A budget unlike any other
When the people’s representatives of capitalist nations get together every year to debate the national budget, the main issue on the agenda is the relation between income and spending. But a look at both sides of the national accounting process demonstrates that the national budget is unlike any other budget in the world of private property. The way that both companies and the wage-dependent calculate their budgets differs significantly from the way that a sovereign power handles its money. Though a state likewise strives to acquire as much of the stuff as possible, the way it procures and allocates money differs considerably from how private citizens handle their income and spending.
A state’s income, its revenue, doesn’t originate from any sort of exchange. The state doesn’t earn it, but expropriates it by virtue of its legitimate force. The type and amount of taxes it collects are a matter of government decision, and the state thereby procures portions of the private property created and circulated in the society over which it rules. Nor do citizens make any kind of purchase when they pay taxes to the state; they are not entitled to any services in return. So from the perspective of private citizens, taxes are a clear deduction from and restriction on their property. At the same time, taxes reveal the dependency in which the capitalist state has put itself: The amount of resources at its disposal is determined by what the functioning of private property within its territory produces. A sovereign demonstrates the respect it has for its source of income all the more when it borrows money, since its creditors – in accordance with the rules of the market – are entitled to interest payments, and therefore to capital.
The state’s spending is, as the name implies, a way of exercising state power in conformity with the principles of the market economy. A bourgeois state never, or rather only in a state of national emergency, requisitions the products and services it requires for its own purposes. Instead, it buys and pays for them, thereby subordinating itself to the regime of money it has established. It does so because money and its accumulation constitute the state’s own primary goal. That is demonstrated not only by the economic form in which the state “commandeers” services from its citizens, but also by the content of state rule, the purposes for which it spends its revenue. Everything the state does serves this goal. And clearly, the market economy needs a whole lot of state – not to correct its malfunctioning, but to foster its success.
Through the budgeting process, the collecting and spending of money, the political community [1] defines itself and its society by subjecting them both to the rule of money. The material relationship between citizens is constituted neither by a plan nor by a central authority, but by the “real community,” something both separate from and empowered by the state: money. [2] The possession of money is the absolute pre-condition for gaining a share of material wealth, which is why the principal goal of all economic activity is to earn money. It is through money, and only through money, that private citizens depend on each other. That is a thoroughly antagonistic kind of dependence, one in which all sides strive to acquire the money that others already have; the offer that one side must make in order to get at the other’s money uses the latter’s need as a weak point to be exploited. The price a producer can get for his offer determines whether and to what extent his labor has been suitable for acquiring other’s wealth. The state uses its political power to subject its citizens to money, making money the true power citizens exercise over each other, a power to which all are subjected by the state. The latter chalks up its citizens’ antagonistic efforts to acquire money as contributions to the nation’s collective revenue demanded by the state. In this sense, private citizens, who are solely concerned with their capitalistic interest in earning money, simultaneously carry out a political assignment. The money they produce and earn in conflict and competition with each other is the essence of the state’s economic power. [3]
I. The Basis of the National Budget: “Legal Means of Payment” – politically guaranteed credit-money
1. The State’s Money Creation: The monopoly over banknotes and its result
Both citizens and the state carry out their economic activity with money that the modern capitalist state “creates.” Newspapers and economists acknowledge this fact whenever they argue about whether the central bank has provided the proper money supply. Although these pundits may only be interested in the quantitative side of the money supply, they implicitly presuppose the qualitative side as well. In modern capitalist society, the creator of money is a public authority.[4] This authority creates money in a more comprehensive sense than the sovereigns of old, who would guarantee the alloy and weight of a commodity money – either gold or silver – by having their insignia printed right on the coins. Because these metals had intrinsic value as products of labor, they were able to express commodity values independent of the state’s decree and beyond the borders of its territory. If the state is now said to “create money,” this doesn’t merely mean that it permits paper bills to circulate as mere representatives of gold, as a mere means of facilitating the course of trade. The so-called “gold backing” of the state’s currency has long since been abandoned. The issuance of banknotes is no longer tied to a specific quantity of gold in the vaults of the nation’s central bank, upon which these notes would represent a claim. Nor is the treasury obligated to take back the paper money it issues in exchange for gold. Currency of intrinsic value has thus been banished both from domestic and – since WWII – international transactions and has been replaced with paper currency, “fiat money.”
The central bank thereby picks up and follows through on the achievements of the private banking sector. In order to make this crucial point clear, it is worth recalling the nature of the banking business.
Already in commercial payment transactions, when a debtor hands over a promissory note instead of paying its bill, promises to pay serve as means of payment. The creditor – in exchange for interest, of course – grants deferred payment, and in the meantime uses the IOU he receives from his debtor to fulfill his own payment obligations by passing it on to his creditor – who then naturally gains a share of the first debtor’s expected interest payment. Of course, this exchange process implies the risk that the primary debtor might not pay his debt, and thus the condition that he do so. “Bills of exchange” are a merely provisional substitute for actual payment, and are only as good as the ability of the debtor to meet his payment obligation on time. The whole business becomes more reliable when the banks get involved: As the technical agents of society’s payment transactions, they just happen to have the monetary wealth of all of capitalist society at their disposal – its reserves of earned and currently unused cash. On the basis of these reserves, banks turn bills of exchange into hard cash, while also lending money independent of an underlying exchange process in order to prolong old business ventures and launch new ones – in exchange for interest, of course. A bank doesn’t even need to touch its cash reserves in order to carry out this operation. It just opens up an account for its debtors and permits them to pass on their payment obligations to the bank. The bank clears incoming and outgoing payments, and only needs to have enough cash deposits or currency reserves at hand to fulfill demands for cash and meet its payment obligations to other banks. And even that can be avoided if a bank issues its own banknotes instead of cash, i.e., guarantees in specific money amounts redeemable for currency at any time.
Substituting banknotes for real currency not only has the advantage of facilitating payment transactions, it also allows banks to free their lending operations from the limits of their own cash reserves – for which they must pay interest to their depositors. They can even fulfill their payment obligations without having to touch their reserves, and thus don’t have to limit themselves to the restricted size of these reserves, if they only have to pay symbolically in the form of banknotes. These promises to pay – which are neither quanitatively restricted nor bear interest – simply circulate in place of real currency. Of course, these monetary substitutes are only valid as long as the public’s confidence in the respective bank’s ability to pay remains unshaken, and provided that the bank is not actually compelled to take back its notes and exchange them for real cash. As soon as these banknotes are no longer a 1:1 representation of a bank’s actual assets, but instead function as credit, they represent and circulate as existing and available money that the business world first has to earn and then use in order to service its debts. It is then all the more essential that the bank’s own business activity raise no doubts about the value of the notes it issues, which is why a bank needs willing and trusting clients whose deposits strengthen the foundation of this banknote superstructure. But above all, it needs successful debtors who can turn the bank’s payment obligations into capitalist wealth, confirming the value of the banknotes used to vouch for these obligations. This is not only important for a bank’s profits, but also for the solidity of the abstract wealth existing in the form of the paper notes it issues. Therefore, private banknotes remain a provisional substitute for real currency, and the monetary value they represent is relative, i.e., subject to comparison with notes issued by other banks. In the days in which these private banknotes still existed, this meant that all privately issued banknotes had a fluctuating market price and were passed on with a premium or discount. And all in all, private bank money remained precarious, for in the event of a “credit crunch” – which are just so common to capitalism, and which expert economic trend-watchers call “recessions” and expect to occur every few years – a bankruptcy annuls the value of the notes that bank issues, which rapidly spreads until the nation’s economy as a whole collapses. In the end, the entire business world’s ability to pay is reduced to the few available cash reserves from which the banking sector had emancipated it so thoroughly.
Here is where the central bank comes in. The establishment of the central bank went hand in hand with a ban on the issuance of private means of circulation and payment, i.e., private banknotes. That restricted their ability to lend as much credit and ability-to-pay as they want on the basis of their assets and expected income, without being able to reliably vouch for that ability to pay. On the other hand, this emancipates banks’ lending operations all the more fundamentally from society’s cash reserves, which the banks have centralized in their vaults and use as a basis for their credit creation. For the purpose of refinancing the loans they grant, and as a cash fund for meeting the liabilities that arise in the course of their borrowing and lending operations, commercial banks and other credit institutions have accounts at the central bank. That gives banks, in accordance with various regulations, access to the central bank’s banknotes. The nation’s money supply, that is, the money that commercial banks’ lending operations turn into advances on capitalist firms’ business ventures and increased ability-to-pay, thus ultimately consists in banks’ right of access to the money of the central bank. This emancipates banks from the limits of their own funds, and consequently unleashes their power to create money.
Unlike commercial banks, a central bank’s ability to issue banknotes is not dependent on society’s collective deposits, i.e., the money that society has earned, saved and deposited in commercial banks for safekeeping. Nor is it dependent on returns from the lending operations it has (re)financed with its banknotes. On the one hand, transactions between commercial banks and the central bank are carefully regulated. Commercial banks that borrow from the central bank in order to refinance their lending operations must either (a) sell securities with a certain credit rating to the central bank, (b) deposit them and transfer their demands on interest, or (c) pay interest themselves. In this way, the central bank also profits from its lending operations. And in perfect accordance with the rules of banking, the central bank documents its currency issues as “liabilities”, as if the borrower possessed a claim on the assets of the central bank, [5] and it documents its claims on commercial banks and other financial institutions as “assets”, balancing its accounts in standard bank fashion. However, unlike the private issuance of banknotes (which no longer exists), the banknotes with which commercial banks now purchase, discount and lend securities do not represent claims to money that someone has earned and deposited, or is soon to deposit. The “nation’s treasury,” which the central bank’s notes “represent,” consists solely in the central bank’s official task: to issue banknotes backed by the authority of state power. Their ability to perform all the functions of money does not depend on their success in doing so. Their monetary quality is not limited by the amount of wealth that the bank manages, nor does it depend on the public’s confidence in the bank’s ability-to-pay based on the latter’s business success. The difference between banknotes and real money is thus eliminated by law. The units printed on the notes are the valid store of national wealth, the standard of income and prices, just as the unit weights of precious metals once were. And these banknotes don’t just symbolically refer to the money of society, they are the money of society, with which all payment obligations are to be fulfilled. By “imitating” and monopolizing commercial banks’ practice of circulating IOUs as means of payment, the national central bank thus consummates this practice, while simultaneously standing it on its head. The central bank creates the money that society can and should subsequently earn.
In order to achieve the feat of giving mere pieces of paper the status of national currency, force is required – force that is unconditionally binding for the entire society. After all, the central bank’s printing machines don’t just replace whole mines of precious metals, but also the labor of acquiring, gathering and making the product of these mines into the basis of smoothly operating enterprise. Furthermore, these machines create the “material” in which society’s wealth consists once it has taken on its proper, that is, abstract form. The “substance” of the value represented by this money is the law, which enforces the recognition and use of central banknotes as currency. The substance of value is thus a relation of force to which the business world and its appendages – the rest of society’s earners and spenders – are subordinated, without exception and without any competing authority. By legally establishing the object that all members of society need to earn, the state turns its monopoly on the use of force into an economic entity.
