State interventions in the economy are unpopular and generally regarded as "against the system"-when the state interferes in profiteering. In the case of a crisis, the losses should be socialized.
FAREWELL TO NEOLIBERALISM
By Klaus Fischer
[This short article published in: Junge Welt 3/19/2008 is translated from the German on the World Wide Web, http://www.jungewelt.de/2008/03-19/064.php?print=1.]
Material existence determines consciousness. In the course of the worldwide financial- and banking crisis, more and more actors from “free enterprise” champion the idea of leaving the clearing work to others. Yesterday strictly neoliberal, today they sing the song of the state. The state must intervene, the US financial system, German bankers and the uniform media urged in a homely choir in the middle of March 2008. These calls did not fall on deaf ears among central bankers and politicians. Capital itself is neither able nor ready to correct the devastating disaster.
Josef Ackermann, head of Deutsche Bank, clarified in March 2008: “Urging the banks to mutual help is no longer enough. We cannot believe “only in the self-healing powers of the market.”
German finance minister Peter Steinbruck picked up the ball. In Potsdam, he diagnosed: this is “one of the greatest financial crises in the last decades” and advocated an intervention of politics. The effects of the crisis on the real economy cannot be denied. This sounded quite different a short time ago.
The politicians have already shown how “the state’s help” could appear. The US government drafted a 0 billion program to prevent a recession. The Fed gave billions in guarantees to J.P. Morgan, the buyer of the deadbeat investment bank Bear Stearns. Great Britain’s New Labor government nationalized the building-and loan association Northern Rock when it faced bankruptcy. The plan to destroy a third of the jobs was revealed. In Germany, Saxony and North Rhine must guarantee speculative billions for their regional banks.
But even more is involved. In the US, the Fed is urged to buy up all the bad speculative securities of private banks to take away the risk. Further nationalizations of stricken financial houses are openly discussed – to protect investors and owners.
State interventions in the economy are unpopular and generally regarded as “against the system” when the state interferes in profiteering. In the case of a crisis, the losses should be socialized. Acting to protect the German economy is vital, Steinbruck said in approving the public authority’s involvement in the game.
All taxpayers should benefit from the state interventions, the economics spokesperson of the Left party in the Bundestag, Herbert Schui, said. “The fool’s privilege or carnival license in the financial markets must be ended,” the former economics professor underscored. Unregulated institutions like hedge funds and special conduits should not exist after the financial crisis. The “speculative transactions” of managers with stock options must also be relegated to the past.
In the meantime, the whole took its very typical course. The quarterly reports of the mammoth US investment banks Lehman Brothers and Goldman Sachs reported lower profits but not the dreaded collapse. The expectation of a further reduction of the Fed’s key interest soon led to a temporary relaxation on the stock markets.
Original: Farewell to Neoliberalism