What 2022 is about: replacing conservatives with progressive economic policies

by Markus Marterbauer

[This article published on Dec 28, 2021 is translated from the German on the Internet, https://awblog.at/worum-es-2022-geht/.]

Conservative economic policy tries to use the economic division into losers:inside and winners:inside for less social protection for the poor and unemployed and lower taxes for the rich. Progressive politics, on the contrary, must take people's fears seriously, provide security, awaken hope for improvement and create more freedom. To do this, it must ask the question of power.

Losers and winners of the crisis

After gross domestic product returned to pre-crisis levels in October 2021, it falls below them again in the winter lockdown. But the already difficult calculation of the overall economic lockdown costs should not obscure the view of the issues that are actually relevant. The Covid economic crisis leads to massive, and for some long-term, reductions in wealth for some social groups, but to large gains for others.

The group of losers:inside consists of:

400,000 unemployed, especially the 110,000 long-term unemployed, who suffered massive income losses. Three quarters of the long-term unemployed are at risk of poverty.

Hundreds of thousands of precariously employed people whose labor market opportunities have deteriorated markedly in the covid crisis: This concerns young people who tried to enter the workforce at the worst possible time, foreign nationals who already suffer particularly from poor working conditions, and women in part-time employment with low hours.

Tens of thousands of one-person entrepreneurs who, during the Covid crisis, had no income or social security and therefore had to rely on late and insufficient aid payments from the Hardship Fund.

Hundreds of thousands of children from socially disadvantaged families who suffer particularly from school closures, lockdowns, cramped housing conditions, lack of social contacts, poverty risk and thus also long-term negative consequences of the Covid crisis.

The Covid crisis has thus particularly affected those social groups for whom the risk of poverty or exclusion is already very high. It thus leads to a further weakening of the weak.

But there are also winners in the crisis. First, there are the billionaires and multimillionaires, because real estate prices and share prices have recently risen like never before. The fortunes of the "billionaires and clans" have once again risen sharply during this crisis.

Second, many companies have benefited from the crisis. In industry, production quickly exceeded pre-crisis levels anyway. The generous, poorly targeted Covid economic aid has showered a financial cornucopia on companies, even leading to a surplus in their financial balance despite the deepest economic slump since 1945. Double and triple subsidies, which combined short-time work with sales and fixed cost replacement and investment subsidies on a scale never before seen, left many a company in a much better financial position than before the crisis. Many companies have benefited from government covid contracts, some in ways that have drawn the attention of corruption prosecutors.

Conservative economic policy: pressure on losers, promotion of winners

Conservative economic policies exploit the social and economic divide between losers and winners in two ways. First, it increases the pressure on the losers, such as the unemployed. The unemployed are a favorite victim of conservative policies, not least because they have a low public profile: unemployment benefits and unemployment assistance for the long-term unemployed should be reduced from the current level of 51% of the last income to less than 40%, according to the proposal of the Austrian People's Party (ÖVP), to 25% according to Agenda Austria and to 0% according to Neos. With it one tries to scare the unemployed and to make them ready for the acceptance of bad jobs. But it is also intended to scare precarious workers, who will be shown what happens if they are not prepared to accept unfair working conditions. The debate about tightening the regulations on reasonableness and the abolition of marginal additional earnings are aimed in the same direction.

Second, conservative economic policy is aimed at strengthening the winners of the crisis: demands for a reduction in corporate income tax, an increase in the profit allowance, the reintroduction of a short retention period for securities capital gains tax, a reduction in non-wage labor costs, ever higher state investment premiums and still more subsidies. Some of the demands have been fended off, but some have found their way into the government's tax reform. Cutting social transfers for the poor and lowering taxes for the rich is how the great U.S. economist John Kenneth Galbraith once satirized neoliberal economic policy.

Progressive economic policy must remove fear and inspire hope

Progressive economic policy must do the opposite. It must first take a close look at social conditions. It must take away the fears of the losers. It must provide security. It must give hope by showing a path of change, improvement and progress. It must open up moments of emancipation and freedom.

Priority must be given to the fight against unemployment, poverty and social exclusion. The social psychologist Marie Jahoda rightly remarked: unemployment does not lead to revolution, but to resignation. Giving people security in the crisis means first stabilizing their income. Increasing the net replacement rate of unemployment benefits to 70% reduces income losses and prevents poverty. The (re)introduction of a poverty-proof means-tested minimum income forms an important additional social safety net against poverty, also for the working poor.

