[Translation of a lecture by Peter Decker at University of Goettingen, December 14, 1994]
I do not want to join the choir of those who now complain how badly the father state deals with his universities and his new generation of academics. The representatives do that — one would like to say, professionally. They are there for such complaining and protesting. If an interest is damaged in democracy, it announces it with the words: “I was damaged, this does not make sense.” Snubbed interests justify themselves with the argument that the state decision is a mistake. The argument is that if the rulers cut back on education they will thereby harm their official duties and not only damage the students, but above all the state, the community. This is not group-specific. When cuts affect the farmers, they say: “But everybody wants fresh eggs, and it is bad if only large-scale enterprises survive!” When education is cut, they protest: “we need properly equipped libraries, less crowded seminars, more student financial assistance — so that we can fulfill our education requirements quickly and well. Society needs good teachers, physicians, engineers!” This can be done to the point that one says that resources should not be cut in the name of the location Germany.
Such protests make one wonder whether to regard them more as hypocrisy or more as proofs of subservient loyalty. Hypocrisy, because the directly damaged special interest protests that its objection is not owed to the egoism of this interest: “It is not because of me! It is because of the larger whole!” Not because of the medical students, but so that good physicians graduate. Not because of the farmers, but so that there are always fresh eggs. That is hypocrisy. Everyone represents their interest, but no one says: “I want this. Now!”
The other side of this is the loyalty oath. Anyone who in the event of a damaged interest seriously accuses officials of a breach of their official duties obviously cannot imagine that national demands could not accord with their own; that the goals and priorities that Germany has when it plans its economy could simply not fit with the demands of the students. In democracy it never comes to the honest conflict: “we want to study in comfort, with more time to hang out — that is also quality of life -- and the state wants to whip us,” or “we want this, and the nation requires the opposite of us!” Conflicts of interest are always expressed in the mendacious form of a good, recognized, general value, which nobody can damage, and if the government does it nevertheless, then it damages itself. Thus, in truth, conflicts of interests are denied. They may not actually exist at all — and if they do nevertheless, a mistake must be present.
Only if one knows the state goals as expressed in state finances can it be judged whether incompetence and mistakes are at work in the considerable dessication of the universities, or whether a state purpose exist that effects even the education of the next generation of state and social elites. The same point of view of “saving” not only governs the universities, but also general patient costs, pensions, social welfare assistance, planned temporal delimitation of unemployment relief, etc.
Even the most superficial view of the national budget shows that “saving,” which is to be accepted as necessary, is a completely inappropriate expression for what the politicians are doing. In Bonn recently the 1995 budget was debated. The Minister of Finance calls it an “austerity budget” because the new debt, the increase of the national debt, is to grow “only” by 55 billion in 1995. No one talks about the debts that the federation and states already have anyway.
Thus the absolute debt is not the question. The fact that it becomes ever larger is completely clear. The state saves in the sense that the Minister of Finance adapts expenditures to income because nothing else is available; there can be no talk by the debt makers of terminating the existing debts. Unlike normal people, the state is obviously not forced to get along on its income and limit spending if it does not have enough money.
So a little economics of the tax state. The state is not an economic subject like the famous household of political economy. It is not subjected to actual current incomes in its expenditures. It transacts expenditures that it considers necessary and decides in parliament on the income for it. If the money is not enough, more must be found! That is a point of view that nobody except the state can afford. If the money is not enough, it increases taxes.
The state is the political sovereign over the society of private property. All must earn money. With capital if they have it, with work if they do not. The state gets it by a completely different relationship: taxes are not an exchange. No one who pays taxes acquires a reciprocal demand for a service — completely unlike someone who buys a commodity or signs an insurance contract. The state gets its money from its citizens. It gets its money by its own resolutions — and it decides how much it needs.
There is however a barrier to taxation, i.e. the usefulness of the tax source. The democratic state is the political sovereign of a society in which private business is conducted; it administers and organizes these businesses and is interested in their success. With taxation, however, it burdens this business activity.
Because they are concerned with the limits of taxation, the agents of the state notice a characteristic difference between the citizens, i.e. they eye the tax sources: the taxation of the consumption of normal people is a variable size within a wide limit. There one can say: “suppose the people give up a vacation or give something else up and are forced to give 10 per cent more to the state.” That can be done, and it does not have huge consequences if the people don’t like it — and do not resist, e.g. with wage conflicts.
