Prosperity without Greed E-Book

Wagenknecht Sahra

• Herausgeber: Campus Verlag
• Kategorie: Fachliteratur
• Sprache: Deutsch
• Veröffentlichungsjahr: 2017

Seitenzahl: 391

Beschreibung

It is time to leave capitalism behind. We live in a system of economic feudalism that has nothing to do with a free market economy. The innovations we need for the solution of our truly important problems are not forthcoming. How can it be that technological developments financed by the taxpayer end up enriching private companies even if their activities violate public interests? We should reward talent and real performance and promote start-ups with good ideas. Based on a clear analysis and concrete proposals, Sahra Wagenknecht launches a discussion on new forms of ownership and sketches the outlines of an innovative and just economy.

Leseprobe

SAHRA WAGENKNECHT

PROSPERITY WITHOUT GREED

How to Save Ourselves from Capitalism

Translated from the German by Andreas Pickel

Campus Verlag

Frankfurt/New York

About the book

It is time to leave capitalism behind. We live in a system of economic feudalism that has nothing to do with a free market economy. The innovations we need for the solution of our truly important problems are not forthcoming. How can it be that technological developments financed by the taxpayer end up enriching private companies even if their activities violate public interests? We should reward talent and real performance and promote start-ups with good ideas.

Based on a clear analysis and concrete proposals, Sahra Wagenknecht launches a discussion on new forms of ownership and sketches the outlines of an innovative and just economy.

Vita

Sahra Wagenknecht holds a Ph.D. in economics and is a journalist and politician. Since October 2015 she has been the parliamentary leader of the party Die Linke in the German Bundestag. From 2010 to 2014 she was deputy secretary of her party, from 2004 to 2009 she was a Member of the European Parliament.

Andreas Pickel is a Professor of Global Politics at Trent University in Peterborough, Ontario, Canada. He has published books and articles in the areas of post-communist transformation, nationalism, and the philosophy of the social sciences.

CONTENTS

TRANSLATOR’S FOREWORD

PREFACE

Civilization in retreat

After us the flood

The inheritance club

How do we want to live?

Less competition, more market power

Labour protection as market rigidity

New playgrounds for profiteers

Twenty-first century economic feudalism

“This economy kills”

Ruled by organized money

Limited liability, unlimited profit

Government funds finance private property

Technocratic swamp

Re-democratization of states

Hayek’s European Project

De-democratization as a result of lost sovereignty

Abolishing global capitalism instead of regulating it

PART I  PERFORMANCE, INDIVIDUAL RESPONSIBILITY AND COMPETITION: THE GRAND ILLUSIONS OF CAPITALISM

1.THE ROGUE ECONOMY: IS GREED A VIRTUE?

Freedom without friends?

Inequality destroys trust

Not property but status

God-given greed

Mandeville’s Fable of the Bees

False philanthropists and respectable fraudsters

Repulsive people with repulsive motives

2.RISE AND DECLINE: HOW INNOVATIVE IS OUR ECONOMY?

Fairy tales

Fetid sewers

A conservative party in favour of a shared economy

“I’m missing the future”

Dead end street instead of innovation

Eco-gamblers enriched

Keynes imagining the year 2028

Uber and Ryanair

Fat and salty

Purchased, used, discarded

Quick and dirty

Anglo-Saxon models

Inventions contra patents

Blockade instead of protection

Depression instead of dynamic growth

3.DISHWASHER LEGENDS, FEUDAL DYNASTIES, AND THE DISAPPEARING MIDDLE

1Top incomes without work

Men of leisure or men of power

Performance-enhancing drugs for success?

From garage entrepreneur to billionaire?

Men of leisure at the top

Max Weber’s error

Firms as investment objects

Small capitalists?

The Matthew effect again

Different worlds

Gates and Bettencourt

2On the futility of saving as a method of accumulating capital

The assets of the middle class

Money vs capital

Capital holdings large and small

Consumption or profit

Workplace vs investment

Saving does not create capital

20,000 years of drudgery

3Inherited privilege: Capital feudalism

Thin air

Family clans

The brief heyday of the performance principle

Inheritance or marriage

Capital as an exclusive good

No dishwashers

Stable dynasties

“Feudal-plutocratic” inheritance law

4Upward mobility was yesterday: the “new middle class” moves to the bottom

Low wages, work contracts, and temporary work

Deutsche Post and Lufthansa pushing down wages

Farewell to the performance principle

Subsidies for the “less capable”?

Family background before talent

Exclusive educational institutions

The Gatsby curve

4.ROBBER BARONS AND TYCOONS—POWER INSTEAD OF COMPETITION

1Industrial oligarchs: no chances for newcomers

Businessmen or shopkeepers?

