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by Kolya Rudzio
Friday, Oct. 24, 2008 at 4:07 AM
The same state haggles over every bowl of soup for welfare recipients. For banks, billions appeared overnight. There must also be money for higher wages and more social services.
THE NEEDIEST NEED HELP LIKE THE BANKS
By Kolja Rudzio
[This short article published on: Zeit Online 42/2008 is translated from the German on the World Wide Web. The state gives billions to bail out the banks. While that is right, the poor need support like bankers.]
Was this shining madness or unparalleled injustice? The state earmarks billions for rescuing the banks and protecting savings accounts. On the other hand, the same state haggles over every bowl of soup for Hartz IV welfare recipients. What is necessary for life can be identified exactly. The benefit amounts must change when the prices rise.
Both banks and Hartz IV recipients belong together. Things are not as simple as DGB (Federation of German trade Unions) chief Michael Sommer presents them. There must also be money for higher wages and more social services. This money has always been scarce, even without crisis. No one knows the extent the government will actually pay for its promises to banks and savers at the end. When the bailout billions are due, the state must finance them through higher taxes, new debts or reduced spending. This affects everyone, including the poor.
The state tries to save the banking system from a collapse that seems unavoidable. Still there is a massive incongruity – not only because lax oversight in the financial system made possible a debacle of billions while the private life of Hartz IV recipients is controlled meticulously. Many social benefits have been frozen for years. That is part of the incongruity or imbalance. When the German government now raises housing subsidies and children’s allowance, this is only a long overdue correction. The Hartz IV levels must be upgraded. This will not be easier through the financial crisis but is possible. A part of the everyday economic subsidies (annually 30 billion euro) could be eliminated. The welfare state should concentrate more on the neediest. They need help just like the bankers.
BILLIONS FOR BANKS REFUTES THESIS OF THE UNAFFORDABLE WELFARE STATE
[This article published 10/14/2008 is translated from the German on the World Wide Web, http://linkszeitung.de/content/view/169873/42.]
Berlin. “We warn against solving the financial market crisis at the expense of citizens and the welfare state,” declared Professor Gunnar Winkler, president of Volkssolidaritat (People’s Solidarity) in Berlin on the billions for the banks resolved by the German government. “It is amazing how quickly many billions appeared to bail out banks while there is no money for pensions, benefits for children and youth or the necessary upgrading of the Hartz IV benefit. The thesis propagated for years that we cannot afford the welfare state is refuted.”
People’s Solidarity advocates measures to ensure functioning financial systems for economic development, secure jobs and distribute burdens justly. But it opposes burdening the general public with state assistance for losses from financial market speculations, the association’s president emphasized. The crisis of the financial markets must have clear consequences. Mammoth assets based on speculation profits do not contribute or contribute little to financing public essentials. This is unacceptable.
Winkler said: “We need more solidarity in the social security systems, not privatization of social security open to the risks of the financial markets. The legal transfer-financed pension insurance must be strengthened as the most important guarantee of provisions for old age. This insurance could be expanded to insurance for employed persons. As our legal health insurance, we do not need a health fund that shifts the burdens more and more on the insured but rather a citizen insurance making impossible high quality of medical care for all the insured.
The welfare state may not be further cut and robbed of its financial foundations to help banks and financial companies, Winkler stressed. This is vital in view of a financial misery caused by those who speculated irresponsibly with their money and now are bailed out with tax funds by citizens. That would be another completely wrong track. For whom is policy really made in this country?
SELF-CONTROL OF THE MARKET
How capitalism became raging
By Spiegel staff writers
[This article is translated from the German in: Spiegel 42/2008.]
Enormous deficits, constantly increasing unemployment numbers, firm bankruptcies one after another, oppressive costs and an unpopular war marked the 1970s. In the 1970s America became meshed in an unbearably long decline.
Here are the roots of the Black Fall of 2008. Ronald Reagan in the White House sowed the long-term crisis at that time. A new age began, an age of unbridled turbo-capitalism. Up to today president George W. Bush and his would-be successor John McCain raved about that turbo-capitalism.
On Wall Street, terms like “junk bonds,” “derivatives” and “shareholder value” were popular, exotic, golden magic words that all conjured fantastic profit chances, the merciless pursuit of profit.
In Washington, Reagan did everything to unleash the forces of the free market: taxes knocked off, state spending cut and regulations cleared out. “Hands off” was the motto of the whole government machine.
One man later watched over the purity of the doctrine: Alan Greenspan, chairman of the Federal Reserve from 1987 to 2006. He successfully fought every attempt to craft clear rules for Wall Street’s new popular financial products. To Greenspan, derivatives were simply “useful instruments” for spreading risk. Where was the problem when creditors with derivatives secured themselves against losses from mortgage businesses? Regulating such securities “would be a mistake,” Greenspan told the US Senate in 2003.
Politicians followed the counsel of their admired “oracle” and gave free rein to the new super-complicated financial products of the 21st century. According to their logic, small investors who should be protected could not invest in hedge funds, “credit default swaps” and all the other hardly understandable Wall Street inventions. No mechanism was needed for the smart, so-called institutional investors. That was the disastrous calculus of Greenspan and his Republican Party friends in Washington.
“Nothing indicates state monitoring is superior to the self-control of the markets,” was the mantra of the head of the Federal Reserve.
That hedge-fund-star, George Soros, publically warned of derivative transactions (“because we don’t understand how they function”) or that “America’s most successful investor, Warren Buffet, saw potential deadly dangers in them did not derail Greenspan or the republican establishment.
As a result, the derivative market swelled up incredibly from 2 trillion in 2002 to 6 trillion by the end of 2007. Hedge funds grew into an uncontrollable financial giant. The investment banks speculated cheerfully with borrowed billions largely undisturbed by monitoring authorities.
Until just before the crash, the pure market doctrine of president Bush was the measure of all things.
In the boardrooms of Wall Street, the remnants of financial oversight were scornfully laughed at – above all the Securities and Exchange Commission (SEC). In 2004 the SEC generously allowed the five largest investment banks to expand their indebtedness. Voluntary self-control should ensure security in the branch.
The authority assigned 30 staff persons to monitor Bear Stearns, Goldman Sachs, Lehman Brothers, Morgan Stanley and Merrill Lynch. “The officials didn’t have a chance,” a top New York banker says about the control mandate of the SEC. “The crisis could not be prevented with such a small team.”
This insight first gained acceptance in Washington after the collapse of the proud branch. “Self-control does not function,” said SEC-chief Christopher Cox. The oversight program of the SEC board was wrongly aimed from the beginning.”
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