Business Management as a Gamble

Robert Kurz

For the common man, the most evil villain in the country is not the slanderer, but the speculator. The “gambling casino” of financial capitalism has long been held responsible for all economic and social crisis phenomena. Thus, the banker has become the prototype of the irresponsible gambler and is considered the number one enemy of all well-behaved philistines. The same consciousness, however, can find a lot of good in the industrial capitalist, who does not hang around in the airy financial superstructure but has material things produced and needs jobs in the process. One does not criticize capitalism at all, but would like to distinguish between dubious financial gambling and down-to-earth real economy.

But is real economic capital with its material basis really so far removed from speculative thinking? Even industrial profit is not fixed from the outset, but must first be won in competition. Because there is no collective planning of social production, no enterprise knows whether it can sell its goods at all. Therefore, material production is also a gamble on the field of universal competition and the real business manager is just as much a gambler as the investment banker. Only the stakes are different: not paper financial securities, but machines, raw materials and people.

For a long time, economic science did not want to associate risk competition with the concept of gambling. Corresponding attempts to apply mathematical game theory to economic behavior came only from outsiders. It was not until 1994 that John F. Nash (Princeton), John C. Harsanyi (Berkeley) and Reinhard Selten (Bonn) received the Nobel Prize as representatives of economic game theory. This change in perception has not only something to do with the postmodern mentality that wants to turn everything and anything into a “game.” Nor is it merely an ideological reflex of the financial bubble economics since the 1980s. Rather, the use of risk in the real industrial economy has also changed dramatically.

As is well known, the trump card in the competitive game is business cost reduction. In the real economy, this also involves risk-taking in a highly material sense. This applies not least to safety standards in the handling of hazardous natural substances and processes. The competitive pressure that has intensified in crisis capitalism has long since taken hold of this sensitive area. The flip side of the same development is the use of ever larger aggregates of production and ever less mature and controlled techniques. For example, according to the official investigation report, the huge oil spill in the Gulf of Mexico in 2010 was due to a rigid business strategy of saving time and money at the corporate conglomerate involved. The same policy has come to light in the Japanese nuclear disaster; not to mention that nuclear energy in itself carries unmanageable risk burdens.

The financial speculators at least play with paper, the big industrial gamblers with nature, with the life and health of people. Who is more irresponsible? The chain of industrial catastrophes caused by business management has become just as dense as the chain of financial catastrophes in the last 30 years. And the next one is sure to come. The game must go on.

Originally published in Neuen Deutschland on 04/04/2011

Starvation Inflation

Robert Kurz

It was common knowledge that the huge government rescue packages and economic stimulus programs since the crisis collapse in 2009 contain inflationary potential that must be unloaded after a transition period. In fact, inflation is on the rise worldwide – especially in the global growth drivers China, India and Brazil, but to some extent already in the euro zone.

However, there are differences between the production sectors. Everywhere, food prices are outstripping all others. The official inflation rate in China is currently 5 percent; in the food sector it is 10 percent, and in real terms it is estimated at 19 percent. The price explosion for basic foodstuffs is even worse in India and other parts of Asia, in Africa and Latin America. Food price increases in the U.S. and the EU have also far exceeded the general inflation rate in recent months. According to the Food and Agriculture Organization (FAO), rice, corn, wheat, meat, vegetables and luxury foods have become more than 30 percent more expensive on average globally since the beginning of the year.

Why are food prices in particular exploding? Obviously, several causes of capitalist economic logic are intertwined here. Government programs and a flood of money from central banks lead to the actual devaluation of money, which affects all sectors. In the case of food, however, special factors are added. The increasing production of biofuel has a particularly serious effect: Oilseeds are being burned for fuel and acreage is being lost for this purpose. At the same time, however, the price of fossil energy has risen and with it the cost of diesel and fertilizer in agricultural production. This development is escalating because high oil prices make the conversion of agricultural products into fuel all the more attractive. Finally, such a situation in agricultural commodities attracts speculative mobile money capital, which bets on further rising prices and makes this process a self-reinforcing one.

