Publication Economic / Social Policy - Labour / Unions - Analysis of Capitalism Neo-Liberal Attacks on People’s Achievements in Germany, the EU respectively

Conference Paper, New Delhi 2014

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John P. Neelsen,

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December 2015

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Prof. Neelsen presented this paper at the official opening of the South Asia Office of the Rosa Luxemburg Stiftung in New Delhi in 2014. The conference was titles “Versatile Resistance from Left against the Neo-Liberal Agenda"

I will begin by sketching the historical context and coinage of the term capitalist neo-liberal globalisation, showing afterwards how it has been implemented with special reference to the West-German context. The second part deals with the change in the meaning of neo-liberalism and its rise to the status of dominant global political-economic ideology. Its use to transform the social-economic order and, thereby, become the principal means and justification for class struggle at the expense of dependent workers, will finally be sketched.

I. Origin and Implementation of a Theoretical Concept

To stem at least intellectually the tide and appeal of state interventionism in the economy as practiced by soviet socialism and authoritarian, at times fascist, governments in Continental Europe, Walter Lippman called a conference in 1938 to discuss the future of the free market. The participants included reputed economists Eucken, Röpke and Rostow as well as major representatives of the so-called Austrian school, van Mises and Hayek, advocates of a more radical free market approach. Convinced that the world economic crisis sparked off in 1929 had essentially been caused by an unrestrained “laissez-faire-capitalism”, there was a consensus that a return to classical liberalism along the line of Adam Smith’ belief in the ‘invisible hand’ of an unfettered market creating the greatest welfare for all was no longer possible. Consequently, the possibilities of a “Third Way” were explored.

From the deliberations emerged eventually the concept of “neo-liberalism” essentially based on a new equilibrium between the market and the state. The latter was attributed a systemic regulatory role to intervene under particular circumstances in the economy in order to correct undesirable, if not dysfunctional, side-effects in the operation of market mechanisms. Three such fundamental situations were identified: (a) to prevent the formation of monopolies and cartels because they prevent the proper functioning of market forces by inhibiting competition and thereby the optimal allocation of resources and the formation of competitive prices; (b) to potentially invest in the creation of a state-sector with public companies; and (c) to actively pursue a social policy aimed at the poor and marginalized, thus contributing to the smooth functioning of the market by preventing social conflict and class struggle in case of increasing inequality, poverty and unemployment.

However, the consensus arrived at during the conference did not last. Already soon afterwards the radicals began to have second thoughts questioning not only an active economic role by the state, but opposing any state intervention on the grounds of being a fetter on individual freedom. Denounced as “paleo-liberals” or incorrigible old-fashioned “liberals”, a split was inevitable.

What had begun as a dispute among academics, acquired a new dimension after 1945 when the “neo-liberals” got a chance to formulate and implement economy policies to rebuild Western Europe from the destruction and ruins of World War II. West Germany represents a particularly pertinent example. Founded in 1949, the new Federal Republic comprised the three occupation zones of the Western allies. It was followed only a few months later by the formation of the German Democratic Republic on the territory of what until then had been the Soviet Occupation Zone. Divided for the next 40 years, the two countries being front-line states in the cold war were separated not only under international law, but also in terms of their political and socio-economic systems. For, the German Democratic Republic pursued a socialist model of development based on state planning under the leadership of the communist party as against the Federal Republic construed as a multi-party democracy founded on a private capitalism. In this situation of political-military confrontation between East and West a competition between capitalism and socialism evolved. This meant for the West German government to demonstrate that a private market economy was not just superior in general productivity but that the working class also prospered. This idea found an immediate echo and strong support from the Christian churches as being fully in line with their social doctrine.