2. State Money “Supply”: The services the state provides for the economy’s need for credit, and its demand on the successful utilization of this credit
In today’s world, i.e., the business world, a nation’s currency doesn’t become money merely by virtue of having been printed by the central bank, but rather by serving as a means of refinancing for commercial banks. The latter obtain this money by making deposits at the central bank in exchange for interest payments, and they bring it into circulation via their lending operations. The very way the central bank “supplies” money demonstrates that this money has been given an economic assignment. The use that commercial banks make of the money they borrow from the central bank must pay off for them, and thus also for their borrowers, from whom the banks collect interest. The money of society therefore owes its existence to a lending operation that starts with the nation’s “bank of banks” and demands that the further use of the borrowed funds justify this operation.
By completing the replacement of money with banknotes, the central bank consummates the capitalist lending business so ideally that it also stands the logic of this business on its head. Taken by itself, commercial banks cannot get around the fact that their credit creation is based on money earned and deposited by their customers. Indeed, banks do all they can to emancipate themselves from this basis, to transform the money they expect to earn on their lending operations into a means of payment with which they finance their further lending, i.e., the advances they make on future earnings. When their customers demand cash, however, these banks must still possess more than enough of it to meet these demands. But in principle, with the central bank and its monopoly on banknotes behind them, commercial banks always have sufficient cash reserves, regardless of whether their prior lending operations have been successful or not. The size of their reserves is thus not limited to previously deposited sums of cash in their vaults. Furthermore, by supplying money in this way, the state emancipates the commercial lending business from its basis in commercial transactions, the discounting of bills of exchange, etc, and founds it instead on the money that the state “apportions” to its banks and credit institutions via the central bank’s lending operations. The state thereby makes itself the “basis” of society’s credit – just as for society’s money. To put it in spatial and chronological terms, the state does not “wait” until the business of lending and credit creation has set itself up and set capitalist business in motion. Rather, the state itself “starts” the whole capitalist circus “from above.” It does so by providing credit in the form of central bank loans – credit that does not merely pretend to be money, but is the currency of society. By providing credit, the state gives a boost to its commercial banks’ lending operations and demands that the nation’s business world develop and grow on the basis of that support. So it is only logical that the central bank imposes strict conditions on the apportionment of this ideal means of commercial lending. After all, these conditions represent the central bank’s recognition of and reaction to the fact that with its own money, it has emancipated the business of lending from the functional restriction represented by the amount of money earned by capitalist society, accumulated by the commercial banks and placed in their vaults.
Through the control the state exercises over commercial banks’ activities, the state actively asserts the demand it makes on every banknote it issues – the same demand inherent in every piece of credit-money: Credit-financed business must succeed, such that the capitalistic use of that credit confirms the asserted monetary value of the borrowed funds. When it comes to the central bank’s lending, however, this demand gets made on society as a whole. Unlike the means of payment once created by private banks, the monetary value of state-created credit is no longer dependent on cash redemption. That is because the credit-money issued by the state is just that: money, the value of which is legally guaranteed. That, however, in no way diminishes the state’s demand that the money be used profitably. Even the value that exists in legal tender must first be created through successful business; the state’s claim about the value of its money must still be redeemed by the successful accumulation of capital. Even the value of the state’s credit-money is dependent upon its successful use in business in a way that private credit-money could never be: The legally determined value of the state’s means of payment becomes relative, the validity of the currency diverges from its monetary value, and the use that the nation’s competing capitalists make of it determines just how much.
This paradox is the unavoidable “price” for the fact that the state equips its nation’s banking sector with such an ideal means of credit. Conversely, the state thereby turns its money into a measure of the loaned credit in its society. Its value therefore rises and falls in step with the business that emerges on the basis of these loans. By boldly decreeing an identity between actual money and money that has been lent out and advanced to make a profit, the state subjects its currency to a test that advances of credit must pass. Although the state decrees that the money its central bank lends is money, this does not invalidate the fundamental capitalist equation according to which the wealth of society consists solely in the exchange-value that has been produced and profitably transformed into money. Nor does the state intend to violate this equation. In other words, the state insists that the society over which it rules confirm the value of the state’s credit-advances through successful capitalistic business. [6] The value of the money to be earned in society is the way the state makes the business community, along with its working appendages, liable for the production of the abstract wealth that the central bank’s notes, upon their issuance into circulation, already claim to have realized and enumerate. A nation’s currency is “soft” because credit and money are therein asserted to be identical. And the entire national economy is obligated to prove that the currency is “hard” and confirm this claimed identity. It is to do so by doing successful business, thus laying the economic “foundation” postulated by the state’s credit-money “superstructure.”
The paradoxical identity and non-identity of money and credit inherent in state-issued banknotes becomes immediately apparent as soon as the nation’s legal tender comes into contact with its foreign peers, that is, as soon as they are equated and compared with the products of other nations’ banknote monopolies. The degree to which a nation’s economy confirms the legally guaranteed value of its national currency is thereby compared with the corresponding relation between the advance and return of the money supply in other nations. The result is an exchange rate assigned to each nation’s respective currency. What the state prevents within its own borders by monopolizing the issuing of banknotes thus reasserts itself at an inter-national level: National credit-monies, all of which equally fulfill various monetary functions, if not all to the same extent, compete to be as valuable as each of them claims to be. The means of credit that the state withdraws from domestic competition, in order to make its national economy capable of confirming the pre-determined value of the national currency, proves to be the object and essence of an undecided test on the success of a nation’s economy, a test that defines economic competition among nations. And this question can never be settled once and for all. When the state supplies money, it doesn’t satisfy the business needs of its capitalists once and for all, but raises a constant political-economical problem, one that consists in a test that the entire national economy must pass in international competition, a competition to prove the identity between money and credit.
It is quite convenient that the bourgeois state power’s sole concern is to deal with this problem. What the state undertakes to that end is the topic of the following three chapters.
II. Means and Ends of the National Budget: The use that the “ideal collective capitalist” [7] makes of money and credit
The activity of the central bank is taken to be an indispensable service provided by a public agency that supplies the economy with a viable means of circulation. At first sight, this activity offers little material for public discussion and concern, and certainly can’t be counted among the nation’s more controversial affairs. When the central bank regulates the economy’s monetary flow and credit supply, it is seen as managing a mere technical necessity of the economy. Its contribution to the functioning of the manifold transactions made in the market economy does not amount to much of a political issue. It only becomes an issue once additional factors come into play, such as the bank’s influence – actual or supposed – on the course of the economy or on the government budget.
A popular notion about the relationship between the state and society’s market-economic activities is that society cannot provide the technical and organizational conditions needed to carry out production, distribution and consumption on its own. So the state steps in and fills the gap, enables free enterprise and allows its citizens to calculate and trade with money, the validity of which the state guarantees by law. That, however, is a rather odd notion, one that simply ignores the not insignificant fact that in this society, sovereign force is necessary for “the market” to function at all. Apparently, the market isn’t very capable of “self-regulation” after all. Its constantly invoked “inherent constraints” obviously don’t take effect without the beneficent coercion of a political sovereign with its monopoly on the use of force.
The bourgeois state is to be thanked for its clarification on the constantly reheated fairy tale of “the economy” that the state supposedly sets in motion and then leaves to go its own way, spared of any interventions from the ruling authorities. At least the experts in the “political class” seem to understand that the central bank, with its counterfeit-proof currency notes, aids in the establishment of an imperative – one that establishes capitalist relations of production in which all work and all life is subordinated to money that belongs to someone. In any case, state managers don’t hold back when it comes to using the power of the state. The way they govern demonstrates in great detail that competition over money cannot function without the ubiquitous supervision of a state power; that state support is constantly needed in order for business to flourish; that many citizens simply cannot endure the effects of capitalist moneymaking without state “intervention,” etc. The catalog of state functions documented in a nation’s budget turns out to be rather comprehensive, precisely because the only thing the state is concerned with is implementing the above-mentioned imperative called capitalism. And the way the state procures the means with which it exercises its authority turns out to be rather complex...
What political pundits alternately term either a “public service” or an unwanted “state intervention” into the life of society; what some citizens demand and others find suspicious; what in any case are recognized and established as the state’s permanently necessary tasks, divided up into various departments and areas of jurisdiction – all of that revolves around the following:
A. The functioning of competition
B. The continuity of capitalist growth
C. International competitiveness and the worldwide success of the national economy
D. The money earned in the society over which the bourgeois state rules, and to the accumulation of which its citizens are bound, is also the material means with which the bourgeois state pursues its aims, and it uses its sovereign authority to procure that money. By using its force to obtain resources the way it does, the state obeys its economy in a fitting manner:
– By taxation, the state takes part in the income and expenditure of its citizens.
– The state makes use of credit, whose usefulness for the business world the state guarantees.
A. The Establishment and Maintenance of a Nation of Competitors
1. Law and Order
In order to establish and maintain a system in which money is to be earned and accumulated, the bourgeois state must above all ensure legal security. The business to which people should commit themselves needs rules; i.e., a multitude of laws for the concluding and fulfillment of all kinds of contracts in which property and services change hands. An extensive judiciary apparatus ensures the proper application of these rules in all business affairs. This apparatus must in turn be able to rely upon a thoroughly effective police force. And since wherever such laws are applied, the violation of these laws is also to be found, criminal courts are needed to protect the authority of the law from those who do not obey it by punishing these violations.
As can be seen, a considerable and constant expenditure is necessary in order to organize the inhabitants of a modern nation into a legal order. Despite suspicions to the contrary, this is not due to the characteristics of the people themselves, nor is it so that it has just been fundamentally and naturally too difficult from time immemorial for people to live according to the law. Rather, the reasons for the extensive precautions that the state must take in order to secure legal conditions are to be found in the peculiar foundational principles that state force establishes in the social community.
The decisive reason for these precautions is private property, which requires a highly complex set of regulations and a most elaborate regime of supervision for its utilization in business. People who don’t take a step nor lift a finger, who could neither produce something useful nor subsist at all without other people’s labor do all these things under social conditions of mutual exclusion from both the means and the results of their peculiar form of “cooperation.” All objects, by way of which people depend upon and act in combination with each other, are fundamentally unavailable for use, and instead exist under the state decreed reservation that they exclusively belong to some private individual or other. And this reservation is never again removed, and certainly not through the necessary cooperation of individuals and their “division of labor.” By means of this reservation, and through the separation between property owners and their correspondingly negative dependence on each other, and who are all entitled to the exclusive possession of their own property, the productive interrelation among the society’s individuals and the social life process is established.
In this first premise of social existence in the bourgeois community, a particular relationship between wills is at issue: people in capitalist society are compelled to acknowledge private property as the condition and means of all material benefit, as the elementary form of all “wealth.” On the one hand, a superior ruling power enforces this acknowledgment. On the other hand, the people are offered the opportunity to themselves weigh costs and benefits on the basis of the fixed and reliable foundation of private property, and to freely act in accordance with these considerations. “Normal” materialism that aims at obtaining material goods for the sake of their use-value is thereby prohibited, while all “materialism” that respects exclusive “possession” as the natural pre-condition for every practical use of goods, and which correspondingly aims at private property, is fully authorized.