Closed markets

Increased capital requirements

Giants of the service industry

Hegemony and dependency

Fictitious diversity: the modular system

Ford fights for its competitors

Common ownership

Organized economy

State support for new competition

2Controlled markets:  market power kills innovation and quality

Absence of ideas and inertia

Standard Oil and Microsoft: ambush instead of performance

Low quality prevails

Cut-throat competition

The Sherman Act: Anti-trust law with bite

3Data monsters: monopoly on the Internet

Monopolies for court favourites

Expensive infrastructure

Prices at marginal cost level

Information: copy almost for free

The network effect

Global corporation overnight

Self-propelling: Windows’ march to victory

Digital giants

Freedom from competition

The data monsters

Orwell on the Internet

Uber’s statistics on extramarital affairs

Trade monopolies and dependent producers

The Internet of things: networked surplus generation

No end to growth in storage capacity

Dumping pressures

Revival of the planned economy?

Data monopoly and global dominance

Oligarchy of unlimited corruption

4The visible hand of the state

War, trade, and piracy

War capitalism

The state provides cheap labour

Counter-program to the Washington Consensus

Domination through free trade

State innovation

Apple’s government-funded technology

Risk-averse capital

“Small potatoes from Silicon Valley”

Industry calling for government support

Anti-government rhetoric as the job of neoliberal ideologues

5.WHY GENUINE ENTREPRENEURS DO NOT NEED CAPITALISM

1Entrepreneurs without profit

Marx’s profit theory

The textbook world: not a healthy biotope

Keeping competition at bay

2“Competition and capitalism  are a contradiction in terms”

Monopoly price for capital

“… giving up autonomy”

Motivated by filthy lucre

Recipe for inequality

PART II  MARKET ECONOMY INSTEAD OF ECONOMIC FEUDALISM: SKETCH OF A MODERN ECONOMIC ORDER

6.WHAT MAKES US RICH?

1The social order is of our own making

Forgotten civilization

Exclusive decline

The selection of the Mandarins

The Venetian commenda

Einstein as farm labourer

Modern illiterates

Labour-saving progress

Inventors born before their time

Faltering engine of innovation

Cheap labour, low investment

2How do ideas emerge?

Intellectual commons

Legal walls

High social costs

Planned innovation?

Fortune hunters and solar cells

Competition as a method of discovery

7.HOW DO WE WANT TO LIVE?

1Tricky measure

The sleep of Australian aborigines

Not always more, but always novel

The stoker on the electric train

Technologies that make you sick

Cared for by robots

Top-of-the-line cars and happy children

De-professionalization: idiots instead of skilled workers

Ikea culture

2A self-reinforcing process

Nightmares from Silicon Valley

Inflatable children’s toys

3-D printing visions

Lost self-respect

Rare losers

8.ANOTHER WAY IS POSSIBLE: COOPERATIVE BANKS

1Master or servant: What kind of financial industry do we need?

Paper euros

Key industry financial economy

Köhler’s monster

State liability

“They have made their own rules …”

Money incest

Masters of the universe

Small and stable

High-flying investment bankers

2Where does money come from?

Bookkeeping of debts and assets

Symbols as means of payment

Paper money from the colour printer

Government money

Bonds as a means of payment

Beheaded bankers

The gold standard

Deflation and crisis

Fixed exchange rates

Gold standard without democracy

“Currency threats”

Cashless credit

The Bretton Woods system

Electronic money’s march to victory

Millions at the click of a mouse

License to print money

Bank saviour European Central Bank

Bubble instead of small business loans

The suffering of the Cypriots

3Money is a public good

Banks as monetary intermediaries?

Capital originates in work

Sovereign-money theory

Bank runs and government guarantees

Financial alchemists at work

The market doesn’t work for public goods

The 3-6-3 rule

Small is beautiful

Capital controls are necessary

Gang of technocrats and euro dictatorship

“Restricting the room to act …”

De-industrialization and a lost generation

Keynes’s Bancor Plan as a European currency system

Financial check-up

Successful credit allocation

Failure rate of 90 percent

Innovation as risk

Central banks as state financiers

Free lunch

Government bonds instead of money for gambling

Rules for a market economy

The Icelandic model

9.RETHINKING PROPERTY

1Property theories since Aristotle

Finding the right measure

Right of use and misuse

New Masters

Property as a natural right

Why don’t you just leave

The disappearing commons

Property rights versus democracy

Personal property and economic property

Protected power

Legitimate profit expectations?

Wage-dumping as a human right?

