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Repaired Shoes or New Shoes

by Heerke Hummel Tuesday, Aug. 14, 2012 at 9:08 AM

The economy demonstrates-in the Marxist sense-its primacy over politics. Whose interests are realized? New holes opened up after every bailout action in the last four years. Greece is only the tip of the iceberg. The debtor is not to blame for the disaster.


By Heerke Hummel

[This article published in: Das Blattchen (7/11/2012) is translated from the German on the Internet, http://www.linksnet.de/de/artikel/27699.]

If the distress is great enough, changing the German basic law is considered in government circles. There is even talk of a possible referendum. The reason this time is that the European Union needs a centralized fiscal policy to really function in relation to the financial system. National authorities must be handed over to the EU necessitating a change of the basic law in Germany. With his pronouncements, the German Finance minister Wolfgang Schauble broke a taboo and provoked a frenzied discussion.

After the Greek state budget disaster and the Spanish and Cyprian bank disasters, the eurozone sees the water rising up to its neck. An end to the rising water is not in sight. In 1999, critics of the introduction of the Euro warned that the necessary framing conditions for a serious action did not exist. In circles of Euro-protagonists, it was hoped the Euro would accelerate Europe’s political integration and force necessary reforms. Now it seem that time will soon come at least concerning the financial sector. The economy demonstrates its primacy over politics – in the Marxist sense.

However politics only stuffs holes with “bailout umbrellas” and “bailout funds,” repairing or patching shoes. In the past, the bailout policy responded to extreme practical distress instead of following the knowledge and insight of true expertise. Can a policy resolved by a majority of the people, the voters, better solve the queued up problems in the financial system? In a complex world marked by the greatest specialization of technical knowledge like ours, a referendum on new rules of budget authority could lead to a decision of the belly instead of the head, of faith instead of knowledge or manipulation by the media. The question would be: whose interests are enforced.

The fact that all the parties favor a referendum of the people should puzzle us. Are private or group interests or interests of the community decisive? What is or would be good for the whole EU and its citizens? There is little reason for confidence that the problems will be soon tackled at their root and really solved according to the present state of the discussion and the practical political initiatives in the financial system. New holes opened up after every “bailout action” during the last four years. This will continue until new social and economic approaches carry the day, an understanding of economics and preservation of our Mother Earth, at least in the scope of Europe. Should there be a referendum on the budget? It seems the parties either want to create a re-insurance for the future in order not to have to tell the people regarding future failures: a majority wanted this. Or they hope to persuade a majority of the voters that the group interests of their clientele are the public interest.

Even a European finance ministry can not master the crisis if it doesn’t make new shoes. The financial crisis is only the latest manifestation of a general capitalist distribution crisis in society. What is produced must be consumed. It cannot be kept for years and decades. Whoever doesn’t spend and consume has income and saves and runs the risk of losing what is saved. The illusion that everyone could retain his r5iches through concealment and even increase it through interest earnings should have finally burst through the worldwide experiences during the last decades. Greece is only the tip of the iceberg “Lessons from Economic History.” The debtor isn’t to blame for the disaster when he isn’t offered credit and has to beg. He must have known how heard it will be to reimburse what was lent and bear the debt load that often doubles the total burden. The creditor must also know this. However when he awards the credit and perhaps even forces his rivals to the le4nding business, he runs into debt in his own failure.

What is the German government doing in the present situation? The German government does everything to force its disastrous austerity course on all Europe with a European financial reform that will only further enlarge the world imbalances of production and consumption and export and import. Its policy is based on the assumptions of classical capitalism from the 1`9th century. Its premises are competition instead of a solidarity, materially-oriented economy, self-interest instead of the public interest, money and financial assets instead of material wealth and as a result of all this: boundless and meaningless growth of the consumption of limited natural resources instead of responsibly managing these resources for coming generations. Necessary reforms in Europe should be discussed. If one doesn’t want to turn this little screw to repair the system, the system must be changed in its essential core so the following is achieved:

• Guarantees that the riches in tangible assets and services produced in Europe can be consumed without permanently encumbering private or public consumers or institutions.

• This assumes upper and lower limits for earned income (minimum wages and top salaries) at least on the European plane.

