When Financial Management Paralyzes Democracy

Author: Roland Rottenfusser

First paragraph (Teaser):

The 2010 Attac Bank Tribunal in Berlin was a civil society legal proceeding that decried the speculative business model: take excessive risks and burden taxpayers with the costs. Rating agencies should be public. Banks that are too big to fail are too big to exist and should be broken up. The government is complicit in bailing out banks and abandoning the real economy.

Rest of the text:

WHEN FINANCIAL MANAGEMENT PARALYZES DEMOCRACY

12 Theses from the 2010 Attac Bank Tribunal

By Roland Rottenfusser

[These 12 theses from the 2010 Attac Bank Tribunal published 3/7/2011 are translated from the German on the Internet, http://hinter-den-schlagzeilen.de/2011/03/07/wenn-die-demokratie-die-finanzwirtschaft-stort/.]

The Attac Bank Tribunal and the Lessons from the Financial Crisis. When we see an institution as senseless and harmful, we strive that it ceases to exist. For a radical rightwing party, shattering it in smaller pieces is not enough. When a party perishes, something entirely new should take its place. Something more human arises. This is similarly true for profit-oriented investment banks, financial markets and speculative businesses. They carry out redistribution from bottom to top, endanger national economies, play with the life and prosperity of billions of people and threaten the foundations of democracy. On the occasion of the Attac Bank Tribunal, important unconventional thinkers showed how dangerous are these institutions and how the financial crisis really occurred.

Africa wakes up; Europe in large part sleeps. Questions are raised in view of the revolts in Arab countries. Could this happen among us? Are there ways to be free of our neoliberal regime? Pointing out our governments were democratically elected is not enough to take the sting from these questions.

1. Governments today are only supported by around 1/3 of persons eligible to vote. 2. This percentage can fall even more through political events. 3. We have seen history accelerates extremely some times. Then structures set in concrete break apart seemingly suddenly and the "impossible" seems possible.

The most important question that is raised is: Is our government (or the system of neoliberal parties, banks and corporations complementing each other) really so bad that overthrowing them would be justified? Metaphors obviously do not work as on a placard at a recent demonstration "Ben Ali -Mubarak - Mappui." Measured by a Gaddafi or a Mubarak, every German politician seems tolerably righteous. The development direction of the whole must be considered, not only the present state. In North Africa, the development runs from dictatorship to more democracy. This is reversed in Europe. Unfortunately this is not an exaggeration.

The 2010 Attac Bank Tribunal made an important contribution to the question whether the power complex governing us is really "so terrible." In this "civil society legal proceeding," the Schroeder government, the two Merkel governments (black-red and black-yellow) and Deutsche Bank are charged. In his final judgment, the social-ethicist Friedrich Hengsbach summarizes: "Through their financial market policy, they (the accused) contributed to the financial markets replacing the real economy and making possible high-risk speculative businesses. Repeatedly they handed over the public interest to free enterprise. They undermine democracy. In the bank bailout, they spared the creditors and did not charge the costs to them. They burden the public budgets with deficits in the billions and refuse the regulation of the financial markets. On top of that, they allow billions of people in the global South to be plunged more deeply into poverty."

Although the Bank Tribunal (April 9-11, 2010) is not a current event, it is still explosive today and is not a piece of historiography. We will not be lulled to sleep or into a false sense of security. Luminaries of the informed civil society like Elmar Altvater, Harald Schumann, Sven Giegold, Ulrich Herrmann, Detlef Hensche and Christian Felber appeared at the tribunal as complainant, witnesses and judges.

Here are twelve important theses on the financial crises, its causes and consequences. I orient myself in the arguments and statements of the actors at the Bank Tribunal. In several places, I draw my own conclusions:

1. The 2008 financial crisis is a focal point of the historical development of the last 75 years. Here the "threads" converge that were tied with Schroder's agenda policy and its continuation by the black-red coalition. From here, the waves pile up that reach into the present and into a future that could be increasingly marked by plundering, social cuts and the dismantling of democracy. Thus correctly analyzing the financial crisis is vastly important before our attention turns to other daily events.

