A plausible economic theory degenerates more and more into a fundamentalist self-immunizing superstition. Its three superstitious principles are: Trust the self-healing powers of the market! The sleek state is the best! Growth and full employment will be reached automatically without the state.
THE RELIGION OF THE MARKET
By Friedhelm Hengsbach
[This article from 10/20/2004 is translated from the German on the World Wide Web,
http://www.st-georgen.uni-frankfurt.de/nbi/pdf/beitrage/rel.pdf.]
“The question whether capitalism can be understood as a religion can be affirmed unconditionally in our present situation.” This was editor Dirk Baecker’s judgment in the book “Kapitalismus als Religion” (Capitalism as Religion). I will examine whether the term “religion” is completely correct for the capitalist market. To that end, I make a differentiated threefold diagnosis underlining the religious appearance of the market, the incredible market slogans and the political deformation of solidarity.
1. THE RELIGIOUS APPEARANCE OF THE MARKET
What or who stands behind the current tendency to ascribe a religious consecration to capitalism, the market and money?
1.1 ASSUMPTIONS
Let me name five tentative assumptions. Firstly, there is Francis Fukuyama’s claim that the “end of history” dawned with the fall of the wall and the collapse of command socialism. The capitalist system proved superior in the system competition. The victory of capitalism is proof that it is right.
Secondly, the assertion by Margaret Thatcher and Gerhard Schroeder that there is no alternative to their policy is constantly repeated. Political decision-makers and social actors are forced to adjust to the mega-trends of globalization, demographic change and technical upheavals.
Thirdly, a “renaissance” of the religious occurs. Religious experiences are taken seriously and analyzed by prominent philosophers across the Atlantic. That religion offers orientations in conduct beyond ecclesiastical-organizational reinforcement is not a bizarre assertion since the active involvement of Buddhist monks in Vietnam’s liberation, the renewal of Latin American community by liberation theology and the appearance of politically engaged Muslims.
Fourthly, purely socio-economic analyses are inadequate for understanding the hegemony of global capitalism. Socio-economic analyses pretend to be precise, unequivocal and fundamental. Dirk Baecker criticizes their claim of grasping the whole reality as presumptuous. Complex structures cannot be described in an exact and linear way. These structures prove to be ambivalent. They dissolve as soon as they are grasped. Something goes wrong as soon as one imagines things are unequivocal. Since discovering the truth is no longer possible, developing and sorting categories, telling stories, elaborating literature and finding imaginative original formulations are imperative. Distinguishing right and wrong should be abandoned. Facts can only become clear in the paradox with growing undecidedness and flowing interpretations.
Fifthly, understanding capitalism, market and money as functional economic rules – including free enterprise competition, elastic money supply, capital-intensive technology out of previous labor and private business organization – is naïve. The analysis of a social hierarchy of power is completely inadequate. Power asymmetries are usually underlined that appear at the juncture of the monetary and real economic cycles in the money- and credit-creating power of the banking system, in the suggestive power of corporations over against atomized consumers, in the superiority of employers and the unequal contracts on the labor market and in the employers’ decision-making monopoly on the basis of private ownership of the means of production. Capitalism, market and money are first of all a worldview or philosophy6 of life, an “all-determining power,” not only an economic structure and a social hierarchy of power.
With these assumptions, I approach the view of the anthology edited by Dirk Baecker presented as a post-humus commemorative volume for Walter Benjamin and as a commentary on Benjamin’s unpublished “Capitalism as Religion.”
1.2 WALTER BENJAMIN: CAPITALISM AS RELIGION
As Walter Benjamin suggested, the characteristics of a religion apply to capitalism since capitalism answers the same anxieties, torments and unrest as the religions. Four characteristics are clear for the religious structure of capitalism: capitalism is a pure cult religion without a special dogmatics and theology. Capitalism celebrates a cult of permanent duration; there is no weekday. This cult is in debt; there is no turning back. Poverty, fear and despair increase hopelessly. The God of this religion must be concealed. Capitalism developed parasitically on Christianity. The ornamentation of banknotes proves that many mythic elements were extracted from Christianity to constitute its own myth. Conversely, the Christianity of the reformation age favored the rise of capitalism and transformed itself into capitalism.
Before Walter Benjamin, the social philosopher Georg Simmel gave a (quasi-) religious consecration to money. At the beginning of the 20th century, he analyzed the value of money dependent on people seeking money for goods exchange. Value corresponds to the relation of two relations, the relation of an amount of money to the total money supply and the relation of one good to the total volume of goods. Money circulation and goods circulation usually refer to one another but can also be separated. Speaking about money requires reflecting on the distribution of money, poverty and wealth. The rich is superior to the poor through the decision-making power given by money as a storehouse of value and assets. He can choose where he spends his money. Money has an ambivalent effect in modern societies. It can open up a new independence to individuals while undermining the worldly milieu anchored in moral and religious convictions. Money increasingly becomes an absolute means, the center of life since it produces all of the important world relations of the individual. Money is regarded as the absolute remedy, an end-in-itself. Inconspicuously it assumes religious characteristics, replaces religion and becomes a religion itself.
Nicolas Luhmann continued Georg Simmel’s diagnosis. Money is a “symbolically generalized medium of communication.” It is symbolic because it shows the unity of the difference of numbers and non-numbers. It is generalized because it expands social communication beyond the circle of the persons present, transforms this communication into money relations and replaces other symbolic mediums like piety, sympathy and justice. The money medium is ambivalent; it can unite and separate. With unequal distribution, it prevents the use of force and also consideration for the poor or a destroyed environment. In middle-class society, God’s omnipresence is replaced by the omnipresence of money.
1.2 AN IMPORTANT DISTINCTION
Capitalism, market and money deserve a socio-economic and political analysis. While this analysis may not be exhaustive, supplementary categories of economic-, labor- and life-styles are necessary. Scrutiny of experiential worlds, lifestyles and designs of life allows an appropriate space for interpretation. Interpretative models, collective expectations and hegemonial convictions are part of the diagnosis. Therefore capitalism, market and money have the rank of a worldview.
Since modern sociologists compare the relations of people with their money and with their religious convictions, they assume a very diffuse concept of religion that suits both personal relations and anonymous money affairs. Only loose analogies, nominalist allegories, “formal similarities” and imaginative metaphors are allowed. Explaining one unknown, money, through an even greater unknown, religion, hardly brings greater knowledge.
Religion is defined very selectively from the conceptual world of sociologists. The words cult, sacrifice, atonement, need satisfaction, sacred, imaginary, transcendence and exclusion constitute the semantics. A sociological idea of religion is far removed from the practical-historical self-image of the Jewish-Christian religion.
Christian theologians rightly insist that the way people deal with their money and the way they interpret their religious experiences should be radically different. Nevertheless they have the choice of strongly emphasizing the similarity or the difference of the Jewish-Christian faith with other religious experiences. If they take up the criticism of money and civilization of modern social philosophers, they risk losing the sense for the medium-character of money. Money is a worldly thing, a cultural asset and God’s good creation, an ambivalent instrument of power.
Theological-dogmatic reflections and social-philosophical comparisons obviously leave behind a totalizing paralysis and a theoretical vacuum. This can only be closed through a functional socio-economic analysis of money and the real financial markets and by an ethical judgment that follows empirical observations and political objectives.
2. THE INCREDIBLE MARKET SLOGANS
Market-radical economic liberal slogans have dominated public opinion for more than a quarter century. In Germany they had a political majority in 1982 when Graf Lambsdorf urgently appealed to abandon short-winded superficial actionism in favor of a total economic concept that declared combating unemployment as the No.1 task. His programmatic paper urged stimulating public and private investments in conservation, rail transportation and energy savings (in building nuclear power plants). Since adjusting social benefits to the changed growth conditions and the pressure on wage the wage demands of dependent wage-earners are central, the paper reads like a challenge to an enlightened social market economy, the core of social-democratic economic policy in the past. This reading becomes all the more reasonable as the social cuts of lower wages, reduced unemployment benefits, training promotion and continued wages in case of sickness become as common as co-payments for medicines and doctor visits, deregulated protection against unlawful dismissals, the demographic factor in the pension formula and freezing the rules of income support.
