1. 95 Theses Against the Rule of the Financial Markets by Perestroika.de
2. Ten Years After the Financial Crash by Rudolf Hickel
3. We live in the time of a radical counter-enlightenment. Interview with Rainer Mausfeld
4. Faith Heals Reason by Dorothee Soelle
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95 THESES AGAINST THE RULE OF THE FINANCIAL MARKETS
BANKS TO PLOWSHARES
TOGETHER FOR A NEW SOLIDARITY REFORMATION AGAINST THE RULE OF THE FINANCIAL MARKETS OVER DEMOCRACIES, SOCIETIES, EUROPE, AND GLOBAL CONDITIONS. 95 THESES
TIME FOR A NEW REFORMATION
By Michael Brie, Peter Wahl, Rudolf Hickel, Ulrich Duchrow, Gregor Gysi, Ingrid Mattern and Andre Brie
[These 95 theses published in 2017 are translated from the German on the Internet, www.perestroika.de by Marc Batko. The financial crisis or bank crisis was redefined as a state debt crisis. Special risks became public debts. The financial sector should be shriveled, and the public sector expanded. The state is not a business or a Swabian housewife but can become indebted to help the present and future generations.]
95 Theses Against the Rule of the Financial Markets
In the style of Luther’s theses 500 years ago, 95 arguments are formulated today that pillory the excesses of the power of the worldwide financial markets for people and societies.
These theses were supported by many politicians of different parties, by academics, scholars, theologians, and artists. In the center is the present situation where the financial markets rule over our societies, Europe, and the world. Concrete alternatives are offered that move social connection, solidarity in the world, ecological reorganization, democracy, and human rights into the center.
For example, Thesis 2 declares: “As the corruption of believers’ salvation was a great crisis with the sale of indulgences 500 years ago, the corruptibility of politics and its subordination under the financial markets is a great crisis today.”
Thesis 7 quotes Pope Francis: “This economy kills.”
Thesis 5 formulates: “Stable and functioning financial markets are a public asset.”…
The authors are convinced these changes must be brought about by the whole society. Their theses end: “94. Self-confident and personally responsible persons can only achieve such a Reformation of society.” “95. The reform blockades in the political and social system can only be overcome through citizen engagement and pressure from society.”
TIME FOR A NEW REFORMATION
1. What began in Luther’s times has reached a new critical stage today: the monopoly of money. Democracy is in danger. Inner and outer peace are threatened. The social cohesion is disturbed. The hegemony of a neoliberal mainstream orients politics worldwide in the financial markets and the interests of the top 1% of the population. The 8 richest men of the earth have as much as the 3.6 billion of the more miserable half of humanity. A reformation or reversal is necessary.
2. Suppose the corruptibility of the salvation of believers was in a great crisis 500 years ago through the sale of indulgences. In that case, the great crisis today is the subordination of politics under the financial markets. You cannot serve both God and mammon; it was said at the time of Jesus and 500 years ago. The question of our time is democracy or finance market capitalism.
3. Sustained underdevelopment, 800 million people starving, hundreds of thousands of deaths in wars, millions of refugees, and internal expellees and dramatic climate change are disastrously connected. Exorbitant riches and luxury are its backside. That the EU Commission changed the financial market guideline of the parliament to stop excessive speculation with food by making it practically ineffective can only be a shock. The austerity policy carried out by the European Central Bank, the IMF, Angela Merkel, and Wolfgang Schauble has led to the dramatic increase of youth unemployment and poverty in southern states of the European Union.
4. If the usury system, as well as the system of colonialism’s ethnic destruction and the slave trade, were financed with the indulgence trade of the global empires of Karl V and Pope Leo X, global finance market capitalism and its accumulation of wealth claims must be financed today from the global gross domestic product.
5. The US economist Michael Hudson rightly summarizes one percent of the population with its financial assets and other wealth keeps “the remaining 99%, businesses and whole states in permanent indebtedness.” This makes impossible a democratic policy of solidarity, preservation of nature, and peace.
6. The system of global capitalism arose 500 years ago. We must apply the reins again today. The crisis since 2008 is another warning shot.
7. This system is socially-destructive and devastating to nature. Pope Francis argues: “As the commandment “Thou shall not kill” sets a clear limit to protect human life, we must say “No to an economy and disparity of incomes. This economy kills.”
8. The financial system is out of control. Its crash causes more than disastrous damages in the financial system. It also drags the real economy, ecology, development of the South, and peace to the abyss.
9. The colossal debt mountains grew uninterruptedly. In 2005 they reached the global record of $152 trillion. This was 225% of the global gross domestic product. Public debts represent a third of this. Solidarity development is sacrificed for debt service.
10. Developing countries are threatened, not only the crisis countries of the eurozone. Annual state loans to low-income countries rose between 2009 and 2014 from $2 billion to $18 billion.
11. The debt trap and state bankruptcy threaten many countries of the South.
12. The poor pay for the enrichment of the rich. The crisis has aggravated social problems.
13. Growing inequality has several causes but the dynamic of the financial markets was the strongest driver of social polarization — long before the crisis.
14. Privatization of vital necessities — pensions and health care — offers financial capital new and very attractive possibilities — at the expense of the security of these systems and the people who depend on them.
15. An end of the tunnel is not in sight. More and more economists warn of the consequences of a neoliberal financial- and economic policy that promotes further crises.
FINANCE CAPITALISM GAINS HEGEMONY
16. The political decisions of governments stood at the beginning. They gave control over the most important economic decisions to the financial markets.
17. The financial sector grew in absurd orders of magnitude. Currency transactions rose 30-fold between 1980 and 2007. In the crisis year 2008, the volume of credit derivatives was ten times greater than the gross domestic product (GDP) of all states of the earth. The holdings in derivatives of Deutsche Bank amounted to 46 trillion euros in 2016 — more than fifteen times the German GDP.
18. The dynamic of the financial markets became the motor of globalization when the weights massively shifted to the market to the disadvantage of democracy.
19. The financial markets evade the regulatory grasp of nation-states. From their role as providers for the real economy and society, they appoint themselves their masters.
20. The profit interests of finance capital were transfigured to practical necessities without alternatives.
21. The socially and democratically constrained capitalism of the postwar era was sacrificed on the financial markets’ altar.
22. Globalization of the financial markets leads to the erosion of democracy. “Governments must adjust according to the desires of investors. Investors no longer need to adjust to the investment possibilities granted by their governments.” The former head of Deutsche Bank, Rolf-Ernst Brever, full of pride, wrote this in 2000.
23. Market-conforming democracy existed long before the German chancellor made it known.
24. A monster has grown over three decades. Some speak of financialization, others of casinos, and still others of finance capitalism. However, it is described, we are confronted with a new and hazardous type of financial system.
25. From the start, the history of crisis management was a history of half-measures, cul-de-sacs, and ineffectiveness.
26. Initially, politics seemed to have learned something under the shock of the crisis. “A boundless capitalism that we witnessed with all its greed devours itself at the end,” former finance minister Peer Steinbrueck said. The G20 summit of London and Pittsburg 2000 seemed on the right way when they announced they would keep a tighter rein on the unfettered financial markets.
27. Then the governments bailed out the banks with gigantic sums of tax funds. The rich were protected.
28. As a result, a state debt crisis arose out of the financial market crisis. Public debts shot up. This was the socialization of private losses to a dramatic extent.
29. The population of Europe’s crisis countries had to pay the price in the form of the austerity policy of conservative governments.
30. Democracy was undermined n the course of crisis management, and European nationalism encouraged.
31. For years, conservative governments in Europe — and the German chancellor and her finance minister who use the dictates of austerity like a mantra — were the driving forces behind the socially- and economically-destructive austerity policy.
32. A big bang or explosion has not occurred only because of the low-interest policy of the European Central Bank and the relief packages of the International Monetary Fund.
33. The European Central Bank cannot buy more than time. The longer this continues, the European Central Bank takes the fire department’s position that lacks the water for firefighting.
34. Therefore strengthening the savings banks and cooperative banks is more important than ever. These are under pressure in the current situation.
35. The privatization of vitally nece4ssary services preached for years now takes its toll. Under zero-interest conditions, private old-age, life- and health insurance cannot amass the necessary minimum profits. That old-age provision systems were partly converted into capital-covered systems gets its revenge here.
36. The European Central Bank prints cheap money without the European Union providing a sensible investment strategy, so the favorable interests trickle away without commercial purpose and understanding.
37. Yes, there were reforms.
38. The capital-holding requirements were intensified. In the US, steps were taken to separating traditional business and investment banking. Profiteering with the so-called over-the-counter trade should become more transparent through clearinghouses. Short-selling or speculating on falling prices was restricted.
39. Small corrections occurred in monitoring banks, rating agencies, hedge funds, investor protections and very risky products like credit-default-swaps.
40. In the meantime, the reform dynamic is paralyzed. In the EU, a rollback started under the Juncker Commission. Deregulation is sought again with the project of a capital market union. In the US, President Trump is canceling the bank reforms.
41. Drying up offshore centers and tax havens has hardly made any progress as the Luxemburg Leaks, and the Panama Papers showed.
42. Financial concentration has also increased. The large banks now move even more substantial sums than before the crisis. In the shadow-bank sector, individual gamblers like the Blackrock pension fund become ever more extensive and more powerful.
43. The reforms always make the casino somewhat more secure — for the gamblers. “Only closing the big casinos will lead to a long-term solution,” UNCTAD explained.
44. The problem-solving capacity of politics seems overtaxed. Location-egoism, nationalism, competitive behavior and screening increase. Multilateralism is mired in crisis. Global governance does not seem to function anymore. Everybody acts on his or her account.
45. Unfortunately, the chances of organizing global trade fairly have fallen in the times of Trump. This president sets national interests in the center of his actions.
46. The financial sector, once the avant-garde of globalization, increasingly has characteristics of a selective de-globalization. The chances of organizing the financial system as a global public asset diminish.
47. The problem-solving deficits are more manifest in the European Union (EU). What sounds so realistic and indigenous, Angela Merkel’s “traveling on a long-term basis,” amounts to repressing problems.
48. The EU heads of government and the commission in their present composition are no longer capable of a liberating blow. Muddling through is the only strategy. As long as the EU preserves the barge from completely sinking with its credit of zero-interest and quantitative easing, people live in the illusion that nothing will happen. However, the situation intensifies from year to year.
49. The financial markets fuel global warming. Hundreds of billions of euros still flow annually into fossil fuels instead of renewable energy and the ecological modernization of our economy.
BRINGING THE FINANCIAL SYSTEM UNDER DEMOCRATIC CONTROL. PRINCIPLES OF REFORM
50. A substantial reform of the financial system is a central component for defending society’s democratic organization and another economic policy today. But such a project will only have a lasting effect if it tackles problems at the root.
51. Stable and functioning financial markets are a public asset…
52. The financial system should serve the real economy and society.
53. Financial markets must be competent for financing ecological reorganization, a solidarity development policy, a social perspective of the European Union, and society’s social modernization.
54. Democratic politics should again have control over markets and actors.
55. The casino enterprise useless in the political economy should be ended.
56. The financial markets must be shriveled, so they are useful for the real economy.
57. The whole system must be de-accelerated.
58. The complexity of the system must be reduced.
59. The public banking system must be strengthened and redeveloped through privileges over the private sector. This should have priority over the EU privatization law.
