This is a chapter from the book:
Work and Wealth (2nd revised edition)

IV. Working under the credit system: More and more work to do, it has to bring more and more profit

Employers use not only their own business revenue for making their means of competition, labor, more effective, but also debt. Borrowed money gives them the freedom to carry on their production continually, expand it and increase its profitability beyond what their assets and the surpluses they are generating allow. Credit, which has become a business in its own right, enables businessmen to make huge investments to compete for market share and to ignore all the barriers they run into in the process. However, this makes access to loan capital a necessary condition for doing business. Profit becomes a means for getting hold of others’ monetary property, which means for meeting the obligation to pay the creditor the tribute tied to having disposal over others’ monetary property. Thus, creditworthiness becomes the criterion of productive business, and therefore its purpose.

The industry that inserts itself into commercial business life in such a crucial, boosting way finances its services with debt, too. It borrows others’ monetary wealth and pays interest to use it. Technically, it is replacing society’s money, practically across the board, with depositors’ claims and its own corresponding liabilities, with ‘bank deposit money,’ settling payments by crediting and debiting bank accounts. In this way, banks concentrate the private power of money in their hands, make it available as credit for capitalist growth, and enrich themselves on interest income, i.e., by means of the legal relationship that the creditor enters into with the borrower. In banks’ business with each other and with private money owners, they turn this way of increasing money into a commodity, in the form of securities of the most diverse kind. By marketing debt as money capital like this, they let everyone participate in the returns they are entitled to, as well as the risks they take on by treating their business customers’ payment obligations as self-increasing assets. In so doing, the credit trade makes a capitalist ideal come true for itself: every sum of money holds a right to more money. The companies it lends to are thereby given the power to overcome the situation that their command over labor and means of production is dependent on how much property the labor they command yields. So they can furnish practical proof that it is solely the size of the advanced sum of money that makes the purchased labor bring a return, i.e., that makes capital productive, once it has incorporated labor in due legal form.

However, this productive force being freed up through credit comes at a price. It intensifies competition between companies for profit-bearing monetary returns on the increasing advance that they generate from labor as their factor of production. Credit strengthens successful capitals just as it helps others overcome weaknesses and even defeats. In the end, it is the speculation of financial institutions and investors that brings about the decision of which credited companies win this competition. Due to the credit-financed growth of all competitors, this decision periodically turns out against all of them, consequently also damaging the financial industry itself. The reason is the politico-economic contradiction between the efforts of capital to maximize the surplus value gained on the money advanced, and the means it employs to do this: reducing the cost of labor by cost-intensively increasing its productive force. This contradiction shows itself now as a disproportion between the mass of credit used by all the companies for their competition, and the general growth actually achieved with it. The financial means the financial industry creates and circulates do not turn out to be the money capital the industry has them on its books as. When capital is emancipated from the barriers to increasing property through human labor while it itself at the same time draws these barriers tighter by its methods for increasing its own productivity, this repeatedly has the paradoxical result that there is too much capital out there for its use to pay off and cause further growth.

When the devaluation of its wealth eventually comes due, the class of property owners, known in the market economy as the “business world,” holds the other class liable. The “factor labor” has not been sufficiently cost-effective, so the last proper way to use it is to lay it off. This always gives rise to the well-known crisis scenario of a whole lot of excess monetary wealth existing “side-by-side” with an enormous excess of wage-dependent population.


As everyone knows, business life does not take place only on the markets where enterprising employers turn the goods they have had produced into money at a profit. The most impressive sections of gainful capitalist activity are at home on the stock trading floors, where the television audience gets to watch brokers producing zigzag curves, or actually play out electronically in those fabulous computers that move sums in the multi-billions around the globe in a matter of seconds. In any case, the fastest money and the biggest fortunes are made in spheres where money owners or their agents only have each other to deal with, and using papers specifying nothing but speculative promises of success.

No matter how removed all this is from any simple commodity production and circulation, it nevertheless has a connection with those sections of the capitalist economy that are called in contrast the “real economy.” If a bank collapses due to bad speculation or, conversely, a stock price rises to unimagined heights, then everyone expects this to have material effects on industry and commerce, even if it is not at all clear which ones. Conversely, “full employment,” which is now understood to mean any single-digit unemployment rate, can drive down an entire national stock index, because it is feared, for example, that full employment will be a reason for higher wages, the wages will be a reason for more inflation, the inflation will be a reason for higher interest rates, and the interest rates will be a reason for falling stock prices — no matter that none of these four “reasons” is actually a reason. A mass layoff, on the other hand, may make a stock price shoot up because a stockbroker takes it as a signal that the company is being more ruthless about increasing its profits, as if the measure were the same as its success, and so on.

It is thus generally accepted that the independent world of speculation on interest-bearing promissory notes and such things has something to do with the world of work. It is also common knowledge that this relation is of a strange nature, inscrutable, and not infrequently characterized by a surprisingly open cynicism. What may be less well known is that, and in what way, the credit system completes the capitalist regime of property over society’s labor.

1. From companies using credit to compete for the most profit-making labor, to companies deploying profit-making labor to compete for credit

Every businessman reaches his limits when doing business. Using available funds to improve his competitive position always shows his assets to be too small. It is no use that they grow. Once invested, they are tied up and out of reach for any “flexible reaction” to the competitive situation. They are lacking for rationalizations that might be indispensable, because dictated by the competition. And besides, investments that promise real success normally cost far more than can be diverted from incoming earnings. So it is not merely the case that capitalist businessmen would always like do more to earn more; their property’s limited size, which is very relative in comparison to competitors, prevents it from being the optimal competitive condition it is supposed to be.

