“Existence Determines Consciousness” (“Das Sein bestimmt das Bewußtsein”)

Karl Marx’s ideas are said to experience a re-animation as a result of the present crisis. While not everybody agrees with that, I was surprised that when I recently chaired a session on European financial market supervision (“Centralised or Decentralised: Banking Supervision and Resolution in the Banking Union”) at the 2014 European Forum in Alpbach, that all my panelists – one EU parliamentarian, two financial market regulators, one banker and one banking lobbyist, unisono denied the gist of my introductory statement, that all the steps taken towards re-regulating financial markets during the past years had not fundamentally changed the way how financial markets worked.

In my intorduction I had quoted IMF (ex) grandees Raghuram Rajan (formerly chief economist of IMF, now president of the National Bank of India) and managing director Christine Lagarde, both of whom had lamented that re-regulation had not gone far enough, that massive industry lobbying had pushed back many well-intentioned attempts by regulators and that the global state of financial markets today might be prone to cause another, even deeper, crisis. I had quoted other analysts’ criticism that past regulation efforts neglected macroeconomic and political economy aspects, that the European Banking Union remained perilously incomplete, that efforts for a European financial transactions tax had come to a standstill, that regulatory and tax arbitrage remained a global threat because of the ongoing existence of tax and regulatory havens, that the root causes of the crisis (imbalances between and within countries, the explosion of financial transactions from 15 times GDP to 80 times GDP within 25 years, the concomitant strengthening of the lobbying power of the financial industry, excessive and risk-promoting remuneration systems, and many others) had not been eliminated, that the booming shadow banking sector remained completely unregulated. In short, that despite multiple efforts around the world, a veritable change-around had not occurred. I had used this list of criticisms as a (slightly) provocative way to enliven the panel debate.

And how I succeeded. The parliamentarian instructed me that I was completely wrong, that he could not disagree more, that the European Parliament had worked night and day to get the Banking Union, the Common Rule Book and many other things on the way, that these days they were starting to tackle the “too-big-to-fail” problem, in short that the European Banking scene today was miles away from that of 2008. The Austrian regulators reported on their efforts in Austria and at the European levels and also showed themselves rather proud of “what had been achieved”. The banker complained about a too high and expensive regulatory burden which threatened to infringe on his bank’s target rate of return of 12% plus. The lobbyist also mentioned the stifling effects of the new regulations and denied the existence of a credit crunch, but stated that it was rather the new regulations which prevented risk-taking and thus extending loans to SME. When I asked the panel whether they did not think that a 12% target rate created new imbalances in an economy which does not grow, whether such a high sectoral rate was not “exploitative” of the other sectors which the financial sector is supposed to serve, I was given rather short shrift and instructed that this was a “risk premium”, thus justified. When I asked about the macroeconomic underpinnings of required regulation, I did not receive any answers. Of course, all the panelists were well informed about their respective tasks, and full of praise or recognition that all the efforts undertaken so far had changed the financial world towards a more sustainable path forward.

While this discussion was far away from most things that Karl Marx theorized about, I realized once more that he was right in this one aspect: What you do determines how you think, how you see the world. It seems to be that the prerogative of not being tied to any workplace is a precondition for adopting a wider view. However, being aware that as the moderator you are not supposed to push and defend your own points of view, but rather to stimulate a lively discussion, this panel remained a relatively one-sided affair. But, as is true with many politicians today: for the panelists it seemed to be more important to create a “positive atmosphere”, “to project optimism about the future” than to engage in critical dialogue. As moderator, I was not able to bring them out of their cocoon, of their (in my mind) too narrow viewpoint.