[Translated from GegenStandpunkt: Politische Vierteljahreszeitschrift 2-09, Gegenstandpunkt Verlag, Munich]
One thing is clear to states as a result of the destruction of all sorts of capital, on whose success they and “we all” live: the services of financial institutions terminated through mismanagement are one, if not the, pillar of the common good. The economic capacity of the financial sector is to be maintained or, as the case may be, restored; the banks are to be enabled to use their financial power once gain. Their rescue is being carried out by the authorities providing the funds that the banks are authorized, and usually also able, to generate. This is what is missing in a crisis. Governments are employing their power to remedy that.
a) The rapid contraction of investment opportunities for society’s accumulated capital is bringing about its destruction in all conceivable aggregations. The enormous losses in “our economy’s” acknowledged means of living and the banks’ self-inflicted inability to continue their indispensable services for the nation’s economic basis to their previous extent, are bringing into the arena critics of every shade, who are agreed on at least one request: whether it’s liberal financial journalists calling for more supervision over speculative business, retired court judges demanding a new foundation for capitalism in the spirit of natural law — alternatively of Christian social doctrine — or intra- and extra-parliamentary leftists with the air of a system critique asking for more friendliness towards the people instead of capital at the commanding heights of the democratic community, all of them are calling on the state to offset the public-damaging breakdown of capitalistic business.
Seldom have critical petitions to government preached to a more appreciative choir; but seldom, too, have public petitioners been so fundamentally off about the really existing circumstances of modern capitalism, owing to their wish for the restoration of useful cooperation between commercial industriousness and responsibly acting banks. Incumbent politicians of all parties accept petitions such as these that are committed to the free market idyll, but let no doubt arise about their intention to do what’s really necessary. It’s not hard to gather from their severe criticism of the black sheep among speculators and bank executives how staunch their praise is for the proper and lawful accomplishments of finance capital. Sticking to the standpoint of the usefulness of this line of business, whose success has endangered capitalistic wealth, they are taking up its rescue. They won’t deny this is expensive, but there is “no alternative.”
While normal people are mistaken when they, only because they are dependent on it, consider the power of property to be their rescue-worthy means of existence, the situation is clear for state power: after all, it didn’t establish its society as a site for stout owners of private property, obligated it by legal rules of procedure to moneymaking as its livelihood, and kept a watchful eye on the socially detrimental effects connected with moneymaking, all because this kind of governance would be just as right for it as any other; rather, this political power — sympathizing journalists and supreme court judges included — indeed lives from these circumstances and therefore wants them to be as they are. Under these circumstances, the state’s money becomes accumulating capital that organizes its people’s work as the source of private monetary wealth. Out of the success of this exploitation, the government secures its share. The state’s materialism therefore aims at the successful outcome of private capital growth in such a way that the provision of its growth-occupied society with money “created” by the state through its central bank, and the transformation of this money into credit of the private financial system, is always an object of governmental oversight. So when the state notices a critical disruption in the workings of the financial institutions in which these institutions lose their interest in, or equally the capability of serving businessmen of all sectors with capital advances, it logically takes this, not as one particular problem, but as a danger for its economic reason of state and the common good in general.
b) In times when the money and credit business flourishes, the state’s interest in a functioning capitalistic metabolism between finance and the rest of society is taken care of in a way that serves the community, too, through the interest of the financial sector in its own private, capitalistic growth — its notorious “greed.” Seen from the state’s point of view, this profession has obtained its license for this purpose, as well as the rules of procedure within which it is supposed to realize its business ingenuity, its freedom to enrich itself, and to extend its financial power in the service of the capitalistic public at large.
In times of crisis, when interbank transactions only take place in a limited way, and transactions with other industries — which work on the expansion of their capital advances with the assistance of credit — are also cancelled to a substantial extent, then the political system sees itself called upon to act in its responsibility for the commonweal: it cannot stand idly by when faced with the cessation of service for the system that it has placed in the hands of its materially interested financial service providers. The capitalist economic system of society, on which the political power lives, cannot do without this service.