Credit helps them over this barrier:

  • Capitalist producers and merchants who trade with each other tend to pay each other with payment promises. Banks act as intermediaries, crediting the invoice amount to one account and entering it as a debt in the other account, and charging interest for the debt until payments are received. In this way, the seller already has his hands on the monetary value of his goods, his capital advance has returned to this extent, and he can continue his operations as a producer even before the value of the goods has been definitively realized in money. The applied capital is no longer tied up while the finished product is being marketed; it can immediately be invested again for producing new property as soon as the product has left the factory floor. This is a significant contribution to capital productivity, which is what counts.
  • And it is not only that the produced commodity value is promptly transformed into ‘liquidity’ by banks entering a buyer’s debt in their books. The credit industry is also ready to provide businessmen with an additional capital advance, i.e., to lend money on a commodity value that has yet to come about through the credited business. Debt, i.e., the pledge of future revenue, gives companies the means they need to expand their sales wherever sales opportunities can be opened up for their business item; to invest in increasing the productive power of the labor they make use of; to open new lines of business or, following the prospect of better returns, switch to other industries; etc. Such additional funds are needed in the interest of accelerating moneymaking; an interest that reacts back on the companies as a necessity because they are all pursuing this interest competing against each other. But credit gives firms the freedom to escape the constraining conditions of their previous course of business and to gear their capital investment entirely to whatever opportunities they see for accelerated growth and whatever their struggle for market shares requires.

This freedom has its price, of course. It costs interest or otherwise defined payment obligations, thereby diminishing the proceeds earned with the capital advance enlarged by debt. Ideally, this price is only a part of the increase in profit. In any case, the company’s profit has to to make the lender’s money capital productive, too. For the credited business, this legally codified obligation means more than just a deduction from its profit. Fulfilling it has legal priority over the economic need that the company fulfills for itself by going into debt, and even over its economic success. Serving the economic success of the creditor comes before all else: the company’s real proceeds have to justify being anticipated by the loan, i.e., to provide the growth anticipated in the claim to interest and thus ensure that the lent sum holds good as money capital for the lender. The fact that this introduces a new criterion of success into capitalist business life does not only become apparent afterwards, when it comes to distributing the additional monetary wealth, the yield from the applied labor. Beforehand the company must already interest the financial world in its growth, convince it of how much and how sure will be the returns that it intends to use the borrowed capital for. To be able to use credit to fight its competitive battles, it has to let banks and investors examine and rate its particular prospects of success, in comparison with other investments and with its competitors’ business opportunities. To use credit for its competition, the company must successfully compete for credit: it must prove its creditworthiness.

The capitalist company’s own interest in succeeding is made a practical necessity by competition; and when credit frees the company from the barriers set by the amount of property it has earned, it faces the second practical necessity of succeeding in order to guarantee the money lender’s or investor’s success. Although financier and credited company enter into a symbiosis, it is not simply a matter of a few like-minded people throwing their capacities together to carry out a common project. When two parties’ property (the company’s and the bank’s) are combined into one big commanding power over labor and means of production, this does not do away with private property as an exclusionary entity, with the conflict of interests between the property owners.[1] Joining forces produces a contradiction for each side: between freedom and constraint on the part of the borrower, between prior right to the other’s business success and dependence on it on the part of the creditor. This shows in a multitude of conflicts that revolve around the costs and terms of financing transactions. One party is challenging the price to be paid for the freedom it gains by borrowing to increase its capital size, the other is vying for the security of its money capital and the amount of return owed by the other party. This dispute alters the capitalist company purpose in exactly one way: it raises the standard to be met by capital’s productivity, which the company is always out to maximize anyway.

The workers that are mobilized and held responsible, with their work and their pay, for the return on capital being able to satisfy this standard are thereby confronted with the fact that there is more than just the property of individual owners behind the command power over their productive activity. There is firstly the symbiosis of this private property with the credit increasing property’s power and its claim to a return. Behind this credit, in the modern market economy, there is in turn not merely one or the other private owner with some money to spare. The credit relationship has been professionalized in the form of banks and other financial institutions in such a way as to unleash the concentrated command power of the wealth of the entire class that lives off owning money. The private assets of all strong market participants — and meanwhile even the private power of all the money that is actually earned and circulating — are systematically combined by the financial industry into a power whose internal contradictions, clashes of interests, and dependencies, make it something quite different from the mere addition of sums of money. So what the “factor labor” is faced with is the monstrous contradiction of a real socialization of private property.

2. The particular politico-economic nature of the financial business, and what it achieves: Setting economic growth free by socializing the private power of money

The banking industry performs its services for companies’ competitive efforts and growth strategies to pursue its own business and its own growth. This has a special way of working.[2]

a) Finance establishes multiplication of money as a right inherent to every sum of money

When credit institutions lend money, they create a claim on their side: a securitized right to increase their money. The money is in another’s hand; what they have in their hands instead is money capital in the form of a legal entitlement to the lent sum of money being increased by agreed-upon payments from the borrower. Productive companies have monetary wealth created, and it contains a surplus over the advanced sum that they set in relation to their own advance as its source, thus measuring the success of applying their own assets. In this way they make money a source of money. In the hands of finance capital, this power of money to act as capital exists as a legal claim separate from any material valorization (value expansion) process, independent of how the lent sum of money is actually used. The purpose that wealth in a market economy is supposed to achieve — to be used as capital and thereby become more — becomes the lender’s right to an increase in money and, in this form, his source of income.[3]

For its lending business, a bank uses the money deposited with it by its customers. In turn it incurs liabilities toward its customers, thus basing its creditor position on its own indebtedness. It secures its power of disposal over the money of others by paying interest itself, i.e., letting its depositors participate in the transformation of money into money capital. It justly lets them participate to a greater extent the longer it gets to dispose of the deposits as funds it can use freely for its lending business.[4] The two kinds of legal relationships banks enter into, as debtors to all money owners and as creditors of all borrowers, each yield economic returns whose difference increases the capital that the banks themselves advance.