• In addition, the decision-making authority of persons and institutions on financial transactions must be limited.

• Accumulation of financial holdings in the hands of private persons and private and public institutions occurs. A state institution must redistribute other holdings in the general interest to do justice to needs. In this way, the incentive to boundless accumulation of monetary- and financial assets and to over-exploitation of nature would disappear from the system.

• The increase of financial assets through interest must be prevented because money by its nature has become the financial quasi-bookkeeping counter-pole of the tangible assets and services created in the real economy helping in the production and consumption of social wealth.

• Lastly, financing the public authority must be made independent of the business cycle ups and downs, that is on the tax flow. Financing must occur directly through the central bank.

All this cannot be achieved either in the short-term or with a single action. However every further step[ in the future reform of the European financial system must be oriented in such a concept or a similar concept to permanently and successfully stabilize Europe economically, socially and politically. Europe must understand itself as an economic space that must produce and reproduce. This process should be guided by an overall concept, not according to a central plan.


By Herbert Walter

[Herbert Walter is a former chief executive of Dresden Bank. This excerpt from a German ZDF television broadcast “maybrit illner” May 24, 2012 is translated from the German on the Internet, http://grundeinkommensblog.blogspot.de/2012/05/ohne-grundeinkommen-kein-ende-der.html.]

Illner: Why do you say politics itself is to blame? Politics maneuvered into this position of powerlessness. Why did it do this and how did it do this?

Walter: When you look at how we financed our growth since the 1970s, we increasingly financed ever weaker growth rates on credit. Presumably we still live on the island of the blessed in Germany and in countries worldwide. This is also true for America and Japan. This is true for Greece, Spain and many other countries. The more states come into dependence and in the sphere of influence of the financiers, the less states can take a clear course concerning regulation and the less free they are to do this uninfluenced… At the end, this dependence is not good,

The problem of dependence threatening democracy is clearly described. Reflecting further and asking why societies adjust to a gigantic indebtedness-dynamic represented very vividly in the graph is rewarding.

Graph: Total US Indebtedness (State, economy, private households and financial sector)

Source: telepolis

Walter makes the connection to economic growth. Governments increasingly and artificially subsidized growth for decades. Why did they do this? The only possible answer that I see is because of the employment effect. The indebtedness-dynamic actually began historically the moment when nearly all the OECD states and the US were confronted for the first time with the problem of structural mass unemployment, a pressing problem kept in check with all kinds of tricks, Elections can be lost on account of this mass unemployment. Many things must still be explained (cf. Franzmann 2010). I must limit myself to a simple reflection. The pressure resulting from mass unemployment was so great that politics for decades guided society in a gigantic indebtedness-dynamic. For a time, an economic growth can be financed whose employment effects are urgently needed to guarantee “full employment” more or less or at least a somewhat tolerable measure of unemployment. There is only a real way out of this logic by becoming free of the pressure of providing paid labor for all citizens by introducing an unconditional basic income and positively developing life without continuous paid labor. Unemployment could be acknowledged as a commendable privileged free space in which people can be radically active without any employment contract obligations in a self-determined and meaningful way when they have an adequate basic income, an economic freedom that seen historically was once reserved to aristocratic circles who could live according to the motto: “I live in order to work (freely) and need not work to live.”

Solving a distribution problem is crucial here. As one can read daily in the newspapers, the indebtedness-dynamic produces tremendous dependencies for politics since combating unemployment means dependence for citizens. On the other hand, if the necessary billions were spent to finance a basic income, the most important cause of the structural growth pressure would be removed and historically-unparalleled freedom possibilities would arise for politics and for citizens. But the supporters of the old work society as a rule stand in the way of a genuine solution because of an internalized culture of mistrust disciplining to the obligation of paid labor. They have long envisioned the next pseudo-solution to evade a principled solution for more decades: the demographic development that will supposedly make present unemployment disappear by itself.

RELATED LINK: Manuel Franzmann (ed.) Unconditional Basic Income as Answer to the Crisis of the Work Society, pp.11-103. URL: http://publikationen.vb.uni-frankfurt.de/volltexte/2010/7436

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