The Origins of Neoliberalism and the Role of the German State

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.

Embedding Liberalism

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.

Disciplining the Hegemon

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.

Introduction

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.

Deflecting Neoliberalism

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.