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Activating State or Active Social State

by Christoph Butterwege Friday, Aug. 29, 2003 at 6:51 AM

"Cuts in benefits are not social reforms but a relapse to the last century when society didn't protect its members from general life risks on account of deficient resources.The welfare state is indispensable for the society altogether and for the socially disadvantaged

Activating State or Active Social State

By Christoph Butterwege

[This article is translated from the German on the World Wide Web, Professor Butterwege is a political scientist at the University of Bremen and a prolific author. Some of his writings, e.g. “Migrants and the Mass Media” and “The Political Center Moves to the Right” are available on]

Hardly anyone doubts that the social state is in a deep crisis. However the crisis of the present private capitalist economic system endangers its continued existence, not the crisis of the social state. This economic system for a long time has not guaranteed adequate growth (sustained business cycle weakness) or high unemployment (structural unemployment).

The Current Explanatory Model of the Acute Problems of the Social State

Four causal factors or development determinants are usually cited in discussions of the “misery of the social state”:

1. Excessive generosity: The German welfare state is too generous in granting benefits. This increasingly causes a financial overstrain and the opposite of what was intended. Unemployment and poverty can no longer be effectively combated since doing paid work is hardly rewarding when wage benefits are on almost the same level.

2. Massive abuse of benefits: People without a legitimate claim profit from social benefits since there are no effective controls. According to the “logic of the cold buffet”, benefits are accepted without a serious need for help. For example, medical treatments are only claimed because the doctor’s visit is free for those with legal health insurance.

3. Demographic change: Through the declining birth rate of Germans and the rising life expectancy on account of medical progress, an “aging” of Germany occurs that weakens the country’s economic potential and overstrains the social security systems (pension-, nursing care- and health-insurance). This can only be countered by means of a (partial-) privatization on the contribution side and a benefit reduction on the cost side.

4. Globalization process and Positional weakness: Owing to intensified world market, the ailing “German position” must be purified and the social state “trimmed” to maintain competitiveness and the attained level of prosperity. To its critics, the (northwest) European welfare state is regarded as outdated by economic-technological development, as an obstacle to international competitiveness and as an investment hindrance, in short as a dinosaur belonging in the museum alongside the spinning loom and the bronze axe.

Criticism of the Dominant Explanatory Models

The following points are important against the misunderstandings and wrong judgments (disseminated by adversaries of the social state):

1. Empirical welfare state research has shown that Germany has fallen back in granting benefits compared to the other 14 EU-states since the 1974/76 worldwide economic crisis and the Schmidt-Kohl change in government and ranks today in the lower middle (8 or 9). This is contrary to the dominant media pictures and resulting mass consciousness.

2. The misuse of the welfare state by persons without claims should be kept in reasonable limits despite numerous reports (above all in the popular press) almost spectacular individual cases, striking advantages for marginal social groups depending on social benefits and the regular gossip about “social parasites”. All serious studies conclude that the deplored misuse of benefits isn’t a mass phenomenon and the social state is not financially drained. Rather people are diverted from more extensive abuse in other areas (income tax declarations of higher income people and owners of capital; subsidy swindle).

3. The demographic development perspectives are darkened in the general public and the media into a horror scenario. Babies are not lacking but contributors who could be won through a more consistent combating of unemployment, increasing the share of paid women’s work, the easing of immigration and/or expansion of the circle of the insured. Demographic perspectives are used as a lever to enforce anti-social “austerity measures” instead of explaining how problems resulting from a long-term change of the age-structure can be overcome in solidarity (for example, raising the contribution criteria and/or expanding the base of the pension system to include independent persons, freelancers and officials).

