed to the same forces conventionally associated with the Anglo-American pioneers. This book challenges this ruling narrative conceptually and empirically. It recasts the genesis of neoliberalism as a process driven by a plenitude of actors, ideas, and interests. And it lays bare the pragmatic reasoning and counterintuitive choices of German crisis managers that are obscured by this master story.
Drawing on extensive original archival research, this book argues that German officials did not intentionally set out to promote neoliberal change. Instead they were more intent on preserving Germany's export markets and competitiveness in order to stabilize the domestic compact between capital and labor. Nevertheless, the series of measures German policy elites took to manage the end of golden-age capitalism promoted neoliberal transformation in crucial respects: it destabilized the Bretton Woods system; it undermined socialist and social democratic responses to the crisis in Europe; it frustrated an internationally coordinated Keynesian reflation of the world economy; and ultimately it helped push the US into the Volcker interest-rate shock that inaugurated the attack on welfare and labor under Reagan and Thatcher.
From this vantage point, the book illuminates the very different rationale behind the painful reforms German state managers have demanded of their indebted eurozone partners.
The introduction asks how Germany—a country long thought to be irrevocably European and committed to a more social market economy—could have emerged at the helm of a punitive program of neoliberalism within Europe. To resolve this puzzle, we need to revisit the crisis of the 1970s, when neoliberalism first appeared, and rethink the role of the German state in light of newly available archival material. From this viewpoint, Germany is revealed to be the "unwitting architect" of neoliberalism. Its parochial attempts to manage the crisis domestically promoted a regressive form of capitalism internationally that soon boomeranged back upon it, and which it promotes across Europe today so as not to practice at home. After a chapter-by-chapter summary of this argument, the Introduction lists the archival sources consulted for this book and discusses how an archival method can be integrated into critical International Political Economy.
This chapter reviews the most prominent explanations of the global rise of neoliberalism provided within critical International Political Economy: (1) a state-centered argument, which holds that neoliberalism was imposed by the United States in a bid to reassert its global dominance; (2) a class-based argument, which sees neoliberalism as the project of globalizing elites who sought to restore their corporate profits and power; and (3) an ideational argument, which describes the rise of neoliberalism as a paradigmatic shift in economic ideas. The chapter argues that these accounts share a common bias: they pivot unduly on the Anglo-American world and are unable to capture the peculiar German contribution to the origins of neoliberalism. As a result, they misread the rise of Germany to the apex of a neoliberal Europe as a belated repetition of the same global movement spearheaded by the US and the UK.
This chapter develops an alternative framework to understand Germany's role in the global rise of neoliberalism. Eschewing a comparative approach, it interrogates the German political economy as not only different from but fundamentally entwined with other national political economies. The lens of uneven and combined development is used to conceptualize this interconnectedness, emphasizing the co-evolution of national capitalisms, the systemic pressures that arise from their coexistence, and the interactive context of foreign economic decision making. This heuristic characterizes neoliberalism as an interactive process involving several states and diverse ideas, rather than an Anglo-American project writ large. Neoliberalism, in this view, did not arise from the domestic conditions prevailing in the US or the UK alone, but within a wider international environment structured by the German state for particular reasons that precede the Anglo-American turn and continue to shape its crisis management today.
This chapter traces the long-term development of German capitalism from the vantage point of uneven and combined development. It argues that Germany's postwar social market economy was built upon an externally oriented developmental model inherited from its belated insertion into the world market, and used to enroll capital and labor in a global export offensive. The underlying vision of Germany as the workshop of an advanced industrial and newly industrializing world coincided with the postwar plans of the United States for an open, multilateral global economy. And yet the chapter cautions that the prevailing image of Germany as a liberal "trading state" (Handelsstaat) that had traded power for wealth as its prime objective fails to capture the novel ways in which the German state, from the crisis of the 1970s onward, has come to exert its influence internationally to sustain this export-led social model.
This chapter asks how German policymakers responded to the monetary turbulences that signaled the end of the golden age of capitalism from the mid-1960s onward. To address this question, the chapter challenges the popular view that Bretton Woods died at the hands of a declining US hegemon and zooms in on the actions of its allies: while French attempts to push the US toward monetary reform destroyed the dollar-gold standard as early as March 1968, German efforts to protect themselves from the abuse of dollar seignorage upended the regime of fixed exchange rates three years later. The chapter argues that, unlike elsewhere in the advanced industrialized world, the shift toward floating enabled the German state to double down on price stability and restabilize its embedded liberal compromise—an experience that framed how German policymakers would respond to the wider economic turmoil of the 1970s.
