Abstract
This Sect. 2.1 will deal with one of the most important societal constructs that came into existence in order to make the fulfilling of man’s (many) needs occur in a purportedly as efficiently manner possible, namely “money”.
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Notes
- 1.
- 2.
It is somehow remarkable that in Classic Antiquity, especially in the Old Greek and Roman civilizations, “Hermes” or “Mercury”, the god of the merchants, was at the same time the god of thieves and crooks, which should not come as a surprise to the extent that both categories of human professions rely on the same skills of being willing to submit, at all cost, one’s fellow human beings’ interests to those of one’s own.
- 3.
In this way, the debate on the morality of the socio-economic system basically seems to come down to answering the question whether or not there is room for any other moral standard other than saying that whatever man does on a socio-economic level for serving his own selfish purposes is intrinsically good (and thus defensible).
- 4.
- 5.
Obviously, one could put the starting point of this narrative even earlier in time, as the monetary system of the Middle Ages itself was but the result of a historical evolution that started when money came first into existence.
- 6.
For further details, see Byttebier (2017), pp. 127–128.
- 7.
In the latter case, the third-party-creditor himself became the new holder of the proof-of-debt documents and, in case he himself needed to pay his own creditor, he in turn got confronted with the same choice as the first-mentioned debtor himself had been (and further so “ad infinitum”).
- 8.
Martin has phrased this as follows (see Martin 2013, p. 101):
It was here – in the creation of a private payments system – that the invention of modern banking originated. Such a humble birth may sound disappointing. Today, the banking sector’s unglamorous routine of providing payments services takes a distant second place in the popular imagination to the exciting business of lending and trading. But their ability to finance and settle payments is the more fundamental activity. This is banks’ specifically monetary role, and what makes them special.
- 9.
Before in history, the lending activity of the custodians of coin money had still been based on lending out their reserves of coin money to third parties in need of credit. This coin money itself was still being “made” by other societal powers, usually regional or local governmental or semi-governmental institutions that, after the decline of the Roman Empire, had started issuing all kinds of coin money.
However, the above described new lending technique would gradually evolve, whereby the custodians of coin money simply started issuing (“out-of-nothing”) “proof-of-debt” documents which did not represent an initial deposit of coin money to a counterparty in need of a credit.
As a result—and by definition—such issuers of proof-of-debt documents brought into circulation higher values (or amounts) of proof-of-debt documents than they had coins in stock. Even so by definition, the total cash resources consisting of coin money of said issuers of proof-of-debt instruments became smaller than the total value of the proof-of-debt documents they had before put into circulation.
Put otherwise, to the further extent that the proof-of-debt instruments got accepted by the general public as payment instruments on their own accord, hence as money, the custodians of coin money evolved into (paper) money creating banks.
The success of the technique of private (paper) money creation based on the lending activities of coin money custodians, would furthermore be enhanced by the decline of the Church prohibition on charging interest that occurred in the second half of the Middle Ages.
For a more detailed description of this historical evolution, see Byttebier (2015a, 2017).
- 10.
Up till today, the same private bankers still play this role of providing the economy with new money, in particular when they grant credit to other economic agents. However, where during the Middle Ages this process of creating money by granting credit consisted in the issuing of new private paper money exceeding the value of the banks’ underlying cash reserve of coins money, today’s money creation by private banks through the granting of credit usually takes place through a booking on a bank account (leading to a so-called creation of “scriptural money”) for amounts exceeding the cash reserve a bank holds (presently usually under the form of coins and bank notes).
- 11.
See Byttebier (2017), p. 33, with further references.
- 12.
An especially risky situation, for instance, occurred when public authorities started relying on borrowed money to finance wars, per definition a completely counterproductive activity hardly ever to be made profitable for society as a whole.
- 13.
At this particular point in the genesis history of the “modern” banking system, there were in most jurisdictions still two types of “cash money” in play, albeit the nature of one of these had changed. There still was the coin money minted by the government, which would for a long time continue to be made out of precious metals. On top of that, there now was also paper money issued by the central banks (which in many jurisdictions obtained a monopoly on issuing it).
- 14.
In the further course of the twentieth century, precious metals would got even more “demonetized”.
- 15.
For instance, an initial deposit of cash money (= coins and banknotes) results in a process of so-called money substitution, resulting in a “conversion” of the deposited cash money into a scriptural claim of repayment (in cash) or for use in scriptural transactions.
- 16.
As a result, the latter is no longer taken into account when calculating the amount of cash money in circulation among the public.
- 17.
At present, there is a lot of debate going on about the abolishment of cash money. To the extent that scriptural money is exclusively made by private banks (as explained, by just booking a debt towards their clients), this is, obviously, a very disturbing idea, as such an abolishment of cash money would even further increase the (economic) power of private commercial banks and even more weaken what little grip central banks still hold on the private banking sector. At the very least would such an abolishment of cash money require that the role of central banks would be drastically reconsidered, for instance by handing them more tools of steering the scriptural money supply (see furthermore the proposals in Chap. 5 of this book).
- 18.
This will however no longer the case in so-called “cashless societies”.
- 19.
For instance, the bank is usually also obliged to perform so-called scriptural money transactions at the request of the depositors (that are basically money transfers between different bank accounts).
- 20.
An illustrious example of a central bank that is to a large extent functioning under the influence of private market players is the US Federal Reserve. (See furthermore, in footnote 24).
- 21.
Not surprisingly, in many jurisdictions, a large part of the banking regulation concerns these matters.
- 22.
In most jurisdictions, private banks have to be organized under the legal form of a “company”, implying that there will be so-called “shareholders” who, in accordance with the underlying principles of capitalist societies (as given shape through a variety of legal rules and systems), are considered as the “ultimate (economic) owners” of such a company, to whom—at least in accordance with the theories of (economic) (neo)liberalism—all the proceeds of the company’s activities, usually referred to as “(company) profits”, (have to) flow to. (See furthermore, Sect. 2.2).
