Germany Welfare Complex and the Drive for a "Basic State Income"

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Niccolo and Donkey
Basic income, low aspiration

Spiked Online

Johannes Richardt

January 2011

At the moment, more than €1 trillion flows into the more or less state-controlled German welfare complex every year. Representing one third of German GDP, this vast amount of money covers every social benefit, from child allowance to health insurance. If the economic stats were not striking enough, of the 80million people living in Germany only 40 per cent earn a wage. So a large proportion of the population is dependent either partially or wholly upon the state.

But the German welfare state does not just provide a financial safety net. It also seeks to regulate the behaviour of benefits claimants through various forms of lifestyle intervention, such as dictating how much claimants should be allowed to spend on cigarettes. In this regard, the so-called Hartz IV legislation, passed in 2005 by the then ruling Green-Social Democrat coalition, is important. Named after its originator, Peter Hartz - then a social democratic trade unionist and manager of part state-owned Volkswagen before being imprisoned for embezzlement in 2007 - Hartz IV effectively revised the status of the unemployed. They were no longer citizens in need of assistance while out of work; they were deemed welfare dependent. They were no longer people fallen on hard times but fully capable of getting back into work; they were psychologically dependent upon welfare and incapable of getting back into work.

Hartz IV not only produced a new form of state dependency; it also sought to prepare these damaged citizens for work. To this end, a new sector of senseless and unproductive labour for about 1.5million of the unemployed benefits claimants was created (thus removing them from unemployment statistics). Under the pretext of empowering the unemployed by psychologically preparing them for the labour market, these benefits claimants are forced into absurd and degrading activities run by highly subsidised companies with Orwellian-sounding names like Neue Arbeit [New Work].

One example of this absurd work-for-work’s-sake philosophy is the Toys Company. In more than 60 factories around Germany, the formerly unemployed work for an extra €1 per hour on top of their out-of-work benefits recycling second-hand toys for poor children. One task is to check the completeness of second-hand puzzles. ‘The record for completing the 5000-piece puzzle is just 10 days’, explained Toys Company’s manager, ‘although unfortunately we found out that three pieces were missing’.

Götz Werner and Adrienne Goehler refer to this example in their new book 1000 € für Jeden. Freiheit. Gleichheit. Grundeinkommen. (€1000 Each. Liberty. Equality. Basic Income.) They argue for a new model of state welfare distribution which would replace the bureaucratic, behaviour-management regime of Hartz IV with one based on a simple premise: the state would pay everyone a basic income.

At first sight their central idea of a basic income for everybody seems quite charming: Every citizen gets €1,000 from the state every month from cradle to grave. As Werner, the billionaire founder of a drugstore chain, and Goehler, president of the Hamburg Art Academy, note €1000 represents more than just a living wage. They argue that it also enables people to participate in the cultural life of the society.

Because this would be an amount that every person would be legally entitled to, there would be no more degrading means tests and interventions in the lives of benefits claimants. The welfare bureaucracy as Germans know it would be redundant: the unemployed would be freed from doing compulsory labour promoted by the state and the rest of society would be freed from the imperative of wage labour provided by the market. Income would be separated from work. As one would not need to sell one’s labour in order to guarantee an income, the authors argue, people could choose their line of work, for who they want to work and for how long. This would lead to a new society in which self-realisation, creativity and compassion replace the existential fears created by the current rat race.

The German political class is partially sympathetic to the idea of a basic income. Hence, with the exception of the Social Democratic Party (plus trade unions), all parties represented in parliament have been discussing various models of basic income at some point in the past few years. For instance, in its party programme, the liberal Free Democratic Party calls for a Bürgergeld (citizen’s income), an amount paid out whenever necessary but low enough to maintain the incentive to work. Elsewhere, the Greens call for a Bedarfsorientiere Grundsicherung (needs-based basic provision), and even within the conservative Christian Democrat Party there is support for a Solidiarisches Bürgergeld (solidarity citizen’s income).

