Paradox of the economy

About solvency and insolvency

To see an incipient world economic crisis as a manifestation of the (class) contradiction between capital and labor, to ame from a marxist perspective that capitalism is about to abdicate, would certainly be puffery. And yet, with the sociologist niklas luhmann1 , who died in 1997, we could see in the present situation that the problem revealed in this crisis is even more fundamental. It is much more elementary to recognize the paradox that the economic system has to cover in its functioning with each of its everyday operations – payments. Namely, that every payment leads simultaneously to the ability to pay and to the inability to pay; every payment leads to the inability to pay for the payer in the same amount as it leads to the inability to pay for the recipient.

A functioning economy must therefore ensure that this paradox remains invisible. The payments constituting the economy were otherwise blocked, the economic system collapsed. The fact that in the money economy the preservation is trusted, thus the trust advance of the acceptance of payments is covered by the security of a thereby made possible expenditure under basically same conditions, is a condition making at least exchange economy possible. The paradox that payments as payments – in pure self-reference – simultaneously generate both solvency and insolvency is resolved by reference to external conditions. In luhmann’s diction, the distinction, which has become questionable, unstable due to the paradox, is reinterpreted by reference to another distinction "deparadoxes". Was long considered the gold standard in this sense external, "deparadoxing" condition, nowadays have the central banks as "wahrungshuter", as institutions conceived in this sense in the broadest possible independence, to provide for consistent conditioning of payments in the period of income and expenditure. In the case of a strong change of conditions from payment to payment, as is the case with hyperinflation, the elementary paradox of the economy became visible, blocking payment transactions.

The reproduction of the ability to pay

In order to free itself in the modern money economy from the limiting restrictions of a barter economy, which can only inadequately solve the problem of scarcity, the economy must, however, also ensure that the cycles of the economy, which reproduce solvency and insolvency, are differentiated. The paradoxically self-destabilizing distinction (solvency/insolvency) is thus transformed into a stable distinction; the distinction is thus once again transformed into a stable distinction "deparadoxed". In this way, besides the central banks, a double cycle is created, reproducing both solvency and insolvency, which once again invisibilizes the fundamental paradox of the economy, i.E. Hides the fact that every payment generates both solvency and insolvency at the same time, in a sense, both abundance and scarcity. The reproduction of the ability to pay (in the financial economy) is ensured by the fact that payments are made only under the premise of maintaining the ability to pay, i.E. Payments have to be profitable. Complementary it is to be ensured that the inability to pay, which is constantly reproduced in the consumption (of state and private households), is replaced. A cycle of taxes and labor serving the current inability to pay is created, which is linked to the cycle serving the ability to pay by the condition of profitability.

In this view it becomes clear that it is too short-sighted to see in capital and labor a contradiction in terms. Dramatized as a contrast between capitalism and socialism, a terminology is cultivated here which serves political purposes (i.E. Questions of the disposition of power), but is useless in economic terms. Rather, we are dealing with two equally important economic (in this sense, the "economic") factors "capital" factors, two flip sides of the operation of payment as a condition of "medal", which reproduces both the ability and the inability to pay in the economic system. Capital strives to achieve and increase solvency through profitable payments; labor (besides taxes) compensates for the inability to pay that constantly occurs in consumption. From this perspective, then, it can hardly be surprising how easily it is currently possible to switch from a "capitalist program" to a "socialist" is to be switched over. Within just a few weeks, it is obviously possible to create a "neoliberal program", which, from the point of view of profitability and profit, gave priority to the aspect of maintaining and increasing solvency, while merely marginalizing taxes and labor as costs, to a program that counters insolvency with massive tax subsidies, practically nationalizes banks to the extent of the aid provided, and intends to secure jobs in economic stimulus programs on an enormous scale.