- 23.
For instance, in recent times, public authorities all over the world have stimulated the use of scriptural money (and of scriptural payment systems) above “chartal money” (bank notes and coin money), in their fight against fiscal fraud and organized crime.
However, to the extent that such policy measures have been successful in stimulating the general public’s preference for scriptural money and scriptural payment system above chartal money, public authority has even further undermined any grip that the central banks still have on the private banking sector.
- 24.
On the growing “impotency” of central banks, see already Galbraith, in his book “the Great Crash 1929” dating of 1954. (See Galbraith (2009), p. 56).
Moreover, one should also be aware of the fact that in some jurisdictions, central banks are nothing but, in part or in total, private institutions themselves, implying that the bank notes and/or coin money they issue could also be considered as “privately created” money. A notorious example hereof concerns the “American Federal Reserve” that, ever since its creation, has continued to remain in private hands (implying that the American dollar is, basically, privately issued money).
- 25.
To give just a general idea of the amounts of credits private banks create “out-of-nothing”, one can take the example of Industrial & Commercial Bank of China Limited (see http://www.icbc.com.cn/ICBC/EN/), at the beginning of 2019 the biggest bank on Earth, as an example. ICBC more precisely has assets of more than four trillion USD, a large part of these being claims originated from credit that has been granted to third parties, hence from private money creation. Obviously, ICBC is but one of many banks that all create vast amounts of new money out of their credit activities. (For an overview of Earth’s biggest banks, see for instance https://www.gfmag.com/magazine/november-2018/biggest-banks-world-2018 (last consulted on March 5 2019); https://www.relbanks.com/worlds-top-banks/assets (last consulted on March 5 2019); https://www.businessinsider.nl/biggest-banks-in-the-world-2018-5/?international=true&r=US (last consulted on March 5 2019)).
- 26.
It will not be a big surprise that in some literature, the private money creation system based upon bank credits has even (ironically) been compared to one big Ponzi-scheme. (See Harari (2014), p. 343. Also http://www.econtalk.org/yuval-harari-on-sapiens/ (last consulted on March 5 2019)).
Harari (2014), p. 343 phrased it as follows:
It sounds like a giant Ponzi scheme, doesn’t it? But if it’s a fraud, then the entire economy is a fraud. The fact is, it’s not a deception, but rather a tribute to the amazing abilities of the human imagination. What enables banks—and the entire economy—to survive and flourish is our trust in the future. This trust is the sole backing for most of the money in the world.
See furthermore Bregman (2017), having argued:
(…) consider this: economists tell us that the optimum level of total private-sector debt is 100% of GDP. Based on this equation, if the financial sector only grows, it won’t equal more wealth, but less. So here’s the bad news. In the United Kingdom, private-sector debt is now at 157.5%. In the United States, the figure is 188.8%.
- 27.
From an economic viewpoint, one may even hold that the performing of labor in execution of an employment agreement, also but comes down to providing services to someone else against payment of a sum of money.
- 28.
We shall readdress this characteristic of the capitalist monetary system(s) more profoundly in Sect. 2.2.2.
- 29.
For further reading on how capitalism has “incentivized” work, see Kotsko (2018), p. 37.
- 30.
Similarly Davis (2018):
This system ensures that the human race will always be in debt, and this system is the new slavery, meaning that when we owe money in this fashion we are not free to use the full power of our labor and resources to improve our communities and infrastructure. Instead, lending moves in the direction of the development of instability and weapons of war. Any time the lender wishes to flex its muscle it can create instant economic hardships by calling in this and making it more difficult to borrow money to service the debt.
The modern-day debt system maintains a tragic dramatic tension in the world, and on a planet with such abundant resources, you have to wonder with a global debt number so high, do the people of the planet owe each other, or are we really in debt to some type of off-planet entity?
See also Dare (2016):
In other words, the money, ie., the debt, is meaningless, only having value if governments around the world use law and the violence of authority to enforce their citizens into payment of these fraudulent obligations, which is indeed happening the world over.
- 31.
Similarly Harari (2014), p. 345, defining “credit” as the difference between today’s economic pie and tomorrow’s economic pie, hence as a measure of expected economic growth.
- 32.
- 33.
Bregman (2017) has put it even more bluntly:
In other words, a big part of the modern banking sector is essentially a giant tapeworm gorging on a sick body. It’s not creating anything new, merely sucking others dry. Bankers have found a hundred and one ways to accomplish this. The basic mechanism, however, is always the same: offer loans like it’s going out of style, which in turn inflates the price of things like houses and shares, then earn a tidy percentage off those overblown prices (in the form of interest, commissions, brokerage fees, or what have you), and if the shit hits the fan, let Uncle Sam mop it up.
- 34.
For instance, in 2015, the OECD estimated that, on a global scale, financial services alone made up 20-30% of total service market revenue and about 20% of the total gross domestic product in developed economies. It was, furthermore, similarly estimated that, in 2014, the financial services sector comprised about 16.9% of the global economy, as measured in GDP. (See Ross (2015)).
- 35.
This may be different in the case of state owned banks, a type of banks that, under the influence of neoliberal doctrine, has been abandoned in most Western countries but still can be met in, for instance, China.
- 36.
Compare Dare (2016):
We have a decent idea of who controls the world’s debt (the central banks, the IMF, and the private banking families), and we assume that these entities own this debt, but the cost to humanity is so great that something simply does not add up, unless the picture is broadened to include the possibility that earthlings are paying rent to other, as of yet undisclosed actors.
- 37.
For a general idea, see https://www.nationaldebtclocks.org/ (last consulted on March 5 2019).
- 38.