For this reason, the government is setting about restoring the banks’ private financial power by exhausting all the state’s sources of financing, because in a crisis, it is obviously not sufficient to insist politically on the banking “industry” and other financial “industries” performing functions that are economically useful for national growth. It is imperative to supplement the money-trade’s continued authorization to exercise these functions to its own advantage by restoring its capability. Finance lacks this capability now that all too many financial industry “products” have transformed themselves from much sought-after promises of profit into unredeemable payment obligations, and the examination of productive companies applying for new loan capital reveals that they don’t deserve it because they are already too big for their markets, or their markets too small for all the credit they already use. Their means of business, along with the financial institutions’ “billions in write-offs,” have shrunk, and the regular provision of society with capital has been affected. Hence the state, which has promoted the banks’ development into powerful, central organs of societal money and capital flow, isn’t stopping with encouraging this line of business to resume its depressed business.
c) With the observation that the money economy has become “illiquid” to an alarming extent as a consequence of a chain of failed businesses, the state’s need for action to rescue capitalism at the main scenes of the crisis is certain: the “liquidity” that has so dramatically drained from the system has to be replaced, and, given the situation, only the public sector has the power at its disposal to create it.
Hence the state is using its power of disposal over the nation’s borrowing capacity to foster new indebtedness with available budget funds, and huge account transactions with funds from the national financial institutions including the central banks, with which the dwindled capital of banks and insurers is being replenished, at least until their ability-to-pay is restored. Where necessary, the state is taking over bankrupt institutions and providing guarantees in the billions for the continued existence of others; if need be, stepping in as guarantor for devalued “assets”; rushing to change accounting rules for “undercapitalized” financial institutions in order, by taking legal action, to help failed liquidity management back on its feet again; and is not shying away from threatening expropriation of uncooperative stockholders. The politically created financial funds are injected into the banking system at the lowest of interest rates or even free of charge, partly in exchange for dubious assets that are declared “discountable.” And these charitable donations — by a state that attaches importance to establishing that it will in no event permit the collapse of “systemically relevant market participants” — are tied to an unambiguous message: the funds and guarantees it is making available actually reestablish the financial conditions for general economic growth and enable the agents of finance capital to put back into operation their indispensable business interest in the service of providing capital for society.
This hopeful appeal and reference to the state’s rescue operations does not, however, undo the damage already done for the financial industry’s managers, who, on the basis of failed speculations and lost means of business, are rearranging their balance sheets. With its insistence on the continuation or resumption of business, the state disregards the losses in capital and trust as well as the thereby diminished business basis of the financial sector. It acts as if its vouching for the liquidity of banks endangered by insolvency restored the sources of their liquidity. This self-interested notion is obviously irrelevant: in times when their business was normal, those who are now being rescued so expensively organized their always present ability-to-pay themselves. For this purpose, they made use of their industry’s typical right of disposal over society’s debts and turned them — as securities of all kinds with rates and yields certified by a rich variety of documents and brought into circulation — into their means of business, into the origin and lever of their growing financial clout, i.e., into their capital. These so peculiar and familiar financial products, as well as the confidence in their quality as capital confirmed by trading them, are the origin of the liquidity of the banks that have suffered so terribly in the crisis. When the demand for such highly profitable investments really plummets on the capital market, then a debt “backed” by a promise-to-pay no longer constitues a piece of capital. This equation loses its validity when the trading that upholds it comes to a halt. When this happens, promising investments suddenly turn back into the sad, raw material they are made of, debts, whose servicing also becomes a matter of concern for creditors. The state’s emergency measures, however, by which the collapse of the banking system is supposed to be prevented, are not restoring the value of a single “junk security,” nor bringing back any collapsed megafund and in no event the “confidence of investors,” among the biggest of which are the banks themselves that are in need of rescue. Rather, they only bear witness to the capitalistic need that necessitates them. And if the state’s rescue maneuvers are sparing some financial institutions from admitting their bankruptcy, maintaining them solvent as debtors, then the liquidity provided by the state does not bring the equation of debts and capital into force again; rather, it confirms the ‘inequation’ that liabilities, saved from failing in such a way — and only for the time being —are certainly not capital. They fall instead into disrepute as “toxic papers,” which, due to the huge loss in value they have suffered, are locked away for years to come in a state-organized and financed hazardous waste depot for finance capital known as a “bad bank” — not without using them to back new liquidity for the banks, whose means of business are indeed “cleared” of these bad investments but also cut back.
All in all, it can be seen that using the state’s legal power and public debt to an extent unseen up to now — which even, according to American comparisons, exceeds the deficits budgeted in war times — isn’t remedying the problematic situation. The interest of financial capitalists in private enrichment is not, or only haltingly and not to the desired extent, fulfilling its public mission, and the state’s donative activities on behalf of the money business turn out to be unsuitable efforts to encourage the financial markets to a new start, as if nothing happened.
