During the Keynesian era, the state established itself as an active supporter of economic life through direct and indirect interventions. However, the basic inconsistency between material output and its abstract and crisis-prone valorization in the bourgeois economy was never questioned. As a result, the fundamental dilemma remained: an increase in productivity with unchanged or stagnant rates of accumulation accompanied by a tendency to cut jobs and the increasing erosion of the basis for real accumulation.
When the Keynesian recipe stopped having a positive effect on private investments in the late 1970s, it was replaced by neoliberalism, which guided untapped investment capital into the speculative sphere of the finance industry. This led to the real economy’s growing dependence on the impulses of the financial markets, which negatively impacted its economic base, in turn causing periodic bubbles in unfunded financial securities. Since the New Economy and the housing bubble burst, the extent of the crisis has gradually become clear with the erosion of public finances. Part 3 of the conversation with Ernst Lohoff and Norbert Trenkle, authors of Die große Entwertung (The Great Devalorization). [Translator’s note: The book is excellent and I would highly recommend that an English-language publisher in the critique-of-capitalism biz find a decent translator and get that thing out there. Just saying.]
Norbert Trenkle: Keynesianism’s relative success during the postwar boom era was linked to specific structural conditions that were beyond its reach, meaning that it had not and could not have created them. Keynesian regulatory and redistribution policy was entirely functional as long as mass industrial employment expanded and acted as the engine for a self-sustaining boom in the valorization of capital. The expansion of welfare systems and an increase in real wages not only contributed to social pacification but also stabilized the economic upswing because it strengthened mass consumption. The expansion of public infrastructure was at least as important. Without that, ubiquitous industrialization and the commodification of everything in society could not have functioned. Cars would not have been able to drive without a dense network of roads, electrification of households required a sufficient supply of electricity, and a good, wide-ranging education system was necessary for educating a skilled labor force.
So the state took on a central role and that fed the idea that it was also in a position to keep economic development running, to guide it, and to stabilize it over the long term. But when the postwar Fordist boom came to an end, that turned out to be an illusion because, to the extent that valorization of capital ground to a halt as more and more workers were laid off due to the rapid increase in productivity, it was not just the financing sources for state activities that ran dry. Even more serious was the fact that it could not manage to start a new surge in self-sustaining valorization of capital despite massive credit-financed stimulus and growth packages.
From our perspective, there is nothing remarkable about that because, while the state can intervene in the market’s mechanisms to a certain extent, it has no access to the basic process that is driven by the internal contradiction of capitalism. To put it another way, Keynesianism was helpless in the face of the across-the-board rationalization that followed the third industrial revolution, which ultimately eroded the foundations of valorization of capital. Every attempt to lead the real economy out of stagflation failed miserably.
That was the deeper reason for neoliberalism’s victory. While it did not have a plan for revving up valorization of capital either, it laid the groundwork for the economic dynamics to be shifted to the “finance industry” and consequently for the crisis to be postponed for the next three decades. The critical factors here were, on one hand, consistent liberalization of the financial markets and, on the other hand, the Reagan administration’s increase of the national debt, which in a way served as financing for the postponement of fictitious-capital accumulation on an enormous scale. The destruction of Fordist structures through the disempowerment of unions, etc. did the rest because at the same time the privatization of the public sector opened up new fields for financial investment, for example the transformation of state pension systems into private life insurance.
RJ: What role does the IT revolution play in all of this?
NT: In the same way that Keynesianism backed up the expansion of industrial mass production, neoliberalism became the godfather of the “finance industry.” It is an irony of history that it simultaneously helped the third industrial revolution break through as a result. By itself it would have suffocated on its own productivity. But the accumulation of fictitious capital created the leeway that was necessary for a broad installation of information technology. It was possible to temporarily override the powerful rationalization effects that brought about a massive displacement of living labor from the core valorization sectors by taking on future value. The result, however, is a progressive erosion of value production that is only really becoming noticeable in its full scale now in the crisis of fictitious capital.
RJ: In your book, you compare economics to an “art school that prescribes an eraser as the only instrument of portraiture.” What do you mean by that?
Ernst Lohoff: That leads us back to the question from the beginning of part one of the interview. Economics, regardless of which school, cannot understand the crisis because it obliterates the basic distinction between the two forms of wealth: material and abstract. The opening chapters of economic theory books always say that the purpose of economics is the satisfaction of needs and the optimal provision of goods to people and that only the market economy under conditions of advanced division of labor can achieve that.