A clear example concerns the fortune of the Rothschild-family. According to several sources, the wealth of the Rothschild-family is estimated to be 500 trillion USD. (See is (2019). Similarly Diks (2013)). Both authors explicitly refer to the power to (privately) create money out of nothing and to the fact that, because of this power, entire nations have entirely become in the grip of the private banking sector, as one of the main causes for this extreme wealth accumulation. Diks, furthermore, points out that if the Rothschild family would be willing to share its extreme wealth, every human being would obtain 70 million USD.
- 39.
Entering into more detail into the (legal) difference(s) prevailing in some jurisdictions between “partnerships”, “associations”, “companies”, “capital companies”, “corporations”… would in the context of this book lead to far, to the extent that, hereafter, there will only, in general terms, be spoken of simply “companies”, whereby abstraction will be made of the fact that some jurisdictions are based upon legal differences between several types of such “companies” (in a broad sense of the term).
- 40.
Earlier in history, there already existed companies, but the idea of granting such a company (or more accurately its stakeholders) the advantage of a limited liability has been an invention of the late Middle Ages. It has been the latter advantage that has made the legal form so popular for conducting enterprises (in a total “irresponsible” manner).
- 41.
With the exception, in many countries, of business activities that are prohibited by law.
- 42.
One could state that the societal construct of such a company (with limited liability) provides a shield behind which “real people” may conduct business in a totally irresponsible, sometimes even immoral, manner, while at the same time the profits such a business makes, in the end, flow back to these “real people”.
- 43.
Sivaraksa (1992), p. 40.
- 44.
See, for instance, the following quote from Plato’s Nomoi:
But the intention of our laws was that the citizens should be as happy as may be, and as friendly as possible to one another. And men who are always at law with one another, and amongst whom there are many wrongs done, can never be friends to one another, but only those among whom crimes and lawsuits are few and slight. Therefore we say that gold and silver ought not to be allowed in the city, nor much of the vulgar sort of trade which is carried on by lending money, or rearing the meaner kinds of livestock; but only the produce of agriculture, and only so much of this as will not compel us in pursuing it to neglect that for the sake of which riches exist – I mean, soul and body, which without gymnastics, and without education, will never be worth anything; and therefore, as we have said not once but many times, the care of riches should have the last place in our thoughts. For there are in all three things about which every man has an interest; and the interest about money, when rightly regarded, is the third and lowest of them.
(Plato (1994–2000).)
- 45.
For further details, see Byttebier (2017), p. 91 a.f.
- 46.
For further details, see Byttebier (2017), p. 94 a.f.
- 47.
This, regretfully, did not withhold the Catholic Church from showing a large extent of leniency towards those “sinful” merchants who were resentful enough to share some of their excessive wealth with the Church itself. This dualistic approach towards wealth gathering would in the late Middle Ages result in all forms of abuses, as a result of which several layers of the Church in many cases became as greedy in gathering riches as the rich bankers and merchants whose wealth acquiring behavior, nevertheless, remained condemnable under official Church teachings.
- 48.
In the (embryonic) economic views of Jesus Christ, as far as they can be inferred from certain verses of the Gospel, every individual is faced with the fundamental life choice between “God” and the “mammon” (a concept that could be translated as the “money devil”). It is (evidently) the intention that man should choose a life in the service of God and not in the service of the mammon, whilst it is impossible to choose both (see Matthew, 6:24).
Other verses of the New Testament warn, in a similar way, against greed and materialism, so for instance the verses Luke, 3: 10–14, in addition to, for instance, 1 Tim. 6:10 (holding that the love of money is the root of all evil).
In a similar way, in the renowned “Sermon on the Mount”, Jesus Christ, furthermore, held that man shall not gather treasures on Earth, where they will decay from worms and moth, or be stolen by thieves, but that on the contrary, man should gather treasures in heaven (see Matthew, 6:19).
As a consequence, a correct (religious) attitude to life consists of not allowing the aforementioned fear and concern for one’s own insecure future to take hold, thus avoiding the need for a life led by egoism in general and the pursuit of money and wealth in particular (i.e. focused only on satisfying materialistic values), and that, on the contrary, human life should be focused on achieving the Kingdom of God. This viewpoint can, for example, be concluded from Jesus Christ’s reply to the question of the rich young man about what to do “to become part of eternal life” (Luke, 18:18; Mark, 10:17). Christ’s answer to this question was: “Sell all that you have and distribute it to the poor, then you shall have treasure in heaven; and come follow me” (Luke, 18:22; see also Mark, 10:21). (See furthermore Byttebier (2017), p. 97).
- 49.
For instance Luther, especially through his opinion that the ideals of Jesus Christ are not accomplishable at a socio-economic level (perhaps unwillingly) helped clearing the path for the emergence of pre-capitalist practices, although Luther at the same time also took a stand against the greed of the rich of his time, for instance when raging against the German banking family Fugger. Calvin showed even more leniency towards wealth gathering by preaching that the accumulation of wealth is permissible for those who work hard and zealously, provided that such saved wealth would be reinvested in economic growth and not be used for sinful expenditure. (See furthermore Byttebier (2017), p. 133, with further references).
Compare Sivaraksa (1992), p. 41.
- 50.
This is why the popular name for Smith’s doctrine is also referred to as the “invisible hand”-theory.
- 51.
See furthermore Ashley (1949), p. 144 a.f. See also Field (2018), p. 31.
Harari has made the observation that this teaching of Adam Smith may in present times not sound that original, as in the meantime, we all have been living in a capitalist world for such a long time and, as a consequence, have become used to this kind of logic, but that nevertheless the teaching of Adam Smith that the fulfilment of one’s selfish human urges best serves the interests of society as a whole is to be considered as one of the most revolutionary ideas in human history. In developing this teaching, Adam Smith in fact claimed that “egoism”, “selfishness” and “greed” are good things, an approach that was totally opposite towards the until then prevailing doctrine of the Catholic Church which, based on the teachings of Jesus Christ, had until then always taught the complete opposite. (See Harari (2014), pp. 336–337).
