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Book Review: "The Great Crash or the Century Crisis" by Elmar Altvater

Capitalism is at an end and the whole world is drawn into the mess. Preventing this is an ethical imperative and a political duty. Losses are nationalized; profits are privatized. The multiple crisis has dragged on for years. The political class allows this to happen. Political answers to the debacle can only be found when there is clarity about the causes of thecrisis.

by Jos Schnurer

[This book review of Elmar Altvater: Der grosse Krach oder der Jahrhundertkrise von Wirtschaft und Finanzen, von Politik und Nature, Verlag Westfalisches Dampfboot (Munster), 2010, 261 pages, 14,90 EUR is translated from the German on the Internet,  http://www.socialnet.de/rezensionen/10533.php.]


Enlightenment, as Immanuel Kant formulated it, is the "awakening of the person from lack of come-of-age existence." The Konigsberg philosopher urged: "Have courage, use your own intelligence!" Humanity's risk now is that this self-evident and logical insight can hardly hold out against the egoism, hegemonisms and human loss of power. We live in a world-risk society as Ulrich Beck argued. Whether this is a normal- or exceptional state is contested. The causes of these local and global dislocations are also sought at different addressees. The circumstances, human fate, imponderabilities, greed exploitation, abuse of power and the question about solutions also reach from the finding that capitalism is really not so bad and only needs a correct direction up to revolutionary change (John Holloway, Kapitalismus aufbrechen, Munster 2010, in: social net reviews, www.socialnet.de/rezensionen/10534.php).
The discovery that crises intensify in all areas of life in the (one?) world developing ever-more interdependently, deregulated and inhumanely leads to a further uncertainty that extends from the egocentric "without-me" and the egoistic-capitalist "I am the most important thing" to the knowledge that crises must be accepted as a challenge for a common, humane and global thinking and acting. Crises are neither God's judgment nor an inevitable fate (cf. Frank Ettrich, Wolf Wagner, ed., KRISE und ihre Bewaltung, Munster 2010 in: social net reviews, www.socialnet.de/rezensionen/9990.php).


The (emeritus) political scientist at the Free University of Berlin, Elmar Altvater, speaks in a passionate way on questions of capitalist and neoliberal development in the world and discusses the theoretical foundations and practical effects of "shareholder capitalism" (Elmar Altvater, Das Ende des Kapitalismus, wie wir ihn kennen, Munster 2005 in: socialnet review, www.socialnet.de/rezensionen/3249.php). With his new book, he shows the state of the "century crisis of the economy and finances, politics and nature" and explains the causes as all-embracing problems of our relations with ourselves and the world in a detailed and profound analysis. The effects of the crisis are not only of an economic nature but concern whole areas of our everyday, social, local and global existence.

Going back to Pierre Bourdieu's demand for an "economic literacy" of humanity, he tackles the fundamental question whether "loosely connected `multiple' crises" are involved in the many crises of our present (time) - the economic- and financial crisis, the crisis of the energy- and raw material supply, the threatening climate catastrophe and the danger of the overheating of our planet (cf. Worldwatch Institute, ed., On the State of the World 2009 in: social net reviews, www.socialnet.de/rezensionen/7730.php), the hunger crises and the unjust local and global distribution of goods which are then tackled separated and in detail or whether they involve "immanent contradictions of the capitalist production method," a system crisis. Altvater's position is clear. A "critique of the political economy" is necessary.


Elmar Altvater divides his book "The Great Crash or the Century-Crisis of Economy and Finances, Politics and Nature" in four chapters.

In the first part, he formulates what is central in the heading, showing the "double character of all economics" and puts his finger on the wound of capitalist development: "It separates what belongs together." This is the "jumping-off point" (Marx) of the process of value formation and commodification. Gaining insight is vital even if it hurts and those who live very well from the ruptures in capitalism (Holloway) do not want to see that the "natural limits are reached on the side of resources used by the capitalist "hardware" in the production process and with the pollutant sinks which are completely overstrained." These are the contradictions that lead to "finance-driven and predatory capitalism" (cf. www.socialnet.de/rezensionen/1787.php). In that the author reflects on the three contradictory planes of value and money, capital and labor and nature and society, he emphasizes "real" developments that can be encountered politically and in a socially-changing way are involved in the crises and catastrophe developments.

