The National Budget: On the Economy of Political Domination Ruthless Criticism

The National Budget:
On the Economy of Political Domination

[Translated from GegenStandpunkt 4:1997]

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 person must make to get at the other’s money exploits the weak point represented by the other’s need. 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 is thus subject to 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 – all 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 on hand to fulfill demands for cash and meet payment obligations toward 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 their restricted size, if banks 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: The monetary value they represent is relative, i.e., subject to comparison with notes issued by other banks. In the days when 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. That then spreads rapidly 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 itself 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 banks’ 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, 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 sell securities with a specified minimum credit rating to the central bank, deposit them and transfer their demands on interest, or 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 use 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 by serving as a means of refinancing for commercial banks. The latter obtain this money through a standard borrowing operation with 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 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 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 invalidate 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. 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 means of 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” [6] makes of money and credit

The activity of the central bank is regarded as an indispensable service provided by a public agency that supplies the economy with a viable means of circulation. At first sight, it 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 circulation of money and the supply of credit, 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 business cycle or on the government budget.

A popular notion about the relationship between the state and the market economy is that society cannot provide the technical and organizational conditions needed to carry out production, distribution and consumption on its own, forcing the state to step in and fill the gap, enable free enterprise and allow its citizens to calculate and trade with the money for which the state guarantees. That is a rather odd notion, given that it simply ignores the not insignificant fact that, apparently, sovereign force is necessary for “the market” to function at all. That is a sign that the market isn’t capable of “self-regulation” after all. The constantly invoked “constraints” of the market obviously don’t take effect without the helpful coercion of a political sovereign that retains a monopoly on the use of force.

The bourgeois state is to be thanked for correcting the constantly reheated tale about “the economy” that the state is said to set in motion and then leave to its own devices, 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 a societal imperative – one that establishes capitalist relations of production in which all work and all life is subordinated to money, which someone or other owns. In any case, the political class doesn’t hold back when it comes to using the power of the state. Its actions demonstrate in great detail that competition over money cannot function without the ubiquitous supervision of a state power; that constant state support is needed for business to flourish; that many citizens simply cannot endure the effects of capitalist moneymaking without state “intervention.” The catalog of state functions documented in a nation’s budget plan is extensive, precisely because the only thing the state is concerned with is implementing the 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;” what some citizens demand and others find suspicious; what in any case are recognized and established as necessary tasks for the state, 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, the money which its citizens are compelled to accumulate, also constitutes the material means that the bourgeois state uses in the pursuit of its aims. At the same time, it uses its sovereign authority to procure that money, thereby obeying the laws of its economy in a fitting manner:

- The state collects taxes, taking a share of the income and expenditure of its citizens.

- The state makes use of credit and guarantees its usefulness for the business world

A. Establishing and Maintaining 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’s first priority is to ensure law and order. The business activities people are to engage in require rules – a set of laws on the exchange of property and services, i.e., on the modalities of entering into contracts and fulfilling their terms. An extensive legal apparatus ensures obedience to these rules in all economic transactions, and it must be able to rely upon an effective police force. And since laws go hand in hand with the violation of laws, criminal courts are needed to protect the authority of the law from those who disobey it.

Hence, permanent expenditures of a significant size are required to impose law and order on the inhabitants of a modern capitalist nation. Despite any suspicions to the contrary, this is not due to human nature, which makes it too difficult for mankind to abide by the law. Rather, the many precautions the government must take in order to ensure obedience to the law derive from the peculiar foundational principles that state force establishes within society.

The decisive reason the state’s legal precautions is the existence of private property, which requires a highly complex set of regulations and an elaborate regime of supervision in order to be useful for moneymaking. People, who could neither produce something useful nor subsist at all without other people’s labor, do so in this society under the reign of property, under conditions of mutual exclusion from both the means and the results of their peculiar form of “cooperation.” All the useful goods and services forming the nexus through which they depend upon and act in combination with each other are fundamentally unavailable for use. The state instead decrees and enforces the exclusive right of their respective owner to withhold goods and services from those who need them. This state-imposed mutual exclusion is permanent, and is not undone by the necessary cooperation of individuals living within a system of “division of labor.” Rather, by establishing this state of mutual exclusion in the midst of mutual dependence, the state establishes the antagonistic manner in which society’s individuals interact with each other in the production process and the social life process in general.

This fundamental premise of social existence in bourgeois society is a peculiar intersubjective relationship among capitalist society’s inhabitants. The latter are compelled to acknowledge private property as a condition upon material welfare and as a means of achieving that welfare, as the elementary form of all “wealth.” On the one hand, the acknowledgment of private property is enforced by a ruling power that threatens to punish any deviation. On the other hand, that same power offers people the opportunity to freely pursue their material interests, to weigh the costs and benefits of the economic transactions they carry out on the basis of the fixed and reliable foundation of private property. Private property prohibits the kind of materialism that aims to get hold of material goods in order to satisfy needs and desires, while wholly authorizing that brand of “materialism” that respects exclusive ownership as a natural prerequisite for making use of material goods, and that therefore aims to acquire private property.

So there is a catch to the free “materialistic” calculations demanded by the regime of private property. Each person’s calculations and efforts stand in opposition to those made by others, who also strive to obtain exclusive ownership over as much property as possible, and upon whom each person in turn depends. Everything people do brings them into contact with other people’s property and thus provokes corresponding conflicts. The absurdity of capitalist society is thus complete: The competitive struggle for money, for ever more property, together with the mutual exclusion from useful goods, constitutes the form, content and goal of social production and consumption.

State power organizes this “fight for survival” by furnishing all its various forms with legal regulations and the administration of justice. The state monopolizes the violence inherent in the competition between property owners, and thereby establishes the necessity of that violence. The state forbids the private use of force and “replaces” it with its own sovereign force, upholding those interests that are justified by law against those that are not. The state power thereby follows through on its empowerment of property owners – who are thereby put in a position to harm the interests and needs of other people, and are quite justified in doing so – by establishing the protection of “the person”, which represents what little is left over after a person has lost all means of subsistence. Coerced into pursuing nothing but their own advantage at the cost of others, everybody reckons with violence, that is, with the force of the state, and attempts to make use of it in their social interactions, all the while looking to avoid its sanctions. Obviously, there is no relying upon such calculating obedience, which is why the bourgeois state, from the very start, takes up its legal subjects’ reciprocal infringements and their self-interested violations of the law into its corpus of laws, immediately subjecting them to the further general rule that each and every crime is to be punished. [7]

None of that comes cheap. After all, turning money into society’s “real community” has a price. But on the other hand, the entire social life process serves the acquisition and accumulation of property, measured in money. From the point of view of the market economy it establishes, however, the costs are worth it. The state might not produce anything else, but at least this expenditure produces the mode of production [8] itself.