The state acts completely differently towards the entrepreneurs. They count. If 10 percent is taken off, business is no longer worthwhile. Then the planned investment and the tax source is cancelled. In today's open world economy, the entrepreneurs have free selection from a world of states which offer themselves to them: “with me you are to invest your good money, I provide a country completely according to your desires!” The entrepreneurs can say: “if I must pay more taxes here than in another comparable country, my profits are worse. So I'll leave.“ Tax policy is set within the contradiction that the state, which fulfills its functions for the businessmen and whose success it wants, nevertheless takes money away and thus diminishes their success.
Over many years a reform of taxation can be observed which shifts the main interest of public revenues: away from capital taxation to the taxation of consumption; away from direct taxation to indirect methods. Indirect taxes are those that the consumers always pay in the end. All must pay the value-added tax, which is placed on any increase in value to a commodity; but they stick this tax onto the selling price of their goods and even point this out. Thus all those who have something to sell roll the tax over onto the buyer and only the last buyer really pays the value-added tax — the whole thing. It was passed on from all the rest. The introduction and repeated heavy weight of the value-added tax in relation to direct taxes is an element of such restructuring.
What does the state do now with the taxes? It distributes funds in accordance with the tasks it sets.
There are many tasks, but they follow a simple principle: the state needs money for itself, its apparatus and its administration.
Secondly: for the service that it carries out for society with its force — with law, police and prisons. It creates and protects the property order, it secures for those who have property that others may not seize it and separates those who do not possess anything from access to land or tools or any other wealth of this world.
With its force monopoly the state guarantees the productivity of a social relationship in which the Have-Nots and the rich are marvelously dependent on each other – the former need the latter, who possess the means of production, to be able to earn their living costs, and the latter also need the former because without their work their fortune does not become automatically larger. The state supplies legal security for the controversies that this beautiful relationship brings out in abundance. It subjects and examines every action of its citizens according to the law, and punishes those who breach the law. This costs a certain amount of money.
Thirdly: the state maintains a military — the second largest national expense. It secures its force monopoly and sovereignty domestically by the fact that it does not let armed private power arise and keeps the influence of foreign state powers away from its borders by force or threat of force. Naturally we know that for the better states — like ours – self-defense is a modest task for the armed forces, which are not content to guard the border but must have lots of force all over the far world. That must be paid for, of course.
Fourth: the political sovereign provides for the creation of conditions in which business prospers. That may sound a little circular — however the only proof is the result of what system critics once called the capitalistic class state: the state serves the business of private entrepreneurs and makes itself dependent on their success. It maintains and promotes its tax sources by spending the money it collects. It establishes an infrastructure at public expense, makes telecommunications and a stable power supply available; and if it does not exist automatically then it ensures that there is steel and coal, and that there are general conditions for profitable business. In this framework it also ensures that people are useful and are made useful. In order to be available for the needs of the entrepreneurs, the people must first of all be in a certain degree of health, secondly trained and thirdly living somehow at all; because by no means can all those who do not bring to the economy worthwhile services live on their payments — the old people, the patients, and those for whom no need exists.
However, the characteristic that a people is intact, thus able to work and useful, is a manufactured thing; the category “public health” falls here. If one goes to the third world and sees the people there, one cannot say whether they are ill or not, they are simply physically shot. Illness decides everything: if someone breaks a leg, then he is a cripple for life, no longer fully functional.
Within this limit the education system also belongs to state activity; first of all the elementary school: reading, writing and arithmetic. Qualified engineers are obtained, which are used for a normal working life, today handling the computer, in addition to the operation of an ATM. The state does not spend tax revenues on the health and education system out of a humanitarian attitude, but because the people are useful. This argument is important because I will later discuss a change of the situation that throws all social-state reckoning overboard: today many are no longer useful.
All public expenditures can be summarized under the main idea: the state spends money for the promotion of its tax sources. It does something so that business prospers. It does it on the side of the legal order, on the side of infrastructure and transportation conditions, and on the side of the care of the people: to give business its means.
Because the state manufactures its tax sources it also does not make itself dependent on whether they are already there, if it promotes them. The competitive capitalistic nations of today would not have come very far if they had made the structure of their political economies and the production of their international competitive power dependent on the financial power they had accumulated from taxes on preceding business activity. That would have taken so long that no state since the late Middle Ages could have done it any differently. The states discovered and tapped a further pecuniary resource: the national debt.