Of course, this achievement of the banking industry is based on a capitalist society’s material production process; after all, it is the particular economic nature of this mode of production that the banking industry becomes the independent form of. The credit system that sets free the capacity of money to function as capital is based on the premise that banks’ services for companies result in a surplus of private property unceasingly being created and realized in money. Banks only know this premise, of course, as an assortment of good and less good risks — risks as to whether their accumulated legal claims to multiplication of their money will actually be fulfilled as agreed. In practical terms, that means what they perceive is reasons to shrewdly differentiate how much they add to the minimum interest rate they charge their commercial debtors according to their creditworthiness, or prices at which they buy and sell their debt instruments. Risk, the speculative nature of the credit business, is given the form of a price, thereby becoming a means for the banking business. In this way, the banking industry makes use of its basis — capitalist companies utilizing the labor of their employees for their growth — consistently as required by its business interests, according to the criterion of its growth.

b) The financial industry multiplies its credit business through transactions between financial players, thus turning its risks into a durable, resilient, extremely potent source of revenue

This means that every credit institution does actually take risks, of course. With every financing transaction, it undertakes payment obligations that are “backed” solely by the security of the debtors actually paying on time and thereby justifying the paid money being entered in the books as money capital. It is from the mass and the course of its financing transactions that a bank draws the capacity and the means to service the liabilities it has entered into and to enter into new ones. So by multiplying the volume of its business, it multiplies its securities because it multiplies its debtors having to pay interest. At the same time, however, it is multiplying its (default) risks.

To make this daring form of enrichment the principle of an entire business sphere, financial institutions fall back on each other. They are not only pursuing the same kind of business. They give and take credit to and from each other, hence are not alone the way they make money but share their risks, earn on each other, and make themselves dependent on their competitors’ business success. They do this not only by lending each other money, deferring claims, taking promises to pay as payment, etc. They procure others’ money for themselves and for their better customers in need of credit by turning the participation in future business earnings, in the form of various kinds of entitlement certificates, into commodities that they sell each other and any interested money owners and also buy back from them. They create a financial market that is characterized not by the exchange of equivalents but by a sui generis service. The investor buys a commercial paper representing a right to the invested sum being increased; what he is “buying” is the transformation of the “price” he pays into money capital that promises growth. By being successfully marketed, the paper, for its part, gains recognition as a portion of legally certified money multiplication: as the real representative of the increase in monetary wealth promised by its issuer. So in addition to financing their “real-economy” clientele, credit companies produce a major re-financing circuit in which they are active as issuers, buyers, intermediaries, agents, and designers of investments. They thereby achieve a mutual economic attestation of their risks as being money capital, make themselves a source of earnings for each other and a new sphere of their growth. At the same time, they make their financial clout universally dependent on the business success of their financial capitalist partners, i.e., on how lastingly the whole gang shows by its trade that it trusts in the earning power of its papers entitling it to earnings.[5]

Bankers don't need to be told that when they expand their business they also increase their risks. They have long since assimilated the risk factor of their way of making money into their business. There is insurance for loans and interest payments against default, and for the value of financial assets against deterioration — and that is another way for bankers to make money. By transforming the rights and obligations arising from such agreements into special commodities and creating separate markets for such products, they have established yet another extensive line of business. This business is, in turn, the basis for a type of speculation that leaves the insurance idea behind and makes risk assessment as such the sole object of transactions. These are like bets, but specialists in the financial industry have developed them too into a respectable source of enrichment and sphere of investment.

The techniques and billion-dollar turnovers of this trade — which is sometimes decried as a den of gamblers — give the public much to marvel at. Less attention is paid to its politico-economic achievement, and wrongly so. For what ends up as completely self-referential speculation is actually the consummation of what began with credit transactions between banks. The credit industry socializes the risks it takes on and multiplies. With interbank lending, securities trading, insurance, and derivatives speculation — and all sorts of business in between — it collectivizes the daring equation of lending and money capital that serves as a source of enrichment for all lending firms. In doing so, it provides the security it needs to function.

This of course does not mean the financial-market players are eliminating the antagonisms in the participants’ business interests, or the risk of their papers not delivering economically what they promise formally, or the certainty that financial bets always involve one side losing. What they are achieving is the paradoxical work of art of private owners being economically communalized. The means they use to achieve this is individual players’ competition for the safest and most lucrative investment. As creditors and debtors, as issuers of securities and as investors, etc., who are just as keen to participate in others’ business as they are skeptical about how safe it is, they work together in all kinds of ways, thereby confirming to each other and altogether that their credit exposures are as good as capital. Bound together in business as competitors, financial companies empower each other to generate from their risks a growing ability to do more and more financial business. In this way they establish the power that they all participate in: the power of society’s finance capital to act only on its own calculations as a quasi-autonomous creator and distributor of the advances that are used for capitalist business.

c) The financial industry makes credit the starting point and endpoint of all business activity, thereby completing capital's contempt for the labor it makes its source

The service to the market economy that the finance sector performs in this way is esteemed by experts as “credit creation” and recognized as “systemic.” They are looking at the fact that the modern banking trade by no means simply helps other business spheres to grow, but frees all the other economic sectors, summarized under the title “real economy,” from their business and growth being restricted to what companies happen to have already earned. It makes itself the general engine of capital accumulation, and makes this accumulation in turn dependent on its ability and willingness to supply means of growth to one and all.[6] Its credit starts off the production of the wealth that matters in the market economy: the increase in private monetary wealth. And with its right to have its speculation confirmed, it marks the endpoint of this production. Thanks to its self-serving service, it is not merely that credit functions as an additional advance of capital; the advance of capital acts as a financial investment. The modern financial industry turns the world of capitalist production into an investment sphere. In this way, it puts into effect the equation that capital is credit.

