Nicos Poulantzas' theory of the state and the neo-liberal state in the European periphery today

Nicos Poulantzas’ theory of the State and the neo-liberalstate in the European periphery

today

Philip Martin

17 April 2013

Senior Seminar

Dr. Fouskas

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Abstract:

Utilising Poulantzas’ theory of ‘authoritarian statism’, this paper locates the source of the state’s ability to reproduce capitalist relations in the bureaucracy’s control over the lacuna between knowledge and power. The establishment of the lacuna is facilitated by the state’s monopoly over violence and the structurally maintained by the imposition of a bureaucracy as its bridge-master interpreting law. Systemically strengthened, by dethatching it from democratic processes, the bureaucracy more efficiently organises the long-term interests of the dominant fraction of the power bloc. The statutory independence of the European Central Bank (ECB) is an example of bureaucratic-executive melding that is characteristic of Poulantzas’ ‘authoritarian statism’. Becauseof the relative autonomy gained by being independent, the ECB is able to intervene in domestic Greek politics in order to organise the long-term political interests of international financialised capital. The November 2011 Greek technocratic government headed by Lucas Papademos is the preeminent exampleof this ability to intervene.

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The financial crises that have afflicted European

countries, specifically Portugal, Ireland, Italy, Greece, and

Spain, have shaken the foundations of internationalised

capital. Furthermore, these crises have questioned the

democratic nature of the European states which are enduring

them. Particularly in Italy and Greece, the political response

to the crises has effectively been a pausing of democratic

politics while technocratic governments attempt to pacify bond

markets and coordinate international monetary and banking

institution bailouts of their respective domestic situations.

The result has been austerity packages for both countries that

shift the fiscal burden of the bailouts onto the populace.

Necessitating the turn to unelected and provisional

technocratic government was, in Italy’s case, increasingly

unsustainable yield rates on Italian sovereign debt (Dinmore

and Segreti, 2011). For Greece it was the breakdown of the

political impetus to implement a large European Union (EU),

European Central Bank (ECB), and International Monetary Fund

(IMF), collectively known as the troika, negotiated sovereign

bailout (Hope, 2011). Both the men appointed to become prime

minister in their respective countries share a common

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background as economists trained in the USA, top bureaucrats

in the EU, and connections to the colossal transnational

financial firm Goldman Sachs (Rachman, 2011; Foley, 2011). The

common heritage of the men indicates that they both are more

than capable to represent and develop the long-term interest

of international financialised capital as the dominant

fraction of the power bloc. Additionally, Italy and Greece are

two countries that Nicos Poulantzas identified as entering a

stage of capitalism that sharpens the generic elements of

political and state crisis and leads to more authoritarian

states (Poulantzas, 2000, p.206).

The final book of the late Poulantzas, State, Power, Socialism

(SPS), outlines the conjuncture of the contemporary monopoly

dominated phase of capitalism and the interplay of economic,

political, ideological and state crises that precipitates a

new form of bourgeois state. He terms this new form of

bourgeois state “authoritarian statism” (Poulantzas, 2000,

p.203). Through SPS, Poulantzas fully details his neo-Marxist

theory of the state which derives its characteristics and

attributes from the class struggle and specifically the

relations of production. This state is “organically present in

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the generation of class powers” (Poulantzas, 2000, p.45).

Because of the connection to the class struggle and its role

during the generation of class powers, Poulantzas argues that

there can be no general theory of the state—each form is

historically determined (2000, p.19). Instead of formulating

the state via its instrumentality, as an appendage of society,

or as an outgrowth of the economic base in a mechanical

manner, Poulantzas formulates the state with “a constitutive

role not only in the relations of production and the powers

which they realise, but also in the totality of power

relations at every level of society (Poulantzas, 2000, p.45).”

This conception of the state is useful in its historical

applicability to the currently occurring forms of state in

Europe. Moreover, Poulantzas’ focus on political and state

crises makes his theory of the state particularly relevant to

European states which are currently embattled in economic,

political and state crises. In the following, a detailed

account of Poulantzas’ theory of the state will be rendered

and applied to the situation surrounding the move to a

technocratic government in Greece in November, 2011. This

exercise will attempt to explain the recent political crisis

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in Greece as an instance of state crisis where the dominant

fraction of the power bloc (international financialised

capitalism) took control of the systemically strengthened

executive in order to articulate and reproduce the relations

of production necessary for its long-term interests. To

supplement this analysis, the mode of organisation of the

economic apparatus of the state—the central bank—will be

investigated. Juxtaposing the political control mechanisms of

the Central Bank of Icelandic (CBI) to the European Central

Bank (ECB) and its European System of Central Banks (ESCB)

will illuminate whose interests each bank serves. The two

states and banks have managed the crisis in widely different

ways. Of note, the Icelandic institutions have conserved

democracy and subsequently, the economy has returned to growth

and the unemployment rate decreased from its crisis heights—

two outcomes the ECB, ESCB, troika and Greek state have been

unable to produce.

