«Early draft on new research, comments most welcome! ‘Follow the money!‘ (All the President’s Men, 1976) All of a sudden, the question of money ...»
Money and capitalism in International Relations
Reflections on a curious absence
RWTH Aachen University
Early draft on new research, comments most welcome!
‘Follow the money!‘ (All the President’s Men, 1976)
All of a sudden, the question of money is at the core of a number of contemporary
international conflicts. The European Union lives through its most existential
political and economic crisis, Ukraine is close to bankruptcy and analysts predict the
same problems for Venezuela later in the year. Money has always at the heart of world politics but this has rarely been as obvious. With this comes a sense of the problems attached to money. Influential sociologist Wolfgang Streeck, and many others, argue that ‘the Euro divides Europe’ instead of uniting it (Streeck 2015). As a consequence, what money does to global social relations is now part of key debates on the future of European and global political economy.
The absence of the serious study of money in the social sciences has been a recurrent theme, returning whenever this absence was most acutely felt because of real-life events (Strange 1971a,b; Bammé 2005; Pahl 2008; Streeck 2015). Explaining the ups and downs of the disciplinary study of money entails a better grasp of the waxing and waning of the study of Marx who turned money and capital into the heart of his theoretical edifice. With a new generation of scholars untainted by the Cold War and really existing Stalinism and who are eyewitnesses to capitalist crisis, it is no wonder Marx is moving back center stage again. This paper, sketching the early stages of my habilitation (‘second book’) project, partakes in this intellectual and political move.
Interdisciplinary endeavors like our workshop are a worthy cause. Because of their interdisciplinary character, however, they often come with a particular kind of utopianism. The utopia is that discussing finance with scholars from multiple scholarly fields will promote a lasting understanding and more holistic grasp of finance overall. While the workshop will certainly be extremely stimulating – partly thanks to its interdisciplinarity – we will later go back to our universities and to our ‘disciplines’ with their evolving but rather rigid barriers. Our more holistic understanding of finance will break apart over time and be thoroughly compartmentalized again depending on our fields. What is more, we will go back to talking mostly to fellow economic sociologists, international political economists or IR theorists. Ultimately, disciplinary boundaries matter most for the long term of our desire to understand finance. So it is in disciplinary politics that one may work towards overcoming compartmentalized scholarship. In these home disciplines, we need to establish firmly that and how money and finance matter.
In International Relations this point needs to be made forcefully. Although since the 1970s International Political Economy has been a growing ‘sub-discipline (Kessler 2008: 11) or ‘sister discipline’ (Wullweber 2014: 63) of IR, financial and monetary matters do not get enough attention. Debt and austerity are among the main political battlefields both within and between EU member states. Rising debt and the next financial market crash which is soon to take place will exacerbate the tensions already present on the European continent. At the same time, Euro-Dollar-Yen and Yuan policies play a major role in the global political economy. Not only is issuing credit and the creditor-debtor relationship a key component of world politics (Dyson 2014) but the monetary system itself, and thus money as such, is a key structural factor impacting on both domestic and international politics.
The fact that IR and IPE are seen as separate fields indicates that those interested in political relations are expected to work in IR, those curious about economic structures and processes should choose to research in IPE. The claim of political economy that the realms of profit and power are necessarily intertwined, possibly not even separate realms, has not had enough traction yet. Despite the growth and consolidation of both IR and IPE in continental Europe in recent decades, the notion of a global political economy has not found a proper institutional home yet. And it is these institutional homes that might bring us closer to fulfilling the utopia of more integrated scholarship about finance.
In this exploratory paper, I make two arguments. First, to position finance more prominently in IR, more analytical focus on global capitalism is needed. Once IR takes capitalism more seriously, one can dig deeper into its constitutive features. In the paper, I then investigate the role of money in capitalism and IR and make the second argument that without a proper political economical understanding of money, few of the conflicts of recent times, in the EU, and current geopolitics can be properly understood. I illustrate this with two short examples, the EU-Greece battle and the position of Deutsche Bank in the current imbroglio.
Capitalism in IR
The relationship between IR and IPE differs between the academic ‘marketplaces’ (Mamdani 2007) in the US, the UK, France and Germany, to name just a few. IR is well established in the US and the UK. While in the US, a particularly conservative kind of IPE is a regular part of MA programs on world politics, international studies or International Relations, this is not at all the case in German IR. France does not have disciplines of IR and IPE to speak of and negotiates questions of global political economy in economics as well as in area studies.1 The UK, by contrast, has a healthily heterogeneous academic field with scholars of all academic and political denominations holding chairs across the country. The ‘global conversation’ (Blyth
2009) of and about IPE is thus mostly an American-British one (Palan 2009;
Wullweber 2014). Capitalism as such, however, only has a home in the British academy.
Rare works broaching the question of capitalism in IR, tend to content themselves, for example, with a typology of varieties of capitalisms to grasp current world order (Buzan and Lawson 2014). The power of capital in shaping our daily lives and international constellations has continued to fall through the grid. 2 The Amsterdam School in its various generations from Kees van der Pijl and Henk Overbeek to Bastian van Appeldoorn or Laura Horn and Gramscian historical materialists like Robert Cox (1981) or Stephen Gill (2015) were for a long time the only ones upholding a visible political economy perspective which took the co-constitution of state, state system and capitalism seriously. Despite its non-reception in the core of the discipline, there has also been an active debate on Trotzki’s notion on ‘uneven and combined development’ in the UK (Rosenberg 2013; Callinicos and Rosenberg 2008) As Jabko argues, France has strong tradition of heterodox economics such as the regulation school (Aglietta, Orléan, Boyer) but their proponents remain economists largely uninterested in politics (Jabko 2009: 233) Sociologists bemoan the same based on their overt belief in structural functionalism in the wake of Talcott Parsons and the separation of sociology from economics (Streeck 2015) as well as in political Marxism (Teschke 2004; Knafo 2009) which seeks to move beyond the economic determinism identified in much Marxist scholarship.3 A brief analysis of all existing German-speaking chairs in IR shows that none of them deals with questions of capitalism as such. By contrast, the chairs of International Political Economy, sometimes denominated as chairs for ‘globalization’ are clearly more akin to a political economy approach but the fact that their chairs are not denominated as IR highlights how resistant German university and the IR ‘community’ are to welcoming critical political economy in their midst.4 German IR is dominated by the quest for international cooperation pursued through institutionalist and constructivist lenses.5 The assumption is that if the UN works more effectively or if norms are implemented or translated in a more effective way, the traditional concern of IR – world peace and cooperation – might become a reality.