This equation does not eliminate the clash of interests between lenders and debtors. Financial capital and the “real economy” do not merely remain different sectors, they pursue opposing claims — in relation to the same means of doing business, of course. Precisely because credit is one side’s business and the other side’s indispensable resource, the two sides are forever fighting over the terms of their symbiosis. This fight thus not only attests to the basic identity of interests between the two kinds of capital, but also to how capitalist production has become subordinate to credit. In fact, industrialists and merchants have long since adopted the finance trade’s standpoint that the “real economy” is nothing more than a collection of competing investments. Representatives of trade and industry regard their own company as an investment that has to be more lucrative than alternative ones. Corporations make an explicit and formal legal distinction between owners and management, in order for the latter to grow shareholders’ wealth as an investment with its own stock-market price. And for ‘mid tier’ businessmen, it goes without saying that their assets have their own right to a decent yield and that their personal efforts in the company toward bringing about a corresponding return on capital deserve a separate employer’s salary. So the way employers engaged in production and commerce themselves calculate reflects the standpoint and the power of their lenders: the standpoint that credit gives money its right to be valorized as capital, and the power to “go to work,” i.e., be circulated as a source of its accumulation. As for labor: it has been tied down by its employers to its capacity to produce monetary property, the company purchases this capacity to use it for the self-accumulation of capitalist property, so labor only comes into action at all as an instrument for the productivity of capital. It ultimately functions as the dependent variable of an investment that an investor has already entered in the books as his growing wealth.

As such, the “labor factor” participates in its system-conforming way in the characteristic ups and downs of the business cycle that the finance-capital regime imposes on the life process of a society tied down to earning money.

3. The necessary collateral damage of economic growth unleashed by credit: after the boom comes the slump

Market-economy companies pursue their growth targets in competition with one another; they use their credit against one another in the battle for market share. The successes that the financial industry demands from its debtors and bases its credit business and its own growth on are not simply added one to the other; they are always achieved at the expense of other firms. In “good times” there is nevertheless general growth, which is what is “good” about these times. After all, individual companies’ growth efforts also give each other some earning opportunities, whether directly or indirectly via the wages they pay. This does not alter the inevitability that some “risks,” no matter how cautiously financed, will always be heading for bankruptcy. The lending bank will then be faced with the alternative of extending, or even increasing, questionable loans for borrowers to achieve a success after all, or cutting the required funds and thereby bringing about insolvency and damaging its own business in order to avoid greater losses to come. Up to a certain extent, however, that too can still be tolerated as a deduction from an overall positive growth record, of the bank in question and in general.[7]

However, experience of life in a market economy also shows that something quite different can happen. There are economic cycles, ups and downs in general moneymaking, and these include phases in which there is a lack of growth, bankruptcies pile up, loans are not serviced and therefore no longer granted, or vice versa. The stock-market value of companies shrinks, share prices “crash,” and even financial institutions collapse. By now crisis, a “recession,” has hit. All useful goods are now in overabundance. There are too many products of all kinds, which cannot be sold at a profit and therefore remain unused until they are finally disposed of. There is too much production equipment, which can no longer be used for doing business, so are sold dirt cheap or go to rot. There is often enough even too much living space, which no money can be earned on and which therefore stays vacant, while on the other side there are plenty of people interested in it who cannot afford either the rent or a building loan. And in phases of “weak growth” there are altogether too many people, who could make themselves useful working the idle production equipment and who could also do with a lot of those unused products, but whose labor no business is interested in. The market economy’s brilliant achievement of making society’s entire production and life process serve the growth of capitalist property and be dependent on this growth, has the absurd consequence that there are times of crisis when the accumulated abundance of everything, rather than being a fine success, much less a reason to have an easier time of it in economic life, is a debacle, and that this abundance must be destroyed before things can “pick up again.”

To market-economy experts, this obvious insanity is not really to be taken seriously as such. It belongs to the realm of accidents or unpredictable malfunctions, mistakes that could have been avoided, and unfortunate developments due to some special circumstances or other. It seems to escape them that this is a fairly periodic occurrence, suggesting a systemic necessity. Faced with the rule that every crisis is preceded by a phase of economic growth, usually quite good business in fact, they ventilate the idea that there was evidently something wrong with this growth, it was somehow not real. They use the metaphor of “overheating” to take care of the absurdity that rapid moneymaking turns out to be counterproductive for continuing the moneymaking. In actual fact, capitalist growth itself already involves the reason why it keeps “crashing” against its limits. Market-economy companies are constantly producing the limits to their growth themselves by what they are aiming for and how they are trying to get it. They are aiming for the surplus that each company, in competition against others, generates from the use of paid labor and measures in relation to its total expenditure. And the means and methods that all competitors use to this end are to cheapen production by increasing the productive power of labor and accordingly saving labor costs. That means the sales revenues for a competitively produced commodity drop while the claim to profit rises. Or, to put it another way, to increase the share of profit in the value of the commodities produced, the competing companies lower not only the unit labor costs but also the market price that they get for their commodity and calculate their profit from. With ever greater capital investment for the purpose of gaining a lasting competitive advantage from cheaper production, companies compete to realize an increasing mass of profit by selling more goods with cutbacks in their profit margin, fighting in this way for the greatest possible return on invested capital. The result is that the successful firms with more capital barely increase its productivity, possibly even lowering it, while the less successful ones fall by the wayside. So the method employed in the competitive struggle conflicts with the desired effect — a contradiction the ultimate reason for which was already explained in the previous chapter. To repeat: thanks to its power over the production process, capital appropriates what all production is good for under the regime of property, namely, ownership of the product that will become a sum of money when sold. In the firm’s effort to pay out as little of this sum as possible to the workers whose labor is what increases its property — while at the same time ensuring that the initial capital reappears in a salable commodity and returns to its owner in monetary form — the firm reduces the quantum of work whose contribution to the production process is what creates all the new property. So it is reducing the value it is bent on keeping more of for itself.