In the second part, Altvater undertakes the "autopsy of financial yields" in grappling with what "money" is, what it brings about as a commodity world and inflicts as capital, money as a means of exchange, payment, speculation and debt liability and the hegemony and agony of the world monetary system. Nothing is certain!

The third part discusses "growth and expansion on the limited spherical surface of planet earth." The "limits of growth" as predicted by the Club of Rome in 1972 and in numerous further analyses up to the admonition of the 1992 Agenda of the World Conference on the Environment and Development, for "sustainability" or sustainable development into which the world consciousness was brought (cf. Ulrich Grober, The Discovery of Sustainability, Munich 2010, www.socialnet.de/rezensionen/9284.php) have not yet arrived in our "capitalized" consciousness. The growth-thinking driven by the ever-faster, ever-higher and ever-more of capitalism is criticized. The necessity that we must remember the "ecological footprint" in all our activities if humanity should humanly survive is more academic discourse than common heritage. The crisis-susceptibility of capitalism leads to collapsing production and consumption, not only collapsing markets and profits.

In the fourth part after the analysis of the capital-infected state of the world, solutions are discussed as proposals for a "politics against the crisis." For critical observers of the hegemonial, economic development on the earth, a repair of the capitalist system means at best the machinery running as before by changing several set-screws and a trifling change of replacement parts. This can be seen now in the hesitant changes from the finance-driven neoliberalism through the assumption of liability for economic losses by society and assumption of benefits by the owners of capital. Losses are nationalized; profits are privatized! The second solution "Green New Deal" appearing with the socialist reform programs of the 21st century also fails according to the author because the na´ve faith in the "ecological open-mindedness of the political elites, the representatives of international organizations and the financial market actors... (and in the) conciliatoriness of economy and ecology" wears a mask, namely that there could be "a capitalist economy without accumulation and therefore without growth." Finally, Altvater finds a hair in the broth in the socialism of the 21st century as "solar and democratic." Testing initiatives of socio-economic thinking and acting is hopeful as long as the "throughput growth" is not stopped as the representatives of an ecologically-oriented economy identified in the succession of the Brundtland Report. The unjust sorting system will not be overcome as long as the structures are not changed which make possible capitalism and its continuance.


"The project of the future is neither neoliberal nor Keynesian. It is social and solidarity" and therefore socialist. That is Elmar Altvater's conclusion. He distances himself from the socialism ideas and programs of the past century and pleads for a further development of social democracy. Social movements that form and drive the state stand in the center of this community. In this book, Altvater does not answer the question whether an upheaval or revolution is needed to expel capitalism or a drying up or breaking open. But he leaves no doubt and formulates in his numerous writings that he regards capitalism as the root of (all) evil and (all) crises. As an alternative, he brings a "solidarity and solar economy" into the discourse around a more just, more humane and democratic (one) world.


Economic Crisis, Peak Oil and Climate Catastrophe

By Bettina Dyttrich

[This book review of Elmar Altvater's "Der grosse Krach. The Century Crisis of Economics and Finances, Politics and Nature," Munster 2010 published on the Swiss www.woz.ch is translated from the German on the Internet,  http://www.woz.ch/artikel/print_20221.html.]

[Economic crisis, peak oil and climate catastrophe are expressions of the same problem. The German economist and author Elmar Altvater pleads for a "solar socialism."]

[Elmar Altvater is 72. The political scientist, economist, emeritus professor at the Free University of Berlin and book- and WOZ-author could take it easy. But the times are much too turbulent for that.]

