Economics and politics - comment and analysis

Hooray, they’re letting us just about manage!

Whoever allows workers to “just about manage” seems to be considered socially progressive these days. Neo-liberalism succeeds time and again in shifting standards to such an extent that we completely lose our perspective and sense of fairness.

Paradoxically, to see this better, you need to take a step backwards rather than forwards. And sometimes one step is not enough. It has to be kilometres, because the object you are observing is blown up to such enormous proportions that it completely dominates the intellectual horizon.

One of the most striking examples of this is the claim that, in order to combat inequality and to nip populism in the bud, we must ensure that people in our highly developed nations can live from their income. That sounds marvellous! The Süddeutsche Zeitung, at an economic summit it organised in Berlin, quoted an American manufacturer of agricultural machinery as saying:

“My hope is that business and politics will work together to ensure that everyone who works     full-time can support their families. Then the populists will have little chance”(Süddeutsche Zeitung, November 17th, 2017, p. 17).

Isn’t that the voice of a reasonable, socially-minded businessman? No, it shows horrendous insolence! This man can probably feed one thousand, two thousand or even five thousand families on his salary alone, and finds it perfectly acceptable if the worst paid of his employees can feed a single family. The era when one person’s salary was enough to support a family is at least one hundred years old! And it is precisely sentences like this that add fuel to the populists’ fire, because they can correctly claim that this is unjust.

The deliberate softening of the sentence, by maintaining that everyone must be able to live on his income from work, is also an impertinence. In an extremely wealthy country, everyone should not only be able to feed himself, or to “live”, or enjoy a “good life”, as the trade unions like to call it. All these claims concerning what a human being supposedly needs to live are nothing less than a capitulation: an abandonment of the goal that all members of society should benefit from the income it generates, including steadily increasing real income. In a nation like Germany, workers’ incomes have for years lagged behind the wage level that would easily have been possible and even necessary. These claims demonstrate that they have given up trying to persuade politicians to end inequality, something that even the trade unions have failed to achieve by collective bargaining.

Having the cheek to demand redistribution, or better still, compensation, is considered a disgrace. This demand can conveniently be left to the parties on the extreme left, because they can then be put on the naughty step and declared unelectable. One only has to look at how frightened a German professor, who sees himself as a champion in the struggle against inequality, becomes when asked if he supports income redistribution. On the radio, Marcel Fratzscher, President of the German Institute for Economic Research (DIW), was asked whether we need more redistribution to ensure people receive adequate benefits from economic growth. Fratzscher replied:

“No. I do not believe that in the long term redistribution will solve the problem. After all, we have an economic situation in Germany today where there is enough for everyone. There are more than enough jobs that are well paid. Only one in five employees in Germany is currently employed in atypical jobs, where wages are very low.

It is therefore a question of creating better work, first of all to get people who do not have a job back into work, and then to enable those who have a job to get better work for better wages so that they secure a living wage. This requires qualifications, because in Germany we have too many people with insufficient qualifications, some of whom did not even finish their school education. But it is also a matter of people in principle getting a fair wage for their work. And if this succeeds, many of these poverty problems would be solved.”

Here is someone waffling completely off the point because there is no way that he will admit: “Yes, we need redistribution”. What does his second sentence say? Because there is enough for everyone, we do not need redistribution, although it is obvious how extremely unequally wealth is currently allocated. However, Fratscher reverts to the trope that we should not redistribute, but instead create better work. But what is better work? Are those jobs whereby the money, which workers have lost over the years, is paid back to them? Does “better work” make it easier for the trade unions to ensure that the wealth created by society is fairly shared with the workers? Does this change the balance of power between the two sides: employers and workers?

No, Fratscher also peddles the fiction that there is something like a fair wage with which the market automatically rewards everyone who has the necessary qualifications. The fact that unemployed workers can be blackmailed and that wages can be lower than justified in relation to economic growth and productivity apparently is alien to Fratscher’s world. It is precisely this uncritical approach to neo-liberalism or neo-classical labour market theory that disqualifies him as a serious critic of inequality.

Even worse, however, is Germany’s so-called Council of Economic Experts. The majority of them recently commented concerning the reasonable EU amendment of the Posting of Workers Directive, (confirming the principle that equal pay must be given for equal work in the same location):

The flexibility of companies is likely to be further impaired by the EU-wide reform of the Posting of Workers Directive. In particular, it provides for the principle of equal pay for equal work for all posted workers. Such regulation of the EU’s internal market could considerably reduce the attractiveness of posted work and restrict the freedom to provide services within the European Union. This would hamper competition for companies that offer cheaper services.”

In the world of these “market experts”, there are indeed no labour markets with supply and demand; there exists only the “flexibility and freedom of companies”, which unequivocally has priority. Companies compete by offering cheaper wages, regardless of where the workers come from, how they are recruited and in what circumstances they “survive”. Whether the Polish worker who works for Polish wages in Germany can do this in conditions worthy of human dignity is of no interest to Germany’s Council of Economic Experts. The most important thing is that wages are low and companies are completely free to do what they want.

Anyone who opposes this image of the world – insanely distorted even by neo-liberal standards – in which the workers barely survive or just about manage, is making a big mistake. The critic has the right opponent in his sights, but he fails to notice that he is losing ground massively to his opponent. The neo-liberal ideologues have thus achieved their goal: to permanently shift standards in the direction they want.

This article has also been published on Brave New Europe, see here.