The Banker who knows his KapitalJune 5, 2011 10:36 am Leave your thoughts
Edgar Most has recently retired from his position as a director of the Deutsche Bank in Berlin, but still works a full week using his banking and financial skills to argue forcefully for an end to jungle capitalism. His outlook and career are unique in the financial world. In GDR times he was Vice-president of the State Bank and knew the socialist economy inside out. With the demise of the GDR and its incorporation into the Federal Republic, he immediately founded German Credit Bank – the first private bank on the territory of the former GDR. By doing so he was able to secure the jobs of 13,000 ex-GDR bank employees who would otherwise have ended on the scrap-heap. When this bank was taken over shortly after unification by the big Deutsche Bank, he was made a member of the board.
Most makes no secret of his former membership of the Socialist Unity Party or his pride in what the GDR achieved. Born during the war, the son of a Thuringian miner, he was given every opportunity by the GDR state to gain the necessary qualifications for a career in banking. His abilities and commitment to the socialist state saw him rise rapidly to become, at 26, the GDR’s youngest bank director and later Vice-president of its State Bank.
‘My father was a simple man with a high sense of morality and ethics. Today in our society I miss that. This society produces so much immorality. Politicians are corrupt, many lawyers feel no obligation to justice and law. There is fiddling, chicanery hustling, tax fraud is an everyday sport and even doctors can be bribed by pharmaceutical companies. I know that making such criticisms is deemed populist, but it’s still true that this latent immorality brutalises and perverts society.’
‘I don’t have dreams of a communist utopia any longer,’ he says, ‘the new human beings that would require are simply not there. I’m a pragmatic thinking person, who has genuinely studied his Marx. I completely agree with his analysis of capitalism – how it becomes deformed once you loosen the reins. But I too, as a left-thinking person, have not given up seeking ways to bring about a more just society in which everyone has the freedom to develop their potential. However, ‘without capital human society can’t function,’ he emphasises, ‘but of itself it is not fair, democratic or scrupulous. In the world of capital, there is no constitution, no submission to an electorate and no moral code. Capital is oriented towards profit maximisation and becomes an explosive mixture that threatens the stability of states, economic systems and societies.’ Of course many people are now asking how this crisis was caused, was it bank managers, corrupt rating agencies, dilettante regulation or are politicians to blame or, as I maintain, capitalism itself.
For Most the central question is how the state can rein-in jungle capitalism, to prevent it devouring itself. The vital need, he argues, is for the relationship between capital and state to be re-structured. He is optimistic that it can be done and very clear that what we are now experiencing is not simply a financial crisis but a crisis of the system itself and, he says, it demands a new ordering of the world-wide economy. Part of his solution is to break up the big banks, nationalise the ratings agencies and introduce a global currency. Sadly, the strongest symptom of the continued crisis is the mass flight of the so-called elite from any sense of responsibility, he says.
‘The effects of this crisis can only be controlled to a limited extent by individual governments or institutions. There can be no return to the previous situation; we have to look to the future and deal with the real problems and introduce the necessary regulatory mechanisms commensurate with a globalised economy. The World Bank should be placed under the governorship of the UN and an attempt should be made to introduce a global currency with strict regulatory mechanisms in place, under uncompromising oversight. If we wish to puncture the balloon of casino capitalism and its system-endangering speculative bubbles, then we have to go down this road.’
He has written two best-selling books ‘Funfzig Jahre im Auftrag des Kapitals’ (Fifty years working for capital), a form of autobiography and ‘Sprengstoff Kapital’ (Explosive Capital) in which he is interviewed about his ideas.
He feels that with his experience at the top of a socialist bank for 26 years and then working in a capitalist bank, has given him unique insights which he is determined to pass on to others.
When he first started working for Deutsche Bank, he says his new ‘West German’ colleagues saw him as an oddity and felt themselves superior. They didn’t take kindly to his criticisms and suggestions for improvement. He tried to tell them that in the GDR they had dealt with a number of social and economic problems that the new Germany and Europe as a whole were now facing, but that only irritated them. The GDR, he says, was more conscious of these problems and offered better solutions.
He vehemently refuses to accept that the GDR was, as the German government and the mainstream media describe it, as an ‘Unrechtsstaat’ (an unjust and illegal state). He makes no secret of his feelings of affection for the GDR which he still views as his real homeland. Of course there was good and bad in the GDR and he had his own difficulties battling the bureaucrats and officialdom, but he was ‘nevertheless hundred percent behind the state and what it stood for’. Most blames Gorbachov for what happened with the GDR. He maintains that the country could have survived in a different form and most of the industries and jobs could have been saved if there had been no rush to impose the West German currency and if Gorbachov had not preferred a quick agreement with Kohl the conqueror rather than one with his defeated comrades in the East.
