Alternative Economics: Reversing Stagnation

TITLE PAGE ALTERNATIVE ECONOMICS: REVERSING STAGNATION An Anthology of Alternative Austrian, Swiss, Polish and German Economists Translated by Marc Batko

P2 DEDICATIONS This anthology of critical economists is dedicated to my brother and all seekers of truth and justice, to all yearning for an inclusive future of generalized security, reduced working hours, exchanging roles, community centers and free Internet books. By rethinking work, happiness, health and security, we can pave the way for a future that is open. dynamic and cooperative full of play, exuberance, surprise and mystery.

Alternatives to stagnation, unemployment and depression call us to changed priorities and policies.

TABLE OF CONTENTS Translator’s Foreword Translator’s Introduction Three Poems for the New World A. ALTERNATIVE ECONOMICS: PLURALISM AND THE PUBLIC INTEREST 1. Ulrike Herrmann: The Crisis of Economists 2. Helmut Martens: Social Inequality Today 3. Attac: Learning Economic Democracy Introduction Causes of the Global Financial Crisis The Neoclassical Crisis Narrative The Keynesian Crisis Narrative The Marxist Crisis Narrative 4. For the Renewal of Economics: Memorandum of Shocked Economists B. ALTERNATIVE ECONOMICS: SHRIVELING THE FINANCIAL SECTOR AND EXPANDING THE PUBLIC SECTOR 1. Tomasz Konacz: From Real Estate Speculation to Collapse of Global Deficit Economy 2. From the Debt Showdown into the Recession 3. The Crisis Explained 4. Democracy in Crisis: The Terror of Economy is a Danger to Democracy 5. The Extremist Society 6. In a Vicious Circle 7. Addicted to Liquidity Injections

8. Tea Party: Extremism of the Middle 9. Financial Market Inflammation 10. Ways Out of Capitalism 11. Everything Must Go! 12. The Great Liquidity Bubble 13. Joachim Bischoff: Finance-driven Capitalism 14. Joachim Bischoff: Alternatives to Stagnation and Depression 15. Karl Georg Zinn: The Catastrophe Has Already Begun C. ALTERNATIVE ECONOMICS: REJECTING MILITARISM AND NEOLIBERALISM 1. Mohssen Massarat: Less Growth and Less Work 2. Mohssen Massarat: The Military-Industrial Complex is the Greatest Threat for World Peace in our Time 3. Michael Schwendinger: Reduced Working Hours as a Socio-economic Investment 4. Franz Garnreiter: Criticism of Market Theory and Market Ideology 5. Andreas Kolbe: The Coded World 6. Sven Giegold: The Lobby for Tax Evaders 7. Ernst Wolff: Janet Yellen’s Storytime APPENDIX: MYTHS OF THE ECONOMY Authors Index

AUTHORS INDEX

Attac: network and portal of alternative economics in Germany and Austria Marc Batko: Portland Oregon translator of alternative economics and liberation theology

Joachim Bischoff: editor of Sozialismus and prolific writer Franz Garnreiter: member of isw-editorial staff Sven Giegold: member of the Green fraction in the European Parliament Ulrike Herrmann: economics editor of taz newspaper and author of “Hurrah! We Can Pay for the Crisis” and “The Victory of the Economy” Andreas Kolbe: former economics editor at Deutschland radio Tomasz Konicz: critical economist living in Poland and author of many articles and books critical of finance capitalism Helmut Martens: author and professor of sociology living in Dortmund Mohssen Massarat: professor of politics and the economy at the University of Osnabruck Michael Schwendinger: Austrian economist at the blog arbeit wirtschaft Ulrich Thielemann: formerly professor at the University of St Gallen (Switzerland) and founder of the MeM alternative economics think tank Ernst Wolff: critical economist and author of “The IMF as a Superpower: Chronicle of a Predatory Attack” (2014) Karl Georg Zinn: taught economics at the University of Aachen from 1970-2004 and author of Social Market Economy and Lessons of Keynesianism

SHORT DESCRIPTION (400 words) The anthology “Alternative Economics: Reversing Stagnation� includes 3 translator’s introductions, 3 poems from the translator, 12 articles by Tomas Konicz, 1 article by Ulrike Herrmann, 1 article by Helmut Martens, 1 article by Franz Garnreiter, 1 article by Sven Giegold,, 1 article by Karl Georg Zinn, 1 article by Ulrich Thielemann, 2 articles by Mohssen Massarat, 2 articles by Joachim Bischoff, 1 article by Andreas Kolbe and articles by Attac and the Rosa Luxemburg foundation..

Mainstream market-radical economic theory has led to exploding inequality, cynicism and resignation and has no answers to mass unemployment, growing precarity, global warming and the rights of nature. The time is right for alternative economics, for economics that is part of life, not a steamroller crushing creativity and self-determination.

The market is not self-healing or a panacea but a necessary and helpful instrument after political questions are answered: what kind of society do we want? How can public necessities remain public? How can people be active participative citizens and not mere cogs in the machine? How can nature be protected and nurtured and not trivialized as a free good, external or sink?

Alternative economics is a vital corrective to market radicalism and neoliberalism with unfettered deregulation, privatization and liberalization of markets. While neoliberal mythology insists higher profits bring more jobs and greater investments, profits soar and investments fall by the wayside. Profitable companies speculate on foreign currencies and buy back their own stock while rewarding managers and CEOs with bonuses. As lessons from the 2008 financial meltdown, the financial sector should be shriveled and the public sector expanded.

The 2008 financial crisis led to the destruction of millions of jobs and the destruction of trillions in wealth. The risk managers turned out to be risk creators. The deregulation of the banking industry, the corruption of the rating agencies and the indifference of the federal government enabled speculation to eclipse productive investment. All corporate and personal achievement depends on state investment in roads, schools, hospitals, food safety, water quality and airwaves. Changing economic priorities and policies is vital to fair distribution and generalized security. All people should be assured a basic unconditional income. The 26 community centers in Vancouver Canada have a cushioning and multiplying effect. In times before Reagan, they were bursting with counseling and surrogate classes and living proof that the future can move to generalized security. Reduced working hours could be seen as a socioeconomic investment ensuring long-term health and expanding time sovereignty.

LONG DESCRIPTION (1100 words) The financial sector should be shriveled and the public sector expanded. The myths of self-healing markets, efficient financial markets, nature as a free good, external and sink, infinite growth in a finite world, quantitative growth and the exact sciences eclipsing qualitative growth and the human sciences (history, literature, play, language, sociology, political science, philosophy) and private opulence next to public squalor (cf. John Kenneth Galbraith) must call us to rethinking – individually and collectively.

Alternative Austrian, Swiss, Polish and German economists can alert us to the bankruptcy of austerity policy and fiscal policy aiding capital at the expense of workers and the environment. The future economic policy must be regional and decentralized. A postmaterialist economy is possible as we transition from excess to access and more to enough. Work, health, strength, security and happiness can be redefined. The rights of nature can be respected in a future of moderation, equality and freedom.

More and more is produced with fewer and fewer workers. Work and income have uncoupled as people cannot survive on their earnings from work and depend on credits and loans. Reducing working hours is a response to increased productivity and is the only way to assure everyone of the right to meaningful work. Reducing working hours, as Michael Schwendinger explains, is a socio-economic investment that protects longterm health interests and gives people more time sovereignty Peter Ulrich is a Swiss economist. The economy must be embedded in society. Society must not be embedded in the economy.

Ulrich Thielemann is a Swiss and German economist. Profit making is not profit maximizing. Studying economics today is like brainwashing.

Tomasz Konicz is a Polish economist. The 30 year crisis is not an Obama crisis. Wages were stagnant for 35 years. Credit was expanded. Families worked 3 or 4 jobs. Health care, education and housing became unaffordable. The US became a black hole for the global economy.

Personal performance always depends on the work of past generations and state interventions. Americans fall to a new feudalism with the deserving and undeserving, fear-mongering and racism. Pragmatism or market religion often replaces vision, principle and courage. Confusing speculation and investment makes the next crisis inevitable. Wall Street banks spent $10 billion in campaign contribution and lobbying ensuring corruption, weak financial deregulation and shifting private losses to public taxpayers.

Profits soar and sovereignty is lost. The TTIP (Transatlantic Trade and Investment Partnership) threatens democracy and the constitutional state. The Investor-State dispute settlement mechanism elevates corporations to the status of nation states. These three judge panels are fronts for corporate investors. 600 corporate lobbyists are discussing the TTIP; senators and the public are denied any transparency! Philip Morris is suing Uruguay and Australia for lost profits through health warnings. A Swedish energy corporation Vattenfall is suing Germany for 1 billion euros for ending nuclear power too quickly! The lessons of NAFTA were repressed: the US trade deficit soared to $180 billion and one million jobs were lost.

How perverse and shameful to ignore facts and blatant failure, to give speculators a free pass for the 2008 crash, to shift costs to workers, the disabled, pensioners and the poor!

In post-democracy representatives do not represent the public welfare or public interests.

Do you think “public spirit” will fall from the sky without redistribution from top to bottom? Lies are bitter fruits of the unchecked market economy normalizing corruption and cowardice. The human future is really the welfare state where cooperation and competition reinforce each other. The market radical or market fundamentalist are caught in a false triumphalism and decry the welfare state as “Bolshevism.”

That globalization will benefit everyone is a deadly myth. According to the neoliberal myth, higher profits would lead to greater investments and more jobs. In truth, corporations used soaring profits to speculate on foreign currencies and buying back their own stock!

The US economy amid outsourcing and financialization is kept alive through foreign investments, social security, Medicare and suffers with false identities, the world sheriff, the empire exploiting colonies and continents through “free investment” trade agreements, military bases and indirect threats.

The implementation of social security insurance drastically reduced the poverty rate in the US. The country is strengthened when fellow citizens escape poverty. Most of the money paid in SSI benefits is immediately cycled back into circulation, further stimulating the economy and thereby benefiting all of us. August 14 was Social Security’s 80th birthday and July 30 was Medicare’s 50th birthday.

All personal and corporate success depended on state investments in schools, roads, hospitals, food safety, water quality and airwaves. The Schwabian housewife is a misleading model. Debts to an individual household are different than debts to corporations and states. Debts to corporations and states are necessary to create the infrastructure for future economic activity.

Political will and political motivation are necessary to break with inertia, corruption and lip service. Creating affordable housing and meaningful living wage jobs can’t be left to the market or neoliberal theory. Profit making is different than profit-maximizing. The neoliberal model promotes profits, not investments (Nikolaus Krowall). Private opulence exists alongside public squalor as John Kenneth Galbraith decried in the 1960s.

Don’t hate the media; become the media. Hope is in alternative media, intercultural learning, breaking out of the box of conformity, herd instinct and selfishness. Fear of the unknown and fear of the future can be overcome as prejudice and illiteracy can be overcome in the event of understanding, the fusion of horizons (cf. Hans Georg Gadamer, Truth and Method). Fear mongering and fault finding are false securities like cheap grace and cheap citizenship. The church (as in Nazi Germany) can become a husk of hypocrisy and barbarism, a bastion of self-righteousness where social justice and the in-breaking reign of God are trivialized. Our own logs of militarism and exploding inequality must be recognized without magnifying the specks in the eyes of others.

We are called to be subjects in a future that is open and dynamic, not closed and static.

We are invited to abundant self-critical and interdependent life, not a 2-inch world of Ponderosa and Mr. Cartwright, an insular world where nothing is learning of difference and other cultures. where wars of aggression and adventure are normalized and where the outside of the cup is cleaned and the inside remains filthy. “We sit here stranded and do our best to deny it,” “the executioner’s face is always well hidden where hunger is ugly and souls are forgotten,” “a hard rain’s goin to fall” (Bob Dylan www.dylanradio.com).

The unexamined life isn’t worth living (Socrates). Truth wells up and cannot be imposed.

Soren Kierkegaard saw truth as inwardness wounding indirectly from behind. Selfrighteousness is the grand delusion, said theologian Eberhard Juengel. Self-interest means that our will and our perception are curved in ourselves, Martin Luther warned.

Narcissism is the unhealed epidemic where Narcissus falls in love with his reflection in the pond and drowns (cf. Janet Twenge on www.booktv.org and Chalmers Johnson “Nemesis”). The ego must die for the self to be born!

TRANSLATOR’S FOREWORD

By Marc Batko THE NEOLIBERAL INDOCTRINATION Neoliberalism serves as social indoctrination. It tells the poor and weak they are responsible for their misery. It does its utmost to prevent the true extent of social poverty from reaching the general public. The health system despite ever greater expenditures becomes increasingly inhuman, social work erodes, a “re-feudalization boom” rages along with de-democratization, and investors aim at privatizing the public education system. When the poor and weak blame themselves for social inequality (low motivation, negative attitudes etc), the state and businesses escape their responsibility to contribute to education, community and the infrastructure. Minds are fogged and controlled by neoliberal media, focus on the trivial (celebrity news and sports fixation) and psycho-techniques make resistance against this inhuman ideology largely impossible.

As low profits led to the explosion of the financial sector and financialization around 1980, the financial meltdown of 2008 led to the discrediting of neoliberalism. Homo oeconomicus fades away as an economic theory along with market fundamentalism and market radicalism. Market failure and state violence epitomized by Enron’s expansive accounting method and the aggressive wars in Vietnam, Nicaragua, Iraq, Afghanistan, Libya and Syria should be lessons if the future is to be worth living.

We live at the close of the neoliberal rollback where universities became profit centers, health care becomes a privilege not a right, where climate change and protection of labor and the environment are ignored in trade agreements while foreign investors can sue states for real and imaginary profits. The threat of lawsuits for lost corporate profits will have a chilling effect on labor and environmental protection.

The people are too big to fail, not the banks. Risks and bailout costs were shifted to taxpayers. When neoliberalism is rolled back and Orwellian distortion of language and democracy is ended, poverty will be ended through the exercise of true democracy.

System change, not climate change is the imperative.

As capitalism grows, inequality grows. Capitalism is an inequality machine (cf. Thomas Piketty). Corporations are sometimes more powerful than nations. In addition to buying back their own stock, corporations store $7 trillion in tax havens and deny local, national and international responsibility and liability. A hundred years ago, the French socialist Jean Juares warned: “Capitalism contains crisis as rain clouds contain rain.”

PHILOSOPHY AND THE SEARCH FOR ORIENTATION: THE FUTURE GUIDES THE PRESENT Striving for utopia is the hope and motivation of the present. The present transcends itself only when it includes hope and promise. The poor live in two worlds, the world of hope and the world of misery, while the rich live in only one world where the future is only a repetition of the present. Life and reality are not linear or self-evident but pluralist and dependent on interpretation. True wealth is manifest in a larger consciousness of interdependence, empathy, historical awareness and humble openness to liberation.

The future should be anticipated and protected in the present, not extrapolated from the present (cf. Jurgen Moltmann, Theology of Hope). The penultimate draws its strength from the ultimate (cf. Dietrich Bonhoeffer, Letters and Papers from Prison).

We find ourselves at the end of an epoch without clear signs of the new epoch. How can citizens be promoted and not reduced to consumers? How can the state ensure the food, housing and health necessities and not set corporate welfare and corporate profit above everything? How can education emphasize critical thinking and sustainability and be strengthened with money from a reduced pentagon and a downsized financial sector?

ALTERNATIVE ECONOMICS: REDUCING WORKING HOURS, EXCHANGING ROLES AND COMMUNITY CENTERS

Community centers could be a third way beyond the state and the market. Vancouver B.C. has 26 community centers, some with swimming pools that take your breath away.

The Carnegie Community Center in the poverty-stricken Downtown East Side is subsidized by the province. There hope is restored and becomes concrete in the real functioning mosaic of interdependence and love of life. Inexpensive meals of casseroles, a library quickly filled to the brim, a computer room offering everyone 3 hours of daily computer use, a basketball gym, a game room, a TV room, a theater and counseling and class opportunities are a life-giving antidote to the non-stop consumerism and cajoling of one-dimensional neoliberal profit worship. The community centers have a cushioning and multiplying effect enabling both working and unemployed to feel integrated and welcomed in the community.

Free Internet books and publishing ebooks at Smashwords.com are examples of the new person-oriented alternative digital economics. The gate is taken away from the gatekeepers; ebooks have a 30% share of new books today that has stabilized over the last 3 or 4 years. People are reading on screens and not only on the printed page.

Openculture.com gives us 700 free movies (including the 1915 “Alice in Wonderland”), 700 free ebooks and 450 free audio books (including George Orwell’s “1984”). How can anyone be “hard-nosed” with 700 free movies? Super Amigos is a free Mexican movie from 2007 where the activist refuses anything packaged, goes up against bestial bullfighting, homophobia and eviction of seniors.

Access could replace excess; enough could replace more. The one thing we learn from history is that we don’t learn from history. The bomb changed everything except the way we think (Albert Einstein). Work, strength, health, power and nature must be reconceptualized to avert re-feudalization, destruction of democracy and corporate destruction of the environment. As we move into a digital knowledge-based society, qualitative growth can replace quantitative growth. Instead of gazing at the stories of office buildings, we could become storytellers living double vision, universal and particular history.

Music, dance, poetry and literature deserve important places in a post-material decommodified world. The military-industrial complex and the horror of never-ending war must give way to multicultural interdependence, forgiveness, empathy, surprise, mystery, play and environmental caring.

Reducing working hours, exchanging roles and community centers are vital in a postgrowth, post-fossil and post-autistic economy. Person-oriented work and investments in labor-intensive sectors could mark our transition and end exploding inequality.

The demonized social state can be re-discovered as the future of humanity. We are fulfilled in the other, in expanding possibilities and awareness, not in amassing things.

Lakes are more than anti-freeze and mountains are more than landfill.

The state should be the support of the majority, rescuing those who fall under the wheel and blocking private interest from eclipsing public interest. “When the government trusts citizens, citizens trust government,” said Justin Trudeau, the new Canadian Prime Minister. Can we promote the welcoming spirit and not the spirit of fear in a multi-polar world in a future that is open and dynamic, not closed and static? How can the future become a future of generalized security? How can food, housing, health care be human rights and not privileges? How can sharing replace hyper-individualism, narcissism, selfrighteousness and class immunization?

The state is different than a business or a household. The state can become indebted and borrow money from the future so future generations can share the benefits of social investment. Bernie Sanders wants to return people’s taxes in the form of infrastructure and education rather than transfer hundreds of billions to military contractors and he wants to regulate Wall Street and break up the big banks. Two ways the bomb changed everything is that weapons can be de-stabilizing and security cannot be only military.

Without regulation, there would be no healthy forests or fish in the lakes. Markets are not self-healing or panaceas but tools helpful after fundamental political questions are answered democratically: What kind of society do we want? How can competition and cooperation strengthen each other? How can the market, state and work be redefined?

How can nature be protected as our partner and our hope and not reduced to a free good, external or sink?

TRANSLATOR’S INTRODUCTION

by Marc Batko “The old gives way to the new as the snow gives way to the spring” (Rilke). “The swan that floats and doesn’t sink represents the intransitory in the transitory” (Heidegger). “The penultimate depends on the ultimate” (Dietrich Bonhoeffer). “The cynic knows the price of everything and the value of nothing (Oscar Wilde).

THE NEOLIBERAL ROLLBACK CONFUSED THE GOAT WITH THE GARDENER The brutal epoch of the neoliberal rollback is ending. State, labor, business, and social myths have caused re-feudalization and destruction of democracy, exploding inequality, insecurity for labor, degradation of the environment and a depressed and cynical populace. Franklin D. Roosevelt, Occupy and Bernie Sanders resisted these myths in their different contexts. In the 1930s Roosevelt brought the economy from ruin to new life by creating four million jobs in two months and building thousands of miles of roads, bridges, schools, hospitals and community centers. Minimum wage, social security and worker protection on the job showed the state could be caring and not only punishing.

Now is the time for counter-measures, for recognizing market failure and state

violence, for quantitative easing for the people, for reducing working hours, and abandoning the misplaced trust in profits and corporate beneficence.

A future-friendly and environment-friendly economic policy that abandons myths is necessary along with circulating money. Only then are persons no longer grist to be ground up or “cost factors” to be reduced and CEOs no longer seen as beneficent “job creators.” The social contract and our interdependence are threatened when we tear at each other like rabid wolves and when the public interest is subordinated to the interests of corporations.

Alternative economics emphasizes reducing working hours and investing in the infrastructure. Education spending must be increased to ensure quality of life. Future necessities and the right to work must not be disregarded as labor insecurity becomes more widespread.

Social-economic regulation opposes supply-side trickle-down economics with its social cuts and tax relief for the super-rich. The Asian, Mexican, Argentinean and the Russian crises refute "Forever Number one." The Washington consensus is exposed as a fraud by the latest financial crisis which results from deregulation, privatization, opening markets and attacking unions.

Instead of expanding education and creating community centers with a multiplier effect, trillions are squandered on wars of choice and bailouts to speculators who stylize themselves as "investors" and "system-relevant."

The crisis is also a chance to abandon the destruction of nature and the hegemony of financial markets and financial products. The "quiet co-op" of Wall Street and the banks could be countered with new models replacing the rapacious business model and the short-sighted privatization model. The state has a social nature and cannot only be a security and power state or a trough for "achievers" and the super-rich and an "activating - punishing" state for the unemployed.

Thirty years of supply side, trickle-down economics favored capital and speculation and harmed labor. The role of the state, reversing inequality and creating meaningful jobs became taboo subjects with the self-healing market. All problems were stylized as interferences with the market. Private vices were said to produce public good. All life was reduced, commodified or instrumentalized to economic productivity.

Herbert Marcuse ("One Dimensional Man"), Erich Fromm ("Escape from Freedom") and John Kenneth Galbraith ("The Affluent Society") could be our mentors as we redefine the economy, the state and future-friendly sustainability. The "Gross Happiness Index" could replace the "Gross Domestic Product." Progress could be redefined as living simply so others can simply live. Maximization of knowledge could replace maximization of profit. The community centers in Vancouver B.C. could be seen as an advance in social evolution with cushioning and multiplier effects reinvigorating public spirit. Ignorance could be fought, not immigrants

The social state, solidarity, justice and sharing, open doors while neoliberal deregulation and privatization lead to exploding inequality, generalized insecurity and disappearance of public spirit. Corporations could be made taxable again since schools, roads and police protection do not arise out of the blue. Dishwashers do not become millionaires. The state has a vital role to protect people from unemployment, old age poverty and abuse of power.

THE ARC OF HISTORY BENDS TOWARD JUSTICE! The arc of history bends toward justice (MLK). The welcoming tradition is also part of American history, not only the traditions of fear and personal enrichment.

The one thing we learn from history is that we don’t learn from history. The bomb changed everything except the way we think (Albert Einstein).

Corporatist democrats seem to be 100% pragmatists and 0% idealists. Lies and trickery darken much of American history. 7.5 million tons of bombs dropped on Vietnam, 2.5 million tons of bombs dropped on Laos. According to Dr. Jill Stein of the Green Party, Saudi Arabia has purchased $50 billion in armaments over the last decade and Israel receives $8 million of military assistance every day.

The elite never make a mistake; everything is only a learning experience. Bill Clinton said NAFTA would bring 1 million jobs to the US and instead 1 million jobs were lost, subsidized corn was dumped on Mexico and millions of Mexicans could not survive on their small farms. Bill Clinton removed the Glass-Steagal fire wall between commercial and speculative banks, encouraged the creation of money out of thin air and had the gall to write “Back to Work.” Life and death matters, economic theory and truthfulness are secondary to financiers and cardboard politicians bent on their own enrichment. Bernie Sanders is the only candidate who will not lead us to WWIII, who has principle, determination, consistency, love of life and love of the future and will help end poverty instead of ending democracy!

The TTIP, TPP and TISA are NAFTA on steroids, corporate rule run amok, refusing to live in a multi-polar world where labor and nature have rights, refusing self-criticism and future-friendly economics, refusing to see market failure and state violence and the selfdestruction of profit-worship and the inanity of thinking we are “allbright.” Jean Twenge in her book “The Narcissism Epidemic” explains that narcissism, the cult of specialness, was thought to be the ladder of success while it really is a terrible anti-social blindness that marginalize others and blocks discussion (www.booktv.org).

In Roosevelt’s New Deal in the 1930s, the state was caring and not punishing and rescued those under the wheel. Minimum wage, social security and worker protection on the job were alternative economic policies in a time of slums and strikes.

Very soon we must find some way besides jobs to distribute the wealth generated by our increasingly automated productivity, something like a guaranteed annual income. But

to make any political changes, we have to change the way we think and talk about economic reality. Austrian, Swiss, Polish and German economists can free us from the “one-dimensional� worship of profit and neoliberal indoctrination. Ending poverty, not democracy and system change, not climate change could be our revolutionary songs.

By abandoning myths, false promises, half-truths and fables, we change assumptions, priorities and policies and live in a future-friendly world with generalized security. By discarding distractions and by involvement we become people of hope.

THREE POEMS FOR THE NEW WORLD

by Marc Batko May these poems help in defending the social logic against the profit logic!

As spirituality means letting go (cf. Richard Rohr, Simplicity and the Joy of Letting Go, 2003), Jesus calls us to a new language and a new mathematics, to an ethic of resistance and solidarity and a future of openness and inclusivity.

Joy comes in the morning, not only profit maximization and endless growth!

Burnt Rubber Instead of radical conversion, sharing work and assets, rewarding poets and writers, not only speculators and con artists, Burnt rubber became a language, a leverage and a lifestyle, a false hope and a false security conferred by a false consciousness in a culture of conformity and mutual congratulation where vision and utopia were lost.

Language and community are in permanent crisis amid repressing and fading out everything unpleasant.

Was speed glorified by the media so present, past and future dissolve as means are confused with ends and the part mistaken for the whole?

A world of interdependence

can be envisioned where stories of liberation eclipse the stories of office buildings, where the market isn’t the omnipotent ruler reducing life to a shopping mall but a means fostering human development..

Change of consciousness from auto-dependence in the car-tastrophe is still in its infancy.

Intoxicated with itself, the triumphalist culture is threatened with solipsism as vanity and narcissism threatened Narcissus gazing at the mirror.

There is power in our question, our proclamation and our vision!

Are human rights the same as market rights?

Do we ever learn from other cultures?

Do we obliterate the memory of other people?

Is growth endless and undifferentiated?

Can market progress threaten human progress?

Can Wall Street overshadow Main Street?

The rich one can lose all things without sorrow.

Buddhist enlightenment like Jesus’ parables can change reality.

True wealth is receiving and sharing reconfiguring the plutonium economy of nonstop consumerism where future generations refuse the celebration of burnt rubber.

The Seven Myths The great myth that individual selfishness becomes public good reflects the displacement of public ethics by personal morality.

The myths of the self-healing market, the ever-larger cake and lifting oneself by one’s bootstraps are economic and psychological like the myths of corporate beneficence, trickle down prosperity and nature as an external.

Who would have thought that Reagonomics would be such an insurmountable virus?

A lie can travel half way around the world before truth gets her boots on! (Mark Twain) Myths and prejudices block the way to understanding.

Economism sets profit and property above human life, degrades labor into a cost factor, and commodifies all life..

The anthropology of self-interest has its counterpart in the anthropology of receptivity.

We are social beings bound to one another llke the waves of the sea.

We are dependent and changed by our context and environment, not atomized nomads without connection, history, passion and hope.

The truth will set us free but the truth is a process where life is an unfolding fragment relational and conditional calling us to engagement not self-righteousness or solipsism.

As the end is present in the beginning, the tree in the seed, our fragmentary lives ought to be dialogical and international where we are questions and answers to one another exploding the myths.

Historical Consciousness and Utopias Historical consciousness and utopias do not become discredited when little Bart comes home all muddy and twisted.

America corrupted by wealth where full employment only occurs through wars is the pioneer of speculation and misfortune.

Capitalism and the last superpower are above the law.

Where our footprint is too great and wasted energy is challenged, we use the Creole trick and stylize ourselves as victims, not culprits.

Only repression artists could redefine non-stop consumerism and limitless nature as economic laws.

People on the fifth floor congratulate people on the fifth floor.

Rightwing propaganda threatens!

Idolizing the nation or the belt-buckle, the rightwing scapegoat the weak, the immigrants who enrich the materialist North.

Triumphant America becomes a buffoon when prosperity is based on weapons exports, redistribution upwards and exploitation of the global South.

The future should be anticipated and protected in the present, not extrapolated from the present.

Let us reclaim life and the future and not become buffoons of the mega-machine!

A. ALTERNATIVE ECONOMICS: PLURALISM AND THE PUBLIC INTEREST 1. THE CRISIS OF ECONOMISTS

By Ulrike Herrmann Debate over Capitalism. Many economic professors act like high-priests. They only make claims and completely lack arguments.

[This article published on 12/2/2015 is translated from the German on the Internet, http://taz.de/!5252356/. Ulrike Herrmann is an economics editor for the taz daily newspaper and author of several important books including “Hurray! We Pay for the Crisis!” and “The Victory of Capital.” Occupy demonstrators often know the ins and outs of capitalism better than the economic wise men.]

Queen Elizabeth II has been governing for more than 60 years but rarely gives any memorable quotations. Only one question she raised after the 2008 financial crash remains in our memory: “Why did no one see it coming?” The answer of British economists is just as legendary. In a three-page letter, they conclude: “So, in summary, Your Majesty, the failure to foresee… the crisis and to head it off… was principally a failure of the collective imagination of many bright people.”

The Queen was not the only one who was surprised. German chancellor Merkel also couldn’t make heads or tails with much advice she received from economists. In the summer of 2014, she was invited to Lindau where the Nobel Prize winners for economics met. Courteously but clearly, she criticized them for their absurd claims of truth.

Economists should “have the honesty to admit the error rate or haziness if they don’t know exactly.”

A little later the chancellor made fun of an expert opinion of the “five economic wise” because the experts wrote that the minimum wage was responsible for the shriveling of the economy. The minimum wage didn’t even exist at that time. With typical smugness, the chancellor remarked “it wasn’t completely trivial to understand how a resolution not yet in force could cause the economic downturn.”

Months later council chairperson Christoph Schmidt was still shocked the chancellor had dared question the wisdom of the “five economic wise men.” To confidants, he announced he would “prepare arguments” the next time. Unintentionally Schmidt identified the central problem. The mainstream economy doesn’t know what an argument is any more. Claims or assertions are made. This neoclassical economics is not a science but resembles a religion that proclaims dogmas.

TEXTBOOKS REPRESENT POWER In a very readable article for the blog “Herd Instinct” (Herdentrieb), the economist Fabian Lindner recently described the trick with which the mainstream economy immunizes itself against every empirical test. In some of these strategies, neoclassicism resorts to tautologies and formulates in a blurry way under what conditions its predictions are valid.

So its statements are seemingly always true and the ivory tower remains intact.

Many students suspect that economics only gives a caricature of reality. In a “Plural Economics Network,” they joined forces to reform the one-sided theory. Last weekend they organized a conference in Berlin titled “Teaching Economics in the 21st Century.”

Mainstream economics doesn’t know what an argument is any more.

The question is raised through many events: What should be emphasized in the textbooks? One of the wonders of mainstream economics is the same lessons are still taught although several financial crises have shown the models cannot be right.

Textbooks represent power. Whoever influences students in the first semesters doesn’t have to worry about followers. The theoretical battle is won. Thus the question about textbooks is central but uneasiness remains. Plural economists only want to change the contents, not abolish the textbook as a principle.

THINKING IS NOT ENCOURAGED However textbooks are not unproblematic. They suggest there is one “truth,” one content or subject matter that can be learned. Imitative understanding is promoted, not thinking.

In textbooks, every chapter ends with a summary. Nearly all authors present models for

which there are “model solutions.” These exercises reinforce the impression that economics provides objective knowledge.

In their textbooks, many Keynesians as well as mainstream economists act as though economics were a natural science resembling physics. Models are constructed and mathematical formulas drafted that are calculated to the decimal point. Given these extremely meticulous numbers, that the economy is a social science that can only provide interpretations was quickly forgotten.

Mathematical models reduce reality. As everybody knows, the economy develops dynamically. Unfortunately, at best, only equilibria can be modeled. This discrepancy is blamed on reality and is not interpreted as a problem of theory. What cannot be modeled does not occur.

HOW DOES GROWTH ARISE? Lay persons immediately know what constitutes capitalism. Capitalism is a social system that produces growth. However most economists cannot explain how growth arises as strange as that may sound. Technical change simply happens and is ignored as an “exogenous factor.”

Economists must investigate empirical reality instead of building models. The economist Mariana Mazzucato shows how this can be done correctly. She analyzed concretely how technical inventions occurred that made possible Google, Smartphones and complex cancer therapies. Research always took place in state laboratories, she concluded.

Private firms “only” tinker around marketable goods. Steve Jobs was very ingenious about transforming state knowledge into new products – and privatizing the profits.

With her empirical research, Mazzucato decries neoclassical economics that dreams of the free market and holds the state as interfering or disruptive. By the way Mazzucato didn’t need a single formula to illustrate her path-breaking conclusions. She also hasn’t written a textbook.

RELATED LINKS: Rana Foroohar, Why You Can Thank the Government for Your iPhone, Oct 27, 2015, http://time.com/4089171/mariana-mazzucato/ Ulrike Herrmann, Free Trade: Project of the Powerful, April 2014, http://rosaluxeuropa.info/userfiles/file/FreeTrade_UHerrmann.pdf

2. SOCIAL INEQUALITY TODAY Diagnoses and Interpretations

By Helmut Martens [This article published on January 20, 2015 is translated from the German on the Internet, http://www.gegenblende.de.]

The idea of overcoming social poverty was joined with the triad of work, progress and happiness in the welfare state democracies of the first postwar decades (Martens/ Peter/ Wolf 1984). This has changed completely in view of a neoliberal rollback that has continued for more than thirty years (Scholz and others 2006). At regular intervals, studies and analyses are presented that explain the extent of the increasing division between the poor and rich sectors of the population. This consciously forced social inequality intensifies economic crisis processes and undermines the political idea of a democratic idea of the free and equal. To what extent a crisis of social cohesion is bound with the “crisis of democracy” and the “crisis of the economy” will be discussed in this paper.

ADVANCING PROCESSES OF SOCIAL DISINTEGRATION The Poverty- and Wealth Report of the German government presented in 2013 for the fourth time since 2001 was politically controversial in the assessment of the political data (BMAS 2013). Still the facts are clear. Whoever has less than 60% of middle needweighted income is considered poor according to the European Union’s definition. In Germany, the corresponding 2012 monthly income for single persons was 869 Euros and 1826 Euros for families with two children. 14 to 16 percent of the population was regarded as poor. As to wealth distribution, the report shows the lower 50% of the population had 1% of the total wealth (in 1998 it was still 4%) while the top 10% had over 53% *45% in 1998).

Germany lies in the general trend in the advancing processes of social disintegration – following the US as trailblazer and with a top position within the EU. The intensely discussed studies of Thomas Piketty (2014) and Chrystia Freeland (2013) verify this.

Piketty shows the gulf between poor and rich in the US was never as great as today since the worldwide economic crisis of 1929. The increased share of the top elite in the social wealth corresponds to the decline in the large majority. The original title of Freeland’s study is “Plutocrats. The Ascent and Rule of a New Global Money Elite and the Descent of Everyone Else.” The Forbes 2012 list of the richest persons included 1,226 billionaires [1]. Piketty also emphasizes the role of the economic elite for the US (the top 10%) in aggravating social inequality. Emmanuel Saez and Gabriel Zucman (2014)

continue and develop his findings and intensify the diagnosis. According to them, the share of 0.01% of the top elite is responsible for the sharp rise of inequality in the US. Their thesis is: “Wealth inequality has grown very intensely at the most extreme top but not below the top 0.1%/” Their tables show an increase for the top 0.01% from 3% (1960) to 11% (2012) and for the top 0.1% to 0.01% from 6.5% to 10.5% in the same time period.

In her analysis, Chrystia Freeland says extreme inequality in the US first developed after the second industrial revolution. That was the “Gilded Age,” as described by Mark Twain and Charles Dudley Warner (2011) in the transition from the 19th to the 20th century. As we know, growing social instabilities arose at that time in the US and Europe (e.g. strikes and slums). They flowed into geopolitical adventure and ultimately the First World War. The reasons why the book by Twain and Warner has become “a history of today” are not clearly explored by Freeland. She speaks of a “second Gilded Age.” She mainly understands the current developments as further stages of development of the promise of capitalist development that she sees confirmed in the genesis of a new middle class in China for example. Piketty warns sharply of the emerging and growing inequality between rich and poor. He enters into pragmatic solutions as in progressive wealth taxes that are not a question of left and right but common sense. At the same time he says he chose “Capital” as part of the title of his book although he doesn’t understand himself as a Marxist.

POST-DEMOCRACY, RE-FEUDALIZATION AND THE CRISIS OF POLITICS The neoliberal rollback since the middle of the 1970s reacted to declining growth rates and growing structural unemployment in the advanced western states (Thatcherism, Reaganomics). For a long time up to the outbreak of the “new worldwide economic crisis,” this rollback was justified as a great promise of freedom in opposition to supposed welfare state dehumanization (Krugman 2009). Many persons of formerly command socialist countries set their hopes on a capitalism tamed by the welfare state that was already in retreat at that time and whose erosion was forced by the implosion of command socialism. To many politicians, the European debt crisis was reason enough to argue that we all “have lived above our means.” The perspective of a “marketconforming democracy” (Merkel) was a political explanation for the “surprising survival of neoliberalism” (Crouch 2011). This prompted the conservative Democrat Frank Schirrmacher to the questions “how falling prices in the middle of a market crisis could appear as a political vision” and “why there were repair efforts in states but not in markets.” His answer was: “Nearly all political and social elites confuse the theory that the market as a natural law knows better than humans.” The “core meltdown” of the financial markets triggered the political vision of a democracy obeying the market like Phoenix rising from the toxic ashes and didn’t cast doubt on the omniscient (Schirrmacher 2013).

We are not only confronted with post-democratic developments that intensify the real threat of continuing multiplier crisis developments so authoritarian solutions catch on.

The advancing social division in poor and rich in the “Gilded Age” creates a reality in

which the official showmanship can decreasingly hide the growing “misery of the world” (Bourdieu 1997). The current consolidation of wealth and influence is correctly described as “re-feudalization.” Following Jurgen Habermas, Sighard Neckel (2013) “doesn’t use this term as the return of a long past historical epoch but as a continuing self-contradiction that can suddenly change certain threshold values so social institutions lose their normative qualities that once characterized them as historically new” (Neckel 2010). He explains this development as a re-feudalization of values in the achievement society (for legitimating high salaries), as a re-feudalization of the economic organizations (through establishment of a privileged estate, the manager class), as a refeudalization of the social structure (through return of the distance between the elite and the precariat) and as a re-feudalization or dismantling of the welfare state (in which public welfare is re-privatized as donations and gifts).

More or less silently we are moving today to accepting already implemented refeudalization processes as foregone conclusions and the growing speechlessness of the new precariat as an inescapable moment. We are living in a “democracy of the higher paid.” In an essay where he develops the reasons for a way “from market freedom to economic democracy,” the philosopher Tilo Wesche (2014) says very rightly that the political idea of a democratic society of the free and equal is undermined given the recent “concentration of property and political power.”

