Lilliput-Information
Euro - the end of the
social state
By Dr. Wilhelm Hankel, professor in Monetary Policy and
Development-Economy
at Goethe University in Frankfurt am Main
(Speech made June 5th
1998)
Introduction:
February 12th 1998 154 professors of
economics in Germany with Wilhelm Hankel as a spokesman reported that the
Euro-project is fundamentally hopeless. This item on Tageshau (ARD-TV, Germany)
the same day was not reported on Danish TV channels. Information of Denmark can
supplementary report that Germany officially had 4.82 mill. unem-ployed (12.6
p.c.) in January 1998, the most ever. In July 1998 the German official
unemployment had decreased to 4.3 p.c., but German SPD-politicians specialized
in the labor market had reported short before the election to the Bundestag
that the real in contrast to the official unemployment in Germany was about 10
mill. (26.1 p.c.). The unemployment in Germany was 4.1 mill. in 1932, and the
population of Germany has been nearly unchanged for this long period of years.
The same phenomenon of discrepancy between the official and real figures
excists in Denmark.
We reported this in details in Danish on: Fals account of unemployment
The
speech has been translated by Information of Denmark that has given a few
(clearly marked) supplementary comments in the text, and we also include a
supplement of discussion below.
***
The
Speech:
1.
The globalization
means unlimited mobility of the markets including the financial market.
This globalization will destroy the
democratic welfare states many maintain.
The free mobility of the capital
undermines the ability of the states to regulate. Especially the labour market.
Wage-pressure and reductions have to absorb the threatening lost of jobs.
The global financial markets are not
subject to any self-regulating competition-mechanism, and they create crisis
after crisis (Asia, Mexico, Russia, Latin America). (IoD:" "The
crises are becoming deeper and deeper thanks to the amount of state-debt-paper
that increases the difference between the nominal and the real values. It is
getting worse when the leaders of states are borrowing more and more".)
And the crises aggravate the social pressure with claims about reductions.
The pressure of the crises are leading to
either the disintegration of the welfare states into linked defending blocs (of
currency like Euro-, Dollar-, Yen- or Renminbi-zones) or to the fallen back to
the old enemy images, perhaps a combination of the two scenario.
With disintegration of the democratic
founded welfare and national state the globalization comes to an end (IoD:
"Because the politicians cannot bear that their populations/voters have to
bear more and more heavy loads without any security or being recouped".)
2.
Euro-Union is a
prototype of this development. Its bad hidden doubble-motive is a) fear of
dollars-dominance and dollar-competition and 2) fear of the new re-united
Germany with its D-Mark-regime.
Fear is always based on a false analyse of
the development. It is not the US-dollar that is threatening the market shares
of Europe in the world trade, but Europe’s lost of knowledge and technology and
Europe’s inertia with reforms and innovations. It is not the hardness and
strength of the D-Mark that is preventing the development and integration of
Europe, but since "Maastricht" the aim has been the repeal of the
D-mark. The explanation is that especially the D-Mark has driven the
Euro-members out in a strong negative development against reforms and social
limitations. Alone these fallacies and false assumptions do not allow realistic
expectations about a hard Euro. Inflation is programmed. (IoD: "All the
member-states are deeply indebted, and totally they make new deficits every year".)
3.
At the beginning
of the Euro the national governments loose their instruments of management (the
currency-rate of exchanges, the interest-rate, the amount of money and a
flexible public budget) to secure the values of the money, of the labour
market, and the social- and ecological standards which the same politicians
have introduced. Differences of structure and competition will disappear
without the suspension of the government.
The primary battlefield is the labour
market, the social- and the ecology-systems. The labour market suffers from the
fact that the middle class is decreasing, and the wage- and the social
cost-competition from the workers in Southern EU-poverty-zones, and the
liquidation of the until now ruling trade-union-wage-rates, and minimum-standards
of the social level. The market is sweeping them away, employers use more and
more their potentials of threat that includes the transfer of productions to
favourable (wage-, social-, tax-, ecology-) EU-zones. (IoD: "E.g. Ireland
where company-tax in some areas is 10 p.c.)
Wage-rates, social-standards and claims of
environment in Euro land have to get harmonized downwards. Social democrates,
other socialists and trade-unions have the naive imagination that things could
improve by the signatures on the Maastricht-Treaty. In Euro-Union the social
welfare policy has resigned finally - and this is happening with full consent
of the social democrats, other socialists and the trade union.
