INEQUALITY AND EQUAL OPPORTUNITY

By Uwe Jean Heuser

Inequality is not always bad but many citizens have no chance. This is disastrous for Germany and for the economy.

[Speculative greed for profits and contempt for whistle-blowers led to the banking crisis in the US that could spill over to a worldwide depression. This article published in: DIE ZEIT 05/2008 is translated from the German on the World Wide Web, http://images.zeit.de/text/2008/05/Gerechtigkeit-Essay.]




One-fifth of Germans no longer believe the national economy is just. Hartz IV [German “welfare reform” combining income support and unemployment benefits and drastically limiting the duration of benefits] is partly responsible for the withering of public spirit..

In the last years, economists have looked closely at what people consider fair and unfair in the economy. Reciprocity is the central principle: I do to you as you do to me.

All persons are not the same in their understanding of fairness. Some emphasize positively repaying favors more than punishing unfair behavior. Others have an opposite perspective. But there is hardly an economic motive as widespread as the idea that one should receive back good or evil.

This attitude plays a great role in evaluating the welfare state and its achievements. Citizens support those not responsible for their predicament who cannot change their plight themselves. Corresponding to reciprocity, readiness to help increases when recipients give back something, whether the return favor is in community work or pushing themselves and gaining new abilities. This is a social policy that invests in human performance without reducing life to consumption.

Is that the idea behind the Hartz reforms? Many feel these reforms are unfair because of different inconsistencies or contradictions. Long-term unemployed should use up nearly all their assets before they are supported by the state while everyone should
Presumably provide privately for old age. The Hartz working method is a worthless abstraction like the hundreds of thousands of long-term jobs that were promised. The red-green did not conceal the fact they sought to activate the unemployed and save something for the treasury.

With false signals, false promises and false goals, the political system creates a feeling of injustice. When a large number of German citizens felt the upswing at last, they noticed that efforts and new jobs were thwarted when black-red raised the sales tax three percent without returning money to citizens elsewhere.

Because energy- and food prices are skyrocketing worldwide, the large majority do not feel any growing purchasing power today. A downturn threatens. Many citizens feel cut off and that they will not get their share of the new hard-fought prosperity of the nation before the world economy takes another nosedive.

In Germany, three developments over the past 20 years have affected distribution. Firstly, old West Germany lived above its means and fell in a vicious circle of higher unemployment and growing social spending. Secondly, reunification united people with very different economic conditions and experiences.

Wages had to be capped, it was said. Maintaining the old West German social standard for everyone became harder if not impossible. Thirdly, globalization created a worldwide job competition that subjected the West to an enormous cost-pressure – along with record profits for corporations and owners of capital.

For a long time, Germany refused to see these realities. Helmut Kohl always acted as though the country could easily deal with them. However the national economy reacted and switched from defense of the old income distribution to attack on the creation of new jobs.

Inequality arising when new economic conditions stress growth and employment is not unjust and is entirely conciliatory – as long as new chances arise for the large majority. That was also Gerhard Schroeder’s reform promise: new possibilities instead of reinforcing old incomes. But the movers and shakers of Agenda 2010 succumbed to the great German illusion that people on the bottom can easily reach the top in this land.

THE OPPOSITE IS TRUE

Pisa studies prove that children of poor parents have to fight a mighty counter-wind. Other analyses show that many of today’s bosses are the sons of yesterday’s bosses. The idea of equal opportunity turns out to be the grand delusion of Germany. [Protestant theologian Eberhard Juengel described “self-righteousness” as the grand delusion, translator’s note].

A lasting annoyance begins here. Many citizens still nod approvingly as global competition becomes harsher. Little is given without a will to performance and the roller coaster economy makes ever new demands!

While conditions have become more severe in the last years, equal opportunity in Germany has diminished. The German people now oppose this development.

The head of the Allenbach Institute for Demography, Renate Kocher calls this attitude “status fatalism.” While 61 percent in West Germany in 1980 were convinced performance is rewarded and honored with economic and social ascent, only 47 percent are convinced today.

In East Germany, only 38 percent subscribe to this. “Fewer and fewer motivating impulses start from increasing social status fatalism,” the demographer writes. In other words, inequality no longer spurs many people to ascend and go all out. This is almost self-evident!

The American dream is inverted here into the German nightmare. The fear of descent has also intensified in the middle class. In such a society, whoever is once down cannot budge any more.

Instead of specifically creating more equal opportunity and reducing fear of descent, politics today sends strangely mixed signals. What should people think when the well-to-do profit from the tax on capital yields while the savers’ free allowance is lowered so the middle class of savers is further burdened and not relieved in old age provisions?

Voters understand why politicians do not raise benefits for poor families corresponding to inflation while simultaneously planning an economically absurd tax relief for corporate heirs.

Contradictions appear everywhere, economically unjustified inequalities without any glimmer of fairness.

Thus a general discomfort has arisen in Germany. The readiness to ask what a dynamic economy really requires in differentiations and what is not required has faded. In this atmosphere, minimum wage is stylized as the test whether Germany is still a decent land, a minimum wage high enough so workers can manage without additional state assistance. Such a high minimum wage in Ger5many would cost jobs or prevent jobs from arising. No governing politician is now strongly arguing that new jobs would be the most just solution.

Hardly anyone dares to connect the desire for fairness with the desire for more jobs and a low minimum wage supplemented with greater state assistance. This is remarkable. The so-called combined wage actually had a very realistic chance among the voters. Two-thirds of the citizens regarded an adequate minimum income as very important, Renate Kocher writes, “whether through minimum wages or combined wages.”

However organized, a minimum wage does not create any new chances for the unemployed. It is above all a substitute theme and at most a symbol in the struggle for fairness. Citizens in the lower third of society must be able to build assets so children of poorer families have better chances.

Regarding assets in the widest sense, schools need the resources to recognize and promote talents or gifted persons. German businesses must support continuing education programs. In the past, continuing education in Germany was worse than all other highly developed economies in the world. On one side, universities require fees; an extensive system of scholarships must arise on the other side.

Building assets means saving money. All senior citizen claims today are calculated on the basis of state security for seniors. These claims are quite pitiful.

Many low earners today hear the warning: Don’t begin accumulating capital! Nothing can be gained! Still they need a subsidy. Otherwise seniors would be left with nothing.

Politics and society have abundant possibilities for creating more fairness without strangling the German job miracle. Perhaps people will reflect on this in the parliamentary elections in Hesse and Hamburg. Time presses for reflection since the economy threatens to collapse.