CONCLUSIONS The neoliberal rollback has created growing instabilities. An advancing process of dedemocratization and implementation of social re-feudalization processes is connected with the rise of the new “super-rich.” The analyses of Neckel and Freeland can be understood as confirmation of Jacques Ranciere’s thesis that “the struggle between rich and poor is not the social reality with which politics must reckon. Rather it is identical with its organization. Democratic politics exists when there is a share of the uninvolved, a part of party of the poor” (Ranciere 2002). However one could also conclude with these reflections on wealth and poverty that the development of global capitalism reveals its contradictory form described by Marx and other philosophers in which something new is constantly proclaimed that ultimately only leads to the old conditions. [2]

3. LEARNING ECONOMIC DEMOCRACY: INTRODUCTION

By Attac Germany [This introduction to Attac’s “Learning Economic Democracy” published in December 2015 is translated from the German on the Internet, www.attac.de.]

In September 2008 an American investment bank – Lehman Brothers – suddenly collapsed. What happened? In 2007 dislocations occurred in the economy and particularly in the financial world. The increasing redistribution from bottom to top led to more and more money (both income and assets) landing with the richer sectors of the population. However the well-to-do consume a smaller portion of their income than poorer sectors of the population. This has two consequences. Firstly, more and more money is stashed (“invested”) in speculative financial objects. Secondly, total consumption is less with a distorted distribution. Businesses obviously notice this and invest less as a consequence of lower expected demand.

In the US the Central Bank (Federal Reserve) lowered interests in the 2000s to support the economic development. This policy of cheap money led to a boom in the real estate sector. More and more houses were purchased on credit; the demand and prices for houses rose. When the value of houses climbed, additional credits were taken reflecting this equivalent value. This real estate bubble burst when the demand for houses and their value declined. The credits also burst. That the banks long resold the credits they awarded was special. What should have served as risk dispersion and risk reduction turned out to be nonsense. Incredibly many banks now had “rotten” credits in their books that were not repaid or only partly repaid. The banks could not repay their own debts.

Lehman Brothers was set as a warning example. The US government did not bail o0ut this bank; it went bankrupt. The other banks that nearly all had problems were now no longer sure whether or not other institutes would also go bust and stopped lending money to each other overnight. The lubricant of the economy suddenly ran out. In Europe, the European Central Bank intervenes and gives money to the banks…

That was not enough for some banks. They needed additional (bailout-) money from the state. This happened in practically all European countries – some more (Ireland, Greece and Spain) and some less. In Germany, the state also bailed out banks like the Commerce Bank and the Hypo Real Estate Bank with billions. In a short time the states had to supply the necessary money; they borrowed money for the bank bailout on the capital markets. As a result, the debt condition of the impacted states worsened enormously.

These states had to accept more credits and as a rule paid higher interests for that. Here the “markets” came into play. If the impression prevails on the markets, that is among the financial investors, that the state may not pay back or will only partly pay back its

credits, then it can only borrow new money at higher interests. This leads to greater spending. “Bailout umbrellas” were gradually resolved in Europe to maintain the creditworthiness of states. As a rule, these states function so (solvent) countries lend money – at trifling interests and pass this on to the crisis countries – at somewhat higher interests. This also means no costs arise with this kind of “state bailout” and slight interest profits could even be realized.

The “sponsors” – represented by the “Troika” (European Commission, European Central bank and the International Monetary Fund) – set strict conditions for the crisis countries.

Public services, salaries, minimum wages, pensions and so forth ere cut – and workers were dismissed according to the neoliberal credo that the economy functions best when the state is kept out of the economy and businesses enjoy good framing conditions. State finances stabilize again as soon as there is “saving” or “cuts”. That is the underlying (neoliberal) idea.

Firstly, the tax revenues collapsed in Greece as a result of the shriveling economy. The state debt rate rose. “Saving” out of the crisis does not work and happens at the expense of simple citizens. Only the banks are bailed out and assets of the rich (and the creditors in Germany for example).

Still there are other solutions including the socialization of state debts (for example through Eurobonds), additional spending to stimulate the economy of crisis countries, reducing the German export surplus by strengthening the domestic demand in Germany for example, strict regulation of the financial markets and much more. However this must be solidly financed – with a property tax and a property fee. The economic- and financial crisis can be combated. Those who profited from the bailout – the wealthy- can “bear the burden.”

THE “NEO-CLASSICAL CRISIS NARRATIVE”: The crisis mainly arose because of deficient competitiveness and wasteful stte spending in the crisis countries

By Philipp Kortendiek and Till von Treeck [This article included in Attac’s “Learning Economic Democracy” (2015) is translated from the German on the Internet.]

The neoclassical school of thought assumes today’s crisis countries long lived above their means after the 1999 introduction of the Euro. This view can be summarized as follows.

Instead of utilizing the additional capital streams for productive investments after introduction of the Euro, today’s crisis states spend these funds primarily for consumption. This led to an excessive increase in public or private indebtedness. In addition, wages in these countries rose too intensely in the pre-crisis period in relation to work productivity and the competitiveness of these countries worsened. Therefore exports decreased and imports increased which led to deteriorating balances of payments.

The following political-economic implications are cited accompanying the described structural problems in the deficit countries underlying the crisis. Reforms on the national plane in countries like Portugal, Ireland, Greece and Spain and also in other countries with competitive problems including France and Italy are necessary to effectively combat the problems. These supply-oriented reforms include pay cuts, deregulation of the labor market and fiscal austerity measures. Finally, the crisis is described generally as a state debt crisis.

Today’s crisis countries have broken the rules of the Stability- and Growth pact that say the annual budget deficit cannot be more than three percent of the gross domestic product (GDP) and the public indebtedness of a country may never exceed 60% of the GDP. While some states like Greece broke these rules before the outbreak of the crisis, other countries like Spain and Ireland had a rather low indebtedness before the crisis. The latter states posted rising state deficits and debts because of their governments’ attempts to master the recession and assume part of the debts of the private sector when the crisis erupted.

Neoclassical economists, particularly the law and order variant dominant in Germany, usually reject the idea that heavily-indebted countries should be “rescued” by a bailout.

Other financially better-off states of the Eurozone must be made liable for such a process.

Behind this rejection is the argument that a bailout would undermine the national responsibility of the crisis countries to carry out the necessary reforms. Instead advocates of this approach urge strictly applying and intensifying the rules of the Maastricht treaty/ criteria as to public deficits and state debt rates.

THE “KEYNESIAN CRISIS NARRATIVE” Restrictive Fiscal Policy and Wage Reserve in Surplus Export Countries like Germany are a Large Part of the Problem

By Philipp Koriendiek and Till van Teeck [This 2015 article that is part of the Attac “Learn Economic Democracy” study is translated from the German on the Internet.]

Keynesian economists criticize the “supply-oriented” interpretation of the crisis. They argue the export deficits of today’s crisis countries are the backside of weak domestic demand and excessive dependence on net exports of a series of countries in the “center” of the Eurozone. It is clear that the export-surpluses of a group of countries (including Germany, Austria, the Netherlands and others) correspond to export-deficits in other countries (including Greece, Spain and Portugal and also France and Italy). According to Keynesian analysis, both the stagnation of real wages and medium incomes and the restrictive fiscal policy in Germany, the largest economy in Western Europe, contributed to the trade balances within the Eurozone. In this crisis interpretation, wage deflation, deregulation of the labor market and cuts in Germany’s social insurance system weakened consumer demand while the government implemented simultaneously a procyclical and contractive fiscal policy in the first years after introduction of the Euro.

Since demand and inflation were very low in Germany in the years after introduction of the Euro, the European Central bank had to keep the interests low over a long period to support the total economic demand in Germany and other countries in the “center.” This promoted the excessive growth of private indebtednesas, partcualrly in the countries of the periphery. […] From this perspective, an important contribution to solving the crisis must come from the surplus countries that should increase their public investments and abandon wage reserve. Authority is considered an unsuitable answer to the crisis because it worsens the recession and makes stabilization of indebtedness difficult on account of falling incomes and declining tax revenues. Instead anti-cyclical fiscal policy and expansive monetary policy are urged to stabilize the economic situation of the Eurozone.

A deepened economic cooperation of euro-countries is demanded. Ideally there should be an economic government for the monetary union and a communal responsibility for state debts – measures that could facilitate the expanded use of discretionary fiscal policy instead of an exclusive rule—based approach. At the least, fiscal consolidation measures and pay cuts should be confined to the crisis countries and complemented by greater state spending and wage increases in the surplus countries.

THE “MARXIST CRISIS NARRATIVE” The Rules of the Game, not the Players. The Financial Crisis According to Karl Marx

By Michael Heinrich [This article published on 1/14/2009 in Tageszeitung is translated from the German on the Internet.]

Profit-maximization and competition continually produce crises like the present one. A nationalization merely changes the actors without incriminating the structure.

“Economists also have their distress with the financial crisis, not only politicians. The neoclassical economic theory predominant at universities and in advisory bodies doesn’t know any crises in its market models. When “disturbances” occur, these can only be countered through interventions from outside the market. Therefore neoclassicists praise the supposedly efficient market year in and year out that if only given free rein would solve all our problems – from unemployment to the costs of old-age pensions and health care.

In the meantime the appearances of radical market defenders are only embarrassing. […]

Keynesians have it somewhat better. They always refer to the limits of the market and emphasize that pay cuts did not always lead to full employment. Capitalism produces unemployment again and again since the investments are not usually enough to employ all the workers. With unshakeable trust in the possibilities of state action, they demand state countermeasures, investment incentives and economic programs to oppose crises.

Karl Marx did not ignore economic crises or reduce them to controllable disturbances.

That he is now given public attention again is not surprising. While his “Capital” is more than 140 years old, Marx did not merely analyze the English capitalism of his time.

English capitalism was only an “illustration” of the “theoretical development,” he emphasized. He described capitalism’s essential structures and mechanisms, not a specific development phase of capitalism. […] Capital is an asset that exploits itself and produces surplus value – through the exploitation of human labor. This exploitation is boundless and knows no inner limit.

The pressure of competition forces this excessiveness on individual capitalists, whether they are individually especially greedy or not is not important.

The immediate producers, the workers, are a cost-factor to be reduced in this production geared for more and more exploitation while the productivity of this factor should be boosted again and again. This constellation is also an essential cause of the crisis-

proclivity of the capitalist production model and does not only have extremely destructive consequences for the workforce (and for nature).

The permanent increase of productivity that usually requires expanded production faces a tendency of limiting consumer possibilities since high wages and the number of employees should remain low for cost reasons. This is like always pressing the gas pedal and the brake at the same time in driving a car which cannot be good in the long run. The goal of capitalist production, the constant enhancement of capital exploitation, underlies the crisis-laden development of capitalism (“Capitalism always contains crisis as rain clouds always contain rain,” said Jean Jaures). […] Present crisis explanations are inadequate that blame institutions outside capitalist production for considerable damage on financial markets through excessive speculation and massive readiness of banks and funds for risks. Marx exposed such explanations and insisted a developed capitalist production is impossible without a developed credit system. […] A developed capitalist economy is only possible with extensive credit relations. However a developed credit system only functions when the credit itself, that is the securitized debts, become tradable goods and when financial markets exist. […] The demand for a nationalization of the banking sector is also too simplistic. […]

The rules of the game are the problem, not the respective players or gamblers (whether public or private). Interventions in the capitalist character of this production are necessary so capitalist production is steered into socially sensible areas or at least made less crisis-prone through a nationalized banking system. To change the rules of the game, the goals and methods of production must be redefined. Production must not only be subject to social control (which is different than state control). Crises like the present crisis will challenge us as long as profit maximization and competition dominate.

4. FOR A RENEWAL OF THE ECONOMY Memorandum of Shocked Economists

By Ulrich Thielemann, Tanja von Egan-Krieger and Sebastian Theme [This initiative published March 13, 2012 is translated from the German on the Internet, http://www.mem-wirtschaftsethik.de/memorandum-2012.]

Economics has fallen into a far-reaching crisis with the continuing financial crisis. * Even establishment experts like the director of the Hamburg World Economy Institute Prof. Thomas Straubhaar plead for an “end of economic imperialism” and urge a fundamental “renewal of theory,” a turning away from the currently dominant core paradigm as the only legitimate perspective. Outside the German economic zone, “new economic thinking” and foundational criticism is developing that are associated with prominent economists like Joseph E. Stiglitz, Paul Krugman and Amartya Sen. * Individual establishment experts – like for example Dennis Snower, president of the Kiel Institute for World Economy – point out self-critically that the large majority of economists did not foresee the financial crisis. Rather they laid the theoretical foundations for a crisis-causing or crisis-intensifying economic policy according to many observers and some experts. This policy was and is supported by the hypotheses of the so-called “efficiency” of financial markets and by an understanding of the “rationality” of conduct associated with the name Homo oeconomicus. 

According to a widespread opinion, economists work toward a policy characterized as “neoliberal” or “market-conforming” that has led to growing income- and wealth disparities. Inequality is seen as another cause and dimension of the present crisis. Occasionally economists judged these recommendations retrospectively as mistakes.

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Social scientists of other disciplines and even decision-makers in business fear the study of economics in its current form encourages an ethically dubious or questionable economization of thinking. This is considered very problematic from the vantage point of an economic didactic committed to the ideas of the Enlightenment.

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Students demand that ethical reflections should become a stable element and “central thread” of economic study so economists can “act responsibly.” A group of Swiss and French lecturers and researchers under the title “Renewing Research and Theory in Economics, Finance and Management to Better Serve the Public Interest” call for discussion of the “ethical foundations” of the “dominant theory in economics.”

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For over ten years, students criticized unrealistic economic theory that through its mathematization forgot that economics is a human- and social science, not a natural science.

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Different experts deplore a lack of scholarly argument, the absence of an argumentative culture that was once a foregone conclusion.

These malformations within the discipline have an overarching social-political significance and are not a purely disciplinary problem of economics. In a society where more and more areas of life are economized in the economic rationality model, a distanced perspective is necessary to judge these developments. However prescribed career patterns obstruct such perspectives so the economic discipline encapsulates dogmatically. Clear signs of this academically intolerable state include: 

Economists who report that they abandoned important research work since this “was not profitable”;

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Rampant “academic prostitution” and academic opportunism because expected publication success in highly regarded journals replaces the intrinsic orientation in advancing knowledge; and

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The rising generation of scholars who are afraid of publically defending positions deviating from the predominant ideas because they fear for their academic careers.

Paradigmatic diversity belongs to research. Present-day economics is seen in the exclusive competence of a single paradigm. This is described in different variants as the “mediation of the market” (Friedrich Breyer). The isolated advances from establishment economics to a paradigmatic opening should be welcomes. However they are too weak to lead economics eminently important for all our lives out of its paradigmatic encapsulation. This also demonstrates the trifling resonance of the many recent calls to open up the discipline from both engaged students and the rising generation of scholars and economists who don’t share the paradigmatic core of the mainstream. Therefore the paradigmatic opening of economics must be given a push from the outside.

We, the signatories of this memorandum, wish to encourage economists as our colleagues, our professors, teachers, advisors of politics and businesses and as intellectuals of public life to paradigmatic openness. The desire to actively promote other ways of looking at things – different from the dominant theory – and show interest in openness for discussion of these positions could ultimately make possible again an honest scholarly argumentative culture. Research that refuses reflection on its own paradigmatic normative foundations is only research in form.

We urge the authorities responsible for safeguarding the authenticity of the university’s nature, the academic council in particular, to set the academic points so a paradigmatic plurality of perspectives can exist within economics. A clear relativization of bibliometric criteria for assessing careers of academic researchers is important because of the conformity with the predominant core paradigms. Academic advances in knowledge are not measurable but can ultimately only be judged substantively.

We urge the authorities competent for the curricula to adopt heterodox and interdisciplinary themes in the curriculum. The integration of events that grapple in a critical-ethical way with the practical consequences of economic theory and with the paradigmatic foundations is vital.

We urge supporters of academia and research to take measures that preserve paradigmatic plurality and avoid a perspectivist monism. These measures could prevent financially strong interests from blocking the necessary pluralist opening of economics.

Economics deeply forms social life in many ways through recommendations and through mediated worldviews. Economics’ claims to be a developed un-dogmatic social science should consist in being helpful to the good and just order of society. Controversies over honesty and openness and conflicts about what this means in social policy and individual areas should become self-evident components of economic research and teaching.

B. ALTERNATIVE ECONOMICS: SHRIVELING THE FINANCIAL SECTOR AND EXPANDING THE PUBLIC SECTOR

CAUSES OF THE GLOBAL FINANCIAL CRISIS

By Boeckler Impulse 2/2008 [This analysis reprinted in Attac’s “Learn Economic Democracy” 11/2015 is translated from the German on the Internet.]

“The pursuit of profit shifts from the real economy to the financial sphere,” writes the economist Stephan Schulmeister from the Austrian Institute for Economic Research (WIFO). Investment plans implemented immediately 30 years ago often land in the drawers today. Building a new factory or production line is not rewarding compared with gaining profits on the financial market. So the financial sector competes for money with the non-virtual economy – instead of supplying the economy with investment funds.

Schulmeister sees this as the “main structural cause” for the rise of unemployment since the 1970s.

Several key features make clear the dimensions of stock speculation: -

In 2006 the returns in trade with currencies, stocks, bonds, bets on future prices and other financial products amounted to $13 trillion – per day. The overwhelming part of these transactions occur on the financial markets in industrial countries. In 2006 their volume was nearly 100 times higher than the nominal gross domestic product (GDP) of these countries.

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Short-term speculative transactions with derivatives like futures or options have the greatest weight. They are securities originally concocted for insurance businesses enabling investors to speculate on the future developments of currencies, stocks, raw materials or other prices. Between 1986 and 2006, the global derivative trade increased at an annual growth rate of 20 percent.

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The stock trade expanded intensely with financial derivatives – in which amateurs participated. In Europe, the stock trade with such securities grew 28.6% a year between 2000 and 2006 and amounted to 40 times the GDP in 2006. Nearly 99% of this turnover fell to Great Britain and Germany.

[…] The maelstrom of the financial markets prevented new jobs from arising in the real economy, Schulmeister argues. Many economists assumed total employment depends on the height of real wages, regulation of the labor market and the work incentives for the unemployed. According to Schulmeister, real capital formation is crucial. New jobs that correspond to “the European level of productivity and income” required great

investments. Ever higher investments are necessary per job on account of technical progress. According to the economic researcher, empirical data from the US, Japan and Germany show that capital intensity per job increased “in every single year, in every sector and in each of the three economies” since 1960 – both in phases of rising real wages and in phases of falling earnings.

FROM REAL ESTATE SPECULATION TO FINANCIAL BUBBLE CAPITALISM Joy to the world, the world of fallen idols and bubble transfer. The truth will set us free but the truth is a process, not a cudgel or stimulus. After the dot-com bubble, trillions were "invested" in real estate speculation. The crisis of the work society is the background for low interests.

Short History of the Worldwide Economic Crisis, Part 3

By Tomasz Konicz [This article published in the German-English cyber journal Telepolis 12/17/2008 is translated from the German on the World Wide Web, http://www.heise.de/tp/r4/artikel/29/29356.1.html.]

The End of the "Golden Age" of Capitalism and the Rise of Neoliberalism (1) Part 1 and Explosive Expansion of the Financial Markets in the Clinton Era (2) (Part 2) The neoliberal reforms sold as an answer to the stagnation (3) of the 1970s (4) brought fundamental contradictions (5) and resulted in dwindling mass demand and thus overproduction of goods and over-accumulation of capital threaten. Other factors intensify the system-immanent contradictions. The fundamental crisis of the work society that went along with the revolutionary increases in productivity triggered by micro-electronics and information technology [Kondratjwes' long business cycle waves (6)] led to a neoliberal "flight." (7) Building the low-wage sector, shifting production to threshold countries and heightened growth of the financial sector into a pillar of the economy were the results.

Global deficit cycles financed on credit by the financial system (8) occurred with formation of speculative bubbles. The United States more and more heavily indebted as a kind of "economic pump" took up the worldwide surplus production of the exportoriented economies. They reinvested their revenues in the US financial sector.

The origin of real estate speculation in the US and several other countries (Spain and Great Britain among others) was connected with the bursting of the high tech bubble in 2000. The stocks of Internet startups driven to astronomical heights by unrealistic expectations crashed within months. (9) Trillions of dollars were withdrawn from the high tech Nasdaq stock exchange and the German "new market" while once celebrated seemingly innovative Internet firms went bankrupt in droves. Billions of dollars in investments burned. The IT-sector could not fulfill the excessive expectations as a new

"key technology" with a new long-lasting business cycle wave.

'PUTTING OUT FIRE WITH GASOLINE" According to official statistics, the US economy scraped past a recession in 2001 and posted an economic growth of nearly four percent in 2004. This trick was owed to the former Fed chairman Alan Greenspan who reacted very exactly, as the economist Paul Sweezy predicted in his article "The Financial Explosion." (10) Greenspan put out the economic fire of the burst speculative bubble with even more gasoline. This "extinguishing with gasoline" was preceded by a radical long-lasting lowering of the key interests that was unparalleled in the economic history of the US. Between 2002 and 2005 the US key interest rate (11) was under two percent. After the terrorist attacks of 8/11/2001, Greenspan even lowered the interest to one percent for over a year.

Because of this low interest policy, borrowing in the United States rapidly increased and the money supply fed into the economic cycle rose dramatically. This extremely expansive monetary policy of the US Federal Reserve increased the money supply around 20 percent between 2001 and 2003. The "cheap" money that flooded the financial market did not lead to a classical inflation but to a real estate bubble since many US citizens accepted cheap credits to build or renovate their homes. Thus an "inflation of home prices" occurred since many small investors who absorbed losses in the bursting of the high tech bubble now relied on seemingly "secure" property. After a brief phase of calm up to 2005, the inflating of the circulating dollar increased vigorously until the Fed saw itself forced to keep statistics about expanded money supply M3 (12) under lock and key.

The Fed had good reason for repressing the exact data on growth of the money supply.

American gross domestic income nearly exploded from 2006. With this immense inflating of the US dollar, real estate speculation was kept alive and the collapse of the world economy delayed.

This fiscal excess was made possible by the abolition of the gold standard of the US dollar. (13) The dollar now has no relation to any real (commodity) value. The dollar was "its own gold," so to speak. The temptation of the US Federal Reserve to validate the dream of medieval alchemists and create "gold out of nothing" was too great in view of the intensifying crisis dynamic.

Another method for putting out the fire of the bursting dot-com bubble consisted in the most far-reaching deregulation of the financial markets shifting the contradictions of the late capitalist mode of production (14) to the financial sector. As long as the financial markets cheerfully continued in fraud, economic stagnation, over-production crises, overaccumulation of capital and the crisis of the work society were repressed. The repeal of the Glass-Stiegal Act in 1999 removing the separation between commercial- and investment-banking was one of the most important milestones (15) of this liberalization process of the financial markets. In 2000, trading with derivatives and "credit default swaps" (CDS) were removed from any control. In 2004 the further hurdles for investment banks fell since these banks were not obligated to any reserve savings to cover possible

losses from their businesses. The way was cleared for "leverages," for the unrestrained indebtedness of financial market actors that quickly took effect in the course of the dollar glut of the Fed. The long-term Fed chief Alan Greenspan is now hardly criticized for the policy of deregulating the financial markets. We should recall Sweezy's metaphor of the man who tried to ride a tiger. The economist wanted to illumine the relation between capitalist elites and the capitalist crisis dynamic. As a glance at the Fortune 500 list reveals, there are many billionaires in the capitalist world system (women are hardly found in this illustrious circle). Still there are no lords of capitalism. There is no one who really guides the capitalist world system "from the outside." Even the most influential billionaires and most powerful politicians are subject to the capitalist social structure and its drive principle that consists in the boundless increase of money and in investment of capital for profit maximization.

The term "The Great Bubble Transfer" (16) describes this maneuver from deregulation and expansive monetary policy with which the Fed successfully maintained capital reproduction in the financial sector. The dot-com bubble was transferred into the real estate bubble. In the course of this maneuver, three trillion dollars were withdrawn from the high tech stock market and reinvested in the real estate market.

To summarize, by riding this "tiger" of the blind capitalist crisis dynamic, the decisionmakers around Greenspan tried to improve the possibilities for realizing profits for Wall Street and sought ways to keep up the whole system of a deficit-financed economy along with the global "bubble economy." The "bubble transfer" gave a reprieve of several years to the world economy. Thus the actors were driven by the crisis dynamic of capitalism and chose "flight," more deregulation and a stronger more expansive monetary policy for the "bubble transfer" to the real estate market.

THE REAL ESTATE BUBBLE The development and the course of the speculative boom on the US real estate market - as in several other countries and regions - have already been explained in detail (17) so only the most important phases of this speculation bubble will briefly sketched here, especially the interlocking with the financial markets.

Between the beginning of speculation in 2000 and its peak in 2006, the formal face value of all US real estate rose from 110 percent of the gross domestic income to over 150 percent. (18) Between 2000 and 2005, the average national home prices rose 50 percent.

The US market was bifurcated. In the countryside, nearly unlimited development areas were available with prices dictated by construction costs. On the other hand, the boom concentrated in the US metropolises and the coastal regions of the country where prices soared an average 100 percent in five years.

Encouraged by the low interests and the expansive monetary policy of the Fed, more and more US citizens took out mortgages at variable interest rates which were then

"guaranteed" by the mortgage banks in freely traded mortgage backed securities. The mortgages were mostly bundled in CDOs (collateralized debt obligations). Fresh capital for new mortgage packages was gained through CDOs resold by banks on the financial markets. The mortgage banks were not very interested in the financial strength of the mortgager since the failure rate was also resold with the CDOs. Therefore the sub-prime mortgages, the mortgages for customers with poor creditworthiness, were so popular among mortgage banks since they had higher interests (on account of the greater failure risk) and thus promised higher commissions.

A regular mass production of sub-prime mortgages started in the financial industry that could sell more and more mortgages by using sales techniques of predatory lending (19) bordering on fraud. To increase the value of these "securities," they were ensured against the failure risks. This happened mostly through credit default swaps (CDS). These credit securities "invented" by the once largest insurance company of the world, the AIG-group, were traded again as securities on the financial markets - while the rating agencies were paid by the inventors of the securities. All these complex "financial instruments" were given the best rating ("triple A"). As Paul Craig Roberts explained (20), these "financial instruments" were exported to the whole world to maintain the global deficit cycle. (21) This snowball system functioned brilliantly as long as home prices continued rising.

However the "sub-prime mortgages" were provided with low interest rates to entice financially weak mortgagers to accept new mortgages. After a while, the interests dramatically soared so that more and more foreclosures were carried out exerting an evergreater pressure on home prices. Then the home prices collapsed and a real tsunami of foreclosures occurred. (22) By 2009, according to the Housing Predictor, three million families will lose their own four walls on account of the crisis since they cannot afford the installments for the mortgages any more.

The massive collapse of mortgages changed the once celebrated financial instruments like the CDOs and the CDSs - very quickly into financial rubbish that could not be sold.

This ended the existence of several financial institutions and led to the notorious credit crunch. (23) No market actor could know for sure how much of this worthless paper slumbered with other financial institutions so the awarding of credits among banks came to a standstill. Every money house hoarded its cash since it feared the awarded credits would not be repaid in case of a borrower's bankruptcy. Awarding credits to private customers and to the real economy was also greatly reduced.

The collapse of the real economy along with the continuing financial crisis follows the bursting of the real estate bubble... The real economy was dragged to the abyss, not only the "credit crunch." These connections will be outlined in the next chapter.

FINANCIAL BUBBLE ECONOMY In the course of the intensifying real estate speculation, the interconnections between the real- and the financial economy intensified to an unparalleled extent. The manufacturing industry depended, so to speak, on the "drip" of the financial markets. Their speculative

movement promoted private consumer demand into an increasingly important economic factor.

The high-paid jobs in the financial sector were among the stimulating effects on the real economy that started from financial capitalism. Sweezy already described this development in the 1980s [The Financial Markets Stand Out (24)]. The economy of the metropolises of financial capital like New York and London for example depends on the consumer zeal of tens of thousands of investment bankers or stockbrokers in the neoliberal trickle-down economy. (25) Their spending generates many poorly paid jobs in the service- or "domestic servant sector."

New York is obviously a classic example for this labor market structure oriented to finance capitalism. In 2007, the financial sector was responsible for a third of all wages paid in this east coast metropolis since each of the high-paid bankers and brokers on Wall Street generated more jobs with his spending. The financial crisis worldwide has already destroyed 150,000 jobs that often had a six-digit annual salary. (26) In the coming months and years, tens of thousands if not hundreds of thousands of bankers will lose their posts and drag the "domestic servant sector" to the abyss. Wage dumping produced this sector.

The real estate bubble brought another effect that did not appear in the high tech bubble and led to economic recovery. In the course of the speculation based on unrealistic profit expectations, real houses were built so that the building industry experienced a strong upswing and had a stimulating effect on the total economy on account of its laborintensive character and interlocking with many supplier industries. An economic structure dominated by a speculatively-fueled construction economy" is not only found in the United States. Real estate bubbles also formed in Great Britain, Spain and parts of Eastern Europe. In 2005, the crisis theoretician Robert Kurz described the enormous effect of this building-boom on the total economy of the affected national economies in the example of Spain.

"If the speculative building activity in Spain amounted to 18% of the gross domestic product, the blowback of `fictional capital' on the real economy was manifest."

Robert Kurz, "Das Weltkapital" Finally the wealth-effect (27) seen during the high tech bubble also massively appears in a slightly modified form in the course of the real estate speculation. The constantly rising prices of their property seduced many members of the American middle class to take mortgages on their houses and use the "gained" money for consumer goods. Several hundred billion dollars were supplied to the domestic US market and kept the global deficit cycle going. (28) The counterpart to the stock frauds of high tech speculation was the so-called flipper during the real estate bubble. (29) Houses often belong to the US middle class were bought during the boom to be sold again with profit after a more or less thorough

renovation. Similar to the profits from stock sales, a part of this generated - or often only imagined - income growth went into consumption as a "wealth effect."

Another characteristic of the market economy in the US driven by the financial markets is the increasing importance of consumption that in the last years was responsible for a large part of the economic dynamic of the world economy. Thus consumer spending (30) in the US climbed from 62 percent of the gross national income in 1980 to 70 percent at the beginning of the 21st century. This permanently increased significance of consumption despite all financial crises and bursting bubbles - cannot only be ascribed to the "wealtheffect" since the consumption based on "unrealistic" profit expectations through stock- or real estate-speculation had to collapse in times of a bursting speculation bubble. The "wealth effect" is nothing but the illusion of increasing wealth that ultimately "bursts" like a dream vision.

The wage development in the US cannot be cited to explain this phenomenon since real wages between New York and Los Angeles have not risen in the past decades. According to the journalist David Cay, average US wages corrected for inflation climbed to their peak of $33,000 in 1973. (31) What drove the "financial bubble economy" along with the global deficit cycle over such a long period? A glance at the indebtedness of the United States lifts the veil.

The total indebtedness of the US has insane dimensions that have absolutely no parallels in the economic history of this largest national economy of the world. On March 31, 2008 the United States was up to its ears in debts at 350 percent of its annual total economic output! In the whole "Golden Age" of capitalism between the 1950s and the 1970s, the total US debt fluctuated between 130 and 160 percent of the gross national income. The debt overload first exploded to 350 percent in the 1980s for three decades in connection with the neoliberal offensive.

To grasp the incredible dimensions of this huge debt mountain, a glance at the exploding indebtedness during the worst economic crisis in the history of the capitalist world system breaking out in 1929 is enough. In 1933 the debt mountain reached 270 percent of the gross national income. This relation rapidly deteriorated on account of the economic program of the "New Deal" and the falling gross national income in the course of the Great Depression.

The total spending to "stabilize" the financial markets in the current debt overload of 350 percent may even rise further. The total indebtedness of the US will soon amount to $44 trillion, equal to the gross world social product, the sociologist John Bellamy Foster summarized in the middle of 2007. (32) Given these dimensions, believing the financial crisis can be managed thanks to a "bailout" of the ridiculous $700 billion is simply illusory.

In 2005 alone, at the peak of the last real estate speculation, private US households increased their debt overload 11.7 percent to the staggering sum (33) of $11.5 trillion.

This was the highest rate of indebtedness since 1985 when the real estate bubble was about to burst and led to the savings account crisis. (34) Neither the heavy debts of US businesses (plus 7.8 percent to $8.4 trillion) nor the state debt of the United States (seven percent plus nine trillion) has risen at the same high speed as private borrowing. Wage earners of the US who for decades have had to struggle with stagnating wages were a real goldmine for the whole capitalist world system. In a lecture, Richard Wolff, professor of economics at the University of Massachusetts at Amherst (35) recently illustrated the functioning of this global contracting of debts: Since employers can prevent higher wages, the only possible way of selling the evergrowing goods production consisted in giving money to workers so they can buy the goods. Businesses invested their profits in buying securities in which mortgages of workers, auto-credits and credit card debts were guaranteed. The owners of these securities had a right to part of workers' monthly installment payments. In the end, the extra profits realized by employers through the low wages were paid out twice since these profits were passed on as credits to workers and juicy interests were pocketed. What a system!

Richard Wolff Wage dumping and "market expansion" of the financial branch by means of debt explosion went hand in hand. This system could be described as a kind of "privatized Keynesianism" in which US citizens support the economy with their "deficit spending." In the end, the American state with its astronomical indebtedness did the same thing. This system was global since this debt-financed demand boom was at the heart of the global deficit cycle that also kept the national economies in Southeast Asia or Europe above water. This perpetual motion machine driven on credit as the center of the "financial bubble economy" succumbed in the course of the financial crisis.

More dislocations will certainly follow the auto-crisis (36) in Germany and the US that now heats up tempers. National economies are directly exposed to the contradictions of the later-capitalist mode of production [the crisis of the work society (37)] expressed in a massive over-production crisis. These crises previously "disappeared" by means of debt packaging in the financial sector. As export world master (38), Germany's industry profited from the global deficit economy. Hartz IV (German welfare "reform" combining income support and unemployment benefits and drastically reducing the duration of benefits) helped the orientation of German society in the interests of German industry whose export offensive had a complementary function to the increasing trade deficit of the US. This financial bubble economy arising in the course of financial capitalism since the deregulation in the 1980s has led to around 100 more or less serious crises and speculations around the globe. Alongside the above-mentioned dislocations, the Mexican financial crisis of 1994/95, the Asian crisis of 1997/98, the Russian financial crash of 1998 and Argentina's collapse of 2002 had disastrous consequences for the affected national economies. The collapse of speculation on the future commodities markets

immediately following the bursting real estate bubble produced the - temporarily - falling raw material and energy prices.

IN THE LAND OF FANTASIES - THE DIMENSIONS OF FINANCIAL CAPITALISM The global deficit economy lives as an appendix of the explosively growing financial markets. This unlikely relation between the global real economy and the financial sphere was only possible on account of the astronomic dimensions of the permanently proliferating and mutating financial markets.

Before we make a quantification of financial capitalism, the inner structure of this expansion movement of financial capital should be clarified. As mentioned, its assets are only produced by means of the burning out of human labor since no new capital and no new assets are actually produced within the financial branch. What occurs is a zero-sum game in which wealth can change owners without any new wealth arising. What causes the expansion of the financial markets?

The financial markets need ever new "fuel" in fresh capital, the "financial explosion," to maintain their growth. In the course of the neoliberal reforms, capital from the real economy streamed into the financial sector since the 1980s since higher profits could be realized there. Later the middle class increasingly invested its savings in stocks and securities starting from the popularization of stock market speculation in the 1990s. The growing social division in nearly all national economies led to a rapid multiplication of well-to-do "investors" who were also engaged on the financial markets. The privatization of welfare systems gave another growth push to the financial branch since the pension funds for example went on a search for profits in the financial sector. Ultimately the debt overload of private households became a business and another source of revenue for financial capital.

The presupposition of this massive indebtedness was a policy of low interests that facilitated awarding credits. In the final analysis, the expansive monetary policy of the Fed ("Extinguishing with Gasoline") provided the most important fuel of the financial markets. Through low interests and expansion of the money supply, "wealth on pushbutton" was seemingly created by activating the printing press since the dollar after the abolition of the gold standard was "its own gold."

A creatio ex nihilo, a "creation out of nothing," occurred, the creation of a purely fictional capital - not covered by any real assets or production. This voodoo economy flanked the runaway indebtedness and - like the inflation of home prices - led to an inflation of stock prices and all kinds of securities. The dimensions of this bloated finance capital bureaucracy based on the real economy are in fact "astronomical," as the philosopher Istvan Meszaros (39) recently remarked: (40) "How can we imagine all these trillions? A trillion years is a hundred times the age of our universe. We speak here about the omnipotent US dollar, the preferred currency of allimportant transactions, not the currency of a banana republic. How much speculative

money now moves around the globe? According to an analysis of the Mitsubishi UFI Asset Management Group, the real economy in which goods and services are dealt amounts to $48.1 trillion. The global financial economy, the total quantity of stocks, securities and deposits comes to $151.8 trillion. Financial management has swollen to three times the size of the real economy... The crisis of 1929 is relatively small compared to what we have today."

Istvan Meszaros The inconceivable dimensions of financial capitalism can be grasped best in relation to the real economy. The relation between the total turnover of the US financial markets and the gross national income of the United States (41) helps us understand the "financial explosion" advancing in the last decades. The American gross national income in 1960 only amounted to 66.2 percent of all the turnover of the US financial markets. In 1970, this share fell to 37.8 percent, in 1980 to 15.7 percent and a decade later to only 2.6 percent.

In 2000, the sum total of all the goods and services of the largest national economy of the world produced in a year amounted to 1.9 percent of the turnover of the US financial markets! The speculative movement clearly increased in the course of finance capitalism.

It is no wonder that the "wealth effect," the "few cents per dollar" of increased fictional assets, went into the real economy to keep this going. The explosion occurring with the creation and spread of derivatives permeated the whole financial sector, as the sociologist John Bellamy Foster explained: (42) "The average daily turnover in currency transactions rose from $570 billion in 1989 to $2.7 trillion in 2006. Since 2001, the global market for derivatives (instruments for transferring risks) grew over 100 percent annually. From being relatively insignificant at the beginning of the millennium, the total face value of the globally-handled credit derivatives inflated to $26 trillion in the first six months of 2006."

John Bellamy Foster This is similarly true for the profits realized in the financial sector and in the real economy. (43) The profits of finance capital with three percent of the gross national income are higher than in the productive industries whose profits are two percent. The rise of the share of profits realized in the financial sector to the total profits in the US climbed from 17 percent in 1985 to almost 40 percent in 2000-2005.

In bankers' newspeak, an important lever for realizing such rapidly increasing profits is called "leverage." This means the degree in indebtedness with which a market actor operates. The expansive monetary policy of the Fed was the presupposition for this widespread practice of "leverage." This expansive policy promoted the debt overload of private households and led to the excessive reliance on foreign capital within the financial branch itself. Thanks to the dollar glut, private equity firms in 2006 for example could mobilize 15 times their own capital holdings.