Political answers to the debacle of the past three years can only be found when there is clarity about the causes , triggers, courses and consequences of the crisis," Altvater writes at the beginning of his new book. His text was written in a hurry... The Greek king in whose hands everything turned into gold was Midas, not Croesus (died 546 BC, last king of Lydia who was known for his great wealth). Still Altvater has important things to say. His strength is thinking on different planes. He argues against the austerity programs for the indebted EU countries because these programs intensify their problems. He looks beyond today's system with its growth pressure.


How did the crisis happen? Altvater looks back and shows that the developments of the last years were not an accident. Creating ever new debts and debtors is a condition for amassing, holding and increasing financial assets. Contracting debts is not an expression of economic incompetence but a "functional system requirement of modern capitalism."

Debt crises occurred for a long time. Altvater shows how the cheap dollar credits in the 1970s led to the great indebtedness of the "Third World" and that debts were an important reason for the collapse of command socialist countries. In the 1990s the threshold countries were caught in debts. Today the crises have arrived at the centers of capitalism.

Thus the mechanisms are not new. But the deregulated financial markets with their new "instruments" intensify them. Altvater compares the financial markets with heaven, the "very earthly social conflicts between paid labor and capital." What brings profits to "heaven" - cutting up firms and selling the most lucrative parts - is often not good to the "earth." The author knows the world of the financial markets. He explains subprime credits and credit default swaps, why a deep capital holding requirement can increase the profit of a bank, how rating agencies contributed to the crisis and why financial capitalism functions as a distribution machine from bottom to top.

Altvater is not one of those leftists who pillory casino capitalism while transfiguring the "real economy." He knows there is a third plane alongside "heaven" and "earth." Though it sounds banal and is often forgotten, "nature functions differently than a capitalist enterprise. Nature does not revolve around efficiency and profitability." Whoever tries to quantify the costs of destruction of nature in money deceives himself. "Even if we could compensate an extinct plant- or animal species in money, we cannot revive them to life again."

Thus the economy runs up against the limits of nature. This is clearest with the fossil sources of energy. "They are the source supporting the high economic growth rates" - and are coming to an end. Other resources and arable land are also becoming scarce. Waste gases heat up the climate. The economy and profit cannot grow infinitely on the "limited spherical surface of planet earth."


The limits of growth are an important reason why Altvater does not believe in economic stimulation according to the prescriptions of John Maynard Keynes from the 1930s. He sees other reasons: labor- and financial markets are strongly linked internationally. Capital is "highly mobile" and no country is autonomous any more in organizing its monetary policy. Further "repairs of the system" would only intensify the ecological and social problems. The idea of a Green New Deal that should bring new growth with eco-technologies also does not convince Altvater. Its advocates had a "na´ve basic trust in the functionality and reform capacity of the capitalist world system."

Socialism is necessary, Altvater says. He does not mean "back to the Soviet Union." Unlike the socialism of the 20th century, the socialism of the 21st century must emphasize the social-ecological question." He also rejects central planning as "too complicated, too bureaucratic and much too authoritarian." An economic system without growth, profit and yield is desirable. How do we get there? Altvater has not worked out any battle plan but points in one direction: protection and re-appropriation of public property like water, land and education, cooperative economics and regulation of foreign markets.

Altvater is realistic when he says a revolution is not foreseeable. "Revolutionary transformations" in renewable energy are necessary. This alone will challenge several assumptions. "Renewable energy is slower and does not allow the enormous acceleration of all processes in work and life as was possible with fossil energy." Social movements and the state complement each other. "When ecologically and socially meaningful green investments are not sufficiently profitable and therefore not undertaken, the public authority must carry them ou8t."

How can such positions gain a majority? The author owes us an answer. The final chapter is an outline. Altvater quotes the late historian Tony Judt: "The more perfect the solution, the more dreadful the consequences." Open democratic process instead of central committees is an important lesson from the 20th century.