Instead, this state of affairs — the fact that the funds with which banks otherwise eagerly cover society’s investment needs out of their own, continually increased creation of credit now mainly come from government accounts — is the stuff of anxious debates over the suitability and risks of national crisis management. The expert considerations on whether and when the unprecedented bloating of the national debt for the rescue of financial capital has to result in “inflation,” if not “hyperinflation,” and whether those in charge are pursuing an unfortunately necessary or a completely wrong policy: these considerations are entirely committed to the standpoint of biased concern for the success of the political efforts, and, in this respect, of rather dubious worth as relevant contributions. But what they reveal — in a consistent way — is a true-to-life view concerning the accomplishments of finance capital and its products: if they accumulate, then so does the wealth of the nation, even if only until the next crisis, but at least that long. They are, in all the airiness of their daring construction that is based entirely on such a fleeting foundation as the “confidence of markets,” the solid — i.e., trustworthy — proof of economic success in the nation and in the world. In this respect, the efficiently accumulating products of the “financial industry” are, because they are capital, a good substitute for national money; particularly when the latter, as in the current crisis period, is only on the move as money in order to patch a ruined financial system, and in the service of limiting capitalistic damage.
The enormous “liquidity” that is now being brought into circulation by the leading capitalistic states without having yet secured any successes in “saving the system” has still to prove its “capability” of functioning as capital. The debates about nascent “inflationary dangers” and “currency corrections” express certain doubts about this within the relevant circles. Their faith in the suitability of their monies as capitalistic means of business cannot be enforced by the states, which is why the latter invoke the old trust in their public debt won in long years of imperialistic accumulation of wealth, as well as in the power on which it is based, in the force of their globally circulating debts that allows no alternative to their monies anywhere in the world, and in their intention to put their “budgets in order” soon anyway, immediately after the crisis. Word on this matter is in the habit of gradually issuing from the global financial markets: in the form of currency rates and the interest states have to “offer” on their bonds to get rid of them. In times of “doubts even arising in America’s first-class financial standing” (Frankfurter Allgemeine Zeitung), one is obviously present at an experiment with an open outcome.
d) The moral criticism directed against the managers of finance capital of all people — fallen into disrepute on account of their “greed,” their “failure,” and their “irresponsibility” — being courted with so much “taxpayer’s money” doesn’t, on the one hand, in view of the crisis drama, attain much more than the status of an accompanying, publicly cultivated grumbling. But on the other hand, politicians, too, know their responsibility for good governance during and after a disaster: restoring the creative abilities of banking capital is not to go off without a new governmental regime of control over the institutions and their enterprising securities designers — in the future, “no market and no investment” is to escape state oversight, and mangers’ salaries, whose size is advanced as one of the most popular causes of the crisis, are also to be more moderate in the future. But hardly are such considerations circulating than fundamental difficulties quickly become apparent: can speculation on the security markets serve at all as desired, rapidly, freely, and unhesitatingly — as it is known it simply must do — if it is restricted too much by state controls? And is one allowed to cut the pay of the heads of finance capital by political edict, or denigrate them on account of their income? Because one is not allowed, the chiefs write collective letters to prime ministers and otherwise complain to their governments with reference to their — intangible — services and to the fact that they know of other fine places to locate their fine hedge funds if need be.
Radical free-market supporters — with their criticism of “political interference” in general and of the state’s rescue operations in particular, which, if they don’t directly lead to socialism, at any rate harm the system and its famous self-healing powers — are for freedom anyway, and always. That sort of thing counts in liberal circles as an expression of firm principles and of a certain “economic competence”: these critics — who do not want to know that their entire “free-market economy,” including its finance part, is, even when successful, hardly “independent of the state” —don’t like it when the state, which cyclically injects its funds “only” to clear up a “financial bubble” and a “market saturation” on the goods markets, obstructs an intrinsically “sound” process from which undoubtedly the best would emerge only strengthened. They regard such a thing as a great advantage of this system, which lets them cold-bloodedly tolerate the destruction of millions of proletarian livelihoods. By contrast, what they find completely unbearable is a state pretending not only to be the “better banker” but even to be the “better businessman” when dealing with the rescue of important producing companies.
