“The State Saves!” Ruthless Criticism

The official ideology for the politics of cutting social spending and de-funding state universities:

“The state saves!”

[Translation of a lecture by a GegenStandpunkt editor at University of Goettingen, December 14, 1994]

I do not want to join the choir of those who are now complaining about how badly the state deals with its universities and its new generation of academics. Lobbyists do that – professionally. They exist for this sort of complaining and protesting. If an interest is harmed in a democracy, it announces it with the words: “I was damaged, this does not make sense.” Snubbed interests justify themselves with the argument that the state decision is a mistake. The argument is that if the rulers cut back on education, they thereby neglect their official duties and not only harm the students, but above all the state, the community. This is not group-specific. When cuts affect the farmers, they say: “But everybody wants fresh eggs, and it is bad if only the large-scale enterprises survive!” When education is cut, they protest: “we need properly equipped libraries, less crowded seminars, more student financial assistance – so that we can fulfill our education requirements quickly and well. Society needs good teachers, physicians, engineers!” This can be done to the point that one says that resources should not be cut in the name of national competitiveness.

Such protests make one wonder whether to regard them more as hypocrisy or as proofs of subservient loyalty. Hypocrisy, because the directly damaged special interest protests that its objection is not owed to the egoism of this interest: “It is not because of me! It is because of the larger whole!” Not because of the medical students, but so that good physicians graduate. Not because of the farmers, but so that there are always fresh eggs. That is hypocrisy. Everyone represents their interest, but no one says: “I want this. Now!”

The other side of this is the loyalty oath. Anyone who in the event of a damaged interest seriously accuses officials of a breach of their official duties obviously cannot imagine that national demands could not accord with their own; that the goals and priorities that Germany has when it plans its economy could simply not fit with the demands of the students. In democracy, it never comes to the honest conflict: “we want to study in comfort, with more time to hang out – that is also quality of life – and the state wants to whip us,” or “we want this, and the nation requires the opposite of us!” Conflicts of interest are always expressed in the mendacious form of a good, recognized, general value which nobody can damage, and if the government nevertheless does, then it damages itself. Thus, in truth, conflicts of interests are denied. They may not actually exist at all – and if they nevertheless do, there must be a mistake.

Only if one knows the state's goals as expressed in its finances can one judge whether, in the considerable de-funding of the universities, incompetence and mistakes are at work or whether the state has a goal that affects even the education of the next generation of the social elite. The same point of view on “saving” not only governs the universities, but also health care costs, pensions, social welfare assistance, the planned temporal delimitation of unemployment relief, etc.

Certainly not “saving”:
The remodelling of the tax regime

Even the most superficial view of the national budget shows that “saving,” which is to be accepted as necessary, is a completely inappropriate expression for what the politicians are doing. In Bonn, the 1995 budget was recently debated. The Minister of Finance calls it an “austerity budget” because the new debt, the increase of the national debt, is to grow “only” by 55 billion in 1995. No one talks about the debts that the federation and the states already have.

Thus the absolute debt is not the question. It is quite clear that it grows ever larger. It can't be said that the state saves in the sense that the Minister of Finance adapts expenditures to income because nothing else is available; or that he would stop going into debt or even scale back the existing debt. Unlike normal people, the state is obviously not forced to get along on its income and limit spending if it does not have enough money.

So a little economics of the tax state: the state is not an economic entity like the famous household in economics. It is not subjected to actual current income in its expenditures. It decides what expenses are necessary and parliament allocates the revenue for it. If there is not enough money, it just gets more! That's a good position to be in, and the state is the only one in this society that can afford it. If it does not have enough money, it raises taxes.

The state is the political sovereign over the society of private property. Everyone has to earn money. With capital if they have it, with work if they do not. The state gets it by a completely different relationship: taxes are not an exchange. No one who pays taxes acquires an entitlement to a service in return – quite unlike someone who buys a commodity or signs an insurance contract. The state takes it from the citizens and then it is the state's. It gets money by deciding to get it – and the state itself decides how much it needs.

There is, however, a barrier to taxation, i.e. the usefulness of the tax source itself. The bourgeois state is the political sovereign of a society in which nothing but private business activities are conducted; it administers and organizes these business activities and is interested in their success. With taxes, however, it burdens these business activities.

Because the state's leaders are concerned to limit taxes, they are struck by a characteristic difference between the citizens, i.e. the tax sources: the taxation of normal people's consumption is a variable with a wide scope. Here they can say: “suppose the people give up a vacation or give up something else and are forced to pay 10 per cent more to the state.” That can be done, and it does not have huge consequences if the people don’t like it – and don't resist, e.g. with wage conflicts.

