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Commentary :: Economy
Overcoming the Dominance of Finance Capital
Changing power relations means taking up the social and political struggle against finance capital. Reversing the redistribution of income is a prerequisite for containing the money flows in the financial sector. In Germany the same goods and services can be produced with a quarter fewer working hours (1991-2010)
OVERCOMING THE DOMINANCE OF FINANCE CAPITAL
Socializing the Banking System and Realizing Economic Democracy
By Conrad Schuhler and Leo Meyer
[This article published in: isw – sozial-okologische wirtschaftsforschung, September 2008 is translated abridged from the German on the Internet, www.linksnet.de/de/artikel/23629.]
The financial crisis and the speculation bubble are expressions of the general crisis of global finance capitalism. They are the results of its functional logic, not isolated crises of a financial sector that fell out of joint. “If one wants to fight this worsening crisis, this logic and the arising policy, this logic must be combated. Where should we start?
The “Alternative Economic Policy study group” subtitled its 2008 memorandum “Redistribution of Income, Work and Power.” In fact the increasingly false distribution in these three areas is an essential cause for the economic and social crisis of neoliberal finance capitalism. The distribution of social wealth in favor of the upper class makes the income of the great majority of the population stagnate and even fall for many. As a result, the mass purchasing power falls behind the potential production of the real economy. An ever-larger part of social surplus value flows into the financial sector. The false distribution of work leads to mass unemployment and longer and more miserable work instead of utilizing the higher work productivity for full employment, adequate income and shorter and better work. The dictation of capital in the real economy and financial management results in its dominance in the political system and an economic and social policy that serves finance capital and the rich and sees the “rest” of society as cost-factors in the international competition. Emancipatory and democratic tendencies are alien to this system and even “against” it in the literal sense. The global dimension of capital exploitation gives finance capital the possibility of playing off states and populations against one another and entangling tax-, social- and wage-systems in an international “race to the bottom.”
Thus the state and the system of states are power instruments of finance capital. As the regulation theory rightly emphasizes (following Nicos Poulantzas), they are also “expressions of the changing power relations and arenas of negotiation” (Brie/Klein 2008). These power relations do not change naturally or automatically. They do not change because leftist economic theoreticians and circles offer clever theories that another economic policy and another world are possible and feasible. The emancipator perspective “discovers and brings to bear good and convincing arguments in the conflict against powerful minorities” (Memo 2008). “Changing power relations” means taking up the social and political struggle against finance capital and regaining control over social resources as quickly and as much as possible. Social movements, parties committed to emancipation and unions must develop much greater power to change the pecking order than was available to them and was mobilized by them in the past. The emancipator forces must link their activities internationally and take common initiatives and actions on the European plane – as Attac proposes.
FOR A REDISTRIBUTION OF INCOMES AND ASSETS
In the four years of the upswing from 2004 to 2007, the gap between the top and the bottom in Germany widened again. Employee-pay increased nominally around 4.2% or 7.5% after inflation. Real pensions fell 8.3%; the earnings of Hartz IV recipients declined 6.9%.
While the great multitude and especially the poor had to put up with losses, the incomes of the rich rose by leaps and bounds. Business- and assets-incomes climbed 38% in that period; profits of corporations 53%; (net) profits of the DAX 30 corporations 185% and dividends 180%. Private financial assets rose 21% to 4.76 trillion euro, twice the gross domestic product (cf. Schmid/Schuhler 2008, pp.2-25).
This redistribution from bottom to top – the wage rate, the share of employee pay in national income fell from 72.2% to 64.0% - was strongly promoted by the state. According to the opinion of the OECD, Germany has by far the highest burden in earned income through direct taxes and social fees. With profit- and property-income, Germany has a low tax rate (WSI-Mitteilungen 11/2007).
