[Translated from broadcast by Gegenstandpunkt-Verlag / Kein Kommentar! July 24 2002]
Der Spiegel already knew it two weeks ago: Capitalism has entered a new stage. The headline reads: “The new predatory capitalism - with greed and megalomania in bankruptcy” – and it continues below:
“Recession prevails on the stock market, almost every week there are new announcements about companies that just recently announced bright profit figures and now face bankruptcy. Stunned investors must watch as their savings and reserves for old age are lost. The blame lies with unscrupulous managers whose greed and megalomania unleashed a predatory capitalism in which only the law of the jungle seems to count. With accounting fraud and a brazen self-service mentality they gamble away the confidence in the American economic model – with devastating consequences for the world economy.”
The “devastating consequences” appeared then last Monday when the stock markets – after the announcement of the Worldcom bankruptcy – tumbled substantially, and the commentators were united: the economy is in the hands of “Bush thieves” and other such shady characters from the world of predators. In their anger over “unscrupulous managers,” are these commentators really aware what a devastating testimony they give about the stock market or also the entirety of capitalism, which they praise nevertheless at the same time as the most rational economic mode?
We do not have to harp on the fact that these “unscrupulous managers” until recently were the absolute heroes of the stock market and the companies led by them – such as Enron, Worldcom, Xerox – were ranked among the “top addresses” whose shares one absolutely had to have in one’s “portfolio.” When they rightfully participated in the earnings from their companies’ success, not only did nobody take this as amiss, on the contrary, it was taken as proof of and reward for the character of a manager who rose body and soul to his occupation, so vigorously did he use every trick and even in doubt asserted himself in the ruthless competition. If now this is supposed to all have been a mere sham, if the companies were merely abused, i.e. as “self-service shops” for a “self-service mentality,” and if all this went smoothly with a simple trick called “accounting fraud,” how does this then speak for the famous “efficiency” of the stock market? And then also directly for the “efficiency” of capitalism? The stock market is supposed to be its primary and most important “steering system,” an “organ” that sends capital flows with incredible precision and speed into those corners of the world where they yield the most. And this main and central capitalist executive body is then blindsided by a few greed heads, merely for their personal enrichment, for an unbelievable amount of money too, so that it eventually – as they say so nicely – “goes into a tailspin”?
It’s a pity that it isn’t so – if capitalism was really a shop where a few greedy fellows could bring everything into disorder with “disastrous results,” then it would come to an end miraculously quickly. “Predators” of this kind lurk in every corner and we could leave the task of closing this shop to them. The fact that all this is not true, one already notices in the small swindle that Der Spiegel begins with. It mentions that “recession prevails on the stock market,” but only to back away and point to the villains. This downturn was already underway before the disclosure of “accounting fraud,” months before the stock market began a massive downturn. So the question is posed differently. Not what did Worldcom, etc., arrange, but why was the cover blown on these Worldcoms and what has been allegedly “falsified” in their balance sheets.
The companies listed on the stock market want money capital to realize their business prospects. This is what the stock brokers do – and they just assess these business prospects. That these companies must show profits, and not bad parenting, is the only requirement – what is critical for the “broker” is the future growth he believes in for these companies. That is why, for example, the recent “new economy” experienced its rapid ascent, because of the promise of “growth potential.” The stock market makes a comparison between the growth prospects of all potential companies, and indeed not only between those competing within a sphere of capital, it also makes a comparison between capital spheres and their actual growth prospects. With this ongoing comparison between individual companies, it is incessantly searching for where capitalism is most ripe for growth. Several of the companies that until recently were thought most likely to be capable of it are now supposed to have been driven by nothing other than “greed and megalomania.” And those who now allegedly abused their strength by the "law of the jungle" became strong through nothing other than the facilities of the stock market.
The flip side: if the stock market makes a picture of which stock companies in the future will excel most, then this also includes in it: these companies are subject to the calculations of the stock market. Then their creditworthiness, and thus also their further progress, depends on whether they reliably demonstrate their growth prospects and prove satisfactory in the comparison of growth prospects, as the stock market sees it. In order to make a good impression on the stock market, of course dozens of expensive frills must be used, but ultimately the tough “analysts,” “chart technicians,” and whatever else they are called, want to see “hard facts” and that means: balance sheets. Thank God balance sheets are not an unalterable set of rules or simple accounts from the last fiscal year, but offer plenty of possibilities for “creativity.” And those are simply enhanced so that that the outlook of the company, which the brokers want to know, appears, yes, in the rosiest light. A planned and yet to be closed deal raising capital is already registered there as an asset. It goes without saying that negative points are not particularly emphasized. They will be covered up, yes, even mercifully, if the investor is infatuated, investments become executed and business success is realized. Not until right at the beginning of a recession must management catch on that they must “fairly” calculate the balance sheets according to the correct rules and also sometimes against the rules. If this is “fraud,” then you have to say: it is inherent in the system. Or rather: a “fraud” that the stock market, as long as it is on an “upswing,” regularly rewards because it is set on growth... –We will not harp on the fact that the “analysts” and “chart technicians” were routinely satisfied at the time with the balance sheets, which are now exposed as a fakes...
This certainly changes when “recession prevails on the stock market.” It prevails because its panoramic view shows: a lot of business prospects once believed in and sponsored with credit prove not to come true – as registered by the crisis. That means for them: the creditworthiness of the corporate landscape is generally down, and this makes them generally skeptical. Exactly because of this, but also the general downgrade in creditworthiness, the stock market generalizes the crisis, it sets standards by which all companies now have to prove themselves. The brokers do this simply because they no longer believe in their own “growth optimism” and switch to a “bearish” point of view. Then the companies no longer get the capital they need to realize their business prospects. This has the result that all the already borrowed credit no longer redeems the promise for which it was solicited and for which it was awarded. Then this credit no longer embodies the prospect of good business, but is just a bunch of unserviceable debt. In truth, evil machinations doe not “shake up” the stock market, but exactly the reverse: The stock market, its money capital stuck in the company's shares, withdraws its own basis, “confidence,” and then and therefore completely normal and previously respected procedures become “fraudulent” and formerly “far-sighted businessmen” become “unscrupulous managers” and “Bush thieves.”
This process is as old as capitalism itself. Nobody denies that it has many ugly “side effects.” Crises, for example, occur routinely and routinely people suffer under them – in this case, "the stunned investors who watch as their savings and reserves for old age are lost." That is regretted – but it will never be a basis for a criticism of the system. Nobody will explain why in this system crises – and their victims – necessarily arise again and again. Rather the opposite is sought, i.e. a deviation from capitalism. In the crisis scapegoats are searched for, those who have sinned against the most reasonable of all economic modes – capitalism. There must have been people at work who for very personal reasons violated their duty of augmenting the wealth of the stock market. Critical minds like that of the Der Spiegel will even then be creative. Not in order to explain to their readers why and how the denounced practices, which differ not very much from those that were praised during the boom, belong to capitalism. The qualities of managers that were praised during the boom as “cleverness,” “successful,” “promising,” now betray “criminal intent.” Completely normal business strategies become “excesses.” And Der Spiegel invents a skewed image for the uncovered den of iniquity: "predatory capitalism." What they uncover is not capitalism, but a perverse deviation from it. Predators in human form were at work there.
And what have the much-invoked stunned investors whose savings and reserves for retirement come to nothing? They know whom they can be angry at. That does not save a pension, but at least the moralistic attitude is served – until next time.