Analysen The Finance-dominated

50 Pages·2013·0.45 MB·English

analysen
Politics and society
the Finance-
domina ted Regime
oF accumulation
and the cRisis
in euRoPe
Alex DemiroviĆ unD ThomAs sAblowski
Contents
1. Simplistic visions of the crisis  4
2.  The connection between industrial, interest-bearing  
and fictitious capital  6
3.  The global, finance-dominated regime of accumulation and its  
contradictions  8
4.  Characteristics of the crisis of the finance-dominated regime  
of accumulation  17
5. The crisis cycle and the multiple crisis  21
6. European crisis policies and their contradictions  25
7. Germany and the crisis in crisis management  30
8. What should be done?  34
Bibliography  41
tHe FInAnCe-DoMInAteD ReGIMe
2
oF ACCUMULAtIon AnD tHe CRIsIs In eURoPe
There is no consensus among the ruling  been taken for granted cannot continue. 
classes on the correct way of dealing  Currently this emancipatory potential 
with the crisis or how to continue with  has been relegated to the background, 
Europe. Should the euro be defended?  because solutions to the crisis tend to 
Would it not be better to split up the euro- provide momentum for nationalist divi-
zone or give up the euro completely?  sions.
Should the European Central Bank (ECB)  Left-wing analyses have also portrayed 
buy unlimited amounts of government  the problem as one between Germany 
bonds or would this simply encourage  and Greece; or between France and 
irresponsible spending, policies that  Germany etc. Merkel’s government 
lead to debt and pave a direct path to  appears as a taskmaster forcing auster-
inflation? Will austerity policies help us  ity policies on other European states. 
overcome the crisis, or would a more  Furthermore, the left also finds it hard 
Keynesian policy of investment be more  to convey its criticism of European crisis 
appropriate? How should austerity meas- policies in the light of Germany’s rela-
ures and measures that stimulate growth  tively stable economic and political situ-
be balanced? Would it be better to return  ation.
to the nation state and its competencies,  In the following we analyse the current 
or move towards deeper European inte- constellation through the lens of the 
gration? How generously should com- finance-dominated regime of accumu-
petencies be transferred to the European  lation.2 The contradictions that emerge 
Commission and the ECB? Should debtor  are specific to this regime and reproduce 
countries such as Greece or Cyprus be  themselves at ever-higher levels because 
rescued or would it be better to have an  the regime itself is not called into ques-
option for the insolvency of states and 
1 This text is a further extensively revised and updated version 
not only for banks? of a text first published in the magazine Prokla (Issue 166, 
The left cannot remain indifferent to this  March 2012) and subsequently in an extended version in the 
Analysen series published by the Rosa Luxemburg Stiftung. 
situation. Until now the left has main- In part, the text reflects the results of the discussion between 
the research group Arbeitskreis kritische Europaforschung 
tained a (quite unsuccessful) defensive 
(AkE) which is part of the Assoziation für kritische Gesellschafts-
position based around the slogan: “We  forschung (AkG – Association of Critical Social Research). We 
would like to thank Joachim Becker, Hans-Jürgen Bieling, Pia 
won’t pay for your crisis”. Many analy- Eberhardt, Axel Gehring, Fabian Georgi, Mathis Heinrich, Niko 
ses have provided good and quite tech- Huke, John Kannankulam, Daniel Keil, Anika Kozicki, Roland 
Kulke, Malte Lühmann, Lukas Oberndorfer and Herbert Panzer, 
nical advice on how the crisis might be  as well as our colleagues at the Institut für Gesellschaftsanalyse 
(Institute of Critical Social Research) at the Rosa Luxemburg 
brought under control; not that the pow-
Stiftung for their helpful suggestions and critique. 2 The 
erful and the ruling classes are likely to  concept of regime of accumulation is taken from French regula-
tion theory (see Aglietta 1979, 68 ff.). A regime of accumulation 
listen. Even if they were to listen, it is  is defined as a “mode of systematic distribution and realloca-
not clear whether this would bring the  tion of the social product which over a prolonged period is able 
to coordinate transformations in the conditions of production 
crisis under control. This leads us to the  (volume of capital invested and its distribution among the 
branches and norms of production) with transformations in 
question of the emancipatory aspects 
the conditions of final consumption (consumption norms of 
of the crisis: crises always open up new  wage-earners and other social classes, collective spending, 
etc.)” (Lipietz 1988, 23). The concept of a finance-dominated 
possibilities; it is clear that what has  regime of accumulation is further developed below.
