Friday, July 1, 2011


Among the alarmingly familiar-sounding things that Marx observed in the wake of the “failed” 1848 revolutions, the most familiar-sounding at the moment are his reflections on credit and “confidence.” In his writings on both the French and German revolutions, Marx finds that the “most eloquent” barometers of the post-revolutionary times are “its financial measures” (The Class Struggles in France: 1848 to 1850, trans. Paul Jackson, in Surveys From Exile, ed. David Fernbach [London: Verso, 2010], p. 49). In his 1850 analysis of events in France, Marx notes that the provisional government sealed its political allegiances when it became anxious to “remove even the suspicion” that it might not honor the debts of the previous government (49). Paying out interest on its bonds before it was even due, the government exacerbated the financial straits of the state and missed the chance at “the bankruptcy of the Bank” which “would have been the deluge which in a trice would have swept from the soil of France the financial aristocracy” (50). Instead, it acted like a “harassed debtor,” so that “credit became a condition of its existence” (52)--or at least was reaffirmed as a condition of its existence.

In December 1848 Marx had written something very similar about the German post-revolution. Reading closely speeches by the Prussian finance minister, David Hansemann, Marx selected for special sarcasm Hansemann’s call for “the strengthening of the state power, which is necessary for the protection of the freedom gained . . . and for the restoration of the confidence that has been disturbed” (Neue Rhenische Zeitung, 31 December 1848, trans. Ben Fowkes, in The Revolutions of 1848, ed. David Fernbach [London: Verso, 2010], 202; Marx’s italics). Marx notes the necessary proximity of police power to investor confidence, and the rhetoric by which Hansemann assured the working class that its condition would improve along with confidence, and so depended on restoring confidence first by “put[ting] a stop to its political agitation” (203).

In the German case, Marx wants to show that Hansemann’s explicit foregrounding of financial over political (and all other) motives was weakening the monarchy even if it was strengthening a new liberal state. Marx points out that between 1847 and 1848, Hansemann’s deployment of bottom-line logic, favorable to his own mercantile interests, changed its main target from the aristocracy to the people. Put another way, Hansemann “change[d] passive resistance against the people into an active attack on the people” [200]. Still, in 1848 as ever, Hansemann’s straightforward emphasis on financial results showed that “the monarchy had become a ‘matter of money’ in Prussia” (204). Implicitly, the monarchy could be switched out when it became insufficiently unprofitable just like anything else. Chez Hansemann, what survives of the old state is “police” and “treasury,” where “police means treasury” (207). So, the finance minister kills confidence in the government and actively reduces its scope at the same time that he attends, in more of Hansemann’s own words underlined by Marx, “to the establishment of confidence, and to the resuscitation of the trading activities which are at present languishing" (205).

Now, Marx predicts that the current ministry will expire by the same bottom-line logic by which it rose. Here Marx himself takes up the financial metaphor of “guarantees” on investment: “However, we have a guarantee that the more active part of the bourgeoisie will have to awaken again from its apathy, in the shape of the monstrous bill with which the counter-revolution will surprise the bourgeoisie in the spring” (212). The idea here is that since everyone is agreed that the reason for doing things is financial, Hansemann’s own credit will be downgraded as soon as society finds out how much it has to pay for his ventures--pay literally, in cash and not only in social bonds. Threading its way through Marx’s witty analysis is Marx’s own increasing investment in the logic of self-interest. Here at the very beginning of his economic turn, the potential to lose in this speculation, this bet on the overriding nature of interest, already appears. Marx believes that Hansemann was mistaken “in the nature of this ‘state power’” that he thought to enhance: “he believed he was strengthening that state power which is worthy of credit, of bourgeois confidence, but he only strengthened the state power which simply insists on confidence, and, where necessary, obtains it with grape-shot because it possesses no credit” (203). Marx plays with the homophony of middle-class confidence in government on the basis of its capacities and investors’ confidence in credit, and apparently wants to imply that the two together are stronger than the latter trying to survive without the former. He seems to be trying to draw a distinction between the stable and capacious government whose economy would merit investment and the state of gangster capital that makes an “offer you can’t refuse.” Hansemann, he suggests, confuses the two and does not notice the real meaning of his moves. But perhaps it’s Marx who’s confused in supposing that any such distinction matters pragmatically, not Hansemann, who was indeed attacked by both conservatives and radicals, and soon departed the political scene, but only to form a hugely successful banking society that eventually merged with Deutsche Bank (“die grosse Fusion,” 1929).