The politicians dealing with the rescue of the system reject this: they are in fact not pretending anything when they stick to the procedures of the private sector financial system with nationalized banks, because they want to see the private interest of reputable speculators in action for their national economic site as soon as possible. Apart from that, they hold out to the “radically free-market” liberal critics the promise of the many “workplaces” they intend to rescue by means of the due revamping of the money system; and by that they mean once again their national business site because, apart from rescuing the banks, it is crucial to maintain and create competitive, profitable workplaces for the survival of the “real” sources of wealth and their competitiveness after the crisis. It will be because of them whether “we emerge from the crisis stronger” than we went into it.
As if those governing were not provoked enough with the contradictions that are arising in the rescue program and are reflected in the balancing of conflicting interests of the most fundamental as well as petty sort, they are allowing themselves a round of globalization right in the middle of the catastrophe. They are burdening their coping with their nation’s necessities with the virtue of arming their national business base for international competition. They are bringing the costs, risks, and impacts of their measures under the additional point of view of what use they are for the world market. Foreign political meetings — whether regularly scheduled or specially arranged — have as their motto, “jointly overcoming the crisis,” over which an open dispute is taking place. European unity is experiencing a further setback, but not without the prospect that the impact of the crisis on sorting out the nations will promote understanding of the necessity of a unified crisis management.
a) The wealth of nations depends on the condition and comparative competitiveness of their national sites for capital; hence so do their globalized interests, the rights they derive from these interests, and the means of power and finance they can muster to assert them. This is a broad field, on which the represented states have clearly differed in precisely these characteristics even before the “deepest economic crisis in eighty years.” The leading countries of global capitalism, with their stock markets and headquarters for global corporations, are home to an internationally oriented finance capital that has won a status that causes entire categories of less advanced nations to compete for popularity with it, and obligates every private financial interest to seek the success of its investments wherever globalized speculation sets the business trends and promises the greatest profit opportunities. The disposable mass of fictitious capital accumulated in the United States, but also in London, Frankfort, or Tokyo, specifies the most important starting address for international needs for loan and speculation capital, and subjects government and business projects worldwide to the profit calculations of bank capital. Its criteria decide whether the purchase or sale of drinkable South American water, arable Sudanese land, or Württembergian sewage plants can be financed and turned into the basis of new securities that provide the market with a new supply of speculative material. This is how the thirst of South American Indians who are more or less able to pay gets under the thumb of Wall Street, and the budgets of Swabian municipalities are in the black until they run into difficulties again together with the American guarantors for their wonderful “cross-boarder leasing.” In this way, it becomes clear that the money economy performs a considerable public service even on a global scale. It only needs to follow its private business purposes, treating the world as a testing ground for its fictitious accumulation, in order to finally complete the imperialistic world with a global network of financial capitalistic dependence and subordination.
b) In times of crisis, what suffers is this lucrative and order-solidifying connection between the activists of worldwide speculation and their various categories of speculative objects that have, each in their own fashion, arranged on a global scale their public or private existence as derivatives of successful speculation. This connection is terminated by the organizers and beneficiaries of worldwide investment in the leading countries of global capitalism, which start to feel the crash of the securities business first and, quantitatively, the most. They have, as one hears, attained “risk positions” with regard to their threatened investments exceeding the combined gross domestic product of all UN members; so they have much to lose. This then is what follows. The rapid loss in value of their assets and its impact on their “capital base” leads those affected once again to compare their widespread business interests at home and abroad, but this time from the viewpoint of “surviving” the “worst crisis in decades.” Whether their losses turn out more often to the detriment of their “involvement” in the periphery of capitalistic centers can be left open, as can the question of whether perhaps Eastern European investment funds are devaluing because investors no longer believe that commercial and state bonds included in the funds will be serviced, or whether the follow-up financing necessary for this is being dropped because its securitization is no longer salable. At any rate, it is obvious that the international banks that have until recently done a flourishing business with the public and private debts of “booming” nations in Eastern Europe and elsewhere, and have transformed harmless North Sea islands into financial market places and others into “Celtic tigers,” are withdrawing from the scenes of their now failed speculation. They are ceasing their lending to states and firms as well as to their private loan customers, who yesterday could all still enjoy compliments for the fabulous growth rates of their “young stock markets” and today have to realize that they have lived “beyond their means.” Some are left with debts that can in the best case be serviced with new debts if creditors who still have liquidity at their disposal want to prevent their bankruptcy from the viewpoint of “saving the system”; the others are left in their private poverty from which their creditors wring whatever that poverty can still hand over.
