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Globalisation
and Class Struggle in Germany (page
5 of 5) Global Finance vs. the National Economy Inside Germany the most hotly contested battle over national champions is in the finance sector. After W. W. II banks and insurers were key players in rebuilding financial and industrial strength. Financial institutions held large direct interests in industrial companies and developed a culture in which financial executives held many non-executive positions on industrial boards. For example, Josef Ackermann of Deutsch Bank is also on the board of Siemens, Linde, Lufthansa and Bayer. This mutual support network was known as Deutschland AG; but with globalisation major banking and insurance companies have begun to divest large chunks of their old industrial shareholdings. Also under threat are low cost loans to Germany’s mid sized business community (Mittelstand) from the regional Landesbanks. The Mittelstand sector generates 60 percent of the GDP, employs 70 percent of the workers and provides 80 percent of training positions.41 Traditionally they have depended on bank lending for finance but now face a credit squeeze as the financial sector has developed more global interests. Lastly, Germany has three levels of banking that includes private-sector banks, not-for-profits co-operatives and state-owned regional saving banks. This system of 2,700 banks has served the national economy well by providing a strong range of local and regional financial resources, but has limited the size of the larger institutions. Germany’s top five banks have only 3.8 percent share of the countries deposits lagging far behind other European markets. For example, the top five banks in Sweden have 75 percent of total deposits; top UK banks have 67 percent, and similar institutions in France 47.6 percent. Among the top ten global banks by assets, Deutsche Bank is the only ranking German institution at number six. But in terms of market capitalization it ranks only tenth among European banks.42 Foreign financial services have also been slow to enter Germany with assets of just 4.7 percent compared to foreign controlled financial services in the UK at 51 percent and 25 percent in Belgium.43 In order to survive global competition German financial institutions are under intense pressure to grow through consolidations and mergers. But in order to achieve competitive size they need large partners outside of Germany’s divided and smaller institutions. Global institutions are able to offer an array of services overwhelming national banks that can’t match their resources. A merger and acquisition wave is already starting to sweep through Europe with nine countries involved in six large cross-border mergers since 1999. Schroder has responded by calling for a consolidation of German banks to create a national champion but as Gary Parr, deputy chairman of Lazard, points out, ‘no one country is large enough to provide an adequate base. The combined market capitalization of Citigroup and Bank of America, for example, is larger than that of all the publicly traded banks in France and Germany combined.’44 Some of Germany’s biggest banks have already developed global growth strategies by focusing on expansion into Eastern Europe. Commerzbank has made acquisitions in Poland, Hungary and the Czech Republic, and moved their back-office work to Poland, the first German bank to do so. Hypovereinsbank (HVB) bought into Bank Austria gaining access to an 850-branch network throughout central and Eastern Europe. They plan on building another 200 branches spanning 11 countries. Announcing the plans chairman Erich Hampel said, ‘We have set ourselves a clear target. We want to become the undisputed number one in central and Eastern Europe.’45 HVB has also held merger discussions with Spain’s top bank, Santander Central Hispano. Deutsche Bank entered global ranks when it acquired the UK’s Morgan Grenfell in 1989 and latter Bankers Trust and Scudder from the US. But nationally based capital groupings still have strong interest in maintaining the old structure. State guarantees against financial bankruptcy enable local industry to borrow from government owned regional banks at low rates. This creates a powerful base for national capital organized around Germany’s savings banks in Deutsche Sparkassen und Giro Verband, the Mittelstand companies and local and regional governments that have direct interests in the regional Landesbanks. State backing of low interest loans undercut private commercial banks but the practice is about to end under pressure from the EU. As one commenter points out, ‘That will be good for German capital markets and bad for German companies that depend heavily on debt to finance themselves…given the increasingly defensive and inward-looking attitudes in some German boardrooms …it is just possible that the temptation in Germany Inc will be to try to turn back the forces of reform transforming the protectionist impulses of national champion strategies into even more negative and anti-competitive actions.’46 Just such defensive attitudes were voiced by Dietrich Hoppenstedt, president of Deutsch