The particular necessity for using a neo-Marxist approach

is the ineptitude of liberal strands in identifying the

structural problems that liberalism, even in its pluralist

nature, produces. To apply a specific liberal strand to

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illustrate a problem within the broad framework of

contemporary liberal society may be sufficient to display the

problems with some competing liberal strand. However, the

self-referencing of any and all strands of liberal thought to

the broad liberal framework obfuscates the problems that the

totality of liberal thought has constituted upon contemporary

society. That is to say, from inside the house one can detect

a leak in the ceiling, but only from an outside perspective

can a person see that the root cause is not a broken pipe, but

rather a missing roof. Adapting theories from neo-Marxists,

and other non-liberal camps, will foster a greater perspective

when analysing the house that liberalism built.

Chapter one: Law, the Executive, and Bureaucracy.

Of course, the most recognisable feature of the state, in

any historical form, is its role as the sole creator of law.

The modern liberal state is one built upon the preeminence of

the law: typically defined by the ‘rule of law’. This is

distinctly distinguished from the previous form of absolutist

forms of state wherein the sovereign had unlimited discretion

to rule over the citizens of the state through fiat. The

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unbounded nature of the exercising of power inside the

previous form of state produced a situation that subjected the

populace to the arbitrariness of the autocrat. Liberal

reforms, which attempted to place the law above the sovereign,

typically signified by a constitution, were meant to preclude

this arbitrary aspect from the society because it often

produced a certain type of terror. Conceiving of the law in

this manner makes a dichotomy readily apparent—one of

law/terror. But is a state under the ‘rule of law’ one where

terror is precluded?

To answer this question it is instructive to investigate

precisely where the power to write law originates. That power

is grounded in violence (Poulantzas, 2000, p.79). The power to

formulate law proceeds directly from the most basic aspect of

the liberal state: a monopoly over the use of violence (Weber,

1946, p.79). While Max Weber’s dictum regarding this aspect of

the state is well-ingrained, the power to write law is best

demonstrated by the circumstances in which the state acts

outside of the law. Through Schmitt we can see that the state

of exception proves the existence of the pure power of the

state behind the law. In his conception, the order created by

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a codified law stands not on norms, but rather on a decision—a

decision within the competence of the state because of its

monopoly over violence (Schmitt, 1985, p.10). The exception is

a situation in which the state’s existence is in peril; a time

when an extreme emergence dictates action from the state in

order to eliminate it. Furthermore, during emergencies, this

ability to act must necessarily be unlimited because the

normal conditions under which the law operates are no longer

present (Schmitt, 1985, p.7). Greece experienced a crisis of

similar proportions in the closing stages of 2011.

The discussion of the state of exception is relevant to a

discussion of the modern liberal state because of two specific

aspects. Firstly, the exceptional circumstance is one where

recourse to parliamentary discussion and consensus building is

precluded because of the necessity for quick and decisive

action. Secondly, as Agamben shows, this method of action has

become ever more prominent in the contemporary democratic

state (Agamben, 2005, p.2). Agamben aptly recognises that the

normalcy of using exceptional circumstances to govern is

directly intertwined with a collapse of parliamentary

legislation and a systemic strengthening of executive powers.

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In a similar vein as Poulantzas, Agamben contends that the

subjugation of parliament to the expanded powers of the

executive has effectively transformed his native Italy from a

parliamentary democracy to an executive government (Agamben,

2005, p.18). The ideological aspect the use of the state of

exception and the strengthening of the executive that it

facilitates can be found in what circumstances are defined as

necessitating executive and extra-legal responses. Agamben,

without a Marxist conception, recognises that the hallmark of

contemporary politics is a conflation of military and economic

emergencies (Agamben, 2005, p.22). Considering the cause of

the crises in Italy and Greece, we can see that the

circumstances of turmoil in international capital markets and

the international organisations that provide the state access

to capital outside of the international markets were the main

facilitators of an emergency rather than any military

exigency.

While the materiality of the power of the state, via its

monopoly of violence, is without question, we must now look at

what functions the law carries out. The law is firstly always

present in the genesis of social order. This is because the

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law is not simply negative in nature or a set of prohibitions,

but because it also performs positive functions; compels

action. The dual nature of the law makes it “a constitutive

element of the socio-political field (Poulantzas, 2000,

p.83).” Furthermore, the dual nature of the law makes it an

instrument to shape and mold society to create and maintain a

specific kind of civilisation (Gramsci, 2007, p.246).

Behind all of its functions, the law is preeminently the

organisation of public violence (Poulantzas, 2000, p.77).

Through the public organisation of violence, the law takes up

its educative functions—its role to create conformity. The

liberal capitalist state is one that thrives on normalcy,

repetitiveness and calculability—rationality. To produce these

conditions the law fulfills the role of repression. The

educative function of the law is to instill within the society

the dominant ideology. It accomplishes this by obscuring the

political-social realities (Poulantzas, 2000, p.83). In order

to obscure those realities it relies on a system of

individualisation.

The modern form of liberal-capitalist state law is

expressed through an axiomatic system that breaks the

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connection of each person to his or her class by creating a

new division—the most radical one—individualisation

(Poulantzas, 2000, p.87). This meshes with the capitalist mode

of production in that it requires individual persons to be

inserted into the labor process. The dominant ideology in a

liberal-capitalist state, which assists in maintaining the

rate of exploitation, is one based upon free agents selling

their labor. By creating a conception of individuals as

individuals rather than members of a class, the law helps to

mold the dominated classes in a way that they can best fit

into the system.