Before we come to the peculiarity of the national credit, I want to make some general remarks about credit: credit exists if someone who possesses money loans it to somebody else for a certain time and takes interest. Martin Luther said famously: “credit is usury!” This form of enrichment at the expense of those who do not have money seemed to him a tremendous unfairness. Because the needy, who have nothing but need something, pay not only the price of the commodity they need, but more than the price, i.e. the interest on top of it, when they use credit. The most abstract formula for capitalism is money that automatically becomes more money; property is the guarantee that it continues to increase — today's self-evident truths seemed to pre-capitalist philosophers not at all self-evident and reasonable. Later Christians had to learn like the Muslims that credit is also a fair thing before God.
Marx said the same thing, but differently: “credit is usury whenever it is not assigned to a capitalist.” Because if an enterprise takes credit so that it transacts an investment and makes profit with the investment, then it must divide the profit with the owner of the money who gave the credit. Some of it must be paid off as interest, although a part remains. The enterprise did something to the property. It made a profit, with capital, which it did not have before. An enterprise takes credit to become rich; debtors who take credit for the purpose of consumption become poorer. The state is an applicant for credit of a completely different kind; it fits into neither of the two categories. First, it is definitely not an entrepreneur. If it takes credit, then it does not thereby increase wealth. It withdraws it. It takes up a billion and buys with it 10 kilometers of motorway, one total school complex or 10 tanks. Those may be things that produce an end product desired by the state — however they do not increase the money spent on it. What happened economically? The state took up a billion, which it did not have, as credit. It promised: the money will be increased. But unlike the case of the entrepreneur, the money does not increase by this act. It was turned into, e.g. tanks; either they wait for war or are used. If they shoot, they destroy the enemy, but they neither reproduce their purchase price, still less a profit beyond it. The promise that the debts will be paid back with interest is given by the state and it keeps it. The bank, which gave it the billion, receives the agreed upon interest, including repayment. The state asserts that the debts it takes up are capital, but they are not. Instead, state consumption, a consumption that is the destruction of wealth, takes place. Interest and repayment are promised not from the return flow of the investment and the profit made, but from future taxes or new debts.
The second peculiarity of the national applicant for credit concerns the “collateral”: if we go to the bank and want credit, it grants it gladly, that is their business, but it requires a guarantee that the debts will be paid back, and/or will be able to be paid back. The “little guy” must prove a regular income, and if he comes into arrears with repayment he must agree to a garnishing of his income. With larger credits a property or other security must be held. Unlike this, national credit is credit without collateral. Why does the state, which does not increase the borrowed money at all, get credit? And to a gigantic extent ... 2000 billion. The answer is: because the state is the master of money. It creates it and sets it into circulation. Its force, its sovereignty is its security. It created the Federal Bank, which in an emergency can simply print money and give it to the state. The security that it offers is that it stands as an economic subject above the economy, that it does not earn money but creates it. And that is not fiction: the state is always the last actor that can still pay if no one else can pay any longer in a society.
This economic freedom of politics, which stands above the economy, has consequences, of course. In political debate, the national debt is considered a means of state financing which has an advantage in relation to taxes; it does not burden the tax sources, the business of the entrepreneurs or wages. Its disadvantage consists of the fact that it shifts the burden into the future, onto “our children.”
This is untrue. If the state provides for its means by accruing debts and extracts material wealth for itself; if it acquires for itself the results of whole industries, then it subtracts wealth from the society. If it means, this harms nobody, this is not true: the procedure actually damages not someone specific, but directly all owners of money. A tax is already a form of expropriation: according to certain rules, money is taken away from the citizens. The state debt is another form of expropriation: the state provides itself purchasing power with its political sovereignty and thereby goes shopping. Its purchasing power was not earned, i.e. the result of sales. The private businesses attract money only by actually selling; their money is a realized commodity, it faces material wealth. The state attracts purchasing power without having increased wealth; rather it decreases it to the degree that it spends. This is recognizable in the fact that people who sell discover that it is easy to increase prices. Inflation is nothing other than salesmen demanding higher prices.
Now we must make still another small digression about inflation. It is considered a dangerous consequence of an overly large national debt and should be avoided. The politico-economic objective of “inflation-free growth” is emphasized again and again. Allegedly, the government has pursued the goal of “no inflation” since 1945. However, this has to be one unsuccessful political endeavor – all the responsible persons would have to despair. Inflation is “secular,” as scientists say: one century long. The politicians do not have to be afraid of inflation, which they always talk about, obviously.
