“INCOME DISTRIBUTION IS PERVERSE”

In the Whirlwind of the US Economic Crisis

Interview with Sahra Wagenknecht

[Stock prices fall and banks collapse. The US is indebted over eleven trillion euros. This is also a chance for a new beginning under socialist perspectives, says Sahra Wagenknecht from the German Left party. In this stern.de interview published 9/25/2008, she urges a more human economic system – and wants to involve the rich. This interview is translated from the German at http://www.stern.de/politik/deutschland/:Finanzkrise-/640261.html?q=Sahra%20Wagenknecht]

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Ms. Wagenknecht, stock prices are falling in New York, Frankfurt and elsewhere. Do you feel a secret joy?

Joy is blocked because taxpayers at the end will take the rap for the crisis. Buying up junk securities from the banks is not the solution. This is also true for Germany where the private IKB bank was saved from bankruptcy with ten billion euro of taxes.

Isn’t this also a crisis of capitalism?

This is more than a financial market crisis. A basic model has broken down. For years the US forced down wages just as brutally as now happens in Germany. Obviously this could have smashed the domestic market. The US maintains consumption while replacing wages with debts. As long as nothing is changed in this perverse income distribution, the problem is only postponed. The current intervention of the US government will cost $700 billion. This is mainly financed with new debts. The credit bubble becomes larger and larger.

In Germany, people reduce debts by saving.

Reducing debts can also happen by raising taxes on those who hoard money. The profit- and speculation-mania of the last years had profiteers. A millionaires’ tax could be levied on private assets over 1 million euro at 5 percent. This could bring 150 billion euro annually to the state budget in Germany. Only the top ten thousand would pay.

In his government statement, Peter Steinbruck (SPD) spoke of a failure of the US government. Haven’t all governments of the big industrial nations failed?

Obviously all have failed. It is a rather low blow when Peter Steinbruck now assigns sole culpability to the US. With its legislation, the German government has also pushed financial market liberalization, legalized hedge funds and supported trade with guaranteed credits. The red carpet was rolled out for the financial gamblers.

What must happen now?

We must re-regulate the financial market. All dubious derivatives and guaranteed credit risks and hedge funds should be prohibited. Their wild financial bets are dangers to the public. Capital transactions must be controlled again. A redistribution of income is also central. Another economic order is necessary in which people are more important than profit percentages.

How should this redistribution occur?

Redistribution requires reorganization of the social net. Ending Hartz IV [radical German welfare “reform” that combined income support and unemployment benefits and drastically reduced the duration of benefits] is the first imperative. The whole privatization mania must be cancelled. We need public property or public ownership at least in core areas of the economy.

If capitalism is in crisis, why is no one calling for alternative social models?

More and more people want alternatives. The majority rejects privatizations today. Take the VW-law. Thousands of workers protest because they know the last remnant of public influence falls away with this law and they are handed over defenselessly to a shareholder value philosophy that ruthlessly downsizes and closes plants in pursuit of maximum profit.