‘Here in Europe we are confronted with appalling levels of imbalance. There are also the inequalities in wealth distribution. The numbers of badly paid and short-term contract workers is mounting in the so-called ‘wealthy’ countries; German salaries have been almost static or sinking for years. These widening disparities of income and wealth are not only socially corrosive and unjust, but signify a decreasing purchasing power.
Instead of re-investing in productive capital what would make economic sense, many big firms have accumulated financial capital and use it for speculation, much of it abroad, and in the deficit countries of the EU (Portugal, Ireland etc). Today the financial conjurors are borrowing low interest money from the European Central bank and lending it to these countries that are in deep trouble at interest rates of 8, 9 or 10%. That’s great business!’
‘For a long time now I’ve been of the opinion that the term “worldwide financial crisis” is not a proper description. It’s abundantly clear that we are facing a crisis whose root causes lie within the system itself; in that sense spending millions in order to rescue banks is only tinkering with the symptoms. In the system that rules at the moment, finance and the real economy have become de-coupled. More and more capital flows into financial instruments instead of into the real economy. That’s happening not only in the USA where Wall Street’s contribution to the Gross National Product, in comparison with the producing sector, has increased enormously. The stock exchanges have speculated with borrowed money – there are a few winners and countless losers. Economic experts have calculated that the total indebtedness within the global financial markets between 1970-2005 rose by a factor of thirty times and the monetary value of shares rose by a factor of forty. In the meantime trading in the financial markets at 4,400 trillion dollars annually is larger by a factor of seventy than annual worldwide economic output. That signifies an incredible expansion of income from financial and property transactions, making it only logical that the contribution made by the productive sector has, in comparison, continually decreased.
‘With the power of the dollar and its military the US wanted to prevent the spread of socialism in the world. What during the Cold War was masked under the cloak of ideology and was accelerated by the collapse of communism, is very clear today: money became a thing to be traded in its own right.’ What was a symbol for expressing value, a simplification of the bartering process, took on a life of its own. Money was no longer the oil keeping the wheels of real industry and commerce turning, but a means of reproducing itself.
‘For years the sanctity of deregulation and reducing the role of the state to a minimum has been preached along with the theory of the self-regulating market with, in Most’s opinion, devastating consequences. Capital and the market became the rulers of the system and began to determine economic policies, politics and social processes. Capitalism was given a totally free rein. But Capital is not of itself ‘social’ and cannot be.
If the political powers only tackle symptoms of the crisis instead of fixing the structural deficiencies in the system, then capitalism will destroy itself in the short or longer term,’ he says categorically.
‘Our society is as sick as the banking system – individual states have profited from a financial system that is now seen as obnoxious. In the USA and UK for instance the financial sector now accounts for at least a third of GDP. This makes me furious because the consequence of their shameless financial greed and the crash is that there has been and is an ongoing redistribution of wealth from the bottom to the top, from the many to the few, from individuals to capital conglomerates. But in the end the bankers and financiers have only taken the opportunities opened up by the politicians in a de-regulated market.’ This crisis has also exposed the vacuousness of the establishment economic theorists.
‘From my experience as a GDR state banker,’ he says, ‘I have always said that internationally we need to control the amount of money in circulation and enforce limitations if it increases beyond the values created by society. In the GDR we had long debates on the question of credit and inflationary tendencies and felt that credit needed to be tightly controlled.’ In the West the opposite approach was taken. ‘Money-making machines can always be set in motion, he says, ‘but the products and consequences of this are seldom recognised or understood. Because we in the GDR had a non-convertible currency and a reasonably insulated market so we were able to regulate the amount of money in circulation and keep inflation under control.’
‘In the East, we took some steps in this direction. I wouldn’t want to spread illusions, but Comecon was set up to regulate trade between the USSR and the other socialist countries and for this purpose the ‘Transfer Rouble’ (as a common trading currency) was introduced and the system functioned very well over many years. But many view such examples only through ideological blinkers and reject them out of hand. What is also vital is that the political sphere reasserts its primacy over the economy and re-orders the relationship between state and capital. After all, the end goal is that capital serves the needs and requirements of society. If politics can’t achieve that – and on a global scale – than the financial world will continue to be unregulated and will carry on as before. Every day over 4 billion dollars are being traded around the world in currency speculation and the profits from that end up in private pockets. One doesn’t know what the immense credit and credit card deals mean for the banking system, let alone the exorbitant state debt that has brought whole countries to the edge of bankruptcy.’
Finally, he says, perceptively: ‘I take care not to make money my ultimate goal; then you become a slave to it. Because you don’t have the freedom to handle money but continually worry how to make it grow.’
Quotations are taken from the book, Sprengstoff Kapital by Edgar Most in an interview with the journalist Steffen Uhlmann Pubs. Das Neue Berlin 2011. Translations by John Green.Tags: Europe
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This post was written by John Green