These two politico-ideological currents provided the underpinnings for Ludwig Erhard, the father of the German economic miracle, to put into practice the so-called “social market economy” or “ordo-liberalism”, i.e. in substance, but not in name a policy of “neo-liberalism”. Its major characteristics were: (a) an economic development strategy based on the nation-state and the internal market; (b) the establishment of a “welfare state”, i.e. a system of social security protecting the individual against economic distress in case of unemployment, sickness, old age, etc.; (c) regulating conflicts through ‘tripartite agreements’ with representatives of government, labour, and entrepreneurs as stake-holders. Based on their mutual recognition as equal partners, it assumed strong trade unions that were integrated into an overall corporatist culture capable to enforce such agreements; (d) providing for an active interventionist role of the state in the economy through public works and other state financed projects in order to stimulate growth and employment in times of stagnation or crisis; (e) following a Keynesian demand-oriented strategy for which labour presented not just a cost but similarly a demand factor this politico-economic model was helped on by an socio-technical system based on mass production and mass consumption. First used by Gramsci, the various dimensions have later been systematized in the concept of “fordism” by the French regulation theory as constituting a particular social formation.

II. Transformation of the Concept into a Political/Class Strategy

The historic forerunner

The free market radicals or ‘paleo-liberals’ came into their own 25 years later. It was in the Chile of General Pinochet who had come to power in 1973 in a CIA supported military coup that the “Chicago boys” – a group of Chilean economists trained at the University of Chicago under von Hayek and Milton Friedman - were called upon to install a free market economic strategy. In total contrast not just to the socialist experiment of Salvador Allende but also to the neo-liberal or ordo-liberal design in West Germany (and elsewhere in continental Europe) a new economic paradigm was implemented that fundamentally favoured the free market over the state. Its main features were: (a) a reduced role of the state in the economy in the name of more efficient production and thus growth together with greater individual freedom; (b) instead, widespread deregulation of markets in conjunction with privatisation of public enterprises; (c) tax deductions and reduction in social charges for employers; (d) flexibility in hiring and firing of labour; (e) reduction in welfare state/social insurance expenditure with a view to progressively eliminate public services in favour of private initiatives; (e) a balanced budget approach. In contrast to the original neo-liberal paradigm, the new strategy of deregulation, privatization, reduction of government services and expenditure aimed at world market integration and was based on the two pillars of monetarism (pursuing an anti-inflation and active interest rate policy) as well as a supply-side economics that favoured a removal of all constraints to competition and capital accumulation.

From national project to international order: a return to paleo-liberalism

Chile proved only the historic forerunner for a world-wide development. At the end of the 1970s the fordist mode of regulation that had been implanted in practically all Western industrialized countries had run its course: economic stagnation had set in, profit rates had begun to diminish, social conflict, with the bloodily suppressed year-long miners’ strike in the UK as most vivid example, to re-emerge. At the same time, the centralisation and concentration of capital in the metropolitan countries had transformed the Multis (MNC) into Trans-national Companies (TNC) increasingly extending their reach to the world market. With the forces of production having outgrown the national sphere of operation, national barriers were broken down in the face of an internal market proving too limited for expansion and accumulation. This process was helped on by technical advances, not least in the field of information and communication accompanied by a drastic fall in prices. Starting in Thatcher’s UK and the USA of Reagan it was soon followed by the other rich countries.

But it was not only in the centre countries of the world capitalist system that this process took hold. In 1978, two years after Mao’s death, Deng and with him the ‘capitalist roaders’ had solidified their power and founded the Special Economic Zones along the South China Sea producing goods for the world market under a private capitalist regime. Similar openings towards external markets in conjunction with greater space for private enterprise were initiated in other countries of the Third World where until then essentially statist models of development had prevailed. The implosion of real socialism in Eastern Europe and the USSR about a decade later completed the political process of restoration; from now on private capitalism reigned again unchallenged on a global scale.

However, differently from earlier periods of national bourgeois development, the strategy to increasingly lower tariffs and encourage international trade not only opened vast new markets for business but led simultaneously to a huge enlargement of the global labour force ready to be employed by international capital. In consequence of this universal orientation towards the world market and increasing integration into a global division of labour and exchange, competition not only between countries and enterprises was sharpened. It has also pitted ever since labour against labour on a world-wide scale without a single worker moving across frontiers. As a result, existing class relations everywhere were altered for the benefit of capital. The social gains won by the workers over many years of struggle came to be questioned. The balance of forces became ever further tilted against the workers as a consequence of globalization.