Therefore the question arises: who or what does inflation damage? I already gave the answer implicitly: it does not damage people who have a commodity to sell; they can sell more expensively and earn more money than before. Inflation is even sometimes a correct means of business: it is favorable if an enterprise has many preliminary products in stock with rising inflation because the commodity to be produced becomes more expensive in the bargain, without it doing anything. If the enterprise must buy the material and raw materials after the inflation, the profit margin sinks again to the normal level.
Those who suffer from the purge of monetary value are those who live on fixed incomes and do not sell goods whose price adapts on short notice to the attainable prices. Fixed incomes include contractual wages, pensions, and student financial assistance plans; they are all fixed over long periods. If they are depreciated, their subscribers are poorer. This reducing people in price is not at all feared, but is an economically pleasing effect of inflation: in the course of the year the workers become cheaper for the entrepreneurs until a new wage standard lines up again. But in the present period often several years are constituted, and the compensation for inflation, which would at least restore the money side of the wages to the old level, is no longer a matter of course. Also the monetary depreciation caused by it does not damage the state: the tax revenue grows nominally, thus remains the same; it even grows with the income tax owing to the pay scale progression.
Therefore this concern by states over the consequences of their financing by national debt may not be taken particularly seriously. First of all, they have no problem with inflation. And if they do nevertheless, then it concerns its degree; then it can become awkward. It tries to avoid the transition from normal to galloping inflation. If the money is no longer reliable, then there can be no more business calculations; business is cancelled because the money is not functional, and it escapes from money into “real value.”
More than a problem, inflation serves as an indicator for that concern which a nation really has with the depreciation of its money: its usefulness in relation to a foreign country. All the money that the state “scoops” is credit — regardless whether the Federal Bank makes the supply of money for the society or whether the Minister of Finance presents national debt papers. Modern money consists of demands against the Federal Bank or the Federal Government; certificates of indebtedness or promises to pay perform the function of money. If these notes are domestically inflationary, this damages owners of money, wages and annuitants, but it does not cancel the function of money for the economy. Within its range of rule, the national sovereign is powerful enough to force every citizen to accept its money notes on demand. They are “legal tender.” Nobody may refuse to accept the national money and in place of the worthless paper require real value as the equivalent for his commodity — e.g. gold. All may determine prices freely, but the national paper money must be accepted as the means of price expression — whether it cancels itself out or not.
It is not like that in relation to the foreign country. Where the power of the state no longer holds, the evaluation of the usefulness of the money takes place purely economically. In international exchange, where no sovereign orders indemnification according to value, a real equivalent for goods deliveries must be on the table; in former times it was gold; today the national currencies are the value guarantee that they can offer, compare and evaluate. And their international purchasing power decides it.
To that extent, the real barrier for the national debt makers is its harmful effect on the international usefulness of the national money. And no state is so modest that the money notes that it “scoops” only by its sovereignty are to work only within the limited area over which its sovereignty extends. Thus its money only holds within its state: “our money functions domestically as means of circulation, here it is given and taken; the capitalistic foreign country may not reject or despise it, we also want it to purchase our supplies. Our money should not be convertible against other currencies.” With their national money capitalistic states want to provide their citizens access to the world market and access to the wealth that exists abroad.
Each state — this is a high ideal and a beautiful insanity of our social form — has the goal that its debts be undoubtedly considered worldwide as money. Then it can increase its debts and send it as good money out into the world. That is genuine economic sovereignty: the ability not only to make money valid in the national framework, but to be able to increase it worldwide politically and thus expand national solvency without increasing profits earned economically. It is an unusual special power of a nation to translate its force directly into wealth. Because power and wealth are first of all not the same: a nation can be militarily superior, it can also rob if it wants, but it cannot put notes into circulation and simply say: whoever has those has wealth. This ideal can become true — however, it cannot possibly be true for all nations. Today there are only three national currencies worldwide that are considered everywhere as money and guarantee access to wealth: the US dollar, the Japanese yen and the German mark. All other currencies are either sub-sections of these three or became useless in the course of international business. The fact that all currencies are today formally convertible, i.e. that states permit the free exchange of their domestic money against foreign money, does not mean that there is also interest in the many currencies, that all of them can happily exercise access to foreign wealth. If no interest in them exists, or if confidence shrinks in the state notes of a country, then such currencies plunge, as happened recently to the Russian ruble and the Mexican peso.