2. The Political Community

By making the inhabitants of its territory into owners and earners of property, the bourgeois state “divides” their individual interests in a conceptual way, which nevertheless has practical consequences. The material side of their natural and social existence is declared to be a matter of private, individual, exclusive right of ownership. This remains a private matter as long as people remain within the bounds of the law, and is basically of no further concern to the state. What does concern the state is the sanctity of law and its boundaries, the just and proper delimitation of individuals’ opposing private spheres. In this regard, the state considers all of its subjects to be equal, that is, equally subordinated to the law without regard to their person, which here encompasses their entire material livelihood. Inasmuch as they are subordinated to this corpus of laws and abstract from all their needs and the means to satisfy them, all citizens are free and entitled to enjoy unrestricted participation in the life of society.

However, the state doesn’t grant this favor to just anybody, only to those people whom it recognizes as its own citizens in accordance with the law. From the cradle to the grave, public administration systems record this in exact detail, so that there is no doubt as to who can appeal to state power for his freedom. Conversely, free citizens also have duties towards the state, the most important of which consists in the all-encompassing duty of recognizing the state as their own, and thus in the willingness to contribute what is required for its further existence and success. The legal relationship between a force monopolist and its private, money-earning subjects therefore includes an illusory relationship of belonging and togetherness, a mutual recognition between citoyens and their political community. [9] Apart from the citizen’s existence as a bourgeois individual 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” led by each and every citizen in the bourgeois community is an expensive matter. It requires a public life, that is, participation in politics via democratic elections, parliament and political parties, political education and socialization, a national culture and representations of the illusory togetherness between the state and its citizens, who thereby earn the honored title of “the people”... On the other hand, this expenditure is indispensable, because competition over money only functions as the rule of social life if free citizens perceive it as the sphere of their individual pursuit of happiness, only if they understand and recognize the same sovereign authority that imposes restrictions upon them as a necessary, reasonable and desirable means for that pursuit – and be it only as a “corrective authority.” If the citizens do so and view the concerns of the ruling power that makes them into servants of private property to be more important than their own material existence, then the state will have succeeded in mobilizing society for the political economy of the nation. And in this sense as well, the money required for organizing a united political community is well invested.

3. Home and Abroad, Us and Them

The political relationship between the state power and its citizens, or between free citizens and their political community, also has an external side: It separates itself from excludes other supreme powers and their subjects.

It is generally taken for granted that foreign citizens are excluded from one’s own people. What is at issue here is a legal status created by the legislative power of the state, one which an individual citizen can neither simply turn down nor acquire at will. For a force monopoly, forbidding other powers to lay claim to one’s own citizens is essential. After all, a state would be sacrificing its sovereignty if it allowed such rival claims on the people to whom it dictates social conditions of existence and whom it declares to be the bearers of the state’s free will. In order to secure that sovereignty, a state power obviously needs more extensive and more diverse means of violence than a mere police force that ensures respect for law at home. It must protect its borders against the possibility of foreign attack, and therefore requires a military apparatus that is constantly at the ready. This also gives some citizens the opportunity to temporarily abandon their lives as private citizens and serve in the military, thereby demonstrating personally just how completely a citizen belongs to his state. His fellow citizens meanwhile can at least provide a financial contribution.

These expenditures also pay off in another regard. The border a state draws between its territory and the rest of the world provides its community of citizens with their very own kind of exclusivity. With a proper-name that differentiates them from the peoples of other nations, the state and its people move through world history together, while the deeds and suffering they bring about serve to fill the abstraction “citizen” with a good deal of illusory content, that is, with a “national identity.” What makes that so useful is the fact that capitalism, the material living conditions around which all state actions revolve, is therein nowhere to be found. This is something truly all nations have in common. Although this means that all the incomparable national collective subjects have one and the same task, i.e., the establishment and management of a free market mode of production, state leaders and citizens fiercely insist that the opposite is true: Their nation’s essence lies in what makes it unique, and membership in this community represents an honor, not the subjection to a single state power. The state power insists to its people that this is true, and its subjects insist to their political leaders – who are always to be “spiritual and moral” leaders – the same. The everyday life of capitalism thereby transforms into the involvement of mature citizens in the nation’s struggle to achieve its own distinctive destiny. And if the people can no longer endure their dissatisfaction with their material living conditions, their nationalist idealism will ensure that they won’t blame the conditions themselves. Hence, even from the point of view of the market economy, the costs for actual and ideological border protection can almost never be too high.

B. The State’s Efforts to Promote Continuous Capitalistic Growth

The bourgeois state turns the entire social life process into the domain of private property and provides capital with power, incarnated in money, over labor and consumption. That is also why capitalist growth cannot run on its own power. It even gets itself into contradictions, and the creators of these contradictions can cope with them on their own. That is because the control over society’s economic activity is left to capitalist property owners who use their power to compete against each other to take advantage of society’s purchasing power, capturing as big a share of profit as possible. Their only point of agreement with each other concerns their negative interest in restricting the other classes’ claims to money; and in doing so they ruin necessary prerequisites for the success of their own business.

The bourgeois state therefore assumes the role of “ideal collective capitalist.” It neither deprives real existing individual capitalists of their control over the means of production, nor does it revoke their freedom to compete. Rather, it supplements their destructive deeds with the use of its own power in order to sustain the course of capitalist business as a whole. With its political standpoint, its responsibility for the common good, the state intervenes in the economic private sphere of its citizens, a sphere the state itself defines and circumscribes. It imposes supplementary rights and duties, forces its capitalists to take certain precautions and provides them with the means to do so, all so that the system of private enrichment can run its desired course.

1. Establishing Basic Conditions for Production and Circulation

The state takes care of the conditions of capitalist business that businessmen can’t take care of themselves, since they are too busy competing for profits. On the one hand, this means taking care of the utterly decisive means of doing business: the money of society. The business world displays a good bit of ingenuity in making its use of abstract wealth for its own accumulation more effective, pushing back the limits that previous business success imposes on its future competitive successes. The accumulation of money is so important to money owners that they defer payment when their business partners either cannot or prefer not to pay immediately. Instead they accept IOUs and use them as means of payment, thereby treating anticipated future business success as if it had already occurred. They avoid the use of real money whenever possible in order to earn more of it than their own funds would allow them to without interruption. Money capitalists substitute credit for money to an extent that, in the end, everyone uses acknowledged debts as means of business. As a result, each capitalist’s assets are dependent on the validity of these IOUs. Once it turns out that far more means of business have been advanced than can possibly be redeemed, the business world loses a portion of what it has entered into its books as actual assets, but that’s not all. Companies’ means of business is ruined; they are forced to return to primitive cash payment and write off all the growth they had financed with credit-money – if, that is, the state power hadn’t intervened and issued its own credit-money, whose validity is guaranteed in spite of credit crises and bankruptcies, as depicted in chapter I. Though that doesn’t mean the state guarantees crisis-free economic growth, it does protect the universal means of free enterprise from being ruined by its own profitable use. For once, as the lender of last resort, this service doesn’t cost the state anything at all, but rather allows it to partake in interest earnings.

Nor can the state leave the material prerequisites for lively and steady capitalist growth up to “the economy.” On the one hand, creating and promoting these prerequisites is, like everything else in capitalism, merely a matter of money. And there is certainly no lack of money under the aegis of a state-guaranteed banking sector. On the other hand, the use of private purchasing power must pay off for the competitive efforts of those companies that use it. And these companies only do so if they can monopolize the benefit they purchase with their money. That presents some serious difficulties.