The competitive struggle by which “real-economy” companies carry this contradiction through is not merely intensified by the regime of the financial industry, but raised to a new level. Credit overcomes the limit to growth set by the amount of yield realized, hence also overcoming the limit due to the counterproductive effect of investing capital for rationalizing production in order to conquer the market. The fact that efforts to increase the earning power of invested capital tend to decrease earnings does not make it impossible to continue and expand business even for the losers of the competition. After all, they are already operating with credit; their failures present their financiers, as mentioned above, with the tricky choice of continuing to bet on future successes or to call the game over. So the contradiction in the competition for returns and growth no longer plays out simply as a battle between manufacturers for market share. Now it is a conflict between the financial industry, which provides the companies with the material for their ruinous battles for sales and profit in order to make money itself, and the borrowers, who are constantly making it increasingly difficult for each other and ultimately for themselves to achieve a sufficient return on capital. It is up to the banks and investors to keep creating credit and investing money while betting on growth in the industrial world, or else to detect a disproportion between their own outlays and the meager financial performance of the companies their investments have obligated to succeed so as to confirm that the borrowed money is actually money capital. And it is the banks and investors whose judgments and decisions also determine the course of the market economy. Just as the financial trade’s business practices bring about a boom, they also bring about the switch of general credit-driven growth to recession and crisis. By tightening financing terms across the board and canceling loans on a huge scale, the financiers bring on the market economy’s worst case scenario of general business failure.

This informs the “real economy” that, in the financial markets’ decisive opinion, the productivity of capital may be satisfactory in some exceptional cases but is overall too low to justify the credit created for and extended to it and to deserve any new loans. So the event has occurred that neither producers nor financiers, neither banks nor commercial bank customers, and certainly neither speculators nor experts want to have anything to do with. Driven by what now turns out to be excessive creation of credit, companies have once again managed to produce more claims to growth of capitalist property than can be realized by selling the goods that are supposed to contain this surplus wealth on the increasingly contested market. The creation of monetary property through labor has once again overall and glaringly fallen short of the level that companies were producing with their rationalizations to reach, and that creditors lent them the advance for and already recorded in their accounts as money capital. This verdict is handed down by the financial institutions in the form of a credit crunch. And when they cripple what they themselves have made the essential purpose of monetary wealth, i.e., its transformation into money capital, they bring about exactly what they were trying to save their money from by tightening credit terms, terminating credit relationships and cutting back their securities trading: they render it useless.

When boom switches to crisis, the financial business pros competing with each other for the most lucrative and at the same time safest investments act as a collective, although each financial manager is of course quite free to make his own decision. Popular credit-market psychologists call this “herd instinct”; academic interpreters of these events also like to speak of “procyclical investment behavior.” But what else are they going to do: an investor mustn’t miss out on investments promising good and secure outcomes, and no responsible banker can ignore the upswing in business, in one sector or in general, that the investors trigger. As the boom is accordingly fueled, risks accumulate in the banker’s books, raising the problem of when it is time to stop competing to finance an increasingly fierce competition. Is it too early, might it even be too late to withdraw funds and keep them safe, is it time to even invest in speculating on insolvencies and losses? In this way the financial institutions bring about what they are betting on, and that follows the logic of their business perfectly. After all, their business consists in conducting credit transactions with other companies and with each other as a basis for procuring the power to make further financial exposures, insofar as they judge current transactions to be safe and new investments to be promising, and involving each other in these transactions and thereby making claims on each other for their risks. This is how growth works in this industry, and business deteriorates the very same way, by chain reaction, when credit relationships are terminated and financial-market activities are discontinued. Then, as security dissipates, so does the willingness to continue “risks” and to take on new ones. And as the interest to get financially involved in the competition and on the various financial markets dissipates, so does the power of the banks to expand or even only maintain their business, a power based on capitalist wealth being socialized this way.

Yet it is the rule, and quite in keeping with the system, that the growth crisis, like the upswing, starts where the credit companies are doing business with each other with their own products. It normally takes the form of a crash on the stock exchanges, where companies of all kinds are always being judged from the viewpoint and according to the criteria of the credit industry, namely as “risks.” It goes without saying that the competition problems of the “real economy” companies are always in their sights. The question of whether increased sales difficulties prompt the financial market players to bet on business failure to such an extent as to result in a general setback for capital growth is decided in their credit and trade dealings with each other. The crisis has arrived when these dealings come to a standstill, i.e., when financial companies are questioning the principle of their own business: whether money lent is actually the same as money capital. Even the decline of an entire industry only becomes an economic crisis if it is a reason for lenders to deny each other recognition of their debts as financial assets and to stop subjecting their money to the risk that its use as credit inevitably involves.[8] A message is then issued from the lofty heights of this financial trade to the world where productive labor is exploited, in the form of a credit crunch from which the financial industry itself suffers. The message is that the methods of increasing the productivity of capital by increasing the productive force of labor have come into conflict with their result. And this conflict leads to massive destruction of material wealth and extensive cancellation of claims to assets.