Property as a convention

Property as performance motivation

2Ownership without liability: the genius of capitalism

Personal liability

Limited risk, unlimited profit

Parliamentary right of reservation concerning corporations

Sold off by the owners

Separating investor and entrepreneur

Leave the work to others

Family feuds as a business risk

Control for personal benefit

Owner Aladdin

Increasing concentration of economic power

Companies owned by foundations

Personal benefit instead of collective benefit

Heirs at the receiving end

Abbe establishes the Zeiss Foundation

3Profits as a “public good”

Ingenious statute for foundations

A successful enterprise

Neutralization of capital

Internal enterprise growth

4Entrepreneurial freedom without neo-feudalism

Personal liability company: getting rich with full risk

Employee-owned company: can’t be sold or milked

Control as the sole ownership right

Interested in long-term success

Motivated employees

Public risk fund

The Public Company: public participation

Common-good company: social services

High-speed Internet for all

No escaping …

Reduced to the smallest size

Deconcentration

Property only through individual work

ACKNOWLEDGEMENTS

ENDNOTES

TRANSLATOR’S FOREWORD

Sahra Wagenknecht is a prominent figure on Germany’s political stage. Since 2009 she has been a member of the federal parliament and the party leadership of Die Linke. She appears regularly on public affairs talk shows and is frequently in the news. She is one of Germany’s intellectually strongest and economically most knowledgeable politicians. While these are not the only, or even main, characteristics of a successful politician, they are all too rare in the country’s political class.

Like Chancellor Angela Merkel, Wagenknecht grew up in the former GDR (East Germany). She became politically active just prior to the fall of the Berlin wall in 1989. She is in the leadership of Die Linke, currently an opposition party in the German Bundestag with a feminist and socialist orientation. Wagenknecht may well earn a place in the German government, if not after the next elections in the fall of 2017, then at some future time.

Prosperity without Greed is in equal parts political analysis and reform program. It explains in clear and jargon-free terms how today’s capitalist economy really works, demonstrating how it runs afoul not only of basic ideas of social justice, but of the principles of a free market economy itself. She shows how today’s dominant financial sector functions and how “the one percent” end up with most of society’s wealth, for which they do not have to work.

Most importantly, Wagenknecht sketches a vision of an alternative economy, a more genuine market economy without the dominance of private capitalists. While private wealth can still be earned in firms in which the owner remains personally liable, the ownership system of private shareholding, which she characterizes as “neo-feudalism”, will be largely replaced by enterprises that are “self-owned”—employee-owned and common-good companies. Wagenknecht’s brand of socialism has significant elements of “market radicalism”, though clearly not of the neoliberal type which uses market ideology to disguise an anti-market and inegalitarian corporate order.

It is clear by now that successful solutions for climate change-induced problems will need to transcend the capitalist logic of limitless private capital accumulation. The significance of Wagenknecht’s work emerges in this context with particular force—a guide for progressive organizations, movements and activists for how the existing economy could be transformed. The book comes at what seems like an inauspicious time for radical reform ideas, with a reactionary U.S. President recently installed in office. But political dynamics tend to be unpredictable, which is why the prospects for radical change of a progressive kind cannot and should not be discounted.

Andreas Pickel, February 2017

PREFACE

The time is out of joint; O curs’d spite,That ever I was born to set it right!

Hamlet, in Shakespeare’s famous tragedy,surveying the state of his kingdom

Hamlet’s attempt to set things right ends in major bloodshed, suggesting that such attempts ought not be imitated. Yet the lesson is not that we should simply accept society’s dissolution. Instead, we need to approach the problem in a way that rises to the challenge. Hamlet yearns to return to the good old days. But the future lies in what is new and has never existed before. Ideas for change should be assessed in terms of their plausibility and persuasiveness, not for whether they have a track record of success.

And isn’t our own time out of joint? Isn’t this what the news we hear and read on a daily basis, the online flood of information, tells us? The truth is, we all feel that things cannot and will not continue the way they are. The big question therefore is: what comes next?

Civilization in retreat

In many regions of the world, civilization is in retreat. Wars and civil wars have turned the Middle East and parts of Africa into a blazing firestorm. Public order is collapsing. Clan leaders, war lords, and terror militias are taking control. Fear, chaos, atrocities and arbitrary killings are the result. Pretty much everywhere, the United States and European countries are involved in these conflicts. It’s about raw materials and markets, profits and geostrategic advantages, pipeline routes and the competition for power with the West’s old opponent, Russia.

More than 60 million people worldwide have lost their homes and have become refugees as a result of such conflicts. Some of them make it to Europe. The majority survive in camps and tent cities located just outside their countries of origin: without work, without a future, without hope, relying on others to feed them and keep them alive.

Even in the advanced industrialized countries—islands of wealth with a comparatively high standard of living—life has become tougher rather than better for many people. Financial bubbles, economic crises, unemployment, dying industrial regions, squalid bedroom communities, jobs that don’t pay a living wage, poverty in old age, insecurity—all threaten our daily lives and frighten us.

After us the flood

Who is willing to find new solutions for our time, who has the ability, the courage and the right ideas? And who, conversely, has a secret or not so secret interest in keeping things just the way they are? “Après nous le déluge!”—“after us the flood”—in the words of the legendary mistress of French King Louis XV, Madame de Pompadour, in 1757 when bad news threatened to disrupt one of their lavish court celebrations. For the majority of French people at the time, on the other hand, life was no party—which is why the royal house of Bourbons would experience its own flood thirty years later.

