Wild World – Dr. Adrian Pabst Interview
Dr. Adrian Pabst is a political theorist and a theologian. He is a lecturer in politics at the University of Kent and a visiting professor at the Institut d’Etudes Politiques de Lille (Sciences Po). His research concerns capitalism, religion, ethics, civil economy, European Union and wider Europe like Russia, Ukraine and Turkey. He is an Associate Editor of the journal TELOS and Fellow of the Centre of Theology and Philosophy. In 2012 Dr. Pabst was appointed a Trustee of the independent non-partisan think-tank ResPublica Trust where he works on alternative political economies. He is also a frequent contributor to both UK and international press, including International Herald Tribune, The Guardian and The Moscow Times.
*Interviewer: Igor Ossipov / Date: 30/04/2013
Crisis of Capitalism, Identity and Finance
In the last two years Europe has lingered around recession with little light at the end of the tunnel. Is someone, or something, responsible for this crisis? Perhaps, is it a virtue of the capitalist system, its agents, or other factors?
The continuous eurozone turmoil provides a microcosm for the wider global economy. It has variously been described as a financial or a fiscal crisis, caused either by an over-leveraged banking system or by unsustainable budget deficits and sovereign debt. But perhaps with the exception of Ireland (banks) and Greece (budget), it is in fact both at once – a combined financial and fiscal disaster. But this combined banking and sovereign debt crisis is symptomatic of a more fundamental problem that requires a political economy analysis beyond the sectional interest of global finance and the ideological posture of austerity, which have conspired to crowd out proper public debate and policy making.
At the root of the eurozone crisis is a balance of payments crisis that is connected with a mismatch between savings and investment, both globally and within Europe. Globally, from 1997 to 2007 emerging markets in Asia, Latin America and the Gulf built up US$10 trillion of foreign reserves which they invested in large part US and European sovereign and corporate bonds. This historically unprecedented ‘savings glut’ flooded the markets with cheap money. This, coupled with low interest rates across the whole eurozone, fuelled credit and real estate bubbles in the USA and Europe, which burst in 2008-9 amid the global ‘credit crunch’.
At first, this led to a pan-European banking crisis, followed by a sovereign debt crisis triggered by Greece’s unsustainable public deficit and debt levels in late 2009. What exacerbated the situation was the near-deadly embrace of big banks and central governments that hold each other’s debt (whether by buying sovereign bonds or by bailing out the banking behemoths ‘too big to fail’).
As the euro area slides deeper into recession, its banking and sovereign debt crisis has a balance of payments crisis that is associated with long-standing trade imbalances between surplus countries at the core and deficit countries in the periphery. These imbalances between the core and the periphery are linked to significant differences in competitiveness and productivity. In turn, competitiveness and productivity differentials are related to private and public sector investment within and across eurozone countries and EU member-states.
As I said at the start of this interview, the euro predicament reflects in large part the condition of the world economy that is characterised by a growing divergence between the interests of global finance and those of the real economy. Today both banks and corporations hoard trillions in cash, while small- and medium-sized enterprise are starved of funds and there is an acute lack of investment that is exacerbated by weak demand.
On an ethical, righteous, or even purely economic level, do you think the world can continue its current path of excessive capitalism? It has been reported that over $20 trillion are hidden in offshore accounts – so have we reached a point of no return, or is there a way out?
Since Marx, we know that capitalism is extraordinary resilient because it combines dislocating changes with progressive innovation – a logic that is encapsulated in Schumpeter’s notion of ‘creative destruction’.
In some sense capitalism is always in crisis. Why? Because the capitalist economy is linked to the inner contradictions of expansion and contradiction, notably the regular over-accumulation of capital and the declining rates of return, as Smith recognised long before Marx. However, the current phase of the continuous capitalist crisis differs from previous times of turmoil because global finance capitalism has eroded the moral economy on which all economic exchanges ultimately depend. The reason is that financial capital undermines relationships, reciprocity, and responsibility. The logic of financialisation has radicalised both capitalist commodification and statist collectivisation to the point where all value that is produced and exchanged has been reduced to a tradable financial instrument or a derivative thereof.