For Poulantzas the need for an organisation of violence—

law—arises from the preeminence of struggles that are based

upon exploitation (Pouantzas, 2000, p.79). Both violence and

consent are congruent for the state in that they are both used

to ensure the continuance of exploitation. The former is

materially necessary for molding the latter. Schmitt,

recalling Hobbes, stated it in this way, “[n]o form of order,

no reasonable legitimacy or legality can exist without

protection and obedience” (Schmitt, 2007, p.52).

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Returning to the historical instance of the European

crises, the ability of an economic crisis to translate itself

into a political or state crisis is apparent to Poulantzas.

However, the articulation from economic to political does not

always occur in chronological lockstep. Instead, as we can see

from the Italian and Greek examples, the political crisis can

occur prior to an economic crisis, or it can occur after the

economic (1976, p.299). In the Italian case the political

crisis preceded the economic crisis and in fact anticipated

the advent of an economic crisis. The Greek case displays a

political crisis that occurred after the economic crisis and

even after the intervention of international organisations

which were meant to solve the economic crisis. In both of

these cases the much-increased role of the executive played a

pivotal role in allowing the state to maneuver through the

political crisis.

It is necessary to remember that the state has always

played a constitutive role in the economy. Through the order

of the law, the state defines ownership: both in economic

terms and in terms of possession of the means of production.

Marx was able to show that transformations in the form of land

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(a means of production) ownership are correlated to

transformation of the state. The change in ownership from

large property holders in the feudal stage to small-holding

peasants in 18th Century France transformed the French state

from absolutist monarchy to the Bonapartist state where the

executive consolidated power away from parliament (Marx, 1852,

p.62). Similarly, in the modern state, a change in the state’s

intervention into the economy requires a transformation of the

state itself. The growth of the state’s economic role is

related to the transfer of powers from the legislative to the

executive (Poulantzas, 2000, p.218).

For Poulantzas, the hegemonic interests of monopoly

capital directly determine the need for a strengthened

executive. As opposed to the hegemony of competitive

capitalism, monopoly capitalism is assisted not by universal

laws but rather by specific and particular regulations (2000,

p.219). Parliaments, by their nature, can only create law via

consensus. Because of this, the law proceeding from

parliaments is typical general and serves the broad interests

of capital rather than the specific interests of particular

fractions. The hegemony of monopoly capital, however, is based

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upon an increasingly small socio-political foundation

(Poulantzas, 2000, p.221). Thus, the tethers of the government

to representative democracy must be continually cut for the

hegemony of monopoly capital to maintain influence in the

state and its apparatuses.

A further transformation of the state under the hegemony

of monopoly capitalism is a curtailment of the parliament over

the bureaucratic administration of government and its movement

towards the executive (Poulantzas, 2000, p.219). The power

that resides in the state’s bureaucracy is contained in its

function as the apparatus that transforms laws into practices.

The distance between theory and practice (logos and praxis) is

spanned by the administrative bureaucracy of the state. The

law may set down a norm, but it is the concretisation and

operationalisation that the bureaucracy completes to transform

that norm into rituals, procedures and codified regulations.

These material effects of the bureaucracy indicate that it is

the main state apparatus that exercises coercive powers

(Gramsci, 2007, p.246). Being the site in which the lacuna

between law and procedure is exorcised supplies the

bureaucracy with enormous powers to stamp its ideology upon

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the material outcomes of the law code. That control and

regulation of the bureaucracy has effectively passed from the

parliament to the executive is a phenomenon that cannot be too

lightly emphasised. In a situation where emergency situations

seemingly occur regularly, necessitating executive action, the

ability of the executive to use the bureaucracy while

drastically minimising competing claims of influence over it

from parliament means that the executive has a more total

control over the law. Controlling both sides of the logos-praxis

gulf supplies the executive with an expanded authority to

amend, mold, and shape society.

Bureaucracy, when it spans the structural gap between

theory and practice, becomes the state agent of shaping the

materiality of those who fall under the law. In order to

display how the state has a distinctly material effect on its

citizens, investigation of this gap, and the ideology of the

apparatus that spans it, is vitally important. This lacuna

holds together pure thought—theory—and pure action—practice.

It is rather self-evident that the agent that decides upon the

material practices and rituals that proceed from the theory of

what is right, good and necessary has a crucial role in

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reproducing its conception of right, good and necessary in the

society.

Furthermore, the dichotomy between theory and practice

can be displayed as one between knowledge and power. With the

state bridging the divide between the two, a split between

work of the mind and work of the body is formalised and

institutionalised. As Poulantzas argues, the capitalist state

“incarnates intellectual labour as separated from manual

labour” (Poulantzas, 2000, p.56). That the state institutes

itself as being the authoritative functionary who decides upon

and creates the logic-ideology that transforms the theory of

right, good and necessary into material form via practices,

places it as a relatively autonomous agent with a major

constitutive role over the public. Rather than allowing for

the distance to be traversed in each instance, by each person,

as they decide how an idea should take material form, the

state intercedes as the agent who uniformly decides. It is the

monopoly over violence that allows the state to stand as a

praetorian guard between the people and access to knowledge of

the meanings of right, good and necessary. Especially in the

state of exception, we can see that the naked power of the

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state deciding on the definition of “necessary” is the

institution of ‘order’. Law, then, is the linguistic

organisation of the state’s naked force.

