Money for everyone
As the gap between rich and poor is widening in Germany, increasingly more people are demanding a radical change of policy
01. Sep. 2008 –
When Chancellor Angela Merkel appeared in front of journalists in Berlin for the traditional summer press conference at the end of July, a tough 90 minutes followed for the press. Merkel personifies the sensible political middle ground to the degree that even 130 political reporters couldn’t or didn’t want to show that she had made any major mistakes.
With this chancellor and the conservative-Social Democrat coalition she heads, Germany seems to have found its center now more than at any other time since World War II. But her unruffled, rational and presidential style of governing is in sharp contrast to the plight and mood of the general population.
The material and intellectual core of German society is shrinking, according to the latest findings of the German Institute for Economic Research (DIW Berlin), with a total of 25 percent of all Germans close to or below the poverty line. And the middle class is disappearing. Only 54 percent of the population belongs to the middle-income group – in 2000, it was still 62 percent.
At the same time, many people are losing their trust in the social welfare system. The Bertlesmann Foundation, a political research organization, recently determined that only 31 percent of all Germans approve of their social market economy. A majority believes that regulated “Rhine capitalism” can no longer deliver social equality. About 73 percent of the respondents find that the distribution of income and assets is unjust. The entire August edition of Berliner Republik, the Social Democratic Party’s house magazine, is devoted to this dramatic loss of trust. The central question is whether the cement that holds German society together is crumbling.
The beginning of this erosion process can be dated to the launch of the social reforms implemented by former Chancellor Gerhard Schröder (SPD). In 2003, his government redefined the meaning of “social security” in Germany, unintentionally triggering a debate on the future of the social welfare state.
Similar to the previous Social Democratic-Green government, Merkel’s cabinet is pursuing three strategies here: First, cutting the costs of the social welfare state by significantly reducing assistance for the unemployed. Second, actively encouraging people who receive state support to start earning their own living. And finally, re-vamping the education system so that more people have realistic prospects of advancement.
Although it does not do justice to the policy’s complex approach, many people reduce the government’s agenda to one simple point: “Hartz IV” – the reform that cut unemployment benefits, named after the man who drew it up, former VW manager Peter Hartz. This reform triggered the battle over the social welfare state and has become a focus for proponents of alternative social welfare models. “Hartz IV is an open prison,” said Götz Werner, owner of dm-drogerie markt, Germany’s second-largest drugstore chain. “Hartz IV torments people and destroys their creativity.”
Werner has challenged prevailing policy with his own model of an “unconditional basic income.” He has written a number of books explaining his theory and has spoken widely on the issue, often to large numbers of listeners. The most high-profile proponent of this alternative model is Dieter Althaus, the Christian Democrat leader of the small German state of Thuringia. He calls his model the “citizen’s solidarity allowance.”
The new social model would function like this: Every German citizen would receive €800 per month from the state, whether they have work or not. The state no longer ties its benefits to an individual’s readiness to be willing to accept work. Children would receive €500 per month. Those who work would pay 50 percent tax on monthly income up to a level of €1,600. Earnings above that would be taxed at a different rate. Below this level, the state will make supplementary payments to its citizens (see info box). While low-income earners will profit from this “negative income tax,” people who earn more than €1,600 per month will pay taxes to the state as much as they do today.
Those who support the basic income model praise the new freedom it incorporates. Employment office caseworkers calling to monitor compliance, obligatory appointments with a job advisor, restrictions on vacation time, arbitrary reductions in welfare payments – those would all be things of the past. Althaus hopes the model would help citizens to develop “renewed trust in the state. People who have a basic guaranteed income will surely voluntarily assume the responsibility of finding work.”
It may sound utopian but the number of politically influential advocates has steadily grown in the past few years. They include Bremen’s environment senator, Reinhard Loske (Greens) and economist Thomas Straubhaar, head of the Hamburg Institute of International Economics (HWWI). Other political parties, such as the pro-business Free Democratic Party (FDP) and The Left, support similar concepts.
Professor Horst Opaschowski, a Hamburg researcher who focuses on leisure time and the future, offers a common message to a mixed group of people when he said, “In a society in which most people will have to live longer without employment, securing the basic necessities becomes an issue of survival. We need ways out of the employment trap.”
This is the crucial line dividing advocates of the new concept and supporters of the established policy: The former no longer believe that the market economy can fulfill its promise of social inclusion for all citizens via payment for work. “We have no hope of returning to full employment,” said Green politician Adrienne Göhler. She points to the unemployment rate, which has steadily increased since the 1970s. “That is why we have to make the ability to secure the basic necessities independent of the job market,” added Michael Opielka, professor of social welfare policy at the Jena University of Applied Sciences.
In view of the recent economic boom that has created 1.6 million new jobs in the past three years, Social Democrats and trade unionists can only shake their heads at the alternative theories. Along with Minister of Labor and Social Affairs Olaf Scholz (SPD), they continue to believe that the goal of full employment can be achieved. They don’t want to accept that structural unemployment is the fate of market economies. Their reluctance also has a philosophical core: Work is the only thing that makes humans human, according to Karl Marx. And Protestantism also preaches that work is the way to God.
In addition to the cultural obstacles, some practical problems will prevent the debate from being decided in favor of the basic income supporters any time soon. Providing basic income to 80 million German citizens would be very expensive, even if all other state social benefits were eliminated at the same time. The new system would cost up to €250 billion per year more than the existing one, according to economics professor and government advisor Wolfgang Wiegard.
Independent of the probability of implementing a comprehensive counter-model, the debate on the meaning of social welfare in Germany is just starting. The increasing lack of trust and democratic legitimization is too significant to be ignored by politicians. Althaus is also counting on that pressure. He persuaded his skeptical party leadership to form a commission to examine the basic income model. Althaus believes that time is on his side. “The project won’t be an issue for the parliamentary election campaign in 2009,” he said. Professor Opaschowski thinks even more long-term: his timeline is the next 50 years.