The social impact of record food prices depends entirely on the proportion of income that has to be spent on food and drink. The majority of people in Asia, Africa and Latin America spend between 60 and 90 percent of their income on food. In China, the figure is still 30 to 40 percent, despite growth successes. In Europe, the figure is 5 to 10 percent. But these figures are deteriorating dramatically in all parts of the world. In the wake of the global economic crisis, which has by no means been overcome, global poverty has spread like wildfire, albeit unevenly. In many regions of the world, the incomes of large masses of the population have fallen to rock bottom. Now the price of, of all things, basic foodstuffs is surging. As early as 2010, the World Bank warned of new hunger revolts. The unbearable rise in food costs is playing a major role in the uprisings in the Arab region. And Spain shows that something similar is brewing in the crisis countries of the euro zone. Although no one here has to starve yet, in view of the rampant youth unemployment, the patience of the generations that are able to fight may be wearing thin if many can no longer afford even the cultural goods and technologies that have become a matter of course because food alone is becoming more and more expensive as budgets shrink.

Originally published in Neuen Deutschland on 05/30/2011

Postnational Chain Reaction

Robert Kurz

In capitalism, it is not people who are socialized, but dead things: money and commodities. Therefore, the perception of the world is reduced to a point; to the single individual, the single company, the single state. The consciousness of time is just as atomized. What counts is always only topicality. Everything else is yesterday’s snow or the Flood that follows. We don’t think in terms of epochs, but in terms of the time horizon of the “daily news.” It is true that we somehow know that there are complex global connections, especially economic ones. But the more there is talk of “networking,” the more isolated the facts appear. Globalization is all well and good, but isn’t it a topic of the day before yesterday?

Ever since the states put together their rescue packages, people everywhere want to put on their national glasses again. The fact that the bankruptcy of Lehman Brothers (was there something?) triggered a chain reaction that for a moment revealed the worldwide network of bad loans is seen as an excess of some paternalistic financial markets. Under the protective umbrella of the government and within the four walls at home, people like to believe that they are in a world of loud patriotic economies. In reality, the same transnational flows of goods and money, the same global imbalances and deficit cycles as before are now subsidized by government loans instead of commercial financial bubbles. And the state money itself is anything but national.

Because capitalism is considered indestructible anyway, and the new quality of globalization tends to be suppressed, the only question that seems to arise is that of up-and-comers among corporations and national winners and losers. Will China replace the U.S. as the economic and political world power? This “grand narrative” of the media is completely blind to reality, because we no longer live in a century of independent national empires. The Chinese export surpluses vis-à-vis the U.S., which are increasing again from month to month, are financed by the money glut of the U.S. Federal Reserve. Conversely, the Chinese feed their state-enforced domestic growth from astronomical foreign exchange reserves, primarily in dollars. The interdependence is so great that any stumble by one brings down the other. Neither individually nor jointly do they control their contradictory interdependence.

In Europe, people pretend that the debt crises of Greece and the other wobblers are homegrown problems that can be dealt with by national austerity efforts. In fact, the deficits in the EU are the flip side of Germany’s export surpluses. If the German economy had to focus on the national domestic market, it would collapse immediately. So far, the draconian austerity measures in Southern and Eastern Europe, and for that matter in Great Britain, have largely only been proclaimed. If they are fully realized, we can expect a European recession with global repercussions. And if Greece goes bankrupt, just when it is saving itself to death, people will wonder where Greek government securities are stashed everywhere. It’s not much different than the Lehman certificates, and it applies to bad government debt everywhere. Capital in all its forms is international.

Originally published in Neuen Deutschland on 06/27/2011

Savings Terror and Revolt

Robert Kurz

German export chauvinism believes itself to be on the island of the blessed, where no crisis exists anymore. It is true that mass poverty and slum conditions have continued to rise in this country as well. But that is not an issue when the economy is booming all the same. China and the USA are not the only ones buying big in Germany thanks to government aid. Together with cars and machine tools, the crisis was mainly exported to the less blessed parts of the EU for the time being. The euro makes it possible because it favors the high-tech export roller. And that’s why it has to be saved. The regulars get artificially excited about alleged gifts of billions for the “lazy Greeks.” But the gifts are not gifts at all, but additional loans that are to be serviced by hook or by crook. This is only possible if Greece saves itself to death and literally cuts the costs of the euro bailout out of its citizens, including the middle class. It is no longer just militant young people who are taking to the streets against this, but also conservative housewives, doctors and teachers, grandpas and grannies.

