Trade War and Zero Deficit Myth

by Stephan Krull and Beigewum Austria Friday, Jun. 01, 2018 at 12:33 AM

State debts are often necessary and are not automatically bad economically. Investments are prerequisites of future prosperity. When private parties spend too little, the state must step into the breach.


By Stephan Krull

[This article published on Ossietzky 8/2018 is translated from the German on the Internet,]

Rules in world trade are man-made and changeable and not god-given. The US president demonstrates this with the sanctions, the negotiations of the European Union as well as China’s reactions.

Besides nation state and supra-national European legislation, the World Trade Organization (WTO) exists with 164 member states and headquarters in Geneva. It was founded in 1994. Previously, there were bi- and multinational trade agreements with partly discriminatory and partly preferential clauses for individual countries. However, enforcement of neoliberal policy, creation and conquest of new markets and the guarantee of profits for investors required equal, long-term legal and economic standards in trade relations. Social standards are not emphasized in the principles of the WTO: free trade, non-discrimination, dismantling trade barriers and tariffs and equal rights are demanded of all member states – irrespective of their technical, economic and social stage of development.

The equal treatment of unequals endangers inequality. This is a truism in the daily routine of many people and a premise for welfare state measures, for union solidarity and for church charity. The approval of the governments of many countries that lost the means of bilateral agreements with WTO membership was reached through different kinds of bribery and corruption of the elites. In connection with the World Bank and the International Monetary Fund institutions resident in Washington, the WTO decides over the rules of worldwide trade – until someone comes, today it is the US president, and changes the rules or interprets them in one-sided interests.

Trump announced tariffs on steel and aluminum and carried out the announcement in March against China. The EU received a brief postponement before new decisions about tariffs toward the EU. Why did Trump raise the tariffs? Will the local economy and the jobs of steelworkers in the US be protected from unfair competition as he claims? Loudly and imperially, he declared the existence of steel production a question of national security: “When one has no steel, one has no state.”

The WTO will now probably change its rules and the US may leave the WTO. In any case, the cards will be shuffled and the rules adjusted to the new conditions. The CDU spokesperson in the Bundestag (mainstream party), Christian Hirte, explains: “Those who emphasize the importance of free trade now must ask whether the TTIP hindered this way in the last years.” The obvious injustices in free trade should be overcome by more free trade.” That is the old barrel organ of the Chicago Boys of Milton Friedman. When the neoliberal promise is not fulfilled, this was because of “too much state” or too much neoliberalism. From the latest developments, we learn rules and laws depend on concrete social and economic developments and the pecking order and are not static. This is a good and encouraging discovery when we champion a peaceful, social development and cooperate in changing the rules and laws – with our possibilities of demonstrations, strikes and boycotts. From experience, we know: the law usually follows actual life - and not the other way around! Laws and rules change at the speed that people change society. Here are three examples:

Continued pay (in case of sickness) for dependent employees was gained through strikes and then legally anchored. When the German government led by Helmut Kohl sought to limit continued pay, that failed in the resistance of the unions. Continued pay remained a law against the resistance of employers and their parliamentary arms.

Various free trade agreements like TTIP were prevented by the resistance of many critics. Beyond the WTO rules, a state liability for lost profits of private businesses would have been enforced.

An international norm guarantees the right to strike for all employees (core labor ILO norm). However, civil servants cannot strike in Germany. This is legitimated and not criticized by the civil servant association that poses as a union. The “prohibition” against political strikes in Germany is similar. International law is not (yet) enforceable in Germany.

Are (punitive) tariff duties and protective measures good and correct measures against the neoliberal free trade? Are we Trump’s allies in this question? A wrong measure like neoliberal free trade cannot be fought by another false measure like protectionism. Protectionism always carries the danger of nationalism in itself. Trump is by no means concerned about jobs in the steel industry of the Rust Belt that were destroyed by unfair Chinese trade practices but rather about gigantic leaps in productivity on a tighter market. Trump is focused on the profit of steel companies. The nationalist mood resulting from his measures is the background music to implementing powerful capital interests. This is clear in Trump’s fiscal policy from which the super-rich profit and in the deregulation of the financial markets from which finance capital profits – including his own amassed empire.

The alternatives to neoliberal free trade and protectionism are just trade between regions and countries and fair trade relations. This includes an equalized or adjusted trade balance between imports and exports. Germany must reduce its exports in favor of the domestic market, repairing and building the infrastructure, strengthening education and training and removing the catastrophic conditions in the public health system. The export surplus of an incredible 250 billion euros per year only serves the further enrichment of the rich and devastating financial speculations. Protecting and promoting less developed economies and partial markets with tariffs on cheap imports and heavily subsidized goods are part of fair world trade. Fair prices for raw materials and semi-finished articles in producing countries and fair wages to producing workers in the mines of Africa and South America and in Asia’s textile and shoe factories belong to fair world trade. Examining and correcting our own role is vital. By exporting heavily-subsidized agricultural products from Germany, the small farmer existences of millions of persons in many African countries are destroyed – all in the name of free trade.

Sabine Stephan from the union-friendly Institute for Macroeconomics and Economic Research (IMK) criticizes the imbalance between losers and winners of free trade. “Globalization on balance leads to prosperity gains that are distributed very unequally. While the profits are privatized, the costs for regions uncoupled in the global competition and the persons who have lost their work burden the state and society.”