While there is party-political interest in a basic income, support for the idea comes from the German middle class. Campaign groups with names like ‘Freedom Instead of Full Employment’ and ‘Federal Agency of Income’ have emerged, advertising their ideas on various websites, in films and at events and demonstrations. It is important to note that support for a basic income does not come from unemployed and poorly educated low-wage employees. It comes from privileged and educated young professionals with middle-class backgrounds who, working in poorly-paid, insecure positions in the media and cultural sector, hope for an unconditional basic income to make their lives that little bit more secure. This is no struggle for abundance for all. For these metropolitan types, a basic income promises security, opportunities for self-realisation and psychological well-being.

It is to the fears and prejudices of this post-material milieu that the book €1000 Each speaks. In this way, the book exemplifies the rampant social pessimism so prominent in contemporary Western societies. The authors describe the insecure working conditions of the ‘creative class’, surviving on short-term contracts and project work, as the future for a society that has given up on the goal of well-paid and meaningful work for everyone. According to the authors, only a minority of people will earn their money in secure, long-term work. The rest of us will be left to the fate currently endured by the creative class, the ‘vanguard of precarious conditions’.

Referring to American sociologist Jeremy Rifkin’s 1995 book The End of Work , Werner and Goehler argue that the advance of globalisation, automation and rationalisation has led to a post-industrial society in which production can no longer serve as the basis of societal wealth.

Economic growth, they assert, ‘is a dead duck’. Instead, Werner and Goehler urge us to focus on creativity as ‘the only remaining, sustainably exploitable resource of the twenty-first century’. This is why they argue for a basic income. Because to tap into this resource of creativity, while avoiding the social unrest that will come with the shortage of constant, paid work, requires everyone to be accorded a level of material security.

It is true that rationalisation and automation have not only led to enormous increases in productivity but have also made many jobs superfluous. And it is also true that more people, relatively speaking, used to be employed in the industrial sector and that it also had a larger share of GDP than it does today. However, this doesn’t mean that industrial production has become less important for society. The contrary is true. In absolute terms, the importance of industry to wealth production has actually increased in the Western world. This is because, streamlined and automated, modern industrial societies produce more goods than ever before. Despite Werner’s and Goehler’s assumption, industrial production remains the basis of our prosperity.

Underpinning the authors’ abandonment of any aspiration toward full employment is the presumption that human needs will not develop. This runs counter to historical experience. In the past 300 years of technological development, humans have consistently developed new needs that in turn have demanded rising levels of productivity. We have seen this in action, for example, with the emergence of the air industry at the beginning of the last century and more recently with the emergence and expansion of the IT and communications sector. Little wonder that global wealth has increased 17-fold since 1930. Nevertheless, there are still plenty of people with needs that remain unmet. There is, therefore, a lot of work to do to raise everybody’s living standards. The danger of Werner’s and Goehler’s assumption is that socio-economic phenomena such as unemployment are changed into natural phenomena. As such, they become natural facts to which we must reconcile ourselves.

If the Hartz IV regime is coercive and controlling, the unconditional basic income is only superficially liberating. It is true that the basic income could lead to a reduction in the power of state bureaucracies to intervene in our private lives. But it does not empower the citizen against the state as the authors assert. Rather, the basic income leads to a new form of financial dependency on the state – for everyone.

Furthermore, the model of the basic income undermines previous notions of welfare, which assert that only the needy get help from society. According to this older notion of welfare, the state primarily views its citizens as adult subjects capable, in normal circumstances, of caring for themselves and their loved ones. Seen as such, welfare is only required in an emergency. But with the basic income, the situation is reversed. Welfare is not exceptional, it is normal. We are deemed incapable of looking after ourselves and our loved ones. Autonomous adult subjects are uniformly transformed into vulnerable objects of state assistance.