This indebtedness assumed absurd dimensions with market heavyweights, as Istvan Meszaros illustrates in the example of mortgage financiers Fannie Mae and Freddie Mac. (45) The internal capital of both giants of the real estate market amounted to $83.2 billion toward the end of 2007 while the debts, guarantees and other obligations of these firms came to $5.3 trillion. The relation between internal capital and debts was one to 65 - in the largest and most important mortgage financiers of the world!

The quantity of "hot air," "fictional capital" generated by the central banks by means of the dollar glut and injected in the financial system, is clear with the help of these relations.

As absurd as it seems, this "hot air" of the all-round escalating indebtedness kept the degenerate late-capitalist world system going.

EXCURSUS: OUR POTEMKIN VILLAGES Some time or other, even the greatest injections of freshly printed US dollars will not be sufficient to maintain the faรงade of a dynamic capitalist system. With progressive financialization, the temptation increased to help along reality statistically. The statistical distortions of the German and American unemployment rates have become known like the growth of the money supply in the US long repressed as a state secret. The statistics portal shadowstate.com shows the manipulation of the inflation rate.

The picture of a capitalism fit as a fiddle disappears very quickly, as soon as this alternative data is considered. Instead the thesis of the stagnation of developed capitalist societies gains in plausibility.

In Germany, it does not look much better since the "experienced inflation" - that must be regarded as real inflation - is always above the "official" inflation rate. Glossing over the facts assumes absurd dimensions with the eruption of the financial crisis, as the recent changes in the balancing regulations for banking demonstrates. In the future, banks and insurances may record their securities at the purchase price and not at the actual market price. One participant of the World Forum commented (46) on this "reform" of the balancing rules: "Can what is still punishable and leads to the nullity of balance sheets, namely overrating assets, bring salvation in the future?... Long bankrupt firms may continue. Degenerate firms are no longer known by their balance sheets. The building block for the next catastrophe in ten years is laid."

Such desperate "reforms" recall the final phase of command socialist countries like the DDR (East Germany) and the Soviet Union. Their official statistics showed continuous economic successes while their economies actually sank in stagnation.

SUMMARY AND OUTLOOK We can now answer the questions about the causes of the coming worldwide economic

crisis. The deregulation of the financial markets actually promoted the "financial explosion" of the last decades. The wildly proliferating financial markets kept alive the real economy threatened by stagnation. Denouncing the "greed" of speculators for the greatest possible profit is just as sensible as complaining about the stench of a manure heap. Both are in the nature of things. The search for the highest profit, for maximizing profits by means of investing in production or speculation, is the innermost nature and end-in-itself of the capitalist system.

The characteristic of the capitalist system that fascinates critics and supporters alive is the permanent competition-driven upheaval of the technical prerequisites of production, the relentless advance of the means of production. That entrepreneur who can apply the latest techniques in production gains the highest profits by producing more and more products in the shortest time with fewer and fewer people.

This permanent "revolution of productive forces" causes reduced jobs in industrial branches. The total system remains in balance as long as branches of industry create additional jobs. Since the 1980s, the technical revolution in microelectronics and information technology has triggered a productivity surge. This is not working out now.

Automation and rationalization in the whole economy make more jobs superfluous than arise in the IT-branch. Cars cannot buy cars. This saying ascribed to Henry Ford which implies a demand-oriented Keynesian policy can only be restrictedly applied to today's situation where the industrial working class rapidly falls and the army of the precarious and unemployed swells from economic cycle to economic cycle. The technical progress of productive forces, the potential foundation of a general satisfaction of needs of all members of society, changed under capitalist conditions of production into a scourge of humanity causing misery, hunger and marginalization.

Thus mountains of goods that cannot be sold (over-production), vast amounts of fallow capital (over-accumulation) and mass unemployment arose from the 1970s. In a seemingly magical way, finance capitalism together with the established bubble economy solves this late capitalist dilemma. The financial markets growing wildly exuberantly accept the surplus capital, the profits generated during the boom phase of diverse speculative bubbles and on the other hand ensured purchasing power demand - even though it was fictional and credit-financed. In the global deficit cycles, the US as an increasingly indebted center accepts the surplus production of export-oriented countries like China, Japan and Germany.

With the collapse of the real estate bubble, these deficit-driven global economic cycles come to a standstill. These cycles cannot be set in motion again given the astronomical indebtedness on which they are based. The dismantling of the huge US debt mountain only seems possible through a hyperinflation. What is now occurring is nothing less than a fundamental structural crisis of the center of the capitalist world system. Industry and the productive economy are cast back on themselves since the stimulating effects of finance capitalism do not occur. An over-production crisis of gigantic dimensions is on the way.

A "return" to the Keynesianism already in crisis in the 1970s, to massive economic

programs, will be just as ineffective as a new regulation of the financial markets. A person suffering from cancer cannot be healed with a cough drop. The continuing (47) scientifictechnical progress makes more and more people "superfluous" for the reproduction of our society and leads to a "crisis of the work society."

The American sociologist Immanuel Wallerstein recently described (48) this "era of transition" and dared a prediction about the future development of the world system.

"The immediate consequences include strong chaotic turbulences that our world system experiences at the moment and will live through for 20 to 50 years. While everyone presses in the direction they consider most advantageous, a new order will emerge out of the chaos that will run along one or two different paths.

The present system cannot survive. We cannot predict the order that will be chosen to replace it because this will be the result of nearly infinite individual efforts. But sooner or later a new system will be installed. It will not be the capitalist system and could also become much worse (even more polarized and hierarchical) or much better (relatively democratic or relatively egalitarian) than the present system. The choice of a new system is the most important global political struggle of our age."

Immanuel Wallerstein The emergence of a new key technology could be a reprieve for the capitalist world system lying in agony, generating mass employment and imitating a "long economic wave," in the sense of Kondratjwes. The wisest US politicians (40) see this possibility in the forced development of renewable energy (50) that could go along with a comprehensive labor-intensive transformation of the whole energetic base of the United States.

Telepolis Artikel-URL:

http://www.heise.de/tp/r4/artikel/29/29356/1.html

FROM THE DEBT SHOWDOWN TO THE RECESSION

by Tomasz Konicz Tuesday Aug 16th, 2011 The scenario of an economic double-dip is ver likely without additional economic measures. The budget cuts may bring about a recession. Republicans in Congress threaten to concoct an economic crisis if they are not allowed to cut spending. We are in an economic crisis whose greatest problem is low spending.

[This article published in the German-English cyber journal Telepolis 8/1/2011 is translated from the German on the Internet, http://www.heise.de/tp/druck/mb/artikel/35/35229/1.html.]

Update: Democrats and republicans have joined together in the debt conflict. This may lead to the deepened economic misery of the United States.

The increasingly polarized US Congress overcame its own shadow and found a compromise [1] in raising the American debt ceiling at the last moment. In the last days of July 2011, the first details seeped through of a bill to raise the US indebtedness limit from the current $14, 3 trillion on which republicans and democrat congressional leaders agreed in tenacious night-time negotiations. [2] According to the bill, the indebtedness ceiling of the US will be raised three trillion dollars this year in two steps. The first increase will occur immediately and the second later this year.

The White House prevailed at least in the concrete increase of the debt ceiling. The republicans originally insisted on a slight rise of the limit of only one trillion to instrumentalize the theme in the 2012 presidential election. Obama succeeded in preventing the republican demand – made for clearly tactical election reasons – that would have made the president’s political survival in 2012 extremely difficult.

However a compromise hardly occurred on the further regulations of the bill since the republicans gained nearly all their radical budgetary demands. The budget cuts going along with raising the debt limit will probably turn out “somewhat higher” than the envisioned increase of the debt ceiling of three trillion dollars. America’s fast growing lower class [3] will be bled white. Participation of the American upper class in the crisis costs intended by the democrats by plugging the tax loopholes is off the table. The republicans prevailed in that the superrich of the US – whose tax breaks from the Bush era were recently extended – will not contribute a single dollar of additional tax burden.

One demand [4] of the extremist rightwing of the Republican Party of the so-called Tea Party was Congress agreeing to a constitutional amendment obligating politics to a “balanced budget.”

RIGHTWING SWING AND INCREASING POLARIZATION Even if the political class in Washington should prevent a partial insolvency of the United States at the last moment, this bitterly waged debt conflict will leave deep traces within the political climate of the largest national economy of the world. The ideological premises of the rightwing of the republicans – that propagate a massive state dismantling except for the police and the military – gained acceptance in the course of the debate while the liberal and leftist positions of the democratic base were marginalized. The extent of the victory of “conservative members of Congress in raising the debt limit “cannot be exaggerated,” the New York Times declared. [5] In the broadest sense, the newly elected Tea Party members in Congress understood how to narrow the national discourse to a nearly monothematic “discourse about debts” and form a public consensus that “America must do more to live within its means.”

The extremist part of the Republicans washed ashore on a wave of rightwing populist resentment in the last midterm elections in Congress drives the widespread conservative ideology in the US to a vast restriction of state spending to the extreme – without regard for losses. Thus the extreme rightwing of republicans practices an “extremism of the middle” [6] which impelled by crisis is on the advance in almost all industrial countries – and in which the ideologies widespread in the public mainstream of the given society are pushed to a worldwide extreme. In the US, the aforementioned public consensus restricting the role of the state in the economy to a minimum serves as an ideological sounding board from which crazy extremist worldview ideas [7] of the Tea Party movement shoot up.

The centrist science-oriented wing of the republicans that works for a radical realization of the interests of corporations and the wealthy in the US is the first victim of the ideological blockade of the Tea Party. No one symbolizes the defeat of this centrist current of republicans better than the repudiated speaker of the House of Representatives, John Boehner. [8] The third most powerful politician of the US was left standing in the rain by the Tea Party fraction during the intense power struggle with the White House.

That fraction constantly refused to support Boehner’s bill in the House of Representatives. After new regulations on budget consolidation, the speaker of the House of Representatives could only get a narrow majority for his bill that was rejected anyway by the Senate. 22 republicans rejected the project. The price Boehner paid for this Pyrrhic victory was enormous, the portal Politico noted. [9] The speaker of the House of Representatives acted “like a hostage” of an 87-member fraction of newly elected representatives inspired by the Tea Party.

“The ugly reality was that the speaker of the House of Representatives tried to move dozens of representatives to support his package. These republicans were ready to let the United States go bankrupt if it would cost them their seats, if the republicans would lose their majority or if Boehner lost his post as spokesperson.”

Politico These rightwing representatives are supported by a diverse network of influential politicians, billionaires, lobbyists and think-tanks who sought to spread their influence within the Republican Party, as the moderate conservative columnist Kathleen Parker [10] remarked in the Washington Post: “Sign your name. Do not forget. The conduct of certain republicans who call themselves Tea Party conservatives makes them the destructive force of misguided `patriots.’”

Kathleen Parker Alongside the luxuriant financing of the Tea Party by the arch-conservative billionaires David and Charles Koch [11], organizations like Freedom Works, Heritage Action, Club for Growth, National Taxpayers Union and Americans for Prosperity played an important part in the rise of the populist rightwing. These lobby associations concentrate mostly on certain conservative themes (like massive tax cuts for the National Taxpayers Union) to

promote a radical rightwing shift of the American society. The rank-and-file of this movement are mostly members of the white middle class threatened with decline.

IS THE US FACING A DOUBLE -DIP? With their – largely successful – ideological crusade against state deficits, these welllinked and funded rightwing extreme zealots bring the consumptive American economy into dire financial straits. The second “victim” of the ideological and political triumphant advance of the American extreme rightwing will be the US economy that will soon plunge on account of the budget cuts. These is even striking to seasoned economic journals like the Economist [12] which warns [13] that “republicans are taking aim at the American economy with a pistol” and threaten to fire if they don’t get their spending cuts.

“Certainly America must trim its exploding social programs. But not now when spending cuts will worsen a limp recovery and not in this way by seizing a (parliamentary) routine and driving the country to the abyss of a lower credit rating or bankruptcy.’

Economist A “limp recovery” in the US is hardly still heard in the revision of 2011 economic data published recently by the U.S. Bureau of Statistics. [14] U.S. economic growth projected for the year from the second quarter of 2011 forecast an economic growth of 1.3 percent.

Like other industrial societies, the US needs a three percent increase of the gross domestic product (GDP) [On Debts and Jobs (15)] to significantly lower the official unemployment rate just below ten percent. American statisticians had to correct strongly downwards the temporary data on economic growth in the first quarter of 2011 from 1.9 percent to 0.4 percent. For the whole crisis period, the Bureau of Statistics had to lower the growth numbers since the GDP shriveled 0.1 percent between 2007 and 2010 instead of growing 0.3 percent annually.

The United States finds itself in an economic stagnation in 2011 that could change suddenly into a recession. The scenario of an economic double-dip [16] is very likely without additional economic measures. The sought-after budget cuts may bring about a recession with nearly mathematical inevitability. In the US a “jobless or recovery-less recovery” of the economy occurred , Washington Post columnist Ezra Klein noted that reflects a reduction in the spending of economic actors like private households, businesses and the state.

“The republicans in Congress threaten to concoct an economic crisis if they are not allowed to cut spending. In the meantime we are in an economic crisis whose greatest problem is low spending. Thus we face the choice of worsening an existing crisis or triggering a new crisis.”

Ezra Klein In large part the stagnation in the US can be referred back to the decline in state spending in the scope of the gigantic American economic package of $787 billion that spurs

economic stimulation through job programs and investments in the infrastructure. The majority of these economic programs financed by escalating indebtedness expired in the summer of 2010 [18] so their stimulating effect is already slackening. Without these credit-financed state expenditures, unemployment will rise in 2011 while economic growth declines.

The economic running amok of the Tea Party movement within the Republican Party may be nouri8shed by an ideological delusion and by the hope for an economic crash that could be held against the president in the election year. The extremist rightwing of the US can only prevail with the continuing economic decline of the country – insofar as this republican obstruction course is carried out.

The rightwing extremist tax-cutting ideology has a grain of truth since the budget deficit and the state indebtedness in the US – seen from an historical perspective – are exploding and cannot be maintained in the medium term without triggering economic dislocations.

However the ideologically motivated attempt to clear away this gigantic debt mountain will result in a depression. Capitalist crisis policy is in a philosophical paradox in which it can choose between more indebtedness up to state bankruptcy together with hyperinflation or austerity programs together with deflation spirals. This treadmill was the core of the political conflict around fiscal policy in the US and outside the US. Both sides – the budget revitalizers and the advocates of economic programs – are partly right when they oppose the catastrophic consequences of the opposite side’s policy. This conflict in the US was waged with political polarization, doggedness, grim determination and brutality. But both sides are also on the wrong way when they assume that their political concepts can solve the fundamental crisis of the goods-producing world system that could only be prolonged since 2007 through escalating state indebtedness.

DEMOCRACY IN CRISIS: THE TERROR OF THE ECONOMY IS A DANGER TO DEMOCRACY

By Tomasz Konicz There is a powerful crisis dynamic that is stronger than the will of the sovereign and its democratic institutions. When capital relations fall into crisis, everything can be redefined or instrumentalized: the basic law, democracy, elementary human rights and even human life. Economic pressure creates an extremism of the middle.

The present Crisis reveals the ambivalent character of middle class democracy. The crisis of capitalism - Part 4

By Tomasz Konicz [This article published in July 2012 is translated from the German on the Internet, http://www.streifzuege.org/2012/demokratie-in-der-krise/print.]

Where are we going? For a long while, we did not govern, lead or determine our path.

Whoever believers specters and ghosts do not stagger around us is a liar. They break down, crumble, faint and collapse. Day is breaking and we don't know whether this is twilight or daybreak, dusk or dawn.

Kurt Tucholsky Is the German basic law compatible with crises? Germany's constitutional guardians now see themselves subjected to tremendous political pressure [4] to affirm this question since the German Constitutional Court held a trial against the Euro "bailout umbrella" and the fiscal pact. The German finance minister Schrauble summarized the fears from politics when he warned of "considerable economic dislocations with unforeseeable consequences." [5] The German Constitutional Court should stop the ESM (fiscal pact) bailout umbrella: "Doubt in the constitutional possibility or the readiness of the Federal Republic of Germany to avert dangers for the stability of the eurozone could strengthen the present crisis symptoms." [6] Rush orders against these crisis measures submitted by different political forces like the Left party (Die Linke) were recently passed by the German Bundestag. CSU-populist Gauweiler and the former SDP Justice minister Daubler-Gmelin ("a referendum is needed" [6]) articulate a widespread diffuse feeling of unease in the population manifest in anxiety about undermining democracy, feelings of powerlessness or resentment. The suspicion spreads that the population's possibilities of influencing the crisis process fade, that a creeping loss of power of legitimated institutions begins with delegating nationstate authorities and instruments of power to an inscrutable European and post-national bureaucracy.

These feelings of powerlessness and hopelessness that often explode in aggressions against scapegoats of the most different shades and colors have a very real core. Schauble is right. We have no choice - not only in the case of the ESWM (European fiscal pact). A decision to stop the ESM by the German Supreme Court would obviously plunge the already shattered eurozone into more turbulence. Without this "protective screen," the interest burden in southern Europe would quickly rise to an unbearable level and the eurozone would again find itself on the brink of ruin.

Late capitalism seized by a system crisis can only be maintained as an authoritarian,

hyper-bureaucratic structure that openly denies the elementary needs of most people in Europe. Late-capitalism resembles the absolutist military dictatorships in the 17th and 18th centuries that served as midwives of this brutal social formation.

The reproduction of the whole society depends on the drop of capital reproduction.

In a certain way, the population in Germany has the same experience already well-known to people in southern Europe [Venturing Less Democracy (7)]: that there is a powerful crisis dynamic that is stronger than the will of the sovereign and its democratic institutions. With threats before the parliamentary election, the system-immanent hopelessness of crisis policy was already shown repeatedly to the Greeks. When German politicians applied enormous pressure to animate voters in Hellas to the "right" choice.

The guidelines of politics were long ago determined in a land held in debt-bondage by the "troika" of the EU-commission, the European Central Bank and the IMF. Spain's rightwing government around Premier Rajoy fought for years against an intervention of the EU in the banking sector. Such an intervention was always described as "relief" until the country had to capitulate because of its rising interest-burden on the "markets." Italy's Prime Minister Monti is himself a "product" of the crisis since his predecessor Berlusconi had to leave his office after an escalation of the Italian debt crisis and massive political pressure.

The illusion of democracy and self-determination in capitalism is now lost because the production-relation has fallen into a fundamental crisis. On account of the crisis of capital relations which always produces new thrusts of productivity and rationalization {see "The Crisis Explained" (0)], more and more people are thrown into unemployment [10] and misery - while resistance against new "bailout packages" for the southern periphery grows in Germany.

This market-mediated process is stylized as a "practical necessity" that has no alternative since breakdown-like dislocations threaten with non-compliance. The Greeks and Spaniards must accept ever new austerity packages. Germany will again be liable for the eurozone since otherwise the collapse of the eurozone threatens. The crisis now makes crystal-clear for everyone that we really have no choice since the reproduction of the whole society depends on the drop of capital reproduction. When capital relations fall into crisis, everything can be redefined or instrumentalized: the basic law, democracy, elementary human rights and even human life.

ALTERNATIVES ARE NOT UP FOR DEBATE The "governments of technocrats" in southern Europe are only the blatant manifestation that the whole society is handed over to the instructions of crisis-laden capital accumulation. The escalating dictatorship of the capitalist "practical necessity" is an objective accompaniment of the crisis of capitalism. In the end this subject-less rule [11] of capital relations is the total negation of democracy when emancipation, selfdetermination and actual election possibilities affecting life conditions are understood as

democracy. On the other hand, middle-class democracy is a competitive-event - both between the parties and even within the parties - in which the optimizing of the present system is contested and which only represents an echo of the all-embracing competition in the economic sphere. Election possibilities are limited to the optimizing of the present system. Alternatives are not up for debate. In the final analysis, middle-class democracy does not go beyond and is exhausted in the choice between Pepsi and Coke.

We never had a true election. This one-dimensionality of middle-class democracy comes into crisis since this insight spreads by leaps and bounds. The suspicion that under capital relations our life cannot be organized in a self-determined way was also an important impulse in the founding of the pirates and similar radical-democratic movements in Eastern Europe (Tschechnya's pirates: Dissidents against `Mafia-capitalism' [12]. These movements experiment with new forms of democracy like the "liquid concept" or think back to original supposedly "pure" forms of democracy. "Recalling" the origins and founding myths [13] of crisis-shaken societies occurs where the mad chase for the disintegrating "ghosts and specters" of the past point the way to the future.

This crisis-ideology that locates the future in the past has a method in it. Since middleclass democracy and its corresponding public discourse only focus on optimizing the present system, they cannot reveal any solutions in the present system crisis. Instead the protagonists of democratic discourse turn faster and faster in circles, repeating their own arguments and distorting (nachschnappend) the demands of the other side.

The discourse movement of individual actors [14] is reminiscent of dogs chasing their own tails. Since the outbreak of the crisis, the dreary conflict [15] has raged in the public over whether more economic packages or austerity measures can lead out of the crisis without the participants noticing that both concepts were tested in the past crisis policy and failed spectacularly ["Is it already too late?" (16)]. Drawing lessons and recognizing the system crisis is hardly possible within the "published" opinion.

This ideological one-dimensionality, this blind persistence in the categories of crisis-laden capitalism, makes capitalist democracy susceptible to fire breaking out in crisis times.

When system-immanent prescriptions - like economic programs and austerity measures do not help in mastering the debt crisis, the tendency to drive the existing system to the extreme gains intensity. The effort to overcome the system crisis with a return to the "pure" and unadulterated origins and founding myths leads in praxis to a structural hardening and increased pressure in the system.

Economic pressure creates an extremism of the middle The pressure increasing on everyone considered a cost-factor - the unemployed or southern Europeans. The economic logic was long imposed on the whole society that is proverbially described as "Germany Inc." In its final crisis, the capital relation in a last brutal expansion strives to subordinate the whole human community to economism in the process of its breakdown. Everyone must constantly show he or she is not a burden to economic location Germany. Everyone who falls out of the work society is deemed

unprotected (fair) game in the general public and to state authorities. [17].

This attitude obviously has a majority. Harsher punishments against the unemployed can be carried out at any time in Germany by means of liquid feedback. The overwhelming majority of the population in Germany experiences the crisis as a constant increase of pressure on the job. This pent-up pressure is helped by the changeable scapegoats. An extremism of the middle has a majority now. The economic logic is projected on the whole society and all persons falling out of Germany Inc. are viewed as its enemies.

Democracy sinks to a naked terror of the majority against the marginalized minority.

Unable to put in question the structures and categories of collapsing capitalism, the public middle-class discourse tends to extremism - and ultimately to barbarism. This crisisconditioned "extremist" movement of published opinion also explains the success of populist actors like Hans-Werner Sinn and Thilo Sarrazin. They speed up the extremism of the middle by bringing all the resentment into the general public. Samazin's successful business model consists of a permanent break with civilization and its last public remnants of decency and consideration. [18] In crisis times, the one-dimensional public democratic discourse - caught in the crumbling capitalist categories - is the greatest danger since it gives a democratic legitimation to the terror of the economy. Still democracy is the conditio sine qua non of every transformational mastery of the crisis. Every search for alternatives to the permanent capitalist crisis can only appear in a broad public discourse in which participants reach agreement about the ways and goals of a post-capitalist society. Such a democratic discourse would search for the new and trigger a social awakening without being worn out maintaining a crumbling social system with crazy and increasingly barbaric characteristics. The Occupy-movement [19] and the Spanish "indignados" [20] are examples of efforts at initiating such an awakening by means of new base democratic forms of organization.

STRUGGLE OVER TERMS The struggle over the future of our crisis-shaken society is a struggle over terms. How do we understand democracy? What does democracy mean to us? Will the categories of capitalism be the silent presupposition of a public discourse guided by the mass media or can an egalitarian discourse aiming at the transformation of the present social order be introduced?

A struggle around the structure of public discourse rages alongside the battle over terms.

Despite all the positive changes through the Internet, the crisis-discourse in Germany is still hierarchically structured so a few media groups can shape the discussion with their products and web presence. However free communication possibilities and an egalitarian discourse structure preventing monopolization of the discourse are the prerequisites of a democratic awakening from the permanent capitalist crisis.

The public reaction of "powerlessness" nourished by the escalating crisis dynamic is

ultimately crucial. In Germany, an increased submission under the terror of the economy carries the day. On the other hand, movements that react with resistance and test new forms of democracy and decision-making could become established in countries like Spain and Greece.

Thus democracy is the greatest danger for our future and at the same time our greatest hope. It ultimately depends on us whether we are in twilight or daybreak. The next text will discuss the crisis-conditioned changes of rightwing extremism.

THE EXTREMIST SOCIETY "The barbaric core of capitalist socialization is on full display in the present system crisis.

The propagandists of totalitarian economism come in the mask of democrats. Economicprofitability thinking is actually pushed to the extreme from the middle and imposed on the whole society. Our society has long been viewed as a business."

"Only what contributes to business success has a right to exist."

BY Tomasz Konicz [This article published in the German-English cyber journal Telepolis 7/31/2012 is translated from the German on the Internet, http://www.heise.de/tp/druck/mb/artikel/37/37354/1.html.]

The barbaric core of capitalist socialization is on full display in the present system crisis.

Crisis of Capitalism - Part 5 "I fear the return of fascists in the mask of democrats, not the return of fascists in the mask of fascists."

Adorno Part 4: Democracy in Crisis [1] ( http://portland.indymedia.org/en/2012/08/417323.shtml) Given his incessant slanders and vulgar remarks toward all possible minorities, hardly anyone suspects Thilo Sarrazin of a sensitive spiritual life. [2] The Berlin Tageszeitung newspaper on its satire page described Sarrazin as a kind of media whore. [3] The man who describes Muslims as genetically inferior [4] and denigrates "southerners" promotes a declaration of neglect. The Taz-satire crosses "the limit of so-called defamatory criticism" [5] and has "nothing to do with an objective discussion." [6] The farce or burlesque casts light on the close connection between the multipliers of published opinion and populist-new right opinion-makers like Thilo Sarrazin. Obviously the media are using the former banker as he uses them. The mutual instrumentalization between the mass media and the media phenomena Sarrazin made the latter a multimillionaire and gives skyrocketing circulations, viewer figures and sales to the latter.

Sarrazin is a roaring business for media-corporations. Sarrazin's sales success on the markets results from the fact that he strikes a certain nerve with the middle class of Germany. A demand in the still relatively solvent "middle" of society is served, a demand that increases with the crises.

Thilo Sarrazin, the former German Central Banker, "broke a taboo" against public articulation of resentment and made it his business model. Sarrazin says in public what "everyone thinks" secretly. Other figures from Germany's functional elite like economics professor Hans-Werner Sinn [7] have a similar function in public discourse. [8] This "thinking" against minorities and human groups who in crisis times are stigmatized as burdens and unnecessary cost-factors for "economic location Germany" - whether Turks, the jobless or southern Europeans - is hatched in the middle of society and turns out a great commercial success.

EXTREMIST ECONOMISM Breaching this taboo is like breaching a civilization that publically propagates human

inequality. This postulated inferiority of certain groups of the population is legitimated with explicit economic arguments. In this ideology, the economic efficiency of a person determines his or her value. People are denied acknowledgment as soon as they fall out of the capitalist work society as Sarrazin formulated explicitly in 2010: [9] "I need not acknowledge anyone who lives from the state, rejects this state, doesn't rationally provide for the education of his children and constantly produces new headscarf little girls."

Since the notorious Sarrazin debate in the summer of 2010, a corresponding public discourse became popular that is marked by a totalitarian economism. Here all social areas and population sectors are tested for their economic commercialization. This productivity thinking running amok goes back to racism or social Darwinism in providing explanations for crisis phenomena - for the rise of a lower class in Germany or the debt crisis in southern Europe. Day by day the nation is seen as an "achievement community" that must take action against "unproductive" elements and "cost-factors": from the refractory Greeks and lazy jobless to Arab immigrants.

In the course of the Sarrazin debate, rightwing extremism went through a certain "rationalization process" in the sense of capitalist profitability thinking. He could establish himself in public discourse in this economic ideology since he has a neoliberal mindset...

Figures like Sarrazin or the notorious professor Hans-Werner Sinn deny the right to stay and implicitly the right to exist to certain groups of the population on the basis of a costbenefit analysis. In this ideology, the person and the whole society - existence as such wither into mere presuppositions of the capitalist exploitation logic. Everything and everyone must prove they are "useful." A life beyond the idolatry of crisis-prone capital accumulation hardly seems conceivable any more. That life is demonized as parasitic and unnatural or perverse. A cold calculation is carried out over which social groups have an economic use and which are mere cost-factors. These elements - that existed in classical National Socialism - dominate in this extremism of the middle while fascist aesthetics and explicit National-Socialist vocabulary are hardly found.

The propagandists of totalitarian economism actually come in the masks of democrats who anxiously issue politically-correct "thought prohibitions" and speak "uncomfortable truths." Half-truths and one-sidedly analyzed statistical material are "proven" with a scholarly claim. The postulated economic inferiority of the jobless, southern Europeans or Turks is ideologized into a kind of natural law - by the Sarrazinian "fog factor." [10] ECONOMIC PROFITABILITY THINING IS FORCED ON THE WHOLE SOCIETY

BY THE MIDDLE In the meantime, this thinking has long been hegemonial in public discourse. When Markus Soeder urges [11] making "an example" of Greece, he can know the majority of Germany's population is on his side. FDP head Roesler who wants to provoke Greece's exclusion from the EU [12] argued similarly. A whole country is "written off" by the German political caste, cleared for disintegration to complete Greece's socio-economic

collapse initiated by the austerity terror forced by Berlin and Brussels. This reflex of exclusion of whole economies will surely become rampant in the German public with regard to the other southern European EU states as soon as the crisis process advances in these countries.

The large majority of German citizens agree the Greeks on account of economic deficits are responsible themselves for their hopeless situation like Hartz IV recipients in Germany. A hardly noticed fact contributed to the success of this totalitarian economism triggered by the crisis dynamic. This ideology is an irrational exaggeration of the values, ideas and ideals that can be found in the constantly eroding "middle class" of capitalist society. Partly unable and partly unwilling to imagine an alternative to the permanent capitalism crisis, these middle classes can only seek a way out of crisis in the mer4cilessly intensified subordination of the whole society under the regime of sluggish capital accumulation.

Since the whole society is persistently subjected to the capitalist profitability criteria in extremist economism, the economic profitability-thinking is actually pushed to the extreme from the "middle" of society and imposed on the whole society. This crazy worldview is already proverbial in the talk of "Germany Inc." Our society has long been viewed as a business. Only what contributes to "business success" has a right to exist.

With Sarrazin, the capitalist ideology reaches its end, lets all pseudo-humanist veils fall and directly subjugates society to the terror of commodified value.

The wafer-thin varnish of all civilized achievements now scorned as "political correctness" that gives a democratic tinge to the capitalist profit-machine is unmasked again and again with every crisis-shock. The whole human community decays to an annoy8ing but necessary transitional stage of capital accumulation where a right to exist is only given every person if he or she contributes directly or indirectly to this irrational and ultimately destructive end-in-itself of capital exploitation. "You are nothing; the economic location is everything." This ideology can be reduced to this slogan that openly articulates this barbaric core of capitalist socialization.

In his study "The Middle in Crisis" [13] [Die Mitte in der Krise], the social psychologist Oliver Decker summarized this crisis-conditioned change of extremist rightwing ideology: "The constant orientation in economic goals - more exactly, demanding submission under its premises - strengthens an authoritarian cycle. This leads to identification with the economy. The renunciation demands flow into authoritarian aggression against the weaker."

This authoritarian cycle fueled by submission under "economic premises" does not need fascist aesthetic as practiced by the boot-fascists of the NPD. However the economistic extremism of the middle presents even greater danger since it makes possible a creeping authoritarian transformation of Germany carried out by a constant reactionary shift of the whole political spectrum. No re-establishment of a rightwing party occurs in Germany

since the whole party-spectrum successively drifts to the right. This insidious formation of an "extremist society" where everything is sacrificed on the altar of the crisis=plagued economy has the greatest potential danger for the remnants of middle class democracy and social emancipation. [14] In Germany, people have long been driven to death from starvation when they refuse the commands of the repressive poverty administration. [15] We have simply accustomed ourselves to these barbaric conditions. These conditions can hardly be seen as extremist and barbaric since they were accepted in a democratic form by parliamentary resolutions.

This extremist economism must be understood as a continuous ideological process that gains dynamism in reaction to the crisis of capitalism. This merciless ideology is permanently and ideologically intensified parallel to the intensifying crisis-dynamic. The more capitalism hits its inner limits, the more intensely the extremism of the middle spreads with its rigid and merciless demand for submission under the dictates of the collapsing economy. Thus Sarrazin is only a kind of "instant water heater" in a process of continuous ideological barbarization in Germany. Sarrazin is rightly compared with an "old whore" in the Taz-satire since his "breaches of taboos" were only slowly exhausted.

The stirred public needs new stronger propaganda.

DEVALUATION OF THE ECONOMICALLY SUPERFLUOUS This extremist economism represents a crisis-ideology that develops as a "reactionary reaction" of the frightened middle class to the crisis-dynamic. The ideological mechanism of personifying the causes of crises that hallucinates crisis-victims into causal agents of the crisis is critical. In many groups of the population threatened with descent, a kind of "bunker mentality" spreads in which one's social position is asserted and crisis victims are made responsible for the crisis to legitimate the measures of marginalizing and punishing the crisis-losers by this personification of the causes of the crisis.

The unproductive cost-factors (like Greeks, jobless, the elderly and the sick) whose mere existence strains the national achievement-community should be cancelled. The exclusion of more and more "superfluous" parts of humanity from the work society resulting objectively from the crisis process has its ideological legitimation in the corresponding extremist discourses that ascribe a racist or culturalist inferiority to the jobless and inhabitants of the stricken countries.

In their core ["The Crisis Explained" (16)], the present dislocations in the crisis of the capitalist work society were triggered by the third industrial revolution in microelectronics and information technologies. In the final analysis, capitalism simply became too productive for itself. This system hits an "inner limit" (Robert Kurz) of its development. Rationalization and automation spreading faster and faster lead to more and more goods produced in every shorter time by fewer and fewer workers.

The "superfluous" people falling out of capital exploitation because of this increasing crisis-dynamic are made responsible for the resulting disintegration phenomena. The mere existence of these people dependent on social transfers is declared the problem and cause

of present crisis phenomena. These crisis-losers were simply "unwilling to perform." That is the mantra of Professor Hans-Werner Sinn, Sarrazin and others.

Thus the total subordination of all social areas under the iron dictates of the crumbling economy provides the ideological legitimation of the advancing crisis process. The crisis appears as the result of the economic failure of individuals or groups. The groups falling out of the collapsing capitalist work society are stigmatized by means of personifying the causes of crises. The impoverishment and deprivation of rights of crisis-victims stamped as causal agents of crisis is legitimated - whether through the Hartz IV labor laws in Germany or the Troika-terror in Greece.

As argued, this totalitarian economism is an ideology in permanent intensification whose extremism intensifies with every crisis-shock. The pressure on the jobless in Germany will soon increase again because of the escalating system-crisis - and in such a situation only needs a media-campaign against "social parasites" to legitimate further cuts for the remains of the German social state. The open threat of destruction resonates with the smear campaign against everyone who will not "recognize" Sarrazin because they cannot or will not work any more. Here lies the implicit genocidal potential of this ideology that is forming: the economically "superfluous" of collapsing capitalism capsizing into barbarism should disappear - at least as cost-factors - because of an ice-cold profitability calculus.

The ecological limits of capital will be described in the next text.

IN A VICIOUS CIRCLE "The world economy is interlinked"

By Tomasz Konicz [This article published 7/10/2012 is translated from the German on the Internet, http://www.streifzuege.org/2012/im-teufelskreis.]

The crisis in Europe increasingly damages the world economy. The Euro-crisis leaves

behind clear marks in non-European economies - with incalculable consequences.

"The world economy is interlinked." This quotation from Kurt Tucholsky is completely conformed in the current crisis. The crisis in the Eurozone gaining dynamic radiates on the world economy at the brink of an economic collapse. The OECD that described the eurozone as the "greatest risk factor for the world economy" recently issued urgent admonitions. The Bank for International Settlements (BIZ) sees enormous potential danger in the shattered European financial sector, in the conditions "after the 2008 collapse of Lehman Brothers."

Economic Climate Cooling Early economic indicators already point to a global economic cooling. The oil-price hit an all-time high in March 2012 despite a sinking demand that has already fallen 30 percent.

The price of gold also rapidly went downhill. The weakened demand for raw materials is also clear in the price drop of the S & P GSCI Raw Material Index that shows the price development of 24 raw materials and sources of energy. That demand has fallen 20 percent. This dramatic drop in prices with sources of energy strikes raw material exporters like Russia very hard. Russia now sees itself confronted with an exploding budget deficit.

The Euro-crisis is transferred to other economic zones both through the economic weaknesses and Europe's unstable financial sector. Imports in the important sales market fall on account of the recession in the Eurozone. With around 18 percent of the world economic output, the European monetary zone represents the second most important economic region after the US. For China, Europe is the most important export market.

The US only exports more to Canada than to the Eurozone. US exports to Europe sank 4.8 percent in April 2012 compared to 2011. China had to accept an export-decline of 0.8 percent to the Eurozone in the first five months of 2012.

The crisis of the European financial sector triggers fear of a "credit crunch" that started in the wake of the 2008 bankruptcy of the Lehman Brothers investment bank. Eastern Europe is affected since Western Europe has a dominant position there. With an escalation of the Euro crisis, serious dislocations also threaten Latin America where around 60 percent of foreign credits come from European banks.

The hopes that the threshold countries would act as a future global economic locomotive are obviously not realized. One after another the growth forecasts of the up-and-coming economies are corrected downwards since they depend greatly on the economies in the centers of the capitalist world system. China's government expects a growth of 7.5 percent in 2012 - the lowest forecast in eight years. In India, the economy has grown less than six percent. Brazil's gross domestic product (GDP) will only climb 2.4 percent in 2012 according to the latest growth predictions.

THE EUROZONE IS ONLY ONE FOCAL POINT OF THE CRISIS In an escalation of the European debt crisis, the threshold countries will also be dragged to

the abyss according to a simulation model of the World Bank. If the 2013 GDP in Europe falls 8.5 percent, the Eurozone will collapse. In the threshold countries, this could lead to a contraction of 4 percent on average.

The Eurozone is only the current focal point of an aggregate capitalist debt crisis as the BIZ confirmed. The world economy has not come near "the model of a sustainable economy" five years after the outbreak of the crisis. The Institute is described as the "bank of central banks." In a "vicious circle," the debt reduction efforts of governments, private budgets, businesses and financial sectors led to gloomy economic prospects.