The Multiple Crises

By Elmar Altvater

[This article published in the Swiss journal woz.ch is translated from the German on the Internet,  http://www.woz.ch/artikel/rss/21026.html.]

Thanks to billions from the bailout fund, banks and speculators are driving those who helped them out of a tight spot in the financial crisis.

"Capital has a horror of the absence of profit or of very little profit (... ). Capital becomes bold with corresponding profit: 10 percent it becomes secure and applied everywhere, 20 percent it becomes lively, 50 percent positively daredevil, at 100 percent it crushes all human laws under foot and at 300 percent no laws can deter from risky behavior... " (T.J. Dunning: "Trade Unions and Strikes," London 1860, quoted in Karl Marx' "Das Kapital, vol. I.")

The world presently finds itself in a diverse crisis - a multiple crisis of finance and economy, energy, climate, food and politics. A growth dilemma lies in the background. Without growth, social stability and economic prosperity are endangered. But accelerated growth will destroy nature to a planetary extent and trigger a crisis of humanity.

The multiple crises began simply as a disastrous financial crisis that the world never experienced before. Financial crises arise when demands of creditors can no longer be satisfied from revenue flows or from the assets of debtors. Either the demands are too great or the surpluses of debtors are too low or both combine.


That the growth rates of the gross domestic product (GDP) are declining everywhere in the world cannot be denied. However unlike the real economic profits, the yields of financial capital are auto-referential and refer only to themselves. With their guaranteeing, financial demands can be traded worldwide as securities. Since then, "originating" securities has been a fantastic business. This is like an alchemist succeeding in producing gold from dirt. Assets are not created through labor and transforming nature but through guaranteeing and derived from the yields realized through sales on the financial markets (that is the reason for the term "derivative").

If the yields fall, the value of the security declines immediately. Credit-relations break when these serve as security for other debts. The great financial crisis occurs if this happens en masse and not only sporadically. If the financial flow comes to a standstill, the real capital circulation is interrupted. Growth collapses and a recession occur, first Lehman Brothers and then General Motors. The state is always there.

But the state no longer follows a "crisis avoidance strategy" today as in the past century. The state is right in the middle of the crisis whirlpool. The current crisis began rather harmlessly as a subprime crisis of toxic mortgages in the US. The income of mortgage debtors was not enough to meet the high speculative interests (financial demands). Since the mortgages were bundled into complex securities with approval of the rating agencies and sold in the four corners of the earth, billions, even trillions of securities were now "toxic" nearly everywhere in the world. The subprime crisis of mortgage debtors in the US was transformed into a global bank crisis.

Insofar as the stricken banks were rated as "system-relevant" (mostly according to the simple formula "too big to fail"), the governments immediately concocted bailout packages. The states ran into debt. If a high debt state and a bad rating (and therefore high interests) come together, the debt service becomes unbearable. From the subprime crisis has come a bank- and financial crisis that now intensifies into the debt crisis of states. The "bailout umbrellas" for private financial institutes and firms are not enough any more since coordinated international intervention is necessary. One only needs to think of the International Monetary Fund that gained know-how in dealing with the debt crises of developing countries in the 1980s. In Europe, a European stability mechanism was created to avert the bankruptcy of a member country and the monetary crisis of the whole Euro-zone. However this does not help much because governments refuse to stop the influx to the "speculative pool" (John Maynard Keynes).


How can the crisis of banks, states and currency zones be overcome? In principle, the crisis can be overcome by increasing the real surpluses to improve debt service and by reducing the financial demands. This is possible in four ways. They lead into a cul-de-sac or are blocked politically.

The first way is called "austerity." To balance the deficit of the secondary budget where debt service is recorded, there must be a surplus in the primary budget where social benefits are mandated. If taxes on the mobile production factors - the "timid" capital - are taboo, taxes and fees on the immobile production factor - the wage-earning workers - must be levied. The spending that could benefit them must be reduced. Social expenditures are slashed, wages and salaries cut and public goods and services trimmed. This is a declaration of war in distribution policy.