At the same time, the last few years have made it abundantly clear that ideas and institutions do not suffice to understand world political events like the financial crisis.
As a consequence, German IR is becoming more open to questions of politicization (Zürn and Ecker-Ehrhardt 2013) or even questions of domination and opposition (Daase 2014). Capitalism might thus have a come-back if IR is willing to see that IR has to be global political economy as well to understand and explain real-world phenomena.
Beyond the confines of IR and IPE, capitalism is ubiquitous these days. Conservative media outlets like the Frankfurter Allgemeine Zeitung staged elaborate debates on the future of capitalism and Piketty’s Capital in the 21st Century (2014) was avidly discussed by mainstream media. This indicates that the influential middle class milieu of journalists is intrigued by the question of capitalism and these journalists assume that their readers are, too.
Although the critical critics were quick to dismiss Piketty’s lack of a theory of capital, Capital in the 21st century has anchored the word of ‚capitalism‘ in European public debate (Lordon 2015; Stützle 2014). If Piketty has thus not achieved more than See also Scherrer’s useful overview of this scholarship (2003) See Christoph Scherrer’s attempts to engage with the IR community and the lack of traction these important attempts have had so far in the overall discipline (1995; 2000). It was probably a conscious decision on his part to work on strengthening IPE in Germany since the mid 2000s instead of trying to work with IR.
Gunter Hellmann and Klaus-Günther Wolf’s diagnosis of a ‘reigning neoliberal-constructivist institutionalism [my translation}’ from ten years ago still holds (2003).
pointing to the obvious – the rise in inequality within and between states and classes because the return on capital has been higher than economic growth –which research can one build on and expand to grasp and expose the workings of contemporary capitalism in IR?
Theories of capitalism
As conceptual abstraction with systemic traits, capitalism is not graspable in a strictly empiricist way. Those willing to claim an ‘–ism’ related to the workings of capital have thus always had to content themselves with making the systemic nature of capitalism plausible (Toscano 2014; Koddenbrock 2015). Focussing on the working of money and capital is one of these strategies.
As recounted many times the term capitalism is a 19th century invention, made popular by Werner Sombart’s work in the early 20th century (Braudel 2013 , 47; Altvater 2011). For the discipline of IR, one question is key: Is capitalism a global system, a totality subsuming all social life within its reach under its rule and logic?
Between critical scholars from a feminist, queer, postcolonial or intersectional background, this question is debated with vigor because as a social relation, capital might not be the only or the most important relation of domination and thus not the primary object of analysis. But intersectional analyses tend to become overly complex lest a more direct route to analyzing all forms of domination together be found, so focusing on capitalism is a valid step (Buckel 2012).
An entry into existing theories of capitalism is necessarily partial and selective. I will focus on the theories of the French historian Fernand Braudel and the German political economists Elmar Altvater and Birgit Mahnkopf here. In Fernand Braudel’s influential analysis, capitalism is the top layer of world society. Beneath it, there is market society and material and everyday life (2013: 49-69). For him, capitalism is the layer in which powerful actors such as governments and transnational companies cooperate and make use of spaces of limited competition. Capitalism is where the utopia of a market society of exchange among equals through the Smithsonian ‘invisible hand’ is actively counter-acted and strategically blocked. Historically, according to Braudel, world trade was used by well-positioned family conglomerates to profit from regulatory voids to reap windfall profits. This constitutive capitalist strategy has continued unabated until this day. New actors participate in the strategy but large (family) conglomerates continue to play an important role.6 Making capitalism visible in Braudelian fashion can thus mean to show how global accumulation of wealth and profit works through reaping (monopoly or oligopoly) profits by using unregulated spaces of economic activity. To what extent public authorities such as national governments partake in these activities would have to be investigated along the way.
For Elmar Altvater, the last and most influential German Marxist political economist who retired in 2004, studying capitalism requires to zero in on capital and money itself, because money is the prime means of global Vergesellschaftung. It is the one means everybody on our planet had to deal with and its being and logics indicate which human relations lay at its basis (Altvater and Mahnkopf 2004).
Making sense of money to make capitalism visible
In 1971 already, Susan Strange, the scholar who played a major role in founding what is considered IPE these days, tried to bring money into IR. She argued that both the concept of ‘international society’ and the ‘state’ should take account of the ‘monetary factor’ because with rising interdependence and interaction between the political and economic systems, the exclusion of monetary concerns had become even less tenable than before (1970: 305). In her first book, Sterling and British Policy (1971) Strange enquired about the political conditions and consequences of using a currency which is not issued by their home government. She shows how the opening of London to trade in foreign currencies played a major role in reshaping the entire post-war North Atlantic political economy.
Money is of course a difficult beast. The sociology of money has often followed in Simmel’s footsteps and has mostly captured it as a means of trust based on trust (Krämer 2015). Scholars who have not attempted to explain and dissect money in the