tion. This thereby extends the crisis to  3. Within the global finance-dominated 
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ever more social relations. It is against  regime of accumulation, the countries of 
this background that we intend to assess  Europe take on different positions. Com-
the policies that have been developed by  bined with competition between capi-
the left and the social movements faced  tals this leads to a situation where states 
with the current situation. mutually block substantial reform of the 
financial regulatory system, which thus 
Our work is based on the following benefits the status quo. But in spite of 
hypotheses and assumptions: differences between governments, there 
1.  Even  though  the  contradictions  is fundamental consensus. The changes 
between the different factions of capital  to European Economic Governance, the 
now appear more clear-cut, the current  European Stability Mechanism (ESM) and 
controversies among the bourgeoisie  the European Fiscal Compact, as well as 
over policies to address the crisis pri- the planned Competitiveness Pact, envis-
marily concern measures to stabilise  age further consolidation and intensifi-
the finance-dominated accumulation  cation of neoliberal European integration 
regime and to secure the share of social  (see Fisahn 2012; Konecny 2012; Heinrich 
wealth appropriated so far by the prop- 2012; Oberndorfer 2012, 2012a).
erty owners. Still, in the course of the  4. Germany’s role in particular has been 
crisis new options might develop behind  repeatedly criticised because Merkel’s 
the backs of the main actors. Although  government forces a debt brake on the 
the old regime cannot continue and the  European Union (EU), and its member 
new has not fully asserted itself, alterna- states are placed ultimately under the 
tives are clearly visible. These range from  political control of the European Com-
authoritarian-statist measures, geo-engi- mission. Actually, Germany’s weight 
neering, green capitalism and the Green  within the European Union is increasing 
New Deal to democratic, socio-ecologi- and, for now, German capital appears to 
cal transformations from within a social- be a winner of the crisis. However, the 
ist perspective (see IfG 2011). German government does not solely rep-
2. Austerity measures are simply the  resent the interests of German capital. 
state-driven continuation and intensifi- Austerity policies, at the heart of German 
cation of processes that occur in every  government policies, are enforced in 
crisis: a time during which countertend- Europe as they ensure the reproduc-
encies to the falling rate of profit become  tion of the regime of accumulation as 
effective and power relations shift to the  a whole; as such, they reflect the inter-
benefit of capital. Austerity measures  ests of a dominant, transnational faction 
might not solve the crisis, but as long  of capital that is present everywhere in 
as the pressure of the crisis subsists,  Europe. We therefore view the argument 
measures directed against the subaltern  that German imperialism is at work in 
classes can be enforced ever further.  the crisis as implausible, at least if this 
Moreover, even if governments are often  means – within the framework of tradi-
unsure and undecided about the course  tional theories of imperialism – that the 
to take, they create the impression that  nation state simply represents the inter-
there is no alternative. ests of its own bourgeoisie.
5. Organising the subaltern classes to  societies have not “lived beyond their 
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defend themselves against austerity  means”. In fact, the opposite is true: it 
measures is currently the main task for  was the state rescue packages for banks, 
the left. With regard to European policy  fiscal stimulus packages, declining tax 
strategies, the left should not adopt an  revenue, growing unemployment and 
anti-European stance (as is done by the  increasing social expenditure in relation 
right), but should instead be guided by  to the domestic product during the crisis 
the concept of united socialist states  that caused budget deficits to grow.