The institutionalization of neo-liberalism on a global scale

The acceptance of the neo-liberal order had not always been voluntary. It was in the wake of the 1980 debt crisis of the Third World that the International Monetary Fund (IMF), one of the principal agencies representing the interests of Western global capital, gained additional clout. Privileging the repayment of foreign debts, if necessary at the expense of the living conditions of the majority of the population, it forced the governments of the South in exchange for necessary credits to adopt an economic policy of internal austerity and growing export orientation. Its Structural Adjustment Programs (SAP) enshrined the basic principles of what was later to be called the Washington Consensus (1990s). These were the now familiar methods, i.e. (1) Anti-deficit budget policies combined with a general reduction in public spending. It aimed in particular at investments in education, health, infrastructure, and transfer payments in support of the poorest people thought of as not being conducive to economic growth. (2) Market determined exchange and interest rates. (3) Deregulation and liberalization of national and international markets in the name of growth, competition and efficiency; (b) free circulation of capital to promote capital investments, not least FDIs. (4) Privatization of public enterprises in the name of greater efficiency and greater individual choice. (5) Guaranteed property rights, incl. Intellectual Property Rights. (6) Financialisation.

These individual measures eventually came to constitute the international regime of the World Trade Organisation. Founded in 1995 as a successor to GATT, the General Agreement on Tariffs and Trade of 1947, it comprised the three pillars of trade in goods, in services, and finally, an internationally binding patent regime. Endowed with a scheme of arbitration of trade disputes reinforced by sanctions, its basic rational aimed at creating a world-wide level playing field for TNC with finance capital in the lead. Thus, the development of capitalism has, at least in principle, formally and regulatory reached its final frontier: it has become a unified global system. Moreover, the rules of the game are determined by the free-marketers. Thus, the controversies among the participants of the Paris conference of 1938 concerning the equilibrium between state and private capitalist interests, between politics and economics, have been decided historically. Transferred from academia to practical politics not just capitalist interests but absolute freedom for private enterprise have prevailed. History has come full circle; what has been designated as neo-liberalism is in fact nothing but old-fashioned unfettered liberalism.

III. The Neo-liberal Agenda in Germany/the EU: a government for the bourgeoisie - from economic policy to social transformation

As has been pointed out neo-liberal globalisation has drawn all countries into its fold with most governments, as it were, having adopted it and implemented its key provisions. A global project, it originated in the metropolitan countries. Institutionalized in various international regimes, it has certainly been conceived to serve first of all the particular interests of its principal stake-holders, the leading capitalist countries, more precisely their ruling classes together with their TNC, dominated by finance capital as main actors. The free world market as new and dominant arena has internationalized the production of goods and services and their distribution. By the same token, it has universalized competition not only between enterprises, but also between states, and eventually costs and conditions of national labour markets. It has diminished the overall role of the state and simultaneously concentrated and re-oriented the policies of all governments towards the external market and the economic imperatives emanating from it. In consequence, economics came to dominate politics, with the political class identifying its interests ever closer with private capital over those of the majority of the people.

When the example of Germany is detailed next, one should keep in mind, that a level playing field for the individual actors competing on the world market does not mean equality of chances or comparable pre-conditions. On the contrary, the international system is highly unequal in the development of forces of production, capital intensity, labour cost and qualification, standard of living, social and economic structure, etc. To give but a few indicators: While India ranks overall as the 10th against Germany being the 4th most important economic power by GNP (in $), they are fundamental differences between the two. Thus, India’s population with 1.2 bio people is 15 times greater than Germany’s; but it’s national income is only about half (1.8 vs 3.6 trillion $); as a result, the average German has an income about 25 times that of an Indian. Further, when comparing the labour market: 8% of the German labour force are self-employed against India’s more than 50%; and whereas 2% work in the primary sector, in India this sector absorbs close to 60%. And while the informal or unorganized sector in German is negligible, over 90% work in it India. The on-going globalisation affects the various countries and classes within them differently. Even if such impacts prove very negative, basic differences in standard of living, social security, life expectancy etc. remain.