The way that the state accomplishes this task of

uniformly deciding how the gap between theory and practice

should be spanned is by the institution of a national language

and by eliminating other languages (Poulantzas, 2000, p.58).

This is the enuciative function on the state. The enunciative

function encompasses the state as a cohesive force and the

state as the condensation of contradictions—the singularity

wherein all parallel levels and arenas of life pass. To better

understand the singularity of the state, we must use analogy.

Since we are now speaking of the liberal-capitalist state, it

is an analogy based upon capitalist relations that will be

used. Assumedly, the pervasiveness of capitalist relations

will make the analogy clear.

We can look at the state’s negative role as linguist-

decisionist between law and practice as a bridge-master who

the people must interact with—in the bridge-master’s language—in order

to settle disputes. Every time differences in interests begin

to crescendo, the monopoly of violence of the state dictates

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that the two parties involved must seek the law to determine

right. The law, by its constitution in language, must be

interpreted. This is the task of bridge-master: to determine

the interpretation of theory (right, good and necessary) to

the material instances of a dispute. This is always done in

the state’s language and inculcates the now individualised-

homogenised juridico-political subject-persons with the

national language and the proper way of thinking, speaking, and

handling problems—the totality of the ideology of rationality

in the case of the liberal-capitalist state. The bridge-master

is always the bureaucracy, for even after parliament

legislates, the bureaucracy, through its administration,

operationalises and concretises the laws.

The bridge-master is not an autonomous position, however.

The bridge-master is only an instrument for articulating the

theory of what is right, good and necessary into material

practice. Because of the instrumentality of the position of

interpreter of right, good and necessary, it is never an

autonomous object but can only be wielded subjectively. The

instrumentality also dictates that the bridge-master is in the

employ of a pay-master (an owner). Who this pay-master is

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determines to a large degree the independence of the bridge-

master and with what logic-ideology they administer the

bridge. When parliament is the pay-master there is more

control exercised by the people—through their representatives—

over the way the bridge-master performs their task. When

parliament as the pay-master of the bureaucracy-

administration-bridge-master is replaced by the executive, the

bridge-master becomes more unified with its owner and

confident in their administration. There is only one person

(indeed, only a figurehead) admonishing and articulating the

desires of the “state” (that is, the bridge-master’s ultimate

boss: the stock-holder citizens, so conceived) to the bridge-

master. This solidifies and condenses the logic-ideology of

the bridge-master as they are increasingly impregnated with

the logic-ideology of a single executive and are cut off from

the logic-ideology of a collective decision-making body, such

as the parliament. The condensed ideology is passed into the

people. As the bridge-master increasingly becomes assured of

the correctness of their interpretation because of their

understanding and coalescing with the logic-ideology of the

individual decision maker bound up in the executive, they

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reduce, via their managerial-administrative control over the

means of violence, the people’s voice and essential democratic

liberties.

The relative autonomy that the state has in the

enunciative function is increased in that it is controlled

more clearly by the logic-ideology of singular ownership vis-

à-vis the executive, which is congruent with the logic of

ownership inherent in international financialised capital.

Here is the moment when the bridge-master is more able to push

the logic-ideology of the brand of ownership into the people.

It sharpens the people’s logic-ideology as it educates them on

a singular logic-ideology rather than on a flexible logic-

ideology which attempts to produce the best outcome for all

during instances of competing claims (as found in the liberal-

competitive capitalist state). The sharpening makes the state

more focused, but also makes the language less flexible to

competing claims which in turn makes the state more brittle.

Through the state fulfilling its enuciative function, with the

constitutive relative autonomy that the task requires, the

long-term political interests of the fraction of capital which

constitutes the hegemonic portion of the power bloc are

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advanced because the logic-ideology of the relations of

production—necessary for the hegemonic fraction to maintain

its dominant position—is reproduced in the people through the

institutional materiality of the state.

Through this apparatus, the dominant fraction’s interests

are organised as the embodiment of national greatness and the

bureaucracy is its instrument of organisation (Poulantzas,

2000, p.225). As the parliamentary control over the

bureaucracy fades, the bureaucracy’s freedom to articulate

state policy makes it a “legitimate creator of social norms”

(Poulantzas, 2000, p.227). This situation of a bureaucracy

embedded within the executive, with increasingly few ties to

the aspect of representative democracy embodied by the

parliament, can achieve a significant destruction of

democratic liberties and “lays the ground for a possible

evolution of power towards Bonapartism” (Poulantzas, 2000,

p.231).

From here it is necessary to look directly at the role of

the executive inside the authoritarian statism framework. As

the bureaucracy is fused with the executive and takes over the

creation of law (particular regulation rather than general

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universal law) and the formulation of state policy, the

executive tends to take on a more personalised form with a

single person at the top of the government. However, rather

than portraying a Bonapartist isolation and condensation of

despotic powers, the executive within authoritarian statism

serves as a focal point of the diverse bureaucratic networks

(Poulantzas, 2000, p.228). Because of this, it is accurate to

describe the executive as seated in the apex of a structure

that projects onto them the varied interests into one person.

As Poulantzas articulates it, “there is not one president, but

several in one” (2000, p.219). The complexity of managing the

various interests produces a search for a “charismatic

frontman” who can coordinate the direction of both the

dominant class and the popular masses (Jessop, 2011, p.50).