After the serious external shock that struck the world economy at the beginning of the last century, namely the cancellation of the Bretton Woods system, the drastic increase in oil prices and the publication of the Club of Rome’s “The Limits of Growth”, economic theories that challenge the status quo sound very plausible. People were tired of the constant conflicts between central banks that wanted to stabilize the value of the currency and the governments that relied on growth and employment. The exaggerated formulation of German chancellor Helmut Schmidt that 5% inflation was better than 5% unemployment seemed grotesque at the end of his term in office since both inflation and stagnation occurred.
The Keynesian theory seemed to underrate the deviation of expected from actual events and the conflict between employment or wage level and inflation. In contrast, a supply-oriented monetarist economic policy strives to improve the economic conditions of production. The conclusion was that the state should revoke the administrative rules on prices and quantities, especially the protective rules on the labor market, because these tied up economic growth and productivity. Dependent employees should not make any exaggerated wage demands. The central bank has to insure a stable value of the currency. The economic policy of the state should reflect the business world.
A plausible economic theory degenerates more and more into a fundamentalist self-immunizing superstition. Its three superstitious principles are: Trust the self-healing powers of the market! The sleek state is the best of all possible states! Growth and full employment will be reached automatically when the central bank rigorously battles against inflation! This economic fundamentalism can be seen in a threefold profile: a blind spot, a micro-view and ideal working models.
2.1 THE BLIND SPOT
The blind spot is a metaphor for the naïve repression of common moral convictions and the social context in which economic conduct and the system of the market economy are embedded. Nicolas Luhmann’s theory of social systems and Friedrich A. Hayek’s concept of spontaneous order as interpretative models of economic society are examples.
In the theory of social systems formulated by Nicolas Luhmann, the free enterprise system is represented as a self-referential, self-contained, auto-poietic partial system of a functionally differentiated modern society. It produces its operative unity and its elements by itself. Its functioning is the result of a separated, self-contained operation and cannot be referred back either to psychic subjects or collective actors as social entities. The free enterprise system is regulated by the binary code of paying/not paying. Since a consensus no longer exists on obligatory moral programs in modern societies, moral standards cannot bring about any social integration. Functionally differentiated systems are morally indifferent. Their functioning codes remain free from morality at least in normal cases. Only in exceptional cases is a moral communication with the binary distinction “good/evil” accepted under the risk that the functional partial systems could become transplanted into a state of alert and disturbed in their frictionless order.
A second variety of the blind spot can be seen in the theoretical economic thinking of Friedrich A. Hayek who made a name for himself in the 1980s as a prominent spokesperson of market radical economists. He criticized the adjective “socially just” added to the market economy as ridiculous and harmful. In the past, socially close-meshed communities had a substantive justice and solidarity through religiously and morally substantiated convictions oriented in particular actions, accessible to social agreement and obligating members to a common goal, whether the public interest or altruistic views. In contrast, modern societies are barred from a substantive understanding of conceptions of justice for two reasons. Firstly, the systemic character of functionally differentiated societies excludes an actor from surveying and influencing the interconnection of his intentional actions and the unintended consequences of actions of other actors. Structural changes are not predicted or consciously guided to realize concrete goals of collective actors. Secondly, the members of modern societies are not able to narrow the action possibilities of other actors and instrumentalize them for their own goals. While certain rules harmonize their action goals and leave unencumbered their freedom of action, these rules are not constructed consciously and by mutual agreement. Rather they result from a blind evolutionary process. Two modern rules gained acceptance, respecting the property rights of others and observing contracts. Observance of these two rules, protection of property and faithfulness to contracts, can be sued for. According to these procedural rules, “justice” represents the formal claim of social actors to be spared the illegitimate restriction of their ownership and contractual rights.
On the strength of these formal rules of justice, the market gains acceptance nowadays as a process of action coordination. Through the market, a “twofold spontaneous order” of social relations is produced and maintained that firstly controls the actions of actors and makes their different expectations correspond and secondly increases the chances of all actors far more than in any other way to gain desired goods without the participating actors reaching agreement on particular goals of justice. Markets function when the instruments of the market, the ownership- and contractual rights, are respected in exchange relations. Therefore a free market economy can be regarded as socially just when suppliers compete for the purchasing power of consumers, when a functioning competition enforces the sovereignty of consumers and when a permanent monopoly supplier is blocked. Hayek appealed to a remark of Ludwig Erhard that a market economy is already social from its origin and need not first be made social.
2.2 THE MICRO-VIEW
The intentional and willful fading out of the dependence of knowledge on the perspective of the knowing that is (inter-) subjectively decided in advance can be seen as a second form of economic fundamentalism. In theoretical economic analyses and political options, different perspectives often turn out to be two sides of one coin, for example the supply/demand relations, the input/output calculation, the cost/benefit analysis or micro/macro economics.
The methodically limited choice of a perspective cannot be criticized. In most cases, innovative insights are gained through this process. However describing research results from a particular question and a limited perspective as adequate or even exhaustive answers to complex problems is methodologically indefensible. Risky wrong diagnoses arise when sections of the description and analysis are held for the whole while complementary questions and answers are systematically faded out. Thus serious wrong diagnoses of economic theory and political power of the last years were due to a micro-view that has defined public discussion in Germany.
One risky wrong diagnosis of the socio-economic crisis in Germany since the middle of the 1970s is explaining mass unemployment as individual failure. With that, the battle against unemployment is reduced to lamenting about social security recipients unwilling to work and the poorly trained. Then one sees the decisive step in lowering the pretentious wage, that work pay necessary for a sole wage-earner to support his non-working spouse and two children and rent an adequate apartment in a congested urban area. Or one hopes for an effective incentive that the unemployed would be quickly available to the regular labor market by cutting income support for persons able to work or reducing unemployment assistance to the level of income support. According to many experiences and the analyses of social associations, the millions of recipients of income support able to work but unwilling to work do not seem to exist. The Hartz commission presses to accelerate or intensify the job placement of the unemployed. Whether additional jobs will arise may be doubted. An individual interpretation of mass unemployment underlies the massive efforts at training. That better training could annul the employment risk does not follow from the discovery that the less trained are affected more quickly and more intensely by unemployment. The unemployed in the new Germany are usually not unemployed on account of inadequate training. Even in the West, engineers apply a hundred times without finding a proper job.
Another wrong diagnosis lies in the dominant position of operational theory and research that has largely repressed economics as a social science and political science in Germany. Thus the individual economic calculation that tends to systematically shift the aggregate economic and social consequences of entrepreneurial goods production to an uninvolved third party or the general public defines the political discussion. For the manager of a business, operational thinking obviously does not determine the market but must adapt to the conditions of the market. The inclination grows to declare the labor market as a first-order variable of crisis management in times of recession or stagnation that cannot be essentially changed by business strategies. Wages are too high; the wage structure is too rigid and inflexible. Protection against unlawful termination discourages small and medium-businesses from hiring additional workers. Industry-wide wage agreements rob higher income persons of those incentives that are crucial for growth. The wage structure at the lowest tier that has the function of a guaranteed minimum wage would drive businesses to replace human labor with capital and thus rob those job seekers of the chance of employment whose labor productivity is below the market value for their labor products. Beyond the individual subjects of labor supply, public criticism is increasingly directed against the Federal Labor Office or the unions as scapegoats for a failed employment policy. However the industry-wide wage agreements only seem rigid to those who don’t know the 40,000 wage agreements concluded yearly. In view of a constant stagnation of domestic demand, private businesses often have pessimistic moods. Nevertheless market success, market nearness and profit prospects are the first-order variables of the majority of business decisions, not wage costs.
The individual-economic wrong diagnosis has become the dominant interpretation model of economies, nation states, communities and all social institutions (including the churches). This may be summarized under the symbol of “state competition” that represents a metaphor more than a hypothesis. The argument usually intensifies to excessively high wage costs, non-wage labor costs, taxes and fees that ruin the local, regional or national competitiveness of the economy. Nation states and communities compete, it is argued, for the location decisions of border-crossing businesses. These businesses compare the benefits of the public infrastructure with the commercial burdens through public fees and state taxes.