“After us the flood” is not a particularly attractive slogan for those who are up to their necks in water. That was true in the eighteenth century. Is it not true in the same way today? What are we waiting for?

The richest 1 percent of the world population now has more wealth than the other 99 percent. 62 multi-billionaires own more assets than half of humanity combined1. At the same time, the inequality of incomes and assets continues to grow, not only on a global scale, but also and especially in the old industrialized countries. Over the past twenty years, the exploding wealth at the top has ceased to pull up the middle class, let alone the poor. Their standard of living does not simply lag behind economic growth, it has become completely disconnected.

The tide that was once supposed to raise all boats now only carries luxury yachts. Since the 1980s, average wages in the United States have stagnated, while lower wages have gone into free fall. In the meantime, Europe has adopted the same model. The upper classes are sitting in their penthouses, elevators on hold and ladders pulled up. The rest are lucky if they manage to continue living on one of the lower floors—which many don’t. This is the case not only in crisis-ridden Southern Europe, but also in wealthy Germany with its booming export economy.

Neither hard work and qualifications nor second or third jobs nowadays offer any guarantee of a relatively comfortable existence. Prosperity in the “middle of society”, to which political hypocrites like to appeal, has become fragile. Whereas in earlier years individuals were able to rise—if not from dishwasher to millionaire, then at least from a working class background to the middle class—nowadays the typical experience is one of decline. Rarely do children today fare better than their parents, while the opposite is often the case.

The inheritance club

One exception is the exclusive club of heirs who can expect a large inheritance that will insure a good life regardless of their own contributions. The promise of social betterment, a main reason for the popularity of capitalism in the second half of the twentieth century, sounds hollow and has lost credibility. Once again it is social origin rather than talent and personal initiative that determines whether one will reach the upper echelons of society’s income and property hierarchy.

Admittedly, jobs with good incomes that afford the classic standard of living of the middle class still do exist. However, for the most part, a high price has to be paid in return: extreme performance pressure, round-the-clock availability, a life devoted to work with little room for family, friends, and leisure. Even for skilled workers and academics, sufficient incomes are no longer standard. A university degree does not protect you from low wages or the permanent insecurity of contract jobs and precarious self-employment. In Southern Europe, young people with top educational credentials face the choice between emigrating or remaining unemployed at home.

The number of people experiencing humiliating poverty in prosperous Europe is increasing. More and more people put only the cheapest products into their shopping carts, spend winters in under-heated apartments, and can only dream of occasionally going to a restaurant or taking a vacation. Perhaps what’s even worse is to see your children grow up in run-down apartment complexes such as the banlieues of Paris, where in chronically under-financed schools they learn about violence and crime rather than receiving a good education.

How do we want to live?

Do we really want to keep living this way? Do we want a society in which individuals are becoming increasingly ruthless because everyone is always worried about crashing and joining the army of losers—an army from which all too often there is no return? Do we want that insecurity and fear of the future shape our daily lives while it is sold to us as the new freedom? And if we do not want this, why don’t we resist? Why do we tolerate so much—all the imposition, humiliation, and hypocrisy that we see for what they are: simply lies? Why do we accept lives that are so much worse than what, with a fairer distribution of society’s wealth, current technology would permit? We only have one life to live.

Do we really think it’s normal that a majority is forced to struggle under increasing pressure just to maintain its standard of living, while a few crisscross the oceans in ever more luxurious yachts? Why do we accept the fact that in spite of universal suffrage time and again a political process prevails which at best serves the interest of the upper 10 percent, and often just the richest 1 percent?

Less competition, more market power

Political decisions are responsible for having altered the face of our economic order in the transition from the twentieth century to the twenty-first—decisions made under the banners of more market, more competition, more freedom, more personal initiative, more growth. Their results are as easily summed up: less market, less competition, more speculation, more dependence and less growth.

Essentially, changes have occurred on three levels in particular. First, a framework of rules for economic life that was created in light of painful earlier crises has been demolished in the name of the free market. The most obvious, though by no means only, example for this is the financial sector. As a consequence, risky business models have multiplied, while the supposedly liberated market was flooded with products that were profitable simply because the finance industries were allowed to externalize most of their cost. In the financial sector, this applies to almost all forms of investment banking, to most so-called derivatives, and high frequency trade. It applies equally to the business idea of corporate raids and bankruptcy speculators, or to global tax savings models through which Amazon, Ikea, etc., unlike smaller firms, dodge their obligations to society. All the cunning tricks and techniques that those at the top of the wealth pyramid use successfully to evade taxes would not work without preceding deregulation and the removal of capital controls.

Among the burdensome rules that were eliminated during the waves of deregulation were anti-trust laws, to the extent that they had retained any authority to curtail economic power in the first place. As a result of all this, from the world of banking to the digital economy, giant global corporations dominating markets and societies were set up whose business decisions now determine the course of the global economy. These corporations do not feel committed to anything but shareholder value. On account of their concentrated economic power, they are able to prevail in almost any industry and at the expense of other market participants. Instead of more competitive pressure, decades of deregulation and market euphoria have produced a greater concentration of economic resources in far fewer hands.