From this discussion we can see that the state uses its

monopoly over violence to install a structural gap between its

citizens and access or knowledge of what is right, good and

necessary. Through administering this divide, the state has a

material effect on its citizens—reproducing the relations of

production required of the capitalist mode of production. That

materiality is based upon interpretation of the law and

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inculcation of the populace with the national language in

which the law is written. In the contemporary transformations

of the capitalist state that Poulantzas identifies as

‘authoritarian statism,’ a bureaucracy increasingly fused to

the executive rather than the parliament or democratic control

administers the structural lacuna. Because international

financialised capital’s hegemony stands upon an ever-

decreasing base, the fusion of executive and bureaucracy

within the state apparatus is required to organise its long-

term interests.

“The relative autonomy of the capitalist state is

essential in order for the hegemony of power to be organised

over the dominated class” (Poulantzas, 1976, p.311).

Throughout his exposition of the theory of the state,

Poulantzas emphasises the constitutive role the state has in

the economy. Specifying for capitalist states, Poulantzas

demonstrates that the liberal-capitalist state maintains a

relative autonomy from the economy in accordance with the

capitalist means of production (1976, pp.303-304). Poulantzas

recognises too that the control of monetary policy, despite

being advertised as an apolitical technocratic function, has

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immense political content (2000, p.179). More importantly, the

relatively autonomy—or separation—allows for the state to

intervene into the economy. During crisis situations, that

autonomy allows state intervention to articulate and organise

the long-term interests of capital. The 2011 crisis in Greece,

however, was a highly complex crisis of both the state and

economy. Because of this circumstance, the hegemony of the

dominant bloc of capitalism required an institution

independent of the Greek state and its economy. That

institution was the European Central Bank (ECB).

Chapter Two: European periphery, Neo-liberal reforms and the

financial crisis

Understanding the European single currency project in

relation to Greece and Iceland’s position within that context

is a crucial element in comprehending their divergent

responses to crisis. Iceland is not a member of the union, but

has taken steps to facilitate future membership. Greece,

however, was accepted into the European Monetary Union (EMU)

in 2001. This places both countries in the periphery of the EU

project. However, their location in the periphery is not

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distinctly similar. Greece being inside the EU and Iceland

being just outside helps to individuate their relations with

the EU and the liberal-capitalist system inherent in the EU

project.

The integration of Europe into a single currency zone has

been given different objectives based upon the background of

the person articulating the objective. Even in its infancy,

Callinicos recognised the contradictions inherent in the

project. Those on the left thought it would reign in financial

speculators and be a counterbalance to global markets, those

on the right anticipated it bringing Anglo-Saxon, laissez-faire

capitalism to the continent, while others believed it would

continue the process of transcending national interests to

maintain peace in Europe (Callinicos, 1998, p.70). However,

the establishment of a central bank to administer the new

currency based upon inflation fighting, monetarist principles

set the agenda for the project (Grahl, 1997, p.129). The

effect of instituting the new central bank with a monetarist

charter was presciently predicted, “to trap the poorer and

less competitive EU countries in a hard-money regime which

will keep their unemployment rates permanently high”

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(Callinicos, 1998, p.73). Furthermore, the ECB has applied a

single monetary policy across the zone with a focus on the

conditions in core countries (Germany, France, Belgium and

Netherlands) without fully accounting for the conditions in

periphery member states (Lapavitsas, C. et al, 2010, p.5).

In Iceland’s case, the slow steps towards convergence

with the EU have meant that the historically highly

politicised central bank and banking sector has undergone neo-

liberal reforms. In the 1990s, foreign currency controls were

removed so that Iceland could enter the European Economic Area

(EEA). By 2001, the currency was allowed to float freely and

the organisational structure of the central bank was reworked

to reflect its European counterparts. Most notably, the

central bank went from having a board of three governors—one

from each of the major political parties—to a single governor

appointed by the government (Carey, 2009, p.6). This was

accompanied by a change in the mandate of the central bank to

become an inflation fighter, again, in-line with European

norms.

By the time the crisis hit, the reforms Iceland had

undergone to meet neo-liberal norms, while looking at future

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implementations of ESCB rules upon admission to the EMU, had

given Iceland a central bank that was beginning to look like a

typical European central bank. However, unlike the ECB/ESCB

system, there are limits to the Central Bank of Iceland’s

independence. Firstly, the Icelandic central bank is

explicitly owned by the Icelandic state and the minutes of

bank board meetings are required to be made public (Article

27). Furthermore, the Minister of Economic Affairs appoints

the bank’s governor, while a seven person Supervisory Board is

elected by the parliament (Iceland, 2001). This attempts to

ensure some level of democratic control over the bank by

parliamentary means and by transparency in regards to the

people. However, it is apparent with hindsight that these neo-

liberal adjustments in the financial sector opened the door to

international financialised capital, or what has been

alternatively termed by John Perkins, a former insider, as

“predator capitalism” (Bhandari, 2013, p.37).

The structure of the Greek central bank is the ESCB. The

ECB and ESCB are built on full statutory independence from the

political process. Its separation from political control is

threefold. Firstly, it is mandated not to take instruction

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from any institutions of the EU or member states. This also

applies to the national central banks that make up the ESCB

(Official Journal of the European Union, 2010). Secondly,

according to Article 10.4, the meetings of the Governing

Council of the bank are to be kept confidential, thus keeping

the public in the dark about the decision-making process.