First, scientific knowledge and its technological application is an absolutely essential productive force for capital in its competitive struggle. Unfortunately, since knowledge is by nature universally accessible, it doesn’t lend itself as a weapon in competition. The invention and enforcement of “intellectual property” helps: With its patent laws, the state subjects knowledge to the rule of property, which makes knowledge useful for competitive success after all. However, this is only true of areas which – in accordance with the immanent logic of research that not even capitalism can change – already presuppose a good amount of scientific knowledge that someone must have at the ready. Moreover, the further expansion of that knowledge requires significant expenditures, but is either too universally applicable to patent, or it is too detached from business application for a patent to be profitable. The state therefore covers the necessary costs, provides for the education of scientists and supports basic research, both of which can be seized by free enterprise for its own scientific and technical progress, without having to shoulder expenses that are unjustifiable from a business perspective. Where the realm of basic scientific education and “basic” research begins and ends is thus not a matter of science, but of financing. The border between basic science and “applied” science results from the relationship and interaction between capitalist practice and the state’s responsibility as the guardian of culture. This border shifts whenever scientific and technical achievements become generalized, and is always closely linked with the state’s own particular thirst for knowledge as a cutting-edge military power.

The nation’s infrastructure is a particularly striking instance of the market-economy dilemma confronting the bourgeois state: Certain institutions are indispensable for successful competition, but are not profitable – and thus too costly – for individual competing businesses to provide. This sector cannot be separated definitively from others, except in the sense that infrastructure consists of use values that are necessary for growing profits, though their provision is not profitable under the given competitive circumstances. Whether the state takes care of the required conditions for growth preemptively, or waits for an “emergency” to react, varies from nation to nation. Political parties also differ in terms of how they assess the need for state action on this front. Once constructed, transportation routes remain open to general use, and their upkeep is a permanent fixture within 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 already been made. The history of the capitalist economy has seen quite a few failed private endeavors in the canal and railroad sector, especially in recently privatized state transportation industries. Natural and raw materials, industrially manufactured basic goods such as iron, as well as energy, all represent prerequisites of growth that, were capitalists forced to pay “honest” prices, would ruin them. In other words, establishing these conditions would not be sufficiently profitable. Therefore, things like state funded power plants must be donated from the political community, or a national nuclear power policy is required so that the capitalist competitors can surmount a barrier to growth they themselves create. [10]

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, when it comes to infrastructure spending, the state’s need for national economic growth coincides nicely with the military’s need for supplies and mobility. Two for one!!

2. Forming and maintaining a useful working class

In bourgeois states, both society’s life process as a whole and individual citizens’ preservation are organized as these individuals’ private affair. Work is done for money in accordance with contractual law, which draws a boundary on the individual’s freedom at the point where it meets another’s legally justified self-interest. The differences that result are attributed by bourgeois society to citizens’ natural particularities and respected as their own private affair. Therefore, it is none of the state’s business that gainful employment – i.e., work for remuneration that is limited by the employer’s competitive calculus; work that is performed according to demands determined by the same calculus, and is correspondingly demanding – proves inadequate for sustaining a livelihood, ruins workers and completely fails as a source of income as soon as they are used up or not used at all, be it temporarily or permanently.

Yet here as well, there is no way to uphold the separation between the public and the private “sphere” completely. On the one hand, the individual fate of the propertyless millions does not determine the political economy of the nation, and definitely not in the precarious and contradictory way as competition between capitalists. Their fate does not compel the state would have to intervene to protect the economic common good. On the other hand, if the masses, due to the poverty and insecurity of their livelihoods, are unable or unwilling to play a constructive role in the community of free law-abiding subjects, then that is a problem for the political community. These people stand outside of the political community; they are a moral and even physical threat to its existence, and no longer carry out the services so urgently needed by the nation’s economy. The bourgeois state power is therefore faced with the unending task of politically integrating the proletarian part of society. This presupposes that the working class is willing to allow its existence to be made dependent on earning money through wage labor, and will only be willing to do so if it actually can thereby earn a livelihood.

For that reason, the state intervenes in the private livelihood of its wageworking subjects. Whereas in former times some states did this in a rather “paternalistic” manner, a modern democratic welfare state intervenes in a very appropriate and functional fashion. It grants political equality to its citizens, allows representatives to influence social legislation – in opposition parties that conform to the system, in unions, or perhaps even as a ruling administration if they have proven “mature” enough to take on such a role. In that way they can work to make a proletarian existence endurable, while dutifully acting in accordance with the common good. The workers themselves have to prove that it’s possible to endure under such conditions.

The kind of specific regulations needed to manage the needy, and the demands that can be reasonably made on the common good and its economy’s strength, differ 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 each nation’s respective system of social insurance. The state power generally deals with both sides of wage labor’s inadequacy as a means of subsistence –the consequences of the poverty imposed by their wages and the deterioration of the labor power that capital purchases by paying wages.

- Those dependent on selling their own labor-power are faced with the necessity of living an entire life from their wages while also producing offspring. Because these wages are paid by companies who stand in competition with each other, calculate labor as a cost factor and thus with corresponding severity, the bourgeois state steps in to manage this necessity in various different ways, different in every country…

- Wageworkers earn their livelihood by selling their capacity to work, which employers command in accordance with the progress of their own growth and general competitive trends. This “capacity” must first of all be developed before a person is old enough to work and thus does not yet earn the money required to do so. It requires education, which needs to keep pace with the constantly changing demands of the working world. This means restricting and functionally compensating the harm done to this capacity by its capitalist utilization. The same is true when workers become unruly and even criminal in times when their labor-power is not utilized. And wageworkers are simply unable to manage any of that on their own wages. So the welfare state intervenes with legal restrictions on working hours, workplace health and safety standards, compensation for the burdens of providing for a family and medical care, an 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 unemployment assistance and measures for retraining the unemployed, the welfare state makes impoverishment a governmentally managed career path.

All of that costs loads of money. As is the custom in a free-market welfare state, the collective wages earned by and redistributed among the working class is a part of the social budget, calculated as supplementary “non-wage benefits” paid out apart from the price of labor. That is thus an overwhelming burden for the economy, one that the state could spare itself and those who pay wages. After all, in bourgeois society, the economy does not consist in producing goods on the basis of a division of labor, with the purpose of providing for a good life for all. Rather, this economy produces money in order to increase capitalistically utilized property. Whether social expenditures in fact pay off as a means of ensuring “social peace” and guaranteeing the productive capacity of the working class is a dubious matter in the eyes of business. During “hard times” – that is, during capitalist crises – these expenditures prove to be a reliable source for cost-cutting measures that lower the nation’s collective price of labor. Conversely, these measures serve to organize a widespread wage decrease into a new social standard of living. However, even this expenditure is in principle indispensable for the market economy. This is especially true since capitalists should not only be allowed to consume and pay for labor power according to their own conditions, but also be able to do so as continuously and as much as possible. So it is absolutely necessary for the welfare state to use its power and accomplish something that the principles of wage payment constantly thwart. It 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. Determining the Damage and Managing the Costs 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 state’s welfare policy. The environmentally conscious citizenry measures how good and concerned politicians are by how many funds they allocate for clean-up campaigns, etc. On the other hand, these friends of nature are criticized by fanatics of the market economy who object to any expenditure that doesn’t immediately increase the returns of some competing company.

