Poor people spend their money wisely

"If I weren't poor, you wouldn't be rich"

Wednesday, May 19, 2021

Reading / Archive | Article from October 20, 2013

Reading special - On the quiet dying of the social market economy

Moderation: Peter Lange

Euro and dollar bills: Many of today's super-rich owe their wealth to political decisions. (AP)

Peter Lange is discussing two new publications with the sociologist Michael Hartmann and the economist Rudolf Hickel: It is about Michael Goodwin's graphic novel "Economix" and Chrystia Freeland's non-fiction book "The Super Rich".

Peter Lange: Welcome to the reading special, as always from the Grillo-Theater in Essen and, as always, in cooperation with the Institute for Cultural Studies and the "Proust" bookstore.

The title of our program "If I weren't poor, you wouldn't be rich" is a loan from Bert Brecht from 1934. There he wrote:
Rich man and poor man stood there and looked at each other.
And the poor said pale, if I weren't poor, you wouldn't be rich.

Today we want to introduce you to two books that deal with poverty and wealth. They deal with business in and of itself - locally, nationally, globally. And it's about private super wealth and public poverty. As always, we invited two guests whom I would like to introduce to you.

Michael Hartmann is Professor of Sociology at the Technical University of Darmstadt. Its main topics are social origin, equal opportunities and the behavior of elites. Welcome, Mr. Hartmann. We asked him to look at the book by US journalist Chrystia Freeland, entitled "The Super Rich. Rise and Rule of a New Global Money Elite".

Cover - "Economix" by Michael GoodwinOur second guest is Rudolf Hickel, retired but still very active professor of economics, critic of neoliberalism and author of a foreword to - hold on tight - a comic about economics that we're about to talk about . First of all, a warm welcome, Mr. Hickel. A comic called "Economix. How our economy works" - and then written in brackets "(or not)". The author is called Michael Goodwin and the illustrations are by Dan E. Burr. That's about 300 years of economic and political history as a narrative of how a young man with horn-rimmed glasses tries to understand how the economy works then and now - theoretically and practically, the whole thing as a comic.

This genre is called graphic novel. If you don't know what a graphic novel is, this is a comic that would like to be a book. 300 pages, Mr. Hickel, why are you so excited about this book?

"The prevailing economic textbooks do not explain"

Rudolf Hickel: Because I wanted to mess with my guild again, it was crucial that the prevailing textbooks do not provide any proper information. They come from like the Bible, the secret revelations. And that's why I find this book so fascinating, now apart from the content, from the representation as a comic, because education is pursued. All of you who are listening to us now are surrounded by an incredible number of questions. What is inflation What are financial instruments? First of all, nobody really knows.

Second, if you then look, you usually get control knowledge, for example, producing from the banks that the financial instruments are the best in the world. And that reveals everything.

And the third thing that fascinates me incredibly is something that no longer occurs in German economics. Before I criticize someone, I first explain what they say.

Example: Milton Friedman is the forefather of neoliberalism with his book "Capitalism and Freedom", in which it is shown that capitalist primacy has to rule everything. You can even explain a marriage in an economically rational way, with benefits and disadvantages. He criticizes it sharply, but first presents his theory.

The three big figures are basically Adam Smith - Adam Smith is worth reading because the actual Adam Smith theory is not properly communicated. For example, the question of wages is not communicated. For example, that Adam Smith made an ardent plea in his fifth book for what we are currently experiencing in Germany, namely that the economy always needs a good public infrastructure.

It's just worth reading how Adam Smith explains why an economic system based on serious, good liberal economic development opportunities has to defend itself when some basically bring together the rationality of the whole system with speculations and bonuses. - And it's worth it.

Peter Lange: Now you are one of those high priests of this order of economists yourself. Of course, I also thought that your colleagues would have thought Hickel writes the foreword in a comic, which is not too good for anything.

Rudolf Hickel: Yeah, I've heard that before. If something is criticized in our industry and you appear in the medium, everyone else always says that science has to remain closed in itself. - I think science, and you have to use all of that, has to be communicative. We have so much need for explanation, people have so much need for explanation and they are so ripped off with so many explanations.
Let me put it quite radically: Any form of enlightenment, including enlightenment with comics, is incredibly convenient for me. And I don't leave anything out.