Consequently, there is a catch with these free “materialistic” calculations that are thereby called for; namely, these calculations stand in opposition to the others’ identical calculations and efforts, which are also concerned with obtaining exclusive possession over as many things as possible. And at the same time, one remains dependent on the efforts of those with which one is in opposition. Every step and every handshake that the people take and make comes into contact with other people’s property, thereby provoking corresponding conflicts of interest. And with this, the absurdity is complete: the competitive struggle for money and for more and more property, which goes hand and hand with mutual exclusion from the possession of useful goods, is the valid form and the actual content and goal of social production and consumption.
The state power directs and manages this “fight for survival” in all of its forms by accompanying it with legal regulations and the administration of justice. The state monopolizes the violence that is inherent in the competition between property owners, and thereby establishes this violence. That is, the state forbids the private use of force and “replaces” it by placing sovereign force behind the interests that are justified by the state’s law, and enforces these interests against those interests that are unjustified. With that, the state power quite logically supplements the empowerment of property owners – who are thereby in the position to harm the interests and needs of other people, and are quite justified in doing so – with the shabby protection of person. This pitiful leftover is thus all that remains of someone who has lost his entire means of subsistence. Coerced into being concerned with nothing but one’s own advantage, everybody reckons with violence in this way – namely, with governmental force, and attempts to make use of it in social commerce, all the while looking to avoid its verdicts. And it is self-evident that such a calculating obedience cannot be relied upon. This is particularly evident to the bourgeois state power itself, which includes the reciprocal infringements between its legal subjects and their selfish violations of the rules into its corpus of laws from the very beginning, and then immediately subjects them to a second general rule, according to which crime is always punished.[8]
As has been mentioned, all of this doesn’t come cheap. After all, turning money into the “real community” has a price. But of course, its all about money. The entire social life process serves the acquisition and accumulation of property. In this sense, the state expenditure pays off after all from the point of view of the market economy. This expenditure may not produce anything else, but at least it produces the mode of production [9] itself.
2. The Political Community
By making the inhabitants of its territory into owners and earners of property, the bourgeois state divides each one of them in a conceptual, yet nevertheless practical and consequential way. First of all, everything material about their natural and social existence is subsumed under the category of “private, individual, exclusive right of disposal.” This remains a private matter as long as one remains within the bounds of the law, and is no longer of concern to the state. The latter is solely concerned with this law and this boundary; that is, with the just and proper delimitation of the individuals’ opposing private spheres. In this regard, the state considers all of its subjects to be equal, and are all identically subordinated to its legal system without regard to person, which here includes their entire material existence. Placed under this corpus of laws and abstracting from all needs as well as the means to satisfy them, all citizens are free, and enjoy unrestricted participation in public life.
However, the state doesn’t grant this favor to just anybody, but rather only to those people who the state recognizes, also in accordance with the law, as its own. From the cradle to the grave, public administration records this in exact detail so that there is no doubt as to who can appeal to his state power for his freedom. Conversely, free citizens also have duties towards the state, the most important of which consists in recognizing the state as one’s own, and thus in the willingness to contribute what is required for its existence as well as for its success. The legal relationship between a force monopolist and its private money-earners therefore includes an illusory relationship of belonging and togetherness; that is, a mutual recognition between the citoyen and his political community [10]. Apart from the citizen’s immediate existence as a bourgeois citizen with the interest of earning money, and above the systemic and social organization of a bourgeois community in which all citizens pursue this same goal in an antagonistic manner, this same community appears in the form of a sovereign self-determined community of free and equal citizens.
This “double life” which the citizen lives in the bourgeois community is an expensive business. A public life is required for this; that is, participation in politics via democratic elections, parliament and political parties, political education and the formation of opinions, a national culture and the representation of the illusory togetherness between the state and its citizens who thereby earn the honored name of “the people”... However, this expenditure is first of all indispensable, because the capitalist acquisition of money only functions as a social rule of life if free citizens perceive it as the traditional sphere of their publicly justified pursuit of happiness, and if they understand and recognize the sovereign authority that restricts them as a necessary, reasonable and desirable means – and be it only a “corrective authority” – of this pursuit. And if they indeed do this and take the concerns of the ruling power that makes them into slaves to private property to be more important than their own material existence, then things look good as far as the mobilization of society for the political economy of the nation goes. And in this sense as well, the money required for the staging of a political unity is well invested.
3. Home and Abroad
The political relationship between the state power and its citizens, or between free citizens and their political community, has an external side to it; that is, this relationship excludes other supreme powers and their subjects.
The exclusion of foreign citizens from one own’s people is a self-evident matter. A legal circumstance is here at issue that originates with the legislative power and cannot be simply cancelled – and it certainly can’t be one-sidedly opened – by the individual citizen. The exclusion of foreign jurisdiction over one’s own citizens is above all essential for an effective monopoly on the use of force. After all, if a state power allowed rival legal claims on the people to which it dictates social conditions of existence, and to which it confers the rank of bearers of the general free state will, the state would have thereby given itself up. In order to secure its sovereignty, a state power obviously needs more extensive and more diverse means of force than a mere police force that ensures the necessary respect at home; a state must also protect its borders against the possibility of attacks from foreigners, and therefore requires a military power that is constantly at the ready. This also gives some citizens the opportunity to fully abandon their private existence for a time and to actively demonstrate by their military service just how completely a citoyen belongs to his state. And the other citizens can at least provide their financial contributions.
This expenditure also pays off in another regard. The border that a state draws between its area of jurisdiction and the rest of the world provides its community of citizens with their very own exclusivity. With a proper-name differentiating them from the peoples of other nations, state and people together knock about world history, and the deeds and suffering produced thereby fill the abstraction called citoyen with a good deal of illusory content; that is, with a “national identity.” What is so useful about this is the fact that capitalism, the material living conditions around which all state actions revolve, are here absolutely nowhere to be found. In this regard, there is certainly no difference among the modern nations. Indeed, this means that all the incomparable national collective subjects – that is, nations – have one and the same task, namely the establishment and management of a free market mode of production, and yet state leaders and citizens fiercely interpret this the other way around. They insist that the essence of their own nation lay in its differentiating particularity, and that membership in this community in no way consists in the subjection to a single state power, but is rather an honor. The state power insists to its people that this is the case, and the people conversely insists to its political leaders – who are always to be “spiritual and moral” leaders – that this is the case. The banal capitalist everyday life thereby morphs into the mature citizen’s participation in the nation’s struggle to achieve its own distinctive future. And in the case where the people just can’t endure their dissatisfaction with their material living conditions, in their national idealism they certainly won’t simply take aim against these imposed capitalist conditions themselves. And thus even from the standpoint of the market economy, the expenditure for actual and ideological border protection can hardly ever be too expensive.
B. What the State Does for Continuous Capitalistic Growth
The bourgeois state turns the entire social life process into the domain of private property, and provides capital with the commanding power, incarnated in money, over labor and consumption. And for precisely this reason, capitalist growth can’t get anywhere on its own power. Moreover, it gets itself into contradictions with which the creators of these contradictions cannot cope on their own. This is so because the control over society’s economic activity is left to the capitalist property owners themselves, who compete with this control against one another for the exploitation of society’s buying power, for the largest portions of profit possible. They only agree with one another concerning their negative interest in restricting the other classes’ claims on money as a means of their competition with one another, by which they ruin necessary prerequisites for their own business success.
Thereby, the bourgeois state takes over the role of the ideal collective capitalist. It removes neither the control over the means of production from the real existing individual capitalists, nor their freedom to compete. Rather, it supplements their destructive work by intervening with its own power in order to secure a sustained continuation of capitalist business as a whole. With its political standpoint that it is responsible for the common good, the state intervenes in the economic private sphere of its citizens, which the state itself defines and constructs as such, and imposes by law supplementary rights and duties on them. It forces them to take certain considerations and provides them with the means to do so, in order for the system of private enrichment to be able to run its desired course.
1. Establishment of Basic Conditions for Production and Circulation
The state looks after the conditions of capitalist business that the businessmen themselves can’t look after, being too busy competing for profits. On the one hand, the state concerns itself with the utterly decisive means of business: the money of the society. The business world displays a good bit of ingenuity in order to make their employment of abstract wealth for its own accumulation more effective, and to thoroughly drive back the barriers that the limited sums of their previous business success place in their way. The accumulation of more and more money is so important to the owners of money that they give each other time to pay, when immediate payment is disadvantageous or not possible. And in place of this they accept IOUs and use them as means of payment; deal with expected future business success as if it had already occurred; indeed they avoid whenever possible the use of real money in order to uninterruptedly earn more of it than their own means would allow them to. Money capitalists spur the substitution of credit for money on to such an extent that in the end, everyone employs the debts that they approve as means of business. Everyone’s assets are consequently dependent on the validity of these IOUs. When it once again turns out that far more means of business are advanced than are actually profitably realized, then the business world doesn’t only lose some of what it has chalked up in its books as actual assets. The business world would have to cope with the ruin of their means of business; reduce itself to primitive cash payment; and would have to write off all the growth that had been financed with credit-money if the state power hadn’t intervened and created money by issuing credit-money with the guarantee that it has validity independent of credit crises and bankruptcies – as was depicted in chapter I. The state may not guarantee crisis-free economic growth – and how! – yet by its growth promoting measures it prevents the universal means of capitalist entrepreneurship from its own ruin. As the lender of last resort, this service for once doesn’t cost the state anything at all, but rather allows it to itself partake in interest earnings.
The state cannot just simply leave the material prerequisites for lively and steady general capitalist growth up to “the economy.” The creation and provision of these prerequisites is, like everything else in capitalism, simply a question of money; and there is certainly no lack of money under the aegis of a state-guaranteed banking sector. However, the utilization of private buying power must pay off for the competitive struggle of those companies that lend their buying power. And these companies only do this if they can monopolize the purchased benefit, and this is not the case in many instances.
For one, scientific insights and their technological application is a productive force that is absolutely essential for capital in its competitive struggle, but since this knowledge is fundamentally universal knowledge, it does not at all lend itself to being applied as a means of competition. The invention of the category of “intellectual property” and its practical enforcement with help of patent laws has helped quite a bit here: with state power, knowledge is here placed under reservations of use, and can then do its service for competitive goals after all. However, this noteworthy protection of property only has effect in spheres which, in accordance with the immanent logic of research, already presuppose a good amount of scientific knowledge. And this logic does not let itself be overruled, even by the market economy. This goes for that knowledge which someone must first of all have at the ready, and which secondly requires great effort for its expansion. This knowledge is either too universal in nature to patent, or it is too detached from business application to promise profitable earnings from having it patented. It is the state that then covers the necessary costs: it ensures the education of scientists and supports basic research, the results of which can be seized by free enterprise for its own scientific and technical progress, without having to hurl themselves into those expenses that do not apply to their own business interests. The sector of basic scientific education and “basic” research consequently doesn’t have its starting-point in a scientific question, but in a financial question. The border between basic science and science that is “application oriented” is a result of the practical relationship and interaction between capitalist praxis and the state’s cultural responsibility. This border displaces itself, however, with every generalization of scientific and technical achievements, and it always has a good deal to do with the state’s own particular thirst for knowledge in its characteristic as a progressive military power.