What a screwy world. The fact that environmental policy has become a permanent task for the state merely demonstrates that the poisoning and destruction of nature is one of the market economy’s many enduring achievements, an inherent part of its functioning, and that the abolition of this “problem” is not even a matter for consideration. What is a problem for the common good are the dimensions of this problem. The mere fact that the bourgeois state sees an opposition between “the economy” and “environmental protection,” which it strives or refuses to “reconcile” in the interest of the environment, excludes the possibility that the state might actually start to pursue the goal of ecology at the cost of the economy. If the state didn’t view the environmental destruction its economy causes as a problem for that same economy, then environmental interests wouldn’t have a chance. And whoever pleas for giving environmental protection “more weight” vis-à-vis “mere profit interests” has missed the decisive point anyway.

The fact that “ecology” has been made an independent sphere of policy reveals how many things can be differentiated between 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 not a more or less useful template for manufacturing goods that would allow people to live better, one source of material benefit that the other source – social labor – can extract from it. Nature is instead a mere “environment” for this vile mode of production called the market economy, in which private property has work done for the sake of its own accumulation – 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. This destruction of the natural basis of all life continues until its consequences become bothersome for the accumulation of private property. If these 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 low as possible.

The expenditures for that goal count among the indispensable expenses the state must take into account for the sake of economic growth. And as is customary in the market economy, these expenses provide the secure basis for a completely new area of business. An industrial country that leads in the destruction of nature possesses the best prerequisites for conquering the most reliable “cutting-edge markets” with developments in “environmental technology.”

4. Financing Land Rent

In a system where all useful goods and means of production are private property, it is only logical that the same be true of real estate. In any case, the bourgeois state finds it totally natural that – in terms of its actual or merely potential economic use – the territory over which it rules should be completely at the disposal of private property owners, and establishes this as a natural legal state of affairs. Moreover, in a system where every economic benefit depends on property, that is, where a state-guaranteed right of ownership grants property owners the power to make money on the needs of those who are able to pay, it is only logical that landed property yields a profit. The bourgeois state also recognizes this as a natural source of income and thereby creates a class of landowners who earn monopoly rents on the use of their landed property without adding to the wealth of the market economy by providing it with another actual good with exchange-value. Their revenue thus constitutes a peculiar set of costs for the rest of society. They are a surcharge on the production prices of foodstuffs and other agricultural goods, a deduction from the earnings of capitalist companies, which after all need a location for their business. Their revenue thus represents a direct expropriation of others’ income.

In the first instance, the demands that landowners make on the abstract wealth produced by the rest of society, without offering a service in return, do not concern the state. The state acknowledges these demands as legitimate, and manages the resulting antagonisms with corresponding laws and regulations. The business done with land itself remains the private affair of mature citizens: paying and collecting rent, exploiting a monopoly on supply and demand, extrapolating the price of property from the rent it generates, speculating on future monopoly prices, linking real estate speculation with credit. However, when these antagonisms get out of hand and start to endanger the functional “cooperation” between the members of the state’s community, it turns out that the state has to intervene in the private transactions between landowners and the rest of society after all. Once again, that is a basic necessity wherever wages – which suffice for the mere reproduction of wageworkers only if the state compels them to with its legislative force – must provide for the landowner’s livelihood. For wage-earners, agriculturally manufactured foodstuffs are too expensive and endanger the healthy functioning of the population. Society’s farming class is endangered by having to survive off of affordable food prices – despite and because of agro-technological progress – and having to share its profits with landowners. And housing prices become increasingly unaffordable as urban supply and demand drives up monopoly prices on land suitable for housing developments.

In both cases, a welfare state cannot avoid nationalizing at least a portion of the cost burden that landed property imposes on the gainfully employed, if it is to secure the revenue of landowners wherever the spending power of the wage-dependent population cannot. The European Union, for instance, provides its farmers with an agricultural market by subsidizing and guaranteeing minimum prices. It thereby also turns agriculture and livestock breeding into capitalist enterprises, causing their products to mutate into foodstuffs of doubtful nutritional value. Some of these farmers’ lands fall under the state’s interest in environmental preservation. In times of serious housing shortages, the state secures the legitimate revenues of its landlords through subsidies for low-income housing projects. Nowadays, the government gets the same effect by providing rent subsidies for slum dwellers, such that social welfare costs can at least make a useful contribution to the market economy.

None of that comes cheap. But private property owners’ entitlement to profit is something the state that grants that entitlement can’t have for free. And some of these costs yield a profit if, e.g., the state manages to use subsidies to successfully raise up a national export industry, which 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 German finance ministry once put it with unsurpassable lucidity. But the state also knows some irrefutable arguments for not handing over society’s accumulation of money solely to private citizens and their efforts at self-enrichment, instead using public funds directly as capital.

Politicians are aware of the key role played by the banking sector. After all, they organize the provision of credit with their own national agency: the central bank. The banking sector is the basis of all capitalist growth, and is therefore a positive condition on all other forms of business. At the same time, banks earn money on others’ business activities, which puts it in opposition to other sectors. In extreme cases, the state finds reasons for establishing its own credit institutions and intervening in, replacing, restricting or at least supplementing private money capital in order to boost business in branches treated poorly by the banks. In Germany, for example, the “Credit Institution for Reconstruction” (KfW), a relic from the Marshall Plan, had its hands full again in the 90s after the annexation of East Germany. And it is not uncommon for a government to engage in entrepreneurial activities, not only to provide services for the growth of competing capitalists, revitalize “deadbeat” firms or “liquidate” damages to private property. Politicians prefer to invest budget funds in cutting edge industries whenever it judges the capital needed to launch promising firms to be too large or unmanageable. Automobile factories, nuclear power plants and firms specializing in the construction and launching of rockets, and of course globally competitive national airline companies – all of these were born as state enterprises.

Depending on their respective political viewpoint, some view these “state interventions” as either contrary to the system or as a criticism of the system. If these are indeed a kind of “criticism,” then it’s the most constructive kind imaginable, for these interventions aim to promote the success of the nation’s capitalism. And the only thing “contrary” about them is the fact that the state acts as entrepreneur. The interventions themselves conform to the system so well that they can only be accused of being contrary to the system once they 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 book, but also successfully. If such an interest comes up, the state usually accommodates it. After all, politicians are usually the ones who propose and also execute the privatization of public enterprises. After all, when the bourgeois state plays capitalist, it doesn’t intend to enter into competition with private business, but to elevate its nation’s private business world to a higher level of economic growth. The state thus operates as a national collective capitalist in a competition which goes beyond the competitive culture it manages and necessitates a third set of costly state measures...