Thirdly, the European Council appoints the President, Vice

President and Executive Board of the bank. This means that the

executive branch of the EU appoints the bank’s boardroom staff

that is independent by statute and obliged to keep their

proceedings from the public. These three aspects combined make

the ECB highly insulated from popular or democratic controls.

As Luttwak has described it, the ECB’s independence is so

severe that the only accurate historical analogy would be that

of the medieval papacy (1997, p.231). Stating the case quite

clearly Luttwak says, “[t]his is truly a sovereign power,

given irrevocably to an institution headed by a central

banker, selected and advised by other central bankers, who are

themselves recruited and trained by their predecessors in

their respective central banks” (Luttwak, 1999, p.200).

Martin 29

Seemingly responding directly to Luttwak’s critique of

the bank’s independence, the ECB declares on its website that

its commitment to democratic accountability is demonstrated by

the fact it publishes monthly bulletins, “rather than the

required quarterly report, and members of the Governing

Council deliver numerous speeches to address relevant topics

of concern to the public” (ECB, 2013). In light of the

tripartite independence guaranteed to the bank through the

treaties that founded it, the idea that a monthly report—

rather than quarterly—will bring democratic accountability to

the bank is immensely derisible.

The neo-liberal reforms that Iceland implemented

essentially opened up its banking sector to foreign investment

and allowed its banks to operate in other European markets.

The reforms had an immediate impact. From 2003 to 2007 the

assets of the Icelandic financial sector ballooned from 170%

to 880% of GDP (Carey, 2009, p.9). This meant that Iceland’s

net external debt was 234% of GDP (Pepinsky, 2012, p.146). The

massive boom in banking sector assets provided easy credit to

the Icelandic people and subsequently their personal

consumption increased to unsustainable heights (Zarrilli,

Martin 30

2011, p.7). The appearance of an Icelandic bubble, however,

did not happen unnoticed.

In Greece, the expansion of the financial sector in

relation to GDP was not as pronounced. From 2003 to 2007, it

rose to 190% from 124% GDP (Lapavitsas, C. et al, 2010, p.38).

However, the framework of the EMU, which allows cross border

borrowing, mediates the relative size of the Greek financial

sector. Looking at the rise of household debt we can see that

unsustainable borrowing, facilitated by cheap credit within

the Eurozone, was certainly present in the Greek economy

leading up to the collapse. Household debt increased from 30%

to 60% GDP in Greece from 2003 to 2007 (Lapavitsas, C. et al,

2010, p.19). In both countries, the liberalisation of the

financial sector had induced massive growth in banking, and

debt. This placed Iceland and Greece as the top two worst OECD

countries for international investment at the end of 2007

(Carey, 2009, p.19).

On September 15, 2008, the American financial firm Lehman

Brothers filed for chapter 11 bankruptcy (BBC News, 2008). The

collapse of the firm signaled the beginning of the global

financial crisis that would spread to every country that was

Martin 31

integrated in the global market system. In response, the major

central banks of the developed world began to use

extraordinary measures to pacify markets and patch together

the financial system that was crumbling under its own weight.

To fully grasp each country’s response, the use of broad

economic figures such as GDP growth and unemployment will be

used. This is necessary because the response of the two states

is not fully incorporated in simply their central bank’s

technical responses. At this level of historical abstraction,

only trends are discernable.

The metric utilised to evaluate the state’s response in

regard to its citizens’ livelihood is unemployment. The

unemployment rate in both countries began to rise in the wake

of the 2008 crisis. In March 2009 the unemployment rates of

both countries were climbing towards 10%. However, the tethers

of parliamentary democracy to monetary authorities had not

been broken in Iceland as they had been in Greece because of

its accession to the ESCB. After early 2009 the unemployment

rates diverge sharply, with the rate in Iceland tracking lower

to moderate rates (approximately 5%) while Greek unemployment

continued climbing to 25% four years after the beginning of

Martin 32

the global crisis (Zero Hedge, 2013). The serious surge in

unemployment has been accompanied by political crisis, unrest,

and the rise of extremist parties in Greece, as well.

The main difference in responses from Greece and Iceland

was that Iceland’s political process still maintained control

over its economic apparatus—the Central Bank of Iceland.

Meanwhile, the political process in Greece, because of the

statutory structure of the ESCB, has virtually no control over

monetary policy. The political control that Iceland

demonstrated coalesced in the “kitchenware revolution”

(Zarrilli, 2011, p.9). The unrest led to a change in

government and eventually a public referendum on whether or

not to pay back the now nationalised banks’ debt. The

referendum produced a resounding ‘no’. 93.2% of voters in the

referendum refused to pay the debts incurred by banks during

the boom (Zarrilli, 2011, p.10).

In Greece, the primary goal of the reaction to the crisis

was to save the Euro. The bailout package that the ECB and the

troika members offered Greece was laden with austerity and

spending cuts that has fueled the ever-ascending unemployment

rate in Greece. Implementation of this package had the effect

Martin 33

of “turning the Greek state into a straightforward predator

agency in the hands of the global financial usury” (Fouskas

and Dimoulas, 2012, p.3). The requirements of imposing harsh

austerity on the Greek people destroyed the Greek political

system. When the domestic political will no longer existed for

implementation of the troika bailout package and the Greek

state was in a full-blown crisis of legitimacy, the ECB

capitalised on its relative autonomy from the Greek state and

sent their own man to administer the implementation of the

bailout package. In November, 2011 the normal workings of

Greek democracy broke down as a uniquely ‘necessary’ situation

arose that required a person who was fully aware of the long-

term interests of the ECB to guide the political unit of the

Greek state and implement ECB dictates. This person was Lucas

Papademos.