This chapter examines the development of a grand economic strategy pursued by the German state from the mid-1970s onward. Its primary objective was to shore up the domestic compact between capital and labor internationally, which required maintaining stable prices and open markets for its exports. To German policymakers, this meant that Germany could not afford to turn inward, or to expend its resources on lofty visions of solidarity. Instead, Germany mobilized its monetary and financial power in order to counter the threats of protectionism and imported inflation posed by leftist crisis responses. The chapter details how German officials, through European exchange-rate cooperation and financial interventions coordinated with the US, sought to commit its European partners to an anti-inflationary program that would complement their own. The result, the chapter explains, was to frustrate progressive resolutions of the crisis and move the world closer toward the neoliberal counter-revolution.
This chapter argues that in order to protect its export model from the dangers of imported inflation, Germany strove to commit the US to monetary and fiscal rigor. To this end, German officials blocked the attempts of the Carter administration to organize a global Keynesian expansion, and scaled back their foreign exchange interventions in support of a weakening dollar. Both actions helped push the US into the Volcker Shock, which deflated the world economy and launched the attack on organized labor. The chapter concludes that the neoliberal experiment in the US, paralleled and reinforced by similar attempts in the UK, was late and lucky. Rather than the outcome of a decade-long domestic shift—seamless and sealed off from the world outside the Anglo-American heartland—the neoliberal counter-revolution was driven in part by the external pressures imposed by Germany, and subsequently sustained by a bout of Japanese investment.
This chapter explores how the German political economy was transformed by the global rise of neoliberalism and how this change feeds into Germany's approach to the eurocrisis. Rather than being pushed down an Anglo-American road, German policymakers still seek to preserve what is left of the domestic compromise between capital and labor. The chapter argues that China's massive demand for German exports informs the long-term vision of a neoliberal Europe structurally adjusted to support the global position of German manufacturers. At the same time, the perceived threat of US interest rates rising out of step with economic conditions in Europe and emerging markets hardened the German stance on austerity during the fever-pitched policy battles at the height of the eurocrisis. Together, these international pressures and opportunities have produced the predicament of German primacy as a transformative and yet destabilizing force within the EU.
The conclusion places Germany's current position in the EU within a global context and draws out the wider implications of this study. It advances a conception of neoliberalism as a multifaceted process in which actors draw upon, and contribute to, an ever wider array of available techniques to deconstruct or reconfigure the social, economic, and political gains working people had wrought from capital and invested in the postwar welfare state. While in this respect neoliberalism is the indispensable marker for a new era of capitalism, it is too amorphous a term to serve as a guide to the emerging frontiers and faultlines of the global political economy.
"With an alternative origin story of neoliberalism pivoting on the historical role of Germany and its contemporary 'primacy' within the European Union, Germann treats the reader to a fresh perspective on the uneven and combined developmental trajectory of capitalist discipline and deflection." ~Adam David Morton, University of Sydney
"A strikingly original, deeply important, and fantastically well-researched book which challenges and recasts much of what we thought we knew about the origins of neoliberalism in Europe and, indeed, beyond. Highly recommended, this is destined to become a key reference point in all subsequent debate on this crucial topic." ~Colin Hay, Sciences Po, Paris
"This seminal work fundamentally recasts our understanding of the evolution of the international political economy since 1945. Based on extensive archival research, Germann's book shows convincingly that the Federal Republic of Germany played a central role in the global neoliberal counterrevolution and that its contemporary European primacy is a central factor in the contemporary global crisis." ~Alan Cafruny, Hamilton College
"In this highly readable, thoroughly documented and at times controversial study, Germann argues that Germany's contribution to the shaping of global neoliberalism goes much deeper than usually recognized. Ever since the global recession of the 1970s Germany has been a key architect—albeit an unwitting one—of the neoliberal global order. A must-read for scholars of European and global political economy!" ~Henk Overbeek, Vrije Universiteit Amsterdam