2. The financial crisis did not come over us like a natural phenomenon. The conduct of its actors was by no means "without alternative." Financial management was prepared, staged and veiled in its true significance by responsible well-known persons. Failure occurred on a monumental scale, as the analysis will show. The most infamous veiling tactic is that "we" lived above our means. "The system was often the theme, a term that exquisitely seduces by allowing personal responsibility to disappear. We are not all responsible in what happened in the greed for money, the money intoxication of the US, not even the homeowners in the US. Every system has its architects and master builders" (Detlef Hensche, former unionist).

3. The drifting apart of the poor and rich inflicts double damage: through the fading of purchasing power and mega-capital moving from place to place. Schroder brought about massive income redistribution. That was one cause for the financial crisis. "The higher the income, the higher the mass purchasing power. The greater the share of the entrepreneurs and big-earners, the more powerful the financial streams that poured out of the real sector to financial management and realized fantasy profits not covered by any real economic development. The economist Conrad Schuhler continues: "From 2000 to 2008, the wage rate fell 10 percent while the profit rate shot up 20 percent. A tax reform benefiting corporations and the rich was carried ou9t at the same time as the collapse of mass income, 30 billion more annually for the high incomes and asset owners." The tax exemption for alienation profits granted by Schroeder encouraged the upswing of the hedge funds that played a disastrous role in the financial crisis. People suffer want where there is too little money. That is obvious. Everyone can understand the collapse of mass purchasing power and its consequences for the economy as dangerous. But stashing away money is given too little public attention. Mega-capital seeks "desperately" for investment possibilities. Capital "must" be invested in harmful and risky funds where there are not enough social and low-risk places of investment. Such dubious businesses "burst." The actors do not see why they should bear the losses. What is the taxpayer for?

4. Big banks try to become larger until their power can extort society. Ackermann (head of Deutsche Bank) did his utmost for deregulation of the financial markets despite the financial crisis. He massively speeded up the relabeling or repackaging of rotten credits and trade with them and did insurance business with these credits. A disastrous upward spiral developed between the accumulation of gigantic assets and the increasing political power of Deutsche Bank. "Deutsche Bank is so large and so powerful that every German minister regardless of party must seriously consider whether to invest with it," said Harald Schumann, economic journalist and author of "The Globalization Trap." Even more drastically, Schumann said: "Business people in Germany have as much fear of Deutsche bank as Italians have of the Mafia." The bank does not threaten with violence but with cancelling credit. "When Deutsche Bank turns its thumb down on a German business, it never gets a Euro-credit again." Do we want so much power in the hands of forces not legitimated in any way by the popular will?

5. Investment banks act according to the business principle: take enormous risks and insure that the taxpayer bears the financial risks. Merkel's government committed momentous errors in the bank bailout. "She unnecessarily wasted tax funds in the bailout of Hypo Real Estate since the ministry of finance did not have any emergency plan despite well-known liquidity shortages. The HRE creditors did not share properly in the bailout costs in a dusk-to-dawn ad hoc bailout action" (Ulricke Herrmann, journalist of "taz"). The merger of Commerzbank and Dresden Bank should not have been allowed and financed with tax funds... Gross negligence is not acceptable in high offices. Schumann illustrates the global money-tangle in the example of Goldman Sachs. This American investment bank is represented worldwide in nearly all industrial- and threshold countries with high-ranking people in all possible groups and as an advisor. Two or three Treasury secretaries in the last 10 years were from Goldman Sachs. The business model of Goldman Sachs is to "take high risks and ensure that these risks do not get stuck with them."