The protagonists of the trade in debts do not accept of their own free will the cutback of their financial power, let alone over the remotest branches of their global market, but are bowing to the necessity resulting from their crisis-diminished means of business. They are reacting to the offers and instructions of their capitalistic home countries, which appear to be alarmed on account of the condition of the “markets” and insist on the political relation with their financial system. After years of ideological celebration and practical exploitation of the boundless, worldwide capital markets, in which its organizers — as supranational agents, so to speak, of a universal, collective speculation — peacefully conquered the world and from whose successful internationalism the home countries of finance capital enriched and strengthened themselves, the crisis is now leading the world’s great financial institutions and their home nations to discover each other again as mutually important: the one side because the state’s credit is, if not really the only remaining secure bank, then anyway the sole source for new credit, without which many would face bankruptcy; the other side because they fear the consequences of exactly these bankruptcies for their material conditions of existence and for their political freedom of action in the competition of nations.
c) The extensive devaluation of finance capital, appearing from the standpoint of the banking sector as a deterioration of their means of access to the wealth of the world, is in many cases also no joke for the world that has been accessed in this way for such a long time. The world, after all, has been arranged for some time now in such a way that the loss of these means of access goes hand in hand with the loss of the vital means of the dependence in which the objects of capitalistic utilization find themselves. In the struggle over the distribution of crisis losses, many of them are in a difficult position.
— Companies that once chose to accumulate their capital by exporting it in part to the places of residence of the cheapest labor power in order to thoroughly exploit it in production, are now, in face of sunken demand for their products, closing their “extended workbenches” abroad. Their chiefs are retreating, even though they are likewise unbiased cosmopolitans by profession, behind the “protective shield” of their home authority, which demands as condition for their loans and guarantees that their profitable workplaces in the “home territory” be the last ones closed. Where capital, by the nature of the business, is tied to location as in the construction industry, agriculture, or the huge “service industry,” and rather prefers to legally or illegally import labor power, those who sell labor power, being no longer necessary, are being sent back home, where they have never been needed anyway. The loss of wages sent back home, whether from the U.S. to Mexico or from the Gulf states to Pakistan, is causing an important part of the “national income” there to drop off and increasing the poverty that had induced the emigration in the first place.
— Common to all who invest their credit in materially productive spheres of business is a worldwide reduction in their need for raw materials and energy for their scaled-down production, thereby bringing entire states — from South America to Russia, from the Persian Gulf to Central Asia — into difficulties or at least to a reassessment of their incomes. This concerns all those nations that live off delivering the output of their oil and gas deposits and mines for the accumulation process of capitalistic property in return for a fee.
— The most dismal prognosis is reserved by experts of the situation for the “poorest countries.” Even though they house no “local private capital market” but at best “microcredit” — of good repute but unimportant for the workings of the financial market — they are not escaping the consequences of the crisis. To the extent that the peoples there participate at all in the income of their nation from the sale of their raw materials or natural products, their livelihoods are likewise affected by the drop in demand on capitalistic markets, the corresponding fall in prices, and the increasing partitioning of their markets. To the extent that they only still survive by means of foreign assistance funds or direct food aid, they are noticing a reduction of the means available for this from “development aid” and internationally financed emergency assistance — despite promises to the contrary — due to corresponding “budget restrictions” in the capitalistic “donor states,” which are at the moment donating trillions for their credit system. A German foundation for science and politics informs us that “the financial crisis is turning the food crisis into a hunger crisis” and ensuring — according to announcements of the IMF and World Bank — “up to ninety million additional extremely poor,” who, together with those who were already suffering from malnutrition before the crisis, add up to a sum of more than a billion starving in the updated misery accounting of world capitalism.
The partial breakdown of financial power in the leading capitalistic nations of the world and the associated work of destruction on the wealth of nations is making relations with the rest of the world involving allocation of roles and subordination more fragile. So the crisis is also bringing about — besides a tremendous boost to worldwide impoverishment and national “disarray” in states that have become destitute — a certain impudence, a self-conscious enterprising spirit, and all sorts of attempts at emancipation on the part of Indians, Chinese, and the usual Latin Americans who regard the crisis situation as a political opportunity.
