COMPETITION IS NOT A NATURAL LAW

Unmasking Neoliberal Globalization

By Gisbert Otto, Stuttgart

[This article published in: Zeit-Fragen 41, 10/17/2005 is translated from the German on the World Wide Web,  http://www.zeit-fragen.ch/.]


On the occasion of the 2005 meeting of the United Nations in New York, the German foreign minister J. Fischer pleaded for a strong UN: “Either we successfully organize globalization or globalization will seize us.” He complained that disarmament and non-proliferation of nuclear weapons were missing as conference themes.

Shockingly these two themes – nuclear weapons and globalization – are treated superficially. Both themes are connected. The driving force is neoliberalism that pretends to be the only true worldwide economic form and unfortunately still has authority. The example of nuclear weapons is illuminating. After a nuclear freeze or efforts at a freeze gained a worldwide consensus – in remembrance of Hiroshima and Nagasaki – in the 1980s, nuclear weapons are made acceptable or respected again today. In a modified form – as depleted uranium – we already know the effects of this DU ammunition in Gulf war I in Iraq (1991), Bosnia (1995), Kosovo (1999), Afghanistan (2001) and Gulf war II in Iraq (2003). The US government obviously trivializes the incidents and denies the injurious effects of enriched uranium. Nevertheless these effects are real.

The shameless pressure for “useable” nuclear weapons is systematic and not simply research-oriented. War and the neoliberal economic order have a common logic and require one another. Terrorism is regarded worldwide as the most important threat to the “civilized world.” Instead of asking about the causes for terrorism, combating terrorism with all means becomes the only theme. National law and international law are pushed aside. A new boundless war is actually propagated – as some critics say under the cover of the “war on terrorism” with the primary goal of assuring geo-strategic rule.

Secondly, access to worldwide resources is crucial. The absolute striving for power underlying these wars takes a heavy toll on human life at home. The domestic war is marked by dismantled social systems, enormously increased unemployment and poverty and restriction of democratic rights. Neoliberalism driving the economy and operating more and more in all areas of life is behind this absolute striving for power. Recognizing and unmasking the mechanisms of neoliberalism is central. Criticism of neoliberal globalization increases more and more but has not settled in public consciousness. In this article, structural problems of neoliberalism will be shown. These problems help unmask neoliberalism. Necessary alternatives can only be effective when the concrete realities are seen.

LOOKING BACK TO HISTORY

The founder of mass psychology, G. Le Bon, investigated the development of cultures over 100 years ago. He declared increasing expenditures of the state – that must be financed through taxes – reduce the disposable income of the population and lead to an unjust assets distribution between owners of capital and employees and ultimately to crisis.

All advanced civilizations seemingly perish through the same process: first capital expansion and rapidly increased productivity and then collapse through unjust assets shifts and increased poverty follows the culture decline. This happened to the world power Rome. The former world power flourished for centuries. Tribes and peoples were subjugated; nothing seemed to stop Rome’s troops. The world power wanted to grow more and more and become more powerful. However everything was over after only a few decades. When the conquests could not still the capital hunger of the center, ever-larger parts of the population were expelled. The impoverished were appeased through “bread and circuses” and distribution of corn but the problems continued. The population growth and city building led more and more people to abandon their self-sufficiency and independent lifestyles. The system could not be controlled any more.

Our situation today seems similar. There are more and more unemployed, around 20 million in the EU (European Union) alone. An intense productivity pressure strains the people who still have jobs. On top of that, the poverty constantly increases. Instead of working out and overcoming the causal problems, people try to put a veil of the “fun society” over the whole – as in the times of Rome. Intensified poverty cannot be prevented with this approach. On the contrary, crises are provoked by the added acceleration of the process today.

The main problem seems to be the striving for unlimited growth. Looking back to history, unlimited growth and unlimited productivity are signs of an unhealthy development. The growth processes in nature confirm this.. Boundless growth only occurs when a self-destructive process winds down as with tumor cells for example.

THE EXPLODING CAPITAL SYSTEM

The labor income of employees and the capital income of capital owners can be distinguished in a national economy. Since the 1970s, capital incomes have risen exponentially while the net incomes of employees have lagged behind. What are the reasons? The claims of capital – including the automatism of interests and compound interest – must be satisfied whether the economy grows or not. This means the lower the percentage growth of the economy – as occurred for many years -; the more dramatic are the claims of financial capital (the interests are fixed by contract and must be paid; these interests have priority before wages). Therefore the share of labor income in the gross domestic product has fallen year after year. Expressed numerically, financial assets rose nine times faster in the time from 1950 to 2000 than the net income of employees. This is a massive injustice that portends social explosions.
The following examples illustrate this dynamic. Money is invested when a profit or interest payment can be expected…An ever-larger part of our national economic output flows in interests to capital… Interest burdens always correspond to interest profits. Financial assets and debts explode in every interest economy. Only one possibility exists for delaying the collapse of the system as much as possible: the economy must be pushed to constant growth so the funds needed to pay the interests on capital can be amassed. Since this is hardly possible today, the share of employees in the cake (GDP) must become smaller and smaller.