60. Instead of geopolitically-motivated trade wars, we need a culture of cooperation and consideration in organizing the world economy.
Besides, THE FOLLOWING KEY REFORMS ARE DESIRABLE:
61. Far stricter rules are necessary for shadow banks.
62. In the crisis, we want to make large and complex banks slightly more understandable. Banks should at least separate their deposit business and their trading business, provide them with capital and direct them independently under one roof.
63. Practical limits should be set to hedge funds, private equity funds, and other speculations.
64. Derivatives need a safety test by the financial monitor. The burden of proof lies with the issuers of the products.
65. Electronic Central Bank money should be introduced for monetary transactions. That would be a firewall for this financial system if financial crises can still occur. In the digital age, this system is largely automated and has a trifling cost.
66. Offshore centers and tax havens should be dried up. Unilateral measures like levying punitive taxes are possible if an international agreement is impossible.
67. High-speed trading should be slowed down. This would eliminate the systemic risks of high-speed trading and would remove the competition distortion that it generates.
68. A severe and straightforward debt brake should be prescribed to the banks.
69. Capital transaction controls are legitimate instruments of capital market regulation. Their application in case of crisis has priority over the freedom of capital transactions.
70. Pensions, health care, and other vitally necessary services should be organized as public functions.
71. Rating agencies receive result-dependent bonuses from public sources. In the past, the rated paid for the rating irrespective of the rating’s accuracy. The pro-cyclical effect of ratings must be prevented. Social and ecological criteria must be integrated into the rating.
72. The monitoring should be outfitted with more considerable resources — financially, legally, technically, and in personnel.
A NEW REFORMATION AND ANOTHER WORLD ARE POSSIBLE
The financial markets and the accumulated wealth lying fallow and counter-productive for society and its cohesion could be mobilized through these changes for solving the great global, European, and social challenges.
73. The goal is lasting prosperity and quality of life by developing the infrastructure for education, health care, nursing, and local public transportation as essentials of a good life for everyone.
74. The poor are the treasure of the church, Luther quoted in his theses. So, the wealth of a good society is the degree of justice that it offers to everyone.
75. A just policy is measured by securing access to the goods of a free life for everyone, particularly the socially weakest among us.
76. After decades, the redistribution from bottom to top, from production and nature to financial markets, from women to men and from South to North, must be reversed.
77. The comprehensive privatization of social riches must give way to socialization in favor of investments in social cohesion, essential insurance of the poorest, and ecological reorganization through the just fiscal mobilization of immense riches, higher incomes, and wealth. Weaker countries must be supported by debt relief.
78. A just, socially- and economically rich inheritance- and property tax is still in the future for Germany.
79. A solidarity economy and a solidarity life must be promoted based on solidarity financing.
80. If we do not want people to flee, the causes of flight must be dismantled, and wars, misery, poverty, and ecological decline overcome. This includes resistance against anti-Semitism, racism, and hostility to foreigners.
81. Enforcing the prohibition on armament exports to crisis regions and dictatorships and global disarmament contribute to more security and limiting aggressive wars. This also could release financial and political resources for people in the South.
82. A global Marshall Plan with development-friendly changes of the world economic structures in favor of fair trade, investments in combating poverty, and ecological reorganization among us and the South is necessary. The South is dramatically impacted by climate change.
83. The austerity policy in the EU rushed through by Angela Merkel, and Wolfgang Schauble must be ended.
84. Instead of austerity, the EU needs a comprehensive investment initiative to transition to renewable energy, sustainable, inclusive systems of housing, transportation, education, culture, health care, and nursing.
85. The German export surplus that is destructive for many other European states and European integration can be redirected through more considerable domestic investments. Simultaneously German budget surpluses could be used for establishing a European investment fund.
86. For a long while, critics warned economic and social dislocations could lead sooner or later to political catastrophes. Alain Badiou warned of “democratic fascism.” The 1929 world financial crisis was one of the causes of the rise of fascism.
87. The spirit of neoliberalism that came along as a practical necessity of a globalized economic order has produced economic insecurity and fear of falling. The effect of austerity policy was felt on top.
88. Uncoupled, degraded, embittered, and furious, part of humankind now turns to the right-wing that promises them security, respect, and participation. They succumb to the illusion nationalism and hostility to foreigners could solve their problems.
89. The further rise of the populist right-wing can be stopped by a different economic-, social- and peace policy.
90. As Luther encouraged believers in his 94th and 95th theses, people in Germany, Europe, and the world need realistic confidence that the real and hard challenges for their social situations, wars, distress, and climate change can be solved.
91. Without hope, Solomon said, people become wild, lewd, and rude. People who only wait for solutions from the top or outside will not find answers.
92. There they will only find the hegemony of the financial markets and their interests.
93. The supremacy of democracy and human rights are at stake, the inviolability of every person’s dignity through solidarity actions against the financial markets.
94. This reformation of society cannot be attained without a self-confident and personally responsible people.
95. The reform blockade in the political and social system can only be broken through society’s pressure and civil society engagement.
Here we stand. We are for another world and cannot turn back.
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Ten Years After the Financial Crash by Rudolf Hickel
·Jun 30, 2021
TEN YEARS AFTER THE FINANCIAL CRASH
by Rudolf Hickel
US economic statistics are dubious since financial markets are based on financial products and money out of nothing unlike productive investments in the real economy. Tax havens, micro-second betting, stock buybacks, and corruption through lobbying are all market-distorting. Only the super-rich can indulge in these manipulations. Tax avoidance and profit shifting to tax havens lead to revenue shortfalls. In the 1960s, 40% of federal revenue came from corporate taxes; now it is 8%.
[This article published in 2018 is translated abridged from the German on the Internet. Rudolf Hickel is a professor of economics and a spokesperson for the Alternative Economic Policy study group in Bremen.]
1. The Lehman Brothers shock and October 5, 2008, in Germany: Signals of a system crisis driven by the financial markets
On the first weekend in October 2008, fears went around in Germany that the banks would have to close next Monday because a run on private deposit accounts would be driven by fears of losses. This “Black Friday” did not happen. A day before on Sunday, October 5, 2008, the German chancellor and the former German finance minister Peer Steinbruck announced all private deposits were secured by the state. These deposits amounted to 1.5 trillion euros at that time, 60% of the gross domestic product. This economic policy obviously had success with moral appeals (“moral suasion”). On the following Monday, there was no run on private deposit accounts. Rather, financial assets were transformed from the big bank with high-risk speculative transactions to institutes with classic banking. Public banks and local savings accounts are examples. The success of these stamina appeals had to do with ignorance about the consequences of the erupting crisis of the powerful financial markets. The German government signals system-relevant banks will be bailed out before any collapse with state assistance and will not be allowed to fall.
The insolvency of the Lehman Brothers investment bank on September 15, 2008, regarded as impossible was the immediate trigger for the spreading fears of the total collapse of the worldwide financial system with consequences for investors. A gigantic need to write-off $3.3 billion in the summer of 2008 preceded the largest business collapse in the history of the US.
Lehman Brothers was denied a state bailout for reasons still not explained today after the US Fed rescued the Bear Stearns investment bank with a bailout package in the previous year, cushioned with the takeover by the JP Morgan Chase & Co. investment bank. The shock was deep and profound. Many purchasers of speculative Lehman Brothers securities in Germany were hit hard… Investors were often inadequately informed about the risks through a dubious aggressive sales policy in German banks.
The day of the insolvency of the Lehman Brothers investment bank on September 15, 2008, is interpreted as the decisive cause of the subsequent fall of the worldwide financial markets ten years later comparable to a “monetary Big Bang.” This causal analysis is much too simplistic. Rather, this is a signaling outburst of a potential crisis growing for years through the increased significance of speculative financial market transactions over the producing, investing and consuming real economy.
Financial instruments for purely speculative purposes were usually central with borrowing used as a lever. Mortgage credits packaged as securities granted in the US without sufficient creditworthiness of borrowers and gladly purchased in Germany. The signs for the US real estate crisis multiplied in the summer of 2007; the packaged securities suddenly became worthless. The extensive financial market crisis from 2007 was described as a “sub-prime crisis” on account of secondary credits in securities. The crisis of the two massive mortgage banks Fannie Mae and Freddie Mac bailed out through state intervention is symbolic for those mortgage banks in the US inflating the real estate bubble.
How mainstream economics dealt with the crisis
For the first time, the most intensive global financial market crisis in the history of capitalism made visible the connections and consequences of speculative capitalism dominating the real economy. In the past, this was regarded as hardly possible. Helplessness on one hand and market-radical arrogance, on the other hand, were the reactions. The financial market crisis was impossible according to the market models. Financial markets were said to move to a hard-and-fast balance equilibrium through rational conduct.
Eugen Famas’ hypothesis on the efficiency of financial markets replicating the competitive market dominated. On the other hand, the systemic instability described by a few critics like Robert Schiller as developing and bursting speculative bubbles on account of “irrational exaggerations” on the financial markets was ignored or fought by “mainstream economics.” This system-threatening financial market crisis is the brutal proof for the collapse of the neoliberal ideology of the self-stabilization of the speculative-driven profit economy. How do the guardians of a crisis-free self-optimization on the financial markets deal with the undeniable crisis since 2007?
Three stages can be distinguished in dealing with the financial market crisis phenomenon. Before the fall of the financial markets, the spirit of the times was dominated by the neoliberal efficiency dogma. Criticism of that dogma means exclusion from official economics. A phase of a breath-taking speechlessness occurred when the financial markets moved toward collapse.
On her visit to the London School of Economics in November 2008, Queen Elizabeth II asked the legendary question: “How could it happen that no one predicted this crisis?” The answer of the interrogated professors took eight months with the dreary reference to the psychology of not wanting to see. The western answer stressed the “failure of the collective imagination of many wise persons.” Criticism of the false modeling of the financial markets was refused up to today.
The system crisis was hardly stopped by state bailout programs. Initial regulations were made taboo by market fundamentalism. Woe to reality if it disagrees with the model! This mockery of Hegel was true again. The necessity of taming the financial markets through regulations learned from the crisis was sharply criticized and the unfettering of market forces propagated. No learning from the experiences of the crisis was apparent. This fundamentalist market loyalty bears responsibility for the coming financial market crisis. The question “How could this happen?” will certainly be asked again.
Politics shocked by the force of the crisis
Mainstream politics can also be divided in three phases of problem perception. In the course of neoliberal indoctrination, mainstream politics supports itself on the illusions of standard neoliberal economics, the crisis-free unfettering of the financial markets creating prosperity.. The rules and institutional barriers that earlier tamed the financial markets were dismantled. The unhindered domination of profit interests through the creation and trade with highly dangerous speculative instruments and the development of speculative investment banking (transactions without customer orders) is the result of active deregulation policy. Politics could not deny this real development when the collapse of the financial markets occurred because of the past false misguided policy of taming risks. The political pressure through the collapse of the economy, the loss of jobs and the strains on the public budget were too great.
A short phase of public policy flared up out of the greatest distress and under public pressure. Only a very brief phase of active economic — and fiscal policy according to the Keynesian intervention model was carried out. In the center were state programs to bail out the banks whose failure could endanger the whole system and an active state anti-crisis policy with targeted programs to stabilize the whole economy.
