This book was panned in the Times Higher for its ‘persistent anti-capitalist tone’ – reason enough for it to be given further consideration here.  ‘risk management’ has become a central feature within the administration of contemporary capitalist society and has correspondingly assumed a new significance within its academic disciplines, particularly economics, politics and sociology.  It is fittingly so.  In an earlier era the anarchy of the capitalist market was meant to resolve all problems. 

Adam Smith’s invisible hand ensured that all resources were put to best available use and that general betterment resulted – even if weaker capitalists were trampled under foot and workers exploited.  Marx himself saw this as the secret of capitalism’s dynamism.  But, as Marx also foresaw, this competitive dynamism had its limits.  Growth through competition would ultimately produce its opposite: monopoly.  And monopoly would dislocate markets, generate fictitious capital and demand intervention by the capitalist state to manage the resulting crises. 

‘Rrisk management’ is the tacit acknowledgement that markets can no longer resolve all economic and social problems. The complex interaction of monopolistic investment, financial engineering and manifold interventions by the state apparatuses of competing countries results in a dangerous and unpredictable environment for capitalist enterprises – and even more so for those employed by them. 

The strength of this study by Beck and Kewell is that it stands outside the discipline of risk management itself and seeks a critical understanding of its wider social context and historical origins.  It is not explicitly Marxist.  But a Marxist understanding informs much of its argument – hence its ‘persistent anti-capitalist tone’. 

The first chapter takes the pre-history of the mathematics of risk from the ancient world to the early modern period.  Based on games of luck and the calculation of chance, the complex mathematics developed in ancient Greece were carried forward in the Arab world, rediscovered in the Renaissance by Cardano and reworked by Pascal and others in the seventeenth century.  In the Enlightenment the resulting mathematics gave substance to the belief that large scale data, on populations, births and deaths, on prices and output, could predict future outcomes and establish order and regularity. Such statistics were able to record, comfortingly, the overall progress arising from apparently anarchic markets.

Chapters two and three document what might be described as the pathology of uncertainty and risk in the early twentieth century.  They move from the genre of disaster novels (the stereotyping of military enemies and of racial threats) to the misuse of statistical information to defend social policies of ethnic cleansing and control: class differentiation justified by ‘intelligence’ testing; eugenics and crusades for racial purity sustained by similar scientific rationales.  Chapters four and five examine the use of statistical chance and game theory, particularly in the United States, to rationalise the interaction between, first, the state and the corporate development of technology, and, second, the state and what were considered to be external threats posed by foreign powers.  Social scientists became the handmaidens of Pentagon in games of probability that determined the fate of millions in Vietnam and potentially many more during the Cuban missile crisis. Similar calculations underlay the development of nuclear energy, pharmaceuticals and the safety of oil installations. 

The final chapter would be of particular interest to readers of this journal.  It examines the dynamics of capitalist risk, in the larger sense, in the twentieth century.  It begins with the theorists of imperialist expansion, from Hobson, Hilferding and Lenin to Sweezy, Magdoff and Perlo, and contrasts them with the theorists of global risk, Giddens and Ulrich Beck.  The former demand some form of collective action for social change; the latter, particularly Giddens, present such risk as an existential crisis for the modern individual and one ultimately requiring some form of Hobbesian contract with globalising state institutions. 

The Contradictions of Austerity brings together a collection of studies on the impact of the 2008 crisis on the  Baltic republics of Estonia, Latvia and Lithuania – all of which introduced austerity policies early and before the rest of the EU. 

The champions of neo-liberalism have used the example of the Baltic states to claim that austerity works.  The studies collected here demonstrate it does not.  Still more important, they analyse the emerging social consequences.  These findings are of major importance and stand as a warning to workers across the rest of the EU.

Much of the story is familiar.  After joining the EU the Baltic republics saw property-based booms fuelled by easy money and low interest rates.  The 2008 financial crisis killed this and precipitated massive contractions in the economy.  Output in Latvia fell by 18 per cent, in Lithuania by 15 and Estonia by 14 per cent. The response of the internal elites was to impose what is described as ‘internal devaluation’.  This was not a currency devaluation. Under the cover of preparing for euro entry, the moneyed elites refused to countenance any reduction in the international value of their wealth.  Instead what was imposed was a massive cut in salaries, pensions and the social wage.

Champions of neo-liberalism in the EU heralded the results as justifying the austerity then being imposed elsewhere. The Baltic states saw 2 per cent growth in 2010 and 5 per cent by 2011 as investors sought to take advantage of cheaper labour.  This growth rate was considerably more than what was then being achieved across most of the rest of the EU – but in reality only a very small gain compared to the loss of output in 2008-09. 

The costs for the populations of the Baltic states were, however, massive.  They went far beyond a sharp drop in living standards and involved a deep remoulding of social relations and the labour market.  The four main changes were: the removal of most contractual safeguards for a majority of the workforce, a massive growth in precarious, part-time employment, the ballooning of a black economy in which workers had no rights at all (30 per cent of total employment in Lithuania by 2011) and unsustainably high levels of emigration for skilled and educationally highly qualified workers. Up to 5 per cent of the workforce has been leaving each year. Wages in Sweden are now four times higher than those in Estonia and five times those in Lithuania. 

The authors document an initial resistance by the trade unions, particularly in Latvia and Lithuania.  But it was not sustained.  A refusal by the governments to respond, the use of increasingly authoritarian methods against any protest, the increasing scale of unemployment and emigration left trade unions weakened and politically marginalised.  The result was the growth of what the authors call an ‘austeriat’, a majority workforce that was only marginally employed and the creation of disabling divisions within the working class.  As local workers left, employers began the process of bringing in other workers from southern Europe or Thailand willing to work at even lower wages. This in turn has strengthened a historic legacy of xenophobia. 

The authors argue that these consequences, now seen dramatically in the Baltic republics, are likely, to some extent or other, to be duplicated across large parts of the EU.  They also note that this flexible, mobile and individualised workforce, increasingly uprooted from any supporting social or national institutions, is what the authors of the Single European Act required for their economic model to work. Market forces will infallibly dominate – ending any pretence of a Social Europe.  While this will not stop the European Commission issuing document such as ‘Strengthening the Social Dimension 2013’, the longer-term social and political consequences are likely to be fatal to the EU itself: ‘the ultimate failure of the European Union’s project is more likely to be a question of when rather than if.’  

The hardback edition is expensive and for library purchase only (hopefully a cheaper paperback edition will be produced). But the book is important nonetheless. The authors are experts in their fields, academics from the Baltic states themselves, from Britain and the US.  They are fully sensitive to the differences between the Baltic states. But they also paint an overall picture which the British labour movement cannot afford to ignore

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