Seen from this perspective, the idea of the basic income is underpinned by a negative image of humankind as weak, vulnerable and isolated. The basic thrust of this sentiment is that people cannot cope within the harsh environment of globalised capitalism without state assistance. Werner and Goehler go as far as to say that the current social world makes people mentally ill and unhappy. Depression, burnout, existential anxiety and excessive pressure are our constant companions in the brave new world of precarious work. Even a move to a new city for a job is seen as a risk given that ‘only the strongest can stand the psychosocial impact of such a massive change’. In this depressed worldview, informal relationships such as those with family, friends and colleagues offer no support or solidarity. Only the state, like a knight in shining armour, can protect the people from the worst evils of the market.

Given this culture of low-aspiration, it is perhaps not surprising that one salient fact is overlooked in the book: €1,000 a month is not very much. In this sense, the basic income is only a higher form of poverty for those without a job. No one could lead a carefree life on a monthly income of €1,000 in a contemporary Western society.

In fact, far from significantly improving living standards, the basic income sets limits to people’s aspirations, certainly when compared to what could be achieved by collectively fighting for better wages and working conditions. The message writ large in the basic income is: settle for less. Having given up on improving the material conditions of people’s lives, the authors are content to repeat the current elite mantra that mental health, happiness and well-being are more important than prosperity and abundance for all.

The concept of unconditional basic income does not, as Werner and Goehler claim, realise the famous tripartite ideals of the French Revolution. Rather it embodies the limits of the contemporary political imagination. The real problems of our society – the need for growth and real social and technological progress – are ignored. This is not to say that the current welfare state does not require reform. An emancipatory social state, for instance, would not rely on government intervention into the private lives of its citizens. It would take people seriously as autonomous citizens and provide material security only for the needy. It would provide the best medical care, quality education and child care available for those who call on it. And it would provide cheap energy, excellent infrastructure and investment in science and research.

But the unconditional basic income only replaces old with new dependencies. Considering the wealth that our society already produces, €1,000 is little more than token charity. We should not lose sight of the fact that a much higher level of material well-being and freedom for everyone is already possible.

Niccolo and Donkey

From the Shoutbox:

  1. 8 minutes ago - Roland : if the economies continue to specialize there will be a substantial superfluous population who lack the ability to earn a wage
  2. 7 minutes ago - Regulus : such is already the case imo
  3. 6 minutes ago - Roland : yes
  4. 5 minutes ago - Roland : the state will find a place for me
  5. 5 minutes ago - niccolo and donkey : yes, these are good points
  6. 5 minutes ago - Roland : i will put puzzles together like the germans
  7. 5 minutes ago - niccolo and donkey : high specialization is also a risk in and of itself should that specialization become redundant or offshored
  8. 5 minutes ago - niccolo and donkey : ..especially if you spend 50 grand for schooling in it
  9. 4 minutes ago - niccolo and donkey : that's why in mexico you see three people behind every counter....two people are there simply to reach up on the shelf and grab an item for you
  10. 4 minutes ago - niccolo and donkey : that's how they deal with excess labour, when they don't self-export to the USA
  11. 4 minutes ago - Roland : it's time for localism
  12. 3 minutes ago - niccolo and donkey : solutrea
  13. 2 minutes ago - Regulus : the production class no longer needs to reckon human labour as the sole supply side factor
  14. 2 minutes ago - Roland : it's a good idea. you have an ethnic support group, nic, but most whites don't
  15. 1 minute ago - Regulus : technology has made a large part of the workforce obsolete. more production can be done with fewer humans now
  16. A moment ago - niccolo and donkey :
  17. A moment ago - Regulus : but without a large wage earning population, these producers would have no one to sell their product too. producers need consumers symbiotically. a paradox
Niccolo and Donkey

This is brilliantly argued:

The individual is thus welded to the state, and the state has achieved total power over the individual.
The Real Problem with the Economy Is That It Doesn't Need You Anymore

Posted Sep 21, 2009 03:13pm EDT by Hank Williams in Investing , Products and Trends , Recession , Banking

From The Business Insider , Sept. 21, 2009:

Roughly speaking the world's economy has always worked as a giant pass-along-game between the planet’s citizens. Person A needed stuff from person B and person B needed stuff from person C and person C needed stuff from person A. So everyone needed everybody. It has been a kind of giant circle of needs.