In a second way, the financial demands of creditors are reduced. The legitimacy of the debts could be examined in a debt audit. The rating agencies must be separated from the businesses. They only scrutinize the creditworthiness of debtors and the credit-standing of securities, not the efficiency of debtors or the legitimacy and reasonableness of the debt service. Therefore absurd ratings are brought forth. The less debtors are able to meet their debts, the higher the interest fees. Therefore a reduction of debt service requires creditors' renouncing on demands, a fair, efficient and transparent insolvency rule.

The third way would not be a cul-de-sac but it is blocked. The speculative reinforcements of capital seeking investment, the "speculative pool," could be scaled down with a property tax and a capital transactions tax. Resistance against such a measure urged by Attac for years is enormous in the "new world" and on the "old" continent. There the Tea-Party movement has prevented reducing the horrific US state indebtedness through a tax increase on the rich which would only restore the status quo before George Bush's tax cuts.

Optimists point to the fourth way. The growth rates of the GDP could be brought to such a high level that indebted countries grow out of their debts. However growth-effective investments compared to financial investments are only attractive when the interests and financial yields are below the profit rates. This did not happen without political interventions in the financial markets. In addition, growth striking the social and ecological limits is not good advice.

Clever theorists propose expanding the limits. We are now in the fields of the Green New Deal. When "cheap oil" runs out, we can fall back on the 'unconventional" reserves of "costly oil: oil from the rainforests, from the Arctic Ocean whose ice caps disappear because of climate change, from the deep sea, from oil sands and oil shale. Limits can expand; reserves lie untapped... The production of "costly oil" has catastrophic effects as can be seen in the Niger Delta, Alaska, the Gulf of Mexico (cf. the catastrophe of "Deepwater Horizon" in the spring of 2010) and elsewhere. Perhaps the oil supply can be kept at a high level for a while at rising prices if oil conflicts carried out politically and militarily are accepted.


The support of the raw material- and energy-consuming capitalist Moloch fades. The energy crisis is concrete and will intensify through the way the economic-, financial- and monetary crisis is mastered. Simultaneously the pollutant depots of the planet strain or overload the earth where the wastes of the Moloch have long been stored. The warning lights for the atmosphere flicker excitedly where greenhouse gases have already caused climate change that can come to a head in a climate catastrophe.

The self-deception with expanding limits continues. If renewable raw materials are refined instead of fossil energy, this will encourage the land-use competition of "tank or plate." In many world regions, billions of people suffer under hunger and malnutrition against the 2000 guidelines of the UN millennium goals and this crisis intensifies. In addition, financial funds speculate with foodstuffs since other speculation objects (like subprime real estate) are lost to them on account of the financial crisis.

The multiple crisis has dragged on for years. Here and there it gives way to a friendly economic stimulation and returns cyclically as a threatening storm front. The political class allows this to happen. This class is afraid of incursions in the economy when incursions oppose the neoliberal dogma of the "real" stable markets and could shake the hierarchy of power. Thus the multiple crisis is a political crisis.

How little Europe's political class is able to react to the multiple challenges is manifest in every new crisis sequence. Since the subprime crisis, "markets," speculators, banks and funds, are courted by accessories (Hilfswillige) and with billions from bailout packages that they immediately use for new speculative attacks. Can the crisis madness continue? The madness obviously cannot continue. Capitalism is at an end and the whole world is drawn into the mess. Preventing this is an ethical imperative and a political duty.


Altvater, Elmar: Fukushima Mon Horreur - The Dream of Economic Reason Gives Birth to Tremendous Catastrophes
 link to www.transform-network.net

Guacche, Vladimiro: Economic Crisis and the Crisis of Neoliberal Ideology, 2009

homepage: homepage: http://climate and capitalism.com
address: address: http://www.stiglitz-sen-fitoussi.fr/en/index.htm

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