Keeping these qualitative differences between countries of the North against those of the South, the following policies broke with fordism and the post-war socio-political paradigm at the expense of employees, the young and the retirees. It favoured capital and brought about a realignment of forces in terms of a collusion between government and big bourgeoisie. By the same token, and in conjunction with the principal orientation of the economy being steered away from the primacy of the national in favour of the world market, the traditional identity of economic and political space and with it the power and legitimacy of government became increasingly eroded.

The most important measures enacted in 2003 by the then governing coalition of social-democrats and greens were the following:

Expropriation of Wage Earners: true enough, 2013 saw with 41,5 million employees an historical record. In contrast to most countries in the EU which had recovered neither the level of national income and even less the one of employment before the onset of the financial and economic crisis of 2008/9, the number of wage earners in Germany had increased for the seventh successive year. But the seeming ‘job miracle’ with 2 million additional workers rings hollow when compared to the total volume of hours worked which had even diminished during the last 20 years. In other words, the same amount of work was simply distributed among a greater number of people. To make this possible former full time occupations and regular long-term work contracts were increasingly subdivided into ‘temporary employment’, part-time work, ‘mini jobs’ or subcontracted to private temporary work agencies. Today, 22% of the German employed labour force finds itself in such ‘atypical’ employment conditions which represent not only the fastest growing but also the biggest employment segment in Western Europe (average 15%).1

Decline in wage share: In the course of the 20th century the proportion of wages and salaries to total national income had grown in Germany from 54% in the 1930s to its highest ever level of 75% between 1974 and 1980. With the neo-liberal policies here, as in other EU countries, workers have not shared in the productivity gains so much so that the proportion of wages and salaries in total national income has stagnated, if not diminished. It hovers in Germany today around 67% or 5% under the level of 2000. It is equivalent to a loss of not distributed real income for employees of more than 100 billion Euros and is reflected in a long term negative wage drift amounting to minus 2% in effective income since the beginning of this century. (isw 48, 2014: 14, 16). A similar decline in real wages of 2.2% since 2010 has been reported for the UK, a loss which is not to be recovered until 2019! (INYT April 11, 2014).

Poverty and precariousness: Even though, Germany weathered the economic and financial crisis better than all other countries in the EU [in fact, it not only profited from it but did so as a result of past policies and austerity programs single-mindedly pursued by Berlin, the dominant economic power in the EU, the Euro Zone respectively], the proportion of poor people, and those living under precarious socio-economic conditions has increased to 120 million, i.e. roughly every forth person in the Union made up of 29 countries. According to the Brussels’ statistical office, even in Germany 16 million or 19 % lived in “poverty and social exclusion” faced as it were with great financial problems. In practice this means that the affected households did not dispose of the necessary means to pay even for the most basic amenities such as adequate housing, sufficient heating, and/or could not afford a proper meal at least every other day!

Even to have a job is no guarantee against precarious living conditions. Thus, the number of ‘working poor’ reached 8 million thanks to the growing proportion of ‘atypical employment’ referred to above. And, far from being a transitional phenomenon, it has long-term negative effects: the insufficient wages accompanied by correspondingly small contributions to the social security (and tax) system - while a boon for (private) employers - have to be augmented by different social transfers constituting a drain on the public security system already today. It will be worse tomorrow when the working poor will retire on miserable pensions with retirement benefits averaging 55% of today’s salaries against an average of 82 % in the other 33 OECD countries. (isw 48, 34f) And despite all news reports of an end to the crisis and renewed economic growth the employment situation in the EU remains grim with about 12 % of the labour force being unemployed (after 7% in 2008), a level that promises at best to stagnate in view of an economic growth rate far too low to create new jobs. The situation is particularly hard for the young under 25. They run the risk of being a lost or rather sacrificed generation with for example roughly 1 in 4 in France, rising to 42 % in Italy and over 55% in Spain and Greece looking for a job. (isw 48, p 39)

