95 THESES AGAINST THE RULE OF THE FINANCIAL MARKETS
BANKS TO PLOWSHARES
[These 95 theses are translated by Marc Batko, [email protected], from the German on the Internet, http://www.perestroika.de.]
What began in Luther’s time has now reached a new high point: the monopoly of money. Democracy is in danger. Internal and external peace is threatened. Social cohesion is disturbed. The predominance of a neo-liberal mainstream has allowed politics worldwide to be guided by the dictates of the financial markets and the interests of the upper, rich one percent of the population. The 8 richest men on earth own as much as the 3.6 billion of the poor half of humanity. A conversion, a reformation is necessary.
While 500 years ago it was the venality of the salvation of souls of the faithful through the sale of indulgences that was the expression of a great crisis, today it is the subordination of politics to the dictates of the financial markets. God or Mammon – you cannot serve both, was said at the time of Jesus and 500 years ago. Democracy or financial market capitalism – this is the question of our time.
Continuing underdevelopment, 800 million people suffering from hunger, hundreds of thousands dead in wars, millions of refugees and internally displaced persons, and the dramatic climate change have become fatally linked. Their flipside is exorbitant wealth and luxury. The fact that the EU Commission has instead changed Parliament’s financial market directive of all things, which was intended to stop excessive speculation in food, in such a way that it has become practically ineffective, can only be outrageous. The austerity policy implemented by the ECB, the IMF, Angela Merkel and Wolfgang Schäuble has also led to youth unemployment and poverty in the south of the European Union taking on dramatic dimensions.
Whereas the trade in indulgences financed the global empires of Charles V and Pope Leo X and the usurious system of the Peruzzi and Bardi, the Fugger and Welser and their system of colonialism, genocide and slave trade, today it is global financial market capitalism and its accumulation of wealth claims that must be financed from the production of the global gross national product.
The US economist Michael Hudson rightly summarizes that one percent of the population with its financial assets and other wealth “keeps the remaining 99 percent, but also companies and entire states, in permanent debt”. This makes a democratic policy of solidarity, conservation of nature and peace impossible.
500 years ago the system of global capitalism was born. Today we must finally rein it in. Last but not least, the crisis since 2008 is another warning shot.
It is a society-destroying and nature-destroying system. Pope Francis puts it in a nutshell: “Just as the commandment ‘Thou shalt not kill’ sets a clear limit to the value of human life, so today we must say ‘No to an economy and the disparity of income’. This economy kills.”
The financial system is out of control. Its crash has caused devastating damage not only in the financial sector itself. It is also tearing down the real economy, ecology, development of the South and peace.
The mountains of debt continue to grow unabated. In 2015, they reached a global record of 152 trillion US dollars. That is 225 percent of the global gross national product. One third of this is public debt. Solidarity-based development is sacrificed to debt service.
It is not only the crisis countries in the euro zone that are particularly threatened, but above all the developing countries. Between 2009 and 2014, the annual issue of government bonds in low-income countries rose from USD 2 billion to USD 18 billion.
Many countries of the South are threatened by debt traps and national bankruptcy.
The poor pay for the enrichment of the rich. The crisis has exacerbated social problems.
Growing inequality has several causes, but the dynamics on the financial markets became the strongest driver of social polarization – long before the crisis.
The privatization of services of general interest – pensions and health – offers financial capital new and highly attractive opportunities for exploitation – at the expense of the security of these systems and the people who depend on them.
There is no end of the tunnel in sight. More and more economists are warning of the consequences of a neo-liberal financial and economic policy that will promote the emergence of further crises.
Financial capitalism takes over
In the beginning there were political decisions of governments. They handed over control of the most important economic decisions to the financial markets.
The financial sector grew to absurd proportions. Between 1980 and 2007, foreign exchange turnover increased 30 times. In the crisis year of 2008, the volume of credit derivatives alone was ten times greater than the gross national product (GDP) of all the countries of the world. In 2016, Deutsche Bank’s portfolio of derivatives still amounted to 46 trillion euros – more than fifteen times Germany’s GDP.
The dynamics of the financial markets became the motor of globalization, in which the weighting was shifted massively to the market, to the detriment of democracy.
The financial markets withdrew from the regulatory grip of the nation states. From the role of service provider for the real economy and society, they swung up to become their masters.
The profit interests of finance capital were transfigured into constraints without alternative.
The social and democratic capitalism of the post-war era was sacrificed on the altar of the financial markets.
The globalization of the financial markets has led to the erosion of democracy. “Investors no longer have to act according to the investment opportunities their governments grant them, but governments have to act according to the wishes of investors,” wrote Rolf-Ernst Breuer, then head of Deutsche Bank, proudly in 2000.
This is market-based democracy as it lives and breathes – long before the Chancellor committed herself to it.
A monster has grown up over three decades. Some talk about financialization, others about casinos and others about financial capitalism. Whatever you call it, we are faced with a new, extremely dangerous type of financial system.
The history of crisis management has been a history of half measures, dead ends and ineffectiveness from the outset.