Labour protection as market rigidity

The power of a handful of global corporations was increased in the name of the market within their industry and vis-à-vis suppliers and customers. They have become more powerful also vis-à-vis those whose labour power creates their wealth and that of their shareholders. This is the second level where changes have occurred. Laws designed to protect workers and employees from hire-and-fire practices of reckless profiteers were now referred to as “labour market rigidities.” When “structural reforms” are discussed in Europe, this is what is at stake. Social benefits, which in many countries were legally regulated as part of a decent wage and once considered to help preserve human dignity in the face of illness, old age, or unemployment, nowadays are seen only as cost factors that put an excessive burden on businesses and need to be minimized.

Former German Social Democratic Chancellor Gerhard Schröder, supported by the Green Party’s Joseph Fischer, as well as current Christian Democratic Chancellor Angela Merkel, in this sense did create a New Middle Class. Thanks to the reforms of “Agenda 2010”, employees who in the past worked in regular full-time jobs with decent wages and belonged to the middle class, nowadays work as temporary workers, contract workers, pseudo self-employed, limited term workers or part-time. Often their incomes have been cut in half in jobs with uncertain prospects; such workers are found in logistics, on the assembly line at BMW, as cashiers in a drug store chain, or at home in front of a computer. Part of the experience of the New Middle Class is the fear of being fired in case of illness or of having to deal with large expenses, as well as the prospect of not receiving a sufficient pension after a long working life. Instead of boosting personal initiative and freedom, this is resulting in dependency and disenfranchisement.

New playgrounds for profiteers

The third level of so-called market orientation has affected areas previously served by public welfare organizations and the government that have become playgrounds for private profiteers. This trend started in housing, the postal service, telecommunications, energy supply, and the railways. It was subsequently extended to formerly municipal utilities such as water works, local transport and garbage removal, and finally reached schools, universities, care facilities, and hospitals. In most of these areas there is not, and cannot be, any real competition. As a result, no new markets were created. Instead, welfare agencies and public suppliers who had not exploited their monopoly position for profit maximization were merely replaced by those whose primary goal is precisely that.

The revenue of the affected enterprises has tended to develop in two directions: steeply upward for management, significantly downward for employees. No one with a minimum of social conscience would find even barely acceptable the principle that those who pay the most are entitled to receive the best product when we are dealing with basic services such as health care, education, or housing. Privatization has contributed to increasing inequality and social polarization in many ways, without creating more competition or strengthening the market.

Twenty-first century economic feudalism

The distribution of wealth and power in today’s capitalism, even if at a much higher level of productivity and prosperity, resembles the period when Louis XV and Madame de Pompadour celebrated their lavish parties. As was the case in the Middle Ages, in the eighteenth century about 1 percent of the population belonged to the upper class. They owned the then important economic resources of arable land, grazing grounds, and forests. They dominated public life, jurisprudence, and the application of law. It goes without saying that they did not pay any taxes. The remaining 99 percent of the population directly or indirectly worked for the richest 1 percent. Assets along with the corresponding social status were passed on from one generation to the next according to the principle of inheritance based on blood relation. The son of a peasant became a peasant; the son of a baron became a baron unless he decided in favour of a career in the clergy or in the military, which would allow him to remain in the upper class.

At the start of the twenty-first century, the richest 1 percent control the most important economic resources, with the difference that in addition to agricultural land and real estate, these include industrial facilities, technological know-how, digital and other networks, servers, software, patents, and much more. Ownership of these resources continues to be passed on unchanged from one generation to the next by inheritance. Nowadays, the transfer of these assets is in many cases virtually tax-free, affording a lifestyle far exceeding any working income. Once again, 99 percent of the population for the most part work, directly or indirectly, for the wealth of this new financial aristocracy.

One might object that the decisive difference consists in the fact that, in the feudal era as well as in the period of absolutism, the economy progressed very little since there were few incentives to increase productivity and improve production methods. In contrast, it might be argued that capitalism has created today’s enormous wealth, which lifts the life of even the poorest inhabitants of industrialized states way above the level of their ancestors in previous centuries. This is correct as far as the past is concerned. But is it true for the present and the future? Admittedly, production continues to be transformed, digitalization promises enormous productivity increases, new processes are introduced, and new products appear on the market. But who benefits from a dynamic economy if the economic dynamic for the majority points downward? And how innovative is our economy really?