For this reason it is not the case that finance capital merely abstracts from the real economy. Rather, virtually every layer of the market economy has been subordinated to the service of short-term financial profit for the self-interested few – at the expense of long-term prosperity for the many. Crucially, an amoral market has proven to be both economically inefficient and entirely unethical – the collusive convergence of ‘big government’ and ‘big business’ that fuels the vicious circle of booms and bubbles which are inevitably followed by busts and bailouts.
One as yet underexplored alternative is the ‘civil economy’ model. By contrast with the ordo-liberalism that underpins the German social market economy, the ‘civil economy’ approach views the market not merely as compatible with the primacy of the social over the economic and the political or the priority of cooperation over conflict. Rather, markets are part of a wider moral economy that promotes the practice of both civic and moral virtue in the shared pursuit of the common good – the good of each and everyone in their concrete place and specific relationships.
This vision translates into the fusion of gift with contract and a commitment to substantive (not just procedural) justice – just prices, just wages and just rates of interest that restrict usury. Linked to this is a vocational economy that fosters ethos based on apprenticeships and professional associations or guilds as well as on the sharing of risk and profit through mutualised banking, finance and cooperative arrangements that are constitutionally recognised.
Whereas the social market economy tends to restrict the role of the state to providing a legal framework for competition, the ‘civil economy’ alternative views the state as encouraging and rewarding virtuous behaviour: first, by rewriting company law in such a way as to foster the internal ethos of firms and professional associations and, second, by putting in place rewards for businesses that deliver both social benefit and a reasonable profit. This approach departs from the liberal myth of value neutrality and the ordo-liberal myth of impartiality that are wrongly ascribed to government. As such, models of ‘civil economy’ have a positive vision of the state as upholding the common good and popular participation in the polity in ways that involve democratic co-determination of society and the economy.
Thus the genuine alternative to both capitalist commodification and statist collectivisation (or its contemporary monetarist and Keynesian variants) is a ‘civil economy’ model that re-embeds transactions in relationships and directs them to the common good in which all can participate.
Is Russia suffering from an identity crisis, is it European, Asian or even Eurasian? Or is Russia like many other modern states is experiencing a decline of statehood?
Russia is a notoriously complex culture that escapes easy categorisation. Of course we can distinguish at least two different outlooks, Western and Eurasian. However, what underpins much of modern Russian thinking about Russia’s identity is a form of exceptionalism, which is rooted in the idea of ‘Third Rome’ and was later secularised as part of the atheist messianism of the Soviet system.
For much of the 1990s, Russia sought a new settlement with the West but at crucial junctures Moscow was either ignored or rebuffed. For example, the Paris Charter that promised a new, pan-European security community was effectively destroyed by unilateral NATO expansion and the EU’s inability to constitute an alternative pole in the post-Cold War order. Since 2000 Russia has oscillated between pragmatic cooperation with Europe and the United States, on the one hand, and growing anti-Western sentiments, on the other hand.
Given her geographical position and cultural diversity, Russia will never have a monolithic identity or single outlook. As the global centre of gravity shifts from the European Atlantic to the Pacific Ocean, Moscow is likely to stop looking West and instead go East – as soaring trade levels with China already foreshadow.
However, Russia remains a European power – part of Europe’s non-West alongside Turkey and Ukraine. Indeed, the country is anchored culturally and politically in the wider Europe, not in Asia. The problem is that both Russia and the rest of Europe have no vision and no policies to form an alternative pole within the international system. More specifically, Moscow lacks a clear strategic direction, as the ruling regime is increasingly divided between an official commitment to economic modernisation, on the one hand, and authoritarian consolidation, on the other hand.
It is argued by some that the Russo-European relationship has soured creating an anti-Russian stance. Has this occurred due to European attempts to lower gas import prices, or more serious underlining issues? Europe’s potential alternative pipeline has even been called “Nabucco” – does Europe really feel enslaved by the Russia energy dependence in a Verdian sense?
For far too long, EU-Russian relations have been notoriously bad – with low-level bureaucratic management overriding strategic considerations and genuine political cooperation. Just as a number of national governments in the EU have turned increasingly anti-Russian, so too Moscow has become disillusioned with Brussels and shifted attention to its Eurasian backyard and beyond.
Oil prices are part of the equation but by no means the main reason. Alternative projects such as the proposed Nabucco pipeline that seek to circumvent Russia are built on financial fantasy and betoken of a short-termism that is strategically reckless. Continued austerity for the next decade and perhaps longer will probably end any remaining hopes for both Nabucco and South Stream.
