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by Christoph Nutterwegge, G Horn and F Schmid
Wednesday, Apr. 24, 2013 at 7:07 AM
Social cuts are a danger for democracy..When fear of social descent or collapse seizes the middle class, the danger grows that exclusion-ideologies may gain acceptance like racism, nationalism or social Darwinism..The economic future is given away on the altar of an ideology that raises location competition to the leitmotif of political-economic policy.
NEOLIBERALISM AS A VARIETY OF SOCIAL DARWINISM
by Christoph Butterwegge
Whoever isn't profitable doesn't count. In the permanent crisis, neoliberalism takes on social Darwinian characteristics
[This article published on April 4, 2013 is translated from the German on the Internet, link to derstandard.at. Christoph Butterwegge is a professor of political science at the University of Koln with a focus on poverty research.]
The more the global financial-, worldwide economic- and currency-crises in the Euro zone become normality, the more intensely the everyday consciousness of people and the political culture of the impacted states are changed. While sensitivity for all dislocations becomes less, the "bailout umbrellas" in the trillions for the banks and the Euro (more exactly: creditors and owners of state debt titles) are moved more strongly into the center of politics.
POVERTY EATS AT THE HEART OF SOCIETY
The worry over the stability of the European currency dominates public discourse so onesidedly that the polarization in poor and rich threatens to be ignored and social justice threatens to fall under the radar. The impoverishment tendencies in Germany are far less dramatic than in Athens where tens of thousands of homeless wander through the city and soup kitchens shoot up like mushrooms. Still German society is disintegrating more and more.
For example, the assets of the Albrecht family, owners of the Aldi chain, amount to billion according to the most recent data of the US economic magazine Forbes. The Quandt-Klatten family, the second-richest in Germany, received 650 million Euro in dividends from BMW shares in 2012 alone. At the same time poverty hardens and eats into the middle of society more and more. A quarter of employed persons work in the low-wage sector earning less than two-thirds of the average. That 600,000 households have electricity and/or gas turned off every year shows that material poverty exists in our rich country.
Social cuts are a danger for democracy like EU summit diplomacy pursued behind closed doors. Democracy involves more than visiting a ballot box every four or five years. Beyond that, it implies that all citizens of a country can jointly determine their fate, that is are involved in processes of political development of objectives and decision-making. But how can a single mother in a Hartz IV relation who has no more cooked food for herself and her children after the 20th of the month have an influence on government resolutions and legislative processes when she isn't subject to any power cuts of municipal utilities?
Neoliberal hegemony understood as public opinion leadership of market radicalism is unbroken despite its legitimation problems from its extensive crisis disasters. More than social asymmetry intensifies. It also represents a danger for democracy. With location nationalism, neoliberalism produces a modern variety of social Darwinism that subdivides society into more and less powerful or winners and losers.
Whoever does not use or hardly uses his/her "own" economic location and can hardly be exploited economically is excluded. The unemployed, seniors, persons with handicaps and immigrants are increasingly criticized for being "social parasites," "don't count" and live off the "location community." Political-ideological starting points for right-wing extremism or populism arise here.
When fear of social descent or collapse seizes parts of the elevated middle class, the danger grows that exclusion ideologies like racism, nationalism and social Darwinism may gain acceptance. Although the "Euro bailout umbrella" mainly involves credits and guarantees, Germany sees itself as the paymaster of the EU and acts the big shot as the disciplinarian. If one reads Thilo Sarrazin's second bestseller "Germany doesn't need the Euro," one has the impression that all countries only want our "hard" currency.
Sarrazin skilfully joins current resentment. In his book "Germany Abolishes Itself," Sarrazin adds Southerners squandering "our hard-earned tax money" and lying idle in the sun to the cliches of the Hartz IV recipient who can't deal with money and migrants of the Muslim faith lying in the hammock of the welfare state.
The neoliberal positional logic must be refuted, solidarity reestablished and attention guided to social-political alternatives that could guarantee social peace and democracy. The cardinal question is in what society do people want to live: a high-output performance- and competition society that increases pressure to perform and work rush, excludes at least the long-term or permanently unemployed, homeless, drug addicts, seniors and persons with handicaps while honoring egoism, self-assertion and ruthlessness, wonders about the decay of customs, decency and morality or a social civic society that promotes cooperation instead of competitive conduct, human relations and tolerance instead of elite consciousness and striving for excellence?