C. Politics in the Interest of Securing the Nation’s Business Success

1. Foreign Trade Policy

Everything the state does to make its society an increasingly productive money machine rests upon its undisputed monopoly over the use of force and the instruments of justice. That implies a dividing line between home and abroad, the exclusion of the authority of foreign powers. And that in turn is a restriction on its citizens’ economic pursuits, a contradiction to the same boundless pursuit for more money that the bourgeois state itself encourages and fosters. Establishing a border between domestic and foreign territory thus also means demanding that a foreign sovereign not forbid one’s own citizens from pursuing their interests beyond their home territory, but place their legitimate economic interests on a par with those of its own citizens. Conversely, a nation-state welcomes foreign businessmen whose monetary assets contribute to its territory’s economic growth. That is how an all-sided interest in transnational commerce comes about.

In order to establish and carry out this economic commerce, states carry out lively diplomatic commerce. They enter into agreements on the convertibility of their respective local currencies in which each side’s entrepreneurs do their business. The exporting and importing which then ensues puts these currencies in the hands of foreign property owners who use and increase their property in the countries of their choice. That is why sovereign creators of money – the states themselves – demand material guarantees that their respective currencies also really and validly represent capitalist wealth, always and everywhere. After all, the continuity of transnational business can’t be allowed to fail merely due to the consequences of international trade balances. States assure each other that they are willing and able to confirm the validity of their own currency as real, universally utilizable money, and to exchange it at any time for any other desired denomination.

For this purpose, states require a supply of foreign monies – and/or some traditionally and globally accepted monetary good. This allows a nation’s central bank to vouch for the funds that are denominated in their banknotes and exchangeable for other denominations at any time. In other words, states require currency reserves made up of foreign currencies and gold. That is why the bourgeois doesn’t just sit back and watch what the international business it empowers its entrepreneurs to undertake. First, it calculates the collective outcome of its economy’s international earning and spending and keeps an eye on the effects that has on the currency reserves with which it enables its own nation’s entrepreneurs to do international business. Second, depending on the outcome of trade, the state intervenes in these international money transactions, sometimes modifying its exchange guarantee and the given exchange rate in order to improve its trade and payments balances. And it reserves the right to collect foreign currency earned by the nation’s firms and apportion it to the nation’s business world as it sees fit. Third, regardless of whether its balances turn out good or bad, the state cultivates the national basis of its capitalists’ foreign dealings. It assesses all its efforts to secure and promote economic growth according to their effects on the balance of payments, i.e., the nation’s success in competing for shares of the world market. The latter doesn’t merely represent the profits made by successful firms, but the nation’s economic success. The nation’s competitive success is the criterion according to which the state ultimately decides – not infallibly – whether and to what extent a company or whole industry deserves state support, whether its subsidies are needed to erect promising industries or represent a waste of money.

Obviously, the better a nation’s capitalists fare in competition, the more freedom a state has in deciding this sort of question. However, enduring and sustainable success of this sort also entails new tasks for the state. In order to ensure the continuity of its economic growth in world trade, it must deal with the problem posed by other nations whose balances, complementary to one’s own success, turn out negative. The international financial sector has taken an enormous upturn ever since the leading global economic powers came up with the very market-appropriate solution of acknowledging states’ foreign currency debts – only under strict conditions, of course – as a substitute for already depleted currency reserves. Because some states cannot fulfill these conditions and yet still represent exploitable business partners, there will always be a place for idealistic sounding things such as “development aid” in the catalogue of serious and budget-funded state tasks.

Therefore, even the victories a potent nation achieves in world market competition are a costly matter. They lay the foundation for a state’s responsibility for the functioning of international business. And that is in no way limited to currency problems and questions of “international liquidity.”

2. Defense and World Peace

When the bourgeois state makes its national economic growth dependent upon the functioning of world markets, it doesn’t simply leave it up to others to decide 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 civil, i.e., economic means of extortion, whose use always aims at the self-interest of the other state power. Rather, the bourgeois state seeks more compelling ways of guaranteeing its access to foreign spheres of business. It is no accident that the economic order establishing the conditions and liberties of this access and ensuring its respect from all sides is called world peace. This global “state of affairs” is the result of past war victories, including the “cold” one, the result of which is the “one world” of global capitalism under “Western” control. The stability of this world order cannot be had without the constant threat of violence, otherwise known as “deterrence.”

As the situation stands now, the few large and powerful bourgeois states are making common cause – not only against dissenters from the rules of the currently dominant world order, but also against any potential efforts to call into question this freedom-ensuring regime of deterrence by making unauthorized modifications to the international balance of power. This kind of preventive peace politics implies 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 it either. That requires the constant readiness and capacity for war. States that refuse to hand over any responsibility for the world order have a correspondingly high level of arms spending. And these expenditures also demonstrate that despite Western allies’ “division of labor” in matters of world order, their internal rivalry has in no way died out. Controversies between the greater bourgeois state over who provides the authoritative definition for world peace are only logical, because that decides whether and to what extent a state is actually and ultimately the boss of the political-economic conditions of existence and success that it establishes. What is not at all necessary is the currently precarious willingness of weaker capitalist powers to value their strategic cooperation with their biggest competitor more than their own efforts to attain imperialist autonomy.

Penny pinching is taboo when it comes to world order and world peace. “Projecting power” worldwide, maintaining military superiority over any potential opponent on land, in the skies, or in any given alliance means financing entire industries that are unsurpassed in terms of producing destructive capacity. And thanks to unceasing technical progress, that will continue to be the case. It is only fitting that these same products – or rather, their outdated varieties – also prove to be a first-class of means of polishing up a country’s trade balance. No other product worldwide enjoys such a willing and solvent customer base. That is where industrial and military policies find common ground – and there is no more convincing illustration of 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, it even counts the means of destruction it requires as an integral part of the nation’s wealth, and it computes the lavish expenditures for these means of destruction as a core part of economic growth.

D. How the state procures funds while adhering to the principles of its economic basis

The bourgeois state procures the means for its expansive works from the class society over which it rules – where else? After all, political rule doesn’t produce anything, just the relations of production. The state adheres to their requirements while procuring the resources of its rule. Here the state makes use of both sides of capitalist moneymaking: On the one side, it mobilizes the power of credit, the origin of all capitalist business activity in an analogous fashion, for its own activity as a servant of capitalist accumulation. On the other side, the state procures a portion of the private revenue that arises from economic growth and from the state’s spending of its own revenue, thus letting it flow back into its economy. In other words, the state takes its share of the wealth of the nation through taxation.