6. Protecting "the system," "the economy," "the EU" and so forth means in truth protecting the profit interests of private banks. On the combative term "system-relevant banks," we all must have an interest that the banks do well. What is a little sacrifice (a few billion Euro) imposed on the taxpayer where something far more precious is at stake? The political scientist Elmar Altvater argues: "What are system-relevant banks? They had very high profits and supposedly special importance for the system altogether. What does the "system" mean? Investment banking. Investment banking was bailed out to carry on as before. Politics is reproached for allowing this before its eyes." The argument with the Greece crisis is similar... "If you let Greece go bankrupt, the whole Greek banking system collapses." When taxpayers vouch for Greece, they are above all protecting the interests of Deutsche Bank. In any case, that is Harald Schumann's interpretation.

7. An effective regulation of the financial markets was not and is not politically desired. Even if it wanted regulation, no "people's representative" would have the power to enforce it. "The task of the German government should have been to create smaller banks instead of organizing gigantic mergers. The present government is to blame that no regulation of the financial markets occurred. Instead speculative transactions are taking place to a vast extent. The danger exists of bubbles forming again on the financial markets" (Ulrike Herrmann).

8. In personnel, politics and the financial markets are very closely intertwined. An "extremely tight linkage or merger or politics and the financial markets "exists (Heidi Klein, "Lobby Control"). In part, "those ruled by the laws are the ones who write the laws." As Harald Schumann says, "financial management on the international plane has a kind of personal shield with which they could resist all attempts at regulation before and after the crisis." Because of their financial power, financial management employs countless lobbyists to influence policy. (Lobbyists in the US spend $4 billion annually) The dependence of politics on party gifts and the "revolving door effect" (politicians move into the economy and vice versa) are against democracy... Businesses that cannot go bankrupt are dangerous because they gain power that is not democratically legitimated.

9. "The financial industry allows democracy influence until it has a disruptive effect on its businesses... Committee members cannot communicate to the outside world what they were told. Even when they learn the worst things violating all the interests of taxpayers, they cannot bring this to the public. This is the opposite of parliament. This is a pseudo-democracy," Schumann shouted angrily. The justification that everything happened in agreement with the prevailing laws is not true. "If this law is so bad that the taxpayer at the end has to answer for all risks, then this law must be changed."

10. The financial industry tries to extend its influence to all areas of life in a totalitarian way. Everything becomes a commodity or merchandise. "The accused stand for a business model that drives speculation into the last spaces of society. Whoever makes water, rice, wheat and other foodstuffs into a competitive business plays with the survival of whole populations" (Detlef Hensche).

11. The problem is not only the size of the bank mergers. Their mere existence is dangerous and against democracy. "The banks should not be so large that they can extort the state" (Sven Giegold). When banks are regarded as "too big to fail, an intolerable state of governmental powerlessness is confirmed which is incompatible with the democracy principle" (Jurgen Borchert, social judge). The "present necessity of breaking up such institutes" follows from this statement. The financial markets are the problem, according to Christian Felber, author and founding member of Attac Austria. Therefore money must be reorganized as a public asset. Like many participants at the Bank Tribunal, Felber urged the shattering of the supposedly system-relevant banks. "The greatest effort of banks in a free enterprise market is growing and devouring one another. The explicit goal of the liberalization of the financial markets in the EU and in the world market was the production and breeding of global markets." This can be looked up in the internal financial market strategy of the EU. The construction of system-relevant banks is the express goal of EU economic policy. "I cannot imagine a global player who would not want to be absolutely system-relevant. Therefore a liberalization strategy is misguided from the start" (Felber).

12. A fundamental improvement could occur in three steps: shattering the big banks, creating democratic banks and closing the exchanges. "More is necessary than smashing banks that become too big. Therefore we propose that all banks be converted to public interest orientation. The growth drive must be taken from them and a new type of bank created: the democratic bank which would also be an expression of the reorganization of money as a public asset. The democratic bank is public property but protected from the grasp of the government and the parliament. The democratic bank belongs explicitly to the democratic sovereign and only fulfills the core conservative functions of a bank, passing on savings deposits in the form of favorable credits. It is naturally not profit-oriented and tests all credit projects for the creation of social and ecological surplus value. Credit would again be a public asset." The last point illustrated by Christian Felber was closing the exchanges. "Stock corporations are a very undemocratic form of business law. In the future, there should not be stocks any more."