Sparkassen, who called on private-sector banks to ‘abandon the old mindset of being the enemies of state-owned savings banks and start thinking of Germany. What disturbs me most is that these banks only look from the point of view of what is good for their shareholders, not what is good for the market, the economy or their customers.’47 Hoppenstedt was responding publicly to statements by Rolf Breuer, Deutsch Bank supervisory board chairman and head of Bundesverbank deutscher Banken, the private-sector banking federation. Speaking about the pressure on Deutsch Bank to find a national partner he said, ‘We do not deny our roots. We stick to our history and tradition. But the majority of our customers, the majority of our employees, the majority of our earnings are not German. So why should we be the German icon?’ In a press interview Breuer went on to attack just about every aspect of the national economic model. He supported increasing the number of foreign executives, called for longer hours and less pay, criticized co-determination, urged the Landesbanks to merge with foreign partners and attacked Germany for driving away pan-European corporations with high taxes and rigid trade union regulations.48 A more clearly articulated transnational agenda would be hard to find. The conflict between globalist and national financial interests are being played out in several arenas. The nearly bankrupt Landesbank West LB was taken over by Thomas Fischer who had headed up risk management at Deutsche Bank. Fischer’s strategy is to take the regional bank and turn it into a global institution. As he states, ‘My ideal is a well-arranged universal bank in the Citigroup mould… I’m running a bank based on profit. That is what Landesbanks have to understand. Profit is quality.’49 At the center of struggle to globalize German banking is Deutsche Bank. Ackermann, who took over as chief executive in 2002, has been a powerful force for transnationalization. But Ackermann and his globalist allies have been struggling to overcome the legacy of the country’s industrial heritage and have faced both internal opposition and a wide range of foes throughout German society. Ackermann had promised raising the banks pre-tax profits rates to 25% but was burdened with an 18 billion pound portfolio of traditional German industrial stocks that average just one percent returns. Large banking investments in industry has been a pillar of the German economic model and Deutsch Bank maintained stocks in such giants as Bayer, Munich RE, RWE, Linde, Allianz and DamilerChrysler. With the support of the bank’s international investors, Ackermann was able to unload 14 billion pounds in industrial stocks. Strengthening Ackermann’s globalist position are investment bankers in the New York and London Deutsch branches who account for 70 percent of the institution’s pre-tax profits. Deutsche Bank is also one of the most important players in global money markets that are tied together by a vast web of cross-border currency flows. Money markets trade about $1.9 trillion dollars everyday and are the biggest and most global markets in the financial world. The top five banks in currency speculation include UBS with 12.36% of the market; Deutsche Bank with 12.18%; Citigroup at 9.37%; JP Morgan with 5.78% and HSBC at 4.89%. 50 Trading in money worth hundreds of billions everyday, these banks become less invested financially or politically in the strength of any single currency. All currencies are part of their market and so the differences in rate, volatility and arbitrage become their main concerns. Another division has been created by the growing denationalization of the executive leadership. Certainly many German managers are pushing for globalization, but there are also interesting splits between the Deutsche Bank executive committee, half of whom are non-German, and the supervisory board most of whom are German. In addition, some of the brightest rising corporate stars are non-German executives such as Indian born Anshu Jain whose fixed-income division led the bank with a growth rate of 28 percent. The struggle between pro-German traditionalists and globalists has been openly acknowledged. As one senior executive stated to the press, ‘The truth is the supervisory board is stuck in the 1970s. It is 90 percent German and 90 percent non-bankers. Yet they can heavily influence our strategic direction and they would simply veto a cross-border move.’51 Another bank insider commented, ‘Lately, it’s been like a massive civil war. But sooner or later, the reactionaries will resign or get fired.’52 Tensions began to build as Ackermann explored possible cross-border deals with the Lloyds, Barclays and Credit Suisse. But it was his interest in a merger with Citibank that set off the furor over national champions. Opposition to a cross-boarder merger didn’t just come from German traditionalists but also representatives of the biggest TNCs. A number of the bank’s biggest customers including Siemens, SAP, Allianz, Daimler-Chrysler and Deutsche Telekom meet with Schroder voicing their opposition to a foreign merger.53 Here we see evidence that transnational capitalists will often pursue