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Neoliberalism as the Godfather of the Financial Industry
by Ernst Lohoff and Norbert Trenkle
Monday Sep 17th, 2012 4:13 AM
Keynesianism was replaced by neoliberalism that guided the fallow investment capital into speculation. The development of social systems and the rise of real wages contributed to the social peace and also stabilized the economic upswing by strengthening mass consumption. All people in the world could live well and only need to spend a fraction of their lifetime in producing material goods if the possibilities in modern productivity were exhausted.

Interview with Ernst Lohoff and Norbert Trenkle on the Economic and Financial Crisis – Part 3

[This excerpt from the book “The Great Devaluation” published in 2012 is translated from the German on the Internet,]

In the epoch of Keynesianism, the state with its direct and indirect interventions established itself as an active promoter of economic life. However the contradiction between material output and its abstract and crisis-prone exploitation in the middle class economy was not tackled. As a result the basic dilemma remained that increased productivity with a constant or stagnating accumulation rate goes alone with reduction of jobs and increasing erosion of real accumulation.

When the prescriptions of Keynesianism no longer had a positive effect on private investments at the end of the 1970s, Keynesianism was replaced by neoliberalism that guided the fallow investment capital into the speculative sphere of the financial industry. As a consequence, the growing dependence of the real economy on impulses of the financial markets had an increasingly negative effect on its economic foundation and periodically triggered an increasing inflation of unprotected financial titles. After the bursting of the New Economy- and real estate bubbles, the extent of the crisis is now gradually being revealed with the erosion of state finances.

You couple the respective triumphant advance of Keynesianism or neoliberalism to different phases of the economic exploitation dynamic in capitalism. Can you illustrate this?

Norbert Trenkle:

The success of Keynesianism in the postwar-boom was bound to certain structural prerequisites that were outside its grasp and could not and did not produce itself. As long as industrial work expanded and represented the motor of a self-sustaining boom of capital exploitation, the Keynesian policy of regulation and redistribution was very functional. The development of social systems and the rise of real wages contributed to the establishment of social peace and also stabilized the economic upswing by strengthening mass consumption. The development of the public infrastructure was just as important. Without that infrastructure, the across-the-board industrialization and economizing of society would not have occurred. Cars could not be driven without a dense road network. The electrification of households required an adequate power supply. A good, diversified school- and university system was necessary for the training of skilled labor.

Thus a central role fell to the state and this supported the notion that the state could control, stabilize and keep economic development going. But when the Fordist postwar-boom ended, this proved to be an illusion. The source for financing state activities dried up when capital exploitation came to a standstill because more and more workers were released on account of the rapidly rising productivity. That a new push of self-sustaining capital exploitation did not succeed despite massive credit-financed economic- and growth-programs was even more serious.

From our view, this is also not surprising. The state can intervene in market mechanisms to a certain degree but has no access to the base process that is driven by the inner capitalist self-contradiction. In other words, Keynesianism was helpless regarding the across-the-board rationalization in the wake of the third industrial revolution which ultimately undermined the foundations of capital exploitation. All the attempts to bring the real economy out of stagflation failed miserably.

That failure was the deeper reason for the triumphant advance of neoliberalism. Neoliberalism failed at getting capital exploitation going again but prepared the ground for shifting the economic dynamic to the “financial industry” and delaying the crises of the next three decades. On one side, the consistent liberalization of the financial markets was crucial. On the other side, the inflation of state indebtedness by the Reagan administration proved to be a gigantic incentive-financing for the accumulation of fictional capital. The shattering of the Fordist structures by stripping unions of their power did the rest while the privatization of the public sector simultaneously opened up new fields for financial investments, for example through the transformation of state pension systems into private life insurances.


Norbert Trenkle: As Keynesianism supported the expansion of industrial mass production, neoliberalism was the godfather of the “financial industry.” That neoliberalism helped the third industrial revolution breakthrough is an irony of history. Focused in itself, neoliberalism would have suffocated in its own productivity. But the accumulation of fictional capital created the necessary possibilities for a wide-ranging installation of information technologies. The enormous rationalization effects leading to a massive repression of workers from the core centers of exploitation could temporarily be covered up by drawing in future value. The result is a continuous undermining of production now first felt in the crisis of fictional capital.

In your book, you compare economics with a “school of engineering design that prescribes the eraser as the only instrument for drawing.” What do you mean?