This is true for European countries and the US and explains why most citizens in the US are worse off today than 25 years ago. The division of society into a few rich who have all the chances and many poor whose possibilities for independent development are increasingly taken away – as Le Bon described 100 years ago – is pre-programmed. As a result, the financial assets of a minority grow exponentially along with the credit entries that must be paid by the majority of citizens.

CAN SAVINGS SOLVE OUR PROBLEMS?

“We have lived beyond our means – our social system must be driven back – we must save.” This message was hammered into our heads for years and has met with enthusiastic response. Unfortunately social expenditures and spending for culture and education must be cut to pay the interests for capital. The savings in wages also has negative effects. The individual wi8th hardly any money can buy little. This weakens demand. The sinking demand leads ultimately to falling prices with increased unemployment and more state indebtedness. The economizing appeal to the state is dubious because the state cannot save in the current situation. Rather the state must keep the debt spiral going so more businesses do not go bankrupt and more employees consigned to the street.

CAN LONGER WORKING HOURS SOLVE OUR PROBLEMS?

Working more means bringing more output or producing more. Who benefits from deficient or low growth and stagnating demand? Extra work only makes sense when jobs can be saved. Longer working hours are basically nothing but hidden savings.

REDISTRIBUTION FROM BOTTOM TO TOP

Two-thirds of the financial assets growth in Germany in 1970 was saved from labor income. This was not even a sixth in 1993. This tendency is also confirmed in a UN study. In 1996, the 358 richest worldwide had nearly half of the world’s income. If assets were considered instead of income, the disparity would be much greater. This redistribution from bottom to top takes place unseen by many citizens because they think as a rule that only the indebted have to pay the interests. This is only half the truth. We all indirectly must pay for the debts of the state in the form of taxes for example. A close connection exists between the debt acceptance of the state and interest development. The sum of the interests paid in the last thirty years is strikingly identical with the sum of new public indebtedness. In other words, the borrowing of public budgets accomplished nothing. There were no real revenues for investments. The borrowing only had the goal of satisfying the interest-claims of owners of capital. Only the persons who had money left to lend to the state profited from that and their assets multiplied. In Germany, this was around 970 billion Euros in the period from 1970 to 2000. That is the lion’s share in the state debts of 1/198 trillion Euros by 2000 (annual interests amounted to 66 billion Euro).

The concentration of capital assets has led to labor losing more and more respect and significance. Mammoth transnational corporations and powerful institutions – the WTO above all – determine worldwide social and economic conditions – in the case of the WTO through the power of its regulations. This turns out to their advantage. The pressure on businesses and employees is a main characteristic of globalization.

GLOBALIZATION

Globalization means that money capital can move from one place to another in a short time to gain more profits. Since production and employees are not as mobile, the predominance of capital owners over labor and production inevitably intensifies. An enterprise is closed on account of “unprofitability” if an enterprise no longer gains the minimum profits on the money market. The result is unemployment for the affected. With globalization, businesses are forced to competition. A merciless predatory competition arises. As a result, wages are forced down on one side. Ever-stronger capital concentrations appear on the other side. Medium-sized firms that represent the majority of jobs have to close amid increased interest burdens and abandon their market share to a large corporation that expands its market position. With the takeover, the firm is first “revitalized” by dismissals. Unemployment is the consequence.

The mammoth corporations fight for the worldwide monopoly. They find themselves under the control of large banks and depend on them. The power of the large banks is manifest in their enormous profits (while simultaneously announcing the termination of thousands of workers). Through the increasing unemployment, the pressure on workers and employees can be expanded almost at pleasure. Everyone must fear imminent unemployment. Equal opportunities in economic life perish and freedom of speech is increasingly restricted. According to a 1997 study, 85% of workers expected adverse effects if they openly expressed their opinion on the job. Through increased pressure, cuts in income support and dismissals, more and more persons are marginalized. With all the drama and suffering triggered by neoliberal globalization, it is important to know that this economic form is not irreversible – as claimed again and again – but can be influenced with financial-political means.

THE IDEOLOGY OF NEOLIBERALISM
Even economic leaders protest that they are handed over to the system of the free market. They do not want to carry out any dismissals but capital profits require this. They do not want to shift any jobs abroad but competition forces this. They do not want to close or expand firms but the stock market with its inexorable stock prices unfortunately makes this unavoidable.

Capitalism appears like a system of unavoidable pressures. While this impression is true, it is defined differently by the ideologues of neoliberalism. These ideologues elevate the principle of competition into a natural law with their attempt to immunize the market economy from every form of criticism.

