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Growth, Prosperity and Quality of Life

by Enquete commission Wednesday, Mar. 18, 2015 at 4:12 AM

"Our understanding of a modern economic and social system is strongly influenced by the phase between 1950 and 1975 when the social market economy was created and democracy was re-stabilized. Since then conditions have changed. New answers are necessary."


[These 12 theses published by the Enquete commission for the German Bundestag on February 3, 2012 are translated from the German on the Internet.]

1. The Enquete commission “Growth, Prosperity and Quality of Life” has the task of assessing the upheavals in the economy and society and giving fundamental programmatic recommendations. The question whether our understanding of prosperity and orientation in economic growth can overcome the economic, social and ecological challenges that appear particularly in the financial- and economic crises, social inequality, climate change and destruction of the natural foundations of life. As many examples show, Enquete commissions are a good instrument for creating cross-party foundations for reforms and a new social consensus connected but not narrowed to day-to-day politics. That is our goal.

2. Our understanding of a modern economic- and social system is strongly influenced by the phase between 1950 and 1975 in West Germany when the social market economy was created and democracy was re-stabilized on the basis of an extraordinarily high economic growth. Since then the economic, technical and political conditions have changed enormously nationally and internationally. New answers are necessary both to protect and strengthen social and democratic achievements and to overcome new challenges resulting from finance capitalism, ecological endangerments and demographic change. We want to renew the social market economy and expand it to a social-ecological market economy.

3. Economic growth is a not a goal but a means for reaching social goals like social justice, sustainability, prosperity and partnership. This understanding underlies the central theme of the Brundtland commission of raising growth to a new level for sustainable development. The years before the current financial market crisis showed that a largely uncontrolled and unlimited maximization of short-term profits can promote the growth of the gross domestic product (GDP) for a short time but in the medium- and long-term is at the expense of quality of life, prosperity and social progress.

4. The GDP is only partly suited as an indicator of prosperity. It only includes goods and services traded on the market and provided with a price there. All production processes that do not fulfill these criteria are not recorded in the GDP as a matter of principle (as for example unpaid care and nursing work and voluntary activities). At best state services are considered through their cost side and cannot be counted directly in the GDP. Paradoxically social and ecological costs can contribute to a higher GDP since the process of “destruction” often gives rise to costs (for example through removal of damages). No conclusions can be drawn from the amount of the GDP for the distribution of material prosperity, income- and assets distribution, the externalization of costs (for example, strain on the natural foundations of life or resource consumption) or the future-friendliness of a development model (investments in education). Therefore alternative measuring instruments supplementing the GDP are necessary.

5. Raising or limiting the GDP should not be the goal of politics. Answer must be found to the social and economic inequalities and to the encumbrance n the natural foundations of life and the shortage of resources and a social-ecological market economy that is future-friendly. Politics creates the framing conditions and thus incentive structures, commands and prohibitions within which the economy and society should develop qualitatively. Therefore strengthening the socially- and environmentally-compatible elements of GDP growth, that is “qualitative growth” through framing conditions – if necessary even though strict regulatory interventions – quickly forcing back harmful areas and limiting virtual growth arising in the realm of financial transactions.

6. A qualitative development is necessary in which all people can share instead of quantitative growth. Qualitative development must be sustainable and ensure social cohesion by strengthening the social and preserving ecological capital. For this, the expansion of the rights of freedom and participation and safeguarding and improving public good are crucial. In addition, the Enquete commission will now develop concrete proposals so political decision-makers will set correct limits and incentives as guard rails for the better development of the economy and society.

7. Many factors that will determine development in Germany in the coming decades can only be changed with difficulty. The demographic change of society can be influenced but not its effects. Negative effects of demographic change can be substantially reduced through better education and training, systematic further education, modernization of the infrastructure, a higher rate of women in gainful employment and a different distribution policy. If no far-reaching structural changes occur in Germany, a far-reaching stagnation of classical GDP growth can be expected in the coming decades on account of the demographic change and the allied diminution of the population able to work. The GDP per capita would rise but the total income available in the German economy and the financial possibilities of the public authority will hardly increase. Therefore the Enquete commission must answer the question: how can a democracy protect social cohesion in times of low GDP growth without risking sustainability and the future of its own existence?

8. The world of work must be organized so more people share in that world, so a balanced distribution of working hours is reached and the compatibility of calling and family is improved. Precarious working conditions that do not ensure existence in the long term and thereby exclude people from cultural and social participation are not compatible with the principles of a social market economy.

9. Economic and social development must be sustainable, socially- and environmentally-friendly and not undermine the conditions of life and production of future generations. Synergies are necessary here in the areas of production, dealing with natural resources, employment, finances and the social system. In the social realm, “inclusivity” and reducing social inequalities must be given a higher rank. This is also a presupposition for the social acceptance of sustainable development.

10. In the long term, every regional or global economy can only be lasting if it does not violate the “planetary limits.” However these limits are already exceeded with climate change, loss of biodiversity and the nitrogen cycle. These violations are bound with ecological and economic damages that became visible in the last years. The necessity of fiscal measures for observing these limits results from the sustainability principle but sustainable economic chances also result. Sustainable development requires the permanent harmonization of production and consumption in the cycles of nature and does not only demand a massively increased efficiency in the use of resources and energy. Therefore efficiency consistency and sufficiency are crucial to reach sustainability.

11. Sustainable economies also pursue the goal of generating high growth in environmental- and resource-sparing products and procedures. An alliance of labor and environment is an important basis for a sustainable economy. An absolute uncoupling of environment- and resource-consumption from economic growth is also necessary. Efficient technologies, renewable energy and also environmental- and resource-sparing material- and production procedures must replace growing. Renewable energy and efficient technologies must gradually replace CO2-intensive energy in a socially-compatible way. Concepts like “green economy” are right for the social-ecological renewal. But they are not formulae for regaining very high GDP growth rates.

12. Lower GDP growths are not a fundamental threat for social and individual prosperity. In the preceding decade, our growth rates were lower than those of threshold countries. Our initial situation was much higher so seen absolutely the quantitative growth as still very high. Our society has developed further and produced innovations and progress in sustainable economies. Our prosperity level is very high in a large part of the population but the increasing social differences and ecological dangers are alarming. Instead of directing our main attention at a constantly rising GDP growth, attaining a more just distribution of gained prosperity must have priority and secondly better understanding and political responses to the social and ecological consequences of saturation.


Giacomo D’Alisa, Giorgos Kallis and Federico Demaria, Degrowth, Introduction, March 2015

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Welfare state transformation: Convergence and the rise of the supply side model

by www.econstor.eu Friday, Mar. 20, 2015 at 3:28 PM


This paper describes welfare state transformation in OECD countries since the 1970s against the background of the post-war settlement. Relying on quantitative macro-data and qualitative information from the literature, we show that welfare states have converged, especially regarding various spending measures, and also to a certain extent in some qualitative policy-making patterns. What has emerged can best be described as the 'supply-side welfare state' model, and this overall orientation is reflected in many welfare state areas. We differ from earlier prognoses of a race to the bottom by generous welfare states and disagree with the view that a supply-side orientation equals 'lean government' in terms of social expenditure. But convergence implies that the space to maneuver has shrunk for policy-makers. The consequences of the 2008 financial crisis for welfare states are difficult to predict; short-term counter-cyclical measures in reaction to the crisis highlight the importance of protective buffers in highly integrated economies. Still, some countries have experienced harsh austerity measures since then, and thus the 2008 financial crisis may mark the end of the convergence period described here.
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