At the beginning, it looked as if politics had understood something under the shock of the crisis. “An excessive capitalism, as we have experienced it here with all its greed, eats itself up in the end,” said Peer Steinbrück, then Minister of Finance. The G20 summits in London and Pittsburgh in 2009 seemed to be on the right track when they announced that they wanted to take the unleashed financial markets back under control.
Then the governments rescued the banks with gigantic sums of tax money. The rich were protected.
As a result, the financial market crisis turned into a national debt crisis. Public debt skyrocketed. It was a socialization of private losses on a dramatic scale.
On the other hand, the population of Europe’s crisis countries had to pay the price in the form of the austerity policies of conservative governments.
Democracy was undermined in the course of crisis management and European nationalism was promoted. Far-reaching decisions were whipped through by the executive at a pace that sometimes did not even allow elected representatives time to read the bills.
For years, the driving force behind the socially and economically destructive austerity policy has been the conservative governments in Europe – and not least the German Chancellor and her Finance Minister Schäuble, who carry the dictates of austerity like a mantra before them.
If there hasn’t been a big bang nevertheless, it’s only because of the zero interest rate policy of the European Central Bank (ECB) and the aid packages of the International Monetary Fund.
But the ECB cannot buy more than time. The longer this takes, the more it is put in the position of a fire brigade that is running out of water.
It is therefore more important than ever to strengthen the savings and cooperative banks. These too have come under pressure in the current situation.
The privatization of services of general interest, which has been preached for years, is now also taking its revenge. Under zero interest rate conditions, private old-age, life and health insurance policies can no longer generate the necessary minimum returns. This is where it is taking revenge that the old-age security systems have in some cases been transferred to funded systems.
The ECB prints cheap money, but without the European Union having a sensible investment strategy for it. And so the cheap interest rates trickle away, without any economic sense.
Yes, there have been reforms.
Capital requirements have been tightened. In the USA, steps have also been taken to separate traditional business from investment banking. The business with non-exchange-traded derivatives, so-called over-the-counter trading, is to be made more transparent through clearing houses. Short selling, i.e. speculation on falling prices, was restricted.
Minor corrections were made in the supervision of banks, rating agencies, hedge funds, investor protection and particularly risky products such as credit default insurance.
In the meantime, the momentum for reform has slackened. Moreover, a roll-back has begun in the EU under the Juncker Commission. With the project of the Capital Market Union, the entry into deregulation is being sought again. And in the USA, President Trump is now rolling back the banking reforms.
The drying up of off-shore centers and tax swamps has made little progress, as Luxembourg Leaks and Panama Papers show us.
Concentration has also increased. The big banks are now moving even larger sums of money than before the crisis. In the shadow banking sector, individual players, such as the Blackrock pension fund, are becoming bigger and more powerful.
The reforms have at best made the casino a little safer – especially for the players. But: “Nothing except the closure of the big casino will lead to a permanent solution,” as UNCTAD states.
The problem-solving capacity of the politicians also seems to be overstretched. On the contrary, site egoism, nationalism, competitive behavior and isolation are on the rise. Multilateralism is in crisis. Global governance no longer seems to work. Everyone acts on their own account.
Unfortunately, the chances of making global trade fair have declined in times of Trump. This president puts national interests at the center of his actions.
The financial sector, once the vanguard of globalization, is increasingly showing signs of selective de-globalization. The chances of shaping the financial system as a global public good are dwindling.
In the European Union (EU), the problem-solving deficits are even more evident. What sounds so beautifully realpolitik and down-to-earth, Angela Merkel’s “Driving for Sight” boils down to not addressing the problems.
The EU heads of government and the Commission in their current constitution no longer seem capable of a liberating blow. Huddling through is the only strategy. As long as the ECB, with its bilge pump of zero interest and quantitative easing, prevents the leaking barge from sinking completely, people live in the illusion that nothing will happen. But the situation continues to deteriorate from year to year.
The financial markets continue to fuel global warming. Hundreds of billions of euros are still flowing every year into fossil fuels instead of renewable energies and the ecological modernization of our economy.
Bring the financial system under democratic control.
Principles of the reorganization
A central component for the defense of democratic shaping of society as well as for a different economic policy today is a substantial reform of the financial system. However, such a project will only have a lasting effect if it gets to the root of the problems.
Stable and functioning financial markets are a public good. Almost 500 years ago, Luther demanded: “One would have to put a bridle in the mouth of the Fugger and similar societies.” This has lost nothing of its validity for the Ackermanns and similar society and must be renewed.
The financial system should serve the real economy and society.
Financial markets must be enabled to finance ecological reconstruction, a development policy based on solidarity, a social perspective for the European Union and the social modernization of society.
Democratic politics will regain control over markets and actors.
The economically useless casino business is to be discontinued.
The financial markets must shrink back to a level that is useful for the real economy.
The entire system must be decelerated.
The complexity of the system must be reduced.