4.Cuts in benefits are not social reforms but a relapse to the last century when society didn’t protect its members from general life risks on account of deficient resources. Today society is richer than ever before. The welfare state is indispensable for the society altogether and for the socially disadvantaged. Germany whose export-oriented economy is one of the main winners in the globalization process can afford a developed social state on account of its growing prosperity that is unequally distributed. Germany need not dismantle the social state since it preserves democracy and inner peace on one side and competitiveness on the other side. In the framework of neoliberal positional logic, there are good reasons for an expansive social policy…

Demography under the battle cry “generational justice” can degenerate into a means of social-political demagoguery

“Generational justice” is a priority goal of the supposedly indispensable social reforms in Gerhard Schroeder’s March 14, 2003 policy statement and in the mandate of the so-called Rurup commission. For a long time, “generational justice” has been an important social-political keyword in Germany. Generational justice is understood as the demand for fair distribution of resources and burdens between the generations (for example, for the social security system). Its present massive propagation implies implicitly or explicitly an unjust distribution burdening the younger generation (for example, old-age provisions, state indebtedness etc.). However social injustices within all generations are given a new interpretation in a “battle of the old against the young” by means of the demand for (more) generational justice.

The political battle cry “generational justice” diverts from an injustice within all generations that is growing dramatically in Germany and other parts of the world. Child poverty is used as a cognitive-political lever to play off parts of the poor population, parents and the childless generally. Something similar happens in discussion of demographic change, the “aging” of our society and the (supposedly) growing financing problems for the system of social security. In these discussions, demography degenerates into ideology and social-political demagogy.

Neoliberal Modernization as a social-political mega-project and frontal attack on the social state

Instead of seeing a natural process in globalization, developed industrial states like Germany press to lower social environmental standards so they can remain competitive on the world market. These countries should be criticizing neoliberal modernization or restructuring nearly all areas of life according to the model of the market as a social-political mega-project that creates more social inequality and deepens the gap between poor and rich everywhere in the world, both between individuals and within all states.

In his 1986 book “Risk Society”, Ulrich Beck spoke of a social “elevator effect” transporting all classes and sectors upwards. If one considers the course of social development, a Paternoster (Our Father prayer) effect can be seen. Some fall downwards in the same measure as others rise upwards. There are social vicissitudes involving insecurity and existential fear for a growing number of people more than ever in the sign of globalization. If the “Americanization” of the social state continues (the partial privatization of old-age provisions through the Senior Citizens Assets law passed by the Bundestag and Bundesrat on May 11, 2001 is an example), an Americanization of the social structure (deepening of the social gap between poor and rich) may not be stopped. Across the Atlantic, the social separation of population groups is clear along with its disastrous consequences for the cohesion of society: an increasing (violent-) criminality, drug abuse and a dilapidation of the public infrastructure.

In a high-powered society that rewards and nearly glorifies competition, performance or output with bonuses and higher salaries, poverty is functional because it embodies the backside of what the diligent and therefore successful have “earned”. Poverty isn’t an unsocial collateral damage of the neoliberal “rebuilding” project but serves its advocates as a disciplining instrument while material prosperity and wealth represent the bait motivating “performers” to special efforts.

In the neoliberal worldview, poverty doesn’t appear as a social problem but as a self-indebted fate with just punishment for refusing performance or refusing to sell working power on the market. Conversely wealth is viewed as a proper reward for the work of following the tip of a good investment advisor. On the other side, high wages or non-wage labor costs are the economic original sin and must take the rap as the cause for the unemployment and growth weaknesses in Germany.

Combating Unemployment by Lowering Non-Wage Labor Costs and Relief for Employers as Neoliberal Dogma

The neoliberal dogma underlies almost all the plans to revitalize the social state like the concepts of the so-called Hartz commission “to reduce unemployment and restructure the Federal Labor Office”, the so-called Rurup commission “for sustainability in financing social security systems” and “Agenda 2010” presented by German chancellor Gerhard Schroeder. In reality, the amount of additional personnel costs, the social security contributions paid by employers, isn’t decisive. Rather piece-labor costs have fallen for years in Germany on account of growing work productivity greater than most countries competing on the world market. This led to a record surplus in the trade balance in 2002. Not accidentally Germany - referring to the per capita efficiency of the population – is by far the “export world master”. Full employment and general luxury must have long prevailed in Bangladesh and Burkina Faso if the well being of a national economy depends on low wage- or non-wage labor costs as neoliberals claim!