Peter Lange: Mr. Hartmann, is that a serious textbook?

Michael Hartmann: I can't judge that, I didn't look too briefly. But, as I said, I have the same opinion on one point. I also believe that every opportunity should be used to educate the public, especially in economic contexts.

It was a couple of weeks ago that there was an appeal, which I also signed, that more different opinions should come into play again in German economics, because that has now become very monothematic, which is prevalent there. And a comic can also be used for this. I can't judge, I've only read 30 or 40 pages. I liked them. But I don't know whether the book as a whole fulfills this purpose.

Peter Lange: Mr. Hickel, you wrote: "I understand my own knowledge better." What does that mean?

Rudolf Hickel: It basically has three entrances. You have now thankfully named one access, Mr. Hartmann. When you go to universities today, look at textbooks, I sometimes don't say comics, I said it's Mickey Mouse economics, but with high mathematical forms. The explanatory value is zero.

And what I like about the book is that the story basically starts with Quesnay, who was actually a doctor, the famous economic cycle. He first explained to us that an economy somehow works like a cycle. It just has history, it has dealt incredibly intensively with the history of the economy.

Peter Lange: The economic historians should actually do that too.

"Economists always have a magic wand and a magic formula"

Rudolf Hickel: The economic historians are a very peculiar guild here. Hopefully no one is under now. They are honorable colleagues, but they have the problem that they explain a lot of economic history. But what is missing is that the formation of economic theories is mapped, so to speak, that the change in paradigms, for example from Keynesian control to neoliberalism, is not explained historically.

The second deficit, I mean, it's really sad to have to say something like that: there are no institutions. Who he scourges the most is, so to speak, the frightening figure and the most desolate figure, this stupid homo oeconomicus. It is always said that a rational actor is a very poor social type. In the meantime, behavioral research knows that nothing more can be explained. But then economists always have a magic wand. - And he and I try to break it. If you say: as if, if, then, with the magic formula I can claim all nonsense, without economic or political relevance.

And the second always reminds me a bit of Hegel. I wrote that in my foreword. The mathematical models, by the way, he is taking massive action against it, I'm also for mathematics, we need mathematics, but if in the end we only train mathematicians who sit at the banks and then develop these unspeakable betting instruments without asking what they are Political, economic, social relevance is, I would say, we also need a piece of institutional structures, democratic developments and that sort of thing. That he put it together in the book and that is of course incredibly provocative. I gladly accept the provocation of writing a book with the subtitle "How economics works (or maybe not)". - Wonderful.

Peter Lange: That is also a history of economics at the same time. While reading, I asked myself: With all the power of interpretation that economists have, with their influence on concrete politics and with their claim to be an almost exact mathematical science at times, it often amazes me why they are so wrong.

Rudolf Hickel: If you will allow me, I will explain it using an example: The council of experts makes appraisals of macroeconomic development - a highly honorable body, five people, whom I never got in because when I was supposed to go in, the others said they would quit . Then I said, okay, I'm not going in.

But they were in 2009, for example, before Lehman Brother was, in October 2008 we were faced with the question of whether the German banking system would collapse. Then the council of experts comes up, makes its report in October / November and writes in the forecast for 2009: We're getting a bit of a shaky growth, but it'll be fine.

In 2009, realistically, we had the biggest slump that we have ever had in Germany, with 5.1 percent collapsing. That can be explained exactly: If you have a great mathematical model, for which we also have huge respect, you have done a great job if the model portrays the financial markets as always self-stabilizing markets, firstly and secondly, the banks as never crisis-prone and there is a crisis, well, well, then they are unlucky.

And now, as part of an educational leave campaign, the Advisory Council is in the process of integrating the financial markets, the bank, so to speak. - That was formulated a bit polemically, but it hits the phenomenon.

Cover - "Economix" by Michael Goodwin (Jacoby & Stuart)Peter Lange: We don't even know polemics from you, Herr Hickel. I've read this thing too. I found it very entertaining, which is what you can expect from American authors. Sometimes I found it a bit wet research though.

So, here for example: Adolf Hitler appears once and looks a bit like a shrewd vacuum cleaner salesman. And then it says here: "The bigger the lie, the more people will follow it." The fanatical right-wing radical Adolf Hitler knew that too. - That was it on the subject too. I found that a bit poor.