d) For all the additional misery that the crisis is bringing the world and for all its inherent potential for disturbing the world order, those who mainly bear the brunt of the worldwide correction of value — property owners frustrated in their drive to accumulate and the political homelands of great property affected along with them — will hear nothing of resigning themselves nor of accepting any disgrace of an economic system that sometimes demands such great sacrifices. In their combative manner, they are not prepared to put up with the consequences of the crisis. Rather, they want to make something out of the events and take the offensive view that, especially now, one has to be able to afford forward-looking action. It’s not hard to discern what this means for all concerned, but it is also explicitly and publicly communicated in order to create confidence and encourage the public: the measures necessary for rescuing the international securities and credit system are not going to lead to the downgrading of one’s own national economic base but, if at all possible, to an improvement of one’s competitive position. Governments are thoroughly and aggressively looking over their capacities and livening up their crisis competition over repairing and reorganizing international business conditions. In scheduled international meetings about saving the situation, they plead for “common measures” against the “financial and economic crisis,” warn each other of the “mistakes” committed by their predecessors in 1929 — Not enough international coordination! Too much national self-interest! — and attempt to outmaneuver each other in the dispute over these measures. Wherever the rescue of the world economy becomes the object of international politics, it is all about the vile calculation of keeping the losses to one’s own economic base as small as possible to get through its crisis better than all the others who at the same time constitute the world market that one needs and intends to use for one’s own success.
— This is leading not only to discussions about the correct way of addressing the crisis, especially between the Europeans and the United States, the latter regarding it as incorrect, with all its daringly extended indebtedness, for it to be the “economic engine” for the entire world. It demands more money from Europe and others, too. They do not intend the criteria of their indebtedness to be dictated by the U.S., but are responding to the plight of their local economic sites because they cannot wait for American actions to be successful: so they themselves are creating — what else — debts to an extent never before seen to bridge the gaps in the lost private business on their capital markets. On both sides of the Atlantic, all this is accompanied by prospects of consolidating the budget and statutory “debt freezes,” which are supposed to give this governmental adventurism a touch of respectability.
— The Europeans object to the American request for an even more aggressive stance vis-à-vis the debt-financed revival of business with their aim of better “regulating the financial markets” in the future to “prevent future crises.” This is, on the one hand, a goal shared by all crisis policy managers holding the view reinforced by the crisis that a bit more oversight of the private interest that has been granted the key financial position in the global business world would indeed be appropriate to the importance of this trade. On the other hand, the European, Chinese, and Russian proposals, among others, unmistakably aim at acquiring — by means of internationalizing the oversight of finance capital — new rights to interfere and participate in financial and stock exchanges that have been under exclusive American or British jurisdiction up to now. Their financial authorities have up to now dictated the small print for world trade with credit to the entire world; they have administered the listing of corporations from all countries on the globally most liquid stock exchanges, making it dependent on submitting to their regulations; and they have thus secured for themselves all the advantages that arise from housing the marketplace for the world’s largest supply of capital on one’s own territory and under one’s national jurisdiction. For nations that organize the “access to capital” with second and third rate financial centers, it seems to be worthwhile to at least partially wrest monopoly rights from the current masters of this competition. Those against whom this is aimed do not underestimate the claimants’ intentions and see to it — with all their promises for a new beginning in matters of correct oversight — that they remain the rightful masters of their successful financial centers, even when their success has just led to such bad results.
— There is broad agreement among the important actors addressing the crisis on the question of “free trade”: it ranks — WTO has issued the slogan — as “the best remedy for overcoming the crisis.” Protectionism must be avoided under all circumstances! It was one of the chief mistakes of 1929! Hardly have the avowals to this effect by the G-20 politicians been filed away in London when “leading world trade experts,” along with upstanding business journals that fly the free market flag, have to notice that 17 of the G-20, and not only they, have already taken “trade-restricting measures” due to the crisis. Those that are using this frowned-upon way of seeking one’s own advantage in contradiction to the free-trade spirit of the WTO agreement do not want their behavior understood as a breach of the dogma of free trade in these times of globalized capitalism when internationality is a condition of business, and protectionism is therefore practiced differently. Though the “industrial nations” are again increasing subsidies for their key industries, they are permitted to do so without penalty as long as a “distortion of trade” is not “proven” against them beyond all doubt in a lengthy procedure provided for such cases. Some “emerging markets” are doubling their customs duties, which does not contravene WTO regulations, because they lowered tariffs below the permitted level in times of good business. They have permission to restrict imports, not because local industries, but because local “consumers” have to be protected from “products damaging to health.” Thus no country readily tolerates the reproach of protectionism: after all, even Putin and his billionaires, Chinese companies, and Arabian sovereign wealth funds have recently been invited to invest capital in honorable European or American companies threatened a bit by bankruptcy. But sometimes protectionism is downright “popular”: in Germany or France, for instance, when jobs are not supposed to be lost at Opel in Germany or at Renault in France, but in Belgium or Rumania; when Fiat needs to be prevented from making all-too Italian investments in Germany, and sound German factories have to be protected from their ailing American parent; i.e., always when the political class defends the continued existence of profitable production on the national business site and supports workers fearing for their livelihood in their welcome misunderstanding that this protection would be for them.