However seen more closely, the metaphor of state competition intensifies the wrong diagnosis engendered by the micro-view. The actors of competition are not states but non-governmental businesses who compete firstly for the well-funded demand of consumers mainly in developed industrial countries to which they supply innovative goods and secondly for trained workers to whom they offer attractive incomes. If wage costs, fees and taxes play dominant roles, they must be set in relation to the achieved labor productivity for an authentic comparison. Thirdly, the decision-making rules of these businesses are mainly influenced by market conditions and profit expectations and then secondarily by taxes, fees, changes in the exchange rates and differences in real interests. Fourthly, the metaphor of a competition between Germany and the US and between VW and General Motors is incorrect because the economic output of a business can be read in an accounting balance or profit-and loss statement that reveals less than the balance of payments surplus of a country or region with an extended domestic market. A higher productivity or a rise of the national income oriented in purchasing power are undoubtedly plausible indicators of an economic output as long as feedback in the form of exchange rate adjustments and changed exchange relations do not occur. This must be integrated in a complex plausible system of economic regulation and feedback to increase the explanatory value of an assumed competition of states and to remove the suspicion of a wrong diagnosis.
2.3 THE IDEAL MODELS
Economic fundamentalism includes both construction of an ideal model and confession to normative principles detached from experience. For example, the functions of stock exchanges and financial markets, especially their beneficial effects encountered in the legendary transfiguration of the textbooks, are told in contrast to the concrete financial markets.
The function of the stock exchanges in a market economy is usually described as follows: As securities exchanges or currency exchanges, stock exchanges form a segment of the monetary sphere alongside the credit markets, money markets and pension markets. Among the securities exchanges, the stock exchanges have a prominent position as the pearl of the capital market. The function of the stock exchanges is to provide optimal capital to businesses for profitable investments and ensure liquidity. They play an indispensable role at the limits of the self-financing of small- and medium-sized businesses and at the junctures of local/regional and supra-regional markets, domestic and foreign engagements and individual businesses and society. According to the opinion of experts, the stock exchanges approach the ideal of a perfect market. The following functions are ascribed to the financial markets in the ideal model: they give authentic signals about the capacities of businesses and economies. They reflect the publically accessible information about alternative investment possibilities. They assess different forms of assets and enable investors to compile financial titles according to their own preferences. As a rule they can expect a greater profit when they take a greater risk. They mediate capital between savers and investors and guide to an optimal return for capital. Capital needed for investments is provided to corporations. Financial risks inherent in certain economic activities are spread among those who can and will best bear them. Global money- and capital-markets finance and secure worldwide trade. They allow access to capital beyond national borders and overcome the barriers to investors from local savings. They force a dynamic competition between worldwide investors, banks and uniform real interest rates. These markets are automatically controlled and embody a de-politicized economic efficiency. Some time ago the spokesperson of the Deutsche Bank board of directors said that the financial markets are the 5th branch in democracy since the hundreds of thousands of daily decisions of national governments are more effective than parliament elections every four years so that these parliaments decide for a rational economic policy.
During the last 25 years since the Bretton Woods currency regime was ended, drastic changes and considerable functional deficits represent considerable risks for economic growth, employment and human and social development. On one hand, the border-crossing financial businesses on the stock-, pensions-, money- and currency markets have risen explosively in new branches of large banks and insurance companies abroad, especially the derived financial businesses (swaps, futures, options) in the last 25 years. On the other hand, the importance of credit businesses has diminished while the securities business has become larger. The prices for stocks, long-term debt titles and derivatives depend largely on subjective short-term expectations. Long-term business plans play a secondary role. Trade with securities is central; equipping businesses with capital takes a back seat. Capital is reserved to investing businesses. Financing mega-mergers plays a greater role than the stock market access of small and medium sized businesses. The sponsors of the so-called new markets were more impressed by visionary presentations of young entrepreneurs than by demonstrations of success with honest accounting.
The concrete financial markets are ruled by the differentials of economic power. Firstly, the international financial businesses are comparable to the border-crossing goods trade and the direct foreign investments concentrated in the core worldwide countries. In addition, the importance of net-financial streams between the economies is relatively trifling compared to the domestic economic financing since investments and savings are still largely balanced on the national plane. Therefore the developing- and transformation countries are only integrated to a very limited extent in the “global” financial markets. Their integration is joined with considerable risks to investors and above all the population of these countries accepting foreign capital. Secondly, financial businesses dominating the market, namely big banks, insurance companies and investment funds from the OECD states have an information advantage over atomized small shareholders. The chances of gaining, passing on and influencing important information are apportioned asymmetrically. Risk ratings reflecting the judgment and decisions of a few opinion-makers are prone to collective blind spots, mood swings and imitative conduct. Thirdly, the power differentials of the key anchor hegemonial currencies are very important over against the non-convertible currencies. The struggle against inflation has a high priority for the central banks of the key currency countries. Countries with dependent currencies submit to this regime and accept higher interests for their devaluation risk. Some countries that want to avoid scaring off foreign investors flee into a “dollarization” or euroization of their currencies.
3. THE POLITICAL DEFORMATION OF SOLIDARITY
Solidarity is an individual virtue of sympathy, compassion and mercy. Solidarity in no way disappeared in the last quarter of the last century and at the threshold of the new century. Solidarity as a legally binding balance of interests organized mainly on the basis of dependent paid work has become brittle. However this solidarity did not only melt away by itself. This solidarity was politically deformed and dismantled. The market-radical economic liberal slogans of the individualization of social risks, privatization of risks and commercialization of basic economic rights have systematically devalued the power of solidarity. This devaluation through the high praise of private market conditions has a global dimension whose core lies in the US and a national dimension embodied in Agenda 2010 as a “genuine representative of the free enterprise superstition.”
3.1 THE US ECONOMIC AND FINANCIAL STYLE
The market-radical economic-liberal slogans would not have been so successful in the political public without the military and political hegemony of the United States, the teamwork of the New York Stock Exchange, the US Treasury Department and the International Monetary Fund, the “Wall Street-Treasury-IMF complex.” The IMF has a key position in the crisis management of the foreign indebtedness of threshold countries. This key position consists in fixing the conditions of structural adjustment that heavily indebted countries must fulfill to establish credit-worthiness and receive new money. This relies one-sidedly on improving the supply conditions, strict budget discipline, reduction of public borrowing, employment in the public sector, liberalization of foreign trade and capital traffic, interest rates that stop inflation, exchange rates favoring exports, privatizing state enterprises and binding property guarantees. Other international institutions that arose and were strengthened in the 1990s appropriated the market-radical economic-liberal slogans alongside the International Monetary Fund and spread them under the guise of economic analysis and political recommendations. The conferences of the World Trade Organization (WTO) are marked by passionate conflicts around the complete liberalization of the markets for services that included in the past t6he public health and education goods, goods of the universal infrastructure like water, electricity and communications as well as social services (GATS). The US economic and financial style threatens to transform the economic styles that developed in Europe and other countries. This trend can be illustrated in four main challenges.
On the European continent, business is understood as an association of persons or a contractual network of those personally and financially engaged in the business, namely the manager, personnel, shareowners, banks, customers, suppliers and communities. In contrast, the shareholder value-concept of business control is oriented in the first place in risky future revenue streams, makes the present value of these currency streams into the proof of business success and commits managers to the so-called commercial value reflected in stock market prices as a strategic goal of their decisions. Therefore an optimal revenue stream is set for every individual company. Only company units with above-average profits receive the necessary funds while the rest are expelled together with their personnel. This Anglo-Saxon concept that understands business as a financial object of shareholders seems to repress the continental European concept of a business as a social association of persons.
A second challenge is assurance against the risks of old age. In the US, this is mainly handed over to private, capital-covered care while solidarian universal-financed security is widespread in continental European countries. In German debates on the financing risks of legal pension schemes, the American form of provision for old age was praised as very profitable, cheap and demographically sound. The special charm of capital covering is that the active employees build a capital stock that will support them in the future when they reach retirement age. In addition, the profit maximization could also help satisfy the private pension claims of Germans. After the sudden fall in prices of securities in 2000, it was clear that private capital-covered old age security is also not protected against the system risks of the financial markets. However this can be an advantageous alternative to the universally financed solidarian security systems of dependent employees in times of high unemployment, low investment and trifling growth rates.