It is above all in the sphere of national infrastructure where the state confronts the dilemma that certain institutions are indispensable for successful competition, yet not profitable – and thus too costly – for individual competing businesses. This sector cannot be definitively distinguished from others, except in the functional sense that use-values are here at issue that are indeed necessary so that growing profits come about, and yet it is not profitable in the given competitive circumstances to provide these goods. Whether the state hurries ahead and takes care of the required conditions for growth, or instead waits for an “emergency” to react, depends on the individual nation. And even political parties differ in their preferences for how they assess the need for state action. Once laid out, transportation routes remain open to general use, and they constantly belong to the state’s catalogue of tasks. However, they can also be removed as soon as they can be transformed into profitable sources of income; that is, once the expensive investments have been made. The history of the capitalist economy has seen quite a few failed private endeavors in the canal and railroad sector, and recently especially in privatized state transportation industries. In the provision of natural and raw materials, of industrially manufactured basic goods such as iron, and in industry’s energy requirements, it is always the case that capitalist enterprises require the provision of basic conditions which, were they compelled to honestly pay for them, would ruin them. Or in other words, the establishment of these conditions would not bring in sufficient profits. Therefore, things like state funded power plants must be donated from the political community, or a state nuclear power policy is required so that the capitalist competitors can surmount a self-produced barrier to growth. [11]
Of course, that’s all quite expensive. But these are all necessary expenses for a mode of production in which everything must pay off for private property, because otherwise nothing happens at all. Besides, in the state expenditures for “infrastructure,” it is quite convenient that the concern for national economic growth goes together rather well with the state military power’s need for supplies and mobility – and not just for the fascists. Two birds with one stone!!
2. Formation of a useful working class
In the bourgeois state, society’s life process as a whole and the maintenance of the individual citizen are organized as these individuals’ private matter. Work takes place for money and in accordance with contractual law, which draws a boundary on the individual’s freedom there where it meets another’s legally justified self-interest. The bourgeois community attributes the fact that all kinds of differences result from these circumstances to the natural particularities which it finds in its citizens, and which it respects as their respective private domain. Consequently, it is fundamentally none of the state’s business that normal gainful employment – work that is remunerated with a wage limited by an employer’s competitive calculations, and which is set up in accordance with the corresponding performance demands – is simply no good; that it ruins labor power; that it completely fails as a source of income as soon as somebody is used up or not used at all, be it temporarily or permanently.
Even here, however, the separation between the public and the private “sphere” cannot endure. It may be so that the “million individual destinies” of the propertyless class do not really determine the nation’s political economy, and certainly not in such a precarious and contradictory way as does the competition among capitalist property owners; at least not in such a way that the common good would require an intervention from the state power. However, from the point of view of the political community, it is indeed a problem if the masses, due to their lack of a secure livelihood, are neither able to play a constructive role in the community of free legal subjects, nor if a sufficient willingness to do so cannot be expected from them. These people then immediately stand outside of the political community; morally and even physically endanger its existence; and no longer carry out the services that their national economy needs from them so urgently. The bourgeois state power is therefore saddled with the constant task of politically integrating the proletarian part of its society. This presupposes the desire of those concerned to make their existence dependent on the acquisition of money by way of wage labor. And this will only lets itself be compelled if this political integration actually works.
The state thus intervenes in the private livelihood of its wageworking subjects. Whereas in earlier times the state here acted more “paternalistically” and “led people by the nose”; in the modern social democracy, the state intervenes in a very appropriate and functional way. By granting political equality, the state grants their representatives influence in social legislation as a “pillar of democracy” which, under the condition of conformity to the system, may act as a legalized opposition, perhaps even as a political party if they are indeed “mature” enough to take such a role. They may then influence this social legislation in such a way as to make a proletarian existence endurable, while still dutifully acting in accordance with the common good. The proof that this existence is then indeed durable must be provided by the proletarians themselves.
What kinds of specific regulations are necessary for the “social” clientele, and what can reasonably be demanded of the common good and its economic strength, differs from nation to nation and is as diverse as the history of class struggle and repression, fascist popular assistance and democratic consolidation which have led to the respective national results. The state power generally deals with both sides of the wageworking coin; or rather, with both sides of its unfittingness as a means of subsistence. It deals with the consequences of the poverty displayed in their wages as well as with the deterioration of the labor power purchased with their wages.
- Those people dependent on their own labor find themselves confronted with the necessity of living an entire life from their wages, while in some cases also producing offspring. Because these wages, which are accounted for as expenses for “labor input,” are paid by companies who stand in competition with each other, they are correspondingly brutally calculated. The bourgeois state regulates this necessity with which the workers are confronted in various ways...
- The means of earning a livelihood which is employed in wage labor consists in the productive capacity that the employer demands from its “labor input” in accordance with the progress of their own business growth and general competitive trends. This “capacity” must first of all be developed in a phase of a person’s life in which they do not work and therefore do not earn money. It requires an education conforming to the constantly changing demands of the working world. The harm done to this capacity by the capitalist utilization of it must be restricted and functionally compensated. The same goes for when this capacity becomes unruly and even criminal in times when it is not utilized. And a wageworker is simply not in the position to see to any of this with his own individual wage. Here the welfare state is of help with its legal restrictions on reasonable working hours; with its supervision of workplace health and safety standards; with compensation for the burdens of providing for a family and medical care; with its general education system that doesn’t overdo it, but rather appropriately sorts the up and coming private citizens into the various brackets of the market economy’s occupational hierarchy, etc. And with the welfare state’s unemployment assistance and the measures it takes for the retraining of those laid off, it organizes a citizen’s conclusive impoverishment into a governmentally managed career that has its final stage in the official nomenclature as an “asocial element.”
All of that costs loads of money. As is the custom in a free-market welfare state, the collective wage earned by and redistributed among the working class as a whole is documented as a part of the social budget and as supplementary “non-wage benefits” paid out apart from the price of labor, and which the state could therefore actually spare itself and those who pay wages. In this case, an overwhelming burden for “the economy” is at hand. After all, in bourgeois society, the economy does not consist in a production of goods on the basis of a division of labor with the provision of all with a good life as its goal. Rather, this economy produces money in order to increase capitalistically utilized property. Whether social expenditures indeed pay off for this goal by ensuring “social peace” and guaranteeing the proletarian productive capacity is seriously suspect in the eyes of the economy. During economic “hard times” – that is, during capitalist crises – these expenditures are often delved as a deep well for cost-cutting measures with which the national collective price of labor is politically lowered. Or put another way, with these measures a general wage reduction can be measured out and adjusted to a new socio-politically balanced living standard. However, even this expenditure is in principle indispensable for the market economy. Precisely when capitalists should not only be allowed to consume and pay for labor power according to their own conditions, but also when they should continue to be able to do so as much as possible, it becomes absolutely necessary for the welfare state to use its power and compel a situation which the principles of wage payment constantly thwart. That is, state power must compel the maintenance and reproduction of an entire class of usable labor power, which also implies the cost-efficient care and administration of poverty that is not usable.
3. Damage Reports and Cost Management of Environmental Destruction
Environmental policy has become part of the standard catalog of the state’s tasks in the more advanced countries, and has correspondingly received its own spot on the budget agenda. The advocates of an intact environment are overjoyed at this fact, just as socially minded people smile at the existence of state welfare policy. The environmentally conscious citizenry measures the goodness and concern of the governing politicians by how many funds the state allocates for clean-up campaigns, among other such deeds. On the other hand, these friends of nature are confronted with criticism from market-economy fanatics who fundamentally disagree with every expenditure that doesn’t immediately increase the returns of some competitive company or other.
What a screwed-up world. In truth, to happily acknowledge the fact that environmental policy has become a permanent state task is merely to concede that the poisoning and destruction of nature through its utilization by the market economy essentially belongs to this system’s many enduring achievements. This is also to concede that the complete abolition of this “problem” is no longer imaginable. The dimensions of this “problem” are instead, according to this standpoint, to be considered a bothersome issue for the common good. The mere fact that the bourgeois state sees an opposition between “economy” and “environmental protection,” which it strives or refuses to “reconcile” in the interest of environmental matters, excludes the possibility that the state might actually start to carry out “ecology at the cost of the economy.” If the state didn’t see a problem for its economy in the environmental destruction that its economy produces, then environmental interests wouldn’t have a chance. And whoever pleas for giving environmental protection “more weight” in comparison to “mere profit interests”; in other words, whoever pleads for more environmental policy instead of more economic policy, has missed the decisive point anyway.
The promotion of “ecology” to the rank of an independent sphere of policy is quite revealing. It reveals between how many things can be differentiated and contrasted with each other when benefit is equated with private property, work with gainful employment, and economy with the accumulation of capital. If this is the case, then even “nature” is merely a more or less usable template for the manufacturing of goods for the betterment of mankind. Or in other words, nature is then nothing but one source of material benefit that the other source – social labor – can extract from it. Nature is then indeed a mere “environment” for this vile production process called market-economy, in which private property has work done for the sake of its own accumulation. And it does this boundlessly and without concern for both of the material sources of all use-value, and without concern for the material benefit to be gained from these sources. And this negative regard for the natural life-basis continues all the way up until the consequences of this recklessness make themselves noticed in a very bothersome way; that is of course, in a way that is bothersome according to the economy’s criterion of property accumulation. If damages thereby occur on somebody’s property, possibly on the property they productively utilize; or if general dangers arise, the avoidance or removal of which necessitates costs, then environmental policy steps in. This policy is the public struggle to keep these costs as minimal as possible.
The expenditures for this latter goal count among the indispensable expenses that the state must take into account for the sake of the economic growth it desires. And as is customary in the market economy, these expenses provide the secure basis for a completely new branch of business. An industrial country that leads in the destruction of nature possesses the best prerequisites for conquering the most reliable “future markets” by means of developments in “environmental technology.”
4. Financing Land Rent
In a system where all useful goods and means of production are private property, then it is only logical that the same be true of real estate. In any case, the bourgeois state finds it totally natural that, with regard to any actual or merely potential economic utilization, the territory over which it rules be completely at the disposal of private property owners. The state therefore establishes this legal position. Moreover, in a system where every economic benefit depends on the ownership of property; where the state-guaranteed right of disposition grants property owners the power to make money on the needs of those people able to pay for these needs; then it is only logical that landed property yield a profit. The bourgeois state also recognizes this as a natural source of income, and thereby creates a social class of landowners. These landowners draw a monopoly-fee for the utilization of their landed property, without having to have produced something in order to enrich the market economy by providing it with another actual good with exchange-value. For this reason, their revenue constitutes a particular set of costs for the rest of society. They add an extra charge to the production prices of foodstuffs and other agricultural goods, thereby burdening the earnings of capitalist companies, which after all need a site for their business, with a deduction. Their revenue thus asserts itself as a direct expropriation of the income of others.
In the first instance, these demands on the abstract wealth produced by the rest of society, which are raised by the landowner class without the offer of a service in return, do not concern the state. The state acknowledge these demands as being justified, and manages the resulting opposing interests with the proper legislation. Payment and collection, the exploitation of the monopolized circumstances of supply and demand, extrapolation of a property price from ground rent, speculation on future monopoly prices, the annexation of credit to real estate speculation and everything to do with business is therefore the private matter of the state’s mature citizens.