As is well known, the social pain threshold is not only being exceeded in Greece. For similar reasons, the austerity terror is also raging in Spain, Portugal, Ireland and elsewhere; even in Great Britain, which, although not part of the euro zone, had to save its own banks and is now making its own population pay for it. Everywhere, a revolt is brewing against the selling off of the last public resources, which, although so far aimless in sociopolitical terms, will soon be containable only by force. Suddenly, “Arab conditions” are looming in the middle of the EU. Whereas the uprisings there have so far been perceived by the media as crucifixive “democratization movements,” the social misery is now emerging as the true motivation on the ground of the European democracies themselves. At the center, here as well as there, is the dramatic mass unemployment of the academic youth, which, by the way, has long been noticeable in China and the other Asian boom countries.

It was the central banks’ flood of money and the global government bailout programs that led to new financial bubbles, rampant inflation or, as in the euro zone, to the brink of currency collapse. The extremist austerity policy is the about-face to escape these consequences. However, this is the only way to manifest the crisis in its full extent. Greece, currently the weakest link in the chain, shows after Arabia the future of the capitalist economy and its world of states. If, after the young, the older generation also suffers the consequences of the crisis as a result of state intervention, the legitimacy of the political system will collapse. This is not only a social and political problem, but also affects capital itself. After all, the mania for austerity against the consequences of the bailout mania is also stifling the global economy again in the end. It is absurd to imagine that the FRG can bask in the glow of its successful crisis exports while the world around it is on fire. It will be interesting to see how the supposed winners of the crisis react socially and politically when the misery finally reaches them.

Originally published in Freitag on 07/07/2011

Toxic Waste Dumps of Credit

Robert Kurz

Anyone who still has a vestige of memory might wonder what happened to the huge masses of bad loans for which the search was on after the financial crash of 2008 to find as inconspicuous a resting place as possible. Nothing has been paid off; on the contrary, the imaginary liabilities have continued to swell. The game of apparently servicing old loans with new ones, and servicing them again with new ones, has long been exhausted in the private sector. On the other hand, the notorious “toxic papers” were not allowed to be written off in full because of their sheer mass, apart from a few cosmetic operations by the banks. According to the financial gurus themselves, this would have meant the famous “meltdown” of the global financial system. In balance sheet terms, the banks were allowed to offload their toxic waste. But even the “bad banks,” which were supposed to temporarily cushion the collapse of the shadow banking system after the bursting of the real estate bubble with the help of government guarantees, have gone quiet.

Officially, hopes and expectations were raised that the government guarantees could soon create enough new “confidence” to bring the long worthless securities back to a halfway decent price. The prerequisite for this would have been that the U.S. real estate sector, from which the shock wave had emanated, recovered strongly. There is no evidence of such a recovery. But the government guarantees did not come due either. This was simply not allowed to happen, because otherwise the “meltdown” would have taken place via the detour of the state budgets. So where has the highly toxic waste of the financial system gone? A final repository has indeed been found, namely the central banks. As is well known, they are currently flooding the world with dollars, euros, etc., in order to breathe life into what is actually a clinically dead global economy. Officially, they are not yet dropping the money from the helicopter, but are giving it to the commercial banks as a loan; albeit at low or even zero interest rates. As with any loan, the banks have to deposit “collateral” for it. And what does this collateral consist of? In the masses of toxic waste paper that the central banks take in their stride as if they were the crown jewels.

Less than three years have passed since the crash of the financial markets, and already the public finances of more and more countries are running out of steam because they were overstretched in the course of the anti-crisis policy. Basically, the same development is repeating itself with government securities as with private financial securities. A growing part of the barely serviceable debt has been transferred to shadow budgets. More and more government bonds are turning into toxic waste like real estate mortgages before them. And central banks are also becoming grateful customers for this. The Asians are buying less and less U.S. bonds? No problem, the U.S. Federal Reserve itself is asking for them like grain during a famine. The European sovereign debt crisis would also have worsened, despite all the rescue packages, if the European Central Bank had not long since started buying up worthless bonds of the crisis states en masse. Of all things, the central banks, the supposed guardians of the Grail of financial stability, have become toxic waste dumps of the global financial system. This is the final disposal site because there is no longer any authority behind it that could, in turn, relieve the central banks of their burden. The façade of normality that has been put up since 2008 consists of the adventurous policy of money creation based on the “safety net” of bad loans.

