The dangers of competition

The financial press is full of commentary on the dangers of competition lately, especially now as the G-20 finance ministers gather this week.  Unchecked competition, Bundesbank head Jens Weidman warns us, will lead the world into a downward spiral in which we “will only know losers”.

What?  Danger of competition?  Impossible!  Does not every country rightly compete to reduce wages, income taxes, and regulations against their neighbor and is not this well and good?

Yes, of course it is.  It turns out that there are actually two types of competition, one in which the common worker struggles and the other in which the ugly collective force of democracy inserts its intrusive head into the “private market”.  The first is good and there is never objection; the second is hated and dangerous as it competes against the values of money and oligarchy.  The competition feared by Mr. Weidman and the finance types is of the second variety, and it’s presenting itself today in what’s termed “currency competition”.  Why is it feared and hated?

There are just three major global currencies today – the dollar, the euro, and the yen.  Orthodox policy throughout history, and especially during the past decades of neoliberalism, required that the governments controlling these currencies always pay out a sum of money, “interest”, based on the amount of wealth one owned.  The holders were never expected to do anything to earn these riskless payments – it was simply a feudal-like tribute to wealth – and it was fully accepted within all respected circles that there should always be an adequately high “riskless rate of return”.

What the outcry today is really about is that this risk free reward for doing nothing is at historically very low levels and even below the rate of inflation.  Further, the American and Japanese governments are even bypassing the “financial markets” and directly printing money.  All of this unorthodoxy is arising, at least partially, out of democratic pressures from below which are demanding steps to stimulate depressed economies.

We have then a conflict of interest between the desires of capital who always want high interest rates and the muffled calls arising from democratic pressure.  Where are the battle lines?  Interestingly, the US and Japanese governments are out in front in lowering rates and creating money.  While I certainly wouldn’t call these states democratic institutions and their actions are also meant to prop up their banks, they are to some large extent responding to democratic pressure.  The voices opposing these actions come from almost the entire global capitalist class and institutionally from the European Central Bank with its historic link to the Bundesbank.  Of course they can’t directly state they want higher riskless payouts; we hear instead things like inflation, “financial repression”, incentives to save, and even morality.  The governments of most “developing” countries, the most unequal societies on earth, are, incredibly, in this camp as well and this speaks volumes to the forces to which these rulers respond.  (I wrote a post on this subject dealing with Chile the other day.)

The conservative defenders of the status quo often deride what they call the “beggar my neighbor” policies of currency competition (read unorthodox monetary policies).  But they care not one iota that the global system of orthodoxy they defend beggars workers everywhere, every single day.  The neighbor they worry about beggaring, you see, doesn’t happen to be a worker.