- 52.
This obviously contributed to a since then ever-declining impact of the teachings of the Catholic Church on socio-economic processes and, by extension, on society as a whole.
Erich Fromm has in this regard pointed out the high level of “caesura” that as a result emerged. In medieval (religious) thinking, wealth was never seen as a purpose in itself, but rather as a means to accomplish one’s life goal. The purpose was life itself or, as the Catholic Church had put it, the salvation of man. In this, economic actions, albeit considered “necessary”, were to be seen as mere ”external activities” which only made sense and only had value to the point where they promoted life and life’s aim, namely human salvation. Fromm also pointed out that the perception of economic activity and the pursuit of profit as a target in itself would have been as inappropriate to the medieval thinker as the lack of such a perception would be to the contemporary (neo-)liberal thinker. (See Fromm (1990), p. 83).
Compare Sivaraksa (1992), p. 44, who points out that the influence of Christianity, or at least real Christian values, has eroded to the extent that Western civilization has become merely capitalistic (and, at the time, socialistic), thus just aiming to increase material goods in order to satisfy (artifical) craving.
- 53.
de Jouvenel (1954), pp. 106–107.
As Galbraith has phrased it:
The market has only one message for the business firm. That is the promise of more money. (…) It must try to make money and, as a practical matter, it must try to make as much as possible. Others do. To fail to conform is to invite loss, failure and extrusion. Certainly, a decision to subordinate interest in earnings to an interest in a more contented life for workers, cows or customers would, in the absence of exceptional supplementary income, mean financial disaster. Given this need to maximize revenue, the firm is thus fully subject to the authority of the market.
(Galbraith (1967), p. 109.)
- 54.
- 55.
Galbraith (1983), pp. 112–113.
- 56.
The end scene of the movie “Once upon a time in the West” (see https://www.imdb.com/title/tt0064116/; last consulted on March 5 2019) gives some idea of what this implied in the case of a nineteenth century company that constructed the first American railroads. In this movie scene, one can see hundreds of people employed by such a railroad building company, all performing the hardest labor under apparently not so nice working conditions.
- 57.
We make abstraction of the fact that the capital of one (capital) company, may even so be provided by another legal person, such as a second (capital) company. But although the chain of (capital) companies thus participating in the capital of another such company, may be very long indeed, at the end of such a chain, one is in most cases bound to meet people of flesh and blood, be it not as “end-of-the-chain-shareholders”, than at least as “end-of-the-chain-beneficiaries” (for instance of “trusts” or similar legal figures) of the added value that is generated through such a chain of interconnected companies.
- 58.
However, the bigger such a company (with limited liability) becomes, the more the interests of the managers and directors become more important, in some cases even to the detriment of the company shareholders. In legal and economic doctrine, this phenomenon has been explained by resorting to the so-called “agent” doctrine. (See especially Berle and Means (1932–1933)).
- 59.
It is indeed remarkable to see the huge influence Smith’s theories have had on the development on a lot of later economic theories which came up with a new vocabulary that Smith himself had not yet used.
- 60.
See the approach of Piketty (2014).
- 61.
The term “liberal” is here used in its original meaning and not in the meaning that is given to the term in the present-day American political debate where the term “liberal” is, surprisingly, used in a distorted way to indicate progressive political thinking.
- 62.
Fervent adherents of economic neoliberalism hold that all interpersonal relationships between legal entities, be it humans or legal persons, should happen in accordance with this voluntary association-theory, hence by entering into contract negotiations on a purportedly equal footing.
- 63.
For a critical analysis of this assumption, see Byttebier (2018), p. 56 a.f.
- 64.
However, the wages a company offers must at the same time be attractive enough to seduce employees to start working for it. As a result, more specialized employees may get higher wages than employees not having special skills. Even so, the extent to which social security systems provide replacement wages for people unemployed, may have an upscaling effect on wages, as people will in such a case normally not accept a job for wages that are lower than the replacement income they could enjoy. The latter also explains how the providing of a replacement income to unemployed people, helps protecting laborers against capitalistic exploitation practices. This fact is also the very reason why neoliberal governments all over the globe aim at getting rid of such replacement income systems, thus ensuring that the Iron Law of the Wages will become more dominant than ever in governing the relationships between employees and employers, an effect which can already be observed in countries that were among the first to apply the ideology of economic neoliberalism most in practice, such as the USA and the UK. (See furthermore Sect. 4.6).
- 65.
Chomsky is reported to have argued that in American society, the use of the word “(working) class” has practically been banished in an attempt to pretend that the American society is basically “class-less”. For especially the upper classes, it is extremely important to make everyone else believe that there is no such thing as class, or at the very least that everyone is just “middle class”: all Americans are equal, just being Americans, living in perfect harmony, all working together, all being great people. (See Maher and Groves (2013), p. 144. See also Komlik (2014)).
As Chomsky said in an interview:
Well, there’s always a class war going on. The United States, to an unusual extent, is a business-run society, more so than others. The business classes are very class-conscious—they’re constantly fighting a bitter class war to improve their power and diminish opposition. Occasionally this is recognized.
We don’t use the term “working class” here because it’s a taboo term. You’re supposed to say “middle class,” because it helps diminish the understanding that there’s a class war going on.
(See Chomsky (2013).)
- 66.
Obviously, the adherents of (neo)liberal doctrine prefer to argue that this conflict of interests is inexistent and that the lower classes should be happy with the breadcrumbs capitalism generates for them (which translates into the earlier referred to “trickle-down economics”-doctrine).
Said conflict of interests also helps explaining the emergence, in the course of the twentieth century of a variety of mutually opposite representative institutions, going from trade unions and organizations of employers, to political parties, whose basic reason for existing is providing an answer to the question how society should best deal with this conflict of interests.
- 67.