While most of the population has less and less purchasing power, the income and assets of the rich explode. What happens when the market for the real economy becomes smaller on account of decreasing purchasing power in Germany? The answer – beside growing exports – is found in the constantly recurring speculation bubbles with the inevitable loud crisis bang. Reversing the redistribution of income from top to bottom in the future is a fundamental prerequisite for containing the money-flows in the financial sector.
Measure No. 1 for this necessary reversal is the struggle of unions for a robust increase of wages and salaries. For some time the unions have been ready to endure harsh struggles for this goal at least in the phase of exorbitantly higher profits. This should be welcomed enthusiastically both for reasons of social justice and economic reason. Further demands to raise income level particularly of the poorer classes – introduction of a legal minimum wage, withdrawal of Hartz IV regulations, extending regular unemployment benefits, introducing a need-oriented basic security and higher taxation on profits, mammoth incomes and assets touch the question of the monetary power of capital and the rich and could dry up part of the surplus money streams.
FOR REDISTRIBUTION OF WORK
Continuing mass unemployment and zealously fomented fear of more job cuts by outsourcing abroad are the main instruments of the neoliberal strategy of redistributing from bottom to top and forcing the working class to miserable poorly paid work. Labor productivity in Germany increased 32.4% from 1991 to 2006. The same amount of goods and services in 1991 could be produced with a quarter fewer working hours. But instead of utilizing this considerable long-term increased productivity for full employment in the form of shorter normal working hours, more working hours were earmarked. Contract-, part-time and other precarious employment were developed with a high base of mass unemployment over years.
Today 2.2 million fewer persons work full time than in 2000. Part-time employment rose in the same time by 2.3 million. Considering all the tricks with German Labor office measures, e.g. the unemployed as early retirees, the true rate of unemployment in 2007 was 12.5%, more than 5.5 million persons (Schmid/Schuhler 2008).
The “Alternative Economic Policy study group” suggests three starting points to reach the full employment goal: public investment- and jobs programs, reductions of working hours and expansion of public employment (Memo 2008, p. 13). All three are future-oriented. The question of reduced working hours will be crucial. The study group estimates our work volume at 56 billion working hours – with the current gross domestic product and current labor productivity. If this work volume were distributed among the 44 million gainful workers, there would be 45 work weeks at an individual weekly working time of 28 hours (the exact number would depend on the real reorganization of “all social workers.”) Thus our slogan is short full-time for everyone – 28 weekly working hours – with a reasonable wage.
Obviously the unions are afraid of waging the struggle for reduced working hours with full wage compensation with the same vigor as in recent wage battles. Unions are in a hard position given mass unemployment and the exit-option (shifting production abroad). In factory contracts and some collective agreements, reduced working hours were joined for years with wage freezes and even extended working hours. This way cements the power and exploitation potential of capital. A strategy of the emancipatory forces must prioritize “reduced working hours with full wage compensation” and “jobs for all who seek a job.” The core of class relations is involved – on how long and how intensively the capitalist can exploit the worker.
REDISTRIBUTING POWER
SOCIALIZING THE BANKING SYSTEM
Banks are central in the system of finance capitalism. Banks direct the bulk of the “surplus capital,” “superfluous“ for the reproduction of the real economy from there to the financial sector. Conversely they organize the funds from the financial sector for the real economy and the corresponding claims of the financial sector to the profits of real economy businesses. In short intervals, these managers proved their “efficiency” to the analysts from the money-houses. The banks are the central authorities on corporate takeovers, issuing shares, issuing loans and guaranteeing credits and issuing credits to hedge funds. The idea of democratizing the financial market so it functions in the interest of the general public without taking control of the banks from finance capital is an illusion. The banks must be socialized.
The banks need not be nationalized. Nationalization and the expansion of the sector of public and cooperative banks could be useful intermediate stages but nationalization under present conditions would only mean putting the banks under the trusteeship of the political elites of neoliberalism. Without the organized claim of democratic forces to joint-decision, banks would not function differently than with the manager elites of the financial sector. The miserable pruning of legal public banks in the subprime crisis proves this. They could not have losses under 20 billion euro. The finance capital propaganda instantly jumped at the chance.