After the crisis provided the opportunity for a far-reaching settlement of tax evasion in Liechtenstein, the American and German governments’ efforts to use the weapon of law to deal a few heavy blows to the annoying financial center of Switzerland is also getting a good press — with the exception of the great minority of tax evaders — and likewise is not supposed to have anything to do with protectionism. Swiss banks, as the world’s biggest “asset managers,” having up to now dominated large parts of the markets and regarded international tax evaders as their rightful Swiss business basis, are now confronted with the demand to function at last as executive organs of American (and German) tax offices or lose — in case of refusal — their authorized access to the American banking market. The beauty of these alternatives lies in the sure destruction of the mainly affected UBS as an international bank if it is excluded from the U.S. market, and its —at least partial — destruction as a market leader in doing business with rich people if it lets itself in for the American “offer.” This marks a transition in the fight over the distribution of crisis-driven losses in the banking sector, a new roughness that doesn’t shrink from dismantling an entire traditional banking center and reversing hitherto successful conditions of capitalist competition.
e) This is how those in authority today are working on their entirely own, contemporary “1929,” and intend to have not much in common with those former circumstances, just because they wield ultra-modern, political anti-crisis techniques. Among these today, there is — as mentioned before — undoubtedly the unlimited use of state money for supporting “systemically” indispensable financial institutions, companies, and social welfare funds. The usefulness of politically created money for this purpose, however, depends largely on its creator. There are big differences in this case, too, and the current crisis scenarios impressively illustrate this generally known circumstance: when Iceland puts its own newly printed currency at the disposal of its bankrupt banks, or when Ukraine vouches with self-fabricated hryvnia for the debts of a Ukrainian company, the debtors that are supposed to be helped are not made more sound. The custodians of such currencies are obviously not able to create credit in that sense with their own funds, and won’t be able to as long as they are not allocated ability-to-pay in “good money” of a worldwide accepted sort — there are not very many of them, as is well known — from states that have it at their disposal.
States that have earned and stashed away world money by selling raw materials or the products of domestic exploitation, i.e., states in the hopeful category of “emerging markets,” likewise have up to now tended not to cover the biggest share of their necessities on the world markets with reals, yuan, or rupees. Just as little can one guarantee an endangered Russian bank with rubles in the face of the suspicions of the international capital market. Dollars or euros, or at least pounds or yen, are demanded for that, too, currencies that such states have at their disposal as “reserves” or can get hold of in exchange for their tradable goods. Because they have to be earned, they are being rationed out carefully.
The sovereign masters of such “reserve currencies” have a different method at their disposal in case of crisis: they “create” for themselves whatever amounts of money they regard as indispensable for saving their financial system or their key industries, and firmly make the case for postponement as far as the associated risks are concerned. The unprecedented increase in public funds, for instance in the United States, is threatening to become an extraordinary case of damage, as can be gathered from the pluralistic debate between those who “worry about the creditworthiness of the world’s biggest national economy” and those who are still of the opinion that the United States has “the dollar and the others have the problem.”
The question, whether and to what extent the trillions in world-money that have come into existence in the course of international crisis management will ever prove their worth as the stuff of American or European capital growth, will only be answered in the future; so too the question about the impact of a serious devaluation of these monies on the international world of states, which keep their national treasuries stocked predominantly with currency reserves of dollars, euros, pounds, and yen, and would thereby be immediately threatened.
Because of such risks, all those that consider themselves able to do so are launching — above all with regard to the American “reserve currency” — all sorts of initiatives aimed at driving the U.S. dollar in the longer term out of their worldwide business dealings and replacing the special position it has conquered for itself as the currency of the world market. They are forming currency zones in yuan or rubles, conclude bilateral trade agreements for balancing payments with national currencies to the exclusion of the dollar, and trying their hand at Latin-American copies of the European Community and the IMF to move “away from the dollar!” In the long term, they plan on competing with the American world money and conquering for themselves the advantages of a globally valid world money. In this way, they intend to make use of the financial power of their dollar reserves today and not only avoid the future consequences of the heedless increase of the American currency but also challenge — as future financial and world powers — its special imperialistic role, and thereby the role of the United States as well.