Bailout programs for the banks: generated and made taboo by neoliberalism
Bailout programs for distressed banks were available in particularly stricken countries. One alternative would have been submitting to radical Darwinian market selection and neoliberal ideology with the fall of insolvent banks. Since banks could no longer survive without bailout measures, previously propagated state-free economics was exposed. A total systemic bank risk can be triggered by aggressive economic rationality. In the US, a successful bailout program TARP (“Troubled Asset Relief Program”) was unfurled with a volume of over $700 billion. In contrast to Germany, this assistance was completely repaid by the rescued banks. In Germany, the financial stabilization fund (SoFFin) was charged with a total volume of 480 billion euros for credits and the recapitalization of distressed banks (bailing out Hypo Real Estate and Commerzbank).
The Ad-hoc government programs provoked harsh criticism. According to the reproach, the privatization of fat profits followed the socialization of losses in the crisis. In the sense of a learning process, the conclusion was drawn after the long discussion to include owners more strongly in financing the bailout of banks. The planned bank union of the European Union is an example.
Through the decline of the total economic production and the increasing unemployment, the material force of the crisis only led to a change of policy for a very short time. What is described today as a sin by optimistic market politics was the double governmental intervention to bail out banks and the entire economy. The reductionist view of the economic teamwork on the markets proved vastly unfit to preventively recognize the causes and consequences of the total economic effects of a financial market crisis and to take action against it.
The delegation effects from the financial markets to the total economic development were systematically underrated. In their view, financial management produced “external effects” burdening the entire economy. Because of the financial crisis, economic growth dropped steeply, jobs were dismantled and the state suffered under crisis costs and revenue shortfalls. The causes are clear. The credit financing of the economy breaks down and the intensified loss in value creation strains the entire economy. In all, the mistrust in the functioning of the inter-bank system contributed to pessimistic expectations curbing practical investments. The state registers tax shortfalls and is strained with crisis costs. The mega-neoliberal error about crisis-free financial markets and a stable aggregate economy is uncovered. The state had to become active all of a sudden in contradiction to the neoliberal oath to the self-healing powers of the market. The anti-cyclical policy against the prevailing ideology was rediscovered more through the anxieties of the aggregate economic crisis than through insight. The macroeconomic control policy could be used successfully to overcome the crisis in the real economy…
- The driving forces of financial market-driven capitalism are finally understood [The causes of the financial markets dominance over the real economy and politics and the resulting malformations are analyzed in Rudolf Hickel’s “Smash the Banks — Dethrone the Financial Markets,” Berlin, 2012].
The true lessons can only be drawn from the financial market crisis when the driving forces and the destructive self-dynamic of the dominant financial markets over the real economy are grasped. Serious effective measures to tame the financial markets toward the serving functions of the banking system for the real economy can first be inferred from that crisis.
Relatively strong uncoupling of the financial markets from the gainful economy
The massively expanded transactions of the financial system by financial intermediaries like banks, insurances, and investment funds have uncoup0led from the vital financing demands by the real economy in Germany since the middle of the 1980s. The financialization of the economy is immense. The share of sales from financial market transactions (financial derivatives, stocks and bonds) in the world social product rose from 1,550% in 1990 to 7,240% in 2011.
Here is another evidence of the dominance of the financial markets. While world production increased fourfold from 1990 to 2011, the volume of derivatives created expressly for speculative transactions expanded 300-fold… Serving or good speculation to ensure exchange rate risks in the production economy must be distinguished from functionless betting on the change of exchange rates. Crisis-susceptibility is marked by system-threatening bets on currencies uncoupled from real economic conditions.
The dominance of finance capital over real capital can be recognized in three OECD indicators. The value of the assets held by the financial sector amounted to a record 220% of the gross domestic product in Germany before the outbreak of the crisis. The growing internalization can also be read in the extent of border-crossing wealth and obligations of the banks…
The rule of the financial markets
The rule of the financial markets that determine the development of the entire economy with their profit business model is carried out with the relative uncoupling from the real economy. No competition idyll prevails there. Rather, highly concentrated financial market actors in investment banking (for example, Goldman Sachs), with hedge funds, private equity funds (The Carlyle Group in 1st place); index funds (like Blackrock) and other investment funds represent monopolistic power structures. In the spring of 2005, Franz Muntefering warned of these “grasshoppers” that still blithely expand today for lack of decisive policy. The relative uncoupling from the real economy is characterized by a dominant financial market oligopoly…
The labor- and production markets are dominated by the powerful profit interests on the financial markets. For example, jobs are lost because a private equity fund tries to increase the profits for its investors by smashing the bought-out business or buys speculative securities in casino capitalism instead of making practical investments.
Wealth concentration drives financial markets
The crucial question is about the origin of the money on the financial markets. The growing concentration of property incomes and wealth drives this expansion of the financial markets. The “reproduction of wealth” (Ralf Dahrendorf) underlies this; wealth is invested and new wealth formed from the realized property income. The sales for financial products prove that more and more rich persons entrust their wealth formation to financial investors. The volume of the wealth invested in the worldwide financial sector rose in the last ten years from $100 trillion to over $170 trillion, according to an estimate of Allianz SE… The wealth accumulation by corporations on the financial markets refutes the neoliberal justification of the profits of businesses as a basis for financing practical investments. Thus, cost reductions in labor incomes and increasing profits are reflected at the end in an expansion of speculative financial investments.
Excessive wealth formation on the financial markets compared to the real economy is a result of harmful aggregate economic over-saving. Gained incomes are not effectively transformed into political-economic expenditures for consumption as demand for goods in the productive economy. Worldwide mega-funds operate like vacuum cleaners that connect money capital seeking an investment with the promise of lucrative but speculative profits on the financial markets.
The important conclusion on the causes of the financial market crisis and its successful control
The growing wealth concentration is the driving force of the financial sphere inflated with speculative transactions… Speculation capitalism driven by the financial markets will dominate as long as this wealth concentration and reduction of over-savings are not successfully tackled through increased investments in the public infrastructure. The risk of new speculation bubbles that burst and burden the real economy is implanted in this system. All the intensive efforts at regulating the financial markets remain symptom therapy as long as the crisis-driven wealth concentration and over-saving are not reduced. Successful control of financial market-driven capitalism demands a policy of redistributing income and wealth.
Speculative investment possibilities through unfettering the financial markets
The institutional barriers must be first dismantled to make the financial markets useful for expanding investment businesses. These barriers were pushed back with the expectation of new profit fields. Pressure for unfettering the financial markets through deregulation was engendered for different reasons since the middle of the 1980s. Firstly, a trend to lower yields with classical investment profits and government bonds has also appeared in Germany since the middle of the 1980s. Secondly, financial investments are preferred to the comparatively low profits from material investments in businesses.
In addition, wealth concentration drives the search for alternative investment possibilities. New financial market businesses must be generated and the business models of banks changed. The key words are “financial market innovations,” creation of new business models and establishing a division for speculative investment banking… Deutsche Bank has shown how capital profits of 25% (after taxes) lead to extremely risky businesses and criminal practices.
One key date for the outbreak of the most recent financial market crisis since 2007 was October 27, 1986. On that day, central regulations for financial market transactions were annulled by Maggy Thatcher at the London financial center. This was comparable to a monetary Big Bang overnight. Cancellation of the separation between customer-oriented businesses and speculative investment banking occurred, abrogation of controlling commissions and fees as well as the neutralization between brokers (“traders”) and jobbers (market actors). This “Big Bang” triggered an international competition around deregulations.
International deregulation spread. For example, Bill Clinton in 1994 annulled the separation of commercial- and investment banks introduced with the Glass-Steagall Act from the experiences of the 1932/33 world economic crisis. In 2000, future commodity markets were deregulated and speculative transactions with funds were approved. Loosening the regulations on investment funds, approval of hedge funds, clearance of short-selling and facilitating securitizations represented Germany’s contribution to the international financial market.
A potential for speculative investment instruments unknown in the past was created by unfettering the financial markets. In this climate of blind trust, whoever opposed the praise of “financial innovations” on account of the high risks was called backward. Similar to bets, speculation investments are produced without any relation to real value creation. With risky investment banking, the big commercial banks created the space where betting instruments were produced and sold in proprietary trading without any customer order. To evade regulation on the official exchanges, trade was handled with the new financial instruments outside the exchanges. Today, over 60% of this trade in Germany is “over the counter.”
The shorthand symbols causing the muddle — like CDO, CDS — are well-known. The symbols stand for a great variety of derivatives. A derivative is a derived financial product whose price depends on the price of another financial product, for example, a share, the exchange rate or raw materials. A derivative is based on speculation whether the price of a certain product will rise or fall in the future. Simply explained, a derivative is a bet that money will take a certain future development with the risk of total loss. The derivative CDO (Collateralized Debt Obligation) was at the center of the process… Speculation crises can be avoided.
Excursus: Smith, Marx, Keynes and Casino Capitalism
The latest financial market crisis is the result of the shift from paid labor in the production of goods and services to the dominance of law and uncertain profit expectations in the producing economy. With lucrative promises of profit, business profits are increasingly guided from material investments to the financial markets. In addition, wealth concentration increases the pressure for finding profitable investments on the financial markets. The price of high-profit expectations is the acceptance of extreme risks. To open new business fields, the regulations on the financial markets must be dismantled. Like a vacuum cleaner, powerful funds attract money capital seeking investment. This dominance of finance capital over real capital produces a higher crisis proclivity of the financial markets that is also reflected in the producing real economy.
Karl Marx recognized this recent modification of capitalism in the third volume of his three-volume “Das Kapital.” He distinguishes industrial capital on the basis of paid labor from fictional (interest-bearing) capital… With his anatomy of the capitalist development dynamic, Marx predicted the growing speculation capitalism susceptible to crises.
In his “General Theory” (1936), John Maynard Keynes analyzed the world economic crisis from the experiences at the end of the 1920s. What happens when the “gambling casino” dominates and no longer capital development? He rightly distinguished system-threatening and useful speculations. Exporters of goods ensuring themselves with swap-businesses against exchange rate risks. This serves the entrepreneurial goal of profit realization.
On the other hand, pure speculation separated from the real economy is dangerous for the economic system. “Speculators cannot do harm as soap-bubbles. But the situation becomes serious when the enterprise becomes then soap bubble for a maelstrom of speculators. Labor is probably disparaged when the capital development of a country becomes the by-product of the activities of a gambling casino” (John Maynard Keynes, General Theory).
Karl Marx and John Maynard Keynes are complemented by an early discovery of Adam Smith. In his classic “Wealth of Nations” (1776), Adam Smith explained why personal freedom must be protected by the government from the negative consequences of an unfettered market economy… “A common firewall to prevent a spreading fire violates personal freedom in the same way as the banking law proposed here” (Adam Smith, Wealth of Nations). Those guided by interests of the bank lobby should hear of the imperative of protecting the entire economic system.
There is a large group of renowned researchers on speculation capitalism like Robert Shiller (animal spirits), George Akerhof (information symmetries) and Joseph Stiglitz (theory of market failure). Their economic findings are hardly considered in mainstream thinking. Empirical and analytical criticism bounces off mainstream economics. Eugen Fama stands for the prevailing modes of ultra-stable financial markets in processing risky, uncertain wagers (Eugen Fama, Efficient Capital Markets, 1970).