The work history of Lucas Papademos makes it readily

apparent that he had the experience, knowledge and skills to

be a representative of the ECB and larger central banking

sector. As the head of the Greek central bank from 1994-2002,

he was responsible for getting the finances of the Greek state

in line with the convergence criteria to join the Euro. After

Martin 34

accomplishing that significant task, he was rewarded by the

European Council with an appointment as Vice President of the

ECB (Independent, 2011). When implementation of the troika’s

bailout package came into doubt, the troika turned to someone

who they could trust. Papademos was not only fully aware of

the long-term goals of the Euro and ECB, but he also

understood the ideology behind the implementation of a single

currency and spoke the language of international financialised

capital.

While the Euro’s future may have been put on more solid

ground by the eight-month technocratic government of

Papademos, the lives of ordinary Greek citizens were made no

better. Unemployment continued to increase, passing the 20%

mark during his time in office, and GDP continued to decrease

(World Bank, 2011a). As Luttwak predicted, “the EMS can work

only if its own priority outranks all other relevant political

priorities, i.e. most of politics, and therefore most of

democracy” (1999, p.197). Meanwhile in Iceland, the continued

connections of parliamentarianism and democracy to the

bureaucratic management of monetary policy and wider handling

of the financial crisis has seen unemployment remain under 10%

Martin 35

throughout and fallen to 5% by mid-2012, the same time that

Papademos left office in Greece. Similarly, the Icelandic

economy also saw an increase of 3% in its 2011 GDP (World

Bank, 2011b).

Chapter 3: Applying ‘authoritarian statism’ to Greece and

Iceland

To apply the key characteristics of Poulantzas’

‘authoritarian statism’ to the Greek case, we must look at a

few key historical events. Firstly, the severing of

parliamentary democratic ties to the bureaucracy of the state.

Secondly, the relative autonomy of the agencies and

institutions trusted with the solving of the crises and,

accordingly, the organisation of the long-term interests of

the hegemonic fraction of capital. The third characteristic

that should be investigated is the language. In this respect

we must look at how the state defines the crisis in terms of

‘necessity’. In all three of these aspects it is apparent that

the development of ‘authoritarian statism’ in Greece has

facilitated a closer control of the dominant fraction of

capital known as international financialised capital.

Martin 36

Juxtaposing the organisation of the Greek monetary authorities

with the Icelandic monetary authority illuminates substantial

differences.

The state’s continued monopoly over violence allows it to

write law. That law is then administered by the bureaucracy

and forms a mold through which the hegemonic ideology of

capitalism is stamped on the people. This occurs because the

bureaucracy’s concretisation and operationalisation of the law

induces materiality of that law by shaping the actual

practices of the public. ‘Authoritarian statism’ demands the

loosening of ties of the bureaucracy to parliament and

democratic controls. Because the bureaucracy cannot be an

independent apparatus, the cutting of ties with parliament is

accompanied by a systemic strengthening of the bureaucracy’s

ties with the executive branch of government. This produces a

more unified and exclusive form of state that facilitates

control by an increasingly small minority, which is necessary

for international financialised capital to maintain its

dominant status within the power bloc.

The rise of rationalised-technocratic administration of

monetary policy in the 20th Century occurs concomitantly with

Martin 37

the transformation of liberal-capitalist states to

‘authoritarian statism’. By claiming that monetary policy

should be left to the experts and is devoid of political

content, the dominant fraction is able to place the control of

policy under the bureaucracy. Once located in the bureaucracy,

amending the ties of the bureaucracy from parliament to the

executive presents an ever-smaller portion of the political

class the ability to articulate their long-term interests. The

ECB/ESCB is the most advanced example of both the

bureaucratising of monetary policy and its removal from

democratic controls.

The unparalleled independence of the ECB vis-à-vis the EU

also provides it with a relative autonomy that allows it to

intervene in the political and economic realm of member

states. This is most clearly demonstrated by Papademos’

November, 2011 government. The exigencies of the crisis

necessitated a person intimately knowledgeable of the long-

term interests of the dominant fraction of capital and

Papademos’ career as a central banker provided him with the

required skill-set. Aligning with Poulantzas’ theory of

‘authoritarian statism’, the political interests of

Martin 38

international financialised capital was organised most

effectively through the use of extraordinary executive action

and particularised bureaucratic regulations—the implementation

of the troika bailout package. That these actions were not in

the interest of the Greek people is evidenced by the continual

increase to unemployment and decrease to GDP domestically.

Contrasting Greece, Iceland’s position outside of the EMU

illustrates how economic crises can be handled in a manner

that is beneficial to the people, provided there are still

political and democratic controls over monetary policy. It is

apparent that the neo-liberal reforms of Iceland’s central

bank and financial sector exposed Iceland to international

financialised capital, which took advantage of the situation.