The first national money that was at the same time world money belonged to the USA, which owing to their victory in the Second World War had the power to draw up a new world economic order. They came out of this war not only as winners like Great Britain, but as a capitalistically intact power which due to the war acquired the gold treasure of the capitalist world – from the allies’ payments for weapon supplies. They gave a gold standard to their (and only their) money, i.e. their dollars exchanged for a fixed rate against gold and thus they offered their money to the world as a gold-equivalent, a replacement for gold. Thus the dollar became the general world currency, which opened the whole “free world” to the dollar as an investment sphere and gave the order to all other countries: “earn dollars!” The dollar was the reserve currency and the absolute material of wealth. Thus gold was displaced in international accounting.
The USA made abundant use of its privileged position of unlimited liberty of indebtedness and financed not a few wars after 1945 by increasing the amount of dollars. In the forty-year long cold war — and for this they bred partner nations that should also be powerful and contribute to the deterrence of the Russians, to the damage and constriction of the socialist camp. But the USA had to consider that two competitors emerged, Germany and Japan. These two have currencies that also have quality: they can be taken and used like a gold treasure. The European currencies, the French, British and Italian, were also for a long time good money; but they were so because of the European Monetary System, by their binding to the German anchor currency. And now people in Europe are experiencing what happens when nations give up their competition for a common guarantee for their currencies: Germany withdrew from this guarantee and let the EMS break up. The strength of the D-mark was defended nationally by being separated from the less reliable European funds; and then the Italian currency lost its credit-worthiness, and so for Italy the situation arose that its government could not make its money circulate and create more debts. Of course, they — so far — make lots of debts, but they cancel their money to the degree that they increase it politically. In consequence, Italy, Spain, and Great Britain, if they nevertheless make new debts — it must only be for repayment of the old. Here one notices what a nation that can calculate its debt in its own currency has for a source of wealth. It honors its debts for reimbursement, but it pays in the medium that it produces. It can always pay. One that must pay in a foreign currency has other obligations: they must carry interest and repayment in a currency that they cannot produce. They must have earned it by export successes, by which they obtain the money of other nations, so that they can then pawn it again to the credit lenders. This applies now to the currencies of the European states that belong to the G7; about the currencies of the rest of the state world in Africa, Latin America and Asia, we do not need to talk. They are not suited for internationally active businessmen and even the native rich. Indeed, they buy and sell in their nation so as to exchange their domestic money as soon as possible for the “safe port” of one of the three world currencies in order to save their money wealth against the depreciation of its domestic validity; the mother countries call that “capital flight.” These references may be sufficient to make clear that the credit currencies enjoy beyond their national borders differ between the winner states of the world market, for whom it is disposable at their discretion, and the loser nations, which must serve their principle without ever coming thereby on relief.
The example of the two social climbers of the postwar competition show how successful states earn the freedom to let their debts work as money: Germany and Japan.
First, a state creates confidence in its own currency by guaranteeing its exchange in a foreign currency. The state permits the international owners of money reliability and business opportunities to continuously compare what its own currency offers with investment alternatives elsewhere — and guarantees the conversion of its own currency into foreign. For this guarantee, a state needs a treasury; this no longer consists mainly of gold but the foreign currency of other states. For a given exchange ratio of D-marks against other currencies, the Federal Bank can last as long as it has foreign exchange reserves. It defends the confidence in its currency by coughing up foreign currency. If confidence is battered, the treasury quickly flows away. The EMS crisis showed that profoundly: Italy and Great Britain practically plundered their public treasuries.
Secondly: how does a state provide for the supply of the foreign currencies that forms its treasury? Foreigners must have a need for the currency, and then exchange their foreign currency for the national. The need for their own currency results first from purchases. If a country exports commodities at a quality and price that is attractive on the world market, then the demand for its own currency and the supply of foreign money adjusts. The export nation West Germany, which for nearly fifty years exported ever more than it imported, thereby provided their money with a solid basis in the world economy. What such a permanently one-sided export organizes in other parts of the world, we do not want to talk about at all; but this much is clear: if a nation sells ever more than another one, if it increasingly controls their domestic markets and collects their money, then the other nation must first of all lose ever more production and secondly lose solvency with which they bought the German commodities. German success is also called: export of unemployment.