4.
The Euro-Union is
not a mean against the employment-crisis of the globalization. On the contrary:
Both of them strengthen the power of the
capital and the helplessness of the state to do something about the
unemployment. That would have been "improvements" towards the 19th
, not towards the 21st Century.
The Euro-Union is no counterbalance to the
unsocial tendencies of the globalization as incompetent analyzers of the left
believe, it strengthens them further. It forces lift of work to fit to monetary
commands. The European centrale bank has to follow a totally common policy for
the 11 differently structured countries without the possibility to go back to
equalize currency-exchanges.
(IoD: "To prevent the capital from
leaving Euro-Union the central bank have to rise the interest-rate, but this
will decrease the activity and increase the unemployment further").
Such a union are meant to end the
conflicts of the member states from where no help is to be found - if it is not
extended to a transfer-union or a federal state with public equalizing of the
finances between the old and the new member-countries. Something like USA or
The Federal Republic of Germany .
When these projections on the Euro-union
show themselves as impossible or they meet too much resistance the question
raises: Is there alternative models to save the world-peace?
A. The Keynes-Plan - and fourth essential
Toward the end of World War II, when the
cold war and the new enemy-pictures had not been introduced yet, the elites of
the powers of victory - USA’s and Great Britain’s - had throught out and
planned One-World and their new order. The British economist John
Maynard Keynes, who in 1944 at the Bretton-Woods-Negociations, proposed a
monetary order and a national employment and social policy. This Keynes-Plan
that was not carried out consequently in the Bretton-Woods-System, is more
relevant than ever.(IoD:"... somebody would say. Others will maintain that
a system which stimulates the leaders of the states to indebt the states,
because it is the easiest solution to themselves, is a system that was heading
for ruin just from the beginning.)
At the beginning the system was throught
out quite different from the Bretton-Woods-System that was built up. The
US-dollar was playing a dominating role as reserve- and loan-currency. That
leads automatically and quite foreseeable to nominal determined currency
exchange-rates in the member-countries and also to domestic inflation-misuse.
(IoD: "or state debt that in the principle is the same.)
B. The Keynes-proposal that was not
carried through can be chosen now
On the other hand - than the Euro-model
too - the national currencies and their matching political instruments will not
be abolished in Keynes’ original proposal. Actually it only deals with a new
International Currency-Foundation (IMF), its conversion from
government-depending foundations without its own money to a World Central Bank,
offering credits and bank-monitoring: To control of world-financing-system
instead of its excisting very unfortunate role, mostly as fire-raiser. Keynes
had three so-called Essentials that characteristed his monetary order as it was
called:
·
a "lender of
last resort" to manage the amount of world money according to the need
both to increase and decrease it to protect against crises as inflation (IoD:
"And against deceitful leaders").
Only if the lender also pays interest - Keynes
maintained - justice can be secured. Without the interest from the lender too
the system is unproductive, because it is sharpening the crisis. Keynes’
proposal with penal interest collected not alone from debtor-nations (overdraft
on the account of the world central bank) was not accepted in the rich nations,
first of all USA. But Keynes had in reality imagined a crisis-sparing-system -
the adjustment-efforts would have been divided - the participants would have
been forced to make domestic investments to support the crisis-management in
the weaker countries - according to the principle of solidarity one for all for
one.
Since the collapse of the
Bretton-Woods-System in the years 1971-1973 everybody knows that what is needed
is the fourth essential: with the introduction of the rate of inflation
incorporated in the determination of exchange-rates: Real exchange-rates
are needed. Bretton Woods did not handle this problem, because nominal
determined exchange-rates are being false and unreliable due to the
feasts of inflation in the states of the nations (with USA as model included).
Using real determined exchange-rates the
problem disappears. The member-countries are given the choice: Either give up
domestic inflation or decide for more inflation - and in consequence of this
give up the real determined exchange-rates and devalue. But the exchange rates
always remain "right" and "truth-worthy", and to get such a
system made permanent the system is not burst, and it will not force the
countries to step out.
Such a system could function tomorrow, if
the G7 or G8- directories of the world, that is aiming to One-World-Economy,
would come to an agreement, and also made enough expert knowledge available.