in Europe; that is, a political union that  We believe that bourgeois society is cur-
would ensure equal conditions of life  rently undergoing a multiple crisis, along-
within Europe. In the endeavour to  side a major crisis in the capitalist mode 
defend spaces for action against neolib- of production. It is a major crisis because 
eral integration and to develop alterna- it cannot be resolved by small fixes to the 
tives, it may make tactical sense to rely on  prevailing regime of accumulation, nor 
the nation state and the non-synchronic- can the dominant mode of capitalist reg-
ity it creates. For example, opposition to  ulation resolve the crisis. Instead, society 
the EU constitution was justified, as was  needs to undergo profound changes.3
opposition to the fiscal compact. The  In the words of Antonio Gramsci, this 
treaties of the European Union have to  is an organic crisis: the economic crisis 
be significantly changed. The freedom of  is developing in a number of countries 
the people of Europe can only be guaran- into a political and ideological crisis – a 
teed if capital’s liberty is abolished. This  crisis of representation that is increas-
would mean Europe having to be rebuilt  ingly leading to a questioning of the 
completely anew from below, such as  future direction of society (Candeias 
through elections to a constitutional  2010). We are dealing with a crisis of the 
assembly and through a social union. finance-dominated regime of accumula-
tion, which is the dominant form of the 
1. Simplistic visions of the crisis valorisation of capital that evolved after 
For some time now the European crisis  the 1970s as a response to the crisis 
has been seen as the result of state debt;  in Fordism (see Aglietta 1979; Lipietz 
the causes are presumed to be found in  1988). Additionally, the European crisis 
ill-adapted social systems, high public  is affected by the contradictions arising 
spending, an inflated public sector and  from monetary union and the European 
a lack of competitiveness. Nonetheless,  Stability and Growth Pact.
these are symptoms of long-term pro- Two common notions among the left 
cesses associated with the global finan- stand in the way of an adequate under-
cial and economic crisis. The current  standing of the crisis: the first is the 
crisis began with the subprime mortgage  notion that the banks’ excessive drive for 
crisis in the US, which then evolved into  profit caused the crisis, which is linked to 
a bank crisis and later into national finan- the assumption that their true function 
cial crises and the crisis of the euro. In  is to serve the real economy. Whilst it is 
contrast to what neoliberal ideology has 
preached for decades – and continues  3 Regarding the difference between “minor” and “major” 
crises, see Altvater 1983, 93 ff.; Lipietz 1988, 15; Boyer 1986, 
to preach during the crisis – European  66 ff.
true that the current crisis is also a crisis  esis was used to explain how Jews, 
5
of the banks, the banks’ excessive drive  pushed into banking through the Chris-
for profit was not accidental, nor a depar- tian ban on usury, were no longer needed 
ture from some supposed correct mode  within capitalism and therefore could 
of functioning. Like all other companies,  be selected as victims by fascist propa-
banks too must invest their capital and  ganda.
make money from money. Competition  Today, this argument is inverted ideo-
forces the banks to drive the excessive  logically by claiming that any criticism 
valorisation of capital or else face the  of finance is anti-Semitic. This view is 
threat of their own demise. shared by parts of the left, the president 
The perceived greed of bankers is merely  of the Munich Institute for Economic 
a structural consequence of the capital- Research (IfO), Hans Werner Sinn, and 
ist mode of production. Capitalism has  Christian Wulff, the former German pres-
never been primarily concerned with  ident. They believe bank managers can 
fulfilling people’s needs; our needs are  be defended by placing them in a similar 
simply a means to the end of valorising  light to persecuted Jews.