"If the rich are doing well, prosperity increases - wrong!

"Rudolf Hickel: Now I come to the criticism. There are three passages that I don't like. I find the passage ridiculous. But that's typical american View of the problems. And the second is the chapter on Lenin and Stalin. I find that unbearable, also portrayed in a very infantry way, so to speak. But he already has the message how it turned over in such a reign of terror, but all of this is too superficial for me overall.

Let me put it this way: When I presented the book, I presented it and left out exactly the two chapters.

What is exciting when you simply have economic theories that you always hear a lot about, and I want to say one thing, that is exactly Hartmann's topic afterwards, the "Rossäpfel theorem", which he castigates. And we'll get to that in a moment. "Rossäpfel-Theorem" or if the rich are well off, so if the horses are fed with the best oats, of course the majority of the masses produced the oats, then there is also in the end what is left for the sparrows, so it is, what falls out of the back is a little more valuable. In other words: If the rich are doing well, in the end it will also increase prosperity for the poor and for those below them.

And that is exactly wrong now. We have increasing social divisions. And that's what he castigates, this theorem. And how long has that shaped the minds in Germany, also in politics according to the motto: The more we cherish and foster wealth, the better everyone is doing. This thesis is so nonsensical. And I'm glad that there are some really nice pictures that - if you criticize the thesis now, you can also show others.

Some say the portrayal is a bit infantile, but I won't allow that. Donald Duck, if you interpret that correctly, is also an economically gifted freak. Well, you can learn a lot from it.

Peter Lange: With that you have already given me the cue. Chapter 7 is called "The Uprising of the Rich". It starts with Ronald Reagan's program, tax breaks for the rich, social cuts, the state as its own public enemy, so to speak. This is where "Economix" meets the second book we want to talk about, "The Super Rich. Rise and Rule of a New Global Money Elite" by Chrystia Freeland.

Mr. Hartmann, you took a closer look at this book. How is the core thesis of this book going?

"Criticism of capitalism from the perspective of a Financial Times editor"

Michael Hartmann: The core thesis is that we are in a phase that is comparable to the phase between the late 19th and early 20th centuries in various ways.

So, first of all, we have something like a second industrial revolution and a second founder period, only that, unlike back then, a first and a second revolution are coming together, i.e. a first industrial revolution, she says, in the emerging countries and at the same time a second technological revolution in developed industrialized countries, which results in everything falling over the world with even greater power.

As a result of these industrial revolutions, they argue, the difference between rich and poor is growing extremely large. This is essentially a consequence of economic developments. She says that too. Political decisions can promote or slow this down. You promoted it, but it's just one factor that adds to it. The core is the economic factor. So that is the first thesis.

The second thesis is: There is always the danger, and it sees it as very concrete, that this wealth tries to decouple itself permanently from the rest of society. That means that every single rich person, whether he is good or bad, well, she takes as examples Warren Buffett and Bill Gates as the good capitalists, there are also the bad ones, but that everyone has an interest in preserving their wealth , and that the consequence of this is that something happens in the long run, which she then illustrates quite nicely using the example of the Venetian Republic of the 14th century, that a society that is highly mobile - and she, as a former editor of the Financial Times, stands up to capitalism very, very positive towards a capitalism that is creative, very destructive, but destructive in a positive sense that this capitalism loses this potency, is no longer creative, but is only concerned with preserving wealth with the rich and so that the mobility of society is lost.

These are their core theses. And she justifies this with the fact that a) the rich are also incredibly influential, that opposing forces are lacking. So, she names two in particular. First, there is no longer a socialist camp. So, at some points she says quite explicitly: The capitalists have come to understand because it was better that the workers earn well than that the workers chase after the Bolsheviks. Second, the capitalists then realized that they needed the middle classes for consumption. This is no longer so important today because there are enough consumers due to the worldwide expansion of capitalism.

And third, we are experiencing something like a global super-elite that - they call it "culturally" - has moved so far from the rest of the world's population that the rest of this population no longer have access. So, they make all the important decisions among themselves. And that is why this danger is that, just like Venice in the 14thCentury from a mobile creative phase into a phase in which only what one already has is defended from above, this danger for them is extraordinarily great. So, she criticizes capitalism from the point of view of an editor at the Financial Times, you can see that in the whole book, but with a great deal of expertise.