The priorities of economic policy represent a third challenge. If the top-priority interest of the big banks, insurance companies and institutional investors on the international financial markets consists in safeguarding the value of financial assets, the danger exists that European governments could submit to this interest. Then they would give priority to the struggle against inflation with the goal that shareholders find secure possibilities of investments instead of focusing on the goal of high employment realized through more economic growth. By transferring the mandate to rigorously combat inflation to an independent central bank and holding tightly to the monetary and fiscal Maastricht criteria, they deprive themselves of the possibility of a coordinated European fiscal-, income-, employment- and growth policy. The result is a violation of the golden rule of growth under which all real economic enterprises suffer. The rule says that capital yields on the financial markets should be less than the profit rate that innovative businesses gain from pre-financed real investments, creation of jobs, production and the sales of their products, that is from the real economic cycle. Violation of this rule is very serious because it shows that the key to overcoming economic stagnation and mass unemployment lies in the financial markets.
A fourth challenge is the encroachment of the US financial style in the structure of public budgets, in relations between the sovereign jurisdictions of other states and in the self-government of the communities, the financial business of a communal property – incineration plants, train network, sports facilities, waterworks and sewage (water treatment) plants – is often taken over by investors from the United States. The commune transfers its economic property for 99 years through an anonymous trust company to investors whose financial investment reduces their taxes to American tax authorities. At the same time the commune makes a conditional agreement for 30 years. Afterwards it can end the financial business by paying an option price. If it cannot do this, the enterprise passes over to the investors who can sell it to a private third party. The mutual advantage of this financial business is that the American investor saves taxes and the German commune receives a fee for participating in the transaction.
3.2 AGENDA 2010
Agenda 2010 of the red-green coalition cannot be explained without the pressure of international financial actors, the interconnection of economic elites with the CDU/CSU opposition and the disseminated propaganda of the middle-class camp. The hasty procedure already anticipates the wayward result.
Agenda 2010 was the powerful staging of a reform. The three-stage tax reform should become the greatest reform project of the century. The pillars in modernizing the public health system were declared the greatest reform work in recent social history. The German chancellor stylized the so-called Hartz laws, especially the reform of the Federal Labor Office and the combination of unemployment assistance and income support as the “most important, most fundamental and most complex social reform in the history of Germany.” In a short time these magic works landed in a private-public switchyard where the financing gaps of federal, territorial and community budgets were shifted to the nearest weaker planes. A rigorous saving, cutting and canceling was prescribed as a political lawnmower and labeled a reform.
Other characteristics of the procedure were the speed of legislative deliberation and the pressure exercised by the chancellor’s office on the factions of the parliamentary majority. The opposition adjusted to the maelstrom and competed with the government parties over deeper social cuts, sharper exactions and further reduction of protection against unlawful dismissal. Exhausted from the outbidding competition, the heads of the parties finally reached a compromise between the two houses of parliament (the Bundestag and Bundesrat). The political class has formed a great informal coalition. It snatches a considerable part of the social wealth from the unemployed, poor, sick and pensioners without ever seeing itself confronted with the serious risks of these people.
Agenda 2010 has produced clear losers, first those whose protection against unlawful termination is cut and those forced through work offers previously termed unreasonable to a downward spiral from secure jobs to risky working conditions, mini-jobs, personal companies and one-euro jobs impoverishing people. The devaluation of work capacity is very serious. It alarms, de-motivates and expands a depressed future expectation beyond the circle of the immediately affected. With the negative effects on individual and collective labor law, the incursions in the situations of the unemployed are a challenge to victims of the crisis who must be outlawed and disciplined as supposed work refusers able to work. Pensioners are forced to an income renunciation without leading payees to a higher consumption propensity or triggering more economic growth. A conflict between the old and the young has been constructed artificially. The conflict around the distribution of a growing national income within the same generation – between those who pay contributions and taxes and those who receive the pension payments – independent of whether old or young – is forgotten.
Agenda 2010 brings about a deformation of solidarity. Firstly, social risks are individualized. Structural ruptures or crashes are represented as caused by personal lapses. Poor will to work, poor training, gender, a careless character or risky lifestyles are responsible for the occurrence of social risks like unemployment, sickness, old age poverty and need of care. This interpretation model then provides the pretext for leaving the mastery of the redefined individual risks to individuals’ initiative. For the wealthy part of the population, income and assets are adequate for privately insuring against life risks, not for those who depend on universal-financed solidarian insurance. Finally, claims to basic rights are converted into market-friendly exchange relations by stylizing the disadvantaged into partners of the social state. A further polarization of society is bound with this individualization and privatization of social risks. That trend documented by the German government in its report on poverty and wealth is reinforced, a growing social division between the unemployed and employed persons, the poor and rich, East- and West Germans, women and men and households without and with children.
Overcoming the growth weaknesses of the domestic market and reducing the hardened mass unemployment were declared the crucial goals of the agenda. Greater state spending for research, development and education as well as future investments in all-day schools will best serve these goals. The last two phases of the tax reform open up a considerable potential of private purchasing power. However the domestic consumer demand will not revive and produce a sustainable economic dynamic as long as the general depressed mood of the population continues.
The diagnosis on which the Agenda is based mainly follows the supply-oriented monetarist model of interpretation. Isolated arguments justify violating the Maastricht criteria, incurring an unexpected new indebtedness and allowing expanded credit possibilities of the communities. The forced improvements of the Agenda have a paradoxical effect. They increase the public budget deficits and inadequately stabilize domestic demand. State and private investments are named sporadically as impulses of constant growth to overcome the economic crisis. The blind spots of the dominant interpretation model remain: that mega-trend to which the political actors see themselves powerfully handed over – the storms of globalization, the demographic division, the public savings pressure, the conflict of generations and above all the encrusted structures on the labor market, the exorbitant taxes, wages and non-wage labor costs as well as the inflated social state to be countered with deep cuts in social benefits.
The Agenda is based on the wrong diagnosis that sees the social state exclusively as a cost-factor and brake on growth, not as an important productivity factor that guarantees the competitiveness of businesses and contributes to economic stability and social cohesion. As a result, the Agenda has no appreciable effect on growth- and employment policy. Its authors declare the labor market as the key in the struggle against unemployment although it is a derived market and revives as soon as a constant dynamic demand takes hold of the commodity markets. The expected employment effects do not occur. Social cuts seem justified since individual failure, namely deficient work capacity and readiness of the unemployed are declared precedent causes of constantly high unemployment. The cuts’ desired effect is not achieved. Disciplining the unemployed does not create millions of additional jobs. Neither the relaxed protection from unlawful termination nor the changed business hours will trigger a jobs miracle. The personal participation of patients will not annul the deficits of the public health system. The risky possibility of further public indebtedness is not a replacement for the urgently necessary public financial reform.
The Agenda also remains ineffective because many contradictions, continuous corrections and hectic improvements of the carelessly formulated laws have exhausted the trust of the population in the competence of the government. For example, unemployment benefits should be reduced to exert more pressure on the unemployed and accelerate job placement. However much greater funds are needed to stimulate entrepreneurs to hire additional unemployed. The pension reformers proposed raising the legal pension age. However only 40 percent of businesses are ready to employ working persons who are over 50. At the same time the government and employer associations agreed on a training pact that promises additional apprenticeships to youths without guaranteeing that the promise can be fulfilled. The “personal companies” should promote the initiative to independent gainful work and are therefore outfitted with generous financial support. In the meantime, the conditions of financial assistance are tightened since the employment effect tends to zero.
Modern societies like to describe themselves as knowledge societies – with enlightened consciousness and a democratic self-image. This transfigured view does not correspond to the concrete societies organized in a free enterprise way. Socio-economic analyses degenerate to an ideological or worldview confession and fundamentalist superstition. Political decisions are explained as adjustments to inevitable mega-trends. What position can be expected from Christian theologians in such a society? They should reflect on the historical-practical dimension of the Jewish-Christian faith in God beyond the whole created world. From this remembrance, religion is defined as being grasped by a transcendent God. Therefore a religion of the market is a bizarre construction. The God of the Bible sets people free to act indifferent to created things, to use them when they pave the way to God in Jesus’ discipleship and to dismiss them when they block this way. This is also true for those things created by people like capitalism, money and the market.
