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The Neoliberal Agenda is Over and The Despised Social State

by Gustav Horn and Thomas Meyer Wednesday, Feb. 24, 2010 at 6:23 AM

Neoliberalism is the political-economic experiment of individualizing social risks and claiming growth and employment will be higher. This claim is refuted convincingly by the global financial crisis destroying enormous assets and causing growth and employment to crash.


Does Everyone Know This?

By Gustav Horn

[This article published 1/19/2010 is translated from the German on the Internet,]

What is neoliberalism? Neoliberalism is the political-economic experiment of individualizing social risks and claiming growth and employment will be higher. This claim is refuted convincingly by the global financial crisis destroying enormous assets and causing growth and employment to crash.

The crisis has made this clear. In a market economy, there are inevitable social risks that increase more than decrease through deregulation. No one can seriously argue that those now unemployed are responsible themselves for being unemployed. They are victims of those mistakes that led to the global financial and economic crisis. The absurd or cynical nature of official government campaigns that in the middle of the decade tried to stylize unemployment as largely self-indebted is now unmistakable. Nevertheless the recent German labor market reforms are based on this way of looking at things. Therefore a reform of the reform and turning away from neoliberal ideas are very sensible.

But there are even more reasons for the great upheaval and the great refusal (cf. Paul Krugman). A political economy with a developed social system can cope with social risks better than one without such a system. From an individual economic perspective, unemp0loyment insurance ensures the income for an unemployed person by covering livelihood costs. From an aggregate economic perspective, the stabilization of income also leads to stabilization of consumer demand in times of crisis so the crisis turns out weaker than without social security. Social insurance only becomes problematic when it gives a strong incentive for remaining unemployed when there are acceptable alternatives. In this context, carrying out a reform of the reforms would be rewarding.

Very different projects are astonishingly proposed alongside these sensible reform efforts. In all seriousness, politicians and economists even urge intensifying the Hartz IV rules (German “reform” that combines unemployment insurance and income support and drastically reduces the duration of benefits). The demands for a temporary wage freeze for employees go in the same direction. Obviously not everyone has understood that this crisis is not the result of lax social systems and excessive wage demands. Perhaps they only want to divert from the real causes in order not to notice truths about the dangers of deregulated market systems that are uncomfortable to them.


By Thomas Meyer

[This article published 2/8/2010 is translated from the German on the Internet,]

In German features sections, the question is suddenly raised whether our social state suits the status of free citizens and whether it can still be justified. People pretend to tackle it at its roots. The question is debated as though it has no history.

A warning reaches us from New York in a land that laboriously wrestles over a first health care insurance for its citizens. Tony Judt, a renowned historian, draws an admonishing lesson from Europe’s history that comes at the right moment for us.

Tony Judt summarizes it in the surprising term “a social democracy of fear.” He turns a central idea from the future ethic of the philosopher Hans Jonas to the social-political. If we do not deal sparingly with natural resources out of responsibility and a sense of justice, we should at least have the survival cleverness to imagine the consequences of neglecting what is necessary. Judt recommends that we support the social state. The shock that triggers this could bring us to consciousness. This counsel is imperative now.

In Europe, we are beginning to forget the social state did not arise as a great donor whim of the kindly and well-to-do. Rather it was a hard-as-nails interest compromise between the economically strong and the weak. In Germany, Bismarck reconciled the strengthened labor movement with the state. The labor movement should not imagine finding its own salvation beyond this state. Sooner or later the social state was adopted everywhere in Europe. German state constitutions are based on this historical compromise: constitutional democracy plus capitalist market economy plus the social state supporting basic rights. Whoever shakes the social pillars shocks the whole structure.

Why should the socially weak be good citizens of a state?, the German legal scholar Hermann Heller asked in view of the crisis-shaken Weimar Republic if that state is not concerned about their interests. Only the social constitutional state can demand and expect everyone’s approval. The basic law of Germany first drew this lesson that has become the dilemma of German history. Whoever carelessly shook the social foundation of democracy even in a little features slapstick cut the republic to the marrow.

Inner peace in Europe is based on this historical compromise. The social state is one of the great European cultural achievements.

Today the social state is a legal claim of all German citizens, not a mere matter of alms for the wealthy according to their desire and mood. The social state has proven to be the condition for the freedom of all. The legitimation of modern democracy rests on the social state.

Without the guarantees of its positive prerequisites – education, freedom from distress, social protection, work and income - freedom for too many citizens remains an empty promise, a mere privilege of the strong. Therefore the 1966 Human Rights pacts of the United Nations give universal authority to basic social and economic rights like freedom itself. The post-modern arsonists at the foundations of the social state have forgotten this. But our societies may not forget this.


Dean Baker on the Recovery on GritTV, February 2010

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