I appreciate Dennis coming back with informed comments on this important issue.
I was basing my remarks on analyses that I have picked up from various quarters, including informed UK business programmes and the International Herald Tribune.
It may well be that to go the whole hog, European capital might need to bulldoze the welfare state. We do not know how far it will want to go.
It is true too at the moment that tight national networks are turning into international ones. (Deutsche and Dresdner back although an all German merger, can be seen as positioning the combined bank for a leading position in Europe and the world, and so actually fits in with Dennis's scenario.)
However I think there is more to the untangling of finance and industrial capital in Germany.
I kept a clipping from the IHT of January 1st. The plan then was to allow companies to sell their holdings in other companies without paying taxes on the profits, or capital gains, now 50%.
The business community in Germany was at first sceptical and incredulous that the SPD-Green government would come up with this proposal. However there was little opposition. The SPD spokespersons said that such a change would spur "more growth and employment by creating more efficient corporate structures." The Green spokesperson said "This gives the economy the push it needs."
The proposals annoyed the small and medium-sized companies, the "mittlestand" who are said to form the backbone of business in Germany, because they will not benefit from a proposal that does not help unincorporated companies.
Traditionally therefore the CDU and the CSU would be against this, but some of their most powerful supporters would be in favour. Besides the CDU has been a little preoccupied of late to get into an argument that might antagonise any of its supporters at all...
The IHT article notes that "if approved, it would eleiminate a huge obstacle that has thus far made it prohibitively expensive for financial insitutions like Deutsche Bank AG and the big insurer Allianz AG to streamline and resuce their vast portfolios of stock in other German companies.
"That would free up tens of billions of marks that have been blocked from reinvestment because of tax liability, analysts said. It could also be expected to accelerate the pace of mergers and acquisitions. Germany's banks and insurers would have new resources for mergers and acquisitions but would themselves become more vulnerable to hostile takeovers. ...
"Deutsche Bank's stock portfolio is worth about $22 billion, and its holdings include Daimler-Chrysler AG, the troubled construction company Philipp Holzman AG, Allianz and a number of retailers.
"If German financial institutions began to sell their cross-holdings, they could become more exposed to takeover attempts. Thus far, the big banks have remained aloof from the kind of merger activity that has occurred in France, Itlany, Spain and the Netherlands.
"Still, Allianz holds 21.6 percent of Dresdner Bank AG, the country's third largest bank, and the Dresdner in turn owns 10 percent of Allianz. Munich Reinsurance AG and Allianz each own 25 percent of each other, and both insurers have stakes in scores of industrial companies.
"These interlocking holdings have been at the centre of postwar corporate Germany, in which banks, insurers and industrial companies supported each other through good times and bad. But the old ties have become too restrictive, dragging down profits at big financial institutions by making it difficult to move money from weak investments to better ones.
"Political leaders have recognized the problem for years. But the idea of giving big banks and insurers a tax windfall worth billions had been dismissed as unacceptable."
Well capital has mysterious ways, its wonders works to perform. And it seems it has chosen for its agents, obscure technical politicians of the SPD and Green party to act as its representatives in a decisive move. That move is the dominance of finance capital over industrial capital. Of big capital over the *mittelstand".
Note that the concept of the total mass of capital remains important for survival through the business cycle, but the composition of that mass will change from financial-industrial to mainly financial. The present phase of the business cycle in Germany means that to get out of the recession a portion of capital needs to be destroyed and successful capital has to regroup. That is what makes for "efficiency", and that is what the executive committee of the bourgeoisie has decided must be facilitated.
So interestingly, as in the UK, the allegedly left of centre party is more in tune with the needs of finance capital, while the right of centre party represents the somewhat smaller and older fashioned capitalist interests.
The article of the 1st January is particularly prophetic. The references to Deutsche Bank and Dresdner Bank in it already show which way the wind was blowing. At the time of the merger announcement last week, it was stated that the capital gains tax break will come in force in 2002. This announcement means that the significance of it is already in play and part of the extensive calculations of finance capital. It has been factored in. Therefore it is in force now - in a sense.
Deutsche and Dresdner Bank are merely a steps ahead of the game.
What we need to do to test this hypothesis further, is to note what happens to massive German insurance companies like Allianz. What do they do? Or what gets done to them? I see that Michael Pollak has just suggested watching Allianz while I polished this letter - great minds thinking alike no doubt!
Anyway it looks as if Schroeder's Neue Mittel has delivered a fatal blow on behalf of finance capital to Germany's Mittelstand!
The petty bourgeois intelligentsia who support the new government in the final analysis have a more comfortable alliance with German finance capital than do the petty bourgeoisie and middle bourgeoisie that support the CDU and CSU.
The ironies of history!
Chris Burford
London