Real crises and collapses of banks cannot shake the dogmatic market fundamentalist thinking
3. When will the next financial market crash? Old and new risks (cf. the profound analyses by Stephan Schulmeister, The Way to Prosperity, 2018)
The past debate and the attempted measures show that the driving forces of the latest financial market crises are not always understood. The official advisory economics starts from crisis-free financial markets despite the crisis experiences. Publications in journals and conferences in the past ten years were not devoted to a merciless analysis and evaluation of the causes of political responses to the crisis consequences. The question whether a new financial market crisis threatens was not raised. It was said the fall since 2007 was not the result of unfettered speculation capitalism. So, most winners of the Nobel Prize for economics at their August 2014 meeting simply deny the systemic crisis proclivity of the financial markets.
Angela Merkel’s welcoming address with much criticism of the embarrassing role of consultation economics was laughed at. With wide approval, Eugen Fama argued the financial markets know everything and will rationally process information on future development. His ideology of the ultra-efficiency seemed imperturbable. In 2013, he received the Nobel Prize for economics for his efficient market hypothesis.
At the same time, a critic of this incredible market optimism, Robert Shiller criticized Fama’s theory as one of the “most remarkable errors in the history of economic thinking.” With the theory of “irrational exaggerations” on the speculation markets, Shiller could understand the real estate bubble that burst more than ten years ago. On the other hand, the prevailing market orthodoxy makes the mistake of treating financial market products like goods with real economic quality.
Risky speculation objects uncoupled from the production economy are traded on the financial markets. Herd instinct, “irrational exaggerations” and a peculiar emotional state mark this casino capitalism. The market-destructive consequences of economic profit speculations are not seen on account of the shortsightedness of price formation. When the speculation bubbles ultimately burst, the whole economy will be dragged into the crisis.
Different from the majority economics, politics could not ignore the financial market crisis. Interlocked banks had to be bailed out because of their role for the whole system. In addition, programs were advanced against the aggregate economic crisis with the collapse of production and job losses. The worry was that the population would not tolerate a new socialization of losses in the next crisis after the preceding free enterprise profits.
Two observations are generally accepted after ten years of financial market crisis. First, many legal regulations point in the right direction. However, they are not enough to permanently stop the speculation economy driven by the wealthy and businesses in the search for profitable investments. Secondly, market-orthodox critics of regulation policy are gradually gaining influence.
The emphasis is on over-regulation, poorly constructed or insufficiently differentiated regulations. Inefficiencies and injustices certainly arose in the financial system through many measures. So the savings banks and cooperative banks are treated more or less like the big banks with their high-risk investment banking. Thus, they must bear regulation costs even though these institutes do not conduct system-endangering speculation businesses…
The bank lobby does successful work. The policy of insidious deregulation is supported by the consulting, market orthodox economics that has no doubt about unfettered financial markets despite their immense susceptibility to crisis. The signals of a new crisis are manifest. New risks are added to the old crisis causes that have not been banished. Accumulation of degenerate credits on corporate balance sheets and the risk of raising interest rates after a long phase of zero- or minus-interests are emphasized. Shadow banks with their bank-like functions without controls are the greatest risk. Many financial managers have exploited this regulatory arbitrage. They become a system risk in bankruptcy since they are bundled with the regulated banking system.
4. Reducing the old well-known crisis risks in the financial system
The shock from the latest financial crisis and the fears of new eruptions with negative real economic effects have forced politicians to action through public pressure. Old regulations and controls of financial intermediaries like banks, insurances, and investment funds are not the only important realities. The risks for the stability of the financial system as a whole are recognized. The financial market crisis teaches the necessary macro-prudential stabilization of the financial system compared to micro-prudential actions referring to individual institutes. Aggregate economic malformations are stressed with the goal of remedying the macroeconomic risks of the monetary and real economic systems. The danger of a developing real estate bubble, fundamental changes in interest and systemically relevant banks whose fall could have effects on the entire system are examples. National and supra-national financial stability boards were established… The overrating of the self-stabilizing forces promised on the free markets narrowed the perception of system risks.
Many important regulations were carried out in the ten years since the outbreak of the financial market crisis. In Germany, laws on reducing deficits were passed and proved inadequate with respect to the driving forces on the financial market. In addition, many regulations in the right direction were restricted under the pressure of the financial lobby. The inadequate intensity together with diluting measures created the foundations for a new financial market crisis. The pressure of the wealthy to find profitable investment possibilities inexorably drives the expansion of speculation businesses with growing system risks.
The following examples show how a few regulations were introduced and often partly retracted again:
Capital holding requirement…
The separated bank system was first originally introduced 1932 and 1933 out of the experiences of the “Great Depression” in the US in two steps with the Glass-Steagal Act. Bill Clinton abandoned the separated bank system in 1999 in the course of his massive deregulation policy. Deregulation followed an enormous bank concentration as shown in the founding of Citigroup. The crisis potential that detonated in 2007 was created through speculative investment banking. With the “Wall Street reform” on the basis of the Dodd-Frank law, Barack Obama restructured the separation of commercial banks from investment banking with the Volcker Rule named after Paul Volcker. Today, Donald Trump is carrying out a withdrawal with his Trumponomics serving the principle “America first.” The renewed deregulation of the banking system in the US is at the top of his agenda. A “proportional regulation” could be a first step.
Several types of derivatives suddenly prove to be highly toxic. These derivatives have nothing to do with financing real economic production.
Politics concentrated on taming these betting instruments through different regulations and prohibitions. Securitization is a popular method of “financial alchemists” for creating derivatives. A bundle of claims from credits is packaged in negotiable securities according to installments (“asset-backed securities”). The “Collateralized Debt Obligation” (CDO) is one example. This derivative was notoriously described as “Mortgage Backed Security” (MBS), negotiable securities based on a pool of inferior mortgage loans. These MBS that burst on account of their trifling creditworthiness encouraged the financial crisis since 2007. The mockery about “stupid German bankers” who purchased these securities without assessing the risks made the rounds. The lesson about the crisis proclivity of derivatives seems repressed in the last years. Even the European Central Bank has these securitization products on their balance sheet in the scope of its debt-buy back- program. The risks for the whole financial system increase if the derivatives become worthless. Clear rules with conditions and controls must be deployed to deactivate these “financial weapons of mass destruction” (George Soros)…
Rating agencies with their assessments on the creditworthiness of the financial markets are vigorously criticized.
The Big Three that command 90% of the market oligopolistically are in the center: Standard & Pours (S&P), Moody’s and the Fitch Group…The most recent financial market crisis teaches that the rating agencies blatantly failed in reducing information asymmetries at the expense of buyers of financial market products. Very risky financial products fabricated by investment banks later proved to be toxic and were given positive ratings against their better judgment. These rating services were paid by the institutions that created the financial market products and had an interest in their sale. Extreme competition over well-paid ratings led to market failure on account of manipulative conduct. Partly negative ratings for states referring to their indebtedness instruments worsened the crisis. The speculators who bet on a price drop of government bonds were the winners. However, the lessons from these negative experiences did not lead to strict regulation…
– High-Frequency Trading (HFT) on the basis of extremely fast high-performance computers was developed to aggressively accelerate crises. Algorithmic trading systems process information in fractions of seconds. One advantage is that price differences on the markets can be exploited very quickly. HFT is defined by market data and market access. A completely uncontrolled high-frequency trading tends to irrationalize securities trading. Thus, the possibility of triggering a “flash crash,” an extremely fast fall of prices, is intensified by high-frequency trading. Countering the irrationalization of trade and affirming contracts are tasks in regulating the trading system…
Installed volatility brakes should limit the erratic swings of prices. The advantages for the whole system in facilitating more liquidity cannot be confirmed. That these systems must be regulated is uncontested. The danger is great that the algorithms of fast traders will be spied out… Unfortunately, there has been a decreasing interest in limiting the dangerous high-frequency trading. The risk of gigantic price fluctuations with brutal crashes (“flash crash”) increases.
The introduction of a financial transactions tax (FTT) to slow down trading with risk instruments was intensively discussed before the outbreak of the latest financial market crisis. Governments now shy away from introducing the FTT although ten member states of the European Union resolved a speedy introduction in the last years. The extremely low tax rates of 0.1% on stock transactions and 0.01% on traded financial derivatives could bring 22 billion euros annually…
Two goals are envisioned. Firstly, the speculative transactions destabilizing the financial markets could be pushed back. Secondly, trading volume is still a productive revenue source. This is more than only throwing “sand in the machine” (James Tobin). Poverty could be fought from the revenue (“tax against poverty”). The miserable history of preventing the FTT is proof how politics is determined by the narrow-minded economic interests of financial market profiteers without regard to systemic damage.
– Important lessons from the crash of the banks were drawn in the last years in one area. Banks were supported by public bailout funds made available by the state in the US and Germany when banks in threatened insolvency were rated as “too big to fail.” In these “bailouts,” the losses were socialized by state money… In the EU, work on a bank union was advanced…
A bank union could bring stability and trust. As a deficit, there is no lever to prevent monopolist bank centers of power that do not obey the regulatory rules.
- Warnings of a new financial market crisis increase.
No serious experts deny that a new financial market crisis threatens. The number of warnings of experts and actors of the next financial market crisis is great. George Soros, the multimillionaire and expert of this casino capitalism, sees many signs of a new crisis. Even Ben Bernanke, the former director of the US Federal Reserve, sees a bubble on the financial markets that could burst soon. Timothy Geithner, Treasury secretary under President Barack Obama and previously CEO of the Federal Reserve Bank of New York, was responsible for several important decisions during the 2008 financial meltdown. Now he agrees with the warnings.
Henry Paulson, former Treasury secretary under G. W. Bush from 2006 to 2009, deplores a terrible “amnesia,” a collective loss of memory “about what we went through.” Suitable “instruments” for avoiding crises were lacking… With Anat Admati, Martin Hellwig, director and member of the Max Planck Institute for Community Research in Bonn wrote the book “The Bankers’ New Clothes: What Went Wrong and Must Change with the Banks” (2013) warns: “Something like this can happen again at any time…
Two essential reasons for the return of a “monetary Big Bang” are the compromises with the bank lobby and the inaccuracy of regulatory instruments. In addition, there was an insidious revocation of the commands and prohibitions in the financial market system. Instead of reducing manifest inefficiencies and injustices, an all-out attack threatens against the measures for taming the financial markets. A regulatory pause is not possible. New risks are superimposed on the sins of the past. These new risks that must be contained through an active control policy are:
– The debts of states and businesses according to IMF data have risen worldwide to $164 trillion, 225% of the global economic output. Euro countries registered a debt expansion from 25% to 40% of the gross domestic product from 2007 to 2016. In the US, the debt rate grew 43% to 108% (2016, $48.1 trillion). In China, the huge mountain of debts rose 1,400% to $25.2 trillion from 2010 to 2016. The debts in China’s business sector alone are $20 trillion… If a deep recession occurs, the debt structure will collapse. Risks result from the composition of the debts and not only from the absolute amount. A dramatic increase of “rotten credits” (non-performing loans) is undeniable… The smoldering fire can quickly cause a major fire on the financial markets.