4. Credit’s contempt for its basis, wage labor — and labor’s system-conforming response: helpless requests for employment

In times of crisis — when workers are affected by the progress of capitalist business to an extraordinary extent by being laid off, having their wages cut, or in any case seeing an escalation in how uncertain their livelihood is — one can witness an astonishing achievement of democratic class society. These very workers actually show solidarity with “their” employers, at least the “honest” and “down-to-earth” ones, against finance capital. When a general credit crunch or even the collapse of the entire credit system causes small and large “real economy” companies to suffer from a lack of access to others’ property, being denied the financing terms they are accustomed to and/or need all the more in view of crisis-induced sales difficulties, and perhaps even being threatened with closure, then their employees join in the lament about the stock-exchange “gamblers” who have thoroughly discredited themselves with the spectacular collapse of their “speculative bubble.” When modern workers see that the entire production of wealth in a market economy, including their own livelihood, depends on the ups and downs of financial business, they are often prompted in times of crisis, motivated by nothing but their own interest in wage labor, to take sides most decidedly with the productive faction of businessmen against the financial jugglers. They accuse them of destroying billions or sticking them into their own pockets out of sheer “greed for profit,” “casino mentality,” or in any case out of egoistic irresponsibility, and now withholding the money from the producers of goods, i.e., ultimately their employees. This makes it clear who is responsible for their lousy situation — and who is not. The fact that it is their employers who are terminating their accustomed livelihood on a massive scale one way or another is not recognized as what it is, the incompatibility of the entire capitalist system with their needs. Instead, it is supposed to be the consequence of a predicament that their own company has only got into due to the machinations of speculators who always only have their moneymaking in mind and simply show no appreciation for the “value added” from solid work.

Though this kind of criticism of finance capital flourishes in the hard times of crisis, it also exists in all phases of the economic cycle, with the appropriate modifications. From ordinary workers through trade union officials up to academics and political parties, there are always those who complain that finance capitalists fail to make any contribution to “employment” despite the enormous sums of money they move around every day; their use their money merely for speculative accumulation instead of investing it to “create jobs.”

Such complaints have something perverse about them because, although speaking in the name of the workers, they totally disregard the extortionate nature of the “situation in life” that makes it vital for workers to have “employment,” or, in plain language, work that meets capitalist demands. Another reason why these complaints are off the mark is that “employment” is never a capitalist concern anyway. Even honest commodity producers who provide a lot of people with jobs are always using employed workers as a means to an end that is the same as what all speculators are after, and that can only be had by regularly laying people off and making the work such a pressure-cooker that nobody could possibly wish for such “employment” without being in dire straits.

Moreover, the accusation is unfair. Whatever jobs capitalist employers create, they create only by means of the inexhaustible resources provided by that trade that turns hoped-for profits into a disposable mass of funds for procuring the necessary “factors of production.” This holds also and especially in the “good times” when companies’ order books are full and the labor market is relatively empty compared to times of crisis. When business is generally flourishing — including individual competitors failing and appropriately making their employees pay the price — and companies expanding their production might even end up paying (out of necessity) a bit more wages to get hold of labor, then they all ultimately have the general success of financial business to thank for their “boom.” It is with loan capital that commodity producers wage their high-level competitive struggle for the lowest unit labor costs. This “secures jobs” only if they still happen to be necessary and only as long as they make the company profitable, its credit obligations included — but these are the only jobs to be had from capitalist employers anyway. Whatever market openings businessmen find in a boom, i.e., opportunities to pursue their insatiable interest in having as much of such rationalized and intensified work done under their command as possible — at the expense of the competition of course, which doesn’t exactly increase the total number of “employees” — they likewise owe this to the financial industry. It provides them with the freedom to act independently of market action, so that they can really get down to making the market their battlefield.

The credit industry does even more. It does not merely make offers for boosting profit production that no commodity producer can refuse if he wants to stay in business. It forces producers to make ever more use of ever more sparingly, i.e., more productively, employed labor as the condition for their creditworthiness. On the one hand, it pays no attention to the difference between society’s material wealth and the property it exists as, much less the connection between property-creating labor and the money this labor costs and provides. But on the other hand, money capital makes it clear enough to its debtors that its self-accumulated wealth consists in entitlements that all the other companies have to fulfill at the peril of their own ruin. So it ultimately ensures that wage labor makes enough profit, and on a large enough scale, to make the company financially worthwhile, along with a mountain of loans — papers speculating on the company’s development, or the growth of several firms, or the performance of an index for the development of selected firms, and so on. The way credit managers make sure wage labor fits the bill is the most effective imaginable: they simply take it as a given, and any company that fails to meet its standards goes under for lack of credit.

So the accusation that finance capitalists fail to promote employment and do something for workers slightly underrates their role. In reality, by their lending financial institutions are above all advancing the contradiction of less and less labor having to make more and more capital profitable according to ever more demanding criteria. They are promoting the competitive interests of commodity-producing capitalists to any degree and demanding success. And with the means for increasing the productive force of labor, they are also establishing the yardstick for the rate of return that has to be achieved. In so doing, they are dictating both the standard that labor must meet to be worth its wages, and the measure of redundancy that will apply to workers. Their demands are so high, if only for their speculative transactions to be on the safe side, that they are fulfilled by less and less labor — in the following two ways.