ADDICTED TO LIQUIDITY INJECTIONS

By Tomasz Konicz Bernanke's announcing of lower monthly printing of money was enough to make stock exchanges collapse in many threshold countries. The monetary policy of printing money and zero interest is caught in a vicious circle. Liquidity glut generates credit growth.

Central banks have long been hostages of their expansive monetary policy [This article published on 7/9/2013 is translated abridged from the German on the Internet, http://www.heise.de/tp/druck/mb/artikel/39/39475/1.html. Thomasz Konicz is the author of “The Crisis Explained” and “The End of the Golden Age of Capitalism and the Rise of Neoliberalism” (cf. www.freembtranslations.net).]

It was a typical European compromise with the European Central Bank reacting to the latest crisis attack in the Eurozone. At the beginning of July, the European Central Bank presidentMario Darghi declared that the key interest rates in the Eurozone would remain permanently at a very low level of 0.5 per cent. “The council expects the important European Central Bank interest rates to be at the current level or below for a long time,” Darghi said. [1] The European Central Bank wanted to lower the key interest rate to 0.25 percent but could not prevail in the European Central Bank council against the German resistance.

[2] In Germany there will soon be elections. Lower key interest rates are very unpopular.

The announcement of a permanent low key interest rate that is still higher than the interest rates in the US should calm the pensions- and financial markets in the Eurozone. A government crisis in Portugal, renewed demands for another debt cut in Greece, falling stock prices all over Europe and a generally rising interest level in the southern periphery of the Eurozone make likely a flaring up of the debt crisis. The European Central Bank wards off the danger of a new Extensive European fire with the

announcement of an unlimited continuance of its low interest policy – at least in the short-term. The interests in southern Europe decline slightly; the stock markets recovered a little. Investors knew that “the European Central Bank was ready in an emergency with its bond purchase program to prevent an escalation,” an analyst explained to the n-tv news broadcast station. [3] This means market actors rely on the headd of the European Central Bank Darghi's famous promise “to do everything tomaintainn the Euro” in an intensified crisis. This involves printing money and increasing the money supply by purchasing bonds (debts) for a short-term stabilization of the system. The additional liquidity glut acts as an economic stimulant that lowers interests, raises stock prices and stimulates awarding credits.

DOUBLE BLOW IN MONETARY POLICY The latest European crisis was triggered primarily by the announcement of the American and Chinese central banks [4] to stop buying bonds which Washington and Peking carried out for quite a long time. On June 19, 2013 Fed chairman Ben Bernanke announced the gradual end to the monthly purchases of bonds in the volume of $85 billion executed under the term quantitative easing 3 (QE). Bond purchases will be reduced “later in the year” since the economy in the United States is gradually recovering, Bernanke explained. Only one day later the Chinese Central Bank signaled it would not pump any more liquidity in the overheated Chinese financial market. The financial institutes should manage their liquidity better in the future, plan spending better and hold ready sufficient funds, according to the official opinion of the Central Bank. All hell broke out on the global financial markets after this double blow in monetary policy. The Chinese financial sector passed into a short-term shock paralysis while stock prices collapsed worldwide and the interest-burden of the southern European crisis states soared. Interests on the so-called inter-bank market shot up in double digits because the banks did not want to grant any short-term credits to one another any more. In the US the previous capital outflow from the bond markets intensified to a “stampede,” [5] a wild uncontrolled escape (German word: Fluchtbewegung) in whose wake the interests for US government bonds rose quickly.

[6] This has been very disastrous in the threshold countries. Bernanke's announcement of a possible lowering of the past monthly printing of money – the key interest rate should remain at the historically low value of 0.25 percent – was enough to make stock exchanges collapse in many threshold countries that massively raised their interest level [7] and encouraged a quick devaluation [8] of the currencies there. These shocks in the semi-periphery of the capitalist world system were triggered by capital outflows that accelerated after Bernanke's announcement.

The methods by which the central banks brought these dislocations on the world financial markets under control again are typified for the late capitalist world system.

Ultimately the currency guardians carried out a change in monetary policy given the escalation within the shortest time. [9] Both Chinese and American central bankers declared they would supply additional liquidity to markets to suppo9rt economic

growth. The withdrawal of the Fed and the Chinese central bank on June 25, 2013 led immediately to a calming of the situation on the financial markets [10] that previously seemed to be losing control. During a June 27 press conference [11[, William C. Dudley, president of the New York Federal Reserve, explained that the Fed in the future could even expand bond purchases if the economic development lags behind the forecasts of the central bankers.

ZERO INTEREST POLICY IS OUT OF ORDER As a result the central banks launched a first attempt to end their permanent printing of money but were surprised by the furious market turbulence and turned back. Thus capitalism in its old days seemed to be like a credit junkie who can only maintain his functioning thanks to permanent liquidity injections of the central banks. The Fed already carried out the third Quantitative Easing (QE3) since the 2008 outbreak of the crisis that unlike the two preceding programs was not temporally limited. Printing money should continue until there is substantial improvement on the US labor market.

In the meantime the system is absolutely “addicted” to these regular liquidity injections, the British Telegraph journal commented on June 20, 2013. [12] “In the wake of the credit crunch, the West discovered quantitative easing – printing money by purchasing securities from banks and other private institutions – as a way to stimulate the economic recovery. Soon we became dependent on that. Now the Fed announces it will end this bad habit... However the panic on the stock markets triggered by the American intimation of a possible withdrawal from the QE … shows that the economic recovery is fragile and depends greatly on “government intervention.”

How did this dependence of the capitalist system on “government intervention,” on ever new “quantitative easing” come about? The zero-interest policy practiced by most central banks since the outbreak of the crisis does not function any more so the “dose” must be increased. The Frankfurter Allgemeine Zeitung newspaper formulated: [13] “The American Central Bank began to increasingly buy up government bonds in the course of the financial crisis since the interests were practically at zero and the economy was still not robust. The state of indebtedness was relieved while a different goal was pursued: forcing down interests for government bonds and credit interest since its own key interest rates cannot be lowered any more.”

ILLUSION OF ECONOMIC RECOVERY In the final analysis reanimating the awarding of credits and enlivening the economy altogether is emphasized with this expansive monetary policy. The US Federal Reserve since the eruption of the crisis has actually practiced an absolutely unique printing of money. [14] Its gigantic dimensions can be read off the balance sheets of the Fed. What amounted to around $800 billion before the beginning of the financial crisis in 2007 exploded in the meantime to $3.4 trillion. That is $3400 billion. In the last months the expansive US monetary policy contrasted with a reduction of the balance sheet total of the European Central Bank. [15] which did not recently initiate any programs of

printing money. This monetary policy reserve – beside the German austerity dictate in Europe – contributed to the stubborn recession in the Eurozone. “Without the Fed the world economy would already have fallen into a deflationary spiral,” the economic blog Querschusse diagnosed.

The capitalist monetary policy that for six years consisted in continuously printing money and zero interests as a “state of emergency” [16] congealed into normality is caught in an absolutely vicious circle. The liquidity glut generates a credit-driven growth. In the threshold countries around four trillion dollars flowed in speculative profit-hungry capital that expected higher profits than in the centers of the capitalist world system. However these short-term credit-financed upswings are bought with increasing medium-term instability and with the formation of new credit- and speculation bubbles. Even the American housing market now experiences a slight recovery phase [17] with double-digit growth rates in housing prices.

The constant injections of ever new “liquidity” first allowed the illusion of an economic recovery to arise that was reason for Ben Bernanke to suggest an end to printing money.

However the serious dislocations on the financial markets after June 19 indicate very clearly that this is really a mirage generated by printing money. As soon as an end of quantitative easing appears on the horizon, a collapse of the house of cards on the financial markets threatens which will lead again to an economic crash in recession.

The underlying idea of this policy is that the capitalist economic motor only needs a kind of monetary policy booster through quantitative easing to get going again is made a fool here. Obviously the system only maintains its functionality by printing money and zero-interest policy since the collapse of the gigantic real estate bubble in the US and Europe.

THERE IS NO SYSTEM-IMMINENT WAY OF MONETARY POLICY OUT OF THE CUL-DE-SAC Rising interests in the center of the capitalist world system would strangle the global economy [18] and bring the apparent successful history of threshold count5ries in the semi-periphery to an abrupt end. Many industrial countries would also collapse under the quickly increasing debt burden. Since the outbreak of the debt crisis, the indebtedness in metropolitan areas has also exploded, as the FrankfurterAllgemeiner Zeitung newspaper noted [19]: “The private and public indebtedness [according to the Bank for International Settlements (BIZ)] has increased around $33 trillion since 2007 in the leading 18 economic countries.” This means the heroic struggle of capitalist crisis policy against the debt crisis in the industrial states alone produced a huge additional debt mountain of $33,000 billion within the last six years.

There is actually no system-immanent way of monetary policy out of this cul-de-sac.

Bernanke only has the choice between printing more money together with a zerointerest policy or a gigantic financial market crash that would drive the world economy to the abyss of a depression. The central banks of China and the US actually only try to continue the finance market-driven deficit by means of massive state support and

boundless printing of money. These deficit economies were made possible by the proliferating real estate markets before the financial crisis of 2007.

This hopelessness of capitalist monetary policy that was the hostage of the liquidity glut that it kindled is only an expression of the contradictions of the capitalist mode of production intensifying for decades [The End of the Golden Age of Capitalism and the Rise of Neoliberalism (20)]. It is a manifestation of a capitalist work society collapsing in its hyper-productivity that can only maintain a kind of zombie-life through a permanently increasing money- and credit-expansion [The Crisis Explained (21).]

TEA PARTY: EXTREMISM OF THE MIDDLE The Tea Party wants to return to an idyllic past that never really happened. The Tea Party want to stop the accelerating descent of the white middle class by driving the ideological conceptions to the extreme. The irrational exaggeration of the neoliberal litany of personal responsibility, will to performance and entrepreneurial spirit is the core of Tea Party ideology.

By Tomasz Konicz [This article published on 10/27/2013 is translated from the German on the Internet, http://www.heise.de/tp/artikel/40/40172/1.html. Other articles by Tomasz Konicz

including "The Crisis Explained" are available at www.freembtranslations.net.]

The budget conflict in the US illustrates the increasing influence of right-wing extremist forces within the Republican Party.

The super budget dislocation in Washington was averted at the last minute. Hundreds of thousands of state employees were back at work on October 17 after the US House of Representatives approved a compromise proposal 285 to 144 ending the week-long feud between Republicans and Democrats over raising the debt ceiling.

The new law enables the US government to continue its deficit budget to February 7 while a balanced commission of House representatives and senators haggle over a proposed compromise for the current state budget. A repetition of this budgetary trial of strength threatens if this commission cannot work out a sound proposal that incorporates both democratic demands for tax increases and the persistence of Republicans on budget cuts [cf "The American solution is called delay" by Tomasz Konicz].

This deferment of the permanent conflict between republicans and democrats is often judged by political commentators as a victory of President Barack Obama who refused to yield to the extortion attempts of the extreme right-wing within the Republican Party.

Republicans had demanded far-reaching cuts in Obama's most important domestic project of health reform passed in 2009 amid vehement protests [cf. The Flogged Health Reform].

Now John Boehner, the republican speaker of the House of Representatives, had to concede the failure of this aggressive extortion strategy in a right-wind populist radio show: "We fought - and lost."

The question is raised whether "the republicans" still exist as a somewhat united political group since the latest budget conflict revealed enormous ideological dislocations in the party. Traditionally those forces set the tone for republicans who ruthlessly represent economic conglomerates and the rich upper class. However the extreme right-wing gained more and more influence in the last years as America's right-wing extremist mainstream.

The voting behavior of this right-wing party in the latest budget compromise is symptomatic for this right-wing swing. Only 87 republican representatives followed their spokesperson Boehner and voted to raise the debt ceiling. The majority of the party refused the "moderate" party leadership.

A recently published poll of the Pew Research Center verifies the schism in the US rightwing. The "positive evaluation" of the right-wing extremist Tea Party movement among moderate republicans fell from 46 percent in June to only 27 percent. The approval ratings of the new shooting star of the extreme American right-wing, the Texas senator Ted Cruz, deteriorated within the moderate republican camp. Four months ago only 16 percent had a negative view of his work; now 31 percent have a negative opinion. On the other hand, Ted Cruz seems to have established himself as the new leader among followers of the Tea Party. Around 74 percent of the extreme right-wing judges positively the policy of the Texan senator who led the fight of the right-wing against Obama's health reform in the latest budget conflict; four months ago they were only 47 percent.

RIGHT-WING EXTREMIST PARTS OF THE REPUBLICAN PARTY ARE OUT OF CONTROL The Washington Post recently made drastic comparisons to illustrate this continuing rightwing development in the Republican Party. The Tea Party carries out regular "purges" reminiscent of the elimination of oppositional forces during the great Stalinist show-trials.

Like the Stalinists and Jacobins, the fanatics of the Tea Party have purged their movement - not through executions but by banning all republicans who do not share their enthusiasm for scrapping the country if they cannot get the majority to follow their convictions.

According to this extremist logic, there are "fewer but better republicans" today, the Washington Post said. One obvious symptom for this continuous development consists in the distancing of the right-wing from the past leaders of the party who now are regarded as too "weak or soft" and willing to compromise. The "hard right-wing core" sees politicians like former president George W. Bush, the presidential candidate Mitt Romney and republican senator McCain as "irritating remnants of a compromising past." Instead figures like Ted Cruz, Rand Paul, Michele Bachmann and the inevitable Sarah Palin are extolled.

The arguments between the moderate wing of republicans and right-wing hardliners were clear in the repeated calls by American economic associations to end the right-wing blockade. Important economic financiers of republicans like the US Chamber of Commerce, the National Association of Manufacturers and the National Retail Federation pressed unsuccessfully for an end to the latest budget strife. Thus a right-wing extremist part of the Republican Party is manifestly out of control.

Meanwhile some of these economic associations even suggest financing rivals of Tea Party politicians to break their dominance. Today's republicans express "resentment" that haunts an alarmed white middle class and no longer speak "for Wall Street or Main Street," the Post concluded.

CRISIS IDEOLOGY OF THE FRAGILE WHITE MIDDLE CLASS The new arising ideology of the extreme American right-wing represents a regressive and irrational processing of crisis fears that is enriched by an increasing racism in the eroding US middle class. In hatred toward the US government felt to be "all-powerful," the powerlessness appears that seized many American suburbs given the uncontrollable crisis dynamic and the social devastations going along with that.

The Tea Party wants to return to an idyllic past that really never existed. The Tea Party wants to stop the accelerating descent of the while middle class by driving the ideological conceptions existing in this "middle" to the extreme. The irrational exaggeration of the neoliberal litany of personal responsibility will to performance, entrepreneurial spirit and

skepticism toward government is actually the core of the Tea Party ideology.

In a classical "extremism of the middle," the worldview ideas prevailing in the mainstream are pushed to the extreme that seize the US right-wing in reaction to the crisis dislocations of the US right-wing. What all of a sudden hostilely faced the US economic associations in their own traditional party is the extreme result of neoliberal indoctrination that was urged for decades by these economic associations. The Tea Party does not use the polemic against tax hikes and "big government" purely tactically to gain tax- and location advantages as American economic lobbies do. The right-wing hardliners really believe capitalism could be reanimated if the state were shattered as much as possible and all necessities of life simply left to the affected people.

"There is no society; there are only individuals." The Tea Party wants to practically realize this slogan from Margaret Thatcher. In addition a resurging racism manifests in this white middle class that cannot come to terms with the demographic changes in the US. Consequently the assessment that Obama is the great winner of the latest trial of strength can only conditionally be maintained. Obama successfully resisted an offensive of the right-wing. Because of their extortion strategy, republicans must accept enormous losses of popularity that could have effects on the coming elections.

LONG-TERM RIGHT-WING SHIFT OF THE ENTIRE POLITICAL SPECTRUM However representatives of the extreme right-wing are also regarded as the great winners of the budget conflict. The Wall Street Journal sees a "hero of the Tea Party right-wing" in Texas senator Ted Cruz who helped escalate the latest budget feud and has now created a "platform for his presidential candidacy." On the other hand the moderate John Boehner has been "clobbered by his own fraction." The Wall Street Journal asks "how he can keep his job."

Thus an extremist right-wing is growing that could act as a central political rallying point for fallen and frightened members of the middle class in a future crisis. The "extremism of the middle" practiced in this movement could become a dominant crisis ideology and make possible a similar ascent of right-wing extremist parties as is happening in Europe.

Finally a "victory" of democrats must be set in the context of a long-term right-wing shift of the whole political spectrum in the US. The entire social climate in the US has fundamentally changed since the "neoliberal" revolution triggered by Ronald Reagan in the 1980s. The policy of the "democratic" President Obama for example still maintains the Guantanamo prison and carries out a global program of extra-legal killings by a high tech drone fleet. The right-wing may have lost a battle but it has long won the war. The neoliberal capitalist ideology - like the capitalist economy - has long won a totalitarian victory against all dissonance or deviation. Now that ideology breaks up in its contradictions and passes into open irrationalism and mania.

Still this is really not a genuine American tendency. The United States functions on

account of advanced crisis processes (as in the de-industrialization of enormous regions) only as an early indicator making the US an ideal projection surface for resentment.

Similar processes of a long-term right-wing shift of the whole political spectrum are occurring in Germany [cf. "The New Middle is Right-Wing"] where the alternative for Germany is ultimately stylized as a German "Tea Party."

FINANCIAL MARKET INFLAMMATION

By Tomasz Konicz To know what inwardly drives the current global crisis dynamic, look at more cartoons [This article published on May 9, 2014 is translated from the German on the Internet, link to www.streifzuege.org).]

We all know and love our Road Runner, the running bird as fast as an arrow who escapes the traps and persecutions of his voracious enemy, the coyote Wile E. Coyote in the Warner Bros. cartoon of the same name. However very few lovers of this animated

cartoon series are aware that a recurring final scene of the Road Runner cartoons - the central "running gag" of the series - represents the perfect allegorical presentation of the past crisis course. Again and again the coyote in its wild chase after the Road Runner races over the cliff of a deep abyss without immediately plunging to the abyss. Rather the coyote is first suspended in the air until suddenly becoming conscious that there was no ground under its feet. Then the deep fall first occurs.

The capitalist world system finds itself in such an historical crisis phase. Capitalism has long stormed over the cliff. The system is suspended in the air although this fact is often ignored. The foundation on which capitalism has chased maximum profit since its earliest beginning around 500 years ago is the exploitation of workers in goods production. For around three decades, the capital relation had forfeited its substance on account of escalating inner contradictions.

This basic contradiction of the capitalist production method is as follows: Paid labor is the substance of capital while capital at the same time strives to replace paid labor in the production process through competition-conditioned rationalization measures. That capitalist who first successfully introduces a rationalization measure can hope for extra profits until this innovation is generalized in the affected branch of industry. The profit or surplus value generated in the impacted industrial branch declines absolutely. Marx introduced the ingenious term "processing contradiction" for this auto-destructive progress. This contradiction of capitalist goods production in which capital minimizes its own substance through competition-mediated rationalization pushes with paid labor can only be maintained in "processing" in continuing expansion and further development of new exploitation fields of goods production. The same scientifictechnical progress that leads to the melting of burnt-out paid labor in established branches of industry also encourages new industrial branches and manufacturing methods to arise.

Thus the famous industrial structural change results from this processing contradiction the ability of capital to "reinvent" itself again and again - about which the middle class capitalism apologetic is so proud. Since the beginning of industrialization in the 18th century, the capitalist economic style has been marked by a structural change in which the textile branch, heavy industry, the chemical branch, the electronic industry and the Fordist auto-manufacturing served as key sectors that exploited masses of paid labor.

With the rise of the micro-electronic revolution, industrial structural change broke down from the 1980s. These new technologies created far fewer jobs than were rationalized away by their aggregate economic application. Thus the productive forces burst "the chains of production relations" (Marx) and capital struck an "inner limit" (Robert Kurz) of its development capability.

To avoid collapsing in its own contradictions, capitalism had to leave the ground of worker exploitation during the neoliberal revolution of the 1980s and set itself in the airy heights of a finance-market dominated economic structure. The system reacted to the breakdown of industrial structural change with the establishment of the financial system as a "key sector." Consequently capital exploitation is increasingly simulated on

the financial markets. Since no real capital exploitation can be permanently pursued within the financial sphere (therefore the entire world for several years has spoken of a necessary "re-industrialization"), growth in the past three decades was fueled by a historically unique boom of the most important good offered by the financial sector: credit. The capitalist world system runs on credit on the anticipation of future exploitation shifted into the future again and again by the awarding of credit. Credit generates the demand that maintains capitalist goods production choking in its productivity. To an overwhelming extent, the accepted credits are real-estate or consumption-credits, not investment credits in goods production and its expansion or modernization.

The central mechanism that transforms the increasing financial market-generated indebtedness into real economic growth is the speculation bubble. The system increasingly processes the speculation bubbles rising and alternating again and again from the 1980s into "hot" air. As soon as a bubble bursts, the fall threatens that was prevented through the rise of a new speculation bonanza. The suspicion that the system is only maintained by hot credit-generated air (the "abyss" seen by the minister of finance Steinbruck in a 2008 Spiegel interview) occurring with the bursting of a bubble had to be repressed by the rise of new speculation waves. One could speak here of a regular bubble-transfer in which all the financial- and fiscal measures used to fight the consequences of a burst speculation dynamic helped create the foundations of a new bubble formation. Ultimately the capitalist financial policy can only put out the speculation fire with gasoline.

This is not a linear but a dynamic process. The costs and expenditures to stabilize the world financial system rise intensely with the bursting of every bubble until financial power exceeds the largest national economies. These crisis tendencies may be concretely understood in the new bursting debt bubbles in many threshold countries (see Konkret 3/14). South Africa, Argentina, India, Indonesia, Ukraine, Malaysia and Brazil are threatened, alongside Turkey. National economies are stricken with high balance of payments deficits, low currency reserves and high indebtedness that experienced a boom fueled in the past years through capital infusions - a so-called deficit economy. Since 2008 the enormous capital inflows in the semi-periphery generated growth. Several "economists" tell of a new global era when threshold countries will act as bearers of global growth. Through the low interest policy in the US and Europe, investments in the threshold countries - as in the real estate sector - were very profitable on account of high yields.

The phase of an extremely expensive monetary policy since 2008 is obviously a consequence of burst speculation bubbles on the real estate markets of the US and several states of Europe. The "cheap money" of the central banks together with the liquidity injections of the Fed, the $85 billion pumped into the markets every month for years first kindled the speculative fear in the threshold-countries that is now strangled by the reduction of bond purchases by the US Fed (to $65 billion) - and threatens to drive the semi-periphery of the capitalist world systems into a serious crisis.

The real estate boom that collapsed in 2008 was initiated by the monetary measures of the US Fed that sought to mitigate the consequences of the stock market speculation with US high tech stocks (Dot-Com bubble) breaking down in 2001. No extreme measures were necessary with the bubble-transfer at that time. The Fed lowered the key interest of 6.5 percent in 2000 to less than two percent in the period between 2002 and the end of 2004. That was enough to make mortgage credits with variable interest rates attractive for people who could not really afford a house. A zero interest policy is no longer enough to stabilize the system which like a debt-junkie is regularly dependent on the liquidity injections of the US Fed. In middle class economics, it is striking that late capitalism depends on incurring debts, printing money and the inevitable formation of bubbles. Former US Treasury secretary Larry Summers rushed forward in declaring the historically unique expansive monetary policy of the US Fed and the financial bubbles of the past decades economic necessities.

In the last decade, speculation bubbles and a loose credit policy only generated "moderate growth," Summers told the Financial Times. Without support by "unconventional policy" (negative interests and printing money to an unparalleled extent), the US and the important global economies would not be able to return "to full employment and strong growth." Bubble-formation covered up a period of long-lasting stagnation for the world economy, Summers said. This state could continue for "a rather long time." In the Financial Times, he even spoke of stagnation as a "new normality" (ironically one challenge of "economics" is explaining the hair-raising exactions of capitalist socialization as normality).

In the New York Times, the well-known US economist and Nobel Prize winner Paul Krugman forecast a global "age of bubbles" in view of the current collapsing speculations in many threshold countries. In a blog entry, Krugman followed the trace of this bubble economy from the Internet stocks bubble of the 1990s and the 1997/98 Asian crisis back to the 1980s, the "late years of the Reagan expansion." Krugman agreed with Summers' assessment that "we are in an economy that needs bubbles to produce nearly full employment." However this is not only true since the financial crisis of 2008. "It is true since the 1980s though with an increased intensity." Two decades after critics like Robert Kurz explained these connections, bourgeois economy has finally met the inner limit of capital.

The crisis process resulting from the de-substantialization of capital, a blind autonomous process, takes place behind the backs of the market subject. For politics, the crisis process has the form of the notorious quasi objective "practical constraints." Unable to act beyond the capitalist framework, middle class politics finds itself in a crisis trap. It can only choose between different ways in the crisis. On one side, the political caste can try to maintain the indebtedness dynamic as long as possible by means of printing money and economic programs (a nationalization of the deficit-economy) or it can choose the Kamikaze-strategy or suicide mission and set off a deflationary shock along with the following economic collapse. As everybody knows, German policy in Europe decided for this variant. The results are well known. On the other side, the US and China reacted to the crisis push and stabilized the system by printing money, economic

injections and low interests - at the cost of the now collapsing speculation dynamic in the threshold countries. But how can the consequences of future dislocations on the financial markets be compensated when monetary policy acts at the limits of its possibilities?

Another characteristic of capitalist crisis policy comes into play here - shifting the crisisconsequences to other subjects. The capitalism processing bubbles rising into hot air tends to let new regions of its periphery simply fall into the abyss. National economics and states can realize this through an aggressive economic policy by gaining the greatest possible trade- and balance of payments-surpluses. Unemployment and indebtedness are exported with these surpluses given this neo-mercantilist economic orientation.

Germany has perfected this strategy by amassing extreme trade surpluses over against the Euro states since the introduction of the Euro on account of Agenda 2010 - driving its southern periphery into socio-economic collapse after the outbreak of the crisis.

Previously the southern periphery was maneuvered into debt-bondage by means of the trade surpluses.

Ultimately a successful capitalist economic policy is only possible at the cost of other economic zones in the present historical phase of a deep system crisis. The illusion of a healed intact capitalist work society in Germany is based ironically on foreign debts demonized in Germany. Therefore classic social-democratic economic policy oriented in demand-stimulation runs aground as recently manifest in France. With open markets and a common currency, the backing of domestic demand simply led to France with the largest trade deficit of all countries of the Eurozone. Thus the French domestic market like Southern Europe's previously collapsed markets - helps the revitalization and expansion of German industry.

What Germany demonstrates in the Eurozone - shifting all crisis consequences to its periphery - is now carried out in a similar way on the global plane toward many threshold countries. With the reduction of bond purchases by the Fed, the global capital streams change direction and increasingly turn from threshold countries threatened by capital outflows, recession, mass unemployment and pauperization while the centers experience a stabilization because of renewed capital inflows. The crisis-plagued Eurozone even profited on account of the falling interest rate. "The financial problems of the threshold countries even increased the attractiveness of the crisis-countries in the Eurozone," the FAZ (Frankfurter Allgemeine Zeitung newspaper) remarked. Threshold countries are important as raw material suppliers and low wage locations, not as markets. The dislocations now occurring in the threshold countries will hardly lead "to a full-blown infection of the rich countries," the Financial Times reassured in a commentary since these countries do not play a great role as sales markets. On the limitation of crisis-consequences to the semi-periphery, the Fed speculates on the reduction of its printing money called "tapering."

The new world trade agreement regulates the unhindered access to the raw materials and resources of the semi-periphery now facing collapse and massively restricts the protectionist measures in the global South. At the same time the global North forces

screening tendencies over against the threshold countries increasingly seen as competition - China in particular. The desired free trade agreement between the US and the EU (Transatlantic Trade and Investment Partnership, TTIP) has no other goal. To both sides, the free trade agreement opens the possibility of re-asserting the "global leadership" of the "old West" in a multi-polar world, the Wall Street Journal commented at the start of negotiations. The Neue Zurcher Zeitung newspaper was even clearer: the TTIP does not serve "liberalization of trade." Rather it represents a protective mechanism against overly strong competition. The targeted free trade zone is a protectionist attempt "to create a trade regime with exclusion of China and other threshold countries."

Deutsche Welle illustrated the calculation behind this: "Where there are many winners, there must be a few losers." The volumes of world trade would experience a re-routing through the TTIP, not a fast increase. While the big trading blocs may strengthen the exchange of goods among themselves, imports from "Latin America, Asia and Africa" would decrease in these "super-free trade zones." The Chinese newspaper Global Times commented that the TTIP would force China "into a corner" because the People's Republic and other threshold countries could not afford being excluded and ultimately would come "on board" - obviously to conditions of the "Old West."

Finally the states in the centers of the world system react with outer expansion to the increasing crisis-conditioned inner contradictions and dislocations. Germany announced a greater military engagement in Africa after France capitulated in a political-economic regard and abandoned resistance against German austerity sadism. The forced pressure of the EU to the East - in which Berlin is again the driving force - has the goal of preparing Russia and the whole post-Soviet realm to be Europe's periphery. Through the intervention of the West in the Ukraine, the possibility of realizing the Kremlin project of a "Eurasian Union" acting as a counterweight to the EU should be taken from Russia. [from: Konkret 4/2014] WAYS OUT OF CAPITALISM

By Tomasz Konicz This introduction to Tomasz Konicz' "On the Search for Alternatives to the Permanent Capitalist Crisis" (2014) is translated from the German. "The disintegration of the capitalist world system began long ago in its periphery... Capitalism perishes in its hyperproductivity and suffocates in the whole mountain of goods." Empire could be replaced by republic, excess by access and more by enough. Capitalist contradictions and dislocations are signs of a disorder. That labor is the basis of wealth and yet is degraded as a cost factor is one contradiction.

[This introduction to Tomasz Konicz’ “Aufbruch ins Ungewisse. On the Search for Alternatives to the Permanent Capitalist Crisis,” 2014 is translated from the German on the Internet, http://www.heise.de/tp/druck/mb/artikel/43/43479/1.html.]

Tremendous obstacles stand in the way of conceiving alternatives to the permanent capitalist crisis. The watertight density of capitalist socialization, the all-persuasiveness of the market long curdled into a totality sets up a thought prison in every inmate of the global capitalist treadmill. When there is no non-capitalist “outside” any more and when all social fields and niches including the subculture are occupied by capitalist cost-benefit calculation, the mediated and subject-less capital rule, the notorious “silent pressure of conditions,” takes on the appearance of a natural condition.

Present conditions seem ahistorical and carved in stone although capitalism from the perspective of humanity’s history has only developed its destructive expansion dynamic in a very short time period. The escalating inner contradictions and dislocations of late capitalism intensifying the crisis appear as natural phenomena. Its structures congeal to axioms of all thought patterns. The post-capitalism debates that now also seize the mainstream of the mass media given the escalating system crisis shows the difficulty of breaking of this mental prison whose bars consist of everyday ideas and categories.

Impelled by the bestseller “The Zero-Marginal Cost Society” of the economic visionary Jeremy Rifkin who predicts an end of the capitalist economic mode, much of the mass media seems to touch a public taboo – in discussing the possibility of a system transformation and an emerging post-capitalist society. The most depressing moment in this public discussion consisted in the relapse to capitalist categories and thought forms of those contributions and actors who regard a system transformation as possible or necessary. Jeremy Rifkin’s visions are also overcome by this unconscious relapse.

In her article “The Brave New Share Economy and its Shady Sides,” Elisabeth Voss described where such a distorted and unreflective post-capitalism debate can lead. A new push of precariousness and wage dumping from which the commercial providers of the “share economy” profit is labeled an alternative economic mode. This is merely a rebranding of late capitalism.

Nevertheless a serious and far-reaching public discussion of system alternatives to crisisplagued late capitalism is simply necessary for survival. The increasingly obvious inner and outer limits of the capitalist economic mode extend from the crisis of the work society and all-pervasive state breakdowns to threatening climate collapse that first catapulted the post-capitalist discou8rse into the mainstream. That the only future perspectives offered by late capitalism consist of dystopias or apocalypses – from film to computer games – is very clear given the escalating dislocations and contradictions.

The disintegration of the capitalist world system began long ago in its periphery. The state breakdown in many regions of Africa and the anomist chaos overtaking wide parts of the Arab region are manifestations of capitalist state failure and the molecular civil war in Mexico and Central America where the borders between states sinking in corruption and nepotism and the cartels are blurred beyond recognition.

The rise of extremist movements and parties from European rightwing extremism to Arab

Jihadism accompanies this far-reaching economic and political crisis process – similar to the 1930s. Parallels to the prewar time in the crisis-plagued 1930s are unmistakable. The state machines of the superpowers react to the increasing state contradictions with intensified pressure to outward expansion expressed in the rapidly increasing tensions between the “West” (Europe and the US) and Russia and China. The perspective of a great war between these power blocs – that assumes an apocalyptic dimension given the accumulated destructive potential – moves into the realm of the conceivable and possible.

The great unknown of the consequences of future climatic upheavals to which a system calibrated to permanent growth and boundless expansion cannot provide an answer hangs over all this like a Damosclenes sword.

Thus the search for alternatives to this social disorder sinking in chaos, war and monstrous barbarism is an expression of the plain will to survive, a sublimated survival instinct, where it becomes clear the rescue of individuals can only be achieved through preservation of the civilization process and transformation of society. The search for alternatives to capitalism is not extremist. The late capitalist system decays in extremism like everyday mass murder and increasing dislocations.

We live in an extremist society that constantly sweats out false ideologies like rightwing extremism or Islamism. Those apologists of capitalist rule who still describe this system mutating to a slaughter house of humanity as without alternatives and as the “best of all possible worlds” could be termed extremists. On the other hand, the search for a systemalternative represents the only rational, medium and moderate course. This is an undertaking to which every petty-bourgeois worried about the future of his children could be devoted. Their training to mobbing machines as happened and now happens in the middle class does not open up any future perspectives worth living.

The destructive potential has increased immeasurably through capitalism. However the material potentials for its mastery and transformation have also grown in the bosom of this old dying social formation. The absurdity of the present system crisis consists in the circumstance that capitalism perishes in its hyper-productivity and suffocates in the whole produced mountain of goods. Thus the system alternative to this gigantic capitalist over-production crisis represents something very simple that is hard to realize as Bertold Brecht formulated.

The goal may be of stirring, heart-rending simplicity but the paths there are enormously difficult and arduous. They can only be found by means of a broad egalitarian discussion, a public discourse in which a fundamental characteristic of a post-capitalist society would appear – the conscious independence of all members of society over the social reproduction process.

This eBook could make a modest contribution to deepening this necessarily controversial debate that is vital to survival. This can only be a first step that makes a fundamental orientation within the complex thematic easier for the interested reader and makes possible a first positioning.

The articles make clear the ideas of the “visionary” Jeremy Riflkin – and the discussion kicked off by him – are ultimately based on the theoretical work of a whole generation of activists over years who drafted these ideas and concepts before the mainstream seized them. Thus this eBook should deepen the discourse about post-capitalism. The concepts underlying these mass media slogans should be taken seriously and filled with concrete content so their misuse by marketing strategies of the commercial “share economy” is prevented. Rights to terms like share economy, peer-production, de-growth, post-growth economy and the commons should be disputed in the media circus so their undermining and devaluation can be prevented.

EVERYTHING MUST GO!

By Tomasz Konicz [This article published on 8/21/2015 is translated abridged from the German on the Internet, http://www.heise.de/tp/artikel/45/45755/1.html.]

The privatization wave forced on Greece is oriented in the fatal historical model of the trust. German companies could be the main profiteers The German airport operator Fraport has a very fat fish on its line in maltreated Greece.

[1] For 1.2 billion euros, the German company will take over 14 regional Greek airports

including popular tourist destinations like Rhodos, Korfu and Mykonos as well as the airport of the big city Thessalonica.

In the middle of August 2015, the privatization ideal was published in a Greek public gazette but the sale was not formally completed, a company spokesperson explained.

The Greek government passed a resolution that is the basis for further negotiations on the operation of the 14 regional airports.

Nevertheless Athens’s approval of this deal is said to be certain. In November, the operators of the Frankfurt Airport received a grant for the vehemently criticized privatization. Reuters reported “the new Greek government questions many privatization projects” which creates a “difficult” situation.

The conditions seem clarified now since Athens was forced to a humiliating capitulation at the notorious Brussels crisis summit of July 13 by Schauble and Merkel [Welcome to Post-Democracy! (2)] that included the sell-off of the Mediterranean country.

The company that previously had “little success” in takeover attempts abroad now has a “green light” in Greece, the Handelsblatt newspaper reported on August 18. [3] “A MODEL NOT APPLIED ANYWHERE IN EUROPE” For the Greek Syriza government, there were very good reasons to reject this absolutely scandalous deal in which the iron motto of all privatization – privatize profits and socialize costs – was carried too far. Last July the Greek minister of infrastructure Christos Spirtzis explained to the ARD magazine why this sale of public property is disadvantageous for Greece. [4] With this privatization, the Greek state should sell 14 profitable airports while the other 30 airports that are not profitable and must be subsidized remain with the Greek state…

This model was not applied anywhere in Europe. This is more suited for a colony than for a member country in the European Union.

Nonetheless Athens has now approved the sale. Here is the background. In a neocolonial manner, the German government made sure the Fraport privatization was anchored by a special clause in the “Memorandum for the New Greek Relief Program,” the taz newspaper reported. [5] Syriza must commit itself to the framework of the German dictate – which taz still describes as a “relief program” – to take “irrevocable steps” to sell these remaining “pieces of crème cake” of the Greek infrastructure. Other privatization projects were different, the newpaper remarked.

After Greece was changed by Berlin into an informal German economic colony, the great sell-off could now begin. This seems to be a constant of German crisis policy of the last five years in Europe although the sell-off obviously represents sheer nonsense from an economic perspective. The deficits that Athens must bear with the 30 airports remaining

in public ownership after the profitable airports pass to Fraport will make the Greek state deficit swell. [6]…

The Fraport deal may only give a bitter foretaste of the great sell-off in Hellas since public property sold off cheap under time pressure must usually be sold below its value.

[9] People will be annoyed when these state businesses are quickly sold off. They will not be sold for their real value. The next government will be upset that it faces privatization without a previous model.

SCHAUBLE’S GREAT PRIVATIZATION PLAN The great privatization plan imposed on the Greek government by finance minister Schauble will bring 50 billion euros. [10] Greece’s debt service should be theoretically guaranteed (Merkel speaks of a “guarantee fund”), the recapitalization of Greek banks carried out and the Greek economy stimulated by means of the privatization revenue.

Berlin forced Hellas to transfer “valuable Greek assets” to a trust fund that should then be sold to “private investors.” The fund should be built by Greece but managed under the supervision of “relevant European institutions.” [11] The EU bureaucracy has parallels and distinctions to the trust.

Originally Schauble even intended to control the trust-fund directly by transferring the Greek assets to a Luxemburg branch of the credit bank for reconstruction… [12] The mechanism calls to mind the trust bank after the turn that privatized DDR (East German) property with dubious methods.