Originally published in Neuen Deutschland in 07/25/2011

Attack on Ukraine: Struggle for World Order

The Rupture in German-Russian Relations and The Return of War as A Continuation of Imperialist Geopolitics in Europe

Tomasz Konicz

Shock and awe – that’s the denominator of the massive Russian attack on Ukraine, in which dozens of targets have been shelled in a very short time to paralyze Ukrainian forces and prevent coordinated resistance to the Russian army’s advance in the east of the country (so far, Russian ground forces have been active only east of the Dnieper River). The large-scale nationwide attack, which targeted and partially destroyed Ukraine’s command structures, depots, and air force, is similar to the U.S. approach in the last Iraq war, when the U.S. Air Force also relied on an overwhelming assault against the ailing Iraqi regime’s military infrastructure.

The start of the war over Ukraine should teach the U.S. and the EU a lesson. By emulating the American attack on Iraq, the Kremlin wants to prove that Russia is militarily on the same imperialist level as the West, a fact that Washington, Berlin, and Brussels want to deny Moscow geopolitically. The imperial Russian sphere of influence in the post-Soviet space, which the economically declining Moscow was no longer willing to concede – is now literally being bombed back into existence by the nuclear power Russia, while the West has to watch impotently if it does not want to risk a nuclear doomsday. The Kremlin thus makes it clear that it will defend to the utmost its imperial position as a great power that wants to dispose of its “spheres of influence” just like the USA and Germany.

Germany and Russia: Close Economic Relations

The political and economic fallout from the war will be massive, especially for Berlin, as the Federal Republic continues to maintain close economic ties with Russia – even though these peaked after the pro-Western overthrow in Kiev in 2014 and the subsequent Ukrainian civil war. The German-Russian trade balance peaked at a volume of 80 billion euros in 2012, only to fall to 48 billion euros in 2016 in the wake of the sanctions. Last year saw a slight recovery to just under 60 billion. Germany mainly exports high-tech products such as machinery and cars, while Russia exports raw materials and in particular fossil fuels with a slight trade surplus. Around 55 percent of the natural gas imported into Germany comes from Russian deposits. Germany is still Russia’s most important European trading partner – globally, the FRG was overtaken by China as a trading partner only a few years ago.

A major setback for Berlin’s energy policy ambitions is the cancellation of the controversial Nord Stream 2 pipeline, the commissioning of which would have made Germany a central European energy hub. Instead, Germany’s consumers and industry must prepare for rapidly rising energy prices. According to former Russian President Dmitry Medvedev, they are likely to reach $2,000 per 1,000 cubic meters of gas soon. This economic fallout, which is now imminent, may have been the most important reason for Berlin’s hesitant attitude toward Moscow. In Washington, in the U.S. press, Berlin’s refusal to supply weapons to Ukraine or to abandon the pipeline project in the North Sea was sharply criticized for weeks.

Now that even the Tagesschau considers the course of German Russia policy, characterized by “dialogue,” to have “failed,” a fundamental reorientation of Berlin is likely to take place. Thus, for the time being, Berlin’s strategy of a mainly economic penetration of the post-Soviet space has failed because of the Russian invasion of Ukraine, ultimately because of Moscow’s military means. German think tanks like to substantiate this German path to geopolitical power development with the term geoeconomics as a complex strategy in which “trade, technology, finance or energy policy are instrumentalized as means to achieve strategic goals.” Greece had to experience how such a geoeconomic conflict is played out in the course of the debt crisis in the summer of 2015, when the country, mistreated by the then German Finance Minister Wolfgang Schäuble, was driven to the brink of economic collapse.

German Geopolitics and Inner-Western Differences

But in reality there is no uniform German policy toward Russia; it has always been an expression of the shifting power constellation between Western-oriented forces within the German functional elites (often derided as Atlanticists) and the forces teased as “Putin whisperers,” who advocated a Eurasian orientation toward Russia, China, and so on.

