Italy's New Bankster in Chief Makes Sure Banks Get Rich

Via Atrios comes this story about Italy's efforts to rein in tax evasion.  It turns out that Italians are among Europe's most frugal people, saving quite a bit and eschewing the use of credit cards.  Would you believe it?  They actually prefer to use cash for a lot of their transactions.

As the article points out, some of this is cultural and some of it is simply a desire to avoid paying taxes.  A lot of retailers, apparently, offer discounts to people who pay in cash and do not demand a receipt, essentially splitting with the customer the savings realized by not paying taxes on the goods sold.

And so bankster-in-chief Prime Minister Mario Monti -- formerly a Goldman Sachs international adviser who was appointed, not elected, to his new position as part of the European financial industry's ongoing usurpation of democracy -- reduced the maximum allowed cash payment from 2,500 euros to only 1,000 euros.  (He originally wanted to reduce it to no more than 300 euros, but it was decided that Italians would need more time to adjust to the changes.  I suppose, eventually, he'll get it down that low.)

Now, on general principles, I don't have a problem with this.  I'm a big believer in what I've come to think of as the "circulatory system" monetary theory:  a portion of any nation's economy must consistently be siphoned over to the government in the form of taxes, which then can be re-injected into that economy by the provision of needed government services.  Only in this way can we avoid the inevitable wealth condensation that ultimately results in a few very, very rich families and lots of very poor people.

So if Italian tax evasion is as rampant as the article indicates, then moving Italians out of a cash-based economy may in fact be an eminently reasonable thing to do.  After all, the article claims that the Italian government loses about 120 billion euros a year due to this type of tax evasion.  That's a good deal of money.

But here's the rub:  forcing Italians to use plastic for their purchases instead of cash means that the banks who issue that plastic are likely to get very, very rich.  You see, the banks charge fees of up to 2% on credit transactions.  And - quite frankly - that's fairly obscene.  Electronic swiping of an account costs the banks fractions of pennies (if it in fact costs them anything at all) because computers do all the work -- it's fully automated.  So really there shouldn't be a bank charge for this service in the first place.  But making the charge dependent on the size of the transaction?  What possible argument can be made that the more money a customer deducts from their account the more the bank should charge that customer (or, more accurately, the customer's retailer) for the privilege of doing so?  If there is any cost at all to the bank from electronic transactions, that cost doesn't depend on whether the transaction amount is $10 or $100,000 -- it's still only an electronic deduction from an account.

If you want to understand who really controls the levers of power, think of how this new law (it took effect December 4th) was imposed on the Italian people without a vote or a referendum or even a poll asking if they were in favor of it, and then consider this passage from the article:

The government is negotiating with the banks to get them to cut fees on credit cards and lower costs for bank accounts to encourage the move away from cash, Grilli said Dec. 5.

Banks are willing to consider zero-cost current accounts for low-income retirees and discuss credit-card costs “in light of the government’s new measures,” Giuseppe Mussari, head of Rome-based ABI, said Dec. 11. However, lenders won’t “give away” services that carry a cost for them, he said.  (emphasis added)

First -- as already noted -- these services don't cost the banks a goddamned thing.  Second, notice that Italy's new Bankster in Chief feels the need to negotiate with the banks about reducing fees.  Seriously?  The Italian government is mandating that the Italian people must now use banks in order to purchase goods and services, but the government isn't doing anything to prevent a bank windfall except to ask pretty please if the banks will maybe cut back on some of their obscene profit gouging?

Yeah.  Mario Monti is a "technocrat."  He doesn't have an ideological agenda.  Tell ya what -- pull the other one, it's got bells on it.

Return of the Son of Marx from Planet X

Following up on my post yesterday about Marxian crisis theory, that little bit about the GOD (“Grow or Die”) Principle and credit was only part of a larger discussion in Kunkel’s article about how Marxian crisis theory envisions economic crises arising naturally out of capitalism.

Below the fold I am going to explain my understanding of what it is Kunkel is saying about how such crises arise, but first I want to present a small excerpt from a recent Bloomberg News op-ed by James Livingston.  Livingston is an historian teaching at Rutgers University and he makes the argument that even though economic austerity is what all the cool kidz are smoking right now, it is in fact very bad for your economic health.

I was directed to the article via Digby yesterday, shortly after posting that thing on Marx, GOD and credit, and I was struck by this statement:

In theory, the Great Depression was a financial meltdown first caused, and then cured, by central bankers.  In fact, the underlying cause of this disaster wasn’t a short-term credit contraction engineered by bankers.  The underlying cause of the Great Depression was a fundamental shift of income shares away from wages and consumption to corporate profits, which produced a tidal wave of surplus capital that couldn’t be profitably invested in goods production – and wasn’t invested in goods production.   (emphasis added)

At no place in his op-ed does Livingston mention Marx, and there is nothing to indicate that he has any knowledge of Marxian crisis theory.  However, his description of what gave rise to the Great Depression – from the point of view of an historian – mirrors exactly the kind of crisis the theory predicts capitalism will inevitably produce.  It also sounds very similar to what we are going through right now.

Marx: GOD and Credit

 At the moment, Marxism seems better prepared to interpret the world than to change it.

                                    --Benjamin Kunkel

That quote is from the closing sentences of an article in the February 2011 London Review of Books.  The article itself – “How Much is Too Much?” – ostensibly reviews David Harvey’s effort in his 2010 work The Enigma of Capital: and the Crises of Capitalism [no, I don’t know why there is a colon in that title] to consider the world’s current economic situation through the lens of Marxian crisis theory.  However, most of its length is devoted to explaining what “Marxian crisis theory” actually is and to describing the gloss that Harvey put on this theory in his earlier work from the 1980s, The Limits to Capital.

I came across the LRB article about a month ago, read it, was highly intrigued by it, but realized that I didn’t actually understand it.  So I printed it out, put it aside, and waited until this weekend to re-read it.  I think I have a better handle on it now, but reading the thing does underscore how woefully little I know about Karl Marx’s critique of capitalism.  It doesn’t help – judging solely from Kunkel’s review and some of the passages he quotes – that the critique does not seem to be easily penetrable. 

In any event, while there is a great deal in the article to pique one’s interest, I cannot claim to really be on any kind of sure footing when I discuss (as I do below) some of the ideas I found particularly interesting.  I suspect that what I really need is a very dumbed-down introduction to this stuff, something like Marxian Economic Theory for Dummies.  (I looked for it; it doesn’t seem to be in print.)

Anyway . . . here goes.