Who should decide over the resources of individual banks, the whole banking sector and the international cooperation of the banks? Brei/Klein say all this can only be decided in the democratization process. “The best possible conditions for developing human wealth instead of capital wealth, a dominant social property order instead of a dominant capitalist property order and how property relations should be concretely organized can only be determined in a radical democratization process.” This is obviously true but does not tell us how to initiate this democratization process…
Strategic questions are central: for whom and for what should money be spent and who should earn how much. Activists from the movements and unions understand this at least as well as the bankers. They only have different criteria.
DEMOCRATIZING THE ECONOMY
We have repeatedly emphasized the close connection of the real economy and the financial sector. This must also be remembered in attempting democratic controls of the financial markets. The banking sector today is the crucial hinge between the real economy and the financial sector. The enormous surpluses arise from the real sector and with the help of the banks land in the financial markets. Capital demanding maximum profit could stream back into the real sector. If the banking sector now had democratic elements that hinder the cycle of speculative profits in the financial sector, the big businesses of the real economy would organize other channels between the real economy and financial management. A democratic control limited to the financial area would fizzle out.
Alongside the banks, big businesses of the real economy should be democratized in the transformation process to a social or socialist society… Since profit margins have long had a global dimension, the investment decisions of transnational corporations (TNCs) decide over the fate of people in other countries. A corporation like Siemens has branches in over 180 countries and employs over 80,000 persons in the US alone. International agreements and regulations are urgently necessary to ensure a global social quality to the operations of TNCs and the worldwide economic system of products. Conversations in the home base could be an essential factor for improvement, joint decisions through groups in society affected by corporate decisions.
The concept of economic democracy in its whole fullness is complex and obviously not fully worked out in all parts. Concrete conflicts, experiences and the realized successes and failures give information about the details and stages of the struggles. However the current financial crisis and the general crisis of trust in neoliberalism show where the democratic movement can immediately begin.
In particular,
1) Co-determination in business must be expanded so employees and their unions can have a veto-right against takeovers by financial investors.
2) This co-determination with veto-right must be expanded to all decisions concerning development of employment. This includes the sale of parts of businesses and outsourcing production abroad or to other locations at home.
3) On the initiative of the employee side, social movements and communal or regional representatives are invited. Their advisory voice should be speedily transferred to genuine joint decision-making authority.
The malfeasance of finance capitalism in the financial crisis and the surging crisis in foods and raw materials must be triggers for democratic forces to encroach with all power in the decision-making contexts of a capitalism that is equal to the historical tasks and proves more and more to be an elementary danger for the people and the nature of the earth.
RELATED LINKS:
"Work- and Social Criticism in the Time of Capitalist Running Amok"
portland.indymedia.org/en/2010/05/399436.shtml
MEMORANDUM 2008: SHORT VERSION
Redistributing Income, Work and Power: Alternatives to Serving the Upper Class
portland.indymedia.org/en/2008/12/384036.shtml
MEMORANDUM 2008 - CRISIS UNDERRATED
Without increasing internal demand, the upswing based on replacement-investments and exports cannot continue. Without reduced working hours, adequate jobs will not be created in a world of reduced work volumes, rationalization and information technology.
portland.indymedia.org/en/2008/12/383481.shtml
SEVEN LOOSE PIECES OF THE WORLD JIGSAW PUZZLE - Subcomandante Marcos 1997
flag.blackened.net/revolt/mexico/ezln/1997/jigsaw.html
VIDEO: MIGUEL D'ESCOTO, FORMER PRESIDENT OF THE UN GENERAL ASSEMBLY 2009-2010, interviewed by Amy Goodman on Democracy Now, April 26, 2010
www.democracynow.org/2010/4/26/the_united_nations_is_beyond_reformit
ATTAC AUSTRIA CATALOG ON DEMOCRATIZING THE FINANCIAL MARKETS
portland.indymedia.org/en/2009/05/391310.shtml
"THE QUIET COUP" BY SIMON JOHNSON
www.theatlantic.com/doc/print/200905/imf-advice
Socializing the Banking System and Realizing Economic Democracy
By Conrad Schuhler and Leo Meyer
[This article published in: isw – sozial-okologische wirtschaftsforschung, September 2008 is translated abridged from the German on the Internet, www.linksnet.de/de/artikel/23629.]