However, when the opposing interests get out of hand and start to endanger the functional “cooperation” between all the members of the state’s socially peaceful community, it turns out that the state must get involved after all in what goes on in the private sphere between landowners and the rest of society. Once again, that is fundamentally necessary where the source of revenue called wages, which only suffices for the mere reproduction of the wageworker if the state forcefully regulates and compels it to do so, must vouch for the sums of money from which the landowner earns his livelihood. For people who earn thoroughly capitalistically calculated wages, the agriculturally manufactured foodstuffs thereby become too expensive to secure their nourishment. Conversely, the class of farmers becomes endangered – despite and because of agri-technological progress – if it is compelled to live merely from the sale of affordable foodstuff prices, or if it even has to divide up these profits with landowners. And housing prices become more and more unaffordable as the supply and demand relation in the cities drives the monopoly prices for land suitable for housing developments sky high.
In both cases, the state cannot avoid nationalizing at least a portion of the social costs with which the establishment of landed property burdens the gainfully employed, in order to secure the landowners their livelihood in those cases where the buying power of the wage-dependent population fails to do so. For example, it is well known that the EU provides its farmers with an agricultural market by way of subsidized and guaranteed prices. It also thereby brings about the consequence that agriculture and livestock breeding mutate into capitalist enterprises and their products mutate into foodstuffs of doubtful nutritional value, some of which fall into the category of environmental protection. In times of serious housing shortages, the state secured the just revenues of its landlords through subsidies earmarked for the construction of low-income housing projects. Now, the government creates the same effect with rent subsidies for slum inhabitants, so that social welfare costs can at least accomplish something useful for the market economy.
All that doesn’t come cheap. But for the state which ensures it, private property’s entitlement to profit isn’t to be had for free. And some of these costs can pay off, for example if the build-up of a national agricultural export business succeeds with the help of purposeful subsidies. This export business can then bring in abstract wealth for the nation from abroad.
5. The Use of Public Funds as Capital
The bourgeois state finances the prerequisites and expenses of continuous capitalist growth so that “the economy” can successfully “take place in the economy,” as an exceptionally gifted expert in the office of the German finance minister once expressed it with unsurpassable lucidity. The state is also familiar with irrefutable reasons to not just simply hand over the entire society’s accumulation of money to the striving of private citizens to enrich themselves. And with the way a nation’s economic growth occurs, there are always new reasons to decide against this. Instead, the state prefers to allow public funds to function directly as capital.
The key role that the banking sector plays is not unfamiliar to those who carry political responsibility. After all, they organize the provision of national borrowed funds through a national agency: the central bank. The banking sector is the basis of all capitalist growth, and is therefore the positive condition of all business. At the same time, the bank earns on all business activity and its interests are therefore in opposition with the other branches of business. There are many reasons for the the public power to intervene with its own credit insitutions in extreme cases and replace, restrict or at least supplement private money capital in order to boost business activity in branches that are poorly treated by the banking sector. For example, the “Credit Institution for Reconstruction” (KfW), a relic from the Marshall Plan, once again had its hands full in the 90s with the reunification of East Germany. And it happens often enough that a government acts in a quite enterprising manner. It does this not only to provide services for the growth of competing capitalists, neither to revitalize “deadbeat” firms or to “liquidate” damages to private property. Politicians responsible for the national budget prefer much more to invest budget funds in future branches, for which the necessary sums of capital for launching promising firms appear too large or unmanageable. Automobile factories, nuclear power plants and firms specializing in the construction and launching of space rockets, and of course globally competitive and national airlines – all of these were born as state enterprises.
Depending on their political viewpoint, some view these “state interventions” as being either contrary to the system or criticisms of the system. If these are indeed a kind of “criticism,” then it’s the most constructive kind imaginable, for these interventions aim at increasing the successes of its nation’s capitalism. And the only thing “contrary” about them is at most their non-private “entrepreneurial personality.” As for the interventions themselves, so little are they contrary to the system that the only time this demanding accusation arises is when these interventions awaken a private interest in enrichment. In other words, this accusation is only hurled when a state enterprise is not only managed with all the tricks in the capitalist books, but also successfully. If such an interest indeed asserts itself, the state usually accommodates it. After all, it is usually the politicians in charge who propose and also execute the projects of privatizing public enterprises, for when the bourgeois state operates as a capitalist, it doesn’t intend to step into competition with its private businessmen, but instead to raise up its nation’s private business world as a whole to a higher level of economic growth. The state here operates as a national collective capitalist in a competition which both goes beyond the competitive culture that it manages and also necessitates a third area of costly state measures...
C. Politics in the Interest of Securing the Nation’s Business Success
1. Foreign Trade Policy
Everything the state undertakes for the goal of forming its society into an increasingly productive money machine presupposes its undisputed monopoly both over the use of force and over the instruments of justice; and this in turn implies the exclusion of foreign authorities. This fact is accompanied by a limitation on its citizens’ sphere of interest, which contradicts their boundless pursuit of more money – a goal to which the bourgeois state itself spurs them on. The establishment of a border between domestic and foreign territory consequently goes together with a demand on the foreign sovereign that it not forbid one’s own citizens to freely act beyond one’s own borders, but rather that it place their justified interests on a par with those of its own citizens. Conversely, the nation-state is certainly interested in having foreign businessmen participate with their monetary assets on their territory’s economic growth. In this way, an all-sided interest on transnational commerce develops.
In order to establish and carry out this commerce, states entertain lively diplomatic commerce. They come to agreements upon their citizens’ entitlements to consulary support abroad and upon the treatment of their local credit-monies, with which enterprising firms do their thing, as being convertible. As a result of the all-sided exporting and importing which then takes place, these monies end up in the hands of foreign property owners who utilize this property of theirs in the states of their choice. Where that’s the case, the sovereign creators of money – the states themselves – ensure by means of a reciprocal material surety that their respective currencies also really and validly represent capitalist wealth – always and everywhere. After all, the continuation of transnational business can’t be allowed to fail merely due to the contingencies of the trade balance between nations. States assure each other their readiness and their ability both to confirm their own currencies at any time as being real, universally utilizable money and to exchange them for any other desired denomination.
For this purpose, states need a supply of foreign monies – or also of traditionally and globally accepted monetary material. With this supply, their national banks can vouch for the funds which are denominated in their banknotes and which can be handed back to them in exchange. In other words, states need their own treasury of gold and foreign currency. For this reason, the bourgeois state establishes and maintains the foreign relations to be utilized by its national business world. It calculates the national collective results of the earning and spending taking place across its borders and the traces this leaves on its central bank’s foreign exchange coffers, because the balance of this business activity directly affects its reserves, with which it establishes the international competitiveness of its national money owners. In accordance with these results, the state intervenes in this financial commerce, possibly modifying its exchange guarantee and the guaranteed exchange rate with the intention of improving its balances, and furthermore retains the ultimate responsibility both for the intake of earned foreign currency as well as for its apportionment to the nation’s business world. And regardless of whether its balances turn out good or bad, the state busies itself with the national basis of its capitalists foreign commerce. It assesses all the measures it takes for the purpose of securing and promoting economic growth with regard to the criterion of its balance of payments. In other words, it views these measures in accordance with the criterion of a success in the competition for portions of the world market, which doesn’t merely show up in the books as the profit of the successful firm, but is also to be added to the nation’s balances. It is in accordance with this national competitive goal that the state ultimately decides – and in any way but infallibly – the question whether and to what degree a company or a whole branch of business earns state support. With its own entrepreneurial activity, the state decides in which cases its subsidies should open up a promising future business branch, and in which cases these subsidies are nothing but a waste of money.
It is self-evident that the better a nation’s domestic money owners’ – or rather, owners of domestic money – fare in competition, the more freely a state can decide this sort of question. However, enduring and sustainable success of this sort gives rise to new tasks for the state. For the sake of the continuity of its external economic growth, it must concern itself with the business capabilities of the other nations whose balances, complementary to one’s own success, end up below par. The international banking sector has thereby taken an enormous upturn, as the leading global economic powers have come up with the very market-appropriate solution of acknowledging state foreign currency debts – only under strict conditions, of course – as a substitute for a state treasury that has vanished. Because some states cannot fulfill these conditions and yet nevertheless can still be set up as exploitable business partners, even such idealistic sounding things as “development aid” exist in the catalogue of serious and budget-funded state tasks.
Therefore, even the victories that a potent nation achieves in the competition for portions of the world market are a costly matter. They provide the foundation for the jurisdiction over the functioning of international business. And this jurisdiction is in no way limited to currency problems and questions of “international liquidity.”
2. Defense and World Peace
When the bourgeois state determinedly makes its national economic growth dependent upon the functioning of world markets, then it doesn’t simply leave the judgment up to others as to how these markets should function as means and sources of the state’s wealth. In assuring itself of its partners’ unconditional will to cooperate, the state does not merely rely on the civil, i.e., economic means of extortion which it accumulates by means of its competitive successes. The employment of these means, however, is certainly aimed at a self-interested calculation on the part of the other state power. The bourgeois state concerns itself with more compelling guarantees for its access to foreign spheres of business. It is no accident that the business order which establishes the conditions and liberties of this access and ensures its respect from all sides is called world peace. This world “situation” is the result of successfully concluded wars – including the “cold” one – which have only left over the “one world” of global capitalism under “western” control. And the stability of this one world is not to be had without the constantly present alternative of threats of belligerent terror, otherwise known as “deterrence.”
As the situation stands now, the few large and powerful bourgeois states are making common cause with each other – not only against current dissenters from the valid order of things, but also with concern to any potential efforts by third parties to call this freedom-ensuring regime of deterrence into question by making unauthorized modifications to the international balance of power. This kind of preventive peace politics implies both that its organizers are certain of being able to endure and decide every thinkable military conflict, and that their potential opponents have no doubts about this either. This kind of peace politics therefore requires a good amount of battle capability at the ready, as well as a constant preparedness for war at any time. For those states which refuse to hand over any world political responsibility, their expenditures on armaments turn out to be correspondingly extreme – and these expenditures also make clear that even with all their “division of labor” with concern to ensuring world order, their competition against each other has in no way died out. Between the greater bourgeois state powers, competence with regard to the authoritative definition of world peace and its “situation” is a necessarily controversial issue, for it is on this “level” that the question is decided concerning the extent to which a state is actually and ultimately the boss of the politico-economic conditions of existence and success that it itself establishes for its nation. By contrast, the currently precarious willingness on the part of the relatively weaker capitalist powers to value their strategic cooperation with their biggest competitor more than their own efforts towards total imperialist autonomy is not at all necessary.
No pennies are pinched when it comes to these matters. The worldwide “projection of power” superior to any potential opponent on the ground, in the air, or in whatever alliance presupposes that the state power must finance entire branches of industry whose goods are unsurpassed in the field of destruction, and which thanks to untiring technical progress will also remain so. It is quite fitting that these same products – or rather their outdated varieties – also prove to be a first-class of means of gilding the foreign trade balance. For no other product worldwide does there exist such a willing and able clientele. In this way, industrial and military policy find common ground – and nothing else illustrates more convincingly the historical vocation of capitalism as the political economy of world rule. Capitalism not only requires a regime of deterrence in order to function properly, but it even enters the means of destruction necessary for this regime into its books as an integral part of the nations’ wealth, while the lavish expenditures for these means of destruction are computed as being the core of economic growth.