There is no complete overlap between the political spectrum and the respective geopolitical preference, as Eurasians and Atlantists are found in varying proportions in almost all Bundestag parties – even if the SPD, Die Linke and, above all, the AfD have a particularly high proportion of “Putin whisperers.” Atlantists, on the other hand, are mainly to be found among the Greens. It is simply a question of the geopolitical orientation of the FRG as the dominant European superpower, within the framework of which its own global ambitions are to be realized: for example, the expansion of the German sphere of influence in eastern and southeastern Europe, which in the course of EU enlargement has long since been transformed into the extended workbench of the German export industry.

Against the background of this loose and changing faction formation within German functional elites, a double strategy emerged vis-à-vis Russia, which the German geostrategist Wolfgang Ischinger described as “congagement,” a portmanteau created from the words containment and engagement. Economic cooperation, in which Russia in fact assumes the peripheral position of a supplier of energy and raw materials, was accompanied, with varying emphases, by German efforts to minimize Russia’s geopolitical influence in Eastern Europe and the post-Soviet space. The phase of tumultuous economic and political expansion in the 1990s – when Berlin supported the breakup of Czechoslovakia, the breakup of Yugoslavia, and the eastward expansion of the EU and NATO – was followed by the phase of cooperation with Putin’s rise to power, which ended only in 2014 with the crisis in Ukraine.

In the wake of the pro-Western upheaval in Kiev, however, it also became clear that Berlin operates as an independent geopolitical actor and does not allow Washington to dictate its policy. In 2013, there was still agreement on the effort to remove Ukraine from the planned Russian economic union. At the time, Germany, through the Konrad Adenauer Foundation, built up the Klitschko party UDAR, which was aiming for a change of power through new elections and quickly came into conflict with more radical, U.S.-sponsored forces during the fighting around the Maidan. U.S. diplomat Victoria Nuland’s famous “Fuck the EU,” published as a recording of a telephone conversation at the height of the crisis, reflects precisely these intra-Western differences, which also explain Germany’s current reticence.

Oceania vs. Eurasia

Washington has since sought to drive a wedge between Berlin and Moscow through additional escalation in order to prevent the formation of a grand Eurasian alliance, while Berlin has rather wanted to embrace Moscow to death and turn it into a periphery as part of a strategy of change through economic rapprochement. The declining empire in Washington sees China, together with a Eurasian alliance (keyword: New Silk Road), as the central threat to its eroding hegemony. The U.S. intervention in Kiev is therefore aimed at consolidating its own “oceanic” alliance, which extends as far as possible across the Atlantic and the Pacific and is ultimately directed against China.

Oceania vs. Eurasia – this is the denominator of the current global hegemonic struggle, with the imperialist camps striving to expand the boundaries of their spheres of influence. The U.S., for example, is trying to re-establish the German-dominated EU, which since the Trump era has increasingly wanted to act as an independent actor, firmly in its sphere of influence.

The increasing autonomy of action of the late capitalist states also comes to bear in the Eastern European countries, which, although economically dependent on the Federal Republic, at the same time tended to pact with the USA (above all Poland and the Baltic countries) when it came to torpedoing further rapprochement between Berlin and Moscow. The old Central Eastern European fear of a renewed division of the region between Berlin and Moscow, revived by the Nord Stream pipeline, provided the U.S. with a good lever of power in the economic “backyard” of the FRG to push this agenda.

Ultimately, the increasing military conflicts in the semi-periphery of the world system, including Turkey’s imperial ambitions, are due precisely to the imperial decline of the USA. Washington can no longer maintain the claim it made in the 1990s to be the “world’s policeman,” largely monopolizing the use of military means globally in bloody world-order wars. Regional powers are pushing into the emerging power vacuum to enforce their imperialist ambitions by military means if necessary.

Shaky World Order and The Crisis of Capital

This is, in a nutshell, the much-invoked “multipolar world order” in the socio-ecological crisis of capital. The decline of the USA has in fact resulted in the emergence of a number of small “baby USAs” that want to project the increasing social (and, in the long term, ecological) distortions caused by the crisis outward by military means: from the Turkish war adventures in Syria, the South Caucasus and Libya, to Russia’s invasion of Ukraine, to the possible showdown between Beijing and Washington over Taiwan.