– The crisis danger from the huge mountain of debts is intensified by a new alarming challenge
The risk in changing the interest-rate must be tackled after the long-lasting low-interest phase of many central banks. There are many signs that the interest rates on the money- and capital markets are related. Central banks play a key role in changing the interest. In two steps, the US Federal Reserve has already raised the key interest rate for the money supply from 1.75% to 2%… If finance capital streamed into the US dollar realm, a devaluation of the US dollar compared to the euro will bring great changes. Export advantages through the euro devaluation will increase Germany’s balance of trade surplus and deepen the US balance of trade deficit.
Then, Donald Trump will tell stories more aggressively about targeted currency manipulation against the US. Intensified “America First” protectionism must be expected. The risks on the financial markets increase since the interest-rate differences between the euro and dollar zones were long exploited in special speculative transactions. In the center are “currency trades” that are massively used now by hedge funds. With leveraging through foreign financing, credits were taken at low-interest rates in low-interest countries and profitable government bonds purchased in the US…
– The old and new risks of a financial market crisis are intensified by the alarmingly greater impatience of shadow banks.
According to the definition of the German Central Bank, shadow banks are “financial market actors who do not belong to the group of regulated banks” and are not subject to legal monitoring. Money-market funds, open and closed investment funds and other financial institutes like securitized conduits, security traders, credit-granting corporations, credit- and insurance activities, company-owned, financial institutions and sponsors (particularly. holding companies) are included in this definition. The highly concentrated hedge funds that gather investor money and promise profits from profitable investments as a return favor are active in the shadows of regulated banks. The shadow banks have expanded as a reaction to the newly introduced regulations of the public banking sector. Indicator sales and managed financial assets verify the flight into the shadows of the regulated banking world…
Shadow banks have used possibilities for tax fraud. Business locations in tax havens like Ireland, Delaware, the Cayman Islands or Jersey in the Canary Islands are often mentioned. The question about risks concentrated in the shadow banking realm is complex…
Altogether the sales volume of shadow banks grows faster than the overall economy… At the end of 2016, the business volume was estimated at $9.6 trillion…
The crisis causes slumbering in this market logic, at least partly tamed by regulations after 2007, are revived in the shadow banks. The danger of a panic-inducing withdrawal of funds can quickly lead to collapse. Money-market funds will be closed for the short-term on account of the run of investors after the latest financial market crisis begins.
Another risk results from the transformation of money invested in the short-term into long-term credits. Risks of failure are manifest when speculative capital-holding transactions occur… Collapses in the shadow banks quickly spill over to the whole system. The shadow banks lack fiscal protection: no access to central bank money, no possibility of money creation, no legally regulated safeguarding of invested capital and no funds from the public in case of insolvency. With their high risks, shadow banks must be regulated and controlled. The whole financial system can be stabilized this way. With their extremely risky transactions, shadow banks create a potential for a new massive financial market crisis straining the total economy and the state, as recent history teaches.
Conclusion: Financial Market Crisis and the Way Ahead
The latest financial market crisis with the intensified signal of the Lehman Brothers insolvency on September 15, 2008 led to deep shocks or shockwaves in politics and the economy. At least in politics, the ideology of unfettered financial markets generating prosperity was first abandoned. Market fundamentalist policy that rejected creative state interventions fell in this suction. Bailout programs in the billions for the banks and previously tabooed economic programs with labor market stipulations were put on the table. Even the market-optimistic majority-media suddenly switched over to the crisis susceptibility of the financial system.
The deficient reporting about early crisis signs before 2008 was part of the failure of the media. For that reason, the Lehman Brothers bankruptcy could only be seen as a completely unexpected fateful blow appearing from nowhere. Prevailing mainstream economics could not be shaken in its neoliberal ideology by the shock of collapsing financial markets. When causes of crises were named, they were exogenous shocks like state interventions, not the endogenous destructive forces of the financial market dynamic.
Politics reacted to the latest financial crash with onerous burdens for the whole economy. Demands were made nationally, internationally, and through the EU in the following years: a professional crisis management, stronger protection of the banks against losses with their own capital, the participation of private administration in bank transactions and many measures for regulating speculation instruments and techniques on the financial markets.
Even after ten years, the proposals were often not carried out in detail. Therefore, the crisis dynamic could not be neutralized in its total effect. One reason is the powerful lobby for the financial markets in regulative processes. The claim of over-regulation was used to carry out backward-oriented corrections. The rediscovery of unfettered financial markets in the US occurs through Donald Trump. The Dodd-Frank Act for financial market regulation is being dismantled. New risks are added to the old causes of crisis that persist. The worldwide shadow banks that successfully escaped the regu9laterd banking sector are at the center.
Up to today, the search for the economic causes of the most recent financial market crisis has been too simplistic. Regulations of the institutes and instruments are undoubtedly necessary but not sufficient. The reasons for money-capital seeking investments on the financial markets must be identified.
Where does the money-capital come from that floods the financial markets and leads to the creation of the new investment instruments? One answer is in the growing concentration of wealth and wealth revenues. Funds are steered to the financial markets, not to financing private and public material investments. This includes businesses hurrying to the gambling table of international casino capitalism on account of the low and uncertain profits for material investments. Comparatively high profits are offered there while the risks of specially created speculation instruments are obscured. The result is over-saving; insufficient money flows to finance political-economic projects.
Is there a way out of the dynamic of the financial market crisis? Yes; wealth and income must be reduced through redistribution. Real economic production through consumption could be strengthened, particularly by low income persons along with the urgently necessary expansion of public investments. The pressure of the financial streams on the financial markets could be reduced by a far-reaching redistribution on one hand and strengthening sustainable economies on the other hand.
In the past, the prevailing mainstream policy concentrated much too little on the causes of the expanding financial volume. Instead, dependence on the financial markets increased through changes in the social system. The legally created dependence of pension payments on the financial markets should be recalled. Removing a momentous system-error of politics is vital. In the course of the system change of the pension system above all by the Schroeder government with Walter Riester, the legal pensions were systematically reduced so much that a private capital supply became necessary for the existential security of seniors.
The great euphoria about financial markets misunderstood as ultra-stable prevailed when this dependence on private capital supply was legally created. Experiences with the crisis susceptibility of financial markets over ten years teach that legal security systems must be freed from dependence on capital markets. As the concept of the social market economy teaches, social risks arising through no fault of our own that cannot be overcome from our own strength must be governmentally cushioned in a wage-centered society. As reality shows, the Riester pensions financed out of tax revenues cannot heal this fundamental system error.
Avoiding a new crisis is vital since a new financial market crisis would deeply shake political conditions and damage parliamentary democracy. An extensive study of the “Institute for World Economics” (Kiel) repeats this warning after analyzing 20 countries since 1870 (“Going to Extremes: Politics after Financial Crises, 1870–2014 in: European Economic Review, 2016, vol. 88).
Through financial crises, the right-wing in its radical configurations gains political significance. The connection of worldwide economic crisis and the rise of National Socialism in the early 1930s are virulent again. Today, Austria with the FPO, Germany with AfD (Alternatives for Germany), the Italian Liga, the Le Pen movement in France and the right-wing of Republicans with Donald Trump are examples of strengthened right-wing populist parties traceable to crises on the financial markets. Financial crises are considered failures of the political system that cannot protect its citizens. This experience is frustrating. Banks can be bailed out with tax revenues while money is not available for “little people.”
Victims of the anonymous violence of finance capital may be named. There are a growing number of people who have lost their jobs through the neoliberal business model… In Germany, 40% of the German people, above all the socially weak, have no savings. The financial oligarchy which is slandered as the rule of Judaism foments political hatred. Thus, the task is to deprive the financial markets of their speculative activities and strengthen the serving or helping financing functions for the economy and society. This benefits economic and democratic stabilization. A future worth living demands civilizing the financial markets through a socially just distribution of income and wealth to contain the infusion of money capital and strengthen the financing of the real economy with sustainable growth.
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“We live in a time of radical counter-enlightenment”
by Rainer Mausfeld
Mon, Dec 3, 2018 3:39AM
Political struggle always means the struggle over the definitional power and appropriation of the world. For decades, neoliberalism has carried out a redistribution project against the majority of the population. This neoliberal project is only possible when the democratic substance is dismantled or neutralized. More and more people recognize the rupture between ideology and reality.
“WE LIVE IN A TIME OF RADICAL COUNTER-ENLIGHTENMENT”
Psychologist Rainer Mausfeld is interviewed about the illusion of being informed, “contempt for the people” and journalists and intellectuals
[This interview published on October 2, 2018 is translated from the German on the Internet, http://www.heise.de.]
Mr. Mausfeld: You are known for your lectures that focus on the hidden role of power elites in our society. You are attacked from many sides. Former ARD-journalist Hans Jessen in a podcast reproached you for a “closed worldview.” The Americanism professor Michael Butter discovers “conspiracy theory features” in your work. Are you surprised by the vehemence of this criticism?
Rainer Mausfeld: Criticism and slander are different. Criticism aims at the cause and slander at the person. Criticism is based on arguments; slander works with a mendacious vocabulary. In my lectures, there is great room for maneuver for different perspectives in considering complex systems. My perspective is influenced by the radical-democratic tradition of the Enlightenment. A methodology is offered to set our everyday political experiences in a context. Autonomy can only be gained and proper conclusions drawn from our experiences through this craft of thinking.
What do you mean by the “craft of thinking”?
Rainer Mausfeld: The methods refined in the Enlightenment uncovering unconscious and often hidden political prejudices are part of the craft of thinking. Thus, ideology criticism is part of methodology. Political indoctrination aims at producing the prejudices that help stabilize the status of the powerful. Enthusiasm cannot be expected from the powerful since ideology criticism is always power criticism.
Every form of dissent is allowed or even desired as a revolution prophylactic in our capitalist democracies as long as the dissent remains ineffective, as the great democracy theorist Sheldon Wolin emphasized. There is a great spectrum of tested dissent management for the enclosure, neutralization and outlawing of undesired dissent.
We could better understand the methods of a dissent management if we focused on its structural qualities instead of on persons… Inadmissable dissent shows the powerful in politics and the media that they have deeply internalized the dominant ideology and is often rewarded in journalist and academic realms with commensurate career chances. These mechanisms of a dissent management in capitalist democracies have been known for a long time.
Are reproaches like “closed worldview” or “conspiracy theory” unexpected for you?
Rainer Mausfeld: Being the target is not surprising tome since my lectures reveal the discrepancy between ideologies and reality and the powerful depend on restricting political dissent.
These reproaches have nothing to do with arguments or evidence… Rainer Mausfeld’s book “What about the silence of the lambs? How elite democracy and neoliberalism destroy our society and our life foundations” was published by Westend publishers.
Language as a Rule Instrument
On the rule of language, you say: “Whoever controls language, the concepts and categories in which we reflect and speak about social-political phenomena has few problems in dominating us.” Words like “populism” or “conspiracy theory” limit thinking and are declared undiscussable. That leads to the question: Can a society make wise decisions when its own thinking is increasingly restricted?
Rainer Mausfeld: Political struggle always means the struggle over definitional power and appropriation of words.” Therefore, language is the most important instrument of rule alongside tanks. Since democracies limit the possibilities of using physical force, the powerful depend on securing stable power relations in other ways. This can be accomplished very effectively through language, for example through an Orwellian redefinition of very fundamental terms like freedom and democracy or even through the gigantic vocabulary of false neoliberal terms like liberalization, globalization, deregulation and reform.