The public banking sector must be strengthened and expanded, including by privileging it over the private sector. This takes precedence over EU competition law.
Instead of geopolitically motivated trade wars, we need a culture of cooperation and consideration in shaping the global economy.
In addition, the following key reforms are crucial:
Much stricter rules are needed for shadow banks.
We want to make large and complex banks easier to wind up during the crisis. At the very least, banks should separate their deposit business and their trading business and manage them independently under one roof and provide them with capital.
We set effective limits for hedge funds, private equity funds and other speculators.
Derivatives generally require a safety assessment by the financial supervisory authority. The burden of proof lies with the issuers of the products.
We introduce electronic central bank money for payment transactions. This would act as a firewall for this central element of the financial system, should financial crises occur after all. In the digital age, such a system is largely automated and can be implemented with little effort.
Offshore centers and tax havens are drying up. As long as this is not possible in an internationally coordinated manner, unilateral measures are also possible, such as the levying of penalty taxes.
High-speed trade will be slowed down. This eliminates the systemic risks of high-speed trade and removes the distortions of competition it creates.
For banks, we are imposing a simple and tough debt brake.
Capital controls are legitimate instruments of capital market regulation. Their application in the event of a crisis takes precedence over the free movement of capital.
Pensions, health and other services of general interest are organized as public tasks.
Rating agencies receive performance-related bonuses, also from public sources. Up to now, the rated party has paid for the rating regardless of how accurate the rating was. In particular, the pro-cyclical effect of ratings must be prevented. Social and ecological criteria must be integrated into the rating.
Supervision will be given greater resources – financial, personnel, legal and technical.
A new reformation and a different world are possible
The financial markets and the accumulated, productively idle, even counterproductive for society and its cohesion, wealth must be able to be drawn on by these changes to solve the major global, European and social challenges.
The aim is sustainable prosperity and quality of life through, for example, the expansion of the infrastructure for education, health care, nursing care and public transport as basic goods for a good life for everyone, for everyone and everyone.
The treasure of the Church is the poor, Luther quotes St. Lawrence in his theses. Thus the treasure of a good society today is the degree of justice it offers to all.
A just policy is measured by the fact that it works to ensure access to the goods of a free life for everyone, including the most vulnerable among us.
After decades, it is time to reverse the redistribution from bottom to top, from production and nature to financial markets, from women to men and from south to north.
The extensive privatization of social wealth must give way to socialization in favor of investment in social cohesion, basic insurance for the poorest people and ecological restructuring through fair taxation of large property, high income and wealth. Weaker countries must be supported in this by cancelling their debts.
A fair, socially and economically productive inheritance and wealth tax is still outstanding in Germany.
An economy based on solidarity and a life based on solidarity must be promoted.
The enforcement of the ban on arms exports to crisis regions and dictatorships as well as global disarmament will not only contribute to greater security and the limitation of threatening wars, but will also release financial and political resources for the people in the South in particular.
If we want people to stop having to flee, then the only way to do so is to reduce the causes of flight, to overcome wars, misery, poverty and ecological decline. This includes resistance to anti-Semitism, racism and xenophobia.
What is needed is a global Marshall Plan with development-friendly changes in world economic structures in favor of fair trade, investment in poverty reduction and ecological transformation both here and in the South, which is already dramatically affected by climate change.
The austerity policy in the EU whipped through by Angela Merkel and Wolfgang Schäuble must be brought to an end.
Instead, the EU needs a comprehensive investment initiative for the transition to renewable energies, sustainable inclusive systems of housing, transport, education and culture, health and care.
The German export surplus, which is destructive for many other European states and for European integration, can be diverted through stronger domestic investment. At the same time, German budget surpluses could be used once only to set up a European investment fund.
Critics had long pointed out that economic and social upheavals could sooner or later lead to political catastrophes, Alain Badious warned against “democratic fascism”. Already the world economic crisis in 1929 was one of the causes for the rise of fascism.
The spirit of neo-liberalism, which came along as a practical constraint of a globalized economic order, produced economic insecurity and generated fear of decline. The effect of the austerity policy then came on top.
Deprived, degraded, embittered and angry, some people are now turning to a right that promises them security, respect and participation. In doing so, they succumb to the illusion that nationalism and xenophobia can solve their problems.
The further rise of the populist right can also be stopped by a different economic, social and peace policy.
Just as Luther encouraged believers in his Theses 94 and 95, people in Germany, Europe and the world need their own realistic confidence that the concentrated and difficult challenges to their social situation, as well as wars, hardship and climate change, can be solved.
Without hope, Solomon said, people will become desperate and wild. But people who merely wait for solutions from above or from outside will not get them.
There they will only find the domination of the financial markets and their interests.
What is at stake is nothing less than the supremacy of democracy and human rights, the inviolability of the dignity of every human being by acting in solidarity even against the financial markets.
This reformation of society cannot be attained without a self-confident and personally responsible people.
The reform blockade in the political and social system can only be broken through pressure from society and civic commitment.
Here we stand. We cannot help it. For another world.