Peter Lange: I found there was a bit of name dropping in it. So who she talked to, unbelievable. That may have something to do with vanity, too. But I also had the impression that she actually differentiates between good and bad high earners. Those who have earned their own money, so to speak, from the smallest of beginnings, are, so to speak, better regarded than those who live on inherited money.

Rudolf Hickel: I mean, she has two terms here. That fits wonderfully here. On the one hand, she speaks of the pension hunters. Or there she also speaks of the plutocrats as a band of robbers, although we have agreed beforehand that we will both not use the term plutocracy because it was one of the worst fighting terms used by the fascists against Jewish capitalism. Obviously she is relatively uninhibited. Well, we don't actually use it in our analyzes, although plutocracy means terror or the rule of wealth.

So, on the one hand the pension hunters, that fits in incredibly well with the time, and on the other hand, that also fits in with the time, namely on the other hand the added value. But I think the distinction is good, not to do the general bashing against capital representatives or, as Marx would say, against character masks, but there are excellent entrepreneurs in the value-added economy and in the service sector, for example. And there are the robber barons.

And the problem is that the robber barons or, as she calls it, the pension hunters, have become dominant and are therefore responsible for the crisis that we have now experienced worldwide due to the financial market crisis.

"How the super-rich have benefited from political decisions"

Michael Hartmann: Let me say one thing about that. She is not consistent in her reasoning. There are a variety of fractions. They are also related to the fact that - if you take the first and the last chapter as the central ones, it argues historically comparatively very stringently, and in between the main part of the book is journalistically written with a lot of name dropping and 'I'm there with him and I'm there with him' - she quite often loses the line of reasoning.

I want to make it clear with this example: At the front she writes very clearly that there is - unlike at the beginning of the 20th century - a clear majority today among the super-rich who created wealth and who do not consume it like the generation of heirs.

If you look further back, she disavows her own argument by describing what they have created. There are those, I'll say Bill Gates, or all of IT, microelectronics, the Internet and so on, where you can say yes, they created something. But most of the examples she cites afterwards are hedge fund managers.

The question arises: what wealth have they created? Private equity managers, investment bankers, you can at least put several question marks behind the category, they created their own wealth. And then it shows very nicely what they have benefited from - from political decisions: deregulation of the financial markets or Carlo Slim, the rich Mexican, who simply benefited from the fact that the Mexican government gave him a monopoly on telecommunications.

That means, that is not what they represent as a creative capitalist creator of value, but they are actually pension hunters.

But up front she has a completely different argument. And so there are a number of things like that where it contradicts itself, because in my opinion - that is the biggest weakness - the book sometimes simply loses the thread in the long middle section due to the multitude of individual representations. It's exactly the same with the global elite. That is an argument that is essentially based on anecdotes. There is very little to be found in really solid arguments. You can find a lot of conversations that she has had.

Rudolf Hickel: Can I make a small addition, not an objection? I mean, there are two characters that she has in mind, the richest men in the world. This is Mr. Soros, the George Soros, who was and is actually a very bad speculator. I even trust them in the way, no matter how many think tanks they can set up, I don't trust them across the board. And the other is Warren Buffett. That’s the one who called financial instruments a means of mass destruction.

And now I want to add: The problem is that the wealth that we actually deal with traditionally, which arises in companies, so to speak, and through the appropriation of those who manage the companies to which they belong in the production economy has grown to that That, I think, she already has a high level of sensitivity, a wealth that is actually based on the destruction of economic value has grown, namely speculation. But these are the richest people. And that’s the super-elite today who, in my opinion, put the system at risk. Or?

Michael Hartmann: But it has to be said that the examples that it brings are predominantly from the financial sector. She has hedge funds ... If you look at the list, which was only recently published, "The billionaires of the world", all the industrialists who are in there, largely fall under the table with her. If you look at the list of the richest Germans, of the first 20, 15 are heirs.

Rudolf Hickel: Aldi is the first.