The state acts quite differently towards the entrepreneurs. They matter. If 10 percent is taken in taxes, a business is no longer profitable. Then the planned investment and the tax source is cancelled. In today's open world economy, the entrepreneurs can freely select from a world of states which offer themselves to them: “Invest your good money with me, I will provide a country completely suited to your desires!” The entrepreneurs can say: “If I have to pay more taxes here than in another comparable country, my profits are worse. So I'll leave.“ Tax policy is set within the contradiction that the state fulfills its functions for business and desires its success, but nevertheless takes away money and thus diminishes its success.

A reform of taxation can be observed over the years which has shifted the main interest of public revenues: away from taxing capital and towards taxing consumption; away from direct taxation towards indirect methods. Indirect taxes are those that the consumer always pays in the end. Everyone must pay the value-added tax which is placed on any increase in value to a commodity; but they stick this tax onto the selling price of their goods and even point this out. Thus everyone who has something to sell rolls the tax over onto the buyer and only the last buyer really pays the value-added tax – the whole thing. It was passed on from everyone else. The introduction and successive increasing of the value-added tax in relation to direct taxes is one element of this restructuring.

What does the state do now with the taxes? It distributes funds according to the tasks it sets.

There are many tasks, but they follow a simple principle: the state needs money for itself, its apparatus and its administration.

Secondly: for the services that it carries out for the society with its force – with law, police and prisons. It creates and protects the property order: for those who have property, it ensures that others may not get hold of it and excludes those who have nothing from accessing land or tools or any of the other wealth of this world.

With its monopoly on force, the state guarantees the productivity of a social relationship in which the have-nots and the rich are marvelously dependent on each other – the former need the latter, who possess the means of production, to be able to earn their livelihoods, and the latter also need the former because without their work their fortunes do not automatically become larger. The state supplies legal security for the conflicts that this beautiful relationship creates in abundance. It subjects and examines every action by its citizens according to the law, and punishes those who violate the law. This costs a certain amount of money.

Thirdly: the state maintains a military – the second largest national expense. It secures its force monopoly and sovereignty domestically by not letting any armed private power arise and keeping the influence of foreign state powers away from its borders by force or the threat of force. Of course, we know that for the better states – like ours – self-defense is a modest task for the armed forces, which are not content to guard the border, but must have plenty of force all over the world. That must be paid for, of course.

Fourth: the political sovereign provides for the creation of conditions in which business prospers. That may sound a little circular – however, the only proof is the result of what critics of the system once called the capitalistic class state: the state serves the business of private entrepreneurs and makes itself dependent on their success. It maintains and promotes its tax sources by spending the money it collects. It establishes an infrastructure at public expense, makes available a telecommunication system and a stable power supply; and if this does not come into existence by itself, then it ensures that there is a steel and coal industry, and that there are general conditions for profitable business. In this framework, it also ensures that people are useful and are made useful. In order to be available for the needs of the entrepreneurs, the people must first of all be in a certain degree of health; secondly, educated; and thirdly, somehow living at all – because by no means can everyone who doesn't do a profitable service for the economy live on their pay – old people, the sick, and those for whom no need exists.

The sole quality that a people is intact, thus able to work and be useful, is something that must be produced; “public health” falls under this category. If one goes to the third world and looks at people there, one cannot say whether they are ill or not; they are simply physically non-functional. Illness decides everything: if someone breaks a leg, then he is a cripple for life, and no longer fully functional.

Within this limit, the education system is also one of the state's tasks; some rough level of reading, writing and arithmetic must be enforced, even if a lot of elementary and high schools are well-known for not doing it. Then that exists for using the technologies dealt with in a normal working life, today the computer, but also an ATM or a numerically controlled machine. The state does not spend tax revenues on its health and education systems out of philanthropy, but because the people are useful. This argument is important because I will later discuss a change in the situation that has thrown all social-state calculations out the window: today there a lot of people who are no longer useful.

All public spending can be summarized under the main idea: the state spends money to promote its tax sources. It does it so that business prospers. With the legal system, the infrastructure and transportation conditions, and the maintenance of the people: it does it to give business its means.