Labor can only be financially worthwhile if the wage share in the created commodity value approaches zero — with all the well-known consequences mentioned in the previous chapter. They relate to the ease of working; the relation between created wealth and the workers’ necessities of life financially compensated in wages; and also to the number of those in the thick of the “realm of necessity” to earn a living by working for others but who are “let go” from the opportunity to do so. The achievements of credit add yet another consequence: it finances not merely the “technical progress” that allows jobs to be saved along with those who hold them, but also the extensive use of labor in the newly created workplaces. That is, until it turns out that these new workplaces quite generally fail as a means of competition because altogether far too much work is done in relation to what can be profitably sold. The agency that makes this fact apparent is, again, the credit industry. It makes its decisions about how creditworthy competing companies are and forces them to make corresponding “job cuts” or to go under — thus revealing that all jobs are based on nothing but its speculation, and that there are times and phases when this speculation stops working out properly. The result is a series of surges in the unemployment rate, which makes even more of a mark on society’s capitalistically usable ability to pay, showing that even more of the work previously done has been superfluous. That is why “recessions” have the well-known unpleasant habit of “deepening.” The upswing that is bound to happen sometime will take place on the basis of a “slimmed down” business life and, of course, on the basis of the most effective production techniques, so that companies will finally grow again and make creditworthy profits, while the army of unemployed that has accumulated is not so fast to decrease, if it does at all. After all, every business crisis produces the result that less labor is needed to make as much capital profitable as can be made profitable. So as capital increases its capacities to accumulate itself in the form of anticipated business success and to make capitalistically commanded labor serve the credibility of its self-accumulation, this increases on the other side the “phenomenon,” peculiar to the market economy, of a “reserve army” of workers who cannot expect to be needed any time soon. The periodically revised surplus of credit-financed business activity is matched by an overpopulation which is only “over” because there is no use for so many people at workplaces meeting the standards of sufficient profitability. Otherwise there would be no obstacle to their making a decent live for themselves; even the means of production are still there, shut down during the last business crisis.

Those who belong to the superfluous crew, and all others who are well aware that they can join it any time, are thus compelled to worry about work; an extremely nasty worry, because those who have to have it have no appropriate means at their disposal to overcome it. The matter becomes downright hopeless when advocates of the workers’ cause take charge of this situation and call for “work,” turning the necessity capitalists have created and so are definitely not going to abolish into a demand. They draw on the bad experience that capitalist business exploiting the productive force of labor also inevitably involves bringing it to a standstill on a massive scale — but rather than wanting to show people what a lousy condition for life that is, they foist it on them as their very own best interest. They call for a capitalistic use of labor — only and actually because capitalists, who want nothing more than exactly that, at the same time make labor incredibly demanding for the sake of the economic effect.[9] The call for work has lost any reminiscence of workers for their part imposing some conditions on how they are used for others’ benefit — or rather, it rules it out: “the need for jobs” simply makes that kind of demand obsolete.

This holds all the more when modern employees let themselves be drawn into a “fight for jobs,” under the guidance of trade unions and with the quite constructive support of politicians and public opinion. Their adversaries — those endangering their jobs — are by no means supposed to be the employers who are threatening to lay them off, but rather jobs elsewhere. What has to change for their fight to succeed is that these other jobs pay off better than “their own.” When a company has to decide about allocating production capacities among individual plants, a site might even have to be closed down, or it is time to “restructure” an entire corporation again; when competition between companies has turned cut-throat again; when the accumulation of money in the productive sector is so dependent on the decisions of finance capital that it is faced with the ultimatum to make radical cuts in the workforce: then workers are supposed to find nothing more sensible than to make special offers to their employers in terms of how cheap and willing they are. Works councils and trade unions are called upon to help organize this, as the way to secure “our” jobs, until they are threatened the next time. This competitive maneuver, if it is successful according to whatever criteria, ends up making colleagues elsewhere lose their jobs of course, which is sometimes registered with a bit of embarrassment, recalling “solidarity among all employees.” The regret is all the less, however, the more the fight for “our” jobs is directed against sites, firms, and workers abroad…


[1] This is true even when forces are actually joined formally, i.e., when private owners pool funds to finance a joint venture whose returns they all participate in according to the size of their shares. Here, the clash of interests between investor and investment takes a more sophisticated form: the company and its competitive struggle act as the basis for the shareholders’ business interest (which is professionally managed as a rule) to make money off of dividends and, above all, through price gains on their securities. When the payrolled corporate management try to fulfill this function optimally, i.e., to advance the company on the market and thereby serve the shareholders, both sides are quite properly on the same page again.

[2] A systematic and detailed explanation of this business has appeared in four parts under the title Das Finanzkapital in issues 3-08, 2-09, 1-10, and 1-11 of GegenStandpunkt, and has been published in a revised version as the book, Das Finanzkapital, by Peter Decker, Konrad Hecker & Joseph Patrick. English translation: Finance Capital (2nd revised edition)

[3] The equation that money is not merely a general equivalent but, in the credit industry’s hands, represents its own multiplication, consistently continues the logic of this political economy that begins with all the goods and services in a market economy being produced as commodities in order to be exchanged. Exchange serves to let the legal relation of property — the exclusion of all those interested in using the produced commodity from using it — prove itself as a means of appropriating another’s property. This purpose of production that is peculiar to the market-economy system takes on an independent form in money. In money, the power of appropriation crucial to the commodity exists separately from the product: money is the general power of disposal in the form of a thing. The use of money as capital makes the purpose to make money the principle of society’s production process in such a way that it is no longer a matter of creating new property as such, but of the owner of the means of production, as the legal head of the labor performed, realizing more money from the sale of commodities than he has put into the means of production and has to pay for workers. Absurdly, the work that creates new property is completely subsumed under its payment, so that the capital advanced becomes the reason for its own increase. In the credit deal this absurdity acquires its own independent form: capital productivity as such becomes an attribute, in the form of an entitlement to more money, of every sum of money that the credit industry gets its hands on.