Ideological frames for thought and explanation can be communicated through language that is used mostly unconsciously for embedding our daily political experiences. The framing narrative of a “western value community” is a very serious example because of its millions of victims. Framing ideological narratives are secured by a broad spectrum of political vocabularies against objections. The terms populism and conspiracy theory are now in a boom season. With them, the neoliberal “fanaticism of the middle” has terms to declare itself without alternatives.
How is the term “populism” used today?
Rainer Mausfeld: Populism can be understood today as a kind of nemesis – as an equalizing justice – for the essential contempt of the people which is characteristic for all elites of western democracies.
This contempt of the people now erupts with populist rage and incalculability, often on the basis of emotions that belong to the dark sides of human nature. These emotions are frequently defensive emotions against one’s feelings of political powerlessness that break out among the socially weakest. These feelings of political powerlessness were and are produced in a very systematic way for decades to keep the people from political participation.
Can you illustrate this?
Rainer Mausfeld: For decades, the neoliberal phantom-middle has carried out a redistribution project directed against the majority of the population. This neoliberal project is only possible when the democratic substance gained arduously over long decades is dismantled or at least neutralized. The dethronement of the legislative, the parliament, by the executive is only one momentous aspect. A politics directed massively against the majority of the population cannot remain hidden from the population in the long run despite enormous efforts.
Thus, it is hardly surprising that more and more people recognize the rupture between ideology and reality. The mistrust in political institutions, the potential indignation and the need for change increase correspondingly. Therefore, the neoliberal phantom-middle needs the rightwing populism jointly produced by it for ensuring its power. It depends on it almost symbiotically because it needs a means for producing anxiety to keep the population’s need for change in paths “without alternative.” Thus, the culprits pretend to be rescuers.
What do you think of all-pervasive “conspiracy theories”?
Rainer Mausfeld: The combative political term conspiracy theory is without any serious intellectual substance and has had its day as a slander term…
If the space for public debate is systematically restricted with this combative term, this means solutions necessary for pressing and threatening political problems will not be available to political decision-makers. They will only focus on evading democratic responsibility for the consequences of their policy and stabilizing their power, that is continuing the political measures that first led to the neoliberal destruction of our social and ecological foundations of life.
Illusion of Being Informed
Telepolis: Your book “What about the silence of the lambs?” concentrates on deceptions and illusions concerning the term democracy and the state of society. You speak of an “illusion of being informed” to which the educated sectors are susceptible.
Rainer Mausfeld: Many deceptions and illusions that can be used for political indoctrination are based on characteristics and design principles of our spirit. The underlying internal mechanisms are largely screened from introspective insights so deceptions still function even when people know they are deceptions…
Ideological indoctrination systems form a multilayered highly complex web through which power relations are socially regulated. Alongside the ideology of the western value community, indoctrination systems only exist in states where a system change is sought. Since our social order is founded on rationality and western values, ideologies obviously have no place in it. Neoliberal indoctrination declares itself the end of all ideology and as a pure effect of the natural laws of free markets. My remark that the educated sectors are especially susceptible for the illusion of being informed refers to this kind of indoctrination.
In other words, the educated often succumb to the illusion of being free from ideologies. How does this happen?
Rainer Mausfeld: Those who passed through the educational institutions of a society and the career filters, whether in journalism or academia, belong to these sectors (cf. “path dependency). However, the educational institutions of a society just like the career filter embody the core ideologies of a society. That is a core sociological truism.
In all times, the educated sectors have shows a very high degree of ideological indoctrination. They internalize this indoctrination so deeply that they do not even notice their indoctrination anymore. Like the inhabitants of the cave in Plato’s Parable of the Cave, they react aggressively when this is pointed out. That their opinions and attitudes are ideological stabilizations of power relations is often inconceivable to them since they continuously strengthen each other in their ideological perspectives.
Invisible Ideologies
You say: “We swim in the ruling ideology like fish in water and do not notice it anymore.” There are “invisible ideologies.” What do you mean?
Rainer Mausfeld: All ideological framing narratives and interpretation models shared by the large majority of the population and not recognized anymore as ideology are included. This was racism in the 19th century that was shared by nearly everyone as something self-evident. In western capitalist democracies, it is the meritocratic ideology, the ideology of a performance-oriented society. According to this ideology, social places are assigned in a social order by individual performance. Thus, salary and social status are determined by individual achievement.
According to this ideology, those who are above in our society are rightly on top and those below are rightly on the bottom because they are deficient in their individual achievements. The meritocratic ideology is the favorite ideology of those above who want to feel they are justly on the top by blaming the losers of this power structure for their situation.
What hidden models do you see?
Rainer Mausfeld: The ideology of the western value community and more generally the exceptionalism with which individual nations give themselves a special place among the nations and insist their crimes, even the gravest war crimes, torture or the most grievous violations of international law should be judged by other criteria, and are the crimes of other states.
The ideology that representative democracy is the best or at least the only realizable embodiment of the key democratic idea or generally embodies democratic intentions is a nearly invisible core ideology of our elite capitalist democracies.
You describe the influencing of the population as “deep indoctrination making intellectual possibilities” invisible. You speak of a “collective hypnosis” and say “those subject to power should not know that centers of power exist – behind the seemingly democratically controlled power on the media-communicated surface. Corporate commercial media vehemently deny a goal-directed power structure in the background of governments and parliaments. This assumption is regarded as “the” conspiracy theory. Such knowledge was common heritage or part of everyday life. In its 1925 Program of Principles, the SPD wrote that “overpowering rulers of the economy bring society into its economic dependence” and “subject the whole economic and political machinery in the state to the dominion of a few financial magnates.” These sentences were the official party program of the SPD over 90 years ago. Was the population more enlightened in the 1920s than today?
Rainer Mausfeld: The term “collective hypnosis” comes from the English dramatist Harold Pinter who gave the ideology and reality of the western value community an unsparing accounting in his Nobel Prize address.
On the understanding of power relations, we think of the hierarchy of power in personal categories and consequently have enormous problems in recognizing and understanding forms of power that are organized in an abstract, structural way. Structural power is practically invisible.
Structurally-organized forms of power may systematically exert influence even if one assumes counter-factually that no concrete persons in the background of governments and parliaments have more influence than the rest of the population. These things were known for many decades in research institutes occupied with power and its organization. The more the media focuses the population on personal aspects of power, the more effectively their understanding of power’s real structural organizational forms is blocked.
Personalization Blocks the Understanding of the Organization of Power
Media mania is manifest in the platforms given to Trump and Putin.
Rainer Mausfeld: With trifling expense, the real centers of political and economic power are made practically invisible to the population. The question about the actual centers of economic and political power can only be answered through empirical studies. In the book, I cite an abundance of careful empirical analyses. Since the pioneering studies of Herman and Chomsky, many empirical studies show how the media is embedded in these power structures.
For example, a few mammoth corporations like Comcast, Walt Disney Company, 21st Century Fox or Time Warner, own practically 90% of all US news media. This obviously does not have any effect on the work of journalists in these media companies because they are only obliged to their professional ethos. The capital interests of their owners are clearly separated from their journalist obligations.
You have humor.
Rainer Mausfeld: Unfortunately, the possibilities of revealing the power relations through satirical exaggeration are largely annulled. The reality of the media takes away the possibilities of satire.
Many empirical Power-Structure-Analyses show the organizational forms of economic and political power have changed since the 1970s and the beginning of the neoliberal “revolution from above.” Political and economic power is now organized in an increasingly more abstract way. All social responsibility dissolves in the fields of abstract networks. The needs for political change of those subject to power cannot have any concrete or politically effective goals anymore.
In other words, people do not know anymore against whom they should demonstrate.
Rainer Mausfeld: The population’s will for change has no addressants anymore among the real decision-makers. With so-called globalization, targeted mechanisms were created through which economic power is transformed into political power.
The term globalization that is almost mystified by many also belongs to the false dictionary of neoliberalism since neoliberal globalization is nothing but a novel form of a nationalism of economically strong countries. In any case, the neoliberal redistribution project was effectively sealed against democratic incursions through the radical reorganization of power.
As long as we do not understand these new forms of the organization of power, all emancipatory efforts and attempts at its civilized enclosure will ultimately fail. Thus, enlightenment is crucial.
“We live in a time of counter-enlightenment”
Telepolis: Your reference point is the French Revolution that gave a constitutional rank to the ideals of the Enlightenment. In your book, you say: “Two hundred years after the Enlightenment of which we are so proud in our political rhetoric, we live in a time of radical counter-enlightenment.” What do you mean?
Rainer Mausfeld: The French Revolution was a very complex event where the forces of the counter-enlightenment were already effective. My reference point is the radical democratic tradition within the Enlightenment. These things can be described simply. To understand this, we do not need special historical knowledge about the Enlightenment.
The question is why democracy is really desirable. The key idea of democracy does not only result from our natural human need for freedom, the need not to be subjected to the will of others. The key idea of democracy results from the desire to find ways to safeguard inner and outer peace in view of the immense trail of blood of the history of human civilization – that is protecting civilization against a rule of violence. Protective beams should prevent the rule of the law of the stronger and the strong dominating over the weak. The Enlightenment sought ways to restrain relations of power and violence.
In a society marked by plurality, the heterogeneity of social interests is so great that agreeing on a procedural principle preventing a rule according to the law of the stronger is not simple. Such a principle must ensure that the strong are no longer granted more or different rights than the weak. Thus, it must be an egalitarian principle. The Enlightenment saw such a principle in acknowledging all persons as free and equal regardless of their factual differences as to their social rights.
Such an egalitarian principle leads to the core idea of democracy at home and to the core idea of international law for inter-state relations. It prevents all attempts at establishing conditions of power and violence on racist, nationalist or exceptionalist premises. Therefore, it was fought massively from the beginning and is the core of the counter-enlightenment.
How do you define this counter-enlightenment?
Rainer Mausfeld: Very heterogeneous currents are found in the counter-enlightenment. However, the rejection or even hatred for democracy and the refusal of an egalitarian international law is common to all these currents. Today, we are again removed from all the civilized achievements that were gained at times on the basis of this egalitarian principle. The elites openly express their contempt of democracy and increasingly resort to authoritarian measures to secure their power.
The increasingly more repressive police laws and the brutal police actions at the G20 summit in Hamburg and in the Hambach forest are two examples. In inter-state relations, the leading states of the western value community insist on their right to break international law on their discretion and to press ahead with NATO war preparations that are increasingly more aggressive. The right of the militarily and economically stronger openly prevails again in a gigantic regression of civilization.
In short, we live in a phase of counter-enlightenment destructively affecting nearly all areas of social life in an unparalleled way since the times of the Enlightenment – a phase of counter-enlightenment that insidiously manages to camouflage as Enlightenment.
Representative Democracy as Resisting Democracy
In your judgment, representative democracy – you speak of “elite democracy” – is above all an instrument of “resisting democracy.” In this connection, you quote several famous founding fathers of the US like James Madison and John Jay who said at that time: “Whoever owns the land should also govern it.” Is our present only different in that no one at the political top would openly say something like that today?