Because the state produces its tax sources, it also does not make itself dependent on whether they already exist when it promotes them. The competitive capitalistic nations of today would not have come very far if they had made the structure of their political economies and the production of their international competitive power dependent on the financial power they had accumulated from taxes on preceding business activity. That would have taken so long that no state since the late Middle Ages could have done it any differently. The states discovered and tapped a further pecuniary resource: the national debt.

The national debt and its consequences

Before we get to the peculiarity of state credit, I want to make some remarks about credit in general: a credit exists when someone who possesses money loans it to somebody else for a certain period of time and collects interest on it. Martin Luther famously said: “credit is usury!” This form of enrichment at the expense of those who do not have money seemed tremendously unfair to him. Because when the poor use credit, those who have nothing but need something are paying not only the price of the commodity they need, but more than the price, i.e. the interest on top of it. The most abstract formula for capitalism is: money automatically becomes more money; property is the guarantee that it will increase – today's self-evident truths seemed not at all self-evident and reasonable to pre-capitalist philosophers. Christians had to learn, like the Muslims later, that credit is also a fair thing in God's eyes.

Marx said the same thing, only differently: “credit is usury whenever it is not assigned to a capitalist.” Because if a company gets a loan in order to transact an investment and makes a profit on the investment, then it must divide the profit with the owner of the money who gave the loan. A part of it must be paid as interest, but the company is also left with a part of it. The company has done something good for itself with the credit. It made a profit with the capital which it did not have before. A company that gets a loan becomes richer; debtors who get credit for the sake of consumption become poorer. The state is a completely different type of credit applicant; it fits neither of the two categories. First, it is definitely not an entrepreneur. If it takes a loan, then it does not thereby increase wealth. It reduces it. It takes a billion and with it buys 10 kilometers of highways, a school complex or 10 tanks. Those may be things that produce an end product that the state wants – but they do not increase the money spent on them. Economically, what happened? The state took a loan for a billion which it did not have. It promised: the money will be increased. But unlike the case of the entrepreneur, the money does not increase by this activity. It was turned into something, e.g. tanks; either they wait for a war or they are used. If they fire, they destroy the enemy, but they don't reproduce their purchase price, much less a profit above it. The state gives its promise that the debt will be paid back with interest, and it keeps its promise. The bank, which gave it the billion, receives the agreed upon interest, including repayment. The state asserts that the debts it makes are capital, but they are not. Instead, the state consumes it; it is a consumption that destroys wealth. Interest and repayment are promised not from the return flow of the investment and the profit made thereby, but from future taxes or new debts.

The second peculiarity of the national debt concerns its “collateral”: if we go to the bank and want credit, it is happy to give it – that's their business – but it requires a guarantee that the debt will be paid back or is able to be paid back. The “little guy” must prove he has a regular income, and if he falls behind in paying it back, he must agree to his income being garnished. For bigger loans, a property or some other security must be held. Unlike these cases, state credit is credit with no collateral. Why does the state, which doesn't increase the borrowed money at all, get credit? And to a gigantic extent ... 2000 billion. The answer is: because the state is the master of money. It creates it and sets it into circulation. Its force, its sovereignty is its security. It created the central bank which in an emergency can simply print money and give it to the state. The security that it offers is that it is an economic subject that stands above the economy, that it does not earn money but creates it. And that is not a fiction: the state is always the last actor in a society that can still pay when no one else can.

This economic freedom of the state, which stands above the economy, certainly has consequences. In political debates, the national debt is considered a way of financing the state's tasks that has an advantage over taxes: it does not burden the tax sources – the entrepreneurs' business or wages. Its disadvantage consists in shifting the burden into the future, onto “our children.” This is untrue. If the state issues debt and boosts material wealth, if it appropriates the results of whole industries for itself, then it deducts wealth from the society. If it means that this doesn't harm anybody, this is not true: the procedure does not damage anyone in particular, but everyone who owns money. Taxes are one form of expropriation: according to certain rules, money is taken away from the citizens. The national debt is a different form of expropriation: the state uses its political sovereignty to give itself purchasing power and goes shopping with it. Its purchasing power is not earned, i.e. a result of selling. Private business attracts money only by actually selling something; their money is a realized commodity that stands opposite material wealth. By contrast, the state's purchasing power is created without this wealth having increased; rather it is decreased to the extent that it buys. This asserts itself when people who have something to sell discover that it's easy to raise prices. Inflation is nothing other than that salesmen can charge higher prices.