If the international demand for the national currency is large enough and there is confidence in this currency’s stability, then it is unimportant how much national debt this country has. Foreign demand for the currency compensates for internal indebtedness. A state that can generate this confidence gathers ever more of it. The currency becomes a reserve currency. Other countries buy it not in order to buy with it, but only in order to keep it available in the public treasury for their own security. This currency is then a value guarantee for others. The country of origin can send money out into the world, and it never returns increased; no one wants to see it for a commodity. The dollar, yen and D-mark are the funds whose possession makes every central bank solvent.
Because other nations hold German money as a safe form of storing value and “guarantee” themselves with it, they set themselves in relation to Germany on the lower levels of business — on import and export – while the whole higher floors of capitalism, the offices of financial transaction, are on top. Security issues, shares and other stock exchange and banking transactions create profit and taxes in Germany, completely without production, and again multiply the international demand for German foreign exchange. Thus this nation has a surprising ability to create debts: it swallows other industrial nations whole and bucks it up capitalistically with an explosion of state debts over five years — and this unreliable growth does not ruin the currency.
In the meantime, the future of national finance, i.e. the freedom of indebtedness, is no longer self-evident. In the years after the Maastricht treaty, the individual European currencies were dismissed from the security of common support by the EMS and were to stand the test of international investors separately — and failed by this yardstick; now there is the so-called currency turbulence between the large three because the issuers of this money no longer succeed in delivering a reliable guarantee of value for their notes and secure with it the confidence of international speculators. Even if the German mark is considered for the time being a “safe port” for funds which are drawn off the dollar, and to the extent that, together with the Japanese yen, it wins the competition over credit, it points to a development that is considered a threat to the world economy because the national credits now stand in a hostile, mutually exclusive relationship to each other — and it is no wonder that in the end the strong currency is only the mirror image of the weaker currency that faces it. Not only can't all currencies be universally recognized as the money of the world economy, but ultimately someday neither can a few currencies be so recognized. German economic policy now positions itself for this fight.
It is not normal in this system that everything between states, which only trade in order to enrich themselves against each other, takes place in credit; i.e. in the last century the balancing of foreign trade accounts took place in gold until the transfer of wealth in real value was ended. After World War II, the USA was terribly proud of the fact that they overcame economic nationalism, the reason for the world economic crisis of the 1930s and thus the world war. Of course, this system arose not at all for its own “reason,” but only from a special situation; a special situation in which the interest in the functioning of the world economy coincided with the national interest of the most powerful country. The USA was the only nation that still had money and an intact economy; they opened the world for their money by putting it at the disposal of the thrashed enemies and the expenditure-bled friends in the form of credit. As long as the dollar was the only international money recognized worldwide, a system of fixed rates of exchange functioned between all the free-market economic powers. When at the beginning of the 1970s the USA had to admit the fact that their money was also only one currency of varying value among others and had to give up the gold parity, the system of mutual crediting of currencies was introduced — and it had its strongest support in the common front of all capitalistic states against the Soviet block in the cold war. The allies had to band together because in isolation each individual partner would have been forced to compromise with the Soviet Union, and they all had an interest in the fact that their NATO partners also developed powerful political economies. But they maintained the system of credits in which balances were never really balanced by the transfer of wealth, but the inability to pay of a country was credited, i.e. assets were written down with the creditor country. The missing sums were regarded as an investment, they never seemed to be paid off, but only interest was paid on. Only under such an exceptional condition could the idyllic situation exist that, despite the very one-sided successes in foreign trade between states, a state must never really announce its bankruptcy and fall out of the world market with its market and its business opportunities.
So the continuation of business was always made possible between the OECD states, as well as in relation to the countries of the third world, which remained raw material suppliers despite their chronic deficits. No potential new business should be neglected because of failure in competition; anywhere in the world a chance for profit existed, money should not be lacking so as to exploit it. For over four decades, the money that future business should earn was anticipated with credit in order to make exactly these businesses possible. If they succeeded, the credit could be served and erased; however, because it often financed the external economic failure of states that had already happened, and because it was a political credit that private banks would not have given, the constant accumulation of credit not only reeled off business and already not directly to the degree that the credit swelled, but a gigantic accumulation of international debt was set in motion. Because there was always enough money for possible business and the expansions of business, the prosperity of capitalism after the second world war surprised not only representatives of Eastern Bloc socialism. Year after year, until 1989, the socialist parties waited for the “great crisis of capitalism.” In their textbooks they had discovered that there must be crises; and nothing more came than on and off again market conditions. They did not understand that they — and the cold war front against them – were the reason for this unusual cooperation between capitalist nations. Because the provision of all means of business by anticipation with credit in all states, without punishment following it, would be an admission of failure that there is not the growing wealth on which credits are given and interest is taken to the necessary degree. Even in the world debt crisis at the beginning of the 1980s, when Mexico and other Latin American countries became insolvent, international cooperation prevented the official credit bubble from bursting and the creditor nations had to delete the assets in their books.