capital. Banks can therefore only serve  In this case, a critique of capitalism is 
the real economy in as far as they yield  reduced to a critique of ideology and, in 
to the excessive drive for the valorisation  contrast to its own aims, is also simplis-
of capital. Nor is it the case that banks  tic as it refrains from analysing relatively 
one-sidedly dominate trade and indus- independent forms of financial capital 
try; a notion which is traceable to Rudolf  and their specific functions, and fails to 
Hilferding. In capitalism, banks, trade  take into account the historical changes 
and industry are rather mutually depend- that have been made to the regulation 
ent. The sections of the left that see the  of the capitalist mode of production and 
banks as the single cause of the crisis are  their political significance. This leads to 
indulged in the illusion that simply imple- an abstract critique of capitalism that is 
menting a different form of banking and  incapable of formulating adequate stra-
financial regulation would be enough to  tegic and tactical answers to the current 
overcome the crisis. crisis. Nonetheless, the societies cur-
Second, and equally problematic, is the  rently dominated by the capitalist mode 
notion that all critical analyses of the  of production are different from those 
financial sector are simplistic critiques  that existed 50, 100 or even 150 years 
of capitalism or even anti-Semitic. Here,  ago. More precisely, over the last few 
production is considered central, and  decades capitalism has undergone a 
circulation as secondary, as the mere  development that we view as the devel-
surface of capitalist production. These  opment of a finance-dominated regime 
views narrowly and uncritically follow  of accumulation. With this we argue that 
Max Horkheimer’s claim that with the  the capitalist mode of production and the 
rule of market-dominating monopolies,  societies it dominates undergo phases 
the mediation of the relations of produc- with distinguishable periods; in other 
tion through circulation has been his- words, a characteristic trait of the capi-
torically overcome (Horkheimer 1988b,  talist mode of production is that it is con-
325). This empirically untenable hypoth- stantly changing. Different patterns of
change can be discerned that remain rel- of circulation but also as capital, any 
6
atively stable over longer periods of time.  amount of money can be seen as poten-
Within the capitalist centres, regulation  tial capital. In its function as potential 
theory differentiates between a liberal  capital, money is more than simply a 
market mode of regulation in the 19th and  means of exchanging commodities, it 
early 20th century, an interventionist and  is also a commodity: money is lent for 
welfare-state Fordist mode of regulation  interest. In the circuit of interest-bearing 
between the 1950s and the 1970s, and  capital, money appears to directly make 
a finance-dominated mode of regulation  more money, interest-bearing capital is 
since the 1980s based on uncertainty.4 therefore, as Marx remarked, “the foun-
tainhead of all manner of insane forms” 
2. The connection between (ibid. 483). The relationship between the 
industrial, interest-bearing and circuit of interest-bearing capital and the 
fictitious capital circuit of industrial capital is contradic-
As Marx showed in Capital, the valori- tory: the advanced “borrowed capital” 
sation of value takes on different forms  enlarges productive capital; therefore 
that become independent from each  it has the potential to create and accu-
other but remain connected at the sys- mulate a greater surplus. However, the 
temic level. During crises in particular,  industrial capitalist also needs to sub-
the connections between the different  tract the interest paid on these loans 
independent forms of money and capital  from the achieved surplus, and surplus 
become brutally clear. Capital can be  value is divided into interest and profit. 
advanced for the production of commod- Therefore, on the one hand, the interests 
ities or services, in which case it func- of the creditor conflict with those of the 
tions as industrial capital: workers are  borrower over the rate of interest. On 
hired and means of production acquired,  the other hand, both the creditor and the 
whereby money-capital is turned into  debtor profit from the increased exploita-
productive capital. Guided by capital,  tion of labour-power, if the realised 
workers produce commodities, and in  surplus value is greater than the interest 
doing so productive capital is turned into  that has to be paid.
commodity-capital. In this process, the  The extended reproduction of the total 
value of labour-power and the means of  capital of society depends on the circuit 
production are reproduced, and surplus  of interest-bearing capital. The circuit of 
value is produced. The commodities this  industrial capital explains both the offer 
leads to are sold, and commodity-cap- and the demand for credit. This circuit 
ital is turned back into money-capital,  systematically returns money to an idle 
which realises surplus value. A share of  state. Fixed capital invested in machin-
this surplus value is invested – in other  ery and factories only slowly amortises 
words, accumulated – and the enlarged  itself over time: little by little the value of 
capital is fed back into the circuit.