Conclusion: The 2010 Bank Tribunal constituted itself as a kind of council of the wise without beards: critical, precise and "unforgiving" in analyzing the causes and turned forward. Such people should have more influence among us. An effective form of a "counter-public" and an ideal countervailing power could arise. Judgments as the Bank Tribunal imposed on actors of the financial crisis should be really "criminally enforced." The connections uncovered in the tribunal should be known to a broad public. This should lead people to withdraw their votes in masses from the participating parties, take to the streets in hundreds of thousands and not invest their money in the overpowering "monster banks" that rebuild their democracy-hostile power with the money of many of us.

"The weight of capital is no longer regarded as a danger for democracy. Rather democracy is seen as a danger for the freedom of capital." So the non-fiction writer describes the situation. The "twilight of democracy" ( http://hinter-den-schlagzeilen.de/2011/02/07/demokratiedammerung) which I described in my last article rests on two pillars: on one side, the development of surveillance- and police-state measures and on the other side the undermining of democracy by the power of the financial markets and investment banks. Even one of these development-strands would be very dangerous; both together are catastrophic. Nevertheless I believe that no power bloc however firmly established can continue for ever, no lie can continue for ever and the self-destructive dynamic of the financial system in union with an alternative culture supported by more and more adults will bring down the self-righteous giant neoliberalism.

COMMENTS: Sundaro

That capitalism is a system forcing exponential growth was not formulated clearly enough. This again forces decisions (for example, financial bets) as (rightly) decried at the tribunal.

I can only accuse persons participating in the global monopoly for keeping a destructive system alive if I have and champion an alternative to the present money system.

Otherwise we fall for the fallacy that "several greedy ones" misused the system and only better controls are needed for a "tamed capitalism" that is not true.

... When Roland Rottenfusser writes: "In North Africa, the development runs from dictatorship to more democracy and this is reversed in Europe," I propose throwing the politicians in the Mediterranean... "

Helmut Josef Weber

... In the Lisbon treaty, the right to life in the European Union was abolished...

To make the situation profitable for the elite in Europe in the future, the leaders of such rebellions must then be shot dead on the streets...

They raise the prices of oil and food and then your money flows again into the pockets of corporations. Politics ensures that critics on the streets are locked away when they are radical and too many...

Reinhard:

Poverty makes people rich and wealth makes people poor.

Lamenting does not help. Building a parallel society with solidarity economics, democratized (entrumpelte) laws, unconditional basic income, without financial capital and dependent politicians and central banks is crucial. A dynamic counter-society is the goal without the incessant political diehards, not moaning and stupidly consuming.

Kaphorn:

Exponential growth in nature is called cancer. Re-socialization of the banks and corporations, back to the roots and away with the rat poison, genetic foods, chem-trails etc. and the unvarnished historical revisionism are important. Then we will find the answers on how the world ticks today...

Sundaro:

If there is some higher power and a higher plan in this universe (I assume there is. Otherwise how can the whole spending be good?). Idiots in the governments mean that the time of humanity is running out and something new should be created.

This could be painful. The healing process must be tackled more decisively.

Saint Germain:

Very good essay!

The changes in the world increase and will not stop with western civilization. We live in a so-called pseudo-democracy. Those who make the effort to research certain backgrounds make discoveries that are incompatible with a real democracy. It was not and will not be an accident when certain persons (Clinton, Blair, Thatcher, Schroeder and Merkel to name only some) are invited to the Bilderberg meeting and shortly afterwards hold high offices. Protégées of certain elite circles become political high fliers. In the past, a background power built and guided marionettes and average citizens believed he decided political fortunes through his voting! Those in power do what they want and not what the people want!

Since there is now certainly a higher power and a higher plan, we will learn how shamelessly we were deceived, cheated and defrauded. This will be the end of these cheating governments. Sincere, honorable, honest and selfless persons are ready to fill the transitional governments. This will only take a little while...