Growing inequality: Neo-liberal policies have sharply increased social inequality, a process augmented still by the crisis. Ideologically framed as a necessary step, the growing gulf has meanwhile alarmed the IMF, protagonist of the Washington Consensus, of the potential for social unrest eventually threatening financial stability and growth.2 Thus of the 10 trillion Euros in assets held in private hands in Germany, the top 10% of the population own two thirds -with the top 1% alone disposing of 36%. By contrast, the lower half of the population owns just 1.4%. As to financial wealth the situation is even worse: there are 826.000 Euro millionaires representing just 1% of the population but calling 45% of the country’s wealth their own. Thus, the leading European economy, stalwart of ‘the social market economy’, shows a skewed wealth distribution second only to the USA in the Triad. This is mirrored in the GINI Coefficient which measures inequality on a scale of 0-1 with 1 implying total inequality. On this scale, far from being an egalitarian society, Germany shows a figure of 0.78 as against 0.68 for France, 0,61 for Italy, and 0,87 for the USA [isw 48, p 32f; quoting a study by the DIW – Wochenbericht 9/2014).

The growing social inequality is reflected in the income differentials between managers and workers. While managers had habitually earned about 20 times the average workers’ pay, this has risen to 90:1, in the UK even to 280:1. And while the lower half of the labour force has suffered a decline in real wages since the beginning of this century, the top 10% have seen an increase in their incomes of 13%, with the top 5% of 20 and the uppermost 1% of fully 48%! These data reveal more than a mere quantitative decline in incomes in one the richest economy. It implies in reality (a) a process of impoverishment of the working class and (b) a continuous diminution of the employed middle classes. The process has been so dramatic that it has drawn the attention of the global ruling elite of capitalists, academics, bureaucrats, and leading politicians gathered at the annual World Economic Forum in Davos/Switzerland as much as the IMF. They fear now not only its negative impact on economic growth because of the reduction in mass consumption capacity but perhaps even more its deteriorating effect on the investment climate caused by its potential for social unrest.3

IV. Neo-liberalism – A project for societal transformation and class warfare

Equilibrium of Forces drastically changed in favour of CAPITAL

The socio-economic effects of neo-liberal globalization have not come about by chance. Even though one of its major features has been a general withdrawal and weakening of the role of the state together with a change in its function, it is imperative to keep in mind that neo-liberalism has from the beginning been a political project decided upon by governments in power. With the abandonment of fordism the systemic class character of the bourgeois state has come to the fore. The veil of ‘neutrality’ of the fordist state based upon an economy essentially oriented towards the internal (national) market and an equilibrium of social forces as well as demand/supply (Altvater) has been withdrawn, the concept of a classless society and of a democratic state acting on behalf of the sovereign proved an illusion. In the course of neo-liberal globalisation, wages are no longer a demand, but only a cost factor for capital. In the name of accelerating employment and growth, direct wages and employers’ contributions to provident funds have been lowered, rules for hiring and firing of employees been lifted.

Moreover, short term labour contracts have been resorted to at a large scale as has been outsourcing of work to private employment agencies’. Social security systems are financially being depleted, criteria of benefit made more restrictive and coercive. It hits particularly the weakest, the unemployed as exemplified by the German Hartz IV regulations. According to them, it is no longer a primary obligation of the state to provide work being a human right as a means to gain a livelihood and of self-identity as a useful member of society. On the contrary, it is up to the individual to find a job. And unemployment benefits are only assented to when the labour office has accepted the relevant documentary evidence as satisfactory whereby criteria of qualification are secondary to simple gainful employment. As a result, job centres have turned into control and punitive agencies, entitled to cut, if not withhold the meagre unemployment benefits. These are, moreover, being doled out only after personal savings have been exhausted, incomes of spouses or even of a cohabiting partner been dipped into first. 4

In historical perspective and putting the much-vaunted German job miracle based on part-time labour in perspective “the industrial reserve army of the 19th century has been transformed into a 20 million strong army of working poor and unemployed constituting about 50% of the labour force”.

The present precarious employment conditions go far in explaining the rising rate of over-indebtedness which meanwhile affects every tenth adult burdened with an average debt of 30.000 Euros.5 As referred to above, low pay today implies low contributions to the provident/pension fund leading to tomorrow’s miserable retirees. Pensioners have, in fact, been the second group hit by government cuts in social services: During the last two decades, pensions have been reduced from 58% to less than 50% of average wages which translates into a loss of purchasing power of 20% over the last ten years alone.

