Aaron Sahr - Keystroke Capitalism: How Banks Create Money for the Few

AARON SAHR is a philosopher turned economic sociologist. He is Visiting Professor at Leuphana University Lneburg, Germany, and head of the Monetary Sovereignty research group at the Hamburg Institute for Social Research. His research interests include the sociology of money, facts and fictions about monetary policy, the history of capitalism, inequality, and social ontology.

Keystroke Capitalism

How Banks Create
Money for the Few

Aaron Sahr

Translated by Sharon Howe

The translation of this work was funded by
Geisteswissenschaften International Translation Funding
for Work in the Humanities and Social Sciences from
Germany, a joint initiative of the Fritz Thyssen Foundation,
the German Federal Foreign Office, the collecting society VG
WORT and the Brsenverein des Deutschen Buchhandels
(German Publishers & Booksellers Association).

First published by Verso 2022
First published in German as Keystroke Kapitalismus:
Ungleichheit auf Knopfdruck Hamburger Edition 2017
Aaron Sahr 2022
Translation Sharon Howe 2022

All rights reserved

The moral rights of the author have been asserted

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ISBN-13: 978-1-83976-119-5

ISBN-13: 978-1-83976-121-8 (US EBK)

ISBN-13: 978-1-83976-120-1 (UK EBK)

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Alles gehrt dir
Eine Welt aus Papier
Alles explodiert
[Everything belongs to you
A world made of paper
Everythings exploding]

Tocotronic (German indie rock band)

Contents

The total volume of privately owned wealth in the world today is approximately 418 trillion US dollars. That is almost five times global economic output.

This record wealth stands in relation to two other phenomena which together point to a social crisis and, as such, form the subject of this book. Alongside booming private wealth, the world is struggling with an unprecedented level of debt: Governments, companies and consumers were indebted to the tune of almost 200 trillion dollars in 2019.

Furthermore, there is a dynamic causal relationship between the growth of private wealth and the increasing indebtedness of OECD countries, which, in turn, points to a third phenomenon: the crisis of inequality. Income and wealth as well as debt itself are becoming increasingly unevenly distributed. In world terms, the income of the so-called global middle classes has risen in recent years, and, to that extent, there has been a slight relative reduction of the disparity between nations.

The same pattern is observable for wealth distribution: in the early 1960s, for example, the richest 10 percent of the UKs population owned approximately 67 percent of private wealth, while the richest 10 percent in France and the US owned around 70 percent. Twenty years later, this share dropped for a time to below 50 percent in the UK, around 50 percent in France, and a good 60 percent in the US.

And it is the job of social science to establish the causes of that break.

Observers whose social instincts veer towards economic liberalism sometimes criticize research on inequality for disregarding the interests of real people. According to them, instead of getting worked up over the fact that almost all the worlds capital is concentrated in the hands of a few people and thereby stoking envy-fuelled debate, we should focus our critique on poverty, not inequality. The way forward, therefore and the intended purpose of this book is to identify the structures that favour the few and disadvantage the many. One of these structures is the financial system.

Financial wealth is even more unevenly distributed than wealth as a whole. In the US, over 90 percent of company shares, bonds and receivables from investment funds and trusts belong to the richest 10 percent, as do a good 60 percent of life insurance policies, bank deposits and pension claims. In short, a relatively small minority owns a substantial majority of financial assets and it is more or less the same story the world over.

The majority of borrowers in these transfer relationships are at the poorer end of wealth distributions. While citizens of the eurozone, for example, including the richest 10 percent, hold an average debt of 20 percent of their assets, the lowest-earning 20 percent owe roughly 110 percent of their assets, and are thus on average hopelessly overindebted.acts as a mighty transfer system from the bottom up. In order to get to grips with the trinity of private wealth, record debt and rising inequality, we therefore need to understand how the financial system managed to get so large and powerful while at the same time becoming increasingly asymmetrical.

In point of fact, the growing financial assets of the few, which also constitute the growing debts of the many, reflect a restructuring of global capitalism in the second half of the twentieth and the early years of the twenty-first century. This restructuring began with the process of financialization: triggered by a relaxation of the rules governing the financial industry and the invention of innovative products, the financial system has, since the late 1970s, become an increasingly attractive place to accumulate capital. More and more capital income has been generated by investing in debt and less and less by investing in labour, industry and other sectors of the real economy. If you want to understand why there is so much private wealth, and why it is so unevenly distributed, you first have to look at why so many financial assets and hence so many debts are produced in the first place, and why these investments have become so profitable.

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The identification of non-economic or, to use the slightly more nuanced term adopted later in this book, para-economic (but nonetheless capitalist) value creation processes is crucial to any analysis (or critique) of the trinity of growing private wealth, mounting debt and rising inequality. After all, the trend towards financialization, which

The ability of banks to do this without regard to the available supply of capital property undermines not only the traditional role of capital owners as the command centre of

While the first three chapters attempt to explain why debt and private wealth have increased to such an extent over the past quarter of a century, the fourth links this phenomenon to the third element of the triad: the inequality crisis. The aim here is to gain a better understanding of how that is, through which structures or channels actors are able to profit from the money creation privilege of private banks. All too often, research on inequality overlooks the fact that, in modern capitalism, economic and para-economic distributional effects are mutually interactive. This blind spot also prevents an effective exploration of possible dimensions of change the subject of the fifth and final chapter of this book. The redistributive state must work to combat the effects of processes set in motion not only by the owners of capital, but also those attributable to its producers namely, banks. If we want to win this unequal, two-on-one battle, we need to do more than just talk about redistribution: we need to challenge the whole regime of keystroke capitalism.