Similar to the 1930s, the economic crisis is breathing down the necks of the shattered state apparatuses. The need to pass on the consequences of the crisis to others is growing steadily. In the course of its economic expansion, the Federal Republic literally managed to export the consequences of the crisis, such as debt or unemployment, by means of high trade surpluses – at the expense of the deficits of the importing countries of the German export offensives. The eurozone sovereign debt crisis of the last decade is a case in point.

In this context, it is not least the mercilessly over-indebted United States that is de facto forced to fight for the hegemonic position, since it must hold the dollar as the world currency. Without the greenback as the measure of value of all commodity things, which Washington until recently could print at will to finance the extreme U.S. budget deficit, the U.S. would degenerate into a gigantic, nuclear-armed debt state. Because of the social disruption at home, the U.S. elites have therefore long since developed a paranoia of Russian influence, similar to that which prevails in the Kremlin with regard to Western-financed “color revolutions.”

But in the end it is precisely the socio-ecological world crisis of capital, concretely in the form of increasing inflation, which prevents Washington itself from using “deficit spending” to whitewash the internal contradictions.

Danger of a Major War

War as a means of politics will thus gain in attractiveness for the late capitalist functional elites. It forms a catalyst of the economic and, in perspective, ecological crisis process: The resulting social distortions find in it a violent medium of external discharge, which ultimately executes the self-destructive tendency of capital – up to the threat of large-scale nuclear war. In the case of Ukraine, one can still hope that the nuclear power plants in the country constitute the only nuclear danger: NATO intervention seems unlikely so far, after U.S. President Biden ruled out direct military intervention even in the run-up to the war.

Nevertheless, a further escalation of the war cannot be ruled out. The powerless left currently has only the option of peace struggle and educational work: the emphasis on the survival necessity of a post-capitalist system transformation in order to prevent the barbaric collapse by means of a repeated large-scale war.

Originally published in analyse & kritik on 02/24/2022

End of The Automotive Fairy Tale

Robert Kurz

Despite all the talk of a service society, industrial production is still the basis of real capitalist value creation. And the auto industry still forms the core sector. A wide range of suppliers and services depend on it. That is why the auto companies were the preferred recipients of state aid alongside the banking system during the major crisis slump in 2009. They were given a helping hand in the form of direct state investments (General Motors), rescue measures and guarantees, as well as subsidies for car sales worldwide. In this country, there was the infamous scrappage premium. This was sorely needed, because it was precisely in the auto industry that the largest global overcapacities had built up, which threatened to melt away like snow on the sun after the collapse of the fictitious purchasing power fed by the financial bubbles.

Within a very short time, car companies everywhere were miraculously deemed to have been saved. The central banks’ flood of money did the rest to cushion the crashing economy. And car sales also benefited from this to a considerable extent, because the rolling tin can is now the preferred object of desire in this world. The next dream of anyone who has just escaped starvation is a car. China in particular experienced a car boom with almost fantastic growth rates. A few months were enough to make the country shine as the most important new export market for German carmakers. A warning sign could have been that it was not small and medium-sized cars that made up the bulk of the export miracle, but the extremely expensive premium class. It was not solid mass consumption that matured here, but rather the need for ostentation on the part of crisis profiteers – not least on the airy basis of the Chinese real estate bubble, which (along with government programs) had replaced the U.S. one as the driving force of the economy.

As is well known, public finances around the world are now running out of steam. The debt crises in the USA and the EU are already having an impact on the economy. In China, galloping inflation and the central bank’s so far inadequate dampening measures indicate a slowdown. Just as the auto industry was one of the first beneficiaries of the rescue packages, it is now likely to be the first to be hit by the increasingly likely return of the global recession. The recovery was too fast and too lush to be true. As early as the second quarter of 2011, the global passenger car market entered a period of stagnation. Forecasts are being revised downward, from 65 to 60 million cars for 2012. The end of the automotive fairy tale will also soon put the substantially unsolved problem of global overcapacity back on the agenda. The old bankruptcy candidates are also the new ones, with General Motors at the forefront. If the robust business feigned with the help of government injections dissolves into the old misery, the fate of GM’s German subsidiary Opel will also once again be on the line. The rumors about a possible sale of Opel a few months ago already spoke a clearer language than any success stories. The only thing is that no one will want the company in the event of a new economic slump. The tame eagle of the subsidized upswing could soon mutate again into the bankrupt vulture of the crisis. In any case, the development of the auto industry is an example of the development of the global economy.