Now we must make still another small digression regarding inflation. It is considered a dangerous consequence of an overly large national debt and is something that is supposed to be avoided. The political-economic objective of “inflation-free growth” is emphasized again and again. Allegedly, the government has pursued the goal of “zero inflation” since 1945. However, this has to be one unsuccessful political endeavor – all the persons responsible for it must despair. Inflation is “secular,” as economists say: one century long. The politicians obviously don't have to fear inflation, which they always talk about. Therefore the question arises: who or what is harmed by inflation? I already gave the answer implicitly: it does not damage people who have a commodity to sell; they can sell it at a more expensive price and earn more money than before. Inflation is even sometimes a proper means of doing business: with inflation, it is favorable for a company when it has a lot of preliminary products in stock because the commodity to be produced becomes more expensive in the bargain, without it having to do anything. If the company has to buy the material and raw materials after the inflation, the profit margin sinks back to the normal level.

Those who suffer from the loss in the value of money are those who live on fixed incomes; not those who sell a commodity whose price adapts on short notice to the price attainable. Fixed incomes include contractual wages, pensions, and student financial assistance plans; they are all fixed over long periods. If they are depreciated, their subscribers are poorer. This reduction in the price of people is not feared at all, but is an economically pleasing effect of inflation: over the course of the year, workers become cheaper for the entrepreneurs until a new wage level is once again established. In the present period, a compensation for inflation which at least restores the money value of wages to the old level is no longer a matter of course. Also the monetary depreciation it causes does no harm to the state: tax revenue grows nominally, thus really stays the same; the income tax even grows thanks to the pay scale adjustment.

That's why the state's concern about the consequences of its being financed by the national debt can't be taken particularly seriously. First of all, it has no problem with inflation. And if it does, then it only concerns its degree; then it can become a problem. Its a matter of avoiding the transition from normal to galloping inflation. If the money is no longer reliable, then business calculations no longer work out; then business ceases because of the uselessness of money, and it flees from money into “real value.”

The competition of nations over credit

Rather than a problem, inflation serves as an indicator for a nation's real concern about the depreciation of its money: its usefulness in relation to those of foreign countries. All the money that the state “creates” is credit – regardless whether the central bank supplies money to the society or whether the Secretary of Finance issues state bonds. Modern money consists of claims on the central bank or the federal government; certificates of indebtedness or promises to pay perform the functions of money. If domestically these notes become inflationary, this harms the owners of money, wages and annuitants, but it doesn't terminate the functions of money for the economy. Within the scope of its rule, the national sovereign is powerful enough to force every citizen to accept its money notes on demand. They are “legal tender.” Nobody may refuse to accept the national money and require real value – e.g., gold – in place of the worthless paper as the equivalent for his commodity. Everyone may freely decide prices, but the national paper money – whether it devalues or not – must be accepted as the means of expressing prices.

It is not like that in relation to a foreign country. Where the power of the state ends, the evaluation of the usefulness of its money takes place purely economically. In international exchange, where no sovereign prescribes the representation of value, a real equivalent for the delivered commodities must be on the table; in former times, it was gold; today, national currencies are compared and assessed according to the guarantee of value they can offer. And their international purchasing power is decided by it.

To that extent, the real barrier for the national debt is its harmful effect on the international usefulness of the national currency. And no state is so modest that it wants the money notes it “creates” only by its sovereignty to work only within the limited area over which its sovereignty extends. With their national currencies, capitalist states want to provide their citizens with access to the world market and the wealth that exists abroad.

Each state – this is a high ideal and a nice insanity of our social form – has the goal that its debts are considered without question all over the world as money. Then it can increase its debts and send them into the world as good money. That is genuine economic sovereignty: the ability not only to make money valid in the national framework, but to be able to increase it worldwide by political means and thus expand national solvency without having to increase the profits earned by economic means. It is an unusual special power of a nation to translate its force directly into wealth. Because power and wealth are first of all not the same: a nation can be militarily superior, it can also rob if it wants, but it can't put notes into circulation and simply say: whoever has these has wealth. This ideal can become true – but it can't possibly be true for all nations. Today there are worldwide only three national currencies that are considered everywhere as money and guarantee access to wealth: the US dollar, the Japanese yen and the German mark. All other currencies are either sub-sections of these three or became useless in the course of international business. The fact that all currencies are today formally convertible, i.e. that states permit the free exchange of their domestic money for foreign money, doesn't mean there is also an interest in all these currencies, that they all can happily access foreign wealth. If no interest in them exists, or if confidence shrinks in the state notes of a country, then such currencies plunge, as happened recently to the Russian ruble and the Mexican peso.