“This economy kills”

Outside the global centres of wealth, the situation is almost hopeless. On our prosperous planet, which thanks to today’s technological potential could feed a world population of 12 billion, one billion people suffer from malnutrition and another one billion are starving. The UN warns that in the coming 15 years another 70 million children will die from preventable or treatable poverty-related diseases before reaching the age of 5. 70 million human beings whose lives will be extinguished before they really had a chance to start it, simply because their fate is of no interest to the most powerful political decision-makers and their economic allies. Incidentally, these are the same people who like to justify their wars with the hypocritical claim of protecting human lives and human rights and with the argument that we can’t just stand by and watch as people are dying. Yet according to Jacques Diouf, General Secretary of the UN Organization for Food and Agriculture, it would take no more than 30 billion dollars per year in order to end hunger and malnutrition globally—a small fraction of the funds spent on militarization and wars.

The UN has issued many warnings, but little has changed, and change that did occur was often for the worse. Poor countries were forced to sign so-called “free trade agreements”, which destroyed their domestic production and opened their markets to Western agricultural and industrial corporations. Millions of small farmers and businesses were wiped out in this way. When in despair people try to make their way to the wealthy countries, they are dismissed as economic refugees. Yet our economy and our corporations are the ones destroying their economic existence and driving them to migrate.

“This economy kills”, Pope Francis has reminded the Church and the world. Evidence to back up this statement can be found every day in the countries of the so-called Third World, parts of the world that have been abandoned by the First World. It is true that in earlier centuries people died of hunger when there were extreme droughts or when other natural disasters destroyed crops. But that in a world of plenty in which a significant part of food is not even consumed but thrown out, year after year millions of people should die a cruel death because they have no food—this is a perversion generated by the capitalist world order.

Ruled by organized money

One question is becoming increasingly urgent: do we still need capitalism today in order to have a better life in the future? Or isn’t it precisely this form of economic life that keeps us from improving our lives? Do we need the profit motive as an incentive to improve our technologies, so that production stops destroying our planet and with it our basis for survival, or is it the profit-oriented logic of growth itself that ties our hands? What would a better alternative look like? What economic structures are needed for turning good ideas into good products quickly? Where do the incentives to develop new production methods come from—methods that can really move us forward since they will not require us to run our economies by progressively exhausting our natural environment? How can we take advantage of the productivity-enhancing effect of digitalization and industry 4.0 without at the same time generating additional unemployment? How can we achieve a dynamic of innovation that increases not only the wealth of corporations and their owners but of everyone?

Surprisingly, it is not that difficult. We simply have to overcome the economic feudalism of the twenty-first century. Markets should not be abolished but, on the contrary, need to be saved from capitalism. We need what neoliberals claim to achieve but in reality systematically destroy: freedom, individual initiative, competition, performance-based pay, protection of property of one’s own creation. Whoever is in favour of change and is serious about it has to end rather than uphold a situation in which the important economic resources and wealth are owned by a tiny upper class that automatically benefits from any additional profit. An upper class that has the power to decide on investments and jobs, and with its major influence on the media, with its think tanks and lobbyists, with its ability to launch campaigns, and with its enormous capital can dominate or buy any government in the world. “Government by organized money is just as dangerous as Government by organized mob”2, President Roosevelt cautioned in a speech as early as 1936.

What socially useful things do the billions of dollars pay for that in the form of dividends and other gains end up in the pockets of the top 1 percent? And even more important, on what grounds can they claim decision-making power over ever-expanding economic wealth and thus over the development of society as a whole—a privilege they enjoy on account of current property law? The standard justification for capital returns is supposed to be the risk that capital owners take when they make investments.

Limited liability, unlimited profit

How great is this risk really? Limited liability for capital invested in the economy is one of capitalism’s original contributions to property rights. In almost all large firms today, liability in case of bankruptcy is limited to no more than the capital initially invested.

And how great is the risk of bankruptcy in established markets dominated by a few large firms? Bankruptcies do occur, as was recently the case with two German retail giants, Karstadt and Schlecker. However, these cases were ruinous mainly for the former employees who lost their jobs rather than for the former owners who lost some of their assets. But is the risk of being demoted from billionaire to millionaire sufficient justification to keep collecting exorbitant incomes? Or is the real threat for a market economy and a democracy that a firm’s assets, created by the work of tens of thousands of employees, end up automatically in the bank accounts of capital owners?

What is more, large firms in particular have perfected the art of shifting risks onto others. In the financial sector, the gap between private profit and public liability for losses became all too evident in the banking crisis of 2008. Subsequent cosmetic corrections in banking regulations have not changed the situation. Yet in the real economy government is also regularly called upon to intervene when it comes to risks: tax incentives, different forms of subsidies, and other kinds of public support for the private sector are always gladly accepted. In the end it is tax-financed innovations that make private enterprises rich. Google, Apple, and the entire pharmaceutical industry are prime examples.

Limited liability, automatic transfer of newly created assets to capital owners, and transfer of losses and risks to the state are the main driving forces behind the growing inequality in property distribution and ownership.