Originally published in Neuen Deutschland on 08/22/2011

Economic Doping

Robert Kurz

Crises come and go, but capitalism remains. Liberal and left-wing theorists alike are convinced of this. How is a major economic crisis overcome? By devaluing surplus capital in all its forms (means of production, labor power, commodities, money capital). After that, it can supposedly go on and on. The economics professors call this “adjustment,” the academic leftists “cleanup.” Since the fall of 2009, it has generally been said that the new global economic crisis is already over. But the great devaluation or shakeout has not taken place at all. Instead, there has been “rescue” by hook or by crook. According to the official economists’ own views as well as those of their leftist colleagues, this would prove that the real devaluation shock has yet to come.

Perhaps the pragmatists were wiser than the theorists because they sensed that only economically scorched earth would remain after the global shakeout. Admittedly, their rescue measures only push the elementary problem in front of them and let it grow into ever greater dimensions. For more than 20 years, the global economy has lived mainly on financial doping. For a long time, it was the financial bubbles that created purchasing power without a real basis, then, since the turn of the century, the central banks and state budgets. The mobilization of labor in China, India and Europe was based solely on one-sided deficit cycles. Ultimately, the production processes stimulated in this way are “invalid.” They must end with the devaluation of all their components. Thus, while the theorists will be proved right, no new prospects for global capital valorization will follow from this.

One can speak of a paralysis of economic theory and economic or monetary policy. This is also evidenced by the fierce controversies in the economic guild and in governments. The neoliberal hardliners, such as the ECB chief economist Jürgen Stark, who has just resigned, want to accept an end of the horror because they believe their ideology more than reality. The pragmatists, on the other hand, want to extend fiscal policy doping excessively, even though in doing so they are always piling up new fuel for the inevitable devaluation shock. At present, government stimulus programs are coming to an end everywhere, and immediately growth rates are falling at a remarkable pace – just like a doped-up runner runs out of air when he runs out of dope. The next global recession is just around the corner. In the USA, President Obama already wants to put together a new mega stimulus package without knowing where he is going to get the money for it.

The unsolvable capitalist dilemma can also be formulated differently. As long as only the thoroughly ailing financial system is propped up with ever new measures, the crisis will remain in abeyance, so to speak. But as soon as insubstantial money creation turns into real demand, demonetization, which was still limited as long as only the economic slump of 2009 was bridged, will march on. Nevertheless, inflation, which can hardly be curbed in the emerging markets, is also on the doorstep in the EU; in the UK, it has already reached the 4.5 percent mark. Like the British administration, the ECB, the Sarkozy and the Merkel governments have apparently opted for inflation as the supposed lesser evil. This is leading to political and economic turmoil. In reality, it is a systemic issue, but no one wants to admit that.

Originally published in Neuen Deutschland on 09/19/2011

The End of The Raw Materials Boom

Robert Kurz

There are increasing signs that the economic downturn is turning into a new global recession. After the crash of the financial markets, the extremely indebted world economy is reaching its second barrier, that of public finances. As in the first half of 2009, a renewed slump would hit the export-heavy countries hardest, and all the harder the smaller the share of the domestic market in their national product. This does not bode well for Germany, whose elites are currently patting themselves on the back in view of their world market leadership in key sectors. But it would also hit the much-vaunted emerging countries hard, all of which have bought their recent rise with a one-sided export orientation.

However, there are different forms of dependence on the world market. While China acts as the world’s industrial workbench with still relatively little vertical integration of its own, most emerging countries are mainly dependent on the export of raw materials. They have thus not been able to improve their traditional weakness vis-à-vis the industrialized countries. Their position has even deteriorated structurally because industrialization processes have failed or at least declined. This has only been masked by the commodity boom of the global deficit economy, especially the commodity hunger of rapid Chinese growth. A new world recession, which can no longer be absorbed by public finances, would mercilessly bring to light the particular plight of the raw material countries.