At the end of June, the former Greek finance minister Yanis Varoufakis published an astute general reckoning [13] with these German privatization plans in Greece.

Varoufakis drew parallels to the disastrous sell-off of the East German economy through the trust right after the reunification in which public property was sold off cheap “far below its value” which had a “devastating effect on employment” in East Germany. In the end, the East German states – that now represent an obliterated post-industrial land – have never recovered from the extreme de-industrialization shock that the trust executed.

The fundamental difference between the sell-off in East Germany and Greece consists in that the trust’s activity in the new German states was accompanied by “massive West German investments” in the infrastructure and “massive social transfers” while the Greek population cannot hope for that kind of support.

Enforcing this disastrous Schauble privatization model was a pure power question, Yanis Varoufakis explained. [14] That enforcement was not motivated by economic considerations.

After the determining powers realized capitulating before the demands of the Troika was imminent for the Greek government, they say the moment of forcing Greece to its humiliated, unimaginative and destructive trust model.

Schauble cooked up this model out of pure vindictiveness or thirst for revenge, Varoufakis said. Many parts of the public infrastructure stand on the sales list alongside the – profitable – airports. [15] The Greek railroad should be privatized like the electricity industry together with the electricity networks. More sales of public property in the harbors of Piraeus and Thessalonica should follow the sale of a terminal in the harbor of Piraeus. A state refinery is on the sales list. Over 1000 state properties should now have new owners as quickly as possible – like dozens of Greek islands.

In the beginning of August, the Greek rail union carried out the first warning strikes directed against the German privatization projects. [16] Passionate conflicts are expected in the privatization of the energy sector since this is characterized by a high degree of union organization. Schauble’s ambitious privatization projects cannot be fulfilled. The privatization wave that is now “finally running out” [Bayernkurier (17)] intensifies the financial misery of the Greek state in the medium term. The sales plans are “extremely controversial” since many experts regard the goals as “completely unrealistic” [18], the Swiss trade paper reported. Die Welt newspaper said [19] the “benefits of privatizations are very controversial.” However privatization may prevail because this is a power question.

THE GREAT LIQUIDITY BUBBLE The expansive monetary policy of the central banks abruptly strikes its limits with China’s crash

By Tomasz Konicz [This article published on 8/26/2015 is translated from the German on the Internet, http://www.neues-deutschland.de/artikel/982434. die-grosse-liquiditaetsblase.html. The economy in threshold countries has been cooling for some time. With the stock exchange collapse in China, this is now also splashing over on the western stock markets.]

The next crisis confluence seems to be moving closer and closer as shown by the socioeconomic trouble-spots flaring up worldwide. The economic cooling in the former growth motor China that desperately resists the threatening devaluation of its real estateand stock bubbles swelling in absurd dimensions by currency devaluations sent energyand raw material prices downward on the most important western stock indexes in the last days and weeks.

With the falling raw material prices, the precarious economic situation of many threshold countries treated as “locomotives of the world economy” intensifies. They see themselves confronted with declining currency revenues, suddenly devalued local currencies and swelling debt mountains. These increasing dislocations in the semiperiphery of the capitalist world system are leaving behind skid marks in the turbulent financial markets of the western centers. The media mainstream speculates about a “new financial crisis” (SZ).

These seemingly disparate crisis tendencies have a common denominator, the liquidity bubble. The current dislocations ultimately represent the systemic consequence of all the measures with which capitalist crisis policy tried to curb the fallout of the 2007/2008 financial- and world-economic crisis. Politics took the only – system-imminent – right way when the housing bubble in the US and Europe began to burst that sent the world economy in a nosedive and the financial markets in a shock paralysis after the Lehman bankruptcy. The governments of most core capitalist countries crafted massive economic programs amounting to 47% of the 2009 global economic output according to the Kiel Institute. The central banks proceeded to a historically unique expansive monetary policy that coupled zero-interest policy with massive printing of money (“quantitative easing”).

This strategy was actually successful since it prevented the core meltdown of the world financial system and the downfall of the world economy into depression threatening in 2009. However this happened at the cost of a renewed bubble promoted by the economic- and fiscal measures of politics. The massive economic programs – particularly in China – and the constant liquidity injections for the consumptive world financial system – particularly in the US – triggers a new speculative dynamic whose driving motor is the liquidity pumped into the markets. The functional elites of politics can only put out the uncontrollable speculative fire on the financial markets with gasoline – by facilitating a regular financial bubble transfer that cushions the threatening disastrous consequences of a burst speculative bubble with a new bubble.

Given the zero-interest policy in the centers, this investment-seeking capital went where profit expectations were higher – to the threshold countries that experienced a brief debtfinanced boom after 2008, a so-called deficit economy. In view of the threatening interest-turn of the Fed and exhaustion of these deficit economies, capital flows back again to the centers. Up to a trillion dollars was withdrawn from threshold countries during the last year that will lead to currency turbulences and financial crises in the semiperiphery mentioned at the outset.

The first collapses on the markets in the center of the world system imply that the West is not screened from these dislocations in the periphery since the currency liquidity bubble has taken on global dimensions. With its overheated stock market speculation, China reflects this global crisis course. The enormous bounce on the stock markets in Germany and the US is absurd in view of the concrete economic development. The expansive monetary policy of the central banks – earlier the US Fed and now the European Central Bank – did not lead to any inflation since it inflated the afore-mentioned liquidity bubble that triggered an inflation of security prices and property titles seized by the speculation fever in Peking, New York and Frankfurt on the Main.

Thus the late-capitalist world system is driven by a financial bubble economy gaining intensity with its speculation-fueled boom phases that are promoted to central economic drivers – while the costs of stabilizing the world economic system with the unavoidable bursting of these bubbles swelling in increasingly perverse dimensions constantly grow.

The present liquidity bubble presupposed the aforementioned transatlantic real estate bubble that followed the great dot.com bubble at the beginning of the 21st century (Nasdaq-boom, T-stocks and new market). The “dominant” functional elite act as drivers of this historically unique financialization (and indebtedness) of capitalism by trying to prolong these crisis processes and shifting their disastrous consequences to other groups or regions (periphery, socially weak, unemployed, etc).

However no relevant actions are available to politics given the extreme measures that had to be taken with the bursting of the real estate bubbles in the EU and the US (zero interest policy and excessive printing of money). These options would cushion the renewed collapse of the current liquidity bubble and transport to a further speculation dynamic by means of a financial bubble transfer. A renewed debt-driven stabilization of latecapitalism stifled in a hyper-productivity seems hardly possible.

13. FINANCE-DRIVEN CAPITALISM by Joachim Bischoff [This summary of Joachim Bischoff's new book "Finance-driven Capitalism" is translated from the German on the Internet. The reading sample is translated from the German, www.vsa-verlag.de-bischofffinanzgetriebener-kapitalimus.pdf. Joachim Bischoff is an economist and editor of the journal Sozialismus.]

The current form of capitalism that fell into crisis worldwide in 2007/2008 is termed finance-driven. Unlike past crises, we see today an enormous bailout activity of the state. The "bank crisis" was transformed into a "state debt" crisis.

Breaking the compromise between paid labor and capital gained through struggle in the postwar time is one of the characteristics of financedriven capitalism. The consequences are a strong decline in unionorganized paid labor and growing precariousness.

The actions of property owners and other financial market actors mark the development of society and no longer technical-industrial innovations - in the form of expanded concrete international investment possibilities, new financial instruments and inclusion of employees (pensions and pension funds etc). Thus financialization refers to the increased significance of financial markets for society altogether and not only to business profits.

Financialization includes different changes: deregulation and opening of the financial markets, marketing of financial relations, explosive expansion of new financial instruments and the rise of institutional investors. The consequences are shareholder value orientation for management of businesses and expansion of the credit- and investment business for private clients in mortgages, consumer credits and private old age insurance.

Controlling banks and financial markets alone is not enough to avoid crises. A social regulation of the economy and a re-calibration of the European system of states are among the necessary alternatives.

14. ALTERNATIVES TO STAGNATION AND DEPRESSION

by Joachim Bischoff Politics has fought the symptoms of the great crisis with banking- and economic packages while its systemic causes remain untouched‌ The hardest phase of the great crisis is ahead of us, not behind us. All sectors try to safeguard their position through spending cuts...

[This article published on 7/22/2013 is translated abridged from the German on the Internet, http:////www.sozialismus.de.]

The 20 leading industrial- and threshold countries (G20) conjure economic growth in view of growing uncertainties in the world economy. At the G20 summit in September

2013 in St. Petersburg, there should be an action plan with a short-term emphasis on more growth and employment, the G20 financial ministers and central bankers declared.

The German economy is in an upwind, according to the German Bundesbank president Jens Weidmann. . Germany will post “an enormous profit in the spring” after a weak winter. This outlook for a slight strengthening of the German economy should certainly be taken with a grain of salt. In 2013 growth in Germany will move in a corridor from 0 to 1 percent.

The prospects for the Eurozone are even more modest. Germany remains the locomotive for the European economy. In 2013 the Eurozone will continue in recession and shrivel 0.6%. In 2014 it should rise 0.7 – thanks to Germany. Without Germany, the economy of the Eurozone would only grow 0.2%. “This is neither a recovery nor a recession,” reported Kai Carstensen from Ifo in Munich. Considered realistically, one could also say politically-conditioned smooth-talking is at work here.

The recession in the European monetary union is deeper and will last longer than predicted by many economists and most political decision-makers. There are undeniably signs pointing to a gradual improvement of the economic situation. At the earliest the economy of the Eurozone will not shrivel any more in the third quarter. For the whole year most economic experts assume a 0.7% decline of the economy in the Eurozone. This will be the second recession year in a row.

Economic weakness is a problem of southern Europe’s debt states first of all. In Greece, Portugal, Cyprus and Ireland, the downward dynamic is unbroken thanks to the ridiculous austerity policy. However the weakening of domestic demand has expanded to the core of Europe, namely to France and the Netherlands. In countries like Italy, the political contradictions increased in the last months. Hardly anything of a necessary growth policy can be seen in France, Italy or the Netherlands.

The European Central Bank holds fast to its policy unlike the US where brightened economic data moves the Federal Reserve to suggest throttling down the expansive monetary policy.

Commercial banks that deposit their surplus liquidity over night with the European Central Bank do not receive any interests today. With this measure, the financial institutes should be moved to award more credits to corporations. However commercial banks withholding credits from businesses is not only a problem in the periphery-states of the Eurozone. A withholding of investments for reasons of cost reduction occurs on the side of businesses. Infrastructure investments of the public authority declined in the last years.

The Netherlands, model student of austerity ideologues Merkel/Schauble for years, is caught by the downward dynamic. With a 0.8% decline of economic output, the country will come out the weakest this year within core Europe. The restraint of corporations in wages and investments is to blame here – as in the Euro periphery states. This led to a

decline of domestic demand.

This trend is intensified by a rise in the unemployment rate, higher income taxes, falling home prices and increased indebtedness of private households. The conclusion is that the austerity policy pushed by Germany in the Eurozone intensifies the crisis constellation and remains focused short of breath on merely gaining time. More crisis measures will be adopted after the September 2013 Bundestag elections.

The Austrian economic researcher Stephan Schulmeister massively criticizes the austerity policy in the Eurozone and the one-sided interpretation of development. “We are skidding into a depression” (“Ten Steps into Depression” in Frankfurter Rundschau 7/18/2013). It is “incomprehensible” that the majority of German economists repeat what was done under the Heinrich Bruening government in the inter-war period. All chances of reviving the economy in Germany were stifled at that time through the severe austerity course.

A “catastrophic development” is manifest in southern European countries. No upswing is possible in these states through the austerity policy. Gradually the shriveling process also seizes the northern countries. The financial crisis of 2008, the following Euro-crisis and its perception as a state debt crisis are part of a long-term process of worsening economic and social outcomes under financial capitalist framing conditions.

“Politics has fought the symptoms of the great crisis with banking- and economic packages while its systemic causes remain untouched… The hardest phase of the great crisis is ahead of us, not behind us. All sectors try to safeguard their position through spending cuts amid falling stock prices, high unemployment, empty state treasuries, EUwide austerity policy and unstable exchange rates and raw material prices: businesspersons, households, foreign countries and the state. That is fuel for a crisis over several years.”

Breaking out of the downward dynamic and an age of austerity requires a political change to a “New Deal” as a concrete alternative concept. To promote the transition to real capitalist framing conditions, the “New Deal” gives greater priority to activities in the real economy than the activities of “financial chemistry.” Simultaneously the overall strategy concentrates on those tasks that were systematically ignored in the neoliberal age. Their mastery would enormously increase real value creation and permanently improve conditions for a “good life,” according to Schulmeister.

In the middle of a grave crisis, an efficient macro-economic fiscal policy must redistribute income from the household sector to the state so private savings decline but not consumption. At the same time short-term speculative activities should be limited to the financial markets and long-term real economic activities of businesses promoted. The measures of the “New Deal” can be financed by contributions of high and the highest incomes and assets and by a higher taxation on financial transactions and financial assets.

The core problem of breaking out of a stubborn depression in the EU is inadequate social

demand. Businesses do not invest enough in new plants or equipment and therefore create little wage income and jobs. The alternative to consolidation policy can be viewed as a political decision, setting investments over social consumption and getting the economy going again.

This has absolutely nothing to do with a continuation of debt policy. Interventions in distribution conditions are necessary, selective tax increases in times of economic distress. Europe needs structural reforms but not as urged by defenders of a consolidation policy. The alternative to consolidation includes financing public goods and services not adequately funded by the private capitalist sector through increased taxes on higher incomes and on profits on property and amassed mammoth assets: improved social security, education, health care and public infrastructure.

Thus the alternatives for further development are clearly outlined. One cannot assume they will play a great role in Germany with the present hierarchy of power.

CRITICISM OF ECONOMICS

By PROKLA editors [This editorial published in June 2013 is translated from the German on the Internet.]

The financial crisis of 2008/2009 and the following economic crisis have shattered dominant economic theory and the economy. Extensive deregulated financial markets, the peak of economic efficiency according to neoclassical doctrine plunged into a deep crisis in the shortest time. A far-reaching collapse of the international financial system could only be prevented through enormous state bonds and financial injections for big banks – in complete contradiction to the market radical dogmas. The analytical helplessness of neoclassicism was so obvious in view of the crisis that many appearances of its advocates seemed embarrassing. In light of the vast economic programs with which the US, Germany and other states reacted to the financial market- and economic crisis, some observers saw a Renaissance of Keynesianism on the horizon. In some media, people are even reminded of the Marxist theory that crises are necessarily part of capitalism.

But all this has not damaged neoclassicism very much. Its reputation is somewhat tarnished. That the market creates the best of all possible worlds and that privatization of state enterprises automatically leads to more efficiency and greater prosperity cannot be defended in the public as easily as a few years ago. Heterodox, Keynesian and Marxoriented voices have become louder. However the dominance of neoclassicism is institutionally unbroken in universities, research institutions and think tanks – both on the “supply” and on the “demand side.”

For years business administration has been in first place in the popularity of students at German universities. More young persons than ever prefer it to jurisprudence or

medicine. It ranks far ahead of German studies, language and literature for young women.

Managers and financial- and business advisors mostly decide for business administration because business administration promises prestigious vocations and relatively high incomes. The discipline is often denied an academic or scholarly character within the scientific community since neither theoretically nor empirically higher claims are pursued… “Customer-orientation,” “Entrepreneurship,” “corporate branding” and “guerilla-marketing” are often put on the market as panaceas or magic formulas without facing the limits and internal contradictions of those concepts. The MBA course (Master of Business Administration), the royal discipline of manager education, is internally criticized by some because complex realities are reduced to numbers enabling quick decisions without understanding the economic and social context. They are accepted uncritically by most students and teachers.

The popularity of the discipline is a symptom of a social condition that is not limited to the organization of the economy but should be applied to culture, education and the social state… Moving the actors into the center and propagating markets as the most efficient form for allocating resources are characteristics of the economics discipline. The continued dominance of neoclassicism in the last decades was also connected with a reprioritization of economic themes.

Micro-economy has strongly gained terrain over against the macro-economy that in its Keynesian variants always stood in suspicion of abandoning the way of pure faith in the market. The micro-economy has proven to be very capable of learning by largely bidding farewell to the ideal type of homo oeconomicus, this calculating machine on two legs incessantly estimating benefits or profits. That people have limited information, depend on others in their behavior and have cultural characteristics was a common inheritance in sociology since time immemorial. However new discoveries on the conduct of actors on the financial markets are offered in behavioral economics and in specializations like behavioral finance. The insight that these actions in no way act in an instrumental rational way but are “risk adverse” under circumstances, apply a “cognitive framing” for information and often display a “herd conduct” undoubtedly represents a reality-gain.

However those explanations that reduce connections of society to “irrational” psychic dispositions of its members prove half-hearted since they fade out the structural moments of capitalist economics – the pressure exerted on many of these actors to maximize shortterm profits on deregulated markets under the whip of competition. These actors undoubtedly act under uncertainty but can assume – as far as they have a certain power position like banks – that they will successfully shift the risks of incorrect calculations to weaker market actors or the state. Different possibilities of actors and social power relations should be analyzed, not only systemic pressures of orientation in profit. These dimensions are diligently faded out when a textbook world is assumed…

Reproaching dominant economics as unrealistic or out of touch is hardly new. In the 1960s Hans Albert criticized a discipline that delighted in constructing elegant models where all actors acted rationally and the economy represented a system of adjustments and recurring states of balance that can be disturbed from the outside. He described this

denial of reality as “model Platonism.” Such arguments were countered with the idea – we are at the beginning of a long promising research way – an idea repeated rightfully four decades and several crises later.

A criticism referring substantively to neoclassicism is stronger than the merely formal criticism of model Platonism. These are on principle two very different starting points.

On one side a criticism of basic neoclassical categories can be oriented in the Marxist criticism of political economy that shows neoclassicism cannot fulfill its own claims. The usual abstractions out of touch with reality are not enough. One must go further and presuppose a “one-commodity-economy” (an economy in which only a single kind of capital goods is produced). With a “two-commodity-economy,” popular doctrines prove wrong like the wage rate and the extent of employment which are in an inverse relation.

The employment level can only be raised when wages (or non-wage costs) fall…

The opposition of orthodox and heterodox recalls historical struggles of the Catholic Church against deviationists and heretics. Even if the stake is not common nowadays for excluding dissenters, the methods of the orthodox mainstream prove extremely effective in preventing pluralism and open debates by simply ignoring the heterodox, particularly by not citing them in scholarly journals or appointing them to professorships. An intensified effect of “methodical monism” appears in the popular journal Rankings in the framework of the dominant paradigm. Katharina Mader and Jana Schuldheiss emphasize that feminist economy has enormous variations and is not a closed system…

The dominance of neoclassicism is important for the real economic praxis of the state and businesses and not only for academic life… The triumphant procession of “quantitative risk measuring models” was promoted by the discipline, given Nobel Prizes and anchored institutionally by authorities.

15. THE CATASTROPHE HAS ALREADY BEGUN Karl Georg Zinn Capitalist growth has become the problem, promotes famines and strangles full employment. Can the world be rescued\? Mass unemployment has never lasted as long as today; global problems increase. Jean Jacques Rousseau said: "Distribution means no one is so rich he can buy others and no one is so poor he must sell himself." A change of consciousness is necessary so the population strives energetically for distribution justice..

The public is persuaded there is no alternative.

Karl Georg Zinn warns of a depressing future.

[This interview published May 27, 2014 is translated from the German on the Internet, http://derstandard.at.]

[Can the world be rescued? Mass unemployment has never lasted as long as today; global problems increase. Admonitions like those of John Maynard Keynes die away unheard.]

[Dr. Karl Georg Zinn (74) is an emeritus professor of economics at the Aachen Technical Academy and son of the former Hesse prime minister George-August Zinn.]

Der Standard.at: Income and inequality are distributed unequally today but discussing redistribution is still taboo. Or are appearances deceiving\?

Zinn: Capitalist growth has constantly increased distribution inequality. 17 percent of the world population appropriates more than half of global value creation. But does quality of life really increase with greater consumption for someone with a reasonable income? I agree with the enlightened Frenchman Jean-Jacques Rousseau: "Distribution means no one is so rich he can buy others and no one is so poor he has to sell himself."

Der Standard.at: How can quality of life be raised\?

Zinn: We cannot solve our contemporary problems through growth. Distribution equality obviously does not mean complete leveling. Rather the question is what a humanly acceptable differentiation is. The highest top incomes are paid in the most unproductive sphere - the realm of finance capital. A change of consciousness is necessary so the population strives energetically for distribution justice and puts politicians under pressure.

Whether this succeeds is doubtful as we saw in the example of the bank bailout. Politics has become largely extorted by finance capital. The public is persuaded there are n o alternatives.

Der Standard.at: Is there"growth fetishism" in our democracies?

Zinn: Fetishism is something metaphorical. Despite all uncertainty, the majority still thinks jobs will vanish without growth. The notion that nearly all socio-economic problems can be solved by starting up the growth machine is fatal.

In the 1930s and 1940s the famous English economist John Maynard Keynes predicted that the highly developed countries would inevitably experience falling growth rates. This forecast is confirmed by the real economic development. For 30 years, growth remained weak - much too weak to return to the growth path toward full employment. Previously the industrialized countries never had to survive such a long phase - a generation - with mass unemployment. Even during the great worldwide economic crisis of the 1930s, mass unemployment "only" lasted ten years before it then ended abruptly with the Second World War. Der Standard.at: Tragically mass unemployment strikes the youth above all in many countries.

Zinn: The young generation of today is socialized under conditions in which mass

unemployment is seen as something normal. Three decades of mass unemployment are unique. That forceful mass protests did not occur and are not occurring is due to ideological propaganda that there can be no alternative to neoliberal ruthlessness. The population seems reduced to subservient citizens who are hardly politically active.

Enlightenment about political-economic alternatives is also lacking.

Der Standard.at: In this context, you like to quote Keynes.

Zinn: Completely narrowed and distorted ideas of Keynesianism were spread. That Keynes proposed much more than only anti-cyclical economic policy against unemployment is actually unknown. As was the rule for three decades, far-reaching distribution - and working hours measures are indispensable with constantly low growth.

"Long-term" Keynesianism occupied with the problem how full employment can be achieved without growth was a book with seven seals to many Keynesians in the past.

In 1030, Keynes already anticipated many findings that were recently rediscovered by economic happiness research as news. For example, increased satisfaction and quality of life is hardly experienced above a critical income level or critical consumption level.

Endless economic growth and endless population growth are not possible on a planet that cannot be multiplied or is not exponential. This may be obvious to everyone with common sense. Keynes recognized all this decades ago but many Keynesians still cling to the growth paradigm.

Der Standard.at: What is your explanation for this?

Zinn: Keynes' reflections were so visionary he was dismissed as a "crackpot" in many places. In 1943 in the middle of the war, the recommendation to carry out reduced working hours amid constantly low growth rates and mass unemployment is found in the brief Keynes text about "The Long-Term Problem with Full Employment."

Whoever takes note of Keynes' 1943 long-term prognosis will have his eyes opened and his mind will have a joyful aha-experience. However there is no inclination among statusquo defenders or growth-fetishists to seriously grapple with the "revolutionary" Keynes on account of this enlightenment potential. Therefore that 1943 text was almost only known to insider circles in the past and was too explosive for politics.

Der Standard.at: Is that why we are accelerating our global problems ourselves?

Zinn: Each of the problems becomes more pressing when we continue business as usual and grow. Collective failure is involved. The catastrophe has already begun. One only needs to look to Africa, at the famines and the conflicts accompanying the famines.

Resource conflicts are often sold to us as ethnic or religious conflicts. A constant shortfall of life possibilities persists.

The perversion appears in the subdued music at the Mediterranean while people simultaneously drown in the same region. The poor population presses in the richer

regions. A brutal social Darwinism will erupt if this development assumes quantitatively greater dimensions. We already see the beginnings that are taking effect very differently.

The climatic changes will be more clearly visible in ten to 15 years. Great catastrophes will occur by the middle of the century if better counter-measures are not introduced. The antiquated is unfortunately not useful any more.

Der Standard.at: Many disasters are already visible today.

Zinn: Because of population density, natural catastrophes will be increasingly disastrous in highly developed countries. We only need to think of the tsunami in Japan. 30 million people, the population in the Tokyo area, cannot simply evacuate. One only lies in saying everything is not so bad. The technically feasible was not done because of corruption and capitalist lobby politics of the government.

Der Standard.at: The world population is growing tremendously alongside the capitalist growth.

Zinn: World population has increased almost tenfold in the last 250 years - from 750 million to more than seven billion. However the demographic world problem is a taboo even for many of the more progressive contemporaries. Hardly anyone dares to point to the nearly unavoidable catastrophe as the Englishman Stephen Emmott explains in his recent book "Ten Billion." The "left" think warnings about over-population can be rebuffed as a long antiquated anti-Malthusianism. The "right" is not inclined to recognize population-oriented interventions as necessary.

Regarding the viability of the global food question for eight, nine or ten billion people, I am a pessimistic optimist. A better world can be created. Everything in harmony with the natural laws is possible but people must resolve this and force politics to make the necessary reforms. I am optimistic and confident as to the technical-economic solubility of the queued-up problems. However the political inertia and the capitalist enrichment greed of a small oligarchy with great political influence oppose all optimism. Presumably this will change somewhat when avoidable catastrophes trigger quasi-revolutionary shocks.

C. ALTERNATIVE ECONOMICS: REJECTING MILITARISM AND NEOLIBERALISM

1. LESS GROWTH AND LESS WORK Mohssen Massarat French economist Thomas Piketty described neoliberalism or finance capitalism as an "inequality machine." Profits soar and investments are postponed. Keynes spoke of three phases: investments, surplus and stagnation. Are economic alternatives and trade agreement blacked out from public discussion\? Reduced working hours is the only way

to full employment and to gaining a work-life balance. Doing the same thing and expecting a different result is the definition of insanity.

LESS GROWTH AND LESS WORK A Realistic Alternative

By Mohssen Massarrat [This article published in: Wissenschaft & Umwelt 13/ 2009 is translated from the German on the Internet.]

Forty years after the catastrophe of the 1920s and 1930s, the tragedy was repeated in the new garment of neoliberalism that sought to turn back the wheel of history to the 19th century. Neoliberal ideologies, parties and institutions successfully instrumentalized the distresses and social uncertainties of people for their invisible dictatorship and cu9ltural hegemony and enforced Manchester capitalist conditions worldwide.

The result is well-known: 9 million unemployed, low income persons, subcontracted workers and Hartz IV recipients in Germany alone. Contrary to all neoliberal promises about creating new jobs through flexible labor markets, liberalizing trade and strengthening the competitive positions of business persons, increased profits since the 1970s were invested in rationalization and job destruction (and above all on the deregulated international financial markets).

Neoliberalism brought mass unemployment which increased and did not decrease everywhere in industrial- and third world countries - wherever growth as possible.

Neoliberalism was like a global mega-bulldozer that rolled on the inclined plane of global wage disparities and tore down all political and moral barriers standing in the way of the interests of the rich of this world. Neoliberalism has long implanted this culture in the minds of people - competitiveness through more work and lower wages and social benefits. [1] It made possible a smooth redistribution from bottom to top and from South to North and played off governments against unions, local communities and states against the nation, younger against older generations, men against women and domestic workers against foreigners. Neoliberalism instrumentalized globalization in the interest of a global minority, intensified the global joblessness, provoked wars and intensified the social division within and between the unions. It was - and is - a strategy of wealth distribution [2] and of the zero-sum game, led to more unemployment in one place because people were simultaneously put on the street in another place and stimulated growth only through cheapening labor and nature and consequently over-exploitation of human workers and the natural foundations of life. Active possibilities for future planning, for strategies for ecological redevelopment, climate protection and global combating of poverty were reduced to zero. The invisible neoliberal dictatorship represents the greatest barrier for solving global challenges like climate change. After fascism, it is the greatest threat to civilization.

BUILT ON SAND While mass unemployment increased, the wage rate and the domestic purchasing power of millions of people declined while governments following the credo of neoliberal ideologues gave big business tax gifts in the billions. Surplus capital was withdrawn from value creation in the real economy - into the hands of great capital and shareholders seeking investments with the highest profits. From Germany alone - to name one example - 260 billion Euros in profits and revenues in 2008 flowed on the international financial markets through the ridiculous profitability of 25 percent and more. In this virtual world, managers come under pressure to increase profits in the real economy by lowering wages and dismantling social systems to the disadvantage of working people.

Whoever thinks this virtual world benefits the environment since it absorbs funds that otherwise would flow in destructive "real projects" is mistaken. All speculations have a material basis whether oil stocks, real estate derivatives or investments in soy plantations.

This basis can be very great... New skimmed-off profits usually have a considerable material basis like the single family homes of the American middle class built on sand covering the whole landscape.

While neoliberal capitalism finds itself in an historical legitimation crisis, nothing indicates politically that a system-change is on the horizon. With all their power, protagonists seek to save their system. They could succeed in this if the victims of neoliberal capitalism do not use the chance for a system change offered by the second great world economic crisis.

A SYSTEM CHANGE If there is a serious difference between the two crises of 1929 and 2009, it is in dealing with the consequences of the crises. The governments of the G8 and G20 states succeeded in resisting protectionism instead of being screened by nationalism and protectionism as in the 1930. That reaction prepared the ground for German fascism and the Second World War. All this happened when the governments were willing and able. The "bailou8t packages" for banks and mammoth corporations resolved in Germany, Europe and the US as well as individual measures like clunker premiums for old cars and short-term work are obviously intended to curb the rage of the present world economic- and financial crisis whose burdens will strain future generations through several thousands of billions of Euro state indebtedness. All previously resolved measures - in Obama's US as in Merkel's Germany, Sarkozy's France, Brown's England and Berlusconi's Italy - are the opposite of a solution.

The real causes of the crisis are still not recognized. These are related to the causes of the

first world economic crisis in the 1920s as neoliberalism is similarly confused with classical laissez-faire liberalism. This first variant of capitalism led to the first world economic crisis since the anarchist logic of individual capitalists ("After me, the Flood") determined economic events.

Unfortunately the clever critics of neoliberalism have not drawn the consequences from their own diagnoses regarding therapy. Joseph Stiglitz warns astutely of Obama's substitute-capitalism and explains that the "500 billion-bailout package of the US government leads to "banks winning, investors winning while taxpayers lose" (Stiglitz 2009). In the past, he limited himself to only proposing more efficient measures of financial policy. This is similarly true for the recent Nobel Prize winner Paul Krugman who in the style of classical Keynesianism supports a comprehensive economic program and warns against making state indebtedness taboo (Krugman 2009). Rudolf Hickel who proposes a consistent program "to regulate capitalism" does not argue any differently (Hickel 2009). However his financial regulation proposals are not a proper answer to his own causal analysis. [3] The time is right for contrasting the neoliberal model obliged to the financial world, capital and machines with another model originating from the interests, basic needs and basic rights of people. Neoliberalism was always a power-politics strategy of the rich, the world elite and powerful states, not an economic theory. This strategy owed its triumphant advance to the weakness of leftist parties and unions, ultimately to the crisis of classicalemployment Keynesianism to which the left still holds, not of its own conceptual and moral superiority.

For several decades, this classical Keynesianism provided OECD states with effective concepts for containing mass joblessness and was unrivaled as a strategy for mobilizing growth resources during the postwar era in the industrial states of the North with their seemingly inexhaustible growth capacities. Where growth resources are declining, the rationalization speed quickly increases and is widely superseded by intensive growth strategies. Keynesian instruments for creating jobs are losing their striking force. High growth rates in highly developed capitalist states belong to the past. These growth rates have been below the rate of labor productivity since the beginnings of the 1970s. In developed industrial countries, more and more social wealth is produced with less and less living labor. Whole population sectors lose their work and are uncoupled in the long run from the labor process and the economic cycle. The high rationalization speed as a result of countrywide use of high tech and communication technologies can no longer be cushioned despite considerable efforts in mobilizing new growth capacities.

Classical Keynesianism presently experiencing a Renaissance [4] seems unable to lead out of the crisis. The first world economic crisis was overcome by a system change away from Laissez-faire capitalism to Keynesian capitalism. A system change is imminent today. The crucial question is where\?

REDUCED WORKING HOURS AND FULL EMPLOYMENT CAPITALISM WITHOUT GROWTH

First of all, the illusion of an unfettered growth must be abandoned and zero-growth recognized as an economically and morally positive goal. Zero-growth on a high level is a very critical goal that mobilizes creative potentials for a "qualitative" growth - building social services, ecological agriculture and renewable sources of energy. A return to higher growth rates - even if attainable - would not be desirable for ecological reasons.

Secondly as the next step, building a "full employment capitalism" stands on the political agenda and unlike Keynesian capitalism is not based on growth. For full employment through growth, growth rates of 3 percent and more must be realized over a long period of time that are higher than the rates of present increased productivity amounting to 2 to 3 percent. However the economy in most EU states has already reached its growth limits.

The new capitalism with a constant tendency to full employment is built on new politically defined regulatory mechanisms: firstly short-term within a few years (transformation phase) through radically reduced working hours and fair distribution of the total work volume. Then the successive reduction of working hours in the long-term adjustment process coupled to rising productivity follows after reaching full employment.

In this perspective and with demographic realities and work concentration, the volume of paid work declines in the long-term with the level of the gross domestic product staying the same (zero growth) since increased productivity balances the negative effect of declining work volume. So paid labor shares at last in the productivity gains and receives more free time for that.

Zero growth, less gainful work and more quality of life are new substantive orientation points that help regain lost ground for genuine reforms and a more socially and ecologically just world. A redistribution of gainful work and income without substantial loss of prosperity is entirely possible. "The actual weekly working hou9rs of full-time employees in the EU lies between 37.7 (France) and 43.3 hours (Great Britain). Germany is in midfield with 39.9 hours. The average full time working hours must be lowered from the spread of 26.4 hours per week in Belgium to 34.4 hours in Austria to reach full employment through redistribution of the existing work volume. The EU average would then be 31 hours" (Bontrup/ Niggemeyer/ Melz 2007). For Germany, the present work volume of 56 billion hours must be redistributed to 44 million persons. With 45 weeks of work, full employment can be reached through lowering to 28 hours per week (Memorandum 2008).

The statistically-calculated reduction of working hours can be carried out individually in many forms and with a flexibility that does justice both to the interests of employees and the requirements resulting from administrative procedure - part-time employment, shorter weekly-, monthly- or annual working hours. Mass unemployment means the destruction of work ability. All potential abilities could be optimally used through full employment and flexible regulations.

A successive reduction of working hours coupled to productivity with simultaneous

qualitative growth in areas like education, health care and environmental protection can also be financed. This pays off economically since the formerly unemployed relieve the social treasuries through their social security contributions and make unnecessary transfers from tax revenues to social funds. In every regard, macro-economic reason supports financing reduced working hours, not unemployment.

MEANS AND WAYS The crucial question is how this alternative can be accepted socially, gain a majority and be carried out politically. Linkage of the relevant actors is vital. The growing rejection of neoliberal globalization seizing all social groups offers a platform for a broad political alliance with a social-ecological orientation that is supported by unions, social movements, social groups and bourgeois capital groups which neoliberal capitalism led to the edge of ruin and self-sacrifice. Forming an alliance under the dominating spirit of neoliberalism is certainly a very complicated challenge. The de-politization in the last decades, the naĂŻve attitude that the cup will pass and the clever gambit of the governments to shift the drastic effects of the current crisis with new indebtedness to the burden of future generations in the future - all these and other factors certainly make difficult the genesis of a powerful counter-movement that can overturn the social-political mood.

Nevertheless mastering this challenge is not impossible.

The price for realizing full employment in capitalism without growth is that the effective national income and the monetary purchasing power of all social classes will stay constant and not grow any more. Financing the conquest of mass unemployment through fair division of the total work volume also assumes a fair distribution of income during the transformation phase. Without income adjustment, reduced working hours leads to poverty and unacceptable losses in prosperity for lower income groups. (a) Funds from financing unemployment are one source for financing the maximum equalizing for low wage- and income groups. (b) Tax relief or even tax exemption for the lower income groups, (c) rearranging from higher wage- and salary groups in collective bargaining and (d) full taxation on income of independent persons. Full wage compensation in reduced working hours still urged by unions and leftist groups and parties in Germany cannot be realized without growth. Gaining a majority is blocked politically. Renouncing on this demand and coming to terms with maximum wage adjustment (Sauerborn 2009) is a prerequisite for pressing the capital side to higher taxation on their income.

Zero growth means maintaining the monetarily financed prosperity and in no way is a stagnation of material and immaterial prosperity. Through reduced gainful working hours, time prosperity increases and the possibility of using the newly gained time for satisfying diverse needs beyond the monetary sector (from growing one's vegetables in the allotment garden to artistic activity). Despite significant advantages of the full employment without growth in capitalism model, backward-oriented business associations, neoliberal media, parties as well as politicians will fight this project most sharply. The project as a whole touches the asymmetrical distribution of power and wealth in Germany and the world. A broad social alliance is necessary for acceptance of the project. Considerable efforts and an offensive debate and enlightenment are demanded of all participants, even in their own

ranks.

At the same time, alternative possibilities for arranging leisure time, enhancing individual self-realization options and raising quality of life must be developed. The project clearly goes beyond the employment dimension. Alternative projects like division of labor just to the genders, continuing education and self-realization, citizen initiatives for supporting the needy and protecting the environment have wind behind them. A plus in available time for everyone, for the family and solidarity life together comes with renunciation on higher income, in particular more quality of life.

Distribution in the long-term will be regulated on the basis of relative strengths - relations that may be more balanced than under present conditions of mass unemployment and neoliberal capitalism - and by the parties to wage agreements. This will happen after the end of the transformation phase and after the model has been socially accepted. In this model, the foundations of capitalism also remain untouched as long as serious alternatives are not carried out.

IS THE END OF CAPITALISM IMMINENT\?

Neoliberal capitalism has now fallen into crisis, not capitalism. Those who repeatedly sing the song of the "end of capitalism" may help in the circulation of illusions. However they hardly contribute to enlightenment and development of alternatives to capitalism. The alternative to capitalism will not appear suddenly from nowhere as soon as the capitalist cycle collapses and the model of capitalism loses legitimation and fascination. It is more likely that a sudden end of capitalism will change abruptly into a new fascism. The seed of a new society will arise and be seen and developed in practice by ever-wider social sectors in the society dominated today by capitalism. Permanently conjuring "the end of capitalism" may not be a great service in view of the unsolved global challenges and the present crisis. Not completely missing what is historically possible and politically realizable may be crucial.

Reduced gainful work with or without wage adjustment is not anti-capitalist per se. Full employment without growth could even stabilize capitalism in industrial countries through increasing acceptance. A more just distribution of growth and income in the world may improve the global consumer demand - as in the industrial countries after the war and thereby favor the prerequisite for a new deregulation of capital accumulation and global economic growth. People should not have any illusions about this perspective.

The model "Less gainful work and more quality of life and jobs for all" opens a window of hope to snatch an ever greater share of material production of goods and services from the driving forces of capitalist accumulation and the "practical constraints" underlying them. This perspective could be more revolutionary than verbal-radical capitalism criticism.