So the market economy is described as functioning according to the principle of the simple exchange of commodities just as it would in an idealized village marketplace where shoes are exchanged for pigs and eggs for balls of wool. This systematically cuts out what is actually completely obvious, which is that under capitalist conditions, what is produced is only what will turn money into more money and that the goal of production is the reproduction of abstract wealth and the commodity is simply a medium for keeping this self-referential system in operation. To put it differently: economics uses the eraser right at the level of its basic assumptions and erases what is specific about the capitalist mode of production. It is no wonder, then, that it is incapable of recognizing the causes of the crisis.
RJ: You regard the personified criticism of speculators and bankers as anti-Semitic and racist mechanisms. Why is that? The criticism directed at bankers since 2008 has not been built on anti-Semitic cliches, unlike in the 1920s, for instance, when caricatures were laced with anti-Semitic images. Or have I missed something?
NT: For starters, we fundamentally distance ourselves from any personified criticism, which is currently out of control in every possible form. The crisis of fictitious capital is also a crisis of the euro. And how is it being addressed? It is because of the “lazy Greeks” who allegedly squandered “our hard-earned money.” This personification doesn’t just insanely overlook the fact that a society has been impoverished in the middle of abundance simply because all wealth has to be forced through the needle eye of commodity production. What is worse is that the rage over this miserable state is projected toward specific, constructed collective subjects so that now it is in fact open season on them.
Open season on collective subjects
Placing the blame on bankers and speculators is by itself “only” one such personification. But there is a hint of something else within that and it is usually an unconscious thing. That particular personification is largely congruent with a basic model of anti-Semitism that constructs an opposition between “constructive” capital and “money-grubbing” capital – and the latter is identified with “the Jews.” We can see that model again today in the widespread idea that the real economy has been destroyed by some greedy speculators and what matters is that they are put in their place.
That does not mean that everyone who lashes out against bankers and speculators is an anti-Semite. What it does mean is that this projective model of processing the crisis is completely compatible with the anti-Semitic mania. It’s no coincidence, then, that the metaphorical language drifts in that direction again and again, for instance in the notorious term “locusts,” which German Social-Democratic politician Franz Müntefering popularized, positioning himself as a critic of capitalism. The phrase “they attack us like locusts” comes from the Nazi propaganda film Jud Süß and anyone who wants to be like these greedy pigs needs no further explanation. Other images recur as well, such as the popular depiction of finance capital as an octopus with the world in its tentacles. This one also turns up in an almost identical form in the Nazis’ anti-Semitic propaganda. We need to be extremely careful about this. There is still a taboo in Germany about transitioning into open anti-Semitic agitation, but the tendency is becoming noticeable and it is very dangerous.
RJ: What political and theoretical practices concretely arise from your theoretical model?
NT: Well for one thing a totally fundamental rejection of austerity. It is just completely insane to claim that we have lived beyond our means and have to tighten our belts in the face of enormously high levels of productivity. The opposite is true. If we were to make full use of the possibilities of modern productive power, every person in the world could have a good life and would only have to spend a fraction of their lifetime producing material goods.
The compulsion to produce abstract wealth
The only reason that doesn’t happen is because the company, of course, obeys its compulsion to produce abstract wealth, because it adheres to the notion that material wealth is only recognized insofar as it represents “value.” And this is not simply a kind of missed opportunity or a possibility that went unnoticed. Adherence to the logic of value production at the current state of productivity is simply catastrophic because it leads to the exclusion of enormous numbers of “superfluous” people who are sacrificed at the altar of the systemic imperative to maintain the flow of fictitious capital from the future into the present.
But if we free ourselves from the seemingly obvious idea that goods can only be produced as commodities, then whole new perspectives open up. Specifically, we could ask how and in what form the existing potential could be meaningfully used for the general welfare without having to think about financial viability, marketability, or profitability. Instead, we would have to assert the perspective of material wealth and concrete needs. This already happens in the practices of social-movements, for instance when evictions are prevented because people don’t see why anyone should have to live on the street or in a tent simply because they can’t pay their mortgage or their rent anymore or when people just say no to privatization of public agencies in cultural or social spheres. Those are first steps that point in the right direction. When they are linked with a radical critique of the form of abstract wealth, whole new perspectives of social emancipation open up.