The historical merit of the welfare state is to provide security for working people. It does this with the help of social pension, unemployment, health and accident insurance and the provision of social services ranging from health and care to kindergarten, school, social work and housing. The welfare state is one of the most successful projects of civilization, but this project is far from complete.

Most urgent is the rapid improvement of social care services for all, so that the division into rich and poor does not manifest itself again in all its sharpness at the end of life. Two-tier medicine must be prevented. All-day kindergartens and all-day schools are elementary for promoting the cognitive, social and emotional skills of all children, regardless of where they come from. Affordable housing by expanding social housing and cleverly regulating rents will secure the basic right to housing.

Better social services will also cost significantly more, there is no question about that. Current expenditures for social transfers, social services and salaries must be financed by current tax revenues. Our tax system must be adjusted to this. Capital expenditures such as housing or infrastructure, on the other hand, should be financed by borrowing.

Reduced working hours open up a moment of freedom

Good unemployment protection is important, but it is not enough. The goal is full employment. Economic policy must lead the demand for labor to full employment. Spending for the future on climate, care, education increases prosperity, and as a welcome side effect, new jobs are created. For the long-term unemployed, a job guarantee in the municipal and non-profit sectors should provide a path out of poverty to work and income. The AMS needs more staff and money to be able to quickly place the unemployed in open positions and to qualify them for these positions.

But creating jobs just for the sake of employment cannot be the goal. People need good jobs, that is, jobs with good working conditions, opportunities for co-determination, secure labor rights, adequate working hours and an income on which one can live well. Raising the lowest wage in all collective agreements to €1,700 is a targeted measure to eliminate wages that are not poverty-proof. The EU Minimum Wage Directive aims to establish the benefits of collective wage setting for all of Europe and to reduce the low-wage sector, which is even larger in many countries than it is here.

Progressive policies must focus on improving the living conditions of all people.

The working society must be refocused more strongly on the goal of freedom. The call for a reduction of working hours has accompanied the workers' movement since its foundation, and it remains one of the most important goals of progressive politics. Working time reduction can take many forms, from the legal introduction of the 6th vacation week for all and the enabling of longer time off, to the time off option, 4-day week, anniversary leave and 35-hour week in collective agreements, to company innovations such as a 30-hour week and more self-determination in working time.

More freedom wants to be spent in an environment worth living in. Climate crisis but also unsocial climate policy burden the economically weaker, while the rich produce enormous climate costs. The urgently needed restructuring of the economy therefore calls for climate-social policies. Better public infrastructure for mobility and housing, public spaces from parks to sports fields, public services from health to schools, public research and technology policies are important elements of a successful climate policy that also poses the distribution question.

Shifting power in the labor market and the distribution question

Achieving new jobs, good working conditions, shorter working hours, higher wages and meaningful work requires a shift in the balance of power in the labor market. Or, to paraphrase U.S. President Joe Biden, our goal is not a labor market where three, four, five unemployed people compete for a job opening, but a labor market where companies compete for workers with attractive offers. So we don't see a (slight) labor shortage as a threat, but as a goal worth striving for. We call this goal full employment and want to achieve it as quickly as possible.

The balance of power must also turn in a second area. Wealth is so concentrated that in Austria 40 billionaires own more than one tenth of the total wealth of all 3.9 million private households, and the two richest families alone own almost twice as much as the bottom half of households. This overabundance of a very small group endangers democracy as well as social and ecological sustainability. By consistently pointing out the unjust conditions and making concrete proposals for progressive taxation of wealth, property income and inheritances, we want to put pressure for justice. This also raises the question of power.

A labor shortage that is slowly taking shape and the demand for progressive taxation of high wealth, which is being championed in many countries, will make it possible to change the economy and society in Austria and Europe for the better. They will help us eradicate poverty, fight the scourge of unemployment, open high-quality care and education to all, tackle the climate crisis, improve working conditions, raise wages, and create more moments of freedom in the working society with shorter working hours, good social services, and democratic participation for all. The goal of progressive economic policy is sustainable well-being for the many, not the few.

Keywords labor market, working time reduction, poverty risk, corona crisis, crisis, progressive economic policy, wealth distribution, distribution issue, economic policy, prosperity-oriented economic policy



Markus Marterbauer

Head of the Department of Economics and Statistics at AK Vienna, Vice President of the Fiscal Council and University Lecturer.