C. What would such a system of the world
bring?
1.
The globalizing and
the finances would be under control. It would have been curbed, and be work-
and production-secured as the old gold standard, because the changes of the
exchange rates would nearly disappear, and without the currency-risk would both
businesses of the speculators and the collapse races stop. The international
community of banks would be linked to the world central bank, an improvement of
IMF. The international market of finances would stop being a hunting-district
for credit-jaws and hazard-players. They would be precisely as regulated as the
domestic markets of credit.
2.
The states would
keep their national scope to solve one of their problems, conjuncture,
employment and social policies. They would keep their national currency and the
instruments they could still choose between stability of the currency or
political stability. No fight about the common money, because it is only to be
used as units of account in central banks by the exchange-rate-determination,
in countries Dollars, DM, FFR or Gulden would remain.
3.
The weak states
in the One-World-Economy would have their chance too. The crises would
be more seldom and lesser profound, you did not meet the alone any more. The
believer-countries of the system had only committed themselves to a
international monetary law - because it is just a part of the symmetric
mechanism of equalizing - that are to helped by a co-ordinated policy. This
would be better than and more efficient than the complains and begging of cheap
credits or development-subsidy in the rich states or in the world bank of
today.
The result: The sufferings under the
globalization is not decided by faith. It is more like lack of analyse,
historical experience and competent policy. Economists are meant to show that
economic-, social- and currency-crises are not events of chance, there is a
reason, and you can always do something.
And economists are meant to show that dead
ends are dead ends like the way towards Europe with the common money. Global
crises are not solved neither in the region nor in the territory, when we are
bound to this globe, and we continue to be so. For this reason there is no
alternative to curbing the globalization. The chances for this to succeed have
never been bigger.
Wilhelm Hankel at
the Römerberg-Speeches in Paulskirche in Frankfurt am Main June 5th
1998
***
Introduction
to discussion by Information of Denmark
Real currency-rates of exchange are better than nominal
rates. The speculators do have the possibility to play their game and make
the crises, as the politicians in the starting point are responsible of, much
worser. Currency-rates are slipping, because the politicians make inflation or
state debt that originates from same wrong-doing.
The consequence of introducing as proposed
by Prof. Wilhelm Hankel, a choise for the nations between trot or irregular
trot has the consequence that those who choose the irregular trot will have to
be ruled by the central bank of the world.
With a political super structure on this
world central bank everything fails.
Real determined exchange rates can only be achieved if the
single nation are managing the amount of note issue and credits like in Germany
in the 1950s and the 1960s. The starting point is a perfect independent central
bank, independent of politicians and of private banks too. Just the
Constitution have to rule here.
The possibility to take measures against
when a nation do not keep its promises Keynes meant had to be given by a new
international unit of account.
The question about the independence of the
central bank of the politicians and the private banks we have to underline is
the absolute assumption of the wanted stability to get a chance. You have to
forbid deficit on the public finances without an according reduction the amount
of money somewhere else in the economy.
The theories of Keynes (or the
interpretation of them) that were used wild uncritical after World War II obvious to
indebt the nations told totally wrong that the economy increases by such
deficits.
This does not match reality.
In principle it is possible to abolish the
hated income-taxations. Its only plays a role of psychology, and it plays the
role very bad. You can use the amount of money to finance the public
expenditures, and then remember to reduce the amount just as much somewhere
else.
Could you imagine that an emission-house
instead of a world central bank was a possibility?
Just an institution that make honourable
currency-transactions coming from your demand for anothers and more secure
currency than your domestic one. Such an emission-house could exchange your
money to ECU or Bancor - but only one - if your Chan-cellor of Exchequer and
the president of your domestic central bank then were forced to reduce the
amount of your national currency just as much to secure your national economic
stability.
How do we arrange this?
Do you have a qualified contribution to
the discussion that is going on in both Denmark and Great Britain before the
referendums about the EURO right now, write to the e-mail address below.
Your contribution will be placed on
Internet with or without your name on if you send it to Information of
Denmark and tells us what to do. And shall try to get the leaders of our
states to participate in the discussion of content too.
Joern Ebbe Vig
Stadion Allé 48
DK-8000 Aarhus C
Denmark
Globalization and economy (especially the
Danish)
E-mail to:
Updated d. 03/03/00