Pointing the way to the future started from the readiness to exchange income and economic growth for freedom and quality of life. From the perspective of ecological and

global justice, the insight is less and less contested and more and more feasible. The age of economic growth and increased consumption was definitively over in the industrial countries of the North with the end of the 20th century. In the 21st century, redistribution and sustainable development are on the agenda.

CHEAPENING LABOR AND NATURE Neoliberalism simulated growth by cheapening labor and nature and thus overexploitation of human labor power and the natural foundations of life.

CRISIS Unfortunately even clever critics of neoliberalism have not drawn the conclusions from their own diagnoses on what seems commanded for therapy.

REORIENTATION Zero growth, less gainful work, more quality of life - these are now substantive orientation points that help regain lost ground for genuine reforms and a more socially and ecologically just world.

REASON. In every regard, macro-economic reason supports financing reduced working hours, not unemployment.

POINTING THE WAY TO THE FUTURE. A signal for the future started from the readiness to exchange income and economic growth for freedom and quality of life.

MOHSSEN MASSARRAT, 1942, studied economics and political science in Berlin, professor (retired) of political science at the University of Osnabruck, themes: political and social-ecological economics, international economic relations, globalization, sustainable development, peace and conflict research, Middle East. E-Mail: mohssenmassarrat@uni-osnabrueck.de This article is based on the author's texts "30 Hour Week for Europe" (sandimgetriebe 34, 6/22/2004. http://sandimgetriebe.attac.at/979.html) and "Full Employment Capitalism.

Plea for a System Change" (Widerspruch. Beitrage zu sozialistische Politik, 2009, p.141153, www.widerspruch.ch).

NOTES 1. Neoliberals selectively use liberal principles, support the liberalization of trademarks in threshold- and developing countries but not liberalization of the agriculture of the EU and the US. They denigrate all laws promoting renewable energy, speak explicitly for building nuclear power plants and put in question the billions in subsidies for this industry. With liberalization, neoliberals think of the unfettered movement of financial streams and streams of goods over the whole globe. With flexibilization, they do not think of taking

into account the diverse needs and interests of people but subordinate human work and existence to administrative efficiency criteria. With privatization, they in no way think of expansion of human privacy and spaces for self-determined work as well as other possibilities of self-realization - no, they do not mean that at all. Rather they think public goods like social services, health care services, education, water- and energy supply, security (police and army) - and even administration of justice must be open to financial world access and subordinated to capitalist exploitation conditions.

2. Cf. on the function of neoliberalism as a strategy of redistribution: Massarrat 2008 3. Rudolf Hickel, member of the "Alternative Economic Policy" study group blames "the neoliberal priority rules for profits" for the financial crisis that "among entrepreneurs and the rich led to enormous liquidity surpluses. These surpluses stream on the financial market. "Capital accumulation institutes like investment funds and hedge funds," Hickel said, "attract money like vacuum cleaners" (FR 10/24/2008).

4. This is urged by 40 academics from the circle of the Keynes society in its call "Dare More Keynes" (FR 4/10/2009).

2. “THE MILITARY-INDUSTRIAL COMPLEX IS THE GREATEST THREAT FOR WORLD PEACE IN OUR TIME” Interview with Mohssen Massarrat [This interview published on 11/17/2015 is translated from the German on the Internet, http://sandimgetriebe.attac.at.]

Wars begin with lies scattered by secret services and then broadcast by the media. Wars do not solve conflicts but create new conflicts. However wars also secure raw materials, open up markets and bring profit. Could concrete interests and actors acting strategically and kindling and initiating wars stand behind all the war lies of the last years and decades and the murders always made appealing as “defense,” “philanthropy” or “battle for

freedom, democracy and human rights”? Does the war logic also follow a profit- and interest-logic that can be traced back to certain authorities? Jens Wernicke raised these questions to Mohssen Massarrat, member of the Attac advisory council.

Mr. Massarrat, you have long argued peace policy requires criticism of the so-called military industrial complex. What do you mean?

War critics usually react to wars after they break out. In the most positive case, they are critically engaged with war preparations and hope to prevent war. One way or another, people constantly chase after violent events and in the final analysis only react to symptoms. The financial structure of violence and war production, the real cause of global wars, the military-industrial complex, the MIC, is hidden beyond our view. This develops to an ever more powerful monster while we feel more and more powerless because of so much disaster and catastrophes as now in the Middle East.

Anti-war activities must be joined with enlightenment about the MIC. The prospects for unmasking one of the worst evils of our present are not so bad after all the knowledge about war plans, after so many experiences with media propaganda to move people to approve the planned wars like the Yugoslavian wars in the 1990s and the last fifteen years in the Middle East.

How do you concretely classify this evil? Who acts wickedly and what methods are used? Do you mean secret services, a “state in the state” or something else?

The roots of militarism go back to the era of the American civil wars. Since that time, a culture of self-defense dev eloped in America that is very alive today among Americans as a constitutionally protected right to self-defense.

Through many wars in the 19th century and the Second World War, the MIC was finally “too big to fail,” a hidden “state in the state.” The MIC grows like a cancer in all areas of American society, in the political system, the economy, academia, cultural institutions and the media.

The MIC is a huge and entirely inscrutable network of which Eisenhower openly warned in his farewell address on January 17, 1961. As a republican president of the United States, he was confronted with a network of a “powerful military establishment and a powerful armament.” That was “new in American history,” Eisenhower said.

Eisenhower gave his successors the following recommendation on the basis of his own experiences with this new network: “In the bodies of government, we must guard against the expansion, whether active or passive, of the unauthorized influence of the militaryindustrial complex. The potential for a disastrous rise of power in the wrong places exists and will exist in the future. We may never allow this influential alliance to endanger our freedoms and the democratic process.”

The MIC at that time was clearly stronger than America’s democracy. The network spans all social areas, all the secret services, created the NSA, encouraged many new think tanks and foundations, infiltrates or even steers research internationally and systematically infiltrates the media. To name one example, psychoanalysis does valuable work for the US secret services. Conversely these secret services and the US military are zealous in forming a whole academic discipline along their lines.

Finally, the MIC is many times more powerful today than ever after over 60 years and an inconceivable nuclear arms race during the block confrontation and many wars that it caused.

Can we agree the MIC is not only a US feature but exists in every country even if it is less powerful and less imposing? Karl Liebknecht described Prussian-German militarism as a state in the state that became a state above the state…

The US MIC is now the greatest threat for peace. The largest and most aggressive military of the world is allied here with the most powerful secret services and an open claim to global leadership that can be easily classified as imperialism.

If the MIC caused all the wars of the US, these wars also had to be planned and carried out systematically and minutely. Isn’t this assumption exaggerated? The Soviet Union also participated in the block confrontation, to name only one example.

The alternative of a peaceful coexistence with the Soviet Union existed for the US after the Second World War, for instance through Germany’s neutralization as proposed by the SU. The goal of worldwide US hegemony was carried out and all non-aggressive alternatives were torpedoed. Before the war’s end, the US used nuclear bombs on Hiroshima and Nagasaki and bound West Germany in the western camp after the war and quickly transitioned to a policy of block confrontation.

The self-assertion powers of a – very unproductive – sector can only continue when new conflicts and wars arise in the world. This unproductive sector develops an enormous dynamic and blocks all paths that could lead to peace at the end. After the victory of the allies in Germany, the path to the Cold War was silently paved and the Soviet Union was driven to a nuclear arms race. After the end of block confrontation and the readiness of the SU under Gorbachev for comprehensive disarmament, the US rejected this alternative and instead came up with the new concept of a missile defense shield based in outer space that fueled a new arms race.

Nearly all US wars after the Second World War were started with brazen lies. This is not a secret any more. The Vietnam- and the Indo-China wars began with the lie of an incident in the Gulf of Tonkin. The Bush administration legitimated the Iraq war with the lie that Saddam Hussein had nuclear weapons. I cannot and will not believe so many conflict- and war-events in the recent past only accidentally occurred systematically one after the other. An underlying system and the MIC as that profiting authority are the

main driving forces of this system of war production. That seems more logical and plausible to me.

Your presentation seems too simplistic. That it could be possible to gain the population’s approval after systematically planning these crimes exceeds my powers of imagination…

Let us not forget the psychological significance of targeted manipulation through scapegoats that completely monopolized the heads of Americans and their allies after the allies’ victory against German fascism.

Up to the collapse of the Soviet Union, communism as a threat to the West was part of the daily routine. This scapegoat couldn’t be removed from public discourse. After the block confrontation ended, Islam quickly became the substitute for a new threat to the West. There is evidence that Huntington’s “Clash of Civilizations” was regarded worldwide as an academic justification for the massive threat to the West by Islam long before 9/11.

Fomenting fears toward a religion is the most dreadful soil on which the seed of violence can thrive best, especially with fanatical Muslims who are predestined to take the role of victim. This cannot be denied.

Seen this way, 9/11, if it was really the work of Al Qaeda, was the result of a selffulfilling prophesy of Huntington’s “Clash of Civilizations.” With terrorism, a new enemy was established. War was immediately declared against this new enemy that “should be waged until the last terrorist is killed,” as George W. Bush jr. declared. The states of the so-called western world helped almost unconditionally in America’s war against terror. People closed one eye when massive violations of human rights like torture were on the daily agenda in this war.

Establishing this and emphasizing the powers and massive interests in the background may seem unimaginable like a conspiracy of a dark power planned from the beginning to end. On the other hand, it cannot be denied a super-power like the US can control an escalation process that it initiates.

To concretize this in an example, I refer to the former US Secretary of State Condoleezza Rice who at a meeting in Raid the capital of Saudi Arabia at the peak of the nuclear conflict with Iran urged Sunni states to form a Sunni belt because Iran together with Iraq, Lebanon and Syria was long intent on creating a Shiite belt to build its hegemony in the Middle East. This interpretation was actually the start of the aggravated conflict between these two Islamic currents and the conflict in Syria along with the genesis of the Islamic State. In addition, Dick Cheney, Donald Rusted, Paul Wolfowitz and many others inside the Bush administration all came from the armaments sector. McCain, the republican spokesperson of the Senate Foreign Relations committee and the sharpest critic of dialogue and cooperation with Iran to solve the nuclear conflict and to settle the Ukranian conflict with Russia is a Vietnam War veteran…

Much larger terror groups like the Al Nusra-Front and the so-called Islamic State actually emerged out of a handful of Al-Qaeda terrorists. We shouldn’t be surprised that mobilization and instrumentalization of public opinion also occurs through other subtle methods like the demonization of supposed enemies. According to need, one time Ghaddafi and then Saddam Hussein were chosen as the new Hitler. Iran was demonized in the nuclear conflict so that the western public would accept a war against this country.

Putin was also demonized day in and day out when he actively resisted the obvious attempt to bring the Ukraine into the EU. In the case of the Ukraine conflict, we all witnessed the spread of anti-Russian propaganda in the West and the alarming advance of a pre-war mentality in Europe. I imagine that a whole series of influential think tanks and networks stood in the back ground of these developments. Political PR campaigns are conceived according to need.

Psychological warfare is speeded up with every war decision. The secret services do the rest.

That leading personnel of the so-called quality media spread the analyses and assessments uncritically n well-organized networks supportive of the MIC in nearly every conflict of the US is an open secret. Our current western media culture obviously wants to know nothing of the Kantian idea of cooperation and peace and esteems the idea of confrontation, threat, permanent invocation of scapegoats and of Thomas Hobbes’ view of humankind, that the person is a wolf to other persons. This diagnosis does not see everything in black and white. Hardly surprisingly the peace movement constantly chases after war events and peace perspectives are lost while the MIC easily has public opinion on its side for all the conflicts and wars that it stages for its own survival.

Two psychologists developed new torture methods for the CIA for $80 million according to the December 2014 torture report of the US Senate. This is only one example of how the culture of war is deeply rooted in US society. When this was made known, the psychologists publically defended their inhuman services as based on science.

How can it be explained that Americans put up with the tremendous costs of many US wars and the provision of personnel and war material? The US is a functioning democracy and the parties are not afraid of criticizing the administration in power. The conflict over approval of the budget often turns into a blockade of payments of salaries for the departments and government work. Do you really regard the dominant propaganda as so powerful that it can influence people almost unconditionally?

That is a very important question. A public debate on military costs is actually a taboo theme in the US. When the defense budget is generally broached in the budget consultations, the focus is on lower rates of increase. There is a consensus between the US parties that defense spending should be constantly raised. This desire also exists in the EU. For example, the EU war parties a few years ago even tried to codify increased defense spending in the basic law which fortunately failed. But all the administrations become indebted again and again in financing the gigantic US defense spending which rose very drastically in the last decade to the astronomical annual sum of $700 billion.

The permanent indebtedness for defense spending, for public investments in an unproductive sector that generates no taxes on the revenue side, is the main reason the US has become the greatest debtor state of the world at over $17 trillion. Every other state would have long gone bust with these debts. For example, the Soviet Union collapsed under the massive burden of arming to death initiated in the 1980s. But no financial disaster happens to the US because the US government thanks to the monopoly as the world currency and the trust of international capital investors in the stability of the dollar finances its new indebtedness with government bonds that it exchanges for cash at the US Fed. On one side, the Fed markets the government bonds all over the globe and creates a constant capital flow into the US economy while on the other side turning on the printing press and supplying the government with newly printed money to finance current government expenditures. Basically the US finances the costs of the MIC with the ac cumulated purchasing power from the whole world that America sucks up as capital like a sponge, not with the tax funds of its own population.

This fact may be the reason why defense financing is not a theme in the US public and hardly disturbs anyone. This incredibly insidious financing model for its wars presupposes that the oil trade worldwide will be carried out on a dollar basis. However this condition cannot be guaranteed through the voluntary readiness of oil exporters.

Many of these oil states are not known for their dependence on America. Rather this condition requires a violent global system where rebellious oil states feel the naked violence of potential regime change and trust in the dollar is maintained.

Under this angle, all the wars of the US in the Middle East appear in a new light. The shattering of strong centralist states like Iraq and the genesis of terrorist groups like the so-called Islamic State are not detrimental to the violent system – as long as the oil for weapons business continues undisturbed. The interests of US governments and the MIC coincide here. The cycle of the violent global system, oil trade on a dollar basis and stability of the US economy is sharpened through drastic capital imports. I will leave it here with these few references since I discussed this thematic in detail in other places.

How can the peace movement act against this and bring about peace if such a “network” exists in the background of democracy as a “state in the state” and this represents an ever greater threat for peace in the world? Demonstrations and appeals against the most powerful and financially well-girded machine of the world seem rather hopeless. What do you propose? Is there a strategy?

As I see it, the MIC should be moved into the center of criticism with all activities of the peace movement. The military-industrial complex is the greatest threat to world peace in our time. Campaigns against weapons exports are important but alone are not en0ugh. In my judgment, a worldwide campaign to outlaw weapons production is necessary. To that end, more intense discussions and cooperation with churches and religious communities are vital.

Fighting the dominant culture of war that promotes all media justifications of war and war propaganda seems important to me. This culture must be decoded as misanthropic and shattered. Building a culture of peace is the project of the century. The idea of cooperation has a great attraction and appeal that encourages us to continue.

3. REDUCED WORKING HOURS AS A SOCIO-ECONOMIC INVESTMENT

By Michael Schwendinger [This blog article published on December 5, 2014 is translated from the German on the Internet, http://blog.arbeit-wirtschaft.at.]

Statistics Austria recently published a special study on the theme “Employment as a Health Risk.� 80% of all gainfully employed persons were exposed to physical or mental health risks through their work. Working overtime hours aggravated problems.

Therefore the strained occupational group of doctors is now negotiating over something that is often demanded: shorter working hours. The killing-argument that is mostly

encountered is cost explosion, cannot be financed, end of discussion. To bend this narrowed perspective, I’d like to dredge up an old article that may help us think of the supposed cost-trap as a future investment.

OPTIMAL WORKING HOURS In 1909, Sidney Chapman, chief economic advisor of the British government from 1927 to 1932, published a study titled “Hours of Labor” in the Economics Journal. Decades later neoclassicists like Alfred Marshall and John Hicks described this paper as incontestable state of the art.

Chapman concentrates on the economic effects of changes in working hours. He begins his analysis with evidence that past reductions of working hours even led to increases and not output reductions in British industry. From this finding, he asked whether the effective channel of the “free market” automatically produces “optimal working hours” or whether improvements could be realized through extreme interventions (of the legislature or unions).

MONEY PREFERENCES AND SHORT-SIGHTEDNESS To this end, Chapman examined both sides of the labor market. For workers, the travail of the work to be performed and the value of free time are factors that play a role for desirable working hours. These factors exist alongside earned income. Chapman assumed people underestimate the long-term effects of overly long work on their health and therefore prefer higher wages in the short-term to shorter working hours. The freedom of decision strongly depends on the amount of the wage. That this short-term money preference hides long-term health risks goes without saying.

For businesspersons, costs, output and productivity are crucial. The higher the number of daily working hours, the lower the productivity per hour. This is explained by exhaustion, lack of concentration and excesses causing sickness. Obviously the full extent of health risks does not immediately make a difference. In the short-term, output can be increased through longer working hours but only at the expense of long-term productivity losses. Conversely, an improvement of productivity does not appear at once with shorter working hours. Rearrangement of the daily work routine permanently improves efficiency.

Reduced working hours (with the same monthly earnings) is like an investment in the productivity of the workforce that is first gradually paid off or amortized. There will be a need for reduced working hours as long as the specialization and intensification of work increase, Chapman says. Why are potentially lucrative investments usually not made?

Businesspersons cannot be certain whether the competition will later woo away the very productive and well-rested workers for minimal financial incentives, Chapman argues.

ADAPTATION TO THE MAINSTREAM

Before I come to the political conclusions from Chapman’s analysis, let me say a word about the remarkable career of this article. For decades, this study was treated as a standard argument on the working hours theme among neoclassical economists and hardly ever seriously questioned. Then the statement that a division of optimal working hours leads to productivity losses moved into the center. This agrees with Chapman’s analysis. The crucial adaptation occurred when the theoretical “optimal working hours” was simply equated with actual working hours. Consequently any change had to appear as inefficient. The economic mainstream obviously persists up to today in this confusion of abstraction and real value. In any case, Chapman’s incontestable study disappeared.

REDUCED WORKING HOURS AS FUTURE INVESTMENT For working hours, Chapman identified market failure as that (singular) situation that legitimates political interventions according to the current mainstream economic theory.

The “free market” systematically produces sub-optimal or overly long working hours that damage individuals, the economy and society generally in the long-term. “These reasons are short-sightedness or fear of incurring an expense the fruits of which other employers might reap” (p. 367). Chapman urged support of the union movement for shorter working hours – based on a neoclassical economic argumentation. The cost-question can now be turned around on the background of this short-sightedness of the “free market” and the health impairments on the job. From a longer-term perspective, overly long working hours represent a cost-trap while reduced working hours becomes a socioeconomic future investment.

A real market economy functions very differently than the harmonic optimal conceptions of market theoreticians. The economic freedom of the competitively strong turns massively against the weaker. Due to this the real market economy leads to spectacular deficits and excesses. The abstract free enterprise principles must be restricted by a multitude of concrete measures. Thus a state is necessary. A minimum in corrective measures is indispensable.

CRITICISM OF MARKET THEORY AND MARKET IDEOLOGY

By Franz Garnreiter [This article published on September 4, 2013 is translated abridged from the German on the Internet.]

The term capitalism provokes meanwhile more resistance than approval in the population.

On the other hand, terms like market and competition have positive connotations even for critical organizations like Greenpeace. Connections with performance justice, hostility to bureaucracy, creative personal freedom, state skepticism and free choice among many options are joined with the term market.

By market I understand a regulation system where consumer and supplier of a good, service or labor power as a commodity can relate, determine the price and exchange money for the commodity. This is more than understanding market only as the concrete market place (!) or the department store. Market stands for the exchange of individual goods provided without social (planning-) agreements. Since individuals face each other as unrelated strangers, the market price can only be set through individual benefit maximization and/or profit maximization for businesses. The private ownership of the means of production, and production decisions that also aim at profit maximization are suitable as criteria of profit maximization on the markets - like one twin matching the other.

Markets are an integral component of capitalism. They constitute its nature on capital's plane of circulation. The neoclassical-neoliberal market theory is the core ideology of capitalism. Thus the criticism of the market economy follows from the criticism of capitalism. The criticism of market theory follows from the criticism of the ideology of the capitalist economic system.

With my criticism I take a much more fundamental approach than the common and frequent criticism of concrete capitalism that focuses on the distortion, monopolization and social harmful effects of markets. In that criticism, prescriptions include breaking encrusted markets, shattering monopolies and introducing a kind of "fair" competition relying on many diligent productive, creative entities. In that criticism, criticism of capitalism culminates in the praise of the middle class.

THE BASIC IDEA OF MARKET THEORY The central fundamental idea of market theoreticians is that this economic system by its nature strives for an optimal and stable and that we people do not need (!) to actively bring about this balance. The competition of millions of individual market actors on different markets - as a bonus to individual success - leads to the best possible macrosocial result. In this balance, everyone is paid justly according to his/her performance (that is distribution justice). Nothing is wasted, neither labor power nor tangible assets (that is the efficiency of the economy). The balance is stable and is reached again after the mastery of any outward disturbances. According to market theoreticians, this dogma of self-regulation to a balance is the central and most important characteristic of a free market economy.

Adam Smith used the well-known picture of the invisible hand to illustrate such a selfregulation. Competition on the markets acts like an invisible hand, like a higher guiding

power bringing everything to a good end.

The need for conscious, macro-social economic planning is invalid. Society as a collective and as a state only needs to worry about observance of the traffic rules on the market. The axiom "We must submit to the market laws; no one can elude them" is then the guiding principle of conduct.

What is the reason behind this statement? In the middle of the 19th century, the increasing crisis-susceptibility of capitalism and the germinating Marxist-socialist class analysis led to doubts of the assumed balanced development. Evidence was necessary. That was the birth of so-called neoclassicism.

Classical political economy - Adam Smith and David Ricardo were its first prominent representatives - was occupied with the value of commodities, with reason for the prevailing distribution of wages and profits and with the causes for the growing wealth of nations after the conquest of feudalism. Marx and Engels revolutionized political economy and profoundly criticized bourgeois classicism. Neoclassicism replied with a completely new approach. Its axiom was everything benefiting a person has a price. The price that is paid proves the usefulness of a thing. Scarcity and usefulness are natural qualities and thus the price is also natural...

Around 1870 the mathematician and economist Leon Walras formulated this theoretical approach. He constructed a "pure economy" in deliberate contrast to the "applied economy" for everyday economic problems... From the beginning, this "pure economy" was a different subject of investigation than the real economy. It consists of an abstract mathematical structure of goods and prices, suppliers and consumers (that's all Walras needed for his theory), and Walras proves that under certain assumptions there exists an equilibrium point with the quoted nice properties. Thus neoclassicism founds totally on fundamental contradiction: The desire to discover generally valid, exact, unchangeable laws in the economy - analogous to natural laws - required the complete fading out of the real economy.

THE HIDDEN DANGERS OF MATHEMATICS The mathematical core of the neoclassical balance theory consists of the question whether and under what conditions a system of partial differential equations (formulating the mutual dependence of all commodity prices and all quantities of supply and demand on each other) leads to a mathematical stable solution that then should represent the balance point. Such mathematical systems are only stable under very restricted and special conditions.

From the start, the population and economists expect a high degree of scientificness from mathematics. This lends a great persuasiveness to neoclassicism. However mathematics has its hidden dangers. It demands that 2 times 3 equals exactly 6 and not just something between 5 and 7 or in the exceptional case 7 ½. The presuppositions for the proof of balance also must be exact. Worlds open up here between the prerequisites in the mathematical description of the Walrasian pseudo-economy and those in the real market

economy. Here are several examples.

1, the theoretical households who must be conceived as computers for benefit calculation buy consumer goods to maximize their advantages. To attain this goal, they must know all about all price fluctuations and all practical qualities of all conceivable consumer goods.

Economists call this perfect information. This is also true for businesses. If this does not happen, the balance evidence definitively breaks down. We saw how magnificently the complete perfect information work in the financial market crisis.

2. Every market business can only have effects on participating buyers and sellers. Effects on uninvolved third parties (=external effects) cannot occur. But in reality External effects, particularly environmental effects, are a core element of the economy. They destroy the balance process. Energy production and energy consumption may be classic evidence how economies affect people even on distant continents and persons from much later generations far beyond those directly involved. However the energy industry is controlled by private energy companies according to the criterion of individual profit maximization. Marx called this the basic capitalist contradiction, the contradiction between social production and private appropriation. Long lists of completely false presuppositions measured by reality could be drawn up.

The core of the theory is very interesting. What does the theory say about the process of coming to an equilibrium ?...

COMPLETE MISUNDERSTANDING OF REAL MARKET PROCESSES 1. ... The theoretical and real market economies are completely different.

The market process needs time in a real economy. But the theory allows sales and purchases only at equilibrium prices. These are prices, where offer and demand are equal.

For the process to come to equilibrium, Walras had the perception of a stock exchange auctioneer, where the bidding needs a lot of iterative steps. (That is a picture like Adam Smith's invisible hand.) But as the mathematics demand infinitely many of these steps, this process would not come to an end with a real auctioneer. So Walras presumed simply that this process runs with an infinitely quick speed. This is ridiculous, compared with real processes, but in a mathematical differential equation system an assumption like this obviously does not cause any problems.

2. There is no auctioneer to steer our normal economical activities. Mathematicized logic does not materialize in a real authority. Therefore there is no one or no authority who gives a signal to buyers and sellers when balanced prices are reached and when they can finally buy and sell. However the core of the theory is that exchanges can only occur with balanced prices. This is not a problem in theory because all market actors have perfect information and are omniscient, and the processes are infinitely quick. But in reality the crucial balance signal is lacking: the reference that waiting for an equilibrium now ends, that all prices are now in balance and that all purchases and sales may and must be carried out exactly now. Because this signal is lacking, those real market actors without perfect information can possibly know whether balanced prices are reached or how far they are

from those prices. Nothing is left to market actors in the real world if they want to exchange than to exchange at imbalanced prices. This is a fundamental contradiction to the general equilibrium theory, so The theory is fundamentally broken and a real imbalance process begins.

3. Thirdly and strangest of all: the theory (the stability of differential equations) requires that supply and demand quantities can change too and not only the prices during the price adjustment equilibrium finding process. This can only mean that this theory does not describe the exchange of goods but in fact the exchange of production plans or vouchers for goods ... The "pure economy" that wants to be a theory of the market economy completely misjudges the principles of a market economy.

THE IDEOLOGY: EQUATION OF A MATHEMATICAL SYSTEM WITH REAL MARKET ECONOMY This "pure economy" has nothing to do with real market economy. In spite of the same vocabulary we are dealing with totally different worlds. The ideology now is, when the economists, admiring the market system, explain: Okay, real market systems may be a little bit different to the theory, may have some imperfections, but: If the theory proves that a market economy is the best possible economic system, then our real market economies should certainly be the best achievable economic system. In fact this is the simple statement, that real and theoretical markets behave similar. This statement is thoroughly false, so it is ideology.

A lot of characteristics in real market economies prove in-depth, that theory and reality differ completely.

OVEREXPLOITATION OF PERSONS AND NATURE The survival efforts in economic problem times expose the great imperative of market competition: being better than the rivals and being the best possible. That alone ensures a business' survival on the market but only for the moment. Being better means producing cheaper than the competition and/or earlier coming on the market with new attractive products earlier than the rival. Compared to earlier societies, this leads to unparalleled pressure, 1. to invent and redevelop production, new techniques and attractive products (this the positive side of the development of productive forces acknowledged by Marx and Engels in The Communist Manifesto) 2. and increasing the pressure of exploitation on employees and nature (mineral resources as a material source and the environment as a waste dump for a as high as possible.

This increased tension has consequences. School children complain about stress more than ever. The fear of failing, the anxiety of not keeping up and satisfying the demands any more and the fear of unemployment and going downhill dominate more and more

people. This fear is well-founded. In most countries of the world, the income distribution benefiting the rich and to the disadvantage of the poor intensifies.

Like human resources, natural resources are also subject to a comparable strain. Far beyond all limits of regeneration and suitability sustainability, the capitalist world system plunders the natural reserves from metal ores, energy, fresh water, fish stocks, in the supposedly infinite world oceans, and natural soil fruitfulness. A crucified planet remains, enormous costs and burdens for future generations, extreme exploitation instead of balance.

A STATE IS NECESSARY A real market economy functions so very differently than the harmonic optimal conceptions of market theoreticians. The economic freedom of the competitively strong turns so massively against the weaker. Due to this the real market economy leads to spectacular deficits and excesses. The abstract free enterprise principles must be restricted by a multitude of concrete measures. Thus a state is necessary. That in no way means the capitalist state represents an adequate corrective for the results of the capitalist economy.

Rather a certain minimum in corrective measures is indispensable to maintain the functioning of this economic system.

Most of the existing political-economic institutions and measures were created "to solve" problems caused by the real market economy. These include a large number of monitoring authorities and measures like industrial oversight [trade supervision], building regulations, industrial safety regulations, monopoly legislation, bank- and stock market supervision, price monitoring, production bans and regulations and so forth. Wherever we look the real market economy produces a need for political regulations at all corners and ends in view of the food scandals, housing distress, bank swindles, destruction of the commodity labor power, air pollution through chemicals and cars and so on. The health sector plus the pharmaceutical industry, the energy industry and raw material exploitation, old age provisions and foreign trade - a market economy without extensive regulations and restrains by the state would lead to a social chaos. With everything that is important in the economy, a state is necessary to control market outcomes.

We know the term "unfettered markets." While theory proves that only the completely unfettered, free markets bring forth the best optimal results, "unfettered markets" rightly represent a terror for most employees and consumers. Market results are only bearable when the markets are fettered.

In addition, the historical battles of workers opposed enforced institutions (esp. trade unions) that contradicted the abstract ideal of the market. On the other hand, these institutions stabilize the functioning of the market economy.

Even if the real market economy with its growing bureaucracy with hundreds of thousands of paragraphs) represents the absolute counterpoint of the theoretical market economy with simple regulations, the two principles

1. the first-rate importance of individuals = entrepreneurial freedom in the economy 2. and the maximum possible restraint of the state in economic activity represent the model both in the current free enterprise agitation from schools to talk shows and in the permanent reflections on how far the new regulations should go and whether present regulations should be retracted or expanded.

CAPITAL FREEDOM AGAINST SOCIAL JUSTICE The term "market-conforming democracy" coined by the German chancellor Merkel underscores the pre-eminent importance of capital freedom, pre-eminent over against democratic principles. In this view, the markets constitute the fundamentals in society.

The form of the state - democracy or not - is artificial arbitrary and second-rank. The first, most distinguished interest of the state is safeguarding and protecting the fundamentals of society, the capitalist market economy. Politics is then the executor of the needs and requirements of the markets, not the social choice between possibilities. Practical constraint is then the justification for politics. Friedrich von Hayek and Milton Friedman, the founding fathers of neoliberalism, said clearly that the democracy, out of control from their perspective, endangers capital freedom. They both welcomed the 1973 fascist Pinochet putsch in Chile that ensured the pre-eminence of capital freedom.

In understanding freedom as the freedom of capital, the freedom of the strong rivals over the weak, social responsibility is branded as a fundamentally subversive doctrine. Belief in social justice, according to Hayek, is the most serious threat to a free civilization.

MARKET IDEOLOGY PROMOTING AGGRESSION Market theory starts from a rational economic conduct of persons, from the so-called homo oeconomicus. In this concept, being rational only means having one's own benefit and profit as a the only goal and being radically selfish. In fact this economic system does everything in its power to produce and promote greed and egoism, rat-race-striving and aggressiveness in the human psyche and make them as dominant as possible over other feelings.

The justification of the competitive economy culminates in a basic credo. One's own prosperity can only be assured by keeping down and suppressing the competitive opponent (who is far from being perceived as an economic partner).

The idea that an economy could be conceivable in which reasonable living conditions are possible for everyone without victory-defeat competition does not occur to the righteous.

This would also not correspond to any free enterprise reality. Desires to that end are made bizarre, illusory, the imagination running wild, never existent, slandered and made ridiculous.

Economic destruction competition is often erroneously compared with athletic

competition. With the latter, the goal is identifying the best, second-best order... Sports have no inherent interest in destruction. The market economy in the competition for market shares is different than in sports. The greater the distance to the second, the more productive is the competition victory. Victory is complete when all other rivals are wiped out. Here there are no parallels to sports. Unlike sports, the destruction of the adversary may and must be gained with nearly all means as in war. Here the parallels to the market economy are much clearer. In the summer of 2008, a quarter of a year before his firm was destroyed in the financial crisis, Richard Fuld, head of Lehmann Brothers, said: "We will defeat all the people standing in our way. Crushing our adversary is vital." The term "elbow society" is a true euphemism in view of such programs.

DEMOCRACY AGAINST MARKET ECONOMY In conclusion, two central points for a counter-draft to the market economy can be distilled from the criticism of market theory for a democratically structured economy.

1. Who determines production? That is the central question.

The mutual dependence of producers is immense today because of the social character of production. Satisfaction of common social interests that are always cut short as external effects in a market economy becomes increasingly important for the social life together.

The demand who, what, where and how to produce must be ordered according to social needs and no longer according to the criterion of maximum profits. Individuals must become more aware of their common interests - especially in dealing with nature, raw materials and the excrements of production - and realize those interests in conscious common planned organization. This means socializing the means of production and raw material stocks.

2. How do we determine production? The real market economy functions very differently than the fantastic notions of the theoretical market economy. Maximum individual profit does not at all go hand in hand with an overall social welfare maximum. Otherwise we would not be standing before the risk of climate collapse and would not need to pump enormous sums of tax money into the revitalization of the financial markets. So we need a new method for the finding, disputing, deciding, controlling, and supervising of the production projects and development plans. This new method can only be a distinctive democratic process, and this process has to include all interested persons and all persons who are impacted. In democratic societies it is necessary that every citizen has the same possibilities in co-shaping and co-designing the general affairs and economic actions.

5. THE CODED WORLD: LOSS OF DEMOCRACY AND ABANDONMENT OF KNOWLEDGE Andreas Kolbe

[Neoliberalism is the enemy of knowledge. That is the central thesis. Specialized knowledge and the experience of skilled workers over years are sought less and less in a world ruled by simple numbers and algorithms. Through economization, powerful private enterprises arose that manipulated or withheld information. The original English title of Colin Crouch's new book is "The Knowledge Corrupters. The Financial Takeover of Public Life." This book review published on 9/10/2015 is translated abridged from the German on the Internet, http://www.deutschlandfunk.de.]

Something is going wrong in Great Britain’s public service. Colin Crouch has no doubt about this from the first line of his book. The so-called New Public Management, the inclusion of free enterprise methods and structures in public service, has led to absurd developments in many places whether in the public health system, the schools or the public administration. One example is the police.

“Neoliberal policy earmarked success rates for the English police in solving car thefts and burglaries because analyses showed that citizens’ subjective sense of security was harmed by these criminal acts. A decline in this area would have given special credibility and persuasiveness to the promise of effectively fighting criminality. In several English cities, police authorities ignored the organized sexual abuse of children since these crimes only played a minor role for their performance numbers.”

Colin Crouch calls this the logic of the financial markets: viewing as many areas of life as possible under a private enterprise lens and ultimately reducing them to numbers of money values. That is the central solution of neoliberal policy which wins more and more followers and influence worldwide according to Crouch.

DOCTORS EXCESSIVELY DIAGNOSE DEMENTIA BECAUSE THEY RECEIVE BONUSES FOR THAT DIAGNOSIS Parents of school age children or patients needing treatment can compare the offers of public schools or clinics. They can decide themselves instead of being assigned a place by government agencies. The providers should be forced to improve services and efficiency.

“The arrangement also has its shady sides. With a great probability, the actual quality of the respective service is distorted like its significance for clients.”

Crouch compiled ample evidence for such malformations: physicians who diagnosed dementia too often because they gained bonuses for that. The program sought to recognize dementia sicknesses earlier. Universities concentrate their curriculum on subjects that promise graduates a high income. Good vocational prospects become one of the decisive numbers in university ranking. Gaining knowledge and cultural progress are not important any more.

Examples from Crouch’s homeland Great Britain have a forerunner role in neoliberalism.

In a detailed way, he enters into the English school system – because his wife has worked in this system for years. She compiled large parts of the material for the book as the author admitted in the acknowledgments.

The many examples illustrate the problem in an entertaining and shocking way. But the system behind the examples is crucial. Neoliberalism is the enemy of knowledge. That is the central thesis. Specialized knowledge and the experience of skilled workers over years are sought less and less in a world ruled by simple numbers and algorithms.

Through the economization of many areas of life, powerful private enterprises arose that manipulated or withheld information and knowledge at pleasure to their own advantage.

PSEUDO-DEMOCRACY AS A SHOW-EVENT TO SOOTHE THE MASSES “The democratic community has to suffer tremendously under this power structure since reliable information is its elixir of life. The community becomes the hostage of their selfinterests as soon as the controllers of influence over power suppress information or supply the public with one-sided, misleading or manipulated information.”

Here Crouch goes back to his earlier reflections on post-democracy where large parts of society are brainwashed while a few sit at the levers of power and stage a pseudodemocracy as a show-event to quiet the masses.

“Our epoch is not the first in human history in which the simple people are basically defrauded by the great and powerful. Rather this has been one of the constants of human socialization. The problems raised here are pressing because they claim to satisfy high demands for transparency and responsibility, not because they are somehow new or in unusual format. This could have catastrophic consequences […]. Our dependence on knowledge changed into a dependence on representatives of private interests hose conduct is only oriented in the morality and ethics forced or not forced by the market.

How the author structures and arranges his reflections is impressive. Right at the beginning, he sketches the thesis, argumentation and development of the book so the reader can find his way in Crouch’s very complex intellectual working model.

The original English title “The Knowledge Corrupters. The Financial Takeover of Public Life” focuses on the central theme. The public sector is crucial. Our democracy is threatened, not only our knowledge.

As with many contributions in political debates, Crouch decries two malformations and raises vital questions. He does not offer prefabricated or completed solutions for the problems. Questions remain.

“I believe we must regain lost trust. This means more intensive communication between experts and citizens in public service and better exchange of information and knowledge.

There are good initiatives in the public health service and in schools where this works.

Applying numbers instead of trust leads us. Only very limited information is exchanged.

Thus we must regain trust through better communication.”

Colin Crouch: “The Coded World – How the Logic of Financial Markets Threatens our Knowledge”

THE LOBBY OF TAX EVADERS

By Sven Giegold

Campaign against Tax Evasion [This article published on 7/9/2015 is translated from the German on the Internet, http://www.fr-online.de. The author is a spokesperson for the Greens in the European Parliament.]

The public still does not know how much taxes businesses pay and in what country. This must change but Germany blocks transparency.