The first national money that was at the same time world money was the USA's, which owing to their victory in the Second World War had the power to draw up a new world economic order. They came out of this war not only as a victor like Great Britain, but as a capitalistically intact power which, due to the war, had acquired the gold treasury of the capitalist world – from the allies’ payments for weapon supplies. They gave a gold standard to their (and only their) money, i.e. their dollars exchanged for a fixed rate against gold, and thus they offered their money to the world as a gold-equivalent, a substitute for gold. Thus the dollar became the general world currency, which opened the whole “free world” to the dollar as an investment sphere and gave the order to all other countries: “earn dollars!” The dollar was the reserve currency and the absolute stuff of wealth. Thus gold was displaced in international accounting.

The USA made abundant use of its privileged position of having unlimited freedom to go into debt and financed not just a few wars after 1945 by increasing the amount of dollars. For the forty-year long cold war, they fostered partner nations that should also be powerful and contribute to deterrence against the Russians, to damaging and constricting the socialist camp. But the USA had to consider that two competitors emerged in Germany and Japan. These two have currencies that also have the quality that they can be accepted and used like gold. The European currencies – the French, British and Italian – were also for a long time good money; but they were so because of the European Monetary System, by their connection to the German anchor currency. And now people in Europe are experiencing what happens when nations give up their competition for a common guarantee of their currencies: Germany withdrew from this guarantee and let the EMS break up. The strength of the D-mark was defended nationally by being separated from the less reliable European funds; and then the Italian currency lost its credit-worthiness, and so for Italy the situation arose that its government could not make its money circulate and create more debt. Of course, they – so far – make lots of debts, but they cancel their money to the degree that they increase it politically. In consequence, Italy, Spain, and Great Britain, if they nevertheless make new debts – it must only be for repayment of the old. Here one notices what a nation that can calculate its debt in its own currency has for a source of wealth. It honors its debts for reimbursement, but it pays in the medium that it produces. It can always pay. One that must pay in a foreign currency has other obligations: they must carry interest and repayment in a currency that they cannot produce. They must have earned it by export successes, by which they obtain the money of other nations, so that they can then pawn it again to the credit lenders. This applies now to the currencies of the European states that belong to the G7; about the currencies of the rest of the states in Africa, Latin America and Asia, we do not need to talk. They are not suited for internationally active businessmen and even the native rich. Indeed, they buy and sell in their nation so as to exchange their domestic money as soon as possible for the “safe port” of one of the three world currencies in order to protect their money wealth against the depreciation of its domestic validity; the native countries call this “capital flight.” These references may be sufficient to make clear that the credit currencies enjoy beyond their national borders differ between the winner states of the world market, who can dispose it at their discretion, and the loser nations, which must serve their principle without ever thereby getting any relief.

The example of the two social climbers of the postwar competition show how successful states earn the freedom to let their debts work as money: Germany and Japan.

First, a state creates confidence in its own currency by guaranteeing its exchange in a foreign currency. The state permits the international owners of money the reliability and business opportunity to continuously compare what its own currency offers with investment alternatives elsewhere – and guarantees the conversion of its own currency into foreign ones. For this guarantee, a state needs a treasury; this no longer consists mainly of gold, but the foreign currency of other states. For a given exchange ratio of D-marks against other currencies, the Federal Bank can last as long as it has foreign exchange reserves. It defends the confidence in its currency by coughing up foreign currency. If confidence is battered, the treasury quickly flows away. The EMS crisis showed that profoundly: Italy and Great Britain practically plundered their public treasuries.

Secondly: how does a state supply the foreign currencies that constitute its treasury? Foreigners must have a need for the currency, and then exchange their foreign currency for the national one. The need for their own currency results first from purchases. If a country exports commodities at a quality and price that is attractive on the world market, then the demand for its own currency and the supply of foreign money adjusts. The export nation West Germany, which for nearly fifty years exported ever more than it imported, thereby provided their money with a solid basis in the world economy. What such a permanently one-sided export organizes in other parts of the world, we do not want to talk about at all; but this much is clear: if one nation sells ever more than another, if it increasingly controls their domestic markets and collects their money, then the other nation must first of all lose ever more production and secondly lose the solvency with which they buy German commodities. German success also means: exporting unemployment.