Thus, the Brazilian upswing of the last few years has feet of clay. The export success is based primarily on industrial and agricultural raw materials such as iron ore, sugar, ethanol (biofuel from sugar cane), coffee and meat. Their upward price jumps spurred growth and foreign exchange reserves. In a global recession, this process can reverse within a very short time. Behind this is a dramatic shift in the structure of exports. While the share of manufactured goods has fallen by 16 percent over the last five years, the share of raw materials has also risen by 16 percent. Accordingly, the contribution of industry to the national product fell by almost half. An important factor in deindustrialization is foreign trade with China, which floods the Brazilian market with cheap industrial goods as a countertrade for raw materials. This only works well as long as raw material prices are high.

The situation is even worse with countries like Russia and Venezuela, which are extremely dependent on oil and gas exports. It is true that the depletion of natural reserves promises a demand surplus in the long term. But in the short and medium term, these countries would hardly survive a cyclical drop in the price of their “liquid gold.” The designation of Russia as an “emerging market” is sheer mockery and only an expression of the widespread deindustrialization after the collapse of state socialism. The consequences were concealed by the raw materials boom, but must appear all the more violently when it ends. The highly indebted economies of the Emirates and Saudi Arabia, with their bizarre construction activity, are also threatened with collapse if the oil price crashes. Such a development would not only cut off the air to the autocratic regimes of the oil-exporting states, but would also intensify the chain reaction of a global recession and financial crisis.

Originally published in Neuen Deutschland on 10/17/2011

Devaluation Race

Robert Kurz

A hard currency with a high external value is generally regarded as a sign of economic superiority. So-called soft currencies, on the other hand, belong to losing states and candidates for relegation on the world market. However, this rule seems to have lost its credibility. Everywhere, people are afraid that their own currency could become too strong. In Switzerland, the central bank is intervening to push down the rising franc against the ailing euro. Central banks in Japan and other countries are pursuing the same policy against the dollar. Emerging economies such as Brazil are also desperately fighting the appreciation of their money. Conversely, people in the U.S. and the EU are anything but sad about the downward trend of their own currency, no longer so proud. Since the supposed end of the crisis, one can practically speak of a devaluation race.

This can be explained by the changed economic structure of crisis capitalism. The world economy now runs only on surreally inflated credit and the associated external economic relations. Surplus countries like Japan, China or the FRG are dependent on one-sided exports, deficit countries on the equally one-sided inflow of transnational money capital. Both have reached their limits. Now they are all trying to rehabilitate themselves at the expense of the others. Some want to save their export surpluses by hook or by crook; others, conversely, want to gain a larger export share themselves. However, the weaker a country’s currency, the cheaper and more competitive its exports become, while imports become more expensive. The devaluation race shows that the domestic economy is being written off everywhere and that the focus is now only on increasing exports.

In the euro zone, we have the particularly paradoxical situation that the deficit countries cannot devalue against the surplus country FRG, because both sides have a common currency. Moreover, the relatively weaker euro, precisely because of the southern European debt crisis, is additionally boosting German exports to the rest of the world. But this success story is short-lived because it is destroying its own preconditions. It is the German export roller that is flattening the euro. Even every textbook of economics knows that such a thing cannot work. A dissolution into the old national currencies would, of course, increase the external debts of the deficit countries immeasurably and at the same time cause the returned deutschmark to appreciate so drastically that the export machine would grind to a halt. The construction of the euro was obviously a suicide mission.

For countries with large export surpluses, revaluation is unproblematic for some time only if they also have a strong domestic market and/or an industrial monopoly. This was the case for Great Britain in the 19th century and the USA in the mid-20th century. Therefore, the currencies of these world powers were able to take over the function of world money. After the descent of the heavily indebted USA, there is no successor candidate anywhere in sight, least of all China. The overdue drastic revaluation of the Chinese currency would ruin large parts of the export industries there, too, and at the same time devalue its huge dollar foreign exchange reserves. No one can get down from their position anymore, but objectively, permanently unilateral exports to indebted countries are impossible. The devaluation race leads beyond the euro crisis into a world currency crisis.

Originally published in Neuen Deutschland on 11/14/2011