You only see exploitation in connection with wages. Extend y8our thinking a little. What is the origin of the raw materials? Were they gained with sustainability? What is the health situation of workers?...
The sustainability of a profitable business is no longer so obvious... The financial market has had effects on our society and our life...
A survival of the fittest where the right of the stronger is in effect is not a sustainable model of society for the peaceful cooperation of a highly developed civilization.
THE MONETARY UNION: NO COMPETITION BETWEEN STATES!
The states in Europe should be like businesses: cheaper, better and more competitive. Such thinking destroys the monetary union.
By Gustav A. Horn
[This article published on 4/16/13 is translated from the German on the Internet, link to www.zeit.de. Gustav Horn directs the Institute for Macro-Economics and economic research of the union-friendly Hans-Bockler-Foundation.]
The crisis of the Eurozone is unending. Why isn't the Eurozone stable despite the tremendous efforts of all member countries?
The simple answer is that the solutions proposed in the past were largely counter-productive. Only the announcement of the European Central Bank to indefinitely buy up bonds calmed the situation up to now. Everything else is hardly helpful in the short-term; some measures are even harmful in the long run. At the same time, the political approval of the Euro dwindles. This process will bring down the common currency - if this development is not stopped soon.
The basic error committed by Germany in particular is a completely wrong view of the monetary union. The German government - like its predecessor governments - understands the common currency zone as a competitive community of states. In this competition, individual countries must prove capable of surviving economically to be legitimate members of the monetary union. "Business models" of states arise from this perspective. As in Cyprus, this could mean countries establishing themselves as attractive locations with low taxes and lax regulations - at the expense of other countries in the monetary alliance. According to this reading, another "business model" could be competing better with wage cuts and dismantling social security systems. This makes people angry against the Euro... These measures have plunged the Eurozone into a tough recession in which neither unemployment nor state debts will decline in the foreseeable future.
What can be learned from this? Firstly, an economic policy that only emphasizes improved conditions on the supply side must fail in an environment of weak demand. No business can survive without adequate demand, however cheaply it can produce. This insight is gradually spreading among the governments of the Eurozone. Therefore demand programs are conceived to a small extent - more or less bashfully.
The second lesson is much more fundamental. It is a basic error to transfer the model of free enterprise competition to states in a monetary union of sovereign states. While competition between businesses leads to desirable aggregate economic results, competition between states is unproductive or even harmful. The reason is simple. When businesses compete, new products and more efficient production processes arise - new sources of prosperity. Prosperity is reduced when states compete with each other.
That lies in the nature of competition. Where this prevails, failure must be possible. Failed businesses disappear from the market. Competition can take over customers and create additional jobs. Failed states remain and the people who live in them. They will have to live with clearly diminished prosperity. To avoid political destabilization, they will even have to be subsidized by the rest of the states.
There are no gleaming "winners" in the location competition. Most lively, the winners must financially support the losers which may not even happen in free enterprise competition.
However there is a positive side for advocates of a location competition. It consists in a relatively dynamic economic development with a good employment situation resulting from investments and exports of highly profitable businesses enticed by low wage costs, trifling regulations and low tax rates. That sounds good but proves to be a sham boom.
EVERYONE LOSES AT THE END
This competition is marked by constant pressure. The tax rates must remain permanently low to maintain a competitive advantage and support businesses. In this way the revenue base of a winner-state erodes in the long run. This becomes lowly noticeable through a decaying infrastructure for which there is no money any more on account of declining state revenues. The chances for growth and employment sink. Even the supposed winner loses.
All this happens before our eyes. Together with their failed "business models", loser-states like Cyprus, Greece, Spain, Ireland and others stagger in an economic abyss and must be supported by other member states. Winners like Germany still bask in supposed success. However their public infrastructures suffer; the public treasuries are empty. Every rail customer knows this. Thus the economic future is given away on the altar of an ideology that exalts location-competition to the leitmotif of political-economic policy.
Instead of this, economic policy in Europe must be coordinated more strongly. Common fiscal framing conditions for all member states and less tax competition are necessary. Competition should be left confidently to businesses. Otherwise there will only be losers at the end.
FIVE YEARS OF CRISIS IN EUROPE: TEN MILLION MORE UNEMPLOYED
by Fred Schmid
[This article published on April 15, 2013 is translated from the German on the Internet, http://www.isw-muenchen.de/download/eu-alo-fs-20130415.pdf.]