[4] In addition, banks appropriately exploit their services in transacting society’s payments: practically all the money earned in society turns up at banks, being entered in their books as credit balances, i.e., replaced by the banks’ payment promises. This transformation of money into bank liabilities is not altered by what account holders do with their earnings. Payments are known to be settled within and between financial institutions by credit balances being transferred to other accounts, the result being banks offsetting or exchanging claims for money with each other. The banking trade thus procures the freedom to treat virtually all of society’s money income — including what payments its borrowers make with their borrowed money, i.e., the money inflow they create elsewhere — as a mass of funds at its disposal for lending within legally prescribed limits. Consequently, the means of payment that businesses use for their dealings and the inhabitants of the modern market economy use to support themselves are (when not hard cash) electronic money tokens that denote nothing more and nothing less than the credit deals their banks start up with them. Nowadays, the means of circulation in the market economy consists of credit tokens.

[5] Market-economy experts like to give this state of affairs a moral or psychological explanation, citing the Latin root of the word ‘credit’ (credere ‘to trust’). They hold that the fine achievements of the credit industry are based on the trust the participants place in each other and enjoy on the financial markets they have created — a pretty harmless way of interpreting the power that finance-industry players draw from their (re)financing deals. The trust being placed here — sometimes more, sometimes less — is in how successful the agents of credit will be at ruthlessly laying hold of all society’s economic activities as a means of increasing their wealth. And this hold of theirs is based even less on trust, it is backed by the power of the state with its legal apparatus.

[6] The liberties that banks take in this regard are clearly shown by the constraints they set for themselves — or are set by state supervision. Whenever payments for loans become due and actually have to be made after receivables and payables are offset, a reputable financial institution must be able to pay. That means it must have reserves available to guarantee its creditworthiness vis-à-vis its peers, i.e., its competing partners. The individual company’s own liquidity vouches for the ability to pay that it creates among its clientele — and the trade as a whole vouches for the liquidity of the entire capitalist system.

[7] It is the rule in a modern market economy that the credit industry all in all creates more ability to pay, and puts more ability to pay into circulation as a capital advance, than is actually transformed successfully into growth, i.e., confirmed as capitalist wealth. Not least the state budget, insofar as it is financed by credit, makes a substantial contribution to the gap between credit creation and its being economically justified. One of the consequences is known as inflation: a percentage loss in value of legal tender. This effect can appear in all the economic phases discussed below, but it stands for disproportions between credit and surplus that have different causes and different consequences depending on the phase. In the hot phases of a boom, the financial industry, speculating on rapid growth and a corresponding increase in the value of its investments, rushes ahead of the accumulation of monetary property that is actually realized by the capital it has abundantly supplied with means of growth. But as long as these advances pay off, no one complains about the multiplication of circulating money that is reflected in the general rise of commodity prices. In this case, the price increases are merely underlining capital’s fine overall success, only harming those who do not set the prices but have to pay them out of their fixed wages. In a downswing, capital starts failing to deliver the return to justify the credit it has been granted. In this phase, rising prices signal that the major credit-creating agencies — always backed in this case by state power — are creating purchasing power beyond any economic justification in order to try and revive or just maintain the economy or even only to cover the state’s needs. Wage earners can again only tell by the rate of money devaluation how fast they are getting poorer. Without such political compensation efforts, a downturn can easily lead to the even greater economic debacle of deflation, a downward price trend. This means that the loans needed to finance growth or even just the reproduction of capital are not being offered or taken at all; in any case credit is not being effectively put into circulation. The decline in the value of unused capital then manifests itself in a decline in the prices of products and means of production, which in this case include the wage-dependent workers who are also no longer needed and thus no longer paid.

[8] That is why it also fits into the picture when, in very advanced capitalism, the crisis-triggering mistrust of financial companies is not linked to negative feedback from the world of the credit-financed “real economy,” but starts out with derivatives losing value. This is what happened in the global financial, economic, sovereign debt, and currency crisis that has been ongoing since 2007, which GegenStandpunkt has been regularly dealing with since issue 3-07.

[9] That is why the demand for “employment,” as submissive as it is, does not even make inherent sense in the wage-labor system. Precisely because work is first and foremost what capitalists are interested in and lay claim to — and only that makes it the condition of life for everyone else — it is entirely up to them to define the criteria for how they use it. So the demand for a “right to work” that can somehow even be sued for is all the more contrary to the system — and it has largely disappeared since an alternative to the capitalist system landed on the dust heap of history.

When political demands for employment are made these days, they no longer have anything to do with making an ideological or even practical dent in the dominating interest to make capital out of using others’ labor for as long as it serves the purpose and then throw it away. Instead, such demands, while citing the social plight of those affected by unemployment, are openly taking sides with this interest: “Jobs are the best social program.” This so much takes for granted that the work has to pay off for business, so that the living conditions of those who need work are entirely dependent on whether their work pays off, that it literally goes without saying. Instead, businessmen, economic policymakers, and ideologists nowadays spell out in detail what they and ultimately the workers themselves can and must do for capital to be able to pull off its great social feat of creating, maintaining or saving jobs. They have to forget any demands they may have had in the past when it comes to wage level, leisure time, how predictable or tolerable these jobs are. When viewed in the light of day, such demands are nothing more than “barriers to employment” that are responsible for the real social scandal of our day. It is the rigidity of the labor market, government bureaucracy, and other work of the devil that is preventing masses of people from enjoying “employment.” And employment is not something to be forced on employers — how could that work anyway? — but to be organized together with them in a spirit of social partnership.

© GegenStandpunkt 2023