Democracy or capitalism – von Wolfram Bernhardt

Democracy or capitalism

von Wolfram Bernhardt

Folgenden Vortrag hat Wolfram Bernhardt am 27. Oktober 2017 in der Main Public Library of Copenhagen im Rahmen der Veranstaltungsreihe „Europe – Manifesto!“ gehalten. Diese Veranstaltungsreihe wird organisiert von der Main Public Library of Copenhagen, dem ATLAS Magasin, dem Goethe Institut Dänemark und dem Institut Francais.

The point I want to make is straightforward and effective. We are in a situation where we have to decide between democracy and capitalism.
It has become more and more obvious that in the radical form of each concept, one concept excludes the other.

Wolfram Bernhardt studierte BWL mit dem Schwerpunkt auf Finanz- und Kapitalmärkte. Er ist Gründer und Magazinmacher der agora42.

For a long time we thought that we can combine these two concepts. That a democratic society can regulate capitalism. In Germany we have a wonderful word for this scenario „Soziale Marktwirtschaft“ – social market economy. However, this is not capitalism.
Recently, the German chancellor Angela Merkel proposed another concept of how these two concepts can be combined, which she called „marktkonforme Demokratie“ What she meant with this was to align democracy with the markets. However, that is not democracy.
Unfortunately it becomes more and more obvious that this was not only a proposal, but actually a very precise description of what we have witnessed over the last few years: a voluntary subordination of democratic institutions to the markets.
Angela Merkel said these famous words when most of the parliaments around the world set up bail-out packages in order to save the banks. The logic behind this reasoning was quiet simple: If the banks go bankrupt, we will face global recession, millions of jobs will be lost and we will enter a period of chaos and turmoil.
In order to prevent this devastating scenario bankrupting the world, billions of dollars where spent to bail out and save those who actually caused this situation. And all this happened as politicians around the world united – probably for the first time in history – in the belief, that there was no alternative.
Since then all major central banks reduced their interest rates in a historical low. Even though this was meant to stimulate growth most of this money never left the financial industry. Hence this money did not lead to economic growth. What it did lead to was to an inflation of financial asset prices, an increase in inequality and higher volatility.
I am sure non of this is new to you. You are probably asking yourself why I consider this topic worth talking about while debating the state and future of Europe?
Let me give you three answers to this question:

Firstly: I consider the incredible power the financial industry has gained not only in Europe, but worldwide as a threat equally dangerous to our society as global warming – especially as we will not be able to effectively tackle global warming if we aren’t able to regulate the financial industry.
Why is that? Because global warming is a result of economical growth. And because the financial industry depends on economic growth in order to earn the expected interest on the respective income.
In a situation where the world GDP equals 73 trillion US$ (2015) and the sum of all shares, bonds and derivatives equals approx. 763 trillion US$, the pressure from the financial industry on the economy to deliver the needed growth rate is tremendous.
The effect of a growing economy on global warming can also be seen when looking at the global CO2 emission in 2009 – the year the financial crisis lead to the worst recession after WW2: As the world economy was tumbling in 2009 we were however able to observe a decrease in global CO2 emissions for the first time in 27 years.
To summarize my first point: If the world is gone(destroyed), Europe is also gone. So we better think about ways to prevent this from happening.

Secondly I don’t see any other state or nation or supranational institution being better suited to start regulating the financial industry.
Why is that? As a result of the financial crisis Europe has not only seen an economical crisis, but has also experienced a major crisis in democracy.
At least that is what I call a situation,

  • when parliaments had nothing to say, as billions of tax payers money was used to save the banks;
  • when governments where forced to repay their debts in order to save the German and French banks from realising a loss;
  • when we accept that the president of the European Commission was responsibly for setting up Luxembourg as a tax haven within the European Union that costs the fellow member states billions of Euros;

You might argue that this is nothing specifically European, but in contrast to the US, there is still hope. Compared to the US, where the financial industry employs five lobbyists for each member of congress, the lobby situation in Europe is still much better – despite it worsening at a freightening pace.
We have access to proven concepts of how the economy can work without just aiming for the maximum profit, be it in agriculture, be it in social and health care or even in prisons – did you know that the prison industry as a whole accounted for over $5 billion in 2011 in the US?
I further believe that most of the independent movements we witness in Europe stem from a desire for more self assertiveness, which is an original democratic impulse. It is also worth remembering that democracy literally translated means „rule of the people“ and is made up of a 99% majority and not the 1%.
By remembering this very basic truth I suggest we emphasize three principles of democracy that distance it from capitalism.

  • Democracy – at least how we understand it further stands for transparency, whereas capitalism stands for confidentiality.
  • Democracy is about the equality before the law. This idea becomes a farce when individuals or companies can afford the best lawyers or when private law companies even formulate the laws, which are passed by congress.
  • Democracy advocates the idea that all people are granted some inalienable rights. The only right that exists within capitalism is the right to buy whatever one wants as long as one can pay the price. Or to put it the other way round: If you don’t have money, you don’t have any rights.

Third, democracy means freedom whereas capitalism in its ultimate form symbolizes the road to serfdom.
Even though capitalists or as they call themselves nowadays “evangelists of free market economy” generally assume that free markets and competition lead to a maximum of personal freedom, they are mistaken.
Freedom within capitalism is like letting a vegetarian choose between a steak and a fatty sausage. The question in capitalism is not whether we aim for more social justice or a more sustainable way of life, the question is always: How do I get the highest return on my investment?
As if that were not enough, freedom in capitalism is always restricted to the very few people at the top. The so called free market economy where each industry is ultimately dominated by a monopoly or by an oligopoly. For example:

  • In the telecommunication industry the top four companies dominate 42,6 % of the total market
  • In the private equity industry the top four companies dominate 65,8 % of the total market
  • In Germany only 1% of all companies are responsible for 66% of all economic activities.
  • And in the digital industry it’s even worse, look at Facebook, Amazon and Google

This situation ist not only restricted to the economy, but eventually leads to a neofeudal society were your birth decides more about your career, your network, your disposable wealth than every effort a less lucky person undertakes throughout his whole lifetime.

If that isn’t the vision we have for Europe, we better remember what democracy means to us. First of all and most importantly, democracy means freedom because the fundamental mistake of all libertarians and evangelists of free market economy is that unrestricted freedom ultimately leads to despotism to the rule for the few strong ones.
Democracy however means, that we have the freedom to define the limits, the boundaries of our actions by ourselves. That we can accept the limits to growth, that we can incorporate human rights and the values of enlightment into a framework that leads our collective actions.

So Europe is at a crossroads. We have to decide if we continue the path we have taken. The path which ultimately leads to serfdom. Or if we trust in the common sense of all citizens and that the decisions we take collectively will pave a way in the future that better meets our expectations from an enlightened society. A future capitalism will never be able to offer.

Am 18.11.2017 findet die nächste Veranstaltung in dieser Reihe statt. Zu Gast werden dieses Mal Nina Power und Dr. Jörg Schaub sein.