[Translated from a radio broadcast by Gegenstandpunkt-Verlag / Kein Kommentar! July 24, 2002]
Der Spiegel already knew it two weeks ago: Capitalism has entered a new stage. The headline reads: “The new predatory capitalism – greed and megalomania in bankruptcy” – and it continues below:
A recession prevails on the stock market, and almost every week there are new announcements about companies that just recently announced bright profit figures now facing bankruptcy. Stunned investors must watch as their savings and reserves for old age are lost. The blame lies with unscrupulous managers whose greed and megalomania unleashed a predatory capitalism in which only the law of the jungle seems to count. With accounting tricks and a brazen self-service mentality, they gamble away trust in the American economic model – with devastating consequences for the world economy.
The “devastating consequences” then appeared last Monday when the stock markets – after the announcement of the Worldcom bankruptcy – tumbled substantially, and the commentators were united: the economy is in the hands of “Bush thieves” and other such shady characters from the world of predators. In their anger over “unscrupulous managers,” are these commentators really unaware of what devastating testimony they give about the stock market or the entirety of capitalism, which they nevertheless praise at the same time as the most rational economic mode?
We do not have to harp on the fact that until recently these “unscrupulous managers” were the absolute heroes of the stock market, and the companies led by them – Enron, Worldcom, Xerox – were ranked among the “top addresses” whose shares one absolutely had to have in one’s “portfolio.” When they rightfully participated in the earnings from their companies’ success, not only did nobody find this amiss, on the contrary, it was taken as proof of and reward for the character of a manager who rose body and soul to his task, so vigorously did he use every trick even when in doubt to assert himself in the ruthless competition. If this is now all supposed to have been a mere sham, if the companies were merely abused, i.e. “self-service shops” for a “self-service mentality,” and if all this went smoothly with a simple trick called “accounting fraud,” what does this then say about the famous “efficiency” of the stock market? And then also for the “efficiency” of capitalism? The stock market is supposed to be its primary and most important “steering system,” an “organ” that sends capital flows with incredible precision and speed into those corners of the world where they yield the most. And this central capitalist executive body is then blindsided by a few greed-heads merely for their personal enrichment, for an unbelievable amount of money too, so that eventually – as they say so nicely – it “went into a tailspin”?
It’s a pity that this isn’t so – if capitalism really was a shop where a few greedy guys could bring everything into chaos with “disastrous results,” then it would come to an end miraculously quickly. “Predators” of this kind lurk in every corner and we could leave the task of closing shop to them. The fact that all this is not true, one already notices in the little swindle that Der Spiegel begins with. It mentions “a recession on the stock market,” but only to back away and point out the villains. This downturn was already underway before the disclosure of “accounting fraud,” months before the stock market began its massive downturn. So the question is posed differently. Not what did Enron, etc., do, but why was the cover blown on these Enrons and what was allegedly “falsified” in their balance sheets.
Companies listed on the stock market want money capital to realize their business prospects. What stock brokers do is just assess these business prospects. The only requirement is that companies must show profit, and not bad parenting – what is critical for the “broker” is the future growth he believes these companies promise. That is why, for example, the companies of the “new economy” ascended so rapidly, because of their promising “growth potential.” The stock market makes a comparison between the growth prospects of all potential companies, and indeed not only between those competing within a sphere of capital; it also makes a comparison between capital spheres and their actual growth prospects. With this ongoing comparison between individual companies, it is incessantly searching for where capitalism is ripest for growth. Several companies that until recently were thought highly capable of growth are now supposed to have been driven by nothing other than “greed and megalomania.” And those who now allegedly abused their power by the "law of the jungle" became powerful through nothing other than the facilities of the stock market.
The flip side: if the stock market makes a picture of which stock companies will excel most in the future, then this also includes: these companies are subject to the calculations of the stock market. Then their creditworthiness, and thus also their further progress, depends on whether they reliably demonstrate their growth prospects and prove satisfactory in the comparison of growth prospects, as the stock market sees it. In order to make a good impression on the stock market, of course dozens of expensive frills must be used, but ultimately the tough “analysts,” “chart technicians,” and whatever else they are called, want to see “hard facts” and that means: balance sheets. Thank God balance sheets are not an unalterable set of rules or simple accounts from the last fiscal year, but offer plenty of possibilities for “creativity.” And those are simply enhanced so that that the outlook of the company, which the brokers want to know, appears, yes, in the rosiest light. A planned and yet to be closed deal raising capital is already registered there as an asset. It goes without saying that negative points are not particularly emphasized. They will be covered up, yes, even mercifully, if the investor is infatuated, investments become executed and business success is realized. Not until right at the beginning of a recession must management catch on that they must “fairly” calculate the balance sheets according to the correct rules and also sometimes against the rules. If this is “fraud,” then you have to say: it is inherent in the system. Or rather: a “fraud” that the stock market, as long as it is on an “upswing,” regularly rewards because it is set on growth... We will not harp on the fact that at the time, the “analysts” and “chart technicians” were routinely satisfied with balance sheets which are now exposed as fakes...
This certainly changes when there is “a recession on the stock market.” A recession prevails now because the panoramic view of the stock brokers shows: a lot of business prospects once believed in and sponsored with credit do not pan out – as the crisis registers. That means for them: the creditworthiness of the corporate landscape is generally down, and this makes them generally skeptical. Exactly because of this, but also the general downgrading in creditworthiness, the stock market generalizes the crisis, it sets standards by which all companies now have to prove themselves. The brokers do this simply because they no longer believe in their own “growth optimism” and switch to a “bearish” point of view. Then the companies no longer get the capital they need to realize their business prospects. This has the result that all the already borrowed credit no longer redeems the promise which it was solicited for and for which it was awarded. Then this credit no longer embodies the prospect of good business, but is just a bunch of unserviceable debts. In truth, evil machinations do not “shake up” the stock market, but exactly the reverse: the stock market, its money capital stuck in the shares of companies, withdraws its own basis, “confidence,” and then and therefore completely normal and previously respected procedures become “tricks” and formerly “far-sighted businessmen” become “unscrupulous managers” and “Bush thieves.”
This process is as old as capitalism itself. Nobody denies that it has many ugly “side effects.” Crises, for example, occur routinely, and people routinely suffer in them – in this case, “stunned investors who watch as their savings and reserves for old age are lost.” That is regrettable – but it will never be a basis for a criticism of the system. Nobody will explain why in this system crises – and their victims – necessarily arise again and again. Rather, the opposite is sought, i.e. a deviation from capitalism. In the crisis, scapegoats are searched for: those who have sinned against the most rational of all economic modes – capitalism. There must have been people at work who for very personal reasons violated their duty to augment the wealth of the stock market. Critical thinkers like Der Spiegel even become creative. Not in order to explain to their readers why and how the denounced practices, which do not differ much from those that were praised during the boom, belong to capitalism. The qualities of managers that were praised during the boom as “clever,” “successful,” “promising,” now betray “criminal intent.” Completely normal business strategies become “excesses.” And Der Spiegel invents a skewed image for the uncovered den of iniquity: “predatory capitalism.” What they uncover is not capitalism, but a perverse deviation from it. Predators in human form were at work there.
And what do the much-invoked stunned investors whose savings and retirement funds disappear get? They know whom they can be angry at. That won't save a single pension, but at least it will serve the moralistic attitude – until next time.