By Friedhelm Hengsbach
[This article from 10/20/2004 is translated from the German on the World Wide Web,
http://www.st-georgen.uni-frankfurt.de/nbi/pdf/beitrage/rel.pdf.] “The question whether capitalism can be understood as a religion can be affirmed unconditionally in our present situation.” This was editor Dirk Baecker’s judgment in the book “Kapitalismus als Religion” (Capitalism as Religion). I will examine whether the term “religion” is completely correct for the capitalist market. To that end, I make a differentiated threefold diagnosis underlining the religious appearance of the market, the incredible market slogans and the political deformation of solidarity.
1. THE RELIGIOUS APPEARANCE OF THE MARKET
What or who stands behind the current tendency to ascribe a religious consecration to capitalism, the market and money?
1.1 ASSUMPTIONS
Let me name five tentative assumptions. Firstly, there is Francis Fukuyama’s claim that the “end of history” dawned with the fall of the wall and the collapse of command socialism. The capitalist system proved superior in the system competition. The victory of capitalism is proof that it is right.
Secondly, the assertion by Margaret Thatcher and Gerhard Schroeder that there is no alternative to their policy is constantly repeated. Political decision-makers and social actors are forced to adjust to the mega-trends of globalization, demographic change and technical upheavals.
Thirdly, a “renaissance” of the religious occurs. Religious experiences are taken seriously and analyzed by prominent philosophers across the Atlantic. That religion offers orientations in conduct beyond ecclesiastical-organizational reinforcement is not a bizarre assertion since the active involvement of Buddhist monks in Vietnam’s liberation, the renewal of Latin American community by liberation theology and the appearance of politically engaged Muslims.
Fourthly, purely socio-economic analyses are inadequate for understanding the hegemony of global capitalism. Socio-economic analyses pretend to be precise, unequivocal and fundamental. Dirk Baecker criticizes their claim of grasping the whole reality as presumptuous. Complex structures cannot be described in an exact and linear way. These structures prove to be ambivalent. They dissolve as soon as they are grasped. Something goes wrong as soon as one imagines things are unequivocal. Since discovering the truth is no longer possible, developing and sorting categories, telling stories, elaborating literature and finding imaginative original formulations are imperative. Distinguishing right and wrong should be abandoned. Facts can only become clear in the paradox with growing undecidedness and flowing interpretations.
Fifthly, understanding capitalism, market and money as functional economic rules – including free enterprise competition, elastic money supply, capital-intensive technology out of previous labor and private business organization – is naïve. The analysis of a social hierarchy of power is completely inadequate. Power asymmetries are usually underlined that appear at the juncture of the monetary and real economic cycles in the money- and credit-creating power of the banking system, in the suggestive power of corporations over against atomized consumers, in the superiority of employers and the unequal contracts on the labor market and in the employers’ decision-making monopoly on the basis of private ownership of the means of production. Capitalism, market and money are first of all a worldview or philosophy6 of life, an “all-determining power,” not only an economic structure and a social hierarchy of power.
With these assumptions, I approach the view of the anthology edited by Dirk Baecker presented as a post-humus commemorative volume for Walter Benjamin and as a commentary on Benjamin’s unpublished “Capitalism as Religion.”
1.2 WALTER BENJAMIN: CAPITALISM AS RELIGION
As Walter Benjamin suggested, the characteristics of a religion apply to capitalism since capitalism answers the same anxieties, torments and unrest as the religions. Four characteristics are clear for the religious structure of capitalism: capitalism is a pure cult religion without a special dogmatics and theology. Capitalism celebrates a cult of permanent duration; there is no weekday. This cult is in debt; there is no turning back. Poverty, fear and despair increase hopelessly. The God of this religion must be concealed. Capitalism developed parasitically on Christianity. The ornamentation of banknotes proves that many mythic elements were extracted from Christianity to constitute its own myth. Conversely, the Christianity of the reformation age favored the rise of capitalism and transformed itself into capitalism.
Before Walter Benjamin, the social philosopher Georg Simmel gave a (quasi-) religious consecration to money. At the beginning of the 20th century, he analyzed the value of money dependent on people seeking money for goods exchange. Value corresponds to the relation of two relations, the relation of an amount of money to the total money supply and the relation of one good to the total volume of goods. Money circulation and goods circulation usually refer to one another but can also be separated. Speaking about money requires reflecting on the distribution of money, poverty and wealth. The rich is superior to the poor through the decision-making power given by money as a storehouse of value and assets. He can choose where he spends his money. Money has an ambivalent effect in modern societies. It can open up a new independence to individuals while undermining the worldly milieu anchored in moral and religious convictions. Money increasingly becomes an absolute means, the center of life since it produces all of the important world relations of the individual. Money is regarded as the absolute remedy, an end-in-itself. Inconspicuously it assumes religious characteristics, replaces religion and becomes a religion itself.
Nicolas Luhmann continued Georg Simmel’s diagnosis. Money is a “symbolically generalized medium of communication.” It is symbolic because it shows the unity of the difference of numbers and non-numbers. It is generalized because it expands social communication beyond the circle of the persons present, transforms this communication into money relations and replaces other symbolic mediums like piety, sympathy and justice. The money medium is ambivalent; it can unite and separate. With unequal distribution, it prevents the use of force and also consideration for the poor or a destroyed environment. In middle-class society, God’s omnipresence is replaced by the omnipresence of money.
1.2 AN IMPORTANT DISTINCTION
Capitalism, market and money deserve a socio-economic and political analysis. While this analysis may not be exhaustive, supplementary categories of economic-, labor- and life-styles are necessary. Scrutiny of experiential worlds, lifestyles and designs of life allows an appropriate space for interpretation. Interpretative models, collective expectations and hegemonial convictions are part of the diagnosis. Therefore capitalism, market and money have the rank of a worldview.
Since modern sociologists compare the relations of people with their money and with their religious convictions, they assume a very diffuse concept of religion that suits both personal relations and anonymous money affairs. Only loose analogies, nominalist allegories, “formal similarities” and imaginative metaphors are allowed. Explaining one unknown, money, through an even greater unknown, religion, hardly brings greater knowledge.
Religion is defined very selectively from the conceptual world of sociologists. The words cult, sacrifice, atonement, need satisfaction, sacred, imaginary, transcendence and exclusion constitute the semantics. A sociological idea of religion is far removed from the practical-historical self-image of the Jewish-Christian religion.
Christian theologians rightly insist that the way people deal with their money and the way they interpret their religious experiences should be radically different. Nevertheless they have the choice of strongly emphasizing the similarity or the difference of the Jewish-Christian faith with other religious experiences. If they take up the criticism of money and civilization of modern social philosophers, they risk losing the sense for the medium-character of money. Money is a worldly thing, a cultural asset and God’s good creation, an ambivalent instrument of power.
Theological-dogmatic reflections and social-philosophical comparisons obviously leave behind a totalizing paralysis and a theoretical vacuum. This can only be closed through a functional socio-economic analysis of money and the real financial markets and by an ethical judgment that follows empirical observations and political objectives.
2. THE INCREDIBLE MARKET SLOGANS
Market-radical economic liberal slogans have dominated public opinion for more than a quarter century. In Germany they had a political majority in 1982 when Graf Lambsdorf urgently appealed to abandon short-winded superficial actionism in favor of a total economic concept that declared combating unemployment as the No.1 task. His programmatic paper urged stimulating public and private investments in conservation, rail transportation and energy savings (in building nuclear power plants). Since adjusting social benefits to the changed growth conditions and the pressure on wage the wage demands of dependent wage-earners are central, the paper reads like a challenge to an enlightened social market economy, the core of social-democratic economic policy in the past. This reading becomes all the more reasonable as the social cuts of lower wages, reduced unemployment benefits, training promotion and continued wages in case of sickness become as common as co-payments for medicines and doctor visits, deregulated protection against unlawful dismissals, the demographic factor in the pension formula and freezing the rules of income support.