The alternatives to neoliberal free trade and protectionism are just trade between regions and countries, fair trade relations, solidarity instead of competition and people before profits.


On Reality and Appearance in the Current Budget Debate

By (Austria) 2000

[This study is translated from the German on the Internet,]

Austerity rage seizes the public. Huge mountains of debt burden the conceptual world of wide circles of the population and demand removal. Even opposition parties do not dare any objection but urge careful modifications on the demand that sees to be the consensus: zero deficit. This demand appears as an economic tautology that puts all political calculations in their place.

Seen economically, zero deficits should not be a state goal!

• State debts are often necessary and are not automatically bad economically. When private parties spend too little, the state must step into the breach. Investments are prerequisites for future prosperity. With its present state debts, Austria was one of the richest countries of the world. Education, housing, construction, transportation infrastructure and much more was financed with the secured money. The repayment should be borne by those who will be enjoying those advantages in 20 or 30 years. Debts are serviced by future generations and represent a building block of prosperity for future generations.

• A state need not have a balanced budget. What the state does with its budget is important – from whom it gains revenue and what projects are funded. Budgets have to fulfill public tasks – welfare, distribution, infrastructure etc. A government is only measured by one criterion – a zero deficit is not a mark of quality. That the right measures are taken for the population is much more important than whether the balance from revenues and expenditures is positive, negative or balanced.

• Reducing state budgets to their balance makes poor budgetary policy because it neglects the main task – aggregate economic control by revenues and expenditures. Good budgetary policy can mean high deficits and a balanced budget can be the result of a disastrous budgetary policy. The latter is true for the current Austrian government.

• The state is best prepared for public expenditures and the necessity to become indebted. Different from a private party, the state de facto never has to repay its debts – because it has “eternal life.” It only needs to pay its ongoing interests on state debts. Again and again, the state can cover the credit sum through new credits. This is possible without problems as long as the interests and the annual new indebtedness do not grow faster than the tax revenues.

• In the Austrian state budget, there are many problems that are far more serious than the negative budget balance. There are deficits that affect the main expenditures:

• There is very little redistribution. There are enormous supply gaps in the social realm;

• Gender-specific problems are hardly considered;

• Low wealth and capital taxation makes Austria into a tax paradise for businesses and wealth;

• The budget processes are very non-transparent and largely elude democratic participation.

The measures of the Austrian FP/VP government justified with the slogan “zero deficits” aggravate these problems. The main expenditures of the budget are now neglected most brutally in favor of the zero deficit and clientele policy.

Why are zero deficits so important to the government?

For the new Austrian government, the zero deficits are the central vehicle for realizing social-political ideas. The desire of the government to privatize or eliminate certain state functions underlies the demand to remove the deficit. Instead of social rights, everything should function only according to the free enterprise principle of competition. Whoever cannot prevail on the market should not be cushioned by the social state anymore. The function of the social state should be taken over by the family. Unpaid women’s work increases with the upgrading of family functions.

Alternative Budgetary Policy

Budgetary policy is social policy. Its task is total social control by means of revenues and expenditures.

Spending side: Spending should concentrate on improving the life- and development chances of broad social groups, particularly those neglected by other financing sources (work- and assets income).

Revenue side: Financing social possibilities and public cushioning of the consequences of private economies are increasingly borne by those who profit from the latter. A higher taxation on resource consumption, wealth and capital income follows from that.

Budget-process: Public functions like budgetary policy and the administration must be democratized. All budgetary measures should be subjected to a social and gender-specific assessment of consequences.


By Beigewum (Austria) 2017

[This Fact Sheet II published in September 2017 is translated from the German on the Internet,]


• In Austria, there are many possibilities for flexible working hours.

• The demand for more flexibility possibilities, for example increasing daily working hours, expanding overtime) aims at saving overtime pay.

• Positive employment effects can not be expected through more flexibilization. Instead, measures for general reduced working hours are sought.

Working hours option rapidly grows

The Austrian model includes a graduated system of working hours regulations. Labor law gives possibilities for collective bargaining regulations. In the last decades, the number of working hours options has grown enormously. Since the end of the 1990s, great flexibilization steps were taken. In 1997, employers had to pay less overtime… In 2007, the daily normal working hours were raised to ten hours (in exceptions even to 12 hours) and the maximum weekly working hours rose to 60 hours.

From this development, we see the demands to employers in working hours have clearly increased in the last decades. A picture of enormous burdens is reflected in these numbers. The average weekly working hours for full-time employees in Austria at 42.8 hours is above the EU average of 41.4 hours. Austria is the fifth highest of 33 countries and the second highest of the European Union.

Other indicators also show the degree of flexible working hours in Austria is very progressive. Every fifth dependent employee has an all-in contract. 20% of overtime is unpaid and 70% of employees have variable working hours (flextime and others).

Working hours sovereignty vs. obligation

Distinguishing between measures in the interest of employees, employers or both is essential in working hours policy. Some of these elements like flextime are completely determined by the interests of employees, for example to make work and family or free time more compatible. But measures exclusively in the interest of businesses are discussed. In the current debate, expanding maximum working hours is a frequent theme. Enforcement would bring savings for businesses. They would not have to pay the 270 million overtime hours. This is often justified in that more flexible working hours would create jobs.

Original: Trade War and Zero Deficit Myth