On the other hand, the state has legislated and pursued policies with a view to encourage private capital accumulation and increase profits, all in the name of international competitiveness, of attracting foreign direct investments, and eventually of creating jobs. Thus, taxes on inheritance, on profits and high incomes were eliminated or drastically curtailed diminishing the state’s yearly revenues by 10-12 billion € shifting the burden of taxation more and more to the wage and salary earners. As a result, public investment in social infrastructure, including roads, postal and telecommunication services, hospitals, education, and research, fall short. In line with neo-liberal ideology and to make up for the shortfall, these socio-economic areas and social sub-systems are not only increasingly privatized, but commercialized. Formerly sovereign prerogatives, they change in content and objective once they have become subordinated to the rules of market, i.e. the respective investments have eventually to yield a profit…

In short, helped on by successive governments the equilibrium of forces has been qualitatively shifted in favour of capital and the free professions as against workers, employees and all those dependent on material transfers from the public social system, such as pensioners, single parent families etc. The repercussions can be traced to the trade union movement: not only has the general level of unionization declined, the unitary industry/branch–wide organization (as against a politically oriented, often directly party-affiliated movement) formerly constituting the great strength of German workers has, in addition, increasingly given way to wage negotiations on the enterprise or shop-floor level. Both developments combine to weaken the working class even further.

Towards generalized commodification and individualisation

In a long article in Le Monde, the eminent neo-Marxist sociologist Pierre Bourdieu has analyzed neo-liberalism as a programme for the methodical destruction of collectives, including those that constitute the basic groups of society and primary institutions in the socialization of the individual, i.e. the family, the nation, and also the trade union. They have been replaced by a process of individualization. At first glance, fulfilment of the leftist vision of the end of history in terms of social and human evolution, the kind of social character produced by neo-liberalism implies in reality an atomization of society and an ego-centric isolated individual. While the material preconditions for humanity to live at last free from want and fear, finally allowing for and ushering into a society without suppression and exploitation have been laid, the new man able to enter objectively and subjectively into a free association with his fellow human beings has not come about. Not only that the historically totally unprecedented development of the productive forces has been accompanied by an equally unprecedented inequality in life chances within and between societies, the individualization today is directly related to the commodification/commercialization of the individual, his appearances, qualities and professional capacities: everything is turned into and evaluated in terms of a marketable product. “Inner directedness”, values based on character, virtue, thruthfulness, sacrifice, solidarity, etc. count for nothing. Instead, ‘flexibility’ and capacity to adapt not just in terms of mobility and varying professional environments but also with regard to convictions and values are privileged as long as they result in formal “success” best expressed in terms of income, wealth and power of consumption. This development has been accompanied and reinforced by fundamental socio-economic changes in so far as a widespread dissolution of particular social milieus with their distinct traditions, neighbourhoods and cultures has been observed. Even political programmes are drafted primarily from a ‘marketable’, i.e. ‘feel-good’ point of view. What holds for the behavioural and ideological level can also be observed on the plane of physical appearance: a new body culture accompanied by aspirations to look forever good, young, and suntanned, continuously wearing new and, if possible, designer-clothes has emerged. The thus socialized individual is not just ‘other- directed’ considering outer appearances as decisive. He is also self-centred and alone viewing all others as competitors. Instead of seeing in the other the precondition for the development of his own humanity he exists alienated from him.6

State and Market: Erosion of Democracy

While the concept, aims and characteristics of the nation state were established in Europe in the wake of the Westfalian Peace Treaty of 1648, it became an overriding historical force with the expansion of industrial capitalism, particularly well illustrated in the case of the unification of Germany and Italy in the 19th century. The systemic expansion of production and the search for markets by industrial capital created not only an internal market but also the need and collective drive for political unification along the lines of language and cultural identity of the majority population. Both are intimately related because capital while inherently striving to universalize markets needs protective boundaries.

