CAPITAL LOGIC ON TRIAL

Book Review of: Rainer Roth’s “The House of Cards”, DVS publishers, 1999

By Ulrich Leicht

[This book review originally published on the LaborNet Germany website is translated from the German on the World Wide Web,  http://labournet.de/diskussion/wipo/leichtroth.html.]

The book “The House of Cards. State Indebtedness in Germany” by the Frankfurt professor Rainer Roth has the expanded title “Economy and State Finances in Germany” in its 2nd edition. His unique compendium is entirely justified in this claim unlike many other packages that do not contain what they promise.

In fact Rainer Roth wrote a book that looks at more than state indebtedness and its causes from every angle. He explains the economic conditions of capitalist Germany, the social conditions and important areas of the state and politics. The author brings together material from the German statistical office, the ministries, the economic institutes, economic associations, the Federation of German trade Unions, alternative memorandums and authoritative publications from A to Z – from Afheldt’s “Prosperity for No One”, Gorz’ “Critique of Economic Reason”, Kickel’s “Positional Mania and Euro Fear”, Ogger’s “Skimming and Dismantling”, Norbert Walter’s “Ethics + Efficiency = Market Economy” to Karl George Zinn’s “The Economic Crisis”. Figures, facts and arguments are offered for “practitioners”, socially engaged persons and active unionists like myself. All in all, this is a true reference work.

That Rainer Roth analyzes and interprets the statistical and factual material in the light of Marxist criticism of political economy makes the whole enterprise – tackling thoroughly and without taboos state indebtedness, crisis susceptibility and the systemic contradictoriness and perversion of the capitalist market economy – very exciting, a unique work of systemic analysis and criticism.

Perhaps the view of a non-economist committed to radical social criticism is needed, an engaged sociologist whose perspective is not darkened by the “economic assumptions”, misleading arguments, orientations and myths from unionist, economic alternative and “leftist” circles.

DANGER, YOU ARE ENTERING THE ECONOMIC SECTOR…

Rainer Roth quotes representatives of banks, corporations and politicians and puts finances, state debts and the German economy on trial. The union side cannot be satisfied with any of their explanations.

“The explanations of state indebtedness raise more questions than they answer. They often analyze connections that are twisted or distorted according to special interests. Therefore problems are not usually thought through to the end.

On our side, searching for prefabricated conceptual models and interests cannot be our priority. The real conditions along with the laws underlying the phenomenon should be examined unsparingly.

Practical possibilities are presented that do not aggravate the problem to be solved.” (from the Foreword)

Exciting questions are raised after reviewing the problem of state indebtedness and the current explanations and “different policies” conjured again and again.

“Why does state indebtedness increase irrespective of whether a right or wrong policy is applied?

Why did every `correct’ policy in the past lead to the opposite of what was promised?

Why did all the measures combating unemployment fail in preventing its increase?”

Rainer Roth writes in summary:

“All the above explanations have correct estimates to different degrees. This should be underlined. However they also raise many questions without answering them…

Analysis usually stops upon leaving the sphere of the political as though a warning sign stood over the economy: `Danger, you are entering the sector of private property. We are not responsible for the consequences of further reflection.’ Scientific reflection is restricted from the start in its observations if the range of its analysis is dictated by the hierarchies of property and power.” (p.11)

To investigate the causes and consequences without restrictions and strike at the roots, Rainer Roth puts the mechanisms of the capitalist economy on trial with concrete data and facts. These mechanisms undoubtedly determine the social and political life in Germany. For the unbiased analyst, satisfaction of general human needs and life interests and preservation of nature and the environment in no way represent the basic mechanism facing the functioning elite of capital and “punishing the elite with its own extinction” (Marx) as the “gravity” of the economy so to speak. Rather the exploitation interests of capital, the exploitation of value for its own sake and as an end-in-itself could be described as the “profit logic”.

THE MAXIM: COUNTER THE FALLING PROFIT RATE

The drive of the capitalist mode of production that determines more than the economy is subjected to a careful safety standards test in Rainer Roth’s description and analysis of the system’s “canonization”.