The unusual prosperity phase of the world economy thus had a condition and a price: that condition – the common enmity of the capitalistic powers against the socialist camp — is now void; and the price is an always larger international accumulation of debts, which represent all the future growth that has not occurred to the necessary extent: debts that can be never be paid back again and on which ever less interest is paid.
The endangerment of credit in all countries determines the political agenda — and while in former times common actions for renewing and extending credit stopgaps were announced, today the big world economic powers try to protect their own currency and their own national credit system from bankruptcy and loss of confidence against the others. Approximately ten years ago, it was the concern of the New York Plaza Accord, and later the Louvre Agreement, to dampen the dollar’s unpredictable currency movements; today the dollar falls by 20% for half a year, the German Minister of Economics considers common measures just as ineffective as unnecessary: “Our trade volume with America constitutes only ten per cent of our foreign trade anyway.” There is disinterest in the common care of currencies. But everyone notices the dangerous situation. The volatility of exchange rates is a continuous topic. But today a different conclusion is drawn: “German politics must ensure with German means that German money can be doubted by no one.” The German means, which are spoken of here, is what is called location politics.
It is no longer a matter, as it was in the times of the modest export nation, of earning the money of other nations in order to develop foreign exchange reserves, but of providing a secure foundation for the international validity of the German credit superstructure against doubts, which are appropriate given the inflated German debt economy. Location politics aim at the re-nationalization of profits in an economy that has long become global. German enterprises no longer have only German labor and German purchasing power as their means of business, but the whole world. Demand for the German mark — and the competition of national credits around it — is created not only by German export products, but also by German banks, which assign credits in every corner of the world. The interest paid on it is income for German institutions and is booked as profits in Germany. It concerns the concentration of world business in the German mark — not necessarily in Germany; the profit guarantee that German money wants to, and must, represent is affirmed and renewed by political means.
A politics that wants to make the DM location worthwhile with all force does not want to have anything to do with “saving.” In order to make the German location firm, massive credit is set into the territory. What is called “saving” is not spending less money, but determining the priorities of the state budget: consumption expenditures are cancelled, investment is promoted. The government spends billions to create new German multinationals, such as T-Mobile and the Federal Railroad. These new “global players” get their investment potential in future markets underwritten, like only seven or eight other American and Japanese companies. If an inner city express train or a subway for Shanghai is to be built, the Federal Chancellor makes himself their salesman abroad. In order to get genetic engineering going in Germany, all earlier fears about people being poisoned are left behind: “the location Germany needs it.” Location politics sort through domestic economic life and the only thing that matters is what promotes the German position on the world market. This sounds so normal to Germans that they do not know that there are still other areas: when grain is cultivated, which is then eaten; when coal is mined from the earth, which then enters into economic circulation, this also is business — and no foreign exchange needs to be spent to import these goods. Now the government says to the miners: “if somewhere in the world coal can be more cheaply procured than it is from you, then we do not need the work in German any longer.” Germany has international purchasing power at any time. But internal subsidies only for the fact that life takes place in the country, that people work and live from it — these diminish the profits which can be made with German money. Now this should no longer to be affordable. On the other hand, massive state money is spent to produce products in Germany, which other nations do not feature, but they need if they want to be competitive. Germany wants to produce the means of rationalization for the whole world. That creates a demand for its own commodities that, to a certain extent, runs ahead of the competition.
The best didactic example is the treatment of the old East Germany by Bonn. A complete industrial nation with capitalistically unprofitable, but still functional, production plants existed there, which is now more or less completely left fallow. And what takes its place? A Siemens chip factory in Dresden, a fully automatic OPEL auto factory in Eisenach and a Volswagen plant in Mosel, and Lothar Spaeth may draw up a line of “optoelectronics” in Jena, which does not exist anywhere else in the world. And the entire rest of the zone is useless, human resources included. In the treatment of the GDR one can examine, as if in a magnifying glass, the politico-economic point of view that the government is gradually applying to all of Germany.