If the international demand for the national currency is large enough, then there is confidence in this currency’s stability and it is unimportant how much national debt this country has. Foreign demand for the currency compensates for internal indebtedness. A state that can generate this confidence gathers ever more of it. The currency becomes a reserve currency. Other countries buy it not in order to buy with it, but only in order to keep it available in the public treasury for their own security. This currency is then a value guarantee for others. The country of origin can send its money out into the world, and it never returns increased; no authority wants to see it for a commodity. The dollar, yen and D-mark are the funds whose ownership makes every central bank solvent.

Because other nations hold German money as a safe form of storing value and “guarantee” themselves with it, they set themselves in relation to Germany on the lower levels of business – importing and exporting – while the whole higher floors of capitalism, the offices of financial transactions, are on top. Security issues, shares and other stock exchange and banking transactions create profits and taxes in Germany, completely without production, and again multiply the international demand for German foreign exchange. Thus this nation has a surprising ability to create debts: it swallows other industrial nations whole and backs it up capitalistically with an explosion of state debts – and this unreliable growth does not ruin the currency.

In the meantime, the future of national finance, i.e. the freedom to go into debt, is no longer self-evident. In the years after the Maastricht treaty, the individual European currencies were dismissed from the security of common support by the EMS and were to stand the test of international investors separately – and failed by this yardstick; now there is the so-called currency turbulence between the big three because the issuers of this money no longer succeed in delivering a reliable value guarantee for their notes and secure with it the confidence of international speculators. Even if the German mark is considered for the time being a “safe port” for funds which are drawn off the dollar, and to the extent that, together with the Japanese yen, it wins the competition over credit, it points to a development that is considered a threat to the world economy because the national credits now stand in a hostile, mutually exclusive relationship to each other – and it is no wonder that in the end the strong currency is only the mirror image of the weaker currency that faces it. Not only can't all currencies be universally recognized as the money of the world economy, but ultimately someday neither can a few currencies be so recognized. German economic policy is now positioning itself for this fight.

The end of an unusually prosperous phase of capitalism

In this system in which all states trade only in order to enrich themselves at the expense of the others, it is not normal that everything takes place between them in credit; in the last century, the balance of foreign trade accounts took place in gold, until the transfer of wealth in real value was ended. After World War II, the USA was terribly proud that they had conquered economic nationalism, the reason for the world economic crisis of the 1930s and thus the world war. Of course, this system arose not at all for its own “reason,” but only from a special situation; a special situation in which the interest in the functioning of the world economy coincided with the national interest of the most powerful country. The USA was the only nation that still had money and an intact economy; they opened the world for their money by putting it at the disposal of their defeated enemies and battered allies in the form of credit. As long as the dollar was the only international money recognized worldwide, a system of fixed exchange rates worked between all the free-market economic powers. At the beginning of the 1970s, when the USA had to admit that their money was also only one currency of varying value among others and had to give up the gold parity, the system was introduced of each country crediting the currency of the other – and it had its strongest support in the common front of all the capitalistic states against the Soviet block in the cold war. The allies had to band together because in isolation each individual partner would have been forced to compromise with the Soviet Union, and they all had an interest in their NATO partners also developing powerful political economies. For it they maintained the system of crediting by which balances were never really adjusted by the transfer of wealth, but the insolvency of one country was credited, i.e. written down as a balance with the creditor country. The missing sums were treated as investments they would never have to pay, but only the interest on them. Only under such an exceptional condition could the idyllic situation exist that, despite the very one-sided successes in foreign trade between states, a state never really had to announce its bankruptcy and drop out of the world market with its market and its business opportunities.

So continuity of business was always made possible between the OECD states, as well as in relation to third world countries which were to remain suppliers of raw materials despite their chronic deficits. No potential new business should be neglected because of a failure in competition; anywhere in the world, wherever a chance for profit existed, there should be no lack of money to exploit it. For over four decades, the money to be earned by a future business was anticipated with credit in order to make exactly that business possible. If it succeeded, the credit could be served and erased; however, because it often financed the ongoing external economic failure of states, and because it was a political credit that would not have been granted by private banks, the constant accumulation of credit not only launched business and did so to an extent not proportionate to the swelling mass of credit, it set in motion a gigantic accumulation of international debt. Because there was always enough money for business possibilities and expansion, the prosperity of capitalism after the second world war was not only a surprise to the Eastern Bloc socialists. The socialist parties waited year after year, until 1989, for the “great crisis of capitalism.” In their textbooks, they had discovered that there must be crises in capitalism; and there were nothing more than on-again off-again market conditions. This happened because in all states the means of business were procured through anticipation with credit, without any punishment following it – the oath of disclosure that the growing wealth did not exist in proportion to the credit granted and interest collected. Even in the world debt crisis at the beginning of the 1980s, when Mexico and other Latin American countries became insolvent, international cooperation prevented the official credit bubble from bursting by creditor nations deleting assets in their books.