Europe is in the fifth year of crisis: financial crisis-bank crisis-economic crisis and state debt crisis. For over a year, the EU and the Eurozone have again been mired in recession with Europe's South in a deep depression. The nosedive of the Eurozone even accelerated in March 2013.
The consequences for people are devastating: record-unemployment, record-poverty, record-debts-cuts in social benefits, pensions and other necessities, losses in purchasing power and so forth.
Within a year, the number of unemployed both in the EU and the Eurozone increased 1.8 million (all numbers are from eurostat). In February, the unemployment rate rose in the Eurozone to 12.0% and in the EU to 10.9% - a record! There were never so many unemployed in Europe: 26.3 million in the EU - ten million more than in February 2008 (16.2 million); 62% more than five years ago, Eurozone: 19.1 million, 7.7 million more than 2008 (11.4 million), an increase of 68%.
Millions of individual and family fates, destroyed existences and life plans, hopelessness and perplexity are hidden behind these sobering statistics. Lack of perspectives and blocked futures affect the youth especially.
The problem of youth unemployment is very serious. Every fourth young European under 25 is without a job: 23.5% in the EU, 23.9% in the Eurozone. The existing jobs are largely precarious. In the periphery, the job problem of y8outh has become a social tragedy. More than half of the youths in Greece (58.4%) and Spain (55.7%) are without work. In Portugal (38.2%) and Italy (37.8%), it is more than every third, in Cyprus 31.8% and in Ireland 30.8%. Altogether 5.7 million y8ouiths in the EU are without work (3.6 million in the Eurozone). On the other hand, Germany has the lowest youth unemployment in the whole EU. Germany is the only country where youth unemployment has fallen since 2008.
The North-South gradient, Europe drifting apart ever more strongly, is remarkable. While unemployment rates in the past years have fallen in the so-called core countries Germany, Netherlands, Austria and France (momentarily caught in the deepest crisis in four years) and are below the 2008 level, the rates in the periphery countries have doubled or tripled. On average, the unemployment rate in the South at the end of 2012 was 15.1% and 6.6% in the North. Before the crisis, it was the other way around: nine percent in the North and eight percent unemployed in the South.
ILO: EUROPE FACES SOCIAL UNREST
According to the UN organization ILO (International Labor Organization), the risk of social unrest in southern EU countries has increased intensely particularly in countries like Cyprus, Greece, Portugal and Italy as a consequence of this unequal development. In the EU average, the risk index for the outbreak of social unrest is twelve percentage points higher than before the financial crisis. The ILO measures risk in a special indicator. The risk fell in Germany, Finland and Belgium. This was discussed at a conference in Oslo (4/8/13) in a ILO discussion paper. "In all the countries impacted by the crisis, high unemployment along with increased insecurity of employment and cuts of wages and social benefits from austerity measures has produced a feeling of injustice and leads to peaceful demonstrations and less peaceful eruptions of social unrest. Under these circumstances, effects of infection in other European countries are only a question of time." The ILO blames the austerity policy prescribed for the crisis countries for the rise in the number of unemployed in these countries. However that is not the only reason. In the course of the over-accumulation crisis - particularly in 2009 - the structurally weak economies of the South were largely catapulted out of the world market and their domestic markets overrun by German exports. In addition, financial crisis and state bank-bailouts ruined state finances and drove state indebtedness to new heights. The austerity dictate of the Troika and the high interests realized through the rating agencies drag these countries into the crisis whirlpool.
Conversely the North is among the crisis winners. For a while, Germany could export out of the crisis, doped by the lowest piece-labor costs and underrated Euro prices. Low interests relieved state budgets and created considerable competitive advantages for firms operating out of Germany (for example the automobile industry). Businesses in Germany now gain extra profits from the job misery of the crisis countries. "The German economy could be the beneficiary of the lack of perspectives of a whole generation of Southern countries," the Handelsblatt paper writes (4/3/13). "Firms despairingly seek skilled workers. Gainful employment in Germany climbs quarter after quarter to new all-time record highs - since young foreigners are also seeking their happiness here." In an interview with rp-online (3/30/13), BA-chief Frank-Jurgen Weise declared: "At the end of 2012, the number of employees in Germany from Spain, Italy, Portugal and Greece rose around 33,000 to 462,000...In the search for skilled workers in these countries, we concentrate on engineers, doctors and nurses." Germany lacks 30,000 skilled nurses. The brain-drain is lucrative for capital in Germany. Training costs are saved with workers from southern countries.
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