After the serious external shock that struck the world economy at the beginning of the last century, namely the cancellation of the Bretton Woods system, the drastic increase in oil prices and the publication of the Club of Rome’s “The Limits of Growth”, economic theories that challenge the status quo sound very plausible. People were tired of the constant conflicts between central banks that wanted to stabilize the value of the currency and the governments that relied on growth and employment. The exaggerated formulation of German chancellor Helmut Schmidt that 5% inflation was better than 5% unemployment seemed grotesque at the end of his term in office since both inflation and stagnation occurred.
The Keynesian theory seemed to underrate the deviation of expected from actual events and the conflict between employment or wage level and inflation. In contrast, a supply-oriented monetarist economic policy strives to improve the economic conditions of production. The conclusion was that the state should revoke the administrative rules on prices and quantities, especially the protective rules on the labor market, because these tied up economic growth and productivity. Dependent employees should not make any exaggerated wage demands. The central bank has to insure a stable value of the currency. The economic policy of the state should reflect the business world.
A plausible economic theory degenerates more and more into a fundamentalist self-immunizing superstition. Its three superstitious principles are: Trust the self-healing powers of the market! The sleek state is the best of all possible states! Growth and full employment will be reached automatically when the central bank rigorously battles against inflation! This economic fundamentalism can be seen in a threefold profile: a blind spot, a micro-view and ideal working models.
2.1 THE BLIND SPOT
The blind spot is a metaphor for the naïve repression of common moral convictions and the social context in which economic conduct and the system of the market economy are embedded. Nicolas Luhmann’s theory of social systems and Friedrich A. Hayek’s concept of spontaneous order as interpretative models of economic society are examples.
In the theory of social systems formulated by Nicolas Luhmann, the free enterprise system is represented as a self-referential, self-contained, auto-poietic partial system of a functionally differentiated modern society. It produces its operative unity and its elements by itself. Its functioning is the result of a separated, self-contained operation and cannot be referred back either to psychic subjects or collective actors as social entities. The free enterprise system is regulated by the binary code of paying/not paying. Since a consensus no longer exists on obligatory moral programs in modern societies, moral standards cannot bring about any social integration. Functionally differentiated systems are morally indifferent. Their functioning codes remain free from morality at least in normal cases. Only in exceptional cases is a moral communication with the binary distinction “good/evil” accepted under the risk that the functional partial systems could become transplanted into a state of alert and disturbed in their frictionless order.
A second variety of the blind spot can be seen in the theoretical economic thinking of Friedrich A. Hayek who made a name for himself in the 1980s as a prominent spokesperson of market radical economists. He criticized the adjective “socially just” added to the market economy as ridiculous and harmful. In the past, socially close-meshed communities had a substantive justice and solidarity through religiously and morally substantiated convictions oriented in particular actions, accessible to social agreement and obligating members to a common goal, whether the public interest or altruistic views. In contrast, modern societies are barred from a substantive understanding of conceptions of justice for two reasons. Firstly, the systemic character of functionally differentiated societies excludes an actor from surveying and influencing the interconnection of his intentional actions and the unintended consequences of actions of other actors. Structural changes are not predicted or consciously guided to realize concrete goals of collective actors. Secondly, the members of modern societies are not able to narrow the action possibilities of other actors and instrumentalize them for their own goals. While certain rules harmonize their action goals and leave unencumbered their freedom of action, these rules are not constructed consciously and by mutual agreement. Rather they result from a blind evolutionary process. Two modern rules gained acceptance, respecting the property rights of others and observing contracts. Observance of these two rules, protection of property and faithfulness to contracts, can be sued for. According to these procedural rules, “justice” represents the formal claim of social actors to be spared the illegitimate restriction of their ownership and contractual rights.
On the strength of these formal rules of justice, the market gains acceptance nowadays as a process of action coordination. Through the market, a “twofold spontaneous order” of social relations is produced and maintained that firstly controls the actions of actors and makes their different expectations correspond and secondly increases the chances of all actors far more than in any other way to gain desired goods without the participating actors reaching agreement on particular goals of justice. Markets function when the instruments of the market, the ownership- and contractual rights, are respected in exchange relations. Therefore a free market economy can be regarded as socially just when suppliers compete for the purchasing power of consumers, when a functioning competition enforces the sovereignty of consumers and when a permanent monopoly supplier is blocked. Hayek appealed to a remark of Ludwig Erhard that a market economy is already social from its origin and need not first be made social.
2.2 THE MICRO-VIEW
The intentional and willful fading out of the dependence of knowledge on the perspective of the knowing that is (inter-) subjectively decided in advance can be seen as a second form of economic fundamentalism. In theoretical economic analyses and political options, different perspectives often turn out to be two sides of one coin, for example the supply/demand relations, the input/output calculation, the cost/benefit analysis or micro/macro economics.
The methodically limited choice of a perspective cannot be criticized. In most cases, innovative insights are gained through this process. However describing research results from a particular question and a limited perspective as adequate or even exhaustive answers to complex problems is methodologically indefensible. Risky wrong diagnoses arise when sections of the description and analysis are held for the whole while complementary questions and answers are systematically faded out. Thus serious wrong diagnoses of economic theory and political power of the last years were due to a micro-view that has defined public discussion in Germany.
One risky wrong diagnosis of the socio-economic crisis in Germany since the middle of the 1970s is explaining mass unemployment as individual failure. With that, the battle against unemployment is reduced to lamenting about social security recipients unwilling to work and the poorly trained. Then one sees the decisive step in lowering the pretentious wage, that work pay necessary for a sole wage-earner to support his non-working spouse and two children and rent an adequate apartment in a congested urban area. Or one hopes for an effective incentive that the unemployed would be quickly available to the regular labor market by cutting income support for persons able to work or reducing unemployment assistance to the level of income support. According to many experiences and the analyses of social associations, the millions of recipients of income support able to work but unwilling to work do not seem to exist. The Hartz commission presses to accelerate or intensify the job placement of the unemployed. Whether additional jobs will arise may be doubted. An individual interpretation of mass unemployment underlies the massive efforts at training. That better training could annul the employment risk does not follow from the discovery that the less trained are affected more quickly and more intensely by unemployment. The unemployed in the new Germany are usually not unemployed on account of inadequate training. Even in the West, engineers apply a hundred times without finding a proper job.
Another wrong diagnosis lies in the dominant position of operational theory and research that has largely repressed economics as a social science and political science in Germany. Thus the individual economic calculation that tends to systematically shift the aggregate economic and social consequences of entrepreneurial goods production to an uninvolved third party or the general public defines the political discussion. For the manager of a business, operational thinking obviously does not determine the market but must adapt to the conditions of the market. The inclination grows to declare the labor market as a first-order variable of crisis management in times of recession or stagnation that cannot be essentially changed by business strategies. Wages are too high; the wage structure is too rigid and inflexible. Protection against unlawful termination discourages small and medium-businesses from hiring additional workers. Industry-wide wage agreements rob higher income persons of those incentives that are crucial for growth. The wage structure at the lowest tier that has the function of a guaranteed minimum wage would drive businesses to replace human labor with capital and thus rob those job seekers of the chance of employment whose labor productivity is below the market value for their labor products. Beyond the individual subjects of labor supply, public criticism is increasingly directed against the Federal Labor Office or the unions as scapegoats for a failed employment policy. However the industry-wide wage agreements only seem rigid to those who don’t know the 40,000 wage agreements concluded yearly. In view of a constant stagnation of domestic demand, private businesses often have pessimistic moods. Nevertheless market success, market nearness and profit prospects are the first-order variables of the majority of business decisions, not wage costs.
The individual-economic wrong diagnosis has become the dominant interpretation model of economies, nation states, communities and all social institutions (including the churches). This may be summarized under the symbol of “state competition” that represents a metaphor more than a hypothesis. The argument usually intensifies to excessively high wage costs, non-wage labor costs, taxes and fees that ruin the local, regional or national competitiveness of the economy. Nation states and communities compete, it is argued, for the location decisions of border-crossing businesses. These businesses compare the benefits of the public infrastructure with the commercial burdens through public fees and state taxes.