The circuit of industrial capital is con- 4 The concept of mode of regulation designates the “totality 
of institutional forms, networks, and explicit or implicit norms 
nected to the circuit of interest-bear-
assuring the compatibility of behaviours within the framework 
ing capital (MEW 25, 350 ff.). Because  of a regime of accumulation in conformity with the state of 
social relations and hence with their conflictual character” 
money functions not simply as a means  (Lipietz 1988, 24).
fixed capital transferred to commodities  they are not functioning capital and 
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returns to the hands of the capitalists in  simply embody legal claims to the pro-
the form of money. Capitalists are often  duction of value which is expected to 
unable to immediately re-invest this  arise from future processes of valorisa-
money in productive capital, but instead  tion. Fictitious capital therefore retains 
provide it to other capitalists in the form  its “value” – or more precisely, its price – 
of interest-bearing capital and, as such,  only to the extent that the trust in future 
take part in the processes of valorisation.  processes of capital valorisation can be 
Conversely, for continuity in the turno- upheld, that is, for as long as there are 
ver of capital, industrial capital gener- buyers for the securities. Rising secu-
ally requires a reserve fund or additional  rities prices become an independent 
capital that can be acquired through  form of valorisation that determine the 
credit. return on the invested money-capital, as 
Accumulation can be extended beyond  does the interest on which the prices of 
the boundary of the realised surplus  fixed-interest securities rest, as well as 
value through credit. This is true not only  the dividends paid to shareholders. Spec-
for individual capital, but also for the  ulation over the price variations of ficti-
total capital of society: not only does the  tious capital (and other commodities) is 
credit system turn fallow surplus value  the basis for derivatives trading: futures, 
into interest-bearing capital, banks are  options and swaps are bets on changes 
also able to produce credit-money liter- in prices. Derivative trading can function 
ally “out of nothing”; that is, in amounts  as a safeguard against price fluctuations, 
far greater than the share of the social  yet it remains an independent source 
product provided to them in the form of  of the speculative valorisation of mon-
deposits would allow for. Interest thereby  ey-capital. The hedging function cannot 
leads to claims over the future work of  be separated from speculation, because 
society. These claims, which in some  every hedge requires a counter-party 
cases reach far into the future, are only  convinced that the prices underlying the 
possible if the overall situation remains  deal will develop in the opposite direc-
predictable and conditions remain suffi- tion.5
ciently stable for the money-capital pro- The formal difference between fictitious 
vided in advance to flow back. and functioning capital plays no part 
The circuits of industrial capital and inter- in investors’ calculations. Just like the 
est-bearing capital lead to a further form  difference between credit-money and 
of capital, one which has gained increas- “real” money, it only becomes evident 
ing importance over the last few decades:  during crises, when the worthlessness 
fictitious capital (MEW 25, 482 ff.). Ficti- of fictitious capital and loans becomes 
tious capital arises from the securitisation  evident. Clearly though, this is not simply 
of credit, that is, through the re-sale of 
creditors’ receivables or through the cre- 5 In capitalism, any investment is speculative because the 
reproduction and valorisation of value is always insecure. The 
ation of stock companies, whereby the  speculative character of derivative financial instruments in 
a more narrow sense is clearly apparent when they are only 
money invested into a company appears 
bought in order to profit from changes in underlying prices. 
to double itself through its shares. Marx  For instance, it is possible to buy a credit default swap, i.e. a 
credit default insurance, for Greek government bonds without 
calls securities fictitious capital because  owning Greek government bonds.
about nominal wealth, but rather about  Our initial hypothesis is that inter-
8
the destruction of (acquired) ownership  est-bearing capital, and especially ficti-
titles, for which labour was needed and  tious capital and derivatives, have grown 
which was appropriated in some form or  much faster over the last few decades 
another by the owners of capital. In the  than industrial capital.