This phase of unusual prosperity for the world economy thus had a condition and a price: that condition – the common enmity of the capitalistic powers against the socialist camp – is now gone; and the price is an ever larger international accumulation of debts which represent all the future growth that has not occurred to the necessary extent: debts that can be never be paid back again and on which ever less interest is paid.

The perils to credit determines the political agenda in all countries – and while in former times, common actions for renewing and extending credit stopgaps were announced, today the big world economic powers try to protect their own currencies and their own national credit systems from bankruptcy and a loss of confidence in realtion to the others. About ten years ago, the New York Plaza Accord, and later the Louvre Agreement, tried to allay fears about the dollar’s volatility; today, the dollar has been falling by 20% for half a year, and the German Minister of Economics considers common measures as ineffective as they are unnecessary: “Our trade volume with America constitutes only 10% of our foreign trade anyway.” There is disinterest in united support for currencies. But everyone notices the dangerous situation. The volatility of exchange rates is a continual topic. But today a different conclusion is drawn: “German politics must ensure with German means that German money can be doubted by no one.” The German means, which are spoken of here, is what is called location politics.

The defense of national competitiveness

It is no longer a matter, as it was in the times of the modest export nation, of earning the money of other nations in order to develop foreign exchange reserves. Now it is a matter of providing a secure foundation for the international validity of the German credit superstructure against the doubts which are appropriate given the inflated German debt economy. Location politics aim at re-nationalizing profits in an economy that has long gone global. German companies no longer have only German labor and German purchasing power as their means of business, but the whole world. Demand for the German mark – and the competition of national credits is about that – is created not only by German export products, but also by German banks which assign credit in every corner of the world. The interest paid on it is income for German institutions and is booked as profits in Germany. It is about the concentration of world business in the German mark – not necessarily in Germany; the profit guarantee that German money wants to – and must – represent is affirmed and renewed by political means.

A policy that wants to use all its power to make the DM a profitable investment site does not want to have anything to do with “saving.” Massive amounts of credit are used to make the German investment-site strong. What is called “saving” is not spending less money, but determining the priorities of the state budget: spending on consumption is cancelled; investment is promoted. The government spends billions to create new German multinationals such as T-Mobile and the Federal Railroad. These new “global players” have had their investment potential in future markets underwritten like only seven or eight other American and Japanese companies. If an inner city express train or a subway for Shanghai is to be built, the Chancellor makes himself its salesman abroad. In order to create a genetic engineering industry in Germany, all earlier fears about people being poisoned are left behind: “the location Germany needs it.” Location politics sort through domestic economic life and the only thing that matters is what promotes the German position on the world market. This sounds so normal to Germans that they no longer know that there are still a few other areas – when grain is cultivated for being eaten; or when coal is mined from the earth which then enters into economic circulation, this is also business – that do not need foreign currency to import these goods. Now the government says to the miners: “if somewhere in the world coal can be bought more cheaply than it is from you, then we do not need you work in German any longer.” Germany has international purchasing power at any time. But domestic subsidies only so that livelihoods can happen in the country, that people can work and live off it – these diminish the profits which can be made with German money. This should now be no longer affordable. On the other hand, massive state money is spent to produce products in Germany which other nations do not produce, but they need if they want to be competitive. Germany wants to produce the means of rationalization for the whole world. That creates a demand for its own commodities that, to a certain extent, takes a lead in the competition.

The best didactic example is the treatment of the old East Germany by Bonn. A complete industrial nation with capitalistically unprofitable, but still functional, production plants existed there, which is now more or less completely left fallow. And what takes its place? A Siemens chip factory in Dresden, a fully automatic OPEL auto factory in Eisenach and a Volswagen plant in Mosel, and Lothar Spaeth may draw up a line of “optoelectronics” in Jena, which does not exist anywhere else in the world. And the entire rest of the zone is useless, human resources included. In the treatment of the GDR one can examine, as if in a magnifying glass, the politico-economic point of view that the government is gradually applying to all of Germany.