Rainer Mausfeld: The term “elite democracy” is conceptually a contradiction in itself. Historically, democracy is said to have carried out a triumphant march since the middle of the 19th century. In fact, there never was a real democracy, a self-legislation of the people and a submission of all state machines under the democratic law. Why should the rulers have an interest in voluntarily limiting or ceding their power to the people?
From the view of the rulers, democracy nearly always only served as a revolution prophylactic. It is also an historical fact that the introduction of representative democracy served as resistance to democracy. This fact is proven in the technical literature under a multitude of analysis perspectives. In the book, I cite the relevant literature. The Harvard legal historian Michael J. Klarman in his book “The Framers’ Coup” showed in meticulous detail that the 1787 American constitution emerged from vehement struggles between different elite groups and is marked by an anti-democratic spirit. From the beginning, the introduction of representative democracy helped safeguard the property system and production of an illusion of democracy by establishing an elite democracy.
The idea of politically competent rational elites committed to the common good is only a phantasy of self-promoting elites. With this ideological fiction, they sought to justify the political incapacitation of the “dumb” people. The political experiences of the past decades show that citizens by no means embody the political stupidity ascribed to them by the political elites, as Ingeborg Maus explained.
With a sober evaluation of the realities and the – long-term – disastrous and destructive consequences of the ideologues of elite democracy and neoliberalism, these ideologies must be regarded as failed more than any past social ideology. Their socially and ecologically destructive work will continue as long as the “dumb” people tolerate it since they have eluded all democratic control.
You mentioned, leading thinkers in the US and elsewhere appeal to a “rationality of the experts.” The people are too fickle and uneducated. Only experts can make rational decisions. The American journalist and government advisor Walter Lippmann saw this similarly and wrote: “Democracy, first of all, is an administrative problem that must be solved by experts as efficiently as possible so the population can devote itself to the individual goals of its private world.” The philosopher John Dewey opposed this in the 1920s: “A judgment about the political competence of citizens is impossible as long as the population does not have all relevant political information, as long as the space of public debate is not open to everyone equally and as long as this space is dominated and systematically restricted by individual power groups.” The role of the media is important here. How must the media be organized to do justice to these demands?
Rainer Mausfeld: The role of the media is crucial in a democracy. A democracy has the difficult task of developing procedures through which the heterogeneity and plurality of very different interests can be harmonized in a peaceful way so a political
action in the sense of the common good is possible. The exchange of individual particular interests occurs through the public debate.
Media Evades Democratic Control
Rainer Mausfeld: The space of public debate is the heart of democracy. However, it can only fulfill its function if it is intact. Since the media now first constitute the space of public debate, they must not be distorted in favor of powerful interest groups. Corporate media by definition cannot fulfill this because of their integration in economic power structures. They almost inevitably become an instrument with which powerful economic lobby groups can enter the public discussion space in a concealed way.
The question about an organization of the media in a democracy can only be considered in the context of the prior question to what extent are all areas of a society democratically organized. As long as central areas of a society like the economy and the media evade democratic control, there cannot be an undistorted space of public debate open to everyone. The condition for the possibility of democracy is left out.
The term “elite negligence” is used increasingly. Billionaires speak “of the responsibility of the media in these times.” This leads to the rhetorical question: How much freedom of the press exists in our system generally?
Rainer Mausfeld: Politics in capitalist democracies only has the possibilities allowed by the economy. John Dewey recognized this more than eight decades ago. This could be understood as a truism. However, neither Dewey nor the innumerable authors that focused on the relation of capitalism and media since then are still present in the public discussion.
The space of public debate is less distorted and reflects a greater spectrum of social interests in times when capitalism allowed a certain degree of democratization as a motor of productivity development. But the advantages seen by capitalism in the national framework in the social pacification function of democratic elements were cancelled in globalized capitalism. Since maintaining the illusion of a democracy is not important anymore, the space of a public debate can now be limited as considered necessary for the stability of the ruling power structure.
What do you mean?
Rainer Mausfeld: Freedom of speech is nearly unlimited with all themes that are irrelevant for the stability of the centers of power. This is true for most themes offered us today in the corporate media. Here everyone can think what they want and enjoy freedom of speech. This is obviously different with politically sensitive themes, themes that touch the stability interests of political and economic power groups.
The Ukraine, Russia, Syria, Saudi Arabia, Israel and Venezuela are examples. In the last decades, the space of allowed debate was greatly narrowed. Here there is only as much margin as there are different interests in the elite spectrum.
This recalls the “Indexing hypothesis” that assumes the big media as a rule only reflect the debate within the political elite. Thus, the scope of the “allowed” is marked out.
Rainer Mausfeld: This was already explained by John Dewey. In his 1935 essay “Our Un-free Press,” he declared we cannot raise the question of freedom of the press independent of the respective economic system. Therefore, we must ask “how much genuine intellectual freedom and social responsibility are possible under the conditions of the present economic order?”
Contempt for the People
You describe the structure of ideas behind the existing economic order neoliberalism as “a kind of intellectual pathology” that takes a way of destruction on all planes – “destruction of community, the idea of community, life, cultural and civilized substance and our ecological foundations.” The system aims at the creation of a new person “whose social life is totally wrapped up in the role of the politically apathetic consumer” and has no knowledge about his own history. Here, the role of intellectuals comes into play that could give orientation to society – which hardly ever happens. You write that many intellectuals have long shared “contempt for the people with power elites.” Is this a new development or possibly the same in all times?
Rainer Mausfeld: This has happened in all times. Those above in the social hierarchies, whether in income, education or political power inclined or incline to look with contempt on the “multitude” or the “people.” Even great spokespersons of the Enlightenment were not free from that.
Those who describe their social success to their special abilities do not control the rest of the population. Thus, it is a kind of individual exceptionalism. For these reasons, the concept of the elite is a thoroughly ideological concept. As history shows, this kind of ideological perspective is hard to uncover and combat and intellectuals are very susceptible. This is not different today than in the past.
What is new?
Rainer Mausfeld: What has changed is the far-reaching disappearance of critical intellectuals from public space. This is connected with the neoliberal ideology of no alternative and with the loss of emancipatory utopias as they drove and guided civilization development since time immemorial.
Intellectual mediators who hand down everything that could be gained collectively in emancipatory insights and experiences are lacking to us. The theoretical ideas on whose basis political experiences can be ordered and political goals formulated are lacking. This includes a great toolbox of ideology-critical methodology and politically effective strategies.
When public intellectuals are missing as mediators, we are separated from all emancipatory traditions. We are socially atomized and intellectually fragmented and thus easy prey for the modern forms of manipulation and control techniques by which present conditions of power seek stability.
An ideological system never before so skillfully understood itself how to dry up and neutralize western capitalist elite democracies with their “soft power” methods developed systematically over more than a century.
Hope is bound to readiness for active conduct
You are not a pessimist or extremist despite the depressing analysis in your book but see a possible way out of the situation in a broad “re-politicization” of the population and in the efforts of every individual to regain the lost social memory – that is, the treasure of experience from centuries of political analysis. What gives you hope in this context?
Rainer Mausfeld: I am often asked that question. I have hope but I do not like to answer simply with a diffuse confession to hope. The nature of this question seems abridged in a way that suggests hope has become a targeted goal-oriented theme of a democracy management as hope management.
In its conceptual history, the word hope referred to two aspects, to the passive aspect of an expectation of a somewhat positive future and to a rather active aspect of striving for something better. Thus, hope was and must always be tied with a will to change in the social-political realm of civilized efforts for a more humane society. Isolated questions about hope seem to lack a decisive dimension since hope and will to change are inseparably connected.
Thus, hope in the political realm cannot be an end-in-itself but is bound to a political goal and to readiness for active conduct. This connection of hope and will to change should be prevented by the rule technology of a hope management. With that, hope threatens to decay from an incentive to political action to a replacement for political action.
As long as one has hope that things are not so bad and civilization progress appears somehow, we can renounce on our political conduct. With that, hope becomes a means of social sedation, a social tranquilizer.
The techniques of hope management use psychic deformations that are produced in the processes of creating a “neoliberal self,” particularly the longing for immediate need satisfaction and extremely narrowed psychic tolerance of division.
The hope for a better world uncoupled from a serious will to change is almost a characteristic of the left-liberal milieu that has established itself in the status quo of the current hierarchy of power. That Barack Obama is the favorite US president of the left-liberal milieu is hardly surprising since Obama was the grand master in selling the favorite product of that milieu, hope. In 2008, he was chosen “Marketer of the Year” by the advertising industry.
In your opinion, can hope for change still be supported when this hope becomes a marketing instrument and is profitably managed?
Rainer Mausfeld: Personal meaning obviously varies from individual to individual. For me, three aspects are particularly important. One aspect is the quality of the human spirit, especially in our natural human need for freedom and in our natural moral sensitiveness for social injustices.
Another aspect lies in the kind of mechanisms that led to the destructive forms of neoliberal social organization. These social transformations are based on human decisions and human decisions, at least on principle, can be corrected and cancelled. Without a radical preceding democratization, such a hope must remain lacking in contact with reality (realitatsleer).
The third aspect is social nature. The social achievements of our civilization history were always gained by only a few, often against the massive resistance of parts of the population interested in maintaining the status quo. Here, we find the models that could give us courage and hope that this could also make possible preserving emancipatory progress in the present and the future. Many examples and models that give hope and courage can be found in the many social movements all over the world who fight for these goals. In any case, hope and the will to change must be allied with a sound understanding of the concrete power structures that strive to cancel emancipatory advances.
Toward the end of your book, you write: “Our future will depend on whether we are finally ready to take the dream of democracy seriously.” Many people hardly take anything seriously including a chance at change. Is “taking the dream of democracy seriously” the real political challenge?
Rainer Mausfeld: That many people hardly take anything seriously, even themselves, is both an important and sad observation. This is only one of many examples that show the far-reaching effects of the ideology of the “neoliberal self” practiced for decades. The psychoanalyst Wilhelm Reich was intensely occupied with the relation of personality structure and fascist ideology in the 1930s in his “Mass Psychology of Fascism.” Every social order tends to produce those personality structures needed for its preservation, he explained.
This is true for neoliberalism that depends on the creation of a “neoliberal self.” Neoliberalism is a totalitarian ideology since it pervades all areas of society and aims at a new person who comes to like his political disheartenment or despondency and becomes wrapped up in the role of consumer. Its goal is the creation of a “flexible person” who optimizes his usability for the objectives of others and forgets self-development of their own talents and interests.
He has also forgotten what it means to take seriously a cause or him- or herself. Seriousness is conflated to consumer decisions and optimizing self-promotion in the so-called social media.
Earlier translated articles by Rainer Mausfeld:
Rainer Mausfeld, Neoliberal Indoctrination, January 2016 http://portland.indymedia.org/en/2016/02/431734.shtml
Neoliberalism tells the poor and weak that they are responsible for their misery. The true extent of social poverty barely reaches the public. A re-feudalization bomb rages and investors seek privatizing the public education system. People are atomized and obscured by psycho-techniques that make resistance against this inhuman system impossible.
Neoliberalism – after European colonialism – is the greatest redistribution project of history. Considerable indoctrination and disciplining efforts are necessary to accept and even join in this battle song against their actual experiences and against their own interests. In a democracy, it is important to conceal and make invisible the real goal of redistribution from bottom to top.