From a rational point of view (to the extent that one may even consider this to be a true mystery), it is incomprehensible how neoliberal ideology has in this regard succeeded in capturing the minds of such large parts of the population in Western countries, as it goes clearly against the interests of most common people, and in particular against the interests of anyone who is employed against fixed wages.
It is hereby clear that the large masses do not easily draw lessons from past experiences, as a result of which the same mistakes in organizing the socio-economic order are made over and over again.
Indeed, already the course of the eighteenth and nineteenth centuries until far in the twentieth century, it had throughout the Western capitalist world appeared that submitting employment contracts exclusively to the voluntary association-principle—whereby it should be clear that the restauration of this model of privately organizing societies is high on the neoliberal agenda—, in practice, mainly implied that the bargaining position of the average employee who enters into such an employment agreement with a would-be employer (as said: in many cases a company), is in most cases way too weak, to the extent that, as a result, employees became exposed to all kinds of exploitation practices, going from having to work under appalling circumstances, to having to work for a ridiculously low wage.
Within some Western countries, the many injustices deriving from applying this private model of organizing societies were, as has already been addressed before, in the course of the second half of the twentieth century somewhat tackled by legislation that provided all kinds of elementary protection to such capitalistic exploitation practices. However, especially during the last decades of the twentieth century, the class of (rich) entrepreneurs would start heavily contesting these forms of protective legislation. They were hereby fed with several arguments provided by neoliberal ideology, mainly coming down to the fact that said protective legislative measures implied too big a cost for the entrepreneurial world and, moreover, purportedly weakened the competitive position of a country’s own enterprises in comparison to enterprises established in countries that did not have comparable protective legislation.
Although rarely phrasing its aspiration in this wordings, the ideology of economic neoliberalism, through this, is basically restoring the Iron Law of the Wages.
- 68.
In the recent past, numerous press reports have illustrated this basic economic truth as, for instance, regards the working situation within the Amazon-empire (although very rarely making the link with the underlying economic doctrine having caused this situation). (See for instance, recently Appelbaum (2018); Bhattarai (2018a, b)).
In America, the extreme application of the Iron Law of the Wages by the Amazon-empire in September 2018 even incited Senator Bernie Sanders to introduce a Senate bill—the “Stop Bezos Act”—that would require large employers such as “Amazon.com” and “Walmart” to pay the government for food stamps, public housing, Medicaid and other federal assistance received by their workers. Said bill’s name is reported to be a dig at Amazon chief executive Jeffrey P. Bezos and stands for “Stop Bad Employers by Zeroing Out Subsidies Act.” The legislative initiative of Senator Sanders hereby aimed at establishing a 100 percent tax on government benefits received by workers at companies with at least 500 employees. (See Bhattarai (2018a)).
As Senator Sanders argued at a news conference announcing the bill (see Bhattarai (2018a)):
In other words, the taxpayers of this country would no longer be subsidizing the wealthiest people in this country who are paying their workers inadequate wages. Despite low unemployment, we end up having tens of millions of Americans working at wages that are just so low that they can’t adequately take care of their families.
The proposed legislation came just one day after Amazon reached $1 trillion in market cap, a milestone that reinforces its position as one of the world's wealthiest companies. (See Bhattarai (2018a)).
As Senator Sanders remarked on Twitter (see Bhattarai (2018a)):
Amazon is worth $1 trillion. Thousands of Amazon workers have to rely on food stamps, Medicaid and public housing to survive. That is what a rigged economy looks like.
The extent to which the rich class of entrepreneurs behave as true elitists can, furthermore, be illustrated by the way Bezos has been reported to plan his own average working day. In an interview of September 3, 2018, held at the Economic Club of Washington, Bezos described his average working day as follows:
He gets eight hours of sleep every night, exercises regularly, and has his first meetings everyday with staff at 10:00 a.m. He is too tired at 5:00 p.m. to make major decisions. He “putters around” in the morning by reading newspapers and has breakfast with his children before they go to school. (See Kass (2018).)
It thus clearly appears that a right balance between “private time” and “(a little bit of) time for work” is high on Bezos’ agenda, at least for himself, but much less for the people employed by the Amazon-empire who, in full accordance with the capitalist principles that those who perform labor should work as much as possible at the lowest cost (= wages) conceivable, have been reported to be subject to the most appalling working conditions. (See recently, next to many similar reports on the problem of the harsh working conditions in the Amazon-empire: Jaeger (2018)).
As Jaeger has reported:
Employees say they are subject to 12-hour workdays five to six days a week, and claim Amazon never made good on promises to provide buses to and from its $100 million Bloomfield warehouse, which opened earlier this year.
“It takes me four hours every day to get to and from work. Between my work schedule and my commute, I haven’t seen my daughter in weeks,” worker Rashad Long said in a statement...“We have asked the company to provide air conditioning, but the company told us that the robots inside cannot work in the cold weather,”...
(Jaeger (2018).)
- 69.
Compare Field (2018), p. 93.
- 70.
Compare Kotsko (2018), p. 37.
- 71.
Such as closing one’s borders for immigrants, or making the import of foreign goods subjected to all kinds of import taxes or other duties.
- 72.
It needs thus not come as a surprise that in its report of 2019 “Public good or private wealth”, Oxfam has pointed out that, on a global scale, economies are built on millions of hours of unpaid labor carried out every day. Because of unjust social attitudes, this unpaid care work is overwhelmingly done by women and girls—time spent caring for children, the elderly and the sick; cooking, cleaning, and collecting water and firewood. If all the unpaid care work done by women across the globe was carried out by a single company, it would have an annual turnover of USD 10 trillion—43 times that of Apple. Women’s unpaid contribution to the health sector alone is estimated to be worth approximately 3% of GDP in low-income countries. According to Oxfam, this for-free-work steals time from women, contributes to poor health and leaves them unable to take advantage of educational, political and economic opportunities. Poor women have the highest burden of unpaid work. (See Oxfam (2019), p. 15).