However seen more closely, the metaphor of state competition intensifies the wrong diagnosis engendered by the micro-view. The actors of competition are not states but non-governmental businesses who compete firstly for the well-funded demand of consumers mainly in developed industrial countries to which they supply innovative goods and secondly for trained workers to whom they offer attractive incomes. If wage costs, fees and taxes play dominant roles, they must be set in relation to the achieved labor productivity for an authentic comparison. Thirdly, the decision-making rules of these businesses are mainly influenced by market conditions and profit expectations and then secondarily by taxes, fees, changes in the exchange rates and differences in real interests. Fourthly, the metaphor of a competition between Germany and the US and between VW and General Motors is incorrect because the economic output of a business can be read in an accounting balance or profit-and loss statement that reveals less than the balance of payments surplus of a country or region with an extended domestic market. A higher productivity or a rise of the national income oriented in purchasing power are undoubtedly plausible indicators of an economic output as long as feedback in the form of exchange rate adjustments and changed exchange relations do not occur. This must be integrated in a complex plausible system of economic regulation and feedback to increase the explanatory value of an assumed competition of states and to remove the suspicion of a wrong diagnosis.
2.3 THE IDEAL MODELS
Economic fundamentalism includes both construction of an ideal model and confession to normative principles detached from experience. For example, the functions of stock exchanges and financial markets, especially their beneficial effects encountered in the legendary transfiguration of the textbooks, are told in contrast to the concrete financial markets.
The function of the stock exchanges in a market economy is usually described as follows: As securities exchanges or currency exchanges, stock exchanges form a segment of the monetary sphere alongside the credit markets, money markets and pension markets. Among the securities exchanges, the stock exchanges have a prominent position as the pearl of the capital market. The function of the stock exchanges is to provide optimal capital to businesses for profitable investments and ensure liquidity. They play an indispensable role at the limits of the self-financing of small- and medium-sized businesses and at the junctures of local/regional and supra-regional markets, domestic and foreign engagements and individual businesses and society. According to the opinion of experts, the stock exchanges approach the ideal of a perfect market. The following functions are ascribed to the financial markets in the ideal model: they give authentic signals about the capacities of businesses and economies. They reflect the publically accessible information about alternative investment possibilities. They assess different forms of assets and enable investors to compile financial titles according to their own preferences. As a rule they can expect a greater profit when they take a greater risk. They mediate capital between savers and investors and guide to an optimal return for capital. Capital needed for investments is provided to corporations. Financial risks inherent in certain economic activities are spread among those who can and will best bear them. Global money- and capital-markets finance and secure worldwide trade. They allow access to capital beyond national borders and overcome the barriers to investors from local savings. They force a dynamic competition between worldwide investors, banks and uniform real interest rates. These markets are automatically controlled and embody a de-politicized economic efficiency. Some time ago the spokesperson of the Deutsche Bank board of directors said that the financial markets are the 5th branch in democracy since the hundreds of thousands of daily decisions of national governments are more effective than parliament elections every four years so that these parliaments decide for a rational economic policy.
During the last 25 years since the Bretton Woods currency regime was ended, drastic changes and considerable functional deficits represent considerable risks for economic growth, employment and human and social development. On one hand, the border-crossing financial businesses on the stock-, pensions-, money- and currency markets have risen explosively in new branches of large banks and insurance companies abroad, especially the derived financial businesses (swaps, futures, options) in the last 25 years. On the other hand, the importance of credit businesses has diminished while the securities business has become larger. The prices for stocks, long-term debt titles and derivatives depend largely on subjective short-term expectations. Long-term business plans play a secondary role. Trade with securities is central; equipping businesses with capital takes a back seat. Capital is reserved to investing businesses. Financing mega-mergers plays a greater role than the stock market access of small and medium sized businesses. The sponsors of the so-called new markets were more impressed by visionary presentations of young entrepreneurs than by demonstrations of success with honest accounting.
The concrete financial markets are ruled by the differentials of economic power. Firstly, the international financial businesses are comparable to the border-crossing goods trade and the direct foreign investments concentrated in the core worldwide countries. In addition, the importance of net-financial streams between the economies is relatively trifling compared to the domestic economic financing since investments and savings are still largely balanced on the national plane. Therefore the developing- and transformation countries are only integrated to a very limited extent in the “global” financial markets. Their integration is joined with considerable risks to investors and above all the population of these countries accepting foreign capital. Secondly, financial businesses dominating the market, namely big banks, insurance companies and investment funds from the OECD states have an information advantage over atomized small shareholders. The chances of gaining, passing on and influencing important information are apportioned asymmetrically. Risk ratings reflecting the judgment and decisions of a few opinion-makers are prone to collective blind spots, mood swings and imitative conduct. Thirdly, the power differentials of the key anchor hegemonial currencies are very important over against the non-convertible currencies. The struggle against inflation has a high priority for the central banks of the key currency countries. Countries with dependent currencies submit to this regime and accept higher interests for their devaluation risk. Some countries that want to avoid scaring off foreign investors flee into a “dollarization” or euroization of their currencies.
3. THE POLITICAL DEFORMATION OF SOLIDARITY
Solidarity is an individual virtue of sympathy, compassion and mercy. Solidarity in no way disappeared in the last quarter of the last century and at the threshold of the new century. Solidarity as a legally binding balance of interests organized mainly on the basis of dependent paid work has become brittle. However this solidarity did not only melt away by itself. This solidarity was politically deformed and dismantled. The market-radical economic liberal slogans of the individualization of social risks, privatization of risks and commercialization of basic economic rights have systematically devalued the power of solidarity. This devaluation through the high praise of private market conditions has a global dimension whose core lies in the US and a national dimension embodied in Agenda 2010 as a “genuine representative of the free enterprise superstition.”
3.1 THE US ECONOMIC AND FINANCIAL STYLE
The market-radical economic-liberal slogans would not have been so successful in the political public without the military and political hegemony of the United States, the teamwork of the New York Stock Exchange, the US Treasury Department and the International Monetary Fund, the “Wall Street-Treasury-IMF complex.” The IMF has a key position in the crisis management of the foreign indebtedness of threshold countries. This key position consists in fixing the conditions of structural adjustment that heavily indebted countries must fulfill to establish credit-worthiness and receive new money. This relies one-sidedly on improving the supply conditions, strict budget discipline, reduction of public borrowing, employment in the public sector, liberalization of foreign trade and capital traffic, interest rates that stop inflation, exchange rates favoring exports, privatizing state enterprises and binding property guarantees. Other international institutions that arose and were strengthened in the 1990s appropriated the market-radical economic-liberal slogans alongside the International Monetary Fund and spread them under the guise of economic analysis and political recommendations. The conferences of the World Trade Organization (WTO) are marked by passionate conflicts around the complete liberalization of the markets for services that included in the past t6he public health and education goods, goods of the universal infrastructure like water, electricity and communications as well as social services (GATS). The US economic and financial style threatens to transform the economic styles that developed in Europe and other countries. This trend can be illustrated in four main challenges.
On the European continent, business is understood as an association of persons or a contractual network of those personally and financially engaged in the business, namely the manager, personnel, shareowners, banks, customers, suppliers and communities. In contrast, the shareholder value-concept of business control is oriented in the first place in risky future revenue streams, makes the present value of these currency streams into the proof of business success and commits managers to the so-called commercial value reflected in stock market prices as a strategic goal of their decisions. Therefore an optimal revenue stream is set for every individual company. Only company units with above-average profits receive the necessary funds while the rest are expelled together with their personnel. This Anglo-Saxon concept that understands business as a financial object of shareholders seems to repress the continental European concept of a business as a social association of persons.
A second challenge is assurance against the risks of old age. In the US, this is mainly handed over to private, capital-covered care while solidarian universal-financed security is widespread in continental European countries. In German debates on the financing risks of legal pension schemes, the American form of provision for old age was praised as very profitable, cheap and demographically sound. The special charm of capital covering is that the active employees build a capital stock that will support them in the future when they reach retirement age. In addition, the profit maximization could also help satisfy the private pension claims of Germans. After the sudden fall in prices of securities in 2000, it was clear that private capital-covered old age security is also not protected against the system risks of the financial markets. However this can be an advantageous alternative to the universally financed solidarian security systems of dependent employees in times of high unemployment, low investment and trifling growth rates.