The only currency for which competition with the dollar is already current practice is the money of the European Union. The participants in the Currency Union have called off their intra-European currency competition in order to take it up with the dollar on a world level by means of a common money, but without a unified state. The system of obligation and extortion worked out in the Masstricht Treaty was supposed to bind the member states’ individual expansion of euro-denominated debt to a demonstrably successful ratio of these debts to the respective national capital growth rate. By means of a sanctions-fortified upper limit on budget deficits, this success was supposed to be continuously monitored, confirmed, and where necessary enforced by punitive measures, and so, with this “stability” of the new money, to ensure growth without fail on European territory. The cessation of intra-European currency competition, however, was — of course — in no way coupled to the cessation of competition otherwise between the national economic sites of the currency zone. Starting from the already large differences in capitalistic development at the founding of the euro regime, the “competitiveness” of the euro nations has — according to the unanimous opinion of all observers — “strongly diverged” in recent years. Consequently, the already politically strongest and most capital-endowed states have obtained further advantages with the new currency, while deficit proceedings, capitalist stagnation, and “real estate bubbles” have accumulated elsewhere.
The crisis and the use of a common currency for rescuing European capitalism under the competing direction of the euro states, their European Central Bank (ECB), and EU central organs are intensifying the contradiction of a common state money without a common state power and pushing the Maastricht regime to its limits.
Confronted with the breakdown of their financial system and impending state bankruptcies, the euro states care less and less about the Currency Union’s treaty clauses, which not even the euro-zone heavyweights can adhere to any longer. They are getting into debt with every investor who buys euro bonds from them for extra interest, without any prospect of a return to keeping to the euro regulations, and certainly without the prospect of being able to pay the sanctions due for violating the rules. On the one hand, the Maastricht treaty is becoming watered down, deficit proceedings are postponed until “after the crisis”; on the other hand, states that are in actual fact bankrupt, that are no longer succeeding in obtaining financing on the bond markets, these states are referred to the IMF with the invocation of a euro-state’s contractual freedom from liability for the national debts of the others. At the same time, the ECB is itself examining the issuance of “Community Bonds,” in which states no longer creditworthy can hide behind the stronger ones. Germany is promising help — explicitly going against the “no-bail-out” clause of the euro treaty — “in case of emergency” for euro states that have become insolvent. While the euro-states’ crisis policy has in actual fact already abrogated the treaty and ruined its economic and legal bases, “Maastricht” is being kept alive as a political slogan for interference in the disputes of the euro-states among each other. After all, the competitiveness of European capitalism and the handling of its crisis are matters of political control. So the quiet cancellation of the Maastricht criteria doesn’t by any means settle the debates as to who can give orders to whom, but reopens them with a new toughness, an open outcome, and with the absurd content of who is permitted under what circumstances, to what extent, and with what consequences, to violate the rules that none of the euro-states can adhere to for the foreseeable future anyway.
There is one point, however, in which all those involved agree: vis-à-vis countries that have announced their interest in entering the currency union because they reckon on advantages in weathering the crisis, it is appropriate to insist on strict compliance with the treaty rules in order to avoid the misuse of the common currency in unauthorized hands! Keeping to the criteria, though, makes impossible the entry of countries that would need the euro as an emergency brake in case of insolvency, and precipitates potential bankruptcies that on the other hand are likewise not convenient for the states of the Currency Union, and so it goes.
Nonetheless, it can be seen that sorrow and pessimism are not the cup of tea of European statesmen. Even the Spanish government, in the midst of a record high in the annals of European unemployment statistics, calls the crisis — in a debate about the state of the nation — a “great opportunity” for new strength, while the European Union thinks of its common future and isn’t letting the crisis stop it from gathering in Russia’s neighbors for a new, Europe-oriented “near abroad.” No government neglects to make a point of demanding the trust of its citizens and the entire world in the capacities of its power. A loss of power through the failure of its economic basis is simply not allowed to occur. In order to avoid this, they will put their power to use — one can bet on this anyway.
© GegenStandpunkt 2009