Ernst Lohoff: This refers back to the initial question in the first part of the interview. Economics of whatever school cannot understand the crisis because the essential distinction between the two forms of wealth, material wealth and abstract wealth, is annulled. In the first chapters of economics textbooks, the goal of economics is always described as satisfying needs and optimal provision of people with goods. Only the market economy can do this under the conditions of the developed division of labor.

When the market economy is described this way, it functions according to the principle of simple goods-exchange, as in an idealized village marketplace where shoes are exchanged for port halves and eggs for balls of wool. What is completely obvious, that under capitalist conditions production is to make more money out of money, that the goal of production is the multiplication of abstract wealth and goods are merely a means to keep this self-referential process going, is systematically faded out. In other words, on the plane of basic assumptions, economics develops the eraser and deletes the specific characteristics of the capitalist production method. Therefore it cannot be surprising that economics cannot see the causes of the crisis.

You identify anti-Semitic and racist mechanisms in the personified criticism of speculators and bankers. Why is that? After 2008 the criticism of bankers was not filled with anti-Semitic clichés – different from the 1920s when caricatures used anti-Semitic pictures.

Norbert Trenkle: Firstly, we distance ourselves from all personifying criticism that now runs wild in all possible forms. The crisis of fictional capital is also a crisis of the Euro. How will that be worked out? The “lazy Greeks” supposedly squandered “our good money.” This personification blocks insight in the madness that a society amidst abundance is impoverished only because all riches must be forced throu9gh the needle of goods production. Rage over the misery is projected on certain fabricated collective subjects who are actually released.

“Collective subjects are released at the end”

Blaming bankers and speculators is “only” one such personification. But something else resonates here that often remains unconscious. This personification is largely identical with a basic model of anti-Semitism that constructs an opposition of “creating” and “accumulating” capital and associates the latter with “the Jews.” We find this basic model again today in the widespread notion that the real economy has been destroyed by greedy speculators and that cutting them down to size is crucial.

This does not mean that everyone who rails against bankers and speculators is an anti-Semite. However this projective model of crisis analysis is completely compatible with the anti-Semitic mania. Therefore it is no accident that pictorial language falls in this direction again and again, as in the notorious term “grasshoppers” or “locusts” that Franz Muntefering made socially acceptable in posing as a capitalism critic. The formulation “like locusts they attack us” comes from the Nazi-propaganda film Jud Suss. Who these avaricious animals were did not need any further explanation.

Other pictures are repeated like the popular representation of financial capital as an octopus that embraces the world. This can be found in almost the same form in the anti-Semitic propaganda of the Nazis. The greatest caution is commanded here. In Germany, the transition to open anti-Semitic agitation is still largely taboo but the tendencies are very dangerous.

What political and social praxis follows concretely from your theoretical model?

Norbert Trenkle: First of all, a very fundamental rejection of all austerity-policy follows from our model. That we are living beyond our means and must now tighten our belts more is completely ridiculous given the enormously high productivity level. The opposite is true. All people in the world could live well and only need to spend a fraction of their lifetime in producing material goods if the possibilities in potential modern productivity were exhausted.


This does not happen because society is subjected to the pressures of abstract wealth production or only acknowledges material wealth as far as it represents “value.” What is involved is not simply a kind of missed opportunity or ignored possibility. Rather holding to the logic of production at the achieved level of productivity is a catastrophe because it leads to excluding masses of people as “superfluous” and sacrifices them on the altar of the system-imperative to maintain the flow of fictional capital from the future into the present.

Very new perspectives open up if we abandon the apparent foregone conclusion that goods can only be produced as commodities. Then we can ask how and in what form can the existing potentials be meaningfully used for the general well-being without concentrating on “financiability,” “market-friendliness” and “profitability.” Instead the standpoint of material wealth and concrete needs could be emphasized. In the praxis of social protest movements, this happens when evictions from dwellings are prevented because no one should live on the street or in a tent only because he or she cannot pay the mortgage or rent or when people simply say No to the privatization of public institutions in cultural or social areas. These are beginnings that point in the right direction. New perspectives of social emancipation open up when these beginnings are joined with radical criticism of the abstract form of wealth.

[Originally published in: Telepolis 8/6/2012]


“The Great Devaluation” – Introduction
“The return of the state as crisis administrator” – Norbert Trenkle, 2009