The author concludes:

In explaining the increasing state indebtedness, the indebtedness of private households, the massive cuts in pensions and social transfer payments, the growing structural unemployment and plans for tax reform and other so-called reforms, we always hit upon the sticking point that the political concepts ultimately help along the “paralyzed economy” and “position Germany” by guaranteeing better conditions and possibilities of competition. Maintaining and guaranteeing the profit rates with all kinds of subsidies is central, Roth explains.

Contrary to generally accepted “leftist” opinion, Roth diagnoses the long-term fall of profit rates (of net capital profits) in all industrial sectors with the striking crisis in the middle of the 1970s and the complaints of representatives of capital as “false propaganda”. As a result, the German economy only grows today because state credit drives it. Since the inner dynamic is largely used up along with the dynamic of the state, the dynamic today is only produced by “external impulses” causing indebtedness. Capitalism in Germany exists in a state of artificial respiration through credits.” (p.98)

This is strikingly different from current claims in circles of the “mainstream” left and unions that never speak about the crisis-susceptibility of capitalism. The arguments of the DGB (Federation of German Trade Unions) from April 1999 are criticized by Roth. “The capital profitability of businesses is as high as in the early times of full employment at the beginning of the seventies” and “Capital no longer prospers as in the last years” are repeated like a prayer wheel.

Rainer Roth questions and analyzes profit levels and net- and gross capital returns. Upon deeper analysis of the figures, another estimate must be made that does not transfigure the real conditions:

The net profit volume has risen. However this does not say anything about the profit rate since this rate falls absolutely and relatively more and more to the burden of the banks of trade. For the analysis of profit rates and real surplus value, the gross amount before deduction of taxes is decisive. Only what comes out as net after deduction of taxes counts for businesses and for DGB calculations. This is not higher than 30 years ago. The national economic price is great. Through massive destruction of jobs, an attempt is made to correct the relation of constant to variable capital in favor of the former to counteract the decline of the profit rate.

The increase of profit in this case is not a sign of the strength of capital. This increase is not based on an increased surplus value creation through greater capital accumulation but from a state subsidy of profit rates by drastic tax relief of an unpre4cedented extent. The price is economically great, an unparalleled state indebtedness. The growth rates (business profits and wage income), where the state draws its taxes, were cut in half from 1970 to 1997 from 8.3 to 4.1%.

To counter the long-term descent of the profit rates, the tax burden for businesses, a constant 21% for the years 1960 to 1980, has spiraled down to only 8% today. In times when capitalism clearly strikes its lower limits, the profits are no longer what they were. These profits are the result of run-away indebtedness more than galloping value creation and capital accumulation.

This is only one example for Rainer Roth’s radical and critical approach in his book. He takes the reader on the journey of current arguments and puts these arguments on trial with the help of empirical material and in the light of a political-economic critique.

I have hardly ever found such a comprehensive work of more than 400 pages bristling with clearly arranged and readable statistical material and tables.

Helpful summaries are found at the end of the four main chapters “Logic of Capital as a Cause of State Indebtedness”, “Logic of Finance Capital as a Cause of State Indebtedness”, “Private Interests as a Cause of State Indebtedness” and “Internationalization (Globalization) as a Cause of State Indebtedness”.

In an extra chapter, “Keynesianism and neoliberalism” that are not hostile brothers are illumined as two sides of the coin of state interventionism. The prospect for a necessarily different system of human production and provisions is presented. This different system would run according to general social needs and interests and “overall economic profitability” and not according to operational (capital) logic.

I would probably argue with Rainer Roth about these important difficult questions of the way out and what we can and must do today, for example whether the “general interest” and the interest of wage-earners are really identical and need only unite, whether “constant” and “variable capital” are not two sides of a (capital) coin, of a conditional capital relation and whether the perspective of a non-profit-oriented society must lie beyond capital and (paid) labor. Still this does not detract from the unique analysis and criticism in Rainer Roth’s book.