Function of Central Banks

Cultural Studies cannot separate itself from the singularity it analyzes. Its narrative links itself to the narratives it studies. Its historical knowledge becomes part of a debate that can have practical consequences and become theoretical argument.

This, then, is the aim of Dirk Baecker's objection to this spot-on and highly stimulating book [⇒ Sovereignty Effect]. Vogl underestimates the possibility of using the theorem of functional differentiation to analyze the function of central banks as well. And he underestimates the possibility of understanding capital and power in a way that, by differentiating them, is also able to reveal their entanglement. Both possibilities are worth recalling here, because only then can the debate about the contribution of the hybrid construction of finance to triggering financial crises be meaningfully pursued.

However, to formulate this objection, Dirk Baecker must supplement the cultural-scientific argument of singularity with the social-scientific argument of society. For it is society, not capitalism, that is functionally differentiated, if at all.

And its frame of reference, as described by Max Weber, Talcott Parsons, or Niklas Luhmann, allows us to identify institutions that are as much elements of functionally differentiated subsystems as they are administrators of boundary processes between them. Parsons, in precisely this meaning, has described the central bank as a converter of capital into wealth and, to this end, has understood capital as a political resource of building confidence in the possibility of reproducing and, on occasion, increasing wealth. And Luhmann has added to this analysis by showing that the central bank, with a view to its political task of ensuring price stability – and possibly, depending on the case, growth and employment – varies that total quantity of money which must be set zero-sum constant by commercial banks and businessmen at the same time, because no accounting works otherwise.

The fact that the central banks' control of money creation is not a complete one and that, in view of the current low and zero interest rate policy, more is at stake than ever before, does not change the fact that their political task of exerting economic influence consists in attempting precisely this control. Like any other political task, this one can only be performed in society and not executed on society. The fact that this central bank policy builds up and also reduces private creditor positions is a marginal condition of this policy, which is consequential in terms of distribution policy but not necessarily relevant in terms of monetary policy. If the aim is to provide the economy with a political capital of trust so that, as Parsons so nicely puts it, a "generalized disposability in the processes of allocation between alternative uses" can be ensured, imbalances in the distribution of income tend to have to be accepted.

In order to understand this double assignment of the function of central banks to two functional systems of society not as an objection against functional differentiation, but as a social contribution to its safeguarding, it is moreover necessary, in addition to the differentiation of money supply constancy and money supply variation, to understand the different functions of capital and power better than Vogl succeeds in his historical reconstruction.

Power as the enforcement of collectively binding decisions in the medium of a threat of force is tied to political institutions that seek to organize the resources and sufficient legitimacy for this threat, but it is not limited to these institutions. But even when it becomes diffuse, as Foucault has shown with his theorem of a "microphysics of power," it remains within political institutions the medium of a calculus of sovereignty that can threaten violence anew at any time in order, for example, to be able to provide for those coercive payments in the form of tax collections without which public credit could not be refinanced and thus could not be collected. Vogl is far from losing sight of the enforcement of political power or even reducing it to the means of the rule of law, but how, against what opposition, and with what Hobbesian promises it is enforced and exercised in each of his historical cases remains open.

Even more serious, however, is what Dirk Baecker considers to be too brief a version of the understanding of Capital. The fact that capital, like any economic activity, has something to do with provisioning for an uncertain future, as has been discussed in sociology since Max Weber, not only remains unclear, but is downright obscured by the idea that capital can be reduced to the precondition and result of private strategies of enrichment. Here, Vogl is too quick to follow an economic theory that restricts economic activity to the handling of scarce resources, and to supplement this theory with the Marxist reference to profit interests, without taking into account that both only make sense against the background of a present provision for an unknown future and only deserve to be called calculation for this reason, to which social aspects of overreaching and competition are subordinated just as much as factual aspects of the decision about different investment projects in each case. Vogl reduces the role of the unknown future to occasions for the emergence of passionate speculative opinions, without again sufficiently taking into account that only in the medium of these opinions it can be calculated which investments seem to be worthwhile and which not, and for how long, and for what reasons. The enigmatic ontology of public credit, the mystery of an all-too-fungible money, the political sensibility of finance and thus the monstrosity of central banks are deciphered as soon as one takes a look at the division of labor, which is disputed again and again, within which politics and economics, framed by education, art, law, religion and science, argue about currently promising futures and the necessary provision for them. >> capital politics economics frame education art law religion science

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BAECKER, Dirk, 2015. Der blinde Fleck des „Kapitalismus“: Zu Joseph Vogls Buch „Der Souveränitätseffekt“. Zeitschrift für Germanistik. 2015. Vol. 25, no. 3, p. 635–642.