their immediate economic interest over the general interests of their class. Most of these TNCs have representatives on the supervisory board of Deutsch Bank and want to protect their influence and access to easy loans that would be weakened in any cross-border deal. For Schroder it provided greater cover to call for a German national champion with political support from both the transnational and national wings of capitalism as well as unions and workers already angry over losing jobs to foreign flight. The chancellor urged Deutsch Bank to look at Postbank, the countries biggest retailer with 62 percent government ownership. As Schroder stated, ‘We need an institution in Germany that is globally competitive.’54 But Schroder is not particularly wedded to a purely German entity, he has also suggested a European champion saying, ‘I’m in favor of using all opportunities to create competitive European entities that transcend national egoism…that can compete against American and Asian companies in the globalized economy.’55 Many observers have worried over the new state interventionism of Germany and France. But they fail to focus on the role and purpose of the state’s efforts, typically inferring any state activity is a throwback to nationalist politics. Schroder’s goal is to help integrate Germany into the global economy seeking out the proper rearticulation that takes into account the balance of political forces. This is what Leslie Sklair has called, ‘emergent global nationalism…the view that the interests of one’s nation or nation-state…are best served if it can find a lucrative set of roles within the ever-expanding global capitalist system.’56 Third Way social democrats like Schroder have redefined national interest through the prism of globalization. They argue Germany’s future economic health and social welfare is tied to being a competitive component in the global chain of accumulation. Therefore, realignment and insertion become the national political agenda and the SPD political role is to use the state to help accomplish the transition. Their attacks on traditional national labor relations is part of this trajectory, an effort to create a new social structure of accumulation that is more efficient, will allow Germany to grow, and therefore benefit the general population. The same logic drives the quest for a national champion. This is not a campaign to reestablish some Fordist industrial era policy, but a complex class struggle to find a compromise sensitive to the history and circumstances of Germany. As Dieter Hein of the Frankfurt research group Fairsearch has observed, ‘Politicans hold the key…they have to create the framework that will allow strong banks to emerge. That means restructuring the state sector.’57 This also means getting regional governments and cities to relinquish control over the Landesbanks and opening the state sector to global competition. All these economic and political interests are expressed through the actual class struggle so that an organic synthesis emerges to create globalisation in Germany. As William Robinson has pointed out, ‘State managers are exposed to a multiple and contradictory pressures, including distinct sets of local and transnational demands…State managers may respond to the agenda of a transnational elite, but they must simultaneously sustain legitimacy, or at least attempt to, among nation-based electorates and often develop contradictory strategies and legitimation discourses.’58 As we weave our way through the complex maze of conflicts we see Germany’s global realignment reflects their own historic circumstances and the strength and organization of class forces within their society. The dominant transnational class faction continues to battle national groupings organized in finance, production, trade unions and local government. In addition, national populism has erupted into protests and created a crisis of legitimacy for the major political parties. Even members of the TCC have internal differences that at times clash with the overall interest of their common class project. But clearly the central contradiction that conditions these different sets of conflicts is between the old and newly emergent structures of capitalist accumulation. Therefore our study of globalization must focus on both aspects of the dialectic. The particular national patterns of insertion produced by uneven development, and the universal forms of accumulation and class relations forged by transnational capitalism. Jerry