But the energy battle between the EU and Russia over Nabucco and South Stream is a proxy conflict in a wider war of rival visions – a growing strategic divergence that risks dividing the greater Europe permanently. Just as the EU seeks to diversify its sources of supply away from Russia towards North Africa and the Middle East, so too Moscow is trying to diversify its sources of demand away from Europe towards Asia-Pacific (in particular China). While diversification makes both geo-political and geo-economic sense, there is no getting away from the mutual strategic and commercial benefits of Russo-European cooperation.
Where is the European-Russian relationship heading?
EU-Russian relations are unlikely to change dramatically because bureaucracies are as slow to turn round as are ocean liners. Without a change of leadership on both sides simultaneously and new leaders who share a strategic outlook, variants of the status quo will prevail.
What Moscow, Brussels and the national capitals of EU member-states are missing is a historic opportunity to forge a new, proper partnership. With the United States mutating into a post-European power as part of its Pacific pivot, the onus is on the wider Europe – the EU member-states, Russia and Turkey – to take charge of both Euro-Atlantic and also increasingly Eurasian geo-economics and geo-politics. However, the new divisions that emerged during the post-Cold War years are coming back to haunt the Europeans. The EU is itself a “multi-pole”, divided between a Franco-German and an Anglo-Atlantic pole as well as between Nordic and Mediterranean countries that individually or collectively tend to form ad hoc coalitions with one or the other. Then there are all the countries that lie in the geo-political grey-zone between the EU, Russia, and Turkey – a post-Cold War no-man’s land that includes Ukraine, part of the Balkans, Moldova, and the South Caucasus.
For her part, a resurgent Russia is as unsure about its global role as the EU post-Lisbon or a Turkey torn between its long-standing Western ties and its Neo-Ottoman future. The tension between pragmatic ties with the West and the Kremlin’s determination to preserve Russian’s “sphere of privileged interests” in the Caucasus and Central Asia are palpable. In the South and East of its vast country, Moscow acts more like a neo-imperial power. Like Beijing and (to a much lesser extent) Ankara, it operates a tributary system with smaller neighbours, providing “security” in exchange for market outlets and inexpensive imports. Indeed, Russia sells military equipment and buys up central Asian energy to export it to the West, while it also imports cheap labour to compensate for its declining population.
In this new “Great Imperial Power Game,” the geo-economics of energy security matters just as much as the geo-politics of indirect territorial control through diplomatic-military activism and claims to cultural pre-eminence. Instead of a global convergence towards national states and liberal market democracy (as Francis Fukuyama predicted in The End of History), we are seeing the rise of old empires and new elites who in the case of Russia (and China) combine elements of bureaucratic capitalism with aspects of authoritarian plutocracy. That is why critical engagement at the level of civil society actors and experts – like the Russian International Affairs Council – is so crucial.
Is Europe undermining its own energy security by attempting to diversify away from Russia?
That’s absolutely right. Amid the anarchy of the Arab Spring, the countries of North Africa and the Middle East won’t prove economically or politically more reliable sources of energy supply than Russia. Indeed, we are seeing the rise of Islamic regimes that are either authoritarian or fundamentalist (or both at once). Even hitherto more moderate states such as Tunisia or Morocco might not be able to avert the radicalisation that is taking hold.
Without real action to reduce mass youth unemployment and growing poverty, the situation will only get more volatile. And with all the post-colonial baggage, it is unlikely that the new Arab and North African leadership will offer deals that are not just lucrative for large corporations but also beneficial to ordinary consumers across Europe.
Russia will continue to expand its network of pipelines towards the Asia-Pacific region, and for good reasons. But this is a very long-term strategy whose success will depend on genuine economic modernisation at home, especially in the Far East that is falling further behind Moscow and St. Petersburg.
So on geo-political and geo-economic grounds, Russia and the EU are in some sense condemned to cooperate with one another. The question is whether and when the governing elites on both sides will develop a common vision and effective policy to fulfil the as yet unrealised potential of a proper economic and security community.
Thank You Dr. Pabst
M.A. University of Kent & Higher School of Economics, Oil/Diesel Broker and RIAC Blogger.