The financial crisis and the speculation bubble are expressions of the general crisis of global finance capitalism. They are the results of its functional logic, not isolated crises of a financial sector that fell out of joint. “If one wants to fight this worsening crisis, this logic and the arising policy, this logic must be combated. Where should we start?
The “Alternative Economic Policy study group” subtitled its 2008 memorandum “Redistribution of Income, Work and Power.” In fact the increasingly false distribution in these three areas is an essential cause for the economic and social crisis of neoliberal finance capitalism. The distribution of social wealth in favor of the upper class makes the income of the great majority of the population stagnate and even fall for many. As a result, the mass purchasing power falls behind the potential production of the real economy. An ever-larger part of social surplus value flows into the financial sector. The false distribution of work leads to mass unemployment and longer and more miserable work instead of utilizing the higher work productivity for full employment, adequate income and shorter and better work. The dictation of capital in the real economy and financial management results in its dominance in the political system and an economic and social policy that serves finance capital and the rich and sees the “rest” of society as cost-factors in the international competition. Emancipatory and democratic tendencies are alien to this system and even “against” it in the literal sense. The global dimension of capital exploitation gives finance capital the possibility of playing off states and populations against one another and entangling tax-, social- and wage-systems in an international “race to the bottom.”
Thus the state and the system of states are power instruments of finance capital. As the regulation theory rightly emphasizes (following Nicos Poulantzas), they are also “expressions of the changing power relations and arenas of negotiation” (Brie/Klein 2008). These power relations do not change naturally or automatically. They do not change because leftist economic theoreticians and circles offer clever theories that another economic policy and another world are possible and feasible. The emancipator perspective “discovers and brings to bear good and convincing arguments in the conflict against powerful minorities” (Memo 2008). “Changing power relations” means taking up the social and political struggle against finance capital and regaining control over social resources as quickly and as much as possible. Social movements, parties committed to emancipation and unions must develop much greater power to change the pecking order than was available to them and was mobilized by them in the past. The emancipator forces must link their activities internationally and take common initiatives and actions on the European plane – as Attac proposes.
FOR A REDISTRIBUTION OF INCOMES AND ASSETS
In the four years of the upswing from 2004 to 2007, the gap between the top and the bottom in Germany widened again. Employee-pay increased nominally around 4.2% or 7.5% after inflation. Real pensions fell 8.3%; the earnings of Hartz IV recipients declined 6.9%.
While the great multitude and especially the poor had to put up with losses, the incomes of the rich rose by leaps and bounds. Business- and assets-incomes climbed 38% in that period; profits of corporations 53%; (net) profits of the DAX 30 corporations 185% and dividends 180%. Private financial assets rose 21% to 4.76 trillion euro, twice the gross domestic product (cf. Schmid/Schuhler 2008, pp.2-25).
This redistribution from bottom to top – the wage rate, the share of employee pay in national income fell from 72.2% to 64.0% - was strongly promoted by the state. According to the opinion of the OECD, Germany has by far the highest burden in earned income through direct taxes and social fees. With profit- and property-income, Germany has a low tax rate (WSI-Mitteilungen 11/2007).
While most of the population has less and less purchasing power, the income and assets of the rich explode. What happens when the market for the real economy becomes smaller on account of decreasing purchasing power in Germany? The answer – beside growing exports – is found in the constantly recurring speculation bubbles with the inevitable loud crisis bang. Reversing the redistribution of income from top to bottom in the future is a fundamental prerequisite for containing the money-flows in the financial sector.
