THE CRASH BEGINS ON THE GOLF COURSE
Book review of: Winfried Wolf, Casino Capital, The Crash Begins on the Golf Course, 1997
By Walter Kuhl
[Walter Kuhl discusses the consequences of the unbridled profit economy. Our holy market economy is honored when the gross domestic product is praised. This review is translated from the German on the World Wide Web, http://waltpolitik.powerbone.de/send199x/kv_kua09.htm.]
Casino capitalism and globalization are two inseparably connected developments of the last twenty years. Productively invested capital that yields profits constantly decreases in industry, raw material processing and agriculture. Instead capital is invested in the financial sector. In other words, speculation occurs. Speculative businesses and interest profiteering bring greater profits to some corporations than selling the products manufactured by these corporations. For example, Siemens has financial assets of around 25 billion marks. With these assets, Siemens can buy and sell shares, notes or other speculative objects. In 1993/94, Siemens pocketed around 3 billion marks in interest- and speculation-profits, more than the firm could rake in as profits in industry.
Winfried Wolf analyzed the world economy of the 1990s in his 1997 book Casino Capital. Since Marxism is his theoretical foundation, the smooth talking of the neoliberals and their obsequious economic research institutes are alien to him. In his analysis, he concluded that the international financial system is everything but stable. The 1997 stock exchange crash showed that stock markets and banks are very susceptible.
In November 1997, the eleventh-largest industrial country, South Korea, sought an immediate assistance credit of $20 billion. Two-thirds of South Korea's foreign debt of $110 billion was due within a year.
Speculations against individual currencies, against Thailand's Baht or South Korea's Wong for example led to destabilization of these economies. However the financial markets did not leave the other countries in peace. In Brazil, stock market prices fell 40 percent in November 1997. The domestic market collapsed. VW in Brazil announced a six-day production stoppage as a first measure. Two Korean automobile firms were driven to the brink of bankruptcy. The most important industrial countries were also not spared from this earthquake.
Japan has a shaken broker- and banking sector with years of bankruptcies and breakdowns of ever-larger institutes. After the October 1997 crash, the tenth-largest brokerage house declared bankruptcy. A regional bank and Japan's tenth-largest bank announced bankruptcy. The largest bank of the country admitted a record loss of 11.5 billion marks.
The cushioning net provided for such cases in the Japanese banking system is overstrained with such large sums. The state must help out for the liabilities of the banks. Estimates of bad credits in Japan reach the gigantic number of 1 trillion marks. Thus Japan's government heads into state bankruptcy, observers say.
Winfried Wolf describes the situation and analyzes its backgrounds. In his opinion, the collapse of the international banking system and an international stock market crash are possible. This will have effects on regional and national economies. More unemployment and impoverishment will be the necessary consequences. Trade wars, above all between the three most important trading blocks - US/Canada, the European Union and Japan with Southeast Asia - cannot be excluded any more. Whether wars beyond trade wars will occur is open.
Anonymous economic powers are not responsible here. For 20 years, the governments of the most important industrial countries have systematically pursued a policy of redistribution - upwards from below. Money was taken from the poor and given to the rich. This is true globally between North and South and not only in the individual countries. Winfried Wolf explains that debtor countries in the twenty years from 1975 to 1994 raised around $2.5 trillion for debt service to their creditors. Far more was paid for this debt service than the total debt for this time period.
Everyone can imagine the consequences. The heavily indebted countries are forced to remit their interests and redemption rates on time. Otherwise exclusion from credits and world trade threatens. This means exporting as much as possible and importing as little as possible. Expenditures for the social realm are systematically slashed. The misery in the countries of the third world is indescribable while managers and large shareholders of corporations and banks live off the fat of the land. This doesn't hinder them from demanding that we tighten our belts. Ultimately we are too demanding. With the help of an historical parallel, Winfried Wolf shows how different standards are involved:
A positive historical standard exists regarding unbearable debt service. In 1952, the over-indebtedness of Germany from the pre- and post-war times was rescheduled in the London debt agreement. Referring to the Versailles treaty and its consequences, more was regarded as too high and "conducive to radicalization". Nevertheless an amount four times greater than the amount exacted on rich Germany is considered "acceptable" today for the poorest countries of the third world.