1. Tax Revenues

In capitalist society, working means earning money, wealth consists in its being owned by somebody, and the social production process yields but one single economic good: exchange-value measured in units of currency. So it is only logical that the means of state power should consist in the social power of the money it collects from its citizens. In other words, the bourgeois state power “lives” off socialized private property. The state thereby makes use of its subjects as private citizens who, despite the acknowledged and legally protected private character of their labor and their assets, are nevertheless acquainted with something higher than a kind of materialism that is restricted to the desire for private property. And this higher thing is the state itself – the citizens’ 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 has them pay taxes, thus honoring them as the true subjects of the rule that is 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 its individual citizens’ tax-paying ability. After all, the burden imposed by one and the same sum of money differs depending on the income of the nation’s various taxpayers. This profound insight about the dialectics of equality is a source of never-ending political struggles over fair taxes – the proper relation between equal sums and equal burdens for all. Modern states have brought about intricate systems of tax collection and deductions, adding 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, as the fiscal authority, never forgets the goals, priorities and dependencies it has established as objective necessities. The state correspondingly utilizes the distribution of the tax burden as a policy instrument in order to promote 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 desired outcome – so certain to the market economys’s ideologues – rarely comes about.

The state customarily imposes “direct” taxes on the incomes of society’s classes and “indirect” taxes on consumption. Indirect tax rates often vary depending on the state’s social, educational and information policies; their economic advantage is that business can pass these costs on to the consumer. In addition, certain classes of goods are categorized as luxury and leisure for fairness sake. There is a special tax on oil because it is so cheap and consumed on such a massive scale, as well as special taxes on tobacco for health reasons. Direct taxes are calculated progressively depending on the level of income, and can be deducted insofar as they are invested in a capitalistically productive fashion. According to the type of income, the state collects taxes differently. For wage-earners and those not “self-employed,” many taxes are deducted right from the paycheck – a testament to how certain the fiscal authority is that it can’t let the working 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 “self-employed” and file prepared tax returns on their earnings, there is the problem of tax fraud and a permanent battle between the tax consultants and the tax authorities.

The tax revenues emerging from all this is the real, periodical summary of private economic activity in the country that has an effect on the state’s coffers, and is thus the only objective summary. It is the balance sheet for the nation's economic performance. For precisely that reason, the state cannot simply leave it at that. After all, the state’s measures are intended to have a productive effect on the future of its economy, not merely to perpetuate the status quo and wait for whatever proceeds might be generated, but to boost growth. That is why the state goes beyond what the economy manages to produce in terms of nationalized surplus wealth.

2. Government borrowing

In order to foster the continuous growth of capital, the state does not restrict itself to tax revenues, but makes use of the same instrument capitalist enterprises use to free themselves from the constraints of their previous business success and acquire the means they need to conquer new markets and market shares: credit. It borrows funds from money capitalists of both domestic and foreign origin, thereby expanding its freedom of action.

The state thereby renders an essential service to capitalist growth. With its own debts, the state provides the financial sector with secure and highly liquid interest-bearing assets, debts of such high quality as to justify loads of new credit. The state thereby expands the basis of national credit, whose general use as money it has already guaranteed with the bank notes of its central bank. By borrowing money and going into debt, the state empowers the financial industry to “create” new credit and thus ever more of the state’s money, in turn expanding overall private business activity.

Of course, this procedure for financing the budget, which not only conforms to the system of the market economy but is almost automatically useful for its functioning, has a price – literally: the interest rate that makes these borrowed funds into assets for money capitalists. The interest rate follows the locally prevailing “price of money” while providing a benchmark for the calculations of private money investors and the borrowing costs of private debtors. But above all, the interest rate on government bonds determines the degree to which the state reckons on the economic success of its policies. The state thereby not only anticipates the future growth of its financial basis, the taxes yielded by the national economy, but makes use of it to a predefined extent – quite analogously to a capitalist debtor who, in order to service his loan, pledges part of the profit he thinks he will gain from the use of credit. Tax revenues, which are insufficient for the state’s financial needs, thus take on a new, inverse relationship to government debt. The latter must justify itself in the form of rising tax revenues, which in turn justifies the state's mountain of debts, including the interest to be paid on them. After all, tax revenues represent the definitive balance sheet for the success of the nation's capitalism; it is the indicator as to whether and to what extent the state’s advances of capital have turned into increasing capital expansion. It is therefore the crucial verification of the quality of national debt.

This has nothing to do with repaying government debt. On the contrary, tax revenues represent satisfactory national growth, the best condition for more government debt. They demonstrate the political community’s increased ability to go into debt. Conversely, unsatisfactory tax revenues increase a state’s need to go into debt; low tax revenues obviously mean the state has done too little to promote growth. Either way, the national debt tends to increase rather than decrease. That has consequences.

3. Inflation

When the state issues debts to cover its financial needs, it not only increases the volume of credit with which the nation’s money capitalists do their business, but it channels, continuously and steadily, additional means of payment into circulation, beyond what has been earned through successful business. These means of payment are tokens of credit, which do not merely represent the amount of national debt incurred for their creation, but units of value that exist independent of that debt. This value, the legally fixed money-quality of the official means of payment and all the property that has its measure in that value, is in turn affected by the expansion of the mass of national credit caused by the state and authorized by the central bank. As the national debt rises, the monetary value denominated by the national currency unit tends to fall. That is the necessary consequence of the contradiction at the heart of government debt: The state declares banknotes representing the nation’s credit to be the nation’s money, as though they reliably quantified the capitalist growth brought about by that credit. At the same time, the state has its own debts, which contain no capitalistic business yields whatsoever, circulate in the shape of these very tokens of credit-money as the real wealth of the nation. Inevitably, each legally valid unit of the national currency represents an amount of credit that has not been turned into successful capitalist business and yet still claims to be value. The currency therefore also represents a certain amount of non-existent value.

The extent to which it does so depends on how well the national debt works to boost growth, on the extent to which the state’s debt financed expenditures are justified by the increased production of value. That lessens the reduction of the real value that the nation’s credit money legally represents. But a fall in value always occurs: That is 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, so foreign to its admirers, is not invalidated by the fact that the bourgeois force monopoly with the power of its laws declares the functionality of a kind of “liquidity” created through debt to be the material of the nation’s money. On the contrary, this characteristic of capitalist wealth asserts itself in the fact that the value of the state’s credit money, the measure of all things in the nation’s capitalism, turns out to be somewhat relative. It must let itself be measured against the yardstick of real value, and thus proves to be a mere substitute for money in that over time it comprises an ever smaller portion of that private power whose measure and effective embodiment it represents at home and abroad.

In practice, this truth about the nation’s credit money comes about as a natural consequence of the capitalistic custom of taking maximum advantage of society’s purchasing power. The growing amount of liquid funds in society, which have not come about as a result of commodity production and yet still, thanks to state decree, count and function as definitive capitalistic means of buying, paying, and storing value, allows sellers, despite the competition amongst them, to sell their goods at overall higher prices. The resulting general price increase reveals itself statistically, as an artfully measured depreciation in the value of money, and is then announced as the inflation rate. As to its practical repercussions, the way inflation comes about proves that capitalists, before inflation causes them any problems, have preserved their benefits from higher prices. After all, they are the ones who raise the rising prices. On the other side, and just as obviously, there is a specific percentage of damage done to those who have to cope with ever more expensive consumer goods, since they live on a contractually bargained, and thus fixed income. In any case, neither outcome conflicts with the system in any way.

