Tracing the relationship between power and money

"The world is much more complicated than researchers portray it in their models," says Andrea Binder, fixing her gaze on the croissant she is currently breaking into mouth-sized morsels. Through her work, she is familiar with both: The social reality in an extremely unequal world – and the statistics of social science, in which people's everyday lives all too often get lost in abstract numbers.

Andrea Binder became aware of this conflicting picture of practical experience and academic theory quite early on: In 2005, she dedicated her master's thesis in Tübingen to the role private enterprises play in peace processes, using Sri Lanka as an example. But no sooner had she handed in the thesis than she began to be plagued by doubts: "What if the statistics and studies in my findings don't accurately reflect social reality?" To find out for sure, Binder packed her bags, set off to interview business people, bankers, and lawyers in Sri Lanka, and carried out a reality check. "In the course of my doctorate, it was an important experience first to talk to the stakeholders on the ground before looking at the data. It really helped me understand how money markets work."
 
Qualitative interviews in the research field are still an important feature of her methodology today. She accepts the fact that this may sometimes be frowned on in the context of political science, where bare statistics are considered the hard currency of knowledge: "Whether my work finds acceptance in the academic mainstream remains to be seen. Binder says this without hesitation, and one senses that she is not afraid to face up to criticism – and that adapting to mainstream thought is not a price she is willing to pay to secure the next step in her academic career.

The assertiveness with which Binder pursued this goal while still a student at high school is illustrated by an episode in the upper grade at the Gymnasium in Ditzingen: In order to have her interest in politics reflected in her high school diploma, Binder recruited the minimum number of five participants required by the authorities to force the school to set up an advanced course in politics, "led by a teacher who had never done it before, but then went on to prove himself most adept." This teacher, the flexibility of the school and, on top of that, a scholarship from the Friedrich Ebert Foundation carried Binder to university in 1999 as a "first-time academic", initially in Augsburg, then in Tübingen: Political science with an international focus, economics, rhetoric. "I originally wanted to study materials science," she says, "but I was talked out of it by the student advisors. Engineering was not for women".

How can the money supply be brought under control?

A brief pause, a concentrated look: How should she outline her complex research project to the layperson on the other side of the table? Then she says: "Globally active banks, including those from Germany, extend cheap loans in U.S. dollars in offshore financial centers such as the Cayman Islands to other banks, to corporations and companies based elsewhere in the world. With each loan in U.S. currency, the offshore banks increase the dollar money supply, they 'create foreign currency'. This proliferation of money escapes any banking oversight or political control and undermines rules that would otherwise apply to banks in their home markets." 

The phenomenon has been known since the 1950s – "and is not illegal," as Binder points out. Politicians tolerate the practice because the cheap loans from the offshore system ensure global economic growth. On the other hand, the volume of debt in this completely non-transparent sector has inflated considerably. No one knows exactly how much. "But who stands in," asks Binder, "if debtors suddenly default on their loans on a large scale?" The answer is obvious: Then the central banks will have to step in and compensate for loan defaults to keep the financial system stable. "In the status quo, the bank always wins," Binder says; and she finds this problematic. The fact that foreign currencies are created in the absence of regulation, that money supply is multiplied out of thin air, as it were, endangers the stability of the financial system and undermines democratic processes.

"What the three-party coalition now decides with a view to fighting inflation will have social consequences for the next ten or fifteen years," says Andrea Binder. "With our series of talks, we provide decision-makers with a protected space to openly discuss central economic phenomena. As researchers, we want to offer the political establishment sound arguments, where otherwise decisions are often merely reactive. We want to bring financial policy out of the specialist circles and bring transparency to the general public."
Then Andrea Binder wipes the croissant crumbs off the table. It's a pity, she says, that so much has been said about her career and so little about her research. And she doesn't seem to realize how much of an incentive she is to others who want to leave the beaten track in academia, even in the face of gusty headwinds. Just the way the Foundation wants the Freigeist-Fellows to be.