According to their interpretation, the rules of the free market are not rules that society has given – and could retract – but eternal forces like the power of gravity against which resistance is pointless. In addition, the principle of competition should be in effect for all areas of life (education, art, health care and so forth). In other words, the simplest kind of Darwinism is the foundation of their ideology. In this perspective, the development of human cultures is as uncontrollable as evolution.

According to Hannah Arendt’s classical definition, the assertion of eternal laws according to which the future can be predicted is the essential characteristic of all totalitarian movements. These movements are released from every form of moral consideration. Who will be victim and who will be victor is fixed from the very start. The decline of those condemned to downfall – that is, the market actors with their weaknesses – cannot be prevented but only accelerated as the National Socialists sought to accelerate the fall of supposedly inferior races and the Bolshevists the downfall of so-called extinct classes. Neoliberals do not want to see how the western economic mode spreads by itself over the world. This mode makes headway through extortionate free trade agreements – see the WTO. War is possible in stubborn cases.

Other simplifications occur. Thus capitalism is stylized as a democratic institution insofar as the consumer votes with every purchase and the market out of self-interest cannot afford any discrimination. That capitalism has functioned well in dictatorships is faded out.

CONCLUSIONS AND PROSPECTS

That neoliberalism represents a system of coercion and is built on lies is not so hard to see. It is ingenious in its claim to unconditional worldwide following – not by using external pressures but by exploiting the need of every living person for personal security on every level. In the lower classes, people worry about their jobs. In the higher circles, fears are activated around positions and money. The market assumes the punishing- and control functions; everyone is responsible for the suffering that is produced. To speak of a “free market” – as the neoliberals do – is absolutely cynical and misanthropic. Alongside the control function of the market, the information network available worldwide today secures the power of the rulers. The totalitarian claim can always be intensified.

Nevertheless there is hope. Citizens in developed countries who once tamed capitalism, as “Rhine capitalism” –using economic success for the cause of social justice – will not accept its regression to the unbridled state without resistance. These examples could be named:

1. The rejection of the EU constitution by the French. Unlike many, the French criticized the EU constitution and declared they could not say Yes to the core of the constitution – the neoliberal economic form.

2. Discussions at the universities. As explained, the neoliberal principle of competition should be in effect for all areas of life, not only for the economy (education, art and so forth). However there are protests at the universities. For example, 180 university lecturers signed a call of opposition (Zeit-Fragen published the declaration “Education is not an Economic Enterprise”).

3. The election in Germany. The people refuse to run behind a “strong woman.” They want changes but not at the price of social justice. That is good. Without social justice, there can be no real progress and no peace.

HEALTH INJURIES AS A CONSEQUENCE OF DU MUNITIONS

56% of Gulf war I soldiers (325,000 of 580,000) in the US suffer in disabilities. Two-thirds of the children of Gulf war I veterans whose children before the war were all healthy show birth defects: missing arms, legs, organs, eyes, blood diseases and diseases of the immune system.

In 1997 the Uranium Research center was the first research group that verified DU in the urine of US, British and Canadian soldiers who took part in Gulf war I. In field research, the UNB environmental program (UNEF) found DU contamination in the vegetation and drinking water supplies.

GROWTH IN NATURE

In nature, growth strives for an optimal size and then completely stops. Orders that do not tend to a stable state are condemned to break down since infinite growth is impossible in a finite world.

THE EXPONENTIAL CLAIMS OF CAPITAL IN THE GDP

It is a mistake in reasoning when the present time is compared with the growth periods of the 1950s and 1960s. In between are around fifty years in which compound interest acted as an exponential money-multiplier. Therefore the precarious total economic situation is actually less the result of exaggerated claims on the social state than the increased claims of capital on the gross domestic product (GDP).

EFFECTS OF COMPOUND INTEREST

One penny invested at 5% in year 1 would have the value of an earth (Erdkugel) of gold in 1466. In 1990 the investment would already have an equivalent value of 134 billion earths of gold. On the basis of compound interest, 10,000 francs would double in 10 years at 7% interest.

From these mathematical facts, one can conclude that our interest system can only function for decades and then breaks down again as occurred in the 1873 and 1929 crashes.

INCOME SHIFTS AND SUGGESTED SOLUTIONS

Increased labor productivity and growing capital intensity shift the income from production more and more to the income of assets and business. On top of that, the growth of the economy in the last decades cannot keep pace with the growth of capital so that the capital claims must be balanced either by unemployment or wage cuts.

There is a solution (that is still taboo today) to influence this massively unjust development. The interest rates and the growth rates of financial assets and debts must be lowered to the growth rates of the economy. Only in this way can a further explosion of the poverty-wealth differential be prevented.