The US resists the downward spiral with a $2 trillion program. Neoliberalism has driven the world into the greatest disaster since Hitler and Stalin
By Robert Misik
[This article published in: taz.de, 2/12/2009 is translated from the German on the World Wide Web, http://www.taz.de.]
The Obama administration will pump $1 trillion into financial management and the banking system. Another $800 billion will stimulate the collapsing economy, an incredible sum with a massive symbolic value. This is not only a relief program diminishing the losses of private investors after they raked in profits for years. Whatever the plan of the US treasury secretary will look like in detail, the state will dictate the conditions. In the extreme case, banks that are practically insolvent will be nationalized. The idea is that today's investors should not earn incredible sums when the financial houses are revitalized. Rather the community will hopefully receive something back. That is the command of justice.
Still there are a few hardliners who always tell us: this way is economically wrong though it may appear just. Ultimately the state may be a bad businessman. But the state cannot be a worse businessman than those currently making decisions.
The state is back. As paradoxical as it may sound, the "more private, the less state" ideology splashed over the western world from the US. The term "ideology" is helpful because it was a government practice, not an idea of dizzy ideologists. With Ronald Reagan, a president entered the White House who constantly proclaimed that the state in the end was something bad. Reagan was a regent who governed against governing. One of the curious aspects of this circumstance is that this ideology was not damaged when its advocates governed badly. Ultimately the protest could be lodged: "Yes, governments are bad. We have always said that." The markets, private initiative and the invisible hand are good. The institutions, rules, offices and bureaucrats were bad - until last fall.
At that time after the heart attack of the financial markets as a result of the Lehman bankruptcy, capitalism did not collapse because the state rescued it. This was the greatest wave of state intervention since Vladimir Lenin.
In the meantime, the hundreds of billions pumped in the financial sector were not enough. The global financial system is damaged too much. Rotten credits and toxic assets slumber in the balance sheets of the banks as crassly overvalued entities. Therefore a real catastrophe mood has spread in the last weeks. Amid all the disaster, people are lulled in a false sense of security that seventy global "system-relevant" banks and investment houses are "too big to fail." Trust will return and the credit markets will jump again. But what happens when the huge debt mountain is so high that activity stops?
No one knows the exact data. Horrific numbers are whispered: 2 trillion euros in rotten credits in the balance sheets of German banks and 270 billion in outstanding loans in the balance sheets of Austrian banks, in credits in Eastern Europe. Toxic securities like "asset backed securities," the famous bundling of American real estate credits, still tear great holes. These asset losses started a chain reaction with fatal feed back effects. Investors who have had massive losses move their investments elsewhere to stay liquid. Prices fall because everyone sells simultaneously. The economy is greased. Even "normal" borrowers, entrepreneurs in the "real economy," went bust or at least could not meet their obligations any more. When one risk becomes irrefutable, many risks become irrefutable since one that falls drags along several others. Whole states could go bankrupt, not only far away in Asia or near the polar cap. Hungary, the Ukraine and Greece are candidates. Even well to do countries cannot save their banks. Losses of two-thirds of its gross domestic product will strain Germany.
The mammoth extent of the potential catastrophe is slowly becoming clear. Neoliberalism has brought the greatest global disaster to the world since Hitler and Stalin. What an incredible balance sheet!