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Against the Neoliberal "Modernization" of the Labor Market

by Heide Knake-Werner Friday, Jan. 13, 2006 at 6:00 AM

he predicted employment effects of the neoliberal strategy do not go beyond expanding low-wage sectors and under-employment.


On Strategic Starting Points for Alternative Economic Policy

By Heide Knake-Werner

[This article published by Utopie kreativ 2005 is translated from the German on the World Wide Web,]

In the example of the neoliberal policy modernizing the labor market in Germany condensed in the so-called Hartz laws, I will show strategic staring points for an alternative economic policy.

The mass unemployment continuing for more than two decades doubtlessly marks the greatest defeat of the neoliberal economy. Again and again there were phases in capitalism with massive job destruction and great employment problems. But what happens today on the labor market is a permanent crisis. Even worse, growth rates on a scale that would make possible restorations of full employment are inconceivable economically and undesirable ecologically.

In Germany, for example, seven million jobs are lacking. Even at the peak of an economic upswing, this number did not fall below six million. No defender of the neoliberal supply theory and no labor market strategist of the ruling parties dare employment forecasts that cut in half the job deficit. The predicted employment effects of the neoliberal strategy do not go beyond expanding law-wage sectors and under-employment. The unemployed are forced into precarious working conditions while mass unemployment continues. Therefore answering the employment question is the most important and most difficult challenge of an alternative socialist economy.

Leftist economists and economic strategists may not cherish the illusion that a new form of full employment is possible without essential changes of macro-economic instruments and revision of social distribution conditions. Neither the market mechanisms nor a demand policy conforming to the market will be able to create the necessary number of jobs. Demand policy can play an important but not decisive role in restoring full employment.

In my opinion, the real problem is not with the deficient prescriptions of the neoliberal supply policy but in a human rupture of the social work regime comparable with breaches like the transition from the agricultural economy to industry.

Thus the new situation does not consist in the end of work in our societies as some theoreticians think. Rather we witness a shift of dominance in which decreased productive activities is accompanied by a growing need for necessary reproduction work. This growing need of works for public welfare, education, culture and science is met less and less and the reproduction of social work capacities can hardly still be guaranteed. The production vitality of modern capitalism is undoubtedly in sharp contradiction to its inability to reproduce the production conditions itself.

In its programmatic and political praxis, the PDS (Party of Democratic Socialism) thematicized this contradiction more than ten years ago and worked out proposals for reorganizing the employment system. Different strategies of reducing working hours were part of these proposals. However developing new employment fields for repairing the social and ecological reproduction crisis was central, not only a better distribution of existing work.

These employment fields obviously belong to state tasks. However these tasks are not exhausted in expanding employment conditions. Dismantling state employment in Germany has cost two million jobs through privatization and limitation of public services. The state need not do everything for which it has responsibility. The PDS concept concentrates more on the permanent promotion of social self-organization and the strengthening of civil society. The publically sponsored employment sector should become a new segment of the employment system and improve the reproduction capacity of social, cultural and ecological resources without automatically expanding the state sector.

Before I explain this, something must be said about the development of German job-creating measures carried out with the beginning of mass unemployment in the middle of the 1970s. In Germany, there was a so-called second labor market for decades whose demand side was formed by public job-generating measures in the so-called third sector. Here social, ecological and cultural functions were set in limited projects that actually belong to public tasks. Since they could no longer be financed as public functions, they were supported with funds from work administration.

From the start, this “third sector” was fraught with problems and diverse grand delusions. Thus for example it was born with the myth of a bridge function to the first labor market. The limited employment in a so-called ABM, a job-generating measure, should increase the chances to transition to the first labor market. However this bridge led nowhere because the activities were almost only in the public sector..for which there were no budgetary funds. Thus social workers, educators, scholars of all disciplines, artisans and engineers were entrusted with tasks of public welfare for which there weren’t either regular jobs or money.

Another myth consisted in claiming that additional tasks were involved here that only helped personal qualification although they were regular public functions. When it turned out that financing public tasks through the work administration was a bottomless pit, the awarding of funds was increasingly limited, pay was reduced and the approval time frame shortened. Consequently, the unemployment of this group of employees increased as the deficits in public welfare overflowed. Other problems were also very foreseeable. The short-winded sponsoring led to waste and misuse so that the job-creation measures fell into vehement criticism and were gradually dismantled. They failed in reducing mass unemployment, mainly for financing reasons.

In the meantime, this phase of employment policy has long belonged to the past.

The current strategies for modernizing the labor market concentrate exclusively on measures of supply policy. Labor is reduced in price and the unemployed are under pressure to create prerequisites of their employment in private enterprise. A program of general wage cuts underlies this strategy. This program cannot stop because employment is regulated through demand on the commodity markets, not through the price of labor. Thus the present strategy of the red0-green German government is socially unjust and economically misguided.

We are witnesses today to a really perverse focus on the growing necessity of doing more work for charitable goals. With its fourth law on modernizing the labor market, the German government introduces so-called one-euro jobs. According to this law, the unemployed could be forced to do regular work up to 30 hours a week for one euro per hour beside their basic security and defrayed housing costs.

The obligation to non-profit work has a very central importance. The German government calculates up to 600,000 jobs in this area and develops remarkable fantasies on how this cheap labor supply can be championed by the territorial authorities and welfare associations. This is a crucial question for the political decision-makers who must deal locally with this federal law. The old myths of state employment policy are revived and the illusion of a bridge to the first labor market spread although everyone knows demand for regular paid work in this area does not exist. The emphasis is again on additional tasks and functions that really do not exist but are reinvented to accustom long-term unemployed to the regular everyday routine. This need for inculcating subordination exists. The number of unemployed among 25-year olds underscores this necessity. These are actually not additional tasks but indispensable cooperative services for a society that needs more services as the social reproduction becomes more expensive. What are involved are functions in education, social services and security in local public traffic.

This strategy is obviously asocial, economically counter-productive and even contributes to the destruction of regular jobs. However one must go beyond this criticism. Socialist politics has the task of discovering those moments that go beyond capitalist principles and form starting points for an alternative development. Concretely this means the forced labor of cooperative one-euro jobs necessitates a fundamental reorganization of our employment system according to responsible strategists of the PDS.

As ridiculous as it may appear, the mobilization of a large part of the unemployed for non-profit work is an undeniable advance because of the underlying admission that additional reproduction work is indispensable. The actual problems of social development are identified. Even if this progress goes along with impoverishment, wage dumping and staff reductions, this development must be utilized as a strategic starting point for leftist alternatives…

What is really central now? Firstly, a central social fund must be created for social and ecological community tasks and expanding the non-profit sector. This will be impossible without social majorities for a new distribution compromise. Therefore the intentional reorganization of the labor system is not a mere jobs policy; the social distribution mechanism must be profoundly changed. Secondly, we do not speak without reason of a public sector or new work possibilities. A new understanding of public functions, developing new vocational fields and a redistribution of tasks between market regulation, state activity and civil society self-organization are necessary. Finally and not less important, a paradigm change must occur in the way humanity today masters its reproduction crisis.

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