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We are all social democrats now. Almost all of us

by Ingo Schmidt Monday, Jun. 07, 2021 at 4:56 PM

A few weeks ago, IMF chief Kristalina Georgieva said rich households should pay higher taxes. Inequality in income and wealth had reached proportions that threatened social peace. The head of the IMF, Alfred Kammer, called on the German government, as in previous years, to increase its investments.

We are all social democrats now. Almost all of us.

By Ingo Schmidt

[This article published in May 2021 is translated from the German on the Internet,]

A few weeks ago, IMF chief Kristalina Georgieva said rich households should pay higher taxes. Inequality in income and wealth had reached proportions that threatened social peace. The head of the IMF, Alfred Kammer, called on the German government, as in previous years, to increase its investments.

The existing budget rules in the EU and its member countries should be changed accordingly. For the purpose of drying up tax havens, U.S. Treasury Secretary Janet Yellen is calling for a global minimum tax on companies.

Michael Hüther, head of the Institute of the German Economy, knows nothing about tax increases. Instead, he attests that Germany's social security systems are able to counteract the increasing inequality of market incomes. The equalization of disposable incomes brought about by redistribution is also urgently needed to counteract social division and populist movements. He also advocates an increase in public investment. The debt brake should be relaxed if necessary

Hüther's institute, in cooperation with the union's own Macroeconomic and Business Cycle Research Institute, had already worked out reasoning arguments two years ago, before Corona and the associated expansion of government spending and debt. In a joint article, placed in public view in the Frankfurter Allgemeine, the chairmen of the DGB and the Green Party, Reiner Hoffmann and Robert Habeck spoke out in favor of more public investment. Without this, a climate-neutral economy would not be possible.

The spirit of the times is turning

With so much social democratic spirit in the air, the SPD is also coming out of the woodwork.

If the Lafontaine-Schröder-Hartz complex did not stand in the way, the party could have claimed intellectual authorship for just about everything that is currently being discussed by Georgieva, Kammer, Yellen, Hüther, Hoffmann and Habeck. This is all concisely summarized in the book 'Keine Angst vor der Globalisierung' ('Don't be afraid of globalization'), which Lafontaine wrote with his then wife Christa Müller and published in time for the 1998 Bundestag election campaign. At that time, of course, the zeitgeist was not on the side of an ecologically enlightened Keynesianism that Lafontaine and Müller propagated.

At that time, the IMF, the U.S. Treasury Department and business associations were unanimously calling for tax cuts and budget consolidation, and for the state to withdraw from its function as a guarantor of property and the competitive order. Lafontaine, who was described by the British gossip magazine Sun as 'Europe's most dangerous man' because he sought EU-wide tax harmonization, gave up his post as finance minister after a few months. Schröder gave in to demands from Washington and domestic business circles. His coalition partner also pushed in this direction. The few Greens who were interested in economic and financial policy at the time were staunch ordoliberals. Prominent among them was Oswald Metzger, a companion of Wilfried Kretschmer. Metzger 2 has since joined the CDU and is involved in the New Social Market Economy Initiative.

But even within the CDU, ordoliberalism is no longer uncontroversial. While the Greens, at least outside of Baden-Württemberg, have openly abandoned ordoliberalism, it is supported by parts of the CDU, for example by the affable chairman Friedrich Merz, but pushed into the background by larger parts in favor of a conceptless serving of economic special interests. Emissions, cum-ex, wirecard and mask scandals make more headlines than entrepreneurial innovations.

This was different during Schröder's chancellorship. In view of the hype about startups and a new economy beyond state and corporate power, Lafontaine's eco-Keynesianism seemed like a relic from the 1980s, a time in which parts of the SPD held on to their Keynesian convictions and sought to combine them with the environmental and peace issues. This was the way to make opposition but not to lead a government. According to the Schröder wing of the party, this meant going along with the new times. And the new era was characterized by market forces that could be unleashed politically.

This did not mean the end of state intervention, but a further shift from the welfare state to state support for stock exchanges, banks and corporations. A development radicalized that had begun in the last years of Helmut Schmidt's chancellorship and was to reach its peak under Gerhard Schröder.

But market forces have exhausted themselves. Recurring economic crises were accompanied by ever-greater state support for private, especially large, companies. No collective bargaining agreement, no social welfare ever ruined public budgets as did bailout programs for monopoly capital.

For ordoliberals, the point is clear: The difference between pubs and kiosks and corporations at the upper end of the size scale is denied because it does not fit into the worldview of free competition among legally equal companies.

The state deficits must be countered with spending cuts in the social sector, of course, because the investment propensity of companies, which is already dampened by the crisis, must not be pushed down to depression level. Rather, it should be boosted by tax cuts.

Ordoliberalism has served well as an ideology and guide to action of the class struggle from above.

The share of profits in national income before and after taxes increased from crisis to crisis. The lowering of the state-guaranteed minimum income and increasingly difficult access conditions undermined the unions' bargaining power.

Entrepreneurial state and unions against fossil capital

Although the goal of redistributing income and power in favor of capital was achieved - the crisis-deficit-austerity cycle was not really efficient. If the government spends so much money to bail out companies, there should be a return on investment. But this was not the case; the economic upswings with rising profits and tax revenues became shorter and shorter. Government bailout programs served to preserve vested interests acquired in the past; they did not promote accumulation and innovation. In the minds of some state and business elites, more in trade associations than on corporate boards, the idea spread that the state should become entrepreneurial.

In her book "The Capital of the State," Mariana Mazzucato traced the role of the state in the flagship companies of the new economy. 3 Entrepreneurial personalities like Steve Jobs and Bill Gates play a role in the rise of these companies. But not the main role. Without diverse government support, they would not have grown from garage businesses into multinational corporations. Those who now rest on their monopoly profits pass off endless product differentiation as innovation.

Mazzucato has become the star economist in circles that want to redirect government funds from monopoly capitalist vested interests toward innovation and accumulation. If the development of new companies was already highly dependent on state support in the past, but their innovation potential was exhausted after only a few years, then why should the state not take the entrepreneurial initiative itself.

This is an obvious conclusion from Mazzucato's analyses. It is attractive for the capital factions that are betting on a switch from coal, oil and gas to solar and wind but less attractive to fossil fuel vested interests. The unity of different capital factions that could be established in the struggle against unions and the welfare state has become fragile - not only in the matter of fossil or post-fossil, but also with view to small and medium-sized enterprises vis-à-vis corporations and the closely connected question of whether to focus on the domestic or the global market.

The cracks in its own ranks also explain why parts of capital are seeking to close ranks with trade unions, the Greens and the Social Democrats. Whether political majorities can be forged is another matter. Should it come to a black-green coalition, the Greens will say goodbye to the Habeck-Hoffmann alliance. In that case, the Metzger-Kretschmer line will once again gain the upper hand.

In a traffic light coalition, the FDP would prevent the implementation of an ecological-social democratic class compromise. Politically, this could, perhaps, be closed by red-red-green. Whether there would be a social force behind the election results required for this compromise against the remaining ordoliberals and the numerous new right-wingers remains to be seen.

{translator Marc’s question: Is Ordoliberalismus similar to a social market economy with state interference to protect competition or authoritarian neoliberalism? marc1seed [at]

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what the world needs

by nbo kjn Friday, Jun. 11, 2021 at 3:38 PM

the world needs birth control and badly. the church is a dead limb. however many the crown virus killed we are still short some billions of deaths necessary to make it livable again.

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