D. The Procurement of Funds in Conformity with the System
The bourgeois state procures the means for its expansive operations from the class society over which it rules – from where else? After all, the political ruler doesn’t produce anything, just the relations of production, and it is to their systematics that it adheres in the procurement of these means. In doing this, the state serves itself to both sides of capitalist moneymaking. On the one hand, it mobilizes the potency of credit, in which all capitalist business activity has its origin, analogously for its own activity as a servant of this business. On the other hand, the state procures a portion of the private revenue originating from economic growth, as well as of the spending of this revenue as this earned money flows back into “the economy.” In other words, the state takes its piece by means of taxation.
1. Collecting Taxes
Where working is identical to earning money; where wealth consists in its belonging to somebody; where the social production process yields but a single economic good, i.e., exchange-value measured in units of currency; there the state power’s means of power consist in the social power of the money it collects from its citizens. In other words, the bourgeois state power “lives” on socialized private property. In this way, the state enlists its subjects, despite the acknowledged and legally protected private character of their labor and their assets, as private citizens who are nevertheless still acquainted with something higher than their materialism that is restricted to the desire for private property. And this higher thing is the state itself – their ideal, abstractly free and equal, i.e., political union. By treating all the people in its nation, without regard for person and without discrimination, as private citizens willing to make sacrifices, the political authority honors them as the true subjects of the rule exercised over them.
The egalitarian manner in which the state seizes a portion of the property of its society – an ensemble of money earning citoyens – admittedly requires that the tax burden be adapted to the individual ability of its various citizens to pay these taxes. After all, the same amount of money represents a burden which varies according to the incomes of the various members of the national tax-paying team. This profound insight into the dialectics of equality is the source of never-ending political struggles to achieve fiscal justice, which is expressed in the proper relation between equal sums and equal burdens for all. Modern states have brought about many artistic systems of tax collecting and deducting which add a rationally calculated fee to every financial transaction, thus more or less exactly reproducing the market economy’s system of earning money. These systems get even a bit more complex, since the state, in its role as the fiscal authority, also never forgets the market-economic goals, priorities and dependencies it has established as objective necessities. The state correspondingly utilizes the distribution of the tax burden as a policy instrument for the promotion of its infrastructural, social, environmental, and agricultural sectors. With that, the state establishes a network of causes and effects so complex that even its creators can’t see through it in the end, since the effects never turn out as planned and the ideologically necessary effects so rarely emerge.
The imposition of “direct” taxes on the incomes of the social classes and of “indirect” taxes on consumption are generally customary. For reasons of social, educational and information policy, there exist various rates of taxation on the latter kind, which have the economic advantage of only being a continuous cost item for “the economy.” In addition, certain classes of goods are ascribed to such private categories as luxury and leisure for reasons of justice. There is a special tax on the mass commodity mineral oil for reasons of its cheapness, and a welcome special tax revenue from the sale of tobacco – the ideal general cause of cancer – for health reasons. According to level of income, direct taxes are progressively calculated and equipped with the freedom to deduct these tax obligations through the capitalistically productive investment of these earnings. Taxes are gathered in various manners according to income type. For wage-earners and those not “self-employed,” many taxes are deducted right from the paycheck – a nice little confession of how certain the fiscal authority is that it can’t let a certain class even get a hand on its earnings if the state ever wants to be able to collect any of it later. For those who are indeed “self-employed” and file prepared tax returns on their earned money – there is the problem of tax honesty and a jobs-creating permanent battle between the honorable profession of the tax consultant and the tax auditor.
The tax revenue that comes out of all this is the real, namely practically effective for the state coffers and so far only objective, periodic summary of private economic activity in the country: the balance sheet for the nation's economic performance. Exactly because of this, the state can not leave it there either. Finally, it wants its measures to act productively in the future; not to only perpetuate the status quo and wait for its real proceeds, but to trigger growth. It goes beyond what at any one time previous economic activity has managed to achieve in nationalized surplus.
2. Going into Debt
In order to empower the uninterrupted growth of capital in its society, the state makes itself independent from the tax revenue received at any one time and uses the means by which any capitalist enterprise frees itself from the limits of its turnover in order to become fit for the conquest of new markets and market shares: credit. It goes into debt with the money capitalists, who have long been not merely those of its own nation, and by this means gains freedom of action.
It thereby renders an essential service for capitalistic growth. With its debts, it provides the credit business with secure, quasi money-like interest-bearing asset titles; debts of such high quality that lots of new loans can be founded on them. In this way, the state expands the basis of national credit, whose general use as money it has already guaranteed with the bank notes of its central bank. Its going into debt empowers the credit business to “create” new credit and with this ever more of its money. In doing so, it expands the extent of private business activity altogether.
Of course, this financing procedure, which is not only in conformity with the system but is almost automatically useful to it, has its price. Quite literally: it costs the interest that makes the money loaned to the state into the total assets of the money capitalists; its amount is oriented by the locally prevailing “price of money” and at the same time gives an amount which can orient the calculations of private money investors and bring the borrowing costs of private debtors into line. But above all, with the interest rate the treasury sets the degree to which it reckons on a national-economic success for its policies. With it, it not only anticipates the future growth of its financial basis, the taxes yielded by the national economy, but draws a predefined amount on it – quite analogously to a capitalist debtor who, in order to service his loan, pledges part of the profit he thinks he will gain from it. Furthermore, the taxes which are insufficient for the state step into a new, inverse relationship to the debt which it takes on because of this: the debt must prove itself in the form of rising tax revenues which thus justify the state's mountain of debts, inclusive of the interest to be paid on it. Since tax revenue is indeed the definitive balance sheet for the success of the nation's capitalism, it is the practically binding indicator for whether and to what extent a growing valorization of capital has been depressed by advances to the public sector. It therefore acts as the crucial verifier of the state debt.
This has nothing to do with repayment; to the contrary. Tax revenues, which represent a satisfactory balance sheet for national growth, are the best condition for largess in borrowing: they prove the growing competence of the community to borrow. Conversely, a growing need for state borrowing emerges with any unfavorable developments in tax revenues: obviously, the government has then done decidedly too little for growth. Either way, the state debt tends to increase rather than ever decrease. And that has consequences.
3. Inflation
With the state's financial needs that become covered by debt, it is not only the volume of credit with which the national money capital does business that increases. Continuously and steadily, additional amounts of legal means of payment become channeled into circulation above the amount of money earned in the course of successfully expanded capital: credit tokens of the power of state authority represent not at all merely the debt level to which they owe their creation, but unit for unit a fixed value independent from that. This value of the legally fixed money character of the official means of payment and all the property sums measured by it is in its turn affected by the state induced and central bank authorized inflation of the mass of national credit: as the national debt rises, so the monetary value denominated by the national currency unit shows a falling tendency. This is the necessary consequence of the contradiction in what the bourgeois state does here: it declares the bank notes that represent the national credit to be the money of the nation, as though they would reliably quantify the capitalist yields of the credits; while at the same time it makes its own debts, which contain absolutely no capitalistic yields, circulate in these very credit money tokens as the real wealth of the nation. Inevitably, the national currency is represented in each of its legally valid units in scraps of these credits which have not at all been turned to account, but are continually asserted as valid, thus with a simply non-existent value.
The extent to which it does this depends on how well the national debt “strikes up” capital growth, hence the sovereignly expended credits become justified by the increased production of value; to the same extent that it likewise puts into perspective the reduction of real value for which the national credit money legally answers. However, a fall in value always occurs: it is, looked at the other way around, the necessary consequence of the economic truth that real monetary value is constituted only by products in which capitalistically profitable labor has been objectified. This characteristic of capitalist wealth, which is so foreign to its admirers, is not invalidated by the fact that the bourgeois force monopoly with the power of its laws declares the functionalism used by it of a “liquidity” created through debt to be a national money matter. On the contrary, it proves itself precisely in that state money, decreed in this way to be the measure of all things in the capitalistically gainful activities of the nation, turns out to be a relative matter to some degree: it must quantify real monetary value and in this way proves to be a mere money substitute that over time comprises an ever smaller portion of that private power whose measure and effective embodiment it represents at home as well as abroad.
This “oath of disclosure” establishes itself in practice as a natural consequence of the capitalistic custom of making optimal use of the financial solvency of the public. The growing mass of liquid funds in the society, which are not at all accrued through the – ongoing or anticipated by credit – production of goods for sale and which even so, by virtue of being set by the state, count and function as definitive capitalistic means of buying-, payment- and store of value, allows the sellers, with all their competition amongst themselves, to sell their goods at rising prices altogether. The general price increase that is brought about in this way reveals itself, artistically rehashed in statistics, as a depreciation percentage in the means of purchase, and this is then announced as the inflation rate. As to its practical repercussions, it is already clear that in this genesis the capitalists, rather they being caused any embarrassment, have on average first of all retained their gain: they in fact make the ever higher prices out of which some average value can then be calculated. On the other side, and just as obviously, is a percentage of damage to those who have to deal with their ever more expensive consumption because they live on a constant, because contractually bargained, fixed income. In any case, neither effect conflicts with the system in any way.
It admittedly remains a certain contradiction that the lavish service that the state renders for the growth of capitalist wealth in its country affects the measuring unit of this wealth and with it the measure of growth. Nominal and real growth diverge; nominal and real abstract wealth generally differ from each other because the depreciation of value does not merely affect the gains, but the property assets themselves existing and quantified in the national currency. Actually, in this difference – as alienated and as objective as fits a capitalist economy – the credit-financed state growth program and its success enter into relation to each another; it is itself a practical balance sheet about the anticipated national capital growth achieved relative to the national debt – thus the political-economic success of the bourgeois state's rule.
Its movers and shakers then also take the rate of inflation to heart as a key criterion of their policies. First of all, they create the inflation rate: they process the tasks and resources of the state power into a great political economic plan; and they tirelessly put it into practice year after year (Chapter III). Then they have their problems with the results (Chapter IV).
III. The Budget: State planning in nations where the “market economy” reigns
Annual budget debates are conflicts over the more or less successful performance of the government in office. And they lead to budgetary decisions which outline the future use of state power. That the decisions over the advisable use of the monopoly of force, about dos and don'ts, what the state demands from its citizens and what it allows them – there is a good reason that all activities of political rule are assessed as correct or misguided acts of treasury management.
On the other hand, there are also consequences to the fact that it rules with the organization of the national budget. Because in the question about the available means, the unending tasks which the state declares indispensable and wants to carry out in the various departments undergoes a crucial qualification. They are not simply fulfilled and paid for; rather, the state examines every one of its projects, everything that falls under its responsibility, to determine whether it is worthwhile. This review results in a success balance whose drawing up naturally incites the parties to some zeal in their competition for authorization by the voters. On the one hand, the items which the voter associations have gotten for the publicly appealing interpretation of capitalistic conditions get their turn in these debates; on the other hand, expertise in matters of the “market economy” always comes into its own, so there is no disagreement about the goals and requirements of an orderly budget. For everyone involved, the state of the nation – whether it is represented as better off or more miserable – is considered as the work of politics that has been busy organizing society into a haven of capitalistic business life. Indeed, it happens that the government, in view of the undeniable disappointments, pleads “powerlessness and innocence” – referring to the volatility of the market and the like; yet the same politicians, after the opposition has delivered the verdict of “neglect and incompetence,” send the practical denial by return mail: they do not say no thanks to the perils of competition which they see themselves at the mercy of. Rather, they vigorously proceed to take measures which help the nation achieve competitive strength. And they reserve the argument of “powerlessness” for those interests that are dashed: they are not “able” to serve these ...