"The German billionaires are the third largest group in the world"

Michael Hartmann: Not only, Otto, you could go through them all. The fact that someone is an heir doesn't mean anything at first. There are heirs who continue to manage companies. Well, Michael Otto is one of them.

Peter Lange: Good, but the German rich are poor eaters again compared to the other rich in Russia and Mexico.

Michael Hartmann: The German billionaires are the third largest group in the world. After the USA and China come the Germans. Don't underestimate that.

Peter Lange: There is a point where it differentiates or where the question arises: Why are there those who are well respected and those who are badly respected. Well, a Bill Gates who donates a lot of money is much more forgettable than a Buffett.

Rudolf Hickel: Yes, well, I mean, I had the opportunity once - that sounds like name dropping, that you have just rightly incriminated, but I once had the opportunity to discuss with Bill Gates at an event, a discussion with Ms. Sabine Christiansen . And I have to tell you, just emotionally: I've rarely heard such a fool.

Peter Lange: The famous Bill Gates.

Rudolf Hickel: He then said to me, yes, the famous Bill Gates, apart from the fact that he was, so to speak, massive with his monopoly - the EU even sued that against Microsoft, because with the monopoly they are young dynamic entrepreneurs who develop new systems , simply suppressed it. I want to tell you, I then argued a bit and said: You are a communist, you like regulation, you are a communist. I like deregulation, I'm capitalist. - So I said: The richest man in the world should not allow himself such a simple worldview. Well, that's documented, it's documented.

Michael Hartmann: One has to say one thing about Bill Gates. That's just an anecdote, but that's nice, it's not systematically included. It describes very nicely the consequences of these large foundations using the example of the medical system in Africa.

Here comes Bill Gates with his big Malaria Foundation. And the poorly paid doctors who work in African countries get offers from him that - in terms of pay - are well above what they could otherwise earn. He's pulling her out of the normal medical system. This is only touched on briefly, but it makes it clear that even such foundations, which may have been established with the best of intentions, such foundations have unintended side effects.

One of the strengths of the book is that at some points, without this being systematically included, very interesting insights come out because she just talked to people.

Peter Lange: If we now include the other book "Economix" again, well, with Freeman it is like that, this capitalism works as long as it is permeable - upwards and downwards. I think that is the decisive criterion for them. As long as that is the case, someone can ascend and someone can also descend, that's in principle okay.
With "Economix" the question is ultimately asked: What should be done? We have to do something. And the Americans are very pragmatic. They also have an idea right away.

Cover - "The Super Rich" by Cynthia Freeland (Westend Verlag)Rudolf Hickel: But at least, I want to say, I really liked a passage in Freeland, because it describes the insight that you have just wonderfully summarized again, Mr. Lange, that the system, so to speak, with super wealth, which has a self-destructive effect , compares it to the law with the anatomy of capitalism by Marx - very explicitly.

Marx has, so to speak, shown the great merit of having individual economic profitability without regard to society as a whole, so to speak, that one then prepares his own downfall, so to speak.

And by the way, that is also a thought in the book "Economix" that does not want to abolish capitalism, Ms. Freeland does not want to abolish capitalism either. Those are thoughts that run into one another to some extent. And finally, that's what I think is the best thing about the book: Now you have tossed your way through because in the end it is not easy to read with "Economix", and at the end he says: By the way, it's not the end. I gave you a few tips. Now you have to think further. And now we have to take action. - This is almost reminiscent of Marx's Feuerbach thesis The philosophers interpreted the world brilliantly, but not changed it. But that's completely open. I think that's the beauty, the democratic, the emancipatory about the conclusion that you are not baked into So, that's it, rather: Take all of this and try to draw your own conclusions. That's wonderful. I would like that from some politicians and some scientists in Germany.

Peter Lange: Although I noticed that the book "Economix" addresses a lot of topics - right up to media criticism. Everything is in there, environmental degradation, etc., etc. Everything is related to everything that would be more paralyzing with us. Where do you start? They say: Well, well, if we could solve a problem, we might get closer to solving others - a completely different approach, right?