Government funds finance private property

True, we would not be better off but significantly poorer if the government were to remove itself completely from economic life. If all struggling banks in 2008 had been left to slide into uncontrolled bankruptcy, the effects on the supply of credit to the economy would have been even more dramatic than they were, and deposit insurance would not have protected the accounts of small savers from losses. If the government were to eliminate all subsidies for research, the process of innovation would slow down even further than it already has in many sectors. Without start-up financing through public risk capital, many firms that enrich our lives with good and useful products would not exist.

The point is not to stop providing any and all economic subsidies. Rather, the point is to eliminate the absurdity that public funds are transformed into private property rights, which are subsequently protected by law even if they turn against public interests. The goal should be an economy that does in fact reward talent and performance, and that enables individuals with ideas, motivation, and business sense to set up firms even if they do not happen to be blessed with a large inheritance. Creative ideas and new technologies that have potential deserve reliable financing that assumes the initial risk and thus access to credit.

At the heart of the power of the upper ten thousand and the origin of their ability to collect incomes without making any contribution is the current constitution of economic property. Transforming economic property structures is therefore the key to a new approach.

Reform proposals that omit this dimension may bring about improvements in certain areas. But in most cases they will end up the way various attempts at banking regulation have: diluted, declawed, and evaded.

Technocratic swamp

In part this is a result of the power disparity between territorially circumscribed state authority and the global scope of economic actors. It is widely believed that democracy could be reinstated if political decision-makers followed the economy’s lead in globalizing or Europeanizing. However, this assumption is naive. Democracy can live only in spaces that people can grasp. Only under such conditions does the demos have a chance to come into contact with, monitor, and control political decision-makers. The larger, less homogeneous, and complex a political unit, the less the likelihood that democracy will work. If in addition there are different languages and cultures, the project becomes hopeless.

There are good reasons why democracy and the welfare state are the result of struggles in individual nation-states. These institutions are compromised, however, when parliaments and national governments lose power. It is no accident that the institutions of the European Union (EU) in Brussels, which have degenerated into the infamous technocratic swamp lacking transparency and which, more than any national government, are controlled by corporate lobbyists, have completely lost the confidence of a large majority of Europeans. Most of these institutions were set up from the start to function without the need for democratic legitimation. Yet even in the elections to the European Parliament, which occur every five years, barely a third of citizens participate, significantly fewer than in any national parliamentary elections.

The limited authority of the European Parliament is not even the primary reason for this. On the contrary, its decision-making powers have been considerably expanded over the years, while at the same time its democratic legitimation has diminished as a result of constantly declining voter turnout. The main reason for this lack of interest seems to be the fact that the EU Parliament is simply too distant, removed from the experience and lived reality of the populations in the individual countries. As a result, people find it difficult to recognize any of the existing parliamentary alliances composed of heterogeneous parties as their voice and personal interest representation. At least at the national level, members of Parliament have a local constituency where citizens can approach them. But no one knows who “their” representatives in the European Parliament are because they don’t exist. This is also why in the German national parliament, the Bundestag in Berlin, there are eight lobbyists for every elected representative, while in Brussels the ratio is twenty to one. Where democratic control fails, the swamp of corruption and the practice of politicians for sale flourishes. Needless to say, this will be reflected in the political agenda.

Re-democratization of states

For the foreseeable future, there is really only one framework in which real democracy can live and which needs to be re-democratized, i. e. the historically evolved state with its various sub-levels, from cities and communities to regions and federal units to national parliaments and governments.

Of course it would be desirable and make sense if the European countries were to follow common rules in certain areas, from the environment and consumer protection to corporate taxes. In order to achieve agreement on such issues, we do not need an arrogant European Commission to get involved in what are the sovereign rights of states, and certainly no high-handed president of the European Central Bank to interfere with the government of individual countries. All that would be needed is European-level coordination between elected governments. We should keep in mind that despite the “pooling of sovereignty”, the EU has not created adequate rules for dealing with the most important issues. While member states continue to compete with each other over who offers the lowest corporate and wealth tax rates, Brussels dictates budget rules and requires states to let international corporations compete in the provision of public services.

Hayek’s European Project

The neoliberal founding father Friedrich von Hayek was convinced that European treaties and institutions could be useful levers for committing policymakers in individual countries to a pro-corporate agenda regardless of election results. For this reason he was a strong proponent of the idea of a European federal state that would be above individual European states—not in order to extend the scope of policymaking, but rather to undercut political intervention and thus obstruct democracy.

Hayek is correct when he writes: “the abrogation of national sovereignties and the creation of an effective international order of law is a necessary complement and the logical consummation of the liberal program. [Since …] on the whole, it is likely that in a federation the weakening of the economic powers of the individual states would and should gradually be carried much further than will at first be evident.”3 Without attracting much attention, a framework could thus be created in which policy makers no longer need to pursue any agenda other than lowering corporate and capital taxes, reduce workers rights and cut public spending, that is to say, follow faithfully Hayek’s idea of a liberal program. In the end, such a straitjacket would deprive governments of the power to unilaterally maintain “even such legislation as the restriction of child labor or of working hours”4, as Hayek notes approvingly.