The outrageous tax avoidance of several international conglomerates could be stopped with a little change of the rules of the game in Europe. Today big businesses publish their profits and taxes on profits summarized for the whole company. The public does not know how much taxes are paid in what country. We must begin here. Companies should be obligated to transparency for the specific countries. This is already prescribed for banks and raw material corporations.

Europe decides questions of business transparency in majority votes with the full cooperation of the European Parliament. Transparency is much less ideologically charged than tax harmonization in Europe. Everyone – particularly big businesses – is for transparency.

Transparency on tax morality would enable investors, journalists, business partners and consumers to punish extreme tax avoidance. The lobby of tax evaders hardly fears the plans of the European Commission to combat tax avoidance. The proposals are either toothless or hopeless thanks to several blockading countries. For Google, Amazon & Co, transparency is a red rag to a bull.

In the European Parliament, there is a narrow majority for country-specific tax transparency for corporations. In the council of member countries, the red-black German government is the harshest opponent of tax transparency. That the German blockade ministers Heiko Maas and Sigmar Gabriel are social democrats is very annoying. While

social democrats in the European Parliament intensively support tax transparency, Mr. Gabriel does not lift a finger to correct the course of the German government in the sense of “working middle class” taxpayers.

This is really overdue after the scandals over the tailor-made tax deals for Wal-Mart, Google and Amazon & Co. The German government could simply act justly: for normal taxpayers and for small and medium-size businesses exposed to an unfair predatory competition.

7. JANET YELLEN’S STORYTIME “Interest-Change” at the Fed

by Ernst Wolff [This article published on 12/19/2015 is translated from the German on the Internet.]

For weeks the world waited for the US Federal Reserve to redeem its promise delayed for years to raise the key interest rate. In the middle of December 2015 in New York, Janet Yellen announced a 0.25% increase of the interest rate after 7 years of near zero interests.

The economic professor justified the step by saying the Federal Reserve reacts to “considerable economic advances.” The labor market is recovering rapidly and wage development shows clear improvements. The risks starting from foreign countries have declined since the summer and the oil price’s decline is a “temporary” phenomenon.

STRANGE BRAZEN LIES Seldom has the whole world been told lies in such an impudent way. Not one of the cited reasons has anything to do with reality. The US economy is not picking up speed, wages are not rising and the situation on the labor market has not improved. The free fall of the price of oil together with decreasing worldwide prices of raw materials point to a dramatic demand decline and are first class danger signals. Nevertheless nearly all mainstream media are celebrating the positive reaction of the stock markets to Yellen’s decision as confirmation of the accuracy of her statements.

In truth, this positive reaction is a proof of the opposite. Yellen’s decision to raise the key interest rate can be compared with the decision of a bus driver who drives up a steep slope and applies the hand brake. The decision cannot make anyone euphoric who is affected by it and has some intelligence. On the contrary, the stock markets would have reacted immediately negatively in a healthy environment. That they didn’t react that way and even moved strongly in the opposite direction only reflects manipulation by the biggest market actors, the central banks in the first place and the mammoth financial institutions and multinational corporations in the second place.

Recalling the development of the global financial system over the past twenty years is vital to understand the backgrounds and actual processes around the supposed “interestchange.”

After deregulation of the financial system in the 1980s and 1990s, the collapse of the hedge fund Long Term Capital Management (LTCM), the worldwide financial system was dragged to the abyss in 1998. To prevent a catastrophe, a group of Wall Street banks helped out at that time and bailed out LTCM. In 2007/2008 a collapse of the financial system threatened again but this time in another dimension. On account of the subprime mortgage collapse in the US, many big banks all over the world stood at the brink of ruin and would have collapsed if the states had not bailed them out under the pretext that they were “too big to fail.”

“TOO BIG TO FAIL” WAS THE GAME-CHANGER The world economy did not get going again after the greatest wealth redistribution in the history of humanity (private financial institutions were bailed out with tax funds in the billions). Under the pretext of stimulating, the central banks worldwide resorted to two measures: they printed money and lowered interest rates.

Both measures did not lead to a recovery of the world economy but allowed the wealth of a tiny financial elite to grow exponentially. The reason is simple. The classification of “system relevant” banks as “too big to fail” changed global financial transactions and our whole world for ever. The executive floors of the big financial institutions now know they will be bailed out under all circumstances and therefore allow much more risky investments than before 2007/2008.

The Big Players, firmly in the hands of the ultra-rich, speculate on the financial markets, mainly on stock markets, bond markets and unregulated financial products (derivatives) and do not invest most of their money in the real economy. Through the “leverage” conventional today, they multiply their commissions and partly realize fantastic profits.

They increase the risks many fold through their game in the international financial casino.

In addition their business model based on constant uninterrupted infusion of cheap money by the central banks has become largely independent and eludes all control through their sheer size (the financial sector today is many times larger than the real economy).

THE TRIP LEADS TO THE BRINK OF DISASTER Financial management is like an air-conditioned car whose driver must drive faster and faster to cool down the motor from the outside. After simultaneously heating the car again and again, the motor at the end must break down because of overheating.

Both politicians and heads of the financial industry know a horrific end is preprogrammed. Seven years of zero interest policy transposed them into an intoxicated state where they believe a system completely out of control can be controlled at least in the medium term – at a time when all data indicate that the world economy has fallen into hardly navigable waters.

China’s weaknesses, the falling price of oil, setbacks on the bond markets, the overheating of the stock- and housing markets and many threshold countries fighting for survival – all these factors show we are in a worldwide downswing phase. But that is not all. Since the sum of the credits of states, businesses and private households worldwide has swollen to over $200 trillion and constantly demands interest payments, the system simultaneously screams for ceaseless growth since every stagnation and every recession increases the debt burden in relation to income.

The decision of the Federal Reserve to raise the key interest rate and step on the economic brake is almost like a bad joke in view of this development. This decision was made for two reasons. The first is the helpless attempt to contain the system-endangering global expansion condemned to fail. The second is lulling people into a false sense of security in a time when the most dramatic economic and social dislocations of all time are imminent.

Thus it is no wonder that nearly all the media suggest unanimously “the crisis of 2007/2008 is now finally closed” with the interest-hike by the Fed.

THE MOMENT WAS NOT AN ACCIDENT That the Fed publicized its decision right before Christmas wasn’t an accident. At the end of the year, stock prices are forced up by the CEOs of corporations and financial institutes – above all by buying back their own stocks – since the bonuses of managers depend on the end-of-the-year results.

Moreover, the “recovery” on closer examination was only half as great as represented to the general public because the interest rate on which the Fed lends money to banks in the future only rose 12 base points (0.12%). This is manageable for the big players on the market and even gives them the chance of assimilating some smaller players.

The threshold countries will bear the main burden of the higher interest rate. These countries are stuck up to their ears in problems on account of the oil price development, decline in raw material prices, devaluation of their currencies and slackening worldwide demand.

Regardless of how the stock markets develop in the next days – the fact that they reacted euphorically to Janet Yellen’s announcement shows the global financial system is manipulated in its foundations and has nothing to do with the reality of the world economy any more. The world was never more removed from a “free market” as today.

APPENDIX: MYTHS OF THE ECONOMY – 2005 – BY THE BEIGEWUM COMMUNITY MYTHS OF THE ECONOMY On Intellectual Self-Defense in Economic Questions Edited by Beigewum/ Advisory council on social, economic and environmental alternatives, Vienna, www.beigewum.at, 2005, Hamburg, vsa.de

[The following 2005 excerpt is translated abridged from the German on the Internet by Marc Batko. Beigewum is an Austrian community organization, portal and advisory council for social-, economic- and environmental alternatives.]

Translator’s Foreword “The old gives way to the new as the snow gives way to the spring” (Rilke). “The swan that floats and doesn’t sink represents the intransitory in the transitory” (Heidegger).

“The penultimate depends on the ultimate” (Dietrich Bonhoeffer). “The cynic knows the price of everything and the value of nothing” (Oscar Wilde).

In Jacob Wasserman’s “Kaspar Hauser,” a town was impoverished by drought, wells dried up and people were filled with rage and aggressiveness until a little boy played so beautifully on his flute that water surged again in the wells.

We find ourselves at the end of the brutal epoch of the neoliberal rollback. State myths, labor myths, business myths and social myths have caused the re-feudalization and destruction of democracy, exploding inequality, precariousness of labor, endangerment of the atmosphere and the environment and generalized cynicism and depression. The Austrian community organization beigewum discussed these myths for one and a half years. In the 29 myths that were distilled over that time, the myth arguments are presented in quotations. Bernie Sanders, Franklin D. Roosevelt and the Occupy movement identified and resisted these myths in their different contexts.

According to the neoliberal myth, higher profits would lead to greater investments and more jobs. In truth, corporations bought back their own stocks, speculated on foreign currencies and rewarded their CEOs with extravagant bonuses. Now is the time for counter-measures, for recognizing market failure and state violence, for quantitative easing for the people, for reducing working hours, community centers and abandoning the naïve trust in profits and corporate beneficence.

What seems rational from a micro-economic perspective can prove irrational from a macro-perspective. If all countries seek unbridled competition, there will be mass unemployment. In Europe, Germany’s export success is based on widespread European unemployment (average 11% in 2015). Without regulation, we would not have healthy forests or fish in the lakes. States are different from businesses and Schwabian housewives and can contract debts and build a future from which new generations profit.

A future-friendly and environment-friendly economic policy that abandons myths is necessary along with circulating money. Persons as actors and subjects are no longer corn to be used up or “cost factors” to be reduced just as CEOs are not beneficent “job creators.” The social contract and our interdependence are threatened when we are wolves to each other and when the public interest is confused with the interests of one or several corporations.

In the long run we must find some way besides jobs to distribute the wealth generated by our increasingly automated productivity, something like a guaranteed annual income. But to make any political changes, we have to change the way we think and talk about economic reality.

By involving and not distracting one another, we become people of hope. By abandoning myths and false promises, half-truths and fish stories, we can change assumptions, priorities and policies and live in a future-friendly world with generalized security.

CONTENTS - FOREWORD STATE MYTHS 1. “The economic location is in danger without reforms” 2. “State indebtedness is bad” 3. “The taxes are too high”

4. “Taxes are paid according to income” 5. “The budget has no gender” 6. “State regulations hinder the economy and inhibit innovations” 7. “A strong currency is imperative” 8. “The best way to development is free trade” 9. “Economic policy should be left to the experts” LABOR MYTHS 1. “Labor costs too much” 2. “Unemployment arises through too little flexibility on the labor market” 3. “Wages are paid according to performance” 4. Eastern expansion of the EU threatens our jobs” 5. “We achieved the economic miracle and reconstruction under our own steam” 6. “Immigration controls and laws protect the labor market” BUSINESS MYTHS 1. “If the economy prospers, everything is good for us” 2. “No technical progress without patents”

3. “Privatization improves public services” 4. “Small is beautiful instead of big business” 5. “The best product prevails on the market” 6. “The stock exchange makes everyone rich” 7. “Longer store hours create more jobs”

SOCIAL MYTHS 1. “Social benefits are often misused” 2. “Aging makes financing the welfare state impossible” 3. “Private old age provisions are more stable than state provisions” 4. “”We need more personal responsibility” 5. “Tax competition undermines financing the welfare state” 6. “State child benefits encourage more children” 7. “The public health system needs more market economy!”

FOREWORD

Myths – symbolically charged narratives with dubious real foundations – are not phenomena limited to the dim and distant past. In their classic “Dialectic of Enlightenment,” Adorno and Horkheimer made the pessimistic diagnosis decades ago that science today has become the central myth today. Science has taken the place of religion in generating blind obedience toward the higher powers [Max Horkheimer/ Theodor W. Adorno: Dialectic of Enlightenment, first edition 1947].

We know how contemporary myths function from Roland Barthes’ analysis “Mythologies” [Roland Barthes, Mythologies, first edition 1957]. Myths have the tinge of innocence and naturalness and divert attention from the social and historical causes and conditions. They like to appeal to so-called common sense and make phenomena appear obvious, self-evident and unalterable which they are not. They make the specific interests behind a statement disappear. They promote passivity since language in myths acts more as intimidation than communication.

The search for examples is not hard when we realize these characteristics. A debate on economic reforms can hardly be avoided in TV channel-hopping.

MYTHS OF THE ECONOMY The economy is a special area of society. On one hand, economic processes influence the day-to-day life of all people. On the other hand, knowledge of economic connections is considered a matter for experts. The pressures and troubles the economy often imposes on us and the simultaneous impossibility of expert discourse about the economy leads many people to want “to have nothing to do with the whole subject.” The “terror of the economy” is discussed and reluctant turning away is often the result. But thinking, speaking and acting is left to others that way. For example, businesses often know what they want and can hire experts to publically justify their desires and demands. This is also true for some individual persons, groups and political parties. They adopt the language of experts to emphasize their demands with certain arguments. Political and interest-based decisions are justified with supposed practical economic constraints or necessities. Counter-arguments that stand up to those constraints often appear. However the quality of public debates and participation in conflicts become feeble now and then with increasing media concentration, decreasing substantive differences between the parties and the political weakening of counter-voices. Certain views of economic experts are unopposed until they assume the character of popular myths. They become natural truths seemingly unchangeable that lie outside our sphere of influence and are hardly questioned by anyone.

The right to join the conversation is vital because the economy concerns all of us. Like all disciplines, the economy has developed a technical language. Only those who learn it understand it. Despite this exclusive language and methodology, the underlying arguments and reflections are mostly generally understandable.

A second objection should be added to this first scratch of the expert Olympiad. Most economic questions are controversial. As in many other social questions, much in the economy depends on the vantage point. Economic arguments can be used for panicmongering, justifying discrimination and spreading feelings of powerlessness, as happens daily – or to better understand society and grapple critically with it and change society.

This second approach inspired this book. In a study group over one-and-a-half years, we collected the most important myths that circulate in the media and everyday discourse.

The core arguments were sifted out and counter-arguments drawn from economic research.

We hope to contribute to a broad economic education of the population and their participation in political-economic debates and decisions.

STATE MYTHS 1. “The economic location is in danger without reforms” “The competitiveness of our country as an economic location will be in danger if no radical reforms are introduced. To stay on top in the international ranking, lowering business taxes, reducing regulations and driving down wage costs are unavoidable.”

Veiling Conflicts of Interest The term “competitiveness” is common on the business plane. Firms are mainly established by their owners to gain profits and must stand the test in competition.

However transferring the term to a whole national economy and the silent assumption of a clear distinction between “competitive” and “non-competitive “ states are problematic [Paul Krugman, The Myth of the Global Economic War, 1994].

Firstly, the economic relations between states as a rule lead to growth from which all participants can profit and isn’t a zero-sum game where one loses and another wins. If China is presently going through a rapid economic development, the exchange can benefit both and does not mean the EU suffers losses [see the myth “Eastern expansion of the EU threatens our jobs”].

Secondly, a business that loses its competitiveness files for bankruptcy and is forced to withdraw from the market. However a state and its population cannot “go bust” and disappear from the market. Thus the term “natural competitiveness” is vague.

In addition, that a state or national economy has different goals and functions than a business is undisputed. While clear hierarchies of command and the model of profitmaking rules in businesses, modern states claim a democratic decision-making and follow a great variety of goals that go beyond economic success.

The anxiety around “national competitiveness” is deceptive because it fades out conflicts of interest and assumes a homogeneous national interest. Every measure to increase “competitiveness” has advantages and disadvantages. There are hardly any politicaleconomic decisions without a goal conflict. All political-economic measures have an effect on distribution between different sectors of the population. For example, lowering the business tax brings advantages for the affected businesses but revenue shortfalls for the state. Different groups suffer because they either must compensate for these revenue shortfalls with new taxes or must endure lower state spending necessitated by the revenue shortfalls. Whether a circumstance is rated good or bad depends on the interests.

“National interest” is given as a supportive argument in political lobbying. What is good for some businesses is said to be automatically good for the whole national economy.

Narrowed Focus on Location Factors The factors described as threats to competitiveness change in the course of time and depend on who is speaking. Excessive (non-) wage labor costs, exorbitant taxes and too many regulations are frequently mentioned. One of these factors cannot claim to be the decisive determinant of “competitiveness.” Different states take different paths in the concrete development of these “location factors” that provoke many discussions.

The argument “all businesses migrate where wages are lowest” is too simplistic. Low wage costs and the supposed cost advantage are often explained by low productivity [see myth “Labor costs too much”]. State regulations can be an obstacle to developing entrepreneurship but are often spurs for profitable innovations. Strict conditions for environmental protection are an example. These conditions press to inventing new environmentally-friendly technologies [see the myth “State regulations hinder the economy and innovation”].

Two deficiencies of the discussion are striking regarding the comparison of wage levels or non-wage labor costs (particularly the employer contribution to social security).

Firstly, the wage costs are only convincing in relation to productivity… Secondly, the contribution of piece-labor costs to the “competitiveness” of states should not be overrated. In industry and trade, wage costs only amount to 10-30% of the production costs and are not the crucial cost factor.

2. “State Indebtedness is Bad” “The state should not contract any new debts because state indebtedness is harmful to the economy, politically unstable and irresponsible as well as an unjust burden for future generations.”

The EU Stability Pact insists member states may not post medium-term budget deficits.

States should avoid “contracting debts” as much as possible. In Austria the government’s budget policy in 2000-2002 stood under the “zero deficits” guideline. Is a balanced budget the best budgetary policy?

Good Reasons for State Indebtedness Economic stabilization and bridging over economic crisis times is an important justification for temporary state deficits. The state must help out when private households and businesses spend too little in phases of economic slack periods. Firstly, this allows its budget deficit to grow through business cycle shortfalls in tax revenues and additional spending for unemployment. Secondly, the state through borrowing can finance which keep the economic dynamic going at the right time and in the right area.

Financing investments is a second important justification for heavy debts. The argument is often made that state deficits are unjust because they shift budgetary burdens to future generations who then have to repay the credits (as today’s taxpayers use credits that the state has taken in the last decades). Costs are partly shifted to future generations of taxpayers in the framework of credit financing – as well as benefits.

Credit-financed state investments are not a threat for the future and do not mean “living at the expense of future generations.” Rather they are often a prerequisite of future prosperity. When public investments are financed with credits, future generations also inherit the benefits from the expenditures and not only the debts. They can use the rebuilt infrastructure; education spending supports their training etc. Thus indebtedness is a way for future generations to share in the costs of today’s future investments from which they will profit.

Moreover future generations also “inherit” the assets held by the creditors of the state (private persons and banks). When a distribution question is raised, distribution is between the taxpayers who must answer for interests and repayment of state debts, not between different generations. In general, the wealthy make credits available to the state and profit from the interest payments while all taxpayers are liable for the interest payments. This has greater effects on redistribution, the more unjustly the tax burden is apportioned.

Special Features of State Debts State debts are neither good nor bad economically. Where the credits are spent is crucial.

In public debates, it is often said the state like a private household cannot spend more than it earns. However state budgetary policy has other functions than the financial conduct of private households [cf. Heiner Flassbeck]. A state does not need a balanced budget. From an economic perspective, what the state does with the budget – from which it gains revenue and for what it makes expenditures – is central. Budgets have to fulfill public tasks – welfare, distribution, infrastructure etc. Unlike private households or

businesses with their budgets, the state has the task of steering the total economy.

Gaining profits (budget surpluses) or zero deficits are not state goals.

The desire to reduce the deficit and save is different for private persons than for the state.

While the economic effect of savings efforts of an individual private household are negligible on account of its trifling size, this is different with the state. Because of its enormous economic magnitude, state savings plans can have economic consequences that under some circumstances frustrate its own savings intentions. State austerity measures (cuts of social benefits) lead to income- and expenditure cuts for many impacted private persons that can negatively affect economic development with a bad aggregate economic mood – which becomes noticeable in falling tax revenues and increasing state spending for unemployment assistance. This diminishing revenue and rising expenditures could thwart the original effects of savings so the deficit is not reduced at the end. Many European states reacted to the economic crisis in the 1930s by attempting to balance their budgets – with disastrous aggregate economic consequences. As another example, the upper limits for state indebtedness of the EU Stability and Growth Pact forced states to make savings efforts in bad economic times so the rules of the pact would not be violated.

This weakened the economy, led to losses in taxes and blocked the planned reduction of the state deficit. On the backdrop of this experience, a reform of the Stability Pact was resolved in 2005 to increase the possibilities for budgetary policy.

The state is better prepared than others to take over public tasks and the necessity of running into debt. Unlike private persons, the state never has to pay back its debts – because it has a “perpetual life.” The state only needs to pay the current interest on state debts. It can cover the total credits through new credits again and again. This is possible without any problems as long as the interests and the annual new indebtedness do not grow faster than the tax revenues.

The relation of the debt state to the gross domestic product is the decisive factor in judging state indebtedness in a growing economy, not the growing indebtedness of the state in itself…

Permanent new indebtedness in itself does not lead to “exploding debts,” as is often argued. State indebtedness is only problematic when the new indebtedness is permanently higher than the economic growth. Then the indebtedness share in the GDP rises. The interest level also plays a role… The framing economic conditions, above all economic growth and the interest level, play a crucial role in whether state indebtedness is sound or not. That state policy can influence these framing conditions is often not mentioned.

State indebtedness does not mean the impacted population, the whole national economy, “lives above its means.” The debts of one are the assets of another. State indebtedness mean the state accepts credits and loans from banks and private persons that represent assets for those banks and private actors. Thus the national economies of Germany and Austria mainly have debts “with themselves.”

The Real Budget Problems Concentration on the budget balance drowns out a necessary discussion abou8t the effects of budgetary policy on the economy and society – for what money is spend and who should finance this [cf. the myths “Taxes are paid according to income” and “The budget has no gender”].

These arguments do not mean budget deficits are always positive. Budget deficits imply redistribution to the owners of capital. The creditors of the state obtain interests that are financed from tax payments…

Budget deficits are often consciously produced by governments and used as a strategic instrument to dismantle public services. First, the taxes are lowered. The resulting revenue shortfalls for the state lead to a budget deficit. In a next step, this deficit then serves as an argument for reducing state spending (that is now described as “impossible to finance”).

Budgetary policy is one of the central political developmental instruments. All budgetary goals including the desire for a balanced budget mainly follow political motives and are not expressions of economic necessities.

3. “The Taxes are Too High” “In Germany and Austria, the taxes are too high. They strangle economic power and destroy competitiveness. Therefore the share of taxes in the gross domestic product (“the tax rate”) must be unconditionally lowered.”

One of the most prominent budgetary goals of the Austrian government is lowering the tax rate. The share of tax- and social security revenue in the gross domestic product (GDP) should be reduced to 40% by 2010.

The tax rate is one of the most important indicators for judging the size of the state sector – alongside the state spending rate that sets all public spending in relation to the GDP. From the perspective of taxpayers (businesses and private persons), taxes and social security contributions represent a burden that reduces economic revenue. From the view of the public sector, taxes and social security contributions are the most important revenue sources for financing public functions.

The political goal of lowering the tax rate in the medium term pushes the financing function of taxes and social security contributions to the background. Taxes and social contributions must either be permanently balanced by increasing revenue or by reducing expenditures…

A Low Tax Rate Only Benefits the Rich

The medium term strategy of the Austrian government is reducing spending parallel to the taxes. The spending rate should be lowered in keeping with the decline of the tax rate to reach a “zero deficit” in the medium term. While some of the introduced austerity measures are certainly sensible, the negative social and employment effects of most of these “spending reforms” (pension- and health reform and administrative reform or reduction of public employees) should be underscored. Redistribution in Germany and Austria occurs through public expenditures. These expenditures mainly benefit the less socially favored (for example social services)…

Lowering the tax rate as a strategic concept for reorganizing state spending – the central point – implies a program of redistribution to the top that is helped with this newly devised number fetish. This redistribution program has negative effects on people with low incomes, particularly women. Possible tax cuts benefit those who are well-organized and can lodge their grievances. The business side demands again the long promised tax cuts. Many tax cuts were justified with the argument that capital and wealth could evade taxation through migration…

Political parties and governments should be judged whether and in what form tax rate change is in their program…

Tax Rate and Economic Growth … Can lowering the tax rate promote economic growth and improve Germany’s and Austria’s international competitiveness? If the height of the tax rate were actually a seal of economic quality, then states in Africa must be the most dynamic economic regions of the world – because the tax burdens there are unbeatably low.

The following theory is found in many economic textbooks. Up to a certain height, a higher tax rate is positive for economic growth. The state with the realized revenue can finance expenditures that increase growth as for example education- or infrastructure spending. But if the tax rate exceeds a certain “critical” level, this has negative incentives for the working population and for entrepreneurial engagement and thus dampens economic growth.

First of all, this argumentation is theoretically contested. Determining the “optimal” height of the tax rate is empirically impossible. A simple international comparison shows an unequivocal connection does not exist between the height of the tax rate and economic growth. For example, the Scandinavian countries and France – countries with tax rates above 40% - have a dynamic economic growth. On the other hand, the growth performance of Switzerland and Japan whose tax rates are under 30% was rather weak in the last years… In Austria and Germany, the structure of the taxes is problematic in distribution- and employment policy, not the height of the tax rate…

4. “Taxes are paid according to income” 5. “The budget has no gender”

6. “State Regulations Hinder the Economy and Inhibit Innovations” “Laws and regulation entail more and more costs and burdens for businesses. They impede entrepreneurial economic activity and act as innovation-brakes. Their reduction is overdue.” …Rules and legal regulations often have unexpectedly positive side-effects like innovation incentives. Secondly, a free market does not protect from misuse and sideeffects (see the scandals around the falsified balance sheets of the American Enron).

Thirdly, much time can pass until the positive effect of regulation appears. This means regulation can be felt to be negative in the short-term although in the end it has positive effects for those subject to the rules.

De-Regulation is Often Deceptive The introduction or increase of competition by removing state regulation (so-called deregulation_ in one branch often makes more regulations necessary in the end. The deregulation or liberalization of the network industries (telecommunications, electricity, gas, postal service etc) was a re-regulation. The state monopoly of these markets was simply transferred into a system with several suppliers… Regulation is often necessary to guide competition in socially useful paths.

Regulation and Social Goals In undifferentiated criticism, regulations are generally presented as bureaucratic arbitrariness. Social goals that conflict with the goal of realizing profit are covered for economic enterprises through regulation: protection of the atmosphere, employee rights, public safety etc. This goal must be weighed against the economic burden arising from the regulation.

Without regulatory conditions for environmental protection, there would probably be no fish in European rivers and no healthy forests. “Free” markets do not function when the production process has negative side-effects that do not burden the causal agents with any costs or only trifling costs (for example, toxic waste water from factories could be drained off free of charge into rivers). There is even a regulated market for pollution rights. Thus regulation is often necessary to curb harmful side-effects of the economy and reach socially desired goals…

Positive Side-Effects of Regulation Beside their contributions to socially desired goals, regulations can also fulfill an economically useful function for the regulated businesses. Instead of harming profit realization, they could even contribute to gaining profit. A deregulation does not always lead to economic success. In many cases, regulations for attaining social goals can prove to be economically advantageous.

As one example, the motivation of employees in developed economic sectors can play a great role for business success. That labor relations are considered fair by the employees is crucial. Diverse employee rights, social services, protection from unlawful termination, joint-determination on the job, collective bargaining and minimum wages provide work satisfaction and are prerequisites for high personal motivation and creativity and are regarded as foundations for business success in a modern knowledgebased economy. Thus regulations could protect the legitimacy of arrangements that are important for a successful economy. By acting as innovation incentives, regulations can make a positive economic contribution…

In Germany, high wages and labor laws that make dismissals difficult act as innovation incentives. Manufacturers try to produce high quality products for which they can charge high prices to cover their higher costs. In many countries, strict norms for products, product safety and protection of the atmosphere often force businesses to new ideas for products, services and production processes that then prove to be market successes.

Regulations as market coordination measures are very similar to competition in many regards. Competition at least in the short-term can be economically detrimental for every individual business. Competition puts businesses under pressure, usually leads to lower prices and lost profits and therefore is not welcome for any business. Nevertheless Competition can have a positive effect on the total economy because it prevents monopolies demanding high prices and forces businesses to innovations. This is also true at least potentially for regulations. At first they represent a burden for a business. But in the long run they press to adjustments that can prove economically and socially positive.

All in all regulations are often necessary to combat harmful side-effects of the economy and reach social goals. They also often act as innovation incentives and contribute to entrepreneurial success.

7. “A Strong Currency is Imperative” “The stronger the shilling, the mark or the euro, the more prosperous is the respective national economy. A strong currency is a reason for job and an expression of prosperity.”

8. “The Best Way to Development is Free Trade” “Unrestricted free trade leads to increased prosperity for all participating countries.

Therefore all countries should specialize in foreign trade corresponding to their comparative advantage. The optimal development policy consists of market opening and free trade.”

David Ricardo’s theory of comparative cost-advantages is the most influential theory on world trade. It claims that free trade benefits all participants since every country can produce at least one good especially well on account of its location and production factors. International prosperity could be maximized if every country would specialize

and all states would pursue worldwide free trade. According to the theory, this would also lead to better development of poorer states.

Obviously there are different location advantages and trade makes sense in many areas.

But a complete opening of markets and specialization in goods with comparative advantages can bring disadvantages and lead to underdevelopment, not development.

International Division of Labor Most “developing countries” have comparative advantages in raw materials or agricultural- and forestry products. This is also reflected in the international division of labor. Industrial countries (EU, US, Japan) export top flight goods with a high technological input while poorer countries export simple commodities…

Judgment depends strongly on the economic perspective of the observer. For owners of financial assets, the shift to an upgraded currency abroad is positive… Devaluations can lead to higher inflation through higher import prices… and press to ever new devaluations…

Since the 1970s the “terms of trade” have shifted dramatically. Raw materials have lost much value compared to finished products…

A report of UNCTAD (Conference of United Nations on the Environment and Development) showed terms of trade fell 28% in Africa, south of the Sahara from 1980 to 1989 which led to an income loss of $16 billion for 1989 alone. In the 1990s, the prices of primary goods fell even more intensely compared with industrial goods.

Specialization in certain agricultural products leads to monocultures. Crucial resources for production on the domestic market are often lost. The consequence is an inadequate food supply for the population, dependence on an export product whose price4 is dictated by the world market and destruction of the environment. A way out of this vicious circle is hardly possible under conditions of free trade. Native or indigenous industries and an extension of the value-creation chain can hardly be developed on open markets since the imports of industrial countries are more competitive and industries are often destroyed.

Transportation Costs Trade requires transportation. The current extent of world trade and the international division of labor is based very strongly on the massive subsidy of transportation and location advantages – at the expense of the environment and sustainable development.

With complete truth in transportation costs, a series of price advantages in foreign trade would be cancelled and regional products would be more competitive…

History

The greatest deficit in the discussion about the magic formula/ panacea free trade is that historical developments are faded out. The postulate that free trade and market opening lead to growth and sustainable development in poor countries is refuted by the experiences of all industrialized countries today. Not a single industrialized country today followed this policy in its industrialization phase that is prescribed to developing countries by the IMF, the World Bank and WTO agreements.

Great Britain and the US are the two countries that had the strongest protectionism in critical phases of their development. From 1830 to the First World War, US tariffs were the highest in the world. Trade relations were first liberalized after its uncontested hegemony was secured.

The Southeast Asian so-called tiger states (South Korea, Hong Kong, Taiwan, and Singapore) that were named again and again as models for development also went a very different way. National industries were consciously protected and developed before markets were opened. The export of unfinished products was never the goal of development [Ha-Joon Chang, Kicking Away the Ladder: Development Strategy in Historical Perspective, London 2002]. The recent successes of China and India refer back to targeted industrial policy, not to unrestricted free trade. Experiences show that comparative advantages are determined by socio-economic, cultural and historical factors and are not static or decreed by nature. Their selection and development depended on political decisions.

The present situation is described by Cambridge economist Chang as “kicking away the ladder.” Developed countries kick away the ladder (protectionism) on which they climbed themselves. They first became advocates of free trade when their industries were competitive on the world market. Even today they are only competitive in those sectors where this is the case. From the US steel industry to the agriculture of the EU, there is no free trade where their own business interests would be harmed. Thus power is really central, not free trade [Attac Austria: The Secret Rules of World Trade. WTO-GATSTRIPS-MAI, Vienna 2004].

Goal versus Instrument Export and free trade do not automatically lead to development and prosperity. They are not political goals. Sustainable development, prosperity, social security and preservation of the ecological foundations of life are political goals. Free trade – like protectionism – can only be an instrument to their attainment under certain conditions. At best the export of simple commodities can be part of a broader concept of development ensuring the connection of the export sector with the local economy where the incomes of broad population sectors flow and are guided in building local economic structures and in the higher development of the export economy. Political-economic regulations are needed to safeguard this. However these options for independent economic policy are massively restricted by international politics and multilateral agreements oriented in market opening.

The advantages and disadvantages of free trade and protectionism for the economic development of a country should be analyzed by the impacted themselves without pressure from outside. There is no magic formula for development of such different countries as China and Haiti. Differentiated and well-planned economic policy opposes an unqualified free trade ideology7 that is empirically untenable.

9. “Economic Policy Should Be Left to the Experts” “Economic policy is a matter for experts. Experts make more objective decisions than politicians recruited out of political parties. Because politicians must be reelected by the people, they are directed by what favors their reelection and cannot make objectively correct decisions. They serve their own interests or the interests of their clientele instead of making efficient, optimal economic policy in the public interest. Therefore important decisions should be made by experts.”

Impartial Knowledge and “Objectively Correct” Solutions Impartial knowledge is assumed in the argument for leaving political-economic decisions to experts. Thus the persons possessing this knowledge would be the only ones who can find socially relevant solutions. Still the situation is not so simple particularly in economics since there are different scholarly theories here with different implications.

Nobel Prize winner for economics Joseph Stiglitz remarked: “These `technocratic’ solutions – seen more closely – often have an ideological foundation that is not economic… Economic policy is normally not technocratic in this sense. Considerations are always involved. A political measure may have the consequence that inflation increases or unemployment falls. One helps investors; the other helps employees” [Joseph Stiglitz, Mistrust the Technocrats, in: Der Standard, 7/23/2003].

Economics is a social science, not a natural science where there may be “objectively correct” or “false” solutions. Different and often conflicting theoretical approaches exist from which completely different political-economic conclusions can be drawn. Specific interests and social groups profit from every decision. Therefore there are no “objectively correct” decisions. Rather the question which population groups should profit in economic policy is central – particularly when we assume the financial resources are limited. The “most efficient solution” for one group can give the worst results for another group.

So decisions that were legitimated by “experts” also contain values. If the solutions of economic problems are simply left to them, their own values or values of their patrons will flow in their decisions.

Experts, Lobbying and Democratic Decisions Thus the problem is the missing democratic foundation of applied value systems. The use of experts often veils interest-policy. Delegation of economic policy to expert groups facilitates the influence of lobby organizations because influencing these screened groups is easier to influence than a broad public discussion offering protection from

implementing clientele interests. Lobbying often disguises itself as expertise. The best experts are usually economically active serving the dominant businesses. How independent can their judgment be?

Experts presenting recommendations really only benefit one small solvent group as “objectively correct” decisions.

Political-economic decisions that directly affect the material life foundation of people should be based on another foundation. The real core of democracy is that people determine their life themselves in common dialogue and not alone. This assumes that defining the life foundations is not left to a few “knowledgeable ones.” Rather this should be defined by the people themselves on the broadest possible basis.

Economic policy always takes place amid uncertainty. There is no agreement among the different economic schools of thought about many connections. Data is lacking for much empirical proof. Many decisions have to be made on the basis of mere forecasts or suppositions about the future. Every measure produces winners and losers. Under these conditions, the mobilization and integration of the knowledge and opinions of as many participants as possible can only contribute to the improvement of decisions.

Political-economic decisions and their effects should not be made with exclusion of the general public. Instead they should be discussed publically so those affected by the respective decision are included.. Decisions should be made democratically on the basis of this discussion. Experts have a place in this process. They can serve as advisors of the population and strengthen democracy.

LABOR MYTHS 1. “Labor Costs Too Much” “High wage costs are one of the most important triggers for problems on the labor market. Labor is often simply too expensive. On one hand, high wages and salaries hinder the competitiveness of local goods on the world markets. They lead to expanding production in low wage locations and unemployment at home. On the other hand, high wage costs make hiring additional employees in the service sector unattractive.”

Wage Costs Have to be Seen in Relation Wages in western European industry facing international competition are actually relatively high. For example, a working hour in Austria in 2003 cost an average 20.6 E. That was a quarter less than in Germany but five times as much as in Chechnya and thirteen times as much as in Rumania. Labor costs per hour rose 1.6% per year since 1995 in Austria and 2.6% on average in its trading partners…

Wage costs in industry are falling in relation to the trading partners and in relation to local production. In the Austrian economy, piece-labor costs corrected for inflation have

fallen 9% since 1995 and 18% since 1980. Costs for labor have clearly declined in relation to the value of produced goods and services. Labor becomes increasingly cheap.

A similar picture appears in Germany. Inflation-corrected piece-labor costs in the whole economy fell 15% since 1980 and 6% since 1995.

The decline in the price of labor measured in produced goods and services was reflected in the rise of unemployment in the last 25 years…

Lower Wages and More Employment?

For the total economy, there is no evidence that excessively high wage costs generally have negative effects on the labor market. In “neoclassical” economic theory, there is the notion that a reduced price of workers leads to businesses using more persons instead of machines and so increasing employment… Most human work is coupled with technology whose deployment can only be expanded. More information workers need more computers, not fewer computers.

In addition, wages are only one cost factor among many and should not be overrated in its significance for the competitiveness of businesses. In the manufacturing industry, the share of wages only amounts to one-fiftieth of total costsThus a considerable reduction of wages only brings trifling savings in the total costs.

2. “Unemployment arises through too little flexibility on the labor market” 3. “Wages are paid according to performance” 4. “Eastern expansion of the EU threatens our jobs” 5. “We achieved the economic miracle and reconstruction under our own steam!’

“That Germany and Austria are among the richest states of the world has much to do with virtues like diligence and eagerness to work. The `economic miracle’ is due to the bustle and zeal of the `builder generation’ in the reconstruction after the war. Conversely, the poverty in other states is mainly because the population there is less industrious and diligent.”

Economic Success and Dependence on Others NS War Industry and Forced Labor as Foundations The Role of the Marshall Plan The neediness of war-damaged Western Europe after 1945 occurred in the favorable circumstance that the US had a political and economic interest in rebuilding Europe. On one hand, a strong counter-pole to command socialism should be established. On the other hand, a receptive and solvent market was needed for its own exports and investments. On the basis of these considerations, the US began the “Marshall Plan” (the

European Recovery Program – ERP) to provide western European states with the urgently necessary financial resources in the form of loans and grants. The Marshall Plan was the central anchor for reviving crushed West German and Austrian economies.

Imported goods (both food and investment goods) were paid for by the US government…

Between 1948 and 1952, around $12.4 billion was provided in the scope of the Marshall Plan. Around $1.5 billion flowed to West Germany…

Concerning financial aspects, West Germany was granted gigantic debt relief. Its foreign debts were reduced 50% to 30 billion DM at the 1953 London Conference of Creditor States…

Economic postwar development in West Germany and Austria profited both from the considerable use of forced labor and from the post war system with its US financial assistance program and the growth of Western industrial states based on exports and investments. A prosperous world economy was and remains an essential condition for economic success for export-oriented states like Germany and Austria.