Whoever refers the mass unemployment in Germany to higher costs of additional personnel as employers, the council of experts assessing the aggregate economic development and the German government confuses cause and effect. High unemployment is made responsible for high non-wage labor costs, not vice versa. As a result, the belief that (partial) reorganization of the social system from contribution- to tax financing would create jobs, economic stability and more social justice proved to be an illusion in the recent past just like the Riester pension reform that the capital-covering principle would solve the problem of old-age provisions of a shriveling gainfully employed population (at least better than each paying the costs). Whoever wants to lower non-wage labor costs “to relieve the factor labor” makes labor cheaper for capital and burdens employees.

Three reasons against a repression of contribution financing and a development of the tax financing of the social security system:

1. When tax-financed social projects – different from contribution-financed projects – are subject to state budget restrictions, they fall victim to the general savings pressures of the public treasury. Their amount is dependent on changing parliamentary majorities and election results. How can the constantly declining tax revenues of the state become the financing base of a functioning system of social security? Ultimately all the parties have written more tax cuts on their banners.

2. The structure of tax revenues shows that businessmen and owners of capital in the “wage tax state” Germany hardly contribute to financing the community. This decline of the fiscal burden (including indirect taxes) leads to one-sided financing by employees. In contrast, the contribution parity of social security requires participation of the employer side in the costs. What is the entrepreneur’s interest in reducing unemployment that strengthens his social position and weakens unions? What interest should entrepreneurs have when they can shift the costs of unemployment almost entirely on the general public, chiefly the multitudes paying the wage- and sales taxes?

3. The claim on insurance benefits is less discriminatory than dependence on state assistance whose claim probably incurs more reproaches of misuse because no “return favor” occurs.

Alternatives to Neoliberal Reorganization or Demolition of the Social State

Compensating for the specific disadvantages of the German social state model without abandoning its special merits is vital. Structural defects of the “Rhine” welfare state include its dual architecture (division into social security and income support), its strict wage- and performance-reference (equivalence principle) and

. its barriers against egalitarian tendencies (contribution limits; insurance limits in health- and nursing care insurance; exemption of precarious employment from social security- or tax obligations). The decisive advantage of the Bismarkian social system over other models is that its monetary benefits and services are not subsidies of the needy and underprivileged from tax funds revocable according to political opportunity but are claims gained (and constitutionally guaranteed) through contribution payments.

The system of social security in Germany is supported one-third by tax revenues and two-thirds by funds from the insured and their employers. More contribution justice could be achieved by applying the principle of economic efficiency to this area. Instead of branding all benefits as “not guaranteed” corresponding to the logic of profit-oriented private insurances, we must reflect how more solidarian redistribution can be realized within the social security branches and winning the general public. The abolition of the compulsory insurance limit in health- and nursing care insurance and the increase or suspension of the contribution limits (while retaining the upper limits of benefits) is obvious…

The present social state is paid-work-, marriage- and adult-oriented. The social state is under intense pressure on the following planes through social structural changes like globalization or neoliberal modernization, individualization and pluralization of life forms:

* In the production process, normal working conditions dissolve. The capital side under the slogans “deregulation” and “flexibility” promotes this. Normal working conditions are not replaced but strongly relativized by a constantly increasing number of atypical, precarious, limited, contract- and (compulsory-) part-time working conditions that don’t offer employees and their family members adequate income or necessary protection in labor law and social rights.

·*In the reproduction area, the normal family loses social relevance, the traditional housewife marriage with one, two or three children subsidized on the state’s side by independent taxation of husbands and wives in income tax law. Other forms of life and love guarantee comparatively less material security for children (so-called single-parent family, “patchwork family”, homosexual partnerships and so forth).

·*Concerning the development of the welfare state, the competition between “economic positions” implies a dismantling of security elements for the “less efficient” when the positional logic is followed and neoliberal policy dominates.

Rebuilding and developing the existing system into a kind of “citizen insurance” would be reasonable. The security gaps can only be closed through a universalization. A general insurance obligation and minimum contribution obligation for all residents (not only employees) would set social security on a broader foundation. The state must contribute or subsidize in cases of absent or limited solvency.

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