The priorities of economic policy represent a third challenge. If the top-priority interest of the big banks, insurance companies and institutional investors on the international financial markets consists in safeguarding the value of financial assets, the danger exists that European governments could submit to this interest. Then they would give priority to the struggle against inflation with the goal that shareholders find secure possibilities of investments instead of focusing on the goal of high employment realized through more economic growth. By transferring the mandate to rigorously combat inflation to an independent central bank and holding tightly to the monetary and fiscal Maastricht criteria, they deprive themselves of the possibility of a coordinated European fiscal-, income-, employment- and growth policy. The result is a violation of the golden rule of growth under which all real economic enterprises suffer. The rule says that capital yields on the financial markets should be less than the profit rate that innovative businesses gain from pre-financed real investments, creation of jobs, production and the sales of their products, that is from the real economic cycle. Violation of this rule is very serious because it shows that the key to overcoming economic stagnation and mass unemployment lies in the financial markets.
A fourth challenge is the encroachment of the US financial style in the structure of public budgets, in relations between the sovereign jurisdictions of other states and in the self-government of the communities, the financial business of a communal property – incineration plants, train network, sports facilities, waterworks and sewage (water treatment) plants – is often taken over by investors from the United States. The commune transfers its economic property for 99 years through an anonymous trust company to investors whose financial investment reduces their taxes to American tax authorities. At the same time the commune makes a conditional agreement for 30 years. Afterwards it can end the financial business by paying an option price. If it cannot do this, the enterprise passes over to the investors who can sell it to a private third party. The mutual advantage of this financial business is that the American investor saves taxes and the German commune receives a fee for participating in the transaction.
3.2 AGENDA 2010
Agenda 2010 of the red-green coalition cannot be explained without the pressure of international financial actors, the interconnection of economic elites with the CDU/CSU opposition and the disseminated propaganda of the middle-class camp. The hasty procedure already anticipates the wayward result.
Agenda 2010 was the powerful staging of a reform. The three-stage tax reform should become the greatest reform project of the century. The pillars in modernizing the public health system were declared the greatest reform work in recent social history. The German chancellor stylized the so-called Hartz laws, especially the reform of the Federal Labor Office and the combination of unemployment assistance and income support as the “most important, most fundamental and most complex social reform in the history of Germany.” In a short time these magic works landed in a private-public switchyard where the financing gaps of federal, territorial and community budgets were shifted to the nearest weaker planes. A rigorous saving, cutting and canceling was prescribed as a political lawnmower and labeled a reform.
Other characteristics of the procedure were the speed of legislative deliberation and the pressure exercised by the chancellor’s office on the factions of the parliamentary majority. The opposition adjusted to the maelstrom and competed with the government parties over deeper social cuts, sharper exactions and further reduction of protection against unlawful dismissal. Exhausted from the outbidding competition, the heads of the parties finally reached a compromise between the two houses of parliament (the Bundestag and Bundesrat). The political class has formed a great informal coalition. It snatches a considerable part of the social wealth from the unemployed, poor, sick and pensioners without ever seeing itself confronted with the serious risks of these people.
Agenda 2010 has produced clear losers, first those whose protection against unlawful termination is cut and those forced through work offers previously termed unreasonable to a downward spiral from secure jobs to risky working conditions, mini-jobs, personal companies and one-euro jobs impoverishing people. The devaluation of work capacity is very serious. It alarms, de-motivates and expands a depressed future expectation beyond the circle of the immediately affected. With the negative effects on individual and collective labor law, the incursions in the situations of the unemployed are a challenge to victims of the crisis who must be outlawed and disciplined as supposed work refusers able to work. Pensioners are forced to an income renunciation without leading payees to a higher consumption propensity or triggering more economic growth. A conflict between the old and the young has been constructed artificially. The conflict around the distribution of a growing national income within the same generation – between those who pay contributions and taxes and those who receive the pension payments – independent of whether old or young – is forgotten.
Agenda 2010 brings about a deformation of solidarity. Firstly, social risks are individualized. Structural ruptures or crashes are represented as caused by personal lapses. Poor will to work, poor training, gender, a careless character or risky lifestyles are responsible for the occurrence of social risks like unemployment, sickness, old age poverty and need of care. This interpretation model then provides the pretext for leaving the mastery of the redefined individual risks to individuals’ initiative. For the wealthy part of the population, income and assets are adequate for privately insuring against life risks, not for those who depend on universal-financed solidarian insurance. Finally, claims to basic rights are converted into market-friendly exchange relations by stylizing the disadvantaged into partners of the social state. A further polarization of society is bound with this individualization and privatization of social risks. That trend documented by the German government in its report on poverty and wealth is reinforced, a growing social division between the unemployed and employed persons, the poor and rich, East- and West Germans, women and men and households without and with children.
Overcoming the growth weaknesses of the domestic market and reducing the hardened mass unemployment were declared the crucial goals of the agenda. Greater state spending for research, development and education as well as future investments in all-day schools will best serve these goals. The last two phases of the tax reform open up a considerable potential of private purchasing power. However the domestic consumer demand will not revive and produce a sustainable economic dynamic as long as the general depressed mood of the population continues.
The diagnosis on which the Agenda is based mainly follows the supply-oriented monetarist model of interpretation. Isolated arguments justify violating the Maastricht criteria, incurring an unexpected new indebtedness and allowing expanded credit possibilities of the communities. The forced improvements of the Agenda have a paradoxical effect. They increase the public budget deficits and inadequately stabilize domestic demand. State and private investments are named sporadically as impulses of constant growth to overcome the economic crisis. The blind spots of the dominant interpretation model remain: that mega-trend to which the political actors see themselves powerfully handed over – the storms of globalization, the demographic division, the public savings pressure, the conflict of generations and above all the encrusted structures on the labor market, the exorbitant taxes, wages and non-wage labor costs as well as the inflated social state to be countered with deep cuts in social benefits.
The Agenda is based on the wrong diagnosis that sees the social state exclusively as a cost-factor and brake on growth, not as an important productivity factor that guarantees the competitiveness of businesses and contributes to economic stability and social cohesion. As a result, the Agenda has no appreciable effect on growth- and employment policy. Its authors declare the labor market as the key in the struggle against unemployment although it is a derived market and revives as soon as a constant dynamic demand takes hold of the commodity markets. The expected employment effects do not occur. Social cuts seem justified since individual failure, namely deficient work capacity and readiness of the unemployed are declared precedent causes of constantly high unemployment. The cuts’ desired effect is not achieved. Disciplining the unemployed does not create millions of additional jobs. Neither the relaxed protection from unlawful termination nor the changed business hours will trigger a jobs miracle. The personal participation of patients will not annul the deficits of the public health system. The risky possibility of further public indebtedness is not a replacement for the urgently necessary public financial reform.
The Agenda also remains ineffective because many contradictions, continuous corrections and hectic improvements of the carelessly formulated laws have exhausted the trust of the population in the competence of the government. For example, unemployment benefits should be reduced to exert more pressure on the unemployed and accelerate job placement. However much greater funds are needed to stimulate entrepreneurs to hire additional unemployed. The pension reformers proposed raising the legal pension age. However only 40 percent of businesses are ready to employ working persons who are over 50. At the same time the government and employer associations agreed on a training pact that promises additional apprenticeships to youths without guaranteeing that the promise can be fulfilled. The “personal companies” should promote the initiative to independent gainful work and are therefore outfitted with generous financial support. In the meantime, the conditions of financial assistance are tightened since the employment effect tends to zero.
Modern societies like to describe themselves as knowledge societies – with enlightened consciousness and a democratic self-image. This transfigured view does not correspond to the concrete societies organized in a free enterprise way. Socio-economic analyses degenerate to an ideological or worldview confession and fundamentalist superstition. Political decisions are explained as adjustments to inevitable mega-trends. What position can be expected from Christian theologians in such a society? They should reflect on the historical-practical dimension of the Jewish-Christian faith in God beyond the whole created world. From this remembrance, religion is defined as being grasped by a transcendent God. Therefore a religion of the market is a bizarre construction. The God of the Bible sets people free to act indifferent to created things, to use them when they pave the way to God in Jesus’ discipleship and to dismiss them when they block this way. This is also true for those things created by people like capitalism, money and the market.
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