Measure No. 1 for this necessary reversal is the struggle of unions for a robust increase of wages and salaries. For some time the unions have been ready to endure harsh struggles for this goal at least in the phase of exorbitantly higher profits. This should be welcomed enthusiastically both for reasons of social justice and economic reason. Further demands to raise income level particularly of the poorer classes – introduction of a legal minimum wage, withdrawal of Hartz IV regulations, extending regular unemployment benefits, introducing a need-oriented basic security and higher taxation on profits, mammoth incomes and assets touch the question of the monetary power of capital and the rich and could dry up part of the surplus money streams.
FOR REDISTRIBUTION OF WORK
Continuing mass unemployment and zealously fomented fear of more job cuts by outsourcing abroad are the main instruments of the neoliberal strategy of redistributing from bottom to top and forcing the working class to miserable poorly paid work. Labor productivity in Germany increased 32.4% from 1991 to 2006. The same amount of goods and services in 1991 could be produced with a quarter fewer working hours. But instead of utilizing this considerable long-term increased productivity for full employment in the form of shorter normal working hours, more working hours were earmarked. Contract-, part-time and other precarious employment were developed with a high base of mass unemployment over years.
Today 2.2 million fewer persons work full time than in 2000. Part-time employment rose in the same time by 2.3 million. Considering all the tricks with German Labor office measures, e.g. the unemployed as early retirees, the true rate of unemployment in 2007 was 12.5%, more than 5.5 million persons (Schmid/Schuhler 2008).
The “Alternative Economic Policy study group” suggests three starting points to reach the full employment goal: public investment- and jobs programs, reductions of working hours and expansion of public employment (Memo 2008, p. 13). All three are future-oriented. The question of reduced working hours will be crucial. The study group estimates our work volume at 56 billion working hours – with the current gross domestic product and current labor productivity. If this work volume were distributed among the 44 million gainful workers, there would be 45 work weeks at an individual weekly working time of 28 hours (the exact number would depend on the real reorganization of “all social workers.”) Thus our slogan is short full-time for everyone – 28 weekly working hours – with a reasonable wage.
Obviously the unions are afraid of waging the struggle for reduced working hours with full wage compensation with the same vigor as in recent wage battles. Unions are in a hard position given mass unemployment and the exit-option (shifting production abroad). In factory contracts and some collective agreements, reduced working hours were joined for years with wage freezes and even extended working hours. This way cements the power and exploitation potential of capital. A strategy of the emancipatory forces must prioritize “reduced working hours with full wage compensation” and “jobs for all who seek a job.” The core of class relations is involved – on how long and how intensively the capitalist can exploit the worker.
REDISTRIBUTING POWER
SOCIALIZING THE BANKING SYSTEM
Banks are central in the system of finance capitalism. Banks direct the bulk of the “surplus capital,” “superfluous“ for the reproduction of the real economy from there to the financial sector. Conversely they organize the funds from the financial sector for the real economy and the corresponding claims of the financial sector to the profits of real economy businesses. In short intervals, these managers proved their “efficiency” to the analysts from the money-houses. The banks are the central authorities on corporate takeovers, issuing shares, issuing loans and guaranteeing credits and issuing credits to hedge funds. The idea of democratizing the financial market so it functions in the interest of the general public without taking control of the banks from finance capital is an illusion. The banks must be socialized.
The banks need not be nationalized. Nationalization and the expansion of the sector of public and cooperative banks could be useful intermediate stages but nationalization under present conditions would only mean putting the banks under the trusteeship of the political elites of neoliberalism. Without the organized claim of democratic forces to joint-decision, banks would not function differently than with the manager elites of the financial sector. The miserable pruning of legal public banks in the subprime crisis proves this. They could not have losses under 20 billion euro. The finance capital propaganda instantly jumped at the chance.