6. “Immigration Controls and Laws Protect the Labor Market” “In industrial states like Germany and Austria, controls rightly exist for immigration and for people with foreign citizenship, special laws in the areas of residence, work, social life and political rights. Only in this way can a stream of workers be prevented that would lead to wage-dumping and unemployment on the native labor market.”

In this myth, an affluent chauvinistic way of looking at things is reflectedbysetting the perspective of native workers above the perspective of persons from abroad. In a similar way, we were warned earlier that greater involvement of women in the labor market would lead to repression and lower wages.

This argument suppresses the fact that competition by foreign workers occurs when businesses migrate. In addition, the effect of an increased number of workers on the wage level and employment depends on whether the economic situation is favorable or unfavorable and whether the state economic policy bears essential responsibility.

This argumentation misunderstands the effects of state screening measures. Stopping illegal immigration has not succeeded either in the US or Europe despite very restrictive measures blocking immigration. Migration obviously follows its own laws that are hardly be influenced by political measures. The notion of complete screening and control of immigration according to criteria of economic usefulness is a myth for the country open to immigrants unless the whole society is not changed into a police state… The screening policy has not reached its supposed goal of substantially limiting immigration.

Rather it leads to a successful illegalization of immigrants.

Reasons for Migration Those responsible for the screening policy assume migration is triggered by differences in affluence between the immigration and emigration countries. Therefore they hope for

higher costs for migration in the form of making access harder and reducing the incentives for immigration. Still migration has other motivations than only a prosperity difference.

Important circumstantial evidence of this reality is that the majority of migration movements occur between states with the same or similar prosperity levels mainly in the southern hemisphere and not between poor and rich states. Historically in Europe, only a few people from poorer regions migrated to richer regions within Europe despite inoperative controls, short distances and a considerable wealth differential between the individual countries.

Migration is a side-effect or accompaniment of socio-economic change, of intensified enforcement of market conditions in the emigration states, factors such as the commercialization and mechanization of farming and repression of the subsistence economy through markets for goods and workers. These changes release whole population groups from their local anchoring. Often these changes are touched off by international developments. The drivers of these developments are those states that later became goals for migration movements… The French and British role as former colonial powers was a central factor for establishing extra-legal networks. In the 20th century, there were periods (after Germany had been an emigration country for a long time) when the state actively sought to “import” foreign workers: from the seasonal work at the beginning of the 20th century in East Prussia, the extreme variant of abduction to forced labor in the Third Reich, recruiting “guest workers” from Italy, Yugoslavia and Turkey in the 1960s and the debate over a “Green card” for skilled foreign IT-workers at the end of the 1990s.

In this arrangement, people were brought into countries and their labor power was used (and their tax payments and sales taxes collected). Before and after the use of their labor power, they were forced to remain or return to their original countries. Socialization-, training- and supply costs were shifted to these countries.

The demand for workers in the host countries represents one of the most important driving forces for migration. The majority of immigrants would not have had any reason to emigrate without information about job prospects with businesses in the host countries…

Legal Discrimination The state classifies immigrants from non-EU states in different groups: workers, family arrivals, students and political refugees or asylum-seekers. In a graduated system, states like Germany and Austria discriminate through refusal, complications or temporal restrictions on the labor market.

To work legally, immigrants need a work permit. The principle that domestic citizens are preferred is in force for job approvals.

On the basis of this criterion, immigrants rarely receive a work permit and as a rule are excluded from the official labor market with the exception of seasonal work quotas in branches like harvest work and tourism…

Effects of Discrimination The screening policy and the special legal treatment of immigrants have an effect on the labor market but not on the number of immigrants. In part, they are declared “illegals” and in part given lesser rights. They are forced to accept lower wages and poorer working conditions than the native working population. They are made a discriminated lower class that is useful for some businesses. On one hand, gaps are filled that were avoided by native workers. On the other hand, a potential underbidding competition is carried out in some segments.

Whoever may not work officially but must work to survive is pushed to the unofficial labor market, the shadow economy. This means no social standards, no health standards, no tax benefits and no insurance coverage, extortion and low wages, no social benefits, terminability at any time, partial wage robbery, no retraining and no political representation. Businesses exploit this outlawed segment of workers to produce more cheaply and exert downward pressure on the wages and working conditions of the officially employed. Punishment for illegal employment is trifling…

Because immigrants in many regions have no access to social housing, they are limited to a narrow segment of the housing market and consequently must often pay higher rents (in Austria over 60%) than the native population.

Thus immigration controls and foreigner laws on the labor market result in discriminations and force immigrants into outlawed low wage segments gladly exploited by businesses.

BUSINESS MYTHS 1. “If the economy prospers, we all prosper” “What benefits business is also in the general interest since businesses create prosperity that helps the whole society. Therefore demands for political-economic preferential treatment of businesses are legitimate and businesses may not be overstrained by societal demands.”

Economic Growth as a Prosperity Indicator?

With this argument, economic prosperity is declared the essential standard for well-being.

We generally associate quality of life with good education, health, a proper relation of work and free time and life in a safe environment. Indicators like the gross domestic product give little information about these. Although the US population has a higher percapita income than the population of the EU, other indicators point to a higher quality of

life in the EU. People in Europe work less, have longer vacations, general health care is more widely accessible, child mortality is lower and the number of murders and prisoners is fewer.

Survey results and theoretical models of so-called “happiness research” show that economic growth is not or is not necessarily reflected in higher subjective human wellbeing. For example, the gross domestic product multiplied in industrial states since 1950 while the subjective well-being of the population, according to the surveys, has been almost constant since that time.

For decades, it was criticized that the gross domestic product is hardly convincing as the central barometer of economic prosperity… Economic growth does not automatically mean higher prosperity and higher quality of life. Higher growth can go along with a worsening of prosperity. On the other hand, high-value economic activities are not paid (for example, unpaid housework is not counted in the GDP).

Faded out Conflicts of Interest and Distribution Questions Since its beginnings, capitalism has been dominated by the conflict between capital and labor. In the course of its history, different social compromises and political regulations were negotiated to deal with this fundamental conflict of interests. In western industrial states of the postwar era, the attempt to bring peace to the conflict dominated so that employees shared an economic growth through higher wages, social benefits and welfare state securities.

“Redistribution of part of the gained wealth in favor of the labor factor has the function of supporting total demand and making possible an extension of the market and development of the productive forces” [Birgit Mahnkopf]. So the conflict over power between capital and labor in production was left to the command of businesses and was shifted to the plane of distribution and consumption. Concessions were made to employees so what benefits the economy was understood by employees in big businesses as their own interest.

This became increasingly clear in the last decades as businesses shifted or cancelled this compromise to their advantage. Increasing profits at the expense of wages, worsening of working conditions, dismissals and resistance of businesses against taxation and welfare state benefits has became dominant. At the same time the claim that what is in the interest of the economy is also in the general interest has become increasingly implausible.

Not all population groups are equally affected by economic events or political-economic measures. For example, a tax cut for businesses means that the lost state tax revenues must be recouped either through higher taxes on other tax groups (for example, income taxes) or cutting state spending benefiting others. If conditions and regulations for businesses are reduced or abolished, those who long profited from these rules will be harmed. Loosening protection against unlawful termination relieves businesses but

increases the pressure and insecurity for wage-earners. Claiming all reforms that benefit the economy are in the public interest ignores such distribution questions.

Dubious Benefits Referring to distribution questions, the objection is often raised that business-promoting measures have positive aggregate economic effects that are greater than the harm of negatively impacted individual actors. Thus it pays off in the end for society generally to accept these burdens. Relief for businesses that leads to higher profits is good because profits are used for investments that create jobs. Even if preferential treatment for businesses (tax cuts, dismantling regulations, sponsorship etc.) harm other groups of the population, positive job effects in a roundabout way more than compensate for this harm.

If this were true, high business profits would always have a positive effect on the total economy. But that is not reality.

Although the profits of businesses in industrial states have been very high in the last years after a decline in the 1970s, their investments are continuously low. Higher profits can end up in the pockets of owners instead of in investments (cf. Engelbert Stockhammer). The fact that announcement of higher unemployment or dismissals often ensures higher prices on the stock exchanges is a manifestation of opposing particular interests that take a back seat to a supposed general interest [John H. Boyd/ Ravi Jagannathan/ Jian Hu: The Stock Market’s Reaction to Unemployment News: Why Bad News is Usually Good for Stocks, NBER Working Paper No. W8092, 2001].

There is also no evidence for the frequent claim that too much redistribution harms the economic dynamic and that income inequalities are positive on account of their effect as performance-incentives. Rather redistribution to poorer groups of the population increases growth since their income becomes purchasing power benefiting the economic cycle and because the social costs of criminality of the impoverished lower class are reduced.

2. “No Technical Progress without Patents” 3. “Privatizations Make Public Services Better” “Liberalization and privatization lead to more efficiency in services. This makes possible cost- and price reductions as well as a higher quality of service. On the other hand, the state is a poor entrepreneur. Private parties can provide qualitatively high-grade services at a more reasonable price.”

For 15 years, liberalizations and privatizations of public services were carried out in Europe’s different states. Hardly one sector was spared. Public infrastructure services like water supply, railroads, energy production and distribution, telecommunications, postal service and public food dispensaries are open for private competitors (liberalization). Past public monopoly firms are sold to private businesses (privatizations).

The prejudice that liberalization and privatization bring better and more inexpensive outcomes fits in the current neoliberal view of the world. It is empirically unjustified.

An unpublished study of the Vienna Institute for Higher Studies could not find any difference in efficiency between public and private enterprises…

Separation from Network and Services as the Liberalization Concept More Disadvantages than Advantages Regulation Dilemmas Increase … Negotiating power lies one-sidedly with firms. Small communities and cities can hardly control the activity of these firms. They are afraid of suing corporations to enforce contract obligations out of fear of compensatory payments and court costs…

Countrywide water supply falls by the wayside like postal services.

In the final analysis, liberalization and privatization of public services mean that the pursuit of profit is the predominant goal of businesses. Public goals, like countrywide service and supply security that are not profitable for businesses, fall behind.

Government regulation in the liberalized market is increasingly unable to safeguard these public services.

4. “Small is beautiful instead of big businesses” “For powerful anonymous big businesses, there is only profit and power. For society, strengthening small enterprises is better: Small is beautiful!”…

Market Conduct A certain dualism usually exists between small and big businesses instead of direct competition… Sometimes services are decentralized and connected with locations where individual solutions are desired rather than standardized mass production.

Small businesses are sources of innovations. However big businesses are needed to develop and diffuse these ideas in new products on the mass market, particularly in very complex market segments. As to innovation, small and big are mostly complementary.

Political Power Big businesses have a negotiating power vis a vis the state. Whoever is big has resources that are useful in different ways. Concessions can be negotiated, for example tax relief or subsidies for investments promising jobs in a certain location. Large firms on account of their greater significance as employers can threaten location relocations more effectively.

This has become easier and easier for capital in the last decades under conditions of farreaching liberalization, freedom of movement and international contractual agreements.

Resources can be invested by businesses in lobbying that influence state and international rules and decisions in their favor.

Simultaneously big businesses are also subject to incentives to prove themselves as “good citizens” of their location. Firstly, brand-name firms live from a good image that could be endangered by disclosures of abuse of power. Secondly, big international firms are dependent on “their” state in many regards. Thus they have an interest in not scaring them off, for example regarding diverse approvals (for new investment projects, subsidies and mergers with other firms) or in representing their interests in international negotiations (for example, trade- and investment protection agreements). These and other mechanisms act as brakes on abuse of power by big business, even if the latter prove stronger in many cases.

All in all, both small and big businesses have their advantages and disadvantages. Small businesses are often less efficient, volatile and unstable and offer less favorable conditions for employees. Big businesses have market power that they can use to harm competitors, consumers and the state. They are under competitive pressure and must work in a profit-oriented way. Therefore businesses of whatever size are not idyllic.

5. “The Best Product Prevails on the Market” “The market is the epitome of efficiency. Competition on the market represents the most effective selection mechanism ensuring the best and socially desirable outcome will prevail at the end. The best product will be purchased most often, the best service will be called upon most of the time and the best technical solution implemented. Competition constantly produces and spreads new ideas, solutions and improvements.”

Market Faith and Path-Dependent Development The assumption of the authority of the best products is misleading and cannot claim to be universally valid or common practice. It is an expression of an ideological attitude that sees the market as a remedy or cure of all economic problems as also in questions of technological development. This cannot be supported scientifically. For a long while, there was the assumption that big businesses can bring any product to a man or woman independent of its usefulne4ss through aggressive advertising strategies and a mammoth advertising budget. Thus marketing success depends more on the advertising budget than on the quality of the product [cf. John Kenneth Galbraith, The Affluent Society, 1971].

Gaining adequate information is usually hard for the consumer and involves massive expense. All comparable products are not equally available. However theoretical and empirical studies in the late 1980s and 1990s in innovation- and industrial economics have shown that a large number of other factors can lead to “market failure.” Often the most productive or technically sophisticated products and technologies do not prevail…

The technical development of writing technology has a path-dependent character. Pathdependency means positive feedback effects between a technology and the technological, historical and social environment in which it arose and is embedded

resulting in strengthening specific characteristics that afterwards turn o0ut to be undesirable trends. This is usually hard to cancel…

Network Effects and “Lock-IN” … Positive feedback effects always arise where people learn from the experience of others…

Tricks of Product Systems … The “best technology” or the “best product” does not necessarily prevail on the market…

6. “The Stock Exchange Makes Everyone Rich” “The most important news is the news of the stock exchange. Everyone can become rich through the stock market. The stock exchange animates the economy.”

Stock Exchange and Resentment against the Financial Circles While the world of the stock exchange is decried by some as a sinister conspiratorial circle, it is represented by others as a source of “riches for everyone.”

The term “trade exchange” refers to a trading center for securities. These securities could be property titles of businesses (stocks), raw materials like oil and gold, currencies or bonds (tradable credits).

From their inception at the beginning of capitalism to the middle of the 20th century, stock exchanges as a rule had the characteristics of a little club with limited membership. A little group of stock exchange actors managed the property of a relatively small group of property owners who with their shares held partial ownership in one or several businesses. Reservations and resentment toward the financial sphere nourished partly out of religious conviction (for example, the catholic interest prohibition) and partly out of a notion identifying “honest work” with artisan activity and rejecting everything “abstract.”

This resentment found simple targets. Ultimately anti-Semitism implies a comparison of “predatory” and “creative” capital and imagines a linked “Jewish financial capital” that governs the world internationally by the stock exchange.

Stock exchanges did not arise – as in the contrived comparison of “creative” and “rapacious” capital – to manipulate businesses through outward extraneous interests.

Rather they represent a special form for organizing and managing the profit-oriented management of businesses for the group of owners.

Shareholders as owners of businesses on the stock exchange are interested in profit like all other business owners. For the wealthy, stocks offer the advantage of holding and

exchanging shares of different firms at any time instead of being tied to the property of a certain firm.

Speculation on profit is an essential motive for acquiring stocks. That is part of its nature… A stock is purchased in the hope that its value will rise in the future or will yield dividends. A business also invests in new production facilities in the hope that products will be produced that can be sold with profit. Both follow a speculative motive…

Stock Exchange and the “Shareholder Value Revolution” Stock exchanges are very popular in times of rising stock prices. Large population groups are encouraged to buy stocks with propagandistic methods. Trust was shaken for decades in the US in the 1920s and 1930s before the stock crash on “Black Friday.” In the last two decades, the role of the stock exchange and financial markets in general changed again. This can be seen very clearly in their position in the media. If stock exchange reports were limited in the past to special branch media, they are an element of the main news on television today. The financial industry is an expanding branch and owning shares is more dispersed today than in the past in many states.

This has different causes. Firstly, far-reaching economic prosperity concentrated enormous wealth in private hands in the decades of the postwar era. Management of this wealth contributed to the growth of a financial industry that acts in the name of investors and strives for political-economic influence and expansion of its business model: dismantling regulations for financial market transactions, opening up new growth areas (above all privatization of pensions) and privatizations of public enterprises through the stock exchange.

Secondly, the idea of spreading ownership of shares more widely in the population has become an important component of neoconservative policy. Important examples include the introduction of private pensions – that moved into the center of reform efforts beginning in 1981 in Chile and since the 1990s in Europe and the US. Then there was the privatization of state enterprises through the stock exchange joined with “people’s stocks” campaigns to spread stock ownership in new groups of the population first in Great Britain under Thatcher in the 1980s and in many countries like Germany and Austria, imitated in the 1990s in the scope of the Telecom privatization. The goal is to move more people to an individualist attitude and make them allies of a capital-friendly policy. The stock exchange has an increasingly symbolic function: as a model of a world where the “free market” rules.

In the 1990s, this development was compressed in the term “shareholder value.” With its diffusion, the idea was accepted that businesses only exist to benefit their shareholders.

This is an attack on development in the postwar era in which businesses on the stock exchange were often exposed to the claims of the state, employees and other so-called stakeholders.

The “shareholder value” motto went along with an extraordinary stock boom particularly in the US. The stock exchange appeared as a machine that makes all participants rich.

New technologies (including the possibility of buying stocks on the Internet), great media attention and political initiatives seduced new groups of customers to purchase shares.

“Shareholder value” was a popular slogan that transported the faith or demand that property ownership leads to a right to profit to which all other goals and claims are subordinated. This claim to profit is declared identical with the public interest or common good.

These claims are exaggerated for many reasons.

Who Becomes Rich through the Stock Exchange?

The Stock Exchange doesn’t Stimulate Economic Growth Insignificant for Financing Businesses Not a Reliable “Economic Barometer” The function of an “economic barometer” is often ascribed to the stock market because stock transactions are based on expectations about economic development in the future and buying or selling today on the basis of these future expectations. Rising prices would point to good general economic prospects. Since price expectations on the stock exchange are made from a business owner perspective, it is a relative one-sided and hardly representative indicator. Higher prices are based on expectations that later turned out wrong again and again.

Limited Effects of Price Fluctuations Stock Exchange Only Covers a Part of the Economy Structural Limits of “Shareholder Value” Declaring “shareholder value” the highest business goal is justified in that businesses would not become “lazy” and fall back economically. Instead “value enhancement” would be continually realized by management’s focus on “shareholder value.”

In the economic press and the management advice literature, “doer types” play an important role in business leadership. However the economic development of big businesses is usually hardly influenced by management (apart from isolated cases). In many branches, structural limits are set to the increase of profits on account of intense competition and stagnant demand in fully developed markets. Therefore a value upgrading through better management is hardly possible. The possibility of raising stock prices depends strongly on the general stock exchange environment. To increase “shareholder value,” the following options are considered: balance-sheet tricks, redistribution within the firm, selling unprofitable parts of the business, taking over other

firms and pressure on employees. These were all used in different configurations, not always successfully…

“Shareholder value” seems to have the main function of legitimating redistribution from groups like employees to shareholders. This redistribution cannot be ascribed per se to the autonomous effect of the stock exchange or limited to the stock exchange. Rather the “shareholder value” principle joins a series of measures and developments in all social areas and is an expression of a forced power shift from labor to capital.

7. “Longer Store Hours Create More Jobs” “If businesses are open longer, more will be sold. More sales personnel will be needed.

Thus additional work will be created.”

Reality looks different. Longer business hours lead to fewer jobs, not more, to worse working conditions, to concentration of ownership, reduction of the locations and a thinning of the local supply.

Precarious Employment with Constant Sales Volumes Increased Pressure on Wages and Small Businesses … Thus longer store hours would burden already existing jobs without bringing additional jobs. They primarily serve the interests of the big chains and prepare the way for the destruction of local supply structures. The variety of goods and services will be further undermined.

SOCIAL MYTHS 1. “Social Benefits are Frequently Misused” “The abuse of social- and insurance benefits is enormous. Everyone knows such cases: achievements like unemployment benefits and income support are often claimed illegitimately. What we need are benefit restrictions and more controls because problems like unemployment and poverty are often pleaded as excuses. The impacted are responsible themselves.”

Who Lives at our Expense? …The labor market has become more insecure. In Austria, times of unemployment are fixed elements of nearly every gainful career and not special cases or exceptions any more… Twice as many persons are available for low wage segments…

Unemployment is a result of social changes and is not an individual problem.

Consequently the benefits of unemployment insurance are increasingly an important element of life income and are not merely bridging assistance…

The social parasite discourse stigmatizes the affected, creates a climate for benefit cuts and hardly thematicizes an important economic problem.

The labor market closes on account of structural problems of many people who depend on that market. When this fact is recognized, the question about the function of unemployment insurance appears in a new way. Can unemployment benefits serving as a foundation of existence for many at least in phases be a means of disciplining? Can the basis of existence for these persons be cut off for up to eight weeks? Why should not persons who refuse a job – and social recognition, certain elements of social participation and economic advantages – be supported by society?

Celebrating Health and Slaving Away Sick?

“Do you know people who celebrated being sick although they were really healthy? Here is a little conscience test: Have you ever done that?”

Do Immigrants Only Want “Our’ Social benefits? … Calculations in which state fees paid by immigrants are offset by the social benefits they receive are very questionable for two principal reasons. Firstly, they fade out the fact that immigrants bring other economic advantages for the immigration country (they represent a young population able to work that an immigration country with an aging population needs as workers and pension contributors). Secondly, the question can be posed: can migrants and their right to remain be viewed only under an economic costbenefit calculus for the native population?

Other calculations show immigrants cannot be regarded as a cost-causal agent from the view of the social state according to narrow cost-benefit considerations…

The system of social security functions exclusively on the basis of payments in the course of gainful activity. Without contributions, there would be no benefits…

Migrants take benefits of the health- and education system to a much lesser extent than native citizens… While migrants paid more into the social system in Austria in the 1980s than they received, the relation changed in the 1990s in extremely modest dimensions – with changed age distribution among migrants and higher unemployment…

Migrants as immigrants often do not spend or experience the “cost-intensive” times of their life (birth, school) in the immigration country and therefore do not cause any costs there. Most social benefits arise in life periods when people are not able to work: in childhood (child grants, school costs etc) and in old age (pensions).

The picture of immigration as a rapacious invasion of native social systems is drawn out of social-psychological and political motives and is not a true reflection of reality.

2. “Aging Makes Financing the Welfare State Impossible” “Demographic predictions seem depressing; they assume an ever higher share of older persons. The welfare state with its benefits for pensions, health and social security will soon not be financed any more.”…

Financing the welfare state depends more on whether sufficient revenue is produced in the national economy to finance welfare state benefits like pensions than on the numerical relation of young and seniors. Whether enough people are in jobs paying into social security is crucial…

All Europe’s aging societies have a potential in future workers that is now unused – entirely apart from possible immigration. Given the increasing work demand in the next 30 to 50 years, people who do not participate now in working life will be needed. These will above all be women who have long performed lower paying work than men…

That enough people gain a work income is not the only factor to assure the financing of the welfare state despite an aging population. A second important factor is how high their incomes will be… Our per-capita income will probably increase because of productivity increases that appear in an innovation-oriented economy. Technical progress and new work methods ensure that more prosperity will be gained from year to year with the same work volume.

3. “Private Old-Age Pensions are More Secure than State Pensions” “Private capital-covered pension systems offer more secure old-age incomes than the transfer-financed system. They are immune against the aging of the population, cheaper, more economically efficient and socially more just.”

As in the previous myth “Aging makes financing the welfare state impossible,” demographic arguments serve to veil the real economic and social-political problems in connection with the transfer-financed pension system… To the advantage of capitalcovered old-age pensions, it is argued the insured could finance their pensions themselves, that they could provide individually uncoupled from the framing economic condition s. Technical-financial considerations cofve3r over real economic realities…

Transfer System and the Capital-Covering System

…In the transfer system, employees can finance their old-age pensions through the contributions of active persons in the future (“generational contract”). In this system, unemployment, sickness etc for individuals does not automatically mean (old age) poverty. These risks can be apportioned on a solidarity basis since all gainfully employed persons are insured. Problems for the transfer system resulted in the last years through weak income development, wage reserve and increased unemployment. Contribution payments for pension insurance are lower than the potential and narrow the financing capacity of the transfer system. Wage development fell behind productivity growth since the end of the 1970s. Redistribution toward profits occurred and these profits are not tied to financing the transfer system (cf. Markus Marterbauer).

These macro-economic causes are often faded out. The public transfer-financed system is represented as “impossible to finance” per se and conversion to private provisions praised as a secure alternative. Whoever saves now can expect to live well from his or her savings. He acts with personal responsibility and does not depend on others. That is the picture implied by capital-covered schemes…

Additional Savings Have Not Stimulated Europe’s Economy!

To the advantage of capital-covered systems, it is argued that total economic savings increase through the spread of private old age provisions. With the savings, additional investments could be financed that stimulate the economy. That is the argument.

This argument is not true for Europe and is even counter-productive. When individuals save, they have less money to spend and consume less. For the total economy, increased savings activity means reduced demand for goods and services. Less is purchased, less is produced and less must be invested. In Europe, investments are not made because they cannot be financed on account of deficient savings activity. Rather Europe is marked by an under-capacity of the economy because too much is saved and too little is consumed.

Capital Yields Fall When the Population Ages!

Individuals may be able to live well in old age from their savings. But the yield prospects change if a whole generation shifts to capital-covering. Then a generation buys masses of stocks to provide for old age. The prices of stocks rise and their profits fall because higher demand leads to higher prices according to the basic rules of the market. The problems are immense if everyone with private old age insurance retires…

In Europe, the number of those in the gainful working population declines. A certain worker scarcity could occur. When workers are scarce, the price for labor, wages, must rise – according to simple market mechanisms. Less would remain for profits. This means losses for private old age provisions since business profits provide the yields of pension treasuries…

Not Everyone Can Afford Private Provisions

Experiences of other countries show the change to covering expenses (Kapitaldeckung) leads to drastic pension losses or increasing old age poverty for the majority of the population, as shown in a recent World Bank study of Chile and many of its Latin American neighbors once celebrated as model students of private provisions. The promise of stimulating the respective financial markets was not fulfilled.

High Costs of Capital Covering … When the stock exchange falls at the wrong time, the expected pension level must suddenly be adjusted downwards. …and No One is Responsible for the Plight Developments on the capital markets over decades are risky and hardly predictable.

Pension funds themselves do not assume any risks. Uncertainties and risks must be borne by the insured individuals. Low yields and premium hikes in the insurances are sold to the insured as practical necessities of the capital market. Unlike pensions, private insurances are not subject to any legitimation pressure.

Several motives of advocates of capital covering can be identified. They support pension funds’ profit-mongering or force the reduction of state spending in the area of social security or they welcome the growing economic inequality in rich Europe. The resistance of private persons against the access of politics or the short-term election interests of politicians represented as an advantage is a shift of insecurities and risks (and costs) to the insured individuals. The claim of capital-covered schemes of being independent of the aging of society as well as the promise of cushioning benefit cuts of transfer-financed systems through capital-covered provisions is without any economic foundation. For Europe, forcing private provisions is counter-productive from a macro-economic perspective. The salvation promises for the population are not fulfilled. A huge profitable market opens up only for insurance companies, banks, funds etc. Since the mechanisms of capital-covered systems are less recognizable compared with the transfer system because they appear with a temporal delay of decades, politics can conveniently bid farewell to its task of stabilizing living standards in old age with false economic arguments [cf. Peter R. Orszag/ Joseph E. Stiglitz: Rethinking Pension Reform: Ten Myths About Social Security Systems in: New Ideas About Old Age Security, Washington D.C., The World Bank, 2001, worldbank.org].

4. “We Need More Personal Responsibility” “The welfare state incapacitates citizens. The `cradle-to-grave mentality’ expects too little of people. In state paternalism for decades, individual abilities waste away.

Therefore more personal responsibility must replace past welfare state services and social security systems. Instead of relying on the state and other collective institutions, every citizen should provide for his or her own decent living and advancement and cover private costs for sickness, accidents and old age.”

In the 19th century, Alexis de Tocqueville wrote that the “welfare state was a powerful patronizing power that alone ensured the pleasures of the subjects and monitored their fate. The welfare state holds people irrevocably in the state of childhood” [Alexis de Tocqueville, On Democracy in America, 1835].

Meanwhile the demand for personal responsibility exists in the programs of nearly all political parties. German President of the Republic Koehler sought to “strengthen the personal responsibility and venturesomeness of Germans.” Personal initiative is urged particularly in the labor market, education and health- and pension services.

The principle of personal responsibility is a contradictory word husk. A foreign ascription of responsibility occurs, not responsibility expected of individuals. Elites do not urge personal responsibility for themselves since they already have it but in an individualizing way for the broad majority of the population.

The Presuppositions for Personal Responsibility are Lacking How far can the current appeals to personal responsibility be justified rationally? The emphasis on personal responsibility must consistently aim at those areas where people can act powerfully. Only self-determined persons can act with personal responsibility.

Sufficient existing social resources first allow us to speak of self-determination.

As an example, private provisions that prevent old age poverty have a series of presuppositions, namely a continuous adequate income (private pensions are only affordable for around 40% of the population), sufficient knowledge, long-oriented investment conduct, good performance of private supply chains and favorable financial market developments. Obviously success depends on a multitude4 of factors outside the personal sphere of influence and only very restrictedly on the responsible conduct of individuals (in this case on their will for austerity and circumspection in selecting the pension fund).

Demanding personal responsibility is directed at the motivation of people. It is assumed that success is a question of good will and individual effort. However human actions are bound to individual and social presuppositions. Being provided with resources like money, influence, personal friendships, relations, socialization and personality is crucial.

The more the economy and social division of labor develop, the greater the mutual dependence of people. The demand for personal economic responsibility starts implicitly from the notion of a rural-artisan society where there is enough land for irrigation for everyone and people mainly produce for their own needs. Thus there is work for everyone who can work and the effort of individuals is crucial for success or their own survival. In this model marked by pre-industrial conditions, work only leads to success under certain presuppositions (everyone has enough or comparable land) and framing conditions (no bad harvests or crop failures).

This is not the case at all in an industrialized capitalist economy where goods and services are produced in an advanced division of labor that must be sold on the market.

The success of individuals largely depends on circumstances outside one’s sphere of influence. The risk is high that no demand will be found at least in phases for certain persons and abilities, regions and times when people no longer produce so they are selfsufficient but depend on solvent demand for their skills. In such cases, admonishing “personal responsibility” mischaracterizes the state of affairs [Herbert Schui, Mythos Eigenverantwortung, March 2004].

Does Personal Responsibility Mean Freedom?

As long as people still have something to lose, most will be risk-shy in their conduct.

Without freedom, there can be no responsibility.

Who Decides Over New Apportionment of Responsibility?

The sociologist Ulrich Beck pleads for a “New Pact of Insecurity” in which a social consensus about acceptable risks can be found since the mutual social dependences have multiplied in the course of capitalist modernization [Die Zeit, 5/13/2004]. In any case, the appeal to more personal responsibility in political discourse starts from an elite and is directed to the population. People are morally admonished and confronted with demands and are not included in a discussion or negotiation process. The risks have to be faced.

This moralizing discourse that appears in the name of criticism by the so-called authoritarian state is extremely paternalistic and “authoritarian.”

The State in New Clothes The redefinition of state controls and goals occurs contrary to the claim encountered in the personal responsibility discourse that the state expands the realm of individual personal responsibility. Social services are cut or abolished but state intervention with a patronizing character is retained or strengthened. Between individuals and the planned social changes, the catalysor of state and private advisory organs, faculty and promoting authors is built that should adjust people to the demands of the market.

In the area of labor market management, a system of testing, monitoring and setting the unemployed under pressure increasingly flanks unemployment benefits with the goal of “activation.” The current reforms on reducing benefits from the public pension system are justified by alleged budgetary burdens.

Aids for More Personal Responsibility: Continuing Education As a substitute for welfare state benefits, the state admonishes people to continuing education. This is the key for success on the labor market. That is the promise.

Whoever corresponds to the demands of the labor market does not need any social security any more. “Lifelong learning” is the solution in this adjustment that provides no way out up to death (and whether it’s financing is a social task or a “personal

responsibility” of individuals mediating equal opportunities remains unclear).

Consequently, people are considered as individuals needing advice and education who should not trust collective institutions any more. They should be committed to lifelong adjustment without any right to their own decision whether and what they should know and learn. The main goal of learning is the capacity for individual economic selfmanagement.

The question is raised here what is worse the personal “narrowing” or “restriction” by the welfare state or control by the imponderabilities of the market, flanked by a controlling state.

While the poor have to learn to only direct their claims for a successful life to themselves, the personally responsible elites (only responsible to themselves in their exercise of power) limit the social framework anew. Those who are materially independent and secure try to bid farewell to economic, social and democratic dependencies, obligations and connections with the slogan “personal responsibility.” Responsibility for the arising or growing economic inequality is assigned to the impacted themselves and compulsorily overtaxes them.

On the other hand, a personally responsible society must raise the question how does it deal with increasing poverty and the new forms of exclusion and how can the materially favored be socially responsible for removing these phenomena [see Jorg Lau, Farewell to Panic-mongering in: Die Zeit, 5/13/2004].

5. “Tax Competition Undermines Financing the Welfare State” “Taxes for businesses must be lowered since the states are in a (tax-) competition.

Therefore we can not afford the welfare state any more.”

Tax competition can be seen as part of the “location competition” myth. It is assumed nation states are in competition with each other – interpreted as a zero-sum game. All areas of politics must aim exclusively at achieving this “competitiveness.” Wage reserves or wage cuts and/or extension of working hours are the central weak points. Moreover taxes – above all business taxes – should be reduced to increase the competitiveness of the state or prevent the migration of businesses. We are in a downward tax competition that undermines the foundations of the welfare state (see the myth “The Economic Location is in Danger without Reforms”)… “Tax competition” is a contrived myth that encourages further tax cuts.

The Social State is Primarily Financed by Mass Taxes Most tax and fee revenue comes either directly from wage-earners (in the form of wage taxes and social security contributions) or indirectly through consumption (in the form of sales taxes). The share of business- and property taxes in all tax revenue is trifling (in the US, the corporate share in federal revenue fell from 40% in the 1960s to 11% in 2014).

In the OECD average in 2002, only 13.8% of the total tax revenue came from profit- and

property taxation. In Austria, it was only 6.4% and in Germany only 5.2%. If the tax revenue from these areas is trifling, that is a problem but does not put the welfare state in question. For mass taxes, the tax competition argument is not credible in any way…

Two further considerations even speak for increasing taxes. Firstly, the Keynesian argument is that the consumption rate tends to tall with increasing income and therefore higher collective or governmental consumption is necessary. Secondly, the need for public goods (as for example education, health care, cultural possibilities) increases with increasing income and must be financed through taxes.

No Pressure for Business Tax Cuts The myth of tax competition may favor businesses and property owners at least in the short-term by reducing their tax burden and possibly increasing short-term profits.

Whether this works for larger economic zones – like the EU – can be doubted. If a similar tax-cutting policy is pursued in many places, this can lead to the reduction of aggregate economic demand, less growth and lower profits. Independent of that, lowering business taxes happens at the expense of the majority. Tax cuts for businesses must either be offset by tax- or fee increases for the multitude or state services must be limited. Therefore the effects of business tax cuts can be viewed as negative.

In addition, business taxes only represent one factor – and a rather unimportant factor according to business surveys – in the choice of locations. For businesses, how much profit they make after taxes is crucial, not how much taxes they pay…

The macro-economic consequences of tax cuts in Germany were very problematic since the expenditure side lacked funds through the lower tax revenues. The budget deficit deepened without positive effects on the economy [cf. Stephan Schulmeister].

Tax Harmonization is Desirable A tax harmonization “upwards” within the EU is important even though nation states have considerable possibilities with business taxes.

While there is no downward tax competition because of the economic pressures, attempts at tax harmonization in the scope of the EU should be strongly welcomed. The contrived basis was obviously successfully taken away from the myth of tax competition. Onesided business tax cuts can be prevented by governments in individual countries. In addition, a coordinated procedure in closing tax havens – and preventing tax evasion – would undoubtedly be important. A European tax harmonization should be welcomed because it discursively undermines the basis of the myth of tax competition. Still we introduce higher taxes on the national plane and can afford a high state benefit level. The welfare state is in no way undermined by tax competition. Despite conflicting theoretical and empirical evidence, the myth of tax competition is loudly proclaimed by business associations and national governments. In Germany and Austria, tax cuts and dismantling the welfare state are propagated as seemingly unavoidable.

6. “State Child Benefits Encourage More Children” “Fewer and fewer children and more and more seniors means the costs of an ever-aging population (pensions, health care etc) cannot be financed and our society dies out in the long term. More payments for families are the only way out.”

All western capitalist countries have posted a slow but steady decline in their birth rate since the 1960s. To counter this development, pithy slogans like F-k for the Future” (Sweden at the end of the 1990s) are used or incentives for children are set with family policy measures. In our latitudes, the myth “More Money for Families Brings More Children” is dominant. Austria has the highest state payment for families compared with the rest of Europe…

Birth Rate and Financial Support for Families Seen empirically, there is no connection between the amount of payments for families and fertility (height of birth rate) within a state… Practically all western capitalist states have birth rates below the natural replacement rate of 2.1 children per woman. The “natural replacement rate” is that number needed to keep the population constant. It obviously changes with time on account of changed life expectancy. In Europe, only Denmark and the Netherlands did not have declining birth rates in the past twenty years.

What Family Policy Brings Success?

Denmark, Sweden and France are states with a very active family policy. This policy is focused more on the compatibility of vocation and family than on payments.

Comprehensive, quality and affordable child care institutions – also for infants – enable mothers to quickly reenter professional or active life… Therefore the Scandinavian countries have both comparatively high birth rates and rates of female employment that are close to the rates of men. This is not a contradiction contrary to conservative judgments… In Scandinavian countries, there is still a high share of families with several children…

Politicians are not entirely wrong when they believe family policy can influence the birth rates. However improving the compatibility of vocation and family is central. Child-care facilities, parent-friendly working hours possibilities, periods of rest or sick leave models, adequate possibilities for the initial child-rearing phase and fathers with family duties are all active measures that encourage diverse and fulfilling life projects.

7. “The Public Health System Needs More Market Economy” “Investing more money in the public health system is neither possible nor sensible.

Containing spending is necessary because the high inefficiencies in the public health system are crucial for the growth of health expenditures. Their removal would curb the

cost dynamic at last. Through the correct free enterprise incentives for increased efficiencies among providers and clients, there could be considerable cost savings without diminishing services.’

What Really Leads to More “Efficiency” in the Public Health System?

The market does not lead to overall social cost efficiency. The US Public Citizen Report from 2002 clearly shows that the pharmaceutical industry invests its extraordinary profits more in marketing and sales departments than in risky and expensive basic research…

What are the Potentials for More Efficiency? …The political discussion must grapple with all these questions without regard for the priorities or self-interest of individual lobbies to have a comprehensive social health system that can be financed in the long term.