1. Laying Out the Budget
The balance sheet for success in which politics takes its measure in order to improve is owed to the observation powers of those contemporaries responsible for governing. They see and count according to – congress retains the old rite of teichoscopy – what is going on “out in the country.” In this way, they are confronted by their indisputable need for action. At the same time, they see and count what is inside the state coffers. Once it is determined how many businesses go bust, how many youths are unemployed, how many children are not going to parks, what retailers but also the police and military suffer, they prepare their programs for the subdivision of capitalistic life management by the respective agencies. These are also always connected in a democratic constitutional state with new laws; and because all state action is dependent on financing, there are all at once several requests to the treasury department from all over. This department is entrusted with the management of state accounts from which the funds are taken for the exercise of responsibilities. The realization of the government projects judged due depends on the availability and continuous procurement of the money that is in the state treasury. Vice versa, the supreme order arises to the leader of state finances that in his role as paymaster of the nation he must deal thriftily with the sums that are in his account. The standpoint of thriftiness is the continuing duty that must be fulfilled by the treasury secretary who, in granting funds, guarantees the solvency of the treasury.
Nothing changes in this if the budget, in view of irrefutable needs, is increased with credit. Because of the strain on the budget that is caused by interest-bearing state debt, the art of self-budgeting is not obsolete, but all the more in demand. The secure financing of the various state tasks, which as established political necessities represent a lot of competing claims on parts of the budget, become demands on the treasury secretary through these budget-burdening state debts. Because of the custom that the rule pays with credit, in all budget debates the treasury secretary advises on the financial feasibility of all the state's future good deeds that are on the agenda.
These CEOs of entire market economies prove their solid management of the budget in three ways at once. First, they demonstrate that they not only provide budget funds, but also reduce and refuse them. They therefore also save on spending. Secondly, they inform congress and anyone who wants to know that their accounting can withstand any audit. The feat achieved by the presentation of numbers is to indicate that they are at least as competent in their capacity as fundraisers as in spending. Their money sources are intact, so that receipts on expenditures – including those for debts – are covered and justified. If in doubt, a timely tax increase also leads to the desired result. Thirdly, in the end, they insist that the task entrusted to the national treasurer of ensuring the continuous financing of policies with solid budget management is in any case only fulfilled if the relation between expenses and income is in line. Treasury secretaries cannot be limited to the duty of balancing inflows and outflows as well as the inevitable debts; they take from their office the right to assess that the policy, which they finance, serves their balance sheet. That is why a great rift between the treasury secretaries of this world and their presidents need not be feared – the standpoint on fiscal policy is an integral part of capitalist governance and enjoys the highest authority. In him, the political rule sets the relentless standard of the requirements of the budget on all departments in their exercise of power: government alternatives are consequently to be examined for whether they mobilize monetary sources for the budget of the nation.
The production and modification of the budget is always carried out by democratic politicians with the air of people who are diligently striving with the money of the state to finance quite a lot of beneficial things for the people and the youth, for health and the future. In the distressing conclusion that something in this regard is once again not (any longer) possible, up to the point of justifying their budgetary decisions with the argument that they are a superior instrument for raising money, they then make unmistakably clear what it is about: with the budget, the state organizes the sort of growth in the country on which it “lives.” In the decisions about what must be financed and what may not or can not – decisions that are all made in the name of a sound accounting system – it passes its capitalistic one-year plan whose effects are certainly also meant in the long term. The third proof for a solid budget relies on the efficiency of the policy which will be financed.
2. Debates over the Budget
are therefore not monotonous events in which some contend that enough money is there, while others swear its not sufficient. In a lack as well as an availability of funding, the organizers always refer to a “for what.” The lamented lack of money is therefore regrettable as a state achievement is dropped; and existing money is put into the wrong projects, so that proper measures remain undone. Budget decisions are due to a weighing between costs and outcomes in every state measure. And because costs are just that and political-economic expertise holds no other outcomes desirable than those that help the success of a national market economy, the quarrel over the use of the treasury is nevertheless rather monotonous. For growth and jobs, it can save just as well as go into debt. Under the viewpoint of the usefulness of expenses for the revenue of the state, both objectives are no longer distinguishable; similarly, profitable ecology has been reconciled with the economy, so that future-oriented nature conservation no longer needs to annoy fanatics of the economy. The fact that it is important to make the force apparatus as lean as it is effective is in any case certain; that saves and costs something ...
Because the guidelines for disputes over a sensible budget calculate on low-cost government activities, a “confession” by the government to a lack of money is testimony to a mistaken policy. At least for the opposition, which is why this does not lead to the rejection of the central ideology of budgetary decisions. They certainly know all sorts of alternatives in relation to past and future governance, but they do not admit the glorification of the national financial situation to be a constraint. This manner of translating the financial figures of the current balance sheet into a list of mandatory commandments is just as appropriate for avowing themselves for the “inherent constraints” which are set in force by the adopted budget as it is for distancing themselves from them. By recognizing the national monetary system as the guideline for their decisions, the politicians testify at the same time to their respect for the few capitalistic rules of arithmetic which hold for raising money. In doing so, statesmen no longer need to know anything more about their system of market economy than differences between “economic” and “social,” or “growth promoting” and “growth-restraining” measures; the division of state expenditures into those for “investment” and “consumption” does its service here; of course, the politicians bear responsibility for jobs in the country, particularly since the state's coffers suffer considerably from unemployment – but politics can't create any jobs, it's already clear that the economy is responsible for that. It would be wrong to spend state money for work; that's why business – one sees this in the unemployed – pays in the end for so little work, because they have to pay too much – in wage (and benefit) costs – for workers as well as the unemployed ...
Such current demonstrations of expertise show the will to all necessities which once gave material for all kinds of criticism of capitalism and are proven in the preparation of a solid budget. By referring to the hardships that the community has with its money, the customary cynicism goes on undisturbed. Work, which little more than poorly supports its hands, is deemed by skilled stewards of the budget to be just as objectionable an “entitlement” as the standard in social benefits that the budget politicians declare to be a decidedly exaggerated level. For the wealth of the nation that is still there, only that normal usage remains left over that democrats can imagine in a market economy – namely, that which contributes to its expansion.
That is why a budget exists in the 1990s in which politicians avowedly place a high value on useful poverty, not only fiercely morally debating cost reductions in the “standard of living,” but matter of factly demanding them. The budget continues to apply the financing of all circumstances in which growth can only flourish; it is, after all, both points of view: it surveys the savings and the efficiency of any state “function” (see Chapter II) – and here some things can't be costly enough.
That's why today there is also no lack of efforts to nobly abstain from the reason and purpose of state tasks which have become self-evident in order to impute a good reason to them and/or their financing. This exercise becomes ever easier the more the money spent by the state flows to any business that “generates” income and jobs and is somehow reflected in the Gross National Product. In the sometimes venturesome calculations of the economic effects which appear through the generous funding of a project, politicians aptly justify with micro-economic ideas the burden on the budget which really deserves relief. So every budget debate is a playground for ideologies which invent all sorts of action mechanisms between savings and growth. That the alleged causal connections – taken seriously as a theory of the “market economy” – are not quite exact, does not diminish the legitimation they serve. One admits the growth-conducive and job creating effects of state measures in which price can play no role; in other departments, the blessed economic effects are denied and one considers that nationalized money and its spending can never substitute for the growth of private property because it rather limits the latter. In the realm of fiscal policy trade-offs, politicians cultivate belief in their ideologies very selectively: advances for the national art of war of course create jobs; that certainly maintains the profitable course of business of the arms industry; so the money of society is sensibly spent. On the other hand, fighting crime is good for some jobs, but promoting crime is simply not to be accommodated in the budget. Between the unambiguously positive or negatively decided cases, a broad range of calls for state action exists whose necessities are certain, but whose fulfillment is questionable under the standpoint of “paying off,” the justification for financial expenses. This good advice comes from the conjuncture in the national business cycle; and some “investment in the future” is convicted of ineligibility when the “quota of state spending to GDP” in the national economy turns out to be unbearably “high” in relation to it. Such disparate matters as nuclear power plants, public health and pensions then befall the same fate as downsizing and reorganization ...
In adopting a tidy budget which has to organize the payments for necessary state tasks based on a state account balance that is helpful to growth, a scrutinizing look at the available money funds is inevitable. Its composition – tax revenue added to the debt constitutes the transferable sums of the nation – still causes every treasury secretary to take on the economization of the debt. The improvement of the relation between both components of the budget is a duty – whether it is now in order to avoid new debt or to justify or continue servicing old loans. From the elementary standpoint of self-budgeting, every budget politician in financing the budget reflects not merely on the long and medium term effects on its planned market support; the role intended for the free market of proving itself as the nation's source of money is always a question of the degree to which the government enlists the citizens for the maintenance of the state.
Because tax increases enable the politicians to finance more of their good works, the search for opportunities to cash in a few percents accompanies budgetary legislation throughout the year. That's why increases in tax rates take place again and again – but not without further ado. Mindful of the primary and general purpose of the budget – the promotion of growth – the politicians search for ways to tax that do not harm growth. It puts itself in all seriousness in the role of “business,” whose criterion for success lies in the ratio between costs and surplus, and finds that taxes hinder growth, at least cut it down touchily. Anxious to collect as much taxes as possible, the director of the budget pays attention to the conservation of his sources, so that huge amounts of money flow into the state treasury from low rates. The pursuit of this principle, which subscribes to the ideal of only getting out of the “economy” what it has left over in the truest sense of the word, leads to outstanding ideological performances and to solutions in tax techniques that come quite close to the ideal.
Tax reductions are offered because business is not profitable owing to taxes, thus “achievement” becomes “punished.” When politicians notice that growth is not being carried out in the free market that they govern and for which they arrange and expand their budget year after year anew, they become self-critical comedians. They then explain that “the state” with its budget is an unbearable obstacle to the national business, a sole strain “on the economy.” Certainly they do not then subsequently proceed to dissolve the association, but go on to the next budget decision, which they supplement with a tax reform. They must bring significant relief to business, which must on the one hand be “refinanced” by the rest of the world. In fairness, budget policy insists on the other hand that the business world then obediently meets its tribute duty and thrives and prospers without the old form of relief – “tax loopholes.”
When alternatives to the state budget are debated in congress and in public and the controversial search for the most efficient use of money and debt rages, macroeconomic zeal presumes many bold theories. This is impossible to avoid, first, if everything that is an object of state care is treated as a factor in economic growth; and second not a big problem, because every budget corrects a previous one. The state learns this from practice in the form of its accountants; and they ascertain in the effects of previous decisions on the national balance sheet what distinguishes a profitable investment from a costly subsidy. Despite all ideological perceptions regarding macroeconomic causes and effects – in Germany, politicians make their mark with a sure hypothesis about the solvency of the broad public which will be ruined by open store hours; that the state has to limit this solvency, if it comes under deliberation as a wage level, they deem as equally certain. Even as purchasers of military equipment, statesmen think strictly economically. There are sometimes cases of the “most cost-effective fighter jet in the world,” etc. – its no wonder that represents a formidable goal to achieve in decision-making. Because all ideas feed on the simple and basic questions: What increases profitability in the country? What is in the way of good business? What contributes to the improvement of the state budgetary situation? What relieves the budget, what proves to be a useless burden? With these tools of the trade, every government then arranges its society for a capitalism as it stands in the book. And whoever has studied Marx will not at all be surprised that all the requirements which these theorists have taken down from the exigencies of the capitalist mode of production are still in practice even today: as conditions set by the society for production, distribution and consumption of wealth ...