At first, this may appear to be merely a blind spot in conventional economic theory. The main problem of economic rationality seems to be that it primarily focuses on the conditions of passing on solvency, marginalizing taxes and labor as costs (to be minimized). "Profitability and. Profitability is thus unilaterally distinguished as a factor that marks a calculation as economic; and the spending disposition of the state and municipalities as well as consumption in private households is seen as not economically motivated. Therefore, they can only be considered economically in the form of costs."2 it can be amed that this marginalization of the cycle of inability to pay, which is complementary to the ability to pay, and which at first appears to be merely theoretical and a blind spot, only became a problem itself, and now apparently in the economic crisis, when this inadmissible view of the economic cycle was applied to the economic cycle of inability to pay "favorable" conditions of application met. Within the framework of so-called globalization it has been possible in the last decades to minimize the factors of taxes and labor as costs in an extreme way. Both labor and tax revenues have been subject to unbridled competition at the nation-state level in recent decades. This led, on the one hand, to a years-long, only briefly interrupted by the bursting of speculative bubbles, of "creative financial instruments" (e.G "collateralized debt obligations" as bundled, broadly diversified securitizations of mortgages) but repeatedly fueled the boom on the stock markets as a thoroughly successful reproduction of solvency. But on the other hand, international competition successfully (and now rather momentously) enabled the marginalization of the complementary problem of insolvency, which had to be compensated on an ongoing basis. Public debt climbed to record levels, broad strata of wage earners are dependent on supplementary state benefits; adjusted for inflation, wages have been falling since the 1970s.

A contradiction that caused the economy to collapse into hyperinflation

The economic system is destroyed by the marginalization of labor and taxes, which in this sense are merely costs to be minimized. As the economic system’s stabilizing ("deparadoxing") distinction of the double cycle of solvency and insolvency, if not in dissolution, then at least in considerable imbalance, the elementary paradox of the economy becomes visible, throttles payment transactions and can lead to the collapse of the economic system. This is all the more so because the tax factor has been "economic" minimization of costs, the tax factor is increasingly being financed through loans. Thus, due to national tax and wage competition, less and less capital is withdrawn from the cycle of solvency; for example, as profit and corporate taxes, as taxation of inheritances, or as speculation taxes ("tobin tax"). The consequence of this is enormous public debt. This is especially true since, indirectly, the labor factor must increasingly be financed through (state) loans, since in germany, for example, millions of people are now living on unemployment benefits through the hartz IV legislation "precarious working conditions" standing persons are dependent on state supplementary benefits. Apart from this, an economically (necessarily) desired increase in consumption, with at best stagnating wages, requires financing through (consumer) credit, as has been practiced excessively above all in the U.S. And is now to be done even more intensively in an almost panic-like easing of credit conditions. This as a "rescue decrease", short-circuiting attempts to extinguish the fire with fuel.

In recent years, society seems to have become more and more dependent on state benefits, as is currently evident in the massive, credit-financed, and "rescue packages" in the case of the "new economy" and the economic stimulus programs, it is necessary to experiment with making the paradox of the economy increasingly invisible via credits, i.E., via the factor of time and thus the deparadoxical distinction between the present and the future. Present inability to pay is compensated by credits into a future inability to pay (again to be financed by credits)?) postponed. Thus, the factors labor and taxes, at least according to their tendency, are directly bound to the cycle of the transmission of solvency and lose in this short-circuited dependence their de-paradoxing effect as independent factors serving the cycle of ongoing compensation of insolvency. This corresponds to the logic of conventional economic theory with its blindness to the cycle of inability to pay, which is only misjudged as a cost factor. In this short-circuit (which resembles a snowball system), it is left to the future when the economic system will collapse. The reference to the time factor, i.E. The expectation that the present and the future are different, overstretches the confidence in a safeguarding of the future. This trust is secured by the fact that future conditions for payments (e.G. With regard to the amount of money) remain the same as the present ones, i.E. The time factor does not play a role in this sense. It may then be this contradiction that causes the economy to collapse into hyperinflation.

Leave a Reply

Your email address will not be published. Required fields are marked *