“We are relying on principles that have been practised for the last 40 years” – An Interview with Joseph Vogl
Professor Vogl, in your publication, “Das Gespenst des Kapitals” (The Spectre of Capital) you argue that financial crises are not anomalies that need to be explained, but are more structural in nature and therefore cannot be prevented. Why are financial markets in particular so structurally unstable?
In this case I am referring to certain forms of radical Keynesianism that are based on the premise that under favourable economic conditions it is not only the willingness to borrow money for investment that increases, but also the willingness of investors to lend money. There is a decline in risk-averse behaviour. These pro-cyclical processes automatically lead to the continual piling up of debt pyramids, options for the future are accumulated. The slightest disturbances in these expectations for the future can however trigger a reversal in the pro-cyclical processes. Since the 1980s, when financial trading moved from the stock markets to what was known as high-volume “over the counter” trading, it has in fact been established that the susceptibility to crisis has sharply increased and that the markets are hit by slumps every two to four years.
You describe how the economic principle of competition is being applied more and more to non-economic sections of society and how it is becoming the basic principle of organisation in our modern-day society. What are the reasons for this?
This conversion of societies into what are called competition-oriented societies is not a diagnosis that was arrived at by me or any other critics of capitalism - it is in fact the declared aim of quite a number of economists, some of whom were even awarded the Nobel prize for their way of thinking. They speak quite clearly of “economic imperialism”. This entailed the drawing up of action plans that have been worked on and implemented since the 1970s. There are various arguments behind it all. Firstly, economic criteria can be applied to areas of society in which prices do not normally play a role. Here the talk is of shadow prices. Areas such as education, crime or certain forms of behaviour have a shadow price put on them. The idea is for favourable forms of behaviour to be encouraged and promoted with the help of incentives. Secondly, competition is expected to generate certain patterns of order which ultimately also become models of social order. To a certain extent competition also provides society with technologies for governing that structure a social sphere more indirectly and are thus much better than government intervention. Thirdly, even today renowned economists are still of the opinion that competition, if it involves as many players as possible on all levels, guarantees the best allocation of goods, i.e. it produces a kind of distributive justice.
The mood on the markets is one of “structural irresponsibility”
At the moment there is a lot of public discussion on whether the “markets” are independent players that do or want a certain thing. In such a de-personalised sphere how can there still be talk of individuals taking responsibility?
On the one hand for 200 years the markets have enjoyed the image of being a kind of monopoly of truth. You have to listen to them if you want to find out what is going on. It is similar to the “Flipper” show on TV in which they said that the friendly dolphin was “trying to tell us something”. On the other hand the markets constitute a conglomerate of players, legal stipulations and government institutions as well as private. This has led to a distribution of decision-making processes which in sociological terms is known as “structural irresponsibility”. The markets are after all good at spawning dependencies. Firstly there are the liability or obligation structures that are related to the most elementary forms of the capitalist economy, namely investment and speculation. Every investment is a speculation on an uncertain future. And the outstanding debt produces a kind of general social contract. Secondly there is the immense interaction among the players. The world’s total capital is dominated today by fewer than 150 players, almost all of them finance companies. Alongside this intertwining of finance companies there is of course also the intertwining of private and governmental institutions - a set-up that became painfully obvious during the last crisis.
The escalation of the financial crisis into a sovereign debt crisis and the action taken by European governments to rescue the Euro has triggered a discussion on the relationship between politics and economics. There is much talk of the impotence of political institutions when faced with the “dictates of the markets”. How do you see this relationship?
I would say that you have to you take the close synergies between the economic and political players into consideration when attempting to describe the international impact of economic liberalism and in particular that of the financial sector over the last 30 years. After realising that the expected income from the production and services sectors was not going to materialise, the markets were not in any way deregulated, but were in fact regulated, by means of new legal general conditions. The present economic situation did not suddenly appear on the scene, it was implemented step by step. This involved both political and business players working closely together which was also enhanced by the connections on a personnel level. The dividing line is probably therefore to be found more between the political and business players on the one hand and what one might call civil society on the other.
What was discussed in 2008 seems long forgotten today
You describe capitalism as a system that was always able to react to criticism and to absorb it. Do you then at the moment see something like a period of economic enlightenment looming on the horizon?
The situation at the moment is very paradox. On the one hand we are able to observe that, due to the crisis, a market for heterodox economic opinions has come into being. People have started reading Marx again, the very unorthodox Keynes has been exhumed again, and people have suddenly noticed that economic institutes are also not as monolithic as they had always thought. In this context one could in fact actually speak of a new economic enlightenment. On the other hand, and this is why I used the word paradox, it seems as if everything that was discussed in 2008 has now been forgotten. Back then a whole new action plan was drawn up that envisaged, for example, the separation of commercial and investment banks, higher capital reserve requirements and an international financial transaction tax. Now however we get the impression that in the attempts to combat the crisis it is exactly those forces that led to the crisis in the first place that have in particular been strengthened. For example, the “cheap money” policy in the United States or the radical imperatives of debt brakes and privatisation in Europe. This is exactly how southern Europe is being restructured at the moment. We are relying on principles that have been practised for the last 40 years.
As a literary scholar you deal with the relationship between economics and society. How is this relationship reflected in literature?
At the moment there are quite a lot of different attempts to capture in literary form the radical transformation of lifestyles against the background of the economic conditions prevailing at the moment, for example, in the works of Karin Rögglas, the plays of Elfride Jelinek and René Pollesch or in the form of the novel, as is the case with Don DeLillo. Literature, like philosophy, has always been able to draw substantial stimuli from the dissolution of familiarities. And capitalism, throughout various historical periods, has consistently destroyed familiarities, conventions and connections. Schumpeter once referred to it as “creative destruction”. And one further point: literature sees itself as an efficient interplay of symbols and concepts and is of course very much interested in observing other, particularly effective concepts such as money or loans. This is where a particular competitive element comes into play between economics and literature, i.e. between striving for the meaning of life via profit and profiting from striving for the meaning of life.
is a cultural and media scholar and works at the Goethe Institut in the Science, Scholarship and Current Events Department.
Translation: Paul McCarthy
Copyright: Goethe-Institut e. V., Internet-Redaktion
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