A little over a year later, Marx would write of the French post-revolution:

Both public credit and private credit were, of course, shaken. Public credit is based on the confidence that the state will allow itself to be exploited by the financial sharks . . . . Private credit was therefore paralysed, circulation restricted, production at a standstill before the February revolution broke out. The revolutionary crisis intensified the commercial crisis. And if private credit is based on the confidence that bourgeois production—the full range of relations of production—and bourgeois order are inviolable and will remain unviolated, what sort of effect must a revolution have which calls into question the basis of bourgeois production . . . . Public and private credit are the thermometers by which the intensity of a revolution can be measured. They fall, the more the passion and potency of the revolution rises. (The Class Struggles in France, 49).

Marx again divides, yet still aiigns the two kinds of credit--credit a state may merit in substance, even if the criteria are limited to those pertaining to the overall economic condition of the state, and credit as measured by investors, which reflects only the prospects of the investors themselves. This is where Marx’s text gets especially, distressingly familiar. In the ongoing Euro crisis many commentators have pointed out the non-relation between a country’s debt-to-GDP ratio and its credit rating. In debt-to-GDP ratio and annual economic growth, Argentina currently outperforms Ireland, but Argentina’s credit rating remains five levels below investment grade and “Ireland’s credit rating remains eight levels above Argentina’s” (“Ireland Follows Greece as Fernandez Beats Euro Nations: Argentina Credit,” Bloomberg News, January 4, 2011). Argentina’s “credit remains constrained by events such as the 2008 nationalization of pension funds and rate freezes on subsidized public utilities,” according to securities expert Siobhan Morden; “You’d need to remove these policies in order to say that Argentina is on the path toward investment grade” (Bloomberg News). What drives the credit rating is not the condition of the economy but the promise to investors that they will be paid no matter what happens to the economy. Similarly, before the Egyptian revolution Standard & Poor’s praised Egypt’s “fairly strong banking sector, which has been well insulated against the recent global financial turmoil”---although this wasn't enough to counter what it called “uncertainties concerning presidential succession” (Arab Finance Brokerage, March 28, 2010). Analysts openly discuss the fact that European assistance “to Greece” actually means assistance to the European banks that would lose money in a Greek default (e.g., Greece is being “helped” only so that it can repay the banks, not to enable it to recover. The main reason that Greece is supposed to go along with this is that otherwise it, like Argentina, will not be able to get credit in the future (“As Greece Ponders Default, Lessons from Argentina,” New York Times, June 23, 2011).

Since repaying the IMF in 2006, Argentina has not borrowed from the IMF again, which “has enabled the Kirchner governments to avoid the agency’s typical prescription of cutting state spending,” The New York Times points out. Argentina wants to repay more and re-enter the credit market; Marx’s comments on confidence, though, suggest that with friends like investment banks, no society needs to arrange for its own counterrevolution. If credit falls “the more the passion and potency of the revolution rises,” of course that doesn’t mean that the more credit falls, the more potentially pro-proletarian a state or a society becomes. Meanwhile, the beginning of Marx’s theoretical conclusion--that the calculus of interest must be brought over to the side of the people, by the process of elimination if necessary--casts its own lot, maybe fatally, with the perceived “reality” of economic interests.

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P.S. July 12:

European officials who've expressed little regret at the economic suffering of ordinary EU citizens are now enraged at the credit rating agencies for downgrading Portugal even though it has met every "austerity" demand of the IMF. "Wolfgang Schauble, German finance minister, said there was no justification for the four-notch downgrade" (, my italics). "Heiner Flassbeck, director of the UN Office for World Trade and Development, said the agencies should be 'dissolved' before they can do any more damage, or at least banned from rating countries" (ibid.). For its part Moody's has "said it had little choice once EU leaders began to insist on 'burden sharing' for private holders of Greek debt" (ibid.). Since the downgrade of Portugal, Irish bonds have been junked and Italy and Spain are "being targeted by the financial markets" ( The EU notes that the Irish rating "contrasts very much with the recent data, which support a return to GDP growth this year, and the determined implementation of the [austerity] programme by Dublin" ( The EU is protesting business as usual as applied to non-European countries now that they are experiencing the ability of private enterprises to undermine all the hard work they've been doing and the very stability of their states. Still, it's nice that Viviane Reding and José Manuel Barroso have joined the indignados. There's room in protest camp for everyone.


Keith Leslie Johnson said...

This has whet my appetite all the more for Graeber's book on debt, which should be out in a week or two. The basic thesis, I gather, is that debt *preceded* money, historically. Though anyone who took out student loans could tell you that...

RT said...

Ah! Interesting--thanks for the reference.