end, somebody actually loses; and par- The share of profits of financial corpora-
ticularly during a crisis, the struggle is  tions in the total amount of profit made 
over who this will be.6 by US corporations rose from 8 % to 
28 % between 1947 and 2012 (Figure 1; 
3. The global, finance-dominated see Krippner 2005). If we divide this time 
regime of accumulation and its span roughly into a Fordist period reach-
contradictions ing from 1947 to 1973 and a post-Fordist 
These forms and processes are all  period from 1973 through to 2012, we 
general characteristics of valorisation  have a rise from 8 % to 20 % during the 
and are related to each another in spe- first period and a rise from 20 % to 28 % 
cific ways within the finance-dominated  during the second period. Clearly, this is 
regime of accumulation. In order to  a long-term trend, characteristic of both 
properly understand this regime and  sub-periods. Figure 1 demonstrates that 
its crisis, it is necessary to take a closer  the share of profits realised in the finan-
look at the development of the circuits  cial sector varied strongly during business 
of industrial capital, interest-bearing  cycles. Comparisons between individual 
capital, fictitious capital and derivatives.  years are therefore liable to be mislead-
The relationship between these circuits is  ing, or, depending on the period studied, 
in flux, whereby three kinds of changes  provide very different results; despite this, 
exist, each with different synchronici- the overall tendency is undeniable.
ties: 1. business cycle changes related to  In the US, private loans from banks and 
cyclical crises; 2. changes to the regime  other financial institutions expressed as 
of accumulation and to the mode of reg- a percentage of gross domestic product 
ulation associated with “major” crises;  (GDP) rose from 71 % in 1960 to 93 % in 
and 3. long-term changes (tendencies in  1973, and 202 % in 2007. In Germany 
the development of the capitalist mode  too, this figure increased: from 39 % 
of production). Direct empirical indi- in 1960 to 72 % in 1973, and to 105 % 
cators of central Marxian categories,  in 2007 (based on data from the World 
such as constant and variable capital or  Bank Financial Structure Database, 
surplus value, neither exist nor can exist  21.11.2008). In the US, expressed as a 
in national accounting; as such, it is dif- percentage of GDP, private loans from 
ficult to provide empirical justification  banks and other financial institutions 
for capital-theoretical assumptions.7  therefore rose annually by an average 
The following empirical illustrations 
should therefore be considered tenta-
6 On the significance of money, loans and the financial markets 
tive but necessary in order to examine  in capitalism in general see Itoh/Lapavitsas 1999; and Gutt-
mann 1994 on the historic development of money and credit 
the changes in the relationship between 
from a regulation theory perspective. 7 For a critique of 
industrial capital, interest-bearing capital  national accounting and attempts to use this data for Marxist 
analyses see Projekt Klassenanalyse 1976; Wienold 1982; 
and fictitious capital. Shaikh/Tonak 1994.
Figure 1: The share of the profit of financial corporations in the total profit
9
of corporations in the USA, 1947–2012 (as a percentage)
50 %
45 %
40 %
35 %
30 %
25 %
20 %
15 %
10 %
5 %
0 %
1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Source: US Department of Commerce, Bureau of Economic Analysis: 
NIPA Table 1.14, own calculations.
of 1.69 % between 1960 and 1973, and  data from the World Bank Financial 
3.21 % annually between 1973 and 2007.  Structure Database, 21.11.2008).
In Germany this figure rose by 1.77 %  In 2007 the US market for government 
annually between 1960 and 1973, and  bonds had a volume of 4.4 trillion US 
0.97 % annually between 1973 and  dollars, the market for securitised mort-
2007. In both countries, therefore, the  gages a volume of 7.1 trillion US dollars 
volume of credit grew faster than GDP.  and the US stock market a market capi-
In Germany this growth was strong- talisation of 21.9 trillion US dollars. Still, 
est during the Fordist period, while in  the growth of these markets during the 
the US the increase was greatest in the  boom until 2007 was relatively moderate 
post-Fordist period. compared with the growth of the market 
In the US, in relation to GDP, the market  for credit default swaps, which was 
capitalisation of stock markets increased  basically non-existent in the 1990s but 
from 58 % in 1989 to 144 % in 2007; in  had contracts valued at 45.5 trillion US 
Germany from 23 % to 57 % (based on  dollars in 2007 (Morgenson 2008).