- 73.
See Byttebier (2018).
- 74.
Up to this very day, it is generally assumed that the modern capitalist economy needs to continuously grow in order to remain sustainable (as Harari has puts it: in the same way as a shark needs to continuously swim in order to avoid suffocating.) (See Harari (2014), p. 388).
- 75.
Compare Harari (2014), p. 347.
- 76.
Harari (2014), p. 348.
- 77.
It is remarkable that this intrinsic characteristic of the capitalist economy has already been criticized in religious doctrines of thousands of years ago.
For instance, a version of the well-known Hindu myth of “Parashurama”, the sixth avatar of the Supreme Lord Vishnu, starts with a complaint by “Bhūmī-Devī”, the goddess of the earth, about the behaviour of the Kshatriya’s, the cast of rulers who were shamelessly exploiting her. This makes the Supreme Lord Vishnu incarnate as the avatar Parashurama, with as mission to end this exploitation of “Mother Earth”. This in its own turn entails a fierce battle which goes on through many generations of Kshatriya’s, and which finally leads to the entire extinction of the (former) cast of the rulers. (See Byttebier (2018), p. 223).
- 78.
Byttebier (2017), p. 152.
- 79.
In an extreme version, the idea of the common good is even totally rejected, as has for instance been done in the works of numerous neoliberal authors, such as Ayn Rand and Milton Friedman.
- 80.
See Galbraith (1996).
- 81.
Annett et al. (2016).
- 82.
Sivaraksa (1992), p. 42.
- 83.
Sivaraksa (1992), pp. 42–43.
- 84.
Zurcher (2017).
- 85.
See furthermore Krugman (2018c).
On the reasons why, as regards the USA, big corporate interests keep denying climate change, see Krugman (2018a), apparently not showing much hesitation of expressing his opinion in a very cynical, albeit probably at the same time realistic manner:
In many ways, climate denialism resembles cancer denialism. Businesses with a financial interest in confusing the public — in this case, fossil-fuel companies — are prime movers. As far as I can tell, every one of the handful of well-known scientists who have expressed climate skepticism has received large sums of money from these companies or from dark money conduits like DonorsTrust — the same conduit, as it happens, that supported Matthew Whitaker, the new acting Attorney General, before he joined the Trump administration.
But climate denial has sunk deeper political roots than cancer denial ever did. In practice, you can’t be a modern Republican in good standing unless you deny the reality of global warming, assert that it has natural causes or insist that nothing can be done about it without destroying the economy. You also have to either accept or acquiesce in wild claims that the overwhelming evidence for climate change is a hoax, that it has been fabricated by a vast global conspiracy of scientists.
Why would anyone go along with such things? Money is still the main answer: Almost all prominent climate deniers are on the fossil-fuel take. However, ideology is also a factor: If you take environmental issues seriously, you are led to the need for government regulation of some kind, so rigid free-market ideologues don’t want to believe that environmental concerns are real (although apparently forcing consumers to subsidize coal is fine).
Finally, I have the impression that there’s an element of tough-guy posturing involved — real men don’t use renewable energy, or something.
And these motives matter. If important players opposed climate action out of good-faith disagreement with the science, that would be a shame but not a sin, calling for better efforts at persuasion. As it is, however, climate denial is rooted in greed, opportunism, and ego. And opposing action for those reasons is a sin.
Indeed, it’s depravity, on a scale that makes cancer denial seem trivial. Smoking kills people, and tobacco companies that tried to confuse the public about that reality were being evil. But climate change isn’t just killing people; it may well kill civilization. Trying to confuse the public about that is evil on a whole different level. Don’t some of these people have children?
And let’s be clear: While Donald Trump is a prime example of the depravity of climate denial, this is an issue on which his whole party went over to the dark side years ago. Republicans don’t just have bad ideas; at this point, they are, necessarily, bad people.
- 86.
In the course of the twentieth century, this led to the emergence of a true “take over”-market.
- 87.
At present, there is indeed strong evidence that the model of financing large enterprises through the financial markets has detrimental economic effects. (See Plender (2015)). For instance, companies whose stock is quoted on a financial market become often obsessed with keeping their shareholders calm via high dividend payout ratios, and to even bolster earnings—and thus earnings-related bonuses—through share buybacks. As a result, according to Plender, the stock market’s central function has been subverted: it no longer functions to provide net new equity capital to the corporate sector, but rather is dictating corporate behavior. (Plender (2015)). It does, hence, not come as a surprise that, for instance in the USA, economists have found evidence that public companies (whose stock are quoted on a financial market) invest substantially less and are less responsive to changes in investment opportunities, especially in industries where share prices are most sensitive to earnings news. There is moreover similar evidence as regards the UK.
Put otherwise, modern capital markets inherently stimulate “short-termism”, with agents in the financial intermediation chain weighing near-term outcomes too heavily at the expense of longer-term opportunities, forgoing valuable investment projects and thus damaging the economy. As a result, instead of being seen to contribute to company value and economic growth, financial markets on the contrary detract wealth, a characteristic they share with private banks exercising their money creating power through bank credits. (See Plender (2015).
- 88.
On the way lobbying works, see Krugman (2008), p. 166.
Already in 1978, Galbraith described the problem of “corporatocracy” (albeit not yet using this term), in a very clear and blunt manner as follows:
The American oil companies, large and small, control a certain number of members of the Congress and handle them pretty much as the performers in a puppet show manipulate their puppets. A squeeze there and the arms respond and the voice squeaks yes. It’s very possible the greatest scandal in our political life, much more damaging to the public interest than Watergate.
(See Galbraith and Salinger (1978), p. 142).
- 89.
To the extent that taxation could be a system of redistributing wealth, neoliberal governments have thus taken a (societal) stand which is in complete opposition to one of the basic assumptions made in Sect. 1.1 of this book, being that in order to create a just and fair society, the overall economic wealth should be distributed in an as just an fair manner possible. (See especially Sachs (2011), pp. 116–117. See even Congregation for the Doctrine of the Faith (2018), n° 30–31).