But as a smaller and smaller number of people are needed to make the basic things that people need for survival, from food to energy, to clothing and housing, the less likely it is that some people will be needed at all.

When you read in the press the oft-quoted concept that “those jobs aren’t coming back” this “reduction of need” is what underlies all of it. Technology has reduced the need for labor. And the labor that *is* needed can’t be done in more developed nations because there are people elsewhere who will happily provide that labor less expensively.

In the long term, technology is almost certainly the solution to the problem. When we create devices that individuals will be able to own that will be able to produce everything that we need, the solution will be at hand. This is *not* science fiction. We are starting to see that happen with energy with things like rooftop solar panels and less expensive wind turbines. We are nowhere near where we need to be, but it is obvious that eventually everyone will be able to produce his or her own energy.

The same will be true for clothing, where personal devices will be able to make our clothing in our homes on demand. Food will be commoditized in a similar way, making it possible to have the basic necessities of life with a few low cost source materials.

The problem is that we are in this awful in-between phase of our planets productivity curve. Technology has vastly reduced the number of workers and resources that are required to make what the planet needs. This means that a small number of people, the people in control of the creation of goods, get the benefit of the increased productivity. When we get to the end of this curve and everyone can, in essence, be their own manufacturer, things will be good again. But until we can ride this curve to its natural stopping point, there will be much suffering, as the jobs that technology kills are not replaced.

The political implications of this are staggering. Clearly, more and more jobs will move from more developed nations to countries like China, and it is difficult to see how, as this process continues, the United States retains its leadership position. In fact, it seems entirely possible that the U.S. will exchange places with less well-developed nations. Yes, there will certainly be fabulously wealthy people in the US, because many US companies will own these highly productive businesses. Unfortunately, that wealth will be held by a very small number of people. And their operations will need to employ very few people.

In short you will have a few very wealthy folks, and a much larger majority that will just not be needed for the most important things that the country needs to do.

I don’t know what the short-term solution to this problem is. In fact, I fear there may not be one. But it is clear that what I am describing has already started and there is little we can do to stop it. GDP will increase as demand for labor **decreases**! How is that for the ultimate economist's oxymoron?

Perfect example of broken logic.

Jobs will only exist in the most technologically advanced nations.

The US is the most technically advanced nation.

China is less advanced than the US in this respect.

Therefore, all the jobs will be in China.
Yes, I believe that people need a cultural/local support network of some kind that exists outside of government direction.
Yes. Depending on the social setup, this can be a problem. If people don't have families or support networks, they will go to the government. 5 people produce 500 units today, 1 person produces 500 units tomorrow. The one person can be the breadwinner of the group. Also, don't forget that demand for goods and services is essentially unlimited. So it would be more like 5 people produce 500 units today, 2 people produce 1000 tomorrow.
Government jobs require little specialization, and private sector jobs require anywhere from none to plenty.

As it stands, government workers in most developed nations have a higher average income and higher median income than people who work in the private sector.

There is little to no room, nor much incentive to developed advanced skills due to the crowding out effect. Might as well jump through hoops and be an unproductive member of society who earns $60k+ a year, and blame the private sector for "a lack of jobs"

Yes, this is true. Specialization earns higher income. Broadening of skills allows more choice in employment.

I believe most of this risk from "specialization" stems from IP.
Niccolo and Donkey
Competing allegiances/centres of power to allow for a balance/system of checks. The Church did this in medieval times. To allow the government to be all-powerful is to court disaster.
Dude, that's what Hoppe is all about.