It was not least the World System Theory7 to which we owe the analytical framework concerning the relation between politics and economics in the context of neo-liberal globalization. Thus, in distinction to a “worldwide empire”, the capitalist ‘world system’ typically universalizes markets for production and exchange and forces every society by way of its cheap prices to adopt the bourgeois mode of production without leading to the establishment of a homologous global political space. In fact, contrary to the increasing integration of all economies the number of nation-states has not diminished but increased. As a reflection of unequal and differentiated capitalist development on a global scale, the developed capitalist countries tend to form greater unions in order for their enterprises to better compete internationally, while the less developed ones tend rather to split up into politically smaller, possibly economically less promising and stable states. In other words, whereas in principle the nation-state is there to stay, its actual contours undergo a continuous process of fission and fusion, of secession and integration.

Despite massive growth of world trade, an internationalization of production lines, processes of centralization and concentration of capital, there is a continuous need by capital itself for the existence and re-creation of political entities. For, not only because of differences in markets, in primary resources, in productivity, and, manifestly, in exchange rates that lend themselves to be exploited for greater profit, for capital to function it needs and depends on the state. For, by its very nature it is incapable of directly negotiating and agreeing upon rules and regulations, even less to formulate and execute sanctions in case of their violation – the primary task of states, governments respectively.

The development of capitalism has been accompanied by an increasingly inclusive notion of citizenship and political empowerment of social groups. Starting from census voting rights that excluded the poor, slaves, colonial peoples, and women, it developed since the end of the 18th century into universal suffrage based on the formal equality of citizens as voters. Simultaneously, political institutions have been created based on the notion of the people as sovereign in whose name and for the wellbeing of whom laws are enacted and policies decided upon by regularly elected representatives. In other words, political and socio-economic space systemically corresponds in modern democracies.

It is precisely, this identity that neo-liberalism has ruptured in two ways. (1) With the opening towards the world market and following the free market ideology the power of the individual government to decide according to essentially national interests, those of the majority respectively, has been dramatically curtailed. National elections are still being held in regular intervals, and governments are formed accordingly but the expectations and demands of the ‘people’, the vaunted sovereign, are and can no longer be met. Whatever the party programmes, it is “Brussels”, “Troikas” (IMF, ECB, Brussels), the (four American) rating agencies, or “the (financial) markets” generally that eventually dictate policies. (2) And these policies are those that favour the demands for increased accumulation and profit by big capital. And –as has been pointed out above- differently from the earlier fordist era the then correspondence of class interests between bourgeois and labour has given way to antagonistic interests under neo-liberal conditions. The opening to the world market has exposed conditions of employment, production and exchange to international competition with the role of the state being transformed from an arbiter to an actor objectively siding with business. In order to facilitate investments, production, and, last but not least, employment political and legislative initiatives are resorted to ease labour market regulations, and, generally, to reduce labour costs to render the country attractive for private capital. To put it differently, the class character of the state as an institution not for the common man but for the advancement of the bourgeoisie becomes ever more pronounced. With its political basis diminished as a result of its collusion with capital, its democratic legitimacy is at the same time being eroded at a time when inequality widens and social conflict is on the rise. In the end, democracy itself turns into an empty shell, a mere façade8 behind which lurk essentially authoritarian governments ever ready to employ repressive measures should the manipulation by the media and the ever more omnipresent surveillance apparatus fail.

1 Schmid, F., Bilanz 2013 Ausblick 2014, Isw - Wirtschaftsinfo 48, München 2014, p 37f; 16.

2 INYT of April 10, 2014 ‘IMF’s new tack emphasizes dangers of income inequality.

3 Piketty, Th., Le Capital au XXI siècle, Paris 2014. The Pope on his part intervened publicly in the same vain.

4 For further details on Germany and other European countries see Mertens, P., Wie können Sie es wagen ? Der Euro, die Krise und der grosse Raubzug, Mainz 2013.

5Cf. Paritätischer Wohlfahrtsverband as cited in: Junge Welt 25.4.14

6 David Riesman et al. had already in the 1950s in “The Lonely Crowd” differentiated between tradition-, inner- and other directness as prototypical characters of modern (American) society.

7 The works of Wallerstein, Frank and Amin have been particularly path- breaking in this field.

8 The German chancellor, Ms.Merkel, typically advocates a “market-conform democracy”