To illustrate the latter, reference can, for instance, be made to the Oxfam 2017-report “An economy for the 99%”, in which it has been stated:
Many of the super-rich also use their power, influence and connections to capture politics and ensure that the rules are written for them. Billionaires in Brazil lobby to reduce taxes, and in São Paulo would prefer to use helicopters to get to work, flying over the traffic jams and broken infrastructure below. Some of the super-rich also use their fortunes to help buy the political outcomes they want, seeking to influence elections and public policy. The Koch brothers, two of the richest men in the world, have had a huge influence over conservative politics in the US, supporting many influential think tanks and the Tea Party movement and contributing heavily to discrediting the case for action on climate change. This active political influencing by the super-rich and their representatives directly drives greater inequality by constructing “reinforcing feedback loops‟ in which the winners of the game get yet more resources to win even bigger next time.
(See Oxfam (2017), p. 5.)
- 90.
During the past decades, this traditional effect of neoliberal economic policy has been further enhanced due to the bailouts of financial institutions in the aftermath of severe financial and/or bank crises, such as obviously the one of 2007–2008, and since then numerous countries have found themselves in ever heavier financial problems, causing them even more to turn to (expensive) debt financing.
Not surprisingly, Stiglitz has referred to the “bailouts” in the bank sector that occurred in the aftermath of the financial crisis of 2007–2008 as one of the greatest schemes of redistribution of wealth (in favor of the rich to the detriment of the poor) of our times (see Stiglitz (2010), p. 200).
As a further result, the debt burden of many (Western) countries has grown to unmeasurable (and even almost unpronounceable) proportions, where it has even become difficult to find precise data in this regard (to the extent that one could even wonder if keeping the numbers of the outstanding debt hidden has been done in a deliberate manner). (See for instance the website http://www.nationaldebtclocks.org/ (last consulted on March 5 2018)). We shall come back to this issue in Sect. 4.2.2.3.
- 91.
In some countries, there is strong support for another approach even more in line with free marketism. This alternative approach consists of defending the right to freely bear arms, an approach that, in the best neoliberal tradition, at the same times supports the interests of the big weapons industry.
- 92.
It hereby is of no concern at all that such measures of supporting big enterprises or big banks have to take place in direct opposition to the most basic free market-principles themselves. (See furthermore Chomsky (2017), pp. 83–88).
As Chomsky has phrased it:
Each time, the taxpayer is called on to bail out those who created the crisis, increasingly the major financial institutions. In a capitalist economy, you wouldn’t do that. In a capitalist system, that would wipe out the investors who make risky investments. But the rich and powerful, they don’t want a capitalist system. They want to be able to run to the “nanny state” as soon as they’re in trouble, and get bailed out by the taxpayer. They’re given a government insurance policy, which means that no matter how often you risk everything, of you get in trouble, the public will bail you out because you’re too big to fail – and it’s just repeating over and over again.
(See Chomsky (2017), pp. 84–85.)
- 93.
See also Krugman (2018b):
That doctrine is all about the supposed need to give the already privileged incentives to do nice things for the rest of us. We must, the right says, cut taxes on the wealthy to induce them to work hard, and cut taxes on corporations to induce them to invest in America.
But this doctrine keeps failing in practice. President George W. Bush’s tax cuts didn’t produce a boom; President Barack Obama’s tax hike didn’t cause a depression. Tax cuts in Kansas didn’t jump-start the state’s economy; tax hikes in California didn’t slow growth.
And with the Trump tax cut, the doctrine has failed again. Unfortunately, it’s difficult to get politicians to understand something when their campaign contributions depend on their not understanding it.
- 94.
See furthermore Oxfam (2019), p. 29:
The push for lower taxation of those at the top has its roots in the idea that if the rich become richer, all of society will benefit. However, this ‘trickle-down’ orthodoxy has been increasingly questioned. In the face of growing inequality, even the International Monetary Fund (IMF) and the UK’s The Economist magazine are saying that there is ample scope to tax the richest more without hurting economic development, and that such redistribution is required to tackle inequality.
A core argument of this paper, outlined in section 4, is that this trend must be reversed, and that it is common sense that the richest individuals and corporations pay their fair share of tax to fund health, education and other public services for all. Governments can use progressive taxation and spending to dramatically reduce the gap between rich and poor and between women and men. If they fail to do this, the inequality crisis will remain out of control.
- 95.
This fiscal leniency towards the rich is, obviously, even more enhanced as a result of the above-described systems of “corporatocracy” (see above, under Sect. 2.2.2.5).
- 96.
Based upon this approach, state authority has during the past years in general been reshaped into a method of creating an as business friendly economic climate possible, a policy system that got theoretically validated by the ideology of (economic) neoliberalism itself to the extent that the latter wants state authority to be deployed in order to ensure that the free market may function unburdened by any governmental intervention. In recent times, this phenomenon has, in a wide variety of countries, taken an even more extreme dimension of captains of industry themselves becoming political leaders in order to ensure that state authority is deployed in a manner best serving the interests of the rich entrepreneurial world. Obvious examples are, or have been: Donald Trump in the USA, Silvio Berlusconi in Italy, Emmanuel Macron in France…
One of the domains in which this approach of kneading economic policy in accordance with the exclusive needs of the entrepreneurial sector has been used to its fullest extent, has obviously been the field of taxation, which explains why a majority of the countries in the world that apply the ideology of (economic) neoliberalism in practice, are becoming more and more tax friendly towards the rich and their enterprises.
- 97.
To the extent that, in some countries, the middle classes are even increasingly disappearing. (See Daugherty (2018)). Daugherty reports that besides the U.S., the nations with declining percentages of middle class adults are Denmark, Finland, Germany, Italy, Luxembourg, Norway and Spain. Germany saw the steepest decline, falling from 79% in 1991 to 72% in 2010.