If politicians adjust the national budgetary system and urge the perfecting of the conditions of the capitalistic course of business; if they embellish their governance with the instrument of the national monetary system for the enactment of ever new “objective constraints”; if compliance with these “objective constraints” and the utilization of state achievements is vice versa obligated to the goal of expanding the private power of money – and “economic growth” is nothing else – in order to provide the state with money; then there is not only a “total national economic account” in existence, but also the question whether it rises.
The custom arises because the state manages the free competition with credit, and persists because of the internationalization of business – and in the form of the problem whether growth in the nation ensures the stability of its money.
IV. The Budget's Final Criterion: Monetary Stability
If comprehensive supervision of the national economy gives rise to growth, then the budget was well managed; the budget balance which serves as a starting point for the continuation of the art of government indicates that the state's money power has been used correctly. That quite a lot – possibly full – employment takes place, every government registers as proof of its success. “Employment,” which takes place in the market economy only if it is profitable anyway, also just expresses that business is good. The honor of an independent criterion for a healthy national economy has come about because growth and employment do not at all march in lockstep. Respectable success in matters of profitability is based on rationalization, on saving on paid labor power. And the state with its social service departments registers these consequences of growth as a burden on its budget. That the success of business to which the nation empowers “the economy” does not automatically coincide with a budget which satisfies the treasury secretary and the Fed, which manage the state treasury, also emerges in foreign trade. This gives resourceful economists who examine the capitalistic hustle and bustle from the standpoint of an intact budget a third precept for national-capitalistic planning. At the very least, a positive trade balance should adjust itself if commerce in commodities and money, labor power and capital moves across borders. Otherwise, they get the nation's debt to foreign countries and are asked what they are to balance this with. The money that is earned in the nation ends up in the coffers of others. So the internationalization of business, the indispensable lever of growth, becomes a threat to the balance sheet of the nation, to its money.
In the interest of international trade, its money enjoys recognition in principle for continual access to low-priced “factors” of growth; this certainly leads the state to anticipate that risk constantly and in different ways. Its sovereign right to endow credit of all kinds with the private power of money that has functioned in earnings on property and its expansion, entails a burden of proof on the world market that its currency must meet every day. This is because the state meets its budget by increasing its debt, which shows up in an increasing number of monetary units in circulation relative to their usefulness. Inflation, the change in the purchasing power of a monetary unit, conveys on the world market the currency comparison calculation. In the determination of exchange rates, the owners of the various national monies are not only informed whether they possess globally valid money; they also learn in what measure wealth of all sorts and provenance is open to them. And not only private individuals who are concerned with practical basic questions about what they have and how much they can buy for their money are among these owners, nor only business people who calculate with price comparisons which are decisively influenced by the “price” of national money. Also, the money power of the nation, what it can do with its budget to maintain the country, as in regulating its balance of payments, depends on the international purchasing power of its money. So it is no wonder that in the “magic square”[12] the objective of stable money completes the criteria for a solid budget.
1. On the Failure and Success of Budget Policy
The trade-offs which are conducted in budget debates aren't made any easier by observing the imperatives which micro-economics recommends in following in the magic square. If there is a stability law, all decisions can be excellently defended as well as criticized in its letter as well as spirit. This leads to the occasion to search for a balance between useful savings here and necessary debts there, up to that notorious general reckoning with the politicians who have run down the entire national business. And unsuccessful balances are always good for a change of government when one can sum up the attainments of policies in the various departments as an outrage against the supreme principles of economic nationalism.
This custom does not detract from the distressing discovery that growth without unemployment is not possible and its support by the state always brings inflation with it; that the square is called “magic” because its goals are not compatible with each other is even noticed by those governing and – if the exclusivity becomes noticeable as a real “objective constraint” – they admit to the necessities of their choice. There once was a German Chancellor to whom the disappearance of price stability seemed a price that could be paid to avoid a rise in unemployment. Twenty years later, the motto is first “stability”; second is the growth of capital from which the money of a nation derives its strength as the only source of blessed “employment,” which also justifies layoffs, which capital needs to grow.
There is no reason to believe that two different, possibly contradictory types of budget management hide behind the two phases in the German art of government and the different emphases in their self-representation. That with the “strength” and “stability” of money the verbalized program always reduces “price stability” and “employment” to funds – the success of the nation does not coincide with the fact that these two sizes turn out high or low. Although it is very important to them, the very practice of successful nations demonstrates how much solid budgets must be “accepted” by this criteria.
If such nations orient their growth by the final criterion for success: if they are concerned with endowing their credit for international use with the guarantee that makes it money, then the success or failure of its budget also spells itself out a little differently than in popular budget debates ...
[1] Marx uses the term “political community” (das politische Gemeinwesen) to indicate a community that is defined by its being ruled over by a single state power. The people of this community are thus a community by virtue of being subjects to the same state power, not because of a common interest. Marx explains this in connection with the “rights of man”: “These rights of man are partly political rights, rights which are only exercised in community with others. What constitutes their content is participation in the community, in the political community or state.” (On the Jewish Question, in: Early Writings, Penguin, p. 227). This issue is discussed in detail below in Chapter II. Section 2.
[2] ”Money is the real community, since it is the general substance of survival for all, and at the same time the social product of all.” “The reciprocal and all-sided dependence of individuals who are indifferent to one another forms their social connection. This social bond is expressed in exchange value, by means of which alone each individual’s own activity or his product becomes an activity and a product for him. He must produce a general product – exchange value, or, the latter isolated for itself and individualized, money. On the other side, the power which each individual exercises over the activity of others or over social wealth exists in him as the owner of exchange values, of money. The individual carries his social power, as well as his bond with society, in his pocket.” (Marx, Grundrisse, Penguin, p.225, 156-7)
[3] Historically, the moment when the feudal sovereign ceased to commandeer goods and services and began to collect taxes was a big step with concern to the enforcement of capitalist business. The sovereign’s subjects had first of all to earn the money that he took away from them. In carrying out the task of producing for sale, the class of farmers and hand-workers was divided and sorted: the more successful among them molted into commodity producers and entrepreneurs who were able to pay taxes, while the others lost their subsistence due to their failure to fulfill their payment duties. Marx characterizes the Mercantilists as the translators of this historical turning point: “It belongs to the period of capitalist development that they represent, that the transformation of feudal agricultural societies into industrial societies, and the resulting industrial struggle of nations on the world market, involves an accelerated development of capital which cannot be attained in the so-called natural way but only by compulsion. It makes a substantial difference whether the national capital is transformed into industrial capital gradually and slowly, or whether this transformation is accelerated in time by the taxes they impose via protective duties, principally on the landowners, small and middle peasants and artisans, by the accelerated expropriation of independent direct producers...The national character of the Mercantile System is therefore not a mere slogan in the mouths of its spokesmen. Under the pretext of being concerned only with the wealth of the nation and the sources of assistance for the state, they actually declare that the interests of the capitalist class, and enrichment in general, are the final purpose of the state, and proclaim bourgeois society as against the old supernatural state. At the same time, however, they show their awareness that the development of the interests of capital and the capitalist class, of capitalist production, has become the basis of a nation’s power and predominance in modern society.” (Marx, Capital Vol.3, Penguin, p.920-1)
[4] “Under Article I, Section 8, of the Constitution, Congress has the power ‘to coin money and regulate the value thereof.’ This power over the money supply and the creation of credit was delegated to the Federal Reserve System in 1913. The ‘Fed,’ as it is called, is a semipublic, semiprivate institution that is ‘independent’ of the president but is the ‘agent’ of Congress.” (HE Shuman, Politics and the Budget, Prentice Hall, 1992, p.183)
[5] Mindful of their origins in the private banking world, and contrary to their actual function as legal tender, some of those banknotes so rich in tradition differentiate explicitly even today between themselves as mere promissory notes and the money upon which they represent a claim. On British £10 notes, for example, it reads that 10 pounds sterling are “payable to the holder of this note.”
[6] “Valorization” (Verwertung) is a term used by Marx to describe the production of surplus-value, the goal of all capitalist production. It describes money’s “constant searching for increases in its own value through the unity of the labour process and the process of production of increased value.” (Capital Vol. 1, Penguin, p.36)
[7] “Ideal” is not meant here in the sense of being “perfect,” but rather in the more philosophical sense of being not real, or “notional,” referring to a concept. The state as the ideal collective capitalist is first of all “ideal,” because it is not a mere capitalist in competition with the others, but rather rules above them. It is secondly collective, because it is not concerned with the business success of this or that capitalist, but with the success of the capitalist class as a whole, from which it derives its tasks: “As the ideal collective capitalist the state provides the real capitalists, the owners of the means of production, with those necessary conditions for competition which are not produced in competition.” (Introduction to Chapter 5, “The Ideal Collective Capitalist,” The Democratic State: Critique of Bourgeois Sovereignty).
[8] The state monopolist on the use of force imposes the competition for property on the people as their “conditio humana.” The state then celebrates itself as a achievement of civilization because it reserves the societal violence – which it creates – for itself, only executing this force in accordance with the rules of private property. One would call that cynicism if one had thought it up.
[9] Marx uses the term “mode of production” (Produktionsverhältnis) to describe the manner in which the production and distribution of goods is – even if only by way of an “invisible hand” – socially organized. Capitalism, socialism and feudalism are all contrasting modes of production.
[10] Marx explains the split in the individual between the citoyen and the bourgeois, the latter being the person who pursues his private and individual interests in the economic sphere, the former being the person who is active in the public and political sphere with universal interests: “The separation of bourgeois society and the political state necessarily appears as a separation of the political member of bourgeois society, the citizen, from bourgeois society, his own actual, empirical reality, because as an idealist of the state he is a being who is completely distinct, different from, and opposed to his own reality.” (Marx, Critique of Hegel’s ‘Philosophy of Right’, Cambridge University Press, 1970, p.79)
[11] Generally still following the principle: “The separation of public works from the state, and their migration into the domain of the works undertaken by capital itself, indicates the degree to which the real community has constituted itself in the form of capital. … The highest development of capital exists when the general conditions of the process of social production are not paid out of deductions from the social revenue, the states taxes – where revenue and not capital appears as the labour fund, and where the worker, although he is a free wage worker like any other, nevertheless stands economically in a different relation – but rather out of capital as capital. This shows the degree to which capital has subjugated all conditions of social production to itself, on one side; and, on the other side, hence, the extent to which social reproductive wealth has been capitalized, and all needs are satisfied through the exchange form.” (Grundrisse, p.531-2)
[12] “Magic square” is an economic policy term, originating in the German Stability Act of 1967, which refers to the “four goals” of economic policy: price stability, a high level of employment, balance of payments equilibrium, and steady growth.