The nation defends its highest source of wealth, its credit. Long ago it overcame the “poverty” of the export nation, which meant: “Germany is a country lacking in raw materials; while the Saudis have oil, we have nothing but our industrious citizens and their skills.” This was of course already a joke in those times. Which is now the more powerful nation, Saudi Arabia or Germany? Every Minister knows that it is productive labor that makes a nation rich. In that time, however, domestic labor was the only source of German wealth, so it was looked after. Today that is overcome; worldwide finance, in which Germany and the D-mark occupy a large portion, has made the work and wealth of all other nations the means for German profits. Production inside the nation is only one source among others.

Those who are in the position of being dependent on the demand for their labor experience this situation very negatively. The famous industrial workers look on the times of the poor export nation as the golden age of unionized workers. In those times, they still had the power to enforce wage demands. Today the country has four million people who are not needed; nearly ten percent unemployment. Because the nation has other sources of wealth, the domestic sources are not supported like before. All the functions of the welfare state – pension, health care, unemployment relief – are paid from the wages that business spends on the employed wage laborers. If these people and their contributions are employed less and are paying less, the income of the social insurance shrinks and is no longer functional. The unemployment fund is a marvelous institution as long as there are hardly any unemployed persons. If they increase, the system breaks down – and the state must fund them from other sources. But because so many people are not needed, it doesn't do this any more. The state does not need to care so much about the impoverishment that the system produces. It is the same with pensions and health insurance. At the moment, we are experiencing big reforms of these institutions that are to prevent their collapse by dismantling what they are there for.

The cuts in the university and education budgets add to the principle that in the German location every effort has to become cheaper so that the money is worth more.

The various appraisals which sectors of the economy and the living conditions of the people undergo in the current state program has nothing to do with health care, pensions, unemployment insurance, work times and conditions, education and the universities suddenly adapting to “the expansion needs of capital.” Such popular accusations always find the subjection of ever more areas of life to the interests of business quite newsworthy; one wants to ask: what was it like yesterday – before all the reforms? The diagnosis, which speaks of a degradation in which society is subjected to the needs of capital, pays yesterday a complement: in the past, things were not yet so completely profit-oriented! However, the present reforms are not about more or less capitalism, but different politico-economic objectives of the capitalist state: all German accomplishments must be produced more cheaply in order to make German business unbeatably attractive to international capital and German money solid in the present world-economic turbulence.

In former times, the rising export nation had reached a certain level of development in relation to its power: the skills of the employed were promoted – today it concerns reducing the redundant human sources of wealth in price. In the middle of the 1960s, an education disaster was once even diagnosed. The dramatic alarm bell was a comparison. America was the most modern nation in the world, the most money was earned there and there was a twenty per cent graduation rate from college. In Germany not even ten percent graduated. Thus the politicians were sure there were too few highly qualified workers in Germany for the nation to be as productive as the USA.

Today the nation has four million unemployed people. It does not have the problem that it needs qualified people. The problem has shifted. The people have the problem of whether they are attractive for the scarce jobs, and businesses can select, for all qualification levels, from a huge surplus of applicants. Now the university also gets to experience this. The FAZ of 12/13/94 writes:

Bad job prospects face the graduates of the education system. In the year 2010, 600,000-900,000 college graduates might be too much... In each case college graduates will have to be content with lower status and income opportunities.

Thus this nation has really changed something since its education offensive in the 60s: its previously unheard of upward mobility. The normal pattern that the son of a shoemaker grows up to be a shoemaker, the son of an industrial worker becomes an industrial worker was actively overcome during that time. The nation needed more highly qualified workers; it offered the chance and this was grabbed to such an extent that today there is human overcapacity in all occupations and training programs. There are too many university graduates, but also too many apprentices.

Now the politically responsible people have the point of view that the people themselves should make sure that they are attractive to the job market. Thus the university can save without losses. So only books which someone looks for in the library are missing. Then only lecture-rooms are overcrowded and papers are never corrected. The people will even get behind it, they know what depends on it! Meanwhile, the unemployed also are no longer paid for retraining courses, but required to invest even their unemployment pay in the development of their “human capital.” This is the whole idea behind the reform of education and the university. With political means, thus with demands, a higher level of profitability is to be produced in the country to meet the international competitive situation. All public expenditures are to be slimmed down under the criteria of monopolizing world business in the German currency. Expenditures for the economic usefulness of the people are reduced because there are more than enough applicants for all positions.

The whole reform has no other content than reducing costs and is a small part of the fight for a German victory in the competition to depreciate the international state debt. If there must be victims, it should at least be known for what! Then it is also clear that there is no good reason to fall for it.