Harris, Professor of History Jerry Harris is a professor of history at DeVry University in Chicago. He is organizational secretary for the Global Studies Association of North America (http://www.net4dem.org/mayglobal), and on the editorial board of the electronic magazine Cy.Rev. His areas of research are transnational capitalist class theory, the military/industrial complex and state theory, labour history, and information technology. Some of Jerry's recent articles include:‘The Dialectics of Globalisation’, Das Argument 257; ‘The U.S. Military in the Era of Globalisation’, Race and Class Vol. 44 #2; ‘Towards a Global Ruling Class: Globalisation and the Transnational Capitalist Class’, Science and Society Vol. 64 #1; Transnational Competition and U.S. Hegemony’, Science and Society Vol. 67 #1. Footnotes Bibliography Arnold, Martin 16 April 2004, ‘Total chief supports Sanofi’s bid for Aventis’, Financial Times, p. 18. Atkins, Ralph 14 April 2004, ‘German chiefs watch their backs as they eye the world’, Financial Times, p. 14. ___________ 20 June 2004, ‘Swede to take over as MAN chief’, Financial Times, p. 18. ___________ 16 July 2004, ‘Carworkers protest at drive for longer hours’, Financial Times, p. 2. ___________ 2 August, 2004, ‘IMF calls for longer working hours in eurozone’, Financial Times, p. 2. Benoit, Bernard 28 April 2004, ‘Low pay linked to convergence’, Financial Times, p. 6. _____________ 13 August 2004, ‘Germany fails to appease critics of reforms’, Financial Times, p. 2. _____________ 6 July 2004, ‘German unions and SPD try to bridge divide’, Financial Times, p. 5. _____________ 7 July 2004, ‘SPD chairman steps up attack on ‘misguided’ trade unions’, Financial Times, p. 4. _____________ 14 July 2004, ‘Party in distress: “The SPD has betrayed its electoral promises and its principles” ’, Financial Times, p. 11. _____________ 24 August 2004, ‘East Germans display deepening discontent’, Financial Times, p. 3. Bartsch, Elga 6 April 2004, ‘Germany must get a grip on its labour costs’, Financial Times, p. 12. De Jonquieres, Guy 27 May 2004, ‘Berlin and Paris must stop championing losers’, Financial Times, p. 15. Dyer, Geoff 5 May 2004, ‘The wrong decision national champions will not cure the imperiled European drug industry’, Financial Times, p. 13. Ehrlich, Peter 18 March 2004, ‘Warning on foreign offers for Deutsche Bank’, Financial Times, p. 15. Financial Times Editorial 6 July 2004, ‘Germany’s Task’, Financial Times, p. 12. Financial Times Editorial 9 July 2004, ‘They still don’t get it’, Financial Times, p. 14. Hughes, Jennifer 27 May 2004, ‘Where money talks very loudly.’ Financial Times, FT Foreign Exchange Special Report. P. 1. Huhge, Christopher 25 August 2004, ‘Laggards who drag at the heart of Europe’, Financial Times, p. 11. Jenkins, Patrick 30 March 2004, ‘Little time for burdens of tradition’, Financial Times, p. 16. _____________7 July 2004, ‘SCH paves the way for European bank deals’, Financial Times, p. 15. ____________ 16 August 2004, ‘Banks must pull together for national interest’, Financial Times, p. 20. ____________ 30 August 2004, ‘A bank of unfinished business’, Financial Times, p. 6. ____________ 16 September 2004, ‘Ackermann’s agenda: Deutsche Bank grapples with divisions over strategy’, Financial Times, p. 13. _____________ and Bettina Wassener 20 July 2004, ‘DaimlerChrysler wins fight with union’, Financial Times, p. 4. Johnson, Jo 27 March 2004, ‘A poor prescription for French national champions’, Financial Times, p. 7. Landler, Mark 7 July 2004, ‘Europe Reluctantly Deciding It Has Less Time for Time Off’, New York Times, p. 1. Mackintosh, James 9 March 2004, ‘Volkswagen misfires: the carmaker counts the cost of its high spending and its faltering search for luxury’, Financial Times, p. 9. _______________ and Daniel Dombey 9 June 2004, ‘Chief of VW criticizes role of politicians’, p. 18. _______________ 9 July 2004, ‘Trucks chief with a global vision’, Financial Times, p. 19. Major, Tony 13 May 2004, ‘Wounded prey may hold little attraction’, Financial Times, p. 13. Marsh, Peter and Bettina Wassener 1 March 2004, ‘Siemens searches for a vision of the future’, Financial Times, p. 6. Munchau, Wolfgang 1 April 2004, ‘Grounded: why Germany’s once soaring economy is failing to take off’, Financial Times, p. 11. ________________ and Ralph Atkins 21 July 2004, “Working longer to save jobs: but will it help Europe close the productivity gap?’, Financial Times, p. 11. Parr, Gary 8 June 2004, “Europe’s banks do not have any easy options’, Financial Times, p. 15. Robinson, William 2004, A Theory of Global Capitalism, Production, Class, and State in a Transnational World. John Hopkins University Press, Baltimore, Maryland, p. 133. Schmid, Fidelius, Sven Clausen and Rolf Lebert 6 May 2004, ‘Schroder in call for bank consolidation’, Financial Times, p. 16. Sklair, Leslie 2001, The Transnational Capitalist Class. Blackwell Publishers Ltd, Oxford, United Kingdom, p. 137. United Nations Conference on Trade and Development. World Investment Report 2003. United Nations, New York, Geneva, 2003 United Nations Conference on Trade and Development. World Investment Report 2002. United Nations, New York, Geneva, 2002. Wagstyl, Stefan 21 September 2004, ‘Intense rivalry for dominance in a fresh market’, Financial Times Special Report, p. 3. Wassener, Bettina and Richard Waters 23 July 2004, ‘Strong SAP results boost hopes in IT sector’, Financial Times, p. 15. Williamson, Hugh 21 March 2005. ‘Skills that keep Silicon Saxony in the picture.’ Financial Times, p. 8. _______________ 22 July 2004. ‘German union chief warns cost-cutting deals threaten stability in labour force.’ Financial Times, p. 2. _______________ 18 August 2004. ‘Industry chiefs back Schroder’s jobless benefit cuts’, Financial Times, p. 2
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