Rudolf Hickel: I find a strong chapter because you just mentioned it is this GDP criticism. Humans do not live on GDP alone. such a paper. That means that people do not live on gross domestic product alone. We always reduce, you have to imagine what it means to a society that economic processes at a growth rate and seriously ask, will it now be 0.5 or 0.8 percent. - And what's behind it in terms of social ... - in the destruction of humanity, what's behind it in terms of the environmental crisis.

There he has some wonderful pictures and basically gives a lecture, to put it elegantly, that capitalism, the microeconomic orientation, repeatedly externalises problems that ultimately bring us to collapse. I find that a strong chapter. You don't usually find this in textbooks.

I believe that the greatest threat to capitalism is not the class struggle, you can no longer talk about it, but the greatest threat is, so to speak, the endogenously generated ecological crisis that will ultimately bring it down - or we will change it.

Peter Lange: And how do we change it?

Rudolf Hickel: There are a few very small indications, such as that we no longer act according to Oscar Wild and say that everything has a price but no value. And there you can do a little something.

"One of the book's strengths: Freeland just talked to people"

Michael Hartmann: You could very easily, Freeland says that very clearly, you can force a development politically or you can slow it down. And right now it's all about this decision. You cannot prevent it, but you can, for example, in terms of tax policy, that is the subject here at the moment, you could say in terms of tax policy, there is such a redistribution going on, it can be limited. Or you can say no, we are promoting this redistribution. That has happened for a good 20 years. That is a very practical political question that is currently pending.

Peter Lange: Yes. But we have already reached the end of the reading. Today we talked about "Economix", with an X at the end, by Michael Goodwin and Dan Burr, "How our economy works (or not)", a graphic novel, published by Jacoby & Stuart in Berlin, costs 304 pages 19.95 euros.

And the second book in this program "The super-rich. Rise and rule of a new global money elite" by Christia Freeland, published by Westend Verlag in Frankfurt am Main, 22.99 euros.

And that brings us to our guests' book tips. Mr. Hartmann, what do you want to recommend?

Michael Hartmann: I've been asked, I hardly get to read which ...

Peter Lange: Read comics. That’s faster.

Michael Hartmann: ... which would have inspired me. It seldom happens that books really inspire me. When I want to relax, I just read crime novels. And there I recommended a crime thriller that has just been published, by two Swedish authors, Hjorth and Rosenfeldt, "The dead that nobody misses". This is a) a very intelligent crime fiction and b) a crime fiction that also has a political background. That wasn't the decisive argument, but if you really want to read an intelligent crime thriller where you can really relax - that's always the main argument for me when I read books like this - then I can highly recommend it.

Peter Lange: Many Thanks. So, something to relax. Mr Hickel, what you are planning is - I don't think so - meant to be relaxing.

Rudolf Hickel: No, I admit, I am totally deformed professionally. I can no longer read novels. My wife reads them and always tells me about them, so she can show off at parties. Well, I can't do it anymore because I read novels with a pen, so to speak, terrible. But I recommend a book that fits exactly what we have discussed, an extremely clever book by Ulrike Hermann, which you probably all know who withdrew for a year in the taz, in the daily newspaper and wrote the book: "The victory of capital", extremely interesting title, "How wealth came into the world. The story of growth, money and crises". Much of what we couldn't discuss more intensively today is laid out there.

And what fascinates me about the book is this great historical knowledge, for example that globalization in the Hanseatic League already took place in the Middle Ages, so a book that I can highly recommend, but with one caveat: it is well written, but none the less, so to speak After-work reading.

Peter Lange: Good thing you have to save for the holidays then.

So, many thanks to Michael Hartmann, sociologist from the University of Darmstadt, and to Rudolf Hickel, economist from Bremen. Thanks for being here.

That was the reading special from the Café Central in Essen's Grillo-Theater in cooperation with the cultural studies institute and the bookstore "Proust". Thank you for your interest.

More on the subject:

Between oligarchical power elite and democratic claim - new cultural conflicts III: the USA

Capitalist with money bag and cigar - Michael Goodwin: "Economix. How our economy works (or not)", Jacoby & Stuart, Berlin 2013, 304 pages

From cultural and social sciences - main topic: The gap between rich and poor is getting deeper - Congress "Redistribute. Power. Justice." at the TU Berlin

The attitude of the elites to social issues - Michael Hartmann: "Social inequality - not an issue for the elites?", Campus Verlag

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