- 98.
For instance, on February 12th 2019, the American press reported that the U.S. national debt had topped $22 trillion for the first time in history. Said debt was moreover reported to have ballooned by more than $2 trillion in the 2 years since President Trump took office in January 2017, when the debt stood at $19.9 trillion. Surprisingly (as most American policy makers seem to have been basically in denial of this fact until then), the news report also acknowledged that this huge debt could form a threat for the future of the American economy. (See Watson (2019)).
- 99.
- 100.
On June 11th 2018.
- 101.
On February 13th 2019.
- 102.
To give at least some general idea of the incredible speed by which public debt has been expanding during the past years, it can be pointed out that, relying on data made available by the same quoted source, the combined public debt (of all the countries in the world together) has grown with an amount of more than 10 trillion USD in about three year time, clearly illustrating that neoliberal policy does not provide an answer to one of the main economic problems of our time, namely the extreme debt positions of both private market players and states themselves (next to other public entities).
- 103.
The fact that, by implementing neoliberal doctrine, state debt is booming on a global scale, is moreover thus the more remarkable given the fact that, as has already been pointed out, during the same time period, a lot of the countries that have witnessed the mentioned huge increase of their outstanding public debt, are at the same time conducting a neoliberal policy of cutting in expenses for public services and social security systems, under the argument that these have become way too expense to have them continued. (See for instance Friedman (1993)).
Moreover, where one could expect that cutting back in the expenses for public services and social security would, if serving no other rational purpose, at the very least help sanitizing public finances, as this is moreover the main neoliberal argument for justifying said cut-backs, one can in reality but observe that the complete opposite is happening, and that under the application of neoliberal policy measures, government deficits all over the planet are skyrocketing. One should hereby indeed not forget that, in the end, this interest burden (next to the burden of having to repay the capital of the credit obtained), eventually, has to be financed out of the income of such a state that is a debtor. In the end, under the prevailing capitalistic economic system, the only source of true income a state has, are taxes due by its population (regardless of the legal form under which such taxes appear, as in theory a state could also just simply “expropriate” all of its inhabitants in order to pay its outstanding debt back).
- 104.
Indeed, such financial institutions (and other market players) that provide credit to ailing states, obviously, do not do this out of concern for the general interest, and certainly not out of the good of their heart, but only for the same reason why they—and by extension all capitalistic enterprises—do anything, namely to make profits. (See already above, Sect. 2.2.2.1).
As has been explained before, one of the main sources for these profits of financial (and similar) institutions are the interests they charge on the credits they provide to a wide variety of credit takers, amongst which states. As a result, states having resorted to credit financing do not only have to pay back the capital of the credit they take up, but also the (conventionally agreed upon) interests.
To give but a general idea of the huge interest burden countries in debt all over the world are exposed to, one can point out that during the course of a 23 min visit to the website https://www.nationaldebtclocks.org/, on the same abovementioned date of checking out the then combined outstanding debt of all the countries of the world put together, more precisely on June 11th 2018, it appeared that the combined interest burden of the overall countries’ debt amounted to a sum of more than 105,000,000 USD, and in the course of a visit of half an hour, to even more than 150,000,000 USD. It, moreover, took only about 105 min to have the interests on the combined countries’ debt amount to 500 million USD, or half a billion USD, where one should bear in mind that these interests are basically money that is due by (and hence impoverishing) the public sector (and ultimately those members of society paying taxes) to (and hence enriching) the private sector (especially people themselves hardly paying any taxes at all) for having taken up (bank) credit.
- 105.
See Oxfam (2015), p. 7, mentioning that, as regards the year 2013:
The biggest and most successful companies from both the finance and insurance sectors and the pharmaceutical and healthcare sectors achieve extremely high profits and therefore command substantial resources which they use to compensate their owners and investors, helping to accumulate their personal wealth.
(…)
Billionaires from the US make up approximately half of the total billionaires on the Forbes list with interests in the financial sector.
- 106.
The effect to which the state debt financing mechanism has, through all this, basically become a method by which state tax income gets diverted into dividend payments to the rich and very rich shareholders of financial institutions, is even more enhanced as a result of surrounding free market mechanisms of evaluating the creditworthiness of state-debtors. Indeed, the extent to which any debtor state has itself any say in the interest rate it will have to endure, has during the past years become extremely small under the influence of neoliberal ideology which always prefer resorting to free market solutions, rather than relying on state prerogative based solutions.
As a result, determining the financial soundness of states, and hence to a large extent also the interest rates they are subjected to, has during the past decades even so fallen in the hands of private market players. Reference is here obviously made to the so-called “rating agencies”, purportedly independent private institutions that have made it their business to rate the creditworthiness of both public and private debtors. It is, amongst others, based upon these credit ratings that financial institutions calculate their interest rates when providing credit, for instance to states. As a result, the price setting for the interest financial institutions charge when providing credit to states—and hence of the mechanism through which the taxes of the poor and middle classes serve at enhancing the wealth of the rich—is to a very large extent again left over to the private sector itself, and this in full accordance with the dictates of economic neoliberalism. When combining this insight with the knowledge on how money is created (see above, under Sect. 2.1), the situation of state financing becomes even more absurd, not to say criminal.
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Byttebier, K. (2019). Main Legal Building Stones of the Capitalist Socio-Economic Order. In: The Tools of Law that Shape Capitalism. Economic and Financial Law & Policy – Shifting Insights & Values, vol 3. Springer, Cham. https://doi.org/10.1007/978-3-030-24182-7_2
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Publisher Name: Springer, Cham
Print ISBN: 978-3-030-24181-0
Online ISBN: 978-3-030-24182-7
eBook Packages: Law and CriminologyLaw and Criminology (R0)