However, when the collapse came, the remaining political

controls over the CBI allowed the change in government to

determine who was defining what was ‘necessary’. While the

international organisations such as the World Bank and IMF

attempted to define repayment of nationalised bank debt as

necessary for the upkeep of the international financial

system, the Icelandic people were able to petition for a

referendum and decide themselves if the crisis dictated the

Martin 39

response prescribed by the World Bank and IMF. As Perkins

notes, Iceland “defied the logic of the World Bank, IMF, and

business schools everywhere and now the country of Iceland is

back on top” (Bhandari, 2013, p.41).

This is highly divergent from the events in Greece where

the embedding of Greek monetary policy inside the ESCB allowed

the ECB to determine what was necessary. Returning to

‘authoritarian statism’, we can see how the national language—

the determination of what is right, good or necessary—is

linked to the bureaucracy and to what level the bureaucracy is

beholden to the people through democracy. The ECB/ESCB have

been able to eradicate the national language of Greece and

have installed the language of international financialised

capital in its place. The severity of this problem is

witnessed by the ever-increasing unemployment rates in Greece.

While the international financial system and Euro—the long-

term interests of the dominant fraction of the power bloc—may

have been saved by the ECB’s intervention in the Greek state,

the life prospects for many ordinary Greeks have evaporated.

Inherently, to speak of an organisation of hegemony of

the dominant fraction of capital by the political class smacks

Martin 40

conspiratorial. However, the convergence of neo-liberal and

orthodox monetarism with the rise of international

financialised capital since the inflationary conflagrations of

the 1970s seems readily apparent. The inflations of the 1970s

and 1980s destroyed many investors’ bond holdings and

precipitated a need for them to closely monitor government

policies to ensure their non-inflationary nature (Callinicos,

1998, p.77). Thus, unhooking national governments from

monetary policy decision making and placing that competence

with the ECB, which has been statutorily insulated from

democratic pressures, allows the ECB to fulfill the need of

international financialised capital for a non-inflationary,

hard-currency environment in Europe. Subsequently, the ECB

exploits to the fullest the continuing dominant ideology that

views the role of technocracy as the “guarantor of growth and

well-being” (Poulantzas, 2000, p.169).

This analysis indicates that further research, through

the Marxist perspective, should be more aware of the political

content inherent in both state—via the monopoly of force—

control and “independent” or bureaucratic control of monetary

policy through the capitalist central bank structure. Control

Martin 41

over monetary policy inside the state system allows for some

control democratically, as Iceland shows in regards to its

response to the crisis, but the state’s control through the

structure of independent central banks that is currently in

vogue allows for small fractions to gain influence over it.

Thus, the aspect of orthodox-Marxism that emphasises fully-

socialised ownership rather than simply statised (that is, the

full “withering away of the state” control over monetary

policy) should be taken seriously. Even under independent

statised monetary control that is democratised, as in the case

of Iceland, the negative impacts of being tied into the

international state system of liberal-capitalist states occurs

as international financialised capital exploits members of

that system. Iceland’s more publically beneficial response to

the crisis can be explained by the democratic controls over

the central bank and monetary policy itself. However, to

provide protection from capitalism and its inherent crises,

monetary control must be removed from the competence of the

liberal-capitalist state itself.

Conclusion:

Martin 42

Poulantzas was very concerned about how the capitalist

state is used to reproduce capitalist relations of production

and the determination of hegemonic ideology inside that

process. It is to his credit that he recognised the preeminent

role the bureaucracy plays in reproduction of ideology through

institutional materiality. The institutional materiality of

the state flows through the bureaucracy by means of

administering the lacuna between theory and practice. With the

ideation of what is right, good and necessary being placed

outside the reach of the people, the bureaucracy’s

interpretation of the law becomes a monopoly of knowledge—

shielded by its monopoly of violence—that allows it to shape

relations between the state and the people and consequently,

formats interpersonal behaviour. The outcome of this is the

reproduction of capitalist relations in so much as the

bureaucracy is owned directly by the capitalist state. The

modality of the administration of the lacuna is dependent upon

which part of the state effectively owns the bureaucracy.

The central contention of ‘authoritarian statism’ is that

the longstanding ability of capitalism to transform the state

via the principle of ownership of the bureaucracy and its

Martin 43

materiality facilitates capitalism’s capacity to reproduce

itself even after changes in the power bloc. Poulantzas

observed a transformation of certain states that was occurring

because their bureaucracy had become bound to the executive

branch of the liberal-capitalist state by cutting its ties to

parliamentary democracy. This allowed hegemonic reproduction

to be controlled by a fraction of the power bloc that is

decreasing in size. The transformation of the state that this

entails makes ‘authoritarian statism’ a highly efficient form

of state for international financialised capital.

The development of ‘authoritarian statism’ anticipated

the sharpening of economic and political crises in European

states. The prescient quality of the analysis is demonstrated

in that the states identified as having characteristics of

‘authoritarian statism’ in 1978 became the states (commonly

known as the PIIGS) that have been most substantially affected

by the financial crises in 21st Century Europe. These crises

have precipitated a need for executive action of an

exceptional type, which is more easily implemented by states

under developed ‘authoritarian statism’. The technocratic

government in Greece in 2011 was an historical conjuncture

Martin 44

that demonstrates the ability of the transformed state to

organise the long-term political interests of the currently

dominant fraction of capitalism, international financialised

capital.

Word count: 7952

Martin 45

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