Neoliberalism causes one disaster after another worldwide and aims at producing consumers who only find a social identity as consumers in a socially atomized society.
Rainer Mausfeld, Propaganda: Making Alternatives Disappear by, 4/22/2016 http://portland.indymedia.org/en/2016/07/432662.shtml
The main responsibility of a government in a “democracy” is protecting the minority of the ownership class against the majority of the non-owners… Our bombing Arab countries is not terrorism but a struggle for freedom and human rights…There was a time of mutual symbiosis between democracy and capitalism. That was the New Deal.
The neoliberal indoctrination systems serve an industrial-scale manufacture of ignorance… The US strives for a full spectrum dominance in water, air, outer space and in the opinion market.
Double standards are part of our human nature. We see moral offenses of others very well but are remarkably tolerant with ourselves… We have pessimism of the intellect but optimism of the will. Go Bernie Go!
Rainer Mausfeld, Why are the Lambs Silent?, Jan 18, 2016 http://portland.indymedia.org/en/2016/02/431754.shtml
Techniques – fragmentation and propaganda – make serious violations of moral norms by the ruling elites morally and cognitively invisible to the population. With many examples, professor Mausfeld gives insight in the actual management of our democracy and how people are kept in apathy and in the illusion of being informed.
“You already know enough. So do I. We don’t lack knowledge. What is missing is the courage to understand what we know and draw conclusions.”
Sven Lindquist (1992). Exterminate All the Brutes.
For Paul Lazarsfeld, the mass media is the “most respectable and efficient of social narcotics.” When citizens feel informed by the mass media, they are so overpowered by their feeling of being informed that “the addict is kept from recognizing his own malady,” Lazarsfeld diagnoses.
Controlling opinions is more important than purely emotional control because opinions are usually more stable than emotions. Therefore a special importance comes to techniques that can control opinions. No special knowledge of psychology is needed for these simple techniques. They are the standard methods of the mass media:
1. Declare facts to be opinions. Dealing with facts as though they are mere opinions is one of the most frightening aspects of totalitarian thought systems, Hannah Arendt explained.
2. Fragment the presentation of connected facts so the context is lost.
3. De-contextualize facts so they are removed from their real contexts and seem as isolated cases.
4. Re-contextualize facts, embed them in a new context with “positive” accompaniments so they lose their original context and the possible potential of moral indignation…
Rainer Mausfeld , “How the Bewildered Herd is Kept on Course”, October 2017
I want to share several insights from the psychologist Rainer Mausfeld in his recent lecture “How the Bewildered Herd is Kept on Course”: 1) Social antagonism is shifted into one’s own person. One becomes a slaveholder of oneself under the neoliberal ideology of human capital. Everyone is a little I-company that must optimize him/herself. (2) Estrangement or de-solidarity can only occur when a necessary measure of fear and uncertainty is induced in individuals. (3) Fear must be induced and has nothing to do with reality. This is an important rule technique. The most important resource in neoliberalism is “accumulation of the fear raw material” (Oscar Negt), “The people are threatening for the rulers when they are without fear” (Tacitus)
Job creation, closing tax havens, redistributing income and wealth and building affordable housing, schools, and hospitals are all trivialized or ignored in the GOP tax bill – in the irrational frenzy to give more benefits and deductions to owners of yachts and private jets!
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Faith Heals Reason
by Dorothee Soelle
Sat, Dec 24, 2011 8:55AM
“There is a beautiful fairy tale by Hans Christian Andersen where the devil builds a mirror that distorts everything beautiful and good into nothing. The most glorious countrysides appear like boiled spinach, the best persons are repulsive or without torsos.. This mirror cancels the creation itself. I asked myself whether or not Andersen meant scientific reason. People only saw profit, success and survival of the fittest and justice faded.”
If I can be God, I no longer need seek God. If I am Lord of time, the Sabbath, interruption and stillness are superfluous
[This sermon is translated from the German on the World Wide Web, http://www.ej-landshut.de/Zeitung/Andacht_soelle.htm. Dorothee Soelle was a liberation theologian, prolific author and prophetic poet.]
Dear community.
Paul writes these difficult sentences to the nascent Christian community in Corinth threatened by conflict and division. “The weapons of our warfare are not worldly (human-earthly) but have divine power (God’s power) to destroy strongholds. We destroy arguments and every proud obstacle to the knowledge of God, and take every thought captive to obey Christ” (2 Cor 10,4f). Thought, reason and lifestyle should be taken captive. What does this mean today?
In my history with faith, I have become increasingly Jewish in the last years, referring more and more to creation. Redemption is bound to creation. I understand “obeying Christ” as binding in faith to the good creation intended by God. My question is: Must we really lock up technocratic-scientific reason to live in this faith? Isn’t that religious arrogance, clerical illusion or conceitedness and a rule ideology that passed once and for all with the modern age?
“Faith heals reason.” That is the theme for today. Reason, thought and science are sick in our world. Here is an example from everyday life: a handicapped child who can only hobble and cannot speak comes with his mother to the children’s playground. After a short time, another mother approaches her: “Must this be? Didn’t you know in advance? Couldn’t you avoid the risk and have an abortion?” The young woman who told this to me was deeply hurt. Science promises planned children. Soon they will be cloned together, beautiful like Marilyn Monroe and intelligent like Albert Einstein. Accidents, mishaps and the imperfect have to disappear from our world. We have no time for breakdowns that are costly and avoidable with early detection.
This reason is sick and needs healing. The great example of sickness comes from economics telling us freedom of the person and freedom of the market are inseparable terms as though the laws of the market that produced the most egoistic and most merciless social orders and degraded persons to mere commodities were consistent with human freedom! The millions of children in the world forced to slave away for their livelihood, prostitute themselves, “donate” their organs and sell drugs are consequences of total liberalization.
Reason and scientific thinking are sick in our world, perhaps incurably sick, so a survival of this world with its limited resources is not very likely. The task of faith is to heal the patient reason. That is Paul’s teaching.
How is its sickness described? One of its most important causes is belief in its omnipotence. Years ago during armament with medium range missiles, I was struck by the sentence of a leading general “We can do everything technologically.” We are omnipotent. We can do everything at any time: clone children, poison the drinking water, arrange tourist visits to the moon, arm the universe, annul the power of renewal through seed and harvest and replace the grain of wheat fallen into the earth with genetically engineered concoctions which must be purchased every year again from the world owners. God who once gave pasture to cows and bread to our children is superfluous. We produce a better and less susceptible world. The old dream that we will be like God is scientifically feasible.
This is striking in our everyday experience in the abolition of the rhythms of creation. Day and night, summer and winter, high tide and low tide, youth and old age, living a while and then dying are conditions of life on earth. Time itself is a rhythmic element that isn’t turned on and off at the flick of a switch but binds our life in a given rhythm.
Recently I saw a man on television who explained that he wanted to be frozen after his death, be given antifreeze in his blood and then preserved in a freezer. Released 500 years after his death, he could live for ever. This only costs $38,000, he explained. The most incredible thing to me was that didn’t act sick or crazy but completely normal. Is a sick diabolical search for God hidden behind this craving to suspend all the rhythms of life? Is this search for rule in eternity possessing not only individuals but the dominant rich world in scientific reason like a pressure with its “faster, often, more”, the perfect expression of the religion-free world? If I can be God, I no longer need to seek God. If I am lord of time, the Sabbath, interruption and stillness are superfluous.
Authorities in Germany spend billions of marks so travelers from Hamburg to Berlin arrive 20 minutes earlier. If time equals money – a basic capitalist axiom time is money -, then the ancient axiom “God’s time is the very best time” is superfluous. If I can play God with the world, its resources and possibilities, dependence on the goodness of life that I cannot produce is unnecessary. That this kindness encounters me and even waits on me, that the beauty of a falling leaf waits for me, that – to speak in an old-fashioned way – God waits that our soul praises him and forgets itself is increasingly forgotten in the world of men of action and intrigues. Longing or yearning dies in feasibility.
There is a beautiful fairy tale by Hans Christian Andersen where the devil builds a mirror that distorts everything beautiful and good into nothing. The most glorious countrysides appear like boiled spinach, the best persons are repulsive or without torsos. Every good or pious idea produces a repulsive grin. This mirror cancels the creation itself (that is called “good” and “beautiful” in the Bible, the two words are exchangeable in the Hebrew). Armed with this mirror, the devil and his magic pupils fly to heaven to finally show God how disgusting, dumb and vulgar is his world. The mirror falls from the devil’s hand and breaks up in billions of splinters that penetrate into the eyes of people. Whoever gets a piece of broken mirror in his heart becomes a clump of ice.
After long years of forgetting, I read this story to our grandchild and asked myself whether or not Andersen meant scientific reason. Some fragments of the mirror fell into glasses. Things didn’t look too good “when the people put on these glasses to see rightly and be just”. They only saw the profit, success and survival of the fittest and justice, God’s ancient name in the Bible, receded. Today justice is no longer used in the language of the empire, only fairness.
There are different changes in us that precede the dominant scientific thinking. One is our relation to time and to the rhythm of life that must be abolished. Everything is purchasable everywhere at any time, strawberries in December, ice skating in the middle of summer, sex objects in old age and spring at any time. As Rene Descartes summarized, we are masters and owners of nature, “maitres et possesseurs de la nature”. We are not creatures but masters, slave owners and controllers. Reason enables us to possess, control and move. In the ideology dominating us, time is not an essential category of life that faces us in the tradition of eternity but at best money that one can use to wangle more from life. That time can also be the bread of life presenting us with a new beginning, a useable gift that we share together, is forgotten. There is an African proverb that describes this state of affairs: “You have clocks, African people tell us, but we have time.”
The other change that the technocratic rule of science assigns to us is in the relation to ourselves. In efficient, hard-working life, we forget that we need God and that these unplanned events which tradition called “revelation” and our relation to the great whole support and fulfill us. Faith can liberate us from always having to play the omnipotent masters of this world. Faith could remind us of these other, old-fashioned superfluous behavior patterns, listening, waiting, being silent and interrupting ourselves. These pathic abilities are harder and harder for us. We forget “to let ourselves go”, as the mystics urged. Only when we know that we are not God but creatures, finite, sinful and mortal, can we find God and share in God. Then we forget the language of definitions and lists of successes and learn again the language of calling, imploring, silence and prayer.
What disturbs me most in the world defined and ruled by science is its language that condemns all emotions, fears and hopes to silence. The expressiveness of what we desire, what our dreams of another life are and where we aim is part of the freedom to which we are called. The world of scientific language is too cold to me. We must learn to communicate differently. If we stop playing masters and owners of the earth, we will find a language for our real inner longings. What religion can do in the hyper-scientific world is make the “more than everything visible, audible and noticeable.
“There must be more than everything!” With this text, Paul didn’t want to condemn either knowledge or reason but to take away their autocracy. He wanted to keep alive our desire for life for all. The way to the prison of which our text speaks is at the same time the way into the freedom that is not content in having, controlling and owning. We need a greater freedom that God promises us. God liberates us from the pressure to do everything and play God. We can become one with God as all mystics have known. Whenever we agree with his will of life for all creatures, wherever we know that our power of knowledge, deconstruction and reconstruction aims at another life, science leaves the prison in which it lived and becomes a co-worker of faith.
, or