The nation defends its highest source of wealth, its credit. Long ago it overcame the “poverty” of the export nation, which meant: “Germany is a country lacking in raw materials; while the Saudis have oil, we have nothing but our industrious citizens and their skills.” This was of course already a joke in those times. Which is now the more powerful nation, Saudi Arabia or Germany? Every Minister knows that it is productive labor that makes a nation rich. In that time, however, domestic labor was the only source of German wealth, so it was looked after. Today that is overcome; worldwide finance, in which Germany and the D-mark occupy a large portion, has made the work and wealth of all other nations the means for German profits. Production inside the nation is only one source among others.
Those who are in the position of being dependent on demand for their labor experience this situation very negatively. The famous industrial workers look on the times of the poor export nation as the golden age of unionized workers. In those times, they still had the power to enforce wages. Today the country has four million people who are not needed; nearly ten percent unemployment. Because the nation has other sources of wealth, the domestic sources are not provided for as before. All welfare state functions — pension, patient care, unemployment relief — are paid from the wages that business spends on the employed wage laborers. If these people and their contributions are employed less and pay less, the income of the social insurance shrinks and is no longer functional. The unemployment fund is a marvelous mechanism as long as there are hardly any unemployed persons. If they increase, the system breaks down — and the state must fund them from other sources. But because so many people are not needed, it does not do this any more. The state does not need to care so much about the pauperism that the system produces. It is the same with pensions and health insurance. At the moment we experience big reforms of these institutions that prevent their collapse by dismantling what they are there for.
The cuts in the university and education budgets add to the principle that in the German location every effort has to become cheaper so that the money is worth more.
The various appraisals which sectors of the economy and the living conditions of the people undergo in the current state program has nothing to do with health care, pensions, unemployment insurance, work times and conditions, education and the universities suddenly adapting to “the utilization needs of capital.” Such popular accusations always discover the subjection of more areas of life to the interests of business completely newsworthy; one wants to ask: what was it like yesterday — before all the reforms? The diagnosis, which speaks of a degradation in which society is subjected to the needs of capital, pays yesterday a complement: in the past things were not yet so completely profit-oriented! However, the present reforms are not about more or less capitalism, but other politico-economic aims of the capitalist state: all German accomplishments must be produced more cheaply in order to make German business unbeatably attractive to international capital and German money solid in the present world-economic turbulence.
In former times, the rising export nation had reached a certain level of development in relation to its power: the qualifications of the employed were promoted — today it concerns reducing the redundant human sources of wealth in price. In the middle of the 1960s, an education disaster was once even diagnosed. The dramatic alarm bell was a comparison. America was the most modern nation in the world, the most money was earned there and there was a twenty per cent graduation rate from college. In Germany not even ten percent graduated. Thus the politicians were sure there were too few highly qualified workers in Germany for the nation to be as productive as the USA.
Today the nation has four million unemployed people. It does not have the problem that it needs qualified people. The problem has shifted. The people have the problem of whether they are attractive for the scarce jobs, and businesses can select, for all qualification levels, from a huge surplus of applicants. Now the university also gets to feel this. The FAZ of 12/13/94 writes:
Bad job prospects face the graduates of the education system. In the year 2010, 600,000-900,000 college graduates might be too much... In each case college graduates will have to be content with lower status and income opportunities.
Thus this nation really changes something since its education offensive in the 60s: its previously unheard of upward mobility. The normal pattern that the son of a shoemaker grows up to be a shoemaker, the son of an industrial worker becomes an industrial worker was actively overcome during that time. The nation needed more highly qualified workers; it offered the chance and this was grabbed to such an extent that today there is human overcapacity in all occupations and training programs. There are too many university graduates, but also too many apprentices.
Now the politically responsible people have the point of view that the people themselves should make sure that they are attractive to the job market. Thus the university can save without losses. So only books which someone looks for in the library are missing. Then only lecture-rooms are overcrowded and papers are never corrected. The people will even get behind it, they know what depends on it! Meanwhile, the unemployed also are no longer paid for retraining courses, but required to invest even their unemployment pay in the development of their “human capital.” This is the whole idea behind the reform of education and the university. With political means, thus with demands, a higher level of profitability is to be produced in the country to meet the international competitive situation. All public expenditures are to be slimmed down under the criteria of monopolizing world business in the German currency. Expenditures for the economic usefulness of the people are reduced because there are more than enough applicants for all positions.
The whole reform has no other content than reducing costs and is a small part of the fight for a German victory in the competition to depreciate the international state debt. If there must be victims, it should at least be known for what! Then it is also clear that there is no good reason to fall for it.