Like the pseudo-Europeans of our time who advocate a reduction of the sovereign rights of states, Hayek was not interested in the European idea or European values. One important European value is after all democracy, which is undermined by European treaties and institutions. In this sense the European Union may well be seen as an anti-European project. Since the signing of the Maastricht Treaty in 1992, the EU’s central goal has been to immunize policies in individual countries against unpredictable electoral outcomes. In a market-conforming democracy, decision-making power lies with the corporations rather than the demos.

De-democratization as a result of lost sovereignty

As Hayek knew, in Europe this has become difficult to accomplish at the level of individual states. Notwithstanding pervasive corruption and the power of money, European states continue to have democratic institutions. Parliaments and in some countries the chief executive are periodically elected directly, giving the population the opportunity to toss out corrupt politicians and unpopular parties. This democratic right loses its significance if the population does not have an opportunity to chose a different government agenda, in other words if governments regardless of which parties are in power are no longer able to make sovereign policy choices. The safest way to eliminate this sovereignty is by establishing transnational treaties and institutions that govern democratic states and have to be respected by them. If Hayek were still around to see the European Union of our time, he probably would have been very pleased. His program of de-democratizing Europe is far advanced. It would be complete with the adoption and ratification of treaties like CETA and TTIP, which would eliminate any political room for manoeuvre.

If we want to live once again in truly democratic polities, we have to head in the opposite direction. Rather than internationalizing politics, economic structures should be decentralized and shrunk. We need global exchange and trade, but we don’t need modern robber barons who organize production on three or four different continents, opting for the places with the cheapest wages and lowest taxes. John Maynard Keynes, Hayek’s old opponent, was convinced that “ideas, art, knowledge, hospitality and travel should be international. In contrast, goods should be produced locally wherever it is reasonably possible; above all, however, finance should remain largely in the national context.”5

Abolishing global capitalism instead of regulating it

Moving to a smaller scale is also necessary for reasons of the economy’s efficiency and capacity for innovation. The economic giants with their enormous market power are destroying not only democratic authority, but also genuine competition. There is nothing wrong with firms cooperating on certain projects. But it is a political scandal for a considerable part of European automobile or pharmaceutical production to be interlinked at the level of ownership, or for one British supplier to have most of Europe’s communication services under its control. It is equally nonsensical for a German company to run Greek airports or for a Swedish corporation to be in charge of energy supply for German cities and municipalities.

The global capitalism of our time can no longer be domesticated at a national level. Democratically legitimated European or international institutions with this kind of power do not and probably cannot exist. If we really want a better life, modest and minor reforms will not do. The challenge is to save our democracy and market economy from capitalism by embarking on the design of a new economic order.

PART I PERFORMANCE, INDIVIDUAL RESPONSIBILITY AND COMPETITION: THE GRAND ILLUSIONS OF CAPITALISM

1.THE ROGUE ECONOMY: IS GREED A VIRTUE?

Do we need to be saved from capitalism? May God save us instead from daydreamers, utopians, and naive believers in human goodness who don’t understand, or don’t want to accept, human nature and its true motivations and causes. With all their magnanimity and good intentions, they would create a catastrophe if ever they were to achieve the power to put their ideas into practice.—Most of us have encountered this notion so frequently in our lives, in any of its many variations, for the automatic response to be triggered. Capitalism, according to this commonsense view, means a dynamic economy, growth, and prosperity because it rewards performance and effort, promising a career and success to those who keep fighting, tolerate adversity, and are persistent in pursuing their goals.

What is bad about an economy that promotes initiative and personal responsibility, but at the same time appeals to ambition, greed, and egoism in order to set free the inexhaustible source of human creativity? True, capitalism does produce great inequality. But is that not precisely the secret recipe motivating people to reach the highest levels of performance—the chance to achieve unimaginable wealth while simultaneously living with the constant risk of social decline?

Humans after all are not noble, helpful, and good. This is why a successful economic system has to start with those characteristics that are typically human instead of relying on those that a majority of people simply do not possess. Sounds plausible. But is this in fact an accurate picture of human nature? An acquisitive, calculating, selfish homo oeconomicus whose universe revolves exclusively around himself? This view is immediately contradicted by the fact that loneliness and social isolation cause humans the worst suffering. Even great wealth can usually not make up for this. The connection between wealth and happiness is that the rich experience social exclusion much more rarely and receive more social respect than the poor, usually regardless of the source of their wealth.

Freedom without friends?

It is interesting that in Indo-Germanic languages, the word freedom has the same root, fri, as the words friend and the German word for peace, Frieden. fri means “to love” and to be free originally meant “to belong to friends” or also “to live in peace (Frieden) with others.”6 Not the absence of ties but having ties with others makes you free, because only ties can sustain you. Humans are social creatures who live much more contentedly if they are connected to others than if they feel left alone. Not even capitalism would work if it was populated for the most part by selfish homines oeconomici