Nevertheless, there is a certain contradiction to the fact that the lavish service the state renders to the growth of the nation’s capitalist wealth affects the units of that wealth and thus the measure of growth. Nominal and real growth diverge, as do nominal and real abstract wealth, because the depreciation of value does not merely affect the size of the growth of national wealth, but the substance of that wealth itself, quantified in the national currency. In fact, this difference represents – in a way that is as distorted and as objective as the capitalist economy itself – the relationship between the state’s program of credit-financed growth and the success of that program. It is a balance sheet for the growth of capital that bas been achieved relative to what has been anticipated in the national debt. Therefore, it is a measure of the political-economic success of the bourgeois state's rule.

It is for that reason that the state’s managers take the rate of inflation seriously, as a key criterion for their policies. First of all, however, they determine their policies, putting together the tasks and the resources of the state power into a great political economic plan. Then they implement that plan year after year (Chapter III). Then they have some problems with the results (Chapter IV).

III. The Budget: State planning in nations where the “market economy” reigns

Annual budget debates are arguments over the more or less successful performance of the administration in office. They lead to budgetary decisions which outline the future use of state power. There is good reason for the fact that all activities of state rule – the decisions over the advisable use of the state’s force monopoly, over imperatives and prescriptions, over the demands the state makes on its citizens and what it allows them – are judged as correct or misguided acts of budget decisions.

On the other hand, there are also consequences to the fact that the state rules by putting together a national budget. The permanent tasks the state declares indispensable and makes the responsibility of various departments are all relativized by the question as to whether the means are available. These tasks aren’t just carried out and paid for, rather the state examines each of its projects, everything in its jurisdiction, as to whether it is worthwhile or not. This review process begins by taking stock of the nation’s past success, which naturally incites political parties to some zeal in their competition to be put into power by the voters. On the one hand, controversies between the parties are a stage for the slogans they use to cast capitalistic circumstances in a light that makes their own party appealing to the public. On the other hand, there is plenty of expertise in how the market economy functions to ensure that there is no disagreement about the goals and the requirements of an orderly budget. For everyone involved, the state of the nation – whether it is represented as splendid or miserable – is considered to be the work of government, which has been busy organizing society into a haven of capitalistic business life. Although the government, in view of undeniable disappointments, pleads “powerless” and “innocent” and invokes things like the volatility of the market, etc., the same politicians prove just the opposite as soon as the opposition accuses it of “neglect” and “incompetence.” They do not step down in the face of the perils of competition they claim to be subjected to, but immediately take measures to help the nation achieve competitive strength, reserving the plea of “powerlessness” for those interests that get harmed in the process. In these cases, government was simply “unable” to do anything to help.

1. Making the Budget

The measure of success according to which politicians judge their own work in order to improve it owes to the observation powers of individuals mature enough to govern. Using the venerable art of teichoscopy, they take a look at what is going on in the country, and find out what needs to be done. At the same time, they take a look at the state of the nation’s coffers. Once they determine how many businesses have gone bust, how many youths are unemployed, how many children are not in school, the sufferings of retailers, but also of the police and the military, the various ministries develop their programs. In a democratic constitutional state, this goes hand in hand with new laws, and because all state action needs financing, the treasury department is faced with all kinds of requests from all corners. This department is entrusted with the management of the nation’s accounts, from which the state draws funds needed to implement all these projects. The latter depend on the availability and continuous procurement of money that is in the state treasury. By converse, the chief of the state’s finances is officially ordered, as paymaster of the nation, to be thrifty. Indeed, thriftiness is his constant duty; his office is responsible for keeping the treasury solvent, while allocating funds.

That isn’t changed by the fact that the state supplements its budget with credit when faced with tasks that must be financed. Because of the strain on the budget caused by interest-bearing state debt, gthe state’s borrowing does not put an end to its budgeting. On the contrary, keeping a sharp eye on the budget becomes all the more necessary. After all, the state’s various tasks, as established political necessities, represent a set of competing claims on the budget, so the burden the national debt imposes on the budget means that those charged with the management of the treasury are ordered explicitly to ensure that these tasks can be financed. Because of the custom of paying for the necessities of state rule with credit, the question and complaint about whether the state’s good deeds are “financially feasible” or not is a permanent fixture of all budget debates.

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 can provide budget funds, but can reduce and refuse them as well. They therefore also save whenever they spend. Secondly, they inform congress and anyone who wants to know that their accounting can withstand any audit. They do so by presenting numbers that prove that they are as assiduous in raising funds as they are in spending them, that their money sources are intact, such that revenues cover and justify expenditures – including those for interest payments on the national debt. When in doubt, a timely tax increase can also produce the desired result. Thirdly and finally, they insist that the task entrusted to the national treasurer – ensuring the continuous financing of policies through solid budget management – can only be fulfilled if the relation between expenses and income is put in order. Treasury secretaries don’t let themselves be restricted to the duty of balancing inflows, outflows and inevitable debts, rather they view their office as giving them the right to obligate the policymakers they finance to serve and obey the treasury’s balance sheet. That doesn’t necessarily cause a rift between the treasury secretary and the president; “fiscal responsibility” is an integral part of capitalist governance and enjoys the highest respect. It is on this basis that the state imposes the requirements of the budget as the standard that all departments must meet when exercising power. This means that policy alternatives are to be examined as to whether they mobilize monetary sources for the national budget.

Putting together and modifying the budget is a task carried out by democratic politicians, who give the impression of diligently striving to finance all kinds of beneficial things for the people and the youth, public health and future generations, all with the money of the state. When they make the sad announcement that some of these nice things are just no longer affordable, and when they argue for a certain budgetary decision by claiming it to be a superior instrument for raising money, they leave no doubt as to what budgeting is all about: The budget is the state’s instrument for organizing the kind of growth on which the state “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 sound accounting – the state passes its capitalistic one-year plan, the effects of which are also considered for the long term. The third proof for a solid budget invokes the efficiency of the policies financed by the budget.

2. Debates over the Budget

are therefore not monotonous events in which some contend that enough money is there, while others swear it’s not. Both the lack of funding and the availability of funding are always set in relation to a certain task. Those that lament a shortage of funds in fact complain about the fact that a state service has been dropped, while others complain that available funds are spent on the wrong programs, causing more important measures to fall by the wayside. Budget decisions come about by weighing the costs and the outcome of each and every state measure. And because costs are costs, and the only desirable outcome for political economic-experts is one that promotes the success of the nation’s market economy, the quarrel over the use of government funds turns out to be rather monotonous after all. For the sake of growth and jobs, saving is just as good as borrowing. In terms of how useful expenses are for state revenue, there is no distinguishing between these two objectives. Similarly, profitable environmental policy has been reconciled with the needs of the economy in such a way that forward-looking conservation no longer needs to annoy fanatics of growth. What is certain is that the state’s force apparatus needs to be as lean as it is effective. That saves costs, but also has a price…

Because well-priced governance is the leitmotiv for debates over a solid budget, an administration’s “admission” that it lacks money is a sign of misguided policies. At least that is the view of the opposition, which does not, however, proceed to reject the core ideology of all budgetary decisions. They certainly know all sorts of alternatives to past and future decisions, but don’t abstain from declaring the nation’s financial situation to be an objective constraint. This manner of translating budgetary figures into a list of necessities is as useful for approving of the “inherent constraints” that the budget sets in force as it is for distancing oneself from them. By recognizing the national money system as the guideline for their decisions, politicians at the same time commit to the few capitalistic laws that apply to raising funds. To do so, the only thing statesmen need to know about the market economy are the differences between expenditures for business and those for social programs, between measures that “promote” growth and those that “restrain” it. Here it is useful to distinguish between expenditures that count as “investment” or “consumption.” Obviously, politicians bear responsibility for jobs at home, particularly since unemployment does significant damage to the state's coffers. But the government can’t create jobs, since that is the responsibility of business. It’s wrong to spend state funds on jobs; after all, business creates so few of them precisely because they have to pay too many “additional costs” for social insurance.