Who should decide over the resources of individual banks, the whole banking sector and the international cooperation of the banks? Brei/Klein say all this can only be decided in the democratization process. “The best possible conditions for developing human wealth instead of capital wealth, a dominant social property order instead of a dominant capitalist property order and how property relations should be concretely organized can only be determined in a radical democratization process.” This is obviously true but does not tell us how to initiate this democratization process…
Strategic questions are central: for whom and for what should money be spent and who should earn how much. Activists from the movements and unions understand this at least as well as the bankers. They only have different criteria.
DEMOCRATIZING THE ECONOMY
We have repeatedly emphasized the close connection of the real economy and the financial sector. This must also be remembered in attempting democratic controls of the financial markets. The banking sector today is the crucial hinge between the real economy and the financial sector. The enormous surpluses arise from the real sector and with the help of the banks land in the financial markets. Capital demanding maximum profit could stream back into the real sector. If the banking sector now had democratic elements that hinder the cycle of speculative profits in the financial sector, the big businesses of the real economy would organize other channels between the real economy and financial management. A democratic control limited to the financial area would fizzle out.
Alongside the banks, big businesses of the real economy should be democratized in the transformation process to a social or socialist society… Since profit margins have long had a global dimension, the investment decisions of transnational corporations (TNCs) decide over the fate of people in other countries. A corporation like Siemens has branches in over 180 countries and employs over 80,000 persons in the US alone. International agreements and regulations are urgently necessary to ensure a global social quality to the operations of TNCs and the worldwide economic system of products. Conversations in the home base could be an essential factor for improvement, joint decisions through groups in society affected by corporate decisions.
The concept of economic democracy in its whole fullness is complex and obviously not fully worked out in all parts. Concrete conflicts, experiences and the realized successes and failures give information about the details and stages of the struggles. However the current financial crisis and the general crisis of trust in neoliberalism show where the democratic movement can immediately begin.
In particular,
1) Co-determination in business must be expanded so employees and their unions can have a veto-right against takeovers by financial investors.
2) This co-determination with veto-right must be expanded to all decisions concerning development of employment. This includes the sale of parts of businesses and outsourcing production abroad or to other locations at home.
3) On the initiative of the employee side, social movements and communal or regional representatives are invited. Their advisory voice should be speedily transferred to genuine joint decision-making authority.
The malfeasance of finance capitalism in the financial crisis and the surging crisis in foods and raw materials must be triggers for democratic forces to encroach with all power in the decision-making contexts of a capitalism that is equal to the historical tasks and proves more and more to be an elementary danger for the people and the nature of the earth.
RELATED LINKS:
"Work- and Social Criticism in the Time of Capitalist Running Amok"
portland.indymedia.org/en/2010/05/399436.shtml
MEMORANDUM 2008: SHORT VERSION
Redistributing Income, Work and Power: Alternatives to Serving the Upper Class
portland.indymedia.org/en/2008/12/384036.shtml
MEMORANDUM 2008 - CRISIS UNDERRATED
Without increasing internal demand, the upswing based on replacement-investments and exports cannot continue. Without reduced working hours, adequate jobs will not be created in a world of reduced work volumes, rationalization and information technology.
portland.indymedia.org/en/2008/12/383481.shtml
SEVEN LOOSE PIECES OF THE WORLD JIGSAW PUZZLE - Subcomandante Marcos 1997
flag.blackened.net/revolt/mexico/ezln/1997/jigsaw.html
VIDEO: MIGUEL D'ESCOTO, FORMER PRESIDENT OF THE UN GENERAL ASSEMBLY 2009-2010, interviewed by Amy Goodman on Democracy Now, April 26, 2010
www.democracynow.org/2010/4/26/the_united_nations_is_beyond_reformit
ATTAC AUSTRIA CATALOG ON DEMOCRATIZING THE FINANCIAL MARKETS
portland.indymedia.org/en/2009/05/391310.shtml
"THE QUIET COUP" BY SIMON JOHNSON
www.theatlantic.com/doc/print/200905/imf-advice
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