Such demonstrations of the expertise at work in the preparation of a solid national budget display the will to manage all the necessities that were once the object of all kinds of criticism of capitalism. But after invoking the community’s budget problems, the customary cynicism can go on undisturbed. Jobs that don’t yield much of a livelihood are deemed by skilled stewards of the budget to be just as objectionable an “entitlement” as the livelihood granted to welfare recipients, which budget managers always regard as too high. For the wealth of the nation, there is only one appropriate use imaginable in the market economy – one that contributes to its expansion.

That is why today’s politicians place a high value on useful poverty. On the one side, a reduction in the “standard of living” is not only demanded by the budget – a subject of fierce debate – but also by reality. On the other side, a modern budget demands that beneficial conditions for growth be financed. After all, all state functions (See section II) can be examined according to both criteria: savings potential and efficiency. And when it comes to generating growth, some things can never be too expensive.

That is also why there is no lack of efforts to abstain from naming the reason and purpose of the state tasks that have become self-evident, in order to impute a good reason to them and/or their financing. The ease of this exercise is proportionate to the amount of spending going to any business that “creates” income and jobs and is somehow reflected in the Gross National Product. In the occasionally bold calculations of the economic effects that thereby come about, politicians justify burdens on the budget, which in fact was supposed to be relieved. So every budget debate is a playground for ideologies, in which all sorts of cause-and-effect relations between savings and growth are invented. That the alleged causal connections – taken seriously as a theory of the “market economy” – are not very exact does not make them any less useful for legitimating state spending. When it comes to measures for which money is no object, there can be no questioning their effects in terms of growth and job creation. In other cases, the positive economic effects are denied; nationalized money and its spending are regarded as inadequate substitutes for the growth of private property because it ultimately limits that growth. In the realm of fiscal policy trade-offs, politicians cultivate belief in their ideologies very selectively. Advances in the nation’s ability to wage war obviously create jobs, and also maintain profits for the arms industry, so this is a sensible use of society’s money. 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 negative cases, a broad range of necessities for state action exists. Although these are certainly necessary, it is not clear whether they will pay off, whether expenses are justified. The business cycle offers the best advice in this regard; some “investments in the future” get deemed useless in hindsight once the “ratio of spending to GDP” turns out to be unbearably “high.” Such disparate matters as nuclear power plants, public health and pensions meet the same fate as cutbacks and readjustments…

When politicians adopt an orderly budget which, starting from a certain balance, is supposed to organize the financing of necessary state tasks in a way that promotes growth, politicians will inevitably scrutinize available funds. The composition of these funds – tax revenues plus borrowed funds – still causes every treasury secretary to take on the task of reducing the debt. It is crucial that the relation between these two budget components is improved, either to avoid new debt, justify current debt or ensure reliable debt service. From the perspective of the budget, each politician reflects on the long and medium term effects of growth measures as a way of financing the budget. The role the state assigns to the free market, which is to function as the nation’s source of money, is always a question of the degree to which the government enlists the citizens for the financing of the state.

Because tax increases enable politicians to finance more of their good works, the search for ways to get hold of cash accompanies budgetary legislation throughout the year. That's why there are continuous tax hikes, though not without further ado. Mindful of the ultimate purpose of the budget – the promotion of growth – politicians search for ways to tax without harming growth. The state 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 or at least impose sensitive limits on it. Anxious to collect as much tax revenue as possible, the budget director looks to conserve his financial sources, so that huge amounts of money at low rates flow into the treasury. Maintaining this principle and the hope that government will only take from business what the latter 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 this ideal.

Tax reductions are needed because taxes can ruin the profitability of business. When politicians notice that growth is not being brought about by the free market that they govern and for which they arrange and expand their budget year after year, they become self-critical comedians. They then declare “the state” along with its budget to be an unbearable obstacle to domestic business, a mere burden. Of course, they do not proceed to dissolve the state, but move on to the next budget decision, which they supplement with a tax reform. Reforms must bring significant relief to business. On the one hand, the loss of revenue must be compensated elsewhere. On the other hand, budget politicians insist that the business world then obey its tribute duties, that it thrive and prosper without the old form of tax relief known as “tax loopholes.”

When alternatives to the state budget are debated in parliament and in public, while a controversial search for the most efficient use of money and debt rages, macroeconomic zealots come up with many a bold theory. That is inevitable, since every object of state attention is treated as a factor in economic growth. Besides, that isn’t a big problem, because every new budget corrects the previous one. The state learns from experience through its accountants; and its accountants view the effects of previous decisions on the national balance sheet and see what distinguishes a profitable investment from a costly subsidy. Even as purchasers of military equipment, statesmen think strictly economically. That can result, e.g., in the “most cost-effective fighter jet in the world”. But it’s no wonder that politicians have remarkable aim when it comes to making budget decisions, since all these decisions derive from the same basic questions: What will increase profits and competitiveness in the economy? What is standing in the way of a boom? How can the budget be improved? What will relieve it and what is a useless burden on it? With these tools of the trade, every government then puts together a textbook version of capitalism. And whoever has studied Marx will not at all be surprised to find that all the determinations he wrote down on the exigencies of the capitalist mode of production are still in practice today, where they take the form of conditions imposed upon society for the production, distribution and consumption of wealth ...

[1] Marx uses the term “political community” (das politische Gemeinwesen) to indicate a community that is defined by its being subject to a single state power. The people of this community are thus a community by virtue of their common subjection, 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 along the way to establishing the capitalist mode of production. The sovereign’s subjects had first of all to earn the money that he took away from them. By producing for sale, the class of farmers and hand-workers was divided and sorted into two different classes: 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 meet their payment obligations. 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 US 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 even today, some of those banknotes differentiate explicitly between their role 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] “Ideal” is not meant here in the sense of being “perfect,” but rather in the philosophical sense of belonging to the realm of ideas. The state is an ideal collective capitalist, because it itself is not a capitalist in competition with the others, but rules above them. It is secondly collective, because its interest is not 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).

[7] With its force monopoly, the state 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 using that force in accordance with the rules of private property.

[8] 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.

[9] Marx explains that in bourgeois society, each individual is divided into a “bourgeois” and a “citoyen”, the former being the person who pursues his private and individual interests in the economic sphere, the latter 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)

[10] The following principle still generally applies: “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)